Skip to Content
Rule

Medicare and Medicaid Programs: Hospital Outpatient Prospective Payment and Ambulatory Surgical Center Payment Systems and Quality Reporting Programs; Electronic Reporting Pilot; Inpatient Rehabilitation Facilities Quality Reporting Program; Revision to Quality Improvement Organization Regulations

Action

Final Rule With Comment Period.

Summary

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

Unified Agenda

 

Table of Contents Back to Top

DATES: Back to Top

Effective Date: This final rule with comment period is effective on January 1, 2013.

Comment Period: To be assured consideration, comments on the payment classifications assigned to HCPCS codes identified in Addenda B, AA, and BB of this final rule with comment period with the “NI” comment indicator and on other areas specified throughout this final rule with comment period must be received at one of the addresses provided in the ADDRESSES section no later than 5 p.m. EST on December 31, 2012.

Application Deadline—New Class of New Technology Intraocular Lenses: Requests for review of applications for a new class of new technology intraocular lenses must be received by 5 p.m. EST on March 1, 2013, at the following address: ASC/NTOL, Division of Outpatient Care, Mailstop C4-05-17, Centers for Medicare and Medicaid Services, 7500 Security Boulevard, Baltimore, MD 21244-1850.

ADDRESSES: Back to Top

In commenting, please refer to file code CMS-1589-FC. Because of staff and resource limitations, we cannot accept comments by facsimile (FAX) transmission.

You may submit comments in one of four ways (no duplicates, please):

1. Electronically. You may (and we encourage you to) submit electronic comments on this regulation to http://www.regulations.gov. Follow the instructions under the “submit a comment” tab.

2. By regular mail. You may mail written comments to the following address ONLY: Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS-1589-FC, P.O. Box 8013, Baltimore, MD 21244-1850.

Please allow sufficient time for mailed comments to be received before the close of the comment period.

3. By express or overnight mail. You may send written comments via express or overnight mail to the following address ONLY: Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS-1589-FC, Mail Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850.

4. By hand or courier. If you prefer, you may deliver (by hand or courier) your written comments before the close of the comment period to either of the following addresses:

a. For delivery in Washington, DC—Centers for Medicare & Medicaid Services, Department of Health and Human Services, Room 445-G, Hubert H. Humphrey Building, 200 Independence Avenue SW., Washington, DC 20201.

(Because access to the interior of the Hubert H. Humphrey Building is not readily available to persons without 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: Back to Top

Marjorie Baldo, (401) 786-4617, for issues related to new CPT and Level II HCPCS codes, exceptions to the 2 times rule, and new technology APCs.

Anita Bhatia, (410) 786-7236, Ambulatory Surgical Center Quality Reporting (ASCQR) Program—Program Administration and Reconsideration Issues.

Douglas Brown, (410) 786-0028, for issues related to Electronic Health Record (EHR) Incentive Program Electronic Reporting Pilot.

Carrie Bullock, (401) 786-0378, for issues related to blood products.

Erick Chuang, (410) 786-1816, for issues related to OPPS APC weights, mean calculation, copayments, wage index, outlier payments, and rural hospital payments.

Caroline Gallaher, (410) 786-8705, for issues related to Inpatient Rehabilitation Facility (IRF) Quality Reporting Program.

Shaheen Halim (410) 786-0641, Hospital Outpatient Quality Reporting Program (OQR)—Measures Issues and Publication of Hospital OQR Program Data, and Ambulatory Surgical Center Quality Reporting (ASCQR) Program—Measures Issues and Publication of ASCQR Program Data.

Twi Jackson, (410) 786-1159, for issues related to device-dependent APCs, no cost/full credit and partial credit devices, hospital outpatient visits, extended assessment and management composite APCs, and inpatient-only procedures.

Thomas Kessler, (401) 786-1991, for issues related to QIO regulations.

Marina Kushnirova, (410) 786-2682, for issues related to OPPS status indicators and comment indicators.

Barry Levi, (410) 786-4529, for issues related to OPPS pass-through devices, brachytherapy sources, intraoperative radiation therapy (IORT), brachytherapy composite APC, multiple imaging composite APCs, cardiac resynchronization therapy composite APC, and cardiac electrophysiologic evaluation and ablation composite APC.

Jana Lindquist, (410) 786-4533, for issues related to partial hospitalization and community mental health center (CMHC) issues.

Ann Marshall, (410) 786-3059, for issues related to hospital outpatient supervision, outpatient status, proton beam therapy, and the Hospital Outpatient Payment (HOP) Panel.

John McInnes, (410) 786-0378, for issues related to new technology intraocular lenses (NTIOLs) and packaged items/services.

James Poyer, (410) 786-2261, Hospital Outpatient Quality Reporting—Program Administration, Validation, and Reconsideration Issues.

Char Thompson, (410) 786-2300, for issues related to OPPS drugs, radiopharmaceuticals, biologicals, blood clotting factors, cost-to-charge ratios (CCRs), and ambulatory surgical center (ASC) payments.

Marjorie Baldo, (410) 786-4617, for all other issues related to hospital outpatient and ambulatory surgical center payments not previously identified.

SUPPLEMENTARY INFORMATION: Back to Top

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 Back to Top

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 Back to Top

In the past, a majority of the Addenda referred to in our OPPS/ASC proposed and final rules were published in the Federal Register as part of the annual rulemakings. However, beginning with the CY 2012 OPPS/ASC proposed rule, all of the Addenda no longer appear in the Federal Register as part of the annual OPPS/ASC proposed and final rules to decrease administrative burden and reduce costs associated with publishing lengthy tables. Instead, these Addenda will be published and available only on the CMS Web site. The Addenda relating to the OPPS are available at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html. The Addenda relating to the ASC payment system are available at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/ASCPayment/index.html. Readers who experience any problems accessing any of the Addenda that are posted on the CMS Web site identified above should contact Charles Braver at (410) 786-0378.

Alphabetical List of Acronyms Appearing in This Federal Register Document Back to Top

AHAAmerican Hospital Association

AMAAmerican Medical Association

APCAmbulatory Payment Classification

ASCAmbulatory surgical center

ASCQRAmbulatory Surgical Center Quality Reporting

ASPAverage sales price

AWPAverage wholesale price

BBABalanced Budget Act of 1997, Public Law 105-33

BBRAMedicare, Medicaid, and SCHIP [State Children's Health Insurance Program] Balanced Budget Refinement Act of 1999, Public Law 106-113

BIPAMedicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000, Public Law 106-554

BLSBureau of Labor Statistics

CAHCritical access hospital

CAPCompetitive Acquisition Program

CASPERCertification and Survey Provider Enhanced Reporting

CAUTICatheter associated urinary tract infection

CBSACore-Based Statistical Area

CCICorrect Coding Initiative

CCNCMS Certification Number

CCRCost-to-charge ratio

CDCCenters for Disease Control and Prevention

CEOChief executive officer

CERTComprehensive Error Rate Testing

CFRCode of Federal Regulations

CLFSClinical Laboratory Fee Schedule

CMHCCommunity mental health center

CMSCenters for Medicare & Medicaid Services

CoP[Medicare] Condition of participation

CPI-UConsumer Price Index for All Urban Consumers

CPTCurrent Procedural Terminology (copyrighted by the American Medical Association)

CQMClinical quality measure

CRChange request

CSACConsensus Standards Approval Committee

CYCalendar year

DFODesignated Federal Official

DRADeficit Reduction Act of 2005, Public Law 109-171

DRGDiagnosis-Related Group

DSHDisproportionate share hospital

EACHEssential access community hospital

eCQMElectronically specified clinical quality measure

ECTElectroconvulsive therapy

EDEmergency department

E/MEvaluation and management

EHRElectronic health record

ESRDEnd-stage renal disease

FACAFederal Advisory Committee Act, 92

FDAFood and Drug Administration

FFS[Medicare] Fee-for-service

FYFiscal year

GAOGovernment Accountability Office

HAIHealthcare-associated infection

HCERAHealth Care and Education Reconciliation Act of 2010, Public Law 111-152

HCPCSHealthcare Common Procedure Coding System

HCRISHospital Cost Report Information System

HEUHighly enriched uranium

HIPAAHealth Insurance Portability and Accountability Act of 1996, Public Law 104-191

HITECHHealth Information Technology for Economic and Clinical Health [Act] (found in the American Recovery and Reinvestment Act of 2009, Public Law 111-5)

HOPHospital Outpatient Payment [Panel]

HOPDHospital outpatient department

ICD-9-CMInternational Classification of Diseases, Ninth Revision, Clinical Modification

ICDImplantable cardioverter defibrillator

ICUIntensive care unit

IHSIndian Health Service

IMRTIntensity Modulated Radiation Therapy

I/OCEIntegrated Outpatient Code Editor

IOLIntraocular lens

IOMInstitute of Medicine

IORTIntraoperative radiation treatment

IPFInpatient Psychiatric Facility

IPPS[Hospital] Inpatient Prospective Payment System

IQR[Hospital] Inpatient Quality Reporting

IRFInpatient rehabilitation facility

IRF-PAIInpatient Rehabilitation Facility-Patient Assessment Instrument

IRF QRPInpatient Rehabilitation Facility Quality Reporting Program

LDRLow dose rate

LOSLength of Stay

LTCHLong-term care hospital

MACMedicare Administrative Contractor

MAPMeasure Application Partnership

MedPACMedicare Payment Advisory Commission

MEIMedicare Economic Index

MFPMultifactor productivity

MGCRBMedicare Geographic Classification Review Board

MIEA-TRHCAMedicare Improvements and Extension Act under Division B, Title I of the Tax Relief Health Care Act of 2006, Public Law 109-432

MIPPAMedicare Improvements for Patients and Providers Act of 2008, Public Law 110-275

MMAMedicare Prescription Drug, Improvement, and Modernization Act of 2003, Public Law 108-173

MMEAMedicare and Medicaid Extenders Act of 2010, Public Law. 111-309

MMSEAMedicare, Medicaid, and SCHIP Extension Act of 2007, Public Law 110-173

MPFSMedicare Physician Fee Schedule

MRAMagnetic resonance angiography

MRIMagnetic resonance imaging

MSAMetropolitan Statistical Area

NCCINational Correct Coding Initiative

NHSNNational Healthcare Safety Network

NQFNational Quality Forum

NTIOLNew technology intraocular lens

NUBCNational Uniform Billing Committee

OACT[CMS] Office of the Actuary

OBRAOmnibus Budget Reconciliation Act of 1996, 99

OIG[HHS] Office of the Inspector General

OMBOffice of Management and Budget

OPD[Hospital] Outpatient Department

OPPS[Hospital] Outpatient Prospective Payment System

OPSFOutpatient Provider-Specific File

OQR[Hospital] Outpatient Quality Reporting

OTOccupational therapy

PCRPayment-to-cost ratio

PEPractice expense

PEPPERProgram for Evaluating Payment Patterns Electronic Report

PHPPartial hospitalization program

PHSPublic Health Service [Act], 96

PPIProducer Price Index

PPSProspective payment system

PQRSPhysician Quality Reporting System

PTPhysical therapy

QDCQuality data code

QIOQuality Improvement Organization

RACRecovery Audit Contractor

RFARegulatory Flexibility Act

RTIResearch Triangle Institute, International

RVURelative value unit

SCHSole community hospital

SCODSpecified covered outpatient drugs

SIStatus indicator

SIRStandardized infection ratio

SLPSpeech-language pathology

SNFSkilled Nursing Facility

SRSStereotactic Radiosurgery

TEPTechnical Expert Panel

TMSTranscranial Magnetic Stimulation Therapy

TOPsTransitional Outpatient Payments

URUtilization review

USPSTFUnited States Preventive Services Task Force

UTIUrinary tract infection

VBPValue-based purchasing

WACWholesale acquisition cost

Table of Contents Back to Top

I. Summary and Background

A. Executive Summary of This Final Rule With Comment Period

1. Purpose

2. Summary of the Major Provisions

3. Summary of Costs and Benefits

B. Legislative and Regulatory Authority for the Hospital OPPS

C. Excluded OPPS Services and Hospitals

D. Prior Rulemaking

E. Advisory Panel on Hospital Outpatient Payment (the HOP Panel or the Panel), Formerly Named the Advisory Panel on Ambulatory Payment Classification Groups (APC Panel)

1. Authority of the Panel

2. Establishment of the Panel

3. Panel Meetings and Organizational Structure

F. Public Comments Received in Response to the CY 2013 OPPS/ASC Proposed Rule

G. Public Comments Received on the CY 2012 OPPS/ASC Final Rule With Comment Period

II. Updates Affecting OPPS Payments

A. Recalibration of APC Relative Payment Weights

1. Database Construction

a. Database Source and Methodology

b. Use of Single and Multiple Procedure Claims

c. Calculation and Use of Cost-to-Charge Ratios (CCRs)

2. Data Development Process and Calculation of Costs Used for Ratesetting

a. Claims Preparation

b. Splitting Claims and Creation of “Pseudo” Single Procedure Claims

(1) Splitting Claims

(2) Creation of “Pseudo” Single Procedure Claims

c. Completion of Claim Records and Geometric Mean Cost Calculations

(1) General Process

(2) Recommendations of the Advisory Panel on Hospital Outpatient Payment Regarding Data Development

d. Calculation of Single Procedure APC Criteria-Based Costs

(1) Device-Dependent APCs

(2) Blood and Blood Products

(3) Brachytherapy Sources

e. Calculation of Composite APC Criteria-Based Costs

(1) Extended Assessment and Management Composite APCs (APCs 8002 and 8003)

(2) Low Dose Rate (LDR) Prostate Brachytherapy Composite APC (APC 8001)

(3) Cardiac Electrophysiologic Evaluation and Ablation Composite APC (APC 8000)

(4) Mental Health Services Composite APC (APC 0034)

(5) Multiple Imaging Composite APCs (APCs 8004, 8005, 8006, 8007, and 8008)

(6) Cardiac Resynchronization Therapy Composite APC (APC 0108)

f. Geometric Mean-Based Relative Payment Weights

3. Changes to Packaged Services

a. Background

b. Clarification of Regulations at 42 CFR 419.2(b)

c. Packaging Recommendations of the HOP Panel (“The Panel”) at its February 2012 Meeting

d. Packaging Recommendations of the HOP Panel (“The Panel”) at its August 2012 Meeting

e. Other Packaging Proposals and Policies for CY 2013

f. Packaging of Drugs, Biologicals, and Radiopharmaceuticals

(1) Existing Packaging Policies

(2) Clarification of Packaging Policy for Anesthesia Drugs

g. Packaging of Payment for Diagnostic Radiopharmaceuticals, Contrast Agents, and Implantable Biologicals (“Policy-Packaged” Drugs and Devices)

h. Summary of Proposals

4. Calculation of OPPS Scaled Payment Weights

B. Conversion Factor Update

C. Wage Index Changes

D. Statewide Average Default CCRs

E. OPPS Payments to Certain Rural and Other Hospitals

1. Hold Harmless Transitional Payment Changes

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

F. OPPS Payment to Certain Cancer Hospitals Described by Section 1886(d)(1)(B)(v) of the Act

1. Background

2. Payment Adjustment for Certain Cancer Hospitals for CY 2013

G. Hospital Outpatient Outlier Payments

1. Background

2. Proposed Outlier Calculation

3. Final Outlier Calculation

4. Outlier Reconciliation

H. Calculation of an Adjusted Medicare Payment From the National Unadjusted Medicare Payment

I. Beneficiary Copayments

1. Background

2. OPPS Copayment Policy

3. Calculation of an Adjusted Copayment Amount for an APC Group

III. OPPS Ambulatory Payment Classification (APC) Group Policies

A. OPPS Treatment of New CPT and Level II HCPCS Codes

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

2. Process for New Level II HCPCS Codes That Will Be Effective October 1, 2012 and New CPT and Level II HCPCS Codes That Will Be Effective January 1, 2013 for Which We Are Soliciting Public Comments in this CY 2013 OPPS/ASC Final Rule with Comment Period

B. OPPS Changes—Variations within APCs

1. Background

2. Application of the 2 Times Rule

3. Exceptions to the 2 Times Rule

C. New Technology APCs

1. Background

2. Movement of Procedures From New Technology APCs to Clinical APCs

3. Payment Adjustment Policy for Radioisotopes Derived From Non-Highly Enriched Uranium (HEU) Sources

a. Background

b. Payment Policy

D. OPPS APC-Specific Policies

1. Cardiovascular and Vascular Services

a. Cardiac Telemetry (APC 0213)

b. Mechanical Thrombectomy (APC 0653)

c. Non-Congenital Cardiac Catheterization (APC 0080)

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

e. External Electrocardiographic Monitoring (APC 0097)

f. Echocardiography (APCs 0177, 0178, 0269, 0270, and 0697)

2. Gastrointestinal Services

a. Laparoscopic Adjustable Gastric Band (APC 0132)

b. Transoral Incisionless Fundoplication (APC 0422)

c. Gastrointestinal Transit and Pressure Measurement (APC 0361)

3. Integumentary System Services

a. Extracorporeal Shock Wave Wound Treatment (APC 0340)

b. Application of Skin Substitute (APCs 0133 and 0134)

c. Low Frequency, Non-Contact, Non-Thermal Ultrasound (APC 0015)

4. Nervous System Services

a. Scrambler Therapy (APC 0275)

b. Transcranial Magnetic Stimulation Therapy (TMS) (APC 0216)

c. Paravertebral Neurolytic Agent (APC 0207)

d. Programmable Implantable Pump (APC 0691)

e. Revision/Removal of Neurostimulator Electrodes (APC 0687)

5. Ocular Services: Placement of Amniotic Membrane (APC 0233)

6. Radiology Oncology

a. Proton Beam Therapy (APCs 0664 and 0667)

b. Device Construction for Intensity Modulated Radiation Therapy (IMRT) (APC 0305)

c. Other Radiation Oncology Services (APCs 0310 and 0412)

d. Stereotactic Radiosurgery (SRS) Treatment Delivery Services (APCs 0065, 0066, 0067 and 0127)

e. Intraoperative Radiation Therapy (IORT) (APC 0412)

(1) Background

(2) CY 2013 Proposals and Final Policies for CPT Codes 77424, 77425, and 77469

7. Imaging

a. Non-Ophthalmic Fluorescent Vascular Angiography (APC 0397)

b. Level II Nervous System Imaging (APC 0402)

c. Computed Tomography of Abdomen/Pelvis (APCs 0331 and 0334)

8. Respiratory Services

a. Bronchoscopy (APC 0415)

b. Upper Airway Endoscopy (APC 0075)

9. Other Services

a. Payment for Molecular Pathology Services

b. Bone Marrow (APC 0112)

IV. OPPS Payment for Devices

A. Pass-Through Payments for Devices

1. Expiration of Transitional Pass-Through Payments for Certain Devices

a. Background

b. CY 2013 Policy

2. Provisions for Reducing Transitional Pass-Through Payments to Offset Costs Packaged into APC Groups

a. Background

b. CY 2013 Policy

3. Clarification of Existing Device Category Criterion

a. Background

b. Clarification of CY 2013 Policy

B. Adjustment to OPPS Payment for No Cost/Full Credit and Partial Credit Devices

1. Background

2. APCs and Devices Subject to the Adjustment Policy

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

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

1. Background

2. Drugs and Biologicals With Expiring Pass-Through Status in CY 2012

3. Drugs, Biologicals, and Radiopharmaceuticals With New or Continuing Pass-Through Status in CY 2013

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

a. Background

b. Payment Offset Policy for Diagnostic Radiopharmaceuticals

c. Payment Offset Policy for Contrast Agents

B. OPPS Payment for Drugs, Biologicals, and Radiopharmaceuticals Without Pass-Through Status

1. Background

2. Criteria for Packaging Payment for Drugs, Biologicals, and Radiopharmaceuticals

a. Background

b. Cost Threshold for Packaging of Payment for HCPCS Codes That Describe Certain Drugs, Nonimplantable Biologicals, and Therapeutic Radiopharmaceuticals (“Threshold-Packaged Drugs”)

c. Packaging Determination for HCPCS Codes That Describe the Same Drug or Biological but Different Dosages

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

a. Payment for Specified Covered Outpatient Drugs (SCODs) and Other Separately Payable and Packaged Drugs and Biologicals

b. CY 2013 Payment Policy

4. Payment Policy for Therapeutic Radiopharmaceuticals

5. Payment for Blood Clotting Factors

6. Payment for Nonpass-Through Drugs, Biologicals, and Radiopharmaceuticals With HCPCS Codes, but Without OPPS Hospital Claims Data

VI. Estimate of OPPS Transitional Pass-Through Spending for Drugs, Biologicals, Radiopharmaceuticals, and Devices

A. Background

B. Estimate of Pass-Through Spending

VII. OPPS Payment for Hospital Outpatient Visits

A. Background

B. Policies for Hospital Outpatient Visits

C. Transitional Care Management

VIII. Payment for Partial Hospitalization Services

A. Background

B. PHP APC Update for CY 2013

C. Coding Changes

D. Separate Threshold for Outlier Payments to CMHCs

IX. Procedures That Would Be Paid Only as Inpatient Procedures

A. Background

B. Changes to the Inpatient List

X. Policies for the Supervision of Outpatient Services in Hospitals and CAHs

A. Conditions of Payment for Physical Therapy, Speech-Language Pathology, and Occupational Therapy Services in Hospitals and CAHs

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

XI. Outpatient Status: Solicitation of Public Comments in the CY 2013 OPPS/ASC Proposed Rule

A. Background

B. Summary of Public Comments Received

1. Part A to Part B Rebilling

2. Clarifying Current Admission Instructions or Establishing Specified Clinical Criteria

3. Hospital Utilization Review

4. Prior Authorization

5. Time-Based Criteria for Inpatient Admission

6. Payment Alignment

7. Public Comments on Other Topics

a. Rules for the External Review of Inpatient Claims

b. Improving Beneficiary Protections

c. Revising the Qualifying Criteria for Skilled Nursing Facility (SNF) Coverage

C. Summary

XII. CY 2013 OPPS Payment Status and Comment Indicators

A. CY 2013 OPPS Payment Status Indicator Definitions

B. CY 2013 Comment Indicator Definitions

XIII. OPPS Policy and Payment Recommendations

A. MedPAC Recommendations

B. GAO Recommendations

C. OIG Recommendations

XIV. Updates to the Ambulatory Surgical Center (ASC) Payment System

A. Background

1. Legislative History, Statutory Authority, and Prior Rulemaking for the ASC Payment System

2. Policies Governing Changes to the Lists of Codes and Payment Rates for ASC Covered Surgical Procedures and Covered Ancillary Services

B. Treatment of New Codes

1. Process for Recognizing New Category I and Category III CPT Codes and Level II HCPCS Codes

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

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

C. Update to the Lists of ASC Covered Surgical Procedures and Covered Ancillary Services

1. Covered Surgical Procedures

a. Additions to the List of ASC Covered Surgical Procedures

b. Covered Surgical Procedures Designated as Office-Based

(1) Background

(2) Changes for CY 2013 to Covered Surgical Procedures Designated as Office-Based

c. ASC Covered Surgical Procedures Designated as Device-Intensive

(1) Background

(2) Changes to List of Covered Surgical Procedures Designated as Device-Intensive for CY 2013

d. Adjustment to ASC Payments for No Cost/Full Credit and Partial Credit Devices

e. ASC Treatment of Surgical Procedures Removed From the OPPS Inpatient List for CY 2013

2. Covered Ancillary Services

D. ASC Payment for Covered Surgical Procedures and Covered Ancillary Services

1. Payment for Covered Surgical Procedures

a. Background

b. Update to ASC Covered Surgical Procedure Payment Rates for CY 2013

c. Waiver of Coinsurance and Deductible for Certain Preventive Services

d. Payment for the Cardiac Resynchronization Therapy Composite

e. Payment for Low Dose Rate (LDR) Prostate Brachytherapy Composite

2. Payment for Covered Ancillary Services

a. Background

b. Payment for Covered Ancillary Services for CY 2013

E. New Technology Intraocular Lenses (NTIOLs)

1. NTIOL Cycle and Evaluation Criteria

2. NTIOL Application Process for Payment Adjustment

3. Requests to Establish New NTIOL Classes for CY 2013 and Deadline for Public Comments

4. Payment Adjustment

5. Revisions to the Major NTIOL Criteria Described in 42 CFR 416.195

6. Request for Public Comment on the “Other Comparable Clinical Advantages” Improved Outcome

7. Announcement of CY 2013 Deadline for Submitting Requests for CMS Review of Appropriateness of ASC Payment for Insertion of an NTIOL Following Cataract Surgery

F. ASC Payment and Comment Indicators

1. Background

2. ASC Payment and Comment Indicators

G. ASC Policy and Payment Recommendations

H. Calculation of the ASC Conversion Factor and the ASC Payment Rates

1. Background

2. Calculation of the ASC Payment Rates

a. Updating the ASC Relative Payment Weights for CY 2013 and Future Years

b. Updating the ASC Conversion Factor

3. Display of CY 2013 ASC Payment Rates

XV. Hospital Outpatient Quality Reporting Program Updates

A. Background

1. Overview

2. Statutory History of the Hospital Outpatient Quality Reporting (Hospital OQR) Program

3. Measure Updates and Data Publication

a. Process for Updating Quality Measures

b. Publication of Hospital OQR Program Data

B. Process for Retention of Hospital OQR Program Measures Adopted in Previous Payment Determinations

C. Removal or Suspension of Quality Measures From the Hospital OQR Program Measure Set

1. Considerations in Removing Quality Measures From the Hospital OQR Program

2. Removal of One Chart-Abstracted Measure for the CY 2013 and Subsequent Years Payment Determinations

3. Suspension of One Chart-Abstracted Measure for the CY 2014 and Subsequent Years Payment Determinations

4. Deferred Data Collection of OP-24: Cardiac Rehabilitation Measure: Patient Referral From an Outpatient Setting for the CY 2014 Payment Determination

D. Quality Measures for CY 2015 Payment Determination

E. Possible Quality Measures Under Consideration for Future Inclusion in the Hospital OQR Program

F. Payment Reduction for Hospitals That Fail To Meet the Hospital OQR Program Requirements for the CY 2013 Payment Update

1. Background

2. Reporting Ratio Application and Associated Adjustment Policy for CY 2013

G. Requirements for Reporting of Hospital OQR Data for the CY 2014 Payment Determination and Subsequent Years

1. Administrative Requirements for the CY 2014 Payment Determination and Subsequent Years

2. Form, Manner, and Timing of Data Submitted for the Hospital OQR Program for the CY 2014 Payment Determination and Subsequent Years

a. Background

b. General Requirements

c. Chart-Abstracted Measure Requirements for CY 2014 and Subsequent Payment Determination Years

d. Claims-Based Measure Data Requirements for the CY 2014 and CY 2015 Payment Determinations

e. Structural Measure Data Requirements for the CY 2014 Payment Determination and Subsequent Years

f. Data Submission Requirements for OP-22: ED-Patient Left Without Being Seen for the CY 2015 Payment Determination

g. Population and Sampling Data Requirements for the CY 2014 Payment Determination and Subsequent Years

3. Hospital OQR Program Validation Requirements for Chart-Abstracted Measure Data Submitted Directly to CMS for the CY 2014 Payment Determination and Subsequent Years

a. Random Selection of Hospitals for Data Validation of Chart-Abstracted Measures for the CY 2014 Payment Determination and Subsequent Years

b. Targeting and Targeting Criteria for Data Validation Selection for CY 2014 Payment Determination and for Subsequent Years

c. Methodology for Encounter Selection for the CY 2014 Payment Determination and Subsequent Years

d. Validation Score Calculation for the CY 2014 Payment Determination and Subsequent Years

H. Hospital OQR Reconsideration and Appeals Procedures for the CY 2014 Payment Determination and Subsequent Years

I. Extraordinary Circumstances Extension or Waiver for the CY 2013 Payment Determination and Subsequent Years

J. Electronic Health Records (EHRs)

K. 2013 Medicare EHR Incentive Program Electronic Reporting Pilot for Eligible Hospitals and CAHs

XVI. Requirements for the Ambulatory Surgical Centers Quality Reporting (ASCQR) Program

A. Background

1. Overview

2. Statutory History of the ASC Quality Reporting (ASCQR) Program

3. History of the ASCQR Program

B. ASCQR Program Quality Measures

1. Considerations in the Selection of ASCQR Program Quality Measures

2. ASCQR Program Quality Measures

3. ASC Measure Topics for Future Consideration

4. Clarification Regarding the Process for Updating ASCQR Program Quality Measures

C. Requirements for Reporting of ASC Quality Data

1. Form, Manner, and Timing for Claims-Based Measures for the CY 2014 Payment Determination and Subsequent Payment Determination Years

a. Background

b. Form, Manner, and Timing for Claims-Based Measures for the CY 2015 Payment Determination and Subsequent Payment Determination Years

2. Data Completeness and Minimum Threshold for Claims-Based Measures Using QDCs

a. Background

b. Data Completeness Requirements for the CY 2015 Payment Determination and Subsequent Payment Determination Years

3. Other Comments on the ASCQR Program

D. Payment Reduction for ASCs That Fail To Meet the ASCQR Program Requirements

1. Statutory Background

2. Reduction to the ASC Payment Rates for ASCs That Fail To Meet the ASCQR Program Requirements for the CY 2014 Payment Determination and Subsequent Payment Determination Years

XVII. Inpatient Rehabilitation Facility (IRF) Quality Reporting Program Updates

A. Overview

B. Updates to IRF QRP Measures Which Are Made as a Result of Review by the National Quality Forum (NQF) Process

C. Process for Retention of IRF Quality Measures Adopted in Previous Fiscal Year Rulemaking Cycles

D. Measures for the FY 2014 Payment Determination

1. Clarification Regarding Existing IRF Quality Measures That Have Undergone Changes During the NQF Measure Maintenance Processes

2. Updates to the “Percent of Residents Who Have Pressure Ulcers That Are New or Worsened” Measure

XVIII. Revisions to the Quality Improvement Organization (QIO) Regulations (42 CFR Parts 476, 478, and 480)

A. Summary of Changes

B. Quality of Care Reviews

1. Beneficiary Complaint Reviews

2. Completion of General Quality of Care Reviews

C. Use of Confidential Information That Explicitly or Implicitly Identifies Patients

D. Secure Transmissions of Electronic Versions of Medical Information

E. Active Staff Privileges

F. Technical Corrections

XIX. Files Available to the Public Via the Internet

XX. Collection of Information Requirements

A. Legislative Requirements for Solicitation of Comments

B. Requirements in Regulation Text

1. 2013 Medicare EHR Incentive Program Electronic Reporting Pilot for Hospitals and CAHs (§ 495.8)

C. Associated Information Collections Not Specified in Regulatory Text

1. Hospital OQR Program

2. Hospital OQR Program Measures for the CY 2012, CY 2013, CY 2014 and CY 2015 Payment Determinations

a. Previously Adopted Hospital OQR Program Measures for the CY 2012, CY 2013, and CY 2014 Payment Determinations

b. Hospital OQR Program Measures for the CY 2014 Payment Determination

c. Hospital OQR Program Measures for CY 2015

3. Hospital OQR Program Validation Requirements for CY 2014

4. Hospital OQR Program Reconsideration and Appeals Procedures

5. ASCQR Program Requirements

a. Claims-Based Outcome Measures for the CY 2014 Payment Determination

b. Claims-Based Process, Structural, and Volume Measures for the CY 2015 and CY 2016 Payment Determinations

c. Program Administrative Requirements and QualityNet Accounts; Extraordinary Circumstance and Extension Requests; Reconsideration Requests

6. IRF QRP

a. Pressure Ulcer Measure

b. CAUTI Measure

XXI. Waiver of Proposed Rulemaking and Response to Comments

A. Waiver of Proposed Rulemaking

B. Response to Comments

XXII. Economic Analyses

A. Regulatory Impact Analysis

1. Introduction

2. Statement of Need

3. Overall Impacts for OPPS and ASC Payment Provisions

4. Detailed Economic Analyses

a. Estimated Effects of OPPS Changes in This Final Rule With Comment Period

(1) Limitations of Our Analysis

(2) Estimated Effects of OPPS Changes on Hospitals

(3) Estimated Effects of OPPS Changes on CMHCs

(4) Estimated Effect of OPPS Changes on Beneficiaries

(5) Estimated Effects of OPPS Changes on Other Providers

(6) Estimated Effects of OPPS Changes on the Medicare and Medicaid Programs

(7) Alternative OPPS Policies Considered

b. Estimated Effects of ASC Payment System Final Policies

(1) Limitations of Our Analysis

(2) Estimated Effects of ASC Payment System Final Policies on ASCs

(3) Estimated Effects of ASC Payment System Final Policies on Beneficiaries

(4) Alternative ASC Payment Policies Considered

c. Effects of the Revisions to the QIO Regulations

d. Accounting Statements and Tables

e. Effects of Requirements for the Hospital OQR Program

f. Effects of the EHR Electronic Reporting Pilot

g. Effects of Proposals for the ASCQR Program

h. Effects of Updates to the IRF QRP

B. Regulatory Flexibility Act (RFA) Analysis

C. Unfunded Mandates Reform Act Analysis

D. Conclusion

XXIII. Federalism Analysis

Regulation Text

I. Summary and Background Back to Top

A. Executive Summary of This Final Rule With Comment Period

1. Purpose

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

In addition to establishing payment rates for CY 2013, we are updating and implementing new requirements under the Hospital Outpatient Quality Reporting (OQR) Program, the Ambulatory Surgical Center Quality Reporting (ASCQR) Program, and the Inpatient Rehabilitation Facility (IRF) Quality Reporting Program. We are continuing the electronic reporting pilot for the Electronic Health Record (EHR) Incentive Program and making revisions to the regulations governing the Quality Improvement Organizations (QIOs), including the secure transmittal of electronic medical information, beneficiary complaint resolution and notification processes, and technical corrections. The technical changes to the QIO regulations that we are making to improve the regulations reflect CMS' commitment to the principles of the President's Executive Order on Regulatory Reform, Executive Order 13563 (January 18, 2011).

2. Summary of the Major Provisions

• OPPS Update: For CY 2013, we are increasing the payment rates under the OPPS by an Outpatient Department (OPD) fee schedule increase factor of 1.8 percent. This increase is based on the final hospital inpatient market basket percentage increase of 2.6 percent for inpatient services paid under the hospital inpatient prospective payment system (IPPS), minus the multifactor productivity (MFP) adjustment of 0.7 percentage points, and minus a 0.1 percentage point adjustment required by the Affordable Care Act. Under this final rule with comment period, we estimate that total payments for CY 2013, including beneficiary cost-sharing, to the more than 4,000 facilities paid under the OPPS (including general acute care hospitals, children's hospitals, cancer hospitals, and community mental health centers (CMHCs)), will be approximately $48.1 billion, an increase of approximately $4.6 billion compared to CY 2012 payments, or $600 million excluding our estimated changes in enrollment, utilization, and case-mix.

We are continuing to implement the statutory 2.0 percentage point reduction in payments for hospitals failing to meet the hospital outpatient quality reporting requirements, by applying a reporting factor of 0.980 to the OPPS payments and copayments for all applicable services.

  • Geometric Mean-Based Relative Payment Weights: CMS has discretion under the statute to set OPPS payments based upon either the estimated mean or median costs of services within an Ambulatory Payment Classification (APC) group, the unit of payment. To improve our cost estimation process, for CY 2013 we are using the geometric mean costs of services within an APC to determine the relative payment weights of services, rather than the median costs that we have used since the inception of the OPPS. Our analysis shows that the change to means will have a limited payment impact on most providers, with a small number experiencing payment gain or loss based on their service-mix.
  • Rural Adjustment: We are continuing the adjustment of 7.1 percent to the OPPS payments to certain rural sole community hospitals (SCHs), including essential access community hospitals (EACHs). This adjustment will apply to all services paid under the OPPS, excluding separately payable drugs and biologicals, devices paid under the pass-through payment policy, and items paid at charges reduced to cost.
  • Cancer Hospital Payment Adjustment: For CY 2013, we are continuing our policy to provide additional payments to cancer hospitals so that the hospital's payment-to-cost ratio (PCR) with the payment adjustment is equal to the weighted average PCR for the other OPPS hospitals using the most recent submitted or settled cost report data. Based on those data, a target PCR of 0.91 will be used to determine the CY 2013 cancer hospital payment adjustment to be paid at cost report settlement. That is, the payment amount associated with the cancer hospital payment adjustment will be the additional payment needed to result in a PCR equal to 0.91 for each cancer hospital.
  • Payment Adjustment Policy for Radio-Isotopes Derived from Non-Highly Enriched Uranium Sources: We are exercising our statutory authority to make payment adjustments necessary to ensure equitable payments in order to provide an adjustment for CY 2013 to cover the marginal cost of hospital conversion to the use of non-HEU sources of radio-isotopes used in medical imaging. The adjustment will cover the marginal cost of radio-isotopes produced from non-HEU sources over the costs of radio-isotopes produced by HEU sources.
  • Payment of Drugs, Biologicals, and Radiopharmaceuticals: For CY 2013, payment for the acquisition and pharmacy overhead costs of separately payable drugs and biologicals that do not have pass-through status will be set at the statutory default of average sales price (ASP) plus 6 percent.
  • Supervision of Hospital Outpatient Therapeutic Services: We are clarifying the application of the supervision regulations to physical therapy, speech-language pathology, and occupational therapy services that are furnished in OPPS hospitals and critical access hospitals (CAHs). In addition, in this final rule we note that we will extend the enforcement instruction one final year through CY 2013. This additional year, which we expect will be the final year of the extension, will provide additional opportunities for stakeholders to bring their issues to the Hospital Outpatient Payment Panel.
  • Outpatient Status: We are concerned about recent increases in the length of time that Medicare beneficiaries spend as outpatients receiving observation services. In addition, hospitals continue to express concern about Medicare Part A to Part B rebilling policies when a hospital inpatient claim is denied because the inpatient admission was not medically necessary. In the CY 2013 OPPS/ASC proposed rule (77 FR 45155 through 45157), we provided an update on the Part A to Part B Rebilling Demonstration that is in effect for CY 2012 through CY 2014, which was designed to assist us in evaluating these issues. We also solicited public comments on potential clarifications or changes to our policies regarding patient status that may be appropriate, which we discuss in this final rule with comment period.
  • Ambulatory Surgical Center Payment Update: For CY 2013, we are increasing payment rates under the ASC payment system by 0.6 percent. This increase is based on a projected CPI-U update of 1.4 percent minus a multifactor productivity adjustment required by the Affordable Care Act that is projected to be 0.8 percent. Based on this update, we estimate that total payments to ASCs (including beneficiary cost-sharing and estimated changes in enrollment, utilization, and case-mix), for CY 2013 will be approximately $4.074 billion, an increase of approximately $310 million compared to estimated CY 2012 payments.
  • New Technology Intraocular Lenses: We are revising the regulations governing payments for new technology intraocular lenses (NTIOLs) to require that the IOL's labeling, which must be approved by the FDA, contain a claim of a specific clinical benefit based on a new lens characteristic in comparison to currently available IOLs. We also are revising the regulations to require that any specific clinical benefit referred to in § 416.195(a)(2) must be supported by evidence that demonstrates that the IOL results in a measurable, clinically meaningful, improved outcome.
  • Ambulatory Surgical Center Quality Reporting (ASCQR) Program: For the ASCQR Program, we address the public comments received as a result of our solicitation in the proposed rule on our approach for future measure selection and development as well as certain measures for future potential inclusion in the ASCQR Program measure set. We are finalizing our approach to future measure selection and development for the ASCQR Program. For the CY 2015 payment determination and subsequent years' payment determinations, we are adopting requirements for claims-based measures regarding the dates for submission and payment of claims and data completeness. We also are finalizing our policy regarding how the payment rates will be reduced in CY 2014 and in subsequent calendar years for ASCs that fail to meet program requirements, and we are clarifying our policy on updating measures.
  • Hospital Outpatient Quality Reporting (OQR) Program: For the Hospital OQR Program, we are not establishing any new measures for CY 2013. We also are not specifying any new targeting criteria to select hospitals for validation of medical records. We are confirming the removal or suspension of data collection for specific measures. We are specifying that the criteria we will consider when determining whether to remove measures for the Hospital Inpatient Quality Reporting (IQR) Program will also apply to the Hospital OQR Program. We are providing that measures adopted in future rulemaking are automatically adopted for all subsequent year payment determinations unless we remove, suspend, or replace them. We are making changes to administrative forms used in the program. We are extending the deadline for submitting a notice of participation form and to enter structural measures data.
  • Electronic Health Record (EHR) Incentive Program: For the EHR Incentive Program, we are extending the 2012 Medicare EHR Incentive Program Electronic Reporting Pilot for Eligible Hospitals and CAHs through 2013, exactly as finalized for 2012. We recently issued a final rule (77 FR 53968) for Stage 2 of the Medicare and Medicaid EHR Incentive Programs.
  • Inpatient Rehabilitation Facility Quality Reporting Program (IRF QRP): We are: (1) Adopting updates on one (out of two) previously adopted measure for the IRF QRP that will affect annual prospective payment amounts for FY 2014; (2) adopting a nonrisk-adjusted version of an NQF-endorsed pressure ulcer measure for the IRF QRP, and we will not publicly report any pressure ulcer measure data until we begin risk adjustment of these data; (3) adopting a policy that will provide that any measure that has been adopted for use in the IRF QRP will remain in effect until the measure is actively removed, suspended, or replaced; and (4) adopting policies regarding when notice-and-comment rulemaking will be used to update existing IRF QRP measures.
  • Revisions to the Quality Improvement Organization (QIO) Regulations: We are revising the QIO program regulations to: (1) Give QIOs the authority to send and receive secure transmissions of electronic versions of medical information; (2) provide more detailed and improved procedures for QIOs when completing Medicare beneficiary complaint reviews and general quality of care reviews, including procedures related to a new alternative dispute resolution process called “immediate advocacy”; (3) increase the information beneficiaries receive in response to QIO review activities; (4) convey to Medicare beneficiaries the right to authorize the release of confidential information by QIOs; and (5) make other technical changes that are designed to improve the regulations. The technical changes to the QIO regulations that we are making to improve the regulations reflect CMS' commitment to the principles of the President's Executive Order on Regulatory Reform, Executive Order 13563 (January 18, 2011).

3. Summary of Costs and Benefits

In sections XXII. and XXIII. of this final rule with comment period, we set forth a detailed analysis of the regulatory and federalism impacts that the changes will have on affected entities and beneficiaries. Key estimated impacts include the following:

a. Impacts of the OPPS Update

(1) Impacts of All OPPS Changes

Table 57 in section XXII. of this final rule with comment period displays the distributional impact all the OPPS changes on various groups of hospitals and CMHCs for CY 2013 compared to all estimated OPPS payments in CY 2012. We estimate that the policies in this final rule will result in a 1.9 percent overall increase in OPPS payments to providers. We estimate that the increase in OPPS expenditures, including beneficiary cost-sharing, will be approximately $600 million, not taking into account potential changes in enrollment, utilization, and case-mix. Taking into account estimated spending changes that are attributable to these factors, we estimate an increase of approximately $4.571 billion in OPPS expenditures, including beneficiary cost-sharing, for CY 2013 compared to CY 2012 OPPS expenditures. We estimate that total OPPS payments, including beneficiary cost-sharing, will be $48.1 billion for CY 2013.

We estimated the isolated impact of our OPPS policies on CMHCs because CMHCs are only paid for partial hospitalization services under the OPPS. Continuing the provider-specific structure that we adopted for CY 2011 and basing payment fully on the type of provider furnishing the service, we estimate a 4.4 percent decrease in CY 2013 payments to CMHCs relative to their CY 2012 payments.

(2) Impacts of Basing APC Relative Payment Weights on Geometric Mean Costs

We estimate that our final policy to base the APC relative payment weights on the geometric mean costs rather than the median costs of services within an APC will not significantly impact most providers. Payments to very low volume urban hospitals and to hospitals for which disproportionate share hospital (DSH) data are not available will increase by an estimated 2.5 and 4.3 percent, respectively. The hospitals for which DSH data are not available are largely non-IPPS psychiatric hospitals. In contrast, payments to CMHCs will decrease by an estimated 3.9 percent due to basing the relative payment weights on the geometric mean costs of services rather than the median costs of services.

(3) Impacts of the Updated Wage Indices

We estimate no significant impacts related to updating the wage indices and applying the frontier State wage index. Adjustments to the wage indices other than the frontier State wage adjustment will not significantly affect most hospitals. The updated wage indices will most affect urban hospitals in the Pacific and East South Central regions and rural hospitals in the Mountain and Pacific regions.

(4) Impacts of the Rural Adjustment and the Cancer Hospital Payment Adjustment

There are no significant impacts of our CY 2013 payment policies for hospitals that are eligible for the rural adjustment or for the cancer hospital payment adjustment. We are not making any change in policies for determining the rural and cancer hospital payment adjustments, and the adjustment amounts do not significantly impact the budget neutrality adjustments for these policies.

(5) Impacts of the OPD Fee Schedule Increase Factor

We estimate that, for most hospitals, the application of the OPD fee schedule increase factor of 1.8 percent to the conversion factor for CY 2013 will mitigate the small negative impacts of the budget neutrality adjustments. Certain low volume hospitals and hospitals for which DSH data are not available will experience larger increases ranging from 4.5 percent to 8.2 percent. As a result of the OPD fee schedule increase factor and other budget neutrality adjustments, we estimate that rural and urban hospitals will experience similar increases of approximately 1.8 percent for urban hospitals and 2.1 percent for rural hospitals. Classifying hospitals by teaching status or type of ownership suggests that these hospitals will receive similar increases.

b. Impacts of the ASC Payment Update

For impact purposes, the surgical procedures on the ASC list of covered procedures are aggregated into surgical specialty groups using CPT and HCPCS code range definitions. The percentage change in estimated total payments by specialty groups under the CY 2013 payment rates compared to estimated CY 2012 payment rates ranges between −3 percent for respiratory system procedures, integumentary system procedures, and cardiovascular system procedures and 3 percent for nervous system procedures.

c. Impacts of the Hospital OQR Program

We do not expect our CY 2013 policies to significantly affect the number of hospitals that do not receive a full annual payment update.

d. Impacts of the EHR Incentive Program Proposal

There are no changes from the 2012 OPPS/ASC final rule to the costs or impact for the 2013 Medicare EHR Incentive Program Electronic Reporting Pilot for Hospitals and CAHs.

e. Impacts of the ASCQR Program

We do not expect our CY 2013 final policies to significantly affect the number of ASCs that do not receive a full annual payment update beginning in CY 2014.

B. Legislative and Regulatory Authority for the Hospital OPPS

When Title XVIII of the Social Security Act was enacted, Medicare payment for hospital outpatient services was based on hospital-specific costs. In an effort to ensure that Medicare and its beneficiaries pay appropriately for services and to encourage more efficient delivery of care, the Congress mandated replacement of the reasonable cost-based payment methodology with a prospective payment system (PPS). The Balanced Budget Act of 1997 (BBA) (Pub. L. 105-33) added section 1833(t) to the Act authorizing implementation of a PPS for hospital outpatient services. The OPPS was first implemented for services furnished on or after August 1, 2000. Implementing regulations for the OPPS are located at 42 CFR parts 410 and 419.

The Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act of 1999 (BBRA) (Pub. L. 106-113) made major changes in the hospital OPPS. The following Acts made additional changes to the OPPS: the Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000 (BIPA) (Pub. L. 106-554); the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) (Pub. L. 108-173); the Deficit Reduction Act of 2005 (DRA) (Pub. L. 109-171), enacted on February 8, 2006; the Medicare Improvements and Extension Act under Division B of Title I of the Tax Relief and Health Care Act of 2006 (MIEA-TRHCA) (Pub. L. 109-432), enacted on December 20, 2006; the Medicare, Medicaid, and SCHIP Extension Act of 2007 (MMSEA) (Pub. L. 110-173), enacted on December 29, 2007; the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA) (Pub. L. 110-275), enacted on July 15, 2008; the Patient Protection and Affordable Care Act (Pub. L. 111-148), enacted on March 23, 2010, as amended by the Health Care and Education Reconciliation Act of 2010 (Pub. L. 111-152), enacted on March 30, 2010 (These two public laws are collectively known as the Affordable Care Act); the Medicare and Medicaid Extenders Act of 2010 (MMEA, Pub. L. 111-309); the Temporary Payroll Tax Cut Continuation Act of 2011 (TPTCCA, Pub. L. 112-78), enacted on December 23, 2011; and most recently the Middle Class Tax Relief and Job Creation Act of 2012 (MCTRJCA, Pub. L. 112-96), enacted on February 22, 2012.

Under the OPPS, we pay for hospital outpatient services on a rate-per-service basis that varies according to the APC group to which the service is assigned. We use the Healthcare Common Procedure Coding System (HCPCS) (which includes certain Current Procedural Terminology (CPT) codes) to identify and group the services within each APC. The OPPS includes payment for most hospital outpatient services, except those identified in section I.C. of this final rule with comment period. Section 1833(t)(1)(B) of the Act provides for payment under the OPPS for hospital outpatient services designated by the Secretary (which includes partial hospitalization services furnished by CMHCs), and certain inpatient hospital services designated by the Secretary that are furnished to inpatients who are entitled to Part A and have exhausted their Part A benefits, or who are not so entitled.

The OPPS rate is an unadjusted national payment amount that includes the Medicare payment and the beneficiary copayment. This rate is divided into a labor-related amount and a nonlabor-related amount. The labor-related 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 pass-through payments,” for at least 2 but not more than 3 years for certain drugs, biological agents, brachytherapy devices used for the treatment of cancer, and categories of other medical devices. For new technology services that are not eligible for transitional pass-through payments, and for which we lack sufficient clinical information and cost data to appropriately assign them to a clinical APC group, we have established special APC groups based on costs, which we refer to as New Technology APCs. These New Technology APCs are designated by cost bands which allow us to provide appropriate and consistent payment for designated new procedures that are not yet reflected in our claims data. Similar to pass-through payments, an assignment to a New Technology APC is temporary; that is, we retain a service within a New Technology APC until we acquire sufficient data to assign it to a clinically appropriate APC group.

C. Excluded OPPS Services and Hospitals

Section 1833(t)(1)(B)(i) of the Act authorizes the Secretary to designate the hospital outpatient services that are paid under the OPPS. While most hospital outpatient services are payable under the OPPS, section 1833(t)(1)(B)(iv) of the Act excludes payment for ambulance, physical and occupational therapy, and speech-language pathology services, for which payment is made under a fee schedule. It also excludes screening mammography, diagnostic mammography, and effective January 1, 2011, an annual wellness visit providing personalized prevention plan services. The Secretary exercised the authority granted under the statute to also exclude from the OPPS those services that are paid under fee schedules or other payment systems. Such excluded services include, for example, the professional services of physicians and nonphysician practitioners paid under the MPFS; laboratory services paid under the Clinical Laboratory Fee Schedule (CLFS); services for beneficiaries with end-stage renal disease (ESRD) that are paid under the ESRD composite rate; and services and procedures that require an inpatient stay that are paid under the hospital IPPS. We set forth the services that are excluded from payment under the OPPS in regulations at 42 CFR 419.22.

Under § 419.20(b) of the regulations, we specify the types of hospitals and entities that are excluded from payment under the OPPS. These excluded entities include: Maryland hospitals, but only for services that are paid under a cost containment waiver in accordance with section 1814(b)(3) of the Act; CAHs; hospitals located outside of the 50 States, the District of Columbia, and Puerto Rico; and Indian Health Service (IHS) hospitals.

D. Prior Rulemaking

On April 7, 2000, we published in the Federal Register a final rule with comment period (65 FR 18434) to implement a prospective payment system for hospital outpatient services. The hospital OPPS was first implemented for services furnished on or after August 1, 2000. Section 1833(t)(9) of the Act requires the Secretary to review certain components of the OPPS, not less often than annually, and to revise the groups, relative payment weights, and other adjustments that take into account changes in medical practices, changes in technologies, and the addition of new services, new cost data, and other relevant information and factors.

Since initially implementing the OPPS, we have published final rules in the Federal Register annually to implement statutory requirements and changes arising from our continuing experience with this system. These rules can be viewed on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html.

E. Advisory Panel on Hospital Outpatient Payment (the HOP Panel or the Panel), Formerly Named the Advisory Panel on Ambulatory Payment Classification Groups (APC Panel)

1. Authority of the Panel

Section 1833(t)(9)(A) of the Act, as amended by section 201(h) of Public Law 106-113, and redesignated by section 202(a)(2) of Public Law 106-113, requires that we consult with an external advisory panel of experts to annually review the clinical integrity of the payment groups and their weights under the OPPS. In CY 2000, based on section 1833(t)(9)(A) of the Act and section 222 of the Public Health Service (PHS) Act, the Secretary established the Advisory Panel on Ambulatory Payment Classification Groups (APC Panel) to fulfill this requirement. In CY 2011, based on section 222 of the PHS Act which gives discretionary authority to the Secretary to convene advisory councils and committees, the Secretary expanded the panel's scope to include the supervision of hospital outpatient therapeutic services in addition to the APC groups and weights. To reflect this new role of the panel, the Secretary changed the panel's name to the Advisory Panel on Hospital Outpatient Payment (the HOP Panel, or the Panel). The Panel is not restricted to using data compiled by CMS, and in conducting its review it may use data collected or developed by organizations outside the Department.

2. Establishment of the Panel

On November 21, 2000, the Secretary signed the initial charter establishing the HOP Panel, at that time named the APC Panel. This expert panel, which may be composed of up to 19 appropriate representatives of providers (currently employed full-time, not as consultants, in their respective areas of expertise), reviews clinical data and advises CMS about the clinical integrity of the APC groups and their payment weights. Since CY 2012, the Panel also is charged with advising the Secretary on the appropriate level of supervision for individual hospital outpatient therapeutic services. The Panel is technical in nature, and it is governed by the provisions of the Federal Advisory Committee Act (FACA). Since its initial chartering, the Secretary has renewed the Panel's charter five times: On November 1, 2002; on November 1, 2004; on November 21, 2006; on November 2, 2008 and November 12, 2010. The current charter specifies, among other requirements, that: The Panel continues to be technical in nature; is governed by the provisions of the FACA; may convene up to three meetings per year; has a Designated Federal Official (DFO); and is chaired by a Federal Official designated by the Secretary. The current charter was amended on November 15, 2011 and the Panel was renamed to reflect expanding the Panel's authority to include supervision of hospital outpatient therapeutic services and therefore to add CAHs to its membership.

The current Panel membership and other information pertaining to the Panel, including its charter, Federal Register notices, membership, meeting dates, agenda topics, and meeting reports, can be viewed on the CMS Web site at: http://www.cms.gov/FACA/05_AdvisoryPanelonAmbulatoryPaymentClassificationGroups.asp#TopOfPage.

3. Panel Meetings and Organizational Structure

The Panel has held multiple meetings, with the last meeting taking place on August 27-28, 2012. Prior to each meeting, we publish a notice in the Federal Register to announce the meeting and, when necessary, to solicit nominations for Panel membership and to announce new members.

The Panel has established an operational structure that, in part, currently includes the use of three subcommittees to facilitate its required review process. The three current subcommittees are the Data Subcommittee, the Visits and Observation Subcommittee, and the Subcommittee for APC Groups and Status Indicator (SI) Assignments (previously known as the Packaging Subcommittee).

The Data Subcommittee is responsible for studying the data issues confronting the Panel and for recommending options for resolving them. The Visits and Observation Subcommittee reviews and makes recommendations to the Panel on all technical issues pertaining to observation services and hospital outpatient visits paid under the OPPS (for example, APC configurations and APC relative payment weights). The Subcommittee for APC Groups and SI Assignments advises the Panel on the following issues: The appropriate SIs to be assigned to HCPCS codes, including but not limited to whether a HCPCS code or a category of codes should be packaged or separately paid; and the appropriate APC placement of HCPCS codes regarding services for which separate payment is made.

Each of these subcommittees was established by a majority vote from the full Panel during a scheduled Panel meeting, and the Panel recommended that the subcommittees continue at the August 2012 Panel meeting. We accepted this recommendation.

Discussions of the other recommendations made by the Panel at the February 2012 and August 2012 Panel meetings are included in the sections of this final rule that are specific to each recommendation. For discussions of earlier Panel meetings and recommendations, we refer readers to previously published OPPS/ASC proposed and final rules, the CMS Web site mentioned earlier in this section, and the FACA database at: http://fido.gov/facadatabase/public.asp.

F. Public Comments Received in Response to the CY 2013 OPPS/ASC Proposed Rule

We received approximately 668 timely pieces of correspondence on the CY 2013 PPS/ASC proposed rule that appeared in the Federal Register on July 30, 2012 (77 FR 45061). We note that we received some public comments that were outside the scope of the proposed rule and that are not addressed in this final rule with comment period. Summaries of the public comments that are within the scope of the proposed rule and our responses are set forth in the various sections of this final rule with comment period under the appropriate subject-matter headings.

G. Public Comments Received on the CY 2012 OPPS/ASC Final Rule With Comment Period

We received approximately 61 timely pieces of correspondence on the CY 2012 OPPS/ASC final rule with comment period that appeared in the Federal Register on November 30, 2011 (76 FR 74122), some of which contained comments on the interim APC assignments and/or status indicators of HCPCS codes identified with comment indicator “NI” in Addendum B to that final rule. Summaries of these public comments on topics that were open to comment and our responses to them are set forth in various sections of this final rule with comment period under the appropriate subject-matter headings.

II. Updates Affecting OPPS Payments Back to Top

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 2013 OPPS/ASC proposed rule (77 FR 45071), for the CY 2013 OPPS, we proposed to recalibrate the APC relative payment weights for services furnished on or after January 1, 2013, and before January 1, 2014 (CY 2013), using the same basic methodology that we described in the CY 2012 OPPS/ASC final rule with comment period. That is, we proposed to recalibrate the relative payment weights for each APC based on claims and cost report data for hospital outpatient department (HOPD) services, using the most recent available data to construct a database for calculating APC group weights. Therefore, for the purpose of recalibrating the proposed APC relative payment weights for CY 2013, we used approximately 141 million final action claims (claims for which all disputes and adjustments have been resolved and payment has been made) for hospital outpatient department services furnished on or after January 1, 2011, and before January 1, 2012. For this final rule with comment period, for the purpose of recalibrating the final APC relative payment weights for CY 2013, we used approximately 153 million final action claims (claims for which all disputes and adjustments have been resolved and payment has been made) for HOPD services furnished on or after January 1, 2011, and before January 1, 2012. For exact counts of claims used, we refer readers to the claims accounting narrative under supporting documentation for the proposed rule and this final rule with comment period on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html.

Of the approximately 153 million final action claims for services provided in hospital outpatient settings used to calculate the final CY 2013 OPPS payment rates for this final rule with comment period, approximately 121 million claims were the type of bill potentially appropriate for use in setting rates for OPPS services (but did not necessarily contain services payable under the OPPS). Of the approximately 121 million claims, approximately 5 million claims were not for services paid under the OPPS or were excluded as not appropriate for use (for example, erroneous cost-to-charge ratios (CCRs) or no HCPCS codes reported on the claim). From the remaining approximately 116 million claims, we created approximately 120 million single records, of which approximately 81 million were “pseudo” single or “single session” claims (created from approximately 39 million multiple procedure claims using the process we discuss later in this section). Approximately 1 million claims were trimmed out on cost or units in excess of ±3 standard deviations from the geometric mean, yielding approximately 120 million single bills for ratesetting. As described in section II.A.2. of this final rule with comment period, our data development process is designed with the goal of using appropriate cost information in setting the APC relative payment weights. The bypass process is described in section II.A.1.b. of this final rule with comment period. This section discusses how we develop “pseudo” single procedure claims (as defined below), with the intention of using more appropriate data from the available claims. In some cases, the bypass process allows us to use some portion of the submitted claim for cost estimation purposes, while the remaining information on the claim continues to be unusable. Consistent with the goal of using appropriate information in our data development process, we only use claims (or portions of each claim) that are appropriate for ratesetting purposes. Ultimately, we were able to use for CY 2013 ratesetting some portion of approximately 95 percent of the CY 2011 claims containing services payable under the OPPS.

The final APC relative weights and payments for CY 2013 in Addenda A and B to this final rule with comment period (which are available via the Internet on the CMS Web site) were calculated using claims from CY 2011 that were processed through June 30, 2012. While we have historically based the payments on median hospital costs for services in the APC groups, we proposed in the CY 2013 OPPS/ASC proposed rule (77 FR 45071) to establish the cost-based relative payment weights of the CY 2013 OPPS using geometric mean costs, as discussed in section II.A.2.f. of this final rule with comment period. Therefore, on the CMS Web site, along with Addenda A and B, we provided a file that presented payment information for the proposed CY 2013 OPPS payments based on geometric mean costs compared to those based on median costs. Under this methodology, we select claims for services paid under the OPPS and match these claims to the most recent cost report filed by the individual hospitals represented in our claims data. We continue to believe that it is appropriate to use the most current full calendar year claims data and the most recently submitted cost reports to calculate the relative costs underpinning the APC relative payment weights and the CY 2013 payment rates.

b. Use of Single and Multiple Procedure Claims

For CY 2013, in general, we proposed to continue to use single procedure claims to set the costs on which the APC relative payment weights are based. We generally use single procedure claims to set the estimated costs for APCs because we believe that the OPPS relative weights on which payment rates are based should be derived from the costs of furnishing one unit of one procedure and because, in many circumstances, we are unable to ensure that packaged costs can be appropriately allocated across multiple procedures performed on the same date of service.

It is generally desirable to use the data from as many claims as possible to recalibrate the APC relative payment weights, including those claims for multiple procedures. As we have for several years, we proposed to continue to use date of service stratification and a list of codes to be bypassed to convert multiple procedure claims to “pseudo” single procedure claims. Through bypassing specified codes that we believe do not have significant packaged costs, we are able to use more data from multiple procedure claims. In many cases, this enables us to create multiple “pseudo” single procedure claims from claims that were submitted as multiple procedure claims spanning multiple dates of service, or claims that contained numerous separately paid procedures reported on the same date on one claim. We refer to these newly created single procedure claims as “pseudo” single procedure claims. The history of our use of a bypass list to generate “pseudo” single procedure claims is well documented, most recently in the CY 2012 OPPS/ASC final rule with comment period (76 FR 74132 through 74134). In addition, for CY 2008 (72 FR 66614 through 66664), we increased packaging and created the first composite APCs, and continued those policies through CY 2012. Increased packaging and creation of composite APCs also increased the number of bills that we were able to use for ratesetting by enabling us to use claims that contained multiple major procedures that previously would not have been usable. Further, for CY 2009, we expanded the composite APC model to one additional clinical area, multiple imaging services (73 FR 68559 through 68569), which also increased the number of bills we were able to use in developing the OPPS relative weights on which payments are based. We have continued the composite APCs for multiple imaging services through CY 2012. We did not receive any public comments on this policy, and therefore, we are finalizing our proposal to continue this policy for CY 2013. We refer readers to section II.A.2.e. of this final rule with comment period for a discussion of the use of claims in modeling the costs for composite APCs.

We proposed to continue to apply these processes to enable us to use as much claims data as possible for ratesetting for the CY 2013 OPPS. This methodology enabled us to create, for this final rule with comment period, approximately 81 million “pseudo” single procedure claims, including multiple imaging composite “single session” bills (we refer readers to section II.A.2.e.(5) of this final rule with comment period for further discussion), to add to the approximately 39 million “natural” single procedure claims. For this final rule with comment period, “pseudo” single procedure and “single session” procedure bills represented approximately 67 percent of all single procedure bills used for ratesetting purposes.

For CY 2013, we proposed to bypass 480 HCPCS codes that were identified in Addendum N to the CY 2013 OPPS/ASC proposed rule (which was available via the Internet on the CMS Web site). Since the inception of the bypass list, which is the list of codes to be bypassed to convert multiple procedure claims to “pseudo” single procedure claims, we have calculated the percent of “natural” single bills that contained packaging for each HCPCS code and the amount of packaging on each “natural” single bill for each code. Each year, we generally retain the codes on the previous year's bypass list and use the updated year's data (for CY 2013, data available for the February 27, 2012 meeting of the Advisory Panel on Hospital Outpatient Payment (the Panel) from CY 2011 claims processed through September 30, 2011, and CY 2010 claims data processed through June 30, 2011, used to model the payment rates for CY 2012) to determine whether it would be appropriate to add additional codes to the previous year's bypass list. For CY 2013, we proposed to continue to bypass all of the HCPCS codes on the CY 2012 OPPS bypass list, with the exception of HCPCS codes that we proposed to delete for CY 2013, which are listed in Table 1 of the proposed rule. We also proposed to remove HCPCS codes that are not separately paid under the OPPS because the purpose of the bypass list is to obtain more data for those codes relevant to ratesetting. In addition, we proposed to add to the bypass list for CY 2013 HCPCS codes not on the CY 2012 bypass list that, using either the CY 2012 final rule data (CY 2010 claims) or the February 27, 2012 Panel data (first 9 months of CY 2011 claims), met the empirical criteria for the bypass list that are summarized below. Finally, to remain consistent with the CY 2013 final policy to develop OPPS relative payment weights based on geometric mean costs, we proposed that the median cost of packaging criterion instead be based on the geometric mean cost of packaging. The entire list proposed for CY 2013 (including the codes that remain on the bypass list from prior years) was open to public comment in the CY 2013 OPPS/ASC proposed rule. Because we must make some assumptions about packaging in the multiple procedure claims in order to assess a HCPCS code for addition to the bypass list, we assumed that the representation of packaging on “natural” single procedure claims for any given code is comparable to packaging for that code in the multiple procedure claims. As we proposed, the criteria for the bypass list are:

  • There are 100 or more “natural” single procedure claims for the code. This number of single procedure claims ensures that observed outcomes are sufficiently representative of packaging that might occur in the multiple claims.
  • Five percent or fewer of the “natural” single procedure claims for the code have packaged costs on that single procedure claim for the code. This criterion results in limiting the amount of packaging being redistributed to the separately payable procedures remaining on the claim after the bypass code is removed and ensures that the costs associated with the bypass code represent the cost of the bypassed service.
  • The geometric mean cost of packaging observed in the “natural” single procedure claims is equal to or less than $55. This criterion also limits the amount of error in redistributed costs. During the assessment of claims against the bypass criteria, we do not know the dollar value of the packaged cost that should be appropriately attributed to the other procedures on the claim. Therefore, ensuring that redistributed costs associated with a bypass code are small in amount and volume protects the validity of cost estimates for low cost services billed with the bypassed service.

We note that, in the CY 2013 OPPS/ASC proposed rule (77 FR 45072), we proposed to establish the CY 2013 OPPS relative payment weights based on geometric mean costs. To remain consistent in the metric used for identifying cost patterns, we proposed to use the geometric mean cost of packaging to identify potential codes to add to the bypass list. The development of the CY 2013 OPPS relative payment weights based on geometric mean costs is discussed in greater detail in section II.A.2.f. of this final rule with comment period.

In response to public comments on the CY 2010 OPPS/ASC proposed rule requesting that the packaged cost threshold be updated, we considered whether it would be appropriate to update the $50 packaged cost threshold for inflation when examining potential bypass list additions. As discussed in the CY 2010 OPPS/ASC final rule with comment period (74 FR 60328), the real value of this packaged cost threshold criterion has declined due to inflation, making the packaged cost threshold more restrictive over time when considering additions to the bypass list. Therefore, adjusting the threshold by the market basket increase would prevent continuing decline in the threshold's real value. Based on the same rationale described for the CY 2012 OPPS/ASC final rule with comment period (76 FR 74133), we proposed for CY 2013 to continue to update the packaged cost threshold by the market basket increase. By applying the final CY 2012 market basket increase of 1.9 percent to the prior non-rounded dollar threshold of $52.76 (76 FR 74133), we determined that the threshold remains for CY 2013 at $55 ($53.76 rounded to $55, the nearest $5 increment). Therefore, we proposed to set the geometric mean packaged cost threshold on the CY 2011 claims at $55 for a code to be considered for addition to the CY 2013 OPPS bypass list.

  • The code is not a code for an unlisted service. Unlisted codes do not describe a specific service, and thus their costs would not be appropriate for bypass list purposes.

In addition, we proposed to continue to include on the bypass list HCPCS codes that CMS medical advisors believe have minimal associated packaging based on their clinical assessment of the complete CY 2013 OPPS proposal. Some of these codes were identified by CMS medical advisors and some were identified in prior years by commenters with specialized knowledge of the packaging associated with specific services. We also proposed to continue to include certain HCPCS codes on the bypass list in order to purposefully direct the assignment of packaged costs to a companion code where services always appear together and where there would otherwise be few single procedure claims available for ratesetting. For example, we have previously discussed our reasoning for adding HCPCS code G0390 (Trauma response team associated with hospital critical care service) and the CPT codes for additional hours of drug administration to the bypass list (73 FR 68513 and 71 FR 68117 through 68118).

As a result of the multiple imaging composite APCs that we established in CY 2009, the program logic for creating “pseudo” single procedure claims from bypassed codes that are also members of multiple imaging composite APCs changed. When creating the set of “pseudo” single procedure claims, claims that contain “overlap bypass codes” (those HCPCS codes that are both on the bypass list and are members of the multiple imaging composite APCs) were identified first. These HCPCS codes were then processed to create multiple imaging composite “single session” bills, that is, claims containing HCPCS codes from only one imaging family, thus suppressing the initial use of these codes as bypass codes. However, these “overlap bypass codes” were retained on the bypass list because, at the end of the “pseudo” single processing logic, we reassessed the claims without suppression of the “overlap bypass codes” under our longstanding “pseudo” single process to determine whether we could convert additional claims to “pseudo” single procedure claims. (We refer readers to section II.A.2.b. of this final rule with comment period for further discussion of the treatment of “overlap bypass codes.”) This process also created multiple imaging composite “single session” bills that could be used for calculating composite APC costs. “Overlap bypass codes” that are members of the multiple imaging composite APCs are identified by asterisks (*) in Addendum N to this final rule with comment period (which is available via the Internet on the CMS Web site).

Addendum N to this final rule with comment period includes the list of bypass codes for CY 2013. The list of bypass codes contains codes that were reported on claims for services in CY 2011 and, therefore, includes codes that were in effect in 2011 and used for billing but were deleted for CY 2012. We retained these deleted bypass codes on the CY 2013 bypass list because these codes existed in CY 2011 and were covered OPD services in that period, and CY 2011 claims data are used to calculate CY 2013 payment rates. Keeping these deleted bypass codes on the bypass list potentially allows us to create more “pseudo” single procedure claims for ratesetting purposes. “Overlap bypass codes” that were members of the proposed multiple imaging composite APCs are identified by asterisks (*) in the third column of Addendum N to this final rule with comment period. HCPCS codes that we are adding for CY 2013 are identified by asterisks (*) in the fourth column of Addendum N. Table 1 of the proposed rule contained the list of codes that we proposed to remove from the CY 2013 bypass list for CY 2013 (77 FR 45073).

Comment: One commenter supported the proposal to include CPT codes 76881 (Ultrasound, extremity, nonvascular, real-time with image documentation; complete) and 76882 (Ultrasound, extremity, nonvascular, real-time with image documentation; limited, anatomic specific) on the CY 2013 OPPS bypass list.

Response: We appreciate the commenter's support.

Comment: Several commenters expressed appreciation for our efforts to include multiple procedure claims in the ratesetting process through processes such as the bypass list and date of service stratification, which are used to create “pseudo” single claims. However, the commenters remained concerned about the limited number of claims used to model brachytherapy APCs 0312 (Radioelement Applications), 0651 (Complex Interstitial Radiation Source Application), and 8001 (LDR Prostate Brachytherapy Composite) and encouraged CMS to continue exploring potential methodologies through which more claims data could be used in OPPS ratesetting.

