Skip to Content

Proposed Rule

Medicare Program; Hospital Outpatient Prospective Payment System and CY 2007 Payment Rates; CY 2007 Update to the Ambulatory Surgical Center Covered Procedures List; Ambulatory Surgical Center Payment System and CY 2008 Payment Rates; Medicare Administrative Contractors; and Reporting Hospital Quality Data for FY 2008 Inpatient Prospective Payment System Annual Payment Update Program-HCAHPS® Survey, SCIP, and Mortality

Document Details

Information about this document as published in the Federal Register.

Published Document

This document has been published in the Federal Register. Use the PDF linked in the document sidebar for the official electronic format.

Start Preamble Start Printed Page 49506

AGENCY:

Centers for Medicare & Medicaid Services (CMS), HHS.

ACTION:

Proposed rule.

SUMMARY:

This proposed rule would revise the Medicare hospital outpatient prospective payment system to implement applicable statutory requirements and changes arising from our continuing experience with this system, and to implement certain related provisions of the Medicare Prescription Drug, Improvement, and Modernization Act (MMA) of 2003, and the Deficit Reduction Act (DRA) of 2005. The proposed rule describes proposed changes to the amounts and factors used to determine the payment rates for Medicare hospital outpatient services paid under the prospective payment system. These changes would be applicable to services furnished on or after January 1, 2007.

In addition, this proposed rule would revise the current list of procedures that are approved when furnished in a Medicare-approved ambulatory surgical center (ASC), which would be applicable to services furnished on or after January 1, 2007. Further, this proposed rule would revise the ASC facility payment system to implement provisions of the MMA and other applicable statutory requirements, and update the ASC payment rates. Changes to the ASC facility payment system and the payment rates would be applicable to services furnished on or after January 1, 2008.

This proposed rule would revise the emergency medical screening requirements for critical access hospitals (CAHs).

In addition, this proposed rule would support implementation of a restructuring of the contracting entities responsibilities and functions that support the adjudication of Medicare fee-for-service (FFS) claims. This restructuring is directed by section 1874A of the Act, as added by section 911 of the MMA. The prior separate Medicare intermediary and Medicare carrier contracting authorities under Title XVIII of the Act have been replaced with the Medicare Administrative Contractor (MAC) authority.

This proposed rule would also continue to implement the requirements of the DRA that require that we expand the “starter set” of 10 quality measures that we used in FY 2005 and FY 2006 for the hospital Inpatient Prospective Payment System (IPPS) Reporting Hospital Quality Data for the Annual Payment Update (RHQDAPU) program. We began to adopt expanded measures effective for payments beginning in FY 2007. We are proposing to add additional quality measures to the expanded set of measures for FY 2008 payment purposes. These measures include the HCAHPS® survey, as well as Surgical Care Improvement Project (SCIP, formerly Surgical Infection Prevention (SIP)), and Mortality quality measures.

DATES:

To be assured consideration, comments on all sections of the preamble of this proposed rule, except section XVIII. and section XXIII., must be received at one of the addresses provided in the ADDRESSES section, no later than 5 p.m. October 10, 2006.

To be assured consideration, comments on section XVIII. of this preamble relating to the proposed revised ASC payment system and the related regulation changes for implementation January 1, 2008, must be received at one of the addresses provided in the ADDRESSES section, no later than 5 p.m. on November 6, 2006.

ADDRESSES:

In commenting on all provisions except those found in section XXIII. of the preamble, please refer to file code CMS-1506-P. In commenting on the provisions found in section XXIII. of the preamble for the FY 2008 IPPS RHQDAPU program, please refer to file code CMS-4125-P. 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 submit electronic comments on specific issues in this regulation to http://www.cms.hhs.gov/​eRulemaking. Click on the link “Submit electronic comments on CMS regulations with an open comment period.” (Attachments should be in Microsoft Word, WordPerfect, or Excel; however, we prefer Microsoft Word.)

2. By regular mail. You may mail written comments (one original and two copies) to the following address ONLY: Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS-1506-P, or CMS-4125-P, P.O. Box 8011, 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 (one original and two copies) to the following address ONLY: Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS-1506-P, or CMS-4125-P, 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 (one original and two copies) before the close of the comment period to one of the following addresses: Room 445-G, Hubert H. Humphrey Building, 200 Independence Avenue, SW., Washington, DC 20201; or 7500 Security Boulevard, Baltimore, MD 21244-1850.

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

(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 proof of filing by stamping in and retaining an extra copy of the comments being filed.)

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

Submission of Comments on Paperwork Requirements. You may submit comments on this document's paperwork requirements by mailing your comments to the addresses provided at the end of the “Collection of Information Requirements” section in this document.

For information on viewing public comments, see the beginning of the SUPPLEMENTARY INFORMATION section.

Start Further Info

FOR FURTHER INFORMATION CONTACT:

Start Printed Page 49507

Alberta Dwivedi, (410) 786-0378, Hospital outpatient prospective payment issues.

Dana Burley, (410) 786-0378, Ambulatory surgery center issues.

Suzanne Asplen, (410) 786-4558, Partial hospitalization and community mental health centers issues.

Mary Collins, (410) 786-3189, Critical access hospital emergency medical planning issues.

Sandra M. Clarke, (410) 786-6975, Medicare Administrative Contractors issues.

Mark Zobel, (410) 786-6905, Medicare Administrative Contractors issues.

Liz Goldstein, (410) 786-6665, FY 2008 IPPS RHQDAPU HCAHPS® issues.

Bill Lehrman, (410) 786-1037, FY 2008 IPPS RHQDAPU HCAHPS® issues.

Sheila Blackstock, (410) 786-3506, FY 2008 IPPS RHQDAPU SCIP and mortality issues.

End Further Info End Preamble Start Supplemental Information

SUPPLEMENTARY INFORMATION:

Submitting Comments We welcome comments from the public on all issues set forth in this proposed rule to assist us in fully considering issues and developing policies. You can assist us by referencing the file code CMS-1506-P or file code CMS-4125-P for FY 2008 RHQDAPU program issues, and the specific “issue identifier” that precedes the section on which you choose to comment.

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.cms.hhs.gov/​eRulemaking. Click on the link “Electronic Comments on CMS Regulations” on that Web site to view public comments.

Comments received timely will also be available for public inspection as they are received, generally beginning approximately 3 weeks after publication of a document, 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 p.m. To schedule an appointment to view public comments, phone 1-800-743-3951.

Electronic Access

This Federal Register document is also available from the Federal Register online database through GPO Access, a service of the U.S. Government Printing Office. Free public access is available on a Wide Area Information Server (WAIS) through the Internet and via asynchronous dial-in. Internet users can access the database by using the World Wide Web; the Superintendent of Documents' home page address is http://www.gpoaccess.gov/​index.html, by using local WAIS client software, or by telnet to swais.access.gpo.gov, then login as guest (no password required). Dial-in users should use communications software and modem to call (202) 512-1661; type swais, then login as guest (no password required).

Alphabetical List of Acronyms Appearing in the Proposed Rule

ACEP American College of Emergency Physicians

AHA American Hospital Association

AHIMA American Health Information Management Association

AMA American Medical Association

APC Ambulatory payment classification

AMP Average manufacturer price

ASC Ambulatory Surgical Center

ASP Average sales price

AWP Average wholesale price

BBA Balanced Budget Act of 1997, Pub. L. 105-33

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

BCA Blue Cross Association

BCBSA Blue Cross and Blue Shield Association

BIPA Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000, Pub. L. 106-554

CAH Critical access hospital

CBSA Core-Based Statistical Area

CCR Cost-to-charge ratio

CMHC Community mental health center

CMS Centers for Medicare & Medicaid Services

CNS Clinical nurse specialist

CORF Comprehensive outpatient rehabilitation facility

CPT [Physicians'] Current Procedural Terminology, Fourth Edition, 2006, copyrighted by the American Medical Association

CRNA Certified registered nurse anesthetist

CY Calendar year

DMEPOS Durable medical equipment, prosthetics, orthotics, and supplies

DMERC Durable medical equipment regional carrier

DRA Deficit Reduction Act of 2005, Pub. L. 109-171

DSH Disproportionate share hospital

EACH Essential Access Community Hospital

E/M Evaluation and management

EPO Erythropoietin

ESRD End-stage renal disease

FACA Federal Advisory Committee Act, Pub. L. 92-463

FAR Federal Acquisition Regulations

FDA Food and Drug Administration

FFS Fee-for-service

FSS Federal Supply Schedule

FY Federal fiscal year

GAO Government Accountability Office

HCPCS Healthcare Common Procedure Coding System

HCRIS Hospital Cost Report Information System

HHA Home health agency

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

ICD-9-CM International Classification of Diseases, Ninth Edition, Clinical Modification

IDE Investigational device exemption

IPPS [Hospital] Inpatient prospective payment system

IVIG Intravenous immune globulin

MAC Medicare Administrative Contractors

MedPAC Medicare Payment Advisory Commission

MDH Medicare-dependent, small rural hospital

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

MPFS Medicare Physician Fee Schedule

MSA Metropolitan Statistical Area

NCCI National Correct Coding Initiative

NCD National Coverage Determination

NTIOL New technology intraocular lens

OCE Outpatient Code Editor

OMB Office of Management and Budget

OPD [Hospital] Outpatient department

OPPS [Hospital] Outpatient prospective payment system

PA Physician assistant

PHP Partial hospitalization program

PM Program memorandum

PPI Producer Price Index

PPS Prospective payment system

PPV Pneumococcal pneumonia (virus)

PRA Paperwork Reduction Act

QIO Quality Improvement Organization

RFA Regulatory Flexibility Act

RHQDAPU Reporting hospital quality data for annual payment update

RHHI Regional home health intermediary

SBA Small Business Administration

SCH Sole community hospital

SDP Single Drug Pricer

SI Status indicator

TEFRA Tax Equity and Fiscal Responsibility Act of 1982, Pub. L. 97-248

TOPS Transitional outpatient payments

USPDI United States Pharmacopoeia Drug Information

In this document, we address three payment systems under the Medicare program: the hospital outpatient prospective payment system (OPPS), the hospital inpatient prospective payment system (IPPS), and the ambulatory surgical center (ASC) payment system. The provisions relating to the OPPS are included in sections I. through XIII., XV., XVI., XX., XXIV., XXVI., and XXVII. of the preamble and in Addenda A, B, C (available on the Internet only; see section XXIV. of the preamble of this proposed rule), D1, D2, and E of this proposed rule. The provisions related to IPPS are included in sections XXIII., XXV. through XXVII. of the preamble. The provisions related to ASCs are Start Printed Page 49508included in sections XVII,. XVIII., and XXIV. through XXVII. of the preamble and in Addenda AA, BB, and CC of the proposed rule.

In addition, in this document, we address our proposed implementation of the Medicare contracting reform provisions of the MMA that replace the prior Medicare intermediary and carrier authorities formerly found in sections 1816 and 1842 of the Act with Medicare administrative contractor (MAC) authority under a new section 1874A of the Act. The provisions relating to MACs are included in sections XIX., XXVI., and XXVII.E. of this preamble. To assist readers in referencing sections contained in this document, we are providing the following table of contents:

Table of Contents

I. Background for the OPPS

A. Legislative and Regulatory Authority for the Hospital Outpatient Prospective Payment System

B. Excluded OPPS Services and Hospitals

C. Prior Rulemaking

D. APC Advisory Panel

1. Authority of the APC Panel

2. Establishment of the APC Panel

3. APC Panel Meetings and Organizational Structure

E. Provisions of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003

1. Reduction in Threshold for Separate APCs for Drugs

2. Special Payment for Brachytherapy

F. Provisions of the Deficit Reduction Act of 2005

1. 3-Year Transition of Hold Harmless Payments

2. Medicare Coverage of Ultrasound Screening for Abdominal Aortic Aneurysms

G. Summary of the Major Contents of This Proposed Rule

1. Proposed Updates Affecting Payment for CY 2007

2. Proposed Ambulatory Payment Classification (APC) Group Policies

3. Proposed Payment Changes for Devices

4. Proposed Payment Changes for Drugs, Biologicals, and Radiopharmaceuticals

5. Estimate of Transitional Pass-Through Spending in CY 2007 for Drugs, Biologicals, and Radiopharmaceuticals

6. Proposed Brachytherapy Payment Changes

7. Proposed Coding and Payment for Drug and Vaccine Administration

8. Proposed Hospital Coding for Evaluation and Management (E/M) Services

9. Proposed Payment for Blood and Blood Products

10. Proposed Payment for Observation Services

11. Procedures That Will Be Paid Only as Inpatient Services

12. Proposed Nonrecurring Policy Changes

13. Emergency Medical Screening in Critical Access Hospitals (CAHs)

14. Proposed OPPS Payment Status and Comment Indicator

15. OPPS Policy and Payment Recommendations

16. Proposed Policies Affecting Ambulatory Surgical Centers (ASCs) for CY 2007

17. Proposed Revised Ambulatory Surgical Center (ASC) Payment System for Implementation January 1, 2008

18. Medicare Provider Contractor Reform Mandate

19. Reporting Quality Data for Improved Quality and Costs under the OPPS

20. Promoting Effective Use of Health Information Technology

21. Health Care Information Transparency Initiative

22. Reporting Hospital Quality Data for Annual Payment Update under the IPPS

23. Impact Analysis

II. Proposed Updates Affecting OPPS Payments for CY 2007

A. Proposed Recalibration of APC Relative Weights for CY 2007

1. Database Construction

a. Database Source and Methodology

b. Proposed Use of Single and Multiple Procedure Claims

c. Proposed Revision to the Overall Cost-to-Charge Ratio (CCR) Calculation

2. Proposed Calculation of Median Costs for CY 2007

3. Proposed Calculation of Scaled OPPS Payment Weights

4. Proposed Changes to Packaged Services

B. Proposed Payment for Partial Hospitalization

1. Background

2. Proposed PHP APC Update for CY 2007

3. Proposed Separate Threshold for Outlier Payments to CMHCs

C. Proposed Conversion Factor Update for CY 2007

D. Proposed Wage Index Changes for CY 2007

E. Proposed Statewide Average Default CCRs

F. OPPS Payments to Certain Rural Hospitals

1. Hold Harmless Transitional Payment Changes Made by Pub. L. 109-171 (DRA)

2. Proposed Adjustment for Rural SCHs Implemented in CY 2006 Related to Pub. L. 108-173 (MMA)

G. Proposed CY 2007 Hospital Outpatient Outlier Payments

H. Calculation of the Proposed OPPS National Unadjusted Medicare Payment

I. Proposed Beneficiary Copayments for CY 2007

1. Background

2. Proposed Copayment for CY 2007

3. Calculation of a Proposed Adjusted Copayment Amount for an APC Group for CY 2007

III. Proposed OPPS Ambulatory Payment Classification (APC) Group Policies

A. Proposed Treatment of New HCPCS and CPT Codes

1. Proposed Treatment of New HCPCS Codes Included in the Second and Third Quarterly OPPS Updates for CY 2006

2. Proposed Treatment of New CY 2007 Category I and III CPT Codes and Level II HCPCS Codes

3. Proposed Treatment of New Mid-Year CPT Codes

B. Proposed Changes—Variations Within APCs

1. Background

2. Application of the 2 Times Rule

3. Exceptions to the 2 Times Rule

C. New Technology APCs

1. Introduction

2. Proposed Movement of Procedures from New Technology APCs to Clinical APCs

a. Nonmyocardial Positron Emission Tomography (PET) Scans

b. PET/Computed Tomography (CT) Scans

c. Stereotactic Radiosurgery (SRS) Treatment Delivery Services

d. Magnetoencephalography (MEG) Services

e. Other Services in New Technology APCs

D. Proposed APC-Specific Policies

1. Skin Replacement Surgery and Skin Substitutes (APCs 0024, 0025 and 0027)

2. Treatment of Fracture/Dislocation (APC 0046)

3. Electrophysiologic Recording/Mapping (APC 0087)

4. Insertion of Mesh or Other Prosthesis (APC 0154)

5. Percutaneous Renal Cryoablation (APC 0163)

6. Keratoprosthesis (APC 0244)

7. Medication Therapy Management Services

8. Complex Interstitial Radiation Source Application (APC 0651)

9. Single Allergy Tests (APC 0381)

10. Hyperbaric Oxygen Therapy (APC 0659)

11. Myocardial Positron Emission Tomography (PET) Scans (APCs 0306, 0307)

12. Radiology Procedures (APCs 0333, 0662, and Other Imaging APCs)

IV. Proposed OPPS Payment Changes for Devices

A. Proposed Treatment of Device-Dependent APCs

1. Background

2. Proposed CY 2007 Payment Policy

3. Devices Billed in the Absence of an Appropriate Procedure Code

4. Proposed Payment Policy When Devices are Replaced Without Cost or Where Credit for a Replaced Device is Furnished to the Hospital

B. Proposed Pass-Through Payments for Devices

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

a. Background

b. Proposed Policy for CY 2007

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

a. Background

b. Proposed Policy for CY 2007

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

A. Proposed Transitional Pass-Through Payment for Additional Costs of Drugs and Biologicals

1. Background

2. Expiration in CY 2006 of Pass-Through Status for Drugs and Biologicals

3. Drugs and Biologicals With Proposed Pass-Through Status in CY 2007Start Printed Page 49509

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

1. Background

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

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

a. Proposed Payment for Specified Covered Outpatient Drugs

b. Proposed CY 2007 Payment for Nonpass-Through Drugs, Biologicals, Radiopharmaceuticals With HCPCS Codes, But Without OPPS Hospital Claims Data

VI. Proposed Estimate of OPPS Transitional Pass-Through Spending in CY 2007 for Drugs, Biologicals, Radiopharmaceuticals, and Devices

A. Total Allowed Pass-Through Spending

B. Proposed Estimate of Pass-Through Spending for CY 2007

VII. Proposed Brachytherapy Source Payment Changes

A. Background

B. Proposed Payments for Brachytherapy Sources in CY 2007

VIII. Proposed Changes to OPPS Drug Administration Coding and Payment for CY 2007

A. Background

B. Proposed CY 2007 Drug Administration Coding Changes

C. Proposed CY 2007 Drug Administration Payment Changes

IX. Proposed Hospital Coding and Payment for Visits

A. Background

1. Guidelines Based on the Number or Type of Staff Interventions

2. Guidelines Based on the Time Staff Spent With the Patient

3. Guidelines Based on a Point System Where a Certain Number of Points Are Assigned to Each Staff Intervention Based on the Time, Intensity, and Staff Type Required for the Intervention

4. Guidelines Based on Patient Complexity

B. CY 2007 Proposed Coding

1. Clinic Visits

2. Emergency Department Visits

3. Critical Care Services

C. CY 2007 Proposed Payment Policy

D. CY 2007 Proposed Treatment of Guidelines

1. Background

2. Outstanding Concerns With the AHA/AHIMA Guidelines

a. Three Versus Five Levels of Codes

b. Lack of Clarity for Some Interventions

c. Treatment of Separately Payable Services

d. Some Interventions Appear Overvalued

e. Concerns of Specialty Clinics

f. American with Disabilities Act

g. Differentiation Between New and Established Patients, and Between Standard Visits and Consultations

h. Distinction Between Type A and Type B Emergency Departments

X. Proposed Payment for Blood and Blood Products

A. Background

B. Proposed Policy Changes for CY 2007

XI. Proposed OPPS Payment for Observation Services

XII. Proposed Procedures That Will Be Paid Only as Inpatient Procedures

A. Background

B. Proposed Changes to the Inpatient Only List

C. Proposed CY 2007 Payment for Ancillary Outpatient Services When Patient Expires (-CA Modifier)

1. Background

2. Proposed Policy for CY 2007

XIII. Proposed OPPS Nonrecurring Policy Changes

A. Removal of Comprehensive Outpatient Rehabilitation Facility (CORF) Services from the List of Services Paid under the OPPS

B. Addition of Ultrasound Screening for Abdominal Aortic Aneurysms (AAAs) (Section 5112 of Pub. L. 109-171 (DRA))

1. Background

2. Proposed Assignment of New HCPCS Code for Payment of Ultrasound Screening for Abdominal Aortic Aneurysm (AAA) (Section 5112)

3. Handling of Comments Received in Response to This Proposal

XIV. Emergency Medical Screening in Critical Access Hospitals (CAHs)

A. Background

B. Proposed Policy Change

XV. Proposed OPPS Payment Status and Comment Indicators

A. Proposed CY 2007 Status Indicator Definitions

1. Proposed Payment Status Indicators to Designate Services That Are Paid Under the OPPS

2. Proposed Payment Status Indicators to Designate Services That Are Paid Under a Payment System Other Than the OPPS

3. Proposed Payment Status Indicators to Designate Services That Are Not Recognized Under the OPPS But That May Be Recognized by Other Institutional Providers

4. Proposed Payment Status Indicators to Designate Services That Are Not Payable by Medicare

B. Proposed CY 2007 Comment Indicator Definitions

XVI. OPPS Policy and Payment Recommendations

A. MedPAC Recommendations

B. APC Panel Recommendations

C. GAO Recommendations

XVII. Proposed Policies Affecting Ambulatory Surgical Centers (ASCs) for CY 2007

A. ASC Background

1. Legislative History

2. Current Payment Method

3. Published Changes to the ASC List

B. Proposed ASC List Update Effective for Services Furnished on or After January 1, 2007

1. Criteria for Additions to or Deletions from the ASC List

2. Response to Comments to the May 4, 2005 Interim Final Rule for the ASC Update

3. Procedures Proposed for Additions to the ASC List

4. Suggested Additions Not Accepted

5. Rationale for Payment Assignment

6. Other Comments on the May 4, 2005 Interim Final Rule

C. Proposed Regulatory Changes for CY 2007

D. Implementation of Section 5103 of Pub. L. 109-171 (DRA)

E. Proposal to Modify the Current ASC Process for Adjusting Payment for New Technology Intraocular Lenses (NTIOLs)

1. Background

a. Current ASC Payment for Insertion of IOLs

b. Classes of NTIOLs Approved for Payment Adjustment

2. Proposed Changes

a. Process for Recognizing IOLs as Belonging to an Active IOL Class

b. Public Notice and Comment Regarding Adjustments of NTIOL Payment Amounts

c. Factors CMS Considers in Determining Whether a Payment Adjustment for Insertion of a New Class of IOL is Appropriate

d. Proposal to Revise Content of a Request to Review

e. Notice of CMS Determination

f. Proposed Payment Adjustment

XVIII. Proposed Revised ASC Payment System for Implementation January 1, 2008

A. Background

1. Provisions of Pub. L. 108-173

2. Other Factors Considered

B. Procedures Proposed for Medicare Payment in ASCs Effective for Services Furnished on or After January 1, 2008

1. Proposed Payable Procedures

a. Proposed Definition of Surgical Procedure

b. Procedures Proposed for Exclusion from Payment Under the Revised ASC System

2. Proposed Treatment of Unlisted Procedure Codes and Procedures That Are Not Paid Separately Under the OPPS

3. Proposed Treatment of Office-Based Procedures

4. Listing of Surgical Procedures Proposed for Exclusion from Payment of an ASC Facility Fee Under the Revised Payment System

C. Proposed Ratesetting Method

1. Overview of Current ASC Payment System

2. Proposal to Base ASC Relative Payment Weights on APC Groups and Relative Payment Weights Established Under the OPPS

3. Proposed Packaging Policy

4. Payment for Corneal Tissue Under the Revised ASC Payment System

5. Proposed Payment for Office-Based Procedures

6. Payment Policy for Multiple Procedure Discounting

7. Proposed Geographic Adjustment

8. Proposed Adjustment for Inflation

9. Proposed Beneficiary Coinsurance

10. Proposed to Phase in Implementation of Payment Rates Calculated Under the CY 2008 Revised ASC Payment System

11. Proposed Calculation of ASC Conversion Factor and Payment Rates for CY 2008

a. Overview

b. Budget Neutrality Requirement Start Printed Page 49510

c. Proposed Calculation of the ASC Payment Rates for CY 2008

d. Proposed Calculation of the ASC Payment Rates for CY 2009 and Future Years

e. Alternative Option for Calculating the Budget Neutrality Adjustment Considered

12. Proposed Annual Updates

D. Information in Addenda Related to the Revised CY 2008 ASC Payment System

E. Technical Changes to 42 CFR Parts 414 and 416

XIX. Medicare Contracting Reform Mandate

A. Background

B. CMS's Vision for Medicare Fee-for-Service and MACs

C. Provider Nomination and the Former Medicare Acquisition Authorities

D. Summary of Changes Made to Sections 1816 of the Act

E. Provisions of the Proposed Regulations

1. Definitions

2. Assignments of Providers and Suppliers to MACs

3. Other Proposed Technical and Conforming Changes

a. Definition of “Intermediary”

b. Intermediary Functions

c. Options Available to Providers and CMS

d. Nomination for Intermediary

e. Notification of Actions on Nominations, Changes to Another Intermediary or to Director Payment, and Requirements for Approval of an Agreement

f. Considerations Relating to the Effective and Efficient Administration of the Medicare Program

g. Assignment and Reassignment of Providers by CMS

h. Designation of National or Regional Intermediaries and Designation of Regional and Alternative Designated Regional Intermediaries for Home Health Agencies and Hospices

i. Awarding of Experimental Contracts

XX. Reporting Quality Data for Improved Quality and Costs under the OPPS

XXI. Promoting Effective Use of Health Care Technology

XXII. Health Care Information Transparency Initiative

XXIII. Additional Quality Measures and Procedures for Hospital Reporting of Quality Data for the FY 2008 IPPS Annual Payment Update

A. Background

B. Proposed Additional Quality Measures for FY 2008

1. Introduction

2. HCAHPS® Survey and the Hospital Quality Initiative

3. Surgical Care Improvement Project (SCIP) Quality Measures

4. Mortality Outcome Measures

C. General Procedures and Participation Requirements for the FY 2008 IPPS RHQDAPU Program

D. HCAHPS® Procedures and Participation Requirements for the FY 2008 IPPS RHQDAPU Program

1. Introduction

2. HCAHPS® Hospital Pledge and Beginning Date for Data Collection

3. HCAHPS® Dry Run

4. HCAHPS® Data Collection Requirements

5. HCAHPS® Registration Requirements

6. HCAHPS® Additional Steps

7. HCAHPS® Survey Completion Requirements

8. HCAHPS® Public Reporting

9. Reporting HCAHPS® Results for Multi-Campus Hospitals

E. SCIP & Mortality Measure Requirements for the FY 2008 RHQDAPU Program

F. Conclusion

XXIV. Files Available to the Public Via the Internet

XXV. Collection of Information Requirements

XXVI. Response to Comments

XXVII. Regulatory Impact Analysis

A. Overall Impact

1. Executive Order 12866

2. Regulatory Flexibility Act (RFA)

3. Small Rural Hospitals

4. Unfunded Mandates

5. Federalism

B. Effects of Proposed OPPS Changes in This Proposed Rule

1. Alternatives Considered

a. Alternatives Considered for CPT Coding and Payment Policy for Evaluation and Management Codes

b. Options Considered for Brachytherapy Source Payments

c. Options Considered for Payment of Radiopharmaceuticals

2. Limitation of Our Analysis

3. Estimated Impact of This Proposed Rule on Hospitals

4. Estimated Effect of This Proposed Rule on Beneficiaries

5. Accounting Statement

6. Conclusion

C. Effects of Proposed Changes to the ASC Payment System for CY 2007

1. Alternatives Considered

2. Limitations on Our Analysis

3. Estimated Effects of This Proposed Rule on ASCs

4. Estimated Effects of This Proposed Rule on Beneficiaries

5. Conclusion

6. Accounting Statement

D. Effects of the Proposed Revisions to the ASC Payment System for CY 2008

1. Alternatives Considered

2. Limitations on Our Analysis

3. Estimated Effects of This Proposed Rule on ASCs

4. Estimated Effects of This Proposed Rule on Beneficiaries

5. Conclusion

E. Effects of the Medicare Contractor Reform Mandate

F. Effects of Proposed Additional Quality Measures and Procedures for Hospital Reporting of Quality Data for IPPS FY 2008

1. Alternatives Considered

2. Estimated Effects of This Proposed Rule

a. Effects on Hospitals

b. Effects on Other Providers

c. Effects on the Medicare and Medicaid Program

G. Executive Order 12866

Regulation Text

Addenda

Addendum A—OPPS Proposed List of Ambulatory Payment Classification (APCs) With Status Indicators (SI), Relative Weights, Payment Rates, and Copayment Amounts— CY 2007

Addendum AA—Proposed List of Medicare Approved ASC Procedures for CY 2007 With Additions and Payment Rates; Including Rates That Result From Implementation of Section 5103 of the DRA

Addendum B—OPPS Proposed Payment Status by HCPCS Code and Related Information Calendar Year 2007

Addendum BB—Proposed List of Medicare Approved ASC Procedures for CY 2008 With Additions and Payment Rates

Addendum CC—Proposed List of Procedures for CY 2008 Subject to Payment Limitation at the Medicare Physician Fee Schedule (MPFS) Nonfacility Amount

Addendum D1—Proposed Payment Status Indicators

Addendum D2—Proposed Comment Indicators

Addendum E—Proposed CPT Codes That Are Paid Only as Inpatient Procedures

I. Background for the OPPS

A. Legislative and Regulatory Authority for the Hospital Outpatient Prospective Payment System

When the Medicare statute was originally 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 (BBA) of 1997 (Pub. L. 105-33), added section 1833(t) to the Social Security Act (the Act) authorizing implementation of a PPS for hospital outpatient services (OPPS).

The Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act (BBRA) of 1999 (Pub. L. 106-113), made major changes in the hospital OPPS. The Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act (BIPA) of 2000 (Pub. L. 106-554), made further changes in the OPPS. Section 1833(t) of the Act was also amended by the Medicare Prescription Drug, Improvement, and Modernization Act (MMA) of 2003 (Pub. L. 108-173). The Deficit Reduction Act (DRA) of 2005 (Pub. L. 109-171), enacted on February 8, 2006, made additional changes in the OPPS. A discussion of the provisions contained in Pub. L. 109-171 that are specific to the calendar year (CY) 2007 OPPS is included in section II.F. of this preamble.

The OPPS was first implemented for services furnished on or after August 1, 2000. Implementing regulations for the OPPS are located at 42 CFR Part 419.

Under the OPPS, we pay for hospital outpatient services on a rate-per-service Start Printed Page 49511basis that varies according to the ambulatory payment classification (APC) group to which the service is assigned. We use Healthcare Common Procedure Coding System (HCPCS) codes (which include certain Current Procedural Terminology (CPT) codes) and descriptors to identify and group the services within each APC group. The OPPS includes payment for most hospital outpatient services, except those identified in section I.B. of this preamble. Section 1833(t)(1)(B)(ii) of the Act provides for Medicare payment under the OPPS for hospital outpatient services designated by the Secretary (which includes partial hospitalization services furnished by community mental health centers (CMHCs)) and hospital outpatient services that are furnished to inpatients who have exhausted their Part A benefits or who are otherwise not in a covered Part A stay. Section 611 of Pub. L. 108-173 added provisions for Medicare coverage of an initial preventive physical examination, subject to the applicable deductible and coinsurance, as an outpatient department service, payable under the OPPS.

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 inpatient hospital 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, services and items within an APC group cannot be considered comparable with respect to the use of resources if the highest median (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 for an item or service within the same APC group (referred to as the “2 times rule”). In implementing this provision, we use the median cost of the item or service assigned to an APC group.

Special payments under the OPPS may be made for new technology items and services 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 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.

B. 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. Section 614 of Pub. L. 108-173 amended section 1833(t)(1)(B)(iv) of the Act to exclude OPPS payment for screening and diagnostic mammography services. The Secretary exercised the authority granted under the statute to 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 Medicare Physician Fee Schedule (MPFS); laboratory services paid under the clinical diagnostic laboratory fee schedule; services for beneficiaries with end-stage renal disease (ESRD) that are paid under the ESRD composite rate; and, services and procedures that require an inpatient stay that are paid under the hospital inpatient prospective payment system (IPPS). We set forth the services that are excluded from payment under the OPPS in § 419.22 of the regulations.

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; critical access hospitals (CAHs); hospitals located outside of the 50 States, the District of Columbia, and Puerto Rico; and Indian Health Service hospitals.

C. 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 to take into account changes in medical practice, changes in technology, 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 experience with this system. We last published such a document on November 10, 2005 (70 FR 68516). In that final rule with comment period, we revised the OPPS to update the payment weights and conversion factor for services payable under the CY 2006 OPPS on the basis of claims data from January 1, 2004, through December 31, 2004, and to implement certain provisions of Pub. L. 108-173. In addition, we responded to public comments received on the provisions of November 15, 2004 final rule with comment period pertaining to the APC assignment of HCPCS codes identified in Addendum B of that rule with the new interim (NI) comment indicators; and public comments received on the July 25, 2005 OPPS proposed rule for CY 2006 (70 FR 42674).

We published a correction of the November 10, 2005 final rule with comment period on December 23, 2005 (70 FR 76176). This correction document corrected a number of technical errors that appeared in the November 10, 2005 final rule with comment period.

D. APC Advisory Panel

1. Authority of the APC Panel

Section 1833(t)(9)(A) of the Act, as amended by section 201(h) of the BBRA, requires that we consult with an outside panel of experts to review the clinical integrity of the payment groups and their weights under the OPPS. The Act further specifies that the panel will act in an advisory capacity. The Advisory Panel on Ambulatory Payment Start Printed Page 49512Classification (APC) Groups (the APC Panel), discussed under section I.D.2. of this preamble, fulfills these requirements. The APC Panel is not restricted to using data compiled by CMS and may use data collected or developed by organizations outside the Department in conducting its review.

2. Establishment of the APC Panel

On November 21, 2000, the Secretary signed the initial charter establishing the APC Panel. This expert panel, which may be composed of up to 15 representatives of providers subject to the OPPS (currently employed full-time, not as consultants, in their respective areas of expertise), reviews and advises CMS about the clinical integrity of the APC groups and their weights. For purposes of this Panel, consultants or independent contractors are not considered to be full-time employees. The APC Panel is technical in nature and is governed by the provisions of the Federal Advisory Committee Act (FACA). Since its initial chartering, the Secretary has twice renewed the APC Panel's charter: on November 1, 2002, and on November 1, 2004. The current charter indicates, among other requirements, that the APC 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 Officer (DFO); and is chaired by a Federal official who also serves as a CMS medical officer.

The current APC Panel membership and other information pertaining to the Panel, including its charter, Federal Register notices, meeting dates, agenda topics, and meeting reports can be viewed on the CMS Web site at http://new.cms.hhs.gov/​FACA/​05_​AdvisoryPanelonAmbulatoryPaymentClassificationGroups.asp.

3. APC Panel Meetings and Organizational Structure

The APC Panel first met on February 27, February 28, and March 1, 2001. Since that initial meeting, the APC Panel has held nine subsequent meetings, with the last meeting taking place on March 1 and 2, 2006. (The APC Panel did not meet on March 3, 2006, as announced in the meeting notice published on December 23, 2005 (70 FR 76313).) Prior to each meeting, we publish a notice in the Federal Register to announce the meeting and, when necessary, to solicit and announce nominations for APC Panel membership.

The APC Panel has established an operational structure that, in part, includes the use of three subcommittees to facilitate its required APC review process. The three current subcommittees are the Data Subcommittee, the Observation Subcommittee, and the Packaging Subcommittee. The Data Subcommittee is responsible for studying the data issues confronting the APC Panel and for recommending options for resolving them. The Observation Subcommittee reviews and makes recommendations to the APC Panel on all issues pertaining to observation services paid under the OPPS, such as coding and operational issues. The Packaging Subcommittee studies and makes recommendations on issues pertaining to services that are not separately payable under the OPPS, but are bundled or packaged APC payments. Each of these subcommittees was established by a majority vote of the APC Panel during a scheduled APC Panel meeting. All subcommittee recommendations are discussed and voted upon by the full APC Panel.

Discussions of the recommendations resulting from the APC Panel's March 2006 meeting are included in the sections of this preamble that are specific to each recommendation. For discussions of earlier APC Panel meetings and recommendations, we reference previous hospital OPPS final rules or the Web site mentioned earlier in this section.

E. Provisions of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003

The Medicare Prescription Drug, Improvement, and Modernization Act (MMA) of 2003, Pub. L. 108-173, made changes to the Act relating to the Medicare OPPS. In the January 6, 2004 interim final rule with comment period and the November 15, 2004 final rule with comment period, we implemented provisions of Pub. L. 108-173 relating to the OPPS that were effective for services provided in CY 2004 and CY 2005, respectively. In the November 10, 2005 final rule with comment period, we implemented provisions of Pub. L. 108-173 relating to the OPPS that went into effect for services provided in CY 2006 (70 FR 68521). We note below those provisions of Pub. L. 108-173 that will expire at the end of CY 2006.

1. Reduction in Threshold for Separate APCs for Drugs

Section 621(a)(2) of Pub. L. 108-173 amended section 1833(t)(16) of the Act to set a $50 per administration threshold for the establishment of separate APCs for drugs and biologicals furnished from January 1, 2005, through December 31, 2006. Because this statutory provision will no longer be in effect for CY 2007, we have included a discussion of the proposed methodology that we would use for the drug administration threshold for CY 2007 in section V. of this preamble.

2. Special Payment for Brachytherapy

Section 621(b)(1) of Pub. L. 108-173 amended section 1833(t)(16) of the Act to require that payment for brachytherapy devices consisting of a seed or seeds (or radioactive source) furnished on or after January 1, 2004, and before January 1, 2007, be paid based on the hospital's charge for each device furnished, adjusted to cost. Because this statutory provision will no longer be in effect for CY 2007, we discuss our proposed methodology for payment for brachytherapy devices for CY 2007 in section VII.B. of this preamble.

F. Provisions of the Deficit Reduction Act of 2005

The Deficit Reduction Act (DRA) of 2005, Pub. L. 109-171, enacted on February 8, 2006, included three provisions affecting the OPPS, as discussed below.

1. 3-Year Transition of Hold Harmless Payments

Section 5105 of Pub. L. 109-171 provides a 3-year transition of hold harmless OPPS payments for hospitals located in a rural area with not more than 100 beds that are not defined as sole community hospitals (SCHs). This provision provides an increased payment for such hospitals for covered OPD services furnished on or after January 1, 2006, and before January 1, 2009, if the OPPS payment they receive is less than the pre-BBA payment amount that they would have received for the same covered OPD services. This provision specifies that, in such cases, the amount of payment to the specified hospitals shall be increased by the applicable percentage of such difference. Section 5105 specifies the applicable percentage as 95 percent for CY 2006, 90 percent for CY 2007, and 85 percent for CY 2008.

2. Medicare Coverage of Ultrasound Screening for Abdominal Aortic Aneurysms

Section 5112 of Pub. L. 109-171 amended section 1861 of the Act to include coverage of ultrasound screening for abdominal aortic aneurysms for certain individuals on or after January 1, 2007. The provision will apply to individuals (a) Who receive a referral for such an ultrasound screening as a result of an initial preventive physical examination; (b) who have not Start Printed Page 49513been previously furnished with an ultrasound screening under Medicare; and (c) who have a family history of abdominal aortic aneurysm or manifest risk factors included in a beneficiary category recommended for screening (as determined by the United States Preventive Services Task Force). Ultrasound screening for abdominal aortic aneurysm will be included in the initial preventive physical examination. Section 5112 also added ultrasound screening for abdominal aortic aneurysm to the list of services for which the beneficiary deductible does not apply. These amendments apply to services furnished on or after January 1, 2007.

G. Summary of the Major Content of This Proposed Rule

In this proposed rule, we are setting forth proposed changes to the Medicare hospital OPPS for CY 2007. These changes would be effective for services furnished on or after January 1, 2007. We are setting forth proposed changes to the Medicare ASC program for CY 2007 and CY 2008. We are setting forth proposed changes to the way we process FFS claims under Medicare Part A and Part B. Some of these changes were effective on October 1, 2005 and all of the changes are to be fully implemented by October 1, 2011. Finally, we are setting forth a notice seeking comments on the RHQDAPU program under the Medicare hospital IPPS for FY 2008. These changes would be effective for payments beginning with FY 2008. The following is a summary of the major changes that we are proposing to make:

1. Proposed Updates Affecting Payments for CY 2007

In section II. of this preamble, we set forth—

  • The methodology used to recalibrate the proposed APC relative payment weights and the proposed recalibration of the relative payment weights for CY 2007.
  • The proposed payment for partial hospitalization, including the proposed separate threshold for outlier payments for CMHCs.
  • The proposed update to the conversion factor used to determine payment rates under the OPPS for CY 2007.
  • The proposed retention of our current policy to apply the IPPS wage indices to wage adjust the APC median costs in determining the OPPS payment rate and the copayment standardized amount for CY 2007.
  • The proposed update of statewide average default cost-to-charge ratios.
  • Proposed changes relating to the expiring hold harmless payment provision.
  • Proposed changes to payment for rural sole community hospitals for CY 2007.
  • Proposed changes in the way we calculate hospital outpatient outlier payments for CY 2007.
  • Calculation of the proposed national unadjusted Medicare OPPS payment.
  • The proposed beneficiary copayment for OPPS services for CY 2007.

2. Proposed Ambulatory Payment Classification (APC) Group Policies

In section III. of this preamble, we discuss the proposed additions of new procedure codes to the APCs; our proposal to establish a number of new APCs; and our proposal to make changes to the assignment of HCPCS codes under a number of existing APCs based on our analyses of Medicare claims data and recommendations of the APC Panel. We also discuss the application of the 2 times rule and proposed exceptions to it; proposed changes for specific APCs; the proposed refinement of the New Technology cost bands; and the proposed movement of procedures from the New Technology APCs.

3. Proposed Payment Changes for Devices

In section IV. of this preamble, we discuss proposed changes to the device-dependent APCs, and to the pass-through payment for categories of devices.

4. Proposed Payment Changes for Drugs, Biologicals, and Radiopharmaceuticals

In section V. of this preamble, we discuss proposed changes for drugs, biologicals, and radiopharmaceuticals.

5. Estimate of Transitional Pass-Through Spending in CY 2007 for Drugs, Biologicals, and Devices

In section VI. of this preamble, we discuss the proposed methodology for estimating total pass-through spending and whether there should be a pro rata reduction for transitional pass-through drugs, biologicals, radiopharmaceuticals, and categories of devices for CY 2007.

6. Proposed Brachytherapy Payment Changes

In section VII. of this preamble, we discuss our proposal concerning coding and payment for the sources of brachytherapy.

7. Proposed Coding and Payment for Drug and Vaccine Administration

In section VIII. of this preamble, we discuss our proposed coding and payment changes for drug and vaccine administration services.

8. Proposed Hospital Coding for Evaluation and Management (E/M) Services

In section IX. of this preamble, we discuss our proposal for developing the coding guidelines for evaluation and management services.

9. Proposed Payment for Blood and Blood Products

In section X. of this preamble, we discuss our proposed payment changes for blood and blood products.

10. Proposed Payment for Observation Services

In section XI. of this preamble, we discuss our proposed criteria and coding changes for separately payable observation services.

11. Procedures That Will Be Paid Only as Inpatient Services

In section XII. of this preamble, we discuss the procedures that we propose to remove from the inpatient list and assign to APCs.

12. Proposed Nonrecurring Policy Changes

In section XIII. of this preamble, we discuss proposed changes to certain comprehensive outpatient rehabilitation facility (CORF) services paid under the OPPS. In this section, we also discuss proposed payment for ultrasound screening for abdominal aortic aneurysms (AAAs).

13. Emergency Medical Screening in Critical Access Hospitals (CAHs)

In section XIV. of this preamble, we discuss proposed changes to a regulation governing emergency medical screening in critical access hospitals (CAHs).

14. Proposed OPPS Payment Status and Comment Indicator

In section XV. of this preamble, we discuss proposed changes to the list of status indicators assigned to APCs and present our proposed comment indicators for the CY 2007 OPPS final rule.

15. OPPS Policy and Payment Recommendations

In section XVI. of this preamble, we address recommendations made by MedPAC and the APC Panel regarding the OPPS for CY 2007.Start Printed Page 49514

16. Proposed Policies Affecting Ambulatory Surgical Centers (ASCs) for CY 2007

In section XVII. of this preamble we discuss proposed payment changes affecting ASCs in CY 2007, the proposed list of updated ASC procedures, and proposed modification of the ASC payment adjustment process for new technology intraocular lenses (NTIOLs).

17. Proposed Revised Ambulatory Surgical Center (ASC) Payment System for Implementation January 1, 2008

In section XVIII. of this preamble, we discuss our proposal to implement a new ASC payment system for services furnished on or after January 1, 2008, and the regulatory changes related to the proposed new system.

18. Medicare Provider Contractor Reform Mandate

In section XIX. of this preamble, we discuss proposed changes to the regulations under 42 CFR Part 421, Subpart B to conform them to the statutory changes required by section 911 of Public Law 108-173 related to Medicare contracting reform.

19. Reporting Quality Data for Improved Quality and Costs Under the OPPS

In section XX. of this preamble, we discuss the expenditure growth in outpatient hospital services, invite comment on value-based purchasing specifically related to hospital outpatient departments, and discuss a value-based purchasing program proposal for the CY 2007 OPPS.

20. Promoting Effective Use of Health Information Technology

In section XXI. of this preamble, we invite comments on promoting hospitals' effective use of health information technology.

21. Health Care Information Transparency Initiative

In section XXII. of this preamble, we discuss HHS' major health information transparency initiative which we are launching in 2006.

22. Reporting Hospital Quality Data for Annual Payment Update Under the IPPS

In section XXIII. of this preamble, we invite comment on our proposal for the FY 2008 IPPS annual payment update to add the HCAHPS® survey, measures from the Surgical Care Improvement Project (SCIP), and Mortality measures to the quality of care measures to be used in FY 2007 for purposes of the IPPS annual payment update.

23. Impact Analysis

In section XXVII. of this preamble, we set forth an analysis of the impact that the proposed changes will have on affected entities and beneficiaries.

II. Proposed Updates Affecting OPPS Payments for CY 2007

A. Proposed Recalibration of APC Relative Weights for CY 2007

(If you choose to comment on the issues in this section, please include the caption “APC Relative Weights” at the beginning of your comment.)

1. Database Construction

a. Database Source and Methodology

Section 1833(t)(9)(A) of the Act requires that the Secretary review and revise the relative payment weights for APCs at least annually. 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. Except for some reweighting due to a small number of APC changes, these relative payment weights continued to be in effect for CY 2001. This policy is discussed in the November 13, 2000 interim final rule (65 FR 67824 through 67827).

We are proposing to use the same basic methodology that we described in the April 7, 2000 final rule with comment period to recalibrate the APC relative payment weights for services furnished on or after January 1, 2007, and before January 1, 2008. That is, we would recalibrate the relative payment weights for each APC based on claims and cost report data for outpatient services. We are proposing to use the most recent available data to construct the database for calculating APC group weights. For the purpose of recalibrating APC relative payment weights in this proposed rule for CY 2007, we used approximately 131.9 million final action claims for hospital OPD services furnished on or after January 1, 2005, and before January 1, 2006. Of the 131.9 million final action claims for services provided in hospital outpatient settings, 102.9 million claims were of 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 102.9 million claims, approximately 48.5 million were not for services paid under the OPPS or were excluded as not appropriate for use (for example, erroneous cost-to-charge ratios or no HCPCS codes reported on the claim). We were able to use 50.7 million whole claims of the remaining 54.4 million claims to set the proposed OPPS APC relative weights for CY 2007 OPPS. From the 50.7 million whole claims, we created 91.4 million single records, of which 62.8 million were “pseudo” single claims (created from multiple procedure claims using the process we discuss in this section).

The proposed APC relative weights and payments for CY 2007 in Addenda A and B to this proposed rule were calculated using claims from this period that had been processed before January 1, 2006. We selected claims for services paid under the OPPS and matched these claims to the most recent cost report filed by the individual hospitals represented in our claims data. We are proposing that the APC relative weights for CY 2007 continue to be based on the median hospital costs for services in the APC groups. For the CY 2007 OPPS final rule, we are proposing to base APC median costs on claims for services furnished in CY 2005 and processed before June 30, 2006.

b. Proposed Use of Single and Multiple Procedure Claims

For CY 2007, we are proposing to continue to use single procedure claims to set the medians on which the APC relative payment weights would be based. We have received many requests asking that we ensure that the data from claims that contain charges for multiple procedures are included in the data from which we calculate the relative payment weights. Requesters believe that relying solely on single procedure claims to recalibrate APC relative payment weights fails to take into account data for many frequently performed procedures, particularly those commonly performed in combination with other procedures. They believe that, by depending upon single procedure claims, we base relative payment weights on the least costly services, thereby introducing downward bias to the medians on which the weights are based.

We agree that, optimally, it is desirable to use the data from as many claims as possible to recalibrate the APC relative payment weights, including those with multiple procedures. We generally use single procedure claims to set the median costs for APCs because we are, so far, unable to ensure that packaged costs can be appropriately allocated across multiple procedures performed on the same date of service. However, by 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 claims from claims that, as submitted, contained Start Printed Page 49515multiple separately paid procedures on the same claim. For the CY 2007 OPPS, we are proposing to use the date of service on the claims and a list of codes to be bypassed to create “pseudo” single claims from multiple procedure claims, as we did in recalibrating the CY 2006 APC relative payment weights. We refer to these newly created single procedure claims as “pseudo” single claims because they were submitted by providers as multiple procedure claims.

For CY 2003, we created “pseudo” single claims by bypassing HCPCS codes 93005 (Electrocardiogram, tracing), 71010 (Chest x-ray), and 71020 (Chest x-ray) on a submitted claim. However, we did not use claims data for the bypassed codes in the creation of the median costs for the APCs to which these three codes were assigned because the level of packaging that would have remained on the claim after we selected the bypass code was not apparent and, therefore, it was difficult to determine if the medians for these codes would be correct.

For CY 2004, we created “pseudo” single claims by bypassing these three codes and also by bypassing an additional 269 HCPCS codes in APCs. We selected these codes based on a clinical review of the services and because it was presumed that these codes had only very limited packaging and could appropriately be bypassed for the purpose of creating “pseudo” single claims. The APCs to which these codes were assigned were varied and included mammography, cardiac rehabilitation, and Level I plain film x-rays. To derive more “pseudo” single claims, we also split the claims where there were dates of service for revenue code charges on that claim that could be matched to a single procedure code on the claim on the same date.

For the CY 2004 OPPS, as in CY 2003, we did not include the claims data for the bypassed codes in the creation of the APCs to which the 269 codes were assigned because, again, we had not established that such an approach was appropriate and would aid in accurately estimating the median costs for those APCs. For CY 2004, from approximately 16.3 million otherwise unusable claims, we used approximately 9.5 million multiple procedure claims to create approximately 27 million “pseudo” single claims. For CY 2005, we identified 383 bypass codes and from approximately 24 million otherwise unusable claims, we used approximately 18 million multiple procedure claims to create approximately 52 million “pseudo” single claims. For CY 2005, we used the claims data for the bypass codes combined with the single procedure claims to set the median costs for the bypass codes.

For CY 2006, we continued using the codes on the CY 2005 OPPS bypass list and expanded it to include 404 bypass codes, including 3 bladder catheterization codes (CPT codes 51701, 51702, and 51703), which did not meet the empirical criteria discussed below for the selection of bypass codes. We added these three codes to the CY 2006 bypass list because a decision to change their payment status from packaged to separately paid would have resulted in a reduction of the number of single bills on which we could base median costs for other major separately paid procedures that were billed on the same claim with these three procedure codes. That is, single bills which contained other procedures would have become multiple procedure claims when these bladder catheterization codes were converted to separately paid status. We believed and continue to believe that bypassing these three codes does not adversely affect the medians for other procedures because we believe that when these services are performed on the same day as another separately paid service, any packaging that appears on the claim would be appropriately associated with the other procedure and not with these codes.

Consequently, for CY 2006, we identified 404 bypass codes for use in creating “pseudo” single claims and used some part of 90 percent of the total claims that were eligible for use in OPPS ratesetting and modeling in developing the final rule with comment period. This process enabled us to use, for CY 2006 OPPS, 88 million single bills for ratesetting: 55 million “pseudo” singles and 34 million “natural” single bills (bills that were submitted containing only one separately payable major HCPCS code). (These numbers do not sum to 88 million because more than 800,000 single bills were removed when we trimmed at the HCPCS level at +/−3 standard deviations from the geometric mean.)

For CY 2007, we are proposing to continue using date-of-service matching as a tool for creation of “pseudo” single claims and to continue the use of a bypass list to create “pseudo” single claims. The process we are proposing for CY 2007 OPPS results in our being able to use some part of 94.8 percent of the total claims that are eligible for use in the OPPS ratesetting and modeling in developing this proposed rule. This process enabled us to use, for CY 2007, 62.8 million “pseudo” singles and 29.6 million “natural” single bills.

We are proposing to bypass the 454 codes identified in Table 1 to create new single claims and to use the line-item costs associated with the bypass codes on these claims, together with the single procedure claims, in the creation of the median costs for the APCS into which they are assigned. Of the codes on this list, 404 codes were used for bypass in CY 2006. We are proposing to continue the use of the codes on the CY 2006 OPPS bypass list and to expand it by adding codes that, using data presented to the APC Panel at its March 2006 meeting, meet the same empirical criteria as those used in CY 2006 to create the bypass list, or which our clinicians believe would contain minimal packaging if the services were correctly coded (for example, ultrasound guidance). Our examination of the data against the criteria for inclusion on the bypass list, as discussed below for the addition of new codes, shows that the empirically selected codes used for bypass for the CY 2006 OPPS generally continue to meet the criteria or come very close to meeting the criteria, and we have received no comments against bypassing them.

To facilitate comment, Table 1 indicates the list of codes we are proposing to bypass for creation of “pseudo” singles for CY 2007 OPPS. Bypass codes shown in Table 1 with an asterisk indicate the HCPCS codes we are proposing to add to the CY 2006 OPPS listed codes for bypass in CY 2007. The criteria we are proposing to use to determine the additional codes to add to the CY 2006 OPPS bypass list in order to create the bypass list for CY 2007 OPPS are discussed below.

The following empirical criteria were developed by reviewing the frequency and magnitude of packaging in the single claims for payable codes other than drugs and biologicals. We assumed that the representation of packaging on the single claims for any given code is comparable to packaging for that code in the multiple claims:

  • There were 100 or more single claims for the code. This number of single claims ensured that observed outcomes were sufficiently representative of packaging that might occur in the multiple claims.
  • Five percent or fewer of the single claims for the code had packaged costs on that single claim for the code. This criterion results in limiting the amount of packaging being redistributed to the payable procedure 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.Start Printed Page 49516
  • The median cost of packaging observed in the single claim was equal to or less than $50. This limits the amount of error in redistributed costs.
  • The code is not a code for an unlisted service.

In addition, we are proposing to add to the bypass list codes that our clinicians believe contain minimal packaging and codes for specified drug administration for which hospitals have requested separate payment but for which it is not possible to acquire median costs unless we add these codes to the bypass list. A more complete discussion of the effects of adding these drug administration codes to the bypass list is contained in the discussion of drug administration in section VIII.C. of this preamble.

We specifically invite public comment on the “pseudo” single process, including the bypass list and the criteria.

Start Printed Page 49517

Start Printed Page 49518

Start Printed Page 49519

Start Printed Page 49520

Start Printed Page 49521

Start Printed Page 49522

Start Printed Page 49523

Start Printed Page 49524

Start Printed Page 49525

Start Printed Page 49526

Start Printed Page 49527

Start Printed Page 49528

c. Proposed Revision to the Overall Cost-to-Charge Ratio (CCR) Calculation

We calculate both an overall CCR and cost center-specific cost-to-charge ratios (CCRs) for each hospital. For CY 2007 OPPS, we are proposing to change the methodology for calculating the overall CCR. The overall CCR is used in many components of the OPPS. We use the overall CCR to estimate costs from charges on a claim when we do not have an accurate cost center CCR. This does not happen very often. For the vast majority of services, we are able to use a cost center CCR to estimate costs from charges. However, we also use the overall CCR to identify the outlier threshold, to model payments for services that are paid at charges reduced to cost, and, during implementation, to determine outlier payments and payments for other services.

We have discovered that the calculation of the overall CCR that the fiscal intermediaries are using to determine outlier payment and payment for services paid at charges reduced to cost differs from the overall CCR that we use to model the OPPS. In Program Transmittal A-03-04 on “Calculating Provider-Specific Outpatient Cost-to-Charge Ratios (CCRs) and Instructions on Cost Report Treatment of Hospital Outpatient Services Paid on a Reasonable Cost Basis” (January 17, 2003), we revised the overall CCR calculation that the fiscal intermediaries use in determining outlier and other cost payments. Until this point, each fiscal intermediary had used an overall CCR provided by CMS, or calculated an updated CCR at the provider's request using the same calculation. The calculation in Program Transmittal A-03-04, that is, the fiscal intermediary calculation, diverged from the “traditional” overall CCR that we used for modeling. It should be noted that the fiscal intermediary overall CCR calculation noted in Program Transmittal A-03-04 was created with feedback and input from the fiscal intermediaries.

CMS' “traditional” calculation consists of summing the total costs from Worksheet B, Part I (Column 27), after removing the costs for nursing and paramedical education (Columns 21 and 24), for those ancillary cost centers that we believe contain most OPPS services, summing the total charges from Worksheet C, Part I (Columns 6 and 7) for the same set of ancillary cost centers, and dividing the former by the later. We exclude selected ancillary cost centers from our overall CCR calculation, such as 5700 Renal Dialysis, because we believe that the costs and charges in these cost centers are largely paid for under other payment systems. The specific list of ancillary cost centers, both standard and nonstandard, included in our overall CCR calculation is available on our Web site in the revenue center-to-cost center crosswalk workbook: http://www.cms.hhs.gov/​HospitalOutpatientPPS.

