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Proposed Rule

Medicare Program: Proposed Changes to the Hospital Outpatient Prospective Payment System and CY 2009 Payment Rates; Proposed Changes to the Ambulatory Surgical Center Payment System and CY 2009 Payment Rates

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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. In this proposed rule, we describe the 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, 2009.

In addition, this proposed rule would update the revised Medicare ambulatory surgical center (ASC) payment system to implement applicable statutory requirements and changes arising from our continuing experience with this system. In this proposed rule, we propose the applicable relative payment weights and amounts for services furnished in ASCs, specific HCPCS codes to which these proposed changes would apply, and other pertinent ratesetting information for the CY 2009 ASC payment system. These changes would be applicable to services furnished on or after January 1, 2009.

DATES:

To be assured consideration, comments on all sections of the preamble of this proposed rule must be received at one of the addresses provided in the ADDRESSES section no later than 5 p.m. EST on September 2, 2008.

ADDRESSES:

In commenting, please refer to file code CMS-1404-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 this regulation to http://www.regulations.gov. Follow the instructions for “Comment or Submission” and enter the filecode to find the document accepting comments.

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-1404-P, P.O. Box 8013, Baltimore, MD 21244-1850.

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

3. By express or overnight mail. You may send written comments (one original and two copies) to the following address ONLY: Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS-1404-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:

a. Room 445-G, Hubert H. Humphrey Building, 200 Independence Avenue, SW., Washington, DC 20201.

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

b. 7500 Security Boulevard, Baltimore, MD 21244-1850.

If you intend to deliver your comments to the Baltimore address, please call the telephone number (410) 786-9994 in advance to schedule your arrival with one of our staff members.

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

Submission of comments on paperwork requirements. You may submit comments on this document's paperwork requirements by following the instructions 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.

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FOR FURTHER INFORMATION CONTACT:

Alberta Dwivedi, (410) 786-0378—Hospital outpatient prospective payment issues; Dana Burley, (410) 786-0378—Ambulatory surgical center issues; Suzanne Asplen, (410) 786-4558—Partial hospitalization and community mental health center issues; Sheila Blackstock, (410) 786-3502—Reporting of quality data issues.

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SUPPLEMENTARY INFORMATION:

Inspection of Public Comments: All comments received before the close of the comment period are available for viewing by the public, including any personally identifiable or confidential business information that is included in a comment. We post all comments received before the close of the comment period on the following Web site as soon as possible after they have been received: http://www.regulations.gov. Follow the search instructions on that Web site to view public comments.

Comments received timely will also be available for public inspection 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. EST. To schedule an appointment to view public comments, phone 1-800-743-3951.

Electronic Access

This Federal Register document is also available from the Federal Register online database through 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 This 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 priceStart Printed Page 41417

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

CAP Competitive Acquisition Program

CBSA Core-Based Statistical Area

CCR Cost-to-charge ratio

CERT Comprehensive Error Rate Testing

CMHC Community mental health center

CMS Centers for Medicare & Medicaid Services

CoP Condition of participation

CORF Comprehensive outpatient rehabilitation facility

CPT [Physicians'] Current Procedural Terminology, Fourth Edition, 2007, 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

FTE Full-time equivalent

FY Federal fiscal year

GAO Government Accountability Office

GME Graduate medical education

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

HOPD Hospital outpatient department

HOP QDRP Hospital Outpatient Quality Data Reporting Program

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

IDE Investigational device exemption

IME Indirect medical education

I/OCE Integrated Outpatient Code Editor

IOL Intraocular lens

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

MIEA-TRHCA Medicare Improvements and Extension Act under Division B, Title I of the Tax Relief Health Care Act of 2006, Pub. L. 109-432

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

MMSEA Medicare, Medicaid, and SCHIP Extension Act of 2007, Pub. L. 110-173

MPFS Medicare Physician Fee Schedule

MSA Metropolitan Statistical Area

NCCI National Correct Coding Initiative

NCD National Coverage Determination

NTIOL New technology intraocular lens

OMB Office of Management and Budget

OPD [Hospital] Outpatient department

OPPS [Hospital] Outpatient prospective payment system

PHP Partial hospitalization program

PM Program memorandum

PPI Producer Price Index

PPS Prospective payment system

PPV Pneumococcal pneumonia vaccine

PRA Paperwork Reduction Act

QIO Quality Improvement Organization

RFA Regulatory Flexibility Act

RHQDAPU Reporting Hospital Quality Data for Annual Payment Update [Program]

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

WAC Wholesale acquisition cost

In this document, we address two payment systems under the Medicare program: The hospital outpatient prospective payment system (OPPS) and the revised ambulatory surgical center (ASC) payment system. The provisions relating to the OPPS are included in sections I. through XIV., and XVI. through XXI. of this proposed rule and in Addenda A, B, C (Addendum C is available on the Internet only; see section XVIII. of this proposed rule), D1, D2, E, L, and M to this proposed rule. The provisions related to the revised ASC payment system are included in sections XV. and XVII. through XXI. of this proposed rule and in Addenda AA, BB, DD1, DD2, and EE (Addendum EE is available on the Internet only; see section XVIII. of this proposed rule) to this proposed rule.

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, Medicaid, and SCHIP Extension Act of 2007

F. Summary of the Major Contents of This Proposed Rule

1. Proposed Updates Affecting OPPS Payments

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

3. Proposed OPPS Payment for Devices

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

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

6. Proposed OPPS Payment for Brachytherapy Sources

7. Proposed OPPS Payment for Drug Administration Services

8. Proposed OPPS Payment for Hospital Outpatient Visits

9. Proposed Payment for Partial Hospitalization Services

10. Proposed Procedures That Will Be Paid Only as Inpatient Services

11. OPPS Nonrecurring and Policy Clarifications

12. Proposed OPPS Payment Status and Comment Indicators

13. OPPS Policy and Payment Recommendations

14. Proposed Update of the Revised Ambulatory Surgical Center Payment System

15. Proposed Quality Data for Annual Payment Updates

16. Healthcare-Associated Conditions

17. Regulatory Impact Analysis

II. Proposed Updates Affecting OPPS Payments

A. Proposed Recalibration of APC Relative Weights

1. Database Construction

a. Database Source and Methodology

b. Proposed Use of Single and Multiple Procedure Claims

c. Proposed Calculation of CCRs

(1) Development of the CCRs

(2) Charge Compression

2. Proposed Calculation of Median Costs

a. Claims Preparations

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

c. Completion of Claim Records and Median Cost Calculations

d. Proposed Calculation of Single Procedure APC Criteria-Based Median Costs

(1) Device-Dependent APCs

(2) Blood and Blood Products

(3) Single Allergy Tests

(4) Echocardiography Services

(5) Nuclear Medicine Services

(6) Hyperbaric Oxygen Therapy

(7) Payment for Ancillary Outpatient Services When Patient Expires (-CA Modifier)

e. Proposed Calculation of Composite APC Criteria-Based Median Costs

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

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

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

(4) Mental Health Services Composite APC (APC 0034)Start Printed Page 41418

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

3. Proposed Calculation of OPPS Scaled Payment Weights

4. Proposed Changes to Packaged Services

a. Background

b. Service-Specific Packaging Issues

(1) Package Services Addressed by APC Panel Recommendations

(2) IVIG Preadministration-Related Services

B. Proposed Conversion Factor Update

C. Proposed Wage Index Changes

D. Proposed Statewide Average Default CCRs

E. Proposed 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)

F. Proposed Hospital Outpatient Outlier Payments

1. Background

2. Proposed Outlier Calculation

3. Outlier Reconciliation

G. Proposed Calculation of an Adjusted Medicare Payment from the National Unadjusted Medicare Payment

H. Proposed Beneficiary Copayments

1. Background

2. Proposed Copayments

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

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

A. Proposed OPPS Treatment of New HCPCS and CPT Codes

1. Proposed Treatment of New HCPCS Codes Included in the April and July Quarterly OPPS Updates for CY 2008

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

B. Proposed OPPS Changes—Variations within APCs

1. Background

2. Application of the 2 Times Rule

3. Proposed Exceptions to the 2 Times Rule

C. New Technology APCs

1. Background

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

D. Proposed OPPS APC-Specific Policies

1. Trauma Response Associated with Hospital Critical Care Services (APC 0618)

2. Suprachoroidal Delivery of Pharmacologic Agent (APC 0236)

3. Closed Treatment Fracture of Finger/Toe/Trunk (APC 0043)

4. Individual Psychotherapy (APCs 0322 and 0323)

5. Implant Injection for Vesicoureteral Reflex (APC 0162)

IV. Proposed OPPS Payment for Devices

A. Pass-Through Payments for Devices

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

a. Background

b. Proposed Policy

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

a. Background

b. Proposed Policy

B. Proposed Adjustment to OPPS Payments for Partial or Full Credit Devices

1. Background

2. Proposed APCs and Devices Subject to the Adjustment Policy

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

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

1. Background

2. Proposed Drugs and Biologicals with Expiring Pass-Through Status in CY 2008

3. Proposed Drugs, Biologicals, and Radiopharmaceuticals with New or Continuing Pass-Through Status in CY 2009

4. Proposed Reduction of Transitional Pass-Through Payments for Diagnostic Radiopharmaceuticals to Offset Costs Packaged into APC Groups

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

1. Background

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

a. Drugs, Biologicals, and Therapeutic Radiopharmaceuticals

b. Proposed Payment for Diagnostic Radiopharmaceuticals and Contrast Agents

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

a. Payment for Specified Covered Outpatient Drugs (SCODs)

b. Proposed Payment Policy

c. Proposed Payment for Blood Clotting Factors

4. Proposed Payment for Therapeutic Radiopharmaceuticals

a. Background

b. Proposed Payment Policy

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

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

A. Background

B. Proposed Estimate of Pass-Through Spending

VII. Proposed OPPS Payment for Brachytherapy Sources

A. Background

B. Proposed OPPS Payment Policy

VIII. Proposed OPPS Payment for Drug Administration Services

A. Background

B. Proposed Coding and Payment for Drug Administration Services

IX. Proposed OPPS Payment for Hospital Outpatient Visits

A. Background

B. Proposed Policies for Hospital Outpatient Visits

1. Clinic Visits: New and Established Patient Visits

2. Emergency Department Visits

3. Visit Reporting Guidelines

X. Proposed Payment for Partial Hospitalization Services

A. Background

B. Proposed PHP APC Update

C. Proposed Policy Changes

1. Proposal to Deny Payments for Low Intensity Days

2. Proposal to Strengthen PHP Patient Eligibility Criteria

3. Proposed Partial Hospitalization Coding Update

C. Proposed Separate Threshold for Outlier Payments to CMHCs

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

A. Background

B. Proposed Changes to the Inpatient List

XII. OPPS Nonrecurring Technical and Policy Clarifications

A. Physician Supervision of HOPD Services

1. Background

2. Summary

B. Reporting of Pathology Services for Prostrate Saturation Biopsy

XIII. Proposed OPPS Payment Status and Comment Indicators

A. Proposed OPPS Payment 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 Comment Indicator Definitions

XIV. OPPS Policy and Payment Recommendations

A. Medicare Payment Advisory Commission (MedPAC) Recommendations

1. March 2008 Report

2. June 2007 Report

B. APC Panel Recommendations

C. OIG Recommendations

XV. Proposed Update of the Revised Ambulatory Surgical Center Payment System

A. Background

1. Legislative Authority for the ASC Payment System

2. Prior Rulemaking

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

B. Proposed Treatment of New Codes

1. Proposed Treatment of New Category I and III CPT Codes and Level II HCPCS Codes

2. Proposed Treatment of New Level II HCPCS Codes Implemented in April and July 2008

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

1. Covered Surgical Procedures

a. Proposed Additions to the List of ASC Covered Surgical Procedures

b. Covered Surgical Procedures Designated as Office Based

(1) Background

(2) Proposed Changes to Covered Surgical Procedures Designated as Office-Based for CY 2009

c. Covered Surgical Procedures Designated as Device-IntensiveStart Printed Page 41419

(1) Background

(2) Proposed Changes to List of Covered Surgical Procedures Designated as Device-Intensive for CY 2009

2. Covered Ancillary Services

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

1. Proposed Payment for Covered Surgical Procedures

a. Background

b. Proposed Update to ASC Covered Surgical Procedure Payment Rates for CY 2009

c. Proposed Adjustment to ASC Payments for Partial or Full Device Credit

2. Proposed Payment for Covered Ancillary Services

a. Background

b. Proposed Payment for Covered Ancillary Services for CY 2009

E. New Technology Intraocular Lenses

1. Background

2. NTIOL Application Process for Payment Adjustment

3. Classes of NTIOLs Approved and New Request for Payment Adjustment

a. Background

b. Requests to Establish New NTIOL Class for CY 2009 and Deadline for Public Comment

4. Proposed Payment Adjustment

5. Proposed ASC Payment for Insertion of IOLs

F. Proposed ASC Payment and Comment Indicators

1. Background

2. Proposed ASC Payment and Comment Indicators

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

1. Background

2. Proposed Policy Regarding Calculation of the ASC Payment Rates

a. Updating the ASC Relative Payment Weights for CY 2009 and Future Years

b. Updating the ASC Conversion Factor

3. Display of Proposed ASC Payment Rates

XVI. Reporting Quality Data for Annual Payment Rate Updates

A. Background

1. Reporting Hospital Outpatient Quality Data for Annual Payment Update

2. Reporting ASC Quality Data for Annual Payment Update

B. Existing Hospital Outpatient Measures for CY 2009

C. Proposed Quality Measures for CY 2010 and Subsequent Calendar Years and Proposed Process to Update Measures

1. Proposed Quality Measures for CY 2010 Payment Determinations

2. Proposed Process for Updating Measures

3. Possible New Quality Measures for CY 2011 and Subsequent Calendar Years

D. Proposed Payment Reduction for Hospitals That Fail to Meet the HOP QDRP Requirements for the CY 2009 Payment Update

1. Background

2. Proposed Reduction of OPPS Payments for Hospitals That Fail to Meet the HOP QDRP CY 2009 Payment Update Requirements

a. Calculation of Reduced National Unadjusted Payment Rates

b. Calculation of Reduced Minimum Unadjusted and National Unadjusted Beneficiary Copayments

c. Treatment of Other Payment Adjustments

E. Requirements for HOP Quality Data Reporting for CY 2010 and Subsequent Calendar Years

1. Administrative Requirements

2. Data Collection and Submission Requirements

3. HOP QDRP Validation Requirements

a. Proposed Data Validation Requirements for CY 2010

b. Alternative Data Validation Approaches for CY 2011

F. Publication of HOP QDRP Data

G. Proposed HOP QDRP Reconsideration and Appeals Procedures

H. Reporting of ASC Quality Data

XVII. Healthcare-Associated Conditions

A. Background

B. Broadening the Concept of the IPPS Hospital-Acquired Conditions Payment Provision to the OPPS

1. Criteria for Possible Candidate OPPS Conditions

2. Collaboration Process

3. Potential OPPS Healthcare-Associated Conditions

4. OPPS Infrastructure and Payment for Encounters Resulting in Healthcare-Associated Conditions

XVIII. Files Available to the Public Via the Internet

A. Information in Addenda Related to the Proposed CY 2009 Hospital OPPS

B. Information in Addenda Related to the Proposed CY 2009 ASC Payment System

XIX. Collection of Information Requirements

A. Legislative Requirement for Solicitation of Comments

B. Associated Information Collections Not Specified in Regulatory Text

C. Addresses for Submittal of Comments on ICRs

XX. Response to Comments

XXI. 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 OPPS Changes in This Proposed Rule

1. Alternatives Considered

2. Limitation of Our Analysis

3. Estimated Effects of This Proposed Rule on Hospitals

4. Estimated Effects of This Proposed Rule on CMHCs

5. Estimated Effects of This Proposed Rule on Beneficiaries

6. Conclusion

7. Accounting Statement

C. Effects of ASC Payment System Changes in This Proposed Rule

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 Proposed Requirements for Reporting of Quality Data for Annual Hospital Payment Update

E. Executive Order 12866

Regulation Text

Addenda

Addendum A—Proposed OPPS APCs for CY 2009

Addendum AA—Proposed ASC Covered Surgical Procedures for CY 2009 (Including Surgical Procedures for Which Payment Is Packaged)

Addendum B—Proposed OPPS Payment by HCPCS Code for CY 2009

Addendum BB—Proposed ASC Covered Ancillary Services Integral to Covered Surgical Procedures for CY 2009 (Including Ancillary Services for Which Payment Is Packaged)

Addendum D1—Proposed OPPS Payment Status Indicators

Addendum DD1—Proposed ASC Payment Indicators

Addendum D2—Proposed OPPS Comment Indicators

Addendum DD2—Proposed ASC Comment Indicators

Addendum E—Proposed HCPCS Codes That Would Be Paid Only as Inpatient Procedures for CY 2009

Addendum L—Proposed Out-Migration Adjustment

Addendum M—Proposed HCPCS Codes for Assignment to Composite APCs for CY 2009

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.

The Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act (BBRA) of 1999 (Pub. L. 106-113) made major changes in the hospital outpatient prospective payment system (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, also made additional changes in the OPPS. In addition, the Medicare Improvements and Extension Act under Division B of Title I of the Start Printed Page 41420Tax Relief and Health Care Act (MIEA-TRHCA) of 2006 (Pub. L. 109-432), enacted on December 20, 2006, made further changes in the OPPS. Further, the Medicare, Medicaid, and SCHIP Extension Act (MMSEA) of 2007 (Pub. L. 110-173), enacted on December 29, 2007, made additional changes in the OPPS. A discussion of these changes is included in sections I.E., II.C., V., and VII. of this proposed rule.

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 basis that varies according to the ambulatory payment classification (APC) group to which the service is assigned. We use the 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 proposed rule. 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 hospital inpatient wage index value for the locality in which the hospital or CMHC is located.

All services and items within an APC group are comparable clinically and with respect to resource use (section 1833(t)(2)(B) of the Act). In accordance with section 1833(t)(2) of the Act, subject to certain exceptions, 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 generally use the median cost of the item or service assigned to an APC group.

For new technology items and services, special payments under the OPPS may be made in one of two ways. Section 1833(t)(6) of the Act provides for temporary additional payments, which we refer to as “transitional pass-through payments,” for at least 2 but not more than 3 years for certain drugs, biological agents, brachytherapy devices used for the treatment of cancer, and categories of other medical devices. For new technology services that are not eligible for transitional pass-through payments, and for which we lack sufficient 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 payment for screening and diagnostic mammography services from the OPPS. The Secretary exercised the authority granted under the statute to also exclude from the OPPS those services that are paid under fee schedules or other payment systems. Such excluded services include, for example, the professional services of physicians and nonphysician practitioners paid under the Medicare Physician Fee Schedule (MPFS); laboratory services paid under the clinical diagnostic laboratory fee schedule (CLFS); services for beneficiaries with end-stage renal disease (ESRD) that are paid under the ESRD composite rate; and services and procedures that require an inpatient stay that are paid under the hospital 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 that take into account changes in medical practices, changes in technologies, and the addition of new services, new cost data, and other relevant information and factors.

Since initially implementing the OPPS, we have published final rules in the Federal Register annually to implement statutory requirements and changes arising from our continuing experience with this system. We published in the Federal Register on November 27, 2007 the CY 2008 OPPS/ASC final rule with comment period (72 FR 66580). 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 2008 OPPS on the basis of claims data from January 1, 2006, through December 31, 2006, and to implement certain provisions of Pub. L. 108-173 and Pub. L. 109-171. In addition, we responded to public comments received on the provisions of the November 26, 2006 final rule with comment period (71 FR 67960) pertaining to the APC assignment of HCPCS codes identified in Addendum B to that rule with the new interim (NI) comment indicator; and public comments received on the August 2, Start Printed Page 414212007 OPPS/ASC proposed rule for CY 2008 (72 FR 42628).

Subsequent to publication of the CY 2008 OPPS/ASC final rule with comment period, we published in the Federal Register on February 22, 2008, a correction notice (73 FR 9860) to correct certain technical errors in the CY 2008 OPPS/ASC 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, and redesignated by section 202(a)(2) 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 Classification (APC) Groups (the APC Panel), discussed under section I.D.2. of this proposed rule, fulfills these requirements. The APC Panel is not restricted to using data compiled by CMS, and it 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 clinical data and advises CMS about the clinical integrity of the APC groups and their payment weights. For purposes of this APC 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 renewed the APC Panel's charter three times: on November 1, 2002; on November 1, 2004; and effective November 21, 2006. The current charter specifies, 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 designated by the Secretary.

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

3. APC Panel Meetings and Organizational Structure

The APC Panel first met on February 27, February 28, and March 1, 2001. Since the initial meeting, the APC Panel has held 13 subsequent meetings, with the last meeting taking place on March 5, and March 6, 2008. Prior to each meeting, we publish a notice in the Federal Register to announce the meeting, and when necessary, to solicit nominations for APC Panel membership, and to announce new members.

The APC Panel has established an operational structure that, in part, includes the use of three subcommittees to facilitate its required APC review process. At its March 2008 meeting, the APC Panel recommended that the Observation and Visit Subcommittee's name be changed to the “Visits and Observation Subcommittee.” We are accepting this recommendation and will refer to the subcommittee by its new name, as appropriate, throughout this proposed rule. Thus, the three current subcommittees are the Data Subcommittee, the Visits and 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 Visits and Observation Subcommittee reviews and makes recommendations to the APC Panel on all technical issues pertaining to observation services and hospital outpatient visits paid under the OPPS (for example, APC configurations and APC payment weights). The Packaging Subcommittee studies and makes recommendations on issues pertaining to services that are not separately payable under the OPPS, but whose payments are bundled or packaged into APC payments. Each of these subcommittees was established by a majority vote from the full APC Panel during a scheduled APC Panel meeting, and their continuation as subcommittees was last approved at the March 2008 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 2008 meeting are included in the sections of this proposed rule that are specific to each recommendation. For discussions of earlier APC Panel meetings and recommendations, we refer readers to previously published hospital OPPS final rules or the Web site mentioned earlier in this section.

E. Provisions of the Medicare, Medicaid, and SCHIP Extension Act of 2007

The Medicare, Medicaid and SCHIP Extension Act (MMSEA) of 2007, (Pub. L. 110-173), enacted on December 29, 2007, included the following provisions that affect the OPPS and the revised APC payment system:

1. Increase in Physician Payment Update

Section 101 of the MMSEA provides a 0.5 percent increase in the physician payment update from January 1, 2008 through June 30, 2008; revises the Physician Assistance and Quality Initiative Fund, and extends through 2009 the physician quality reporting system. We refer readers to section XV. of this proposed rule for discussion of the effect of this provision on services paid under the revised ASC payment system.

2. Extended Expiration Date for Cost-Based OPPS Payment for Brachytherapy Sources and Therapeutic Radiopharmaceuticals

Section 106 of the MMSEA amended section 1833(t)(16)(C) of the Act, as amended by section 107 of the MIEA-TRCHA to extend for an additional 6 months, through June 30, 2008, payment for brachytherapy devices at hospitals' charges adjusted to costs and to mandate that the same cost-based payment methodology apply to therapeutic radiopharmaceuticals for the same extended payment period. We refer readers to sections V. and VII of this proposed rule for discussion of this provision.

3. Alternative Volume Weighting in Computation of Average Sales Price (ASP) for Medicare Part B Drugs

Section 112 of the MMSEA amended section 1847A(b) to provide for application of alternative volume weighting in computing the average sales price (ASP) for payment of Part B multiple source and single source drugs furnished after April 1, 2008, and for a special rule, beginning April 1, 2008, for payment of single source drugs or biologicals treated as a multiple source drug. This provision is discussed in section V. of this proposed rule.Start Printed Page 41422

4. Extended Expiration Date for Certain IPPS Wage Index Geographic Reclassifications and Special Exceptions

Section 117 of the MMSEA extended through September 30, 2008, both the reclassifications that were extended by section 106 of MIEA-TRCHA as well as certain special exception wage indices referenced in the FY 2005 IPPS final rule (69 FR 49105 and 49107). This provision also amended section 508 of Pub. L. 108-173 to specify conditions specific to the reclassification of a group of hospitals in a geographic area for discharges occurring during FY 2008. In addition, for hospital reclassifications extended by section 106(a) of the MIEA-TRCHA, that resulted in a lower wage index for the second half of FY 2007 than applicable to such hospitals during the first half of FY 2007, section 117 of the MMSEA directs the Secretary to apply a higher wage index to such hospitals for the entire FY 2007. We refer readers to section II.C. of this proposed rule for discussion of this provision.

F. Summary of the Major Contents of This Proposed Rule

In this proposed rule, we are setting forth proposed changes to the Medicare hospital OPPS for CY 2009. These changes would be effective for services furnished on or after January 1, 2009. We are also setting forth proposed changes to the Medicare revised ASC payment system for CY 2009. These changes would be effective for services furnished on or after January 1, 2009. The following is a summary of the major changes that we are proposing to make:

1. Proposed Updates Affecting OPPS Payments

In section II. of this proposed rule, we set forth—

  • The methodology used to recalibrate the proposed APC relative payment weights.
  • The proposed changes to packaged services.
  • The proposed update to the conversion factor used to determine payment rates under the OPPS. In this section we set forth changes in the amounts and factors for calculating the full annual update increase to the conversion factor.
  • The proposed retention of our current policy to use the IPPS wage indices to adjust, for geographic wage differences, the portion of the OPPS payment rate and the copayment standardized amount attributable to labor-related cost.
  • The proposed update of statewide average default CCRs.
  • The proposed application of hold harmless transitional outpatient payments (TOPs) for certain small rural hospitals.
  • The proposed payment adjustment for rural SCHs.
  • The proposed calculation of the hospital outpatient outlier payment.
  • The calculation of the proposed national unadjusted Medicare OPPS payment.
  • The proposed beneficiary copayments for OPPS services.

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

In section III. of this proposed rule, we discuss the proposed additions of new procedure codes to the APCs; our proposal to establish a number of new APCs; and our analyses of Medicare claims data and certain recommendations of the APC Panel. We also discuss the application of the 2 times rule and proposed exceptions to it; proposed changes to specific APCs; and the proposed movement of procedures from New Technology APCs to clinical APCs.

3. Proposed OPPS Payment for Devices

In section IV. of this proposed rule, we discuss proposed pass-through payment for specific categories of devices and the proposed adjustment for devices furnished at no cost or with partial or full credit.

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

In section V. of this proposed rule, we discuss proposed CY 2009 OPPS payment for drugs, biologicals, and radiopharmaceuticals, including the proposed payment for drugs, biologicals, and radiopharmaceuticals with and without pass-through status.

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

In section VI. of this proposed rule, we discuss the estimate of CY 2009 OPPS transitional pass-through spending for drugs, biologicals, and devices.

6. Proposed OPPS Payment for Brachytherapy Sources

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

7. Proposed OPPS Payment for Drug Administration Services

In section VIII. of this proposed rule, we set forth our proposed policy concerning payment and coding for drug administration services.

8. Proposed OPPS Payment for Hospital Outpatient Visits

In section IX. of this proposed rule, we set forth our proposed policies for the payment of clinic and emergency department visits and critical care services based on claims paid under the OPPS.

9. Proposed Payment for Partial Hospitalization Services

In section X. of this proposed rule, we set forth our proposed payment for partial hospitalization services, including the proposed separate threshold for outlier payments for CMHCs.

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

In section XI. of this proposed rule, we discuss the procedures that we are proposing to remove from the inpatient list and assign to APCs.

11. OPPS Nonrecurring Technical and Policy Clarifications

In section XII. of this proposed rule, we set forth our nonrecurring technical and policy clarifications.

12. Proposed OPPS Payment Status and Comment Indicators

In section XIII. of this proposed rule, we discuss our proposed changes to the definitions of status indicators assigned to APCs and present our proposed comment indicators for the CY 2009 OPPS/ASC final rule with comment period.

13. OPPS Policy and Payment Recommendations

In section XIV. of this proposed rule, we address recommendations made by the Medicare Payment Advisory Commission (MedPAC) in its June 2007 and March 2008 reports to Congress, by the APC Panel regarding the OPPS for CY 2009, and by the Office of the Inspector General (OIG) in its June 2007 report.

14. Proposed Update of the Revised Ambulatory Surgical Center Payment System

In section XV. of this proposed rule, we discuss the proposed update of the revised ASC payment system payment rates for CY 2009.

15. Proposed Reporting of Hospital Outpatient Quality Data for Annual Hospital Payment Rate Updates and CY 2009 Payment Reduction

In section XVI. of this proposed rule, we discuss the proposed quality Start Printed Page 41423measures for reporting hospital outpatient quality data for CY 2010 and subsequent calendar years, set forth the requirements for data collection and submission for the annual payment update, and propose a reduction in the OPPS payment for hospitals that fail to meet the HOP QDRP requirements for CY 2009.

16. Healthcare-Associated Conditions

In section XVII. of this proposed rule, we discuss considerations related to potentially extending the principle of Medicare not paying more for the preventable healthcare-associated conditions acquired during inpatient stays paid under the IPPS to other Medicare payment systems for healthcare-associated conditions that occur or result from care in other settings.

17. Regulatory Impact Analysis

In section XXI. of this proposed rule, we set forth an analysis of the impact the proposed changes would have on affected entities and beneficiaries.

II. Proposed Updates Affecting OPPS Payments

A. Proposed Recalibration of APC Relative Weights

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. As discussed in the November 13, 2000 interim final rule (65 FR 67824 through 67827), except for some reweighting due to a small number of APC changes, these relative payment weights continued to be in effect for CY 2001.

We are proposing to use the same basic methodology that we described in the April 7, 2000 OPPS final rule with comment period to recalibrate the APC relative payment weights for services furnished on or after January 1, 2009, and before January 1, 2010 (CY 2009). That is, we are proposing to 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 the proposed APC relative payment weights for CY 2009, we used approximately 130 million final action claims for hospital outpatient department (HOPD) services furnished on or after January 1, 2007, and before January 1, 2008. (For exact counts of claims used, we refer readers to the claims accounting narrative under supporting documentation for this proposed rule on the CMS Web site at: http://www.cms.hhs.gov/​HospitalOutpatientPPS/​HORD/​).

Of the 130 million final action claims for services provided in hospital outpatient settings used to calculate the CY 2009 OPPS payment rates for this proposed rule, approximately 100 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 100 million claims, approximately 45 million were not for services paid under the OPPS or were excluded as not appropriate for use (for example, erroneous cost-to-charge ratios (CCRs) or no HCPCS codes reported on the claim). We were able to use approximately 52 million whole claims of the approximately 54 million claims that remained to set the OPPS APC relative weights that we are proposing for the CY 2009 OPPS. From the 52 million whole claims, we created approximately 90 million single records, of which approximately 60 million were “pseudo” single claims (created from multiple procedure claims using the process we discuss in this section). Approximately 627,000 claims trimmed out on cost or units in excess of +/−3 standard deviations from the geometric mean, yielding approximately 89 million single bills used for median setting. Ultimately, we were able to use for proposed CY 2009 ratesetting some portion of the data from 96 percent of the CY 2007 claims containing services payable under the OPPS.

The proposed APC relative weights and payments for CY 2009 in Addenda A and B to this proposed rule were calculated using claims from CY 2007 that were processed before January 1, 2008, and continue to be based on the median hospital costs for services in the APC groups. 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 continue to believe that it is appropriate to use the most current full calendar year claims data and the most recently submitted cost reports to calculate the median costs which we are proposing to convert to relative payment weights for purposes of calculating the CY 2009 payment rates.

b. Proposed Use of Single and Multiple Procedure Claims

For CY 2009, in general, we are proposing to continue to use single procedure claims to set the medians on which the APC relative payment weights would be based, with some exceptions as discussed below. We generally use single procedure claims to set the median costs for APCs because we believe that it is important that the OPPS relative weights on which payment rates are based be appropriate when one and only one procedure is furnished and 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. 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 claims for multiple procedures. As we have for several years, we continued to use date of service stratification and a list of codes to be bypassed to convert multiple procedure claims to “pseudo” single procedure claims. Through bypassing specified codes that we believe do not have significant packaged costs, we are able to use more data from multiple procedure claims. In many cases, this enables us to create multiple “pseudo” single claims from claims that, as submitted, contained numerous separately paid procedures reported on the same date on one claim. We refer to these newly created single procedure claims as “pseudo” single claims because they were submitted by providers as multiple procedure claims. The history of our use of a bypass list to generate “pseudo” single claims is well documented, most recently in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66590 through 66597). In addition, for CY 2008, we increased packaging and created composite APCs, which also increased the number of bills we were able to use for median calculation by enabling us to use claims that contained multiple major procedures that previously would not have been usable. We refer readers to section II.A.2.e. of this proposed rule for discussion of the use of claims to establish median costs for composite APCs.

We are proposing to continue to apply these processes to enable us to use as much claims data as possible for ratesetting for the CY 2009 OPPS. Application of these processes in development of this proposed rule data resulted in our being able to use some or all of the data from 96 percent of the total claims that are eligible for use in Start Printed Page 41424the OPPS ratesetting and modeling for this proposed rule. This process enabled us to create, for this proposed rule, approximately 60 million “pseudo” single claims, including multiple imaging composite “single session” bills (we refer readers to section II.A.2.e.(5) of this proposed rule for further discussion), and approximately 30 million “natural” single bills. For this proposed rule, “pseudo” single procedure bills represent 67 percent of all single bills used to calculate median costs. This compares favorably to the CY 2008 OPPS/ASC final rule with comment period data in which “pseudo” single bills represented 66 percent of all single bills used to calculate the median costs on which the CY 2008 OPPS payment rates were based.

For CY 2009, we are proposing to bypass 452 HCPCS codes that are identified in Table 1 of this proposed rule. We are proposing to continue the use of the codes on the CY 2008 OPPS bypass list. Since the inception of the bypass list, we have calculated the percent of “natural” single bills that contained packaging for each HCPCS code and the amount of packaging in each “natural” single bill for each code. We have generally retained the codes on the previous year's bypass list and used the update year's data (for CY 2009, data available for the first CY 2008 APC Panel meeting for services furnished on and after January 1, 2007 through and including September 30, 2007) to determine whether it would be appropriate to add additional codes to the previous year's bypass list. The entire list (including the codes that remained on the bypass list from prior years) is open to public comment. We removed two HCPCS codes from the CY 2008 bypass list for this CY 2009 proposal because the codes were deleted on December 31, 2005, specifically C8951 (Intravenous infusion for therapy/diagnosis; each additional hour (List separately in addition to C8950)) and C8955 (Chemotherapy administration, intravenous; infusion technique, each additional hour (List separately in addition to C8954)). We updated HCPCS codes on the CY 2008 bypass list that were mapped to new HCPCS codes for CY 2009 ratesetting. We are proposing to add to the bypass list all HCPCS codes not on the CY 2008 bypass list that, using the APC Panel data, meet the same previously established empirical criteria for the bypass list that are summarized below. We assume that the representation of packaging in the single claims for any given code is comparable to packaging for that code in the multiple claims. The proposed criteria for the bypass list are:

  • There are 100 or more single claims for the code. This number of single claims ensures that observed outcomes are sufficiently representative of packaging that might occur in the multiple claims.
  • Five percent or fewer of the single claims for the code have packaged costs on that single claim for the code. This criterion results in limiting the amount of packaging being redistributed to the separately 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.
  • The median cost of packaging observed in the single claims is 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 HCPCS codes that CMS medical advisors believe have minimal associated packaging based on their clinical assessment of the complete CY 2009 OPPS proposal. To ensure clinical consistency in our treatment of related services, we are also proposing to add the other CPT add-on codes for drug administration services to the CY 2009 bypass list, in addition to the CPT codes for additional hours of infusion that were previously included on the CY 2008 bypass list, because adding them enables us to use many correctly coded claims for initial drug administration services that would otherwise not be available for ratesetting. The result of this proposal is that the packaged costs associated with add-on drug administration services are packaged into payment for the initial administration service, as has been our payment policy for the past 2 years for the CPT codes for additional hours of infusion. We are also proposing to add HCPCS code G0390 (Trauma response team activation associated with hospital critical care service) because we think it is appropriate to attribute all of the packaged costs that appear on a claim with HCPCS code G0390 and CPT code 99291 (Critical care, evaluation and management of the critically ill or critically injured patient; first 30-74 minutes) to CPT code 99291. If we did not add HCPCS code G0390 to the bypass list, we would have many fewer claims to use to set the median costs for APCs 0617 (Critical Care) and 0618 (Trauma Response with Critical Care). By definition, we could not have any properly coded “natural” single bills for HCPCS code G0390. Including HCPCS code G0390 on the bypass list allows us to create more “pseudo” single bills for CPT code 99291 and HCPCS code G0390, and, therefore, to improve the accuracy of the median costs of APCs 0617 and 0618 to which the two codes are assigned, respectively. The Integrated Outpatient Code Editor (I/OCE) logic rejects a line for HCPCS code G0390 if CPT code 99291 is not also reported on the claim. Therefore, we cannot assess whether HCPCS code G0390 would meet the empirical criteria for inclusion on the bypass list because we have no “natural” single claims for HCPCS code G0390.

As a result of the multiple imaging composite APCs that we are proposing to establish for CY 2009 as discussed in section II.A.2.e.(5) of this proposed rule, the “pseudo” single converter logic for bypassed codes that are also members of multiple imaging composite APCs would change. When creating the set of “pseudo” single claims, claims that contain “overlap bypass codes,” that is, those HCPCS codes that are both on the bypass list and are members of the multiple imaging composite APCs, are identified first. These HCPCS codes are then processed to create multiple imaging composite “single” bills, that is, claims containing HCPCS codes from only one imaging family, thus suppressing the initial use of these codes as bypass codes. However, these “overlap bypass codes” are retained on the bypass list because single unit occurrences of these codes are identified as single bills at the end of the “pseudo” single processing logic. The net effect of using these HCPCS codes in building multiple imaging composite “single session” claims rather than for bypass purposes is a slight reduction in the number of “pseudo” single claims available for the “overlap bypass codes” and a handful of services that would be frequently billed with an “overlap bypass code.” This process also creates multiple imaging composite “single session” bills that can be used for calculating composite APC median costs. “Overlap bypass codes” that would be members of the proposed multiple imaging composite APCs are identified by asterisks (*) in Table 1.

We note that this list contains bypass codes that were appropriate to claims for services in CY 2007 and, therefore, includes codes that were deleted for CY 2008. Moreover, there are codes on the proposed bypass list that are new for CY 2008 and which are appropriate additions to the bypass list in preparation for use of the CY 2008 claims for creation of the CY 2010 OPPS. Table 1 below includes a list of the bypass codes that we are proposing Start Printed Page 41425for CY 2009. We specifically request public comment on this proposed list of bypass codes for CY 2009.

Table 1.—Proposed CY 2009 Bypass Codes for Creating “Pseudo” Single Claims for Calculating Median Costs

HCPCS codeShort descriptor“Overlap bypass codes”
11056Trim skin lesions, 2 to 4
11057Trim skin lesions, over 4
11300Shave skin lesion
11301Shave skin lesion
11719Trim nail(s)
11720Debride nail, 1-5
11721Debride nail, 6 or more
11954Therapy for contour defects
17000Destruct premalg lesion
17003Destruct premalg les, 2-14
29220Strapping of low back
31231Nasal endoscopy, dx
31579Diagnostic laryngoscopy
51798Us urine capacity measure
53661Dilation of urethra
54240Penis study
56820Exam of vulva w/scope
57150Treat vagina infection
67820Revise eyelashes
69210Remove impacted earwax
69220Clean out mastoid cavity
70030X-ray eye for foreign body
70100X-ray exam of jaw
70110X-ray exam of jaw
70120X-ray exam of mastoids
70130X-ray exam of mastoids
70140X-ray exam of facial bones
70150X-ray exam of facial bones
70160X-ray exam of nasal bones
70200X-ray exam of eye sockets
70210X-ray exam of sinuses
70220X-ray exam of sinuses
70250X-ray exam of skull
70260X-ray exam of skull
70328X-ray exam of jaw joint
70330X-ray exam of jaw joints
70336Magnetic image, jaw joint*
70355Panoramic x-ray of jaws
70360X-ray exam of neck
70370Throat x-ray & fluoroscopy
70371Speech evaluation, complex
70450Ct head/brain w/o dye*
70480Ct orbit/ear/fossa w/o dye*
70486Ct maxillofacial w/o dye*
70490Ct soft tissue neck w/o dye*
70544Mr angiography head w/o dye*
70551Mri brain w/o dye*
71010Chest x-ray
71015Chest x-ray
71020Chest x-ray
71021Chest x-ray
71022Chest x-ray
71023Chest x-ray and fluoroscopy
71030Chest x-ray
71034Chest x-ray and fluoroscopy
71035Chest x-ray
71100X-ray exam of ribs
71101X-ray exam of ribs/chest
71110X-ray exam of ribs
71111X-ray exam of ribs/chest
71120X-ray exam of breastbone
71130X-ray exam of breastbone
71250Ct thorax w/o dye*
72010X-ray exam of spine
72020X-ray exam of spine
72040X-ray exam of neck spine
72050X-ray exam of neck spine
72052X-ray exam of neck spine
72069X-ray exam of trunk spine
72070X-ray exam of thoracic spine
72072X-ray exam of thoracic spine
72074X-ray exam of thoracic spine
72080X-ray exam of trunk spine
72090X-ray exam of trunk spine
72100X-ray exam of lower spine
72110X-ray exam of lower spine
72114X-ray exam of lower spine
72120X-ray exam of lower spine
72125Ct neck spine w/o dye*
72128Ct chest spine w/o dye*
72131Ct lumbar spine w/o dye*
72141Mri neck spine w/o dye*
72146Mri chest spine w/o dye*
72148Mri lumbar spine w/o dye*
72170X-ray exam of pelvis
72190X-ray exam of pelvis
72192Ct pelvis w/o dye*
72202X-ray exam sacroiliac joints
72220X-ray exam of tailbone
73000X-ray exam of collar bone
73010X-ray exam of shoulder blade
73020X-ray exam of shoulder
73030X-ray exam of shoulder
73050X-ray exam of shoulders
73060X-ray exam of humerus
73070X-ray exam of elbow
73080X-ray exam of elbow
73090X-ray exam of forearm
73100X-ray exam of wrist
73110X-ray exam of wrist
73120X-ray exam of hand
73130X-ray exam of hand
73140X-ray exam of finger(s)
73200Ct upper extremity w/o dye*
73218Mri upper extremity w/o dye*
73221Mri joint upr extrem w/o dye*
73510X-ray exam of hip
73520X-ray exam of hips
73540X-ray exam of pelvis & hips
73550X-ray exam of thigh
73560X-ray exam of knee, 1 or 2
73562X-ray exam of knee, 3
Start Printed Page 41426
73564X-ray exam, knee, 4 or more
73565X-ray exam of knees
73590X-ray exam of lower leg
73600X-ray exam of ankle
73610X-ray exam of ankle
73620X-ray exam of foot
73630X-ray exam of foot
73650X-ray exam of heel
73660X-ray exam of toe(s)
73700Ct lower extremity w/o dye*
73718Mri lower extremity w/o dye*
73721Mri jnt of lwr extre w/o dye*
74000X-ray exam of abdomen
74010X-ray exam of abdomen
74020X-ray exam of abdomen
74022X-ray exam series, abdomen
74150Ct abdomen w/o dye*
74210Contrst x-ray exam of throat
74220Contrast x-ray, esophagus
74230Cine/vid x-ray, throat/esoph
74246Contrst x-ray uppr gi tract
74247Contrst x-ray uppr gi tract
74249Contrst x-ray uppr gi tract
76100X-ray exam of body section
76510Ophth us, b & quant a
76511Ophth us, quant a only
76512Ophth us, b w/non-quant a
76513Echo exam of eye, water bath
76514Echo exam of eye, thickness
76516Echo exam of eye
76519Echo exam of eye
76536Us exam of head and neck
76645Us exam, breast(s)
76700Us exam, abdom, complete*
76705Echo exam of abdomen*
76770Us exam abdo back wall, comp*
76775Us exam abdo back wall, lim*
76776Us exam k transpl w/doppler*
76801Ob us <14 wks, single fetus
76805Ob us ≥14 wks, sngl fetus
76811Ob us, detailed, sngl fetus
76816Ob us, follow-up, per fetus
76817Transvaginal us, obstetric
76830Transvaginal us, non-ob
76856Us exam, pelvic, complete*
76857Us exam, pelvic, limited*
76870Us exam, scrotum*
76880Us exam, extremity
76970Ultrasound exam follow-up
76977Us bone density measure
76999Echo examination procedure
77072X-rays for bone age
77073X-rays, bone length studies
77074X-rays, bone survey, limited
77075X-rays, bone survey complete
77076X-rays, bone survey, infant
77077Joint survey, single view
77078Ct bone density, axial
77079Ct bone density, peripheral
77080Dxa bone density, axial
77081Dxa bone density/peripheral
77082Dxa bone density, vert fx
77083Radiographic absorptiometry
77084Magnetic image, bone marrow
77280Set radiation therapy field
77285Set radiation therapy field
77290Set radiation therapy field
77295Set radiation therapy field
77300Radiation therapy dose plan
77301Radiotherapy dose plan, imrt
77315Teletx isodose plan complex
77326Brachytx isodose calc simp
77327Brachytx isodose calc interm
77328Brachytx isodose plan compl
77331Special radiation dosimetry
77332Radiation treatment aid(s)
77333Radiation treatment aid(s)
77334Radiation treatment aid(s)
77336Radiation physics consult
77370Radiation physics consult
77401Radiation treatment delivery
77402Radiation treatment delivery
77403Radiation treatment delivery
77404Radiation treatment delivery
77407Radiation treatment delivery
77408Radiation treatment delivery
77409Radiation treatment delivery
77411Radiation treatment delivery
77412Radiation treatment delivery
77413Radiation treatment delivery
77414Radiation treatment delivery
77416Radiation treatment delivery
77418Radiation tx delivery, imrt
77470Special radiation treatment
77520Proton trmt, simple w/o comp
77523Proton trmt, intermediate
80500Lab pathology consultation
80502Lab pathology consultation
85097Bone marrow interpretation
86510Histoplasmosis skin test
86850RBC antibody screen
86870RBC antibody identification
86880Coombs test, direct
Start Printed Page 41427
86885Coombs test, indirect, qual
86886Coombs test, indirect, titer
86890Autologous blood process
86900Blood typing, ABO
86901Blood typing, Rh (D)
86903Blood typing, antigen screen
86904Blood typing, patient serum
86905Blood typing, RBC antigens
86906Blood typing, Rh phenotype
86930Frozen blood prep
86970RBC pretreatment
86977RBC pretreatment, serum
88104Cytopath fl nongyn, smears
88106Cytopath fl nongyn, filter
88107Cytopath fl nongyn, sm/fltr
88108Cytopath, concentrate tech
88112Cytopath, cell enhance tech
88160Cytopath smear, other source
88161Cytopath smear, other source
88162Cytopath smear, other source
88172Cytopathology eval of fna
88173Cytopath eval, fna, report
88182Cell marker study
88184Flowcytometry/ tc, 1 marker
88185Flowcytometry/tc, add-on
88300Surgical path, gross
88302Tissue exam by pathologist
88304Tissue exam by pathologist
88305Tissue exam by pathologist
88307Tissue exam by pathologist
88311Decalcify tissue
88312Special stains
88313Special stains
88321Microslide consultation
88323Microslide consultation
88325Comprehensive review of data
88331Path consult intraop, 1 bloc
88342Immunohistochemistry
88346Immunofluorescent study
88347Immunofluorescent study
88348Electron microscopy
88358Analysis, tumor
88360Tumor immunohistochem/manual
88361Tumor immunohistochem/comput
88365In situ hybridization (FISH)
88368Insitu hybridization, manual
88399Surgical pathology procedure
89049Chct for mal hyperthermia
89230Collect sweat for test
89240Pathology lab procedure
90472Immunization admin, each add
90474Immune admin oral/nasal addl
90761Hydrate iv infusion, add-on
90766Ther/proph/dg iv inf, add-on
90767Tx/proph/dg addl seq iv inf
90770Sc ther infusion, addl hr
90771Sc ther infusion, reset pump
90775Tx/pro/dx inj new drug add-on
90801Psy dx interview
90802Intac psy dx interview
90804Psytx, office, 20-30 min
90805Psytx, off, 20-30 min w/e&m
90806Psytx, off, 45-50 min
90807Psytx, off, 45-50 min w/e&m
90808Psytx, office, 75-80 min
90809Psytx, off, 75-80, w/e&m
90810Intac psytx, off, 20-30 min
90811Intac psytx, 20-30, w/e&m
90812Intac psytx, off, 45-50 min
90816Psytx, hosp, 20-30 min
90818Psytx, hosp, 45-50 min
90826Intac psytx, hosp, 45-50 min
90845Psychoanalysis
90846Family psytx w/o patient
90847Family psytx w/patient
90853Group psychotherapy
90857Intac group psytx
90862Medication management
90899Psychiatric service/therapy
92002Eye exam, new patient
92004Eye exam, new patient
92012Eye exam established pat
92014Eye exam & treatment
92020Special eye evaluation
92025Corneal topography
92081Visual field examination(s)
92082Visual field examination(s)
92083Visual field examination(s)
92135Ophth dx imaging post seg
92136Ophthalmic biometry
92225Special eye exam, initial
92226Special eye exam, subsequent
92230Eye exam with photos
92240Icg angiography
92250Eye exam with photos
92275Electroretinography
92285Eye photography
92286Internal eye photography
92520Laryngeal function studies
92541Spontaneous nystagmus test
92546Sinusoidal rotational test
92548Posturography
92552Pure tone audiometry, air
92553Audiometry, air & bone
92555Speech threshold audiometry
92556Speech audiometry, complete
Start Printed Page 41428
92557Comprehensive hearing test
92567Tympanometry
92582Conditioning play audiometry
92585Auditor evoke potent, compre
92603Cochlear implt f/up exam 7 >
92604Reprogram cochlear implt 7 >
92626Eval aud rehab status
93005Electrocardiogram, tracing
93017Cardiovascular stress test
93225ECG monitor/record, 24 hrs
93226ECG monitor/report, 24 hrs
93231Ecg monitor/record, 24 hrs
93232ECG monitor/report, 24 hrs
93236ECG monitor/report, 24 hrs
93270ECG recording
93271Ecg/monitoring and analysis
93278ECG/signal-averaged
93727Analyze ilr system
93731Analyze pacemaker system
93732Analyze pacemaker system
93733Telephone analy, pacemaker
93734Analyze pacemaker system
93735Analyze pacemaker system
93736Telephonic analy, pacemaker
93741Analyze ht pace device sngl
93742Analyze ht pace device sngl
93743Analyze ht pace device dual
93744Analyze ht pace device dual
93786Ambulatory BP recording
93788Ambulatory BP analysis
93797Cardiac rehab
93798Cardiac rehab/monitor
93875Extracranial study
93880Extracranial study
93882Extracranial study
93886Intracranial study
93888Intracranial study
93922Extremity study
93923Extremity study
93924Extremity study
93925Lower extremity study
93926Lower extremity study
93930Upper extremity study
93931Upper extremity study
93965Extremity study
93970Extremity study
93971Extremity study
93975Vascular study
93976Vascular study
93978Vascular study
93979Vascular study
93990Doppler flow testing
94015Patient recorded spirometry
94690Exhaled air analysis
95115Immunotherapy, one injection
95117Immunotherapy injections
95165Antigen therapy services
95250Glucose monitoring, cont
95805Multiple sleep latency test
95806Sleep study, unattended
95807Sleep study, attended
95808Polysomnography, 1-3
95812Eeg, 41-60 minutes
95813Eeg, over 1 hour
95816Eeg, awake and drowsy
95819Eeg, awake and asleep
95822Eeg, coma or sleep only
95869Muscle test, thor paraspinal
95872Muscle test, one fiber
95900Motor nerve conduction test
95921Autonomic nerv function test
95925Somatosensory testing
95926Somatosensory testing
95930Visual evoked potential test
95950Ambulatory eeg monitoring
95953EEG monitoring/computer
95970Analyze neurostim, no prog
95972Analyze neurostim, complex
95974Cranial neurostim, complex
95978Analyze neurostim brain/1h
96000Motion analysis, video/3d
96101Psycho testing by psych/phys
96111Developmental test, extend
96116Neurobehavioral status exam
96118Neuropsych tst by psych/phys
96119Neuropsych testing by tec
96150Assess hlth/behave, init
96151Assess hlth/behave, subseq
96152Intervene hlth/behave, indiv
96153Intervene hlth/behave, group
96402Chemo hormon antineopl sq/im
96411Chemo, iv push, addl drug
96415Chemo, iv infusion, addl hr
96417Chemo iv infus each addl seq
96423Chemo ia infuse each addl hr
96900Ultraviolet light therapy
96910Photochemotherapy with UV-B
96912Photochemotherapy with UV-A
96913Photochemotherapy, UV-A or B
96920Laser tx, skin <250 sq cm
98925Osteopathic manipulation
98926Osteopathic manipulation
98927Osteopathic manipulation
98940Chiropractic manipulation
98941Chiropractic manipulation
98942Chiropractic manipulation
99204Office/outpatient visit, new
99212Office/outpatient visit, est
99213Office/outpatient visit, est
99214Office/outpatient visit, est
Start Printed Page 41429
99241Office consultation
99242Office consultation
99243Office consultation
99244Office consultation
99245Office consultation
0144TCT heart wo dye; qual calc
G0008Admin influenza virus vac
G0101CA screen; pelvic/breast exam
G0127Trim nail(s)
G0130Single energy x-ray study
G0166Extrnl counterpulse, per tx
G0175OPPS Service,sched team conf
G0340Robt lin-radsurg fractx 2-5
G0344Initial preventive exam
G0365Vessel mapping hemo access
G0367EKG tracing for initial prev
G0376Smoke/tobacco counseling >10
G0389Ultrasound exam AAA screen
G0390Trauma response w/hosp criti
M0064Visit for drug monitoring
Q0091Obtaining screen pap smear

c. Proposed Calculation of CCRs

(1) Development of the CCRs

We calculated hospital-specific overall CCRs and hospital-specific departmental CCRs for each hospital for which we had CY 2007 claims data. For CY 2009 OPPS ratesetting, we used the set of claims processed during CY 2007. We applied the hospital-specific CCR to the hospital's charges at the most detailed level possible, based on a revenue code-to-cost center crosswalk that contains a hierarchy of CCRs used to estimate costs from charges for each revenue code. That crosswalk is available for review and continuous comment on the CMS Web site at: http://www.cms.hhs.gov/​HospitalOutpatientPPS/​03_​crosswalk.asp#TopOfPage. We calculated CCRs for the standard and nonstandard cost centers accepted by the electronic cost report database. In general, the most detailed level at which we calculated CCRs was the hospital-specific departmental level.