Response: We appreciate the commenters' support of our efforts to include more appropriate claims data for ratesetting purposes. As discussed above, one of the challenges in modeling the APC costs on which the OPPS/ASC relative payment weights are based is appropriately allocating the packaged cost associated with a service, when multiple separately payable procedures appear on the claim. However, recognizing the challenges associated with obtaining additional information, we will continue to explore potential methodologies through which we would be able to derive accurate cost data from the multiple major procedure claims made available to us.

After consideration of the public comments we received, we are adopting as final the proposed “pseudo” single claims process and the final CY 2013 bypass list of 480 HCPCS codes, as displayed in Addendum N of this final rule with comment period (available via the Internet on the CMS Web site). Table 1 below contains the list of codes that we are removing from the CY 2013 bypass list because these codes were either deleted from the HCPCS before CY 2011 (and therefore were not covered OPD services in CY 2011) or were not separately payable codes under the CY 2013 OPPS because these codes are not used for ratesetting (and therefore would not need to be bypassed). None of these deleted codes are “overlap bypass” codes.

c. Calculation and Use of Cost-to-Charge Ratios (CCRs)

In the CY 2013 OPPS/ASC proposed rule (77 FR 45073), for CY 2013, we proposed to continue to use the hospital-specific overall ancillary and departmental cost-to-charge ratios (CCRs) to convert charges to estimated costs through application of a revenue code-to-cost center crosswalk. To calculate the APC costs on which the proposed CY 2013 APC payment rates were based, we calculated hospital-specific overall ancillary CCRs and hospital-specific departmental CCRs for each hospital for which we had CY 2011 claims data from the most recent available hospital cost reports, in most cases, cost reports beginning in CY 2010. For the CY 2013 OPPS proposed rates, we used the set of claims processed during CY 2011. We applied the hospital-specific CCR to the hospital's charges at the most detailed level possible, based on a revenue code-to-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-Service-Payment/HospitalOutpatientPPS/index.html.

To ensure the completeness of the revenue code-to-cost center crosswalk, we reviewed changes to the list of revenue codes for CY 2011 (the year of the claims data we used to calculate the proposed CY 2013 OPPS payment rates) and found that the National Uniform Billing Committee (NUBC) did not add any new revenue codes to the NUBC 2011 Data Specifications Manual.

In accordance with our longstanding policy, we calculated CCRs for the standard and nonstandard cost centers accepted by the electronic cost report database. In general, the most detailed level at which we calculated CCRs was the hospital-specific departmental level. For a discussion of the hospital-specific overall ancillary CCR calculation, we refer readers to the CY 2007 OPPS/ASC final rule with comment period (71 FR 67983 through 67985). One longstanding exception to this general methodology for calculation of CCRs used for converting charges to costs on each claim, as detailed in the CY 2007 OPPS/ASC final rule with comment period, is the calculation of blood costs, as discussed in section II.A.2.d.(2) of this final rule with comment period and which has been our standard policy since the CY 2005 OPPS.

For the CCR calculation process, we used the same general approach that we used in developing the final APC rates for CY 2007 and thereafter, using the revised CCR calculation that excluded the costs of paramedical education programs and weighted the outpatient charges by the volume of outpatient services furnished by the hospital. We refer readers to the CY 2007 OPPS/ASC final rule with comment period for more information (71 FR 67983 through 67985). We first limited the population of cost reports to only those hospitals that filed outpatient claims in CY 2011 before determining whether the CCRs for such hospitals were valid.

We then calculated the CCRs for each cost center and the overall ancillary CCR for each hospital for which we had claims data. We did this using hospital-specific data from the Hospital Cost Report Information System (HCRIS). We used the most recent available cost report data, in most cases, cost reports with cost reporting periods beginning in CY 2010. For the proposed rule, we used the most recently submitted cost reports to calculate the CCRs to be used to calculate costs for the proposed CY 2013 OPPS payment rates. If the most recently available cost report was submitted but not settled, we looked at the last settled cost report to determine the ratio of submitted to settled cost using the overall ancillary CCR, and we then adjusted the most recent available submitted, but not settled, cost report using that ratio. We then calculated both an overall ancillary CCR and cost center-specific CCRs for each hospital. We used the overall ancillary CCR referenced above for all purposes that require use of an overall ancillary CCR. We proposed to continue this longstanding methodology for the calculation of costs for CY 2013.

Since the implementation of the OPPS, some commenters have raised concerns about potential bias in the OPPS cost-based weights due to “charge compression,” which is the practice of applying a lower charge markup to higher cost services and a higher charge markup to lower cost services. As a result, the cost-based weights may reflect some aggregation bias, undervaluing high-cost items and overvaluing low-cost items when an estimate of average markup, embodied in a single CCR, is applied to items of widely varying costs in the same cost center. This issue was evaluated in a report by Research Triangle Institute, International (RTI). The RTI final report can be found on RTI's Web site at: http://www.rti.org/reports/cms/HHSM-500-2005-0029I/PDF/Refining_Cost_to_Charge_Ratios_200807_Final.pdf. For a complete discussion of the RTI recommendations, public comments, and our responses, we refer readers to the CY 2009 OPPS/ASC final rule with comment period (73 FR 68519 through 68527).

We addressed the RTI finding that there was aggregation bias in both the IPPS and the OPPS cost estimation of expensive and inexpensive medical supplies in the FY 2009 IPPS final rule (73 FR 48458 through 45467). Specifically, we created one cost center for “Medical Supplies Charged to Patients” and one cost center for “Implantable Devices Charged to Patients,” essentially splitting the then current cost center for “Medical Supplies Charged to Patients” into one cost center for low-cost medical supplies and another cost center for high-cost implantable devices in order to mitigate some of the effects of charge compression. In determining the items that should be reported in these respective cost centers, we adopted commenters' recommendations that hospitals should use revenue codes established by the AHA's NUBC to determine the items that should be reported in the “Medical Supplies Charged to Patients” and the “Implantable Devices Charged to Patients” cost centers. For a complete discussion of the rationale for the creation of the new cost center for “Implantable Devices Charged to Patients,” public comments, and our responses, we refer readers to the FY 2009 IPPS final rule.

The cost center for “Implantable Devices Charged to Patients” has been available for use for cost reporting periods beginning on or after May 1, 2009. As discussed in the CY 2013 OPPS/ASC proposed rule (77 FR 45074), in order to develop a robust analysis regarding the use of cost data from the “Implantable Devices Charged to Patients” cost center, we believe that it is necessary to have a critical mass of cost reports filed with data in this cost center. In preparation for the CY 2013 proposed rule, we assessed the availability of data in the “Implantable Devices Charged to Patients” cost center using cost reports in the December 31, 2011 quarter ending update of HCRIS, which was the latest upload of the cost report data that we could use for the CY 2013 proposed rule. We determined that 2,063 hospitals, out of approximately 3,800 hospitals, utilized the “Implantable Devices Charged to Patients” cost center. Because we believe that this is a sufficient amount of data from which to generate a meaningful analysis, we proposed to use data from the “Implantable Devices Charged to Patients” cost center to create a distinct CCR for use in calculating the OPPS relative payment weights for CY 2013.

In the FY 2011 IPPS/LTCH PPS final rule (75 FR 50075 through 50080), we finalized our proposal to create new standard cost centers for “Computed Tomography (CT),” “Magnetic Resonance Imaging (MRI),” and “Cardiac Catheterization,” and to require that hospitals report the costs and charges for these services under new cost centers on the revised Medicare cost report Form CMS 2552-10. As we discussed in the FY 2009 IPPS and CY 2009 OPPS/ASC proposed and final rules, RTI also found that the costs and charges of CT scans, MRIs, and cardiac catheterization differ significantly from the costs and charges of other services included in the standard associated cost center. RTI concluded that both the IPPS and the OPPS relative payment weights would better estimate the costs of those services if CMS were to add standard costs centers for CT scans, MRIs, and cardiac catheterization in order for hospitals to report separately the costs and charges for those services and in order for CMS to calculate unique CCRs to estimate the cost from charges on claims data. We refer readers to the FY 2011 IPPS/LTCH PPS final rule (75 FR 50075 through 50080) for a more detailed discussion on the reasons for the creation of standard cost centers for CT scans, MRIs, and cardiac catheterization. The new standard cost centers for CT scans, MRIs, and cardiac catheterization are effective for cost report periods beginning on or after May 1, 2010, on the revised cost report Form CMS-2552-10. However, because cost reports that were filed on the revised cost report Form CMS-2552-10 are not currently accessible in the HCRIS, we were unable to calculate distinct CCRs for CT scans, MRIs, and cardiac catheterization using the new standard cost centers for these services. We believe that we will have cost report data available for an analysis of creating distinct CCRs for CT scans, MRIs, and cardiac catheterization for the CY 2014 OPPS rulemaking.

Comment: Many commenters supported CMS' proposal to use data from the “Implantable Devices Charged to Patients” cost center to create a distinct CCR for use in calculating the OPPS relative payment weights for CY 2013. The commenters also encouraged CMS to continue to engage in educational efforts related to the use of the new cost center so that hospitals understand how to accurately report data in the new cost center. In addition, the commenters suggested that the Medicare administrative contractors (MACs) develop an audit program that would identify hospitals that have not reported data for the new cost center.

Response: We appreciate the commenters' support of our proposal to use data from the “Implantable Devices Charged to Patients” cost center to create a distinct CCR. We agree with commenters that it is important that hospitals understand how to accurately report data in the “Implantable Devices Charged to Patients” cost center, and we have worked to add more clarity to the cost report instructions under the new Medicare cost report form CMS-2552-10. The new cost report form also facilitates greater audit scrutiny from the MACs. Line 121 of Worksheet S-2, Part I, of cost report form CMS-2552-10 asks “Did this facility incur and report costs for implantable devices charged to a patient? Enter in column 1 `Y' for yes and `N' for no.”

Comment: Two commenters recommended that CMS wait until CY 2014 OPPS rulemaking to determine if the “Implantable Devices Charged to Patients” cost center should be used to create a distinct CCR. The commenters did not believe that data from 2,063 hospitals provide a meaningful representation of all of the hospitals subject to the OPPS from which to base the proposal to use the new cost center for CY 2013.

Response: We disagree with the commenters and believe that data from the 2,063 hospitals that utilized the “Implantable Devices Charged to Patients” cost center, out of approximately 3,800 hospitals, are sufficient and appropriate for creating a distinct CCR to use in the calculation of the CY 2013 OPPS relative payment weights.

Comment: Commenters expressed disappointment that, because the revised cost report Form CMS-2552-10 was not accessible in the HCRIS at the time of the proposed rule, CMS was not able to create distinct CCRs for CT scans, MRIs, and cardiac catheterization services for use in the calculation of the CY 2013 OPPS relative payment weights. The commenters urged CMS to analyze the data in the new CT scan, MRI, and cardiac catheterization cost centers when the data are available and utilize the new cost centers in the development of the OPPS relative payment weights as soon as possible.

Response: We expect that we will have sufficient and appropriate cost report data available for an analysis of creating distinct CCRs for CT scans, MRIs, and cardiac catheterization for the CY 2014 rulemaking. If so, as was done for the “Implantable Devices Charged to Patients” cost center for the CY 2013 OPPS/ASC proposed rule, we expect to provide an impact analysis in the CY 2014 OPPS/ASC proposed rule that will enable the public to assess the full impact of the use of the new CCRs specific to CT scans, MRIs, and cardiac catheterization on payments for all services.

Comment: One commenter recommended that CMS require the use of the new nonstandard cost center for cardiac rehabilitation instead of making its use optional.

Response: We created the new nonstandard cost center for cardiac rehabilitation because we believed that this would facilitate more accurate cost reporting for these services. The nonstandard cost centers are additional common cost centers available to hospitals for reporting when preparing their Medicare hospital cost report. To the extent hospitals provide services captured by nonstandard cost centers, they should report the relevant nonstandard cost centers as well. However, we do not specify a revenue code-to-cost center crosswalk that hospitals must adopt to prepare the cost report and, therefore, we do not believe that we should require hospitals to use the nonstandard cost center for cardiac rehabilitation.

After consideration of the public comments we received, we are finalizing our proposal to use data from the “Implantable Devices Charged to Patients” cost center to create a distinct CCR for use in calculating the OPPS relative payment weights for CY 2013.

2. Data Development Process and Calculation of Costs Used for Ratesetting

In this section of this final rule with comment period, we discuss the use of claims to calculate OPPS payment rates for CY 2013. The Hospital OPPS page on the CMS Web site on which this final rule with comment period is posted (http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html) provides an accounting of claims used in the development of the final payment rates. That accounting provides additional detail regarding the number of claims derived at each stage of the process. In addition, below in this section we discuss the file of claims that comprises the data set that is available for purchase under a CMS data use agreement. The CMS Web site, http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html, includes information about purchasing the “OPPS Limited Data Set,” which now includes the additional variables previously available only in the OPPS Identifiable Data Set, including ICD-9-CM diagnosis codes and revenue code payment amounts. This file is derived from the CY 2011 claims that were used to calculate the final payment rates for the CY 2013 OPPS.

In the history of the OPPS, we have traditionally established the scaled relative weights on which payments are based using APC median costs, which is a process most recently described in the CY 2012 OPPS/ASC final rule with comment period (76 FR 74188). However, as discussed in more detail in section II.A.2.f. of this final rule with comment period, we proposed to use geometric mean costs to calculate the relative weights on which the CY 2013 OPPS payment rates are based. While this policy changes the cost metric on which the relative payments are based, the data process in general remains the same, under the methodologies that we use to obtain appropriate claims data and accurate cost information in determining estimated service cost.

We used the methodology described in sections II.A.2.a. through II.A.2.e. of this final rule with comment period to calculate the costs we used to establish the relative weights used in calculating the OPPS payment rates for CY 2013 shown in Addenda A and B to this final rule with comment period (which are available via the Internet on the CMS Web site). For the proposed rule, we provided a comparison file so that the public could provide meaningful comment on our proposal to base the CY 2013 OPPS relative payment weights on geometric mean costs. We refer readers to section II.A.4. of this final rule with comment period for a discussion of the conversion of APC costs to scaled payment weights.

Comment: Commenters expressed concern with respect to the volatility of the OPPS payment rates from year to year. The commenters suggested a “stability policy” and suggested that the costs from claims be adjusted to limit changes from year to year and asked that CMS limit any decreases in payment compared to the prior year to no more than a 5-percent decline.

Response: As previously discussed in the CY 2012 OPPS/ASC final rule with comment period (76 FR 74139), there are a number of factors that contribute to cost fluctuations from one year to the next, including (but not limited to) hospital behavior in adjusting mix of services, hospital costs and charges changes each year resulting in changes to the CCRs, reassignments of HCPCS codes, changes to OPPS payment policy (for example, changes to packaging), and implementation of composite APCs. We cannot stabilize hospital-driven fundamental inputs to the calculation of OPPS payment rates. However, we have strived to resolve some of the other potential reasons for instability from year to year. Specifically, we continue to seek ways to use more claims data so that we have fewer APCs for which there are small numbers of single bills used to set the APC costs. Moreover, we have tried to eliminate APCs with very small numbers of single bills where we could do so. We recognize that changes to payment policies, such as the packaging of payment for ancillary and supportive services and the implementation of composite APCs, may contribute to volatility in payment rates in the short term. However, we believe that larger payment packages and bundles should help to stabilize payments in the long term by enabling us to use more claims data and by establishing payments for larger groups of services. Further, in seeking to mitigate fluctuations in the OPPS, we believe that implementing the policy suggested by the commenters would make payments less reflective of the true service costs, which would be contrary to a purpose of our proposed CY 2013 policy of establishing relative payment weights based on geometric mean costs. Limiting decreases to payments across all APCs in a budget neutral payment system could unfairly reduce the payments for other services due to the effects of the scaling that is necessary to maintain budget neutrality and would distort the relativity of payment that is based on the cost of all services.

a. Claims Preparation

For this final rule with comment period, we used the CY 2011 hospital outpatient claims processed through June 30, 2012, to calculate the geometric mean costs of APCs that underpin the relative payment weights for CY 2013. To begin the calculation of the relative payment weights for CY 2013, we pulled all claims for outpatient services furnished in CY 2011 from the national claims history file. This is not the population of claims paid under the OPPS, but all outpatient claims (including, for example, critical access hospital (CAH) claims and hospital claims for clinical laboratory services for persons who are neither inpatients nor outpatients of the hospital).

We then excluded claims with condition codes 04, 20, 21, and 77 because these are claims that providers submitted to Medicare knowing that no payment would be made. For example, providers submit claims with a condition code 21 to elicit an official denial notice from Medicare and document that a service is not covered. We then excluded claims for services furnished in Maryland, Guam, the U.S. Virgin Islands, American Samoa, and the Northern Mariana Islands because hospitals in those geographic areas are not paid under the OPPS, and, therefore, we do not use claims for services furnished in these areas in ratesetting.

We divided the remaining claims into the three groups shown below. Groups 2 and 3 comprise the 121 million claims that contain hospital bill types paid under the OPPS.

1. Claims that were not bill types 12X (Hospital Inpatient (Medicare Part B only)), 13X (Hospital Outpatient), 14X (Hospital—Laboratory Services Provided to Nonpatients), or 76X (Clinic—Community Mental Health Center). Other bill types are not paid under the OPPS; therefore, these claims were not used to set OPPS payment.

2. Claims that were bill types 12X, 13X or 14X. Claims with bill types 12X and 13X are hospital outpatient claims. Claims with bill type 14X are laboratory specimen claims, of which we use a subset for the limited number of services in these claims that are paid under the OPPS.

3. Claims that were bill type 76X (CMHC).

To convert charges on the claims to estimated cost, we multiplied the charges on each claim by the appropriate hospital-specific CCR associated with the revenue code for the charge as discussed in section II.A.1.c. of this final rule with comment period. We then flagged and excluded CAH claims (which are not paid under the OPPS) and claims from hospitals with invalid CCRs. The latter included claims from hospitals without a CCR; those from hospitals paid an all-inclusive rate; those from hospitals with obviously erroneous CCRs (greater than 90 or less than 0.0001); and those from hospitals with overall ancillary CCRs that were identified as outliers (that exceeded ±3 standard deviations from the geometric mean after removing error CCRs). In addition, we trimmed the CCRs at the cost center (that is, departmental) level by removing the CCRs for each cost center as outliers if they exceeded ±3 standard deviations from the geometric mean. We used a four-tiered hierarchy of cost center CCRs, which is the revenue code-to-cost center crosswalk, to match a cost center to every possible revenue code appearing in the outpatient claims that is relevant to OPPS services, with the top tier being the most common cost center and the last tier being the default CCR. If a hospital's cost center CCR was deleted by trimming, we set the CCR for that cost center to “missing” so that another cost center CCR in the revenue center hierarchy could apply. If no other cost center CCR could apply to the revenue code on the claim, we used the hospital's overall ancillary CCR for the revenue code in question as the default CCR. For example, if a visit was reported under the clinic revenue code but the hospital did not have a clinic cost center, we mapped the hospital-specific overall ancillary CCR to the clinic revenue code. The revenue code-to-cost center crosswalk is available for inspection on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html. Revenue codes that we do not use in establishing relative costs or to model impacts are identified with an “N” in the revenue code-to-cost center crosswalk.

We applied the CCRs as described above to claims with bill type 12X, 13X, or 14X, excluding all claims from CAHs and hospitals in Maryland, Guam, the U.S. Virgin Islands, American Samoa, and the Northern Mariana Islands and claims from all hospitals for which CCRs were flagged as invalid.

We identified claims with condition code 41 as partial hospitalization services of hospitals and moved them to another file. We note that the separate file containing partial hospitalization claims is included in the files that are available for purchase as discussed above.

We then excluded claims without a HCPCS code. We moved to another file claims that contained only influenza and pneumococcal pneumonia (PPV) vaccines. Influenza and PPV vaccines are paid at reasonable cost; therefore, these claims are not used to set OPPS rates.

We next copied line-item costs for drugs, blood, and brachytherapy sources to a separate file (the lines stay on the claim, but are copied onto another file). No claims were deleted when we copied these lines onto another file. These line-items are used to calculate a per unit arithmetic and geometric mean and median cost and a per day arithmetic and geometric mean and median cost for drugs and nonimplantable biologicals, therapeutic radiopharmaceutical agents, and brachytherapy sources, as well as other information used to set payment rates, such as a unit-to-day ratio for drugs.

In the past several years, we have developed payment policy for nonpass-through separately paid drugs and biologicals based on a redistribution methodology that accounts for pharmacy overhead by allocating cost from packaged drugs to separately paid drugs. This typically would have required us to reduce the cost associated with packaged coded and uncoded drugs in order to allocate that cost. However, for CY 2013, as we proposed, we are paying for separately payable drugs and biologicals under the OPPS at ASP + 6 percent, based upon the statutory default described in section 1833(t)(14)(A)(iii)(II) of the Act. Therefore, under this policy, we do not redistribute the packaged cost. We refer readers to section V.B.3. of this final rule with comment period for a complete discussion of our policy to pay for separately paid drugs and biologicals in CY 2013.

We then removed line-items that were not paid during claim processing, presumably for a line-item rejection or denial. The number of edits for valid OPPS payment in the Integrated Outpatient Code Editor (I/OCE) and elsewhere has grown significantly in the past few years, especially with the implementation of the full spectrum of National Correct Coding Initiative (NCCI) edits. To ensure that we are using valid claims that represent the cost of payable services to set payment rates, we removed line-items with an OPPS status indicator that were not paid during claims processing in the claim year, but have a status indicator of “S,” “T,” “V,” or “X” in the prospective year's payment system. This logic preserves charges for services that would not have been paid in the claim year but for which some estimate of cost is needed for the prospective year, such as services newly removed from the inpatient list for CY 2012 that were assigned status indicator “C” in the claim year. It also preserves charges for packaged services so that the costs can be included in the cost of the services with which they are reported, even if the CPT codes for the packaged services were not paid because the service is part of another service that was reported on the same claim or the code otherwise violates claims processing edits.

For CY 2013, as we proposed, we are continuing the policy we implemented for CY 2012 to exclude line-item data for pass-through drugs and biologicals (status indicator “G” for CY 2011) and nonpass-through drugs and biologicals (status indicator “K” for CY 2011) where the charges reported on the claim for the line were either denied or rejected during claims processing. Removing lines that were eligible for payment but were not paid ensures that we are using appropriate data. The trim avoids using cost data on lines that we believe were defective or invalid because those rejected or denied lines did not meet the Medicare requirements for payment. For example, edits may reject a line for a separately paid drug because the number of units billed exceeded the number of units that would be reasonable and, therefore, is likely a billing error (for example, a line reporting 55 units of a drug for which 5 units is known to be a fatal dose). As with our trimming in the CY 2012 OPPS/ASC final rule with comment period (76 FR 74141) of line-items with a status indicator of “S,” “T,” “V,” or “X,” we believe that unpaid line-items represent services that are invalidly reported and, therefore, should not be used for ratesetting. We believe that removing lines with valid status indicators that were edited and not paid during claims processing increases the accuracy of the data used for ratesetting purposes.

b. Splitting Claims and Creation of “Pseudo” Single Procedure Claims

(1) Splitting Claims

For the CY 2013 OPPS, we then split the remaining claims into five groups: single majors; multiple majors; single minors; multiple minors; and other claims. (Specific definitions of these groups are presented below.) For CY 2013, as we proposed, we are continuing our current policy of defining major procedures as any HCPCS code having a status indicator of “S,” “T,” “V,” or “X”; defining minor procedures as any code having a status indicator of “F,” “G,” “H,” “K,” “L,” “R,” “U,” or “N”:and classifying “other” procedures as any code having a status indicator other than one that we have classified as major or minor. For CY 2013, as we proposed, we are continuing to assign status indicator “R” to blood and blood products; status indicator “U” to brachytherapy sources; status indicator “Q1” to all “STVX-packaged codes”; status indicator “Q2” to all “T-packaged codes”; and status indicator “Q3” to all codes that may be paid through a composite APC based on composite-specific criteria or paid separately through single code APCs when the criteria are not met.

As discussed in the CY 2009 OPPS/ASC final rule with comment period (73 FR 68709), we established status indicators “Q1,” “Q2,” and “Q3” to facilitate identification of the different categories of codes. As we proposed, we are treating these codes in the same manner for data purposes for CY 2013 as we have treated them since CY 2008. Specifically, we are continuing to evaluate whether the criteria for separate payment of codes with status indicator “Q1” or “Q2” are met in determining whether they are treated as major or minor codes. Codes with status indicator “Q1” or “Q2” are carried through the data either with status indicator “N” as packaged or, if they meet the criteria for separate payment, they are given the status indicator of the APC to which they are assigned and are considered as “pseudo” single procedure claims for major codes. Codes assigned status indicator “Q3” are paid under individual APCs unless they occur in the combinations that qualify for payment as composite APCs and, therefore, they carry the status indicator of the individual APC to which they are assigned through the data process and are treated as major codes during both the split and “pseudo” single creation process. The calculation of the geometric mean costs for composite APCs from multiple procedure major claims is discussed in section II.A.2.e. of this final rule with comment period.

Specifically, as we proposed, we divided the remaining claims into the following five groups:

1. Single Procedure Major Claims: Claims with a single separately payable procedure (that is, status indicator “S,” “T,” “V,” or “X,” which includes codes with status indicator “Q3”); claims with one unit of a status indicator “Q1” code (“STVX-packaged”) where there was no code with status indicator “S,” “T,” “V,” or “X” on the same claim on the same date; or claims with one unit of a status indicator “Q2” code (“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,” “V,” or “X,” which includes codes with status indicator “Q3”), or multiple units of one payable procedure. These claims include those codes with a status indicator “Q2” code (“T-packaged”) where there was no procedure with a status indicator “T” on the same claim on the same date of service but where there was another separately paid procedure on the same claim with the same date of service (that is, another code with status indicator “S,” “V,” or “X”). We also include in this set claims that contained one unit of one code when the bilateral modifier was appended to the code and the code was conditionally or independently bilateral. In these cases, the claims represented more than one unit of the service described by the code, notwithstanding that only one unit was billed.

3. Single Procedure Minor Claims: Claims with a single HCPCS code that was assigned status indicator “F,” “G,” “H,” “K,” “L,” “R,” “U,” or “N” and not status indicator “Q1” (“STVX-packaged”) or status indicator “Q2” (“T-packaged”) code.

4. Multiple Procedure Minor Claims: Claims with multiple HCPCS codes that are assigned status indicator “F,” “G,” “H,” “K,” “L,” “R,” “U,” or “N”; claims that contain more than one code with status indicator “Q1” (“STVX-packaged”) or more than one unit of a code with status indicator “Q1” but no codes with status indicator “S,” “T,” “V,” or “X” on the same date of service; or claims that contain more than one code with status indicator “Q2” (T-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. Non-OPPS claims have codes paid under other fee schedules, for example, durable medical equipment or clinical laboratory tests, and do not contain a code for a separately payable or packaged OPPS service. Non-OPPS claims include claims for therapy services paid sometimes under the OPPS but billed, in these non-OPPS cases, with revenue codes indicating that the therapy services would be paid under the Medicare Physician Fee Schedule (MPFS).

The claims listed in numbers 1, 2, 3, and 4 above are included in the data file that can be purchased as described above. Claims that contain codes to which we have assigned status indicators “Q1” (“STVX-packaged”) and “Q2” (“T-packaged”) appear in the data for the single major file, the multiple major file, and the multiple minor file used for ratesetting. Claims that contain codes to which we have assigned status indicator “Q3” (composite APC members) appear in both the data of the single and multiple major files used in this final rule with comment period, depending on the specific composite calculation.

(2) Creation of “Pseudo” Single Procedure Claims

To develop “pseudo” single procedure claims for this final rule with comment period, we examined both the multiple procedure major claims and the multiple procedure minor claims. We first examined the multiple major procedure claims for dates of service to determine if we could break them into “pseudo” single procedure claims using the dates of service for all lines on the claim. If we could create claims with single major procedures by using dates of service, we created a single procedure claim record for each separately payable procedure on a different date of service (that is, a “pseudo” single procedure claim).

We also use the bypass codes listed in Addendum N to this final rule with comment period (which is available via the Internet on our Web site) and discussed in section II.A.1.b. of this final rule with comment period to remove separately payable procedures which we determined contained limited or no packaged costs or that were otherwise suitable for inclusion on the bypass list from a multiple procedure bill. As discussed above, we ignore the “overlap bypass codes,” that is, those HCPCS codes that are both on the bypass list and are members of the multiple imaging composite APCs, in this initial assessment for “pseudo” single procedure claims. The final CY 2013 “overlap bypass codes” are listed in Addendum N to this final rule with comment period (which is available via the Internet on the CMS Web site). When one of the two separately payable procedures on a multiple procedure claim was on the bypass list, we split the claim into two “pseudo” single procedure claim records. The single procedure claim record that contained the bypass code did not retain packaged services. The single procedure claim record that contained the other separately payable procedure (but no bypass code) retained the packaged revenue code charges and the packaged HCPCS code charges. We also removed lines that contained multiple units of codes on the bypass list and treated them as “pseudo” single procedure claims by dividing the cost for the multiple units by the number of units on the line. If one unit of a single, separately payable procedure code remained on the claim after removal of the multiple units of the bypass code, we created a “pseudo” single procedure claim from that residual claim record, which retained the costs of packaged revenue codes and packaged HCPCS codes. This enabled us to use claims that would otherwise be multiple procedure claims and could not be used.

We then assessed the claims to determine if the criteria for the multiple imaging composite APCs, discussed in section II.A.2.e.(5) of this final rule with comment period, were met. If the criteria for the imaging composite APCs were met, we created a “single session” claim for the applicable imaging composite service and determined whether we could use the claim in ratesetting. For HCPCS codes that are both conditionally packaged and are members of a multiple imaging composite APC, we first assessed whether the code would be packaged and, if so, the code ceased to be available for further assessment as part of the composite APC. Because the packaged code would not be a separately payable procedure, we considered it to be unavailable for use in setting the composite APC costs on which the CY 2013 OPPS payments are based. Having identified “single session” claims for the imaging composite APCs, we reassessed the claim to determine if, after removal of all lines for bypass codes, including the “overlap bypass codes,” a single unit of a single separately payable code remained on the claim. If so, we attributed the packaged costs on the claim to the single unit of the single remaining separately payable code other than the bypass code to create a “pseudo” single procedure claim. We also identified line-items of overlap bypass codes as a “pseudo” single procedure claim. This allowed us to use more claims data for ratesetting purposes.

As we proposed, we also examine the multiple procedure minor claims to determine whether we could create “pseudo” single procedure claims. Specifically, where the claim contained multiple codes with status indicator “Q1” (“STVX-packaged”) on the same date of service or contained multiple units of a single code with status indicator “Q1,” we selected the status indicator “Q1” HCPCS code that had the highest CY 2012 relative payment weight, set the units to one on that HCPCS code to reflect our policy of paying only one unit of a code with a status indicator of “Q1.” We then packaged all costs for the following into a single cost for the “Q1” HCPCS code that had the highest CY 2012 relative payment weight to create a “pseudo” single procedure claim for that code: Additional units of the status indicator “Q1” HCPCS code with the highest CY 2012 relative payment weight; other codes with status indicator “Q1”; and all other packaged HCPCS codes and packaged revenue code costs. We changed the status indicator for the selected code from the data status indicator of “N” to the status indicator of the APC to which the selected procedure was assigned for further data processing and considered this claim as a major procedure claim. We used this claim in the calculation of the APC geometric mean cost for the status indicator “Q1” HCPCS code.

Similarly, if a multiple procedure minor claim contained multiple codes with status indicator “Q2” (“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 2012 relative payment weight and set the units to one on that HCPCS code to reflect our policy of paying only one unit of a code with a status indicator of “Q2.” We then packaged all costs for the following into a single cost for the “Q2” HCPCS code that had the highest CY 2012 relative payment weight to create a “pseudo” single procedure claim for that code: Additional units of the status indicator “Q2” HCPCS code with the highest CY 2012 relative payment weight; other codes with status indicator “Q2”; and other packaged HCPCS codes and packaged revenue code costs. We changed the status indicator for the selected code from a data status indicator of “N” to the status indicator of the APC to which the selected code was assigned, and we considered this claim as a major procedure claim.

If a multiple procedure minor claim contained multiple codes with status indicator “Q2” (“T-packaged”) and status indicator “Q1” (“STVX-packaged”), we selected the T-packaged status indicator “Q2” HCPCS code that had the highest relative payment weight for CY 2012 and set the units to one on that HCPCS code to reflect our policy of paying only one unit of a code with a status indicator of “Q2.” We then packaged all costs for the following into a single cost for the selected (“T packaged”) HCPCS code to create a “pseudo” single procedure claim for that code: Additional units of the status indicator “Q2” HCPCS code with the highest CY 2012 relative payment weight; other codes with status indicator “Q2”; codes with status indicator “Q1” (“STVX-packaged”); and other packaged HCPCS codes and packaged revenue code costs. We selected status indicator “Q2” HCPCS codes instead of “Q1” HCPCS codes because “Q2” HCPCS codes have higher CY 2012 relative payment weights. If a status indicator “Q1” HCPCS code had a higher CY 2011 relative payment weight, it became the primary code for the simulated single bill process. We changed the status indicator for the selected status indicator “Q2” (“T-packaged”) code from a data status indicator of “N” to the status indicator of the APC to which the selected code was assigned and we considered this claim as a major procedure claim.

We then applied our process for creating “pseudo” single procedure claims to the conditionally packaged codes that do not meet the criteria for packaging, which enabled us to create single procedure claims from them, if they met the criteria for single procedure claims. Conditionally packaged codes are identified using status indicators “Q1” and “Q2,” and are described in section XII.A. of this final rule with comment period.

Lastly, we excluded those claims that we were not able to convert to single procedure claims even after applying all of the techniques for creation of “pseudo” single procedure claims to multiple procedure major claims and to multiple procedure minor claims. As has been our practice in recent years, we also excluded claims that contained codes that were viewed as independently or conditionally bilateral and that contained the bilateral modifier (Modifier 50 (Bilateral procedure)) because the line-item cost for the code represented the cost of two units of the procedure, notwithstanding that hospitals billed the code with a unit of one.

Comment: Commenters supported the proposed process for creating “pseudo” single procedure claims.

Response: We appreciate the commenters' support and will continue to look for ways to refine the process to secure more claims data for use in calculating costs.

After consideration of the public comments we received, we are finalizing our proposals to continue to apply the methodology described above for the purpose of creating “pseudo” single procedure claims for the CY 2013 OPPS.

c. Completion of Claim Records and Geometric Mean Cost Calculations

(1) General Process

We then packaged the costs of packaged HCPCS codes (codes with status indicator “N” listed in Addendum B to this final rule with comment period (which is available via the Internet on the CMS Web site) and the costs of those lines for codes with status indicator “Q1” or “Q2” when they are not separately paid), and the costs of the services reported under packaged revenue codes in Table 2 below that appeared on the claim without a HCPCS code into the cost of the single major procedure remaining on the claim.

As noted in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66606), for the CY 2008 OPPS, we adopted an APC Panel recommendation that CMS should review the final list of packaged revenue codes for consistency with OPPS policy and ensure that future versions of the I/OCE edit accordingly. As we have in the past, and as we proposed, we are continuing to compare the final list of packaged revenue codes that we are adopting for CY 2013 to the revenue codes that the I/OCE will package for CY 2013 to ensure consistency.

In the CY 2009 OPPS/ASC final rule with comment period (73 FR 68531), we replaced the NUBC standard abbreviations for the revenue codes listed in Table 2 of the CY 2009 OPPS/ASC proposed rule with the most current NUBC descriptions of the revenue code categories and subcategories to better articulate the meanings of the revenue codes without changing the list of revenue codes. In the CY 2010 OPPS/ASC final rule with comment period (74 FR 60362 through 60363), we finalized changes to the packaged revenue code list based on our examination of the updated NUBC codes and public comment on the CY 2010 proposed list of packaged revenue codes.

For CY 2013, as we did for CY 2012, we reviewed the changes to revenue codes that were effective during CY 2011 for purposes of determining the charges reported with revenue codes but without HCPCS codes that we are packaging for CY 2013. We believe that the charges reported under the revenue codes listed in Table 2 below continue to reflect ancillary and supportive services for which hospitals report charges without HCPCS codes. Therefore, for CY 2013, we proposed to continue to package the costs that we derive from the charges reported without HCPCS code under the revenue codes displayed in Table 2 below for purposes of calculating the geometric mean costs on which the final CY 2013 OPPS/ASC payment rates are based.

We did not receive any public comments on our proposed list of packaged revenue codes. Therefore, for the reasons set forth in the proposed rule (77 FR 45079 through 45081), we are finalizing the proposed packaged revenue codes for CY 2013, without modification, which are identified in Table 2 below. We note that these revenue codes include only revenue codes that were in effect in CY 2011, the year of the claims data on which the final CY 2013 OPPS payment rates are based.

BILLING CODE 4120-01-P

BILLING CODE 4120-01-C

In accordance with our longstanding policy, we proposed to continue to exclude: (1) claims that had zero costs after summing all costs on the claim; and (2) claims containing packaging flag number 3. Effective for services furnished on or after July 1, 2004, the I/OCE assigned packaging flag number 3 to claims on which hospitals submitted token charges less than $1.01 for a service with status indicator “S” or “T” (a major separately payable service under the OPPS) for which the fiscal intermediary or MAC was required to allocate the sum of charges for services with a status indicator equaling “S” or “T” based on the relative payment weight of the APC to which each code was assigned. We do not believe that these charges, which were token charges as submitted by the hospital, are valid reflections of hospital resources. Therefore, we deleted these claims. We also deleted claims for which the charges equaled the revenue center payment (that is, the Medicare payment) on the assumption that, where the charge equaled the payment, to apply a CCR to the charge would not yield a valid estimate of relative provider cost. We proposed to continue these processes for the CY 2013 OPPS.

For the remaining claims, we then standardized 60 percent of the costs of the claim (which we have previously determined to be the labor-related portion) for geographic differences in labor input costs. We made this adjustment by determining the wage index that applied to the hospital that furnished the service and dividing the cost for the separately paid HCPCS code furnished by the hospital by that wage index. The claims accounting that we provide for the proposed and final rule contains the formula we use to standardize the total cost for the effects of the wage index. As has been our policy since the inception of the OPPS, we use the pre-reclassified wage indices for standardization because we believe that they better reflect the true costs of items and services in the area in which the hospital is located than the post-reclassification wage indices and, therefore, would result in the most accurate unadjusted geometric mean costs.

In accordance with our longstanding practice, we also proposed to exclude single and “pseudo” single procedure claims for which the total cost on the claim was outside 3 standard deviations from the geometric mean of units for each HCPCS code on the bypass list (because, as discussed above, we used claims that contain multiple units of the bypass codes).

After removing claims for hospitals with error CCRs, claims without HCPCS codes, claims for immunizations not covered under the OPPS, and claims for services not paid under the OPPS, approximately 116 million claims were left. Using these approximately 116 million claims, we created approximately 120 million single and “pseudo” single procedure claims, of which we used slightly more than 120 million single bills (after trimming out approximately 1 million claims as discussed in section II.A.1.a. of this final rule with comment period) in the CY 2013 geometric mean cost development and ratesetting.

As discussed above, the OPPS has historically developed the relative weights on which APC payments are based using APC median costs. For the CY 2013 OPPS, we proposed to calculate the APC relative payment weights using geometric mean costs; therefore, the following discussion of the 2 times rule violation and the development of the relative payment weight refers to geometric means. For more detail about the CY 2013 OPPS/ASC policy to calculate relative payment weights based on geometric means, we refer readers to section II.A.2.f. of this final rule with comment period.

We proposed to use these claims to calculate the CY 2013 geometric mean costs for each separately payable HCPCS code and each APC. The comparison of HCPCS code-specific and APC geometric mean costs determines the applicability of the 2 times rule. Section 1833(t)(2) of the Act provides that, subject to certain exceptions, the items and services within an APC group shall not be treated as comparable with respect to the use of resources if the highest median cost (or mean cost, if elected by the Secretary) for an item or service within the group is more than 2 times greater than the lowest median cost (or mean cost, if so elected) for an item or service within the same group (the 2 times rule). While we have historically applied the 2 times rule based on median costs, as part of the CY 2013 policy to develop the OPPS relative payment weights based on geometric mean costs, we also are applying the 2 times rule based on geometric mean costs. For a detailed discussion of the CY 2013 policy to develop the APC relative payment weights based on geometric mean costs, we refer readers to section II.A.2.f. of this final rule with comment period.

We note that, for purposes of identifying significant HCPCS for examination in the 2 times rule, we consider codes that have more than 1,000 single major claims or codes that have both greater than 99 single major claims and contribute at least 2 percent of the single major claims used to establish the APC geometric mean cost to be significant. This longstanding definition of when a HCPCS code is significant for purposes of the 2 times rule was selected because we believe that a subset of 1,000 claims is negligible within the set of approximately 120 million single procedure or single session claims we use for establishing geometric mean costs. Similarly, a HCPCS code for which there are fewer than 99 single bills and which comprises less than 2 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 median-based cost methodology. Under our CY 2013 policy to base the relative payment weights on geometric mean costs, we believe that this same consideration for identifying significant HCPCS codes should apply because the principles are consistent with their use in the median-based cost methodology. Unlisted codes are not used in establishing the percent of claims contributing to the APC, nor are their costs used in the calculation of the APC geometric mean. Finally, we reviewed the geometric mean costs for the services for which we pay separately under this final rule with comment period, and we reassigned HCPCS codes to different APCs where it was necessary to ensure clinical and resource homogeneity within the APCs. Section III. of this final rule with comment period includes a discussion of many of the HCPCS code assignment changes that resulted from examination of the geometric mean costs and for other reasons. The APC geometric means were recalculated after we reassigned the affected HCPCS codes. Both the HCPCS code-specific geometric means and the APC geometric means were weighted to account for the inclusion of multiple units of the bypass codes in the creation of “pseudo” single procedure claims.

Comment: Some commenters asked that CMS provide an adjustment for medical education costs under the OPPS. These commenters stated that CMS indicated that it would study the costs and payment differential among different classes of providers in the April 7, 2000 OPPS final rule but has not done so. The commenters requested that CMS conduct its own analysis and that, if that analysis showed a difference in their payment to cost ratios (similar to the comparison study performed to calibrate the cancer hospital payment adjustment) due to the unique missions of teaching hospitals, CMS should add a teaching payment adjustment under the OPPS.

Response: Unlike payment under the IPPS, the law does not specifically provide for payment for direct or indirect graduate medical education costs to be made under the OPPS. Section 1833(t)(2)(E) of the Act states that the Secretary shall establish, in a budget neutral manner “* * * other adjustments as determined to be necessary to ensure equitable payments, such as adjustments for certain classes of hospitals.” We have not found such an adjustment to be necessary to ensure equitable payments to teaching hospitals and, therefore, have not developed such an adjustment. As the commenters recognized, the cancer hospital payment adjustment discussed in section II.F. of this final rule with comment period was established based on section 1833(t)(18) of the Act. Similarly, those hospitals were permanently held harmless and continued to receive TOPs under section 1833(t)(7)(d)(ii) of the Act. Furthermore, in this final rule with comment period, we have developed OPPS relative payment weights that we believe provide appropriate and adequate payment for the complex medical services, such as new technology services and device-dependent procedures, which we understand are furnished largely by teaching hospitals. The impacts of the final CY 2013 policies, by class of hospital, are displayed in Table 57 in section XXII. of this final rule with comment period.

After consideration of the public comments we received, we are finalizing our proposed CY 2013 methodology for calculating the costs upon which the CY 2013 OPPS payment rates are based.

As we discuss in sections II.A.2.d. and II.A.2.e. and in section VIII.B. of this final rule with comment period, in some cases, APC geometric mean costs are calculated using variations of the process outlined above. Specifically, section II.A.2.d. of this final rule with comment period addresses the calculation of single APC criteria-based geometric mean costs. Section II.A.2.e. of this final rule with comment period discusses the calculation of composite APC criteria-based geometric mean costs. Section VIII.B. of this final rule with comment period addresses the methodology for calculating the geometric mean costs for partial hospitalization services.

(2) Recommendations of the Advisory Panel on Hospital Outpatient Payment Regarding Data Development

At the August 27-28, 2012 meeting of the Advisory Panel on Hospital Outpatient Payment (the Panel), we provided the Data Subcommittee with a list of all APCs fluctuating by greater than 10 percent when comparing the CY 2013 OPPS/ASC proposed rule costs based on CY 2011 claims processed through June 30, 2012, to those based on CY 2012 OPPS/ASC final rule data (CY 2010 claims processed through June 30, 2011). The Data Subcommittee reviewed the fluctuations in the APC costs and their respective weights.

At the August 27-28, 2012 Panel meeting, the Panel made a number of recommendations related to the data process. The Panel's recommendations and our responses follow.

Recommendation: The Panel recommends that the work of the Data Subcommittee continue.

CMS Response: We are accepting this recommendation.

Recommendation: The Panel recommends that Traci Rabine serve as the acting chair of the Data Subcommittee for the August 2012 HOP Panel meeting.

CMS Response: We are accepting this recommendation.

Recommendation: The Panel recommends that CMS continue to provide a list of APCs fluctuating by more than 10 percent in costs.

CMS Response: We are accepting this recommendation.

d. Calculation of Single Procedure APC Criteria-Based Costs

(1) Device-Dependent APCs

Device-dependent APCs are populated by HCPCS codes that usually, but not always, require that a device be implanted or used to perform the procedure. For a full history of how we have calculated payment rates for device-dependent APCs in previous years and a detailed discussion of how we developed the standard device-dependent APC ratesetting methodology, we refer readers to the CY 2008 OPPS/ASC final rule with comment period (72 FR 66739 through 66742). Overviews of the procedure-to-device edits and device-to-procedure edits used in ratesetting for device-dependent APCs are available in the CY 2005 OPPS final rule with comment period (69 FR 65761 through 65763) and the CY 2007 OPPS/ASC final rule with comment period (71 FR 68070 through 68071).

In the CY 2013 OPPS/ASC proposed rule (77 FR 45081 through 45082), we proposed for CY 2013 to use the standard methodology for calculating costs for device-dependent APCs that was finalized in the CY 2012 OPPS/ASC final rule with comment period (76 FR 74148 through 74151). This methodology utilizes claims data that generally represent the full cost of the required device and the most recent cost report data. Specifically, we proposed to calculate the costs for device-dependent APCs for CY 2013 using only the subset of single procedure claims from CY 2011 claims data that pass the procedure-to-device and device-to- procedure edits; do not contain token charges (less than $1.01) for devices; do not contain the “FB” modifier signifying that the device was furnished without cost to the provider, or where a full credit was received; and do not contain the “FC” modifier signifying that the hospital received partial credit for the device. The procedure-to-device edits require that when a particular procedural HCPCS code is billed, the claim must also contain an appropriate device code, while the device-to-procedure edits require that a claim that contains one of a specified set of device codes also contain an appropriate procedure code. We stated in the proposed rule that we continue to believe the standard methodology for calculating costs for device-dependent APCs gives us the most appropriate costs for device-dependent APCs in which the hospital incurs the full cost of the device. In Table 4A of the proposed rule, we listed the APCs for which we proposed to use our standard device-dependent APC ratesetting methodology for CY 2012.

Subsequent to the publication of the CY 2013 OPPS/ASC proposed rule, the AMA's CPT Editorial Panel created several new CPT codes describing services related to device-dependent APCs, to be effective beginning January 1, 2013. Our standard process for dealing with new CPT codes effective on January 1 for the upcoming calendar year is to assign each code to the APC that we believe contains services that are comparable with respect to clinical characteristics and resources required to furnish the service. The new CPT code is given a comment indicator of “NI” in Addendum B to the final rule with comment period to identify it as a new interim APC assignment for the new year and the APC assignment for the new codes is then open to public comment for 60 days following the publication of the final rule with comment period. As with all new CPT codes, we encourage interested stakeholders to review those codes identified with the “NI” in Addendum B and assigned to device-dependent APCs and submit public comments on those assignments.

Our interim assignment of some of the new CPT codes for CY 2013 to device-dependent APCs prompted us to change the titles of two APCs to reflect more accurately the clinical configurations of those APCs for CY 2013. Specifically, we assigned, on an interim basis, the following codes to device-dependent APC 0107, currently titled “Insertion of Cardioverter-Defibrillator”: CPT code 0319T (Insertion or replacement of subcutaneous implantable defibrillator system with subcutaneous electrode), 0321T (Insertion of subcutaneous implantable defibrillator pulse generator only with existing subcutaneous electrode), and 0323T (Removal of subcutaneous implantable defibrillator pulse generator with replacement of subcutaneous implantable defibrillator pulse generator only). We note that the title of APC 0108 is currently “Insertion/Replacement/Repair of AICD Leads, Generator and Pacing Electrode.” In order to streamline and simplify the titles of APCs 0107 and 0108, which both contain procedures for the implantation of cardioverter-defibrillator pulse generators, leads, and electrodes, we are revising their titles to reflect the insertion of cardioverter-defibrillators without specifying the component pieces involved. Specifically, we are revising the title of APC 0107 to read “Level I Implantation of Cardioverter-Defibrillator” and the title of APC 0108 to read “Level II Implantation of Cardioverter-Defibrillator.”

The creation of new CPT codes involving intracoronary stent placement procedures for CY 2013 also requires us to create nine new HCPCS C-codes and to delete two existing HCPCS G-codes in order to maintain the correct implementation of existing OPPS policy for CY 2013. Specifically, since CY 2003, under the OPPS, we assign coronary stent placement procedures to separate APCs based on the use of nondrug-eluting or drug-eluting stents (APC 0104 (Transcatheter Placement of Intracoronary Stents) or APC 0656 (Transcatheter Placement of Intracoronary Drug-Eluting Stents), respectively). In order to effectuate this policy, we created HCPCS G-codes G0290 (Transcatheter placement of a drug eluting intracoronary stent(s), percutaneous, with or without other therapeutic intervention, any method; single vessel) and G0291 (Transcatheter placement of a drug eluting intracoronary stent(s), percutaneous, with or without other therapeutic intervention, any method; each additional vessel) for drug-eluting intracoronary stent placement procedures that parallel existing CPT codes 92980 (Transcatheter placement of an intracoronary stent(s), percutaneous, with or without other therapeutic intervention, any method; single vessel) and 92981 (Transcatheter placement of an intracoronary stent(s), percutaneous, with or without other therapeutic intervention, any method; each additional vessel), which are used to describe nondrug-eluting intracoronary stent placement procedures. CPT codes 92980 and 92981 are assigned to APC 0104, while HCPCS codes G0290 and G0291 are assigned to APC 0656. We refer readers to the CY 2003 OPPS final rule with comment period (67 FR 66732 through 66734) for more information regarding the initial implementation of this policy.

Effective January 1, 2013, the AMA's CPT Editorial Panel is deleting CPT codes 92980 and 92981 and replacing them with the following new CPT codes:

  • CPT code 92928 (Percutaneous transcatheter placement of intracoronary stent(s), with coronary angioplasty when performed; single major coronary artery or branch), 92929 (Percutaneous transcatheter placement of intracoronary stent(s), with coronary angioplasty when performed; each additional branch of a major coronary artery (List separately in addition to code for primary procedure));
  • CPT code 92933 (Percutaneous transluminal coronary atherectomy, with intracoronary stent, with coronary angioplasty when performed; single major coronary artery or branch);
  • CPT code 92934 (Percutaneous transluminal coronary atherectomy, with intracoronary stent, with coronary angioplasty when performed; each additional branch of a major coronary artery (List separately in addition to code for primary procedure));
  • CPT code 92937 (Percutaneous transluminal revascularization of or through coronary artery bypass graft (internal mammary, free arterial, venous), any combination of intracoronary stent, atherectomy and angioplasty, including distal protection when performed; single vessel);
  • CPT code 92938 (Percutaneous transluminal revascularization of or through coronary artery bypass graft (internal mammary, free arterial, venous), any combination of intracoronary stent, atherectomy and angioplasty, including distal protection when performed; each additional branch subtended by the bypass graft (List separately in addition to code for primary procedure));
  • CPT code 92941 (Percutaneous transluminal revascularization of acute total/subtotal occlusion during acute myocardial infarction, coronary artery or coronary artery bypass graft, any combination of intracoronary stent, atherectomy and angioplasty, including aspiration thrombectomy when performed, single vessel);
  • CPT code 92943 (Percutaneous transluminal revascularization of chronic total occlusion, coronary artery, coronary artery branch, or coronary artery bypass graft, any combination of intracoronary stent, atherectomy and angioplasty; single vessel); and
  • CPT code 92944 (Percutaneous transluminal revascularization of chronic total occlusion, coronary artery, coronary artery branch, or coronary artery bypass graft, any combination of intracoronary stent, atherectomy and angioplasty; each additional coronary artery, coronary artery branch, or bypass graft (List separately in addition to code for primary procedure)).

In order to maintain the existing policy of differentiating payment for intracoronary stent placement procedures involving nondrug-eluting and drug-eluting stents, we are deleting HCPCS codes G0290 and G0291 and replacing them with the following new HCPCS C-codes to parallel the new CPT codes:

  • HCPCS code C9600 (Percutaneous transcatheter placement of drug eluting intracoronary stent(s), with coronary angioplasty when performed; single major coronary artery or branch);
  • HCPCS code C9601 (Percutaneous transcatheter placement of drug-eluting intracoronary stent(s), with coronary angioplasty when performed; each additional branch of a major coronary artery (List separately in addition to code for primary procedure));
  • HCPCS code C9602 (Percutaneous transluminal coronary atherectomy, with drug eluting intracoronary stent, with coronary angioplasty when performed; single major coronary artery or branch);
  • HCPCS code C9603 (Percutaneous transluminal coronary atherectomy, with drug-eluting intracoronary stent, with coronary angioplasty when performed; each additional branch of a major coronary artery (List separately in addition to code for primary procedure));
  • HCPCS code C9604 (Percutaneous transluminal revascularization of or through coronary artery bypass graft (internal mammary, free arterial, venous), any combination of drug-eluting intracoronary stent, atherectomy and angioplasty, including distal protection when performed; single vessel);
  • HCPCS code C9605 (Percutaneous transluminal revascularization of or through coronary artery bypass graft (internal mammary, free arterial, venous), any combination of drug-eluting intracoronary stent, atherectomy and angioplasty, including distal protection when performed; each additional branch subtended by the bypass graft (List separately in addition to code for primary procedure));
  • HCPCS code C9606 (Percutaneous transluminal revascularization of acute total/subtotal occlusion during acute myocardial infarction, coronary artery or coronary artery bypass graft, any combination of drug-eluting intracoronary stent, atherectomy and angioplasty, including aspiration thrombectomy when performed, single vessel);
  • HCPCS code C9607 (Percutaneous transluminal revascularization of chronic total occlusion, coronary artery, coronary artery branch, or coronary artery bypass graft, any combination of drug-eluting intracoronary stent, atherectomy and angioplasty; single vessel); and
  • HCPCS code C9608 (Percutaneous transluminal revascularization of chronic total occlusion, coronary artery, coronary artery branch, or coronary artery bypass graft, any combination of drug-eluting intracoronary stent, atherectomy and angioplasty; each additional coronary artery, coronary artery branch, or bypass graft (List separately in addition to code for primary procedure)).

The interim APC assignment for CPT codes 92928, 92933, 92929, 92934, 92937, 92938, 92941, 92943, and 92944 is APC 0104, and the interim APC assignment for HCPCS codes C9600, C9601, C9602, C9603, C9604, C9605, C9606, C9607, and C9608 is APC 0656 for CY 2013.

Comment: One commenter requested that CPT code 0304T (Insertion or removal and replacement of intracardiac ischemia monitoring system including imaging supervision and interpretation when performed and intra-operative interrogation and programming when performed; device only) be placed in APC 0107 (Level I Implantation of Cardioverter-Defibrillators (ICDs)), rather than APC 0090 (Insertion/Replacement of Pacemaker Pulse Generator), because CPT code 0304T describes the insertion or removal and replacement of a device, which is similar to other CPT codes assigned to APC 0107, such as CPT code 33262 (Removal of pacing cardioverter-defibrillator pulse generator with replacement of pacing cardioverter-defibrillator pulse generator; single lead system). The commenter also stated that CPT code 33224 (Insertion of pacing electrode, cardiac venous system, for left ventricular pacing, with attachment to previously placed pacemaker or pacing cardioverter-defibrillator pulse generator (including revision of pocket, removal, insertion, and/or replacement of existing generator) is better aligned with APC 0107 than with its current APC assignment of APC 0655 (Insertion/Replacement/Conversion of a Permanent Dual Chamber Pacemaker or Pacing Electrode).

Response: We disagree with the commenter's assertion that CPT codes 0304T and 33224 should be placed in APC 0107. APC 0107 includes procedures involving the insertion of a cardioverter-defibrillator, and CPT codes 0304T and 33224 do not describe such procedures.

Comment: One commenter suggested that CMS consider the assignment of different APCs for upgrades to a pacemaker or cardioverter-defibrillator based on the number of leads inserted, which can result in cost differences among procedures.

Response: The commenter did not provide specific CPT codes for pacemaker or cardioverter-defibrillator insertion procedures for us to consider. Generally speaking, however, we believe that our standard ratesetting methodology for device-dependent APCs would appropriately capture hospitals' varying costs based on the number of leads inserted during these procedures because we use data from hospital claims and cost reports that would reflect any such differences in costs.

Comment: Commenters expressed appreciation for the proposed increase in payment for the cochlear implant procedure, described by CPT code 69930 (Cochlear device implantation, with or without mastoidectomy) which is assigned to APC 0259 (Level VII ENT Procedures). However, the commenters also expressed concern that the increase does not reflect the actual cost of the procedure and device. The commenters indicated potential coding errors by major hospital facilities where claims for less expensive osseointegrated auditory device implant procedures (such as those assigned to APC 0425 (Level II Arthroplasty or Implantation with Prosthesis)) were included in the dataset used for calculation of cochlear implants, and requested that CMS review the APC 0259 source data and remove the claims that were inadvertently included as part of the original dataset to ensure the appropriate payment.

Response: We employ procedure-to-device and device-to-procedure edits to ensure that the appropriate procedures and devices are correctly billed together and those same edits are again used in modeling the OPPS payment rates for the respective device-dependent APCs. Only claims containing the appropriate procedure and device code pairings are used to model the estimated APC cost for device-dependent APCs. We also note that the cochlear implant procedure and the osseointegrated auditory device implant procedures are in different APCs; therefore, only single claims containing one of these procedures would be used to model the estimated APC cost for their respective APCs. Further, claims with multiple major procedures generally are not entered into the dataset used for calculating estimated APC costs. Therefore, we do not believe that the inclusion of claims containing both cochlear implant procedures and osseointegrated auditory device implant procedures would result in inaccurate procedure or APC cost estimations.

Comment: Some commenters pointed out an apparent discrepancy between the listed proposed payment rate for APC 0425 in Addendum B to the CY 2013 OPPS/ASC proposed rule when compared to the listed proposed payment rate for APC 0425 in the data file entitled “CY 2013 OPPS Comparison Between Proposed Geometric Mean and Median-Based Payments.” Commenters requested that CMS review its proposed payment rates and determine which proposed payment rate reflects the correct geometric mean cost for APC 0425 for use in CY 2013 OPPS ratesetting.

Some commenters also requested that CMS reconfigure APC 0425 to ensure the procedures in the APC are similar from both a cost and clinical cohesion perspective and thereby facilitate Medicare hospital outpatient payment rates that are more in line with hospitals' actual costs for orthopedic arthroplasty procedures. Specifically, the commenters argued that the osseointegrated auditory device implant procedures assigned to APC 0425, such as the procedure described by CPT code 69714 (Implantation, osseointegrated implant, temporal bone, with percutaneous attachment to external speech processor/cochlear stimulator; without mastoidectomy), are not related to the orthopaedic joint replacement procedures also assigned to APC 0425. The commenters also stated the proposed composition of APC 0425 violated the 2 times rule because CPT code 69717 (Replacement (including removal of existing device), osseointegrated implant, temporal bone, with percutaneous attachment to external speech processor/cochlear stimulator; without mastoidectomy) has a proposed mean cost of $5,382 and CPT code 25446 (Arthroplasty with prosthetic replacement; distal radius and partial or entire carpus (total wrist)) has a proposed mean cost of $15,020.

Response: We recognize the discrepancy between the proposed payment rate for APC 0425 in Addendum B to the CY 2013 OPPS/ASC proposed rule and the proposed payment rate for APC 0425 listed in the “CY 2013 OPPS Comparison Between Proposed Geometric Mean and Median-Based Payments” data file. The cost statistics used in the generation of the “CY 2013 OPPS Comparison Between Proposed Geometric Mean and Median-Based Payments” data file did not reflect the final configuration of the proposed CY 2013 OPPS relative payment weights; thus, the proposed payment rate reflected in that data file was inaccurate.

We believe that the current configuration of APC 0425 is appropriate as all procedures within the APC share clinical and resource similarity. Specifically, we disagree with the commenters who asserted that the osseointegrated auditory device implant procedures assigned to APC 0425 are not related to the orthopaedic joint replacement procedures also assigned to APC 0425. As we have stated in the past (73 FR 68539), all procedures assigned to APC 0425, including the osseointegrated auditory device implant procedures, involve the implantation of a prosthetic device into bone. We also note the assignments of CPT codes 69717 and 25446 to APC 0425 do not violate the 2 times rule as the commenters claimed. As discussed in section III.B.2. of the proposed rule and this final rule with comment period, we consider only those HCPCS codes that are significant, based on the number of claims, in making this determination. For purposes of identifying significant HCPCS codes for examination in the 2 times rule, we consider codes that have more than 1,000 single major claims or codes that have both greater than 99 single major claims and contribute at least 2 percent of the single major claims used to establish the APC cost to be significant. CPT codes 69717 and 25446 do not meet this criteria and their inclusion in the same APC, therefore, does not violate the 2 times rule because they are not considered significant.

Comment: One commenter stated that CMS should study further the claims for any device-dependent APC for which the calculated proposed payment reduction would be greater than 10 percent and take action to correct issues that may artificially reduce these payments.

Response: We routinely examine all APCs with a greater than 10 percent fluctuation in costs as part of our annual rulemaking process.

Comment: Commenters supported CMS' determination that urology procedures in APCs 0385 (Level I Prosthetic Urological Procedures), 0386 (Level II Prosthetic Urological Procedures), and 0674 (Prostate Cryoablation) should be categorized as device-dependent APCs. The commenters also requested the mandatory reporting of all HCPCS device C-codes on hospital claims for services involving devices and asserted that CMS should require complete and correct coding for packaged services. The commenters urged CMS to continue to promote device coding edits, while encouraging hospitals to remain vigilant in reporting the costs of performing device related services, and educating hospitals on the importance of accurate coding for devices, supplies, and other technologies.

Response: We appreciate the commenters' support and will continue to promote device coding edits, as well as encourage hospitals to report all costs in performing device related services. As we have stated in the past (73 FR68535 through 68536 and 74 FR 60367), we agree that accurate reporting of device, supply, and technology charges will help to ensure that these items are appropriately accounted for in future years' OPPS payment rates. As we stated in the CY 2009 OPPS/ASC final rule with comment period (73 FR 68575), we strongly encourage hospitals to report a charge for each packaged service they furnish, either by billing the packaged HCPCS code and a charge for that service if separate reporting is consistent with CPT and CMS instructions, by increasing the charge for the separately paid associated service to include the charge for the packaged service, or by reporting the charge for the packaged service with an appropriate revenue code but without a HCPCS code. Any of these means of charging for the packaged service will result in the cost of the packaged service being incorporated into the cost we estimate for the separately paid service. If a HCPCS code is not reported when a packaged service is provided, we acknowledge that it can be challenging to specifically track the utilization patterns and resource cost of the packaged service itself. However, we have no reason to believe that hospitals have not considered the cost of the packaged service in reporting charges for the independent, separately paid service.

After consideration of the public comments we received, we are finalizing our proposed policy to use the standard methodology for calculating costs for device-dependent APCs for CY 2013 that was finalized in the CY 2012 OPPS/ASC final rule with comment period.

Table 3 below lists the APCs for which we used our standard device-dependent APC ratesetting methodology for CY 2013. We refer readers to Addendum A to this final rule with comment period (which is available via the Internet on the CMS Web site) for the payment rates for these device-dependent APCs for CY 2013.

BILLING CODE 4120-01-P

(2) Blood and Blood Products

Since the implementation of the OPPS in August 2000, we have made separate payments for blood and blood products through APCs rather than packaging payment for them into payments for the procedures with which they are administered. Hospital payments for the costs of blood and blood products, as well as for the costs of collecting, processing, and storing blood and blood products, are made through the OPPS payments for specific blood product APCs.

In the CY 2013 OPPS/ASC proposed rule (77 FR 45082 through 45083), we proposed to continue for CY 2013 to establish payment rates for blood and blood products using our blood-specific CCR methodology, which utilizes actual or simulated CCRs from the most recently available hospital cost reports to convert hospital charges for blood and blood products to costs. This methodology has been our standard ratesetting methodology for blood and blood products since CY 2005. It was developed in response to data analysis indicating that there was a significant difference in CCRs for those hospitals with and without blood-specific cost centers, and past public comments indicating that the former OPPS policy of defaulting to the overall hospital CCR for hospitals not reporting a blood-specific cost center often resulted in an underestimation of the true hospital costs for blood and blood products. Specifically, in order to address the differences in CCRs and to better reflect hospitals' costs, we proposed to continue to simulate blood CCRs for each hospital that does not report a blood cost center by calculating the ratio of the blood-specific CCRs to hospitals' overall CCRs for those hospitals that do report costs and charges for blood cost centers. We would then apply this mean ratio to the overall CCRs of hospitals not reporting costs and charges for blood cost centers on their cost reports in order to simulate blood-specific CCRs for those hospitals. We calculated the costs upon which the proposed CY 2013 payment rates for blood and blood products were based using the actual blood-specific CCR for hospitals that reported costs and charges for a blood cost center and a hospital-specific simulated blood-specific CCR for hospitals that did not report costs and charges for a blood cost center. We noted that we used geometric mean unit costs for each blood and blood product to calculate the proposed payment rates, consistent with the methodology we proposed for other items and services, discussed in section II.A.2.f. of the proposed rule and this final rule with comment period.

We stated in the proposed rule that we continue to believe the hospital-specific, blood-specific CCR methodology best responds to the absence of a blood-specific CCR for a hospital than alternative methodologies, such as defaulting to the overall hospital CCR or applying an average blood-specific CCR across hospitals. Because this methodology takes into account the unique charging and cost accounting structure of each hospital, we stated in the proposed rule that we believe that it yields more accurate estimated costs for these products.

Comment: Some commenters expressed concern that the proposed APC payment rates for some blood products are less than the acquisition costs of those products, citing a published study of a national survey of blood acquisition and overhead costs. According to the commenters, the safety and availability of blood may be jeopardized without adequate payment. The commenters asked that CMS formally consider and evaluate potential alternative methodologies for setting APC payment rates for blood products, preferably by seeking input from affected stakeholders. The commenters also stated that the use of the geometric mean methodology to calculate blood costs would result in lower payment rates compared to the use of median costs to calculate the payment rates for blood and blood products and urged CMS to use the median cost instead.

Response: As we have stated in the past (75 FR 71838 through 71839 and 76 FR 74152), we continue to believe that using blood-specific CCRs applied to hospital claims data results in payment that appropriately reflect hospitals' relative costs of providing blood and blood products as reported to us by hospitals. We will consider any information presented to us from affected stakeholders regarding alternative ratesetting methodologies. We address the use of geometric mean costs to calculate blood payment rates in section II.A.2.c. of this final rule with comment period.

Comment: One commenter expressed concern regarding coding and payment for pre-storage pooled, leukocyte reduced platelets. According to the commenter, hospitals currently bill for pre-storage pooled, leukocyte reduced platelets using HCPCS code P9031 (Platelets, leukocytes reduced, each unit) based on the number of platelet concentrates (PCs) that are combined to create one unit of the blood product. The commenter stated that because the number of PC units used to make a therapeutic dose of pre-storage pooled, leukocyte reduced platelets is variable, blood centers must notify hospitals of the number of PCs in each therapeutic dose for the hospital's billing purposes, even though it does not affect the cost of the product to the hospital.

According to the commenter, a new technology exists that can make a unit of pre-storage pooled, leukocyte reduced platelets out of fewer PCs. However, the commenter expressed concern that the current coding and payment based on the use of HCPCS code P9031 unfairly and inappropriately disadvantages the use of this technology. The commenter indicated that where a greater number of PCs are needed to make a unit of pre-storage pooled, leukocyte reduced platelets, the hospital may end up being paid at a rate that significantly exceeds the cost of the product. However, according to the commenter, where the blood center can make the pre-storage pooled, leukocyte reduced platelets using fewer PCs, the hospital may end up receiving payment that is not sufficient to cover the cost of the product.

The commenter stated that a separate code will be necessary to differentiate pre-storage pooled, leukocyte reduced platelets from other platelet products, and that an application for a unique HCPCS code is currently pending. The commenter urged CMS, for OPPS purposes, to take action to ensure appropriate payment for pre-storage pooled, leukocyte reduced platelets, regardless of whether a new HCPCS code is created.

Response: The outcome of the commenter's application for a unique HCPCS code for pre-storage pooled, leukocyte reduced platelets is beyond the scope of OPPS rulemaking. We note that it is an expected and appropriate outcome of a prospective payment system that hospitals would receive payments that are less than their costs in some cases and exceed their costs in other cases, as the commenter described is occurring in the case of pre-storage pooled, leukocyte reduced platelets. Therefore, we do not believe that it is necessary for us to take action to ensure appropriate payment for pre-storage pooled, leukocyte reduced platelets at this time. However, we are interested in hearing from other stakeholders regarding the current incentives and disincentives that exist in the marketplace for pre-storage pooled, leukocyte reduced platelets and invite public comment on payment for the blood product described by HCPCS code P9031 in this final rule with comment period.

After consideration of the public comments we received, we are finalizing our proposed policy, without modification, to continue to establish payment rates for blood and blood products using our blood-specific CCR methodology, which utilizes actual or simulated CCRs from the most recently available hospital cost reports to convert hospital charges for blood and blood products to costs, for CY 2013. We continue to believe that this methodology in CY 2013 will result in costs for blood and blood products that appropriately reflect the relative estimated costs of these products for hospitals without blood cost centers and, therefore, for these blood products in general.

We refer readers to Addendum B to this final rule with comment period (which is available via the Internet on the CMS Web site) for the final CY 2013 payment rates for blood and blood products (which are identified with status indicator “R”). For a more detailed discussion of the blood-specific CCR methodology, we refer readers to the CY 2005 OPPS proposed rule (69 FR 50524 through 50525). For a full history of OPPS payment for blood and blood products, we refer readers to the CY 2008 OPPS/ASC final rule with comment period (72 FR 66807 through 66810).

(3) Brachytherapy Sources

Section 1833(t)(2)(H) of the Act, as added by section 621(b)(2)(C) of Public Law 108-173 (MMA), mandated the creation of additional groups of covered OPD services that classify devices of brachytherapy consisting of a seed or seeds (or radioactive source) (“brachytherapy sources”) separately from other services or groups of services. The additional groups must reflect the number, isotope, and radioactive intensity of the brachytherapy sources furnished and must include separate groups for palladium-103 and iodine-125 sources. For the history of OPPS payment for brachytherapy sources, we refer readers to prior OPPS proposed and final rules. As we have stated previously (72 FR 66780, 73 FR 41502, 74 FR 60533 through 60534, 75 FR 71978, and 76 FR 74160), we believe that adopting the general OPPS prospective payment methodology for brachytherapy sources is appropriate for a number of reasons. The general OPPS payment methodology uses costs based on claims data to set the relative payment weights for hospital outpatient services. This payment methodology results in more consistent, predictable, and equitable payment amounts per source across hospitals by averaging the extremely high and low values, in contrast to payment based on hospitals' charges adjusted to cost. We believe that the OPPS prospective payment methodology, as opposed to payment based on hospitals' charges adjusted to cost, has provided hospitals with incentives for efficiency in the provision of brachytherapy services to Medicare beneficiaries. Moreover, this approach is consistent with our payment methodology for the vast majority of items and services paid under the OPPS.

