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Proposed Rule

Medicare Program: Proposed Changes to the Hospital Outpatient Prospective Payment System and CY 2010 Payment Rates; Proposed Changes to the Ambulatory Surgical Center Payment System and CY 2010 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 (OPPS) 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, 2010.

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 set forth 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 2010 ASC payment system. These proposed changes would be applicable to services furnished on or after January 1, 2010.

DATES:

To be assured consideration, comments on all sections 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 August 31, 2009.

ADDRESSES:

In commenting, please refer to file code CMS-1414-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 file code 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-1414-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-1414-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.

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.

Michele Franklin, (410) 786-4533, and Jana Lindquist, (410) 786-4533, Partial hospitalization and community mental health center issues.

James Poyer, (410) 786-2261, Reporting of quality data issues.

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SUPPLEMENTARY INFORMATION:

Submitting Comments: We welcome comments from the public on all issues set forth in this proposed rule to assist us in fully considering issues and developing policies. You can assist us by referencing file code CMS-1414-P for all issues on which you wish to comment.

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

AMP Average manufacturer price

AOA American Osteopathic Association

APC Ambulatory payment classification

ASC Ambulatory Surgical Center

ASP Average sales priceStart Printed Page 35233

AWP Average wholesale price

BBA Balanced Budget Act of 1997, Public Law 105-33

BBRA Medicare, Medicaid, and SCHIP [State Children's Health Insurance Program] Balanced Budget Refinement Act of 1999, Public Law 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, Public Law 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

CKD Chronic kidney disease

CMHC Community mental health center

CMS Centers for Medicare & Medicaid Services

CORF Comprehensive outpatient rehabilitation facility

CPT [Physicians] Current Procedural Terminology, Fourth Edition, 2009, copyrighted by the American Medical Association

CR Cardiac rehabilitation

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, Public Law 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, Public Law 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, Public Law 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

ICR Intensive cardiac rehabilitation

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

KDE Kidney disease education

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, Public Law 109-432

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

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

MMSEA Medicare, Medicaid, and SCHIP Extension Act of 2007, Public Law 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

OIG [HHS] Office of the Inspector General

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

PR Pulmonary rehabilitation

PRA Paperwork Reduction Act

QAPI Quality Assessment and Performance Improvement

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, Public Law 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; we refer readers to section XVIII.A. 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., XVI., and XVIII. through XXI. of this proposed rule and in Addenda AA, BB, DD1, DD2, and EE to this proposed rule. (Addendum EE is available on the Internet only; we refer readers to section XVIII.B. of this proposed rule.)

Table of Contents

I. Background and Summary of the CY 2010 OPPS/ASC Proposed Rule

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. 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. Proposed OPPS Nonrecurring Technical 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 (ASC) Payment System

15. Reporting Quality Data for Annual Payment Rate 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 Data Development Process and Calculation of Median Costs

a. Claims Preparations

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

(1) Splitting Claims

(2) 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 ServicesStart Printed Page 35234

(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)

(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) Other Service-Specific Packaging Issues

B. Proposed Conversion Factor Update

C. Proposed Wage Index Changes

D. Proposed Statewide Average Default CCRs

E. Proposed OPPS Payment to Certain Rural and Other Hospitals

1. Hold Harmless Transitional Payment Changes Made by Public Law 110-275 (MIPPA)

2. Proposed Adjustment for Rural SCHs Implemented in CY 2006 Related to Public Law 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 Copayment Policy

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

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

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

1. Proposed Treatment of New Level II HCPCS Codes and Category I CPT Vaccine Codes and Category III CPT Codes for Which We Are Soliciting Public Comments in This Proposed Rule

2. Proposed Process for New Level II HCPCS Codes and Category I and III CPT Codes for Which We Will Be Soliciting Public Comments in the CY 2010 OPPS/ASC Final Rule With Comment Period

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/ASC Specific Policies: Insertion of Posterior Spinous Process Distraction Device (APC 0052)

IV. Proposed OPPS Payment for Devices

A. Pass-Through Payments for Devices

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

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 Payment for No Cost/Full Credit and Partial 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 2009

3. Proposed Drugs, Biologicals, and Radiopharmaceuticals With New or Continuing Pass-Through Status in CY 2010

4. Pass-Through Payments for Implantable Biologicals

a. Background

b. Proposed Policy for CY 2010

5. Definition of Pass-Through Payment Eligibility Period for New Drugs and Biologicals

6. Proposed Provision for Reducing Transitional Pass-Through Payments for Diagnostic Radiopharmaceuticals and Contrast Agents To Offset Costs Packaged Into APC Groups

a. Background

b. Payment Offset Policy for Diagnostic Radiopharmaceuticals

c. Proposed Payment Offset Policy for Contrast Agents

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. Background

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

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

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

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

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

b. Proposed Payment Policy

4. Proposed Payment for Blood Clotting Factors

5. Proposed Payment for Therapeutic Radiopharmaceuticals

a. Background

b. Proposed Payment Policy

6. 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 for CY 2010

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. Proposed OPPS Nonrecurring Technical and Policy Changes and Clarifications

A. Kidney Disease Education Services

1. Background

2. Proposed Payment for Services Furnished by Providers of Services Located in a Rural Area

B. Pulmonary Rehabilitation and Cardiac Rehabilitation Services

1. Legislative Changes

2. Proposed Payment for Services Furnished to Hospital Outpatients in a Pulmonary Rehabilitation Program

3. Proposed Payment for Services Furnished to Hospital Outpatients Under a Cardiac Rehabilitation or an Intensive Cardiac Rehabilitation Program

4. Physician Supervision for Pulmonary Rehabilitation, Cardiac Rehabilitation, and Intensive Cardiac Rehabilitation Services

C. Stem Cell Transplants

D. Physician Supervision

1. Background

2. Issues Regarding the Physician Supervision of Hospital Outpatient Services Raised by Hospitals and Other Stakeholders

3. Proposed Policies for Direct Supervision of Hospital and CAH Outpatient Therapeutic ServicesStart Printed Page 35235

4. Proposed Policies for Direct Supervision of Hospital and CAH Outpatient Diagnostic Services

5. Summary of CY 2010 Physician Supervision Proposals

E. Direct Referral for Observation Services

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 on Outpatient Claims

B. Proposed Comment Indicator Definitions

XIV. OPPS Policy and Payment Recommendations

A. MedPAC Recommendations

B. APC Panel Recommendations

C. OIG Recommendations

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

A. Background

1. Legislative Authority for the ASC Payment System

2. Prior Rulemaking

3. Policies Governing Changes to the Lists of 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 2009

C. Proposed Update to the List 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. Proposed Covered Surgical Procedures Designated as Office-Based

(1) Background

(2) Proposed Changes to Covered Surgical Procedures Designated as Office-Based for CY 2010

c. Covered Surgical Procedures Designated as Device-Intensive

(1) Background

(2) Proposed Changes to List of Covered Surgical Procedures Designated as Device-Intensive for CY 2010

d. ASC Treatment of Surgical Procedures Proposed for Removal from the OPPS Inpatient List for CY 2010

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 2010

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

2. Proposed Payment for Covered Ancillary Services

a. Background

b. Proposed Payment for Covered Ancillary Services for CY 2010

E. New Technology Intraocular Lenses (NTIOLs)

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 2010 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. ASC Policy and Payment Recommendations

H. Proposed Revision to Terms of Agreements for Hospital-Operated ASCs

1. Background

2. Proposed Changes to the Terms of Agreements for ASCs Operated by a Hospital

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

1. Background

2. Proposed Calculation of the ASC Payment Rates

a. Updating the ASC Relative Payment Weights for CY 2010 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. Overview

2. Hospital Outpatient Quality Data Reporting Under Section 109(a) of Public Law 109-432

3. Reporting ASC Quality Data for Annual Payment Update

4. HOP QDRP Quality Measures for the CY 2009 Payment Determinations

5. HOP QDRP Quality Measures for the CY 2010 Payment Determination

a. Background

b. Maintenance of Technical Specifications for Quality Measures

c. Publication of HOP QDRP Data

B. Proposals Regarding Quality Measures

1. Considerations in Expanding and Updating Quality Measures Under the HOP QRDP Program

2. Retirement of HOP QRDP Quality Measures

3. Proposed HOP QDRP Quality Measures for the CY 2011 Payment Determination

C. Possible Quality Measures Under Consideration for FY 2012 and Subsequent Years

D. Proposed Payment Reduction for Hospitals That Fail To Meet the HOP QDRP Requirements for the CY 2010 Payment Update

1. Background

2. Proposed Reporting Ratio Application and Associated Adjustment Policy for CY 2010

E. Proposed Requirements for HOPD Quality Data Reporting for CY 2011 and Subsequent Years

1. Administrative Requirements

2. Data Collection and Submission Requirements

a. General Data Collection and Submission Requirements

b. Extraordinary Circumstance Extension or Waiver for Reporting Quality Data

3. HOP QDRP Validation Requirements

a. Proposed Data Validation Requirements for CY 2011

b. Proposed Data Validation Approach for CY 2012 and Subsequent Years

c. Additional Data Validation Conditions Under Consideration for CY 2012 and Subsequent Years

F. Proposed 2010 Publication of HOP QDRP Data

G. Proposed HOP QDRP Reconsideration and Appeals Procedures

H. Reporting of ASC Quality Data

I. Electronic Health Records

XVII. Healthcare-Associated Conditions

A. Background

1. Preventable Medical Errors and Hospital-Acquired Conditions (HACs) Under the IPPS

2. Expanding the Principles of the IPPS HACs Payment Provision to the OPPS

3. Discussion in the CY 2009 OPPS/ASC Final Rule With Comment Period

B. Public Comments and Recommendations on Issues Regarding Healthcare-Associated Conditions From the Joint IPPS/OPPS Listening Session

C. CY 2010 Approach to Healthcare-Associated Conditions Under the OPPS

XVIII. Files Available to the Public via the Internet

A. Information in Addenda Related to the Proposed CY 2010 Hospital OPPS

B. Information in Addenda Related to the Proposed CY 2010 ASC Payment System

XIX. Collection of Information Requirements

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 of Our AnalysisStart Printed Page 35236

3. Estimated Effects of This Proposed Rule on Payments to 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 2010

Addendum AA—Proposed ASC Covered Surgical Procedures for CY 2010 (Including Surgical Procedures for Which Payment Is Packaged)

Addendum B—Proposed OPPS Payment by HCPCS Code for CY 2010

Addendum BB—Proposed ASC Covered Ancillary Services Integral to Covered Surgical Procedures for CY 2010 (Including Ancillary Services for Which Payment Is Packaged)

Addendum D1—Proposed OPPS Payment Status Indicators for CY 2010

Addendum DD1—Proposed ASC Payment Indicators for CY 2010

Addendum D2—Proposed OPPS Comment Indicators for CY 2010

Addendum DD2—Proposed ASC Comment Indicators for CY 2010

Addendum E—Proposed HCPCS Codes That Would Be Paid Only as Inpatient Procedures for CY 2010

Addendum L—Proposed CY 2010 OPPS Out-Migration Adjustment

Addendum M—Proposed HCPCS Codes for Assignment to Composite APCs for CY 2010

I. Background and Summary of the CY 2010 OPPS/ASC Proposed Rule

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

When the Medicare statute was enacted, Medicare payment for hospital outpatient services was based on hospital-specific costs. In an effort to ensure that Medicare and its beneficiaries pay appropriately for services and to encourage more efficient delivery of care, the Congress mandated replacement of the reasonable cost-based payment methodology with a prospective payment system (PPS). The Balanced Budget Act (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 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.

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 following Acts made additional changes to the OPPS: the Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act (BIPA) of 2000 (Pub. L. 106-554); 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; the Medicare Improvements and Extension Act under Division B of Title I of the Tax Relief and Health Care Act (MIEA-TRHCA) of 2006 (Pub. L. 109-432), enacted on December 20, 2006; the Medicare, Medicaid, and SCHIP Extension Act (MMSEA) of 2007 (Pub. L. 110-173), enacted on December 29, 2007; and the Medicare Improvements for Patients and Providers Act (MIPPA) of 2008 (Pub. L. 110-275), enacted on July 15, 2008.

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 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 Public Law 108-173 added provisions for coverage for 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 Public Law 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 Start Printed Page 35237example, 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. These rules can be viewed on the CMS Web site at: http://www.cms.hhs.gov/​HospitalOutpatientPPS/​. We published in the Federal Register on November 18, 2008 the CY 2009 OPPS/ASC final rule with comment period (73 FR 68502). 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 2009 OPPS on the basis of claims data from January 1, 2007, through December 31, 2007, and to implement certain provisions of Public Law 110-173 and Public Law 110-275. In addition, in that final rule we also responded to public comments received on the provisions of the November 27, 2007 final rule with comment period (72 FR 66580) pertaining to the APC assignment of HCPCS codes identified in Addendum B to that rule with the new interim (“NI”) comment indicator, and to public comments received on the July 18, 2008 OPPS/ASC proposed rule for CY 2009 (73 FR 41416).

Subsequent to publication of the CY 2009 OPPS/ASC final rule with comment period, we published in the Federal Register on January 26, 2009, a correction notice (74 FR 4343 through 4344) to correct certain technical errors in the CY 2009 OPPS/ASC final rule with comment period.

D. Advisory Panel on Ambulatory Payment Classification Groups

1. Authority of the APC Panel

Section 1833(t)(9)(A) of the Act, as amended by section 201(h) of Public Law 106-113, and redesignated by section 202(a)(2) of Public Law 106-113, requires that we consult with an 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 (currently employed full-time, not as consultants, in their respective areas of expertise) subject to the OPPS, reviews clinical data and advises CMS about the clinical integrity of the APC groups and their payment weights. The APC Panel is technical in nature, and it is governed by the provisions of the Federal Advisory Committee Act (FACA). Since its initial chartering, the Secretary has renewed the APC Panel's charter four times: on November 1, 2002; on November 1, 2004; on November 21, 2006; and on November 2, 2008. 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 through March 1, 2001. Since the initial meeting, the APC Panel has held 15 meetings, with the last meeting taking place on February 18 and 19, 2009. 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. 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 February 2009 APC Panel meeting. At that meeting, the APC Panel recommended that the work of these three subcommittees continue, and we accept those recommendations of the APC Panel. All subcommittee recommendations are discussed and voted upon by the full APC Panel.Start Printed Page 35238

Discussions of the other recommendations made by the APC Panel at the February 2009 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/ASC proposed and final rules, the CMS Web site mentioned earlier in this section, and the FACA database at http://fido.gov/​facadatabase/​public.asp.

E. Background and Summary of the CY 2010 OPPS/ASC Proposed Rule

In this proposed rule, we set forth proposed changes to the Medicare hospital OPPS for CY 2010 to implement statutory requirements and changes arising from our continuing experience with the system. In addition, we are setting forth proposed changes to the revised Medicare ASC payment system for CY2010, including proposed updated payment weights and covered surgical ancillary services based on the proposed OPPS update. Finally, we are setting forth proposed quality measures for the Hospital Outpatient Quality Data Reporting Program (HOP QDRP) for reporting quality data for annual payment rate updates for CY 2011 and subsequent calendar years, the requirements for data collection and submission for the annual payment update, and a proposed reduction in the OPPS payment for hospitals that fail to meet the HOP QDRP requirements for the CY 2010 payment update, in accordance with the statutory requirement. These changes would be effective for services furnished on or after January 1, 2010. 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 proposed 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 HCPCS codes to APCs.
  • Our proposals to establish a number of new APCs.
  • Our analyses of Medicare claims data and certain recommendations of the APC Panel.
  • The application of the 2 times rule and proposed exceptions to it.
  • Proposed changes to specific APCs.
  • 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 2010 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 2010 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 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 coding and payment 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 data.

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 for payment under the OPPS.

11. Proposed OPPS Nonrecurring Technical and Policy Changes and Clarifications

In section XII. of this proposed rule, we set forth our proposals regarding nonrecurring technical issues and provide 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 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 March 2009 report to Congress, by the Office of Inspector General (OIG), and by the APC Panel regarding the OPPS for CY 2010.

14. Proposed Ambulatory Surgical Center (ASC) Payment System

In section XV. of this proposed rule, we discuss the proposed update of the revised ASC payment system covered surgical procedures and covered ancillary services and payment rates for CY 2010.Start Printed Page 35239

15. Reporting Quality Data for Annual Payment Rate Updates

In section XVI. of this proposed rule: We discuss the proposed quality measures for reporting hospital outpatient (HOP) quality data for the annual payment update factor for CY 2012 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 Quality Data Reporting Program (QDRP) requirements for CY 2010.

16. Healthcare-Associated Conditions

In section XVII. of this proposed rule, we discuss public responses to a December 2008 CMS public listening session addressing the potential extension of the principle of Medicare not paying more under the IPPS for the care of preventable hospital-acquired conditions experienced by a Medicare beneficiary during a hospital inpatient stay to medical care in other settings that are paid under other Medicare payment systems, including the OPPS, for those healthcare-associated conditions that occur or result from care in those 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.

For CY 2010, 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, 2010, and before January 1, 2011 (CY 2010). That is, we are proposing to recalibrate the relative payment weights for each APC based on claims and cost report data for hospital outpatient department (HOPD) services. We are proposing to use the most recent available data to construct the database for calculating APC group weights. Therefore, for the purpose of recalibrating the proposed APC relative payment weights for CY 2010, we used approximately 130 million final action claims for hospital outpatient department services furnished on or after January 1, 2008, and before January 1, 2009. (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 2010 OPPS payment rates for this proposed rule, approximately 100 million claims were the type of bill potentially appropriate for use in setting rates for OPPS services (but did not necessarily contain services payable under the OPPS). Of the 100 million claims, approximately 46 million claims were not for services paid under the OPPS or were excluded as not appropriate for use (for example, erroneous cost-to-charge ratios (CCRs) or no HCPCS codes reported on the claim). From the remaining 54 million claims, we created approximately 91 million single records, of which approximately 61 million were “pseudo” single or “single session” claims (created from 24 million multiple procedure claims using the process we discuss later in this section). Approximately 622,000 claims were trimmed out on cost or units in excess of +/− 3 standard deviations from the geometric mean, yielding approximately 90 million single bills for median setting. As described in section II.A.2. of this proposed rule, our data development process is designed with the goal of using appropriate cost information in setting the APC relative weights. The bypass process described in section II.A.1.b. of this proposed rule discusses how we develop “pseudo” single claims, with the intention of using more appropriate data from the available claims. In some cases, the bypass process allows us to use some portion of the submitted claim for cost estimation purposes, while the remaining information on the claim continues to be unusable. Consistent with the goal of using appropriate information in our data development process, we only use claims (or portions of each claim) that are appropriate for ratesetting purposes. Ultimately, we were able to use for CY 2010 ratesetting some portion of 95 percent of the CY 2008 claims containing services payable under the OPPS.

The proposed APC relative weights and payments for CY 2010 in Addenda A and B to this proposed rule were calculated using claims from CY 2008 that were processed before January 1, 2009, 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 2010 payment rates.

b. Proposed Use of Single and Multiple Procedure Claims

For CY 2010, 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 in this section. We generally use single procedure claims to set the median costs for APCs because we believe that the OPPS relative weights on which payment rates are based should be derived from the costs of furnishing one procedure and because, in many circumstances, we are unable to ensure that packaged costs can be appropriately allocated across multiple procedures performed on the same date of service.

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 were submitted as multiple procedure claims that contained numerous separately paid procedures reported on the same date on one claim. We refer to these newly created single procedure claims as “pseudo” single claims. The history of our use of a bypass list to generate “pseudo” single claims is well documented, most recently in the CY 2009 OPPS/ASC final rule with comment period (73 FR 68512 through Start Printed Page 3524068519). In addition, for CY 2008, we increased packaging and created the first composite APCs. This also increased the number of bills that 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. Further, for CY 2009, we expanded the composite APC model to one additional clinical area, multiple imaging services (73 FR 68559 through 68569). 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 2010 OPPS. This process enabled us to create, for this proposed rule, approximately 61 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), to add to the approximately 30 million “natural” single bills. For this proposed rule, “pseudo” single and “single session” procedure bills represent 67 percent of all single bills used to calculate median costs.

For CY 2010, we are proposing to bypass 438 HCPCS codes for CY 2010 that are identified in Table 1 of this proposed rule. 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 2010, data available for the February 2009 APC Panel meeting from CY 2008 claims processed through September 30, 2008) to determine whether it would be appropriate to propose to add additional codes to the previous year's bypass list. For CY 2010, we are proposing to continue to bypass all of the HCPCS codes on the CY 2009 OPPS bypass list. We also are proposing to add to the bypass list for CY 2010 all HCPCS codes not on the CY 2009 bypass list that, using both CY 2009 final rule and February 2009 APC Panel data, meet the same previously established empirical criteria for the bypass list that are summarized below. The entire list proposed for CY 2010 (including the codes that remain on the bypass list from prior years) is open to public comment. We assume that the representation of packaging in the “natural” 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 “natural” 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 “natural” 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 “natural” 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 continue to include on the bypass list HCPCS codes that CMS medical advisors believe have minimal associated packaging based on their clinical assessment of the complete CY 2010 OPPS proposal. Some of these codes were identified by CMS medical advisors and some were identified in prior years by commenters with specialized knowledge of the services that they requested be added to the bypass list. We also are proposing to continue to include on the bypass list certain HCPCS codes in order to purposefully direct the assignment of packaged costs where codes always appear together and there would otherwise be few single claims available for ratesetting. For example, we have previously discussed our reasoning for adding HCPCS code G0390 (Trauma response team associate with hospital critical care service) and the CPT codes for additional hours of drug administration to the bypass list (73 FR 68513 and 71 FR 68117 through 68118).

As a result of the multiple imaging composite APCs that we established in CY 2009, we note that the program logic for creating “pseudo” singles from bypassed codes that are also members of multiple imaging composite APCs changed. 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, were identified first. These HCPCS codes were then processed to create multiple imaging composite “single session” bills, that is, claims containing HCPCS codes from only one imaging family, thus suppressing the initial use of these codes as bypass codes. However, these “overlap bypass codes” were retained on the bypass list because, at the end of the “pseudo” single processing logic, we reassessed the claims without suppression of the “overlap bypass codes” under our longstanding “pseudo” single process to determine whether we could convert additional claims to “pseudo” single claims. (We refer readers to section II.A.2.b. of this proposed rule for further discussion of the treatment of “overlap bypass codes.”) This process also created multiple imaging composite “single session” bills that could be used for calculating composite APC median costs. “Overlap bypass codes” that are members of the proposed multiple imaging composite APCs are identified by asterisks (*) in Table 1 below.

At the February 2009 APC Panel Meeting, the APC Panel recommended that CMS place CPT code 76098 (Radiological examination, surgical specimen) on the bypass list and reassign the code to APC 0260 (Level I Plain Film Except Teeth) in response to a public presentation requesting that CMS makes these changes. Although CPT code 76098 would not be eligible for addition to the bypass list because the frequency and magnitude of packaged costs in its “natural” single claims exceed the empirical criteria, the presenter suggested that the “natural” single claims represented aberrant billing with inappropriate packaged services and pointed out that the packaged services support the surgical procedures that commonly are also reported on claims for CPT code 76098. The presenter suggested that bypassing CPT code 76098 would properly allocate packaged costs to surgical procedures on these claims, and would increase the number of single claims available for ratesetting for both CPT code 76098 and the associated surgical breast procedures. The APC Panel indicated that the issues raised by the presenter appeared to be consistent with clinical practice and subsequently made the recommendation to bypass CPT code 76098 and reassign the code to APC 0260 based on its revised cost.

Based on the APC Panel's specific recommendation for CPT code 76098, we studied the billing patterns for the code in the “natural” single and multiple major claims in the CY 2008 claims data available for the February 2009 APC Panel. The presenter asserted that CPT code 76098 is commonly billed with surgical breast procedures and our claims data from the multiple procedure Start Printed Page 35241claims confirm this observation. However, as noted above, there are also a significant number of “natural” single bills in those data (1,303), and these “natural” single claims include packaged services, such as CPT code 19290 (Preoperative placement of needle localization wire, breast) and CPT 77032 code (Mammographic guidance for needle placement, breast (e.g., for wire localization or for injection), each lesion, radiological supervision and interpretation). We have received anecdotal information that hospitals may place guidance wires prior to surgery in the hospital's radiology department and then examine the surgical specimen in the radiology department after its surgical removal. This information, along with the number of observed “natural” single claims, suggests that the packaged costs might appropriately be associated with the radiological examination of the breast specimen. Although bypassing CPT code 76098 would allow for the creation of more “pseudo” single claims for ratesetting, it would also require the assumption that all packaging on the claim would be correctly assigned to the remaining major procedure where it exists and that on “natural” single bills no packaging would be appropriately associated with CPT code 76098. Given the number of “natural” single bills for CPT code 76098 and the significant packaged costs on these claims, we are not confident that placement on the bypass list is appropriate.

While we are not proposing to place CPT code 76098 on the bypass list, and we want to continue to provide separate payment for this procedure when appropriate, we do believe that CPT code 76098 is generally ancillary and supportive to surgical breast procedures. In CY 2008 we established a group of conditionally packaged codes, called “T-packaged codes,” whose payment is packaged when one or more separately paid surgical procedures with status indicator “T” are provided during a hospital encounter. In order to provide separate payment for CPT code 76098 when not provided with a separately payable surgical procedure, and also to recognize its ancillary and supportive nature when it accompanies separately payable procedures, we are proposing to conditionally package CPT code 76098 as a “T-packaged code” for CY 2010, identified with status indicator “Q2” in Addendum B to this proposed rule. As a “T-packaged code,” CPT code 76098 would receive separate payment except where it appears with a surgical procedure, in which case its payment would be packaged. Designating CPT 76098 in this way allows the separate payment to appropriately account for the packaged costs that appear on the code's “natural” single bills, while also allowing us to use more multiple procedure claims that include both a surgical procedure and CPT code 76098 to set the payment rates for the related surgical procedures. The code-specific median cost of CPT code 76098 is approximately $346, consistent with its CY 2009 assignment to APC 0317 (Level II Miscellaneous Radiology Procedures) which has an APC median cost of approximately $339. In contrast, the median cost of APC 0260, the APC reassignment recommended by the APC Panel, is much lower at approximately $46. Therefore, we are not accepting the APC Panel's recommendation to reassign CPT code 76098. Instead, we are proposing to continue its assignment to APC 0317 for CY 2010 in those cases where CPT code 76098 is separately paid.

Table 1 includes the proposed list of bypass codes for CY 2010. This list contains bypass codes that are appropriate to claims for services in CY 2008 and, therefore, includes codes that were deleted for CY 2009. We retain these deleted bypass codes on the bypass list because these codes existed in CY 2008, the year of our claims data. Using these deleted bypass codes for bypass purposes allows us to potentially create more “pseudo” single claims for ratesetting purposes. “Overlap bypass codes” that are members of the proposed multiple imaging composite APCs are identified by asterisks (*) in Table 1 below.

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c. Proposed Calculation of CCRs

(1) Development of the CCRs

We calculated hospital-specific overall ancillary CCRs and hospital-specific departmental CCRs for each hospital for which we had CY 2008 claims data from the most recent available hospital cost reports, in most cases, cost reports beginning in CY 2007. For the CY 2010 OPPS proposed rates, we used the set of claims processed during CY 2008. 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 Start Printed Page 35253and 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. For a discussion of the hospital-specific overall ancillary CCR calculation, we refer readers to the CY 2007 OPPS/ASC final rule with comment period (71 FR 67983 through 67985).

For CY 2010, we are proposing to continue using the hospital-specific overall ancillary and departmental CCRs to convert charges on the claims reported under specific revenue codes to estimated costs through application of a revenue code-to-cost center crosswalk.

(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. We discuss our CCR calculation in section II.A.1.c. of this proposed rule and how we use these CCRs to estimate cost on hospital outpatient claims in detail in section II.A.2.a. of this proposed rule. As a result, the cost-based weights incorporate aggregation bias, undervaluing high cost items and overvaluing low cost items when an estimate of average markup, embodied in a single CCR, is applied to items of widely varying costs in the same cost center. Commenters expressed increased concern about the impact of charge compression when CMS began setting 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 capture better the variation in cost and charges for individual services when calculating costs for the IPPS relative weights across services in the same cost center. 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 revenue codes associated with the cost center in the claims data. 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 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).

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 that 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 or, at least, similar approaches 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 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. The RTI final report can be found on RTI's Web site at: http://www.rti.org/​reports/​cms/​HHSM-500-2005-0029I/​PDF/​Refining_​Cost_​to_​Charge_​Ratios_​200807_​Final.pdf. For a complete discussion of the RTI recommendations, public comments, and our responses, we refer readers to the CY 2009 OPPS/ASC final rule with comment period (73 FR 68519 through 68527).