We are proposing to make a change to the revenue code-to-cost center crosswalk for the CY 2009 OPPS. Specifically, for revenue code 0904 (Activity Therapy), we are proposing to make cost center 3550 (Psychiatric/Psychological Services) the primary cost center and to make cost center 6000 (Clinic services) the secondary cost center. For CY 2008, for revenue code 0904, the primary cost center is 3580 (Recreational Therapy), cost center 3550 is secondary; and cost center 6000 is tertiary. We are proposing this change to conform the OPPS methodology for hospital claims to the crosswalk that is being used to calculate partial hospitalization costs for CMHCs.

We would like to affirm that the longstanding Medicare principles of cost apportionment at § 413.53 convey that, under the departmental method of apportionment, the cost of each ancillary department is to be apportioned separately rather than being combined with another department. However, CMS does not specify a revenue code-to-cost center crosswalk that hospitals must adopt to prepare the cost report, but instead, requires hospitals to submit their individual crosswalk to the Medicare contractor when the cost report is filed. The proposed CY 2009 OPPS revenue code-to-cost center crosswalk contains several potential cost center locations for a revenue code because it is an attempt to best represent the association of revenue codes with cost centers across all hospitals for modeling purposes. Assignment to cost centers is mutually exclusive and only defaults to the next level when the cost center with higher priority is unavailable. The changes to the crosswalk for revenue code 0904 mentioned above are used by CMS for modeling purposes only, and we fully expect hospitals to comply with the Medicare reimbursement policies when reporting their costs and charges on the cost report.

At the March 2008 APC Panel meeting, we reviewed with the APC Panel's Data Subcommittee the current revenue code-to-cost center crosswalk, as well as other data in preparation for the CY 2009 rulemaking cycle. At this meeting, the APC Panel recommended that the Data Subcommittee continue its work and we are accepting that recommendation. We will continue to work with the APC Panels' Data Subcommittee to prepare and review data and analyses relevant to the APC configurations and OPPS payment policies for hospital outpatient items and services.

(2) Charge Compression

Since the implementation of the OPPS, some commenters have raised concerns about potential bias in the OPPS cost-based weights due to “charge compression,” which is the practice of applying a lower charge markup to higher-cost services and a higher charge markup to lower-cost services. As a result, the cost-based weights suffer from aggregation bias, undervaluing high cost items and overvaluing low cost items if an estimate of average markup embodied in a single CCR is applied to items of widely varying costs in the same cost center. Commenters expressed increased concern about the impact of charge compression when, partially in response to recommendations of the Medicare Payment Advisory Commission (MedPAC), CMS proposed to set the relative weights for payment under the IPPS based on the costs of inpatient hospital services, rather than the charges for the services.

To explore this issue, in August 2006 we awarded a contract to RTI International (RTI) to study the effects of charge compression in calculating the IPPS relative weights, particularly with regard to the impact on inpatient diagnosis-related group (DRG) payments, and to consider methods to reduce the variation in the CCRs used to calculate costs for the IPPS relative weights across services within cost centers. Of specific note was RTI's analysis of a regression-based methodology estimating an average adjustment for CCR by type of revenue code from an observed relationship between provider cost center CCRs and proportional billing of high and low cost services in the cost center. RTI issued a report in March 2007 with its findings on charge compression. The report is available on the CMS Web site at: http://www.cms.hhs.gov/​reports/​downloads/​Dalton.pdf. Although this report was focused largely on charge compression in the context of the IPPS cost-based relative weights, several of the findings were relevant to the OPPS. Therefore, we discussed the findings and our responses to that interim draft report in the CY 2008 OPPS/ASC proposed rule (72 FR 42641 through 42643) and reiterated them in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66599 through 66602).

As RTI noted in its 2007 report that its research was limited to IPPS DRG cost-based weights and that it did not examine potential areas of charge compression specific to hospital outpatient services, we were concerned Start Printed Page 41430that the analysis was too limited in scope because typically hospital cost report CCRs encompass both inpatient and outpatient services for each cost center. Further, because both the IPPS and OPPS rely on cost-based weights, we preferred to introduce any methodological adjustments to both payment systems at the same time. We believe that because charge compression affects the cost estimates for services paid under both IPPS and OPPS in the same way, it is appropriate that we would use the same approach to address the issue. Finally, we noted that we wished to assess the educational activities being undertaken by the hospital community to improve cost reporting accuracy in response to RTI's findings, either as an adjunct to or in lieu of regression-based adjustments to CCRs.

We have since expanded RTI's analysis of charge compression to incorporate outpatient services. In August 2007, we again contracted with RTI. Under this contract, we asked RTI to evaluate the cost estimation process for the OPPS relative weights. This research included a reassessment of the regression-based CCR models using hospital outpatient and inpatient charge data, as well as a detailed review of the OPPS revenue code-to-cost center crosswalk and the OPPS' hospital-specific CCR methodology. In evaluating cost-based estimation, in general, the results of RTI's analyses impact both the OPPS APC relative weights and the IPPS MS-DRG (Medicare-Severity) relative weights. With the release of the IPPS FY 2009 proposed rule in April 2008, CMS also posted an interim report discussing RTI's research findings for the IPPS MS-DRG relative weights to be available during the public comment period on the FY 2009 IPPS proposed rule. This report can be found on RTI's Web site at: http://www.rti.org/​reports/​cms/​HHSM-500-2005-0029I/​PDF/​Refining_​Cost_​to_​Charge_​Ratios_​200804.pdf. The IPPS-specific chapters, which were separately displayed in the April 2008 interim report, as well as the more recent OPPS chapters, are included in the July 2008 RTI final report entitled, “Refining Cost to Charge Ratios for Calculating APC and DRG Relative Payment Weights,” that became available at the time of the development of this proposed rule. The RTI final report can be found on RTI's Web site at: http://www.rti.org.

RTI's final report distinguished between two types of research findings and recommendations, those pertaining to the accounting or cost report data itself and those related to statistical regression analysis. Because the OPPS uses a hospital-specific CCR methodology, employs detailed cost report data, and estimates costs at the claim level, CMS asked RTI to closely evaluate the accounting component of the cost-based weight methodology, specifically the revenue code-to-cost center crosswalk. In reviewing the cost report data for nonstandard cost centers used in the crosswalk, RTI discovered some problems concerning the classification of nonstandard cost centers, and reclassified nonstandard cost centers by reading providers' cost center labels. Standard cost centers are preprinted in the CMS-approved cost report software, while nonstandard cost centers are identified and updated periodically through analysis of frequently used labels. RTI also evaluated the revenue code-to-cost center crosswalk after examining hospitals' cost report and revenue code billing patterns in order to reduce aggregation bias inherent in defaulting to the overall ancillary CCR and generally to improve the empirical accuracy of the crosswalk.

With regard to the statistical adjustments, RTI confirmed the findings of its March 2007 report that regression models are a valid approach for diagnosing potential aggregation bias within selected services for the IPPS and found that regression models are equally valid for setting payments under the OPPS. RTI also suggested that regression-based CCRs could provide a short-term correction until accounting data could be refined to support more accurate CCR estimates under both the IPPS and the OPPS. RTI again found aggregation bias in devices, drugs, and radiology and, using combined outpatient and inpatient claims, expanded the number of recommended regression-adjusted CCRs.

In almost all cases, RTI observed that potential distortions in the APC relative weights were proportionally much greater than for MS-DRGs for both accounting-based and statistical adjustments because APC groups are small and generally price a single service. However, just as the overall impacts on MS-DRGs were more moderate because MS-DRGs experienced offsetting effects of changes in cost estimation, a given hospital outpatient visit might include more than one service, leading to offsetting effects in cost estimation for services provided in the outpatient episode as a whole. In general, APC relative weights are more volatile than MS-DRG relative weights from year to year yet OPPS provider impacts are typically quite modest and, in light of this experience, we expect that overall provider impacts could be much more moderate than those suggested by individual APC impacts from the RTI analysis.

Notwithstanding likely offsetting effects at the provider-level, RTI asserted that, while some averaging is appropriate for a prospective payment system, extreme distortions in APC payments for individual services bias perceptions of service profitability and may lead hospitals to inappropriately set their charge structure. RTI noted that this may not be true for “core” hospital services, such as oncology, but has a greater impact in evolving areas with greater potential for provider-induced demand, such as specialized imaging services. RTI also noted that cost-based weights are only one component of a final prospective payment rate. There are other rate adjustments (wage index, indirect medical education (IME), and disproportionate share hospital (DSH)) to payment derived from the revised cost-based weights and the cumulative effect of these components may not improve the ability of final payment to reflect resource cost. With regard to APCs and MS-DRGs that contain substantial device costs, RTI cautioned that other prospective payment system adjustments (wage index, IME, and DSH) largely offset the effects of charge compression among hospitals that receive these adjustments. RTI endorsed short-term regression-based adjustments, but also concluded that more refined and accurate accounting data are the preferred long-term solution to mitigate charge compression and related bias in hospital cost-based weights.

As a result of this research, RTI made 11 recommendations, 2 of which are specific to IPPS MS-DRGs and are not discussed in this proposed rule. The first set of non-IPPS-specific recommendations concentrates on short-term accounting changes to current cost report data; the second set addresses short-term regression-based and other statistical adjustments. RTI concluded its recommendations with longer-term accounting changes to the cost report. (RTI report, “Refining Cost to Charge Ratios for Calculating APC and MS-DRG Relative Payment Weights,” July 2008). Given the magnitude and scope of impacts on APC relative weights that would result from adopting both accounting and statistical changes, as specifically observed in Chapter 6 of RTI's July 2008 final report and Attachments 4a, 4b, and 5 (RTI report, “Refining Cost to Charge Ratios for Calculating APC and MS-DRG Relative Payment Weights,” July 2008), we are not proposing to adopt any short-term adjustments to OPPS payment rate Start Printed Page 41431calculations for CY 2009. Furthermore, the numerous and substantial changes that RTI recommends have significantly complex interactions with one another and we believe that we should proceed cautiously. In a budget neutral payment system, increases in payment for some services must be countered by reductions to payment for other services.

We are, however, specifically seeking public comments on several of RTI's recommended accounting-based changes pertaining to the cost report as discussed below because we plan to consider these public comments in our current revision to the Medicare hospital cost report and in our decisions pertaining to the CY 2010 OPPS. We believe that improved and more precise cost reporting is the best way to improve the accuracy of all cost-based payment weights, including relative weights for the IPPS MS-DRGs. Because both the IPPS and the OPPS rely on cost-based weights derived, in part, from data on the Medicare hospital cost report form, public comments on recommended changes to the cost report should address any impact on both the inpatient and outpatient payment systems.

We noted in the FY 2009 IPPS proposed rule that we are updating the cost report form to eliminate outdated requirements in conjunction with the Paperwork Reduction Act (PRA), and that we plan to propose actual changes to the cost reporting form, the attending cost reporting software, and the cost report instructions in Chapter 36 of the Medicare Provider Reimbursement Manual (PRM), Part II (73 FR 23546 through 23547). We anticipate proposing these revisions shortly. We would consider any public comments on our proposals for cost report changes, as well as any public comments on RTI's cost estimation findings and recommendations for revising the cost report in general, in updating the cost report. We expect the revised cost report may be available for hospitals to use when submitting cost reports during FY 2010, that is, for cost reporting periods beginning after October 1, 2008, and we expect that we would be able to use some of these data for setting payment rates for future OPPS updates.

RTI's first set of four recommendations for accounting changes addressed improved use of existing cost report and claims data. RTI recommended: (1) Immediately using text searches of providers' line descriptions to more appropriately classify nonstandard cost centers in current hospital cost report data; (2) changing cost report preparation software to impose fixed descriptions on nonstandard cost centers; (3) slightly revising CMS' cost center aggregation table to eliminate duplicative or misplaced nonstandard cost centers and to add nonstandard cost centers for common services without one; and (4) adopting RTI's recommended changes to the revenue code-to-cost center crosswalk.

Given the magnitude and scope of impacts resulting from RTI's recommended revisions, we are not proposing to adopt any of the short-term accounting changes, including text searches of providers' line descriptions to more appropriately classify nonstandard cost centers and recommended changes to the revenue code-to-cost center crosswalk. We will modify the cost report preparation software that will accompany the revised Medicare cost report form to print a brief fixed description with a nonstandard cost center number, while continuing to allow the hospital to enter a line description.

With regard to revisions to the cost center aggregation table, we are specifically inviting public comment on whether several identified cost centers are duplicative (RTI report, “Refining Cost to Charge Ratios for Calculating APC and MS-DRG Relative Payment Weights,” July 2008). We are also specifically requesting public comment on creation of new nonstandard cost centers for services that are well represented in line descriptions associated with “other ancillary services” cost centers, but for which no distinct nonstandard cost center currently exists and for which UB-04 revenue codes do exist, including cardiac rehabilitation, hyperbaric oxygen therapy, and patient education (RTI report, “Refining Cost to Charge Ratios for Calculating APC and MS-DRG Relative Payment Weights,” July 2008). We will consider these comments as we continue our work on revising the Medicare hospital cost report form.

Furthermore, we are interested in public comment on RTI's recommended changes to the OPPS revenue code-to-cost center crosswalk, and we may propose to adopt crosswalk changes for CY 2010 based on RTI's analyses and related public comments received on this issue. Although available on the CMS Web site for continuous public comment, we have received relatively few public comments over the last several years on the OPPS revenue code-to-cost center crosswalk, which has undergone only minimal change since the inception of the OPPS. RTI's revised crosswalk in Attachment 2b of its final report reflected all accounting changes, including reclassification of nonstandard cost centers from text searches, removal of duplicative cost centers, and addition of new nonstandard cost centers for common services. Throughout the July 2008 final report, RTI used a subscripting nomenclature developed from CMS' aggregation table to identify cost centers. To disentangle the combined impact of these changes and clearly communicate RTI's recommended changes in current cost center numbers, we have made available on the CMS Web site a revised (RTI-recommended) crosswalk using current standard and nonstandard cost centers in the same format as the crosswalk proposed for the CY 2009 OPPS. This revised (RTI-recommended) crosswalk may be found on the CMS Web site under supporting documentation for this proposed rule at: http://www.cms.hhs.gov/​HospitalOutpatientPPS/​HORD/​list.asp#TopOfPage. We did not include RTI's recommended new or collapsed nonstandard cost centers in this revised crosswalk.

We are specifically inviting public comment on the numerous changes included in this crosswalk. Areas of specific interest include the addition of “default” CCRs for clinic, cardiology, and therapy services before defaulting to the overall ancillary CCR, as is our current policy. The overall ancillary CCR is charge-weighted and heavily influenced by the relationship between costs and charges for surgical and imaging services. RTI also introduced cost center 4300 (Radioisotope) as a primary cost converter for the nuclear medicine revenue codes (034X). Further, RTI added secondary and tertiary crosswalk maps for services that frequently appear together, such as CCRs for Computed Tomography (CT) Scan as a secondary cost converter for the Magnetic Resonance Imaging (MRI) revenue codes (061X) (RTI report, “Refining Cost to Charge Ratios for Calculating APC and MS-DRG Relative Payment Weights,” July 2008).

RTI's second set of recommendations concentrated on short-term statistical regression-based adjustments to address aggregation bias. RTI recommended: (1) Adopting regression-adjusted OPPS CCRs for Devices, Other Supplies Sold, Additional Detail Coded Drugs, and Intravenous (IV) Solutions and Other Drugs Sold; and (2) adopting a set of CCRs that blend corrected cost report and regression-adjusted CCRs for CT scanning, MRI, therapeutic radiology, nuclear medicine, and other diagnostic radiology services for hospitals that did not report these standard and nonstandard cost centers. We agree that Start Printed Page 41432improved data for cost estimation in these areas is a desirable goal. However, we have chosen to concentrate our efforts on concrete steps to improve the quality of cost report accounting data that ultimately would be used to calculate both hospital inpatient and outpatient prospective payment system relative weights. In the proposed rule for the FY 2009 IPPS (73 FR 23544), for which the public comment period closed on June 13, 2008, we emphasize this fundamental goal of improving cost report accounting data rather than making short-term statistical adjustments.

RTI's third and final set of recommendations focused on long-term accounting revisions to the cost report and educational efforts to improve the overall accuracy of accounting data. RTI recommended: (1) Clarifying cost report instructions and requiring hospitals to use all standard lines in the cost report if their facility offers the described services; (2) creating new standard lines on the cost report for CT Scanning, MRI, Cardiac Catheterization, Devices, and Drugs Requiring Additional Coding; and (3) educating hospitals through industry-led educational initiatives directed at methods for capital cost finding, specifically encouraging providers to use direct assignment of equipment depreciation and lease costs wherever possible, or at least to allocate moveable equipment depreciation based on dollar value of assigned depreciation costs.

We will consider the best means to clarify the principle of departmental apportionment of costs at § 413.53, which states that hospitals should apportion separately the costs and charges of each ancillary department for which charges are customarily made separately rather than combining those costs and charges with another ancillary department. RTI noted that many hospitals combine costs and charges for therapeutic radiology and nuclear medicine services under the diagnostic radiology cost center, when these are services with their own specific and distinct charges and cost centers (RTI report, “Refining Cost to Charge Ratios for Calculating APC and MS-DRG Relative Payment Weights,” July 2008). We seek to better understand the reason for this aggregation and other relatively common scenarios, such as a failure to report the standard cost center 4700 (Blood Storing, Processing & Transp.) when the hospital bills Medicare for blood products that always have storage and processing costs and charges, as well as any concerns hospitals may have about reporting all appropriate standard cost centers.

With regard to creating new standard lines on the cost report, we are proposing standard lines on the cost report for Devices and Drugs Requiring Additional Coding. In the FY 2009 IPPS proposed rule (73 FR 23546), we proposed to create two new cost centers, Medical Supplies Charged to Patients and Implantable Devices Charged to Patients, to replace the current cost center called Supplies Charged to Patients as part of our initiative to revise and update the Medicare hospital cost report form. In our discussion of pharmacy overhead cost in section V.B.3. of this proposed rule, we are proposing to create two other new cost centers, Drugs with High Overhead Costs Charged to Patients and Drugs with Low Overhead Costs Charged to Patients, to replace the current cost center called Drugs Charged to Patient. Public comment on the proposal for these two other new cost centers included in this proposed rule should be made in reference to that detailed discussion.

We believe that standard cost centers for CT Scanning, MRI, and Cardiac Catheterization also may be appropriate as we revise the Medicare hospital cost report form. CMS already has established nonstandard cost centers for these services and many, but not all, hospitals currently report costs and charges in these cost centers. As noted earlier in this section, cost center coding is a way to standardize cost reporting across hospitals. Standard cost centers are preprinted through CMS-approved cost report software, and nonstandard cost centers are identified and updated periodically through analysis of frequently used labels. While we currently use available nonstandard cost center CCRs for cost estimation under the OPPS, creating standard lines for CT Scanning, MRI, and Cardiac Catheterization would do more to require hospitals to break out their costs and charges for services in these clinical areas, especially as we pursue clarifying our departmental apportionment regulations requiring reporting of distinct charge types in separate ancillary cost centers. We are specifically inviting public comment on the appropriateness of creating standard cost centers for CT Scanning, MRI, and Cardiac Catheterization, rather than continuing the established nonstandard cost centers for these services.

The accuracy of capital cost allocation under Medicare allocation methods remains an issue when discussing the accuracy of CCRs for radiology and other capital-intensive services. We are supportive of industry-led educational initiatives to improve the quality of reporting capital costs on the cost report and, as we explained in the FY 2008 IPPS final rule with comment period (72 FR 47196), we are willing to work with the hospital industry to further such initiatives.

In summary, for CY 2009, we are proposing to adopt or support several of RTI's accounting recommendations that would improve the accuracy of cost report data, including educational initiatives on reporting capital costs, additional standard cost centers on the cost report for Drugs with High Overhead Costs and Drugs with Low Overhead Costs, adding fixed descriptions to the cost report software, and clarifying instructions requiring hospitals to report all standard cost centers if they offer services of the appropriate type. We are interested in significant public discussion of some of RTI's short-term and long-term recommendations, including RTI's suggested revisions to the revenue code-to-cost center crosswalk and recommended creation of standard cost centers for CT Scanning, MRI, and Cardiac Catheterization. We believe our CY 2009 proposals and certain short-term and long-term recommendations included in RTI's July 2008 final report would further our pursuit of concrete steps for CY 2009 and future years to improve the overall accuracy of cost report accounting data and, therefore, hospital cost-based relative weights.

2. Proposed Calculation of Median Costs

In this section of this proposed rule, we discuss the use of claims to calculate the proposed OPPS payment rates for CY 2009. The hospital OPPS 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 at: 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 2009 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.” These files are available for the claims that were used to calculate the proposed payment rates for the CY 2009 OPPS.Start Printed Page 41433

We used the following methodology to establish the relative weights used in calculating the proposed OPPS payment rates for CY 2009 shown in Addenda A and B to this proposed rule.

a. Claims Preparation

We used the CY 2007 hospital outpatient claims processed before January 1, 2008, to set the proposed relative weights for CY 2009. To begin the calculation of the relative weights for CY 2009, we pulled all claims for outpatient services furnished in CY 2007 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 would be made. For example, providers submit claims with a condition code 21 to elicit an official denial notice from Medicare and document that a service is not covered. We then excluded claims for services furnished in Maryland, Guam, the U.S. Virgin Islands, American Samoa, and the Northern Mariana Islands because hospitals in those geographic areas are not paid under the OPPS.

We divided the remaining claims into the three groups shown below. Groups 2 and 3 comprise the 100 million claims that contain hospital bill types paid under the OPPS.

1. Claims that were not bill types 12X, 13X (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. In prior years, we also used claims of bill type 14X to set payment rates under the OPPS. However, bill type 14X ceased to be used to report any services for which payment is made under the OPPS effective April 1, 2006. Therefore, we did not use these claims in development of the proposed CY 2009 OPPS rates.

2. Claims that were bill types 12X or 13X (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 2007 using the revised CCR calculation which excluded the costs of paramedical education programs and weighted the outpatient charges by the volume of outpatient services furnished by the hospital. We refer readers to the CY 2007 OPPS/ASC final rule with comment period for more information (71 FR 67983 through 67985). We first limited the population of cost reports to only those for hospitals that filed outpatient claims in CY 2007 before determining whether the CCRs for such hospitals were valid.

We then calculated the CCRs for each cost center and the overall CCR 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 2006. For this proposed rule, we used the most recently submitted cost reports to calculate the CCRs to be used to calculate median costs for the proposed CY 2009 OPPS rates. 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 calculated both an overall CCR and cost center-specific CCRs for each hospital. We used the overall CCR calculation discussed in section II.A.1.c. of this proposed rule for all purposes that require use of an overall CCR.

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 overall 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 (that is, departmental) level by removing the CCRs for each cost center as outliers if they exceeded ± 3 standard deviations from the geometric mean. We used a four-tiered hierarchy of cost center CCRs 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 cost center 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, if a visit was reported under the clinic revenue code, but the hospital did not have a clinic cost center, we mapped the hospital-specific overall CCR to the clinic revenue code. The hierarchy of CCRs is available for inspection and comment on the CMS Web site: http://www.cms.hhs.gov/​HospitalOutpatientPPS. We note that as discussed in section II.A.1.c.(1) of this proposed rule, we are proposing to remove cost center 3580 (Recreational Therapy) from the hierarchy of CCRs for revenue code 0904 (Activity Therapy).

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 of this proposed rule contains a list of the revenue codes we are proposing to package. Revenue codes not included in Table 2 are those not allowed under the OPPS because their services could not 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 to this general methodology for converting charges to costs on each claim is the calculation of median blood costs, as discussed in section II.A.2.d.(2) of this proposed rule.

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

We identified claims with condition code 41 as partial hospitalization services of hospitals and moved them to another file. 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 moved to another file claims that contained nothing but influenza and pneumococcal pneumonia (PPV) vaccines. Influenza and PPV vaccines are paid at reasonable cost and, therefore, these claims are not used to set OPPS rates. We note that the separate file containing partial hospitalization claims is included in the files that are available for purchase as discussed above.

We next copied line-item costs for drugs, blood, and brachytherapy sources (the lines stay on the claim, but are copied onto another file) to a separate file. No claims were deleted when we copied these lines onto another file. Start Printed Page 41434These line-items are used to calculate a per unit mean and median cost and a per day mean and median cost for drugs, radiopharmaceutical agents, blood and blood products, and brachytherapy sources, as well as other information used to set payment rates, such as a unit-to-day ratio for drugs.

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

We then split the remaining claims into five groups: single majors, multiple majors, single minors, multiple minors, and other claims. (Specific definitions of these groups follow below.) We are proposing to continue our current policy of defining major procedures as any procedure having a status indicator of “S,” “T,” “V,” or “X;” defining minor procedures as any code having a status indicator of “F,” “G,” “H,” “K,” “L,” “R,” “U,” or “N,” and classifying “other” procedures as any code having a status indicator other than one that we have classified as major or minor. For CY 2009, we are proposing that status indicator “R” would be assigned to blood and blood products; status indicator “U” would be assigned to brachytherapy sources; status indicator “Q1” would be assigned to all “STVX-packaged codes;” status indicator “Q2” would be assigned to all “T-packaged codes;” and status indicator “Q3” would be assigned to all codes that may be paid through a composite APC based on composite-specific criteria or paid separately through single code APCs when the criteria are not met. The codes with proposed status indicators “Q1,” “Q2,” and “Q3” were previously assigned status indicator “Q” for the CY 2008 OPPS. As we discuss in section XIII.A.1. of this proposed rule, we are proposing to assign these new status indicators to facilitate identification of the different categories of codes. We are proposing to treat these codes in the same manner for data purposes for CY 2009 as we treated them for CY 2008. Specifically, we are proposing to continue to evaluate whether the criteria for separate payment of codes with status indicator “Q1” or “Q2” are met in determining whether they are treated as major or minor codes. Codes with status indicator “Q1” or “Q2” are carried through the data either with status indicator “N” as packaged or, if they meet the criteria for separate payment, they are given the status indicator of the APC to which they are assigned and are considered as “pseudo” single major codes. Codes assigned status indicator “Q3” are paid under individual APCs unless they occur in the combinations that qualify for payment as composite APCs and, therefore, they carry the status indicator of the individual APC to which they are assigned through the data process and are treated as major codes during both the split and “pseudo” single creation process. The calculation of the median costs for composite APCs from multiple major claims is discussed in section II.A.2.e. of this proposed rule.

Specifically, we 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,” which includes codes with status indicator “Q3”); claims with one unit of a status indicator “Q1” code (“STVX-packaged”) where there was no code with status indicator “S,” “T,” “V,” or “X” on the same claim on the same date; or claims with one unit of a status indicator “Q2” code (“T-packaged”) where there was no code with a status indicator “T” on the same claim on the same date.

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

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

4. Multiple Minor Claims: Claims with multiple HCPCS codes that are assigned status indicator “F,” “G,” “H,” “K,” “L,” “R,” “U,” or “N;” claims that contain more than one code with status indicator “Q1” (“STVX-packaged”) or more than one unit of a code with status indicator “Q1” but no codes with status indicator “S,” “T,” “V,” or “X” on the same date of service; or claims that contain more than one code with status indicator “Q2” (T-packaged), or “Q2” and “Q1,” or more than one unit of a code with status indicator “Q2” but no code with status indicator “T” on the same date of service.

5. Non-OPPS Claims: Claims that contain no services payable under the OPPS (that is, all status indicators other than those listed for major or minor status). These claims were excluded from the files used for the OPPS. Non-OPPS claims have codes paid under other fee schedules, for example, durable medical equipment or clinical laboratory tests, and do not contain either a code for a separately paid OPPS service or a code for a packaged service. Non-OPPS claims include claims for “sometimes” therapy HCPCS codes for wound care paid sometimes under the OPPS but billed, in these non-OPPS cases, with revenue codes indicating that the therapy services would be paid under the Medicare Physician Fee Schedule (MPFS).

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

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

We also used the bypass codes listed earlier in Table 1 and discussed in section II.A.1.b. of this proposed rule to remove separately payable procedures that we determined contained limited or no packaged costs or that 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 list, we split the claim into two “pseudo” Start Printed Page 41435single procedure claim records. The single procedure claim record that contained the bypass code did not retain packaged services. The single procedure claim record that contained the other separately payable procedure (but no bypass code) retained the packaged revenue code charges and the packaged HCPCS code charges. We also removed lines that contained multiple units of codes on the bypass list and treated them as “pseudo” single 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 enabled us to use claims that would otherwise be multiple procedure claims and could not be used.

However, where only one unit of one of an “overlap bypass code” appeared on a claim with only one unit of another separately paid code, we used the line-item cost of the “overlap bypass code” to create a “pseudo” single procedure claim for the “overlap bypass code” but did not use the remaining costs on the claim for the other separately paid procedure. We did not incorporate the changes to create “pseudo” single claims from the remaining information on these claims in the data development process for this proposed rule. We believe this simplifies our communication of the claims development process to the public by not adding unnecessary complexity. Furthermore, the limited increase of only 1 percent in the number of “pseudo” single claims that would be created from the remaining data made it impractical to include the changes to the data development process that would be required, taking into consideration the complexity of making such changes.

We also examined the multiple minor claims to determine whether we could create “pseudo” single procedure claims. Specifically, where the claim contained multiple codes with status indicator “Q1” (“STVX-packaged”) on the same date of service or contained multiple units of a single code with status indicator “Q1,” we selected the status indicator “Q1” HCPCS code that had the highest CY 2008 relative weight, moved the units to one on that HCPCS code, and packaged all costs for other codes with status indicator “Q1,” as well as all other packaged HCPCS code and packaged revenue code costs, into a total single cost for the claim to create a “pseudo” single claim for the selected code. We changed the status indicator for selected codes from the data status indicator of “N” to the status indicator of the APC to which the selected procedure was assigned for further data processing and considered this claim as a major procedure claim. We used this claim in the calculation of the APC median cost for the status indicator “Q1” HCPCS code.

Similarly, where a multiple minor claim contained multiple codes with status indicator “Q2” (“T-packaged”) or multiple units of a single code with status indicator “Q2,” we selected the status indicator “Q2” HCPCS code that had the highest CY 2008 relative weight, moved the units to one on that HCPCS code, and packaged all costs for other codes with status indicator “Q2,” as well as all other packaged HCPCS code and packaged revenue code costs into a total single cost for the claim to create a “pseudo” single claim for the selected code. We changed the status indicator for the selected code from a data status indicator of “N” to the status indicator of the APC to which the selected code was assigned, and we considered this claim as a major procedure claim.

Lastly, where a multiple minor claim contained multiple codes with status indicator “Q2” (“T-packaged”) and status indicator “Q1” (“STVX-packaged”), we selected the status indicator “Q2” HCPCS code (“T-packaged”) that had the highest relative weight for CY 2008, moved the units to one on that HCPCS code, and packaged all costs for other codes with status indicator “Q2,” costs of all codes with status indicator “Q1” (“STVX-packaged”), other packaged HCPCS code and packaged revenue code costs into a total single cost for the claim to create a “pseudo” single claim for the selected (“T-packaged”) code. We favor status indicator “Q2” over “Q1” HCPCS codes because “Q2” HCPCS codes have higher CY 2008 relative weights. If a status indicator “Q1” HCPCS code had a higher CY 2008 relative weight, it would become the primary code for the simulated single bill process. We changed the status indicator for the selected status indicator “Q2” (“T-packaged”) code from a data status indicator of “N” to the status indicator of the APC to which the selected code was assigned and we considered this claim as a major procedure claim.

After we assessed the conditional packaging of HCPCS codes with proposed status indicators “Q1” and “Q2,” we then assessed the claims to determine if the proposed criteria for the multiple imaging composite APCs, discussed in section II.A.2.e.(5) of this proposed rule, were met. Where the criteria for the proposed imaging composite APCs were met, we created a “single session” claim for the applicable imaging composite service and determined whether we could use the claim in ratesetting. For HCPCS codes that are both conditionally packaged and are proposed members of a multiple imaging composite APC, we first assessed whether the code would be packaged and if so, the code ceased to be available for further assessment as part of the composite APC. Because the code would not be a separately payable procedure, we considered it to be unavailable for use in setting the composite APC median cost.

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

c. Completion of Claim Records and Median Cost Calculations

We then packaged the costs of packaged HCPCS codes (codes with status indicator “N” listed in Addendum B to this proposed rule and the costs of those lines for codes with status indicator “Q1” or “Q2” when they are not separately paid) and packaged revenue codes into the cost of the single major procedure remaining on the claim.

The list of packaged revenue codes is shown in Table 2 below. As noted in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66606), for the CY 2008 OPPS, we adopted an APC Panel recommendation that requires CMS to review the final list of packaged revenue codes for consistency with OPPS policy and ensure that future versions of the I/OCE edit accordingly. We compared the packaged revenue codes in the I/OCE to the final list of packaged revenue codes for the CY 2008 OPPS (72 FR 66608 through 66609) that we used for packaging costs in median calculation. As a result of that analysis, we are proposing to use the packaged revenue codes for CY 2009 displayed in Table 2 below.

We also excluded (1) claims that had zero costs after summing all costs on the claim and (2) claims containing packaging flag number 3. Effective for Start Printed Page 41436services furnished on or after July 1, 2004, the I/OCE assigned packaging 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 the OPPS) for which the fiscal intermediary was required to allocate the sum of charges for services with a status indicator equaling “S” or “T” based on the weight of the APC to which each code was assigned. We do not believe that these charges, which were token charges as submitted by the hospital, are valid reflections of hospital resources. Therefore, we deleted these claims. We also deleted claims for which the charges equaled the revenue center payment (that is, the Medicare payment) on the assumption that where the charge equaled the payment, to apply a CCR to the charge would not yield a valid estimate of relative provider cost.

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, therefore, would result in the most accurate unadjusted 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).

After removing claims for hospitals with error CCRs, claims without HCPCS codes, claims for immunizations not covered under the OPPS, and claims for services not paid under the OPPS, approximately 54 million claims were left for this proposed rule. Of these 54 million claims, we were able to use some portion of approximately 52 million whole claims (96 percent of approximately 54 million potentially usable claims) to create approximately 90 million single and “pseudo” single claims, of which we used 89 million single bills (after trimming out approximately 627,000 claims as discussed below) in the CY 2009 median development and ratesetting.

We used the remaining claims to calculate the proposed CY 2009 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. 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 where we believed that it was appropriate. Section III. of this proposed rule includes a discussion of certain proposed 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.

In some cases, APC median costs are calculated using variations of the process outlined above. Section II.A.2.d. of this proposed rule that follows addresses the calculation of single APC criteria-based median costs. Section II.A.2.e. of this proposed rule discusses the calculation of composite APC criteria-based median costs.

Section X.B. of this proposed rule addresses the methodology for calculating the median cost for partial hospitalization services.

Table 2.—Proposed CY 2009 Packaged Revenue Codes

Revenue codeDescription
0250PHARMACY.
0251GENERIC.
0252NONGENERIC.
0254PHARMACY INCIDENT TO OTHER DIAGNOSTIC.
0255PHARMACY INCIDENT TO RADIOLOGY.
0257NONPRESCRIPTION DRUGS.
0258IV SOLUTIONS.
0259OTHER PHARMACY.
0260IV THERAPY, GENERAL CLASS.
0262IV THERAPY/PHARMACY SERVICES.
0263SUPPLY/DELIVERY.
0264IV THERAPY/SUPPLIES.
0269OTHER IV THERAPY.
0270M&S SUPPLIES.
0271NONSTERILE SUPPLIES.
0272STERILE SUPPLIES.
0273TAKE HOME SUPPLIES.
0275PACEMAKER DRUG.
0276INTRAOCULAR LENS SOURCE DRUG.
0278OTHER IMPLANTS.
0279OTHER M&S SUPPLIES.
0280ONCOLOGY.
0289OTHER ONCOLOGY.
0343DIAGNOSTIC RADIOPHARMS.
0344THERAPEUTIC RADIOPHARMS.
0370ANESTHESIA.
0371ANESTHESIA INCIDENT TO RADIOLOGY.
0372ANESTHESIA INCIDENT TO OTHER DIAGNOSTIC.
Start Printed Page 41437
0379OTHER ANESTHESIA.
0390BLOOD STORAGE AND PROCESSING.
0399OTHER BLOOD STORAGE AND PROCESSING.
0560MEDICAL SOCIAL SERVICES.
0569OTHER MEDICAL SOCIAL SERVICES.
0621SUPPLIES INCIDENT TO RADIOLOGY.
0622SUPPLIES INCIDENT TO OTHER DIAGNOSTIC.
0624INVESTIGATIONAL DEVICE (IDE).
0630DRUGS REQUIRING SPECIFIC IDENTIFICATION, GENERAL CLASS.
0631SINGLE SOURCE.
0632MULTIPLE.
0633RESTRICTIVE PRESCRIPTION.
0681TRAUMA RESPONSE, LEVEL I.
0682TRAUMA RESPONSE, LEVEL II.
0683TRAUMA RESPONSE, LEVEL III.
0684TRAUMA RESPONSE, LEVEL IV.
0689TRAUMA RESPONSE, OTHER.
0700CAST ROOM.
0709OTHER CAST ROOM.
0710RECOVERY ROOM.
0719OTHER RECOVERY ROOM.
0720LABOR ROOM.
0721LABOR.
0732TELEMETRY.
0762OBSERVATION ROOM.
0801HEMODIALYSIS.
0802PERITONEAL DIALYSIS.
0803CAPD.
0804CCPD.
0809OTHER INPATIENT DIALYSIS.
0810ORGAN ACQUISITION.
0819OTHER ORGAN ACQUISITION.
0821HEMODIALYSIS COMP OR OTHER RATE.
0824MAINTENANCE 100%.
0825SUPPORT SERVICES.
0829OTHER HEMO OUTPATIENT.
0942EDUCATION/TRAINING.

d. Proposed Calculation of Single Procedure APC Criteria-Based Median Costs

(1) Device-Dependent APCs

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

For CY 2009, we are proposing to continue using our standard methodology for calculating median costs for device-dependent APCs, which utilizes claims data that generally represent the full cost of the required device. Specifically, we are proposing to calculate the medians for device-dependent APCs for CY 2009 using only the subset of single bills from CY 2007 claims data that pass the procedure-to-device edits; do not contain token charges for devices; and do not contain the “FB” modifier signifying that the device was furnished without cost to the provider, supplier, or practitioner, or where a full credit was received. We continue to believe that this methodology gives us the most appropriate median costs for device-dependent APCs in which the hospital incurs the full cost of the device.

While the median costs for the majority of device-dependent APCs show increases from CY 2008 based on the CY 2009 proposed rule claims data, the median costs for three APCs involving electrode/lead implantation decreased significantly compared to the CY 2008 final rule with comment period median costs. Specifically, APCs 0106 (Insertion/Replacement of Pacemaker Leads and/or Electrodes), 0225 (Implantation of Neurostimulator Electrodes, Cranial Nerve), and 0418 (Insertion of Left Ventricular Pacing Electrode), demonstrate median decreases of 26 percent, 52 percent, and 47 percent, respectively. We believe these decreases reflect hospitals' correction of inaccurate and incomplete billing practices for these services due to the implementation of device-to-procedure edits beginning in CY 2007. As discussed in the CY 2007 OPPS/ASC final rule with comment period (71 FR 68070 through 68071), in the course of examining claims data for calculation of the CY 2007 payment rates, we identified circumstances in which hospitals billed a device code but failed to bill any procedure code with which the device could be used correctly. For APCs 0106, 0225, and 0418 in particular, we saw that hospitals frequently billed a procedure code for Start Printed Page 41438lead/electrode implantation with device HCPCS codes for a lead/electrode and the more expensive pulse generator, but failed to report a procedure code for generator implantation. These errors in billing led to the costs of the pulse generator being packaged incorrectly into the procedure codes for lead/electrode implantation. Hospitals that coded and billed in this manner received no payment for the procedure to implant the pulse generator, but these erroneous claims caused the payment rate for the lead/electrode implantation APCs to be inappropriately high. To address this problem, we implemented edits to correct the coding for CY 2007, and the decreases to the median costs of APCs 0106, 0225, and 0418 for CY 2009 are consistent with what we expect, based on what we understand to be the nature of the services and the costs of correctly coded devices. We also note an anticipated decrease in our frequency of single bills for the services assigned to APCs 0106, 0225, and 0418, most likely because the device-to-procedure edits led hospitals to include the pulse generator implantation HCPCS codes on the same claims, resulting in fewer single claims for the lead/electrode implantation procedures.

APC 0625 (Level IV Vascular Access Procedures) as configured for CY 2008 and calculated based on CY 2007 claims data also demonstrates a significant decrease in median cost (approximately 59 percent) relative to CY 2008 (based on CY 2006 claims data). We believe this decrease is attributable to the implementation of procedure-to-device edits on January 1, 2007, for the only CPT code assigned to this APC, specifically CPT code 36566 (Insertion of tunneled centrally inserted central venous access device, requiring two catheters via two separate venous access sites; with subcutaneous port(s)). Because the procedure described by CPT code 36566 involves the insertion of a dialysis access system, our edits require that the HCPCS code for that device be present on the claim any time a hospital bills CPT code 36566. Prior to January 1, 2007, we believe that hospitals often reported CPT code 36566 without also reporting the device HCPCS code for the dialysis access system, or incorrectly billed CPT code 36566 for procedures that do not require the use of the device. Therefore, with the implementation of procedure-to-device edits, the volume of total CY 2007 claims for CPT code 36566 decreased as hospitals corrected their claims to report this service only under the appropriate circumstances, while the correctly coded claims reporting the required device (and available for CY 2009 ratesetting) increased significantly from CY 2006 to CY 2007. We believe that the CY 2009 proposed rule median cost of $2,092 calculated for CPT code 36566 from those claims is accurate and appropriately reflects correct hospital reporting of the procedure and the associated device. Furthermore, because of the decrease in the median cost for CPT code 36566, we are proposing for CY 2009 to reassign the code to APC 0623 (Level III Vascular Access Procedures), which has a median cost of approximately $1,939. We also are proposing to delete APC 0625 because no other procedures would map to this APC once CPT code 36566 is reassigned.

In addition, we note a decrease of approximately 19 percent for APC 0681 (Knee Arthroplasty) relative to CY 2008, which we believe is attributable to a low volume of services being performed by a small number of providers. As we have stated in the past, some fluctuation in relative costs from year to year is to be expected in a prospective payment system for low volume device-dependent APCs such as APC 0681, for which the median cost increased approximately 37 percent from CY 2007 to CY 2008.

Table 3 lists the APCs for which we are proposing to use our standard device-dependent APC ratesetting methodology for CY 2009. We refer readers to Addendum A to this proposed rule for the proposed payment rates for these APCs.

Table 3.—Proposed CY 2009 Device-Dependent APCs

APCStatus indicatorAPC title
0039SLevel I Implantation of Neurostimulator.
0040SPercutaneous Implantation of Neurostimulator Electrodes, Excluding Cranial Nerve.
0061SLaminectomy, Laparoscopy, or Incision for Implantation of Neurostimulator Electrodes, Excluding Cranial Nerve.
0082TCoronary or Non Coronary Atherectomy.
0083TCoronary or Non Coronary Angioplasty and Percutaneous Valvuloplasty.
0084SLevel I Electrophysiologic Procedures.
0085TLevel II Electrophysiologic Procedures.
0086TLevel III Electrophysiologic Procedures.
0089TInsertion/Replacement of Permanent Pacemaker and Electrodes.
0090TInsertion/Replacement of Pacemaker Pulse Generator.
0104TTranscatheter Placement of Intracoronary Stents.
0106TInsertion/Replacement of Pacemaker Leads and/or Electrodes.
0107TInsertion of Cardioverter-Defibrillator.
0108TInsertion/Replacement/Repair of Cardioverter-Defibrillator Leads.
0115TCannula/Access Device Procedures.
0202TLevel VII Female Reproductive Procedures.
0222SLevel II Implantation of Neurostimulator.
0225SImplantation of Neurostimulator Electrodes, Cranial Nerve.
0227TImplantation of Drug Infusion Device.
0229TTranscatheter Placement of Intravascular Shunts.
0259TLevel VII ENT Procedures.
0293TLevel V Anterior Segment Eye Procedures.
0315SLevel III Implantation of Neurostimulator.
0384TGI Procedures with Stents.
0385SLevel I Prosthetic Urological Procedures.
0386SLevel II Prosthetic Urological Procedures.
0418TInsertion of Left Ventricular Pacing Elect.
0425TLevel II Arthroplasty with Prosthesis.
0427TLevel II Tube or Catheter Changes or Repositioning.
Start Printed Page 41439
0622TLevel II Vascular Access Procedures.
0623TLevel III Vascular Access Procedures.
0648TLevel IV Breast Surgery.
0652TInsertion of Intraperitoneal and Pleural Catheters.
0653TVascular Reconstruction/Fistula Repair with Device.
0654TInsertion/Replacement of a permanent dual chamber pacemaker.
0655TInsertion/Replacement/Conversion of a permanent dual chamber pacemaker.
0656TTranscatheter Placement of Intracoronary Drug-Eluting Stents.
0674TProstate Cryoablation.
0680SInsertion of Patient Activated Event Recorders.
0681TKnee Arthroplasty.

(2) Blood and Blood Products

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 are 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.

For the CY 2009 OPPS, we are proposing to continue to establish payment rates for blood and blood products using our blood-specific CCR methodology, which utilizes actual or simulated CCRs from the most recently available hospital cost reports to convert hospital charges for blood and blood products to costs. This methodology has been our standard ratesetting methodology for blood and blood products since CY 2005. It was developed in response to data analysis indicating that there was a significant difference in CCRs for those hospitals with and without blood-specific cost centers, and past comments indicating that the former OPPS policy of defaulting to the overall hospital CCR for hospitals not reporting a blood-specific cost center often resulted in an underestimation of the true hospital costs for blood and blood products. Specifically, in order to address the difference in CCRs and to better reflect hospitals' costs, we are proposing to continue to simulate blood CCRs for each hospital that does not report a blood cost center by calculating the ratio of the blood-specific CCRs to hospitals' overall CCRs for those hospitals that do report costs and charges for blood cost centers. We would then apply this mean ratio to the overall CCRs of hospitals not reporting costs and charges for blood cost centers on their cost reports in order to simulate blood-specific CCRs for those hospitals. We calculated the proposed median costs upon which the proposed CY 2009 payment rates for blood and blood products are based using the actual blood-specific CCR for hospitals that reported costs and charges for a blood cost center and a hospital-specific simulated blood-specific CCR for hospitals that did not report costs and charges for a blood cost center.

We continue to believe that the blood-specific CCR methodology better responds to the absence of a blood-specific CCR for a hospital than alternative methodologies, such as defaulting to the overall hospital CCR or applying an average blood-specific CCR across hospitals. Because this methodology takes into account the unique charging and cost accounting structure of each provider, we believe that it yields more accurate estimated costs for these products. We believe that continuing with this methodology in CY 2009 would result in median costs for blood and blood products that accurately reflect the relative estimated costs of these products for hospitals without blood cost centers, and, therefore, for these products in general.

As discussed in section XIII.A.1. of this proposed rule, we are also proposing to create status indicator “R” (Blood and Blood Products), to denote blood and blood products for publication and payment purposes in CY 2009. We believe that it is necessary to create a status indicator that is specific to blood and blood products to facilitate development of blood product median costs under the blood-specific CCR methodology and to facilitate implementation of the reduced payments that would be made to hospitals that fail to report the hospital outpatient quality data, as discussed in section XVI.D.2. of this proposed rule.

We refer readers to Addendum B to this proposed rule for the CY 2009 proposed payment rates for blood and blood products, which are identified with proposed status indicator “R.” For more detailed discussion of the blood-specific CCR methodology, we refer readers to the CY 2005 OPPS proposed rule (69 FR 50524 through 50525). For a full history of OPPS payment for blood and blood products, we refer readers to the CY 2008 OPPS/ASC final rule with comment period (72 FR 66807 through 66810).