Therefore, in the CY 2013 OPPS/ASC proposed rule (77 FR 45087), we proposed to use the costs from CY 2011 claims data for setting the proposed CY 2013 payment rates for brachytherapy sources, as we proposed for most other items and services that will be paid under the CY 2013 OPPS. We based the proposed rates for brachytherapy sources using geometric mean unit costs for each source, consistent with the methodology proposed for other items and services, discussed in section II.A.2.f. of the proposed rule. We proposed to continue the other payment policies for brachytherapy sources we finalized and first implemented in the CY 2010 OPPS/ASC final rule with comment period (74 FR 60537). We proposed to pay for the stranded and non-stranded NOS codes, HCPCS codes C2698 and C2699, at a rate equal to the lowest stranded or non-stranded prospective payment rate for such sources, respectively, on a per source basis (as opposed, for example, to a per mCi), which is based on the policy we established in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66785). We also proposed to continue the policy we first implemented in the CY 2010 OPPS/ASC final rule with comment period (74 FR 60537) regarding payment for new brachytherapy sources for which we have no claims data, based on the same reasons we discussed in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66786; which was superseded for a period of time by section 142 of Pub. L. 110-275). That policy is intended to enable us to assign new HCPCS codes for new brachytherapy sources to their own APCs, with prospective payment rates set based on our consideration of external data and other relevant information regarding the expected costs of the sources to hospitals.

Consistent with our policy regarding APC payments made on a prospective basis, as we did for CY 2011 and CY 2012, we proposed to subject brachytherapy sources to outlier payments under section 1833(t)(5) of the Act, and also to subject brachytherapy source payment weights to scaling for purposes of budget neutrality. Hospitals can receive outlier payments for brachytherapy sources if the costs of furnishing brachytherapy sources meet the criteria for outlier payment specified at 42 CFR 419.43(d). In addition, implementation of prospective payment for brachytherapy sources provides opportunities for eligible hospitals to receive additional payments in CY 2013 under certain circumstances through the 7.1 percent rural adjustment, as described in section II.E. of the proposed rule and this final rule with comment period.

We referred readers to Addendum B to the proposed rule (which was available via the Internet on the CMS Web site) for the proposed CY 2013 payment rates for brachytherapy sources, identified with status indicator “U.” We invited public comment on this proposed policy and also requested recommendations for new HCPCS codes to describe new brachytherapy sources consisting of a radioactive isotope, including a detailed rationale to support recommended new sources. In the proposed rule, we provided an appropriate address for receipt of these recommendations; the address is repeated at the end of this section. We indicated that we will continue to add new brachytherapy source codes and descriptors to our systems for payment on a quarterly basis.

Comment: A number of commenters opposed our proposal to base the payment for brachytherapy sources on geometric mean costs, while other commenters supported the proposal. Commenters also addressed other payment issues related to brachytherapy:

First, some commenters claimed that there are longstanding problems with OPPS claims data for brachytherapy source payment. For example, commenters stated that high dose rate (HDR) sources can be used to treat multiple patients because they decay over a 90-day period. The commenters stated that, as a result, the per source cost depends on the number of patients treated as well as the number of treatments and the intensity of the treatments within the 90-day period, making adequate payment for all hospitals difficult. Commenters asserted, as further examples of problems with our claims data, that our claims data continue to show a huge variation in unit costs on claims across hospitals; that more than half of the brachytherapy APCs have proposed payment rates based on 50 or fewer hospitals; and that our claims data contain rank order anomalies between high-activity palladium-103 (HCPCS code C2635) and low-activity palladium-103 sources (HCPCS codes 2640 and C2641), claiming that high-activity palladium-103 always costs more than low-activity palladium-103.

Second, commenters stated that brachytherapy source payments proposed for CY 2013 are unstable and fluctuate significantly from CY 2012 levels. They expressed concern about unpredictable changes in payment rates for brachytherapy sources from year to year, stating that proposed rates for some sources would change significantly, ranging from a decrease of 14.2 percent for HCPCS code C2643 (Brachytherapy source, non-stranded, cesium-131, per source) to an increase of 216 percent for HCPCS code C1716 (Brachytherapy source, non-stranded, gold-198, per source).

Response: In response to the commenters' concerns regarding the proposal to base payment for brachytherapy sources on geometric mean cost, we refer readers to section II.A.2.f. of this final rule with comment period, where we address the use of the geometric means methodology for determining OPPS payments for brachytherapy sources for CY 2013.

We disagree with the commenters who stated that the CY 2013 proposed payment rates for brachytherapy sources based on geometric mean cost would change payment levels significantly from the CY 2012 payment rates. While the commenters are correct that the proposed CY 2013 payment rate changes range from −14.2 to 216 percent, when we compare the CY 2013 proposed payment rates to the CY 2012 final payment rates, we find that 10 of the 16 brachytherapy source codes will receive increases or decreases of less than 10 percent, indicating stability for the majority of the brachytherapy sources. Moreover, when we compare the CY 2013 proposed payment rates to the CY 2012 final payment rates, we find that 10 of the 16 brachytherapy source codes will receive increased payment amounts per source, while 6 of the 16 codes will receive decreased payments per source.

With regard to the commenters who articulated concerns about perceived longstanding problems such as variability of brachytherapy source payment rates (which they have repeatedly opined in prior years), we are pleased that, unlike in past years, the commenters did not express objection to prospective payment for brachytherapy sources. As we stated previously (72 FR 66782, 74 FR 60534, 75 FR 71979, and 76 FR 74161), we believe that our per-source payment methodology specific to each source's radioisotope, radioactive intensity, and stranded or non-stranded configuration, supplemented by payment based on the number of sources used in a specific clinical case, adequately accounts for the major expected sources of variability across treatments. As we also explained previously (72 FR 66782, 74 FR 60535, and 75 FR 71979), a prospective payment system such as the OPPS relies on the concept of averaging, where the payment may be more or less than the estimated cost of providing a service for a particular patient, but with the exception of outlier cases, it is adequate to ensure access to appropriate care. In the case of brachytherapy sources for which the law requires separate payment groups, without packaging, the costs of these individual items could be expected to show greater variation than some other APCs under the OPPS because higher variability in costs for some component items and services is not balanced with lower variability in costs for other component items and services and because relative weights are typically estimated using a smaller set of claims.

As we have stated previously (75 FR 71979 and 76 FR 74161), under the budget neutral provision for the OPPS, it is the relativity of costs of services, not their absolute costs, that is important, and we believe that brachytherapy sources are appropriately paid according to the standard OPPS payment approach. Furthermore, some sources may have costs and payment rates based on 50 or fewer hospitals because it is not uncommon for OPPS prospective payment rates to be based on claims from a relatively small number of hospitals that furnished the service in the year of claims data available for the OPPS update year. Fifty hospitals may report hundreds of brachytherapy source claims for many cases and comprise the universe of hospitals using particular low-volume sources, for which we are required to pay separately by statute. Further, our methodology for estimating costs for brachytherapy sources utilizes all line-item charges for those sources, which allows us to use all hospital reported charge and estimated cost information to set payment rates for these items. Therefore, no brachytherapy source claims are lost. We believe that prospective payment rates based on claims from those hospitals furnishing a particular source appropriately reflect the cost of that source for hospitals.

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

As we indicated in the CYs 2011 and 2012 OPPS/ASC final rules with comment period (75 FR 71980 and 76 FR 74162, respectively), we agree that high dose rate (HDR) brachytherapy sources such as HDR iridium-192 have a fixed active life and must be replaced every 90 days; as a result, hospitals' per-treatment cost for the source would be dependent on the number of treatments furnished per source. The source cost must be amortized over the life of the source. Therefore, in establishing their charges for HDR iridium-192, we expect hospitals to project the number of treatments that would be provided over the life of the source and establish their charges for the source accordingly, as we have stated previously (72 FR 66783, 74 FR 60535, 75 FR 71980, and 76 FR 74162). For most of these OPPS services, our practice is to establish prospective payment rates based on the costs from hospitals' claims data to provide incentives for efficient and cost effective delivery of these services.

Comment: One commenter requested that CMS establish appropriate payment for HCPCS code A9527 (Iodine, I-125, sodium iodide solution, therapeutic, per millicurie (mCi)), claiming that the source has not been available for patients from June 2010 to July 2012, when it became available for purchase by providers. The commenter stated that the claims from two hospitals that reported HCPCS code A9527 are erroneous. The commenter requested that CMS use external data based upon actual hospital invoices to assign payment for HCPCS code A9527, which, according to the commenter, cost hospitals in CY 2012 $28.00 per millicurie (mCi), which is above the proposed payment rate of $20.86.

Response: We have been paying for I-125 brachytherapy solution since 2003, both as HCPCS code A9527 and its predecessor code in the OPPS, C2632 (Brachytherapy solution, iodine-125, per mCi). Our claims data over the period of 2004 through 2011 show a consistent range of costs of $16.83 to $29.42 per mCi, with several thousand units of claims in most of those years. The claims data for HCPCS code A9527 reflect claims for 8 providers, rather than 2 as indicated by the commenter. Therefore, we believe that we are obtaining adequate and consistent data on HCPCS code A9527. We will maintain our use of claims data for HCPCS code A9527 in our OPPS ratesetting for CY 2013.

Comment: One commenter requested that CMS add a new C-code and APC for a high-activity cesium-131 brachytherapy source, which is designed to generate isotropic emission of therapeutic radiation and to be used primarily for the treatment of head and neck and eye cancer.

Response: We appreciate the commenter informing us of a new high-activity cesium-131 source. However, our evaluation process of new sources for addition to our set of codes is beyond the scope of this rulemaking. As we state elsewhere in this final rule with comment period, and in previous rules, such as the CY 2012 OPPS/ASC final rule with comment period (76 FR 74163), we ask parties to submit recommendations to us for new HCPCS codes to describe new brachytherapy sources consisting of a radioactive isotope, including a detailed rationale to support recommended new sources. We suggest to the commenter to send its recommendation for this new brachytherapy source, along with the detailed rationale to support the new source, to the address provided at the end of this section. We will continue to add new brachytherapy source codes and descriptors to our systems on a quarterly basis.

Comment: One commenter supported CMS' proposal to continue the policy of paying for new sources for which we have no claims data, with prospective payment rates based on the consideration of external data as well as other relevant information. The commenter expressed appreciation for CMS' efforts to establish appropriate payment rates for brachytherapy sources in a timely manner, and recommended that CMS finalize this proposal.

Response: We appreciate the support and recognition of our efforts to provide appropriate and timely payment. We are finalizing our proposal to pay for new sources using external data and other relevant information.

After consideration of the public comments we received, we are finalizing our proposal to pay for brachytherapy sources at prospective payment rates based on their source-specific geometric mean costs for CY 2013. We refer readers to Addendum B to this final rule with comment period (which is available via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html) for the final CY 2013 payment rates for brachytherapy sources, identified with status indicator “U.” We also are finalizing our proposals to continue our policies regarding payment for NOS codes for stranded and non-stranded sources and new brachytherapy sources for which we have no claims data. Specifically, we are finalizing our proposals to continue payment for stranded and non-stranded NOS codes, HCPCS codes C2698 and C2699, at a rate equal to the lowest stranded or non-stranded prospective payment for such sources, respectively, as discussed in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66786); and our proposal to assign HCPCS codes for new brachytherapy sources to their own APCs, with payment rates based on consideration of external data and other relevant information, in the absence of claims data. Once claims data are available, our standard ratemaking process will be applied to the calculation of the cost for the new brachytherapy source.

Consistent with our policy regarding APC payments made on a prospective basis, we are finalizing our proposal to subject the cost of brachytherapy sources to the outlier provision of section 1833(t)(5) of the Act, and also to subject brachytherapy source payment relative weights to scaling for purposes of budget neutrality.

As stated in the proposed rule (77 FR 45087), we continue to invite hospitals and other parties to submit recommendations to us for new HCPCS codes to describe new brachytherapy sources consisting of a radioactive isotope, including a detailed rationale to support recommended new sources. Such recommendations should be directed to the Division of Outpatient Care, Mail Stop C4-05-17, Centers for Medicare and Medicaid Services, 7500 Security Boulevard, Baltimore, MD 21244. We will continue to add new brachytherapy source codes and descriptors to our systems for payment on a quarterly basis.

e. Calculation of Composite APC Criteria-Based Costs

As discussed in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66613), we believe it is important that the OPPS enhance incentives for hospitals to provide necessary, high quality care and as efficiently as possible. For CY 2008, we developed composite APCs to provide a single payment for groups of services that are typically performed together during a single clinical encounter and that result in the provision of a complete service. Combining payment for multiple, independent services into a single OPPS payment in this way enables hospitals to manage their resources with maximum flexibility by monitoring and adjusting the volume and efficiency of services themselves. An additional advantage to the composite APC model is that we can use data from correctly coded multiple procedure claims to calculate payment rates for the specified combinations of services, rather than relying upon single procedure claims which may be low in volume and/or incorrectly coded. Under the OPPS, we currently have composite policies for extended assessment and management services, low dose rate (LDR) prostate brachytherapy, cardiac electrophysiologic evaluation and ablation services, mental health services, multiple imaging services, and cardiac resynchronization therapy services. We refer readers to the CY 2008 OPPS/ASC final rule with comment period for a full discussion of the development of the composite APC methodology (72 FR 66611 through 66614 and 66650 through 66652) and the CY 2012 OPPS/ASC final rule with comment period (76 FR 74163) for more recent background.

In the CY 2013 OPPS/ASC proposed rule (77 FR 45087 through 45094), we proposed for CY 2013 to continue our composite policies for extended assessment and management services, LDR prostate brachytherapy, cardiac electrophysiologic evaluation and ablation services, mental health services, multiple imaging services, and cardiac resynchronization therapy services, as discussed in sections II.A.2.e.(1), II.A.2.e.(2), II.A.2.e.(3), II.A.2.e.(4), II.A.2.e.(5), and II.A.2.e.(6), respectively, of the proposed rule.

Comment: One commenter encouraged CMS to create payments that drive hospitals to develop low cost deliveries of care instead of rewarding them for excess deliveries of care, such as beneficiaries receiving up to three CT scans in a single emergency department visit.

Response: We agree with the commenter that it is important to create payment methodologies that encourage efficiency. As we have stated in the past, we believe that composite APCs enable hospitals to manage their resources with maximum flexibility by monitoring and adjusting the volume and efficiency of services themselves. With respect to CT scans in particular, as we discuss in section II.A.2.e.(5) of this final rule with comment period, we provide a single payment each time a hospital bills more than one CT on the same date of service.

The final composite policies for extended assessment and management services, LDR prostate brachytherapy, cardiac electrophysiologic evaluation and ablation services, mental health services, multiple imaging services, and cardiac resynchronization therapy services are discussed in the following sections (II.A.2.e.(1), II.A.2.e.(2), II.A.2.e.(3), II.A.2.e.(4), II.A.2.e.(5), and II.A.2.e.(6), respectively) of this final rule with comment period.

(1) Extended Assessment and Management Composite APCs (APCs 8002 and 8003)

In the CY 2013 OPPS/ASC proposed rule (77 FR 45088), we proposed to continue to include composite APC 8002 (Level I Extended Assessment and Management Composite) and composite APC 8003 (Level II Extended Assessment and Management Composite) in the OPPS for CY 2013. Beginning in CY 2008, we created these two composite APCs to provide payment to hospitals in certain circumstances when extended assessment and management of a patient occur (an extended visit). In most circumstances, observation services are supportive and ancillary to the other services provided to a patient. In the circumstances when observation care is provided in conjunction with a high level visit or direct referral and is an integral part of a patient's extended encounter of care, payment is made for the entire care encounter through one of the two composite APCs as appropriate. We refer readers to the CY 2012 OPPS/ASC final rule with comment period (76 FR 74163 through 74165) for a full discussion of this longstanding policy.

For CY 2013, we proposed to continue the extended assessment and management composite APC payment methodology and criteria for APCs 8002 and 8003 that we finalized for CYs 2009 through 2012. We continue to believe that the composite APCs 8002 and 8003 and related policies provide the most appropriate means of paying for these services. We also proposed to calculate the costs for APCs 8002 and 8003 using the same methodology that we used to calculate the costs for composite APCs 8002 and 8003 for the CY 2008 OPPS (72 FR 66649). That is, we proposed to use all single and “pseudo” single procedure claims from CY 2011 that met the criteria for payment of each composite APC and apply the standard packaging and trimming rules to the claims before calculating the CY 2013 costs. The proposed CY 2013 cost resulting from this methodology for composite APC 8002 was approximately $446, which was calculated from 17,072 single and “pseudo” single claims that met the required criteria. The proposed CY 2013 cost for composite APC 8003 was approximately $813, which was calculated from 255,231 single and “pseudo” single claims that met the required criteria.

We did not receive any public comments on this proposal. We are finalizing our proposed policy, without modification, to calculate the costs for APCs 8002 and 8003 using the same methodology that we used to calculate the costs for composite APCs 8002 and 8003 for the CY 2008 OPPS (72 FR 66649). The final CY 2013 cost resulting from this methodology for composite APC 8002 is approximately $453, which was calculated from 19,028 single and “pseudo” single claims that met the required criteria. The final CY 2013 cost for composite APC 8003 is approximately $821, which was calculated from 284,861 single and “pseudo” single claims that met the required criteria.

At its August 2012 meeting, the Advisory Panel on Hospital Outpatient Payment (the Panel) recommended that CMS continue to report clinic/emergency department visit and observation claims data and, if CMS identifies changes in patterns of utilization or cost, that CMS bring those issues to the Visits and Observation Subcommittee. Additionally, the Panel recommended that CMS examine the costs and frequency for Level I and Level II Extended Assessment and Management Composite APCs associated with greater than 24 hours of observation, if available, and report the findings to the Visits and Observation Subcommittee. The Panel recommended that Scott Manaker, M.D., Ph.D., be named the chair of the Visits and Observation Subcommittee. The Panel recommended that the work of the Visits and Observation Subcommittee continue. We are accepting these recommendations and will provide the requested data to the Panel at a future meeting.

(2) Low Dose Rate (LDR) Prostate Brachytherapy Composite APC (APC 8001)

LDR prostate brachytherapy is a treatment for prostate cancer in which hollow needles or catheters are inserted into the prostate, followed by permanent implantation of radioactive sources into the prostate through the needles/catheters. At least two CPT codes are used to report the composite treatment service because there are separate codes that describe placement of the needles/catheters and the application of the brachytherapy sources: CPT code 55875 (Transperineal placement of needles or catheters into prostate for interstitial radioelement application, with or without cystoscopy) and CPT code 77778 (Interstitial radiation source application; complex), which are generally present together on claims for the same date of service in the same operative session. In order to base payment on claims for the most common clinical scenario, and to further our goal of providing payment under the OPPS for a larger bundle of component services provided in a single hospital encounter, beginning in CY 2008, we began providing a single payment for LDR prostate brachytherapy when the composite service, reported as CPT codes 55875 and 77778, is furnished in a single hospital encounter. We based the payment for composite APC 8001 (LDR Prostate Brachytherapy Composite) on the cost derived from claims for the same date of service that contain both CPT codes 55875 and 77778 and that do not contain other separately paid codes that are not on the bypass list. We refer readers to the CY 2008 OPPS/ASC final rule with comment period (72 FR 66652 through 66655) for a full history of OPPS payment for LDR prostate brachytherapy and a detailed description of how we developed the LDR prostate brachytherapy composite APC.

In the CY 2013 OPPS/ASC proposed rule (77 FR 45088 through 45089), we proposed for CY 2013 to continue to pay for LDR prostate brachytherapy services using the composite APC methodology proposed and implemented for CY 2008 through CY 2012. That is, we proposed to use CY 2011 claims on which both CPT codes 55875 and 77778 were billed on the same date of service with no other separately paid procedure codes (other than those on the bypass list) to calculate the payment rate for composite APC 8001. Consistent with our CY 2008 through CY 2012 practice, we proposed not to use the claims that met these criteria in the calculation of the costs for APC 0163 (Level IV Cystourethroscopy and Other Genitourinary Procedures) and APC 0651 (Complex Interstitial Radiation Source Application), the APCs to which CPT codes 55875 and 77778 are assigned, respectively. We proposed to continue to calculate the costs for APCs 0163 and 0651 using single and “pseudo” single procedure claims. We stated that we believe that this composite APC contributes to our goal of creating hospital incentives for efficiency and cost containment, while providing hospitals with the most flexibility to manage their resources. We also stated that we continue to believe that data from claims reporting both services required for LDR prostate brachytherapy provide the most accurate cost upon which to base the composite APC payment rate.

Using a partial year of CY 2011 claims data available for the CY 2013 proposed rule, we were able to use 650 claims that contained both CPT codes 55875 and 77778 to calculate the cost upon which the proposed CY 2013 payment for composite APC 8001 was based. The proposed cost for composite APC 8001 for CY 2013 was approximately $3,362.

Comment: A few commenters supported the proposed payment methodology and policy for APC 8001. The commenters also supported the continued use of the LDR prostate brachytherapy composite APC methodology and the proposed increase in payment for CY 2013.

Response: We appreciate the commenters' support.

We are finalizing, without modification, our proposed policy for composite APC 8001. Using a full year of CY 2011 claims data available for this CY 2013 final rule with comment period, we were able to use 677 claims that contained both CPT codes 55875 and 77778 to calculate the cost upon which the final CY 2013 payment for composite APC 8001 is based. The final cost for composite APC 8001 for CY 2013 is approximately $3,348.

(3) Cardiac Electrophysiologic Evaluation and Ablation Composite APC (APC 8000)

Effective January 1, 2008, we established APC 8000 (Cardiac Electrophysiologic Evaluation and Ablation Composite) to pay for a composite service made up of at least one specified electrophysiologic evaluation service and one specified electrophysiologic ablation service. Correctly coded claims for these services often include multiple codes for component services that are reported with different CPT codes and that, prior to CY 2008, were always paid separately through different APCs (specifically, APC 0085 (Level II Electrophysiologic Evaluation), APC 0086 (Ablate Heart Dysrhythm Focus), and APC 0087 (Cardiac Electrophysiologic Recording/Mapping)). Calculating a composite APC for these services allowed us to utilize many more claims than were available to establish the individual APC costs for these services, and advanced our stated goal of promoting hospital efficiency through larger payment bundles. In order to calculate the cost upon which the payment rate for composite APC 8000 is based, we used multiple procedure claims that contained at least one CPT code from Group A for evaluation services and at least one CPT code from Group B for ablation services reported on the same date of service on an individual claim. Table 9 in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66656) identified the CPT codes that are assigned to Groups A and B. For a full discussion of how we identified the Group A and Group B procedures and established the payment rate for the cardiac electrophysiologic evaluation and ablation composite APC, we refer readers to the CY 2008 OPPS/ASC final rule with comment period (72 FR 66655 through 66659). Where a service in Group A is furnished on a date of service that is different from the date of service for a CPT code in Group B for the same beneficiary, payments are made under the appropriate single procedure APCs and the composite APC does not apply.

In the CY 2013 OPPS/ASC proposed rule (77 FR 45089), we proposed for CY 2013 to continue to pay for cardiac electrophysiologic evaluation and ablation services using the composite APC methodology proposed and implemented for CY 2008 through CY 2012. We stated that we continue to believe that the cost for these services calculated from a high volume of correctly coded multiple procedure claims would result in an accurate and appropriate proposed payment for cardiac electrophysiologic evaluation and ablation services when at least one evaluation service is furnished during the same clinical encounter as at least one ablation service. Consistent with our practice since CY 2008, we proposed not to use the claims that met the composite payment criteria in the calculation of the costs for APCs 0085 and 0086, to which the CPT codes in both Groups A and B for composite APC 8000 are otherwise assigned. We proposed that the costs for APCs 0085 and 0086 would continue to be calculated using single procedure claims. For CY 2013, using a partial year of CY 2011 claims data available for the proposed rule we were able to use 11,358 claims containing a combination of Group A and Group B CPT codes to calculate a proposed cost of approximately $11,458 for composite APC 8000.

Subsequent to the publication of the CY 2013 OPPS/ASC proposed rule, the AMA's CPT Editorial Panel created five new CPT codes describing cardiac electrophysiologic evaluation and ablation services, to be effective January 1, 2013. These five new codes are:

  • CPT code 93653 (Comprehensive electrophysiologic evaluation including insertion and repositioning of multiple electrode catheters with induction or attempted induction of an arrhythmia with right atrial pacing and recording, right ventricular pacing and recording, His recording with intracardiac catheter ablation of arrhythmogenic focus; with treatment of supraventricular tachycardia by ablation of fast or slow atrioventricular pathway, accessory atrioventricular connection, cavo-tricuspid isthmus or other single atrial focus or source of atrial re-entry);
  • CPT code 93654 (Comprehensive electrophysiologic evaluation including insertion and repositioning of multiple electrode catheters with induction or attempted induction of an arrhythmia with right atrial pacing and recording, right ventricular pacing and recording, His recording with intracardiac catheter ablation of arrhythmogenic focus; with treatment of ventricular tachycardia or focus of ventricular ectopy including intracardiac electrophysiologic 3D mapping, when performed, and left ventricular pacing and recording, when performed);
  • CPT code 93655 (Intracardiac catheter ablation of a discrete mechanism of arrhythmia which is distinct from the primary ablated mechanism, including repeat diagnostic maneuvers, to treat a spontaneous or induced arrhythmia (List separately in addition to code for primary procedure));
  • CPT code 93656 (Comprehensive electrophysiologic evaluation including transseptal catheterizations, insertion and repositioning of multiple electrode catheters with induction or attempted induction of an arrhythmia with atrial recording and pacing, when possible, right ventricular pacing and recording, His bundle recording with intracardiac catheter ablation of arrhythmogenic focus, with treatment of atrial fibrillation by ablation by pulmonary vein isolation); and
  • CPT code 93657 (Additional linear or focal intracardiac catheter ablation of the left or right atrium for treatment of atrial fibrillation remaining after completion of pulmonary vein isolation (List separately in addition to code for primary procedure)).

The CPT Editorial Panel also deleted two electrophysiologic ablation codes, CPT code 93651 (Intracardiac catheter ablation of arrhythmogenic focus; for treatment of supraventricular tachycardia by ablation of fast or slow atrioventricular pathways, accessory atrioventricular connections or other atrial foci, singly or in combination) and CPT code 93652 (Intracardiac catheter ablation of arrhythmogenic focus; for treatment of ventricular tachycardia), effective January 1, 2013.

Our standard process for dealing with new CPT codes effective on January 1 for the upcoming calendar year is to assign each code to the APC that we believe contains services that are comparable with respect to clinical characteristics and resources required to furnish the service. The new CPT code is given a comment indicator of “NI” in Addendum B to the final rule with comment period to identify it as a new interim APC assignment for the new year and the APC assignment for the new CPT codes is then open to public comment for 60 days following the publication of the final rule with comment period.

New CPT codes 93653, 93654, and 93656 are primary electrophysiologic services that encompass evaluation as well as ablation, while new CPT codes 93655 and 93657 are add-on codes. Because CPT codes 93653, 93654, and 93656 already encompass both evaluation and ablation services, we are assigning them to composite APC 8000 with no further requirement to have another electrophysiologic service from either Group A or Group B furnished on the same date of service, and we are assigning them interim status indicator “Q3” (Codes that may be paid through a composite APC) in Addendum B to this final rule with comment period. To facilitate implementing this policy, we are assigning CPT codes 93653, 93654, and 93656 to a new Group C, which will be paid at the composite APC 8000 payment rate. (We note that we will use single and “pseudo” single claims for CPT codes 93653, 93654, and 93656 when they become available for calculating the costs upon which the payment rate for APC 8000 will be based in future ratesetting.) Because CPT codes 93655 and 93657 are dependent services that may only be performed as ancillary services to the primary CPT codes 93653, 93654, and 93656, we believe that packaging CPT codes 93655 and 93657 with the primary procedures is appropriate, and we are assigning them interim status indicator “N.” Because the CPT Editorial Panel deleted CPT codes 93651 and 93652, effective January 1, 2013, we are deleting them from the Group B code list, leaving only CPT 93650 (Intracardiac catheter ablation of atrioventricular node function, atrioventricular conduction for creation of complete heart block, with or without temporary pacemaker placement) in Group B at this time.

As is our usual practice for new CPT codes that were not available at the time of the proposed rule, our treatment of new CPT codes 93653, 93654, 93655, 93656, and 93657 is open to public comment for a period of 60 days following the publication of this final rule with comment period.

We did not receive any public comments on our proposal to continue to pay for cardiac electrophysiologic evaluation and ablation services using the composite APC methodology. We are finalizing our proposed policy for CY 2013 to continue to pay for cardiac electrophysiologic evaluation and ablation services using the composite APC methodology proposed and implemented for CY 2008 through CY 2012. We note that we are modifying our proposal for CY 2013 to reflect the CPT coding changes as discussed above. For CY 2013, using a full year of CY 2011 claims data available for this final rule with comment period, we were able to use 12,235 claims containing a combination of Group A and Group B CPT codes to calculate a final cost of approximately $11,466 for composite APC 8000.

Table 4 below lists the groups of procedures upon which we will base composite APC 8000 for CY 2013.

BILLING CODE 4120-01-P

(4) Mental Health Services Composite APC (APC 0034)

(a) Mental Health Services Composite Policy

In the CY 2013 OPPS/ASC proposed rule (77 FR 45090), we proposed for CY 2013 to continue our longstanding policy of limiting the aggregate payment for specified less resource-intensive mental health services furnished on the same date to the payment for a day of partial hospitalization provided by a hospital, which we consider to be the most resource-intensive of all outpatient mental health treatments for CY 2013. We refer readers to the April 7, 2000 OPPS final rule with comment period (65 FR 18452 to 18455) for the initial discussion of this longstanding policy and the CY 2012 OPPS/ASC final rule with comment period (76 FR 74168) for more recent background.

Specifically, we proposed that when the aggregate payment for specified mental health services provided by one hospital to a single beneficiary on one date of service based on the payment rates associated with the APCs for the individual services exceeds the maximum per diem partial hospitalization payment for a hospital, those specified mental health services would be assigned to APC 0034 (Mental Health Services Composite). We proposed to continue to set the payment rate for APC 0034 at the same rate as we pay for APC 0176 (Level II Partial Hospitalization (4 or more services) for Hospital-Based PHPs), which is the maximum partial hospitalization per diem payment for a hospital, and that the hospital would continue to be paid one unit of APC 0034. Under this policy, the I/OCE would continue to determine whether to pay for these specified mental health services individually or make a single payment at the same rate as the APC 0176 per diem rate for partial hospitalization for all of the specified mental health services furnished by the hospital on that single date of service.

We did not receive any public comments on this proposal. Therefore, we are finalizing our CY 2013 proposal, without modification, to continue our longstanding policy of limiting the aggregate payment for specified less resource-intensive mental health services furnished on the same date by a hospital to the payment for APC 0176, which is the maximum partial hospitalization per diem payment for a hospital for CY 2013.

(b) Coding Changes

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

Because the new mental health CPT codes in Table 5 replace CPT codes that are subject to the mental health composite APC, and because all of the HCPCS codes in the respective APCs to which these codes are assigned for CY 2013 are subject to the mental health composite APC, the new separately payable mental health CPT codes also will be assigned to composite APC 0034 with an interim status indicator of “Q3” (Codes that may be paid through a composite APC) in Addendum B to this final rule with comment period. The single code APC assignment, the composite APC assignment, and the interim status indicator assignment for each of these new CPT codes are included in Table 5 below. As discussed above for new CPT codes that were not available at the time of the proposed rule, our treatment of these new mental health CPT codes is open to public comment for a period of 60 days following the publication of this final rule with comment period. The current single code APC assignments for all of the HCPCS codes to which the mental health composite APC policy applies, along with their composite APC assignment and their APC assignments when the composite methodology does not apply, can be found in Addendum M to this final rule with comment period (which is available via the Internet on the CMS Web site).

BILLING CODE 4120-01-P

BILLING CODE 4120-01-C

(5) Multiple Imaging Composite APCs (APCs 8004, 8005, 8006, 8007, and 8008)

Effective January 1, 2009, we provide a single payment each time a hospital bills more than one imaging procedure within an imaging family on the same date of service, in order to reflect and promote the efficiencies hospitals can achieve when performing multiple imaging procedures during a single session (73 FR 41448 through 41450). We utilize three imaging families based on imaging modality for purposes of this methodology: (1) Ultrasound; (2) computed tomography (CT) and computed tomographic angiography (CTA); and (3) magnetic resonance imaging (MRI) and magnetic resonance angiography (MRA). The HCPCS codes subject to the multiple imaging composite policy and their respective families are listed in Table 8 of the CY 2012 OPPS/ASC final rule with comment period (76 FR 74171 through 74175).

While there are three imaging families, there are five multiple imaging composite APCs due to the statutory requirement under section 1833(t)(2)(G) of the Act that we differentiate payment for OPPS imaging services provided with and without contrast. While the ultrasound procedures included in the policy do not involve contrast, both CT/CTA and MRI/MRA scans can be provided either with or without contrast. The five multiple imaging composite APCs established in CY 2009 are:

  • APC 8004 (Ultrasound Composite);
  • APC 8005 (CT and CTA without Contrast Composite);
  • APC 8006 (CT and CTA with Contrast Composite);
  • APC 8007 (MRI and MRA without Contrast Composite); and
  • APC 8008 (MRI and MRA with Contrast Composite).

We define the single imaging session for the “with contrast” composite APCs as having at least one or more imaging procedures from the same family performed with contrast on the same date of service. For example, if the hospital performs an MRI without contrast during the same session as at least one other MRI with contrast, the hospital will receive payment for APC 8008, the “with contrast” composite APC.

We make a single payment for those imaging procedures that qualify for composite APC payment, as well as any packaged services furnished on the same date of service. The standard (noncomposite) APC assignments continue to apply for single imaging procedures and multiple imaging procedures performed across families. For a full discussion of the development of the multiple imaging composite APC methodology, we refer readers to the CY 2009 OPPS/ASC final rule with comment period (73 FR 68559 through 68569).

In the CY 2013 OPPS/ASC proposed rule (77 FR 45090), we proposed to continue for CY 2013 to pay for all multiple imaging procedures within an imaging family performed on the same date of service using the multiple imaging composite APC payment methodology. We stated that we continue to believe that this policy would reflect and promote the efficiencies hospitals can achieve when performing multiple imaging procedures during a single session. The proposed CY 2013 payment rates for the five multiple imaging composite APCs (APC 8004, APC 8005, APC 8006, APC 8007, and APC 8008) were based on costs calculated from a year of CY 2011 claims available for the CY 2013 OPPS/ASC proposed rule that qualified for composite payment under the current policy (that is, those claims with more than one procedure within the same family on a single date of service). To calculate the proposed costs, we used the same methodology that we used to calculate the final CY 2012 costs for these composite APCs, as described in the CY 2012 OPPS/ASC final rule with comment period (76 FR 74169). The imaging HCPCS codes that we removed from the bypass list for purposes of calculating the proposed multiple imaging composite APC costs, pursuant to our established methodology (76 FR 74169), appeared in Table 11 of the proposed rule.

We were able to identify approximately 1.0 million “single session” claims out of an estimated 1.5 million potential composite cases from our ratesetting claims data, more than half of all eligible claims, to calculate the proposed CY 2013 costs for the multiple imaging composite APCs.

Comment: One commenter supported the proposed payment rate for APC 8004, while acknowledging the increased proposed payment rate for the ultrasound composite and for other standard (non-composite) ultrasound procedures.

Response: We appreciate the commenter's support.

Comment: Several commenters supported CMS' decision not to propose any new multiple imaging composite APCs, and requested that CMS analyze the potential impact on utilization and access for any newly proposed multiple imaging composite APCs, and to provide notice and seek comment for any new proposals.

Response: We appreciate the feedback regarding the multiple imaging composite APCs. As is our usual practice, we will analyze our claims data and provide public notice and seek comment for any new proposals through our annual rulemaking process.

After consideration of the public comments we received, we are finalizing our proposed policy, without modification, to calculate multiple imaging composite APC costs for CY 2013 pursuant to our established methodology. For this final rule with comment period, we were able to identify approximately 1.0 million “single session” claims out of an estimated 1.6 million potential composite cases from our ratesetting claims data, more than half of all eligible claims, to calculate the final CY 2013 costs for the multiple imaging composite APCs.

Table 6 below lists the HCPCS codes that will be subject to the multiple imaging composite policy and their respective families and approximate composite APC costs for CY 2013. Table 7 below lists the OPPS imaging family services that overlap with HCPCS codes on the CY 2013 bypass list. We note that we mistakenly did not include CPT code 70547 (Magnetic resonance angiography, neck; without contrast material(s)) on this list in the proposed rule. We are adding it to this list for the final rule with comment period because it is part of the MRI and MRA with and without contrast imaging family and is also on the CY 2013 bypass list.

BILLING CODE 4120-01-P

BILLING CODE 4120-01-C

(6) Cardiac Resynchronization Therapy Composite APC (APC 0108)

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

As described in the CY 2012 OPPS/ASC final rule with comment period (76 FR 74182), hospitals continue to use the same CPT codes to report CRT-D implantation services, and the I/OCE will identify when the combination of CPT codes 33225 and 33249 on the same day qualify for composite service payment. We make a single composite payment for such cases. When not performed on the same day as the service described by CPT code 33225, the service described by CPT code 33249 is also assigned to APC 0108. When not performed on the same day as the service described by CPT code 33249, the service described by CPT code 33225 is assigned to APC 0655.

In order to ensure that hospitals correctly code for CRT services in the future, we also finalized a policy in the CY 2012 OPPS/ASC final rule with comment period (76 FR 74182) to implement claims processing edits that will return to providers incorrectly coded claims on which a pacing electrode insertion (the procedure described by CPT code 33225) is billed without one of the following procedures to insert an ICD or pacemaker, as specified by the AMA in the CPT codebook:

  • 33206 (Insertion or replacement of permanent pacemaker with transvenous electrode(s); atrial);
  • 33207 (Insertion or replacement of permanent pacemaker with transvenous electrode(s); ventricular);
  • 33208 (Insertion or replacement of permanent pacemaker with transvenous electrode(s); atrial and ventricular);
  • 33212 (Insertion or replacement of pacemaker pulse generator only; single chamber, atrial or ventricular);
  • 33213 (Insertion or replacement of pacemaker pulse generator only; dual chamber, atrial or ventricular);
  • 33214 (Upgrade of implanted pacemaker system, conversion of single chamber system to dual chamber system (includes removal of previously placed pulse generator, testing of existing lead, insertion of new lead, insertion of new pulse generator));
  • 33216 (Insertion of a single transvenous electrode, permanent pacemaker or cardioverter-defibrillator);
  • 33217 (Insertion of 2 transvenous electrodes, permanent pacemaker or cardioverter-defibrillator);
  • 33222 (Revision or relocation of skin pocket for pacemaker);
  • 33233 (Removal of permanent pacemaker pulse generator);
  • 33234 (Removal of transvenous pacemaker electrode(s); single lead system, atrial or ventricular);
  • 33235 (Removal of transvenous pacemaker electrode(s); dual lead system, atrial or ventricular);
  • 33240 (Insertion of single or dual chamber pacing cardioverter-defibrillator pulse generator); or
  • 33249 (Insertion or repositioning of electrode lead(s) for single or dual chamber pacing cardioverter-defibrillator and insertion of pulse generator).

In the CY 2013 OPPS/ASC proposed rule (77 FR45094), we proposed to continue for CY 2013 to recognize CRT-D as a single, composite service as described above and finalized in the CY 2012 OPPS/ASC final rule with comment period. By continuing to recognize these procedures as a single, composite service, we are able to use a higher volume of correctly coded claims for CPT code 33225, which, because of its add-on code status, is always performed in conjunction with another procedure and, therefore, to address the inherent ratesetting challenges associated with CPT code 33225. We also noted that this policy is consistent with the principles of a prospective payment system, specifically to place similar services that utilize technologies with varying costs in the same APC in order to promote efficiency and decision making based on individual patient's clinical needs rather than financial considerations. In calculating the costs upon which the proposed payment rate for APC 0108 was based for CY 2013, for the proposed rule, we included single procedure claims for the individual services assigned to APC 0108, as well as single procedure claims that contain the composite CRT-D service, defined as the combination of CPT codes 33225 and 33249 with the same date of service. We were able to use 9,790 single claims from the CY 2013 proposed rule claims data to calculate a proposed cost of approximately $31,491 for APC 0108. Because CPT codes 33225 and 33249 may be treated as a composite service for payment purposes, we proposed to continue to assign them status indicator “Q3” (Codes that may be paid through a composite APC) in Addendum B to the proposed rule. The assignment of CPT codes 33225 and 33249 to APC 0108 when treated as a composite service was also reflected in Addendum M to the proposed rule (which is available via the Internet on the CMS Web site).

As we noted in the proposed rule (77 FR 45094), we revised the claims processing edits in place for CPT code 33225 due to revised guidance from the AMA in the CPT code book specifying the codes that should be used in conjunction with CPT code 33225. Specifically, on February 27, 2012, the AMA posted a correction as errata to the CY 2012 CPT code book on the AMA Web site at http://www.ama-assn.org/resources/doc/cpt/cpt-corrections.pdf. This correction removed CPT code 33222 (Revision or relocation of skin pocket for pacemaker) as a service that should be provided in conjunction with CPT code 33225, and added CPT codes 33228 (Removal of permanent pacemaker pulse generator with replacement of pacemaker pulse generator; dual lead system), 33229 (Removal of permanent pacemaker pulse generator with replacement of pacemaker pulse generator; multiple lead system), 33263 (Removal of pacing cardioverter-defibrillator pulse generator with replacement of pacing cardioverter-defibrillator pulse generator; dual lead system), and 33264 (Removal of pacing cardioverter-defibrillator pulse generator with replacement of pacing cardioverter-defibrillator pulse generator; multiple lead system). In accordance with this revised guidance, we deleted CPT code 33222 as a code that can satisfy the claims processing edit for CPT code 33225, and added CPT codes 33228, 33229, 33263, and 33264 as codes that can satisfy this edit beginning in CY 2012.

Comment: One commenter requested that CMS delay the status indicator change from “T” to “Q3” for CPT code 33225, stating that CMS does not have sufficient cost data to allow a composite payment for this procedure. The commenter also asked that CPT code 33225 be assigned to APC 0655 while CMS carries out further analysis.

Response: We disagree with the commenter that we do not have sufficient cost data to allow a composite payment for the procedure described by CPT code 33225. For this final rule with comment period, we were able to use 3,413 single claims containing the CRT-D composite service, defined as the combination of CPT codes 33225 and 33249 with the same date of service, to calculate the cost of APC 0108. We note that we did not propose to change the status indicator for CPT code 33225 from “T” to “Q3” for CY 2013 as the commenter indicated; rather, we proposed to continue to apply the “Q3” status indicator to CPT code 33225 in accordance with the status indicator and policy for this code finalized in the CY 2012 OPPS/ASC final rule with comment period. We also note that, when not performed on the same day as the service described by CPT code 33249, the service described by CPT code 33225 is assigned to APC 0655 and not paid as a composite service.

After consideration of the public comment we received, we are finalizing our proposed policy, without modification, to continue to recognize CRT-D as a single, composite service as described above and finalized in the CY 2012 OPPS/ASC final rule with comment period. In calculating the costs upon which the final payment rate for APC 0108 is based for CY 2013, for this final rule with comment period, we included single procedure claims for the individual services assigned to APC 0108, as well as single procedure claims that contain the composite CRT-D service, defined as the combination of CPT codes 33225 and 33249 with the same date of service. We were able to use 11,251 single claims from the CY 2013 final rule claims data to calculate a final cost of approximately $31,561 for APC 0108. Because CPT codes 33225 and 33249 may be treated as a composite service for payment purposes, we are continuing to assign them status indicator “Q3” (Codes that may be paid through a composite APC) in Addendum B to this final rule with comment period.

f. Geometric Mean-Based Relative Payment Weights

As we discussed in the CY 2013 OPPS/ASC proposed rule (77 FR 45094 through 45098), when the Medicare program was first implemented, payment for hospital services (inpatient and outpatient) was based on hospital-specific reasonable costs attributable to furnishing services to Medicare beneficiaries. Although payment for most Medicare hospital inpatient services became subject to a PPS under section 1886(d) of the Act in 1983, Medicare hospital outpatient services continued to be paid based on hospital-specific costs. This methodology for payment provided little incentive for hospitals to furnish such outpatient services efficiently and in a cost effective manner. At the same time, advances in medical technology and changes in practice patterns were bringing about a shift in the site of medical care from the inpatient setting to the outpatient setting.

In the Omnibus Budget Reconciliation Act of 1986 (OBRA 1986) (99), the Congress paved the way for development of a PPS for hospital outpatient services. Section 9343(g) of OBRA 1986 mandated that fiscal intermediaries require hospitals to report claims for services under the Healthcare Common Procedure Coding System (HCPCS). Section 9343(c) of OBRA 1986 extended the prohibition against unbundling of hospital services under section 1862(a)(14) of the Act to include outpatient services as well as inpatient services. The codes under the HCPCS enabled us to determine which specific procedures and services were billed, while the extension of the prohibition against unbundling ensured that all nonphysician services provided to hospital outpatients were reported on hospital bills and captured in the hospital outpatient data that were used to develop an outpatient PPS.

The brisk increase in hospital outpatient services further led to an interest in creating payment incentives to promote more efficient delivery of hospital outpatient services through a Medicare outpatient PPS. Section 9343(f) of OBRA 1986 and section 4151(b)(2) of the Omnibus Budget Reconciliation Act of 1990 (OBRA 1990) (101) required that we develop a proposal to replace the hospital outpatient payment system with a PPS and submit a report to the Congress on the proposed system. The statutory framework for the OPPS was established by the Balanced Budget Act (BBA) of 1997 (Pub. L. 105-33) with section 4523 amending section 1833 of the Act by adding subsection (t), which provides for a PPS for hospital outpatient department services and the BBRA of 1999 (Pub. L. 106-113), with section 201 further amending section 1833(t) of the Act. The implementing regulations for these statutory authorities were codified at 42 CFR part 419, effective for services furnished on or after August 1, 2000.

Section 1833 of the Act sets forth the methodological requirements for developing the PPS for hospital outpatient services (the OPPS). At the onset of the OPPS, there was significant concern over observed increases in the volume of outpatient services and corresponding rapidly growing beneficiary coinsurance. Accordingly, much of the focus was on finding ways to address those issues. Section 1833(t)(2)(C) of the Act initially provided that relative payment weights for covered outpatient department services be established based on median costs under section 4523(a) of the BBA of 1997. Later, section 201(f) of the BBRA of 1999 amended section 1833(t)(2)(C) of the Act to allow the Secretary the discretion to base the establishment of relative payment weights on either median or mean hospital costs. Since the OPPS was initially implemented, we have established relative payment weights based on the median hospital costs for both statistical reasons and timely implementation concerns. The proposed rule for the OPPS was published prior to the passage of the BBRA of 1999, which amended the Act to permit the use of mean costs. At that time, we noted that making payment for hospital outpatient services based on the median cost of each APC was a way of discouraging upcoding that occurs when individual services that are similar have disparate median costs, as well as associating services for which there are low claims volume into the appropriate classifications based on clinical patterns and their resource consumption (63 FR 47562).

As discussed in the CY 2000 OPPS final rule with comment period (65 FR 18482 through 18483), initial implementation of the payment system for hospital outpatient services was delayed due to multiple extensions of the proposed rule comment period, Year 2000 (Y2K) system concerns, and other systems challenges in developing the OPPS. Even though the BBRA of 1999 passed during that period of time, and provided the Secretary with the discretion to establish relative payment weights under the OPPS based on mean hospital costs, we determined that reconstructing the database to evaluate the impact of using mean costs would have postponed implementation of the OPPS further. There were important challenges at the time, including being responsive to stakeholder comments regarding the initial OPPS and addressing implementation issues so that the payment and claims processing systems would work correctly. To do so in a timely manner was critical; therefore, median costs were selected as an appropriate metric on which to base payment relativity, both based on the statistical reasons noted above and practical implementation concerns.

In addition to the reasons discussed above, developing relative payment weights based on median costs was a way of attenuating the impact of cost outlier cases. In an environment where facility coding practices were still in their infancy, median costs served to minimize the impact of any coding errors. Using median costs to establish service cost relativity served the same function as any measure of central tendency (including means), ensuring that the relative payment weights used in the OPPS would, in general, account for the variety of costs associated with providing a service.

Since the beginning of the OPPS and throughout its development, we have striven to find ways to improve our methods for estimating the costs associated with providing services. The dialogue with the public regarding these issues, the meaningful information and recommendations that the Panel (previously the APC Panel) has provided, and the policies we have established to better derive the costs on which OPPS payment is calculated have contributed to improving cost estimation. However, challenges remain in our continuing effort to better estimate the costs associated with providing services. These challenges include our limited ability to obtain more meaningful information from the claims and cost report data available and ensuring that the approach used to calculate the payments for services accurately captures the relative costs associated with providing the services. Over the years, we have implemented many changes to the OPPS cost modeling process to help address these challenges.

To obtain more information from the claims data we have available, we first began bypassing codes from the standard process to develop “pseudo” single claims in CY 2003 (67 FR 66746). In CY 2006, this concept later evolved into the bypass list (and its corresponding criteria for addition) which allows us to extract more cost information from claims that would otherwise be unusable for modeling service cost (70 FR 68525). In CY 2008, we examined clinical areas where packaging of services was appropriate, which allows us to use more claims in modeling the payments for primary procedures and encourage providers to make cost efficient choices where possible (72 FR 66610 through 66649). In the CY 2008 OPPS/ASC final rule with comment period (72 FR 66590), we noted that this packaging approach increased the number of “natural” single bills, while simultaneously reducing the universe of codes requiring single bills for ratesetting. Beginning in CY 2008, we also established composite APCs for services that are typically provided together in the same encounter, allowing us to use even more previously unusable claims (due to containing multiple separately payable major codes) for modeling service cost, as well as develop APCs that reflect the combined encounter (72 FR 66650 through 66658). We have implemented many steps to obtain more information from the claims and cost report data available to us, and continue to examine ways in which we can derive more meaningful information on service costs for use in ratesetting.

In our experience in working with the OPPS, we also have implemented many processes to ensure that the cost information we derive from cost reports and claims data is accurate. In the beginning of the OPPS, we implemented a cost trim of three standard deviations outside the geometric mean cost, similar to the cost data trim in the IPPS, because it would ensure that the most aberrant data were removed from ratesetting (65 FR 18484). We also have implemented similar trims to the hospital departmental CCR and claims based unit data related to the services (71 FR 67985 through 67987).

During the CY 2008 rulemaking cycle, we contracted with Research Triangle Institute, International (RTI) to examine possible improvements to the OPPS cost estimation process after RTI had investigated similar issues in the IPPS setting (72 FR 66659 through 66602). There was significant concern that charge compression, which results from the hospital practice of attaching a higher mark-up to charges for low cost supplies and a lower mark-up to charges for higher cost supplies, was influencing the cost estimates on which the OPPS relative payment weights are based. Based on RTI's recommendations in its July 2008 report, available on the Web site at: http://www.rti.org/reports/cms/HHSM-500-2005-0029I/PDF/Refining_Cost_to_Charge_Ratios_200807_Final.pdf, in CY 2009, we finalized modifications to the Medicare cost report form to create an “Implantable Medical Devices Charged to Patients” cost center to address public commenters' concerns related to charge compression in the “Medical Supplies Charged to Patients” cost center (73 FR 48458 through 48467). These modifications helped to address potential issues related to hospital mark-up practices and how they are reflected in the CCRs on the Medicare hospital cost reporting form.

In CY 2010, we incorporated a line item trim into our data process that removed lines that were eligible for OPPS payment in the claim year but received no payment, presumably because of a line item rejection or denial due to claims processing edits (74 FR 60359). This line item trim was developed with the goal of using additional lines to model prospective payment.

In addition to these process changes that were designed to include more accurate cost data in ratesetting, we have developed a number of nonstandard modeling processes to support service or APC specific changes. For example, in the device-dependent APCs, we have incorporated edits into the cost estimation process to ensure that the full cost of the device is incorporated into the primary procedure.

While we have already implemented numerous changes to the data process in order to obtain accurate resource cost estimates associated with providing a procedure, we continue to examine possible areas of improvement. In the past, commenters have expressed concern over the degree to which payment rates reflect the costs associated with providing a service, believing that, in some cases, high cost items or services that might be packaged are not accordingly reflected in the payment weights (72 FR 66629 through 66630 and 66767). As mentioned above, in the CY 2008 OPPS/ASC final rule with comment period, we developed a packaging policy that identified a number of clinical areas where services would be commonly performed in a manner that was typically ancillary and supportive to other primary procedures. Packaging for appropriate clinical areas provides an incentive for efficient and cost-effective delivery of services. In that final rule with comment period, we recognized that there were strengths and weaknesses associated with using median costs as the metric for developing the OPPS relative payment weights (72 FR 66615). Medians are generally more stable than means because they are less sensitive to extreme observations, but they also do not reflect subtle changes in cost distributions. As a result, the use of medians rather than means under the OPPS usually results in relative payment weight estimates being less sensitive to packaging decisions, as well as changes in the cost model due to factors such as the additional claims processed between the proposed rule and the final rule.

The OPPS, like other prospective payment systems, relies on the concept of averaging, where the payment may be more or less than the estimated costs of providing a service or package of services for a particular patient (73 FR 68570). Establishing the cost-based relative payment weights based on a measure of central tendency, such as means or medians, ensures that the payments for the package of services should generally account for the variety of costs associated with providing those services. Prospective payments are ultimately adjusted for budget neutrality and updated by an OPD update factor, which affects the calculated payments, but the accuracy of the cost-based weights is critical in ensuring that the relative payment weights are adjusted appropriately.

We recognize that median costs have historically served and may continue to serve as an appropriate measure on which to establish relative payment weights. However, as discussed above, the metric's resistance to outlier observations is balanced by its limited ability to be reflective of changes to the dataset used to model cost or changes beyond the center of the dataset. While there was significant concern in the initial years of the OPPS regarding outlier cost values and the possible introduction of potentially aberrant values in the cost modeling, hospital experience in coding under the system, the data modeling improvements we have made to obtain more accurate cost information while removing erroneous data, and other changes in our experience with the system have all lessened the potential impact of error values (rather than actual, accurate cost outliers). As noted above, over the history of the OPPS, we have made multiple refinements to the data process to better capture service costs, respond to commenter concerns regarding the degree to which OPPS relative payment weights accurately reflect service cost and APC payment volatility from year to year, and better capture the variety of resource cost associated with providing a service as provided under section 1833(t)(2)(C) of the Act. In the CY 2013 OPPS/ASC proposed rule (77 FR 45098), we proposed for CY 2013 to shift the basis for the CY 2013 APC relative payment weights that underpin the OPPS from median costs to geometric mean-based costs.

Geometric means better encompass the variation in costs that occur when providing a service because, in addition to the individual cost values that are reflected by medians, geometric means reflect the magnitude of the cost measurements, and are thus more sensitive to changes in the data. We believe developing the OPPS relative payment weights based on geometric mean costs would better capture the range of costs associated with providing services, including those cases involving high-cost packaged services, and those cases where very efficient hospitals have provided services at much lower costs. The use of geometric mean-based costs also would allow us to detect changes in the cost of services earlier, because changes in cost often diffuse into the industry over time as opposed to impacting all hospitals equally at the same time. Medians and geometric means both capture the impact of uniform changes, that is, those changes that influence all providers, but only geometric means capture cost changes that are introduced slowly into the system on a case-by-case or hospital-by-hospital basis.

We stated that an additional benefit of this proposed policy relates to the 2 times rule, described in section III.B. of the proposed rule, which is our primary tool for identifying clinically similar services that have begun to deviate in terms of their financial resource requirements. We stated that basing HCPCS projections on geometric mean costs would increase the sensitivity of this tool as we configure the APC mappings because it would allow us to detect differences when higher costs occur in a subset of services even if the number of services does not change. This information would allow us to better ensure that the practice patterns associated with all the component codes appropriately belong in the same APC.

In addition to better incorporating those cost values that surround the median and, therefore, describing a broader range of clinical practice patterns, we stated in the proposed rule that basing the relative payment weights on geometric mean costs may also promote better stability in the payment system. In the short term, geometric mean-based relative payment weights would make the relative payment weights more reflective of the service costs. Making this change also may promote more payment stability in the long term by including a broader range of observations in the relative payment weights, making them less susceptible to gaps in estimated cost near the median observation and also making changes in the relative payment weight a better function of changes in estimated service costs.

We noted that this proposed change would bring the OPPS in line with the IPPS, which utilizes hospital costs derived from claims and cost report data to calculate prospective payments, and specifically, mean costs rather than median costs to form the basis of the relative payment weights associated with each of the payment classification groups. We stated in the CY 2012 OPPS/ASC final rule with comment period (76 FR 74181) our intent to explore methods to ensure our payment systems do not provide inappropriate payment incentives to provide services in one setting of care as opposed to another setting of care based on financial considerations rather than clinical needs. By adopting a means cost-based approach to calculating relative payment weights under the OPPS, we stated that we expect to achieve greater consistency between the methodologies used to calculate payment rates under the IPPS and the OPPS, which would put us in a better position from an analytic perspective to make cross-system comparisons and examine issues of payment parity.

For the reasons described above, in the CY 2013 OPPS/ASC proposed rule (77 FR 45098), we proposed to establish the CY 2013 OPPS relative payment weights based on geometric mean costs. While this would involve a change to the metric used to develop the relative payment weights, the use of claims would not be affected. We proposed to continue to subset claims using the data processes for modeling the standard APCs and the criteria-based APCs described in section II.A.2. of the proposed rule, where appropriate. The reasoning behind implementing modeling edits or changes in the criteria-based APCs would not be affected because the process of developing the relative payment weights based on a measure of central tendency is the last step of the modeling process, and occurs only once the set of claims used in ratesetting has been established.

One important step that occurs after the development of relative payment weights is the assignment of individual HCPCS codes (services) to APCs. In our analysis of the impacts of a process conversion to geometric means, we determined that the change to means would not significantly influence the application of the 2 times rule. Very few services would need to be shifted to new APCs because of 2 times rule violations because the use of geometric means would resolve some violations that would exist under the use of medians, even as it creates other violations due to new cost projections. The net impact of the proposed change results in seven more violations of the 2 times rule created by the entire rebasing process than would exist if median-based values were used.

During the development of this proposed policy, we also determined that the cumulative effect of data shifts over the 12 years of OPPS introduced a number of inconsistencies in the APC groupings based on clinical and resource homogeneity. We believe that a shift to payments derived from geometric means would improve our ability to identify resource distinctions between previously homogenous services, and we intend to use this information over the next year to reexamine our APC structure and assignments to consider further ways of increasing the stability of payments for individual services over time.

We noted that this proposed policy to establish all OPPS relative payment weights using geometric mean costs would apply to all APCs that would have previously been paid based on median costs. In addition, we proposed to calculate the relative payment weights for line item based payments such as brachytherapy sources, which were discussed in section II.A.2.d.(6) of the proposed rule, as well as blood and blood products, which were discussed in section II.A.2.d.(2) of the proposed rule, based on their proposed geometric mean costs for the CY 2013 OPPS.

We indicated that the CY 2013 proposed policy to base relative payment weights on geometric mean costs would specifically include the CMHC and hospital-based partial hospitalization program APCs, which were previously based on median per diem costs. Their estimated payments would continue to be included in the budget neutral weight scaling process, and their treatment is similar to other nonstandard APCs discussed in section II.A. of the proposed rule. The process for developing a set of claims that is appropriate for modeling these APCs would continue to be the same as in recent years, with the only proposed difference being that a geometric mean per diem cost would be calculated rather than a median per diem cost. The proposed CY 2013 partial hospitalization payment policies were described in section VIII. of the proposed rule.

In the proposed rule, we stated that we believe it is important to make the transition from medians to means across all APCs in order to capture the complete range of costs associated with all services, and to ensure that the relative payment weights of the various APCs are properly aligned. If some OPPS payments calculated using relative payment weights are based on means while others are based on medians, the ratio of the two payments will not accurately reflect the ratio of the relative costs reported by the hospitals. This is of particular significance in the process of establishing the budget neutral weight scaler, discussed in section II.A.4. of the proposed rule.

We noted that the few exceptions to the applications of the geometric mean-based relative payment weights would be the same exceptions that exist when median-based weights are applied, including codes paid under different payment systems or not paid under the OPPS, items and services not paid by Medicare, items or services paid at reasonable cost or charges reduced to cost, among others. For more information about the various proposed payment status indicators for CY 2013, we referred readers to Addendum D1 to the proposed rule (which was available via the Internet on the CMS Web site).

We proposed for CY 2013 that payment for nonpass-through separately payable drugs and biologicals will continue to be developed through its own separate process. Payments for drugs and biologicals are included in the budget neutrality adjustments, under the requirements in section 1833(t)(9)(B) of the Act, but the budget neutral weight scaler is not applied to their payments because they are developed through a separate methodology, outside the relative payment weight based process. We noted that, for CY 2013, we proposed to pay for nonpass-through separately payable drugs and biologicals under the OPPS at ASP+6 percent, based upon the statutory default described in section 1833(t)(14)(A)(iii)(II) of the Act. Also, as is our standard methodology, for CY 2013, we proposed to use payment rates based on the ASP data from the fourth quarter of CY 2011 for budget neutrality estimates, packaging determinations, and the impact analyses. For items that did not have an ASP-based payment rate, such as some therapeutic radiopharmaceuticals, we proposed to use their mean unit cost derived from the CY 2011 hospital claims data to determine their per day cost. The nonpass-through separately payable drug and biological payment policy for CY 2013 is described in greater detail in section V.B. of the proposed rule and this final rule with comment period.

Comment: Many commenters expressed cautious support for the proposal to calculate the relative payment weights based on geometric mean costs. The commenters believed that the inclusion of additional cost data in developing the APC relative payment weights would represent an improvement to the ratesetting process, while the generally limited provider impacts and enhanced sensitivity to cost changes in calibrating the 2 times rule would be appropriate. While the commenters supported improvements in the accuracy of the OPPS relative payment weights and the goals of the proposed policy, they requested that CMS proceed with caution and transparency in this process to avoid unintended consequences on beneficiaries and hospitals. The commenters also suggested that CMS monitor changes in frequency and cost distributions for services for several years to ensure that no access to care issues develop as a result of the geometric means-based payment policy. Several commenters requested a transitional approach to relative payment weights based on geometric mean costs to mitigate any potentially negative payment effects.

Response: We appreciate the commenters' support. As discussed in the CY 2013 OPPS/ASC proposed rule, we believe that using geometric mean costs to calculate the APC relative payment weights will make them more reflective of the range of service costs, introduce greater sensitivity to the 2 times rule, as well as potentially allow for cross-system payment comparisons (77 FR 45094). We believe that the numerous changes we have made to the data process to obtain additional information from the available cost report and claims data and ensure the accuracy of the cost estimation, in addition to hospital experience with the OPPS, have prepared us to make this incremental change. We agree that the change to base the relative payment weights on geometric mean costs is appropriate.

We recognize the concerns that commenters have regarding a transitional process towards geometric mean-based APC payment and the possibility that payment fluctuations based on both the naturally occurring variation from year to year and those variations associated with basing the relative payment weights on geometric mean costs may occur. However, we do not believe that an approach to geometric mean-based OPPS relative payment weights beyond the changes we have proposed for the CY 2013 OPPS is necessary or appropriate. Prior to proposing this change, we evaluated the last 4 years of OPPS claims data to model the fluctuations that would have resulted from geometric or arithmetic means in comparison to our traditional medians. We determined that there was no significant difference in the degree of fluctuation with geometric means or with medians, and we also believe that the one-time differences created by the switch are typically small; therefore, we do not believe that a transition period is necessary. In the CY 2013 OPPS/ASC proposed rule, we noted that we made limited changes in APC assignments except where necessary as a result of the proposal to base the relative payment weights on geometric mean costs and stated our intention to further examine appropriate OPPS reconfigurations in the future to resolve potential clinical or resource homogeneity inconsistencies in the future to promote stability (77 FR 45097). Geometric mean costs more fully encompass the range of costs, including packaged costs, associated with providing a service and, therefore, may result in payments that are more reflective of actual cost. Transitioning into a geometric mean-based system would not be practical, as one of the overarching goals of using geometric mean costs is better relativity across the OPPS. Applying a phased-in approach would potentially distort the relativity of the OPPS payment weights. As we discuss in section II.A.2 of this final rule with comment period, there are various reasons that contribute to cost fluctuation from year to year. We believe that artificially introducing stability into the payment system could potentially distort the relativity of the payment system, especially when doing so could potentially dampen both decreases and increases.

We agree that continued monitoring of changes in cost distributions and the frequency of services is important in understanding the impact of basing the APC relative payment weights on geometric mean costs. However, we note that the frequency of services may change from year to year based on a variety of factors, issues unrelated to OPPS payment, and situations where APC overpayment may have potentially led to inappropriate incentives to provide care. Despite the consideration of the many reasons that may cause service frequency and cost structures to change over time, we will continue to monitor these data, as well as make that information available online through the cost statistics files associated with each rulemaking cycle.

Comment: A number of commenters disagreed with the proposal to base the CY 2013 OPPS/ASC relative payment weights on geometric mean costs. Many of these commenters preferred continued use of median costs in the ratesetting process. Several commenters believed that the geometric mean costs were inappropriate for OPPS ratesetting for statistical reasons, including their heightened sensitivity to lower cost inliers and lowered sensitivity for high-cost outliers relative to arithmetic means. Other commenters were concerned about the range between minimum and maximum cost values for each APC, and believed them to be implausible. A few commenters stated that while there have been advances in coding practice over the past decade, the same problems of upcoding and outliers will continue to exist, and that the original selection of median costs would continue to be appropriate. One commenter suggested that, beyond the initial years of the OPPS, there have been no cost reporting and coding practice improvements over the years.

Response: We noted in the CY 2013 OPPS/ASC proposed rule that median costs have historically served and may continue to serve as an appropriate measure on which to base the relative payment weights (77 FR 45096). However, we believe that a policy of developing the relative payment weights based on geometric mean costs would represent an improvement beyond our current use of the cost information available to us.

In our discussion in the CY 2013 OPPS/ASC proposed rule relating to basing the relative payment weights on geometric mean costs, we stated that there are a variety of reasons that one metric might be more appropriate than the other. However, the reasoning for selecting one metric relative to any others must be considered in the context of the issues at that time. In our discussion of our proposal to develop the relative payment weights based on geometric mean costs, we described the issues at the initial development of the OPPS and our original reasons for selecting median costs as the preferred metric. We also described in the proposed rule the many data process changes that we made over the history of the OPPS, including various trimming methodologies, processes to generate more information from the claims and cost report data available to us, steps to address charge compression, modeling and payment edits, modeling configurations to make payment more reflective of the service or services provided, and others (77 FR 45095 through 45096). In addition, we discussed our belief that CMS and hospital experience with the OPPS as well as the coding methodologies for payment would have improved over the past decade. Finally, we discussed various aspects of the geometric means proposal that would affect other policy areas, such as ASC payment, application of the 2 times rule, and other payment methodologies under the OPPS. For these reasons, we established the CY 2013 OPPS/ASC proposal to base the relative payment weights using geometric mean costs (77 FR 45094 through 45098).

We recognize that there are different aspects of each statistical metric that may make any of them preferable to the others. Means-based methodologies, whether arithmetic means or geometric means, incorporate a broader range of estimated cost values into the relative payment weights, whereas medians are less sensitive to that range of costs as well as any changes in them. Depending on whether sensitivity towards changes in service costs is viewed as a relevant objective or not may guide whether selecting means or medians is a preferable alternative. As described above, several commenters have suggested that the lack of sensitivity towards cost changes is precisely why medians remain the preferable option. However, in the CY 2013 OPPS/ASC proposed rule, we noted comments in the past expressing concern regarding the degree to which payment rates failed to reflect the costs associated with providing a service (77 FR 45096). In light of those concerns, we believe that geometric means and their ability to better reflect packaging patterns and ranges in cost represent an improvement in our cost estimation process.

With regards to the varying level of sensitivity towards cost outliers that geometric means represent, as described above, there are various benefits and drawbacks to each selected metric. Accordingly, the relative payment weights associated with any service may rise or fall, depending on the specific distribution of reported costs, and where the geometric mean appears not only relative to the median but also that of APC 606 (Level 3 Hospital Clinic Visits). While commenters have suggested that there is a systemic risk for “implausible” values, we believe that many of the outlier values present in the data represent actual cost outliers rather than errors, with different accounting assumptions creating different populations of values. At the low-cost and high-cost ends of the cost spectrum for each APC, there is thus the potential for both “spurious” (atypical and/or incorrect) data as well as accurate data to appear. Furthermore, while the minimum and maximum values identify the most extreme outlier values, they do not necessarily reflect the distribution of costs within the model; the minimum and maximum values may not accurately represent the range of costs describing the codes with greatest representation within an APC.

While commenters suggested that there has not been much of an improvement we believe the possibility exists that conditions and circumstances have stabilized to a certain degree over the past decade. Part of the argument for medians at the inception of the OPPS was that the coding system was still new, as was our use of claims data to calculate prospective payments. Given the many improvements we have made to our internal process of modeling and using data, we would expect that coding and cost reporting practices have improved over that time period as both CMS and hospitals have had the opportunity to develop more experience with the system.

Comment: Some commenters believed that aligning the OPPS relative payment weights on geometric mean costs would hamper hospitals' ability to plan budgets for each year, given the degree to which payments might fluctuate. The commenters also believed that geometric mean costs would lead to greater instability of OPPS payment. Some commenters were concerned about the negative impacts of APC payments declining due to use of geometric mean costs, believing that those changes hindered hospitals' ability to provide high quality health care.

Response: We do not believe that the policy of calculating relative payment weights based on geometric mean costs will inevitably lead to greater payment instability. There are a variety of factors that may contribute to payment volatility from year to year, as we have previously described in section II.A.2. of this final rule with comment period. While there may be some interim fluctuation in the short term as we realign the OPPS to be based on geometric mean costs, we expect many of those issues to stabilize over time. When discussing payment stability, the natural inclination is to view stability as a fixed numerical value that stays the same over time. We evaluated this numerical definition of stability and determined that it was not significantly greater when geometric means were used. However, another view of payment stability is through the relationship between costs and the degree to which they are reflected in payments. We believe that a policy of using geometric mean costs to develop the APC relative payment weights will make them more reflective of the costs associated with providing services. Further, using geometric mean costs helps ensure that the relative payment weights accurately reflect the distribution of costs associated with providing services, and mitigates the possibility that any fluctuation occurs due to gaps in the distribution of the model, rather than any material changes to the service costs.

We also disagree with the commenter's belief that use of geometric mean costs in calculating the relative payment weights will lead to hospitals being unable to provide access to high-quality health care. Geometric mean costs encompass a broader range of costs, and will result in payments that more fully reflect the range of costs both on the low and high ends, than median-based costs. We believe that this will ultimately be an improvement in the data process as well as OPPS payment policy. Although, as commenters have noted, there are many APC payment rates that decline as a result of the alignment of relative payments weights based on geometric mean costs, we note that a number of APC payment rates also increase as a result of this policy. We believe that, for most provider classes that furnish a mixed array of services to meet the various needs of their patients, the financial impacts from the changes in APC payment rates will be relatively limited. In consideration of all of those factors, we believe that the use of geometric mean costs will result in APC payments that are more reflective of the range of service costs.