The overall CCR calculation provided in Program Transmittal A-03-04, on the other hand, takes the CCRs from Worksheet C, Part I, Column 9, for each specified ancillary cost center; multiplies them by the Medicare Part B outpatient specific charges in each corresponding ancillary cost center from Worksheet D, Parts V and VI (Columns 2, 3, 4, and 5 and subscripts thereof); and then divides the sum of these costs by the sum of charges for the specified ancillary cost centers from Worksheet D, Parts V and VI (Columns 2, 3, 4, and 5 and subscripts thereof). Compared with our “traditional” overall CCR calculation that has been used for modeling OPPS and to calculate the median costs, this fiscal intermediary calculation of overall CCR fails to remove allied health costs and adds weighting by Medicare Part B charges.

In comparing these two calculations, we discovered that, on average, the overall CCR calculation being used by the fiscal intermediary resulted in higher overall CCRs than under our “traditional” calculation. Using the most recent cost report data available for every provider with valid claims for CY 2004 as of November 2005, we estimated the median overall CCR using the traditional calculation to be 0.3040 (mean 0.3223) and the median overall CCR using the fiscal intermediary calculation to be 0.3309 (mean 0.3742). There also was much greater variability in the fiscal intermediary calculation of the overall CCR. The standard deviation under the “traditional” calculation was 0.1318, while the standard deviation using the fiscal intermediary's calculation was 0.2143. In part, the higher median estimate for the fiscal intermediary calculation is attributable to the inclusion of allied health costs for the over 700 hospitals with allied health programs. It is inappropriate to include these costs in the overall CCR calculation, because CMS already reimburses hospitals for the costs of these programs through cost report settlement. The higher median estimate and greater variability also is a function of the weighting by Medicare Part B charges. Because the fiscal intermediary overall CCR calculation is higher, on average, CMS has underestimated the outlier payment thresholds and, therefore, overpaid outlier payments. We also have underestimated spending for services paid at charges reduced to cost in our budget neutrality estimates.

In examining the two different calculations, we decided that elements of each methodology had merit. Clearly, as noted above, allied health costs should not be included in an overall CCR calculation. However, weighting by Medicare Part B charges from Worksheet D, Parts V and VI, makes the overall CCR calculation more specific to OPPS. Therefore, we are proposing to adopt a single overall CCR calculation that incorporates weighting by Medicare Part B charges but excludes allied health costs for modeling and payment. Specifically, the proposed calculation removes allied health costs from cost center CCR calculations for specified ancillary cost centers, as discussed above, multiplies them by the Medicare Part B charges on Worksheet D, Parts V and VI, and sums these estimated Medicare costs. This sum is then divided by the sum of the same Medicare Part B charges for the same specified set of ancillary cost centers.

Using the same cost report data, we estimated a median overall CCR for the proposed calculation of 0.3081 (mean 0.3389) with a standard deviation of 0.1583. The similarity to the median and standard deviation of the “traditional” overall CCR calculation noted above (median 0.3040 and standard deviation of 0.1318) masks some sizeable changes in overall CCR calculations for specific hospitals due largely to the inclusion of Medicare Part B weighting.

In order to isolate the overall impact of adopting this methodology on APC medians, we used the first 9 months of CY 2005 claims data to estimate APC median costs varying only the two methods of determining overall CCR. We expected the impact to be limited because the majority of costs are estimated using a cost center-specific CCR and not the overall. As predicted, we observed minor changes in APC median costs from the adoption of the proposed overall CCR calculation. We largely observed differences of no more than 5 percent in either direction. The median overall percent change in APC cost estimates was -0.3 percent. We typically observe comparable changes in APC medians when we update our cost report data. The impact of the proposed CCR calculation on the outlier threshold is discussed further in section II. G. of this preamble. Using updated cost report data for the calculations in this proposed rule, we estimate a median overall CCR across all hospitals of 0.2999 using the proposed overall CCR calculation.Start Printed Page 49529

We believe that a single overall CCR calculation should be used for all components of the OPPS for both modeling and payment. Therefore, we are proposing to use the modified overall CCR calculation as discussed above when the hospital-specific overall CCR is used for any of the following calculations—in the CMS calculation of median costs for OPPS ratesetting, in the CMS calculation of the outlier threshold, in the fiscal intermediary calculation of outlier payments, in the CMS calculation of statewide CCRs, in the fiscal intermediary calculation of pass-through payments for devices, and for any other fiscal intermediary payment calculation in which the current hospital-specific overall CCR may be used now or in the future. If this proposal is finalized, we would issue a Medicare program instruction to fiscal intermediaries that would instruct them to recalculate and use the hospital-specific overall CCR as we are proposing for these purposes.

2. Proposed Calculation of Median Costs for CY 2007

In this section of the preamble, we discuss the use of claims to calculate the proposed OPPS payment rates for CY 2007. The hospital outpatient prospective payment page on the CMS Web site on which this proposed rule is posted provides an accounting of claims used in the development of the proposed rates: http://www.cms.hhs.gov/​HospitalOutpatientPPS. The accounting of claims used in the development of this proposed rule is included on the Web site under supplemental materials for the CY 2007 proposed rule. That accounting provides additional detail regarding the number of claims derived at each stage of the process. In addition, below we discuss the files of claims that comprise the data sets that are available for purchase under a CMS data user contract. Our CMS Web site, http://www.cms.hhs.gov/​HospitalOutpatientPPS, includes information about purchasing the following two OPPS data files: “OPPS Limited Data Set” and “OPPS Identifiable Data Set.”

We are proposing to use the following methodology to establish the relative weights to be used in calculating the proposed OPPS payment rates for CY 2007 shown in Addenda A and B to this proposed rule. This methodology is as follows:

We used outpatient claims for the full CY 2005, processed before January 1, 2006, to set the relative weights for this proposed rule for CY 2007. To begin the calculation of the relative weights for CY 2007, we pulled all claims for outpatient services furnished in CY 2005 from the national claims history file. This is not the population of claims paid under the OPPS, but all outpatient claims (including, for example, CAH claims, and hospital claims for clinical laboratory services for persons who are neither inpatients nor outpatients of the hospital).

We then excluded claims with condition codes 04, 20, 21, and 77. These are claims that providers submitted to Medicare knowing that no payment will 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, and the U.S. Virgin Islands because hospitals in those geographic areas are not paid under the OPPS.

We divided the remaining claims into the three groups shown below. Groups 2 and 3 comprise the 103 million claims that contain hospital bill types paid under the OPPS.

1. Claims that were not bill types 12X, 13X, 14X (hospital bill types), or 76X (CMHC bill types). Other bill types are not paid under the OPPS and, therefore, these claims were not used to set OPPS payment.

2. Claims that were bill types 12X, 13X, or 14X (hospital bill types). These claims are hospital outpatient claims.

3. Claims that were bill type 76X (CMHC). (These claims are later combined with any claims in item 2 above with a condition code 41 to set the per diem partial hospitalization rate determined through a separate process.)

For the CCR calculation process, we used the same general approach as we used in developing the final APC rates for CY 2006 (70 FR 68537), with a change to the development of the overall CCR as discussed above. That is, we first limited the population of cost reports to only those for hospitals that filed outpatient claims in CY 2005 before determining whether the CCRs for such hospitals were valid.

We then calculated the CCRs at a cost center level and overall for each hospital for which we had claims data. We did this using hospital-specific data from the Healthcare Cost Report Information System (HCRIS). We used the most recent available cost report data, in most cases, cost reports for CY 2004. For this proposed rule, we used the most recent cost report available, whether submitted or settled. If the most recent 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 CCR, and we then adjusted the most recent available submitted but not settled cost report using that ratio. We are proposing to use the most recently submitted cost reports to calculate the CCRs to be used to calculate median costs for the OPPS CY 2007 final rule. We calculated both an overall CCR and cost center-specific CCRs for each hospital. We used the proposed overall CCR calculation discussed in II.A.1.c. of this preamble for all purposes.

We then flagged 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 .0001); and those from hospitals with CCRs that were identified as outliers (3 standard deviations from the geometric mean after removing error CCRs). In addition, we trimmed the CCRs at the cost center level by removing the CCRs for each cost center as outliers if they exceeded +/-3 standard deviations from the geometric mean. This is the same methodology that we used in developing the final CY 2006 CCRs. For CY 2007, we are proposing to trim at the departmental CCR level to eliminate aberrant CCRs that, if found in high volume hospitals, could skew the medians. We used a four-tiered hierarchy of cost center CCRs to match a cost center to every possible revenue code appearing in the outpatient claims, 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 departmental CCR could apply to the revenue code on the claim, we used the hospital's overall CCR for the revenue code in question. For example, a visit reported under the clinic revenue code, but the hospital did not have a clinic cost center, we mapped the hospital-specific overall CCR to the clinic revenue code. The hierarchy of CCRs is available for inspection and comment at the CMS Web site: http://www.cms.hhs.gov/​HospitalOutpatientPPS.

We then converted the charges to costs on each claim by applying the CCR that we believed was best suited to the revenue code indicated on the line with the charge. Table 2 below contains a list of the allowed revenue codes. Revenue codes not included in Table 2 are those Start Printed Page 49530not allowed under the OPPS because their services cannot be paid under the OPPS (for example, inpatient room and board charges) and, thus charges with those revenue codes were not packaged for creation of the OPPS median costs. One exception is the calculation of median blood costs, as discussed in section X. of this preamble.

Thus, we applied CCRs as described above to claims with bill types 12X, 13X, or 14X, excluding all claims from CAHs and hospitals in Maryland, Guam, and the U.S. Virgin 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. These claims were combined with the 76X claims identified previously to calculate the partial hospitalization per diem rate.

We then excluded claims without a HCPCS code. We also moved claims for observation services to another file. We moved to another file claims that contained nothing but flu and pneumococcal pneumonia (“PPV”) vaccine. Influenza and PPV vaccines are paid at reasonable cost and, therefore, these claims are not used to set OPPS rates. We note that the two above mentioned separate files containing partial hospitalization claims and the observation services claims are included in the files that are available for purchase as discussed above.

We next copied line-item costs for drugs, blood, and devices (the lines stay on the claim, but are copied off onto another file) to a separate file. No claims were deleted when we copied these lines onto another file. These line-items are used to calculate a per unit mean and median and a per administration mean and median for drugs, radiopharmaceutical agents, blood and blood products, and devices, including but not limited to brachytherapy sources, as well as other information used to set payment rates, including a unit to day ratio for drugs.

We then divided the remaining claims into the following five groups:

1. Single Major Claims: Claims with a single separately payable procedure (that is, status indicator S, T, V, or X), all of which would be used in median setting.

2. Multiple Major Claims: Claims with more than one separately payable procedure (that is, status indicator S, T, V, or X), or multiple units for one payable procedure. As discussed below, some of these can be used in median setting.

3. Single Minor Claims: Claims with a single HCPCS code that is packaged (that is, status indicator N) and not separately payable.

4. Multiple Minor Claims: Claims with multiple HCPCS codes that are packaged (that is, status indicator N) and not separately payable.

5. Non-OPPS Claims: Claims that contain no services payable under the OPPS (that is, all status indicators other than S, T, V, X, or N). These claims are excluded from the files used for the OPPS. Non-OPPS claims have codes paid under other fee schedules, for example, durable medical equipment or clinical laboratory, and do not contain either a code for a separately paid service or a code for a packaged service.

In previous years, we made a determination of whether each HCPCS code was a major code, or a minor code, or a code other than a major or minor code. We used those code specific determinations to sort claims into these five identified groups. For CY 2007 OPPS, we are proposing to use status indicators, as described above, to sort the claims into these groups. We believe that using status indicators is an appropriate way to sort the claims into these groups and also to make our process more transparent to the public. We further believe that this proposed method of sorting claims will enhance the public's ability to derive useful information and become a more informed commenter on this proposed rule.

We note that the claims listed in numbers 1, 2, 3, and 4 above are included in the data files that can be purchased as described above.

We set aside the single minor, multiple minor claims and the non-OPPS claims (numbers 3, 4, and 5 above) because we did not use these claims in calculating median cost. We then examined the multiple major claims for date of service to determine if we could break them into single procedure claims using the dates of service on all lines on the claim. If we could create claims with single major procedures by using date of service, we created a single procedure claim record for each separately paid procedure on a different date of service (that is, a “pseudo” single).

We then used the “bypass codes” listed in Table 1 of this preamble and discussed in section II.A.1.b. to remove separately payable procedures that we determined contain limited costs or no packaged costs, or were otherwise suitable for inclusion on the bypass list, from a multiple procedure bill. When one of the two separately payable procedures on a multiple procedure claim was on the bypass code list, we split the claim into two single procedure claims 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 charges.

We also removed lines that contained multiple units of codes on the bypass list and treated them as “pseudo” single claims by dividing the cost for the multiple units by the number of units on the line. Where one unit of a single separately paid procedure code remained on the claim after removal of the multiple units of the bypass code, we created a “pseudo” single claim from that residual claim record, which retained the costs of packaged revenue codes and packaged HCPCS codes. This enables us to use claims that would otherwise be multiple procedure claims and could not be used. We excluded those claims that we were not able to convert to singles even after applying all of the techniques for creation of “pseudo” singles.

We then packaged the costs of packaged HCPCS codes (codes with status indicator “N” listed in Addendum B to this proposed rule) and packaged revenue codes into the cost of the single major procedure remaining on the claim. The list of packaged revenue codes is shown below in Table 2.

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, 97.5 million claims were left. Of these 97.5 million claims, we were able to use some portion of 50.7 million whole claims (93.2 percent of the 54.4 million potentially usable claims) to create the 91.4 million single and “pseudo” single claims for use in the CY 2007 median payment ratesetting. Approximately 43 million claims were for services not paid under the OPPS.

We also excluded (1) Claims that had zero costs after summing all costs on the claim and (2) claims containing payment flag 3. Effective for services furnished on or after July 1, 2004, the Outpatient Code Editor (OCE) assigns payment flag number 3 to claims on which hospitals submitted token charges for a service with status indicator “S” or “T” (a major separately paid service under OPPS) for which the fiscal intermediary is required to allocate the sum of charges for services with a status indicator equaling “S” or “T” based on the weight for the APC to which each code is assigned. We do not believe that these charges, which were token charges as submitted by the Start Printed Page 49531hospital, are valid reflections of hospital resources. Therefore, we are proposing to delete these claims. We also deleted claims for which the charges equal the revenue center payment (that is, the Medicare payment) on the assumption that where the charge equals the payment, to apply a CCR to the charge would not yield a valid estimate of relative provider cost.

For the remaining claims, we then standardized 60 percent of the costs of the claim (which we have previously determined to be the labor-related portion) for geographic differences in labor input costs. We made this adjustment by determining the wage index that applied to the hospital that furnished the service and dividing the cost for the separately paid HCPCS code furnished by the hospital by that wage index. As has been our policy since the inception of the OPPS, we are proposing 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 would result in the most accurate adjusted median costs.

We also excluded claims that were 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). We then deleted 299,022 single bills reported with modifier 50 that were assigned to APCs that contained HCPCS codes that are considered to be conditional or independent bilateral procedures under the OPPS and that are subject to special payment provisions implemented through the OCE. Modifier 50 signifies that the procedure was performed bilaterally. Although these are apparently single claims for a separately payable service and although there is only one unit of the code reported on the claim, the presence of modifier 50 signifies that two services were furnished. Therefore, costs reported on these claims are for two procedures and not for a single procedure. Hence, we deleted these multiple procedure records, which we would have treated as single procedure claims in prior OPPS updates. We are seeking comments on the relative benefits of deleting these claims versus dividing the costs for the two procedures by two to create two “pseudo” single claims.

We used the remaining claims to calculate median costs for each separately payable HCPCS code and each APC. The comparison of HCPCS and APC medians determines the applicability of the “2 times” rule. As stated previously, 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 median (or mean cost, if elected by the Secretary) for an item or service in the group is more than 2 times greater than the lowest median cost for an item or service within the same group (“the 2 times rule”). Finally, we reviewed the medians and reassigned HCPCS codes to different APCs as deemed appropriate. Section III.B. of this preamble includes a discussion of the HCPCS code assignment changes that resulted from examination of the medians and for other reasons. The APC medians were recalculated after we reassigned the affected HCPCS codes. Both the HCPCS medians and the APC medians were weighted to account for the inclusion of multiple units of the bypass codes in the creation of pseudo single bills.

A detailed discussion of the proposed medians for blood and blood products is included in section X. of this preamble. A discussion of the proposed medians for APCs that require one or more devices when the service is performed is included in section IV.A. of this preamble. A discussion of the proposed median for observation services is included in section XI. of this preamble and a discussion of the proposed median for partial hospitalization is included below in section II.B. of this preamble.

Start Printed Page 49532

Start Printed Page 49533

3. Proposed Calculation of Scaled OPPS Payment Weights

Using the median APC costs discussed previously, we calculated the proposed relative payment weights for each APC for CY 2007 shown in Addenda A and B of this proposed rule. In prior years, we scaled all the relative payment weights to APC 0601 (Mid Level Clinic Visit) because it is one of 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.

For CY 2007 OPPS, we are proposing to scale all of the relative payment weights to APC 0606 (Level III Clinic Visits) because we are proposing to delete APC 0601 as part of the reconfiguration of the visit APCs. We chose APC 0606 as the scaling base because under our proposal to reconfigure the APCs where clinic visits are assigned for CY 2007, APC 0606 is the middle level clinic visit APC (that is, Level III of five levels). We have historically used the median cost of the middle level clinic visit APC (that is APC 0601 through CY 2006) to calculate unscaled weights because mid-level clinic visits are among the most frequently performed services in the hospital outpatient setting. Therefore, to maintain consistency in using as a median the most frequently used services, we are proposing to continue to use the median cost of the middle clinic level, proposed ASC 0606, to calculate unscaled weights. Following our standard methodology, but using the proposed CY 2007 median for APC 0606, we assigned APC 0606 a relative payment weight of 1.00 and divided the median cost of each APC by the median cost for APC 0606 to derive the unscaled relative payment weight for each APC. The choice of the APC on which to base the relative 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 manner that assures that aggregate payments under the OPPS for CY 2007 are neither greater than nor less than the aggregate payments that would have been made without the changes. To comply with this requirement concerning the APC changes, we compared aggregate payments using the CY 2006 relative weights to aggregate payments using the CY 2007 proposed relative payment weights. Based on this comparison, we adjusted the relative weights for purposes of budget neutrality. The unscaled relative payment weights were adjusted by 1.354626473 for budget neutrality. We recognize the scaler, or weight scaling factor, for budget neutrality that we are proposing for CY 2007 is higher than any previous OPPS weight scaler as a result of our proposal to use APC 0606 as the base for calculation of relative weights. Our proposed use of the median cost for APC 0606 of $83.67 causes the unscaled weights to be lower than they would have been if we had chosen APC 0605 (Level 2 Clinic Visits; median $62.12) as the scaling base. The CY 2007 median cost of APC 0606 is significantly higher than the CY 2006 median cost of APC 0601 for mid-level clinic visits, which was used in CY 2006 and earlier years to calculate unscaled weights. Historically, the median cost for APC 0601 has been similar to the CY 2007 proposed median cost for APC 0605. In order to appropriately scale the total weight estimated for OPPS in CY 2007 to be similar to the total weight in OPPS for CY 2006, we calculated a scaler of 1.354626473, which is higher using APC 0606 as the base than it would be if we used APC 0605 as the base. In addition to adjusting for increases and decreases in weight due the recalibration of APC medians, the scaler also accounts for any change in the base.

The proposed relative payment weights listed in Addenda A and B of this proposed rule incorporate the recalibration adjustments discussed in sections II.A.1. and 2. of this preamble.

Section 1833(t)(14)(H) of the Act, as added by section 621(a)(1) of Pub. L. 108-173, 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.” Section 1833(t)(14) of the Act provides the payment rates for certain “specified covered outpatient drugs.” Therefore, the cost of those specified covered outpatient drugs (as discussed in section V. of this preamble) is now included in the budget neutrality calculations for CY 2007 OPPS.

Under section 1833(t)(16)(C) of the Act, as added by section 621(b)(1) of Pub. L. 108-173, payment for devices of brachytherapy consisting of a seed or seeds (or radioactive source) is to be made at charges adjusted to cost for services furnished on or after January 1, 2004, and before January 1, 2007. As we stated in our January 6, 2004 interim final rule, charges for the brachytherapy sources were not used in determining outlier payments, and payments for these items were excluded from budget neutrality calculations for the CY 2006 OPPS. We excluded these payments from budget neutrality calculations, in part, because of the challenge posed by estimating hospital-specific cost payment. For CY 2007, we are proposing a specific payment rate for brachytherapy sources, which will be subject to scaling for budget neutrality. (We provide a discussion of brachytherapy payment issues, including their continued exclusion from outlier payments, under section VII. of this preamble.) Therefore, the costs of brachytherapy sources are accounted for in the scaler of 1.354626473.

4. Proposed Changes to Packaged Services

(If you choose to comment on the issues in this section, please include the caption “Packaged Services” at the beginning of your comment.)

Payments for packaged services under the OPPS are bundled into the payments providers receive for separately payable services provided on the same day. Packaged services are identified by the status indicator “N.” Hospitals include charges for packaged services on their claims, and the costs associated with these packaged services are then bundled into the costs for separately payable procedures on those same claims in establishing payment rates for the separately payable services. This is consistent with the principles of a prospective payment system based upon groupings of services and in contrast to a fee schedule that provides individual payment for each service billed. Hospitals may use CPT codes to report any packaged services that were performed, consistent with CPT coding guidelines.

As a result of requests from the public, a Packaging Subcommittee to the APC Panel was established to review all the procedural CPT codes with a status indicator of “N.” Providers have often suggested that many packaged services could be provided alone, without any other separately payable services on the claim, and requested that these codes not be assigned status indicator “N.” In deciding whether to package a service or pay for a code separately, we consider a variety of factors, including whether the service is normally provided separately or in conjunction with other services; how likely it is for the costs of the packaged code to be appropriately mapped to the separately payable codes Start Printed Page 49534with which it was performed; and whether the expected cost of the service is relatively low.

The Packaging Subcommittee identified areas for change for some packaged CPT codes that it believed could frequently be provided to patients as the sole service on a given date and that required significant hospital resources as determined from hospital claims data.

Based on the comments received, additional issues, and new data that we shared with the Packaging Subcommittee concerning the packaging status of codes for CY 2007, the Packaging Subcommittee reviewed the packaging status of numerous HCPCS codes and reported its findings to the APC Panel at its March 2006 meeting. The APC Panel accepted the report of the Packaging Subcommittee, heard several presentations on certain packaged services, discussed the deliberations of the Packaging Subcommittee, and recommended that—

  • CMS pay separately for HCPCS code 0069T (Acoustic heart sound recording and computer analysis only).
  • CMS maintain the packaged status of HCPCS code 0152T (Computer aided detection with further physician review for interpretation, with or without digitization of films radiographic images; chest radiograph(s)).
  • CMS maintain the packaged status of CPT code 36500 (venous catheterization for selective blood organ sampling).
  • CMS pay separately for CPT code 36540 (Collect blood, venous access device) if there are no separately payable OPPS services on the claim.
  • CMS pay separately for CPT code 36600 (Arterial puncture; withdrawal of blood for diagnosis) if there are no separately payable OPPS services on the claim.
  • CMS pay separately for CPT code 38792 (Sentinel node identification) if there are no separately payable OPPS services on the claim.
  • CMS maintain the packaged status of CPT codes 74328 (Endoscopic catheterization of the biliary ductal system, radiological supervision and interpretation), 74329 (Endoscopic catheterization of the pancreatic ductal system, radiological supervision and interpretation), and 74330 (Combined endoscopic catheterization of the biliary and pancreatic ductal systems, radiological supervision and interpretation).
  • CMS pay separately for CPT code 75893 (Venous sampling through catheter, with or without angiography, radiological supervision and interpretation) if there are no separately payable OPPS services on the claim.
  • CMS continue to separately pay for CPT code 76000 (Fluoroscopy, up to one hour physician time).
  • CMS maintain the packaged status of CPT codes 76001 (Fluoroscopy, physician time more than one hour), 76003 ((Fluoroscopic guidance for needle placement), and 76005 (Fluoroscopic guidance and localization of needle or catheter tip).
  • CMS maintain the packaged status of CPT codes 76937 (Ultrasound guidance for vascular access) and 75998 (Fluoroscopic guidance for central venous access device placement, replacement, or removal).
  • CMS provide separate payment for CPT codes 94760 (Noninvasive ear or pulse oximetry for oxygen saturation; single determination), 94761 (Noninvasive ear or pulse oximetry for oxygen saturation; multiple determinations), and 94762 (Noninvasive ear or pulse oximetry for oxygen saturation by continuous overnight monitoring) if there are no separately payable OPPS services on the claim.
  • CMS pay separately for CPT code 96523 (Irrigation of implanted venous access device) if there are no separately payable OPPS services on the claim.
  • CMS maintain the packaged status of HCPCS code G0269 (Placement of occlusive device into either a venous or arterial access site).
  • CMS pay separately for HCPCS code P9612 (Catheterization for collection of specimen, single patient) if there are no separately payable OPPS services on the claim.
  • CMS bring data to the next APC Panel meeting that show the following: (a) how the costs of packaged items and services are incorporated into the median costs of APCs and (b) how the costs of these packaged items and services influence payments for associated procedures.
  • The Packaging Subcommittee continue until the next APC Panel meeting.

For CY 2007, we are proposing to maintain CPT code 0069T as a packaged service and not adopt the APC Panel's recommendation to pay separately for this code. The service uses signal processing technology to detect, interpret, and document acoustical activities of the heart through special sensors applied to a patient's chest. This code was a new Category III CPT code implemented in the CY 2005 OPPS and assigned a new interim status indicator of “N” in the CY 2005 OPPS final rule. The APC Panel recommended packaging CPT code 0069T for CY 2006, and we accepted that recommendation when we finalized the status indicator “N” assignment to 0069T for CY 2006. This code is indicated as an add-on code to an electrocardiography service, according to the AMA's CY 2006 CPT book. In its presentation to the APC Panel, the manufacturer requested that we pay separately for CPT code 0069T and assign it to APC 0099 (Electrocardiograms), based on its estimated cost and clinical characteristics.

At the APC Panel meeting, the manufacturer stated that the acoustic heart sounds recording and analysis service may be provided with or without a separately reportable electrocardiogram. Members of the APC Panel engaged in extensive discussion of clinical scenarios as they considered whether CPT code 0069T could or could not be appropriately reported alone or in conjunction with several different procedure codes. We note that the parenthetical information following the AMA's code descriptor indicates that CPT code 0069T is to be reported in conjunction with CPT code 93005 (Electrocardiogram, routine ECG with at least 12 leads; tracing only, without interpretation and report). In addition, we do not believe that, based on its expected clinical uses as described by the manufacturer, CPT code 0069T would ever be performed as a sole service without other separately payable OPPS services and payment for CPT code 0069T could always be packaged into payments for those other services. Therefore, we believe that CPT code 0069T is appropriately packaged because it is closely linked to the performance of an ECG, should never be reported alone, and is estimated to require only modest hospital resources. Using CY 2005 claims, we had only 9 single claims for CPT code 0069T, with a median line-item cost of $1.93, consistent with its low expected cost. Packaging payment for CPT code 0069T is consistent with the principles of a prospective payment system that provides payments for groups of services. To the extent that the acoustic heart sounding recording service may be more frequently provided in the future in association with ECGs or other OPPS services as its clinical indications evolve, we expect that its cost would also be increasingly reflected in the median costs for those other services, particularly ECG procedures.

For CY 2007, we are proposing to accept the APC Panel's recommendation to maintain the packaged status of CPT code 0152T. The service involves the application of computer algorithms and classification technologies to chest x-ray Start Printed Page 49535images to acquire and display information regarding chest x-ray regions that may contain indications of cancer. This code was a new Category III CPT code implemented in the CY 2006 OPPS and assigned a new interim status indicator of “N” in the CY 2006 OPPS final rule with comment period. The code is indicated as an add-on code to chest x-ray CPT codes, according to the AMA's CY 2006 CPT book. In its presentation to the APC Panel, the manufacturer requested that we pay separately for this service and assign it to a New Technology APC with a payment rate of $15, based on its estimated cost, clinical considerations, and similarity to other image post-processing services that are paid separately.

Under the OPPS we make payment for medically necessary services either separately or packaged into our payments for other services. We agree with the APC Panel that packaged payment for diagnostic chest x-ray computer-aided detection (CAD) under a prospective payment methodology for outpatient hospital services is appropriate because of the close relationship of chest x-ray CAD to chest x-ray services and its projected modest cost. Because 0152T is a new CPT code for CY 2006, we have no CY 2005 hospital claims data available for analysis. To the extent that CAD may be more frequently provided in the future to aid in the review of diagnostic chest x-rays as its clinical indications evolve, we expect that its cost would also be increasingly reflected in the median costs for chest x-ray procedures.

For CY 2007, we are proposing to accept the recommendation of the APC Panel and maintain the packaged status of CPT code 36500. We note that several providers have commented that CPT code 36500 is sometimes billed only with its corresponding radiological supervision and interpretation code, 75893, but with no other separately payable OPPS services. In those cases, the provider would not receive any payment. For CY 2006, we accepted the APC Panel's recommendation to package both CPT codes 36500 and 75893 and to examine claims data. Our initial review of several clinical scenarios submitted by the public seemed to suggest that other separately payable procedures, such as venography, would likely be billed on the same claim. Our claims data indicate that there are usually separately payable codes that are billed on claims with CPT codes 36500 and 75893. However, we acknowledge that these two codes may occasionally be provided without any separately payable procedures. In these uncommon instances, the provider historically has not received any payment under the OPPS. We also understand that there is a cost associated with registering a patient and providing these services. For CY 2006, we have approximately 160 single claims for CPT code 75893, with a median cost of $269. Based on the proposal described below for “special” packaged codes, for CY 2007, when CPT codes 36500 and 75893 are billed on a claim with no separately payable OPPS services, CPT code 75893 would become separately payable and would receive payment for APC 0668. In this circumstance, payment for CPT code 36500 would be packaged into the separate payment for CPT code 75893.

For CY 2007, we are proposing to accept the APC Panel's recommendation and pay separately for CPT codes 36540, 36600, 38792, 75893, 94762, and 96523 when any of these codes appear on a claim with no separately payable OPPS services also reported for the same date of service. We will refer to this subset of codes as “special” packaged codes. We acknowledge that there is a cost to the hospital associated with registering and treating a patient, regardless of whether the specific service provided requires minimal or significant hospital resources. While we continue to believe that these “special” packaged codes are almost always provided along with a separately payable service, our claims analyses indicate that there are rare instances when one of these services is provided without another separately payable OPPS service on the claim for the same date of service. In these instances, providers do not currently receive any payment. Therefore, we are proposing to provide payment for the “special” packaged codes listed above when they are billed on a claim without another separately payable OPPS service on the same date. When any of the “special” packaged codes are billed with other codes that are separately payable under the OPPS on the same date of service, the “special” packaged code would be treated as a packaged code, and the cost of the packaged code would be bundled into the costs of the other separately payable services on the claim. The payments that the provider receives for the separately payable services would include the bundled payment for the packaged code(s).

We have heard concerns from the public stating that they are unable to submit claims to CMS that report only packaged codes. We note that although these claims are processed by the OCE and are ultimately rejected for payment, they are received by CMS, and we have cost data for packaged services based upon these claims. However, we recognize that the data used in our analyses to assess the frequencies with which packaged services are provided alone and their median costs are somewhat limited. It is possible that an unknown number of hospitals chose not to submit claims to CMS when a packaged code(s) was provided without other separately payable services on their claims, realizing that they would not receive payment for those claims. While we have been told that some hospitals may bill for a low-level visit if a packaged service only is provided so that they receive some payment for the encounter, we note that providers should bill a low-level visit code in such circumstances only if the hospital provides a significant, separately identifiable low-level visit in association with the packaged service.

Through OCE logic, the PRICER would automatically assign payment for a “special” packaged service reported on a claim if there are no other services separately payable under the OPPS on the claim for the same date of service. In all other circumstances, the “special” packaged codes would be treated as packaged services. We are proposing to assign status indicator “Q” to these “special” packaged codes to indicate that they are usually packaged, except for special circumstances when they are separately payable. Through OCE logic, the status indicator of a “special” packaged code would be changed either to “N” or to the status indicator of the APC to which the code is assigned for separate payment, depending upon the presence or absence of other OPPS services also reported on the claim for the same date. Table 3 below lists the proposed status indicators and APC assignments for these “special” packaged codes when they are separately payable. We note that the payment for these “special” packaged codes is intended to make payment for all of the hospital costs, which may include patient registration and establishment of a medical record, in an outpatient hospital setting even when no separately payable services are provided to the patient on that day.Start Printed Page 49536

Table 3.—Proposed Status Indicators and APC Assignments for “Special” Packaged CPT Codes

CPT codeDescriptorProposed CY 2007 APCProposed status indicatorProposed CY 2007 APC median
36540Collect blood, venous access device0624S$32.96
36600Arterial puncture; withdrawal of blood for diagnosis0035T12.45
38792Sentinel node identification0389S86.92
75893Venous sampling through catheter, with or without angiography, radiological supervision and interpretation0668S393.35
94762Noninvasive ear or pulse oximetry for oxygen saturation by continuous overnight monitoring0443X61.39
96523Irrigation of implanted venous access device0624S32.96

In the case of a claim with two or more “special” packaged codes only reported on a single date of service, the PRICER would assign separate payment only to the “special” packaged code that would receive the highest payment. The other “special” codes would remain packaged and would not receive separate payment.

We will monitor and analyze the claims frequency and claims detail for situations in which these codes are billed alone and then separately paid. This will allow us to determine both which providers are billing these codes most often and under what circumstances these codes are billed. We expect that hospitals scheduling and providing services efficiently to Medicare beneficiaries will continue to generally provide these minor services in conjunction with other medically necessary services.

For CY 2007, we are proposing to accept the APC Panel's recommendation and maintain the packaged status of CPT codes 74328, 74329, and 74330. The AMA notes that these radiological supervision and interpretation codes should be reported with procedure codes 43260-43272. In fact, our data indicate that these supervision and interpretation codes are billed with 43260-43272 more than 90 percent of the time, indicating their routine use. We believe that some providers may be concerned that although the payment for the endoscopic procedure includes the bundled payment for the supervision and interpretation performed by the radiology department, the payment for the comprehensive service may be directed to the hospital department that performed the endoscopic procedure, rather than to the radiology department. While we understand this concern, the OPPS pays hospital for services provided, and we believe that hospitals are responsible for attributing payments to hospital departments as they believe appropriate. We do not believe that packaging these radiological supervision and interpretation codes leads to inaccurate payments for the full hospital resources associated with endoscopic retrograde cholangiopancreatography procedures.

For CY 2007, we are proposing to accept the APC Panel's recommendation to continue to package CPT codes 76001, 76003, and 76005 and to continue to pay separately for CPT code 76000. We received a comment which stated that it was inconsistent to pay separately for CPT code 76000 (Fluoroscopy (separate procedure), up to one hour physician time) but to package CPT code 76001 (Fluoroscopy, physician time more than one hour) when CPT code 76001 appears to be a similar code, except that it is for a longer period of physician time. The Packaging Subcommittee believed that many of the claims that listed CPT code 76001 were erroneously billed, as many of the procedure codes that were billed with CPT code 76001 included fluoroscopy as an integral part of the procedure. In other cases, the Packaging Subcommittee noted that a procedure-specific fluoroscopy code should probably have been billed, instead of CPT code 76001. The Packaging Subcommittee believed that CPT code 76000 could often be provided as a sole service, with no other separately payable procedures. The Packaging Subcommittee recommended that CMS continue to pay separately for CPT code 76000, consistent with the AMA's definition of this code, which specifies that it is a separate procedure, and to continue to package CPT codes 76001, 76003, and 76005.

For CY 2007, we are proposing to accept the APC Panel's recommendation to continue to package CPT codes 76937 and 75998. In the CY 2006 OPPS final rule with comment period (70 FR 68544 and 68545), we reviewed in detail the data related to these two codes and promised to share CY 2004 and early CY 2005 data with the Packaging Subcommittee. We reviewed current data with the Packaging Subcommittee, and it recommended that we continue to package these codes. In summary, we believe that these services would always be provided with another separately payable procedure, so their costs would be appropriately bundled with the definitive vascular access device procedures. The costs for these guidance procedures are relatively low compared to the CY 2007 proposed payment rates for the separately payable services they most frequently accompany. If we were to unpackage CPT codes 76937 and 75998, the single bills available to develop median costs for vascular access device insertion services would be significantly reduced. Therefore, we are proposing to continue to package both CPT codes 76937 and 75998 for CY 2007.

For CY 2007, we are proposing to accept the APC Panel's recommendation to continue to package HCPCS code G0269. This code should never be billed without another separately payable procedure. Recent data indicate that 94 percent of the time HCPCS code G0269 was billed with either CPT code 93510 or 93526. In addition, the median cost of G0269 is low compared to the costs of the procedures with which it is typically associated.

For CY 2007, we are proposing to continue packaging CPT codes 94760 (Noninvasive ear or pulse oximetry for oxygen saturation; single determination) and 94761 (Noninvasive ear or pulse oximetry for oxygen saturation; multiple determinations) and not adopt the APC Panel's recommendation to provide separate payment for these services if there are no other separately payable OPPS services on the claim for the same date of service. Our data review revealed that these services are very frequently provided in the OPPS, with over 1 million claims in CY 2005 for the single pulse oximetry determination service and over 400,000 claims for the multiple determinations service. These high frequencies may actually be understated as both of these services are packaged codes, and we have been told that some hospitals may not report the Start Printed Page 49537HCPCS codes for services for which they receive no separate payments. Single and multiple pulse oximetry determinations are almost always provided in association with other services that are separately payable under the OPPS, into which their costs may be appropriately packaged. Specifically, OPPS hospital claims data revealed that out of the total instances of CPT code 94760 appearing on claims used for setting payment rates for this CY 2007 OPPS proposed rule, CPT code 94760 was billed only 4 percent of the time in association with no other separately payable OPPS services, with a median cost of $14. Using the same data, CPT code 94761 was billed only 7 percent of the time in association with no other separately payable OPPS services, with a median cost of $36. These pulse oximetry services have a relatively low cost compared with the OPPS services they frequently accompany. If we were to provide separate payment for these pulse oximetry determinations when performed as stand alone procedures by hospitals, we are concerned that hospitals would lose their incentive to provide these basic, low cost, and brief services as efficiently as possible, generally during the same encounters where they are providing other services to the same patients. We believe their appropriate provision as single services should be very rare. Therefore, for CY 2007 we are proposing not to include these codes on the list of “special” packaged codes, so their payment would remain packaged in all circumstances.

For CY 2007, we are proposing to assign status indicator “A” to HCPCS code P9612 and reject the APC Panel's recommendation to pay separately under the OPPS for this code when it is billed without any separately payable OPPS services. This code is currently payable on the clinical lab fee schedule. Its status indicator of “A” would provide payment for the service whenever it is billed, regardless of the presence or absence of other reported services. In addition, for consistency we are proposing to assign status indicator “A” to HCPCS code P9615 as it is also payable on the clinical lab fee schedule. In general, when a code is payable on the clinical lab fee schedule, we defer to that fee schedule and do not assign payment under the OPPS.

The APC Panel Packaging Subcommittee remains active, and additional issues and new data concerning the packaging status of codes will be shared for its consideration as information becomes available. We continue to encourage submission of common clinical scenarios involving currently packaged HCPCS codes to the Packaging Subcommittee for its ongoing review. Additional detailed suggestions for the Packaging Subcommittee should be submitted to APCPanel@cms.hhs.gov, with “Packaging Subcommittee” in the subject line.

B. Proposed Payment for Partial Hospitalization

(If you choose to comment on issues in this section, please include the caption “Partial Hospitalization” at the beginning of your comment.)

1. Background

Partial hospitalization is an intensive outpatient program of psychiatric services provided to patients as an alternative to inpatient psychiatric care for beneficiaries who have an acute mental illness. A partial hospitalization program (PHP) may be provided by a hospital to its outpatients or by a Medicare-certified community mental health center (CMHC). Section 1833(t)(1)(B)(i) of the Act provides the Secretary with the authority to designate the hospital outpatient services to be covered under the OPPS. The Medicare regulations at 42 CFR 419.21(c) that implement this provision specify that payments under the OPPS will be made for partial hospitalization services furnished by CMHCs. Section 1883(t)(2)(C) of the Act requires that we establish relative payment weights based on median (or mean, at the election of the Secretary) hospital costs determined by 1996 claims data and data from the most recent available cost reports. Payment to providers under the OPPS for PHPs represents the provider's overhead costs associated with the program. Because a day of care is the unit that defines the structure and scheduling of partial hospitalization services, we established a per diem payment methodology for the PHP APC, effective for services furnished on or after August 1, 2000. For a detailed discussion, we refer readers to the April 7, 2000 OPPS final rule with comment period (65 FR 18452).

Historically, the median per diem cost for CMHCs has greatly exceeded the median per diem cost for hospital-based PHPs and has fluctuated significantly from year to year while the median per diem cost for hospital-based PHPs has remained relatively constant ($200-$225). We believe that CMHCs may have increased and decreased their charges in response to Medicare payment policies. As discussed in more detail in section II.B.2. of the preamble of this proposed rule and in the CY 2004 OPPS final rule with comment period (68 FR 63470), we believe that some CMHCs manipulated their charges in order to inappropriately receive outlier payments.

In the CY 2003 OPPS update, the difference in median per diem cost for CMHCs and hospital-based PHPs was so great, $685 for CMHCs and $225 for hospital-based PHPs, that we applied an adjustment factor of .583 to CMHC costs to account for the difference between “as submitted” and “final settled” cost reports. By doing so, the CMHC median per diem cost was reduced to $384, resulting in a combined hospital-based and CMHC PHP median per diem cost of $273. As with all APCs in the OPPS, the median cost for each APC was scaled relative to the cost of a mid-level office visit and the conversion factor was applied. The resulting per diem rate for PHP for CY 2003 was $240.03.

In the CY 2004 OPPS update, the median per diem cost for CMHCs grew to $1,038, while the median per diem cost for hospital-based PHPs was again $225. After applying the .583 adjustment factor in the CY 2004 proposed rule to the median CMHC per diem cost, the median CMHC per diem cost was $605. Because the CMHC median per diem cost exceeded the average per diem cost of inpatient psychiatric care, we proposed a per diem rate for CY 2004 based solely on hospital-based PHP data. The proposed PHP per diem for CY 2004, after scaling, was $208.95. However, by the time we published the OPPS final rule with comment period for CY 2004, we had received updated CCRs for CMHCs. Using the updated CCRs significantly lowered the CMHC median per diem cost to $440. As a result, we determined that the higher per diem cost for CMHCs was not due to the difference between “as submitted” and “final settled” cost reports, but was the result of excessive increases in charges which may have been done in order to receive higher outlier payments. Therefore, in calculating the PHP median per diem cost for CY 2004, we did not apply the .583 adjustment factor to CMHC costs to compute the PHP APC. Using the updated CCRs for CMHCs, the combined hospital-based and CMHC median per diem cost for PHP was $303. After scaling, we established the CY 2004 PHP APC of $286.82.

For CY 2005, the PHP per diem amount was based on 12 months of hospital and CMHC PHP claims data (for services furnished from January 1, 2003, through December 31, 2003). We used data from all hospital bills reporting condition code 41, which identifies the claim as partial hospitalization, and all bills from CMHCs because CMHCs are Medicare Start Printed Page 49538providers only for the purpose of providing partial hospitalization services. We used CCRs from the most recently available hospital and CMHC cost reports to convert each provider's line-item charges as reported on bills, to estimate the provider's cost for a day of PHP services. Per diem costs were then computed by summing the line-item costs on each bill and dividing by the number of days on the bill.

In a Program Memorandum issued on January 17, 2003 (Transmittal A-03-004), we directed fiscal intermediaries to recalculate hospital and CMHC CCRs by April 30, 2003, using the most recently settled cost reports. Following the initial update of CCRs, fiscal intermediaries were further instructed to continue to update a provider's CCR and enter revised CCRs into the outpatient provider specific file. Therefore, for CMHCs, we used CCRs from the outpatient provider specific file.

In the CY 2005 OPPS update, the CMHC median per diem cost was $310 and the hospital-based PHP median per diem cost was $215. No adjustments were determined to be necessary and, after scaling, the combined median per diem cost of $289 was reduced to $281.33. We believed that the reduction in the CMHC median per diem cost indicated that the use of updated CCRs had accounted for the previous increase in CMHC charges, and represented a more accurate estimate of CMHC per diem costs for PHP.

For the CY 2006 OPPS final rule with comment period, we analyzed 12 months of the most current claims data available for hospital and CMHC PHP services furnished between January 1, 2004, and December 31, 2004. We also used the most currently available CCRs to estimate costs. The median per diem cost for CMHCs was $154, while the median per diem cost for hospital-based PHPs was $201. Based on the CY 2004 claims data, the average charge per day for CMHCs was $760, considerably greater than hospital-based per day costs but significantly lower than what it was in CY 2003 ($1,184). We believed that a combination of reduced charges and slightly lower CCRs for CMHCs resulted in a significant decline in the CMHC median per diem cost between CY 2003 and CY 2004.

Following the methodology used for the CY 2005 OPPS update, the CY 2006 OPPS update combined hospital-based and CMHC median per diem cost was $161, a decrease of 44 percent compared to the CY 2005 combined median per diem amount. We believed that this amount was too low to cover the cost for all PHPs.

Therefore, as stated in the CY 2006 OPPS final rule with comment period (70 FR 68548 and 68549), we considered the following three alternatives to our update methodology for the PHP APC for CY 2006 to mitigate this drastic reduction in payment for PHP services: (1) Base the PHP APC on hospital-based PHP data alone; (2) apply a different trimming methodology to CMHC costs in an effort to eliminate the effect of data for those CMHCs that appeared to have excessively increased their charges in order to receive outlier payments; and (3) apply a 15 percent reduction to the combined hospital-based and CMHC median per diem cost that was used to establish the CY 2005 PHP APC. (We refer readers to the CY 2006 OPPS final rule with comment period for a full discussion of the three alternatives (70 FR 68548).) After carefully considering these three alternatives and all comments received on them, we adopted the third alternative for CY 2006. We adopted this alternative because we believed and continue to believe that a reduction in the CY 2005 median per diem cost would strike an appropriate balance between using the best available data and providing adequate payment for a program that often spans 5-6 hours a day. We believe that 15 percent is an appropriate reduction because it recognizes decreases in median per diem costs in both the hospital data and the CMHC data, and also reduces the risk of any adverse impact on access to these services that might result from a large single-year rate reduction. However, we adopted this policy as a transitional measure, and stated in the CY 2006 OPPS final rule with comment period that we would continue to monitor CMHC costs and charges for these services and work with CMHCs to improve their reporting so that payments can be calculated based on better empirical data, consistent with the approach we have used to calculate payments in other areas of the OPPS (70 FR 68548).

To apply this methodology for CY 2006, we reduced $289 (the CY 2005 combined unscaled hospital-based and CMHC median per diem cost) by 15 percent, resulting in a combined median per diem cost of $245.65 for CY 2006.

2. Proposed PHP APC Update for CY 2007

For CY 2007, we are proposing to calculate the CY 2007 PHP per diem payment rate using the same update methodology that we adopted in CY 2006. That is, we are proposing to apply an additional 15-percent reduction to the combined hospital-based and CMHC median per diem cost that was used to establish the CY 2006 per diem PHP payment.

For CY 2007, we analyzed 12 months of data for hospital and CMHC PHP claims for services furnished between January 1, 2005 and December 31, 2005. We also used the most currently available CCRs to estimate costs. Using these CY 2005 claims data, the median per diem cost for CMHCs was $165 and the median per diem cost for hospital-based PHPs was $209. Following the methodology used for the CY 2005 update, the CY 2007 combined hospital-based and CMHC median per diem cost is $172.

While the combined hospital-based and CMHC median per diem cost is about $10 higher using the CY 2005 data compared to the CY 2004 data ($172 compared to $161), we believe this amount is still too low to cover the cost for PHPs. We continue to believe that the policy we adopted for CY 2006—a 15-percent reduction applied to the current median cost—provides an appropriate decrease in median per diem costs for both the hospital and CMHC data. Therefore, for CY 2007, we are proposing an additional 15 percent reduction to the combined hospital-based and CMHC median per diem cost. We will continue to monitor and work with CMHCs to improve their reporting. If CMHC data continues to be a problem, we would consider using data from hospital-based PHPs only.

To calculate the CY 2007 APC PHP per diem cost, we reduced $245.65 (the CY 2005 combined hospital-based and CMHC median per diem cost of $289 reduced by 15 percent) by 15 percent, which resulted in a combined median per diem cost of $208.80.

3. Proposed Separate Threshold for Outlier Payments to CMHCs

In the November 7, 2003 final rule with comment period (68 FR 63469), we indicated that, given the difference in PHP charges between hospitals and CMHCs, we did not believe it was appropriate to make outlier payments to CMHCs using the outlier percentage target amount and threshold established for hospitals. There was a significant difference in the amount of outlier payments made to hospitals and CMHCs for PHP. In addition, further analysis indicated that using the same OPPS outlier threshold for both hospitals and CMHCs did not limit outlier payments to high cost cases and resulted in excessive outlier payments to CMHCs. Therefore, for CYs 2004, 2005, and 2006, we established a separate outlier threshold for CMHCs. For CYs 2004 and 2005, we designated a portion of the Start Printed Page 49539estimated 2.0 percent outlier target amount specifically for CMHCs, consistent with the percentage of projected payments to CMHCs under the OPPS in each of those years, excluding outlier payments. For CY 2006, we set the estimated outlier target at 1.0 percent and allocated a portion of that 1.0 percent, 0.6 percent (or 0.006 percent of total OPPS payments), to CMHCs for PHP services. The CY 2006 CMHC outlier threshold is met when the cost of furnishing services by a CMHC exceeds 3.40 times the PHP APC payment amount. The CY 2006 OPPS outlier payment percentage is 50 percent of the amount of costs in excess of the threshold.

The separate outlier threshold for CMHCs became effective January 1, 2004, and has resulted in more commensurate outlier payments. In CY 2004, the separate outlier threshold for CMHCs resulted in $1.8 million in outlier payments to CMHCs. In CY 2005, the separate outlier threshold for CMHCs resulted in $0.5 million in outlier payments to CMHCs. In contrast, in CY 2003, more than $30 million was paid to CMHCs in outlier payments. We believe this difference in outlier payments indicates that the separate outlier threshold for CMHCs has been successful in keeping outlier payments to CMHCs in line with the percentage of OPPS payments made to CMHCs.

As discussed in section II.B.2. of this preamble, the CY 2005 CMHC data produce median per diem costs too low to use for the CY 2007 partial hospitalization payment rate. Due to the continued volatility of the CMHC charge data, we are proposing to maintain the existing outlier threshold for CMHCs for CY 2007 at 3.40 times the APC payment amount and the CY 2007 outlier payment percentage applicable to costs in excess of the threshold at 50 percent.

As noted in section II.G. of this preamble, for CY 2007, we are proposing to continue our policy of setting aside 1.0 percent of the aggregate total payments under the OPPS for outlier payments. We are proposing that a portion of that 1.0 percent, an amount equal to 0.25 percent of outlier payments and 0.0025 percent of total OPPS payments would be allocated to CMHCs for PHP service outliers. As discussed in section II.G. of this preamble, we again are proposing to set a dollar threshold in addition to an APC multiplier threshold for OPPS outlier payments. However, because the PHP is the only APC for which CMHCs may receive payment under the OPPS, we would not expect to redirect outlier payments by imposing a dollar threshold. Therefore, we are not proposing to set a dollar threshold for CMHC outliers. As noted above, we are proposing to set the outlier threshold for CMHCs for CY 2007 at 3.40 percent times the APC payment amount and the CY 2007 outlier payment percentage applicable to costs in excess of the threshold at 50 percent.

CMS and the Office of the Inspector General are continuing to monitor the excessive outlier payments to CMHCs.

C. Proposed Conversion Factor Update for CY 2007

(If you choose to comment on issues in this section, please include the caption “Conversion Factor” at the beginning of your comment.)

Section 1833(t)(3)(C)(ii) of the Act requires us to update the conversion factor used to determine payment rates under the OPPS on an annual basis. Section 1833(t)(3)(C)(iv) of the Act provides that, for CY 2007, the update is equal to the hospital inpatient market basket percentage increase applicable to hospital discharges under section 1886(b)(3)(B)(iii) of the Act.

The forecast of the hospital market basket increase for FY 2007 published in the IPPS proposed rule on April 25, 2006 is 3.4 percent (71 FR 24148). To set the OPPS proposed conversion factor for CY 2007, we increased the CY 2006 conversion factor of $59.511, as specified in the November 10, 2005 final rule with comment period (70 FR 68551), by 3.4 percent.

In accordance with section 1833(t)(9)(B) of the Act, we further adjusted the conversion factor for CY 2006 to ensure that the revisions we are making to our updates for a revised wage index and expanded rural adjustment are made on a budget neutral basis. We calculated a budget neutrality factor of 0.999908021 for wage index changes by comparing total payments from our simulation model using the FY 2007 IPPS proposed wage index values to those payments using the current (FY 2006) IPPS wage index values. To reflect the inclusion of essential access community hospitals (EACHs) as rural SCHs (discussed in section II.F. of this preamble), we calculated an additional budget neutrality factor of 0.999883468 for the rural adjustment, including EACHs. For CY 2007, we estimate that allowed pass-through spending would equal approximately $43.2 million, which represents 0.13 percent of total OPPS projected spending for CY 2007. The proposed conversion factor also is adjusted by the difference between the 0.17 percent pass-through dollars set-aside in CY 2006 and the 0.13 percent estimate for CY 2007 pass-through spending. Finally, proposed payments for outliers remain at 1.0 percent of total payments for CY 2007.

The proposed market basket increase update factor of 3.4 percent for CY 2007, the required wage index budget neutrality adjustment of approximately 0.999908021, the return of 0.04 percent for the difference in the pass-through set-aside, and the proposed adjustment for the rural payment adjustment for rural SCHs, including rural EACHs, of 0.999883468 result in a proposed conversion factor for CY 2007 of $61.551.

D. Proposed Wage Index Changes for CY 2007

(If you choose to comment on issues in this section, please include the caption “OPPS: Wage Indices” at the beginning of your comment.)

Section 1833(t)(2)(D) of the Act requires the Secretary to determine a wage adjustment factor to adjust, for geographic wage differences, the portion of the OPPS payment rate and the copayment standardized amount attributable to labor and labor-related cost. This adjustment must be made in a budget neutral manner. As we have done in prior years, we are proposing to adopt the IPPS wage indices and extend these wage indices to hospitals that participate in the OPPS but not the IPPS (referred to in this section as “non-IPPS” hospitals).

As discussed in section II.A. of this preamble, we standardize 60 percent of estimated costs (labor-related costs) for geographic area wage variation using the IPPS wage indices that are calculated prior to adjustments for reclassification to remove the effects of differences in area wage levels in determining the OPPS payment rate and the copayment standardized amount.

As published in the original OPPS April 7, 2000 final rule with comment period (65 FR 18545), OPPS has consistently adopted the final IPPS wage indices as the wage indices for adjusting the OPPS standard payment amounts for labor market differences. Thus, the wage index that applies to a particular hospital under the IPPS will also apply to that hospital under the OPPS. As initially explained in the September 8, 1998 OPPS proposed rule, we believed and continue to believe that using the IPPS wage index as the source of an adjustment factor for OPPS is reasonable and logical, given the inseparable, subordinate status of the hospital outpatient within the hospital overall. In accordance with section 1886(d)(3)(E) of the Act, the IPPS wage index is updated annually. In this proposed rule, we are using the Start Printed Page 49540proposed FY 2007 hospital IPPS wage indices published in the Federal Register on April 25, 2006, which include the wage indices proposed to be in effect through March 31, 2007, and those proposed to be in effect on or after April 1, 2007, to accommodate the expiring reclassification provisions under section 508 of Pub. L. 108-173, to determine the wage adjustments for the OPPS payment rate and the copayment standardized amount for CY 2007. However, in accordance with our established policy, we are proposing to use the FY 2007 final version of these wage indices to determine the wage adjustments for the OPPS payment rate and copayment standardized amount that we will publish in our final rule for CY 2007.

On May 17, 2006 (71 FR 28644), in response to a court order in Bellevue Hosp. Ctr. v. Leavitt, we published a second IPPS proposed rule that would revise the methodology for calculating the occupational mix adjustment for FY 2007. We proposed to replace in full the descriptions of the data and methodology that would be used in calculating the occupational mix adjustment discussed in the first FY 2007 IPPS proposed rule. The second proposed rule also states that, because of the collection of new occupational mix data, we would publish the FY 2007 occupational mix adjusted wage index tables and related impacts on the CMS Web site shortly after we publish the FY 2007 IPPS final rule, and in advance of October 1, 2006. The weights and factors would also be published on the CMS Web site after the FY 2007 IPPS final rule, but in advance of October 1, 2006. (71 FR 28650). Thus, for purposes of determining OPPS wage indices, readers are also directed to refer to the wage index tables that are published after the FY 2007 IPPS final rule.