In the FY 2009 IPPS final rule, we finalized our proposal for both the OPPS and IPPS to add one cost center to the cost report so that, in general, the costs and charges for relatively inexpensive medical supplies would be reported separately from the costs and charges for more expensive implantable devices (such as pacemakers and other implantable devices). Specifically, we said that we would create one cost center for “Medical Supplies Charged to Patients” and one cost center “Implantable Devices Charged to Patients.” This change ultimately will split the current CCR for Medical Supplies and Equipment into one CCR for medical supplies and another CCR for implantable devices. In response to the majority of commenters on the proposal set forth in the FY 2009 IPPS proposed rule, we finalized a definition of the Implantable Devices Charged to Patients cost center as capturing the costs and charges billed with the following UB-04 revenue codes: 0275 (Pacemaker), 0276 (Intraocular lens), 0278 (Other implants), and 0624 (FDA investigational devices). This change to the cost report form will be made and will be reflected in cost reports for cost reporting periods beginning in the spring of 2009. Because there is generally a 3-year lag between the availability of cost report data for IPPS and OPPS ratesetting purposes in a given calendar year, we believe we will be able to use data from the revised cost report form to estimate costs from charges associated with UB-04 revenue codes 0275, 0276, 0278, and 0624 for implantable devices in order to more accurately estimate the costs of device-related procedures for the CY 2013 OPPS relative weights. For a complete discussion of the proposal, public comments, and our responses, we refer readers to the FY2009 IPPS final rule (73 FR 48458 through 48467).

For the CY 2009 OPPS/ASC proposed rule, we made a similar proposal for drugs, proposing to split the Drugs Charged to Patients cost center into two cost centers: One for drugs with high pharmacy overhead costs and one for drugs with low pharmacy overhead costs (73 FR 41492). We noted that we expected that CCRs from the proposed new cost centers would be available in 2 to 3 years to refine OPPS drug cost Start Printed Page 35254estimates by accounting for differential hospital markup practices for drugs with high and low pharmacy overhead costs. However, after consideration of the public comments received and the APC Panel recommendations, we did not finalize our proposal to split the single standard Drugs Charged to Patients cost center into two cost centers, and instead indicated in the CY 2009 OPPS/ASC final rule with comment period (73 FR 68659) that we would continue to explore other potential approaches to improve our drug cost estimation methodology. Unlike implantable devices, we do not currently have a policy to address charge compression in our cost estimation for expensive drugs and biologicals. In section V.B.3.of this proposed rule, we are proposing an adjustment to our cost estimation methodology for drugs and biologicals in CY 2010 to address charge compression by proposing to shift a portion of the pharmacy overhead cost associated with packaged drugs and biologicals from those packaged drugs and biologicals to separately payable drugs and biologicals; proposing payment for separately payable drugs and biologicals at ASP +4 percent; and proposing a proportional reduction in the total amount of pharmacy overhead cost associated with packaged drugs and biologicals prior to our estimating the total resource costs of individual OPPS services.

Finally, in the CY 2009 OPPS/ASC final rule with comment period, we indicated that we would be making some OPPS-specific changes in response to the RTI report recommendations. With regard to modifying the cost reporting preparation software in order to impose fixed descriptions for nonstandard cost centers, we indicated that the change would be made for the next release of the cost report software. We anticipate that these changes will be made to the cost reporting software in CY 2010 and will act as a quality check for hospitals to review their choice of nonstandard cost center code to ensure that the reporting of nonstandard cost centers is accurate, while not significantly increasing provider burden. In addition to improving the reporting mechanism for the nonstandard cost centers, we indicated in the CY 2009 final rule with comment period that we also planned to add the new nonstandard cost centers for Cardiac Rehabilitation, Hyperbaric Oxygen Therapy, and Lithotripsy. We expect that changes to add these nonstandard cost centers will be proposed for cost reports beginning in CY 2011 as part of a larger effort to update the Medicare cost report. We noted in the FY 2009 IPPS final rule (73 FR 48467 through 48468) that we are updating the cost report form to eliminate outdated requirements, in conjunction with the Paperwork Reduction Act, and that we planned to propose actual changes to the cost reporting form, the attending cost reporting software, and the cost report instructions in Chapter 36 of the PRM-II. We believe that improved cost report software, the incorporation of new nonstandard cost centers, and elimination of outdated requirements will improve the accuracy of the cost data contained in the electronic cost report data files and, therefore, the accuracy of our cost estimation processes for the OPPS relative weights. As has been described above, CMS has taken steps to address charge compression in the IPPS and OPPS, and continues to examine ways in which it can improve the accuracy of its cost estimation process.

2. Proposed Data Development Process and 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 2010. 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 payment 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 2010 proposed rule. That accounting provides additional detail regarding the number of claims derived at each stage of the process. In addition, below in this section we discuss the file of claims that comprise the data set that is available for purchase under a CMS data use agreement. Our CMS Web site, http://www.cms.hhs.gov/​HospitalOutpatientPPS, includes information about purchasing the “OPPS Limited Data Set,” which will now include the additional variables previously available only in the OPPS Identifiable Data Set, including ICD-9-CM diagnosis codes and revenue code payment amounts. This file is derived from the CY 2008 claims that were used to calculate the proposed payment rates for the CY2010 OPPS.

We used the following methodology to establish the relative weights used in calculating the proposed OPPS payment rates for CY 2010 shown in Addenda A and B to this proposed rule.

a. Claims Preparation

We used the CY 2008 hospital outpatient claims processed before January 1, 2009 to calculate the median costs of APCs, which in turn are used to set the proposed relative weights for CY 2010. To begin the calculation of the relative weights for CY 2010, we pulled all claims for outpatient services furnished in CY 2008 from the national claims history file. This is not the population of claims paid under the OPPS, but all outpatient claims (including, for example, critical access hospital (CAH) claims and hospital claims for clinical laboratory services for persons who are neither inpatients nor outpatients of the hospital).

We then excluded claims with condition codes 04, 20, 21, and 77. 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), 14X (laboratory specimen bill types), or 76X (CMHC bill types). Other bill types are not paid under the OPPS and, therefore, these claims were not used to set OPPS payment.

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

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

To convert charges on the claims to estimated cost, we needed to multiply those charges by the CCR associated with each revenue code as discussed in section II.A.1.c.(1) of this proposed rule. For the CCR calculation process, we used the same general approach that we used in developing the final APC rates Start Printed Page 35255for 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 2008 before determining whether the CCRs for such hospitals were valid.

We then calculated the CCRs for each cost center and the overall ancillary CCR for each hospital for which we had claims data. We did this using hospital-specific data from the Hospital Cost Report Information System. We used the most recent available cost report data, in most cases, cost reports beginning in CY 2007. 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 2010 OPPS payment 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 ancillary CCR, and we then adjusted the most recent available submitted but not settled cost report using that ratio. We calculated both an overall ancillary CCR and cost center-specific CCRs for each hospital. We used the overall ancillary CCR referenced in section II.A.1.c.(1) of this proposed rule for all purposes that require use of an overall ancillary 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 ancillary 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, the revenue code-to-cost center crosswalk, to match a cost center to every possible revenue code appearing in the outpatient claims that is relevant to OPPS services, with the top tier being the most common cost center and the last tier being the default CCR. If a hospital's cost center CCR was deleted by trimming, we set the CCR for that cost center to “missing” so that another cost center CCR in the revenue center hierarchy could apply. If no other cost center CCR could apply to the revenue code on the claim, we used the hospital's overall ancillary CCR for the revenue code in question. For example, if a visit was reported under the clinic revenue code but the hospital did not have a clinic cost center, we mapped the hospital-specific overall ancillary CCR to the clinic revenue code. The revenue code-to-cost center crosswalk is available for inspection and comment on the CMS Web site: http://www.cms.hhs.gov/​HospitalOutpatientPPS. Revenue codes not used to set medians or to model impacts are identified with an “N” in the revenue code-to-cost center crosswalk.

We are proposing to update the revenue code-to-cost center crosswalk to more accurately reflect the current use of revenue codes. We indicated in the CY 2009 OPPS/ASC final rule with comment period (73 FR 68531) that we intended to assess the National Uniform Billing Committee (NUBC) revenue codes to determine whether any changes to the list of packaged revenue codes should be proposed for the CY 2010 OPPS. We expanded this evaluation to review all revenue codes in the revenue code-to-cost center crosswalk that we have used for OPPS ratesetting purposes in recent years against the CY 2008 NUBC definitions of revenue codes in place for CY 2008. As a result of that review we are proposing to revise the revenue code-to-cost center crosswalk as described in Table 2 below to update the revenue codes for which we would estimate costs on each claim and incorporate the costs for those revenue codes into APC median cost estimates. In Table 2, Column A provides the 2008 revenue code and description. Column B indicates whether the charges reported with the revenue code would be converted to cost and incorporated into median cost estimates for CY 2010. Column C indicates whether the charges reported with the revenue code were converted to cost and incorporated into median cost estimates for the CY 2009 OPPS. In both columns, a “Y” indicates that the charges would be converted to cost in CY 2010 (or were converted for CY 2009), and an “N” indicates that charges reported under the revenue code would not be converted to cost and incorporated into median cost estimates. Finally, Column D provides our rationale for the proposed CY 2010 change.

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Also, as a result of our comprehensive review of the revenue codes included in the revenue code-to-cost center crosswalk, we are proposing to add revenue codes to the hierarchy of primary, secondary, and tertiary hospital cost report cost centers that result in the departmental CCRs that we use to estimate cost from charges for some revenue codes or to revise the applicable cost centers associated with a given revenue code. Table below lists the revenue codes for which we are proposing changes to the revenue code-to-cost center crosswalk and our rationale for each proposed change. With the exception of revenue code 0942 (Other Therapeutic Services; Education/Training), the revenue codes for which we are proposing changes to the designated departmental CCRs are those identified in our comprehensive review that are also listed above in Table 2.

Table 3—Proposed Changes to CY 2010 OPPS Hierarchy of Cost Centers in the Revenue Code-to-Cost Center Crosswalk

2008 Revenue code and descriptionRationale for proposed CY 2010 change
0392—Administration, Processing and Storage for Blood and Blood Components; Processing and StorageWe are proposing to crosswalk charges under revenue code 0392 to cost center 4700 (Blood Storing, Processing, & Transfusing) because we believe that cost center 4700 is the most likely departmental cost center to which hospitals would assign the costs of blood processing and storage. We are proposing no secondary or tertiary cost centers because we believe that no other departmental cost centers are appropriate.
0623—Medical Surgical Supplies—Extension of 027X; Surgical DressingsWe are proposing to crosswalk the charges reported under revenue code 0623 to cost center 5500 (Medical Supplies Charged to Patients) as the primary cost center because we believe that the costs associated with the charges for surgical dressings are most likely to be assigned by hospitals to cost center 5500. We are proposing no secondary or tertiary cost centers because we believe that no other departmental cost centers are appropriate.
0931—Medical Rehabilitation Day Program; Half DayWe are proposing to crosswalk charges reported under revenue codes 0931 and 0932 to cost center 6000 (Clinic) as the primary cost center. We are proposing no secondary or tertiary cost centers because we believe that no other departmental cost centers are appropriate.
0932—Medical Rehabilitation Day Program; Full Day
0942—Other Therapeutic Services (also see 095x, an extension of 094x); Educ/TrainingWe are proposing to crosswalk the charges under revenue code 0942 to cost center 6000 (Clinic) as the primary cost center. Currently, the charges under revenue code 0942 are crosswalked to the overall ancillary CCR. We believe that cost center 6000 is a more appropriate primary cost center. We are proposing no secondary or tertiary cost centers because we believe that no other departmental cost centers are appropriate.
0948—Other Therapeutic Services (also see 095x, an extension of 094x); Pulmonary RehabilitationWe are proposing to crosswalk the charges under revenue code 0948 to cost center 4900 (Respiratory Therapy) as primary and to cost center 6000 (Clinic) as secondary because we believe that hospitals are most likely to assign the costs of these services to these cost centers. We are proposing no tertiary cost center.

Having revised the revenue code-to-cost center crosswalk, 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. 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, 13X, or 14X, excluding all claims from CAHs and hospitals in Maryland, Guam, the U.S. Virgin Islands, American Samoa, and the Northern Mariana Islands and Start Printed Page 35262claims 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 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 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 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. These line-items are used to calculate a per unit mean and median cost and a per day mean and median cost for drugs, therapeutic radiopharmaceutical agents, and brachytherapy sources, as well as other information used to set payment rates, such as a unit-to-day ratio for drugs.

To implement our proposal to redistribute some portion of total cost for packaged drugs and biologicals to separately payable drugs and biologicals as acquisition and pharmacy overhead and handling costs discussed in section V.B.3. of this proposed rule, we used the line-item cost data for drugs and biologicals for which we had a HCPCS code with ASP pricing information to calculate the ASP+X values first for all drugs and biologicals, and then for separately payable drugs and biologicals and for packaged drugs and biologicals, respectively, by taking the ratio of total claim cost for each group relative to total ASP dollars (per unit of each drug or biological HCPCS code's April 2009 ASP amount multiplied by total units for each drug or biological in the CY 2008 claims data). These values are ASP+13 percent, ASP−2 percent, and ASP+247 percent, respectively. As we discuss in greater detail in section V.B.3. of this proposed rule, we believe that between one-third and one-half of the total cost in our claims data in excess of ASP dollars for packaged drugs and biologicals, about $150 million, is currently allocated to packaged drugs and biologicals due to the combined effects of charge compression and our choice of a drug packaging threshold but should instead be allocated to separately payable drugs and biologicals as acquisition and pharmacy overhead and handling cost. The $150 million is between one-third and one-half of the difference of $395 million between the total cost of packaged drugs and biologicals in our CY 2008 claims data ($555 million) and ASP dollars for the same drugs and biologicals ($160 million). Removing $150 million in pharmacy overhead cost from packaged drugs and biologicals reduces the $555 million to $405 million, a 27 percent reduction. To implement our CY 2010 proposal to redistribute $150 million in claim cost from packaged drugs and biologicals to separately payable drugs and biologicals, we multiplied the cost of each packaged drug or biological with a HCPCS code and ASP pricing information in our CY 2008 claims data by 0.73. We also added the redistributed $150 million to the total cost of separately payable drugs and biologicals in our CY 2008 claims data, which increased the relationship between the total cost for separately payable drugs and biologicals and ASP dollars for the same drugs and biologicals to ASP+4 percent.

For CY 2010, we added an additional trim in our claims preparation to remove line-items that were not paid during claim processing, presumably for a line-item rejection or denial. The number of edits for valid OPPS payment in the Integrated Outpatient Code Editor (I/OCE) and elsewhere has grown significantly in the past few years, especially with the implementation of the full spectrum of National Correct Coding Initiative (NCCI) edits. To ensure that we are using valid claims that represent the cost of payable services to set payment rates, we removed line-items with an OPPS status indicator for the claim year (CY 2008) and a status indicator of “S,” “T,” “V,” or “X” when separately paid under the proposed CY 2010 payment system. This logic preserves charges for services that would not have been paid in the claim year but for which some estimate of cost is needed for the prospective year, such as services newly proposed to come off the inpatient list for CY 2010 which were assigned status indicator “C” in the claim year.

Using February 2009 APC Panel data, we estimate that the impact of removing line-items with valid status indicators that received no CY 2008 payment was limited to approximately 1.4 percent of all line-items for separately paid services. This additional trim reduced the number of single bills available for ratesetting by 1.5 percent. For approximately 92 percent of procedural APCs, we observed a change in the APC median cost of less than 1 percent. A handful of APCs experienced greater changes in median cost. For example, APC 0618 (Trauma Response with Critical Care) experienced declines in both the number of single bills used to set the median cost and the estimated median cost itself. This occurred because the I/OCE has an edit to ensure that HCPCS code G0390 (Trauma response team activation associated with hospital critical care service), which is assigned to APC 0618, receives payment only when one unit of G0390 appears with both a revenue code in the 68x series and CPT code 99291 (Critical care, evaluation and management of the critically ill or critically injured patient; first 30-74 minutes) on the claim for the same date of service, as described in the CY 2007 OPPS/ASC final rule with comment period (71 FR 68134). If the I/OCE criteria are not met, HCPCS code G0390 is not separately paid, and we found that a number of CY2008 claims including HCPCS code G0390 did not meet the criteria for payment. On the other hand, a few APCs had greater estimated median costs and greater numbers of single bills as a result of this additional trim, presumably because removing lines from the claim allowed us to identify more single bills. We believe that removing lines with valid status indicators that were edited and not paid during claims processing increases the accuracy of the single bills used to determine the APC median costs for ratesetting.

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

(1) Splitting 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 HCPCS code having a status indicator of “S,” “T,” “V,” or “X,” defining minor procedures as any code having a status indicator of “F,” “G,” “H,” “K,” “L,” “R,” “U,” or “N,” and classifying “other” procedures as any code having a status indicator other than one that we have classified as major or minor. For CY 2010, we are proposing to continue assigning status indicator “R” to blood and blood products; status indicator “U” to brachytherapy sources; status indicator “Q1” to all “STVX-packaged codes”; status indicator “Q2” to all “T-packaged codes”; and status indicator “Q3” to all codes that may be paid through a Start Printed Page 35263composite APC based on composite-specific criteria or paid separately through single code APCs when the criteria are not met. As discussed in the CY 2009 OPPS/ASC final rule with comment period (73 FR 68709), we established status indicators “Q1,” “Q2,” and “Q3” to facilitate identification of the different categories of codes. We are proposing to treat these codes in the same manner for data purposes for CY 2010 as we have treated them since 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. As discussed earlier in this section, because we are proposing to treat CPT code 76098 as conditionally packaged, this logic now includes the addition of CPT code 76098 as a “Q2” code. 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 a code for a separately payable or packaged OPPS service. Non-OPPS claims include claims for therapy services paid sometimes under the OPPS but billed, in these non-OPPS cases, with revenue codes indicating that the therapy services would be paid under the Medicare Physician Fee Schedule (MPFS).

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

(2) Creation of “Pseudo” Single Claims

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 payable 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. As discussed above, we ignore the “overlap bypass codes,” that is, those HCPCS codes that are both on the bypass list and are members of the multiple imaging composite APCs, in this initial assessment for “pseudo” single claims. The proposed CY 2010 “overlap bypass codes” are listed in Table 1 in section II.A.1.b. of this proposed rule. When one of the two separately payable procedures on a multiple procedure claim was on the bypass list, we split the claim into two “pseudo” single procedure claim records. The single procedure claim record that contained the bypass code did not retain packaged services. The single procedure claim record that contained the other separately payable procedure (but no bypass code) retained the packaged revenue code charges and the packaged HCPCS code charges. We also removed lines that contained multiple units of codes on the bypass list and treated them as “pseudo” single claims by dividing the cost for the multiple units by the number of units on the line. Where one unit of a single, separately payable procedure code remained on the claim after removal of the multiple units of the bypass code, we created a “pseudo” single 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 Start Printed Page 35264otherwise be multiple procedure claims and could not be used.

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

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, set the units to one on that HCPCS code to reflect our policy of paying only one unit of a code with a status indicator of ”Q1.” We then packaged all costs for the following into a single cost for the “Q1” HCPCS code that had the highest CY 2008 relative weight to create a “pseudo” single claim for that code: Additional units of the status indicator “Q1” HCPCS code with the highest CY 2008 relative weight; other codes with status indicator “Q1;” and all other packaged HCPCS codes and packaged revenue code costs. 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, set the units to one on that HCPCS code to reflect our policy of paying only one unit of a code with a status indicator of ”Q2.” We then packaged all costs for the following into a single cost for the “Q2” HCPCS code that had the highest CY 2008 relative weight to create a “pseudo” single claim for that code: Additional units of the status indicator “Q2” HCPCS code with the highest CY 2008 relative weight; other codes with status indicator “Q2”; and other packaged HCPCS codes and packaged revenue code costs. We changed the status indicator for the selected code from a data status indicator of “N” to the status indicator of the APC to which the selected code was assigned, and we considered this claim as a major procedure claim.

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 and set the units to one on that HCPCS code to reflect our policy of paying only one unit of a code with a status indicator of “Q2.” We then packaged all costs for the following into a single cost for the selected (“T-packaged”) HCPCS code to create a “pseudo” single claim for that code: additional units of the status indicator “Q2” HCPCS code with the highest CY 2008 relative weight; other codes with status indicator “Q2;” codes with status indicator “Q1” (“STVX-packaged”); and other packaged HCPCS codes and packaged revenue code costs. We 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.

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 major and to multiple minor claims. As has been our practice in recent years, we also excluded claims that contained codes that were viewed as independently or conditionally bilateral and that contained the bilateral modifier (Modifier 50 (Bilateral procedure)) because the line-item cost for the code represented the cost of two units of the procedure, notwithstanding that 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 the costs of packaged revenue codes into the cost of the single major procedure remaining on the claim. For CY 2010, this packaging also included the redistributed packaged pharmacy overhead cost relative to the units of separately payable drugs on each single procedure claim.

As noted in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66606), for the CY 2008 OPPS, we adopted an APC Panel recommendation that 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 2009 OPPS (73 FR 68531 through 68532) 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 2010 that are displayed in Table 4 below.

As noted in the CY 2009 OPPS/ASC final rule with comment period (73 FR 68531), we replaced the NUBC standard abbreviations for the revenue codes listed in Table 2 of the CY 2009 OPPS/ASC proposed rule with the most current NUBC descriptions of the revenue code categories and subcategories to better articulate the meanings of the revenue codes without actually changing the proposed list of revenue codes. In the course of making the changes in labeling for the revenue codes in Table 2 of the CY 2009 OPPS/ASC final rule with comment period, we noticed some changes to revenue categories and subcategories that we Start Printed Page 35265believed warranted further review for future OPPS updates. Although we finalized the list of packaged revenue codes in Table 2 for CY 2009, we indicated in the CY 2009 OPPS/ASC final rule with comment period (73 FR 68531) that we intended to assess the NUBC revenue codes to determine whether any changes to the list of packaged revenue codes should be proposed for the CY 2010 OPPS. We specifically requested public input and discussion on this issue during the comment period of the CY 2009 OPPS/ASC final rule with comment period. We did not receive any public comments on this issue. As we discuss in section II.A.2.a. of this proposed rule, we have completed that analysis for all revenue codes in the revenue code-to-cost center crosswalk and, as a result, we are proposing to add several revenue codes to the list of packaged revenue codes for the CY 2010 OPPS. Specifically, we believe that the costs derived from charges reported under revenue codes 0261 (IV Therapy; Infusion Pump); 0392 (Administration, Processing and Storage for Blood and Blood Components; Processing and Storage); 0623 (Medical Supplies—Extension of 027X, Surgical Dressings); 0943 (Other Therapeutic Services (also see 095X, an extension of 094X), Cardiac Rehabilitation); and 0948 (Other Therapeutic Services (also see 095X, an extension of 094X), Pulmonary Rehabilitation) are appropriately packaged into payment for other OPPS services when charges appear on lines with these revenue codes but no HCPCS code appears on the line. Revenue codes that we are proposing to add to the CY 2010 packaged revenue code list are identified by asterisks (*) in Table 4 below.

Table 4—Proposed CY 2010 Packaged Revenue Codes

Revenue codeDescription
0250Pharmacy; General Classification.
0251Pharmacy; Generic Drugs.
0252Pharmacy; Non-Generic Drugs.
0254Pharmacy; Drugs Incident to Other Diagnostic Services.
0255Pharmacy; Drugs Incident to Radiology.
0257Pharmacy; Non-Prescription.
0258Pharmacy; IV Solutions.
0259Pharmacy; Other Pharmacy.
0260IV Therapy; General Classification.
0261 *IV Therapy; Infusion Pump.
0262IV Therapy; IV Therapy/Pharmacy Svcs.
0263IV Therapy; IV Therapy/Drug/Supply Delivery.
0264IV Therapy; IV Therapy/Supplies.
0269IV Therapy; Other IV Therapy.
0270Medical/Surgical Supplies and Devices; General Classification.
0271Medical/Surgical Supplies and Devices; Non-sterile Supply.
0272Medical/Surgical Supplies and Devices; Sterile Supply.
0273Medical/Surgical Supplies and Devices; Take Home Supplies.
0275Medical/Surgical Supplies and Devices; Pacemaker.
0276Medical/Surgical Supplies and Devices; Intraocular Lens.
0278Medical/Surgical Supplies and Devices; Other Implants.
0279Medical/Surgical Supplies and Devices; Other Supplies/Devices.
0280Oncology; General Classification.
0289Oncology; Other Oncology.
0343Nuclear Medicine; Diagnostic Radiopharmaceuticals.
0344Nuclear Medicine; Therapeutic Radiopharmaceuticals.
0370Anesthesia; General Classification.
0371Anesthesia; Anesthesia Incident to Radiology.
0372Anesthesia; Anesthesia Incident to Other DX Services.
0379Anesthesia; Other Anesthesia.
0390Administration, Processing and Storage for Blood and Blood Components; General Classification.
0392 *Administration, Processing and Storage for Blood and Blood Components; Processing and Storage.
0399Administration, Processing and Storage for Blood and Blood Components; Other Blood Handling.
0560Home Health (HH)—Medical Social Services; General Classification.
0569Home Health (HH)—Medical Social Services; Other Med. Social Service.
0621Medical Surgical Supplies—Extension of 027X; Supplies Incident to Radiology.
0622Medical Surgical Supplies—Extension of 027X; Supplies Incident to Other DX Services.
0623 *Medical Supplies—Extension of 027X, Surgical Dressings.
0624Medical Surgical Supplies—Extension of 027X; FDA Investigational Devices.
0630Pharmacy—Extension of 025X; Reserved.
0631Pharmacy—Extension of 025X; Single Source Drug.
0632Pharmacy—Extension of 025X; Multiple Source Drug.
0633Pharmacy—Extension of 025X; Restrictive Prescription.
0681Trauma Response; Level I Trauma.
0682Trauma Response; Level II Trauma.
0683Trauma Response; Level III Trauma.
0684Trauma Response; Level IV Trauma.
0689Trauma Response; Other.
0700Cast Room; General Classification.
0709Cast Room; Reserved.
0710Recovery Room; General Classification.
0719Recovery Room; Reserved.
0720Labor Room/Delivery; General Classification.
0721Labor Room/Delivery; Labor.
Start Printed Page 35266
0732EKG/ECG (Electrocardiogram); Telemetry.
0762Specialty Room—Treatment/Observation Room; Observation Room.
0801Inpatient Renal Dialysis; Inpatient Hemodialysis.
0802Inpatient Renal Dialysis; Inpatient Peritoneal Dialysis (Non-CAPD).
0803Inpatient Renal Dialysis; Inpatient Continuous Ambulatory Peritoneal Dialysis (CAPD).
0804Inpatient Renal Dialysis; Inpatient Continuous Cycling Peritoneal Dialysis (CCPD).
0809Inpatient Renal Dialysis; Other Inpatient Dialysis.
0810Acquisition of Body Components; General Classification.
0819Inpatient Renal Dialysis; Other Donor.
0821Hemodialysis—Outpatient or Home; Hemodialysis Composite or Other Rate.
0824Hemodialysis—Outpatient or Home; Maintenance—100%.
0825Hemodialysis—Outpatient or Home; Support Services.
0829Hemodialysis—Outpatient or Home; Other OP Hemodialysis.
0942Other Therapeutic Services (also see 095X, an extension of 094x); Education/Training.
0943 *Other Therapeutic Services (also see 095X, an extension of 094X), Cardiac Rehabilitation.
0948 *Other Therapeutic Services (also see 095X, an extension of 094X), Pulmonary Rehabilitation.

In addition, we excluded (1) claims that had zero costs after summing all costs on the claim and (2) claims containing packaging flag number 3. Effective for services furnished on or after July 1, 2004, the I/OCE assigned packaging flag number 3 to claims on which hospitals submitted token charges for a service with status indicator “S” or “T” (a major separately payable service under the OPPS) for which the fiscal intermediary or MAC was required to allocate the sum of charges for services with a status indicator equaling “S” or “T” based on the relative 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. Using these 54 million claims, we created approximately 91 million single and “pseudo” single claims, of which we used 90 million single bills (after trimming out approximately 622,000 claims as discussed above in this section) in the proposed CY 2010 median development and ratesetting.

We used these claims to calculate the proposed CY 2010 median costs for each separately payable HCPCS code and each APC. The comparison of HCPCS code-specific 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 median costs for this proposed rule 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 HCPCS code assignment changes that resulted from examination of the median costs, review of the public comments, and for other reasons. The APC medians were recalculated after we reassigned the affected HCPCS codes. Both the HCPCS code-specific 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.