Comment: One commenter believed that median costs and the fact that they do not reflect subtle changes in cost distributions was appropriate to use to determine the OPPS payment rates, given aberrant coding, billing, and charging practices by hospitals. The commenter also believed that OPPS outlier payments would address issues where high-cost services did not have those costs reflected in their APC payments. Several commenters suggested that lack of sensitivity towards packaging patterns when using median cost was why median costs would be a more appropriate metric. Other commenters believed that the hospital claims do not provide reliable data and that the Medicare cost report data at the departmental level are not accurate because there is no financial incentive to report accurate data. Commenters also stated that RTI identified flawed cost data and pointed out that charges on hospital claims do not match those on the cost reports. One commenter requested that CMS delay the proposal to use geometric mean costs in ratesetting until it can verify that the data are not flawed.

Response: We appreciate the need for accurate and reliable cost information for use in the OPPS ratesetting process. Many of the changes we have made to our data process over the past decade have arisen with consideration of the need for accurate and reliable cost information. To a certain extent, we can mitigate the issues raised by those concerns through data process changes like trimming methodologies, such as those for the line items as well as cost and unit outliers, and modeling changes, such as those for composite and device-dependent methodologies, to more accurately estimate cost. However, more broadly, we rely on OPPS providers to submit accurate cost and charge information to establish the relativity in the OPPS on which APC payments are based.

We value the comments that stakeholders provide with regards to potential data improvements as well as methods by which we can obtain more accurate data. In situations such as the proton beam APCs for the CY 2013 OPPS/ASC proposed rule and subsequent information about cost report revisions and inaccurate coding, we must balance our reliance on information from OPPS providers with the complementing goal of obtaining accurate cost information. As we described in the CY 2013 OPPS/ASC proposed rule, we have taken steps to address issues such as charge compression in areas such as the former “Medical Supplies Charged to Patients” cost center by establishing a new standard cost center for “Implantable Medical Devices Charged to Patients.”

In the case of calculating relative payment weights based on geometric mean costs, we believe that such a change, while affecting the OPPS very broadly, would not involve much manipulation of the data. Although several commenters have suggested that the lack of sensitivity towards cost outliers is appropriate, we also have received comments and HOP Panel presentations in the past regarding the degree to which APC relative payments fail to reflect high-cost packaged services. Calculating relative payment weights based on geometric mean cost is one way of being responsive to those concerns regarding the degree to which correctly reported claims with unusually high costs are incorporated into the relative payment weights. While we agree that OPPS outliers do help mitigate the financial risk associated with performing certain services that require additional complexity or resources, we also believe that developing the relative payment weights based on geometric mean-based costs will help ensure that payments are more reflective of the range of service cost.

In the CY 2013 OPPS/ASC proposed rule, in our proposal to base the CY 2013 relative payments weights on geometric mean costs, we described the many changes we have made since the inception of the OPPS to improve upon our data process. These improvements have helped us obtain more information from the claims and cost report data we have available to us, in addition to ensuring the accuracy of the resource cost estimates we use to model the APC relative payment weights. While we continue to look for ways in which we can improve the OPPS and our modeling of the estimated costs used to develop the relative payment weights, we do not believe that the cost information and methods through which we establish the relative payment weights are inherently flawed. Aligning the relative payment weights based on geometric mean costs may be a significant change in how the relative payment weights are calculated; however, the change can be viewed as incremental based on the other data improvements throughout the history of the OPPS, as described earlier in this section.

We believe that incentives exist for accurate cost reporting beyond direct financial incentives. We believe that external perceptions of incorrect reporting are based primarily on the failure to consider limitations of the data collection methodology when making assumptions and conclusions. The Medicare cost report form allows hospitals to report in a manner that is consistent with their own financial accounting systems and, therefore, should be accurate for each individual hospital.

The regulations at 42 CFR 413.24(f)(4)(iv) specify the certification statement on the first page of the Medicare cost report (Hospital and Hospital Heath Care Complex Cost Report, Form CMS-2552-10) that must be signed by the hospital's administrator or chief financial officer certifying that the data contained in the cost report are true and accurate. Also included on the certification page is a “penalty statement” which conveys to the hospital official signing the cost report that misrepresentation or falsification of any information contained in the cost report is punishable by criminal, civil, and administrative action, fine, and/or imprisonment under Federal law. Further, the “penalty statement” also states that if services identified in the cost report were provided or procured through the payment directly or indirectly of a kickback or were otherwise illegal, then criminal, civil, and administrative action, fine, and/or imprisonment may result. We believe that the possibility of mandatory cost report adjustments by fiscal intermediaries or MACs where erroneous amounts are found to exist and the possibility of Federal prosecution where potentially false claims and/or fraudulent conduct are found to exist act as reasonable incentives to complete the cost report accurately. Further, the cost report data and their use in the OPPS cost estimation and payment rate development process, combined with potential penalties for inaccurate reporting, provide financial incentive for reporting costs accurately.

We recognize that hospitals are complex entities, each having their own accounting systems and reporting methodology. As such, the cost and charge data that they provide through the Medicare cost report forms are structured in a way that reflects their own internal accounting systems. Although we would obtain the most accurate information by using a highly structured reporting format across hospitals, in using these data for OPPS ratesetting, we must balance between our use of these data for the cost estimation process and the burden associated with forcing hospitals to convert to a government-mandated standardized financial management system. The current mechanism allows us to collect information that is accurate in the aggregate and that further, at a granular level, reflects the relative allocation of costs to departments and services by the industry as a whole without creating additional burden.

We note that while the RTI investigation into charge compression and the calculation of the relative payment weights yielded areas where the cost estimation process could be improved, there was no suggestion that the process or data itself were fundamentally flawed. We also note that we have tried to be responsive to the concerns raised in the RTI report regarding charge compression and the accuracy of the relative payment weights, for example, through the creation of the new “Implantable Medical Devices Charged to Patients” standard cost center or through the packaged cost redistribution to account for pharmacy overhead in the past several years. Regarding the concern about the matching process between the data used to calculate the CCRs on the Medicare cost report and the claims- based charges, we note that we use the most updated accurate information made available to us and match them to the degree possible to accurately calculate estimated costs. In the revenue code-to-cost center modeling crosswalk that we use to estimate cost, the hierarchy of cost center CCRs is based on our best assumption of where those revenue code charges would be placed even though it may not necessarily reflect every hospitals' individual cost report structure.

As discussed earlier in this section, we have made many improvements to the OPPS data process over the course of the past decade. Many of those changes were intended to either derive more information from the claims and cost report data we have available to us, while others were intended to estimate cost in a way that more accurately represented the provision of the service and associated resources. We believe that basing the relative payment weights on geometric mean costs will improve the degree to which our APC payments reflect the range of resource costs associated with providing services, and represents an incremental data improvement. Therefore, we do not believe it is appropriate to postpone the use of geometric mean costs in establishing the CY 2013 OPPS/ASC relative payment weights.

Comment: Several commenters requested clarification regarding why CMS selected geometric mean costs as the metric for our proposed policy for calculating the CY 2013 OPPS/ASC relative payment weights rather than arithmetic mean costs. Other commenters noted that using arithmetic means would bring the OPPS even further in line with the IPPS ratesetting methodology.

Response: While developing the proposal to establish the CY 2013 OPPS/ASC relative payment weights using geometric mean costs, we also reviewed the volatility associated and impact of an OPPS based on arithmetic mean costs. We also considered many of the same issues that commenters described with respect to the use of arithmetic means, including whether their ability to more sensitively consider the variety of cost patterns, provide a better reflection of total costs, and to synchronize the OPPS system with the IPPS methodology, would be a preferable option among the three metrics.

We noted that because only natural and “pseudo” single major claims would be used to model the relativity of the OPPS, arithmetic means would not truly reflect total cost in the system. Although arithmetic mean costs would be more sensitive towards outlier values than both geometric mean costs and median costs, there would also be greater volatility associated with the use of them due to their sensitivity towards outlier values. Similarly, the short-term transition from medians to arithmetic means would also include a greater range of both positive and negative provider payment impacts and would result in the need for more reconfiguration of the APCs to resolve 2 times rule violations than geometric mean costs. While we have discussed our intention to perform a thorough review of the OPPS in the future that may involve more significant reconfiguration, that review would be performed with the goal of developing more accurate and stable payment rates, to the extent that they reflect the range of service costs. Although we stated the possibility of using these geometric mean based payments for exploring cross-system payment comparisons, we recognize that there may be aspects of each payment system data methodology that may be unique. While using arithmetic mean costs would potentially capture the full range of costs better than both geometric means and medians, that benefit has limited value in a relative system such as the OPPS, where all total costs are reduced to relative rates. Conversely, it also would potentially allow an inappropriate impact due to aberrant values because there would be no mitigation of the influence of outlier costs, which could be accurate or aberrant values. Therefore, we viewed the use of geometric mean costs as a balanced approach between both the strengths and weaknesses of using medians and arithmetic means.

Comment: Several commenters expressed concern with regard to the decline in APC payment to CMHCs due to use of the geometric mean cost for calculating the OPPS relative payment weights, and recommended that CMS continue to monitor the impact of its payment policies on CMHCs.

Response: Over the past several years, we have made changes to the calculation of PHP relative payment weights to more accurately align their PHP APC payments to their specific costs. These changes to PHP relative payment weights have included establishing a separate cost estimation process based on provider type as well as a two-tiered APC payment system under which we pay one amount for days with 3 services and a higher amount for days with 4 or more services for both CMHC and hospital-based PHPs. As discussed in the CY 2013 OPPS/ASC proposed rule, we believe that the use of geometric mean costs rather than median costs in the ratesetting process is one such improvement because it allows the payment metric to consider a broader range of service costs (77 FR 45097). We will continue to monitor the impact of our payment policies on OPPS providers, including CMHCs.

Comment: One commenter was concerned with the minimum and maximum values associated with APCs 0690 (Level I Electronic Analysis of Devices) and 0105 (Repair/Revision/Removal of Pacemakers, AICDs, or Vascular Devices). In the case of APC 0690, the commenter suggested that the APC payment rate be set to the median cost and not allowed to drop below the payment that CMS would have calculated using medians. For CPT 0307T (Removal of intracardiac ischemia monitoring device), the commenter also believed that its placement in APC 0105 was appropriate. However, the commenter requested that CMS perform an analysis to determine whether some of the procedures might be more appropriately placed in a different APC.

Response: In the case of both of these APCs, the presence of high-cost, low-volume services in the claims used to model each APC creates outliers that foster the perception that the services spread more evenly across the range between the minimum and maximum values than actually is the case. Those minimum and maximum values represent individual points at the most extreme ends of the model, and include service cost estimations that do not contribute significantly enough to the APC weight to be considered in the application of the 2 times rule. In that sense, those values can be misleading because the minimum and maximum should be considered as the most extreme outlier cases; we evaluate the range through the application of the 2 times rule, which only considers services that have sufficient volume to demonstrate stability and reliability and which significantly contribute to the relative payment weight of the APC. Both medians and means are measures of central tendency and have strengths and weaknesses when considering the degree to which they accurately represent the dataset. Similarly, the minimum and maximum values are informative in identifying the most extreme outliers of a dataset but do not necessarily reflect the bulk of the distribution.

For CPT codes 0305T and 0306T which are assigned to APC 0690, we note that the geometric mean cost ($34.78) was slightly higher than the median cost ($33.71) for the APC in the data used for the CY 2013 OPPS/ASC proposed rule. In addition, after calculation of budget neutrality and other adjustments, the national unadjusted payment rate for a geometric mean cost-based APC payment was proposed to be higher than a median cost-based one for CY 2013. Finally, for prospective APC payment rates which are calculated through the standard process, we would not pay using the cost as a rate but we would use the estimated costs to establish the relative payment weights on which OPPS payments are based. Therefore, we are not setting the payment rate for APC 0690 at the median cost.

We appreciate the commenters' support regarding the placement of CPT code 0307T in APC 0105. We do not agree that having a wide distribution of costs in an APC necessarily implies that a problem in the construction of the APC exists, particularly in cases where we believe the clinical placement and resource use is appropriate. As described above, the minimum and maximum values identified within each CPT or APC are the most extreme outliers, and may not necessarily reflect where the majority of the cost estimates are within each code. For application of the 2 times rule discussed in section III.B. of this final rule with comment period, we only consider codes that are “significant” in their contribution towards the cost estimates in the APC as being useful in the identification of how similar the services within an APC are to each other, from a cost perspective. However, this does not eliminate the need to consider clinical factors when constructing the APC assignments. We do not believe that differences in the distribution of costs for a service automatically creates the need for further study, especially because the purpose of geometric mean costs is to more fully include those cost observations. Similarly, the APC configurations are intended to group together services with clinical and resource homogeneity. However, in the CY 2013 OPPS/ASC proposed rule, we stated our intention of using the information we have available to us to reexamine the APC structure and assignments to consider further ways of increasing the stability of payments over time, and will consider these issues as we do so in the future.

Comment: Commenters expressed concern with regard to the impact of the use of geometric mean-based costs for other specific APCs as well as certain clinical areas. APCs that commenters requested specific detail about included APCs 0690 (Level I Electronic Analysis of Devices); 0105 (Repair/Revision/Removal of Pacemakers, AICDs, or Vascular Devices); 0331 (Combined Abdomen and Pelvis CT without Contrast); 0334 (Combined Abdomen and Pelvis CT with Contrast); 0383 (Cardiac Computed Tomographic Imaging); 0336 (Magnetic Resonance Imaging and Magnetic Resonance Angiography without Contrast); 0337 (Magnetic Resonance Imaging and Magnetic Resonance Angiography without Contrast followed by Contrast); 0308 (Positron Emission Tomography (PET) imaging); 0402 (Level II Nervous System Imaging); 0408 (Level III Tumor/Infection Imaging); 0169 (Lithotripsy); 0385 (Level I Prosthetic Urological Procedures); 0386 (Level II Prosthetic Urological Procedures); and 0674 (Prostate Cryoablation). Other clinical areas that commenters expressed concern about included otolaryngological and orthopaedic procedures. One commenter requested that CMS ensure that there was no disproportionate impact to any given medical specialty.

Response: In the case of these APCs, generally the issue is that the geometric mean costs reflect lower cost values than otherwise indicated by the median value. We have identified numerous other data issues or policies beyond the use of geometric mean costs that may attribute to potential declines in the relative payment weight.

For APCs 0331 and 0334, this is the first year where actual data are available for ratesetting based on the new CY 2011 computed tomography of abdomen/pelvis codes: CPT codes 74176 (Computed tomography, abdomen and pelvis; without contrast material); 74177 (Computed tomography, abdomen and pelvis; with contrast material(s)); and 74178 (Computed tomography, abdomen and pelvis, without contrast material in one or both body regions, followed by contrast material(s) and further sections in one or both body regions). For more discussion on the Computed Tomography of Abdomen/Pelvis APCs, we refer readers to section II.A.7.c. of this final rule with comment period.

Another influencing factor may be the use of the new standard cost center for “Implantable Devices Charged to Patient”. For device-dependent APCs 0385, 0386, and 0674, there may be effects based on use of the new standard cost center CCR being mapped to revenues codes where appropriate. For a discussion of the cost report CCRs used to estimate service cost, we refer readers to section II.A.1.c. of this final rule with comment period.

For APC 0169, the estimated costs of the APC may have changed based on corrections to the revenue code-to-cost center crosswalk described in the second correction notice to the CY 2012 OPPS/ASC final rule with comment period (77 FR 24409). Further, because CPT code 50590 (Lithotripsy, extracorporeal shock wave) is the only code used to model the APC, any variation with the estimated costs for the CPT code will directly affect the APC relative payment weight.

For all the APCs referenced by commenters, the relative payment weights based on using geometric mean costs now include a greater range of resource costs associated with furnishing the services. Declines in their APC relative payment weights can partially be attributable to these changes in the degree to which the relative payment are reflective of costs. As we have noted, there also may be additional influencing factors that have led to those changes, including use of actual rather than simulated claims data, the use of the new “Implantable Medical Devices Charged to Patients” standard cost center, the corrections we made to our revenue code-to-cost center modeling crosswalk in our data process, and others. We also note that, because of budget neutrality, for each APC that commenters identified as having decreased payments, there are other APCs that have increased payments. As a general matter, we believe that, in their totality, the newly based APC payment rates better reflect the underlying costs in both cases.

We have typically analyzed the impacts of any proposals at the CPT code, APC, and provider levels of granularity, as most hospitals furnish a variety of services to Medicare beneficiaries. We do not believe that observed declines or increases in the payments for codes are typically associated with any individual specialty because, as we have noted, there are both increases and decreases in relative payment weight associated with this proposal. Additionally, changes generally are due to the degree to which medians were insensitive to the range of service costs.

Comment: One commenter expressed concern regarding the impact of geometric means-based payment on blood products because many of the blood product APCs would experience declines in payment. The commenter recommended that blood products continue to be separately paid based on simulated median costs or that a CY 2013 payment floor be set at the CY 2012 APC payment rates.

Response: While we appreciate the concerns expressed by the commenter, we do not believe that it is appropriate to establish the relative payment weights using different cost metrics for various APC categories. Doing so would potentially distort the cost relativity and APC payments of services paid through the OPPS. We note that, to ensure that the cost estimation process for blood products is as accurate as possible, we have continued to use simulated CCRs where appropriate, as discussed under section II.A.d.2. of this final rule with comment period. Similarly, we do not believe that setting a payment floor for a specific set of services is appropriate. The estimated resource costs associated with providing a service change from year to year and establishing arbitrary payment floors would decrease the degree to which APC payments reflect the range of costs associated with providing a service.

Comment: Commenters also expressed concern regarding the use of geometric mean costs as the basis for APC relative payment weights for brachytherapy sources and recommended that they not be used in establishing the relative payment weights. The commenters believed that geometric mean costs would be inappropriate for use in ratesetting, in particular for the case of brachytherapy sources.

One commenter stated that the geometric mean is inappropriate for use in determining payment levels under the OPPS because it will overemphasize the weight of low and potentially spurious values in the data. The commenter had other statistical concerns regarding the extent to which there were high-cost and low-cost outliers that they believed were not plausible values as well as variation in estimated costs for brachytherapy relative to other OPPS services. The commenter attributed that variation as being due to hospital reporting practices, and contrasted that variation in the OPPS to the IPPS, where the commenter believed the main concern was high-cost outliers and high-cost values. Under the commenter's belief that geometric means would pay inadequately for brachytherapy, the commenter also believed it would create a disincentive to use brachytherapy in the treatment of cancer and create access to care issues. The commenter stated that CMS would be acting contrary to the intent of the cost-based payment extensions for brachytherapy payment from CY 2004 through CY 2009. Further, the commenter stated that CMS did not provide sufficient warning to other policymakers in CYs 2010 and 2011 regarding the likelihood that it might potentially change the cost metric used to establish relative payment weights. The commenter believed that geometric mean costs should not be used to develop the relative payment weights of brachytherapy sources.

Response: As with all other OPPS services that would be affected by the proposed policy, we do not believe that the use of geometric mean costs in establishing the APC relative payment weights for brachytherapy sources is inappropriate. While the use of geometric mean costs will include the weight of low values in the data, we note that it also better incorporates cost observations from the higher values in the data. This can be seen in the increases in the relative payment weight for certain brachytherapy sources based on using geometric mean costs. As discussed earlier in this section, the values now being included could potentially include spurious values on both ends of the dataset, as well as legitimate and accurate data. We believe that encompassing a broader range of service costs in establishing the relative payment weights is a technical improvement and may increase the degree to which payments reflect the range of costs associated with providing a service.

Both the IPPS and OPPS contain reporting variations due to the different charging practices among hospitals. While we agree that some of the variations in cost outlier values may be due to the fact that brachytherapy sources rely on charges and costs associated with a CCR, that does not imply that they are necessarily inappropriate, as all OPPS payments rely on charges and CCRs. As we have noted earlier in this section, as long as providers are using generally acceptable accounting practices (GAAP), and the cost report structure reflects their charging practices, we believe that this results in accurate calculations. While the commenter has suggested that the variation in the costs of brachytherapy sources is inappropriate, this can be attributed to both accounting and real cost differences among the various providers that furnish the service in addition to low frequency of line items which may be used to model cost. Although medians may be less sensitive to cost outliers, or even the range of costs, we believe that is both a strength and a weakness of that metric, but is not a reflection of greater or lesser accuracy. While commenters have provided examples with a sample size of three values to illustrate their point regarding sensitivity to low cost values, we note that cases with this order of extreme observations used to model the relative payment weights would be exceptionally rare. For example, the commenter posited a reported charge of $0.01 which is not only extremely unlikely but also is not supported by institutional claims processing. In situations where there are few claims available to model the service costs, the basic issue is the claims volume and their use in establishing the relative payment weights, and not necessarily the fact that medians or geometric means are used. We can address small claim volumes in some cases through assigning similar services based on resource costs or clinical similarity to the same APCs. However, this method of addressing variability based on low claims volume is unavailable as a tool for line item cost-based APCs.

We do not believe that changes in payment based on the use of geometric mean costs will create a disincentive towards using brachytherapy as a viable option in the treatment of cancer. As we noted earlier in this section, there is variation even among the brachytherapy APCs, which suggests that some of those APC payment rates may now better reflect the range of costs associated with them. There also is extreme variation in the costs reported by individual hospitals for each service within the APC. In considering whether a median cost-based system or a geometric mean-based system is more appropriate at this juncture, the inclination is to view declines in payments as aberrant, without consideration of increases in payment. However, it is equally possible that medians and their lack of sensitivity towards outliers may have led to more payments based on overstated costs than would have been appropriate when considering the broader range of service costs. As discussed in an earlier response, we will continue to monitor the impact of this proposal to base the relative payment weights on geometric mean costs.

With respect to the comments regarding the process through which we establish payment policy for each prospective payment year, we note that the OPPS rulemaking process occurs annually, and is intended to give providers notice as well as the opportunity to inform rulemaking and express their stances regarding various policy proposals. While being able to prepare for each rulemaking cycle so that each prospective payment policy proposal is known years in advance may be preferred by commenters, it is not operationally feasible. As we have discussed in this section, as well as in the CY 2013 OPPS/ASC proposed rule, the situations that were pressing during the inception of the initial OPPS, and the changes we have made since then, have allowed us to consider different issues as well as areas for improvement. We believe that basing the relative payment weights on geometric mean costs is one such improvement. Although Congress did extend the prior cost-based methodology for brachytherapy sources from CYs 2004 through 2009, we note that no such additional extension has been enacted. Further, the discretion to use a median-based or mean-based system in establishing the OPPS relative payment weights predates those extensions, as authorized by section 201(f) of the BBRA of 1999.

While we recognize the concerns regarding the payments for brachytherapy sources based on geometric mean costs, we continue to believe that this change will result in more accuracy in the cost estimation. We do not believe that paying for some services based on median costs while using geometric mean costs for other services is appropriate, equitable, or consistent with statute. Further, using different cost metrics for different services could distort the relativity of services within the system and increase the inaccuracy and instability of service payment.

Comment: Several commenters noted that they had difficulty modeling the budget neutrality and impact calculations, and suggested that CMS provide a more thorough explanation before proceeding with the proposal to establish OPPS relative payment weights based on geometric mean costs. The commenters stated that lack of a study, in particular one that studies the effect of using geometric mean costs as the basis for the relative payment weights over time, made it difficult for them to make an informed decision. The commenters also stated that an explanation regarding the impacts was necessary before proceeding, with several commenters noting that the effect of basing the relative payment weights on geometric mean costs was not evenly distributed by provider types. One commenter disagreed that there would generally be limited financial impact to hospitals, due to the fluctuations in certain APCs. Some commenters claimed that the proposal to base the relative payment weights on geometric mean costs disproportionately affected teaching hospitals. Other commenters asked CMS to provide a list of APCs whose costs fluctuated above a certain threshold each year, so that those APCs could be identified through rulemaking for public comment and to allow for presentations before the HOP Panel. A few commenters expressed concern in using geometric mean costs for small sample sizes, as was the case with those associated with proton beam therapy.

Response: For the past several years, each OPPS/ASC rule has included a discussion summarizing both our data process, as well as the calculations associated with budget neutrality and hospital impacts. However, we also make available online a claims accounting document that summarizes in great detail the claims manipulation that goes into modeling the costs used to develop the relative payment weights, as well as the calculations and data processes used to model budget neutrality and the hospital impacts each cycle. The budget neutrality and hospital impacts portions of this document were developed beginning with the CY 2007 OPPS proposed rule, and have been available for every OPPS rulemaking cycle thereafter.

While we appreciate the concerns that commenters have with regard to studying the effects over time, we believe that any increased fluctuations due to geometric mean-based payments are generally not significant enough to create cause for concern. This data process change applied to the cost metric used to develop the relative payment weights more fully captures the range of costs associated with providing a service. However, service costs and APC payments fluctuate over time for a variety of reasons, as we have previously discussed in the CY 2012 OPPS/ASC final rule with comment period (76 FR 74139). As we have discussed earlier in this section, we will continue to monitor the impact of using geometric mean costs to establish the APC relative payment weights and any changes in service frequency or beneficiary access. Our investigation into the impact of using geometric mean costs to establish the relative payment weights also suggest that there should be limited volatility in the payment rates after this initial change. We note that some services do have payment decreases associated with using geometric mean-based relative weights. However, many services also experience payment increases as a result of the geometric mean-based calculation, presumably because the relative payment weights more accurately reflect higher costs associated with provisions of those services. Finally, we note that the one-time effect of converting from medians to means this year is not to be confused with the much less significant effect of year-to-year variation associated with means.

We agree with the commenters' concern regarding the issue of APCs with small sample sizes. However, our concern has less to do with the use of geometric mean costs being used to model the relative payment weights where they are appropriate, but more with the degree to which a substantive cost baseline can be established. In general, APCs with relatively low service costs or those where there is low claims volume tend to be more vulnerable to cost and payment volatility. We continue to examine methods and APC configurations, such as larger bundles, to mitigate any concerns related to those issues. As the commenter discussed regarding the case of proton beam therapy, there are situations where the costs of the service reflect only provision from a small number of providers and, therefore, may not establish a broad baseline as is the case for most APCs. However, in the case of the proton beam APCs, a sufficiently large volume of claims had been provided and the geometric means helped carry out our intention of capturing the full range of costs. As discussed in the APC-specific policy section of this final rule with comment period, section II.D., the issues relayed by the commenter primarily were due to presumed idiosyncrasies and errors in the submission of the cost reports, which, in turn, affected the estimation of costs, and was further impacted by the coding practices at an individual provider. We note that the potential of these issues to affect the relative payment weights would occur both under a median-based system, provided there was enough significant volume, as well as under geometric mean costs.

In both the CY 2013 OPPS/ASC proposed rule and in this CY 2013 OPPS/ASC final rule with comment period, we have included a column in the impact tables that separately shows the effects of the use of geometric mean costs on the APC relative payment weights. At a very basic level, provider categories that experienced more significant negative or positive payment impacts did so because of the mix of services furnished by those providers based on our claims data. We note that the OPPS provider payment impacts identified in section XXIII. of this CY 2013 OPPS/ASC final rule are relatively limited. Some commenters have stated that the policy of developing relative payment weights using geometric mean costs disproportionately affects teaching hospitals; other commenters have noted that the impacts are not identical based on the provider categories. That differential in the impacts is to be expected based on this policy, just as any estimated payment impact based on the mix of services that a hospital provides will vary from year to year. Because this policy affects the calculation of the relative payment weights and does not affect the relative payment weights uniformly, it is natural for the changes in those weights to have corresponding variation reflected in the provider impacts based on the mix of services furnished by providers. In the provider impact table in this CY 2013 OPPS/ASC final rule with comment period, we note that, even among major and minor teaching hospitals, there are different estimated impacts based on this policy. We further note that, while the payment category may reflect an increase or decrease in total estimated payment, even among the hospitals in that category, there may be differential impacts that may not necessarily be in the same direction. As discussed earlier in this section, we will continue to monitor any changes that may be associated with the policy of calculating the relative payment weights using geometric mean costs.

We make available with each proposed rule and final rule cost statistics files that include information about costs by CPT code and APC, as well as modeling and total frequency information for each code. Addenda A and B which show the payment rates associated with each rule, also are made available on the CMS Web site. Therefore, the information to continue monitoring changes in APC payment, code frequency, and cost are made available to the public.

Comment: One commenter supported the goal of making cross-system payment comparison of payment parity. Two commenters cautioned against using OPPS payments based on geometric mean costs as a basis for examining payment parity across the prospective payment systems. They noted that other factors may be involved that would cause those comparisons to potentially be inappropriate, including the acuity of the patients, case-mix, ratesetting methodologies, and resource use in different care settings, as well as different payment adjustments in each system.

Response: While we believe that each of the payment systems has an internally consistent methodology, we recognize the value of including useful information in making potential payment comparisons. We note that we already implement cross-system payment and utilization comparisons in cases such as the MPFS DRA imaging cap, the ASC cap on separately payable radiology services, the cap on ASC office-based covered surgical procedures, and the comparison of service provision across settings for purposes of the inpatient list. The goal in making any potential payment comparisons is to analyze the differences and similarities in as appropriate a manner as possible.

As we discussed in the CY 2012 OPPS/ASC final rule with comment period, in the context of the proposed Cardiac Resynchronization Therapy composite APC, there are various goals associated with making cross-system payment comparisons, including ensuring that we do not create an inappropriate payment incentive to provide services in one setting of care as opposed to another, using more accurate information where it is available, and constructing the payment groups to be more clinically and resource similar to each other where appropriate, among others (76 FR 74179 through 74182). We specifically noted that there could be many payment approaches that could be chosen for comparison purposes for any given item or service (76 FR 74181).

After consideration of the public comments we received, we are finalizing our proposal to develop the APC relative payment weights using geometric mean costs in the manner described above.

As we also discussed in the CY 2013 OPPS/ASC proposed rule (77 FR 45097), under the revised ASC payment system that was effective January 1, 2008, we established a standard ASC ratesetting methodology that bases payment for most ASC covered surgical procedures and some covered ancillary services on the OPPS relative payment weights (72 FR 42491 through 42493). Therefore, because we proposed to calculate CY 2013 OPPS relative payment weights using geometric mean costs, we also proposed that CY 2013 ASC payment rates under the standard ASC ratesetting methodology would be calculated using the OPPS relative payment weights that are based on geometric mean costs. We noted that basing the relative payment weights on geometric mean costs rather than median costs affects the proposed CY 2013 payment rates. We stated that differences in the proposed payment rates, as with any changes from year to year, affect other parts of the OPPS, including the copayments described in section II.I. of the proposed rule as well as the fixed-dollar outlier threshold described in section II.G. of the proposed rule.

We did not receive any public comments on the adoption of OPPS relative payment weights based on geometric means in the ASC system. For a more detailed discussion of the ASC ratesetting methodology, we refer readers to section XIV. of this final rule with comment period.

Under the CY 2013 proposed policy to base the relative payment weights on geometric mean costs, we also proposed to revise the related regulations that currently reflect a median cost-based OPPS to instead reflect a geometric mean cost-based OPPS. Specifically, we proposed to revise 42 CFR 419.31, which describes the 2 times rule discussed in section III.B. of the proposed rule and this final rule with comment period and the development of relative payment weights based on the cost metrics discussed in section II.A.4 of the proposed rule and this final rule with comment period.

Comment: One commenter stated that CMS did not address why it did not apply the 2 times rule based on geometric means while continuing to use medians for calculating the relative weights because the commenter believed that it would improve the detection of changes in service cost while basing relative payment weights on the less volatile median.

Response: In the CY 2013 OPPS/ASC proposed rule, we discussed the impact of evaluating the 2 times rule based on geometric mean costs rather than median costs, noting that while doing so did not significantly affect the application of the rule, it created several additional 2 times rule violations in the rebasing process (77 FR 45097). Similar to the IPPS and since the inception of the OPPS, we have used a statistical outlier trim of three standard deviations beyond the geometric mean cost, even though we have historically used median costs as the metric on which to base the relative payment weights. The application of the 2 times rule is inherently tied to the configuration of the APCs and, therefore, how individual codes are paid. To apply the 2 times rule based on geometric mean cost and reconfigure the APCs based on that metric, while calculating relative payment weights based on medians, would be an inconsistency in the data process in the same way that using geometric mean costs for some services and median costs for others would be. Further, section 1833(t)(2) of the Act states that the application of the 2 times rule should be based on the metric selected in section 1833(t)(2)(C) of the Act.

After consideration of the public comments we received, we are finalizing our proposal to apply the 2 times rule based on geometric mean costs and the corresponding changes in 42 CFR 419.31.

In section XXII. of this final rule with comment period, which discusses the regulatory impact analysis, we are providing an additional column in the impact tables for the OPPS that identifies the estimated impact due to APC recalibration of a geometric means-based OPPS as well as a column that estimates the impact of recalibration based on CY 2011 claims and historical cost report data. As depicted in the impact tables, many provider categories will experience limited impacts under the final policy to base the OPPS relative payment weights on geometric means. We note that the impact tables only estimate the OPPS payment impact based on the most current available claims and cost report data, and that providers' actual payments may vary, depending on the mix of services provided in the actual claims year. Also, the budget neutral payment adjustments ensure that, under a geometric mean-based system or a median cost-based system, aggregate OPPS payments will remain the same.

Section XXII. of this final rule with comment period contains an OPPS provider impact table that estimates the effect of policy changes and budget neutrality adjustments on provider payment under the CY 2013 OPPS. Column 3 of the impact table shows the estimated impact by provider category of calculating the CY 2013 OPPS payments based on geometric mean costs rather than median costs. While the policy to shift the basis for relative payment weights to geometric mean costs may involve some changes to the relative weights on which OPPS payments are based, providers will generally experience limited impacts to payment as a result of the CY 2013 final policy. Those provider categories that are estimated to experience increased payments as a result of the policy to base the CY 2013 relative payment weights on geometric mean costs generally included non-IPPS hospitals that provided psychiatric, hospital-based PHPs, and other services whose relative payment weights increased based on geometric mean costs. As noted above, we recognize that there may be fluctuations in the relative payment weights based on this CY 2013 final policy, but we believe that this policy represents an improvement that more accurately estimates the costs associated with providing services.

In our experience developing the OPPS, we have implemented many changes to obtain more cost information from the claims and cost report data available to us, in an effort to arrive at more accurate estimates of service cost. Many of those changes are described above and in prior OPPS final rules. Despite the challenges created by the complexity of the data and the diversity of facility accounting systems, we continue to examine possible process and data changes that may further improve precision, validity, and utility. Commenters have historically expressed concerns about the degree to which OPPS relative payment weights are reflective of the service costs associated with providing them, APC payment rate volatility from year to year, and other cost modeling related issues. We recognize that some of those issues will remain because they are related to naturally occurring changes in the economic environment, clinical practice, and the nature of payment systems, among other reasons. However, we believe that basing the OPPS relative payment weights on geometric means better captures the range of costs associated with providing services, improves payment accuracy while limiting year-to-year volatility, and allows reconfigurations in the APC environment using a metric that provides greater computational depth. For these reasons, and those discussed above, we are basing the CY 2013 OPPS/ASC final relative payment weights on geometric mean costs.

3. Changes to Packaged Services

a. Background

Like other prospective payment systems, the OPPS relies on the concept of averaging, where the payment may be more or less than the estimated cost of providing a specific service or bundle of specific services for a particular patient. However, with the exception of outlier cases, overall payment is adequate to ensure access to appropriate care. The OPPS packages payment for multiple interrelated services into a single payment to create incentives for providers to furnish services in the most efficient way by enabling hospitals to manage their resources with maximum flexibility, thereby encouraging long-term cost containment. For example, where there are a variety of supplies that could be used to furnish a service, some which are more expensive than others, packaging encourages hospitals to use the most cost-efficient item that meets the patient's needs, rather than to routinely use a more expensive item, which could result if separate payment is provided for the items. Packaging also encourages hospitals to negotiate with manufacturers and suppliers to reduce the purchase price of items and services or to explore alternative group purchasing arrangements, thereby encouraging the most economical health care. Similarly, packaging encourages hospitals to establish protocols that ensure that necessary services are furnished, while scrutinizing the services ordered by practitioners to maximize the efficient use of hospital resources. Packaging payments into larger payment bundles promotes the predictability and accuracy of payment for services over time. Finally, packaging may reduce the importance of refining service-specific payment because packaged payments include costs associated with higher cost cases requiring many ancillary services and lower cost cases requiring fewer ancillary services. For these reasons, packaging payment for items and services that are typically ancillary and supportive to a primary service has been a fundamental part of the OPPS since its implementation in August 2000.

We use the term “dependent service” to refer to the HCPCS codes that represent services that are typically ancillary and supportive to a primary diagnostic or therapeutic modality. We use the term “independent service” to refer to the HCPCS codes that represent the primary therapeutic or diagnostic modality into which we package payment for the dependent service. In future years, as we consider the development of larger payment groups that more broadly reflect services provided in an encounter or episode of care, it is possible that we might propose to bundle payment for a service that we now refer to as “independent.”

We assign status indicator “N” to those HCPCS codes of dependent services that we believe are always integral to the performance of the primary modality; therefore, we always package their costs into the costs of the separately paid primary services with which they are billed. Services assigned to status indicator “N” are unconditionally packaged.

We assign status indicator “Q1” (STVX-Packaged Codes), “Q2” (T-Packaged Codes), or “Q3” (Codes that may be paid through a composite APC) to each conditionally packaged HCPCS code. An STVX-packaged code describes a HCPCS code whose payment is packaged with one or more separately paid primary services with the status indicator of “S,” “T,” “V,” or “X” furnished in the hospital outpatient encounter. A T-packaged code describes a code whose payment is only packaged with one or more separately paid surgical procedures with the status indicator of “T” are provided during the hospital outpatient encounter. STVX-packaged codes and T-packaged codes are paid separately in those uncommon cases when they do not meet their respective criteria for packaged payment. STVX-packaged codes and T-packaged codes are conditionally packaged. We refer readers to section XII.A.1. of this final rule with comment period and Addendum D1, which is available via the Internet on the CMS Web site with other Addenda, for a complete listing of status indicators and the meaning of each status indicator.

Hospitals include HCPCS codes and charges for packaged services on their claims, and the estimated costs associated with those packaged services are then added to the costs of separately payable procedures on the same claims to establish prospective payment rates. We encourage hospitals to report all HCPCS codes that describe packaged services provided, unless the CPT Editorial Panel or CMS provides other guidance. The appropriateness of the OPPS payment rates depends on the quality and completeness of the claims data that hospitals submit for the services they furnish to Medicare beneficiaries.

In addition to the packaged items and services listed in 42 CFR 419.2(b), in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66610 through 66659), we adopted the packaging of payment for items and services in seven categories with the primary diagnostic or therapeutic modality to which we believe these items and services are typically ancillary and supportive. The seven categories are: (1) Guidance services; (2) image processing services; (3) intraoperative services; (4) imaging supervision and interpretation services; (5) diagnostic radiopharmaceuticals; (6) contrast media; and (7) observation services. We specifically chose these categories of HCPCS codes for packaging because we believe that the items and services described by the codes in these categories are typically ancillary and supportive to a primary diagnostic or therapeutic modality and, in those cases, are an integral part of the primary service they support. Packaging under the OPPS also includes composite APCs, which are described in section II.A.2.e. of this final rule with comment period.

We recognize that decisions about packaging and bundling payment involve a balance between ensuring that payment is adequate to enable the hospital to provide quality care and establishing incentives for efficiency through larger units of payment. Therefore, in the CY 2013 OPPS/ASC proposed rule (77 FR 45098 through 45101), we invited public comments regarding our packaging proposal for the CY 2013 OPPS.

b. Clarification of the Regulations at 42 CFR 419.2(b)

In the CY 2013 OPPS/ASC proposed rule (77 FR 45099), we proposed to clarify the regulatory language at 42 CFR 419.2(b) to make explicit that the OPPS payments for the included costs of the nonexclusive list of items and services covered under the OPPS referred to in this paragraph are packaged into the payments for the related procedures or services with which such items and services are provided. We stated that this proposed clarification is consistent with our interpretation and application of 42 CFR 419.2(b) since the inception of the OPPS. We invited public comments on this clarification.

Comment: One commenter objected to the proposed clarification of the regulatory language at 42 CFR 419.2(b). The commenter expressed concern that the proposed changes to the regulatory language are ambiguous and may result in confusion for hospitals and contractors. The commenter believed that Medicare audit contractors will try to assert that all services furnished during a particular encounter, such as E/M visits, drug administration, X-rays, or other ancillary tests, are all related to the main procedure or service received. The commenter further stated that this may lead to payment denials or monies taken during audits and/or post-payment reviews based on the proposed clarification. Therefore, the commenter recommended that CMS abandon this proposal because the current regulatory language is clear and instructs all entities about CMS' packaging principles.

Another commenter did not object to the proposed wording change from “included costs” to “packaged costs” because, the commenter stated, CMS did not propose to add or alter any of the examples of packaged items and services, and the language used already notes that the list provided is not an inclusive one. However, the commenter was concerned that the proposed addition of the phrase “the payments for which are packaged into the payment for the related procedures or services” introduces a new concept that may lead to a broad interpretation of the regulatory text. The commenter expressed concern that when audits of OPPS accounts occur, the proposed regulatory text may be used to broaden the packaging concept beyond accurate CPT coding by using a subjective interpretation of the term “related”. Therefore, the commenter requested that CMS not add the phrase “the payments for which are packaged into the payment for the related procedures or services”.

Response: We disagree with the commenters' assertion that the proposed clarification of the regulatory text at 42 CFR 419.2(b) is ambiguous or confusing. We note our proposal simply clarifies our longstanding policy of packaging, which is a fundamental concept of the OPPS. Specifying that included costs are packaged under the OPPS and that the payment for these packaged costs is packaged into the payment of the related procedures or services is consistent with our longstanding policies related to packaging. In addition, we disagree with the commenter's statement that the proposed addition to 42 CFR 419.2(b) of the phrase “the payment for which are packaged into the payment for the related procedures or services” introduces a new concept into the current regulation text.

As we have repeatedly stated, since the inception of the OPPS, packaging payment for items and services that are typically ancillary and supportive to a primary service has been a fundamental part of the OPPS. The concept of packaging entails that the costs for packaged services that are billed with a status indicator of “N” are packaged into the costs of the separately paid primary service with which they are billed. This then means that no separate APC payment is made for the packaged service alone but payment is instead included in the payment for the service or procedure with which the packaged service has been billed.

We believe that our clarification of the regulations at 42 CFR 419.2(b) is consistent with the concept of packaging under the OPPS and does not deviate in any way from our current and longstanding policies regarding packaging under the OPPS.

After consideration of the public comments we received, we are finalizing our proposed policy, without modification, to clarify 42 CFR 419.2(b) to make explicit that the OPPS payments for the included costs of the nonexclusive list of items and services covered under the OPPS referred to in this paragraph are packaged into the payments for the related procedures or services with which such items and services are provided.

c. Packaging Recommendations of the HOP Panel (“The Panel”) at Its February 2012 Meeting

During its February 2012 meeting, the Panel made five recommendations related to packaging and to the function of the subcommittee. One additional recommendation that originated from the APC Groups and Status Indicator (SI) Assignment Subcommittee about observation services is discussed in section II.A.2.e. of this final rule with comment period. The report of the February 2012 meeting of the Panel may be found on the CMS Web site at: http://www.cms.gov/FACA/05_AdvisoryPanelonAmbulatoryPaymentClassificationGroups.asp.

Below we present each of the Panel's five packaging recommendations and our responses to those recommendations.

Panel Recommendation: CMS should delete HCPCS code G0259 (Injection procedure for sacroiliac joint; arthrography) and HCPCS code G0260 (Injection procedure for sacroiliac joint; provision of anesthetic, steroid and/or other therapeutic agent, with or without arthrography), and instead use CPT code 27096 (Injection procedure for sacroiliac joint, anesthetic/steroid, with image guidance (fluoroscopy or CT) including arthrography, when performed) with a status indicator of “T,” and assign CPT code 27096 to APC 0207 (Level III Nerve Injections).

Response: In the CY 2013 OPPS/ASC proposed rule, we did not accept the Panel's recommendation to delete HCPCS code G0259 and G0260 and instead use CPT code 27096 with a status indicator of “T” and assign CPT code 27096 to APC 0207. For CY 2012, we assigned CPT code 27096 to status indicator “B,” meaning that this code is not payable under the OPPS. In order to receive payment for procedures performed on the sacroiliac joint with or without arthrography or with image guidance under the OPPS, hospitals must use either HCPCS code G0259, which is assigned to status indicator “N” for CY 2012, or HCPCS code G0260, which is assigned to status indicator “T” for CY 2012, as appropriate. CMS created HCPCS codes G0259 and G0260 to separate and distinguish the image guidance procedure from the therapeutic injection procedure for the sacroiliac joint. As stated above, guidance procedures are packaged under the OPPS because we believe that they are typically ancillary and supportive to a primary diagnostic or therapeutic modality and are an integral part of the primary service they support.

We believe that the existence of HCPCS codes G0259 and G0260 is necessary to assign appropriate packaged payment for the image guidance procedure, according to our established packaging policy, and separate payment for the therapeutic injection procedure. Therefore, we did not accept the Panel's recommendation and followed the previously established policy to continue to assign HCPCS code G0259 to status indicator “N,” HCPCS code G0260 to status indicator “T,” and CPT code 27096 to status indicator “B” for CY 2013.

Comment: Several commenters disagreed with CMS' proposal to not accept the Panel's recommendation on HCPCS codes G0259 and G0260 and to continue to assign a status indicator of “B” for CPT code 27096. One commenter expressed concern that the continued use of HCPCS codes G0259 and G0260 instead of the CPT code 27096 is administratively burdensome to hospitals because it does not allow standardized code reporting among all payers.

Another commenter stated that there is no CPT code that would describe the radiological portion of the procedure to be reported in addition to HCPCS code G0259 because the AMA deleted CPT code 73054. As of January 1, 2012, the commenter stated that CPT code 27096 is always a complete procedure that includes the injection of a diagnostic or therapeutic agent and the associated imaging. The commenter recommended that CMS recognize CPT code 27096 and assign the appropriate APC code to this CPT code based on the CY 2011 claims data for HCPCS code G0259 with CPT code 73542 and HCPCS code G0260 or modify the descriptor of HCPCS code G0259 to include the radiological portion of the procedure and assign the appropriate status indicator and APC for the complete procedure.

One commenter stated that CPT codes 77003 (Fluoroscopic guidance and localization of needle or catheter tip for spine or paraspinous diagnostic or therapeutic injection procedures (epidural or subarachnoid)) and 77012 (Computed tomography guidance for needle placement (eg, biopsy, aspiration, injection, localization device), radiological supervision and interpretation) that are billed with HCPCS code G0260 have a NCCI edit with an indicator of “1.” Therefore, the commenter stated that CPT codes 77003 and 77012 cannot be reported with modifier “59” because the imaging guidance is not separate and distinct and it is instead part of the procedure. The commenter stated that providers cannot accurately report the cost of the imaging guidance (either fluoroscopy or CT) due to the CCI edits and the fact that the HCPCS code G0260 descriptor does not indicate if either fluoroscopy or CT imaging is bundled into the procedure code. Therefore, the commenter asked that CMS establish a new HCPCS code to describe the sacroiliac injection procedure performed with imaging (fluoroscopy or CT) or allow the reporting of CPT code 27096 and revise the status indicator from “B” to “T.”

Response: We continue to believe that assigning HCPCS codes G0259 to status indicator “N” is necessary in order to designate appropriate packaged payment for the image guidance procedure, according to our established packaging policy, and separate payment for the therapeutic injection procedure. However, we will reevaluate the descriptors for HCPCS code G0259 and G0260 for CY 2014 in light of the commenter's concerns on the AMA's modification of the descriptor for CPT code 27096 in CY 2012 to include the arthrography services described by CPT code 73542.

After consideration of the public comments we received, for CY 2013, we are continuing to assign a status indicator of “N” to HCPCS code G0259, a status indicator of “T” to HCPCS code G0260, which is assigned to APC 0207 with a final CY 2013 geometric mean cost of approximately $582, and a status indicator of “B” to CPT code 27096.

Panel Recommendation: CMS provide data to the APC Groups and SI Subcommittee on the following arthrography services, so that the Subcommittee can consider whether the SI for these services should be changed from “N” to “S”:

  • HCPCS code 21116 (Injection procedure for temporomandibular joint arthrography);
  • HCPCS code 23350 (Injection procedure for shoulder arthrography or enhanced CT/MRI shoulder arthrography);
  • HCPCS code 24220 (Injection procedure for elbow arthrography);
  • HCPCS code 25246 (Injection procedure for wrist arthrography);
  • HCPCS code 27093 (Injection procedure for hip arthrography; without anesthesia);
  • HCPCS code 27095 (Injection procedure for hip arthrography; with anesthesia);
  • HCPSC code 27096 (Injection procedure for sacroiliac joint, anesthetic/steroid with image guidance (fluoroscopy or CT) including arthrography when performed);
  • HCPCS code 27370 (Injection procedure for knee arthrography); and
  • HCPCS code 27648 (Injection procedure for ankle arthrography).

CMS Response: In the CY 2013 OPPS/ASC proposed rule, we accepted the Panel's recommendation that CMS provide data to the APC Groups and SI Assignment Subcommittee on CPT codes 21116, 23350, 24220, 25246, 27093, 27095, 27096, 27370, and 27648 at a future Panel meeting.

We did not receive any public comments on this recommendation.

Panel Recommendation: CMS change the status indicator for HCPCS code 19290 (Preoperative placement of needle localization wire, breast) from “N” to “Q1” and continue to monitor the frequency of the code when used in isolation.

CMS Response: In the CY 2013 OPPS/ASC proposed rule, we agreed with the Panel that a status indicator of “Q1” is appropriate for CPT code 19290. This status indicator will allow for separate payment when this procedure is performed alone or packaged payment when this procedure is performed with an associated surgical procedure. Therefore, as we proposed, we are accepting the Panel's recommendation and assigning CPT code 19290 to APC 0340 (Minor Ancillary Procedures) and status indicator “Q1” for the CY 2013 OPPS. APC 0340 has a final geometric mean cost of approximately $51 (as compared to approximately $50 calculated for the proposed rule) for CY 2013.

Comment: Several commenters supported CMS' proposal to reassign HCPCS code 19290 from “N” to “Q1”. However, one commenter recommended that CMS review the APC assignments for HCPCS codes 19290 and 19295 (Image guided placement, metallic localization clip, percutaneous, during breast biopsy/aspiration (list separately in addition to code for primary procedure) during the CY 2014 rulemaking cycle and propose a more appropriate and higher paying APC for these services.

Response: We appreciate the commenters' support. For CY 2013, we are accepting the Panel's recommendation and finalizing our proposal to assign a status indicator of “Q1” to HCPCS code 19290, which is assigned to APC 0340 with a CY 2013 final payment rate of approximately $51. As has been our practice since the implementation of the OPPS in 2000, we review, on an annual basis, the APC assignments for the procedures and services paid under the OPPS. We will continue to review, on an annual basis, the APC assignments for CPT codes 19290 and 19295.

Panel Recommendation: Judith Kelly, R.H.I.T., R.H.I.A., C.C.S., remain the chair of the APC Groups and SI Subcommittee.

CMS Response: In the CY 2013 OPPS/ASC proposed rule, we indicated that we accepted the Panel's recommendation that Judith Kelly, R.H.I.T., R.H.I.A., C.C.S., continue to chair the APC Groups and SI Assignment Subcommittee.

We did not receive any public comments on this recommendation. We appreciate the services of Ms. Kelly as chair of the Subcommittee for CY 2012.

Panel Recommendation: The work of the APC Groups and SI Assignment Subcommittee continue.

CMS Response: In the CY 2013 OPPS/ASC proposed rule, we indicated that we accepted the Panel's recommendation that the work of the APC Groups and SI Assignment Subcommittee continue.

We did not receive any public comments on this recommendation.

d. Packaging Recommendations of the HOP Panel (“The Panel”) at Its August 2012 Meeting

During its August 2012 meeting, the Panel accepted the report of the Subcommittee for APC Groups and Status Indicator (SI) Assignments, heard several public presentations related to packaged services and APC grouping and status indicator assignments, and made two recommendations related to the function of the subcommittee. The subcommittee also made recommendations with regard to APC assignment of specific services that are discussed in section III.D. of this final rule with comment period. The report for the August 2012 meeting of the Panel may be found on the CMS Web site at: http://www.cms.gov/FACA/05_AdvisoryPanelonAmbulatoryPaymentClassificationGroups.asp.

Below we present the two recommendations related to the function of the subcommittee. Recommendations that evolved from the discussions of the Subcommittee on APC Groups and SI Assignments that are specific to the APC assignment of HCPCS codes and the removal of HCPCS codes from the inpatient list are discussed in section III. and IX., respectively, of this final rule with comment period.

Panel Recommendation: The Panel recommends that Jacqueline Phillips be named chair of the APC Groups and SI Assignments Subcommittee.

CMS Response: We accept the Panel's recommendation that Jacqueline Phillips be named chair of the APC Groups and SI Assignments Subcommittee. We thank Ms. Judith Kelly for her service as chair of the APC Groups and SI Assignments Subcommittee, and we welcome Ms. Phillips as chair of the APC Groups and SI Assignments Subcommittee.

Panel Recommendation: The Panel recommends that the work of the APC Groups and SI Assignments Subcommittee continue.

CMS Response: We are accepting the APC Panel's recommendation that the work of the APC Groups and SI Assignments Subcommittee continue.

e. Other Packaging Proposals and Policies for CY 2013

The HCPCS codes that we proposed to be packaged either unconditionally (for which we continue to assign status indicator “N”), or conditionally (for which we continue to assign status indicator “Q1”, “Q2”, or “Q3”), were displayed in Addendum B of the CY 2013 OPPS/ASC proposed rule. The supporting documents for the CY 2013 OPPS/ASC proposed rule, including but not limited to Addendum B, are available at the CMS Webs site at: http://www.cms.hhs.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html. To view the status indicators by HCPCS code in Addendum B, select “CMS 1589” and then select the folder labeled “2013 OPPS Proposed Rule Addenda” or “2013 OPPS Final Rule with Comment Period Addenda” from the list of supporting files. Open the zipped file and select Addendum B, which is available as both an Excel file and a text file.

Comment: Commenters stated that CMS' packaging policies would likely lead to less efficient use of resources, limited access to innovative treatment options, and greater instability in payment because the policies are based on several flawed assumptions. The commenters believed that, to the extent that hospitals control the array of services they provide, CMS' packaging policies assume that the same incentives apply to services furnished in HOPDs as to inpatient services. One commenter stated that, under the IPPS, hospitals have an incentive to provide care in an efficient manner to ensure the lowest cost for the patient's diagnosis. In contrast, in HOPDs, because Medicare payment is based on procedures rather than diagnoses, the commenter believed that hospitals have an incentive to provide the lowest cost item or service included in an APC. The commenter further believed that if that service does not fully address the patient's needs, the hospital would receive better payment by bringing the patient back for a second visit or admitting the patient for inpatient care than by providing a more costly option within the same APC.

Moreover, the commenters believed that when an APC's payment rate is significantly less than the cost of a technology, hospitals have a strong disincentive to use that technology, even if it could reduce the costs of care at a later date. The commenters believed that CMS' use of expanded packaging has the risk of encouraging hospitals to forego performing needed services and using new technologies that may be more resource intensive during one visit, but could save the patient future outpatient department visits or inpatient care.

Response: As we stated in the CY 2012 OPPS/ASC final rule with comment period (76 FR 74186), packaging payment for items and services that are ancillary to and dependent on the major procedure for which a payment rate is established is a fundamental concept of the OPPS, based in regulation in the definition of costs that are included in the national payment rate for a service (42 CFR 419.2(b)) and in place since the inception of the OPPS (65 FR 18447). We continue to believe that packaging creates incentives for hospitals and their practitioner partners to work together to establish appropriate protocols that eliminate unnecessary services where they exist and institutionalize approaches to providing necessary services more efficiently. With respect to new services or new applications of existing technology, we believe that packaging payment for ancillary and dependent services creates appropriate incentives for hospitals to consider whether a new service or a new technology offers a benefit that is sufficient to justify the cost of the new service or new technology. Whether this review results in reductions in services that are only marginally beneficial or influences hospitals' choices to not utilize certain technologies, we believe that these changes could improve, rather than harm, the quality of care for Medicare beneficiaries because every service furnished in a hospital carries some level of risk to the patient and the beneficiary would be spared the risk associated with the additional service or different technology. Moreover, we believe that hospitals strive to provide the best care they can to the patients they service so that when new technologies are proven to improve the quality of care, their utilization will increase appropriately, whether the payment for them is packaged or not. While we believe hospitals are committed to provide optimal care to their patients, we are aware that there are financial pressures on hospitals that might motivate some hospitals to split services among different hospital encounters in such a way as to maximize payments. While we do not expect that hospitals would routinely change the way they furnish services or the way they bill for services in order to maximize payment, we recognize that it would be possible and we consider that possibility as we annually review hospital claims data. We will continue to examine claims data for patterns of fragmented care, and if we find a pattern in which a hospital appears to be dividing care across multiple days, we will refer it for investigation to the QIO or to the Program Safeguard Contractor, as appropriate to the circumstances we find.

Comment: One commenter stated that continued reporting by CMS on utilization of all packaged services and access to care will be essential to ensure that Medicare's payment policies do not restrict beneficiaries' access to necessary care. The commenter asked that CMS make annual reports to the HOP Panel on reporting of services subject to CMS' expanded packaging services.

Response: Each year, we make available an extensive amount of OPPS data that can be used for any data analysis an interested party would care to perform. Specifically, we make available a considerable amount of data for public analysis each year through the supporting data files that are posted on the CMS Web site in association with the proposed and final rules. In addition, as we discuss in detail in section II.A.2. of this final rule with comment period, we make available the public use files of claims, including, for CY 2008 and later, supplemental line item cost data for every HCPCS code under the OPPS, and a detailed narrative description of our data process for the annual OPPS/ASC proposed and final rules that the public can use to perform any desired analyses. Therefore, stakeholders are able to examine and analyze these data to develop specific information to assess the impact and effect of packaging for the services of interest to them. This information is available to support public requests for changes to payments under the OPPS, whether with regard to separate payment for a packaged service or other issues. We understand that the OPPS is a complex payment system and that it may be difficult to determine the quantitative amount of packaged cost included in the cost for every independent service. However, stakeholders routinely provide us with meaningful analyses at a very detailed and service-specific level based on the claims data we make available. We routinely receive complex and detailed public comments, including extensive code-specific data analysis on packaged and separately paid codes, using the data from current and prior proposed and final rules.

Furthermore, we are not required, nor do we intend, to make annual reports to the Panel regarding services that are subject to CMS' packaging policies. We note that the Panel did not recommend at either the February 2012 meeting or the August 2012 meeting that CMS present annual reports on services subject to CMS' packaging services.

Comment: Commenters stated that CMS assumes that its packaging policies will allow it to continue to collect the data it needs to set appropriate, stable payment rates in the future. The commenters stated that CMS' past experience with packaging payment for ancillary items indicates that hospitals do not submit codes for services that do not directly affect calculations of future payment rates for that Medicare Severity-Diagnosis Related Group (MS-DRG). The commenters further stated that, under the IPPS, hospitals report only the data required to assign a case to the highest paying appropriate MS-DRG, even though other data might affect payment in the long term. The commenters stated that they saw no reason to believe that the current approach would have a different outcome unless CMS gives clear instruction to continue coding for all items and services provided and provides some incentive to do so. The commenters asked that CMS require complete and correct coding for packaged services.

Response: We do not believe that there has been or will be a significant change in what hospitals report and charge for the outpatient service they furnish to Medicare beneficiaries and other patients as a result of our current packaging methodology. Medicare cost reporting standards specify that hospitals must impose the same charges for Medicare patients as for other patients. We are often told by hospitals that many private payers pay based on a percentage of charges and that, in accordance with Medicare cost reporting rules and generally accepted accounting principles, hospital chargemasters do not differentiate between the charges to Medicare patients and other patients. Therefore, we have no reason to believe that hospitals will stop reporting HCPCS codes and charges for packaged services they provide to Medicare beneficiaries. As we stated in the CY 2009 OPPS/ASC final rule with comment period (73 FR 68575), we strongly encourage hospitals to report a charge for each packaged service they furnish, either by billing the packaged HCPCS code and a charge for that service if separate reporting is consistent with CPT and CMS instructions, by increasing the charge for the separately paid associated service to include the charge for the packaged service, or by reporting the charge for the packaged service with an appropriate revenue code but without a HCPCS code. Any of these means of charging for the packaged service will result in the cost of the packaged service being incorporated into the cost we estimate for the separately paid service. If a HCPCS code is not reported when a packaged service is provided, we acknowledge that it can be challenging to specifically track the utilization patterns and resource cost of the packaged service itself. However, we have no reason to believe that hospitals have not considered the cost of the packaged service in reporting charges for the independent, separately paid service. We expect that hospitals, as other prudent businesses, have a quality review process that ensures that they accurately and completely report the services they furnish, with appropriate charges for that service to Medicare and all other payers. We encourage hospitals to report on their claim for payment all HCPCS codes that describe packaged service that were furnished, unless the CPT Editorial Panel or CMS provides other guidance. To the extent that hospitals include separate charges for packaged services on their claims, the estimated costs of those packaged services are then added to the costs of separately paid procedures on the same claims and used in establishing payment rates for the separately paid services. It is impossible to know with certainty whether hospitals are failing to report HCPCS codes and charges for service for which the payment is packaged into payment for the independent service with which the packaged service is furnished. Moreover, if a hospital fails to report the HCPCS codes and charges for packaged services, the reason may be that the hospital has chosen to package the charge for the ancillary and dependent service into the charge for the service with which it is furnished. Although we prefer that hospitals report HCPCS codes and charges for all service they furnish, if the hospital's charge for the independent services also reflects the charge for all ancillary and supportive service it typically provides, the absence of HCPCS codes and separate charges would not result in inappropriately low cost for the independent service, although CMS would not know which specific ancillary and supportive services were being furnished. If a hospital is no longer providing a service, there may be many reasons that a hospital chooses not to provide a particular service or chooses to cease providing a particular service, including, but not limited to, because the hospital has determined that it is no longer cost effective for the hospital to furnish the service and that there may be other hospitals in the community that can furnish the service more efficiently.

Comment: One commenter asked that CMS reinstate separate payment for radiation oncology guidance procedures because these services are vital to the safe provision of radiation therapy and unconditionally packaging payment for them may discourage hospitals from providing them.

Response: As we stated in the CY 2012 OPPS/ASC final rule with comment period (76 FR 74188), we recognize that radiation oncology guidance services, like most packaged services, are important to providing safe and high quality care to patients. However, we continue to believe that hospitals will invest in services that represent genuinely increased value to patient care. We will continue to pay separately for innovative technologies if a device meets the conditions for separate payment as a pass-through device or if a new procedure meets the criteria for payment as a new technology APC.

Comment: One commenter expressed concern over a statement made in the proposed rule that indicated that CMS might propose to bundle payment for [services] that [it] now refers to as “independent [services”]. The commenter stated that CMS did not provide any statutory authority that would allow it to move away from a fundamental OPPS policy, that only “dependent services” are potentially considered as part of a bundled reimbursement methodology. The commenter further stated that packaging payment for multiple services that are not interrelated presents no efficiency or resource management incentives, because, by definition, these services are not related, meaning there are no efficiencies to be gained and no overlap in resources expended.

Response: In the CY 2013 OPPS/ASC proposed rule (77 FR 45089), we noted that we use the term “independent service” to refer to the HCPCS codes that represent the primary therapeutic or diagnostic modality into which we package payment for the dependent service. We also noted that, in future years, as we consider the development of larger payment groups that more broadly reflect services provided in an encounter or episode of care, it is possible that we might propose to bundle payment for a service that we now refer to as “independent.” We disagree with the commenter that we do not have the statutory authority to consider larger payment bundles that more broadly reflect services provided in an encounter or episode of care. Our statutory authority is defined in section 1833(t)(2)(B) of the Act, which allows the OPPS to establish groups of covered HOPD services, namely APC groups, and use them as the basic unit of payment.

Furthermore, for CY 2008, we expanded packaging to services that were once considered independent services and items, such as nonpass-through contrast agents and observation services. We now consider these services to be ancillary and supportive to a primary diagnostic or therapeutic modality and have assigned these services an unconditionally packaged status indicator of “N.” It follows then that items or services that are currently considered to be “independent” services within this final rule with comment period may be packaged where appropriate in future years, after taking into consideration the clinical nature of the item or service and then determining whether or not that item or service is considered ancillary and supportive to a primary diagnostic or therapeutic modality.

We note that we did not make any new proposals to develop additional payment bundles for CY 2013, but that we will likely do so in future rulemaking. For CY 2013, we proposed to continue to package the payment for items and services in seven categories with the primary diagnostic or therapeutic modality to which we believe that these items and services are typically ancillary and supportive. Because the commenter does not question the appropriateness of these seven categories of packaged payment given in the proposed rule nor does the commenter question the appropriateness of a specific APC assignment for a packaged HCPCS or CPT code, we cannot fully address the commenter's concerns about bundling multiple services that are not interrelated and that may or may not present efficiency or resource management incentives. We continue to believe that the seven categories of packaged services and items are appropriate to encourage hospital efficiency, flexibility, and ultimately cost containment.

Comment: One commenter requested that CMS change the status indicator for HCPCS code L8604 (Injectable bulking agent, dextranomer/hyaluronic acid copolymer implant, urinary tract, 1 ml, includes shipping and necessary supplies) from “N” to “A.” The commenter argued that this would allow HCPCS code L8604 to be paid under a different fee schedule and would allow for access to the product SOLESTA® in the HOPD. The commenter also asked that CMS cover and pay for SOLESTA® in the same manner as other hyaluronic acid products and assign SOLESTA® a separate and unique HCPCS code.

Response: HCPCS code L8604 describes several products that are implantable prosthetic devices. According to 42 CFR 419.2(b)(11), implantable prosthetic devices are packaged under the OPPS. Therefore, status indicator “N” is the correct status indicator for HCPCS code L8604. We also note that any coverage, reclassification, or HCPCS code change requests for SOLESTA® are outside the scope of this final rule with comment period. Such issues are addressed by processes outside the OPPS/ASC rule by either CMS' HCPCS Workgroup or CMS' Coverage and Analysis Group.

Comment: One commenter requested that CMS assign HCPCS code J7665 (Mannitol, administered through an inhaler, 5 mg) to a status indicator of “K” for CY 2013. The commenter stated that the product that is described by HCPCS code J7665 is a drug indicated for the assessment of bronchial hyperresponsiveness in individuals at least six years of age without clinically apparent asthma and that, consistent with its FDA labeling, the product that is described by HCPCS code J7665 can only be used in an institutional setting or a physician's office. The commenter argued that HCPCS code J7665 was incorrectly assigned a status indicator of “N” because this product is approved as a drug through the NDA process and should be paid under the OPPS as a separately paid drug as opposed to a supply under the OPPS.

Response: We agree with the commenter that HCPCS code J7665 can be administered in the HOPD. However, we do not believe that the product described by HCPCS code J7665 is a separately payable drug as we have described here within this final rule with comment period, and is instead a supply with costs included in the payment under the OPPS as described in 42 CFR 419.2(b). Mannitol (HCPCS code J7665), when administered through an inhaler, is always used as a supply in bronchial challenge testing. Therefore, for CY 2013, we are assigning a status indicator of “N” to HCPCS code J7665.

After consideration of the public comments we received, for CY 2013, we are finalizing our proposed policy to continue to package payment for the services for which we proposed unconditional or conditional packaged payment in the proposed rule for the reasons set forth above.

f. Packaging of Drugs, Biologicals, and Radiopharmaceuticals

(1) Existing Packaging Policies

In the OPPS, we currently package five categories of drugs, biologicals, and radiopharmaceuticals (unless temporary pass-through status applies): (1) Those with per day costs at or below the packaging threshold; (2) diagnostic radiopharmaceuticals; (3) contrast agents; (4) anesthesia drugs; and (5) drugs treated as surgical supplies. Anesthesia drugs are discussed further in section II.A.3.c.(2) of this final rule with comment period. For detailed discussions of the established packaging policies for diagnostic radiopharmaceuticals and contrast agents, we refer readers to the CY 2008 OPPS/ASC final rule with comment period (72 FR 66765 through 66768). For further details on drugs treated as surgical supplies, we refer readers to the CY 2003 OPPS final rule (67 FR 66767) and Chapter 15, Section 50.2 of the Medicare Benefit Policy Manual.

(2) Clarification of Packaging Policy for Anesthesia Drugs

It has been longstanding OPPS policy to package “anesthesia” and “supplies and equipment for administering and monitoring anesthesia or sedation,” as described in 42 CFR 419.2(b)(4) and (b)(5). As described above, items and services paid under the OPPS that are typically ancillary and supportive to a primary diagnostic or therapeutic modality and, in those cases, are considered dependent items and services are packaged into the payment of their accompanying independent primary service. In accordance with our current policy on packaging items and services, drugs that are used to produce anesthesia in all forms are ancillary and supportive to a primary diagnostic or therapeutic modality, and are included in our definition of “anesthesia” as described in § 419.2(b)(4) and (b)(5). However, we recognize that some anesthesia drugs may qualify for transitional pass-through status under section 1833(t)(6) of the Act. Therefore, in the CY 2013 OPPS/ASC proposed rule (77 FR45100), we proposed to clarify that our general policy is to package drugs used to produce anesthesia, and that those anesthesia drugs with pass-through status will be packaged upon the expiration of pass-through status. We invited public comment on our clarification of the existing packaging policies for anesthesia drugs under § 419.2(b)(4) and (b)(5).

Comment: Commenters objected to the proposed clarification of the OPPS policy on anesthesia and all future policies that expand the packaging of drugs, through the increase of the drug packaging threshold or otherwise. The commenters expressed their concern over the increase in packaging for drugs in general and urged CMS not to finalize this policy. The commenters also stated their concern that the CMS drug packaging polices used in the HOPD could encourage hospitals to under utilize critically important drugs and ultimately compromise beneficiary's access to care and undercut CMS' work to improve the quality of care. The commenters urged CMS not to finalize this proposal, to conduct a careful review to assess the effect of packaging on quality of care, and to forego any new packaging policies as a whole.

One commenter expressed support for the clarification of this policy. The commenter further encouraged CMS to continue to monitor packaged drugs and biologicals to ensure they are appropriately paid.

Response: For the CY 2013 OPPS/ASC proposed rule (77 FR 45100), we proposed to clarify the existing policies related to nonpass-through and pass-through anesthesia drugs. It has been our longstanding policy to package anesthesia drugs, which are drugs that are used to produce anesthesia in all forms and are ancillary and supportive to a primary diagnostic or therapeutic modality, that are not on pass-through status as included costs under the OPPS, as described in 42 CFR 419.2(b)(4) and (b)(5). However, we also clarified in the proposed rule that anesthesia drugs are eligible for transitional pass-through status as a drug, as provided in section 1833(t)(6) of the Act. Therefore, we noted that we were not finalizing a new policy to package nonpass-through anesthesia drugs but were clarifying in our preamble language our currently existing policies.

In addition, as we stated above, we continue to believe that packaging payment for items and services that are ancillary to and dependent on the major procedure for which a payment rate is established is a fundamental concept of the OPPS. We address additional comments on packaging for drugs, biologicals, diagnostic radiopharmaceuticals, and contrast agents below in section II.A.3.f. and section V.A. of this final rule with comment period.