(3) Single Allergy Tests

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 2009. Multiple allergy tests are currently assigned to APC 0370 (Allergy Tests), with a median cost calculated based on the standard OPPS methodology. We provided billing guidance in CY 2006 in Program 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 2007 claims data available for this CY 2009 proposed rule for APC 0381 do not reflect improved and more consistent hospital billing practices of “per test” for single allergy tests. The median cost of APC 0381, calculated for this proposed rule according to the standard single claims OPPS methodology, is approximately $51, significantly higher than the CY 2008 median cost of APC 0381 of approximately $17 calculated according to the “per unit” methodology, and greater than we would expect for these procedures that are to be reported “per test” with the appropriate number of units. 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 CYs 2006, 2007, and Start Printed Page 414402008, we are proposing to calculate a “per unit” median cost for APC 0381, based upon 520 claims containing multiple units or multiple occurrences of a single CPT code. The CY 2009 proposed median cost for APC 0381 using the “per unit” methodology is approximately $25. For a full discussion of this methodology, we refer readers to the CY 2008 OPPS/ASC final rule with comment period (72 FR 66737).

(4) Echocardiography Services

For the CY 2009 OPPS, we are proposing to continue the packaging of payment for all contrast agents into the payment for the associated imaging procedure, as we did in CY 2008. For echocardiography services, we are proposing to estimate median costs using the same methodology that we used to set medians for these services for CY 2008. In CY 2008, we finalized a policy to package payment for all contrast agents into the payment for the associated imaging procedure regardless of whether the contrast agent met the OPPS drug packaging threshold. Section 1833(t)(2)(G) of the Act requires us to create additional APC groups of services for procedures that use contrast agents that classify them separately from those procedures that do not utilize contrast agents. To reconcile this statutory provision with our final policy of packaging all contrast agents, for CY 2008, we calculated HCPCS-specific median costs for all separately payable echocardiography procedures that may be performed with contrast agents by isolating single and “pseudo” single claims with the following CPT codes where a contrast agent was also billed on the claim: 93303 (Transthoracic echocardiography for congenital cardiac anomalies; complete), 93304 (Transthoracic echocardiography for congenital cardiac anomalies; follow-up or limited study), 93307 (Echocardiography, transthoracic, real-time with image documentation (2D) with or without M-mode recording; complete), 93308 (Echocardiography, transthoracic, real-time with image documentation (2D) with or without M-mode recording; follow-up or limited study), 93312 ( Echocardiography, transesophageal, real time with image documentation (2D) (with or without M-mode recording); including probe placement, image acquisition, interpretation and report), 93315 (Transesophageal echocardiography for congenital cardiac anomalies; including probe placement, image acquisition, interpretation and report), 93318 (Echocardiography, transesophageal (TEE) for monitoring purposes, including probe placement, real time 2-dimensional image acquisition and interpretation leading to ongoing (continuous) assessment of (dynamically changing) cardiac pumping function and to therapeutic measures on an immediate time basis), and 93350 (Echocardiography, transthoracic, real-time with image documentation (2D), with or without M-mode recording, during rest and cardiovascular stress test using treadmill, bicycle exercise and/or pharmacologically induced stress, with interpretation and report). As noted in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66644), our analysis indicated that all echocardiography procedures that may be performed with contrast agents are reasonably similar both clinically and in terms of resource use, as evidenced by similar HCPCS median costs.

Pursuant to the statute, for CY 2008, we created APC 0128 (Echocardiogram With Contrast) to provide payment for echocardiography procedures that are performed with a contrast agent. In addition, as discussed in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66644 through 66646), in order for hospitals to identify separately and receive appropriate payment for echocardiography procedures performed with contrast beginning in CY 2008, we created eight new HCPCS codes (C8921 through C8928) that corresponded to the related CPT echocardiography codes and assigned them to the newly created APC 0128. We instructed hospitals performing echocardiography procedures without contrast to continue to report the CPT codes and to report the new C-codes when performing echocardiography procedures with contrast or without contrast followed by with contrast.

Claims data from CY 2008 are not yet available for ratesetting, so we do not yet have claims data specific to HCPCS codes C8921 through C8928 in order to determine the CY 2009 payment rate for APC 0128. Therefore, for CY 2009, we are proposing to again use the methodology that we used to set the CY 2008 payment rate for APC 0128 (72 FR 66645). That is, we isolate single and “pseudo” single claims in our database that include those CPT codes in the range of 93303 through 93350 as described above that correspond to the contrast studies described by HCPCS codes C8921 through C8928. For claims where one of these echocardiography procedures was billed with a contrast agent, we packaged the cost of the contrast agent into the cost of the echocardiography procedure and then calculated a median cost for APC 0128 using this subset of claims to determine the proposed median cost for APC 0128 of approximately $563. As in CY 2008, the HCPCS code-specific median costs for echocardiography procedures performed with contrast are all similar, and we continue to believe these services share sufficient similarity to be assigned to the same APC.

For CY 2009, we also recalculated the median cost for APCs 0269 (Level II Echocardiogram Without Contrast Except Transesophageal); 0270 (Transesophageal Echocardiogram Without Contrast); and 0697 (Level I Echocardiogram Without Contrast Except Transesophageal), as we did in CY 2008 (72 FR 66645). We used claims for CPT codes 93303 through 93350 after removing claims from the ratesetting process that included contrast agents because these claims were used to set the median cost for APC 0128.

We continue to believe that these echocardiography APC medians accurately reflect hospital costs when performing echocardiography procedures, both with and without contrast. In addition, we believe that this coding and payment methodology allows us to both adhere to the statutory requirement to create additional groups of services for procedures that use contrast agents and to continue packaged payment for contrast agents.

(5) Nuclear Medicine Services

In CY 2008, we began packaging payment for diagnostic radiopharmaceuticals into the payment for the associated nuclear medicine procedure. (For a discussion regarding the distinction between diagnostic and therapeutic radiopharmaceuticals, we refer readers to the CY 2008 OPPS/ASC final rule at 72 FR 66636). Prior to the implementation of this policy, diagnostic radiopharmaceuticals were subject to the standard OPPS drug packaging methodology whereby payments are packaged when the estimated mean per day product costs fall at or below the annual packaging threshold for drugs, biologicals, and radiopharmaceuticals.

Packaging costs into a single aggregate payment for a service, encounter, or episode of care is a fundamental principle that distinguishes a prospective payment system from a fee schedule. In general, packaging the costs of supportive items and services into the payment for the independent procedure or service with which they are associated encourages hospital efficiencies and also enables hospitals to manage their resources with maximum flexibility. All nuclear medicine procedures require the use of at least Start Printed Page 41441one radiopharmaceutical or other radiolabeled product, and there are only a small number of radiopharmaceuticals that may be appropriately billed with each diagnostic nuclear medicine procedure. For the OPPS, we distinguish diagnostic radiopharmaceuticals from therapeutic radiopharmaceuticals for payment purposes, and this distinction is recognized in the Level II HCPCS codes for diagnostic radiopharmaceuticals that include the term “diagnostic” along with a radiopharmaceutical in their HCPCS code descriptors. As we stated in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66635), we believe that our policy to package payment for diagnostic radiopharmaceuticals (other than those already packaged when their per day costs are below the packaging threshold for OPPS drugs, biologicals, and radiopharmaceuticals) is consistent with OPPS packaging principles, provides greater administrative simplicity for hospitals, and encourages hospitals to use the most clinically appropriate and cost efficient diagnostic radiopharmaceutical for each study. For more background on this policy, we refer readers to discussions in the CY 2008 OPPS/ASC proposed rule (72 FR 42667 through 42672) and the CY 2008 OPPS/ASC final rule with comment period (72 FR 66635 through 66641).

We continue to believe that it is most appropriate to package payment for some radiopharmaceuticals, specifically diagnostic radiopharmaceuticals, into the payment for diagnostic nuclear medicine procedures, and we are proposing to continue to package payment for diagnostic radiopharmaceuticals into the payment for the associated nuclear medicine procedure for CY 2009 as described in section V.B.2.b. of this proposed rule.

During the March 2008 APC Panel meeting, the APC Panel recommended that CMS continue to package payment for diagnostic radiopharmaceuticals for CY 2009. In addition, the APC Panel recommended that CMS present data at the first CY 2009 APC Panel meeting on usage and frequency, geographic distribution, and size and type of hospitals performing nuclear medicine studies using radioisotopes in order to ensure that access to diagnostic radiopharmaceuticals is preserved for Medicare beneficiaries. We are accepting both of these recommendations.

For CY 2008 ratesetting, we used only claims for nuclear medicine procedures that contained a diagnostic radiopharmaceutical in calculating the median costs for APCs including nuclear medicine procedures (72 FR 66639). This is similar to the established methodology used for device-dependent APCs before claims reflecting the procedure-to-device edits were included in our claims data. For CY 2008 we also implemented claims processing edits (called procedure-to-radiopharmaceutical edits) requiring the presence of a radiopharmaceutical (or other radiolabeled product) HCPCS code when a separately payable nuclear medicine procedure is present on a claim. Similar to our practice regarding the procedure-to-device edits that have been in place for some time, we continually review comments and requests for changes related to these edits and, based on our review, may update the edit list during our quarterly update process if necessary. The radiopharmaceutical (and other radiolabeled product) and procedure HCPCS codes that are included in these edits can be viewed on the OPPS Web site at: http://www.cms.hhs.gov/​HospitalOutpatientPPS/​01_​overview.asp.

The CY 2008 OPPS claims that are subject to the procedure-to-radiopharmaceutical edits will not be available for setting payment rates until CY 2010 and, therefore, are not yet available to set payment rates for CY 2009. Therefore, we are proposing to continue our established CY 2008 methodology for setting the payment rates for APCs that include nuclear medicine procedures for CY 2009. We used an updated list of radiolabeled products from the procedure-to-radiopharmaceutical edit file to identify single and “pseudo” single claims for nuclear medicine procedures that also included at least one eligible radiolabeled product. Using this subset of claims, we followed our standard OPPS ratesetting methodology, discussed in section II.A. of this proposed rule, to calculate median costs for nuclear medicine procedures and their associated APCs.

We have identified those APCs containing nuclear medicine procedures that would be subject to this methodology under our CY 2009 proposal in Table 4 below. As in CY 2008, when we set APC median costs based on single and “pseudo” single claims that also included at least one radiolabeled product on our edit file, we observed an equivalent or higher median cost than that calculated from all single and “pseudo” single bills. We believe that this methodology appropriately ensures that the costs of diagnostic radiopharmaceuticals are included in the ratesetting process for these APCs.

Table 4.—Proposed APCs Where Nuclear Medicine Procedures Are Assigned With Median Costs Calculated From Claims With an Associated Radiolabeled Product

APCAPC title
0307Myocardial Positron Emission Tomography (PET) imaging.
0308Non-Myocardial Positron Emission Tomography (PET) imaging.
0377Level II Cardiac Imaging.
0378Level II Pulmonary Imaging.
0389Level I Non-Imaging Nuclear Medicine.
0390Level I Endocrine Imaging.
0391Level II Endocrine Imaging.
0392Level II Non-imaging Nuclear Medicine.
0393Hematologic Processing & Studies.
0394Hepatobiliary Imaging.
0395GI Tract Imaging.
0396Bone Imaging.
0397Vascular Imaging.
0398Level I Cardiac Imaging.
0400Hematopoietic Imaging.
0401Level I Pulmonary Imaging.
0402Level II Nervous System Imaging.
0403Level I Nervous System Imaging.
Start Printed Page 41442
0404Renal and Genitourinary Studies.
0406Level I Tumor/Infection Imaging.
0408Level III Tumor/Infection Imaging.
0414Level II Tumor/Infection Imaging.

(6) Hyperbaric Oxygen Therapy

Since the implementation of OPPS in August 2000, the OPPS has recognized HCPCS code C1300 (Hyperbaric oxygen under pressure, full body chamber, per 30 minute interval) for hyperbaric oxygen therapy (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 APC 0659 (Hyperbaric Oxygen) 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 CCR to estimate costs for HCPCS code C1300 from billed charges rather than the CCR for the respiratory therapy or other departmental cost centers. 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. Since CY 2005, we have used this methodology to estimate the median cost for HBOT. The median costs of HBOT using this methodology have been relatively stable for the last 5 years. For CY 2009, we are proposing to continue using the same methodology to estimate a “per unit” median cost for HCPCS code C1300 of approximately $103 using 71,866 claims with multiple units or multiple occurrences for this proposed rule.

(7) Payment for Ancillary Outpatient Services When Patient Expires (-CA Modifier)

In the November 1, 2002 final rule with comment period (67 FR 66798), we discussed the creation of the new HCPCS-CA modifier 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 Program Transmittal A-02-129, issued on January 3, 2003, we instructed hospitals on the use of this modifier. For a complete description of the history of the policy and development of the payment methodology for these services, we refer readers to the CY 2007 OPPS/ASC final rule with comment period (71 FR 68157 through 68158).

For CY 2009, we are proposing to continue to use our established ratesetting methodology for calculating the median cost of APC 0375 (Ancillary Outpatient Services When Patient Expires), and we are proposing to continue to make one payment under APC 0375 for the services that meet the specific conditions for using modifier -CA. We would calculate the relative payment weight for APC 0375 by using all claims reporting a status indicator “C” procedure appended with the -CA modifier, using estimated costs from claims data for line-items with a HCPCS code assigned status indicator “G,” “H,” “K,” “N,” “Q1,” “Q2,” “Q3,” “R,” “S,” “T,” “U,” “V,” and “X” and charges for packaged revenue codes without a HCPCS code. We continue to believe that this methodology results in the most appropriate aggregate median cost for the ancillary services provided in these unusual clinical situations.

Also, we believe that hospitals are reporting the -CA modifier according to the policy initially established in CY 2003. The claims frequency for APC 0375 has been relatively stable over the past few years. Although the proposed median cost for APC 0375 is slightly lower for CY 2009 than for CY 2008, generally it has increased significantly in recent years. Variation in the median cost for APC 0375 is expected because of the small number of claims and because the specific cases are grouped by the presence of the -CA modifier appended to an inpatient procedure and not according to the standard APC criteria of clinical and resource homogeneity. Cost variation for APC 0375 from year to year is anticipated and acceptable so long as hospitals continue judicious reporting of the -CA modifier.

Table 5 shows the number of claims and the median cost for APC 0375 from CY 2006 to CY 2008. For CY 2009, we are proposing a median cost for APC 0375 of approximately $4,762.

Table 5.—Claims for Ancillary Outpatient Services When Patient Expires (-CA Modifier) for CYs 2006 Through 2008

Prospective payment yearNumber of claimsMedian cost ($)
CY 20063702,717
CY 20072603,549
CY 20081834,945

e. Proposed Calculation of Composite APC Criteria-Based Median Costs

As discussed in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66613), we believe it is important that the OPPS enhance incentives for hospitals to provide only necessary, high quality care and to provide that care as efficiently as possible. For CY 2008, we developed composite APCs to provide a single payment for groups of services that are typically performed together during a single clinical encounter and that result in the provision of a complete service. Bundling payment for multiple independent services into a single OPPS payment in this way enables hospitals to manage their resources with maximum flexibility by monitoring and adjusting the volume and efficiency of services themselves. An additional advantage to the composite APC model is that we can use data from correctly coded multiple procedure claims to calculate payment rates for the specified combinations of services, rather than relying upon single procedure claims which typically are low in volume and/or incorrectly coded. We refer readers to section II.A.4. of the CY 2008 OPPS/ASC final rule with comment period for a full discussion of the development of the composite APC methodology (72 FR Start Printed Page 4144366611 through 66614 and 66650 through 66652).

We continue to consider the development and implementation of larger payment bundles, such as composite APCs, a long-term policy objective for the OPPS and continue to explore other areas where this payment model may be utilized. In developing this proposed rule, we followed the same methodology for identifying possible composite APCs as we did for CY 2008. Specifically, we examined the multiple procedure claims that we could not convert to single procedure claims to identify common combinations of services for which we have relatively few single procedure claims. We then performed a clinical assessment of the combinations that we identified to determine whether our findings were consistent with our understanding of the services furnished. In addition, consistent with our stated intention to involve the APC Panel in our future exploration of how we can develop encounter-based and episode-based payment groups (72 FR 66614), we also specifically explored a possible composite APC for radioimmunotherapy in response to a recommendation of the APC Panel from its September 2007 meeting.

After performing claims analysis and clinical assessments as described above, and taking into consideration the recommendation of the APC Panel from its March 2008 meeting that we continue pursing a radioimmunotherapy composite APC, we are not proposing a composite APC payment for radioimmunotherapy for CY 2009, as discussed further in section V.B.4. of this proposed rule. However, we are proposing to expand the composite APC model to one new clinical area for CY 2009, multiple imaging services, as described in detail in section II.A.2.e.(5) of this proposed rule. We also are proposing to continue our established composite APC policies for extended assessment and management, low dose rate (LDR) prostate brachytherapy, cardiac electrophysiologic evaluation and ablation, and mental health services for CY 2009, as discussed in sections II.A.2.e.(1), II.A.2.e.(2), II.A.2.e.(3), and II.A.2.e.(4), respectively, of this proposed rule.

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

For the CY 2009 OPPS we are proposing to continue to include composite APC 8002 (Level I Extended Assessment and Management Composite) and composite APC 8003 (Level II Extended Assessment and Management Composite) in the OPPS. In addition, we are proposing to include HCPCS code G0384 (Level 5 hospital emergency department visit provided in a type B emergency department) in the criteria that determine eligibility for payment for composite APC 8003. For CY 2008, we created these two new composite APCs to provide payment to hospitals in certain circumstances when extended assessment and management of a patient occur (an extended visit). In most circumstances, observation services are supportive and ancillary to the other services provided to a patient. In the circumstances when observation care is provided in conjunction with a high level visit or direct admission and is an integral part of a patient's extended encounter of care, payment is made for the entire care encounter through one of two composite APCs as appropriate.

As defined for the CY 2008 OPPS, composite APC 8002 describes an encounter for care provided to a patient that includes a high level (Level 5) clinic visit or direct admission to observation in conjunction with observation services of substantial duration (72 FR 66648 through 66649). Composite APC 8003 describes an encounter for care provided to a patient that includes a high level (Level 4 or 5) emergency department visit or critical care services in conjunction with observation services of substantial duration. HCPCS code G0378 (Observation services, per hour) is assigned status indicator “N,” signifying that its payment is always packaged. As noted in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66648 through 66649), the I/OCE evaluates every claim received to determine if payment through a composite APC is appropriate. If payment through a composite APC is inappropriate, the I/OCE, in conjunction with the PRICER, determines the appropriate status indicator, APC, and payment for every code on a claim. The specific criteria that must be met for the two extended assessment and management composite APCs to be paid are provided below in the description of the claims that were selected for the calculation of the proposed CY 2009 median costs for these composite APCs. The general composite APC logic and observation care reporting criteria have also been included in updates to the Claims Processing and Benefit Policy Manuals through Change Request 5916 (Program Transmittals 82 and 1145), dated February 8, 2008, and we are not proposing to change these criteria for the CY 2009 OPPS.

When we created composite APCs 8002 and 8003 for CY 2008, we retained as general reporting requirements for all observation services those criteria related to physician order and evaluation; documentation; and observation beginning and ending time as listed in section XI. of the CY 2008 final rule with comment period (72 FR 66812). We are not proposing to change these reporting requirements for the CY 2009 OPPS. These are more general requirements that encourage hospitals to provide medically reasonable and necessary care and help to ensure the proper reporting of observation services on correctly coded hospital claims that reflect the full charges associated with all hospital resources utilized to provide the reported services.

As noted in detail in sections IX.C and XI. of the CY 2008 OPPS/ASC final rule with comment period (72 FR 66802 through 66805 and 66814), we saw a normal and stable distribution of clinic and emergency department visit levels. We do not expect to see an increase in the proportion of visit claims for high level visits as a result of the new composite APCs adopted for CY 2008 and proposed for CY 2009. Similarly, we expect that hospitals will not purposely change their visit guidelines or otherwise upcode clinic and emergency department visits reported with observation care solely for the purpose of composite payment. As stated in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66648), we expect to carefully monitor any changes in billing practices on a service-specific and hospital-specific level to determine whether there is reason to request that Quality Improvement Organizations (QIOs) review the quality of care furnished, or to request that Benefit Integrity contractors or other contractors review the claims against the medical record. However, we will not have claims available for analysis that reflect the new CY 2008 payment policy for the extended assessment and management composite APCs until the CY 2010 annual OPPS rulemaking cycle.

At the March 2008 meeting of the APC Panel, we discussed with the Visits and Observation Subcommittee, as well as with the full APC Panel, the extended assessment and management composite APCs and observation-related data previously requested by the APC Panel at its September 2007 meeting. At its March 2008 meeting, the APC Panel recommended that CMS provide them with additional data related to the frequency and median cost for the extended assessment and management composite APCs and length-of-stay Start Printed Page 41444frequency distribution data for observation services, with additional detail at the 24-48 hour and greater than 48 hour levels. We are accepting those recommendations and will provide additional data as requested at the next APC Panel meeting in 2008. In addition, the APC Panel recommended continuation of the Visits and Observation Subcommittee's work. We also are accepting that recommendation.

For CY 2009, we are proposing to continue the extended assessment and management composite APC payment methodology for APCs 8002 and 8003. As stated above, we are also proposing to continue the general reporting requirements for observation services reported with HCPCS code G0378. We continue to believe that the composite APCs 8002 and 8003 and the related policies provide the most appropriate means of paying for these services. We are proposing to calculate the median costs for APCs 8002 and 8003 using all single and “pseudo single” procedure claims for CY 2007 that meet the criteria for payment of each composite APC.

Specifically, to calculate the proposed median costs for composite APCs 8002 and 8003, we selected single and “pseudo” single claims that met each of the following criteria:

1. Did not contain a HCPCS code to which we have assigned status indicator “T” with a date of service 1 day earlier than the date of service associated with HCPCS code G0378. (By selecting these claims from single and “pseudo” single claims, we had already assured that they would not contain a code for a service with status indicator “T” on the same date of service.);

2. Contained 8 or more units of HCPCS code G0378; and

3. Contained one of the following codes:

  • In the case of composite APC 8002, HCPCS code G0379 (Direct admission of patient for hospital observation care) on the same date of service as G0378; or CPT code 99205 (Office or other outpatient visit for the evaluation and management of a new patient (Level 5)); or CPT code 99215 (Office or other outpatient visit for the evaluation and management of an established patient (Level 5)) provided on the same date of service or one day before the date of service for HCPCS code G0378.
  • In the case of composite APC 8003, CPT code 99284 (Emergency department visit for the evaluation and management of a patient (Level 4)); CPT code 99285 (Emergency department visit for the evaluation and management of a patient (Level 5)); CPT code 99291 (Critical care, evaluation and management of the critically ill or critically injured patient; first 30-74 minutes); or HCPCS code G0384 provided on the same date of service or one day before the date of service for HCPCS code G0378. (As discussed in detail below, we are proposing to add HCPCS code G0384 to the eligibility criteria for composite APC 8003 for CY 2009.)

We applied the standard packaging and trimming rules to the claims before calculating the proposed median costs. The proposed CY 2009 median cost resulting from this process for composite APC 8002 is $364, which was calculated from 14,968 single and “pseudo” single bills that met the required criteria. The proposed median cost for composite APC 8003 is $670, which was calculated from 83,491 single and “pseudo” single bills that met the required criteria. This is the same methodology we used to calculate the medians for composite APCs 8002 and 8003 for the CY 2008 OPPS (72 FR 66649).

As discussed in more detail in section IX.B. of this proposed rule, we are proposing to reassign HCPCS code G0384 from APC 0608 (Level 5 Hospital Clinic Visits) to APC 0616 (Level 5 Emergency Visits). Consistent with this change for CY 2009, we are also proposing to add HCPCS code G0384 to the eligibility criteria for payment of composite APC 8003. Because these visits are rare, we would not expect that adding HCPCS code G0384 to the eligibility criteria for payment for extended assessment and management composite APC 8003 would significantly increase the relative frequency of the Type B emergency department Level 5 visits reported using HCPCS code G0384.

As discussed further in sections III.D and IX. of this proposed rule and consistent with our CY 2008 final policy, when calculating the median costs for the clinic, Type A emergency department visit, Type B emergency department visit, and critical care APCs (0604 through 0617 and 0626 through 0629), we would utilize our methodology that excludes those claims for visits that are eligible for payment through the two extended assessment and management composite APCs, that is APC 8002 or APC 8003. We believe that this approach would result in the most accurate cost estimates for APCs 0604 through 0617 and 0626 through 0629 for CY 2009.

Also as discussed in section XIII.A.1. of this proposed rule, for CY 2009, we are proposing to replace current status indicator “Q” with three new separate status indicators: “Q1,” “Q2,” and “Q3.” We believe that this proposed change would make our policy more transparent to hospitals and would facilitate the use of status indicator-driven logic in our ratesetting calculations, and in hospital billing and accounting systems. Under this proposal, status indicator “Q3” would be assigned to all codes that may be paid through a composite APC based on composite-specific criteria or separately through single code APCs when the criteria are not met. Therefore, we are proposing that each of the direct admission, clinic, and emergency department visit codes that may be paid through composite APCs 8002 and 8003 be assigned status indicator “Q3” for CY 2009. We are proposing that HCPCS code G0378 would continue to be always packaged by assigning the HCPCS code status indicator “N,” its current status indicator under the CY 2008 OPPS.

We are also proposing that the payment policy for separate payment of HCPCS code G0379 that was finalized for the CY 2008 OPPS (72 FR 66814 through 66815) would continue to apply for CY 2009 when the criteria for payment of this service through composite APC 8002 are not met. The criteria for payment of HCPCS code G0379 under either composite APC 8002, as part of the extended assessment and management composite service or APC 0604, as a separately payable individual service are: (1) both HCPCS codes G0378 and G0379 are reported with the same date of service; and (2) no service with a status indicator of “T” or “V” or Critical Care (APC 0617) is provided on the same date of service as HCPCS code G0379. If either of the above criteria is not met, HCPCS code G0379 is assigned status indicator “N” and its payment is packaged into the payment for other separately payable services provided in the same encounter.

In summary, for CY 2009, we are proposing to continue the extended assessment and management composite APC payment methodology and the general reporting requirements for observation services reported with HCPCS code G0378. We are proposing to base the CY 2009 OPPS payment for composite APC 8002 on a median cost of $364 and to base the payment for composite APC 8003 on a median cost of $670. For CY 2009, we are also proposing to add HCPCS code G0384 to the eligibility criteria for payment of composite APC 8003. Furthermore, we are proposing to assign status indicator “Q3” to each of the visit codes that may be paid through the Level I and Level II extended assessment and management composite APCs.Start Printed Page 41445

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

LDR prostate brachytherapy is a treatment for prostate cancer in which needles or catheters are inserted into the prostate, followed by permanent implantation of radioactive sources into the prostate through the hollow needles or catheters. At least two CPT codes are used to report the composite treatment service because there are separate codes that describe placement of the needles/catheters and the application of the brachytherapy sources: CPT code 55875 (Transperineal placement of needles or catheters into prostate for interstitial radioelement application, with or without cystoscopy) and CPT code 77778 (Interstitial radiation source application; complex). Generally, the component services represented by both codes are provided in the same operative session in the same hospital on the same date of service to the Medicare beneficiary treated with LDR brachytherapy for prostate cancer. As discussed in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66653), OPPS payment rates for CPT code 77778, in particular, have fluctuated over the years. We were frequently informed by the public that reliance on single procedure claims to set the median costs for these services resulted in use of only incorrectly coded claims for LDR prostate brachytherapy because a correctly coded claim should include, for the same date of service, CPT codes for both needle/catheter placement and application of radiation sources, as well as separately coded imaging and radiation therapy planning services (that is, a multiple procedure claim).

In order to base payment on claims for the most common clinical scenario, and to contribute to our goal of providing payment under the OPPS for a larger bundle of component services provided in a single hospital encounter, beginning in CY 2008 we provide a single payment for LDR prostate brachytherapy when the composite service, billed as CPT codes 55875 and 77778, is furnished in a single hospital encounter. We base the payment for composite APC 8001 (LDR Prostate Brachytherapy Composite) on the median cost derived from claims for the same date of service that contain both CPT codes 55875 and 77778 and that do not contain other separately paid codes that are not on the bypass list. In uncommon occurrences in which the services are billed individually, hospitals continue to receive separate payments for the individual services. We refer readers to the CY 2008 OPPS/ASC final rule with comment period (72 FR 66652 through 66655) for a full history of OPPS payment for LDR prostate brachytherapy and a detailed description of how we developed the LDR prostate brachytherapy composite APC.

For CY 2009, we are proposing to continue paying for LDR prostate brachytherapy services using the composite APC methodology proposed and implemented for CY 2008. That is, we are proposing to use CY 2007 claims on which both CPT codes 55875 and 77778 were billed on the same date of service with no other separately paid procedure codes (other than those on the bypass list) to calculate the payment rate for composite APC 8001. Consistent with our CY 2008 practice, we would not use the claims that meet these criteria in the calculation of the median costs for APCs 0163 (Level IV Cystourethroscopy and Other Genitourinary Procedures) and 0313 (Brachytherapy) to which HCPCS codes 55875 and 77778 are assigned respectively; median costs for APCs 0163 and 0313 would continue to be calculated using single procedure claims. As discussed in section XIII.A.1. of this proposed rule, we also are proposing to use new status indicator “Q3” (Codes that May be Paid Through a Composite APC), to denote HCPCS codes such as CPT codes 55875 and 77778 that may be paid through a composite APC for publication and payment purposes for CY 2009, rather than status indicator “Q” that is being used in CY 2008. We are proposing the status indicator change to facilitate identification of HCPCS codes that may be paid through composite APCs and to facilitate development of the composite APC median costs.

We continue to believe that this composite APC contributes to our goal of creating hospital incentives for efficiency and cost containment, while providing hospitals with the most flexibility to manage their resources. We also continue to believe that data from claims reporting both services required for LDR prostate brachytherapy provide the most accurate median cost upon which to base the composite APC payment rate.

Using partial year CY 2007 claims data available for the CY 2009 proposed rule, we were able to use 6,897 claims that contained both CPT code 77778 and 55875 to calculate the median cost upon which the CY 2009 proposed payment for composite APC 8001 is based. The proposed median cost for composite APC 8001 for CY 2009 is approximately $3,509. This is an increase compared to the CY 2008 OPPS/ASC final rule with comment period in which we calculated a final median cost for this composite APC of approximately $3,391 based on a full year of CY 2006 claims data. The CY 2009 proposed composite APC median is slightly less than $3,581, the sum of the proposed median costs for APCs 0163 (Level IV Cystourethroscopy and other Genitourinary Procedures) and 0651 (Complex Interstitial Radiation Source Application) ($2,388 + $1,193), the APCs to which CPT codes 77778 and 55875 map if one service is billed on a claim without the other. We believe that the proposed median cost for composite APC 8001 of approximately $3,509, which is calculated from claims we believe to be correctly coded, would result in a reasonable and appropriate payment rate for this service in CY 2009.

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

Cardiac electrophysiologic evaluation and ablation services frequently are performed in varying combinations with one another during a single episode of care in the HOPD. Therefore, correctly coded claims for these services often include multiple codes for component services that are reported with different CPT codes and that, prior to CY 2008, were always paid separately through different APCs (specifically, APC 0085 (Level II Electrophysiologic Evaluation), APC 0086 (Ablate Heart Dysrhythm Focus), and APC 0087 (Cardiac Electrophysiologic Recording/Mapping)). As a result, there would never be many single bills for cardiac electrophysiologic evaluation and ablation services, and those that are reported as single bills would often represent atypical cases or incorrectly coded claims. As described in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66655 through 66659), the APC Panel and the public expressed persistent concerns regarding the limited and reportedly unrepresentative single bills available for use in calculating the median cost for these services according to our standard OPPS methodology.

Effective January 1, 2008, we established APC 8000 (Cardiac Electrophysiologic Evaluation and Ablation Composite) to pay for a composite service made up of at least one specified electrophysiologic evaluation service and one electrophysiologic ablation service. Calculating a composite APC for these services allowed us to utilize many more claims than were available to establish the individual APC median Start Printed Page 41446costs for these services, and we also saw this composite APC as an opportunity to advance our stated goal of promoting hospital efficiency through larger payment bundles. In order to calculate the median cost upon which the payment rate for composite APC 8000 is based, we used multiple procedure claims that contained at least one CPT code from group A for evaluation services and at least one CPT code from group B for ablation services reported on the same date of service on an individual claim. We refer readers to Table 6 for identification of the CPT codes that are assigned to groups A and B. For a full discussion of how we identified the group A and group B procedures and established the CY 2008 payment rate for the cardiac electrophysiologic evaluation and ablation composite APC, we refer readers to the CY 2008 OPPS/ASC final rule with comment period (72 FR 66655 through 66659). Where a service in group A is furnished on a date of service that is different from the date of service for a code in group B for the same beneficiary, payments are made under the appropriate single procedure APCs and the composite APC does not apply.

For CY 2009, we are proposing to continue paying for cardiac electrophysiologic evaluation and ablation services using the composite APC methodology established for CY 2008. Consistent with our CY 2008 practice, we would not use the claims that meet these criteria in the calculation of the median costs for APCs 0085 (Level II Electrophysiologic Procedures) and 0086 (Level III Electrophysiologic Procedures), to which the HCPCS codes in both groups A and B for composite APC 8000 are otherwise assigned. Median costs for APCs 0085 and 0086 would continue to be calculated using single procedure claims. As discussed in section XIII.A.1. of this proposed rule, we also are proposing to use new status indicator “Q3” (Codes that May be Paid Through a Composite APC) to denote HCPCS codes such as the cardiac electrophysiologic evaluation and ablation CPT codes that may be paid through a composite APC for publication and payment purposes for CY 2009, rather than the status indicator “Q” that is being used in CY 2008. We continue to believe that the composite APC for cardiac electrophysiologic evaluation and ablation services is the most efficient and effective way to use the claims data for the majority of these services and best represents the hospital resources associated with performing the common combinations of these services that are clinically typical. Further, this approach creates incentives for efficiency by providing a single payment for a larger bundle of major procedures when they are performed together, in contrast to continued separate payment for each of the individual procedures.

Using partial year CY 2007 claims data available for this proposed rule, we were able to use 5,603 claims containing a combination of group A and group B codes and calculated a proposed median cost of approximately $9,174 for composite APC 8000. This is an increase compared to the CY 2008 OPPS/ASC final rule with comment period in which we calculated a final median cost for this composite APC of approximately $8,438 based on a full year of CY 2006 claims data. We believe that the proposed median cost of $9,174 calculated from a high volume of correctly coded multiple procedure claims results in an accurate and appropriate proposed payment for cardiac electrophysiologic evaluation and ablation services when at least one evaluation service is furnished during the same clinical encounter as at least one ablation service. Table 6 below lists the groups of procedures upon which we are proposing to base composite APC 8000 for CY 2009.

Table 6.—Groups of Cardiac Electrophysiologic Evaluation and Ablation Procedures Upon Which We Base Composite APC 8000

Codes used in combinations: At least one in Group A and one in Group BHCPCS codeProposed single code CY 2009 APCProposed CY 2009 SI (composite)
Group A
Electrophysiology evaluation936190085Q3
Electrophysiology evaluation936200085Q3
Group B
Ablate heart dysrhythm focus936500085Q3
Ablate heart dysrhythm focus936510086Q3
Ablate heart dysrhythm focus936520086Q3

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

For the CY 2009 OPPS, we are proposing to continue our longstanding policy of limiting the aggregate payment for specified less intensive mental health services furnished on the same date to the payment for a day of partial hospitalization, which we consider to be the most resource intensive of all outpatient mental health treatment. We refer readers to the April 7, 2000 OPPS final rule with comment period (65 FR 18455) for the initial discussion of this longstanding policy. We continue to believe that the costs associated with administering a partial hospitalization program represent the most resource intensive of all outpatient mental health treatment, and we do not believe that we should pay more for a day of individual mental health services under the OPPS than the partial hospitalization per diem payment.

For CY 2009, as discussed further in section X.B. of this proposed rule, we are proposing to create two new APCs, 0172 (Level I Partial Hospitalization (3 services)) and 0173 (Level II Partial Hospitalization (4 or more services)), to replace APC 0033 (Partial Hospitalization), which we are proposing to delete for CY 2009. In summary, when a community mental health center (CMHC) or hospital provides three units of partial hospitalization services and meets all other partial hospitalization payment criteria, the CMHC or hospital would be paid through APC 0172. When the CMHC or hospital provides four or more units of partial hospitalization services and meets all other partial hospitalization payment criteria, the hospital would be paid through APC 0173. For CY 2009, we are proposing to set the payment rate for mental health composite APC 0034 at the same rate as APC 0173, which is the maximum partial hospitalization per diem payment. We believe this APC payment Start Printed Page 41447rate would provide the most appropriate payment for composite APC 0034, taking into consideration the intensity of the mental health services and the differences in the HCPCS codes for mental health services that could be paid through this composite APC compared with the HCPCS codes that could be paid through partial hospitalization APC 0173. Through the I/OCE, when the payment for specified mental health services provided by one hospital to a single beneficiary on one date of service based on the payment rates associated with the APCs for the individual services would exceed the maximum per diem partial hospitalization payment [listed as APC 0173 (Level II Partial Hospitalization (4 or more services))], those specified mental health services would be assigned to APC 0034 (Mental Health Services Composite), which has the same payment rate as APC 0173, and the hospital would be paid one unit of APC 0034. In the CY 2008 OPPS/ASC final rule with comment period (72 FR 66651), we clarified that this longstanding policy regarding payment of APC 0034 for combinations of independent mental health services provided in a single hospital encounter resembles the payment policy for composite APCs that we finalized for LDR prostate brachytherapy and cardiac electrophysiologic evaluation and ablation services for CY 2008. Similar to the logic for those two composite APCs, the I/OCE currently determines, and we are proposing for CY 2009 that it would continue to determine, whether to pay these specified mental health services individually or to make a single payment at the same rate as the APC 0173 per diem rate for partial hospitalization for all of the specified mental health services furnished on that date of service. However, we note that this established policy for payment of APC 0034 differs from the payment policies for the LDR prostate brachytherapy and cardiac electrophysiologic evaluation and ablation composite APCs because APC 0034 is only paid if the sum of the individual payment rates for the specified mental health services provided on one date of service exceeds the APC 0034 payment rate.

For CY 2008 (72 FR 66651), we changed the status indicator to “Q” for the HCPCS codes that describe the specified mental health services to which APC 0034 applies because those codes are conditionally packaged when the sum of the payment rates for the single code APCs to which they are assigned exceeds the per diem payment rate for partial hospitalization. For CY 2009, we are proposing to change the status indicator from “Q” (Packaged Services Subject to Separate Payment under OPPS Payment Criteria) to “Q3,” (Codes that May be Paid Through a Composite APC), for those HCPCS codes that describe the specified mental health services to which APC 0034 applies. This is consistent with our proposal to change the status indicator from “Q” to “Q3” for all HCPCS codes that may be paid through composite APCs, in order to further refine our identification of the different types of conditionally packaged HCPCS codes that were previously all assigned the same status indicator “Q” under the OPPS. We are proposing to apply this status indicator policy to the HCPCS codes that are assigned to composite APC 0034 in Addendum M to this proposed rule. We are also proposing to change the status indicator from “P” (Partial Hospitalization) to “S” (Significant Procedure, Not Discounted when Multiple), for APC 0034. Although APC 0034 has been historically assigned status indicator “P” under the OPPS, this APC provides payment for mental health services that are furnished in an HOPD outside of a partial hospitalization program. This proposed status indicator change should have no practical implications for hospitals from a billing or payment perspective. Rather, we believe that it is more appropriate to assign status indicator “S” to an APC that describes mental health services that are provided outside of a partial hospitalization program. We refer readers to section XIII.A. of this proposed rule for a complete discussion of status indicators and our proposed status indicator changes for CY 2009.

In summary, we are not proposing a change to the longstanding payment policy under which the OPPS pays one unit of APC 0034 in cases in which the total payments for specified mental health services provided on the same date of service would otherwise exceed the payment rate for APC 0173. However, we are proposing to change the status indicator to “Q3” for the HCPCS codes for the mental health services to which this policy applies, consistent with our belief that payment for these services should be packaged into a single payment made at the same rate as a day of partial hospitalization unless the sum of the individual payments for these codes would be less than the payment for composite APC 0034.

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

Under current OPPS policy, hospitals receive a full APC payment for each imaging service on a claim, regardless of how many procedures are performed during a single session using the same imaging modality or whether the procedures are performed on contiguous body areas. In response to a 2005 MedPAC recommendation to reduce the technical component payment for multiple imaging services performed on contiguous body areas, CMS proposed a payment reduction policy for multiple imaging procedures performed on contiguous body areas in both the CY 2006 MPFS proposed rule (70 FR 45849 through 45851) and the CY 2006 OPPS proposed rule (70 FR 42748 through 42751). In the March 2005 MedPAC report entitled, “Report to the Congress: Medicare Payment Policy,” MedPAC concluded that Medicare's physician's office payment rates for imaging services were based on each service being provided independently and that the rates did not account for efficiencies that may be gained when multiple studies using the same imaging modality are performed in the same session. In both the CY 2006 MPFS proposed rule (70 FR 45849) and the CY 2006 OPPS proposed rule (70 FR 42751), we suggested that although each imaging procedure entails the use of hospital resources, including certain staff, equipment, and supplies, some of those resource costs are not incurred twice when the procedures are performed in the same session and thus, should not be paid as if they were incurred twice. Specifically, for CY 2006, for both the MPFS and the OPPS, we proposed to apply a 50-percent reduction in the payment for certain second and subsequent imaging procedures performed during the same session, similar to the longstanding OPPS policy of reducing payments for certain second and subsequent surgical procedures performed during the same operative session. We developed the 50-percent reduction estimate using MPFS input data to estimate the practice expense resources associated with equipment time and indirect costs that would not occur for the second and subsequent procedures. We proposed that the reduction would apply only to individual services within 11 designated imaging families, which were comprised of procedures utilizing similar modalities across contiguous body areas and developed based on MPFS billing data. The imaging modalities included in the proposal Start Printed Page 41448were ultrasound, computed tomography (CT), computed tomographic angiography (CTA), magnetic resonance imaging (MRI), and magnetic resonance angiography (MRA). Prior to making the proposal for the OPPS, we confirmed that the CY 2004 OPPS claims for the CY 2006 OPPS update demonstrated comparable clustering of imaging procedures by modality and within family. The OPPS and MPFS imaging services provided across families would not be subject to the reduction policy as proposed for CY 2006. The proposed 11 families of imaging services were as follows:

  • Ultrasound (Chest/Abdomen/Pelvis-Non-Obstetrical)
  • CT and CTA (Chest/Thorax/Abd/Pelvis)
  • CT and CTA (Head/Brain/Orbit/Maxillofacial/Neck)
  • MRI and MRA (Chest/Abd/Pelvis)
  • MRI and MRA (Head/Brain/Neck)
  • MRI and MRA (Spine)
  • CT (Spine)
  • MRI and MRA (Lower Extremities)
  • CT and CTA (Lower Extremities)
  • MR and MRI (Upper Extremities and Joints)
  • CT and CTA (Upper Extremities)

In response to the multiple imaging payment reduction policy proposed for the CY 2006 OPPS (70 FR 68707 through 68708), several commenters requested that we postpone implementation until we performed further analyses and were able to find more substantial, hospital-based data to support the 50-percent payment reduction rather than base the policy on MPFS data. Commenters argued that, unlike a relative value unit (RVU) estimate of the total resources associated with a single service for the MPFS, the OPPS cost-based methodology already incorporates the efficiencies of performing multiple procedures during the same session and that median cost estimates for single procedures reflect these savings. Specifically, an imaging CCR consists of the labor and allocated capital and overhead costs for all imaging provided in a department specified by each hospital on its cost report, divided by the total charges for all imaging services provided. In short, commenters stated that because the OPPS cost estimates used for setting the OPPS payment rates for imaging services already reflect costs for a department in general, the CCR used to adjust charges to costs currently incorporated savings from the imaging efficiencies associated with multiple procedures provided in a single session. By applying this CCR to every charge on a claim, commenters noted that CMS averages multiple imaging efficiencies for all imaging services across all service costs estimated with the departmental CCR. At its August 2005 meeting, the APC Panel heard this and other arguments and recommended that CMS postpone implementation of the policy for a year in order to gather more data on the impact of the proposed changes.

In the CY 2006 OPPS final rule with comment period (70 FR 68516), we acknowledged that, based on our analysis of how hospitals report charges and costs for diagnostic radiology services, it may be correct that the median costs from hospital claims data for the imaging services in the 11 families proposed for the reduction policy already reflect reduced median costs based, in part, on hospitals' provision of multiple imaging services in a single session. However, we expressed concern that the marginal effect of imaging efficiencies on a given CCR may be negligible, thereby underestimating the impact of multiple imaging efficiencies, especially where hospitals reported all diagnostic radiology services in one cost center and did not split the costs and charges for advanced imaging with CT, MRI, or ultrasound into separate cost centers. Because efficiencies are inherent in our cost methodology, our analysis did not provide a definitive answer regarding how much, on average, the OPPS median costs for single imaging services in the 11 families are reduced due to existing hospital efficiencies related to multiple services provided in a single session. Accordingly, we did not implement a multiple imaging payment reduction policy for the OPPS in CY 2006 (a modified MPFS multiple imaging payment reduction policy was implemented with a 25-percent reduction policy for certain second and subsequent imaging services for CY 2006, and that same reduction policy currently remains in effect under the MPFS). In the CY 2006 OPPS final rule with comment period (70 FR 68707 through 68708), we stated that, depending upon the results of future analyses, we might revisit this issue and propose revisions to the structure of our payment rates for imaging procedures in order to ensure that those rates properly reflect the relative costs of initial and subsequent imaging procedures. Since publication of the CY 2006 OPPS final rule with comment period, MedPAC has encouraged us to continue our analyses in order to improve payment accuracy for imaging services under the OPPS, including considering adopting a multiple procedure payment reduction policy.

In preparation for the CY 2009 OPPS proposed rule, we revisited the issue of how we could improve the accuracy of OPPS payment for multiple imaging services and incorporate the lower marginal cost for conducting second and subsequent imaging procedures in the same imaging session. As already noted, for CY 2008, we developed a composite APC methodology to provide a single payment for two or more major independent services that are typically performed together during a single operative session and that result in the provision of a complete service (72 FR 66650 through 66652). The composite APCs for LDR prostate brachytherapy services and cardiac electrophysiologic evaluation and ablation services discussed in sections II.A.2.e.(2) and (3), respectively, of this proposed rule are classic examples. Providing one payment for an entire session encourages hospitals to closely evaluate the resources they use for all components of the composite service in order to improve their payment relative to the costs of performing the composite service. We decided to explore capturing efficiencies for multiple imaging procedures through a composite APC payment methodology when a hospital provides more than one imaging procedure using the same modality during a single session.

We began by reexamining the 11 imaging families of HCPCS codes for contiguous body areas involving a single imaging modality that we had proposed for CY 2006 and that are currently in use under the MPFS for the multiple imaging procedure payment reduction policy. We based this code-specific analysis on the HCPCS codes recognized under the OPPS for the same services that are included in the 11 CY 2008 MPFS imaging families, and in addition, we incorporated the 10 HCPCS codes that are proposed for inclusion in these 11 families for the CY 2009 MPFS. We collapsed the 11 MPFS imaging families into 3 OPPS imaging families according to their modality—1 for ultrasound, 1 for CT and CTA, and 1 for MRI and MRA services. These larger OPPS imaging families generally correspond to the larger APC groups of services paid under OPPS relative to the service-specific payment under the MPFS. We believe that these larger OPPS imaging families are appropriate because eliminating the contiguous body area concept that is central to the MPFS imaging families should not significantly limit potential efficiencies in an imaging session. For example, we would not expect second and subsequent imaging services of the same modality involving noncontiguous body areas to require duplicate facility Start Printed Page 41449services such as greeting the patient, providing education and obtaining consent, retrieving prior exams, setting up an intravenous infusion, and preparing and cleaning the room, any more than second and subsequent imaging procedures of the same modality on contiguous body areas. The contiguous body area concept was a component of MedPAC's recommendation for reducing physician payment, but we believe it is less appropriate for a single, session-based OPPS composite imaging payment. In addition, using these collapsed OPPS families would add only 12 percent additional claims to those eligible for composite payment relative to using the 11 MPFS imaging families, suggesting that under the OPPS, multiple imaging claims are within the same imaging modality and involve contiguous body areas the vast majority of the time. Nevertheless, the three OPPS imaging families would allow us to capture additional claims for payment under an imaging composite payment methodology.

Another unique aspect of imaging services for OPPS ratesetting, in general, is their inclusion on our bypass list and contribution to creating “pseudo” single claims, particularly those services that are specifically performed without the administration of contrast. Our creation of “pseudo” single claims from multiple procedure claims is discussed in section II.A.1.b. of this proposed rule. In beginning to model these potential multiple imaging composite APCs, we noted that there would be overlap between the bypass list and noncontrast imaging HCPCS codes that are included in the three OPPS imaging families. The bypass process removes any line-item for a bypass HCPCS code, irrespective of units, from multiple procedure claims. The line-item information is used to make at least one “pseudo” single bill and the line-items remaining on the claim are split by date and reassessed for single bill status. To model the median costs for the potential multiple imaging composite APCs, we removed any HCPCS codes in the OPPS imaging families that overlap with codes on our bypass list to avoid splitting claims with multiple units or multiple occurrences of codes in an OPPS imaging family into new “pseudo” single claims. The imaging HCPCS codes that we removed from the bypass list for purposes of calculating proposed multiple imaging composite APC median costs appear in Table 7 below. (We refer readers to section II.A.1.b. of this proposed rule for further discussion of how we treat claims with HCPCS codes in the OPPS imaging families that are also on the bypass list.) We integrated the identification of imaging composite “single session” claims, that is, claims with multiple imaging procedures within the same family on the same date of service, into the creation of “pseudo” single claims to ensure that claims were split in the “pseudo” single process into accurate reflections of either a composite “single session” imaging service or a standard sole imaging service resource cost. Like all single bills, the new composite “single session” claims were for the same date of service and contained no other separately paid services in order to isolate the session imaging costs. Our last step after processing all claims through the “pseudo” single process was to make line-items for HCPCS codes in the OPPS imaging families remaining on multiple procedure claims with one unit of the imaging HCPCS code and no other imaging services in the families into “pseudo” single bills for use in calculating the median costs for sole imaging services.

Table 7.—Proposed OPPS Imaging Family Services Overlapping With HCPCS Codes on the Proposed CY 2009 Bypass List

Family 1—Ultrasound
76700Us exam, abdom, complete.
76705Echo exam of abdomen.
76770Us exam abdo back wall, comp.
76775Us exam abdo back wall, lim.
Family 1—Ultrasound
76776Us exam k transpl w/doppler.
76856Us exam, pelvic, complete.
76870Us exam, scrotum.
76857Us exam, pelvic, limited.
Family 2—CT and CTA With and Without Contrast
70450Ct head/brain w/o dye.
70480Ct orbit/ear/fossa w/o dye.
70486Ct maxillofacial w/o dye.
70490Ct soft tissue neck w/o dye.
71250Ct thorax w/o dye.
72125Ct neck spine w/o dye.
72128Ct chest spine w/o dye.
72131Ct lumbar spine w/o dye.
72192Ct pelvis w/o dye.
73200Ct upper extremity w/o dye.
73700Ct lower extremity w/o dye.
74150Ct abdomen w/o dye.
Family 3—MRI and MRA With and Without Contrast
70336Magnetic image, jaw joint.
70544Mr angiography head w/o dye.
70551Mri brain w/o dye.
72141Mri neck spine w/o dye.
72146Mri chest spine w/o dye.
72148Mri lumbar spine w/o dye.
73218Mri upper extremity w/o dye.
Family 3—MRI and MRA With and Without Contrast
73221Mri joint upr extrem w/o dye.
Family 3—MRI and MRA With and Without Contrast
73718Mri lower extremity w/o dye.
73721Mri jnt of lwr extre w/o dye.