At the February 2009 APC Panel Meeting, the APC Panel recommended that CMS study the claims data for any APC in which the calculated payment reduction would be greater than 10 percent. The APC Panel also recommended that CMS provide a list of APCs to the APC Panel at the next meeting with a proposed payment rate change of greater than 10 percent. While we recognize the concerns the APC Panel expressed with regards to cost variability in the system, we already engage in a standard review process for all APCs that experience significant changes in median costs. We study all significant changes in estimated cost to determine the effect that proposed and final payment policies have on the APC payment rates and ensure that these policies are appropriate and that the intended cost estimation methodologies have been correctly applied. We note that there are a number of factors that cause APC median costs to change from one year to the next. Some of these are Start Printed Page 35267a reflection of hospital behavior, and some of them are a reflection of fundamental characteristics of the OPPS as defined in the statute. With limited exceptions, we are required by law to reassign HCPCS codes to APCs where it is necessary to avoid 2 times violations. Thus, there are various mechanisms already in place to ensure that we assess changes in cost and adjust APC weights accordingly or justify why we have not made adjustments. We plan to continue our examination of all APCs that experience changes of greater than10 percent, and we will provide the APC Panel with a list of the APCs with proposed changes in costs of more than 10 percent for CY 2010 at the next CY 2009 APC Panel meeting. Accordingly, we are accepting this recommendation of the APC Panel in full.

At the February 2009 APC Panel meeting, we reviewed and examined the data process in preparation for the CY 2010 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 closely with the APC Panel's Data Subcommittee to prepare and review data and analyses relevant to the APC configurations and OPPS payment policies for hospital outpatient items and services.

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 2010, we are proposing to revise 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, to exclude claims that contain the “FC” modifier. Specifically, we are proposing to calculate the median costs for device-dependent APCs for CY 2010 using only the subset of single procedure claims from CY 2008 claims data that pass the procedure-to-device and device-to-procedure edits; do not contain token charges (less than $1.01) for devices; do not contain the “FB” modifier signifying that the device was furnished without cost to the provider, supplier, or practitioner, or where a full credit was received; and do not contain the “FC” modifier signifying that the hospital received partial credit for the device. The “FC” modifier became effective January 1, 2008, and is present for the first time on claims that would be used in OPPS ratesetting for CY 2010. We believe that the standard methodology for calculating median costs for device-dependent APCs, further refined to exclude claims with the “FC” modifier, gives us the most appropriate proposed median costs for device-dependent APCs in which the hospital incurs the full cost of the device.

The median costs for the majority of device-dependent APCs that are calculated using the CY 2010 proposed rule claims data are generally stable, with most median costs increasing moderately compared to the median costs upon which the CY 2009 OPPS payment rates were based. However, the median costs for APC 0225 (Implantation of Neurostimulator Electrodes, Cranial Nerve) and APC 0418 (Insertion of Left Ventricular Pacing Electrode) demonstrate significant fluctuation. Specifically, the CY 2010 proposed median cost for APC 0225 increases approximately 49 percent compared to the CY 2009 final median cost, although this APC median cost had declined by approximately the same proportion from CY 2008 to CY 2009. The CY 2010 proposed median cost for APC 0418, which had decreased approximately 45 percent from CY 2008 to CY 2009, shows an increase of approximately 56 percent based on the claims data available for the CY 2010 proposed rule. We believe the fluctuations in median costs for these two APCs are a consequence of the small number of single bills upon which the median costs are based and the small number of providers of these services. 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, particularly where there are small numbers of single bills from a small number of providers. The additional single bills available for ratesetting in the CY 2010 final rule data and updated cost report data may result in less fluctuation in the median costs for these APCs for CY 2010.

At the February 2009 meeting of the APC Panel, one presenter stated that the assignment of the cranial neurostimulator implantation procedure described by CPT code 61885 (Insertion or replacement of cranial neurostimulator pulse generator or receiver, direct or inductive coupling; with connection to a single electrode array) to APC 0039 (Level I Implantation of Neurostimulator Generator), along with the peripheral/gastric neurostimulator implantation procedure described by CPT code 64590 (Insertion or replacement of peripheral or gastric neurostimulator pulse generator or receiver, direct or inductive coupling) is not appropriate, given the clinical and cost differences between the two procedures. According to the presenter, the cranial procedure described by CPT code 61885 is more similar clinically and in terms of resource utilization to the spinal neurostimulator implantation procedure described by CPT code 63685 (Insertion or replacement of spinal neurostimulator pulse generator or receiver, direct or inductive coupling), which is the only CPT code assigned to APC 0222 (Level II Implantation of Neurostimulator) for CY 2009. The presenter requested that the APC Panel recommend CMS restructure the existing configuration of neurostimulator pulse generator implantation APCs for CY 2010 by splitting APC 0039, so that procedures involving peripheral/gastric neurostimulators and cranial neurostimulators would be in distinct APCs, or by reassigning the cranial neurostimulator implantation procedure described by CPT code 61885 from APC 0039 to APC 0222. In response to this request, the APC Panel recommended that CMS combine APC 0039 and APC 0222 for CY 2010, given the overall similarity in median costs among the cranial, peripheral/gastric, and spinal neurostimulator pulse generator implantation procedures assigned to these two APCs. The APC Panel also recommended that CMS maintain the configuration of APC 0315 (Level III Implantation of Neurostimulator Generator) as it currently exists in CY 2009 for CY 2010.

We agree with the APC Panel that the median costs of the procedures described by CPT codes 61885, 63685, and 64590 are sufficiently similar to warrant placement of the CPT codes into a single APC, rather than two APCs. We are accepting the APC Panel's Start Printed Page 35268recommendation and, therefore, are proposing to reassign CPT code 63685 to APC 0039, to delete APC 0222, and to maintain the current configuration of APC 0315 for CY 2010. We also are proposing to change the title of APC 0315 to “Level II Implantation of Neurostimulator Generator” to reflect the proposed two-level, rather than three-level, structure of the neurostimulator generator implantation APCs.

In reviewing the APC Panel recommendation for consolidating APC 0039 and APC 0222, we observed that the median costs of the procedures assigned to APC 0425 (Level II Arthroplasty or Implantation with Prosthesis) and APC 0681 (Knee Arthroplasty) also are sufficiently similar to warrant combining these two APCs into one APC. The proposed HCPCS code-specific median cost for the only procedure currently assigned to APC 0681, described by CPT code 27446 (Arthroplasty, knee, condyle and plateau; medial OR lateral compartment), is approximately $7,464 based on the claims data available for the CY 2010 proposed rule. This proposed median cost is very similar to the proposed median cost of approximately $7,852 calculated for APC 0425, which includes other procedures involving the implantation of prosthetic devices into bone, similar to the procedure described by CPT code 27446. Given the shared resource and clinical characteristics of the procedures included in APC 0425 and the only procedure assigned to APC 0681 for CY 2009, we are proposing to consolidate these two APCs by reassigning CPT code 27446 to APC 0425, and deleting APC 0681. We also note that over the past several years, the median cost for CPT code 27446 has fluctuated due to a low volume of services being performed by a small number of providers, and to a single provider performing the majority of services (73 FR 68535). We believe that by reassigning CPT code 27446 to APC 0425 and deleting APC 0681, we can maintain greater stability from year to year in the payment rate for this knee arthroplasty service, while also paying appropriately for the service.

Table 5 below lists the APCs for which we are proposing to use our standard device-dependent APC rate setting methodology for CY 2010, with the proposed amendment to exclude claims that contain the “FC” modifier. We refer readers to Addendum A to this proposed rule for the proposed payment rates for these APCs.

Table 5—Proposed CY 2010 Device-Dependent APCs

Proposed CY 2010 APCProposed CY 2010 status indicatorProposed CY 2010 APC title
0039SLevel I Implantation of Neurostimulator Generator.
0040SPercutaneous Implantation of Neurostimulator Electrodes.
0061SLaminectomy, Laparoscopy, or Incision for Implantation of Neurostimulator Electrodes.
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.
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 II Implantation of Neurostimulator Generator.
0384TGI Procedures with Stents.
0385SLevel I Prosthetic Urological Procedures.
0386SLevel II Prosthetic Urological Procedures.
0418TInsertion of Left Ventricular Pacing Electrode.
0425TLevel II Arthroplasty or Implantation with Prosthesis.
0427TLevel II Tube or Catheter Changes or Repositioning.
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.

(2) Blood and Blood Products

Since the implementation of the OPPS in August 2000, we have made separate payments for blood and blood products through APCs rather than packaging payment for them into payments for the procedures with which they are administered. Hospital payments for the costs of blood and blood products, as Start Printed Page 35269well as for the costs of collecting, processing, and storing blood and blood products, are made through the OPPS payments for specific blood product APCs.

For CY 2010, 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 differences 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 median costs upon which the proposed CY 2010 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 hospital-specific, 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 2010 would result in median costs for blood and blood products that appropriately reflect the relative estimated costs of these products for hospitals without blood cost centers and, therefore, for these products in general.

We refer readers to Addendum B to this proposed rule for the CY 2010 proposed payment rates for blood and blood products, which are identified with 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 2010. 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 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. Our CY 2008 claims data available for this 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 $55, significantly higher than the CY 2009 median cost of APC 0381 of approximately $23 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 single allergy tests since CY 2006, we are proposing to calculate a “per unit” median cost for APC 0381, based upon 530 claims containing multiple units or multiple occurrences of a single CPT code. The CY 2010 proposed median cost for APC 0381 using the “per unit” methodology is approximately $29. 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

In CY 2008, we implemented a policy whereby payment for all contrast agents is packaged 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 code-specific median costs for all separately payable echocardiography procedures that may be performed with contrast agents by isolating single and “pseudo” single echocardiography 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 Start Printed Page 35270pharmacologically induced stress, with interpretation and report).

After reviewing HCPCS code-specific median costs, we determined that all echocardiography procedures that may be performed with contrast agents are reasonably similar both clinically and in terms of resource use. In CY 2008, we created APC 0128 (Echocardiogram With Contrast) to provide payment for echocardiography procedures that are performed with a contrast agent. We refer readers to the CY 2008 OPPS/ASC final rule with comment period (72 FR 66643 through 66646) for more information on this methodology.

In order for hospitals to identify 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 to report the CPT codes when performing echocardiography procedures without contrast and to report the new HCPCS C-codes when performing echocardiography procedures with contrast, or without contrast followed by with contrast. As is our standard policy with regard to new codes, the APC assignment of these codes was then open to comment in that final rule.

We used the same process to calculate median costs for these codes for CY 2009 as we used for CY 2008 to separately identify echocardiography services provided with contrast and those provided without contrast because the data reported under these new codes were not yet available for CY 2009 ratesetting.

In addition, for CY 2009, the American Medical Association (AMA) revised several CPT codes in the 93000 series to more specifically describe particular services provided during echocardiography procedures. The CY 2009 descriptor for new CPT code 93306 (Echocardiography, transthoracic real- time with image documentation (2D), includes M-mode recording, when performed, complete, with spectral Doppler echocardiography, and with color flow Doppler echocardiography) includes the services described in CY 2008 by three CPT codes: 93307 (Echocardiography, transthoracic, real- time with image documentation (2D) with or without M-mode recording; complete); 93320 (Doppler echocardiography, pulsed wave and/or continuous wave with spectral display; complete), and 93325 (Doppler echocardiography color flow velocity mapping). Therefore, in CY 2008, the service described in CY 2009 by new CPT code 93306 was reported with three CPT codes, specifically CPT codes 93307, 93320, and 93325. For CY 2008, the hospital received separate payment for CPT code 93307 through APC 0269 (Level II Echocardiogram Without Contrast Except Transesophageal), into which payment for the other two services was packaged. The revised CY 2009 descriptor of CPT code 93307 (Echocardiography, transthoracic, real-time with image documentation (2D), includes M- mode recording, when performed, complete, without spectral or color Doppler echocardiography) explicitly excludes services described by CPT codes 93320 and 93325.

To estimate the hospital costs of CPT codes 93306 and 93307 based on their CY 2009 descriptors and the corresponding HCPCS codes C8929 and C8923 for CY 2009, we used claims data from CY 2007. As described in the CY 2009 OPPS/ASC final rule with comment period (73 FR 68542 through 68544), we manipulated our CY 2007 single and “pseudo” single claims data to simulate the new CY 2009 definitions of these services. Specifically, we selected claims for CPT code 93307 on which CPT codes 93320 and 93325 were also present and we treated the summed costs on these claims as if they were a single procedure claim for CPT code 93306. Similarly, we selected single claims for CPT code 93307 to reflect the newly revised descriptor for CY 2009; that is, we included those claims where CPT code 93307 was not billed with packaged CPT code 93320 or CPT code 93325 on the same claim. We then applied our CY 2009 methodology for calculating HCPCS code-specific median costs for these echocardiography procedures with and without contrast by dividing the new set of claims for CPT codes 93306 and 93307 into those billed with and without contrast agents. We assigned the costs for simulated CPT codes 93306 and 93307 reported without contrast to those CPT codes. We then assigned the costs for simulated CPT codes 93306 and 93307 reported with contrast to new HCPCS code C8929 (Transthoracic echocardiography with contrast, or without contrast followed by with contrast, real-time with image documentation (2D), includes M-mode recording, when performed, complete, with spectral Doppler echocardiography, and with color flow Doppler echocardiography) and revised HCPCS code C8923 (Transthoracic echocardiography with contrast, or without contrast followed by with contrast, real-time with image documentation (2D), includes M-mode recording, when performed, complete, without spectral or color Doppler echocardiography), respectively. In the CY 2009 OPPS/ASC final rule with comment period, we assigned these CPT and HCPCS codes to APCs for CY 2009 based on their simulated median costs and clinical characteristics. New CY 2009 CPT code 93306 and HCPCS code C8929 were assigned comment indicator “NI” in that final rule, to signify that they were new codes whose interim final OPPS treatment was open to comment on that final rule.

This CY 2010 proposed rule is the first opportunity that we have claims data available from hospitals for echocardiography services performed with contrast (or without contrast followed by with contrast) and reported with HCPCS codes C8921 through C8928. With the exception of HCPCS code C8923, which had a significant change in its code descriptor for CY 2009, we are proposing to use our standard methodology to set the CY 2010 OPPS payment rates for these echocardiography services performed with contrast, taking into consideration their HCPCS code-specific median costs from CY 2008 claims.

For CY 2010 ratesetting, we are proposing to employ an alternative ratesetting methodology for CPT codes 93306 and 93307 and HCPCS codes C8929 and C8923 that is similar to the approach we used for CY 2009 in order to account for the new codes and revised code descriptors for which CY 2008 data are unavailable. However, in the case of the proposed CY 2010 cost estimation, our CY 2008 claims for CPT code 93307 are only for services performed without contrast, and we have CY 2008 claims for HCPCS C8923 for the comparable services performed with contrast. Specifically, we selected claims for CPT code 93307 on which CPT codes 93320 and 93325 were also present and we treated the summed costs on these claims as if they were a single procedure claim for CPT code 93306 in order to simulate the median cost for CPT code 93306, for which CY 2008 claims data are not available. We then selected single claims for CPT code 93307 to reflect the newly revised descriptor for CY 2009; that is, we included those claims where CPT code 93307 was not billed with either packaged CPT code 93320 or CPT code 93325 on the same claim in order to simulate an appropriate CY 2010 proposed median cost for CPT code 93307. We assigned the costs of HCPCS code C8923 when reported with CPT codes 93320 and 93325 to HCPCS code C8929 and the costs of HCPCS code Start Printed Page 35271C8923 when reported without CPT code 93320 or 93325 to HCPCS code C8923.

Following publication of the CY 2009 OPPS/ASC final rule with comment period, several stakeholders brought a number of concerns to our attention, including the interim APC assignment of new CPT code 93351 (Echocardiography, transthoracic, real-time with image documentation (2D), includes M-mode recording, when performed, during rest and cardiovascular stress test using treadmill, bicycle exercise and/or pharmacologically induced stress, with interpretation and report; including performance of continuous electrocardiographic monitoring, with physician supervision) and the corresponding new HCPCS code C8930 (Transthoracic echocardiography, with contrast, or without contrast followed by with contrast, real-time with image documentation (2D), includes M-mode recording, when performed, during rest and cardiovascular stress test using treadmill, bicycle exercise and/or pharmacologically induced stress, with interpretation and report; including performance of continuous electrocardiographic monitoring, with physician supervision). These stakeholders noted that new CY 2009 CPT code 93351 was created to include the services reported previously by CPT codes 93015 (Cardiovascular stress test using maximal or submaximal treadmill or bicycle exercise, continuous electrocardiographic monitoring, and/or pharmacological stress; with physician supervision, with interpretation and report) and 93350 (Echocardiography, transthoracic, real-time with image documentation (2D), includes M-mode recording, when performed, during rest and cardiovascular stress test using treadmill, bicycle exercise and/or pharmacologically induced stress, with interpretation and report). Because new CY 2009 CPT code 93351 was meant to include the services previously reported with both the CPT codes for a transthoracic echocardiogram during rest and stress (CPT code 93350 is recognized under the OPPS) and a cardiovascular stress test (CPT code 93017 is recognized under the OPPS, rather than CPT code 93015), these stakeholders disagreed with our assignments of both CPT codes 93350 and 93351 to APC 0269 for CY 2009.

Upon review of these concerns and our CY 2008 data, for CY 2010, we are proposing to use an alternative methodology to simulate median costs for CPT code 93351 and corresponding HCPCS code C8930, for which CY 2008 claims data are unavailable, and for CPT code 93350 and corresponding HCPCS code C8928 (Transthoracic echocardiography with contrast, or without contrast followed by with contrast, real-time with image documentation (2D), includes M-mode recording, when performed, during rest and cardiovascular stress test using treadmill, bicycle exercise and/or pharmacologically induced stress, with interpretation and report). That is, we are proposing to use claims that contain both CPT codes 93350 and 93017 (Cardiovascular stress test using maximal or submaximal treadmill or bicycle exercise, continuous electrocardiographic monitoring, and/or pharmacological stress; tracing only, without interpretation and report) to simulate the median cost for CPT code 93351. We also are proposing to use the remaining claims that contain CPT code 93350 but that do not contain CPT code 93017 to develop the proposed CY 2010 median cost for CPT code 93350. We identified over 74,000 CY 2008 claims with both CPT code 93350 and CPT code 93017 on the same date of service and no other separately paid services appearing on the same date after applying our bypass processing logic, discussed in section II.A.1.b. of this proposed rule, that we modified to treat CPT codes 93350 and code 93017 as a single service. We calculated a proposed median cost of approximately $604. Therefore, for CY 2010, we are proposing to reassign CPT code 93351 to revised APC 0270 (Level III Echocardiogram Without Contrast) which has a proposed APC median cost of approximately $596. We are proposing to continue to assign CPT code 93350 to APC 0269, which has a proposed APC median cost of approximately $456, based on its HCPCS code-specific median cost of approximately $406 based on approximately 11,000 single claims. Furthermore, we are proposing to use claims for HCPCS code C8928 that are reported with CPT code 93017 on the same claim to simulate the CY 2010 median cost for HCPCS code C8930. We identified over 4,000 claims with both HCPCS code C8930 and CPT code 93017 on the same date of service and no other separately paid services appearing on the same date after applying our bypass processing logic, discussed in section II.A.1.b. of this proposed rule, that we modified to treat HCPCS code C8930 and CPT code 93017 as a single service. We calculated a HCPCS code-specific median cost of approximately $706. Therefore, we are proposing to continue to assign HCPCS code C8930 to APC 0128 with a proposed APC median cost of approximately $660. We also are proposing to continue to assign HCPCS code C8928 to APC 0128, based on its HCPCS code-specific median cost of approximately $595 based on approximately 1,000 single claims.

Table 6 below shows CY 2009 CPT codes for billing echocardiography services without contrast, their proposed APC assignments for CY 2010, and the corresponding HCPCS codes for use when echocardiography services are performed with contrast (or without contrast followed by with contrast), along with their proposed APC assignments for CY 2010.

Start Printed Page 35272

Start Printed Page 35273

Start Printed Page 35274

Start Printed Page 35275

Finally, for CY 2010, based upon our proposed APC configurations, we also are proposing to revise the titles of our existing series of echocardiography APCs to more accurately describe the groups of services identified by CPT codes 93303 through 93352 and HCPCS codes C8921 through C8930 that are assigned to these APCs. We are proposing to rename APCs 0269, 0270, and 0697 as described in Table 7 below.Start Printed Page 35276

Table 7—Proposed CY 2010 Echocardiography APCs

Proposed CY 2010 APCProposed CY 2010 APC titleProposed CY 2010 approximate APC median cost
0128Echocardiogram With Contrast$660
0269Level II Echocardiogram Without Contrast456
0270Level III Echocardiogram Without Contrast596
0697Level I Echocardiogram Without Contrast263

(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 with comment period 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 (other than implantable 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 one 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).

For CY 2008 ratesetting, we used only claims for nuclear medicine procedures that contained a diagnostic radiopharmaceutical in calculating the median costs for APCs that include 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-radiolabeled product 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 radiolabeled product and procedure HCPCS codes that are included in these edits can be viewed on the CMS Web site at: http://www.cms.hhs.gov/​HospitalOutpatientPPS/​01_​overview.asp.

The CY 2008 OPPS claims that are subject to the procedure-to-radiolabeled product edits were not available for setting payment rates in CY 2009. Therefore, as described in the CY 2009 OPPS/ASC final rule with comment period (73 FR 68545), we continued to use our established CY 2008 methodology for setting the payment rates for APCs that included nuclear medicine procedures for CY 2009. We used an updated list of radiolabeled products, including but not limited to diagnostic radiopharmaceuticals, from the procedure-to-radiolabeled product 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 to calculate median costs for nuclear medicine procedures and their associated APCs. 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 ensured that the costs of diagnostic radiopharmaceuticals were included in the CY 2009 ratesetting process for these APCs.

As discussed in section II.A.4.b.(1) of this proposed rule, during the September 2007 APC Panel meeting, the APC Panel requested that CMS evaluate the impact of expanded packaging on beneficiaries. Also, during the March 2008 APC Panel meeting, the APC Panel requested that CMS report to the APC Panel at the first meeting in CY 2009 regarding the impact of packaging on net payments for patient care. In response to these requests, we shared data with the APC Panel at the February 2009 APC Panel meeting that compared the frequency of the billing of diagnostic radiopharmaceuticals billed under the OPPS in CY 2007, before the packaging of all diagnostic radiopharmaceuticals went into effect, to the frequency of the billing of those same products in CY2008, their first year of packaged payment. We also reviewed information about the aggregate payment for diagnostic radiopharmaceuticals and nuclear medicine procedures during those same 2 years. A summary of these data analyses is provided in section II.A.4.b.(1) of this proposed rule.

In addition to these aggregate analyses of total frequency and payment, we also presented our analyses of the number of hospitals performing nuclear medicine scans and the specific diagnostic Start Printed Page 35277radiopharmaceuticals appearing with cardiac and tumor imaging nuclear medicine procedures, excluding positron emission tomography (PET) scans, by classes of hospitals between the CY 2007 claims processed through September 30, 2007 and the CY 2008 claims processed through September 30, 2008. At the March 2008 APC Panel meeting, the APC Panel also recommended that we evaluate the usage and frequency, geographic distribution, and size and type of hospitals performing nuclear medicine studies using radioisotopes to assess beneficiaries' access and that we present these analyses at the first APC Panel meeting in CY 2009. The number of all hospitals reporting any nuclear medicine procedure declined by 2 percent between the CY 2007 claims data and the CY 2008 claims data. Across several classes of hospitals (urban and rural, teaching and nonteaching, and small and large OPPS service volume), the number of hospitals billing any nuclear medicine procedure declined by up to 4 percent over that same time period. With regard to the specific diagnostic radiopharmaceuticals reported with cardiac and tumor imaging nuclear medicine procedure, we generally observed comparable distributions of radiopharmaceuticals between the CY 2007 claims data and the CY 2008 claims data. However, the utility of this analysis was limited due to the introduction of the procedure-to-radiolabeled product claims processing edits discussed above. There are nuclear medicine procedures reported with a diagnostic radiopharmaceutical HCPCS code on the CY 2008 claims that would have not necessarily been billed with a diagnostic radiopharmaceutical HCPCS code on the CY 2007 claims. Specifically, we observed an increase in billing for many radiopharmaceuticals, some new and costly, between the CY 2007 claims data and the CY 2008 claims data. We do not know how much of this was attributable to changes in hospitals' use of radiopharmaceuticals or to the CY 2008 introduction of the procedure-to-radiolabeled product edits that require a radiolabeled product on the claim for payment of the nuclear medicine procedure. With the exception of the notable increases in the frequencies of certain radiopharmaceutical HCPCS codes that potentially resulted from the introduction of these edits, in general, hospital billing patterns for diagnostic radiopharmaceuticals associated with cardiac and tumor imaging nuclear medicine scans did not change dramatically between CY 2007 and CY 2008 for all hospitals and classes of hospitals. We concluded that very few hospitals stopped providing nuclear medicine procedures as a result of our CY 2008 policy to package payment for diagnostic radiopharmaceuticals and that, in general, hospitals did not decrease their use of expensive radiopharmaceuticals.

As a result of the discussions of the APC Panel following our presentation of the analyses of the impact of packaging payment for all diagnostic radiopharmaceuticals in the OPPS, the APC Panel further recommended that CMS continue to analyze the impact on beneficiaries of increased packaging of diagnostic radiopharmaceuticals and provide more detailed analyses at the next APC Panel meeting. Further, the APC Panel requested that, in the more detailed analyses of packaging of diagnostic radiopharmaceuticals by type of nuclear medicine scan, CMS analyze the data according to the specific CPT codes billed with the diagnostic radiopharmaceuticals. We are accepting the APC Panel's recommendation and will provide additional data to the APC Panel at an upcoming meeting.

For CY 2010 ratesetting, we are able to use CY 2008 OPPS claims that were subject to the procedure-to-radiolabeled product claims processing edits incorporated into the I/OCE prior to payment of claims in order to develop single and “pseudo” single claims for nuclear medicine procedures according to our standard methodology. We believe that using the CY 2008 claims for these services without further editing for the presence of a radiolabeled product is now appropriate for CY 2010 because these claims reflect all possible relationships between the nuclear medicine procedures and their associated radiolabeled products that we have accommodated for payment of nuclear medicine procedures. Moreover, as we indicated in the CY 2009 OPPS/ASC final rule with comment period (73 FR 68548 through 68549), in the rare circumstance where a diagnostic radiopharmaceutical is not provided in association with a nuclear medicine procedure, for example, because a beneficiary receives a therapeutic radiopharmaceutical as part of a hospital inpatient stay and then returns to the HOPD for a nuclear medicine scan without needing a diagnostic radiopharmaceutical to be administered again for the study, we believe it is appropriate to use these claims for ratesetting purposes. We believe that just as these situations are representative of the performance of a nuclear medicine scan, it is also appropriate to include them for ratesetting purposes.

(6) Hyperbaric Oxygen Therapy

Since the implementation of the 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 OPPS 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. The public comments on the CY 2005 OPPS 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 4 years. We are proposing to continue using the same methodology to estimate a “per unit” median cost for HCPCS code C1300 for CY 2010 of approximately $108, using 279,139 claims with multiple units or multiple occurrences.

(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 Start Printed Page 35278Transmittal 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 the 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 2010, 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 to continue to make one payment under APC 0375 for the services that meet the specific conditions for using modifier -CA. We are proposing to 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.

We believe that hospitals are reporting the -CA modifier according to the policy initially established in CY 2003. We note that the claims frequency for APC 0375 has been decreasing over the past few years. For this proposed rule, there are only 131 claims for this APC. Although the median cost for APC 0375 has increased in recent years, the median in the data for this proposed rule is only slightly higher than the final median cost for CY 2009. 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 as long as hospitals continue judicious reporting of the -CA modifier. Table 8 below shows the number of claims and the final median costs for APC 0375 for CYs 2007, 2008 and 2009. For CY 2010, we are proposing a median cost for APC 0375 of approximately $5,784.

Table 8—Claims for Ancillary Outpatient Services When Patient Expires (-Ca Modifier) for CYs 2007 Through 2009

Prospective payment yearNumber of claimsAPC median cost
CY 2007260$3,549
CY 20081834,945
CY 20091685,545

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. Combining payment for multiple independent services into a single OPPS payment in this way enables hospitals to manage their resources with maximum flexibility by monitoring and adjusting the volume and efficiency of services themselves. An additional advantage to the composite APC model is that we can use data from correctly coded multiple procedure claims to calculate payment rates for the specified combinations of services, rather than relying upon single procedure claims which may be low in volume and/or incorrectly coded. Under the OPPS, we currently have composite APC policies for extended assessment and management services, low dose rate (LDR) prostate brachytherapy, cardiac electrophysiologic evaluation and ablation services, mental health services, and multiple imaging services. We refer readers to the CY 2008 OPPS/ASC final rule with comment period for a full discussion of the development of the composite APC methodology (72 FR 66611 through 66614 and 66650 through 66652).

