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Rule

Medicare and Medicaid Programs: Hospital Outpatient Prospective Payment and Ambulatory Surgical Center Payment Systems and Quality Reporting Programs; Hospital Value-Based Purchasing Program; Organ Procurement Organizations; Quality Improvement Organizations; Electronic Health Records (EHR) Incentive Program; Provider Reimbursement Determinations and Appeals

Action

Final Rule With Comment Period And Final Rules.

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 2014 to implement applicable statutory requirements and changes arising from our continuing experience with these systems. In this final rule with comment period, we describe the changes to the amounts and factors used to determine the payment rates for Medicare services paid under the OPPS and those paid under the ASC payment system. In addition, this final rule with comment period updates and refines the requirements for the Hospital Outpatient Quality Reporting (OQR) Program, the ASC Quality Reporting (ASCQR) Program, and the Hospital Value-Based Purchasing (VBP) Program.

In the final rules in this document, we are finalizing changes to the conditions for coverage (CfCs) for organ procurement organizations (OPOs); revisions to the Quality Improvement Organization (QIO) regulations; changes to the Medicare fee-for-service Electronic Health Record (EHR) Incentive Program; and changes relating to provider reimbursement determinations and appeals.

Unified Agenda

 

Table of Contents Back to Top

DATES: Back to Top

Effective Dates: The final rule with comment period and final rules in this document are effective on January 1, 2014, with the exception of 42 CFR 412.167; 42 CFR 486.316 and 486.318; 42 CFR 475.1 and 475.100 through 475.107; and 42 CFR 495.4 and 495.104, which are effective on January 27, 2014.

Implementation Date: The implementation date for the policies specified under section II.A.2.e. of the final rule with comment period relating to comprehensive Ambulatory Payment Classification (APC) groups is January 1, 2015.

Comment Period: We will consider comments on the payment classification assigned to HCPCS codes identified in Addenda B, AA, and BB of this final rule with comment period with the “NI” comment indicator, and on other areas specified throughout this rule, received at one of the addresses provided in the ADDRESSES section no later than 5 p.m. EST on January 27, 2014.

Application Deadline—New Class of New Technology Intraocular Lenses: Request for review of applications for a new class of new technology intraocular lenses must be received by 5 p.m. EST on March 3, 2014.

ADDRESSES: Back to Top

In commenting, please refer to file code CMS-1601-FC. Because of staff and resource limitations, we cannot accept comments by facsimile (FAX) transmission.

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

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

2. By regular mail. You may mail written comments to the following address only: Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS-1601-FC, P.O. Box 8013, Baltimore, MD 21244-1850.

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

3. By express or overnight mail. You may send written comments via express or overnight mail to the following address only: Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS-1601-FC, Mail Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850.

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

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

(Because access to the interior of the Hubert H. Humphrey Building is not readily available to persons without Federal Government identification, commenters are encouraged to leave their comments in the CMS drop slots located in the main lobby of the building. A stamp-in clock is available for persons wishing to retain a proof of filing by stamping in and retaining an extra copy of the comments being filed.)

b. For delivery in Baltimore, MD—Centers for Medicare & Medicaid Services, Department of Health and Human Services, 7500 Security Boulevard, Baltimore, MD 21244-1850.

If you intend to deliver your comments to the Baltimore address, please call the telephone number (410) 786-7195 in advance to schedule your arrival with one of our staff members.

Comments mailed to the addresses indicated as appropriate for hand or courier delivery may be delayed and received after the comment period.

For information on viewing public comments, we refer readers to the beginning of the SUPPLEMENTARY INFORMATION section.

Applications for a new class of new technology intraocular lenses: Requests for review of applications for a new class of new technology intraocular lenses must be sent by regular mail to: ASC/NTIOL, Division of Outpatient Care, Mailstop C4-05-17, Centers for Medicare & Medicaid Services, 7500 Security Boulevard, Baltimore, MD 21244-1850.

FOR FURTHER INFORMATION CONTACT: 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, platelet rich plasma, and stereotactic radiosurgery services.

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

Chuck Braver, (410) 786-9379, for issues related to the Advisory Panel on Hospital Outpatient Payment (HOP Panel).

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

Diane Corning, (410) 786-8486, for issues related to the Conditions for Coverage for Organ Procurement Organizations (OPOs).

Dexter Dickey, (410) 786-6856, or Dorothy Myrick, (410) 786-9671, for issues related to partial hospitalization and community mental health center (CMHC) issues.

Roxanne Dupert-Frank, (410) 786-4827, for issues related to the Hospital Value-Based Purchasing (VBP) Program.

Dan Duvall, (410) 786-4592, for issues related to comprehensive APCs.

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

James Hart, (410) 786-9520, for issues related to the Medicare fee-for-service Electronic Health Record (EHR) Incentive Program.

Jeneen Iwugo, (410) 786-1028, for issues related to the revisions of the Quality Improvement Organization (QIO) Regulations.

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

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

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

Ann Marshall, (410) 786-3059, for issues related to packaged items/services, hospital outpatient supervision, proton beam therapy, therapy caps in CAHs, incident to physician or nonphysician practitioner services, and provider-based issues.

Danielle Moskos, (410) 786-8866, or Michael Zleit, (410) 786-2050, for issues related to Provider Reimbursement Determination Appeals.

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

Char Thompson, (410) 786-2300, for issues related to OPPS drugs, radiopharmaceuticals, biologicals, blood clotting factors, new technology intraocular lenses (NTIOLs), and ambulatory surgical center (ASC) payments.

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

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 are published and available only on the CMS Web site. The Addenda relating to the OPPS are available at: http://www.cms.gov/Medicare/Medicare-Fee-for-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.

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, Pub. L. 105-33

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

BIPAMedicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000, Pub. L. 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

CfC[Medicare] Condition for coverage

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, Pub. L. 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

FDA ood and Drug Administration

FFS[Medicare] Fee-for-service

FYFiscal year

FFYFederal fiscal year

GAOGovernment Accountability Office

HAIHealthcare-associated infection

HCERAHealth Care and Education Reconciliation Act of 2010, Pub. L. 111-152

HCPCSHealthcare Common Procedure Coding System

HCRISHospital Cost Report Information System

HEUHighly enriched uranium

HIPAAHealth Insurance Portability and Accountability Act of 1996, Pub. L. 104-191

HITECHHealth Information Technology for Economic and Clinical Health [Act] (found in the American Recovery and Reinvestment Act of 2009, Pub. L. 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

IPPS[Hospital] Inpatient Prospective Payment System

IQR[Hospital] Inpatient Quality Reporting

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, Pub. L. 109-432

MIPPAMedicare Improvements for Patients and Providers Act of 2008, Pub. L. 110-275

MMAMedicare Prescription Drug, Improvement, and Modernization Act of 2003, Pub. L. 108-173

MMEAMedicare and Medicaid Extenders Act of 2010, Pub. L. 111-309

MMSEAMedicare, Medicaid, and SCHIP Extension Act of 2007, Pub. L. 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

OPOOrgan Procurement Organization

OPPS[Hospital] Outpatient Prospective Payment System

OPSFOutpatient Provider-Specific File

OQR[Hospital] Outpatient Quality Reporting

OTOccupational therapy

PBDProvider-Based Department

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

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 Document

1. Purpose

2. Summary of the Major Provisions

3. Summary of Costs and Benefits

B. Legislative and Regulatory Authority for the Hospital OPPS

C. Excluded OPPS Services and Hospitals

D. Prior Rulemaking

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

1. Authority of the Panel

2. Establishment of the Panel

3. Panel Meetings and Organizational Structure

F. Public Comments Received in Response to the CY 2014 OPPS/ASC Proposed Rule

G. Public Comments Received on the CY 2013 OPPS/ASC Final Rule with Comment Period

II. Updates Affecting OPPS Payments

A. Recalibration of APC Relative Payment Weights

1. Database Construction

a. Database Source and Methodology

b. Use of Single and Multiple Procedure Claims

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

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

a. Claims Preparation

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

(1) Splitting Claims

(2) Creation of “Pseudo” Single Procedure Claims

c. Completion of Claim Records and Geometric Mean Cost Calculations

(1) General Process

(2) Recommendations of the Panel Regarding Data Development

d. Calculation of Single Procedure APC Criteria-Based Costs

(1) Device-Dependent APCs

(2) Blood and Blood Products

(3) Brachytherapy Source Payment

e. Establishment of Comprehensive APCs

(1) Definitions and General Principles

(2) Comprehensive APCs for Device-Dependent Services

f. 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)

3. Changes to Packaged Items and Services

a. Summary of CY 2014 Final Packaging Policies

b. Background

c. Basis for New Packaging Policies for CY 2014

d. New Packaging Policies for CY 2014

(1) Drugs, Biologicals, and Radiopharmaceuticals That Function as Supplies When Used in a Diagnostic Test or Procedure

(2) Drugs and Biologicals That Function as Supplies When Used in a Surgical Procedure

(3) Clinical Diagnostic Laboratory Tests

(4) Procedures Described by Add-On Codes

(5) Ancillary Services (Status Indicator “X”)

(6) Diagnostic Tests on the Bypass List

(7) Device Removal Procedures

e. Clarification Regarding Supplies That Are Packaged in the OPPS

f. Revision and Clarification of the Regulations at 42 CFR 419.2(b) and 42 CFR 419.22

g. Comment Solicitation on Increased Packaging for Imaging Services

4. Calculation of OPPS Scaled Payment Weights

B. Conversion Factor Update

C. Wage Index Changes

D. Statewide Average Default CCRs

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

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

1. Background

2. Payment Adjustment for Certain Cancer Hospitals for CY 2014

G. Hospital Outpatient Outlier Payments

1. Background

2. Proposed Outlier Calculation

3. Final Outlier Calculation

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

I. Beneficiary Copayments

1. Background

2. OPPS Copayment Policy

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

III. OPPS Ambulatory Payment Classification (APC) Group Policies

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

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

2. Process for New Level II HCPCS Codes That Will Be Effective October 1, 2013 and New CPT and Level II HCPCS Codes That Will Be Effective January 1, 2014 for Which We Are Soliciting Public Comments in this CY 2014 OPPS/ASC Final Rule with Comment Period

B. OPPS Changes—Variations within APCs

1. Background

2. Application of the 2 Times Rule

3. Exceptions to the 2 Times Rule

C. OPPS APC-Specific Policies

1. Cardiovascular and Vascular Services

a. Non-Ophthalmic Fluorescent Vascular Angiography (APC 0263)

b. Subcutaneous Defibrillator (APC 0107)

c. Thrombolytic Therapy (APC 0621)

d. Vascular Ligation (APCs 0091 and 0092)

2. Gastrointestinal Services

a. Fecal Microbiota Transplantation (APC 0340)

b. Transoral Incisionless Fundoplication (APC 0422)

3. Genitourinary Services

a. Percutaneous Renal Cryoablation (APC 0423)

b. Anoscopy with Directed Submucosal Injection (APC 0150)

4. Musculoskeletal Services

a. Arthroplasty (APC 0425)

b. Joint Stabilization (APC 0052)

5. Nervous System Services

a. Chemodenervation (APCs 0161 and 0204)

b. Nerve Conduction Studies (APCs 0216 and 0218)

c. Parasympathetic Function and Sympathetic Function (APC 0215)

d. Epidural Lysis (APCs 0203 and 0207)

e. Cerebrospinal Shunt Reprogramming (APC 0692)

6. Ocular Services

a. Retinal Prosthesis (APC 0672)

b. Tear Film (APC 0230)

7. Imaging

a. Myocardial Sympathetic Innervation Imaging (APC 0398)

b. Neurologic Imaging (APCs 0402, 0403, 0406 and 0414)

8. Radiology Oncology

a. Intraoperative Radiation Therapy (IORT) Related Services (APCs 0028 and 0065)

b. Proton Beam Therapy (APCs 0664 and 0667)

c. Stereotactic Radiosurgery (SRS) Services (APCs 0066 and 0067)

9. Respiratory Services

a. Bronchial Thermoplasty (APC 0415)

b. Direct Laryngoscopy (APC 0074)

c. Pulmonary Rehabilitation Services (APC 0077)

10. Other Services

a. Balloon Sinus Dilation (APCs 0074 and 0075)

b. Radiofrequency Ablation of Uterine Fibroids (APC 0174)

c. Magnetic Resonance Image Guided Focused Ultrasound (APC 0065)

d. Flow Cytometry (APC 0443)

e. Hormone Pellet Implant (APC 0420)

f. Peyronie Disease Injection Procedure (APC 0164)

g. Negative Pressure Wound Therapy (NPWT) (APC 0016)

h. Platelet Rich Plasma (PRP) (APC 0186)

i. Payment for Radioisotopes Derived From Non-Highly Enriched Uranium (HEU) Sources (APC 1442)

IV. OPPS Payment for Devices

A. Pass-Through Payments for Devices

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

a. Background

b. CY 2014 Policy

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

a. Background

b. CY 2014 Policy

3. Changes to Device Pass-Through Criteria: Integral and Subordinate Criterion

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

1. Background

2. Policy for CY 2014

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

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

1. Background

2. Drugs and Biologicals with Expiring Pass-Through Status in CY 2013

3. Drugs, Biologicals, and Radiopharmaceuticals with New or Continuing Pass-Through Status in CY 2014

4. Provisions for Reducing Transitional Pass-Through Payments for Diagnostic Radiopharmaceuticals; Contrast Agents; Drugs, Biologicals, and Radiopharmaceuticals That Function as Supplies When Used in a Diagnostic Test or Procedure; and Drugs and Biologicals That Function as Supplies When Used in a Surgical Procedure to Offset Costs Packaged into APC Groups

a. Background

b. Payment Offset Policy for Diagnostic Radiopharmaceuticals

c. Payment Offset Policy for Contrast Agents

d. Payment Offset Policy for Products Packaged According to the Policy to Package Drugs, Biologicals, and Radiopharmaceuticals That Function as Supplies When Used in a Diagnostic Test or Procedure and Drugs and Biologicals That Function as Supplies When Used in a Surgical Procedure

B. OPPS Payment for Drugs, Biologicals, and Radiopharmaceuticals without 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, Certain 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 2014 Payment Policy

4. Payment Policy for Therapeutic Radiopharmaceuticals

5. Payment for Blood Clotting Factors

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

C. Nuclear Medicine Procedure-to-Radiolabeled Product Edits

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. Payment for Hospital Outpatient Clinic and Emergency Department Visits

C. Payment for Critical Care Services

VIII. Payment for Partial Hospitalization Services

A. Background

B. PHP APC Update for CY 2014

C. Discussion of Possible Future Initiatives, Request for Public Comments, and Summary of Public Comments Received

D. Separate Threshold for Outlier Payments to CMHCs

IX. Procedures That Will Be Paid Only as Inpatient Procedures

A. Background

B. Changes to the Inpatient List

X. Nonrecurring Policy Changes

A. Supervision of Hospital Outpatient Therapeutic Services

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

2. Supervision Requirements for Observation Services

B. Application of Therapy Caps in CAHs

C. Requirements for Payment of Outpatient Therapeutic (“Incident to”) Hospital or CAH Services

1. Overview

2. Background

3. Proposed and Final Policy

4. Technical Correction

D. Collecting Data on Services Furnished in Off-Campus Provider-Based Departments

XI. CY 2014 OPPS Payment Status and Comment Indicators

A. CY 2014 OPPS Payment Status Indicator Definitions

B. CY 2014 Comment Indicator Definitions

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

A. Background

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

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

B. Treatment of New Codes

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

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

3. Process for New Level II HCPCS Codes and Category I and Category III CPT Codes for Which We Are Soliciting Public Comments in This CY 2014 OPPS/ASC Final Rule with Comment Period

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

1. Covered Surgical Procedures

a. Additions to the List of ASC Covered Surgical Procedures

b. Covered Surgical Procedures Designated as Office-Based

(1) Background

(2) Changes for CY 2014 to Covered Surgical Procedures Designated as Office-Based

c. ASC Covered Surgical Procedures Designated as Device-Intensive

(1) Background

(2) Changes to List of Covered ASC Surgical Procedures Designated as Device-Intensive for CY 2014

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

e. ASC Treatment of Surgical Procedures Removed from the OPPS Inpatient List for CY 2014

2. Covered Ancillary Services

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

1. ASC Payment for Covered Surgical Procedures

a. Background

b. Update to ASC Covered Surgical Procedure Payment Rates for CY 2014

c. Waiver of Coinsurance and Deductible for Certain Preventive Services

d. Payment for Cardiac Resynchronization Therapy Services

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

2. Payment for Covered Ancillary Services

a. Background

b. Payment for Covered Ancillary Services for CY 2014

E. New Technology Intraocular Lenses (NTIOLs)

1. NTIOL Application Cycle

2. Requests to Establish New NTIOL Classes for CY 2015

3. Payment Adjustment

4. Announcement of CY 2014 Deadline for Submitting Requests for CMS Review of Applications for a New Class of NTIOLs

F. ASC Payment and Comment Indicators

1. Background

2. ASC Payment and Comment Indicators

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

1. Background

2. Calculation of the ASC Payment Rates

a. Updating the ASC Relative Payment Weights for CY 2014 and Future Years

b. Updating the ASC Conversion Factor

3. Display of CY 2014 ASC Payment Rates

XIII. Hospital Outpatient Quality Reporting Program Updates

A. Background

1. Overview

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

3. Measure Updates and Data Publication

a. Process for Updating Quality Measures

b. Publication of Hospital OQR Program Data

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

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

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

2. Removal of Two Chart-Abstracted Measures from the Hospital OQR Program

a. Removal of OP-19: Transition Record with Specified Elements Received by Discharged ED Patients

b. Removal of OP-24: Cardiac Rehabilitation Measure: Patient Referral from an Outpatient Setting

D. Quality Measures Previously Adopted for the CY 2014 and CY 2015 Payment Determinations and Subsequent Years

E. Quality Measures for the CY 2016 Payment Determination and Subsequent Years

1. Influenza Vaccination Coverage Among Healthcare Personnel (NQF #0431)

2. Complications Within 30 Days Following Cataract Surgery Requiring Additional Surgical Procedures (NQF #0564)

3. Endoscopy/Polyp Surveillance: Appropriate Follow-up Interval for Normal Colonoscopy in Average Risk Patients (NQF #0658)

4. Endoscopy/Polyp Surveillance: Colonoscopy Interval for Patients with a History of Adenomatous Polyps—Avoidance of Inappropriate Use (NQF #0659)

5. Cataracts—Improvement in Patient's Visual Function Within 90 Days Following Cataract Surgery (NQF #1536)

F. Possible Hospital OQR Program Measure Topics for Future Consideration

G. Payment Reduction for Hospitals That Fail to Meet the Hospital OQR Program Requirements for the CY 2014 Payment Update

1. Background

2. Reporting Ratio Application and Associated Adjustment Policy for CY 2014

H. Requirements for Reporting of Hospital OQR Data for the CY 2015 Payment Determination and Subsequent Years

1. Administrative Requirements for the CY 2015 Payment Determination and Subsequent Years

2. Form, Manner, and Timing of Data Submitted for the Hospital OQR Program

a. Background

b. Effects of Changes on Data Submission for CY 2015 and CY 2016 Payment Determinations and Subsequent Years

c. General Requirements

d. Chart-Abstracted Measure Requirements for the CY 2015 Payment Determination and Subsequent Years

e. Claims-Based Measure Data Requirements for the CY 2015 Payment Determination and Subsequent Years

f. Data Submission Requirements for Measure Data Submitted via Web-Based Tool for the CY 2016 Payment Determination and Subsequent Years

g. Data Submission Requirements for a Measure Reported via NHSN for the CY 2016 Payment Determination and Subsequent Years

h. Population and Sampling Data Requirements for the CY 2015 Payment Determination and Subsequent Years

3. Hospital OQR Program Validation Requirements for Chart-Abstracted Measure Data Submitted Directly to CMS for the CY 2015 Payment Determination and Subsequent Years

a. Selection of Hospitals for Data Validation of Chart-Abstracted Measures for the CY 2015 Payment Determination and Subsequent Years

b. Targeting Criteria for Data Validation Selection for the CY 2015 Payment Determination and Subsequent Years

c. Methodology for Encounter Selection for the CY 2015 Payment Determination and Subsequent Years

d. Medical Record Documentation Requests for Validation and Validation Score Calculation for the CY 2015 Payment Determination and Subsequent Years

I. Hospital OQR Reconsideration and Appeals Procedures for the CY 2015 Payment Determination and Subsequent Years

J. Extraordinary Circumstances Extension or Waiver for the CY 2014 Payment Determination and Subsequent Years

XIV. Hospital Value-Based Purchasing (VBP) Program Updates

A. Background

B. Additional CMS Appeals Review Process

1. Statutory Basis

2. Independent CMS Review

C. Performance and Baseline Periods for Certain Outcome Measures for the FY 2016 Hospital VBP Program

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

A. Background

1. Overview

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

3. Regulatory History of the ASCQR Program

B. ASCQR Program Quality Measures

1. Considerations in the Selection of ASCQR Program Quality Measures

2. ASCQR Program Quality Measures Adopted in Previous Rulemaking

3. Additional ASCQR Program Quality Measures for the CY 2016 Payment Determination and Subsequent Years

a. Complications Within 30 Days Following Cataract Surgery Requiring Additional Surgical Procedures

b. Endoscopy/Polyp Surveillance: Appropriate Follow-Up for Normal Colonoscopy in Average Risk Patients (NQR #0658)

c. Endoscopy/Polyp Surveillance: Colonoscopy Interval for Patients with a History of Adenomatous Polyps—Avoidance of Inappropriate Use (NQF #0659)

d. Cataracts: Improvement in Patient's Visual Function within 90 Days Following Cataract Surgery (NQF #1536)

4. ASCQR Program Measure Topics for Future Consideration

5. Technical Specification Updates and Data Publication

C. Payment Reduction for ASCs That Fail to Meet the ASCQR Program Requirements

1. Statutory Background

2. Reduction to the ASC Payment Rates for ASCs That Fail to Meet the ASCQR Program Requirements for Each Payment Determination Year

D. Administrative Requirements

1. Requirements Regarding QualityNet Account and Security Administrator

a. Background for the CY 2014 and CY 2015 Payment Determinations

b. Requirements for the CY 2016 Payment Determination and Subsequent Years

2. Requirements Regarding Participation Status

a. Background for the CY 2014 Payment Determination and Subsequent Years

b. Requirements for the CY 2016 Payment Determination and Subsequent Years

3. Requirements Regarding Data Processing and Collection Periods for Claims-Based Measures for the CY 2014 Payment Determination and Subsequent Years

4. Minimum Threshold, Minimum Case Volume, and Data Completeness for Claims-Based Measures Using QDCs

a. Background for the CY 2014 Payment Determination and Subsequent Years

b. Requirements for the CY 2016 Payment Determination and Subsequent Years

5. Requirements for Data Submitted Via a CMS Online Data Submission Tool

a. Background for the CY 2015 Payment Determination and Subsequent Years

b. Requirements for the CY 2016 Payment Determination and Subsequent Years for Measures Currently Finalized

c. Requirements for the CY 2016 Payment Determination and Subsequent Years for New Measures with Data Submission Via a CMS Web-Based Tool

6. Data Submission Requirements for a Measure Reported Via the National Healthcare Safety Network (NHSN) for the CY 2016 Payment Determination

a. Background for the CY 2016 Payment Determination

b. Requirements for the CY 2016 Payment Determination

7. ASCQR Program Validation of Claims-Based and CMS Web-Based Measures

8. Extraordinary Circumstances Extensions or Waivers for the CY 2014 Payment Determination and Subsequent Years

a. Background

b. Additional Criterion for Extraordinary Circumstance Waiver or Extension for CY 2014 and Subsequent Years

9. ASCQR Program Reconsideration Procedures for the CY 2014 Payment Determination and Subsequent Years

XVI. Final Rule: Changes to the Conditions for Coverage (CfCs) for Organ Procurement Organizations (OPOs) (42 CFR Part 486, Subpart G)

A. Background

B. Regulatory Changes

XVII. Final Rule: Revisions of the Quality Improvement Organization (QIO) Regulations

A. Legislative History

B. Basis for Proposals and Finalized Policies

C. Changes to the Nomenclature and Regulations under 42 CFR Parts 475 and 476

1. Nomenclature Changes

2. Addition and Revision of Definitions

3. Scope and Applicability of Subpart C of Part 475

4. Eligibility Requirements for QIOs (§§ 475.101 through 475.106)

a. Eligibility to be Awarded a QIO Contract (§ 475.101)

b. Eligibility Requirements for QIOs to Perform Case Reviews and Quality Improvement Initiatives (§ 475.102 and § 475.103)

c. Prohibitions on Eligibility as a QIO (§§ 475.105 and 475.106)

5. QIO Contract Awards (§ 475.107)

XVIII. Final Rule: Medicare Fee-for-Service Electronic Health Record (EHR) Incentive Program

A. Incentive Payments for Eligible Professionals (EPs) Reassigning Benefits to Method II CAHs

1. Background for Definition of EPs and EHR Incentive Payments to EPs

2. Special Circumstances of EPs Reassigning Benefits to Method II CAHs

B. Cost Reporting Periods for Interim and Final EHR Incentive Payments to Hospitals

1. Background

2. Special Circumstances

XIX. Medicare Program: Provider Reimbursement Determinations and Appeals: Final Rule

A. Matters Not Subject to Administrative or Judicial Review (§ 405.1804)

1. Background

2. Technical Conforming Change

B. Clarification of Reopening of Predicate Facts in Intermediary Determinations of Provider Reimbursement (§ 405.1885)

XX. Files Available to the Public Via the Internet

XXI. Collection of Information Requirements

A. Legislative Requirements for Solicitation of Comments

B. Requirements in Regulation Text

1. Changes to the Outcome Measure Requirement for OPOs

2. Changes to the Medicare Fee-for-Service EHR Incentive Program

C. Associated Information Collections Not Specified in Regulatory Text

1. Hospital OQR Program

a. Hospital OQR Program Requirements for the CY 2015 Payment Determinations and subsequent Years

b. Chart-Abstracted Measures for the CY 2016 Payment Determination and Subsequent Years

c. Web-Based Measures Submitted Directly to CMS for the CY 2016 Payment Determination and Subsequent Years

d. NHSN HAI Measure for the CY 2016 Payment Determination and Subsequent Years

e. Hospital OQR Program Validation Requirements for the CY 2015 Payment Determination and Subsequent Years

f. Hospital OQR Program Reconsideration and Appeals Procedures

2. ASCQR Program Requirements

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

b. Claims-Based and Web-Based Measures for the CY 2015 and CY 2016 Payment Determinations

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

3. Hospital VBP Program Requirements

XXII. Response to Comments

XXIII. Economic Analyses

A. Regulatory Impact Analysis

1. Introduction

2. Statement of Need

3. Overall Impacts for the OPPS and ASC Payment Provisions

4. Detailed Economic Analyses

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

(1) Limitations of Our Analysis

(2) Estimated Effects of OPPS Changes on Hospitals

(3) Estimated Effects of OPPS Changes on CMHCs

(4) Estimated Effect of OPPS Changes on Beneficiaries

(5) Estimated Effects of OPPS Changes on Other Providers

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

(7) Alternative OPPS Policies Considered

b. Estimated Effects of CY2014 ASC Payment System Final Policies

(1) Limitations of Our Analysis

(2) Estimated Effects of CY2014ASC Payment System Final Policies on ASCs

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

(4) Alternative ASC Payment Policies Considered

c. Accounting Statements and Tables

d. Effects of Requirements for the Hospital OQR Program

e. Effects of CY2014 Policies for the ASCQR Program

f. Effects of Changes to the CfCs for OPOs Relating to the Outcome Measure Requirement for Recertification

g. Effects of Revisions of the QIO Regulations

h. Effects of Revised Policies Regarding Medicare Fee-for-Service EHR Incentive Program

B. Regulatory Flexibility Act (RFA) Analysis

C. Unfunded Mandates Reform Act Analysis

D. Conclusion

XXIV. Federalism Analysis

XXV. Waiver of 60-Day Delay of Effective Date

Regulation Text Back to Top

I. Summary and Background Back to Top

A. Executive Summary of This Document

1. Purpose

In the final rule with comment period of this document, we are updating the payment policies and payment rates for services furnished to Medicare beneficiaries in hospital outpatient departments and Ambulatory Surgical Centers (ASCs) beginning January 1, 2014. Section 1833(t) of the Social Security Act (the Act) requires us to annually review and update the relative payment weights and the conversion factor for services payable under the Outpatient Prospective Payment System (OPPS). Under section 1833(i) of the Act, we annually review and update the ASC payment rates. We describe these and various other statutory authorities in the relevant sections of this final rule with comment period. In addition, the final rule with comment period updates and refines the requirements for the Hospital Outpatient Quality Reporting (OQR) Program, the ASC Quality Reporting (ASCQR) Program, and the Hospital Value-Based Purchasing (VBP) Program.

In the final rules in this document, we are finalizing changes to the conditions for coverage (CfCs) for organ procurement organizations (OPOs); revisions to the Quality Improvement Organization (QIO) regulations; changes to the Medicare fee-for-service Electronic Health Record (EHR) Incentive Program; and changes relating to provider reimbursement determinations and appeals.

After publication of our annual proposed rule for CY 2014, we discovered that in applying our established and proposed methodologies to develop the CY 2014 proposed OPPS and ASC payment rates, specific cost estimation errors occurred in the OPPS modeling process. The errors resulting from the cost modeling used to develop the CY 2014 proposed OPPS payment rates were isolated to a few specific ambulatory payment classifications (APCs). However, because the OPPS is a budget neutral payment system, there was a resulting impact on other proposed OPPS payment rates. In addition, because the ASC payment rates are based on the OPPS relative payment weights for the majority of items and services that are provided at ASCs, corrections to the proposed CY 2014 OPPS relative payment weights also had an impact on the proposed CY 2014 ASC relative payment weights and ASC payment rates. Therefore, we released corrected data files on August 28, 2013, and extended the comment period to September 16, 2013, on the technical corrections noted in the correcting document published in the Federal Register on September 6, 2013 (78 FR 54842). This final rule with comment period refers to the corrected OPPS and ASC information.

2. Summary of the Major Provisions

• OPPS Update: For CY 2014, we are increasing the payment rates under the OPPS by an Outpatient Department (OPD) fee schedule increase factor of 1.7 percent. This increase is based on the final hospital inpatient market basket percentage increase of 2.5 percent for inpatient services paid under the hospital inpatient prospective payment system (IPPS), minus the multifactor productivity (MFP) adjustment of 0.5 percentage points, and minus a 0.3 percentage point adjustment required by the Affordable Care Act. Under this final rule with comment period, we estimate that total payments for CY 2014, including beneficiary cost-sharing, to the approximately 4,100 facilities paid under the OPPS (including general acute care hospitals, children's hospitals, cancer hospitals, and community mental health centers (CMHCs)), will be approximately $50.4 billion, an increase of approximately $4.372 billion compared to CY 2013 payments, or $600 million excluding our estimated changes in enrollment, utilization, and case-mix.

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

  • Rural Adjustment: We are continuing the adjustment of 7.1 percent to the OPPS payments to certain rural sole community hospitals (SCHs), including essential access community hospitals (EACHs). This adjustment will apply to all services paid under the OPPS, excluding separately payable drugs and biologicals, devices paid under the pass-through payment policy, and items paid at charges reduced to cost.
  • Cancer Hospital Payment Adjustment: For CY 2014, we are continuing our policy to provide additional payments to cancer hospitals so that the hospital's payment-to-cost ratio (PCR) with the payment adjustment is equal to the weighted average PCR for the other OPPS hospitals using the most recent submitted or settled cost report data. Based on those data, a target PCR of 0.89 will be used to determine the CY 2014 cancer hospital payment adjustment to be paid at cost report settlement. That is, the payment amount associated with the cancer hospital payment adjustment will be the additional payment needed to result in a PCR equal to 0.89 for each cancer hospital.
  • Payment of Drugs, Biologicals, and Radiopharmaceuticals: For CY 2014, payment for the acquisition and pharmacy overhead costs of separately payable drugs and biologicals that do not have pass-through status will be set at the statutory default of average sales price (ASP) plus 6 percent.
  • Packaging Policies: Beginning in CY 2014, we are unconditionally or conditionally packaging the following five categories of items and services and adding them to the list of OPPS packaged items and services in 42 CFR 419.2(b):

(1) Drugs, biologicals, and radiopharmaceuticals used in a diagnostic test or procedure;

(2) Drugs and biologicals when used as supplies in a surgical procedure;

(3) Certain clinical diagnostic laboratory tests;

(4) Procedures described by add-on codes; and

(5) Device removal procedures.

Further details are provided in section II.A.3. of this document.

  • Establishing Comprehensive APCs: In order to improve the accuracy and transparency of our payment for certain device-dependent services, we are finalizing our policy to establish 29 comprehensive APCs to prospectively pay for the most costly hospital outpatient device-dependent services, but we are delaying implementation of this policy until CY 2015. We have defined a comprehensive APC as a classification for the provision of a primary service and all adjunct services provided to support the delivery of the primary service. For services that trigger a comprehensive APC payment, the comprehensive APC will treat all individually reported codes on the claim as representing components of the comprehensive service, resulting in a single prospective payment based on the cost of all individually reported codes on the claim. We will make a single payment for the comprehensive service based on all charges on the claim, excluding only charges for services that cannot be covered by Medicare Part B or that are not payable under the OPPS. We also have modified our methodology to make larger payments for many complex and costly multiple device procedures. Due to our decision to delay implementation until CY 2015 for operational reasons, we are inviting comment on this section of the final rule. We have published tables in the rule to demonstrate how this policy would have been implemented in CY 2014, and we will be considering comments as we update the policy for CY 2015 to account for changes that may occur in the CY 2013 claims data.
  • Payment of Hospital Outpatient Visits: For CY 2014, we are finalizing our proposal to replace the current five levels of visit codes for each clinic visit with a new alphanumeric Level II HCPCS code representing a single level of payment for clinic visits. We are finalizing our proposal to assign the new alphanumeric Level II HCPCS to newly created APC 0634 with CY 2014 OPPS payment rates based on the total mean costs of Level 1 through Level 5 clinic visit codes obtained from CY 2012 OPPS claims data. For CY 2014, we are not finalizing our proposal to replace the current five levels of visit codes for each Type A ED, and Type B ED visits with two new alphanumeric Level II HCPCS codes representing a single level of payment for two types of ED visits, respectively.
  • OPPS Nonrecurring Policy Changes: The enforcement instruction for the supervision of outpatient therapeutic services furnished in CAHs and small rural hospitals will expire at the end of CY 2013. In addition, we are amending the conditions of payment for “incident to” hospital or CAH outpatient services (sometimes referred to as hospital or CAH “therapeutic” services) to explicitly require that individuals furnishing these services be in compliance with State law. In the CY 2014 OPPS/ASC proposed rule, we solicited public comments regarding a potential new claims or other data element that would indicate that the services were furnished in an off-campus provider-based department, which we discuss in this final rule with comment period. Finally, we refer readers to the CY 2014 Medicare Physician Fee Schedule (MPFS) final rule (CMS-1600-F) to review Medicare's policies on application of the therapy caps and related provisions under section 1833(g) of the Act to physical therapy (PT), speech-language pathology (SLP) and occupational therapy (OT) (“therapy”) services that are furnished by a CAH, effective January 1, 2014.
  • Ambulatory Surgical Center Payment Update: For CY 2014, we are increasing payment rates under the ASC payment system by 1.2 percent. This increase is based on a projected CPI-U update of 1.7 percent minus a multifactor productivity adjustment required by the Affordable Care Act that is projected to be 0.5 percent. Based on this update, we estimate that total payments to ASCs (including beneficiary cost-sharing and estimated changes in enrollment, utilization, and case-mix) for CY 2014 will be approximately $3.992 billion, an increase of approximately $143 million compared to estimated CY 2013 payments.
  • Hospital Outpatient Quality Reporting (OQR) Program: For the Hospital OQR Program, we are adopting four new quality measures for the CY 2016 payment determination and subsequent years: Three where aggregate data (numerators, denominators, and exclusions) are collected and data submitted via an online Web-based tool located on a CMS Web page and one HAI measure submitted through the CDC's NHSN. We also are removing two measures and are codifying administrative procedures.
  • Ambulatory Surgical Center Quality Reporting (ASCQR) Program: For the ASCQR Program, we are adopting three new quality measures for the CY 2016 payment determination and subsequent years where data collection will begin in CY 2014. We are collecting aggregate data (numerators, denominators, and exclusions) on all ASC patients for these four chart-abstracted measures via an online Web-based tool located on a CMS Web page. We also are adopting, for the CY 2016 payment determination and subsequent years' payment determinations, requirements for a QualityNet account and security administrator, facility participation, a minimum threshold and minimum volume for claims-based measures, and data collection and submission for new measures and for certain previously finalized measures.
  • Changes to Organ Procurement Organization (OPO) Regulations. In section XVI. of this document, we are finalizing our proposals to modify the current requirement that OPOs meet all three outcome measures set forth in 42 CFR 486.318. Specifically, the final rule provides that an OPO must meet two out of the three outcome measures. This change to the outcome measures requirement will allow those OPOs that fail only one outcome measure to avoid automatic decertification in the 2014 recertification cycle.
  • Revisions to the Quality Improvement Organizations Regulations. We are updating the regulations at 42 CFR Parts 475 and 476 based on the recently enacted Trade Adjustment Assistance Extension Act of 2011 (TAAEA) (Pub. L. 112-40, Section 261) whereby Congress authorized numerous changes to the original legislation and included additional flexibility for the Secretary in the administration of the QIO program. The existing regulations at 42 CFR Part 475 include definitions and standards governing eligibility and the award of contracts to QIOs. In this final rule with comment period, we are finalizing the partial deletion and revision of the regulations under 42 CFR Parts 475 and 476, which relate to the QIO program, including the following: (1) Replace nomenclature in Parts 475 and 476 that has been amended by the TAAEA; (2) revise the existing definition for the term “physician”; (3) add new definitions as necessary to support the new substantive provisions in Subpart C; and (4) replace some of the substantive provisions in Subpart C in their entirety to fully exercise the Secretary's authority for the program and update the contracting requirements to align with contemporary quality improvement.
  • Changes to the Medicare Fee-for-Service Electronic Health Record (EHR) Incentive Program. We are revising the regulations to provide a special method for making hospital-based determinations for 2014 only in the cases of those eligible professionals (EPs) who reassign their benefits to Method II CAHs. Previously, we have been unable to make EHR payments to these EPs for their CAH II claims, or to take those claims into consideration in making hospital-based determinations because of systems limitations. Finalizing the adoption of our method for 2014 will allow us to begin making payments based on CAH II one year earlier than we would be able to do under existing regulations. We also are adopting a minor clarification to the regulations concerning the cost reporting period to be used in determining final EHR payments for hospitals.

3. Summary of Costs and Benefits

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

a. Impacts of the OPPS Update

(1) Impacts of All OPPS Changes

Table 55 in section XXIII. of this final rule with comment period displays the distributional impact of all the OPPS changes on various groups of hospitals and CMHCs for CY 2014 compared to all estimated OPPS payments in CY 2013. We estimate that the policies in this final rule will result in a 1.8 percent overall increase in OPPS payments to providers. We estimate that the increase in OPPS expenditures, including beneficiary cost-sharing, will be approximately $600 million, not taking into account potential changes in enrollment, utilization, and case-mix. Taking into account estimated spending changes that are attributable to these factors, we estimate an increase of approximately $4.372 billion in OPPS expenditures, including beneficiary cost-sharing, for CY 2014 compared to CY 2013 OPPS expenditures. We estimate that total OPPS payments, including beneficiary cost-sharing, will be $50.4 billion for CY 2014.

We estimated the isolated impact of our OPPS policies on CMHCs because CMHCs are only paid for partial hospitalization services under the OPPS. Continuing the provider-specific structure that we adopted beginning in CY 2011 and basing payment fully on the type of provider furnishing the service, we estimate a 1.8 percent increase in CY 2014 payments to CMHCs relative to their CY 2013 payments.

(2) Impacts of Policies Other Than Outpatient Laboratory Test Packaging

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

(3) Impacts of Packaging Outpatient Laboratory Tests

Packaging laboratory services modestly reduces payment to rural and major teaching hospitals, as they will no longer receive separate payment for common laboratory tests.

(4) Impacts of the Updated Wage Indices

Adjustments to the wage indices other than the frontier State wage adjustment will not significantly affect most hospitals and CMHCs. The nonbudget neutral frontier wage index adjustment will result in payment increases to rural and urban hospitals in West North Central and Mountain States.

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

There are no significant impacts of our CY 2014 payment policies for hospitals that are eligible for the rural adjustment or for the cancer hospital payment adjustment. We are not making any change in policies for determining the rural and cancer hospital payment adjustments, and the adjustment amounts do not significantly impact the budget neutrality adjustments for these policies.

(6) Impacts of the OPD Fee Schedule Increase Factor

We estimate that, for many hospitals, the application of the OPD fee schedule increase factor of 1.7 percent to the conversion factor for CY 2014 will mitigate the small negative impacts of the budget neutrality adjustments. While most classes of hospitals will receive an increase that is in line with the 1.7 percent overall increase after the update is applied to the budget neutrality adjustments, some hospitals will receive smaller but still generally positive overall increases.

b. Impacts of the ASC Payment Update

For impact purposes, the procedures on the ASC list of covered surgical procedures are aggregated into surgical specialty groups using CPT and HCPCS code range definitions. The percentage change in estimated total payments by specialty groups under the CY 2014 payment rates compared to estimated CY 2013 payment rates ranges between −11 percent for ancillary items and services and 14 percent for respiratory system procedures.

c. Impacts of the Hospital OQR Program

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

d. Impacts of the ASCQR Program

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

e. Impacts for the QIO Program Changes

We estimate the effects of the QIO Program changes to be consistent with the Congressional Budget Office's 2011 Cost Estimate of the Trade Bill (H.R. 2832) which included a reduction in spending of $330 million over the 2012-2021 period. According to the CBO Estimate and subsequently the regulatory changes “would modify the provisions under which CMS contracts with independent entities called [“]Quality Improvement Organizations (QIOs)[”] in Medicare. QIOs, generally staffed by health care professionals, review medical care, help beneficiaries with complaints about the quality of care, and implement care improvements. H.R. 2832 would make several changes to the composition and operation of QIOs, and would harmonize QIO contracts with requirements of the Federal Acquisition Regulation. Among those changes are a modification to expand the geographic scope of QIO contracts and a lengthening of the contract period. CBO estimates that those provisions would reduce spending by $330 million over the 2012-2021 period.”

B. Legislative and Regulatory Authority for the Hospital OPPS

When Title XVIII of the Social Security Act was enacted, Medicare payment for hospital outpatient services was based on hospital-specific costs. In an effort to ensure that Medicare and its beneficiaries pay appropriately for services and to encourage more efficient delivery of care, the Congress mandated replacement of the reasonable 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; the Middle Class Tax Relief and Job Creation Act of 2012 (MCTRJCA, Pub. L. 112-96), enacted on February 22, 2012; and the American Taxpayer Relief Act of 2012 (Pub. L. 112-240), enacted January 2, 2013.

Under the OPPS, we pay for hospital outpatient services on a rate-per-service basis that varies according to the APC group to which the service is assigned. We use the Healthcare Common Procedure Coding System (HCPCS) (which includes certain Current Procedural Terminology (CPT) codes) to identify and group the services within each APC. The OPPS includes payment for most hospital outpatient services, except those identified in section I.C. of this final rule with comment period. Section 1833(t)(1)(B) of the Act provides for payment under the OPPS for hospital outpatient services designated by the Secretary (which includes partial hospitalization services furnished by CMHCs), and certain inpatient hospital services that are paid under Part B.

The OPPS rate is an unadjusted national payment amount that includes the Medicare payment and the beneficiary copayment. This rate is divided into a labor-related amount and a nonlabor-related amount. The 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 originally exercised the authority granted under the statute to also exclude from the OPPS those services that are paid under fee schedules or other payment systems. Such excluded services include, for example, the professional services of physicians and nonphysician practitioners paid under the MPFS; laboratory services paid under the Clinical Laboratory Fee Schedule (CLFS); services for beneficiaries with end-stage renal disease (ESRD) that are paid under the ESRD prospective payment system; and services and procedures that require an inpatient stay that are paid under the hospital IPPS. We set forth the services that are excluded from payment under the OPPS in regulations at 42 CFR 419.22. This final rule with comment period modifies 42 CFR 419.22 and includes in the OPPS some of these previously excluded services.

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

D. Prior Rulemaking

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

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

2. Establishment of the Panel

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

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

3. Panel Meetings and Organizational Structure

The Panel has held multiple meetings, with the last meetings taking place on March 11, 2013 and August 26-27, 2013. Prior to each meeting, we publish a notice in the Federal Register to announce the meeting and, when necessary, to solicit nominations for Panel membership and to announce new members.

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

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

Each of these subcommittees was established by a majority vote from the full Panel during a scheduled Panel meeting, and the Panel recommended at the August 2013 meeting that the subcommittees continue. We accepted this recommendation.

Discussions of the other recommendations made by the Panel at the March 2013 and August 2013 Panel meetings are included in the sections of this final rule that are specific to each recommendation. For discussions of earlier Panel meetings and recommendations, we refer readers to previously published OPPS/ASC proposed and final rules, the CMS Web site mentioned earlier in this section, and the FACA database at: http://fido.gov/facadatabase/public.asp.

F. Public Comments Received in Response to the CY 2014 OPPS/ASC Proposed Rule

We received approximately 2,677 timely pieces of correspondence on the CY 2014 OPPS/ASC proposed rule that appeared in the Federal Register on July 19, 2013 (78 FR 43534) and the correcting document published in the Federal Register on September 6, 2013 (78 FR 54842). This final rule with comment period refers to the corrected information wherever applicable. We note that we received some public comments that were outside the scope of the proposed rule and that are not addressed in this final rule with comment period. Summaries of the public comments to the proposed rule and the correcting document that are within the scope of the proposed rule and our responses are set forth in the various sections of this final rule with comment period under the appropriate subject-matter headings.

G. Public Comments Received on the CY 2013 OPPS/ASC Final Rule With Comment Period

We received approximately 27 timely pieces of correspondence on the CY 2013 OPPS/ASC final rule with comment period that appeared in the Federal Register on November 15, 2012 (77 FR 68210), some of which contained comments on the interim APC assignments and/or status indicators of HCPCS codes identified with comment indicator “NI” in Addenda B, AA, and BB to that final rule. Summaries of these public comments on topics that were open to comment and our responses to them are set forth in various sections of this final rule with comment period under the appropriate subject-matter headings.

II. Updates Affecting OPPS Payments 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 2014 OPPS/ASC proposed rule (78 FR 43544), for the CY 2014 OPPS, we proposed to recalibrate the APC relative payment weights for services furnished on or after January 1, 2014, and before January 1, 2015 (CY 2014), using the same basic methodology that we described in the CY 2013 OPPS/ASC final rule with comment period. That is, we proposed to recalibrate the relative payment weights for each APC based on claims and cost report data for hospital outpatient department (HOPD) services, using the most recent available data to construct a database for calculating APC group weights. Therefore, for the purpose of recalibrating the proposed APC relative payment weights for CY 2014, we used approximately 146 million final action claims (claims for which all disputes and adjustments have been resolved and payment has been made) for hospital outpatient department services furnished on or after January 1, 2012, and before January 1, 2013. For this final rule with comment period, for the purpose of recalibrating the final APC relative payment weights for CY 2014, we used approximately 158 million final action claims (claims for which all disputes and adjustments have been resolved and payment has been made) for HOPD services furnished on or after January 1, 2012, and before January 1, 2013. For exact counts of claims used, we refer readers to the claims accounting narrative under supporting documentation for the CY 2014 OPPS/ASC proposed rule and this final rule with comment period on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html.

Of the approximately 158 million final action claims for services provided in hospital outpatient settings used to calculate the CY 2014 OPPS payment rates for this final rule with comment period, approximately 125 million claims were the type of bill potentially appropriate for use in setting rates for OPPS services (but did not necessarily contain services payable under the OPPS). Of the approximately 125 million claims, approximately 6 million claims were not for services paid under the OPPS or were excluded as not appropriate for use (for example, erroneous cost-to-charge ratios (CCRs) or no HCPCS codes reported on the claim). From the remaining approximately 119 million claims, we created approximately 125 million single records, of which approximately 80 million were “pseudo” single or “single session” claims (created from approximately 31 million multiple procedure claims using the process we discuss later in this section). Approximately 1 million claims were trimmed out on cost or units in excess of +/−3 standard deviations from the geometric mean, yielding approximately 124 million single bills for ratesetting. As described in section II.A.2. of this final rule with comment period, our data development process is designed with the goal of using appropriate cost information in setting the APC relative payment weights. The bypass process is described in section II.A.1.b. of this final rule with comment period. This section discusses how we develop “pseudo” single procedure claims (as defined below), with the intention of using more appropriate data from the available claims. In some cases, the bypass process allows us to use some portion of the submitted claim for cost estimation purposes, while the remaining information on the claim continues to be unusable. Consistent with the goal of using appropriate information in our data development process, we only use claims (or portions of each claim) that are appropriate for ratesetting purposes.

The final APC relative weights and payments for CY 2014 in Addenda A and B to this final rule with comment period (which are available via the Internet on the CMS Web site) were calculated using claims from CY 2012 that were processed through June 30, 2013. While prior to CY 2013 we had historically based the payments on median hospital costs for services in the APC groups, beginning with the CY 2013 OPPS, we established the cost-based relative payment weights for the OPPS using geometric mean costs, as discussed in the CY 2013 OPPS/ASC final rule with comment period (77 FR 68259 through 68271). For the CY 2014 OPPS, we proposed and are using this same methodology, basing payments on geometric mean costs. Under this methodology, we select claims for services paid under the OPPS and match these claims to the most recent cost report filed by the individual hospitals represented in our claims data. We continue to believe that it is appropriate to use the most current full calendar year claims data and the most recently submitted cost reports to calculate the relative costs underpinning the APC relative payment weights and the CY 2014 payment rates.

b. Use of Single and Multiple Procedure Claims

For CY 2014, in general, as we proposed, we are continuing to use single procedure claims to set the costs on which the APC relative payment weights are based. We generally use single procedure claims to set the estimated costs for APCs because we believe that the OPPS relative weights on which payment rates are based should be derived from the costs of furnishing one unit of one procedure and because, in many circumstances, we are unable to ensure that packaged costs can be appropriately allocated across multiple procedures performed on the same date of service.

It is generally desirable to use the data from as many claims as possible to recalibrate the APC relative payment weights, including those claims for multiple procedures. As we have for several years, we are continuing to use date of service stratification and a list of codes to be bypassed to convert multiple procedure claims to “pseudo” single procedure claims. Through bypassing specified codes that we believe do not have significant packaged costs, we are able to use more data from multiple procedure claims. In many cases, this enables us to create multiple “pseudo” single procedure claims from claims that were submitted as multiple procedure claims spanning multiple dates of service, or claims that contained numerous separately paid procedures reported on the same date on one claim. We refer to these newly created single procedure claims as “pseudo” single procedure claims. The history of our use of a bypass list to generate “pseudo” single procedure claims is well documented, most recently in the CY 2013 OPPS/ASC final rule with comment period (77 FR 68227 through 68229). In addition, for CY 2008 (72 FR 66614 through 66664), we increased packaging and created the first composite APCs, and continued those policies through CY 2013. Increased packaging and creation of composite APCs also increased the number of bills that we were able to use for ratesetting by enabling us to use claims that contained multiple major procedures that previously would not have been usable. Further, for CY 2009, we expanded the composite APC model to one additional clinical area, multiple imaging services (73 FR 68559 through 68569), which also increased the number of bills we were able to use in developing the OPPS relative weights on which payments are based. We have continued the composite APCs for multiple imaging services through CY 2013, and as we proposed, we are continuing this policy for CY 2014. In addition, as we proposed, we are further expanding our packaging policies for CY 2014. We refer readers to section II.A.2.f. of this final rule with comment period for a discussion of the use of claims in modeling the costs for composite APCs and to section II.A.3. of this final rule with comment period for a discussion of our packaging policies for CY 2014.

As we proposed, we are continuing to apply these processes to enable us to use as much claims data as possible for ratesetting for the CY 2014 OPPS. This methodology enabled us to create, for this final rule with comment period, approximately 80 million “pseudo” single procedure claims, including multiple imaging composite “single session” bills (we refer readers to section II.A.2.f.(5) of this final rule with comment period for further discussion), to add to the approximately 43 million “natural” single procedure claims.

For CY 2014, we proposed to bypass 179 HCPCS codes that were identified in Addendum N to the CY 2014 OPPS/ASC proposed rule (which is available via the Internet on the CMS Web site). Since the inception of the bypass list, which is the list of codes to be bypassed to convert multiple procedure claims to “pseudo” single procedure claims, we have calculated the percent of “natural” single bills that contained packaging for each HCPCS code and the amount of packaging on each “natural” single bill for each code. Each year, we generally retain the codes on the previous year's bypass list and use the updated year's data (for CY 2014, data available for the March 11, 2013 meeting of the Advisory Panel on Hospital Outpatient Payment (the Panel) from CY 2012 claims processed through September 30, 2012, and CY 2011 claims data processed through June 30, 2012, used to model the payment rates for CY 2013) to determine whether it would be appropriate to add additional codes to the previous year's bypass list. For CY 2014, we proposed to continue to bypass all of the HCPCS codes on the CY 2013 OPPS bypass list, with the exception of HCPCS codes that we proposed to delete for CY 2014, which were listed in Table 1 of the proposed rule (78 FR 43546). We also proposed to remove HCPCS codes that are not separately paid under the OPPS because the purpose of the bypass list is to obtain more data for those codes relevant to ratesetting. Some of the codes we proposed to remove from the CY 2014 bypass list are affected by the CY 2014 packaging final policy, discussed in section II.A.3. of this final rule with comment period. In addition, we proposed to add to the bypass list for CY 2014 HCPCS codes not on the CY 2013 bypass list that, using either the CY 2013 final rule data (CY 2011 claims) or the March 11, 2013 Panel data (first 9 months of CY 2012 claims), met the empirical criteria for the bypass list that are summarized below. Finally, to remain consistent with the CY 2014 final policy to continue to develop OPPS relative payment weights based on geometric mean costs, we also proposed that the packaged cost criterion continue to be based on the geometric mean cost. The entire list proposed for CY 2014 (including the codes that remain on the bypass list from prior years) was open to public comment in the CY 2014 OPPS/ASC proposed rule. Because we must make some assumptions about packaging in the multiple procedure claims in order to assess a HCPCS code for addition to the bypass list, we assumed that the representation of packaging on “natural” single procedure claims for any given code is comparable to packaging for that code in the multiple procedure claims. As we proposed, the criteria for the bypass list are:

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

We note that, as we did for CY 2013, we proposed to continue to establish the CY 2014 OPPS relative payment weights based on geometric mean costs. To remain consistent in the metric used for identifying cost patterns, we proposed to use the geometric mean cost of packaging to identify potential codes to add to the bypass list.

In response to public comments on the CY 2010 OPPS/ASC proposed rule requesting that the packaged cost threshold be updated, we considered whether it would be appropriate to update the $50 packaged cost threshold for inflation when examining potential bypass list additions. As discussed in the CY 2010 OPPS/ASC final rule with comment period (74 FR 60328), the real value of this packaged cost threshold criterion has declined due to inflation, making the packaged cost threshold more restrictive over time when considering additions to the bypass list. Therefore, adjusting the threshold by the market basket increase would prevent continuing decline in the threshold's real value. Based on the same rationale described for the CY 2013 OPPS/ASC final rule with comment period (77 FR 68221), we proposed for CY 2014 to continue to update the packaged cost threshold by the market basket increase. By applying the final CY 2013 market basket increase of 1.8 percent to the prior nonrounded dollar threshold of $53.76 (77 FR 68221), we determined that the threshold remains for CY 2014 at $55 ($54.73 rounded to $55, the nearest $5 increment). Therefore, we proposed to set the geometric mean packaged cost threshold on the CY 2012 claims at $55 for a code to be considered for addition to the CY 2014 OPPS bypass list.

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

In addition, we proposed to continue to include on the bypass list HCPCS codes that CMS medical advisors believe have minimal associated packaging based on their clinical assessment of the complete CY 2014 OPPS proposal. Some of these codes were identified by CMS medical advisors and some were identified in prior years by commenters with specialized knowledge of the packaging associated with specific services. We also proposed to continue to include certain HCPCS codes on the bypass list in order to purposefully direct the assignment of packaged costs to a companion code where services always appear together and where there would otherwise be few single procedure claims available for ratesetting. For example, we have previously discussed our reasoning for adding HCPCS code G0390 (Trauma response team associated with hospital critical care service) to the bypass list (73 FR 68513).

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

Comment: One commenter supported the CY 2014 proposal to remove certain codes from the bypass list, in particular for the anatomic pathology procedures, suggesting that the bypass list undervalues codes, and artificially lowers their estimated costs, as evidenced by the estimated increase in payment for some of those services in the proposed CY 2014 OPPS.

Response: We appreciate the commenter's support. The bypass list process is used to extract more data from claims that would otherwise be unusable. We use a variety of information in identifying codes that could be potentially added to the bypass list each year, including codes selected based on the empirical criteria, CMS medical advisor recommendations, and commenter requests. In doing so, we attempt to ensure that the amount of packaged cost being redistributed as a result of the process is limited.

As discussed in the CY 2014 OPPS/ASC proposed rule (78 FR 43545 through 43546), we proposed to remove the bypass codes listed in Table 1 of the proposed rule, several of which were affected by the CY 2014 proposed packaging policy. Codes that would not be separately paid in the prospective year, whether because of prospective packaging policies or deletions prior to the claims year, would not be appropriately applied to the bypass process. Bypassing packaged codes would potentially remove costs that would otherwise be used in calculating payment weights for other separately payable procedures, which would be inappropriate. We note that OPPS payment rates may fluctuate from year to year based on a variety of other factors, including updated data, APC recalibration, and increased packaging.

Comment: Several commenters believed that an inconsistency existed in the application of the bypass policy and the E&M codes. They noted that visit codes 99211 and 99215 were not included on the proposed CY 2014 OPPS bypass list, and that because those codes were part of the proposed new visit APC 0634 (Hospital Clinic Visits), which also would be used in calculating the OPPS relative payment weights, an error had occurred.

Response: We acknowledge that the proposed CY 2014 OPPS bypass list did not include several of the E&M codes. With the exception of CPT code 99205, which we proposed to add to the CY 2014 OPPS bypass list, the other visit codes already had been on the bypass list in prior years based on the empirical criteria previously described. Applying those empirical criteria would continue to exclude the remaining E&M codes from the bypass list. Therefore, we do not believe that those exclusions are an error. While we recognize that there are interactions between the visits policy discussed in section VII. of this final rule with comment period and the bypass process to derive more information, those interactions allow for policy interpretations based on the individual rules and goals being applied. In developing the proposed CY 2014 OPPS bypass list, we tried to retain the principles and guidelines we have used in the past while accommodating other proposals where they might interact, such as with the CY 2014 OPPS proposed packaging policy. We appreciate the meaningful policy comments that stakeholders provide, especially where these policy intersections occur. We will continue to review the codes on the bypass list and their appropriateness, especially in the context of the packaging policies described in section II.A.3. of this final rule with comment period.

We note that while we proposed that the new CY 2014 visit APC 0634 would be the new base APC on which the scaled weights would be calculated, it was selected as a baseline because clinic visits are one of the most frequently performed services in the hospital outpatient setting, similar to APCs 0606 and 0601 in prior years. However, choice of the APC on which to base the proposed relative payment weights for all other APCs does not affect the payments made under the OPPS because the weights are scaled for budget neutrality. Therefore, any potential miscalculations or policy issues related to an APC would generally be concentrated in those APCs because, for scaling purposes, it would be similar to selecting any number as a baseline, which would later be budget neutralized through a weight scaler. The CY 2014 OPPS weight scaler is discussed in section II.A.4. of this final rule with comment period.

Comment: One commenter noted that many of the codes on the bypass list may no longer be appropriate because the proposed CY 2014 packaging policy would potentially cause many of the natural single major claims, to which CMS applies the empirical criteria, to exceed the packaged cost thresholds.

Response: We appreciate the issue that the commenter has raised regarding the application of the bypass list and its interaction with our proposed CY 2014 policies. In prior years, we generally continued bypassing codes that were on the previous year's bypass list under the assumption that packaging, billing, and clinical patterns would generally remain similar from year to year. As the commenter noted, under the proposed CY 2014 OPPS packaging policies, the data on which we identify codes potentially added to the bypass list may change. We will continue to examine the cost patterns for codes which may be appropriately added or removed from the bypass list.

After consideration of the public comments we received, we are adopting as final the proposed “pseudo” single claims process. As discussed earlier in this section, there are interactions between the application of a bypass list and various other OPPS payment policies. As a result of modifications to the packaging policies described in section III. of this final rule with comment period, we are adding codes that we had originally proposed to remove from the CY 2014 bypass list back on the CY 2014 final OPPS bypass list. Addendum N to this final rule with comment period (which is available via the Internet on the CMS Web site) includes the list of bypass codes for CY 2014.

The list of bypass codes contains codes that were reported on claims for services in CY 2012 and, therefore, includes codes that were in effect in CY 2012 and used for billing but were deleted for CY 2013. We retained these deleted bypass codes on the CY 2014 bypass list because these codes existed in CY 2012 and were covered OPD services in that period, and CY 2012 claims data are used to calculate CY 2014 payment rates. Keeping these deleted bypass codes on the bypass list potentially allows us to create more “pseudo” single procedure claims for ratesetting purposes. “Overlap bypass codes” that were members of the multiple imaging composite APCs are identified by asterisks (*) in the third column of Addendum N to this final rule with comment period. HCPCS codes that we are adding for CY 2014 are identified by asterisks (*) in the fourth column of Addendum N.

Table 1 of the proposed rule contained the list of codes that we proposed to remove from the CY 2014 bypass list for CY 2014 (78 FR 43546). Table 1 below contains the list of codes that we are removing from the final CY 2014 bypass list because these codes were either deleted from the HCPCS before CY 2012 (and therefore were not covered OPD services in CY 2012) or were not separately payable codes under the CY 2014 OPPS because these codes are not used for ratesetting through the bypass process. The list of codes for removal from the bypass list includes those that will be affected by the CY 2014 OPPS packaging policy described in section II.A.3. of this final rule with comment period.