One final requirement of our assessment of multiple imaging composite APCs was our expansion of the OPPS families for the three modalities—ultrasound, CT and CTA, and MRI and MRA—into five composite APCs to accommodate the statutory requirement in section 1833(t)(2)(G) of the Act, that the OPPS provide payment for imaging services provided with contrast and without contrast through separate payment groups. Ultrasound studies do not utilize contrast and thus this family constituted a single composite APC. However, we had to split the families for CT and CTA, and MRI and MRA, into two separate composite APCs each to reflect whether the procedures were performed with or without contrast. We examined the HCPCS codes on our “single session” claims, and if the claim had at least one HCPCS code that was performed with contrast, we classified the “single session” bill as “with contrast.” We then recalculated the median costs for the standard (sole service) imaging APCs based on single and “pseudo” single bills and the imaging composite APC median costs based on appropriate “single session” bills with multiple imaging procedures.

We were able to identify 1.7 million “single session” claims out of an estimated 4 million potential composite cases from our ratesetting claims database, or almost half of all eligible claims, to calculate median costs for the 5 OPPS multiple imaging composite APCs. We used 8 million single and “pseudo” single claims to set the medians for the standard (sole service) APCs for the same imaging procedures. We specifically note that the proposed CY 2009 payment rates for multiple imaging services provided during the same session and within the same OPPS Start Printed Page 41450imaging family are based entirely on median costs derived empirically from OPPS claims and Medicare cost report data.

In general, we found that the per service median cost for each of the multiple imaging procedures performed during a single session, and reflected in the composite APC median costs, was modestly less than the sole service median cost when only one imaging service was performed during a single session, as reflected in the median cost of the standard (sole service) imaging APCs (that is, those imaging services that would not have qualified for payment through a multiple imaging composite APC under the proposed composite methodology). However, we also noticed that the proposed CY 2009 median costs for the standard (sole service) imaging APCs increased slightly compared to the median costs that we would calculate using the current OPPS imaging service payment policy. These variations in median costs are consistent with our expectations. Because the OPPS cost-based payment weight methodology estimates a standard cost per imaging procedure for each hospital, these results suggest that the imaging composite “single session” claims disproportionately represent services furnished by more efficient providers that frequently perform more than one imaging procedure during a single session. The lower cost claims also may include more providers that appropriately report costs and charges for nonstandard cost centers for advanced imaging on their cost reports.

In light of these findings, we determined that a proposal to revise our methodology for paying for multiple imaging procedures is warranted because the current OPPS policy of providing a full APC payment for each imaging service on a claim, regardless of how many procedures are performed during a single session using the same imaging modality, neither reflects nor promotes the efficiencies hospitals can achieve when they perform multiple imaging procedures during a single session, as seen in the claims data.

Therefore, we are proposing to utilize the three OPPS imaging families discussed above, incorporating statutory requirements to differentiate OPPS payment for imaging services provided with contrast and without contrast as required by section 1833(t)(2)(G) of the Act, to create five multiple imaging composite APCs for payment in CY 2009. The proposed APCs are: APC 8004 (Ultrasound Composite); APC 8005 (CT and CTA without Contrast Composite); APC 8006 ( CT and CTA with Contrast Composite); APC 8007 (MRI and MRA without Contrast Composite); and APC 8008 (MRI and MRA with Contrast Composite). We calculated the proposed median costs for these APCs using CY 2007 claims data by isolating “single session” claims with more than one imaging service within a family as discussed above. Unlike our CY 2006 proposal where we would have applied a 50-percent payment reduction for second and subsequent imaging procedures comparable to the proposed MPFS policy, the CY 2009 OPPS proposal would calculate the composite APC payment amounts empirically from estimated costs on claims for multiple imaging services provided in a single session. This proposed composite methodology for multiple imaging services parallels the payment methodologies that we are proposing for other composite APCs under the CY 2009 OPPS.

Table 8 below presents the HCPCS codes comprising the three OPPS imaging families and five composite APCs that would be created under this proposal for CY 2009, along with the proposed median costs upon which the payment rates for these composite APCs would be based. The HCPCS codes included in Table 8 are assigned status indicator “Q3” in Addendum B to this proposed rule to identify their status as potentially payable through a composite APC. Their composite APC assignments are identified in Addendum M to this proposed rule.

To implement this proposed policy, we would provide one composite APC payment each time a hospital bills more than one procedure described by the HCPCS codes in one OPPS imaging family displayed in Table 8 below on a single date of service. If the hospital performs a procedure without contrast during the same session as at least one other procedure with contrast using the same imaging modality, then the hospital would receive payment for the “with contrast” composite APC. A single imaging procedure, or imaging procedures reported with HCPCS codes assigned to different OPPS imaging families, would be paid according to the standard OPPS methodology through the standard (sole service) imaging APCs to which they are proposed for assignment in CY 2009. We are proposing that hospitals would continue to use the same HCPCS codes to report imaging services, and that the I/OCE would determine when combinations of imaging procedures would qualify for composite APC payment or would map to standard APCs for payment. We would make a single payment for those imaging services that qualify for composite APC payment, as well as the packaged services furnished on the same date of service. The proposed composite APCs would have status indicators of “S,” signifying that payment for the APC would not be reduced when appearing on the same claim with other significant procedures.

Table 8.—Proposed OPPS Imaging Families and Multiple Imaging Procedure Composite APCs

Family 1—Ultrasound
APC 8004 (Ultrasound Composite)Proposed CY 2009 Median Cost = $194.14
76604Us exam, chest.
76700Us exam, abdom, complete.
76705Echo exam of abdomen.
76770Us exam abdo back wall, comp.
76775Us exam abdo back wall, lim.
76776Us exam k transpl w/Doppler.
76831Echo exam, uterus.
76856Us exam, pelvic, complete.
76870Us exam, scrotum.
76857Us exam, pelvic, limited.
Family 2—CT and CTA With and Without Contrast
APC 8005 (CT and CTA without Contrast Composite) *Proposed CY 2009 Median Cost = $422.98
0067TCt colonography;dx.
70450Ct head/brain w/o dye.
70480Ct orbit/ear/fossa w/o dye.
70486Ct maxillofacial w/o dye.
70490Ct soft tissue neck w/o dye.
71250Ct thorax w/o dye.
72125Ct neck spine w/o dye.
Family 2—CT and CTA With and Without Contrast
APC 8005 (CT and CTA without Contrast Composite) *Proposed CY 2009 Median Cost = $422.98
72128Ct chest spine w/o dye.
72131Ct lumbar spine w/o dye.
72192Ct pelvis w/o dye.
73200Ct upper extremity w/o dye.
73700Ct lower extremity w/o dye.
74150Ct abdomen w/o dye.
APC 8006 (CT and CTA with Contrast Composite)Proposed CY 2009 Median Cost = $639.09
70487Ct maxillofacial w/dye.
70460Ct head/brain w/dye.
Start Printed Page 41451
70470Ct head/brain w/o & w/dye.
70481Ct orbit/ear/fossa w/dye.
70482Ct orbit/ear/fossa w/o&w/dye.
70488Ct maxillofacial w/o & w/dye.
70491Ct soft tissue neck w/dye.
70492Ct sft tsue nck w/o & w/dye.
70496Ct angiography, head.
70498Ct angiography, neck.
71260Ct thorax w/dye.
71270Ct thorax w/o & w/dye.
71275Ct angiography, chest.
72126Ct neck spine w/dye.
72127Ct neck spine w/o & w/dye.
72129Ct chest spine w/dye.
72130Ct chest spine w/o & w/dye.
72132Ct lumbar spine w/dye.
72133Ct lumbar spine w/o & w/dye.
72191Ct angiograph pelv w/o&w/dye.
72193Ct pelvis w/dye.
72194Ct pelvis w/o & w/dye.
73201Ct upper extremity w/dye.
73202Ct uppr extremity w/o&w/dye.
73206Ct angio upr extrm w/o&w/dye.
Family 2—CT and CTA With and Without Contrast
APC 8006 (CT and CTA with Contrast Composite)Proposed CY 2009 Median Cost = $639.09
73701Ct lower extremity w/dye.
73702Ct lwr extremity w/o&w/dye.
73706Ct angio lwr extr w/o&w/dye.
74160Ct abdomen w/dye.
74170Ct abdomen w/o & w/dye.
74175Ct angio abdom w/o & w/dye.
75635Ct angio abdominal arteries.
* If a “without contrast” CT or CTA procedure is performed during the same session as a “with contrast” CT or CTA procedure, the I/OCE will assign APC 8006 rather than APC 8005.
Family 3—MRI and MRA With and Without Contrast
APC 8007 (MRI and MRA without Contrast Composite) *Proposed CY 2009 Median Cost = $724.66
70336Magnetic image, jaw joint.
70540Mri orbit/face/neck w/o dye.
70544Mr angiography head w/o dye.
70547Mr angiography neck w/o dye.
70551Mri brain w/o dye.
70554Fmri brain by tech.
71550Mri chest w/o dye.
72141Mri neck spine w/o dye.
72146Mri chest spine w/o dye.
72148Mri lumbar spine w/o dye.
72195Mri pelvis w/o dye.
73218Mri upper extremity w/o dye.
73221Mri joint upr extrem w/o dye.
73718Mri lower extremity w/o dye.
73721Mri jnt of lwr extre w/o dye.
74181Mri abdomen w/o dye.
75557Cardiac mri for morph.
75559Cardiac mri w/stress img.
C8901MRA w/o cont, abd.
Family 3—MRI and MRA With and Without Contrast
APC 8007 (MRI and MRA without Contrast Composite) *Proposed CY 2009 Median Cost = $724.66
C8904MRI w/o cont, breast, uni.
C8907MRI w/o cont, breast, bi.
C8910MRA w/o cont, chest.
C8913MRA w/o cont, lwr ext.
C8919MRA w/o cont, pelvis.
APC 8008 (MRI and MRA with Contrast Composite)Proposed CY 2009 Median Cost = $1,002.72
70549Mr angiograph neck w/o&w/dye.
70542Mri orbit/face/neck w/dye.
70543Mri orbt/fac/nck w/o & w/dye.
70545Mr angiography head w/dye.
70546Mr angiograph head w/o&w/dye.
APC 8008 (MRI and MRA with Contrast Composite)Proposed CY 2009 Median Cost = $1,002.72
70548Mr angiography neck w/dye.
70552Mri brain w/dye.
70553Mri brain w/o & w/dye.
71551Mri chest w/dye.
71552Mri chest w/o & w/dye.
72142Mri neck spine w/dye.
72147Mri chest spine w/dye.
72149Mri lumbar spine w/dye.
72156Mri neck spine w/o & w/dye.
72157Mri chest spine w/o & w/dye.
72158Mri lumbar spine w/o & w/dye.
72196Mri pelvis w/dye.
72197Mri pelvis w/o & w/dye.
73219Mri upper extremity w/dye.
73220Mri uppr extremity w/o&w/dye.
73222Mri joint upr extrem w/dye.
73223Mri joint upr extr w/o&w/dye.
73719Mri lower extremity w/dye.
73720Mri lwr extremity w/o&w/dye.
73722Mri joint of lwr extr w/dye.
Family 3—MRI and MRA With and Without Contrast
APC 8008 (MRI and MRA with Contrast Composite)Proposed CY 2009 Median Cost = $1,002.72
73723Mri joint lwr extr w/o&w/dye.
74182Mri abdomen w/dye.
74183Mri abdomen w/o & w/dye.
75561Cardiac mri for morph w/dye.
75563Card mri w/stress img & dye.
C8900MRA w/cont, abd.
C8902MRA w/o fol w/cont, abd.
C8903MRI w/cont, breast, uni.
C8905MRI w/o fol w/cont, brst, un.
C8906MRI w/cont, breast, bi.
C8908MRI w/o fol w/cont, breast.
C8909MRA w/cont, chest.
C8911MRA w/o fol w/cont, chest.
C8912MRA w/cont, lwr ext.
C8914MRA w/o fol w/cont, lwr ext.
APC 8008 (MRI and MRA with Contrast Composite)Proposed CY 2009 Median Cost = $1,002.72
C8918MRA w/cont, pelvis.
C8920MRA w/o fol w/cont, pelvis.
* If a “without contrast” MRI or MRA procedure is performed during the same session as a “with contrast” MRI or MRA procedure, the I/OCE will assign APC 8008 rather than 8007.

3. Proposed Calculation of OPPS Scaled Payment Weights

Using the APC median costs discussed in sections II.A.1. and 2. of this proposed rule, we calculated the proposed relative payment weights for each APC for CY 2009 shown in Addenda A and B to this proposed rule. In years prior to CY 2007, we standardized all the relative payment weights to APC 0601 (Mid Level Clinic Visit) because mid-level clinic visits were among the most frequently performed services in the hospital outpatient setting. We assigned APC 0601 a relative payment weight of 1.00 and divided the median cost for each APC by the median cost for APC 0601 to derive the relative payment weight for each APC.

Beginning with the CY 2007 OPPS (71 FR 67990), we standardized all of the relative payment weights to APC 0606 (Level 3 Clinic Visits) because we deleted APC 0601 as part of the reconfiguration of the visit APCs. We selected APC 0606 as the base because Start Printed Page 41452APC 0606 was the middle level clinic visit APC (that is, Level 3 of five levels). We had 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 were among the most frequently performed services in the hospital outpatient setting. Therefore, for CY 2009, to maintain consistency in using a median for calculating unscaled weights representing the median cost of some of the most frequently provided services, we are proposing to continue to use the median cost of the mid-level clinic visit APC, proposed APC 0606, to calculate unscaled weights. Following our standard methodology, but using the proposed CY 2009 median cost for APC 0606, for CY 2009 we assigned APC 0606 a relative payment weight of 1.00 and divided the median cost of each APC by the proposed 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 2009 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 2008 relative weights to aggregate payments using the CY 2009 proposed relative weights. Again this year, we included payments to CMHCs in our comparison. Based on this comparison, we adjusted the relative weights for purposes of budget neutrality. The unscaled relative payment weights were adjusted by a weight scaler of 1.3354 for budget neutrality. In addition to adjusting for increases and decreases in weight due to the recalibration of APC medians, the scaler also accounts for any change in the base, other than changes in volume which are not a factor in the weight scaler. The proposed relative payment weights listed in Addenda A and B to this proposed rule incorporate the recalibration adjustments discussed in sections II.A.1. and 2. of this proposed rule.

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 proposed rule) is included in the budget neutrality calculations for the CY 2009 OPPS.

4. Proposed Changes to Packaged Services

a. Background

The OPPS, like other prospective payment systems, relies on the concept of averaging, where the payment may be more or less than the estimated costs of providing a service or package of services for a particular patient, but with the exception of outlier cases, is adequate to ensure access to appropriate care. Packaging and bundling payment for multiple interrelated services into a single payment create incentives for providers to furnish services in the most efficient way by enabling hospitals to manage their resources with maximum flexibility, thereby encouraging long-term cost containment. For example, where there are a variety of supplies that could be used to furnish a service, some of which are more expensive than others, packaging encourages hospitals to use the least expensive item that meets the patient's needs, rather than to routinely use a more expensive item. Packaging also encourages hospitals to negotiate carefully with manufacturers and suppliers to reduce the purchase price of items and services or to explore alternative group purchasing arrangements, thereby encouraging the most economical health care. Similarly, packaging encourages hospitals to establish protocols that ensure that necessary services are furnished, while carefully scrutinizing the services ordered by practitioners to maximize the efficient use of hospital resources. Finally, packaging payments into larger payment bundles promotes the stability of payment for services over time. Packaging and bundling also may reduce the importance of refining service-specific payment because there is more opportunity for hospitals to average payment across higher cost cases requiring many ancillary services and lower cost cases requiring fewer ancillary services.

Decisions about packaging and bundling payment involve a balance between ensuring some separate payment for individual services and establishing incentives for efficiency through larger units of payment. Over the past several years of the OPPS, greater unpackaging of payment has occurred simultaneously with continued growth in OPPS expenditures as a result of increasing volumes of individual services. In an attempt to address this increase in volume of services, in the CY 2008 OPPS/ASC final rule with comment period, we finalized additional packaging for the CY 2008 OPPS, which included the establishment of four new composite APCs for CY 2008, specifically APC 8000 (Cardiac Electrophysiologic Evaluation and Ablation Composite), APC 8001 (LDR Prostate Brachytherapy Composite), APC 8002 (Level I Extended Assessment & Management Composite), and APC 8003 (Level II Extended Assessment & Management Composite) (72 FR 66650 through 66659). HCPCS codes that may be paid through a composite APC if certain composite-specific criteria are met or otherwise may be paid separately are assigned status indicator “Q” for CY 2008, and we consider them to be conditionally packaged. We discuss composite APCs in more detail in section II.A.2.e. of this proposed rule.

In addition, in the CY 2008 OPPS/ASC final rule with comment period, (72 FR 66610 through 66659), we adopted the packaging of payment for items and services in the seven categories listed below into the payment for the primary diagnostic or therapeutic modality to which we believe these items and services are typically ancillary and supportive. The seven categories are: Guidance services, image processing services, intraoperative services, imaging supervision and interpretation services, diagnostic radiopharmaceuticals, contrast media, and observation services. We specifically chose these categories of HCPCS codes for packaging because we believe that the items and services described by the codes in these categories are the HCPCS codes that are typically ancillary and supportive to a primary diagnostic or therapeutic modality and, in those cases, are an integral part of the primary service they support. We finalized our assignment of status indicator “N” to those HCPCS codes that we believe are always integral to the performance of the primary modality, so we always package their costs into the costs of the separately paid primary services with which they are billed. Services assigned status indicator “N” in CY 2008 are unconditionally packaged.

We also finalized our assignment of status indicator “Q” to those HCPCS Start Printed Page 41453codes that we believe are typically integral to the performance of the primary modality and, in such cases, we package payment for their costs into the costs of the separately paid primary services with which they are usually billed. An “STVX-packaged code” describes a HCPCS code whose payment is packaged when one or more separately paid primary services are furnished in the hospital outpatient encounter. A “T-packaged code” describes a code whose payment is packaged when one or more separately paid surgical procedures are provided during the hospital encounter. “STVX-packaged codes” and “T-packaged codes” are paid separately in those uncommon cases when they do not meet their respective criteria for packaged payment. “STVX-packaged codes” and “T-packaged HCPCS codes” assigned status indicator “Q” in CY 2008 are conditionally packaged.

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

An example of a CY 2008 change in the OPPS packaging status for a dependent HCPCS code that is ancillary and supportive is CPT code 61795 (Stereotactic computer-assisted volumetric (navigational) procedure, intracranial, extracranial, or spinal (List separately in addition to code for primary procedure)). CPT code 61795 was assigned separate payment in CY 2007 but its payment is packaged during CY 2008. This service is only performed during the course of a surgical procedure. Several of the surgical procedures that we would expect to be reported in association with CPT code 61795 are assigned to APC 0075 (Level V Endoscopy Upper Airway) for CY 2008. We consider the stereotactic guidance service to be an ancillary and supportive service that may be performed only in the same operative session as a procedure that could otherwise be performed independently of the stereotactic guidance service.

During its March 2008 meeting, the APC Panel recommended that CMS report to the APC Panel at its first CY 2009 meeting the impact of packaging on the net payments for patient care. We will take this recommendation into consideration and determine which data we can provide at the first CY 2009 APC Panel meeting that would best respond to this recommendation. The APC Panel also recommended that CMS present data at the first CY 2009 APC Panel meeting on usage and frequency, geographic distribution, and size and type of hospitals performing nuclear medicine examinations and using radioisotopes to ensure that access to these services is preserved for Medicare beneficiaries. This recommendation is discussed in more detail in section V.B.2.b. of this proposed rule.

Hospitals include charges for packaged services on their claims, and the costs associated with those packaged services are then added to the costs of separately payable procedures on the same claims in establishing payment rates for the separately payable services. We encourage hospitals to report all HCPCS codes that describe packaged services that were provided, unless CPT or CMS provide other guidance. If a HCPCS code is not reported when a packaged service is provided, it can be challenging to track utilization patterns and resource costs.

For CY 2009, we are proposing to further refine our identification of the different types of conditionally packaged HCPCS codes that were previously all assigned status indicator “Q” (Packaged Services Subject to Separate Payment under OPPS Payment Criteria) under the OPPS. We are proposing to create and assign status indicators “Q1” / (“STVX-Packaged Codes”), “Q2” (“T-Packaged Codes”), or “Q3” (Codes that may be paid through a composite APC) to each conditionally packaged HCPCS code. We refer readers to section XIII.A.1. of this proposed rule for a complete discussion of status indicators and our proposed status indicator changes for CY 2009.

While most conditionally packaged HCPCS codes are assigned to only one of the conditionally packaged categories described above, for CY 2009, we are proposing to assign one particular HCPCS code to two conditionally packaged categories. Specifically, we are proposing to treat CPT code 75635 (Computed tomographic angiography, abdominal aorta and bilateral iliofemoral lower extremity runoff, with contrast material(s), including noncontrast images, if performed, and image postprocessing) as both a “T-packaged code” and a component of composite APC 8006 (CT and CTA with Contrast Composite). We are proposing to assign this code status indicator “Q2” in Addendum B and “Q3” in Addendum M, to signify its dual treatment. For CY 2009, we are proposing to first assess whether CPT code 75635 would be packaged or separately payable, based on its status as a “T-packaged code.” If the service reported with CPT code 75635 would be separately payable due to the absence of another procedure on the claim with status indicator “T” for the same date of service, the code would then be assessed in the context of any other relevant imaging services reported on the claim for the same date of service to determine whether payment for CPT code 75635 under composite APC 8006 would be appropriate. If the criteria for payment of the code under composite APC 8006 are not met, then CPT code 75635 would be separately paid based on the proposed APC 0662 (CT Angiography) and its corresponding proposed payment rate displayed in Addendum B to this proposed rule.

b. Service-Specific Packaging Issues

(1) Packaged Services Addressed by APC Panel Recommendations

The Packaging Subcommittee of the APC Panel was established to review all packaged HCPCS codes. In deciding whether to package a service or pay for a code separately, we have historically considered 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 with which it was performed; and whether the expected cost of the service is relatively low. As discussed in section II.A.4.a. of this proposed rule regarding our packaging approach for CY 2008, we established packaging criteria that apply to seven categories of codes whose payments are packaged. Four of the APC Panel's packaging recommendations from its March 2008 meeting reference codes that are included in the seven categories of services that we packaged for CY 2008. For these four recommendations, we specifically applied the packaging considerations that apply to those seven categories of codes in determining whether a code should be proposed as packaged or separately payable for CY 2009. Specifically, we determined whether a service is a dependent service falling into one of the seven specified categories that is always or almost always provided integral to an independent service. For those two APC Panel recommendations that do not fit into any of the seven categories of services that were part of the CY 2008 Start Printed Page 41454packaging approach, we applied the packaging criteria noted above that were historically used under the OPPS. Moreover, we took into consideration our interest in possibly expanding the size of payment groups for component services to provide encounter-based or episode-of-care-based payment in the future in order to encourage hospital efficiency and provide hospitals with maximal flexibility to manage their resources.

The Packaging Subcommittee reviewed the packaging status of numerous HCPCS codes and reported its findings to the APC Panel at its March 2008 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—

1. CMS provide additional data to support packaging radiation oncology guidance services for review by the Data Subcommittee at the next APC Panel meeting.

2. CPT code 36592 (Collection of blood specimen using established central or peripheral catheter, venous, not otherwise specified) be treated as an “STVX-packaged code” for CY 2009 and assigned to the same APC as CPT code 36591 (Collection of blood specimen from a completely implantable venous access device) until adequate data are collected that would enable CMS to determine its own payment rate.

3. HCPCS code A4306 (Disposable drug delivery system, flow rate of less than 50 mL per hour) remain packaged for CY 2009.

4. CPT code 74305 (Cholangiography and/or pancreatography; through existing catheter, radiological supervision and interpretation) be treated as a “T-packaged code” for CY 2009 and that CMS consider assigning this code to APC 0263 (Level I Miscellaneous Radiology Procedures).

5. CMS reinstate separate payment for the following intravascular ultrasound and intracardiac echocardiography codes: CPT codes 37250 (Intravascular ultrasound (non-coronary vessel) during diagnostic evaluation and/or therapeutic intervention; initial vessel); 37251 (Intravascular ultrasound (non-coronary vessel) during diagnostic evaluation and/or therapeutic intervention; each additional vessel); 92978 (Intravascular ultrasound (coronary vessel or graft) during diagnostic evaluation and/or therapeutic intervention including imaging supervision, interpretation and report; initial vessel); 92979 (Intravascular ultrasound (coronary vessel or graft) during diagnostic evaluation and/or therapeutic intervention including imaging supervision, interpretation and report; each additional vessel); and 93662 (Intracardiac echocardiography during therapeutic/diagnostic intervention, including imaging supervision and interpretation).

6. CMS continue to package diagnostic radiopharmaceuticals for CY 2009.

7. The Packaging Subcommittee continue its work.

We address each of these recommendations in turn in the discussion that follows.

Recommendation 1

In response to the APC Panel's recommendation, we are adopting the recommendation and will provide data related to radiation oncology guidance services to the Data Subcommittee at the next APC Panel meeting. For CY 2009, we are proposing to maintain the packaged status of radiation oncology guidance services. These services are ancillary and dependent in relation to the radiation therapy services with which they are most commonly furnished. Consistent with the principles of a prospective payment system, in some cases payment in an individual case exceeds the average cost, and in other cases payment is less than the average cost, but on balance, payment should approximate the relative cost of the average case. While we are aware that some of the radiation oncology guidance codes describe relatively new technologies, we do not believe that beneficiary access to care would be harmed by packaging payment for radiation oncology guidance services. We believe that packaging will create incentives for hospitals and their physician partners to work together to establish appropriate protocols that will eliminate unnecessary services where they exist and institutionalize approaches to providing necessary services more efficiently. Therefore, we see no basis for treating radiation oncology services differently from other guidance services that are ancillary and dependent to the procedures they facilitate.

Recommendation 2

For CY 2009, we are adopting the APC Panel recommendation and proposing to treat CPT code 36592 (Collection of blood specimen using established central or peripheral catheter, venous, not otherwise specified) as an “STVX-packaged code” and assigning it to APC 0624 (Phlebotomy and Minor Vascular Access Device Procedures), the same APC to which we are proposing to assign CPT 36591 code (Collection of blood specimen from a completely implantable venous access device).

CPT code 36592 became effective January 1, 2008, and was assigned interim status indicator “N” in the CY 2008 OPPS/ASC final rule with comment period. Several members of the public requested that we change the status of this code from unconditionally packaged to conditionally packaged, thereby paying it identically to CPT code 36591. CPT code 36591 also became effective January 1, 2008, and was assigned interim status indicator “Q” with treatment as an “STVX-packaged code” and assignment to APC 0624. CPT code 36591 was a direct replacement for CPT code 36540, which was deleted effective January 1, 2008, but was an “STVX-packaged code” with assignment to APC 0624 for CY 2007. These members of the public stated that the resource costs associated with drawing blood from an established central or peripheral catheter were almost identical to the resources associated with drawing blood from an implanted venous access device.

We agree that the resource costs associated with CPT code 36592 are likely similar to the resource costs associated with CPT code 36591. When cost data for CPT code 36592 are available for the CY 2010 OPPS annual update, we will reevaluate whether assignment to APC 0624 continues to be appropriate.

In summary, for CY 2009, we are proposing to change the packaged status of CPT code 36592 from unconditionally packaged to conditionally packaged, as an “STVX-packaged code,” which is parallel to the proposed treatment of CPT code 36591. This service would be paid separately when it is provided in an encounter without a service assigned status indicator “S,” “T,” “V,” or “X.” In all other circumstances, its payment would be packaged.

As noted above, for CY 2009, we are proposing to further refine our identification of the different types of conditionally packaged HCPCS codes that were previously all assigned status indicator “Q” (Packaged Services Subject to Separate Payment under OPPS Payment Criteria) under the OPPS. Therefore, we are proposing to assign status indicator”Q1” to CPT code 36592 for CY 2009, which indicates that it is an “STVX-packaged code.” We refer readers to section XIII.A.1. for a complete discussion of status indicators and our proposed status indicator changes for CY 2009.

We note that we expect hospitals to follow the CPT guidance related to CPT Start Printed Page 41455codes 36591 and 36592 regarding when these services should be appropriately reported.

Recommendation 3

For CY 2009, we are adopting the APC Panel's recommendation and proposing to maintain the packaged status of HCPCS code A4306 (Disposable drug delivery system, flow rate of less than 50 mL per hour).

HCPCS code A4306 describes a disposable drug delivery system with a flow rate of less than 50 mL per hour. Beginning in CY 2007, HCPCS code A4306 is payable under the OPPS with status indicator “N,” indicating that its payment is unconditionally packaged. We packaged this code because it is considered a supply, and under the OPPS it is standard to package payment for all supplies, including implantable and non-implantable supplies, into payment for the procedures in which the supplies are used. In March 2007, we first discussed this code with the APC Panel. A manufacturer noted in a presentation during the March 2007 APC Panel meeting that there is a particular disposable drug delivery system that is reported with HCPCS code A4306 that is specifically used to treat postoperative pain. The manufacturer requested that this code be moved to its own APC for CY 2008 so that the service could receive separate payment. During its September 2007 meeting, the APC Panel recommended that this code remain packaged for CY 2008 and asked CMS to present additional data to the APC Panel when available.

During the APC Panel's March 2008 meeting, we provided to the Packaging Subcommittee additional cost data related to this code. Our CY 2007 proposed rule claims data indicate that HCPCS code A4306 was billed on OPPS claims approximately 2,400 times, yielding a line-item median cost of approximately $4. The individual costs for this supply range from $4 per unit to $2,056 per unit. The Packaging Subcommittee suggested that this code may not always be correctly reported by hospitals as the data also show that this code was frequently billed together with computed tomography (CT) scans of various regions of the body, without surgical procedures on the same date of service. The APC Panel speculated that this code may be currently reported when other types of drug delivery devices are utilized for nonsurgical procedures or for purposes other than the treatment of postoperative pain. It was also noted that hospitals may actually be appropriately reporting HCPCS code A4306, which may be used to describe supplies used for purposes other than postoperative pain relief.

In summary, because HCPCS code A4306 represents a supply and payment of supplies is packaged under the OPPS according to longstanding policy, we are proposing to maintain the unconditionally packaged status of HCPCS code A4306 for CY 2009.

Recommendation 4

For CY 2009, we are adopting the APC Panel's recommendation and proposing to treat CPT code 74305 (Cholangiography and/or pancreatography; through existing catheter, radiological supervision and interpretation) as a “T-packaged code” and assign it to APC 0263 (Level I Miscellaneous Radiology Procedures).

Effective January 1, 2008, CPT code 74305 is unconditionally packaged and falls into the imaging supervision and interpretation category of codes that we created as part of the CY 2008 packaging approach. Several members of the public recently noted that CPT code 74305 may sometimes be provided in a single hospital encounter with CPT code 47505 (Injection procedure for cholangiography through an existing catheter (eg, percutaneous transepatic or T-tube)), which is unconditionally packaged itself, when these are the only two services reported on a claim. In the case where only these two services were performed, the hospital would receive no separate payment. Our claims data indicate that CPT code 74305 is infrequently provided without any other separately payable services on the same date of service.

Therefore, for CY 2009, we are proposing to change the packaged status of CPT code 74305 from unconditionally packaged to conditionally packaged, as a “T-packaged code,” which is parallel to the treatment of many other conditionally packaged imaging supervision and interpretation codes. Hospitals would receive separate payment for this service when it appears on a claim without a surgical procedure. The payment for this service would be packaged into payment for a status indicator “T” surgical procedure when it appears on the same date as a surgical procedure. Hospitals that furnish this imaging supervision and interpretation service on the same date as an independent surgical procedure assigned status indicator “T” must bill both services on the same claim.

As noted above, for CY 2009, we are proposing to further refine our identification of the different types of conditionally packaged HCPCS codes that were previously all assigned status indicator “Q” (Packaged Services Subject to Separate Payment under OPPS Payment Criteria) under the OPPS. Therefore, we are proposing to assign status indicator “Q2” to CPT code 74305 for CY 2009, which indicates that it is a “T-packaged code.” We refer readers to section XIII.A.1. for a complete discussion of status indicators and our proposed status indicator changes for CY 2009.

In summary, for CY 2009, we are proposing to change the status indicator for CPT code 74305 from “N” to “Q2,” with assignment to APC 0263 (Level I Miscellaneous Radiology Procedures) when it would be separately paid.

Recommendation 5

For CY 2009, we are proposing to maintain the packaged status of CPT codes 37250 (Intravascular ultrasound (non-coronary vessel) during diagnostic evaluation and/or therapeutic intervention; initial vessel); 37251 (Intravascular ultrasound (non-coronary vessel) during diagnostic evaluation and/or therapeutic intervention; each additional vessel); 92978 (Intravascular ultrasound (coronary vessel or graft) during diagnostic evaluation and/or therapeutic intervention including imaging supervision, interpretation and report; initial vessel); 92979 (Intravascular ultrasound (coronary vessel or graft) during diagnostic evaluation and/or therapeutic intervention including imaging supervision, interpretation and report; each additional vessel); and 93662 (Intracardiac echocardiography during therapeutic/diagnostic intervention, including imaging supervision and interpretation). We are not adopting the APC Panel's recommendation to pay separately for these intraoperative intravascular ultrasound (IVUS) and intracardiac echocardiography (ICE) services for CY 2009.

These services were newly packaged for CY 2008 because they were members of the intraoperative category of services that were included in the CY 2008 packaging approach. The intraoperative category includes those codes that are reported for supportive dependent diagnostic testing or other minor procedures performed during surgical or other independent procedures. Because these intraoperative IVUS and ICE services support the performance of an independent procedure and they are provided in the same operative session as the independent procedure, we packaged their payment into the OPPS payment for the independent procedure performed. We believe these IVUS and ICE services are always integral to and dependent upon the independent Start Printed Page 41456services that they support and, therefore, we believe their payment would be appropriately packaged into the independent procedure.

A presenter at the March 2008 APC Panel meeting requested separate payment for these services, noting that they are high cost and provided with relatively low frequency compared to the services they typically accompany. We continue to believe that these services are ancillary and dependent in relation to the independent cardiac and vascular procedures with which they are most commonly furnished. We note that resource cost was not a factor we considered when deciding to package intraoperative services. Packaging payment for items and services that are directly related to performing a procedure, even when those packaged items and services have variable resource costs or different frequencies of use in relationship to one another or to the independent services into which their payment is packaged, has been a principle of the OPPS since the inception of that payment system. For example, once an implantable device is no longer eligible for device pass-through payment, our standard policy is to package the payment for the device into the payment for the procedures with which the device was reported. These former pass-through devices may be high or low cost in relationship to the other costs of the associated surgical procedures, or the devices may be implanted in a large or small proportion of those surgical procedures, but the device payment is nevertheless packaged. We do not believe that the fact that a procedure may be performed with assorted technologies of varying resource costs is a sufficient reason to pay separately for a particular technology that is clearly ancillary and dependent in relationship to independent associated procedures. We acknowledge that the costs associated with packaged services may contribute more or less to the median cost of the independent service, depending on how often the dependent service is billed with the independent service. Consistent with the principles of a prospective payment system, in some cases payment in an individual case exceeds the average cost, and in other cases payment is less than the average cost, but on balance, payment should approximate the relative cost of the average case. While we understand that these services represent technologies that are not commonly used in most institutions, we do not believe that beneficiary access to care would be harmed by packaging payment for IVUS and ICE services. We note that IVUS and ICE services are existing, established technologies and that hospitals have provided some of these services in the HOPD since the implementation of the OPPS in CY 2000. We believe that packaging will create incentives for hospitals and their physician partners to work together to establish appropriate protocols that will eliminate unnecessary services where they exist and institutionalize approaches to providing necessary services more efficiently. Therefore, we see no basis for treating IVUS and ICE services differently from other intraoperative services that are ancillary and dependent to the procedure they facilitate.

In summary, we are proposing to maintain the unconditionally packaged status of CPT codes 37250, 37251, 92978, 92979, and 93662 for CY 2009.

Recommendation 6

For CY 2009, we are adopting the APC Panel recommendation and proposing to maintain the packaged status of diagnostic radiopharmaceuticals. This recommendation is discussed in detail in section V.B.2.b. of this proposed rule.

Recommendation 7

In response to the APC Panel's recommendation for the Packaging Subcommittee to remain active until the next APC Panel meeting, we note that 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, and we also encourage recommendations of specific services or procedures whose payment would be most appropriately packaged under the OPPS. Additional detailed suggestions for the Packaging Subcommittee should be submitted by e-mail to APCPanel@cms.hhs.gov with Packaging Subcommittee in the subject line.

(2) IVIG Preadministration-Related Services

We are proposing to package payment for HCPCS code G0332 (Services for intravenous infusion of immunoglobulin prior to administration (this service is to be billed in conjunction with administration of immunoglobulin)) for CY 2009. Immune globulin is a complicated biological product that is developed from human plasma obtained from human plasma donors. Its purification is a complex process that occurs along a very long timeline and, therefore, only a small number of manufacturers provide commercially available products. In past years, there have been issues reported with the supply of intravenous immune globulin (IVIG) due to numerous factors, including decreased manufacturing capacity, increased usage, more sophisticated processing steps, and low demand for byproducts from IVIG fractionation.

Under the OPPS, the current CY 2008 payment methodology for IVIG treatments consists of three components, which include payment for the drug itself (described by a HCPCS J-code), administration of the IVIG product (described by one or more CPT codes), and the preadministration-related services (HCPCS code G0332). The CY 2009 proposed OPPS payment rates for IVIG products are established based on the Part B ASP drug methodology, as discussed further in section V.B.3. of this proposed rule. Under the OPPS, payment is made separately for the administration of IVIG and those services are reported using the CPT code for the first hour and, as needed, additional hour CPT infusion codes. The CY 2009 proposed OPPS payments for drug administration services are discussed in section VIII.B. of this proposed rule. As explained in detail in the CY 2006 OPPS, CY 2007 OPPS/ASC, and CY 2008 OPPS/ASC final rules with comment period (70 FR 68648 to 68650, 71 FR 68092 to 68093, and 72 FR 66697 to 66698, respectively), we temporarily paid separately for the IVIG preadministration-related services in CY 2006 through CY 2008 because of reported instability in the IVIG marketplace due, in part, to the implementation of the new ASP payment methodology for IVIG drugs. Under the CY 2006 and CY 2007 OPPS, HCPCS code G0332 was assigned to New Technology APC 1502 (New Technology—Level II ($50-$100)), with a payment rate of $75. For CY 2008, HCPCS code G0332 was reassigned to APC 0430 (Drug Preadministration-Related Services), with a payment rate of approximately $38 set prospectively based on robust CY 2006 claims data for this code. In addition, a separate payment for HCPCS code G0332 has been made under the MPFS during the same time period, CY 2006 to CY 2008.

We specifically indicated in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66697 through 66698) that we would consider packaging payment for HCPCS code G0332 in future years and that we intended to reevaluate the Start Printed Page 41457appropriateness of separate payment for IVIG preadministration-related services for the CY 2009 OPPS rulemaking cycle, especially as we explore the potential for greater packaging under the OPPS. We note that the Office of the Inspector General's (OIG's) study on the availability and pricing of IVIG published in a report in April 2007 entitled, “Intravenous Immune Globulin: Medicare Payment and Availability (OEI-03-05-00404),” found that for the third quarter of CY 2006, just over half of the IVIG sales to hospitals and physicians were at prices below Medicare payment amounts. Relative to the previous three quarters, this represented a substantial increase in the percentage of sales with prices below Medicare amounts. We have reviewed national claims data for IVIG drug utilization, as well as utilization of the preadministration-related services HCPCS code. These data show modest increases in the utilization of IVIG drugs and the preadministration-related services code, which suggest that IVIG pricing and access may be improving.

IVIG preadministration-related services are dependent services that are always provided in conjunction with other separately payable services, such as drug administration services, and thus are well suited for packaging into the payment for the separately payable services that they usually accompany. The recent findings of the OIG report suggest that stability in the IVIG market had improved in late CY 2006. No other comprehensive studies have been presented to indicate continued instability in market conditions or systematic problems with patient access. In addition, beginning July 1, 2007, six new HCPCS codes for specific IVIG products were adopted to implement separate payment for these products, contributing to generally increased payments for IVIG products and, we believe, improved market stability. Therefore, consistent with our OPPS payment policy for the facility resources expended to prepare for the administration of all other drugs and biologicals under the OPPS, we now believe that payment for the hospital resources required to locate and obtain the appropriate IVIG products and to schedule patients' infusions should be made through the OPPS payment for the associated drug administration services. Furthermore, the cost data that we have gathered for the services described by HCPCS code G0332 since CY 2006, including the line-item median cost for the code of approximately $38 from CY 2007 claims data, indicate that the cost of the services is relatively low. Therefore, because HCPCS code G0332 meets our historical criteria for packaged payment, because we paid separately for these services on a temporary basis only, and because we believe that the reported transient market conditions that led us to adopt the separate payment for IVIG preadministration-related services have improved, we now believe that packaged payment is more appropriate for the CY 2009 OPPS, consistent with our ongoing efforts to expand the size of the OPPS payment bundles. Therefore, we are proposing to assign status indicator “N” to HCPCS code G0332 for CY 2009. We will continue to work with stakeholders of the IVIG industry to understand their concerns regarding the pricing of IVIG and Medicare beneficiary access to this important therapy.

The treatment of these services under the MPFS will be addressed separately in the CY 2009 MPFS proposed rule.

B. Proposed Conversion Factor Update

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 2009, 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 proposed hospital market basket increase for FY 2009 published in the IPPS proposed rule on April 30, 2008 is 3.0 percent (73 FR 23708). To set the proposed OPPS conversion factor for CY 2009, we increased the CY 2008 conversion factor of $63.694, as specified in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66677), by 3.0 percent. Hospitals that fail to meet the reporting requirements of the Hospital Outpatient Quality Data Reporting (HOP QDRP) program are subject to a reduction of 2.0 percentage points from the market basket update to the conversion factor. For a complete discussion of the HOP QDRP program, we refer readers to section XVI. of this proposed rule.

In accordance with section 1833(t)(9)(B) of the Act, we further adjust the conversion factor annually to ensure that any revisions we are proposing to our updates for a revised wage index and rural adjustment are made on a budget neutral basis. We calculated an overall budget neutrality factor of 1.0010 for wage index changes by comparing total payments from our simulation model using the FY 2009 IPPS proposed wage index values to those payments using the current (FY 2008) IPPS wage index values. For CY 2009, we are not proposing a change to our rural adjustment policy. Therefore, the budget neutrality factor for the rural adjustment is 1.000.

For CY 2009, in this proposed rule, we estimate that allowed pass-through spending for both drugs and biologicals and devices would equal approximately $19 million, which represents 0.07 percent of total projected OPPS spending for CY 2009. Therefore, the conversion factor was also adjusted by the difference between the 0.09 percent pass-through dollars set aside for CY 2008 and the 0.07 percent estimate for CY 2009 pass-through spending. Finally, proposed payments for outliers remain at 1.0 percent of total OPPS payments for CY 2009.

The proposed market basket increase update factor of 3.0 percent for CY 2009, the required wage index budget neutrality adjustment of approximately 1.0010, and the proposed adjustment of 0.02 percent of projected OPPS spending for the difference in the pass-through set aside result in a proposed full market basket conversion factor for CY 2009 of $65.684. To calculate the CY 2009 reduced market basket conversion factor for those hospitals that fail to meet the requirements of the HOP QDRP for the full CY 2009 payment update, we made all other adjustments discussed above, but used a reduced market basket increase update factor of 1.0 percent. This results in a proposed reduced market basket conversion factor for CY 2009 of $64.409.

C. Proposed Wage Index Changes

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, which includes the copayment standardized amount, that is attributable to labor and labor-related cost. This adjustment must be made in a budget neutral manner and budget neutrality is discussed in section II.B. of this proposed rule.

The OPPS labor-related share is 60 percent of the national OPPS payment. This labor-related share is based on a regression analysis that determined that approximately 60 percent of the costs of services paid under the OPPS were attributable to wage costs. We confirmed that this labor-related share for outpatient services is still appropriate during our regression analysis for the payment adjustment for rural hospitals in the CY 2006 OPPS final rule with comment period (70 FR 68553). Therefore, we are not proposing to revise this policy for the CY 2009 OPPS. We refer readers to section II.G. of this Start Printed Page 41458proposed rule for a description and example of how the wage index for a particular hospital is used to determine the payment for the hospital.

As discussed in section II.A.2.c. of this proposed rule, for estimating national median APC costs, we standardize 60 percent of estimated claims costs for geographic area wage variation using the same FY 2009 pre-reclassified wage indices that the IPPS uses to standardize costs. This standardization process removes the effects of differences in area wage levels from the determination of a national unadjusted OPPS payment rate and the copayment amount.

As published in the original OPPS April 7, 2000 final rule with comment period (65 FR 18545), the OPPS has consistently adopted the final 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 acute short-stay 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 the OPPS is reasonable and logical, given the inseparable, subordinate status of the HOPD within the hospital overall. In accordance with section 1886(d)(3)(E) of the Act, the IPPS wage index is updated annually. Therefore, in accordance with our established policy, we are proposing to use the final FY 2009 version of the IPPS wage indices used to pay IPPS hospitals to adjust the CY 2009 OPPS payment rates and copayment amounts for geographic differences in labor cost for all providers that participate in the OPPS, including providers that are not paid under the IPPS (referred to in this section as “non-IPPS” providers).

We note that the proposed FY 2009 IPPS wage indices continue to reflect a number of adjustments implemented over the past few years, including revised Office of Management and Budget (OMB) standards for defining geographic statistical areas (Core Based Statistical Areas or CBSAs), reclassification to different geographic areas, rural floor provisions and the accompanying budget neutrality adjustment, an adjustment for out-migration labor patterns, an adjustment for occupational mix, and a policy for allocating hourly wage data among campuses of multicampus hospital systems that cross CBSAs. In addition, our proposed changes to the FY 2009 IPPS wage index also included a revision of the reclassification average hourly wage comparison criteria and a state-level rural floor and imputed floor budget neutrality adjustment applied to the wage index. We refer readers to the FY 2009 IPPS proposed rule (73 FR 23617 through 23639) for a detailed discussion of these proposed changes to the wage index. In addition, we refer readers to the CY 2005 OPPS final rule with comment period (69 FR 65842 through 65844) and subsequent OPPS rules for a detailed discussion of the history of these wage index adjustments as applied under the OPPS.

The IPPS wage index that we are proposing to adopt includes all reclassifications that are approved by the Medicare Geographic Classification Review Board (MGCRB) for FY 2009. We note that reclassifications under section 508 of Pub. L. 108-173 were extended by section 106(a) of the MIEA-TRHCA and were set to terminate September 30, 2007. However, section 117(a)(1) of the Medicare, Medicaid, and SCHIP Extension Act (MMSEA) of 2007 (Pub. L. 110-173) further extended geographic reclassifications under section 508 until September 30, 2008. In addition, section 117(a)(2) of the MMSEA extended certain special exception reclassifications as well. On February 22, 2008, we published a notice in the Federal Register (73 FR 9807) that indicated how we are implementing section 117(a) of the MMSEA under the IPPS. We also issued a joint signature memorandum on January 28, 2008, that explained how section 117 of the MMSEA would apply to the OPPS. As we stated in that memorandum, while most of the reclassifications extended by the MMSEA would expire September 30, 2008, for both the IPPS and the OPPS (with OPPS hospitals reverting to a previous reclassification or home area wage index from October 1, 2008, to December 31, 2008), special exception wage indices for certain hospitals would be extended through December 31, 2008, under the OPPS in order to give these hospitals the special exception wage index under the OPPS for the same time period as under the IPPS. Because the MMSEA provisions expire in 2008, and are not applicable to FY 2009, we are not making any proposals related to those provisions for the OPPS wage index for CY 2009.

For purposes of the OPPS, we are proposing to continue our policy in CY 2009 to allow non-IPPS hospitals paid under the OPPS to qualify for the out-migration adjustment if they are located in a section 505 out-migration county. We note that because non-IPPS hospitals cannot reclassify, they are eligible for the out-migration wage adjustment. Table 4J published in the Addendum to the FY 2009 IPPS proposed rule identifies counties eligible for the out-migration adjustment and providers receiving the adjustment. As we have done in prior years, we are reprinting the Table 4J, as Addendum L to this proposed rule, with the addition of non-IPPS hospitals that would receive the section 505 out-migration adjustment under the CY 2009 OPPS.

As stated earlier in this section, we continue to believe that using the IPPS wage index as the source of an adjustment factor for the OPPS is reasonable and logical, given the inseparable, subordinate status of the HOPD within the hospital overall. Therefore, we are proposing to use the final FY 2009 IPPS wage indices for calculating the OPPS payments in CY 2009. With the exception of the out-migration wage adjustment table (Addendum L to this proposed rule), which includes non-IPPS hospitals paid under the OPPS, we are not reprinting the proposed FY 2009 IPPS wage indices referenced in this discussion of the wage index. We refer readers to the CMS Web site for the OPPS at: http://www.cms.hhs.gov/​providers/​hopps. At this link, the reader will find a link to the proposed FY 2009 IPPS wage indices tables.

D. Proposed Statewide Average Default CCRs

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 CCR because there is no cost report available. For these hospitals, CMS uses the statewide average default CCRs to determine the payments mentioned above until a hospital's Medicare contractor is able to calculate the hospital's actual CCR from its most recently submitted Medicare cost report. These hospitals include, but are not limited to, hospitals that are new, have not accepted assignment of an existing hospital's provider agreement, and have not yet submitted a cost report. CMS also uses the statewide average default CCRs to determine payments for hospitals that appear to have a biased CCR, that is, the CCR falls outside predetermined floor and ceiling thresholds for a valid CCR, or for hospitals whose most recent cost report reflects an all-inclusive rate status (Section 10.11, Chapter 4, Medicare Claims Processing Manual Pub. 100-04). In this proposed rule, we are proposing to update the default ratios for CY 2009 using the most recent cost report data, and we are proposing to codify our Start Printed Page 41459policies for using the default ratios for hospitals that do not have a CCR for outlier payments specifically. We refer readers to section II.F. of this proposed rule where we discuss this proposal for default CCRs as part of our broader proposal to implement an outlier reconciliation process similar to that implemented under the IPPS.