While 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, we are not proposing any new composite APCs for CY 2010 so that we may monitor the effects of the existing composite APCs on utilization and payment. In response to our CY 2009 proposal to apply a composite payment methodology to multiple imaging procedures provided on the same date of service, several public commenters stated that we should proceed cautiously as we expand service bundling. They commented that we should not implement additional composite methodologies until adequate data are available to evaluate the composite policies' effectiveness and impact on beneficiary access to care (73 FR 68561 through 68562).

In response to the concerns of the public commenters and the APC Panel, we reviewed the CY 2008 claims data for claims processed through September 30, 2008, for the services in the following composite APCs: APC 8000 (Cardiac Electrophysiologic Evaluation and Ablation Composite); APC 8001 (Low Dose Rate Prostate Brachytherapy Composite); APC 8002 (Level I Extended Assessment and Evaluation Composite); and APC 8003 (Level II Extended Assessment and Evaluation Composite). Our analyses did not consider inflation, changes in beneficiary population, or other comparable variables that can affect changes in aggregate payment from year to year. We found that the average payment for the package of services in both APC 8000 and APC 8001 increased from CY 2007, when payments were made for all individual services, to CY 2008 under the composite payment methodology. We also note that the proposed median costs for these composite APCs for CY 2010 are higher than the median costs upon which the CY 2009 payments are based. We believe that, in part, this is because we are using more claims data for common clinical scenarios to calculate the median costs of these APCs than we were prior to the implementation of the composite payment methodology.

With regard to APCs 8002 and 8003, we compared payment for all visits appearing with observation services in CY 2007 with payments for all visits appearing with observation services in CY 2008 and found that total payment Start Printed Page 35279for visits and observation services increased from approximately $197 million to $270 million for claims processed through September 30 in each year. We attribute this increase in payments, in part, to the introduction of a composite payment for visits and observation through the extended assessment and management composite methodology that occurred for CY 2008 and that did not incorporate the International Classification of Diseases, Ninth Edition, Clinical Modification (ICD-9-CM) diagnosis criteria previously necessary for separate payment of observation.

We will continue to review the claims data for the impact of all of the composite APCs on payments to hospitals and on services to beneficiaries and will take such data into consideration before proposing new composite APCs. As stated in the CY 2009 OPPS/ASC final rule with comment period, we believe that we proceeded with an appropriate level of caution by implementing multiple imaging composite APCs as the one new composite APC policy for CY 2009 (73 FR 68563). However, we do recognize the concerns expressed by the public commenters that moving ahead too quickly with any nonstandard OPPS payment methodology (even one such as composite APCs that may improve the accuracy of the OPPS payment rates by utilizing more complete and valid claims in ratesetting) could have unintended consequences and requires close monitoring. Because the multiple imaging composite APCs were implemented for the first time in CY 2009, we will not have data available for such monitoring until early CY 2010. Therefore, we believe that it is in the best interest of hospitals and the integrity of the OPPS that we do not propose any new composite APC policies for at least one year.

At its February 2009 meeting, the APC Panel recommended that CMS evaluate the implications of creating composite APCs for cardiac resynchronization therapy with a defibrillator or pacemaker and report its findings to the APC Panel. While we are not proposing any new composite APCs for CY2010, we are accepting this APC Panel recommendation, and we will evaluate the implications of creating composite APCs for cardiac resynchronization therapy services and report our findings to the APC Panel at a future meeting. We also will consider bringing other potential composite APCs to the APC Panel for further discussion.

For CY 2010, we are proposing to continue our established composite APC policies for extended assessment and management, LDR prostate brachytherapy, cardiac electrophysiologic evaluation and ablation, mental health services, and multiple imaging services, as discussed in sections II.A.2.e.(1), II.A.2.e.(2), II.A.2.e.(3), II.A.2.e.(4), and II.A.2.e.(5), respectively, of this proposed rule.

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

For CY 2010, 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. 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 referral and is an integral part of a patient's extended encounter of care, payment is made for the entire care encounter through one of 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 referral 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) Type A emergency department visit, a high level (Level 5) Type B 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 through66649), the Integrated Outpatient Code Editor (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 OPPS 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 2010 median costs for these composite APCs. We are not proposing to change these criteria for the CY 2010 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 the CY 2008 OPPS/ASC final rule with comment period (72 FR 66812). 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. We are not proposing to change these reporting requirements for the CY 2010 OPPS. However, as discussed below, the APC Panel at its February 2009 meeting requested that CMS issue guidance clarifying the correct method for reporting the starting time for observation services. The APC Panel noted that the descriptions of the start time for observation services located in the Medicare Claims Processing Manual (Pub. 100-4), Chapter 4, sections 290.2.2 through 290.5, cause confusion for hospitals. We are accepting this recommendation and plan to issue clarifying guidance in the Claims Processing Manual through a future quarterly update of the OPPS.

As noted in detail in 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 in the OPPS claims data through CY 2006 available at that time. We stated that we did 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. Similarly, we stated that we expected that hospitals would 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 CY2008 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 Start Printed Page 35280Integrity contractors or other contractors review the claims against the medical record.

As noted above, we observed a 37 percent increase in total payments for all visits appearing with observation services for claims processed through September 30 in CY 2007 and CY 2008. We believe this increase is, in part, attributable to the expansion of payment under the extended assessment and management composites to all ICD-9-CM diagnoses. To confirm this, we calculated the percentage of visit HCPCS codes billed with HCPCS code G0378 (Observation services, per hour) between CY 2007 and CY 2008 and compared the percentage associated with visit codes included in the extended assessment and management composites in each year. If hospitals had inappropriately changed their visit reporting behavior to maximize payment through the new composite APCs, we would expect to see significant changes in the percentage of visit HCPCS codes included in the composite APCs billed with observation services relative to all other visit HCPCS codes billed with observation services between CY 2007 and CY 2008. We did not observe a sizable increase in the proportion of visit HCPCS codes included in the composite APCs relative to the proportion of all other visit HCPCS codes billed with observation services. For example, the percentage of claims billed with CPT code 99285 (Emergency department visit for the evaluation and management of a patient (Level 5)) and HCPCS code G0378 was 51 percent in the CY 2007 data and 54 percent in the CY 2008 data. Similarly, the percentage of claims billed with CPT code 99284 (Emergency department visit for the evaluation and management of a patient (Level 4)) and HCPCS code G0378 decreased only slightly from 28 percent in the CY 2007 data to 27 percent in the CY 2008 data. We conclude that although the volume of visits billed with HCPCS code G0378 increased between CY 2007 and CY2008, the overall pattern of billing visit levels did not change significantly. We will continue to carefully monitor any changes in billing practices on a service-specific and hospital-specific level.

For CY 2010, we are proposing to continue the extended assessment and management composite APC payment methodology for APCs 8002 and 8003. As stated earlier, we also are 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 related policies provide the most appropriate means of paying for these services. We are proposing to calculate the median costs for APCs 8002 and8003 using all single and “pseudo” single procedure claims for CY 2008 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” that is reported with a date of service 1 day earlier than the date of service associated with HCPCS code G0378. (By selecting these claims from single and “pseudo” single claims, we 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 referral 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. We refer readers to section XII.F. of this proposed rule for a full discussion of our proposed revision of the code descriptor for HCPCS code G0379 for CY 2010.
  • 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 (Level 5 Hospital Emergency Department Visit Provided in a Type B Emergency Department) provided on the same date of service or one day before the date of service for HCPCS code G0378. (As discussed in detail in the CY2009 OPPS/ASC final rule with comment period (73 FR 68684), we finalized our proposal 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 CY2010 median costs. The proposed CY 2010 median cost resulting from this process for composite APC8002 is approximately $384, which was calculated from 14,981 single and “pseudo” single bills that met the required criteria. The proposed CY 2010 median cost for composite APC 8003 is approximately $709, which was calculated from 154,843 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 further in sections III.D and IX. of this proposed rule, and consistent with our CY 2008 and CY 2009 final policies, 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 are utilizing 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 results in the most accurate cost estimates for APCs 0604 through 0617 and 0626 through 0629 for CY 2010.

At the February 2009 meeting of the APC Panel, the APC Panel recommended that CMS present at the next APC Panel meeting an analysis of CY 2008 claims data for clinic, emergency department (Types A and B), and extended assessment and management composite APCs. We are accepting this recommendation, and we will share the requested claims data with the APC Panel at its next meeting.

In summary, for CY 2010, 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. We are proposing to continue the extended assessment and management composite APC payment methodology and criteria that we finalized for CY 2009. We also are proposing to calculate the median costs for APCs 8002 and 8003 using all single and “pseudo” single procedure claims from CY 2008 that meet the criteria for payment of each composite APC. We are not proposing to change the reporting requirements for observation services for the CY 2010 OPPS. However, we plan to issue further clarifying guidance in the Medicare Claims Processing Manual related to observation start time, as recommended by the APC Panel.Start Printed Page 35281

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

LDR prostate brachytherapy is a treatment for prostate cancer in which hollow needles or catheters are inserted into the prostate, followed by permanent implantation of radioactive sources into the prostate through the needles/catheters. At least two CPT codes are used to report the composite treatment service because there are separate codes that describe placement of the needles/catheters and the application of the brachytherapy sources: CPT code 55875 (Transperineal placement of needles or catheters into prostate for interstitial radioelement application, with or without cystoscopy) and CPT code 77778 (Interstitial radiation source application; complex). 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 being 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, had 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 further our goal of providing payment under the OPPS for a larger bundle of component services provided in a single hospital encounter, beginning in CY 2008, we provide a single payment for LDR prostate brachytherapy when the composite service, reported as CPT codes 55875 and 77778, is furnished in a single hospital encounter. We base the payment for composite APC 8001 (LDR Prostate Brachytherapy Composite) on the 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 2010, we are proposing to continue paying for LDR prostate brachytherapy services using the composite APC methodology proposed and implemented for CY 2008 and CY 2009. That is, we are proposing to use CY 2008 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 and CY 2009 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 0651 (Complex Interstitial Radiation Source Application), the APCs to which CPT codes 55875 and 77778 are assigned, respectively. The median costs for APCs 0163 and 0651 would continue to be calculated using single and “pseudo” single procedure claims. 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 2008 claims data available for this proposed rule, we were able to use 669 claims that contained both CPT codes 77778 and 55875 to calculate the median cost upon which the proposed CY 2010 payment for composite APC 8001 is based. The proposed median cost for composite APC 8001 for CY 2010 is approximately $3,106. This is an increase compared to the CY2009 OPPS/ASC final rule with comment period in which we calculated a final median cost for this composite APC of approximately $2,967 based on a full year of CY 2007 claims data. The CY 2010 proposed median cost for this composite APC is slightly less than $3,268, the sum of the proposed median costs for APCs 0163 and 0651 ($2,453+$815), the APCs to which CPT codes 55875 and 77778 map if one service is billed on a claim without the other. We believe the proposed CY 2010 median cost for composite APC 8001 of approximately $3,106 calculated from claims we believe to be correctly coded results in a reasonable and appropriate payment rate for this service in CY 2010.

(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 hospital outpatient setting. 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 costs 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 specified 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 costs 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. Table 9 in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66656) identified the CPT codes that are Start Printed Page 35282assigned to groups A and B. For a full discussion of how we identified the group A and group B procedures and established the payment rate for the cardiac electrophysiologic evaluation and ablation composite APC, we refer readers to the CY 2008 OPPS/ASC final rule with comment period (72 FR 66655 through 66659). Where a service in group A is furnished on a date of service that is different from the date of service for a 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 2010, we are proposing to continue paying for cardiac electrophysiologic evaluation and ablation services using the composite APC methodology proposed and implemented for CY 2008 and CY 2009. Consistent with our CY 2008 and CY 2009 practice, we would not use the claims that meet the composite payment criteria in the calculation of the median costs for APC 0085 and APC 0086, to which the CPT codes in both groups A and B for composite APC 8000 are otherwise assigned. Median costs for APCs 0085 and 0086 continue to be calculated using single procedure claims. We continue to believe that the composite APC methodology 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. Furthermore, 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 2008 claims data available for this proposed rule, we were able to use 6,975 claims containing a combination of group A and group B codes and calculated a proposed median cost of approximately $10,105 for composite APC 8000. This is an increase compared to the CY 2009 OPPS/ASC final rule with comment period in which we calculated a final median cost for this composite APC of approximately $9,206 based on a full year of CY 2007 claims data. We believe that the proposed median cost of $10,105 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 9 below lists the groups of procedures upon which we are proposing to base composite APC 8000 for CY 2010.

Table 9—Proposed Groups of Cardiac Electrophysiologic Evaluation and Ablation Procedures Upon Which Composite APC 8000 Is Based

Codes used in combinations: at least one in Group A and one in Group BCY 2009 HCPCS codeProposed single code CY 2010 APCProposed CY 2010 SI (composite)
Group A
Comprehensive electrophysiologic evaluation with right atrial pacing and recording, right ventricular pacing and recording, His bundle recording, including insertion and repositioning of multiple electrode catheters, without induction or attempted induction of arrhythmia936190085Q3
Comprehensive electrophysiologic evaluation including insertion and repositioning of multiple electrode catheters with induction or attempted induction of arrhythmia; with right atrial pacing and recording, right ventricular pacing and recording, His bundle recording936200085Q3
Group B
Intracardiac catheter ablation of atrioventricular node function, atrioventricular conduction for creation of complete heart block, with or without temporary pacemaker placement936500085Q3
Intracardiac catheter ablation of arrhythmogenic focus; for treatment of supraventricular tachycardia by ablation of fast or slow atrioventricular pathways, accessory atrioventricular connections or other atrial foci, singly or in combination936510086Q3
Intracardiac catheter ablation of arrhythmogenic focus; for treatment of ventricular tachycardia936520086Q3

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

For CY 2010, we are proposing to continue our longstanding policy of limiting the aggregate payment for specified less resource-intensive mental health services furnished on the same date to the payment for a day of partial hospitalization, which we consider to be the most resource-intensive of all outpatient mental health treatment for CY 2010. 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. Therefore, 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 2010, as discussed further in section X.B. of this proposed rule, we are proposing to continue using the two tiered payment approach for partial hospitalization services that we implemented in CY 2009: One APC for days with three services (APC 0172) (Level I Partial Hospitalization (3 services)) and one APC for days with four or more services (APC 0173) (Level II Partial Hospitalization (4 or more services)). When a CMHC or hospital provides three units of partial hospitalization services and meets all other partial hospitalization payment criteria, we are proposing that the CMHC or hospital be paid through APC 0172. When the CMHC or hospital provides 4 or more units of partial hospitalization services and meets all other partial hospitalization payment criteria, we are proposing that the CMHC or hospital be paid through APC 0173. We are proposing to set the CY 2010 payment rate for mental health services composite APC 0034 (Mental Health Services Composite) at the same Start Printed Page 35283rate as we are proposing for APC 0173, which is the maximum partial hospitalization per diem payment. We believe this APC payment rate 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. When the aggregate payment for specified mental health services provided by one hospital to a single beneficiary on one date of service based on the payment rates associated with the APCs for the individual services exceeds the maximum per diem partial hospitalization payment, we are proposing that those specified mental health services would be assigned to APC 0034. We are proposing that APC 0034 would continue to have the same payment rate as APC 0173, and that the hospital would continue to be paid one unit of APC 0034. The I/OCE currently determines, and we are proposing for CY 2010 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 by the hospital on that single date of service.

For CY 2010, we are proposing to continue assigning status indicator “Q3” (Codes that May be Paid Through a Composite APC) to the HCPCS codes that are assigned to composite APC 0034 in Addendum M to this proposed rule. We also are proposing to continue assigning status indicator “S” (Significant Procedure, Not Discounted when Multiple), as adopted for CY 2009, to APC 0034 for CY 2010.

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

Prior to CY 2009, hospitals received a full APC payment for each imaging service on a claim, regardless of how many procedures were performed during a single session using the same imaging modality. Based on extensive data analysis, we determined that this practice neither reflected nor promoted the efficiencies hospitals can achieve when performing multiple imaging procedures during a single session (73 FR 41448 through 41450). As a result of our data analysis, and in response to ongoing requests from MedPAC to improve payment accuracy for imaging services under the OPPS, we expanded the composite APC model developed in CY 2008 to multiple imaging services. Effective January 1, 2009, we provide a single payment each time a hospital bills more than one imaging procedure within an imaging family on the same date of service. We utilize three imaging families based on imaging modality for purposes of this methodology: Ultrasound, computed tomography (CT) and computed tomographic angiography (CTA), and magnetic resonance imaging (MRI) and magnetic resonance angiography (MRA). The HCPCS codes subject to the multiple imaging composite policy, and their respective families, are listed in Table 8 of the CY 2009 OPPS/ASC final rule with comment period (73 FR 68567 through 68569).

While there are three imaging families, there are five multiple imaging composite APCs due to the statutory requirement at section 1833(t)(2)(G) of the Act that we differentiate payment for OPPS imaging services provided with and without contrast. While the ultrasound procedures included in the policy do not involve contrast, both CT/CTA and MRI/MRA scans can be provided either with or without contrast. The five multiple imaging composite APCs established in CY 2009 are: APC 8004 (Ultrasound Composite); APC 8005 (CT and CTA without Contrast Composite); APC 8006 (CT and CTA with Contrast Composite); APC 8007 (MRI and MRA without Contrast Composite); and APC 8008 (MRI and MRA with Contrast Composite). We define the single imaging session for the “with contrast” composite APCs as having at least one or more imaging procedures from the same family performed with contrast on the same date of service. For example, if the hospital performs an MRI without contrast during the same session as at least one other MRI with contrast, the hospital will receive payment for APC 8008, the “with contrast” composite APC.

Hospitals continue to use the same HCPCS codes to report imaging procedures, and the I/OCE determines when combinations of imaging procedures qualify for composite APC payment or map to standard (sole service) APCs for payment. We will make a single payment for those imaging procedures that qualify for composite APC payment, as well as any packaged services furnished on the same date of service. The standard (noncomposite) APC assignments continue to apply for single imaging procedures and multiple imaging procedures performed across families.

For a full discussion of the development of the multiple imaging composite APC methodology, we refer readers to the CY 2009 OPPS/ASC final rule with comment period (73 FR 68559 through 68569).

During the February 2009 meeting of the APC Panel, the APC Panel heard from stakeholders who claimed that a composite payment is not appropriate when multiple imaging procedures are provided on the same date of service but at different times. Some APC Panel members expressed concern that the same efficiencies that may be gained when multiple imaging procedures are performed during the same sitting may not be gained if a significant amount of time passes between the second and subsequent imaging procedures, when the patient may leave not only the scanner, but also the radiology department or hospital. The APC Panel recommended that CMS continue to work with stakeholders to examine different options for APCs for multiple imaging sessions and multiple imaging procedures. We are accepting this recommendation, and we will continue to work with any stakeholders who are interested in our multiple imaging composite payment methodology. We note that we routinely seek broad public input on OPPS payment rates and payment policies, including the multiple imaging composite APCs, through a variety of forums. Through our annual rulemaking process, we consider all timely public comments received from interested organizations and individuals, and respond to each of those public comments in the final rule for the forthcoming year. We also seek input from the public at meetings of the APC Panel, and consider opinions expressed in correspondences received outside of the annual rulemaking cycle. Furthermore, we note that we regularly accept requests from all interested parties to discuss with us their views about OPPS payment policy issues, and that we do not work exclusively with any single stakeholder or stakeholder group.

While we are accepting the APC Panel recommendation that CMS continue to work with stakeholders to examine different options for APCs for multiple imaging sessions and multiple imaging procedures, we do not believe it is appropriate to propose modifications to the multiple imaging composite policy for CY 2010. As stated in the CY 2009 OPPS/ASC final rule with comment period (73 FR 68565), we continue to believe that composite payment is appropriate even when procedures are provided on the same date of service but at different times, because hospitals do Start Printed Page 35284not expend the same facility resources each and every time a patient is seen for a distinct imaging service in a separate imaging session. In most cases, we expect that patients in those circumstances would receive imaging procedures at different times during a single prolonged hospital outpatient encounter, and that the efficiencies that may be gained from providing multiple imaging procedures during a single session are achieved in such ways as not having to register the patient again, or not having to re-establish new intravenous access for an additional study when contrast is required. Furthermore, we stated that even if the same level of efficiencies could not be gained for multiple imaging procedures performed on the same date of service but at different times, we expect that any higher costs associated with these cases would be reflected in the claims data and cost reports we use to calculate the median costs for the multiple imaging composite APCs and, therefore, in their payment rates.

In summary, for CY 2010, we are proposing to continue paying for all multiple imaging procedures within an imaging family performed on the same date of service using the multiple imaging composite payment methodology, without modification. The proposed CY 2010 payment rates for the five multiple imaging composite APCs (APC 8004, APC 8005, APC 8006, APC 8007, and APC 8008) are based on median costs calculated from the partial year CY 2008 claims available for the proposed rule that would have qualified for composite payment under the current policy (that is, those claims with more than one procedure within the same family on a single date of service). To calculate the proposed median costs, we used the same methodology that we used to calculate the final CY 2009 median costs for these composite APCs. That is, we removed any HCPCS codes in the OPPS imaging families that overlapped with codes on our bypass list (“overlap bypass codes”) 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 the proposed multiple imaging composite APC median costs appear in Table 11 below. 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 reassess the remaining multiple procedure claims using the full bypass list and bypass process in order to determine if we could make other “pseudo” single bills. That is, we assessed whether a single separately paid service remained on the claim after removing line items for the “overlap bypass codes.”

We were able to identify 1.7 million “single session” claims out of an estimated 2.5 million potential composite cases from our ratesetting claims data, or well over half of all eligible claims, to calculate the proposed CY 2010 median costs for the multiple imaging composite APCs. The HCPCS codes subject to the proposed multiple imaging composite policy, and their respective families, are listed below in Table 10.

Table 10—Proposed OPPS Imaging Families and Multiple Imaging Procedure Composite APCs

Proposed CY 2010 APC 8004 (ultrasound composite)Proposed CY 2010 approximate APC median cost = $197.
Family 1—Ultrasound
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
Proposed CY 2010 APC 8005 (CT and CTA without contrast composite)*Proposed CY 2010 approximate APC median cost = $429
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.
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.
Proposed CY 2010 APC 8006 (CT and CTA with contrast composite)Proposed CY 2010 approximate APC median cost = $634
70487Ct maxillofacial w/dye.
70460Ct head/brain w/dye.
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.
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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
Proposed CY 2010 APC 8007 (MRI and MRA without contrast composite) *Proposed CY 2010 approximate APC median cost = $732
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.
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.
Proposed CY 2010 APC 8008 (MRI and MRA with contrast composite)Proposed CY 2010 approximate APC median cost = $1,013
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.
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.
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.
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.

Table 11—Proposed OPPS Imaging Family Services Overlapping With HCPCS Codes on the Proposed CY 2010 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.
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.
Start Printed Page 35286
72141Mri neck spine w/o dye.
72146Mri chest spine w/o dye.
72148Mri lumbar spine 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.

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 2010 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 clinic visit APCs. We selected APC 0606 as the base because APC 0606 was the mid-level clinic visit APC (that is, Level 3 of five levels). Therefore, for CY 2010, 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, APC 0606, to calculate unscaled weights. Following our standard methodology, but using the proposed CY2010 median cost for APC 0606, for CY 2010 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 proposed unscaled relative payment weight for each APC. The choice of the APC on which to base the proposed 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 budget neutral manner. Budget neutrality ensures that estimated aggregate weight under the OPPS for CY 2010 is neither greater than nor less than the estimated aggregate weight that would have been made without the changes. To comply with this requirement concerning the APC changes, we are proposing to compare estimated aggregate weight using the CY 2009 scaled relative weights to estimated aggregate weight using the CY 2010 unscaled relative weights. For CY 2009, we multiply the CY 2009 scaled APC relative weight applicable to a service paid under the OPPS by the volume of that service from CY 2008 claims to calculate the total weight for each service. We then add together the total weight for each of these services in order to calculate an estimated aggregate weight for the year. For CY 2010, we perform the same process using the CY 2010 unscaled weights rather than scaled weights. We then calculate the weight scaler by dividing the CY 2009 estimated aggregate weight by the CY 2010 estimated aggregate weight. The service mix is the same in the current and prospective years because we use the same set of claims for service volume in calculating the aggregate weight for each year. For a detailed discussion of the weight scaler calculation, we refer readers to the OPPS claims accounting document available on the CMS Web site at: http://www.cms.hhs.gov/​HospitalOutpatientPPS/​. Again this year, we included payments to CMHCs in our comparison of estimated unscaled weight in CY 2010 to estimated total weight in CY 2009 using CY 2008 claims data and holding all other things constant. Based on this comparison, we adjusted the unscaled relative weights for purposes of budget neutrality. The CY 2010 unscaled relative payment weights were adjusted by multiplying them by a proposed weight scaler of 1.2863 to ensure budget neutrality of the proposed CY 2010 relative weights in this proposed rule.

Section 1833(t)(14)(H) of the Act, as added by section 621(a)(1) of Public Law 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 proposed budget neutrality calculations for the CY 2010 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 cost of providing a service or bundle of services for a particular patient, but with the exception of outlier cases, the payment 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 that payment is adequate to enable the hospital to provide quality care and establishing incentives for efficiency through larger units of payment. In the CY 2008 OPPS/Start Printed Page 35287ASC final rule with comment period (72 FR66610 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 assign status indicator “N” to those HCPCS codes that we believe are always integral to the performance of the primary modality; therefore, we always package their costs into the costs of the separately paid primary services with which they are billed. Services assigned status indicator “N” are unconditionally packaged.

We assign status indicator “Q1” (“STVX-Packaged Codes”), “Q2” (“T-Packaged Codes”), or “Q3” (Codes that may be paid through a composite APC) to each conditionally packaged HCPCS code. An “STVX-packaged code” describes a HCPCS code whose payment is packaged when one or more separately paid primary services with the status indicator of “S,” “T,” “V,” or “X” 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 with the status indicator of “T” 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” are conditionally packaged. We refer readers to section XIII.A.1. of this proposed rule for a complete listing of status indicators.

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.”

In addition, in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66650 through 66659), we finalized additional packaging for the CY 2008 OPPS, which included the establishment of 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). In the CY 2009 OPPS/ASC final rule with comment period (73 FR 68559 through 68569), we expanded the composite APC model to one new clinical area, multiple imaging services. We created five multiple imaging composite APCs for payment in CY 2009 that incorporate statutory requirements to differentiate between imaging services provided with contrast and without contrast as required by section 1833(t)(2)(G) of the Act. The multiple imaging composite 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 discuss composite APCs in more detail in section II.A.2.e. of this proposed rule.

Hospitals include charges for packaged services on their claims, and the estimated costs associated with those packaged services are then added to the costs of separately payable procedures on the same claims 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 the CPT Editorial Panel or CMS provides 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.

b. Service-Specific Packaging Issues

(1) Packaged Services Addressed by the APC Panel Recommendations

The Packaging Subcommittee of the APC Panel was established to review 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.

During the September 2007 APC Panel meeting, the APC Panel requested that CMS evaluate the impact of expanded packaging on beneficiaries. During the March 2008 APC Panel meeting, the APC Panel requested that CMS report to the Panel at the first Panel meeting in CY 2009 regarding the impact of packaging on net payments for patient care. In response to these requests, we shared data with the APC Panel at the February 2009 APC Panel meeting that compared the frequency of specific categories of services billed under the OPPS in CY 2007, before the expanded packaging went into effect, to the frequency of those same categories of services in CY 2008, their first year of packaged payment. In each category, the HCPCS codes that we compared are the ones that we identified in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66659 through 66664) as fitting into one of the seven packaging categories listed in section II.A.4.a. of this proposed rule. The data shared with the APC Panel at the February 2009 APC Panel meeting compared CY 2007 claims processed through September 30, 2007 to CY 2008 claims processed through September 30, 2008. We did not make any adjustments for inflation, changes in Medicare population, or other variables that potentially influenced billing between CY 2007 and CY 2008. These data represent about 60 percent of the full year data. A summary of these data analyses is provided below.