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

In the CY 2014 OPPS/ASC proposed rule (78 FR 43547), we proposed to continue to use the hospital-specific overall ancillary and departmental 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 2014 APC payment rates were based, we calculated hospital-specific overall ancillary CCRs and hospital-specific departmental CCRs for each hospital for which we had CY 2012 claims data from the most recent available hospital cost reports, in most cases, cost reports beginning in CY 2011. For the CY 2014 OPPS proposed rates, we used the set of claims processed during CY 2012. We applied the hospital-specific CCR to the hospital's charges at the most detailed level possible, based on a revenue 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 2012 (the year of claims data we used to calculate the proposed CY 2014 OPPS payment rates) and found that the National Uniform Billing Committee (NUBC) did not add any new revenue codes to the NUBC 2012 Data Specifications Manual.

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

For the CCR calculation process, we used the same general approach that we used in developing the final APC rates for CY 2007 and thereafter, using the revised CCR calculation that excluded the costs of paramedical education programs and weighted the outpatient charges by the volume of outpatient services furnished by the hospital. We refer readers to the CY 2007 OPPS/ASC final rule with comment period for more information (71 FR 67983 through 67985). We first limited the population of cost reports to only those hospitals that filed outpatient claims in CY 2012 before determining whether the CCRs for such hospitals were valid.

We then calculated the CCRs for each cost center and the overall ancillary CCR for each hospital for which we had claims data. We did this using hospital-specific data from the Hospital Cost Report Information System (HCRIS). We used the most recent available cost report data, which, in most cases, were from cost reports with cost reporting periods beginning in CY 2011. For the proposed rule, we used the most recently submitted cost reports to calculate the CCRs to be used to calculate costs for the proposed CY 2014 OPPS payment rates. If the most recently available cost report was submitted but not settled, we looked at the last settled cost report to determine the ratio of submitted to settled cost using the overall ancillary CCR, and we then adjusted the most recent available submitted, but not settled, cost report using that ratio. We then calculated both an overall ancillary CCR and cost center-specific CCRs for each hospital. We used the overall ancillary CCR referenced above for all purposes that require use of an overall ancillary CCR. We proposed to continue this longstanding methodology for the calculation of costs for CY 2014.

Since the implementation of the OPPS, some commenters have raised concerns about potential bias in the OPPS cost-based weights due to “charge compression,” which is the practice of applying a lower charge markup to higher cost services and a higher charge markup to lower cost services. As a result, the cost-based weights may reflect some aggregation bias, undervaluing high-cost items and overvaluing low-cost items when an estimate of average markup, embodied in a single CCR, is applied to items of widely varying costs in the same cost center. This issue was evaluated in a report by the Research Triangle Institute, International (RTI). The RTI final report can be found on RTI's Web site at: http://www.rti.org/reports/cms/HHSM-500-2005-0029I/PDF/Refining_Cost_to_Charge_ratios_200807_Final.pdf. For a complete discussion of the RTI recommendations, public comments, and our responses, we refer readers to the CY 2009 OPPS/ASC final rule with comment period (73 FR 68519 through 68527).

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

The cost center for “Implantable Devices Charged to Patients” has been available for use for cost reporting periods beginning on or after May 1, 2009. In the CY 2013 OPPS/ASC final rule with comment period, we determined that a significant volume of hospitals were utilizing the “Implantable Devices Charged to Patients” cost center. Because a sufficient amount of data from which to generate a meaningful analysis was available, we established in the CY 2013 OPPS/ASC final rule with comment period a policy to create a distinct CCR using the “Implantable Devices Charged to Patients” cost center (77 FR 68225). For the CY 2014 OPPS, as we proposed, we are continuing to use data from the “Implantable Devices Charged to Patients” cost center to create a distinct CCR for use in calculating the OPPS relative payment weights.

In the FY 2011 IPPS/LTCH PPS final rule (75 FR 50075 through 50080), we finalized our proposal to create new standard cost centers for “Computed Tomography (CT),” “Magnetic Resonance Imaging (MRI),” and “Cardiac Catheterization,” and to require that hospitals report the costs and charges for these services under these new cost centers on the revised Medicare cost report Form CMS 2552-10. As we discussed in the FY 2009 IPPS and CY 2009 OPPS/ASC proposed and final rules, RTI also found that the costs and charges of CT scans, MRIs, and cardiac catheterization differ significantly from the costs and charges of other services included in the standard associated cost center. RTI concluded that both the IPPS and the OPPS relative payment weights would better estimate the costs of those services if CMS were to add standard costs centers for CT scans, MRIs, and cardiac catheterization in order for hospitals to report separately the costs and charges for those services and in order for CMS to calculate unique CCRs to estimate the cost from charges on claims data. We refer readers to the FY 2011 IPPS/LTCH PPS final rule (75 FR 50075 through 50080) for a more detailed discussion on the reasons for the creation of standard cost centers for CT scans, MRIs, and cardiac catheterization. The new standard cost centers for CT scans, MRIs, and cardiac catheterization were effective for cost report periods beginning on or after May 1, 2010, on the revised cost report Form CMS-2552-10.

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

BILLING CODE 4120-01-P

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In our CY 2014 OPPS/ASC proposed rule discussion, we noted that the estimated changes in geometric mean estimated APC cost of using data from the new standard cost centers for CT scans and MRIs appeared consistent with RTI's analysis of cost report and claims data in the July 2008 final report (pages 5 and 6). RTI concludes that “in hospitals that aggregate data for CT scanning, MRI, or nuclear medicine services with the standard line for Diagnostic Radiology, costs for these services all appear substantially overstated, while the costs for plain films, ultrasound and other imaging procedures are correspondingly understated.” We also noted that there were limited additional impacts in the implantable device-related APCs from adopting the new cost report form CMS 2552-10 because we had used data from the standard cost center for implantable medical devices in CY 2013 OPPS ratesetting, as discussed above.

As we have indicated in prior rulemaking (77 FR 68223 through 68225), once we have determined that cost report data for the new standard cost centers were sufficiently available, we would analyze that data and, if appropriate, we would propose to use the distinct CCRs for new standard cost centers described above in the calculation of the OPPS relative payment weights. As stated in the CY 2014 OPPS/ASC proposed rule (78 FR 43550), we have conducted our analysis and concluded that we should develop distinct CCRs for each of the new cost centers and use them in ratesetting. Therefore, beginning in the CY 2014 OPPS, we proposed to calculate the OPPS relative payment weights using distinct CCRs for cardiac catheterization, CT scan, and MRI and to continue using a distinct CCR for implantable medical devices. Section XXIII. of this final rule with comment period includes the impacts of calculating the CY 2014 OPPS relative payment weights using these new standard cost centers.

Comment: Commenters generally supported the proposals to implement the standard cost center CCRs for implantable devices and cardiac catheterization. However, many commenters requested that CMS reconsider the impact of distinct CCRs for MRI and CT scan cost centers before adopting them. Various commenters opposed the implementation of distinct MRI and CT scan CCRs, expressing concern that doing so would result in very low CCRs for these services because of gross hospital cost reporting practices that allocate capital costs for MRIs and CT scans across the entire hospital, rather than to the appropriate CT scan and MRI cost centers. Specifically, commenters reported that some hospitals currently use an imprecise “square feet” allocation methodology for the costs of large moveable equipment like CT scan and MRI machines. They indicated that while CMS recommends using two alternative allocation methods, “direct assignment” or “dollar value,” as a more accurate methodology for directly assigning equipment costs, industry analysis suggests that approximately only half of the reported cost centers for CT scans and MRIs rely on these preferred methodologies. The commenters expressed concern that “square feet” allocation results in CCRs that lack face validity because the proposed CCRs for CT scans and MRIs are less than the proposed CCR for general diagnostic radiology, inaccurately reflecting the higher resources used for MRIs and CT scans relative to the less expensive plain film x-rays. These commenters also noted that, under the CY 2014 OPPS proposed policy of using standard CT and MRI cost center data from the Medicare cost report Form CMS 2552-10, payment for certain x-rays would be similar to that of CT imaging services, despite their belief that CT services would cost significantly more to perform. Other commenters suggested that if CMS were to finalize the new CCRs, CMS should only use cost report data that meet minimum data quality standards, such as only including: (1) Cost report data based on dollar value or direct assignment cost allocation methods; (2) “plausible” costs for CT and MRI cost centers; and (3) data when there is evidence of reclassified costs from diagnostic radiology to standard CT and MRI cost centers. Commenters also raised concerns with CMS' analysis and indicated that similarity of the APC payment impacts in the CY 2014 OPPS proposed rule and those in the RTI report did not confirm the validity of the proposed CCRs. Commenters asserted that more time is needed by hospitals to modify their cost reporting practices, while other commenters suggested that it was unrealistic to expect hospitals to adopt cost allocation methods that would improve the accuracy of the cost data at all, due to the significant expenses involved and the limited benefit to each individual hospital.

Commenters also noted that the Deficit Reduction Act (DRA) of 2005 sets the technical component (TC) of advanced imaging services under the Medicare Physician Fee Schedule (MPFS) to the lesser of: (1) The payment under the MPFS; or (2) the payment under the OPPS. The commenters stated that, as proposed, the separate cost centers for MRI and CT scans would result in significant cuts to the MPFS technical component payments and that such payment cuts could affect beneficiary access to care. The commenters urged CMS not to use the proposed CCRs for MRIs and CT scans until the payment effects have been thoroughly analyzed.

Response: We appreciate the comments regarding the use of standard cost center CCRs for implantable devices, MRIs, CT scans, and cardiac catheterization. We appreciate the support for our proposal to use distinct CCRs for implantable devices and cardiac catheterization. We have reviewed the comments objecting to implementation of distinct CCRs for MRIs and CT scans. We note that the new standard cost centers for CT scans, MRIs, and cardiac catheterization have been in effect since cost reporting periods beginning on or after May 1, 2010, on the revised Medicare cost report Form CMS-2552-10. Therefore, the cost reports that we are using to develop the CY 2014 OPPS relative payment weights were either the first or the second opportunity for hospitals to submit cost reports with the new CT scan and MRI cost centers (lines 57 and 58 of Worksheets A and C, Part I of the Form CMS-2552-10), depending on the hospital's cost reporting period. Simultaneous with implementing the new CT scan and MRI cost centers, in the FY 2011 IPPS/LTCH PPS final rule (75 FR 50077) and the CY 2011 OPPS/ASC final rule (75 FR 71824), we also notified hospitals of the need and importance of properly reporting the capital costs of moveable equipment on the Medicare cost report.

In the FY 2011 IPPS/LTCH PPS final rule (75 FR 50078), we explained that, in accordance with Section 104 of CMS Pub. 15-1, Chapter 1, CT scans and MRIs are major moveable equipment, and the costs should be reported together with the rest of the hospital's major moveable equipment cost in the Capital-Related Costs—Moveable Equipment cost centers on Worksheet A (lines 2 and 4 on the Form CMS-2552-96 and line 2 on the Form CMS-2552-10). The costs in these cost centers are allocated to all the hospital's cost centers that use major moveable equipment (including CT and MRI), using “dollar value” (which is the “recommended” or default statistical basis, in accordance with the cost reporting instructions contained in Section 4095 of CMS Pub. 15-2, for the Form CMS-2552-10). Alternatively, the hospital may have obtained the contractor's approval under Section 2313 of CMS Pub. 15-1 to use the simplified cost allocation methodology known as “square feet.” However, a hospital that historically has been using “square feet” and is concerned that this method of allocation may result in inaccurate CCRs (on Worksheet C, Part I) for the CT scan, MRI, and other ancillary cost centers may request contractor approval in accordance with Section 2307 of the CMS Pub. 15-1 to use the “direct assignment” allocation method, and directly assign the cost of moveable equipment to all of the hospital's cost centers that use moveable equipment, including CT scans and MRIs, using the provider's routine accounting process. This would ensure that the cost of the CT scanning and MRI equipment would be reflected in the CCR that would be calculated for those departments and that would be used to estimate the cost of CT scan and MRI services. In any case, hospitals should correct their cost reporting practices to come into compliance with CMS' longstanding policy regarding the “Capital-Related Costs—Moveable Equipment” cost center, by either using the recommended statistical allocation method of “dollar value” for costs in Worksheet A, Column 2 for Capital- Related Costs—Moveable Equipment or by requesting contractor approval in accordance with Section 2307 of CMS Pub. 15-1 to use the “direct assignment” allocation method. In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53283), we reiterated this policy, and added that “Hospitals that still need to correct their cost reporting practices in this regard should do so soon” so that distinct CT and MRI cost center CCRs would accurately reflect the costs associated with providing those services.

In the CY 2014 OPPS/ASC proposed rule, we provided information about the CT and MRI cost center CCRs and the estimated effects on APC payment of adopting those cost centers. We noted the similarities between our estimations and the RTI report results not only to demonstrate that they were generally consistent with each other, but to again note that any concerns and criticisms of the data and its corresponding impact on the payment rates would be the same as were expected when the report was initially published in July 2008, absent any improvements in cost reporting practice. We further note that some of the concerns that commenters described related to differentials in payment for plain film x-rays based on proposed CY 2014 OPPS payment rates being similar to those of the CT and MRI services have abated because the ancillary services and diagnostic tests on the bypass list packaging proposals are not being finalized for CY 2014. Various packaged items and services under those proposals may have created some of the estimated increase in service cost for plain film x-rays.

While some commenters believe that it is unrealistic for hospitals to adopt cost allocation methods that improve data and payment accuracy, we believe that those recommended changes are critical in the shared goal of developing OPPS relative payment weights that accurately reflect service costs. We also believe that because approximately half of hospitals reporting either the new CT scan or MRI standard cost center thus far have adopted one of the more accurate cost allocation methods, other hospitals also should be able to do so. Of the 1,961 hospitals reporting a new CT scan standard cost center, 1,055 hospitals reported using either “direct assignment” or “dollar value” as the cost allocation method. Similarly, of the 1,871 hospitals reporting a new MRI standard cost center, approximately 985 hospitals report using either “direct assignment” or “dollar value” as the cost allocation method. Commenters have previously recognized the significant impact that the CT scan and MRI standard cost center data would have on multiple payment systems, and we believe that the significant effects of these data on payment should inherently encourage more accurate cost reporting (75 FR 71824). Standard cost centers for CT and MRI services were developed in the revised Medicare cost report Form CMS-2552-10 to more accurately capture the costs associated with providing these important services. Not including the cost report data derived from these cost centers in ratesetting with no future indication of improvement would be contrary to their purpose and our goal to develop OPPS relative payment weights that accurately reflect service costs.

We have considered the public comments recommending that if CMS does finalize distinct CCRs for CT scans and MRIs for the OPPS relative payment weights, CMS adopt certain minimum quality standards, such as using only cost report data of hospitals that use either direct assignment or the dollar value statistical allocation method, have at least $250,000 of cost in the CT scan or MRI cost center, and have reclassified overhead costs from the diagnostic radiology cost center to the CT scan and/or MRI cost centers. We appreciate the commenters' shared concern surrounding the goal of using the best available information to estimated costs associated with these new standard cost centers.

For the FY 2014 IPPS/LTCH PPS final rule, we did not agree with the adoption of commenters' suggested minimum data standards because doing so would have ignored the fact that many hospitals have chosen (at least up to this point) to employ the square feet statistical allocation methodology, perhaps for reasons unrelated to the costs of MRIs and CT scans, and, therefore, those data reflect, in large part, the best available data that we have. It also is not administratively feasible for CMS to determine, using HCRIS data, whether hospitals have reclassified overhead costs from the diagnostic radiology cost center to the CT scan and/or MRI cost centers. However, in the FY 2014 IPPS/LTCH PPS final rule, we recognized that while only a fraction of the negative impact would be manifested in the IPPS MS-DRGs, the OPPS relative payment weights would be more significantly affected by the adoption of the new standard cost center CCRs (78 FR 50521).

We took note of the many comments regarding the ramifications of developing distinct CT scan and MRI CCRs on beneficiary access to care and other payment systems. We understand that any such change could have significant payment impacts under the MPFS where the TC payment for many imaging services is capped at the OPPS payment. These significant payment effects based on adoption of the new CT scan and MRI standard cost center CCRs further underscore the need for accurate cost reporting for ratesetting purposes. Although these payment effects are significant, we do not believe that they would likely significantly affect beneficiary access to imaging because imaging is readily available at different sites of service and the magnitude of the payment effects are not so drastic that providers and suppliers of imaging would likely discontinue offering CT and MRI services.

We appreciate the concerns expressed by the commenters related to payment changes of implementing these cost center CCRs, and the importance of not providing an incentive for hospitals to furnish, or not furnish, certain services. However, we are not convinced that further delay or further trimming of CCR values is necessary in order to implement all of the proposed CCRs. Although hospitals have been permitted to use the alternative basis cost allocation (that is, “square feet”) under Section 2313 of CMS Pub. 15-1, this methodology does not ensure precise CCRs for CT scans and MRIs. Therefore, we encouraged hospitals over the past several years to use the most precise cost reporting methods in response to the new cost report lines. Specifically, the longstanding cost report instructions contained in Section 4020 (previously Section 3617) of CMS Pub. 15-2 state that “The statistical basis shown at the top of each column on Worksheet B-1 is the recommended basis of allocation of the cost center indicated which must be used by all providers completing this form (Form CMS-2552-10), even if a basis of allocation other than the recommended basis of allocation was used in the previous iteration of the cost report (Form CMS-2552-96).” Under Table 1 of the Medicare cost report, which lists the Record Specifications for the cost centers on Worksheet B-1, “dollar value” is specified as the recommended statistical allocation method for Column 2, Capital-Related Costs—Moveable Equipment. While the “dollar value” statistical allocation method is more precise than “square feet,” to ensure even more precise CCRs for CT scans and MRIs, 90 days prior to the beginning of their next cost reporting period, hospitals may request permission from their Medicare contractors in accordance with Section 2307 of CMS Pub. 15-1 to use the “direct assignment” allocation method on Worksheet B, Part II, Column 0. Although “direct assignment” is the preferred and most precise allocation method, hospitals that do not have the resources to directly assign the costs of every cost center are strongly encouraged to instead use the “dollar value” statistical allocation method. (We note that, under Section 2313 of CMS Pub. 15-1, hospitals not currently using “dollar value” should notify their contractor of their intention to switch their statistical allocation basis to “dollar value” at least 90 days prior to the end of a cost reporting period.) We also intend to communicate with the Medicare contractors to facilitate approval of hospitals' requests to switch from the square feet statistical allocation method to the “direct assignment” or “dollar value” allocation method for the costs of major moveable equipment. We believe that, by adopting more refined CCRs, we are fostering more careful cost reporting. Therefore, we generally do not believe that the concerns expressed by the commenters warrant further delay in implementing the proposed CCRs for CT scans and MRIs for use in OPPS ratesetting.

However, we recognize the commenters' concerns with regard to the application of the new CT and MRI standard cost center CCRs and their use in OPPS ratesetting. As compared to the IPPS, there is increased sensitivity to the cost allocation method being used on the cost report forms for these new standard imaging cost centers under the OPPS due to the limited size of the OPPS payment bundles and because the OPPS applies the CCRs at the departmental level for cost estimation purposes. As a means of addressing the commenters' concerns related to the new CT and MRI standard cost centers, when calculating the CT and MRI cost center CCRs used to estimate costs for the CT and MRI APCs listed in Table 4 below, we removed all claims from providers that use “square feet” as a cost allocation method. We identified providers using “square feet” as the cost allocation method by extracting HCRIS data on Worksheet B-1. Table 4 displays information about the relative effect on CT and MRI APC payments after removing cost data for providers that report CT and MRI standard cost centers using “square feet” as the cost allocation method. Table 5 below provides statistical values based on the CT and MRI standard cost center CCRs using the different cost allocation methods.

As we have stated in prior rulemaking (77 FR 53281 through 53283 and 77 FR 68224), once we determined that a sufficient amount of cost report data were available from which to generate a meaningful analysis, we would propose, and finalize if appropriate, the use of the distinct CCRs described above in the calculation of the OPPS relative payment weights. We believe that the analytic findings described in the proposed rule, and the volume of hospitals that have “valid” CCRs described above, computed using the July 2013 HCRIS update, support our original decision to create new cost centers and distinct CCRs for implantable devices, MRIs, CT scans, and cardiac catheterization, and we see no reason to further delay implementation of the CCRs of each of these cost centers for the OPPS. Therefore, we are finalizing a policy for the CY 2014 OPPS to remove claims from providers that use a cost allocation method of “square feet” to calculate CCRs used to estimate costs associated with the CT and MRI APCs identified in Table 4. This change allows hospitals additional time to use one of the more accurate cost allocation methods, and thereby improve the accuracy of the CCRs on which the OPPS relative payment weights are developed. As part of this transitional policy to estimate the CT and MRI APC relative payment weights using only cost data from providers that do not use “square feet” as the cost allocation statistic, we will sunset this policy in 4 years once the updated cost report data become available for ratesetting purposes. We believe that 4 years is sufficient time for hospitals that have not done so to transition to a more accurate cost allocation method and for the related data to be available for ratesetting purposes. Therefore, in CY 2018, we will estimate the CT and MRI APC relative payment weights using cost data from all providers, regardless of the cost allocation statistic employed.

After consideration of the public comments we received, we are finalizing, without modification, our proposal to use data from the “Implantable Devices Charged to Patients” and “Cardiac Catheterization” cost centers to create distinct CCRs for use in calculating the OPPS relative payment weights for CY 2014. For the “Magnetic Resonance Imaging (MRI)” and “Computed Tomography (CT) Scan” APCs identified in Table 4 earlier in this section, we are modifying our proposal so that the final policy will remove claims from cost modeling for those providers using “square feet” as the cost allocation statistic.

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

In this section of this final rule with comment period, we discuss the use of claims to calculate the OPPS payment rates for CY 2014. The Hospital OPPS page on the CMS Web site on which this final rule with comment period is posted (http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html) provides an accounting of claims used in the development of the final payment rates. That accounting provides additional detail regarding the number of claims derived at each stage of the process. In addition, below in this 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 2012 claims that were used to calculate the final payment rates for the CY 2014 OPPS.

In the history of the OPPS, we have traditionally established the scaled relative weights on which payments are based using APC median costs, which is a process described in the CY 2012 OPPS/ASC final rule with comment period (76 FR 74188). However, as discussed in more detail in section II.A.2.f. of the CY 2013 OPPS/ASC final rule with comment period (77 FR 68259 through 68271), we finalized the use of geometric mean costs to calculate the relative weights on which the CY 2013 OPPS payment rates were based. While this policy changed the cost metric on which the relative payments are based, the data process in general remained the same, under the methodologies that we used to obtain appropriate claims data and accurate cost information in determining estimated service cost. For CY 2014, as we proposed, we are continuing to use geometric mean costs to calculate the relative weights on which the CY 2014 OPPS payments rates are based.

We used the methodology described in sections II.A.2.a. through II.A.2.f. of this final rule with comment period to calculate the costs we used to establish the relative weights used in calculating the OPPS payment rates for CY 2014 shown in Addenda A and B to this final rule with comment period (which are available via the Internet on the CMS Web site). We refer readers to section II.A.4. of this final rule with comment period for a discussion of the conversion of APC costs to scaled payment weights.

Comment: Commenters expressed concern with respect to the volatility of the OPPS payment rates from year to year. One commenter suggested a “dampening policy” that would limit declines in payment service from year to year.

Response: As previously discussed in the CY 2013 OPPS/ASC final rule with comment period (77 FR 68225), there are a number of factors that contribute to cost fluctuations from one year to the next, including (but not limited to) hospital behavior in adjusting mix of services, changes in hospital costs and charges each year resulting in changes to the CCRs, reassignments of HCPCS codes, changes to OPPS payment policy (for example, changes to packaging policies), and implementation of composite APCs. We cannot stabilize hospital-driven fundamental inputs to the calculation of OPPS payment rates. However, we have strived to resolve some of the other potential reasons for instability from year to year. Specifically, we continue to seek ways to use more claims data so that we have fewer APCs for which there are small numbers of single bills used to set the APC costs. Moreover, we have tried to eliminate APCs with very small numbers of single bills where we could do so. We recognize that changes to payment policies, such as the packaging of payment for ancillary and supportive services and the implementation of composite APCs, may contribute to volatility in payment rates in the short term. However, we believe that larger payment packages and bundles should help to stabilize payments in the long term by enabling us to use more claims data and by establishing payments for larger groups of services. Further, in seeking to mitigate fluctuations in the OPPS, we believe that implementing the policy suggested by the commenters would make payments less reflective of the true service costs. Limiting decreases to payments across all APCs in a budget neutral payment system could unfairly reduce the payments for other services due to the effects of the scaling that is necessary to maintain budget neutrality and would distort the relativity of payment that is based on the cost of all services.

a. Claims Preparation

For this final rule with comment period, we used the CY 2012 hospital outpatient claims processed through June 30, 2013, to calculate the geometric mean costs of APCs that underpin the relative payment weights for CY 2014. (For the proposed rule, we used CY 2012 hospital outpatient claims processed through December 31, 2012.) To begin the calculation of the relative payment weights for CY 2014, we pulled all claims for outpatient services furnished in CY 2012 from the national claims history file. This is not the population of claims paid under the OPPS, but all outpatient claims (including, for example, critical access hospital (CAH) claims and hospital claims for clinical laboratory tests for persons who are neither inpatients nor outpatients of the hospital).

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

We divided the remaining claims into the three groups shown below. Groups 2 and 3 comprise the 125 million claims that contain hospital bill types paid under the OPPS.

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

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

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

To convert charges on the claims to estimated cost, we multiplied the charges on each claim by the appropriate hospital-specific CCR associated with the revenue code for the charge as discussed in section II.A.1.c. of this final rule with comment period. We then flagged and excluded CAH claims (which are not paid under the OPPS) and claims from hospitals with invalid CCRs. The latter included claims from hospitals without a CCR; those from hospitals paid an all-inclusive rate; those from hospitals with obviously erroneous CCRs (greater than 90 or less than 0.0001); and those from hospitals with overall ancillary CCRs that were identified as outliers (that exceeded +/−3 standard deviations from the geometric mean after removing error CCRs). In addition, we trimmed the CCRs at the cost center (that is, departmental) level by removing the CCRs for each cost center as outliers if they exceeded +/- 3 standard deviations from the geometric mean. We used a four-tiered hierarchy of cost center CCRs, which is the revenue code-to-cost 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.

Prior to CY 2013, our payment policy for nonpass-through separately paid drugs and biologicals was based on a redistribution methodology that accounted for pharmacy overhead by allocating cost from packaged drugs to separately paid drugs. This methodology typically would have required us to reduce the cost associated with packaged coded and uncoded drugs in order to allocate that cost. However, for CY 2013, we paid for separately payable drugs and biologicals under the OPPS at ASP+6 percent, based upon the statutory default described in section 1833(t)(14)(A)(iii)(II) of the Act. Under that policy, we did not redistribute the pharmacy overhead costs from packaged drugs to separately paid drugs. For the CY 2014 OPPS, as we proposed, we are continuing the CY 2013 payment policy for separately payable drugs and biologicals. We refer readers to section V.B.3. of this final rule with comment period for a complete discussion of our CY 2014 final payment policy for separately paid drugs and biologicals.

We then removed line-items that were not paid during claim processing, presumably for a line-item rejection or denial. The number of edits for valid OPPS payment in the Integrated Outpatient Code Editor (I/OCE) and elsewhere has grown significantly in the past few years, especially with the implementation of the full spectrum of National Correct Coding Initiative (NCCI) edits. To ensure that we are using valid claims that represent the cost of payable services to set payment rates, we removed line-items with an OPPS status indicator that were not paid during claims processing in the claim year, but have a status indicator of “S,” “T,” “V,” or “X,” in the prospective year's payment system. This logic preserves charges for services that would not have been paid in the claim year but for which some estimate of cost is needed for the prospective year, such as services newly removed from the inpatient list for CY 2013 that were assigned status indicator “C” in the claim year. It also preserves charges for packaged services so that the costs can be included in the cost of the services with which they are reported, even if the CPT codes for the packaged services were not paid because the service is part of another service that was reported on the same claim or the code otherwise violates claims processing edits.

For CY 2014, as we proposed, we are continuing the policy we implemented for CY 2013 to exclude line-item data for pass-through drugs and biologicals (status indicator “G” for CY 2012) and nonpass-through drugs and biologicals (status indicator “K” for CY 2012) where the charges reported on the claim for the line were either denied or rejected during claims processing. Removing lines that were eligible for payment but were not paid ensures that we are using appropriate data. The trim avoids using cost data on lines that we believe were defective or invalid because those rejected or denied lines did not meet the Medicare requirements for payment. For example, edits may reject a line for a separately paid drug because the number of units billed exceeded the number of units that would be reasonable and, therefore, is likely a billing error (for example, a line reporting 55 units of a drug for which 5 units is known to be a fatal dose). As with our trimming in the CY 2013 OPPS/ASC final rule with comment period (77 FR 68226) of line-items with a status indicator of “S,” “T,” “V,” or “X,” we believe that unpaid line-items represent services that are invalidly reported and, therefore, should not be used for ratesetting. We believe that removing lines with valid status indicators that were edited and not paid during claims processing increases the accuracy of the data used for ratesetting purposes.

For the CY 2014 OPPS, as part of our packaging of certain clinical diagnostic laboratory tests, we also apply the line item trim to these services if they did not receive payment in the claims year. Removing these lines ensures that, in establishing the CY 2014 OPPS relative payments weights, we appropriately allocate the costs associated with packaging these services. For a more detailed discussion of the final policy to package certain clinical diagnostic laboratory tests, we refer readers to section II.A.3.b.(3) of this final rule with comment period.

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

(1) Splitting Claims

For the CY 2014 OPPS, we then split the remaining claims into five groups: single majors; multiple majors; single minors; multiple minors; and other claims. (Specific definitions of these groups are presented below.) We note that, under the final CY 2014 OPPS packaging policy, we are not deleting status indicator “X” and not revising the title and description of status indicator “Q1” to reflect that deletion, as discussed in sections II.A.3. and XI. of this final rule with comment period. For CY 2014, as we proposed, we are continuing our current policy of defining major procedures as any HCPCS code having a status indicator of “S,” “T,” or “V”; defining minor procedures as any code having a status indicator of “F,” “G,” “H,” “K,” “L,” “R,” “U,” or “N”; and classifying “other” procedures as any code having a status indicator other than one that we have classified as major or minor. For CY 2014, we had originally proposed to delete status indicator “X” as part of our proposal to package ancillary services under that status indicator. However, as discussed in section II.A.3. of this final rule with comment period, we are not establishing that policy in CY 2014 and may reexamine that policy in the future. Therefore, for CY 2014, we are defining HCPCS codes having a status indicator of “X” as major procedure, due to the retention of the status indicator. For CY 2014, we are continuing to assign status indicator “R” to blood and blood products; status indicator “U” to brachytherapy sources; status indicator “Q1” to all “STVX-packaged codes”; status indicator “Q2” to all “T-packaged codes”; and status indicator “Q3” to all codes that may be paid through a composite APC based on 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 2014 as we have treated them since CY 2008. Specifically, we are continuing to evaluate whether the criteria for separate payment of codes with status indicator “Q1” or “Q2” are met in determining whether they are treated as major or minor codes. Codes with status indicator “Q1” or “Q2” are carried through the data either with status indicator “N” as packaged or, if they meet the criteria for separate payment, they are given the status indicator of the APC to which they are assigned and are considered as “pseudo” single procedure claims for major codes. Codes assigned status indicator “Q3” are paid under individual APCs unless they occur in the combinations that qualify for payment as composite APCs and, therefore, they carry the status indicator of the individual APC to which they are assigned through the data process and are treated as major codes during both the split and “pseudo” single creation process. The calculation of the geometric mean costs for composite APCs from multiple procedure major claims is discussed in section II.A.2.f. of this final rule with comment period.

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

1. Single Procedure Major Claims: Claims with a single separately payable procedure (that is, status indicator “S,” “T,” “V,” or “X” which includes codes with status indicator “Q3”); claims with one unit of a status indicator “Q1” code (“STVX-packaged”) where there was no code with status indicator “S,” “T,” “V,” or “X” on the same claim on the same date; or claims with one unit of a status indicator “Q2” code (“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, and do not contain a code for a separately payable or packaged OPPS service. Non-OPPS claims include claims for therapy services paid sometimes under the OPPS but billed, in these non-OPPS cases, with revenue codes indicating that the therapy services would be paid under the Medicare Physician Fee Schedule (MPFS).

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

(2) Creation of “Pseudo” Single Procedure Claims

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

As proposed, we also use the bypass codes listed in Addendum N to this final rule with comment period (which is available via the Internet on our Web site) and discussed in section II.A.1.b. of this final rule with comment period to remove separately payable procedures which we determined contained limited or no packaged costs or that were otherwise suitable for inclusion on the bypass list from a multiple procedure bill. As discussed above, we ignore the “overlap bypass codes,” that is, those HCPCS codes that are both on the bypass list and are members of the multiple imaging composite APCs, in this initial assessment for “pseudo” single procedure claims. The final CY 2014 “overlap bypass codes” are listed in Addendum N to this final rule with comment period (which is available via the Internet on the CMS Web site). When one of the two separately payable procedures on a multiple procedure claim was on the bypass list, we split the claim into two “pseudo” single procedure claim records. The single procedure claim record that contained the bypass code did not retain packaged services. The single procedure claim record that contained the other separately payable procedure (but no bypass code) retained the packaged revenue code charges and the packaged HCPCS code charges. We also removed lines that contained multiple units of codes on the bypass list and treated them as “pseudo” single procedure claims by dividing the cost for the multiple units by the number of units on the line. If one unit of a single, separately payable procedure code remained on the claim after removal of the multiple units of the bypass code, we created a “pseudo” single procedure claim from that residual claim record, which retained the costs of packaged revenue codes and packaged HCPCS codes. This enabled us to use claims that would otherwise be multiple procedure claims and could not be used.

We then assessed the claims to determine if the criteria for the multiple imaging composite APCs, discussed in section II.A.2.f.(5) of this final rule with comment period, were met. If the criteria for the imaging composite APCs were met, we created a “single session” claim for the applicable imaging composite service and determined whether we could use the claim in ratesetting. For HCPCS codes that are both conditionally packaged and are members of a multiple imaging composite APC, we first assessed whether the code would be packaged and, if so, the code ceased to be available for further assessment as part of the composite APC. Because the packaged code would not be a separately payable procedure, we considered it to be unavailable for use in setting the composite APC costs on which the CY 2014 OPPS relative payment weights are based. Having identified “single session” claims for the imaging composite APCs, we reassessed the claim to determine if, after removal of all lines for bypass codes, including the “overlap bypass codes,” a single unit of a single separately payable code remained on the claim. If so, we attributed the packaged costs on the claim to the single unit of the single remaining separately payable code other than the bypass code to create a “pseudo” single procedure claim. We also identified line-items of overlap bypass codes as a “pseudo” single procedure claim. This allowed us to use more claims data for ratesetting purposes.

As we proposed, we also examined the multiple procedure minor claims to determine whether we could create “pseudo” single procedure claims. Specifically, where the claim contained multiple codes with status indicator “Q1” (“STVX-packaged”) on the same date of service or contained multiple units of a single code with status indicator “Q1,” we selected the status indicator “Q1” HCPCS code that had the highest CY 2013 relative payment weight, and set the units to one on that HCPCS code to reflect our policy of paying only one unit of a code with a status indicator of “Q1.” We then packaged all costs for the following into a single cost for the “Q1” HCPCS code that had the highest CY 2013 relative payment weight to create a “pseudo” single procedure claim for that code: additional units of the status indicator “Q1” HCPCS code with the highest CY 2013 relative payment weight; other codes with status indicator “Q1”; and all other packaged HCPCS codes and packaged revenue code costs. We changed the status indicator for the selected code from the data status indicator of “N” to the status indicator of the APC to which the selected procedure was assigned for further data processing and considered this claim as a major procedure claim. We used this claim in the calculation of the APC geometric mean cost for the status indicator “Q1” HCPCS code.

Similarly, if a multiple procedure minor claim contained multiple codes with status indicator “Q2” (“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 2013 relative payment weight and set the units to one on that HCPCS code to reflect our policy of paying only one unit of a code with a status indicator of “Q2.” We then packaged all costs for the following into a single cost for the “Q2” HCPCS code that had the highest CY 2013 relative payment weight to create a “pseudo” single procedure claim for that code: additional units of the status indicator “Q2” HCPCS code with the highest CY 2013 relative payment weight; other codes with status indicator “Q2”; and other packaged HCPCS codes and packaged revenue 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 2013 and set the units to one on that HCPCS code to reflect our policy of paying only one unit of a code with a status indicator of “Q2.” We then packaged all costs for the following into a single cost for the selected (“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 2013 relative payment weight; other codes with status indicator “Q2”; codes with status indicator “Q1” (“STVX-packaged”); and other packaged HCPCS codes and packaged revenue code costs. We selected status indicator “Q2” HCPCS codes instead of “Q1” HCPCS codes because “Q2” HCPCS codes have higher CY 2013 relative payment weights. If a status indicator “Q1” HCPCS code had a higher CY 2013 relative payment weight, it became the primary code for the simulated single bill process. We changed the status indicator for the selected status indicator “Q2” (“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 XI.A. of this final rule with comment period.

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

We proposed to continue to apply the methodology described above for the purpose of creating “pseudo” single procedure claims for the CY 2014 OPPS.

We did not receive any public comments on this proposal, and therefore are finalizing our proposal to continue to apply the methodology described above for the purpose of creating “pseudo” single procedure claims for the CY 2014 OPPS.

c. Completion of Claim Records and Geometric Mean Cost Calculations

(1) General Process

We then packaged the costs of packaged HCPCS codes (codes with status indicator “N” listed in Addendum B to this final rule with comment period (which is available via the Internet on the CMS Web site) and the costs of those lines for codes with status indicator “Q1” or “Q2” when they are not separately paid), and the costs of the services reported under packaged revenue codes in Table 6 below that appeared on the claim without a HCPCS code into the cost of the single major procedure remaining on the claim. For a more complete discussion of our final CY 2014 OPPS packaging policy, we refer readers to section II.A.3. of this final rule with comment period.

As noted in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66606), for the CY 2008 OPPS, we adopted an APC Panel recommendation that CMS should review the final list of packaged revenue codes for consistency with OPPS policy and ensure that future versions of the I/OCE edit accordingly. As we have in the past, and as we proposed, we are continuing to compare the final list of packaged revenue codes that we adopt for CY 2014 to the revenue codes that the I/OCE will package for CY 2014 to ensure consistency.

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

For CY 2014, as we did for CY 2013, we reviewed the changes to revenue codes that were effective during CY 2012 for purposes of determining the charges reported with revenue codes but without HCPCS codes that we proposed to package for CY 2014. We believe that the charges reported under the revenue codes listed in Table 6 below continue to reflect ancillary and supportive services for which hospitals report charges without HCPCS codes. Therefore, for CY 2014, we proposed to continue to package the costs that we derive from the charges reported without HCPCS codes under the revenue codes displayed in Table 6 below for purposes of calculating the geometric mean costs on which the final CY 2014 OPPS/ASC payment rates are based.

Comment: One commenter recommended that CMS consider examining revenue codes not currently on the list of CY 2014 packaged revenue codes for potential addition to the list of packaged revenue codes. The commenter stated that with increased packaging of ancillary and adjunctive services, it becomes more important to ensure that all OPPS service costs are packaged into the pertinent OPPS furnished service.

Response: In the CY 2010 OPPS/ASC proposed rule and the final rule with comment period, we reviewed the revenue code-to-cost center crosswalk and the revenue codes which are considered for use in OPPS ratesetting. Although there was an extensive discussion in the CY 2010 OPPS/ASC final rule with comment period about the use of revenue codes in OPPS ratesetting, we did not receive any public comments regarding additions or removals of revenue codes from the packaged revenue code list (78 FR 43554). Similarly, commenters' specific concerns have typically been isolated to the adoption of the new standard cost center CCRs in the Medicare cost report Form CMS-2552-10. However, we recognize the commenter's concern and believe that an examination of both the current packaged revenue code list and potential addition or removal of revenue codes in the future may be worth performing.

After consideration of the public comments we received, we are finalizing the proposed packaged revenue codes for CY 2014, which are identified in Table 6 below, without modification. We note that these revenue codes include only revenue codes that were in effect in CY 2012, the year of the claims data on which the final CY 2014 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 Medicare administrative contractor (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 2014 OPPS.

For the remaining claims, we proposed to then standardize 60 percent of the costs of the claim (which we have previously determined to be the 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 proposed to use the pre-reclassified wage indices for standardization because we believe that they better reflect the true costs of items and services in the area in which the hospital is located than the 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 119 million claims were left. Using these approximately 119 million claims, we created approximately 125 million single and “pseudo” single procedure claims, of which we used approximately 124 million single bills (after trimming out approximately 1 million claims as discussed in section II.A.1.a. of this final rule with comment period) in the CY 2014 geometric mean cost development and ratesetting.

As discussed above, the OPPS has historically developed the relative weights on which APC payments are based using APC median costs. For the CY 2013 OPPS, we calculated the APC relative payment weights using geometric mean costs, and we do the same for CY 2014. Therefore, the following discussion of the 2 times rule violation and the development of the relative payment weight refers to geometric means. For more detail about the CY 2014 OPPS/ASC policy to calculate relative payment weights based on geometric means, we refer readers to section II.A.2.f. of this final rule with comment period.

We proposed to use these claims to calculate the CY 2014 geometric mean costs for each separately payable HCPCS code and each APC. The comparison of HCPCS code-specific and APC geometric mean costs determines the applicability of the 2 times rule. Section 1833(t)(2) of the Act provides that, subject to certain exceptions, the items and services within an APC group shall not be treated as comparable with respect to the use of resources if the highest median cost (or mean cost, if elected by the Secretary) for an item or service within the group is more than 2 times greater than the lowest median cost (or mean cost, if so elected) for an item or service within the same group (the 2 times rule). While we have historically applied the 2 times rule based on median costs, in the CY 2013 OPPS/ASC final rule with comment period (77 FR 68270), as part of the CY 2013 policy to develop the OPPS relative payment weights based on geometric mean costs, we also applied the 2 times rule based on geometric mean costs. For the CY 2014 OPPS, we are continuing to develop the APC relative payment weights based on geometric mean costs.

We note that, for purposes of identifying significant HCPCS codes for examination in the 2 times rule, we consider codes that have more than 1,000 single major claims or codes that have both greater than 99 single major claims and contribute at least 2 percent of the single major claims used to establish the APC geometric mean cost to be significant. This longstanding definition of when a HCPCS code is significant for purposes of the 2 times rule was selected because we believe that a subset of 1,000 claims is negligible within the set of approximately 124 million single procedure or single session claims we use for establishing geometric mean costs. Similarly, a HCPCS code for which there are fewer than 99 single bills and which comprises less than 2 percent of the single major claims within an APC will have a negligible impact on the APC geometric mean. We note that this method of identifying significant HCPCS codes within an APC for purposes of the 2 times rule was used in prior years under the median-based cost methodology. Under our proposed CY 2014 policy to continue to base the relative payment weights on geometric mean costs, we believe that this same consideration for identifying significant HCPCS codes should apply because the principles are consistent with their use in the median-based cost methodology. Unlisted codes are not used in establishing the percent of claims contributing to the APC, nor are their costs used in the calculation of the APC geometric mean. Finally, we reviewed the geometric mean costs for the services for which we pay separately under this final rule with comment period, and we reassigned HCPCS codes to different APCs where it was necessary to ensure clinical and resource homogeneity within the APCs. The APC geometric means were recalculated after we reassigned the affected HCPCS codes. Both the HCPCS code-specific geometric means and the APC geometric means were weighted to account for the inclusion of multiple units of the bypass codes in the creation of “pseudo” single procedure claims.

Comment: Several commenters remarked on the quality of the data and the degree to which technical errors caused modeling problems throughout the rest of the system. These commenters believed that CMS did not provide adequate data to allow hospitals to assess the impact of the major revisions. Commenters also commented on the complexity inherently in the payment system and increased by the many interactions between various proposed and existing policies. These commenters remarked that CMS had not fully explained the impacts of each proposal in a manner that would allow stakeholders to provide meaningful input. Based on the assertions about a lack of transparency, impact analysis, guidance on how rates were developed, policy details, technical errors, etc., commenters suggested that those proposals be delayed until more accurate and detailed information was available. Other commenters stated that CMS had ignored previous HOP Panel suggestions on analyzing the impact of expanded packaging policies, and believed that the potential for unintended downstream consequences existed.

Response: We appreciate the commenters' concerns with regards to the complexity of modeling the OPPS. There are many interactions between the various goals and pieces of the payment system. For example, as discussed in section II.A.1.b. of this final rule with comment period, the goal of extracting more data from the available claims through the bypass list process is also balanced by the impact of any packaged costs that may be redistributed as a result of that data process. In developing the CY 2014 OPPS/ASC proposed rule, we strived to provide as accurate information as possible with regard to the calculated rates. We discovered that, in the process of applying established and proposed methodologies to develop the CY 2014 proposed OPPS and ASC payment rates, specific cost estimation errors occurred in the OPPS modeling process. We released corrected data files on August 28, 2013, and extended the comment period to September 16, 2013, on the technical corrections noted in the correcting document published in the Federal Register on September 6, 2013 (78 FR 54842). While, in a budget neutral system, changes to any OPPS relative payment weights have redistributional effects throughout the system, any policy change or data update has the potential to do the same. Therefore, the technical corrections described in the correcting document were made to address issues where the calculated payment rates were not appropriately reflective of the proposed policies. While, as discussed in the correcting document to the CY 2014 OPPS/ASC proposed rule, new proposed visit APC 0634 contained a technical error that excluded certain packaged costs from the APC, the fact that we proposed to use APC 0634 as the baseline APC for scaling the aggregate CY 2014 OPPS weight for budget neutrality, did not distort the relativity of the OPPS payment weights. As discussed in section II.A.4. of this final rule with comment period, the selection of the base APC or any other number, from which to establish the relative payment weights, does not have an impact because OPPS weights are scaled for budget neutrality.

With regard to the adequacy of available data, each year, CMS makes available an extensive amount of OPPS data that can be used for any data analysis an interested party would care to perform. Specifically, we make available a considerable amount of data for public analysis each year through the supporting data files that are posted on the CMS Web site in association with the display of the proposed and final rules. In addition, we make available the public use files of claims, including, for CY 2008 and later, supplemental line item cost data for every HCPCS code under the OPPS and a detailed narrative description of our data process for the annual OPPS/ASC proposed and final rules that the public can use to perform any desired analyses. Therefore, we believe commenters are able to examine and analyze these data to develop specific information to assess the impact and effect of packaging for the services of interest to them. This information is available to support their requests for changes to payments under the OPPS, whether with regard to separate payment for a packaged service or other issues. We understand that the OPPS is a complex payment system and that it may be difficult to determine the quantitative amount of packaged cost included in the geometric mean cost for every independent service. However, commenters routinely provide us with meaningful analyses at a very detailed and service-specific level based on the claims data we make available. We routinely receive complex and detailed public comments, including extensive code-specific data analysis on packaged and separately paid codes using the data from this and prior proposed and final rules. Among the public comments received in response to the CY 2014 OPPS/ASC proposed rule, we received many detailed public comments that included data analysis.

We disagree that the CY 2014 OPPS policy proposals should be delayed as a result of the data concerns that commenters have raised. While we are sympathetic to the challenges that have been described, we develop policy and model the OPPS payment rates under those same constraints. In general, we have tried to limit the changes beyond the current year OPPS with regards to data modeling, so that little additional logic changes would be necessary and would instead be built off existing processes. While we continuously examine ways in which the data process could be simplified or made clearer, we also welcome and appreciate public comment with regards to potential improvements. Similarly, we appreciate the meaningful comments that stakeholders provide regarding ways that the cost modeling process could be more accurate or methods to extract more appropriate data from the claims available for OPPS cost modeling.

The technical errors described in the correcting document published in the Federal Register on September 6, 2013 (78 FR 54842) were generally isolated to specific policy areas and did not substantively affect the proposed policies described in the CY 2014 OPPS/ASC proposed rule. The correcting document merely corrected the underlying data errors to conform to the proposed policies clearly intended in the preamble of the proposed rule.

As commenters have described, modeling the OPPS payment rates can sometimes be a complex undertaking. We have tried to alleviate some of those concerns about the complexity and transparency of the OPPS cost modeling process by having an extensive discussion of the data process in the preamble discussion, through providing code lists, isolating the impacts of certain proposals in the regulatory impact analysis, and providing a claims accounting with documented claims volume throughout each stage of the process. Commenters have stated that CMS has not provided data regarding packaging policies to the Advisory Panel on Hospital Outpatient Payment (referred to in this document as the Panel). However, in the CY 2009 OPPS/ASC final rule with comment period (73 FR 68573), the CY 2010 OPPS/ASC final rule with comment period (74 FR 60409 through 60412), the CY 2011 OPPS/ASC final rule with comment period (75 FR 71682 through 71868), the CY 2012 OPPS/ASC final rule with comment period (76 FR 74184 through 74185), and the CY 2013 OPPS/ASC final rule final rule with comment period (77 FR 68273 through 68274), we describe various data analyses we have provided to the Panel based on its recommendations.

After consideration of the public comments we received, we are finalizing our proposed CY 2014 methodology for calculating the geometric mean costs upon which the CY 2014 OPPS payment rates are based.

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

(2) Recommendations of the Panel Regarding Data Development

At the August 2013 meeting of the Panel, we discussed the claims accounting process for the CY 2014 OPPS proposed rule, the proposed adoption of the new standard cost centers for CT, MRI, and cardiac catheterization in the new Medicare cost report Form CMS-2552-10, as well as the CY 2014 OPPS policy of calculating OPPS relative payment weights using geometric mean costs.

At the August 2013 Panel meeting, the Panel made a number of recommendations related to the data process. The Panel's data-related recommendations and our responses follow.

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

CMS Response: We are accepting this recommendation.

Recommendation: The Panel recommends that John Marshall, C.R.A., R.C.C, R.T., serve as chair of the Data Subcommittee.

CMS Response: We are accepting this recommendation.

In addition, the Panel requested that CMS provide additional information about the impacts of certain CY 2014 policy proposals at the 2014 spring meeting. Depending upon the CY 2014 final policy decisions, we will consider providing additional relevant information to the Panel at the Spring 2014 Panel meeting.

d. Calculation of Single Procedure APC Criteria-Based Costs

(1) Device-Dependent APCs

Historically, device-dependent APCs are populated by HCPCS codes that usually, but not always, require that a device be implanted or used to perform the procedure. The standard methodology for calculating device-dependent APC costs utilizes claims data that generally reflect the full cost of the required device by using only the subset of single procedure claims that pass the procedure-to-device and device-to-procedure edits; do not contain token charges (less than $1.01) for devices; do not contain the “FB” modifier signifying that the device was furnished without cost to the provider, or where a full credit was received; and do not contain the “FC” modifier signifying that the hospital received partial credit for the device. For a full history of how we have calculated payment rates for device-dependent APCs in previous years and a detailed discussion of how we developed the standard device-dependent APC ratesetting methodology, we refer readers to the CY 2008 OPPS/ASC final rule with comment period (72 FR 66739 through 66742). Overviews of the procedure-to-device edits and device-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 2014 OPPS/ASC proposed rule (78 FR 43558 through 43561), for CY 2014, we proposed in section II.A.2.e. to define 29 device-dependent APCs as single complete services and to assign them to comprehensive APCs that would provide all-inclusive payments for those services. As we explained in that section, we proposed this policy as a further step to improve the accuracy and transparency of our payments for these services where the cost of the device is large compared to the other costs that contribute to the cost of the service. Table 5 of the proposed rule provided a list of the 39 APCs currently recognized as device-dependent APCs and identified those 29 APCs that we proposed to include in the comprehensive APCs proposal (78 FR 43557). We proposed to treat the remaining 10 device-dependent APCs by applying our standard APC ratesetting methodology to calculate their CY 2014 payment rates. We initially adopted a specific device-dependent APC ratesetting methodology because commenters had previously expressed concerns that the costs associated with certain high-cost devices were not always being accurately reported and included in the calculation of relative payment weights for the associated procedures. As we stated in the proposed rule, we do not believe that it is necessary to continue to apply the more specific device-dependent APC ratesetting methodology to ensure accurate ratesetting for the 10 APCs that were not included in the comprehensive APCs proposal because hospitals now have had several years of experience reporting procedures involving implantable devices and have grown accustomed to ensuring that they code and report charges so that their claims fully and appropriately reflect the costs of those devices. Therefore, we believe that it is possible to calculate the payment rates for these APCs using our standard APC ratesetting methodology (78 FR 43556).

In the CY 2014 OPPS/ASC proposed rule (78 FR 43556 through 43557), beginning in CY 2014, we also proposed to no longer implement procedure-to-device edits and device-to-procedure edits for any APCs. We explained that, under this proposal, hospitals would still be expected to adhere to the guidelines of correct coding and append the correct device code to the claim when applicable. However, claims would no longer be returned to providers when specific procedure and device code pairings do not appear on a claim. We stated that we believe that this is appropriate because of the experience hospitals now have had in coding and reporting these claims fully and because, for the more costly devices, the proposed comprehensive APCs would reliably reflect the cost of the device if it is included anywhere on the claim. Therefore, we do not believe that the burden on hospitals of adhering to the procedure-to-device edits and device-to-procedure edits, and the burden on the Medicare program of maintaining those edits, continue to be warranted. As with all other items and services recognized under the OPPS, we expect hospitals to code and report their costs appropriately, regardless of whether there are claims processing edits in place.

Comment: Commenters urged CMS not to finalize its proposal to eliminate device-to-procedure edits and procedure-to-device edits in order to ensure continued complete and accurate cost reporting by hospitals. In addition, one commenter requested that CMS, if it elects to delete these edits, commit to only using complete and correctly coded claims from CY 2014 for the CY 2016 ratesetting process. Some commenters, while supporting elimination of the contractor edits, opposed dropping the use of the edit criteria when selecting the set of claims to be used to calculate the geometric mean costs of services. One commenter requested that CMS remove APC 0648 from the list of device-dependent APCs.

Response: We continue to believe that the elimination of device-to-procedure edits and procedure-to-device edits is appropriate due to the experience hospitals now have in coding and reporting these claims fully and because, for the more costly devices, the proposed comprehensive APCs would reliably reflect the cost of the device if it is included anywhere on the claim. We remind commenters that, under our proposed policy, hospitals would still be expected to adhere to the guidelines of correct coding and append the correct device code to the claim when applicable. As with all other items and services recognized under the OPPS, we expect hospitals to code and report their costs appropriately, regardless of whether there are claims processing edits in place. We expect the CY 2014 claims that we will use for the CY 2016 ratesetting to reflect this correct coding and cost reporting. While we believe that device-to-procedure edits and procedure-to-device edits are no longer necessary at this time, we are sensitive to the commenters' concerns that all relevant costs for the 39 APCs currently recognized as device-dependent APCs are appropriately included in the claims that CMS will use for ratesetting. In light of those concerns, we are further assessing whether we need to continue claims processing edits requiring a device code to be on the claim under the comprehensive APCs in CY 2015.

We believe that APC 0648 is appropriately included in the current list of device-dependent APCs, as APC 0648 is populated by HCPCS codes that usually, but not always, require that a device be implanted or used to perform the procedure.

After consideration of the public comments we received, and in conjunction with our finalized comprehensive APC policy, which is fully discussed in section II.A.2.e. of this final rule with comment period, we are finalizing our proposal to no longer apply the current device-dependent APC ratesetting methodology to the 10 currently recognized device-dependent APCs not included in the comprehensive APC proposal and apply our standard APC ratesetting methodology to calculate their payment rates, but delaying the implementation of this finalized policy until CY 2015. For CY 2014, we will continue to apply the current device-dependent APC ratesetting methodology to the 39 currently recognized device-dependent APCs.

Table 7 below provides a list of the 39 APCs currently recognized as device-dependent APCs for CY 2014 and identifies those 29 APCs that we are including in the finalized comprehensive APCs policy for CY 2015.

(2) Blood and Blood Products

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

In the CY 2014 OPPS/ASC proposed rule (78 FR 43557), for CY 2014, we proposed to continue to establish payment rates for blood and blood products using our blood-specific CCR methodology, which utilizes actual or simulated CCRs from the most recently available hospital cost reports to convert hospital charges for blood and blood products to costs. This methodology has been our standard ratesetting methodology for blood and blood products since CY 2005. It was developed in response to data analysis indicating that there was a significant difference in CCRs for those hospitals with and without blood-specific cost centers, and past public comments indicating that the former OPPS policy of defaulting to the overall hospital CCR for hospitals not reporting a 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 stated that we calculated the costs upon which the proposed CY 2014 payment rates for blood and blood products are based using the actual blood-specific CCR for hospitals that reported costs and charges for a blood cost center and a hospital-specific simulated blood-specific CCR for hospitals that did not report costs and charges for a blood cost center.

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 believe that it yields more accurate estimated costs for these products. We continue to believe that this methodology in CY 2014 would result in costs for blood and blood products that appropriately reflect the relative estimated costs of these products for hospitals without blood cost centers and, therefore, for these blood products in general.

We did not receive any public comments on this proposal. Therefore, we are finalizing our proposed policy, without modification, to continue to establish payment rates for blood and blood products using our blood-specific CCR methodology, which utilizes actual or simulated CCRs from the most recently available hospital cost reports to convert hospital charges for blood and blood products to costs, for CY 2014. We continue to believe that this methodology in CY 2014 will result in costs for blood and blood products that appropriately reflect the relative estimated costs of these products for hospitals without blood cost centers and, therefore, for these blood products in general.

We note that, as discussed in section II.A.2.e. of this final rule with comment period, we are establishing comprehensive APCs that will provide all-inclusive payments for certain device-dependent procedures. Under this policy, we will include the costs of blood and blood products when calculating the overall costs of these comprehensive APCs. We note that we will continue to apply the blood-specific CCR methodology described in this section when calculating the costs of the blood and blood products that appear on claims with services assigned to the comprehensive APCs. Because the costs of blood and blood products will be reflected in the overall costs of the comprehensive APCs (and, as a result, in the payment rates of the comprehensive APCs), we will not make separate payments for blood and blood products when they appear on the same claims as services assigned to the comprehensive APCs.

We refer readers to Addendum B to this final rule with comment period (which is available via the Internet on the CMS Web site) for the CY 2014 payment rates for blood and blood products (which are identified with status indicator “R”). For a more detailed discussion of the blood-specific CCR methodology, we refer readers to the CY 2005 OPPS proposed rule (69 FR 50524 through 50525). For a full history of OPPS payment for blood and blood products, we refer readers to the CY 2008 OPPS/ASC final rule with comment period (72 FR 66807 through 66810).

(3) Brachytherapy Source Payment

Section 1833(t)(2)(H) of the Act provides that the Secretary shall create additional groups of covered OPD services that classify devices of brachytherapy consisting of a seed or seeds (or radioactive source) (“brachytherapy sources”) separately from other services or groups of services, in a manner that reflects the number, isotope, and radioactive intensity of the brachytherapy sources furnished and must include separate groups for palladium-103 and iodine-125 sources, and for stranded and non-stranded devices furnished on or after July 1, 2007. In the CY 2010 OPPS/ASC final rule with comment period (74 FR 60533 through 60537), we adopted for CY 2010 the general OPPS prospective payment methodology for brachytherapy sources, consistent with section 1833(t)(2)(C) of the Act, with payment rates based on source-specific costs, which has been utilized for each year's brachytherapy source payment since CY 2010 (74 FR 60537; 75 FR 71980; 76 FR 74162; 77 FR 68242). As we have previously stated, we believe that adoption of the general OPPS prospective payment methodology for brachytherapy sources is appropriate (77 FR 68240).

Comment: Commenters expressed concern regarding CMS' brachytherapy source data and stated that there are longstanding problems with CMS' OPPS data used to set brachytherapy source payment rates. Commenters also stated that the brachytherapy source data continue to show huge variation in per unit costs across hospitals. Commenters noted that high dose rate (HDR) brachytherapy sources decay over a 90-day period and are used to treat multiple patients. Therefore, the commenters believed that the true cost of brachytherapy sources per use depends on the number of patients treated during the 90-day period, which makes it difficult to establish fair and adequate payment rates. Commenters also believed that CMS' claims data contain rank order anomalies between the high-activity palladium-103 source (HCPCS code C2635) and the low-activity palladium-103 sources (HCPCS codes C2640 and C2641), and stated that the high-activity palladium-103 source always costs more than low-activity palladium-103 sources.

Response: We believe that the claims data used for brachytherapy ratesetting are adequate to ensure accurate payment for these services. Also, as we have stated in previous OPPS/ASC proposed and final rules, we believe that our 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 (72 FR 66782; 74 FR 60534; 75 FR 71979; 76 FR 74161; and 77 FR 68241). We have also explained in previous OPPS/ASC proposed and final rules that a prospective payment system such as the OPPS relies on the concept of averaging, where the payment may be more or less than the estimated cost of providing a service for a particular patient, and with the exception of outlier cases, the prospective payment is adequate to ensure access to appropriate care (72 FR 66782; 74 FR 60535; 75 FR 71979; and 77 FR 68241). In the case of brachytherapy sources for which the law requires separate payment groups, without packaging, the costs of these individual items could be expected to show greater variation than some other APCs under the OPPS because higher variability in costs for some component items and services is not balanced with lower variability in costs for other component items and services. In addition, relative payment weights are typically estimated using a smaller set of claims.

As we have stated in previous OPPS/ASC proposed and final rules, we agree that HDR brachytherapy sources such as HDR irirdium-192 have a fixed active life and must be replaced every 90 days (75 FR 71980; 76 FR 74162; and 77 FR 68242). As a result, hospitals' 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, when establishing their charges for HDR iridium-192, we expect hospitals to project the number of treatments that would be provided over the life of the source and establish their charges for the source accordingly (72 FR 66783; 74 FR 60535; 75 FR 71980; 76 FR 74162; and 77 FR 68242). For most of these OPPS services, our practice is to establish prospective payment rates based on the costs determined from hospitals' claims data to provide incentives for efficient and cost effective delivery of these services.

In the case of high-activity and low-activity iodine-125 sources, our CY 2012 claims data show that the hospitals' relative costs for the high-activity source as reported on hospital claims and in cost report data are greater than the costs of the low-activity sources, as we have noticed in the past. However, this relationship is reversed for palladium-103 sources, as a few commenters pointed out. As we have stated in the past, we do not have any information about the expected cost differential between high-activity and low-activity sources of various isotopes other than what is available in our claims and hospital cost report data (75 FR 71979; 76 FR 74162; and 77 FR 68242). For the high-activity palladium-103 source, only 7 hospitals reported this service in CY 2012, compared to 118 and 171 hospitals for the low-activity palladium-103 sources described by HCPCS codes C2640 and C2641, respectively. As we stated regarding this issue in the CYs 2010, 2011, 2012, and 2013 OPPS/ASC final rules with comment period, it is clear that fewer hospitals furnished the high-activity palladium-103 source than the low-activity palladium-103 sources, and we expect that the hospital cost distribution for those hospitals could be different than the cost distribution of the large number of hospitals reporting the low-activity palladium-103 sources (74 FR 60535; 75 FR 71979; 76 FR 74162; and 77 FR 68242).