After consideration of the public comments we received, we are finalizing this proposed clarification for CY 2013. Anesthesia drugs that are used to produce anesthesia in all forms are ancillary and supportive to a primary diagnostic or therapeutic modality under 42 CFR 419.2(b)(4) and (b)(5). Therefore, nonpass-through anesthesia drugs are packaged under the OPPS. New anesthesia drugs that were not being paid for as an HOPD service as of December 31, 1996, and whose cost is “not insignificant” in relation to the OPPS payment for the procedures or services associated with the new anesthesia drug are eligible for transitional pass-through status as a drug or biological, as described in section 1833(t)(6) of the Act. We discuss OPPS transitional pass-through payment for additional costs of drugs, biologicals, and radiopharmaceuticals in section V.A. of this final rule with comment period.

g. Packaging of Payment for Diagnostic Radiopharmaceuticals, Contrast Agents, and Implantable Biologicals (“Policy-Packaged” Drugs and Devices)

Prior to CY 2008, the methodology of calculating a product's estimated per day cost and comparing it to the annual OPPS drug packaging threshold was used to determine the packaging status of drugs, biologicals, and radiopharmaceuticals under the OPPS (except for the CYs 2005 through 2009 exemption for 5-HT3 antiemetics). However, as established in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66766 through 66768), we began packaging payment for all diagnostic radiopharmaceuticals and contrast agents into the payment for the associated procedure, regardless of their per day costs. In addition, in CY 2009, we adopted a policy that packaged the payment for nonpass-through implantable biologicals into payment for the associated surgical procedure on the claim, regardless of their per day cost (73 FR 68633 through 68636). We refer to diagnostic radiopharmaceuticals and contrast agents collectively as “policy-packaged” drugs. We refer to implantable biologicals as “devices” because, in CY 2010, we finalized a policy to treat implantable biologicals as devices for OPPS payment purposes (74 FR 60471 through 60477).

As set forth at § 419.2(b), as a prospective payment system, the OPPS establishes a national payment rate, standardized for geographical wage differences, that includes operating and capital-related costs that are directly related and integral to performing a procedure or furnishing a service on an outpatient basis, and in general, these costs include, but are not limited to, implantable prosthetics, implantable durable medical equipment, and medical and surgical supplies. Packaging costs into a single aggregate payment for a service, encounter, or episode-of-care is a fundamental principle that distinguishes a prospective payment system from a fee schedule. In general, packaging the costs of items and services into the payment for the primary procedure or service with which they are associated encourages hospital efficiency and also enables hospitals to manage their resources with maximum flexibility.

Prior to CY 2008, we noted that the proportion of drugs, biologicals, and radiopharmaceuticals that were separately paid under the OPPS had increased in recent years, a pattern that we also observed for procedural services under the OPPS. Our final CY 2008 policy that packaged payment for all nonpass-through diagnostic radiopharmaceuticals and contrast agents, regardless of their per day costs, contributed significantly to expanding the size of the OPPS payment bundles and is consistent with the principles of a prospective payment system.

As discussed in more detail in the CY 2009 OPPS/ASC final rule with comment period (73 FR 68645 through 68649), we presented several reasons supporting our initial policy to package payment of diagnostic radiopharmaceuticals and contrast agents into their associated procedures on a claim. Specifically, we stated that we believed packaging was appropriate because: (1) The statutorily required OPPS drug packaging threshold had expired; (2) diagnostic radiopharmaceuticals and contrast agents function effectively as supplies that enable the provision of an independent service, rather than serving themselves as a therapeutic modality; and (3) section 1833(t)(14)(A)(iii) of the Act required that payment for specified covered outpatient drugs (SCODs) be set prospectively based on a measure of average hospital acquisition cost (76 FR 74307).

Therefore, in the CY 2013 OPPS/ASC proposed rule (77 FR 45100), we stated that we believe it is appropriate to continue to treat diagnostic radiopharmaceuticals and contrast agents differently from specified covered outpatient drugs (SCODs) for CY 2013. Therefore, we proposed to continue packaging payment for all contrast agents and diagnostic radiopharmaceuticals, collectively referred to as “policy-packaged” drugs, regardless of their per day costs, for CY 2013. We also proposed to continue to package the payment for diagnostic radiopharmaceuticals into the payment for the associated nuclear medicine procedure and to package the payment for contrast agents into the payment for the associated echocardiography imaging procedure, regardless of whether the agent met the OPPS drug packaging threshold. We refer readers to the CY 2010 OPPS/ASC final rule with comment period for a detailed discussion of nuclear medicine and echocardiography services (74 FR 35269 through 35277).

Comment: Commenters objected to CMS' proposal to package payment of all nonpass-through diagnostic radiopharmaceuticals and contrast agents in CY 2013. A number of commenters stated that diagnostic radiopharmaceuticals and contrast agents with per day costs over the proposed OPPS drug packaging threshold are defined as SCODs and, therefore, should be assigned separate APC payments. In particular, the commenters questioned CMS' authority to classify groups of drugs, such as diagnostic radiopharmaceuticals and contrast agents, and implement packaging and payment policies that do not reflect their status as SCODs. Several commenters disagreed with CMS' labeling of radiopharmaceuticals as supplies and stated instead that they should be treated as other SCODs. The commenters recommended that diagnostic radiopharmaceuticals should be subject to the same per day cost drug packaging threshold that applies to other drugs, in order to determine whether their payment would be packaged or made separately.

One commenter supported CMS' continued packaging policy for diagnostic radiopharmaceuticals and contrast agents that do not have pass-through status. The commenter noted that diagnostic radiopharmaceuticals are supplies that are necessary to the provision of the service in which they are used and, like other supplies, payment for them should be part of the payment for the service.

Response: As discussed in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66766), the CY 2009 OPPS/ASC final rule with comment period (73 FR 68645), the CY 2010 OPPS/ASC final rule with comment period (74 FR 60497), the CY 2011 OPPS/ASC final rule with comment period (75 FR 71949), and the CY 2012 OPPS/ASC final rule with comment period (76 FR 74307), we continue to believe that diagnostic radiopharmaceuticals and contrast agents are different from other drugs and biologicals for several reasons. We note that the statutorily required OPPS drug packaging threshold, as described in section 1833(t)(16)(B) of the Act, has expired, and we continue to believe that diagnostic radiopharmaceuticals and contrast agents function effectively as supplies that enable the provision of an independent service and are always ancillary and supportive to an independent service, rather than themselves serving as the therapeutic modality. We packaged their payment in CYs 2008, 2009, 2010, 2011, and 2012 as ancillary and supportive services in order to provide incentives for greater efficiency and to provide hospitals with additional flexibility in managing their resources. In order for payment to be packaged, it is not necessary that all products be interchangeable in every case, and we recognized that, in some cases, hospitals may utilize higher cost products and, in some cases, lower cost products, taking into consideration the clinical needs of the patient and the efficient use of hospital resources. While we recognize this variability from case to case, on average under a prospective payment system, we expect payment to cover the costs for the services furnished. In the past, we have classified different groups of drugs for specific payment purposes, as evidenced by our CY 2005 through CY 2009 policy regarding 5-HT3 anti-emetics and their exemption from the drug packaging threshold. We note that we treat diagnostic radiopharmaceuticals and contrast agents as “policy-packaged” drugs because our policy is to package payment for all of the products in this category.

In the CY 2009 OPPS/ASC final rule with comment period (73 FR 68634), we also began packaging the payment for all nonpass-through implantable biologicals into payment for the associated surgical procedure because we consider these products to always be ancillary and supportive to an independent service, similar to implantable non-biological devices that are always packaged. Therefore, we currently package payment of nonpass-through implantable biologicals, also known as devices that are surgically inserted or implanted (through a surgical incision or a natural orifice) into the body. As we stated in the CY 2013 OPPS/ASC proposed (77 FR 45101), we continue to believe that payment should be packaged for nonpass-through implantable biologicals for CY 2013.

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

Comment: Several commenters disagreed with the proposal to distinguish between diagnostic and therapeutic radiopharmaceuticals for payment purposes under the OPPS. Some commenters noted that CMS' identification of HCPCS code A0544 (Iodine I-131 tositumomab, diagnostic, per study dose) as a diagnostic radiopharmaceutical is inappropriate because this radiopharmaceutical functions as a dosimetric radiopharmaceutical and not as a diagnostic radiopharmaceutical. A few commenters explained that this particular radiopharmaceutical product is used as part of a therapeutic regimen and, therefore, should be considered therapeutic for OPPS payment purposes. Furthermore, many commenters urged CMS to classify dosimetric doses used in radiopharmaceutical procedures as therapeutic in nature, and allow for separate payment for that dosimetric dose.

Response: As discussed above and in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66641), the CY 2009 OPPS/ASC final rule with comment period (73 FR 68645), the CY 2010 OPPS/ASC final rule with comment period (74 FR 60498), the CY 2011 OPPS/ASC final rule with comment period (75 FR 71949), and the CY 2012 OPPS/ASC final rule with comment period (76 FR 74308), we classified each radiopharmaceutical into one of the two groups according to whether its long descriptor contained the term “diagnostic” or “therapeutic.” HCPCS code A9544 contains the term “diagnostic” in its long code descriptor. Therefore, according to our established methodology, we continued to classify it as diagnostic for the purposes of CY 2012 OPPS payment. While we understand that this item is provided in conjunction with additional supplies, imaging tests, and therapeutic radiopharmaceuticals for patients already diagnosed with cancer, we continue to believe that the purpose of administering the product described by HCPCS code A9544 is diagnostic in nature. As we first stated in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66641), we continue to believe that the product described by HCPSC code A9544 is a diagnostic radiopharmaceutical. While it is not used to necessarily diagnose a general disease state, we understand that it is used to determine whether future therapeutic services would be beneficial to the patient and to determine how to proceed with therapy. We note that this is not different than the use of a laboratory test to guide therapy; the fact that the diagnostic test, a service which provides information, is used to guide therapy does not make it a therapeutic service, on which its intent is to improve a patient's clinical condition. While a group of associated services may be considered a therapeutic regimen by some commenters, HCPCS code A9544 is provided in conjunction with a series of nuclear medicine imaging scans. Many nuclear medicine studies using diagnostic radiopharmaceuticals are provided to patients who already have an established diagnosis. We continue to consider HCPCS code A9544 to be diagnostic because this item is provided for the purpose of conducting a diagnostic imaging procedure and is used to identify the proposed dose of the therapeutic agent to be provided at a later time.

Comment: Commenters recommended using the ASP methodology and the proposed statutory default rate of ASP+6 percent to make payment for nonpass-through diagnostic radiopharmaceuticals and contrast agents. The commenters noted that it would be inconsistent for CMS to treat diagnostic radiopharmaceuticals and contrast agents as “drugs” for pass-through payment purposes and provide payment for diagnostic radiopharmaceuticals and contrast agents that have pass-through status based on the ASP methodology, and, then, after the diagnostic radiopharmaceutical's or contrast agent's pass-through payment status expires, package the costs included in historical hospital claims data, rather than use the ASP methodology to pay for the product and treat the drug as a supply. A few commenters suggested that diagnostic radiopharmaceuticals could be paid separately as therapeutic radiopharmaceuticals are paid, which would allow manufacturer to voluntarily submit ASP data, and then default to the mean unit cost when ASP data are unavailable. Some commenters recommended that CMS use ASP data as a benchmark for determining costs for diagnostic radiopharmaceuticals that are packaged.

One commenter stated that payment for diagnostic radiopharmaceuticals should not be paid at ASP+6 percent for the reasons commenters provided when CMS proposed to make payment at ASP+6 percent in prior years. Specifically, the commenter noted that the ASP statute excludes reporting of the ASP for diagnostic radiopharmaceuticals and, therefore, such reporting would need to be voluntary. However, in terms of voluntary reporting of diagnostic radiopharmaceuticals, the commenter further noted that CMS could never be confident that it would receive reports from all manufacturers of any particular diagnostic radiopharmaceutical. Moreover, the commenter stated, high volume diagnostic radiopharmaceuticals are furnished using generators that hospitals use for up to 28 days to provide doses of diagnostic radiopharmaceuticals as needed and therefore the manufacturer, who would report the ASP under penalty of perjury, would never be able to certify the actual number of doses furnished with confidence. The commenter finally noted that packaging is consistent with the general principles of a prospective payment system, one goal of which is to encourage hospital cost containment.

Response: As we stated above, the statutorily required OPPS drug packaging threshold has expired, and we continue to believe that nonpass-through diagnostic radiopharmaceuticals and contrast agents are always ancillary and supportive to an independent service, rather than services themselves as the therapeutic modality. We disagree with commenters who suggest that nonpass-through diagnostic radiopharmaceuticals and contrast agents should be paid under the ASP methodology, that nonpass-through diagnostic radiopharmaceuticals and contrast agents should be paid as pass-through drugs and biologicals, or that nonpass-through diagnostic radiopharmaceuticals should be paid similarly to therapeutic radiopharmaceuticals. We continue to believe that nonpass-through diagnostic radiopharmaceuticals, contrast agents, and implantable biologicals function effectively as supplies that enable the provision of an independent service. As we noted in the CY 2009 OPPS/ASC final rule with comment period (73 FR 68646) and restate above, drugs, biologicals, or radiopharmaceuticals for which we have not established a separate APC will receive packaged payment under the OPPS, and are considered not to be SCODs. We continue to believe that the line-item estimated cost for nonpass-through diagnostic radiopharmaceuticals, contrast agents, and implantable biologicals in our claims data is a reasonable approximation of average acquisition and preparation and handling costs for diagnostic radiopharmaceuticals, contrast agents, and implantable biologicals, respectively.

Further, as we have stated above, we believe that packaging costs into a single aggregate payment for a service, encounter, or episode-of-care is a fundamental principle that distinguishes a prospective payment system from a fee schedule. Our policy of packaging payment for nonpass-through diagnostic radiopharmaceuticals, contrast agents, and implantable biologicals into the payment for the primary procedure or service with which they are associated encourages hospital efficiencies and also enables hospitals to manage their resources with maximum flexibility. Paying separately for nonpass-through diagnostic radiopharmaceuticals, contrast agents, and implantable biologicals, when each of these items is ancillary or supportive to an independent service, is contrary to this principle of a prospective payment system.

Finally, we do not agree with the commenter's assertion that separate payment for diagnostic radiopharmaceuticals would result in more accurate payment for these products. When CMS discussed possible ASP-based payment for diagnostic radiopharmaceuticals in the CY 2006 OPPS final rule with comment period (70 FR 68653 through 68657), numerous commenters advised CMS that diagnostic radiopharmaceuticals are formulated, distributed, compounded, and administered in unique distribution channels that preclude the determination of ASP relevant to a diagnostic radiopharmaceutical HCPCS codes. Further, commenters advised CMS that the manufacturer has no way to calculate the ASP of the end product patient dose and, consequently, could not supply CMS with accurate ASP data. In the intervening period between the CY 2006 final rule with comment period and the present, diagnostic radiopharmaceutical use has become more widespread and its formulation more complex. Moreover, we believe that the phenomena described by commenters (including radiopharmaceutical manufacturers) in the comment period preceding the CY 2006 OPPS final rule with comment period, including the many preparatory and compounding steps between manufacturer and the patient's bedside, remain an impediment to manufacturers' calculations of accurate ASP and thus accurate payment for these products. Therefore, we do not believe that diagnostic radiopharmaceuticals (or contrast agents or implantable biologicals) should be paid separately under the OPPS such that manufactures voluntarily can submit ASP data and then default to mean unit cost when ASP data are unavailable. We believe they are appropriately packaged into a single aggregate payment for the accompanying services.

Comment: Commenters recommended that CMS modify the way that it applies the “2 times” rule for nuclear medicine APCs by including the cost of the packaged diagnostic radiopharmaceutical drugs in its analysis and not just the cost of services. The commenters argued that this is mandated by the statute, which provides that an APC group cannot be considered comparable with respect to the use of resources if the highest cost for an item or service in the APC group is more than two times greater than the lowest cost for an item or service within the same APC group. Therefore, the commenters believed that it is logical that as long as CMS views the packaged nuclear medicine service and the radiopharmaceutical as one unit for APC payment purposes, it should consider both components together in applying the 2 times rule and analysis to APC payment.

Response: While the language in section 1833(t)(2) of the Act regarding the 2 times rule describes consideration of both items and services for purposes of identifying exceptions to the rule, it does so within the context of services that belong to an APC group. Unconditionally packaged items and services, being associated with the particular item or service being modeled for separate payment, would not individually belong to any APC group. However, these unconditionally packaged costs would be incorporated into the system through the separately paid items or services with which they appear on the claim, and would thus be factored into the ultimate consideration of the 2 times rule. Therefore, consideration of items and services within each APC only applies to the separately paid HCPCS and CPT codes assigned to each APC and would thus not include any discrete calculation for packaged costs with regards to the two times rule.

Comment: One commenter recommended that CMS establish a threshold for radiopharmaceutical drugs that would trigger separate payment when the cost of the radiopharmaceutical is greater than the total APC payment or over another threshold value.

Response: Consistent with the CY 2013 OPPS/ASC proposed rule, for this final rule with comment period, we continue to believe that diagnostic radiopharmaceuticals are ancillary and supportive to the nuclear medicine procedures in which they are used and that their costs should be packaged into the primary procedures with which they are associated. We do not believe it would be appropriate to set a cost threshold for packaging diagnostic radiopharmaceuticals because, regardless of their per day cost, they are always supportive of an independent procedure that is the basis for administration of the diagnostic radiopharmaceutical. We also do not believe that it is appropriate to consider alternate packaging criteria for nonpass-through diagnostic radiopharmaceuticals because we continue to believe that, regardless of their per-day cost, these items are always supportive of an independent procedure that is the basis for administration of the diagnostic radiopharmaceutical. Therefore, our policy of packaging costs for these products into an associated APC continues to be the approach best suited for use in this prospective payment system.

Further, we note that the OPPS, as a prospective payment system, already includes the costs associated with diagnostic radiopharmaceuticals into the APCs for which the product is ancillary and supportive. We believe that the cost associated with a given product at a given point in time is immaterial because the OPPS, as a prospective payment system with payments based on average costs associated with a covered procedure, already takes into account both higher and lower input costs associated with that procedure. We also note that the OPPS, like many of Medicare's prospective payment systems, has polices in place to provide hospitals with additional outlier payments for certain high-cost cases whose costs exceed certain thresholds. This system of outliers already provides hospitals (or, in the case of partial hospitalization services, community mental health centers) with additional reimbursement to offset costs that are high relative to the prospective payment amount, regardless of whether the costs are associated with diagnostic radiopharmaceuticals or another relatively high cost element in the patient's course of care.

Comment: One commenter requested that CMS present additional, detailed information regarding how the agency ensures that the full cost of diagnostic radiopharmaceuticals are captured in the associated packaged APC procedural payments, including the validation methods used by the agency.

Response: The data that CMS used to calculate, propose, and finalize APC assignments and rates, including costs associated with diagnostic radiopharmaceuticals, for the CY 2013 OPPS, are available for purchase under a CMS data use agreement through the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatinetPPS/index.html. This Web site includes information about purchasing the “OPPS Limited Data Set,” which now includes the additional variable previously available only in the OPPS Identifiable Data set, including ICD-9-CMS diagnosis codes and revenue code payment amounts.

As we state above, we discuss in detail in section II.A.2. of this final rule with comment period the availability to the public of the use of files of claims, including, for CY 2008 and later, supplemental line item cost data for every HCPCS code under the OPPS, and a detailed narrative description of our data process for the annual OPPS/ASC proposed and final rules that the public can use to perform any desired analyses.

We continue to believe that the cost of a diagnostic radiopharmaceutical is captured into the associated packaged APC procedural payment. We see no need at this time to provide further data analyses.

For CY 2013, we proposed to make an additional payment of $10 for diagnostic radiopharmaceuticals that utilize the Tc-99m radioisotope produced by non-HEU methods (77 FR 45121). We proposed to base this payment on the best available estimations of the marginal costs associated with non-HEU radioisotope production, pursuant to our authority described in section 1833(t)(2)(E) of the Act which allows us to establish “other adjustments as determined to be necessary to ensure equitable payments” under the OPPS. We described this policy in further detail in section III.C.3. of the proposed rule.

We received numerous comments on this proposal, including comments that suggested that separate payment for diagnostic radiopharmaceuticals is the most effective way to encourage hospital conversion from HEU to non-HEU sources that utilize Tc-99m. We have addressed these comments on the proposed payment for non-HEU sources that recommended separate payment for diagnostic radiopharmaceuticals above and in section III.C.3. of this final rule with comment period.

In the CY 2009 OPPS/ASC final rule with comment period (73 FR 68634), we began packaging the payment for all nonpass-through implantable biologicals into payment for the associated surgical procedure because we consider these products to always be ancillary and supportive to independent services, similar to implantable nonbiological devices that are always packaged. We continued to follow this policy in CY 2012 (76 FR 74306 through 74310). Specifically, we continue to package payment for nonpass-through implantable biologicals, also known as devices that are surgically inserted or implanted (through a surgical incision or a natural orifice) into the body. In the CY 2013 OPPS/ASC proposed rule (77 FR45101), for CY 2013, we proposed to continue to apply the policies finalized in CY 2012, to package payment for nonpass-through implantable biologicals (“devices”) that are surgically inserted or implanted (through a surgical incision or a natural orifice) into the body.

Comment: One commenter requested that HCPCS code Q4130 (Strattice tm, per square centimeter) be assigned status indicator “K” for CY 2013 because, the commenter argued, HCPCS code Q4130 is a skin substitute graft for chronic wounds and a surgical biological implant for breast reconstruction and hernia repair procedures. The commenter stated that assigning HCPCS code Q4130 to a status indicator of “K” would signify its use as a biological skin substitute graft for which separate payment is available.

The commenter further noted that Transmittal 2418 of the Medicare Claims Processing Manual lists HCPCS code Q4130 in table 5 of the transmittal, along with other biologicals with “dual” use.

Response: HCPCS code Q4130 was assigned a status indicator of “N” in the CY 2013 OPPS/ASC proposed rule, signifying that the product that is represented by this code is an implantable biological device. We continue to believe that the product described by HCPCS code Q4130 is an implantable biological device, as evidenced by language within the 510(k) FDA clearance which lists the product described by HCPCS code Q4130 as a surgical mesh intended for the reinforcement of soft tissue repaired by sutures or suture anchors during tendon repair surgery including reinforcement of rotator cuff, patella, Achilles, biceps, quadriceps, or other tendons. Further indications of use include the repair of body wall defects which require the use of reinforcing or bridging material to obtain the desired surgical outcome. As we stated above, the payment for nonpass-through implantable biologicals, or implanted devices, is packaged into the payment for the primary procedure. Therefore, we are continuing to assign a status indicator of “N” to HCPCS code Q4130 for CY 2013. Additionally, we are correcting the table within Transmittal 2418 which contains a list of skin substitutes only.

Comment: One commenter who responded to the CY 2012 OPPS/ASC final rule with comment period expressed concern that Medicare contractors had been inadvertently making separate payment for nonpass-through biological implants as they process OPPS claims for breast reconstruction and hernia repair procedures. The commenter stated that these procedure claims included claims for biological implants, including HCPCS codes Q4100 through Q4130. The commenter noted that HCPCS code Q4116 (Alloderm, per square centimeter) in particular was paid separately on several occasions. Therefore, the commenter recommended that CMS take several steps to prevent further billing errors with respect to the OPPS payment policy for implantable biologicals.

Response: For the April 2012 quarterly update, we installed logic changes in the I/OCE to allow for separate payment for separately payable skin substitute HCPCS codes that are coded with skin substitute procedure CPT codes only. We reminded hospitals that HCPCS codes describing skin substitutes should only be separately reported when used with one of the CPT codes describing the application of a skin substitute (CPT codes 15271 through 15278). Therefore, we have previously addressed the commenters' concerns.

Under the OPPS, HCPCS codes that describe skin substitute products, with a separately payable status indicator of “K” or “G” that are billed with a skin substitute application procedure, will receive separate payment for both the skin substitute product and the procedure. Payment for skin substitute HCPCS codes that are billed with other procedures will be packaged into the payment for the corresponding procedure.

After consideration of the public comments we received, we are finalizing our proposals, without modification, to continue to package payment for all nonpass-through diagnostic radiopharmaceuticals and contrast agents, and implantable biologicals that are surgically inserted or implanted into the body through a surgical incision or a natural orifice, regardless of their per day costs. Given the inherent function of diagnostic radiopharmaceuticals and contrast agents as ancillary and supportive to the performance of an independent procedure and the similar functions of implantable biologicals and nonbiological devices as integral to and supportive of the separately paid surgical procedures in which either may be used, we continue to view the packaging of payment for diagnostic radiopharmaceuticals, contrast agents, and implantable biologicals as a logical expansion of packaging payment for drugs and biologicals. In addition, as we initially established in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66768), we will continue to identify diagnostic radiopharmaceuticals specifically as those Level II HCPCS codes that include the term “diagnostic” alone with a radiopharmaceutical in their long code descriptors, and therapeutic radiopharmaceuticals as those Level II HCPCS codes that include the term “therapeutic” along with a radiopharmaceuticals in their long code descriptors. We believe that the current descriptors accurately discriminate between those radiopharmaceuticals that are used to gather information and those which are intended to improve the patient's medical condition.

In addition, any new biological lacking pass-through status that is surgically inserted or implanted through a surgical incision or natural orifice will be packaged in CY 2013.

We refer reader to section III.D.1.f. of this final rule with comment period for a discussion of comments related to echocardiography services furnished with and without contrast. For more information on how we set CY 2013 payment rates for nuclear medicine procedures in which diagnostic radiopharmaceuticals are used an echocardiography services provided with and without contrast agents, we refer readers to the CY 2010 OPPS/ASC final rule with comment period for a detailed discussion of nuclear medicine and echocardiography services (74 FR 35269 through 35277).

h. Summary of Proposals

As we proposed, we are finalizing, for this final rule with comment period, the HCPCS codes that we unconditionally packaged (for which we continue to assign status indicator “N”), or conditionally packaged (for which we continue to assign status indicators “Q1,” “Q2,” or “Q3”), and those codes are displayed in Addendum B of this final rule with comment period (which is available via the Internet on the CMS Web site). The supporting documents for this CY 2013 OPPS/ASC final rule with comment period, including, but not limited to, Addendum B, are available on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html. To view the status indicators by HCPCS code in Addendum B, select “CMS 1589-FC” and then select the folder labeled “2013 OPPS Final Rule Addenda” from the list of supporting files. Open the zipped file and select Addendum B, which is available as both an Excel file and a text file.

4. Calculation of OPPS Scaled Payment Weights

In the CY 2013 OPPS/ASC proposed rule (77 FR 45101), we proposed for CY 2013 to calculate the relative payment weights for each APC for CY 2013 shown in Addenda A and B to the proposed rule (which were available via the Internet on the CMS Web site) using the APC costs discussed in sections II.A.1. and II.A.2. of the proposed rule. In years prior to CY 2007, we standardized all the relative payment weights to APC 0601 (Mid-Level Clinic Visit) because mid-level clinic visits were among the most frequently performed services in the hospital outpatient setting. We assigned APC 0601 a relative payment weight of 1.00 and divided the median cost for each APC by the median cost for APC 0601 to derive the relative payment weight for each APC.

Beginning with the CY 2007 OPPS (71 FR 67990), we standardized all of the relative payment weights for APC 0606 (Level 3 Clinic Visits) because we deleted APC 0601 as part of the reconfiguration of the clinic visit APCs. We selected APC 0606 as the base because APC 0606 was the mid-level clinic visit APC (that is, Level 3 of five levels). For CY 2013, we proposed to base the relative payment weights on which OPPS payments will be made by using geometric mean costs, as described in section II.A.2.f. of the proposed rule. However, in an effort to maintain consistency in calculating unscaled weights that represent the cost of some of the most frequently provided services, we proposed to continue to use the cost of the mid-level clinic visit APC (APC 0606) in calculating unscaled weights. Following our general methodology for establishing relative payment weights derived from APC costs, but using the proposed CY 2013 geometric mean cost for APC 0606, for CY 2013, we proposed to assign APC 0606 a relative payment weight of 1.00 and to divide the geometric mean cost of each APC by the proposed geometric mean cost for APC 0606 to derive the proposed unscaled relative payment weight for each APC. We stated that the choice of the APC on which to base the proposed relative payment weights for all other APCs does not affect the payments made under the OPPS because we scale the weights for budget neutrality.

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

As we proposed, in this final rule with comment period, we include estimated payments to CMHCs in our comparison of estimated unscaled weights in CY 2013 to estimated total weights in CY 2012 using CY 2011 claims data, holding all other components of the payment system constant to isolate changes in total weight. Based on this comparison, we adjusted the unscaled relative payment weights for purposes of budget neutrality. The CY 2013 unscaled relative payment weights were adjusted by multiplying them by a weight scaler of 1.3596 to ensure that the CY 2013 relative payment weights are budget neutral.

Section 1833(t)(14) of the Act provides the payment rates for certain SCODs. Section 1833(t)(14)(H) of the Act states that “Additional expenditures resulting from this paragraph shall not be taken into account in establishing the conversion factor, weighting, and other adjustment factors for 2004 and 2005 under paragraph (9), but shall be taken into account for subsequent years.” Therefore, the cost of those SCODs (as discussed in section V.B.3. of this final rule) was included in the budget neutrality calculations for the CY 2013 OPPS.

We did not receive any public comments on the proposed methodology for calculating scaled weights based on the geometric mean costs for the CY 2013 OPPS. Therefore, for the reasons set forth in the proposed rule (77 FR 45101), we are finalizing our proposed methodology without modification, including updating of the budget neutrality scaler for this final rule with comment period as we proposed. Under this methodology, the final unscaled relative payment weights were adjusted by a weight scaler of 1.3596 for this final rule with comment period. The final scaled relative payment weights listed in Addenda A and B to this final rule with comment period (which are available via the Internet on the CMS Web site) incorporate the final recalibration adjustments discussed in sections II.A.1. and II.A.2. of this final rule with comment period.

We noted in the proposed rule that we were providing additional information, in association with the proposed rule, so that the public could provide meaningful comment on our proposed policy to base the CY 2013 OPPS relative payment weights on geometric mean costs. The scaled relative payment weights listed in Addenda A and B to this final rule with comment period (which are available via the Internet on the CMS Web site) incorporate the recalibration adjustments discussed in sections II.A.1. and II.A.2. of this final rule with comment period.

B. Conversion Factor Update

Section 1833(t)(3)(C)(ii) of the Act requires the Secretary to update the conversion factor used to determine the payment rates under the OPPS on an annual basis by applying the OPD fee schedule increase factor. For purposes of section 1833(t)(3)(C)(iv) of the Act, subject to sections 1833(t)(17) and 1833(t)(3)(F) of the Act, the OPD fee schedule increase factor is equal to the hospital inpatient market basket percentage increase applicable to hospital discharges under section 1886(b)(3)(B)(iii) of the Act. In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53414), consistent with current law, based on IHS Global Insight, Inc.'s second quarter 2012 forecast of the FY 2013 market basket increase, the FY 2013 IPPS market basket update is 2.6 percent. However, sections 1833(t)(3)(F) and 1833(t)(3)(G)(ii) of the Act, as added by section 3401(i) of Pub. L. 111-148 and as amended by section 10319(g) of that law and further amended by section 1105(e) of Public Law 111-152, provide adjustments to the OPD fee schedule increase factor for CY 2013.

Specifically, section 1833(t)(3)(F)(i) of the Act requires that, for 2012 and subsequent years, the OPD fee schedule increase factor under subparagraph (C)(iv) be reduced by the productivity adjustment described in section 1886(b)(3)(B)(xi)(II) of the Act. Section 1886(b)(3)(B)(xi)(II) of the Act defines the productivity adjustment as equal to the 10-year moving average of changes in annual economy-wide, private nonfarm business multifactor productivity (MFP) (as projected by the Secretary for the 10-year period ending with the applicable fiscal year, year, cost reporting period, or other annual period) (the “MFP adjustment”). In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51689 through 51692), we finalized our methodology for calculating and applying the MFP adjustment. In the FY 2013 IPPS/LTCH PPS proposed rule (77 FR 27975 through 27976), we discussed the calculation of the proposed MFP adjustment for FY 2013, which was 0.8 percentage point.

We proposed that if more recent data became subsequently available after the publication of the proposed rule (for example, a more recent estimate of the market basket increase and the MFP adjustment), we would use such data, if appropriate, to determine the CY 2013 market basket update and the MFP adjustment, components in calculating the OPD fee schedule increase factor under sections 1833(t)(3)(C)(iv) and (F) of the Act, in this CY 2013 OPPS/ASC final rule with comment period. In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53414), we discussed the calculation of the final MFP adjustment for FY 2013, which is 0.7 percentage point.

In addition, section 1833(t)(3)(F)(ii) of the Act requires that for each of year 2010 through 2019, the OPD fee schedule increase factor under section 1833(t)(3)(C)(iv) of the Act be reduced by the adjustment described in section 1833(t)(3)(G) of the Act. For CY 2013, section 1833(t)(3)(G)(ii) of the Act provides a 0.1 percentage point reduction to the OPD fee schedule increase factor under section 1833(t)(3)(C)(iv) of the Act. Therefore, in accordance with sections 1833(t)(3)(F)(ii) and 1833(t)(3)(G)(ii) of the Act, in the CY 2013 OPPS/ASC proposed rule (77 FR 45102), we proposed to apply a 0.1 percentage point reduction to the OPD fee schedule increase factor for CY 2013.

We note that section 1833(t)(3)(F) of the Act provides that application of this subparagraph may result in the OPD fee schedule increase factor under section 1833(t)(3)(C)(iv) of the Act being less than 0.0 for a year, and may result in payment rates under the OPPS for a year being less than such payment rates for the preceding year. As described in further detail below, using the final methodology and more recent data would result in an OPD fee schedule increase factor of 1.8 percent for the CY 2013 OPPS (2.6 percent, which is the final estimate of the hospital inpatient market basket percentage increase, less the final 0.7 percentage point MFP adjustment, less the 0.1 percentage point additional adjustment).

We note that hospitals that fail to meet the Hospital OQR Program reporting requirements are subject to an additional reduction of 2.0 percentage points from the OPD fee schedule increase factor adjustment to the conversion factor that would be used to calculate the OPPS payment rates for their services, as required by section 1833(t)(17) of the Act. As a result, using the final methodology and more recent data, those hospitals failing to meet the Hospital OQR Program reporting requirements will receive an OPD fee schedule increase factor of −0.2 (2.6 percent, which is the final estimate of the hospital inpatient market basket percentage increase, less the final 0.7 percentage point MFP adjustment, less the 0.1 percentage point additional adjustment, less 2.0 percentage points for the Hospital OQR Program reduction). For further discussion of the Hospital OQR Program, we refer readers to section XV.F. of this final rule with comment period.

In the CY 2013 OPPS/ASC proposed rule (77 FR 45103), we proposed to amend 42 CFR 419.32(b)(1)(iv)(B) by adding a new paragraph (4) to reflect the requirement in section 1833(t)(3)(F)(i) of the Act that, for CY 2013, we reduce the OPD fee schedule increase factor by the MFP adjustment as determined by CMS, and to reflect the requirement in section 1833(t)(3)(G)(ii) of the Act, as required by section 1833(t)(3)(F)(ii) of the Act, that we reduce the OPD fee schedule increase factor by an additional 0.1 percentage point for CY 2013.

Comment: Several commenters expressed support for the OPD fee schedule increase factor because they believed it would better align payment with hospital costs.

Response: We appreciate the commenters' support.

We did not receive any public comments on the proposed amendment to 42 CFR 419.32(b)(1)(iv)(B) to add a new paragraph (4) to reflect the requirements in section 1833(t)(3)(F) of the Act. For the reasons discussed above, we are adjusting the OPD fee schedule increase factor and adopting as final the amendment to 42 CFR 419.32(b)(1)(iv)(B), as proposed.

We did not receive any public comments on our proposed methodology for calculating the CY 2013 conversion factor. Therefore, we are finalizing our proposed methodology for calculating the budget neutrality adjustment factors, as described in the following discussion.

As we proposed, to set the OPPS conversion factor for CY 2013, we are increasing the CY 2012 conversion factor of $70.016 by 1.8 percent. In accordance with section 1833(t)(9)(B) of the Act, we are further adjusting the conversion factor for CY 2013 to ensure that any revisions made to the updates for a revised wage index and rural adjustment are made on a budget neutral basis (77 FR 45103). We are calculating an overall budget neutrality factor of 0.9998 for wage index changes by comparing total estimated payments from our simulation model using the final FY 2013 IPPS wage indices to those payments using the current (FY 2012) IPPS wage indices, as adopted on a calendar year basis for the OPPS.

For CY 2013, we did not propose to make a change to our rural adjustment policy, and as discussed in section II.E. of this final rule with comment period, we are not making any changes to the rural adjustment policy. Therefore, the budget neutrality factor for the rural adjustment is 1.0000.

For CY 2013, we are finalizing our proposal to continue previously established policies for implementing the cancer hospital payment adjustment described in section 1833(t)(18) of the Act, as discussed in section II.F. of this final rule with comment period. We are calculating a CY 2013 budget neutrality adjustment factor for the cancer hospital payment adjustment by comparing the estimated total CY 2013 payments under section 1833(t) of the Act including the CY 2013 cancer hospital payment adjustment to the estimated CY 2013 total payments using the CY 2012 final cancer hospital payment adjustment under sections 1833(t)(18)(B) and 1833(t)(2)(E) of the Act. The difference in the CY 2013 estimated payments as a result of applying the CY 2013 cancer hospital payment adjustment relative to the CY 2012 final cancer hospital payment adjustment does not have a significant impact on the budget neutrality calculation. Therefore, we are applying a budget neutrality adjustment factor of 1.0000 to the conversion factor to ensure that the cancer hospital payment adjustment is budget neutral.

For this final rule with comment period, we estimate that pass-through spending for both drugs and biologicals and devices for CY 2013 would equal approximately $74 million, which represents 0.15 percent of total projected CY 2013 OPPS spending. Therefore, the conversion factor is also adjusted by the difference between the 0.22 percent estimate of pass-through spending for CY 2012 and the 0.15 percent estimate of CY 2013 pass-through spending, resulting in an adjustment for CY 2013 of −0.07 percent. Finally, estimated payments for outliers remain at 1.0 percent of total OPPS payments for CY 2013.

The OPD fee schedule increase factor of 1.8 percent for CY 2013 (that is, the estimate of the hospital inpatient market basket percentage increase of 2.6 percent less the 0.7 percentage point MFP adjustment and less the 0.1 percentage point required under section 1833(t)(3)(F) of the Act), the required wage index budget neutrality adjustment of approximately 0.9998, the cancer hospital payment adjustment of 1.0000, and the adjustment of -0.07 percent of projected OPPS spending for the difference in the pass-through spending result in a conversion factor for CY 2013 of $71.313.

As we stated in the proposed rule, hospitals that fail to meet the reporting requirements of the Hospital OQR Program will continue to be subject to a further reduction of 2.0 percentage points to the OPD fee schedule increase factor adjustment to the conversion factor that would be used to calculate the OPPS payment rates made for their services as required by section 1833(t)(17) of the Act. For a complete discussion of the Hospital OQR Program requirements and the payment reduction for hospitals that fail to meet those requirements, we refer readers to section XV.F. of this final rule with comment period. To calculate the CY 2013 reduced market basket conversion factor for those hospitals that fail to meet the requirements of the Hospital OQR Program for the full CY 2013 payment update, we are making all other adjustments discussed above, but using a reduced OPD fee schedule update factor of −0.2 percent (that is, the OPD fee schedule increase factor of 1.8 percent further reduced by 2.0 percentage points as required by section 1833(t)(17)(A)(i) of the Act for failure to comply with the Hospital OQR requirements). This results in a reduced conversion factor for CY 2013 of $69.887 for those hospitals that fail to meet the Hospital OQR requirements (a difference of −$1.426 in the conversion factor relative to those hospitals that met the Hospital OQR requirements).

In summary, for CY 2013, we are using a final conversion factor of $71.313 in the calculation of the national unadjusted payment rates for those items and services for which payment rates are calculated using geometric mean costs. For further discussion regarding our final policy to base the CY 2013 OPPS relative payment weights on geometric mean costs, we refer readers to section II.A.2.f. of this final rule with comment period. We are finalizing our proposed amendment to § 419.32(b)(1)(iv)(B) by adding a new paragraph (4) to reflect the reductions to the OPD fee schedule increase factor that are required for CY 2013 in order to satisfy the statutory requirements of sections 1833(t)(3)(F) and (t)(3)(G)(ii) of the Act. We also are using a reduced conversion factor of $69.887 in the calculation of payments for hospitals that fail to comply with the Hospital OQR Program requirements to reflect the reduction to the OPD fee schedule increase factor that is required by section 1833(t)(17) of the Act.

C. Wage Index Changes

Section 1833(t)(2)(D) of the Act requires the Secretary to determine a wage adjustment factor to account for geographic wage differences in a portion of the OPPS payment rate, which includes the copayment standardized amount and is attributable to labor and labor-related costs. This portion of the OPPS payment rate is called the OPPS labor-related share. This adjustment must be made in a budget neutral manner and budget neutrality is discussed in section II.B. of this final rule with comment period.

The OPPS labor-related share is 60 percent of the national OPPS payment. This labor-related share is based on a regression analysis that determined that, for all hospitals, approximately 60 percent of the costs of services paid under the OPPS were attributable to wage costs. We confirmed that this labor-related share for outpatient services is appropriate during our regression analysis for the payment adjustment for rural hospitals in the CY 2006 OPPS final rule with comment period (70 FR 68553). Therefore, as we proposed, we are not revising this policy for the CY 2013 OPPS. We refer readers to section II.H. of this final rule with comment period for a description and example of how the wage index for a particular hospital is used to determine the payment for the hospital.

As discussed in section II.A.2.c. of this final rule with comment period, for estimating APC costs, we standardize 60 percent of estimated claims costs for geographic area wage variation using the same FY 2013 pre-reclassified wage index that the IPPS uses to standardize costs. This standardization process removes the effects of differences in area wage levels from the determination of a national unadjusted OPPS payment rate and the copayment amount

As published in the original OPPS April 7, 2000 final rule with comment period (65 FR 18545), the OPPS has consistently adopted the final fiscal year IPPS wage index as the calendar year wage index for adjusting the OPPS standard payment amounts for labor market differences. Thus, the wage index that applies to a particular acute care short-stay hospital under the IPPS also applies to that hospital under the OPPS. As initially explained in the September 8, 1998 OPPS proposed rule (63 FR 47576), we believed that using the IPPS wage index as the source of an adjustment factor for the OPPS is reasonable and logical, given the inseparable, subordinate status of the HOPD within the hospital overall. In accordance with section 1886(d)(3)(E) of the Act, the IPPS wage index is updated annually.

The Affordable Care Act contained provisions affecting the wage index. These provisions were discussed in the CY 2012 OPPS/ASC final rule with comment period (76 FR 74191). As discussed in that final rule with comment period, section 10324 of the Affordable Care Act requires a “frontier State” wage index floor of 1.00 in certain cases. For the CY 2013 OPPS, as we proposed, we are implementing this provision in the same manner as we did for CY 2012. That is, frontier State hospitals will receive a wage index of 1.00 if the otherwise applicable wage index (including reclassification, rural floor, and rural floor budget neutrality) is less than 1.00. Similar to our current policy for HOPDs that are affiliated with multicampus hospital systems, the HOPD will receive a wage index based on the geographic location of the specific inpatient hospital with which it is associated. Therefore, if the associated hospital is located in a frontier State, the wage index adjustment applicable for the hospital will also apply for the affiliated HOPD. We refer readers to the FY 2011 and FY 2012 IPPS/LTCH PPS final rules (75 FR 50160 through 50161 and 76 FR 51586, respectively) and the FY 2013 IPPS/ LTCH PPS final rule (77 FR 53369 through 53370) for a detailed discussion regarding this provision, including our methodology for identifying which areas meet the definition of frontier States as provided for in section 1886(d)(3)(E)(iii)(II) of the Act.

In addition to the changes required by the Affordable Care Act, we note that the final FY 2013 IPPS wage indices continue to reflect a number of adjustments implemented over the past few years, including, but not limited to, reclassification of hospitals to different geographic areas, the rural floor provisions, an adjustment for occupational mix, and an adjustment to the wage index based on commuting patterns of employees (the out-migration adjustment). We refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR 53365 through 53374) for a detailed discussion of all changes to the FY 2013 IPPS wage indices. In addition, we refer readers to the CY 2005 OPPS final rule with comment period (69 FR 65842 through 65844) and subsequent OPPS rules for a detailed discussion of the history of these wage index adjustments as applied under the OPPS.

Section 102 of the Medicare and Medicaid Extender Act extended, through FY 2011, section 508 reclassifications as well as certain special exceptions. The most recent extension of these special wage indices was included in section 302 of the Temporary Payroll Tax Cut Continuation Act of 2011 (Pub. L. 112-78), as amended by section 3001 of the Middle Class Tax Relief and Job Creation Act of 2012 (Pub. L. 112-96). These legislative provisions extended certain section 508 reclassifications and special exception wage indices for a 6-month period during FY 2012, from October 1, 2011 through March 31, 2012. We implemented this extension in a notice (CMS-1442-N) published in the Federal Register on April 20, 2012 (77 FR 23722). As we did for CY 2010, we revised wage index values for certain special exception hospitals from January 1, 2012 through June 30, 2012, under the OPPS, in order to give these hospitals the special exception wage indices under the OPPS for the same time period as under the IPPS. In addition, because the OPPS pays on a calendar year basis, the end date under the OPPS for certain nonsection 508 and nonspecial exception providers to receive special wage indices was June 30, 2012, instead of March 31, 2012, so that these providers also received a full 6 months of payment under the revised wage index comparable to the IPPS. However, section 508 reclassifications and special exceptions have not been reauthorized since their expiration under Pub. L. 112-96 and, therefore, are no longer applicable.

For purposes of the OPPS, as we proposed, we are continuing our policy in CY 2013 of allowing non-IPPS hospitals paid under the OPPS to qualify for the out-migration adjustment if they are located in a section 505 out-migration county (section 505 of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA)). We note that, because non-IPPS hospitals cannot reclassify, they are eligible for the out-migration wage adjustment. Table 4J listed in the FY 2013 IPPS/LTCH PPS final rule (available via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) identifies counties eligible for the out-migration adjustment and hospitals that will receive the adjustment for FY 2013. We note that, beginning with FY 2012, under the IPPS, an eligible hospital that waives its Lugar status in order to receive the out-migration adjustment has effectively waived its deemed urban status and, thus, is rural for all purposes under the IPPS, including being considered rural for the disproportionate share hospital (DSH) payment adjustment, effective for the fiscal year in which the hospital receives the out-migration adjustment. We refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR 53371) for a more detailed discussion on the Lugar redesignation waiver for the out-migration adjustment). As we have done in prior years, we are including Table 4J from the FY 2013 IPPS/LTCH PPS final rule as Addendum L to this final rule with comment period with the addition of non-IPPS hospitals that will receive the section 505 out-migration adjustment under the CY 2013 OPPS. Addendum L is available via the Internet on the CMS Web site.

In response to concerns frequently expressed by providers and other relevant parties that the current wage index system does not effectively reflect the true variation in labor costs for a large cross-section of hospitals, two studies were undertaken by the Department. First, section 3137(b) of the Affordable Care Act required the Secretary to submit to Congress a report that includes a plan to comprehensively reform the Medicare wage index applied under section 1886(d) of the Act. In developing the plan, the Secretary was directed to take into consideration the goals for reforming the wage index that were set forth by the Medicare Payment Advisory Commission (MedPAC) in its June 2007 report entitled “Report to Congress: Promoting Greater Efficiency in Medicare” and to “consult with relevant affected parties.” Second, the Secretary commissioned the Institute of Medicine (IOM) to “evaluate hospital and physician geographic payment adjustments, the validity of the adjustment factors, measures and methodologies used in those factors, and sources of data used in those factors.” Reports on both of these studies for geographic adjustment to hospital payments recently have been released. For summaries of the studies, their findings, and recommendations on reforming the wage index system, we refer readers to section IX.B. of the preamble of the FY 2013 IPPS/LTCH PPS final rule (77 FR 53660 through 53664).

Comment: Several commenters expressed disappointment that CMS did not set forth a proposal in the CY 2013 OPPS/ASC proposed rule to begin reform of the wage index process and simply proposed to continue adopting the IPPS fiscal year wage indexes. Several commenters encouraged CMS to expedite wage index reform to create a more equitable system that adequately pays hospitals for care provided to Medicare beneficiaries. A few commenters supported the continuation of the current wage index system; one commenter suggested that, as more comprehensive reforms continue to be developed, they encompass the goals of minimizing volatility, discouraging manipulation of the system, and limiting adverse effects on high wage area markets.

Response: In the CY 2012 OPPS/ASC proposed rule, we solicited comment on possible alternative wage index systems under the OPPS (76 FR 42212 through 42213). However, in the CY 2012 OPPS/ASC final rule with comment period, we stated our belief that maintaining the current policy of adopting the fiscal year IPPS wage index and adopting it in the OPPS on a calendar year basis would continue to be appropriate, given our longstanding use of the fiscal year IPPS wage index in the OPPS on a calendar year basis (76 FR 74192) and the broader wage index reform currently under development and consideration (76 FR 74193). In the CY 2013 OPPS/ASC proposed rule, we proposed that continuing to use the IPPS wage index as the source of an adjustment factor for the OPPS is reasonable and logical, given the inseparable, subordinate status of the HOPD within the hospital overall (77 FR 45105). As discussed above, the FY 2013 IPPS/LTCH PPS final rule contains a discussion of a MedPAC report and an IOM study focused on potential models for wage index reform (77 FR 53660 through 53664).

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

D. Statewide Average Default CCRs

In addition to using CCRs to estimate costs from charges on claims for ratesetting, CMS uses overall hospital-specific CCRs calculated from the hospital's most recent cost report to determine outlier payments, payments for pass-through devices, and monthly interim transitional corridor payments under the OPPS during the PPS year. Medicare contractors cannot calculate a CCR for some hospitals because there is no cost report available. For these hospitals, CMS uses the statewide average default CCRs to determine the payments mentioned above until a hospital's Medicare contractor is able to calculate the hospital's actual CCR from its most recently submitted Medicare cost report. These hospitals include, but are not limited to, hospitals that are new, have not accepted assignment of an existing hospital's provider agreement, and have not yet submitted a cost report. CMS also uses the statewide average default CCRs to determine payments for hospitals that appear to have a biased CCR (that is, the CCR falls outside the predetermined ceiling threshold for a valid CCR) or for hospitals in which the most recent cost report reflects an all-inclusive rate status (Medicare Claims Processing Manual (Pub. 100-04), Chapter 4, Section 10.11). We discuss our policy for using default CCRs, including setting the ceiling threshold for a valid CCR, in the CY 2009 OPPS/ASC final rule with comment period (73 FR 68594 through 68599) in the context of our adoption of an outlier reconciliation policy for cost reports beginning on or after January 1, 2009.

For CY 2013, we proposed to continue to use our standard methodology of calculating the statewide average default CCRs using the same hospital overall CCRs that we use to adjust charges to costs on claims data for setting the proposed CY 2013 OPPS relative payment weights. Table 12 published in the proposed rule (77 FR 45106) listed the proposed CY 2013 default urban and rural CCRs by State and compared them to last year's default CCRs. These proposed CCRs represented the ratio of total costs to total charges for those cost centers relevant to outpatient services from each hospital's most recently submitted cost report, weighted by Medicare Part B charges. We also proposed to adjust ratios from submitted cost reports to reflect the final settled status by applying the differential between settled to submitted overall CCRs for the cost centers relevant to outpatient services from the most recent pair of final settled and submitted cost reports. We then proposed to weight each hospital's CCR by the volume of separately paid line-items on hospital claims corresponding to the year of the majority of cost reports used to calculate the overall CCRs. We refer readers to the CY 2008 OPPS/ASC final rule with comment period (72 FR 66680 through 66682) and prior OPPS rules for a more detailed discussion of our established methodology for calculating the statewide average default CCRs, including the hospitals used in our calculations and our trimming criteria.

Comment: One commenter expressed concern that Florida has the lowest CCR in the United States for both rural and urban areas. The commenter suggested that the statewide average default CCRs for Florida are “significantly skewed” due to cost report information submitted by hospitals in the Miami area and recommended that CMS evaluate the data used to calculate the CCRs in order to validate this assumption.

Response: As detailed in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66680 through 66682), we use only valid CCRs to calculate the default ratios. That is, we remove the CCRs for all-inclusive hospitals and CAHs, we identify and remove any obvious error CCRs, and we trim any outliers. The Florida statewide average default CCRs have been very stable over the last several years. Contrary to the commenter's belief that we use statewide average default CCRs to estimate the costs (from charges on claims) that are used to calculate the OPPS relative weights, Medicare contractors use statewide average default CCRs to determine outlier payments, payments for pass-through devices, and monthly interim transitional corridor payments for hospitals with no available cost report.

After consideration of the public comment we received on our CY 2013 proposal, we are finalizing our proposal to apply our standard methodology of calculating the statewide average default CCRs using the same hospital overall CCRs that we used to adjust charges to costs on claims data for setting the CY 2013 OPPS relative weights. We used this methodology to calculate the statewide average default CCRs listed in Table 8 below.

For this CY 2013 OPPS/ASC final rule with comment period, approximately 62 percent of the submitted cost reports utilized in the default ratio calculations represented data for cost reporting periods ending in CY 2010, and approximately 38 percent were for cost reporting periods ending in CY 2009. For Maryland, we used an overall weighted average CCR for all hospitals in the Nation as a substitute for Maryland CCRs. Few hospitals in Maryland are eligible to receive payment under the OPPS, which limits the data available to calculate an accurate and representative CCR. The weighted CCR is used for Maryland because it takes into account each hospital's volume, rather than treating each hospital equally. We refer readers to the CY 2005 OPPS final rule with comment period (69 FR 65822) for further discussion and the rationale for our longstanding policy of using the national average CCR for Maryland. In general, observed changes in the statewide average default CCRs between CY 2012 and CY 2013 are modest and the few significant changes are associated with areas that have a small number of hospitals.

Table 8 below lists the finalized statewide average default CCRs for OPPS services furnished on or after January 1, 2013.

BILLING CODE 4120-01-P

BILLING CODE 4120-01-C

E. OPPS Payments to Certain Rural and Other Hospitals

1. Hold Harmless Transitional Payment Changes

The OPPS was implemented in CY 2000 under the Balanced Budget Act of 1997 (BBA) (Pub. L. 105-33). The Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act of 1999 (BBRA) (Pub. L. 106-113) made major changes in the hospital OPPS, including adding a new paragraph (7) to section 1833(t) of the Act, effective as if included in the enactment of the BBA. Section 1833(t)(7) of the Act sets forth that every provider was eligible to receive an additional payment adjustment (called either transitional corridor payments or transitional outpatient payments (TOPs)) if the payments it received for covered OPD services under the OPPS were less than the payments it would have received for the same services under the prior reasonable cost-based system (referred to as the pre-BBA amount), and that the TOPs were temporary payments for most providers and intended to ease their transition from the prior reasonable cost-based payment system to the OPPS system. There are two types of hospitals excepted from the policy described above, cancer hospitals and children's hospitals. Specifically, such a hospital could receive TOPs to the extent its PPS amount was less than its pre-BBA amount in the applicable year. Section 1833(t)(7)(D)(i) of the Act originally provided for TOPs to all hospitals for covered OPD services furnished before January 1, 2004. However, section 411 of Public Law 108-173 (the Medicare Prescription Drug, Improvement, and Modernization Act of 2003) amended section 1833(t)(7)(D)(i) of the Act to extend these payments through December 31, 2005, for rural hospitals with 100 or fewer beds. Section 411 also extended the TOPs to sole community hospitals (SCHs) located in rural areas for services furnished during the period that began with the provider's first cost reporting period beginning on or after January 1, 2004, and ending on December 31, 2005. Accordingly, the authority for making TOPs under section 1833(t)(7)(D)(i) of the Act, as amended by section 411 of Public Law 108-173, for rural hospitals having 100 or fewer beds and SCHs located in rural areas expired on December 31, 2005.

Section 5105 of Public Law 109-171 (the Deficit Reduction Act of 2005) extended the TOPs for covered OPD services furnished on or after January 1, 2006, and before January 1, 2009, for rural hospitals having 100 or fewer beds that are not SCHs. Section 5105 of Public Law 109-171 also reduced the TOPs to rural hospitals from 100 percent of the difference between the provider's OPPS payments and the pre-BBA amount. This provision provided that, in cases in which the OPPS payment was less than the provider's pre-BBA amount, the amount of payment would be increased by 95 percent of the amount of the difference between the two amounts for CY 2006, by 90 percent of the amount of that difference for CY 2007, and by 85 percent of the amount of that difference for CY 2008.

For CY 2006, we implemented section 5105 of Public Law 109-171 through Transmittal 877, issued on February 24, 2006. In Transmittal 877, we did not specifically address whether TOPs applied to essential access community hospitals (EACHs), which are considered to be SCHs under section 1886(d)(5)(D)(iii)(III) of the Act. Accordingly, by law, EACHs are treated as SCHs. In the CY 2007 OPPS/ASC final rule with comment period (71 FR 68010), we stated that EACHs were not eligible for TOPs under Public Law 109-171. However, we stated they were eligible for the adjustment for rural SCHs authorized under section 411 of Public Law 108-173. In the CY 2007 OPPS/ASC final rule with comment period (71 FR 68010 and 68228), we updated § 419.70(d) of our regulations to reflect the requirements of Public Law 109-171.

In the CY 2009 OPPS/ASC proposed rule (73 FR 41461), we stated that, effective for services provided on or after January 1, 2009, rural hospitals with 100 or fewer beds that are not SCHs would no longer be eligible for TOPs, in accordance with section 5105 of Public Law 109-171. However, subsequent to issuance of the CY 2009 OPPS/ASC proposed rule, section 147 of Public Law 110-275 (the Medicare Improvements for Patients and Providers Act of 2008) amended section 1833(t)(7)(D)(i) of the Act by extending the period of TOPs to rural hospitals with 100 beds or fewer for 1 year, for services provided before January 1, 2010. Section 147 of Public Law 110-275 also extended TOPs to SCHs (including EACHs) with 100 or fewer beds for covered OPD services provided on or after January 1, 2009, and before January 1, 2010. In accordance with section 147 of Public Law 110-275, when the OPPS payment is less than the provider's pre-BBA amount, the amount of payment is increased by 85 percent of the amount of the difference between the two payment amounts for CY 2009.

For CY 2009, we revised our regulations at §§ 419.70(d)(2) and (d)(4) and added paragraph (d)(5) to incorporate the provisions of section 147 of Public Law 110-275. In addition, we made other technical changes to § 419.70(d)(2) to more precisely capture our existing policy and to correct an inaccurate cross-reference. We also made technical corrections to the cross-references in paragraphs (e), (g), and (i) of § 419.70.

For CY 2010, we made a technical correction to the heading of § 419.70(d)(5) to correctly identify the policy as described in the subsequent regulation text. The paragraph heading now indicates that the adjustment applies to small SCHs, rather than to rural SCHs.

In the CY 2010 OPPS/ASC final rule with comment period (74 FR 60425), we stated that, effective for services provided on or after January 1, 2010, rural hospitals and SCHs (including EACHs) having 100 or fewer beds would no longer be eligible for TOPs, in accordance with section 147 of Public Law 110-275. However, subsequent to the issuance of the CY 2010 OPPS/ASC final rule with comment period, section 3121(a) of the Affordable Care Act (Pub. L. 111-148) amended section 1833(t)(7)(D)(i)(III) of the Act by extending the period of TOPs to rural hospitals that are not SCHs with 100 beds or fewer for 1 year, for services provided before January 1, 2011. Section 3121(a) of the Affordable Care Act amended section 1833(t)(7)(D)(i)(III) of the Act and extended the period of TOPs to SCHs (including EACHs) for 1 year, for services provided before January 1, 2011, and section 3121(b) of the Affordable Care Act removed the 100-bed limitation applicable to such SCHs for covered OPD services furnished on or after January 1, 2010, and before January 1, 2011. In accordance with section 3121 of the Affordable Care Act, when the OPPS payment is less than the provider's pre-BBA amount, the amount of payment is increased by 85 percent of the amount of the difference between the two payment amounts for CY 2010. Accordingly, in the CY 2011 OPPS/ASC final rule with comment period (75 FR 71882), we updated § 419.70(d) of the regulations to reflect the self-implementing TOPs extensions and amendments described in section 3121 of the Affordable Care Act.

Section 108 of the Medicare and Medicaid Extenders Act of 2010 (MMEA) (Pub. L. 111-309) extended for 1 year the hold harmless provision for a rural hospital with 100 or fewer beds that is not an SCH (as defined in section 1886(d)(5)(D)(iii) of the Act). Therefore, for such a hospital, for services furnished before January 1, 2012, when the PPS amount is less than the provider's pre-BBA amount, the amount of payment to the hospital is increased by 85 percent of the amount of the difference between the two payments. In addition, section 108 of the MMEA also extended for 1 year the hold harmless provision for an SCH (as defined in section 1886(d)(5)(D)(iii) of the Act (including EACHs) and the removal of the 100-bed limit applicable to such SCHs for covered OPD services furnished on or after January 1, 2010, and before January 1, 2012. Therefore, for such hospitals, for services furnished before January 1, 2012, when the PPS amount is less than the provider's pre-BBA amount, the amount of payment to the hospital is increased by 85 percent of the amount of the difference between the two payments. Effective for services provided on or after January 1, 2012, a rural hospital with 100 or fewer beds that is not an SCH and an SCH (including EACHs) are no longer eligible for TOPs, in accordance with section 108 of the MMEA. In the CY 2012 OPPS/ASC final rule with comment period (76 FR 74199), we revised our regulations § 419.70(d) to conform the regulation text to the self-implementing provisions of section 108 of the MMEA described above.

Subsequent to the issuance of the CY 2012 OPPS/ASC final rule with comment period, section 308 of the Temporary Payroll Tax Cut Continuation Act of CY 2011 (Pub. L. 112-78), as amended by section 3002 of the Middle Class Tax Relief and Jobs Creation Act (Pub. L. 112-96), extended through December 31, 2012, the hold harmless provision for a rural hospital with 100 or fewer beds that is not an SCH (as defined in section 1886(d)(5)(D)(iii) of the Act). Therefore, for such a hospital, for services furnished before January 1, 2013, when the PPS amount is less than the provider's pre-BBA amount, the amount of payment is increased by 85 percent of the amount of the difference between the two payments.

Section 308 of Public Law 112-78 also extended through February 29, 2012, the hold harmless provision for an SCH (as defined in section 1886(d)(5)(D)(iii) of the Act), including an EACH, without the bed size limitation. Therefore, for such hospitals, for services furnished before March 1, 2012, when the PPS amount is less than the provider's pre-BBA amount, the amount of payment is increased by 85 percent of the amount of the difference between the two payments. However, section 3002 of Public Law 112-96 extended through December 31, 2012, the hold harmless provision for an SCH (as defined in section 1886(d)(5)(D)(iii) of the Act), including an EACH, that has no more than 100 beds. Therefore, for such hospitals, for services furnished before January 1, 2013, when the PPS amount is less than the provider's pre-BBA amount, the amount of payment is increased by 85 percent of the amount of the difference between the two payments. Accordingly, as we proposed in the CY 2013 OPPS/ASC proposed rule (77 FR 45108), we are revising § 419.70(d) of the regulations to reflect the TOPs extensions and amendments described in section 308 of Public Law 112-78 and section 3002 of Public Law 112-96.

Effective for services provided on or after March 1, 2012, SCHs (including EACHs) with greater than 100 beds are no longer eligible for TOPs, in accordance with section 308 of Public Law 112-78. Effective for services provided on or after January 1, 2013, a rural hospital with 100 or fewer beds that is not an SCH and an SCH (including an EACH) are no longer eligible for TOPs, in accordance with section 3002 of Public Law 112-96.

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

In the CY 2006 OPPS final rule with comment period (70 FR 68556), we finalized a payment increase for rural SCHs of 7.1 percent for all services and procedures paid under the OPPS, excluding drugs, biologicals, brachytherapy sources, and devices paid under the pass-through payment policy in accordance with section 1833(t)(13)(B) of the Act, as added by section 411 of Public Law 108-173. Section 411 gave the Secretary the authority to make an adjustment to OPPS payments for rural hospitals, effective January 1, 2006, if justified by a study of the difference in costs by APC between hospitals in rural areas and hospitals in urban areas. Our analysis showed a difference in costs for rural SCHs. Therefore, for the CY 2006 OPPS, we finalized a payment adjustment for rural SCHs of 7.1 percent for all services and procedures paid under the OPPS, excluding separately payable drugs and biologicals, brachytherapy sources, and devices paid under the pass-through payment policy, in accordance with section 1833(t)(13)(B) of the Act.

In CY 2007, we became aware that we did not specifically address whether the adjustment applies to EACHs, which are considered to be SCHs under section 1886(d)(5)(D)(iii)(III) of the Act. Thus, under the statute, EACHs are treated as SCHs. Therefore, in the CY 2007 OPPS/ASC final rule with comment period (71 FR 68010 and 68227), for purposes of receiving this rural adjustment, we revised § 419.43(g) to clarify that EACHs are also eligible to receive the rural SCH adjustment, assuming these entities otherwise meet the rural adjustment criteria. Currently, three hospitals are classified as EACHs, and as of CY 1998, under section 4201(c) of Public Law 105-33, a hospital can no longer become newly classified as an EACH.

This adjustment for rural SCHs is budget neutral and applied before calculating outlier payments and copayments. We stated in the CY 2006 OPPS final rule with comment period (70 FR 68560) that we would not reestablish the adjustment amount on an annual basis, but we may review the adjustment in the future and, if appropriate, would revise the adjustment. We provided the same 7.1 percent adjustment to rural SCHs, including EACHs, again in CYs 2008 through 2012. Further, in the CY 2009 OPPS/ASC final rule with comment period (73 FR 68590), we updated the regulations at § 419.43(g)(4) to specify, in general terms, that items paid at charges adjusted to costs by application of a hospital-specific CCR are excluded from the 7.1 percent payment adjustment.

In the CY 2013 OPPS/ASC proposed rule (77 FR 45109), we proposed to continue for CY 2013 our policy of a budget neutral 7.1 percent payment adjustment for rural SCHs, including EACHs, for all services and procedures paid under the OPPS, excluding separately payable drugs and biologicals, devices paid under the pass-through payment policy, and items paid at charges reduced to costs. We indicated in the proposed rule that we intend to reassess the 7.1 percent adjustment in the future by examining differences between urban hospitals' costs and rural hospitals' costs using updated claims data, cost reports, and provider information.

Comment: Several commenters expressed support for the proposed continuation of the 7.1 percent rural SCH adjustment. A few commenters also suggested that the rural SCH adjustment also apply to urban SCHs. One commenter suggested that the 7.1 percent payment adjustment also be applied to MDHs, given that their inpatient classification was set to expire in October 2012.

Response: We agree that it is appropriate to continue the 7.1 percent adjustment for rural SCHs (including EACHs) as we proposed for CY 2013. We note that the rural SCH adjustment was developed under the authority described in section 1833(t)(13) of the Act, which applies specifically to rural hospitals. Although commenters have suggested that the rural SCH adjustment also apply to urban SCHs, the study authorized under section 1833(t)(13)(A) of the Act specifically focuses on APC costs incurred by rural hospitals, as they exceed those costs incurred by hospitals in urban areas. Moreover, the Secretary's authority to make an adjustment based on that study was with respect to a determination that costs incurred by rural hospitals exceed those costs incurred by urban hospitals and to reflect those higher costs. Therefore, the authority to make any such adjustment was limited to reflect the higher costs incurred by such applicable rural hospitals. Although the MDH classification is currently set to expire, we note that the definition of a MDH at 1886(d)(5)(G)(iv)(III) of the Act specifically excludes sole community hospitals, to which the rural adjustment applies. Further, as we discussed in the CY 2006 OPPS final rule, our analysis of urban SCHs as well as rural MDHs did not support the application of a rural adjustment (70 FR 68560 through 68561).

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

F. OPPS Payment to Certain Cancer Hospitals Described by Section 1886(d)(1)(B)(v) of the Act

1. Background

Since the inception of the OPPS, which was authorized by the Balanced Budget Act of 1997 (BBA), Medicare has paid cancer hospitals identified in section 1886(d)(1)(B)(v) of the Act (cancer hospitals) under the OPPS for covered outpatient hospital services. There are 11 cancer hospitals that meet the classification criteria in section 1886(d)(1)(B)(v) of the Act. These 11 cancer hospitals are exempted from payment under the IPPS. With the Medicare, Medicaid and SCHIP Balanced Budget Refinement Act of 1999, Congress created section 1833(t)(7) of the Act, “Transitional Adjustment to Limit Decline in Payment,” to serve as a permanent payment floor by limiting cancer hospitals' potential losses under the OPPS. Through section 1833(t)(7)(D)(ii) of the Act, a cancer hospital receives the full amount of the difference between payments for covered outpatient services under the OPPS and a “pre-BBA” amount. That is, cancer hospitals are permanently held harmless to their “pre-BBA” amount, and they receive TOPs to ensure that they do not receive a payment that is lower under the OPPS than the payment they would have received before implementation of the OPPS, as set forth in section 1833(t)(7)(F) of the Act. The “pre-BBA” payment amount is an amount equal to the product of the reasonable cost of the hospital for covered outpatient services for the portions of the hospital's cost reporting period (or periods) occurring in the current year and the base payment-to-cost ratio (PCR) for the hospital. The “pre-BBA” amount, including the determination of the base PCR, are defined at 42 CFR 419.70(f). TOPs are calculated on Worksheet E, Part B, of the Hospital and Hospital Health Care Complex Cost Report (Form CMS-2552-96 or Form CMS-2552-10, as applicable) each year. Section 1833(t)(7)(I) of the Act exempts TOPs from budget neutrality calculations.

Section 3138 of the Affordable Care Act amended section 1833(t) of the Act by adding a new paragraph (18), which instructs the Secretary to conduct a study to determine if, under the OPPS, outpatient costs incurred by cancer hospitals described in section 1886(d)(1)(B)(v) of the Act with respect to APC groups exceed the costs incurred by other hospitals furnishing services under section 1833(t) of the Act, as determined appropriate by the Secretary. In addition, section 3138 of the Affordable Care Act requires the Secretary to take into consideration the cost of drugs and biologicals incurred by such hospitals when studying cancer hospital costliness. Further, section 3138 of the Affordable Care Act provides that if the Secretary determines that cancer hospitals' costs with respect to APC groups are determined to be greater than the costs of other hospitals furnishing services under section 1833(t) of the Act, the Secretary shall provide an appropriate adjustment under section 1833(t)(2)(E) of the Act to reflect these higher costs. After conducting the study required by section 3138, we determined in 2012 that outpatient costs incurred by the 11 specified cancer hospitals were greater than the costs incurred by other OPPS hospitals. For a complete discussion regarding the cancer hospital cost study, we refer readers to the CY 2012 OPPS/ASC final rule with comment period (76 FR 74200 through 74201).

Based on our findings that costs incurred by cancer hospitals were greater than the costs incurred by other OPPS hospitals, we finalized a policy to provide a payment adjustment to the 11 specified cancer hospitals that reflects the higher outpatient costs as discussed in the CY 2012 OPPS/ASC final rule with comment period (76 FR 74202 through 74206). Specifically, we adopted a policy to provide additional payments to each of the 11 cancer hospitals so that each cancer hospital's final PCR for services provided in a given calendar year is equal to the weighted average PCR (which we refer to as the “target PCR”) for other hospitals paid under the OPPS. The target PCR is set in advance of the calendar year and is calculated using the most recent submitted or settled cost report data that are available at the time of final rulemaking for the calendar year. The amount of the payment adjustment is made on an aggregate basis at cost report settlement. We note that the changes made by section 1833(t)(18) of the Act do not affect the existing statutory provisions that provide for TOPs for cancer hospitals. The TOPs are assessed as usual after all payments, including the cancer hospital payment adjustment, have been made for a cost reporting period. For CY 2012, the target PCR for purposes of the cancer hospital payment adjustment is 0.91.