For CY 2009, we used our standard methodology of calculating the statewide default CCRs using the same hospital overall CCRs that we use to adjust charges to costs on claims data. Table 9 lists the proposed CY 2009 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 ratios from submitted cost reports to reflect final settled status by applying the differential between settled to submitted costs and charges from the most recent pair of final settled and submitted cost reports. We then weighted each hospital's CCR by claims volume corresponding to the year of the majority of cost reports used to calculate the overall CCR. We refer readers to section II.E. of the CY 2008 OPPS/ASC final rule with comment period (72 FR 66680 through 66682) and prior OPPS rules for a more detailed discussion of our established methodology for calculating the statewide average default CCRs, including the hospitals used in our calculations and trimming criteria.

For this proposed rule, approximately 38 percent of the submitted cost reports represented data for cost reporting periods ending in CY 2005 and 60 percent were for cost reporting periods ending in CY 2006. Table 9 lists the proposed CY 2009 default urban and rural CCRs by State and compares them to last year's default CCRs. For Maryland, we used an overall weighted average CCR for all hospitals in the nation as a substitute for Maryland CCRs. Few providers in Maryland are eligible to receive payment under the OPPS, which limits the data available to calculate an accurate and representative CCR. In general, observed changes between CY 2008 and CY 2009 are modest and the few significant changes are associated with a small number of hospitals. The national urban and rural CCRs observed for Maryland changed by less than 1 percent.

Table 9.—Proposed CY 2009 Statewide Average CCRs

StateUrban/ruralProposed CY 2009 default CCRPrevious default CCR (CY 2008 OPPS final rule)
ALASKARURAL0.5620.537
ALASKAURBAN0.3510.351
ALABAMARURAL0.2230.228
ALABAMAURBAN0.2100.213
ARKANSASRURAL0.2580.266
ARKANSASURBAN0.2760.270
ARIZONARURAL0.2690.264
ARIZONAURBAN0.2320.232
CALIFORNIARURAL0.2230.232
CALIFORNIAURBAN0.2210.218
COLORADORURAL0.3550.355
COLORADOURBAN0.2510.254
CONNECTICUTRURAL0.3940.391
CONNECTICUTURBAN0.3370.339
DISTRICT OF COLUMBIAURBAN0.3290.346
DELAWARERURAL0.2980.302
DELAWAREURBAN0.3680.400
FLORIDARURAL0.2120.219
FLORIDAURBAN0.1940.198
GEORGIARURAL0.2730.279
GEORGIAURBAN0.2620.269
HAWAIIRURAL0.3710.373
HAWAIIURBAN0.3450.317
IOWARURAL0.3460.349
IOWAURBAN0.3170.325
IDAHORURAL0.4340.445
IDAHOURBAN0.4190.414
ILLINOISRURAL0.2860.286
ILLINOISURBAN0.2720.271
INDIANARURAL0.3060.313
INDIANAURBAN0.2990.301
KANSASRURAL0.3170.318
KANSASURBAN0.2410.240
KENTUCKYRURAL0.2400.244
KENTUCKYURBAN0.2640.262
LOUISIANARURAL0.2800.271
LOUISIANAURBAN0.2680.277
MARYLANDRURAL0.3070.308
MARYLANDURBAN0.2830.284
MASSACHUSETTSURBAN0.3420.338
MAINERURAL0.4450.433
MAINEURBAN0.4250.424
MICHIGANRURAL0.3260.331
Start Printed Page 41460
MICHIGANURBAN0.3280.318
MINNESOTARURAL0.4970.499
MINNESOTAURBAN0.3400.342
MISSOURIRURAL0.2770.289
MISSOURIURBAN0.2820.292
MISSISSIPPIRURAL0.2650.267
MISSISSIPPIURBAN0.2160.217
MONTANARURAL0.4440.453
MONTANAURBAN0.4520.450
NORTH CAROLINARURAL0.2840.286
NORTH CAROLINAURBAN0.3050.321
NORTH DAKOTARURAL0.3630.379
NORTH DAKOTAURBAN0.3570.378
NEBRASKARURAL0.3450.347
NEBRASKAURBAN0.2920.290
NEW HAMPSHIRERURAL0.3740.375
NEW HAMPSHIREURBAN0.3110.337
NEW JERSEYURBAN0.2720.276
NEW MEXICORURAL0.2700.275
NEW MEXICOURBAN0.3440.353
NEVADARURAL0.3110.329
NEVADAURBAN0.2000.200
NEW YORKRURAL0.4140.417
NEW YORKURBAN0.3960.402
OHIORURAL0.3590.354
OHIOURBAN0.2630.268
OKLAHOMARURAL0.2790.288
OKLAHOMAURBAN0.2410.245
OREGONRURAL0.3200.321
OREGONURBAN0.3740.366
PENNSYLVANIARURAL0.2850.298
PENNSYLVANIAURBAN0.2320.241
PUERTO RICOURBAN0.5140.474
RHODE ISLANDURBAN0.2950.308
SOUTH CAROLINARURAL0.2600.258
SOUTH CAROLINAURBAN0.2450.244
SOUTH DAKOTARURAL0.3330.334
SOUTH DAKOTAURBAN0.2690.289
TENNESSEERURAL0.2530.256
TENNESSEEURBAN0.2290.241
TEXASRURAL0.2680.271
TEXASURBAN0.2460.242
UTAHRURAL0.4170.416
UTAHURBAN0.4330.406
VIRGINIARURAL0.2680.268
VIRGINIAURBAN0.2750.275
VERMONTRURAL0.4090.416
VERMONTURBAN0.4080.340
WASHINGTONRURAL0.3570.358
WASHINGTONURBAN0.3600.368
WISCONSINRURAL0.3990.384
WISCONSINURBAN0.3570.362
WEST VIRGINIARURAL0.2950.298
WEST VIRGINIAURBAN0.3610.360
WYOMINGRURAL0.4210.449
WYOMINGURBAN0.3330.351

E. Proposed OPPS Payment to Certain Rural Hospitals

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 (called either transitional corridor payment or transitional outpatient payment) if the payments it received for covered outpatient department (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 to ease their transition from the prior reasonable cost-based payment system to the OPPS system. There are two exceptions, cancer hospitals and Start Printed Page 41461children's hospitals, to this provision and those 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 ended 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, for rural hospitals having 100 or fewer beds and SCHs located in rural areas expired 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 the 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 implemented section 5105 of Pub. L. 109-171 through Transmittal 877, issued on February 24, 2006. We did not specifically address whether TOPs apply to essential access community hospitals (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 believed and continue to believe that EACHs are not currently eligible for TOPs under Pub. L. 109-171. However, they are eligible for the adjustment for rural SCHs. In the CY 2007 OPPS/ASC final rule with comment period (71 FR 68010 and 68228), we updated § 419.70(d) to reflect the requirements of Pub. L. 109-171.

Effective for services provided on or after January 1, 2009, rural hospitals having 100 or fewer beds that are not SCHs will no longer be eligible for hold harmless TOPs, in accordance with section 5105 of Pub. L. 109-171.

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

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 for rural SCHs. Therefore, we implemented a payment adjustment for only those hospitals beginning January 1, 2006.

In CY 2007, we became aware that we did not specifically address whether the adjustment applies to EACHs, which are considered to be SCHs under section 1886(d)(5)(D)(iii)(III) of the Act. Thus, under the statute, EACHs are treated as SCHs. Therefore, in the CY 2007 OPPS/ASC final rule with comment period (71 FR 68010 and 68227), for purposes of receiving this rural adjustment, we revised § 419.43(g) to clarify that EACHs are also eligible to receive the rural SCH adjustment, assuming these entities otherwise meet the rural adjustment criteria. Currently, fewer than 10 hospitals are classified as EACHs and as of CY 1998, under section 4201(c) of Pub. L. 105-33, a hospital can no longer become newly classified as an EACH.

This adjustment for rural SCHs is budget neutral and applied before calculating outliers and copayment. As stated in the CY 2006 OPPS final rule with comment period (70 FR 68560), we would not reestablish the adjustment amount on an annual basis, but we note that we may review the adjustment in the future and, if appropriate, would revise the adjustment.

For CY 2009, we are proposing to continue our current policy of a budget neutral 7.1 percent payment increase for rural SCHs, including EACHs, for all services and procedures paid under the OPPS, excluding drugs, biologicals, and services paid under the pass-through payment policy in accordance with section 1833(t)(13)(B) of the Act. This adjustment is in accordance with section 411 of the MMA, which gave the Secretary the authority to make an adjustment to OPPS payments for rural hospitals, if justified by a study of the difference in costs by APC between hospitals in rural and urban areas. Our past analysis showed a difference in costs only for rural SCHs, and we implemented a payment adjustment for those hospitals beginning January 1, 2006. For CY 2009, we also are proposing to continue to include brachytherapy sources in the group of services eligible for the 7.1 percent payment increase because we are proposing to pay them at prospective rates based on their median costs as calculated from historical claims data. We intend to reassess the 7.1 percent adjustment in the near future by examining differences between urban and rural hospitals' costs using updated claims, cost, and provider information. In that process, we will include brachytherapy sources in each hospital's mix of services.

F. Proposed Hospital Outpatient Outlier Payments

1. Background

Currently, the OPPS pays outlier payments on a service-by-service basis. For CY 2008, 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 $1,575 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 hospital 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. This outlier payment has historically been considered a final payment by longstanding OPPS policy.

It has been our policy for the past several years to report the actual amount of outlier payments as a percent of total spending in the claims being used to model the proposed OPPS. An accounting error for CY 2005, CY 2006, and CY 2007 inflated CMS' estimates of OPPS expenditures, which led us to underestimate outlier payment as a percentage of total OPPS spending in prior rules. Total OPPS expenditures have been revised downward, and we have accordingly revised our outlier payment estimates. We further note that the CY 2005 outlier payment estimate included in the CY 2007 OPPS/ASC Start Printed Page 41462final rule with comment period (71 FR 68010) has not changed based on revised spending estimates. However, we previously stated that CY 2006 outlier payment was equal to 1.1 percent of OPPS expenditures for CY 2006 (72 FR 66685), but based on our revised numbers, actual outlier payments are equal to approximately 1.3 percent of CY 2006 OPPS expenditures. Our current estimate of total outlier payments as a percent of total CY 2007 OPPS payment, using available CY 2007 claims and the revised OPPS expenditure estimate, is approximately 0.9 percent. For CY 2007, the estimated outlier payment was set at 1.0 percent of the total aggregated OPPS payments. Therefore, for CY 2007 we estimate that we paid approximately 0.1 percent less than the CY 2007 outlier target of 1.0 percent of total aggregated OPPS payments. We will update our estimate of CY 2007 outlier spending in the CY 2009 OPPS/ASC final rule with comment period.

As explained in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66685), we set our projected target for aggregate outlier payments at 1.0 percent of aggregate total payments under the OPPS for CY 2008. The outlier thresholds were set so that estimated CY 2008 aggregate outlier payments would equal 1.0 percent of aggregate total payments under the OPPS. Using the same set of CY 2007 claims and CY 2008 payment rates, we currently estimate that outlier payments for CY 2008 would be approximately 0.8 percent of total CY 2008 OPPS payments. The difference between 1.0 percent and 0.8 percent is reflected in the regulatory impact analysis in section XXI.B. of this proposed rule. We note that we provide estimated CY 2009 outlier payments for hospitals and CMHCs with claims included in the claims data that we used to model impacts on the CMS Web site in the Hospital-Specific Impacts—Provider-Specific Data file on the CMS Web site at: http://www.cms.hhs.gov/​HospitalOutpatientPPS/​.

2. Proposed Outlier Calculation

For CY 2009, we are proposing to continue our policy of setting aside 1.0 percent of aggregate total payments under the OPPS for outlier payments. We are proposing that a portion of that 1.0 percent, specifically 0.07 percent, would be allocated to CMHCs for partial hospitalization program outlier payments. This is the amount of estimated outlier payments that would result from the proposed CMHC outlier threshold of 3.40 times the CY 2009 PHP APC payment rates, as a proportion of all payments dedicated to outlier payments. For further discussion of CMHC outlier payments, we refer readers to section X.B.4. of this proposed rule.

To ensure that estimated CY 2009 aggregate outlier payments would equal 1.0 percent of estimated aggregate total payments under the OPPS, we are proposing that the hospital outlier threshold be set so that outlier payments would be triggered when the cost of furnishing a service or procedure by a hospital exceeds 1.75 times the APC payment amount and exceeds the APC payment rate plus an $1,800 fixed-dollar threshold. This proposed threshold reflects the methodology discussed below, as well as proposed APC recalibration for CY 2009.

We calculated the fixed-dollar threshold for this proposed rule using largely the same methodology as we did in CY 2008. For purposes of estimating outlier payments for this proposed rule, we used the CCRs available in the April 2008 update to the OPSF.

The claims that we use to model each OPPS update lag by 2 years. For this proposed rule, we used CY 2007 claims to model the CY 2009 OPPS. In order to estimate CY 2009 hospital outlier payments for this proposed rule, we inflated the charges on the CY 2007 claims using the same inflation factor of 1.1204 that we used to estimate the IPPS fixed-dollar outlier threshold for the FY 2009 IPPS proposed rule. For 1 year, the inflation factor is 1.0585. The methodology for determining this charge inflation factor was discussed in the FY 2009 IPPS proposed rule (73 FR 23710 through 23711). As we stated in the CY 2005 OPPS final rule with comment period (69 FR 65845), we believe that the use of this charge inflation factor is appropriate for the 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.

As noted in the CY 2007 OPPS/ASC final rule with comment period (71 FR 68011), we are concerned that we may systematically overestimate the OPPS hospital outlier threshold if we did not apply a CCR inflation adjustment factor. Therefore, we are proposing to apply the same CCR inflation adjustment factor that we proposed to apply for the FY 2009 IPPS outlier calculation to the CCRs used to simulate the CY 2009 OPPS outlier payments that determined the fixed-dollar threshold. Specifically, for CY 2009, we are proposing to apply an adjustment of 0.9920 to the CCRs that are currently in the April 2008 OPSF to trend them forward from CY 2008 to CY 2009. The methodology for calculating this adjustment is discussed in the FY 2009 IPPS proposed rule (73 FR 23710 through 23711).

Therefore, to model hospital outliers for this proposed rule, we applied the overall CCRs from the April 2008 OPSF file after adjustment (using the proposed CCR inflation adjustment factor of 0.9920 to approximate CY 2009 CCRs) to charges on CY 2007 claims that were adjusted (using the proposed charge inflation factor of 1.1204 to approximate CY 2009 charges). We simulated aggregated CY 2009 hospital outlier payments using these costs for several different fixed-dollar thresholds, holding the 1.75 multiple constant and assuming that outlier payment would continue to be made at 50 percent of the amount by which the cost of furnishing the service would exceed 1.75 times the APC payment amount, until the total outlier payments equaled 1.0 percent of aggregated estimated total CY 2009 OPPS payments. We estimate that a proposed fixed-dollar threshold of $1,800, combined with the proposed multiple threshold of 1.75 times the APC payment rate, would allocate 1.0 percent of aggregated total OPPS payments to outlier payments. We are proposing to continue to make an outlier payment that equals 50 percent of the amount by which the cost of furnishing the service exceeds 1.75 times the APC payment amount when both the 1.75 multiple threshold and the fixed-dollar $1,800 threshold are met. For CMHCs, if a CMHC's cost for partial hospitalization exceeds 3.40 times the payment rate for APC 0172 (Level I Partial Hospitalization (3 services)) or APC 0173 (Level II Partial Hospitalization (4 or more services)), the outlier payment is calculated as 50 percent of the amount by which the cost exceeds 3.40 times the APC payment rate.

New section 1833(t)(17)(A) of the Act, which applies to hospitals as defined under section 1886(d)(1)(B) of the Act, requires that hospitals that fail to report data required for the quality measures selected by the Secretary, in the form and manner required by the Secretary under 1833(t)(17)(B) of the Act, incur a 2.0 percentage point reduction to their OPD fee schedule increase factor, that is, the annual payment update factor. The application of a reduced OPD fee schedule increase factor results in reduced national unadjusted payment rates that will apply to certain outpatient items and services performed by hospitals that are required to report outpatient quality data and that fail to meet the HOP QDRP requirements. For hospitals that fail to meet the HOP Start Printed Page 41463QDRP quality data reporting requirements, we are proposing that the hospitals' costs would be compared to the reduced payments for purposes of outlier eligibility and payment calculation. We believe no changes in the regulation text would be necessary to implement this policy because using the reduced payment for these outlier eligibility and payment calculations is contemplated in the current regulations at § 419.43(d). This proposal conforms to current practice under the IPPS in this regard. Specifically, under the IPPS, for purposes of determining the hospital's eligibility for outlier payments, the hospital's estimated operating costs for a discharge are compared to the outlier cost threshold based on the hospital's actual DRG payment for the case. For more information on the HOP QDRP, we refer readers to section XVI. of this proposed rule.

3. Outlier Reconciliation

As provided in section 1833(t)(5) of the Act, and described in the CY 2001 final rule with comment period (65 FR 18498), we initiated the use of a provider-specific overall CCR to estimate a hospital's or CMHC's costs from billed charges on a claim to determine whether a service's cost was significantly higher than the APC payment to qualify for outlier payment. Currently, these facility-specific overall CCRs are determined using the most recent settled or tentatively settled cost report for each facility. At the end of the cost reporting period, the hospital or CMHC submits a cost report to its Medicare contractor, who then calculates the overall CCR that is used to determine outlier payments for the facility. We believe the intent of the statute is that outlier payments would be made only in situations where the cost of a service provided is extraordinarily high. For example, under our existing outlier methodology, a hospital's billed current charges may be significantly higher than the charges included in the hospital's overall CCR that is used to calculate outlier payments, while the hospital's costs are more similar to the costs included in the overall CCR. In this case, the hospital's overall CCR used to calculate outlier payments is not representative of the hospital's current charge structure. The overall CCR applied to the hospital's billed charges would estimate an inappropriately high cost for the service, resulting in inappropriately high outlier payments. This is contrary to the goal of outlier payments, which are intended to reduce the hospital's financial risk associated with services that have especially high costs. The reverse could be true as well, if a hospital significantly lowered its current billed charges in relationship to its costs, which would result in inappropriately low outlier payments.

For CY 2009, we are proposing to address vulnerabilities in the OPPS outlier payment system that lead to differences between billed charges and charges included in the overall CCR used to estimate cost. Our proposal would apply to all hospitals and CMHCs paid under the OPPS. The main vulnerability in the OPPS outlier payment system is the time lag between the CCRs from the latest settled cost report and current charges that create the potential for hospitals and CMHCs to set their own charges to exploit the delay in calculating new CCRs. A facility can increase its outlier payments during this time lag by increasing its charges significantly in relation to its cost increases. The time lag may lead to inappropriately high CCRs relative to billed charges that overestimate cost, and as a result, greater outlier payments. Therefore, we are taking steps to ensure that outlier payments appropriately account for financial risk when providing an extraordinarily costly and complex service, while only being made for services that legitimately qualify for the additional payment.

We believe that some CMHCs may have historically increased and decreased their charges in response to Medicare outlier payment policies. The HHS Office of the Inspector General (OIG) has published several reports that found that CMHCs took advantage of vulnerabilities in the outpatient outlier payment methodology by increasing their billed charges after their CCRs were established to garner greater outlier payments (DHHS OIG June 2007, A-07-06-0459, page 2). We discuss the OIG's most recent report and accompanying recommendations in section XIV.C. of this proposed rule. We similarly noted in the CY 2004 OPPS final rule with comment period (68 FR 63470) that some CMHCs manipulated their charges in order to inappropriately receive outlier payments.

To address these vulnerabilities in the area of the OPPS outlier payment methodology, we are proposing to update our regulations to codify two existing longstanding OPPS policies, as discussed in further detail below. For the CY 2009 OPPS, we are also proposing to incorporate outlier policies comparable to those that have been included in several Medicare prospective payment systems, in particular the IPPS (68 FR 34494). Specifically, we are proposing to allow Medicare contractors to use a different CCR in certain circumstances to estimate costs, and we are proposing to require reconciliation of outlier payments in certain circumstances. We believe that all these proposed changes would address most of the current vulnerabilities present in the OPPS outlier payment system.

First, we are proposing to update the regulations to codify two existing outlier policies. These policies are currently stated in Pub 100-04, Chapter 4, section 10.11.1 of the Internet-Only Manual, as updated via Transmittal 1445, Change Request 5946, dated February 8, 2008. To be consistent with our manual instructions, for CY 2009, we are proposing to revise 42 CFR 419.43 to add two new paragraphs (d)(5)(ii) and (d)(5)(iii). Specifically, we are proposing to add new paragraph (d)(5)(ii) to incorporate rules governing the overall ancillary CCR applied to processed claims and new paragraph (d)(5)(iii) to incorporate existing policy governing when a statewide average CCR may be used instead of an overall ancillary CCR. We note that use of a statewide average CCR in the specified cases is to ensure that the most appropriate CCR possible is used for outlier payment calculations. For purposes of this discussion and OPPS payment policy in general, we treat “overall CCR” and “overall ancillary CCR” as synonymous terms that refer to the overall CCR that is calculated based on cost report data, which for hospitals, pertains to a specific set of ancillary cost centers.

We are proposing new § 419.43(d)(5)(ii) to specify use of the hospital's or CMHC's most recently updated overall CCR for purposes of calculating outlier payments. Our ability to identify true outlier cases depends on the accuracy of the CCRs. To the extent some facilities may be motivated to maximize outlier payments by taking advantage of the time lag in updating the CCRs, the payment system remains vulnerable to overpayments to individual hospitals or CMHCs. This proposed provision specifies that the overall CCR applied at the time a claim is processed is based on either the most recently settled or tentatively settled cost report, whichever is from the latest cost reporting period. We are also proposing new § 419.43(d)(5)(iii) to describe several circumstances in which a Medicare contractor may substitute a statewide average CCR for a hospital's or CMHC's CCR. In the CY 2007 OPPS/ASC final rule with comment period (71 FR 68006), we finalized this policy but inadvertently did not update our regulations. We refer readers to section II.D. of this proposed rule for a more Start Printed Page 41464detailed discussion of statewide average CCRs. In summary, Medicare contractors can use a statewide CCR for new hospitals or CMHCs that have not accepted assignment of the existing provider agreement and who have not yet submitted a cost report; for hospitals or CMHCs whose Medicare contractor is unable to obtain accurate data with which to calculate the overall ancillary CCR; and for facilities whose actual CCR is more than 3 standard deviations above the geometric mean of other overall CCRs. For CY 2009, we estimate this upper threshold to be 1.3. While this existing policy minimizes the use of CCRs that are significantly above the mean for cost estimation, facilities with CCRs that fall significantly below the mean would continue to have their actual CCRs utilized, instead of the statewide default CCR. We also are proposing to reevaluate the upper threshold and propose a new upper threshold, if appropriate, through rulemaking each year.

These improvements somewhat mitigate, but do not fully eliminate, a hospital's or CMHC's ability to significantly increase its charges in relation to its cost increases each year, thereby receiving significant outlier payments because of the inflated CCR. Therefore, we also are proposing two new policies to more fully address the vulnerabilities described above. Specifically, we are proposing new § 419.43(d)(5)(i) that states that for hospital outpatient services performed on or after January 1, 2009, CMS may specify an alternative CCR or the facility may request an alternative CCR under certain circumstances. The alternative CCR in either case may be either higher or lower than the otherwise applicable CCR. In addition, we are proposing to allow a facility to request that its CCR be prospectively adjusted if the facility presents substantial evidence that the overall CCR that is currently used to calculate outlier payments is inaccurate. Such an alternative CCR may be appropriate if a facility's charges have increased at an excessive rate, relative to the rate of increase among other hospitals or CMHCs. CMS would have the authority to direct the Medicare contractor to calculate a CCR from the cost report that accounts for the increased charges. As explained in greater detail below, we are also proposing new § 419.43(d)(5)(iv) to allow Medicare contractors the administrative discretion to reconcile hospital or CMHC cost reports under certain circumstances.

We are proposing to implement a reconciliation process similar to that implemented by the IPPS in FY 2003 (68 FR 34494). This proposed policy would subject certain outlier payments to reconciliation when a hospital or CMHC cost report is settled. While the existing policies described above partially address the vulnerabilities in the OPPS outlier payment system, the proposed reconciliation process would more fully ensure accurate outlier payments for those facilities whose CCRs fluctuate significantly, relative to the CCRs of other facilities. We are proposing that this reconciliation process would only apply to those services provided on or after January 1, 2009. We considered proposing that this reconciliation process would become effective beginning with services provided during the hospital's first cost reporting period beginning in CY 2009 but believe effectuating this policy based upon date of service would be less burdensome for hospitals. We are specifically soliciting public comment related to the effective date for the reconciliation process that would be most administratively feasible for hospitals and CMHCs. We note this reconciliation process would be done on a limited basis in order to ease the administrative burden on Medicare contractors, as well as to focus on those facilities that appear to have improperly manipulated their charges to receive excessive outlier payments. We are proposing to set reconciliation thresholds in the manual, reevaluate them annually, and modify them as necessary. Following current IPPS outlier policy, these thresholds would include a measure of acceptable percent change in a hospital's or CMHC's CCR and an amount of outlier payment involved. We are further proposing that when the cost report is settled, reconciliation of outlier payments would be based on the overall CCR calculated based on the ratio of costs and charges computed from the cost report at the time the cost report coinciding with the service dates is settled. Reconciling these outlier payments would ensure that the outlier payments made are appropriate and that final outlier payments reflect the most accurate cost data. Because reconciliation entails evaluating claims for outlier payments using a revised CCR, this process would not apply to services and items not otherwise subject to outlier payments, including items and services paid at charges reduced to cost.

This reconciliation process would require recalculating outlier payments for individual claims. We understand that the aggregate change in a facility's outlier payments cannot be determined because changes in the CCR would affect the eligibility and amount of outlier payment. For example, if a CCR declined, some services may no longer qualify for any outlier payments while other services may qualify for lower outlier payments. Therefore, the only way to accurately determine the net effect of a decrease in an overall CCR on a facility's total outlier payments is to assess the impact on a claim-by-claim basis. At this time, CMS is developing a method for reexamining claims to calculate outlier payments using a revised CCR.

Similar to the IPPS, we also are proposing to adjust the amount of final outlier payments determined during reconciliation for the time value of money. A second vulnerability remaining after reconciliation is related to the same issue of the ability of hospitals and CMHCs to manipulate the system by significantly increasing charges in the year the service is performed, and obtaining excessive outlier payments as a result. Even though under the proposal the excess money would be refunded at the time of reconciliation, the facility would have access to excess payments from the Medicare Trust Fund on a short-term basis. In cases of underpayment, the facility would not have had access to appropriate outlier payment for that time period.

Accordingly, we believe it is necessary to adjust the amount of the final outlier payment to reflect the time value of the funds for that time period. Therefore, we are proposing to add section § 419.43(d)(6) to provide that when the cost report is settled, outlier payments would be subject to an adjustment to account for the value of the money for the time period in which the money was inappropriately held by the hospital or CMHC. This would also apply where outlier payments were underpaid. In those cases, the adjustment would result in additional payments to hospitals or CMHCs. Any adjustment would be made based on a widely available index to be established in advance by the Secretary, and would be applied from the midpoint of the cost reporting period to the date of reconciliation (or when additional payments are issued, in the case of underpayments). This adjustment to reflect the time value of a facility's outlier payments would ensure that the outlier payment finalized at the time its cost report is settled appropriately reflects the hospital's or CMHC's approximate marginal costs in excess of the APC payments for services, taking into consideration the applicable outlier thresholds.Start Printed Page 41465

Despite the fact that each individual facility's outlier payments may be subject to adjustment when the cost report is settled, we continue to believe that the hospital multiple and fixed-dollar outlier thresholds should be based on projected payments using the latest available historical data, without retroactive adjustments, to ensure that actual outlier payments are equal to the target spending percentage of total anticipated hospital outpatient spending. The proposed reconciliation process and ability to change overall CCRs are intended only to adjust actual outlier payments so that they most closely reflect true costs rather than artificially inflated costs. These adjustments would be made irrespective of whether total outlier spending targets are met or not.

We are not proposing to make any changes to the method that we use to calculate outlier thresholds for CY 2009. The multiple and fixed-dollar outlier thresholds are an important aspect of the prospective nature of the OPPS and key to their importance is their predictability and stability for the prospective payment year. The outlier payment policy is designed to alleviate any financial disincentive hospitals may have in providing any medically necessary care their patients may require, even to those patients who are very sick and would be likely more costly to treat. Preset and publicized OPPS outlier thresholds allow hospitals and CMHCs to approximate their Medicare payment for an individual patient while that patient is still in the hospital. Even though we are proposing to make outlier payments susceptible to a reconciliation based on the facility's actual CCRs during the contemporaneous cost reporting period, the facility should still be in a position to make this approximation. Hospitals and CMHCs have immediate access to the information needed to determine what their CCR will be for a specific time period when their cost report is settled. Even if the final CCR is likely to be different from the ratio used initially to process and pay the claim, hospitals and CMHCs not only have the information available to estimate their CCRs, but they also have the ability to control those CCRs, through the structure and levels of their charges. If we were to make retroactive adjustments to hospital outlier payments to ensure that we met total OPPS outlier spending targets, we would undermine the critical predictability aspect of the prospective nature of the OPPS. Making such an across-the-board adjustment would lead to either more or less outlier payments for all hospitals that would, therefore, be unable to immediately approximate the payment they would receive for especially costly services at the time those services were provided. We believe that it is neither necessary nor appropriate to make such an aggregate retroactive adjustment.

For the corresponding proposed regulation text changes, we refer readers to § 419.43(d)(5) and § 419.43(d)(6) of this proposed rule.

G. Proposed Calculation of an Adjusted Medicare Payment From the Proposed National Unadjusted Medicare Payment

The basic methodology for determining prospective payment rates for HOPD services under the OPPS is set forth in existing regulations at § 419.31, § 419.32, § 419.43 and § 419.44. The payment rate for most services and procedures for which payment is made under the OPPS is the product of the conversion factor calculated in accordance with section II.B. of this proposed rule and the relative weight determined under section II.A. of this proposed rule. Therefore, the national unadjusted payment rate for most APCs contained in Addendum A to this proposed rule and for most HCPCS codes, to which separate payment under the OPPS has been assigned in Addendum B to this proposed rule, was calculated by multiplying the proposed CY 2009 scaled weight for the APC by the proposed CY 2009 conversion factor. We note that section 1833(t)(17)(A) of the Act, which applies to hospitals as defined under section 1886(d)(1)(B) of the Act, requires that hospitals that fail to report data required for the quality measures selected by the Secretary, in the form and manner required by the Secretary under 1833(t)(17)(B) of the Act, incur a 2.0 percentage point reduction to their OPD fee schedule increase factor, that is, the annual payment update factor. The application of a reduced OPD fee schedule increase factor results in reduced national unadjusted payment rates that will apply to certain outpatient items and services provided by hospitals that are required to report outpatient quality data and that fail to meet the HOP QDRP requirements. For further discussion of the proposed payment reduction for hospitals that fail to meet the HOP QDRP data reporting requirements, we refer readers to section XVI.D. of this proposed rule.

We demonstrate in the steps below how to determine the APC payment that would be made in a calendar year under the OPPS to a hospital that fulfills the HOP QDRP data reporting requirements and to a hospital that fails to meet the HOP QDRP data reporting requirements for a service that has any of the status indicator assignments: “P,” “Q1,” “Q2,” “Q3,” “R,” “S,” “T,” “U,” “V,” or “X” (as defined in Addendum D1 to this proposed rule), in a circumstance in which the multiple procedure discount does not apply and the procedure is not bilateral.

Individual providers interested in calculating the proposed payment amount that they specifically would receive for a specific service from the proposed national unadjusted payment rates presented in Addenda A and B to this proposed rule, should follow the formulas presented in the following steps. For purposes of the payment calculations below, we refer to the national unadjusted payment rate for hospitals that meet their HOP QDRP reporting requirements as the “full” national unadjusted payment rate. We refer to the national unadjusted payment rate for hospitals that fail to meet their HOP QDRP reporting requirements as the “reduced” national unadjusted payment rate. The “reduced” national unadjusted payment rate is calculated by multiplying the proposed reporting ratio of 0.981 times the “full” national unadjusted payment rate. The national unadjusted payment rate used in the calculations below is either the “full” national unadjusted payment rate or the “reduced” national unadjusted payment rate, depending on whether the hospital met its HOP QDRP reporting requirements in order to receive the full CY 2009 OPPS increase factor.

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

The formula below is a mathematical representation of Step 1 discussed above and identifies the labor-related portion of a specific payment rate for the specific service.Start Printed Page 41466

x − Labor-related portion of the national unadjusted payment rate

x = .60 * (national unadjusted payment rate)

Step 2. Determine the wage index area in which the hospital is located and identify the wage index level that applies to the specific hospital. The wage index values assigned to each area reflect the new geographic statistical areas as a result of revised OMB standards (urban and rural) to which hospitals are assigned for FY 2009 under the IPPS, reclassifications through the Medicare Geographic Reclassification Review Board (MCGRB), section 1886(d)(8)(B) “Lugar” hospitals, and section 401 of Pub. L. 108-173. We note that the reclassifications of hospitals under the section 508 of Pub. L. 108-173 are scheduled to expire on September 30, 2008 and will not be applicable to FY 2009. The wage index values include the occupational mix adjustment described in section II.C. of this proposed rule that was developed for the proposed FY 2009 IPPS payment rates published in the Federal Register on April 30, 2008 (73 FR 23624 through 23632).

Step 3. Adjust the wage index of hospitals located in certain qualifying counties that have a relatively high percentage of hospital employees who reside in the county, but who work in a different county with a higher wage index, in accordance with section 505 of Pub. L. 108-173. Addendum L to this proposed rule contains the qualifying counties and the proposed wage index increase developed for the FY 2009 IPPS and published in the FY 2009 IPPS proposed rule as Table 4J (73 FR 23810 through 23819). 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.

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

xa− Labor-related portion of the national unadjusted payment rate (wage adjusted)

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

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

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

y − Nonlabor-related portion of the national unadjusted payment rate

y = .40 * (national unadjusted payment rate)

Adjusted Medicare Payment = y + xa

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

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

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

We have provided examples below of the calculation of both the full and reduced national unadjusted payment rates that will apply to certain outpatient items and services performed by hospitals that meet and that fail to meet the HOP QDRP requirements, using the steps outlined above. For purposes of this example, we will use a provider that is located in Brooklyn, New York that is assigned to CBSA 35644. This provider bills one service that is assigned to APC 0019 (Level I Excision/Biopsy). The proposed CY 2009 full national unadjusted payment rate for APC 0019 is $288.20. The reduced national unadjusted payment rate for a hospital that fails to meet the HOP QDRP requirements would be $282.72. This reduced rate is calculated by multiplying the reporting ratio of 0.981 by the full unadjusted payment rate for APC 0019.

The FY 2009 wage index for a provider located in CBSA 35644 in New York is 1.3043. The labor portion of the proposed full national unadjusted payment is $225.54 (.60 × 288.20 × 1.3043). The labor portion of the reduced national unadjusted payment is $221.25 (.60 × 282.72 × 1.3043). The nonlabor portion of the proposed full national unadjusted payment is $115.28 (.40 × $288.20). The nonlabor portion of the reduced national unadjusted payment is $113.08 (.40 × $282.72). The sum of the labor and nonlabor portions of the proposed full national adjusted payment is $340.82 ($225.54 + $115.28). The sum of the reduced national adjusted payment is $334.33 ($221.25 + $113.08).

H. Proposed Beneficiary Copayments

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 (determined on a national unadjusted basis) for that service in the year does not exceed a specified percentage. As specified in section 1833(t)(8)(C)(ii)(V) of the Act, for all services paid under the OPPS in CY 2009, and in calendar years thereafter, the percentage is 40 percent of the APC payment rate. Section 1833(t)(3)(B)(ii) of the Act provides that, for a covered OPD service (or group of such services) furnished in a year, the national unadjusted copayment amount cannot be less than 20 percent of the OPD fee schedule amount. Sections 1834(d)(2)(C)(ii) and (d)(3)(C)(ii) of the Act further require that the copayment for screening flexible sigmoidoscopies and screening colonoscopies be equal to 25 percent of the payment amount. Since the beginning of the OPPS, we have applied the 25-percent copayment to screening flexible sigmoidoscopies and screening colonoscopies.Start Printed Page 41467

2. Proposed Copayment

For CY 2009, we are proposing to determine copayment amounts for new and revised APCs using the same methodology that we implemented for CY 2004. We refer readers to the November 7, 2003 OPPS final rule with comment period (68 FR 63458). In addition, we are proposing to use the same rounding methodology implemented in CY 2008 in instances where the application of our standard copayment methodology would result in a copayment amount that is less than 20 percent and cannot be rounded, under standard rounding principles, to 20 percent. (We refer readers to the CY 2008 OPPS/ASC final rule with comment period (72 FR 66687).) The proposed national unadjusted copayment amounts for services payable under the OPPS that would be effective January 1, 2009 are shown in Addendum A and Addendum B to this proposed rule. As discussed in section XVI.D. of this proposed rule, we are proposing that the Medicare beneficiary's minimum unadjusted copayment and national unadjusted copayment for a service to which a reduced national unadjusted payment rate applies would equal the product of the reporting ratio and the national unadjusted copayment, or the product of the reporting ratio and the minimum unadjusted copayment, respectively, for the service.

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

Individuals interested in calculating their proposed national copayment liability for a given service provided by a hospital that met or failed to meet its HOP QDRP reporting requirements should follow the formulas presented in the following steps.

Step 1. Calculate the beneficiary payment percentage for the APC by dividing the APC's national unadjusted copayment by its payment rate. For example, using APC 0019, $71.87 is 24.938 percent of the proposed full national unadjusted payment rate of $288.20.

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

b = Beneficiary payment percentage

b = national unadjusted copayment for APC/national unadjusted payment rate for APC

Step 2. Calculate the appropriate wage-adjusted payment rate for the APC for the provider in question, as indicated in section II.G. of this proposed rule. Calculate the rural adjustment for eligible providers as indicated in section II.G. of this proposed rule.

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

The formula below is a mathematical representation of Step 3 discussed above and applies the beneficiary percentage to the adjusted payment rate for a service calculated under II.G. above, with and without the rural adjustment, to calculate the proposed adjusted beneficiary copayment for a given service.

Wage-adjusted copayment amount for the APC = Adjusted Medicare Payment * b

Wage-adjusted copayment amount for the APC (SCH or EACH) = (Adjusted Medicare Payment * 1.071)* b

Step 4. For a hospital that failed to meet its HOP QDRP reporting requirements, multiply the copayment calculated in Step 3 by the reporting ratio of 0.981.

The proposed unadjusted copayments for services payable under the OPPS that would be effective January 1, 2009 are shown in Addenda A and B to this proposed rule. Please note that the proposed national unadjusted payment rates and copayment rates shown in Addenda A and B to this proposed rule reflect the full market basket conversion factor increase as discussed in section XVI.D. of this proposed rule.

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

A. Proposed OPPS Treatment of New HCPCS and CPT Codes

1. Proposed Treatment of New HCPCS Codes Included in the April and July Quarterly OPPS Updates for CY 2008

During the April and July quarters of CY 2008, we created a total of 11 new Level II HCPCS codes that were not addressed in the CY 2008 OPPS/ASC final rule with comment period that updated the CY 2008 OPPS. For the April quarter of CY 2008, we recognized for separate payment a total of four new Level II HCPCS codes, specifically C9241 (Injection, doripenem, 10 mg); Q4096 (Injection, von willebrand factor complex, human, ristocetin cofactor (not otherwise specified), per i.u. VWF:RCO); Q4097 (Injection, immune globulin (Privigen), intravenous, non-lyophilized (e.g., liquid), 500 mg); and Q4098 (Injection, iron dextran, 50 mg). For the July quarter of CY 2008, we recognized a total of seven new Level II HCPCS codes, specifically C9242 (Injection, fosaprepitant, 1 mg); C9356 (Tendon, porous matrix of cross-linked collagen and glycosaminoglycan matrix (TenoGlide Tendon Protector Sheet), per square centimeter); C9357 (Dermal substitute, granulated cross-linked collagen and glycosaminoglycan matrix (Flowable Wound Matrix), 1 cc); C9358 (Dermal substitute, native, non-denatured collagen (SurgiMend Collagen Matrix), per 0.5 square centimeters); G0398 (Home sleep study test (HST) w/type II portable monitor, unattended; minimum of 7 channels: EEG, EOG, EMG, ECG/heart rate, airflow, respiratory effort and oxygen saturation); G0399 (Home sleep test (HST) with type III portable monitor, unattended; minimum of 4 channels: 2 respiratory movement/airflow, 1 ECG/heart rate and 1 oxygen saturation); and G0400 (Home sleep test (HST) with type IV portable monitor, unattended; minimum of 3 channels). We designated the payment status of these codes and added them either through the April update (Transmittal 1487, Change Request 5999, dated April 8, 2008) or the July update of the CY 2008 OPPS.

In this proposed rule, we are soliciting public comment on the status indicators, APC assignments, and payment rates of these codes, which are listed in Table 10 and Table 11 of this proposed rule. Because of the timing of this proposed rule, the codes implemented through the July 2008 OPPS update are not included in Addendum B to this proposed rule. We Start Printed Page 41468are proposing to assign these new HCPCS codes for CY 2009 to APCs with the proposed payment rates as displayed in Table 11 and incorporate them into Addendum B to our final rule with comment period for CY 2009, which is consistent with our annual APC updating policy. The HCPCS codes implemented through the April 2008 OPPS update and displayed in Table 10 are included in Addendum B to this proposed rule, where their proposed payment rates can also be found.

Table 10.—New HCPCS Codes Implemented in April 2008

HCPCS codeLong descriptorProposed CY 2009 status indicatorProposed CY 2009 APC
C9241Injection, doripenem, 10 mgG9241
Q4096Injection, von willebrand factor complex, human, ristocetin cofactor (not otherwise specified), per i.u. VWF:RCOK1213
Q4097Injection, immune globulin (Privigen), intravenous, non-lyophilized (e.g., liquid), 500 mgK1214
Q4098Injection, iron dextran, 50 mgK1215

 Table 11.—New HCPCS Codes Implemented in July 2008

HCPCS codeLong descriptorProposed CY 2009 status indicatorProposed CY 2009 APCProposed CY 2009 payment rate
C9242 *Injection, fosaprepitant, 1 mgG9242$1.61
C9356 *Tendon, porous matrix of cross-linked collagen and glycosaminoglycan matrix (TenoGlide Tendon Protector Sheet), per square centimeterG935616.92
C9357 *Dermal substitute, granulated cross-linked collagen and glycosaminoglycan matrix (Flowable Wound Matrix), 1 ccG9357883.33
C9358 *Dermal substitute, native, non-denatured collagen (SurgiMend Collagen Matrix), per 0.5 square centimetersG935810.38
G0398Home sleep study test (HST) with type II portable monitor, unattended; minimum of 7 channels: EEG, EOG, EMG, ECG/heart rate, airflow, respiratory effort and oxygen saturationS0213152.52
G0399Home sleep test (HST) with type III portable monitor, unattended; minimum of 4 channels: 2 respiratory movement/airflow, 1 ECG/heart rate and 1 oxygen saturationS0213152.52
G0400Home sleep test (HST) with type IV portable monitor, unattended; minimum of 3 channelsS0213152.52
* The drug payment rates displayed in Table 11 reflect the July 2008 ASP data.

2. Proposed Treatment of New 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 through program transmittals, which are released in the summer through 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 to the OPPS/ASC final rule with comment period to indicate that we are assigning them an interim payment status which is subject to public comment. Specifically, the status indicator, the APC assignment, or both, for all such codes flagged with comment indicator “NI” will be open to public comment in the CY 2009 OPPS/ASC final rule with comment period. We are proposing to continue this recognition and process for CY 2009. New Category I and III CPT codes, as well as new Level II HCPCS codes, effective January 1, 2009, will be listed in Addendum B to the CY 2009 OPPS/ASC final rule with comment period and designated using comment indicator “NI.” We will respond to all comments received concerning these codes in a subsequent final rule for the next calendar year's OPPS/ASC update.

In addition, we are proposing to continue our policy of the last 3 years of recognizing new mid-year CPT codes, generally Category III CPT codes, that the American Medical Association (AMA) releases in January for implementation the following July through the OPPS quarterly update process. Therefore, for CY 2009, we are proposing to include in Addendum B to the CY 2009 OPPS/ASC final rule with comment period the new Category III CPT codes released in January 2008 for implementation on July 1, 2008 (through the OPPS quarterly update process), and the new Category III codes released in July 2008 for implementation on January 1, 2009. However, only those new Category III CPT codes implemented effective January 1, 2009, will be flagged with comment indicator “NI” in Addendum B to the CY 2009 OPPS/ASC final rule with comment period, to indicate that we have assigned them an interim payment status which is subject to public comment. Category III CPT codes implemented in July 2008, which appear in Table 12 below, are subject to comment through this proposed rule, and we are proposing to finalize their status in the CY 2009 OPPS/ASC final rule with comment period.Start Printed Page 41469

TABLE 12.—Category III CPT Codes Implemented in July 2008

CPT codeLong descriptorProposed CY 2009 status indicatorProposed CY 2009 APC
0188TRemote real-time interactive videoconferenced critical care, evaluation and management of the critically ill or critically injured patient; first 30-74 minutesMNot applicable.
0189TRemote real-time interactive videoconferenced critical care, evaluation and management of the critically ill or critically injured patient; each additional 30 minutesMNot applicable.
0190TPlacement of intraocular radiation source applicatorT0237.
0191TInsertion of anterior segment aqueous drainage device, without extraocular reservoir; internal approachT0234.
0192TInsertion of anterior segment aqueous drainage device, without extraocular reservoir; external approachT0234.

B. Proposed OPPS Changes—Variations Within APCs

1. Background

Section 1833(t)(2)(A) of the Act requires the Secretary to develop a classification system for covered hospital outpatient 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 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 similar services, as well as medical visits. We also have developed separate APC groups for certain medical devices, drugs, biologicals, therapeutic radiopharmaceuticals, and brachytherapy devices.

We have packaged into payment for each procedure or service within an APC group the costs associated with those items or services that are directly related to and supportive of performing the main independent procedures or furnishing the services. Therefore, we do not make separate payment for these 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) 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 proposed rule); (7) incidental services such as venipuncture; and (8) guidance services, image processing services, intraoperative services, imaging supervision and interpretation services, diagnostic radiopharmaceuticals, and contrast media. Further discussion of packaged services is included in section II.A.4. of this proposed rule.

In CY 2008, we implemented composite APCs to provide a single payment for groups of services that are typically performed together during a single clinical encounter and that result in the provision of a complete service. Under current CY 2008 OPPS policy, we provide composite APC payment for certain extended assessment and management services, low dose rate prostate brachytherapy, cardiac electrophysiologic evaluation and ablation, and mental health services. We also are proposing for CY 2009 a composite APC payment methodology for multiple imaging services. Further discussion of composite APCs is included in section II.A.2.e. of this proposed rule.

Under the OPPS, we generally pay for hospital outpatient services on a rate-per-service basis, where the service may be reported with one or more HCPCS codes. Payment varies according to the APC group to which the independent service or combination of services is assigned. Each APC weight represents the hospital median cost of the services included in that APC relative to the hospital median cost of the services included in APC 0606 (Level 3 Hospital Clinic Visits). The APC weights are scaled to APC 0606 because it is the middle level clinic visit APC (that is, where the level 3 clinic visit CPT code of five levels of clinic visits is assigned), and because middle level clinic visits are among the most frequently furnished services in the hospital outpatient setting.

Section 1833(t)(9)(A) of the Act requires the Secretary to review 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, 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 the CY 2009 OPPS and our responses to them are discussed in the relevant specific sections throughout this proposed rule).

Finally, section 1833(t)(2) of the Act provides that, subject to certain exceptions, the items and services within an APC group cannot be considered comparable with respect to the use of resources if the highest median cost, or mean cost as 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 cost 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 are proposing to make exceptions to this limit on the variation of costs within each APC group in unusual cases such as low-volume items and services.Start Printed Page 41470

During the APC Panel's March 2008 meeting, we presented median cost and utilization data for services furnished during the period of January 1, 2007 through September 30, 2007, 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 most service-specific issues, the APC Panel recommendations, if any, and our proposals for CY 2009 are contained principally in sections III.C. and III.D. of this proposed rule.

In addition to the assignment of specific services to APCs that 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 to this proposed rule. In these cases, to eliminate a 2 times violation or to improve clinical and resource homogeneity, we are proposing to reassign the codes to APCs that contain services that are similar with regard to both their clinical and resource characteristics. We also are proposing to rename existing APCs, discontinue existing APCs, or create new clinical APCs to complement proposed HCPCS code reassignments. In many cases, the proposed HCPCS code reassignments and associated APC reconfigurations for CY 2009 included in this proposed rule are related to changes in median costs of services that are observed in the CY 2007 claims data newly available for CY 2009 ratesetting. 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 are proposing to change the status indicators for some codes because we believe that another status indicator would more accurately describe their payment status from an OPPS perspective based on the policies that we are proposing for CY 2009 or because we are proposing new status indicators to differentiate a related group of services from other services that previously shared the same status indicator.

Addendum B to this proposed rule identifies with comment indicator “CH” those HCPCS codes for which we are proposing a change to the APC assignment or status indicator as assigned in the April 2008 Addendum B update (via Transmittal 1487, Change Request 5999, dated April 8, 2008). HCPCS codes with proposed CY 2009 changes in status indicator assignments from “Q” to “Q1,” from “Q” to “Q2,” or from “Q” to “Q3” are an exception to this identification practice because they are not flagged with comment indicator “CH” in Addendum B to this proposed rule. These proposed changes in status indicators are to facilitate policy transparency and operational logic rather than reflect changes in OPPS payment policy for these services, hence we believe that identifying these HCPCS codes with “CH” could be confusing to the public.

3. Proposed 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 2009 based on the APC Panel recommendations discussed mainly in sections III.C. and III.D. of this proposed rule, the other proposed changes to status indicators and APC assignments as identified in Addendum B to this proposed rule, and the use of CY 2007 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 outpatient setting
  • Frequency of service (volume)
  • Opportunity for upcoding and code fragments.

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

Table 13 below lists the APCs that we are proposing to exempt from the 2 times rule for CY 2009 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 CY 2007 claims data used to determine the APC payment rates that we are proposing for CY 2009. The median costs for hospital outpatient services for these and all other APCs that were used in the development of this proposed rule can be found on the CMS Web site at: http://www.cms.hhs.gov/​HospitalOutpatientPPS/​01_​overview.asp.

Table 13.—Proposed APC Exceptions to the 2 Times Rule for CY 2009

APCAPC title
0060Manipulation Therapy.
0080Diagnostic Cardiac Catheterization.
0093Vascular Reconstruction/Fistula Repair without Device.
0105Repair/Revision/Removal of Pacemakers, AICDs, or Vascular Devices.
0141Level I Upper GI Procedures.
0245Level I Cataract Procedures without IOL Insert.
0303Treatment Device Construction.
0330Dental Procedures.
0409Red Blood Cell Tests.
0426Level II Strapping and Cast Application.
0432Health and Behavior Services.
0604Level 1 Hospital Clinic Visits.

C. New Technology APCs

1. Background

In the November 30, 2001 final rule (66 FR 59903), we finalized changes to the time period a service was eligible for payment under a New Technology APC. Beginning in CY 2002, we retain services within New Technology APC groups until we gather sufficient claims data to enable us to assign the service to 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 2 years if sufficient data upon which to base a decision for reassignment have not been collected.