After consideration of the public comments we received, we are finalizing our proposal to continue to set the payment rates for brachytherapy sources using our established prospective payment methodology, which is based on geometric mean costs. The CY 2014 final payment rates for brachytherapy sources are found in Addendum B to this final rule with comment period.

e. Establishment of Comprehensive APCs

(1) Definition and General Principles

During the initial development of a proposal for an outpatient prospective payment system in 1998 (63 FR 47552 through 48036), we considered developing the payment system based on a comprehensive outpatient bundle, as opposed to on a HCPCS component level. In 2000, we implemented an OPPS based generally on making payments at the HCPCS level (65 FR 18434 through 18820). Since then, however, we have been steadily moving the OPPS towards a more comprehensive approach that increases flexibility and opportunity for efficiencies in a prospective system.

In the CY 2014 OPPS/ASC proposed rule (78 FR 43534), for CY 2014, we proposed to create 29 comprehensive APCs to replace 29 existing device-dependent APCs. We proposed to define a comprehensive APC as a classification for the provision of a primary service and all adjunctive services provided to support the delivery of the primary service. Because a comprehensive APC would treat all individually reported codes as representing components of the comprehensive service, our proposal was to make a single prospective payment based on the cost of all individually reported codes that represent the provision of a primary service and all adjunctive services provided to support that delivery of the primary service. Specifically, we proposed to create comprehensive APCs for the 29 most costly device-dependent services, where the cost of the device is more expensive than the other costs that contribute to the cost of delivering the primary service.

We stated in the proposed rule that we believe that, under the authority of sections 1833(t)(1) and (t)(2) of the Act, the Secretary has the discretion to establish comprehensive APCs as part of developing the OPPS classification system, and that this proposal furthers our ongoing efforts to move the OPPS towards a more comprehensive payment system in support of our objectives to increase flexibility and efficiencies.

The OPPS data we have accumulated over the past decade have enabled us to continue to address several longstanding goals, including: continuing to improve the validity of our payments to most accurately reflect costs; improving transparency and reducing complexity and administrative burden whenever possible; and increasing flexibility for hospitals to develop increased efficiencies in the delivery of quality care.

We stated that we believe that this proposal to establish comprehensive APCs will improve our ability to accurately set payment rates. In the normal process of setting payment rates, costs in certain cost centers (“uncoded costs”) are added to the costs of services reported with specific HCPCS codes only when they can be reliably assigned to a single service. Under the proposal, the entire claim would be associated with a single comprehensive service so all costs reported on the claim may be reliably assigned to that service. This increases the accuracy of the payment for the comprehensive service and also increases the stability of the payment from year to year.

We also stated that we believe that our policy will enhance beneficiary understanding and transparency. Typically beneficiaries understand the primary procedure to be the OPPS service they receive, and do not generally consider that the other HCPCS codes are separate services. For example, beneficiaries believe that a single service includes procedures such as “getting my gall bladder removed” or “getting a pacemaker.” We believe that defining certain services within the OPPS in terms of a single comprehensive service delivered to the beneficiary improves transparency for the beneficiary, for physicians, and for hospitals by creating a common reference point with a similar meaning for all three groups and using the comprehensive service concept that already identifies these same services when they are performed in an inpatient environment.

Finally, we believe that larger bundles that contain a wider mix of related services in the prospectively paid bundles increase the opportunities for providers to tailor services to the specific needs of individual beneficiaries, thereby increasing the opportunities for efficiencies and improving the delivery of medical care.

Comment: Overall, commenters were generally supportive of the concept of creating larger payment bundles, but were uncertain that they fully understood the specifics of the proposed comprehensive APC payment policy. Commenters acknowledged many potential advantages for hospitals, and possibly also for beneficiaries in terms of lower coinsurance payments and increased transparency, as well as for increased physician flexibility.

A few commenters fully endorsed the proposal for CY 2014. For example, MedPAC stated that it has long supported CMS' efforts to expand the size of payment units in the OPPS and supported this proposal, as well as other packaging proposals in this final rule with comment period. MedPAC stated that the comprehensive APC groups have similarities to the diagnosis related groups (DRGs) used in the inpatient prospective payment system (IPPS) and that this payment structure encourages hospitals to identify the most efficient and efficacious methods to provide care for each patient, which will help contain Medicare spending. Another commenter believed that the proposed device-dependent APCs were particularly appropriate for comprehensive APCs because the independent services that require these devices are generally clearly defined and the other services furnished during the encounter are generally furnished in order to facilitate the independent service. The commenter supported the ability of this proposal to use all claims data in establishing a payment rate for the comprehensive APC.

Several commenters recommended a more expansive policy. One commenter recommended that CMS identify other procedures that would be suitable for the creation of comprehensive APCs. Other commenters suggested that CMS require hospitals to report charges for all items and services for which comprehensive APC payment is being made as covered charges and specify that hospitals may not charge beneficiaries for these items and services (because the copayment for the APC constitutes the only beneficiary cost sharing for the package of services). Commenters also suggested that CMS limit the national unadjusted payment for each comprehensive APC under the OPPS to no more than the standardized DRG amount that would be paid for the same service provided to an inpatient without complications or comorbidities.

Response: We appreciate the support of the commenters for our proposal to create comprehensive packages. We agree with the commenters that this would improve our ability to more accurately establish payment rates for these services by enabling us to use all claims for the primary service in a comprehensive APC when establishing payment for that APC. We appreciate the commenters' interest in identifying other services that would be suitable for the creation of comprehensive APCs, as well as ways to consider setting payment relative to the IPPS. We agree with the commenters that hospitals should report charges for all items and services for which a comprehensive APC payment is being made, and note that it has been a longstanding requirement as stated in the Claims Processing Manual IOM 100-4, Chapter 4, Section. 10.4.A that hospitals must report all services that were furnished on an outpatient claim regardless of whether or not those services are separately paid, and that Medicare providers may not separately bill beneficiaries for services that are covered under Medicare.

Comment: The majority of commenters recommended that CMS delay implementation of the comprehensive APCs until CY 2015 or later. While they generally supported the idea of larger payment bundles, commenters were concerned that they could not verify the accuracy of the proposed payments and urged CMS not to implement these policies until the agency has verified that its calculations are accurate. Commenters asserted that it has become increasingly difficult for stakeholders to verify OPPS payment rates because the complexity of the modeling logic is far beyond other payment systems that CMS administers, such as the IPPS. Some commenters were concerned that they were not able to replicate CMS' calculations, preventing independent analyses and affecting their ability to develop comments and alternative proposals. Some commenters requested that CMS provide stakeholders with additional information about how estimated costs for these APCs are being calculated for CY 2014, and give stakeholders an opportunity to comment on the additional information provided.

Some commenters requested that CMS provide individual impacts of each proposed policy when proposing several policies that have an interactive effect. Several commenters stated that CMS' packaging proposals discussed in section II.A.3. of the proposed rule, combined with this proposal to create 29 new comprehensive APCs, created a complicated “layering” effect that made their understanding of how final estimated costs for proposed comprehensive APCs would be calculated a much more involved process.

Finally, commenters recommended a delayed implementation to allow hospitals more time to assess the impact of such a new payment approach on their particular institution and to consider how they may need to adjust organizational processes. Commenters also suggested that we might need more time to implement revisions to our claims processing systems.

Response: We agree with the commenters that we should delay implementation of the proposed comprehensive APCs. As we discuss later in this section, we are finalizing our proposal to create 29 comprehensive APCs with modification, but we are delaying implementation and final configuration of those comprehensive APCs until CY 2015. We acknowledge commenters' concerns that this is a complex proposal for a new payment structure under the OPPS. We agree that hospitals should have time to prepare for a comprehensive payment structure, and we also agree with the commenters that a delay in implementation will allow us more time to operationalize changes necessary to process comprehensive payments.

In response to public commenters' requesting additional detail on our calculation of the comprehensive APC relative payment weights, we provide a granular discussion of our methodology for constructing the comprehensive APC payment rates later in this section, as well as the specific APC configurations we would implement for CY 2014 if we had not delayed implementation until CY 2015. We also believe that the delay in implementation will give hospitals more time to study the final methodology for calculating APC relative payment weights that we discuss in this section for the modification that recognizes resource differences in complex and simple versions of the same primary service. We are taking advantage of the delay in implementation and requesting additional public comments on this methodology.

With regard to the commenters' concern that they could not fully model the proposal, we provide all of the information we would have used to create APC relative payment weights for CY 2014 using the CY 2012 claims data to illustrate the final methodology below. We believe that this will assist interested parties in replicating our methodology. We will recalibrate all of the comprehensive APC relative payment weights for CY 2015 using CY 2013 claims data consistent with our annual recalibration of APC relative payment weights to reflect the most recently available claims and cost report information in next year's rulemaking cycle. We discuss the limited methodological errors that we discovered in the proposed rule and subsequent correcting document in section II.A.3. of this final rule with comment period.

With regard to the availability of detailed impacts, we believe that a delay in implementation until CY 2015 along with the illustrations of the methodology included in this section will give stakeholders the requested time to model this final policy and assess the impact on their organization. We will incorporate the proposed payment rates for CY 2015 comprehensive APCs in our CY 2015 impact analysis in the CY 2015 OPPS/ASC proposed rule.

Comment: Commenters were also concerned that this proposal would impose a significant administrative burden on providers and that there is not sufficient time for information system technology vendors and operational processes to adjust to the new regulations or to allow hospitals enough time to fully understand how the proposals would affect their outpatient finances, making hospital budgeting for the upcoming year nearly impossible. Moreover, several commenters were concerned that neither CMS nor its Medicare Administrative Contractors (MACs) would be prepared to implement the proposed changes for CY 2014.

Other commenters believed that providers are likely to have increased costs and challenges in their efforts to accurately separate claims for unrelated services. One commenter recommended that CMS make the necessary operational changes to billing instructions before moving forward with its proposal, and implement the proposed comprehensive APCs only after the agency has used the new billing instructions long enough to have claims data that identify related services for the purpose of defining a comprehensive APC.

Response: This proposal does not require any changes in provider coding and billing practices, nor would we expect providers to change their billing and coding practices in response to a change in payments. We do expect providers to assess their delivery of these comprehensive services in light of internal organizational processes. As previously stated, we are finalizing the comprehensive APC proposal with modification in this final rule with comment period, but we are delaying implementation of the finalized policy until CY 2015. This will allow us sufficient time to develop appropriate claims processing systems protocols for comprehensive APCs and to test those new protocols prior to implementation.

Comment: Many commenters were concerned that a comprehensive DRG-like payment would provide a single payment for a wide range of cases characterized by widely varying complexity and widely varying costs. Such a system could potentially disadvantage hospitals willing to take on the treatment of sicker, more complex and costly cases while rewarding those that handle less complex and less costly cases. One commenter was specifically concerned that the level of payment was not sufficient to support the higher level of diagnostic testing and ancillary services that occur at academic medical centers. Another commenter stated that the costs of these cases are relatively fixed when they are dependent on one or more expensive devices and hospitals can either perform these complex procedures at a loss or cease performing them altogether, which has implications for beneficiary access to care. One commenter stated that hospitals have only limited ability to reduce costs for complex procedures and recommended that CMS incorporate a “severity level” APC similar to the Medicare Severity Diagnosis Related Group (MS-DRG) system where there is a base DRG, a complication or comorbidity DRG (CC DRG), and a major complication or comorbitity DRG (MCC DRG). In adapting the concept to the APC classification system, the commenter recommended that complexity could be based on the included components, for example, an ICD insertion comprehensive APC and another higher-weighted comprehensive APC for ICD insertion with removal of previously implanted device.

A few commenters believed that the comprehensive payment may have unintended consequences that could include quality consequences, cost consequences, and payment consequences. Several commenters were concerned that the quality of care could suffer because the commenters believed that there are currently no outcome programs or measures in place, similar to inpatient quality measures, readmission reduction programs and value based purchasing incentives, to monitor the quality of care provided under an encounter-based payment that creates an incentive for hospitals to improve delivery efficiency. The commenters believed that inappropriate attempts to garner additional profit could lead to reduced access and lower quality of health care services provided in the hospital outpatient setting. Several commenters were concerned that there might be unintended Medicare cost consequences if hospitals split services and delayed ancillary procedures until a subsequent encounter. Some of these commenters believed that the proposal should be tested or evaluated through a demonstration project or some other appropriate mechanism before broader introduction, while one commenter objected to the CY 2014 implementation because CMS had not proposed mechanisms to retrospectively assess the ramifications of these proposed policy changes on patients. Finally, one commenter opined that the proposal does not conform the requirement under section 1833(t)(2) of the Act that items and services shall not be treated as comparable with respect to the use of resources if the highest mean cost for an item or service is more than 2 times greater than the lowest mean cost.

Response: We agree with the commenters that there is wide spread variation in the comprehensive costs of individual claims within each primary procedure, and we further agree with the commenters that we do not want to financially disadvantage hospitals that treat beneficiaries who require more complex and costly procedures. We also understand that complex beneficiaries may require more diagnostic tests. We agree with the commenters that there are constraints on individual hospitals' ability to reduce costs associated with complex procedures, and we agree with the commenters who recommended recognizing the level of resources associated with more complex forms of a procedure not unlike the severity levels used in the IPPS. Therefore, we are modifying our proposed policy for creating comprehensive APCs to recognize variation in the complexity of services that will be paid through comprehensive APCs for CY 2015.

We do not believe that there is any issue with 2 times rule violations in the proposed rule or in this final rule with comment period. The statute directs the Secretary to establish groups of covered OPD services that are comparable both clinically and with respect to use of resources. In doing so, the statute requires the Secretary to compare the mean cost of items and services within a group and ensure that the highest mean cost item or service is no more than 2 times greater than the lowest mean cost item or service within a group (2 times rule). With respect to each proposed comprehensive APC, no 2 times rule violations were observed. However, as noted above, we do observe widespread variation within the comprehensive costs of primary services. As we discuss below in more detail, our final policy recognizes differences in complexity and resource costs of complex forms of the primary service to address variation within the comprehensive costs of individual primary procedures.

Commenters raised concerns about quality decreases because of economic pressures, and access issues because of a reluctance of facilities to provide these device-intensive procedures to certain beneficiaries if the expected costs for complex cases would greatly exceed the comprehensive APC payment. We note that these same concerns were raised with the introduction of both the IPPS and the OPPS, but that claims data continue to show that hospitals continue to provide complex services to beneficiaries. We believe that hospitals understand that there will be considerable variation in the costs of providing a comprehensive primary service to individual beneficiaries relative to the comprehensive payment amount.

We disagree with the commenters on the need for greater outcomes measures prior to implementation of the comprehensive APC payment policy. As noted, in this final rule with comment period, we are recognizing the resource differential for complex forms of primary procedures. Further, we believe that outpatient procedures, such as these device-intensive procedures, that are also performed on an inpatient basis benefit from hospital protocols established for inpatient hospital quality programs such as quality measures, readmission reduction programs, and value-based purchasing incentives. Therefore, we do not agree with the commenters who were concerned that patient care might suffer or that quality measures need to be strengthened before implementation of the comprehensive APC policy.

We are concerned by some of the comments that imply that some providers might change their practice of providing a comprehensive service and instead perform split or staged procedures in order to maximize payment. Although we do not believe that practitioners or facilities would voluntarily expose beneficiaries to an increased risk of additional surgery and anesthesia, we recognize that payment can influence behavior. When we implement the finalized comprehensive APC policy in CY 2015, we will closely monitor billing patterns for split or staged procedures and consider claims processing edits or other approaches to ensure that our prospective payments uniformly apply to complete services, if necessary.

With regard to the commenters' request for evaluation under a demonstration project before full implementation, we do not believe that comprehensive APCs are sufficiently different from our historical hospital payment practices to warrant a demonstration project. Further, we are adopting the proposed policy with modification and are delaying implementation of the comprehensive APC policy until CY 2015 in this final rule with comment period to the public to allow us and the public time to transition to this new payment approach.

(2) Comprehensive APCs for Device-Dependent Services

(a) Identification of High-Cost Device-Dependent Procedures

As we discussed in the CY 2014 OPPS/ASC proposed rule, in order to identify those services for which comprehensive packaging would have the greatest impact on cost validity, payment accuracy, beneficiary transparency, and hospital efficiency, we ranked all APCs by CY 2012 costs and then identified 29 device-dependent APCs where we believe that the device-dependent APC is characterized by a costly primary service with relatively small cost contributions from adjunctive services.

Comment: Several commenters asked for additional information on the criteria utilized by CMS to create the comprehensive APCs and how CMS would evaluate services and procedures to qualify for comprehensive APCs going forward. One commenter asked why the other 10 device-dependent APCs were not included, and why no other nondevice-dependent APCs were classified as a comprehensive APC. Another commenter recommended that CMS consider the comprehensive approach for a smaller number of APCs (four or five), while other commenters recommended that additional APCs be paid as comprehensive APCs, including recommendations for a broader application of the comprehensive APC criteria to all claims dominated by a single procedure and specifically recommended procedures such as those assigned to APC 0067 (Stereotactic Radiosurgery).

Response: As we stated in the proposed rule, we initially proposed a subset of device-dependent APCs for conversion to comprehensive APCs because we believed that these procedures represented a cohesive subgroup with which to introduce a broader packaging initiative. We stated that comprehensive APCs are appropriate when they reflect a single global service that the beneficiary would be receiving from the hospital. In this case, we have identified procedures where the beneficiary would reasonably consider the encounter to be for the implantation of a device, and we limited our proposal to the most costly procedures where the geometric mean cost of the comprehensive procedure was approximately five times the current beneficiary inpatient deductible or greater. This created a consistent group of services with similar clinical and resource characteristics, which were archetypal for our definition of a comprehensive service.

However, we agree with the commenters that there is no reason that comprehensive payments could not be extended in future years to other procedures. In addition, we do not agree with the commenters that we should limit the comprehensive APCs to a small trial of four or five APCs. We are adopting the proposed policy with modification and are delaying implementation of the comprehensive APC policy until CY 2015 in this final rule with comment period to the public to allow us and the public time to transition to this new payment approach. We believe that the identified subgroup of device-related APCs is clinically cohesive and similar in resource construction. We will consider possibly adding a comprehensive APC for single session cranial stereotactic radiosurgery (procedures assigned to APC 0067) in CY 2015.

(b) Creation of Comprehensive APCs for Certain Device-Dependent Procedures

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

(3) Inclusion of Otherwise Packaged Services and Supplies

As part of the comprehensive APCs, we proposed to package all services that are packaged in CY 2013, and all services proposed for unconditional or conditional packaging for CY 2014.

We did not receive any separate public comments on this proposal outside of the public comments we received on our proposal to create comprehensive APCs for CY 2014 (which final policy with modification, we are delaying implementation until CY 2015) discussed in section II.A.3. of this final rule with comment period.

(4) Inclusion of Adjunctive Services

We previously noted in section II.A.3.a. of the proposed rule that it has been a goal of the OPPS to package services that are typically integral, ancillary, supportive, dependent, or adjunctive to a primary service. We proposed to package into the comprehensive APCs all of these integral, ancillary, supportive, dependent, and adjunctive services, hereinafter collectively referred to as “adjunctive services,” provided during the delivery of the comprehensive service. This includes the diagnostic procedures, laboratory tests and other diagnostic tests, and treatments that assist in the delivery of the primary procedure; visits and evaluations performed in association with the procedure; uncoded services and supplies used during the service; outpatient department services delivered by therapists as part of the comprehensive service; durable medical equipment as well as prosthetic and orthotic items and supplies when provided as part of the outpatient service; and any other components reported by HCPCS codes that are provided during the comprehensive service, except for mammography services and ambulance services, which are never payable as OPD services in accordance with section 1833(t)(1)(B)(iv) of the Act.

Comment: Several commenters expressed concerns regarding the packaging of unrelated services reported on the claim. Given that a single claim can span multiple days, a few commenters believed that under current billing instructions this proposal would arbitrarily package all services occurring within a 30-day or 60-day period. Currently, there is no means on outpatient claims to differentiate between adjunct services that are related to the primary procedure and other services that are ordered by other physicians and/or are unrelated to the primary procedure. These commenters were concerned that if CMS assumed that all services reported on the claim are related, it could lead to incorrect ratesetting. Alternatively, these commenters reasoned that if CMS revised billing instructions to allow all unrelated services (not merely labs) to be billed on separate claims, hospitals would need to change their billing systems to bill separately for unrelated services and would experience significant administrative burden separating unrelated from related items and services.

Response: We do not agree with the commenters' assertions that a significant amount of unrelated services would be billed on the claim for the primary service. We note that most commenters were concerned about unrelated services reported on claims spanning 30 days. We remind hospitals that we have previously issued manual guidance in the Internet Only Manual at 100-4, Chapter 1, Section 50.2.2 that only recurring services should be billed monthly. Moreover, we have further specified that in the event that a recurring service occurs on the same day as an acute service that falls within the span of the recurring service claim, hospitals should bill separately for recurring services on a monthly claim (repetitive billing) and submit a separate claim for the acute service. We also do not expect that these claims for comprehensive services in the outpatient setting would extend beyond a few days.

Additionally, we have noted that occasionally beneficiaries may, for reasons of convenience or coincidence, receive laboratory services at the hospital that are unrelated to the primary service. When beneficiaries are at the hospital for the non-trivial procedures in comprehensive APCs, we do not expect that unrelated laboratory services would be a common occurrence, but we have nonetheless instructed hospitals that laboratory tests ordered by unrelated providers for unrelated medical conditions may be billed on a 14X bill-type. We refer readers to section II.A.3.c.(3) of this final rule with comment period for more discussion of this final policy.

Beyond these two sets of circumstances, we believe that other services performed at the time of these major procedures can reasonably be considered to be related to the primary service or procedure. We proposed that we would consider all services reported on the claim to be related to the primary service. Under such a presumption, all services delivered to a beneficiary during an encounter for a comprehensive procedure would be included in establishing the payment rate for the comprehensive APC. As we are including all adjunctive services in the comprehensive APC calculation, hospitals would not need to look for unrelated services. We considered all covered costs when calculating the comprehensive APC payment as is done with IPPS DRGs. As previously noted, hospitals would continue to code and bill for these services in the same way that they currently code and bill.

Comment: One commenter asked that CMS modify the proposal by specifically excluding clinical diagnostic laboratory tests and the facility component of anatomic pathology procedures from comprehensive APC payment for the same reasons that other commenters believed that these services should not be packaged as part of our general packaging proposals.

Response: We do not agree with this commenter that laboratory and the facility component of anatomic pathology procedures should be excluded from the comprehensive APC payment. We are finalizing our other proposed policy to package laboratory tests, as described in section II.A.3.c.(3) of this final rule with comment period. We note that laboratory and anatomic pathology tests are almost always performed as part of the provision of the primary service in the case of these comprehensive services and are, therefore, appropriately considered ancillary and supportive. In summary, we believe that these device-dependent procedures represent archetypal cases of a single comprehensive service and that laboratory and anatomic pathology services are classic examples of adjunctive services that are supportive of the primary procedure.

(5) Inclusion of Devices, Durable Medical Equipment, Prosthetics, Orthotics and Supplies (DMEPOS)

As part of the comprehensive service packaging policy described above, we proposed to package all devices; implantable durable medical equipment (DME); implantable prosthetics; DME, prosthetics, and orthotics when used as supplies in the delivery of the comprehensive service; and supplies used in support of these items when these items or supplies are provided as part of the delivery of a comprehensive service. We have a longstanding policy of providing payment under the OPPS for implantable DME, implantable prosthetics, and medical and surgical supplies, as provided at sections 1833(t)(1)(B)(i) and (t)(1)(B)(iii) of the Act and 42 CFR 419.2(b)(4), (b)(10), and (b)(11). Under this proposal, DME, prosthetics, and orthotics, when used as supplies in the delivery of the comprehensive service, would be covered OPD services as provided under section 1833(t)(1)(B)(i) of the Act and § 419.2(b)(4) of the regulations. Under this proposal, we believe that when such items and services are provided as adjunctive components in the delivery of a comprehensive service, such items are appropriate for coverage under the OPPS as covered OPD services, and for payment under the OPPS. We noted that, at other times, such items when not provided as adjunctive components in the delivery of a comprehensive service would not constitute covered OPD services, and such items would be appropriately provided by suppliers and paid for under the DMEPOS benefit. More specifically, we do not believe that this proposed policy limits a hospital's ability to function as a DMEPOS supplier and bill DMEPOS items to the DME-MAC when those items are unrelated to the outpatient procedure and provided outside of the delivery of the comprehensive service.

In summary, we proposed to consider all DMEPOS items to be covered hospital outpatient department services and to be adjunctive to the primary service when they are delivered during the comprehensive service, as described above and, therefore, proposed to package such items into the applicable comprehensive service. This policy includes any items described by codes that are otherwise covered and paid separately in accordance with the payment rules for DMEPOS items and services, and applies to those items when they are provided as part of the delivery of the comprehensive service. Under this proposal, when such items are provided during the delivery of a comprehensive service, we proposed that they are covered OPD services as provided under sections 1833(t)(1)(B)(i) and (t)(1)(B)(iii) of the Act and §§ 419.2(b)(4), (b)(10), and (b)(11) of the regulations, and payable under the OPPS, as described above.

We did not receive any public comments on our proposal to include these DMEPOS items in the comprehensive APC payment. We did receive public comments on the impact of these new items on budget neutrality, which we discuss below, and comments on how DMEPOS items impact APC 0227 (Implantation of Drug Infusion Device), which we discuss in greater detail later in this section.

(6) Inclusion of OPD Services Reported by Therapy Codes

Generally, section 1833(t)(1)(B)(4) of the Act excludes therapy services from the OPPS. We have previously noted that therapy services are those provided by therapists under a plan of care, and are paid under section 1834(k) of the Act subject to an annual therapy cap, when applied. However, certain other activities similar to therapy services are considered and paid as outpatient services. Although some adjunctive services may be provided by therapists and reported with therapy codes, we do not believe that these services always constitute therapy services. In the case of adjunctive components of a comprehensive service that are described by codes that would, under other circumstances, be indicative of therapy services, we note that there are a number of factors that would more appropriately identify them as OPD services. These services are not independent services, but are delivered as an integral part of the OPD service on the order of the physician who is providing the service; they are not typically provided under an established plan of care, but on a direct physician order; they may be performed by nontherapists; and they frequently do not contribute to a rehabilitative process. For example, we note that therapists might be asked to provide a detailed documentation of patient weaknesses to be used by the physician to help identify or quantify a possible procedure-associated stroke or help with the mobilization of the patient after surgery in order to prevent blood clots. We note that these nontherapy services furnished by a therapist are limited to the immediate perioperative period, consistent with their inclusion as part of the larger service to deliver the device, and are distinct from subsequent therapy services furnished under a therapy plan of care, which serve to establish rehabilitative needs and begin the process of rehabilitation.

For that reason, when provided within this very limited context of a comprehensive service such as the implantation of an expensive device, in the CY 2014 OPPS/ASC proposed rule (78 FR 43534), we proposed that services reported by therapy HCPCS codes, including costs associated with revenue codes 042X, 043X and 044X would be considered to be adjunctive OPD services in support of the primary service when those services occur within the perioperative period; that is, during the delivery of this comprehensive service that is bracketed by the OPD registration to initiate the service and the OPD discharge at the conclusion of the service. These services do not constitute therapy services provided under a plan of care, are not subject to a therapy cap, if applied, and are not paid separately as therapy services.

Comment: Physical therapy stakeholders commented that they were concerned about the effect this proposal may have on necessary physical therapy services that are provided in conjunction with these proposed 29 APCs and any comprehensive APCs that may be added in the future. The commenter stated that, generally, section 1833(t)(1)(B)(4) of the Act excludes therapy services from the OPPS. The commenter further stated that, instead, the majority of therapy services in the hospital setting are provided by therapists under a plan of care, and are paid under the physician fee schedule (we refer readers to section 1834(k) of the Act). However, the commenter acknowledged that there is a subset of services designated as “sometimes therapy” services that are paid under the OPPS when they are not furnished as therapy under a certified plan of care in an outpatient hospital or critical access hospital (CAH).

The commenter stated that physical therapy should not be considered to be an adjunctive service because physical therapists are consultative members of the health care team, physical therapy is a separate benefit, and some services provided during the perioperative period, such as a physical therapy evaluation to establish a plan of care, could still be considered to be therapy services. The commenter was also concerned that the comprehensive APC payment would not be adequate to cover the services provided by therapists during this perioperative period, that rehabilitation could be prolonged if the therapist is unable to intervene “to increase the patient's mobility, function and endurance prior to surgery,” and that it could be difficult to reliably and reproducibly differentiate those perioperative services that are not therapy from those that could be separately billed as therapy services. Another commenter asked if functional reporting requirements would apply in these cases of adjunctive services reported with therapy codes.

Response: We agree with the commenter that physical therapy is a separate benefit that is not part of an OPPS service. However, after consideration of the public comments we received, we continue to believe that services provided during the perioperative period are adjunctive services and not therapy services as described in section 1834(k) of the Act regardless of whether the services are delivered by therapists or other nontherapist health care workers. We note that adjunctive services are those services provided in support of another service, that is, they are typically performed to facilitate the primary service and are unnecessary or serve a different function if the primary service is not provided. Adjunctive services may be provided by consultative members of the healthcare team. For example, an add-on procedure performed by a cardiac surgeon is nonetheless adjunctive to the primary procedure, as an add-on procedure by definition cannot exist in the absence of the procedure to which it is added.

We have previously noted that therapy services are those provided by therapists under a plan of care in accordance with section 1835(a)(2)(C) and section 1835(a)(2)(D) of the Act and are paid under section 1834(k) of the Act subject to an annual therapy cap, when applied. However, certain other activities similar to therapy services are considered and paid as outpatient services. Specifically, we have said in the Claims Processing Manual IOM 100-4, Chapter 5, Section 20.1 that some services, described as “sometimes therapy services,” may at times be considered therapy, but at other times may be consider to be outpatient department services, such as when those services are provided by non-therapists or provided in the absence of a plan of care. We stated in the proposed rule that we believe services reported with therapy codes, but that are provided as part of a comprehensive service are similar to “sometimes therapy” services in that these services are not properly considered to be therapy services even though they may be reported with therapy HCPCS codes (78 FR 43559 through 43560).

Considering the services that commenters believed should be therapy services, we note that these are outpatient procedures; therefore, the comprehensive procedure includes only the perioperative period, a brief period of time immediately before and immediately following the procedure. We would not expect that an evaluation performed immediately following the surgery would establish the beneficiary's needs for rehabilitation because the beneficiary is still under the influence of the completed primary surgical procedure. Rather, services reported with therapy codes during that brief time period may represent interventions to promote breathing and ambulation, traditional post-operative nursing services, or may represent assessments to provide the surgeon with specific clinical information relative to the immediate effects of the surgery. We would not expect therapy assessments or rehabilitative therapy until after the patient has recovered from the immediate effects of the procedure and associated anesthesia. With respect to the statement that it may be beneficial to increase the beneficiary's endurance prior to surgery, we agree with the commenter that this can be a desirable and necessary service, but we would not expect that therapists are routinely increasing “mobility, function and endurance” in the hour or two immediately before the surgery. Therefore, we do not expect that providers and reviewers would struggle to differentiate separately paid therapy services from appropriately packaged nontherapy services. We believe that therapy services would be separated in time from the comprehensive services, and would not be provided during the span of the comprehensive service, from OPD registration to discharge, because we do not expect that the comprehensive service would extend beyond the immediate perioperative period. We also believe that, for a beneficiary who is already receiving therapy on an ongoing basis, it is very unlikely that a therapist would deliver that service during a comprehensive service. There are rare exceptions, for example, in the case of a beneficiary receiving therapy for a burn or contracture. In that case, we have previously published guidance stating that recurring services may be separated from acute services and billed on a separate claim.

We have stated that the relative cost of these comprehensive services includes all of the estimated costs reported on the claims for these services. Therefore, the total payment for the comprehensive service includes a payment for the services reported with therapy codes that is proportional to the frequency with which these codes are reported on the claims. As the comprehensive payment now reflects costs, we believe that the aggregate comprehensive payment will continue to be adequate to cover the cost of the service provided, and we do not expect that these services would be discontinued when they are medically necessary. We also note that there is no provision in this final rule with comment period that prohibits a hospital from providing any medically necessary service as part of a comprehensive service, regardless of the code with which it is otherwise commonly reported.

With respect to functional reporting, we note that these services reported with therapy codes are outpatient department services not therapy services and, therefore, the requirement for functional reporting does not apply. These changes will be implemented in the claims processing systems prior to the start of CY 2015.

(7) Inclusion of Additional Hospital Room and Board Revenue Cost Centers in the Calculation of Covered Costs

In the CY 2014 OPPS/ASC proposed rule (78 FR 43534), we stated that we believe that the cost of the bed and room occupied by the patient, the cost of nursing services, and the cost of any necessary fluid and nutrition (board) are considered covered costs when incurred during the provision of an OPD service, that is, during the provision of the comprehensive service. Because we are able to assign all costs reported on the claim to the comprehensive service, we believe that we have an opportunity to better capture costs by including these costs in our calculations even when they appear in certain revenue cost centers not usually used to report OPPS costs. Specifically, we proposed to include costs reported with room, board, and nursing revenue codes 012X, 013X, 015X, 0160, 0169, 0200 through 0204, 0206 through 0209, 0210 through 0212, 0214, 0219, 0230 through 0234, 0239, 0240 through 0243, and 0249 because we believe these revenue cost centers are sometimes associated with the costs of room, nutrition, and nursing care provided during these comprehensive services.

Comment: One commenter supported the specific inclusion of room and board revenue cost centers on outpatient claims, but another commenter believed that reporting may be difficult for hospitals and hospital systems. Commenters were concerned that CMS did not discuss how those charges would be included in the cost calculation for the comprehensive APCs or provide a cost center source for converting those charges to costs in the CY 2014 OPPS Revenue Code to Cost Center Crosswalk released with the proposed rule. Another commenter was concerned that additional funds were not moved into the OPPS system to account for these “new” costs.

Response: We appreciate the commenter's support for our decision to specifically identify the costs of room and board as being covered costs in certain outpatient stays. We understand the other commenters' confusion as to why room and board revenue codes would appear on an outpatient claim because our claims processing instructions do not allow payment for these revenue codes on Part B claims as they are reserved exclusively for inpatient use. (For example, we refer readers to our recent contractor instructions under Change Request (CR) 8185, “CMS Administrator's Ruling: Part A to Part B Rebilling of Denied Hospital Inpatient Claims”, which excludes these revenue codes on rebilled Part B inpatient claims because room and board services are not covered under Medicare Part B). For this reason, we have not included these revenue codes on our revenue code to cost center crosswalk. Although we proposed to include costs estimated from charges for these revenue codes in our estimate of comprehensive APC costs, we did not include any of these costs. We failed to modify our revenue code-to-cost center crosswalk that we use to estimate costs from charges on claims to include room and board revenue codes. Without revenue codes and associated CCRs from identified cost centers, our model ignored those revenue codes and did not estimate a cost for the room and board revenue codes. We did not include any additional estimated costs in our proposed comprehensive APC payment calculation. We discuss the role of the revenue code-to-cost center crosswalk in section II.A.1.c. of this final rule with comment period.

We now believe that the appearance of these revenue codes on hospital outpatient claims would be improper billing. Charges on ancillary revenue codes for recovery room and observation, for example, should reflect the complete costs of furnishing those services, including the capital cost of the room and nursing labor costs. Further, we would expect that hospitals would allocate these costs, and if appropriate, board costs for services furnished to outpatients, to ancillary cost centers on their Medicare hospital cost report consistent with the matching principles of cost accounting principles. We believe that, as calculated, our estimated costs for comprehensive APCs appropriately includes all costs and charges associated with staying in a room for the duration of the comprehensive service as an outpatient, and we are not finalizing our proposal to include the costs reported with certain inpatient room, board, and nursing revenue codes.

(8) Inclusion of Hospital-Administered Drugs

In the CY 2014 OPPS/ASC proposed rule (78 FR 43534), we also proposed to package all drugs provided to the beneficiary as part of the delivery of the comprehensive service, except for those drugs separately paid through a transitional pass-through payment. Intravenous drugs, for example, are OPPS services that are considered adjunctive to the primary procedure because the correct administration of the drug either promotes a beneficial outcome, such as the use of intravenous pain medications, or prevents possible complications, such as the use of intravenous blood pressure medications to temporarily replace oral blood pressure medications and reduce the risk of a sudden rise in blood pressure when a normal daily medication is stopped. We noted that, in defining these packaged drugs, we were applying both our existing definitions of self-administered drugs (SADs) and our existing definition of drugs as supplies to the situation where the OPD service is a comprehensive service.

We proposed that all medications provided by the hospital for delivery during a comprehensive service pursuant to a physician order, regardless of the route of administration, would be considered to be adjunctive supplies and, therefore, packaged as part of the comprehensive APC payment. We stated that we believe that the physician order demonstrates that the delivery of the medication by the hospital is necessary to avoid possible complications during the delivery of the comprehensive service, to ensure patient safety, and to ensure that the comprehensive service delivery is not compromised and, therefore, the medication should be considered an adjunctive supply.

Therefore, we proposed to consider all medications to be supplies that are adjunctive to the primary service if the medicines are ordered by the physician and supplied and delivered by the hospital for administration during the comprehensive service.

Comment: Commenters generally supported the inclusion of drugs as supplies in the comprehensive APC payment. For example, one commenter stated that this proposal would be extremely helpful to beneficiaries by reducing their financial burden and would greatly reduce the processing burden on the hospital. Several commenters stated that CMS' reasoning was sound and the concept should be expanded to all self-administered drugs incident to practitioners' therapeutic services, not just in comprehensive APCs because the commenters believed that the concept that drugs are integral and adjunctive to the furnishing of a therapeutic service applies to observation and other procedures. For example, one commenter stated that self-administered drugs provided during an ED visit are directly related to the necessary care. The commenter suggested that a requirement to bill for self-administered drugs be established so that these costs could be identified for inclusion in ratesetting.

However, one commenter was concerned that including all hospital-administered drugs, regardless of the route of administration, in the cost calculations of the comprehensive APCs will not accurately account for the significant cost variation in required drugs from beneficiary to beneficiary based on individual beneficiary requirements and that, as a result, the payment rate for a comprehensive APC might not provide adequate payment for the specific drugs and biologicals an individual beneficiary needs, and that hospitals would be discouraged from providing appropriate drugs during a comprehensive service.

Response: We appreciate the commenters' support for our proposal to consider drugs, regardless of their route of administration, to be adjunctive supplies used in support of the primary comprehensive service when ordered by a physician and delivered during the administration of a comprehensive service.

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

Although some cost of drugs that are used as supplies have been included in APC payments, we recognize that there are some drugs that previously may not have been considered as supplies because previously they were provided outside of the defined service. We generally address public comments about how costs for newly included adjunctive items will be considered under budget neutrality below.

We do not believe that including these drugs and biologicals in the comprehensive APC payment greatly increases a hospital's financial risk for providing a comprehensive service. Further, we expect that a payment based on geometric mean estimated cost would reflect the relative resources of drugs used as supplies included on comprehensive service claims, along with all other ancillary supplies and services, and that while the cost of any given case will vary, the hospital would receive a payment based on average estimated cost for all cases. We do not believe that comprehensive APC payments that include physician-ordered, hospital-administered drugs delivered during the comprehensive service would be inadequate to cover the cost of providing the service, and we do not believe that the comprehensive APC payment would discourage hospitals from providing appropriate drugs during delivery of these comprehensive services.

Finally, we agree with the commenters that all covered costs related to a service should be included on the claim per our manual instruction in the Claims Processing Manual IOM 100-4, Chapter 4, Section 10.4.A and as discussed in section II.3.a. (Packaging) of this final rule with comment period and that those costs should be reported as precisely as possible using HCPCS codes when available or uncoded revenue cost centers when HCPCS codes do not exist. Overall, we believe that drug costs, regardless of the route of administration, are accurately accounted for in the APC relative payment weight. We believe that overall payment for the comprehensive service is adequate and will permit access to the specific drugs and biologicals required for an individual beneficiary.

After consideration of all of the public comments we received, we are finalizing our proposal to package all outpatient services, including diagnostic procedures, laboratory tests and other diagnostic tests, and treatments that assist in the delivery of the primary procedure; visits and evaluations performed in association with the procedure; coded and uncoded services and supplies used during the service; outpatient department services delivered by therapists as part of the comprehensive service; durable medical equipment, as well as prosthetic and orthotic items and supplies when provided as part of the outpatient service; and any other outpatient components reported by HCPCS codes that are provided during the comprehensive service, except for certain services including mammography services, ambulance services, brachytherapy seeds, and pass-through drugs and devices. When billed on a claim in conjunction with a primary procedure assigned to status indicator “J1” in CY 2015, we will pay for these services through the OPPS comprehensive APC payment. We are not finalizing our proposal to include costs reported with room, board, and nursing revenue codes 012X, 013X, 015X, 0160, 0169, 0200 through 0204, 0206 through 0209, 0210 through 0212, 0214, 0219, 0230 through 0234, 0239, 0240 through 0243, and 0249.

The APCs for which we are finalizing this proposal for CY 2015 are identified below in Table 8.

(c) Methodology

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

(d) Payments

As we further stated in the CY 2014 OPPS/ASC proposed rule (78 FR 43534), we used the proposed APC relative payment weights for each of these device-dependent comprehensive services to calculate proposed payments following our standard methodology. The proposed payments for the HCPCS codes assigned to these proposed comprehensive APCs were included in Addendum B of the proposed rule (which is available via the Internet on the CMS Web site). We proposed to assign a new status indicator, “J1” (OPD services paid through a comprehensive APC), to these device-dependent procedures. The claims processing system would be configured to make a single payment for the device-dependent comprehensive service whenever a HCPCS code reporting one of these primary procedures appears on the claim. From a processing system perspective, all other adjunctive services except mammography, ambulance, and pass-through services would be conditionally packaged when a comprehensive service is identified on a claim. From our data, we determined that multiple primary HCPCS codes are reported together in 24 percent of these device-dependent claims, but rarely represent unrelated services. Having determined that having multiple unrelated device-dependent services reported on a claim is an uncommon event, we proposed to only pay the largest comprehensive payment associated with a claim. However, the costs of all of these more extensive or additional services are included in the calculations of the relative payment weights for the comprehensive service, so the prospective payment includes payment for these occurrences.

Comment: Some commenters suggested that errors and lack of clarity pertaining to some HCPCS codes proposed for comprehensive payment in the proposed rule prevented the public from being able to respond informatively to the comprehensive APC proposal. One commenter was concerned that CMS stated in the preamble text that there are 136 HCPCS codes that define the device-dependent services to be included in the proposed comprehensive APCs whereas, in Addendum B to the proposed rule, there are 148 HCPCS codes listed. Other commenters identified occasional instances in the proposed rule APC cost statistics data files where the number of single procedures was reported as more than the number of total procedures, and they also identified several inconsistencies in Addendum B where the HCPCS code's status indicator was listed as “Q2” (conditionally packaged), yet the APC assignment was associated with status indicator “J1” (comprehensive APC, all other items on the claim are packaged).

Response: We discussed 136 primary procedure codes in our proposal for comprehensive APCs (78 FR 43534). Commenters are correct that we also identified 148 primary procedure codes in Addendum B to the proposed rule as corrected (which is available on the CMS Web site at: http://www.cms.hhs.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html). As we discussed in our September 6, 2013 correcting document, we revised the status indicators of several HCPCS codes that appeared in Addendum B from “Q2” to “J1” to reflect their status as a primary procedure code in a comprehensive APC. The remaining difference in these two numbers is that 136 represents the number of CY 2012 device-dependent HCPCS codes reported on the CY 2012 claims that we are using to model CY 2014 geometric mean costs to illustrate the comprehensive APC methodology. We generally discuss our modeling of the CY 2012 claims data to establish CY 2014 payment rates in section II.A.1.c. of this final rule with comment period. However, considering the revisions to specific procedure codes used to report certain procedures, such as the new percutaneous coronary intervention procedure codes (CPT codes 92920 through 92943) beginning in CY 2013, the number of CY 2013 device-dependent HCPCS codes appropriately assigned to comprehensive APCs increased to 148. Upon adoption of the new coding scheme for CY 2014, the number of HCPCS codes assigned to a comprehensive APC for payment in this final rule with comment period as it would have been implemented for CY 2014 is 167. All of these comprehensive HCPCS codes for each year (CY 2012 through 2014) appear below in Table 9. Before we implement this policy in CY 2015, we will assess all active codes for CY 2015 and assign the procedure to status indicator “J1,” as appropriate.

We believe that the corrections to the status indicators assigned to the device-dependent procedure codes that appeared in Addendum B to our correcting document (http://www.cms.hhs.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html) were minor and did not compromise the ability of commenters to analyze and respond to our comprehensive APC proposal. We note that some commenters were able to correctly identify the claims that we used to model the proposed CY 2014 payment rates for comprehensive APCs by identifying the device-related HCPCS codes associated with the 29 comprehensive APCs for CY 2012. Some commenters also were able to correctly identify the HCPCS codes that we proposed would trigger a comprehensive payment in CY 2014 based on our identification of HCPCS codes in Addendum B. The commenters were able to model relative payments based on our identification of the inclusion of all services reported on the claim except mammography, ambulance, and pass-through services, and were able to determine the impact of the proposal based on our publication of proposed payment rates for those 29 comprehensive APCs. Our proposed payment rate for these comprehensive APCs did not change appreciably with the correcting document. In addition, we are delaying implementation of the finalized comprehensive APC policy until CY 2015, and we are providing a detailed discussion of our final methodology for establishing comprehensive APC relative payment weights through this final rule with comment period.

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Comment: Commenters stated that they had difficulty understanding the APC assignment of a specific claim when two or more procedure codes assigned to status indicator “J1” appear on a single claim and indicated that they could not independently replicate the proposed comprehensive APC methodology. Commenters believed that there was ambiguity in whether the primary HCPCS code assignment was based on CY 2012 Medicare payment for the primary procedure or CY 2012 claims cost as determined by reported charges converted to costs in the CY 2012 claims data set using CMS' methodology outlined in section II.A.1.c. of the proposed rule and this final rule with comment period. One commenter believed that using a ranking based on CY 2012 payments would be inconsistent with setting a prospective payment rate for CY 2014 because prioritizing by payment was potentially more reflective of historical costs than CY 2102 costs and also reflected units in a way that assigned some procedures reporting claims with single units to one APC and other procedures reporting claims with multiple units to a different APC. This latter issue was particularly concerning to commenters because the commenters believed that some claims contributed to the cost of one APC, yet would actually be paid through a different APC.

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

We stated in the proposed rule that, “Any claims that contained more than one of these procedures were identified but were included in calculating the cost of the procedure that had the greatest cost when traditional HCPCS level accounting was applied.” Using this methodology, we proposed to identify a primary service on claims reporting multiple HCPCS codes assigned to status indicator “J1” by identifying the HCPCS code assigned to status indicator “J1” on the claim that had the highest device-dependent APC geometric mean cost. The primary service is not only the most costly service but also typically represents the most significant or core service that is being provided to the beneficiary. To facilitate claims processing and to ensure that we identified the most costly device-related procedure on each claim, including those billed with multiple units, we envisioned using the CY 2014 device-dependent APC payment amount that would have been made for the service in the absence of a proposal for comprehensive APCs to identify the most costly procedure described by a HCPCS code assigned to status indicator “J1” on the claim. We proposed to assign the procedure described by a HCPCS code assigned to status indicator “J1” with the highest device-dependent APC line-item payment, considering the entire payment when multiple units are billed, as the primary procedure and to make payment for the claim through the associated comprehensive APC. We note that the device-dependent APC payment rates have the same relativity as device-dependent geometric mean costs, as those costs underpin final budget neutral payment rates.

We agree with the commenters that the methodology by which a claim that has at least one procedure described by a HCPCS code that is assigned to status indicator “J1” is assigned to a comprehensive APC is fundamental to understanding final payment under the comprehensive APC policy. If there is only one procedure described by a HCPCS code assigned to status indicator “J1” reported on the claim, the comprehensive APC assignment is straightforward; the claim is paid through the comprehensive APC associated with that procedure. This is true under the proposed methodology as well as under the revised methodology we are finalizing in this final rule with comment period. In the event that more than one procedure described by a HCPCS code assigned to status indicator “J1” was present on the claim, an important goal of our proposed methodology was to ensure that the costliest procedure, including increased cost due to multiple units, would be identified as the primary procedure on the claim so that the claim would be paid through the most costly potential comprehensive APC and ultimately garner the highest potential comprehensive APC payment. After review of the public comments we received, we are modifying our proposed methodology for assigning a primary procedure described by a HCPCS code assigned to status indicator “J1” reported on a claim to an appropriate comprehensive APC when more than one procedure described by a HCPCS code assigned to status indicator “J1” is reported. First, we will only use current ratesetting estimated cost information and not device-dependent APC payment rates to identify the primary procedure described by the HCPCS code assigned to status indicator “J1” on the claim and the subsequent comprehensive APC through which payment for the service would be made. For CY 2015, we will use estimated costs on CY 2013 claims to calibrate comprehensive APC payment amounts.

Second, we will recognize the greater resources attributable to more complex cases. Commenters suggested addressing variations in cost of comprehensive APCs by recognizing the greater resources attributable to more complex cases with multiple device-dependent procedures in some manner similar to the severity adjustment incorporated into the IPPS MS-DRG system. We agree with the commenters that instituting a higher comprehensive payment for complex cases would both allow us to continue a comprehensive payment methodology where the most costly service reported with status indicator “J1” on the claim determines the comprehensive APC assignment and also recognize relative resource differences associated with multiple device-dependent procedures. In this response, we discuss the first step in this process of identifying a primary HCPCS service assigned to status indicator of “J1” for each claim. We present the methodology for identifying complex subsets of primary services and reassigning claims to higher-level APCs in the following comment and response.

To address concerns presented by some of the commenters that they could not fully model the proposal, we provide all of the information we used to create relative payment weights for CY 2014 using the CY 2012 claims data to illustrate the final methodology below. We believe that this will assist interested parties in replicating our methodology. We will recalibrate all of the comprehensive APC relative payment weights for CY 2015 using CY 2013 claims data, consistent with our annual recalibration of APC relative payment weights, to reflect the most recently available claims and cost information.

To arrive at the illustrative CY 2014 comprehensive geometric mean cost for the comprehensive APCs in Table 8, we began by first identifying all claims reporting a single procedure described by a HCPCS code with status indicator “J1.” As noted earlier, this is approximately 75 percent of claims with any procedure described by a HCPCS code reported with status indicator “J1.” On claims reporting a single procedure described by a HCPCS code with status indicator “J1,” we considered that procedure to be the primary service that determines the comprehensive APC assignment. We then used these single “J1” claims to calculate a comprehensive APC single “J1” procedure claim geometric mean cost for all comprehensive APCs using the total cost on each claim. These comprehensive APC single “J1” procedure claim geometric mean costs appear in Table 9.

We then began the process of identifying a “primary HCPCS code” that represents the “primary service” or “primary procedure” on a claim reporting multiple procedures described by HCPCS codes with status indicator “J1.” We used the APC geometric mean comprehensive cost based on claims reporting a single “J1” procedure described by a HCPCS code with status indicator “J1” (Table 9) to identify the most costly procedure reported on each claim. Specifically, we selected the primary HCPCS code by determining the comprehensive procedure that is assigned to the APC with the highest geometric mean comprehensive cost based on claims with a single service with status indicator “J1.” We undertook a second step when a comprehensive service claim contained two or more procedures described by a HCPCS code with status indicator “J1” that are assigned to the same APC. Of those procedures described by a HCPCS code with status indicator “J1” that are also assigned to the same APC with the highest comprehensive APC cost from Table 9, we identified the service described by a HCPCS code reported with status indicator “J1” with the highest HCPCS-level geometric mean cost, also derived from the comprehensive cost of claims that contain a single procedure with status indicator “J1,” to be the primary HCPCS code on the claim.

In the event that a HCPCS-level geometric mean comprehensive cost cannot be determined for a particular HCPCS code from the claims data, such as new HCPCS codes that are not represented in the claims data or an add-on code for which there are no claims with only that procedure, we will model a HCPCS-level comprehensive geometric mean cost that we will only use to identify a primary procedure. For procedure codes with missing data, we will include an estimated comprehensive HCPCS code geometric mean cost in each proposed or final rule, as appropriate, using the best information we have available about each code. However, we will not use modeled HCPCS-level comprehensive geometric mean costs to set comprehensive APC payment rates. We will only use modeled HCPCS-level comprehensive geometric mean costs in our claims processing systems to identify a primary HCPCS code reported on a claim with multiple procedures described by HCPCS codes assigned to status indicator “J1” in the same comprehensive APC. Our goal in modeling such a HCPCS-specific geometric mean cost is to identify a primary HCPCS code on a claim with multiple procedures in the same comprehensive APC with sufficient accuracy for a few years until actual claims data become available. This modeled geometric mean cost is not intended in any way to presuppose the actual cost of the service for future ratesetting.

Table 9 contains a list of all HCPCS codes assigned to status indicator “J1” that are assigned to APCs, which are associated with a comprehensive payment. Deleted codes are those codes that were used to estimate geometric mean costs, but are not valid codes for CY 2104 while new codes are those codes that will be valid for payment in CY 2014, but were not present in the CY 2012 claims data. The comprehensive APC assignment that we proposed for each HCPCS code assigned to status indicator “J1” in the proposed rule is shown in Column 3, and the illustrative final CY 2014 comprehensive APC assignment that we would have been established based on public comment on the CY 2014 proposed rule and using CY 2012 claims data is shown in Column 4. Column 7 shows the APC geometric mean cost and Column 8 shows the HCPCS code geometric mean cost; together these two columns allow the determination of the primary service HCPCS code and initial APC assignment for any claims with a combination of HCPCS codes reported with status indicator “J1.” We have not provided any modeled HCPCS geometric mean costs for CY 2013 or CY 2014 “J1” HCPCS codes for which we do not have claims data as we are finalizing this policy with modification, but delaying implementation until CY 2015. We will make those modeled geometric mean costs available in next year's proposed rule.

Comment: Commenters expressed concern that CMS' proposal for a single, comprehensive APC payment would not adequately cover the higher cost of cases where multiple expensive devices are used. Commenters also raised several concerns with paying claims with multiple primary procedures under a single APC payment. The commenters noted that, under comprehensive APCs, hospitals would find simple claims with a single comprehensive HCPCS code and few services to be more profitable on a case basis than complex claims with a greater number of comprehensive HCPCS codes and more ancillary services. Commenters believed that this could be a significant issue for many of the comprehensive APCs because only one primary service is paid and one quarter of all claims have multiple procedures. Many commenters believed that a single, comprehensive APC payment for single and multiple device insertion procedures would create an incentive to not perform complex and multiple procedures where the cost materially exceeds payment and that it also could create an incentive for hospitals to use inappropriately less expensive devices, services, and supplies to offset the financial threat of reduced “packaged” payments, including cases where those substitutions could increase program costs as a whole and carry greater risk for beneficiaries.

Commenters argued that hospitals systematically performing more multiple device insertion procedures may face severe financial hardship because they would not have enough simple, single primary procedure cases to cover the cost of their many multiple device insertion procedures, which may limit their ability to provide these services as they have in the past. While we stated that we believed that the comprehensive APC proposal would encourage hospitals to negotiate better rates on supplies and increase the efficiency of individual procedures, commenters stated that the added cost of additional expensive devices cannot be routinely reduced to approximate the cost of a single device procedure.

Response: We agree with the commenters that there is wide spread variation in the comprehensive costs of individual claims within each primary procedure, and we further agree with the commenters that we do not want to financially disadvantage hospitals that treat sicker beneficiaries that require more complex and costly procedures. We also agree with the commenters that the presence of certain device-related procedures reported together on a claim can, but does not always, constitute a more complex and resource-intensive subset of a comprehensive procedure.

In calculating the proposed payment rates for comprehensive APCs, we proposed to allocate the costs of all ancillary and adjunctive services to the primary procedure assigned to status indicator “J1,” including the costs of additional procedures identified with status indicator “J1.” A comprehensive approach increases opportunities for hospitals to garner efficiencies in the delivery of these services, but also increases the variation in estimated total claim costs contributing to the comprehensive APC relative payment weight calculation. We agree with the commenters that, in certain instances, cost variation could be too large and could potentially create undue financial risk for hospitals that treat complex patients. We also agree with the commenters that there are some limitations on individual hospitals' ability to reduce costs associated with complex procedures, especially in the short term. Cost reductions may involve changing suppliers or renegotiating contracts for expensive devices. Further, it may be difficult for hospitals to immediately analyze the effects of changing payment models and rapidly implement the practices that they use to handle cost variations within inpatient DRGs.

Given our interest in establishing a comprehensive APC payment under the OPPS that is comparable to a severity level DRG payment adjustment, we agree with the commenters who recommended assigning combinations of procedures that are reported together which indicate a more complex and resource-intensive version of the primary procedure to higher level comprehensive APCs, not unlike the IPPS policy of assigning procedures with certain conditions to higher paying MS-DRGs. After reviewing significant public comments pointing out common clinical scenarios for combinations of device insertion procedures assigned to status indicator “J1,” we decided to recognize complexity in these device-dependent procedures by reassigning claims for certain forms of the primary procedures to higher level comprehensive APCs as a modification to our proposal. We welcome public comments on recognizing the cost of more complex forms of primary procedures through our final policy to reassign claims for complex forms of the primary procedures discussed below. We identify the complex forms of primary procedures that we would reassign for CY 2014 using CY 2012 claims data if we were implementing the comprehensive APC policy in CY 2014 in Table 10. We discuss our consideration of code-specific comments by clinical family later in this section.

We took several steps to moderate resource cost variation in comprehensive APC payments. First, we undertook a standard APC recalibration. We specifically evaluated the APC assignment of some primary procedures and moved those procedures from one APC to another to better align resource and clinical homogeneity. In considering the APC assignment of these procedures, we looked at the traditional parameters of geometric mean cost for the primary service and clinical characteristics of the APC. We created, consolidated, or redefined the primary procedures in the comprehensive APCs as necessary to better group services with clinical and resource homogeneity. Second, we identified complex subsets of primary procedures, which consist of the primary HCPCS code reported in combination with other HCPCS codes that together describe a more complex form of the primary service. We reassigned many claims with complex subsets of primary procedures to a higher level comprehensive APC in the same clinical family through this methodology. We define a clinical family of comprehensive APCs to be a set of clinically related comprehensive APCs that represent different resource levels of clinically comparable services.

Reassignment of claims with complex subsets of the primary procedures does not change the primary service identified on a claim. We continue to consider all services reported on the claim, even the additional “J1” HCPCS codes identifying a claim as complex, to be adjunctive and packaged into the primary service. We make a distinction here between the idea of a primary service under comprehensive APCs and the concept of a composite service as discussed in section II.A.2.f. of this final rule with comment period. Both methodologies foster more accurate ratesetting by allowing us to use additional information reported on a claim to establish a geometric mean cost and accompanying relative payment weight. However, under a composite payment approach, we identify certain procedures that are frequently performed together during a single clinical encounter as a single service and identify that set of services as a complete service. For comprehensive APCs, we assess many combinations of procedure codes for purposes of determining complex forms of a primary service, but the combination of codes is not considered to be separate and distinct service. For comprehensive APCs, the primary service continues to represent the complete furnished service.

For the purpose of evaluating HCPCS code combinations for reassignment to a higher level comprehensive APC after identifying one of the procedures described by a HCPCS code assigned to status indicator “J1”reported on the claim as being the primary service, we recognized a combination of procedure codes as complex and appropriately reassigned to a higher level APC in the same clinical family of services if the complex combination of procedures met all of the following criteria.

  • The comprehensive geometric mean cost of the claims with the combination of procedures was more than two times the comprehensive geometric mean cost of claims reporting only a single comprehensive procedure described by a HCPCS code assigned to status indicator “J1.”
  • There were greater than 100 claims with the specific combination of procedure codes.
  • The number of claims reporting the specific combination of procedure codes exceeded 5 percent of the total volume of claims reporting that procedure as the primary service described by a HCPCS code assigned to status indicator “J1”, and we did not determine that the combination of procedure codes represented an uncommon clinical or resource extreme value within the entire family of services.

In reviewing the CY 2012 claims data for purposes of illustrating this final methodology, we addressed all of the combinations of procedures reported on claims that met all of these criteria, but also addressed other combinations of procedures reported on claims that did not meet all of these criteria if clinical consistency suggested that additional reassignment was necessary.

Once we determined that a particular procedure code combination for a primary service was complex because it represented a sufficiently costly case and frequent subset within the primary procedure overall, we evaluated alternate APC assignments for those claims reporting a combination of procedure codes. We assessed resource variation for reassigned claims within the receiving APC using the geometric mean cost for all reassigned claims for the primary service relative to other services assigned to that APC using the 2 times rule criteria. We maintained clinical homogeneity by reassigning claims within the same clinical family of comprehensive APCs. Any combinations of multiple comprehensive HCPCS codes that were not sufficiently frequent or which did not represent sufficiently costly cases relative to the cost of the primary procedure established with simple, single procedure claims were not identified as complex subsets of the primary procedures and were not reassigned. We repeated this process for each APC for which commenters expressed concerns regarding complexity of cases contributing to wide variation in costs. After both reassigning some procedure codes to different comprehensive APCs and reassigning claims for complex cases of primary services, we then calculated the final comprehensive geometric mean cost for the comprehensive APCs. The illustrative comprehensive geometric mean costs that we would have calculated for the comprehensive APCs for CY 2014 appear in Table 8.

Infrequently, we will not have claims data for some procedures described by HCPCS codes that are assigned to status indicator “J1” and, therefore, no claims cost information upon which to base an assessment of volume or costliness. In this case, we will use the best information available to us to prospectively identify a complex version of the primary service, which is indicated by the combination of procedure codes reported on a claim and assign those complex cases to a higher level comprehensive APC. We will reassess the appropriateness of identifying certain combinations of procedure codes as complex subsets of a primary service once cost information becomes available. This is comparable to our policy for assigning new codes or codes without claims data to an APC based on the best information we have available at the time of assignment and reassessing that resource homogeneity of that APC assignment when claims data become available.