2. Payment Adjustment for Certain Cancer Hospitals for CY 2013

In the CY 2013 OPPS/ASC proposed rule (77 FR 45110), we proposed to continue our policy to provide additional payments to cancer hospitals so that each cancer hospital's final PCR is equal to the weighted average PCR (or “target PCR”) for the other OPPS hospitals using the most recent submitted or settled cost report data that were available at the time of the proposed rule. To calculate the proposed CY 2013 target PCR, we used the same extract of cost report data from HCRIS, as discussed in section II.A. of the proposed rule, used to estimate costs for the CY 2013 OPPS. Using these cost report data, we included data from Worksheet E, Part B, for each hospital, using data from each hospital's most recent cost report, whether as submitted or settled. We estimated that, on average, the OPPS payments to other hospitals furnishing services under the OPPS were approximately 91 percent of reasonable cost (weighted average PCR of 0.91). Based on these data, we proposed a target PCR of 0.91 that would be used to determine the CY 2013 cancer hospital payment adjustment that would be paid at cost report settlement. Therefore, we proposed that the payment amount associated with the cancer hospital payment adjustment to be determined at cost report settlement would be the additional payment needed to result in a proposed target PCR equal to 0.91 for each cancer hospital.

Comment: Some commenters suggested that the PCR is only one component of the adjustment needed to account for the differences in providing cancer care. The commenters suggested that CMS utilize a methodology that they stated would ensure that the 11 cancer hospitals' losses (on a per unit PCR basis) equal the losses (on a per unit PCR basis) of the other PPS hospitals. The commenters provided details of this “equivalent loss per unit” methodology which they indicate would result in a target PCR equal to 0.94 for CY 2013.

Response: Section 3138 of the Affordable Care Act provides that if the Secretary determines under section 1833(t)(18)(A) of the Act that costs incurred by cancer hospitals exceed those costs of other hospitals furnishing services under section 1833(t), the Secretary shall provide for an appropriate adjustment under section 1833(t)(2)(E) of the Act, to reflect the higher costs. Because the statute requires that we provide a cancer hospital payment adjustment to reflect the higher costs, not losses, incurred at cancer hospitals, we believe that it would be inappropriate to revise our cancer hospital payment adjustment policy so that the target PCR is calculated based on the cancer hospitals' losses per unit PCR compared to the other OPPS hospitals' losses per unit PCR.

Comment: Commenters stated that CMS should not recalculate the target PCR annually because the cancer hospitals require payment stability and predictability in order to provide services to Medicare beneficiaries.

Response: We believe that annual recalculation of the target PCR will provide a timely assessment of the changes in OPPS payments relative to costs and, therefore, will enable us to provide payment adjustments to cancer hospitals that are accurate and equitable. In addition, it is unlikely that the target PCR (the weighted average PCR for the other OPPS hospitals) would fluctuate significantly from year to year. The target PCR is 0.91 for purposes of the CY 2012 cancer hospital payment adjustment and remained at 0.91 when recalculated for the CY 2013 OPPS/ASC proposed rule and this final rule with comment period. In addition to the apparent stability of the target PCR, because the target PCR is set in advance of each calendar year, cancer hospitals can easily predict the amount of their hospital-specific payment adjustment associated with the target PCR for the following year and budget accordingly.

Comment: Commenters stated that CMS must make the cancer hospital payment adjustment effective for services furnished on or after January 1, 2011, in order to comply with section 3138 of the Affordable Care Act.

Response: As explained in the CY 2011 OPPS/ASC final rule with comment period (75 FR 71886 through 71887), we did not finalize the proposed cancer hospital adjustment for CY 2011 for a variety of reasons, including, ultimately, a determination that further study and deliberation of the issues were necessary. The obligation to provide a cancer hospital payment adjustment is triggered only insofar as the Secretary determines under section 1833(t)(18)(A) of the Act that costs incurred by hospitals described in section 1886(d)(1)(B)(v) of the Act exceed those costs incurred by other hospitals furnishing services under that subsection. Several commenters on the CY 2011 OPPS/ASC proposed rule raised concerns about the agency's study of costliness conducted under section 1833(t)(18)(A) of the Act; for example, one commenter suggested that the CMS analysis was inadequate to conclude that costs are higher in cancer hospitals and that an adjustment was warranted. Given the uncertainty surrounding these issues, public comments arguing against implementing a cancer hospital payment adjustment for CY 2011, and our determination that further study and deliberation were necessary, we decided to not finalize a cancer hospital payment adjustment for CY 2011. We note that, because the cancer hospital payment adjustment is budget neutral, the lack of a cancer hospital payment adjustment for CY 2011 also meant that other payments were not reduced for CY 2011 to offset the increased payments from the adjustment.

Comment: One commenter noted that, although CMS indicated the estimated percent by which each cancer hospital's OPPS payments would be increased under the cancer hospital payment adjustment policy in the CY 2012 OPPS/ASC proposed and final rules, CMS did not include this information in the CY 2013 OPPS/ASC proposed rule. The commenter requested that CMS include this information in the CY 2013 OPPS/ASC final rule with comment period.

Response: We agree with the commenter that it would be informative to provide the estimated percentage increase in CY 2013 OPPS payments to each cancer hospital due to the cancer hospital payment adjustment policy. Therefore, we are including that information in the last column of Table 9 below.

After consideration of the public comments we received, we are finalizing our proposal to continue our policy to provide additional payments to cancer hospitals so that each cancer hospital's final PCR is equal to the weighted average PCR for the other OPPS hospitals using the most recent submitted or settled cost report data that were available at the time of this final rule with comment period. To calculate the final CY 2013 target PCR, we used the same extract of cost report data from HCRIS, as discussed in section II.A. of this final rule with comment period, used to estimate costs for the CY 2013 OPPS. Using these cost report data, we included data from Worksheet E, Part B, for each hospital, using data from each hospital's most recent cost report, whether as submitted or settled. We then limited the dataset to the hospitals with CY 2011 claims data that we used to model the impact of the final CY 2013 APC relative weights (4,026 hospitals) because it is appropriate to use the same set of hospitals that we are using to calibrate the modeled CY 2013 OPPS. The cost report data for the hospitals in this dataset were from cost report periods with fiscal year ends ranging from 2010 to 2011. We then removed the cost report data of the 48 hospitals located in Puerto Rico from our dataset because we do not believe that their cost structure reflects the costs of most hospitals paid under the OPPS and, therefore, their inclusion may bias the calculation of hospital-weighted statistics. We also removed the cost report data of 182 hospitals because the cost report data that were not complete (missing aggregate OPPS payments, missing aggregate cost data, or missing both), so that all cost reports in the study would have both the payment and cost data necessary to calculate a PCR for each hospital, leading to an analytic file of 3,796 hospitals with cost report data.

Using this smaller dataset of cost report data, we estimated that, on average, the OPPS payments to other hospitals furnishing services under the OPPS are approximately 91 percent of reasonable cost (weighted average PCR of 0.91). Based on these data, we will use a target PCR of 0.91 to determine the CY 2013 cancer hospital payment adjustment to be paid at cost report settlement. Therefore, the payment amount associated with the cancer hospital payment adjustment to be determined at cost report settlement will be the additional payment needed to result in a PCR equal to 0.91 for each cancer hospital.

Table 9 below indicates the estimated percentage increase in OPPS payments to each cancer hospital for CY 2013 due to the cancer hospital payment adjustment policy. The actual amount of the CY 2013 cancer hospital payment adjustment for each cancer hospital will be determined at cost report settlement and will depend on each hospital's CY 2013 payments and costs. We note that the changes made by section 1833(t)(18) of the Act do not affect the existing statutory provisions that provide for TOPs for cancer hospitals. The TOPs will be assessed as usual after all payments, including the cancer hospital payment adjustment, have been made for a cost reporting period.

G. Hospital Outpatient Outlier Payments

1. Background

Currently, the OPPS provides outlier payments on a service-by-service basis. In CY 2011, the outlier threshold was determined to be met when the cost of furnishing a service or procedure by a hospital exceeds 1.75 times the APC payment amount and exceeds the APC payment rate plus a $2,025 fixed-dollar threshold. We introduced a fixed-dollar threshold in CY 2005, in addition to the traditional multiple threshold, in order to better target outlier payments to those high-cost and complex procedures where a very costly service could present a hospital with significant financial loss. If the cost of a service meets both of these conditions, the multiple threshold and the fixed-dollar threshold, the outlier payment is calculated as 50 percent of the amount by which the cost of furnishing the service exceeds 1.75 times the APC payment rate. Before CY 2009, this outlier payment had historically been considered a final payment by longstanding OPPS policy. However, we implemented a reconciliation process similar to the IPPS outlier reconciliation process for cost reports with cost reporting periods beginning on or after January 1, 2009, in our CY 2009 OPPS/ASC final rule with comment period (73 FR 68594 through 68599).

It has been our policy for the past several years to report the actual amount of outlier payments as a percent of total spending in the claims being used to model the proposed OPPS. Our current estimate of total outlier payments as a percent of total CY 2011 OPPS payment, using available CY 2011 claims and the revised OPPS expenditure estimate for the 2012 Trustee's Report, is approximately 1.2 percent of the total aggregated OPPS payments. Therefore, for CY 2011, we estimate that we paid 0.2 percent above the CY 2011 outlier target of 1.0 percent of total aggregated OPPS payments.

As explained in the CY 2012 OPPS/ASC final rule with comment period (77 FR 74207 through 74209), we set our projected target for aggregate outlier payments at 1.0 percent of the estimated aggregate total payments under the OPPS for CY 2012. The outlier thresholds were set so that estimated CY 2012 aggregate outlier payments would equal 1.0 percent of the total estimated aggregate payments under the OPPS. Using CY 2011 claims data and CY 2012 payment rates, we currently estimate that the aggregate outlier payments for CY 2012 will be approximately 0.9 percent of the total CY 2012 OPPS payments. The difference between 1.0 percent and 0.9 percent is reflected in the regulatory impact analysis in section XXII. of this final rule with comment period. We note that we provide estimated CY 2013 outlier payments for hospitals and CMHCs with claims included in the claims data that we used to model impacts in the Hospital-Specific Impacts—Provider-Specific Data file on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html.

2. Proposed Outlier Calculation

In the CY 2013 OPPS/ASC proposed rule (77 FR 45110), we proposed to continue for CY 2013 our policy of estimating outlier payments to be 1.0 percent of the estimated aggregate total payments under the OPPS for outlier payments. We proposed that a portion of that 1.0 percent, an amount equal to 0.12 percent of outlier payments (or 0.0012 percent of total OPPS payments) would be allocated to CMHCs for PHP outlier payments. This is the amount of estimated outlier payments that would result from the proposed CMHC outlier threshold as a proportion of total estimated OPPS outlier payments. As discussed in section VIII.C. of the CY 2013 OPPS/ASC proposed rule, for CMHCs, we proposed to continue our longstanding policy that if a CMHC's cost for partial hospitalization services, paid under either APC 0172 (Level I Partial Hospitalization (3 services) for CMHCs) or APC 0173 (Level II Partial Hospitalization (4 or more services) for CMHCs), exceeds 3.40 times the payment rate for APC 0173, the outlier payment would be calculated as 50 percent of the amount by which the cost exceeds 3.40 times the APC 0173 payment rate. For further discussion of CMHC outlier payments, we refer readers to section VIII.C. of this final rule with comment period.

To ensure that the estimated CY 2013 aggregate outlier payments would equal 1.0 percent of estimated aggregate total payments under the OPPS, we proposed that the hospital outlier threshold be set so that outlier payments would be triggered when the cost of furnishing a service or procedure by a hospital exceeds 1.75 times the APC payment amount and exceeds the APC payment rate plus a $2,400 fixed-dollar threshold.

We proposed to calculate the fixed-dollar threshold using largely the same methodology as we did in CYs 2011 and 2012 (75 FR 71887 through 71889 and 76 FR 74207 through 74209). For purposes of estimating outlier payments for the proposed rule, we used the hospital-specific overall ancillary CCRs available in the April 2012 update to the Outpatient Provider-Specific File (OPSF). The OPSF contains provider-specific data, such as the most current CCR, which are maintained by the Medicare contractors and used by the OPPS Pricer to pay claims. The claims that we use to model each OPPS update lag by 2 years.

In order to estimate the CY 2013 hospital outlier payments for the proposed rule, we inflated the charges on the CY 2011 claims using the same inflation factor of 1.1406 that we used to estimate the IPPS fixed-dollar outlier threshold for the FY 2013 IPPS/LTCH PPS proposed rule (77 FR 28142). We used an inflation factor of 1.0680 to estimate CY 2012 charges from the CY 2011 charges reported on CY 2011 claims. The methodology for determining this charge inflation factor is discussed in the FY 2013 IPPS/LTCH PPS proposed rule (77 FR 28142). As we stated in the CY 2005 OPPS final rule with comment period (69 FR 65845), we believe that the use of these charge inflation factors are appropriate for the OPPS because, with the exception of the inpatient routine service cost centers, hospitals use the same ancillary and outpatient cost centers to capture costs and charges for inpatient and outpatient services.

As noted in the CY 2007 OPPS/ASC final rule with comment period (71 FR 68011), we are concerned that we could systematically overestimate the OPPS hospital outlier threshold if we did not apply a CCR inflation adjustment factor. Therefore, we proposed in the CY 2013 OPPS/ASC proposed rule to apply the same CCR inflation adjustment factor that we applied for the FY 2013 IPPS outlier calculation to the CCRs used to simulate the CY 2013 OPPS outlier payments to determine the fixed-dollar threshold. Specifically, for CY 2013, we proposed to apply an adjustment factor of 0.9790 to the CCRs that were in the April 2012 OPSF to trend them forward from CY 2012 to CY 2013. The methodology for calculating this proposed adjustment was discussed in the FY 2013 IPPS/LTCH PPS proposed rule (77 FR 28142 through 28144). We note that, due to the issue described in the IPPS proposed rule correction notice published on June 11, 2012, the operating and capital CCR inflation factors were reversed (77 FR 34326). In estimating the proposed CY 2013 OPPS fixed-dollar outlier threshold, we applied the corrected CCR inflation factor.

Therefore, to model hospital outlier payments for the proposed rule, we applied the overall CCRs from the April 2012 OPSF file after adjustment (using the proposed CCR inflation adjustment factor of 0.9790 to approximate CY 2013 CCRs) to charges on CY 2011 claims that were adjusted (using the charge inflation factor of 1.1406 to approximate CY 2013 charges). We simulated aggregated CY 2013 hospital outlier payments using these costs for several different fixed-dollar thresholds, holding the 1.75 multiple threshold constant and assuming that outlier payments would continue to be made at 50 percent of the amount by which the cost of furnishing the service would exceed 1.75 times the APC payment amount, until the total outlier payments equaled 1.0 percent of aggregated estimated total CY 2013 OPPS payments. We estimated that a proposed fixed-dollar threshold of $2,400, combined with the multiple threshold of 1.75 times the APC payment rate, would allocate 1.0 percent of aggregated total OPPS payments to outlier payments. We proposed to continue to make an outlier payment that equals 50 percent of the amount by which the cost of furnishing the service exceeds 1.75 times the APC payment amount when both the 1.75 multiple threshold and the proposed fixed-dollar threshold of $2,400 were met. For CMHCs, we proposed that, if a CMHC's cost for partial hospitalization services, paid under either APC 0172 or APC 0173, exceeds 3.40 times the payment rate for APC 0173, the outlier payment would be calculated as 50 percent of the amount by which the cost exceeds 3.40 times the APC 0173 payment rate.

Section 1833(t)(17)(A) of the Act, which applies to hospitals as defined under section 1886(d)(1)(B) of the Act, requires that hospitals that fail to report data required for the quality measures selected by the Secretary, in the form and manner required by the Secretary under 1833(t)(17)(B) of the Act, incur a 2.0 percentage point reduction to their OPD fee schedule increase factor, that is, the annual payment update factor. The application of a reduced OPD fee schedule increase factor results in reduced national unadjusted payment rates that will apply to certain outpatient items and services furnished by hospitals that are required to report outpatient quality data and that fail to meet the Hospital OQR Program requirements. For hospitals that fail to meet the Hospital OQR Program requirements, we proposed to continue the policy that we implemented in CY 2010 that the hospitals' costs will be compared to the reduced payments for purposes of outlier eligibility and payment calculation. For more information on the Hospital OQR Program, we refer readers to section XV. of this final rule with comment period.

Comment: Several commenters expressed concern with respect to the relative increase in the proposed CY 2013 OPPS fixed-dollar outlier threshold of $2,400. The commenters believed that the increase in the fixed-dollar threshold would bring about a drastic reduction in outlier payments as well as the ability to furnish services to beneficiaries. Commenters also suggested CMS to reconsider the fixed-dollar threshold value, confirm that the data used to develop the threshold were accurate, and provide data to support the increase in the threshold. Commenters also suggested alternative fixed-dollar threshold setting methodologies such as a 3-year transition to the threshold or a calculation based on prior year estimated percent OPPS outlier spending.

Response: As indicated above, we introduced a fixed-dollar threshold in order to better target outlier payments to those high-cost and complex procedures where a very costly service could present a hospital with significant financial loss. We maintain the target outlier percentage of 1.0 percent of estimated aggregate total payment under the OPPS and have a fixed-dollar threshold so that OPPS outlier payments are made only when the hospital would experience a significant loss for supplying a particular service. While commenters have expressed concern based on the assumption that OPPS outlier payments made under an increased fixed-dollar threshold would decrease, we note that the threshold may increase or decrease from year to year, to maintain the 1.0 percent outlier spending target. While we described issues related to the charge and CCR inflation factors in the CY 2013 OPPS/ASC proposed rule, there were no other errors in the methodology (77 FR 45111). The methodology for determining the OPPS fixed-dollar threshold is described in this section, the LDS files used to model the threshold that are available for public purchase, and a detailed claims accounting document that is available online, which all support the determination of the fixed-dollar threshold. We do not believe that a transitional methodology to determine the outlier threshold or a methodology that takes into account prior spending is appropriate because the relationship between a hospital's costs and the APC payment rates changes each year.

3. Final Outlier Calculation

Consistent with historical practice, we use updated data for this final rule with comment period for our outlier calculation. For CY 2013, we are applying the overall CCRs from the July 2012 OPSF with a CCR adjustment factor of 0.9880 to approximate CY 2013 CCRs to charges on the final CY 2011 claims that were adjusted to approximate CY 2013 charges (using the final 2-year charge inflation factor of 1.0894). These are the same CCR adjustment and charge inflation factors that were used to set the IPPS fixed-dollar threshold for the FY 2013 IPPS/LTCH PPS final rule (77 FR 53695 through 53696). We simulated aggregated CY 2013 hospital outlier payments using these costs for several different fixed-dollar thresholds, holding the 1.75 multiple threshold constant and assuming that outlier payment would continue to be made at 50 percent of the amount by which the cost of furnishing the service would exceed 1.75 times the APC payment amount, until the total outlier payments equaled 1.0 percent of aggregated estimated total CY 2013 OPPS payments. We estimate that a fixed-dollar threshold of $2,025, combined with the multiple threshold of 1.75 times the APC payment rate, will allocate 1.0 percent of estimated aggregated total OPPS payments to outlier payments.

In summary, for CY 2013, we will continue to make an outlier payment that equals 50 percent of the amount by which the cost of furnishing the service exceeds 1.75 times the APC payment amount when both the 1.75 multiple threshold and the final fixed-dollar threshold of $2,025 are met. For CMHCs, if a CMHC's cost for partial hospitalization services, paid under either APC 0172 or APC 0173, exceeds 3.40 times the payment rate for APC 0173, the outlier payment is calculated as 50 percent of the amount by which the cost exceeds 3.40 times the APC 0173 payment rate. We estimate that this threshold will allocate 0.12 percent of outlier payments to CMHCs for PHP outlier payments.

4. Outlier Reconciliation

In the CY 2009 OPPS/ASC final rule with comment period (73 CFR 68599), we adopted as final policy a process to reconcile hospital or CMHC outlier payments at cost report settlement for services furnished during cost reporting periods beginning in CY 2009. OPPS outlier reconciliation more fully ensures accurate outlier payments for those facilities that have CCRs that fluctuate significantly relative to the CCRs of other facilities, and that receive a significant amount of outlier payments (73 FR 68598). As under the IPPS, we do not adjust the fixed-dollar threshold or the amount of total OPPS payments set aside for outlier payments for reconciliation activity because such action would be contrary to the prospective nature of the system. Our outlier threshold calculation assumes that overall ancillary CCRs accurately estimate hospital costs based on the information available to us at the time we set the prospective fixed-dollar outlier threshold. For these reasons, and as we have previously discussed in the CY 2009 OPPS/ASC final rule with comment period (73 FR 68596), and as we proposed for CY 2013, we are not incorporating any assumptions about the effects of reconciliation into our calculation of the OPPS fixed-dollar outlier threshold in this final rule with comment period.

H. Calculation of an Adjusted Medicare Payment From the National Unadjusted Medicare Payment

The basic methodology for determining prospective payment rates for HOPD services under the OPPS is set forth in existing regulations at 42 CFR part 419, subparts C and D. For this final rule with comment period, the payment rate for most services and procedures for which payment is made under the OPPS is the product of the conversion factor calculated in accordance with section II.B. of this final rule with comment period and the relative payment weight determined under section II.A. of this final rule with comment period. Therefore, the national unadjusted payment rate for most APCs contained in Addendum A to this final rule with comment period (which is available via the Internet on the CMS Web site) and for most HCPCS codes to which separate payment under the OPPS has been assigned in Addendum B to this final rule with comment period (which is available via the Internet on the CMS Web site) was calculated by multiplying the CY 2013 scaled weight for the APC by the CY 2013 conversion factor.

We note that section 1833(t)(17) of the Act, which applies to hospitals as defined under section 1886(d)(1)(B) of the Act, requires that hospitals that fail to submit data required to be submitted on quality measures selected by the Secretary, in the form and manner and at a time specified by the Secretary, incur a reduction of 2.0 percentage points to their OPD fee schedule increase factor, that is, the annual payment update factor. The application of a reduced OPD fee schedule increase factor results in reduced national unadjusted payment rates that apply to certain outpatient items and services provided by hospitals that are required to report outpatient quality data and that fail to meet the Hospital OQR Program (formerly referred to as the Hospital Outpatient Quality Data Reporting Program (HOP QDRP)) requirements. For further discussion of the payment reduction for hospitals that fail to meet the requirements of the Hospital OQR Program, we refer readers to section XV. of this final rule with comment period.

We demonstrate in the steps below how to determine the APC payments that will be made in a calendar year under the OPPS to a hospital that fulfills the Hospital OQR Program requirements and to a hospital that fails to meet the Hospital OQR Program requirements for a service that has any of the following status indicator assignments: “P,” “Q1,” “Q2,” “Q3,” “R,” “S,” “T,” “U,” “V,” or “X” (as defined in Addendum D1 to this final rule with comment period), in a circumstance in which the multiple procedure discount does not apply, the procedure is not bilateral, and conditionally packaged services (status indicator of “Q1” and “Q2”) qualify for separate payment. We note that, although blood and blood products with status indicator “R” and brachytherapy sources with status indicator “U” are not subject to wage adjustment, they are subject to reduced payments when a hospital fails to meet the Hospital OQR Program requirements.

We did not receive any public comments on the proposed calculation of an adjusted Medicare payment. Therefore, we are finalizing the calculation of an adjusted Medicare payment, where appropriate, in the manner described as follows. Individual providers interested in calculating the payment amount that they will receive for a specific service from the national unadjusted payment rates presented in Addenda A and B to this final rule with comment period (which are available via the Internet on the CMS Web site) should follow the formulas presented in the following steps. For purposes of the payment calculations below, we refer to the national unadjusted payment rate for hospitals that meet the requirements of the Hospital OQR Program as the “full” national unadjusted payment rate. We refer to the national unadjusted payment rate for hospitals that fail to meet the requirements of the Hospital OQR Program as the “reduced” national unadjusted payment rate. The reduced national unadjusted payment rate is calculated by multiplying the reporting ratio of 0.980 times the “full” national unadjusted payment rate. The national unadjusted payment rate used in the calculations below is either the full national unadjusted payment rate or the reduced national unadjusted payment rate, depending on whether the hospital met its Hospital OQR Program requirements in order to receive the full CY 2013 OPPS fee schedule increase factor of 1.8 percent.

Step 1. Calculate 60 percent (the labor-related portion) of the national unadjusted payment rate. Since the initial implementation of the OPPS, we have used 60 percent to represent our estimate of that portion of costs attributable, on average, to labor. We refer readers to the April 7, 2000 OPPS final rule with comment period (65 FR 18496 through 18497) for a detailed discussion of how we derived this percentage. We confirmed that this labor-related share for hospital outpatient services is appropriate during our regression analysis for the payment adjustment for rural hospitals in the CY 2006 OPPS final rule with comment period (70 FR 68553).

The formula below is a mathematical representation of Step 1 and identifies the labor-related portion of a specific payment rate for a specific service.

X is the labor-related portion of the national unadjusted payment rate.

X= .60 * (national unadjusted payment rate)

Step 2. Determine the wage index area in which the hospital is located and identify the wage index level that applies to the specific hospital. The wage index values assigned to each area reflect the geographic statistical areas (which are based upon OMB standards) to which hospitals are assigned for FY 2013 under the IPPS, reclassifications through the MGCRB, section 1886(d)(8)(B) “Lugar” hospitals, reclassifications under section 1886(d)(8)(E) of the Act, as defined in § 412.103 of the regulations, and hospitals designated as urban under section 601(g) of 98. We note that the reclassifications of hospitals under section 508 of Public Law 108-173, as extended by sections 3137 and 10317 of the Affordable Care Act, expired on September 30, 2010. Section 102 of the Medicare and Medicaid Extenders Act of 2010 extended section 508 and certain additional special exception hospital reclassifications from October 1, 2010 through September 30, 2011. Section 302 of the Temporary Payroll Tax Cut Continuation Act of 2011 (Pub. L. 112-78) as amended by section 3001 of the Middle Class Tax Relief and Job Creation Act of 2012 (Pub. L. 112-96) extended section 508 and certain additional special exception hospital reclassifications from October 1, 2011 through March 31, 2012. Therefore, these reclassifications will not apply to the CY 2013 OPPS. (For further discussion of the changes to the FY 2013 IPPS wage indices, as applied to the CY 2013 OPPS, we refer readers to section II.C. of this final rule with comment period). We proposed to continue to apply a wage index floor of 1.00 to frontier States, in accordance with section 10324 of the Affordable Care Act.

Step 3. Adjust the wage index of hospitals located in certain qualifying counties that have a relatively high percentage of hospital employees who reside in the county, but who work in a different county with a higher wage index, in accordance with section 505 of Public Law 108-173. Addendum L to this final rule with comment period (which is available via the Internet on the CMS Web site) contains the qualifying counties and the associated wage index increase developed for the FY 2013 IPPS and listed as Table 4J in the FY 2013 IPPS/LTCH PPS final rule and available via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html. This step is to be followed only if the hospital is not reclassified or redesignated under section 1886(d)(8) or section 1886(d)(10) of the Act.

Step 4. Multiply the applicable wage index determined under Steps 2 and 3 by the amount determined under Step 1 that represents the labor-related portion of the national unadjusted payment rate.

The formula below is a mathematical representation of Step 4 and adjusts the labor-related portion of the national unadjusted payment rate for the specific service by the wage index.

X a is the labor-related portion of the national unadjusted payment rate (wage adjusted).

X a= .60 * (national unadjusted payment rate) * applicable wage index.

Step 5. Calculate 40 percent (the nonlabor-related portion) of the national unadjusted payment rate and add that amount to the resulting product of Step 4. The result is the wage index adjusted payment rate for the relevant wage index area.

The formula below is a mathematical representation of Step 5 and calculates the remaining portion of the national payment rate, the amount not attributable to labor, and the adjusted payment for the specific service.

Y is the nonlabor-related portion of the national unadjusted payment rate.

Y= .40 * (national unadjusted payment rate)

Adjusted Medicare Payment =Y+X a

Step 6. If a provider is an SCH, set forth in the regulations at § 412.92, or an EACH, which is considered to be an SCH under section 1886(d)(5)(D)(iii)(III) of the Act, and located in a rural area, as defined in § 412.64(b), or is treated as being located in a rural area under § 412.103, multiply the wage index adjusted payment rate by 1.071 to calculate the total payment.

The formula below is a mathematical representation of Step 6 and applies the rural adjustment for rural SCHs.

Adjusted Medicare Payment (SCH or EACH) = Adjusted Medicare Payment * 1.071

We have provided examples below of the calculation of both the full and reduced national unadjusted payment rates that will apply to certain outpatient items and services performed by hospitals that meet and that fail to meet the Hospital OQR Program requirements, using the steps outlined above. For purposes of this example, we used a provider that is located in Brooklyn, New York that is assigned to CBSA 35644. This provider bills one service that is assigned to APC 0019 (Level I Excision/Biopsy). The CY 2013 full national unadjusted payment rate for APC 0019 is $336.38. The reduced national unadjusted payment rate for a hospital that fails to meet the Hospital OQR Program requirements is $329.65. This reduced rate is calculated by multiplying the reporting ratio of 0.980 by the full unadjusted payment rate for APC 0019.

The FY 2013 wage index for a provider located in CBSA 35644 in New York is 1.2971. The labor-related portion of the full national unadjusted payment is $261.79 (.60 * $336.38 * 1.2971). The labor-related portion of the reduced national unadjusted payment is $256.55 (.60 * $329.65 * 1.2971). The nonlabor-related portion of the full national unadjusted payment is $134.55 (.40 * $336.38). The nonlabor-related portion of the reduced national unadjusted payment is $131.86 (.40 * $329.65). The sum of the labor-related and nonlabor-related portions of the full national adjusted payment is $396.34 ($261.79 + $134.55). The sum of the reduced national adjusted payment is $388.41 ($256.55 + $131.86).

I. Beneficiary Copayments

1. Background

Section 1833(t)(3)(B) of the Act requires the Secretary to set rules for determining the unadjusted copayment amounts to be paid by beneficiaries for covered OPD services. Section 1833(t)(8)(C)(ii) of the Act specifies that the Secretary must reduce the national unadjusted copayment amount for a covered OPD service (or group of such services) furnished in a year in a manner so that the effective copayment rate (determined on a national unadjusted basis) for that service in the year does not exceed a specified percentage. As specified in section 1833(t)(8)(C)(ii)(V) of the Act, the effective copayment rate for a covered OPD service paid under the OPPS in CY 2006, and in calendar years thereafter, shall not exceed 40 percent of the APC payment rate.

Section 1833(t)(3)(B)(ii) of the Act provides that, for a covered OPD service (or group of such services) furnished in a year, the national unadjusted copayment amount cannot be less than 20 percent of the OPD fee schedule amount. However, section 1833(t)(8)(C)(i) of the Act limits the amount of beneficiary copayment that may be collected to the amount of the inpatient deductible.

Section 4104 of the Affordable Care Act eliminated the Part B coinsurance for preventive services furnished on and after January 1, 2011, that meet certain requirements, including flexible sigmoidoscopies and screening colonscopies, and waived the Part B deductible for screening colonoscopies that become diagnostic during the procedure. Our discussion of the changes made by the Affordable Care Act with regard to copayments for preventive services furnished on and after January 1, 2011, may be found in section XII.B. of the CY 2011 OPPS/ASC final rule with comment period (75 FR 72013).

2. OPPS Copayment Policy

In the CY 2013 OPPS/ASC proposed rule (77 FR 45113), we proposed to determine copayment amounts for new and revised APCs using the same methodology that we implemented beginning in CY 2004. (We refer readers to the November 7, 2003 OPPS final rule with comment period (68 FR 63458).) In addition, we proposed to use the same standard rounding principles that we have historically used in instances where the application of our standard copayment methodology would result in a copayment amount that is less than 20 percent and cannot be rounded, under standard rounding principles, to 20 percent. (We refer readers to the CY 2008 OPPS/ASC final rule with comment period (72 FR 66687) in which we discuss our rationale for applying these rounding principles.) The national unadjusted copayment amounts for services payable under the OPPS that will be effective January 1, 2013, are shown in Addenda A and B to this final rule with comment period (which are available via the Internet on the CMS Web site). As discussed in section XV. of this final rule with comment period, for CY 2013, the Medicare beneficiary's minimum unadjusted copayment and national unadjusted copayment for a service to which a reduced national unadjusted payment rate applies equals the product of the reporting ratio and the national unadjusted copayment, or the product of the reporting ratio and the minimum unadjusted copayment, respectively, for the service.

We note that APC copayments may increase or decrease each year based on changes in the calculated APC payment rates due to updated cost report and claims data, and any changes to the OPPS cost modeling process. The CY 2013 proposed policy to base APC relative weights on geometric mean costs would also affect the APC payment rates and, through them, the corresponding beneficiary copayments. However, as described in the CY 2004 OPPS/ASC final rule with comment period, the development of the copayment methodology generally moves beneficiary copayments closer to 20 percent of OPPS APC payments (68 FR 63458 through 63459). For a more detailed discussion of the final policy to base the APC relative payment weights on geometric mean costs, we refer readers to section II.A.2.f. of this final rule with comment period.

We did not receive any public comments regarding the proposed methodology for calculating copayments for CY 2013. Therefore, for the reasons set forth in the proposed rule (77 FR 45113), we are finalizing our CY 2013 copayment methodology without modification.

3. Calculation of an Adjusted Copayment Amount for an APC Group

Individuals interested in calculating the national copayment liability for a Medicare beneficiary for a given service provided by a hospital that met or failed to meet its Hospital OQR Program requirements should follow the formulas presented in the following steps.

Step 1. Calculate the beneficiary payment percentage for the APC by dividing the APC's national unadjusted copayment by its payment rate. For example, using APC 0019, $67.28 is 20 percent of the full national unadjusted payment rate of $336.38. For APCs with only a minimum unadjusted copayment in Addenda A and B of this final rule with comment period (which are available via the Internet on the CMS Web site), the beneficiary payment percentage is 20 percent.

The formula below is a mathematical representation of Step 1 and calculates national copayment as a percentage of national payment for a given service.

B is the beneficiary payment percentage.

B= National unadjusted copayment for APC/national unadjusted payment rate for APC

Step 2. Calculate the appropriate wage-adjusted payment rate for the APC for the provider in question, as indicated in Steps 2 through 4 under section II.H. of this final rule with comment period. Calculate the rural adjustment for eligible providers as indicated in Step 6 under section II.H. of this final rule with comment period.

Step 3. Multiply the percentage calculated in Step 1 by the payment rate calculated in Step 2. The result is the wage-adjusted copayment amount for the APC.

The formula below is a mathematical representation of Step 3 and applies the beneficiary payment percentage to the adjusted payment rate for a service calculated under section II.H. of this final rule with comment period, with 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 will be effective January 1, 2013, are shown in Addenda A and B to this final rule with comment period (which are available via the Internet on the CMS Web site). We note that the national unadjusted payment rates and copayment rates shown in Addenda A and B to this final rule with comment period reflect the full CY 2013 OPD fee schedule increase factor discussed in section II.B. of this final rule with comment period.

Also, as noted above, section 1833(t)(8)(C)(i) of the Act limits the amount of beneficiary copayment that may be collected to the amount of the inpatient deductible.

III. OPPS Ambulatory Payment Classification (APC) Group Policies Back to Top

A. OPPS Treatment of New CPT and Level II HCPCS Codes

CPT and Level II HCPCS codes are used to report procedures, services, items, and supplies under the hospital OPPS. Specifically, CMS recognizes the following codes on OPPS claims:

  • Category I CPT codes, which describe surgical procedures and medical services;
  • Category III CPT codes, which describe new and emerging technologies, services, and procedures; and
  • Level II HCPCS codes, which are used primarily to identify products, supplies, temporary procedures, and services not described by CPT codes.

CPT codes are established by the American Medical Association (AMA) and the Level II HCPCS codes are established by the CMS HCPCS Workgroup. These codes are updated and changed throughout the year. CPT and HCPCS code changes that affect the OPPS are published both through the annual rulemaking cycle and through the OPPS quarterly update Change Requests (CRs). CMS releases new Level II HCPCS codes to the public or recognizes the release of new CPT codes by the AMA and makes these codes effective (that is, the codes can be reported on Medicare claims) outside of the formal rulemaking process via OPPS quarterly update CRs. This quarterly process offers hospitals access to codes that may more accurately describe items or services furnished and/or provides payment or more accurate payment for these items or services in a timelier manner than if CMS waited for the annual rulemaking process. We solicit public comments on these new codes and finalize our proposals related to these codes through our annual rulemaking process. As we proposed in the CY 2013 OPPS/ASC proposed (77 FR 45114), in Table 10 below (Table 13 of the proposed rule), we summarize our process for updating codes through our OPPS quarterly update CRs, seeking public comments, and finalizing their treatment under the OPPS. We note that because the payment rates associated with codes effective July 1 were not available to us in time for incorporation into the Addenda of the proposed rule, the Level II HCPCS codes and the Category III CPT codes implemented through the July 2012 OPPS quarterly update CR were not included in Addendum B of the proposed rule (which is available via the Internet on the CMS Web site), while those codes based upon the April 2012 OPPS quarterly update were included in Addendum B. Nevertheless, we requested public comments on the codes included in the July 2012 OPPS quarterly update and included these codes in the preamble of the proposed rule.

BILLING CODE 4120-01-P

This process is discussed in detail below. We have separated our discussion into two sections based on whether we solicited public comments in the CY 2013 OPPS/ASC proposed rule or whether we are soliciting public comments in this CY 2013 OPPS/ASC final rule with comment period. We note that we sought public comments in the CY 2012 OPPS/ASC final rule with comment period on the new CPT and Level II HCPCS codes that were effective January 1, 2012. We also sought public comments in the CY 2012 OPPS/ASC final rule with comment period on the new Level II HCPCS codes effective October 1, 2011. These new codes, with an effective date of October 1, 2011, or January 1, 2012, were flagged with comment indicator “NI” (New code, interim APC assignment; comments will be accepted on the interim APC assignment for the new code) in Addendum B to the CY 2012 OPPS/ASC final rule with comment period to indicate that we were assigning them an interim payment status and an APC and payment rate, if applicable, which were subject to public comment following publication of the CY 2012 OPPS/ASC final rule with comment period. We are responding to public comments and finalizing our interim OPPS treatment of these codes in this CY 2013 OPPS/ASC final rule with comment period.

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

BILLING CODE 4120-01-C

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

Through the April 2012 OPPS quarterly update CR (Transmittal 2418, Change Request 7748, dated March 2, 2012) and the July 2012 OPPS quarterly update CR (Transmittal 2483, Change Request 7847, dated June 8, 2012), we recognized several new HCPCS codes for separate payment under the OPPS. Effective April 1 and July 1 of CY 2012, we made effective 13 new Level II HCPCS codes and 7 Category III CPT codes. Specifically, 5 new Level II HCPCS codes were effective for the April 2012 update and another 8 new Level II HCPCS codes were effective for the July 2012 update for a total of 13. Seven new Category III CPT codes were effective for the July 2012 update. Of the 13 new Level II HCPCS codes, we recognized for separate payment 11 of these codes, and of the 7 new Category III CPT codes, we recognized for separate payment all 7 new Category III CPT codes, for a total of 18 new Level II HCPCS and Category III CPT codes that are recognized for separate payment for CY 2013.

Through the April 2012 OPPS quarterly update CR, we allowed separate payment for each of the five new Level II HCPCS codes. Specifically, as displayed in Table 12 below, we provided separate payment for HCPCS codes C9288, C9289, C9290, C9291 and C9733.

In the CY 2013 OPPS/ASC proposed rule (77 FR 45115), we solicited public comments on the proposed status indicators and APC assignments for Level II HCPCS codes C9288, C9289, C9290, C9291, and C9733, which were listed in Table 14 of the proposed rule (77 FR 45115) and now appear in Tables 12 and 13 of this final rule with comment period.

We did not receive any public comments on the proposed APC assignments and status indicators for HCPCS codes C9288, C9289, C9290, and C9291. However, we received several public comments on HCPCS code C9733, which are addressed in section III.D.7.a. of this final rule with comment period.

For CY 2013, the HCPCS Workgroup replaced HCPCS codes C9288, C9289, and C9291 (which was replaced with HCPCS code Q2046, effective July 1, 2012) with permanent HCPCS J-codes. Table 13 below list the replacement HCPCS J-codes for the temporary HCPCS C-codes. Consistent with our general policy of using permanent HCPCS codes rather than using temporary HCPCS codes for the reporting of drugs under the OPPS in order to streamline coding, we are showing the replacement HCPCS codes C9288, C9289, and C9291/Q2046, effective January 1, 2013, in Table 13.

In this final rule with comment period, we are assigning the Level II HCPCS codes listed in Table 13 below to the specific APCs and status indicators for CY 2013.

For CY 2013, we note that we are not making any changes to the status indicators and APC assignments for HCPCS code C9290 and C9733. That is, HCPCS code C9290 will continue its pass-through status and will also continue to be assigned to APC 9290 for CY 2013. Similarly, HCPCS code C9733 will continue to be assigned to status indicator “Q2” and also will continue to be assigned to APC 0397 for CY 2013.

Furthermore, because HCPCS code J9019 describes the same drug and the same dosage currently designated by HCPCS code C9289, this drug will continue its pass-through status in CY 2013. Therefore, we are assigning HCPCS code J9019 to the same status indicator and APC as its predecessor HCPCS code, as shown in Table 13.

However, we note that the replacement code for HCPCS code C9291, which was replaced with HCPCS code Q2046 effective July 1, 2012, did not describe the same dosage descriptor, and consequently, the replacement HCPCS code was assigned a new APC number. Specifically, HCPCS code Q2046, which has a dosage descriptor of 1 mg, was assigned to APC 1420 effective July 1, 2012. Because the predecessor HCPCS code C9291 was assigned to pass-through status, HCPCS code Q2046 also was assigned to pass-through status for CY 2013. Similarly, the replacement code for HCPCS code C9288 does not describe the same dosage descriptor, and, consequently, its replacement HCPCS code J0716 was assigned a new APC. Specifically, HCPCS code C9288 has a dosage descriptor of 1 vial; however, its replacement HCPCS code J0716 has a dosage descriptor of “up to 120 milligrams.” Therefore, effective January 1, 2013, HCPCS codes J0716 is assigned to APC 1431, a different APC, to maintain data consistency for future rulemaking. Because the predecessor HCPCS code C9288 was assigned to pass-through status, HCPCS code J0716 will continue to be assigned status indicator “G” for CY 2013.

As discussed in the CY 2013 OPPS/ASC proposed rule (77 FR 45115 through 45116), through the July 2012 OPPS quarterly update CR, which included HCPCS codes that were made effective July 1, 2012, we allowed separate payment for 6 of the 8 new Level II HCPCS codes. Specifically, as displayed in Table 14 below (also Table 14 of the proposed rule), we provided separate OPPS payment for HCPCS codes C9368, C9369, Q2045, Q2046, Q2048, and Q2049.

We note that three of the Level II HCPCS Q-codes that were made effective July 1, 2012, were previously described by HCPCS J-codes or C-codes that were separately payable under the hospital OPPS. First, HCPCS code Q2045 replaced HCPCS code J1680 (Injection, human fibrinogen concentrate, 100 mg), beginning July 1, 2012. HCPCS code J1680 was assigned to status indicator “K” (Nonpass-through drugs and nonimplantable biologicals, including therapeutic radiopharmaceuticals; paid under OPPS; separate APC payment) on January 1, 2012. However, because HCPCS code J1680 was replaced by HCPCS code Q2045 effective July 1, 2012, we changed its status indicator to “E” (Not Payable by Medicare) effective July 1, 2012. Because HCPCS code Q2045 describes the same drug as HCPCS code J1680, we continued its separate payment status and assigned it to status indicator “K” effective July 1, 2012. However, because the dosage descriptor for HCPCS code Q2045 is not the same as HCPCS code J1680, we assigned HCPCS code Q2045 to a new APC to maintain data consistency for future rulemaking. Specifically, HCPCS code Q2045 was assigned to APC 1414 effective July 1, 2012.

Second, HCPCS code Q2046 replaced HCPCS code C9291 effective July 1, 2012. HCPCS code C9291 was assigned pass-through status when it was effective April 1, 2012. Because HCPCS code Q2046 describes the same product as HCPCS code C9291, we continued its pass-through status and assigned HCPCS code Q2046 to status indicator “G” as well as assigned it to the same APC, specifically APC 9291, effective July 1, 2012. HCPCS code C9291 was deleted on June 30, 2012.

Third, the HCPCS Workgroup replaced HCPCS code J9001 (Injection, doxorubicin hydrochloride, all lipid formulations, 10 mg) with new HCPCS code Q2048, effective July 1, 2012. Consequently, the status indicator for HCPCS code J9001 was changed to “E” (Not Payable by Medicare) effective July 1, 2012. Because HCPCS code Q2048 describes the same drug as HCPCS code J9001, we continued its separate payment status and assigned HCPCS code Q2048 to status indicator “K” effective July 1, 2012. In addition, because, HCPCS code Q2049 is similar to HCPCS code Q2048, we assigned HCPCS code Q2049 to status indicator “K” effective July 1, 2012.

Of the 15 HCPCS codes that were effective July 1, 2012, we did not recognize for separate OPPS payment two HCPCS codes because they are both paid under a payment system other than OPPS. Specifically, HCPCS code Q2047 was assigned to status indicator “A” (Not paid under OPPS; paid by fiscal intermediaries/MACs under a fee schedule or payment system other than OPPS), and HCPCS code Q2034 was assigned to status indicator “L” (Not paid under OPPS; paid at reasonable cost).

In the CY 2013 OPPS/ASC proposed rule (77 FR 45116), we solicited public comments on the proposed status indicators and APC assignments for the HCPCS codes that were listed in Table 15 of the proposed rule and now appear in Table 14 and 15 of this final rule with comment period.

We did not receive any other public comments on the new Level II HCPCS codes that were implemented in July 2012. We are adopting as final, without modification, our proposal to assign the Level II HCPCS codes listed in Table 15 to the APCs and status indicators as proposed for CY 2013.

Table 15 below includes a complete list of the Level II HCPCS codes that were made effective July 1, 2012, with their final status indicators and APC assignments for CY 2013.

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

Finally, HCPCS code Q2047 will be replaced with HCPCS code J0890 effective January 1, 2013. Because HCPCS code J0890 describes the same product currently designated by HCPCS code Q2047, this product will continue to be assigned to the same status indicator as its predecessor HCPCS code, as shown in Table 15.

In the CY 2013 OPPS/ASC proposed rule (77 FR 45116), we proposed to continue our established policy of recognizing Category I CPT vaccine codes for which FDA approval is imminent and Category III CPT codes that the AMA releases in January of each year for implementation in July through the OPPS quarterly update process. Under the OPPS, Category I CPT vaccine codes and Category III CPT codes that are released on the AMA Web site in January are made effective in July of the same year through the July quarterly update CR, consistent with the AMA's implementation date for the codes. For the July 2012 update, there were no new Category I CPT vaccine codes. Through the July 2012 OPPS quarterly update CR (Transmittal 2483, Change Request 7847, dated June 8, 2012), we allowed separate OPPS payment for all seven new Category III CPT codes effective July 1, 2012. Specifically, as displayed in Table 16 of the proposed rule and in Table 16 below, we allowed separate payment for Category III CPT codes 0302T, 0303T, 0304T, 0305T, 0306T, 0307T, and 0308T.

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

BILLING CODE 4120-01-P

BILLING CODE 4120-01-C

In the CY 2013 OPPS/ASC proposed rule (77 FR 45114 through 45117), we solicited public comments on the CY 2013 proposed status indicators and the proposed APC assignments and payment rates for the Level II HCPCS codes and the Category III CPT codes that were effective April 1, 2012, and July 1, 2012, through the respective OPPS quarterly update CRs. These codes were listed in Tables 14, 15, and 16 of the proposed rule. We proposed to finalize their status indicators and their APC assignments and payment rates, if applicable, in this CY 2013 OPPS/ASC final rule with comment period. Because the new Category III CPT and Level II HCPCS codes that become effective for July are not available to us in time for incorporation into the Addenda to the OPPS/ASC proposed rule, our policy is to include the codes, their proposed status indicators, proposed APCs (where applicable), and proposed payment rates (where applicable) in the preamble of the proposed rule but not in the Addenda to the proposed rule. These codes were listed in Tables 15 and 16, respectively, of the proposed rule. We proposed to incorporate these codes into Addendum B to this CY 2013 OPPS/ASC final rule with comment period, which is consistent with our annual OPPS update policy. The Level II HCPCS codes implemented or modified through the April 2012 OPPS update CR and displayed in Table 14 were included in Addendum B to the proposed rule (which was available via the Internet on the CMS Web site), where their proposed CY 2013 payment rates were also shown.

We did not receive any additional public comments on this process. The final status indicators, APC assignments, and payment rates if applicable, for the Level II HCPCS codes and the Category III CPT codes that were implemented or modified through the April 2012 or July 2012 OPPS update CR are found in Addendum B to this final rule with comment period (which is available via the Internet on the CMS Web site).

2. Process for New Level II HCPCS Codes That Will Be Effective October 1, 2012 and New CPT and Level II HCPCS Codes That Will Be Effective January 1, 2013 for Which We Are Soliciting Public Comments in This CY 2013 OPPS/ASC Final Rule With Comment Period

As has been our practice in the past, we incorporate those new Category I and III CPT codes and new Level II HCPCS codes that are effective January 1 in the final rule with comment period updating the OPPS for the following calendar year. These codes are released to the public via the CMS HCPCS (for Level II HCPCS codes) and AMA Web sites (for CPT codes), and also through the January OPPS quarterly update CRs. In the past, we also have released new Level II HCPCS codes that are effective October 1 through the October OPPS quarterly update CRs and incorporated these new codes in the final rule with comment period updating the OPPS for the following calendar year. For CY 2013, these codes are flagged with comment indicator “NI” in Addendum B to the OPPS/ASC final rule with comment period to indicate that we are assigning them an interim payment status which is subject to public comment. In addition, the CPT and Level II HCPCS codes that will be effective January 1, 2013, are flagged with comment indicator “NI” in Addendum B to the OPPS/ASC final rule with comment period. Specifically, the status indicator and the APC assignment and payment rate, if applicable, for all such codes flagged with comment indicator “NI” are open to public comment in the final rule with comment period, and we respond to these comments in the OPPS/ASC final rule with comment period for the next calendar year's OPPS/ASC update. In the CY 2013 OPPS/ASC proposed rule (77 FR 45117 through 45118), we proposed to continue this process for CY 2013. Specifically, for CY 2013, we proposed to include in Addendum B to this CY 2013 OPPS/ASC final rule with comment period the new Category I and III CPT codes effective January 1, 2013 (including the Category III CPT codes that were released by the AMA in July 2012) that would be incorporated in the January 2013 OPPS quarterly update CR and the new Level II HCPCS codes, effective October 1, 2012, or January 1, 2013, that would be released by CMS in its October 2012 and January 2013 OPPS quarterly update CRs. As proposed, in this final rule with comment period, the October 1, 2012 and January 1, 2013 codes are flagged with comment indicator “NI” in Addendum B to this CY 2013 OPPS/ASC final rule with comment period to indicate that we have assigned them an interim OPPS payment status for CY 2013. As proposed, in this final rule with comment period, their status indicators and their APC assignments and payment rates, if applicable, are open to public comment and will be finalized in the CY 2014 OPPS/ASC final rule with comment period.

We did not receive any public comments on our proposal. Therefore, we are finalizing our proposal to flag new Level II HCPCS codes that become effective October 1, 2012, and new CPT and Level II HCPCS codes that become effective January 1, 2013 with comment indicator “NI” in Addendum B to this CY 2013 OPPS/ASC final rule with comment period to indicate that these codes have been assigned an interim OPPS payment status for CY 2013. In addition, because these codes have been assigned to comment indicator “NI,” their status indicators and their APC assignments and payment rates, if applicable, are open to public comment and will be finalized in the CY 2014 OPPS/ASC final rule with comment period.

B. OPPS Changes—Variations Within APCs

1. Background

Section 1833(t)(2)(A) of the Act requires the Secretary to develop a classification system for covered hospital outpatient department services. Section 1833(t)(2)(B) of the Act provides that the Secretary may establish groups of covered OPD services within this classification system, so that services classified within each group are comparable clinically and with respect to the use of resources. In accordance with these provisions, we developed a grouping classification system, referred to as Ambulatory Payment Classifications (APCs), as set forth in § 419.31 of the regulations. We use Level I and Level II HCPCS codes to identify and group the services within each APC. The APCs are organized such that each group is homogeneous both clinically and in terms of resource use. Using this classification system, we have established distinct groups of similar services. We have also developed separate APC groups for certain medical devices, drugs, biologicals, therapeutic radiopharmaceuticals, and brachytherapy devices.

We have packaged into payment for each procedure or service within an APC group the costs associated with those items or services that are directly related to, and supportive of, performing the main independent procedures or furnishing the services. Therefore, we do not make separate payment for these packaged items or services. For example, packaged items and services include:

(a) Use of an operating, treatment, or procedure room;

(b) Use of a recovery room;

(c) Observation services;

(d) Anesthesia;

(e) Medical/surgical supplies;

(f) Pharmaceuticals (other than those for which separate payment may be allowed under the provisions discussed in section V. of the proposed rule and this final rule with comment period);

(g) Incidental services such as venipuncture;

(h) Guidance services, image processing services, intraoperative services, imaging, supervision and interpretation services, diagnostic radiopharmaceuticals, and contrast media.

Further discussion of packaged services is included in section II.A.3. of this final rule with comment period.

In CY 2008, we implemented composite APCs to provide a single payment for groups of services that are typically performed together during a single clinical encounter and that result in the provision of a complete service (72 FR 66650 through 66652). Under CY 2012 OPPS policy, we provide composite APC payment for certain extended assessment and management services, low dose rate (LDR) prostate brachytherapy, cardiac electrophysiologic evaluation and ablation, mental health services, multiple imaging services, and cardiac resynchronization therapy services. Further discussion of composite APCs is included in section II.A.2.e. of this final rule with comment period.

Under the OPPS, we generally pay for hospital outpatient services on a rate-per-service basis, where the service may be reported with one or more HCPCS codes. Payment varies according to the APC group to which the independent service or combination of services is assigned. Each APC weight represents the hospital cost of the services included in that APC, relative to the hospital cost of the services included in APC 0606 (Level 3 Hospital Clinic Visits). The APC weights are scaled to APC 0606 because it is the middle level hospital clinic visit APC (the Level 3 hospital clinic visit CPT code out of five levels), and because middle level hospital clinic visits are among the most frequently furnished services in the hospital outpatient setting.

Section 1833(t)(9)(A) of the Act requires the Secretary to review, on a recurring basis occurring no less than annually, and revise the groups, the relative payment weights, and the wage and other adjustments to take into account changes in medical practice, changes in technology, the addition of new services, new cost data, and other relevant information and factors. Section 1833(t)(9)(A) of the Act also requires the Secretary to consult with an expert outside advisory panel composed of an appropriate selection of representatives of providers to review (and advise the Secretary concerning) the clinical integrity of the APC groups and the relative payment weights (the HOP Panel recommendations for specific services for the CY 2013 OPPS and our responses to them are discussed in the relevant specific sections throughout this final rule with comment period).

Finally, section 1833(t)(2) of the Act provides that, subject to certain exceptions, the items and services within an APC group cannot be considered comparable with respect to the use of resources if the highest cost for an item or service in the group is more than 2 times greater than the lowest cost for an item or service within the same group (referred to as the “2 times rule”). In the CY 2013 OPPS/ASC proposed rule (77 FR 45118), for CY 2013, we proposed to use the cost of the item or service in implementing this provision, as discussed in section II.A.2.f. of this final rule with comment period. The statute authorizes the Secretary to make exceptions to the 2 times rule in unusual cases, such as low-volume items and services (but the Secretary may not make such an exception in the case of a drug or biological that has been designated as an orphan drug under section 526 of the Federal Food, Drug, and Cosmetic Act).

2. Application of the 2 Times Rule

In accordance with section 1833(t)(2) of the Act and § 419.31 of the regulations, we annually review the items and services within an APC group to determine, with respect to comparability of the use of resources, if the cost of the highest cost item or service within an APC group is more than 2 times greater than the cost of the lowest cost item or service within that same group. In making this determination, we consider only those HCPCS codes that are significant based on the number of claims. We note that, for purposes of identifying significant HCPCS codes for examination in the 2 times rule, we consider codes that have more than 1,000 single major claims or codes that have both greater than 99 single major claims and contribute at least 2 percent of the single major claims used to establish the APC cost to be significant (75 FR 71832). This longstanding definition of when a HCPCS code is significant for purposes of the 2 times rule was selected because we believe that a subset of 1,000 claims is negligible within the set of approximately 100 million single procedure or single session claims we use for establishing costs. Similarly, a HCPCS code for which there are fewer than 99 single bills and which comprises less than 2 percent of the single major claims within an APC will have a negligible impact on the APC cost. In the CY 2013 OPPS/ASC proposed rule (77 FR 45118), we proposed to make exceptions to this limit on the variation of costs within each APC group in unusual cases, such as low-volume items and services, for CY 2013.

In the CY 2013 OPPS/ASC proposed rule, we identified APCs with 2 times rule violations but for which we proposed changes to their HCPCS codes' APC assignments in Addendum B to the proposed rule. We note that Addendum B did not appear in the printed version of the Federal Register as part of the CY 2013 OPPS/ASC proposed rule. Rather, it was published and made available via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html. In these cases, to eliminate a 2 times rule violation or to improve clinical and resource homogeneity, we proposed to reassign the codes to APCs that contain services that are similar with regard to both their clinical and resource characteristics. We also proposed to rename existing APCs or create new clinical APCs to accommodate proposed HCPCS code reassignments. In many cases, the proposed HCPCS code reassignments and associated APC reconfigurations for CY 2013 included in the proposed rule were related to changes in costs of services that were observed in the CY 2011 claims data newly available for CY 2013 ratesetting. We also proposed changes to the status indicators for some codes that were not specifically and separately discussed in the proposed rule. In these cases, we proposed to change the status indicators for some codes because we believe that another status indicator would more accurately describe their payment status from an OPPS perspective based on the policies that we proposed for CY 2013. Addendum B of the CY 2013 OPPS/ASC proposed rule identified with a comment indicator “CH” those HCPCS codes for which we proposed a change to the APC assignment or status indicator as assigned in the April 2012 Addendum B Update (available via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html). In contrast, Addendum B of this final rule with comment period (available via the Internet on the CMS Web site) identifies with the “CH” comment indicator the final CY 2013 changes compared to the codes' status as reflected in the October 2012 Addendum B update.

3. Exceptions to the 2 Times Rule

As discussed earlier, we may make exceptions to the 2 times limit on the variation of costs within each APC group in unusual cases such as low-volume items and services. Taking into account the APC changes that we proposed for CY 2013, we reviewed all the APCs to determine which APCs would not satisfy the 2 times rule. Then we used the following criteria to decide whether to propose exceptions to the 2 times rule for affected APCs:

  • Resource homogeneity;
  • Clinical homogeneity;
  • Hospital outpatient setting utilization;
  • Frequency of service (volume); and
  • Opportunity for upcoding and code fragments.

For a detailed discussion of these criteria, we refer readers to the April 7, 2000 OPPS final rule with comment period (65 FR 18457 and 18458).

Table 17 of the CY 2013 OPPS/ASC proposed rule listed 21 APCs that we proposed to exempt from the 2 times rule for CY 2013 based on the criteria cited above and based on claims data processed from January 1, 2011, through December 31, 2011.

We note that, for cases in which a recommendation by the HOP Panel appears to result in or allow a violation of the 2 times rule, we generally accept the Panel's recommendation because those recommendations are based on explicit consideration of resource use, clinical homogeneity, site of service, and the quality of the claims data used to determine the APC payment rates.

For the CY 2013 OPPS/ASC proposed rule, we based the listed exceptions to the 2 times rule on claims data for dates of service between January 1, 2011, and December 31, 2011, that were processed before January 1, 2011. For this final rule with comment period, we used claims data for dates of service between January 1, 2011, and December 31, 2011, that were processed on or before June 30, 2012 and updated CCRs, if available. Thus, after considering the public comments we received on the CY 2013 OPPS/ASC proposed rule and making changes to APC assignments based on those comments, we analyzed the CY 2011 claims data used for this final rule with comment period to identify the APCs with 2 times rule violations. Based on the final CY 2011 claims data, we found that there are 19 APCs with 2 times rule violations, a cumulative decrease of 2 APCs compared to the proposed rule. We applied the criteria as described earlier to identify the APCs that are exceptions to the 2 times rule for CY 2013, and identified two additional APCs that meet the criteria for exception to the 2 times rule for this final rule with comment period:

  • APC 0148 (Level I Anal/Rectal Procedures)
  • APC 0254 (Level V ENT Procedures)

In addition, we also determined that four APCs no longer violated the 2 times rule:

  • APC 0128 (Echocardiogram with Contrast)
  • APC 0173 (Level II Partial Hospitalization (4 or more services) for CMHCs)
  • APC 0604 (Level 1 Hospital Clinic Visits)
  • APC 0655 (Insertion/Replacement/Conversion of a Permanent Dual Chamber Pacemaker or Pacing)

As discussed in section III.D.1.f. of this final rule with comment period, because of concerns raised regarding the 2 times rule violation for echocardiography services, and after further analysis of our claims data, we deleted APC 0128 and replaced it with two new APCs to correct the 2 times rule violation. Specifically, APC 0128 has been replaced with APC 0177 (Level I Echocardiogram with Contrast) and APC 0178 (Level II Echocardiogram with Contrast). We have not included in this count those APCs where a 2 times rule violation is not a relevant concept, such as APC 0375 (Ancillary Outpatient Services when Patient Expires), with an APC cost set based on multiple procedure claims; therefore, we have identified only final APCs, including those with criteria-based costs, such as device-dependent APCs, with 2 times rule violations.

Comment: Several commenters urged CMS to reassign HCPCS G0379 (Direct admission of patient for hospital observation care) from APC 0604 (Level 1 Hospital Clinic Visits) to APC 0608 (Level 5 Hospital Clinic Visits). In particular, the commenters requested that CMS assign HCPCS G0379 to the same APC as CPT code 99205 (Office or other outpatient visit for the evaluation and management of a new patient (Level 5)) when the Composite APC 8002 (Level I Extended Assessment & Management Composite) criteria are not met. The commenters indicated that the reassignment of HCPCS code G0379 to APC 0608 would be appropriate because it would resolve the 2 times rule violation in APC 0604 and also align the resources with a high-level hospital visit when the criteria for Composite APC 8002 are not met. The commenters suggested that continuing to assign HCPCS code G0379 to APC 0604 would result in continued underpayments to HOPDs when the services and claims processing requirements for APC 8002 are not met for a direct referral. The commenters further added that this same issue was discussed during the February 2012 HOP Panel meeting, and that after the discussion, the Panel recommended that CMS reassign HCPCS code G0379 from APC 0604 to an appropriate APC. The commenters urged CMS to accept the Panel's recommendation.

Response: Based on the recommendation of the HOP Panel at its February 2012 meeting, we reviewed our claims data for HCPCS code G0379. Our analyses revealed that the level of hospital resources used to provide HCPCS code G0379 is about the same as for CPT code 99205. In particular, our claims data show similar geometric mean costs for HCPCS code G0379 and CPT code 99205. Specifically, our claims data show a geometric mean cost of approximately $181 for HCPCS code G0379 based on 2,368 single claims (out of 3,975 total claims), and a geometric mean cost of approximately $179 based on 95,017 single claims (out of 104,246 total claims) for CPT code 99205. Based on our review of the claims data associated with HCPCS code G0379 and CPT code 99025, we agree with the commenters that the reassignment of HCPCS code G0379 to APC 0608 is appropriate. Because APC assignments are made based on consideration of both hospital resources and clinical homogeneity, we believe this reassignment improves the clinical homogeneity of APC 0608 and appropriately aligns the resource costs of HCPCS code G0379 to those procedures assigned to APC 0608.

After consideration of the public comments we received, we are finalizing our CY 2013 proposal with modification to reassign HCPCS code G0379 from APC 0604 to APC 0608, which has a final CY 2013 geometric mean cost of approximately $181.

Comment: One commenter indicated that APC 0623 violates the 2 times rule and requested that CMS review the costs associated with CPT code 36260 (Insertion of implantable intra-arterial infusion pump (eg, for chemotherapy of liver)) and reassign the CPT code to a more appropriate APC.

Response: Table 17 of the CY 2013 OPPS/ASC proposed rule listed 21 APCs that violated the 2 times rule for CY 2013. APC 0623 does not appear in Table 17 and assignment of CPT code 36260 to APC 0623 does not violate the 2 times rule. As stated above, in determining whether a 2 times rule violation exist in an APC, we consider only those HCPCS codes that are significant based on the number of claims. For purposes of identifying significant HCPCS codes for examination in the 2 times rule, we consider codes that have more than 1,000 single major claims or codes that have both greater than 99 single major claims and contribute at least 2 percent of the single major claims used to establish the APC cost to be significant (75 FR 71832). This longstanding definition of when a HCPCS code is significant for purposes of the 2 times rule was selected because we believe that a subset of 1,000 claims is negligible within the set of approximately 100 million single procedure or single session claims we use for establishing costs. Similarly, a HCPCS code for which there are fewer than 99 single bills and which comprises less than 2 percent of the single major claims within an APC will have a negligible impact on the APC cost. For this CY 2013 OPPS/ASC final rule with comment period, there are only 3 single claims for CPT code 36260 (each of the 3 total claims). Because CPT code 36260 does not represent a significant HCPCS code based on the number of claims, it does not violate the 2 times rule.

After consideration of the public comments we received and our review of the CY 2011 costs from hospital claims and cost report data available for this final rule with comment period, we are finalizing our proposals with some modifications. Specifically, we are finalizing our exemption of 17 of the original APCs (that appeared in Table 17 of the CY 2013 OPPS/ASC proposed rule with comment period and also appears in Table 17 below) from the 2 times rule for CY 2013. We are removing four APCs that no longer violated the 2 times rule and decreasing the number of APC exceptions from 21 to 19 APCs, as described previously in this section. Our final list of 19 APCs exempted from the 2 times rule for CY 2013 is displayed in Table 17 below.

C. New Technology APCs

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.

We note that the cost bands for New Technology APCs range from $0 to $50 in increments of $10, from $50 to $100 in increments of $50, from $100 to $2,000 in increments of $100, and from $2,000 to $10,000 in increments of $500. These cost bands identify the APCs to which new technology procedures and services with estimated service costs that fall within those cost bands are assigned under the OPPS. Payment for each APC is made at the mid-point of the APC's assigned cost band. For example, payment for New Technology APC 1507 (New Technology—Level VII ($500—$600)) is made at $550. Currently, there are 82 New Technology APCs, ranging from the lowest cost band assigned to APC 1491 (New Technology—Level IA ($0—$10)) through the highest cost band assigned to APC 1574 (New Technology—Level XXXVII ($9,500—$10,000). In CY 2004 (68 FR 63416), we last restructured the New Technology APCs to make the cost intervals more consistent across payment levels and refined the cost bands for these APCs to retain two parallel sets of New Technology APCs, one set with a status indicator of “S” (Significant Procedure, Not Discounted When Multiple) and the other set with a status indicator of “T” (Significant Procedure, Multiple Reduction Applies). These current New Technology APC configurations allow us to price new technology services more appropriately and consistently.

Every year we receive many requests for higher payment amounts under our New Technology APCs for specific procedures under the OPPS because they require the use of expensive equipment. We are taking this opportunity to reiterate our response in general to the issue of hospitals' capital expenditures as they relate to the OPPS and Medicare.

Under the OPPS, one of our goals is to make payments that are appropriate for the services that are necessary for the treatment of Medicare beneficiaries. The OPPS, like other Medicare payment systems, is budget neutral and increases are limited to the annual hospital inpatient market basket increase. We believe that our payment rates generally reflect the costs that are associated with providing care to Medicare beneficiaries in cost-efficient settings, and we believe that our rates are adequate to ensure access to services.

For many emerging technologies, there is a transitional period during which utilization may be low, often because providers are first learning about the techniques and their clinical utility. Quite often, parties request that Medicare make higher payment amounts under our New Technology APCs for new procedures in that transitional phase. These requests, and their accompanying estimates for expected total patient utilization, often reflect very low rates of patient use of expensive equipment, resulting in high per use costs for which requesters believe Medicare should make full payment. Medicare does not, and we believe should not, assume responsibility for more than its share of the costs of procedures based on projected utilization for Medicare beneficiaries and does not set its payment rates based on initial projections of low utilization for services that require expensive capital equipment. For the OPPS, we rely on hospitals to make informed business decisions regarding the acquisition of high cost capital equipment, taking into consideration their knowledge about their entire patient base (Medicare beneficiaries included) and an understanding of Medicare's and other payers' payment policies.

We note that, in a budget neutral environment, payments may not fully cover hospitals' costs in a particular circumstance, including those for the purchase and maintenance of capital equipment. We rely on hospitals to make their decisions regarding the acquisition of high cost equipment with the understanding that the Medicare program must be careful to establish its initial payment rates, including those made through New Technology APCs, for new services that lack hospital claims data based on realistic utilization projections for all such services delivered in cost-efficient hospital outpatient settings. As the OPPS acquires claims data regarding hospital costs associated with new procedures, we regularly examine the claims data and any available new information regarding the clinical aspects of new procedures to confirm that our OPPS payments remain appropriate for procedures as they transition into mainstream medical practice.

2. Movement of Procedures From New Technology APCs to Clinical APCs

As we explained in the November 30, 2001 final rule (66 FR 59902), we generally keep a procedure in the New Technology APC to which it is initially assigned until we have collected sufficient data to enable us to move the procedure to a clinically appropriate APC. However, in cases where we find that our original New Technology APC assignment was based on inaccurate or inadequate information (although it was the best information available at the time), or where the New Technology APCs are restructured, we may, based on more recent resource utilization information (including claims data) or the availability of refined New Technology APC cost bands, reassign the procedure or service to a different New Technology APC that most appropriately reflects its cost.

Consistent with our current policy, in the CY 2013 OPPS/ASC proposed rule (77 FR 45120), for CY 2013, we proposed to retain services within New Technology APC groups until we gather sufficient claims data to enable us to assign the service to a clinically appropriate APC. The flexibility associated with this policy allows us to move a service from a New Technology APC in less than 2 years if sufficient claims data are available. It also allows us to retain a service in a New Technology APC for more than 2 years if sufficient claims data upon which to base a decision for reassignment have not been collected. Table 18 of the proposed rule listed the HCPCS codes and associated status indicators that we proposed to reassign from a New Technology APC to a clinically appropriate APC or to a different New Technology APC for CY 2013.

In the CY 2013 OPPS/ASC proposed rule, we noted that currently, in CY 2012, there are three procedures described by HCPCS G-codes receiving payment through a New Technology APC(77 FR 45121). Specifically, HCPCS code G0417 (Surgical pathology, gross and microscopic examination for prostate needle saturation biopsy sampling, 21-40 specimens) is assigned to New Technology APC 1505 (New Technology—Level V ($300-$400)); HCPCS code G0418 (Surgical pathology, gross and microscopic examination for prostate needle saturation biopsy sampling, 41-60 specimens) is assigned to New Technology APC 1506 (New Technology—Level VI ($400-$500)); and HCPCS code G0419 (Surgical pathology, gross and microscopic examination for prostate needle saturation biopsy sampling, greater than 60 specimens) is assigned to New Technology APC 1508 (New Technology—Level VIII ($600-$700)). These HCPCS codes have been assigned to New Technology APCs since CY 2009.