We note that the cost bands for New Technology APCs range from $0 to $50 in increments of $10, from $50 to $100 in increments of $50, from $100 through $2,000 in increments of $100, and from $2,000 through $10,000 in increments of $500. These increments, 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.

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 Start Printed Page 41471APC. 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 cost bands, reassign the procedure or service to a different New Technology APC that most appropriately reflects its cost.

Consistent with our current policy, for CY 2009 we are proposing to retain services within New Technology APC groups until we gather sufficient claims data to enable us to assign the service to a clinically appropriate APC. The flexibility associated with this policy allows us to move a service from a New Technology APC in less than 2 years if sufficient data are available. It also allows us to retain a service in a New Technology APC for more than 2 years if sufficient hospital claims data upon which to base a decision for reassignment have not been collected. HCPCS codes C9725 (Placement of endorectal intracavitary applicator for high intensity brachytherapy), C9726 (Placement and removal (if performed) of applicator into breast for radiation therapy), and C9727 (Insertion of implants into the soft palate; minimum of three implants), which are presented below in Table 14 of this proposed rule, represent services assigned to New Technology APCs for CY 2008 for which we believe we have sufficient claims data to propose their reassignment to clinically appropriate APCs for CY 2009. These 3 procedures have been assigned to their New Technology APCs for at least 3 years, thereby providing us with sufficient data from at least 2 years of hospital claims upon which to base our proposed reassignments. In addition, these three procedures are clinically similar to other services currently paid through clinical APCs under the OPPS and for which we have substantial claims data regarding hospital costs. Therefore, for CY 2009, we are proposing to reassign these procedures to clinically appropriate APCs, applying their CY 2007 claims data to develop their clinical APC median costs upon which payments would be based. These procedures and their proposed APC assignments are displayed in Table 14 below.

HCPCS code C9723 (Dynamic infrared blood perfusion imaging (diri)) was assigned to New Technology APC 1502 (New Technology—Level II ($50-$100)) when it was implemented in April 2005. However, based on our claims data for the past 3 years, which have shown no utilization for this code, we are proposing to delete HCPCS code C9723 on December 31, 2008.

Table 14.—Proposed CY 2009 APC Reassignments of New Technology Procedures to Clinical APCs

HCPCS codeShort descriptorCY 2008 SICY 2008 APCProposed CY 2009 APCProposed CY 2009 SI
C9725Placement of endorectal intracavitary applicator for high intensity brachytherapyS15070164T
C9726Placement and removal (if performed) of applicator into breast for radiation therapyS15080028T
C9727Insertion of implants into the soft palate; minimum of three implantsS15100252T

D. Proposed OPPS APC-Specific Policies

1. Trauma Response Associated With Hospital Critical Care Services (APC 0618)

In the CY 2007 OPPS/ASC final rule with comment period (71 FR 68133 through 68134), we discussed the creation of HCPCS code G0390 (Trauma response team activation associated with hospital critical care service), which became effective January 1, 2007. HCPCS code G0390 is reported by hospitals when providing critical care services in association with trauma response team activation. HCPCS code G0390 has been assigned to APC 0618 (Trauma Response with Critical Care) since CY 2007, with payment rates of approximately $495 and $330, for CYs 2007 and 2008, respectively. The creation of HCPCS code G0390 enables us to pay differentially for critical care when trauma response team activation is associated with critical care services and when there is no trauma response team activation. We instructed hospitals to continue to report CPT codes 99291 (Critical care, evaluation and management of the critically ill or critically injured patient; first 30-74 minutes) and 99292 (Critical care, evaluation and management of the critically ill or critically injured patient; each additional 30 minutes (List separately in addition to code for primary service)) for critical care services when they also report HCPCS code G0390.

For CY 2007 and CY 2008, we calculated the median cost for APC 0617 (Critical Care) to which CPT code 99291 is assigned using the subset of single claims for CPT code 99291 that did not include charges under revenue code 068x, the trauma revenue code, reported on the same day. We established the median cost for APC 0618 (Trauma Response with Critical Care) by calculating the difference in median costs between the two subsets of single claims for CPT code 99291 representing the reporting of critical care services with and without revenue code 068x charges reported on the same day. For a complete description of the history of the policy and development of the payment methodology for these services, we refer readers to the CY 2007 OPPS/ASC final rule with comment period (71 FR 68133 through 68134). We provided billing guidance in CY 2006 in Transmittal 1139, Change Request 5438, issued on December 22, 2006, specifically clarifying when it would be appropriate to report HCPCS code G0390. The I/OCE logic only accepts HCPCS code G0390 when it is reported with revenue code 068x and CPT code 99291 on the same claim and on the same date of service.

For CY 2009, we are proposing a median cost for APC 0617 of approximately $488 and a median cost for APC 0618 of approximately $989. For CY 2009 OPPS ratesetting, we are using claims data from CY 2007 that also include claims for HCPCS code G0390, as CY 2007 is the initial year that we established OPPS payment for HCPCS code G0390. We are proposing to use the line-item median cost for HCPCS code G0390 in the CY 2007 claims to set the median cost for APC 0618, as HCPCS code G0390 is the only code assigned to that APC. As discussed in section II.A.1.b. of this proposed rule, we are proposing to add HCPCS code G0390 to the CY 2009 bypass list to isolate the line-item cost for HCPCS code G0390 and ensure that the critical Start Printed Page 41472care claims for CPT code 99291 that are reported with HCPCS code G0390 are available to set the medians for APC 0617 and composite APC 8003. The costs of packaged revenue code charges and HCPCS codes for services with status indicator “N” on a claim with HCPCS code G0390 would be associated with CPT code 99291 for ratesetting, if the claim for CPT code 99291 is a single or “pseudo” single bill.

For APC 0617, we are proposing to calculate the median cost using our standard methodology that excludes those single claims for critical care services that are eligible for payment through the Level II extended assessment and management composite APC, that is APC 8003, as described in section II.A.2.e.(1) of this proposed rule. We believe that these proposed refinements in median cost calculations would result in more accurate cost estimates and payments for APCs 0617 and 0618 for CY 2009.

2. Suprachoroidal Delivery of Pharmacologic Agent (APC 0236)

CPT code 0186T (Suprachoroidal delivery of pharmacologic agent (does not include supply of medication)) is a new code for CY 2008. It was released on the AMA CPT Web site on July 1, 2007, and implemented on January 1, 2008. In the CY 2008 OPPS/ASC final rule with comment period (72 FR 66997), we assigned this code to APC 0236 (Level II Posterior Segment Eye Procedures) with a CY 2008 payment rate of approximately $1,161. We also assigned this code comment indicator “NI” in Addendum B to the CY 2008 OPPS/ASC final rule with comment period to indicate that it is a new code for CY 2008 with an interim payment status subject to public comment following publication of that rule.

As has been our practice in the past, we implement new HCPCS codes in the OPPS/ASC final rule with comment period, at which time we invite public comment on our interim treatment of the new codes. We subsequently respond to those comments in the final rule with comment period for the following year’s OPPS update.

In its March 2008 presentation to the APC Panel, a presenter requested the reassignment of CPT code 0186T from APC 0236 to APC 0237 (Level III Posterior Segment Eye Procedures), which has a CY 2008 payment rate of approximately $1,774. The presenter indicated that CPT code 0186T is analogous to CPT code 67027 (Implantation of intravitreal drug delivery system (e.g., ganciclovir implant), includes concomitant removal of vitreous), which is assigned to APC 0672 (Level IV Posterior Segment Eye Procedures) with a CY 2008 payment rate of about $2,370. Although the presenter stated that both procedures share similar clinical characteristics and resource costs, the presenter believed that CPT code 0186T would be most appropriately assigned to APC 0237 based on the procedure's estimated hospital cost. The APC Panel noted that because the CPT code is new and there are no claims data for this procedure, the APC Panel would not make a specific CY 2009 APC assignment recommendation to CMS at this time. However, the APC Panel recommended that CMS share with the APC Panel the claims data for CPT code 0186T at the first CY 2009 APC Panel meeting, and that CMS reevaluate the assignment of CPT code 0186T to APC 0236 on the basis of those data. We are accepting the recommendation of the APC Panel and will provide the initial OPPS claims data available for this CPT code, based on CY 2008 claims data, for the first CY 2009 APC Panel meeting. These data will not be available until the CY 2010 OPPS update rulemaking cycle.

Under the OPPS, we generally assign a new Category III CPT code to an APC if we believe that the procedure, if covered, would be appropriate for separate payment under the OPPS. A specific assignment to a clinical APC where HCPCS codes with comparable clinical and resource characteristics also reside is based on a variety of types of information including, but not limited to: Advice from our medical advisors, information from specialty societies, review of resource costs for related services from historical hospital claims data, consideration of the clinical similarity of the service to existing procedures, and review of any other information available to us.

Based upon our further review and analysis of the clinical characteristics and resource costs associated with CPT code 0186T, we agree with the presenter that the most appropriate CY 2009 APC assignment for this procedure is APC 0237. We believe that the other procedures also assigned to APC 0237 are similar to the procedure described by CPT code 0186T. Therefore, for CY 2009, we are proposing to reassign CPT code 0186T from APC 0236 to APC 0237, which has a proposed median cost of approximately $1,447. We also note that because CPT code 0186T describes a specific drug administration service, the drug itself would be separately reported under the appropriate Level II HCPCS drug code.

3. Closed Treatment of Fracture of Finger/Toe/Trunk (APC 0043)

We received a comment to the CY 2008 OPPS/ASC proposed rule on the variety of procedures assigned to APC 0043 (Closed Treatment Fracture Finger/Toe/Trunk). The commenter did not agree with the placement of various procedures in APC 0043 as many of the procedures vary in resource costs. In particular, the commenter asserted that the costs associated with finger treatments, hip dislocations, and spinal fractures vary significantly, and further stated that the costs of treating spinal fractures are significantly greater than the costs associated with finger or toe fractures. The commenter also expressed concern that grouping all of the approximately 150 procedures in one clinical APC violated the 2 times rule, and that continuing to exempt APC 0043 from the 2 times rule was not appropriate. The commenter recommended that CMS pay appropriately for these procedures, and stated that this could be achieved by dividing the procedures currently assigned to APC 0043 into several APCs. However, the commenter did not make any specific recommendations regarding alternative APC configurations. Because APC 0043 contains so many different fracture treatment procedures with low volume, we were concerned that any restructuring for CY 2008 without the benefit of public comment could result in the reconfiguration of APCs that did not reflect improved clinical and resource homogeneity over the proposed configuration. Therefore, we did not reconfigure APC 0043 for CY 2008, and we finalized a payment rate for APC 0043 of about $113.

In the CY 2008 OPPS/ASC final rule with comment period (72 FR 66723), we stated that we agreed with the commenter that grouping all of the closed fracture treatment procedures in one APC may not accurately distinguish the more expensive from the less resource-intensive fracture treatment procedures. However, we also explained that we found that there were only 13 procedures that were significant procedures with the frequency necessary to assess the APC's alignment with the 2 times rule. The other procedures were all very low volume and, therefore, not significant procedures for purposes of evaluating the APC with respect to the 2 times rule. We noted that APC 0043 has been exempted from the 2 times rule for the past 7 years under the OPPS, and we had not previously received public comments regarding the structure of this APC. In that same rule (72 FR 66723) we Start Printed Page 41473specifically invited public recommendations on potential alternative APC configurations for the services currently assigned to APC 0043 for the CY 2009 APC review process. We received no public comments on this APC issue.

In the CY 2008 OPPS/ASC final rule with comment period (72 FR 66723), we also stated that we would bring this APC issue to the attention of the APC Panel at its March 2008 meeting and requested input as to how to most appropriately categorize the procedures in APC 0043. Based on the updated CY 2007 hospital outpatient claims data available for the March 2008 APC Panel meeting, we presented a possible reconfiguration of APC 0043 for the APC Panel's consideration. In particular, the potential reconfiguration reviewed and discussed by the APC Panel would delete APC 0043 and replace it with three new APCs, configured based on the hospital resource data from the CY 2007 claims data, as well as the clinical characteristics of the procedures currently assigned to APC 0043. The APC Panel recommended that CMS adopt the approach that CMS described to the APC Panel to reconfigure APC 0043 into three new APCs, and we are accepting the APC Panel's recommendation for CY 2009. Therefore, for CY 2009, we are proposing three new APCs to replace APC 0043, with proposed configurations as displayed in Table 15 below.

Based on these configurations, proposed new APC 0129 (Level I Closed Treatment Fracture Finger/Toe/Trunk) has a proposed APC median cost of approximately $104, with the HCPCS code-specific median costs of the significant procedures ranging from approximately $74 to $124. Proposed new APC 0138 (Level II Closed Treatment Fracture Finger/Toe/Trunk) has a proposed APC median cost of approximately $397, with only one significant procedure with a HCPCS code-specific median cost of approximately $399. Proposed new APC 0139 (Level III Closed Treatment Fracture Finger/Toe/Trunk) has a proposed APC median cost of approximately $1,340, with only one significant volume HCPCS code whose median cost is approximately $1,574.

While all three proposed APCs contain many procedures that are very low in volume, this reconfiguration reflects an attempt to realign the procedures previously assigned to APC 0043 based on their clinical characteristics and resource costs into APC groups that are more homogeneous. Therefore, for CY 2009, we are proposing to reconfigure APC 0043 by deleting APC 0043 and reassigning the HCPCS codes previously assigned to APC 0043 to proposed new APCs 0129, 0138, and 0139.

Table 15.—Proposed New APCs for Closed Treatment Fracture of Finger/Toe/Trunk

Proposed CY 2009 new APCHCPCS codeSIShort descriptorProposed CY 2009 APC median cost
012921800TTreatment of rib fracture$103.52
21820TTreat sternum fracture
22305TTreat spine process fracture
23500TTreat clavicle fracture
23540TTreat clavicle dislocation
23570TTreat shoulder blade fx
23600TTreat humerus fracture
23620TTreat humerus fracture
23650TTreat shoulder dislocation
23675TTreat dislocation/fracture
23929TShoulder surgery procedure
24500TTreat humerus fracture
24505TTreat humerus fracture
24530TTreat humerus fracture
24560TTreat humerus fracture
24565TTreat humerus fracture
24576TTreat humerus fracture
24600TTreat elbow dislocation
24640TTreat elbow dislocation
24650TTreat radius fracture
24670TTreat ulnar fracture
24675TTreat ulnar fracture
24999TUpper arm/elbow surgery
25500TTreat fracture of radius
25530TTreat fracture of ulna
25535TTreat fracture of ulna
25560TTreat fracture radius & ulna
25600TTreat fracture radius/ulna
25622TTreat wrist bone fracture
25630TTreat wrist bone fracture
25650TTreat wrist bone fracture
25660TTreat wrist dislocation
25675TTreat wrist dislocation
25680TTreat wrist fracture
25999TForearm or wrist surgery
26600TTreat metacarpal fracture
26605TTreat metacarpal fracture
26641TTreat thumb dislocation
26670TTreat hand dislocation
26700TTreat knuckle dislocation
26705TTreat knuckle dislocation
Start Printed Page 41474
26720TTreat finger fracture, each
26725TTreat finger fracture, each
26740TTreat finger fracture, each
26742TTreat finger fracture, each
26750TTreat finger fracture, each
26755TTreat finger fracture, each
26770TTreat finger dislocation
26989THand/finger surgery
27193TTreat pelvic ring fracture
27200TTreat tail bone fracture
27220TTreat hip socket fracture
27230TTreat thigh fracture
27250TTreat hip dislocation
27256TTreat hip dislocation
27265TTreat hip dislocation
27267TCltx thigh fx
27299TPelvis/hip joint surgery
27501TTreatment of thigh fracture
27503TTreatment of thigh fracture
27508TTreatment of thigh fracture
27516TTreat thigh fx growth plate
27517TTreat thigh fx growth plate
27520TTreat kneecap fracture
27530TTreat knee fracture
27538TTreat knee fracture(s)
27550TTreat knee dislocation
27560TTreat kneecap dislocation
27599TLeg surgery procedure
27750TTreatment of tibia fracture
27760TCltx medial ankle fx
27767TCltx post ankle fx
27768TCltx post ankle fx w/mnpj
27780TTreatment of fibula fracture
27786TTreatment of ankle fracture
27788TTreatment of ankle fracture
27808TTreatment of ankle fracture
27816TTreatment of ankle fracture
27824TTreat lower leg fracture
27830TTreat lower leg dislocation
27899TLeg/ankle surgery procedure
28400TTreatment of heel fracture
28430TTreatment of ankle fracture
28435TTreatment of ankle fracture
28450TTreat midfoot fracture, each
28455TTreat midfoot fracture, each
28470TTreat metatarsal fracture
28475TTreat metatarsal fracture
28490TTreat big toe fracture
28495TTreat big toe fracture
28510TTreatment of toe fracture
28515TTreatment of toe fracture
28530TTreat sesamoid bone fracture
28540TTreat foot dislocation
28600TTreat foot dislocation
28605TTreat foot dislocation
28630TTreat toe dislocation
28660TTreat toe dislocation
28899TFoot/toes surgery procedure
013820660TApply, rem fixation device397.39
22310TTreat spine fracture
23520TTreat clavicle dislocation
23525TTreat clavicle dislocation
23545TTreat clavicle dislocation
23575TTreat shoulder blade fx
23665TTreat dislocation/fracture
24535TTreat humerus fracture
24577TTreat humerus fracture
24655TTreat radius fracture
25505TTreat fracture of radius
Start Printed Page 41475
25520TTreat fracture of radius
25565TTreat fracture radius & ulna
25605TTreat fracture radius/ulna
25624TTreat wrist bone fracture
25635TTreat wrist bone fracture
26340TManipulate finger w/anesth
26645TTreat thumb fracture
26675TTreat hand dislocation
27238TTreat thigh fracture
27246TTreat thigh fracture
27500TTreatment of thigh fracture
27510TTreatment of thigh fracture
27810TTreatment of ankle fracture
27818TTreatment of ankle fracture
27840TTreat ankle dislocation
28570TTreat foot dislocation
013922315TTreat spine fracture1,339.53
23505TTreat clavicle fracture
23605TTreat humerus fracture
23625TTreat humerus fracture
24620TTreat elbow fracture
25259TManipulate wrist w/anesthes
25690TTreat wrist dislocation
26607TTreat metacarpal fracture
26706TPin knuckle dislocation
27502TTreatment of thigh fracture
27532TTreat knee fracture
27752TTreatment of tibia fracture
27762TCltx med ankle fx w/mnpj
27781TTreatment of fibula fracture
27825TTreat lower leg fracture
27831TTreat lower leg dislocation
28405TTreatment of heel fracture
28575TTreat foot dislocation

4. Individual Psychotherapy (APCs 0322 and 0323)

APC 0323 (Extended Individual Psychotherapy) had a 2 times rule violation for CYs 2007 and 2008, and was exempted from the 2 times rule during those years. APC 0323 would continue to have a 2 times rule violation in CY 2009 if its configuration is not adjusted. In the CY 2008 OPPS/ASC final rule with comment period (72 FR 66739), we agreed to review APC 0323 at the next APC Panel meeting and seek the APC Panel's guidance in reconfiguring this APC for CY 2009.

It was brought to our attention that a handful of CPT codes describe psychotherapy services that could be appropriately provided and reported as part of a partial hospitalization program, but would not otherwise be appropriately reported by a HOPD for those psychotherapy services. Specifically, the category heading in the 2008 CPT book specifies that the CPT codes listed in Table 16 below are to be reported for services provided in an “inpatient hospital, partial hospital, or residential care facility.” These CPT codes have been assigned to APCs 0322 (Brief Individual Psychotherapy) and 0323 since the implementation of the OPPS.

Table 16.—Inpatient Hospital, Partial Hospital, or Residential Care Facility Psychotherapy Codes

CPT codeLong descriptor
90816Individual psychotherapy, insight oriented, behavior modifying and/or supportive, in an inpatient hospital, partial hospital or residential care setting, approximately 20 to 30 minutes face-to-face with the patient;
90817Individual psychotherapy, insight oriented, behavior modifying and/or supportive, in an inpatient hospital, partial hospital or residential care setting, approximately 20 to 30 minutes face-to-face with the patient; with medical evaluation and management services.
90818Individual psychotherapy, insight oriented, behavior modifying and/or supportive, in an inpatient hospital, partial hospital or residential care setting, approximately 45 to 50 minutes face-to-face with the patient;
90819Individual psychotherapy, insight oriented, behavior modifying and/or supportive, in an inpatient hospital, partial hospital or residential care setting, approximately 45 to 50 minutes face-to-face with the patient; with medical evaluation and management.
90821Individual psychotherapy, insight oriented, behavior modifying and/or supportive, in an inpatient hospital, partial hospital or residential care setting, approximately 75 to 80 minutes face-to-face with the patient;
Start Printed Page 41476
90822Individual psychotherapy, insight oriented, behavior modifying and/or supportive, in an inpatient hospital, partial hospital or residential care setting, approximately 75 to 80 minutes face-to-face with the patient; with medical evaluation and management services.
90823Individual psychotherapy, interactive, using play equipment, physical devices, language interpreter, or other mechanisms of non-verbal communication, in an inpatient hospital, partial hospital or residential care setting, approximately 20 to 30 minutes face-to-face with the patient;
90824Individual psychotherapy, interactive, using play equipment, physical devices, language interpreter, or other mechanisms of non-verbal communication, in an inpatient hospital, partial hospital or residential care setting, approximately 20 to 30 minutes face-to-face with the patient; with medical evaluation and management services.
90826Individual psychotherapy, interactive, using play equipment, physical devices, language interpreter, or other mechanisms of non-verbal communication, in an inpatient hospital, partial hospital or residential care setting, approximately 45 to 50 minutes face-to-face with the patient;
90827Individual psychotherapy, interactive, using play equipment, physical devices, language interpreter, or other mechanisms of non-verbal communication, in an inpatient hospital, partial hospital or residential care setting, approximately 45 to 50 minutes face-to-face with the patient; with medical evaluation and management services.
90828Individual psychotherapy, interactive, using play equipment, physical devices, language interpreter, or other mechanisms of non-verbal communication, in an inpatient hospital, partial hospital or residential care setting, approximately 75 to 80 minutes face-to-face with the patient;
90829Individual psychotherapy, interactive, using play equipment, physical devices, language interpreter, or other mechanisms of non-verbal communication, in an inpatient hospital, partial hospital or residential care setting, approximately 75 to 80 minutes face-to-face with the patient; with medical evaluation and management services.

The 2008 CPT book also includes a parallel set of CPT codes whose category heading in the CPT book specifies that these codes are to be reported for services provided in the office or other outpatient facilities. These CPT codes are listed in Table 17. These CPT codes have also been assigned to APCs 0322 and 0323 since the implementation of the OPPS.

Table 17.—Office or Other Outpatient Facility Psychotherapy Codes

CPT codeLong descriptor
90804Individual psychotherapy, insight oriented, behavior modifying and/or supportive, in an office or outpatient facility, approximately 20 to 30 minutes face-to-face with the patient;
90805Individual psychotherapy, insight oriented, behavior modifying and/or supportive, in an office or outpatient facility, approximately 20 to 30 minutes face-to-face with the patient; with medical evaluation and management services.
90806Individual psychotherapy, insight oriented, behavior modifying and/or supportive, in an office or outpatient facility, approximately 45 to 50 minutes face-to-face with the patient;
90807Individual psychotherapy, insight oriented, behavior modifying and/or supportive, in an office or outpatient facility, approximately 45 to 50 minutes face-to-face with the patient; with medical evaluation and management.
90808Individual psychotherapy, insight oriented, behavior modifying and/or supportive, in an office or outpatient facility, approximately 75 to 80 minutes face-to-face with the patient;
90809Individual psychotherapy, insight oriented, behavior modifying and/or supportive, in an office or outpatient facility, approximately 75 to 80 minutes face-to-face with the patient; with medical evaluation and management services.
90810Individual psychotherapy, interactive, using play equipment, physical devices, language interpreter, or other mechanisms of non-verbal communication, in an office or outpatient facility, approximately 20 to 30 minutes face-to-face with the patient;
90811Individual psychotherapy, interactive, using play equipment, physical devices, language interpreter, or other mechanisms of non-verbal communication, in an office or outpatient facility, approximately 20 to 30 minutes face-to-face with the patient; with medical evaluation and management services.
90812Individual psychotherapy, interactive, using play equipment, physical devices, language interpreter, or other mechanisms of non-verbal communication, in an office or outpatient facility, approximately 45 to 50 minutes face-to-face with the patient;
90813Individual psychotherapy, interactive, using play equipment, physical devices, language interpreter, or other mechanisms of non-verbal communication, in an office or outpatient facility, approximately 45 to 50 minutes face-to-face with the patient; with medical evaluation and management services.
90814Individual psychotherapy, interactive, using play equipment, physical devices, language interpreter, or other mechanisms of non-verbal communication, in an office or outpatient facility, approximately 75 to 80 minutes face-to-face with the patient;
90815Individual psychotherapy, interactive, using play equipment, physical devices, language interpreter, or other mechanisms of non-verbal communication, in an office or outpatient facility, approximately 75 to 80 minutes face-to-face with the patient; with medical evaluation and management services.

Our CY 2007 claims data for this proposed rule (excluding all claims for partial hospitalization services) include approximately 10,000 OPPS claims for CPT codes 90816 through 90829, compared with approximately 500,000 claims for CPT codes 90804 through 90815. We are unclear as to what HOPD services these claims for CPT codes 90816 through 90829 represent and believe that these may be miscoded claims. We do not believe that CPT codes 90816 through 90829 could be appropriately reported for hospital outpatient services that are not part of a partial hospitalization program. Therefore, for CY 2009, we are proposing to assign status indicator “P” to CPT codes 90816 through 90829, indicating that these services may be billed appropriately and paid under the Start Printed Page 41477OPPS only when they are part of a partial hospitalization program. Partial hospitalization services are not included in our ratesetting process for nonpartial hospitalization OPPS services. Under this proposal, hospitals would continue to report CPT codes 90804 through 90815 for individual psychotherapy services provided in the HOPD that are not part of partial hospitalization services, consistent with CPT instructions.

We recalculated the median costs for APCs 0322 and 0323, after assigning status indicator “P” to CPT codes 90816 through 90829. As partial hospitalization services only, the claims data for these codes would only be considered for ratesetting with respect to partial hospitalization services paid through the two proposed CY 2009 partial hospitalization APCs, specifically APC 0172 (Level I Partial Hospitalization (3 services)) and APC 0173 (Level II Partial Hospitalization (4 or more services)), and no historical hospital claims data would continue to map to APCs 0322 and 0323. We refer readers to section X.B. of this proposed rule for a complete discussion of the proposed CY 2009 partial hospitalization payment policy. The CY 2009 proposed median costs for APCs 0322 and 0323 are approximately $88 and $108, respectively. This new configuration for APC 0323 eliminates the longstanding 2 times violation for this APC, although the median cost remains approximately the same as it was for CYs 2007 and 2008.

During its March 2008 APC Panel meeting, the APC Panel recommended that CMS restructure APC 0323 as described above, and that a similar restructuring be considered for APC 0322. For CY 2009, we are adopting the APC Panel's recommendation and, therefore, we are proposing to assign status indicator “P” to CPT codes 90816 through 90829.

5. Implant Injection for Vesicoureteral Reflex (APC 0162)

Following publication of the CY 2008 OPPS/ASC final rule with comment period, several members of the public contacted us to express their concerns regarding decreased access to and inadequate payment for CPT code 52327 (Cystourethroscopy, including ureteral catheterization, with subureteric injection of implant material). The CY 2008 OPPS payment for this procedure, which is assigned to APC 0162 (Level III Cystourethroscopy and other Genitourinary Procedures), is approximately $1,578. This procedure is primarily performed on pediatric patients to correct an anatomical defect that causes urine to reflux back to the kidneys (vesicoureteral reflux disease or VUR). From the perspective of these stakeholders, the assignment of this procedure to APC 0162 provides inadequate payment to cover the hospital's cost for the procedure, which they asserted requires expensive implant material. Specifically, they stated that the currently available CPT and Level II HCPCS coding lacks the specificity needed to properly account for the cost of the ureteral implant, resulting in inadequate payment for this procedure. In addition to receiving several letters on this subject, we also met with several stakeholders about the concerns of pediatric urologists regarding decreased access to and inadequate payment for performance of this procedure.

At the March 2008 APC Panel meeting, a presenter requested that the APC Panel recommend reassignment of CPT code 52327 from APC 0162 to APC 0385 (Level I Prosthetic Urological Procedures), which has a CY 2008 payment rate of approximately $5,327. The presenter indicated that while CPT code 52327 is clinically similar to other procedures assigned to APC 0162, it is not similar in terms of resource utilization. The presenter stated that CPT code 52327 is the only procedure assigned to APC 0162 that uses a high cost implant, yet it is paid the same as procedures that do not. The APC Panel recommended that CMS consider reassigning CPT code 52327 to a more appropriate APC.

Based upon our further review and analysis of the clinical characteristics and resource costs associated with the procedure, we are accepting the APC Panel's recommendation and proposing to reassign CPT code 52327 to APC 0163 (Level IV Cystourethroscopy and other Genitourinary Procedures) for CY 2009. The median cost of CPT code 52327 is approximately $2,030 based on 246 single claims available for this proposed rule. The proposed median cost of APC 0163 is approximately $2,388, and the median costs of significant procedures in this APC range from approximately $1,951 to $2,526. A number of the procedures assigned to APC 0163 are clinically similar to CPT code 52327, involving the use of a cystoscope and the implantation of devices. Based on our review of its clinical and resource characteristics, we believe the most appropriate CY 2009 APC assignment for CPT code 52327 is APC 0163. Therefore, for CY 2009, we are proposing to reassign CPT code 52327 from APC 0162 to APC 0163, with a proposed median cost of approximately $2,388.

IV. Proposed OPPS Payment for Devices

A. Pass-Through Payments for Devices

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. We may establish a new device category for pass-through payment in any quarter. 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. We propose and finalize the dates for expiration of pass-through payments for device categories as part of the OPPS annual update.

Two currently eligible categories, C1821 (Interspinous process distraction device (implantable)) and L8690 (Auditory osseointegrated device, includes all internal and external components), were established for pass-through payment as of January 1, 2007. These two device categories will be eligible for pass-through payment for 2 years through December 31, 2008. In the CY 2008 OPPS/ASC final rule with comment period (72 FR 66751), we finalized our policy to expire these two categories from pass-through device payment after December 31, 2008.

We also have an established policy to package the costs of the devices no longer eligible for pass-through payments into the costs of the procedures with which the devices are reported in the claims data used to set the payment rates (67 FR 66763). Brachytherapy sources, which are now separately paid in accordance with section 1833(t)(2)(H) of the Act, are an exception to this established policy.

b. Proposed Policy

For CY 2009, we are implementing the final decisions that we discussed in the CY 2008 OPPS/ASC final rule with comment period that finalizes the expiration date of pass-through status for device categories C1821 and L8690. Therefore, as of January 1, 2009, we will discontinue pass-through payment for device category codes C1821 and L8690. In accordance with our established policy, we will package the costs of the devices assigned to these device categories into the costs of the procedures with which the devices were Start Printed Page 41478billed in CY 2007, the year of hospital claims data used for this OPPS update.

We currently have no established device categories eligible for pass-through payment that are continuing into CY 2009. We continue to evaluate applications for devices pass-through payment on an ongoing basis. We may establish a new device category in any quarter, and we will advise the public of our decision to establish a new device category in a subsequent quarter in CY 2008 through the transmittal that implements the OPPS update for the applicable quarter. We would then propose an expiration date for such new categories in future OPPS annual updates.

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

a. Background

We have an established policy to estimate the portion of each APC payment rate that could reasonably be attributed to the cost of the associated devices that are eligible for pass-through payments (66 FR 59904). We deduct from the pass-through payments for identified device categories eligible for pass-through payments an amount that reflects the portion of the APC payment amount that we determine is associated with the cost of the device, defined as the APC offset amount, as required by section 1833(t)(6)(D)(ii) of the Act. We have consistently employed an established methodology to estimate the portion of each APC payment rate that could reasonably be attributed to the cost of an associated device eligible for pass-through payment, using claims data from the period used for the most recent recalibration of the APC rates (72 FR 66751 through 66752). We establish and update the applicable APC offset amounts for eligible pass-through device categories through the transmittals that implement the quarterly OPPS updates.

b. Proposed Policy

We are proposing to continue our established policies for calculating and setting the APC offset amounts for each device category eligible for pass-through payment. We are also proposing to continue to review each new device category on a case-by-case basis, to determine whether device costs associated with the new category are packaged into the existing APC structure. If device costs packaged into the existing APC structure are associated with the new category, we would deduct the APC offset amount from the pass-through payment for the device category.

B. Proposed Adjustment to OPPS Payment for Partial or Full Credit Devices

1. Background

In recent years there have been several field actions and recalls as a result of implantable device failures. In many of these cases, the manufacturers have offered devices without cost to the hospital or with credit for the device being replaced if the patient required a more expensive device. In order to ensure that payment rates for procedures involving devices reflect only the full costs of those devices, our standard rate-setting methodology for device-dependent APCs uses only claims that contain the correct device code for the procedure, do not contain token charges, and do contain the “FB” modifier signifying that the device was furnished without cost or with a full credit.

To ensure equitable payment when the hospital receives a device without cost or with full credit, in CY 2007 we implemented a policy to reduce the payment for specified device-dependent APCs by the estimated portion of the APC payment attributable to device costs (that is, the device offset) when the hospital receives a specified device at no cost or with full credit. Hospitals are instructed to report such full credit/no cost cases using the “FB” modifier on the line with the procedure code in which the free device is used. In cases in which the device is furnished without cost, the hospital is to report a token device charge of less than $1.01. In cases in which the device being inserted is an upgrade (either of the same type of device or to a different type of device) with a full credit for the device being replaced, the hospital is to report as the device charge the difference between its usual charge for the replacement device being implanted and its usual charge for the replaced device for which it received full credit. In CY 2008, we expanded this payment adjustment policy to include cases in which hospitals receive partial credits of 50 percent or more of the cost of a specified device. Hospitals are instructed to append the “FC” modifier to the procedure code that reports the service provided to furnish the device when they receive a partial credit of 50 percent or more of the cost of the new device. In CY 2008, OPPS payment for the implantation procedure is reduced by 100 percent of the device offset for full credit/no cost cases when both a specified device code is present on the claim and the procedure code maps to a specified APC. Payment for the implantation procedure is reduced by 50 percent of the device offset for partial credit cases when both a specified device code is present on the claim and the procedure code maps to a specified APC. Beneficiary copayment is based on the reduced payment amount when either the “FB” or “FC” modifier is billed and the procedure and device codes appear on the lists of procedures and devices to which this policy applies. We refer readers to the CY 2008 OPPS/ASC final rule with comment period for more background information on the “FB” and “FC” payment adjustment policy (72 FR 66743 through 66749).

2. Proposed APCs and Devices Subject to the Adjustment Policy

For CY 2009, we are proposing to continue the policy of reducing OPPS payment by 100 percent of the device offset amount when a hospital furnishes a specified device without cost or with a full credit and by 50 percent of the device offset amount when the hospital receives partial credit in the amount of 50 percent or more of the cost for the device. Because the APC payments for the related services are specifically constructed to ensure that the full cost of the device is included in the payment, we continue to believe that it is appropriate to reduce the APC payment in cases in which the hospital receives a device without cost, with full credit, or with partial credit, in order to provide equitable payment in these cases (we refer readers to section II.A.2.d.(1) of this proposed rule for a description of our standard ratesetting methodology for device-dependent APCs). Moreover, the payment for these devices comprises a large part of the APC payment on which the beneficiary copayment is based, and we continue to believe it is equitable that the beneficiary cost sharing reflect the reduced costs in these cases.

We also are proposing to continue using the three criteria established in the CY 2007 OPPS/ASC final rule with comment period for determining the APCs to which this policy applies (71 FR 68072 through 68077). Specifically, (1) all procedures assigned to the selected APCs must require implantable devices that would be reported if device insertion procedures were performed, (2) the required devices must be surgically inserted or implanted devices that remain in the patient's body after the conclusion of the procedures (at least temporarily), and (3) the device offset amount must be significant, which for purposes of this policy is defined as exceeding 40 percent of the APC cost. We also are proposing to continue to restrict the devices to which Start Printed Page 41479the APC payment adjustment would apply to a specific set of costly devices to ensure that the adjustment would not be triggered by the implantation of an inexpensive device whose cost would not constitute a significant proportion of the total payment rate for an APC. We continue to believe that these criteria are appropriate because free devices and credits are likely to be associated with particular cases only when the device must be reported on the claim and is of a type that is implanted and remains in the body when the beneficiary leaves the hospital. We believe that the reduction in payment is appropriate only when the cost of the device is a significant part of the total cost of the APC into which the device cost is packaged, and that the 40 percent threshold is a reasonable definition of a significant cost.

We examined the offset amounts calculated from the CY 2009 proposed rule data and the clinical characteristics of APCs to determine whether the APCs to which the full credit/no cost and partial credit device adjustment policy applies in CY 2008 continue to meet the criteria for CY 2009, and to determine whether other APCs to which the policy does not apply in CY 2008 would meet the criteria for CY 2009. Table 18 below lists the proposed APCs to which the payment reduction policy for full credit/no cost and partial credit devices would apply in CY 2009 and displays the proposed payment reduction percentages for both full credit/no cost and partial credit circumstances. Table 19 lists the proposed devices to which this policy would apply in CY 2009. As reflected in the tables, we are proposing to add APC 0425 (Level II Arthroplasty or Implantation with Prosthesis) and APC 0648 (Level IV Breast Surgery) and their associated devices that would not otherwise be on the device list for CY 2009 because the device offset percentages for these two APCs are above the 40 percent threshold based on the CY 2007 claims data available for the proposed rule. We also are proposing to remove APC 0106 (Insertion/Replacement of Pacemaker Leads and/or Electrodes) and device HCPCS codes associated only with procedures assigned to this APC because the proposed device offset percentage for that APC is less than 40 percent. We will update the lists of APCs and devices to which the full credit/no cost and partial credit device adjustment policy would apply in CY 2009 based on the final CY 2007 claims data available for the CY 2009 OPPS/ASC final rule with comment period.

Table 18.—Proposed APC Adjustments in Cases of Devices Furnished at No Cost or With Full or Partial Credit

APCSIAPC titleProposed CY 2009 reduction for full credit case (percent)Proposed CY 2009 reduction for partial credit case (percent)
0039SLevel I Implantation of Neurostimulator8342
0040SPercutaneous Implantation of Neurostimulator Electrodes, Excluding Cranial Nerve5628
0061SLaminectomy, Laparoscopy, or Incision for Implantation of Neurostimulator Electrodes, Excluding Cranial Nerve6130
0089TInsertion/Replacement of Permanent Pacemaker and Electrodes7236
0090TInsertion/Replacement of Pacemaker Pulse Generator7336
0107TInsertion of Cardioverter-Defibrillator8944
0108TInsertion/Replacement/Repair of Cardioverter-Defibrillator Leads8844
0222SLevel II Implantation of Neurostimulator8442
0225SImplantation of Neurostimulator Electrodes, Cranial Nerve6130
0227TImplantation of Drug Infusion Device8140
0259TLevel VII ENT Procedures8342
0315SLevel III Implantation of Neurostimulator8844
0385SLevel I Prosthetic Urological Procedures5729
0386SLevel II Prosthetic Urological Procedures6432
0418TInsertion of Left Ventricular Pacing Elect7035
0425TLevel II Arthroplasty or Implantation with Prosthesis4623
0648TLevel IV Breast Surgery4121
0654TInsertion/Replacement of a permanent dual chamber pacemaker7738
0655TInsertion/Replacement/Conversion of a permanent dual chamber pacemaker7537
0680SInsertion of Patient Activated Event Recorders7135
0681TKnee Arthroplasty7437

Table 19.—Proposed Devices for Which the “FB” or “FC” Modifier Must Be Reported With the Procedure Code When Furnished at No Cost or With Full or Partial Credit

Device HCPCS codeShort descriptor
C1721AICD, dual chamber.
C1722AICD, single chamber.
C1728Cath, brachytx seed adm.
C1764Event recorder, cardiac.
C1767Generator, neurostim, imp.
C1771Rep dev, urinary, w/sling.
C1772Infusion pump, programmable.
C1776Joint device (implantable).
C1778Lead, neurostimulator.
Start Printed Page 41480
C1779Lead, pmkr, transvenous VDD.
C1785Pmkr, dual, rate-resp.
C1786Pmkr, single, rate-resp.
C1789Prosthesis, breast, imp.
C1813Prosthesis, penile, inflatab.
C1815Pros, urinary sph, imp.
C1820Generator, neuro rechg bat sys.
C1881Dialysis access system.
C1882AICD, other than sing/dual.
C1891Infusion pump, non-prog, perm.
C1897Lead, neurostim, test kit.
C1898Lead, pmkr, other than trans.
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.
L8600Implant breast silicone/eq.
L8614Cochlear device/system.
L8690Aud osseo dev, int/ext comp.

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

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

1. Background

Section 1833(t)(6) of the Act provides for temporary additional payments or “transitional pass-through payments” for certain drugs and 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 provided for certain “new” drugs and biological agents that were not being paid for as an HOPD service as of December 31, 1996, and whose cost is “not insignificant” in relation to the OPPS payments for the procedures or services associated with the new drug or biological. For pass-through payment purposes, radiopharmaceuticals are included as “drugs.” Under the statute, transitional pass-through payments can be made for at least 2 years but not more than 3 years. Proposed CY 2009 pass-through drugs and biologicals and their APCs are assigned status indicator “G” as indicated in Addenda A and B to this proposed rule.

Section 1833(t)(6)(D)(i) of the Act specifies that the pass-through payment amount, in the case of a drug or biological, is the amount by which the amount determined under section 1842(o) of the Act (or, if the drug or biological is covered under a competitive acquisition contract under section 1847B of the Act, an amount determined by the Secretary equal to the average price for the drug or biological for all competitive acquisition areas and year established under such section as calculated and adjusted by the Secretary) for the drug or biological exceeds the portion of the otherwise applicable Medicare OPD fee schedule that the Secretary determines is associated with the drug or biological. This methodology for determining the pass-through payment amount is set forth in § 419.64 of the regulations, which specifies that the pass-through payment equals the amount determined under section 1842(o) of the Act minus the portion of the APC payment that CMS determines is associated with the drug or biological. Section 1847A of the Act, 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 for drugs and biologicals described in section 1842(o)(1)(C) of the Act that are furnished on or after January 1, 2005. The ASP methodology, as applied under the OPPS, uses several sources of data as a basis for payment, including the ASP, wholesale acquisition cost (WAC), and average wholesale price (AWP). In this proposed rule, the term “ASP methodology” and “ASP-based” are inclusive of all data sources and methodologies described therein. Additional information on the ASP methodology can be found on the CMS Web site at: http://www.cms.hhs.gov/​McrPartBDrugAvgSalesPrice/​01_​overview.asp#TopOfPage.

As noted above, section 1833(t)(6)(D)(i) 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 1847B of the Act, as added by section 303(d) of Pub. L. 108-173, establishes the payment methodology for Medicare Part B drugs and biologicals under the competitive acquisition program (CAP). The Part B drug CAP was implemented July 1, 2006, and includes approximately 190 of the most common Part B drugs provided in the physician's office setting. The list of drugs and biologicals covered under the Part B drug CAP, their associated payment rates, and the Part B drug CAP pricing methodology can be found on the CMS Web site at: http://www.cms.hhs.gov/​CompetitiveAcquisforBios.

For CYs 2005, 2006, and 2007, we estimated the OPPS pass-through payment amount for drugs and biologicals to be zero based on our interpretation that the “otherwise applicable Medicare OPD fee schedule” amount was equivalent to 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). We concluded for those years that the resulting difference between these two rates would be zero. For CY 2008, we estimated the OPPS pass-through payment amount for drugs and biologicals to be $6.6 million. Our proposed OPPS pass-through payment estimate for drugs and biologicals in CY 2009 is $8.9 million, which is discussed in section VI.B. of this proposed rule.

The pass-through application and review process for drugs and biologicals is explained on the CMS Web site at: http://www.cms.hhs.gov/​HospitalOutpatientPPS/​04_​passthrough_​payment.asp.

2. Proposed Drugs and Biologicals With Expiring Pass-Through Status in CY 2008

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. We are proposing that the pass-through status of 15 drugs and biologicals expire on December 31, 2008, as listed in Table 20 below. Our standard methodology for providing payment for drugs and biologicals with expiring pass-through status in an upcoming calendar year is to determine the product's estimated per day cost and compare it with the OPPS drug packaging threshold for that Start Printed Page 41481calendar year (proposed at $60 for CY 2009). If the estimated per day cost is less than or equal to the applicable OPPS drug packaging threshold, we would package payment for the drug or biological into the payment for the associated procedure in the upcoming calendar year. If the estimated per day cost is greater than the OPPS drug packaging threshold, we would provide separate payment at the applicable relative ASP-based payment amount (proposed at ASP + 4 percent for CY 2009). For drugs and biologicals that are currently covered under the CAP, we are proposing to use the payment rates calculated under that program that are in effect as of April 1, 2008, for purposes of packaging decisions and for Addenda A and B to this proposed rule. We are proposing to update these payment rates for purposes of the CY 2009 OPPS/ASC final rule with comment period.

Three of the products with expiring pass-through status for CY 2009 are biologicals that are solely surgically implanted according to their Food and Drug Administration-approved indications. These products are described by HCPCS codes C9352 (Microporous collagen implantable tube (Neuragen Nerve Guide), per centimeter length); C9353 (Microporous collagen implantable slit tube (NeuraWrap Nerve Protector), per centimeter length); and J7348 (Dermal (substitute) tissue of nonhuman origin, with or without other bioengineered or processed elements, without metabolically active elements (Tissuemend), per square centimeter).

The methodology of calculating a product's estimated per day cost and comparing it to the annual OPPS drug packaging threshold has been used to determine the packaging status of all drugs and biologicals under the OPPS (except for our exemption for 5HT3 anti-emetics), including injectable products paid for under the OPPS as biologicals (such as intraarticular sodium hyaluronate products). However, we believe that the three products described above with expiring pass-through status for CY 2009 differ from other biologicals paid under the OPPS in that they specifically function as surgically implanted devices. Both implantable devices under the OPPS and these three biologicals with expiring pass-through status are always surgically inserted or implanted (including through a surgical incision or a natural orifice). Furthermore, in some cases these implantable biologicals can substitute for implantable nonbiologic devices (such as for synthetic nerve conduits or synthetic mesh used in tendon repair). To date, for other nonpass-through biologicals paid under the OPPS which may sometimes be used as implantable devices, we have instructed hospitals, via Transmittal 1336, Change Request 5718, dated September 14, 2007, to not separately bill for the HCPCS codes for the products when using these items as implantable devices (including as a scaffold or an alternative to human or nonhuman connective tissue or mesh used in a graft) during surgical procedures. In such cases, we consider payment for the biological used as an implantable device in a specific clinical case to be included in payment for the surgical procedure.

As we established in the CY 2003 OPPS final rule with comment period (67 FR 66763), when the pass-through payment period for an implantable device ends, it is standard OPPS policy to package payment for the implantable device into payment for its associated surgical procedure. We consider nonpass-through implantable devices to be integral and supportive items and services for which packaged payment is most appropriate. According to our regulations at § 419.2(b), as a prospective payment system, the OPPS establishes a national payment rate that includes operating and capital-related costs that are directly related and integral to performing a procedure or furnishing a service on an outpatient basis including, but not limited to, implantable prosthetics, implantable durable medical equipment, and medical and surgical supplies. Therefore, when the period of device pass-through payment ends, we package the costs of the devices no longer eligible for pass-through payment into the costs of the procedures with which the devices were reported in the claims data used to set the payment rates for the upcoming calendar year. We believe this policy to package payment for implantable devices that are integral to the performance of separately paid procedures should also apply to payment for implantable biologicals without pass-through status, when those biologicals function as implantable devices. As stated above, implantable biologicals may be used in place of other implantable nonbiologic devices whose costs are already accounted for in the associated procedural APC payments for surgical procedures. If we were to provide separate payment for these implantable biologicals without pass-through status, we would potentially be providing duplicate device payment, both through the packaged nonbiologic device cost included in the surgical procedure's payment and separate biological payment. We see no basis for treating implantable biological and nonbiologic devices without pass-through status differently for OPPS payment purposes, because both are integral to and supportive of the separately paid surgical procedures in which either may be used. Therefore, for CY 2009, we are proposing to package payment for any biological without pass-through status that is surgically inserted or implanted (through a surgical incision or a natural orifice) into the payment for the associated surgical procedure. As a result of this proposed methodology, HCPCS codes C9352, C9353 and J7348 would be packaged and assigned status indicator “N” for CY 2009. In addition, any new biologicals without pass-through status that are surgically inserted or implanted (through a surgical incision or a natural orifice) would be packaged beginning in CY 2009. Moreover, for nonpass-through biologicals which may sometimes be used as implantable devices, we would continue to instruct hospitals to not bill separately for the HCPCS codes for the products when used as implantable devices. This reporting would ensure that the costs of these products that may be, but are not always, used as implanted biologicals are appropriately packaged into payment for the associated implantation procedures.

Table 20.—Proposed Drugs and Biologicals for Which Pass-Through Status Would Expire December 31, 2008

CY 2009 HCPCS codeCY 2008 HCPCS codeCY 2008 descriptorProposed CY 2009 SIProposed CY 2009 APC
C9352C9352Neuragen nerve guide, per cmN
C9353C9353Neurawrap nerve protector, cmN
J0129J0129*Abatacept injectionK9230
Start Printed Page 41482
J0348J0348Anadulafungin injectionK0760
J0894J0894*Decitabine injectionK9231
J1740J1740*Ibandronate sodium injectionK9229
J1743J1743Idursulfase injectionK9232
J2248J2248Micafungin sodium injectionK9227
J2323J2323*Natalizumab injectionK9126
J2778J2778*Ranibizumab injectionK9233
J3243J3243Tigecycline injectionK9228
J3473J3473Hyaluronidase recombinantN
J7348J7348Tissuemend tissueN
J7349J7349Primatrix tissueK1141
J9303J9303Panitumumab injectionK9235
* Indicates that the drug was paid at a rate determined by the Part B drug CAP methodology while identified as pass-through under the OPPS.

3. Proposed Drugs, Biologicals, and Radiopharmaceuticals With New or Continuing Pass-Through Status in CY 2009

We are proposing to continue pass-through status in CY 2009 for 16 drugs and biologicals. These items, which were approved for pass-through status between April 1, 2007 and July 1, 2008, are listed in Table 21. The APCs and HCPCS codes for these proposed drugs and biologicals listed in Table 21 are assigned status indicator “G” in Addenda A and B to this proposed rule.