We note that the FY 2007 IPPS wage indices continue to reflect a number of changes implemented in FY 2005 as a result of the revised Office of Management and Budget (OMB) standards for defining geographic statistical areas, the implementation of an occupational mix adjustment as part of the wage index, and new wage adjustments provided for under Pub. L. 108-173. The following is a brief summary of the proposed changes in the FY 2005 IPPS wage indices, continued for FY 2007, and any adjustments that we are applying to the OPPS for CY 2007. We refer the reader to the FY 2007 IPPS proposed rule (71 FR 24074 through 24091) for a detailed discussion of the proposed changes to the wage indices. Readers should refer to our proposed rule published May 17, 2006, for proposed changes to the occupational mix adjustment and related issues (71 FR 28644-28653). In this proposed rule, we are not reprinting the proposed FY 2007 IPPS wage indices. We also refer readers to the CMS Web site for the OPPS at http://www.cms.hhs.gov/​providers/​hopps. At this Web site, the reader will find a link to the proposed FY 2007 IPPS wage indices tables. (However, as noted above, these tables may change as a result of the May 17, 2006 occupational mix proposed rule discussed above.)

1. The proposed continued use of the Core Based Statistical Areas (CBSAs) issued by the OMB as revised standards for designating geographical statistical areas based on the 2000 Census data, to define labor market areas for hospitals for purposes of the IPPS wage index. The OMB revised standards were published in the Federal Register on December 27, 2000 (65 FR 82235), and OMB announced the new CBSAs on June 6, 2003, through an OMB bulletin. In the FY 2005 IPPS final rule, CMS adopted the new OMB definitions for wage index purposes. In the FY 2007 IPPS proposed rule, we again stated that hospitals located in MSAs will be urban and hospitals that are located in Micropolitan Areas or outside CBSAs will be rural. To help alleviate the decreased payments for previously urban hospitals that became rural under the new geographical definitions, we allowed these hospitals to maintain for the 3-year period from FY 2005 through FY 2007, the wage index of the MSA where they previously had been located. To be consistent with the IPPS, we will continue the policy we began in CY 2005 of applying the same urban-to-rural transition to non-IPPS hospitals paid under the OPPS. That is, we would maintain the wage index of the MSA where the hospital was previously located for purposes of determining a wage index for CY 2007. Beginning in FY 2008, the 3-year transition will end and these hospitals will receive their statewide rural wage index. However, hospitals paid under the IPPS will be eligible to apply for reclassification.

For the occupational mix adjustment, we refer readers to CMS's May 17, 2006 occupational mix proposed rule discussed above. Under this proposed rule, wage indices would be adjusted 100 percent for occupational mix. In addition, as stated above, CMS plans that wage index tables and other adjustment factors would be published after publication of the FY 2007 IPPS final rule, but prior to October 1, 2006.

As noted above, for purposes of estimating an adjustment for the OPPS payment rates to accommodate geographic differences in labor costs in this proposed rule, we have used the wage indices identified in the FY 2007 IPPS proposed rule. For the CY 2007 OPPS final rule, we plan to use the revised FY 2007 IPPS wage indices that will be fully adjusted for differences in occupational mix using the new survey data and available after October 1, 2006. In all cases, we will use the final FY 2007 IPPS wage indices, which include the wage indices to be in effect through March 31, 2007, and those to be in effect on or after April 1, 2007, with any subsequent corrections, for calculating OPPS payment in CY 2007.

2. The reclassifications of hospitals to geographic areas for purposes of the wage index. For purposes of the OPPS wage index, we are proposing to adopt all of the IPPS reclassifications for FY 2007, including reclassifications that the Medicare Geographic Classification Review Board (MGCRB) approved under the one-time appeal process for hospitals under section 508 of Pub. L. 108-173. We note that section 508 reclassifications will terminate March 31, 2007, and that this expiration, along with the calendar year operating period of OPPS, impacts the calculation of the OPPS payment and the budget neutrality adjustment for the wage index. In the FY 2007 IPPS proposed rule (71 FR 24085 through 24087), we proposed procedural rules for hospitals that wished to reclassify for the second half of FY 2007 (April 1, 2007, through September 30, 2007) under section 1886(d)(10) of the Act. These rules essentially provided procedures for some hospitals to retain section 508 reclassifications for the first half of FY 2007 and also be eligible to maintain an approved reclassification under section 1886(d)(10) for the second half of FY 2007. Rather than calculating one wage index that reflected all final reclassification adjustments, we proposed two separate wage indices for FY 2007, one to be in effect October 1 through March 31, 2007, and one to be in effect April 1 through September 30, 2007.

These procedural rules also impact a hospital's eligibility to receive the out-migration wage adjustment, discussed in greater detail in section III.I. of the FY 2007 IPPS proposed rule (71 FR 24087) and under section II.D.4. of this preamble. A hospital cannot receive an out-migration wage adjustment if it is reclassified under section 1886(d)(10) of the Act. Hospitals declining reclassification status for any part of the year become eligible to receive the out-migration wage adjustment if they are located in an adjustment county. Start Printed Page 49541Because the OPPS operates on a calendar year (January 1 through December 31) and not a fiscal year, the expiring reclassification status under section 508 of Pub. L. 108-173 results in different wage indices for OPPS for the first quarter of CY 2007 (January 1, 2007, through March 31, 2007) and the last three quarters of CY 2007 (April 1, 2007, through December 31, 2007).

3. The out-migration wage adjustment to the wage index. In FY 2007 IPPS proposed rule (71 FR 24087), we discussed the out-migration adjustment under section 505 of Pub. L. 109-173 for counties under this adjustment. Hospitals paid under the IPPS located in the qualifying section 505 “out-migration” counties receive a wage index increase unless they have already been otherwise reclassified. (See the IPPS FY 2007 proposed rule for further information on out-migration.) For OPPS purposes, we propose to continue our policy from CY 2006 to allow non-IPPS hospitals paid under the OPPS to qualify for out-migration adjustment if they are located in a section 505 out-migration county. Because non-IPPS hospitals cannot reclassify, they are eligible for the out-migration wage adjustment. Tables identifying counties eligible for the out-migration adjustment will be published after the FY 2007 IPPS final rule and CMS plans to publish them in advance of October 1, 2006. These tables will reflect updated county listing to reflect changes to the occupation mix adjustment made in response to Bellevue court case discussed above. Because we are proposing to adopt the final FY 2007 IPPS wage index, we will adopt any changes in a hospital's classification status that would make them either eligible or ineligible for the out-migration wage adjustment both through March 31, 2007, and on or after April 1, 2007.

With the exception of reclassifications resulting from the implementation of the one-time appeal process under section 508 of Pub. L. 108-173, all changes to the wage index resulting from geographic labor market area reclassifications or other adjustments must be incorporated in a budget neutral manner. Accordingly, in calculating the OPPS budget neutrality estimates for CY 2007, in this proposed rule, we have included the wage index changes that would result from MGCRB reclassifications, implementation of section 505 of Pub. L. 108-173, and other refinements made in the FY 2007 IPPS proposed rule, such as the hold harmless provision for hospitals changing status from urban to rural under the new CBSA geographic statistical area definitions. However, section 508 sets aside $900 million to implement the section 508 reclassifications. We considered the increased Medicare payments that the section 508 reclassifications would create in both the IPPS and OPPS when we determined the impact of the one-time appeal process. Because the increased OPPS payments already count against the $900 million limit, we did not consider these reclassifications when we calculated the proposed OPPS budget neutrality adjustment.

Under the procedural rules described under section II.D.3. of this proposed rule above and in section III.H.5. of the FY 2007 IPPS proposed rule (71 FR 24085) regarding expiring section 508 reclassifications, different wage indices may be in effect for the first quarter of the calendar year and the last three quarters of the calendar year. These rules have implications for budget neutrality adjustments. Any additional payment attributable to reclassifications due to section 508 between January 1 and April 1, 2007, must be excluded from a budget neutrality adjustment, and all other adjustments to the wage index are subject to budget neutrality. Rather than calculating two different conversion factors, with different budget neutrality adjustments, we are proposing to calculate one budget neutrality adjustment that reflects the combined adjustments required for the first quarter and last three quarters of the calendar year, respectively. We followed the same approach in the FY 2007 IPPS proposed rule (71 FR 24087).

E. Proposed Statewide Average Default CCRs

(If you choose to comment on issues in this section, please include the caption “OPPS: Cost-to-Charge Ratios” at the beginning of your comment.)

CMS uses CCRs to determine outlier payments, payments for pass-through devices, and monthly interim transitional corridor payments under the OPPS. Some hospitals do not have a valid CCR. These hospitals include, but are not limited to, hospitals that are new and have not yet submitted a cost report, hospitals that have a CCR that falls outside predetermined floor and ceiling thresholds for a valid CCR, or hospitals that have recently given up their all-inclusive rate status. Last year, we updated the default urban and rural CCRs for CY 2006 in our final rule, published on November 10, 2005 (70 FR 68553 through 68555). In this proposed rule, we are proposing to update the default ratios for CY 2007 using the most recent cost report data.

We calculated the statewide default CCRs using the same overall CCRs that we use to adjust charges to costs on claims data. Please refer to section II.A.1.c. of this preamble for a discussion of our proposed revision to the overall CCR calculation. Table 4 lists the proposed CY 2007 default urban and rural CCRs by State and compares them to last year's default CCRs. These CCRs are the ratio of total costs to total charges from each provider's most recently submitted cost report, for those cost centers relevant to outpatient services weighted by Medicare Part B charges. We also adjusted these ratios to reflect final settled status by applying the differential between settled to submitted costs and charges from the most recent pair of settled to submitted cost reports.

For this proposed rule, 81.79 percent of the submitted cost reports represented data for CY 2004. We only used valid CCRs to calculate these default ratios. That is, we removed the CCRs for all-inclusive hospitals, CAHs, and hospitals in Guam and the U.S. Virgin Islands because these entities are not paid under the OPPS, or in the case of all-inclusive hospitals, because their CCRs are suspect. We further identified and removed any obvious error CCRs and trimmed any outliers. We limited the hospitals used in the calculation of the default CCRs to those hospitals that billed for services under the OPPS during CY 2004.

Finally, we calculated an overall average CCR, weighted by a measure of volume for CY 2004, for each State except Maryland. This measure of volume is the total lines on claims and is the same one that we use in our impact tables. For Maryland, we used an overall weighted average CCR for all hospitals in the Nation as a substitute for Maryland CCRs, which appear in Table 4. Very few providers in Maryland are eligible to receive payment under the OPPS, which limits the data available to calculate an accurate and representative CCR. The observed differences between last year's default statewide CCRs and the proposed CCRs are a combination of the general decline in the ratio between costs and charges widely observed in the cost report data and the change in the proposed overall CCR calculation.

Start Printed Page 49542

Start Printed Page 49543

Start Printed Page 49544

Start Printed Page 49545

As stated above, CMS uses default statewide CCRs for several groups of hospitals, including, but not limited to, hospitals that are new and have not yet submitted a cost report, hospitals that have a CCR that falls outside predetermined floor and ceiling thresholds for a valid CCR, and hospitals that have recently given up their all-inclusive rate status. Current OPPS policy also requires hospitals that experience a change of ownership, but that do not accept assignment of the previous hospital's provider agreement, to use the previous provider's CCR.

For CY 2007, we are proposing to apply this treatment of using the default statewide CCR to include an entity that has not accepted assignment of an existing hospital's provider agreement in accordance with 42 CFR 489.18, and that has not yet submitted its first Medicare cost report. We are proposing that this policy be effective for hospitals experiencing a change of ownership on or after January 1, 2007. We believe that a hospital that has not accepted assignment of an existing hospital's provider agreement is similar to a new hospital that will establish its own costs and charges. We believe that the hospital that has chosen not to accept assignment may have different costs and charges than the existing hospital. Furthermore, we believe that the hospital should be provided time to establish its own costs and charges. Therefore, we are proposing to use the default statewide CCR to determine cost-based payments until the hospital has submitted its first Medicare cost report.

F. OPPS Payments to Certain Rural Hospitals

(If you choose to comment on issues in this section, please include the caption “OPPS: Rural Hospitals Hold Harmless Transitional Payments” at the beginning of your comment.)

1. Hold Harmless Transitional Payment Changes Made by Pub. L. 109-171 (DRA)

When the OPPS was implemented, every provider was eligible to receive an additional payment adjustment (transitional corridor payment) if the payments it received for covered OPD services under the OPPS were less than the payments it would have received for the same services under the prior reasonable cost-based system. Section 1833(t)(7) of the Act provides that the transitional corridor payments are temporary payments for most providers, with two exceptions, to ease their transition from the prior reasonable cost-based payment system to the OPPS system. Cancer hospitals and children's hospitals receive the transitional corridor payments on a permanent basis. Section 1833(t)(7)(D)(i) of the Act originally provided for transitional corridor payments to rural hospitals with 100 or fewer beds for covered OPD services furnished before January 1, 2004. However, section 411 of Pub. L. 108-173 amended section 1833(t)(7)(D)(i) of the Act to extend these payments through December 31, 2005, for rural hospitals with 100 or fewer beds. Section 411 also extended the transitional corridor payments to sole community hospitals (SCHs) located in rural areas for services furnished during the period that begins with the provider's first cost reporting period beginning on or after January 1, 2004, and ends on December 31, 2005. Accordingly, the authority for making transitional corridor payments under section 1833(t)(7)(D)(i) of the Act, as amended by section 411 of Pub. L. 108-173, expired for rural hospitals having 100 or fewer beds and SCHs located in rural areas on December 31, 2005.

Section 5105 of Pub. L. 109-171 reinstituted the hold harmless transitional outpatient payments (TOPs) for covered OPD services furnished on or after January 1, 2006, and before January 1, 2009, for rural hospitals having 100 or fewer beds that are not SCHs. When the OPPS payment is less than the payment the provider would have received under the previous reasonable cost-based system, the amount of payment is increased by 95 percent of the amount of the difference between those two payment systems for CY 2006, by 90 percent of the amount of that difference for CY 2007, and by 85 percent of the amount of that difference for CY 2008.

For CY 2006, we have implemented section 5106 of Pub. L. 109-171 through Transmittal 877, issued on February 24, 2006. We did not specifically address whether TOPs payments apply to EACHs, which are considered to be SCHs under section 1886(d)(5)(D)(iii)(III) of the Act. Accordingly, under the statute, EACHs are treated as SCHs. Therefore, we believe that EACHs are not eligible for TOPs payment under Pub. L. 109-171. We are proposing to update § 419.70(d) Start Printed Page 49546to reflect the requirements of Pub. L. 109-171.

2. Proposed Adjustment for Rural SCHs Implemented in CY 2006 Related to Pub. L. 108-173 (MMA)

(If you choose to comment on issues in this section, please include the caption “OPPS: Rural SCH Payments” at the beginning of your comment.)

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 seeds, and services paid under pass-through payment policy in accordance with section 1833(t)(13)(B) of the Act, as added by section 411 of Pub. L. 108-173. Section 411 gave the Secretary the authority to make an adjustment to OPPS payments for rural hospitals effective January 1, 2006 if justified by a study of the difference in costs by APC between hospitals in rural and urban areas. Our analysis showed a difference in costs only for rural SCHs and we implemented a payment adjustment for those hospitals beginning January 1, 2006.

We recently became aware that we did not specifically address whether the adjustment applies to EACHs, which are considered to be SCHs pursuant to section 1886(d)(5)(D)(iii)(III) of the Act. Thus, under the statute, EACHs are treated as SCHs. Currently, fewer than 10 hospitals are classified as EACHs. As of CY 1998, under section 4201(c) of Pub. L. 105-33, a hospital can no longer become newly classified as an EACH. Therefore, for purposes of receiving this rural adjustment, we are clarifying that EACHs are treated as SCHs for purposes of receiving this adjustment, assuming these entities otherwise meet the rural adjustment criteria.

This adjustment is budget neutral and applied before calculating outliers and coinsurance. We also stated that we would not reestablish the adjustment amount on an annual basis, but that we might review the adjustment in the future and, if appropriate, would revise the adjustment. For CY 2007, we are proposing to continue our current policy of a budget neutral 7.1 percent payment increase for rural SCHs for specified services.

G. Proposed CY 2007 Hospital Outpatient Outlier Payments

(If you choose to comment on issues in this section, please include the caption “Outlier Payments” at the beginning of your comment.)

Currently, the OPPS pays outlier payments on a service-by-service basis. For CY 2006, the outlier threshold is 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 $1,250 fixed-dollar threshold. We introduced a fixed-dollar threshold in CY 2005 in addition to the traditional multiple threshold in order to better target outliers to those high cost and complex procedures where a very costly service could present a hospital with significant financial loss. If a provider 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. For a discussion on CMHC outliers, see section II.B.3. of the preamble to this proposed rule.

As explained in our CY 2006 OPPS final rule with comment period (70 FR 68561), we set our projected target for aggregate outlier payments at 1.0 percent of aggregate total payments under the OPPS. Our outlier thresholds were set so that estimated CY 2006 aggregate outlier payments would equal 1.0 percent of aggregate total payments under the OPPS. In our CY 2006 OPPS final rule with comment period (70 FR 68563), we also published total outlier payments as a percent of total expenditures for past years. At this time, we do not have a complete set of CY 2005 claims in order to produce this number for CY 2005. We will report on CY 2005 outlier payments in our CY 2007 OPPS final rule.

For CY 2007, we are proposing to continue our policy of setting aside 1.0 percent of aggregate total payments under the OPPS for outlier payments. A portion of that 1.0, an amount equal to 0.25 percent of outlier payments and 0.0025 percent of total OPPS payments would be allocated to CMHCs for partial hospitalization program service outliers.

In order to ensure that estimated CY 2007 aggregate outlier payments would equal 1.0 percent of estimated aggregate total payments under the OPPS, we are proposing that the outlier threshold be set so that outlier payments are 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 $1,825 fixed-dollar threshold.

We calculated the fixed-dollar threshold for this proposed rule using the same methodology as we did in CY 2006 except we used the revised overall CCR calculation discussed in section II.A.1.c. of this preamble. As discussed in section II.A.1.c. of this preamble, we discovered that the calculation of the overall CCR that the fiscal intermediaries are using to determine outlier payment and payment for services paid at charges reduced to cost differs from the overall CCR that we traditionally use to model the outlier thresholds. We discovered this during our calculations of the outlier threshold for our CY 2006 final rule with comment period, and we indicated in our preamble discussion for that rule, that we may revisit the threshold estimate in light of identified differences in the overall CCR calculation. Because, on average, the overall CCR calculation used by the fiscal intermediaries results in higher CCRs than those estimated using our “traditional” CCR sets, the outlier threshold is too low. The OPPS impact table in section XXVII. of this preamble demonstrates an estimated payment differential of 0.25 percent of total spending for hospital outlier payments in CY 2006 because of the differences in overall CCR calculations. The revised overall CCR calculation that we are proposing for CY 2007 aligns the two CCR calculations by removing allied and nursing health costs for those hospitals with paramedical education programs from the fiscal intermediary's CCR calculation and weighting our “traditional” calculation by total Medicare Part B charges. We expected this proposed change in the overall CCR calculation to raise the outlier threshold.

The claims that we use to model each OPPS lag by 2 years. For this proposed rule, we used CY 2005 claims to model the CY 2007 OPPS. In order to estimate CY 2007 outlier payments for this proposed rule, we inflated the charges on the CY 2005 claims using the same inflation factor of 1.1515 that we used to estimate the IPPS fixed-dollar outlier threshold for the IPPS FY 2007 proposed rule. For 1 year, the inflation factor is 1.0757. The methodology for determining this charge inflation factor was discussed in the FY 2007 IPPS proposed rule (71 FR 24150). As we stated in our CY 2005 final rule with comment period, we believe that the use of this charge inflation factor is appropriate for OPPS because, with the exception of the routine service cost centers, hospitals use the same cost centers to capture costs and charges across inpatient and outpatient services (69 FR 65845, November 15, 2004). As also noted in the FY 2006 IPPS final rule, we believe that a charge inflation factor is more appropriate than an adjustment to costs because this methodology closely captures how Start Printed Page 49547actual outlier payments are made and calculated (70 FR 47495, August 12, 2005). We then applied the revised overall CCR that we calculated from each hospital's most recent cost report (CMS-2552-96) and, if the cost report was not settled, we adjusted it by a settled-to-submitted ratio. We simulated aggregated outlier payments using these costs for several different fixed-dollar thresholds holding the 1.75 multiple constant until the total outlier payments equaled 1.0 percent of aggregated total OPPS payments. We estimate that a threshold of $1,825 combined with the multiple threshold of 1.75 times the APC payment rate would allocate 1.0 percent of aggregated total OPPS payments to outlier payments.

For CMHCs, in CY 2007 we project the outlier threshold is met when the cost of furnishing a service or procedure by a CMHC exceeds 3.40 times the APC payment rate. If a CMHC provider meets this condition, the outlier payment is calculated as 50 percent of the amount by which the cost exceeds 3.40 times the APC payment rate. We are proposing to continue the same threshold policy for CY 2007 as we have established for CY 2006. An explanation for this proposed policy is discussed in section II.B.3. the preamble of this proposed rule.

The following is an example of an outlier calculation for CY 2007 under our proposed policy. A hospital charges $20,000 for a procedure. The wage adjusted, and rural adjusted, if applicable, APC payment for the procedure is $3,500. Using the provider's CCR of 0.35, the estimated cost to the hospital is $7,000 (0.35 × $20,000). To determine whether this provider is eligible for outlier payments for this procedure, the provider must determine whether the cost for the service exceeds both the APC outlier cost threshold (1.75 × APC payment) and the fixed-dollar threshold ($1,825 + APC payment). In this example, the provider meets both criteria:

(1) $7,000 exceeds $6,125 (1.75 × $3,500)

(2) $7,000 exceeds $5,325 ($3,500 + $1,825)

To calculate the outlier payment, which is 50 percent of the amount by which the cost of furnishing the service exceeds 1.75 times the APC rate, subtract $6,125 (1.75 × $3,500) from $7,000 (resulting in $825). The provider is eligible for 50 percent of the difference, in this case $437.50 ($825/2). The formula is (cost − (1.75 × APC payment rate))/2.

H. Calculation of the Proposed OPPS National Unadjusted Medicare Payment

(If you choose to comment on issues in this section, please include the caption “OPPS: National Unadjusted Medicare Payment” at the beginning of your comment.)

The basic methodology for determining prospective payment rates for OPD services under the OPPS is set forth in existing regulations at § 419.31 and § 419.32. The payment rate for services and procedures for which payment is made under the OPPS is the product of the conversion factor calculated in accordance with section II.C. of this proposed rule and the relative weight determined under section II.A. of this proposed rule. Therefore, the national unadjusted payment rate for APCs contained in Addendum A to this proposed rule and for HCPCS codes to which payment under the OPPS has been assigned in Addendum B to this proposed rule (Addendum B is provided as a convenience for readers) was calculated by multiplying the proposed CY 2007 scaled weight for the APC by the proposed CY 2007 conversion factor.

However, to determine the payment that will be made in a calendar year under the OPPS to a specific hospital for an APC for a service other than a drug, in a circumstance in which the multiple procedure discount does not apply, we take the following steps:

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. (Refer to the April 7, 2000 final rule with comment period (65 FR 18496 through 18497) for a detailed discussion of how we derived this percentage.)

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 new geographic statistical areas as a result of revised OMB standards (urban and rural) to which hospitals are assigned for FY 2007 under the IPPS, reclassifications through the Medicare Classification Geographic Review Board, section 1866(d)(8)(B) “Lugar” hospitals, and section 401 of Pub. L. 108-173, and the reclassifications of hospitals under the one-time appeals process under section 508 of Pub. L. 108-173. The wage index values include the occupational mix adjustment described in section II.D. of this proposed rule that was developed for the proposed FY 2007 IPPS payment rates. We note that the original proposal for calculating the FY 2007 IPPS wage index has been recently changed. (Refer to the May 17, 2006 FY 2007 IPPS proposed rule, 71 FR 28644).) Final FY 2007 IPPS wage indices will be adjusted 100 percent for differences in occupational mix. Although we have not incorporated those changes in this proposed rule due to the availability of new survey data, as is our practice, we propose to adopt changes made to the FY 2007 IPPS wage index values after they have been finalized.

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 contains the qualifying counties and the proposed wage index increase developed for the FY 2007 IPPS. This step is to be followed only if the hospital has chosen not to accept reclassification under Step 2 above.

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.

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.

Step 6. If a provider is a SCH, as defined in § 419.92, and located in a rural area, as defined in § 412.63(b), or is treated as being located in a rural area under § 412.103 of the Act, multiply the wage index adjusted payment rate by 1.071 to calculate the total payment.

I. Proposed Beneficiary Copayments for CY 2007

(If you choose to comment on issues in this section, please include the caption “OPPS: Beneficiary Copayments” at the beginning of your comment.)

1. Background

Section 1833(t)(3)(B) of the Act requires the Secretary to set rules for determining 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 Start Printed Page 49548(determined on a national unadjusted basis) for that service in the year does not exceed specified percentages. For all services paid under the OPPS in CY 2007, and in calendar years thereafter, the specified percentage is 40 percent of the APC payment rate (section 1833(t)(8)(C)(ii)(V) of the Act). 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 coinsurance amount cannot be less than 20 percent of the OPD fee schedule amount.

2. Proposed Copayment for CY 2007

For CY 2007, we are proposing to determine copayment amounts for new and revised APCs using the same methodology that we implemented for CY 2004 (Refer to the November 7, 2003 OPPS final rule with comment period, 68 FR 63458.) The proposed unadjusted copayment amounts for services payable under the OPPS that would be effective January 1, 2007, are shown in Addendum A and Addendum B of this proposed rule.

3. Calculation of a Proposed Adjusted Copayment Amount for an APC Group for CY 2007

To calculate the OPPS adjusted copayment amount for an APC group, take 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 0001, $7.00 is 23 percent of $30.14.

Step 2. Calculate the wage adjusted payment rate for the APC, for the provider in question, as indicated in section II.H. of this preamble. Calculate the rural adjustment for eligible providers as indicated in section II.H. of this preamble.

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.

III. Proposed OPPS Ambulatory Payment Classification (APC) Group Policies

A. Proposed Treatment of New HCPCS and CPT Codes

(If you choose to comment on issues in this section, please include the caption “OPPS: New HCPCS and CPT Codes” at the beginning of your comment.)

1. Proposed Treatment of New HCPCS Codes Included in the Second and Third Quarterly OPPS Updates for CY 2006

During the second and third quarters of CY 2006, we created a total of four new Level II HCPCS codes that were not addressed in the November 10, 2005 final rule with comment period that updated the CY 2006 OPPS. We have designated the payment status of those codes and added them either through the April update (Transmittal 896, dated March 24, 2006) or the July update of the CY 2006 OPPS (Transmittal 970, dated May 30, 2006). In this proposed rule, we are soliciting public comments on the status indicators and APC assignments of these services, which are listed in Table 5. Because of the timing of this proposed rule, those codes implemented through the July 2006 OPPS update are not included in Addendum B of this proposed rule, while those codes based upon the April 2006 OPPS update are included in Addendum B. We intend to finalize the assignments for all of these services in the OPPS CY 2007 final rule.

Table 5.—New HCPCS Codes Implemented in April or July 2006

HCPCS codeDescriptionAssigned status indicatorAssigned APCImplementation date
C9227Injection, micafungin sodium, per 1 mgG9227April 1, 2006.
C9228Injection, tigecycline, per 1 mgG9228April 1, 2006.
C9229Injection ibandronate sodiumG9229July 1, 2006.
C9230Injection, abataceptG9230July 1, 2006.

2. Proposed Treatment of New CY 2007 Category I and III CPT Codes and Level II HCPCS Codes

As has been our practice in the past, we implement new Category I and III CPT codes and new Level II HCPCS codes, which are released in the fall of each year for annual updating, effective January 1 in the final rule updating the OPPS for the following calendar year. These codes are flagged with Comment Indicator “NI” in Addendum B of the OPPS final rule to indicate that we are assigning them an interim payment status which is subject to public comment following publication of the final rule that implements the annual OPPS update. (See the discussion immediately below concerning our modified policy for implementing new Category I and III mid-year CPT codes.) We are proposing to continue this recognition and process for CY 2007. New Category I and III CPT codes and new Level II HCPCS codes, effective January 1, 2007, will be designated in Addendum B of the CY 2007 OPPS final rule with Comment Indicator “NI.” The status indicator, the APC assignment, or both for all such codes flagged with Comment Indicator “NI,” will be open to public comment. We will respond to all comments received in a subsequent final rule.

3. Proposed Treatment of New Mid-Year CPT Codes

Twice each year, the AMA issues Category III CPT codes, which the AMA defines as temporary codes for emerging technology, services, and procedures. (In addition, AMA issues mid-year Category I CPT codes for vaccines for which FDA approval is imminent, to ensure timely availability of a code.) The AMA establishes these codes to allow collection of data specific to the service described by the code, as these services could otherwise only be reported using a Category I CPT unlisted code. The AMA releases Category III CPT codes in January, for implementation beginning the following July, and in July, for implementation beginning the following January. Prior to CY 2006, we treated new Category III CPT codes implemented in July of the previous year or January of the OPPS update year in the same manner that new Category I CPT codes and new Level II HCPCS codes implemented in January of the OPPS update year are treated; that is, we provided APC and status indicator assignments or both in the final rule updating the OPPS for the following calendar year. New Category I and Category III CPT codes, as well as new Level II HCPCS codes, were flagged with Comment Indicator “NI” in Addendum B of the final rule to indicate that we were assigning them an Start Printed Page 49549interim payment status which was subject to public comment following publication of the final rule that implemented the annual OPPS update.

As stated in the CY 2006 OPPS final rule with comment period (70 FR 68567), we modified our process for implementing the Category III codes that the AMA releases each January for implementation in July to ensure timely collection of data pertinent to the services described by the codes; to ensure patient access to the services the codes describe; and to eliminate potential redundancy between Category III CPT codes and some of the C-codes, which are payable under the OPPS and created by us in response to applications for new technology services. Therefore, beginning on July 1, 2006, we implemented in the OPPS seven Category III CPT codes that the AMA released in January 2006 for implementation in July 2006. The codes are shown in Table 6. These codes are not included in Addendum B of this proposed rule, which is based upon the April 2006 OPPS update. In this proposed rule, we are soliciting public comments on the status indicators and, if applicable, the APC assignments of these services. We intend to finalize the assignments of these Category III CPT codes implemented in July 2006 in the CY 2007 OPPS final rule.

Table 6.—Category III CPT Codes Implemented in July 2006

HCPCS codeLong descriptorStatus indicatorAPC
0155TLaparoscopy, surgical, implantation or replacement of gastric stimulation electrodes, lesser curvature (i.e., morbid obesity)T0130
0156TLaparoscopy, surgical, revision or removal of gastric stimulation electrodes, lesser curvature (i.e., morbid obesity)T0130
0157TLaparotomy, implantation or replacement of gastric stimulation electrodes, lesser curvature (i.e., morbid obesity)C
0158TLaparotomy, revision or removal of gastric stimulation electrodes, lesser curvature (i.e., morbid obesity)C
0159TComputer aided detection, including computer algorithm analysis of MRI image data for lesion detection/characterization, pharmacokinetic analysis, with further physician review for interpretation, breast MRIN
0160TTherapeutic repetitive transcranial magnetic stimulation treatment planningX0340
0161TTherapeutic repetitive transcranial magnetic stimulation treatment delivery and management, per sessionX0340

Some of the new Category III CPT codes describe services that we have determined to be similar in clinical characteristics and resource use to HCPCS codes in an existing APC. In these instances, we may assign the Category III CPT code to the appropriate clinical APC. Other Category III CPT codes describe services that we have determined are not compatible with an existing clinical APC, yet are appropriately provided in the hospital outpatient setting. In these cases, we may assign the Category III CPT code to what we estimate is an appropriately priced New Technology APC. In other cases, we may assign a Category III CPT code one of several nonseparately payable status indicators, including N, C, B, or E, which we believe is appropriate for the specific code. We expect that we will have received applications for new technology status for some of the services described by new Category III CPT codes, which may assist us in determining appropriate APC assignments. If the AMA establishes a Category III CPT code for a service for which an application has been submitted to CMS for new technology status, CMS may not have to issue a temporary Level II HCPCS code to describe the service, as has often been the case in the past when Category III CPT codes were only recognized by the OPPS on an annual basis.

Therefore, for CY 2007, we are proposing to include in Addendum B of the OPPS CY 2007 final rule the new Category III CPT codes and the new Category I CPT codes for vaccines released in January 2006 for implementation on July 1, 2006 (through the OPPS quarterly update process) and the Category III and vaccine Category I CPT codes released in July 2006 for implementation on January 1, 2007. However, only those new Category III codes and the new vaccine codes implemented effective January 1, 2007, will be flagged with Comment Indicator “NI” in Addendum B of the CY 2007 final rule to indicate that we are assigning them an interim payment status which is subject to public comment. As discussed earlier, Category III codes and Category I vaccine codes implemented in July 2006, which are listed in Table 6, are subject to comment through this proposed rule and their status will be made final in the CY 2007 OPPS final rule.

B. Proposed Changes—Variations Within APCs

(If you choose to comment on issues in this section, please include the caption “OPPS: 2 Times Rule” at the beginning of your comment.)

1. Background

Section 1833(t)(2)(A) of the Act requires the Secretary to develop a classification system for covered hospital outpatient services. Section 1833(t)(2)(B) of the Act provides that this classification system may be composed of groups of services, so that services 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 the Ambulatory Payment Classification Groups (or APCs), as set forth in § 419.31 of the regulations. We use Level I and Level II HCPCS codes and descriptors 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 surgical, diagnostic, and partial hospitalization services, as well as medical visits. We also have developed separate APC groups for certain medical devices, drugs, biologicals, radiopharmaceuticals, and brachytherapy devices.

We have packaged into each procedure or service within an APC group the costs associated with those items or services that are directly related and integral to performing a procedure Start Printed Page 49550or furnishing a service. Therefore, we do not make separate payment for packaged items or services. For example, packaged items and services include: (1) Use of an operating, treatment, or procedure room; (2) use of a recovery room; (3) most observation services; (4) anesthesia; (5) medical/surgical supplies; (6) pharmaceuticals (other than those for which separate payment may be allowed under the provisions discussed in section V of this preamble); and (7) incidental services such as venipuncture. Our packaging methodology is discussed in section II.A. of this proposed rule.

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. Each APC weight represents the hospital median cost of the services included in that APC relative to the hospital median cost of the services included in APC 0606. The APC weights are scaled to APC 0606 because we are proposing it to be the middle level clinic visit APC (that is, where the Level III Clinic Visit HCPCS code of five proposed levels of clinic visits is assigned), and because middle level clinic visits are among the most frequently furnished services in the outpatient hospital setting. See section II.A.3. of this preamble for a complete discussion of the reasons for choosing APC 0606 as the basis for scaling the APC relative weights.

Section 1833(t)(9)(A) of the Act requires the Secretary to review the components of the OPPS not less than annually and to revise the groups and relative payment weights and make other adjustments to take into account changes in medical practice, changes in technology, and the addition of new services, new cost data, and other relevant information and factors. Section 1833(t)(9)(A) of the Act, as amended by section 201(h) of the BBRA of 1999, also requires the Secretary, beginning in CY 2001, to consult with an outside panel of experts to review the APC groups and the relative payment weights (the APC Panel recommendations for specific services for CY 2007 OPPS and our responses to them are discussed in section III.D. of this preamble).

Finally, as discussed earlier, 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 median (or mean cost, if elected by the Secretary) for an item or service in the group is more than 2 times greater than the lowest median cost for an item or service within the same group (referred to as the “2 times rule”). We use the median cost of the item or service in implementing this provision. The statute authorizes the Secretary to make exceptions to the 2 times rule in unusual cases, such as low-volume items and services.

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 median of the highest cost item or service within an APC group is more than 2 times greater than the median of the lowest cost item or service within that same group (“2 times rule”). We make exceptions to this limit on the variation of costs within each APC group in unusual cases such as low-volume items and services.

During the APC Panel's March 1-2, 2006 meeting, we presented median cost and utilization data for services furnished during the period of January 1, 2005, through September 30, 2005, about which we had concerns or about which the public had raised concerns regarding their APC assignments, status indicator assignments, or payment rates. The discussions of service-specific issues, the APC Panel recommendations if any, and our proposals for CY 2007 are contained in section III.D. of this preamble.

In addition to the assignment of specific services to APCs which we discussed with the APC Panel, we also identified APCs with 2 times violations that were not specifically discussed with the APC Panel but for which we are proposing changes to their HCPCS codes' APC assignments in Addendum B of this proposed rule. In these cases, to eliminate a 2 times violation, we reassigned the codes to APCs that contained services that were similar with regard to both resource use and clinical homogeneity. We also are proposing changes to the status indicators for some codes that are not specifically and separately discussed in this proposed rule. In these cases, we changed the status indicators for some codes because we thought that another status indicator more accurately describes their payment status from an OPPS perspective based on our CY 2007 proposed policies.

Addendum B of this proposed rule identifies with a comment indicator “CH” those HCPCS codes for which we are proposing a change to the APC assignment or status indicator as assigned in the January 2006 Addendum B. These proposed reassignments of APC or status indicator are subject to public comment under this proposed rule.

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 are proposing for CY 2007 based on the APC Panel recommendations discussed in section III.D. of this preamble, the proposed changes to status indicators and APC assignments as identified in Addendum B, and the use of CY 2005 claims data to calculate the median costs of procedures classified in the APCs, we reviewed all the APCs to determine which APCs would not satisfy the 2 times rule. We used the following criteria to decide whether to propose exceptions to the 2 times rule for affected APCs:

  • Resource homogeneity
  • Clinical homogeneity
  • Hospital concentration
  • Frequency of service (volume)
  • Opportunity for upcoding and code fragments.

For a detailed discussion of these criteria, refer to the April 7, 2000 OPPS final rule with comment period (65 FR 18457).

Table 7 lists the APCs that we are proposing to exempt from the 2 times rule based on the criteria cited above. For cases in which a recommendation by the APC Panel appeared to result in or allow a violation of the 2 times rule, we generally accepted the APC Panel's recommendation because those recommendations were based on explicit consideration of resource use, clinical homogeneity, hospital specialization, and the quality of the data used to determine the APC payment rates that we are proposing for CY 2007. The median costs for hospital outpatient services for these and all other APCs which were used in development of this proposed rule can be found on the CMS Web site: http://www.cms.hhs.gov. Start Printed Page 49551

Table 7.—Proposed APC Exceptions to the 2 Times Rule for CY 2007

APCAPC description
0007Level II Incision & Drainage.
0010Level I Destruction of Lesion.
0019Level I Excision/Biopsy.
0024Level I Skin Repair.
0031Smoking Cessation Services.
0040Percutaneous Implantation of Neurostimulator Electrodes, Excluding Cranial Nerve.
0043Closed Treatment Fracture Finger/Toe/Trunk.
0058Level I Strapping and Cast Application.
0060Manipulation Therapy.
0081Non-Coronary Angioplasty or Atherectomy.
0085Level II Electrophysiologic Evaluation.
0093Vascular Reconstruction/Fistula Repair without Device.
0105Revision/Removal of Pacemakers, AICD, or Vascular.
0111Blood Product Exchange.
0112Apheresis, Photopheresis, and Plasmapheresis.
0204Level I Nerve Injections.
0235Level I Posterior Segment Eye Procedures.
0245Level I Cataract Procedures without IOL Insert.
0251Level I ENT Procedures.
0252Level II ENT Procedures.
0274Myelography.
0303Treatment Device Construction.
0307Myocardial Positron Emission Tomography (PET) Imaging.
0312Radioelement Applications.
0323Extended Individual Psychotherapy.
0330Dental Procedures.
0409Red Blood Cell Tests.
0418Insertion of Left Ventricular Pacing Elect.
0432Health and Behavior Services.
0437Level II Drug Administration.
0604Level I Clinic Visits.
0664Level I Proton Beam Radiation Therapy.

C. New Technology APCs

(If you choose to comment on issues in this section, please include the caption “New Technology APCs” at the beginning of your comment.)

1. Introduction

In the November 30, 2001 final rule (66 FR 59903), we finalized changes to the time period a service was eligible for payment under a New Technology APC. Beginning in CY 2002, we retain services within New Technology APC groups until we gather sufficient claims data to enable us to assign the service to a clinically appropriate APC. This policy allows us to move a service from a New Technology APC in less than 2 years if sufficient data are available. It also allows us to retain a service in a New Technology APC for more than 3 years if sufficient data upon which to base a decision for reassignment have not been collected. We note that the cost bands for new technology APCs range from $0 to $50 in increments of $10, from $50 to $100 in an increment of $50, from $100 through $2,000 in intervals of $100, and from $2,000 through $6,000 in intervals of $500. These intervals, which are in two parallel sets of New Technology APCs, one with status indicator “S” and the other with status indicator “T,” allow us to price new technology services more appropriately and consistently.

Every year we receive many requests for higher payment amounts for specific procedures under the OPPS because they require the use of expensive equipment. We are taking this opportunity to reiterate our response in general to the issue of hospitals' capital expenditures as they relate to the OPPS and Medicare.

Under the OPPS, one of our goals is to make payments that are appropriate for the services that are necessary for treatment of Medicare beneficiaries. The OPPS like other Medicare payment systems is budget neutral and so, although we do not pay full hospital costs for procedures, we believe that our payment rates generally reflect the costs that are associated with providing care to Medicare beneficiaries in cost-efficient settings. Further, we believe that our rates are adequate to assure access to services for most beneficiaries.

For many emerging technologies there is a transitional period during which utilization may be low, often because providers are first learning about the techniques and their clinical utility. Quite often, the requests for higher payment amounts are for new procedures in that transitional phase. These requests, and their accompanying estimates for expected Medicare beneficiary or total patient utilization, often reflect very low rates of patient use, resulting in high per use costs for which requesters believe Medicare should make full payment. Medicare does not, and we believe should not, assume responsibility for more than its share of the costs of procedures based on Medicare beneficiary projected utilization and does not set its payment rates based on initial projections of low utilization for services that require expensive capital equipment. For the OPPS, we rely on hospitals to make their business decisions regarding acquisition of high cost capital equipment taking into consideration their knowledge about their entire patient base (Medicare beneficiaries included) and an understanding of Medicare's and other payers' payment policies.

We note that in a budget neutral environment, payments may not fully cover hospitals' costs, including those for the purchase and maintenance of capital equipment. We rely on providers to make their decisions regarding the acquisition of high cost equipment with the understanding that the Medicare Start Printed Page 49552program must be careful to establish its initial payment rates for new services that lack hospital claims data based on realistic utilization projections for all such services delivered in cost-efficient hospital outpatient settings. As the OPPS acquires claims data regarding hospital costs associated with new procedures, we will regularly examine the claims data and any available new information regarding the clinical aspects of new procedures to confirm that our OPPS payments remain appropriate for procedures as they transition into mainstream medical practice.

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

As we explained in the November 30, 2001 final rule (66 FR 59897), we generally keep a procedure in the New Technology APC to which it is initially assigned until we have collected data sufficient to enable us to move the procedure to a clinically appropriate APC. However, in cases where we find that our original New Technology APC assignment was based on inaccurate or inadequate information, or where the New Technology APCs are restructured, we may, based on more recent resource utilization information (including claims data) or the availability of refined New Technology APC bands, reassign the procedure or service to a different New Technology APC that most appropriately reflects its cost.

The procedures presented below represent services assigned to New Technology APCs for CY 2006 for which we believe we have sufficient data to reassign them to clinically appropriate APCs for CY 2007. Therefore, we are proposing to reassign them to clinically appropriate APCs as indicated specifically in our discussion and in Table 10.

a. Nonmyocardial Positron Emission Tomography (PET) Scans

Positron emission tomography (PET) is a noninvasive diagnostic imaging procedure that assesses the level of metabolic activity and perfusion in various organ systems of the human body. PET serves an important role in the clinical care of many Medicare beneficiaries. We recognize that PET is a useful technology in many instances and want to ensure that the technology remains available to Medicare beneficiaries when medically necessary. Since August 2000, nonmyocardial PET procedures have been assigned to a New Technology APC in the OPPS. As a result of our collection of 5 full years worth of hospital claims data, we believe that we have sufficient data to assign nonmyocardial PET scans to a clinically appropriate APC for CY 2007. Note that we assign a service to a New Technology APC only when we do not have adequate claims data upon which to determine the median cost of performing the procedure, and we expect that the service's clinical or resource characteristics will differ from all other procedures already assigned to clinical APCs. Each New Technology APC represents a particular cost band (for example, $1,400-1,500), and we assign procedures to these APCs based on our analysis of the procedures' costs. Payment for items assigned to a New Technology APC is the midpoint of the band (for example, $1,450). We move a service from a New Technology APC to a clinical APC when we have adequate claims data upon which to base its future payment rate. In the case of nonmyocardial PET services, we believe that we now have sufficient data to assign them to a clinically appropriate APC.

We last proposed changes in payments for nonmyocardial PET procedures for CY 2005. At that time, while we had large numbers of single claims reflecting that the median cost of PET procedures was substantially lower than their CY 2004 payment rate of $1,450, we had some concerns that abruptly lowering the payment rate for nonmyocardial PET scans could hinder access to this technology. Therefore, we proposed three options to develop the CY 2005 payment rate for these procedures in the August 16, 2004 proposed rule (69 FR 50468). Specifically, we proposed the following options and invited comments on each of the options.

  • Option 1: Continue in CY 2005 the CY 2004 assignment of the scans to New Technology APC 1516 prior to assigning to a clinical APC.
  • Option 2: Assign the PET scans to a clinically appropriate APC priced according to the median cost of the scans based on CY 2003 claims data. Under this option, we would assign PET scans to APC 0420, PET imaging.
  • Option 3: Transition assignment to a clinical APC in CY 2006 by setting payment in CY 2005 based on a 50/50 blend of the median cost of PET scans and their CY 2004 New Technology payment rate. We would assign the scans to New Technology APC 1513 for a blended transition payment.

Based on comments received, we decided to set the CY 2005 payment rate for nonmyocardial PET scans based on option 3 at $1,150. We further stated in the November 15, 2004 final rule with comment period (69 FR 65716) that we believed there were sufficient claims data to assign nonmyocardial PET scans to a single clinical APC. However, to minimize any potential impact that a payment reduction resulting from this move might have had on beneficiary access to this technology, we set the CY 2005 OPPS payment rate for nonmyocardial PET scans based on a 50/50 blend of their median cost based on CY 2003 claims data and the payment rate of the CY 2004 New Technology APC to which they were assigned. Therefore, nonmyocardial PET scans were assigned to New Technology APC 1513 (New Technology—Level XIV ($1,000-$1,200) for a blended payment rate of $1,150 in CY 2005. In CY 2005, in the context of an expansion in Medicare coverage for PET procedures, we also simplified coding for PET services by instructing hospitals to bill several more general CPT codes in place of numerous disease-specific G-codes. We continued with these coding and payment methodologies in CY 2006.

For CY 2007, we are proposing the assignment of nonmyocardial PET procedures to a clinically appropriate APC as we have several years of robust and stable claims data upon which to determine the median cost of performing these procedures. Based on analysis of our claims data, the median costs for nonmyocardial PET scans have ranged between approximately $852 and $924 for claims submitted from CY 2002 through CY 2005, yet our payment rates have been significantly higher than the median costs throughout this same time period. We have observed significant growth in the number of nonmyocardial PET scans performed on Medicare beneficiaries, from about 48,000 in CY 2002, to 68,000 in CY 2003, and once again to 121,000 in CY 2004, the year when we first reduced the OPPS nonmyocardial PET scan payment rates from $1,450 to $1,150. For the CY 2007 proposed rule, we have about 45,000 single PET claims from CY 2005, yielding a stable median cost for PET procedures of about $867. Although the CY 2005 claims data are not yet complete, the apparent decline in numbers of claims for nonmyocardial PET scans alone in the CY 2005 claims data is likely related to the large number of claims for PET/CT scans now observed in CY 2005, when codes for that combined service were first available for billing. In fact, the total number of PET scans provided to Medicare beneficiaries in CY 2005, defined as PET scans and PET/CT scans, continued to climb to almost 128,000 based upon the CY 2005 claims data available for this proposed rule, in Start Printed Page 49553comparison to final claims for CY 2004 of approximately 121,000 for PET scans.

Therefore, we are proposing to assign nonmyocardial PET scans, in particular, CPT codes 78608, 78811, 78812, and 78813, to new APC 0308 (Nonmyocardial PET Imaging) with a median cost of $865.30 for CY 2007. We are confident, in the face of our stable median costs for nonmyocardial PET scans over the past 4 years, that their additional 2-year period of receiving New Technology APC payments at the blended rate of $1,150 for CY 2005 and CY 2006 as we transitioned the services to a clinical APC should ensure continued availability of this technology now that its services will be paid through a clinical APC for CY 2007, like most other OPPS services.

b. PET/Computed Tomography (CT) Scans

Since August 2000, we have paid separately for PET and CT scans. In CY 2004, the payment rate for nonmyocardial PET scans was $1,450, while it was $193 for typical diagnostic CT scans. Prior to CY 2005, nonmyocardial PET and the PET portion of PET/CT scans were described by G-codes for billing to Medicare. Several commenters to the November 15, 2004 final rule with comment period (69 FR 65682) urged that we replace the G-codes for nonmyocardial PET and PET/CT scan procedures with the established CPT codes. These commenters stated that movement to the established CPT codes would greatly reduce the burden on hospitals of tracking and billing the G-codes which are not recognized by other payers and would allow for more uniform hospital billing of these scans. We agreed with the commenters that movement from the G-codes to the established CPT codes for nonmyocardial PET and PET/CT scans would allow for more uniform billing of these scans. As a result of a Medicare national coverage determination (Publication 100-3, Medicare Claims Processing Manual section 220.6) that was made effective January 28, 2005, we discontinued numerous G-codes that described myocardial PET and nonmyocardial PET procedures and replaced them with the established CPT codes. The CY 2005 payment rate for concurrent PET/CT scans using the CPT codes 78814, 78815, and 78816 was $1,250, which was $100 higher than the payment rate for PET scans alone. These PET/CT CPT codes were placed in New Technology APC 1514 (New Technology—Level XIV, $1,200-$1,300) for CY 2005. We continued with these coding and payment methodologies in CY 2006.

For CY 2007, we are proposing the assignment of concurrent PET/CT scans, specifically CPT codes 78814, 78815, and 78816, to a clinically appropriate APC because we believe we have adequate claims data from CY 2005 upon which to determine the median cost of performing these procedures. Based on our analysis of CY 2005 single claims, the median cost of PET/CT scans is $865 from over almost 64,000 single claims. Comparison of the median cost of nonmyocardial PET procedures of $867 with the median cost of concurrent PET/CT scans demonstrates that the median costs of PET scans with or without concurrent CT scans for attenuation correction and anatomical localization are about the same. This result is not unexpected because many newer PET scanners also have the capability of rapidly acquiring CT images for attenuation correction and anatomical localization, sometimes with simultaneous image acquisition.

To explore the possibility that the similarity in median costs for PET and PET/CT procedures could be related to different groups of hospitals billing the two types of PET services based on their available equipment, rather than the true comparability of hospital resources required for the two types of services, we analyzed claims from a subset of hospitals billing both PET and PET/CT scans in CY 2005. This analysis looked at 362 providers who billed a PET HCPCS code and a PET/CT CPT code at least one time each during CY 2005. The median cost from this subset of claims for nonmyocardial PET scans was $890, in comparison with $863 for the PET/CT scans. Thus, we observed the same close relationship between median costs of PET and PET/CT procedures from hospitals billing both sets of services as we did for all OPPS CY 2005 claims available for this proposed rule for these scans. We believe that our claims data accurately reflect the comparable hospital resources required to provide PET and PET/CT procedures, and the scans have obvious clinical similarity as well. Therefore, for CY 2007 we are proposing to assign the CPT codes for PET/CT scans, along with the CPT codes for PET scans, to the same new APC 0308 (Nonmyocardial PET Imaging) with a median cost of $865.30.

We note that we have been paying separately for fluorodeoxyglucose (FDG), the radiopharmaceutical described by HCPCS code A9552 (F18 fdg), that is commonly administered during nonmyocardial PET and PET/CT procedures. For CY 2007, we are proposing to continue paying separately for FDG, according to the methodology described in section V. (Proposed OPPS Payment Changes for Drugs, Biologicals, and Radiopharmaceuticals) of the preamble of this proposed rule.

c. Stereotactic Radiosurgery (SRS) Treatment Delivery Services

For the past several years, we have collected hospital costs associated with the planning and delivery of stereotactic radiosurgery services (hereafter referred to as SRS). As new technology emerged in the field of SRS, public commenters urged us to recognize cost differences associated with the various methods of SRS planning and delivery. Beginning in CY 2001, we established G-codes to capture any such cost variations associated with the various methods of planning and delivery of SRS. For CY 2004, based on comments received regarding the G-codes used for SRS, we made some modifications to the coding (68 FR 63431 and 63432). First, we received comments regarding the descriptors for HCPCS codes G0173 and G0251, indicating that these codes did not distinguish image-guided robotic SRS systems from other forms of linear accelerator-based SRS systems to account for the cost variation in delivering these services. In response, for CY 2004 we created two new G-codes (G0339 and G0340) to describe complete and fractionated image-guided robotic linear accelerator-based SRS treatment. We placed HCPCS code G0339 in APC 1528 at a payment rate of $5,250, and HCPCS code G0340 in APC 1525 at a payment rate of $3,750. Second, we received comments on HCPCS code G0242 which requested that we modify the code descriptor to avoid confusion and misuse of the code, and also to appropriately describe treatment planning for both linear accelerator-based and Cobalt 60-based SRS treatments. In response, for CY 2004, we created HCPCS code G0338 to distinguish linear accelerator-based SRS treatment planning from Cobalt 60-based SRS treatment planning. We placed HCPCS code G0338 in APC 1516 at a payment rate of $1,450.

In CY 2005, there were no changes to the coding or New Technology APC payment rates for the SRS planning or treatment delivery codes from CY 2004. We stated in the CY 2005 OPPS final rule with comment period (69 FR 65711) that any SRS code changes would be premature without cost data to support a code restructuring. Therefore, we maintained HCPCS codes G0173, G0242, G0243, G0251, G0338, G0339, and G0340 in their respective New Technology APCs for CY 2005. We further stated that until we had completed an analysis of claims for these procedure codes, we would Start Printed Page 49554continue to maintain HCPCS codes G0173, G0242, G0243, G0251, G0338, G0339, and G0340 in their respective New Technology APCs for CY 2005 as we considered the adoption of CPT codes to describe all SRS procedures for CY 2006.

At its February 2005 meeting, the APC Panel discussed the clinical and resource cost similarities between planning for Cobalt 60-based and linear accelerator-based SRS. The APC Panel also discussed the use of CPT codes instead of specific G-codes to describe the services involved in SRS planning, noting the clinical similarities in radiation treatment planning regardless of the mode of treatment delivery. Given the APC Panel's thoughts about the possible need for CMS to separately track planning for SRS, the APC Panel eventually recommended that we create a single HCPCS code to encompass both Cobalt 60-based and linear accelerator-based SRS planning. Because we had no programmatic need to separately track SRS planning services, in the CY 2006 OPPS final rule with comment period (70 FR 68585) we discontinued HCPCS codes G0242 and G0338 for the reporting of charges for SRS planning and instructed hospitals to bill charges for SRS planning, regardless of the mode of treatment delivery, using all of the available CPT codes that most accurately reflect the services provided.

Furthermore, the APC Panel recommended that we make no changes to the coding or APC placement of SRS treatment delivery HCPCS codes G0173, G0243, G0251, G0339, and G0340 for CY 2006. In addition, presenters to the APC Panel described ongoing deliberations among interested professional societies around the descriptions and coding for SRS. The APC Panel and presenters suggested that we wait for the outcome of these deliberations before making any significant changes to SRS delivery coding or payment rates. To date, we have received no report from participating professional societies as to the outcome of such deliberations.

In response to comments for CY 2006 regarding the mature technology and stable median costs associated with Cobalt 60-based SRS treatment delivery described by G0243, we reassigned G0243 from a New Technology APC to new clinical APC 0127 (Stereotactic Radiosurgery) with a payment rate of $7,305 established based on the CY 2004 median cost of G0243. We made no changes for CY 2006 to the New Technology APC assignments of the other four SRS treatment codes, specifically, G0173, G0251, G0339, and G0340.

Since we first established the full group of SRS treatment delivery codes in CY 2004, we now have 2 years of hospital claims data reflecting the costs of each of these services. Based on analysis of our claims data from CY 2004 and CY 2005, the median costs for linear accelerator-based SRS treatment delivery procedures as described by HCPCS codes G0173, G0251, G0339, and G0340 have been stable and generally lower than our New Technology APC payment rates in effect from CY 2004 through CY 2006. Specifically, the payment rate for HCPCS code G0173, a complete course of non-image guided, non-robotic linear accelerator-based SRS treatment, has been set at $5,250, yet our claims data indicate a median cost of $2,802 from CY 2004 claims and $3,665 from CY 2005 claims, based upon hundreds of single claims from each year. For HCPCS code G0251, fractionated non-image guided, non-robotic linear accelerator-based SRS treatment, the corresponding median costs have been $1,028 and $1,386 based upon over 1,000 single claims from each year, and relatively consistent with the procedure's New Technology APC payment of $1,150. With respect to the complete course of therapy in one session or first fraction of image-guided, robotic linear accelerator-based SRS, described by HCPCS code G0339, its median costs have been $4,917 and $4,809 for CY 2004 and CY 2005 respectively, based upon over 500 single bills in each year, in comparison with the procedure's payment rate of $5,250 for those years. Lastly, the median costs of HCPCS code G0340, the second through fifth sessions of image-guided, robotic linear accelerator-based SRS treatment, have been $2,502 for CY 2004 and $2,917 for CY 2005 as determined by over 1,000 single bills during each year, significantly lower than its payment rate of $3,750. Unquestionably, the claims data from CY 2004 and CY 2005 for linear accelerator-based SRS treatment delivery services reveal highly stable median costs from year to year based on significant claims volume.