Analysis of the diagnostic radiopharmaceuticals category showed that the frequency of the reporting of diagnostic radiopharmaceuticals increased by 1 percent between the first 9 months of CY 2007 and the first 9 months of CY 2008. In CY 2007, some diagnostic radiopharmaceuticals were packaged and others were separately payable, depending on whether their per day mean costs fell above or below the $55 drug packaging threshold for CY 2007. All diagnostic Start Printed Page 35288radiopharmaceuticals were uniformly packaged in CY 2008. Two percent more hospitals reported one or more diagnostic radiopharmaceuticals during CY 2008 as compared to CY 2007. Effective for CY 2008, we first required reporting of a radiolabeled product (including diagnostic radiopharmaceuticals) when billing a nuclear medicine procedure, and we believe that the increases in frequency and the number of reporting hospitals reflect hospitals meeting this reporting requirement.

We also found that nuclear medicine procedures (into which diagnostic radiopharmaceuticals were packaged) and associated diagnostic radiopharmaceuticals were billed approximately 3 million times during the first 9 months of both CY 2007 and CY 2008. Further analysis revealed that we paid hospitals over $637 million for nuclear medicine procedures and diagnostic radiopharmaceuticals during the first 9 months of CY 2007, when diagnostic radiopharmaceuticals were separately payable, and over $619 million for nuclear medicine procedures and diagnostic radiopharmaceuticals during the first 9 months of CY 2008, when payment for diagnostic radiopharmaceuticals was packaged. This represents a 3 percent decrease in aggregate payment between the first 9 months of CY 2007 and the first 9 months of CY 2008.

Using the same data, we calculated an average payment per service or item billed (including nuclear medicine procedures and packaged or separately payable diagnostic radiopharmaceuticals) of $203 in CY 2007 and $198 in CY 2008 for nuclear medicine procedures. This represents a decrease of 2 percent in average payment per item or service billed between CY 2007 and CY 2008. It is unclear how much of the decrease in estimated aggregate or average per service or item billed payment may be due to packaging payment for diagnostic radiopharmaceuticals (and other services that were newly packaged for CY 2008) and how much may be due to the usual annual APC recalibration and typical fluctuations in service frequency. However, we believe that all of these factors likely contributed to the slight decrease in aggregate payment in CY 2008, as compared to CY 2007. Overall, the observed changes between CY 2007 and CY 2008 are very small and indicate that there has been very little change in frequency or aggregate payment in this clinical area between CY 2007 and CY 2008.

We similarly analyzed 9 months of CY 2007 and CY 2008 data related to all services that were packaged during CY 2008 because they were categorized as guidance services. Analysis of the guidance category (which includes image-guided radiation therapy services) showed that the frequency of guidance services increased by 2 percent between the first 9 months of CY 2007 and the first 9 months of CY 2008. One percent fewer hospitals reported one or more guidance services during CY 2007 as compared to CY 2008.

We further analyzed 9 months of CY 2007 and CY 2008 claims data for radiation oncology services that would be accompanied by radiation oncology guidance. We found that radiation oncology services (including radiation oncology guidance services) were billed approximately 4 million times in CY 2007 and 3.9 million times in CY 2008, representing a decrease in frequency of approximately 5 percent between CY 2007 and CY 2008. These numbers represent each instance where a radiation oncology service or a radiation oncology guidance service was billed. Our analysis indicates that hospitals were paid over $818 million for radiation oncology services and radiation oncology guidance services under the OPPS during the first 9 months of CY 2007, when radiation oncology guidance services were separately payable. During the first 9 months of CY 2008, when payments for radiation oncology guidance were packaged, hospitals were paid over $740 million for radiation oncology services under the OPPS. This $740 million includes packaged payment for radiation oncology guidance services and represents a 10 percent decrease in aggregate payment from CY 2007 to CY 2008. Using the first 9 months of data for both CY 2007 and CY 2008, we calculated an average payment per radiation oncology service or item billed of $201 in CY 2007 and $190 in CY 2008, representing a decrease of 5 percent from CY 2007 to CY 2008. It is unclear how much of the decrease in aggregate payment and the decrease in average payment per service provided may be due to packaging payment for radiation oncology guidance services (and other services that were newly packaged for CY 2008) and how much may be due to the usual annual APC recalibration and typical fluctuations in service frequency. This analysis is discussed in further detail below, under “Recommendation 1” in this section of this proposed rule. In that analysis, we demonstrate that the volume of some packaged radiation oncology guidance services increased during the period, leading us to conclude that, irrespective of the decline in the frequency of radiation oncology services in general, hospitals do not appear to be changing their practice patterns specifically in response to packaged payment for radiation oncology guidance services.

We similarly analyzed 9 months of CY 2007 and CY 2008 data related to all services that were packaged during CY 2008 because they were categorized as intraoperative services. Analysis of the intraoperative category (which includes intravascular ultrasound (IVUS), intracardiac echocardiography (ICE), and coronary fractional flow reserve (FFR)) showed minimal changes in the frequency and the number of reporting hospitals between CY 2007 and CY 2008.

We found that cardiac catheterization and other percutaneous vascular procedures that would typically be accompanied by IVUS, ICE and FFR (including IVUS, ICE, and FFR) were billed approximately 375,000 times in CY 2007 and approximately 400,000 times in CY 2008, representing an increase of 8 percent in the number of services and items billed between CY 2007 and CY 2008. Further analysis revealed that the OPPS paid hospitals over $912 million for cardiac catheterizations, other related services, and IVUS, ICE, and FFR in CY 2007, when IVUS, ICE, and FFR were separately payable. In the first 9 months of CY 2008, the OPPS paid hospitals approximately $1.1 billion for cardiac catheterization and other percutaneous vascular procedures and IVUS, ICE, and FFR, when payments for IVUS, ICE, and FFR were packaged. This represents a 25 percent increase in payment from CY 2007 to CY 2008. Using the 9 months of data for both CY 2007 and CY 2008, we calculated an average payment per service or item provided of $2,430 in CY 2007 and $2,800 in CY 2008 for cardiac catheterization and other related services. This represents an increase of 15 percent in average payment per item or service from CY 2007 to CY 2008.

We cannot determine how much of the 25 percent increase in aggregate payment for these services may be due to the packaging of payment for IVUS, ICE, and FFR (and other services that were newly packaged for CY 2008) and how much may be due to the usual annual APC recalibration and typical fluctuations in service frequency. However, we believe that all of these factors contributed to the increase in payment between these 2 years.

The three remaining packaging categories (excluding observation services, which are further discussed in section II.A.2.e.(1) of this proposed Start Printed Page 35289rule), contrast agents, image processing services, and imaging supervision and interpretation services, show minimal changes in frequency between CY 2007 and CY 2008, ranging from a 2 percent increase to a 1 percent decrease in frequency. Similarly, when examining the number of hospitals reporting these services, the data show similar numbers of hospitals reporting these services in CY 2007, when these services were separately payable, and CY2008, when they were packaged. Specifically, the percentage change in the number of reporting hospitals for these categories between CY 2007 and CY 2008 ranges from 0 percent to a decrease of 1 percent.

In summary, these preliminary data indicate that hospitals in aggregate do not appear to have significantly changed their service reporting patterns as a result of the expanded packaging adopted for the OPPS beginning in CY 2008.

The APC Panel's Packaging Subcommittee reviewed the packaging status of several CPT codes and reported its findings to the APC Panel at its February 2009 meeting. The full report of the February 18-19, 2009 APC Panel meeting can be found on the CMS Web site at: http://www.cms.hhs.gov/​FACA/​05_​AdvisoryPanelonAmbulatoryPaymentClassificationGroups.asp. The APC Panel accepted the report of the Packaging Subcommittee, heard several presentations related to packaged services, discussed the deliberations of the Packaging Subcommittee, and recommended that—

1. CMS pay separately for radiation therapy guidance services performed in the treatment room for 2 years and then reevaluate packaging on the basis of claims data. (Recommendation 1)

2. CMS continue to analyze the impact of increased packaging on beneficiaries and provide more detailed versions of the analyses presented at the February 2009 meeting of services initially packaged in CY 2008 at the next Panel meeting. In addition, the Panel requested that, in the more detailed analyses of radiation oncology services that would be accompanied by radiation oncology guidance, CMS stratify the data according to the type of radiation oncology service, specifically, intensity modulated radiation therapy, stereotactic radiosurgery, brachytherapy, and conventional radiation therapy. (Recommendation 2)

3. CMS continue to analyze the impact on beneficiaries of increased packaging of diagnostic radiopharmaceuticals and provide more detailed analyses at the next Panel meeting. In addition, the Panel requested that, in the more detailed analyses of packaging of diagnostic radiopharmaceuticals by type of nuclear medicine scan, CMS break down the data according to the specific CPT codes billed with the diagnostic radiopharmaceuticals. (Recommendation 3)

4. CPT code 36592 (Collection of blood specimen using established central or peripheral catheter, venous, not otherwise specified) remain assigned to APC 0624 (Phlebotomy and Minor Vascular Access Device Procedures) for CY 2010. (Recommendation 4)

5. The Packaging Subcommittee continue its work until the next APC Panel meeting. (Recommendation 5)

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

Recommendation 1

We are not proposing to pay separately for radiation therapy guidance services provided in the treatment room for CY 2010, which would be consistent with the APC Panel's recommendation. Instead, we are proposing to maintain the packaged status of radiation therapy guidance services performed in the treatment room for CY 2010.

As discussed above in this section, during the February 2009 APC Panel meeting, we presented data that estimated that aggregate payment for radiation oncology services, including the payment for radiation oncology guidance services, decreased by approximately 10 percent between the first 9 months of CY 2007 (before the expanded packaging went into effect) and the first 9 months of CY 2008 (after the expanded packaging went into effect). This decline may be attributable to many factors, including lower payment rates for common radiation oncology services in CY 2008 specifically and generally reduced volume for separately paid radiation oncology services. The APC Panel expressed concern that this aggregate payment decrease could inhibit patient access to technologically advanced and clinically valuable radiation oncology guidance services whose payment became packaged effective January 1, 2008.

While we presented data to the APC Panel comparing payment between CY 2007 and CY 2008 in response to past APC Panel recommendations, we note that we made changes to the bypass list for CY 2009 to ensure that we more fully captured all packaged costs on each claim, which resulted in significantly increased payment rates for many of these radiation oncology services for CY 2009, as compared to the CY 2008 payment rates for these services.

Specifically, as discussed in detail in the CY 2009 OPPS/ASC final rule with comment period (73 FR 68575), in response to public comments received, several radiation oncology CPT codes had been included on the bypass list for the CY 2008 OPPS although they failed to meet the empirical criteria for inclusion on the bypass list. For CY 2009, we removed from the bypass list those radiation oncology codes that did not meet the empirical criteria. As a result of these changes to the bypass list, the CY 2009 median costs for several common radiation oncology APCs increased by more than 9 percent as compared to the CY 2008 median costs, while the median costs for some of the other lower volume radiation oncology APCs, most notably the brachytherapy source application APCs, declined. For example, as noted in the CY 2009 OPPS/ASC final rule with comment period (73 FR 68575), these changes to the bypass list resulted in payment for the common combination of intensity modulated radiation therapy (IMRT) and image guided radiation therapy (IGRT) increasing from $348 in CY 2008 to $411 in CY 2009. Notably, the CY 2007 total payment rate for this combination of services, before the expanded packaging went into effect, was $403.

We do not yet have CY 2009 claims data reflecting utilization based on the payment rates in effect for CY 2009. However, we do not expect that an overall per service payment comparison between CY 2007 and CY 2009 would likely demonstrate a significant decrease in payment for radiation oncology services because we have adopted a significant increase in the CY 2009 payment rates for the most common radiation oncology services. In addition, we note that CY 2010 proposed rule data indicate that the CY 2010 APC median costs applicable to most radiation oncology services experience increases of approximately 2 to 15 percent when compared to their CY 2009 median costs. Although a small number of other lower volume radiation oncology APCs, most notably the brachytherapy and stereotactic radiosurgery APCs, experience declines in median costs, we do not expect that an overall per service payment comparison between CY 2007 and CY 2010 would likely demonstrate a significant decrease in payment for radiation oncology services over this time period.

While we understand that the CY 2007 to CY 2008 aggregate payment Start Printed Page 35290comparison provided to the APC Panel during the February 2009 meeting may have contributed to the APC Panel's particular concern about payment for radiation oncology services for CY 2010, we do not believe that packaging payment for radiation oncology guidance services has primarily caused this decline. In addition, we do not believe that beneficiaries' access to these services has been limited as a result of packaging payment for radiation oncology guidance services. In the data presented to the APC Panel at the February 2009 meeting, the number of all packaged guidance services provided during the first 9 months of CY 2008 represented a 2 percent increase from the number of guidance services provided during the first 9 months of CY 2007. Further, although the CY 2008 volume of the radiation oncology guidance codes that we newly packaged for CY 2008 varied, with some of the services experiencing increases in volume and others experiencing decreases in volume, in aggregate, the reporting of radiation oncology guidance services increased by 4 percent in the first 9 months of claims for CY 2008, as compared to the first 9 months of CY 2007, and the number of hospitals reporting these services also increased. This further supports our belief that, irrespective of the decline in the frequency of radiation oncology services in general, hospitals do not appear to be changing their practice patterns specifically in response to packaged payment for radiation oncology guidance services.

Therefore, we are not proposing to pay separately for radiation therapy guidance services performed in the treatment room for 2 years as the APC Panel recommended. Instead, for CY 2010, we are proposing to maintain the packaged status of all radiation therapy guidance services, including those radiation therapy guidance services performed in the treatment room.

Recommendation 2

We are accepting the APC Panel recommendation to continue to analyze the impact of increased packaging on beneficiaries and to share more data with the APC Panel. We will carefully consider which additional data would be most informative for the APC Panel and will discuss these data with the APC Panel at the next CY 2009 APC Panel meeting and/or the first CY 2010 APC Panel meeting. Similarly, we will determine what additional detailed data related to radiation oncology services would be helpful to the APC Panel and will share these data at the next CY 2009 APC Panel meeting and/or the first CY 2010 APC Panel meeting.

Recommendation 3

We are accepting the APC Panel's recommendation that CMS continue to analyze the impact on beneficiaries of increased packaging of diagnostic radiopharmaceuticals and provide more detailed analyses at the next APC Panel meeting. In these analyses of diagnostic radiopharmaceuticals by type of nuclear medicine scan, the APC Panel further recommended that CMS analyze the data according to the specific CPT codes billed with the diagnostic radiopharmaceuticals. This APC Panel recommendation is discussed in detail in section II.A.2.d (5) of this proposed rule. We are accepting the APC Panel's recommendation and will provide additional data to the APC Panel at an upcoming meeting.

Recommendation 4

For CY 2010, we are proposing to continue 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 to assign it to APC 0624 (Phlebotomy and Minor Vascular Access Device Procedures), the same APC to which CPT code 36591 (Collection of blood specimen from a completely implantable venous access device) is currently assigned as the APC Panel recommended. 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. For CY 2009, in response to public comments, we proposed to treat CPT code 36592 as a conditionally packaged code, with assignment to APC 0624. In the CY 2009 OPPS/ASC final rule with comment period (73 FR 68576), we discussed the public comments we received regarding our proposed treatment of CPT code 36592. Several of these commenters supported our proposal to treat CPT code 36592 as a conditionally packaged code with assignment to APC 0624. We stated in the CY 2009 OPPS/ASC final rule with comment period that when cost data for CPT code 36592 became available for the CY 2010 OPPS annual update, we would reevaluate whether assignment to APC 0624 continued to be appropriate.

Based on our analysis of claims data, our clinical understanding of the service, and our discussion with the APC Panel Packaging Subcommittee, we are proposing to maintain the assignment of CPT code 36592 to APC 0624 for CY 2010, consistent with the APC Panel recommendation, and we are proposing to continue to treat CPT code 36592 as an “STVX packaged code” and assign it to APC 0624. We note that we expect hospitals to follow the CPT guidance related to CPT codes 36591 and 36592 regarding when these services should be appropriately reported.

Recommendation 5

In response to the APC Panel's recommendation for the Packaging Subcommittee to remain active until the next APC Panel meeting, we note that we have accepted this recommendation and the APC Panel Packaging Subcommittee remains active. 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. 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) Other Service-Specific Packaging Issues

The APC Panel also recommended that CMS reassign CPT code 76098 (Radiological examination, surgical specimen) from APC 0317 (Level II Miscellaneous Radiology Procedures) to APC 0260 (Level I Plain Film), and to place CPT code 76098 on the bypass list. Based on our analysis of the CY 2010 claims containing CPT 76098 and clinical review of the services being furnished, we are proposing to treat CPT code 76098 as a “T-packaged” code for CY 2010 with continued assignment to APC 0317. As discussed above, a “T-packaged code,” identified with status indicator “Q2,” describes a code whose payment is packaged when one or more separately paid surgical procedures with a status indicator of “T” are provided during the hospital encounter. The assignment of status indicator “Q2” to CPT code 76098 would result in more claims data being available to set the median costs for the surgical procedures with which CPT code 76098 is most commonly billed (for example, CPT code 19101 (Biopsy of breast, percutaneous, needle core, not using image guidance; open incisional)), while continuing to provide appropriate Start Printed Page 35291separate payment that reflects the costs of the service, including its packaged costs, when it is not billed with a surgical procedure. Further discussion related to this proposal is included in section II.A.1.b. of this 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 2010, 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 2010 published in the FY 2010 IPPS/LTCH PPS proposed rule (74 FR24239 through 24241) is 2.1 percent. To set the proposed OPPS conversion factor for CY 2010, we increased the CY 2009 conversion factor of $66.059, as specified in the CY 2009 OPPS/ASC final rule with comment period (73 FR 68584 through 68585), by 2.1 percent. Hospitals that fail to meet the reporting requirements of the Hospital Outpatient Quality Data Reporting Program (HOP QDRP) 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 requirements and the payment reduction for hospitals that fail to meet those requirements, we refer readers to section XVI. of this proposed rule.

In accordance with section 1833(t)(9)(B) of the Act, we further adjusted the conversion factor for CY 2010 to ensure that any revisions we are proposing to make 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 1.0000 for wage index changes by comparing total payments from our simulation model using the FY 2010 IPPS proposed wage index values to those payments using the current (FY 2009) IPPS wage index values. For CY 2010, we are not proposing a change to our rural adjustment policy. Therefore, the proposed budget neutrality factor for the rural adjustment is 1.0000.

For this proposed rule, we estimate that pass-through spending for both drugs and biologicals and devices for CY 2010 would equal approximately $38 million, which represents 0.12 percent of total projected CY 2010 OPPS spending. Therefore, the conversion factor is also adjusted by the difference between the 0.11 percent estimate of pass-through spending set aside for CY 2009 and the 0.12 percent estimate of CY 2010 pass-through spending. Finally, estimated payments for outliers remain at 1.0 percent of total OPPS payments for CY 2010.

The proposed market basket increase update factor of 2.1 percent for CY 2010 and the adjustment of 0.01 percent of projected OPPS spending for the difference in the pass-through spending set aside resulted in a full proposed market basket conversion factor for CY 2010 of $67.439. To calculate the proposed CY 2010 reduced market basket conversion factor for those hospitals that fail to meet the requirements of the HOP QDRP for the full CY 2010 payment update, we made all other adjustments discussed above, but used a proposed reduced market basket increase update factor of 0.1 percent. This resulted in a proposed reduced market basket conversion factor for CY 2010 of $66.118 for those hospitals that fail to meet the HOP QDRP requirements.

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 2010 OPPS. We refer readers to section II.G. of this proposed 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 2010 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 care short-stay hospital under the IPPS would 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 2010 version of the IPPS wage indices used to pay IPPS hospitals to adjust the CY 2010 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 2010 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. For the FY 2010 wage indices, these changes include a continuing transition to the new reclassification threshold criteria that were finalized in the FY 2009 IPPS final rule (73 FR 48568 through 48570), updated 2007-2008 occupational mix survey data, and a continuing transition to State-level budget neutrality for the rural and imputed floors. We refer readers to the FY 2010 IPPS/LTCH PPS proposed rule (74 FR 24137 through 24153) for a detailed discussion of all proposed changes to the FY 2010 IPPS wage indices. In addition, we refer readers to the CY 2005 OPPS final rule with comment period (69 FR 65842 through 65844) and subsequent OPPS Start Printed Page 35292rules for a detailed discussion of the history of these wage index adjustments as applied under the OPPS.

The IPPS wage indices that we are proposing to adopt in this proposed rule include all reclassifications that are approved by the Medicare Geographic Classification Review Board (MGCRB) for FY 2010. We note that reclassifications under section 508 of Public Law 108-173 and certain special exception reclassifications that were extended by section 106(a) of Public Law 109-432 (MIEA-TRHCA) and section 117(a)(1) of Public Law 110-173 (MMSEA) were set to terminate September 30, 2008, but were further extended by section 124 of Public Law 110-275 (MIPPA) through September 30, 2009.

As noted in the CY 2009 OPPS/ASC final rule with comment period (73 FR 68585), after issuance of the CY 2009 OPPS/ASC proposed rule, section 124 of Public Law 110-275 further extended geographic reclassifications under section 508 and certain special exception reclassifications until September 30, 2009. We did not make any proposals related to these provisions for the CY 2009 OPPS wage indices in our CY 2009 proposed rule because Public Law 110-275 was enacted after issuance of the CY 2009 OPPS/ASC proposed rule. In accordance with section 124 of Public Law 110-275, for CY 2009, we adopted all section 508 geographic reclassifications through September 30, 2009. Similar to our treatment of section 508 reclassifications extended under Public Law 110-173 as described in the CY 2009 OPPS/ASC final rule with comment period (73 FR 68586), hospitals with section 508 reclassifications revert to their home area wage index, with out-migration adjustment if applicable, from October 1, 2009, to December 31, 2009. As we did for CY 2008, we also have extended the special exception wage indices for certain hospitals through December 31, 2009, under the OPPS, in order to give these hospitals the special exception wage indices under the OPPS for the same time period as under the IPPS. We refer readers to the Federal Register notice published subsequent to the FY 2009 IPPS final rule for a detailed discussion of the changes to the wage indices as required by section 124 of Public Law 110-275 (73 FR 57888). Because the provisions of section 124 of Public Law 110-275 expire in 2009 and are not applicable to FY 2010, we are not making any proposals related to those provisions for the OPPS wage indices for CY 2010.

For purposes of the OPPS, we are proposing to continue our policy in CY 2010 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 in the Federal Register for the FY 2010 IPPS proposed wage indices (74 FR 24446 through 24462) identifies counties eligible for the out-migration adjustment and providers receiving the adjustment. As we have done in prior years, we are reprinting 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 2010 OPPS.

As stated earlier in this section, we continue to believe that using the IPPS wage indices 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 2010 IPPS wage indices for calculating the OPPS payments in CY 2010. 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 FY 2010 IPPS proposed 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, readers will find a link to the FY 2010 IPPS proposed wage index tables.

D. Proposed Statewide Average Default CCRs

In addition to using CCRs to estimate costs from charges on claims for ratesetting, CMS uses CCRs to determine outlier payments, payments for pass-through devices, and monthly interim transitional corridor payments under the OPPS during the PPS year. Medicare contractors cannot calculate a CCR for some hospitals because there is no cost report available. For these hospitals, CMS uses the statewide average default CCRs to determine the payments mentioned above until a hospital's Medicare contractor is able to calculate the hospital's actual CCR from its most recently submitted Medicare cost report. These hospitals include, but are not limited to, hospitals that are new, have not accepted assignment of an existing hospital's provider agreement, and have not yet submitted a cost report. CMS also uses the statewide average default CCRs to determine payments for hospitals that appear to have a biased CCR (that is, the CCR falls outside the predetermined ceiling threshold for a valid CCR) or for hospitals whose most recent cost report reflects an all-inclusive rate status (Medicare Claims Processing Manual, Pub. 100-04, Chapter 4, Section 10.11). We are proposing to update the default ratios for CY 2010 using the most recent cost report data. We discuss our policy for using default CCRs, including setting the ceiling threshold for a valid CCR, in the CY 2009 OPPS/ASC final rule with comment period (73 FR 68594 through 68599) in the context of our adoption of an outlier reconciliation policy for cost reports beginning on or after January 1, 2009.

For CY 2010, we used our standard methodology of calculating the statewide average default CCRs using the same hospital overall CCRs that we use to adjust charges to costs on claims data for setting the CY 2010 proposed OPPS relative weights. Table 12 below lists the proposed CY 2010 default urban and rural CCRs by State and compares them to last year's default CCRs. These proposed CCRs are the ratio of total costs to total charges from each hospital'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 the volume of separately paid line-items on hospital claims corresponding to the year of the majority of cost reports used to calculate the overall CCRs. We refer readers to the CY 2008 OPPS/ASC final rule with comment period (72 FR 66680 through 66682) and prior OPPS rules for a more detailed discussion of our established methodology for calculating the statewide average default CCRs, including the hospitals used in our calculations and our trimming criteria.

For this proposed rule, approximately 85 percent of the submitted cost reports utilized in the default ratio calculations represented data for cost reporting periods ending in CY 2007 and 14 percent were for cost reporting periods ending in CY 2006. For Maryland, we used an overall weighted average CCR for all hospitals in the nation as a substitute for Maryland CCRs. Few hospitals in Maryland are eligible to receive payment under the OPPS, which limits the data available to calculate an accurate and representative CCR. In Start Printed Page 35293general, observed changes in the statewide average default CCRs between CY 2009 and CY 2010 are modest and the few significant changes are associated with areas that have a small number of hospitals.

Table 12—Proposed CY 2010 Statewide Average CCRs

StateUrban/ruralProposed CY 2010 default CCRPrevious default CCR (CY 2009 OPPS Final rule)
ALASKARURAL0.5110.562
ALASKAURBAN0.3340.345
ALABAMARURAL0.2180.221
ALABAMAURBAN0.2020.202
ARKANSASRURAL0.2560.256
ARKANSASURBAN0.2590.268
ARIZONARURAL0.2600.267
ARIZONAURBAN0.2190.226
CALIFORNIARURAL0.2100.219
CALIFORNIAURBAN0.2120.218
COLORADORURAL0.3430.346
COLORADOURBAN0.2510.248
CONNECTICUTRURAL0.3710.372
CONNECTICUTURBAN0.3330.322
DISTRICT OF COLUMBIAURBAN0.3270.329
DELAWARERURAL0.3200.302
DELAWAREURBAN0.3820.349
FLORIDARURAL0.2050.204
FLORIDAURBAN0.1890.189
GEORGIARURAL0.2670.267
GEORGIAURBAN0.2470.251
HAWAIIRURAL0.3570.367
HAWAIIURBAN0.3070.344
IOWARURAL0.3320.439
IOWAURBAN0.2920.294
IDAHORURAL0.4770.449
IDAHOURBAN0.4250.419
ILLINOISRURAL0.2770.280
ILLINOISURBAN0.2610.266
INDIANARURAL0.2950.298
INDIANAURBAN0.2970.295
KANSASRURAL0.2970.300
KANSASURBAN0.2380.238
KENTUCKYRURAL0.2330.236
KENTUCKYURBAN0.2600.255
LOUISIANARURAL0.2810.283
LOUISIANAURBAN0.2650.258
MARYLANDRURAL0.2990.303
MARYLANDURBAN0.2710.276
MASSACHUSETTSURBAN0.3250.328
MAINERURAL0.4510.452
MAINEURBAN0.4360.428
MICHIGANRURAL0.3190.317
MICHIGANURBAN0.3190.321
MINNESOTARURAL0.4850.488
MINNESOTAURBAN0.3300.348
MISSOURIRURAL0.2740.269
MISSOURIURBAN0.2760.282
MISSISSIPPIRURAL0.2610.261
MISSISSIPPIURBAN0.1980.209
MONTANARURAL0.4680.455
MONTANAURBAN0.4660.439
NORTH CAROLINARURAL0.2720.272
NORTH CAROLINAURBAN0.2880.292
NORTH DAKOTARURAL0.3490.369
NORTH DAKOTAURBAN0.3520.354
NEBRASKARURAL0.3460.345
NEBRASKAURBAN0.2640.283
NEW HAMPSHIRERURAL0.3500.350
NEW HAMPSHIREURBAN0.2880.296
NEW JERSEYURBAN0.2510.257
NEW MEXICORURAL0.2640.263
NEW MEXICOURBAN0.3370.328
NEVADARURAL0.3110.312
NEVADAURBAN0.1920.192
NEW YORKRURAL0.4210.412
Start Printed Page 35294
NEW YORKURBAN0.3850.388
OHIORURAL0.3480.353
OHIOURBAN0.2540.258
OKLAHOMARURAL0.2750.278
OKLAHOMAURBAN0.2380.238
OREGONRURAL0.3110.318
OREGONURBAN0.3530.374
PENNSYLVANIARURAL0.2820.284
PENNSYLVANIAURBAN0.2240.232
PUERTO RICOURBAN0.4870.519
RHODE ISLANDURBAN0.2930.294
SOUTH CAROLINARURAL0.2430.242
SOUTH CAROLINAURBAN0.2450.240
SOUTH DAKOTARURAL0.3280.336
SOUTH DAKOTAURBAN0.2630.267
TENNESSEERURAL0.2370.244
TENNESSEEURBAN0.2200.221
TEXASRURAL0.2560.257
TEXASURBAN0.2300.238
UTAHRURAL0.4060.413
UTAHURBAN0.4090.430
VIRGINIARURAL0.2530.257
VIRGINIAURBAN0.2630.266
VERMONTRURAL0.4120.406
VERMONTURBAN0.4220.422
WASHINGTONRURAL0.3540.349
WASHINGTONURBAN0.3360.342
WISCONSINRURAL0.4020.399
WISCONSINURBAN0.3340.346
WEST VIRGINIARURAL0.2920.293
WEST VIRGINIAURBAN0.3480.349
WYOMINGRURAL0.4130.418
WYOMINGURBAN0.3150.331

E. Proposed OPPS Payment to Certain Rural and Other Hospitals

1. Hold Harmless Transitional Payment Changes Made by Public Law 110-275 (MIPPA)

When the OPPS was implemented, every provider was eligible to receive an additional payment adjustment (called either transitional corridor payments or transitional outpatient payments (TOPs)) if the payments it received for covered OPD services under the OPPS were less than the payments it would have received for the same services under the prior reasonable cost-based system (referred to as the pre-BBA amount). Section 1833(t)(7) of the Act provides that the transitional corridor payments are temporary payments for most providers and were intended to ease their transition from the prior reasonable cost-based payment system to the OPPS system. There are two exceptions to this provision, cancer hospitals and children's hospitals, 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 Public Law 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 SCHs located in rural areas for services furnished during the period that began with the provider's first cost reporting period beginning on or after January 1, 2004, and 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 Public Law 108-173, for rural hospitals having 100 or fewer beds and SCHs located in rural areas expired on December 31, 2005.