Table 10 shows the combinations of procedure codes that we identified within the 136 primary procedure codes assigned to status indicator “J1” in the CY 2012 claims data that we used in our illustration of CY 2014 modeling and the APC to which those combinations of procedures would be reassigned, as well as combinations of CY 2013 and CY 2014 procedure codes that are not represented in our modeling dataset for which we identified a clinical similarity to existing services and would have identified for reassignment as a complex subset of the primary service for CY 2014. We intend to reassess both procedure code assignments in the comprehensive APCs and our identification and reassignment of complex cases represented by combinations of procedure codes using updated claims and cost report data as we establish relative payment weights each year. We note that we will have CY 2013 claims data for some of the procedure codes listed in Table 10 and we will reassess our identification of combinations of procedures as complex for CY 2015 in light of data and in response to comments received on this final rule with comment period in our CY 2015 OPPS/ASC proposed rule.

In summary, after consideration of the public comments we received, we are finalizing the following methodology for establishing an APC relative payment weight for the comprehensive APC policy, which is our proposed policy with a modification. During ratesetting, single claims reporting a single procedure described by a HCPCS code assigned to status indicator “J1” are used to establish an initial APC assignment for each procedure described by that HCPCS code. The geometric mean of the total estimated costs on each claim is used to establish resource similarity for each procedure code's APC assignment and is evaluated within the context of clinical similarity, with assignment starting from the APC assignments in effect for the current payment year. Claims reporting multiple procedures described by HCPCS codes assigned to status indicator “J1” are identified and the procedures are then assigned to a comprehensive APC, based on the primary HCPCS code, that has the highest geometric mean estimated cost. This ensures that multiple procedures described by HCPCS codes assigned to status indicator “J1” reported on claims are always paid through and assigned to the comprehensive APC that would generate the highest APC payment. If multiple procedures described by HCPCS codes assigned to status indicator “J1” that are reported on the same claim have the same APC geometric mean estimated cost, as would be the case when two different procedures described by HCPCS codes assigned to status indicator “J1” are assigned to the same APC, identification of the primary HCPCS code is then based on the procedure described by the HCPCS code assigned to status indicator “J1” with the highest HCPCS-level geometric mean cost based on claims with a single HCPCS code assigned to status indicator “J1.” Where we have no claims data upon which to establish a HCPCS-level comprehensive geometric mean cost, we will model a HCPCS-level geometric mean cost for the sole purpose of appropriately assigning the primary HCPCS code reported on a claim. The comprehensive APC assignment of each procedure described by HCPCS codes assigned to status indicator “J1” is then confirmed by verifying that the APC assignment remains appropriate when considering the clinical similarity, as well as the estimated cost of all claims reporting each procedure described by HCPCS codes assigned to status indicator “J1,” including simple and complex claims, with multiple device-related procedures.

We are providing in Table 9 the APC assignments for each procedure described by HCPCS codes assigned to status indicator “J1,” the APC geometric mean estimated cost based on claims reporting single procedures, and the HCPCS geometric mean estimated cost based on the claims reporting single procedures that we used to identify primary HCPCS codes and to assign the procedure to an appropriate comprehensive APC. If we were implementing this policy in CY 2014, Table 9 would contain the same information as the claims processing system and could, therefore, be used to determine the initial APC assignment and APC geometric mean estimated cost for any procedure described by HCPCS codes assigned to status indicator “J1” reported on claims prior to any reassignment of certain costly claims for a primary service that represent a complex form of the primary service to higher level APCs. Table 9 is configured for CY 2104 and will be updated for implementation in CY 2015.

We then considered reassigning complex subsets of claims for each primary service HCPCS code. All claims reporting more than one procedure described by HCPCS codes assigned to status indicator “J1” are evaluated for the existence of commonly occurring combinations of procedure codes reported on claims that exhibit a materially greater comprehensive geometric mean cost relative to the geometric mean cost of the claims reporting that primary HCPCS code. This indicates that the subset of procedures identified by the secondary HCPCS code has increased resource requirements relative to less complex subsets of that procedure. If a combination of procedure codes reported on claims is identified that meets these requirements, that is, commonly occurring and exhibiting materially greater resource requirements, it is further evaluated to confirm clinical validity as a complex subset of the primary procedure and the combination of procedure codes is then identified as complex, and primary service claims with that combination of procedure codes are subsequently reassigned as appropriate. If a combination of procedure codes does not meet the requirement for a materially different cost or does not occur commonly, it is not considered to be a complex, and primary service claims with that combination of procedure codes are not reassigned. All combinations of procedures described by HCPCS codes assigned to status indicator “J1” for each primary HCPCS code are similarly evaluated.

Once all combinations of procedures described by HCPCS codes assigned to status indicator “J1” have been evaluated, all claims identified for reassignment for each primary service are combined and the group is assigned to a higher level comprehensive APC within a clinical family of comprehensive APCs, that is, an APC with greater estimated resource requirements than the initially assigned comprehensive APC and with appropriate clinical homogeneity. We assessed resource variation for reassigned claims within the receiving APC using the geometric mean cost for all reassigned claims for the primary service relative to other services assigned to that APC using the 2 times rule criteria.

For new HCPCS codes and codes without data, we will use the best data available to us to identify combinations of procedures that represent a more complex form of the primary procedure and warrant reassignment to a higher level APC. We will reevaluate our APC assignments, and identification and APC placement of complex claims once claims data become available. We then recalculate all APC comprehensive geometric mean costs and ensure clinical and resource homogeneity.

We have provided in Table 10 the combinations of procedures described by HCPCS codes assigned to status indicator “J1” that we used to set payment rates and the additional combinations of procedures described by new HCPCS codes assigned to status indicator “J1” that would be identified for reassignment as a complex form of the primary procedure in CY 2014. If we were implementing this policy in CY 2014, Table 10 would contain the same information as the claims processing system and could, therefore, be used to determine the final comprehensive APC assignment and comprehensive APC geometric mean estimated cost for any procedure described by HCPCS codes assigned to status indicator “J1” reported on an individual claims. Table 10 is configured for CY 2104. We will update this table for implementation in CY 2015.

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(e) Impact of Proposed Comprehensive APCs for Device-Dependent Procedures

• Impact on Medicare Payments

In our proposed rule, we stated that because these device-dependent comprehensive APCs are entirely derived from existing services currently reported on Medicare claims, the policy is effectively budget neutral in its impact on Medicare payments. We noted that room, board, and nursing services have been covered costs in the delivery of outpatient services that require the patient to receive nursing services, occupy a bed for outpatient care, and maintain a controlled metabolic intake during a prolonged outpatient stay. Although we proposed to include new revenue center costs for room and board when reported on these claims, we emphasized that we were proposing to include them to increase the accuracy of reporting and not because they represent a new cost.

Comment: One commenter opined that CMS is correct to include the costs of all component services and supplies that would be packaged under the proposal for CY 2014; all adjunctive services, including laboratory tests, diagnostic tests and evaluation and management services; DMEPOS for which payment would be made under the OPPS; services reported by therapy codes that would be payable under the OPPS; room and board as reported in room and board revenue cost centers; and cost of hospital-administered drugs (regardless of the route of administration) to ensure that the geometric mean cost upon which the payment for these comprehensive APCs would be based would include all necessary costs of the services. However, several commenters were concerned that CMS did not account for the payments for services proposed to contribute to the comprehensive APC geometric mean costs into the CY 2013 current year payment estimates in budget neutrality calculations, but included these costs in the CY 2014 OPPS payment rate calculations. The commenters pointed out that CMS proposed to include the CLFS payments for laboratory services proposed for packaging in the OPPS current year (CY 2013) total payment amount when calculating budget neutrality adjustments for the prospective payment year (CY 2014), but that CMS apparently did not add payments to the OPPS current year total payment estimate for the adjunctive items and services that would be newly paid under the OPPS through the 29 comprehensive APCs. In short, payment for newly added services should be added to the total CY 2013 payment level against which CY 2014 payments would be held budget neutral. These commenters defined the additional services that would be newly paid under the OPPS to include durable medical equipment, therapy services, inpatient nursing services, and inpatient room and board for overnight outpatient stays. The commenters further stated that the proposed rule provides no information concerning how this calculation was made and data was not provided to allow the public to review and validate the determination of budget neutrality.

Response: We appreciate the acknowledgement that we correctly identified and included the costs of adjunctive services contributing to these comprehensive OPD services, with the exception of charges on inpatient revenue codes, including room and board revenue codes. We agree with the commenters that we should have included payments for adjunctive services proposed for payment through the OPPS for the first time in the current year budget neutrality calculations as well as in the relative payment weights for the proposed year calculation. In calculating budget neutrality adjustments for CY 2015 we will incorporate modeled payments for services that will be newly included in the comprehensive APCs on both sides of the budget neutrality calculation as we did for those laboratory services that we are packaging for CY 2014.

Comment: Several commenters stated that, although they recognized that changes in assignments in a prospective (average) payment system cause some payments to increase and others to decrease, the commenters were concerned that payment amounts have not been set to appropriately encompass the additional services that will be packaged. Another commenter noted that the shift from limited to comprehensive APCs would be accompanied by wide shifts in payment and questioned whether the changes with the expanded bundles, including occasional decreases, accurately reflected the costs of the additional packaged services. They requested that CMS delay proposed payments for the comprehensive APCs to ensure payment amounts have been set appropriately to include the additional packaged services.

Response: We agree with commenters that, for some services, there was considerable variation in the payment change from an isolated payment for the primary service, a device-related procedure, to a comprehensive payment for the complete service. There were a number of reasons for this variation. First, services varied considerably with respect to the number and estimated cost of adjunctive services that were typically provided during the same encounter. Some services were almost completely described by the primary HCPCS code with status indicator “J1” with few additional adjunctive services reported in the claims data. Proposed comprehensive payment for these services did not change significantly. Other services, however, appear with many adjunctive services reported in the claims data that became packaged into the comprehensive payment, so the comprehensive payment for those primary HCPCS codes was considerably greater than the payment for the primary service alone.

Second, comprehensive payments allow us to use almost all of the claims for the primary service, rather than using a smaller subset of claims that have a single major procedure and no other significant procedures. We believe that this methodology provides much more accurate cost estimates for these comprehensive services, including incorporating the cost of all adjunctive services proportional to their presence on claims reporting comprehensive services into our final APC relative payment weight calculation. Our adoption of the geometric mean-based methodology rather than the median-based methodology to establish relative payment weights finalized in the CY 2013 OPPS/ASC final rule with comment period (77 FR 68229 through 68233) ensures that the final APC relative payment weight captures the complete spectrum of estimated geometric mean costs of procedures reported on claims and assigned to that APC. We recognize that the magnitude and direction of the change in payment from current OPPS payment structure for more granular payment for individual services to the proposed single comprehensive APC payment for the primary service and its adjunctive services varied from primary service to primary service. In a few instances, the relative geometric mean cost of the entire comprehensive service was less than the geometric mean cost of the primary service alone. We believe that this is largely attributable to the improved accuracy of our ratesetting process. Under our traditional ratesetting methodology, we attempt to identify a cost for each separately payable service from our claims data. We use many strategies to use as much claims data as possible, but we cannot use all claims to estimate the APC geometric mean cost underpinning the relative payment weight. Comprehensive APCs allow us to use almost all of the claims for the primary service to calculate the geometric mean cost and the comprehensive APC to which the primary service is assigned.

Finally, we note that we reassigned some procedures described by HCPCS codes assigned to status indicator “J1” to different comprehensive APCs based on public comments that we received. Also in response to public comments that we received, we are finalizing a methodology for identifying complex subsets of the procedures reported in combination with the primary service that contain multiple device-dependent procedures and require greater resources, and we are reassigning these complex cases to a higher level comprehensive APC. We believe that reassigning claims for complex forms of the primary procedure to a higher level APC within the same clinical family directly addresses commenters' concerns regarding recognizing the additional cost of ancillary services in complex procedures and improves the relative accuracy of the final OPPS payment for the primary service.

Comment: Several commenters questioned whether outlier payments would be adequate under the OPPS as the new comprehensive APCs are formed and packaging is expanded. The commenters noted that under the IPPS outlier payments are set at 5.1 percent of total payments, compared to 1 percent under the OPPS, and costs reported above the outlier threshold under the IPPS are paid at 80 percent compared to 50 percent under the OPPS. One commenter suggested that CMS increase outlier payments for comprehensive APCs, while another commenter suggested that outlier payments are an issue that CMS should examine and perhaps should have examined prior to advancing new packaging policies.

Response: Although we did not propose a change in outlier payments, we will consider whether we should expand our current outlier payment policy. Section 1833(t)(5)(C) of the Act specifies that the estimated total of additional payments for outliers cannot exceed 3 percent of estimated total program payments in that year. Currently, we allocate 1 percent of total program payments to outlier payments each year. Overall, we believe that the current structure of the OPPS, which continues to make separate payment for most services, does not create the same financial risk for individually costly cases as IPPS payment through MS-DRGs, for example. Further, we are not sure an expansion to our outlier payment policy is necessary because we believe that our final policy to reassign claims for complex forms of primary services to higher level APCs reduces financial risk associated with comprehensive APC payment.

• Impact on APCs

Impact on Composite APCs. There is currently one device-dependent composite service under the OPPS, cardiac resynchronization therapy, which is assigned to APC 0108. Because a comprehensive APC will treat all individually reported codes as representing components of the comprehensive service, all of the elements of the composite service are included in the new comprehensive service. Therefore, cardiac resynchronization therapy will no longer be identified as a composite service, but will be identified as a comprehensive service. All services currently assigned to APC 0108, including cardiac resynchronization therapy services, were assigned to the new comprehensive APC in our CY 2014 proposal.

Comment: Several commenters noted that, whereas we proposed making APC 0085 (Level II Electrophysiologic Procedures) a comprehensive APC, we did not discuss composite APC 8000 (Cardiac Electrophysiologic Evaluation and Ablation Composite), which also would be absorbed by the new comprehensive APC policy. The commenters also noted that they believed that CMS calculated an APC geometric mean cost and payment rate based on the same set of claims for both APCs.

Response: We stated that cardiac resynchronization therapy services (assigned to APC 0108 Cardiac Resychronization Therapy) would no longer be identified as a composite service because it would be incorporated into a comprehensive service. However, we did not state in the proposed rule that the same situation existed in terms of APC 8000. Commenters are correct that the same principle applies. Because one of the components of the composite service is assigned a procedure assigned to status indicator “J1,” all of those claims reporting these services would trigger the comprehensive payment policy that we are finalizing with modification in this final rule with comment period. Commenters also are correct that in the proposed rule, we incorrectly assigned procedures to both APCs and calculated geometric mean costs and relative payment weights based on the same set of claims. We will reassign the previous status indicators for procedures assigned to APC 8000 from “S” and “T” to status indicator “J1” for CY 2015, and we will make a comprehensive APC payment for cardiac electrophysiologic evaluation and ablation services.

Impact on Claims Used to Calculate Other APCs. Some of the costs reported on claims for device-dependent procedures may no longer be available to contribute to the calculations for other services through the pseudo-single process described in section II.A. of this final rule with comment period. However, the loss of usable cost data for these services will not create a significant impact on other APCs because most of these services currently cannot be isolated as the “single services” that can be used in the cost calculation process. The exceptions are services such as EKGs and chest x-rays that occur in very high frequency across all types of encounters, and laboratory services and drugs, neither of which are calculated based on average cost. Finally, it is also important to note that the impact associated with the loss in usable claims data is lessened when assessing the benefit of more accurate cost calculations and ratesetting that will be achieved from the use of 400,000 new claims that can now be used for these purposes because of the establishment of the comprehensive APCs.

Impact on Device-Dependent APCs. The impact on current device-dependent APCs is described above in section II.A.2.d.(1) of this final rule with comment period. Comprehensive APC geometric mean costs generally exceed the device-dependent procedure geometric mean costs by an average of 11 percent, less than $1,000 per claim. The direct cost contribution of other adjunctive OPPS services accounts for most of this increase, with laboratory tests contributing approximately $18 per claim (a 0.1 percent increase) and other adjunctive covered outpatient services (not currently paid under the OPPS) contributing an additional $18 per claim. There is significant variation across comprehensive APCs, however, not only because the distribution of adjunctive services varies, but also because the larger bundles allow a more complete incorporation of packaged costs. Finally, the use of comprehensive APCs would allow the number of claims used to estimate costs for these services to almost triple from 233,000 to 649,000, increasing the accuracy of our relative cost estimates.

Comment: Several commenters were concerned about hospitals' willingness to consider new technologies, which can be costly. The commenters expressed concern that this proposal would impact device pass-through payment, New Technology APC provisions, and payments for device-dependent APCs. The commenters also were concerned that packaging is likely to limit the data available for future OPPS updates because the commenters believed that hospital reporting would be less accurate if there were no payment consequences for omitting a device on the claim and that the sunset of device edits would reduce the reliability of the data provided for payment calculations for the same reason. The commenters also were concerned that future potential pass-through device categories may be disadvantaged because pass-through eligibility includes demonstrating costliness relative to several thresholds based on APC payment. Specifically, the commenters were concerned that fewer device categories would be eligible for pass-though payment because fewer device categories would exceed a new higher threshold as a percent of the APC payment amount as payment increases with expanded packaging. Some commenters requested that CMS continue to apply the procedure-to-device and device-to-procedure edits. One commenter asserted that hospitals do not find these edits to be burdensome, that the edits are a useful flag for accurate charging and that, if it is eliminated, providers could fail to report device charges completely.

Response: We do not agree with commenters that comprehensive APC payment will inhibit adoption of new technology. We have not proposed any changes to the New Technology APCs or device pass-through payment provisions and we discuss these payment policies in sections II.A.2.d.(1) and I.B. of this final rule with comment period. These processes for supporting new technologies will continue. New Technology APCs are reserved for new services that are not eligible for transitional pass-through payments for a device, drug, or biological, and for which we lack sufficient clinical information and cost data to appropriately assign them to a clinical APC group. Our proposed policy does not impact our New Technology APC policy, and our determination of new technology eligibility is not dependent on a particular cost threshold.

With regard to pass-through payment eligibility, we agree with the commenters that comprehensive APCs will create expanded bundles and generally higher payment from which the dollar value of the various cost thresholds that are part of the pass-through eligibility process will be determined. The specific cost thresholds used in determining eligibility of a new device pass-through category are listed in 42 CFR 419.66(d). For CY 2015, payment for device-dependent procedures through comprehensive APC payment will create a higher costliness threshold against which new device categories interested in pass-through status must demonstrate costliness. We believe that the statutory construction of the OPPS envisions the relative cost of services to vary over time as services are redefined, recoded, and reassigned among APCs, and as new claims and cost report data become available, which would raise or lower the cost threshold for pass-through payment eligibility under section 1833(t)(6)(A)(iv)(II) of the Act. We estimate that, for CY 2014, the inclusion of additional adjunctive packaged services, in aggregate, account for approximately 11 percent of the cost of these device-intensive services. Relative payment weights for device-related procedures can change by this amount each year due to annual recalibration. As we implement the comprehensive APC payment policy in CY 2015, we will monitor the impact of eligibility for device pass-through payments for a change in the percent of potential device categories failing to clear the current cost threshold criteria.

We also believe that that expanded payment bundles encourage adoption of new technologies by giving hospitals more flexibility over how they deliver a particular service and creating more opportunities for hospitals to make tradeoffs to absorb the cost of improved devices. As we discuss in section II.A.2.d.(1) of this final rule with comment period, we plan to continue our historical device editing in CY 2014. Also as indicated in that section, we are further assessing whether we need to continue claims processing edits requiring a device HCPCS code to be reported on the claim when we implement the comprehensive APCs policy in CY 2015.

• Impact on Beneficiary Payments

Under the comprehensive service APCs, instead of paying copayments for a number of separate services that are generally, individually subject to the copayment liability cap at section 1833(t)(8)(C)(i) of the Act, beneficiaries can expect to only pay a single copayment that is subject to the cap. This will likely reduce beneficiary overall liability for most of these claims.

Comment: Several commenters agreed with CMS that, due to the inpatient deductible cap on beneficiary copayments, net beneficiary coinsurance would decrease under the proposed change. One commenter was concerned that beneficiary out-of-pocket costs may still be higher for any individual beneficiary. The commenter was particularly concerned that new cost-sharing with beneficiaries for laboratory services would be contrary to statue and congressional intent. The commenter objected to a proposal that would impose new beneficiary cost-sharing requirements in order to cut total projected Medicare spending for outpatient services.

Response: We believe that this proposal decreases the liability for almost all beneficiaries receiving primary procedures assigned to comprehensive APCs in CY 2015 because the inpatient deductible cap, mandated by statute to apply to single services, will now apply to the entire hospital claim, as it is now considered a single service or procedure. We agree with the commenters that there may be some isolated beneficiaries who may have a higher beneficiary liability than they would have had we not proposed comprehensive APCs. In many instances, and for these device-related procedures in particular, beneficiaries will no longer make copayments for individual ancillary services. Because the device insertion procedures that we have proposed as comprehensive services are universally very expensive, the cap will apply to the majority of claims reporting services assigned to comprehensive APC. We received many public comments on our proposal to package laboratory services and address those comments and concerns in our discussion of that final policy in section II.A.3.c.(3) of this final rule with comment period.

• Impact on Specific APCs

In conjunction with our proposed rule, we published Addendum B, which identified specific proposed comprehensive payments associated with HCPCS codes proposed for assignment to status indicator “J1” under the proposed comprehensive APC payment policy. We identified the 29 device-dependent APCs proposed for comprehensive APCs and assigned HCPCS codes based on their prior APC assignment. Most of the public comments that we received were specific to certain HCPCS codes, certain APCs, or certain families of services.

Although we are not implementing this final comprehensive APC payment policy until CY 2015, to address concerns by some commenters that they could not fully model the proposal, we provide all of the information we would use to create a relative payment weight for CY 2014 using the CY 2012 claims data in order to illustrate the final comprehensive APC methodology. We summarize and respond to the public comments on individual services in this section, as if we were implementing this policy for CY 2014, grouped by those families of services below. We will recalibrate all of the comprehensive APC relative payment weights for CY 2015 using CY 2013 claims data, consistent with our annual recalibration of APC relative payment weights, to reflect the most recently available claims and cost information in next year's rulemaking cycle.

Comment: With reference to the neurostimulator family of APCs, APCs 0039, 0041, 0061, and 0318, one commenter was concerned that the CY 2014 proposal would broadly decrease payments for neurostimulator insertions. Other commenters believed that total payments would remain approximately the same, but also believed that the spread of costs within a given APC was too great when certain combinations of devices were used. Commenters argued that there is a vast difference in supply (device) costs between a battery or generator replacement and a paddle lead implant or even a percutaneous lead implant. Commenters argued that bundling all of the different variations of neurostimulator implants into one comprehensive payment could create an unintended incentive to use less effective single leads and to increase the number of device replacements and revisions, which could potentially limit the therapeutic effectiveness for patients with complex pain syndromes.

With respect to leads, commenters stated that payment for dual lead trials would be decreased by nearly 40 percent, while single lead trials would be increased by 25 percent, encouraging single lead trials. Similarly, the payment for the initial dual lead implant would decrease by 16 percent. The commenter asserted that this policy may reverse the common clinical practice of dual lead trials for the majority of patients and create a financial incentive to reduce the number of leads used for permanent implants, increasing the need for additional lead placements at a later time, which would result in an increase in readmissions and possible increase in adverse events and complications.

Additionally, commenters believed that this proposal could create incentives to use shorter life devices such as non-rechargeable devices, requiring more frequent replacement procedures in future years. The commenters stated that on the one hand, providers would have a financial incentive to use less expensive devices initially. However, the commenter further stated that on the other hand because CMS is proposing to increase the generator replacement payment rate by 29 percent, providers could be encouraged to use shorter life devices that may require more frequent replacements with a consequent increase in Medicare spending and beneficiary cost sharing.

Commenters proposed a number of modifications to address these issues, including the creation of composite APCs to pay appropriately for the combination of devices provided to an individual patient. The commenters recommended that CMS retain the existing single component APCs for use when only one component (that is, a generator or an array) is implanted or replaced, and create two new composite APCs that reflect different combinations of components—pulse generator and one array and pulse generator and two or more arrays. Alternatively, the commenters recommended Comprehensive APC 0318 (Implantation of Neurostimulator Pulse Generator and Electrode) as the appropriate assignment for most complete neurostimulator systems procedures because it is already used to describe complete cranial nerve and vagus nerve systems procedures. Several commenters recommended maintaining a differentiation between laminectomy lead implants and percutaneous implants, and between spinal systems and sacral systems.

Response: We do not agree with the commenters who are concerned that we are underestimating payments for neurostimulators. We believe that by using all claims for these services, instead of the much smaller subsets of single claims that we used for our device-dependent methodology, any adjustments in the payments for specific services represent a more accurate estimation of relative resources required for the primary service than past estimates. We also note that by estimating the total cost of the procedure by packaging all charges reported on the claim, we ensure that all of the estimated costs of all of these services contribute to the cost estimation for the neurostimulator procedure. Our methodology for identifying single claims, which is designed to isolate the unique costs associated with a specific service, makes some assumptions about assigning packaged costs to individual services. However, we agree with the commenters who were concerned that complex procedures such as those characterized by multiple units and multiple comprehensive components have a wide variation in comprehensive costs and that the geometric mean cost of these subsets is often materially greater than the geometric mean cost of all claims that include both simple and complex versions of the procedure. We agree with the commenters that delivery of these complex services could potentially be impacted under our proposed comprehensive APC payment policy.

Specifically, we agree with the commenters that procedures that implant individual elements of device systems, such as a generator without leads, may have significantly different costs than procedures that implant entire systems. We also agree with the commenters that there may be significant resource differences between individual elements of neurostimulator systems, such as transcutaneous leads and implanted paddles, and between different systems, such as epidural systems and sacral systems. These differences may then be reflected in the variation in the estimated geometric mean costs of the comprehensive service due to different combinations of component services. Therefore, we are accepting the commenters' suggestions and we would reconfigure these APCs to better separate procedures for individual elements of neurostimulator systems from procedures in which the entire system is implanted, and to more closely align relative resource requirements of complex subsets of the service with the corresponding payment for that subset if we were implementing this comprehensive APC policy in CY 2014.

Once we reassign complex claims for a primary service to a higher level APC, as we discuss below, we believe that many of the concerns raised by the commenters would be directly addressed, and therefore, we do not believe that we should not consider these procedures for a comprehensive APC assignment in CY 2015. We believe that hospitals understand that under a prospective payment system the cost of providing care to individual patients may vary relative to the payment amount, which is one hallmark of a prospective payment system. We are comfortable implementing comprehensive APCs for neurostimulators in CY 2015 with variance in the geometric mean costs of individual services that are comparable to the variance we see in estimated hospital costs for traditional, discrete, noncomprehensive services.

To implement the commenters' suggestions we would use the four techniques described above to reassign claims for complex forms of the primary service to higher level APCs. We have analyzed the claims in which multiple units or multiple HCPCS codes assigned to status indicator “J1”are present and have divided individual services into simple and complex services, with complex services characterized by complete systems, multiple components or other associations that correlate with high resource requirements (high cost). We are adopting the basic suggestion of differentiating between partial systems and complete systems, and we plan to use the claims data to group clinically similar, high-volume, complex procedures into APCs with similar costs in CY 2015. In this final rule with comment period, we invite commenters to apply the analysis, methodology, and the payment estimation techniques presented here to specific neurostimulator services and to provide comment on these illustrative CY 2014 reassignments of complex neurostimulator claims.

Changes to implement the commenters' suggestions and concerns for CY 2014, if we were implementing this policy for CY 2014, for this neurostimulator family of APCs are as follows:

  • APC Redesignations: We would eliminate APC 0315, and we would rename APC 0039 and APC 0318.
  • APC Reassignments: We would reassign CPT codes 43647 and 63655 from APC 0061 to APC 0039; CPT code 0268T from APC 0039 to APC 0040; CPT codes 63664 and 64553 from APC 0040 to APC 0061; and CPT code 61886 from APC 0315 to APC 0318.
  • Complexity Reassignment: We would reassign certain HCPCS code combinations that occur with CPT codes 0282T, 61885, 63650, 63663, 63685, 64555, and 64590 as complex forms of the primary service. We summarize all of the codes that we would reassign as complex forms of their primary procedure in Table 10 as if we were implementing this policy in CY 2014.

We request comment on these specific HCPCS code movements and complex claim reassignments. We will reassess the application of this policy to this neurostimulator family of APCs with CY 2013 claims data for CY 2015 implementation, and we will update them based on new claim and cost report data and any relevant new CY 2015 codes through next year's rulemaking cycle.

Comment: With reference to the endovascular family of APCs, APCs 0082, 0083, 0104, 0229, 0319, and 0656, one commenter was supportive of the approach to further integrate the payment methodologies for the inpatient and outpatient systems in this case and agreed that patients who receive the major services contained within the 29 comprehensive APCs are unlikely to be receiving unrelated services on the same day. The commenter urged CMS to monitor the effects of this new system to ensure that patients continue to receive access to the most appropriate care. Other commenters were generally supportive of the approach, but believed that there were specific reasons for not applying comprehensive status to the endovascular family APCs, for delaying the implementation for these comprehensive APCs, or for modifying payments within the family. One commenter specifically was concerned about a substantial decline in payment for APC 0083 (Coronary Angioplasty, Valvuloplasty, and Level I Endovascular Revascularization of the Lower Extremity).

Commenters noted that for CY 2011, 16 new HCPCS codes were implemented to create comprehensive codes for endovascular treatment in the lower extremity arterial territories; for CY 2013, new base and add-on codes were created for coronary artery interventions; and four new comprehensive endovascular codes will be added for CY 2014. Several commenters objected to the creation of any comprehensive APCs using any CPT codes that are less than 3 years old, as they believe the data is not yet reliable.

Several commenters noted that the existing OPPS payment structure for coronary and peripheral revascularization procedures (angioplasty and stent placement) is component-based, providing separate but often reduced APC payments for each clinical aspect of the revascularization service, which are frequently assigned a status indicator of “T” (multiple reduction applies). Commenters argued that the clinical scenarios for revascularization procedures are based on each beneficiary's unique clinical needs, making them incredibly complex with required resources varying significantly from patient to patient. Given this complexity, one commenter opined that coronary and peripheral revascularization procedures are ill-suited for comprehensive APCs because this type of payment structure is unable to capture the differences in hospital resources associated with the differences in revascularization services offered to patients. A few commenters believed that the proposal will inevitably give hospitals an incentive to use less expensive items and less extensive procedures even if those items will increase program costs as a whole and carry greater risk for beneficiaries. In a specific example, one commenter was concerned that all cardiac magnetic resonance imaging and other imaging studies within a 30-day period would be bundled into payment for the comprehensive APC, discourage the use of appropriate imaging modalities, and result in cost as the driving factor in patient access to needed medical imaging services.

Finally, another commenter believed that comprehensive APCs for stent placement procedures would allow a few patients receiving all the possible components of the bundle to experience a lesser hospital outpatient copayment amount, but would cause many beneficiaries to pay for services that they have not received and do not need.

Response: We appreciate the commenters' support for our conclusion that beneficiaries receiving these major services are unlikely to be receiving unrelated services on the same day, and we appreciate commenters who were generally supportive of our intent to create comprehensive packages. We recognize that there has been recent change in the coding and billing of many of these endovascular procedures, but we believe that hospitals prepare to adopt new codes each year and establish a charge relative to the best cost information available to them. We use estimated costs from claims data as soon as it becomes available to establish APC relative payment weights generally, and we have no reason to believe that continuing that practice for comprehensive APCs is not appropriate. With respect to the comments concerning APC 0083, for example, we note that the estimated hospital costs for the procedure alone did not change significantly between CY 2011 and CY 2012, and that the proposed comprehensive service geometric mean cost was approximately 10 percent higher than the single procedure geometric mean cost, a ratio that is comparable to the average aggregate increase in cost for the additional ancillary services observed across all proposed comprehensive services, indicating continued stability in the relative cost estimations despite changes to a methodology that now aggregates all estimated costs reported on each claim before calculating a geometric mean cost.

However, we agree with the commenters that endovascular procedure coding has historically been component based. In general, commenters argued that multi-vessel endovascular procedures have different resource requirements than single-vessel procedures. We agree with the commenters that there is a correlation between the number of vessels treated and hospital costs. However, we also observe that there are a variety of endovascular procedures where the geometric mean costs of some single-vessel procedures are similar to the geometric mean costs of other multi vessel procedures. Nonetheless, we generally agree with the commenters that the range of estimated costs for any individual HCPCS code or HCPCS code combination is wide, with considerable overlap occurring across primary service codes and code combinations. We agree that, in general, payments for multiple vessel services should be adjusted to account for higher complexity and resources when those higher resources are reflected in our claims data.

To model commenters' suggestions for illustration purposes in CY 2014, we have used the techniques described above to reassign claims for certain high-cost, complex versions of the primary service, primarily multiple vessel endovascular procedures. We analyzed the claims in which multiple units of a primary service or multiple HCPCS codes assigned to status indicator “J1,” including the primary service, are present. We divided individual services into simple and complex services, with complex services characterized by multiple components, multiple vessels, or other associations that correlate with high resource requirements (high cost). For our CY 2014 illustration, we are adopting the basic suggestion of differentiating between single vessel and multiple vessel procedures, and we are using the claims data to group clinically similar, high-volume, complex procedures into APCs with similar costs. In this final rule with comment period, we invite commenters to apply the analysis, methodology, and the payment estimation techniques presented here to specific endovascular services and to provide comment on these illustrative CY 2014 reassignments of complex claims for endovascular services.

Changes to implement the commenters' suggestions and concerns for CY 2014, if we were implementing this policy for CY 2014 for this endovascular family of APCs are as follows:

  • APC Redesignations: We would delete APC 0082 and reassign its services to other APCs. We would create a new APC, APC 0445 (Level III Endovascular Procedures). We would rename APCs 0083, 0104, 0229, 0319, and 0656.
  • APC Reassignments: We would reassign CPT codes 37229, 37230 and 92995 from APC 0082 to APC 0445; CPT codes 92984, 92987, 92990, and 92997 from APC 0083 to APC 0104; and HCPCS code G0291 from APC 0656 to APC 0319 (for the purpose of estimating geometric mean costs from CY 2012 claims data used for CY 2014 ratesetting).
  • New HCPCS Codes: The comprehensive APC assignments that we would make for new HCPCS codes for this family are listed in Table 9. The new codes in this family would include CPT codes 37236, 37237, 37238, 37239, 37241, 37242, 37243, 37244, 92920, 92921, 92924, 92925, 92928, 92933, 92934, 92937, 92938, 92941, 92943, 92944, and HCPCS codes C9600, C9601, C9602, C9603, C9604, C9605, C9606, C9607, and C9608.
  • Complexity Reassignments: We would reassign certain HCPCS code combinations that occur with HCPCS and CPT codes 0238T, 35471, 35475,35476, 37204, 37205, 37220, 37221, 37224, 37225, 92920, 92928, 92933, 92941, 92943, 92980, 92981, 92982, 92995, C9600, C9602, C9604, C9606, C9608, G0290, and G0291. We summarize all of the codes that we would reassign as complex forms of their primary service in Table 10 as if we were implementing this policy in CY 2014.

We request comment on these specific HCPCS movements and complex claim reassignments. We will reassess the application of this policy to this endovascular services family of APCs with CY 2013 claims data for CY 2015 implementation, and we will update them based on new claims data and any relevant new CY 2015 codes through next year's rulemaking cycle.

Comment: Commenters generally did not object to the creation of comprehensive APCs for cardiac electrophysiology (EP) studies and one commenter specifically supported the proposal. However, commenters were confused and concerned about the impact of comprehensive APCs on payment for certain ablation procedures when performed in conjunction with EP studies. In the proposed rule, we discussed the creation of comprehensive APCs for EP studies, applying our proposed methodology in which all adjunctive services, with a few exceptions already discussed, reported on the claim are packaged into the payment for the primary service, which is based on the average comprehensive cost of those claims. However, we also inadvertently included a discussion of the continued existence of composite APC 8000 (Cardiac Electrophysiologic Evaluation and Ablation), a composite payment based on the performance of an ablation procedure with an EP service. Claims containing HCPCS codes for both an ablation and an EP study would, therefore, meet the criteria for the composite, but would also meet the criteria for comprehensive APC 0085 (Level II Electrophysiologic Procedures), understandably generating reader confusion and causing commenters to ask how any services would be paid as composite APC 8000 services when they would all be subsumed under comprehensive APC 0085. We also believe that we added to this confusion by initially including some claims and estimated costs in the cost calculation of both APC 8000 and APC 0085, duplicating the reporting of composite APC 8000 claims and causing some statistics for the two APCs to be incorrect. Moreover, we also were not consistent in our application of status indicators or in our treatment of EP-ablation composites that for CY 2013 were reported with new CPT codes.

Commenters proposed several alternatives to our proposed treatment of EP studies and ablations but all of the alternatives involved differentially paying for ablation procedures when those procedures were performed in conjunction with EP procedures. One commenter recommended retaining one of the remaining ablation codes, CPT code 93650 (Ablate heart dysrhythm focus), as a status indicator “Q3” codes that may be paid through a composite APC when not conditionally packaged. Noting that a status indicator of “Q3” would have the same packaging effect as including it in the comprehensive package as proposed, we believe this commenter intended to recommend a higher payment for EP procedures performed with an ablation, such as would occur when the two codes would determine a composite APC assignment. Another commenter expressed concerns that CPT code 93620 (Electrophysiology evaluation) was also listed with a status indicator of “Q3” but assigned to comprehensive APC 0085. Commenters requested that we clarify the intended treatment of EP and ablation services, differentially pay for the lower costs of EP studies performed alone relative to the higher costs of EP-ablation procedures, and create a consistent treatment of services within these sets of codes.

Response: We agree with the commenters that our proposed rule provisions were not consistent in regard to our treatment of the electrophysiology-ablation procedures as composite services and as comprehensive services. We also agree with the commenters that there are significant differences between estimated costs of EP studies and estimated costs of EP-ablation procedures, and that the costs of services reported with EP-ablation combination codes are similar to the costs of single EP-ablation services assigned to composite APC 8000. For CY 2015, we intend to modify our proposal to create a separate comprehensive APC for new CY 2013 HCPCS codes that represent an EP study procedure with ablation, and we also intend to identify combined EP-ablation services reported with multiple HCPCS codes as a complex form of EP services and reassign them to a higher level APC. Finally, we also intend to delete composite APC 8000 as we move payment for these services under the comprehensive APC payment policy. In this final rule with comment period, we invite commenters to apply the analysis, methodology, and the payment estimation techniques presented here to specific EP services and to provide comment on these illustrative CY 2014 reassignments of complex claims for EP services.

Changes to implement the commenters' suggestions and concerns for CY 2014, as if we were implementing this policy for CY 2014, for this set of electrophysiologic evaluation and ablation APCs are as follows:

  • APC Redesignations: We would redesignate composite APC 8000 as comprehensive APC 0444 (Level III Electrophysiologic Procedures).
  • New codes: We would reassign CPT codes 93653, 93654 and 93656 from APC 8000 to APC 0444.
  • Complexity Reassignments: We would reassign HCPCS codes 93619 and 93620, in combination with CPT code 93650, as complex forms of the primary EP service, and we would reassign those claims to APC 0444. For purposes of modeling the policy for CY 2014, we treated claims previously assigned to composite APC 8000 as complex forms of the primary service. We summarize all of the codes that we would reassign as complex forms of their primary procedures in Table 10 as if we were implementing this policy in CY 2014.

We request public comment on these specific HCPCS movements and complex claim reassignments. We will reassess the application of this policy to this set of electrophysiologic evaluation and ablation APCs with CY 2013 claims data for CY 2015 implementation, and we will update them based on new claims data and any relevant new CY 2015 codes through next year's rulemaking cycle.

Comment: In addition to the general comment that CMS should ensure that complex (multiple device) procedures are not inappropriately grouped with single device insertions, there were several public comments regarding the pacemaker-defibrillator family of services, APCs 0089, 0090, 0106, 0107, 0108, 0654, 0655, and 0674. With the exception of public comments on cardiac resynchronization therapy (CRT), these comments dealt with general issues such as the difficulty in modeling the impacts of payment changes based on the information provided in the proposed rule and are discussed elsewhere in this final rule with comment period. Currently, we pay for CRT services through composite APC 0108 (Level II Implantation of Cardioverter-Defibrillators (ICDs)) based on the geometric mean costs of procedures reported on claims with a specific set of codes describing the parts of this composite service (77 FR 68258). Our proposal for comprehensive payment would have subsumed the need for a composite APC in CY 2014. One commenter requested that CRT services continue to be paid based on the geometric mean cost of the composite service rather than based on the geometric mean cost of all services furnished with multiple lead pacemakers or defibrillators that would occur with both our proposal to package procedures described by add-on codes and the comprehensive APC policy.

Response: We agree with the commenters that complex forms of certain services, generally characterized by combinations of codes in which components were separately reported in order to describe the delivery of an entire pacemaker or defibrillator system, have different resource profiles from simple procedures that implant system components or certain simple devices. We agree that CRT services are one of the most costly subsets of pacemaker implantation services but that other complex combinations of codes also exist. However, as part of the process of converting these APCs to comprehensive APCs, we noted that the comprehensive geometric mean cost of these services differed considerably, in some cases, from our estimates of the primary service calculated through our traditional single bill methodology and these new cost estimates suggested reassigning codes among the family of pacemaker APCs in order to increase resource homogeneity. These reassignments also suggested renaming or restructuring APCs as necessary. We found these reassignments would reduce much of the cost to payment variance.

Therefore, in response to public comments we received, we would modify our proposal to establish comprehensive payments for pacemaker related services. We would realign the APCs by moving primary services subject to our standard 2 times rule methodology. In addition, we have identified a number of HCPCS combinations that represent high volume, high cost, more complex subsets of the primary service, and we would reassign those claims to a higher level APC. We note that our decision to finalize this proposed comprehensive APC policy with modification in this final rule with comment period, but to delay implementation of the policy until CY 2015 creates the opportunity for the public to further review the illustrative reconfigurations of comprehensive APCs that we would make in response to comment. In this final rule with comment period, we invite commenters to apply the analysis, methodology, and the payment estimation techniques presented here to specific pacemaker services and to provide comment on these illustrative CY 2014 APC configurations, APC assignments, and complexity reassignments.

Changes to implement commenters' suggestions and concerns for CY 2014, if we were implementing this policy for CY 2014, for this pacemaker-defibrillator family of APCs are as follows:

  • APC Redesignations: We would rename APC 0089 “Level III Insertion/Replacement of Permanent Pacemaker,” and we would rename APC 0106 “Insertion/Replacement of Pacemaker Components.”
  • APC Reassignments: We would reassign CPT code 33217 from APC 0106 to APC 0090; CPT code 33229 from APC 0645 to APC 0655; CPT code 33231 from APC 0107 to APC 0108; CPT codes 33208, 33214, and 33224 from APC 0655 to APC 0089; and CPT code 33221 from APC 0654 to APC 0089.
  • Complexity Reassignments: We would reassign certain combinations of the following CPT codes 33206, 33207, 33208, 33210, 33212, 33213, 33216, 33224, 33227, 33228, 33230, 33240, 33263, and 33264 as complex forms of the primary pacemaker-defibrillator service. We summarize all of the codes that we would reassign as complex forms of their primary procedures in Table 10 as if we were implementing this policy in CY 2014.

We request comment on these specific HCPCS movements and complex claim reassignments. We will reassess the application of this policy to this pacemaker-defibrillator family of APCs with CY 2013 claims data for CY 2015 implementation, and we will update them based on new claims data and any relevant new CY 2015 codes through next year's rulemaking cycle.

Comment: Several commenters requested that CMS not designate APC 0202 (Level VII Female Reproductive Procedures) as a comprehensive APC. The commenters opined that, as opposed to the stated description of comprehensive APCs, APC 0202 does not contain a single major procedure with relatively small cost contributions from adjunctive services but contains independent services that are frequently performed in combination with each other. Commenters also noted that CMS is currently achieving payment efficiencies for these concomitant procedures by reducing the payment for any second procedure to 50 percent even when that second procedure contains an additional medical device. The commenters stated that when multiple services are performed together under a comprehensive payment, the averaged payment assigned to the APC may be significantly less than the cost of the individual services performed. The commenters believed that this may encourage some hospitals to delay or stage procedures inappropriately, increasing overall Medicare costs and potentially threatening patient access to certain devices.

One commenter believed that APCs 0385 (Level I Prosthetic Urological Procedures) and 0386 (Level II Prosthetic Urological Procedures) similarly would have sizable reductions in Medicare payments that could create significant disincentives for hospitals to perform certain procedures that utilize medical devices. Another commenter believed that this result also applied to APC 0674 (Prostate Cryoablation).

Response: We do not agree with the commenters that these APCs represent a different class of services. All of the services described by the HCPCS codes in these APCs represent major surgical procedures where the encounter can be viewed as a single primary service and where a beneficiary would view the encounter globally. What commenters are describing as unrelated procedures are individual components of a single surgical procedure, which is, in turn, the primary reason for the encounter. CPT codes are designed by physicians to facilitate reporting of variation in physician work and, as a result, often describe individual components of services that can be grouped in various ways. However, from a hospital payment perspective, many of those component codes are ancillary to or supportive of a primary service. For example, during a procedure to repair the urogenital tract the surgeon may report CPT code 57265 (Extensive repair of vagina) along with CPT code 57288 (Repair bladder defect), but these individual physician services are both part of the comprehensive surgical repair procedure. In the proposed rule, we proposed defining the most costly component of a comprehensive service as the primary service that determines the APC assignment and final payment of the service, and we believe that this methodology remains appropriate for these services.

We agree with the commenters generally and that, with respect to these reproductive surgery APCs specifically, there are some instances of commonly performed clinically coherent combinations of HCPCS codes assigned to status indicator “J1” that are associated with high estimated cost and sufficient volume, and we would designate these procedures as complex subsets of these primary services eligible for reassignment to a higher level APC if we were implementing this policy in CY 2014. We would have applied this methodology along with other techniques described above for CY 2014 in order to facilitate the transition from discrete incremental payments to a single comprehensive payment for the entire service. For APCs 0385, 0386, and 0674, as well as APC 0202, we also identified several combinations of HCPCS codes that represented common, costly subsets of services and we would reassign several HCPCS codes to different APCs to reduce the variance between the geometric mean estimated cost of the complex services and geometric mean cost of the APC to which the services would be assigned. In this final rule with comment period, we are inviting commenters to apply the analysis, methodology, and the payment estimation techniques presented here to specific reproductive services and to provide comment on these illustrative CY 2014 reassignment of complex reproductive services claims.

Changes to implement the commenters' suggestions and concerns for CY 2014, if we were implementing the policy for CY 2014, for this urogenital procedures family of APCs are as follows:

  • APC Redesignations: We would rename APC 0385 “Level I Urogenital Procedures”; APC 0386 “Level II Urogenital Procedures”; and APC 0674 “Level III Urogenital Procedures”.
  • APC Reassignments: We would reassign CPT code 53445 from APC 0386 to APC 0674; CPT code 55873 from APC 0674 to APC 0385; and CPT code 57423 from APC 0202 to APC 0385.
  • Complexity Reassignments: We would reassign certain combinations of CPT codes 54405, 57265, 57282, and 57285 as complex forms of the primary service. We summarize all of the codes that we would reassign as complex forms of their primary procedures in Table 10 as if we were implementing this policy in CY 2014.

We request comment on these specific HCPCS movements and complex claim reassignments. We will reassess the application of this policy to this urogenital procedures family of APCs with CY 2013 claims data for CY 2015 implementation, and we will update them based on new claims data and any relevant new CY 2015 codes through next year's rulemaking cycle.

Comment: One commenter noted that APC 0082, a cardiovascular APC, includes CPT code 37204 (Transcatheter occlusion), which is occasionally used to report brachytherapy for liver therapy. The commenter believed that packaging yttrium in the cost of APC 0082 would be in conflict with section 1833(t)(2)(H) of the Act, which requires separate payment for brachytherapy.

Response: We agree with the commenters that the statute specifies that brachytherapy devices (seeds) shall be classified separately under the OPPS from other services. Because brachytherapy devices could be used during some encounters to deliver comprehensive services, we will modify our proposal to state that brachytherapy devices, like mammography and ambulance services, will not be included in the comprehensive payments beginning in CY 2015 and will continue to receive separate payment.

Comment: One commenter stated that CMS should not consider APC 0227 (Implantation of Drug Infusion Device) to be a comprehensive APC because the drug that is used to fill the reservoir is not part of the comprehensive service. The commenter stated that the drug that is used to fill the pump should not be considered adjunctive because the drug itself is therapeutic and separate and apart from the implantation of the primary (pump) service. This commenter believed that therapeutic drugs in general should be excluded from a comprehensive APC payment and expressed concern that packaging may decrease hospital use of costly drugs, such as PRIALT, which is a non-narcotic alternative. Another commenter stated that CMS should provide greater data transparency if it decides to move ahead with the inclusion of DME items within a comprehensive APC. The commenter was concerned that there will be a decrease in the payment rate for APC 0227 relative to the CY 2013 payment rate, which will render the payment inadequate to cover the cost of the services in question.

Response: We do not agree with the commenters that drugs being supplied to the patient to fill the reservoir of a pump at the time of pump implantation should be excluded from the comprehensive APC payment. Drugs supplied to fill the pump during implantation of the pump are adjunctive to the procedure. As we have noted above, costs of costly adjunctive services are included proportionally into the cost estimation for the primary services through our ability to use almost all claims for a service and adoption of the geometric mean cost upon which to establish relative payment weights. Certainly, the greater the cost variance of a particular component and the less frequently that exceptional component is used, the less the relative payment weight, based on a geometric mean of estimated cost, will reflect those less frequent, costly cases. Hospitals are also aware that the costs of extremely costly cases are partially mitigated by outlier payments, which would continue to apply in this case upon implementation of the comprehensive APC policy in CY 2015. Finally, with respect to APC 0227, we note that the comprehensive estimated geometric mean costs are in fact approximately 10 percent higher than the individual procedure estimated geometric mean costs, consistent with the relative contribution of adjunctive services across all comprehensive APCs.

Therefore, we are confirming that drugs used to fill in pumps at the time of a comprehensive pump insertion procedure are considered to be ancillary and supportive to the primary procedure and packaged as part of the comprehensive APC payment regardless of whether the drug was previously packaged within the OPPS payment, was previously separately paid under the OPPS, or was previously paid according to a DMEPOS fee schedule.

(f) Summary of Creation of Comprehensive APCs for High-Cost Device Dependent Procedures for Implementation in CY 2015

In summary, in response to public comments we received, we have decided to finalize the comprehensive APCs with modification and to delay the implementation or effective date of the policy until CY 2015. We acknowledge commenters' concerns that this is a complex new payment structure under the OPPS. We agree that hospitals should have time to prepare for this comprehensive payment structure, and we also agree with the commenters that a delay in implementation will allow us (and them) more time to operationalize changes necessary to process comprehensive payments.

In response to public commenters' request for additional detail on our calculation of the comprehensive APC relative payment weights, we have provided a granular discussion of our methodology for constructing the comprehensive APC payment rates as well as the specific APC configurations we would implement for CY 2014 if we were not delaying implementation to CY 2015. We also believe that the delay in implementation will give hospitals more time to study the final methodology for calculating relative payment weights that we discuss in this section, and specifically how the methodology recognizes resource differences in complex and simple versions of the same primary service. We are taking advantage of the delay in implementation and requesting additional comment on this methodology.

For CY 2015, we will recalibrate comprehensive APCs and final reassignment of complex claims in light of any comments on the illustrative CY 2014 assignments that we present and updated CY 2013 claims and cost report data next year. For CY 2014, we will continue our payment for device-dependent APCs and composite payment for both CRT and cardiac electrophysiologic evaluation and ablation as discussed elsewhere in this final rule with comment period.

Effective for CY 2015, we will include all integral, ancillary, supportive, dependent, and adjunctive outpatient services into the comprehensive APC payment, excluding certain services such as ambulance services; mammography services; brachytherapy sources; and drugs, biologicals, and devices receiving pass-through payment. We will not include charges reported with inpatient room and board revenue codes as we do not believe outpatient costs are correctly reported in those revenue codes. Adjunctive items and services that will be unconditionally packaged into the comprehensive APC payment for CY 2015 include the following.

  • All packaged services that were packaged in CY 2013.
  • All services finalized for unconditional or conditional packaging for CY 2014.
  • All adjunctive services and supplies provided during the delivery of the comprehensive service, which includes all other cover OPPS items and services appearing on a claim, including those with a HCPCS with status indicator “J1”; implantable DMEPOS supplies provided during the comprehensive OPPS service; services performed by therapists provided during the OPPS service; and all other covered outpatient items and services appearing on the claim.
  • All packaged hospital-administered drugs pursuant to a physician order, excluding pass-through drugs that are required to be separately paid by statute.

We are finalizing a modification to our proposed methodology for identifying a primary service, assigned to status indicator “J1” on a claim reporting multiple procedures described by HCPCS codes assigned to status indicator “J1” in order to effectuate an appropriate comprehensive APC payment. We are finalizing a multiple step process to include an evaluation of costliness based on the comprehensive geometric mean cost of single procedures assigned to status indicator “J1” reported on claims. We also have determined that there are certain subsets of outpatient cases for a primary service that should be more appropriately paid when stratified according to the complexity of the service. Therefore, we have identified a number of complexity reassignments for certain high-volume, costly, complex versions of a primary service, and we have reassigned these subsets of procedures representing a complex version of the primary service to higher-level APCs in the same clinical family.

In response to public comments we received, we discuss how we would have revised some comprehensive APC definitions and reassigned HCPCS codes to specific APCs in order to better align the comprehensive geometric mean cost of primary services with APCs that better capture the resource and clinical aspects of the service if we were implementing this policy for CY 2014. We discuss the methodology that we followed for all of those modifications to our proposal in detail earlier in this section. We display the final APC revisions that we would make and final comprehensive geometric mean cost for those APCs, if we were implementing this policy for CY 2014 in Table 8. We display final HCPCS assignments in Table 9 and complexity reassignments in Table 10 that we would make if we were implementing this policy for CY 2014.

We have reconciled the inconsistency in our proposal to pay for cardiac electrophysiology-ablation procedures under both composite and comprehensive methodologies. For CY 2015, we are reassigning the codes assigned to composite APC 8000 into a new composite APC 0444, along with complex services from APC 0085 that are characterized by composite EP-ablation procedures described by HCPCS code combinations.

Therefore, for CY 2015, we are creating 29 comprehensive APCs to prospectively pay for services associated with 167 CY 2014 HCPCS codes, which is the most recent code set available. We note that the list of HCPCS codes represent the procedures that would be assigned to a comprehensive APC if we implemented this policy for CY 2014. We will update this list as indicated in our proposed and final OPPS rules for CY 2015.

For CY 2015, we are treating all individually reported procedures that are assigned to status indicator “J1,” which will appear in the CY 2015 Addendum B to the proposed rule, as representing components of a comprehensive service characterized by a primary service, and we will make a single payment for the comprehensive service. We will be making a single all-inclusive payment for each comprehensive service reported on a claim with that payment subject to a single beneficiary copayment, up to the cap set at the level of the inpatient hospital deductible, as provided at section 1833(t)(8)(C)(i) of the Act.

f. Calculation of Composite APC Criteria-Based Costs

As discussed in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66613), we believe it is important that the OPPS enhance incentives for hospitals to provide necessary, high quality care as efficiently as possible. For CY 2008, we developed composite APCs to provide a single payment for groups of services that are typically performed together during a single clinical encounter and that result in the provision of a complete service. Combining payment for multiple, independent services into a single OPPS payment in this way enables hospitals to manage their resources with maximum flexibility by monitoring and adjusting the volume and efficiency of services themselves. An additional advantage to the composite APC model is that we can use data from correctly coded multiple procedure claims to calculate payment rates for the specified combinations of services, rather than relying upon single procedure claims which may be low in volume and/or incorrectly coded. Under the OPPS, we currently have composite policies for extended assessment and management services, low dose rate (LDR) prostate brachytherapy, cardiac electrophysiologic evaluation and ablation services, mental health 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 2014 OPPS/ASC proposed rule (78 FR 43561), for CY 2014, we proposed to continue our composite policies for extended assessment and management services, LDR prostate brachytherapy services, cardiac electrophysiologic evaluation and ablation services, mental health services, and multiple imaging services, as discussed below. We proposed to discontinue and supersede the cardiac resynchronization therapy composite APC with our proposed comprehensive APC 0108, as discussed in section II.A.2.e. of the proposed rule (78 FR 43561). Comments on cardiac resynchronization therapy relating to comprehensive APCs are discussed in section II.A.2.e. of this final rule with comment period.

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

(a) Background

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

In the CY 2014 OPPS/ASC proposed rule (78 FR 43562 through 43563), for CY 2014, we proposed to modify our longstanding policy to provide payment to hospitals in certain circumstances when extended assessment and management of a patient occur. We proposed to create one new composite APC, entitled “Extended Assessment and Management (EAM) Composite” (APC 8009), to provide payment for all qualifying extended assessment and management encounters rather than recognize two levels of EAM composite APCs. We proposed to allow any visit furnished by a hospital in conjunction with observation services of substantial duration to qualify for payment through EAM composite APC 8009. These policies are discussed in greater detail below.

(b) Payment for Extended Assessment and Management Services

As we discussed in section VII. of the CY 2014 OPPS/ASC proposed rule (78 FR 43614 through 43617), we proposed to no longer recognize five distinct visit levels for clinic visits and emergency department visits based on the existing HCPCS E/M codes, and instead recognize three new alphanumeric HCPCS codes for each visit type. Currently, the payment criteria for the EAM composite APCs 8002 and 8003 include a high level visit represented by HCPCS code 99205, 99215, 99284, 99285, or G0304; critical care represented by CPT code 99281; or direct referral represented by HCPCS code G0379 provided in conjunction with observation care represented by HCPCS code G0378. We stated that in light of the proposal to no longer differentiate visit payment levels, and the fact that the current high level visit codes (HCPCS codes 99205, 99215, 99284, 99285 and G0304) would no longer be recognized under the OPPS, it would no longer be feasible to continue with our current payment criteria for the EAM composite APCs 8002 and 8003 for CY 2014. Therefore, to ensure that we continue to provide payment to hospitals in certain circumstances when extended assessment and management of a patient occur, for CY 2014, we proposed to provide payment for the entire care encounter through proposed new EAM Composite APC 8009 when observation care is provided in conjunction with a visit, critical care, or direct referral and is an integral part of a patient's extended encounter of care. Specifically, for CY 2014, we proposed to provide EAM composite APC payment through a newly created composite APC in circumstances when a clinic or ED visit, identified by one of the three new alphanumeric HCPCS codes proposed in section VII. of the proposed rule, is accompanied by observation care of substantial duration on a claim. We would no longer recognize composite APC 8002 or APC 8003. The specific criteria we proposed to be met for the proposed new EAM composite APC to be paid is provided below in the description of the claims that we proposed to select for the calculation of the proposed CY 2016 geometric mean costs for this composite APC.

We proposed to calculate the geometric mean costs for the proposed new EAM composite APC (APC 8009) for CY 2014 using CY 2012 single and “pseudo” single procedure claims that meet each of the following criteria:

  • The claim does not contain a HCPCS code to which we have assigned status indicator “T” that is reported with a date of service 1 day earlier than the date of service associated with HCPCS code G0378. (By selecting these claims from single and “pseudo” single claims, we assured that they would not contain a code for a service with status indicator “T” on the same date of service.);
  • The claim contains 8 or more units of HCPCS code G0378 (Observation services, per hour); and
  • The claim contains one of the following codes: HCPCS code G0379 (Direct referral of patient for hospital observation care) on the same date of service as G0378; or CPT code 99201 (Office or other outpatient visit for the evaluation and management of a new patient (Level 1)); CPT code 99202 (Office or other outpatient visit for the evaluation and management of a new patient (Level 2)); CPT code 99203 (Office or other outpatient visit for the evaluation and management of a new patient (Level 3)); CPT code 99204 (Office or other outpatient visit for the evaluation and management of a new patient (Level 4)); CPT code 99205 (Office or other outpatient visit for the evaluation and management of a new patient (Level 5)); CPT code 99211 (Office or other outpatient visit for the evaluation and management of an established patient (Level 1)); CPT code 99212 (Office or other outpatient visit for the evaluation and management of an established patient (Level 2)); CPT code 99213 (Office or other outpatient visit for the evaluation and management of an established patient (Level 3)); CPT code 99214 (Office or other outpatient visit for the evaluation and management of an established patient (Level 4)); CPT code 99215 (Office or other outpatient visit for the evaluation and management of an established patient (Level 5)); CPT code 99281 (Emergency department visit for the evaluation and management of a patient (Level 1)); CPT code 99282 (Emergency department visit for the evaluation and management of a patient (Level 2)); CPT code 99283 (Emergency department visit for the evaluation and management of a patient (Level 3)); CPT code 99284 (Emergency department visit for the evaluation and management of a patient (Level 4)); CPT code 99285 (Emergency department visit for the evaluation and management of a patient (Level 5)); or HCPCS code G0380 (Type B emergency department visit (Level 1)); HCPCS code G0381 (Type B emergency department visit (Level 2)); HCPCS code G0382 (Type B emergency department visit (Level 3)); HCPCS code G0383 (Type B emergency department visit (Level 4)); HCPCS code G0384 (Type B emergency department visit (Level 5)); or CPT code 99291 (Critical care, evaluation and management of the critically ill or critically injured patient; first 30-74 minutes) provided on the same date of service or 1 day before the date of service for HCPCS code G0378.

The proposed CY 2014 geometric means cost resulting from this methodology for the proposed new EAM composite APC (APC 8009) was approximately $1,357, which was calculated from 318,265 single and “pseudo” single claims that met the required criteria.

We stated in the proposed rule that when hospital claims data for the CY 2014 proposed clinic and ED visit codes becomes available, we proposed to calculate the geometric mean cost for the proposed new EAM composite APC (APC 8009) for CY 2016 using CY 2014 single and “pseudo” single procedure claims that meet each of the following criteria:

  • The claims do not contain a HCPCS code to which we have assigned status indicator “T” that is reported with a date of service 1 day earlier than the date of service associated with HCPCS code G0378. (By selecting these claims from single and “pseudo” single claims, we ensure that they would not contain a code for a service with status indicator “T” on the same date of service.);
  • The claims contain 8 or more units of HCPCS code G0378 (Observation services, per hour); and
  • The claims contain one of the following codes: HCPCS code G0379 (Direct referral of patient for hospital observation care) on the same date of service as HCPCS code G0378; or CPT code 99291 (Critical care, evaluation and management of the critically ill or critically injured patient; first 30-74 minutes); or newly proposed alphanumeric Level II HCPCS code GXXXA (Type A ED visit); newly proposed alphanumeric Level II HCPCS code GXXXB (Type B ED visit); or newly proposed alphanumeric Level II HCPCS code GXXXC (Clinic visit) provided on the same date of service or 1 day before the date of service for HCPCS code G0378.