Section 1833(t)(6)(D)(i) of the Act sets the amount of pass-through payment for pass-through drugs and biologicals (the pass-through payment amount) as the difference between the amount authorized under section 1842(o) of the Act (or, if the drug or biological is covered under a CAP under section 1847B of the Act, an amount determined by the Secretary equal to the average price for the drug or biological for all competitive acquisition areas and year established under such section as calculated and adjusted by the Secretary) and the portion of the otherwise applicable fee schedule amount that the Secretary determines is associated with the drug or biological. Given our CY 2009, proposal to provide payment for nonpass-through separately payable drugs and biologicals at ASP+4 percent as described further in section V.B.3. of this proposed rule, we believe it would be consistent with the statute to provide payment for drugs and biologicals with pass-through status that are not part of the Part B drug CAP at a rate of ASP+6 percent, the amount authorized under section 1842(o) of the Act, rather than ASP+4 percent that would be the otherwise applicable fee schedule portion associated with the drug or biological. The difference between ASP+4 percent and ASP+6 percent, therefore, would be the CY 2009 pass-through payment amount for these drugs and biologicals. Thus, for CY 2009, we are proposing to pay for pass-through drugs and biologicals that are not part of the Part B drug CAP at ASP+6 percent, equivalent to the rate these drugs and biologicals would receive in the physician's office setting in CY 2009.

Section 1842(o) of the Act also states that if a drug or biological is covered under the CAP 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 year established as calculated and adjusted by the Secretary. For CY 2009, we are proposing to provide payment for drugs and biologicals with pass-through status that are offered under the Part B drug CAP at a rate equal to the Part B drug CAP rate. Therefore, considering ASP+4 percent to be the otherwise applicable fee schedule portion associated with these drugs or biologicals, the difference between the Part B drug CAP rate and ASP+4 percent would be the pass-through payment amount for these drugs and biologicals. HCPCS codes that are offered under the CAP program as of April 1, 2008 are identified in Table 21 below with an asterisk.

In section V.B.5. of this proposed rule, we discuss our proposal to make separate payment in CY 2009 for new drugs and biologicals with a HCPCS code but without hospital claims data, 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's office setting (or under section 1847B of the Act, if the drug or biological is covered under a competitive acquisition contract) only if we have received a pass-through application for the item and pass-through status has been subsequently granted. Otherwise, we are proposing to pay ASP+4 percent for these products in CY 2009.

In addition, we are proposing to update pass-through payment rates on a quarterly basis on our Web site during CY 2009 if later quarter ASP submissions (or more recent WAC or AWP information, as applicable) indicate that adjustments to the payment rates for these pass-through drugs and biologicals are necessary. If a drug or biological that has been granted pass-through status for CY 2009 becomes covered under the Part B drug CAP, we are proposing to make the appropriate adjustments to the payment rates for these drugs and biologicals on a quarterly basis.

In CY 2009, we are proposing to provide payment for diagnostic and therapeutic radiopharmaceuticals that are granted pass-through status based on the ASP methodology. As stated above, for purposes of pass-through payment, we consider radiopharmaceuticals to be drugs under the OPPS and, therefore, if a diagnostic or therapeutic radiopharmaceutical receives pass-through status during CY 2009, we are proposing to follow the standard ASP methodology to determine its pass-through payment rate under the OPPS. If ASP information is available, the payment rate would be equivalent to the payment rate that drugs receive under section 1842(o) of the Act, that is, ASP+6 percent. If ASP data are not available for a radiopharmaceutical, we are proposing to base the pass-through payment on the product's WAC. If WAC information is also not available, we are proposing to provide payment for the pass-through radiopharmaceutical at 95 percent of its most recent AWP.Start Printed Page 41483

Table 21.—Proposed Drugs and Biologicals With Continuing Pass-Through Status in CY 2009

CY 2008 HCPCS codeCY 2009 HCPCS codeShort descriptorProposed CY 2009 SIProposed CY 2009 APC
C9238C9238Inj, levetiracetamG9238
C9239C9239Inj, temsirolimusG1168
C9240*C9240Injection, ixabepiloneG9240
C9241C9241Injection, doripenemG9241
C9242C9242Injection, fosaprepitantG9242
C9354C9354Veritas collagen matrix, cm2G9354
C9355C9355Neuromatrix nerve cuff, cmG9355
C9356C9356TenoGlide Tendon Prot, cm2G9356
C9357C9357Flowable Wound Matrix, 1 ccG9357
C9358C9358SurgiMend, 0.5 cm2G9358
J1300J1300Eculizumab injectionG9236
J1571J1571HepaGam B IM InjectionG0946
J1573J1573Hepagam B intravenous, injG9356
J3488*J3488Reclast injectionG0951
J9226J9226Supprelin LA implantG1142
J9261J9261Nelarabine injectionG0825
* Indicates that the drug was paid at a rate determined by the Part B drug CAP methodology while identified as pass-through under the OPPS.

4. Proposed Reduction of Transitional Pass-Through Payments for Diagnostic Radiopharmaceuticals To Offset Costs Packaged Into APC Groups

Prior to CY 2008, certain diagnostic radiopharmaceuticals were paid separately under the OPPS if their mean per day costs were greater than the applicable year's drug packaging threshold. In CY 2008 (72 FR 66768), we packaged payment for all nonpass-through diagnostic radiopharmaceuticals as ancillary and supportive items and services. Specifically, we packaged payment for all nonpass-through diagnostic radiopharmaceuticals, including those products that would not otherwise have been packaged based solely on the CY 2008 drug packaging threshold, into payment for their associated nuclear medicine procedures. We are proposing to continue to package payment in CY 2009 for all nonpass-through diagnostic radiopharmaceuticals as discussed in section V.B.2.b. of this proposed rule.

As previously noted, for OPPS pass-through payment purposes, radiopharmaceuticals are considered to be “drugs.” As described above, section 1833(t)(6)(D)(i) of the Act specifies that the transitional pass-through payment amount for pass-through drugs and biologicals is the difference between the amount paid under section 1842(o) or the Part B drug CAP rate and the otherwise applicable OPPS payment amount. Furthermore, transitional pass-through payments for drugs, biologicals, and radiopharmaceuticals under the OPPS are made for a period of at least 2 but not more than 3 years. There are currently no radiopharmaceuticals with pass-through status under the OPPS. For new pass-through radiopharmaceuticals with no ASP information or CAP rate, our proposed CY 2009 payment methodology is discussed in section V.A.3. of this proposed rule. According to this proposal and consistent with our CY 2008 final policy (72 FR 66755), new pass-through diagnostic radiopharmaceuticals without ASP information would be paid based on WAC or, if WAC is not available, based on 95 percent of the product's most recently published AWP.

As described in section IV.A.2.a. of this proposed rule regarding pass-through device payment, we have consistently employed an established methodology to estimate the portion of each APC payment rate that could reasonably be attributed to the cost of an associated device eligible for pass-through payment (the APC device offset amount) to avoid duplicate payment for the device portion of a procedure. This calculation uses calendar year claims data from the period used for the most recent recalibration of the APC payment rates (72 FR 66751 through 66752). We evaluate new pass-through device categories individually to determine if there are device costs packaged into the associated procedural APC payment rate from predecessor devices that resemble the new pass-through device category, suggesting that a device offset amount would be appropriate. On an ongoing basis, through the quarterly transmittals that implement the quarterly OPPS updates, we establish the applicable APC device offset amount, if any, in the same quarter as the eligible pass-through device category is first established. We update device offset amounts annually for eligible pass-through device categories when we recalibrate APC payment rates. We note that we initially implemented the device offset policy in CY 2001 only for pacemakers and neurostimulators but subsequently expanded the offset to other pass-through devices with costs from predecessor devices packaged into the existing APC structure beginning in CY 2002. Since April 2002, we have applied a uniform reduction, the APC device offset amount for the associated procedure, to payment for each of the devices receiving transitional pass-through payments furnished on or after April 1, 2002, and for which we have determined that the pass-through device resembles packaged predecessor devices.

Because of our proposed CY 2009 packaging policy for diagnostic radiopharmaceuticals, we believe that a payment offset policy, as discussed previously for implantable devices, is now appropriate for diagnostic radiopharmaceuticals approved for pass-through payment status. An APC radiopharmaceutical offset amount would allow us to avoid duplicate payment for the diagnostic radiopharmaceutical portion of a nuclear medicine procedure by providing a diagnostic radiopharmaceutical pass-through payment that represents the difference between the payment rate for the diagnostic radiopharmaceutical and the packaged radiopharmaceutical cost included in the procedural APC payment for the nuclear medicine procedure. The otherwise applicable OPPS payment amount for the diagnostic radiopharmaceutical would roughly be the median cost of the predecessor diagnostic radiopharmaceuticals that is packaged into the payment for the nuclear Start Printed Page 41484medicine procedure. This APC radiopharmaceutical offset amount, similar to the longstanding device offset policy for payment of implantable devices with pass-through status, would be calculated based on a percentage of the APC payment for a nuclear medicine procedure attributable to the costs of packaged diagnostic radiopharmaceuticals, as reflected in the most recent complete year of hospital outpatient claims data.

Beginning in CY 2009, we are proposing to review each new pass-through diagnostic radiopharmaceutical on a case-by-case basis, to determine whether radiopharmaceutical costs associated with predecessors of the new product are packaged into the existing APC structure for those nuclear medicine procedures with which the new radiopharmaceutical would be used. This proposed methodology is consistent with our current policy for new device categories. Because of the nature of diagnostic radiopharmaceuticals and the small number of nuclear medicine procedures to which they are typically closely linked, we believe that we would usually find costs for predecessor diagnostic radiopharmaceuticals packaged into the existing APC payment for the nuclear medicine procedures associated with the new product. In these cases, we would deduct the uniform, applicable APC radiopharmaceutical offset amount for the associated nuclear medicine procedure, calculated as described below, from the pass-through payment for the diagnostic radiopharmaceutical. We are proposing to establish the pertinent APC radiopharmaceutical offset amounts for newly eligible pass-through diagnostic radiopharmaceuticals quarterly through the transmittals that implement the quarterly OPPS updates and update these offset amounts annually, as needed.

Not all CY 2007 OPPS claims for nuclear medicine procedures include radiolabeled products because radiopharmaceutical claims processing edits were implemented beginning in CY 2008. These claims processing edits require that a radiolabeled product be included on all claims for nuclear medicine procedures to ensure that we capture the full costs of the packaged diagnostic radiopharmaceuticals used for the procedures in future ratesetting. Because our most recent claims data do not yet reflect the results of these edits, we are proposing to use only those claims that pass the radiopharmaceutical edits to set rates for nuclear medicine procedures in CY 2009 as discussed in section II.A.2.d.(5) of this proposed rule. We are proposing to use the same claims to calculate the APC radiopharmaceutical offset amounts. Specifically, we would calculate the APC radiopharmaceutical offset fraction as: 1 minus (the cost from single procedure claims in the APC that pass the radiopharmaceutical edits after removing the costs for packaged diagnostic radiopharmaceuticals divided by the cost from single procedure claims in the APC that pass the radiopharmaceutical edits). To determine the actual APC offset amount, we would then multiply the resulting fraction by the CY 2009 APC payment amount for the procedure with which the new diagnostic radiopharmaceutical is used and, accordingly, reduce the transitional pass-through payment for the diagnostic radiopharmaceutical with pass-through status by this amount.

Table 22 displays the APCs to which nuclear medicine procedures are proposed for assignment in CY 2009 and for which we would expect that an APC radiopharmaceutical offset could be applicable in the case of new diagnostic radiopharmaceuticals with pass-through status.

Table 22.—APCs to Which Nuclear Medicine Procedures Are Proposed for CY 2009 Assignment

APCAPC title
0307Myocardial Positron Emission Tomography (PET) imaging.
0308Non-Myocardial Positron Emission Tomography (PET) imaging.
0377Level II Cardiac Imaging.
0378Level II Pulmonary Imaging.
0389Level I Non-imaging Nuclear Medicine.
0390Level I Endocrine Imaging.
0391Level II Endocrine Imaging.
0392Level II Non-imaging Nuclear Medicine.
0393Hematologic Processing & Studies.
0394Hepatobiliary Imaging.
0395GI Tract Imaging.
0396Bone Imaging.
0397Vascular Imaging.
0398Level I Cardiac Imaging.
0400Hematopoietic Imaging.
0401Level I Pulmonary Imaging.
0402Level II Nervous System Imaging.
0403Level I Nervous System Imaging.
0404Renal and Genitourinary Studies.
0406Level I Tumor/Infection Imaging.
0408Level III Tumor/Infection Imaging.
0414Level II Tumor/Infection Imaging.

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

1. Background

Under the CY 2008 OPPS, we currently pay for drugs, biologicals, and radiopharmaceuticals that do not have pass-through status in one of two ways: Packaged payment into 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.

Section 1833(t)(16)(B) of the Act, as added by section 621(a)(2) of Pub. L. 108-173, sets the threshold for establishing separate APCs for drugs and biologicals at $50 per administration for CYs 2005 and 2006. Therefore, for CYs 2005 and 2006, we paid separately for drugs, biologicals, and radiopharmaceuticals whose per day cost exceeded $50 and packaged the costs of drugs, biologicals, and radiopharmaceuticals whose per day cost was equal to or less than $50 into the procedures with which they were billed. For CY 2007, the packaging threshold for drugs, biologicals, and radiopharmaceuticals that were not new and did not have pass-through status was established at $55. For CY 2008, the packaging threshold for drugs, biologicals, and radiopharmaceuticals that are not new and do not have pass-through status was established at $60. The methodology used to establish the $55 threshold for CY 2007, the $60 Start Printed Page 41485threshold for CY 2008, and our proposed approach for CY 2009 are discussed in more detail in section V.B.2. of this proposed rule.

In addition, since CY 2005, we have provided an exemption to this packaging determination for oral and injectable 5HT3 anti-emetic products. We discuss in section V.B.2. of this proposed rule our proposed CY 2009 payment policy for these anti-emetic products.

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

a. Drugs, Biologicals, and Therapeutic Radiopharmaceuticals

As indicated above, in accordance with section 1833(t)(16)(B) of the Act, the threshold for establishing separate APCs for payment of drugs and biologicals was set to $50 per administration during CYs 2005 and 2006. In CY 2007, we used the fourth quarter moving average Producer Price Index (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 then rounded the resulting dollar amount to the nearest $5 increment in order to determine the CY 2007 threshold amount of $55. Using the same methodology as that used in CY 2007 (which is discussed in more detail in the CY 2007 OPPS/ASC final rule with comment period (71 FR 68085 through 68086)), for CY 2008 we set the packaging threshold for establishing separate APCs for drugs and biologicals at $60.

Following the CY 2007 methodology for CY 2009, we used updated fourth quarter moving average PPI levels to trend the $50 threshold forward from the third quarter of CY 2005 to the third quarter of CY 2009 and again rounded the resulting dollar amount ($61.25) to the nearest $5 increment, which yielded a figure of $60. In performing this calculation, we used the most up-to-date forecasted, quarterly PPI estimates from CMS' Office of the Actuary (OACT). As actual inflation for past quarters replaced forecasted amounts, the PPI estimates for prior quarters have been revised (compared with those used in the CY 2007 OPPS/ASC final rule with comment period) and have been incorporated into our calculation. Based on the calculations described above, we are proposing a packaging threshold for CY 2009 of $60. As stated in the CY 2007 OPPS/ASC final rule with comment period (71 FR 68086), we believe that packaging certain items is a fundamental component of a prospective payment system, that packaging these items does not lead to beneficiary access issues and does not create a problematic site of service differential, that the packaging threshold is reasonable based on the initial establishment in law of a $50 threshold for the CY 2005 OPPS, that updating the $50 threshold is consistent with industry and government practices, and that the PPI for prescription preparations is an appropriate mechanism to gauge Part B drug inflation. During the March 2008 APC Panel meeting, the APC Panel made a recommendation supporting CMS' current methodology of adjusting the threshold dollar amount for packaging drugs and biologicals on the basis of the PPI for prescription drugs. We are adopting the APC Panel's recommendation, and we are proposing to continue this methodology for updating the drug packaging threshold for CY 2009.

To determine their CY 2009 proposed packaging status, we calculated the per day cost of all drugs, biologicals, and therapeutic radiopharmaceuticals that had a HCPCS code in CY 2007 and were paid (via packaged or separate payment) under the OPPS using claims data from January 1, 2007, to December 31, 2007. In order to calculate the per day costs for drugs, biologicals, and therapeutic radiopharmaceuticals to determine their packaging status in CY 2009, 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 70 FR 68638). To calculate the proposed CY 2009 per day costs, we used an estimated payment rate for each drug and biological of ASP+4 percent (which is the payment rate we are proposing for separately payable drugs and biologicals in CY 2009, as discussed in more detail in section V.B.3.b. of this proposed rule). We used the manufacturer submitted ASP data from the fourth quarter of CY 2007 (data that were used for payment purposes in the physician's office setting, effective April 1, 2008) to determine the proposed per day cost.

As is our standard methodology, we are proposing to use payment rates based on the ASP data from the fourth quarter of CY 2007 for budget neutrality estimates, packaging determinations, impact analyses, and completion of Addenda A and B to this proposed rule because these are the most recent data available for use at the time of development of this proposed rule. These data are also the basis for drug payments in the physician's office setting, effective April 1, 2008. For items that did not have an ASP-based payment rate, we used their mean unit cost derived from the CY 2007 hospital claims data to determine their per day cost. We packaged items with a per day cost less than or equal to $60 and identified items with a per day cost greater than $60 as separately payable. Consistent with our past practice, we crosswalked historical OPPS claims data from the CY 2007 HCPCS codes that were reported to the CY 2008 HCPCS codes that we display in Addendum B to this proposed rule for payment in CY 2009.

Our policy during previous cycles of the OPPS has been to use updated ASP and claims data to make final determinations of the packaging status of drugs, biologicals, and radiopharmaceuticals for the final rule with comment period. We note that it is also our policy to make an annual packaging determination only when we develop the OPPS/ASC final rule for the update year. Only items that are identified as separately payable in the final rule would be subject to quarterly updates. For our calculation of per day costs of drugs, biologicals, and therapeutic radiopharmaceuticals in the CY 2009 OPPS/ASC final rule with comment period, we are proposing to use ASP data from the first quarter of CY 2008, which is the basis for calculating payment rates for drugs and biologicals in the physician's office setting using the ASP methodology, effective July 1, 2008, along with updated hospital claims data from CY 2007. We note that we would also use these data for budget neutrality estimates and impact analyses for the CY 2009 OPPS/ASC final rule with comment period. Payment rates for separately payable drugs and biologicals included in Addenda A and B to that final rule with comment period would be based on ASP data from the second quarter of CY 2008, which are the basis for calculating payment rates for drugs and biologicals in the physician's office setting using the ASP methodology, effective October 1, 2008. These rates would then be updated in the January 2009 OPPS update, based on the most recent ASP data to be used for physician's office and OPPS payment as of January 1, 2009.

Consequently, the packaging status for drugs, biologicals, and therapeutic radiopharmaceuticals in the CY 2009 OPPS/ASC final rule with comment period using the updated data may be different from their packaging status determined based on the data used for Start Printed Page 41486this proposed rule. Under such circumstances, we are proposing to apply the following policies to these drugs, biologicals, and therapeutic radiopharmaceuticals whose relationship to the proposed $60 threshold changes based on the final updated data:

  • Drugs, biologicals, and therapeutic radiopharmaceuticals that were paid separately in CY 2008, proposed for separate payment in CY 2009, and have per day costs equal to or less than $60 based on the updated ASPs and hospital claims data used for the CY 2009 final rule with comment period, would continue to receive separate payment in CY 2009.
  • Drugs, biologicals, and therapeutic radiopharmaceuticals that were packaged in CY 2008 and that were proposed for separate payment in CY 2009, and have per day costs equal to or less than $60 based on the updated ASPs and hospital claims data used for the CY 2009 final rule with comment period, would remain packaged in CY 2009.
  • Drugs, biologicals, and therapeutic radiopharmaceuticals for which we proposed packaged payment in CY 2009, but have per day costs greater than $60 based on the updated ASPs and hospital claims data used for the CY 2009 final rule with comment period, would receive separate payment in CY 2009.

For CY 2009, we are also proposing to continue exempting the oral and injectable forms of 5HT3 anti-emetic products from packaging, thereby making separate payment for all of the 5HT3 anti-emetic products. As we stated in the CY 2005 OPPS final rule with comment period (69 FR 65779 through 65780), it is our understanding that 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.

Table 23.—Proposed Anti-Emetics to Exempt From CY 2009 OPPS Drug Packaging Threshold

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

b. Proposed Payment for Diagnostic Radiopharmaceuticals and Contrast Agents

As established in the CY 2008 final rule with comment period (72 FR 66766 through 66768), we began packaging payment for all diagnostic radiopharmaceuticals and contrast agents into the payment for the associated procedure, regardless of their per day costs. Packaging costs into a single aggregate payment for a service, encounter, or episode-of-care is a fundamental principle that distinguishes a prospective payment system from a fee schedule. In general, packaging the costs of items and services into the payment for the primary procedure or service with which they are associated encourages hospital efficiencies and also enables hospitals to manage their resources with maximum flexibility. Prior to CY 2008, we noted that the proportion of drugs, biologicals, and radiopharmaceuticals that were separately paid under the OPPS had increased in recent years, a pattern that we also observed for procedural services under the OPPS. Our final CY 2008 policy that packaged payment for all nonpass-through diagnostic radiopharmaceuticals and contrast agents regardless of their per day costs contributed significantly to expanding the size of the OPPS payment bundles and is consistent with the principles of a prospective payment system.

During the March 2008 meeting of the APC Panel, the APC Panel recommended that CMS continue to package payment for diagnostic radiopharmaceuticals for CY 2009. We are accepting this recommendation and, therefore, for CY 2009, we are proposing to continue packaging payment for all nonpass-through diagnostic radiopharmaceuticals and contrast agents regardless of their per day costs for the reasons discussed below. As we established in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66768), we identify diagnostic radiopharmaceuticals specifically as those Level II HCPCS codes that include the term “diagnostic” along with a radiopharmaceutical in their long code descriptors.

We continue to believe that our proposal to continue to treat diagnostic radiopharmaceuticals and contrast agents differently from other specified covered outpatient drugs (SCODs) is appropriate for several reasons. First, the statutory requirement that we must pay separately for drugs and biologicals for which the per day cost exceeds $50 under section 1833(t)(16)(B) of the Act has expired. Therefore, we are not restricted in the extent to which we can package payment for SCODs and other drugs, nor are we required to treat all classes of drugs in the same manner with regard to whether they are packaged or separately paid. We have used this flexibility to make different packaging determinations with regard to specific anti-emetic drugs.

Second, diagnostic radiopharmaceuticals and contrast agents function effectively as supplies that enable the provision of an independent service. More specifically, contrast agents are always provided in support of a diagnostic or therapeutic procedure that involves imaging, and diagnostic radiopharmaceuticals are always provided in support of a diagnostic nuclear medicine procedure. This is different from many other SCODs, such as therapeutic radiopharmaceuticals, where the therapeutic radiopharmaceutical itself is the primary therapeutic modality. Given the inherent function of contrast agents and diagnostic radiopharmaceuticals as supportive to the performance of an independent procedure, we continue to view the packaging of payment for contrast agents and diagnostic radiopharmaceuticals as a logical expansion of packaging for SCODs. As we consider the possibility of moving to additional encounter-based and episode-based payment in future years, we may consider additional options for packaging more SCODs in the future.

Third, section 1833(t)(14)(A)(iii) of the Act requires that payment for SCODs be set prospectively based on a measure of average hospital acquisition cost. We believe our claims data offer an acceptable proxy for average hospital acquisition cost and associated handling and preparation costs for radiopharmaceuticals. We believe that hospitals have adapted to the CY 2006 coding changes for radiopharmaceuticals and responded to our instructions to include charges for radiopharmaceutical handling in their charges for the radiopharmaceutical products. We have relied on mean unit Start Printed Page 41487costs derived from our claims data as one proxy for average acquisition cost and pharmacy overhead, and we use these data to determine the packaging status for SCODs.

In the case of contrast agents, while we have ASP data that could be a proxy for average hospital acquisition cost and associated handling and preparation costs, payment for almost all contrast agents would be packaged under the OPPS for CY 2009 based on the proposed CY 2009 OPPS $60 per day packaging threshold. Therefore, we believe it would be appropriate to continue to package payment for all contrast agents for CY 2009, to provide accurate payment for the associated tests and procedures using an approach that promotes hospital efficiency.

In summary, we view diagnostic radiopharmaceuticals and contrast agents as ancillary and supportive of the diagnostic tests and therapeutic procedures in which they are used. In light of our authority to make different packaging determinations and the improved reporting of hospital charges for radiopharmaceutical handling in the CY 2007 claims data, we are proposing to continue packaging payment for all contrast agents and diagnostic radiopharmaceuticals regardless of their per day costs for CY 2009.

For more information on how we are proposing to set CY 2009 payment rates for nuclear medicine procedures in which diagnostic radiopharmaceuticals are used and echocardiography services provided with and without contrast agents, we refer readers to sections II.A.2.d.(5) and (4), respectively, of this proposed rule.

During the March 2008 APC Panel meeting, the APC Panel also recommended that CMS present data at the first CY 2009 APC Panel meeting on usage and frequency, geographic distribution, and size and type of hospitals performing nuclear medicine studies using radioisotopes in order to ensure that access is preserved for Medicare beneficiaries. We are accepting this recommendation and will present information to the APC Panel at its first CY 2009 meeting when initial claims data from CY 2008 will be available.

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

a. Payment for Specified Covered Outpatient Drugs (SCODs)

Section 1833(t)(14) of the Act, as added by section 621(a)(1) of Pub. L. 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 has been established and that either is a radiopharmaceutical agent or is a drug or biological for which payment was made on a pass-through basis on or before December 31, 2002.

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

  • A drug or biological for which payment is first made on or after January 1, 2003, under the transitional pass-through payment provision in section 1833(t)(6) of the Act.
  • A drug or biological for which a temporary HCPCS code has not been assigned.
  • During CYs 2004 and 2005, an orphan drug (as designated by the Secretary).

Section 1833(t)(14)(A)(iii) of the Act, as added by section 621(a)(1) of Pub. L. 108-173, requires that payment for SCODs in CY 2006 and subsequent years be equal to the average acquisition cost for the drug for that year as determined by the Secretary, subject to any adjustment for overhead costs and taking into account the hospital acquisition cost survey data collected by the Government Accountability Office (GAO) in CYs 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.

In the CY 2006 OPPS proposed rule (70 FR 42728), we discussed the CY 2005 report by MedPAC regarding pharmacy overhead costs in HOPDs and summarized the findings of that study:

  • Handling costs for drugs, biologicals, and radiopharmaceuticals administered in the HOPD are not insignificant;
  • Little information is available about the magnitude of pharmacy overhead costs;
  • Hospitals set charges for drugs, biologicals, and radiopharmaceuticals at levels that reflected their respective handling costs; and
  • Hospitals vary considerably in their likelihood of providing services which utilize drugs, biologicals, or radiopharmaceuticals with different handling costs.

As a result of these findings, MedPAC developed seven drug categories for pharmacy and nuclear medicine handling costs based on the estimated level of hospital resources used to prepare the products. Associated with these categories were two recommendations for accurate payment of pharmacy overhead under the OPPS.

1. CMS should establish separate, budget neutral payments to cover the costs hospitals incur for handling separately payable drugs, biologicals and radiopharmaceuticals.

2. CMS should define a set of handling fee APCs that group drugs, biologicals, and radiopharmaceuticals based on attributes of the products that affect handling costs; CMS should instruct hospitals to submit charges for these APCs and base payment rates for the handling fee APCs on submitted charges reduced to costs.

In assigning drugs to the seven categories, MedPAC considered additional characteristics that contribute to differential pharmacy handling costs, such as radioactivity, toxicity, mode of administration, and the need for special handling. While MedPAC was able to include information on a variety of drugs with many of these characteristics, hospitals participating in MedPAC's research were not able to provide sufficient cost information regarding the handling of outpatient radiopharmaceuticals for MedPAC to make a recommendation about overhead categories for these products.

In response to the MedPAC findings, in the CY 2006 OPPS proposed rule (70 FR 42729), we discussed our belief that because of the varied handling resources required to prepare different forms of drugs, it would be impossible to exclusively and appropriately assign a drug to a certain overhead category that would apply to all hospital outpatient uses of the drug. Therefore, our CY 2006 OPPS proposal included a proposal to establish three distinct Level II HCPCS C-codes and three corresponding APCs for drug handling categories to differentiate overhead costs for drugs and biologicals. We also proposed: (1) To combine several overhead categories recommended by MedPAC according to Table 24, as shown below; (2) to establish three drug handling categories, as we believed that larger groups would minimize the number of drugs that may fit into more than one category and would lessen any undesirable payment policy incentives to utilize particular forms of drugs or specific preparation methods; (3) to collect hospital charges for these C-codes for 2 years; and (4) to ultimately base payment for the corresponding drug handling APCs on Start Printed Page 41488CY 2006 claims data available for the CY 2008 OPPS. Both the MedPAC categories and the CY 2006 proposed categories are identified in Table 24 below.

Table 24.—Drug Overhead Category Groupings Discussed in the CY 2006 OPPS Proposed Rule

MedPAC drug overhead categoryDescriptionProposed CY 2006 drug overhead category
Category 1Orals (oral tablets, capsules, solutions)Category 1.
Category 2Injection/Sterile Preparation (draw up a drug for administration)Category 2.
Category 3Single IV Solution/Sterile Preparation (adding a drug or drugs to a sterile IV solution) or Controlled SubstancesCategory 2.
Category 4Compounded/Reconstituted IV Preparations (requiring calculations performed correctly and then compounded correctly)Category 2.
Category 5Specialty IV or Agents requiring special handling in order to preserve their therapeutic value or Cytotoxic Agents, oral (chemotherapeutic, teratogenic, or toxic) requiring personal protective equipment (PPE)Category 3.
Category 6Cytotoxic Agents (chemotherapeutic, teratogenic, or toxic) in all formulations except oral requiring PPECategory 3.
Category 7Radiopharmaceutical: Basic and Complex Diagnostic Agents, PET Agents, Therapeutic Agents, and Radioimmunoconjugates

In the CY 2006 OPPS final rule with comment period (70 FR 68659 through 68665), we discussed the public comments we received on our proposal regarding pharmacy overhead. The overwhelming majority of commenters did not support our proposal and urged us not to finalize this policy, as it would be administratively burdensome for hospitals. Therefore, we did not finalize this proposal for CY 2006.

As we noted in the CY 2006 OPPS final rule with comment period (70 FR 68640), 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. After considering all public comments received, in the CY 2006 OPPS final rule with comment period (70 FR 68642), we established a policy to provide a combined payment rate of ASP+6 percent for both the hospital's drug and biological acquisition costs and associated pharmacy overhead costs, as this was the equivalent average ASP-based amount to the aggregate cost from CY 2004 hospital claims data for separately payable drugs under the OPPS. We acknowledged the limitations of this methodology, namely that pharmacy overhead costs of specific drugs and biologicals are not directly related to their specific acquisition costs. We also solicited additional comments on future options for ways to identify and provide an alternative payment methodology for pharmacy overhead costs under the OPPS.

In the CY 2007 OPPS/ASC final rule with comment period (71 FR 68091), we proposed and finalized a policy that provided a single payment of ASP+6 percent for the hospital's acquisition cost for the drug or biological and all associated pharmacy overhead and handling costs. The ASP+6 percent rate was higher than the equivalent average ASP-based amount calculated from claims of ASP+4 percent, but we adopted this methodology for stability while we continued to examine the issue of the costs of pharmacy overhead in the HOPD.

We continued to meet with interested pharmacy stakeholders regarding the various issues related to hospital charging practices and how these practices would affect our potential proposals for payment of drugs and pharmacy overhead under the OPPS. Many comments from the hospital industry reiterated that hospitals do not attach a specific pharmacy overhead charge to a particular drug. In particular, a more expensive drug with high pharmacy overhead costs does not commonly result in a sufficiently high hospital charge for the drug to account for all of the associated drug acquisition and pharmacy overhead costs. We have been told that hospitals frequently allocate a relatively greater pharmacy overhead charge to the single hospital charge for less expensive drugs to counterbalance the lesser charge for pharmacy overhead for more expensive drugs with high pharmacy overhead costs.

Therefore, the pharmacy overhead costs of one drug may be distributed among charges for many drugs. This practice of unequally distributing pharmacy overhead charges among all drugs provided by the hospital pharmacy makes the single CCR for cost center 5600 (Drugs Charged to Patients) applied for OPPS cost estimation of drugs through the revenue code-to-cost center crosswalk result in less accurate costs for individual drugs. The result is that the charges and estimated costs for less expensive drugs shoulder a higher burden of pharmacy overhead costs as compared to the charges and estimated costs for more expensive drugs. Commenters have suggested that our OPPS methodology of applying a single CCR for the cost estimation of all drugs unfairly reduces payment amounts for separately payable expensive drugs, as the actual CCR varies widely across drugs. The concerns surrounding the impact on payment accuracy of differential hospital charging practices for pharmacy overhead costs resemble the concerns regarding charge compression that have been raised for expensive implantable devices over the past several years of the OPPS (72 FR 66599 through 66602). In general, differential hospital markup policies related to the cost of an item lead to overestimating the cost of inexpensive items and underestimating the cost of expensive items when a single CCR is applied to charges on claims.

In the CY 2008 OPPS/ASC proposed rule (72 FR 42735), in response to ongoing discussions with interested parties, we proposed to continue our methodology of providing a combined payment rate for drug and biological acquisition and pharmacy overhead costs. We also proposed to instruct hospitals to remove the pharmacy overhead charge for both packaged and separately paid drugs and biologicals from the charge for the drug or biological and report the pharmacy overhead charge on an uncoded revenue code line on the claim. We believed that Start Printed Page 41489this would provide us with an avenue for collecting pharmacy handling cost data specific to drugs in order to package the overhead costs of these items into the associated procedures, most likely drug administration services. We believed that this methodology of reporting pharmacy overhead costs on an uncoded revenue center line would increase the accuracy of pharmacy overhead payments for drugs and biologicals as it would package the overhead cost for similar drugs into the commonly associated separately payable services, for example, by packaging the pharmacy overhead cost for a chemotherapy drug with the cost of the chemotherapy drug administration service also included on the claim.

Similar to the public response to our CY 2006 pharmacy overhead proposal, the overwhelming majority of commenters did not support our CY 2008 proposal and urged us to not finalize this policy (72 FR 66761). While MedPAC supported the proposal for improving the accuracy of drug payment by incorporating variability in pharmacy overhead costs, most other commenters cited the increased hospital burden that would be associated with manipulating accounting systems and making manual calculations, along with concerns about making these changes to their billing operations while continuing to set charges for particular services that were the same for all payers. After hearing concerns about the burden of establishing a unique pharmacy overhead charge for every drug, at its September 2007 meeting, the APC Panel recommended that hospitals not be required to separately report charges for pharmacy overhead and handling and that payment for overhead be included as part of drug payment. The APC Panel also recommended that CMS continue to evaluate alternative methods to standardize the capture of pharmacy overhead costs in a manner that is simple to implement at the organizational level (72 FR 66761). Because of these concerns, we did not finalize the proposal to instruct hospitals to separately report pharmacy overhead charges for CY 2008. Instead, in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66763), we finalized a policy of providing payment for separately payable drugs and biologicals and their pharmacy overhead at ASP+5 percent as a transition from their CY 2007 payment of ASP+6 percent to payment based on the equivalent average ASP-based payment rate calculated from hospital claims, which was ASP+3 percent for the CY 2008 OPPS/ASC final rule with comment period. Hospitals continued to include charges for pharmacy overhead costs in the line-item charges for the associated drugs reported on claims.

b. Proposed Payment Policy

The provision in section 1833(t)(14)(A)(iii) of the Act, as described above, continues to be applicable to determining payments for SCODs for CY 2009. This provision requires that, in CY 2009, payment for SCODs 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 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. In addition, section 1833(t)(14)(E)(ii) authorizes the Secretary to adjust APC weights for SCODs to take into account the MedPAC report relating to overhead and related expenses, such as pharmacy services and handling costs.

During this past year, we have met with a variety of stakeholders regarding different proposals for collecting pharmacy overhead cost information for setting OPPS payment rates. One such proposal was endorsed by several stakeholders during the March 2008 APC Panel meeting. Presenters to the APC Panel explained that CMS' methodology of using a single CCR to determine the acquisition and pharmacy overhead cost for all drugs attributes a greater relative share of pharmacy overhead cost to the lower-priced packaged drugs and a lower relative share of pharmacy overhead cost to the more expensive, separately payable drugs. Because the OPPS packages payment for drugs and biologicals with an estimated per day cost of $60 or less and estimates the equivalent average ASP-based amount based only on the costs of separately payable drugs, some pharmacy overhead cost that should be associated with separately payable drugs is being packaged into payment for the procedures that are performed with lower cost packaged drugs.

This stakeholder proposal suggested that CMS recalculate the equivalent average ASP-based amount based on the costs of packaged and separately payable drugs with HCPCS codes, rather than on our current methodology of calculating an ASP-based amount solely from claims data for separately payable drugs. CMS would then use this equivalent average ASP-based amount (or the physician's office payment rate of ASP+6 percent) to represent the acquisition and pharmacy overhead cost of all packaged drugs and would substitute this figure for the costs of packaged drugs in ratesetting for their associated procedures. The pool of money under the budget neutral OPPS that would result from this methodology that would package lower drug costs with associated procedures than our current methodology could then be distributed to OPPS payment in a number of ways, such as increasing the combined acquisition and overhead cost payment for separately payable drugs to a higher average ASP-based amount and/or providing separate payment for pharmacy overhead costs for either all drugs or only separately payable drugs based on a flat add-on rate or on tiers of pharmacy service complexity. The stakeholders presented APC median cost estimates demonstrating that their recommendation would significantly impact drug payment rates but would only change the majority of APC median costs by less than 2 percent.

At its March 2008 meeting, the APC Panel recommended that CMS work with stakeholders to further develop recommendations on the validity of this methodology and conduct an impact analysis, with consideration for CY 2009 rulemaking. Because CMS would redistribute pharmacy overhead cost when modeling payment rates for ratesetting, the suggested methodology would be administratively simple for hospitals. This approach also would refine the existing OPPS methodology for estimating pharmacy overhead cost in a budget neutral manner, without redistributing money from the payment for nondrug components of other services to payment for drugs. However, we also believe that substituting an average ASP-based amount (or the physician's office payment rate of ASP+6 percent) on claims for purposes of packaging drug costs into associated procedures would be a highly significant change to our established methodology. It is our longstanding policy to accept hospital charge data as it is reported on claims, in order to capture variability in hospitals' unique charges that is specific to each hospital's charging structure, as well as other potential efficiencies. The stakeholder recommendation would eliminate the expected variability in hospitals' costs of drugs that are packaged into their associated procedures.

While we appreciate the thoughtful approach to OPPS payment for Start Printed Page 41490pharmacy overhead costs as described above, we believe there are several issues to be seriously considered before we could potentially propose the adoption of such a methodology including, but not limited to, its implications for how we would more generally estimate the costs of items packaged into a primary service. We package payment under the OPPS for the costs of many items and services other than relatively inexpensive drugs that are integral to separately payable primary services. In addition, it is not clear to us what approach for redistributing pharmacy overhead dollars would be most accurate and operationally feasible for CMS. We specifically invite public comment on this potential approach for estimating pharmacy overhead costs and redistributing pharmacy overhead payment under the OPPS.

Recently, RTI completed its evaluation of the OPPS cost-based weight methodology in general, and charge compression in particular. Pharmacy stakeholders have already noted that accurately estimating pharmacy overhead cost is intimately related to the CCR used to estimate costs from claims' charges. As discussed above, hospitals have informed us that they redistribute the cost of pharmacy overhead from expensive to inexpensive drugs when setting charges for drugs.

RTI determined that hospitals billing a greater percent of drug charges under revenue code 0636 (Drugs requiring detail coding) out of all revenue codes related to drugs had a significantly higher CCR for cost center 5600 (Drugs Charged to Patients). “These findings are consistent with the a priori expectation that providers tend to use lower markup rates on these relatively expensive items, as compared with other items in their CCR group.” (RTI report, “Refining Cost to Charge Ratios for Calculating APC and MS-DRG Relative Payment Weights,” July 2008). RTI, in its March 2007 report, noted that hospitals billing a greater percent of drug charges under revenue code 0258 (IV solutions) out of all revenue codes related to drugs had a significantly lower CCR for cost center 5600. In the short term, RTI recommends that CMS adopt regression-adjusted CCRs under the OPPS for drugs requiring detail coding (reported under revenue code 0636) and for IV solutions (reported under revenue code 0258) for purposes of estimating median costs. To eliminate the need for simulated CCRs in the longer term, RTI recommends that CMS create a new standard cost center on the cost report for drugs requiring detail coding (reported under revenue code 0636) to mitigate charge compression by acquiring more specific CCRs (RTI report, “Refining Cost to Charge Ratios for Calculating APC and MS-DRG Relative Payment Weights,” July 2008.). RTI's recommendations provide other alternatives to the recent pharmacy stakeholder recommended approach described above for improving the cost estimation of the acquisition and pharmacy overhead costs of drugs under the OPPS.

As discussed further in section II.A.1.c. of this proposed rule and consistent with our proposal for the FY 2009 IPPS, we are not proposing to adopt regression-based CCRs for cost estimation in any area of the CY 2009 OPPS, including drugs requiring detail coding and IV solutions. Instead, we believe that RTI's empirical findings would appropriately be addressed through concrete steps to improve the quality of accounting information used to estimate future costs from drug charges. Cognizant of public comments on past proposals, we also believe that this should be done in a manner that is fairly simple for hospitals to implement.

For CY 2009, we are proposing to continue our policy of making a combined payment for the acquisition and pharmacy overhead costs of separately payable drugs and biologicals at an equivalent average ASP-based amount calculated based on our standard methodology of estimating drug costs from claims. Using updated data for this proposed rule, after determining the proposed CY 2009 packaging status of drugs and biologicals, we estimated the aggregate cost of all drugs and biologicals (excluding therapeutic radiopharmaceuticals for which no ASP data are currently available) that would be separately payable in CY 2009 based on mean costs from hospital claims data and calculated the equivalent average ASP-based payment rate that would equate to the aggregate reported hospital cost. The results of our analysis indicate that setting the payment rates for drugs and biologicals that would be separately payable in CY 2009 based on hospital costs would be equivalent to providing payment, on average, at ASP+4 percent. Therefore, we are proposing to pay for separately payable drugs and biologicals under the CY 2009 OPPS at ASP+4 percent because we believe that this is the best currently available proxy for average hospital acquisition cost and associated pharmacy overhead costs.

In addition, we are also proposing to break the single standard cost center 5600 into two standard cost centers, Drugs with High Overhead Cost Charged to Patients and Drugs with Low Overhead Cost Charged to Patients, to reduce the reallocation of pharmacy overhead cost from expensive to inexpensive drugs and biologicals when setting an equivalent average ASP-based payment amount in the future. This proposal is consistent with RTI's recommendation for creating a new cost center whose CCR would be used to adjust charges to costs for drugs requiring detail coding. We note, however, that while improved CCRs would more accurately estimate the ASP-based amount for combined drug and pharmacy overhead payment, they would not capture within HCPCS code variability in pharmacy handling costs resulting from different methods of drug preparation used by hospitals. As discussed above, we believe that improved and more precise cost reporting is the best way to improve the accuracy of all cost-based payment weights, including relative weights for the IPPS MS-DRGs. Because both the IPPS and the OPPS rely on cost-based weights derived, in part, from data on the Medicare hospital cost report form, public comment on this proposed change to the cost report to break the single standard cost center 5600 into two standard cost centers should address any impact on both the inpatient and outpatient payment systems.

This proposal would not affect OPPS cost estimation for radiopharmaceuticals for several reasons. First, we would not expect the costs and charges for radiopharmaceuticals to be assigned to cost center 5600. Rather cost center 4300 (Radioisotope) is more appropriate for these items. Second, our claims data demonstrate that some hospitals continue to bill radiopharmaceuticals under revenue code 0636, contrary to UB-04 instructions (Official UB04 Data Specifications Manual, AHA 2007, p. 127) specifically noting that radiopharmaceuticals should be billed under revenue codes 0343 (Diagnostic Radiopharmaceuticals) and 0344 (Therapeutic Radiopharmaceuticals). We believe that billing radiopharmaceuticals under revenue code 0636 could be a result of dated CMS' guidance regarding billing radiopharmaceuticals under revenue code 0636. On April 8, 2008, we deleted this guidance from our Claims Processing Manual through administrative issuance (Transmittal 1487, Change Request 5999). Finally, RTI did not observe evidence of differential mark-up in cost center 4300 (for hospitals reporting the cost center) for products reported under revenue Start Printed Page 41491codes 0343 and 0344 (RTI report, “Refining Cost to Charge Ratios for Calculating APC and MS-DRG Relative Payment Weights,” July 2008).

In the FY 2009 IPPS proposed rule (73 FR 23544 through 23546), we proposed creating two cost centers, specifically (1) Medical Supplies Charged to Patients and (2) Implantable Devices Charged to Patients, to replace the current cost center Supplies Charged to Patients as part of our initiative to revise and update the Medicare hospital cost report form. We noted that we were only proposing one additional cost center in order to proceed cautiously with changes to the Medicare cost report in order to avoid unintended consequences for hospitals paid on a cost basis and to limit hospitals' administrative burden associated with adapting to new cost reporting forms and instructions. We remain committed to moving cautiously but recognize the need for a judicious number of additional cost centers in specific areas, including drugs and biologicals. As with the items reported in the cost center Supplies Charged to Patients, items reported in Drugs Charged to Patients demonstrate significant variability in the costs of included items.

We noted in the FY 2009 IPPS proposed rule (73 FR 23546 through 23547) that we are updating the cost report form to eliminate outdated requirements in conjunction with the PRA, and that we plan to propose actual changes to the cost reporting form, the attending cost reporting software, and the cost report instructions in Chapter 36 of the Medicare Provider Reimbursement Manual (PRM), Part II. We anticipate proposing these revisions shortly. If we were to adopt as final our proposal to create one cost center for Drugs with High Overhead Cost Charged to Patients and one cost center for Drugs with Low Overhead Cost Charged to Patients in the CY 2009 OPPS/ASC final rule with comment period, the cost report forms and instructions would reflect those changes. We expect the revised cost report may be available for hospitals to use when submitting cost reports during FY 2009, that is, for cost reporting periods beginning after October 1, 2008, and we expect that we would be able to use some of these data for setting drug payment rates for a future OPPS update, generally 2 to 3 years from implementation of the new cost report form.

Currently, to estimate the cost of separately payable drugs and biologicals for purposes of establishing the equivalent average ASP-based amount, we estimate costs from charges billed with UB-04 drug revenue codes 025X (Pharmacy) and 063X (Drugs Require Specific ID) using the CCR for cost center 5600. Our current revenue code-to-cost center crosswalk is available on the CMS Web site: (http://www.cms.hhs.gov/​HospitalOutpatientPPS/​03_​crosswalk.asp#TopOfPage). As part of our effort to isolate the costs and charges for drugs with high and low pharmacy overhead costs respectively, as proposed, we would instruct hospitals to report the charges for drugs and biologicals qualifying for the Drugs with High Overhead Cost Charged to Patients cost center under revenue code 0636 and all other drugs and biologicals under other appropriate drug revenue codes.

It is current practice for hospitals to bill only outpatient drug and biological charges with revenue code 0636. Payment for inpatient hospital services through DRGs does not require detailed HCPCS coding for drugs and biologicals. More importantly, CMS claims processing systems currently allow only HCPCS codes for blood clotting factors to be reported with revenue code 0636 on inpatient claims. Under our CY 2009 proposal, we would instruct hospitals to report charges for drugs and biologicals meeting the criteria for the proposed Drugs with High Overhead Costs Charged to Patients cost center under revenue code 0636 for both inpatient and outpatient claims. CMS would need to change its claims processing systems and, because revenue code 0636 requires all charges to be reported in association with HCPCS codes, this approach would require hospitals to report HCPCS codes for drug charges under revenue code 0636 on inpatient claims. We believe that consistent billing of drugs and biologicals across inpatient and outpatient settings in the same hospital would be more appropriate than current practice, in order to refine our cost estimation for drugs with high and low pharmacy overhead costs. Continuing to exclude inpatient hospital charges for drugs and biologicals with high overhead costs from being reported under revenue code 0636 would leave some averaging of high and low pharmacy overhead costs under other pharmacy revenue codes, especially revenue code series 025X that we would map to the proposed new cost center Drugs with Low Overhead Costs Charged to Patients. As a result, there would be no improvement in the accuracy of MS-DRG weights based on the two new cost centers that we are proposing to create. However, we specifically invite public comment on how a CMS requirement to report certain drug and biological charges under revenue code 0636 on hospital inpatient claims would impact hospitals.

There are several ways we could define these new cost centers for purposes of hospital reporting. First, we could adopt the assumptions behind RTI's empirical findings and require that hospitals simply report the costs and charges associated with revenue code 0636 in the proposed new cost center Drugs with High Overhead Costs Charged to Patients. This approach would require hospitals to report charges and costs for all other drugs in the proposed new cost center Drugs with Low Overhead Costs Charged to Patients. We believe this approach would be administratively simple for hospitals to implement because it would easily align revenue code and cost center relationships and would not require hospitals to otherwise categorize drugs or estimate a unique pharmacy overhead cost for each drug. Notwithstanding our requirement for hospitals to report, consistent with CPT and CMS instructions, all services described by HCPCS codes provided in an encounter, to the extent that hospitals report HCPCS codes for drugs that are not packaged, this approach might isolate costs and charges for drugs that are separately paid under the OPPS for purposes of more accurately estimating their costs. While we believe that RTI's findings suggest an increase in the CCR for adjustment of drug charges to costs would result from isolating the costs and charges for drugs billed under revenue code 0636, one limitation of this approach is that it would not fully mitigate the disproportionate allocation of pharmacy overhead cost reflected in differential markup. Although clearly an improvement in accuracy over current cost estimation, it is likely that significant variability in markup and overhead cost for drugs currently billed under revenue code 0636 would remain in the proposed new cost center CCR for Drugs with High Overhead Costs Charged to Patients.

Second, we could set a cost threshold for drug acquisition and pharmacy overhead cost for purposes of including costs and charges for the drug in one of the two proposed new cost centers. If we were to implement this methodology, we potentially could set the threshold at the OPPS drug packaging threshold, which is proposed to be $60 for CY 2009. This would clearly identify those drugs that would be billed in each cost center because all drug and biological HCPCS codes would be assigned either separately payable or Start Printed Page 41492packaged status under the CY 2009 OPPS. However, we believe that using the OPPS drug packaging threshold may be too low, and probably does not identify a cost point that would maximize cost differences between drugs with relatively high pharmacy overhead costs and drugs with relatively low pharmacy overhead costs. This approach has the benefit of considering cost, which appears largely to determine the amount of markup for pharmacy overhead costs a hospital incorporates into drug charges. Although some high cost drugs may have low pharmacy overhead costs, in general this alternative may do a better job of improving cost estimates for drugs with high pharmacy overhead costs through the use of more specific CCRs than the first alternative discussed, a cost center that would include all drugs currently billed under revenue code 0636. On the other hand, we are uncertain as to how we would identify the most appropriate cost threshold amount, or the manner and frequency with which we would update the threshold. More importantly, we are concerned that identifying the unique acquisition and overhead cost for each drug could impose a comparable administrative burden as other prior proposals.

Third, we could also set a cost threshold for pharmacy overhead specifically to define high versus low overhead cost for purposes of reporting costs and charges for drugs in the two new cost centers. This alternative would require hospitals to identify the cost of pharmacy overhead for every drug in order to assign it to a cost center. This approach would most accurately isolate drugs with high and low overhead costs, respectively. The resulting CCRs, therefore, would better estimate the average acquisition and overhead cost for these drugs. On the other hand, as with the second alternative, we are uncertain as to how we would identify the most appropriate pharmacy cost threshold amount, or the manner and frequency with which we would update the threshold. Further, this approach could also impose a significant hospital administrative burden, comparable to the burden identified by commenters regarding other prior proposals.