Section 5105 of Public Law 109-171 reinstituted the TOPs for covered OPD services furnished on or after January 1, 2006, and before January 1, 2009, for rural hospitals having 100 or fewer beds that are not SCHs. When the OPPS payment was less than the provider's pre-BBA amount, the amount of payment was 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 Public Law 109-171 through Transmittal 877, issued on February 24, 2006. In the Transmittal, 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. In the CY 2007 OPPS/ASC final rule with comment period (71 FR 68010), we stated that EACHs were not eligible for TOPs under Public Law 109-171. However, we stated they were eligible for the adjustment for rural SCHs. In the CY 2007 OPPS/ASC final rule with comment period (71 FR 68010 and 68228), we updated § 419.70(d) of our regulations to reflect the requirements of Public Law 109-171.Start Printed Page 35295

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

For CY 2009, we revised §§ 419.70(d)(2) and (d)(4) and added a new paragraph (d)(5) to incorporate the provisions of section 147 of Public Law 110-275. In addition, we made other technical changes to § 419.70(d)(2) to more precisely capture our existing policy and to correct an inaccurate cross-reference. We also made technical corrections to the cross-references in paragraphs (e), (g), and (i) of § 419.70. For CY 2010, we are proposing to make a technical correction to the heading of § 419.70(d)(5) to correctly identify the policy as described in the subsequent regulation text. The paragraph heading should indicate that the adjustment applies to small SCHs, rather than to rural SCHs.

Effective for services provided on or after January 1, 2010, rural hospitals and SCHs (including EACHs) having 100 or fewer beds will no longer be eligible for hold harmless TOPs, in accordance with section 147 of Public Law 110-275.

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

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

This adjustment for rural SCHs is budget neutral and applied before calculating 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 may review the adjustment in the future and, if appropriate, would revise the adjustment. We provided the same 7.1 percent adjustment to rural SCHs, including EACHs, again in CY 2008 and CY 2009. Further, in the CY 2009 OPPS/ASC final rule with comment period (73 FR 68590), we updated the regulations at § 419.43(g)(4) to specify, in general terms, that items paid at charges adjusted to costs by application of a hospital-specific CCR are excluded from the 7.1 percent payment adjustment.

For the CY 2010 OPPS, we are proposing to continue our policy of a budget neutral 7.1 percent payment adjustment for rural SCHs, including EACHs, for all services and procedures paid under the OPPS, excluding separately payable drugs and biologicals, devices paid under the pass-through payment policy, and items paid at charges reduced to costs. We 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.

F. Proposed Hospital Outpatient Outlier Payments

1. Background

Currently, the OPPS pays outlier payments on a service-by-service basis. For CY 2009, 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 $1,800 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 the cost of a service meets both of these conditions, the multiple threshold and the fixed-dollar threshold, the outlier payment is calculated as 50 percent of the amount by which the cost of furnishing the service exceeds 1.75 times the APC payment rate. Before CY 2009, this outlier payment had historically been considered a final payment by longstanding OPPS policy. We implemented a reconciliation process similar to the IPPS outlier reconciliation process for cost reports with cost reporting periods beginning on or after January 1, 2009 (73 FR 68594 through 68599).

It has been our policy for the past several years to report the actual amount of outlier payments as a percent of total spending in the claims being used to model the proposed OPPS. We previously estimated that CY 2008 outlier payments were approximately 0.73 percent of the total CY 2008 OPPS payments (73 FR 68592). Our current estimate of total outlier payments as a percent of total CY 2008 OPPS payment, using available CY 2008 claims and the revised OPPS expenditure estimate, is approximately 1.2 percent of the total aggregated OPPS payments. Therefore, for CY 2008, we estimate that we paid approximately 0.2 percent more than the CY 2008 outlier target of 1.0 percent of total aggregated OPPS payments. We will update our estimate of CY 2008 outlier spending in the CY 2010 OPPS/ASC final rule with comment period.

As explained in the CY 2009 OPPS/ASC final rule with comment period (73 FR 68594), we set our projected target for aggregate outlier payments at 1.0 percent of the aggregate total payments under the OPPS for CY 2009. The outlier thresholds were set so that estimated CY 2009 aggregate outlier payments would equal 1.0 percent of Start Printed Page 35296the total aggregated payments under the OPPS. Using the same set of CY 2008 claims and CY 2009 payment rates, we currently estimate that the aggregate outlier payments for CY 2009 would be approximately 1.08 percent of the total CY 2009 OPPS payments. The difference between 1.0 percent and 1.08 percent is reflected in the regulatory impact analysis in section XXI.B. of this proposed rule. We note that we provide estimated CY 2010 outlier payments for hospitals and CMHCs with claims included in the claims data that we used to model impacts in the Hospital-Specific Impacts—Provider-Specific Data file on the CMS Web site at: http://www.cms.hhs.gov/​HospitalOutpatientPPS/​.

2. Proposed Outlier Calculation

For CY 2010, we are proposing to continue our policy of estimating outlier payments to be 1.0 percent of the estimated aggregate total payments under the OPPS for outlier payments. We are proposing that a portion of that 1.0 percent, specifically 0.02 percent, would be allocated to CMHCs for PHP outlier payments. This is the amount of estimated outlier payments that would result from the proposed CMHC outlier threshold as a proportion of total estimated outlier payments. As discussed in section X.C. of this proposed rule, for CMHCs, we are proposing that if a CMHC's cost for partial hospitalization services, paid under either APC 0172 (Level I Partial Hospitalization (3 services)) or APC 0173 (Level II Partial Hospitalization (4 or more services)), exceeds 3.40 times the payment for APC 0173, the outlier payment would be calculated as 50 percent of the amount by which the cost exceeds 3.40 times the APC 0173 payment rate. For further discussion of CMHC outlier payments, we refer readers to section X.C. of this proposed rule. To ensure that the estimated CY 2010 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 a $2,225 fixed-dollar threshold. This proposed threshold reflects the methodology discussed below in this section, as well as the proposed APC recalibration for CY 2010.

We calculated the fixed-dollar threshold for this proposed rule using largely the same methodology as we did in CY 2009 (73 FR 41462). For purposes of estimating outlier payments for this proposed rule, we used the CCRs available in the April 2009 update to the Outpatient Provider Specific File (OPSF). The OPSF contains provider-specific data, such as the most current CCR, which are maintained by the Medicare contractors and used by the OPPS Pricer to pay claims. The claims that we use to model each OPPS update lag by 2 years. For this proposed rule, we used CY 2008 claims to model the CY 2010 OPPS. In order to estimate the CY 2010 hospital outlier payments for this proposed rule, we inflated the charges on the CY 2008 claims using the same inflation factor of 1.1511 that we used to estimate the IPPS fixed-dollar outlier threshold for the FY 2010 IPPS/LTCH PPS proposed rule (74 FR 24245). For 1 year, the inflation factor we used is 1.0729. The methodology for determining this charge inflation factor was discussed in the FY 2010 IPPS/LTCH PPS proposed rule (74 FR 24245). 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 could 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 2010 IPPS outlier calculation to the CCRs used to simulate the CY 2010 OPPS outlier payments that determine the fixed-dollar threshold. Specifically, for CY 2010, we are proposing to apply an adjustment of 0.9840 to the CCRs that were in the April 2009 OPSF to trend them forward from CY 2009 to CY 2010. The methodology for calculating this adjustment is discussed in the FY 2010 IPPS/LTCH PPS proposed rule (74 FR 24245 through 24247).

Therefore, to model hospital outlier payments for this proposed rule, we applied the overall CCRs from the April 2009 OPSF file after adjustment (using the proposed CCR inflation adjustment factor of 0.9840 to approximate CY 2010 CCRs) to charges on CY 2008 claims that were adjusted (using the proposed charge inflation factor of 1.1511 to approximate CY 2010 charges). We simulated aggregated CY 2010 hospital outlier payments using these costs for several different fixed-dollar thresholds, holding the 1.75 multiple threshold constant and assuming that outlier payment would continue to be made at 50 percent of the amount by which the cost of furnishing the service would exceed 1.75 times the APC payment amount, until the total outlier payments equaled 1.0 percent of aggregated estimated total CY 2010 OPPS payments. We estimate that a proposed fixed-dollar threshold of $2,225, 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 proposed fixed-dollar $2,225 threshold are met. For CMHCs, if a CMHC's cost for partial hospitalization services, paid under either APC 0172 or APC 0173, exceeds 3.40 times the payment for APC 0173, the outlier payment would be calculated as 50 percent of the amount by which the cost exceeds 3.40 times the APC 0173 payment rate.

Section 1833(t)(17)(A) of the Act, which applies to hospitals as defined under section 1886(d)(1)(B) of the Act, requires that hospitals that fail to report data required for the quality measures selected by the Secretary, in the form and manner required by the Secretary under 1833(t)(17)(B) of the Act, incur a 2.0 percentage point reduction to their OPD fee schedule increase factor, that is, the annual payment update factor. The application of a reduced OPD fee schedule increase factor results in reduced national unadjusted payment rates that will apply to certain outpatient items and services furnished by hospitals that are required to report outpatient quality data and that fail to meet the HOP QDRP requirements. For hospitals that fail to meet the HOP QDRP requirements, we are proposing to continue our policy that we implemented in CY 2009 that the hospitals' costs would be compared to the reduced payments for purposes of outlier eligibility and payment calculation. For more information on the HOP QDRP, we refer readers to section XVI. of this proposed rule.

3. Outlier Reconciliation

In the CY 2009 OPPS/ASC final rule with comment period (73 CFR 68599), we adopted as final policy a process to reconcile hospital or CMHC outlier payments at cost report settlement for services furnished during cost reporting periods beginning in CY 2009. OPPS outlier reconciliation ensures accurate Start Printed Page 35297outlier payments for those facilities whose CCRs fluctuate significantly relative to the CCRs of other facilities, and who receive a significant amount of outlier payments. OPPS outlier reconciliation thresholds are provided in section 10.7.2.1 of Chapter 4 of the Medicare Claims Processing Manual (Pub. 100-4), reevaluated annually, and modified if necessary. When the cost report is settled, reconciliation of outlier payments will be based on the overall CCR, calculated as 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 outlier payments ensures that the outlier payments made are appropriate and that final outlier payments reflect the most accurate cost data. In the CY 2009 OPPS/ASC finale rule with comment period (73 FR 68599), we also finalized a proposal to adjust the amount of final outlier payments determined during reconciliation for the time value of money. The OPPS outlier reconciliation process will require recalculating outlier payments for individual claims in order to accurately determine the net effect of a change in an overall CCR on a facility's total outlier payments. For cost reporting periods beginning in CY 2009, Medicare contractors will begin to identify cost reports that require outlier reconciliation as a component of cost report settlement. At this time, CMS continues to develop a method for reexamining claims to calculate the change in total outlier payments in order to reconcile outlier payments for these cost reports.

As under the IPPS, we do not adjust the fixed-dollar threshold or amount of total OPPS payment set aside for outlier payments for reconciliation activity. The predictability of the fixed-dollar threshold is an important component of a prospective payment system. We do not adjust the prospectively set outlier threshold for the amount of outlier payment reconciled at cost report settlement because such action would be contrary to the prospective nature of the system. Our outlier threshold calculation assumes that CCRs accurately estimate hospital costs based on the information available to us at the time we set the prospective fixed-dollar outlier threshold. For these reasons, we are not incorporating any assumptions about the effects of reconciliation into our calculation of the proposed OPPS fixed-dollar outlier threshold.

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

The basic methodology for determining prospective payment rates for HOPD services under the OPPS is set forth in existing regulations at 42 CFR Part 419, subparts C and D. 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 proposed 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 2010 scaled weight for the APC by the proposed CY 2010 conversion factor.

We note that section 1833(t)(17) of the Act, which applies to hospitals as defined under section 1886(d)(1)(B) of the Act, requires that hospitals that fail to submit data required to be submitted on quality measures selected by the Secretary, in the form and manner and at a time specified by the Secretary, receive 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 apply to certain outpatient items and services provided by hospitals that are required to report outpatient quality data and that fail to meet the Hospital Outpatient Quality Data Reporting Program (HOP QDRP) requirements. For further discussion of the proposed payment reduction for hospitals that fail to meet the requirements of the HOP QDRP, we refer readers to section XVI.D. of this proposed rule.

We demonstrate in the steps below how to determine the APC payments that would be made in a calendar year under the OPPS to a hospital that fulfills the HOP QDRP requirements and to a hospital that fails to meet the HOP QDRP requirements for a service that has any of the following status indicator assignments: “P,” “Q1,” “Q2,” “Q3,” “R,” “S,” “T,” “U,” “V,” or “X” (as defined in Addendum D1 to this 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 payment amount that they 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 the requirements of the HOP QDRP as the “full” national unadjusted payment rate. We refer to the national unadjusted payment rate for hospitals that fail to meet the requirements of the HOP QDRP as the “reduced” national unadjusted payment rate. The reduced national unadjusted payment rate is calculated by multiplying the reporting ratio of 0.98 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 requirements in order to receive the full CY 2010 OPPS increase factor.

Step 1. Calculate 60 percent (the labor-related portion) of the proposed national unadjusted payment rate. Since the initial implementation of the OPPS, we have used 60 percent to represent our estimate of that portion of costs attributable, on average, to labor. We refer readers to the April 7, 2000 OPPS final rule with comment period (65 FR 18496 through 18497) for a detailed discussion of how we derived this percentage. We confirmed that this labor-related share for hospital outpatient services is 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 and identifies the labor-related portion of a specific payment rate for a specific service.

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

X = .60 * (national unadjusted payment rate)

Step 2. Determine the wage index area in which the hospital is located and identify the wage index level that applies to the specific hospital. The wage index values assigned to each area reflect the geographic statistical areas (which are based upon OMB standards) to which hospitals are assigned for FY 2010 under the IPPS, reclassifications through the MGCRB, section 1886(d)(8)(B) of the Act, as well as “Lugar” reclassifications under section Start Printed Page 352981886(d)(8)(B) of the Act. We note that the reclassifications of hospitals under section 508 of Public Law 108-173, as extended by section 124 of Public Law 110-275, will expire on September 30, 2009, and will not be applicable under the IPPS for FY 2010. Therefore, these reclassifications will not apply to the CY 2010 OPPS. For further discussion of the proposed changes to the FY 2010 IPPS wage indices, as applied to the CY 2010 OPPS, we refer readers to section II.C. of this proposed rule. The proposed wage index values include the occupational mix adjustment described in section II.C. of this proposed rule that was developed for the FY 2010 IPPS proposed payment rates appearing in the Federal Register on May 22, 2009 (74 FR 24140 through 24144).

Step 3. Adjust the wage index of hospitals located in certain qualifying counties that have a relatively high percentage of hospital employees who reside in the county, but who work in a different county with a higher wage index, in accordance with section 505 of Public Law 108-173. Addendum L to this proposed rule contains the qualifying counties and the proposed wage index increase developed for the FY 2010 IPPS published in the FY 2010 IPPS/LTCH PPS proposed rule as Table 4J (74 FR 24446 through24462). 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 and adjusts the labor-related portion of the national payment rate for the specific service by the wage index.

Xais the labor-related portion of the national unadjusted payment rate (wage adjusted).

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

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

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

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

Y = .40 * (national unadjusted payment rate)

Adjusted Medicare Payment = Y + Xa

Step 6. If a provider is a SCH, set forth 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 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 proposed full and reduced national unadjusted payment rates that would 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 Wayne, New Jersey that is assigned to CBSA 35644. This provider bills one service that is assigned to APC 0019 (Level I Excision/Biopsy). The proposed CY 2010 full national unadjusted payment rate for APC 0019 is $292.33. The proposed reduced national unadjusted payment rate for a hospital that fails to meet the HOP QDRP requirements is $286.48. This reduced rate is calculated by multiplying the reporting ratio of 0.98 by the full unadjusted payment rate for APC 0019.

The proposed FY 2010 wage index for a provider located in CBSA 35644 in New Jersey is 1.2986. The labor portion of the full national unadjusted payment is $227.77 (.60 * $292.33 *1.2986). The labor portion of the reduced national unadjusted payment is $223.21 (.60 * $286.48 *1.2986). The nonlabor portion of the full national unadjusted payment is $116.93 (.40 * $292.33). The nonlabor portion of the reduced national unadjusted payment is $114.59 (.40 * $286.48). The sum of the labor and nonlabor portions of the full national adjusted payment is $344.70 ($227.77 + $116.93). The sum of the reduced national adjusted payment is $337.80 ($223.21 + $114.59).

H. Proposed Beneficiary Copayments

1. Background

Section 1833(t)(3)(B) of the Act requires the Secretary to set rules for determining the unadjusted copayment amounts to be paid by beneficiaries for covered OPD services. Section 1833(t)(8)(C)(ii) of the Act specifies that the Secretary must reduce the national unadjusted copayment amount for a covered OPD service (or group of such services) furnished in a year in a manner so that the effective copayment rate (determined on a national unadjusted basis) for that service in the year does not exceed a specified percentage. As specified in section 1833(t)(8)(C)(ii)(V) of the Act, for all services paid under the OPPS in CY 2010, 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.

2. Proposed Copayment Policy

For CY 2010, we are proposing to determine copayment amounts for new and revised APCs using the same methodology that we implemented beginning in CY 2004. (We refer readers to the November 7, 2003 OPPS final rule with comment period (68 FR 63458)). In addition, we are proposing to use the same standard rounding principles that we have historically used in instances where the application of our standard copayment methodology would result in a copayment amount that is less than 20 percent and cannot be rounded, under standard rounding principles, to 20 percent. (We refer readers to the CY 2008 OPPS/ASC final rule with comment period (72 FR 66687) in which we discuss our rationale for applying these rounding principles.) The national unadjusted copayment amounts for services payable under the OPPS that would be effective January 1, 2010, are shown in Addenda A and B to this proposed rule. As discussed in section XVI.D. of this proposed rule, we are proposing that for CY 2010, 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.Start Printed Page 35299

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

Individuals interested in calculating the national copayment liability for a Medicare beneficiary for a given service provided by a hospital that met or failed to meet its HOP QDRP 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, $64.13 is 22 percent of the full national unadjusted payment rate of $292.33.

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

B is the beneficiary payment percentage.

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

Step 2. Calculate the appropriate wage-adjusted payment rate for the APC for the provider in question, as indicated in section II.G. of this proposed rule. Calculate the rural adjustment for eligible providers as indicated in Step 6 under 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 and applies the beneficiary percentage to the adjusted payment rate for a service calculated under section II.G. of this proposed rule, with and without the rural adjustment, to calculate the adjusted beneficiary copayment for a given service.

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

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

Step 4. For a hospital that failed to meet its HOP QDRP requirements, multiply the copayment calculated in Step 3 by the reporting ratio of 0.98.

The proposed unadjusted copayments for services payable under the OPPS that would be effective January 1, 2010 are shown in Addenda A and B to this proposed rule. We 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 CPT and Level II HCPCS Codes

CPT and Level II HCPCS codes are used to report procedures, services, items, and supplies under the hospital OPPS. Specifically, CMS recognizes the following codes on OPPS claims: (1) Category I CPT codes, which describe medical services and procedures; (2) Category III CPT codes, which describe new and emerging technologies, services, and procedures; and (3) Level II HCPCS codes, which are used primarily to identify products, supplies, temporary procedures, and services not described by CPT codes. CPT codes are established by the AMA and the Level II HCPCS codes are established by the CMS HCPCS Workgroup. These codes are updated and changed throughout the year. CPT and HCPCS code changes that affect the OPPS are published both through the annual rulemaking cycle and through the OPPS quarterly update Change Requests (CRs). CMS releases new Level II HCPCS codes to the public or recognizes the release of new CPT codes by the AMA and makes these codes effective (that is, the codes can be reported on Medicare claims) outside of the formal rulemaking process via OPPS quarterly update CRs. This quarterly process offers hospitals access to codes that may more accurately describe items or services furnished and/or provides payment or more accurate payment for these items or services in a more timely manner than if CMS waited for the annual rulemaking process. We solicit comments on these new codes and finalize our proposals related to these codes through our annual rulemaking process. In Table 13 below, we summarize our proposed process for updating codes through our OPPS quarterly update CRs, seeking public comment, and finalizing their treatment under the OPPS.

Table 13—Comment Timeframe for New or Revised HCPCS CODES

OPPS quarterly update CRType of codeEffective dateComments soughtWhen finalized
April 1, 2009Level II HCPCS CodesApril 1, 2009CY 2010 OPPS/ASC proposed ruleCY 2010 OPPS/ASC final rule with comment period.
July 1, 2009Level II HCPCS CodesJuly 1, 2009CY 2010 OPPS/ASC proposed ruleCY 2010 OPPS/ASC final rule with comment period.
Category I (certain vaccine codes) and III CPT CodesJuly 1, 2009CY 2010 OPPS/ASC proposed ruleCY 2010 OPPS/ASC final rule with comment period.
October 1, 2009Level II HCPCS CodesOctober 1, 2009CY 2010 OPPS/ASC final rule with comment periodCY 2011 OPPS/ASC final rule with comment period.
January 1, 2010Level II HCPCS CodesJanuary 1, 2010CY 2010 OPPS/ASC final rule with Comment PeriodCY 2011 OPPS/ASC final rule with comment period.
Category I and III CPT CodesJanuary 1, 2010CY 2010 OPPS/ASC final rule with comment periodCY 2011 OPPS/ASC final rule with comment period.

This process is discussed in detail below and we have separated our discussion into two sections based on whether we are proposing to solicit public comments in this CY 2010 proposed rule on a specific group of the CPT and Level II HCPCS codes or whether we are proposing to solicit public comments on another specific group of the codes in the CY 2010 final rule with comment period. We note that we sought public comments in the CY 2009 OPPS/ASC final rule with comment period on the new CPT and Level II HCPCS codes that were effective January 1, 2009. Earlier, the AMA had released the new Category I vaccine codes and Category III CPT codes effective January 1, 2009, on the AMA Web site in July 2009. The new Level II HCPCS codes and Category I and III CPT codes were included in our January 2009 OPPS quarterly update CR. We also sought public comments in the CY2009 OPPS/ASC final rule with comment period on the new Level II HCPCS codes effective October 1, 2008. Start Printed Page 35300These new codes with effective dates of October 1, 2008, or January 1, 2009, were flagged with comment indicator “NI” (New code, interim APC assignment; comments will be accepted on the interim APC assignment for the new code) in Addendum B to the CY 2009 OPPS/ASC final rule with comment period to indicate that we were assigning them an interim payment status and an APC and payment rate, if applicable, which were subject to public comment following publication of the CY2009 OPPS/ASC final rule with comment period. We will respond to public comments and finalize our proposed OPPS treatment of these codes in the CY 2010 OPPS/ASC final rule with comment period.

1. Proposed Treatment of New Level II HCPCS Codes and Category I CPT Vaccine Codes and Category III CPT Codes for Which We Are Soliciting Public Comments in this Proposed Rule

Effective April 1 and July 1 of CY 2009, we made effective a total of 13 new Level II HCPCS codes and 5 new Category I vaccine and Category III CPT codes that were not addressed in the CY 2009 OPPS/ASC final rule with comment period that updated the OPPS. Thirteen new Level II HCPCS codes were made effective for the April and July 2009 updates, and 13 Level II HCPCS codes were newly recognized for separate payment. Although one of the new Level II HCPCS codes is not payable under the OPPS, we changed the OPPS status indicator for one existing Level II HCPCS code from the interim status indicator designated in the CY 2009 OPPS/ASC final rule with comment period.

Through the April 2009 OPPS quarterly update CR (Transmittal 1702, Change Request 6416, dated March 13, 2009), we allowed separate payment for a total of 2 additional Level II HCPCS codes, specifically existing HCPCS code C9247 (Iobenguane, I-123, diagnostic, per study dose, up to 10 millicuries) and new HCPCS code C9249 (Injection, certolizumab pegol, 1 mg). HCPCS code C9249, which received separate payment as a result of its pass-through status under the OPPS, was made effective on April 1, 2009. HCPCS code C9247 was released January 1, 2009, through the January 2009 OPPS quarterly update CR (Transmittal 1657, Change Request 6320, dated December 31, 2008). From January 1, 2009, through March 31, 2009, because HCPCS code C9247 is a nonpass-through diagnostic radiopharmaceutical, and nonpass-through diagnostic radiopharmaceutical are always packaged under the CY 2009 OPPS, it was packaged under the OPPS and assigned status indicator “N” (Items and Services Packaged into APC Rates. Paid under OPPS; payment is packaged into payment for other services, including outliers). Therefore, there was no separate APC payment for HCPCS code C9247 from January 1, 2009, through March 31, 2009. Effective April 1, 2009, HCPCS code C9247 was allowed separate pass-through payment and its status indicator was changed from “N” to “G” (Pass-Through Drugs and Biologicals. Paid under OPPS; separate APC payment includes pass-through amount).

Through the July 2009 OPPS quarterly update CR (Transmittal 107, Change Request 6492, dated May 22, 2009) which included HCPCS codes that were made effective July 1, 2009, we allowed separate payment for a total of 11 new Level II HCPCS codes for pass-through drugs and biologicals and new nonpass-through drugs and nonimplantable biologicals. Specifically, we provided separate payment for HCPCS codes C9250 (Human plasma fibrin sealant, vapor-heated, solvent-detergent (Artiss), 2ml); C9251 (Injection, C1 esterase inhibitor (human), 10 units); C9252 (Injection, plerixafor, 1 mg); C9253 (Injection, temozolomide, 1 mg); C9360 (Dermal substitute, native, non-denatured collagen, neonatal bovine origin (SurgiMend Collagen Matrix), per 0.5 square centimeters); C9361 (Collagen matrix nerve wrap (NeuroMend Collagen Nerve Wrap), per 0.5 centimeter length); C9362 (Porous purified collagen matrix bone void filler (Integra Mozaik Osteoconductive Scaffold Strip), per 0.5 cc); C9363 (Skin substitute, Integra Meshed Bilayer Wound Matrix, per square centimeter); C9364 (Porcine implant, Permacol, per square centimeter); Q2023 (Injection, factor viii (antihemophilic factor, recombinant) (Xyntha), per i.u.); and Q4116 (Skin substitute, Alloderm, per square centimeter).

Although HCPCS code Q4115 (Skin substitute, Alloskin, per square centimeter) was initially assigned status indicator “K” (Nonpass-Through Drugs and Biologicals) for July 2009 to signify its separate payment, we are correcting its status indicator assignment to “M” (Items and Services Not Billable to the Fiscal Intermediary/MAC) retroactive to July 2009 because no July 2009 pricing information is available for the ASP payment methodology that applies to payment of new HCPCS codes for drugs and biologicals. If ASP information becomes available for a later quarter in CY 2009 or for a quarter in CY 2010, we would reassign HCPCS code Q4115 status indicator “K” for that quarter and pay separately for the new biological HCPCS code at ASP+4 percent, consistent with the final CY 2009 policy and the proposed CY 2010 policy for payment of new drug and biological HCPCS codes.