Comment: One commenter supported CMS' proposal to delete composite APCs 8002 and 8003 and to pay for extended assessment and management services through newly created composite APC 8009. Another commenter, who did not support the proposal, stated that the proposed policy did not accurately account for the cost of providing an extended assessment and management service and urged CMS to carefully assess the potential impact of this proposal upon different types of facilities and patients before moving forward.

Response: We appreciate the commenter's support of our proposal. We disagree with the one commenter's argument that our proposal does not accurately account for the cost of providing an extended assessment and management service. We believe that this proposal accurately accounts for the cost of providing an extended assessment and management service and that this proposal does not have any substantial impact on any particular type of facility or patient type.

After consideration of the public comments we received, we are finalizing our proposal to create a new composite APC, entitled “Extended Assessment and Management (EAM) Composite” (APC 8009), to provide payment for all qualifying extended assessment and management encounters rather than recognizing two levels of EAM Composite APCs. In light of our CY 2014 final visit payment policy, which is discussed in detail in section VII. of this final rule with comment period, we are modifying our proposal to allow any clinic and certain high level ED visits furnished by a hospital in conjunction with observation services of substantial duration to qualify for payment through the newly created Extended Assessment and Management (EAM) Composite APC (APC 8009). Specifically, we are allowing a clinic visit (for CY 2014, there will be one code to describe all clinic visits), a Level 4 or Level 5 Type A ED visit, or a Level 5 Type B ED visit furnished by a hospital in conjunction with observation services of substantial duration to qualify for payment through composite APC 8009. This modification of the proposed EAM composite APC criteria is due to our decision not to finalize any changes to the Type A or Type B ED visit codes for CY 2014. Because we are not changing the ED visit codes for CY 2014, we also are not changing for CY 2014 the particular ED visit codes that qualify for the EAM composite APC.

We also are modifying our proposal to calculate the payment rate for the new EAM composite APC (APC 8009). Specifically, we calculated the geometric mean cost for procedures assigned to APC 8009 for CY 2014 using CY 2012 single and “pseudo” single procedure claims that met each of the following criteria:

  • The claim does not contain a HCPCS code to which we have assigned status indicator “T” that is reported with a date of service 1 day earlier than the date of service associated with HCPCS code G0378. (By selecting these claims from single and “pseudo” single claims, we assured that they would not contain a code for a service with status indicator “T” on the same date of service.);
  • The claim contains 8 or more units of HCPCS code G0378 (Observation services, per hour); and
  • The claim contains one of the following codes: HCPCS code G0379 (Direct referral of patient for hospital observation care) on the same date of service as HCPCS code G0378; or CPT code 99201 (Office or other outpatient visit for the evaluation and management of a new patient (Level 1)); CPT code 99202 (Office or other outpatient visit for the evaluation and management of a new patient (Level 2)); CPT code 99203 (Office or other outpatient visit for the evaluation and management of a new patient (Level 3)); CPT code 99204 (Office or other outpatient visit for the evaluation and management of a new patient (Level 4)); CPT code 99205 (Office or other outpatient visit for the evaluation and management of a new patient (Level 5)); CPT code 99211 (Office or other outpatient visit for the evaluation and management of an established patient (Level 1)); CPT code 99212 (Office or other outpatient visit for the evaluation and management of an established patient (Level 2)); CPT code 99213 (Office or other outpatient visit for the evaluation and management of an established patient (Level 3)); CPT code 99214 (Office or other outpatient visit for the evaluation and management of an established patient (Level 4)); CPT code 99215 (Office or other outpatient visit for the evaluation and management of an established patient (Level 5)); CPT code 99284 (Emergency department visit for the evaluation and management of a patient (Level 4)); CPT code 99285 (Emergency department visit for the evaluation and management of a patient (Level 5)); or HCPCS code G0384 (Type B emergency department visit (Level 5)); or CPT code 99291 (Critical care, evaluation and management of the critically ill or critically injured patient; first 30-74 minutes) provided on the same date of service or 1 day before the date of service for HCPCS code G0378.

The final CY 2014 payment rate for composite APC 8009 is approximately $1,199.

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

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

In the CY 2014 OPPS/ASC proposed rule (78 FR 43563), for CY 2014, we proposed to continue to pay for LDR prostate brachytherapy services using the composite APC methodology proposed and implemented for CY 2008 through CY 2013. That is, we proposed to use CY 2012 claims on which both CPT codes 55875 and 77778 were billed on the same date of service with no other separately paid procedure codes (other than those on the bypass list) to calculate the payment rate for composite APC 8001. Consistent with our CY 2008 through CY 2013 practice, we proposed not to use the claims that meet these criteria in the calculation of the geometric mean costs of procedures or services assigned to APC 0163 (Level IV Cystourethroscopy and Other Genitourinary Procedures) and APC 0651 (Complex Interstitial Radiation Source Application), the APCs to which CPT codes 55875 and 77778 are assigned, respectively. We proposed to continue to calculate the geometric mean costs of procedures or services assigned to APCs 0163 and 0651 using single and “pseudo” single procedure claims. We stated that we believe that this composite APC contributes to our goal of creating hospital incentives for efficiency and cost containment, while providing hospitals with the most flexibility to manage their resources. We also continue to believe that data from claims reporting both services required for LDR prostate brachytherapy provide the most accurate geometric mean cost upon which to base the composite APC payment rate.

Using a partial year of CY 2012 claims data available for the CY 2014 OPPS/ASC proposed rule, we were able to use 1,487 claims that contained both CPT codes 55875 and 77778 to calculate the geometric mean cost of these procedures upon which the proposed CY 2014 payment rate for composite APC 8001 was based. The proposed payment rate for composite APC 8001 for CY 2014 was approximately $4,340.

Comment: A few commenters asserted that the existing methodology to create “pseudo” single claims from multiple procedure claims is not yielding a significant number of claims to be used to calculate adequate payment rates for APC 8001, APC 0312 (Radioelement Applications), and APC 0313 (Brachytherapy). The commenters believed that use of this methodology and its insignificant results is a continuing trend.

Response: For CY 2014, we have 591 final rule claims available for APC 8001 geometric mean cost calculation, while for CY 2013 we were able to use 677 claims that contained both CPT codes 55875 and 77778 to calculate the geometric mean cost of these procedures upon which the final CY 2013 payment rate for composite APC 8001 was based. For CY 2014, we have 52 single claims available for geometric mean cost calculation for APC 0312, compared to 74 claims available for CY 2013. For APC 0313, we have 17,810 single claims available for CY 2014 for geometric mean cost calculation compared to 17,743 single claims available for CY 2013. Therefore, there is approximately the same number of “pseudo” single claims available for APCs 8001 and 0313 geometric mean cost calculation compared to CY 2013. With regard to APC 0312 geometric mean cost calculation, the number of single claims available for ratesetting for CY 2014 compared to CY 2013 is somewhat low for both years. We agree with the commenter that it would be preferable if we had a larger volume of single claims on which to base the payment rate for APC 0312. We will continue to evaluate additional refinements and improvements to our ratesetting methodologies in order to maximize our use of claims data. In addition, we will continue to study means by which we can use a larger volume of claims data to establish the payment rate for APC 0312 specifically.

Comment: One commenter supported CMS' proposal to continue paying for LDR prostate brachytherapy services using composite APC 8001 and noted recognition of the proposed increase in payment.

Response: We appreciate the commenter's support for this proposal.

After consideration of the public comments we received, we are finalizing our policy to continue paying for LDR prostate brachytherapy services using composite APC 8001 for CY 2014, with a final CY 2014 geometric mean cost for APC 8001 of approximately $3,858.

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

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

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

  • CPT code 93653 (Comprehensive electrophysiologic evaluation including insertion and repositioning of multiple electrode catheters with induction or attempted induction of an arrhythmia with right atrial pacing and recording, right ventricular pacing and recording, His recording with intracardiac catheter ablation of arrhythmogenic focus; with treatment of supraventricular tachycardia by ablation of fast or slow atrioventricular pathway, accessory atrioventricular connection, 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.

As we described in the CY 2013 OPPS/ASC final rule with comment period (77 FR 68425), new CPT codes 93653, 93654, and 93656 are primary electrophysiologic services that encompass evaluation as well as ablation, while new CPT codes 93655 and 93657 are add-on codes. Because CPT codes 93653, 93654, and 93656 already encompass both evaluation and ablation services, we assigned them to composite APC 8000 with no further requirement to have another electrophysiologic service from either Group A or Group B furnished on the same date of service, and we assigned them interim status indicator “Q3” (paid through a composite APC) in Addendum B to the CY 2013 OPPS/ASC final rule with comment period. To facilitate implementing this policy, we assigned CPT codes 93653, 93654, and 93656 to a new Group C, which is paid at the composite APC 8000 payment rate. (We noted that we will use single and pseudo single claims for CPT codes 93653, 93654, and 93656 when they become available for calculating the geometric mean costs upon which the payment rate for APC 8000 will be based in future ratesetting.) Because CPT codes 93655 and 93657 are dependent services that may only be performed as ancillary services to the primary CPT codes 93653, 93654, and 93656, we believed that packaging CPT codes 93655 and 93657 with the primary procedures is appropriate, and we assigned them interim status indicator “N.” Because the CPT Editorial Panel deleted CPT codes 93651 and 93652, effective January 1, 2013, we deleted them from the Group B code list, leaving only CPT code 93650 (Intracardiac catheter ablation of atrioventricular node function, atrioventricular conduction for creation of complete heart block, with or without temporary pacemaker placement) in Group B.

As is our usual practice for new CPT codes that were not available at the time of the proposed rule, our treatment of new CPT codes 93653, 93654, 93655, 93656, and 93657 was open to public comment for a period of 60 days following the publication of the CY 2013 OPPS/ASC final rule with comment period.

In the CY 2014 OPPS/ASC proposed rule (78 FR 43564), for CY 2014, we proposed to continue to pay for cardiac electrophysiologic evaluation and ablation services using the composite APC methodology proposed and implemented for CY 2008 through CY 2013. We also proposed to continue the new Group C methodology we first established for CY 2013, described above, in response to the CPT Editorial Panel's creation of primary CPT codes 93653, 93654, and 93656. We stated that we continue to believe that the geometric mean cost for cardiac electrophysiologic evaluation and ablation services calculated from a high volume of correctly coded multiple procedure claims would result in an accurate and appropriate proposed payment for these services when at least one evaluation service is furnished during the same clinical encounter as at least one ablation service. Consistent with our practice since CY 2008, we proposed not to use the claims that met the composite payment criteria in the calculation of the geometric mean costs for APC 0085, to which the CPT codes in both Groups A and B for composite APC 8000 are otherwise assigned. We proposed that the geometric mean costs for APC 0085 would continue to be calculated using single procedure claims. For CY 2014, using a partial year of CY 2012 claims data available for the CY 2014 OPPS/ASC proposed rule, we were able to use 15,817 claims containing a combination of Group A and Group B CPT codes (Group C was not effective until January 1, 2013) to calculate a proposed geometric mean cost of approximately $13,402 for composite APC 8000.

Table 6 of the proposed rule listed the groups of procedures upon which we proposed to base composite APC 8000 for CY 2014 (78 FR 43565).

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

In response to the CY 2014 OPPS/ASC proposed rule, this same commenter and one other commenter expressed appreciation for CMS' proposal to package the cost of CPT code 93462 within the APC payment rates of other services, and recommended that CMS finalize the proposed method of calculating the cost of APC 8000 for CY 2014.

Response: We assigned CPT code 93462 to APC 0080 for CY 2013, with a payment rate of $2,649.52. CPT code 93462 is an add-on code. For CY 2014, we proposed to package most add-on codes, including CPT code 93462. As a result of our packaging proposal, the geometric mean cost and frequency for composite APC 8000 have increased. Based on CY 2014 final cost data, the geometric mean cost of composite APC 8000 is approximately $13,161 based on 16,937 claims available for cost calculation of composite APC 8000. We believe that packaging the cost of CPT code 93462 within the APC payment rates of other services as a result of the add-on code packaging policy addresses the commenters' concerns.

Comment: One commenter who agreed with CMS' proposed methodology not to use claims that meet the composite APC 8000 criteria for geometric mean cost calculation purposes for APC 0085, expressed concern regarding the proposed payment rate for APC 0085. The commenter noted that the proposed payment rate for APC 0085 for CY 2014 is $11,517 (the corrected proposed rate included in the September 6, 2013 OPPS Addendum B, which was posted on the CMS Web site is approximately $11,345), which is significantly higher than the CY 2013 payment rate of $4,035. However, the commenter believed that this variation is a result of unintended reuse of claims used to calculate the composite APC 8000 payment rate. The commenter further believed that excluding the composite APC 8000 claims from APC 0085 cost calculation will lower the geometric mean cost of APC 0085 significantly, and urged CMS to correct this error.

Response: We acknowledge that the proposed payment rate for APC 0085 was incorrectly initially published as approximately $11,517, as well as the corrected payment rate (which was posted on the CMS Web site) of $11,345. The proposed rule payment rate for APC 0085 was based on our comprehensive APC methodology, which packaged the cost of ancillary and other services. However, our comprehensive APC methodology will not be effective until CY 2015. The final geometric mean cost for APC 0085 is approximately $4,248, based on 6,362 claims available for ratesetting.

After consideration of the public comments we received, we are finalizing our proposal to continue payment for composite APC 8000 for CY 2014. Based on a full year of CY 2012 claims data, the final geometric mean cost of composite APC 8000 is approximately $13,162, based on 16,935 claims available for ratesetting. We also are finalizing the payment for APC 0085, based on a geometric mean cost of approximately $4,248.

Table 11 below lists the groups of procedures upon which we based composite APC 8000 for CY 2014

BILLING CODE 4120-01-P

BILLING CODE 4120-01-C

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

In the CY 2014 OPPS/ASC proposed rule (78 FR 43565), for CY 2104, we proposed to continue our longstanding policy of limiting the aggregate payment for specified less resource-intensive mental health services furnished on the same date to the payment for a day of partial hospitalization services provided by a hospital, which we consider to be the most resource-intensive of all outpatient mental health treatments. We refer readers to the April 7, 2000 OPPS final rule with comment period (65 FR 18452 through 18455) for the initial discussion of this longstanding policy and the CY 2012 OPPS/ASC final rule with comment period (76 FR 74168) for more recent background.

We proposed that when the aggregate payment for specified mental health services provided by one hospital to a single beneficiary on one date of service based on the payment rates associated with the APCs for the individual services exceeds the maximum per diem payment rate for partial hospitalization services provided by a hospital, those specified mental health services would be assigned to APC 0034 (Mental Health Services Composite). Specifically, we proposed to continue to set the payment rate for APC 0034 at the same payment rate that we proposed to establish for APC 0176 (Level II Partial Hospitalization (4 or more services) for hospital-based PHPs), which is the maximum partial hospitalization per diem payment rate for a hospital and proposed that the hospital would continue to be paid one unit of APC 0034. Under this policy, the I/OCE would continue to determine whether to pay for these specified mental health services individually or to make a single payment at the same payment rate established for APC 0176 for all of the specified mental health services furnished by the hospital on that single date of service. We stated that we continue to believe that the costs associated with administering a partial hospitalization program at a hospital represent the most resource-intensive of all outpatient mental health treatments. Therefore, we do not believe that we should pay more for mental health services under the OPPS than the highest partial hospitalization per diem payment rate for hospitals.

We did not receive any public comments on this proposal. Therefore, we are finalizing our CY 2014 proposal, without modification, to continue our longstanding policy of limiting the aggregate payment for specified less resource-intensive mental health services furnished on the same date by a hospital to the payment for APC 0176, which is the maximum partial hospitalization per diem payment for a hospital for CY 2014.

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

Effective January 1, 2009, we provide a single payment each time a hospital bills more than one imaging procedure within an imaging family on the same date of service, in order to reflect and promote the efficiencies hospitals can achieve when performing multiple imaging procedures during a single session (73 FR 41448 through 41450). We utilize three imaging families based on imaging modality for purposes of this methodology: (1) Ultrasound; (2) computed tomography (CT) and computed tomographic angiography (CTA); and (3) magnetic resonance imaging (MRI) and magnetic resonance angiography (MRA). The HCPCS codes subject to the multiple imaging composite policy and their respective families are listed in Table 6 of the CY 2013 OPPS/ASC final rule with comment period (77 FR 68253 through 68257).

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

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

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

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

In the CY 2014 OPPS/ASC proposed rule (78 FR 43566), for CY 2014, we proposed to continue to pay for all multiple imaging procedures within an imaging family performed on the same date of service using the multiple imaging composite APC payment methodology. We continue to believe that this policy would reflect and promote the efficiencies hospitals can achieve when performing multiple imaging procedures during a single session. The proposed CY 2014 payment rates for the five multiple imaging composite APCs (APC 8004, APC 8005, APC 8006, APC 8007, and APC 8008) were based on geometric mean costs calculated from a partial year of CY 2012 claims available for the CY 2014 OPPS/ASC proposed rule that qualified for composite payment under the current policy (that is, those claims with more than one procedure within the same family on a single date of service). To calculate the proposed geometric mean costs, we used the same methodology that we used to calculate the final CY 2012 and CY 2013 geometric mean costs for these composite APCs, as described in the CY 2012 OPPS/ASC final rule with comment period (76 FR 74169). The imaging HCPCS codes referred to as “overlap bypass codes” that we removed from the bypass list for purposes of calculating the proposed multiple imaging composite APC geometric mean costs, pursuant to our established methodology (76 FR 74169), were identified by asterisks in Addendum N to the proposed rule (which is available via the Internet on the CMS Web site) and were discussed in more detail in section II.A.1.b. of the proposed rule.

For the CY 2014 proposed rule, we were able to identify approximately 0.8 million “single session” claims out of an estimated 1.5 million potential composite cases from our ratesetting claims data, more than half of all eligible claims, to calculate the proposed CY 2014 geometric mean costs for the multiple imaging composite APCs.

Table 7 of the proposed rule listed the proposed HCPCS codes that would be subject to the multiple imaging composite policy and their respective families and approximate composite APC geometric mean costs for CY 2014 (78 FR 43567). We noted that the proposed geometric mean costs calculated for many imaging APCs, including the multiple imaging composite APCs, have changed significantly from the geometric mean costs calculated for the CY 2013 OPPS/ASC final rule with comment period for these APCs as a result of the proposed adoption of the new MRI and CT cost centers, as discussed in section II.A.1.c. of the proposed rule.

Comment: Some commenters supported CMS' decision not to propose any new multiple imaging composite APCs. Other commenters urged CMS to restore separate payment for each imaging procedure, regardless of the date of service because of the decreases in payment for imaging services over several years, which according to the commenters may create disincentives to performing multiple imaging services on the same date. Some commenters stated that other CMS proposals such as the CY 2014 proposed new CCRs for CT and MRI services have further decreased payment rates for imaging services for CY 2014, and the use of the new cost centers is directly responsible for the substantial decreases in payment for multiple imaging APCs, including composite APCs. Some commenters suggested that CMS provide an analysis of the impacts from decreases in payments for imaging services.

Response: As explained earlier in this section, we continue to believe that our multiple imaging composite policies reflect and promote the efficiencies hospitals can achieve when performing multiple imaging procedures during a single session. We have a total of 1.6 million composite cases in our claims data for CY 2014 ratesetting, which we believe is a sufficiently robust number of multiple imaging cases performed for ratesetting purposes. We address the concern that the new cost centers may be responsible for substantial decreases in payment for multiple imaging APCs in section II.A.1.c. of this final rule with comment period.

After consideration of the public comments we received, for this CY 2014 final rule with comment period, we were able to identify approximately 0.7 million “single session” claims out of an estimated 1.6 million potential composite cases from our ratesetting claims data, approximately 45 percent of all eligible claims, to calculate the final CY 2014 geometric mean costs for the multiple imaging composite APCs.

Table 12 below lists the HCPCS codes that will be subject to the multiple imaging composite policy and their respective families and approximate composite APC geometric mean costs for CY 2014.

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 codes 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 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 procedure described by CPT code 33225, the procedure described by CPT code 33249 is also assigned to APC 0108. When not performed on the same day as the procedure described by CPT code 33249, the procedure described by CPT code 33225 is assigned to APC 0655 (Insertion/Replacement/Conversion of a Permanent Dual Chamber Pacemaker).

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

  • 33206 (Insertion or replacement of permanent pacemaker with transvenous electrode(s); atrial);
  • 33207 (Insertion or replacement of permanent pacemaker with transvenous electrode(s); ventricular);
  • 33208 (Insertion or replacement of permanent pacemaker with transvenous electrode(s); atrial and ventricular);
  • 33212 (Insertion or replacement of pacemaker pulse generator only; single chamber, atrial or ventricular);
  • 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).

We continued for CY 2013 to recognize CRT-D as a single, composite service as described above and finalized in the CY 2013 OPPS/ASC final rule with comment period (77 FR 68259). By continuing to recognize these procedures as a single, composite service, we are able to use a higher volume of correctly coded claims for CPT code 33225, which, because of its add-on code status, is always performed in conjunction with another procedure. We also noted that this policy is consistent with the principles of a prospective payment system, specifically to place similar services that utilize technologies with varying costs in the same APC in order to promote efficiency and decision-making based on individual patient's clinical needs rather than financial considerations. Because CPT codes 33225 and 33249 may be treated as a composite service for payment purposes, we continued to assign them status indicator “Q3” (Codes that may be paid through a composite APC) in Addendum B to the proposed rule (which is available via the Internet on the CMS Web site). The assignment of CPT codes 33225 and 33249 to APC 0108 when treated as a composite service was also reflected in Addendum M to the proposed rule (which is available via the Internet on the CMS Web site).

In addition, for CY 2013, we revised the claims processing edits in place for CPT code 33225 due to revised guidance from the AMA in the CPT codebook specifying the codes that should be used in conjunction with CPT code 33225. Specifically, on February 27, 2012, the AMA posted a correction as errata to the CY 2012 CPT codebook on the AMA Web site at: http://www.ama-assn.org/resources/doc/cpt/cpt-corrections.pdf. This correction removed CPT code 33222 (Revision or relocation of skin pocket for pacemaker) as a service that should be provided in conjunction with CPT code 33225, and added CPT codes 33228 (Removal of permanent pacemaker pulse generator with replacement of pacemaker pulse generator; dual lead system), 33229 (Removal of permanent pacemaker pulse generator with replacement of pacemaker pulse generator; multiple lead system), 33263 (Removal of pacing cardioverter-defibrillator pulse generator with replacement of pacing cardioverter-defibrillator pulse generator; dual lead system), and 33264 (Removal of pacing 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 (77 FR 68259).

For CY 2014, we proposed to discontinue and supersede the cardiac resynchronization therapy composite APC with our proposed comprehensive APC 0108, as discussed in section II.A.2.e. of the proposed rule (78 FR 43561). The public comments that we received on cardiac resynchronization therapy that relate to proposed comprehensive APCs are discussed in section II.A.2.e. of this final rule with comment period.

As discussed in section II.A.2.e. of this final rule with comment period, comprehensive APCs will not be effective until CY 2015. Therefore, for CY 2014, we are finalizing the continuation of our current CRT-D composite policy, without modification and finalizing payment for CRT services using the composite APC 0108 payment methodology that we used for CYs 2012 and 2013, as discussed above. That is, for CY 2014, CRT-D will be recognized as a single, composite service as described above and finalized in the CY 2012 and CY 2013 OPPS/ASC final rules with comment period. In calculating the costs upon which the final payment rate for APC 0108 is based for CY 2014, for this final rule with comment period, we included single procedure claims for the individual services assigned to APC 0108, as well as single procedure claims that contain the composite CRT-D service, defined as the combination of CPT codes 33225 and 33249 with the same date of service. We were able to use 15,454 single bills from the CY 2014 final rule claims data to calculate a final geometric mean cost of approximately $32,257 for APC 0108. Because CPT codes 33225 and 33249 may be treated as a composite service for payment purposes, we are continuing to assign them status indicator “Q3” (Codes that may be paid through a composite APC) in Addendum B to this final rule with comment period.

3. Changes to Packaged Items and Services

a. Summary of CY 2014 Final Packaging Policies

Beginning in CY 2014, we are unconditionally or conditionally packaging the following items and services and adding them to the list of OPPS packaged items and services in 42 CFR 419.2(b):

(1) Drugs, biologicals, and radiopharmaceuticals that function as supplies when used in a diagnostic test or procedure;

(2) Drugs and biologicals that function as supplies when used in a surgical procedure;

(3) Certain clinical diagnostic laboratory tests;

(4) Certain procedures described by add-on codes; and

(5) Device removal procedures.

The HCPCS codes that we are packaging for CY 2014 are displayed in both Addendum P and Addendum B of this final rule with comment period. The supporting documents for this final rule with comment period, including but not limited to these Addenda, are available at the CMS Web site at: http://www.cms.hhs.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html. Further details including comments and responses on the particular packaging proposals are discussed below.

b. Background

Like other prospective payment systems, the OPPS relies on the concept of averaging to establish a payment rate for services. The payment may be more or less than the estimated cost of providing a specific service or bundle of specific services for a particular patient. The OPPS packages payment for multiple interrelated items and services into a single payment to create incentives for hospitals to furnish services most efficiently and to manage their resources with maximum flexibility. Our packaging policies support our strategic goal of using larger payment bundles to maximize hospitals' incentives to provide care in the most efficient manner. For example, where there are a variety of devices, drugs, items, supplies, etc. that could be used to furnish a service, some of which are more expensive than others, packaging encourages hospitals to use the most cost-efficient item that meets the patient's needs, rather than to routinely use a more expensive item, which often results if separate payment is provided for the items.

Packaging also encourages hospitals to effectively negotiate with manufacturers and suppliers to reduce the purchase price of items and services or to explore alternative group purchasing arrangements, thereby encouraging the most economical health care delivery. Similarly, packaging encourages hospitals to establish protocols that ensure that necessary services are furnished, while scrutinizing the services ordered by practitioners to maximize the efficient use of hospital resources. Packaging payments into larger payment bundles promotes the predictability and accuracy of payment for services over time. Finally, packaging may reduce the importance of refining service-specific payment because packaged payments include costs associated with higher cost cases requiring many ancillary items and services and lower cost cases requiring fewer ancillary items and services. Because packaging encourages efficiency and is an essential component of a prospective payment system, packaging payment for items and services that are typically integral, ancillary, supportive, dependent, or adjunctive to a primary service has been a fundamental part of the OPPS since its implementation in August 2000. Most, but not necessarily all, items and services currently packaged in the OPPS are listed in 42 CFR 419.2(b). For an extensive discussion of the history and background of the OPPS packaging policy, we refer readers to the CY 2000 OPPS final rule (65 FR 18434), the CY 2008 OPPS/ASC proposed rule (72 FR 42628) and the CY 2008 OPPS/ASC final rule with comment period (72 FR 66580).

Over the last 15 years, we have refined our understanding and implementation of the OPPS and have packaged numerous services that we originally paid as primary services. As we continue to consider the development of larger payment groups that more broadly reflect services provided in an encounter or episode of care, we may propose to expand these packaging policies as they apply to services that we currently separately pay as primary services. We use the term “primary service” to refer to the HCPCS codes that represent the primary therapeutic or diagnostic modality into which we package payment for a dependent service.

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

In addition to the packaged items and services listed in 42 CFR 419.2(b), in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66610 through 66659), we adopted the packaging of payment for items and services in seven categories with the primary diagnostic or therapeutic modality to which we believe these items and services are typically ancillary and supportive. The seven categories are: (1) Guidance services; (2) image processing services; (3) intraoperative services; (4) imaging supervision and interpretation services; (5) diagnostic radiopharmaceuticals; (6) contrast media; and (7) observation services. We specifically chose these categories of HCPCS codes for packaging because we believe that the items and services described by the codes in these categories are typically ancillary and supportive to a primary diagnostic or therapeutic modality and, in those cases, are an integral part of the primary service they support. In addition, in the CY 2009 OPPS/ASC final rule with comment period (73 FR 68634), we packaged products described as implantable biologicals. As discussed below, in the CY 2014 OPPS/ASC proposed rule (78 FR 43575), we proposed to add each of these categories of packaged items and services that were packaged beginning in CYs 2008 and 2009, along with newly proposed packaged items and services for CY 2014 as described below to the OPPS packaging regulation at 42 CFR 419.2(b). Composite APCs under the OPPS, which are described in section II.A.2.f. of this final rule with comment period, and comprehensive APCs, which are described in section II.A.2.e. of this final rule with comment period, also include packaging.

c. Basis for New Packaging Policies for CY 2014

As discussed above, the OPPS is a prospective payment system. It is not intended to be a fee schedule, in which separate payment is made for each coded line item. However, the OPPS is currently a prospective payment system that packages some items and services but not others. Payment for some items and services in the OPPS is according to the principles of a prospective payment system, while the payment for other items and services is more like that of a fee schedule. Our overarching goal is to make OPPS payments for all services paid under the OPPS more consistent with those of a prospective payment system and less like those of a per service fee schedule, which pays separately for each coded item. As a part of this effort, we have continued to examine the payment for items and services provided in the OPPS to determine which OPPS services can be packaged to achieve the objective of advancing the OPPS as a prospective payment system.

Therefore, as we did in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66610 through 66659), we have examined the items and services currently provided under the OPPS, reviewing categories of integral, ancillary, supportive, dependent, or adjunctive items and services for which we believe payment would be appropriately packaged into payment of the primary service they support. Specifically, we examined the HCPCS code definitions (including CPT code descriptors) to see whether there were categories of codes for which packaging would be appropriate according to existing OPPS packaging policies or a logical expansion of those existing OPPS packaging policies. In general, in the CY 2014 OPPS/ASC proposed rule, we proposed to package the costs of selected HCPCS codes into payment for services reported with other HCPCS codes where we believe that one code reported an item or service that was integral, ancillary, supportive, dependent, or adjunctive to the provision of care that was reported by another HCPCS code. Below we discuss categories and classes of items and services that we proposed to package beginning in CY 2014. In several cases, we proposed that services be conditionally packaged so that if they are provided without other services, there will be a separate payment for the service. The proposed policies detailed below are not exhaustive, and we expect to continue to review the OPPS and consider additional packaging policies in the future.

d. New Packaging Policies for CY 2014

In the CY 2014 OPPS/ASC proposed rule (78 FR 43570 through 43575), we proposed to package the following categories of items and services beginning in 2014:

(1) Drugs, biologicals, and radiopharmaceuticals that function as supplies when used in a diagnostic test or procedure;

(2) Drugs and biologicals that function as supplies when used in a surgical procedure;

(3) Certain clinical diagnostic laboratory tests;

(4) Procedures described by add-on codes;

(5) Ancillary services (status indicator “X”);

(6) Diagnostic tests on the bypass list; and

(7) Device removal procedures.

Category (2) listed above was described in the proposed rule as “drugs and biologicals that function as supplies or devices when used in a surgical procedure.” In this final rule with comment period, we are deleting the words “or devices” from the name of this category because the words are redundant of “supplies.” In this context, devices are a type of supply (78 FR 43571), so it is not necessary to include the words “or devices” after supplies in the name of this category of packaged items.

Comment: Many commenters requested that CMS postpone finalizing all of the packaging proposals because of the commenters' inability to replicate the CY 2014 proposed OPPS payment rates, which the commenters asserted limited their ability to fully evaluate and, therefore, meaningfully comment on the packaging proposals. Many commenters also stated that, given the significance and scope of the proposals, CMS should delay implementation of these policies to allow stakeholders more time to evaluate these packaging proposals. In addition, the Advisory Panel on Hospital Outpatient Payment recommended that CMS delay implementation of the CY 2014 packaging proposals until data can be reviewed by the Panel at its spring 2014 meeting regarding interactions between the proposals and their potential cumulative impact.

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

Below we discuss our proposals and summarize and respond to the numerous substantive public comments we received on each packaging proposal.

(1) Drugs, Biologicals, and Radiopharmaceuticals That Function as Supplies When Used in a Diagnostic Test or Procedure

As we discussed in the CY 2014 OPPS/ASC proposed rule (78 FR 43570), in the OPPS, we currently unconditionally package the following six categories of drugs, biologicals, and radiopharmaceuticals (unless temporary pass-through status applies): (1) those with per day costs at or below the packaging threshold (discussed further in section V.B.2. of the proposed rule and this final rule with comment period); (2) diagnostic radiopharmaceuticals; (3) contrast agents; (4) anesthesia drugs; (5) drugs used as supplies according to § 419.2(b)(4); and (6) implantable biologicals. For CY 2014, we reviewed all of the drugs, biologicals, and radiopharmaceuticals administered in the hospital outpatient setting to identify categories or classes of drugs, biologicals, and radiopharmaceuticals that either should be packaged according to existing packaging policies or should be packaged as a logical expansion of existing OPPS packaging policies for drugs, biologicals, and radiopharmaceuticals.

Currently, two of the categories of drugs, biologicals, and radiopharmaceuticals that are packaged in the OPPS (contrast agents and diagnostic radiopharmaceuticals) have a common characteristic—they both describe products that function as supplies when used in a diagnostic test or procedure. Although in the past we identified these specific categories of drugs, biologicals, and radiopharmaceuticals as packaged unless pass-through status applied, we recognize that they actually represent subcategories of a broader category of drugs, biologicals, and radiopharmaceuticals that should be packaged in the OPPS according to OPPS packaging principles: drugs, biologicals, and radiopharmaceuticals that function as supplies when used in a diagnostic test or procedure. In particular, we are referring to drugs, biologicals, and radiopharmaceuticals that function as supplies as a part of a larger, more encompassing service or procedure, namely, the diagnostic test or procedure in which the drug, biological, or radiopharmaceutical is employed. Because diagnostic radiopharmaceuticals and contrast agents represent specific examples of a broader category of drugs, biologicals, or radiopharmaceuticals that function as supplies that are integral and supportive to a diagnostic test or procedure, we proposed to unconditionally package drugs, biologicals, and radiopharmaceuticals that function as supplies when used in a diagnostic test or procedure, except when the drug, biological, or radiopharmaceutical has pass-through payment status.

A diagnostic test or procedure is defined as any kind of test or procedure performed to aid in the diagnosis, detection, monitoring, or evaluation of a disease or condition. A diagnostic test or procedure also includes tests or procedures performed to determine which treatment option is optimal. A diagnostic test or procedure can have multiple purposes, but at least one purpose must be diagnostic. We proposed to revise the regulations at 42 CFR 419.2(b) to specify that any drugs, biologicals, and radiopharmaceuticals that function as supplies when used in diagnostic tests or procedures will be packaged as supplies in the OPPS, except when pass-through status applies. This proposed broader category of packaged drugs, biologicals, and radiopharmaceuticals includes the currently packaged categories of contrast agents and diagnostic radiopharmaceuticals.

In the proposed rule, we identified one new class of drugs (stress agents) and one specific drug (Cysview) that we believe also fit within this new category of packaged items, that is, drugs, biologicals, and radiopharmaceuticals that function as supplies when used in a diagnostic test or procedure. We discuss the application of this policy to these specific drugs and the associated comments below.

(a) Stress Agents

Our review of OPPS drugs identified pharmacologic stress agents (“stress agents”) as a class of drugs that is described by the proposed packaged category of drugs, biologicals, and radiopharmaceuticals that function as supplies when used in a diagnostic test or procedure. Stress agents are a class of drugs that are used in diagnostic tests to evaluate certain aspects of cardiac function. In many cases, these agents are used in patients who are unable to perform an exercise stress test, which typically precedes additional diagnostic imaging. The primary diagnostic test in which these agents are used is myocardial perfusion imaging (MPI), which is primarily reported with CPT code 78452 and is the highest cost nuclear medicine procedure in the OPPS, with total payments exceeding $800 million in CY 2012. In the proposed rule, we reported that approximately 96 percent of MPI is billed with CPT code 78452. Stress agents include the following drugs described by these HCPCS codes: HCPCS codes J0152 (Injection, adenosine for diagnostic use, 30 mg); J1245 (Injection, dipyridamole, per 10 mg); J1250 (Injection, dobutamine hydrochloride, per 250 mg); and J2785 (Injection, regadenoson, 0.1 mg). For CY 2013, HCPCS codes J1245 and J1250 are packaged in the OPPS, and J0152 and J2785 are separately paid. OPPS payments for the two separately payable stress agents totaled approximately $111 million in CY 2012.

In the CY 2014 OPPS/ASC proposed rule (78 FR 43570), we proposed to package all stress agents that function as supplies into the diagnostic tests or procedures in which they are employed, consistent with the policy proposed above. The primary service in which stress agents are employed is MPI. MPI with stress encompasses the imaging service, the stress test, and either exercise to induce stress or the administration of a pharmacologic stress agent. In the proposed rule, we included Table 8 which showed the CY 2013 separate payment versus the proposed CY 2014 packaged payment for MPI (78 FR 43571). We note that some of the payment rates for MPI in Table 8 were corrected in the correcting document published in the Federal Register on September 6, 2013 (78 FR 54842).

Comment: Some commenters supported packaging stress agents into MPI because they believed that it supports CMS' goal to make OPPS payments more consistent with those of a prospective payment system.

Response: We appreciate the commenters' support.

Comment: Several commenters objected to this proposal. Some commenters stated that CMS should not expand packaging to any new categories of drugs, biologicals, and radiopharmaceuticals, including stress agents. One commenter objected to the proposed policy for the following reasons and suggested changes or alternatives to the proposed policy:

  • Packaging stress agents into MPI could adversely affect patient access to stress agents;
  • Because a stress agent is not used with 100 percent of MPI tests, CMS should only package drugs that are used at least 80 percent of the time with the primary procedure, to ensure that the packaged payment reflects the full cost of the packaged drug;
  • Hospitals would have a financial incentive not to use a stress agent with MPI, because stress can be induced with exercise instead of a stress agent;
  • To avoid incurring the cost of a stress agent, hospitals will encourage patients to exercise, and this could be dangerous for the patient;
  • As a consequence of packaging stress agents, hospitals may perform inadequate MPI tests (without proper stress), resulting is misdiagnoses;
  • CMS should require hospitals to code stress agents on MPI claims to ensure that costs are adequately captured; and
  • CMS should create separate APCs for MPI with and without use of a stress agent.

Response: We disagree with the commenter that packaging stress agents will limit beneficiary access to MPI tests with a stress agent when it is not clinically appropriate for the patient to induce stress through exercise. Rather, as we discuss below, we believe that a single payment for MPI establishes better incentives to ensure clinically appropriate patient care.

We are not adopting the commenter's recommendation that we adopt a minimum utilization requirement of 80 percent for drug packaging. We package services that are typically integral, ancillary, supportive, dependent, or adjunctive to a primary service, irrespective of the frequency with which this packaged service is used in any given primary procedure. This policy has been a fundamental part of the OPPS since its implementation in August 2000. In some cases, a packaged item may be associated with a primary service 100 percent of the time and in other cases a packaged item may be rarely used with the procedure or service with which it is packaged. Using the geometric mean cost for an APC ensures that minor changes in the total for items and services from low volume packaged services will impact the APC payment rate. Receiving some incremental amount for packaged items allows the hospital to best determine the most efficient and clinically appropriate delivery of a service. An 80 percent utilization threshold for packaging is more reflective of a fee schedule than a prospective payment system, creating payment for a single service of MPI and stress agent that would not encourage the efficient delivery of MPI. We believe a minimum utilization threshold would be unduly restrictive in the context of a prospective payment system because such a threshold would exclude services or items from packaging that are typically integral, ancillary, supportive, dependent, or adjunctive to a primary service.

Regarding the commenter's concern that hospitals will have a financial incentive not to use a stress agent with MPI, again we note that the established payment rate is based on the geometric mean cost of claims with and without a stress agent and that hospitals will now receive incrementally more payment for each MPI, proportional to included costs for stress agents on the claims, even when they do not use a stress agent. We believe that knowing the full amount of payment for the MPI, with or without the stress agent, will allow the hospital to make the most efficient decision that is clinically appropriate. As we state above, like other prospective payment systems, the OPPS relies on the concept of averaging, where the payment may be more or less than the estimated cost of providing a specific service or bundle of specific services for a particular patient. Finally, the recent availability of certain generic stress agents should further mitigate any financial incentive not to use a stress agent with MPI.

With regard to clinical concerns that hospitals may encourage physicians to order exercise rather than an MPI with stress agent, we disagree that hospitals and physicians are likely to settle for inadequate stress-MPI tests rather than incur the cost of the stress agent because a truly inadequate stress test would not provide the physician with sufficient information to arrive at a diagnosis and would require repeat testing. We believe that hospitals and physicians choose the most clinically appropriate diagnostic testing approach for their patients and that they will use a stress agent when necessary.

With regard to the suggestion that we require hospitals to code stress agents in MPI claims, we have repeatedly stated that hospitals should report all codes and associated charges on the claim for the item and services provided to the patient, so that we will be able to monitor trends in stress agent utilization over time.

Finally, we are not accepting the suggestion that we assign MPI tests with and without the use of a stress agent to different APCs. As with the minimum utilization threshold, we believe that establishing separate APCs would result in unnecessary differentiation between stress MPI with stress induced through exercise and stress MPI with stress induced through a stress agent, and that such a difference could discourage the efficient delivery of MPI. Further, the MPI CPT code descriptors include stress or rest, and stress can be induced either through exercise or use of a stress agent.

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

(b) Hexaminolevulinate Hydrochloride (Cysview®)—HCPCS Code C9275

Cysview is a drug for which pass-through status expired on December 31, 2012. Beginning in CY 2013, Cysview was unconditionally packaged in the OPPS as a contrast agent (77 FR 68364). The indications and usage of Cysview as listed in the FDA-approved label are as follows: “Cysview is an optical imaging agent indicated for use in the cystoscopic detection of non-muscle invasive papillary cancer of the bladder among patients suspected or known to have lesion(s) on the basis of a prior cystoscopy. Cysview is used with the Karl Storz D-Light C Photodynamic Diagnostic (PDD) system to perform cystoscopy with the blue light setting (Mode 2) as an adjunct to the white light setting (Mode 1).”

In the CY 2008 OPPS/ASC final rule with comment period (72 FR 42672), we described contrast agents as follows: “Contrast agents are generally considered to be those substances introduced into or around a structure that, because of the differential absorption of x-rays, alteration of magnetic fields, or other effects of the contrast medium in comparison with surrounding tissues, permit visualization of the structure through an imaging modality. The use of certain contrast agents is generally associated with specific imaging modalities, including x-ray, computed tomography (CT), ultrasound, and magnetic resonance imaging (MRI), for purposes of diagnostic testing or treatment.”

Upon reexamining this description of contrast agents and considering our prior application of this description to specific compounds, we believe that contrast agents should include those compounds that are used with the imaging modalities x-ray, computed tomography (CT), ultrasound, magnetic resonance imaging (MRI), and other related modalities that could represent advancements of these modalities. Based on the indications and usage described above for Cysview, we do not believe that Cysview is best described as a contrast agent. Rather, we believe Cysview is more appropriately described as a drug used in a procedure to diagnose bladder cancer.

As discussed above, in the CY 2014 OPPS/ASC proposed rule, we proposed a new policy to package all drugs, biologicals, and radiopharmaceuticals that function as supplies when used in a diagnostic test or procedure. Cysview is a drug that functions as a supply when used in a diagnostic test or procedure for the purpose of the “detection of non-muscle invasive papillary cancer of the bladder.” Therefore, as a drug that functions as a supply when used in a diagnostic test or procedure, we proposed to package Cysview for CY 2014 under the OPPS (78 FR 43571). Cysview is currently assigned to status indicator “N” for CY 2013, and under this proposal, the status indicator assignment of “N” would continue for CY 2014.

Comment: Many of the commenters on CMS' proposal to package Cysview were urologists who consider Cysview to be valuable in the care of bladder cancer patients and who expressed concern that CMS' proposed packaging policy will restrict access to blue light cystoscopy, which is the service in which Cysview is employed. One commenter stated that:

  • Packaging Cysview limits patient access to the drug;
  • Cystoscopy procedures that employ Cysview are not clinically comparable to other procedures assigned to the same APCs;
  • CMS does not have the authority to package drugs, biologicals, and radiopharmaceuticals used in a diagnostic test or procedure;
  • Packaging Cysview results in an inequitable payment for Cysview;
  • Cysview does not function as a supply and therefore should not be packaged;
  • Cysview is a treatment and is not used in a diagnostic test and therefore should not be packaged under the policy that packages drugs, biologicals, and radiopharmaceuticals used as a supply in a diagnostic test or procedure.
  • CMS must create a separate APC for Cysview as it has done for procedures that use contrast agents.

Response: We disagree with the commenters that packaging will limit patient access to Cysview. As we state above, like other prospective payment systems, the OPPS relies on the concept of averaging, where the payment may be more or less than the estimated cost of providing a specific service or bundle of specific services for a particular patient. There are many items and services in the OPPS in which use of the item or service may increase the cost per case above that of the average or typical case, and there are cases where no additional items or services are necessary and the cost of a typical case is much less than the average. This is a fundamental aspect of a prospective payment system. Overall, we believe that OPPS payments reflect average estimated costs for both situations and encourage the hospital to assess the appropriate use of those additional items and services in diagnosing bladder cancer and other diseases.

Cysview is used in blue light cystoscopy, which is an optional adjunct to white light cystoscopy. The various CPT codes for cystoscopy include white light cystoscopy with or without blue light cystoscopy. Cysview is packaged into the cystoscopy procedures. We believe that the current structure of the APCs that include the various cystoscopy procedures sufficiently reflects clinical and resource homogeneity as required by section 1833(t)(2)(B) of the Act because most of the codes in these APCs are cystoscopy procedures or other urological endoscopy procedures that, like cystoscopy, employ an endoscope. We also do not believe that packaging Cysview in the OPPS is inequitable. We package all drugs that function as supplies when used in a diagnostic test or procedure, and we will continue to review drugs used in the OPPS to assess whether they function as supplies or are otherwise integral, ancillary, and supportive to a diagnostic test or procedure, and therefore appropriately packaged into the procedure.

We disagree with the commenters who suggested that we do not have the authority to package drugs, biologicals, and radiopharmaceuticals that function as supplies when used in a diagnostic test or procedure. We discussed our authority to package drugs, biologicals, and radiopharmaceuticals extensively in 2008, when we packaged diagnostic radiopharmaceuticals and contrast agents, and refer readers to that discussion in the CY 2008 OPPS final rule (72 FR 66610).

We disagree with the commenter's view that Cysview should not be packaged because it does not function as a supply when used in a diagnostic test. We believe that the commenter misunderstands the term “supply” as it is used in the OPPS. Supply is a very broad term that describes many types of products in the OPPS. As discussed elsewhere in this section and in the CY 2014 OPPS/ASC proposed rule (78 FR 43571 through 43575), supplies is a large category of items that typically are either for single patient use or have a shorter life span in use than equipment. A supply in the OPPS can be anything that is not equipment, and supplies can be either expensive or inexpensive and either commonly or uncommonly used. According to OPPS policy, drugs, biologicals, radiopharmaceuticals, medical devices, and other items and products that are not equipment can be supplies in the OPPS (78 FR 43571 and 43575). Since the inception of the OPPS, implantable medical devices have been considered supplies in the OPPS (65 FR 18443). Many implantable medical devices are very technologically sophisticated, costly, and tailored to specific medical needs but they are nonetheless supplies in the OPPS. Cysview facilitates diagnosis through blue light cystoscopy, and therefore we consider it to be a drug that functions as a supply in a diagnostic test in the OPPS.

We do not believe that Cysview and blue light cystoscopy are therapeutic. The FDA-approved label for Cysview states that Cysview is used for “cystoscopic detection of non-muscle invasive papillary cancer of the bladder,” which is a diagnostic purpose according to our definition of a diagnostic test described above and in the proposed rule (78 FR 43570). Also, Cysview itself does not eliminate bladder cancer cells. It enables better localization of the bladder cancer cells as compared to white light cystoscopy alone, which then requires a therapeutic procedure such as resection.

Finally, we disagree with the commenter's suggestion that we must create a separate APC according to section 1833(t)(2)(G) of the Act for procedures that use Cysview. Cysview is not being packaged as a contrast agent. Instead, it is being packaged into the service in which it is used under the policy of packaging drugs, biologicals, and radiopharmaceuticals that function as supplies when used in a diagnostic test or procedure, which also currently includes diagnostic radiopharmaceuticals, contrast agents, and stress agents.

Comment: One commenter requested clarification regarding CMS' definition of the term “contrast agent,” and requested that CMS recognize these products as drugs and that CMS refrain from calling these products supplies.

Response: The purpose of the clarification of the term “contrast agent” in the proposed rule (78 FR 43571), which is repeated above, was to explain that we believe that contrast agents are products used in certain types of imaging techniques (or advancements of those techniques), namely x-ray, computed tomography (CT), ultrasound, and magnetic resonance imaging (MRI). Contrast agents are typically drugs and are eligible for pass-through as drugs in the OPPS. However, as mentioned above, drugs can also function as supplies, and be paid as such, when used in a diagnostic test or procedure in the OPPS. Contrast agents function as supplies when used in an imaging test and are packaged in the OPPS, unless pass-through status applies. This is a well-established OPPS packaging policy, and this policy makes no fundamental changes to the policy of unconditionally packaging contrast agents. We consider packaging of contrast agents under the more general packaging category of drugs, biologicals, and radiopharmaceuticals that function as supplies when used in a diagnostic test or procedure, and this packaging category is being codified at 42 CFR 419.2(b)(15).

After consideration of the public comments we received, we are finalizing our proposed policy to package Cysview as a drug under our policy that packages drugs, biologicals, and radiopharmaceuticals that function as supplies when used in a diagnostic test or procedure. Therefore, HCPCS code C9275 (Cysview) will be assigned status indicator “N” (unconditionally packaged) in CY 2014.

Comment: One commenter requested that radiopharmaceuticals used for dosimetry not be considered diagnostic radiopharmaceuticals but instead be treated as therapeutic radiopharmaceuticals.

Response: Radiopharmaceuticals used for dosimetry are packaged supplies in the OPPS according to established OPPS policy (68 FR 63443). In addition, the purpose of dosimetry is to establish the treatment dose or the optimal treatment for the patient. As stated in the proposed rule (78 FR 43570) and again above, diagnostic items “include tests or procedures performed to determine which treatment option is optimal.” Therefore, because dosimetry is performed to determine the optimal treatment dose of a therapeutic radiopharmaceutical, we believe, according to our definition of a diagnostic item, test, or procedure, that it is diagnostic and not therapeutic. Therefore, radiopharmaceuticals used for dosimetry are packaged in the OPPS.

(2) Drugs and Biologicals That Function As Supplies When Used in a Surgical Procedure

Since the inception of the OPPS we have packaged medical devices, medical and surgical supplies, and surgical dressings into the related procedure under § 419.2(b)(4). Medical and surgical supplies are a broad category of items used in the hospital outpatient setting. Supplies is a large category of items that typically are either for single patient use or have a shorter life span in use than equipment. Supplies include not only minor, inexpensive, or commodity-type items but also include a wide range of products used in the hospital outpatient setting, including certain implantable medical devices. We consider implantable medical devices to be integral to, dependent on, and supportive to a surgical implantation procedure. For further discussion, we refer readers to the CY 2000 OPPS final rule (65 FR 18443). Packaged supplies can include certain drugs, biologicals, and radiopharmaceuticals. Packaged supplies in the OPPS also include implantable biologicals, which are packaged because they function as implantable devices which, as noted above, are considered to be a type of supply in the OPPS. We refer readers to the CY 2009 OPPS/ASC final rule with comment period (73 FR 68634) for a more detailed discussion of implantable biologicals. We believe that the existing packaging policy for implantable biologicals represents an example of a broader category of drugs and biologicals that should be packaged in the OPPS according to longstanding regulations and existing policies: drugs and biologicals that function as supplies when used in a surgical procedure. Therefore, in the CY 2014 OPPS/ASC proposed rule (78 FR 43571), beginning in the CY 2014 OPPS, we proposed to unconditionally package all drugs and biologicals that function as supplies in a surgical procedure, following the current packaging policy for implantable biologicals.

Skin substitutes are a class of products that we treat as biologicals that fit within the proposed packaging category of drugs and biologicals that function as supplies in a surgical procedure. The term “skin substitutes” refers to a category of products that are most commonly used in outpatient settings for the treatment of diabetic foot ulcers and venous leg ulcers. Although the term “skin substitute” has been adopted to refer to this category of products in certain contexts, these products do not actually function like human skin that is grafted onto a wound; they are not a substitute for a skin graft. Instead, these products are applied to wounds to aid wound healing and through various mechanisms of action they stimulate the host to regenerate lost tissue. We refer readers to the “Skin Substitutes for Treating Chronic Wounds Technology Assessment Report at ES-2” which is available on the AHRQ Web site at: http://www.ahrq.gov/research/findings/ta/skinsubs/HCPR0610_skinsubst-final.pdf. Skin substitutes are regulated by the FDA as either medical devices (and classified as wound dressings) or as human cell, tissue, and cellular and tissue-based products (HCT/Ps) under section 361 of the Public Health Service Act. Most of the various skin substitutes are applied to a wound during a surgical procedure described by CPT codes under the heading in the 2013 CPT codebook “Skin Replacement Surgery” and the subheading “Skin Substitute Grafts” in the CPT code range 15271 through 15278. To be properly performed, every surgical procedure in this CPT code range requires the use of at least one skin substitute product. These surgical procedures include preparation of the wound and application of the skin substitute product through suturing or various other techniques. Currently skin substitutes are separately paid in the OPPS as if they are biologicals according to the ASP methodology and are subject to the drug and biological packaging threshold.

Because a skin substitute must be used to perform any of the procedures described by a CPT code in the range 15271 through 15278, and conversely because it is the surgical procedure of treating the wound and applying a covering to the wound that is the independent service, skin substitute products serve as a necessary supply for these surgical repair procedures. In addition, the FDA classifies many skin substitutes as wound dressings, which make them in many cases similar to surgical dressings that are packaged under § 419.2(b)(4). Finally, implantable biological products are very similar to (and in some instances the same as) skin substitute products, except that the clinical applications for implantable biologicals are typically an internal surgery versus the application to a wound for a skin substitute. Some products that are used as skin substitutes have dual uses as both skin substitutes and implantable biologicals, which underscores the similarity of these overlapping classes of products. Some products that function as skin substitutes can also function as implantable biologicals. Implantable biologicals and skin substitutes both function as supplies that are used in surgical procedures and, therefore, we believe that they should be packaged with the surgical procedure in which the products are used. Since CY 2009, we have packaged implantable biologicals. We see no reason to distinguish skin substitutes from implantable biologicals for OPPS packaging purposes based on the clinical application of individual products. Therefore, in the CY 2014 OPPS/ASC proposed rule (78 FR 43572), we proposed to unconditionally package skin substitutes into their associated surgical procedures. Packaging payment for these skin substitutes into the APC payment for the related surgical procedures would result in a total prospective payment that is more reflective of the average resource costs of the procedures because prices for these products vary significantly from product to product. Packaging these products also would promote more efficient resource use by hospitals and would be more consistent with the treatment of similar products under the OPPS. Pass-through payment status would still be available to new skin substitutes that meet the pass-through payment criteria.

Comment: Many commenters supported CMS' proposal to package skin substitutes, and believed that packaging will result in greater access to the full range of skin substitute products, that patients will benefit, and that Medicare will also benefit through cost savings from this proposed change in payment policy.

Response: We appreciate the commenters' support.

Comment: Many commenters opposed CMS' proposal to package skin substitutes and argued that because all skin substitutes or two skin substitutes in particular, Apligraf and Dermagraft, are specified covered outpatient drugs (SCODs) under section 1833(t)(14)(B) of the Act, CMS cannot package these products and instead must pay separately for them in the OPPS.

Response: We disagree with the commenters' assertion that skin substitutes generally or Apligraf and Dermagraft specifically are SCODs. Section 1833(t)(14)(B) of the Act defines a SCOD as a “covered outpatient drug (as defined in section 1927(k)(2)) . . . .” Covered outpatient drugs under section 1927(k)(2) of the Act are generally limited to products approved as drugs by the FDA, biologicals licensed under section 351 of the Public Health Service Act, and insulin. Skin substitutes, including Apligraf and Dermagraft, are not within any of these categories of products because they were approved by the FDA as either medical devices or as human cell, tissue, and cellular and tissue-based products (HCT/Ps) under section 361 of the Public Health Service Act. Therefore, none of these products are covered outpatient drugs under section 1927(k)(2) of the Act, and therefore no skin substitutes are SCODs according to section 1833(t)(14)(B) of the Act. Furthermore, we explained in finalizing our policies of packaging diagnostic radiopharmaceuticals and contrast agents in the CY 2008 OPPS final rule (72 FR 66766) that CMS has the authority to package the payment of SCODs in the OPPS and that we may consider additional packaging options for SCODs and other separately payable drugs in the future.

Comment: Many commenters believed that skin substitutes should continue to be separately paid and not packaged because, according to these commenters, they are neither supplies, nor comparable to implantable biologicals, nor wound dressings, and because they have a therapeutic purpose. Some commenters requested that CMS begin referring to these products as “cellular and/or tissue based products for wounds (CTPs)” instead of using the term “skin substitutes” to describe the products that are applied in the procedures described by the CPT codes 15271 through 15278. Commenters also expressed concern about CMS' use of the term “wound dressing” to describe skin substitutes.

Response: We disagree with the commenters that we should not describe skin substitutes as a type of supply used in a surgical procedure. As explained in the proposed rule (78 FR 43571 and 43575) and elsewhere in this final rule with comment period, supplies are a large category of items that typically are either for single patient use or have a shorter life span in use than equipment. Supplies can be anything that is not equipment and include not only minor, inexpensive, or commodity-type items but also include a wide range of products used in the hospital outpatient setting, including certain implantable medical devices, which we have considered supplies since the inception of the OPPS (65 FR 18443). Supplies can also be drugs, biologicals, or radiopharmaceuticals. We consider implantable medical devices to be integral to, dependent on, and supportive to a surgical implantation procedure. We consider implantable biologicals to be supplies used in a surgical procedure because, as a part of a surgical procedure, they reinforce and aid the healing of various internal structures, which makes them integral to, dependent on, and supportive to a surgical procedure. Similarly, we believe that skin substitutes are supplies used in a surgical procedure because, as a part of a surgical repair procedure, they reinforce and aid the healing of tissue like implantable biologicals, but with skin substitutes, the tissue is skin instead of internal connective tissues. Like implantable biologicals, skin substitutes are integral to, dependent on, and supportive to the surgical procedures in which they are used. Therefore, we believe it is appropriate to describe skin substitutes as supplies, and it is consistent with OPPS policy to consider skin substitutes as a type of supply (like an implantable biological or medical device) used in a surgical repair procedure.

We disagree with the commenters who stated that skin substitutes are unlike packaged implantable biologicals and therefore should not be packaged. Our proposal to package skin substitutes relies on our determination that these products act as supplies that are integral to, dependent on, and supportive to a surgical procedure. We also believe that a reasonable analogy can be made that skin substitutes are similar to and operate as implantable biologicals in terms of composition, clinical use, role in hospital outpatient care, and product function in healing and repair such that packaging skin substitutes represents a logical expansion of our current packaging policy that packages implantable biologicals as surgical supplies. For example, implantable biologicals are used in internal surgeries for healing and to improve the structural integrity of joints, soft tissues and nerves, among others, and skin substitutes do the same for external surgical repairs of the integumentary system. In fact, several of the skin substitute products that are described by HCPCS Q-codes in the Q4100 series are used both as implantable biologicals and skin substitutes.

With regard to the comments relating to our use of the term “wound dressing” to describe skin substitutes, we discussed surgical dressings in the proposed rule as an example of packaged surgical supplies that have some similarities to skin substitutes, many of which FDA classifies as “wound dressings.” We believe that commenters may have misunderstood our description of skin substitutes in the proposed rule as wound dressings and assumed that we were conflating skin substitutes with products in the Medicare benefit category of surgical dressings described in section 1861(s)(5) of the Act. We are not conflating these two product categories. We note that the FDA uses the term “wound dressing” to classify many of the skin substitutes. For example, the skin substitutes Apligraf and Dermagraft are classified by the FDA as “dressing, wound and burn, interactive,” and the skin substitute Oasis is classified by the FDA as “dressing, wound, collagen.” Further, we assign HCPCS A-codes to surgical dressings; HCPCS Q-codes are typically assigned to drugs and biologicals and are used to describe skin substitutes, unless a HCPCS C-code has been assigned to a skin substitute with pass-through payment status.

Regarding the comment that skin substitutes should not be packaged because they have a therapeutic purpose, we proposed for CY 2014 the packaging of drugs and biologicals that function as supplies when used in a surgical procedure, and surgical procedures typically have a therapeutic purpose. This CY 2014 packaging proposal for drugs and biologicals that function as supplies does not exclude items with a therapeutic purpose.

We use the term “skin substitute” to describe the products that are used in the surgical procedures described by CPT codes 15271 through 15278 because the CPT code descriptors for these codes include the term “skin substitute graft” for the products that are applied in these procedures. For example, the descriptor for CPT code 15271 is “Application of skin substitute graft to trunk, arms, legs, total wound surface area up to 100 sq cm; first 25 sq cm or less wound surface area.” While we acknowledge that the term “skin substitutes” may be more or less appropriate for specific products, we believe that this term is currently the best term for these products in order to avoid ambiguity. The term “skin substitutes” is conventional in the medical vernacular for these products and it is also used in the CPT code descriptor for the surgical procedures that apply these products. In addition, we do not believe that we should adopt the term “cellular and/or tissue based products for wounds (CTPs) to describe skin substitutes,” because “CTP” is too close to the abbreviation HCT/P that the FDA uses to refer to human cell, tissue, and cellular and tissue-based products (HCT/Ps) under section 361 of the Public Health Service Act, which is the regulatory pathway for only some skin substitutes.

We acknowledge that there are differences in composition among the various skin substitute products and that is why each is assigned a distinct HCPCS Q-code (or HCPCS C-code in some cases). If all of the products were identical, we would only need one code to describe all of them. Skin substitutes are those products that are used in wound healing procedures and that are typically assigned a HCPCS Q-code in the Q4100 series (or assigned a HCPCS C-code if OPPS pass-through payment status applies). We understand that some of the products described by HCPCS Q-codes in the HCPCS code Q4100 series function both as skin substitutes and implantable biologicals.