A fourth approach would be to instruct hospitals to assign those drugs they administer in the OPPS to the two proposed new cost centers according to the categories discussed in the CY 2006 final rule with comment period and presented in Table 24 above. Under this methodology, drugs falling in CMS categories 1 and 2 would be billed under revenue codes 025X or 063X (other than 0636) and captured on the cost report in the proposed new cost center Drugs with Low Overhead Cost Charged to Patients, while drugs falling in CMS category 3 would be billed under revenue code 0636 and reported in the proposed new cost center Drugs with High Overhead Cost Charged to Patients. CMS would provide some examples in the cost report instructions of appropriate drugs for each category. We are aware that some pharmacy stakeholders have already categorized drug and biological HCPCS codes into the three CMS pharmacy overhead categories that were proposed for CY 2006. Because pharmacy overhead costs may vary depending on the preparation of a specific product at an individual hospital and hospital accounting also varies, the same drug could appear in a different cost center across hospitals. However, we do not believe it would be necessary for hospitals to assign exactly the same drugs to each of the two proposed new cost centers, as long as hospitals' assessment of the pharmacy overhead cost category is consistent with their billing of these drugs under revenue codes 063X (other than 0636) and 025X or 0636 and the inclusion of these drugs in the associated cost centers. Prospectively, the OPPS cost estimation methodology would use the CCR calculated for the proposed new cost center Drugs with High Overhead Cost Charged to Patients to adjust drug charges billed under revenue code 0636 to cost and the CCR calculated for the proposed new cost center Drugs with Low Overhead Cost Charged to Patients to adjust drug charges billed under revenue codes 025X and 063X (other than 0636) to cost for determining drug acquisition and pharmacy overhead costs. We believe that this fourth approach would best estimate a CCR for drugs with high pharmacy overhead cost and relatively low markup as reflected in hospitals' charges. Because the number of drugs in pharmacy overhead category three would be limited based on the specific category description, this approach should more accurately address the limited markup for very expensive drugs with high pharmacy overhead costs, where charges do not reflect the hospitals' pharmacy overhead costs for those drugs. We also believe that hospitals would find this alternative easier to implement than any policy requiring hospitals to identify a unique total acquisition and overhead cost or a specific pharmacy overhead cost for each drug for purposes of assigning the drug's costs and charges to one of the two proposed new cost centers. However, we realize that there would still be some additional administrative burden for hospitals that have not yet determined the appropriate pharmacy overhead category for each of their drugs, and that they would need to educate their billing staff, to modify their chargemasters, and to adapt other billing software.

In summary, we are proposing to pay for the combined average acquisition and pharmacy overhead cost of separately payable drugs and biologicals at ASP+4 percent under the CY 2009 OPPS. In addition, we are proposing to create two new cost centers when we revise the Medicare hospital cost report form, specifically Drugs with High Overhead Cost Charged to Patients and Drugs with Low Overhead Cost Charged to Patients. We expect that CCRs from these proposed new cost centers would be available in 2 to 3 years to refine OPPS drug cost estimates by accounting for differential hospital markup practices for drugs with high and low pharmacy overhead costs. We specifically invite public comment on the policy and operational benefits, challenges, and concerns that may be associated with these proposals, specifically as they relate to our proposed approach to distinguishing between drugs and biologicals for purposes of inclusion in the two proposed new cost centers and the other alternatives discussed above.

c. Proposed Payment for Blood Clotting Factors

For CY 2008, we are providing payment for blood clotting factors under the OPPS at ASP+5 percent, plus an additional payment for the furnishing fee that is also a part of the payment for blood clotting factors furnished in physicians' offices under Medicare Part B. The CY 2008 updated furnishing fee increased by 4.0 percent to $0.158 per unit.

For CY 2009, we are proposing to pay for blood clotting factors at ASP+4 percent, consistent with our proposed payment policy for other nonpass-through separately payable drugs and biologicals, and to continue our policy for payment of the furnishing fee using an updated amount for CY 2009. Because the furnishing fee update is based on the percentage increase in the Consumer Price Index (CPI) for medical care for the 12-month period ending with June of the previous year and the Bureau of Labor Statistics releases the applicable CPI data after the MPFS and OPPS/ASC proposed rules are published, we are not able to include the actual updated furnishing fee in this proposed rule. Therefore, in accordance with our policy as finalized in the CY Start Printed Page 414932008 OPPS/ASC final rule with comment period (72 FR 66765), we will announce the actual figure for the percent change in the applicable CPI and the updated furnishing fee calculated based on that figure through applicable program instructions and posting on the CMS Web site at: http://www.cms.hhs.gov/​McrPartBDrugAvgSalesPrice/​.

4. Proposed Payment for Therapeutic Radiopharmaceuticals

a. Background

Section 303(h) of Pub. L. 108-173 exempted radiopharmaceuticals from ASP pricing in the physician's office setting. Beginning in the CY 2005 OPPS final rule with comment period, we have exempted radiopharmaceutical manufacturers from reporting ASP data for payment purposes under the OPPS. (For more information, we refer readers to the CY 2005 OPPS final rule with comment period (69 FR 65811) and the CY 2006 OPPS final rule with comment period (70 FR 68655).) Consequently, we did not have ASP data for radiopharmaceuticals for consideration for previous years' OPPS ratesetting. In accordance with section 1833(t)(14)(B)(i)(I) of the Act, we have classified radiopharmaceuticals under the OPPS as SCODs. As such, we have paid for radiopharmaceuticals at average acquisition cost as determined by the Secretary and subject to any adjustment for overhead costs. Radiopharmaceuticals are also subject to the policies affecting all similarly classified OPPS drugs and biologicals, such as pass-through payment for diagnostic and therapeutic radiopharmaceuticals and individual packaging determinations for therapeutic radiopharmaceuticals, discussed earlier in this proposed rule.

For CYs 2006 and 2007, we used mean unit cost data from hospital claims to determine each radiopharmaceutical's packaging status and implemented a temporary policy to pay for separately payable radiopharmaceuticals based on the hospital's charge for each radiopharmaceutical adjusted to cost using the hospital's overall CCR. In addition, in the CY 2006 final rule with comment period (70 FR 68654), we instructed hospitals to include charges for radiopharmaceutical handling in their charges for the radiopharmaceutical products so these costs would be reflected in the CY 2008 ratesetting process. We note that this continues to be our expectation, and we believe that the charges for radiopharmaceuticals in the CY 2007 claims data that we are using for this proposed rule reflect both the acquisition cost of the radiopharmaceutical and its associated overhead. The methodology of providing separate payment based on the individual hospital's overall CCR for CYs 2006 and 2007 was finalized as an interim proxy for average acquisition cost because of the unique circumstances associated with providing radiopharmaceutical products to Medicare beneficiaries. The single OPPS payment represented Medicare payment for both the acquisition cost of the radiopharmaceutical and its associated handling costs.

During the CY 2006 and CY 2007 rulemaking processes, we encouraged hospitals and radiopharmaceutical stakeholders to assist us in developing a viable long-term prospective payment methodology for these products under the OPPS. As reiterated in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66766), we were pleased to note that we had many discussions with interested parties regarding the availability and limitations of radiopharmaceutical cost data.

In considering payment options for therapeutic radiopharmaceuticals for CY 2008, we examined several alternatives which we discussed in our CY 2008 OPPS/ASC proposed rule (72 FR 42738 through 42739) and CY 2008 OPPS/ASC final rule with comment period (72 FR 66769 through 66770). (We refer readers to these rules for a full discussion of all of the options that we considered.) After considering the options and all public comments, we finalized a CY 2008 methodology to provide a prospective payment for therapeutic radiopharmaceuticals (defined as those Level II HCPCS codes that include the term “therapeutic” along with a radiopharmaceutical in their long code descriptors) using mean costs derived from the CY 2006 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 (72 FR 66772). We additionally finalized a policy to package payment for all diagnostic radiopharmaceuticals (defined as Level II HCPCS codes that include the term “diagnostic” along with a radiopharmaceutical in their long code descriptors) for CY 2008. As discussed in the CY 2008 OPPS/ASC proposed rule (72 FR 42739), we believed that adopting prospective payment based on historical hospital claims data was appropriate because it served as our most accurate available proxy for the average hospital acquisition cost of separately payable therapeutic radiopharmaceuticals. In addition, we noted that we have found that our general prospective payment methodology based on historical hospital claims data results in more consistent, predictable, and equitable payment amounts across hospitals and likely provides incentives to hospitals for efficiently and economically providing these outpatient services.

Prior to implementation of our finalized CY 2008 methodology of providing a prospective payment for therapeutic radiopharmaceuticals, section 106(b) of the MMSEA was enacted on December 29, 2007, that provided payment for therapeutic radiopharmaceuticals based on individual hospital charges adjusted to cost. Therefore, hospitals continue to receive payment for therapeutic radiopharmaceuticals by applying the hospital-specific overall CCR to each hospital's charge for a therapeutic radiopharmaceutical from January 1, 2008 through June 30, 2008. Thereafter, the OPPS provides payment for separately payable therapeutic radiopharmaceuticals on a prospective basis, with payment rates based upon mean costs from hospital claims data as set forth in the CY 2008 OPPS/ASC final rule with comment period, unless otherwise required by law.

b. Proposed Payment Policy

Since the start of the temporary cost-based payment methodology for radiopharmaceuticals in CY 2006, we have met with several interested parties on a number of occasions regarding payment under the OPPS for radiopharmaceuticals and have received numerous different suggestions from these stakeholders regarding payment methodologies that we could employ for future use under the OPPS.

In the CY 2008 OPPS/ASC final rule with comment period (72 FR 66771), we solicited comments requesting interested parties to provide information related to if and how the existing ASP methodology could be used to establish payment for specific therapeutic radiopharmaceuticals under the OPPS. We received several responses to our request for comments.

Similar to the recommendations we received during the CY 2008 OPPS/ASC proposed rule comment period (72 FR 66770), we received several suggestions regarding the establishment of an OPPS-specific methodology for radiopharmaceutical payment that would be similar to the ASP methodology, without following the Start Printed Page 41494established ASP procedures referenced at 1847A of the Act and implemented through rulemaking. Some commenters recommended using external data submitted by a variety of sources other than manufacturers. Along this line, commenters suggested gathering information from nuclear pharmacies using methodologies with a variety of names such as Nuclear Pharmacy Calculated Invoiced Price (Averaged) (CIP) and Calculated Pharmacy Sales Price (CPSP). Other commenters recommended that CMS base payment for certain radiopharmaceuticals on manufacturer-reported ASP.

As noted in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66771), a ratesetting approach based on external data would be administratively burdensome for us because we would be required to collect, process, and review external information to ensure that it was valid, reliable, and representative of a diverse group of hospitals so that it could be used to establish rates for all hospitals. However, we specifically requested additional comments regarding the use of the existing ASP reporting structure for therapeutic radiopharmaceuticals as this established methodology is already used for payment of other drugs provided in the hospital outpatient setting (72 FR 66771). While we received several recommendations from commenters on the CY 2008 OPPS/ASC final rule with comment period regarding payment of therapeutic radiopharmaceuticals based on estimated costs provided by manufacturers or other parties, we believe that the use of external data for payment of therapeutic radiopharmaceuticals should only be adopted if those external data are subject to the same well-established regulatory framework as the ASP data currently used for payment of separately payable drugs and biologicals under the OPPS. We have previously indicated that nondevice external data used for setting payment rates should be publicly available and representative of a diverse group of hospitals both by location and type, while it should also identify its data sources. We do not believe that external therapeutic radiopharmaceutical cost data voluntarily provided outside of the established ASP methodology, either by manufacturers or nuclear pharmacies, would generally satisfy these criteria that are minimum standards for setting OPPS payment rates.

Another commenter on the CY 2008 OPPS/ASC final rule with comment period recommended that CMS identify the therapeutic radiopharmaceutical used for Zevalin therapy (A9543 (Yttrium Y-90 ibritumomab tiuxetan, therapeutic, per treatment dose, up to 40 millicuries)) as a biological for payment purposes, instead of treating it as a radiopharmaceutical. As discussed in the CY 2003 OPPS final rule with comment period (67 FR 66757), Zevalin treatment consists of a radioactive isotope that is delivered to its target tissue by a monoclonal antibody. At that time, we explained that because of the specific requirements associated with delivery of radioactive isotope therapy, any product containing a therapeutic radioisotope, including Y-90 Zevalin, would be considered to be covered and paid under the category of benefits described under section 1861(s)(4) of the Act for radioactive isotope therapy. We stated that we would not consider therapeutic radiopharmaceuticals to be drugs as described in section 1861(t) and, therefore, the OPPS payment methodology for separately payable drugs and biologicals would not be applicable to payment for Y-90 Zevalin. We continue to believe that the most appropriate Medicare benefit category for Y-90 Zevalin is provided in section 1861(s)(4) of the Act because this product is a specific radioactive isotope therapy. Therefore, the CY 2009 OPPS proposal for nonpass-through payment of separately payable biologicals that is described in section V.B.3.b. of this proposed rule would not apply to payment for Y-90 Zevalin.

As noted in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66770), at its September 2007 meeting, the APC Panel recommended that CMS create a composite APC for Bexxar or related therapies and present it for the APC Panel's consideration at the next APC Panel meeting. We accepted this recommendation and modeled a radioimmunotherapy (RIT) composite APC for both Bexxar and Zevalin therapies using our final rule CY 2008 claims database. We discussed this analysis with the APC Panel at its March 2008 meeting.

To perform this analysis for the APC Panel, we first identified all claims that had an occurrence of a case-defining therapeutic radiopharmaceutical HCPCS code used for a RIT treatment: A9545 (Iodine I-131 tositumomab, therapeutic, per treatment dose) and A9543 (Yttrium Y-90 ibritumomab tiuxetan, therapeutic, per treatment dose, up to 40 millicuries). We then identified what we considered to be the HCPCS codes for services and products associated with RIT, based on information from the manufacturers and suggestions from CMS medical advisors and identified associated claims (using beneficiary health insurance claim (HIC) numbers) to develop the total median cost for a RIT composite APC.

We note that very few hospitals billed all of the HCPCS codes for an individual beneficiary that we expected to be reported for a case of RIT treatment. We used this “HIC-linked” file consisting of all associated claims for each beneficiary from one hospital that we considered to be part of a single case of RIT treatment to develop a composite APC cost estimate for a course of RIT treatment, where a case required: (1) HCPCS code A9545 or A9543; (2) an HCPCS code for either nonradiolabeled tositumomab (G3001 (Administration or supply of tositumomab, 450 mg)) or rituximab (J9310 (Rituximab, 100 mg)) (which would also indicate the start of a RIT case); (3) a HCPCS code for the corresponding diagnostic radiopharmaceutical (A9544 (Iodine I-131 tositumomab, diagnostic, per study dose) or A9542 (Indium In-111, ibritumomab tiuxetan, diagnostic, per study dose, up to 5 millicuries)); and (4) at least one instance of a diagnostic imaging service (CPT code 78804 (Radiopharmaceutical localization of tumor or distribution of radiopharmaceutical agent(s); whole body, requiring two or more days imaging)) prior to the administration of the therapeutic radiopharmaceutical. In addition, in order to further define the case for an estimate of a composite APC cost, we did not include the costs of services occurring on dates before the provision of the nonradiolabeled tositumomab or rituximab or after the administration of the therapeutic radiopharmaceutical.

Other services we expected to be reported for a case, such as CPT code 79403 (Radiopharmaceutical therapy, radiolabeled monoclonal antibody by intravenous infusion) and CPT code 77300 (Basic radiation dosimetry calculation, central axis depth dose calculation, TDF, NSD, gap calculation, off axis factor, tissue inhomogeneity factors, calculation of non-ionizing radiation surface and depth dose, as required during course of treatment, only when prescribed by the treating physician), were considered optional and, although they were not required in order to determine the RIT case, the costs of these associated services were included when we established the median cost of the RIT composite APC.

We determined that the median cost for the RIT composite APC, including required and optional additional services directly related to the RIT treatment, would be approximately $19,000. This figure represents, at a minimum, the estimated cost of the nonradiolabeled tositumomab (or Start Printed Page 41495rituximab), the diagnostic radiopharmaceutical, the therapeutic radiopharmaceutical, and the imaging, based on costs from hospital claims data.

Upon review of this study, the APC Panel, at its March 2008 meeting, recommended that CMS pursue a RIT composite APC that uses existing claims and stakeholder data to establish appropriate payment rates for RIT protocols. In addition, the APC Panel recommended that CMS provide specific guidance to hospitals on appropriate billing for RIT under a composite APC methodology. We are not accepting these recommendations of the APC Panel. First, we do not believe it would be appropriate to incorporate external data into a composite APC methodology, when composite APC median costs for a comprehensive service that the composite APC describes are based upon reported hospital costs on claims as described in section II.A.2.e. of this proposed rule. As we have hospital costs from CY 2007 claims for the services that would be paid through a RIT composite APC, we would have no reason to use external stakeholder data instead of reported hospital costs for ratesetting for such an APC. In addition, as the APC Panel alluded to in its second recommendation regarding billing guidance to hospitals, our claims analysis demonstrated that, according to hospital claims data, apparently few patients actually received all the component services associated with RIT treatment from a single hospital, or many RIT treatments were incorrectly reported by hospitals. A composite APC payment provides more accurate payment for a set of major services with only limited variation from hospital to hospital or from case to case and relies on correctly coded claims for the comprehensive service to develop the composite cost, whereas RIT treatment does not appear to have these characteristics. Stakeholders have confirmed that a proportion of patients receiving a diagnostic radiopharmaceutical and imaging in preparation for RIT treatment do not go on to receive the therapeutic radiopharmaceutical for a variety of specific clinical reasons. Furthermore, the whole course of RIT treatment may occur over a several week period, and the challenges associated with instructing hospitals to report component services in a timely fashion that would allow the I/OCE to determine whether a composite payment would be appropriate are significant. Therefore, we believe it would be premature to propose payment of a composite APC for RIT treatment for CY 2009.

We received comments on the CY 2008 OPPS/ASC final rule with comment period from certain radiopharmaceutical manufacturers who indicated that the standard ASP methodology could be used for payment of certain therapeutic radiopharmaceutical products. Specifically, these manufacturers expressed interest in providing ASP for their therapeutic radiopharmaceutical products as a basis for payment under the OPPS. We appreciate the willingness of these manufacturers to provide ASP data, but we recognize that payment based on the ASP methodology may not be possible for all therapeutic radiopharmaceuticals if manufacturers are unable or unwilling to voluntarily submit ASP data. Therefore, we are proposing the following payment methodology for therapeutic radiopharmaceuticals under the CY 2009 OPPS. For therapeutic radiopharmaceuticals where ASP information is submitted through the established ASP process by all manufacturers of the specific therapeutic radiopharmaceutical, we would provide payment for the average acquisition and associated handling costs of the therapeutic radiopharmaceutical at the same relative ASP-based amount (proposed at ASP+4 percent for CY 2009) that we would pay for separately payable drugs and biologicals in CY 2009 under the OPPS. If sufficient ASP information is not submitted or appropriately certified by the manufacturer for a given calendar year quarter, then for that quarter we are proposing that the OPPS would provide a prospective payment based on the mean cost from hospital claims data as displayed in Table 25 below, as this was the methodology finalized in the CY 2008 OPPS/ASC final rule with comment period. Further, we are proposing to continue the methodology, as discussed in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66772), of eliminating claims from providers who consistently (more than 2 times) reported charges in the CY 2007 claims data that were less than $100 when converted to costs for HCPCS codes A9543 and A9545 as part of the usual ratesetting process. We believe that this would mitigate the effects of using incorrectly coded claims from several providers in our standard ratesetting methodology which calculates the mean costs for these two products from the claims available for the update year.

Because we do not have ASP data for therapeutic radiopharmaceuticals that were used for payment in April 2008, the proposed payment rates included in Addenda A and B to this proposed rule are based on mean costs from historical hospital claims data available for this proposed rule. Under our proposal that initially looks to ASP data to establish the payment rates for separately payable therapeutic radiopharmaceuticals, beginning in CY 2009, we would update the payment rates for therapeutic radiopharmaceuticals quarterly as new ASP data become available, just as we would update the payment rates for separately payable drugs and biologicals under the OPPS.

We are proposing to allow manufacturers to submit ASP information for any separately payable therapeutic radiopharmaceutical for payment purposes under the OPPS. However, we are not proposing to compel manufacturers to submit ASP information. The ASP data submitted would need to be provided for a patient-specific dose, or patient-ready form, of the therapeutic radiopharmaceutical in order to properly calculate the ASP amount for a given HCPCS code. In addition, in those instances where there is more than one manufacturer of a particular therapeutic radiopharmaceutical, we note that all manufacturers would need to submit ASP information in order for payment to be made on an ASP basis. We are specifically requesting public comment on the development of a crosswalk, similar to the NDC/HCPCS crosswalk for separately payable drugs and biologicals posted on the CMS Web site at: http://www.cms.hhs.gov/​McrPartBDrugAvgSalesPrice/​01a_​2008aspfiles.asp, for use for therapeutic radiopharmaceuticals. We believe that the use of ASP information for OPPS payment would provide an opportunity to improve payment accuracy for these products by applying an established methodology that has already been successfully implemented under the OPPS for other separately payable drugs and biologicals. As is the case with other drugs and biologicals subject to ASP reporting, in order for a therapeutic radiopharmaceutical to receive payment based on ASP beginning January 1, 2009, we would need to receive ASP information from the manufacturer in October 2008 that would reflect therapeutic radiopharmaceutical sales in the third quarter of CY 2008 (July 1, 2008 through September 30, 2008). These data would not be available for publication in the CY 2009 OPPS/ASC final rule with Start Printed Page 41496comment period but would be included in the January 2009 OPPS quarterly release that would update the payment rates for separately payable drugs, biologicals, and therapeutic radiopharmaceuticals based on the most recent ASP data, consistent with our customary practice over the past 3 years when we have used the ASP methodology for payment of separately payable drugs and biologicals under the OPPS. In addition, we would need to receive information from radiopharmaceutical manufacturers that would allow us to calculate a unit dose cost estimate based on the applicable HCPCS code for the therapeutic radiopharmaceutical.

We realize that not all therapeutic radiopharmaceutical manufacturers may be willing or able to submit ASP information for a variety of reasons. We are proposing to provide payment at the ASP rate if ASP information is available for a given calendar year quarter or, if ASP information is not available, we are proposing to provide payment based on the most recent hospital mean unit cost data that we have available. We believe that both methodologies represent an appropriate and adequate proxy for average hospital acquisition cost and associated handling costs for these products. Therefore, if ASP information for the appropriate period of sales related to payment in any CY 2009 quarter is not available, we would rely on the CY 2007 mean unit cost data derived from hospital claims to set the payment rates for therapeutic radiopharmaceuticals. We note that this is not the usual OPPS process that relies on alternative data sources, such as WAC or AWP, when ASP information is temporarily unavailable, prior to defaulting to the mean unit cost from hospital claims data. We are proposing this methodology specifically for therapeutic radiopharmaceuticals whereby we would immediately default to the mean unit cost from hospital claims if sufficient ASP data were not available because we are not proposing to require therapeutic radiopharmaceutical manufacturers to report ASP data at this time. We do not believe that WAC or AWP is an appropriate proxy for OPPS payment for average therapeutic radiopharmaceutical acquisition cost and associated handling costs when manufacturers are not required to submit ASP data and, therefore, payment based on WAC or AWP could continue for the full calendar year.

Similar to the ASP process already in place for drugs and biologicals, we are proposing to update ASP data for therapeutic radiopharmaceuticals through our quarterly process as updates become available. In addition, we are proposing to assess the availability of ASP data for therapeutic radiopharmaceuticals quarterly, and if ASP data become available midyear, we would transition at the next available quarter to ASP-based payment. For example, if ASP data are not available for the quarter beginning January 2009 (that is, ASP information reflective of third quarter CY 2008 sales are not submitted in October 2008), then the next opportunity to begin payment based on ASP data for a therapeutic radiopharmaceutical would be April 2009 if ASP data reflective of fourth quarter CY 2008 sales were submitted in January 2009.

Table 25.—Proposed CY 2009 Separately Payable Therapeutic Radiopharmaceuticals

HCPCS codeShort descriptorProposed CY 2009 APCProposed CY 2009 SIProposed CY 2009 payment rate based on mean cost from claims
A9517I131 iodide cap, rx1064K$514.52
A9530I131 iodide sol, rx1150K424.97
A9543Y90 ibritumomab, rx1643K15,159.66
A9545I131 tositumomab, rx1645K10,554.47
A9563P32 Na phosphate1675K164.98
A9564P32 chromic phosphate1676K560.36
A9600Sr89 strontium0701K1,308.96
A9605Sm 153 lexidronm0702K2,655.52

5. Proposed 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 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 to 2007, we implemented a policy to provide separate payment 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's office setting, established in accordance with the ASP methodology. For CY 2008, we finalized a policy to provide payment for new drugs and biologicals with HCPCS codes but which do not have pass-through status and are without OPPS hospital claims data, at ASP+5 percent, consistent with the final OPPS payment methodology for other separately payable drugs and biologicals. We are proposing to continue this methodology for CY 2009. Therefore, for CY 2009, we are proposing to provide payment for new drugs and biologicals with HCPCS codes, but which do not have pass-through status and are without OPPS hospital claims data, at ASP+4 percent, consistent with the CY 2009 proposed payment methodology for other separately payable nonpass-through drugs and biologicals. It is our belief that this policy ensures that new nonpass-through drugs and biologicals are treated like other drugs and biologicals under the OPPS, unless they are granted pass-through status. Only if Start Printed Page 41497they are pass-through drugs and biologicals would they receive a different payment for CY 2009, generally equivalent to the payment these drugs and biologicals would receive in the physician's office setting, consistent with the requirements of the statute. We are proposing to continue packaging payment for all new nonpass-through diagnostic radiopharmaceuticals in CY 2009.

In accordance with the ASP methodology, in the absence of ASP data, we are proposing, for CY 2009, to continue the policy we implemented beginning in CY 2005 of using the WAC for the product to establish the initial payment rate for new nonpass-through drugs and biologicals with HCPCS codes, but which are without OPPS claims data. However, we note that if the WAC is also unavailable, we would make payment at 95 percent of the product's most recent AWP. We are also proposing to assign status indicator “K” to HCPCS codes for new drugs and biologicals for which we have not received a pass-through application. We further note that with respect to new items for which we do not have ASP data, once their ASP data become available in later quarter submissions, their payment rates under the OPPS would be adjusted so that the rates are based on the ASP methodology and set to the finalized ASP-based amount (proposed for CY 2009 at ASP+4 percent) for items that have not been granted pass-through status.

For CY 2009, we also are proposing to base payment for new therapeutic radiopharmaceuticals with HCPCS codes as of January 1, 2009, but which do not have pass-through status, on the WACs for these products if ASP data for these therapeutic radiopharmaceuticals are not available. If the WACs are also unavailable, we would make payment for new therapeutic radiopharmaceuticals at 95 percent of their most recent AWPs because we would not have mean costs from hospital claims data upon which to base payment. Analogous to new drugs and biologicals, we are proposing to assign status indicator “K” to HCPCS codes for new therapeutic radiopharmaceuticals for which we have not received a pass-through application.

Consistent with other ASP-based payments, for CY 2009, we are proposing to make any appropriate adjustments to the payment amounts for new drugs and biologicals in the CY 2009 OPPS/ASC final rule with comment period and also on a quarterly basis on our Web site during CY 2009 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 therapeutic radiopharmaceuticals would also be adjusted accordingly. We note, the new CY 2009 HCPCS codes for drugs, biologicals, and therapeutic radiopharmaceuticals are not available at the time of development of this proposed rule; however, they will be included in the CY 2009 OPPS/ASC final rule with comment period where they will be assigned comment indicator “NI” to reflect that their interim final OPPS treatment is open to comment in the CY 2009 OPPS/ASC final rule with comment period.

There are several nonpass-through drugs and biologicals that were payable in CY 2007 and/or CY 2008 for which we do not have any CY 2007 hospital claims data. In order to determine the packaging status of these items for CY 2009, 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+4 percent, similar to other nonpass-through drugs and biologicals paid separately under the OPPS, by an estimated average number of units of each product that would typically be furnished to a patient during one administration in the hospital outpatient setting. We are proposing to package items for which we estimate the per administration cost to be less than or equal to $60, which is the general packaging threshold that we are proposing for drugs, biologicals, and therapeutic radiopharmaceuticals in CY 2009. We are proposing to pay separately for items with an estimated per administration cost greater than $60 (with the exception of diagnostic radiopharmaceuticals and contrast agents which we are proposing to continue to package regardless of cost, as discussed in more detail in section V.B.2.b. of this proposed rule) in CY 2009. We are proposing that the CY 2009 payment for separately payable items without CY 2007 claims data would be based on ASP+4 percent, similar to other separately payable nonpass-through drugs and biologicals under the OPPS. In accordance with the ASP methodology used in the physician's office setting, in the absence of ASP data, we would use the WAC for the product to establish the initial payment rate. However, we note that if the WAC is also unavailable, we would make payment at 95 percent of the most recent AWP available.

Table 26 lists all of the nonpass-through drugs and biologicals without available CY 2007 claims data to which these policies would apply in CY 2009.

Table 26.—Drugs and Biologicals Without CY 2007 Claims Data

HCPCS codeShort descriptorProposed ASP-based payment rateEstimated average number of units per administrationProposed CY 2009 SIProposed CY 2009 APC
C9237Inj, lanreotide acetate$23.9090K9237
J0400Aripiprazole injection39N
J1573Hepagam B intravenous, inj47.438K1138
J2724Protein C concentrate11.96630K1139
J3355Urofollitropin, 75 iu48.252K1741
Q4096VWF complex, not Humate-P0.646825K1213
Q4097Inj IVIG Privigen 500 mg33.5484K1214

In the CY 2008 OPPS/ASC final rule with comment period (72 FR 66776), we began recognizing, for OPPS payment purposes, multiple HCPCS codes indicating different dosages for covered Part B drugs. In general, prior to CY 2008, the OPPS recognized the lowest available administrative dose of a drug if multiple HCPCS codes existed for the drug; for the remainder of the doses, the HCPCS codes were assigned status indicator “B” indicating that another code existed for OPPS purposes. For example, if drug X has 2 HCPCS codes, 1 for a 1 ml dose and a second for a 5 Start Printed Page 41498ml dose, prior to CY 2008, the OPPS would have assigned a payable status indicator to the 1 ml dose and status indicator “B” to the 5 ml dose. Hospitals were then responsible for billing the appropriate number of units for the 1 ml dose in order to receive payment for the drug under the OPPS.

As these HCPCS codes were previously unrecognized under the OPPS prior to CY 2008, we do not have claims data to determine their appropriate packaging status for CY 2009. For the CY 2008 OPPS/ASC final rule with comment period (72 FR 66775), we implemented a policy that assigned the status indicator of the previously recognized HCPCS code to the associated newly recognized code(s). For CY 2009, we are again proposing to continue to use this methodology. Table 27 below shows the CY 2007 unrecognized HCPCS code, the CY 2007 status indicator for the unrecognized HCPCS code, the CY 2008 short descriptor for the unrecognized HCPCS code, the associated recognized CY 2007 HCPCS code, and the proposed status indicator for the newly recognized code. As noted in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66775), we believe that this approach is the most appropriate and reasonable way to implement this change in HCPCS code recognition under the OPPS without impacting payment. However, once claims data are available for these previously unrecognized HCPCS codes, we would determine the packaging status and resulting status indicator for each HCPCS code according to the general code-specific methodology for determining a code's packaging status for a given update year. As we stated in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66775), we plan to closely follow our claims data to ensure that our annual packaging determinations for the different HCPCS codes describing the same drug do not create inappropriate payment incentives for hospitals to report certain HCPCS codes instead of others.

Table 27.—HCPCS Codes Unrecognized in CY 2007, Associated Recognized HCPCS Codes, and Proposed Status Indicators for CY 2009

HCPCS codes not recognized in CY 2007CY 2007 SICY 2008 short descriptorAssociated HCPCS recognized in CY 2007Proposed CY 2009 SI for HCPCS code newly recognized in CY 2008
J1470BGamma globulin 2 CC injJ1460K
J1480BGamma globulin 3 CC injJ1460K
J1490BGamma globulin 4 CC injJ1460K
J1500BGamma globulin 5 CC injJ1460K
J1510BGamma globulin 6 CC injJ1460K
J1520BGamma globulin 7 CC injJ1460K
J1530BGamma globulin 8 CC injJ1460K
J1540BGamma globulin 9 CC injJ1460K
J1550BGamma globulin 10 CC injJ1460K
J1560BGamma globulin > 10 CC injJ1460K
J8521BCapecitabine, oral, 500 MGJ8520K
J9062BCisplatin 50 MG injectionJ9060N
J9080BCyclophosphamide 200 MG injJ9070N
J9090BCyclophosphamide 500 MG injJ9070N
J9091BCyclophosphamide 1.0 Grm injJ9070N
J9092BCyclophosphamide 2.0 Grm injJ9070N
J9094BCyclophosphamide lyophilizedJ9093N
J9095BCyclophosphamide lyophilizedJ9093N
J9096BCyclophosphamide lyophilizedJ9093N
J9097BCyclophosphamide lyophilizedJ9093N
J9110BCytarabine hcl 500 MG injJ9100N
J9140BDacarbazine 200 MG injJ9130N
J9182BEtoposide 100 MG injJ9181N
J9260BMethotrexate sodium injJ9250N
J9290BMitomycin 20 MG injJ9280N
J9291BMitomycin 40 MG injJ9280N
J9375BVincristine sulfate 2 MG injJ9370N
J9380BVincristine sulfate 5 MG injJ9370N

Finally, there are 8 drugs and biologicals, shown in Table 28 below, that were payable in CY 2007 for which we lack CY 2007 claims data and for which we are unable to determine the per day cost based on the ASP methodology. As we are unable to determine the packaging status and subsequent payment rates, if applicable, for these drugs and biologicals for CY 2009 based on the ASP methodology or claims data, we are proposing to package payment for these drugs and biologicals in CY 2009.

Table 28.—Drugs and Biologicals Without Information on per Day Cost That Are Proposed for Packaging in CY 2009

HCPCS codeShort descriptorProposed CY 2009 SI
90393Vaccina ig, imN
Start Printed Page 41499
90581Anthrax vaccine, scN
J0350Injection anistreplase 30 uN
J0395Arbutamine HCl injectionN
J1452Intraocular Fomivirsen naN
J2670Totazoline hcl injectionN
J3530Nasal vaccine inhalationN
Q0174Thiethylperazine maleate 10 mgN

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

A. Background

Section 1833(t)(6)(E) of the Act limits the total projected amount of transitional pass-through payments for drugs, biologicals, radiopharmaceuticals, and categories of devices for a given year to an “applicable percentage” 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 payments 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, developing an estimate of pass-through spending in CY 2009 entails estimating spending for two groups of items. The first group of items consists of device categories that were recently made eligible for pass-through payment and that would continue to be eligible for pass-through payment in CY 2009. The CY 2008 OPPS/ASC final rule with comment period (72 FR 66778) describes the methodology we have used in previous years to develop the pass-through spending estimate for known device categories continuing into the applicable update year. The second group contains items that we know are newly eligible, or project would be newly eligible, for device pass-through payment in the remainder of CY 2008 or beginning in CY 2009. The sum of the CY 2009 pass-through estimates for these two groups of device categories would equal the total CY 2009 pass-through spending estimate for device categories with pass-through status.

For drugs and biologicals, section 1833(t)(6)(D)(i) of the Act establishes the pass-through payment amount for drugs and biologicals eligible for pass-through payment as the amount by which the amount authorized under section 1842(o) of the Act (or, if the drug or biological is covered under a competitive acquisition contract under section 1847B of the Act, an amount determined by the Secretary equal to the average price for the drug or biological for all competitive acquisition areas and year established under such section as calculated and adjusted by the Secretary) exceeds the portion of the otherwise applicable fee schedule amount that the Secretary determines is associated with the drug or biological. Because we are proposing to pay for nonpass-through separately payable drugs and biologicals under the CY 2009 OPPS at ASP+4 percent, which represents the otherwise applicable fee schedule amount associated with a pass-through drug or biological, and we would pay for pass-through drugs and biologicals at ASP+6 percent or the Part B drug CAP rate, if applicable, our estimate of drug and biological pass-through payment for CY 2009 is not zero. Similar to estimates for devices, the first group of drugs and biologicals requiring a pass-through payment estimate consists of those products that were recently made eligible for pass-through payment and that would continue to be eligible for pass-through payment in CY 2009. The second group contains drugs and biologicals that we know are newly eligible, or project would be newly eligible, beginning in CY 2009. The sum of the CY 2009 pass-through estimates for these two groups of drugs and biologicals would equal the total CY 2009 pass-through spending estimate for drugs and biologicals with pass-through status.

B. Proposed Estimate of Pass-Through Spending

We are proposing to set the applicable percentage limit at 2.0 percent of the total OPPS projected payments for CY 2009, consistent with our OPPS policy from CY 2004 through CY 2008.

As discussed in section IV.A. of this proposed rule, there are currently no known device categories receiving pass-through payment in CY 2008 that would continue for payment during CY 2009. Therefore, there are no device categories in the first group, that is, device categories recently made eligible for pass-through payment and continuing into CY 2009, and the estimate for this group is $0.

In estimating CY 2009 pass-through spending for device categories in the second group (that is, device categories that we know at the time of the development of this proposed rule would be newly eligible for pass-through payment in CY 2009 (of which there are none), additional device categories that we estimate could be approved for pass-through status subsequent to the development of this proposed rule and before January 1, 2009, and contingent projections for new categories in the second through fourth quarters of CY 2009), we are proposing to use the general methodology described in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66778), while also taking into account recent OPPS experience in approving new pass-through device categories. The estimate of CY 2009 pass-through spending for this second group is $10.0 million. Employing our established methodology that the estimate of pass-through device spending in CY 2009 incorporates CY 2009 estimates of pass-through spending for known device categories continuing in CY 2009, those first effective January 1, 2009, and those device categories projected to be approved during subsequent quarters of CY 2008 and CY 2009, our proposed total pass-through estimate for device categories for CY 2009 is $10.0 million.Start Printed Page 41500

To estimate CY 2009 pass-through spending for drugs and biologicals in the first group, specifically those drugs and biologicals recently made eligible for pass-through payment and continuing into CY 2009, we are proposing to utilize the most recent Medicare physician's office data regarding their utilization, information provided in the respective pass-through applications, historical hospital claims data, pharmaceutical industry information, and clinical information regarding the drugs or biologicals, in order to project the CY 2009 OPPS utilization of the products. For the known drugs and biologicals that would continue on pass-through status in CY 2009, we then estimate the total pass-through payment amount as the difference between ASP+6 percent or the Part B drug CAP rate, as applicable, and ASP+4 percent, aggregated across the projected CY 2009 OPPS utilization of these products. If payment for the drug or biological would be packaged if the product were not paid separately because of its pass-through status, we include in the pass-through estimate the full payment for the drug or biological at ASP+6 percent. Based on these analyses, we are proposing the estimated pass-through spending attributable to the first group (that is, the known drugs and biologicals continuing with pass-through eligibility in CY 2009) described above to be about $3.4 million for CY 2009. This $3.4 million estimate of CY 2009 pass-through spending for the first group of pass-through drugs and biologicals reflects the current pass-through drugs and biologicals that are continuing on pass-through status into CY 2009, which are displayed in Table 21 in section V.A.3. of this proposed rule.

To estimate CY 2009 pass-through spending for drugs and biologicals in the second group (that is, drugs and biologicals that we know at the time of development of this proposed rule would be newly eligible for pass-through payment in CY 2009 (of which there are none), additional drugs and biologicals that we estimate could be approved for pass-through status subsequent to the development of this proposed rule and before January 1, 2009, and projections for new drugs and biologicals that could be initially eligible for pass-through payment in the second through fourth quarters of CY 2009), we are proposing to use utilization estimates from applicants, pharmaceutical industry data, and clinical information as the basis for pass-through spending estimates for these drugs and biologicals for CY 2009, while also considering the most recent OPPS experience in approving new pass-through drugs and biologicals. Based on these analyses, we are proposing the estimated pass-through spending attributable to this second group of drugs and biologicals to be about $5.5 million for CY 2009.

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.) There are no radiopharmaceuticals that are eligible for pass-through payment at the time of publication of this proposed rule. In addition, we have no information identifying new radiopharmaceuticals to which a HCPCS code might be assigned on or after January 1, 2009, for which pass-through payment status would be sought. We also have no historical data regarding payment for new radiopharmaceuticals with pass-through status under the methodology that we specified for the CY 2005 OPPS or the CY 2009 methodology that we are proposing as discussed in section V.A.3. of this proposed rule. However, we do not believe that pass-through spending for new radiopharmaceuticals in CY 2009 would be significant enough to materially affect our estimate of total pass-through spending in CY 2009. Therefore, we are not including radiopharmaceuticals in our proposed estimate of pass-through spending for CY 2009. We discuss the proposed methodology for determining the CY 2009 payment amount for new therapeutic radiopharmaceuticals without pass-through status in section V.B.5. of this proposed rule. We discuss our proposal to package payment for all new diagnostic radiopharmaceuticals without pass-through status in CY 2009 in section V.B.2.b. of this proposed rule.

In accordance with the comprehensive methodology described above, we estimate that total pass-through spending for the device categories and the drugs and biologicals that are continuing for pass-through payment into CY 2009 and those devices, drugs, biologicals, and radiopharmaceuticals that first become eligible for pass-through status subsequent to this proposed rule in CY 2008 or during CY 2009 would approximate $18.9 million, which represents 0.07 percent of total OPPS projected payments for CY 2009.

Because we estimate that pass-through spending in CY 2009 would not amount to 2.0 percent of total projected OPPS CY 2009 spending, we are proposing to return 1.93 percent of the pass-through pool to adjust the conversion factor, as we discuss in section II.B. of this proposed rule.

VII. Proposed OPPS Payment for Brachytherapy Sources

A. Background

Section 1833(t)(2)(H) of the Act, as added by section 621(b)(2)(C) of Public Law 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 reflect the number, isotope, and radioactive intensity of the devices of brachytherapy furnished, including separate groups for palladium-103 and iodine-125 devices.

Section 1833(t)(16)(C) of the Act, as added by section 621(b)(1) of Public Law 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 were excluded from budget neutrality for that time period as well.

Section 621(b)(3) of Pub. L. 108-173 required the 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 on the appropriate payments for such devices. This report was due to Congress and to the Secretary no later than January 1, 2005. The GAO's final report, “Medicare Outpatient Payments: Rates for Certain Radioactive Sources Used in Brachytherapy Could Be Set Prospectively” (GAO-06-635), was published on July 24, 2006. We summarized and discussed the report's findings and recommendations in the CY 2007 OPPS/ASC final rule with comment period (71 FR 68103 through 68105). The GAO report principally recommended that we use OPPS historical claims data to determine prospective payment rates for two of the Start Printed Page 41501most frequently used brachytherapy sources, iodine-125 and palladium-103, and also recommended that we consider using claims data for the third source studied, high dose rate (HDR) iridium-192.

In our CY 2007 annual OPPS rulemaking, we proposed and finalized a policy of prospective payment based on median costs for the 11 brachytherapy sources for which we had claims data. We based the prospective payment rates on median costs for each source from our CY 2005 claims data (71 FR 68102 through 71 FR 68114).

Subsequent to publication of the CY 2007 OPPS/ASC final rule with comment period, section 107(a) of the MIEA-TRHCA amended section 1833(t)(16)(C) of the Act by extending the payment period for brachytherapy sources based on a hospital's charges adjusted to cost for 1 additional year, through December 31, 2007. Therefore, we continued to pay for brachytherapy sources on charges adjusted to cost for CY 2007.

Section 107(b)(1) of the MIEA-TRHCA amended section 1833(t)(2)(H) of the Act by adding a requirement for the establishment of separate payment groups for “stranded and non-stranded” brachytherapy devices beginning July 1, 2007. Section 107(b)(2) of the MIEA-TRHCA authorized the Secretary to implement this new requirement by “program instruction or otherwise.” This new requirement is in addition to the requirement for separate payment groups based on the number, isotope, and radioactive intensity of brachytherapy devices that was previously established by section 1833(t)(2)(H) of the Act. We note that commenters who responded to the CY 2007 proposed rule asserted that stranded sources, which they described as embedded into the stranded suture material and separated within the strand by material of an absorbable nature at specified intervals, had greater production costs than non-stranded sources (71 FR 68113 through 68114).

As a result of the statutory requirement to create separate groups for stranded and non-stranded sources as of July 1, 2007, we established several coding changes via program transmittal, effective July 1, 2007 (Transmittal 1259, dated June 1, 2007). Based upon comments on our CY 2007 proposed rule and industry input, we were aware of three sources available in stranded and non-stranded forms at that time: iodine-125; palladium-103; and cesium-131 (72 FR 42746). We created six new HCPCS codes to differentiate the stranded and non-stranded versions of iodine, palladium and cesium sources.

The first partial year claims data for separately coded stranded and non-stranded iodine, palladium, and cesium sources are now available in the CY 2007 claims data that we are using for CY 2009 ratesetting for brachytherapy sources included in this proposed rule.

In Transmittal 1259, we indicated that if we receive information that any of the other sources now designated as non-stranded are marketed as a stranded source, we would create a code for the stranded source. We also established two “Not Otherwise Specified” (NOS) codes for billing stranded and non-stranded sources that are not yet known to us and for which we do not have source-specific codes, that is, C2698 (Brachytherapy source, stranded, not otherwise specified, per source) for stranded NOS sources, or C2699 (Brachytherapy source, non-stranded, not otherwise specified, per source) for non-stranded NOS sources.

In the CY 2008 OPPS/ASC final rule with comment period (72 FR 66783 through 66784), we again finalized prospective payment for brachytherapy sources, beginning in CY 2008, with payment rates determined using the CY 2006 claims-based costs per source for each brachytherapy source. Consistent with our policy regarding APC payments made on a prospective basis, we finalized our policy in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66686) to subject the cost of brachytherapy sources to the outlier provision of section 1833(t)(5) of the Act, and to also subject brachytherapy source payment weights to scaling for purposes of budget neutrality. Therefore, brachytherapy sources could receive outlier payments if the costs of furnishing brachytherapy sources met the criteria for outlier payment. In addition, as noted in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66683), implementation of prospective payment for brachytherapy sources provides opportunities for hospitals to receive additional payments under certain circumstances through the 7.1 percent rural SCH adjustment.

We proposed and finalized a policy for CY 2008 to pay the two NOS codes, C2698 and C2699, based on a rate equal to the lowest stranded or non-stranded prospective payment rate for such sources, respectively, on a per source basis (as opposed, for example, to per mci). We reasoned that this payment methodology for NOS sources would provide payment to a hospital for new sources, while encouraging interested parties to quickly bring new sources to our attention so specific coding and payment could be established (72 FR 66785).

After we finalized our proposal to pay for brachytherapy sources in CY 2008 based on median costs, section 106(a) of the MMSEA extended the charges adjusted to cost payment methodology for an additional 6 months, through June 30, 2008. On January 18, 2008, we issued Transmittal R1417CP to indicate how we are implementing this provision. At this time, the prospective payment rates for brachytherapy sources finalized in the CY 2008 OPPS/ASC final rule with comment period will become effective July 1, 2008.

Status indicator “H” (defined in the CY 2008 OPPS/final rule with comment period as “Pass-Through Device Categories. Separate cost-based pass-through payment; not subject to copayment.”) is currently assigned to brachytherapy sources through June 30, 2008, for claims processing purposes, although a beneficiary copayment is being applied to payment for these sources. We finalized a policy in the CY 2008 OPPS/ASC final rule with comment period to assign status indicator “K” (defined as “Nonpass-Through Drugs and Biologicals; Therapeutic Radiopharmaceuticals; Brachytherapy Sources; Blood and Blood Products. Paid under OPPS; separate APC payment.”) to all brachytherapy source APCs because the sources would be paid based on prospective payment. The definition of status indicator “K” was initially changed for CY 2007 to accommodate prospective payment for brachytherapy sources and this change was continued for CY 2008 (72 FR 66785). Brachytherapy source APCs will be assigned status indicator “K” beginning July 1 through December 31, 2008.

For CY 2008, we also adopted the policy we established in the CY 2007 OPPS/ASC final rule with comment period (which was superseded by section 107 of the MIEA-TRHCA) regarding payment for new brachytherapy sources for which we have no claims data. We assign future new HCPCS codes for new brachytherapy sources to their own APCs, with prospective payment rates set based on our consideration of external data and other relevant information regarding the expected costs of the sources to hospitals (72 FR 66785). When section 106(a) of the MMSEA extended the charges adjusted to cost payment methodology for brachytherapy sources through June 30, 2008, this policy was not implemented as of January 1, 2008. We anticipate implementing this policy as of July 1, 2008.

At its March 2008 meeting, the APC Panel recommended that CMS use Start Printed Page 41502median cost data to pay for brachytherapy sources in CY 2009, as presented by the CMS staff and reviewed by the APC Panel Data Subcommittee.

B. Proposed OPPS Payment Policy

As we have stated in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66780), we believe that adopting prospective payment for brachytherapy sources would be appropriate for a number of reasons. The general OPPS payment methodology is a prospective payment system using median costs based on claims data to set the relative payment weights for hospital outpatient services. This prospective payment methodology would result in more consistent, predictable, and equitable payment amounts per source across hospitals by eliminating some of the extremely high and low payment amounts resulting from payment based on hospitals' charges adjusted to cost. Prospective payment would also provide hospitals with incentives for efficiency in the provision of brachytherapy services to Medicare beneficiaries. Moreover, this approach is consistent with our payment methodology for the vast majority of items and services paid under the OPPS. Indeed, section 1833(t)(2)(C) of the Act requires us to establish prospective payment rates for the OPPS system based on median costs (or mean costs if elected by the Secretary). Only pass-through devices continue to be paid at charges adjusted to cost for all of CY 2008, while brachytherapy sources and therapeutic radiopharmaceuticals are paid at charges adjusted to cost for the first 6 months of CY 2008.

We are proposing to use CY 2007 claims data for setting the CY 2009 rates for brachytherapy sources, as we are proposing for most other items and services that will be paid under the CY 2009 OPPS, using our standard OPPS ratesetting methodology. We believe that we have sufficiently robust CY 2007 claims data for all payable brachytherapy sources, including stranded and non-stranded iodine, palladium, and cesium sources. As indicated earlier, at the March 2008 APC Panel meeting, the APC Panel Data Subcommittee reviewed the CY 2007 claims data for brachytherapy sources and the APC Panel recommended using the median cost data for CY 2009 rates. We are accepting the APC Panel's recommendation, which is consistent with our proposal.

We are proposing to pay for the stranded and non-stranded NOS codes, C2698 and C2699, based on a rate equal to the lowest stranded or non-stranded prospective payment rate for such sources, respectively, on a per source basis (as opposed, for example, to per mci). This proposed payment methodology for NOS sources would provide payment to a hospital for new sources, while encouraging interested parties to quickly bring new sources to our attention so specific coding and payment could be established.