For CY 2010, we are proposing to continue our established policy of recognizing Category I CPT vaccine codes for which FDA approval is imminent and Category III CPT codes that the AMA releases in January of each year for implementation in July through the OPPS quarterly update process. Under the OPPS, Category I vaccine codes and Category III CPT codes that are released on the AMA Web site in January are made effective in July of the same year through the July OPPS quarterly update CR, consistent with the AMA's implementation date for the codes. Through the July 2009 OPPS quarterly update CR, we allowed separate payment for 3 of the 5 new Category I vaccine and Category III CPT Codes effective July 1, 2009. Specifically, as displayed in Table 16, we allowed payment for CPT codes 0199T (Physiologic recording of tremor using accelerometer(s) and gyroscope(s), (including frequency and amplitude) including interpretation and report); 0200T (Percutaneous sacral augmentation (sacroplasty), unilateral injection(s), including the use of a balloon or mechanical device (if utilized), one or more needles); and 0201T (Percutaneous sacral augmentation (sacroplasty), bilateral injections, including the use of a balloon or mechanical device (if utilized), two or more needles). We note that CPT code 0202T (Posterior vertebral joint(s) arthroplasty (e.g. , facet joint[s] replacement) including facetectomy, laminectomy, foraminotomy and vertebral column fixation, with or without injection of bone cement, including fluoroscopy, single level, lumbar spine) was assigned status indicator “C” (Inpatient procedures. Not paid under OPPS. Admit patient. Bill as inpatient.) because we believe that this procedure may only be safely performed on Medicare beneficiaries in the hospital inpatient setting. In addition, CPT code 90670 (Pneumococcal conjugate vaccine, 13 valent, for intramuscular use), a Category I CPT vaccine code, was assigned status indicator “E” (Items, Codes, and Services * * * Not paid by Medicare when submitted on outpatient claims (any outpatient bill type)) because the drug has not yet been approved by the FDA for marketing.

In this proposed rule, we are soliciting public comments on the proposed status indicators and the Start Printed Page 35301proposed APC assignments and payment rates, if applicable, for the 14 Level II HCPCS codes and the 5 Category I vaccine and Category III CPT codes that were newly recognized or had a change in OPPS status indicator in April or July 2009 through the respective OPPS quarterly update CRs. These codes are listed in Tables 14, 15, and 16 of this proposed rule. We are proposing to finalize their status indicators and their APC assignments and payment rates, if applicable, in the CY 2010 OPPS/ASC final rule with comment period. Because the July 2009 OPPS quarterly update CR was issued close to the publication of this proposed rule, the Level II HCPCS codes and the Category I vaccine and Category III CPT codes implemented through the July 2009 OPPS quarterly update CR could not be included in Addendum B to this proposed rule, but these codes are listed in Tables 15 and 16, respectively. We are proposing to incorporate them into Addendum B to the CY 2010 OPPS/ASC final rule with comment period, which is consistent with our annual OPPS update policy. The Level II HCPCS codes implemented or modified through the April 2009 OPPS update CR and displayed in Table 14 are included in Addendum B to this proposed rule, where their proposed CY 2010 payment rates also are shown.

Table 14—Level II HCPCS Codes With a Change in OPPS Status Indicator or Newly Implemented in April 2009

CY 2009 HCPCS CodeCY 2009 Long DescriptorProposed CY 2010 Status IndicatorProposed CY 2010 APC
C9247Iobenguane, I-123, diagnostic, per study dose, up to 10 millicuriesG9247
C9249Injection, certolizumab pegol, 1 mgG9249

Table 15—New Level II HCPCS Codes Implemented in July 2009

CY 2009 HCPCS CodeCY 2009 Long DescriptorProposed CY 2010 Status IndicatorProposed CY 2010 APCProposed CY 2010 Payment Rate*
C9250Human plasma fibrin sealant, vapor-heated, solvent-detergent (Artiss), 2mlG9250$155.00
C9251Injection, C1 esterase inhibitor (human), 10 unitsG925141.34
C9252Injection, plerixafor, 1 mgG9252276.04
C9253Injection, temozolomide, 1 mgG92535.00
C9360Dermal substitute, native, non-denatured collagen, neonatal bovine origin (SurgiMend Collagen Matrix), per 0.5 square centimetersG936014.31
C9361Collagen matrix nerve wrap (NeuroMend Collagen Nerve Wrap), per 0.5 centimeter lengthG9361124.55
C9362Porous purified collagen matrix bone void filler (Integra Mozaik Osteoconductive Scaffold Strip), per 0.5 ccG936256.71
C9363Skin substitute, Integra Meshed Bilayer Wound Matrix, per square centimeterG936311.13
C9364Porcine implant, Permacol, per square centimeterG936418.57
Q2023Injection, factor viii (antihemophilic factor, recombinant) (Xyntha), per i.uK12681.15
Q4115Skin substitute, Alloskin, per square centimeterMNot ApplicableNot Applicable
Q4116Skin substitute, Alloderm, per square centimeterK127032.42
*Based on July 2009 ASP information.

Table 16—Category I Vaccine and Category III CPT Codes Implemented in July 2009

CY 2009 HCPCS codeCY 2009 long descriptorProposed CY 2010 status indicatorProposed CY 2010 APCProposed CY 2010 payment rate
0199TPhysiologic recording of tremor using accelerometer(s) and gyroscope(s), (including frequency and amplitude) including interpretation and reportS0215$40.79
0200TPercutaneous sacral augmentation (sacroplasty), unilateral injection(s), including the use of a balloon or mechanical device (if utilized), one or more needlesT00491,489.69
0201TPercutaneous sacral augmentation (sacroplasty), bilateral injections, including the use of a balloon or mechanical device (if utilized), two or more needlesT00502,134.51
0202TPosterior vertebral joint(s) arthroplasty (e.g., facet joint[s] replacement) including facetectomy, laminectomy, foraminotomy and vertebral column fixation, with or without injection of bone cement, including fluoroscopy, single level, lumbar spineCNot applicableNot applicable
90670Pneumococcal conjugate vaccine, 13 valent, for intramuscular useENot applicableNot applicable
Start Printed Page 35302

2. Proposed Process for New Level II HCPCS Codes and Category I and III CPT Codes for Which We Will Be Soliciting Public Comments in the CY 2010 OPPS/ASC Final Rule With Comment Period

As has been our practice in the past, we incorporate those new Category I and III CPT codes and new Level II HCPCS codes that are effective January 1 in the final rule with comment period updating the OPPS for the following calendar year. These codes are released to the public via the CMS HCPCS (for Level II HCPCS codes) and AMA Web sites (for CPT codes), and also through the January OPPS quarterly update CRs. In the past, we also have released new Level II HCPCS codes that are effective October 1 through the October OPPS quarterly update CRs and incorporated these new codes in the final rule with comment period updating the OPPS for the following calendar year. All of 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 and the APC assignment, and payment rate, if applicable, for all such codes flagged with comment indicator “NI” are open to public comment in the OPPS/ASC final rule with comment period, and we respond to these comments in the final rule with comment period for the next calendar year's OPPS/ASC update. We are proposing to continue this process for CY 2010. Specifically, for CY 2010, we are proposing to include in Addendum B to the CY 2010 OPPS/ASC final rule with comment period the new Category I and III CPT codes effective January 1, 2010 (including those Category I vaccine and Category III CPT codes that were released by the AMA in July 2009) that would be incorporated in the January 2010 OPPS quarterly update CR and the new Level II HCPCS codes, effective October 1, 2009 or January 1, 2010, that would be released by CMS in its October 2009 and January 2010 OPPS quarterly update CRs. These codes would be flagged with comment indicator “NI” in Addendum B to the CY 2010 OPPS/ASC final rule with comment period to indicate that we have assigned them an interim OPPS payment status. Their status indicators and their APC assignments and payment rates, if applicable, would be open to public comment in the CY 2010 OPPS/ASC final rule with comment period and would be finalized in the CY 2011 OPPS/ASC final rule with comment period.

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 outpatient department services. Section 1833(t)(2)(B) of the Act provides that the Secretary may establish groups of covered outpatient department services within this classification system, so that services classified within each group are comparable clinically and with respect to the use of resources (and so that an implantable item is classified to the group that includes the service to which the item relates). 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 (72 FR 66650), 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 our CY 2009 OPPS policy, we provide composite APC payment for certain extended assessment and management services, low dose rate (LDR) prostate brachytherapy, cardiac electrophysiologic evaluation and ablation, mental health services, and 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 not less often than annually and revise the groups, relative payment weights, and the wage and other adjustments under the OPPS to take into account changes in medical practice, changes in technology, the addition of new services, new cost data, and other relevant information and factors. Section 1833(t)(9)(A) of the Act, as amended by section 201(h) of the BBRA, also requires the Secretary to consult with an outside panel of experts to review (and advise the Secretary concerning) the clinical integrity of the APC groups and the relative payment weights (the APC Panel recommendations for specific services for the CY 2010 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 (or mean cost, if so elected) for an item or service within the same group (referred to as the “2 times rule”). We use the median cost Start Printed Page 35303of the item or service in implementing this provision. Section 1833(t)(2) of the Act authorizes the Secretary to make exceptions to the 2 times rule in unusual cases, such as low-volume items and services (but the Secretary may not make such an exception in the case of a drug or biological that has been designated as an orphan drug under section 526 of the Federal Food, Drug, and Cosmetic Act).

2. Application of the 2 Times Rule

In accordance with section 1833(t)(2) of the Act and § 419.31 of the regulations, we annually review the items and services within an APC group to determine, with respect to comparability of the use of resources, if the 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. 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 for CY 2010.

During the APC Panel's February 2009 meeting, we presented median cost and utilization data for services furnished during the period of January 1, 2008 through September 30, 2008, 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, and our proposals for CY 2010 are contained mainly 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 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 2010 included in this proposed rule are related to changes in median costs of services that were observed in the CY 2008 claims data newly available for CY 2010 ratesetting. In addition, we 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 2010.

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 that were initially assigned in the April 2009 Addendum B update (Transmittal 1702, Change Request 6416, dated March13, 2009).

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 2010 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 2008 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 and to determine which APCs should be proposed as exceptions to the 2 times rule for CY 2010. 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 17 of this proposed rule lists 14 APCs that we are proposing to exempt from the 2 times rule for CY 2010 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 2008 claims data used to determine the APC payment rates that we are proposing for CY 2010. 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 17—Proposed APC Exceptions to the 2 Times Rule for CY 2010

Proposed CY 2010 APCProposed CY 2010 APC title
0080Diagnostic Cardiac Catheterization.
0105Repair/Revision/Removal of Pacemakers, AICDs, or Vascular Devices.
0128Echocardiogram with Contrast.
0141Level I Upper GI Procedures.
0142Small Intestine Endoscopy.
0237Level II Posterior Segment Eye Procedures.
0245Level I Cataract Procedures without IOL Insert.
0303Treatment Device Construction.
0325Group Psychotherapy.
0381Single Allergy Tests.
0432Health and Behavior Services.
0436Level I Drug Administration.
0604Level 1 Hospital Clinic Visits.
0664Level I Proton Beam Radiation Therapy.
Start Printed Page 35304

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 cost bands identify the APCs to which new technology procedures and services with estimated service costs that fall within those cost bands are assigned under the OPPS. Payment for each APC is made at the mid-point of the APC's assigned cost band. For example, payment for New Technology APC 1507 (New Technology—Level VII ($500-$600)) is made at $550. Currently, there are 82 New Technology APCs, ranging from the lowest cost band assigned to APC 1491 (New Technology—Level IA ($0-$10)) through the highest cost band assigned to APC 1574 (New Technology—Level XXXVII ($9,500-$10000). In CY 2004 (68 FR 63416), we last restructured the New Technology APCs to make the cost intervals more consistent across payment levels and refined the cost bands for these APCs to retain two parallel sets of New Technology APCs, one set with a status indicator of “S” (Significant Procedures, Not Discounted when Multiple. Paid under OPPS; separate APC payment) and the other set with a status indicator of “T” (Significant Procedure, Multiple Reduction Applies. Paid under OPPS; separate APC payment). These current New Technology APC configurations allow us to price new technology services more appropriately and consistently.

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

As we explained in the November 30, 2001 final rule (66 FR 59902), we generally keep a procedure in the New Technology APC to which it is initially assigned until we have collected sufficient data to enable us to move the procedure to a clinically appropriate APC. However, in cases where we find that our original New Technology APC assignment was based on inaccurate or inadequate information (although it was the best information available at the time), or where the New Technology APCs are restructured, we may, based on more recent resource utilization information (including claims data) or the availability of refined New Technology APC cost bands, reassign the procedure or service to a different New Technology APC that most appropriately reflects its cost.

Consistent with our current policy, in this proposed rule, for CY 2010 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.

Table 18 below lists the HCPCS code and its associated status indicator that we are proposing to reassign from a New Technology APC to a clinically appropriate APC for CY 2010. Based on the CY2008 OPPS claims data available for this proposed rule, we believe we have sufficient claims data to propose reassignment of CPT code 0182T to a clinically appropriate APC. Specifically, we are proposing to reassign this electronic brachytherapy service from APC 1519 (New Technology—Level IXX ($1700-$1800)) to APC 0313 (Brachytherapy), where other brachytherapy services also reside. Based on hospital claims data for CPT code 0182T, its hospital resource costs are similar to those of other services assigned to APC 0313.

Table 18—Proposed CY 2010 Reassignment of a New Technology Procedure to a Clinical APC

CY 2009 HCPCS codeCY 2009 short descriptorCY 2009 SICY 2009 APCProposed CY 2010 SIProposed CY 2010 APC
0182THdr elect brachytherapyS1519S0313

D. Proposed OPPS APC Specific Policies: Insertion of Posterior Spinous Process Distraction Device (APC 0052)

For CY 2009 (73 FR 68620), we reassigned CPT codes 0171T (Insertion of posterior spinous process distraction device (including necessary removal of bone or ligament for insertion and imaging guidance), lumbar, single level) and 0172T (Insertion of posterior spinous process distraction device (including necessary removal of bone or ligament for insertion and imaging guidance), lumbar, each additional level) from APC 0050 (Level II Musculoskeletal Procedures Except Hand and Foot) to APC 0052 (Level IV Musculoskeletal Procedures Except Hand and Foot). For CY 2007 and CY 2008, the device implanted in procedures described by CPT codes 0171T and 0172T, HCPCS code C1821 (Interspinous process distraction device (implantable)), was assigned pass-through payment status and, therefore, was paid separately at charges adjusted to cost. The period of pass-through payment for HCPCS code C1821 expired after December 31, 2008. According to our established methodology, the costs of devices no longer eligible for pass-through payments are packaged into the costs of the procedures with which the devices are reported in the claims data used to set the payment rates for those procedures. Therefore, the costs of the implanted device identified by HCPCS code C1821 are packaged into the costs of CPT codes 0171T and 0172T beginning in CY 2009.

At the February 2009 meeting, the APC Panel heard a public presentation that recommended reassignment of CPT codes 0171T and 0172T from APC 0052 to APC 0425 (Level II Arthroplasty or Implantation with Prosthesis). The presenter believed that APC resource homogeneity would be improved if CPT codes 0171T and 0172T were reassigned to APC 0425. The presenter asserted, based on its analysis of CY 2007 claims Start Printed Page 35305data, that the median cost of CPT code 0171T was significantly higher than the median cost of APC 0052, while only slightly lower than the median cost of APC 0425. The presenter indicated that, while the median cost of APC 0052 was significantly higher than the median cost of device HCPCS code C1821, device costs are only one element of the overall procedure cost and other associated procedure costs are more than $3,200. Regarding clinical homogeneity, the presenter stated that kyphoplasty is the only spine procedure currently assigned to APC 0052 other than CPT codes 0171T and 0172T. The presenter also claimed that 36 percent of claims for CPT code 0171T are reported without HCPCS code C1821, which identified a device that is always implanted in procedures reported with CPT codes 0171T and 0172T. The presenter requested reassignment of CPT codes 0171T and 0172T to APC 0425 because this APC is a device-dependent APC, and CPT codes 0171T and 0172T would then be subject to procedure-to-device claims processing edits.

The APC Panel recommended that CMS continue the assignment of CPT codes 0171T and 0172T to APC 0052 for CY 2010, institute procedure-to-device claims processing edits for HCPCS code C1821, and then reevaluate the APC assignments of CPT codes 0171T and 0172T in one year.

Under our existing policy, we generally do not identify any individual HCPCS codes as device-dependent codes under the OPPS. We create device edits, when appropriate, for procedures assigned to device-dependent APCs, where those APCs have been historically identified under the OPPS as having very high device costs. As we noted in the CY 2009 OPPS/ASC final rule with comment period regarding APC 0052 (73 FR 68621), we typically do not implement procedure-to-device edits for an APC where there are not device HCPCS codes for all possible devices that could be used to perform a procedure that always requires a device, and the APC is not designated as a device-dependent APC. APC 0052 is not a device-dependent APC because a number of the procedures assigned to the APC do not require the use of implantable devices. Furthermore, in some cases, there may not be HCPCS codes that describe all devices that may be used to perform the procedures in APC 0052.

We examined the CY 2008 claims data available for this proposed rule to determine the frequency of billing CPT code 0171T (which is the main procedure code reported with HCPCS code C1821) with and without device HCPCS code C1821. CPT code 0172T is an add-on code to CPT code 0171T. We recognize that our single claims for CPT code 0172T may not be correctly coded claims and, therefore, our cost estimation for CPT code 0172T may not be accurate. Our analysis shows that the CY 2010 proposed rule median cost for CPT code 0171T is approximately $7,717 based on over 800 single claims. The CY 2010 proposed rule claims data for CPT code 0171T reveal a median cost of approximately $7,916 based on over 500 single claims with HCPCS code C1821, and a median cost of approximately $7,387 based on about 300 single claims without HCPCS code C1821. Therefore, the median cost of claims for CPT code 0171T reported with HCPCS code C1821 is similar to the median cost of claims for the procedure reported without HCPCS code C1821. We have no reason to believe that those hospitals not reporting the device HCPCS code have failed to consider the cost of the device in charging for the procedure. Furthermore, claims for CPT code 0171T reported with HCPCS code C1821 account for about two-thirds of the single claims available for ratesetting. The overall median cost of CPT code 0171T falls within an appropriate range of HCPCS code-specific median costs for those services proposed for CY 2010 assignment to APC 0052, which has a proposed APC median cost of approximately $5,939 and no 2 times violation. Moreover, we do not believe that procedure-to-device claims processing edits are necessary to ensure accurate cost estimation for CPT code 0171T.

The CY 2010 proposed rule line-item median cost for HCPCS code C1821 is approximately $4,625, while the CY 2010 proposed rule median cost of APC 0052 is approximately $1,300 more than this device cost. Previous estimates of procedure time presented to us at the time of the device pass-through application for the interspinous process distraction device described by HCPCS code C1821 were approximately 30 to 60 minutes of procedure time for the service currently described by CPT code 0171T. This is reasonably comparable to the typical procedure time for kyphoplasty described by CPT code 22523 (Percutaneous vertebral augmentation, including cavity creation (fracture reduction and bone biopsy included when performed) using mechanical device, one vertebral body, unilateral or bilateral cannulation (e.g., kyphoplasty); thoracic) and CPT code 22524 (Percutaneous vertebral augmentation, including cavity creation (fracture reduction and bone biopsy included when performed) using mechanical device, one vertebral body, unilateral or bilateral cannulation (e.g., kyphoplasty); lumbar), which are also assigned to APC 0052.

In summary, because we believe that APC 0052 pays appropriately for the procedure cost of CPT codes 0171T and 0172T, we are proposing to maintain the assignment of CPT codes 0171T and 0172T to APC0052 for CY 2010 and not to implement device edits for these procedures. We are accepting one part of the APC Panel's recommendation regarding the continued assignment of CPT codes 0171T and 0172T to APC 0052, but we are not accepting the APC Panel's further recommendation to institute procedure-to-device edits for these services for CY 2010. As we do for all OPPS services, we will reevaluate the APC assignments of CPT codes 0171T and 0172T when additional claims data become available for CY 2011 ratesetting, in accordance with the final part of the APC Panel's recommendation for these procedures.

IV. Proposed OPPS Payment for Devices

A. Pass-Through Payments for Devices

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

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 pass-through payment eligibility period begins with the first date on which transitional pass-through payments may be 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 pass-through status expiration dates for the category codes on the date on which a category is in effect. The date on which a category is in effect is the first date on which pass-through payment may be made for any medical device that is described by such category. We propose and finalize the dates for expiration of pass-through status for device categories as part of the OPPS annual update.

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 Start Printed Page 35306section 1833(t)(2)(H) of the Act, are an exception to this established policy.

There currently are no device categories eligible for pass-through payment, and there are no categories for which we would propose expiration of pass-through status. If we create new device categories for pass-through payment status during the remainder of CY 2009 or during CY 2010, we will propose future expiration dates in accordance with the statutory requirement that they be eligible for pass-through payments for at least 2, but not more than 3, years from the date on which pass-through payment for any medical device described by the category may first be made.

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 device 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 device APC offset amounts for eligible pass-through device categories through the transmittals that implement the quarterly OPPS updates.

We currently have published a list of all procedural APCs with the CY 2009 portions (both percentages and dollar amounts) of the APC payment amounts that we determine are associated with the cost of devices, on the CMS Web site at: http://www.cms.hhs.gov/​HospitalOutpatientPPS/​01_​overview.asp. The dollar amounts are used as the device APC offset amounts. In addition, in accordance with our established practice, the device APC offset amounts in a related APC are used in order to evaluate whether the cost of a device in an application for a new device category for pass-through payment is not insignificant in relation to the APC payment amount for the service related to the category of devices, as specified in our regulations at § 419.66(d).

b. Proposed Policy

For CY 2010, we are proposing to continue our established policies for calculating and setting the device APC offset amounts for each device category eligible for pass-through payment. We also are 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 already 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 device APC offset amount from the pass-through payment for the device category. As stated earlier, these device APC offset amounts also would be used in order to evaluate whether the cost of a device in an application for a new device category for pass-through payment is not insignificant in relation to the APC payment amount for the service related to the category of devices (§ 419.66(d)).

We are proposing in section V.A.4. of this proposed rule to specify that, beginning in CY 2010, the pass-through evaluation process and pass-through payment methodology for implantable biologicals that are surgically inserted or implanted (through a surgical incision or a natural orifice) would be the device pass-through process and payment methodology only. As a result of that proposal, we are proposing in this section that, beginning in CY 2010, we would include implantable biologicals in our calculation of the device APC offset amounts. As of CY 2009, the costs of implantable biologicals not eligible for pass-through payment are packaged into the costs of the procedures in which they are implanted because nonpass-through implantable biologicals are not separately paid. We are proposing to calculate and set any device APC offset amount for a new device pass-through category that includes a newly eligible implantable biological beginning in CY 2010 using the same methodology we have historically used to calculate and set device APC offset amounts for device categories eligible for pass-through payment (72 FR 66751 through 66752), with one modification. Because implantable biologicals would be considered devices rather than drugs for purposes of pass-through evaluation and payment under this proposal for CY 2010, the device APC offset amounts would include the costs of implantable biologicals for the first time. We also would utilize these revised device APC offset amounts to evaluate whether the cost of an implantable biological in an application for a new device category for pass-through payment is not insignificant in relation to the APC payment amount for the service related to the category of devices. Further, we are proposing to no longer use the “policy-packaged” drug APC offset amounts for evaluating the cost significance of implantable biological pass-through applications under review and for setting the APC offset amounts that would apply to pass-through payment for those implantable biologicals, effective for new pass-through status determinations beginning in CY 2010. In addition, we are proposing to update, on the CMS Web site at http://www.cms.hhs.gov/​HospitalOutpatientPPS, the list of all procedural APCs with the final CY 2010 portions of the APC payment amounts that we determine are associated with the cost of devices so that this information is available for use by the public in developing potential CY2010 device pass-through payment applications and by CMS in reviewing those applications.

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

1. Background

In recent years, there have been several field actions on and recalls of medical devices 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 ratesetting methodology for device-dependent APCs uses only claims that contain the correct device code for the procedure, do not contain token charges, and do not contain the “FB” modifier signifying that the device was furnished without cost or with a full credit. As discussed in section II.A.2.d.(1) of this proposed rule, we are proposing to refine further our standard ratesetting methodology for device-dependent APCs for CY 2010 by also excluding claims with the “FC” modifier signifying that the device was furnished with partial 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 Start Printed Page 35307APCs by the estimated portion of the APC payment attributable to device costs (that is, the device offset) when the hospital receives a specified device at no cost or with full credit (71 FR 68071 through 68077). Hospitals are instructed to report no cost/full credit cases using the “FB” modifier on the line with the procedure code in which the no cost/full credit device is used. In cases in which the device is furnished without cost or with full credit, the hospital is instructed to report a token device charge of less than $1.01. In cases in which the device being inserted is an upgrade (either of the same type of device or to a different type of device) with a full credit for the device being replaced, the hospital is instructed to report as the device charge the difference between its usual charge for the device being implanted and its usual charge for the device for which it received full credit. In CY 2008, we expanded this payment adjustment policy to include cases in which hospitals receive partial credit of 50 percent or more of the cost of a specified device. Hospitals 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. We reduce the OPPS payment for the implantation procedure by 100 percent of the device offset for no cost/full credit 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 the “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 policies (72 FR 66743 through 66749).

2. Proposed APCs and Devices Subject to the Adjustment Policy

For CY 2010, we are proposing to continue the policy of reducing OPPS payment for specified APCs by 100 percent of the device offset amount when a hospital furnishes a specified device without cost or with a full credit and by 50 percent of the device offset amount when the hospital receives partial credit in the amount of 50 percent or more of the cost for the specified device. 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 reflects 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 involve implantable devices that would be reported if device insertion procedures were performed; (2) the required devices must be surgically inserted or implanted devices that remain in the patient's body after the conclusion of the procedure (at least temporarily); and (3) the device offset amount must be significant, which, for purposes of this policy, is defined as exceeding 40 percent of the APC cost. We are proposing to continue to restrict the devices to which the 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 device credits are likely to be associated with particular cases only when the device must be reported on the claim and is of a type that is implanted and remains in the body when the beneficiary leaves the hospital. We believe that the reduction in payment is appropriate only when the cost of the device is a significant part of the total cost of the APC into which the device cost is packaged, and that the 40-percent threshold is a reasonable definition of a significant cost.

We examined the offset amounts calculated from the CY 2010 proposed rule data and the clinical characteristics of APCs to determine whether the APCs to which the no cost/full credit and partial credit device adjustment policy applies in CY 2009 continue to meet the criteria for CY 2010, and to determine whether other APCs to which the policy does not apply in CY 2009 would meet the criteria for CY 2010. Based on the CY 2008 claims data available for this proposed rule, we are not proposing any changes to the APCs and devices to which this policy applies. Table 19 below lists the proposed APCs to which the payment reduction policy for no cost/full credit and partial credit devices would apply in CY 2010 and displays the proposed payment reduction percentages for both no cost/full credit and partial credit circumstances. Table 20 below lists the proposed devices to which this policy would apply in CY 2010. We will update the lists of APCs and devices to which the no cost/full credit and partial credit device adjustment policy would apply in CY 2010, consistent with the three selection criteria discussed earlier in this section, based on the final CY 2008 claims data available for the CY 2010 OPPS/ASC final rule with comment period.