Comment: Many commenters opposed packaging skin substitutes, but also requested that, if CMS does package skin substitutes, CMS exclude from the packaging policy any products that are approved by the FDA through the premarket approval (PMA) process, the biologic license application (BLA) process, or the new drug application (NDA) process. Some commenters believed that products that achieve marketability through one of these processes are clinically superior to the other skin substitutes that are regulated by FDA as either 510(k) medical devices or as HCT/Ps because the PMA, NDA, or BLA-approval routes are more rigorous. As a consequence, they believe that PMA, NDA, or BLA-approved products deserve special recognition under the OPPS versus other skin substitutes that are regulated by FDA through another process. However, other commenters stated that the FDA regulatory pathway does not necessarily establish the clinical utility of the product. Other commenters argued that the various skin substitutes should not be packaged because they are different products each with different characteristics; for example, some skin substitutes are constructed of living cells while others are not.

Commenters also stated that among the range of skin substitutes, some products, including those approved through the PMA process, have higher costs than other skin substitutes that are used in the skin substitute surgical procedures. They argued that surgical procedures using these higher cost skin substitutes should not receive the same payment rate as those surgical procedures using less costly skin substitutes. These commenters were concerned that hospitals would have a financial incentive to use the least expensive skin substitute. Other commenters suggested different approaches to payment based on differential skin substitute cost or other skin substitute properties.

Response: Payment under the OPPS is established based on an assessment of resource and clinical homogeneity. We disagree that certain products with FDA regulatory approval should be exempt from packaging. With notable regulatory and statutory exceptions, clinical superiority, utility, and efficacy are not aspects of a service or product that we consider in developing a payment rate under the OPPS. However, we are persuaded by numerous public comments that there is a significant difference in resource costs among the numerous skin substitute products and that multiple codes based on resource differences may be more appropriate.

We do not believe that the FDA approval process should exempt products from this packaging proposal or factor into the level of Medicare payment. While some skin substitutes have been approved by FDA as medical devices through the PMA process, including Apligraf, Dermagraft, and the Integra skin substitutes, all of the other current skin substitutes are regulated as either 510(k) medical devices or HCT/Ps under section 361 of the Public Health Service Act. Proponents of some of the products approved through the PMA process request that we make an exception to packaging for these products (or any products approved through a PMA, NDA, or BLA). We believe that this request is based on the presumption that, because these FDA approval routes typically require clinical trials, these products have stronger evidence that supports their clinical performance as compared to the non-PMA approved products, and therefore PMA approval can be used as a proxy for evidence of clinical superiority relative to non-PMA-approved skin substitutes. However, we consider factors such as clinical and resource homogeneity for OPPS payment. As previously stated in regard to implantable biologicals, “We do not believe that it is necessary to make our OPPS payment policies regarding implantable biologicals dependent on categories of FDA approval, the intent of which is to ensure safety and efficacy . . .” (74 FR 60476), but rather according to our established criteria of clinical and resource homogeneity. Therefore, as in the case of implantable biologicals, we also believe that the FDA regulatory pathway should not determine OPPS skin substitute payment policy. Generally, once a service is covered, clinical and resource homogeneity, as well as other considerations, determines APC placement and packaging status. Determinations related to the clinical merits of a product are outside the scope of this rule. We proposed to apply the packaging policy to all skin substitutes recognized by CMS, regardless of the FDA regulatory pathway.

However, we agree with commenters that, among the range of skin substitutes, there is sufficient resource heterogeneity such that all of the skin substitutes should not be packaged into the same application procedures and placed in the same APC. As noted above, factors in APC assignment in the OPPS include clinical homogeneity and resource homogeneity. While the procedures described by CPT codes 15271 through 15278 are clearly clinically homogeneous, there is significant resource heterogeneity in the payment amount for the various skin substitutes from approximately $6.95 per sq cm for the least expensive to approximately $200 per sq cm for the most expensive. In order to ensure adequate resource homogeneity among APC assignments, in this final rule with comment period, we are dividing the skin substitutes into two groups for packaging purposes: high cost skin substitutes and low cost skin substitutes. Assignments to the high cost or low cost groups depended upon a comparison of the July 2013 payment amount for the skin substitute in OPPS Addendum B to the weighted average payment per unit of all skin substitutes using the skin substitute utilization from the CY 2012 claims data and the July 2013 payment amounts in OPPS Addendum B; this weighted average is $32 per sq cm. Skin substitutes with a payment amount above $32 per sq cm are classified in the high cost group and those at or below $32 are classified in the low cost group. Table 13 below lists the skin substitutes and their assignment as either a high cost or low cost skin substitute. We also note that a few skin substitute products are applied as either liquids or powders per milliliter or per milligram and are employed in procedures outside of CPT codes 15271 through 15278. These products will not be classified as either high cost or low cost but will be packaged into the surgical procedure in which they are used. These products are not listed below in Table 13 but appear in Addendum B to this final rule with comment period (which is available via Internet on the CMS Web site).

BILLING CODE 4120-01-P

BILLING CODE 4120-01-C

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

High cost skin substitutes will continue to be billed using the existing skin substitute application CPT codes 15271 through 15278. We are creating a new set of HCPCS C-codes that parallel the current set of skin substitute application CPT codes (15271 through 15278) for application of low cost skin substitutes beginning in CY 2014 (HCPCS codes C5271, C5272, C5273, C5274, C5275, C5276, C5277, and C5278). We are establishing code edits in our claims processing system that require that the high cost skin substitutes be reported with the CPT codes and the low cost skin substitutes be reported with the new HCPCS C-codes. Geometric mean costs for the various procedures were calculated using only claims for the skin substitutes that are assigned to each class; that is, claims for services described by CPT codes 15271, 15273, 15275, and 15277, including only high cost skin substitutes, were used to calculate the geometric mean costs for these procedures and claims for HCPCS codes C5271, C5273, C5275, and C5277, including only low cost skin substitutes, were used to calculate the geometric mean costs for these procedures. The add-on CPT skin substitute application codes (CPT codes 15272, 15274, 15276, and 15278) and the add-on HCPCS C-codes for skin substitute application (HCPCS codes C5272, C5274, C5276, and C5278) are packaged in the OPPS under the add-on code packaging policy described in section II.B.3.d.(4) of this final rule with comment period. CPT codes 15271, 15273, 15275, and 15277 and HCPCS C-codes C5271, C5273, C5275, and C5277 were assigned to one of the following four skin repair APCs according to the geometric mean cost for the code: APC 0326 (Level I Skin Repair); APC 0327 (Level II Skin Repair); APC 0328 (Level III Skin Repair); and APC 0329 (Level IV Skin Repair). These procedure codes and the CY 2014 APC assignments and status indicator for each of the procedure codes are listed in the Table 14 below.

BILLING CODE 4120-01-P

BILLING CODE 4120-01-C

Skin substitutes with pass-through payment status should be reported with CPT codes 15271 through 15278. We will apply an offset to the payment for pass-through skin substitutes according to the offset policy described in section V.A.4.d of this final rule with comment period.

Comment: A few commenters stated that CMS should not package skin substitutes because the claims data used for modeling the cost does not accurately represent the actual cost of the skin substitutes used in the HOPD. They suggested that inaccurate coding and reporting by hospitals, and charge compression, result in packaged costs that are lower than the actual costs of the skin substitutes used in the surgical procedures in which skin substitutes are employed.

Response: It is our longstanding policy to use the claims and cost report data available to us, without significant editing or modification, to model the prospective payment year OPPS payment rates. We have stated previously that: “[b]eyond our standard OPPS trimming methodology . . . that we apply to those claims that have passed various types of claims processing edits, it is not our general policy to judge the accuracy of hospital coding and charging for purposes of ratesetting” (75 FR 71838). We do not believe that a problem exists with skin substitute reporting or with the associated data used in modeling the packaged payments for the procedures that includes the cost of the skin substitute. Currently, there is an incentive to code properly for skin substitute application services as the significant majority of the overall payment for these services stems from the separately paid and reported skin substitute, which we believe provides sufficient motivation for the hospitals to accurately report the amount of skin substitute used. We do not have any evidence of systemic underreporting of these products. We have estimated costs for skin substitutes as we have for all other services in our claims data using our standard methodology outlined in section II.A.2.c. of this final rule with comment period, and we believe these costs to be sufficient for establishing payment for skin substitute application procedures as they are for all other services paid under the OPPS and ASC payment systems. Regarding charge compression, we have addressed charge compression in the OPPS through new cost centers. We refer readers to section II.A.1.c. of this final rule with comment period for a discussion of this topic.

Comment: A few commenters requested that CMS not package implantable biologicals that are used for various surgical procedures in which the implantable biological product is implanted into the body as a part of surgical procedure.

Response: Implantable biologicals have been packaged in the OPPS since 2009. We did not propose to reconsider this packaging policy for CY 2014. In fact, part of the rationale for extending packaging in the OPPS to include skin substitutes that function as surgical supplies is that we already package several products that are the same as or similar to skin substitutes in the OPPS that are described by the term “implantable biological” due to their particular clinical use. Several of the products in the HCPCS code Q4100 series are dual use or multi-use products in that they serve as both skin substitutes and implantable biologicals. We believe that both implantable biologicals and skin substitutes should be packaged into the surgical procedures that employ these products when they function as supplies.

Comment: Some commenters expressed concern that packaging skin substitutes in the OPPS will inhibit the development of biotechnology products and that this proposed policy will result in less investment in such technology.

Response: We do not believe that this policy will result in less investment in biotechnology. New skin substitutes remain eligible for pass-through payment status for at least 2 years, but not more than 3 years. Pass-through payments are intended to facilitate the adoption of certain new products. In addition, we believe that the packaged payments for the associated surgical procedures, including payment for the skin substitute are adequate and will not discourage use of the skin substitute products used in these procedures. Furthermore, the final policy that distinguishes high cost from low cost skin substitutes addresses the issue of differential cost among the range of skin substitute products. Finally, this packaging policy applies to skin substitutes and other drugs and biologicals used in surgical procedures. It does not apply broadly to all biotechnology.

Comment: Some commenters mentioned that the skin substitute packaging policy will result in a site-of-service shift to the physician office setting where separate payment for skin substitutes will be made in CY 2014.

Response: The physician, in consultation with his or her patient, decides the site of service for treatment and many factors are considered as a part of that decision. We believe that we have adequately addressed concerns about heterogeneous resource costs resulting in payment inadequacy and that these procedures will continue to be performed in the HOPD.

We received a few additional public comments regarding a single product that we also proposed to package because it is a drug that functions as a supply in a surgical procedure. We summarize and respond to these comments below.

Comment: A few commenters objected to the packaging of the drug Mitosol (HCPCS code J7315) when used as a supply in a surgical procedure, which was the interim assignment for new HCPCS code J7315 in the CY 2013 OPPS/ASC final rule with comment period. We refer readers to Addendum B.—Final OPPS Payment by HCPCS Code for CY 2013 available on the Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Hospital-Outpatient-Regulations-and-Notices-Items/CMS-1589-FC.html?DLPage=1&DLSort=2&DLSortDir=descending. One commenter in particular complained that, although Mitosol is indicated as “an adjunct for ab externo glaucoma surgery,” OPPS packaging requires that an item be integral to the procedure. The commenter stated that because the use of Mitosol is optional in some cases of glaucoma surgery, it should not be packaged in the OPPS. The commenter stated that “up to 20% of glaucoma surgeries do not include an anti-fibrotic [including Mitosol].” The commenter further stated that Mitosol serves a separate clinical purpose from glaucoma surgery. The commenter emphasized CMS' threshold packaging policy for drugs, biologicals, and radiopharmaceuticals, and suggested that drugs with per day costs above the threshold should not be packaged. Finally, the commenter stated that the clinical benefits and orphan drug designation are reasons to not package Mitosol.

Response: Mitosol is an anti-fibrotic drug (meaning that it inhibits wound healing) that is used in glaucoma surgery. Since this comment was filed, we granted Mitosol pass-through payment status. We address the commenter's specific points as follows. First, we want to dispel the notion that packaged drugs must be used in the associated procedure 100 percent of the time that the procedure is performed. That is not our OPPS packaging policy. As stated above and throughout the proposed rule, we believe packaging is appropriate for items and services that are integral or ancillary or supportive or dependent or adjunctive to the primary procedure. Therefore, items and services that fall within any of these categories may be properly packaged in the OPPS. Mitosol, as an adjunct to trabeculectomy, would therefore be appropriately packaged as a surgical supply if pass-through payment status were not in effect because it functions as a supply in a surgical procedure, and supplies are integral to, dependent on, and supportive of a primary service, as noted above.

We also disagree with the commenter's assertion that Mitosol serves a different clinical purpose than trabeculectomy, which is to create a functioning filtering bleb for control of intraocular pressure. Mitosol prevents the bleb from scarring, which helps to maintain a functioning filtering bleb, which is the purpose of the glaucoma surgery. Determinations related to the clinical merit of a product are outside the scope of this rule. As noted above, relative clinical value or effectiveness was not proposed as a criterion for OPPS packaging determinations. Finally, while FDA orphan drug designation results in additional exclusivity according to the Federal Food Drug, and Cosmetic Act, it does not exempt a drug from packaging in the OPPS. Upon expiration of pass-through payment status for Mitosol, it is our intent to package it as a supply with glaucoma surgery in the OPPS.

After consideration of the public comments we received, we are packaging all skin substitutes according to the scheme described above, which assigns skin substitutes to either the high cost category or the low cost category unless pass-through payment status applies. Skin substitutes assigned to the high cost category will be reported with CPT codes 15271 through 15278 and the applicable skin substitute HCPCS Q-code, while skin substitutes assigned to the low cost category will be reported with HCPCS codes C5271 through C5278 and the applicable skin substitute HCPCS Q-code. In addition, the few skin substitute products that are applied as either liquids or powders per milliliter or per milligram and are currently employed in procedures outside of the CPT code range of 15271 through 15278 will not be classified as either high cost or low cost, but will be packaged into the surgical procedure in which they are used.

The skin substitute products that are unconditionally packaged under this final policy and assigned to status indicator “N” for CY 2014 are listed in Addendum P to this CY 2014 OPPS/ASC final rule with comment period. The payment for CPT codes 15271 through 15278 for surgical application of high cost skin substitutes (payment rate per square centimeter over $32 for CY 2014) and HCPCS codes C5271 through C5278 for surgical application of low cost skin substitutes (payment rate per square centimeter $32 and under for CY 2014), including the cost of the packaged skin substitutes, for CY 2014, are listed in Addendum B to this final rule with comment period. The OPPS addenda are available on the CMS Web site at: http://www.cms.hhs.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html.

(3) Clinical Diagnostic Laboratory Tests

Since the beginning of the OPPS, clinical diagnostic laboratory tests (laboratory tests) provided in the hospital outpatient setting have been separately paid to hospitals at Clinical Laboratory Fee Schedule (CLFS) rates (65 FR 18442). Section 1833(t)(1)(B)(i) of the Act authorizes the Secretary to designate the hospital outpatient services that are paid under the OPPS. Under this authority, the Secretary excluded from the OPPS those services that are paid under fee schedules or other payment systems. As stated in the April 17, 2000 OPPS final rule with comment period: “Rather than duplicate existing payment systems that are effectively achieving consistency of payments across different service delivery sites, we proposed to exclude from the outpatient PPS those services furnished in a hospital outpatient setting that were already subject to an existing fee schedule or other prospectively determined payment rate” (65 FR 18442). Because payment rates for laboratory tests were based on the CLFS, laboratory tests are among the services excluded from the OPPS. We codified this policy at 42 CFR 419.22(l).

As discussed above, it is our intent to revise the structure of the OPPS to adopt greater aspects of a prospective payment system and retain less of a fee schedule structure, which makes separate payment for each separately coded item. We have examined the services performed in the hospital outpatient setting to determine those services that we believe should be packaged in order to make the OPPS a more complete and robust prospective payment system. We were guided by our longstanding OPPS packaging principle of packaging the payment of items or services when they are provided along with primary services they support. Based on this approach, we believe that laboratory tests (other than molecular pathology tests, as discussed below) that are integral, ancillary, supportive, dependent, or adjunctive to the primary services provided in the hospital outpatient setting are services that should be packaged. Laboratory tests and their results support clinical decision making for a broad spectrum of primary services provided in the hospital outpatient setting, including surgery and diagnostic evaluations. Therefore, except as discussed below for molecular pathology tests, in the CY 2014 OPPS/ASC proposed rule (78 FR 43572), we proposed to package laboratory tests when they are integral, ancillary, supportive, dependent, or adjunctive to a primary service or services provided in the hospital outpatient setting. Specifically, we proposed that laboratory tests would be integral, ancillary, supportive, dependent, or adjunctive to a primary service or services provided in the hospital outpatient setting and appropriate for packaging into the payment of the primary service when they are provided on the same date of service as the primary service and when they are ordered by the same practitioner who ordered the primary service. We stated that the laboratory test codes that we were proposing to be packaged and assigned status indicator “N” for CY 2014 were listed in Addendum P to the proposed rule (which is available via the Internet on the CMS Web site). We also proposed to revise the regulation text at § 419.2(b) and § 419.22(l) to reflect this laboratory test packaging proposal.

We stated that we would consider a laboratory test to be unrelated to a primary service and, therefore, not part of the proposed packaging policy when the laboratory test is the only service provided on a date of service or when the laboratory test is provided on the same date of service as the primary service but is ordered for a different purpose than the primary service by a practitioner different than the practitioner who ordered the primary service provided in the hospital outpatient setting. We stated that laboratory tests not included in the packaging proposal would continue to be paid separately at CLFS rates when billed on a 14X bill type. We note that hospitals already use the 14X bill type to bill for referred specimens or any situation where the beneficiary receives laboratory tests but is not a registered outpatient of the hospital.

We also proposed an exception to our proposal to package laboratory tests for molecular pathology tests described by CPT codes in the ranges of 81200 through 81383, 81400 through 81408, and 81479. We did not propose that these services be packaged because we believe that these relatively new tests may have a different pattern of clinical use, which may make them generally less tied to a primary service in the hospital outpatient setting than the more common and routine laboratory tests that we proposed to package. As we gain more experience with molecular pathology tests, we stated that we will consider if packaging them in the OPPS in the future would be appropriate. These services would continue to be billed on a 13x claim and be assigned status indicator “A.”

In addition to the laboratory packaging policy proposals described above, we considered proposing an alternative laboratory packaging policy that would package those laboratory tests meeting the proposed policies above, but exclude laboratory tests with costs greater than some dollar threshold similar to the approach we use for separately paid drugs and biologicals in the OPPS so that only laboratory tests (meeting the proposed standards above) with CLFS payment rates below a certain dollar threshold amount would be packaged. Under this alternative policy, tests meeting the proposed standards above, but for which the CLFS payment rates are above the threshold amount, would continue to be separately paid. We decided not to propose this alternative policy because, as discussed above in the background section, our packaging policies generally do not consider the cost of the individual items and services that are packaged, meaning that we package both inexpensive and expensive items according to OPPS packaging principles.

We recognize that the Medicare Part B deductible and coinsurance generally do not apply for laboratory tests paid to hospitals at CLFS rates and that the deductible and coinsurance would apply to laboratory tests packaged into other services in the OPPS. The purpose of the laboratory packaging proposal was not to shift program costs onto beneficiaries. It is to encourage greater efficiency by hospitals and the most economical delivery of medically necessary laboratory tests which would contain unnecessary growth in hospital outpatient spending over the long run, which benefits all stakeholders. We stated that we estimate that the combination of packaging laboratory tests into a wide array of primary services provided in the hospital outpatient setting combined with our longstanding methodology to adjust the copayment percentages to 20 percent as provided in section 1833(t)(3)(B)(ii) of the Act and as discussed in section II.I. of the proposed rule (78 FR 43586 through 43587), and the limitation on the copayment amount for a procedure to the inpatient hospital deductible as set forth at section 1833(t)(8)(C)(i) of the Act would fully offset the financial impact on Medicare beneficiaries receiving laboratory tests that would be subject to the proposed packaging policy.

Further, we stated that we believe that creating these larger bundles will result in a more efficient use of laboratory tests when they are adjunctive to an outpatient service. In addition, to the extent that the coinsurance and deductible do not apply under the CLFS, they would continue not to apply for tests that are ordered, provided, and billed independently from a primary service as discussed above, or for molecular pathology tests. We invited public comments on the effect of packaging laboratory tests on beneficiary coinsurance.

Comment: Some commenters supported the proposal to package laboratory tests because they believed that packaging laboratory tests is consistent with CMS' goal to move the structure of the OPPS closer to a prospective payment system and away from a fee schedule construction.

Response: We appreciate the commenters' support.

Comment: A few commenters opposed the proposal to package laboratory tests because they believed that it could harm beneficiary access to these laboratory tests.

Response: We disagree. We believe that beneficiaries will continue to receive laboratory tests that are medically necessary. We are continuing to pay for these laboratory tests and have included the cost of the associated laboratory tests with the estimated cost of primary hospital outpatient services when establishing payment for these services. We believe that packaged payment will allow hospitals to better assess when and which laboratory tests are appropriate and provide these services more efficiently, but that this policy will not affect beneficiaries' access to reasonable and appropriate care.

Comment: A few commenters opposed the proposal to package laboratory tests because they believed that it would not achieve CMS' objective of greater cost efficiency in hospitals.

Response: We disagree. Packaging encourages efficiency and is an essential component of a prospective payment system. Packaging payment for items and services that are typically integral, ancillary, supportive, dependent, or adjunctive to a primary service has been a fundamental part of the OPPS since its implementation in August 2000. We believe that packaging encourages hospitals to furnish services in the most efficient way by enabling hospitals to manage their resources with the maximum flexibility, thereby encouraging long-term cost containment. Therefore, our packaging policies support our strategic goal of incentivizing hospitals to provide appropriate care in the most efficient manner.

Comment: One commenter suggested that CMS does not have the legislative authority to package laboratory tests in the OPPS. The commenter states that section 1833(h)(1)(A) of the Act requires that CMS pay for laboratory tests (except inpatient laboratory tests) in all settings according to the CLFS.

Response: We disagree. Although section 1833(h)(1)(A) of the Act established the CLFS, it does not prohibit outpatient laboratory tests from being paid either separately or as part of a packaged payment under the OPPS. Section 1833(t) of the Act gives the Secretary discretion to designate which services are covered OPD services, with the exception of those listed in section 1833(t)(1)(B)(iv) of the Act, and laboratory tests are not among the services listed in section 1833(t)(1)(B)(iv) of the Act. Laboratory tests provided in the hospital outpatient department have always been considered hospital outpatient services. However, until this proposal, we have since the inception of the OPPS elected to separately pay for laboratory tests in the hospital outpatient setting at the CLFS payment rates. For CY 2014, we proposed to include certain laboratory tests as covered OPD services under the OPPS, and we proposed to package payment for certain tests, similar to other covered outpatient services that are typically integral, ancillary, supportive, dependent, or adjunctive to a primary hospital outpatient services under the OPPS.

Comment: A few commenters expressed concern about increased beneficiary liability associated with laboratory tests being paid under the OPPS, which has a coinsurance obligation, unlike payment for laboratory tests under the CLFS, which does not have an associated coinsurance obligation by statute. One commenter also requested that, if CMS does finalize the laboratory test packaging policy for CY 2014, it exclude laboratory tests from the services into which they are packaged for the purpose of determining the coinsurance amount.

Response: We appreciate the commenters' concern about the welfare of Medicare beneficiaries. We assessed the financial impact of packaging laboratory tests on beneficiaries for the proposed rule and reassessed the impact for this final rule with comment period. We estimated in the proposed rule that the combination of packaging laboratory tests into a wide array of primary services provided in the hospital outpatient setting combined with our longstanding methodology to adjust the copayment percentages to 20 percent, as provided in section 1833(t)(3)(B)(ii) of the Act and as discussed in section II.I. of the proposed rule (78 FR 43573, 43586 through 43587), and the limitation on the copayment amount for a procedure to the inpatient hospital deductible as set forth at section 1833(t)(8)(C)(i) of the Act, would offset the financial impact on Medicare beneficiaries receiving laboratory tests that will be subject to the finalized packaging policy.

In this final rule with comment period, we are not finalizing our proposed policy to package ancillary services with a CY 2013 status indicator of “X” and diagnostic tests on the bypass list in response to public comments. We estimate that, in aggregate, the percentage of beneficiary liability for OPPS payments for CY 2014, including payment for certain clinical diagnostic laboratory tests, will be 21.7 percent in CY 2014, consistent with aggregate beneficiary liability under the OPPS in recent years. We believe that our final policy to create 29 comprehensive APCs for CY 2015 will reduce the aggregate beneficiary liability in CY 2015.

In addition, we believe that creating larger payment bundles will result in a more efficient use of clinical diagnostic laboratory tests when they are integral or supportive of an outpatient service. Furthermore, to the extent that the coinsurance and deductible do not apply under the CLFS, they would continue not to apply for tests that are ordered, provided, and billed independently from a primary service as discussed above, or for molecular pathology tests, which will continue to be paid under the CLFS.

Regarding the commenter's request that CMS exclude laboratory tests from the services into which they are packaged for the purpose of determining the coinsurance amount, we do not have the authority under section 1833(t)(8) of the Act to exclude laboratory tests from the services into which they are packaged for the purpose of determining the coinsurance amount.

Comment: Some commenters expressed concern about CMS' proposed exception to packaging for laboratory tests provided on the same date of service as another hospital outpatient service or services, but that are ordered by a different practitioner than the practitioner who ordered the primary hospital outpatient service or services and where the ordered laboratory test also is for a different purpose than the primary service. Commenters were concerned about hospitals' administrative burden associated with billing for separately paid laboratory tests. Commenters suggested that CMS implement claims processing changes and instructions in advance of adopting the laboratory packaging policy to ease hospitals' transition to this policy and the exceptions to this policy.

Response: We believe that these commenters may have misunderstood the nature of the proposed laboratory packaging policy. We proposed to package laboratory tests when they are integral, ancillary, supportive, dependent, or adjunctive to a primary service or services provided in the hospital outpatient setting; that is, when they are provided on the same date of service as the primary service and when they are ordered by the same practitioner who ordered the primary service. One exception to our proposal to package laboratory tests is to exempt molecular pathology tests, which would continue to be separately paid when billed on a 13x claim.

A laboratory test can be separately paid when (1) the laboratory test is the only service provided to that beneficiary on that date of service; or (2) the laboratory test is on the same date of service as the primary service but is ordered for a different purpose than the primary service by a practitioner different than the practitioner who ordered the primary service. When a laboratory test is the only service provided to a beneficiary at the hospital, the hospital can receive separate payment for those laboratory tests by billing for these services on a 14x claim; we would pay hospitals for these laboratory tests based on the CLFS payment rate. To illustrate the second scenario, a beneficiary has eye surgery scheduled with physician A, an ophthalmologist, but also has an order from physician B, a cardiologist, for unrelated laboratory tests. The beneficiary goes to the hospital for the eye procedure and decides to have the laboratory tests that have been ordered by physician B for a different purpose than the eye procedure on the same date of service. While the laboratory test is on the same date of service as the eye procedure, the laboratory tests are ordered for a different purpose than the primary service by a practitioner different than the practitioner who ordered the eye procedure. In this situation, the hospital can bill Medicare for the unrelated laboratory tests on a 14x claim and receive separate payment under the CLFS, similar to when the laboratory tests are the only service performed in the hospital outpatient department on a given date of service. However, if, in this example, physician A also ordered some laboratory tests as a part of a preoperative evaluation for the eye procedure and the beneficiary had the tests on the same date of service as the eye procedure, then the hospital would report those laboratory tests on a 13x claim along with the eye surgery. Payment for those preoperative laboratory tests would be packaged into the payment for the surgery, which is the primary procedure that would be paid separately. It will be the hospital's responsibility to determine when to separately bill laboratory tests on the 14x claim according to this description of these limited exceptions. We plan to issue revised contractor instructions for billing for these laboratory tests on a 14x bill type in January 2014, and we also will install claims processing edits.

Comment: A few commenters suggested that CMS adopt the alternative laboratory packaging policy discussed briefly above and in the proposed rule (78 FR 43573) to package only those laboratory tests with payment rates below some dollar threshold, similar to the approach that CMS uses for most drugs, biologicals, and therapeutic radiopharmaceuticals in the OPPS. Commenters stated that such a policy would enable hospital specialty clinics to perform more complex, expensive, and esoteric laboratory tests.

Response: We appreciate the commenters' thoughts on this alternative. We continue to believe that a dollar packaging threshold is not appropriate for laboratory tests because almost all laboratory tests are inexpensive (97 percent of all laboratory tests have CLFS national limitation amounts of less than $100) relative to other services that are provided in the hospital outpatient department. This is unlike many of the drugs and biologicals that are used in the hospital outpatient department that not uncommonly cost thousands of dollars per dose. Therefore, we continue to believe that it is not necessary to adopt a payment threshold policy for packaging laboratory tests similar to the threshold policy for packaging drugs and biologicals.

Comment: A few commenters requested additional exceptions to the proposal to package specific laboratory tests, including, for example, tests for in situ hybridization and cardiovascular screening. These commenters stated that, like molecular pathology tests for which CMS proposed an exception to the proposal to conditionally package laboratory tests, these tests have a different pattern of clinical use than most other laboratory tests and, therefore, should continue to be separately paid in the hospital outpatient setting.

Response: After considering the various requests for exceptions for specific laboratory tests that we received, we do not believe that additional exceptions to the laboratory packaging policy are necessary. We understand that there are laboratory tests that are less common and frequent than a standard panel, such as new tests. We do not believe that the tests described by the commenters or other laboratory tests that were proposed to be packaged are similar to the tests in the molecular pathology test series such that additional exceptions are warranted. We proposed to exclude the molecular pathology tests from our packaging proposal because, as a class of laboratory tests, their overall pattern of clinical use has not yet developed and we believe that these tests are less tied to a primary service than other laboratory tests. Once their pattern of use develops, we will assess whether we believe these laboratory tests also should be conditionally packaged. We do not believe that in situ hybridization and cardiovascular screening or other types of laboratory tests are a developing class of laboratory tests for which we do not know the pattern of use. For example, in situ hybridization may be a part of a comprehensive evaluation for a suspected malignancy. In response to commenter requests for additional exceptions, we also reviewed all of the laboratory tests listed in Addendum P to the proposed rule and do not believe that further exceptions to our proposal to conditionally package laboratory tests are necessary.

After consideration of the public comments we received, for CY 2014, we are finalizing our proposal without modification to package laboratory tests in the OPPS when they are integral, ancillary, supportive, dependent, or adjunctive to a primary service or services provided in the hospital outpatient setting; that is, when they are provided on the same date of service as the primary service and when they are ordered by the same practitioner who ordered the primary service. This means that a laboratory test will not be packaged when (1) a laboratory test is the only service provided to that beneficiary on that date of service; or (2) a laboratory test is conducted on the same date of service as the primary service but is ordered for a different purpose than the primary service by a practitioner different than the practitioner who ordered the primary service. We also are finalizing our proposal without modification to except molecular pathology tests described by CPT codes in the ranges of 81200 through 81383, 81400 through 81408, and 81479 from this packaging proposal. In addition, we are finalizing our proposal without modification to revise the regulation text at § 419.2(b) and § 419.22(l) to reflect this conditional laboratory test packaging policy.

The laboratory test codes subject to this packaging policy will be assigned status indicator “N” because any laboratory tests reported on a 13x bill type will be packaged for CY 2014. These codes are listed in Addendum P to this final rule with comment period (which is available via the Internet on the CMS Web site).

(4) Procedures Described by Add-On Codes

Add-on codes describe procedures that are always performed in addition to a primary procedure. CPT defines add-on codes as codes that describe “procedures [that] are commonly carried out in addition to the primary procedure performed,” and also states that “[a]dd-on codes are always performed in addition to the primary service or procedure and must never be reported as a stand-alone code” (2013 CPT Codebook Professional Edition, page xi). CPT add-on codes are listed in Appendix D of the CPT codebook. Add-on codes can also be Level II HCPCS codes. For example, the procedure described by CPT code 11001 is “Debridement of extensive eczematous or infected skin; each additional 10% of the body surface, or part thereof (list separately in addition to code for primary procedure).” This code is used for additional debridement beyond that described by the primary procedure code. Historically, the OPPS has generally paid separately for add-on codes based on an APC assignment with status indicator “T” indicating that the multiple procedure payment reduction for surgeries applies.

Procedures described by add-on codes represent an extension or continuation of a primary procedure, which means that they are typically supportive, dependent, or adjunctive to a primary service, which is usually a surgical procedure. The primary code defines the purpose and typical scope of the patient encounter and the add-on code describes incremental work, when the extent of the procedure encompasses a range rather than a single defined endpoint applicable to all patients. The CPT codebook states that an add-on code describes “additional intra-service work associated with the primary procedure” (2013 CPT Codebook Professional Edition, page xi). For example, add-on CPT code 11001 is used for each additional 10 percent of debridement beyond that described by the primary code. Given the dependent nature and adjunctive characteristics of procedures described by add-on codes and in light of longstanding OPPS packaging principles described above, we believe add-on procedures should be packaged with the primary procedure. In the CY 2014 OPPS/ASC proposed rule (78 FR 43573), we proposed to unconditionally package all procedures described by add-on codes in the OPPS.

Aside from advancing the OPPS as a prospective payment system by packaging add-on codes, an additional benefit to packaging add-on codes is more accurate OPPS payment for procedures described by add-on codes. Currently, calculating geometric mean costs for procedures described by add-on codes is problematic in the OPPS because, as with many claims with multiple procedures, we cannot determine which costs on a claim are attributable to the primary procedure and which costs are attributable to the add-on procedure. Furthermore, because we use single claims and pseudo single procedure claims for ratesetting, we generally must rely on incorrectly coded claims containing only the add-on code to determine payment rates for add-on procedures. Claims containing only an add-on code are incorrectly coded because they should be reported with (or “added-on” to) a primary procedure. Packaging the line item costs associated with an add-on code into the cost of the primary procedure will help address this ratesetting problem because the costs of the add-on code would be packaged into the primary procedure, and we would no longer have to use miscoded claims to calculate estimated costs for add-on codes. Packaging add-on codes also would increase the number of single bills available for ratesetting for the primary procedures. We discuss how we model claims to establish relative payment weights, including definitions of multiple, single, and pseudo single claims in section II.A.2. of this final rule with comment period.

We proposed to revise the regulations at § 419.2(b) to include the packaging of add-on codes. The specific add-on codes that we proposed to be unconditionally packaged and assigned status indicator “N” for CY 2014 are listed in Addendum P to the proposed rule, which is available via the Internet on the CMS Web site.

Comment: Some commenters supported the proposal to package add-on codes, and agreed with CMS that packaging add-on codes is consistent with a prospective payment system and will improve OPPS ratesetting.

Response: We appreciate the commenters' support.

Comment: Several commenters objected to the proposal to package add-on codes for the following reasons:

  • According to the commenters, procedures described by add-on codes are not necessarily integral, ancillary, supportive, dependent, or adjunctive to the primary service into which they would be packaged.
  • Some procedures described by add-on codes include expensive implantable medical devices, and although they are integral to the primary procedure, commenters note that packaging these procedures into the primary procedure risks significant underpayment for the overall procedure that includes additional medical devices, which could negatively affect patient access to these devices.
  • Add-on code packaging should not apply to infrequently performed add-on codes as the cost of these infrequent services will not be sufficiently reflected in the payment for the primary procedure.
  • Some add-on codes are not related to the primary procedure but represent incremental additional physician work, and for this reason should not be packaged.

To insure continued patient access to these procedures, commenters requested that CMS establish exceptions to its proposal to package add-on codes for specific services that commenters believed would be underpaid under the policy, including, but not limited to, kyphoplasty add-on procedure, endoscopic retrograde cholangiopancreatography add-on procedure, pelvic reconstruction add-on procedures, neurolysis, and pathology services.

Response: We disagree with commenters that add-on services are not integral, ancillary, supportive, dependent, or adjunctive to the primary service. The fundamental nature of an add-on code procedure is that it typically describes some form of a related extension of or addition to the primary procedure or service described by the primary procedure. The very definition of an add-on code is that it is an extension of a primary, base service. CPT states that “add-on codes describe additional intra-service work associated with the primary procedure” (emphasis added) (2013 CPT Codebook Professional Edition, page xi). Therefore, we believe that add-on code procedures are related extensions, supportive, integral, or adjunctive of the primary procedure and, therefore, it is appropriate to package the cost of the add-on codes into the payment calculation for the primary procedure. For the same reasons, we also do not agree with commenters that some add-on codes are not related to the primary procedure but represent a separate procedure that should be paid separately from the primary procedure.

Regarding the packaging of add-on procedures that use expensive medical devices, we note that the most expensive medical devices used in procedures to insert or implant devices in the outpatient setting are included in procedures we proposed to be assigned to comprehensive APCs. In section II.A.2.e. of this final rule with comment period, we discuss this policy, which we are adopting, but delaying the implementation until CY 2015. We will continue to separately pay for procedures described by add-on codes that are currently assigned to device-dependent APCs. We note that almost all such codes will be included in a comprehensive APC for CY 2015. Therefore, until the comprehensive APC policy is implemented, we will continue to pay separately for procedures described by add-on codes that are assigned to device-dependent APCs. The device-dependent add-on codes that will continue to be separately paid in CY 2014 are listed below in Table 15.

BILLING CODE 4120-01-P

BILLING CODE 4120-01-C

However, in general the cost of all medical devices used along with all of the other costs associated with the add-on code procedures are a part of the costs used to calculate the payment for a primary procedure when add-on codes are packaged. Most important, a prospective payment system pays an average amount for a unit of service, which may be more or less costly on a case-by-case basis. Unless an ancillary service is always performed with a primary procedure or service, a prospective payment will not reflect the full estimated cost of the packaged procedure or service. Payment for the primary procedure rather would reflect some payment for the ancillary procedure, but each time the primary procedure is performed, the hospital receives additional payment, even when the ancillary service is not provided. Unless an add-on code is always performed with a primary procedure, we would not expect the relative payment weight to reflect the full costs associated with performing the primary procedure and certain add-on procedures, especially if the add-on procedures are performed relatively infrequently as compared to the primary procedure. Our experience with packaging services under the OPPS, where we continue to see packaged services furnished with the primary procedure, leads us to believe that hospitals will continue to provide the full range of medically necessary care to beneficiaries under overall prospective payment for the primary procedure and any add-on procedures. Therefore, we do not believe that it is necessary to create additional exceptions to the add-on code policy for select infrequently performed services that may cost more (in addition to the cost of the primary procedure) to pay more than the prospective payment for the primary service with add-on code procedures packaged into them.

However, we acknowledge that, under certain circumstances, certain primary code and add-on code combinations could be more likely to result in a relatively highly costly case as compared to the packaged payment for the primary code. Therefore, in light of this new policy to unconditionally package most add-on codes, we will examine our estimated OPPS outlier percentage in light of all final packaging policies contained in this final rule with comment period and consider increasing it in the future to accommodate greater potential risk from high cost outlier cases that would result from packaging of certain add-on codes. An increase in the outlier percentage would accommodate more relatively high cost cases.

Comment: Some commenters objected to packaging drug administration add-on codes, which typically describe each additional hour of infusion or each additional intravenous push, etc. in addition to the initial drug administration service. The commenters believed that such a policy could disadvantage providers of longer drug administration services, which are often protocol driven and are not necessarily dictated by the hospital but by the characteristics of the specific drug or biological being administered to the patient.

Response: We believe that, given the frequency of drug administration services in the hospital outpatient department and their use in such a wide variety of different drug treatment protocols for various diseases in all types of hospitals, further study of the payment methodology for these services is warranted at this time. Therefore, we are not finalizing our proposal to package the drug administration add-on codes in CY 2014. However, we may continue to explore other payment options, including packaging and variations on packaging, in future years.

After consideration of the public comments we received, we are finalizing our proposal to unconditionally package procedures described by add-on codes, with the exception of add-on codes for drug administration services and for CY 2014 add-on codes assigned to device-dependent APCs. In addition, for CY 2014 only, we will continue to separately pay for procedures described by add-on codes that are currently assigned to device-dependent APCs. We also are revising § 419.2(b) to include add-on code procedures among the services that are packaged in the OPPS. The specific add-on codes that we are unconditionally packaging and assigning status indicator “N” for CY 2014 are listed in Addendum P and Addendum B to this final rule with comment period (which are available via the Internet on the CMS Web site).

(5) Ancillary Services (Status Indicator “X”)

Under the OPPS, we currently pay separately for certain ancillary services that are assigned to status indicator “X,” defined as “ancillary services.” Those ancillary services assigned status indicator “X” in the OPPS and paid separately are, by definition, ancillary to primary services provided in the OPPS and include many minor diagnostic tests and procedures that are typically performed with a primary service, although there are instances where hospitals provide such services alone and without another primary service on the same date.

As mentioned above, our intent is that the OPPS be more of a prospective payment system through expanded packaging. Given that the longstanding OPPS policy is to package items and services that are integral, ancillary, supportive, dependent, or adjunctive to a primary service, we stated in the CY 2014 OPPS/ASC proposed rule (78 FR 43573) that we believe that these ancillary services, which are assigned status indicator “X,” should be packaged when they are performed with another service, but should continue to be separately paid when performed alone. We indicated that this packaging approach is most consistent with a prospective payment system and the regulation at § 419.2(b) that packages ancillary services into primary services while preserving separate payment for those instances in which one of these services is provided alone (not with a separate primary service) to a hospital outpatient.

In summary, in the proposed rule, we proposed to conditionally package all ancillary services that were previously assigned a status indicator of “X” and assign these services to status indicator “Q1” (packaged when provided with a service assigned a status indicator of “S,” “T,” or “V”). Status indicator “X” would be discontinued. To encourage maximum flexibility to beneficiaries across different sites of service, we did not propose to conditionally package preventive services assigned to status indicator “X” and instead proposed to change the status indicator for preventive services from the currently assigned status indicator “X” to status indicator “S.” The specific codes for procedures assigned to status indicator “X” that were proposed to be conditionally packaged and assigned to status indicator “Q1” for CY 2014 were listed in Addendum P to the proposed rule (which is available via the Internet on the CMS Web site).

Comment: A few commenters agreed with CMS' proposal to package services assigned the status indictor “X” (ancillary services) because they believed that this proposal was consistent with CMS' policy of packaging services that are typically integral, ancillary, supportive, dependent, or adjunctive to a primary HOPD service.

Response: We appreciate the commenters' support.

Comment: Many commenters opposed the proposal to conditionally package services currently assigned status indicator “X.” These commenters stated that this category of services is too varied and that the services in this category are not always ancillary to the services into which they would be packaged. The commenters specifically mentioned radiation oncology planning services and pathology services as examples of services that, under the proposal, could be packaged into a visit but would not be ancillary to that visit. They also objected because, in some cases, relatively costly services could be packaged into services with a low payment, especially a visit code because there is so much volume in visit codes that high cost, low volume ancillary services would not measurably impact visit payments.

Response: We believe that the commenters have raised some valid points regarding whether all of the services currently assigned status indicator “X” are in all cases ancillary to the services into which their payment would be packaged. We believe that a reexamination of this group of services is warranted to determine which services are best described as ancillary services and packaged on that basis and which services should either be packaged under a different policy or separately paid in the OPPS.

However, we will finalize the conditional packaging of one ancillary service described by CPT code 93017 (Cardiovascular stress test using maximal or submaximal treadmill or bicycle exercise, continuous electrocardiographic monitoring, and/or pharmacological stress; tracing only, without interpretation and report). Stress testing is often performed as a part of myocardial perfusion imaging (MPI). MPI is most commonly reported with CPT code 78452 (Myocardial perfusion imaging, tomographic (SPECT) (including attenuation correction, qualitative or quantitative wall motion, ejection fraction, by first pass or gated technique, additional quantification, when performed); multiple studies, at rest and/or stress (exercise or pharmacologic) and/or redistribution and/or rest reinjection). As indicated by the code descriptor, MPI includes stress testing as described by CPT code 93017, and approximately 96 percent of MPI is performed under stress. Therefore, we believe that, because stress testing is both integral and ancillary to MPI, it should be packaged into MPI when a stress test accompanies MPI.

After consideration of the public comments we received, we are not finalizing our proposal to conditionally package codes currently assigned the ancillary service status indicator “X” for CY 2014 when performed with another service, with the exception that CPT code 93017 will be conditionally packaged. We may review the services assigned status indicator “X” (ancillary services) to determine which may be appropriate for packaging as ancillary services in the OPPS in future years.

(6) Diagnostic Tests on the Bypass List

For the CY 2013 OPPS, we continued our policy to use a bypass list to convert lines from multiple procedure claims into “pseudo” single procedure claims. In the CY 2014 OPPS/ASC proposed rule (78 FR 43574), we proposed to continue developing “pseudo” single procedure claims using a bypass list for the CY 2014 OPPS, as discussed in section II.A.1.b. of the proposed rule. The bypass list of separately paid services is used to convert claims with multiple separately payable procedures, which are generally not used for ratesetting purposes, into claims with the isolated costs of a single separately paid procedure that can be used for ratesetting. Services on the bypass list have limited associated packaged costs so they can be bypassed when assigning packaged costs on a claim to a separately paid procedure on the same claim.

As noted above, beginning in CY 2008, we packaged several diagnostic items and services including guidance services, image processing services, intraoperative services, imaging supervision and interpretation services, diagnostic radiopharmaceuticals, and contrast agents. In the CY 2014 OPPS/ASC proposed rule (78 FR 43570), we also proposed to conditionally package several diagnostic items and services, including drugs, biologicals, and radiopharmaceuticals that function as supplies when used in a diagnostic test or procedure, ancillary services (many of which are diagnostic tests), and certain clinical laboratory tests. We stated that we believe that the diagnostic tests on the bypass list share many of the characteristics with these other conditionally or unconditionally packaged or proposed packaged categories of items and services in that they are diagnostic and are integral, ancillary, supportive, dependent, or adjunctive to a primary service. Examples include a barium swallow test (CPT code 74220) and a visual field examination (CPT code 92081). Given the nature of these services, we proposed to conditionally package these procedures. We recognize that some of these services are sometimes provided without other services and, therefore, they will continue to be separately paid in those circumstances.

We proposed to conditionally package codes on the bypass list and to assign them the appropriate status indicator “Q1” beginning in the CY 2014 OPPS. Some of these diagnostic tests on the bypass list are currently assigned to status indicator “X” and, therefore, would be conditionally packaged under the proposed policy to conditionally package ancillary services currently assigned status indicator “X.” The only diagnostic codes on the bypass list affected by this proposal are currently assigned to status indicator “S.” The specific codes for the diagnostic tests on the bypass list that we proposed to be conditionally packaged and assigned to status indicator “Q1” for CY 2014 were listed in Addendum P to the proposed rule (which is available via the Internet on the CMS Web site). Similar to our conditional packaging proposal for services previously assigned to status indicator “X,” we did not propose to conditionally package preventive services that are diagnostic tests on the bypass list.

Comment: Some commenters supported CMS' proposal to package diagnostic codes on the bypass list because they believed that they are generally ancillary and supportive to other HOPD services.

Response: We appreciate the commenters' support.

Comment: Some commenters opposed packaging diagnostic tests on the bypass list for the following reasons:

  • Some of the tests, for example, echocardiography, included in this category are not typically integral, ancillary, supportive, dependent, or adjunctive to the service into which they would be packaged.
  • Some of the procedures on the bypass list would be packaged into significantly lower paying procedures, including visits.
  • The interaction between conditional packaging of these diagnostic tests and other status indicator logic sometimes produces anomalous payments.
  • Hospitals have an incentive to schedule procedures on different days to avoid packaging.
  • Access to some of these tests may be negatively impacted by packaging.

Response: We believe that the commenters have raised some valid points regarding whether all of the services included in the category “diagnostic codes on the bypass list” are integral, ancillary, supportive, dependent, or adjunctive to the service into which their payment is packaged. We believe that a reexamination of this group of services is warranted to determine which services are best described as integral, ancillary, supportive, dependent, or adjunctive services to the service into which it would be packaged to determine which services should either be packaged under a different policy or separately paid in the OPPS.

Therefore, after consideration of the public comments we received, we are not finalizing our proposal to conditionally package diagnostic tests on the bypass list for CY 2014, or our proposal to assign these codes a status indicator of “Q1.” We will review the services currently listed in Addendum P under “diagnostic tests on the bypass list” to determine which tests may be appropriate for packaging in the OPPS in future years. Codes that would have been affected by the CY 2014 packaging proposal for this category of services will remain on the bypasss list for the CY 2014 OPPS, as discussed in section II.A.1.b. of this final rule with comment period.

(7) Device Removal Procedures

Implantable devices frequently require a procedure to remove or replace the device due to wear, failure, recall, and infection, among other reasons. Since the beginning of the OPPS, implantable devices have been packaged (either as supplies, implantable prosthetics, or implantable DME) into their associated procedures. A device removal procedure is sometimes described by a code that may include repair or replacement. In other cases, a device removal procedure is described by a separate code that only describes the surgical procedure to remove a device. Device removal procedures are frequently performed with procedures to repair or replace devices, although it is possible that a device removal procedure may occur without repair or replacement if the clinical indication for the device that was removed no longer exists. When a separately coded device removal procedure is performed with a separately coded device repair or replacement procedure, the device removal procedure should be considered as one part of an overall procedure for removing a device with repair or replacement of the device.

Given that a separately coded device removal procedure that accompanies a device repair or replacement procedure represents a service that is integral and supportive to a primary service, in the CY 2014 OPPS/ASC proposed rule (78 FR 73574), we proposed to conditionally package device removal codes when they are billed with other surgical procedures involving repair or replacement and assign a status indicator of “Q2.” We stated that we believe that this conditional packaging policy is appropriate under longstanding OPPS packaging principles because these device removal procedures are an integral and supportive step in a more comprehensive overall procedure. Furthermore, conditionally packaging these device removal procedures with the replacement or revision codes would be consistent with our packaging policies for other dependent services. The specific codes for the device removal procedures that we proposed to be conditionally packaged and assigned to status indicator “Q2” for CY 2014 were listed in Addendum P to the proposed rule (which is available via the Internet on the CMS Web site).

Comment: Some commenters agreed with CMS' proposal to conditionally package device removal procedures in the OPPS because they are often part of a larger procedure to revise or replace a device.

Response: We appreciate the commenters' support.

After consideration of the public comments we received, we are finalizing our policy to conditionally package device removal procedures in the OPPS when performed together with a repair or replacement of a device and to assign a status indicator of “Q2.” The specific device removal procedure codes that we are conditionally packaging and assigning to status indicator “Q2” for CY 2014 are listed in Addendum P to this final rule with comment period (which is available via the Internet on the CMS Web site).

e. Clarification Regarding Supplies That Are Packaged in the OPPS

Under the regulations at § 419.2(b)(4), medical and surgical supplies and equipment are unconditionally packaged in the OPPS and have been since the beginning of the payment system. Supplies is a large category of items that typically are either for single patient use or have a shorter life span in use than equipment. Packaged supplies can include certain drugs, biologicals, and radiopharmaceuticals. The only supplies that are sometimes paid separately in the hospital outpatient setting are prosthetic supplies under § 419.22(j), and if paid separately, they are paid according to the DMEPOS fee schedule. As we discussed in the CY 2014 OPPS/ASC proposed rule (78 FR 43575), in our annual review of the OPPS for CY 2014, we discovered many supplies that should be packaged in the OPPS according to § 419.2(b)(4), but that are currently assigned to status indicator “A” and are separately paid in the hospital outpatient setting according to the DMEPOS fee schedule. For CY 2014, we proposed to revise the status indicator for all supplies described by Level II HCPCS A-codes (except for prosthetic supplies) from status indicator “A” to “N,” so that these supplies would be unconditionally packaged as required by § 419.2(b)(4).

Comment: A few commenters supported CMS' proposed change in the status indicators for these supplies from “A” to “N.” One commenter urged CMS not to finalize this proposal because the commenter believed that hospitals should be separately paid for supplies given to the patient to take home.

Response: Our longstanding regulations at § 419.2(b)(4) require that we package all supplies in the OPPS except prosthetic supplies.

After consideration of the public comments we received, we are updating the status indicators for all supplies (except prosthetic supplies) to “N.” The specific Level II HCPCS A-codes whose status indicator are revised from “A” to “N” are listed in Addendum P to this CY 2014 OPPS/ASC final rule with comment period (which is available via the Internet on the CMS Web site).

f. Revision and Clarification of the Regulations at 42 CFR 419.2(b) and 42 CFR 419.22

In the CY 2013 OPPS/ASC final rule with comment period (77 FR 68272), after consideration of public comments we received on the proposed rule, we clarified the regulatory language at § 419.2(b) to make explicit that the OPPS payments for the included costs of the nonexclusive list of items and services covered under the OPPS referred to in this paragraph are packaged into the payments for the related procedures or services with which such items and services are provided. In the CY 2014 OPPS/ASC proposed rule (78 FR 43575), we proposed to further revise this regulation to add the packaging categories that were adopted in CYs 2008 and 2009 in addition to the new proposed policies described above. We also proposed to make some further minor revisions and editorial clarifications to the existing language of § 419.2(b) to make it more clearly reflect current packaging policy. Finally, we proposed to revise the list of services excluded from the OPPS at § 419.22.

Comment: Some commenters urged CMS not to revise the regulations at 42 CFR 419.2(b) as a part of their request that CMS not adopt any of the packaging proposals.

Response: We believe that codifying the new policies will promote clarity regarding OPPS packaging policy, and therefore we are finalizing our revision of the regulations.

After consideration of the public comments received, we are finalizing our revision of the regulations at 42 CFR 419.2(b) and 419.22 to reflect the new packaging policies.

g. Comment Solicitation on Increased Packaging for Imaging Services

We currently package several kinds of imaging services in the OPPS, including image guidance services, image processing services, intraoperative imaging, and imaging supervision and interpretation services. In addition to these imaging services that are either packaged or proposed to be packaged, we stated in the CY 2014 OPPS/ASC proposed rule (78 FR 43575) that we are considering a proposal for CY 2015 that would conditionally package all imaging services with any associated surgical procedures. We stated that imaging services not provided with a surgical procedure would continue to either be separately paid according to a standard clinical APC or a composite APC. We requested public comments on this potential CY 2015 proposal.

Comment: Some commenters objected to this potential future proposal on the grounds that such a packaging policy could result in less access to imaging in the HOPD. One commenter asked about the claims logic hierarchy for packaging imaging into surgery as it relates to the imaging composites.

Response: We appreciate these thoughtful comments, and we will consider them as we further consider packaging imaging services in the OPPS.

4. Calculation of OPPS Scaled Payment Weights

In the CY 2014 OPPS/ASC proposed rule (78 FR 43576), for CY 2014, we proposed to calculate the relative payment weights for each APC for CY 2014 shown in Addenda A and B to the proposed rule (which are available via the Internet on the CMS Web site) using the APC costs discussed in sections II.A.1. and II.A.2. of the proposed rule. For this CY 2014 final rule with comment period, we are continuing to use this methodology to calculate the relative payment weights for each APC for CY 2014. In years prior to CY 2007, we standardized all the relative payment weights to APC 0601 (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 the CY 2013 OPPS (77 FR 68283), we established a policy of using geometric mean-based APC costs to calculate relative payment weights. For the CY 2014 OPPS, we proposed to continue basing the relative payment weights on which OPPS payments will be made by using geometric mean costs (78 FR 43576). As we discuss in section VII. of the proposed rule and this final rule with comment period, we proposed to reconfigure the CY 2014 visit APCs so that they would include a single level for each visit type. However, in an effort to maintain consistency in calculating unscaled weights that represent the cost of some of the most frequently provided services, we proposed to use the cost of the clinic visit APC in calculating unscaled weights, which for CY 2014 was proposed APC 0634. While we have previously used APC 0606 as the base from which to develop the OPPS budget neutral weight scaler, under our proposal to reconfigure the visit APCs, we proposed to have a single APC for each visit type. The proposal to reconfigure the visit APCs is discussed in more detail in section VII. of the proposed rule and this final rule with comment period. Following our general methodology for establishing relative payment weights derived from APC costs, but using the proposed CY 2014 geometric mean cost for APC 0634, for CY 2014, we proposed to assign APC 0634 a relative payment weight of 1.00 and to divide the geometric mean cost of each APC by the proposed geometric mean cost for APC 0634 to derive the proposed unscaled relative payment weight for each APC. The choice of the APC on which to base the proposed relative payment weights for all other APCs does not affect the payments made under the OPPS because we scale the weights for budget neutrality.

Section 1833(t)(9)(B) of the Act requires that APC reclassification and recalibration changes, wage index changes, and other adjustments be made in a budget neutral manner. Budget neutrality ensures that the estimated aggregate weight under the OPPS for CY 2014 is neither greater than nor less than the estimated aggregate weight that would have been made without the changes. To comply with this requirement concerning the APC changes, as we proposed, we compare the estimated aggregate weight using the CY 2013 scaled relative payment weights to the estimated aggregate weight using the CY 2014 unscaled relative payment weights.

For CY 2013, we multiplied the CY 2013 scaled APC relative payment weight applicable to a service paid under the OPPS by the volume of that service from CY 2012 claims to calculate the total relative payment weight for each service. We then added together the total relative payment weight for each of these services in order to calculate an estimated aggregate weight for the year. For CY 2014, we are applying the same process using the CY 2014 unscaled relative payment weights rather than scaled relative payment weights. We calculate the weight scaler by dividing the CY 2013 estimated aggregate weight by the CY 2014 estimated aggregate weight. The 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. We note that, as a result of the CY 2014 OPPS packaging policy for laboratory tests described in section II.A.3.b.(3) of this final rule with comment period, we need to incorporate the estimated relative payment weights from those services. Therefore, the CY 2013 estimated OPPS aggregate weight include payments for outpatient laboratory tests paid at the CLFS rates.

For a detailed discussion of the weight scaler calculation, we refer readers to the OPPS claims accounting document available on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html.

We include estimated payments to CMHCs in our comparison of the estimated unscaled relative payment weights in CY 2014 to the estimated total relative payment weights in CY 2013 using CY 2012 claims data, holding all other components of the payment system constant to isolate changes in total weight. Based on this comparison, we adjusted the CY 2014 unscaled relative payment weights for purposes of budget neutrality. The CY 2014 unscaled relative payment weights were adjusted by multiplying them by a weight scaler of 1.2732 to ensure that the CY 2014 relative payment weights are budget neutral.

Section 1833(t)(14) of the Act provides the payment rates for certain SCODs. Section 1833(t)(14)(H) of the Act states that “Additional expenditures resulting from this paragraph shall not be taken into account in establishing the conversion factor, weighting, and other adjustment factors for 2004 and 2005 under paragraph (9), but shall be taken into account for subsequent years.” Therefore, the cost of those SCODs (as discussed in section V.B.3. of this final rule with comment period) is included in the budget neutrality calculations for the CY 2014 OPPS.

Comment: One commenter expressed the concern that CMS may have underfunded the OPPS in developing the budget neutral weight scaler for the additional costs associated with laboratory tests for CY 2014.

Response: We appreciate the commenter's concern. We discussed the calculation of the proposed CY 2014 budget neutral weight scaler in the CY 2014 OPPS/ASC proposed rule (78 FR 43576) as well as the claims accounting narrative that we make available via the Internet on the CMS Web site. In calculating the CY 2014 OPPS budget neutral weight scaler, we calculated the CY 2013 aggregate payment weight associated with the laboratory tests paid at CLFS rates by applying the CY 2013 CLFS payment rates to the laboratory tests performed in the hospital setting. We note that this is the standard process we use to develop relative payment weights for budget neutrality for items and services that have predetermined payment rates, such as separately paid OPPS drugs and New Technology APCs. We note that we released corrected data files on August 28, 2013, and extended the comment period to September 16, 2013, on the technical corrections noted in the correcting document published in the Federal Register on September 6, 2013 (78 FR 54842). However, there were no corrections associated with the amount of the estimated payment weight being budget neutralized from these clinical diagnostic laboratory tests.

After consideration of the public comments we received, we are finalizing our proposed methodology for calculating the OPPS scaled relative payment weights without modification, including updating of the budget neutrality scaler for this final rule with comment period. Under this methodology, the final unscaled relative payment weights were adjusted by a weight scaler of 1.2732 for this final rule with comment period. The CY 2014 unscaled relative payment weights listed in Addenda A and B to this final rule with comment period (which are available via the Internet on the CMS Web site) incorporate the recalibration adjustments discussed in sections II.A.1. and II.A.2. of this final rule with comment period.

B. Conversion Factor Update

Section 1833(t)(3)(C)(ii) of the Act requires the Secretary to update the conversion factor used to determine the payment rates under the OPPS on an annual basis by applying the OPD fee schedule increase factor. For purposes of section 1833(t)(3)(C)(iv) of the Act, subject to sections 1833(t)(17) and 1833(t)(3)(F) of the Act, the OPD fee schedule increase factor is equal to the hospital inpatient market basket percentage increase applicable to hospital discharges under section 1886(b)(3)(B)(iii) of the Act. In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50607), consistent with current law, based on IHS Global Insight, Inc.'s second quarter 2013 forecast of the FY 2014 market basket increase, the final FY 2014 IPPS market basket update is 2.5 percent. However, sections 1833(t)(3)(F) and 1833(t)(3)(G)(iii) of the Act, as added by section 3401(i) of the Patient Protection and Affordable Care Act of 2010 (Pub. L. 111-148) and as amended by section 10319(g) of that law and further amended by section 1105(e) of the Health Care and Education Reconciliation Act of 2010 (Pub. L. 111-152), provide adjustments to the OPD fee schedule increase factor for CY 2014.

Specifically, section 1833(t)(3)(F)(i) of the Act requires that, for 2012 and subsequent years, the OPD fee schedule increase factor under subparagraph (C)(iv) be reduced by the productivity adjustment described in section 1886(b)(3)(B)(xi)(II) of the Act. Section 1886(b)(3)(B)(xi)(II) of the Act defines the productivity adjustment as equal to the 10-year moving average of changes in annual economy-wide, private nonfarm business multifactor productivity (MFP) (as projected by the Secretary for the 10-year period ending with the applicable fiscal year, year, cost reporting period, or other annual period) (the “MFP adjustment”). In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51689 through 51692), we finalized our methodology for calculating and applying the MFP adjustment. In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27572), we discussed the calculation of the proposed MFP adjustment for FY 2014, which was 0.4 percentage point.

We proposed that if more recent data became subsequently available after the publication of the proposed rule (for example, a more recent estimate of the market basket increase and the MFP adjustment), we would use such data, if appropriate, to determine the CY 2014 market basket update and the MFP adjustment, components in calculating the OPD fee schedule increase factor under sections 1833(t)(3)(C)(iv) and 1833(t)(3)(F) of the Act, in this CY 2014 OPPS/ASC final rule with comment period. In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50607), we discussed the calculation of the final MFP adjustment for FY 2014, which is 0.5 percentage point.