Based on the above findings, we believe that we have adequate claims data to assign the SRS treatment delivery procedures to clinically appropriate APCs, and we believe that such movement is appropriate. For CY 2007, we are proposing to create several new SRS clinical APCs of different levels to assign the HCPCS codes describing linear accelerator-based SRS treatment, G0173, G0251, G0339, and G0340, based on their clinical and hospital resource similarities and differences. In particular, we are proposing to assign HCPCS codes G0339 and G0173 to the same Level III SRS APC, because we believe these codes that describe the complete or first fraction of all types of linear accelerator-based SRS treatments have substantial hospital resource and clinical similarity, as observed in their median costs and recognized previously in their equivalent New Technology APC payments. The codes describing subsequent fractions of image-guided, robotic and non-image guided, non-robotic linear accelerator-based SRS treatments will each be assigned to their own clinical APCs, as they demonstrate significant differences in resource utilization as reflected in their median costs. Their previous assignments to different New Technology APCs anticipated these resource distinctions. We are proposing to continue our assignment of HCPCS code G0243 for Cobalt 60-based SRS treatment delivery to clinical APC 0127, renamed Level IV Stereotactic Radiosurgery. Our proposed reassignments of SRS services from New Technology APCs to clinical APCs are listed in Table 8 below.

Table 8.—Proposed APC Reassignment for SRS Treatment Delivery Services for CY 2007

HCPCS codeShort descriptorCY 2006 SICY 2006 APCCY 2006 payment rateProposed CY 2007 SIProposed CY 2007 APCProposed CY 2007 APC median cost
G0173Linear acc stereo radsur comS1528$5,250.00S0067$4,059.61
G0251Linear acc based stereo radioS15131,150.00S00651,386.20
G0339Robot lin-radsurg com, firstS15285,250.00S00674,059.61
G0340Robot lin-radsurg fractx 2-5S15253,750.00S00662,916.68
Start Printed Page 49555

d. Magnetoencephalography (MEG) Services

Magnetoencephalography (MEG) is a non-invasive diagnostic tool that assists surgeons presurgery by measuring and mapping brain activity. It may be used for epilepsy and brain tumor patients. Since CY 2002, the MEG procedures described by CPT codes 95965 (Meg, spontaneous), 95966 (Meg, evoked, single), and 95967 (Meg, evoked, each additional) have been assigned to New Technology APCs. In the July 25, 2005 proposed rule (70 FR 42709), we proposed to reassign MEG procedures to clinical APC 0430 using CY 2004 claims data to establish median costs on which the CY 2006 payment rates would be based. This proposal involved the reassignment of the three MEG procedures, specifically CPT codes 95965, 95966, and 95967, from three separate New Technology APCs into one new clinical APC with a status indicator of “T.” Commenters to this proposal believed that their assignment to clinical APC 0430 would be inappropriate because the proposed payment level of $674 was inadequate to cover the costs of the procedures, and because the procedures should not be assigned to only one level as their required hospital resources differ significantly. They further stated that our data did not represent the true costs of the procedures because MEG procedures are performed on very few Medicare patients.

Analysis of our hospital data for claims submitted from CY 2002 through CY 2005 indicates that these procedures are rarely performed on Medicare beneficiaries. For claims submitted from CY 2002 through CY 2005, our single claims data show that there were annually only between 2 and 23 claims submitted for CPT code 95965, 3 and 7 claims for CPT code 95966, and only 1 for CPT code 95967. Additionally, the hospital claims median costs for these codes have varied widely, perhaps due to our small volume of claims. The median cost for CPT code 95965 has ranged from $332 using CY 2002 claims to $3,166 based upon CY 2005 claims. The median cost for CPT code 95966 has varied widely from CY 2002 to CY 2005. For single claims submitted during CY 2002, the median cost was $1,949, while it was $507 for CY 2003, $1,435 for CY 2004, and $701 from 3 single claims for CY 2005. The median cost for CPT code 95967 based upon 1 single claim from CY 2005 claims is $217. We have no hospital median cost data for CPT code 95967 prior to CY 2005.

In the November 10, 2005 final rule with comment period (70 FR 68579), we stated that we carefully considered our claims data, information provided by the commenters, and the APC Panel recommendation for CY 2006 that we retain the MEG procedures in New Technology APCs. As a result of this analysis, we determined that using a 50/50 blend of the code specific median costs from our most recent CY 2004 hospital claims data and the CY 2005 New Technology APC code-specific payments amounts as the basis for assignment of the procedures for CY 2006 would be an appropriate way to recognize both the current payment rates for the procedures, which were originally based on the theoretical costs to hospitals of providing MEG services, and the median costs based upon our hospital claims data regarding actual MEG services provided to Medicare beneficiaries by hospitals. Therefore, CPT codes 95965, 95966, and 95967 were assigned to different New Technology APCs for CY 2006 based on this blended methodology, with payment rates of $2,750, $1,250, and $850 respectively.

At the March 2006 APC Panel meeting, the Panel recommended that CMS move CPT codes 95965 (MEG, spontaneous), 95966 (MEG, evoked, single), and 95967 (MEG, evoked, each additional) from their CY 2006 New Technology APCs which were assigned based on the blended methodology described above to clinical APC(s) for CY 2007. Following that meeting, interested parties have provided us with CY 2005 charge and cost information from six hospitals that provided MEG services. These external data show wide variation in hospitals' costs and charges for MEG procedures, with generally higher values for CPT code 95965 and lower values for CPT codes 95966 and 95967 but no consistent proportionate relationship among those costs and charges. In some cases, the charges and costs for CPT codes 95966 and 95967 are quite similar for the two related services, one of which describes MEG for a single modality of evoked magnetic fields and the other that describes MEG for each additional modality of evoked magnetic fields. The individual hospital cost and charge data for specific services demonstrate significant variations of up to six fold across the hospitals, with an apparent inverse relationship between the numbers of services provided and the costs of the procedures. This finding is not unexpected, given the dependence of MEG procedures on the use of expensive capital equipment. As we have previously stated, our OPPS payment rates generally reflect the costs that are associated with providing care to Medicare beneficiaries in cost-efficient settings. For emerging technologies, we establish payment rates for new services that lack hospital claims data based on realistic utilization projections for all such services delivered in cost-efficient hospital outpatient settings. Given that we now have 4 years of hospital claims data for MEG procedures, because MEG is no longer a new technology, we do not believe these external data from 6 hospitals that performed MEG services in CY 2005 provide a better estimate of the hospital resources used in MEG procedures during the care of Medicare beneficiaries than our standard OPPS historical claims methodology.

We agree with the APC Panel and are proposing to accept their recommendation to move the MEG CPT codes into clinical APCs for CY 2007. While the volumes for the MEG procedures are low, almost all procedures, including those with very low Medicare volume, are assigned to clinical APCs under the OPPS, with their payment rates based on the median costs of their assigned APCs. Therefore, we are proposing to assign CPT code 95965 to new clinical APC 0038 (Spontaneous MEG) with a proposed median cost of $3,166.30 and to assign both CPT codes 95966 and 95967 to APC 0209 (Level II MEG, Extended EEG Studies, and Sleep Studies) with a proposed median cost of $709.36. We believe that the assignment of CPT codes 95966 and 95967 to APC 0209 is appropriate because MEG studies are similar to EEGs and sleep studies in measuring activity of the brain over a significant time period, and our hospital claims data show that their hospital resources are also relatively comparable. MEG procedures and their CY 2007 proposed APC assignments are displayed in Table 9. Start Printed Page 49556

Table 9.—Proposed CY 2007 APC Assignment for MEG

HCPCS CodeShort descriptorCY 2006 SICY 2006 APCCY 2006 payment rateProposed CY 2007 SIProposed CY 2007 APCProposed CY 2007 APC median cost
95965Meg, spontaneousS1523$2,750.00S0038$3,166.30
95966Meg, evoked, singleS15141,250.00S0209709.36
95967Meg, evoked, each additionalS1510850.00S0209709.36

As these procedures are performed on very few Medicare patients, we expect to continue to have small Medicare claims volumes for MEG services each year. However, we are confident that over time our claims data for these procedures will become more consistent and reflective of the full hospital resources used in MEG services, especially because only a small subset of hospitals provide MEG services. We have been told that hospitals performing MEG procedure recently have been paying increased attention to accurately reporting charges for all necessary hospital resources on their claims. We are optimistic that both increased public awareness of Medicare coding for these procedures and improved understanding of the standard OPPS methodology for establishing APC payment rates should result in improved claims data in the future that more accurately reflect the required hospital resources.

e. Other Services in New Technology APCs

(If you choose to comment on issues in this section, please include the caption “Other New Technology Services” at the beginning of your comment.)

Other than the PET, PET/CT, and SRS new technology services discussed above, there are 23 procedures currently assigned to New Technology APCs for which we believe we also have data adequate to support their assignment to clinical APCs. For CY 2007, we are proposing to reassign these procedures to clinically appropriate APCs, applying their CY 2005 claims data to develop their clinical APC median costs on which payments would be based. These procedures and their proposed APC assignments are displayed in Table10.

Table 10.—Proposed APC Reassignment of Other New Technology Procedures to Clinical APCs for CY 2007

HCPCS CodeShort descriptorCY 2006 SICY 2006 APCCY 2006 payment rateProposed CY 2007 SIProposed CY 2007 APCProposed CY 2007 APC median cost
0003TCervicographyS1492$15.00T0191$9.22
0101TExtracorp shockwv tx,hi enrgT1547850.00T00501,548.05
0102TExtracorp shockwv tx,anesthT1547850.00T00501,548.05
0133TEsophageal implant injexnT15561,750.00T04221,704.85
19296Place po breast cath for radS15243,250.00T00302,533.62
19297Place breast cath for radS15232,750.00T00291,822.38
20982Ablate, bone tumor(s) perqT15571,850.00T00501,548.05
28890High energy eswt, plantar fT1547850.00T00501,548.05
36566Insert tunneled cv cathT15644,750.00T06231,703.97
77421Stereoscopic x-ray guidanceS150275.00S025788.39
78804Tumor imaging, whole bodyS1508650.00S0408308.82
79403Hematopoietic nuclear txS1507550.00S0413315.17
90473Immune admin oral/nasalS14915.00S043610.71
90474Immune admin oral/nasal addlS14915.00S043610.71
91035G-esoph reflx tst w/electrodS1506450.00X0361242.86
C9716Radiofrequency energy to anuS15191,750.00T01501,818.31
G0248Demonstrate use home inr monS1503150.00V060449.45
G0249Provide test material,equipmS1503150.00V060449.45
G0293Non-cov surg proc,clin trialS1505350.00X034038.52
G0294Non-cov proc, clinical trialS150275.00X034038.52
G0375Smoke/tobacco counseling 3-10S14915.00X003110.60
G0376Smoke/tobacco counseling >10S14915.00X003110.60
G3001Admin + supply, tositumomabS15222,250.00S04421,515.80

D. Proposed APC-Specific Policies

1. Skin Replacement Surgery and Skin Substitutes (APCs 0024, 0025, 0027)

(If you choose to comment on issues in this section, please include the caption “Skin Replacement Surgery and Skin Substitutes” at the beginning of your comment.)

For CY 2006, the American Medical Association (AMA) made comprehensive changes, including code additions, deletions, and revisions, accompanied by new and revised introductory language, parenthetical notes, subheadings and cross-references, to the Integumentary, Repair (Closure) subsection of surgery in the CPT book to facilitate more accurate reporting of skin grafts, skin replacements, skin substitutes, and local wound care. In particular, the section of the CPT book previously titled “Free Skin Grafts” and containing codes for skin replacement and skin substitute procedures was renamed, reorganized, and expanded. New and existing CPT codes related to skin replacement surgery and skin substitutes were organized into five subsections: Surgical Preparation, Autograft/Tissue Cultured Autograft, Acellular Dermal Replacement, Allograft/Tissue Cultured Allogeneic Skin Substitute, and Xenograft. Start Printed Page 49557

As part of the CY 2006 CPT code update in the newly named “Skin Replacement Surgery and Skin Substitutes” section, certain codes were deleted that previously described skin allograft and tissue cultured and acellular skin substitute procedures, including CPT 15342 (Application of bilaminate skin substitute/neodermis; 25 sq cm); CPT 15343 (Application of bilaminate skin substitute/neodermis; each additional 25 sq cm); CPT 15350 (Application of allograft, skin; 100 sq cm or less), and CPT 15351 (Application of allograft, skin; each additional 100 sq cm). Thirty-seven new CPT codes were created in the “Skin Replacement Surgery and Skin Substitutes” section, and these codes received interim final status indicators and APC assignments in the CY 2006 final rule with comment period and were subject to comment.

At its March 2006 meeting, the APC Panel heard several presentations on some of the new CY 2006 CPT codes for skin replacement and skin substitute procedures, and CMS has received additional information from the public regarding a number of these services. In particular, 18 new CPT codes that were created to more specifically describe skin allograft, skin replacement, and skin substitute procedures were the subject of the APC Panel discussion and recommendations. These codes are as follows:

  • CPT 15170 (Acellular dermal replacement, trunk, arms, legs; first 100 sq cm or less, or one percent of body area of infants and children)
  • CPT 15171 (Acellular dermal replacement, trunk, arms, legs; each additional 100 sq cm, or each additional one percent of body area of infants and children, or part thereof)
  • CPT 15175 (Acellular dermal replacement, face, scalp, eyelids, mouth, neck, ears, orbits, genitalia, hands, feet and/or multiple digits; first 100 sq cm or less, or one percent of body area of infants and children)
  • CPT 15176 (Acellular dermal replacement, face, scalp, eyelids, mouth, neck, ears, orbits, genitalia, hands, feet and/or multiple digits; each additional 100 sq cm, or each additional one percent of body area of infants and children, or part thereof)
  • CPT 15300 (Allograft skin for temporary wound closure, trunk, arms, legs; first 100 sq cm or less, or one percent of body area of infants and children)
  • CPT 15301 (Allograft skin for temporary wound closure; trunk, arms, legs; each additional 100 sq cm, or each additional one percent of body area of infants and children, or part thereof)
  • CPT 15320 (Allograft skin for temporary wound closure, face, scalp, eyelids, mouth, neck, ears, orbits, genitalia, hands, feet and/or multiple digits; first 100 sq cm or less, or one percent of body area of infants and children)
  • CPT 15321 (Allograft skin for temporary wound closure, face, scalp, eyelids, mouth, neck, ears, orbits, genitalia, hands, feet and/or multiple digits; each additional 100 sq cm, or each additional one percent of body area of infants and children, or part thereof)
  • CPT 15340 (Tissue cultured allogeneic skin substitute; first 25 sq cm or less)
  • CPT 15341 (Tissue cultured allogeneic skin substitute; each additional 25 sq cm)
  • CPT 15360 (Tissue cultured allogeneic dermal substitute; trunk, arms, legs; first 100 sq cm or less, or one percent of body area of infants and children)
  • CPT 15361 (Tissue cultured allogeneic dermal substitute; trunk, arms, legs; each additional 100 sq cm, or each additional one percent of body area of infants and children, or part thereof)
  • CPT 15365 (Tissue cultured allogeneic dermal substitute, face, scalp, eyelids, mouth, neck, ears, orbits, genitalia, hands, feet and/or multiple digits; first 100 sq cm or less, or one percent of body area of infants and children)
  • CPT 15366 (Tissue cultured allogeneic dermal substitute, face, scalp, eyelids, mouth, neck, ears, orbits, genitalia, hands, feet and/or multiple digits; first 100 sq cm or less, or one percent of body area of infants and children)
  • CPT 15420 (Xenograft skin (dermal), for temporary wound closure, face, scalp, eyelids, mouth, neck, ears, orbits, genitalia, hands, feet and/or multiple digits; first 100 sq cm or less, or one percent of body area of infants and children)
  • CPT 15421 (Xenograft skin (dermal), for temporary wound closure, face, scalp, eyelids, mouth, neck, ears, orbits, genitalia, hands, feet and/or multiple digits; each additional 100 sq cm, or each additional one percent of body area of infants and children, or part thereof)
  • CPT 15430 (Acellular xenograft implant; first 100 sq cm or less, or one percent of body area of infants and children)
  • CPT 15431 (Acellular xenograft implant; each additional 100 sq cm, or each additional one percent of body area of infants and children, or part thereof).

The CY 2006 interim final APC assignments of these codes, the recommendations made by the APC Panel at its March 2006 meeting, and our proposed placement of the codes for CY 2007 are listed in Table 11 below. Note that in general, biological skin substitutes and replacements used in procedures described by these CPT codes are proposed for separate payment under the OPPS for CY 2007, according to the methodology outlined in section V. of the preamble of this proposed rule.

Table 11.—CY 2007 Proposed Assignments of Skin Substitute and Skin Replacement Procedures

CPT codeShort descriptorCY 2006 assignmentAPC panel recommendationCY 2007 proposed assignment
APCSIAPC medianAPCSIAPC median
15170Cell graft trunk/arm/legs24T$92.222725T$314.58
15171Cell graft t/arm/leg add-on24T92.222525T314.58
15175Acellular graft, f/n/hf/g24T92.222725T314.58
15176Acell graft, f/n/hf/g/add-on24T92.222525T314.58
15300Apply skin allograft, t/arm/lg27T1081.66N/A25T314.58
15301Apply sknallograft t/a/l addl25T315.37N/A25T314.58
15320Apply skin allogrft f/n/hf/g25T315.372725T314.58
15321Apply sknallogrft f/n/hfg add25T315.372525T314.58
15340Apply cult skin substitute24T92.222725T314.58
15341Apply cult skin sub add-on24T92.222525T314.58
15360Apply cult derm sub, t/a/l24T92.222725T314.58
Start Printed Page 49558
15361Aply cult derm sub t/a/l/ add-on24T92.222525T314.58
15365Apply cult derm sub f/n/hf/g24T92.222725T314.58
15366Apply cult derm f/hf/g add24T92.222525T314.58
15420Apply skin xgraft, f/n/hf/g25T315.372725T314.58
15421Apply skn xgraft, f/n/hf/g add25T315.372525T314.58
15430Apply acellular xenograft25T315.372725T314.58
15431Apply acellular xgraft add25T315.372525T314.58

We reviewed the presentations to the APC Panel; the APC Panel's recommendations; the CPT code descriptors, introductory explanations, cross-references, and parenthetical notes; the clinical characteristic of the procedures; and the code-specific median costs for all related CPT codes available from our CY 2005 claims data. While we agree with the APC Panel that the codes currently placed in APC 0024 (Level I Skin Repair) should be assigned to an APC with a higher median cost for CY 2007, we disagree that these procedures should be placed in APC 0027 (Level IV Skin Repair). APC Panel presenters reasoned that some of the codes (CPTs 15170, 15175, 15320, 15340, 15360, 15365, 15420, and 15430) for the first increment of body surface area treated should be placed in APC 0027 because they are similar to CPT code 15300 (Allograft skin for temporary wound closure, trunk, arms, legs; first 100 sq cm or less, or one percent of body area of infants and children). Upon further review of the clinical and expected hospital resource characteristics of CPT code 15300, we believe that this procedure is not appropriately placed in APC 0027. Split-thickness and full thickness skin autograft procedures currently assigned to APC 0027 are likely to require greater hospital resources, including additional operating room time and special equipment, in comparison to application of a separately paid allograft skin product. Instead, for CY 2007 we are proposing to reassign CPT code 15300 to APC 0025 (Level II Skin Repair), with an APC median cost of $314.58. We agree, in principle, that other CPT codes for the first increment of body surface area treated with a skin replacement or skin substitute are similar clinically and from a hospital resource perspective to CPT code 15300 and are, therefore, proposing to assign these procedures to APC 0025 as well for CY 2007.

Similarly, presenters reasoned that the related add-on codes (CPTs 15171, 15176, 15321, 15342, 15361, 15366, 15421, and 15431) for procedures to treat additional body surface areas are similar to CPT code 15301 (Allograft skin for temporary wound closure, trunk, arms, legs; each additional 100 sq cm, or each additional one percent of body area of infants and children, or part thereof) in terms of required hospital resources. CPT code 15301 is assigned to APC 0025 for CY 2006. We are proposing to maintain the assignment of CPT code 15301 to APC 0025 for CY 2007 and to reassign the other add-on codes to this APC. Note that APC 0025 has a status indicator of “T,” so that the add-on codes will experience the standard OPPS multiple surgical procedure reduction when properly billed with the first body surface area treatment codes that are assigned to the same clinical APC. We believe that this reduction in payment for the procedural resources associated with the add-on services is appropriate.

2. Treatment of Fracture/Dislocation (APC 0046)

(If you choose to comment on issues in this section, please include the caption “Treatment of Fracture/Dislocation” at the beginning of your comment.)

APC 0046 is a large clinical APC to which many procedures related to the percutaneous or open treatment of fractures and dislocations are assigned for CY 2006. Most of the approximately 100 procedures in the APC are relatively low volume, with even fewer single bills available for ratesetting. The median costs of the significant procedures in this APC as configured for CY 2006 range from a low of about $1,415 to a high of about $3,893. We received comments to the CY 2006 proposed rule (70 FR 42674) requesting that we distinguish procedures containing “with or without external fixation” in their descriptors to provide greater payments when external fixation is used to treat fractures. The commenters explained that when external fixation devices are used, the costs of the procedures increase, and, therefore, the current APC placement significantly underpays those procedures in those instances. In the CY 2006 final rule with comment period (70 FR 68607), we declined to reassign procedures that could include external fixation at that time but we acknowledged that we had treated APC 0046 as an exception to the 2 times rule for several years. For CY 2006, we again treated APC 0046 as an exception to the 2 times rule, but noted we would ask the APC Panel to consider whether this APC could be reconfigured to improve its clinical and resource homogeneity.

At the March 2006 meeting of the APC Panel, we asked the Panel to consider a possible reconfiguration of APC 0046 based on partial year CY 2005 claims data. The reconfiguration would create three new APCs and would divide the codes in APC 0046 among them. The APC Panel recommended that CMS continue to evaluate the refinement of APC 0046 (Open/Percutaneous Treatment Fracture or Dislocation) into at least three APC levels, with consideration of a fourth level should data support this additional level. We are accepting the APC Panel's recommendation and are proposing for CY 2007 to split APC 0046 into three new APCs: APC 0062 (Level I Treatment Fracture/Dislocation); APC 0063 (Level II Treatment Fracture/Dislocation); and APC 0064 (Level III Treatment Fracture/Dislocation). To ensure clinical and resource homogeneity in the new APCs, their proposed configurations are based on the procedure code descriptors, clinical considerations specific to each procedure, and service-specific hospital resource utilization as shown in the claims data from CY 2005. Restructuring APC 0046 into these three new APCs eliminates 2 times rule violations in the Fracture/Dislocation series. Start Printed Page 49559

We are not currently proposing a fourth APC level in the Fracture/Dislocation series because we do not believe our claims data are sufficiently robust and consistent from year to year to support differential payment for another service level. One code, CPT 27615 (Radical resection of tumor (e.g., malignant neoplasm), soft tissue of leg or ankle area), is not clinically coherent with the other procedures in APC 0046, and we are proposing to reassign this procedure outside of the Fracture/Dislocation series to APC 0050 (Level II Musculoskeletal Procedures Except Hand and Foot) for CY 2007.

Start Printed Page 49560

Start Printed Page 49561

3. Electrophysiologic Recording/Mapping (APC 0087)

(If you choose to comment on issues in this section, please include the caption “Electrophysiologic Recording/Mapping” at the beginning of your comment.)

At its March 2006 meeting, the APC Panel heard testimony from a presenter who asked that the Panel recommend that CPT codes 93609 (intraventricular and/or intra-atrial mapping of tachycardia, add-on), 93613 (intracardiac electrophysiologic 3-D mapping), and 93631 (intra-operative epicardial & endocardial pacing and mapping to localize zone of slow conduction for surgical correction) be removed from APC 0087. The presenter asked the APC Panel to recommend that these codes be placed in APC 0086 for improved clinical and resource alignment. The presenter indicated that the median costs for these CPT codes were more than two times the median cost of the least costly HCPCS code in APC 0087 and, therefore, constituted a 2 times violation. The presenter also indicated that the median cost of APC 0087 had declined in recent years, and argued that the payment rate for APC 0087 was too low to adequately compensate providers for these services.

The APC Panel did not recommend that CMS move these codes from APC 0087 to APC 0086, but instead recommended that CMS maintain the three codes in APC 0087 for CY 2007. The APC Panel noted that, due to the low volume of these and other services assigned to APC 0087, under the CMS' rules there was no 2 times violation in APC 0087. Moreover, the APC Panel found that the services under discussion were cardiac electrophysiologic mapping services, like other procedures also assigned to APC 0087, and were, therefore, clinically coherent with other services in APC 0087. The APC Panel did not believe that these three cardiac electrophysiologic mapping procedures were similar clinically or from a resource perspective to the intracardiac catheter ablation procedures residing in APC 0086. We agree with the APC Panel's assessment and are accepting this APC Panel recommendation. Therefore, we are proposing that CPT codes 93609, 93613, and 93631 remain assigned to APC 0087 for CY 2007.

4. Insertion of Mesh or Other Prosthesis (APC 0154)

(If you choose to comment on issues in this section, please include the caption “Insertion of Mesh or Other Prosthesis” at the beginning of your comment.)

During the March 2006 APC Panel meeting, a presenter requested that we Start Printed Page 49562reassign CPT code 57267 (Insertion of mesh or other prosthesis for repair of pelvic floor defect, each site (anterior, posterior compartment), vaginal approach) to a more clinically and resource-appropriate APC than its CY 2006 assignment to APC 0154 (Hernia/Hydrocele Procedures). The presenter expressed concern that the procedure is currently assigned to an APC with a “T” status indicator and stated that payment would be more accurate if it were assigned to an APC that has an “S” status indicator. The mesh insertion procedure is a CPT add-on code and is, by definition, performed at the same time as certain other procedures and will, therefore, be discounted every time it is performed. The presenter objected to our assignment of CPT code 57267 to an APC that is subject to the multiple procedure discount because it is always a secondary procedure, and the discounted payment amount is not adequate to pay even for the cost of the implantable mesh. The presenter also believed that its assignment to an APC where hernia and hydrocele procedures were also assigned was clinically inappropriate.

The APC Panel recommended that CMS reassign CPT code 57267 to a more clinically and resource-appropriate APC.

In the CY 2005 claims data, the median cost for CPT code 57267 is $529.14, the lowest by far for procedures in APC 0154, which has an APC median cost of $1,821 for CY 2007. However, the median cost of CPT code 57267 is based on only 6 single claims of the total 1,038 submitted for the service. Because the procedure always is performed in addition to other related procedures, we expect that claims for this service will be multiple claims. Therefore, we are not confident that the procedure's median cost based upon the six single claims is accurate.

Therefore, in order to obtain more information about the cost of the procedure, we performed additional analyses of CY 2005 claims data in an attempt to specifically explore the cost of the mesh implant packaged into the payment for CPT code 57267. We believe that a significant portion of the procedural cost should be related to the cost of the mesh, based on information presented at the March 2006 APC Panel meeting. We looked at all claims that included charges for the HCPCS code for implantable mesh (C1781) and either CPT code 57267 or 49568 (Implantation of mesh or other prosthesis for incisional or ventral hernia repair). We examined the bills for CPT code 49568 in addition to those for CPT code 57267 because it is a high volume procedure that also uses implantable mesh, and we expected that the extra volume would improve our chances of identifying meaningful charge data.

We found 210 claims with charges reported for both CPT code 57267 and HCPCS code C1781 on the same day and 6,345 claims with reported charges for both CPT code 49568 and HCPCS code C1781 on the same day. Costs developed from these two claims subsets included the cost of the implanted mesh device that was used in performing the procedure. Table 13 below displays the median costs from those claims. The costs shown in the column titled “Line-item Median Cost” are those we obtained by looking at all CY 2005 OPPS claims on which charges for both the procedure code (either CPT code 57267 or 49568) and the code for the implantable mesh (HCPCS code C1781) were reported. The costs shown in the column titled “Single Claims Median Cost” are the median costs calculated using only single procedure claims for the specific procedure that also included the C-code for the mesh.

Our additional data analysis supports the APC Panel presenter's assertion that the cost of the mesh is greater than 50 percent of the total cost of CPT code 57267, but it also indicates that the mesh cost is far less than 50 percent of the payment amount for APC 0154. In CY 2006 the payment rate for APC 0154 is $1,704.59, and the payment when the multiple procedure discount is taken is $852.30, which is much greater than both the line-item median cost of the mesh and the median single claims cost of CPT code 57267 (which explicitly includes the implantable mesh) reflected in our claims data.

Table 13.—Median Costs of HCPCS Code C1781 and Associated Procedures

HCPCS codeShort descriptorLine-item median costSingle claims median costCY 2006 APC 0154 payment amount (T status)
57267Insert mesh/pelvic flr add-on$423.28$529.14$1,704.59
C1781 (billed with 57267)Mesh (implantable)383.35N/AN/A
49568Hernia repair w/mesh363.411,323.291,704.59
C1781 (billed with 49568)Mesh (implantable)242.20N/AN/A

We agree with the APC Panel that the procedure should be assigned to a more clinically appropriate APC, and therefore, we are proposing to accept its recommendation and reassign CPT code 57267 to APC 0195 (Level IX Female Reproductive Procedures), with status indicator “T” for CY 2007. The proposed median cost of APC 0195 is $1,777 for CY 2007, very comparable to the CY 2006 median cost of APC 0154, where CPT code 57267 is currently assigned. The median cost for the procedure remains very low in comparison with other procedures assigned to APC 0195, so that payment for the service when the multiple procedure reduction is applied should be appropriate. While not affecting the procedure's payment significantly, this reassignment improves the clinical homogeneity of APCs 0154 and 0195.

5. Percutaneous Renal Cryoablation (APC 0163)

(If you choose to comment on issues in this section, please include the caption “Percutaneous Renal Cryoablation” at the beginning of your comment.)

During the March 2006 APC Panel meeting, a presenter requested that we reassign CPT code 0135T (Ablation renal tumor(s), unilateral, percutaneous, cryotherapy) to APC 0423 (Level II Percutaneous Abdominal and Biliary Procedures). The presenter provided information about the costs of performing these procedures and compared the resource requirements for the procedures to those for CPT code 47382 (Ablation, one or more liver tumor(s), percutaneous, radiofrequency), which is currently assigned to APC 0423. The presenter proposed reassignment of CPT code 0135T to APC 0423 because that is where CPT code 47382 is assigned, and stated that the costs of the two procedures are very similar. Start Printed Page 49563

The APC Panel recommended that we assign CPT code 0135T to APC 0423 for CY 2007.

CPT code 0135T is new for CY 2006 and therefore, we have no claims data on which to base our APC assignment decision. The procedure currently has an interim assignment to APC 0163 (Level IV Cystourethroscopy and Other Genitourinary Procedures), with a CY 2006 payment amount of $1,999.35.

We are proposing to accept the APC Panel's recommendation to reassign CPT code 0135T to APC 0423 for CY 2007. We believe that assignment of CPT code 0135T to APC 0423 is clinically appropriate, and that the CY 2007 median cost of APC 0423 of $2,410 is reasonably close to our expectations regarding the resource requirements for the renal cryoablation procedure.

6. Keratoprosthesis (APC 0244)

(If you choose to comment on issues in this section, please include the caption “Keratophrosthesis” at the beginning of your comment.)

CPT code 65770 is a surgical procedure for implantation of a keratoprosthesis, an artificial cornea. The keratoprosthesis device that is required for the implantation is described by HCPCS code C1818 (Integrated keratoprosthesis), a device category that received transitional pass-through payment under the OPPS from July 2003 through December 2005. When the device came off pass-through status for CY 2006 and its costs were packaged into the implantation procedure, CPT code 65770 continued to be assigned to APC 0244 (Corneal Transplant), with a payment rate of about $2,275, despite an increase in the median cost of the implantation procedure of about $1,200 associated with the packaging of the device. There is no 2 times violation in APC 0244 for CY 2006.

At the March 2006 meeting of the APC Panel, following a presentation regarding the procedure to implant a keratoprosthesis that described the clinical and hospital resource characteristics of CPT code 65770, the Panel recommended moving CPT code 65770 to a more appropriate APC in order to make appropriate payment. We agree with the recommendation of the APC Panel. Claims data from CY 2005 demonstrate that the median cost for implantation of a keratoprosthesis of $3,127.51 remains significantly higher than the median costs of other procedures assigned to APC 0244, although there is no 2 times violation. In addition, CPT code 65770 contributes less than 1 percent of the single claims in the APC available for ratesetting, and it is likely to continue to be an uncommon procedure among Medicare beneficiaries, resulting in its persistent small contribution to the median cost of APC 0244. Therefore, for CY 2007 we are proposing to create a new APC 0293 (Level V Anterior Segment Eye Procedures) with a median cost of $3,127.51 and to move CPT code 65770 into that APC in order to more appropriately pay for the procedure and the related device.

7. Medication Therapy Management Services

(If you choose to comment on issues in this section, please include the caption “Medication Therapy Management Services” at the beginning of your comment.)

Following a presentation at its March 2006 meeting, the APC Panel made two recommendations regarding Category III CPT codes for pharmacist medication therapy management services that were new for CY 2006. These services include CPT codes 0115T (medication therapy management services provided by a pharmacist, individual, face-to-face with patient, initial 15 min., w/assessment and intervention if provided; initial encounter), 0116T (medication therapy management; subsequent encounter), and 0117T (medication therapy management; additional 15 min.). These codes were assigned status indicator “B” in the CY 2006 OPPS final rule with comment period, indicating that they are not recognized by the OPPS when submitted on an outpatient hospital Part B bill type, with comment indicator “NI” to identify them as subject to comment. The APC Panel recommended that we create a new APC, with a nominal payment, to which we would assign these codes; implement the assignment in July 2006, if possible, or otherwise in CY 2007; and provide guidance to hospitals on how and when these codes should be reported. We are not accepting the APC Panel's recommendations. Rather, we are proposing to continue to assign status indicator “B” to CPT codes 0115T, 0116T, and 0117T for CY 2007.

According to the AMA, the purpose of Category III CPT codes is to facilitate data collection on and assessment of new services and procedures. Medication therapy management services are not new services in the OPPS, as they have been provided to patients by hospitals in the past as components of a wide variety of services provided by hospitals, including clinic and emergency room visits, procedures, and diagnostic tests. As such, we believe their associated hospital resource costs are already incorporated into the OPPS payments for these other services that are based on historical hospital claims data. The three Category III CPT codes specifically describe medication therapy management services provided by a pharmacist. We have no need to distinguish medication therapy management services provided by a pharmacist in a hospital from medication therapy management services provided by other hospital staff, as the OPPS only makes payments for services provided incident to physicians' services. Hospitals providing medication therapy management services incident to physicians' services may choose a variety of staffing configurations to provide those services, taking into account other relevant factors such as State and local laws and hospital policies.

In general, we do not establish new clinical APCs for new codes and set payment rates for those APCs when we have no cost data for any services populating the APCs. New codes where we believe that there are no existing clinical APCs compatible with their expected clinical and hospital resource characteristics are often assigned to New Technology APCs until we have sufficient cost data to determine appropriate clinical APC assignments. However, these medication therapy management codes would not be eligible to map to New Technology APCs because they are not new services which are unrepresented in historical hospital claims data. As stated earlier, because we believe the costs of medication therapy management services are imbedded as a component within our claims data, we are confident that our claims data reflect the costs of pharmacist medication management services provided to hospital outpatients who are receiving hospital services.

8. Complex Interstitial Radiation Source Application (APC 0651)

(If you choose to comment on issues in this section, please include the caption “Complex Interstitial Radiation Source Application” at the beginning of your comment.)

APC 0651 (Complex Interstitial Radiation Source Application), contains only one code, CPT code 77778 (Complex interstitial application of brachytherapy sources). The coding, APC assignment, median cost, and resulting payment rate for CPT code 77778 have not been stable since the inception of the OPPS, and that instability has been a source of concern to hospitals that furnish the service and to specialty societies. The vast majority Start Printed Page 49564of claims for interstitial brachytherapy are for the treatment of patients with a diagnosis of prostate cancer. The historical coding, APC assignments, and payment rates for CPT code 77778 and the related service CPT code 55859 (Transperitoneal placement of needles or catheters into the prostate for application of brachytherapy sources), are shown in Table 14.

Table 14.—Historical Payment Rates for Complex Interstitial Application of Brachytherapy Sources

OPPS CYCombination APCCPT code 77778APC for 77778CPT code 55859APC for 55859Source
2000N/A$198.31APC 312$848.04APC 162Pass-through.
2001N/A205.495APC 312878.72APC 162Pass-through.
2002N/A6344.67APC 3122068.23APC 163Pass-through with pro rata reduction.
2003 (if prostate brachytherapy with iodine sources)G0261, APC 648, $5154.34N/AN/AN/AN/APackaged.
2003 (if prostate brachytherapy with palladium sources)G0256, APC 649, $5998.24N/AN/AN/AN/APackaged.
2003 (if not prostate brachytherapy, not including sources)N/A2853.58APC 6511479.60APC 163Separate payment based on scaled median cost per source.
2004N/A558.24APC 6511848.55APC 163Cost.
2005N/A1248.93APC 6512055.63APC 163Cost.
2006N/A666.21APC 6511993.35APC 163Cost.

We have frequently been told by the public that the instability in our payment rates for APC 0651 creates difficulty in planning and budgeting for hospitals. Moreover, we have been told that in this case reliance on single procedure claims results in use of only incorrectly coded claims for prostate brachytherapy because, for application to the prostate, which is estimated to be 85 percent of all occurrences of CPT code 77778, a correctly coded claim is a multiple procedure claim. Specifically, we are told that a correctly coded claim for prostate brachytherapy should include, for the same date of service, both CPT codes 55859 and 77778, brachytherapy sources reported with C-codes, and typically separately coded imaging and radiation therapy planning services. We are further advised that in the cases of complex interstitial brachytherapy where sources are placed in sites other than the prostate, the charges for both placing the needles or catheters and for applying the sources may be reported by CPT code 77778 alone because there are no other specific CPT codes for placement of needles or catheters in those sites. In other cases, the placement of needles or catheters may be reported with not otherwise classified codes specific to the treated body area.

At the March 2006 APC Panel meeting, presenters urged the Panel to recommend that CMS use only single procedure claims that contain charges for brachytherapy sources on the same claim with CPT code 77778 to set the median cost for APC 0651. Presenters also urged that CMS adopt a process for using multiple procedure claims to set the median for APC 0651 that would sum the costs on multiple procedure claims containing CPT codes 77778 and 55859 (and no other separately payable services not on the bypass list) and, excluding the costs of sources, split the resulting aggregate median cost on the multiple procedure claim according to a preestablished attribution ratio between CPT codes 77778 and 55859. Presenters also urged that we provide hospital education on correct coding of brachytherapy services and devices of brachytherapy required to perform brachytherapy procedures. They indicated that any claim for a brachytherapy service that did not also report a brachytherapy source should be considered to be incorrectly coded and thus not reflective of the hospital resources required for the interstitial source application procedure. They believed that these claims should be excluded from use in establishing the median cost for APC 0651. They believed that hospitals which report the brachytherapy sources on their claims are more likely to report complete charges for the associated brachytherapy procedure than hospitals that do not report the separately payable brachytherapy sources.

The APC Panel recommended that CMS reevaluate the proposed payment for brachytherapy services in APC 0651 for CY 2007. The APC Panel also recommended that CMS formally work with the Coalition for the Advancement of Brachytherapy, American Brachytherapy Society, and the American Society for Therapeutic Radiology and Oncology to evaluate the methodology for setting brachytherapy service payment rates in APC 0651.

In response to the APC Panel recommendations, we are explicitly analyzing the standard OPPS methodology that we used in determining our proposed payment rate for APC 0651 in this proposed rule in the context of alternative multiple bill methodologies. In addition, we note that we routinely accept requests from interested organizations to discuss their views about OPPS payment policy issues.

The organizations that the APC Panel asked us to work with have frequently brought their concerns to our attention through the rulemaking process and otherwise. We will consider the input of any individual or organization to the extent allowed by Federal law including the Administrative Procedure Act (APA) and the Federal Advisory Committee Act (FACA). We establish the OPPS rates through regulations. We are required to consider the timely comments of interested organizations, establish the payment policies for the forthcoming year, and respond to the timely comments of all public commenters in the final rule in which we establish the payments for the forthcoming year.

For this proposed rule, we developed a median cost for APC 0651 using single procedure claims using the general OPPS process, but we also looked at multiple procedure claims that contain the most common combinations of codes used with APC 0651. Our single procedure claims process results in using 1,123 claims to calculate a median cost of $1028.93 for APC 0651. We have added CPT code 76965, a CPT code for ultrasound guidance that commonly appears on claims for complex Start Printed Page 49565interstitial brachytherapy, to the bypass list for CY 2007 after close clinical review because we believe that it would typically have little associated packaging. We believe that this change, along with maintenance of CPT code 77290 for complex therapeutic radiology simulation-aided field setting on the bypass list, is responsible for the growth in single procedure claims from the 381 single bills on which the APC 0651 median cost was calculated for the CY 2006 OPPS final rule with comment period. However, only 6 of these 1,123 single and “pseudo” single claims also included brachytherapy sources used in complex interstitial brachytherapy source application, and the median cost for these 6 claims at $600.68 is significantly less than the median cost for all single claims. It is unclear why so many of these claims do not contain brachytherapy sources, which were separately paid at cost in CY 2005. Because we are proposing to pay separately for brachytherapy sources again for CY 2007, we see no reason to believe that these few claims for brachytherapy services that included sources, which also do not report CPT code 55859 for placement of needles or catheters into the prostate, are more correctly coded than those claims which do not separately report brachytherapy sources. We believe it is possible that hospitals billing CPT code 77778 and not the associated brachytherapy sources may have bundled their charges for the brachytherapy sources into their charge for CPT code 77778.

We also identified multiple procedure claims that contained both CPT codes 77778 and 55859 and also included any one or more of the following procedure codes, which have repeatedly appeared as common procedures that are reported on the same claim with CPT codes 55859 and 77778: 76000, 76965, or 77290. We then calculated median costs for interstitial prostate brachytherapy in two different ways: (1) Bypassing the line item charges for these three ancillary codes; and (2) packaging the costs of these three ancillary codes. We applied this methodology both (1) to all claims that met these criteria with and without sources and (2) to claims that met the criteria and also separately reported brachytherapy sources that would be expected to be reported with CPT code 77778. See Tables 15 and 16 below for the results of this investigation.

We found 10,571 multiple procedure claims with CPT codes 55859 and 77778 reported on the claim, including those both with and without separately reported sources. We found that 7,181 of the 10,571 claims contained any combination of the 3 ancillary codes (76000, 76965, or 77290). Table 15 shows the results of bypassing and packaging the line-item costs of the 3 ancillary procedures.

Table 15.—Multiple Procedure Claims Including CPT Codes 55859 and 77778

FrequencyMinimum costMaximum costMean costMedian cost
Ancillary Codes Packaged* 7180$828.46$11,202.81$3,326.50$3,062.99
Ancillary Codes Bypassed7181811.9511,203.813,300.163,030.01
* 1 lost to trimming.

We found 9,791 multiple procedure claims with CPT codes 55859 and 77778 reported on the claim that also included brachytherapy sources that would be used with CPT code 77778. We found that 6,748 of the 9,791 claims contained any combination of the 3 ancillary codes. Table 16 shows the results of bypassing and packaging the line-item costs of the 3 ancillary procedures.

Table 16.—Multiple Procedure Claims Including CPT Codes 55859 and 77778 and One or More Brachytherapy Sources

FrequencyMinimum costMaximum costMean costMedian cost
Ancillary Codes Packaged6748$890.56$10,224.17$3,240.13$3,026.62
Ancillary Codes Bypassed6748912.8110,307.373,215.752,992.60

The claims containing CPT codes 55859 and 77778 and any combination of the three identified ancillary codes have mean and median costs that are very close to one another, regardless of whether the hospital billed separately for the brachytherapy sources on the claim with the procedure codes. Moreover, most of the multiple procedure claims we identified contained sources. This leads us to conclude that the presence of sources on the claim does not make a significant difference in the median cost of the combined service.

Moreover, when we calculate the total median cost from single bills for the APCs for the two major procedures codes without regard to the separate payments that would be made for CPT codes 76000, 76965, and 77290, the sum of the CY 2007 proposed medians for APC 0651 and APC 0163 is $3,197.07, which is greater than the combination medians, even when the three ancillary services are packaged into the combination median. Under our proposed policies for CY 2007, hospitals would also be paid separately for brachytherapy sources, guidance services, and radiation therapy planning services that may be provided in support of services reported with CPT codes 55859 and 77778.

Therefore, we believe that the summed median cost for APC 0651 and APC 0163 results in an appropriate level of full payment for the dominant type of service provided under APC 0651, interstitial prostate brachytherapy. We are proposing to use the median cost of $1,028.93, as derived from all single bills for APC 0651 according to our standard OPPS methodology, to establish the median for that APC.

We recognize that prostate brachytherapy is not the sole use of CPT code 77778, although it is the predominant use. Costs attributable to the placement of needles and catheters and to the interstitial application of brachytherapy sources to sites other than the prostate may also be reported on claims whose data map to APC 0651. Start Printed Page 49566This clinically driven variability in the claims data is difficult to assess without adding additional levels of complexity to the issue by considering diagnoses in establishing payments rates. However, recognizing that a PPS is a system based on averages and, to the extent that claims for all types of complex interstitial brachytherapy source application are included in the body of claims used to set the median cost for APC 0651, we believe that the payment for these services is appropriate.

9. Single Allergy Tests (APC 0381)

(If you choose to comment on issues in this section, please include the caption “Allergy Testing” at the beginning of your comment.)

We are proposing to continue with our methodology of differentiating single allergy tests (“per test”) from multiple allergy tests (“per visit”) by assigning these services to two different APCs to provide accurate payments for these tests in CY 2007. Multiple allergy tests are assigned to APC 0370, with a median cost calculated based on the standard OPPS methodology. We provided billing guidance in CY 2006 in Transmittal 804 (issued on January 3, 2006) specifically clarifying that hospitals should report charges for the CPT codes that describe single allergy tests to reflect charges “per test” rather than “per visit” and should bill the appropriate number of units of these CPT codes to describe all of the tests provided. However, our CY 2005 claims data available for the CY 2007 proposed rule do not yet reflect the improved and more consistent hospital billing practices of “per test” “for single allergy tests. Some claims for single allergy tests still appear to provide charges that represent a “per visit” charge, rather than a “per test” charge. Therefore, consistent with our payment policy for CY 2006, we are proposing to calculate a “per unit” median cost for APC 0381, based upon 349 claims containing multiple units or multiple occurrences of a single CPT code, where packaging on the claims is allocated equally to each unit of the CPT code. Using this methodology, we are proposing a median cost of $13.29 for APC 0381 for CY 2007. We are hopeful that the better and more accurate hospital reporting and charging practices for these single allergy test CPT codes beginning in CY 2006 will allow us to calculate the median cost of APC 0381 using the standard OPPS process in future OPPS updates.

10. Hyperbaric Oxygen Therapy (APC 0659)

(If you choose to comment on issues in this section, please include the caption “Hyperbaric Oxygen Therapy” at the beginning of your comment.)

When hyperbaric oxygen therapy (HBOT) is prescribed for promoting the healing of chronic wounds, it typically is prescribed for 90 minutes and billed using multiple units of HBOT on a single line or multiple occurrences of HBOT on a claim. In addition to the therapeutic time spent at full hyperbaric oxygen pressure, treatment involves additional time for achieving full pressure (descent), providing air breaks to prevent neurological and other complications from occurring during the course of treatment, and returning the patient to atmospheric pressure (ascent). The OPPS recognizes HCPCS code C1300 (Hyperbaric oxygen under pressure, full body chamber, per 30 minute interval) for HBOT provided in the hospital outpatient setting.

In the CY 2005 final rule with comment period (69 FR 65758 through 65759), we finalized a “per unit” median cost calculation for HBOT using only claims with multiple units or multiple occurrences of HCPCS code C1300 because delivery of a typical HBOT service requires more than 30 minutes. We observed that claims with only a single occurrence of the code were anomalies, either because they reflected terminated sessions or because they were incorrectly coded with a single unit. In the same rule, we also established that HBOT would not generally be furnished with additional services that might be packaged under the standard OPPS APC median cost methodology. This enabled us to use claims with multiple units or multiple occurrences. Finally, we also used each hospital's overall cost-to-charge ratio (CCR) to estimate costs for HCPCS code C1300 from billed charges rather than the CCR for the respiratory therapy cost center. Comments on the CY 2005 proposed rule effectively demonstrated that hospitals report the costs and charges for HBOT in a wide variety of cost centers. We used this methodology to estimate payment for HBOT in CYs 2005 and 2006. For CY 2007, we are proposing to continue using the same methodology to estimate a “per unit” median cost for HCPCS code C1300. Using 50,311 claims with multiple units or multiple occurrences, we estimate a median cost of $98.36.

11. Myocardial Positron Emission Tomography (PET) Scans (APCs 0306, 0307)

(If you choose to comment on issues in this section, please include the caption “Myocardial PET Scans” at the beginning of your comment.)

From August 2000 to December 31, 2005, under the OPPS we assigned to one clinical APC all myocardial positron emission tomography (PET) scan procedures, which were reported with multiple G-codes through March 31, 2005. Effective April 1, 2005, myocardial PET scans were reported with three CPT codes, specifically CPT codes 78459, 78491, and 78492, under the OPPS. Public comments to the CY 2006 OPPS proposed rule suggested that the HCPCS codes describing multiple myocardial PET scans should be assigned to a separate APC from single study codes because their hospital resource costs are significantly higher than single scans. Review of the CY 2004 claims data for myocardial PET scans revealed a median cost of $2,482 for the 9 G-codes that describe multiple myocardial PET scans, based upon 978 single claims of 2,001 total claims for multiple scan procedures. The CY 2004 claims data showed a median cost of $800 for the 6 G-codes describing single PET studies, based on 391 single claims of 575 total claims. A review of CY 2003 claims data showed a similar pattern of significantly higher hospital costs for multiple myocardial PET studies in comparison with single studies, although there were fewer claims for the procedures in CY 2003 in comparison with CY 2004. In response to the comments received and based on this claims information, myocardial PET services were assigned to two clinical APCs for the CY 2006 OPPS. HCPCS codes for single scans were assigned to APC 0306 with a payment rate of $800.55, and HCPCS codes for the multiple scan procedures were assigned to APC 0307 with a payment rate of $2,484.88.

Analysis of the latest CY 2005 claims data for myocardial PET scans reveals that the APC median costs for the single and multiple myocardial PET codes are $836 and $680 respectively, based on 296 single claims for single studies and 1,150 single claims for multiple scan procedures. Despite more CY 2005 single claims for multiple scan procedures, the median cost of these procedures declined significantly from CY 2004 to CY 2005, dropping below the median cost of single studies. As indicated earlier, there was a significant coding change for myocardial PET services in CY 2005, with the reporting Start Printed Page 49567of a single CPT code for multiple studies (CPT code 78492) for most of CY 2005, in comparison with nine G-codes in CY 2004. We examined the single bills for multiple scan procedures from CY 2004 and noted 17 hospitals were represented, with the majority of those claims from a single hospital. In contrast, in the CY 2005 claims, 25 hospitals were represented in the single bills for multiple scan procedures, and no single hospital contributed a majority of claims to the median cost calculation. We also examined differences in charges associated with G-codes versus the CPT code to determine if hospitals had adjusted the charge for the CPT code to reflect the termination of the multiple study G-codes. However, the individual charging practices of hospitals did not appear to vary with the use of a G-code versus the CPT code in either the CY 2004 or the CY 2005 claims. Greater volume of claims and consistent charging for both the G-codes and CPT code by hospitals suggest that the median appropriately captures the greater variability in relative hospital costs for multiple myocardial PET studies in the CY 2005 claims data.

Based on our claims data, the use of myocardial PET scan technology has become more widely prevalent in hospitals, and as a result, we now have more data to support our proposed payment rates. We believe that the median costs from our CY 2005 claims data for myocardial PET scan services, calculated based upon our standard OPPS methodology and based on almost 1,500 single claims, for both the single and multiple scans, should be reflective of the hospital resources required to provide the services to Medicare beneficiaries in the outpatient hospital setting. Based on these data, the differential median costs of the single and multiple study procedures do not support the present two-level APC payment structure. Although we acknowledge that some people may believe that multiple scan procedures should require increased resources at some hospitals in comparison with single scans, particularly because of the longer scan times required for multiple studies, our data do not support a resource differential that would necessitate the placement of these single and multiple scan procedures into two separate APCs. As myocardial PET scans are being provided more frequently at a greater number of hospitals than in the past, it is possible that most hospitals performing multiple PET scans are particularly efficient in their delivery of higher volumes of these services and, therefore, incur hospital costs that are similar to those of single scans, which are provided less commonly.

When all myocardial PET scan procedure codes are combined into a single clinical APC, as they were prior to CY 2006, the APC median cost for myocardial PET services is about $721, very similar to the $703 median cost of their single CY 2005 clinical APC. Therefore, for CY 2007, we are proposing to assign CPT codes 78459, 78491, and 78492 to a single APC, specifically, APC 0307 titled Myocardial Positron Emission Tomography (PET) Imaging, with a proposed median cost of $721. We believe that the assignment of these three CPT codes to APC 0307 is appropriate as the CY 2005 claims data reveal that more hospitals are providing multiple myocardial PET scan services, most myocardial PET scans are multiple studies, and the hospital resource costs of single and multiple studies are similar. We believe that the proposed median cost appropriately reflects the hospital resources associated with providing myocardial PET scans to Medicare beneficiaries in cost-efficient settings. Further, we believe that the proposed rates are adequate to ensure appropriate access to these services for Medicare beneficiaries. We are seeking comments on our proposal to provide a single payment rate for all myocardial PET scans in CY 2007. The myocardial PET scan CPT codes and their CY 2007 proposed APC assignments are displayed in Table 17.

Table 17.—Proposed CY 2007 APC Assignment for Myocardial PET

HCPCS codeShort descriptorCY 2006 SICY 2006 APCCY 2006 payment rateProposed CY 2007 SIProposed CY 2007 APCProposed CY 2007 APC median cost
78459Heart muscle imaging (PET)S0306$800.55S0307$721.26
78491Heart image (PET), singleS0306800.55S0307721.26
78492Heart image (PET), multipleS03072,484.88S0307721.26

12. Radiology Procedures (APCs 0333, 0662, and Other Imaging APCs)

(If you choose to comment on issues in this section, please include the caption “Radiology Procedures” at the beginning of your comment.)

At its March 2006 meeting, the APC Panel made three recommendations regarding radiology services. These include the following:

  • Reaffirming the CY 2005 recommendation that CMS postpone implementation of the multiple procedure reduction policy for imaging services as included in the CY 2006 OPPS proposed rule for CY 2007, to allow CMS to gather more data on the efficiencies associated with multiple imaging procedures that may already be reflected in OPPS payment rates for imaging services.
  • Recommending that CMS review payment rates for computed tomography (CT) and computed tomographic angiography (CTA) procedures to ensure that their payment rates are comparatively consistent and that they accurately reflect resource use.
  • Recommending that CMS invite comments on ways that hospitals can uniformly and consistently report charges and costs related to radiology services.

In the CY 2006 OPPS final rule with comment period (70 FR 68707), we indicated that based on the APC Panel's recommendations and public comments received, we decided not to finalize our CY 2006 proposal to reduce OPPS payments for some second and subsequent diagnostic imaging procedures performed in the same session. Our analyses did not disprove the commenters' contentions that there are efficiencies already reflected in their hospital costs, and, therefore, their CCRs and the median costs for the procedures. Over the past 7 months, we have conducted additional studies of our hospital claims data for single and multiple diagnostic imaging procedures, and our analyses to date support continued deferral for CY 2007 of implementation of a multiple imaging procedure payment reduction policy in the OPPS. Therefore, we are accepting the APC Panel's recommendation to not adopt such a policy for CY 2007 pending the results of further analyses. Depending upon the findings from such studies, in a future rulemaking we may propose revisions to the structure of our Start Printed Page 49568rates to further refine these rates in the context of additional study findings.