Analysis of the hospital outpatient data for claims submitted in CYs 2009, 2010, and 2011 indicate that prostate needle saturation biopsy procedures are rarely performed on Medicare beneficiaries. For OPPS claims submitted from CY 2009 through CY 2011, our final rule claims data show very minimal claims for HCPCS code G0417, G0418, and G0419, as shown in Table 18.

Given the continued lack of cost data for these HCPCS codes, we proposed to reassign these procedures to an APC that is appropriate from a clinical standpoint (77 FR 45121). Specifically, we proposed to reassign HCPCS G-codes G0417, G0418, and G0419 to clinical APC 0661 (Level V Pathology), with a proposed APC payment rate of approximately $160 for CY 2013. We stated that we believe that all three procedures, as described by HCPCS codes G0417, G0418, and G0419, are comparable clinically to other pathology services currently assigned to APC 0661 and likely require similar resources. Table 18 of the proposed rule listed the HCPCS G-codes and associated status indicators that we proposed to reassign from New Technology APCs 1505, 1506, and 1508 to APC 0661 for CY 2013.

We did not receive any public comments on the APC reassignments for HCPCS codes G0417, G0418, and G0419. Therefore, for the reasons set forth above, we are finalizing our proposal, without modification, to assign these codes to APC 0661. We note that APC 0661 is the same APC to which the other HCPCS G-code for prostate needle saturation biopsy procedure, G0416 (Surgical pathology, gross and microscopic examination for prostate needle saturation biopsy sampling, 1-20 specimens), is assigned. In addition, for the CY 2013 update, we are revising the long descriptor for HCPCS code G0416 to read “Surgical pathology gross and microscopic examination for prostate needle saturation biopsy sampling 10-20 specimens” effective January 1, 2013. The final CY 2013 geometric mean cost for APC 0661 is approximately $162.

Table 19 below lists the HCPCS codes and associated status indicators that we are reassigning from a New Technology APC to a different New Technology APC for CY 2013. The final CY 2013 payment rates for HCPCS codes G0417, G0418, and G0419 can be found in Addendum B of this final rule with comment period (which is available via the Internet on the CMS Web site).

3. Payment Adjustment Policy for Radioisotopes Derived From Non-Highly Enriched Uranium Sources

a. Background

Radioisotopes are widely used in modern medical imaging, particularly for cardiac imaging and predominantly for the elderly (Medicare) population. Technetium-99 (Tc-99m), the radioisotope used in the majority of such diagnostic imaging services, is currently produced in legacy reactors outside of the United States using highly enriched uranium (HEU).

The Administration has established an agenda to eliminate domestic reliance on these reactors, and is promoting the conversion of all medical radioisotope production to non-HEU sources. Alternative methods for producing Tc-99m without HEU are technologically and economically viable, and conversion to such production has begun and is expected to be completed within a 5-year time period. We expect this change in the supply source for the radioisotope used for modern medical imaging will introduce new costs into the payment system that are not accounted for in the historical claims data.

Full Cost Recovery, which is routinely considered in CMS payment under Medicare, is the accounting practice used by producers and suppliers to describe the recovery of all contributing costs. Unlike legacy sources that often benefit from government subsidized multifunction facilities, the cost of these alternative methods will be increased over the cost of medical radioisotopes produced using HEU because hospitals' payments to producers and suppliers will have to cover capital expense (such as, for example, the cost of building new reactors, particle accelerators, or other very long-term investments), as well as all other new industry-specific ancillary costs (such as, for example, the cost of long-term storage of radioactive waste). Hospitals that use medical radioisotopes that are produced from non-HEU sources can expect producers and suppliers to pass on to them the full impact of these costs.

In the short term, some hospitals will be able to depend on low cost legacy producers using aging subsidized reactors while other hospitals will be forced to absorb the full cost of non-HEU alternative sources. Over several years, we believe that these cost differentials will promote increased regional shortages and create larger cost differentials and greater cost variations among hospitals. As a result, we believe this change in supply source will create a significant payment inequity among hospitals resulting from factors that are outside of normal market forces.

b. Payment Policy

In the CY 2013 OPPS/ASC proposed rule (77 FR 45121 through 45123), we proposed to exercise our authority to establish “other adjustments as determined to be necessary to ensure equitable payments” under the OPPS in accordance with section 1833(t)(2)(E) of the Act. We stated that we do not believe that we can ensure equitable payments to hospitals over the next 4 to 5 years in the absence of an adjustment to account for the significant payment inequities created by factors that will likely arise due to the change in supply source for the radioisotope used commonly in modern medical imaging procedures. We proposed to provide an adjustment for the marginal cost for radioisotopes produced from non-HEU sources over the costs for radioisotopes produced by HEU sources. We stated that we believe such an adjustment would ensure equitable payments in light of the Administration's HEU agenda, market influences, cost differentials, and cost variations that will create significant payment inequities among hospitals.

For CY 2013, we proposed to make an additional payment of $10, which is an amount based on the best available estimations of the incremental costs associated with non-HEU Tc-99m production as calculated using the Full Cost Recovery accounting methodology. We proposed to establish a new HCPCS code, QXXXX (Tc-99m from non-HEU source, full cost recovery add-on, per dose), to describe the Tc-99m radioisotope produced by non-HEU methods and used in a diagnostic procedure. Under the proposal, hospitals would be able to report this HCPCS Q-code once per dose along with any diagnostic scan or scans furnished using Tc-99m as long as the Tc-99m doses used can be certified by the hospital as coming from non-HEU sources and have been priced using a Full Cost Recovery accounting methodology. The HCPCS Q-code would be used to pay hospitals for the additional (incremental) cost of using Tc-99m from a non-HEU source.

Under the proposal, hospitals would not be required to make a separate certification of the non-HEU source on the claim; the inclusion of the new HCPCS code QXXXX on the claim would indicate that the hospital has met the conditions of the service definition as it does for any billed service. However, in the event of an audit, we stated that hospitals would be expected to be able to produce documentation that the individual dose delivered to the patient was completely produced from a non-HEU source. We proposed three ways in which hospitals could accomplish this.

First, the hospital could produce documentation such as invoices or patient dose labels or tracking sheets that indicated that the patient's dose was completely produced from non-HEU sources and priced based on Full Cost Recovery. In this first case, the supplier would be expected to be able to trace a specific dose of Tc-99m to a completely non-HEU batch. Current pharmacy recordkeeping is generally able to trace all components of radiopharmaceuticals back to their source production batches. A hospital would not be compliant with the HCPCS Q-code definition if the documentation indicated the supplier produced a mixed batch and labeled a fraction of the doses equal to the non-HEU fraction in the batch.

Second, a hospital could produce documentation that the entire batch of Tc-99m doses derives from non-HEU sources for a specified period of time, for example, the time that a single non-HEU based generator is in use. This approach would obviate the need for specific dose tracking from a claims audit perspective, although that information is typically required for other purposes. An attestation from the generator supplier would be sufficient evidence for the hospital, as would invoices that show that all doses of Tc-99m during a specified period came from inherently non-HEU alternative sources.

Third, if the industry was to implement labeling of generators and/or doses with labels attesting to 100 percent non-HEU sources priced based on Full Cost Recovery, documentation of labeled isotope usage using either the specific dose approach or the 100 percent hospital usage approach could provide evidence of hospital compliance. The hospital would be required to retain appropriate documentation within the hospital (including pharmacy) records but would not need to keep any specific documentation within the individual medical record. Also, we would consider a dose to be priced based on Full Cost Recovery when the supplier could attest that the supply chain adheres to usual industry practices to account for Full Cost Recovery, specifically including the capital cost of sustainable production and the environmental cost of waste management.

To reduce the administrative overhead for hospitals, we proposed not to require hospitals to separately track additional costs for Tc-99m doses from non-HEU sources, but to include the cost of the radioisotope in the cost of the diagnostic radiopharmaceutical as usual, reporting only a token $1 charge for the HCPCS code QXXXX line. Under the proposal, we would continue to calculate the total costs of radionuclide scans using claims data, and would periodically recalculate the estimated incremental cost of Tc-99m from non-HEU sources based on Full Cost Recovery, using models relying on the best available industry reports and projections, and would adjust the payment for HCPCS code QXXXX accordingly, reducing the payment for the scans by the amount of cost paid through HCPCS code QXXXX payment. We stated that we believe this proposal allows us to continuously compensate for unanticipated changes in Tc-99m cost attributable to new non-HEU supply sources while avoiding a double payment for the increased cost.

Comment: The vast majority of commenters conceptually agreed with CMS' proposed payment policy. However, the commenters differed in opinion on how CMS should implement a proposal to encourage hospitals to switch from Tc-99m derived from HEU sources to Tc-99m derived from non-HEU sources.

Many commenters disagreed specifically with CMS' proposal to make an additional payment of $10 per dose for Tc-99m radioisotopes produced by non-HEU methods, used in a diagnostic procedure. These commenters agreed that an additional payment is necessary in order to ensure that hospitals are fully paid for the additional costs incurred for the use of non-HEU Tc-99m radioisotopes, but the commenters argued that the additional $10 payment is insufficient and inadequate to incentivize hospitals to change their current practices and transition purchases of Tc-99m to non-HEU sources. The commenters suggested that CMS instead adjust or increase the payment amount to more adequately cover any additional costs to providers.

One commenter asked that CMS conduct a study of the actual costs at a time when non-HEU Tc-99m is actually available to hospitals, and propose an adjustment that will better reflect both the marginal additional costs of the non-HEU sources and the administrative and compliance burden on hospitals.

Another commenter recommended that CMS establish HCPCS code QXXXX (Tc-99m from non-HEU sources, full cost recovery add-on, per dose) and make an interim payment of $10 per unit for CY 2013 and CY 2014. The commenter further suggested that, beginning in CY 2015, CMS calculate the cost of the service described by the recommended code based on the standard CMS payment methodology because the calculations will be based on charges for services furnished in CY 2013, and for CY 2015 and years following, CMS will have estimated costs on which to base the additional payment for the HCPCS Q-code. In addition, the commenter recommended that CMS carefully track the phase-out of the HEU sources and eliminate HCPCS code QXXXX once HEU is phased out of the market in the United States.

Overall, most of the commenters encouraged CMS to continue to work with pertinent stakeholders and providers in the industry on this issue.

Response: We agree with the commenters that $10 is not a large incentive payment to promote a conversion to non-HEU sources of Tc-99m. However, we are concerned that many commenters have mischaracterized this payment. We did not create an additional payment to promote the Administration's initiative to eliminate domestic reliance on legacy production processes producing Tc-99m from HEU, as that is outside the scope of the OPPS. Rather, the industry has conveyed to us that this conversion to non-HEU sources will occur in response to U.S. strategic policy, but that cost considerations have created barriers to that movement. One of the cost considerations is the fact that non-HEU sourced Mo-99, the Tc-99m precursor, is expected to cost more than current sources from legacy reactors, and this increased cost will adversely impact hospitals. In evaluating that concern, we determined that there is, in fact, a probability not only that costs will increase but that those costs will not be passed on uniformly as the industry converts. Therefore, we used our authority to ensure payment equity among hospitals by proposing to create this additional payment to address the incremental cost of obtaining Tc-99m from the new sources of supply. Although commenters have opined that a larger payment would be a better incentive to support non-HEU conversion, the purpose for the additional payment is limited to mitigating any adverse impact of existing payment policy and is based on the authority set forth at section 1833(t)(2)(E) of the Act.

Most of the comments raising concerns about the inadequacy of the additional payment suggested that we did not account for the administrative costs involved in implementing this additional payment at the hospital level, at the radiopharmacy level, and at the level of the generator manufacturer. However, we note that previous discussions with the industry indicated that the actual costs of conversion, distinct from the administrative costs of billing, are confined to the producer (reactor) and the processor and are passed down through the supply chain from there. In our own analysis, we concurred with that finding and calculated a payment that would readily cover the additional cost of this change in supply as it is passed down the supply chain. We do not believe that it promotes efficiency to add administrative markup to this increased cost of a supply, especially given that we believe that the administrative cost of adding a new service into the billing system should be small at the hospital and the pharmacy levels. Moreover, due to the small absolute difference in cost between non-HEU and HEU sourced Tc-99m, we do not believe that significant inequities would exist in hospital costs until a significant amount of more expensive non-HEU Mo-99 enters the system, at which point any administrative cost would be spread over a large number of claims.

Finally, we agree with commenters who stated that this additional payment should be updated as better data become available. We stated in the proposed rule that we intend to look at the amount of the add-on payment and potentially update it as better economic information becomes available. Although we did not limit ourselves to the methodology beyond a commitment to use the best available data, we also did not propose using our usual OPPS methodologies to update the payment. We had specifically advised hospitals that separate reporting of the cost of Tc-99m from non-HEU sources was not required for several reasons. First, a particular generator manufacturer could elect to provide HEU and non-HEU generators at the same averaged cost, a method that would enable the client hospitals to defray any overall cost increase as non-HEU generators became randomly available. Because there could still be an incremental cost differential incurred by doing business with that manufacturer as compared with a purely non-HEU manufacturer, our normal OPPS methods would show no incremental cost and thus could not be used to mitigate a payment inequity. Second, we noted that separate reporting of the costs of the two sources or the calculation and reporting of a cost differential would significantly increase the administrative burden on hospitals, a burden of which we have been particularly mindful.

Comment: Several commenters asked that CMS provide separate payment for all diagnostic radiopharmaceuticals, regardless of their per day cost, as this policy would support conversion to non-HEU sources. A few commenters recommended that CMS unpackage all radiopharmaceuticals that meet the annual packaging threshold. They also suggested that CMS unpackage all radiopharmaceuticals that use Tc-99m, regardless of their per day cost. One commenter suggested that the proposed add-on payment of $10 be made in addition to separate payment for the diagnostic radiopharmaceutical.

The commenters emphasized their concern over increased costs of conversion to 100 percent non-HEU for radioisotopes. One commenter argued that separate payment would provide a direct, measurable incentive to the entire radiopharmaceutical market supply chain to support the efforts to convert from HEU to non-HEU sources. Additionally, the commenter stated that separate payment would allow CMS to obtain accurate hospital cost data on the cost of both HEU and non-HEU radiopharmaceuticals.

Response: We have already discussed in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66765 through 66768) the reasons why the agency has determined that it is appropriate to package payment for a diagnostic radiopharmaceutical into the payment for the nuclear medicine scan, and we have finalized this policy again in section II.A.3.f. of this final rule with comment period. However, specifically from the standpoint of this add-on payment to ensure equitable payments to hospitals, a separate payment for the diagnostic radiopharmaceutical would not unpackage the cost of the radioisotope from the much larger cost of the drug component, nor would it differentiate between HEU and non-HEU sources. Therefore, unpackaging the cost of the diagnostic radiopharmaceutical would not create a differential payment to ensure payment equity amongst hospitals.

Comment: Several commenters were concerned with CMS' proposal that Tc-99m doses be derived 100 percent from non-HEU sources in order to receive the additional $10 payment. A few commenters stated that it would be impossible to accurately predict the percentage of Tc-99m doses that will be comprised 100 percent from non-HEU sources. Other commenters expressed concern over the significant costs that will be incurred for segregating 100 percent non-HEU sources, especially in the radiopharmacy.

Response: We agree with the commenters that it will be impossible to accurately predict the percentage of Tc-99m doses that will be comprised of 100 percent of non-HEU sourced material, but that is because it will be impossible to predict the percentage of non-HEU Tc-99m available to manufacturers at any point in time. This presumption is one of the reasons that led us to the conclusion that payment for doses where 100 percent comes from non-HEU sources was the only reasonable option. We do not need to predict the amount of non-HEU Mo-99 available to the industry to establish a blend; instead, the HCPCS Q-code can be used whenever and wherever enough non-HEU Tc-99m is available to be kept separate down to the level of the generator or patient dose. Multiple codes to reflect different blends are not needed, and we do not need to create smaller payments for blends that reflect smaller amounts of non-HEU material. Because payment must be driven by cost, a 20-percent blend would be limited to 20 percent of the $10 cost or $2, and hospitals are already concerned that the $10 additional payment is a small payment when they consider it against the effort involved in making tracking and billing changes.

However, we do not believe that any costs created by changes in radiopharmacy procedures will be significant in the charges passed on to hospitals. We do understand that there may be some instances in which a radiopharmacy will have both a non-HEU and an HEU generator, and the pharmacy will need to determine whether it wants to keep those sources separate or blend them and eschew labeling of a non-HEU source. We also understand that this may be a larger issue at the generator manufacturer level, especially very early in the conversion when non-HEU Mo-99 is scarce. On the other hand, when non-HEU Mo-99 is scarce, the incremental cost of higher priced non-HEU Mo-99 is small and the blending of small amounts of non-HEU Mo-99 will not create payment inequities among hospitals. We expect that as conversion progresses and more non-HEU Mo-99 enters the supply chain, manufacturing processes may evolve. Ultimately, there is no requirement to use this HCPCS Q-code or label non-HEU based Mo-99; the payment exists as a tool if it is necessary to reduce payment inequities that might occur as a consequence of industry conversion to non-HEU based Mo-99.

One of the concerns about reporting doses derived from 100 percent non-HEU sources had to do with compliance concerns if, in the process of switching between an HEU and a non-HEU run, the manufacturer or pharmacy did not add in an extra step of flushing lines to ensure that cross-contamination did not occur. Our understanding is that using different sources for consecutive manufacturing runs would not create source contamination of more than 1 or 2 percent based on usual manufacturing processes. We note that it is not our intent to introduce unnecessary inefficiencies solely to support payment, and in this case we can confirm that production steps, such as cleaning lines, should be driven by FDA manufacturing requirements, not by payment artificialities. We believe that manufacturing steps that do not risk reducing the non-HEU sourced Mo-99 or Tc-99m to less than 95 percent of the generator, elution or dose (that is, do not risk reducing the content of the dose supplied to the patient to less than 95 percent non-HEU sourced Tc-99m) are consistent with a product that is completely derived from a non-HEU source. Therefore, we are modifying our proposal to state that any dose of Tc-99m that can be traced to a Mo-99 supply containing no more than 5 percent HEU sourced Mo-99 shall be considered to be completely derived from non-HEU sources for the purposes of this final rule with comment period, this additional payment, and any compliance practices that support it. It is our understanding that the normal manufacturing records will still support processes that created the non-HEU supply.

Comment: One commenter expressed concern regarding the administrative and financial burden that hospitals may incur upon adoption of this proposed policy. The commenter stated that these burdens may exceed the marginal additional cost of moving to non-HEU sources. The commenter believed that the proposed policy would result in additional administration and documentation burdens which include the following additional expenses: expenses for developing and maintaining policies to track, certify, and document HEU versus non-HEU sources in order to use the newly required HCPCS Q-code; new compliance program checks and monitoring to ensure the appropriate codes are used and documentation is maintained should an audit be conducted; additional personnel time and resources to create and maintain line items on the hospital charge master for non-HEU versus HEU codes and charges; and additional resources to develop nuclear medicine department information technology infrastructure, as well as billing policies for documentation and use of the new HCPCS Q-code.

Another commenter also believed that this proposal would create a significant burden on hospitals by requiring them to obtain, document, and track information from the supplier and thereby create an unnecessary level of complexity for hospitals that could result in code errors and omissions on claims. The commenter urged CMS not to finalize this proposal.

Response: We do not believe that this additional payment will result in a significant administrative burden to hospitals. We note that most hospitals have computerized inventory and billing systems that are able to track low-cost items such as needles and aspirins. We have reiterated in our response to public comments in this final rule with comment period that we expect hospitals requesting this additional payment to be able to track a dose that has been labeled or claimed as “non-HEU sourced” and do not expect hospitals to audit the validity of such claims made by their suppliers. We also note that the cost of adding a new code to the hospital chargemaster is not large, and that a hospital is not being subject to a significant payment inequity if the cost of adding a new code to the chargemaster actually exceeds the added cost of non-HEU sourced Tc99m to the hospital. Hospitals that are not experiencing high volumes of significantly increased costs are not obligated to use this additional payment as its use is entirely optional.

Comment: One commenter asked that CMS confirm in this final rule with comment period that hospitals will not be required to audit or otherwise independently verify manufacturer or radiopharmacy documentation that a dose/injection meets the standard of non-HEU priced at Full Cost Recovery.

A few commenters expressed concern regarding the compliance and liability burden that adopting this policy may place on hospitals. These commenters stated that hospitals may be uncomfortable attesting that the supplies they receive are from non-HEU sources when there is no reliable guarantee that the products are from non-HEU sources. Further, the commenters stated that they believe that the term “attesting” in the ASP model is significantly different from what they believe is the original intent of this proposal. Therefore, the commenters suggested that CMS clarify the adequate documentation necessary to confirm that the provider obtained a dose that is 100 percent from non-HEU sources.

Response: We are aware that providers must exert considerable effort to conscientiously perform their compliance responsibilities over such a vast health care system, and we specifically attempted to offer examples of acceptable compliance steps to alleviate that burden in this instance. We acknowledge that the end product used by hospitals is effectively homogenous, and there is no practical way for a hospital to prove chemically that a supply purported to be derived from a non-HEU source truly meets those requirements. On the other hand, the radiopharmaceutical industry is a heavily regulated industry closely monitored by the Food and Drug Administration, and it is our understanding that if a supplier indicates that a source is non-HEU, manufacturing records will be able to confirm that. We are confident that claims by suppliers as to the source of the Tc-99m used can be satisfactorily audited through usual manufacturing processes without creating additional requirements for hospitals. We do not expect hospitals to assay doses of drugs to ensure that they received what the invoice claimed, and we do not expect any chemical or physical verification here. It was our intent in the proposed rule to indicate that providers are expected to exercise due diligence, and to ensure that their claims are supported by internal records of some type, but that facilities could accept any tracking mechanism by a supplier (invoice, label, contract, among others) regarding a non-HEU source as satisfactory proof for the purposes of the facility.

We also note that any use of the word “attestation” in the proposed rule was meant only to indicate a formal statement by one party to assure another party of the source and composition. We further note that these were examples in the proposed rule rather than requirements.

Comment: Several commenters asked that CMS publish the methodology and data used to establish the additional payment amount of $10 for Tc-99m derived from non-HEU sources.

Response: There are two data sources on which we relied. First, the Organization for Economic Cooperation and Development—Nuclear Energy Agency (OECD-NEA) has published several economic analyses of the world market for Tc-99m, which are pertinent for the United States because, at present, our entire supply comes from foreign sources. Although some members of the industry have opined that these data are not accurate because the data include little information from U.S. suppliers, the fact remains that there is currently no supply available domestically. Thus, while the data we used may not reflect all of the unique market forces present in the domestic market, this data source provides the best estimation of the costs of non-HEU sources compared to HEU sources because the manufacturing steps are primarily performed overseas and therefore reflect the global market. Nonetheless, as an additional data source, we invited industry entities to submit additional information regarding their manufacturing and supply costs, production levels, and prices. However, given that the industry is small with limited numbers of competitors at each level of the supply chain, most American companies were reluctant to provide information and were insistent on confidentiality (as protected by FOIA Exemption 4) to safeguard the sensitive (business competitive) information that they did share. Therefore, we accepted supplemental information from the industry and pledged to maintain its confidentiality, and consequently are unable to provide details of the additional information. We can disclose our methodology and refer readers to the OECD-NEA models that form the basis of our model, noting that the supplemental information submitted to date has not significantly altered the conclusions drawn by the OECD-NEA.

To estimate costs, we tracked costs through the entire supply chain, using a building block approach to add the cost of each step onto the steps that occurred before it. Because the OECD-NEA provided ranges rather than point estimations, we used an averaging approach to factor in the possible low cost, the possible high cost, and the most likely “expected” cost. This is a common estimation technique used in business when significant uncertainty exists. By avoiding optimistic assumptions, we were able to model a payment that reflects not only the likely costs but ones that would also be adequate to cover unexpected costs in one or more of the manufacturing steps.

In response to the request to provide as much detail about our methodology as possible, we are detailing that methodology here. We used a supply chain model to accumulate costs through the Tc-99m supply chain based on—

(Unit Cost of Supply/Production Efficiency) + Unit Production Cost + ((Fixed Production Costs + Overhead)/Units Produced) = Unit Production Cost = Downstream Unit Cost of Supply.

In tracking units (efficiency), we allowed for product loss during production and for product loss as a function of time (decay). We applied this model across a supply chain that consisted of—

Irradiator/Producer > Processor > Generator Manufacturer > Nuclear Pharmacy > Hospital > Patient.

Using a Program Evaluation and Review Technique (PERT) 3-point estimation applied to costs, we based the upper and lower bounds on the OECD-NEA economic models for Full Cost Recovery (2011) and non-HEU Conversion (2012), given that U.S. supply is based on the global market. We then varied the expected value to model a range of outcomes. Finally we calculated the incremental cost of process changes by subtracting current costs. Almost all of the incremental costs of switching to non-HEU sources occur in the irradiation and the processing steps, with very little impact on generator assembly, generator elution, or the preparation of the patient dose. We noted that any artificial costs of tracking during conversion would not be reflected in the final post-conversion costs of supply. Due to the wide variation in cost projections, we rounded up to the nearest $5 as most of the estimators could not be regarded as sufficiently precise to justify a more precise value until actual cost data become available. This methodology resulted in a projection that fully accounts for the cost of conversion in almost all probable scenarios and that also accounts for or significantly offsets the costs of Full Cost Recovery under most combinations of assumptions. Therefore, the $10 value can be expected to offset any payment inequities under most likely combinations of cost changes within the Tc-99m supply chain.

Comment: One commenter stated that suppliers of Mo-99 are currently working toward full conversion to non-HEU sources by 2015. However, the commenter stated that it is estimated that only 10 percent of the Tc-99m doses used in the United States could be produced from 100 percent non-HEU sources in 2013. The commenter further believed that the proposed policy will cause a substantial increase in material costs, require duplicative effort in the preparation of radiopharmaceutical doses, add additional administrative costs, increase the costs for non-HEU products, and create a disincentive for hospitals that cannot purchase non-HEU products as they would be unwilling to pay higher prices for their nuclear pharmaceutical products when they are not receiving any additional benefits.

The commenter instead suggested that these impacts can be reduced by establishing a threshold amount of Mo-99 that must be used by a generator manufacturer for CY 2013, based on information provided by the OECD-NEA and other pertinent stakeholders. The commenter stated that this amount could then be adjusted upward in later years. The commenter further explained that, in order for a technetium generator to be considered “compliant” with the requirements for the additional payment, the manufacturer of that generator would need to certify to providers that it used at least the established threshold amount of non-HEU sourced Mo-99 in the production of its generators for CY 2013 and for subsequent quarters. In turn, the hospitals that purchased the Tc-99m doses prepared by complaint manufactures would receive separate payment during that specific period. The commenter stated that this approach would require a downward adjustment to the proposed $10 additional payment to reflect the lower amount of non-HEU Mo-99.

Response: We acknowledge the desirability of a simplified payment for non-HEU sourced material in the generators, and agree that the proposed blended payment would be much easier to implement. However, we note that we do not have the authority to create that type of payment. Within the OPPS, we depend on reported costs, as calculated from claims and cost report information, to set prospective payments. Our authority to deviate from this system in this instance is based on the authority of the Secretary to adjust payments if necessary to ensure payment equity among hospitals. A payment adjustment based on industry-wide thresholds would not create a payment differential among those hospitals with predominantly higher cost non-HEU sources and those hospitals with predominantly lower cost HEU sources. However, although we lack the authority to create a special payment to cover rising costs at the industry or manufacturer level, we note that the normal OPPS payment mechanism does exactly that: as costs rise, those costs will be passed on globally to hospitals and reflected in their charges adjusted to costs and, therefore, ultimately reflected in the prospective payments calculated by our usual methodology. This add-on payment merely ensures equitable payments to hospitals through the transition where non-HEU sources are not uniformly distributed, while our established OPPS mechanisms will ensure that the total costs of new sources are incorporated into final payments year by year. We also have previously stated that we believe that costly changes in manufacturing solely to facilitate a transitional payment are not likely to occur, and that instead the payment can be expected to trigger small administrative changes. We expect that expensive changes in industry processes will not be driven by an interim payment but will occur only when those changes will continue to be necessary or desirable after the transition is complete.

Comment: A few commenters suggested that CMS, at a minimum, allow a payment adjustment for lower percentages (less than 100 percent) of non-HEU sources and institute a multiyear phase-in period. One commenter suggested that CMS establish a “threshold quotient” of non-HEU content in Tc-99m radiopharmaceuticals during CY 2013 and allow partial payment of the $10 additional payment amount. The commenter explained that this would require CMS to accept a given percentage amount of non-HEU source content and pay a corresponding percentage of the proposed $10 additional payment amount. The commenter gave the example of a payment of $1.50 for Tc-99m sources that contain 15 percent non-HEU, as $1.50 is 15 percent of the $10 proposed additional payment amount. The commenter also suggested that CMS could further promote the conversion to 100 percent non-HEU sources by adopting industry-wide targets for conversion, which would include conversion to 25 percent in CY 2013, 50 percent in CY 2014, 75 percent in CY 2015, and 100 percent in CY 2016.

Another commenter suggested that a 10-percent industry threshold program be considered for CY 2013 in lieu of the 100 percent non-HEU sources proposed requirement. The commenter stated that a payment of no less than $10 could be given for non-HEU documented doses and that this would be more reflective of the short-term non-HEU Mo-99 supply.

Response: As noted above, our authority to establish this additional payment is based on the necessity to ensure equitable payments to hospitals, an authority that does not allow us to develop payments to promote the conversion of the industry to non-HEU sources. Therefore, our ability to create industry-wide payments is limited. We considered using one or more thresholds ranging from 10 percent to 80 percent to pay for blended sources that were not derived entirely from non-HEU sourced Mo-99, but determined that to be impractical for several reasons. First, the use of multiple codes to describe different mixtures of HEU and non-HEU sourced Mo-99 is immeasurably more complex than a simple single all or nothing coding choice, and many commenters were concerned about the complexity of even our proposed coding schema. Second, any blend of HEU and non-HEU sourced material will, as mentioned by the commenters, have reduced additional costs in proportion to the percentage of the blend. Because many commenters were concerned that $10 was small compared to the administrative effort they believed might be involved, we did not believe that a significantly smaller payment would be acceptable to that level of the supply chain.

Comment: Several commenters suggested that CMS extend the $10 additional payment for non-HEU sources for at least 5 years. The commenters stated that this period of time will be required to convert fully to non-HEU sources. Another commenter requested clarification of the proposed implementation date and methodology for calculating the total costs of radionuclide scans using claims data and the periodic recalculation of the estimated marginal cost of non-HEU Full Cost Recovery sources using models relying on the best available industry reports and projections, resulting in an adjustment in the payment of the proposed HCPCS code QXXXX accordingly, reducing the payment for the scans by the amount of cost paid through the HCPCS code QXXXX payment.

Response: Although we typically propose only the payments for the subsequent calendar year except in the case of adjustments that need to be phased in over multiple years, we did state our current expectations of the state of the industry and our expectations of a probable need for this additional payment over multiple years. We stated that our current expectation is that the transition to non-HEU sourced Mo-99 will be completed within 4 to 5 years. Therefore, we expect there may be a need to make differential payments for a period of 4 to 5 years. We will reassess, and propose, on an annual basis, whether such an adjustment under section 1833(t)(2)(E) of the Act continues to be necessary and whether any changes to the adjustment are needed. Again, our current expectation is that this additional payment will be needed for the duration of the industry's conversion to alternative methods to producing Tc-99m without HEU, which is expected to be completed within 4 to 5 years.

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

Comment: A few commenters suggested that CMS alter the description of the proposed HCPCS code QXXXX by adding the word “study” into the descriptor in order to make this definition more consistent with the arcana of the radiopharmaceutical industry. The commenters stated that the descriptor for the HCPCS Q-code therefore would be HCPCS code QXXXX (Tc-99m from non-HEU source, full cost recovery add-on, per study dose). The commenters stated that it would be logical to add the word “study” because several nuclear cardiology procedures could require multiple Tc-99m doses administered alone with one CPT procedure code. Thus, they believed that providers would purchase one to three study doses. The commenters further suggested that CMS clarify in this final rule with comment period that the add-on payment would apply to each per study dose of the complete service as described by the CPT procedure code. Therefore, the commenters stated, providers would be able to bill the HCPCS Q-code with multiple units and be paid $10 per the number of study doses provided during the procedure described by the CPT code, as appropriate.

Response: We acknowledge that it was our intent that this additional payment would be applied per study dose, such as the dose for the study performed at rest and the dose for the study performed with exercise. Therefore, we accept these recommendations and are modifying the proposed HCPCS definition to include the word “study” as follows: HCPCS code Q9969 (Tc-99m from non-highly enriched uranium source, full cost recovery add-on, per study dose).

Comment: Several commenters requested that CMS clarify the proposal which requires a reduction to the payment for the scans by the amount of cost paid through the proposed HCPCS code QXXXX. The commenters were not sure whether the payment offset would be applied uniformly to all hospitals or only to those hospitals reporting non-HEU source doses. The commenters further requested that no reduction in payment for nuclear scans by made as a result of the additional $10 payment amount.

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

Comment: Several commenters suggested that CMS use the average sales price (ASP) methodology to establish the additional payment amount for Tc-99m based on non-HEU sources. One commenter suggested that CMS use the ASP data when available as a benchmark for determining costs that are packaged. A few commenters suggested that payment based on the ASP methodology be applied in the same manner CMS pays for therapeutic radiopharmaceuticals. The commenters stated that this will establish transparency in the ratesetting for radioisotopes derived from non-HEU sources.

Response: We note that the ASP methodology does not apply to the Tc-99m radioisotope but only to the radiopharmaceutical that results from the combination of the isotope with the pharmaceutical moiety. Moreover, the ASP methodology is particularly unsuited to use on the radioisotope component alone because the isotope does not have an ASP. The radioisotope is typically produced by a generator and, whereas the ASP of a generator can be determined, the cost of a single dose is highly dependent on the number and timing of elutions of the generator, information that is not captured in the ASP. In fact, ASP is marginally valuable for Tc-99m radiopharmaceuticals only because the cost of the drug component is typically large compared to the cost of the isotope. This fact also argues against the comment that ASP would increase “transparency” of the cost of Tc-99m: There is no additional transparency of an isotope packaged into a payment with the drug than there is for an isotope packaged into a payment with the scan. Finally, the use of the ASP methodology would not differentiate between the cost of a non-HEU sourced Tc-99m and the cost of using an HEU source, which is the purpose of this payment. The proposed additional payment accounts for the increased cost of the isotope, which meets both incremental payment and transparency goals.

Comment: A few commenters recommended that CMS establish parallel codes for the use of HEU and non-HEU sourced radiopharmaceuticals to collect cost data for future ratesetting. Most of the commenters were concerned with the complexity involved in adding and reporting a single code.

Response: We do not believe that an entire set of parallel codes would lessen the complexity or the administrative cost and, in fact, we believe it would significantly increase them. We acknowledge that this, like many other options we have had on other issues, could significantly improve the accuracy of our ratesetting. However, based on other comments from the hospitals that would have to use these parallel codes, we do not believe that we or the hospitals would consider the increased administrative cost to be worth the slight increase in payment precision.

Comment: A few commenters requested that CMS clarify the meaning of “calculation by `Full Cost Recovery' ”. Some commenters also requested clarification of what this method encompasses.

Response: Full Cost Recovery is a concept that is well known to the producers, processors, and manufacturers but is not commonly discussed by radiopharmacies and hospitals. Unlike other supplies, radioisotopes typically require nuclear reactors for initial production, and many of the capital and environmental costs are not captured in the prices. For example, some reactors were built decades ago for other purposes and can be used (relatively) “free of charge” because it costs almost the same to run the reactor and do nothing as it does to run the reactor and irradiate some uranium. This has implications on the accounting of capital costs, which, in many cases, were or are recovered by other uses to which the reactors were put. Similarly, moderately enriched uranium left over from previous programs may be cheaply downgraded and provided at a “low” cost because the alternative is to allow it to decay in storage with no consequent benefit. In both cases, the Tc-99m produced is obtained by hospitals at a bargain price, but not at a price that is sustainable because the old reactors will need to be replaced and the enriched uranium will be depleted. There are other unique costs for radioisotopes, such as the need to make arrangements for long-term storage of radioactive waste. Failure to account for those costs can lower the price of the radioisotope for some hospitals today but creates a long-term problem in that other hospitals must pick up the costs. Full Cost Recovery is the accounting principle that ensures that all of these long-term costs are included in cost calculations.

Full Cost Recovery is obviously not important to the hospitals although, because it is critically important in providing for the long-term supply of the radioisotope, it is actually a major underlying cause of payment inequities associated with this transition. From the standpoint of this final rule with comment period then, Full Cost Recovery is coupled to the non-HEU criterion for purposes of the additional payment. Just as manufacturers will indicate that certain Tc-99m doses are derived from non-HEU sources, it is our expectation that the irradiator (reactor) and the processor of the non-HEU Mo- 99 will be able to confirm that Full Cost Recovery accounting was used in setting the price of the non-HEU sourced Mo-99, an accounting principle that is considered integral to the conversion to non-HEU sources. We expect the generator manufacturer to affirm to the radiopharmacy that its source is non-HEU, with this designation including accounting according to Full Cost Recovery. As mentioned earlier, we consider this affirmation to be sufficient for the radiopharmacy and the hospital, regardless of whether the affirmation is in the form of a letter or statement, a notation on the invoice, or a label on the vial or tracking slip. We do not believe that independent verification is necessary or even possible for the radiopharmacy and the hospital and require only their due diligence in accepting claims made by their suppliers. The costs of new capital expenses such as new reactors, including all their associated costs, are factored into the manufacturer's price of the Tc-99m and passed down to hospitals, and the additional payment is made to account for those unique costs that the hospitals will incur.

Comment: One commenter asked that CMS delay finalizing the proposal until CY 2014 so that hospitals have adequate time to implement the proposed change. Another commenter recommended that CMS postpone the implementation of the proposed policy until CY 2015, so that hospitals could avoid the complexities of handling and segregating HEU sources versus non-HEU sources. Another commenter expressed doubt that hospitals would be able to obtain Tc-99m derived from non-HEU sources in CY 2013. Therefore, they requested that the proposal be deferred until CY 2014.

One commenter expressed concern about the availability of non-HEU sources because they were told by their suppliers that a 100 percent non-HEU source supply is unavailable for CY 2012 and also will be unavailable by CY 2013. The commenter questioned whether this issue should be addressed by a payment system and suggested that this issue instead be addressed by the Administration as opposed to CMS. The commenter further suggested that the implementation of this proposal be delayed until there is some availability of 100 percent non-HEU sourced isotopes in this country.

Response: We considered the timing of this proposed additional payment after advice and consultation from both the Mo-99 industry and other U.S. agencies. We were initially advised that it is the understanding of the industry that conversion to non-HEU sources is already underway and is expected to be completed by the end of 2016. We understand this remains the case. We are aware that currently commercial Tc-99m is not readily available in the United States as it is in the world market, but that there also has not been a demand from within the United States. We do understand there is an expectation that it will make an appearance in CY 2013.

We acknowledge that the supply of non-HEU sourced Mo-99 may be small in CY 2013. However, we believe, as the industry believes, that conversion to non-HEU sourced Tc-99m is inevitable and will occur over the next several years. From the standpoint of the Medicare payment system, it is important for us to have some mechanism in place to mitigate any adverse impact on hospitals. If the supply is very low, hospitals will not be significantly disadvantaged and may elect to not make use of this additional payment in CY 2013. Conversely, if the supply starts to increase, some hospitals may be forced to shoulder a disproportionate share of the cost due to supplier relationships and contract status; this additional payment will create an opportunity for those hospitals to mitigate that cost. We fully expect that utilization of this additional payment will be small in CY 2013 but will increase in CYs 2014, 2015, and 2016 as this conversion occurs. We reiterate that the normal mechanisms of the OPPS will ultimately incorporate increased costs into APC calculations with resultant increased payments for the nuclear scans that use this radioisotope that will allow us to retire or modify this payment and incorporate the entire additional cost into the base payment. This additional payment will enable hospitals to avoid any inequities caused by suddenly rising local costs that are not able to be captured in a timely fashion by usual methods. Based on the timetable for conversion and the rescue nature of the payment, we believe that a delay until CY 2014 or CY 2015 is unnecessary.

Comment: Several commenters suggested that an additional separate payment be given in other Medicare settings, including the physician's office and ASC, for radioisotopes derived from non-HEU sources. One commenter recommended that these additional payments also be made under Medicaid, the Department of Defense/Veterans Affairs, Indian Health Services health programs, and any other government health programs where nuclear medicine procedures are covered. This commenter acknowledged that its comments are outside the scope of the OPPS/ASC final rule with comment period.

Response: We agree with the commenter that addressing additional payments for radioisotopes derived from non-HEU sources in other settings and payment systems, such as the Physician's Office, Medicaid, the Department of Defense/Veterans Affairs, Indian Health Services health programs, and any other government health programs where nuclear medicine procedures are covered, is outside the scope of the proposed rule and cannot be addressed in this final rule with comment period. In addition, we note that the Medicare authority for this additional payment is based on the need to establish equitable payments for hospitals. The authority to make equitable adjustments under section 1833(t)(2)(E) of the Act does not extend to the ASC setting. We do use a HCPCS Q-code as the vehicle for this additional payment so that other payers and other payment systems could use this code if desired.

After consideration of the public comments we received, we are finalizing our proposed policy with the modifications discussed above. Specifically, we are modifying the policy to provide that a product identified as non-HEU sourced must be at least 95 percent derived from non-HEU sources. We also are finalizing our proposal to establish a HCPCS code for Tc-99m from non-HEU sources with a revised code definition. The number and title of the new HCPCS code is HCPCS code Q9969 (Tc-99m from non-highly enriched uranium source, full cost recovery add-on, per study dose) for CY 2013. HCPCS code Q9969 is assigned to APC 1442 (Non-HEU TC-99M Add-On/Dose) with a status indicator of “K” and a CY 2013 payment rate of $10.

D. OPPS APC-Specific Policies

1. Cardiovascular and Vascular Services

a. Cardiac Telemetry (APC 0213)

For CY 2013, we proposed to reassign CPT code 93229 (External mobile cardiovascular telemetry with electrocardiographic recording, concurrent computerized real time data analysis and greater than 24 hours of accessible ecg data storage (retrievable with query) with ecg triggered and patient selected events transmitted to a remote attended surveillance center for up to 30 days; technical support for connection and patient instructions for use, attended surveillance, analysis and physician prescribed transmission of daily and emergent data reports) from APC 0209 (Level II Extended EEG, Sleep, and Cardiovascular Studies), which had a proposed rule payment rate of approximately $808, to APC 0340 (Minor Ancillary Procedures), which had a proposed rule payment rate of approximately $49.

Comment: One commenter disagreed with CMS' proposal to reassign CPT code 93229 to APC 0340 because the service described by CPT code 93229 involves the use of sophisticated technology requiring 24-hour, 7 days a week monitoring by a technician for up to 30 days, which according to the commenter, is not a minor procedure. According to the commenter, the proposed rule payment rate of approximately $49 is significantly lower than the MPFS payment rate of $694, and much lower than the average contractual arrangement charge to hospitals of $674. The commenter explained that while this procedure is performed primarily by independent diagnostic testing facilities (approximately 98 percent), this service is provided in the HOPD setting under contractual arrangements with hospitals. The commenter stated that the CPT code is fairly new because it was effective January 1, 2009, and suggested that the low geometric mean cost for the service could be attributed to miscoding by hospitals. The commenter believed that hospitals may be reporting CPT code 93229 incorrectly when they are actually performing other remote cardiac tests, such as the services described by CPT code 93226 (External electrocardiographic recording up to 48 hours by continuous rhythm recording and storage; scanning analysis with report) or CPT code 93271 (External patient and, when performed, auto activated electrocardiographic rhythm derived event recording with symptom-related memory loop with remote download capability up to 30 days, 24-hour attended monitoring; transmission and analysis), that require fewer resources. In addition, the commenter questioned the validity of the claims data, given the low number of claims billed under the OPPS. The commenter requested that CMS delay the reassignment of the service described by CPT code 93229 to APC 0340, and urged CMS to maintain CPT code 93229 in APC 0209 until more data are available to determine an appropriate payment for the service.

Response: The commenter is correct that CPT code 93229 was effective January 1, 2009. However, we believe that since that time hospitals have familiarized themselves with how to code this service appropriately. We have no reason to believe that hospitals are incorrectly reporting the service described by CPT code 93229, and note that we do not specify the methodologies that hospitals must use to set charges for this, or any other, procedure. The calculation of OPPS relative payment weights that reflect the relative resources required for HOPD services is the foundation of the OPPS. We rely on hospitals to bill all HCPCS codes accurately in accordance with their code descriptors and CPT and CMS instructions, as applicable, and to report charges on claims and charges and costs on their Medicare hospital cost report appropriately.

We do not agree with the commenter that it is necessary to delay the reassignment of CPT code 93229 to APC 0340. We examined our claims data for the last 3 years, given the concerns raised by the commenter regarding the low number of claims. Our analysis revealed that the claims submitted for the service described by CPT code 93229 have steadily increased since CY 2009, but the cost for the procedure has been significantly lower than the APC payment rate. Specifically, the cost for the service described by CPT code 93229 in CY 2009 was approximately $287, based on 103 single claims (out of 114 total claims), approximately $260 in CY 2010, based on 184 single claims (out of 184 total claims), and approximately $172 for CY 2011, based on 1,949 single claims (out of 1,949 total claims). Based on the claims data, we have no reason to believe that the claims data used to calculate the cost for CPT code 93229 for CY 2013 does not appropriately reflect the hospitals cost for providing this service.

In addition, because of concerns raised by the commenter regarding reassigning CPT code 93229 to an APC that is labeled “Minor Ancillary Procedures,” further review of our claims data for this final rule with comment period showed that CPT code 93229 would be more appropriately assigned to APC 0213 (Level I Extended EEG, Sleep, and Cardiovascular Studies) than APC 0340 based on its clinical homogeneity and resource costs in relation to the other procedures assigned to APC 0213. Our claims data show a geometric mean cost of approximately $172 for CPT code 93229, which is relatively similar to the final geometric mean cost of approximately $178 for APC 0213.

Further, we recognize that the MPFS pays separately for CPT code 93229, but the MPFS and the OPPS are very different payment systems. Each system is established under a different set of statutory and regulatory principles, and the policies established under the MPFS do not have bearing on the payment policies under the OPPS.

In summary, after consideration of the public comment we received, we are finalizing our CY 2013 proposal, with modification. Specifically, we are reassigning CPT code 93229 from APC 0209 to APC 0213 (instead of the proposed APC 0340) for CY 2013. The final CY 2013 geometric mean cost for APC 0213 is approximately $178.

b. Mechanical Thrombectomy (APC 0653)

For CY 2013, we proposed to continue to assign CPT code 36870 (Thrombectomy, percutaneous, arteriovenous fistula, autogenous or nonautogenous graft (includes mechanical thrombus extraction and intra-graft thrombolysis)) to APC 0653 (Level I Hand Musculoskeletal Procedures), which had a proposed rule payment rate of approximately $2,445.

Comment: Some commenters expressed concern regarding the proposed 19.7 percent reduction in the payment rate for the APC in which the procedure describing a mechanical thrombectomy by arteriovenous access, CPT code 36870, is assigned. The commenters believed that such a reduction would impede Medicare beneficiary's access to the procedure. In addition, the commenters stated that CMS offered no explanation for the payment rate reduction, nor permitted adequate notice for a meaningful opportunity to comment. The commenters requested that CMS delay its proposal to reduce the payment rate for mechanical thrombectomy by AV access until stakeholders have been given a meaningful opportunity to comment.

Response: On an annual basis, CMS evaluates hospital outpatient claims data to determine the cost of procedures and services paid under the OPPS to ensure appropriate APC assignment for the following year. This evaluation generally results in establishing new APCs, reassigning procedures and services to more appropriate APCs, or deleting APCs that are no longer applicable. In addition, this evaluation may result in revising relative payment weights, as well as wage and other adjustments, to take into account changes in medical practices, changes in technology, the addition of new services, new cost data, and other relevant information and factors. The OPPS proposed rule is published annually in the summer and is the mechanism used by CMS to inform the public of the proposed changes for the upcoming year and provide an opportunity for comment. As has been our practice, we encourage the public to submit their comments on issues addressed in the proposed rule. Comments received in response to the proposed rule are addressed in the final rule with comment period, which is also published annually in the winter.

For the CY 2013 update, our analysis of the latest hospital outpatient data for claims submitted for services provided during CY 2011 shows a geometric mean cost for CPT code 36870 of approximately $2,662, based on 539 single claims (out of 50,476 total claims), which is relatively similar to the proposed rule payment rate of approximately $2,748 for APC 0653. Based on our claims data, we believe that APC 0653 is the most appropriate APC assignment for CPT code 36870 based on its clinical homogeneity and resource costs in relation to the other procedures assigned to the APC. Consistent with our policy of reviewing APC assignments annually, we will again reevaluate the cost of CPT code 36870 and its APC assignment in CY 2013 for the CY 2014 rulemaking cycle.

After consideration of the public comments we received, we are finalizing our CY 2013 proposal without modification. We will continue to maintain CPT code 36870 in APC 0653 for CY 2013. The final CY 2013 geometric mean cost for APC 0653 is approximately $2,748.

c. Non-Congenital Cardiac Catheterization (APC 0080)

For CY 2011, the AMA's CPT Editorial Panel restructured the Cardiac Catheterization section of the CPT codebook so that combinations of services that were previously reported using multiple codes are now reported with one CPT code. This revision deleted several non-congenital cardiac catheterization-related CPT codes from the 93500 series and created new CPT codes in the 93400 series and in the 93500 series. We discussed these coding changes in detail in the CY 2011 OPPS/ASC final rule with comment period (75 FR 71846 through 71849), along with the process by which we assigned the new CPT codes to APCs that we believe are comparable with respect to clinical characteristics and resources required to furnish the cardiac catheterization services described by the new CPT codes. As discussed in that final rule with comment period, we were able to use the existing CY 2009 hospital outpatient claims data and the most recent cost report data to create simulated costs for the new separately payable CPT codes for CY 2011. Specifically, to estimate the hospital costs associated with the 20 new non-congenital cardiac catheterization-related CPT codes based on their CY 2011 descriptors, we used claims and cost report data from CY 2009. Because of the substantive coding changes associated with the new non-congenital cardiac catheterization-related CPT codes for CY 2011, we used our CY 2009 single and “pseudo” single claims data to simulate the new CY 2011 CPT code definitions. We stated that many of the new CPT codes were previously reported using multiple CY 2009 CPT codes, and we provided a crosswalk of the new CY 2011 cardiac catheterization CPT codes mapped to the CY 2009 cardiac catheterization CPT codes in Table 11 of the CY 2011 OPPS/ASC final rule with comment period (75 FR 71849). Table 11 showed the criteria we applied to select a claim to be used in the calculation of the cost for the new codes (shown in Column A). As we stated in the CY 2011 OPPS/ASC final rule with comment period (75 FR 71847 through 71848), we developed these criteria based on our clinicians' understanding of the services that were reported by the CY 2009 CPT codes that, in various combinations, reflect the services provided that are described in the new CPT codes. We used approximately 175,000 claims for the new non-congenital catheterization-related CPT codes, together with the single and “pseudo” single procedure claims for the remaining non-congenital catheterization-related CPT codes in APC 0080 (Diagnostic Cardiac Catheterization), to calculate CPT code level costs and the payment rate for APC 0080 of approximately $2,698. We noted that, because the CPT codes listed in Table 11 were new for CY 2011, they were identified with comment indicator “NI” in Addendum B to that final rule with comment period to indicate that the interim APC assignment was subject to public comment. We specifically requested public comment on our methodology for simulating the costs for these new CY 2011 CPT codes, in addition to public comments on the payment rates themselves (75 FR 71848).

For CY 2012, we continued to use the CY 2011 methodology in determining the APC assignments for the new cardiac catheterization CPT codes. That is, we continued to use the CY 2011 methodology in determining the APC assignments for the cardiac catheterization CPT codes by using the existing hospital outpatient claims and the cost report data from the predecessor cardiac catheterization CPT codes to simulate an estimated cost for the new cardiac catheterization CPT codes in determining the appropriate APC assignments. Specifically, we used the CY 2010 hospital outpatient claims data and the most recent cost report data to create simulated costs for the new separately payable CPT codes for CY 2012 to determine the payment rates for the APC to which the cardiac catheterization CPT codes were assigned. For CY 2012, we did not make any changes to the CY 2011 APC assignments of any of the CPT codes assigned to APC 0080 because the claims data supported continuation of these APC assignments.

As we discussed in the CY 2013 OPPS/ASC proposed rule, because the cardiac catheterization CPT codes were new for CY 2011, CY 2013 is the first year that claims data are available for ratesetting for these specific CPT codes (77 FR 45084 through 45085). For CY 2013, our analysis of the CY 2011 claims data available for the proposed rule showed no violation of the 2 times rule for the cardiac catheterization CPT codes because the lowest cost of a CPT code with significant claims data in APC 0080 was approximately $1,716 (for CPT code 93451), while the highest cost of a CPT code with significant claims data was approximately $3,308 (for CPT code 93461). We stated in the proposed rule that we believe that the cardiac catheterization CPT codes continue to be appropriately assigned to APC 0080 based on clinical homogeneity and resource costs. Therefore, for CY 2013, we proposed to continue to assign the cardiac catheterization CPT codes to APC 0080.

Comment: One commenter pointed out that CPT codes 93463 (Pharmacologic agent administration (eg, inhaled nitric oxide, intravenous infusion of nitroprusside, dobutamine, milrinone, or other agent) including assessing hemodynamic measurements before, during, after and repeat pharmacologic agent administration, when performed (list separately in addition to code for primary procedure)) and 93464 (Physiologic exercise study (eg, bicycle or arm ergometry) including assessing hemodynamic measurements before and after (list separately in addition to code for primary procedure)), which appeared in Table 5 (Proposed APCs to Which Non-Congenital Cardiac Catheterization CPT Codes Would Be Assigned for CY 2013) of the CY 2013 OPPS/ASC proposed rule do not appear to represent cardiac catheterization procedures.

Response: CPT codes 93463 and 93464 are packaged procedures. These CPT codes appeared in Table 5 of the CY 2013 OPPS/ASC proposed rule because these procedures are performed in conjunction with cardiac catheterization procedures. CPT code 93463 is an add-on code that describes a pharmacologic agent that may be administered when a cardiac catherization procedure is performed. Similarly, CPT code 93464 is an add-on code that describes a physiologic exercise test that may be combined with a cardiac catheterization. Because these procedures are used in conjunction with cardiac catherization procedures, we believe that listing them in Table 5 of the CY 2013 OPPS/ASC proposed rule was appropriate.

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

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

For the CY 2011 update, the AMA's CPT Editorial Panel created 16 new CPT codes under the Endovascular Revascularization section of the 2011 CPT codebook to describe endovascular revascularization procedures of the lower extremity performed for occlusive disease. In the CY 2011 OPPS/ASC final rule with comment period (75 FR 71841 through 71845), we discussed the process and methodology by which we assigned the CY 2011 endovascular revascularization CPT codes to APCs that we believe are comparable with respect to clinical characteristics and resources required to furnish the services. Specifically, we were able to use the existing CY 2009 hospital outpatient claims data and the most recent cost report data to create simulated costs for 12 of the 16 new separately payable CPT codes for CY 2011. Because the endovascular revascularization CPT codes were new for CY 2011, we used our CY 2009 single and “pseudo” single claims data to simulate the new CY 2011 CPT code definitions. As shown in Table 7 of the CY 2011 OPPS/ASC final rule with comment period (75 FR 71844), many of the new endovascular revascularization CPT codes were previously reported using a combination of CY 2009 CPT codes. In order to simulate costs, we selected claims that we believe met the definition for each of the new endovascular revascularization CPT codes. Table 7 showed the criteria we applied to select a claim to be used in the calculation of the costs for the new CPT codes (shown in Column A). As we stated in the CY 2011 OPPS/ASC final rule with comment period (75 FR 71842), we developed these criteria based on our clinicians' understanding of services that were reported by the CY 2009 CPT codes that, in various combinations, reflect the services provided that are described by the new CPT codes for CY 2011.

After determining the simulated costs for the procedures, we assigned each CPT code to appropriate APCs based on their clinical homogeneity and resource use. Of the 16 CPT new codes, we assigned 9 CPT codes to APC 0083 (Coronary or Non-Coronary Angioplasty and Percutaneous Valvuloplasty) and 5 CPT codes to APC 0229 (Transcatheter Placement of Intravascular Shunts), and created new APC 0319 (Endovascular Revascularization of the Lower Extremity) for the remaining 2 CPT codes. Table 8 of the CY 2011 OPPS/ASC final rule with comment period (75 FR 71845) displayed their final CY 2011 APC assignments and CPT code costs. We noted that, because these CPT codes were new for CY 2011, they were assigned comment indicator “NI” in Addendum B to the CY 2011 OPPS/ASC final rule with comment period to identify them as new interim APC assignments for CY 2011, and subject to public comment. We specifically requested public comment on our methodology for simulating the costs for these new CY 2011 CPT codes in addition to public comments on the payment rates themselves (75 FR 71845).

As stated in the CY 2012 OPPS/ASC final rule with comment period (76 FR 74156), for CY 2012, we continued to use the CY 2011 methodology to determine the APC assignments for the CPT codes that describe endovascular revascularization of the lower extremity. Because previous endovascular revascularization CPT codes were in existence prior to CY 2011 and assigned to designated APCs, we continued to use existing hospital outpatient claims and cost report data from the established CPT codes to simulate estimated costs for the endovascular revascularization CPT codes to determine the appropriate APC assignments for CY 2012, as we did for CY 2011. In the CY 2012 OPPS/ASC final rule with comment period, we also revised the title of APC 0083 from “Coronary or Non-Coronary Angioplasty and Percutaneous Valvuloplasty” to “Coronary Angioplasty, Valvuloplasty, and Level I Endovascular Revascularization of the Lower Extremity”; revised the title of APC 0229 from “Transcatheter Placement of Intravascular Shunts and Stents” to “Level II Endovascular Revascularization of the Lower Extremity”; and revised the title of APC 0319 from “Endovascular Revascularization of the Lower Extremity” to “Level III Endovascular Revascularization of the Lower Extremity”.

Because the endovascular revascularization of the lower extremity CPT codes were new for CY 2011, CY 2013 is the first year of claims data that are available for ratesetting for these specific CPT codes. For CY 2013, review of the procedures with significant claims data in APCs 0083, 0229, and 0319 did not show 2 times rule violations in these APCs. In the CY 2013 OPPS/ASC proposed rule, we stated that we believe that the endovascular revascularization CPT codes assigned to APCs 0083, 0229, and 0319 continue to be appropriately assigned based on clinical homogeneity and resource costs. Therefore, we proposed to continue to assign the endovascular revascularization CPT codes to APCs 0083, 0229, and 0319 for CY 2013 (77 FR 45083 through 45084).

Comment: Several commenters believed that the assignment of CPT code 37183 (Revision of transvenous intrahepatic portosystemic shunt(s) (tips) (includes venous access, hepatic and portal vein catheterization, portography with hemodynamic evaluation, intrahepatic tract recanulization/dilatation, stent placement and all associated imaging guidance and documentation) and 37210 (Uterine fibroid embolization (ufe, embolization of the uterine arteries to treat uterine fibroids, leiomyomata), percutaneous approach inclusive of vascular access, vessel selection, embolization, and all radiological supervision and interpretation, intraprocedural roadmapping, and imaging guidance necessary to complete the procedure) to APC 0229 (Level II Endovascular Revascularization of the Lower Extremity) violated the 2 times rule. The commenter believed that these two codes should be reassigned to APC 0083 (Coronary Angioplasty, Valvuloplasty, and Level I Endovascular Revascularization of the Lower Extremity).

Response: As stated above, in determining whether a 2 times rule violation exists in an APC, we consider only those HCPCS (both CPT and Level II Alphanumeric HCPCS codes) codes that are significant based on the number of claims. For purposes of identifying significant HCPCS codes for examination to determine if they violate the 2 times rule, we consider codes that have more than 1,000 single major claims or codes that have both greater than 99 single major claims and contribute at least 2 percent of the single major claims used to establish the APC cost to be significant (75 FR 71832). This longstanding definition of when a code is significant for purposes of the 2 times rule was selected because we believe that a subset of 1,000 claims is negligible within the set of approximately 100 million single procedure or single session claims we use for establishing costs. Similarly, a code for which there are fewer than 99 single claims and which comprises less than 2 percent of the single major claims within an APC will have a negligible impact on the APC cost.

For this CY 2013 OPPS/ASC final rule with comment period, our analysis of the CY 2011 claims data showed that CPT code 37183 had 211 single claims (out of 302 total claims) while CPT code 37210 had 211 single claims (out of 254 total claims). Of the 12 procedures assigned to APC 0229, only 5 procedures meet the definition of significant claims. Specifically, CPT codes 37205 (Transcatheter placement of an intravascular stent(s) (except coronary, carotid, vertebral, iliac, and lower extremity arteries), percutaneous; initial vessel), 37221 (Revascularization, endovascular, open or percutaneous, iliac artery, unilateral, initial vessel; with transluminal stent placement(s), includes angioplasty within the same vessel, when performed), 37225 (Revascularization, endovascular, open or percutaneous, femoral, popliteal artery(s), unilateral; with atherectomy, includes angioplasty within the same vessel, when performed), 37226 (Revascularization, endovascular, open or percutaneous, femoral, popliteal artery(s), unilateral; with transluminal stent placement(s), includes angioplasty within the same vessel, when performed), and 37229 (Revascularization, endovascular, open or percutaneous, tibial, peroneal artery, unilateral, initial vessel; with atherectomy, includes angioplasty within the same vessel, when performed) have significant claims data to determine whether a violating of the 2 times rule exists within APC 0229. Review of the procedures assigned to APC 0229 revealed that the range of the CPT geometric mean costs for the procedures with significant claims data is between approximately $7,013 (for CPT code 37205, which represents 14 percent of the single claims) and approximately $9,915 (for CPT code 37229, which represents 5 percent of the single claims). Taking into consideration all of the codes with significant claims that are assigned to APC 0229, CPT codes 37183 and 37210 do not meet the definition of significant claims to determine if there is a violation of the 2 times rule within APC 0229.

Therefore, based on the clinical similarity to other procedures currently assigned to APC 0229, and because there is no determination of a violation of the 2 times rule, we are continuing to assign CPT codes 37183 and 37210 to APC 0229 for CY 2013. For CY 2013, APC 0229 has a final geometric mean cost of approximately $8,905.

Comment: Several commenters recommended the reassignment of add-on CPT code 37223 (Revascularization, endovascular, open or percutaneous, iliac artery, each additional ipsilateral iliac vessel; with transluminal stent placement(s), includes angioplasty within the same vessel, when performed (list separately in addition to code for primary procedure)) from APC 0083 to APC 0229 because the proposed geometric mean cost of the procedure is similar to the geometric mean costs of procedures assigned to APC 0229 (although the commenters also pointed out that the cost data calculated from single claims for CPT code 37223 are unreliable because CPT code 37223 is an add-on code and would not appear by itself on a claim). Some commenters also argued that the assignment of CPT code 37223 to APC 0083 results in a violation of the 2 times rule. The commenters stated that the reassignment of CPT code 37223 to APC 0229 would be consistent with CMS' policy of assigning add-on codes to the same APC as their base codes. In addition, the commenters asserted that this reassignment would not only ensure patient access for this therapeutic procedure, but also would promote clinical homogeneity and similar resource cost of procedures assigned to APC 0229 and provide accurate payment for the procedure.

Response: Although there are many add-on codes that have been assigned to the same APC as their base code, there are some procedures that are add-on codes that have been assigned to different APCs from their base or primary codes. In establishing an appropriate APC assignment, we take into consideration the clinical homogeneity and similarity in resource use associated with the procedure or service. This determination may result in the same APC assignment for both the base code and the add-on code, or in different APC assignments, as illustrated in Table 21 below. Therefore, we disagree with the commenters' assertion that we should reassign CPT code 37223 to APC 0229 so that it is in the same APC as its base code.

We also do not agree with commenters that the composition of APC 0083 constitutes a violation of the 2 times rule because CPT code 37223 does not have sufficient single claims to qualify as a significant procedure for purposes of applying the 2 times rule, as described earlier in this section. Based on our understanding of the procedure, we continue to believe that APC 0083 is the most appropriate assignment for CPT code 37223 based on clinical considerations and similarity in resource use to other procedures assigned to APC 0083, as we have stated in the past (76 FR 74156).

Further, in response to the commenters' concerns regarding providing accurate payment for the procedure described by CPT code 37223 to ensure patient access, we believe that the payment rate for the procedure does not inhibit HOPDs from performing the procedure. The OPPS, like other Medicare payment systems, is budget neutral and overall increases in payments are limited to the hospital inpatient market basket increase. We believe that our payment rates generally reflect the costs that are associated with providing care to Medicare beneficiaries in cost efficient settings, and we believe that our payment rates are adequate to ensure access to services.

After consideration of the public comments we received, we are finalizing our proposal, without modification, to continue to assign CPT code 37223 to APC 0083 for CY 2013.

Comment: One commenter believed that CPT codes 37234 (Revascularization, endovascular, open or percutaneous, tibial/peroneal artery, unilateral, each additional vessel; with transluminal stent placement(s), includes angioplasty within the same vessel, when performed (list separately in addition to code for primary procedure)), and 37235 (Revascularization, endovascular, open or percutaneous, tibial/peroneal artery, unilateral, each additional vessel; with transluminal stent placement(s) and atherectomy, includes angioplasty within the same vessel, when performed (list separately in addition to code for primary procedure)) are inappropriately assigned to APC 0083, and recommended that they be reassigned to APC 0229. The commenter indicated that these procedures involve both angioplasty with stent placements, similar to the procedure described by CPT code 37221 (Revascularization, endovascular, open or percutaneous, iliac artery, unilateral, initial vessel; with transluminal stent placement(s), includes angioplasty within the same vessel, when performed), which is assigned to APC 0229. The commenter also stated that CPT codes 37234 and 37235 are similar to the stent procedures described by CPT codes 37205 (Transcatheter placement of an intravascular stent(s) (except coronary, carotid, vertebral, iliac, and lower extremity arteries), percutaneous; initial vessel) and 37206 (Transcatheter placement of an intravascular stent(s) (except coronary, carotid, vertebral, iliac, and lower extremity arteries), percutaneous; each additional vessel (list separately in addition to code for primary procedure)), which are assigned to APC 0229. The commenter concluded that the payment rate for APC 0083 does not reflect the resources associated with placement of a cardiovascular stent; therefore, CPT codes 37234 and 37235 should be reassigned to APC 0229.

Response: We continue to believe that APC 0083 is the most appropriate assignment for these CPT codes based on clinical and resource considerations. We do not agree that the procedures described by CPT codes 37234 and 37235 are dissimilar to other procedures in APC 0083 because they involve a stent. In addition, an analysis of CY 2011 claims data shows only one single claim for CPT code 37234 (out of 153 total claims) and no single claims (out of 31 total claims) for CPT code 37235. Therefore, the outpatient claims data do not support an APC reassignment of these CPT codes. Because these CPT codes were made effective January 1, 2011, CY 2011 is the first year of claims data available for CPT codes 37234 and 37235. Consistent with CMS' policy of reviewing APC assignments annually, we will reevaluate the cost of these procedures and their APC assignments next year for the CY 2014 rulemaking cycle.

After consideration of the public comment we received, we are finalizing our CY 2013 proposal, without modification, to continue to assign CPT codes 37234 and 37235 to APC 0083, which has a CY 2013 final geometric mean cost of approximately $4,139.

Table 22 below provides the list of endovascular revascularization CPT codes assigned to APCs 0083, 0229, and 0319 for CY 2013.

e. External Electrocardiographic Monitoring (APC 0097)

In the CY 2012 OPPS/ASC final rule with comment period, we assigned new CPT codes 0296T (External electrocardiographic recording) and 0297T (External electrocardiographic recording; scanning analysis with report) on an interim basis to APC 0097 (Level I Non-Invasive Physiologic Studies), which has a CY 2012 payment rate of approximately $68 and a CY 2013 proposed payment rate of approximately $67.

Comment: One commenter who responded to the CY 2012 OPPS/ASC final rule with comment period supported our placement of CPT code 0296T in APC 0097. The commenter stated that the service described by CPT code 0296T is clinically similar to other services in that APC. However, the commenter believed that CPT code 0297T would be more appropriately assigned to APC 0692 (Level II Electronic Analysis of Devices), which has a CY 2013 proposed rule cost of approximately $113). The commenter argued that CPT code 0297T is similar in nature and in required resources to CPT code 93271 (Electrocardiographic monitoring and analysis), which is assigned to APC 0692, because it has a similar monitoring period and requires similar network and information technology resources.

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

f. Echocardiography (APCs 0177, 0178, 0269, 0270, and 0697)

Under the OPPS, echocardiography services are reported using a combination of CPT codes and HCPCS C-codes. Hospitals report the echocardiography CPT codes when performing echocardiography procedures without contrast. Alternatively, hospitals report the HCPCS C-codes when performing echocardiography procedures with contrast, or procedures without contrast followed by procedures with contrast. In addition to the HCPCS C-codes, hospitals should also report the appropriate units of the HCPCS codes for the contrast agents used in the performance of the echocardiograms.

Currently, there are four APCs that describe echocardiography services:

  • APC 0128 (Echocardiogram With Contrast)
  • APC 0697 (Level I Echocardiogram Without Contrast)
  • APC 0269 (Level II Echocardiogram Without Contrast)
  • APC 0270 (Level III Echocardiogram Without Contrast)

For CY 2013, we proposed payment rates for these APCs of approximately $571, $212, $392, and $558, respectively.

Comment: One commenter expressed concern regarding the APC assignment of the procedures for fetal echocardiography to APC 0697. The commenter believed that this APC classification and payment rate are inconsistent with the resources required to perform fetal echocardiography studies. These resources, the commenter noted, substantially exceed the resources generally needed for adult services. Therefore, the commenter recommended that CMS reassign fetal echocardiography CPT codes 76825 (Echocardiography, fetal, cardiovascular system, real time with image documentation (2d), with or without m-mode recording;) and 76826 (Echocardiography, fetal, cardiovascular system, real time with image documentation (2d), with or without m-mode recording; follow-up or repeat study) to the same APC as adult echocardiography procedures, APC 0269 (Level II Echocardiogram Without Contrast).

Response: For the CY 2013 OPPS/ASC proposed rule, we proposed to assign CPT codes 76825 and 76826 to APC 0697, which had a proposed payment rate of $211.71. As we stated in the CY 2012 OPPS/ASC final rule with comment period, because these codes have been in existence for almost 20 years, and have been reportable under the OPPS since it was implemented in 2000, we believe that the low frequency of these services is the result of infrequent use of this procedure on Medicare beneficiaries. Analysis of our claims data from past years revealed that these procedures are relatively low volume procedures. CPT code 76825 has had fewer than 330 single claims for ratesetting for each year with a cost that has ranged between approximately $88 and approximately $140. Similarly, CPT code 76826 has had fewer than 50 single claims for ratesetting for each year with a cost that has ranged between approximately $85 and approximately $92. For this CY 2013 OPPS/ASC final rule with comment period, CPT codes 76826 and 76825 are assigned APCs with payment rates that exceed their respective individual geometric mean costs. Therefore, based on our claims data, we believe that CPT codes 76825 and 76826 are appropriately assigned to APC 0697 for CY 2013 based on their clinical homogeneity and resource costs of the other procedure assigned to APC 0697.