In addition, section 1833(t)(3)(F)(ii) of the Act requires that, for each of years 2010 through 2019, the OPD fee schedule increase factor under section 1833(t)(3)(C)(iv) of the Act be reduced by the adjustment described in section 1833(t)(3)(G) of the Act. For CY 2014, section 1833(t)(3)(G)(iii) of the Act provides a 0.3 percentage point reduction to the OPD fee schedule increase factor under section 1833(t)(3)(C)(iv) of the Act. Therefore, in accordance with sections 1833(t)(3)(F)(ii) and 1833(t)(3)(G)(iii) of the Act, in the CY 2014 OPPS/ASC proposed rule (78 FR 43577), we proposed to apply a 0.3 percentage point reduction to the OPD fee schedule increase factor for CY 2014.

We note that section 1833(t)(3)(F) of the Act provides that application of this subparagraph may result in the OPD fee schedule increase factor under section 1833(t)(3)(C)(iv) of the Act being less than 0.0 for a year, and may result in payment rates under the OPPS for a year being less than such payment rates for the preceding year. As described in further detail below, using the final methodology and more recent data results in an OPD fee schedule increase factor of 1.7 percent for the CY 2014 OPPS (which is 2.5 percent, the final estimate of the hospital inpatient market basket percentage increase, less the final 0.5 percentage point MFP adjustment, and less the 0.3 percentage point additional adjustment).

We note that hospitals that fail to meet the Hospital OQR Program reporting requirements are subject to an additional reduction of 2.0 percentage points from the OPD fee schedule increase factor adjustment to the conversion factor that would be used to calculate the OPPS payment rates for their services, as required by section 1833(t)(17) of the Act. As a result, using the final methodology and more recent data, those hospitals failing to meet the Hospital OQR Program reporting requirements will receive an OPD fee schedule increase factor of -0.3 percent (which is 2.5 percent, the final estimate of the hospital inpatient market basket percentage increase, less the final 0.5 percentage point MFP adjustment, less the 0.3 percentage point additional adjustment, and less 2.0 percentage points for the Hospital OQR Program reduction). For further discussion of the Hospital OQR Program, we refer readers to section XIII. of this final rule with comment period.

In the CY 2014 OPPS/ASC proposed rule (78 FR 43577), we proposed to amend 42 CFR 419.32(b)(1)(iv)(B) by adding a new paragraph (5) to reflect the requirement in section 1833(t)(3)(F)(i) of the Act that, for CY 2014, we reduce the OPD fee schedule increase factor by the MFP adjustment as determined by CMS, and to reflect the requirement in section 1833(t)(3)(G)(iii) of the Act, as required by section 1833(t)(3)(F)(ii) of the Act, that we reduce the OPD fee schedule increase factor by an additional 0.3 percentage point for CY 2014.

We did not receive any public comments on our proposed adjustments to the OPD fee schedule increase factor or on the proposed changes to § 419.32(b)(1)(iv)(B) to add a new paragraph (5). For the reasons discussed above, we are adjusting the OPD fee schedule increase factor and adopting, as final, the amendment to § 419.32(b)(1)(iv)(B), as proposed.

We did not receive any public comments on our proposed methodology for calculating the CY 2014 conversion factor. Therefore, we are finalizing our proposed methodology for calculating the budget neutrality adjustment factors, as described in the following discussion.

As we proposed, to set the OPPS conversion factor for CY 2014, we are increasing the CY 2013 conversion factor of $71.313 by 1.7 percent. In accordance with section 1833(t)(9)(B) of the Act, we are further adjusting the conversion factor for CY 2014 to ensure that any revisions made to the updates for a revised wage index and rural adjustment are made on a budget neutral basis. We are calculating an overall budget neutrality factor of 1.0002 for wage index changes by comparing total estimated payments from our simulation model using the final FY 2014 IPPS wage indices to those payments using the FY 2013 IPPS wage indices, as adopted on a calendar year basis for the OPPS.

For CY 2014, we did not propose to make a change to our rural adjustment policy, and as discussed in section II.E. of this final rule with comment period, we are not making any changes to the rural adjustment policy. Therefore, the budget neutrality factor for the rural adjustment is 1.0000.

For CY 2014, we are finalizing our proposal to continue previously established policies for implementing the cancer hospital payment adjustment described in section 1833(t)(18) of the Act, as discussed in section II.F. of this final rule with comment period. We are calculating a CY 2014 budget neutrality adjustment factor for the cancer hospital payment adjustment by comparing the estimated total CY 2014 payments under section 1833(t) of the Act, including the CY 2014 cancer hospital payment adjustment, to the estimated CY 2014 total payments using the CY 2013 final cancer hospital payment adjustment as required under section 1833(t)(18)(B) of the Act. The difference in the CY 2014 estimated payments as a result of applying the CY 2014 cancer hospital payment adjustment relative to the CY 2013 final cancer hospital payment adjustment has a limited impact on the budget neutrality calculation. Therefore, we are applying a budget neutrality adjustment factor of 1.0005 to the conversion factor to ensure that the cancer hospital payment adjustment is budget neutral.

For this final rule with comment period, we estimate that pass-through spending for both drugs and biologicals and devices for CY 2014 will equal approximately $12.3 million, which represents 0.02 percent of total projected CY 2014 OPPS spending. Therefore, the conversion factor is also adjusted by the difference between the 0.15 percent estimate of pass-through spending for CY 2013 and the 0.02 percent estimate of CY 2014 pass-through spending, resulting in an adjustment for CY 2014 of 0.13 percent. Finally, estimated payments for outliers remain at 1.0 percent of total OPPS payments for CY 2014.

The final OPD fee schedule increase factor of 1.7 percent for CY 2014 (that is, the estimate of the hospital inpatient market basket percentage increase of 2.5 percent less the final 0.5 percentage point MFP adjustment and less the 0.3 percentage point required under section 1833(t)(3)(F)(ii) of the Act), the required wage index budget neutrality adjustment of approximately 1.0002, the cancer hospital payment adjustment of 1.0005, and the adjustment of 0.13 percent of projected OPPS spending for the difference in the pass-through spending result in a conversion factor for CY 2014 of $72.672.

As we stated in the proposed rule (78 FR 43578), hospitals that fail to meet the reporting requirements of the Hospital OQR Program will continue to be subject to a further reduction of 2.0 percentage points to the OPD fee schedule increase factor adjustment to the conversion factor that would be used to calculate the OPPS payment rates made for their services as required by section 1833(t)(17) of the Act. For a complete discussion of the Hospital OQR Program requirements and the payment reduction for hospitals that fail to meet those requirements, we refer readers to section XIII.G. of this final rule with comment period. To calculate the CY 2014 reduced market basket conversion factor for those hospitals that fail to meet the requirements of the Hospital OQR Program for the full CY 2014 payment update, we are making all other adjustments discussed above, but using a reduced OPD fee schedule update factor of −0.3 percent (that is, the OPD fee schedule increase factor of 1.7 percent further reduced by 2.0 percentage points as required by section 1833(t)(17)(A)(i) of the Act for failure to comply with the Hospital OQR requirements). This results in a reduced conversion factor for CY 2014 of $71.219 for those hospitals that fail to meet the Hospital OQR requirements (a difference of −$1.453 in the conversion factor relative to those hospitals that met the Hospital OQR requirements).

In summary, for CY 2014, we are using a final conversion factor of $72.672 in the calculation of the national unadjusted payment rates for those items and services for which payment rates are calculated using geometric mean costs. We are finalizing our proposed amendment to § 419.32(b)(1)(iv)(B) by adding a new paragraph (5) to reflect the reductions to the OPD fee schedule increase factor that are required for CY 2014 in order to satisfy the statutory requirements of sections 1833(t)(3)(F) and (t)(3)(G)(iii) of the Act. We also are using a reduced conversion factor of $71.219 in the calculation of payments for hospitals that fail to comply with the Hospital OQR Program requirements to reflect the reduction to the OPD fee schedule increase factor that is required by section 1833(t)(17) of the Act.

C. Wage Index Changes

Section 1833(t)(2)(D) of the Act requires the Secretary to “determine a wage adjustment factor to adjust the portion of payment and coinsurance attributable to labor-related costs for relative differences in labor and labor-related costs across geographic regions in a budget neutral manner” (codified at 42 CFR 419.43(a)). This portion of the OPPS payment rate is called the OPPS labor-related share. Budget neutrality is discussed in section II.B. of this final rule with comment period.

The OPPS labor-related share is 60 percent of the national OPPS payment. This labor-related share is based on a regression analysis that determined that, for all hospitals, approximately 60 percent of the costs of services paid under the OPPS were attributable to wage costs. We confirmed that this labor-related share for outpatient services is appropriate during our regression analysis for the payment adjustment for rural hospitals in the CY 2006 OPPS final rule with comment period (70 FR 68553). Therefore, we did not propose to revise this policy for the CY 2014 OPPS. We refer readers to section II.H. of this final rule with comment period for a description and example of how the wage index for a particular hospital is used to determine the payment for the hospital.

As discussed in section II.A.2.c. of this final rule with comment period, for estimating APC costs, we standardize 60 percent of estimated claims costs for geographic area wage variation using the same FY 2014 pre-reclassified wage index that the IPPS uses to standardize costs. This standardization process removes the effects of differences in area wage levels from the determination of a national unadjusted OPPS payment rate and the copayment amount.

Under 42 CFR 419.41(c)(1) and 419.43(c) (published in the original OPPS April 7, 2000 final rule with comment period (65 FR 18495 and 18545)), the OPPS adopted the final fiscal year IPPS wage index as the calendar year wage index for adjusting the OPPS standard payment amounts for labor market differences. Thus, the wage index that applies to a particular acute care short-stay hospital under the IPPS also applies to that hospital under the OPPS. As initially explained in the September 8, 1998 OPPS proposed rule (63 FR 47576), we believed that using the IPPS wage index as the source of an adjustment factor for the OPPS is reasonable and logical, given the inseparable, subordinate status of the HOPD within the hospital overall. In accordance with section 1886(d)(3)(E) of the Act, the IPPS wage index is updated annually.

The Affordable Care Act contained provisions affecting the wage index. These provisions were discussed in the CY 2012 OPPS/ASC final rule with comment period (76 FR 74191). As discussed in that final rule with comment period, section 10324 of the Affordable Care Act added section 1886(d)(3)(E)(iii)(II) to the Act, which defines “frontier State,” and amended section 1833(t) of the Act to add new paragraph (19), which requires a “frontier State” wage index floor of 1.00 in certain cases, and states that the frontier State floor shall not be applied in a budget neutral manner. We codified these requirements in § 419.43(c)(2) and (c)(3) of our regulations. In the CY 2014 OPPS/ASC proposed rule, we stated that, for the CY 2014 OPPS, we will implement this provision in the same manner as we have since CY 2011. That is, frontier State hospitals will receive a wage index of 1.00 if the otherwise applicable wage index (including reclassification, rural and imputed floor, and rural floor budget neutrality) is less than 1.00. Similar to our current policy for HOPDs that are affiliated with multicampus hospital systems, the HOPD will receive a wage index based on the geographic location of the specific inpatient hospital with which it is associated. Therefore, if the associated hospital is located in a frontier State, the wage index adjustment applicable for the hospital will also apply for the affiliated HOPD. We refer readers to the following sections in the FY 2011 through FY 2014 IPPS/LTCH PPS final rules for discussions regarding this provision, including our methodology for identifying which areas meet the definition of frontier States as provided for in section 1886(d)(3)(E)(iii)(II) of the Act: FY 2011 (75 FR 50160 through 50161), FY 2012 (76 FR 51793, 51795, and 51825), FY 2013 (77 FR 53369 through 53370), and FY 2014 (78 FR 50590 through 50591).

In addition to the changes required by the Affordable Care Act, we note that the final FY 2014 IPPS wage indices continue to reflect a number of adjustments implemented over the past few years, including, but not limited to, reclassification of hospitals to different geographic areas, the rural and imputed floor provisions, an adjustment for occupational mix, and an adjustment to the wage index based on commuting patterns of employees (the out-migration adjustment). We refer readers to the FY 2014 IPPS/LTCH PPS final rule (78 FR 50585 through 50596) for a detailed discussion of all changes to the FY 2014 IPPS wage indices. In addition, we refer readers to the CY 2005 OPPS final rule with comment period (69 FR 65842 through 65844) and subsequent OPPS rules for a detailed discussion of the history of these wage index adjustments as applied under the OPPS.

For purposes of the OPPS, we proposed to continue our policy for CY 2014 of allowing non-IPPS hospitals paid under the OPPS to qualify for the out-migration adjustment if they are located in a section 505 out-migration county (section 505 of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) (Pub. L. 108-173)). We noted that, because non-IPPS hospitals cannot reclassify, they are eligible for the out-migration wage adjustment. Table 4J from the FY 2014 IPPS/LTCH PPS final rule as corrected (available via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) identifies counties eligible for the out-migration adjustment and hospitals that will receive the adjustment for FY 2014. We also noted that, beginning with FY 2012, under the IPPS, an eligible hospital that waives its Lugar status in order to receive the out-migration adjustment has effectively waived its deemed urban status and, thus, is rural for all purposes under the IPPS, including being considered rural for the disproportionate share hospital (DSH) payment adjustment, effective for the fiscal year in which the hospital receives the out-migration adjustment. We refer readers to the FY 2014 IPPS/LTCH PPS final rule (78 FR 50592) for a more detailed discussion on the Lugar redesignation waiver for the out-migration adjustment. As we have done in prior years, we are including Table 4J from the FY 2014 IPPS/LTCH PPS final rule as corrected as Addendum L to this final rule with comment period with the addition of non-IPPS hospitals that will receive the section 505 out-migration adjustment under the CY 2014 OPPS. Addendum L is available via the Internet on the CMS Web site.

As discussed in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50586), the Office of Management and Budget (OMB) issued revisions to the current geographic area designations on February 28, 2013, that included a number of significant changes such as new CBSAs, urban counties that become rural, rural counties that become urban, and splitting existing CBSAs (OMB Bulletin 13-01). This bulletin can be found at: http://www.whitehouse.gov/sites/default/files/omb/bulletins/2013/b13-01.pdf. All of these designations have corresponding effects on the wage index system and its adjustments. In order to allow for sufficient time to assess the new revisions and their ramifications, we intend to propose changes to the IPPS wage index based on the newest CBSA designations in the FY 2015 IPPS/LTCH PPS proposed rule. Similarly, in the OPPS, which uses the IPPS wage index, we intend to propose changes based on the new OMB revisions in the CY 2015 OPPS/ASC proposed rule, consistent with any proposals in the FY 2015 IPPS/LTCH PPS proposed rule.

As stated earlier in this section, we continue to believe that using the IPPS wage index as the source of an adjustment factor for the OPPS is reasonable and logical, given the inseparable, subordinate status of the HOPD within the hospital overall. Therefore, we did not propose to change our current regulations which require that we use the FY 2014 IPPS wage indices for calculating OPPS payments in CY 2014.

We did not receive any public comments on our proposals. Therefore, we are finalizing our proposals without modification and are adopting the FY 2014 IPPS wage index for the CY 2014 OPPS in its entirety, including the rural floor, geographic reclassifications, and all other wage index adjustments. As stated earlier in this section, we continue to believe that using the IPPS wage index as the source of an adjustment factor for the OPPS is reasonable and logical, given the inseparable, subordinate status of the HOPD within the hospital overall. Therefore, we are using the final FY 2014 IPPS wage indices for calculating OPPS payments in CY 2014. With the exception of the out-migration wage adjustment table (Addendum L to this final rule with comment period, which is available via the Internet on the CMS Web site), which includes non-IPPS hospitals paid under the OPPS, we are not reprinting the final FY 2014 IPPS wage indices referenced in this discussion of the wage index. We refer readers to the CMS Web site for the OPPS at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html. At this link, readers will find a link to the final FY 2014 IPPS wage index tables.

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). In the CY 2014 OPPS/ASC proposed rule (78 FR 43579), we proposed to update the default ratios for CY 2014 using the most recent cost report data. We discuss our policy for using default CCRs, including setting the ceiling threshold for a valid CCR, in the CY 2009 OPPS/ASC final rule with comment period (73 FR 68594 through 68599) in the context of our adoption of an outlier reconciliation policy for cost reports beginning on or after January 1, 2009.

For CY 2014, we proposed to continue to use our standard methodology of calculating the statewide average default CCRs using the same hospital overall CCRs that we use to adjust charges to costs on claims data for setting the proposed CY 2014 OPPS relative payment weights. Table 9 published in the proposed rule (78 FR 43580 through 43581) listed the proposed CY 2014 default urban and rural CCRs by State and compared them to last year's default CCRs. These proposed CCRs represented the ratio of total costs to total charges for those cost centers relevant to outpatient services from each hospital's most recently submitted cost report, weighted by Medicare Part B charges. We also proposed to adjust ratios from submitted cost reports to reflect the final settled status by applying the differential between settled to submitted overall CCRs for the cost centers relevant to outpatient services from the most recent pair of final settled and submitted cost reports. We then proposed to weight each hospital's CCR by the volume of separately paid line-items on hospital claims corresponding to the year of the majority of cost reports used to calculate the overall CCRs. We refer readers to the CY 2008 OPPS/ASC final rule with comment period (72 FR 66680 through 66682) and prior OPPS rules for a more detailed discussion of our established methodology for calculating the statewide average default CCRs, including the hospitals used in our calculations and our trimming criteria.

We did not receive any public comments on our CY 2014 proposal. We are finalizing our proposal to apply our standard methodology of calculating the statewide average default CCRs using the same hospital overall CCRs that we used to adjust charges to costs on claims data for setting the CY 2014 OPPS relative payment weights. We used this methodology to calculate the statewide average default CCRs listed in Table 16 below.

For Maryland, we used an overall weighted average CCR for all hospitals in the Nation as a substitute for Maryland CCRs. Few hospitals in Maryland are eligible to receive payment under the OPPS, which limits the data available to calculate an accurate and representative CCR. The weighted CCR is used for Maryland because it takes into account each hospital's volume, rather than treating each hospital equally. We refer readers to the CY 2005 OPPS final rule with comment period (69 FR 65822) for further discussion and the rationale for our longstanding policy of using the national average CCR for Maryland. In general, observed changes in the statewide average default CCRs between CY 2013 and CY 2014 are modest and the few significant changes are associated with areas that have a small number of hospitals.

Table 16 below lists the finalized statewide average default CCRs for OPPS services furnished on or after January 1, 2014.

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

In the CY 2006 OPPS final rule with comment period (70 FR 68556), we finalized a payment increase for rural SCHs of 7.1 percent for all services and procedures paid under the OPPS, excluding drugs, biologicals, brachytherapy sources, and devices paid under the pass-through payment policy in accordance with section 1833(t)(13)(B) of the Act, as added by section 411 of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) (Pub. L. 108-173). Section 1833(t)(13) of the Act provided the Secretary the authority to make an adjustment to OPPS payments for rural hospitals, effective January 1, 2006, if justified by a study of the difference in costs by APC between hospitals in rural areas and hospitals in urban areas. Our analysis showed a difference in costs for rural SCHs. Therefore, for the CY 2006 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) of the regulations to clarify that EACHs also are eligible to receive the rural SCH adjustment, assuming these entities otherwise meet the rural adjustment criteria. Currently, three hospitals are classified as EACHs, and as of CY 1998, under section 4201(c) of Public Law 105-33, a hospital can no longer become newly classified as an EACH.

This adjustment for rural SCHs is budget neutral and applied before calculating outlier payments and copayments. We stated in the CY 2006 OPPS final rule with comment period (70 FR 68560) that we would not reestablish the adjustment amount on an annual basis, but we may review the adjustment in the future and, if appropriate, would revise the adjustment. We provided the same 7.1 percent adjustment to rural SCHs, including EACHs, again in CYs 2008 through 2013. Further, in the CY 2009 OPPS/ASC final rule with comment period (73 FR 68590), we updated the regulations at § 419.43(g)(4) to specify, in general terms, that items paid at charges adjusted to costs by application of a hospital-specific CCR are excluded from the 7.1 percent payment adjustment.

In the CY 2014 OPPS/ASC proposed rule (78 FR 43582), we proposed to continue our policy of a 7.1 percent payment adjustment that is done in a budget neutral manner for rural SCHs, including EACHs, for all services and procedures paid under the OPPS, excluding separately payable drugs and biologicals, devices paid under the pass-through payment policy, and items paid at charges reduced to costs.

Comment: Several commenters supported the proposed continuation of the 7.1 percent rural SCH adjustment. One commenter also recommended that CMS update the analysis in the near future to assess if the 7.1 percent payment adjustment remains a valid figure. One commenter recommended that any potential future changes to the rural adjustment be implemented 12 months after the changes are finalized, to address concerns about budgeting.

Response: We appreciate the commenters' support. We agree that it is appropriate to continue the 7.1 percent adjustment for rural SCHs (including EACHs) as we proposed for CY 2014. As we indicated in the proposed rule (78 FR 43582), we may reassess the 7.1 percent rural adjustment in the near future by examining differences between urban hospitals' costs and rural hospitals' costs using updated claims, cost reports, and provider information. We recognize the concerns that commenters present regarding budgeting concerns and will take into consideration these concerns for any review and revision of the adjustment in the future.

After consideration of the public comments we received, we are finalizing our CY 2014 proposal, without modification, to apply the 7.1 percent payment adjustment to rural SCHs, including EACHs, for all services and procedures paid under the OPPS in CY 2014, excluding separately payable drugs and biologicals, devices paid under the pass-through payment policy, and items paid at charges reduced to costs.

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

1. Background

Since the inception of the OPPS, which was authorized by the Balanced Budget Act of 1997 (BBA) (Pub. L. 105-33), Medicare has paid cancer hospitals identified in section 1886(d)(1)(B)(v) of the Act under the OPPS for covered outpatient hospital services. There are 11 cancer hospitals that meet the classification criteria in section 1886(d)(1)(B)(v) of the Act that are exempted from payment under the IPPS. With the Medicare, Medicaid and SCHIP Balanced Budget Refinement Act of 1999 (Pub. L. 106-113), Congress established section 1833(t)(7) of the Act, “Transitional Adjustment to Limit Decline in Payment,” to hold harmless cancer hospitals and children's hospitals based on their pre-BBA amount under the OPPS. As required under section 1833(t)(7)(D)(ii) of the Act, a cancer hospital receives the full amount of the difference between payments for covered outpatient services under the OPPS and a “pre-BBA amount.” That is, cancer hospitals are permanently held harmless to their “pre-BBA amount,” and they receive transitional outpatient payments (TOPs) or hold harmless payments to ensure that they do not receive a payment that is lower under the OPPS than the payment they would have received before implementation of the OPPS, as set forth in section 1833(t)(7)(F) of the Act. The “pre-BBA amount” is an amount equal to the product of the reasonable cost of the hospital for covered outpatient services for the portions of the hospital's cost reporting period (or periods) occurring in the current year and the base payment-to-cost ratio (PCR) for the hospital defined in section 1833(t)(7)(F)(ii) of the Act. The “pre-BBA amount,” including the determination of the base PCR, are defined at 42 CFR 419.70(f). TOPs are calculated on Worksheet E, Part B, of the Hospital and Hospital Health Care Complex Cost Report (Form CMS-2552-96 or Form CMS-2552-10, as applicable) each year. Section 1833(t)(7)(I) of the Act exempts TOPs from budget neutrality calculations.

Section 3138 of the Affordable Care Act of 2010 amended section 1833(t) of the Act by adding a new paragraph (18), which instructs the Secretary to conduct a study to determine if, under the OPPS, outpatient costs incurred by cancer hospitals described in section 1886(d)(1)(B)(v) of the Act with respect to APC groups exceed the costs incurred by other hospitals furnishing services under section 1833(t) of the Act, as determined appropriate by the Secretary. In addition, section 1833(t)(18)(A) of the Act requires the Secretary to take into consideration the cost of drugs and biologicals incurred by such hospitals when studying cancer hospital costliness. Further, section 1833(t)(18)(B) of the Act provides that if the Secretary determines that costs by these cancer hospitals with respect to APC groups are determined to be greater than the costs of other hospitals furnishing services under section 1833(t) of the Act, the Secretary shall provide an appropriate adjustment under section 1833(t)(2)(E) of the Act to reflect these higher costs. After conducting the study required by section 1833(t)(18)(A) of the Act, we determined in 2011 that outpatient costs incurred by the 11 specified cancer hospitals were greater than the costs incurred by other OPPS hospitals. For a complete discussion regarding the cancer hospital cost study, we refer readers to the CY 2012 OPPS/ASC final rule with comment period (76 FR 74200 through 74201).

Based on our findings that costs incurred by cancer hospitals were greater than the costs incurred by other OPPS hospitals, we finalized a policy to provide a payment adjustment to the 11 specified cancer hospitals that reflects the higher outpatient costs as discussed in the CY 2012 OPPS/ASC final rule with comment period (76 FR 74202 through 74206). Specifically, we adopted a policy to provide additional payments to each of the 11 cancer hospitals so that each cancer hospital's final PCR for services provided in a given calendar year is equal to the weighted average PCR (which we refer to as the “target PCR”) for other hospitals paid under the OPPS. The target PCR is set in advance of the calendar year and is calculated using the most recent submitted or settled cost report data that are available at the time of final rulemaking for the calendar year. The amount of the payment adjustment is made on an aggregate basis at cost report settlement. We note that the changes made by section 1833(t)(18) of the Act do not affect the existing statutory provisions that provide for TOPs for cancer hospitals. The TOPs are assessed as usual after all payments, including the cancer hospital payment adjustment, have been made for a cost reporting period. For CYs 2012 and 2013, the target PCR for purposes of the cancer hospital payment adjustment was 0.91.

2. Payment Adjustment for Certain Cancer Hospitals for CY 2014

In the CY 2014 OPPS/ASC proposed rule (78 FR 43582), we proposed to continue our policy to provide additional payments to cancer hospitals so that each cancer hospital's final PCR is equal to the weighted average PCR (or “target PCR”) for the other OPPS hospitals using the most recent submitted or settled cost report data that were available at the time of the development of the proposed rule. To calculate the proposed CY 2014 target PCR, we used the same extract of cost report data from HCRIS, as discussed in section II.A. of the proposed rule, used to estimate costs for the CY 2014 OPPS. Using these cost report data, we included data from Worksheet E, Part B, for each hospital, using data from each hospital's most recent cost report, whether as submitted or settled. We estimated that, on average, the OPPS payments to other hospitals furnishing services under the OPPS were approximately 90 percent of reasonable cost (weighted average PCR of 0.90). Based on these data, we proposed a target PCR of 0.90 that would be used to determine the CY 2014 cancer hospital payment adjustment that would be paid at cost report settlement. Therefore, we proposed that the payment amount associated with the cancer hospital payment adjustment to be determined at cost report settlement would be the additional payment needed to result in a proposed target PCR equal to 0.90 for each cancer hospital.

Comment: Similar to public comments received in response to the CY 2013 OPPS/ASC proposed rule that we addressed in the CY 2013 OPPS/ASC final rule with comment period, commenters representing the cancer hospitals again stated that the PCR is only one component of the adjustment needed to account for the differences in providing cancer care. The commenters suggested that CMS utilize a methodology that they stated would ensure that the 11 cancer hospitals' losses (on a per unit PCR basis) equal the losses (on a per unit PCR basis) of the other PPS hospitals. The commenters provided details of this “equivalent loss per unit” methodology which they indicated would result in a target PCR equal to 0.94 for CY 2014.

Response: As we indicated in the CY 2013 OPPS/ASC final rule with comment period (77 FR 68293), section 3138 of the Affordable Care Act provides that if the Secretary determines under section 1833(t)(18)(A) of the Act that costs incurred by cancer hospitals exceed those costs of other hospitals furnishing services under section 1833(t) of the Act, the Secretary shall provide for an appropriate adjustment under section 1833(t)(2)(E) of the Act to reflect the higher costs. Because the statute requires that we provide a cancer hospital payment adjustment to reflect the higher costs, not losses, incurred at cancer hospitals, we believe that it would be inappropriate to revise our cancer hospital payment adjustment policy so that the target PCR is calculated based on the cancer hospitals' losses per unit PCR compared to the other OPPS hospitals' losses per unit PCR.

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

Response: As we stated in the CY 2013 OPPS/ASC final rule with comment period (77 FR 68294) in response to this same comment, we believe that annual recalculation of the target PCR will provide a timely assessment of the changes in OPPS payments relative to costs and, therefore, will enable us to provide payment adjustments to cancer hospitals that are accurate and equitable. In addition, because the target PCR is set in advance of each calendar year, cancer hospitals can easily predict the amount of their hospital-specific payment adjustment associated with the target PCR for the following year and budget accordingly.

After consideration of the public comments we received, we are finalizing our proposal to continue our policy to provide additional payments to cancer hospitals so that each cancer hospital's final PCR is equal to the weighted average PCR for the other OPPS hospitals using the most recent submitted or settled cost report data that were available at the time of this final rule with comment period. To calculate the final CY 2014 target PCR, we used the same extract of cost report data from HCRIS, as discussed in section II.A. of this final rule with comment period, used to estimate costs for the CY 2014 OPPS. Using these cost report data, we included data from Worksheet E, Part B, for each hospital, using data from each hospital's most recent cost report, whether as submitted or settled. We then limited the dataset to the hospitals with CY 2012 claims data that we used to model the impact of the final CY 2014 APC relative payment weights (4,044 hospitals) because it is appropriate to use the same set of hospitals that we are using to calibrate the modeled CY 2014 OPPS. The cost report data for the hospitals in this dataset were from cost report periods with fiscal year ends ranging from 2011 to 2012. We then removed the cost report data of the 48 hospitals located in Puerto Rico from our dataset because we do not believe that their cost structure reflects the costs of most hospitals paid under the OPPS and, therefore, their inclusion may bias the calculation of hospital-weighted statistics. We also removed the cost report data of 116 hospitals because these hospitals had cost report data that were not complete (missing aggregate OPPS payments, missing aggregate cost data, or missing both), so that all cost reports in the study would have both the payment and cost data necessary to calculate a PCR for each hospital, leading to an analytic file of 3,880 hospitals with cost report data.

Using this smaller dataset of cost report data, we estimated that, on average, the OPPS payments to other hospitals furnishing services under the OPPS are approximately 89 percent of reasonable cost (weighted average PCR of 0.89). Based on these data, we used a target PCR of 0.89 to determine the CY 2014 cancer hospital payment adjustment to be paid at cost report settlement. Therefore, the payment amount associated with the cancer hospital payment adjustment to be determined at cost report settlement will be the additional payment needed to result in a PCR equal to 0.89 for each cancer hospital.

Table 17 below indicates the estimated percentage increase in OPPS payments to each cancer hospital for CY 2014 due to the cancer hospital payment adjustment policy. The actual amount of the CY 2014 cancer hospital payment adjustment for each cancer hospital will be determined at cost report settlement and will depend on each hospital's CY 2014 payments and costs. We note that the changes made by section 1833(t)(18) of the Act do not affect the existing statutory provisions that provide for TOPs for cancer hospitals. The TOPs will be assessed as usual after all payments, including the cancer hospital payment adjustment, have been made for a cost reporting period.

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G. Hospital Outpatient Outlier Payments

1. Background

Currently, the OPPS provides outlier payments on a service-by-service basis. In CY 2012, the outlier threshold was determined to be met when the cost of furnishing a service or procedure by a hospital exceeds 1.75 times the APC payment amount and exceeds the APC payment rate plus a $2,025 fixed-dollar threshold. We introduced a fixed-dollar threshold in CY 2005, in addition to the traditional multiple threshold, in order to better target outlier payments to those high-cost and complex procedures where a very costly service could present a hospital with significant financial loss. If the cost of a service meets both of these conditions, the multiple threshold and the fixed-dollar threshold, the outlier payment is calculated as 50 percent of the amount by which the cost of furnishing the service exceeds 1.75 times the APC payment rate. Before CY 2009, this outlier payment had historically been considered a final payment by longstanding OPPS policy. However, we implemented a reconciliation process similar to the IPPS outlier reconciliation process for cost reports with cost reporting periods beginning on or after January 1, 2009, in our CY 2009 OPPS/ASC final rule with comment period (73 FR 68594 through 68599).

It has been our policy for the past several years to report the actual amount of outlier payments as a percent of total spending in the claims being used to model the proposed OPPS. Our current estimate of total outlier payments as a percent of total CY 2012 OPPS payment, using available CY 2012 claims and the revised OPPS expenditure estimate for the 2013 Trustee's Report, is approximately 1.2 percent of the total aggregated OPPS payments. Therefore, for CY 2012, we estimate that we paid 0.2 percent above the CY 2012 outlier target of 1.0 percent of total aggregated OPPS payments.

As explained in the CY 2013 OPPS/ASC final rule with comment period (77 FR 68295 through 68297), we set our projected target for aggregate outlier payments at 1.0 percent of the estimated aggregate total payments under the OPPS for CY 2013. The outlier thresholds were set so that estimated CY 2013 aggregate outlier payments would equal 1.0 percent of the total estimated aggregate payments under the OPPS. Using CY 2012 claims data and CY 2013 payment rates, we currently estimate that the aggregate outlier payments for CY 2013 will be approximately 1.1 percent of the total CY 2013 OPPS payments. The difference between 1.1 percent and 1.0 percent is reflected in the regulatory impact analysis in section XXIII. of this final rule with comment period. We note that we provide estimated CY 2014 outlier payments for hospitals and CMHCs with claims included in the claims data that we used to model impacts in the Hospital-Specific Impacts—Provider-Specific Data file on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html.

2. Proposed Outlier Calculation

In the CY 2014 OPPS/ASC proposed rule (78 FR 43584), we proposed to continue our policy of estimating outlier payments to be 1.0 percent of the estimated aggregate total payments under the OPPS for outlier payments. We proposed that a portion of that 1.0 percent, an amount equal to 0.18 percent of outlier payments (or 0.0018 percent of total OPPS payments) would be allocated to CMHCs for PHP outlier payments. This is the amount of estimated outlier payments that would result from the proposed CMHC outlier threshold as a proportion of total estimated OPPS outlier payments. As discussed in section VIII.D. of the CY 2014 OPPS/ASC proposed rule (78 FR 43622), for CMHCs, we proposed to continue our longstanding policy that if a CMHC's cost for partial hospitalization services, paid under either APC 0172 (Level I Partial Hospitalization (3 services) for CMHCs) or APC 0173 (Level II Partial Hospitalization (4 or more services) for CMHCs), exceeds 3.40 times the payment rate for APC 0173, the outlier payment would be calculated as 50 percent of the amount by which the cost exceeds 3.40 times the APC 0173 payment rate. For further discussion of CMHC outlier payments, we refer readers to section VIII.D. of this final rule with comment period.

To ensure that the estimated CY 2014 aggregate outlier payments would equal 1.0 percent of estimated aggregate total payments under the OPPS, we proposed that the hospital outlier threshold be set so that outlier payments would be triggered when the cost of furnishing a service or procedure by a hospital exceeds 1.75 times the APC payment amount and exceeds the APC payment rate plus a $2,775 fixed-dollar threshold.

We calculated the proposed fixed-dollar threshold using largely the standard methodology, most recently used for CY 2013 (77 FR 68295 through 68297). For purposes of estimating outlier payments for the proposed rule, we used the hospital-specific overall ancillary CCRs available in the April 2013 update to the Outpatient Provider-Specific File (OPSF). The OPSF contains provider-specific data, such as the most current CCR, which are maintained by the Medicare contractors and used by the OPPS Pricer to pay claims. The claims that we use to model each OPPS update lag by 2 years.

In order to estimate the CY 2014 hospital outlier payments for the proposed rule, we inflated the charges on the CY 2012 claims using the same inflation factor of 1.0993 that we used to estimate the IPPS fixed-dollar outlier threshold for the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27767). We used an inflation factor of 1.0485 to estimate CY 2013 charges from the CY 2012 charges reported on CY 2012 claims. The methodology for determining this charge inflation factor is discussed in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27767) as well as the FY 2014 IPPS/LTCH PPS final rule (78 FR 50982). As we stated in the CY 2005 OPPS final rule with comment period (69 FR 65845), we believe that the use of these charge inflation factors are appropriate for the OPPS because, with the exception of the inpatient routine service cost centers, hospitals use the same ancillary and outpatient cost centers to capture costs and charges for inpatient and outpatient services.

As noted in the CY 2007 OPPS/ASC final rule with comment period (71 FR 68011), we are concerned that we could systematically overestimate the OPPS hospital outlier threshold if we did not apply a CCR inflation adjustment factor. Therefore, in the CY 2014 OPPS/ASC proposed rule, we proposed to apply the same CCR inflation adjustment factor that we apply for the FY 2014 IPPS outlier calculation to the CCRs used to simulate the CY 2014 OPPS outlier payments to determine the fixed-dollar threshold. Specifically, for CY 2014, we proposed to apply an adjustment factor of 0.9732 to the CCRs that were in the April 2013 OPSF to trend them forward from CY 2013 to CY 2014. The methodology for calculating this proposed adjustment was discussed in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27766 through 27768) as well as the FY 2014 IPPS/LTCH PPS final rule (78 FR 50978 through 50982).

Therefore, to model hospital outlier payments for the proposed rule, we applied the overall CCRs from the April 2013 OPSF file after adjustment (using the proposed CCR inflation adjustment factor of 0.9732 to approximate CY 2014 CCRs) to charges on CY 2012 claims that were adjusted (using the charge inflation factor of 1.0993 to approximate CY 2014 charges). We simulated aggregated CY 2014 hospital outlier payments using these costs for several different fixed-dollar thresholds, holding the 1.75 multiple threshold constant and assuming that outlier payments would continue to be made at 50 percent of the amount by which the cost of furnishing the service would exceed 1.75 times the APC payment amount, until the total outlier payments equaled 1.0 percent of aggregated estimated total CY 2014 OPPS payments. We estimated that a proposed fixed-dollar threshold of $2,775, combined with the proposed multiple threshold of 1.75 times the APC payment rate, would allocate 1.0 percent of aggregated total OPPS payments to outlier payments. We proposed to continue to make an outlier payment that equals 50 percent of the amount by which the cost of furnishing the service exceeds 1.75 times the APC payment amount when both the 1.75 multiple threshold and the proposed fixed-dollar threshold of $2,775 were met. For CMHCs, we proposed that, if a CMHC's cost for partial hospitalization services, paid under either APC 0172 or APC 0173, exceeds 3.40 times the payment rate for APC 0173, the outlier payment would be calculated as 50 percent of the amount by which the cost exceeds 3.40 times the APC 0173 payment rate.

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

Comment: Several commenters urged CMS to reconsider the increase in the CY 2014 OPPS outlier threshold. The commenters believed that the thresholds were being set higher than was necessary to achieve the OPPS outlier spending target, based on their analysis of the thresholds and aggregate outlier spending in prior years. Commenters also desired transparency about why an outlier threshold increase was necessary, when historical evidence suggested that such a change is unwarranted. One commenter recommended that the OPPS outlier percentage spending target be reduced to 0.5 percent of the system because patients who develop complications requiring complex care are highly likely to be admitted to inpatient care.

Response: Many of the commenters who recommended changes to the OPPS fixed-dollar outlier threshold relied on direct comparisons between aggregate spending and the OPPS outlier thresholds. As discussed earlier in this section, OPPS outliers are paid and modeled based on comparisons between APC payment and estimated cost. As a result, changing the OPPS fixed-dollar outlier threshold by any increment does not result in an evenly distributed change in OPPS outlier spending as well as services that receive OPPS outlier payments.

There are a variety of factors that may affect the OPPS fixed-dollar outlier threshold, including data changes such as hospital charging practices and fluctuations in the overall ancillary CCRs as well as changes in OPPS payment policy such as those involving packaging and compositing. Those changes can influence the individual comparisons between APC service payment and estimated costs. While the OPPS outlier threshold has been relatively stable in the past several years, historically the OPPS fixed-dollar outlier threshold has fluctuated from year to year as identified in the Annual Policy Files which are available via the Internet on the CMS Web site. In the CY 2014 OPPS/ASC proposed rule, we proposed to update several OPPS packaging policies which would have a corresponding effect on the OPPS fixed-dollar outlier threshold by potentially increasing APC payment for certain paid service lines while moving affected services from previously being on the payment portion of the OPPS outlier payment comparison into the cost portion. In particular, by conditionally packaging certain clinical diagnostic laboratory tests previously paid at CLFS rates, the CY 2014 fixed-dollar OPPS outlier threshold would have to account for significant changes to both the APC payment and estimated cost portions of the OPPS outlier payment comparison.

We appreciate the recommendation regarding revisiting the correct OPPS outlier spending target and will continue to consider whether a 1.0 percent OPPS outlier percentage spending target continues to remain appropriate.

3. Final Outlier Calculation

Consistent with historical practice, we use updated data for this final rule with comment period for our outlier calculation. For CY 2014, we are applying the overall CCRs from the October 2013 OPSF with a CCR adjustment factor of 0.9645 to approximate CY 2014 CCRs to charges on the final CY 2012 claims that were adjusted to approximate CY 2014 charges (using the final 2-year charge inflation factor of 1.0969). These are the same CCR adjustment and charge inflation factors that were used to set the IPPS fixed dollar threshold for the FY 2014 IPPS/LTCH PPS final rule (78 FR 50982). We simulated aggregated CY 2014 hospital outlier payments using these costs for several different 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 2014 OPPS payments. We estimate that a fixed-dollar threshold of $2,900, combined with the multiple threshold of 1.75 times the APC payment rate, will allocate 1.0 percent of estimated aggregated total OPPS payments to outlier payments.

In summary, for CY 2014, we will continue to make an outlier payment that equals 50 percent of the amount by which the cost of furnishing the service exceeds 1.75 times the APC payment amount when both the 1.75 multiple threshold and the final fixed-dollar threshold of $2,900 are met. For CMHCs, if a CMHC's cost for partial hospitalization services, paid under either APC 0172 or APC 0173, exceeds 3.40 times the payment rate for APC 0173, the outlier payment is calculated as 50 percent of the amount by which the cost exceeds 3.40 times the APC 0173 payment rate. We estimate that this threshold will allocate 0.16 percent of outlier payments to CMHCs for PHP outlier payments.

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

The basic methodology for determining prospective payment rates for HOPD services under the OPPS is set forth in existing regulations at 42 CFR Part 419, Subparts C and D. For this CY 2014 OPPS/ASC final rule with comment period, the payment rate for most services and procedures for which payment is made under the OPPS is the product of the conversion factor calculated in accordance with section II.B. of this final rule with comment period and the relative payment weight determined under section II.A. of this final rule with comment period. Therefore, the national unadjusted payment rate for most APCs contained in Addendum A to this final rule with comment period (which is available via the Internet on the CMS Web site) and for most HCPCS codes to which separate payment under the OPPS has been assigned in Addendum B to this final rule with comment period (which is available via the Internet on the CMS Web site) was calculated by multiplying the CY 2014 scaled weight for the APC by the CY 2014 conversion factor.

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

We demonstrate in the steps below how to determine the APC payments that will be made in a calendar year under the OPPS to a hospital that fulfills the Hospital OQR Program requirements and to a hospital that fails to meet the Hospital OQR Program requirements for a service that has any of the following status indicator assignments: “P,” “Q1,” “Q2,” “Q3,” “R,” “S,” “T,” “U,” “V,” or “X” (as defined in Addendum D1 to this final rule with comment period), in a circumstance in which the multiple procedure discount does not apply, the procedure is not bilateral, and conditionally packaged services (status indicator of “Q1” and “Q2”) qualify for separate payment. We note that, although blood and blood products with status indicator “R” and brachytherapy sources with status indicator “U” are not subject to wage adjustment, they are subject to reduced payments when a hospital fails to meet the Hospital OQR Program requirements. We note that we had proposed to create status indicator “J1” to reflect the comprehensive APCs discussed in section II.A.2.e. of this final rule with comment period. However, the comprehensive APCs will not be implemented in the CY 2014 OPPS, and therefore status indicator “J1” will not apply. We also note that we had proposed to delete status indicator “X” as part of the CY 2014 packaging proposal for ancillary services, discussed in section II.A.4. of this final rule with comment period. We are not finalizing the ancillary services packaging policy, and therefore status indicator “X” will continue to be active in the CY 2014 OPPS.

Individual providers interested in calculating the payment amount that they will receive for a specific service from the national unadjusted payment rates presented in Addenda A and B to this final rule with comment period (which are available via the Internet on the CMS Web site) should follow the formulas presented in the following steps. For purposes of the payment calculations below, we refer to the national unadjusted payment rate for hospitals that meet the requirements of the Hospital OQR Program as the “full” national unadjusted payment rate. We refer to the national unadjusted payment rate for hospitals that fail to meet the requirements of the Hospital OQR Program as the “reduced” national unadjusted payment rate. The reduced national unadjusted payment rate is calculated by multiplying the reporting ratio of 0.980 times the “full” national unadjusted payment rate. The national unadjusted payment rate used in the calculations below is either the full national unadjusted payment rate or the reduced national unadjusted payment rate, depending on whether the hospital met its Hospital OQR Program requirements in order to receive the full CY 2014 OPPS fee schedule increase factor of 1.7 percent.

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

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

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

X=.60 * (national unadjusted payment rate).

Step 2. Determine the wage index area in which the hospital is located and identify the wage index level that applies to the specific hospital. The wage index values assigned to each area reflect the geographic statistical areas (which are based upon OMB standards) to which hospitals are assigned for FY 2014 under the IPPS, reclassifications through the MGCRB, section 1886(d)(8)(B) “Lugar” hospitals, reclassifications under section 1886(d)(8)(E) of the Act, as defined in § 412.103 of the regulations, and hospitals designated as urban under section 601(g) of 98. (For further discussion of the changes to the FY 2014 IPPS wage indices, as applied to the CY 2014 OPPS, we refer readers to section II.C. of this final rule with comment period.) As we proposed, we are continuing to apply a wage index floor of 1.00 to frontier States, in accordance with section 10324 of the Affordable Care Act of 2010.

Step 3. Adjust the wage index of hospitals located in certain qualifying counties that have a relatively high percentage of hospital employees who reside in the county, but who work in a different county with a higher wage index, in accordance with section 505 of Pub. L. 108-173. Addendum L to this final rule with comment period (which is available via the Internet on the CMS Web site) contains the qualifying counties and the associated wage index increase developed for the FY 2014 IPPS and listed as Table 4J in the FY 2014 IPPS/LTCH PPS final rule and available via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html. This step is to be followed only if the hospital is not reclassified or redesignated under section 1886(d)(8) or section 1886(d)(10) of the Act.

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

The formula below is a mathematical representation of Step 4 and adjusts the 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 2014 full national unadjusted payment rate for APC 0019 is approximately $318.79. The reduced national unadjusted payment rate for APC 0019 for a hospital that fails to meet the Hospital OQR Program requirements is approximately $312.41. This reduced rate is calculated by multiplying the reporting ratio of 0.980 by the full unadjusted payment rate for APC 0019.

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

I. Beneficiary Copayments

1. Background

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

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

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

2. OPPS Copayment Policy

In the CY 2014 OPPS/ASC proposed rule (78 FR 43586), for CY 2014, we proposed to determine copayment amounts for new and revised APCs using the same methodology that we implemented beginning in CY 2004. (We refer readers to the November 7, 2003 OPPS final rule with comment period (68 FR 63458).) In addition, we proposed to use the same standard rounding principles that we have historically used in instances where the application of our standard copayment methodology would result in a copayment amount that is less than 20 percent and cannot be rounded, under standard rounding principles, to 20 percent. (We refer readers to the CY 2008 OPPS/ASC final rule with comment period (72 FR 66687) in which we discuss our rationale for applying these rounding principles.) The proposed national unadjusted copayment amounts for services payable under the OPPS that would be effective January 1, 2014, were shown in Addenda A and B to the proposed rule (which are available via the Internet on the CMS Web site). As discussed in section XIII.G. of the proposed rule, for CY 2014, the proposed Medicare beneficiary's minimum unadjusted copayment and national unadjusted copayment for a service to which a reduced national unadjusted payment rate applies will equal the product of the reporting ratio and the national unadjusted copayment, or the product of the reporting ratio and the minimum unadjusted copayment, respectively, for the service.

We noted that OPPS copayments may increase or decrease each year based on changes in the calculated APC payment rates due to updated cost report and claims data, and any changes to the OPPS cost modeling process. However, as described in the CY 2004 OPPS/ASC final rule with comment period, the development of the copayment methodology generally moves beneficiary copayments closer to 20 percent of OPPS APC payments (68 FR 63458 through 63459).

We did not receive any public comments regarding the proposed methodology for calculating copayments for CY 2014. Therefore, for the reasons set forth in this final rule with comment period, we are finalizing our CY 2014 copayment methodology without modification.

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

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

Step 1. Calculate the beneficiary payment percentage for the APC by dividing the APC's national unadjusted copayment by its payment rate. For example, using APC 0019, approximately $63.76 is 20 percent of the full national unadjusted payment rate of approximately $318.79. For APCs with only a minimum unadjusted copayment in Addenda A and B to this final rule with comment period (which are available via the Internet on the CMS Web site), the beneficiary payment percentage is 20 percent.

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

B is the beneficiary payment percentage.

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

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

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

The formula below is a mathematical representation of Step 3 and applies the beneficiary payment percentage to the adjusted payment rate for a service calculated under section II.H. of this final rule with comment period, with and without the rural adjustment, to calculate the adjusted beneficiary copayment for a given service.

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

Wage-adjusted copayment amount for the APC (SCH or EACH) = (Adjusted Medicare Payment * 1.071) *B.

Step 4. For a hospital that failed to meet its Hospital OQR Program requirements, multiply the copayment calculated in Step 3 by the reporting ratio of 0.980.

The unadjusted copayments for services payable under the OPPS that will be effective January 1, 2014, are shown in Addenda A and B to this final rule with comment period (which are available via the Internet on the CMS Web site). We note that the national unadjusted payment rates and copayment rates shown in Addenda A and B to this final rule with comment period reflect the full CY 2014 OPD fee schedule increase factor discussed in section II.B. of this final rule with comment period.

In addition, as noted above, section 1833(t)(8)(C)(i) of the Act limits the amount of beneficiary copayment that may be collected for a procedure performed in a year to the amount of the inpatient hospital deductible for that year.

III. OPPS Ambulatory Payment Classification (APC) Group Policies 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 2014 OPPS/ASC proposed rule (78 FR 43587), in Table 18 below (Table 11 of the proposed rule), we summarized our process for updating codes through our OPPS quarterly update CRs, seeking public comments, and finalizing their treatment under the OPPS. We note that because the payment rates associated with codes effective July 1 were not available to us in time for incorporation into the Addenda of the proposed rule, the Level II HCPCS codes and the Category III CPT codes implemented through the July 2013 OPPS quarterly update CR were not included in Addendum B of the proposed rule (which is available via the Internet on the CMS Web site), while those codes based upon the April 2013 OPPS quarterly update were included in Addendum B. Nevertheless, we requested public comments on the codes included in the July 2013 OPPS quarterly update and included these codes in the preamble of the proposed rule.

This process is discussed in detail below. We have separated our discussion into two sections based on whether we solicited public comments in the CY 2014 OPPS/ASC proposed rule or whether we are soliciting public comments in this CY 2014 OPPS/ASC final rule with comment period. We note that we sought public comments in the CY 2013 OPPS/ASC final rule with comment period on the new CPT and Level II HCPCS codes that were effective January 1, 2013. We also sought public comments in the CY 2013 OPPS/ASC final rule with comment period on the new Level II HCPCS codes effective October 1, 2012. These new codes, with an effective date of October 1, 2012, or January 1, 2013, were flagged with comment indicator “NI” (New code, interim APC assignment; comments will be accepted on the interim APC assignment for the new code) in Addendum B to the CY 2013 OPPS/ASC final rule with comment period to indicate that we were assigning them an interim payment status and an APC and payment rate, if applicable, which were subject to public comment following publication of the CY 2013 OPPS/ASC final rule with comment period. We are responding to public comments and finalizing our interim OPPS treatment of these codes in this CY 2014 OPPS/ASC final rule with comment period.

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

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

Through the April 2013 OPPS quarterly update CR (Transmittal 2664, Change Request 8228, dated March 1, 2013), and the July 2013 OPPS quarterly update CR (Transmittal 2718, Change Request 8338, dated June 7, 2013), we recognized several new HCPCS codes for separate payment under the OPPS. Effective April 1 and July 1 of CY 2013, we made effective 18 new Level II HCPCS codes and 6 Category III CPT codes. Specifically, 8 new Level II HCPCS codes were effective for the April 2013 quarterly update and another 10 new Level II HCPCS codes were effective for the July 2013 quarterly update for a total of 18. In addition, six new Category III CPT codes were effective for the July 2013 quarterly update. Of the 24 new HCPCS and CPT codes, we recognized for separate payment under the OPPS 14 new codes from the April and July 2013 OPPS quarterly updates.

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

In the CY 2014 OPPS/ASC proposed rule (78 FR 43588), we solicited public comments on the proposed status indicators and APC assignments for Level II HCPCS codes C9130, C9297, C9298, C9734, C9735, Q0507, Q0508, and Q0509, which were listed in Table 12 of the proposed rule (78 FR 43588) and now appear in Table 20 of this final rule with comment period.

We did not receive any public comments on the proposed APC assignments and status indicators for HCPCS codes C9130, C9297, C9298, Q0507, Q0508, and Q0509. However, we received several public comments on HCPCS codes C9734 and C9735, which are addressed in sections III.C.10.c. and III.C.3.b., respectively, of this final rule with comment period.

For CY 2014, the HCPCS Workgroup replaced HCPCS codes C9130, C9297, and C9298 with permanent HCPCS J-codes. Table 21 below lists the replacement HCPCS J-codes for the temporary HCPCS C-codes. Consistent with our general policy of using permanent HCPCS codes rather than using temporary HCPCS codes for the reporting of drugs under the OPPS in order to streamline coding, we are showing the replacement HCPCS codes for HCPCS codes C9130, C9297, and C9298, which are effective January 1, 2014, in Table 21.

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

For CY 2014, we note that we are not making any changes to the status indicator and APC assignment for HCPCS code C9735. Specifically, HCPCS code C9735 will continue to be assigned to APC 0150 for CY 2014 with a status indicator of “T.” However, we are reassigning HCPCS code C9734 from APC 0067 (Level II Stereotactic Radiosurgery) to APC 0065 (IORT, MRgFUS, and MEG), as discussed in section III.C.10.c. of this final rule with comment period. In addition, we are reassigning HCPCS codes Q0507, Q0508, and Q0509 from status indicator “A” to “N” to indicate that they are now packaged under the hospital OPPS, consistent with our packaging guidelines, which are discussed in section II.A.3. of this final rule with comment period.

Furthermore, because HCPCS codes J1556, J9262, and J7316 describe the same drug and the same dosage currently described by HCPCS codes C9130, C9297, and C9298, respectively, these drugs will continue their pass-through status in CY 2014. Therefore, we are assigning HCPCS codes J1556, J9262, and J7316 to the same APCs and the same status indicators as their predecessor HCPCS codes, as shown in Table 21.

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

We note that two of the Level II HCPCS Q-codes that were made effective July 1, 2013, were previously described by HCPCS J-codes that were separately payable under the hospital OPPS. First, the HCPCS Workgroup replaced HCPCS code J9002 (Injection, doxorubicin hydrochloride, liposomal, Doxil, 10 mg) with new HCPCS code Q2050, effective July 1, 2013, to appropriately identify and pay for both the brand and generic forms of doxorubicin hydrochloride liposome. Consequently, the status indicator for HCPCS code J9002 was changed to “E” (Not Payable by Medicare), effective July 1, 2013. Because HCPCS code Q2050 describes the same product as HCPCS code J9002, we continued its separate payment status and assigned HCPCS code Q2050 to status indicator “K” (Nonpass-through drugs and nonimplantable biologicals, including therapeutic radiopharmaceuticals; paid under OPPS; separate APC payment). We also assigned HCPCS code Q2050 to the same APC as HCPCS code J9002, specifically APC 7046 (Doxil injection), effective July 1, 2013.

Secondly, the HCPCS Workgroup replaced HCPCS codes J3487 (Injection, zoledronic acid (Zometa), 1 mg) and J3488 (Injection, zoledronic acid (Reclast), 1 mg) with one new HCPCS code, specifically Q2051, effective July 1, 2013, to appropriately identify and pay for both the brand and generic forms of zoledronic acid. Consequently, the status indicators for HCPCS codes J3487 and J3488 were changed to “E,” effective July 1, 2013, to indicate that the codes were not separately payable by Medicare. Because HCPCS code Q2051 described the same product as HCPCS codes J3487 and J3488, we assigned HCPCS code Q2051 to separate payment status indicator “K,” effective July 1, 2013. Because HCPCS codes J3487 and J3488, which were assigned to two separate APCs, were replaced with only one code, we assigned HCPCS code Q2051 to a new APC to maintain data consistency for future rulemaking. Specifically, HCPCS code Q2051 was assigned to APC 1356 (Zoldedronic acid 1 mg), effective July 1, 2013.

Of the 10 Level II HCPCS codes that were made effective July 1, 2013, we did not recognize for separate payment the following 5 HCPCS codes: HCPCS codes K0008, K0013, and K0900, which were assigned to status indicator “Y” (Non-implantable durable medical equipment; not paid under OPPS); HCPCS code Q2033, which was assigned to status indicator “L” (Not paid under OPPS; paid at reasonable cost); and HCPCS code Q0090, which was assigned to status indicator “E” (Not payable/Non-covered by Medicare; not paid under OPPS).

In the CY 2014 OPPS/ASC proposed rule (78 FR 43589), we solicited public comments on the proposed status indicators and APC assignments for the HCPCS codes that were listed in Table 13 of the proposed rule and now appear in Tables 22 and 23 of this final rule with comment period.

We did not receive any public comments on the proposed APC assignments and status indicators for HCPCS codes C9131, K0008, K0013, K0900, Q0090, Q2033, Q2050, and Q2051. Therefore, we are adopting as final, without modification, our proposal to assign these eight Level II HCPCS codes to the APCs and status indicators as proposed for CY 2014.

We received several public comments on HCPCS codes C9736 and G0460, which are addressed in section III.C. of this final rule with comment period.

Table 23 below includes a complete list of the Level II HCPCS codes that were made effective July 1, 2013, with their final status indicators and APC assignments for CY 2014.

We note that the HCPCS Workgroup replaced HCPCS codes C9131, Q0090, and Q2051 with HCPCS codes J9354, J7301, and J3489, respectively, effective January 1, 2014. Because HCPCS code J9354 describes the same drug currently described by HCPCS code C9131, this drug will continue its pass-through status in CY 2014. Therefore, we are assigning HCPCS code J9354 to the same APC and status indicator as its predecessor HCPCS code, which shares the same dosage descriptor, as shown in Table 23. We note that because HCPCS code Q2051 is assigned to status indicator “K” (Nonpass-Through Drugs; Paid under OPPS; Separate APC payment), its replacement HCPCS code J3489, which describes the same item as its predecessor code, will also continue its nonpass-through status and APC assignment in CY 2014. In addition, because HCPCS code Q0090 is assigned to status indicator “E” to indicate that this drug is not covered by Medicare, its replacement HCPCS code J7301 will also continue its noncovered status in CY 2014. We note that two HCPCS codes, specifically, HCPCS codes C9736 and Q2033, will be replaced with CPT codes 0336T and 90673, respectively, effective January 1, 2014. As noted in Table 23, CPT code 90673, which is the replacement code for HCPCS code Q2033, will be assigned to status indicator “L.” However, CPT code 0336T, which replaces HCPCS code C9736, will be assigned to APC 0174. We refer readers to section III.C.10.b. of this final rule with comment period for further discussion of the APC assignment of CPT code 0336T, which replaced HCPCS code C9736.

In the CY 2014 OPPS/ASC proposed rule (78 FR 43589), we proposed to continue our established policy of recognizing Category I CPT vaccine codes for which FDA approval is imminent and Category III CPT codes that the AMA releases in January of each year for implementation in July through the OPPS quarterly update process. Under the OPPS, Category I CPT vaccine codes and Category III CPT codes that are released on the AMA Web site in January are made effective in July of the same year through the July quarterly update CR, consistent with the AMA's implementation date for the codes. For the July 2013 quarterly update, there were no new Category I CPT vaccine codes. However, we note that Level II HCPCS code Q2033, which is listed in Tables 22 and 23, describes a flu vaccine that was effective July 1, 2013, and is separately payable by Medicare at reasonable cost.

Through the July 2013 OPPS quarterly update CR (Transmittal 2718, Change Request 8338, dated June 7, 2013), we allowed separate payment for four of the six new Category III CPT codes effective July 1, 2013. Specifically, as displayed in Table 24 (also shown in Table 14 of the CY 2014 OPPS/ASC proposed rule), we allowed separate payment for Category III CPT codes 0330T, 0331T, 0332T, and 0334T. We did not recognize for separate payment Category III CPT code 0329T because the device associated with this procedure has not received FDA approval. In addition, we did not recognize for separate payment Category III CPT code 0333T because this procedure is not covered by Medicare. As listed in Table 24, both CPT codes 0329T and 0333T were assigned to status indicator “E” (Not payable/Non-covered by Medicare; not paid under OPPS).

We received public comments on several of the Category III CPT codes that were implemented in July 2013, specifically on CPT codes 0330T, 0331T, 0332T, and 0334T, which are addressed in section III.C. of this final rule with comment period. Table 24 below lists the Category III CPT codes that were implemented in July 2013, along with their final status indicators, APC assignments, and payment rates for CY 2014.

In the CY 2014 OPPS/ASC proposed rule (78 FR 43588 through 43590), we proposed to continue our process of soliciting public comments on our status indicators and APC assignments for the CPT/HCPCS codes effective April 1 and July 1. For the CY 2014 update, we solicited public comments on the CY 2014 proposed status indicators and the proposed APC assignments and payment rates for the Level II HCPCS codes and the Category III CPT codes that were effective April 1, 2013, and July 1, 2013, through the respective OPPS quarterly update CRs. These codes were listed in Tables 12, 13, and 14 of the proposed rule. We proposed to finalize their status indicators and their APC assignments and payment rates, if applicable, in this CY 2014 OPPS/ASC final rule with comment period. Because the new Category III CPT and Level II HCPCS codes that become effective for July are not available to us in time for incorporation into the Addenda to the OPPS/ASC proposed rule, our policy is to include the codes, their proposed status indicators, proposed APCs (where applicable), and proposed payment rates (where applicable) in the preamble of the proposed rule but not in the Addenda to the proposed rule. These codes were listed in Tables 13 and 14, respectively, of the proposed rule. We proposed to incorporate these codes into Addendum B to this CY 2014 OPPS/ASC final rule with comment period, which is consistent with our annual OPPS update policy. The Level II HCPCS codes implemented or modified through the April 2013 OPPS update CR and displayed in Table 12 were included in Addendum B to the proposed rule (which is available via the Internet on the CMS Web site), where their proposed CY 2014 payment rates were also shown.