We also are accepting the APC Panel's recommendation to review the CY 2007 proposed payment rates for CT and CTA procedures to ensure that their rates are comparatively consistent and accurately reflective of hospitals' resource costs. Presenters at the March 2006 APC Panel meeting indicated to the Panel that hospital resources for CTA procedures are similar to those for CT procedures that include scans without contrast followed by scans with contrast, but additional resources are required for the 3-dimensional reconstruction that is part of the CTA procedures. As a result of this image postprocessing, CTA scans display the vasculature in a 3-dimensional format rather than in the 2-dimensional cross-sectional images of conventional CT scans. Based upon CY 2005 claims data, the CY 2007 proposed median cost for APC 0333 for CT procedures that include scans without contrast material, followed by contrast scans to complete the studies is $309, and the CY 2007 proposed median cost for APC 0662 for CTA procedures is $304. As has been the case for the past several years, the median costs associated with these two APCs are virtually identical to one another and are also quite consistent with their historical costs from prior years of claims data. The CY 2007 proposed median costs for APCs 0333 and 0662 are based on about 500,000 and 150,000 single claims, respectively. The stability of these APC median costs, based on large numbers of single claims, is consistent with our belief that the median costs of these APCs accurately reflect hospitals' resource use. From CY 2004 to CY 2005 the number of CTA procedures performed in the outpatient department increased by 50 percent, whereas the number of CT procedures that included a scan without contrast followed by a scan with contrast to complete each full study increased by only about 1 percent. The large annual increases in the OPPS frequencies of CTA procedures through CY 2005 provide no evidence that Medicare beneficiaries are experiencing difficulty accessing these services in the hospital outpatient setting. CTA procedures are being more commonly performed for various clinical indications, likely resulting in more consistent and efficient use of the associated image postprocessing technology. Accordingly, it is not surprising that the hospital costs of typical CTA procedures in contemporary medical practice are very similar to the hospital costs of the more involved and resource-intensive complex CT services that, like CTA procedures, include scans without contrast material, followed by scans with contrast. Thus, we believe that our CY 2007 proposed payment rates for CT and CTA procedures are generally consistent with one another and accurately reflective of hospitals' resource costs.

With respect to the APC Panel's recommendation regarding the reporting of costs and charges for radiology services, CMS requires hospitals to report their costs and charges through the cost report with sufficient specificity to support CMS' use of cost report data for monitoring and payment. Within generally accepted principles of cost accounting, we allow providers flexibility to accommodate the unique attributes of each institution's accounting systems. For example, providers must match the generally intended meaning of the line-item cost centers, both standard and nonstandard, to the unique configuration of department and service categories used by each hospital's accounting system. Also, while the cost report provides recommended bases of allocation for the general services cost centers, a provider is permitted, within specified guidelines, to use an alternative basis for a general service cost if it can justify to its fiscal intermediary that the alternative is more accurate than the recommended basis. This approach creates internal consistency between a hospital's accounting system and the cost report, but cannot guarantee the precise comparability of costs and charges for individual cost centers across institutions.

However, we believe that achieving greater uniformity by, for example, specifying the exact components of individual cost centers, would be very burdensome for hospitals and auditors. Hospitals would need to tailor their internal accounting systems to reflect a national definition of a cost center. It is not clear that the marginal improvement in precision created by such a requirement would justify the additional administrative burden. The current hospital practice of matching costs to the general intended meaning of a cost center ensures that most services in the cost center will be comparable across providers, even if the precise composition of a cost center among hospitals differs. Further, every hospital provides a different mix of services. Even if CMS specified the components of each cost center, costs and charges on the cost report would continue to reflect each individual hospital's mix of services. At the same time, internal consistency is very important to the OPPS. Costs are estimated on claims by matching cost-to-charge ratios for a given hospital to their own claims data through a cost center-to-revenue code crosswalk. OPPS relative weights are based on the median cost for all services in an APC. The components resulting in CCRs for a given revenue code would have to be dramatically different for the providers contributing the majority of claims used to calculate an APC's median cost in order to impact relative weights.

We are accepting the APC Panel's recommendation and specifically inviting comments on ways that hospitals can uniformly and consistently report charges and costs related to all cost centers, not just radiology, that also acknowledge the ubiquitous tradeoff between greater precision in developing CCRs and administrative burden associated with reduced flexibility in hospital accounting practices.

IV. Proposed OPPS Payment Changes for Devices

A. Proposed Treatment of Device-Dependent APCs

(If you choose to comment on issues in this section, please include the caption “Device-Dependent APCs” at the beginning of your comment.)

1. Background

Device-dependent APCs are populated by HCPCS codes that usually, but not always, require that a device be implanted or used to perform the procedure. For the CY 2002 OPPS, we used external data, in part, to establish the device-dependent APC medians used for weight setting. At that time, many devices were eligible for pass-through payment. For the CY 2002 OPPS, we estimated that the total amount of pass-through payments would far exceed the limit imposed by statute. To reduce the amount of a pro rata adjustment to all pass-through items, we packaged 75 percent of the cost of the devices, using external data furnished by commenters on the August 24, 2001 proposed rule and information furnished on applications for pass-through payment, into the median costs for the device-dependent APCs associated with these pass-through devices. The remaining 25 percent of the cost was considered to be pass-through payment.

In the CY 2003 OPPS, we determined APC medians for device-dependent APCs using a three-pronged approach. First, we used only claims with device codes on the claim to set the medians for these APCs. Second, we used Start Printed Page 49569external data, in part, to set the medians for selected device-dependent APCs by blending that external data with claims data to establish the APC medians. Finally, we also adjusted the median for any APC (whether device-dependent or not) that declined more than 15 percent. In addition, in the CY 2003 OPPS we deleted the device codes (“C” codes) from the HCPCS file in the belief that hospitals would include the charges for the devices on their claims, notwithstanding the absence of specific codes for devices used.

In the CY 2004 OPPS, we used only claims containing device codes to set the medians for device-dependent APCs and again used external data in a 50/50 blend with claims data to adjust medians for a few device-dependent codes when it appeared that the adjustments were important to ensure access to care. However, hospital device code reporting was optional.

In the CY 2005 OPPS, which was based on CY 2003 claims data, there were no device codes on the claims and, therefore, we could not use device-coded claims in median calculations as a proxy for completeness of the coding and charges on the claims. For the CY 2005 OPPS, we adjusted device-dependent APC medians for those device-dependent APCs for which the CY 2005 OPPS payment median was less than 95 percent of the CY 2004 OPPS payment median. In these cases, the CY 2005 OPPS payment median was adjusted to 95 percent of the CY 2004 OPPS payment median. We also reinstated the device codes and made the use of the device codes mandatory where an appropriate code exists to describe a device utilized in a procedure. We also implemented HCPCS code edits to facilitate complete reporting of the charges for the devices used in the procedures assigned to the device-dependent APCs.

In the CY 2006 OPPS, which was based on CY 2004 claims data, we set the median costs for device-dependent APCs for CY 2006 at the highest of: (1) The median cost of all single bills; (2) the median cost calculated using only claims that contained pertinent device codes and for which the device cost is greater than $1; or (3) 90 percent of the payment median that was used to set the CY 2005 payment rates. We set 90 percent of the CY 2005 payment median as a floor rather than 85 percent as proposed, in consideration of public comments that stated that a 15-percent reduction from the CY 2005 payment median was too large of a transitional step. We noted in our CY 2006 proposed rule that we viewed our proposed 85-percent payment adjustment as a transitional step from the adjusted medians of past years to the use of unadjusted medians based solely on hospital claims data with device codes in future years (70 FR 42714). We also incorporated, as part of our CY 2006 methodology, the recommendation to base payment on medians that were calculated using only claims that passed the device edits. As stated in the CY 2006 OPPS final rule with comment period (70 FR 68620), we believed that this policy provided a reasonable transition to full use of claims data in CY 2007, which would include device coding and device editing, while better moderating the amount of decline from the CY 2005 OPPS payment rates.

2. Proposed CY 2007 Payment Policy

For CY 2007, we are proposing to base the device-dependent APC medians on CY 2005 claims, the most current data available. As stated earlier, in CY 2005 we reinstated the use of device codes and made the reporting of device codes mandatory where an appropriate code exists to describe a device utilized. In CY 2005, we also implemented HCPCS code edits to facilitate complete reporting of the charges for the devices used in the procedures assigned to the device-dependent APCs. We implemented the first set of device edits on April 1, 2005, for those APCs for which the CY 2005 payment rate was based on an adjusted median cost. We continued to take public comment on the remaining device edits after April 1, 2005, and implemented device edits for the remaining device-dependent APCs on October 1, 2005. Subsequent to the implementation of the device edits, we received public comments that caused us to remove the requirement for edits for several APCs on the basis that the services in them do not always require the use of a device or there may be no suitable device codes available for reporting all devices that may be used to perform the procedures.

For example, we removed the requirement for device codes for APC 0080 (Diagnostic Cardiac Catheterization) based on the information provided by hospitals that the codes assigned to this APC do not always require a device for which there is an appropriate HCPCS code. Therefore, we no longer consider this APC to be device dependent and have removed it from the list of device-dependent APCs. In the case of some procedures assigned to other device-dependent APCs, where we determined that no device was required to provide a particular service or where there were no HCPCS codes that described all devices that could be used to furnish the service, we removed the requirement for a device code for the individual procedure code but retained the device requirement for other procedure codes assigned to that device-dependent APC.

In its February 2005 meeting, the APC Panel recommended that we consider calculating the median costs for APCs 0107 (Insertion of Cardioverter Defibrillator) and 0108 (Insertion/Replacement/Repair of Cardioverter-Defibrillator Leads) by bypassing the line-item costs of CPT code 33241 (Subcutaneous removal of single or dual chamber pacing cardioverter-defibrillator pulse generator) and packaging the line item-costs of CPT codes 93640 (Electrophysiological evaluation of single or dual chamber pacing cardioverter-defibrillator leads including defibrillation threshold evaluation (induction of arrhythmia, evaluation of sensing and pacing for arrhythmia termination) at time of initial implantation or replacement) and 93641 (Electrophysiological evaluation of single or dual chamber pacing cardioverter-defibrillator leads including defibrillation threshold evaluation (induction of arrhythmia, evaluation of sensing and pacing for arrhythmia termination) at time of initial implantation or replacement; with testing of single or dual chamber pacing cardioverter-defibrillator) when these codes, separately or in combination, are reported on the same claim with HCPCS codes G0297 (Insertion of single chamber pacing cardioverter defibrillator pulse generator), G0298 (Insertion of dual chamber pacing cardioverter defibrillator pulse generator), G0299 (Insertion or repositioning of electrode lead for single chamber pacing cardioverter defibrillator and insertion of pulse generator) and G0300 (Insertion or repositioning of electrode lead(s) for dual chamber pacing cardioverter defibrillator and insertion of pulse generator), which are assigned to APCs 0107 and 0108. The APC Panel recommended bypassing the line-item costs for CPT code 33241 because members believed that when a pacing cardioverter-defibrillator (ICD) pulse generator removal is performed in the same operative session as the insertion of a new pulse generator described by a procedure code assigned to APC 0107 or 0108, the packaging on the claim is appropriately assigned to the procedure code in APC 0107 or 0108. Moreover, CPT codes 93640 and 93641 may only be correctly coded when the electrophysiologic evaluation of ICD leads is performed at the time of initial implantation or replacement of an ICD Start Printed Page 49570pulse generator and/or leads, with or without testing of the pulse generator. Thus, the APC Panel expected that the costs of the evaluations of the ICD leads (CPT codes 93640 and 93641) could be appropriately packaged with the procedure codes that describe the insertion of ICD generators, which are assigned to APCs 0107 and 0108, or the insertion of ICD leads assigned to APCs 0106 (Insertion/Replacement/Repair of Pacemaker and/or Electrodes), 0108, and 0418 (Insertion of Left Ventricular Pacing Elect). Because APCs 0107 and 0108 have typically had very few single bills on which the medians have been based, and because the APC Panel indicated that it believed that we could use many more claims if we bypassed CPT code 33241 and packaged CPT codes 93640 and 93641, we calculated median costs for APCs 0107 and 0108 using these rules. We excluded claims that did not meet the device edits, and we also excluded token claims.

The effect of packaging CPT codes 93640 and 93641 into claims that both pass the device edits and also contain no token charges for devices are shown in Table 19 below. This affected APCs 0106, 0107, 0108, and 0418. Bypassing the line-item cost of CPT code 33241 could not be done for all claims on which this CPT code was reported because there are clinical circumstances in which the ICD pulse generator is removed and no new device is implanted. Therefore, the APC assignment for CPT code 33241 and the payment for that code need to reflect the packaging associated with the procedure when it is performed alone. Because of this problem with assigning packaging in all the circumstances in which the procedure may be reported, we decided against proposing to bypass CPT code 33241, either in general for all procedures or selectively, when it is reported with the procedures in APCs 0107 and 0108.

However, CPT codes 93640 and 93641 are always performed during an operative procedure for ICD initial implantation or replacement or with implantation, revision or replacement of leads, and, therefore, it would be appropriate to package them into the surgical procedure with which they are performed. Moreover, as a result of the descriptors of the lead evaluation CPT codes, they should never be billed as single procedure claims and packaging them would also resolve the problem of setting their payment rates in part on the basis of claims that reflect erroneous coding. Packaging the costs of the intraoperative electrophysiologic testing of the ICD leads yields many more single bills on which to set median costs and also increases the median costs for APCs 0106, 0107, 0108, and 0418. Therefore, we are proposing to package CPT codes 93640 and 93641 for CY 2007.

We calculated the median cost for device-dependent APCs using two different sets of claims. We first calculated a median cost using all single procedure claims for the procedure codes in those APCs. We also calculated a second median cost using only claims that contain allowed device codes and also for which charges for all device codes were in excess of $1.00 (nontoken charge device claims). We excluded claims for which the charge for a device was less than $1.01, in part, to recognize hospital charging practices due to a recall of cardioverter defibrillator and pacemaker pulse generators in CY 2005 for which the manufacturers provided replacement devices without cost to the beneficiary or hospital. We also found that there are other devices for which the charge was less than $1.01, and we removed those claims also.

As expected, the median costs calculated using all single procedure bills, including both bills that lack appropriate device codes (where there are edits) and bills with token charges for devices, are, in many cases, less than the medians calculated using only claims that contain appropriate device codes and that have no token charges for devices. In some cases the medians are significantly different when claims either without device codes or which have only token device charges are removed. We believe that the claims that reflect the best estimated costs for these APCs, including the costs of the devices, are those claims that contain appropriate devices and which also have no token charges for devices. (See section IV.A.4. below for our discussion of payments when the hospital incurs no cost for the principal device required for the service.)

When we compare the proposed median costs calculated using only CY 2005 claims that contain correct device codes and which do not contain token charges for devices to the unadjusted median costs that were derived from CY 2004 claims data, we find that the medians for only 2 APCs decline (6.3 percent for APC 0061 (Laminectomy or Incision for Implantation of Neurostimulator Electrodes, Excluding Cranial Nerve) and 2.78 percent for APC 0115 (Cannula/Access Device Procedures)). When we compared the proposed CY 2007 medians to the adjusted medians used to set the payment rates for CY 2006, only 6 APCs would decline more than 10 percent in median cost. This compares favorably to the data for the CY 2006 OPPS final rule with comment period in which 12 APCs declined more than 10 percent when the unadjusted median cost from the data for the CY 2006 OPPS final rule with comment period were compared to the adjusted median cost on which the CY 2005 OPPS payments were based. Some APC cost variation from year to year, whether increasing or decreasing, is to be expected.

Therefore, we are proposing to base the payment rates for CY 2007 for these device-dependent APCs on median costs calculated using claims with appropriate device codes and which have no token charges for devices reported on the claim. We do not believe that adjustment of these median costs is necessary to provide adequate payment for these services, and, therefore, we are not proposing to adjust the median costs for these APCs to moderate any decreases in medians from CY 2006 to CY 2007. We recognize that, notwithstanding the device edits, it may continue to be necessary for purposes of median cost calculations to remove claims that do not contain devices because it is likely that there would be incidental occurrences of interrupted procedures in which a device is not used and does not appear on the claim. (The interrupted procedure modifier nullifies the device edit.) Moreover, there are likely to continue to be incidental occurrences of token charges for devices as a result of devices that are replaced without cost by the manufacturer. However, each of these circumstances could cause the procedure code median cost to underrepresent the cost of the complete procedure, including the device cost, where the hospital purchases the device.

Hence, we believe that use of claims that meet the device edits and which do not contain token charges for devices are the appropriate claims to use to set the median costs for the device-dependent APCs, ensuring that the costs of the principal devices are included in the APC medians. In addition, we believe that, with our proposed changes to the OPPS packaging status of two codes for electrophysiologic evaluation of ICD leads, no special payment policies are needed to establish payment rates that correctly reflect the relative costs of these procedures to other procedures paid under the OPPS.

Start Printed Page 49571

Start Printed Page 49572

Start Printed Page 49573

Table 19.—Effect of Packaging CPT Codes 93640 and 93641 on All Single Bills

APCSIAPC group titlePost cost total frequencyProposed CY 2007 single bill frequency 93640/93641 not packagedProposed CY 2007 single bill median 93640/93641 not packagedProposed CY 2007 single bill frequency 93640/93641 packagedProposed CY 2007 single bill median 93640/93641 packaged
0106TInsertion/Replacement/Repair of Pacemaker and/or Electrodes3819457$2,459.08494$2,549.70
0107TInsertion of Cardioverter-Defibrillator162764819,669.3288611,215.82
0108TInsertion/Replacement/Repair of Cardioverter-Defibrillator Leads907592918,030.96295022,362.68
0418TInsertion of Left Ventricular Pacing Elect48241425,098.032259,696.51

3. Devices Billed in the Absence of an Appropriate Procedure Code

In the course of examining claims data for creation of the payment rates for this proposed rule, we identified circumstances in which hospitals billed a device code but failed to also bill any procedure code with which the device could be used correctly. These errors in billing lead to the costs of the device being packaged with an incorrect procedure code and also cause the hospital to be paid incorrectly for the service furnished if the device was appropriately reported. We discussed the billing of devices with incorrect procedure codes with the APC Panel at its March 2006 meeting, and the APC Panel recommended that we explore the extent to which it would be appropriate to establish edits for HCPCS device codes to ensure that hospitals also bill procedures in which the devices would be used on the same claim.

We examined our CY 2005 claims data and found that incorrect billing occurs more often with some devices than with others. We are taking this opportunity to inform the public that we expect to implement device to procedure code edits for the specified devices and their associated procedures, which we believe must be reported on a claim with the specified device for the claim to be correctly coded and the device costs properly attributed to procedures with which they are used. The devices for which we expect to implement edits are shown below in Table 20 and are posted on the CMS outpatient hospital Web site, along with our initial draft of all the procedures with which they could be appropriately used and thus reported. We believe the establishment of claims edits reflects merely operational and administrative practice. However, as the public may assist in establishing appropriate edits, we, therefore, are asking that comments regarding the specific associations of device codes and procedure codes be provided to the following e-mail address: OutpatientPPS@cms.hhs.gov. This is the same e-mail address to which comments on the existing procedure to device edits should be directed.

Comments submitted on this issue to this mail box are not comments on this proposed rule and we will not respond to them in the CY 2007 OPPS final rule.

Table 20.—Devices Which Must Be Billed With Associated Procedure Codes

DeviceDescription
C1721AICD, dual chamber.
C1722AICD, single chamber.
C1767Generator, neuro non-recharg.
C1777Lead, AICD, endo single coil.
C1778Lead, neurostimulator.
Start Printed Page 49574
C1779Lead, pmkr, transvenous VDD.
C1785Pmkr, dual, rate-resp.
C1786Pmkr, single, rate-resp.
C1820Generator, neuro rechg bat sys.
C1882AICD, other than sing/dual.
C1895Lead, AICD, endo dual coil.
C1896Lead, AICD, non sing/dual.
C1897Lead, neurostim test kit.
C1898Lead, pmkr, other than trans.
C1899Lead, pmkr/AICD combination.
C1900Lead, coronary venous.
C2619Pmkr, dual, non rate-resp.
C2620Pmkr, single, non rate-resp.
C2621Pmkr, other than sing/dual.

4. Proposed Payment Policy When Devices are Replaced Without Cost or Where Credit for a Replaced Device Is Furnished to the Hospital

As we discuss above in the context of the calculation of median costs for ICDs and pacemakers, in recent years there have been several field actions and recalls with regard to failure of these devices. In many of these cases, the manufacturers have offered replacement devices without cost to the hospital or credit for the device being replaced if the patient required a more expensive device. In some circumstances manufacturers have also offered, through a warranty package, to pay specified amounts for unreimbursed expenses to persons who had replacement devices implanted. In addition, we believe that incidental device failures that are covered by manufacturer warranties occur routinely. While we understand that some device malfunctions may be inevitable as medical technology grows increasingly sophisticated, we believe that early recognition of problems would reduce the number of people with the potential to be adversely affected by these device problems. The medical community needs heightened and early awareness of patterns of device failures, voluntary field actions, and recalls so that they can take appropriate action to care for our beneficiaries. Systematic efforts must be undertaken by all interested and involved parties, including manufacturers, insurers, and the medical community, to ensure that device problems are recognized and addressed as early as possible so that people's health is protected and high quality medical care is provided. We are taking several steps to assist in the early recognition and analysis of patterns of device problems to minimize the potential for harmful device-related effects on the health of Medicare beneficiaries and the public in general.

In recent years, CMS has recognized the importance of data collection as a condition of Medicare coverage for selected services. In 2005, CMS issued a National Coverage Determination (NCD) that expanded coverage of ICDs and required registry participation when the devices were implanted for certain clinical indications. The NCD included this requirement in order to ensure that the care received by Medicare beneficiaries was reasonable and necessary and, therefore, appropriately reimbursed. Presently, the American College of Cardiology—National Cardiovascular Data Registry (ACC—NCDR) collects these data and maintains the registry.

In addition to ensuring appropriate payment of claims, collection, and ongoing analysis of ICD implantation, data can speed public health action in the event of future device recalls. The systematic recording of device manufacturer and model number can enhance patient and provider notification. Analysis of registry data may uncover patterns in complication rates (for example, device malfunction, device-related infection, and early battery depletion) associated with particular devices that signify the need for a more specific investigation. Patterns found in registry data may identify problems earlier than the currently available mechanisms, which do not systematically collect such detailed information surrounding procedures.

We encourage the medical community to work to develop additional registries for implantable devices, so that timely and comprehensive information is available regarding devices, recipients of those devices, and their health status and outcomes. While participation in an ICD registry is required as a condition of coverage for ICD implantation for certain clinical conditions, we believe that the potential benefits of registries extend well beyond their application in Medicare's specific national coverage determinations. As medical technology continues to swiftly advance, data collection regarding the short and long term outcomes of new technologies, and especially concerning implanted devices that may remain in the bodies of patients for their lifetimes, will be essential to the timely recognition of specific problems and patterns of complications. This information will facilitate early interventions to mitigate harm and improve the quality and efficiency of health care services.

Moreover, data from registries may help further the development of high quality, evidence-based clinical practice guidelines for the care of patients who may receive device-intensive procedures. In turn, widespread use of evidence-based guidelines may reduce variation in medical practice, leading to improved personal and public health. Registry information may also contribute to the development of more comprehensive and refined quality metrics that may be used to systematically assess and then improve the safety and quality of health care. Such improvements in the quality of care that result in better personal health will require the sustained commitment of industry, payers, health care providers, and others towards that goal, along with excellent and open communication and rapid system-wide responses in a comprehensive effort to protect and enhance the health of the public. We look forward to further discussions with the public about new strategies to recognize device problems early and how to definitively address them, in order to minimize both the harmful health effects and increased health care costs that may result.

In addition, we believe that the routine identification of Medicare claims where hospitals identify and then appropriately report selected services performed under the OPPS when devices are replaced without cost to the hospital or with full credit to the hospital for the cost of the replaced device, should provide comprehensive information regarding the outpatient hospital experiences of Medicare beneficiaries with certain devices that are being replaced. Because Medicare beneficiaries are common recipients of implanted devices, this claims information may be particularly helpful in identifying patterns of device problems early in their natural history so that appropriate strategies to reduce future problems may be developed.

In addition to our concern for the public health, we also have a fiduciary responsibility to the Medicare trust fund to ensure that Medicare pays only for covered services. Therefore, we are proposing, effective for services furnished on or after January 1, 2007, to reduce the APC payment and beneficiary copayment for selected APCs in cases in which an implanted Start Printed Page 49575device is replaced without cost to the hospital or with full credit for the removed device. Specifically, we are proposing to revise the existing regulations by adding new § 419.45, Payment and copayment reduction for replaced devices. This regulation is intended to cover certain devices for which credit for the replaced device is given or which are replaced as a result of or pursuant to a warranty, field action, voluntary recall, involuntary recall, and certain devices which are provided free of charge. It would provide for a reduction in the APC payment rate when we determine that the device is replaced without cost to the provider or beneficiary or when the provider receives full credit for the cost of a replaced device. The amount of the reduction to the APC payment rate would be calculated in the same manner as the offset amount that would be applied if the implanted device assigned to the APC had pass-through status as defined under § 419.66. The beneficiary's copayment amount would be calculated based on the reduced APC payment rate.

We believe that this is appropriate because in these cases the full cost of the replaced device is not incurred and, therefore, we believe that an adjustment to the APC payment is necessary to remove the cost of the device. We believe that the averaging nature of the calculation of the amount of the adjustment causes it to be appropriately applied to cases of credit for the replaced device, regardless of whether there is a residual cost due to the implantation of a more expensive device.

We also believe that the proposed adjustment is consistent with section 1862(a)(2) of the Act, which excludes from Medicare coverage an item or service for which neither the beneficiary nor anyone on his or her behalf has an obligation to pay. Payment of the full APC payment rate in these cases in which the device was replaced under warranty or in which there was a full credit for the price of the recalled or failed device effectively results in Medicare payment for a noncovered item. Moreover, it results in creation of a beneficiary liability for the copayment associated with the device for which the beneficiary has no liability. Therefore, we are proposing to adjust the APC payment rate in these circumstances under the authority of section 1833(t)(2)(E) of the Act, which permits us to make equitable adjustments to the OPPS payment rates.

We recognize that in many cases, the packaged cost of the device is a relatively modest part of the APC payment for the procedure into which the device cost is packaged. In the case of devices of modest cost, we believe that the averaging nature of payments under the OPPS based on the conversion of charges to costs with CCRs would incorporate any significant savings from a warranty replacement, field action, or recall into the payment rate for the associated procedural APC and that no specific adjustment would be necessary or appropriate. However, in other cases, such as implantation of an ICD, the cost of the device is the majority of the cost of the APC and payment at the full payment rate for the procedural APC would pay the hospital much in excess of its incurred cost of the service.

As we discuss above, we are proposing to set the APC payment rates for device-dependent APCs for the CY 2007 OPPS using only claims that contain appropriate devices to ensure that we make appropriate full payment when the hospital initially incurs the full cost of the device. Beginning in CY 2005, we required that device codes be billed for devices used and specifically required that hospitals bill certain device codes for some services. We are using the CY 2005 claims to set the payment rates for the CY 2007 OPPS. Currently, where the device is furnished without cost to the hospital, we have authorized hospitals to charge less than $1.01, although Medicare's longstanding policy has been that, in these cases, providers may not charge for the device furnished to them without cost. (See the Medicare Internet Only Manual, Medicare Benefit Policy Manual, Publication 100-02 Chapter 16, section 40.4.)

We authorized this charge because the CMS device edits require that the hospital must report an appropriate device if they bill for certain codes that cannot be performed without a device or the claim will be returned. Moreover, the Fiscal Intermediary Standard System will not accept the claim unless there is a charge for each HCPCS code billed. In addition, we were seeking a means of identifying these recall cases in the data. Therefore, by authorizing hospitals to charge less than $1.01 for the device we enabled the claim to be paid and also provided a mechanism for identifying devices for which the hospital incurred no expense.

Where we set the payment rates for these device-dependent APCs using only claims that contain the full costs of devices when they are purchased by hospitals and exclude claims for which there is no appropriate device code or a charge for the device of less than $1.01, the proposed APC payments into which the full costs of the devices have been packaged would result in excessive program payments and beneficiary copayments for the services being furnished if the devices were provided without cost to hospitals. To avoid excessive payments in these circumstances, as noted previously we are proposing to adjust the APC payment rates when implanted devices have been replaced without cost to the hospital or beneficiary or where full credit for such a device has been given because the replacement device is of greater cost than the originally implanted device.

We are proposing that the adjustment would be limited to the APCs listed in Table 21, but only when the purpose of the procedure is to replace a device that is reported by a HCPCS code in Table 22 which was furnished without cost or at full credit by the manufacturer. We are proposing that the following three criteria must each be met for an APC to be subject to the adjustment. We selected the APCs in Table 21 on the basis of these three criteria.

The first criterion is that all procedures assigned to the selected APCs must require implantable devices that would be reported if device replacement procedures were performed. Therefore, the device being replaced must be necessary for the service to be furnished and without the devices, the services assigned to the APCs could not be performed. For services, and, therefore, their assigned APCs, where a device is not needed or where it may or may not be needed to perform a procedure, we do not believe that reducing the payment for the APCs would be appropriate because the charges for the devices are unlikely to be a significant factor in establishing the rates for the APCs.

The second criterion is that the required devices must be surgically inserted or implanted devices that remain in the patient's body after the conclusion of the procedures, at least temporarily. We believe this is necessary to establish that the replacement device is a direct replacement for the device being removed. In cases of failures of devices that are surgically inserted or implanted but do not remain in the patient's body after the conclusion of procedures, we believe that it is highly likely that the replacement device is not specifically used to care for the patient on whom the original defective device was used and that, where a defective device of this type is used, there is no savings to the hospital. For example, if a vascular catheter fails during a procedure, we believe that the physician will probably Start Printed Page 49576use another similar catheter to finish the procedure. In these cases the hospital would correctly charge for the catheter that was used, and there would be no savings to the hospital from that procedure. The hospital would likely charge for both the defective device and the device used to complete the procedure because both catheters were used to provide the full service. We believe that if a replacement catheter is furnished to the hospital under warranty from the manufacturer, it would be used at a much later date on a different patient, it would most likely be charged to that patient account, and it would be unlikely to be specifically identified as being furnished without cost to the hospital. In these cases, we expect that any cost savings from the replacement devices such as these (for example, catheters) that are furnished without cost would be incorporated into the median costs for the procedures in the normal course of the data process through application of the CCRs generated from the cost reports.

The third criterion is that the offset percent for the APC (that is, the median cost of the APC without device costs divided by the median cost of the APC with devices) must be significant. For this purpose, we are defining a significant offset percent as exceeding 40 percent. We believe that this percent is appropriate because our studies have shown that approximately 60 percent of the cost of OPPS services is wage-related, and that approximately 40 percent of the cost of OPPS services is not wage related. This is why we wage adjust 60 percent of the APC payment rates for all APCs, including APCs for which a greater percentage of the APC payment is for the cost of a device.

We believe that once the device share of an APC exceeds the 40 percent we attribute to costs other than wage costs (for example, device costs, capital costs, plant costs, and supplies other than devices), the device cost is a significant part of the APC cost. Therefore, where the device costs in an APC exceed 40 percent, which is the average of all types of nonwage-related costs across all APCs, we are proposing to define the device costs as “significant” for purposes of this proposed policy.

We recognize that it may be appropriate to define “significant” for this purpose at a different percentage of the APC cost because there are costs other than device costs (for example, capital costs and other supply costs) in the 40 percent of service costs to which the wage adjustment does not apply. We would reassess for future years whether it is appropriate to define “significant” for this purpose at a level other than 40 percent.

For purposes of making the proposed adjustment, we would adapt the methodology that we have employed to establish an offset for the device costs incorporated into APCs in cases where a pass-through device is also being billed. We currently calculate the offset amount by first calculating a median including the device costs and then calculating a median excluding device costs using single bills that contain devices. We then divide the “without device” median by the “with device” median and subtract the percent from 100 to acquire the percent of cost attributable to devices in the APC. We apply this percent to the payment rate of the APC to determine the offset amount. For example, this is the methodology we used to calculate the offset amount for APC 0222 when current pass-through device C1820 (Generator, neuro rechg bat sys) is billed on the same claim. We believe that it is appropriate to apply this same methodology in circumstances when we need to remove the cost of the device from the APC payment, not because the device is being paid under pass-through but because the hospital is either not incurring the cost for the replaced device or has been given full credit for the replaced device. In both cases, the intent is to remove the cost of the device from the APC payment rate.

Using this methodology, we calculated the proposed offset amounts in Table 21 by first calculating an APC median cost including device costs and then calculating a median cost excluding device costs, using only single bills that meet our device edits and do not have token charges for devices. We then divided the “without device” median cost by the “with device” median cost and subtracted the percent from 100 to acquire the percent of cost attributable to devices in the APC. We next applied this percent to the payment rate for the APC to determine the offset amount.

The following is an example of the payment reduction in the case of replacement of an ICD under warranty. Where the cardioverter defibrillator pulse generator described by HCPCS code C1721 (AICD, dual chamber) is replaced under warranty during a procedure described by HCPCS code G0298 (Insertion of dual chamber pacing cardioverter defibrillator pulse generator), the hospital would report HCPCS code G0298 with a specified modifier and would also report HCPCS code C1721 with a token charge for the device. Assuming the hospital had a wage index of 1, the payment rate for APC 0107 after adjustment would be $1862.27. That is, the adjusted payment rate would equal the unadjusted payment rate for APC 0107 ($17,185.34) less the warranty reduction percentage in Table 21 of 89.13 percent ($15,317.29). Because the adjustment amount is set for the APC, the same adjustment amount would be removed if devices reported under HCPCS code C1722 or C1882 were reported with HCPCS code G0297. This is identical to the amount of adjustment that would apply to the payment for a pass-through device if there were, hypothetically, a new ICD to which we had given pass-through status (no ICD currently has pass-through status).

We are proposing to both adjust the APC payment to remove payment for the device furnished without cost to the hospital or beneficiary and also to decrease the beneficiary copayment in proportion to the reduced APC payment so that the beneficiary would, in many but not all cases, share in the cost savings attributable to the provision of the device without cost by the manufacturer. We are proposing that when a device is replaced without cost to the hospital under warranty or recall or a credit is provided for the cost of a failed or recalled device (unlike cases of offset for a pass-through device), the beneficiary's copayment would be calculated based on the reduced APC payment rate, maintaining the same percentage copayment as applies to the unadjusted APC payment if the inpatient deductible is not exceeded. We believe that it is appropriate to reduce the beneficiary copayment in these cases because the device is being furnished or credited by the manufacturer without obligation on the part of the beneficiary. We note, however, that in the case of some high cost APCs, making the payment adjustment in a recall or warranty situation may not result in reduction of the copayment because the copayment, although based on the reduced payment rate, may continue to exceed the inpatient deductible and, therefore, would continue to be set at the inpatient deductible.

In contrast, in the case of pass-through devices, the beneficiary is liable for the copayment on the full APC amount (which, in the case of high cost APCs, is limited to the Medicare inpatient deductible) but pays no copayment for the incremental cost of the pass-through device. This is appropriate in the case of payment for pass-through devices because the hospital incurs costs for both the service and the device, and Medicare pays for both the service through the full APC Start Printed Page 49577payment and for the incremental cost of the pass-through device above the costs of associated devices already reflected in the APC payment at charges reduced to cost by a CCR. The pass-through payment amount is reduced only to prevent the program from making duplicate payment for a portion of the device, once as part of the APC payment and once through the pass-through payment.

We are proposing to implement the adjustment through the use of an appropriate modifier specific to a device replacement without cost or crediting of the cost of a device by the manufacturer. Hospitals would be required to report the modifier appended to a specific procedure on claims for services when two conditions are met. The first condition is that the procedure is assigned to one of the APCs in Table 21. We have discussed above the criteria that we employed for selecting the APCs in Table 21. The second condition is that the device for which the manufacturer furnished a replacement device (or provided credit for the device being replaced) is one of the devices included in Table 22. We are restricting the devices to which the adjustment would apply to those included in Table 22 in order to ensure that the adjustment is not triggered by the replacement of an inexpensive device whose cost does not constitute a significant proportion of the total payment rate for an APC.

The presence of the modifier would trigger the adjustment in payment for the APCs in Table 21. While we recognize that this creates a reporting burden for hospitals, we believe the reporting requirement is unavoidable. Only hospitals can report whether the circumstances for reduced payment as described above are met and, therefore, we see no option other than to have hospitals report this information to us. We recognize that the current FB modifier (“Item furnished without cost to provider, supplier or practitioner”) may not be appropriate in cases in which the replacement device is a more expensive device than the device being removed and may need to be changed to expand its use for all potential APC payment adjustment scenarios.

Our proposed policy would accomplish three important goals. First and foremost, it would advise us of the extent to which devices are being replaced due to device failures so that, if patterns are identified, we can explore them to see if there are systemic problems with certain devices. The reporting of a specific modifier with certain procedure codes would allow us to examine patterns of delivery of specific hospital services when implanted devices are replaced without cost or with full credit for the cost of a device by the manufacturer, in comparison with publicly available information about problematic devices. Analysis of outpatient hospital claims would serve as an additional source of information to the medical community about patterns of device failures, voluntary field actions, and recalls, contributing to improved awareness and understanding of problems.

Secondly, it would ensure equitable adjustment to the payments for surgical procedures to replace problematic devices by providing payments to hospitals only for the nondevice related procedural costs when a device is replaced without cost to the hospital for the device or with full credit for the removed device. Thirdly, it would also identify those claims that contain reduced device charges due to the full credit provided by the manufacturer for a replaced device so that in the future we can assess the impact of these claims on median costs for the services into which the device costs are packaged.

This proposed policy would be effective for services furnished on or after January 1, 2007. We believe that this proposed policy is necessary to enable us to secure claims data that may be used to identify trends in device problems that lead to device replacements. It is also necessary to fulfill our fiduciary responsibility to the Medicare program by not providing payments for items that are excluded from coverage under Medicare law because neither the beneficiary nor any party on his or her behalf has an obligation to pay.

Table 21.—Proposed Adjustment to APCs in Cases of Replacement of or Full Credit for Failed or Recalled Device

APCSIAPC group titleCY 2007 proposed offset percent
0039SLevel I Implantation of Neurostimulator78.51%
0040SPercutaneous Implantation of Neurostimulator Electrodes, Excluding Cranial Nerve54.66%
0061SLaminectomy or Incision for Implantation of Neurostimulator Electrodes, Excludin60.59%
0089TInsertion/Replacement of Permanent Pacemaker and Electrodes77.14%
0090TInsertion/Replacement of Pacemaker Pulse Generator74.56%
0106TInsertion/Replacement/Repair of Pacemaker and/or Electrodes41.04%
0107TInsertion of Cardioverter-Defibrillator89.13%
0108TInsertion/Replacement/Repair of Cardioverter-Defibrillator Leads89.15%
0222TImplantation of Neurological Device78.10%
0225SImplantation of Neurostimulator Electrodes, Cranial Nerve80.62%
0226TImplantation of Drug Infusion Reservoir62.21%
0227TImplantation of Drug Infusion Device81.50%
0229TTranscatherter Placement of Intravascular Shunts42.32%
0259TLevel VI ENT Procedures84.03%
0315TLevel II Implantation of Neurostimulator83.52%
0385SLevel I Prosthetic Urological Procedures46.88%
0386SLevel II Prosthetic Urological Procedures61.32%
0418TInsertion of Left Ventricular Pacing Elect86.11%
0654TInsertion/Replacement of a permanent dual chamber pacemaker76.73%
0655TInsertion/Replacement/Conversion of a permanent dual chamber pacemaker76.89%
0680SInsertion of Patient Activated Event Recorders77.03%
0681TKnee Arthroplasty73.26%
Start Printed Page 49578

Table 22.—Devices for Which the Proposed Modifier Must Be Reported With the Procedure Code When Furnished Without Cost or at Full Credit for a Replaced Device

DeviceDescription
C1721AICD, dual chamber.
C1722AICD, single chamber.
C1764Event recorder, cardiac.
C1767Generator, neurostim, imp.
C1771Rep dev, urinary, w/sling.
C1772Infusion pump, programmable.
C1776Joint device (implantable).
C1777Lead, AICD, endo single coil.
C1778Lead, neurostimulator.
C1779Lead, pmkr, transvenous VDD.
C1785Pmkr, dual, rate-resp.
C1786Pmkr, single, rate-resp.
C1813Prosthesis, penile, inflatab.
C1815Pros, urinary sph, imp.
C1820Generator, neuro rechg bat sys.
C1882AICD, other than sing/dual.
C1891Infusion pump, non-prog, perm.
C1895Lead, AICD, endo dual coil.
C1896Lead, AICD, non sing/dual.
C1897Lead, neurostim, test kit.
C1898Lead, pmkr, other than trans.
C1899Lead, pmkr/AICD combination.
C1900Lead coronary venous.
C2619Pmkr, dual, non rate-resp.
C2620Pmkr, single, non rate-resp.
C2621Pmkr, other than sing/dual.
C2622Prosthesis, penile, non-inf.
C2626Infusion pump, non-prog, temp.
C2631Rep dev, urinary, w/o sling.
L8614Cochlear device/system.

B. Proposed Pass-Through Payments for Devices

(If you choose to comment on issues in this section, please include the caption “Pass-Through Devices” at the beginning of your comment.)

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

a. Background

Section 1833(t)(6)(B)(iii) of the Act requires that, under the OPPS, a category of devices be eligible for transitional pass-through payments for at least 2, but not more than 3, years. This period begins with the first date on which a transitional pass-through payment is made for any medical device that is described by the category. The device category codes became effective April 1, 2001, under the provisions of the BIPA. Prior to pass-through device categories, Medicare payments for pass-through devices under the OPPS were made on a brand-specific basis. All of the initial 97 category codes that were established as of April 1, 2001, have expired; 95 categories expired after CY 2002, and 2 categories expired after CY 2003. In addition, nine new categories have expired since their creation. We currently have no category codes for pass-through devices that will expire January 1, 2007. We created one new category effective January 1, 2006, for C1820 (Generator, neurostimulator (implantable), with rechargeable battery and charging system), which we are proposing to continue to pay under the pass-through provision in CY 2007 under the OPPS. This category was created after we published modifications to our criteria in the CY 2006 OPPS final rule with comment period on November 10, 2005 (70 FR 68628 through 68631) allowing CMS to refine previous pass-through category descriptions that would have prevented us from making pass-through payments for a new technology that otherwise met our criteria. These modifications amended the original criteria and process for creating additional device categories for pass-through payment that we published on November 2, 2001 (66 FR 55850 through 55857). Under our established policy, we base the expiration dates for the category codes on the date on which a category was first eligible for pass-through payment.

In the November 1, 2002 OPPS final rule, we established a policy for payment of devices included in pass-through categories that are due to expire (67 FR 66763). For CY 2003 through CY 2006, we packaged the costs of the devices no longer eligible for pass-through payments into the costs of the procedures with which the devices were billed in the claims data used to set the payment rates for those years. Brachytherapy sources, which are now separately paid in accordance with section 1833(t)(2)(H) of the Act, are an exception to this established policy (with the exception of brachytherapy sources for prostate brachytherapy, which were packaged in the CY 2003 OPPS only).

b. Proposed Policy for CY 2007

As we stated earlier, currently we have one effective device category for pass-through payment, C1820, which we created for pass-through payment effective January 1, 2006. We are proposing to continue to make payment under the pass-through provisions for category C1820 for CY 2007. We are proposing that this category would expire from pass-through payment after December 31, 2007. This would provide the category transitional pass-through payment status for a 2-year period, in accordance with the statutory requirement that no category be paid as a pass-through device for less than 2 years, nor more than 3 years.

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

a. Background

In the November 30, 2001 OPPS final rule, we explained the methodology we used to estimate the portion of each APC payment rate that could reasonably be attributed to the cost of the associated devices that are eligible for pass-through payments (66 FR 59904). Beginning with the implementation of the CY 2002 OPPS quarterly update (April 1, 2002), we deducted from the pass-through payments for the identified devices an amount that reflected the portion of the APC payment amount that we determined was associated with the cost of the device, as required by section 1833(t)(6)(D)(ii) of the Act. In the November 1, 2002 interim final rule with comment period, we published the applicable offset amounts for CY 2003 (67 FR 66801).

For the CY 2002 and CY 2003 OPPS updates, to estimate the portion of each APC payment rate that could reasonably be attributed to the cost of an associated device eligible for pass-through payment, we used claims data from the period used for recalibration of the APC rates. That is, for CY 2002 OPPS updating, we used CY 2000 claims data, and for CY 2003 OPPS updating, we used CY 2001 claims data. For CY 2002, we used median cost claims data based on specific revenue centers used for device-related costs because C-code cost data were not available until CY 2003. For CY 2003, we calculated a median cost for every APC without packaging the costs of associated C-codes for device categories that were billed with the APC. We then calculated a median cost for every APC with the costs of the associated device category C-codes that were billed with the APC packaged into the median. Comparing the median APC cost without device packaging to the median APC cost, including device packaging, enabled us to determine the percentage of the median APC cost that is attributable to the associated pass-through devices. By applying those percentages to the APC payment rates, we determined the applicable amount to be deducted from the pass-through payment, the ”offset” amount. We created an offset list comprised of any APC for which the device cost was at least 1 percent of the APC's cost.

The offset list that we published for CY 2002 through CY 2004 was a list of offset amounts associated with those APCs with identified offset amounts developed using the methodology described above. As a rule, we do not Start Printed Page 49579know in advance which procedures residing in certain APCs may be billed with new device categories. Therefore, an offset amount is applied only when a new device category is billed with a HCPCS procedure code that is assigned to an APC appearing on the offset list.

For CY 2004, we modified our policy for applying offsets to device pass-through payments. Specifically, we indicated that we would apply an offset to a new device category only when we could determine that an APC contains costs associated with the device. We continued our existing methodology for determining the offset amount, described earlier. We were able to use this methodology to establish the device offset amounts for CY 2004 because providers reported device codes (C-codes) on the CY 2002 claims used for the CY 2004 OPPS update. For the CY 2005 update to the OPPS, our data consisted of CY 2003 claims that did not contain device codes and, therefore, for CY 2005, we utilized the device percentages as developed for CY 2004. In the CY 2004 OPPS update, we reviewed the device categories eligible for continuing pass-through payment in CY 2004 to determine whether the costs associated with the device categories are packaged into the existing APCs. Based on our review of the data for the device categories existing in CY 2004, we determined that there were no close or identifiable costs associated with the devices relating to the respective APCs that are normally billed with them. Therefore, for those device categories, we set the offset amount to $0 for CY 2004. We continued this policy of setting the offset amount to $0 for the device categories that continued to receive pass-through payment in CY 2005.

For the CY 2006 OPPS update, CY 2004 hospital claims were available for analysis. Hospitals billed device C-codes in CY 2004 on a voluntary basis. We reviewed our CY 2004 data and found that the numbers of claims for services in many of the APCs for which we calculated device percentages using CY 2004 data were quite small. We also found that many of these APCs already had relatively few single claims available for median calculations compared with the total bill frequencies because of our inability to use many multiple bills in establishing median costs for all APCs. In addition, we found that our claims demonstrated that relatively few hospitals specifically coded for devices utilized in CY 2004. Thus, we were not confident that CY 2004 claims reporting C-codes represented the typical costs of all hospitals providing the services. Therefore, we did not use CY 2004 claims with device coding to calculate CY 2006 device offset amounts. In addition, we did not use the CY 2005 methodology, for which we utilized the device percentages as developed for CY 2004. Two years had passed since we developed the device offsets for CY 2004, and the device offsets originally calculated from CY 2002 hospitals' claims data may either have overestimated or underestimated the contributions of device costs to total procedural costs in the outpatient hospital environment of CY 2004. In addition, a number of the APCs on the CY 2004 and CY 2005 device offset percentage lists were either no longer in existence or were so significantly reconfigured that the past device offsets likely did not apply.

For CY 2006, we reviewed the single new device category established thus far, C1820, to determine whether device costs associated with the new category are packaged into the existing APC structure. Under our established policy, if we determine that the device costs associated with the new category are closely identifiable to device costs packaged into existing APCs, we set the offset amount for the new category to an amount greater than $0. Our review of the service indicated that the median costs for the applicable APC 0222 (Implantation of Neurological Device) contained costs for neurostimulators similar to the costs of the new device category C1820. Therefore, we determined that a device offset would be appropriate. We announced an offset amount for that category in Program Transmittal No. 804, dated January 3, 2006.

For CY 2006, we are using available partial year CY 2005 hospital claims data to calculate device percentages and potential offsets for CY 2006 applications for new device categories. Effective January 1, 2005, we require hospitals to report device C-codes and their costs when hospitals bill for services that utilize devices described by the existing C-codes. In addition, during CY 2005, we implemented device edits for many services that require devices and for which appropriate device C-codes exist. Therefore, we expected that the number of claims that include device codes and their respective costs to be much more robust and representative for CY 2005 than for CY 2004. We believe that use of the most current claims data to establish offset amounts when they are needed to ensure appropriate payment is consistent with our stated policy; therefore, we are proposing to continue to do so for the CY 2007 OPPS. Specifically, if we create a new device category for payment in CY 2007, to calculate potential offsets we are proposing to examine the most current available claims data, including device costs, to determine whether device costs associated with the new category are already packaged into the existing APC structure, as indicated earlier. If we conclude that some related device costs are packaged into existing APCs, we are proposing to use the methodology described earlier and first used for the CY 2003 OPPS to determine an appropriate device offset percentage for those APCs with which the new category would be reported.

We did not publish a list of APCs with device percentages as a transitional policy for CY 2006 because of the previously discussed limitations of the CY 2004 OPPS data with respect to device costs associated with procedures. We stated in the CY 2006 final rule with comment period (70 FR 68628) that we expected to reexamine our previous methodology for calculating the device percentages and offset amounts for the CY 2007 OPPS update, which would be based on CY 2005 hospital claims data where device C-code reporting is required.

b. Proposed Policy for CY 2007

For CY 2007, we are proposing to continue to review each new device category on a case-by-case basis as we have done in CY 2004, CY 2005, and CY 2006, to determine whether device costs associated with the new category are packaged into the existing APC structure. If we determine that, for any new device category, no device costs associated with the new category are packaged into existing APCs, we are proposing to continue our current policy of setting the offset amount for the new category to $0 for CY 2007. There is currently one new device category that would continue for pass-through payment in CY 2007. This category, described by HCPCS code C1820, currently has an offset amount of $8,647.81, which is applied to APC 0222. We are proposing to update this offset for CY 2007 based on the full year of claims data for CY 2005, the claims data year for our CY 2007 rate update. We are proposing an offset amount for C1820 of 78.1 percent of the proposed CY 2007 payment rate for APC 0222 based on the CY 2005 data used to calculate the proposed payment amount in this proposed rule. (See Addendum A of this proposed rule for a listing of the proposed CY 2007 APC payment rates.)

We are proposing to continue our existing policy to establish new Start Printed Page 49580categories in any quarter when we determine that the criteria for granting pass-through status for a device category are met. If we create a new device category and determine that our data contain a sufficient number of claims with identifiable costs associated with the new category of devices in any APC, we are proposing to adjust the APC payment if the offset amount is greater than $0. If we determine that a device offset greater than $0 is appropriate for any new category that we create, we are proposing to announce the offset amount in the program transmittal that announces the new category.

In summary, for CY 2007, we are proposing to use CY 2005 hospital claims data to calculate device percentages and potential offsets for CY 2007 applications for new device categories. We are proposing to publish, through program transmittals, any new or updated offsets that we calculate for CY 2007, corresponding to newly created categories or existing categories, respectively.

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

A. Proposed Transitional Pass-Through Payment for Additional Costs of Drugs and Biologicals

(If you choose to comment on issues in this section, please include the caption “Pass-Through Drugs” at the beginning of your comment.)

1. Background

Section 1833(t)(6) of the Act provides for temporary additional payments or “transitional pass-through payments” for certain drugs and biological agents. As originally enacted by the Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act (BBRA) of 1999 (Pub. L. 106-113), this provision requires the Secretary to make additional payments to hospitals for current orphan drugs, as designated under section 526 of the Federal Food, Drug, and Cosmetic Act (Pub. L. 107-186); current drugs and biological agents and brachytherapy sources used for the treatment of cancer; and current radiopharmaceutical drugs and biological products. For those drugs and biological agents referred to as “current,” the transitional pass-through payment began on the first date the hospital OPPS was implemented (before enactment of the Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act BIPA of 2000 (Pub. L. 106-554), on December 21, 2000).

Transitional pass-through payments are also required for certain “new” drugs and biological agents that were not being paid for as a hospital outpatient department service as of December 31, 1996, and whose cost is “not insignificant” in relation to the OPPS payments for the procedures or services associated with the new drug or biological. Under the statute, transitional pass-through payments can be made for at least 2 years but not more than 3 years. In Addenda A and B of this proposed rule, proposed CY 2007 pass-through drugs and biological agents are identified by status indicator “G.”

The process to apply for transitional pass-through payment for eligible drugs and biological agents can be found on our CMS Web site: http://www.cms.hhs.gov. If we revise the application instructions in any way, we will post the revisions on our Web site and submit the changes to the Office of Management and Budget (OMB) for approval, as required under the Paperwork Reduction Act (PRA). Notification of new drugs and biologicals application processes is generally posted on the OPPS Web site at: http://www.cms.hhs.gov/​providers/​hopps.

2. Expiration in CY 2006 of Pass-Through Status for Drugs and Biologicals

Section 1833(t)(6)(C)(i) of the Act specifies that the duration of transitional pass-through payments for drugs and biologicals must be no less than 2 years and no longer than 3 years. The 12 drugs and biologicals listed in Table 23, whose pass-through status will expire on December 31, 2006, meet that criterion. For all drugs and biologicals with pass-through status expiring on December 31, 2006, that are currently assigned temporary C-codes, if there is a permanent HCPCS code available for CY 2007 that describes the product, then we are proposing to delete the C-code and use the permanent HCPCS code for purposes of OPPS billing and payment for the product in CY 2007. Based on our review of the existing permanent HCPCS codes available at the time of this proposed rule, we have determined that HCPCS code J7344 (Nonmetabolic active tissue) appropriately describes the product reported under HCPCS code C9221 in the CY 2006 OPPS; therefore, we propose to delete C9221 and pay for this product using J7344 in CY 2007. The coding changes for the other products will depend on what the final HCPCS codes are for CY 2007, which will be included in the CY 2007 OPPS final rule. We specifically request comments on this proposed policy for CY 2007.

Table 23.—Proposed List of Drugs and Biologicals for Which Pass-Through Status Expires December 31, 2006

HCPCSAPCShort descriptor
C92209220Sodium hyaluronate.
C92219221Graftjacket Reg Matrix.
C92229222Graftjacket Sft Tis.
J01289216Abarelix injection.
J08789124Daptomycin injection.
J23579300Omalizumab injection.
J27830738Rasburicase.
J27949125Risperidone, long acting.
J75189219Mycophenolic acid.
J90359214Bevacizumab injection.
J90559215Cetuximab injection.
J93059213Pemetrexed injection.

3. Drugs and Biologicals With Proposed Pass-Through Status in CY 2007

We are proposing to continue pass-through status in CY 2007 for nine drugs and biologicals. These items, which are listed in Table 24 below, were given pass-through status as of April 1, 2006. The APCs and HCPCS codes for drugs and biologicals that we are proposing to continue with pass-through status in CY 2007 are assigned status indicator “G” in Addenda A and B of this proposed rule.

Section 1833(t)(6)(D)(i) of the Act sets the payment rate for pass-through eligible drugs (assuming that no pro rata reduction in pass-through payment is necessary) as the amount determined under section 1842(o) of the Act. We note that this section of the Act also states that if a drug or biological is covered under a competitive acquisition contract under section 1847B of the Act, the payment rate is equal to the average price for the drug or biological for all competitive acquisition areas and the year established as calculated and adjusted by the Secretary.

Section 1847A of the Act, as added by section 303(c) of Pub. L. 108-173, establishes the use of the average sales price (ASP) methodology as the basis for payment of drugs and biologicals described in section 1842(o)(1)(C) of the Act and furnished on or after January 1, 2005. This payment methodology is set forth in § 419.64 of the regulations. Section 1847B of the Act, as added by section 303(d) of Pub. L. 108-173, establishes the payment methodology for drugs and biologicals under the competitive acquisition program. The competitive acquisition program was implemented as of July 1, 2006. The list of drugs and biologicals covered under this program can be found on http://www.cms.hhs.gov/​CompetitiveAcquisforBios, along with Start Printed Page 49581their payment rates and information on the program's methodology.

Section 1833(t)(6)(D)(i) of the Act sets the payment rate for pass-through eligible drugs as the amount determined under section 1842(o) of the Act, or if a drug or biological is covered under a competitive acquisition contract under section 1847B of the Act, the payment rate is equal to the average price for the drug or biological for all competitive acquisition areas and the year established as calculated and adjusted by the Secretary. For CY 2007, under the OPPS we are proposing payment for drugs and biologicals with pass-through status that will also be covered under the competitive acquisition program to be based on the competitive acquisition program methodology. Similar to the payment policy established for pass-through drugs and biologicals in CY 2006, we are proposing to pay under the OPPS for all other drugs and biologicals with pass-through status in CY 2007 consistent with the provisions of section 1842(o) of the Act, as amended by section 621 of Pub. L. 108-173, at a rate that is equivalent to the payment these drugs and biologicals would receive in the physician office setting.