Comment: Several commenters expressed concern regarding a violation of the 2 times rule for APC 0128 and urged CMS not to finalize an exemption from the 2 times rule for APC 0128. The commenters stated that the assignment of HCPCS codes C8924 (Transthoracic echocardiography with contrast, or without contrast followed by with contrast, real-time with image documentation (2d), includes m-mode recording, when performed, follow-up or limited study) and C8930 (Transthoracic echocardiography, with contrast, or without contrast followed by with contrast, real-time with image documentation (2d), includes m-mode recording, when performed, during rest and cardiovascular stress test using treadmill, bicycle exercise and/or pharmacologically induced stress, with interpretation and report; including performance of continuous electrocardiographic monitoring, with physician supervision) to APC 0128 results in a violation of the 2 times rule in particular, and that the other procedures assigned to APC 0128 are not clinically comparable in nature, therefore resulting in an APC payment rate that does not reflect the wide range of resources utilized for the procedures assigned to APC 0128. The commenters further recommended that CMS reconfigure APC 0128 so that the procedures are clinically similar with respect to resources. One commenter recommended that CMS adopt three levels of contrast-enhanced APCs that parallel the three APCs that have been established for non-contrast enhanced procedures.

Response: As stated above, we have four separate APCs to which echocardiography services are assigned. Procedures that utilize contrast agents are currently assigned to APC 0128, while procedures without contrast agents are assigned to one of three APCs, specifically APC 0270, APC 0269, or APC 0697. In the CY 2013 OPPS/ASC proposed rule, we proposed a payment rate for APC 0128 of approximately $571 for CY 2013. As we do every year, we reviewed our claims data for the services assigned to APC 0128. Based on our review, and taking into consideration the public comments received in response to the final rule with comment period, we agree with commenters that APC 0128 has a 2 times violation that cannot be exempted for this CY 2013 OPPS/ASC final rule with comment period. As we have stated in section III.B. of this final rule with comment period, we make exemptions to the 2 times rule's limit on the variation of costs within each APC group in unusual cases, such as low volume items and services. In deciding to propose exemptions to the 2 times rule, we look at the respective APC's resource homogeneity, clinical homogeneity, hospital outpatient setting, frequency of service (volume), and opportunity for upcoding and code fragmentation. We believe that, for this CY 2013 OPPS/ASC final rule with comment period, it would be inappropriate to exempt APC 0128 from the 2 times rule and to continue to assign echocardiography services utilizing contrast agents to one APC, based on our evaluation of the aforementioned criteria. Therefore, for CY 2013, we are splitting APC 0128 to create two new level APCs: APC 0177 (Level I Echocardiogram with Contrast) and APC 0178 (Level II Echocardiogram with Contrast).

After consideration of the public comments we received, we are finalizing our proposals, with the modifications mentioned above, to continue to calculate the costs of the HCPCS codes describing the non-contrast echocardiography procedures based on APCs 0697, 0269, and 0270, and to calculate the costs for the HCPCS codes describing contrast echocardiography procedures based on new APCs 0177 and 0178. For a more detailed discussion and history of the OPPS payment for echocardiography services, we refer readers to the CY 2008 OPPS/ASC final rule with comment period (72 FR 66644 through 66646), the CY 2009 OPPS/ASC final rule with comment period (72 FR 68542 through 68544), and the CY 2010 OPPS/ASC final rule with comment period (74 FR 60374 through 60383).

Table 23 below shows the procedure assignments and the final geometric mean cost assigned to echocardiography APCs, including the new Level I and Level II Echocardiogram with Contrast APCs.

BILLING CODE 4120-01-P

BILLING CODE 4120-01-C

2. Gastrointestinal Services

a. Laparoscopic Adjustable Gastric Band (APC 0132)

Effective January 1, 2006, the AMA's CPT Editorial Panel established CPT code 43770 (Laparoscopy, surgical, gastric restrictive procedure; placement of adjustable gastric restrictive device (eg, gastric band and subcutaneous port components)) to describe the bariatric placement of an adjustable band by laparoscopy. From January 1, 2006 through December 31, 2011, CPT code 43770 was assigned to status indicator “C” to indicate that the procedure was not paid separately under the OPPS because the procedure was considered an “inpatient” procedure. However, in the CY 2012 OPPS/ASC final rule (76 FR 74355), we stated that we received a comment requesting that this CPT code be removed from the inpatient list and assigned to a separately payable APC, effective January 1, 2012. Based on input from our physicians and review of our claims data, we determined that it was appropriate to remove CPT code 43770 from the inpatient list because patients undergoing this procedure can typically be managed postoperatively as outpatients. Consequently, we assigned CPT code 43770 to APC 0131 (Level II Laparoscopy), effective January 1, 2012.

At the August 2012 HOP Panel meeting, a presenter requested that the Panel recommend to CMS the reassignment of CPT code 43770 from APC 0131 to a new APC. The commenter expressed concern about the existing APC assignment and indicated that APC 0131 does not adequately cover the costs of performing the procedure. After discussion of the procedure and review of the hospital outpatient claims data, the Panel recommended that CPT code 43770 remain in APC 0131 for the CY 2013 update.

For CY 2013, we proposed to continue to assign CPT code 43770 to APC 0131, which had a proposed rule payment rate of approximately $3,497.

Comment: Several commenters disagreed with the proposal to continue to assign CPT code 43770 to APC 0131 because the procedure is different from other procedures assigned to this APC. According to one commenter, the procedures assigned to APC 0131 are less intensive (for example, resource cost) than CPT code 43770. Another commenter stated that the procedures assigned to APC 0131 are not similar to CPT code 43770 because this procedure includes the implantation of a gastric band device as well as a port device, while the other procedures assigned to this APC do not. In addition, some commenters believed that assignment of CPT code 43770 to APC 0131 violates the 2 times rule. According to the commenters, there is no existing APC that includes procedures that are comparable to the procedures described by CPT code 43770, both clinically and in terms of resource utilization. Therefore, they requested that CMS establish a new APC for CPT code 43770 to ensure the most appropriate payment for this procedure.

However, we received conflicting statements on the issue of clinical comparability from some of the commenters. One commenter stated that, although there is no existing APC that accurately fits with CPT code 43770, the commenter mentioned that APC 0132 (Level III Laparoscopy) does include some procedures that are more clinically comparable to CPT code 43770 than the procedures assigned to APC 0131, and suggested that APC 0132 would be an appropriate APC assignment for this procedure. Another commenter considered suggesting a reassignment of CPT code 43770 to APC 0132 but stated that the procedures assigned to APC 0132 are not comparable in terms of resource utilization. Although most of the commenters agreed that establishing a new APC for CPT code 43770 would be more appropriate, some commenters suggested assigning the procedure to APC 0132 as an interim APC assignment if a new APC cannot be established for the CY 2013 update.

Response: We do not agree with the commenters' assertion that assigning CPT code 43770 to APC 0131 violates the 2 times rule. In determining whether a 2 times rule violation exists in an APC, we consider only those HCPCS codes that are significant based on the number of claims. For purposes of identifying significant HCPCS codes for examination in the 2 times rule, we consider codes that have more than 1,000 single major claims or codes that have both greater than 99 single major claims and comprise at least 2 percent of the single major claims used to establish the costs of the procedures assigned to an APC to be significant (75 FR 71832). This longstanding definition of when a HCPCS code is significant for purposes of the 2 times rule was selected because we believe that a subset of 1,000 claims is negligible within the set of approximately 100 million single procedure or single session claims we use for establishing costs. Similarly, a HCPCS code for which there are fewer than 99 single claims and which comprises less than 2 percent of the single major claims within an APC will have a negligible impact on the costs of the procedures in an APC. For the CY 2013 OPPS/ASC proposed rule, claims data for CPT code 43770 showed 171 single claims out of 216 total claims and comprised less than 1 percent of the claims for procedures within APC 0131. Although CPT code 43770 had more than 99 single major claims, it did not contribute to at least 2 percent of the single major claims for procedures within APC 0131. Therefore, in the CY 2013 OPPS/ASC proposed rule, we determined that assigning CPT code 43770 to APC 0131 did not violate the 2 times rule because it did not meet the definition of a significant HCPCS code.

As stated above, the HOP Panel made a recommendation to continue to assign CPT code 43770 to APC 0131 for the CY 2013 update. However, after the Panel meeting, we reviewed our more recent claims data for this final rule with comment period, and our analysis revealed that the procedure would be more appropriately assigned to APC 0132 (Level III Laparoscopy). Specifically, our analysis showed 213 single claims (out of 262 total claims) for CPT code 43770 with a geometric mean cost of approximately $7,410. Furthermore, our analysis revealed that CPT code 43770 meets the definition of significant claims because the procedure represents more than 99 single major claims and contribute to at least 2 percent of the claims for procedures within APC 0132. Consequently, we do not agree with the Panel's recommendation, and are reassigning CPT code 43770 to APC 0132.

In summary, after consideration of the public comments we received, we are revising the APC assignment for CPT code 43770 from APC 0131 to 0132 for CY 2013. The final CY 2013 geometric mean cost for APC 0132 is approximately $5,268.

b. Transoral Incisionless Fundoplication (APC 0422)

For CY 2013, we proposed to continue to assign CPT code C9724 (Endoscopic full-thickness plication in the gastric cardia using endoscopic plication system (eps); includes endoscopy) to APC 0422 (Level III Upper GI Procedures), which had a proposed payment rate of approximately $1,878.

We note that at the August 2012 HOP Panel meeting, a presenter requested that the Panel recommend to CMS the reassignment of HCPCS code C9724 from APC 0422 to a new APC, or alternatively, to establish a new APC with a descriptor of “Level IV Upper GI Procedures.” The commenter stated that the payment rate for APC 0422 does not cover the cost of providing the procedure. After discussion of the procedure and review of the hospital outpatient claims data, the Panel recommended that HCPCS code C9724 remain in APC 0422 for the CY 2013 update.

Comment: Several commenters disagreed with the proposal to continue to assign HCPCS code C9724 to APC 0422. The commenters stated that the proposed payment rate for APC 0422 would not cover the cost of performing the procedure. According to the commenters, the cost of performing the procedure is approximately $5,000. The commenters urged CMS to either reassign HCPCS code C9724 to APC 1565 (New Technology—Level XXVIII ($5000-$5500)), which had a proposed payment rate of approximately $5,250, or establish a new APC titled “Level IV Upper GI Procedures” with a payment rate of approximately $5,000.

Response: HCPCS code C9724, which was established by CMS effective April 1, 2005, describes an endoscopic full-thickness plication procedure for the treatment of gastroesophageal reflux disease (GERD). Since April 2005, HCPCS code C9724 has been assigned to APC 0422. Because this code has been in existence since April 2005, we have claims data for several years. For this final rule with comment period, which is based on claims submitted from January 1, 2011 through December 31, 2011, our data show a geometric mean cost of approximately $5,728 based on 24 single claims (out of 120 total claims) for HCPCS code C9724. In addition, we agree with the Panel's recommendation to maintain HCPCS code C9724 in APC 0422 for the CY 2013 update. Based on the clinical similarity to other procedures currently assigned to APC 0422, and because there is no violation with the 2 times rule, we will continue to assign HCPCS code C9724 to APC 0422. Consistent with CMS' policy of reviewing APC assignments annually, we will reevaluate the cost of HCPCS code C9724 and its APC assignment for the CY 2014 rulemaking cycle.

In addition, because of concerns related to the current descriptor for HCPCS code C9724, we are revising the long descriptor to read “Endoscopic full-thickness plication of the stomach using endoscopic plication system (eps); includes endoscopy,” effective January 1, 2013. This change in the long descriptor is necessary to accurately describe how the procedure is currently performed.

After consideration of the public comments we received, we are finalizing our CY 2013 proposal without modification and will continue to maintain HCPCS code C9724 in APC 0422. The final CY 2013 geometric mean cost for APC 0422 is approximately $1,921.

c. Gastrointestinal Transit and Pressure Measurement (APC 0361)

The AMA's CPT Editorial Panel created CPT code 0242T (Gastrointestinal tract transit and pressure measurement, stomach trough colon, wireless capsule, with interpretation and report) effective January 1, 2011. For CY 2011, we initially assigned CPT code 0242T to APC 0361 (Level II Alimentary Tests), with a payment rate of $282.48.

For CY 2012, we maintained the assignment of CPT code 0242T to APC 0361 with a payment rate of $285.59. We noted in the CY 2012 OPPS/ASC final rule with comment period (76 FR 74242) that we routinely make assignments of new CPT codes to clinical APCs before we have claims data that are indicative of the resource costs of a procedure. We make these assignments initially using the best currently available information, while reviewing claims data once such data become available and making reassignments accordingly based on those data.

We stated in the CY 2012 OPPS/ASC final rule with comment period that, as was the case when we made the initial assignment for CY 2011, we continued to believe that there are relevant clinical similarities between the service described by CPT code 0242T and other services assigned to APC 0361 to continue to justify this APC assignment. The service described by CPT code 0242T and the services assigned to APC 0361 all involve tests of the alimentary canal. We believed that the clinical attributes and CY 2012 costs of the services assigned to APC 0361 supported the initial assignment of CPT code 0242T to APC 0361. We indicated that we routinely make assignments of new CPT codes to clinical APCs before we have claims data to indicate the procedural resource costs, and that we generally wait until claims data are available before reassignment to a new APC. For CY 2012, we maintained our assignment of CPT code 0242T to APC 0361, which has a final median cost of $285.89, and we stated that we would review this assignment for CY 2013 when some claims data should be available for this procedure.

For CY 2013, we proposed to maintain the assignment of CPT code 0242T to APC 0361, which had a proposed rule geometric mean cost of approximately $311 and a proposed payment rate of approximately $303. We now have a small number of claims for use in CY 2013 for CPT code 0242T, which had a proposed rule geometric mean cost of approximately $613. The range of procedure level costs in APC 0361 for the CY 2013 proposed rule was approximately $214 to approximately $633. This range of costs does not constitute a 2 times rule violation because the range of costs for procedures with significant volume in the APC is approximately $302 to approximately $406.

We did not receive any public comments on our proposed APC assignment of CPT code 0242T to APC 0361.

At the August 2012 meeting of the HOP Panel, the Panel recommended that CMS assign CPT code 0242T to APC 0142 (Level I Small Intestine Endoscopy), based on the procedure's proposed rule mean cost of approximately $613, with a frequency of 8 claims.

Our CY 2013 final rule claims data show a cost of approximately $497 for CPT code 0242T, based on 8 claims. Our analysis comparing the proposed rule data and the final rule data for CPT code 0242T shows that one claim was dropped and another added, resulting in the fluctuation in geometric mean costs for the small number of claims between the proposed rule dataset and the final rule dataset for this procedure. The CY 2013 final geometric mean cost for APC 0361 is approximately $311, which includes a range of costs for procedures in the APC of approximately $209 to approximately $633. The CY 2013 final geometric mean cost for APC 0142 is approximately $772, which includes a range of costs for procedures in the APC of approximately $569 to approximately $826. Therefore, based on the final rule geometric mean cost for CPT code 0242T, assignment of the code to APC 0361 is appropriate. We also continue to believe that CPT code 0242T is similar clinically to other procedures assigned to APC 0361. Therefore we are maintaining our assignment of the CPT code 0242T procedure to APC 0361 for CY 2013.

We note that the CPT Editorial Panel is replacing the CPT code for the procedure described by CPT code 0242T with a Category I CPT code, CPT code 91112 (Gastrointestinal transit and pressure measurement, stomach trough colon, wireless capsule, with interpretation and report), effective January 1, 2013. Therefore, we are deleting CPT code 0242T from the OPPS effective January 1, 2013, and assigning replacement CPT code 91112 to APC 0361 for this procedure.

3. Integumentary System Services

a. Extracorporeal Shock Wave Wound Treatment (APC 0340)

In the CY 2012 OPPS/ASC final rule with comment period, we assigned new CPT codes 0299T (Extracorporeal shock wave for integumentary wound healing, initial wound) and 0300T (Extracorporeal shock wave for integumentary wound healing, each additional wound) on an interim basis to APC 0340 (Minor Ancillary Procedures), which has a CY 2012 payment rate of approximately $46 and a CY 2013 proposed rule payment rate of approximately $49.

Comment: One commenter objecting to the interim APC assignment of CPT codes 0299T and 0300T believed that the assignment is not consistent clinically or in terms of the resources associated with the shock wave treatment procedures. The commenter stated that these services are more similar clinically and in related resources to the high-energy shock wave procedure for musculoskeletal conditions that is assigned to APC 0050 (Level II Musculoskeletal Procedures Except Hand and Foot), which has a CY 2012 payment rate of approximately $2,269. The commenter believed that assignment of these codes to a New Technology APC would be appropriate to gather cost data, and indicated that they would submit an application for new technology payments for these codes to CMS.

We received other similar comments to the proposed rule from several clinicians in the field who were involved in the initial clinical trial of the extracorporeal shock wave procedure. These commenters discussed the clinical trial and the clinical attributes of this treatment, indicating that it offers significantly greater clinical benefit than other wound healing therapies at a considerably lower cost. They objected to CMS' assignment of CPT codes 0299T and 0300T to APC 0340. The commenters believed that the payment rate for this APC would inhibit the use of this emerging technology and would prevent patient access to the treatment.

Response: We agree with the commenters that it may be more appropriate in terms of clinical and resource similarity to assign CPT codes 0299T and 0300T to an APC other than APC 0340. However, we do not agree that CPT codes 0299T and 0300T should be assigned to APC 0050. Having considered the information provided by the commenters, and based on our evaluation of clinical and resource similarity to existing services, we believe that placement in APC 0133 (Level I Skin Repair) would be more appropriate for these services until claims data are available. For CY 2013, we are placing CPT codes 0299T and 0300T in APC 0133, which has a final geometric mean cost of approximately $88. We will reevaluate the APC placement when claims data are available for CY 2014.

b. Application of Skin Substitute (APCs 0133 and 0134)

For CY 2012, we made assignments for several new (replacement) CPT codes for the application of skin substitutes. We assigned CPT code 15272 (Application of skin substitute graft to trunk, arms, legs, total wound surface area up to 100 sq cm; each additional 25 sq cm or part thereof) and CPT code 15276 (Application of skin substitute graft to face, scalp, eyelids, mouth, neck, ears, orbits, genitalia, hands, feet and/or multiple digits, total wound surface area up to 100 sq cm; each additional 25 sq cm or part thereof) to APC 0133 (Level I Skin Repair), which has a CY 2012 payment rate of approximately $84 and a CY 2013 proposed payment rate of approximately $86. We assigned CPT code 15274 (Application of skin substitute graft to trunk, arms, legs, total wound surface area greater than or equal to 100 sq cm; each additional 100 sq cm or part thereof) and CPT code 15278 (Application of skin substitute graft to face, scalp, eyelids, mouth, neck, ears, orbits, genitalia, hands, feet and/or multiple digits, total wound surface area greater than or equal to 100 sq cm; each additional 100 sq cm or part thereof) to APC 0134 (Level II Skin Repair), which has a CY 2012 payment rate of approximately $228 and a CY 2013 proposed payment rate of approximately $252.

Comment: One commenter stated that CMS should have assigned the new codes to the APC that includes their predecessor base codes so that a 2 times rule violation is avoided. They requested that for CY 2013, CMS reassign CPT codes 15272 and 15276 to APC 0134, crosswalking them to the predecessor add-on CPT code 15341 and assign them to the same APC as the former base CPT code 15340. Similarly, the commenter requested that CMS reassign CPT codes 15274 and 15278 to APC 0135 (Level III Skin Repair) which includes their applicable base codes (CPT codes 15273 and 15277).

Response: As we indicated in the CY 2012 OPPS/ASC final rule (76 FR 74269), we assigned these four replacement CPT codes for CY 2012 based on their clinical and estimated resource similarity to the services in their assigned APCs. We also took into account the size descriptions in the new codes' long descriptors. There was not a one-to-one crosswalk between the old skin substitute application codes and the new CPT codes, as suggested by the commenter. Several of the old CPT codes map to a single new code. Therefore, we made the most appropriate assignment based on clinical homogeneity and estimated resource similarity, taking into account all of the former procedures that are now encompassed by a single code and the new coding structure for the family of codes.

For CY 2013, we will continue to assign CPT codes 15272 and 15276 to APC 0133, which has a final geometric mean cost of approximately $88, and CPT codes 15274 and 15278 to APC 0134, which has a final geometric mean cost of approximately $259. We will reevaluate the placement of these codes when claims data become available in the CY 2014 rulemaking cycle.

c. Low Frequency, Non-Contact, Non-Thermal Ultrasound (APC 0015)

Effective January 1, 2008, the CPT Editorial Panel created CPT code 0183T (Low Frequency, Non-Contact, Non-Thermal Ultrasound). Since that time, we have assigned this service to either APC 0013 (Level II Debridement and Destruction) or APC 0015 (Level III Debridement and Destruction). Initially, for CY 2008 and CY 2009, we placed this service in the higher Level III APC 0015, with a payment rate of approximately $100. Based on our review of the first year of hospital claims data (CY 2008 claims), for CY 2010 we reassigned the service to the lower Level II APC 0013, with a payment rate of approximately $59. For CY 2011 and CY 2012, due to a change in the estimated cost of CPT code 0183T, we reassigned it to the higher level APC 0015, with a payment rate of approximately $105 in CY 2011 and approximately $103 in CY 2012.

For CY 2013, we proposed to reassign CPT 0183T to APC 0013 because its proposed rule geometric mean cost of approximately $89 was closer to the proposed rule geometric mean cost of APC 0013 (approximately $73) than the proposed rule geometric mean cost of APC 0015 (approximately $110).

Comment: One commenter objected to the reassignment of CPT code 0183T to APC 0013 because the commenter's estimated cost of furnishing this service of approximately $101 would be greater than its proposed payment. The commenter believed that procedures currently assigned to APC 0013 and those assigned to APC 0015 are not homogeneous clinically or in terms of resource requirements. The commenter requested that CMS split APC 0013 and APC 0015 to create a third APC, such that APC 0013 would include the services with costs less than $80; the new APC would include services with costs between $80 and $110; and APC 0015 would include services with costs greater than or equal to $110.

Another commenter recommended that CMS merge APC 0013 and APC 0015, arguing that both APCs are for skin procedures and noting that the proposed cost for the highest volume service in APC 0013, described by CPT code 17000 (Destruction of premalignant lesions; first lesion), is more than half of the cost of the highest volume service in APC 0015, described by CPT code 97597 (Open wound debridement; first 20 sq cm or less).

Response: The final rule geometric mean cost of CPT code 0183T and APC 0013 (approximately $88 and $74, respectively) did not change significantly from their proposed rule costs and remain very similar. There also is no significant change in the final rule geometric mean cost of APC 0015 (approximately $110). We note that merging the two APCs as one commenter suggested would create several 2-times rule violations, and we see no clinical or other need to further split the APCs. Therefore, because the geometric mean cost of CPT code 0183T continues to be closer to the geometric mean cost of APC 0013 than that of APC 0015, and because merging the APCs would create several 2 times rule violations, for CY 2013, we are finalizing our proposal to reassign CPT code 0183T to APC 0013.

4. Nervous System Services

a. Scrambler Therapy (APC 0275)

For the CY 2012 update, the AMA's CPT Editorial Panel established Category III CPT code 0278T (Transcutaneous electrical modulation pain reprocessing (eg, scrambler therapy), each treatment session (includes placement of electrodes)) effective January 1, 2012. CPT code 0278T describes a transcutaneous electrical modulation pain reprocessing procedure and involves the use of four to five electrodes that deliver electrical stimulation to treat chronic chemo-induced neuropathic pain. Based on the nature of the procedure, which can be performed by physicians, nurses, or physical therapists, the therapy involves 10 sessions (1 session per day for 10 days), and each session takes approximately between 30 and 45 minutes.

In Addendum B of the CY 2012 OPPS/ASC final rule with comment period, we assigned CPT code 0278T to APC 0215 (Level I Nerve and Muscle Tests) which has a CY 2012 payment rate of approximately $44. We also assigned this CPT code comment indicator “NI” to indicate that the code was new for CY 2012 with an interim APC assignment that was subject to public comment following the publication of the final rule with comment period. Specifically, the code's APC assignment and status indicator were subject to public comment. We received one public comment regarding the interim APC assignment for CPT code 0278T which we address below in this section.

We note that we do not discuss APC or status indicator assignments for new codes for the upcoming year in the proposed rule because the new codes are not available when we publish the proposed rule. Rather, as has been our practice in the past, we implement new HCPCS codes in the OPPS final rule with comment period, at which time we invite public comments regarding the treatment of the new codes. We subsequently respond to those comments in the final rule with comment period for the following year's OPPS update.

As has been our practice since the implementation of the OPPS in 2000, we carefully review all new procedures before assigning them to an APC. In determining the APC assignment for CPT code 0278T, we took into consideration the clinical and resource characteristics involved with Scrambler Therapy. Based on our initial review of the components of these services and consultation with our medical advisors, we assigned CPT code 0278T to APC 0215 for CY 2012.

At the February 2012 HOP Panel meeting, a presenter requested the reassignment of CPT code 0278T from APC 0215 to APC 0206 (Level II Nerve Injections) based on resource cost and clinical homogeneity. The presenter stated that the assignment of CPT code 0278T to APC 0215 is not appropriate because the procedures in this APC are primarily diagnostic in nature, whereas CPT code 0278T represents a therapeutic procedure. The presenter further added that the time and cost involved with providing the service associated with CPT code 0278T is considerably greater than the time and cost involved for procedures assigned to APC 0215, and recommended that the Scrambler Therapy would be more appropriately assigned to APC 0206 because the procedures in APC 0206 are mostly therapeutic in nature and represent similar costs. At the February 2012 meeting, the Panel made no recommendation to reassign CPT code 0278T from its current APC 0215 assignment for CY 2013.

In Addendum B of the CY 2013 OPPS/ASC proposed rule, we proposed to continue to assign CPT code 0278T to APC 0215. At the August 2012 HOP Panel meeting, the same presenter at February 2012 Panel meeting made the same request to the Panel to recommend to CMS to reassign CPT code 0278T to a more appropriate APC. Specifically, at the August 2012 HOP Panel meeting, the requester recommended that CPT code 0278T be reassigned to APC 0204 (Level I Nerve Injections) based on clinical and cost considerations. During the discussion, one of the Panel members pointed out that the procedures assigned to APC 0204 represent nerve injections, which is in contrast to how the procedure described by CPT code 0278T is delivered because the procedure associated with the Scrambler Therapy does not involve injections. After discussion of the issue, the HOP Panel recommended that CMS assign CPT code 0278T to APC 0218 (Level II Nerve and Muscle Tests).

Comment: One commenter to the CY 2012 OPPS/ASC final rule with comment period recommended the reassignment of CPT code 0278T from APC 0215 to APC 0206 based on the commenter's cost analysis. Alternatively, the commenter recommended assignment of CPT code 0278T to APC 0204 because this is the APC assigned to unlisted CPT code 64999 (Unlisted procedure, nervous system), which would be used to report the Scrambler Therapy if CPT code 0278T had not been established.

Response: As a new Category III CPT code for CY 2012, we do not yet have hospital claims data for the procedure. Category III CPT codes are temporary codes that describe emerging technology, procedures, and services, and are created by the AMA to allow for data collection for new services or procedures. Under the OPPS, we generally assign a payment rate to a new Category III CPT code based on input from a variety of sources, including but not limited to, review of resource costs and clinical homogeneity of the service to existing procedures, information from specialty societies, input from CMS medical advisors, and other information available to us. Based on our review of the clinical characteristics of the service described by CPT code 0278T and the information provided by the commenter, we do not believe that we have sufficient clinical or cost information to justify a reassignment to a different APC at this time. As we do every year for other services and procedures under the OPPS, we will review the claims data for CPT code 0278T for CY 2012 for the CY 2014 rulemaking cycle. Because CPT code 0278T was a new code for CY 2012, the first time we will have claims data for this procedure is next year for the CY 2014 update, and at which time we will reevaluate the APC assignment for this code.

Comment: Some commenters recommended a range of the appropriate payment for CPT code 0278T based on their internal analysis. One commenter recommended that CPT code 0278T be assigned to an APC that has a payment rate of between $124 to $144 based on their analysis, by taking into consideration the site of service, staff time involved, and system costs associated with providing the therapy. Another commenter stated that the total cost of providing Scrambler Therapy is approximately $274; however, an initial payment of approximately $184 may be adequate for hospitals to initiate treatment. The commenter further stated that the proposed payment rate of approximately $81 for APC 0218, which was recommended by the HOP Panel at the August 2012 meeting, is adequate. However, the commenter asserted that the proposed payment rate of approximately $150 for New Technology APC 1540 (New Technology—Level III ($100—$200)) would be more appropriate.

Response: After further review of the HOP Panel recommendation at the August 2012 meeting and consideration of the public comments that we received on this particular procedure, we believe that we should continue to assign the Scrambler Therapy to APC 0215. Therefore, we are not accepting the Panel's recommendation to reassign CPT code 0278T to APC 0218. In addition, we do not agree with the commenter that CPT code 0278T should be assigned to New Technology APC 1540. Based on our understanding of the procedure, we believe that APC 0215 is the most appropriate APC assignment for CPT code 0278T based on its similarity to other procedures assigned to APC 0215. We will review the claims data for CPT 0278T next year for the CY 2014 rulemaking to determine whether an APC reassignment for the Scrambler Therapy is necessary.

After consideration of the public comments received, we are finalizing our CY 2013 proposal, without modification, to continue to assign CPT code 0278T to APC 0215 for CY 2013. The final CY 2013 geometric mean cost for APC 0215 is approximately $44.

b. Transcranial Magnetic Stimulation Therapy (TMS) (APC 0216)

Since July 2006, CPT codes have existed to describe Transcranial Magnetic Stimulation Therapy (TMS) therapy. The initial CPT codes were temporary Category III CPT codes, specifically, CPT code 0160T (Therapeutic repetitive transcranial magnetic stimulation treatment planning) and 0161T (Therapeutic repetitive transcranial magnetic stimulation treatment delivery and management, per session), that were effective July 1, 2006. For CY 2011, the CPT Editorial Panel deleted CPT code 0160T on December 31, 2010, and replaced it with CPT code 90867 (Therapeutic repetitive transcranial magnetic stimulation (tms) treatment; initial, including cortical mapping, motor threshold determination, delivery and management) effective January 1, 2011. Similarly, CPT code 0161T was deleted on December 31, 2010, and was replaced with CPT code 90868 (Therapeutic repetitive transcranial magnetic stimulation (tms) treatment; subsequent delivery and management, per session) effective January 1, 2011. In CY 2012, the AMA's CPT Editorial Panel established an additional TMS therapy code, specifically CPT code 90869 (Therapeutic repetitive transcranial magnetic stimulation (tms) treatment; subsequent motor threshold re-determination with delivery and management), that was effective January 1, 2012.

In Addendum B of the CY 2013 OPPS/ASC proposed rule, we proposed to continue to assign CPT codes 90867, 90868, and 90869 to APC 0218 (Level II Nerve and Muscle Tests), which had a proposed payment rate of approximately $81.

Comment: One commenter disagreed with the proposed APC assignment and stated that the TMS therapy codes are not similar to the services assigned to APC 0218. The commenter recommended three options on the appropriate APC assignment.

Under the first option, the commenter recommended the reassignment of CPT codes 90867, 90868, and 90869 to APC 0216 (Level III Nerve and Muscle Tests), which had a proposed payment rate of approximately $182. The commenter also recommended the revision of the APC title description to read “Level III Nerve and Muscle Tests & TMS”. The commenter stated that the TMS therapy services are similar to the services described by CPT codes 95961 (Functional cortical and subcortical mapping by stimulation and/or recording of electrodes on brain surface, or of depth electrodes, to provoke seizures or identify vital brain structures; initial hour of physician attendance), 95962 (Functional cortical and subcortical mapping by stimulation and/or recording of electrodes on brain surface, or of depth electrodes, to provoke seizures or identify vital brain structures; each additional hour of physician attendance (list separately in addition to code for primary procedure)), and 96000 (Comprehensive computer-based motion analysis by video-taping and 3d kinematics), which are assigned to APC 0216.

Under the second option, the commenter recommended the establishment of a new APC for the three TMS therapy CPT codes, and further recommended revising the APC title description to read “Transcranial Magnetic Stimulation”.

Under the third option, the commenter suggested assigning CPT codes 90867, 90868, and 90869 to APC 0320 (Electroconvulsive Therapy), which had a proposed payment rate of approximately $441. Although TMS therapy is clinically related to electroconvulsive therapy (ECT), the commenter stated that its resource costs are lower than ECT.

Response: We appreciate the commenter's thoughtful suggestions on the APC assignments for CPT codes 90867, 90868, and 90869. We do not agree with the commenter that the procedures described by CPT codes 90867, 90868, and 90869 would be appropriately assigned to APC 0320 from a clinical perspective because the provision of electroconvulsive therapy generally requires more extensive monitoring and services (for example, muscle blockade) than transcranial magnetic treatment delivery and management. However, based on the latest claims data used for this rulemaking, we do agree with the commenter's suggestion that APC 0216 would be the more appropriate APC assignment for the three TMS therapy CPT codes. Analysis of our more recent claims data revealed that the resources associated with CPT codes 90867, 90868, and 90869 are similar to those services assigned to APC 0216. Specifically, for claims submitted during CY 2011, which were used for this final rule with comment period, CPT code 90867 showed a geometric mean cost of approximately $190 based on 15 single claims (out of 18 total claims), and a geometric mean cost of approximately $233 for CPT code 90868 based on 609 single claims (out of 614 total claims). In addition, review of the procedures assigned to APC 0216 showed that the range of the geometric mean cost for the procedures with significant claims data is between approximately $146 (for CPT code 92584 (Electrocochleography)) and approximately $233 (for CPT code 90868 (Tcranial magn stim tx deli)). Based on the clinical and resource similarity to other procedures currently assigned to this APC, we believe it is appropriate to reassign the TMS therapy services to APC 0216. Although CPT code 90869 is a new code for CY 2012, we believe that it is appropriate to reassign this service to APC 0216, similar to the APC assignment of CPT codes 90867 and 90868. Because of this reassignment, we also are revising the APC title descriptions of APCs 0215, 0216, and 0218 to appropriately reflect the services within each APC. Specifically, we are revising the APC title description of APC 0215 from “Level I Nerve and Muscle Tests” to “Level I Nerve and Muscle Services”; the title description of APC 0218 from “Level II Nerve and Muscle Tests” to “Level II Nerve and Muscle Services”; and the title description of APC 0216 from “Level III Nerve and Muscle Tests” to “Level III Nerve and Muscle Services”.

After consideration of the public comment we received, we are finalizing our CY 2013 proposal, with modification. That is, we are reassigning CPT codes 90867, 90868, and 90869 from APC 0218 to APC 0216, which has a final CY 2013 geometric mean cost of approximately $189. Table 24 below shows the final APC assignments for CPT codes 90867, 90868, and 90869 for CY 2013.

c. Paravertebral Neurolytic Agent (APC 0207)

Effective January 1, 2012, the AMA's CPT Editorial Panel created CPT code 64633 (Destruction by neurolytic agent, paravertebral facet joint nerve(s), with imaging guidance (fluoroscopy or ct); cervical or thoracic, single facet joint). For CY 2012, we assigned new CPT code 64633 on an interim basis to APC 0207 (Level III Nerve Injections). This interim APC assignment was consistent with our standard process for dealing with new CPT codes effective on January 1 for the upcoming calendar year, which is to assign each code to the APC that we believe contains services that are comparable with respect to clinical characteristics and resources required to furnish the service. CPT code 64633 was assigned a comment indicator of “NI” in Addendum B to the CY 2012 OPPS/ASC final rule with comment period to identify it as a new interim APC assignment for the new year and the APC assignment for this new code was open to public comment for 60 days following the publication of the CY 2012 OPPS/ASC final rule with comment period. For CY 2013, we proposed to continue to assign CPT code 64633 to APC 0207, which had a proposed payment rate of approximately $568.

Comment: One commenter who responded to the CY 2012 OPPS/ASC final rule with comment period objected to the assignment of CPT code 64633 to APC 0207 because the commenter believed that the payment rate for APC 0207 substantially underpays providers for this service.

Response: Due to the lack of any claims data for CPT code 64633, we have no way to validate or substantiate the claim made by the commenter. We expect to have CY 2012 claims data for CPT code 64633 available in CY 2013 in preparation for the CY 2014 rulemaking cycle and will reevaluate the APC assignment of CPT code 64633 at that time.

After consideration of the public comments we received, we are finalizing our CY 2013 proposal, without modification, to continue to assign CPT code 64633 to APC 0207, which has a final CY 2013 APC geometric mean cost of approximately $582.

d. Programmable Implantable Pump (APC 0691)

Effective January 1, 2012, the AMA's CPT Editorial Panel created two new CPT codes that combine pump refill and programming/analysis procedures: CPT code 62369 (Electronic analysis of programmable, implanted pump for intrathecal or epidural drug infusion (includes evaluation of reservoir status, alarm status, drub prescription status); with reprogramming and refill) and CPT code 62370 (Electronic analysis of programmable, implanted pump for intrathecal or epidural drug infusion (includes evaluation of reservoir status, alarm status, drub prescription status); with reprogramming and refill (requiring physician's skill)). For CY 2012, CPT codes 62369 and 62370 received a new interim APC assignment to APC 0691 (Level III Electronic Analysis of Devices), consistent with our standard process for dealing with new CPT codes effective on January 1 for the upcoming calendar year, which is to assign each code to the APC that we believe contains services that are comparable with respect to clinical characteristics and resources required to furnish the service. CPT codes 62369 and 62370 were both given a comment indicator of “NI” in Addendum B to the CY 2012 OPPS/ASC final rule with comment period to identify it as a new interim APC assignment for the new year and the APC assignment for these two new codes was open to public comment for 60 days following the publication of the CY 2012 OPPS/ASC final rule with comment period. For CY 2013, we proposed to continue to assign CPT codes 62369 and 62370 to APC 0691, which had a proposed payment rate of approximately $192.

Comment: Commenters who responded to the CY 2012 OPPS/ASC final rule with comment period objected to the assignment of CPT codes 62369 and 62370 to APC 0691 because they believed that the payment rate for APC 0691 substantially underpays providers for these services.

Response: Due to the lack of any claims data for CPT codes 62369 and 62370, we have no way to validate or substantiate the claim made by commenters. We expect to have CY 2012 claims data for CPT codes 62369 and 62370 in CY 2013 in preparation for the CY 2014 rulemaking cycle and will reevaluate the APC assignment of CPT codes 62369 and 62370 at that time.

After consideration of the public comments we received, we are finalizing our CY 2013 proposal, without modification, to continue to assign CPT codes 62369 and 62370 to APC 0691, which has a final CY 2013 APC geometric mean cost of approximately $197.

e. Revision/Removal of Neurostimulator Electrodes (APC 0687)

For CY 2013, we proposed to continue to assign CPT code 64569 (Revision or replacement of cranial nerve (eg, vagus nerve) neurostimulator electrode array, including connection to existing pulse generator) to APC 0687 (Revision/Removal of Neurostimulator Electrodes), which had a proposed CY 2013 payment rate of approximately $1,576.

Comment: Commenters objected to the assignment of CPT code 64569 in APC 0687 because they stated that this code is used to report both the revision and the replacement of neurostimulator electrodes. The commenters believed that hospital resources are substantially greater when neurostimulator electrodes are being replaced rather than revised. The commenters asked CMS to reassign CPT code 64569 to device-dependent APC 0040 (Level I Implantation/Revision/Replacement of Neurostimulator Electrodes) or assign new HCPCS codes to differentiate between electrode replacements (with a new electrode) and electrode revisions (without a new electrode) so that electrode revisions map to APC 0687 and electrode replacements map to APC 0040. The commenters noted that, like CPT code 64569, the procedures currently assigned to APC 0040 involve the implantation of a new electrode, either as an initial implant or as a replacement, while all of the procedures currently assigned to APC 0687, with the exception of CPT code 64569, are defined as “revision or removal” or simply “removal” of electrodes. The commenters stated that the resources associated with the procedure described by CPT code 64569 are similar to the resources associated with the procedures assigned to APC 0040.

Response: We agree with the commenters that the resources associated with the procedure described by CPT code 64569 are similar to the resources associated with procedures assigned to APC 0040, and that these procedures share clinical characteristics. We note that the CY 2013 final rule geometric mean cost for CPT code 64569 of approximately $5,473 is more consistent with the CY 2013 final rule geometric mean cost of APC 0040 of approximately $4,526 than with the CY 2013 final rule geometric mean cost of APC 0687 of approximately $1,554. Therefore, we are modifying our proposal and assigning CPT code 64569 to APC 0040 for CY 2013.

5. Ocular Services: Placement of Amniotic Membrane (APC 0233)

In CY 2011, the AMA CPT Editorial Panel revised the long descriptor for CPT code 65780 (Ocular surface reconstruction; amniotic membrane transplantation, multiple layers) to include the words “multiple layers” to further clarify the code descriptor. In addition, the AMA's CPT Editorial Panel created two new CPT codes that describe the placement of amniotic membrane on the ocular surface without reconstruction: one describing the placement of a self-retaining (non-sutured/non-glued) device on the surface of the eye; and the other describing a single layer of amniotic membrane sutured to the surface of the eye. Specifically, the AMA's CPT Editorial Panel established CPT codes 65778 (Placement of amniotic membrane on the ocular surface for wound healing; self-retaining) and 65779 (Placement of amniotic membrane on the ocular surface for wound healing; single layer, sutured), effective January 1, 2011.

As has been our practice since the implementation of the OPPS in 2000, we review all new procedures before assigning them to an APC. In determining the APC assignments for CPT codes 65778 and 65779, we took into consideration the clinical and resource characteristics involved with placement of amniotic membrane products on the eye for wound healing via a self-retaining device and a sutured, single-layer technique. In the CY 2011 OPPS/ASC final rule with comment period (75 FR 72402), we assigned CPT code 65778 to APC 0239 (Level II Repair and Plastic Eye Procedures), which had a payment rate of approximately $559, and CPT code 65779 to APC 0255 (Level II Anterior Segment Eye Procedures), which had a payment rate of approximately $519.

In addition, consistent with our longstanding policy for new codes, we assigned these two new CPT codes to interim APCs for CY 2011. Specifically, we assigned CPT codes 65778 and 65779 to comment indicator “NI” in Addendum B of the CY 2011 OPPS/ASC final rule with comment period to indicate that the codes were new with interim APC assignments that were subject to public comment. In accordance with our longstanding policy, our interim APC assignment for each code was based on our understanding of the resources required to furnish the service as defined in the code descriptor and input from our physicians.

At the Panel's February 28-March 1, 2011 meeting, a presenter requested the reassignment of CPT codes 65778 and 65779 to APC 0244 (Corneal and Amniotic Membrane Transplant), which is the same APC to which CPT code 65780 is assigned. The presenter indicated that, prior to CY 2011, the procedures described by CPT codes 65778 and 65779 were previously reported under the original version of CPT code 65780, which did not specify “multiple layers,” and as such these new CPT codes should continue to be assigned to APC 0244. Further, the presenter stated that the costs of the procedures described by CPT codes 65778 and 65779 are very similar to the cost of the procedure described by CPT code 65780.

The Panel recommended that CMS reassign the APC assignments for both CPT codes 65778 and 65779. Specifically, the Panel recommended the reassignment of CPT code 65778 from APC 0239 to APC 0233 (Level III Anterior Segment Eye Procedures), and the reassignment of CPT code 65779 from APC 0255 to APC 0233. In addition, the Panel recommended that CMS furnish data when data become available for these two codes. We noted at that time that because these CPT codes were effective January 1, 2011, the first available claims data for these codes would be for the CY 2013 OPPS rulemaking cycle.

We accepted the Panel's recommendations. However, in the CY 2012 OPPS/ASC final rule with comment period (76 FR 74247), we indicated that, while we agreed with the Panel's recommendation to reassign CPT codes 65778 and 65779 to APC 0233, we believed that CPT code 65778 should be assigned to a conditionally packaged status indicator of “Q2” to indicate that the procedure would be packaged when it is reported with another procedure that is also assigned to status indicator “T”; but in all other circumstances, the CPT code would be paid separately. Because the procedure described by CPT code 65778 would rarely be provided as a separate, stand-alone service in the HOPD, and because the procedure would almost exclusively be provided in addition to and following another procedure or service, we proposed to reassign CPT code 65778 a conditionally packaged status indicator of “Q2.” In addition, our medical advisors indicated that the procedure described by CPT code 65778 is not significantly different than placing a bandage contact lens on the surface of the eye to cover a corneal epithelial defect. CPT code 65778 describes the simple placement of a special type of bandage (a self-retaining amniotic membrane device) on the surface of the eye, which would most commonly be used in the HOPD to cover the surface of the eye after a procedure that results in a corneal epithelial defect.

At the August 10-11, 2011 Panel meeting, a presenter urged the Panel to recommend to CMS not to conditionally package CPT code 65778 for CY 2012, and instead, assign it status indicator “T.” Based on information presented at the meeting, and after further discussion of the issue, the Panel recommended that CMS reassign the status indicator for CPT code 65778 from conditionally packaged “Q2” to status indicator “T.” Several commenters also urged CMS not to finalize its proposal to conditionally package CPT code 65778 by assigning it status indicator “Q2” and instead adopt the Panel's recommendation to assign status indicator “T.”

After consideration of the Panel's August 2011 recommendation and the public comments that we received in response to the CY 2012 OPPS/ASC proposed rule, we finalized our proposal and reassigned the status indicator for CPT code 65778 from “T” to “Q2” effective January 1, 2012 (76 FR 74246). Given the clinical characteristics of this procedure, we believed that conditionally packaging CPT code 65778 was appropriate under the OPPS.

For the CY 2013 OPPS update, we proposed (77 FR 45123) to continue to assign CPT code 65778 a conditionally packaged status indicator of “Q2.” Similarly, we stated that we believe that we should assign CPT code 65779 to a conditionally packaged status indicator of “Q2.” Therefore, for CY 2013, we proposed to revise the status indicator for CPT code 65779 from status indicator “T” to “Q2” to indicate that the procedure would be packaged when it is reported with another procedure that is also assigned status indicator “T,” but in all other circumstances, the CPT code would be paid separately. This reassignment would enable hospitals to perform either procedures (CPT code 65778 or 65779) when appropriate, and would not differentiate one procedure from the other because of the status indicator assignment under the OPPS.

As indicated at the February 28-March 1, 2011 Panel meeting, because CPT codes 65778 and 65779 were effective January 1, 2011, the first available claims data for these codes would be in CY 2012 for the CY 2013 OPPS rulemaking. We now have claims data for CPT codes 65778 and 65779, and our data show that both procedures are performed in the HOPD setting. Analysis of the CY 2011 claims data available for the proposed rule, which was based on claims processed from January 1 through December 31, 2011, revealed that the estimated cost for CPT code 65778 is approximately $1,025 based on 33 single claims (out of 130 total claims), and the estimated cost for CPT code 65779 is approximately $2,303 based on 35 single claims (out of 260 total claims). Based on the clinical similarity to other procedures currently assigned to APC 0233, and because there was no violation with the 2 times rule, we stated that we believe that we should continue to assign both CPT codes 65778 and 65779 to APC 0233, which had a payment rate of approximately $1,150. Review of the procedures assigned to APC 0233 showed that the range of the cost for the procedures with significant claims data is between approximately $859 (for CPT code 65400 (Removal of eye lesion)) and approximately $1,397 (for CPT code 66840 (Removal of lens material)).

In summary, for CY 2013, we proposed to continue to assign CPT code 65778 to a conditionally packaged status indicator of “Q2” and to reassign the status indicator for CPT code 65779 from “T” to “Q2,” similar to CPT code 65778. In addition, we proposed to continue to assign both CPT codes 65778 and 65779 to APC 0233, which had a proposed geometric mean cost of approximately $1,150. Both procedures and their CY 2013 APC assignments were displayed in Table 19 of the proposed rule.

At the August 2012 HOP Panel Meeting, a presenter urged the Panel to recommend to CMS not to conditionally package CPT code 65779 for CY 2013, and instead, assign status indicator “T” to the code. Based on the information presented at the meeting, and after further discussion of the issue, the HOP Panel made no recommendation to revise the status indicator assignment for CPT code 65779.

Comment: One commenter urged CMS not to finalize its proposal to conditionally package CPT code 65779 by assigning it status indicator “Q2,” and recommended that CMS continue to assign the code status indicator “T.” The commenter expressed concern that assigning a “Q2” status indicator to CPT code 65779 would impede access to this procedure because, in a majority of the cases (84 percent), hospitals perform this procedure with another procedure. Consequently, a “Q2” status indicator would result in no payment for CPT code 65779. The commenter further recommended that CMS assign CPT code 65779 to APC 0244, or another APC that better reflects the resources associated with the procedure, such as APC 0241 (Level IV Repair and Plastic Eye Procedures) or APC 0234 (Level IV Anterior Segment Eye Procedures).

Response: We believe that the revision in status indicator for CPT code 65779 would enable hospitals to perform either procedures (CPT code 65778 or 65779) when appropriate, and would not differentiate one procedure from the other because of the status indicator assignment under the hospital OPPS. In addition, because CPT codes 65778 and 65779 were new for CY 2011, CY 2013 is the first year of claims data that we have available for ratesetting for both CPT codes. Analysis of the CY 2011 claims data revealed a geometric mean cost of approximately $989 for CPT code 65778 based on 36 single claims (out of 142 total claims), and approximately $2,314 for CPT code 65779 based on 37 single claims (out of 280 total claims). Review of the procedures assigned to APC 0233 showed that the range of the CPT geometric mean cost for the procedures with significant claims data is between approximately $867 (for CPT code 65400 (Removal of eye lesion)) and approximately $1,390 (for CPT code 66840 (Removal of lens material)). Based on the clinical similarity to other procedures currently assigned to APC 0233, and because there is no violation with the 2 times rule, we believe that we should continue to assign CPT code 65779 to APC 0233, which has a final geometric mean cost of approximately $1,162 for CY 2013.

As has been our practice since the implementation of the OPPS, we annually review all the items and services within an APC group to determine, with respect to comparability of the use of resources, for any 2 times rule violations. In making this determination, we review our claims data and determine whether we need to make changes to the current APC assignments for the following year. For CPT codes 65778 and 65779, we will again reevaluate their APC assignments for the CY 2014 OPPS rulemaking cycle.

After consideration of the public comment that we received, we are finalizing our CY 2013 proposal, without modification, to assign status indicator “Q2” to CPT code 65779. When the service is furnished with a separately payable surgical procedure with status indicator “T” on the same day, payment for CPT code 65779 is packaged. Otherwise, payment for CPT code 65779 is made separately through APC 0233, which has a final CY 2013 geometric mean cost of approximately $1,162. The amniotic membrane procedures and their CY 2013 final APC assignments are displayed in Table 25 below.

6. Radiology Oncology

a. Proton Beam Therapy (APCs 0664 and 0667)

APC 0664 (Level I Proton Beam Radiation Therapy) includes two procedures: CPT code 77520 (Proton treatment delivery; simple, without compensation), which had a CY 2013 proposed rule cost of approximately $331 (based on 185 single claims of 185 total claims submitted for CY 2011); and CPT code 77522 (Proton treatment delivery; simple, with compensation), which had a proposed rule cost of approximately $1,191 (based on 14,279 single claims of 15,405 total claims submitted for CY 2011). APC 0667 (Level II Proton Beam Radiation Therapy) also includes two procedures: CPT code 77523 (Proton treatment delivery, intermediate), which had a proposed rule cost of approximately $920 (based on 3,009 single claims out of 3,202 total claims submitted for CY 2011), and CPT code 77525 (Proton treatment delivery, complex), which had a proposed rule cost of approximately $483 (based on 1,400 single claims out of 1,591 total claims submitted for CY 2011). Based on these CY 2011 claims data, under the current APC structuring the proposed rule cost of APC 0664 was approximately $1,171, and the proposed rule cost of APC 0667 was approximately $750.

Because only a few hospitals bill Medicare for these services, their payment rates, which are set annually based on claims data according to the standard OPPS ratesetting methodology, may fluctuate significantly from year to year. For CY 2013, under the current APC assignments, the proposed rule cost of APC 0664 was approximately the same as its CY 2012 payment rate of $1,184. However, the proposed rule cost of APC 0667 decreased substantially from the CY 2012 payment rate. We also observed that for CY 2013, as in several prior years, the lower level APC 0664 did not include the lower cost services among the four CPT codes. For CY 2013, we proposed to improve the resource homogeneity within the proton beam therapy APCs by including the services requiring fewer resources in APC 0664 (Level I) and the services requiring greater resources in APC 0667 (Level II). Specifically, we proposed to reassign CPT code 77522 to APC 0667 and to reassign CPT code 77525 to APC 0664. Under the proposed reassignment, the estimated cost of APC 0664 was approximately $462, and the estimated cost of APC 0667 was approximately $1,138. We invited public comments on this proposal.

Comment: Several commenters indicated that the decrease in the cost of APC 0667 is attributable to inaccurate coding and cost reporting during part of CY 2010 and part of CY 2011, on the part of one hospital. The commenters stated that one hospital's services that should have been billed as CPT code 77523 were instead billed as CPT code77525, which has a lower estimated cost. They stated that these services were also reported under an unintended cost center in the hospital's cost report, and argued that the current APC configuration better reflects the clinical similarity and relative resources used to furnish proton beam therapy services. We received a comment from the hospital in question indicating the same. This provider also stated that these issues were corrected and do not affect any claims in CY 2012. These commenters requested that we therefore forego using the CY 2011 claims data to set CY 2013 rates because they are based in part on inaccurate data reported by one of the few billing providers. They requested that CMS maintain both the CY 2012 payment rates and the current CY 2012 APC configuration through CY 2013, and the HOP Panel agreed with this recommendation at its August 2012 public meeting.

One commenter recommended that CMS obtain corrected data from the provider in question and use the corrected data in updating the CY 2012 proton beam therapy payment rates for CY 2013. The commenter recommended that if CMS could not accomplish this in time for publication of the CY 2013 final rule, CMS exclude the reportedly erroneous data from its ratesetting process and update the CY 2012 payments for proton beam services for CY 2013 using the remaining claims data. In either event, the commenter recommended that we not restructure the APCs this year because despite what the cost data show, simple and complex proton beam therapy services are not clinically homogenous.

Another commenter supported the proposed reduction in payments for proton beam services. The commenter stated that given the cost of establishing and staffing proton beam centers, proton beam therapy does not yield commensurate benefit over other therapies.

Response: We appreciate the public comments and the HOP Panel's recommendation. After consideration of the public comments we received, we are updating the payment rates for proton beam therapy for CY 2013 to reflect the most recently available claims data from all providers. Therefore, we are not maintaining the CY 2013 payment rates at CY 2012 levels, and we are not excluding the reportedly erroneous data from the ratesetting process. However, we are maintaining the current APC structure for CY 2013 and will reevaluate the costs and appropriateness of the APC structuring for proton beam services next year. Using the current APC assignments for proton beam services, the CY 2013 final geometric mean cost of APC 0664 (including CPT codes 77520 and 77522) is approximately $1,169. The CY 2013 final geometric mean cost of APC 0667 (including CPT codes 77523 and 77525) is approximately $702.

b. Device Construction for Intensity Modulated Radiation Therapy (IMRT) (APC 0305)

Effective January 1, 2010, the CPT Editorial Panel created CPT code 77338 (Construction of multi-leaf collimator (MLC) device(s) for IMRT per IMRT plan) to report all of the devices furnished under a single IMRT treatment plan. The code was created as part of an effort to consolidate the reporting of multiple services or units of service into a single code. For CY 2011, we assigned CPT 77338 to APC 0310 (Level III Therapeutic Radiation Treatment Preparation) based on a simulated cost of approximately $792 that we calculated using CY 2009 claims data for the predecessor CPT code 77334 ((Treatment devices, design and construction; complex (irregular blocks, special shields, compensators, wedges, molds or casts)).

For CY 2012, using our standard ratesetting methodology and the first year of available claims data for CPT code 77338, and based upon a final rule cost of approximately $188, we reassigned this service from APC 0310 to APC 0305 (Level II Therapeutic Radiation Treatment Preparation) with a final payment rate of approximately $264. In our response to public comments, we noted several possible reasons for the discrepancy in the reported cost of the service relative to its predecessor code. We stated that it is not unusual for providers to bill a given service in a manner that is inconsistent with what we would expect based on the definition of a new code. We also noted potential clinical reasons for the apparent anomaly, such as the inclusion of labor-intensive physical blocks, shields, and molds in the service described by CPT code77334, and accounting rationales such as the crosswalking of a single collimator setting to the charges for the construction of a physical block, also in the service described by CPT code 77334. We stated that we saw no basis to ignore our robust set of single procedure claims submitted by a significant number of hospitals by continuing to simulate a cost for CPT code 77338.

In the CY 2013 OPPS/ASC proposed rule Addenda, based on a proposed rule cost of approximately $293, we proposed to continue the current assignment of CPT code 77338 for CY 2013 to APC 0305, and to add this service to the bypass list which would increase the number of claims that could be used in setting its payment rate.

Comment: One commenter objected to the continued assignment of CPT code 77338 to APC 0305. The commenter again noted the low estimated cost of this service compared to its predecessor code, and continued to believe that providers are inappropriately coding the service. They requested that for CY 2013, we simulate the cost of this service using the alternative methodology that we used in CY 2011, and that we reassign the service to APC 0310, which has a final rule cost of approximately $1,013.

Response: As we noted last year, we see no reason to discard the reported claims data for CPT code 77338, which has a CY 2013 final rule geometric mean cost of approximately $297. For the reasons previously discussed, for CY 2013 we will continue assigning this CPT code to APC 0305, which has a final geometric mean cost of approximately $299. We will reevaluate whether this placement is appropriate next year when additional claims data are available.

c. Other Radiation Oncology Services (APCs 0310 and 0412)

Comment: One commenter addressed the proposed payment rates for the following services: CPT code 77418 (Radiation treatment delivery intensity modulated radiotherapy), which is assigned to APC 0412 (Level II Radiation Therapy) and is separately paid; CPT code 77295 (3-D Therapeutic radiology simulation-aided field setting), which is assigned to APC 0310 (Level III Therapeutic Radiation Treatment Preparation) and is also separately paid; CPT code 77373 (Stereotactic body radiation therapy delivery), which has a status indicator of “B” (Not covered under the OPPS); and CPT code 77014 (CT scan for therapy guidance), which has status indicator of “N” and is packaged. The commenter expressed concern about perceived decreases in payment for these services.

Response: Under our standard ratesetting methodology, we proposed a slight payment increase for CPT 77418 from approximately $459 in CY 2012 to approximately $484 in CY 2013, based on a CY 2013 proposed rule geometric mean cost of $497. Similarly, we proposed a slight payment increase for CPT 77295 from approximately $953 in CY 2012 to approximately $985 in CY 2013, based on a CY 2013 proposed rule geometric mean cost of $988. The final CY 2013 geometric mean cost of CPT 77418 is approximately $498, and the final CY 2013 geometric mean cost of CPT 77295 is approximately $991.

Since 2007, we have not recognized CPT code 77373 under the OPPS, and hospitals should instead report this service using HCPCS code G0251 (Linear accelerator based stereotactic radiosurgery, delivery). HCPCS code G0251 is assigned to APC 0065 (Level I Stereotactic Radiosurgery, MRgFUS, and MEG), whose payment rate also increased from CY 2012 (final CY 2012 payment of approximately $902) to CY 2013 (final CY 2013 geometric mean cost of approximately $1,007). CPT code 77014 has been packaged under the OPPS since 2008 when we implemented our guidance services policy.

d. Stereotactic Radiosurgery (SRS) Treatment Delivery Services (APCs 0065, 0066, 0067, and 0127)

For CY 2013, we proposed to continue to assign CPT code 77371 (Radiation treatment delivery, stereotactic radiosurgery (SRS), complete course of treatment of cranial lesion(s) consisting of 1 session; multi-source Cobalt 60 based) to APC 0127 (Level IV Stereotactic Radiosurgery, MRgFUS, and MEG), which had a CY 2013 proposed payment rate of approximately $8,011.

We also proposed to continue to recognize four existing HCPCS G-codes that describe linear accelerator-based SRS treatment delivery services for separate payment in CY 2013. Specifically, we proposed the following: to assign HCPCS code G0173 (Linear accelerator based stereotactic radiosurgery, complete course of therapy in one session) and HCPCS code G0339 (Image-guided robotic linear accelerator-based stereotactic radiosurgery, complete course of therapy in one session or first session of fractionated treatment) to APC 0067 (Level III Stereotactic Radiosurgery, MRgFUS, and MEG), which had a CY 2013 proposed payment rate of approximately $3,294; to assign HCPCS code G0251 (Linear accelerator-based stereotactic radiosurgery, delivery including collimator changes and custom plugging, fractionated treatment, all lesions, per session, maximum five sessions per course of treatment) to APC 0065 (Level I Stereotactic Radiosurgery, MRgFUS, and MEG), which had a CY 2013 proposed payment rate of approximately $967; and to assign HCPCS code G0340 (Image-guided robotic linear accelerator based stereotactic radiosurgery, delivery including collimator changes and custom plugging, fractionated treatment, all lesions, per session, second through fifth sessions, maximum five sessions per course of treatment) to APC 0066 (Level II Stereotactic Radiosurgery, MRgFUS, and MEG), which had a CY 2013 proposed payment rate of approximately $2,361.

Further, we proposed to continue to assign SRS CPT codes 77372 (Radiation treatment delivery, stereotactic radiosurgery (SRS) (complete course of treatment of cerebral lesion(s) consisting of 1 session); linear accelerator based) and 77373 (Stereotactic body radiation therapy, treatment delivery, per fraction to 1 or more lesions, including image guidance, entire course not to exceed 5 fractions) status indicator “B” (Codes that are not recognized by OPPS when submitted on an outpatient hospital Part B bill type (12x and 13x)) under the OPPS, to indicate that these CPT codes are not payable under the OPPS.

Comment: One commenter urged CMS to reevaluate the APC assignments for the linear accelerator-based (LINAC) and robotic Cobalt-60 based stereotactic radiosurgery (r-SRS) HCPCS codes. The commenter stated that no clinical data exist to support the need for differential payments for LINAC-based and Cobalt-60 r-SRS procedures. The commenter further explained that there is no clinical evidence to suggest that one system is superior to the other, and the costs of purchasing and maintaining the devices are similar. The commenter recommended that CMS assign HCPCS code G0339 and CPT code 77371 to the same APC, thereby establishing payment parity for the complete course of treatment for intracranial and other head and neck r-SRS, regardless of equipment or energy source. In addition, the commenter argued that this APC reevaluation is necessary to protect the Medicare program and beneficiaries from excessive costs associated with Cobalt-60-based system, when both the LINAC-based and Cobalt-60-based systems are similar in clinical homogeneity and resource costs.

Response: We disagree with the commenter's argument that the LINAC-based and Cobalt-60 based systems have similar resource costs. For the past several years, we have seen resource differences based on the geometric mean costs for the LINAC-based and Cobalt-60-based systems, and analysis of our claims data show that the geometric mean costs for LINAC-based and Cobalt-60-based SRS procedures differ significantly. Since CY 2007, when CPT code 77371 became effective, our claims data have shown consistently a cost of more than $7,000 for the service associated with the Cobalt-60-based system, which is higher than the mean cost of approximately $3,500 for the LINAC-based system (described by HCPCS G-code G0339).

Analysis of the updated CY 2011 claims data used for this final rule with comment period indicates that the code-specific geometric mean costs for the LINAC-based and Cobalt-60-based systems continue to differ. Our updated claims data on the hospital outpatient claims available for CY 2013 ratesetting show a geometric mean cost of approximately $8,138 for CPT code 77371 based on 410 single claims (out of a total of 4,598 claims), which is significantly higher than the geometric mean costs associated with HCPCS codes G0173, G0251, G0339, and G0340. Specifically, our claims data indicate a geometric mean cost of approximately $2,605 for HCPCS code G0173 based on 923 single claims (out of a total of 1,597 claims), a geometric mean cost of approximately $1,007 for HCPCS code G0251 based on 12,965 single claims (out of a total of 13,746 claims), a geometric mean cost of approximately $3,497 for HCPCS code G0339 based on 8,287 single claims (out of a total of 10,462 claims), and a geometric mean cost of approximately $2,423 for HCPCS code G0340 based on 25,444 single claims (out of a total of 25,708 claims). Because the geometric mean costs of HCPCS code G0339 and CPT code 77371 differ significantly, we do not believe it would be appropriate to provide OPPS payment through a single APC for these r-SRS treatment delivery services in CY 2013. We continue to believe that APC 0127 is an appropriate APC assignment for CPT code 77371, and, similarly, that APC 0067 is an appropriate APC assignment for HCPCS code G0339 based on consideration of the clinical characteristics associated with these procedures and based on the geometric mean costs for these services calculated from the most recently available hospital outpatient claims and cost report data. Consistent with our current policy to annually assess the appropriateness of the APC assignments for all services under the hospital OPPS, we will continue to monitor our claims data for the SRS treatment delivery services in the future.

As we have stated in the past (74 FR 60456), the OPPS is a prospective payment system, where APC payment rates are based on the relative costs of services as reported to us by hospitals according to the most recent claims and cost report data as described in section II.A. of this final rule with comment period. The 2 times rule specifies that the mean cost of the highest cost item or service within a payment group may be no more than 2 times greater than the mean cost of the lowest cost item or service within the same group. Based on the 2 times rule, HCPCS code G0339 and CPT code 77371 could not be assigned to the same APC and, because hospitals continue to report very different costs for these services, we believe it is appropriate to maintain their assignments to different payment groups for CY 2013. As a matter of payment policy, the OPPS does not set payment rates for services based on considerations of clinical effectiveness. Furthermore, in accordance with the statute, we budget neutralize the OPPS each year in the annual update so that projected changes in spending for certain services are redistributed to payment for other services.

After consideration of the public comments we received, we are finalizing our CY 2013 proposals, without modification, to continue to assign CPT code 77371 to APC 0127, which has a final CY 2013 APC geometric mean cost of approximately $8,138, and to continue to assign HCPCS code G0339 to APC 0067, which has a final CY 2013 APC geometric mean cost of approximately $3,395.

e. Intraoperative Radiation Therapy (IORT) (APC 0412)

(1) Background

The AMA's CPT Editorial Panel created three new Category I CPT codes for intraoperative radiation therapy (IORT), effective January 1, 2012: CPT codes 77424 (Intraoperative radiation treatment delivery, x-ray, single treatment session); 77425 (Intraoperative radiation treatment delivery, electrons, single treatment session); and 77469 (Intraoperative radiation treatment management). As with all new CPT codes for CY 2012, these three codes were included in Addendum B to the CY 2012 OPPS/ASC final rule with comment period (available via the CMS Web site), effective on January 1, 2012. In accordance with our standard practice each year, our clinicians review the many CPT code changes that will be effective in the forthcoming year and make decisions regarding status indicators and/or APC assignments based on their understanding of the nature of the services. We are unable to include proposed status indicators and/or APC assignments in the proposed rule for codes that are not announced by the AMA's CPT Editorial Panel prior to the issuance of the proposed rule. Therefore, in accordance with our longstanding policy, we include, in the final rule with comment period, interim status indicators and/or APC assignments for all new CPT codes that are announced by the AMA's CPT Editorial Panel subsequent to the issuance of the OPPS/ASC proposed rule to enable payment for new services as soon as the codes are effective.

We identified the new codes for IORT for CY 2012 in Addendum B to the CY 2012 OPPS/ASC final rule with comment period as being open to public comment by showing a comment indicator of “NI” and made interim status indicator assignments for each of these new IORT codes, based on our understanding of the clinical nature of the services they describe. Specifically, for CY 2012, we packaged these IORT service codes with the surgical procedures with which they are billed, assigning them interim status indicators of “N” (Items and Services Packaged into APC Rates). We did so based on a policy that was adopted in the CY 2008 OPPS final rule with comment period (72 FR 66610 through 66659) to package services that are typically ancillary and supportive of a principal diagnostic or therapeutic procedure, which would generally include intraoperative services. Because IORT are intraoperative services furnished as a single dose during the time of the related surgical session, we packaged them into the payment for the principal surgical procedures with which they are performed based on claims data used for the CY 2012 OPPS/ASC final rule with comment period.

Subsequent to issuance of the CY 2012 OPPS/ASC final rule with comment period, stakeholders provided comments on the interim status of these IORT service codes for CY 2012, asserting that these services are not ancillary to the surgical procedures, urging us to unpackage these codes, and requesting that we assign them to an APC reflective of the resources used to provide the IORT services. Commenters who responded to the CY 2012 OPPS/ASC final rule with comment period argued that IORT services described by CPT codes 77424 and 77425 are separate, distinct, and independent radiation treatment services from the surgical services to remove a malignant growth. According to the commenters, IORT is performed separately by a radiation oncologist and a medical physicist when there is concern for residual unresected cancer because of narrow margins related to the surgical resection. A number of the commenters provided varied estimates of the cost of IORT as between $4,000 and $7,000 per treatment, and some commenters cited a hospital survey of per treatment costs for the procedure described by CPT code 77424 of $4,441.17 and for the procedure described by CPT code 77425 of $6,897.50.

One commenter stated that the x-ray intraoperative service described by CPT code 77424 has previously been reported with CPT code 0182T (High dose rate electronic brachytherapy, per fraction), which is a separately paid OPPS service. However, the commenter pointed out that it would not be proper to report intraoperative radiation therapy with CPT code 0182T because now CPT codes 77424 and 77425 more specifically and accurately describe the intraoperative radiation services. One commenter recommended that CPT code 77425 be mapped to a new technology APC.

(2) CY 2013 Proposals for CPT Codes 77424, 77425, and 77469

Based on the public comments and information received on the IORT policies contained in the CY 2012 OPPS/ASC final rule with comment period, and after further review and consideration of those public comments and the clinical nature of the IORT procedures, we agreed that IORT services are not the typical intraoperative services that we package, as they are not integral to or dependent upon the surgical procedure to remove a malignancy that precedes IORT. Therefore, for CY 2013, we proposed to unpackage CPT codes 77424 and 77425 and assign them to APC 0412, currently titled “IMRT Treatment Delivery” (77 FR 45124). We stated that IORT treatment services are clinically similar to other radiation treatment forms, such as IMRT treatment, which are assigned to APC 0412. Furthermore, we proposed to change the title of APC 0412 to “Level III Radiation Therapy” to encompass a greater number of clinically similar radiation treatment modalities. The CY 2013 proposed rule geometric mean cost for APC 0412, based on CY 2011 claims data, was approximately $496. We also proposed to monitor hospitals' costs for furnishing the services described by CPT codes 77424 and 77425.

In the CY 2013 proposed rule, we stated that we believe that CPT code 77469 should receive equal treatment to other radiation management codes, such as CPT code 77431 (Radiation therapy management with complete course of therapy consisting of 1 or 2 fractions only) and CPT code 77432 (Stereotactic radiation treatment management of cranial lesion(s) (complete course of treatment consisting of 1 session)), which are assigned status indicator “B” (Codes that are not recognized by OPPS when submitted on an outpatient hospital Part B bill type (12x and 13x)) and are not paid under the OPPS. Therefore, we proposed that the appropriate status indicator code assignment for CPT code 77469 be “B” for nonpayable status under the OPPS for CY 2013, a change from its current CY 2012 status indicator assignment of “N” for packaged payment status.

At its August 2012 meeting, the HOP Panel recommended that CMS assign CPT code 77424 and CPT code 77425 to APC 0313 (Brachytherapy), and consider