We did not receive any additional public comments on this process. The final status indicators, APC assignments, and payment rates, if applicable, for the Level II HCPCS codes and the Category III CPT codes that were implemented or modified through the April 2013 or July 2013 OPPS update CR can be found in Tables 21, 23, and 24, or in Addendum B to this final rule with comment period (which is available via the Internet on the CMS Web site).

2. Process for New Level II HCPCS Codes That Were Effective October 1, 2013 and New CPT and Level II HCPCS Codes That Will Be Effective January 1, 2014 for Which We Are Soliciting Public Comments in This CY 2014 OPPS/ASC Final Rule With Comment Period

As has been our practice in the past, we incorporate those new Category I and III CPT codes and new Level II HCPCS codes that are effective January 1 in the final rule with comment period updating the OPPS for the following calendar year. These codes are released to the public via the CMS HCPCS Workgroup Web site (for Level II HCPCS codes) and the AMA Web site (for CPT codes), and also through the January OPPS quarterly update CRs. In the past, we also have released new Level II HCPCS codes that are effective October 1 through the October OPPS quarterly update CRs and incorporated these new codes in the final rule with comment period updating the OPPS for the following calendar year. For CY 2014, these codes are flagged with comment indicator “NI” in Addendum B to this final rule with comment period to indicate that we are assigning them an interim payment status, which is subject to public comment. In addition, the CPT and Level II HCPCS codes that will be effective January 1, 2014, are flagged with comment indicator “NI” in Addendum B to this final rule with comment period. Specifically, the status indicator and the APC assignment and payment rate, if applicable, for all such codes flagged with comment indicator “NI” are open to public comment in the final rule with comment period, and we respond to these comments in the final rule with comment period for the next calendar year's OPPS/ASC update. In the CY 2014 OPPS/ASC proposed rule (78 FR 43590), we proposed to continue this process for CY 2014. Specifically, for CY 2014, we proposed to include in Addendum B to this CY 2014 OPPS/ASC final rule with comment period the new Category I and III CPT codes effective January 1, 2014 (including the Category III CPT codes that were released by the AMA in July 2013) that would be incorporated in the January 2014 OPPS quarterly update CR and the new Level II HCPCS codes, effective October 1, 2013, or January 1, 2014, that would be released by CMS in its October 2013 and January 2014 OPPS quarterly update CRs. As proposed, in this final rule with comment period, the October 1, 2013 and January 1, 2014 codes are flagged with comment indicator “NI” in Addendum B to this CY 2014 OPPS/ASC final rule with comment period to indicate that we have assigned them an interim OPPS payment status for CY 2014. As proposed, in this final rule with comment period, their status indicators and their APC assignments and payment rates, if applicable, are open to public comment and will be finalized in the CY 2015 OPPS/ASC final rule with comment period.

For the CY 2014 update, we are finalizing our proposal to flag new Level II HCPCS codes that become effective October 1, 2013, and new CPT and Level II HCPCS codes that become effective January 1, 2014 with comment indicator “NI” in Addendum B to this CY 2014 OPPS/ASC final rule with comment period to indicate that these codes have been assigned an interim OPPS payment status for CY 2014. In addition, because these codes have been assigned to comment indicator “NI,” their status indicators and their APC assignments and payment rates, if applicable, are open to public comment and will be finalized in the CY 2015 OPPS/ASC final rule with comment period.

B. OPPS Changes—Variations Within APCs

1. Background

Section 1833(t)(2)(A) of the Act requires the Secretary to develop a classification system for covered hospital outpatient department services. Section 1833(t)(2)(B) of the Act provides that the Secretary may establish groups of covered OPD services within this classification system, so that services classified within each group are comparable clinically and with respect to the use of resources. In accordance with these provisions, we developed a grouping classification system, referred to as Ambulatory Payment Classifications (APCs), as set forth in § 419.31 of the regulations. We use Level I and Level II HCPCS codes to identify and group the services within each APC. The APCs are organized such that each group is homogeneous both clinically and in terms of resource use. Using this classification system, we have established distinct groups of similar services. We also have developed separate APC groups for certain medical devices, drugs, biologicals, therapeutic radiopharmaceuticals, and brachytherapy devices.

We have packaged into payment for each procedure or service within an APC group the costs associated with those items or services that are directly related to, and supportive of, performing the main independent procedures or furnishing the primary and complete services. Therefore, we do not make separate payment for these packaged items or services. In general, according to the regulations at § 419.2(b), packaged items and services include, but are not limited to:

(1) Use of an operating suite, procedure room, or treatment room;

(2) Use of recovery room;

(3) Use of an observation bed;

(4) Anesthesia, certain drugs, biologicals, and other pharmaceuticals; medical and surgical supplies and equipment; surgical dressings; and devices used for external reduction of fractures and dislocations;

(5) Supplies and equipment for administering and monitoring anesthesia or sedation;

(6) Intraocular lenses (IOLs);

(7) Incidental services such as venipuncture;

(8) Capital-related costs;

(9) Implantable items used in connection with diagnostic X-ray tests, diagnostic laboratory tests, and other diagnostic tests;

(10) Durable medical equipment that is implantable;

(11) Implantable prosthetic devices (other than dental) which replace all or part of an internal body organ (including colostomy bags and supplies directly related to colostomy care), including replacement of these devices;

(12) Costs incurred to procure donor tissue other than corneal tissue.

Significant revisions to the regulations at § 419.2(b) were proposed. Further discussion of our packaging proposals was included in section II.A.3. of the proposed rule (78 FR 43568 through 43575).

In CY 2008, we implemented composite APCs to provide a single payment for groups of services that are typically performed together during a single clinical encounter and that result in the provision of a complete service (72 FR 66650 through 66652). Under the CY 2013 OPPS (77 FR 68243 through 68258), we provided composite APC payments for 10 categories of services:

(1) Mental Health Services (APC 0034);

(2) Cardiac Electrophysiologic Evaluation and Ablation (APC 8000);

(3) Low Dose Rate (LDR) Prostate Brachytherapy (APC 8001);

(4) Level I Extended Assessment & Management Composite (APC 8002);

(5) Level II Extended Assessment & Management Composite (APC 8003);

(6) Ultrasound (APC 8004);

(7) CT and CTA without Contrast (APC 8005);

(8) CT and CTA with Contrast (APC 8006);

(9) MRI and MRA without Contrast Composite (APC 8007); and

(10) MRI and MRA with Contrast Composite (APC 8008).

Further discussion of composite APCs is included in section II.A.2.f. of this final rule with comment period.

Under the OPPS, we generally pay for hospital outpatient services on a 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 relative payment weight represents the hospital cost of the services included in that APC, relative to the hospital cost of the services included in new proposed APC 0634 (Hospital Clinic Visits). The APC relative payment weights are scaled to new APC 0634 because it is the hospital clinic visit APC and because clinic visits are among the most frequently furnished services in the hospital outpatient setting. We refer readers to section VII. of the proposed rule and this final rule with comment period for further discussion of the establishment of new APC 0634.

Section 1833(t)(9)(A) of the Act requires the Secretary to review, on a recurring basis occurring no less than annually, and revise the groups, the relative payment weights, and the wage and other adjustments to take into account changes in medical practice, changes in technology, the addition of new services, new cost data, and other relevant information and factors. Section 1833(t)(9)(A) of the Act also requires the Secretary to consult with an expert outside advisory panel composed of an appropriate selection of representatives of providers to review (and advise the Secretary concerning) the clinical integrity of the APC groups and the relative payment weights (the Panel recommendations for specific services for the CY 2014 OPPS and our responses to them are discussed in the relevant specific sections throughout this final rule with comment period).

Finally, section 1833(t)(2) of the Act provides that, subject to certain exceptions, the items and services within an APC group cannot be considered comparable with respect to the use of resources if the highest cost for an item or service in the group is more than 2 times greater than the lowest cost for an item or service within the same group (referred to as the “2 times rule”). The statute authorizes the Secretary to make exceptions to the 2 times rule in unusual cases, such as low-volume items and services (but the Secretary may not make such an exception in the case of a drug or biological that has been designated as an orphan drug under section 526 of the Federal Food, Drug, and Cosmetic Act).

2. Application of the 2 Times Rule

In accordance with section 1833(t)(2) of the Act and § 419.31 of the regulations, we annually review the items and services within an APC group to determine, with respect to comparability of the use of resources, if the cost of the highest cost item or service within an APC group is more than 2 times greater than the cost of the lowest cost item or service within that same group. In making this determination, we consider only those HCPCS codes that are significant based on the number of claims. We note that, for purposes of identifying significant HCPCS codes for examination of the 2 times rule, we consider codes that have more than 1,000 single major claims, or codes that have both greater than 99 single major claims and contribute at least 2 percent of the single major claims used to establish the APC cost to be significant (75 FR 71832). This longstanding criterion to determine when a HCPCS code is significant for purposes of the 2 times rule was established because we believe that a subset of 1,000 claims is negligible within the set of approximately 100 million single procedure or single session claims we use for establishing costs. Similarly, a HCPCS code for which there are fewer than 99 single bills and which comprises less than 2 percent of the single major claims within an APC will have a negligible impact on the APC cost. In the CY 2014 OPPS/ASC proposed rule (78 FR 43592), we proposed to make exceptions to this limit on the variation of costs within each APC group in unusual cases, such as low-volume items and services, for CY 2014.

In the CY 2014 OPPS/ASC proposed rule, we identified APCs with 2 times rule violations, for which we proposed changes to their HCPCS codes' APC assignments in Addendum B to the proposed rule. We note that Addendum B did not appear in the printed version of the Federal Register as part of the CY 2014 OPPS/ASC proposed rule. Rather, it was published and made available via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html. In these cases, to eliminate a 2 times rule violation or to improve clinical and resource homogeneity, we proposed to reassign the HCPCS codes to APCs that contain services that are similar with regard to both their clinical and resource characteristics. We also proposed to rename existing APCs or create new clinical APCs to accommodate proposed HCPCS code reassignments. In many cases, the proposed HCPCS code reassignments and associated APC reconfigurations for CY 2014 included in the proposed rule are related to changes in costs of services that were observed in the CY 2012 claims data newly available for CY 2014 ratesetting. We also proposed changes to the status indicators for some HCPCS codes that were not specifically and separately discussed in the CY 2014 OPPS/ASC proposed rule. In these cases, we proposed to change the status indicators for some HCPCS codes because we believe that another status indicator would more accurately describe their payment status from an OPPS perspective based on the policies that we proposed for CY 2014. Addendum B to the CY 2014 OPPS/ASC proposed rule identified with comment indicator “CH” those HCPCS codes for which we proposed a change to the APC assignment or status indicator, or both, that were initially assigned in the April 2013 Addendum B Update (available via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html). In contrast, Addendum B to this final rule with comment period (available via the Internet on the CMS Web site) identifies with the “CH” comment indicator the final CY 2014 changes compared to the HCPCS codes' status as reflected in the October 2013 Addendum B update.

3. Exceptions to the 2 Times Rule

As discussed earlier, we may make exceptions to the 2 times limit on the variation of costs within each APC group in unusual cases such as low-volume items and services. Taking into account the APC changes that we proposed for CY 2014, we reviewed all the APCs to determine which APCs would not satisfy the 2 times rule. Then we used the following criteria to decide whether to propose exceptions to the 2 times rule for affected APCs:

  • Resource homogeneity;
  • Clinical homogeneity;
  • Hospital outpatient setting utilization;
  • Frequency of service (volume); and
  • Opportunity for upcoding and code fragments.

For a detailed discussion of these criteria, we refer readers to the April 7, 2000 OPPS final rule with comment period (65 FR 18457 and 18458).

For the CY 2014 OPPS/ASC proposed rule, the list of 10 APCs that appeared in Table 15 of the CY 2014 OPPS/ASC proposed rule (78 FR 43592) that were excepted from the 2 times rule were based on claims data for dates of service between January 1, 2012, and December 31, 2012, that were processed before January 1, 2013. For this final rule with comment period, we used claims data for dates of service between January 1, 2012, and December 31, 2012, that were processed on or before June 30, 2013 and updated CCRs, if available. Therefore, after considering the public comments we received on the CY 2014 OPPS/ASC proposed rule and making changes to APC assignments based on those comments, we analyzed the CY 2012 claims data used for this final rule with comment period to identify the APCs with 2 times rule violations. Based on the final CY 2012 claims data, we found 10 APCs with 2 times rule violations, which is the same number of APCs that violated the 2 times rule in the proposed rule. We applied the criteria as described earlier to identify the APCs that are exceptions to the 2 times rule for CY 2014, and identified six new APCs that meet the criteria for exception to the 2 times rule for this final rule with comment period, but that did not meet the criteria using proposed rule claims data. Specifically, we found that the following six new APCs violated the 2 times rule: APC 0066 (Level I Stereotactic Radiosurgery); APC 0067 (Level II Stereotactic Radiosurgery); APC 0193 (Level V Female Reproductive Procedures); APC 0342 (Level I Pathology); APC 0370 (Multiple Allergy Tests); and APC 0634 (Hospital Clinic Visits).

After consideration of the public comments we received and our review of the CY 2012 costs from hospital claims and cost report data available for this final rule with comment period, we are finalizing our proposals with some modifications. Specifically, we are finalizing our proposal to except 4 of the proposed 10 original APCs from the 2 times rule for CY 2014, specifically, APCs 0057, 0272, 0330, and 0690. In contrast, we are not finalizing our proposal to except 6 of the proposed 10 original APCs from the 2 times rule, specifically, APCs 0060 (Manipulation Therapy), 0075 (Level V Endoscopy Upper Airway), 0105 (Repair/Revision/Removal of Pacemakers, AICDs, or Vascular Devices), 0148 (Level I Anal/Rectal Procedures), 0278 (Diagnostic Urography), and 0402 (Level II Nervous System Imaging). Our data analysis for this final rule with comment period revealed that these six APCs no longer violate the 2 times rule. Table 25 below lists 10 APCs that we are excepting from the 2 times rule for CY 2014 based on the criteria above and a review of updated claims data. We note that, for cases in which a recommendation by the HOP Panel appears to result in or allow a violation of the 2 times rule, we generally accept the Panel's recommendation because those recommendations are based on explicit consideration of resource use, clinical homogeneity, site of service, and the quality of the claims data used to determine the APC payment rates. The geometric mean costs for hospital outpatient services for these and all other APCs that were used in the development of this final rule with comment period can be found on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Hospital-Outpatient-Regulations-and-Notices.html.

C. OPPS APC-Specific Policies

1. Cardiovascular and Vascular Services

a. Non-Ophthalmic Fluorescent Vascular Angiography (APC 0263)

We created HCPCS code C9733 (Non-ophthalmic fluorescent vascular angiography (FVA)), effective April 1, 2012, for a service that became known to us through the new technology APC application process. We assigned HCPCS code C9733 to APC 0397 (Vascular Imaging), which had a CY 2012 payment rate of $154.87 and a status indicator of “Q2.” The “Q2” status indicator shows that payment for the service will be packaged in the APC payment if billed on the same date of service as a HCPCS code assigned status indicator “T”; and in all other circumstances, a separate APC payment for the service will be made. We maintained the assignment of HCPCS code C9733 to APC 0397 for CY 2013, which has a payment rate of $330.97, and continued the assignment of status indicator “Q2.”

Comment: One commenter objected to the continued assignment of status indicator “Q2” to the service described by HCPCS code C9733, as well as packaging payment for the service as a result of the breast reconstruction surgery primary code being included in a comprehensive APC, because the commenter believed that both of these proposed policies would result in packaging the payment for the service described by HCPCS code C9733. The commenter stated that packaging payment for a service or item is only appropriate when the cost of the service or item can be taken into account in establishing the payment rate for the separately paid services. The commenter pointed out that there were no single claims reporting HCPCS code C9733 in the claims data used for the proposed rule ratesetting, and asserted that, because HCPCS code C9733 described a new service with no single claims, payment should not be packaged until several years after the code's creation, when there will be sufficient claims data. The commenter further asserted that the proposed packaging payment for the service described by HCPCS code C9733 with payment for CPT code 19357 (Breast reconstruction, immediate or delayed, with tissue expander, including subsequent expansion) does not comport with CMS' principle that packaging payment for services should reflect how the service is reported. The commenter stated that its disagreement with the packaging proposals is supported by CMS' acknowledgement that none of the 10 claims reporting HCPCS code C9733 were identified as single claims and, according to an analysis that the commenter conducted, HCPCS code C9733 was reported in combination with CPT code 19357 approximately 90 percent of the time. The commenter also believed that packaging payment for HCPCS code C9733 contradicts the principle that CMS should be able to map the costs of the packaged service to the separately payable services with which it is performed.

Response: We disagree with the commenter that payment for the service described by HCPCS code C9733 should not be packaged when it is used intraoperatively on the same date of service as the primary procedure. While it is true that HCPCS code C9733 is a relatively new service, the commenter stated that its own data analysis shows that the service is being reported in combination with CPT code 19357 approximately 90 percent of the time. Therefore, payment for the service described by HCPCS code C9733 is being taken into account in establishing the payment rate for the separately paid services with which it is performed. In addition, we believe that packaging payment for the service described by HCPCS code C9733 does reflect how the service is furnished and how it is being reported on a claim in combination with CPT code 19357. Although none of the 10 claims available for the proposed rule ratesetting were single claims, the services reported on the 10 claims appear to have been mapped to appropriate separately paid procedures. The procedure described by HCPCS code C9733 is often performed intraoperatively in combination with a number of primary procedures, including facial reconstruction and reanimation, muscle flaps, trauma reconstruction, and digital and limb reattachment and, as the commenter stated, breast reconstruction, which appears to be the focus of the commenter's concern. In other words, there are a number of plastic and reconstructive surgical procedures with which the imaging procedure described by HCPCS code C9733 can be used, not just breast reconstruction surgery.

While we proposed to maintain the assignment of HCPCS code C9733 to APC 0397, in this final rule with comment period, we are deleting APC 0397 because of multiple 2 times rule violations in APC 0397 based on the final rule claims data. Once we removed the high-cost services from APC 0397, only several low-volume services remained in this APC, including HCPCS code C9733, which we reassigned to another APC. We have reassigned HCPCS code C9733 to APC 0263 (Level I Miscellaneous Radiology Procedures) for CY 2014, with a final rule geometric mean cost of approximately $319.

After consideration of the public comment we received, we are finalizing our proposal to maintain the assignment of “Q2” status indicator to HCPCS code C9733. However, we are reassigning HCPCS code C9733 to APC 0263 when the service described by HCPCS code C9733 is performed and reported separately. Further discussion of comprehensive APCs is included in section II.A.2.e. of this final rule with comment period. However, we note that we are not implementing our comprehensive APC policy until CY 2015.

b. Subcutaneous Defibrillator (APC 0107)

For CY 2014, we proposed to continue to assign CPT code 0319T (Insertion or replacement of subcutaneous implantable defibrillator system with subcutaneous electrode) to APC 0107 (Level I Implantation of Cardioverter-Defibrillators (ICDs)), for which we proposed a CY 2014 geometric mean cost of approximately $25,447. (The proposed payment rate reflects the corrected proposed rate included in the September 6, 2013 OPPS Addendum B, which was posted on the CMS Web site.)

Comment: Commenters objected to the proposed assignment of CPT code 0319T to APC 0107 and requested that CMS reassign CPT code 0319T to APC 0108 (Level II Implantation of Cardioverter-Defibrillators (ICDs)), for which we proposed a CY 2014 geometric mean cost of approximately $31,911. The commenters believed that CPT code 0319T is similar in clinical application and resource use to CPT code 33249 (Insertion or replacement of permanent pacing cardioverter-defibrillator system with transvenous lead(s), single or dual chamber), which is currently assigned to APC 0108.

Response: We believe that the procedure described by CPT code 0319T is sufficiently clinically similar to the other procedures assigned to APC 0107. In addition, because we do not have CY 2012 claims data for CPT code 0319T for the CY 2014 ratesetting cycle, we cannot determine the resource costs for this procedure at this time. We expect to have claims data for CPT code 0319T in preparation for the CY 2015 rulemaking cycle and will reevaluate the APC assignment of CPT code 0319T at that time.

After consideration of the public comments we received, we are finalizing our CY 2014 proposal, without modification, to continue to assign CPT code 0319T to APC 0107, which has a final CY 2014 APC geometric mean cost of approximately $25,106.

c. Thrombolytic Therapy (APC 0621)

For CY 2014, we proposed to continue to assign CPT code 37211 (Transcatheter therapy, arterial infusion for thrombolysis other than coronary, any method, including radiological supervision and interpretation, initial treatment day) and CPT code 37212 (Transcatheter therapy, venous infusion for thrombolysis other than coronary, any method, including radiological supervision and interpretation, initial treatment day) to APC 0621 (Level I Vascular Access Procedures), for which we proposed a CY 2014 geometric mean cost of approximately $866. (The proposed payment rate reflects the corrected proposed rate included in the September 6, 2013 OPPS Addendum B, which was posted on the CMS Web site.)

Comment: One commenter objected to the proposed continued assignment of CPT codes 37211 and 37212 to APC 0621. The commenter stated that CPT codes 37211 and 37212, which both are assigned status indicator “T,” are often times performed in conjunction with CPT code 75710 (Angiography, spinal selective, radiological supervision and interpretation) which is assigned status indicator “Q2” and is assigned to APC 0279 (Level II Angiography and Venography), for which we proposed a CY 2014 geometric mean cost of approximately $2,700. The commenter stated that, because CPT code 75710 is not separately paid when it appears on a claim in combination with other services assigned to status indicator “T” (such as CPT codes 37211 and 37212), providers receive significantly lower payment for CPT code 75710 when performed and reported in conjunction with CPT code 37211 or CPT code 37212, compared to payment for the services when performed and reported separately, although significantly more resources are used. The commenter stated that payment for CPT codes 37211 and 37212 should not be packaged with payment for CPT code 75710 when the services described by CPT codes 37211 and 37212 are performed on the same date as CPT code 75710.

Response: We believe that the procedure described by CPT codes 37211 and 37212 are sufficiently clinically similar to the other procedures assigned to APC 0621. In addition, CPT codes 37211 and 37212 are new codes for CY 2013, and because we do not have claims data available for these two new CPT codes for CY 2013 ratesetting, we do not have a way to validate or substantiate the claims made by commenters. We expect to have claims data for CPT codes 37211 and 37212 in preparation for the CY 2015 rulemaking cycle and will reevaluate the APC assignment of CPT codes 37211 and 37212 at that time.

After consideration of the public comments we received, we are finalizing our CY 2014 proposal, without modification, to continue to assign CPT codes 37211 and 37212 to APC 0621, which has a final CY 2014 APC geometric mean cost of approximately $853.

d. Vascular Ligation (APCs 0091 and 0092)

For CY 2014, we proposed to continue to assign CPT codes 36475 (Endovenous ablation therapy of incompetent vein, extremity, inclusive of all imaging guidance and monitoring, percutaneous, radiofrequency; first vein treated) and 37191 (Insertion of intravascular vena cava filter, endovascular approach including vascular access, vessel selection, and radiological supervision and interpretation, intraprocedural roadmapping, and imaging guidance (ultrasound and fluoroscopy), when performed) to APC 0091 (Level II Vascular Ligation), which had a proposed payment rate of approximately $2,882.

In addition, we proposed to continue to assign CPT code 36478 (Endovenous ablation therapy of incompetent vein, extremity, inclusive of all imaging guidance and monitoring, percutaneous, laser; first vein treated) to APC 0092 (Level I Vascular Ligation), which had a proposed payment rate of approximately $2,047.

(The proposed payment rates reflect the corrected proposed rates included in the September 6, 2013 OPPS Addendum B, which was posted on the CMS Web site.)

Comment: One commenter stated that the CPT codes assigned to APCs 0091 and 0092 do not meet the CMS requirement of clinical and cost homogeneity, and requested that CMS consider restructuring APCs 0091 and 0092. The commenter requested that CMS review the clinical and cost characteristics of all the procedures assigned to these APCs and consider either combining APCs 0091 and 0092 or reassigning specific procedures to more appropriate APCs in order to establish clinical homogeneity. In particular, the commenter requested that CMS review the APC assignments for CPT codes 37191 and 36475 (assigned to APC 0091) and CPT code 36478 (assigned to APC 0092). The commenter stated that CPT code 37191 is not similar to the other procedures assigned to APC 0091 because it is not a ligation procedure, and is the only procedure assigned to APC 0091 that requires an expensive implanted device. The commenter further stated that the cost associated with CPT code 37191 is significantly higher than the cost of most of the other procedures assigned to APC 0091. The commenter also recommended that CPT codes 36475 and 36478 be assigned to the same APC because they are nearly identical procedures. The commenter stated that the CPT clinical vignettes for CPT code 36475 (radiofrequency) and CPT code 36478 (laser) show similarities between these two procedures, which further support the clinical homogeneity of these two procedures. The commenter believed that assigning both of these procedures to two different APCs, and maintaining a payment differential between CPT code 36475 and CPT code 36478, incentivizes providers to choose radiofrequency instead of laser, which is a clinically comparable procedure. The commenter believed that assigning the two procedures to the same APC would encourage providers to make treatment decisions based solely on clinical characteristics.

Response: We appreciate the commenter's suggestions. We agree with the commenter's recommendations for reassignment of CPT codes 36475, 36478, and 37191. With respect to CPT codes 36475 and 36478, we have further analyzed updated hospital outpatient claims data and determined that both procedures are comparable in terms of clinical homogeneity and resource costs and should be assigned to the same APC. Analysis of updated CY 2012 hospital outpatient claims data for the CY 2014 final rule shows a geometric mean cost of approximately $1,966 for CPT code 36478, which is comparable to the geometric mean cost of approximately $2,382 for CPT code 36475. We also agree with the commenter that CPT code 37191 should be reassigned to another APC that is more appropriate based on the nature of the procedure. Based on our review of the existing vascular-related APCs and input from our medical advisors, we believe that CPT code 37191 would be more appropriately reassigned to APC 0093 (Vascular Reconstruction/Fistula Repair) because of the clinical homogeneity and similar resource costs of other procedures assigned to APC 0093.

By accepting the commenter's recommendation to reassign CPT code 37191 from APC 0091 to APC 0093, and after taking into consideration all of the procedures in APCs 0091 and 0092, we have determined that combining APCs 0091 and 0092 into one APC is appropriate. To accomplish this reconfiguration, we are establishing new APC 0219 (Vascular Ligation), which has a geometric mean cost of approximately $2,147. The geometric mean cost of new APC 0219 is based on the costs of all of the 22 procedures assigned to APCs 0091 and 0092; the most significant cost among these 22 procedures ranged between $1,455 (for CPT code 37765) and $2,382 (for CPT code 36475). In addition, because of the reassignment of CPT code 37191 to APC 0093, we are modifying the title of APC 0093 to read: “Vascular Reconstruction/Fistula Repair” to appropriately describe all the procedures assigned to this APC.

After further consideration of the public comment that we received, we are revising the APC assignment for CPT codes 36475, 36478, and 37191. Specifically, we are reassigning CPT codes 36475 and 36478 to new APC 0219, reassigning CPT code 37191 to APC 0093, and modifying the title of APC 0093 to read: “Vascular Reconstruction/Fistula Repair”. The final CY 2014 geometric mean cost of APC 0219 is approximately $2,147, and approximately $2,857 for APC 0093. The final CY 2014 payment rates for CPT codes 36475, 36478, and 37191 can be found in Addendum B to this CY 2014 OPPS/ASC final rule with comment period (which is available via the Internet on the CMS Web site).

2. Gastrointestinal Services

a. Fecal Microbiota Transplantation (APC 0340)

For CY 2014, we proposed to continue to assign HCPCS code G0455 (Preparation with instillation of fecal microbiota by any method, including assessment of donor specimen) to APC 0340 (Level I Minor Procedures), which had a proposed payment rate of approximately $74. Although the CPT Editorial Panel established CPT code 44705 (Preparation of fecal microbiota for instillation, including assessment of donor specimen), effective January 1, 2013, to describe a fecal microbiota procedure, we did not recognize the CPT code for payment under the OPPS. As we stated in the CY 2013 MPFS final rule with comment period (77 FR 69052), by policy, Medicare's payment for the preparation of the donor specimen would only be made if the specimen is ultimately used for the treatment of a beneficiary. Because of this policy, we believe that it was appropriate to bundle the preparation and instillation of fecal microbiota into one payable HCPCS code. Consequently, we established HCPCS code G0455, effective January 1, 2013, for Medicare reporting of the fecal microbiota procedure.

Comment: One commenter stated that the CY 2013 payment rate of approximately $50 for HCPCS code G0455 is insufficient. The commenter further stated that this payment rate does not appear to recognize the patient preparation for the implantation or the instillation of the donor microbes, the supplies, or the overall work involved in providing this procedure. The commenter stated that if the microbiota instillation is performed via colonoscopy or esophagogastroduodenoscopy (EGD), the CY 2013 payment rate for the procedure does not include the cost of the endoscopic portion of the procedure. To pay appropriately for this procedure, the commenter recommended that CMS delete existing HCPCS code G0455 and replace it with three new HCPCS G-codes. The commenter suggested that the three recommended HCPCS G-codes differentiate the various preparation methods used in performing the procedure and be assigned accordingly to appropriate APCs. Specifically, the commenter recommended that one HCPCS G-code describe instillation by oronasogastric tube or enema, the second HCPCS G-code describe instillation by upper endoscopy, and the third HCPCS G-code describe instillation by colonoscopy.

Response: We appreciate the commenter's suggestions. However, we believe that the existing HCPCS code G0455 appropriately describes the procedure for which Medicare should pay. Under Medicare, payment for the preparation of the donor specimen would only be made if the specimen is ultimately used for the treatment of a beneficiary because Medicare is not authorized to pay for the costs of any services not directly related to the diagnosis and treatment of a beneficiary. Because of this policy, we believe that it is appropriate to bundle the preparation and instillation of fecal microbiota under HCPCS code G0455.

Based on our understanding of the procedure, we believe that HCPCS code G0455 is appropriately assigned to APC 0340 for CY 2014. Because this code was new for CY 2013, we expect to have claims data for HCPCS code G0455 for the CY 2015 ratesetting process. As has been our practice since the implementation of the OPPS, we annually review all the items and services within an APC group to determine, with respect to comparability of the use of resources, for any 2 times rule violations. In making this determination, we review our claims data and determine whether we need to make changes to the current APC assignments for the following year. We will reevaluate the status indicator and APC assignment for HCPCS code G0455 for the CY 2015 OPPS rulemaking cycle.

After consideration of the public comment that we received, we are finalizing our CY 2014 proposal, without modification, to continue to assign HCPCS code G0455 to APC 0340. The final CY 2014 geometric mean cost of HCPCS code G0455 is approximately $54. The final CY 2014 payment rate for HCPCS code G0455 can be found in Addendum B to this CY 2014 OPPS/ASC final rule with comment period (which is available via the Internet on the CMS Web site).

b. Transoral Incisionless Fundoplication (APC 0422)

For CY 2014, we proposed to continue to assign CPT code C9724 (Endoscopic full-thickness plication of the stomach using endoscopic plication system (eps); includes endoscopy) to APC 0422 (Level III Upper GI Procedures), which had a proposed payment rate of approximately $1,967. (The proposed payment rate reflects the corrected proposed rate included in the September 6, 2013 OPPS Addendum B, which was posted on the CMS Web site.)

HCPCS code C9724, which was established by CMS effective April 1, 2005, describes an endoscopic full-thickness plication procedure for the treatment of gastroesophageal reflux disease (GERD). Since April 2005, HCPCS code C9724 has been assigned to APC 0422. Of the three existing upper GI APCs, APC 0422 is the highest paying APC.

In the CY 2013 OPPS/ASC final rule with comment period (77 FR 68333), we stated that a presenter at the August 2012 HOP Panel meeting requested that CMS either reassign HCPCS code C9724 from APC 0422 to New Technology APC 1565 (New Technology—Level XXVIII ($5000-$5500)) or create a new APC with a descriptor of “Level IV Upper GI Procedures.” We also stated that, based on the Panel's review and discussion of the claims data, we accepted the Panel's recommendation to continue to assign HCPCS code C9724 to APC 0422 for the CY 2013 update.

Furthermore, because of concerns related to the descriptor of HCPCS code C9724, in that same final rule with comment period, we revised the long descriptor of HCPCS code C9724 to read “Endoscopic full-thickness plication of the stomach using endoscopic plication system (eps); includes endoscopy,” effective January 1, 2013, to accurately describe how the procedure is currently performed.

At the August 2013 HOP Panel meeting, the same presenter at the August 2012 HOP Panel meeting requested that the Panel recommend that CMS reassign HCPCS code C9724 from APC 0422 to a new APC with a descriptor of “Level IV Upper GI Procedures.” The Panel did not make this recommendation at the meeting.

Comment: Several commenters disagreed with the proposal to continue to assign HCPCS code C9724 to APC 0422. The commenters stated that the proposed payment rate for APC 0422 does not adequately pay for the cost of performing the procedure. These commenters urged CMS to establish a new APC with a descriptor of “Level IV Upper GI Procedures” or “Level IV Upper GI Transoral Procedures,” with a payment rate of between $3,000 and $5,000, and reassign HCPCS code C9724 and CPT code 43257 to this newly created APC.

Response: Because HCPCS code C9724 became effective April 1, 2005, we have several years of claims data. We examined the latest hospital outpatient claims data for HCPCS code C9724, based on claims data for dates of service between January 1, 2012, and December 31, 2012, that were processed on or before June 30, 2013. Our analysis of these latest claims data shows a geometric mean cost of approximately $6,801 based on 12 single claims (out of 73 total claims) for HCPCS code C9724. Overall, APC 0422 has a geometric mean cost of approximately $1,976, which is based on the seven procedures assigned to this APC. Of the seven procedures assigned to APC 0422, three procedures have geometric mean cost ranging between approximately $1,431 (for CPT code 43830) and approximately $2,042 (for CPT code 43228).

APC 0422 consists of other procedures that manipulate the natural or an artificial entrance to the stomach, similar to the procedure described by TIF. We believe that maintaining the assignment of HCPCS code C9724 to APC 0422 continues to be appropriate because several other procedures assigned to this APC are highly clinically similar to the procedure described by HCPCS code C9724 in that they are upper gastrointestinal endoscopy procedures. In particular, CPT code 43257 describes an upper gastrointestinal endoscopy procedure for the treatment of GERD, which is also the method and purpose of HCPCS code C9724. Consistent with our longstanding policy since the implementation of OPPS in 2000, we will reevaluate the APC assignment for every code during our annual rulemaking cycle.

After consideration of the public comments that we received, we are finalizing our CY 2014 proposal, without modification, to maintain the assignment of HCPCS code C9724 to APC 0422. The final CY 2014 geometric mean costs for APC 0422 is approximately $1,976. The final CY 2014 payment rate for HCPCS code C9724 can be found in Addendum B to this CY 2014 OPPS/ASC final rule with comment period (which is available via the Internet on the CMS Web site).

3. Genitourinary Services

a. Percutaneous Renal Cryoablation (APC 0423)

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

Comment: One commenter expressed concern that the proposed payment rate of approximately $4,114 for APC 0423, the APC to which CPT code 50593 is assigned, is inadequate because the proposed payment rate does not accurately account for the costs incurred by hospitals in performing the procedure described by CPT code 50593. Further, the commenter indicated that hospitals are hesitant to perform this procedure because of the inadequate APC payment rate assigned to the procedure. The commenter asked CMS to designate CPT code 50593 as a “device-dependent” procedure and require hospitals to submit claims with the appropriate device C-code, specifically, HCPCS code C2618 (Probe, cryoablation). The commenter believed that the inadequacy of the proposed payment rate for APC 0423 is attributable to claims data that do not accurately capture the full costs of the procedure described by CPT code 50593. The commenter stated that approximately half of the single claims reporting CPT code 50593 do not contain the associated charge for the required device used in performing the service, specifically HCPCS code C2618 (Probe, cryoablation). The commenter stated that designating CPT code 50593 as a device-dependent procedure would result in a more accurate payment for the procedure and continued Medicare beneficiary access to percutaneous renal cryoablation in the HOPD.

Response: We continue to believe that CPT code 50593 is appropriately assigned to APC 0423 based on clinical and resource similarities compared to other procedures also proposed for assignment to APC 0423 for CY 2014. As we stated in the CY 2007 OPPS final rule with comment period (71 FR 68049 through 68050), the CY 2008 OPPS/ASC final rule with comment period (72 FR 66709), the CY 2009 OPPS/ASC final rule with comment period (73 FR 68611), the CY 2010 OPPS/ASC final rule with comment period (74 FR 60444), and the CY 2011 OPPS/ASC final rule with comment period (75 FR 71910), we initially revised the APC assignment for the percutaneous renal cryoablation procedure from APC 0163 to APC 0423 in CY 2007 based on the APC Panel's recommendation. In addition, based on our CY 2012 claims data, the resource use associated with CPT code 50593 is comparable to the other procedures assigned to APC 0423. Specifically, our latest hospital outpatient claims data shows that the geometric mean cost for CPT code 50593, based on 667 single claims (out of 1,357 total claims), is approximately $5,047. Overall, APC 0423 has a geometric mean cost of approximately $4,121, which is based on claims data for the eight procedures assigned to this APC. Of the eight procedures, six procedures have the most significant geometric mean cost, ranging between approximately $3,117 (for CPT code 47511) and approximately $5,047 (for CPT code 50593). Based on our latest claims data, and the clinical homogeneity and resource similarity of the procedure described by CPT code 50593 to the other procedures assigned to APC 0423, we believe that CPT code 50593 is appropriately assigned to APC 0423.

Moreover, we disagree with the commenter's assertion that hospitals are reluctant to perform this procedure because of the inadequate payment rate. We believe that the payment rate for APC 0423, the APC to which CPT code 50593 is assigned, is sufficient to ensure Medicare beneficiary access to this service.

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

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

Comment: One commenter requested that CMS revise the code descriptor for device HCPCS code C2618 consistent with how cryoablation probes are now classified by the medical industry. The commenter stated that since the implementation of the OPPS and the development of device descriptions, cryoablation probes have improved and these devices are now referred to as cryoablation needles. The commenter believed that modifying the description of HCPCS code C2618 will enable hospitals to appropriately report the use of the device when submitting claims to CMS and other payers.

Response: Based on input from our medical advisors, we agree that a change in the description of HCPCS code C2618 is appropriate. Therefore, for the CY 2014 update, we are revising the description for HCPCS code C2618 from “Probe, cryoablation” to “Probe/needle, cryoablation” effective January 1, 2014.

After consideration of the public comments we received, we are finalizing our CY 2014 proposal, without modification, to continue to assign CPT code 50593 to APC 0423, which has a final CY 2014 geometric mean cost of approximately $4,121. In addition, we are revising the code descriptor for HCPCS code C2618 to read: “Probe/needle, cryoablation” effective January 1, 2014. The final CY 2014 payment rate for CPT code 50593 can be found in Addendum B to this CY 2014 OPPS/ASC final rule with comment period (which is available via the Internet on the CMS Web site).

b. Anoscopy With Directed Submucosal Injection (APC 0150)

We created HCPCS code C9735 (Anoscopy; with directed submucosal injection(s), any substance) effective April 1, 2013, and assigned the code to APC 0150 (Level IV Anal/Rectal Procedures) for CY 2013, which has a payment rate of $2,365.97. The procedure described by HCPCS code C9735 involves injection of a bulking agent, L8605 (Injectable bulking agent dextranomer/hyaluronic acid copolymer implant, anal canal, 1 ml, includes shipping and necessary supplies). For CY 2014, we proposed to maintain the assignment of HCPCS code C9735 to APC 0150, with a proposed payment rate of approximately $2,520. (The proposed payment rate reflects the corrected proposed rate included in the September 6, 2013 OPPS Addendum B, which was posted on the CMS Web site.)

Comment: One commenter believed that the proposed assignment of HCPCS code C9735 to APC 0150 is inappropriate. The commenter stated that the bulking agent used in the performance of the procedure described by HCPCS code C9735 costs $4,900 for the 4 mL required for the injections, and that the total cost of the procedure described by HCPCS code C9735 is more than the proposed payment rate of approximately $2,519 for APC 0150. The commenter recommended creating a new Level V Anal/Rectal Procedures APC, composed of HCPCS code C9735, and two other procedures, CPT code 46762 (Sphincteroplasty, anal, for incontinence, adult; implantation artificial sphincter), and CPT code 0184T (Excision of rectal tumor, transanal endoscopic microsurgical approach (ie, TEMS), including muscularis propria (ie, full thickness)). The commenter stated that the procedure described by CPT code 46762 is clinically similar to the procedure described by HCPCS code C9735 because both procedures involve implantation of a product to treat fecal incontinence, and that the procedure described by HCPCS code C9735 is similar to the procedure described by CPT code 0184T because both procedures involve new technology with significant procedure costs.

Alternatively, the commenter recommended assigning HCPCS code C9735 to New Technology APC 1526, with a CY 2014 proposed payment rate of approximately $4,250.

Response: HCPCS code C9735 was created effective April 1, 2013. Therefore, we do not have claims data on this procedure at this time. Our longstanding policy is to wait until claims data are available on a new procedure before reassigning the procedure to another clinical APC. We do not agree with the commenter that creating a Level V Anal/Rectal Procedures APC is warranted at this time. The three codes recommended for assignment to such an APC, all of which are currently assigned to the Level IV Anal/Rectal Procedures APC, are low volume or no volume services. According to our CY 2012 claims data, CPT code 0184T has 104 single frequency claims, CPT code 46762 has 8 single claims, and HCPCS code C9735 has no claims volume. The low volume of claims for such an APC would contribute to APC cost and payment volatility. Regarding the commenter's recommendation to assign HCPCS code C9735 to a New Technology APC, we believe that HCPCS code C9735 is clinically similar to the other services assigned to APC 0150, which includes another anoscopy service, and, therefore, APC 0150 is an appropriate APC assignment for HCPCS code C9735. Based on our established OPPS ratesetting methodology, we will review the APC assignment for HCPCS code C9735 once we have OPPS claims data for this service during our annual OPPS update process. Therefore, we are finalizing our proposal to maintain the assignment of HCPCS code C9735 to APC 0150 for CY 2014. The final CY 2014 geometric mean cost for APC 0150 is approximately $2,510.

4. Musculoskeletal Services

a. Arthroplasty (APC 0425)

APC 0425 (Level II Arthroplasty or Implantation with Prosthesis) contains arthroplasty procedures as well as osseointegrated implant procedures. For CY 2014, we proposed to convert APC 0425 to a comprehensive APC, with a proposed geometric mean cost of approximate $9,939. (The proposed payment rate reflects the corrected proposed rate included in the September 6, 2013 OPPS Addendum B, which was posted on the CMS Web site.)

Comment: One commenter requested that CMS review the current composition of APC 0425 for clinical homogeneity and resource cost cohesion, including the newly added adjunctive costs that would result from converting APC 0425 to a comprehensive APC. The commenter recommended that CMS remove the following osseointegrated implant procedure codes from APC 0425 and assign them to a more clinically appropriate APC: CPT code 69714 (Implantation, osseointegrated implant, temporal bone, with percutaneous attachment to external speech processor/cochlear stimulator; without mastoidectomy); CPT code 69715 (Implantation, osseointegrated implant, temporal bone, with percutaneous attachment to external speech processor/cochlear stimulator; with mastoidectomy); CPT code 69717 (Replacement (including removal of existing device), osseointegrated implant, temporal bone, with percutaneous attachment to external speech processor/cochlear stimulator; without mastoidectomy); and CPT code 69718 (Replacement (including removal of existing device), osseointegrated implant, temporal bone, with percutaneous attachment to external speech processor/cochlear stimulator; with mastoidectomy).

Response: In response to the commenter's request, we have again reviewed the composition of APC 0425 for clinical and resource homogeneity. Although we are not making comprehensive APCs effective until CY 2015, the proposed procedural composition of APC 0425 is the same whether this APC is a comprehensive APC or not. We found in our review that the clinical and resource composition of proposed APC 0425 is appropriate because all of the procedures assigned to the APC involve surgical procedures that use high-cost devices, including the osseointegrated device procedures represented by CPT codes 69714, 69715, 69717, and 69718. Therefore, we do not believe that it is necessary to reconfigure the proposed APC 0425.

After consideration of the public comment we received, we are finalizing the proposed composition of APC 0425 for CY 2014 with the modification that APC 0425 will not be made a comprehensive APC until CY 2015. The final CY 2014 geometric mean cost of APC 0425 is approximately $9,766.

b. Joint Stabilization (APC 0052)

The CPT Editorial Panel created CPT Code 0334T (Sacroiliac joint stabilization for arthrodesis, percutaneous or minimally invasive (indirect visualization), includes obtaining and applying autograft or allograft (structural or morselized) when performed, includes image guidance when performed (eg., CT or fluoroscopic)), effective July 1, 2013. For CY 2013, we assigned CPT code 0334T to APC 0208 (Laminotomies and Laminectomies) with a payment rate of $3,758.59. For CY 2014, we proposed to maintain the assignment of CPT code 0334T to APC 0208, with a proposed payment rate of approximately $4,109. (The proposed payment rate reflects the corrected proposed rate included in the September 6, 2013 OPPS Addendum B, which was posted on the CMS Web site.)

Comment: A few commenters objected to our proposed assignment of CPT code 0334T to APC 0208, and stated that APC 0208 is not an appropriate assignment for CPT code 0334T either in terms of resources or clinical homogeneity. The commenters stated that the proposed payment rate for APC 0208 is insufficient to cover the approximately $10,500 in implant costs. The commenters further stated that the other procedures assigned to APC 0208 do not have appreciable device costs. One commenter performed a cost analysis on claims reporting CPT code 27280 (Arthrodesis, sacroiliac joint (including obtaining graft)), the CPT code that would have been used for minimally invasive Sacroiliac (SI) fusion procedures in CY 2012, the year used for the CY 2014 ratesetting. Based on the commenter's analysis, 38 hospitals submitted outpatient claims reporting CPT code 27280. However, no claims were used for CY 2014 Medicare ratesetting because CPT code 27280 was included on the OPPS inpatient only list for CY 2012 (and currently remains on this list). The commenter calculated a geometric mean cost of $14,733 based on these 38 claims. The commenter believed that these 38 claims represented migration of the procedure described by CPT code 27280, which uses minimally invasive techniques and implants, to the hospital outpatient setting. Some commenters also stated that other procedures assigned to APC 0208 are primarily used for decompressing the disc and neural structures, which differ in location and purpose from the procedure described by CPT code 0334T. The commenters recommended that CMS consider assigning CPT code 0334T to a New Technology APC with a payment rate range between $14,500 and $15,000, based on the commenter's analysis of the claims reporting CPT code 27280; or creating a new clinical APC and assigning CPT code 0334T to that APC based on the cost estimate for performing the procedure described by CPT code 27280 because there are no other clinical APCs that are appropriate to assign CPT code 0334T.

Response: We appreciate the commenters' suggestions. However, in regard to the commenter's cost analysis performed using the 38 CY 2012 claims for CPT code 27280, we do not believe that these 38 claims likely represent the cost of performing the procedure described by CPT code 0334T. As the commenter stated, CPT code 27280 was listed as an inpatient only service for CY 2012, currently remains on the inpatient only list for CY 2013, and is proposed to remain on the inpatient only list for CY 2014. CPT code 27280 is used primarily to report open sacroiliac joint fusion procedures, rather than minimally invasive SI joint fusion procedures. Therefore, while some of the 38 claims may involve the minimally invasive techniques, we are not convinced that these claims represent minimally invasive techniques, but consist mainly of open SI joint fusion procedures, which are the primarily reported procedures for this code. Regarding the commenters' suggested option to create a new device pass-through category, we do not discuss the merits of OPPS pass-through status applications in our proposed or final rules. Regarding the commenters' recommended option to assign CPT code 0334T to a New Technology APC or to create a new clinical APC for CPT code 0334T, we agree with the commenters that there may be a more appropriate APC to which we could assign CPT code 0334T based on resource use and clinical homogeneity. However, we believe that CPT code 0334T can be appropriately assigned to an existing clinical APC, which is preferable because other clinically similar procedures populate the APC. The final geometric mean cost of APC 0208 is approximately $4,017. We agree that the resource use associated with the procedure described by CPT code 0334T is likely to be greater than the resource use associated with the typical procedures assigned to APC 0208. Therefore, we believe that a more appropriate initial APC assignment based on clinical and resource homogeneity for this new procedure is APC 0052 (Level IV Musculoskeletal Procedures Except Hand and Foot). APC 0052 includes several orthopedic fusion procedures that are clinically similar to the procedure described by CPT code 0334T, and we believe that it is appropriate clinically to assign CPT code 0344T to APC 0052, which has a final geometric mean cost of approximately $6,530. In accordance with our longstanding policy, we will review the assignment of CPT code 0334T in a future annual OPPS update, when we have available claims data for ratesetting.

After consideration of the public comments we received, we are not finalizing our CY 2014 proposal to maintain the assignment of CPT code 0334T to APC 0208. Rather, for CY 2014, we are assigning CPT code 0334T to APC 0052, which has a final geometric mean cost of approximately $6,530.

5. Nervous System Services

a. Chemodenervation (APCs 0161 and 0204)

CPT codes 64615 (Chemodenervation of muscle(s); muscle(s) innervated by facial, trigeminal, cervical spinal and accessory nerves, bilateral (e.g., for chronic migraine)) and 52287 (Cystourethroscopy, with injection(s) for chemodenervation of the bladder) both became effective January 1, 2013. For CY 2014, we proposed to continue to assign CPT code 52287 to APC 0161 (Level II Cystourethroscopy and Other Genitourinary Procedures), with a proposed payment rate of approximately $1,201. In addition, we proposed to continue to assign CPT code 64615 to APC 0204 (Level I Nerve Injections), with a proposed payment rate of approximately $214. (The proposed payment rates reflect the corrected proposed rates included in the September 6, 2013 OPPS Addendum B, which was posted on the CMS Web site.)

Comment: One commenter requested that CMS reassign CPT code 64615 from APC 0204 to APC 0206 (Level II Nerve Injections) because of the clinical similarity to the procedure described by CPT code 64613 (Chemodenervation of muscle(s); neck muscle(s) (eg, for spasmodic torticollis, spasmodic dysphonia)), which is assigned to APC 0206. This commenter stated that the payment rate for APC 0204 does not adequately pay for the cost of providing the procedure. The commenter submitted this same request in response to the CY 2013 OPPS/ASC final rule with comment period.

Response: We disagree with the commenter's assertion that the procedure described by CPT code 64615 is more similar to the procedure described by CPT code 64613. Based on the description of the procedure, the procedure described by CPT code 64615 is most similar to the procedure described by CPT code 64612 (Chemodenervation of muscle(s); muscle(s) innervated by facial nerve, unilateral (eg, for blepharospasm, hemifacial spasm)), which is assigned to APC 0204. The procedures described by CPT codes 64612 and 64615 both involve facial nerve muscles, whereas the procedure described by CPT code 64613 involves the neck muscles. Consequently, we believe that CPT code 64615 is appropriately assigned to APC 0204 based on its clinical homogeneity to CPT code 64612.

We note that, in addition to the payment for the procedure, hospitals would receive separate payment for the drug onabotulinumtoxina, which is described by HCPCS code J0585 (Injection, onabotulinumtoxina, 1 unit), when the drug is administered during the procedure.

Consistent with CMS' longstanding policy since the implementation of the OPPS in 2000, we evaluate, on an annual basis, all of the APC assignments for appropriateness. We note that because CPT code 64615 is a new code that became effective for CY 2013, we will have a full year of claims data available next year, and as with every HCPCS code or CPT code, we will reevaluate its APC assignment during the annual rulemaking cycle.

Comment: One commenter requested that CMS reassign CPT code 52287 from APC 0161 to APC 0162 (Level III Cystourethroscopy and Other Genitourinary Procedures). The commenter stated that the proposed APC assignment for CPT code 52287 is economically and clinically inappropriate. The commenter further stated that the procedure described by CPT code 52287 is more clinically similar to the procedure described by CPT code 52283 (Cystourethroscopy, with steroid injection into stricture), which is assigned to APC 0162. The commenter submitted this same request in response to the CY 2013 OPPS/ASC final rule with comment period.

Response: APC 0161 consists of a variety of procedures, some of which describe cystourethroscopic procedures of the urethra and bladder. We believe that the procedure described by CPT code 52287 is more clinically similar to the other cystourethroscopic procedures assigned to APC 0161, such as the procedure described by CPT code 52281, than to procedures assigned to APC 0162, such as the procedure described by CPT code 52287 as mentioned by the commenter. We also note that in addition to a payment for the procedure at the payment rate for APC 0161, hospitals also receive separate payment for the chemodenervation drug. For the CY 2014 update, the payment rate for APC 0161 is approximately $1,205. As has been our practice since the implementation of the OPPS, we annually review all of the items and services within an APC group to determine, with respect to comparability of the use of resources, any 2 times rule violations. In making this determination, we review all claims data and determine whether we need to make changes to the current APC assignments for the following year. We will reevaluate the status indicator and APC assignment for CPT code 52287 for the CY 2015 OPPS rulemaking cycle.

After consideration of the public comments received, we are finalizing our CY 2014 proposals, without modification, to continue to assign CPT code 64615 to APC 0204, and to continue to assign CPT code 52287 to APC 0161. The final CY 2014 geometric mean costs for APCs 0204 and 0161 are approximately $203 and $1,209, respectively.

b. Nerve Conduction Studies (APCs 0216 and 0218)

For CY 2013, the AMA's CPT Editorial Panel established seven new CPT codes to describe nerve conduction tests, which were effective January 1, 2013. For CY 2014, we proposed to continue to assign CPT codes 95907, 95908, 95909, and 95910 to APC 0215 (Level I Nerve and Muscle Services), with a proposed payment rate of approximately $67. In addition, we proposed to reassign CPT codes 95911, 95912, and 95913 from APC 0218 (Level II Nerve and Muscle Services) to APC 0215. The descriptors for these seven CPT codes and our proposed APC assignments are listed in Table 26 below.

Comment: Some commenters expressed concern with the proposed APC assignments of CPT codes that describe the nerve conduction tests. The commenters stated that the proposed payment of $67 for APC 0215 is inadequate because it does not cover the expenses associated with providing these services. The commenters urged CMS to reconsider the proposed APC assignments for CPT codes 95907 through 95913, and suggested specific alternative APC assignments for these specific codes. Specifically, the commenters recommended the reassignment of CPT code 95907 from APC 0215 to APC 0218, the reassignment of CPT codes 95908, 95909, and 95910 from APC 0215 to APC 0216 (Level III Nerve and Muscle Services), and the reassignment of CPT codes 95911, 95912, and 95913 from APC 0218 to APC 0216.

We also received a comment in response to the CY 2013 OPPS/ASC final rule with comment period relating to these codes. The commenter stated that the CY 2013 OPPS payment rates for these new codes were significantly lower for these services when they were performed in the hospital outpatient setting compared to when they were performed in the physician office setting, and suggested that the lower payment rates would negatively impact beneficiary access to neurologic care.

Response: After further consultation with our medical advisors, we agree with the commenters that a revision to the APC assignments for CPT codes 95907 through 95913 is necessary. Based on the nature of the procedures described by these codes and the additional information submitted to us by the commenters on the CY 2013 OPPS/ASC final rule with comment period and the CY 2014 OPPS/ASC proposed rule, we believe that the nerve conduction tests described by CPT codes 95908, 95909, 95910, 95911, 95912, and 95913 would be more appropriately assigned to APC 0216. In addition, we believe that the nerve conduction test described by CPT code 95907 would be more appropriately assigned to APC 0218.

Therefore, after consideration of the public comments we received, we are revising our CY 2014 proposed APC reassignment of CPT codes 95908, 95909, 95910, 95911, 95912, and 95913 from APC 0215 to APC 0216. In addition, we are revising our CY 2014 proposed APC reassignment of CPT code 95907 from APC 0215 to APC 0218. The final APC assignments for these codes, along with the final status indicators are listed in Table 26 below. The final CY 2014 payment rates for CPT codes 95907 through 95913 are included in Addendum B to this final rule with comment period (which is available via the Internet on the CMS Web site).

We remind hospitals that, consistent with our longstanding policy since the implementation of OPPS in 2000, we will reevaluate the APC assignments for these codes in next year's rulemaking cycle. As has been our practice, we annually review all the items and services within an APC group to determine, with respect to comparability of the use of resources, if the geometric mean cost of the highest cost item or service within an APC group is more than 2 times greater than the geometric mean cost of the lowest cost item or service within that same group. In making this determination, we review our claims data and determine whether we need to make changes to the current APC assignments for the following year. We note that, because CPT codes 95907 through 95913 became effective for CY 2013, we will not have applicable claims data available for these services for ratesetting until the CY 2015 rulemaking cycle.

c. Parasympathetic Function and Sympathetic Function (APC 0215)

In CY 2013, the AMA's Editorial Panel created two new codes to describe testing of parasympathetic and sympathetic functions of the autonomic nervous system at the same time, with and without use of passive tilt: CPT code 95943 (Simultaneous, independent, quantitative measures of both parasympathetic function and sympathetic function) and CPT code 95924 (Testing of autonomic nervous system function; combined parasympathetic and sympathetic adrenergic function testing with at least 5 minutes of passive tilt). For CY 2013, we assigned CPT code 95943 to APC 0215 (Level I Nerve and Muscle Tests), which has a CY 2013 payment rate of approximately $43. We also assigned comment indicator “NI” to CPT code 95943 to indicate that the code was new for CY 2013 with an interim APC assignment that was subject to public comment following the publication of the CY 2013 final rule with comment period. We assigned CPT code 95924 (Testing of autonomic nervous system function; combined parasympathetic and sympathetic adrenergic function testing with at least 5 minutes of passive tilt) to APC 0218 (Level II Nerve and Muscle Tests), which has a CY 2013 payment rate of approximately $80.

Comment: One commenter who addressed the interim APC assignment of CPT code 95943 believed that the test described by CPT code 95943 is more similar in terms of clinical homogeneity and resource use to the services assigned to APC 0218, and requested that CMS reassign CPT code 95943 to APC 0218 for CY 2014, which has a final rule geometric mean cost of approximately $128. APC 0215 has a final rule geometric mean cost of approximately $50. The commenter noted that the predecessor codes for CPT code 95943, CPT code 95921 (Testing of autonomic nervous system function; cardiovagal innervation (parasympathetic function)) and CPT code 95922 (Testing of autonomic nervous system function; vasomotor adrenergic innervation (sympathetic adrenergic function)), were assigned to APC 0218. In addition, the commenter stated that the test described by CPT code 95943 is almost identical to the test described by CPT code 95924, which is assigned to APC 0218. The commenter stated that, although the test described by CPT code 95924 is the only test that uses a tilt table, the monitor used to perform the test described by CPT code 95943 is more expensive than the monitor used to perform the test described by CPT code 95924.

Response: We agree with the commenter that the service described by CPT code 95943 is clinically similar to the other services assigned to APC 0218, including its predecessor codes, CPT codes 95921 and 95922. Therefore, for CY 2014, we are reassigning CPT code 95943 from APC 0215 to APC 0218.

We will reconsider the APC assignments for this code once claims data are available, as part of our usual ratesetting methodology for CY 2015.

d. Epidural Lysis (APCs 0203 and 0207)

For CY 2013, CPT code 62263 (Epidural lysis, multiple sessions) and CPT code 62264 (Epidural lysis on single day) are assigned to APC 0203 (Level IV Nerve Injections), with a payment rate of approximately $857. For CY 2014, we proposed to reassign CPT code 62264, which had a proposed rule geometric mean cost of approximately $874 from APC 0203 (which had a proposed rule geometric mean cost of approximately $1,574) to APC 0207 (Level III Nerve Injections), which had a proposed rule geometric mean cost of approximately $687.

Comment: One commenter objected to the reassignment of CPT code 62264 from APC 0203 to APC 0207 asserting that the resources used to perform the procedures described by CPT codes 62263 and 62264 are the same and that CPT code 62263 is rarely used.

Response: The geometric mean costs for performing the procedures described by CPT codes 62263 and 62264 were not the same for CY 2013: CPT code 62263 had a CY 2013 final rule geometric mean cost of approximately $1,406, and CPT code 62264 had a CY 2013 final rule geometric mean cost of approximately $876. The geometric mean costs of the procedures described by CPT codes 62263 and 62264 continued to differ by a similar magnitude for CY 2014: the CY 2014 proposed rule geometric mean cost of the procedure described by CPT code 62263 was approximately $1,492, while the CY 2014 proposed rule geometric mean cost of CPT code 62264 was approximately $874. However, for CY 2014, we determined that continuing to assign CPT code 62264 to APC 0203 would create a 2 times rule violation because the geometric mean cost of the APC increased from approximately $881 in CY 2013 to approximately $1,550 for CY 2014. To correct the 2 times rule violation, we proposed to reassign CPT code 62264 from APC 0203 to APC 0207, which has a final rule geometric mean cost of approximately $672.

Based on updated claims data, the resources required to furnish the procedure described by CPT code 62264 (which has a final rule geometric mean cost of approximately $883) continue to be more similar to the resources required for services assigned to APC 0207 (which has a final rule geometric mean cost of approximately $672) than for services assigned to APC 0203 (which has a final rule geometric mean cost of approximately $1,550). Therefore, after consideration of the public comment we received, we are finalizing our proposal to reassign CPT code 62264 from APC 0203 to APC 0207 for CY 2014.

e. Cerebrospinal Shunt Reprogramming (APC 0692)

For CY 2014, we proposed to reassign CPT code 62252 (Reprogramming of programmable cerebrospinal shunt), which had a proposed rule geometric mean cost of approximately $155, from APC 0691 (Level III Electronic Analysis of Devices), which had a proposed payment rate of approximately $274, to APC 0692 (Level II Electronic Analysis of Devices), which had a proposed payment rate of approximately $139. (These proposed rates reflect the corrected proposed rates included in the September 6, 2013 OPPS Addendum B, which was posted on the CMS Web site.)

Comment: One commenter asked CMS to explain the rationale for the proposed reassignment of CPT code 62252 from APC 0691 to APC 0692.

Response: We proposed to reassign CPT code 62252 from APC 0691 to APC 0692 because it would violate the 2 times rule if we continued to assign it to APC 0691.

After consideration of the public comment we received, we are finalizing our proposal to reassign CPT code 62252 from APC 0691 to APC 0692, which has a final rule geometric mean cost of approximately $116. In addition, based on our review of the configuration of APCs 0691 and 0692, we determined that we need to improve the clinical and resource homogeneity of these two APCs. In order to avoid several 2 times rule violations in these APCs, we are reassigning CPT code 95971 (Simple neurostimulator analysis), which has a final rule geometric mean cost of approximately $113 and CPT code 95972 (Complex neurostimulator analysis), which ha