Table 24 lists the drugs and biologicals for which we are proposing that pass-through status continue in CY 2007. Of these nine drugs and biologicals, only HCPCS codes J2503 (Pegaptanib sodium injection) and J9264 (Paclitaxel injection) are covered under the competitive acquisition program at the time of the development of this proposed rule. Therefore, in CY 2007, we are proposing to set payment for HCPCS codes J2503 and J9264 at the amounts determined under the competitive acquisition program, which will be a rate slightly different than the rate determined under the ASP methodology. Payment for all other drugs and biologicals would be equivalent to the payment these drugs and biologicals would receive in the physician office setting in CY 2007, where payment will be determined by the methodology described in § 419.904 and generally be equal to ASP+6 percent. In accordance with the ASP methodology, in the absence of ASP data, we are continuing the policy we implemented during CYs 2005 and 2006 of using the wholesale acquisition cost (WAC) for the product to establish the initial payment rate. We note, however, that if the WAC is also unavailable, then we would make payment at 95 percent of the product's most recent AWP. We adopted this interim payment methodology in order to be consistent with how we pay for new drugs, biologicals, and radiopharmaceuticals without HCPCS codes, as discussed in the CY 2006 OPPS final rule with comment period (70 FR 68669). We further note that with respect to items for which we currently do not have ASP data, once their ASP data become available in later quarter submissions, their payment rates under OPPS will be adjusted so that the rates are based on the ASP methodology and set to ASP+6 percent.

Currently, there are no radiopharmaceuticals that would have pass-through status in CY 2007. In the event that a new radiopharmaceutical agent receives pass-through status in CY 2007, we propose to base its payment on the WAC for the product as ASP data for radiopharmaceuticals are not available. We note, however, that if the WAC is also unavailable, then we would calculate payment for the radiopharmaceutical at 95 percent of its most recent AWP. We are proposing to adopt this interim payment methodology in order to be consistent with how we pay for new drugs, biologicals, and radiopharmaceuticals without HCPCS codes, as discussed in the CY 2006 OPPS final rule with comment period (70 FR 68669).

Section 1833(t)(6)(D)(i) of the Act also sets the amount of additional payment for pass-through eligible drugs and biologicals (the pass-through payment amount). The pass-through payment amount is the difference between the amount authorized under section 1842(o) of the Act (or under section 1847B of the Act, if the drug or biological is covered under a competitive acquisition contract), and the portion of the otherwise applicable fee schedule amount (that is, the APC payment rate) that the Secretary determines is associated with the drug or biological.

We discuss in section V.B.3.b. of the preamble that we are proposing to make separate payment in CY 2007 for new drugs and biologicals with a HCPCS code, consistent with the provisions of section 1842(o) of the Act at a rate that is equivalent to the payment they would receive in a physician office setting (or under section 1847B of the Act, if the drug or biological is covered under a competitive acquisition contract), whether or not we have received a pass-through application for the item. Accordingly, in CY 2007 the pass-through payment amount would equal zero for those new drugs and biologicals that we determine have pass-through status. That is, when we subtract the amount to be paid for pass-through drugs and biologicals under section 1842(o) of the Act (or section 1847B of the Act, if the drug or biological is covered under a competitive acquisition contract), from the portion of the otherwise applicable fee schedule amount or the APC payment rate associated with the drug or biological that would be the amount paid for drugs and biologicals under section 1842(o) of the Act (or section 1847B of the Act, if the drug or biological is covered under a competitive acquisition contract), the resulting difference is equal to zero.

We are proposing to use payment rates based on the ASP data from the fourth quarter of CY 2005 for budget neutrality estimates, impact analyses, and to complete Addenda A and B of this proposed rule because these are the most recent data available to us at this time. These payment rates are also the basis for drug payments in the physician office setting effective April 1, 2006. To be consistent with the ASP-based payments that would be made when these drugs and biologicals are furnished in physician offices, we are proposing to make any appropriate adjustments to the amounts shown in Addenda A and B of this proposed rule when we publish our CY 2007 OPPS final rule and also on a quarterly basis on our Web site during CY 2007 if later quarter ASP submissions (or more recent WACs or AWPs) indicate that adjustments to the payment rates for these pass-through drugs and biologicals are necessary. The payment rate for a radiopharmaceutical with pass-through status would also be adjusted accordingly. We also are proposing to make appropriate adjustments to the payment rates for these drugs and biologicals in the event that they become covered under the competitive acquisition program in the future. For drugs and biologicals that are currently covered under the competitive acquisition program, we are proposing to use the payment rates calculated under this program that are in effect as of July 1, 2006. We are proposing to update these payment rates if the rates change in the future.

Table 24 lists the drugs and biologicals for which we are proposing that pass-through status continue in CY 2007. We assigned pass-through status to these drugs and biologicals as of April 1, 2006. We also have included in Addenda A and B of this proposed rule, the proposed CY 2007 APC payment rates for all pass-through drugs and biologicals, based on ASP data from the fourth quarter of CY 2005 (or if applicable, payment rates calculated under the competitive acquisition program) as described above. Start Printed Page 49582

Table 24.—Proposed List of Drugs and Biologicals With Pass-Through Status in CY 2007

HCPCSAPCShort descriptor
C92259225Fluocinolone acetonide.
C92279227Injection, micafungin sodium.
C92289228Injection, tigecycline.
J22781694Ziconotide injection.
J25031697Pegaptanib sodium injection.
J85010868Oral aprepitant.
J90271710Clofarabine injection.
J92641712Paclitaxel injection.
Q40799126Natalizumab injection.

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

(If you choose to comment on issues in this section, please include the caption “OPPS: Nonpass-Through Drugs, Biologicals, and Radiopharmaceuticals” at the beginning of your comment.)

1. Background

Under the CY 2006 OPPS, we currently pay for drugs, biologicals, and radiopharmaceuticals that do not have pass-through status in one of two ways: packaged payment within the payment for the associated service or separate payment (individual APCs). We explained in the April 7, 2000 OPPS final rule with comment period (65 FR 18450) that we generally package the cost of drugs and radiopharmaceuticals into the APC payment rate for the procedure or treatment with which the products are usually furnished. Hospitals do not receive separate payment from Medicare for packaged items and supplies, and hospitals may not bill beneficiaries separately for any packaged items and supplies whose costs are recognized and paid within the national OPPS payment rate for the associated procedure or service. (Program Memorandum Transmittal A-01-133, issued on November 20, 2001, explains in greater detail the rules regarding separate payment for packaged services.)

Packaging costs into a single aggregate payment for a service, procedure, or episode of care is a fundamental principle that distinguishes a prospective payment system from a fee schedule. In general, packaging the costs of items and services into the payment for the primary procedure or service with which they are associated encourages hospital efficiencies and also enables hospitals to manage their resources with maximum flexibility. Notwithstanding our commitment to package as many costs as possible, we are aware that packaging payments for certain drugs, biologicals, and radiopharmaceuticals, especially those that are particularly expensive or rarely used, might result in insufficient payments to hospitals, which could adversely affect beneficiary access to medically necessary services.

Section 1833(t)(16)(B) of the Act, as added by section 621(a)(2) of Pub. L. 108-173, requires that the threshold for establishing separate APCs for drugs and biologicals be set at $50 per administration for CYs 2005 and 2006. However, this requirement for establishing the packaging threshold will expire at the end of CY 2006. For CY 2006, we finalized our policy to continue paying separately for drugs, biologicals, and radiopharmaceuticals whose per day cost exceeds $50 and packaging the costs of drugs, biologicals, and radiopharmaceuticals whose per day cost is less than $50 into the procedures with which they are billed. For CY 2006, we also continued an exception policy to our packaging rule for one particular class of drugs, the oral and injectable 5HT3 forms of anti-emetic treatments (70 FR 68635 through 68638).

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

During the March 2006 meeting of the APC Panel, the Panel recommended that CMS maintain the $50 packaging threshold or if the threshold is reevaluated, that CMS provide the Panel with data that indicate the costs of packaged drugs that are incorporated into drug administration payment rates.

As indicated above, in accordance with section 1833(t)(16)(B) of the Act, the threshold for establishing separate APCs for drugs and biologicals was set to $50 per administration during CYs 2005 and 2006. Because this packaging threshold will expire at the end of CY 2006, we evaluated four options for packaging levels so that we could determine what the appropriate packaging threshold proposal for drugs, biologicals, and radiopharmaceuticals would be for the CY 2007 OPPS update.

One of the packaging options we considered for the CY 2007 OPPS update was to pay separately for all drugs, biologicals, and radiopharmaceuticals with a HCPCS code. This would be a straightforward policy that would speed the creation of procedural APC medians. However, this policy would be inconsistent with OPPS packaging principles, reduce hospitals' incentives for economy and efficiency, and increase hospitals' administrative burden related to separate billing for more drugs, biologicals, and radiopharmaceuticals.

The second option we considered for CY 2007 was to increase the packaging threshold to a level much higher than the current $50 threshold. This option would result in the packaging of more drugs, biologicals, and radiopharmaceuticals and would be more consistent with OPPS packaging principles. This option would also provide greater administrative simplicity for hospitals. However, implementation of this option might result, in some cases, in the drug administration payments being less than the cost of the packaged drugs. Relatively expensive drugs, biologicals, and radiopharmaceuticals could also be packaged under this option.

The third packaging threshold option we evaluated was to maintain the packaging threshold at $50. We believe that this is a reasonable policy option that would provide stability to the payment system, as the packaging threshold has been set at $50 since CY 2004. This policy option would also be consistent with the APC Panel recommendation to maintain the packaging threshold at $50 in CY 2007; however, this policy would not take into account price inflation in determining the drug packaging threshold since the $50 threshold was initially established.

Consequently, the fourth option we considered and are proposing for CY 2007 and subsequent years is to update the packaging threshold for inflation using an inflation adjustment factor based on the Producer Price Index (PPI) for prescription preparations. In order to update the packaging threshold for CY 2007 under this proposal, we used the four quarter moving average PPI levels for prescription preparations to trend the $50 threshold forward from the third quarter of CY 2005 (when the Pub. L. 108-173-mandated threshold became effective) to the third quarter of CY 2007. We are proposing that for each year beginning with CY 2007, we would adjust the packaging threshold by the PPI for prescription drugs, and the adjusted dollar amount would be rounded to the nearest $5 increment in order to determine the new threshold. The adjusted amount for CY 2007 was calculated to be $55.99, which we are rounding to $55. Therefore, for CY 2007, we are proposing to pay separately for drugs, biologicals, and radiopharmaceuticals whose per day cost exceeds $55 and packaging the costs of drugs, biologicals, and radiopharmaceuticals whose per day cost is less than or equal to $55 into the procedures with which they are billed. Start Printed Page 49583

This proposed policy is consistent with the principle employed in many health care payment policy areas (and many other areas of government policy) of acknowledging the real costs by using an inflation adjustment instead of static dollar values. We believe that our proposed policy is consistent with the APC Panel's recommendation because we would be maintaining the $50 threshold in terms of its real value during the calendar year in which it would be in effect. Also, in the absence of a mechanism to update the threshold, we believe that current relatively inexpensive drugs would begin to receive separate payment over time. The PPI for prescription preparations reflects price changes at the wholesale or manufacturer stage. Because OPPS payment rates for drugs and biologicals are generally based on average sales price (ASP) data that are reported by their manufacturers, we believe that the PPI for prescription preparations would be an appropriate price index to use to update the packaging threshold for CY 2007 and beyond.

For CY 2007, we are also proposing to continue our policy of exempting the oral and injectable 5HT3 anti-emetic products from our packaging rule (Table 25), thereby making separate payment for all of the 5HT3 anti-emetic products. As stated in the CY 2005 OPPS final rule with comment period (69 FR 65779 through 65780), chemotherapy is very difficult for many patients to tolerate, as the side effects are often debilitating. In order for Medicare beneficiaries to achieve the maximum therapeutic benefit from chemotherapy and other therapies with side effects of nausea and vomiting, anti-emetic use is often an integral part of the treatment regimen. We believe that we should continue to ensure that Medicare payment rules do not impede a beneficiary's access to the particular anti-emetic that is most effective for him or her as determined by the beneficiary and his or her physician. We solicit comments on these packaging proposals.

Table 25.—Proposed Anti-Emetics To Exempt From Proposed $55 Packaging Requirement

HCPCS codeShort description
J1260Dolasetron mesylate.
J1626Granisetron HCl injection.
J2405Ondansetron HCl injection.
J2469Palonosetron HCl.
Q0166Granisetron HCl 1 mg oral.
Q0179Ondansetron HCl 8 mg oral.
Q0180Dolasetron mesylate oral.

To determine their CY 2007 proposed packaging status, we calculated the per day cost of all drugs, biologicals, and radiopharmaceuticals that had a HCPCS code in CY 2005 and were paid (via packaged or separate payment) under the OPPS using claims data from January 1, 2005, to December 31, 2005. In CY 2005, multisource drugs and radiopharmaceuticals had two HCPCS codes that distinguished the innovator multisource (brand) drug or radiopharmaceutical from the noninnovator multisource (generic) drug or radiopharmaceutical. We aggregated claims for both the brand and generic HCPCS codes in our packaging analysis of these multisource products. In order to calculate the per day cost for drugs, biologicals, and radiopharmaceuticals to determine their packaging status in CY 2007, we are proposing to use the methodology that was described in detail in the CY 2006 OPPS proposed rule (70 FR 42723 through 42724) and finalized in the CY 2006 OPPS final rule with comment period (70 FR 68636 through 68638). However, in our calculation of per day costs for this proposed rule for the CY 2007 OPPS update, we used the payment rate for each drug and biological at its ASP+5 percent which was based on manufacturer-submitted ASP data from the fourth quarter of CY 2005. The ASP data from this period were also the basis for determining payments for drugs and biologicals in the physician office setting, effective April 1, 2006. The rationale for using ASP+5 percent as the payment for drugs and biologicals is described in section V.B.3.a.2. of this preamble. For items that did not have an ASP-based payment rate, we used their mean unit cost derived from the CY 2005 hospital claims data to determine their per day cost. We packaged the items with per day cost less than or equal to $55 and made items with per day cost greater than $55 separately payable. We are requesting comments on the methodology we are proposing to use to determine the per day cost of drugs, biologicals, and radiopharmaceuticals under the CY 2007 OPPS update.

Our policy during previous cycles of the OPPS has been to use updated data for the final rules. For the CY 2007 OPPS final rule, we are proposing to use the ASP data from the first quarter of CY 2006, which would be the basis for calculating payment rates for drugs and biologicals in the physician office setting using the ASP methodology effective July 1, 2006, along with updated hospital claims data from CY 2005 to determine the final per day costs of drugs, biologicals, and radiopharmaceuticals and their packaging status in CY 2007. Subsequently, payment rates for CY 2007 separately payable drugs and biologicals will be updated to reflect applicable ASP-based rates effective in the physician office setting for services effective January 1, 2007.

Because, for the CY 2007 OPPS final rule, we are proposing to use ASP data from the first quarter of CY 2006, which would be the basis for calculating payment rates for drugs and biologicals in the physician office setting using the ASP methodology, effective July 1, 2006, along with updated hospital claims data from CY 2005 to determine the final per day costs of drugs, biologicals, and radiopharmaceuticals, the packaging status of these items using the updated data may be different from their packaging status determined based on the data we are using for this proposed rule. Under such circumstances, we are proposing to apply the following policies to these drugs, biologicals, and radiopharmaceuticals whose relationship to the $55 threshold changes based on the final updated data:

  • Drugs, biologicals, and radiopharmaceuticals that were paid separately in CY 2006 (which are proposed for separate payment in CY 2007), and then have per day costs less than $55 based on the updated ASPs and hospital claims data that would be used for the CY 2007 final rule with comment period, would continue to receive separate payment in CY 2007.
  • Drugs, biologicals, and radiopharmaceuticals that were packaged in CY 2006, (which are proposed for separate payment in CY 2007), and then have per day costs less than $55 based on the updated ASPs and hospital claims data that would be used for the CY 2007 final rule with comment period, would remain packaged in CY 2007.
  • Drugs, biologicals, and radiopharmaceuticals for which we propose packaged payment in CY 2007 but then have per day costs greater than $55 based on the updated ASPs and hospital claims data that would be used for the CY 2007 final rule with comment period, would receive separate payment in CY 2007.

We are requesting specific comments on these proposed policies for CY 2007. Start Printed Page 49584

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

a. Proposed Payment for Specified Covered Outpatient Drugs

(1) Background

Section 1833(t)(14) of the Act, as added by section 621(a)(1) of Public Law 108-173, requires special classification of certain separately paid radiopharmaceuticals, drugs, and biologicals and mandates specific payments for these items. Under section 1833(t)(14)(B)(i) of the Act, a “specified covered outpatient drug” is a covered outpatient drug, as defined in section 1927(k)(2) of the Act, for which a separate APC exists and that either is a radiopharmaceutical agent or is a drug or biological for which payment was made on a pass-through basis on or before December 31, 2002.

Under section 1833(t)(14)(B)(ii) of the Act, certain drugs and biologicals are designated as exceptions and are not included in the definition of “specified covered outpatient drugs.” These exceptions are—

• A drug or biological for which payment is first made on or after January 1, 2003, under the transitional pass-through payment provision in section 1833(t)(6) of the Act.

• A drug or biological for which a temporary HCPCS code has not been assigned.

• During CYs 2004 and 2005, an orphan drug (as designated by the Secretary).

Section 1833(t)(14)(A)(iii) of the Act, as added by section 621(a)(1) of Pub. L. 108 173, requires that payment for specified covered outpatient drugs in CY 2006 and subsequent years be equal to the average acquisition cost for the drug for that year as determined by the Secretary subject to any adjustment for overhead costs and taking into account the hospital acquisition cost survey data collected by the Government Accountability Office (GAO) in CYs 2004 and 2005. If hospital acquisition cost data are not available, the law requires that payment be equal to payment rates established under the methodology described in section 1842(o), section 1847A, or section 1847B of the Act as calculated and adjusted by the Secretary as necessary.

For CY 2006, we adopted a policy of paying for the acquisition and overhead costs of separately paid drugs and biologicals at a combined rate of ASP+6 percent. To calculate the ASP+6 percent payment rate, we evaluated the three data sources that were available to us for setting the CY 2006 payment rates for drugs and biologicals. As described in the CY 2006 OPPS final rule with comment period (70 FR 68639 through 68644), these data sources were the GAO reported average purchase prices for 55 specified covered outpatient drug categories for the period July 1, 2003 to June 30, 2004 collected via a survey of 1,400 acute care Medicare-certified hospitals; ASP data; and mean costs derived from CY 2004 hospital claims data used in developing the CY 2006 final rule with comment period. For the CY 2006 final rule with comment period, we used ASP data from the second quarter of CY 2005, which were used to set payment rates for drugs and biologicals in the physician office setting effective October 1, 2005. We also used updated claims data, reflecting all of the hospital claims data from CY 2004 and updated CCRs.

In our data analysis for the CY 2006 OPPS final rule with comment period, we compared the payment rates for drugs and biologicals using data from all three sources described above. We estimated aggregate expenditures for all drugs and biologicals (excluding radiopharmaceuticals) that would be separately payable in CY 2006 and for the 55 drugs and biologicals reported by the GAO using mean costs from the claims data, the GAO mean purchase prices, and the ASP-based payment amounts (ASP+6 percent in most cases), and then calculated the equivalent average ASP-based payment rate under each of the three payment methodologies. The results based on updated ASP and claims data were published in Table 24 of the CY 2006 OPPS final rule with comment period. For a full discussion of our reasons for using these data, refer to section V.B.3.a. of the CY 2006 OPPS final rule with comment period (70 FR 68639 through 68644).

As noted in the CY 2006 OPPS final rule with comment period, findings from a MedPAC survey of hospital charging practices indicated that hospitals set charges for drugs, biologicals, and radiopharmaceuticals high enough to reflect their pharmacy handling costs as well as their acquisition costs. Therefore, we believe the MedPAC survey indicated that payment for drugs and biologicals and pharmacy overhead at a combined ASP+6 percent rate would serve as the best proxy for the combined acquisition and overhead costs of each of these products.

(2) Proposed Payment Policy for CY 2007

The provision in section 1833(t)(14)(A)(iii) of the Act, as described above, continues to be applicable to determining payments for specified covered outpatient drugs for CY 2007. Similar to CY 2006, this provision requires that in CY 2007 payment for specified covered outpatient drugs be equal to the average acquisition cost for the drug for that year as determined by the Secretary subject to any adjustment for overhead costs and taking into account the hospital acquisition cost survey data collected by the Government Accountability Office (GAO) in CYs 2004 and 2005. If hospital acquisition cost data are not available, the law requires that payment be equal to payment rates established under the methodology described in section 1842(o), section 1847A, or section 1847B of the Act as calculated and adjusted by the Secretary as necessary. Additionally, section 1833(t)(14)(E)(ii) authorizes the Secretary to adjust APC weights for specified covered outpatient drugs to take into account the MedPAC report relating to overhead and related expenses, such as pharmacy services and handling costs.

For the CY 2007 proposed rule, we evaluated two data sources that we have available to us for setting the CY 2007 payment rates for drugs and biologicals. The first source of drug pricing information that we have is the ASP data from the fourth quarter of CY 2005, which were used to set payment rates for drugs and biologicals in the physician office setting effective April 1, 2006. We have ASP-based prices for approximately 500 drugs and biologicals (including contrast agents) payable under the OPPS; however, we currently do not have any ASP data on radiopharmaceuticals. Payments for most of the drugs and biologicals paid in the physician office setting are based on ASP+6 percent, and payments for items with no reported ASP are based on wholesale acquisition cost (WAC).

The second source of cost data that we have for drugs, biologicals, and radiopharmaceuticals are the mean and median costs derived from the CY 2005 hospital claims data. As section 1833(t)(14)(A)(iii) of the Act clearly specifies that payment for specified covered outpatient drugs in CY 2007 be equal to the “average” acquisition cost for the drug, we limited our analysis to the mean costs of drugs determined using the hospital claims data, instead of using median costs. Start Printed Page 49585

In our data analysis, we compared the payment rates for drugs and biologicals using data from both sources described above. We estimated aggregate expenditures for all drugs and biologicals (excluding radiopharmaceuticals) that would be separately payable in CY 2007 using mean costs from the hospital claims data and the ASP-based payment amounts (ASP+6 percent in most cases), and calculated the equivalent average ASP-based payment rate under both payment methodologies.

The results of our data analysis indicate that using mean unit cost to set the payment rates for the drugs and biologicals that would be separately payable in CY 2007 would be equivalent to basing their payment rates, on average, at ASP+5 percent. As noted in the CY 2006 proposed and final rules, findings from a MedPAC survey of hospital charging practices indicated that hospitals set charges for drugs, biologicals, and radiopharmaceuticals high enough to reflect their pharmacy handling costs as well as their acquisition costs. Therefore, the mean costs calculated using charges from hospital claims data converted to costs are representative of hospital acquisition costs for these products, as well as their related pharmacy overhead costs. Our calculations indicate that using mean unit costs to set the payment rates for all separately payable drugs and biologicals would be equivalent to basing their payment rates on the ASP+5 percent, on average. Because pharmacy overhead costs are already built into the charges for drugs, biologicals, and radiopharmaceuticals, our current data therefore indicate that payment for drugs and biologicals and pharmacy overhead at a combined ASP+5 percent rate would serve as the best proxy for the combined acquisition and overhead costs of each of these products. Therefore, for CY 2007, we are proposing a policy of paying for the acquisition and overhead costs of separately paid drugs and biologicals at a combined rate of ASP+5 percent.

In its final report on the hospital acquisition cost survey of specified covered outpatient drugs titled “Medicare Hospital Pharmaceuticals: Survey Shows Price Variation and Highlights Data Collection Lessons and Outpatient Rate-setting Challenges for CMS”, the GAO recommended that Secretary validate, on an occasional basis, manufacturers' reported drug ASPs as a measure of hospitals' acquisition costs using a survey of hospitals or other method that CMS determines to be similarly accurate and efficient. As we indicated in our written comments to the GAO on its draft report, we will continue to consider the best approach for setting payment rates for drugs and biologicals in light of this recommendation. We also indicated that we will continue to analyze the adequacy of ASP-based pricing in light of our hospital claims data, which for this CY 2007 OPPS proposed rule indicates that ASP+5 percent would be the best available proxy for hospitals' average acquisition and handling costs of drugs and biologicals in CY 2007.

We note that ASP data are unavailable for some drugs and biologicals. For these few drugs and biologicals, we are proposing to use the mean costs from the CY 2005 hospital claims data to determine their packaging status for ratesetting. Until we receive ASP data for these items, payment will be based on their mean cost calculated from CY 2005 hospital claims data. The payment rates for separately payable drugs and biologicals shown in Addenda A and B to this proposed rule represent payments for their acquisition and overhead costs.

Our proposal uses payment rates based on ASP data from the fourth quarter of 2005 because these are the most recent numbers available to us at this time. To be consistent with the ASP data that would be used to determine payments for these drugs and biologicals when furnished in physician offices, we propose to make any appropriate adjustments to the amounts shown in Addenda A and B to this proposed rule for those items on a quarterly basis as more recent ASP data become available and post the payment rate changes on our Web site during each quarter of CY 2007. We note that we would determine the packaging status of each drug or biological only once during the year during the update process; however, for the separately payable drugs and biologicals, we would update their ASP-based payment rates on a quarterly basis.

During the March 2006 meeting of the APC Panel, the Panel recommended that CMS examine pharmacy overhead costs issues and work with appropriate associations to study how to measure pharmacy overhead costs. The Panel also recommended that CMS solicit feedback on how pharmacy overhead costs should be reimbursed in the future.

In response to the APC Panel recommendations, we will continue to work on issues related to pharmacy overhead costs and request comments on other proposals that we can consider when establishing a future pharmacy overhead cost methodology. In addition, we note that we routinely accept requests from interested organizations to discuss their views about OPPS payment policy issues. We will consider the input of any individual or organization to the extent allowed by Federal law, including the Administrative Procedure Act (APA) and the Federal Advisory Committee Act (FACA). We establish the OPPS rates through regulations. We are required to consider the timely comments of interested organizations, establish the payment policies for the forthcoming year, and respond to the timely comments of all public commenters in the final rule in which we establish the payments for the forthcoming year.

We are specifically requesting public comments on our proposal to pay for acquisition and overhead costs of drugs and biologicals under the OPPS at ASP+5 percent and the adequacy of the payment rates to account for actual acquisition and overhead costs incurred by hospitals for these items.

In its October 31, 2005 letter of comment on proposed 2006 SCOD rates titled “Comments on Proposed 2006 SCOD Rates,” the GAO recommended that to better approximate hospitals' acquisition costs of SCODs the Secretary reconsider the level of proposed payment rates for drug SCODs, in relation to survey data on average purchase price, the role of rebates in determining acquisition costs, and the desirability of setting payment rates for SCODs at average acquisition costs. In the CY 2006 OPPS proposed rule (70 FR 42726), we noted that the comparison between the GAO purchase price data and the ASP data indicated that the GAO data on average were equivalent to ASP+3 percent. However, we also indicated that using mean unit cost from the CY 2004 hospital claims data to set the payment rates for the drugs and biologicals that would be separately payable in CY 2006 would be equivalent to basing their payment rates, on average, at ASP+8 percent. Therefore, we had proposed to establish payment for drugs and biologicals and their overhead costs at a combined rate of ASP+8 percent, where ASP+6 percent represented the acquisition cost of these items and 2 percent of ASP was for their overhead costs. For the CY 2006 OPPS final rule with comment period, where more recent ASP data, updated CCRs, and updated CY 2004 hospital claims data were available, we found that the comparison between the GAO purchase price data and the ASP data indicated that the GAO data on average were equivalent to ASP+4 percent, and using mean unit cost from hospital claims to set the payment rates for the drugs and Start Printed Page 49586biologicals that would be separately payable in CY 2006 would be equivalent to basing their payment rates, on average, at ASP+6 percent. Because pharmacy overhead costs are already built into the charges for drugs, biologicals, and radiopharmaceuticals, we noted in the CY 2006 OPPS final rule with comment period that our claims data indicated that payment for drugs and biologicals and their pharmacy overhead at a combined ASP+6 percent rate served as the best proxy for the combined acquisition and overhead costs of each of these products. For the CY 2007 proposed rule, as indicated earlier in the preamble, we compared the CY 2005 hospital claims data with more recent ASP data and determined that using mean unit cost to set payment rates for separately payable drugs and biologicals in CY 2007 would be equivalent to basing their payment rates, on average, at ASP+5 percent. This is the policy we are proposing for CY 2007, and we believe that this payment level would serve as the best proxy for the combined acquisition and overhead costs of separately payable drugs and biologicals in CY 2007.

In the CY 2006 OPPS final rule with comment period (70 FR 68661), we indicated that we will be paying for blood clotting factors at ASP+6 percent during CY 2006 under the OPPS and providing payment for the furnishing fee that is also a part of the payment for blood clotting factors furnished in physician offices under Medicare Part B. This furnishing fee will be updated each calendar year based on the consumer price index, and we will update the amount appropriately each year under the OPPS based upon the final amount noted in the Medicare Physician Fee Schedule final rule. In CY 2006, the furnishing fee is $0.146 per unit. For the CY 2007 OPPS, we are proposing to make payment for blood clotting factors at ASP+5 percent along with continuing payment for the furnishing fee using the updated amount for CY 2007. The proposed CY 2007 regulations establishing the ASP methodology and the furnishing fee for blood clotting factors under Medicare Part B can be found in the CY 2007 Medicare Physician Fee Schedule proposed rule. The updated furnishing fee amount for CY 2007 under the OPPS will be announced in the CY 2007 OPPS final rule.

(3) CY 2007 Proposed Payment Policy for Radiopharmaceuticals

Section 303(h) of Pub. L. 108-173 exempted radiopharmaceuticals from ASP pricing in the physician office setting where the fewer numbers (relative to the hospital outpatient setting) of radiopharmaceuticals are priced locally by Medicare contractors. Consequently, we do not have ASP data for radiopharmaceuticals. However, the law also requires us to make payments for specified covered outpatient drugs, including radiopharmaceuticals, equal to the average acquisition cost for the drug as determined by the Secretary and subject to any adjustment for overhead costs. We expect hospitals' different purchasing and preparation and handling practices for radiopharmaceuticals to be reflected in their charges. Therefore, for CY 2006, we calculated per day costs of radiopharmaceuticals using mean unit costs from the CY 2004 hospital claims data to determine the items' packaging status similar to the drugs and biologicals with no ASP data. For CY 2006, we implemented a 1-year temporary policy to pay for separately payable radiopharmaceuticals based on the hospital's charge for each radiopharmaceutical adjusted to cost. We clearly stated in our CY 2006 OPPS final rule with comment period that we did not intend to maintain the CY 2006 methodology permanently (70 FR 68656) and that we would actively seek other methodologies for setting payments for radiopharmaceuticals in CY 2007.

During the March 2006 meeting of the APC Panel, the Panel recommended that CMS work with stakeholders to continue to develop a methodology to pay for radiopharmaceuticals. We note that we routinely accept requests from interested organizations to discuss their views about OPPS payment policy issues. We will consider the input of any individual or organization to the extent allowed by Federal law, including the Administrative Procedure Act (APA) and the Federal Advisory Committee Act (FACA). We establish OPPS rates through regulations. We are required to consider the timely comments of interested organizations, establish the payment policies for the forthcoming year, and respond to the timely comments of all public commenters in the final rule in which we establish the payments for the forthcoming year. We have considered comments and information from interested organizations in developing these policy options for CY 2007.

Over this past year, despite reviews of the literature and numerous discussions with interested individuals and organizations from the radiopharmaceutical industry, we have received no specific suggestions from hospitals or industry regarding alternative prospective payment methodologies for radiopharmaceuticals that could be used in place of our CY 2006 cost-based payment methodology. However, in its final report on the hospital acquisition cost survey of specified covered outpatient drugs, titled “ Medicare Hospital Pharmaceuticals: Survey Shows Price Variations and Highlights Data Collection Lesson and Outpatient Rate-setting Challenges for CMS,” the GAO acknowledged that the distinctive nature of radiopharmaceuticals as compared with other drugs poses special challenges for collecting and interpreting hospital cost data. They discussed the challenges of balancing accuracy and efficiency in obtaining price data on radiopharmaceutical specified covered outpatient drugs. They concluded that the best option available to CMS, in terms of accuracy and efficiency, is for the Secretary to collect and use ready-to-use unit-dose prices paid by hospitals when available as the data source for setting and updating Medicare payment rates for radiopharmaceutical specified covered outpatient drugs. As we indicated in our written comments to the GAO on its draft report, we remain uncertain about whether a survey to collect unit-dose acquisition costs would be conducted as a survey of hospitals or manufacturers. We are also concerned about the level of expense and administrative burden that would be placed on the party reporting such information, based on the GAO's experience in surveying hospitals regarding radiopharmaceutical acquisition costs. The survey approach could lead to a very inefficient methodology for establishing payment rates. We also note that in conducting a survey to obtain ready-to-use unit-dose prices for radiopharmaceuticals, we would be able to collect this information for only a small number of radiopharmaceuticals that are purchased in unit-dose forms by hospitals; however, we believe that it is important to apply a consistent payment methodology to determine payments for all separately payable radiopharmaceuticals. Even though we are not proposing to adopt the GAO's recommendation for CY 2007, we will continue to explore this recommendation for future updates of the OPPS.

In developing the payment policy proposal for separately payable radiopharmaceuticals for the CY 2007 proposed rule, we considered several additional policy options. The first option we considered proposing was to package additional Start Printed Page 49587radiopharmaceuticals, either through packaging payments for all radiopharmaceuticals with payments for the services with which they are billed or increasing the packaging threshold for radiopharmaceuticals from a cost of $55 per day to a higher amount. In contrast to other separately payable drugs where the administration of many drugs is reported with only a few drug administration HCPCS codes, only a small number of specific radiopharmaceuticals may be appropriately provided in the performance of each particular nuclear medicine procedure. Because the provision of nuclear medicine procedures always requires one or more radiopharmaceuticals, packaging more radiopharmaceuticals effectively results in some increases in the costs of the associated nuclear medicine procedures to reflect the greater packaging of the radiopharmaceuticals. The specific increased procedural costs observed are dependent upon the volumes and costs of various radiopharmaceuticals used in the procedures and thus reflect an average cost across clinical scenarios where providers may choose among several radiopharmaceuticals for the procedures. A policy to package additional radiopharmaceuticals would be very consistent with OPPS packaging principles and payment policies which generally provide appropriate payment for the average service and would provide greater administrative simplicity for hospitals. Because we believe that radiopharmaceutical handling costs are included in hospitals charges for the radiopharmaceuticals themselves, payments for the nuclear medicine procedures would include payments for the handling costs of the radiopharmaceuticals used under this option.

In examining our claims data for CY 2005, we noted that significant numbers of claims for nuclear medicine procedures included no HCPCS codes for radiopharmaceuticals. While it is possible that hospitals used packaged radiopharmaceuticals in some studies and therefore chose not to report them separately, it is also possible that some hospitals may have included charges for the required radiopharmaceuticals in their charges for the nuclear medicine procedures themselves. Packaging additional radiopharmaceuticals would be consistent with the charging practices of some hospitals that already may not be separately reporting radiopharmaceuticals, even when those radiopharmaceuticals would receive separate payment under the OPPS. Were we to package additional radiopharmaceuticals under the OPPS, consistent with our packaging policies for implantable devices, we might need to establish edits to ensure that radiopharmaceutical charges were always included on claims for nuclear medicine procedures, as has been suggested to us by interested organizations.

However, under a policy of increased packaging of radiopharmaceuticals, payments for certain nuclear medicine procedures could potentially be less than the costs of some of the packaged radiopharmaceuticals and relatively expensive and high volume radiopharmaceuticals could become packaged. In addition, our payment policy could discourage selection of the most clinically appropriate radiopharmaceutical for a particular nuclear medicine procedure, especially if that radiopharmaceutical were expensive and not commonly used so that its costs were not fully reflected in the payment for the nuclear medicine procedure. In addition, the statutory definition of a “specified covered outpatient drug” for OPPS purposes that includes radiopharmaceutical agents appears more consistent with the treatment of radiopharmaceuticals like other drugs under the OPPS, at least when this is feasible. We solicit public comment on the merits of establishing a higher packaging threshold for radiopharmaceuticals, given their unique characteristics.

The second option that we considered proposing was to continue the temporary CY 2006 methodology of paying for separately payable radiopharmaceuticals at charges reduced to cost, where payment would be determined using each hospital's overall CCR, and establishing our radiopharmaceutical packaging threshold at $55, as we are proposing for other drugs under the CY 2007 OPPS. This policy would provide stability to the payment methodology for radiopharmaceuticals from CY 2006 to CY 2007. As we indicated for CY 2007, this payment methodology provides an acceptable proxy for the average acquisition of the radiopharmaceutical along with its handling cost.

However, as also indicated previously, we stated in the CY 2006 OPPS final rule with comment period that this payment policy was intended to be only a temporary policy, and that we would consider alternative methodologies to base radiopharmaceutical payments on for the CY 2007 OPPS update. We generally do not make payments under the OPPS for items and services at cost, particularly if we do not expect the costs of services to vary substantially and unpredictably over time and if we have hospital claims data available. Paying for radiopharmaceuticals at cost provides hospitals with no incentive to supply radiopharmaceuticals in the most efficient manner. In its comments on the CY 2006 OPPS proposed rule, the GAO expressed concern that this methodology would be likely to result in payments that exceed hospitals' acquisition costs for certain radiopharmaceuticals. Estimates of our CY 2006 payments for radiopharmaceuticals reveal variation from the 25th to 75th payment percentile of 2 to 9 fold, depending on the specific radiopharmaceutical. We do not believe that the radiopharmaceutical acquisition and handling costs for different hospitals to provide most radiopharmaceuticals should vary that greatly. In addition, using hospitals' overall CCRs to determine payments likely results in an overstatement of radiopharmaceutical costs, which are likely reported in several cost centers such as diagnostic radiology that have lower CCRs than hospitals' overall CCRs.

The third option that we considered and are proposing for CY 2007 is to establish prospective payment rates for separately payable radiopharmaceuticals using mean costs derived from the CY 2005 claims data, where the costs are determined using our standard methodology of applying hospital-specific departmental CCRs to radiopharmaceutical charges, defaulting to hospital-specific overall CCRs only if appropriate departmental CCRs are unavailable. This proposal establishes our packaging threshold for radiopharmaceuticals at $55, as for other drugs under the CY 2007 OPPS. We believe this option provides us with the most consistent, accurate, and efficient methodology for prospectively establishing payment rates for separately payable radiopharmaceuticals. This is our preferred payment proposal for radiopharmaceuticals because this methodology is consistent with how payment rates for other services are determined under the OPPS and provides for prospective payments that serve as appropriate proxies for the average acquisition costs of the radiopharmaceuticals along with their handling costs. The MedPAC has indicated that hospitals currently include the charge for radiopharmaceutical handling in their charge for the radiopharmaceutical. In addition, this approach provides an average payment to hospitals, consistent Start Printed Page 49588with the statutory requirement that we pay the average acquisition cost, in comparison with our CY 2006 cost-based policy which paid each hospital differently for each claim based on the claim's charges and the hospital's overall CCR.

We believe that this methodology would likely pay more accurately for radiopharmaceuticals, and provide incentives for their efficient acquisition and preparation. Also, as discussed earlier, MedPAC indicated that hospitals include charges for handling costs in their charge for radiopharmaceuticals; therefore, mean costs based on our claims data would represent both the acquisition and overhead costs of the separately payable radiopharmaceuticals. We believe that this payment policy could also be an appropriate long-term radiopharmaceutical payment policy that would allow us to consistently establish prospective OPPS payment rates for the acquisition and overhead costs of separately payable radiopharmaceuticals. Because we will be paying separately for radiopharmaceuticals with mean costs per day greater than $55, without additional radiopharmaceutical packaging for CY 2007, we see no reason to establish edits for the presence of radiopharmaceutical codes on claims for nuclear medicine procedures as, in many cases, payments for the procedures do not include payments for the radiopharmaceuticals used.

Under each of the payment options for radiopharmaceuticals, we considered that beginning with CY 2007 and going forward we would update the packaging threshold for inflation using an inflation adjustment factor based on the Producer Price Index (PPI) for prescription preparations. As discussed elsewhere in the preamble, the adjusted amount for CY 2007 was determined to be $55.

In its October 31, 2005 letter of comment on proposed 2006 SCOD rates titled “Comments on Proposed 2006 SCOD Rates”, the GAO recommended that to better approximate hospitals' acquisition costs of SCODs that the Secretary reconsider the decision to base payment rates for radiopharmaceutical SCODs exclusively on estimated costs in light of the availability of data on actual prices paid for key radiopharmaceuticals. As we did not have ASPs for radiopharmaceuticals that best represent market prices, in the CY 2006 OPPS final rule with comment period, we finalized a temporary 1-year policy for CY 2006 to pay for radiopharmaceuticals that were separately payable in CY 2006 based on the hospital's charge for each radiopharmaceutical agent adjusted to cost. We noted that MedPAC has indicated that hospitals currently include the charge for pharmacy overhead costs in their charge for the radiopharmaceutical. Therefore, we believed that paying for these items on the basis of charges converted to cost would be the best available proxy for the average acquisition cost of the radiopharmaceutical along with its handling cost in CY 2006. We did not use the GAO hospital purchase prices as the basis for setting payments because when we examined differences between the CY 2005 payment rates for these nine radiopharmaceuticals and their GAO mean purchase prices, we found that the GAO purchase prices were substantially lower for several of these agents. We indicated that our intent was to maintain consistency, whenever possible, between the payment rates for these agents from CY 2005 to CY 2006. For CY 2007, however, we considered several payment options for radiopharmaceuticals that we discussed above and are proposing to establish prospective payment rates for separately payable radiopharmaceuticals using mean costs derived from the CY 2005 claims data.

We note that the National HCPCS Panel changed the codes and the descriptors of many of the radiopharmaceutical products effective January 1, 2006, in some cases moving from prior code descriptors based upon units of radioactivity to new descriptors based on study doses. The hospital claims data we used for our analysis are based on radiopharmaceutical HCPCS codes that were in effect during CY 2005. Because there were significant changes in HCPCS code descriptors for several radiopharmaceuticals from CY 2005 to CY 2006, implementation of the proposed payment methodology for radiopharmaceuticals requires us to crosswalk the cost data for these radiopharmaceuticals that are in terms of the CY 2005 codes to the updated CY 2006 codes that we expect to be in effect during CY 2007. The mean cost data per unit of many CY 2005 codes can be directly crosswalked to the new CY 2006 codes because the products and units included in the code descriptors are essentially the same. However, there are several CY 2005 codes with descriptors specifying units of radioactivity that were changed to per study dose units in CY 2006. For these radiopharmaceuticals, we are proposing to calculate their per day costs based on the CY 2005 codes and use those per day costs as proxies for the per study dose costs of the CY 2006 codes. We believe that patients would generally receive one study dose of these radiopharmaceuticals each day, and our CY 2005 claims data show that they were most commonly billed with specific nuclear medicine procedures that normally include a single radiopharmaceutical dose on a given day. Therefore, the per day costs of these radiopharmaceuticals calculated based on claims reporting the CY 2005 codes should be an appropriate basis for determining the payment rates for the CY 2006 HCPCS codes.

Out of the 39 radiopharmaceutical HCPCS codes that we are proposing to pay separately for in CY 2007, we are able to directly crosswalk the CY 2005 cost data to 31 of these codes. The descriptors for the remaining eight codes changed from per unit of radioactivity in CY 2005 to new descriptors based on per study doses in CY 2006. Therefore, we are proposing to use the per day costs based on the CY 2005 claims data as proxies for the per study dose costs for this subset of radiopharmaceutical HCPCS codes to be reported in CY 2007.

There are three cases where two CY 2005 HCPCS codes were mapped to one new CY 2006 code that will be reported in CY 2007. These three CY 2006 HCPCS codes are A9550, A9553, and A9559. Because of the complicated nature of crosswalking the cost data for two predecessor HCPCS codes with different units in their descriptors to each of these new HCPCS codes, we are proposing to crosswalk the cost data only from the predecessor HCPCS codes with the most claims volume in CY 2005 to each of these three HCPCS codes to be reported for CY 2007.

Table 26 below lists all of the CY 2007 separately payable radiopharmaceuticals and the predecessor HCPCS codes whose claims data were used to set the CY 2007 proposed payment rates and notes the crosswalk methodology used for the proposed rates.

Start Printed Page 49589

Start Printed Page 49590

Start Printed Page 49591

Start Printed Page 49592

Start Printed Page 49593

We specifically request public comment on the radiopharmaceutical payment methodology that we are proposing for the CY 2007 OPPS update. We also seek public comment on the possibility of developing an alternative packaging threshold for radiopharmaceuticals to provide greater administrative simplicity for hospitals. Additionally, we request public comment on the crosswalk that we are proposing to use to determine the CY 2007 payment rates for separately payable radiopharmaceuticals.

While payments for drugs, biologicals and radiopharmaceuticals are taken into account when calculating budget neutrality, we note that we are proposing to make payments for drugs, biologicals, and radiopharmaceuticals without scaling these payment amounts. Start Printed Page 49594Section 1833(t)(14)(A)(iii)(I) requires that, beginning in CY 2006, we pay for a separately payable drug on the basis of “the average acquisition cost of the drug.” As we stated in the CY 2006 OPPS final rule with comment period (70 FR 42728), we believe that the best interpretation of the specific requirement that we pay for such drugs on the basis of average acquisition cost, is that these payments themselves should not be adjusted as part of meeting the statutory budget neutrality requirement. If we were to apply a budget neutrality scalar to these payments, we would no longer be paying the average acquisition cost, but rather an adjusted average acquisition cost, for separately payable drugs, biologicals, and radiopharmaceuticals. We believe that these amounts, without a budget neutrality scalar applied, are the best proxies we have for the aggregate average acquisition and pharmacy overhead and handling costs of drugs, biologicals, and radiopharmaceuticals.

b. Proposed CY 2007 Payment for Nonpass-Through Drugs, Biologicals, and Radiopharmaceuticals With HCPCS Codes, But Without OPPS Hospital Claims Data

Pub. L. 108-173 does not address the OPPS payment in CY 2005 and after for new drugs, biologicals, and radiopharmaceuticals that have assigned HCPCS codes, but that do not have a reference AWP or approval for payment as pass-through drugs or biologicals. Because there is no statutory provision that dictated payment for such drugs and biologicals in CY 2005, and because we had no hospital claims data to use in establishing a payment rate for them, we investigated several payment options for CY 2005 and discussed them in detail in the CY 2005 OPPS final rule with comment period (69 FR 65797 through 65799).

For CYs 2005 and 2006, we finalized the policy to pay separately for new drugs, biologicals, and radiopharmaceuticals with HCPCS codes, but which did not have pass-through status at a rate that was equivalent to the payment they received in the physician office setting, which was established in accordance with the ASP methodology. For CY 2007, we are proposing to continue payment for these new drugs and biologicals with HCPCS codes as of January 1, 2007, but which do not have pass-through status, at a rate that is equivalent to the payment they would receive in the physician office setting, which would be established in accordance with the ASP methodology described in the CY 2006 Medicare Physician Fee Schedule final rule, where payment would generally be equal to ASP+6 percent. In accordance with the ASP methodology, in the absence of ASP data, we are continuing the policy we implemented during CYs 2005 and 2006 of using the wholesale acquisition cost (WAC) for the product to establish the initial payment rate. We note, however, that if the WAC is also unavailable, we would make payment at 95 percent of the product's most recent AWP. We are proposing to adopt this interim payment methodology in order to be consistent with how we pay for new drugs, biologicals, and radiopharmaceuticals without HCPCS codes, as discussed in the CY 2006 OPPS final rule with comment period (70 FR 68669). We further note that with respect to items for which we do not have ASP data, once their ASP data become available in later quarter submissions, their payment rates under OPPS will be adjusted so that the rates are based on the ASP methodology and set to ASP+6 percent. In the event that the drug or biological is covered under the competitive acquisition program, then we propose to pay for it at the payment rate calculated under this program consistent with the provisions in section 1847B of the Act. We propose to base payment for new radiopharmaceuticals with HCPCS codes as of January 1, 2007, but which do not have pass-through status, on the WACs for these products as ASP data for radiopharmaceuticals are not available. In addition, we note that if the WACs are also unavailable, then we would make payment for the radiopharmaceuticals at 95 percent of their most recent AWPs. We are proposing to adopt this interim payment methodology in order to be consistent with how we pay for new drugs, biologicals, and radiopharmaceuticals without HCPCS codes, as discussed in the CY 2006 OPPS final rule with comment period (70 FR 68669). To be consistent with the ASP-based payments that would be made when the new drugs and biologicals are furnished in physician offices, we are proposing to make any appropriate adjustments to their payment amounts in the CY 2007 OPPS final rule and also on a quarterly basis on our Web site during CY 2007 if later quarter ASP submissions (or more recent WACs or AWPs) indicate that adjustments to the payment rates for these drugs and biologicals are necessary. The payment rates for new radiopharmaceuticals would also be adjusted accordingly. We are also proposing to make appropriate adjustments to the payment rates for new drugs and biologicals in the event that they become covered under the competitive acquisition program in the future.

As discussed in the CY 2005 OPPS final rule with comment period (69 FR 65797), and the CY 2006 OPPS final rule with comment period (70 FR 68666), new drugs, biologicals, and radiopharmaceuticals may be expensive, and we are concerned that packaging these new items might jeopardize beneficiary access to them. In addition, we do not want to delay separate payment for these items solely because a pass-through application was not submitted. The payment methodologies described above are the same as the methodologies that would be used to calculate the OPPS payment amount that pass-through drugs, biologicals, and radiopharmaceuticals would be paid in CY 2007. We refer readers to section V.A. of this preamble for a discussion of payment policies of pass-through drugs, biologicals, and radiopharmaceuticals under OPPS. Consequently, we are proposing to continue to treat new drugs, biologicals, and radiopharmaceuticals with newly established HCPCS codes the same, irrespective of whether pass-through status has been determined. We also are proposing to assign status indicator “K” to HCPCS codes for new drugs, biologicals, and radiopharmaceuticals for which we have not received a pass-through application. We specifically request comments on our proposed payment policies for new drugs, biologicals, and radiopharmaceuticals with HCPCS codes but which do not have pass-through status as of January 1, 2007. The new CY 2007 HCPCS codes for drugs, biologicals, and radiopharmaceuticals are not available at the time of the development of this proposed rule; however, they will be included in the CY 2007 OPPS final rule.

There are several drugs, biologicals, and radiopharmaceuticals that were payable during CY 2005 or where HCPCS codes for products were created effective January 1, 2006, for which we do not have any CY 2005 hospital claims data. In order to determine the packaging status of these items for CY 2007, we calculated an estimate of the per day cost of each of these items by multiplying the payment rate for each product based on ASP+5 percent similar to other separately payable nonpass-through drugs and biologicals under the OPPS and, as determined using the ASP methodology as described in section V.B.3.a.2. of this preamble, by an estimated average number of units of each product that would typically be Start Printed Page 49595furnished to a patient during one administration in the hospital outpatient setting. We are proposing to package items for which we estimate the per administration cost to be less than $55, which is the packaging threshold that we are proposing for drugs, biologicals, and radiopharmaceuticals in CY 2007, and pay separately for items with an estimated per administration cost greater than $55. We are proposing that the CY 2007 payment for separately payable items would be based on rates determined using the ASP methodology established in the physician office setting and set to ASP+5 percent, similar to other separately payable nonpass-through drugs and biologicals under the OPPS. In accordance with the ASP methodology used in the physician office setting, in the absence of ASP data, we would use the WAC for the product to establish the initial payment rate. We note, however, that if the WAC is also unavailable, then we would make payment at 95 percent of the most recent AWP available. We note that for radiopharmaceutical agents that do not have any CY 2005 hospital claims data, we propose to determine their packaging status and, if the items are separately payable, then establish their payment rates using the WACs for the products because ASP data are not available for any radiopharmaceuticals. We also note that if the WACs are unavailable, then we would use payment at 95 percent of the most recent AWPs to determine their packaging status and payment rates. In order to determine the packaging status and payment rates for these drugs, biologicals, and radiopharmaceuticals in this proposed rule, we used ASP data from the fourth quarter of 2005 or the most recent WAC or AWP data available at this time, as appropriate.

Table 27 below lists all of the items without available CY 2005 claims data to which these policies would apply in CY 2007. There are three HCPCS codes for which we were not able to determine payment rates based on the ASP methodology. The HCPCS codes are 90393 (Vaccina ig, im), 90693 (Typhoid vaccine, akd, sc), and A9567 (Technitium TC-99m aerosol). Because we are unable to estimate the per administration cost of these items, we are proposing to package them in CY 2007. We are seeking comments on our proposed policies for determining the per administration cost of the drugs, biologicals, and radiopharmaceuticals that are payable under the OPPS, but do not have any CY 2005 claims data.

Table 27.—Drugs, Biologicals, and Radiopharmaceuticals Without CY 2005 Claims Data

HCPCS codeDescriptionASP-based payment rateEstimated average number of units per administrationCY 2007 proposed SI
90714Td vaccine no prsrv >/= 7 im$18.091N
90727Plague vaccine, im150.001K
A9535Injection, methylene blue2.8710N
J0132Acetylcysteine injection1.86210K
J0200Alatrofloxacin mesylate16.032.5N
J0278Amikacin sulfate injection1.335.25N
J0288Ampho b cholesteryl sulfate12.0035K
J0350Injection anistreplase 30 u2,265.461K
J0395Arbutamine HCl injection160.001K
J1452Intraocular Fomivirsen na210.001K
J2425Palifermin injection11.3784K
J2805Sincalide injection44.141N
J2850Inj secretin synthetic human20.3114K
J3355Urofollitropin, 75 iu48.842K
J3471Ovine, up to 999 USP units0.11150N
J3472Ovine, 1000 USP units133.771K
J7341Non-human, metabolic tissue1.6450K
J8540Oral dexamethasone0.0780N
J9225Histrelin implant2,019.821K
Q9958HOCM ≤ 149 mg/ml iodine, 1ml0.06100N
Q9959HOCM 150-199mg/ml iodine,1ml0.08100N
Q9960HOCM 200-249mg/ml iodine,1ml0.09100N
Q9961HOCM 250-299mg/ml iodine,1ml0.17100N
Q9962HOCM 300-349mg/ml iodine,1ml0.14100N
Q9963HOCM 350-399mg/ml iodine,1ml0.39100N
Q9964HOCM ≥ 400mg/ml iodine, 1ml0.19100N

VI. Proposed Estimate of OPPS Transitional Pass-Through Spending in CY 2007 for Drugs, Biologicals, Radiopharmaceuticals, and Devices

(If you choose to comment on issues in this section, please include the caption “OPPS: Estimated Transitional Pass-Through Spending” at the beginning of your comment.)

A. Total Allowed Pass-Through Spending

Section 1833(t)(6)(E) of the Act limits the total projected amount of transitional pass-through payments for drugs, biologicals, radiopharmaceuticals, and categories of devices for a given year to an “applicable percentage” of projected total Medicare and beneficiary payments under the hospital OPPS. For a year before CY 2004, the applicable percentage was 2.5 percent; for CY 2004 and subsequent years, we specify the applicable percentage up to 2.0 percent.

If we estimate before the beginning of the calendar year that the total amount of pass-through payments in that year would exceed the applicable percentage, section 1833(t)(6)(E)(iii) of the Act requires a uniform reduction in the amount of each of the transitional pass-through payments made in that year to ensure that the limit is not exceeded. We make an estimate of pass-through spending to determine not only whether Start Printed Page 49596payments exceed the applicable percentage, but also to determine the appropriate reduction to the conversion factor for the projected level of pass-through spending in the following year.

For devices, making an estimate of pass-through spending in CY 2007 entails estimating spending for two groups of items. The first group consists of those items for which we have claims data for procedures that we believe used devices that were eligible for pass-through status in CY 2005 and CY 2006 and that would continue to be eligible for pass-through payment in CY 2007. The second group consists of those items for which we have no direct claims data, that is, items that became, or would become, eligible in CY 2006 and would retain pass-through status in CY 2007, as well as items that would be newly eligible for pass-through payment beginning in CY 2007.

B. Proposed Estimate of Pass-Through Spending for CY 2007

We are proposing to set the applicable percentage cap at 2.0 percent of the total OPPS projected payments for CY 2007. As we discuss in section IV.B. of this preamble, there is one device category receiving pass-through payment in CY 2006 that will continue for payment during CY 2007. Therefore, we estimate pass-through spending attributable to the first group of items described above to be $36.8 million.

To estimate CY 2007 pass-through spending for device categories in the second group, that is, items for which we have no direct claims data, we used the following approach: For additional device categories that are approved for pass-through status after July 1, 2006, but before January 1, 2007, we are proposing to use price information from manufacturers and volume estimates based on claims for procedures that would most likely use the devices in question because we do not have any CY 2005 claims data upon which to base a spending estimate. We are proposing to project these data forward to CY 2007 using inflation and utilization factors based on total growth in OPPS services as projected by CMS' Office of the Actuary (OACT) to estimate CY 2007 pass-through spending for this group of device categories. We may use an alternate growth factor for any specific new device category based on our claims data or the device's clinical characteristics, or both. For device categories that become eligible for pass-through status in CY 2007, we are proposing to use the same methodology. We anticipate that any new categories for January 1, 2007, would be announced after the publication of this proposed rule, but before publication of the final rule with comment period. Therefore, the estimate of pass-through spending in the CY 2007 OPPS final rule with comment period would incorporate any pass-through spending for device categories made effective January 1, 2007, and during subsequent quarters of CY 2007.

With respect to CY 2007 pass-through spending for drugs and biologicals, as we explain in section V.A.3. of this proposed rule, the pass-through payment amount for new drugs and biologicals that we determine have pass-through status will equal zero. Therefore, our estimate of pass-through spending for drugs and biologicals with pass-through status in CY 2007 equals zero.

In the CY 2005 OPPS final rule with comment period (69 FR 65810), we indicated that we are accepting pass-through applications for new radiopharmaceuticals that are assigned a HCPCS code on or after January 1, 2005. (Prior to this date, radiopharmaceuticals were not included in the category of drugs paid under the OPPS, and therefore, were not eligible for pass-through status.) We have no new radiopharmaceuticals that were added for pass-through payment in CY 2005 or to this point in CY 2006, and we currently have no information identifying new radiopharmaceuticals to which a HCPCS code might be assigned on or after January 1, 2007, for which pass-through payment status would be sought. We also have no data regarding payment for new radiopharmaceuticals with pass-through status under the methodology that we specified in the CY 2005 OPPS final rule with comment period. However, we do not believe that pass-through spending for new radiopharmaceuticals in CY 2007 will be significant enough to materially affect our estimate of total pass-through spending in CY 2007. Therefore, we are not including radiopharmaceuticals in our estimate of pass-through spending for CY 2007. We discuss the methodology for determining the proposed CY 2007 payment amount for radiopharmaceuticals with pass-through status in section V.B.3.b. of this preamble.

In accordance with the methodology described above, we estimate that total pass-through spending for both device categories that are continuing into CY 2007 and that first become eligible for pass-through status during CY 2007 would equal approximately $43.2 million, which represents 0.13 percent of total OPPS projected payments for CY 2007. This figure includes estimates for the current device category continuing into CY 2007, which equals $36.8 million, in addition to projections for categories that may become eligible after publication of this proposed rule but before the end of CY 2006, and for projections for new categories that may become eligible during CY 2007.

Table 28.—Estimates for CY 2007 Transitional Pass-Through Spending for Current Pass-Through Categories Continuing Into CY 2007

HCPCSAPCExisting pass-through device categoryCY 2007 estimated utilizationCY 2007 estimated pass-through payments
C18201820Generator, neurostimulator (implantable), with rechargeable battery and charging system4,568$36,766,720

Because we estimate pass-through spending in CY 2007 will not amount to 2.0 percent of total projected OPPS CY 2007 spending, we are proposing to return 1.87 percent of the pass-through pool to adjust the conversion factor, as we discuss in section II.C. of this preamble.

VII. Proposed Brachytherapy Source Payment Changes

(If you choose to comment on issues in this section, please include the caption “OPPS: Brachytherapy” at the beginning of your comment.)

A. Background

Section 1833(t)(2)(H) of the Act, as added by section 621(b)(2)(C) of Pub. L. 108-173, mandated the creation of separate groups of covered OPD services that classify brachytherapy devices separately from other services or groups of services. The additional groups must Start Printed Page 49597reflect the number, isotope, and radioactive intensity of the devices of brachytherapy furnished, including separate groups for Palladium-103 and Iodine-125 devices. In accordance with this provision, since CY 2004 we have established four new brachytherapy source codes and descriptors.

Section 1833(t)(16)(C) of the Act, as added by section 621(b)(1) of Pub. L. 108-173, established payment for devices of brachytherapy consisting of a seed or seeds (or radioactive source) based on a hospital's charges for the service, adjusted to cost. The period of payment under this provision is for brachytherapy sources furnished from January 1, 2004, through December 31, 2006. Under section 1833(t)(16)(C) of the Act, charges for the brachytherapy devices may not be used in determining any outlier payments under the OPPS for that period of payment. Consistent with our practice under the OPPS to exclude items paid at cost from budget neutrality consideration, these items have been excluded from budget neutrality for that time period as well.

In the OPPS interim final rule with comment period published on January 6, 2004 (69 FR 827), we implemented sections 621(b)(1) and (b)(2)(C) of Pub. L. 108-173. In that rule, we stated that we would pay for the brachytherapy sources listed in Table 4 of the interim final rule with comment period (69 FR 828) on a cost basis, as required by the statute. Since January 1, 2004, we have used status indicator “H” to denote nonpass-through brachytherapy sources paid on a cost basis, a policy that we finalized in the CY 2005 final rule with comment period (69 FR 65838).

Furthermore, we adopted a standard policy for brachytherapy code descriptors, beginning January 1, 2005. We included “per source” in the HCPCS code descriptors for all those brachytherapy source descriptors for which units of payment were not already delineated.

Section 621(b)(3) of Pub. L. 108-173 requires the Government Accountability Office (GAO) to conduct a study to determine appropriate payment amounts for devices of brachytherapy, and to submit a report on its study to the Congress and the Secretary, including recommendations. The GAO's final report, published at the end of July 2006, was not available in time to review and discuss in this proposed rule. We plan to discuss the report's findings and recommendations in the CY 2007 OPPS final rule with comment period.

B. Proposed Payments for Brachytherapy Sources in CY 2007

As indicated above, the provision to pay for brachytherapy sources at charges reduced to cost expires after December 31, 2006, in accordance with section 1833(t)(16)(C) of the Act. However, under section 1833(t)(2)(H) of the Act, we are still required to create APC groupings that classify devices of brachytherapy separately from other services or groups of services in a manner reflecting the number, isotope, and radioactive intensity of the devices of brachytherapy furnished.

We are proposing to pay separately for each of the sources listed in Table 29 below on a prospective basis for CY 2007, with payment rates to be determined using the CY 2005 claims-based median cost per source for each brachytherapy device. Consistent with our policy regarding APC payments made on a prospective basis, we are proposing that the cost of brachytherapy sources be subject to the outlier provisions of section 1833(t)(5) of the Act. As indicated in section II.A.2. of the preamble to this proposed rule, for CY 2007, we are proposing a specific payment rate for brachytherapy sources, which will be subject to scaling for budget neutrality.

Table 29 includes a complete listing of the HCPCS codes, long descriptors, APC assignments, APC titles, and status indicators that we currently use for brachytherapy sources paid under the OPPS in CY 2006 and that we are proposing to use for CY 2007. The brachytherapy sources and related information in Table 29 are the same sources and information as those listed in Table 28 of the OPPS CY 2006 final rule with comment period (70 FR 68676). No additional brachytherapy sources have been added since the CY 2006 final rule with comment period.

Table 29.—Proposed Separately Payable Brachytherapy Sources for CY 2007

HCPCS codeLong descriptorAPCAPC titleNew status indicator
C1716Brachytherapy source, Gold 198, per source1716Brachytx source, Gold 198K
C1717Brachytherapy source, High Dose Rate Iridium 192, per source1717Brachytx source, HDR Ir-192K
C1718Brachytherapy source, Iodine 125, per source1718Brachytx source, Iodine 125K
C1719Brachytherapy source, Non-High Dose Rate Iridium 192, per source1719Brachytx source, Non-HDR Ir-192K
C1720Brachytherapy source, Palladium 103, per source1720Brachytx source, Palladium 103K
C2616Brachytherapy source, Yttrium-90, per source2616Brachytx source, Yttrium-90K
C2632Brachytherapy solution, Iodine125, per mCi2632Brachytx sol, I-125, per mCiK
C2633Brachytherapy source, Cesium-131, per source2633Brachytx source, Cesium-131K
C2634Brachytherapy source, High Activity, Iodine-125, greater than 1.01 mCi (NIST), per source2634Brachytx source, HA, I-125K
C2635Brachytherapy source, High Activity, Palladium-103, greater than 2.2 mCi (NIST), per source2635Brachytx source, HA, P-103K
C2636Brachytherapy linear source, Palladium-103, per 1MM2636Brachytx linear source, P-103K
C2637Brachytherapy source, Ytterbium-169, per source2637Brachytx, Ytterbium-169K

There are a number of advantages to this proposed payment method. The OPPS is a prospective payment system under which payment rates are generally established based on median costs from historical hospital claims. Therefore, under this payment method, brachytherapy sources would be paid using the same basic median cost methodology as the overall OPPS. The payment of sources would thus be an integral part of the OPPS, rather than a separate cost-based payment methodology within the OPPS. In addition, consistent and predictable prospectively established payment rates under the OPPS for brachytherapy sources are appropriate because we do not believe that the hospital resource costs associated with specific brachytherapy sources should vary Start Printed Page 49598greatly across hospitals or across clinical conditions under treatment, other than through differences in the numbers of sources utilized, which are already accounted for in our per source payment methodology. This prospective payment methodology would promote efficiency in the provision of sources, while continuing to provide payments that reflect the wide clinical variation in the use of brachytherapy sources related to many factors, including tumor type and stage, patient anatomy, and planned brachytherapy dose. In addition, under this method, we would continue to pay for brachytherapy sources separately using the same C-codes and descriptors that hospitals have reported for the last several years.

We note that High Dose Rate (HDR) Iridium-192 (C1717) is a reusable source, across treatment sessions and across patients. It is unclear whether hospitals are reporting the number of units provided accurately. Thus, while we are currently proposing that HDR Iridium be paid separately on the basis of the median cost per source as we are proposing to pay for the other brachytherapy sources, we invite comments on alternatives to using this methodology for this source, such as on the basis of median costs per treatment day on hospital claims.

During the March 1-2, 2006 APC Panel meeting, we discussed median cost data for brachytherapy sources developed from the partial CY 2005 hospitals claims data available for analysis at the time of the meeting. While the APC Panel made no specific recommendations about a specific OPPS CY 2007 payment methodology for brachytherapy sources, the Panel reviewed the median costs for the sources of brachytherapy and generally commented that the median costs appeared reasonable for the commonly furnished brachytherapy sources.

Because brachytherapy sources would no longer be paid on the basis of their charges reduced to costs, we are proposing to discontinue our use of payment status indicator “H” for APCs assigned to brachytherapy sources. We are proposing to use status indicator “K” for all brachytherapy source APCs for CY 2007. We are also proposing for CY 2007 to change the definition of status indicator “K” to ensure that “K” appropriately describes brachytherapy source APCs. Payment status indicators are discussed in section XV.A. of this preamble.

There is one source for which we have no claims data or payment information. We added Ytterbium-169 (HCPCS code C2637) for payment effective October 1, 2005, because it met the requirements of section 1833(t)(2)(H) of the Act as a separate brachytherapy source. It is our understanding that this source, which is for use in high dose rate (HDR) brachytherapy, is not yet marketed by the manufacturer, although it has been approved by the Food and Drug Administration (FDA). Therefore, we have no claims data for this brachytherapy source in order to develop a prospective payment rate, as we do for the other brachytherapy sources for CY 2007. In addition, it is our understanding that no price for the product exists, as it has not yet been marketed. Thus, we also have no external information regarding the cost of this source to hospitals. We are weighing our payment options for CY 2007 for brachytherapy sources for which we have no payment or claims information, such as the present case with Ytterbium-169. This includes considering our CY 2007 payment options for other new brachytherapy sources that come to our attention, which historically have been newly recognized under the OPPS on a quarterly basis.

One option for CY 2007 would be to pay for the currently existing HCPCS code C2637 at charges converted to costs. However, this would be inconsistent with our proposed policy with regard to payment for brachytherapy sources under prospectively established payment rates. We paid for all brachytherapy sources based upon charges converted to costs for CYs 2004 through 2006 because the law required us to do so. However, that provision will expire for the CY 2007 OPPS. In addition, this methodology would be inconsistent with the prospective payment methodologies we use to provide payments for other new items and services under the OPPS for which we do not yet have claims data.

A second option would be to assign the code to its own APC or to a New Technology APC with a payment rate set at or near the lowest proposed payment rate for any source of brachytherapy paid on a per source basis (as opposed, for example, per mCi), for CY 2007. However, we have no claims data or other information regarding the cost of HCPCS code C2637 to hospitals. This payment policy would resemble our policy regarding the APC assignment of not otherwise classified codes, which are assigned to the lowest level APC in their clinically compatible series. However, HCPCS code C2637 is a specifically defined brachytherapy source, and such a payment rate would not recognize the clinical distinctions among brachytherapy sources, including their differences in isotopes, activity levels, and clinical uses in low dose rate (LDR) versus HDR brachytherapy. The solid brachytherapy source with the lowest proposed median cost for CY 2007 is HCPCS code C2634, for High Activity Iodine-125, with a median cost of $25.77 per source, which is implanted in LDR brachytherapy.

A third option would be to assign HCPS code C2637 to its own APC or to a New Technology APC with a payment rate established at or near the proposed payment rate for HCPCS code C1717, which describes HDR Iridium-192. Like HCPCS code C2637, HCPCS code C1717 is used for HDR brachytherapy, and HCPCS code C1717 is the most commonly used source for HDR brachytherapy under the OPPS. However, this approach would not take into consideration significant differences in the two sources, including their radioactive isotopes and energy levels.

The fourth option would be to assign HCPCS code C2637 to its own APC or to a New Technology APC with a prospective payment rate based on external data provided to us regarding the expected cost of the source to hospitals. If we were provided reliable and relevant cost information for the source, we could establish its payment rate based on that information and our review of other pertinent considerations, as we do for new technology services under the OPPS. Under this option, in the absence of external cost information, we would not recognize HCPCS code C2637 under the OPPS for CY 2007 until we received such information and could establish a payment rate in a quarterly OPPS update. CMS provided the brachytherapy source Ytterbium-169 a HCPCS code in CY 2005 at the manufacturer's request, based on the belief that the source would be marketed shortly. However, the product has not yet been marketed. Therefore, we currently have a recognized HCPCS code for an item that is not currently available to hospitals. We do not typically issue and maintain as payable a HCPCS code for an item that is not marketed. Under this option, if the source were marketed mid-quarter in CY 2007 and cost information was provided to us, there would be no payment available for the source until the next OPPS quarterly update, which would establish the payment rate for HCPCS code C2637 and its effective date.

After weighing the above options, we are proposing the second option discussed, that is, to assign C2637 to its own APC or a New Technology APC with a payment rate set at or near the lowest proposed payment rate for any Start Printed Page 49599source of brachytherapy paid on a per source basis. This option resembles our policy regarding the APC assignment of not otherwise classified codes, in the absence of any data currently available. Once we have claims data, or obtain external data, we can consider movement to another APC, if warranted. However, as we indicate below, we are interested in the public's comments on the four options we have presented.

We are specifically inviting comments on how we should establish the CY 2007 payment amount for Ytterbium-169 (HCPCS code C2637), especially with consideration of the four options discussed above, and on how we should generally proceed on setting payment amounts for established or new brachytherapy sources eligible for separate payment under section 1833(t)(2)(H) of the Act, for which we have no claims-based cost data in the future. Note that under option 4, for a future new source we would need cost information regarding the source in order to establish a code for which we could set an appropriate OPPS payment rate. We intend to avoid routinely establishing HCPCS codes for brachytherapy sources which hospitals could not be using, and, therefore, for which payments would not be necessary.

As we have consistently done in the past, we are inviting the public to submit recommendations for new codes to describe new brachytherapy sources in a manner reflecting the number, isotope, and radioactive intensity of the sources. We are requesting that commenters provide a detailed rationale to support recommended new sources and send recommendations to us. We will continue our endeavor to add new brachytherapy source codes and descriptors to our systems for payment on a quarterly basis. Such recommendations should be directed to the Division of Outpatient Care, Mail Stop C4-05-17, Centers for Medicare & Medicaid Services, 7500 Security Boulevard, Baltimore, MD 21244.

We have considered the definition of the term “brachytherapy source” in the context of current medical practice, and in light of the language in section 1833(t)(2)(H) of the Act. We are proposing to define a device of brachytherapy eligible for separate payment under the OPPS as a “seed or seeds (or radioactive source)” as indicated in section 1833(t)(2)(H) of the Act, which refers to sources that are themselves radioactive, meaning that the sources contain a radioactive isotope. Therefore, for example, we do not consider specific devices that do not utilize radioactive isotopes to deliver radiation to be radioactive sources as envisioned by the statute. While the public may recommend any item that it wishes us to consider as a brachytherapy source, we remind the public of our interpretation of a device of brachytherapy eligible for separate payment under section 1833(t)(2)(H) of the Act.

VIII. Proposed Changes to OPPS Drug Administration Coding and Payment for CY 2007

(If you choose to comment on issues in this section, please include the caption “OPPS: Drug Administration” at the beginning of your comment.)

A. Background

From the start of the OPPS until the end of CY 2004, three HCPCS codes were used to bill drug administration services provided in the hospital outpatient department:

  • Q0081 (Infusion therapy, using other than chemotherapeutic drugs, per visit)
  • Q0083 (Chemotherapy administration by other than infusion technique only, per visit)
  • Q0084 (Chemotherapy administration by infusion technique only, per visit).

A fourth OPPS drug administration HCPCS code, Q0085 (Administration of chemotherapy by both infusion and another route, per visit), was active from the beginning of the OPPS through the end of CY 2003.

Each of these four HCPCS codes mapped to an APC (that is, Q0081 mapped to APC 0120, Q0083 mapped to APC 0116, Q0084 mapped to APC 0117, and Q0085 mapped to APC 0118), and the APC payment rates for these codes were made on a per-visit basis. The per-visit payment included payment for all hospital resources (except separately payable drugs) associated with the drug administration procedures. For CY 2004, we discontinued using HCPCS code Q0085 to identify drug administration services and moved to a combination of HCPCS codes Q0083 and Q0084 that allowed more accurate calculations when determining OPPS payment rates.

In CY 2005, in response to the recommendations made by commenters and the hospital industry, OPPS transitioned to the use of CPT codes for drug administration services. These CPT codes allowed for more specific reporting of services, especially regarding the number of hours for an infusion, and provided consistency in coding between Medicare and other payers. However, we did not have any data to revise the CY 2005 per-visit APC payment structure for infusion services. In order to collect data for future ratesetting purposes, we implemented claims processing logic that collapsed payments for drug administration services and paid a single APC amount for those services for each visit, unless a modifier was used to identify drug administration services provided in a separate encounter on the same day. Hospitals were instructed to bill all applicable CPT codes for drug administration services provided in a hospital outpatient department, without regard to whether or not the CPT code would receive a separate APC payment during OPPS claims processing.

While hospitals were just adopting CPT codes for outpatient drug administration services in CY 2005, physicians paid under the Medicare Physician Fee Schedule were using HCPCS G-codes in CY 2005 to report office-based drug administration services. These G-codes were developed in anticipation of substantial revisions to the drug administration CPT codes by the CPT Editorial Panel that were expected for CY 2006.

In CY 2006, as anticipated, the CPT Editorial Panel revised its coding structure for drug administration services, incorporating new concepts such as initial, sequential, and concurrent services into a structure that previously distinguished services based on type of administration (chemotherapy/nonchemotherapy), method of administration (injection/infusion/push), and for infusion services, first hour and additional hours. For CY 2006, we proposed a crosswalk that mapped the expected CY 2006 CPT codes (represented by CY 2005 G-codes used in the physician office setting, the closest proxy at the time) to the APC payment structure implemented in CY 2005. Our crosswalk was reviewed by the APC Panel at both the February and August 2005 meetings, and was included in the CY 2006 OPPS proposed rule. During the proposed rule comment period, we received a number of comments that prompted several revisions to our proposed crosswalk, including the development of complex claims processing logic to assign correct payment for certain drug administration services that would vary based on other drug administration services provided during the same patient visit. These revisions were a result of the growing understanding, facilitated by the preview of CPT drug administration coding guidelines developed by the CPT Editorial Panel, in the hospital community of the multiple implications associated with adopting the newly Start Printed Page 49600introduced CPT concepts of initial, sequential, and concurrent services.

Upon review of the completed revisions to our proposed CY 2006 methodology, and following comprehensive assessment of all public comments, we implemented 20 of the 33 CY 2006 drug administration CPT codes that did not reflect the concepts of initial, sequential, and concurrent services, and we created 6 new HCPCS C-codes that generally paralleled the CY 2005 CPT codes for the same services. We chose not to implement the full set of CY 2006 CPT codes because of our concerns regarding the interface between the complex claims processing logic required for correct payments and hospitals' challenges in correctly coding their claims to receive accurate payments for these services. In addition, numerous commenters indicated that implementing certain CPT codes in a fashion consistent with the code descriptors would present hospitals with difficult operational and administrative challenges because concepts integral to the codes were inconsistent with the clinical patterns of drug administration services provided in hospital outpatient departments. In addition to coding changes, CY 2006 payment rates for drug administration services were updated based upon CY 2004 claims, and we continued the claims processing logic that required hospitals providing drug administration services to report all applicable drug administration HCPCS codes, despite some codes being collapsed into one APC for payment purposes.

B. Proposed CY 2007 Drug Administration Coding Changes

For the CY 2007 OPPS, we are proposing to continue the CY 2006 OPPS drug administration coding structure, which combines CPT codes with several C-codes. However, we welcome comments from hospitals regarding their experiences in implementing, for purposes of reporting to other payers, the CY 2006 CPT codes that incorporate the concepts of initial, sequential, and concurrent drug administration services. While we are not proposing to transition to the full set of CPT codes in CY 2007, we retain this as an option for the future.

In addition, because of the discrepancies between APC payments (based on per-visit hospital claims data) and per-service CPT/HCPCS coding, we provided special instructions to hospitals in CY 2005 and CY 2006 regarding modifier 59 in order to ensure proper OPPS payments, consistent with our claims processing logic. As we do not expect any changes to our coding structure for CY 2007 and because we have updated service-specific claims data from CY 2005, we no longer have the need for specific drug administration instructions regarding modifier 59. Instead, for CY 2007 we are proposing that hospitals apply modifier 59 to drug administration services using the same correct coding principles that they generally use for other OPPS services.

C. Proposed CY 2007 Drug Administration Payment Changes

CY 2007 is the first year that we have more detailed claims data to inform our ratesetting process. Through CY 2006, payment for additional hours of drug infusion has always been packaged, although separate codes for reporting these hours have been used under the OPPS since CY 2005. Specifically, hospitals began reporting more precise CPT codes in CY 2005 that included separate coding for the first hour of infusion versus additional hours of infusion. In order to analyze these data, because we expected that additional hours of infusion codes would always be reported with codes for the first hour of infusion, thereby resulting in multiple bills for the additional hours of infusion CPT codes, we added the following three CY 2005 drug administration CPT codes to the bypass list utilized to create “pseudo” single claims: CPT codes 90781 (Intravenous infusion for therapy/diagnosis, administered by physician or under direct supervision of physician; each additional hour, up to eight (8) hours); 96412 (Chemotherapy administration, intravenous; infusion technique, one to 8 hours, each additional hour); and 96423 (Chemotherapy administration, intra-arterial; infusion technique, one to 8 hours, each additional hour). The standard OPPS methodology, as described in section II.A. of this proposed rule, was used to calculate HCPCS medians for these three drug administration codes. We then mapped all the data for the three additional hours of infusion CPT codes from the single and “pseudo” single claims to the APCs to which we are proposing to assign the CY 2005 claims data for these codes for purposes of calculating APC median costs.

While bypassing these three CPT codes and developing additional “per unit” claims provide a methodology to calculate median costs for these previously packaged drug administration services and to attribute all of their cost data to their assigned APCs, we note that this methodology allocates all packaging on the claim related to drug administration to the associated first hour drug administration code. Because these additional hours of infusion codes are not reported alone in conjunction with other separately payable nondrug administration services, we would not expect that the packaging related to additional hours of infusion would be inappropriately assigned to nondrug administration services. While we realize that there are some packaged costs that truly are clinically related to the second and subsequent hours of infusion, especially for infusions of packaged drugs that span several hours, and would, therefore, be most appropriately allocated to the additional hours of infusion codes, we are not able at this time to accurately assign representative portions of packaging costs to multiple different services at this time due to the limitations of our claims data. We believe this proposed methodology takes into account all of the packaging on claims for drug administration services and provides a reasonable framework for developing median costs for drug administration services that are often provided in combination with one another.

Upon review of the HCPCS median costs for all drug administration services, including injections and antigen therapy services, we created a comprehensive set of new APC groupings of CY 2005 HCPCS codes for drug administration services, with our assignments based both upon hospital resources utilized as reflected in HCPCS median costs and clinical coherence. The result of this analysis was the development of six proposed drug administration APC levels for the proposed CY 2007 payment rates, as shown in Table 30-1.

Start Printed Page 49601

As shown above, the placement of HCPCS codes into the proposed six levels follows logical, clinically coherent principles and is consistent with both expected and observed differences in hospital resource costs, Start Printed Page 49602both across levels and within each level. For example, the first hour of chemotherapy infusion is assigned to proposed Level VI, while additional hours of chemotherapy infusion are assigned to proposed Level III. This proposed structure is mirrored by the nonchemotherapy codes that show the first hour of nonchemotherapy infusion assigned to proposed Level V, while additional hours of nonchemotherapy infusion are assigned to proposed Level II.

Using this structure as a base, the CY 2006 OPPS drug administration codes were assigned to the proposed 6-level APC structure based on their clinical and expected hospital resource characteristics, as seen in Table 30-2.

This proposed structure was presented to the APC Panel during the March 2006 meeting. The Panel recommended using the bypass methodology as described above for the three additional hours of infusion codes to develop their median costs and supported separate payment for each additional hour of infusion for CY 2007, as shown in Table 30-2.

Start Printed Page 49603

We are accepting the APC Panel's recommendation for CY 2007 to use the bypass and “per unit” methodology as described in proposing a drug administration payment structure that includes a methodology to pay for Start Printed Page 49604infusion services by the hour. Therefore, we are proposing to assign HCPCS codes for CY 2007 to six new drug administration APCs, as listed in Table 30-2, with payment rates based on median costs for the APCs from CY 2005 claims data as assigned in Table 30-1.

For CY 2007, the APC Panel also recommended that CMS reevaluate payment for IVIG administration, especially considering the resource intensity of IVIG infusions. We are accepting this APC Panel recommendation and believe that our proposed CY 2007 drug administration payment policy that would provide specific payment for each hour of infusion would provide more accurate and appropriate payment for lengthy infusions, including the administration of IVIG. IVIG administration in the outpatient hospital setting typically occurs over 3-6 hours, and under our proposal hospitals would receive separate payment for the first hour of infusion, along with payments for each of the additional 2-5 hours generally required for the IVIG infusion. Considerable hospital resources are used throughout the infusion period, including significant clinical staff time to monitor and adjust infusions based on patients' evolving conditions, so we believe separate payment for each additional hour is appropriate. With respect to separate payment for IVIG preadministration-related services, the APC Panel recommended that CMS maintain separate payment as long as it remains appropriate. For CY 2006 only, we created the temporary G-code G0332 (Preadministration-related services for intravenous infusion of immunoglobulin, per infusion encounter). We are accepting this APC Panel recommendation and have considered whether separate payment for IVIG preadministration-related services remains appropriate. Based upon our ongoing review of the IVIG marketplace and our CY 2007 proposed payment policies for items and services under the OPPS, we believe that separate payment for preadministration-related services specific to IVIG infusions would not be necessary in CY 2007 to ensure Medicare beneficiary access to IVIG.

Hospitals' cooperation during CY 2005 in reporting all drug administration services, whether or not separate payments were made for all such services, has allowed us to develop robust median costs for individual services so that we have sufficient information to propose this more specific APC payment structure for drug administration services for CY 2007. We believe that this proposed structure would make appropriate payments for the hospital resources required to provide drug administration services, as we have large numbers of claims for many specific drug administration services that reveal significant and differential costs. In particular, using this proposed APC structure should allow us to make more accurate payments to hospitals for complex and lengthy drug administration services furnished to Medicare beneficiaries for many medical conditions, while also providing accurate payments for individual services when they are provided alone.

IX. Proposed Hospital Coding and Payments for Visits

(If you choose to comment on issues in this section, please include the caption “Visits” at the beginning of your comment.)

A. Background

Currently, CMS instructs hospitals to use the CY 2006 CPT codes used by physicians and listed in Table 31 to report clinic and emergency department visits and critical care services on claims paid under the OPPS.

Table 31.—CY 2006 CPT Codes Used To Report Clinic and Emergency Department Visits and Critical Care Services

CPT codeDescriptor
CPT Evaluation and Management Codes
99201Office or other outpatient visit for the evaluation and management of a new patient (Level 1).
99202Office or other outpatient visit for the evaluation and management of a new patient (Level 2).
99203Office or other outpatient visit for the evaluation and management of a new patient (Level 3).
99204Office or other outpatient visit for the evaluation and management of a new patient (Level 4).
99205Office or other outpatient visit for the evaluation and management of a new patient (Level 5).
99211Office or other outpatient visit for the evaluation and management of an established patient (Level 1).
99212Office or other outpatient visit for the evaluation and management of an established patient (Level 2).
99213Office or other outpatient visit for the evaluation and management of an established patient (Level 3).
99214Office or other outpatient visit for the evaluation and management of an established patient (Level 4).
99215Office or other outpatient visit for the evaluation and management of an established patient (Level 5).
99241Office consultation for a new or established patient (Level 1).
99242Office consultation for a new or established patient (Level 2).
99243Office consultation for a new or established patient (Level 3).
99244Office consultation for a new or established patient (Level 4).
99245Office consultation for a new or established patient (Level 5).
Emergency Department Visit CPT Codes
99281Emergency department visit for the evaluation and management of a patient (Level 1).
99282Emergency department visit for the evaluation and management of a patient (Level 2).
99283Emergency department visit for the evaluation and management of a patient (Level 3).
99284Emergency department visit for the evaluation and management of a patient (Level 4).
99285Emergency department visit for the evaluation and management of a patient (Level 5).
Critical Care Services CPT Codes
99291Critical care, evaluation and management of the critically ill or critically injured patient; first 30-74 minutes.
99292Each additional 30 minutes.

The majority of CPT code descriptors are applicable to both physician and facility resources associated with specific services. However, we have acknowledged from the beginning of the OPPS that we believe that CPT Evaluation and Management (E/M) Start Printed Page 49605codes were defined to reflect the activities of physicians and do not describe well the range and mix of services provided by hospitals during visits of clinic and emergency department patients and critical care encounters. Presently, CPT indicates that office or other outpatient visit codes are used to report E/M services provided in the physician's office or in an outpatient or other ambulatory facility. For OPPS purposes, we refer to these as clinic visit codes. CPT also indicates that emergency department visit codes are used to report E/M services provided in the emergency department, defined as an “organized hospital-based facility for the provision of unscheduled episodic services to patients who present for immediate medical attention. The facility must be available 24 hours a day.” For OPPS purposes, we refer to these as emergency visit codes. CPT defines critical care services as the “direct delivery by a physician(s) of medical care for a critically ill or critically injured patient.” It also states that “critical care is usually, but not always, given in a critical care area, such as * * * the emergency care facility.”

In the April 7, 2000 OPPS final rule (65 FR 18434), CMS instructed hospitals to report facility resources for clinic and emergency department visits using CPT E/M codes and to develop internal hospital guidelines to determine what level of visit to report for each patient. While awaiting the development of a national set of facility-specific codes and guidelines, we have advised that each hospital's internal guidelines should follow the intent of the CPT code descriptors, in that the guidelines should be designed to reasonably relate the intensity of hospital resources to the different levels of effort represented by the codes.

During the January 2002 APC Panel meeting, the APC Panel recommended that CMS adopt the American College of Emergency Physicians (ACEP) intervention-based guidelines for facility coding of emergency department visits and develop guidelines for clinic visits that are modeled on the ACEP guidelines.

In the August 9, 2002 OPPS proposed rule, we proposed 10 new G-codes (Levels 1-5 Facility Emergency Services and Levels 1-5 Facility Clinic Services) for use in the OPPS to report hospital visits. We also asked for public comments regarding national guidelines for hospital coding of emergency and clinic visits. We discussed various types of models, reflecting on the advantages and disadvantages of each. We reviewed in detail the considerations around various discrete types of specific guidelines, including guidelines based on staff interventions, based upon staff time spent with the patient, based on resource intensity point scoring, and based on severity acuity point scoring related to patient complexity. We note below our analysis of the various models.

1. Guidelines Based on the Number or Type of Staff Interventions

Under this model, the level of service reported would be based on the number and/or type of interventions performed by nursing or ancillary staff. In the intervention model, baseline care (including registration, triage, initial nursing assessment, periodic vital signs as appropriate, simple discharge instructions, and exam room set up/clean up) and possibly a single minor intervention (for example, suture removal, rapid strep test, or visual acuity) would be reported by the lowest level of service. Higher levels of service would be reported as the number and/or complexity of staff interventions increased.

The most commonly recommended intervention-based guidelines were the facility-coding guidelines developed by the ACEP. The ACEP model uses examples of interventions to illustrate appropriate coding. Coders extrapolate from these examples to determine the correct level of service to report. The ACEP model uses the types of interventions rather than the number of interventions to determine the appropriate level of service. This means that the single most complex intervention determines the level of service, whether it was the only service provided (in addition to baseline care), whether other similarly complex interventions were also provided, or whether other interventions of less complexity were also provided. The intervention model is based on emergency department/clinic resource use, is simple, reflects the care given to the patient, and does not require additional facility documentation. However, we expressed concern that the intervention model may provide an incentive to provide unnecessary services and that it is susceptible to upcoding. In addition, it is not particularly focused on measuring and appropriately reporting a code reflecting total hospital resources used in a visit. Furthermore, the ACEP model requires extrapolation from a set of examples that could make it prone to variability across hospitals.

2. Guidelines Based on the Time Staff Spent With the Patient

Under this model, the level of service would be determined based on the amount of time hospital staff spent with a patient. The underlying assumption is that staff time spent with the patient is an appropriate proxy for total hospital resource consumption. In this model, if only baseline care (as described above) were provided, a Level 1 service would be reported. Higher levels of service would be reported based on increments of staff time beyond baseline care. For example, Level 2 could be reported for 11 to 20 minutes beyond baseline care, and Level 3 could be reported for 21 to 30 minutes beyond baseline care. This model is simple, correlates with total hospital resource use, and provides an objective standard for all hospitals to follow. However, we observed that this model would require additional, potentially burdensome documentation of staff time, could provide an incentive to work slowly or use less efficient personnel, and has the potential for upcoding and gaming.

3. Guidelines Based on a Point System Where a Certain Number of Points Are Assigned to Each Staff Intervention Based on the Time, Intensity, and Staff Type Required for the Intervention

In this model, points or weights are assigned to each facility service and/or intervention provided to a patient in the clinic or emergency department. The level of service is determined by the sum of the points for all services/interventions provided. Commenters to the August 9, 2002 proposed rule recommended various approaches to a point system, including point systems that assigned points based on the amount of staff time spent with the patient, the number of activities performed during the visit, and a combination of patient condition and activities performed. A point system would correlate with facility resource consumption and provide an objective standard. In addition, it is not as easily gamed because time-based interventions can be assigned a set number of points. However, we noted that a point system could present a significant burden for hospitals in terms of requiring additional, clinically unnecessary documentation. Point systems that are complex could require dedicated staff to monitor and maintain them.

4. Guidelines Based on Patient Complexity

Several variations were recommended in comments to the August 9, 2002 proposed rule, including assignment of Start Printed Page 49606levels of service based on ICD-9-CM (International Classification of Diseases, Ninth Edition, Clinical Modification) diagnosis codes, based on complexity of medical decision making, or based on presenting complaint or medical problem. The premise for these guideline systems is that many emergency departments follow established protocols based on patients' presenting complaints and/or diagnoses. Therefore, assigning a level of service based on patient diagnosis should correlate with facility resource consumption. These systems may require the use of a coding “grid,” which lists more than 100 examples of patient conditions and diagnoses and assigns a level of service to each example. When the patient presents with a condition that does not appear on the grid, the coder must extrapolate from the grid to the individual patient. We expressed concern that these systems are extremely complex, demand significant interpretive work on the part of the coder (who may not have clinical experience), and are subject to variability across hospitals. While no clinically unnecessary documentation would be required because the system is based on diagnoses that are already reported on claims, there is a significant potential for upcoding and gaming.

In the August 9, 2002 OPPS proposed rule, we also stated that we were concerned about counting separately paid services (for example, intravenous infusions, x-rays, electrocardiograms, and lab tests) as “interventions” or including their associated “staff time” in determining the level of service. We believed that the level of service should be determined by resource consumption that is not otherwise captured in payments for other separately payable services. We are now reconsidering this perspective and will discuss this further in section IX.D. of the preamble of this proposed rule.

In the November 1, 2002 OPPS final rule, we specified that we would not create new codes to replace existing CPT E/M codes for reporting hospital visits until national guidelines have been developed, in response to commenters who were concerned about implementing code definitions without national guidelines. We noted that an independent panel of experts would be an appropriate forum to develop codes and guidelines that are simple to understand and implement, and that are compliant with the HIPAA requirements. We explained that organizations such as the American Hospital Associations (AHA) and the American Health Information Management Association (AHIMA) had such expertise and would be capable of creating hospital visit guidelines and providing ongoing education of providers. We also articulated a set of principles that any national guidelines for facility visit coding should satisfy, including that coding guidelines should be based on facility resources, should be clear to facilitate accurate payments and be usable for compliance purposes and audits, should meet the HIPAA requirements, should only require documentation that is clinically necessary for patient care, and should not facilitate upcoding or gaming. We stated that the distribution of codes should result in a normal curve. We concluded that we believed the most appropriate forum for development of code definitions and guidelines was an independent expert panel that would makes recommendations to CMS.

The AHA and AHIMA originally supported the ACEP model for emergency visit coding, but we expressed concern that the ACEP guidelines allowed counting of separately payable services in determining a service level, which could result in the double counting of hospital resources in establishing visit payment rates and payment rates for those separately payable services. Subsequently, on their own initiative, the AHA and AHIMA formed an independent expert panel, the Hospital Evaluation and Management Coding Panel, comprised of members with coding, health information management, documentation, billing, nursing, finance, auditing, and medical experience. This panel included representatives from the AHA, AHIMA, ACEP, Emergency Nurses Association, and American Organization of Nurse Executives. CMS and AMA representatives observed the meetings. On June 24, 2003, the AHA and AHIMA submitted their recommended guidelines, hereafter referred to as the AHA/AHIMA guidelines, for reporting three levels of hospital clinic and emergency visits and a single level of critical care services to CMS, with the hope that CMS would publish the guidelines in the CY 2004 proposed rule. The AHA and AHIMA acknowledged that “continued refinement will be required as in all coding systems. The Panel * * * looks forward to working with CMS to incorporate any recommendations raised during the public comment period” (AHA/AHIMA guidelines report, page 9). The AHA and AHIMA indicated that the guidelines were field-tested several times by panel members at different stages of their development. The guidelines are based on an intervention model, where the levels are determined by the numbers and types of interventions performed by nursing or ancillary hospital staff. Higher levels of services are reported as the number and/or complexity of staff interventions increase.

Although we did not publish the guidelines, the AHA and AHIMA released the guidelines through their Web sites. Consequently, we received numerous comments from providers and associations, some in favor and some opposed to the guidelines. We undertook a critical review of the recommendations from the AHA and AHIMA and made some modifications to the guidelines based on comments we received from outside hospitals and associations on the AHA/AHIMA guidelines, clinical review, and changing payment policies in the OPPS regarding some separately payable services.

In an attempt to validate the modified AHA/AHIMA guidelines and examine the distribution of services that would result from their application to hospital clinic and emergency visits paid under the OPPS, we contracted a study that began in September 2004 and concluded in September 2005 to retrospectively code, under the modified AHA/AHIMA guidelines, hospital visits by reviewing hospital visit medical chart documentation gathered through the Comprehensive Error Rate Testing (CERT) work. While a review of documentation and assignment of visit levels based on the modified AHA/AHIMA guidelines to 12,500 clinic and emergency visits was initially planned, the study was terminated after a pilot review of only 750 visits. The contractor identified a number of elements in the guidelines that were difficult for coders to interpret, poorly defined, nonspecific, or regularly unavailable in the medical records. The contractor's coders were unable to determine any level for about 25 percent of the clinic cases and about 20 percent of the emergency cases reviewed. The only agreement observed between the levels reported on the claims and levels according to the modified AHA/AHIMA guidelines was the classification of Level 1 services, where the review supported the level on the claims 54-70 percent of the time. In addition, the vast majority of the clinic and emergency visits reviewed were assigned to Level 1 during the review. Based on these findings, we believed that it was not necessary to review additional records after the initial sample. The contractor advised that multiple terms in the guidelines required clearer definition and believed Start Printed Page 49607that more examples would be helpful. Although we believe that all of the visit documentation for each case was available for the contractor's review, we were unable to determine definitively that this was the case. Thus, there is some possibility that the contractor's assignments would have differed if additional documentation from the medical records was available for the visits. In summary, while testing of the modified AHA/AHIMA guidelines was helpful in illuminating areas of the guidelines that would benefit from refinement, we were unable to draw conclusions about the relationship between the distribution of current hospital reporting of visits using CPT E/M codes that are assigned according to each hospital's internal guidelines and the distribution of coding under the AHA/AHIMA guidelines, nor were we able to demonstrate a normal distribution of visit levels under the modified AHA/AHIMA guidelines.

B. CY 2007 Proposed Coding

As discussed above, the majority of all CPT code descriptors are applicable to both physician and facility resources associated with specific services. However, we believe that CPT E/M codes were defined to reflect the activities of physicians and do not describe well the range and mix of services provided by hospitals during visits of clinic and emergency department patients and critical care encounters. While awaiting the development of a national set of facility-specific codes and guidelines, we have advised that each hospital's internal guidelines should follow the intent of the CPT code descriptors, in that the guidelines should be designed to reasonably relate the intensity of hospital resources to the different levels of effort represented by the codes.

In the November 1, 2002 OPPS final rule, we specified that we would not create new codes to replace existing CPT E/M codes for reporting hospital visits until national guidelines have been developed, in response to commenters who were concerned about implementing code definitions without national guidelines. While we do not yet have a formal set of guidelines that we believe may be appropriately applied nationally to report different levels of hospital clinic and emergency department visit and to report critical care services, we have made significant progress in developing potential guidelines and, therefore, are proposing for CY 2007 the establishment of HCPCS codes to describe hospital clinic and emergency department visits and critical care services. Prior to our implementation of national guidelines for the new hospital visit HCPCS codes, we are proposing that hospitals may continue to use their existing internal guidelines to determine the visit levels to be reported with these codes. We anticipate that many providers would choose to use their existing guidelines for reporting visits with CPT codes. We do not expect a substantial workload for a provider that chooses to adjust its guidelines to reflect our proposed policies.

We acknowledge that it can be burdensome for providers to bill G-codes rather than CPT codes. In this case, because current CPT E/M codes do not describe hospital visit resources, we have no alternative other than to create new G-codes. CPT has not yet created clinic and emergency department visit and critical care services codes that describe hospital resource utilization. It is important to note that G-codes may be recognized by other payers.

1. Clinic Visits

For clinic visits, we are proposing five new codes, to replace hospitals' reporting of the CPT clinic visit E/M codes for new and established patients and consultations listed in Table 31. Providers have been reporting five levels of CPT codes through CY 2006, and we believe that it should be fairly easy to crosswalk current internal hospital guidelines to these five proposed new codes. Commenters to prior rules have stated that the hospital resources used for new and established patients to provide a specific level of service are very similar, and that it is unnecessary and burdensome from a coding perspective to distinguish between the two types of visits. The new codes are proposed in Table 32 below.

Table 32.—Proposed CY 2007 HCPCS Codes To Be Used To Report Clinic Visits

HCPCS codeShort descriptorLong descriptor
Gxxx1Level 1 hosp clinic visitLevel 1 hospital clinic visit.
Gxxx2Level 2 hosp clinic visitLevel 2 hospital clinic visit.
Gxxx3Level 3 hosp clinic visitLevel 3 hospital clinic visit.
Gxxx4Level 4 hosp clinic visitLevel 4 hospital clinic visit.
Gxxx5Level 5 hosp clinic visitLevel 5 hospital clinic visit.

2. Emergency Department Visits

As described above, CPT defines an emergency department as “an organized hospital-based facility for the provision of unscheduled episodic services to patients who present for immediate medical attention. The facility must be available 24 hours a day.” Under the OPPS, we have restricted the billing of emergency department CPT codes to services furnished at facilities that meet this CPT definition. Facilities open less than 24 hours a day should not use the emergency department codes.

Sections 1866(a)(1)(I), 1866(a)(1)(N), and 1867 of the Act impose specific obligations on Medicare-participating hospitals and critical access hospitals that offer emergency services. These obligations concern individuals who come to a hospital's dedicated emergency department (DED) and request examination or treatment for medical conditions, and apply to all of these individuals, regardless of whether or not they are beneficiaries of any program under the Act. Section 1867(h) of the Act specifically prohibits a delay in providing required screening or stabilization services in order to inquire about the individual's payment method or insurance status. Section 1867(d) of the Act provides for the imposition of civil monetary penalties on hospitals and physicians responsible for failing to meet the provisions listed above. These provisions, taken together, are frequently referred to as the Emergency Medical Treatment and Labor Act (EMTALA). EMTALA was passed in 1986 as part of the Consolidated Omnibus Budget Reconciliation Act of 1985 Pub. L. 99-272 (COBRA).

Section 489.24 of the EMTALA regulations defines “dedicated emergency department” as any department or facility of the hospital, regardless of whether it is located on or off the main hospital campus, that meets at least one of the following requirements: (1) It is licensed by the State in which it is located under applicable State law as an emergency room or emergency department; (2) It is Start Printed Page 49608held out to the public (by name, posted signs, advertising, or other means) as a place that provides care for emergency medical conditions on an urgent basis without requiring a previously scheduled appointment; or (3) During the calendar year immediately preceding the calendar year in which a determination under this section is being made, based on a representative sample of patient visits that occurred during that calendar year, it provides at least one-third of all of its outpatient visits for the treatment of emergency medical conditions on an urgent basis without requiring a previously scheduled appointment.

We believe that every emergency department that meets the CPT definition of emergency department also qualifies as a dedicated emergency department under EMTALA. However, we are aware that there are some departments or facilities of hospitals that meet the definition of a DED under the EMTALA regulations but that do not meet the more restrictive CPT definition of an emergency department. For example, a hospital department or facility that meets the definition of a DED may not be available 24 hours a day, 7 days a week. Nevertheless, hospitals with such departments or facilities incur EMTALA obligations with respect to an individual who presents to the department and requests, or has requested on his or her behalf, examination or treatment for an emergency medical condition. However, because they do not meet the CPT requirements for reporting emergency visit E/M codes, these facilities must bill clinic visit codes for the services they furnish. We have no way to distinguish in our hospital claims data the costs of visits provided in DEDs that do not meet the CPT definition of emergency department from the costs of clinic visits.

Some hospitals have requested that they be permitted to bill emergency visit codes under the OPPS for services furnished in a facility that meets CPT's definition for reporting emergency visit E/M codes, except that they are not available 24 hours a day. These hospitals believe that their resource costs are more similar to those of emergency departments that meet the CPT definition than they are to the resource costs of clinics. Representatives of such facilities have argued that emergency department visit payments are more appropriate, on the grounds that their facilities treat patients with emergency conditions whose costs exceed the resources reflected in the clinic visit APC payments, even though these emergency departments are not available 24 hours per day. In addition, these hospital representatives indicated that their facilities have EMTALA obligations and should, therefore, be able to receive emergency visit payments. While these emergency departments may provide a broader range and intensity of hospital services and require significant resources to assure their availability and capabilities in comparison with typical hospital outpatient clinics, the fact that they do not operate with all capabilities full-time suggests that hospital resources associated with visits to emergency departments or facilities available less than 24 hours a day may not be as great as the resources associated with emergency departments or facilities that are available 24 hours a day and that fully meet the CPT definition.

To determine whether visits to emergency departments or facilities (referred to as Type B emergency departments) that incur EMTALA obligations but do not meet more prescriptive expectations that are consistent with the CPT definition of an emergency department (referred to as Type A emergency departments) have different resource costs than visits to either clinics or Type A emergency departments, for CY 2007 we are proposing a set of five G-codes for use by all entities that meet the definition of a DED under the EMTALA regulations in § 489.24 but that are not Type A emergency departments, as described in Table 33 below. These codes will be called “Type B emergency visit codes.”

Table 33.—Proposed CY 2007 HCPCS Codes To Be Used To Report Emergency Visits Provided in Type B Emergency Departments

HCPCS codeShort descriptorLong descriptor
Gzzz1Lev 1 hosp type B ED visitLevel 1 hospital emergency department visit provided in a Type B emergency department. (The ED must meet at least one of the following requirements: (1) It is licensed by the State in which it is located under applicable State law as an emergency room or emergency department; (2) It is held out to the public (by name, posted signs, advertising, or other means) as a place that provides care for emergency medical conditions on an urgent basis without requiring a previously scheduled appointment; or (3) During the calendar year immediately preceding the calendar year in which a determination under this section is being made, based on a representative sample of patient visits that occurred during that calendar year, it provides at least one-third of all of its outpatient visits for the treatment of emergency medical conditions on an urgent basis without requiring a previously scheduled appointment).
Gzzz2Lev 2 hosp type B ED visitLevel 2 hospital emergency department visit provided in a Type B emergency department. (The ED must meet at least one of the following requirements: (1) It is licensed by the State in which it is located under applicable State law as an emergency room or emergency department; (2) It is held out to the public (by name, posted signs, advertising, or other means) as a place that provides care for emergency medical conditions on an urgent basis without requiring a previously scheduled appointment; or (3) During the calendar year immediately preceding the calendar year in which a determination under this section is being made, based on a representative sample of patient visits that occurred during that calendar year, it provides at least one-third of all of its outpatient visits for the treatment of emergency medical conditions on an urgent basis without requiring a previously scheduled appointment).
Start Printed Page 49609
Gzzz3Lev 3 hosp type B ED visitLevel 3 hospital emergency department visit provided in a Type B emergency department. (The ED must meet at least one of the following requirements: (1) It is licensed by the State in which it is located under applicable State law as an emergency room or emergency department; (2) It is held out to the public (by name, posted signs, advertising, or other means) as a place that provides care for emergency medical conditions on an urgent basis without requiring a previously scheduled appointment; or (3) During the calendar year immediately preceding the calendar year in which a determination under this section is being made, based on a representative sample of patient visits that occurred during that calendar year, it provides at least one-third of all of its outpatient visits for the treatment of emergency medical conditions on an urgent basis without requiring a previously scheduled appointment).
Gzzz4Lev 4 hosp type B ED visitLevel 4 hospital emergency department visit provided in a Type B emergency department. (The ED must meet at least one of the following requirements: (1) It is licensed by the State in which it is located under applicable State law as an emergency room or emergency department; (2) It is held out to the public (by name, posted signs, advertising, or other means) as a place that provides care for emergency medical conditions on an urgent basis without requiring a previously scheduled appointment; or (3) During the calendar year immediately preceding the calendar year in which a determination under this section is being made, based on a representative sample of patient visits that occurred during that calendar year, it provides at least one-third of all of its outpatient visits for the treatment of emergency medical conditions on an urgent basis without requiring a previously scheduled appointment).
Gzzz5Lev 5 hosp type B ED visitLevel 5 hospital emergency department visit provided in a Type B emergency department. (The ED must meet at least one of the following requirements: (1) It is licensed by the State in which it is located under applicable State law as an emergency room or emergency department; (2) It is held out to the public (by name, posted signs, advertising, or other means) as a place that provides care for emergency medical conditions on an urgent basis without requiring a previously scheduled appointment; or (3) During the calendar year immediately preceding the calendar year in which a determination under this section is being made, based on a representative sample of patient visits that occurred during that calendar year, it provides at least one-third of all of its outpatient visits for the treatment of emergency medical conditions on an urgent basis without requiring a previously scheduled appointment).

For CY 2007, we also are proposing to create five G-codes to be reported by the subset of provider-based emergency departments or facilities of the hospital, called Type A emergency departments, that are available to provide services 24 hours a day, 7 days per week and meet one or both of the following requirements related to the EMTALA definition of DED, specifically: (1) It is licensed by the State in which it is located under the applicable State law as an emergency room or emergency department; or (2) It is held out to the public (by name, posted signs, advertising, or other means) as a place that provides care for emergency medical conditions on an urgent basis without requiring a previously scheduled appointment. These codes will be called “Type A emergency visit codes” and would replace hospitals’ current reporting of the CPT emergency department visit E/M codes listed in Table 33. Our intention is to allow hospital-based emergency departments or facilities that are currently appropriately reporting CPT emergency department visit E/M codes to bill these new Type A emergency visit codes. We believe that this proposed definition of Type A emergency departments will neither narrow nor broaden the group of emergency departments or facilities that may bill the Type A emergency visit codes in comparison with those that are currently correctly billing CPT emergency department visit E/M codes. Rather, we are refining and clarifying the definition for use in the hospital context. We believe that because the concepts employed in the definition of a DED for EMTALA purposes are already familiar to hospitals, it is appropriate to employ those concepts, rather than the concepts employed in the CPT definition of emergency department, for purposes of defining these new G-codes. As we have previously noted, the CPT codes were defined to reflect the activities of physicians and do not always describe well the range and mix of services provided by hospitals during visits of emergency department patients. We believe that these new codes that we are proposing for reporting emergency visits to Type A emergency departments are more specific to the hospital context. For example, one feature that distinguishes Type A hospital emergency departments from other departments of the hospital is that Type A emergency departments do not generally provide scheduled care, but rather regularly operate to provide immediately available unscheduled services.

The new codes that we are proposing for CY 2007 are listed in Table 34 below. Start Printed Page 49610

Table 34.—Proposed CY 2007 HCPCS Codes To Be Used To Report Emergency Visits Provided in Type A Emergency Departments

HCPCS codeShort descriptorLong descriptor
Gyyy1Lev 1 hosp type A ED visitLevel 1 hospital emergency visit provided in a Type A hospital-based facility or department. (The facility or department must be open 24 hours a day, 7 days a week and meets at least one of the following requirements: (1) It is licensed by the State in which it is located under applicable State law as an emergency room or emergency department; or (2) It is held out to the public (by name, posted signs, advertising, or other means) as a place that provides care for emergency medical conditions on an urgent basis without requiring a previously scheduled appointment).
Gyyy2Lev 2 hosp type A ED visitLevel 2 hospital emergency visit provided in a Type A hospital-based facility or department. (The facility or department must be open 24 hours a day, 7 days a week and meets at least one of the following requirements: (1) It is licensed by the State in which it is located under applicable State law as an emergency room or emergency department; or (2) It is held out to the public (by name, posted signs, advertising, or other means) as a place that provides care for emergency medical conditions on an urgent basis without requiring a previously scheduled appointment).
Gyyy3Lev 3 hosp type A ED visitLevel 3 hospital emergency visit provided in a Type A hospital-based facility or department. (The facility or department must be open 24 hours a day, 7 days a week and meets at least one of the following requirements: (1) It is licensed by the State in which it is located under applicable State law as an emergency room or emergency department; or (2) It is held out to the public (by name, posted signs, advertising, or other means) as a place that provides care for emergency medical conditions on an urgent basis without requiring a previously scheduled appointment).
Gyyy4Lev 4 hosp type A ED visitLevel 4 hospital emergency visit provided in a Type A hospital-based facility or department. (The facility or department must be open 24 hours a day, 7 days a week and meets at least one of the following requirements: (1) It is licensed by the State in which it is located under applicable State law as an emergency room or emergency department; or (2) It is held out to the public (by name, posted signs, advertising, or other means) as a place that provides care for emergency medical conditions on an urgent basis without requiring a previously scheduled appointment).
Gyyy5Lev 5 hosp type A ED visitLevel 5 hospital emergency visit provided in a Type A hospital-based facility or department. (The facility or department must be open 24 hours a day, 7 days a week and meets at least one of the following requirements: (1) It is licensed by the State in which it is located under applicable State law as an emergency room or emergency department; or (2) It is held out to the public (by name, posted signs, advertising, or other means) as a place that provides care for emergency medical conditions on an urgent basis without requiring a previously scheduled appointment).

3. Critical Care Services

For critical care services, we are proposing two new codes, to replace hospitals' reporting of the CPT E/M critical care codes listed in Table 31. Providers have been reporting two CPT codes through CY 2006, and we believe that it should be fairly easy to crosswalk current internal hospital guidelines to these two new proposed codes. The proposed new codes are listed in Table 35 below.

Table 35.—Proposed CY 2007 HCPCS Codes To Be Used To Report Critical Care Services

HCPCS codeShort descriptorLong descriptor
Gccc1Hosp critical care, 30-74 minHospital critical care services, first 30-74 minutes.
Gccc2Hosp critical care, add 30 minHospital critical care services, each additional 30 minutes.

C. CY 2007 Proposed Payment Policy

Since the implementation of the OPPS, outpatient visits provided by hospitals have been paid at three payment levels for both clinic and emergency department visits, even though hospitals have been reporting five resource-based coding levels of clinic and emergency department visits using CPT E/M codes. Critical care services have been paid at one level, with separate payment for the first 30 to 74 minutes of care and bundling of payment for all additional 30 minute increments of critical care services into payment for the first 30-74 minutes. If the critical care service is less than 30 minutes in duration, then it is to be billed as either a clinic visit or an emergency visit CPT code. Because the three payment rates for clinic and emergency department visits are based on five levels of CPT codes as listed in Table 31, in general the two lowest levels of CPT codes (1 and 2) are assigned to the low-level visit APCs and the two highest levels of CPT codes (4 and 5) are assigned to the high-level visit APCs, with the single middle CPT level CPT code (3) assigned to the mid-level visit APCs. Hospital claims data indicate that the cost of providing a visit of the same level is generally significantly higher for emergency visits in comparison with clinic visits, with the differential increasing at higher levels of services.

Based upon CY 2005 claims data processed through December 31, 2005, the median costs of clinic visit, emergency visit, and critical care APCs as configured for CY 2006 are listed below. Start Printed Page 49611

Table 36.—Median Costs of Clinic and Emergency Visit and Critical Care APCs as Configured for CY 2006

APC titleAPC medianLevels of CPT codes assigned to APC
Clinic Visits
Low Level Clinic Visits$53.94Level 1 Clinic Visit, Level 2 Clinic Visit.
Mid Level Clinic Visits63.73Level 3 Clinic Visit.
High Level Clinic Visits91.27Level 4 Clinic Visit, Level 5 Clinic Visit.
Emergency Department Visits
Low Level Emergency Visits76.43Level 1 ED Visit, Level 2 ED Visit.
Mid Level Emergency Visits133.98Level 3 ED Visit.
High Level Emergency Visits237.17Level 4 ED Visit, Level 5 ED Visit.
Critical Care Services
Critical Care495.16Critical care, first hour.

Historical hospitals claims data, however, have generally reflected significantly different median costs for the two levels of services assigned to the low and high level visit APCs. While the median costs of these services do not violate the 2 times rule within their assigned APCs, this may not be the most accurate method of payment for these very common hospital levels of visits which clearly demonstrate differential hospital resources. In particular, because of the relatively low volume of the highest levels of services in the clinic and emergency department, our payment rates may be especially low. Therefore, we are proposing five payment levels for clinic and emergency visits and one payment level for critical care services.

As discussed in the previous section, we are proposing to create 17 new G-codes to replace the CPT E/M codes that hospitals are currently billing to report visits and critical care services. To determine appropriate payment rates for the new G-codes, we are proposing to map the data from the CY 2005 CPT E/M codes and other HCPCS codes currently assigned to the clinic visit APCs to 11 new APCs, 5 for clinic visits, 5 for emergency visits, and 1 for critical care services as shown in Table 37 to develop median costs for these APCs. We mapped the CPT E/M codes and other HCPCS codes to the new APCs based on median costs and clinical considerations.

Start Printed Page 49612

In the case of the CPT E/M codes for emergency visits, the assignment of data from a single visit code to the new Type A Emergency Visit APC of the same level was straightforward. Similarly, the assignment of data from the only separately payable critical care CPT code to the new APC for critical care services was clear-cut. However, in some cases of the data for CPT clinic visit E/M codes, we assigned a code to Start Printed Page 49613an appropriate clinic visit APC level based upon resource and clinical homogeneity considerations, and that APC assignment did not correspond to the visit level described by the code. For example, CPT 99213 is a level 3 clinic visit code for an established patient, which would seem to logically map to the Level 3 Clinic Visit APC. However, because CPT 99213 has a median cost of $63.04, it maps more appropriately to the Level 2 Clinic Visit APC, which has an overall median cost of $62.12. In general, CPT codes for established patient visits had lower median costs than new patient visit or consultation codes of the same E/M level, and that variability is reflected in their respective proposed APC data assignments for CY 2007. We believe that in CY 2007, when hospitals utilize their own internal guidelines to report clinic visits, without codes that differentiate among new, established, or consultation visits, they will report G-code levels that reflect their resources used. We expect that payments provided for G-codes of each level, based upon the CY 2005 claims data assignments as listed in Table 38, would provide appropriate resource-based payments for visits reported at each level.

After the CY 2005 CPT E/M codes and other HCPCS codes were mapped to an appropriate new APC as shown in Table 38, the next step required was to assign an APC to each new G-code for which no data were available. We assigned these 16 new separately payable G-codes to an appropriate APC level based on the code level alone as shown in Table 38. For example, both the Level 1 Hospital Clinic Visit and Level 1 Hospital Type B ED visit codes are mapped to the Level 1 Hospital Clinic Visit APC, 0604. Similarly, the Level 1 Hospital Type A ED visit code is mapped to the Level 1 Type A Emergency Visit APC, 0609. We expect that this configuration would provide appropriate resource-based payments for visits reported at each level. We are proposing to assign status indicator “B” to the CPT E/M codes for CY 2007, with no APC assignment, because we are proposing new G-codes for the OPPS for CY 2007, as delineated in Table 38. Table 38 also removes codes that were deleted by CPT for CY 2007, and only includes codes that would be effective under the OPPS for CY 2007.

Start Printed Page 49614

We are proposing to map the five new clinic visit G-codes to the five new Clinic Visit APCs, 0604, 0605, 0606, 0607, and 0608. We are proposing to assign the five new Type A emergency visit codes for services provided in a Type A emergency department to the five new Type A Emergency Visit APCs, 0609, 0613, 0614, 0615, and 0616. For CY 2007, we are proposing to assign the five new Type B emergency visit codes for services provided in a Type B emergency department to the five new Clinic Visit APCs, 0604, 0605, 0606, 0607, and 0608.

This payment policy for Type B emergency visits is similar to our current policy which requires services furnished in emergency departments that have an EMTALA obligation but do not meet the CPT definition of emergency department to be reported using CPT clinic visit E/M codes, resulting in payments based upon clinic visit APCs. As mentioned above, CPT requires an emergency department to be open 24 hours per day in order for it to be eligible to bill emergency department E/M codes. While maintaining the same payment policy for Type B emergency department visits in CY 2007, the reporting of specific G-codes for emergency visits provided in Type B emergency departments will permit us to specifically collect and analyze the hospital resource costs of visits to these facilities in order to determine in the future whether a proposal of an alternative payment policy may be warranted. This approach to more refined data collection is similar to our approach to drug administration services under the OPPS over the past several years. We collected hospital claims data for specific detailed services using CPT and HCPCS codes for CYs 2005 and 2006, while making payments based on claims data available to us for the less specific HCPCS codes billed by hospitals prior to CY 2005. We recognize that reporting specific drug administration services for which hospitals received no separate or Start Printed Page 49615additional payments created some additional administrative burden on hospitals for a period of time, but the resource information collected through the claims submissions has been critical to the development of our proposal of more refined drug administration payment policies. The hospital claims data based upon the CY 2005 drug administration coding structure now form the foundation of our CY 2007 proposal for drug administration services as described in section VIII.C. of the preamble to this proposed rule.

Although we believe that our proposed payment policy for CY 2007 for Type B emergency department visits is consistent with our past policy regarding visits to emergency departments that do not meet the CPT definition of an emergency department, we are interested in public comments regarding this policy. The OPPS rulemaking cycle for CY 2009 will be the first year that we will have cost data for these new Type B emergency department HCPCS codes available for analysis. In the interim, we are particularly concerned with ensuring that necessary emergency department services are available to rural Medicare beneficiaries. We recognize that rural emergency departments may be disproportionately likely to offer essential emergency department services less than 24 hours per day, 7 days a week because of the limited demand for those services and the high costs and inefficiencies associated with providing full emergency department availability during times when few patients are present for emergency care. We believe that our OPPS payment policies for Type A and Type B emergency visits should support the ability of hospitals to provide their communities with essential and appropriate emergency department services efficiently and effectively. We also believe that the payment policies should present no payment incentive for hospitals to provide necessary emergency services less than 24 hours per day, 7 days per week, which could result in limited access to emergency services for Medicare beneficiaries, thereby leading to adverse effects on their health.

We are proposing to map code Gccc1, the new proposed hospital critical care services code for the first 30-74 minutes of care, to the proposed new Critical Care APC 0617. We are proposing to assign status indicator “N” to proposed HCPCS code Gccc2, to indicate that the code is packaged, as the predecessor code to Gccc2 was also packaged.

D. CY 2007 Proposed Treatment of Guidelines

1. Background

As described in section IX.A. of the preamble of this proposed rule, since April 7, 2000 we have instructed hospitals to report facility resources for clinic and emergency department outpatient hospital visits using the CPT E/M codes and to develop internal hospital guidelines for reporting the appropriate visit level. In the CY 2003 OPPS final rule with comment period, we noted that an independent panel of experts would be an appropriate forum to develop codes and guidelines. In that final rule with comment period, we also articulated a set of principles that any national guidelines for facility visit coding should satisfy, including that coding guidelines should be based on facility resources, should be clear to facilitate accurate payments and be usable for compliance purposes and audits, should meet the HIPAA requirements, should only require documentation that is clinically necessary for patient care, and should not facilitate upcoding or gaming. We stated that the distribution of codes should result in a normal curve.

Subsequently, as described above, the AHA and AHIMA formed an independent expert panel, the Hospital Evaluation and Management Coding Panel, and submitted the AHA/AHIMA guidelines for reporting three levels of hospital clinic and emergency visits and a single level of critical care services to CMS. The guidelines are based on an intervention model, where the levels are determined by the numbers and types of interventions performed by nursing or ancillary hospital staff. We undertook a critical review of the recommendations and made some modifications to the guidelines based on comments we received from outside hospitals and associations, clinical review, and changing payment policies in the OPPS regarding some separately payable services. In addition, as previously stated, we contracted a study to retrospectively code, under the modified AHA/AHIMA guidelines, hospital visits by reviewing hospital visit medical chart documentation gathered through CERT work. In summary, while the testing of the modified AHA/AHIMA guidelines was helpful in illuminating areas of the guidelines that would benefit from refinement, we were unable to draw conclusions about the relationship between the distribution of current hospital reporting of visits using CPT E/M codes that are assigned according to each hospital's internal guidelines and the distribution of code levels under the AHA/AHIMA guidelines, nor were we able to demonstrate a normal distribution of visit levels under the modified AHA/AHIMA guidelines.

Despite the inconclusive findings from the validation study, after reviewing the AHA/AHIMA guidelines, as well as approximately a dozen other guidelines for outpatient visits submitted by various hospitals and hospital associations, we believe that the AHA/AHIMA guidelines are the most appropriate and well-developed guidelines for use in the OPPS of which we are aware. Our particular interest in these guidelines is based upon the broad-based input into their development, the need for CMS to move definitively to promulgate national outpatient hospital visit coding guidelines in the near future, and full consideration of the characteristics of alternative types of guidelines. We also think that hospitals will react favorably to guidelines developed and supported by the AHA and AHIMA, national organizations that have great interest in hospital coding and payment issues and possess significant medical, technical and practical expertise due to their broad membership, which includes hospitals and health information management professionals. Anecdotally, we have been told that a number of hospitals are successfully utilizing the AHA/AHIMA guidelines to report levels of hospital visits. However, other organizations have expressed concern that the AHA/AHIMA guidelines may result in a significant redistribution of hospital visits to higher levels, reducing the ability of the OPPS to discriminate among the hospital resources required for various different levels of visits. We, too, remain concerned about the potential redistributive effect on OPPS payments for other services or among levels of hospital visits when national guidelines for outpatient visit coding are adopted. We recognize that there may be difficulty crosswalking historical hospital claims data from current CPT E/M codes reported based on individual internal hospital guidelines to payments for any new coding system developed, in order to provide appropriate payment levels for hospital visits reported based on national guidelines in the future.

There are several types of problems with the AHA/AHIMA guidelines that have been identified based upon extensive staff review and contractor use of the guidelines during the validation study. We believe the AHA/AHIMA guidelines require short-term refinement prior to their full adoption by the OPPS, as well as continued refinement over time after their Start Printed Page 49616implementation. Our modified version of the AHA/AHIMA guidelines provides some possibilities for addressing certain issues. Our eight general areas of concern regarding the AHA/AHIMA model are listed below. In addition, we have posted to the CMS Web site both the original AHA/AHIMA guidelines and our modified draft version, and we are seeking public input before we adopt national guidelines. We continue to commit that we will provide a minimum of 6-12 months notice to hospitals prior to implementation of national guidelines to provide sufficient time for providers to make the necessary systems changes and educate their staff.

2. Outstanding Concerns With the AHA/AHIMA Guidelines

a. Three Versus Five Levels of Codes

The AHA/AHIMA guidelines describe three levels of codes for clinic and emergency visits, rather than the five levels of codes that we are proposing for clinic and Type A and Type B emergency visits. It would be impossible to pay at five levels using these guidelines, unless the guidelines were revised. As discussed above, our claims data indicate that five payment levels are justified for both clinic and Type A emergency visits, and, therefore, we are proposing five levels of G-codes so that providers may code at five visit levels and receive payments at five levels as well. In fact, the materials explaining the AHA/AHIMA guidelines state that one of the reasons that the model includes only three coding levels is because CMS only paid at three payment levels. We are now proposing to pay at five payment levels, and if our proposed CY 2007 payment policy is finalized, the AHA/AHIMA guidelines may need to be revised to reflect five visit levels.

b. Lack of Clarity for Some Interventions

Some interventions are vague, unclear, or nonspecific, without sufficient examples of documentation in the medical record that may support those interventions. For instance, it is unclear what documentation for the intervention stated as “Patient registration, room set up, patient use of room, room cleaning” and assigned in the AHA/AHIMA guidelines to a low-level clinic visit would be necessary to support all aspects of that intervention. In another case, the intervention “Frequent monitoring/assessment as evidenced by two sets of vital sign measurements or assessments” that is attributable to a mid-level emergency visit in the guidelines explains that this may include assessment of cardiovascular, pulmonary, or neurological status. However, it is unclear exactly what coders should look for in the medical record to support this intervention and whether narrative hospital staff descriptions of patient status would be considered to be assessments. These examples, and others, were identified by the contractor engaged in medical chart reviews as part of the guidelines validation study. The AHA/AHIMA guidelines may benefit from revisions to clarify some interventions and/or provide additional examples based upon questions that arose during field testing of the guidelines or that are raised by hospitals reviewing the AHA/AHIMA guidelines and the modified version posted on our Web site.

c. Treatment of Separately Payable Services

CMS and the APC Panel stated that separately payable services should be excluded from the guidelines because of their concern over the potential for double payment for hospital resources attributed to visit services when those resources were actually used to provide the separately payable services. Consistent with this policy, at the time of their development the AHA/AHIMA guidelines excluded all services separately payable under the OPPS from the list of interventions. For policy consistency, in our modified draft version of the guidelines, we removed interventions that have now become separately payable under the OPPS through CY 2006, such as bladder catheterizations and some wound care services. However, upon further reflection as we move forward to implement national guidelines, we are open to reconsidering whether the inclusion of some separately payable services in guidelines to determine visit levels could serve as a proxy for the resources that the patient will consume and that should be attributable to the hospital visit, not the separately payable services. In such cases, consideration of separately payable services in reporting visit levels may not result in double payment for components of those separately payable services. There may be hospital resources used in visits that are not captured in the AHA/AHIMA guidelines' limited number of interventions that are not separately payable. We believe that, in general, a patient with high medical acuity will consume more hospital resources in the visit than a patient with moderate acuity. However, when separately payable interventions are removed from the model, it may be difficult for the limited interventions remaining in the guidelines for each visit level to capture the acuity level of the patient. In addition, the list of HCPCS codes that are packaged can change annually. For example, in the CY 2006 OPPS, bladder catheterization services, which had been packaged in prior years, were first made separately payable. If the guidelines strictly excluded all separately payable services, then the guidelines could also change from year to year, possibly requiring additional education of hospital staff on an annual basis. An extremely ill emergency department patient who may need a significant number of separately payable procedures, but only one or two minor interventions that are not separately payable, may require significant time and attention from hospital staff that is unrelated to the hospital resources generally required for the separately payable procedures. The guidelines may indicate that a low level emergency department visit code should be billed, while in fact the patient may require significantly more hospital resources than a mildly ill patient who received the same two minor interventions. We are open to further discussion and welcome public comments on the exclusion of separately payable services from the national visit guidelines and whether their inclusion could pose a risk of attributing the same hospital resources to both visits and separately payable services, potentially resulting in duplicate payments for those resources.

d. Some Interventions Appear Overvalued

Several interventions that we believe may be minor are valued at a high level in the guidelines. This could result in visits with relatively less resource intensive interventions being coded as high level visits, leading to an overall visit distribution that was skewed toward the high end. Claims data then would fail to reflect the differential hospital resources associated with hospital visits of five levels. For example, the AHA/AHIMA guidelines consider oxygen administration, described as initiation and/or adjustment from a baseline oxygen regimen, to be a mid level emergency department intervention, while we believe that the associated hospital resources could be more consistent with its characterization as a low level emergency department intervention. In another example, the AHA/AHIMA guidelines consider specimen collection(s), other than venipuncture and other separately payable services, to be a mid level clinic intervention, while we believe this may be more consistent with other low level clinic Start Printed Page 49617interventions, depending upon the numbers and types of different specimens collected. We encourage specific comments on the levels assigned to various interventions in the guidelines, with the goal of differentiating five levels of services in a normal distribution, based on their respective hospital resources.

e. Concerns of Specialty Clinics

The AHA/AHIMA guidelines are unlikely to sufficiently address the concerns of various specialty clinics (for example, pain management clinics, oncology clinics, and wound care centers). Anecdotally, we have heard that the interventions listed in the AHA/AHIMA guidelines do not include many of the interventions commonly performed in specialty clinics and that some of the interventions in the guidelines would never be performed in certain types of clinics. Currently, each provider has its own set of guidelines, and we believe that some specialty clinics have customized guidelines to facilitate coding their visits at different levels based upon the specific hospital resources commonly used in visits to their clinics. While we prefer to have one model that can be applied nationally to each level of clinic visit code for which we make a specific OPPS payment, we are unsure as to whether one model can adequately characterize visit levels for all types of clinics. For example, we have been told that the most appropriate proxy for facility resource consumption in cancer care is staff time due to the intensive staff interactions required to care for patients with cancer, regardless of the reasons for their clinic visits. We are interested in comments regarding the feasibility of applying national guidelines to specialty clinic visits while ensuring appropriate OPPS payments for those services and suggestions for revisions to the guideline models posted that could improve their utility in reporting such visits.

f. Americans With Disabilities Act

We are concerned that the AHA/AHIMA guidelines' intervention related to the special needs of certain patients may be in violation of the Americans with Disabilities Act, as it may increase the visit level reported, thereby increasing a patient's copayment. Even if additional hospital resources are required to treat patients with disabilities, patients must not have additional financial liability for those services based on their disabilities.

g. Differentiation Between New and Established Patients, and Between Standard Visits and Consultations

The AHA/AHIMA guidelines do not differentiate between new versus established patients or consultations versus standard visits for clinic visits. During the summer 2002 APC Panel meeting, the APC Panel recommended that CMS not differentiate among visit types, specifically new, established, and consultation visits, for the purposes of clinic visit facility coding. Therefore, in the August 9, 2002 OPPS proposed rule, we proposed to accept the APC Panel's recommendation to create five new G-codes to replace the CPT new and established clinic visit and consultation E/M codes. We did not finalize the codes for CY 2003 because of concerns then about creating new G-codes without national guidelines.

During CY 2006 and earlier, there has not been a payment difference between new and established patient visits of the same level, as generally both were mapped to the same APC. The information describing the AHA/AHIMA guidelines indicates that only one set of guidelines was developed for five levels of codes for clinic visits, regardless of a patient's status as a new or established patient or the provision of a consultation visit. This approach may have been related to the lack of a payment differential for different types of clinic visits of the same level under the OPPS when those guidelines were developed. However, several years of hospital claims data regarding the median costs of the specific CPT clinic visit E/M codes consistently indicate that new patients generally are more resource intensive than existing patients across all visit levels, and that consultations are more resource intensive than standard visits. For example, based upon CY 2005 claims used by the OPPS for CY 2007 ratesetting, CPT code 99213, the level 3 clinic visit code for established patients, has a median cost of $63.04. CPT code 99203, the level 3 clinic visit code for new patients, has a median cost of $74.12. CPT code 99243, the level 3 consultation visit code, has a median cost of $84.14. Finally, CPT code 99273, the level 3 confirmatory consultation visit code which was deleted for CY 2006, had a median cost of $100.77. We encourage public comments that discuss the potential differences in hospital clinic resource consumption for new patient visits, established patient visits, and consultations. If there are significant additional hospital resources required to provide new patient visits or consultations, we are unsure whether the interventions in the AHA/AHIMA guidelines would reliably capture these additional resources.

h. Distinction Between Type A and Type B Emergency Departments

There are no AHA/AHIMA guidelines for the reporting of visits to Type B emergency departments that meet the EMTALA definition of a DED, but do not meet the proposed definition of a Type A emergency department, as discussed above. When the AHA and AHIMA created these guidelines, emergency departments that did not meet the CPT definition of emergency department were instructed to bill CPT clinic visit E/M codes. There was no distinction in reporting between emergency departments that, as DEDs, had an EMTALA obligation but did not meet the CPT definition of emergency department and outpatient hospital clinics that did not provide emergency services. If we finalize our proposal to create new G-codes for CY 2007 for Type B emergency departments to use in reporting visits, in the short run hospitals will use internal guidelines to determine their visit levels for Type B emergency department visits, as they will for visits to both clinics and Type A emergency departments. However, with the implementation of national hospital visit guidelines we will need to specify those guidelines to be used for the purposes of Type B emergency visit reporting. The AHA and AHIMA have not yet had the opportunity to consider the issue of Type B emergency visit reporting in their guidelines, and we welcome public comments to provide additional perspectives on the appropriate guidelines for reporting visit levels in these Type B emergency departments.

The public comments that we receive on this guidelines section of this proposed rule will be publicly available to the AHA and AHIMA and their expert panel, along with comments that we receive on the two versions of the guidelines posted on our Web site. We hope to receive input from them over the upcoming months to address the eight areas of concern that are discussed above, as well as other issues brought to our attention by the public. We understand that some issues will not be able to be fully addressed by their expert panel until we finalize our CY 2007 payment policies for visits in the OPPS. We plan to communicate progress on the development of OPPS visit guidelines through updates to the OPPS Web site, and we may post other versions of draft guidelines in order to solicit additional public input during CY 2007. When we post additional Start Printed Page 49618materials to the web for purposes of providing information or soliciting further comments regarding national guidelines, we will update the public through all means practically available to us, including communications with professional associations, list-serves, etc. While we understand the interest of some hospitals in our moving quickly to promulgate national guidelines that will assure standardized reporting of outpatient hospital visit levels, we believe that the issues we have identified and others that may arise are important and require serious consideration prior to the implementation of national guidelines. Because of our commitment to provide hospitals with 6-12 months notice prior to implementation of national guidelines, we expect that we will not implement national guidelines prior to CY 2008. We acknowledge that, once implemented, the guidelines will require periodic review and updating based on factors such as changing medical practices, hospital experiences in reporting the codes, new payment policies under the OPPS, and median costs for levels of services calculated from claims data. We are hopeful that the information received from the AHA, AHIMA and others on such reviews would permit us to effectively, and in a timely manner, address emerging guideline implementation issues, as well as develop desirable future modifications to the guidelines based on hospitals' experiences reporting commonly provided visits. We believe that this ongoing system should provide the most successful approach to ensuring that OPPS national visit guidelines continue to facilitate consistent and standardized reporting of outpatient hospital visits, in a manner that is resource-based and supportive of appropriate OPPS payments for the efficient and effective provision of visits in hospital outpatient settings.

X. Proposed Payment for Blood and Blood Products

A. Background

(If you choose to comment on issues in this section, please include the caption “Blood and Blood Products” at the beginning of your comment.)

Since the implementation of the OPPS in August 2000, separate payments have been made for blood and blood products through APCs rather than packaging them into payments for the procedures with which they were administered. Hospital payments for the costs of blood and blood products, as well as the costs of collecting, processing, and storing blood and blood products, are made through the OPPS payments for specific blood product APCs. On April 12, 2001, CMS issued the original billing guidance for blood products to hospitals (Program Transmittal A-01-50). In response to requests for clarification of these instructions, CMS issued Program Transmittal 496 on March 4, 2005. The comprehensive billing guidelines in the Program Transmittal also addressed specific concerns and issues related to billing for blood-related services, which the public had brought to our attention.

In the CY 2000 OPPS, payments for blood and blood products were established based on external data provided by commenters due to limited Medicare claims data. From the CY 2000 OPPS to the CY 2002 OPPS, payment rates for blood and blood products were updated for inflation. For the CY 2003 OPPS, as described in the November 1, 2002 final rule with comment period (67 FR 66773), we applied a special adjustment methodology to blood and blood products that had significant reductions in payment rates from the CY 2002 OPPS to the CY 2003 OPPS, when median costs were first calculated from hospital claims. Using the adjustment methodology, we limited the decrease in payment rates for blood and blood products to approximately 15 percent. For the CY 2004 OPPS, as recommended by the APC Panel, we froze payment rates for blood and blood products at CY 2003 levels as we studied concerns raised by commenters and presenters at the August 2003 and February 2004 APC Panel meetings.

For the CY 2005 OPPS, we established new APCs that allowed each blood product to be assigned to its own separate APC, as several of the previous blood product APCs contained multiple blood products with no clinical homogeneity or whose product-specific median costs may not have been similar. Some of the blood product HCPCS codes were reassigned to the new APCs (Table 34 of the November 15, 2004 final rule with comment period (69 FR 65819)).

We also noted in the November 15, 2004 final rule with comment period, that public comments on previous OPPS rules had stated that the CCRs that were used to adjust charges to costs for blood products in past years were too low. Past commenters indicated that this approach resulted in an underestimation of the true hospital costs for blood and blood products. In response to these comments and APC Panel recommendations from its February 2004 and September 2004 meetings, we conducted a thorough analysis of the CY 2003 claims (used to calculate the CY 2005 APC payment rates) to compare CCRs between those hospitals reporting a blood-specific cost center and those hospitals defaulting to the overall hospital CCR in the conversion of their blood product charges to costs. As a result of this analysis, we observed a significant difference in CCRs utilized for conversion of blood product charges to costs for those hospitals with and without blood-specific cost centers. The median hospital blood-specific CCR was almost two times the median overall hospital CCR. As discussed in the November 15, 2004 final rule with comment period, we applied a methodology for hospitals not reporting a blood-specific cost center, which simulated a blood-specific CCR for each hospital that we then used to convert charges to costs for blood products. Thus, we developed simulated medians for all blood and blood products based on CY 2003 hospital claims data (69 FR 65816).

For the CY 2005 OPPS, we also identified a subset of blood products that had less than 1,000 units billed in CY 2003. For these low-volume blood products, we based the CY 2005 OPPS payment rate on a 50/50 blend of the CY 2004 OPPS product-specific OPPS median costs and the CY 2005 OPPS simulated medians based on the application of blood-specific CCRs to all claims. We were concerned that, given the low frequency in which these products were billed, a few occurrences of coding or billing errors may have led to significant variability in the median calculation. The claims data may not have captured the complete costs of these products to hospitals as fully as possible. This low-volume adjustment methodology also allowed us to further study the issues raised by commenters and by presenters at the September 2004 APC Panel meeting, without putting beneficiary access to these low-volume blood products at risk.

Overall, median costs from CY 2003 (used for the 2005 OPPS) to CY 2004 (used for the 2006 OPPS) were relatively stable, with a few significant increases and decreases from the CY 2005 adjusted median costs for some specific blood products. For the CY 2006 OPPS, we adopted a payment adjustment policy that limited significant decreases in APC payment rates for blood and blood products from the CY 2005 OPPS to the CY 2006 OPPS to not more than 5 percent. We applied this adjustment to 11 blood and blood product APCs for the CY 2006 OPPS, which we identified in Table 33 of the CY 2006 OPPS final rule with comment period. For the CY 2006 OPPS we set the final median costs for blood and blood products at the Start Printed Page 49619greater of: (1) The simulated median costs calculated from the CY 2004 claims data; or (2) 95 percent of the CY 2005 OPPS adjusted median costs for these products, as reflected in Table 33 published in the CY 2006 OPPS final rule with comment period.

B. Proposed Policy Changes for CY 2007

For the CY 2007 OPPS, we are proposing to establish payment rates for blood and blood products by using the same simulation methodology described in the November 15, 2004 final rule with comment period (69 FR 65816), which utilized hospital-specific actual or simulated CCRs for blood cost centers to convert hospital charges for blood and blood products to costs. We continue to believe that using blood-specific CCRs applied to hospital claims data will result in payments that more fully reflect hospitals' true costs of providing blood and blood products than our general methodology of defaulting to the overall hospital CCR when more specific CCRs are unavailable.

The median costs for blood and blood products in this proposed rule are derived from the CY 2005 claims data and have the benefit of reflecting, in part, the clarifications about reporting that were provided through CMS Program Transmittal 496, which we issued on March 4, 2005. This instruction articulated and clarified many questions that had been raised by hospitals and others about how hospitals should report charges for blood and blood products. These instructions went into effect for services furnished on or after July 1, 2005, and therefore were in effect for the last 6 months of CY 2005. Thus, we expect that the reporting of charges and units for blood and blood products in CY 2005 has improved over past years, especially with respect to hospitals' inclusion of all charges related to the acquisition, processing, and handling of blood and blood products as specifically described in each of the relevant P-code descriptors. We believe that the median costs for blood and blood products from the CY 2005 claims data reflect this improved reporting of charges and units for these products, particularly with regard to the most commonly furnished blood and blood products.

Of the 34 blood products, median costs per unit (calculated using the simulated blood CCR methodology) rise for 23 of them compared to the CY 2006 final rule with comment period unadjusted median unit costs. These 23 products account for 92.4 percent of all units of blood products furnished in our CY 2005 claims data. As has been the case in the past, the low volume products (which we define as fewer than 1,000 units) show the most volatility. Of the 12 low volume products, 6 products have increases in their unit costs compared to their CY 2006 unadjusted median unit costs, and 6 products show decreases in their median unit costs compared to their CY 2006 unadjusted median unit costs. The low-volume products for which the medians decline compared to their unadjusted median costs in CY 2006 represent only 0.29 percent of the total units of blood products furnished in the CY 2005 OPPS claims data.

Fewer blood products increased in projected costs from CY 2006 to the proposed median costs for CY 2007 because we adjusted the CY 2006 median costs for blood and blood products. Of the 34 blood products, median costs rise for 19 of them compared to the CY 2006 OPPS adjusted median costs on which the CY 2006 payments were based (and which were adjusted to no less than 95 percent of the CY 2005 payment medians). These 19 products accounted for 91.6 percent of all units of blood products furnished in our CY 2005 claims data. Of the 12 low-volume products, 4 show increases in their median unit costs compared to the CY 2006 OPPS adjusted median unit costs, and 8 show decreases compared to their CY 2006 OPPS adjusted median unit costs. The low-volume products that show a decline in medians compared to their CY 2006 adjusted median costs represent only 0.4 percent of the total units of blood products reflected in the CY 2005 claims data.

We are proposing to set the payment rates for blood and blood products for CY 2007 based on the unadjusted median costs for blood and blood products which are derived from the CY 2005 claims data as we have described. We believe that, in most cases, the unadjusted unit costs developed by this process are valid reflections of the estimated median costs of furnishing these specific blood products, and that no adjustment is required to result in appropriate payments for blood and blood products in CY 2007. Under this proposed policy, based on the CY 2005 claims data, the projected payments would rise for approximately 92 percent of the blood product units paid under OPPS if patterns of furnishing blood products in CY 2007 were similar to those in CY 2005. The low-volume products whose median costs decline compared to their CY 2006 unadjusted median costs are furnished very rarely and by very few providers because, in part, more commonly available products may be used for similar clinical indications. We have no reason to believe that the median costs for low-volume products are not valid reflections of the costs of furnishing these low-volume services, particularly given that so few providers furnish them and it is their claims data that is used to develop the medians. We note, as well, that the median costs of several low-volume blood products show a significant increase for CY 2007. We welcome public comments on this issue.

Displayed in Table 39 is the list of blood product HCPCS codes with their proposed CY 2007 payment medians.

Table 39.—Proposed CY 2007 Payment Medians for Blood and Blood Products

HCPCS codeSIAPCShort descriptionProposed CY 2007 unitsProposed CY 2007 OPPS median unit costCY 2006 unadjusted median costCY 2006 adjusted median cost
P9010K0950Whole blood for transfusion, per unit2060$134.80$117.91$117.91
P9011K0967Blood split unit, specify amount136136.4282.5082.50
P9012K0952Cryoprecipitate each unit415552.9440.3347.10
P9016K0954RBC leukocytes reduced, each unit556100177.51163.16163.16
P9017K9508Plasma 1 donor frz w/in 8 hr, each unit4011372.1270.4070.40
P9019K0957Platelets, each unit2579660.4951.5051.50
P9020K0958Platelet rich plasma unit657156.49277.42277.42
P9021K0959Red blood cells unit145507129.99121.48121.48
P9022K0960Washed red blood cells unit2455216.35172.40189.22
P9023K0949Frozen plasma, pooled, sd, each unit38855.9660.3876.15
Start Printed Page 49620
P9031K1013Platelets leukocytes reduced, each unit1936894.6198.3098.30
P9032K9500Platelets, irradiated, each unit4579129.4573.4686.55
P9033K0968Platelets leukoreduced irrad, each unit4802130.89102.18150.58
P9034*K9507Platelets, pheresis, each unit9292465.60434.01434.01
P9035K9501Platelet pheresis leukoreduced, each unit40933490.51493.12493.12
P9036K9502Platelet pheresis irradiated, each unit1476413.58317.43325.87
P9037K1019Plate pheresis leukoredu irrad, each unit17766616.68581.01581.01
P9038K9505RBC irradiated, each unit4130201.36147.47147.47
P9039K9504RBC deglycerolized, each unit818352.72343.44343.44
P9040K0969RBC leukoreduced irradiated, each unit57857228.76218.04218.04
P9043K0956Plasma protein fract, 5%, 50ml43024.8167.9467.94
P9044K1009Plasma, cryoprecipitate reduced, each unit586880.2374.5274.52
P9048K0966Plasma protein fract, 5%, 250ml398193.39127.36315.70
P9050K9506Granulocytes, pheresis unit495253.43245.14994.64
P9051K1010Blood, l/r, cmv-neg, each unit3364135.83207.72207.72
P9052K1011Platelets, hla-m, l/r, unit1809649.06609.48609.48
P9053K1020Plt, pher, l/r cmv-neg, irr, each unit895722.82654.13654.13
P9054K1016Blood, l/r, froz/degly/wash, each unit49389.3389.73261.93
P9055K1017Plt, aph/pher, l/r, cmv-neg, each unit534379.91526.00526.00
P9056K1018Blood, l/r, irradiated, each unit3720134.43162.42178.37
P9057K1021RBC, frz/deg/wsh, l/r, irrad, each unit71427.35345.53345.53
P9058K1022RBC, l/r, cmv-neg, irrad, each unit1965264.47256.76266.89
P9059K0955Plasma, frz between 8-24hour, each unit311873.2874.7074.70
P9060K9503Fr frz plasma donor retested, each unit28373.6094.7294.72
*After removal of two claims with grossly excessive units.

XI. Proposed OPPS Payment for Observation Services

(If you choose to comment on issues in this section, please include the caption “OPPS: Observation Services” at the beginning of your comment.)

Observation care is a well-defined set of specific, clinically appropriate services that include ongoing short-term treatment, assessment, and reassessment, before a decision can be made regarding whether patients will require further treatment as hospital inpatients or if they are able to be discharged from the hospital. Observation status is commonly assigned to patients with unexpectedly prolonged recovery after surgery and to patients who present to the emergency department and who then require a significant period of treatment or monitoring before a decision is made concerning their next placement.

For CY 2006, we adopted two coding changes that affect how observation services are reported, and we made changes in the OCE to shift from individual providers to the OPPS claims processing systems the determination of whether or not observation services are separately payable or packaged. Observation services reported using HCPCS code G0378 (Hospital observation services, per hour) that are eligible for separate payment map to APC 0339 (Observation). The CY 2006 payment rate for APC 0339 is $425.08. The proposed CY 2007 median cost for APC 0339 is $442.16, reflecting relative stability in hospital costs for separately payable observation care. Direct admission to observation (G0379), when separately payable, is currently assigned for payment to APC 0600 (Low Level Clinic Visit) with a CY 2006 payment rate of $52.37. As discussed below, for CY 2007 we are proposing to assign direct admission to observation, when separately payable, to APC 0604 (Low Level Clinic Visit). The CY 2007 proposed median cost for APC 0604 is $49.93.

As we stated in the November 10, 2005 OPPS final rule with comment period (70 FR 68688), the changes that we adopted for CY 2006 were intended to ensure more consistent hospital billing for observation services in order to guide our future analyses of payment for observation care and to simplify how observation services are reported and paid. We refer readers to the CY 2006 OPPS final rule with comment period for a detailed discussion of the G-codes for observation services and the OCE logic changes implemented for CY 2006 (70 FR 68688), and to Program Transmittal 787, issued on December 16, 2005, in which we updated Chapter 4, Section 290 of the Medicare Claims Processing Manual (Pub. 100-04) to reflect the CY 2006 changes and to provide additional guidance to contractors and hospitals.

During the APC Panel's March 2006 meeting, the Observation Subcommittee did not make any recommendations to the Panel other than to request its review of additional data on observation services at the Panel's 2007 winter meeting. The APC Panel adopted the Observation Subcommittee's report and recommended no changes to the criteria for separate payment for observation services or to the coding and payment methodology for observation services.

Therefore, for CY 2007, we are proposing to continue applying the criteria for separate payment for observation services and the coding and payment methodology for observation services that were implemented in CY 2006, with one exception. In section IX. of this preamble, we are proposing changes in coding and payment for clinic and emergency room visits. As part of these proposed changes, low level clinic visits would move from APC 0600 to APC 0604, with a CY 2007 proposed median cost of $49.93. Under the circumstances where direct admission to observation is separately payable, we are proposing to assign HCPCS code G0379 to APC 0604 consistent with its CY 2006 placement in the APC for Low Level Clinic Visits.

As we stated in Program Transmittal A-02-129 released in January 2003, we Start Printed Page 49621will continue to include in the October quarterly update of the OPPS any changes to the list of ICD-9-CM codes required for separate payment of HCPCS code G0378 resulting from the October 1 annual update of ICD-9-CM codes. The currently applicable ICD-9-CM codes are listed in Table 34 of the CY 2006 OPPS final rule with comment period (70 FR 68692), and any changes to that list will be included in the CY 2007 OPPS final rule with comment period.

XII. Proposed Procedures That Will Be Paid Only as Inpatient Procedures

A. Background

Section 1833(t)(1)(B)(i) of the Act gives the Secretary broad authority to determine the services to be covered and paid for under the OPPS. Before implementation of the OPPS in August 2000, Medicare paid reasonable costs for services provided in the outpatient department. The claims submitted were subject to medical review by the fiscal intermediaries to determine the appropriateness of providing certain services in the outpatient setting. We did not specify in regulations those services that were appropriate to provide only in the inpatient setting and that, therefore, should be payable only when provided in that setting.

In the April 7, 2000 final rule with comment period, we identified procedures that are typically provided only in an inpatient setting and, therefore, would not be paid by Medicare under the OPPS (65 FR 18455). These procedures comprise what is referred to as the “inpatient list.” The inpatient list specifies those services that are only paid when provided in an inpatient setting because of the nature of the procedure, the need for at least 24 hours of postoperative recovery time or monitoring before the patient can be safely discharged, or the underlying physical condition of the patient. As we discussed in the April 7, 2000 final rule with comment period (65 FR 18455) and the November 30, 2001 final rule (66 FR 59856), we use the following criteria when reviewing procedures to determine whether or not they should be moved from the inpatient list and assigned to an APC group for payment under the OPPS:

  • Most outpatient departments are equipped to provide the services to the Medicare population.
  • The simplest procedure described by the code may be performed in most outpatient departments.
  • The procedure is related to codes that we have already removed from the inpatient list.

In the November 1, 2002 final rule with comment period (67 FR 66741), we removed 43 procedures from the inpatient list for payment under OPPS. We also added the following criteria for use in reviewing procedures to determine whether they should be removed from the inpatient list and assigned to an APC group for payment under the OPPS:

  • We have determined that the procedure is being performed in numerous hospitals on an outpatient basis; or
  • We have determined that the procedure can be appropriately and safely performed in an ambulatory surgical center (ASC) and is on the list of approved ASC procedures or proposed by us for addition to the ASC list.

We believe that these additional criteria help us to identify procedures that are appropriate for removal from the inpatient list.

B. Proposed Changes to the Inpatient Only List

(If you choose to comment on issues in this section, please include the caption “Inpatient Only Procedures” at the beginning of your comment.)

For CY 2007 OPPS, we used the same methodology as described in the November 15, 2004 final rule with comment period (69 FR 65835) to identify a subset of procedures currently on the inpatient list that are being widely performed on an outpatient basis. These procedures were then clinically reviewed for possible removal from the inpatient list. We solicited input from the APC Panel on the appropriateness of the removal of seven procedures from the inpatient list at the March 1, 2006 APC Panel meeting. During CY 2006, we have received no other candidate HCPCS codes for removal from the OPPS inpatient list based on recommendations from the public. The APC Panel recommended that one of the procedures (CPT code 21181, Reconstruction by contouring of benign tumor of cranial bones, extracranial) be removed from the list and that we solicit approval from the relevant physician specialty societies prior to proposing removal of the other procedures.

Consistent with our established policy for removing procedures from the inpatient list, we rely on our utilization data and clinical staff input in determining which procedures are candidates for removal. We believe that our policy of proposing the procedures for removal and soliciting comments from the public, which includes physician specialty societies, is the most appropriate process to receive input from the public on this issue. Rather than solicit approval from a select group (for example, specific physician specialty societies), we believe that solicitation of comments from all interested parties is more consistent with meeting our obligation to the public regarding outpatient services provided by hospitals. The utilization data and clinical review findings for the eight procedures support our proposal to remove them from the inpatient list, and therefore, we are proposing to remove these procedures from the inpatient list and to assign them to clinically appropriate APCs, as shown in Table 40. The changes to the inpatient list would be effective for services furnished on or after January 1, 2007.

Table 40.—Proposed Procedure Codes To Remove From Inpatient List and Proposed APC Assignments, Effective January 1, 2007

HCPCS codeLong descriptorProposed new APC assignmentCurrent status indicatorProposed new status indicator
16035Escharotomy; initial incision0016CT
21181Reconstruction by contouring of benign tumor of cranial bones, extracranial0254CT
22851Apply spine prosth device0049CT
57292Construction of artificial vagina; with graft0195CT
57335Vaginoplasty for intersex state0195CT
61720Creation of lesion by stereotactic method, including burr holes and localizing and recording techniques, single of multiple stages; globus pallidus or thalamus0221CT
62000Elevation of depressed skull fracture; simple extradural0254CT
Start Printed Page 49622
64804Sympathectomy, cervicothoracic0220CT

C. Proposed CY 2007 Payment for Ancillary Outpatient Services When Patient Expires (-CA Modifier)

(If you choose to comment on issues in this section, please include the caption “Ancillary Outpatient Services” at the beginning of your comment.)

1. Background

In the November 1, 2002 final rule with comment period (67 FR 66798), we discussed the creation of a new HCPCS modifier -CA to address situations where a procedure on the OPPS inpatient list must be performed to resuscitate or stabilize a patient (whose status is that of an outpatient) with an emergent, life-threatening condition, and the patient dies before being admitted as an inpatient. In Transmittal A-02-129, issued on January 3, 2003, we instructed hospitals on the use of this modifier when submitting a claim on bill type 13x for a procedure that is on the inpatient list and assigned the payment status indicator (SI) “C” (to indicate inpatient services that are not paid under the OPPS). Conditions to be met for hospital payment for a claim reporting a service billed with modifier -CA include a patient with an emergent, life-threatening condition on whom a procedure on the inpatient list is performed on an emergency basis to resuscitate or stabilize the patient. For CY 2003, a single payment for otherwise payable outpatient services billed on a claim with a procedure appended with this new -CA modifier was made under APC 0977 (New Technology Level VIII, $1,000-$1,250), due to the lack of available claims data to establish a payment rate based on historical hospital costs.

As discussed in the November 7, 2003 final rule with comment period, we created APC 0375 (Ancillary Outpatient Services When Patient Expires) to pay for services furnished on the same date as a procedure with SI “C” and billed with the modifier -CA (68 FR 63467) because we were concerned that payment under a New Technology APC would not result in an appropriate payment. Payment under a New Technology APC is a fixed amount that does not have a relative payment weight and, therefore, is not subject to recalibration based on hospital costs. In the absence of hospital claims data to determine costs, the clinical APC 0375 payment rate for CY 2004 was set at $1,150, which was the payment amount for the newly structured New Technology APC that replaced APC 0977.

For CYs 2005 and 2006, the payment rates for APC 0375 for services billed on the same date as a “C” status procedure appended with modifier -CA were established in accordance with the same methodology we followed to set payment rates for the other procedural APCs in those years, based on the relative payment weight calculated for APC 0375. For APC 0375 specifically, we calculated the relative payment weight from all claims reporting a “C” status procedure appended with modifier -CA, using charge data from the relevant calendar year claims for line items with a HCPCS code and status indicator “V,” “S,” “T,” “X,” “N,” “K,” “G,” and “H,” in addition to charges for revenue codes without a HCPCS code. We continued to make one payment in CYs 2005 and 2006 under APC 0375 for the services that met the specific conditions discussed in previous rules for using modifier -CA.

In the CY 2006 final rule with comment period (70 FR 68700) we discussed our concern about the large increase in the volume of hospital claims billed with modifier -CA from CY 2003 to CY 2004, growing from 18 to 300 claims over that 1-year time period. We acknowledged that because modifier -CA was first introduced for CY 2003, the use of the modifier in CYs 2003 and 2004 may have reflected such an increase due to hospitals' learning curve with respect to the modifier's appropriate use on claims for services payable under the OPPS. We also expressed some concern that numerous claims reflected unanticipated examples of “C” status procedures reported with modifier -CA that may not have been provided to patients with emergency life threatening conditions, where the inpatient procedure was performed on an emergency basis to resuscitate or stabilize the patient. We promised to monitor CY 2005 claims data for similar increases.

Our review of the CY 2005 claims data revealed a decrease in the use of modifier -CA in comparison with CY 2004 claims. In CY 2005 there were only 210 claims submitted reporting modifier -CA. Because of the diverse individual clinical scenarios where modifier -CA may be appropriately reported, we expect some variation from year to year in the number of OPPS claims reporting the modifier. It would appear that the hospital learning curve regarding use of modifier -CA may have been completed over the past 3 year period, and that we may expect relatively consistent reporting of this modifier in future years. We wish to particularly note that not only was there no increase in the number of claims reporting modifier -CA in CY 2005, but there were also far fewer apparently inappropriate instances of use. Our CY 2005 claims data show the majority of reporting of modifier -CA was in association with what were likely to have been urgent interventions, including the insertion of intra-aortic balloon assist devices and exploratory laparotomies. We believe that the data support our speculation that much of the increase in reporting of the modifier observed in CY 2004 data was a result of hospitals' learning curve regarding the appropriate use of the modifier.

2. Proposed Policy for CY 2007

We do not propose any change to our policies regarding reporting of modifier -CA for CY 2007, or to our payment policy regarding APC 0375. Therefore, for CY 2007, we are proposing that hospitals continue reporting modifier -CA only under circumstances described in section VI. of Transmittal A-02-129, which provided specific billing guidance for the use of modifier -CA. In addition, we are proposing to continue to make one payment under APC 0375 for the services that meet the specific conditions discussed in previous rules for using modifier -CA, based on calculation of the relative payment weight for APC 0375 as described above. We applaud hospitals' improved billing practices and as before, will continue to monitor use of modifier -CA. The CY 2007 proposed APC 0375 median cost is $3,539, significantly increased from the $2,527 Start Printed Page 49623median cost proposed in the CY 2006 proposed rule. This variation in median costs, however, is expected because the specific cases that populate the claims data for APC 0375 likely exhibit only limited clinical and resource homogeneity among all the claims attributable to that APC in a given year and across different years for the same APC. The cost variation of APC 0375 from year to year could be expected because APC 0375 is unique in the OPPS and, by its definition, should always be limited in its use.

XIII. Proposed Nonrecurring Policy Changes

A. Removal of Comprehensive Outpatient Rehabilitation Facility (CORF) Services From the List of Services Paid under the OPPS

(If you choose to comment on issues in this section, please include the caption “CORF Services” at the beginning of your comment.)

We are proposing to make a technical change to the regulations at 42 CFR 419.21(d) to remove from the list of services paid under the OPPS certain services furnished by a comprehensive outpatient rehabilitation facility (CORF) when they are provided outside the patient's plan of care (for example, hepatitis B vaccine). Section 1834(k) of the Act, as added by section 4541(a) of Pub. L. 105-33 (BBA), requires that CORF services be paid using the lesser of actual charges or a fee schedule amount. We instructed fiscal intermediaries to use the Medicare Physician Fee Schedule (MPFS) for payments to CORFs. We have not required CORF cost reports, or paid CORFs under the OPPS, since 2001. The proposed revision of the regulation to delete certain CORF services from the list of specified services paid under the OPPS is necessary to conform the regulations to the statutory requirement.

B. Addition of Ultrasound Screening for Abdominal Aortic Aneurysms (AAAs) (Section 5112 of Pub. 109-171 (DRA))

(If you choose to comment on the issues in this section, please include the caption “AAA Screening” at the beginning of your comment.)

1. Background

Section 5112 of the Deficit Reduction Act of 2005, Pub. L. 109-171 (DRA), amended section 1861 and related provisions of the Act to provide for coverage under Part B of ultrasound screening for abdominal aortic aneurysms (AAAs), effective for services furnished on or after January 1, 2007, subject to certain eligibility and other limitations. The proposed rule governing this new Part B coverage will be established through a separate document, specifically the CY 2007 Medicare Physician Fee Schedule proposed rule. We refer readers to that document for a full and complete explanation of this coverage provision.

2. Proposed Assignment of New HCPCS Code for Payment of Ultrasound Screening for Abdominal Aortic Aneurysm (AAA) (Section 5112)

There is no current CPT code that specifically describes an ultrasound screening for AAA. Therefore, we are proposing to establish the following new HCPCS code, GXXXX (Ultrasound, B-scan and or real time with image documentation; for abdominal aortic aneurysm (AAA) screening) to be used to bill for the new service under both the Medicare Physician Fee Schedule and the OPPS. As required by the statute, Medicare will allow payment for a one-time only screening examination, and this screening test will be available even if the qualifying patient does not present signs or symptoms of disease or illness. In addition, this code does not include any other preventive services that are currently separately covered and paid under the Medicare Part B screening benefits. When these other preventive services are performed, they should be reported using the existing appropriate codes.

We are proposing to base the payment for GXXXX on equivalent hospital resources and intensity to those contained in CPT code 76775, which is assigned to APC 0266 (Level II Diagnostic and Screening Ultrasound) under the OPPS for CY 2007. We believe that the hospital costs associated with the screening study are very similar to those of the limited retroperitoneal ultrasound diagnostic examination and, therefore, that the screening and diagnostic studies should be assigned to the same clinical APC for reasons of clinical and resource homogeneity. Thus, we are proposing to assign GXXXX to APC 0266 with a median cost of $98.59 for CY 2007.

3. Handling of Comments Received in Response to This Proposal

We noted previously that ultrasound screening for AAAs is also addressed in detail in our proposed rule to update the Medicare Physician Fee Schedule for CY 2007. We will respond to all comments regarding the proposed elements required for the ultrasound screening for AAA, whether the examination is performed in a physician's office or an outpatient hospital setting, and the exception from the Part B annual deductible, in the final rule implementing the Medicare Physician Fee Schedule for CY 2007. We will respond to all comments regarding payment for GXXXX under the OPPS in the CY 2007 OPPS final rule.

XIV. Emergency Medical Screening in Critical Access Hospitals (CAHs)

(If you choose to comment on issues in this section, please include the caption “CAHs: Emergency Medical Screening” at the beginning of your comment.)

A. Background

Section 1820 of the Act, as amended by section 4201 of the Balanced Budget Act of 1997, provides for the establishment of Medicare Rural Hospital Flexibility Programs (MRHFPs), under which individual States may designate certain facilities as critical access hospitals (CAHs). Facilities that are so designated and meet the CAH conditions of participations (CoPs) under 42 CFR Part 485, Subpart F, will be certified as CAHs by CMS. The MRHFP replaced the Essential Access Community Hospital (EACH)/Rural Primary Care Hospital (RPCH) program.

B. Proposed Policy Change

Existing regulations governing CAHs at § 485.618(d) require on-call doctors and nonphysician practitioners who may be attending to urgent/acute medical problems in other areas of the CAH or outside the CAH to report to the CAH's emergency room within 30 minutes (60 minutes if the CAH is located in a frontier or remote area or permissible under the State's rural health care plan) to see a patient in the emergency room of a CAH. Often, these patients do not have emergency medical conditions. With changes to the regulations at § 489.24 that implement the Emergency Medical Treatment and Labor Act (EMTALA) over the past few years, some practitioners have noted to CMS that the requirements regarding who should respond to calls to see patients who present to the emergency department of a CAH are more stringent than for general hospitals.

The provider community recently requested that we change the emergency on-call personnel requirements for CAHs to conform to the regulatory changes published in the FY 2005 IPPS final rule (69 FR 49271). In response to this request, we are proposing to revise the current CAH CoPs to align the emergency medical screening requirements in CAHs with those applicable to acute care hospitals. The Start Printed Page 49624proposed change would allow registered nurses, in addition to the personnel currently required at § 485.618(d), to serve as qualified medical personnel to screen individuals who present to the CAH emergency room if the nature of the patient's request is within the registered nurse's scope of practice under State law and such screening is permitted by the CAH's bylaws. This proposed change would effectively eliminate the need for a doctor or mid-level practitioner to report to the emergency department to attend to a nonemergent request for medical care if a registered nurse is on site at the CAH and has made a determination that the care needed is of a non-emergent nature.

The EMTALA statute at section 1867 of the Act states that a hospital in this context must provide an appropriate (suitable for the symptoms presented) medical screening examination within the capability of the hospital's emergency department to determine whether or not an emergency medical condition exists (section 1866(a)(1)(I) of the Act imposes the section 1867 requirements on a CAH). The EMTALA regulations at § 489.24(a) state that the examination must be conducted by qualified medical personnel. These qualified medical personnel designated to perform medical screening examinations must be determined qualified by the hospital's bylaws or rules and regulations and must be practicing within the scope of practice under State law.

The regulations at § 489.24(c) relating to the use of dedicated emergency department for nonemergency services were added in September 2003 (68 FR 53262) to state that if an individual goes to a hospital's dedicated emergency department to request medical treatment, and the nature of the request makes it clear that the medical condition is not of an emergency nature, the hospital is required only to perform such screening as would be appropriate to determine that the individual does not have an emergency medical condition.

Although EMTALA also applies to CAHs, the CoP for CAH emergency services (§ 485.618(d)) states that a physician, a physician assistant, a nurse practitioner, or a clinical nurse specialist with training or experience in emergency care must be on call and available onsite at a CAH within a specified timeframe. These are the CAH personnel who would be available to conduct an emergency medical screening under § 489.24(c). In contrast, the emergency services CoP for acute care hospitals at § 482.55 does not specify the type of personnel who must be available to provide emergency services and who would, therefore, perform assessments and screenings. The regulation states only that the services must be organized and supervised under the direction of a qualified member of the medical staff. Therefore, an acute care hospital may, if it chooses, have protocols that permit a registered nurse to conduct specific emergency medical screenings if the nature of the individual's request for examination and treatment is within the scope of practice of a registered nurse. For emergencies that are outside of a registered nurse's scope of practice, another qualified medical personnel (operating within his or her scope of practice under State law) would conduct the emergency medical screening.

We are proposing to revise the CAH standard at § 485.618(d) to allow a CAH, if applicable, the flexibility of including a registered nurse, with training and experience in emergency care and who is on site at the CAH, as one of the qualified medical personnel available for emergency services, particularly emergency medical screenings, if the nature of the individual's request makes clear that the medical condition is not of an emergency nature and the individual's request for examination and treatment is within the registered nurse's scope of practice under State law. If the registered nurse begins the emergency medical screening and determines that the nature of the individual's conditions is outside his or her scope of practice under State law, the physician, physician assistant, nurse practitioner or a clinical nurse specialist must be contacted to see the patient within 30 or 60 minutes to conduct the emergency medical screening and provide stabilizing treatment. If the registered nurse knows initially that the medical screening for the presenting complaint is outside the applicable scope of practice under State law, the physician or other nonphysician practitioner must see the individual within the 30 or 60 minute timeframes (as currently specified in § 485.618(d)(1)).

We recognize that not all CAHs will be able to utilize this flexibility. Some State licensure boards have stated that it is not within the authorized scope of practice for a registered nurse to independently perform an appropriate emergency medical screening for the purpose of determining if an emergency medical condition exists. However, the licensure boards in these States further maintain that it is within the scope of practice for a registered nurse to assess the health status of an individual to determine a nonemergent condition and to provide nursing care or to refer the individual to appropriate medical resources. Therefore, based on State law, some CAHs will not be able to designate registered nurses as qualified medical personnel under our proposed revision to the regulations governing CAHs. However, as we wish to provide flexibility to CAHs and to be consistent with existing EMTALA policy, we are proposing the revision to the regulation at § 485.618(d).

XV. Proposed OPPS Payment Status and Comment Indicators

A. Proposed CY 2007 Status Indicator Definitions

(If you choose to comment on issues in this section, please include the caption “OPPS Status Indicator” at the beginning of your comment.)

The OPPS payment status indicators (SIs) that we assign to HCPCS codes and APCs play an important role in determining payment for services under the OPPS. They indicate whether a service represented by a HCPCS code is payable under the OPPS or another payment system and also whether particular OPPS policies apply to the code. Our proposed CY 2007 status indicator assignments for APCs and HCPCS codes are shown in Addendum A and Addendum B, respectively. We are proposing to use the status indicators and definitions that are listed in Addendum D1, which we discuss below in greater detail:

1. Proposed Payment Status Indicators To Designate Services That Are Paid Under the OPPS

IndicatorItem/code/serviceOPPS payment status
GPass-Through Drugs and BiologicalsPaid under OPPS; Separate APC payment includes pass-through amount.
H(1) Pass-Through Device Categories(1) Separate cost-based pass-through payment; Not subject to coinsurance.
(2) Radiopharmaceutical Agents(2) Separate cost-based non-pass-through payment.