Table 19—Proposed APCs to Which the No Cost/Full Credit and Partial Credit Device Adjustment Policy Would Apply

Proposed CY 2010 APCProposed CY 2010 APC titleProposed CY 2010 device offset percentage for no cost/full credit caseProposed CY 2010 device offset percentage for partial credit case
0039Level I Implantation of Neurostimulator Generator8543
Start Printed Page 35308
0040Percutaneous Implantation of Neurostimulator Electrodes5829
0061Laminectomy, Laparoscopy, or Incision for Implantation of Neurostimulator Electrodes6331
0089Insertion/Replacement of Permanent Pacemaker and Electrodes7135
0090Insertion/Replacement of Pacemaker Pulse Generator7337
0106Insertion/Replacement of Pacemaker Leads and/or Electrodes4120
0107Insertion of Cardioverter-Defibrillator8844
0108Insertion/Replacement/Repair of Cardioverter-Defibrillator Leads8844
0225Implantation of Neurostimulator Electrodes, Cranial Nerve7337
0227Implantation of Drug Infusion Device8241
0259Level VII ENT Procedures8542
0315Level II Implantation of Neurostimulator Generator8844
0385Level I Prosthetic Urological Procedures5829
0386Level II Prosthetic Urological Procedures7035
0418Insertion of Left Ventricular Pacing Elect8140
0425Level II Arthroplasty or Implantation with Prosthesis5728
0648Level IV Breast Surgery4723
0654Insertion/Replacement of a permanent dual chamber pacemaker7437
0655Insertion/Replacement/Conversion of a permanent dual chamber pacemaker7537
0680Insertion of Patient Activated Event Recorders7336

Table 20—Proposed Devices to Which the No Cost/Full Credit and Partial Credit Device Adjustment Policy Would Apply

CY 2009 device HCPCS codeCY 2009 short 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).
C1777Lead, AICD, endo single coil.
C1778Lead, neurostimulator.
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.
C1895Lead, AICD, endo dual coil.
C1896Lead, AICD, non sing/dual.
C1897Lead, neurostim, test kit.
C1898Lead, pmkr, other than trans.
C1899Lead, pmkr/AICD combination.
C1900Lead coronary venous.
C2619Pmkr, dual, non rate-resp.
C2620Pmkr, single, non rate-resp.
C2621Pmkr, other than sing/dual.
C2622Prosthesis, penile, non-inf.
C2626Infusion pump, non-prog, temp.
C2631Rep dev, urinary, w/o sling.
L8600Implant breast silicone/eq.
L8614Cochlear device/system.
L8685Implt nrostm pls gen sng rec.
L8686Implt nrostm pls gen sng non.
L8687Implt nrostm pls gen dua rec.
L8688Implt nrostm pls gen dua non.
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 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.

Transitional pass-through payments also are 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 for a drug or biological described in section 1833(t)(6)(C)(i)(II) of the Act can be made for at least 2 years but not more than 3 years after the product's first payment as a hospital outpatient service under Part B. The pass-through payment eligibility period is discussed in detail in section V.A.5. of this proposed rule. Proposed CY 2010 pass-through drugs and biologicals and their designated APCs are assigned status indicator “G” Start Printed Page 35309as 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 to be equal to the average price for the drug or biological for all competitive acquisition areas and the year established under such section as calculated and adjusted by the Secretary) 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 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.

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 establishes the payment methodology for Medicare Part B drugs and biologicals under the competitive acquisition program (CAP). The Part B drug CAP was implemented on July 1, 2006, and included approximately 190 of the most common Part B drugs provided in the physician's office setting. As we noted in the CY 2009 OPPS/ASC final rule with comment period (73 FR 68633), the Part B drug CAP program was suspended beginning in CY 2009 (Medicare Learning Network (MLN) Matters Special Edition 0833, available via the Web site: http://www.medicare.gov). Therefore, there is no effective Part B drug CAP rate for pass-through drugs and biologicals as of January 1, 2009. As we noted in the CY 2009 OPPS/ASC final rule with comment period (73 FR 68633), if the program is reinstituted during CY 2010 and Part B drug CAP rates become available, we would again use the Part B drug CAP rate for pass-through drugs and biologicals if they are a part of the Part B drug CAP program. Otherwise, we would continue to use the rate that would be paid in the physician's office setting for drugs and biologicals with pass-through status. We note that the June 2009 CY 2010 MPFS proposed rule (CMS-1413-P; Medicare Program; Payment Policies under the Physician Fee Schedule and Other Revisions to Part B for CY 2010) includes proposed changes to the operation of the Part B drug CAP program, including a proposal to change the frequency of CAP drug pricing updates.

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 CYs 2008 and 2009, we estimated the OPPS pass-through payment amount for drugs and biologicals to be $6.6 million and $23.3 million, respectively. Our proposed OPPS pass-through payment estimate for drugs and biologicals in CY 2010 is $28 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 2009

We are proposing that the pass-through status of 6 drugs and biologicals would expire on December 31, 2009, as listed in Table 21 below. All of these drugs and biologicals will have received OPPS pass-through payment for at least 2 years and no more than 3 years by December 31, 2009. These items were approved for pass-through status on or before January 1, 2008. With the exception of those groups of drugs and biologicals that are always packaged when they do not have pass-through status, specifically diagnostic radiopharmaceuticals, contrast agents, and implantable biologicals, our standard methodology for providing payment for drugs and biologicals with expiring pass-through status in an upcoming calendar year is to determine the product's estimated per day cost and compare it with the OPPS drug packaging threshold for that calendar year (which is proposed at $65 for CY 2010), as discussed further in section V.B.2. of this proposed rule. If the drug's or biological's 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 (which is proposed at ASP+4 percent for CY 2010). Section V.B.2.d. of this proposed rule discusses the packaging of all nonpass-through contrast agents, diagnostic radiopharmaceuticals, and implantable biologicals.

Table 21—Proposed Drugs and Biologicals for Which Pass-Through Status Would Expire December 31, 2009

CY 2009 HCPCS codeCY 2009 short descriptorProposed CY 2010 SIProposed CY 2010 APC
C9354Veritas collagen matrix, cm2NN/A
C9355Neuromatrix nerve cuff, cmNN/A
J1300Eculizumab injectionK9236
Start Printed Page 35310
J3488Reclast injectionK0951
J9261Nelarabine injectionK0825
J9330Temsirolimus injectionK1168

3. Proposed Drugs, Biologicals, and Radiopharmaceuticals With New or Continuing Pass-Through Status in CY 2010

We are proposing to continue pass-through status in CY 2010 for 31 drugs and biologicals. None of these products will have received OPPS pass-through payment for at least 2 years and no more than 3 years by December 31, 2009. These items, which were approved for pass-through status between April 1, 2008 and July 1, 2009, are listed in Table 22 below. The APCs and HCPCS codes for these drugs and biologicals 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 the year established under such section as calculated and adjusted by the Secretary) and the portion of the otherwise applicable OPD fee schedule that the Secretary determines is associated with the drug or biological. Payment for drugs and biologicals with pass-through status under the OPPS is currently made at the physician's office payment rate of ASP+6 percent. We believe it is consistent with the statute to continue to provide payment for drugs and biologicals with pass-through status at a rate of ASP+6 percent in CY 2010, the amount that drugs and biologicals receive under section 1842(o) of the Act. Thus, for CY 2010, we are proposing to pay for pass-through drugs and biologicals at ASP+6 percent, equivalent to the rate these drugs and biologicals would receive in the physician's office setting in CY 2010. The difference between ASP+4 percent that we are proposing to pay for nonpass-through separately payable drugs under the CY 2010 OPPS and ASP+6 percent, therefore, would be the CY 2010 pass-through payment amount for these drugs and biologicals. In the case of pass-through contrast agents, diagnostic radiopharmaceuticals, and implantable biologicals, their pass-through payment amount would be equal to ASP+6 percent because, if not on pass-through status, payment for these products would be packaged into the associated procedures.

In addition, we are proposing to update pass-through payment rates on a quarterly basis on the CMS Web site during CY 2010 if later quarter ASP submissions (or more recent WAC or AWP information, as applicable) indicate that adjustments to the payment rates for these pass-through drugs or biologicals are necessary. If the Part B drug CAP is reinstated during CY 2010, and a drug or biological that has been granted pass-through status for CY 2010 becomes covered under the Part B drug CAP, we are proposing to provide pass-through payment at the Part B drug CAP rate and to make the appropriate adjustments to the payment rates for these drugs and biologicals on a quarterly basis as appropriate.

In CY 2010, consistent with our CY 2009 policy for diagnostic radiopharmaceuticals, we are proposing to provide payment for both 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 2010, 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 provide pass-through payment at WAC+6 percent, the equivalent payment provided to nonradiopharmaceutical pass-through drugs and biologicals without ASP information. 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.

Table 22—Proposed Drugs and Biologicals With Pass-Through Status in CY 2010

CY 2009 HCPCS codeCY 2009 short descriptorProposed CY 2010 SIProposed CY 2010 APC
C9245Injection, romiplostimG9245
C9246Inj, gadoxetate disodiumG9246
C9247Inj, iobenguane, I-123, dxG9247
C9248Inj, clevidipine butyrateG9248
C9249Inj, certolizumab pegolG9249
C9250Artiss fibrin sealantG9250
C9251Inj, C1 esterase inhibitorG9251
C9252Injection, plerixaforG9252
C9253Injection, temozolomideG9253
C9356TendoGlide Tendon Prot, cm2G9356
C9358SurgiMend, fetalG9358
C9359Implnt, bon void filler-puttyG9359
Start Printed Page 35311
C9360SurgiMend, neonatalG9360
C9361NeuraMend nerve wrapG9361
C9362Implnt, bon void filler-stripG9362
C9363Integra Meshed Bil Wound MatG9363
C9364Porcine implant, PermacolG9364
J0641Levoleucovorin injectionG1236
J1267Doripenem injectionG9241
J1453Fosaprepitant injectionG9242
J1459Inj IVIG privigen 500 mgG1214
J1571Hepagam b im injectionG0946
J1573Hepagam b intravenous, injG1138
J1953Levetiracetam injectionG9238
J2785Injection, regadenosonG9244
J8705Topotecan oralG1238
J9033Bendamustine injectionG9243
J9207Ixabepilone injectionG9240
J9225Vantas implantG1711
J9226Supprelin LA implantG1142
Q4114Flowable Wound Matrix, 1 ccG1251

As discussed in more detail in section V.B.2.d. of this proposed rule, over the last 2 years, we implemented a policy whereby payment for all nonpass-through diagnostic radiopharmaceuticals, contrast agents, and implantable biologicals is packaged into payment for the associated procedure, and we are proposing to continue the packaging of these items, regardless of their per-day cost, in CY 2010. As stated earlier, pass-through payment is 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 the year established under such section as calculated and adjusted by the Secretary) and the portion of the otherwise applicable OPD fee schedule that the Secretary determines is associated with the drug or biological. Because payment for a drug that is either a diagnostic radiopharmaceutical or a contrast agent (identified as a “policy-packaged” drug, first described in the CY 2009 OPPS/ASC final rule with comment period (73 FR 68639)) or for an implantable biological (which we are proposing to consider to be a device for all payment purposes beginning in CY2010 as discussed in sections V.A.4. and V.B.2.d. of this proposed rule) would otherwise be packaged if the product did not have pass-through status, we believe the otherwise applicable OPPS payment amount would be equal to the “policy-packaged” drug or the device APC offset amount for the associated clinical APC in which the drug or biological is utilized. The calculation of the “policy-packaged” drug and the device APC offset amounts are described in more detail in sections V.A.6.b. and IV.A.2. of this proposed rule, respectively. It follows that the copayment for the nonpass-through payment portion (the otherwise applicable fee schedule amount that we would also offset from payment for the drug or biological if a payment offset applies) of the total OPPS payment for this subset of drugs and biologicals would, therefore, be accounted for in the copayment for the associated clinical APC in which the drug or biological is used. According to section 1833(t)(8)(E) of the Act, the amount of copayment associated with pass-through items is equal to the amount of copayment that would be applicable if the pass-through adjustment was not applied. Therefore, beginning in CY 2010, we are proposing to set the associated copayment amount for pass-through diagnostic radiopharmaceuticals, contrast agents, and implantable biologicals that would otherwise be packaged if the item did not have pass-through status to zero. The separate OPPS payment to a hospital for the pass-through diagnostic radiopharmaceutical, contrast agent, or implantable biological, after taking into account any applicable payment offset for the item due to the device or “policy-packaged” APC offset policy, is the item's pass-through payment, which is not subject to a copayment according to the statute. Therefore, we are not publishing a copayment amount for these items in Addendum A and B to this proposed rule.

4. Pass-Through Payment for Implantable Biologicals

a. Background

Section 1833(t)(6)(A)(iv) of the Act authorizes transitional pass-through payments for new medical devices, drugs, and biologicals, for those items where payment was not being made as a hospital outpatient service under Part B as of December 31, 1996, and whose cost is not insignificant in relation to the OPD fee schedule amount payable for the service (or group of services) involved. These pass-through payments are in addition to the usual APC payments for services in which the product is used. Coding and payment for drugs and biologicals with pass-through status are generally provided on a product-specific basis, while coding and payment for devices with pass-through status are provided for categories of devices that may describe numerous products. The Act specifies that the duration of transitional pass-through payments for devices must be no less than 2 and no more than 3 years from the first date on which payment is made for any medical device that is described by the category. For drugs and biologicals, as further discussed in section V.A.5. of this proposed rule, generally beginning in CY 2010 we are specifying, consistent with the statute, that the pass-through payment eligibility period for drugs and biologicals is no less than 2 and no more than 3 years from the first date on which payment is made for the drug or biological under Part B as an outpatient Start Printed Page 35312hospital service. Therefore, we utilize separate pass-through application and evaluation processes and criteria for drugs and biologicals and device categories because the statutory provisions are not the same for all items that may receive pass-through payment. These processes and the applicable evaluation criteria are available on the CMS Web site at: http://www.cms.hhs.gov/​HospitalOutpatientPPS/​04_​passthrough_​payment.asp#TopOf Page. The regulations that govern pass-through payment for drugs and biologicals are found in § 419.64 and those applicable to pass-through device categories are found in § 419.66.

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 the 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. For the drugs and biologicals that would have otherwise been paid under the Part B drug CAP, because the Part B drug CAP has been suspended beginning January 1, 2009, pass-through payment for these drugs and biologicals is currently made at the physician's office payment rate of ASP+6 percent. In the case of diagnostic radiopharmaceuticals, where all products without pass-through status are packaged into payment for nuclear medicine procedures, the pass-through payment is reduced by an amount that reflects the diagnostic radiopharmaceutical portion of the APC payment amount for the associated nuclear medicine procedure (the “policy-packaged” drug APC offset) that we determine is associated with the cost of predecessor diagnostic radiopharmaceuticals. We are proposing a similar payment offset policy for contrast agents beginning in CY 2010, as discussed in section V.A.6. of this proposed rule. Pass-through payment for a category of devices is made at the hospital's charge for the device adjusted to cost by application of the hospital's CCR. If applicable, the device payment is reduced by an amount that reflects the portion of the APC payment amount for the associated surgical procedure that we determine is associated with the cost of the device, called the device APC offset and discussed further in section IV.A.2. of this proposed rule.

In the CY 2009 OPPS/ASC final rule with comment period (73 FR 68633 through 68636), we finalized a policy to package payment for implantable biologicals without pass-through status that are surgically inserted or implanted (through a surgical incision or a natural orifice) into payment for the associated surgical procedure. Prior to our implementation of this policy for nonpass-through implantable biologicals, we adopted in the CY 2003 OPPS final rule with comment period (67 FR 66763) the current OPPS policy that packages payment for an implantable device into the associated surgical procedures when its pass-through payment period ends because payment for all implantable devices without pass-through status under the OPPS is packaged. We consider nonpass-through implantable devices to be integral and supportive items for which packaged payment is most appropriate. As we stated in the CY2009 OPPS/ASC final rule with comment period (73 FR 68634), we believe this policy to package payment for implantable devices that are integral to the performance of procedures paid separately through an APC payment should also apply to payment for implantable biologicals without pass-through status, when those biologicals function as implantable devices. Implantable biologicals may be used in place of other implantable nonbiological devices whose costs are already accounted for in the associated procedural APC payments for surgical procedures. We reasoned that if we were to provide separate payment for nonpass-through implantable biologicals, we would potentially be providing duplicate device payment, both through the packaged nonbiological device cost included in the surgical procedure's payment and the separate biological payment.

In the CY 2009 OPPS/ASC final rule with comment period (73 FR 68634), we stated our belief that the three implantable biologicals with expiring pass-through status for CY 2009 differ from other biologicals paid under the OPPS in that they specifically always function as surgically implanted devices. We noted that both implantable nonbiological devices under the OPPS and the three biologicals with expiring pass-through status in CY 2009 are surgically inserted or implanted (including through a surgical incision or a natural orifice). These three biologicals are approved by the FDA as devices, and they are solely surgically implanted according to their FDA-approved indications. Furthermore, in some cases, these implantable biologicals can substitute for implantable nonbiological devices (such as for synthetic nerve conduits or synthetic mesh used in tendon repair).

For other nonpass-through biologicals paid under the OPPS that may sometimes be used as implantable devices, we have instructed hospitals, beginning via Transmittal 1336, Change Request 5718, dated September 14, 2007, to not separately bill 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. We stated that hospitals may include the charge for the biological in their charge for the procedure, report the charge on an uncoded revenue center line, or report the charge under a device HCPCS code, if one exists, so that the biological costs may be considered in future ratesetting for the associated surgical procedures.

Several commenters to the CY 2009 OPPS/ASC proposed rule supported CMS' proposal to package payment for implantable biologicals without pass-through status into payment for the associated surgical procedure (73 FR 68635). One commenter also recommended that CMS treat biologicals that are always surgically implanted or inserted and have FDA device approval, as devices for purposes of pass-through payment, rather than as drugs. The commenter observed that this would allow all implantable devices, biological and otherwise, to be subject to a single pass-through payment policy. The commenter concluded that this policy change would provide consistency in billing and payment for these products functioning as implantable devices during their pass-through payment period, as well as after the expiration of pass-through status.

We finalized in the CY 2009 OPPS/ASC final rule with comment period (73 FR 68635) our proposal to package payment for any nonpass-through biological that is surgically inserted or implanted (through a surgical incision or a natural orifice) into the payment for the associated surgical procedure, just as we package payment for all nonpass-through, implantable, nonbiological devices. As a result of this final policy, the three implantable biologicals with Start Printed Page 35313expiring pass-through status in CY 2009 were packaged and assigned status indicator “N” as of January 1, 2009. In addition, any new biologicals without pass-through status that are surgically inserted or implanted (through a surgical incision or a natural orifice) are also packaged beginning in CY 2009. Hospitals continue to report the HCPCS codes that describe biologicals that are always used as implantable devices on their claims, and we package the costs of those biologicals into the associated procedures, according to the standard OPPS ratesetting methodology that is described in section II.A.2. of this proposed rule. Moreover, for nonpass-through biologicals that may sometimes be used as implantable devices, we continue to instruct hospitals to not bill separately for the HCPCS codes for the products when used as implantable devices. This reporting ensures 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 when the products are used as implantable devices.

b. Proposed Policy for CY 2010

Some implantable biologicals are described by device category codes for expired pass-through categories, including HCPCS code C1781 (Mesh (implantable)), HCPCS code C1762 (Connective tissue, human), and HCPCS code C1763 (Connective tissue, non-human). All implantables described by the latter two categories are biologicals, while HCPCS code C1781 describes both implantable biological and nonbiological devices. Historically, these category codes included biological products that we approved for pass-through payment under the device pass-through process, initially when we paid for pass-through devices on a brand-specific basis from CY 2000 through March 31, 2001, and later through the device categories described by HCPCS codes C1781, C1762, and C1763 which were developed effective April 1, 2001.

We believe that it is most appropriate for a product to be eligible for a single period of OPPS pass-through payment, rather than a period of device pass-through payment and a period of drug or biological pass-through payment. The limited timeframe for transitional pass-through payment ensures that new devices, drugs, and biologicals may receive special payment consideration under the OPPS for the first few years after their initial use, in order to allow sufficient time for their cost information to be reflected in hospital claims data and, therefore, to be available for OPPS ratesetting. After the pass-through payment period ends, like other existing services, we have cost information regarding these new products provided to us by hospitals from claims and cost report data. We then utilize that information when packaging the costs of the items (all devices, diagnostic radiopharmaceuticals, contrast agents, and implantable biologicals, and other drugs with an estimated per day cost equal to or less than the annual drug packaging threshold) or paying separately for the products (drugs except contrast agents and diagnostic radiopharmaceuticals and also nonimplantable biologicals with estimated per day costs above the annual drug packaging threshold). Further, although implantable biologicals with pass-through status may substitute for nonpass-through implantable devices whose costs are packaged into procedural APC payments, our existing APC offset policies for the costs of predecessor items packaged into APC payment for the associated services do not apply to pass-through payment for biologicals. We note that the APC offset amount that would be most applicable to implantable biologicals, were we to establish such an offset policy for them, would be the device APC offset amount, based on their similarity of function to the implantable devices whose costs have been included in establishing the procedural APC payment, not the “policy-packaged” or “threshold-packaged” drug APC offset amounts that one would expect to apply to pass-through drugs and biologicals. Similarly, when we currently evaluate a pass-through implantable biological application for the cost significance of the product, our methodology utilizes the “policy-packaged” APC offset amount to assess the candidate implantable biological, not the device APC offset amount that would be more reflective of the costs of predecessor devices related to the candidate implantable biological, such as those of device category HCPCS codes C1781, C1762, and C1763.

Many implantable biologicals, such as the three biologicals that expired from pass-through status after CY 2008, have FDA approval as devices. A number of other implantable biologicals with FDA approval as devices have also been approved for OPPS pass-through payment over the past several years, based on their product-specific pass-through applications as biologicals, not devices. Moreover, outside of the period of pass-through payment, the costs of implantable biologicals, like the costs of implantable devices, are now packaged into the cost of the procedure in which they are used. Implantable biologicals may be used in place of other implantable nonbiological devices whose costs are already accounted for in the associated procedural APC payments. Payment is made for nonpass-through implantable biologicals, like for devices, through the APC payment for the associated surgical procedure.

In view of these considerations, we are proposing that the pass-through evaluation process and pass-through payment methodology for implantable biologicals that are surgically inserted or implanted (through a surgical incision or a natural orifice) and that are newly approved for pass-through status beginning on or after January 1, 2010, be the device pass-through process and payment methodology only. Given the shared payment methodologies for implantable biological and nonbiological devices during their nonpass-through payment periods, as well as their overlapping and sometimes identical clinical uses and their similar regulation by the FDA as devices, we believe that the most consistent pass-through payment policy for these different types of items that are surgically inserted or implanted and that may sometimes substitute for one another is to evaluate all such devices, both biological and nonbiological, only under the device pass-through process. As a result, implantable biologicals would no longer be eligible to submit biological pass-through applications and to receive biological pass-through payment at ASP+6 percent. While we understand that implantable biologicals have characteristics that result in their meeting the definitions of both devices and biologicals, we believe that biologicals are most similar to devices because of their required surgical insertion or implantation and that it would be appropriate to only evaluate them as devices because they share significant clinical similarity with implantable nonbiological devices. We refer readers to the CMS Web site specified previously in this section to view the device pass-through application requirements and review criteria that would apply to the evaluation of all implantable biologicals for pass-through status when their pass-through payment would begin on or after January 1, 2010.

However, those implantable biologicals that are surgically inserted or implanted (through a surgical incision or natural orifice) and that are receiving pass-through payment as biologicals prior to January 1, 2010, would continue Start Printed Page 35314to be considered pass-through biologicals for the duration of their period of pass-through payment. These products have already been evaluated for pass-through status based on their application as biologicals and have been approved for pass-through status based on the established criteria for biological pass-through payment. We believe it would be most appropriate for them to complete their 2- to 3-year period of pass-through payment as biologicals in accordance with the pass-through payment policies that were applicable at the time their pass-through status was initially approved.

We note that, in conducting our pass-through review of implantable biologicals as devices beginning for CY 2010 pass-through payment, we would apply the portions of APC payment amounts associated with devices (that is, the device APC offset amounts) to assess the cost significance of the candidate implantable biologicals, as we do for other devices. The CY 2009 device APC offset amounts are posted on the CMS Web site at: http://www.cms.hhs.gov/​HospitalOutpatientPPS/​04_​passthrough_​payment.asp. The result of evaluating all implantable biological items only for device pass-through payment is that payment for implantable biologicals eligible for pass-through payment beginning on or after January 1, 2010, would be based on hospital charges adjusted to cost, rather than the ASP methodology that is applicable to pass-through drugs and biologicals. Treating implantable biologicals as devices for pass-through payment evaluation and payment would result in their consistent treatment with respect to coding and payment during their pass-through and nonpass-through periods of payment. This proposed policy would allow us to appropriately offset the pass-through payment for an implantable biological using the device APC offset amounts, which would incorporate the costs of predecessor devices (both biological and nonbiological) that are similar to the implantable biological item with pass-through status. Finally, this proposed policy would ensure that each implantable biological is eligible for OPPS pass-through payment for only one 2- to 3-year time period (as a device only, not as a biological), so that once OPPS claims data incorporate cost information for the implantable biological, the product would not be again eligible for OPPS pass-through payment in the future.

Further, because we are proposing that the pass-through evaluation process for CY 2010 pass-through status approvals and pass-through payment methodology for implantable biologicals that are surgically inserted or implanted (through a surgical incision or a natural orifice) beginning in CY 2010 be the device pass-through process and payment methodology only, we also are proposing to revise our regulations at §§ 419.64 and 419.66 to conform to this new policy. Specifically, we are proposing to amend § 419.64 by adding a new paragraph (a)(4)(iii) and language under a new paragraph (c)(3) to exclude implantable biologicals from consideration for drug and biological pass-through payment. Furthermore, proposed new paragraph (a)(4)(iv) of § 419.64 would specify the continued inclusion of implantable biologicals for which pass-through payment as a biological is made on or before December 31, 2009, as eligible for biological pass-through payment, consistent with our proposal to allow these products to complete their period of pass-through payment as biologicals.

Moreover, in light of our CY 2010 proposal that implantable biological applications approved for pass-through status beginning on or after January 1, 2010, would be considered only for device pass-through evaluation and payment, we believe it would also be appropriate to clarify the current example in § 419.66(b)(4)(iii) of the regulations regarding the exclusion of materials, for example biological or synthetic materials, that may be used to replace human skin from device pass-through payment eligibility. While, by definition, implantable biologicals that are surgically implanted or inserted would not be biological materials that replace human skin, we are proposing to more precisely state this in the regulations. Therefore, we are proposing to revise § 419.66(b)(4) (iii), which currently states that a device is not a material that may be used to replace human skin and provides an example of such a material as “a biological or synthetic material.” We are proposing to revise § 419.66(b)(4)(iii) to specify that the biological materials be a “biological skin replacement material” rather than a “biological” and the synthetic materials be a “synthetic skin replacement material” rather than a “synthetic material” because we do not believe this example should refer to biologicals or synthetic materials that are used for purposes other than as a skin replacement material, given that the regulatory provision in § 419.66(b)(4)(iii) applies only to a material that may be used to replace human skin.

5. Definition of Pass-Through Payment Eligibility Period for New Drugs and Biologicals

Section 1833(t)(6) of the Act provides for transitional pass-through payments for medical devices, drugs, and biologicals. Section 1833(t)(6)(A) of the Act generally describes two groups of services—“current” and “new”—that are eligible for pass-through payments, depending, in part, on when they were first paid. One of the criteria for “new” drugs and biologicals to receive pass-through payments under section 1833(t)(6)(A)(iv)(I) of the Act is that payment for the item as an outpatient hospital service under Part B was not being made as of December 31, 1996. For those “new” drugs and biologicals, section 1833(t)(6)(C)(i)(II) of the Act specifies that there is a 2- to 3-year limitation on the pass-through period that begins on the first date on which payment is made under Part B for the drug or biological as an outpatient hospital service.

Section 419.64 of the regulations codifies the transitional pass-through payment provisions for drugs and biologicals. Section 419.64(a) describes the drugs and biologicals that are eligible for pass-through payments, essentially capturing the distinction between “new” and “current” services. Section 419.64(c)(2) provides that the pass-through payment eligibility period for drugs and biologicals that fall into the “new” category begins on the date that CMS makes its first pass-through payment for the drug or biological.

It has come to our attention that our pass-through payment eligibility period for “new” drugs and biologicals in § 419.64(c)(2) does not most accurately reflect the statutory requirements of section1833(t)(6)(C)(i)(II) of the Act. Where our regulations indicate that the pass-through payment eligibility period for “new” drugs and biologicals begins on the first date on which pass-through payment is made for the item, section 1833(t)(6)(c)(i)(II) of the Act specifies that the pass-through period of 2 to 3 years for “new” drugs and biologicals begins on the first date on which payment is made under Part B for the drug or biological as an outpatient hospital service. In order to better reflect the statutory requirement for the pass-through period for a “new” drug or biological, we are proposing to revise paragraph (c)(2) of § 419.64 and add a new paragraph (c)(3) to § 419.64 of the regulations.

In order to conform the regulations to the statutory provisions, we are proposing to change the start date of the pass-through payment eligibility period Start Printed Page 35315for a drug or biological from the first date on which pass-through payment is made to the date on which payment is first made for a drug or biological as an outpatient hospital service under Part B. Under this proposal, we would need to identify a first date of payment for a drug or biological as an outpatient hospital service under Part B. (Under our current policy, we have not needed to establish a first date on which payment is made under Part B for the drug or biological as an outpatient hospital service because the pass-through payment eligibility period begins on the first date pass-through payment is made for the item.) Due to the 2-year delay in the availability of claims data, under our CY 2010 proposal we would not be able to identify an exact date of first payment for a drug or biological as an outpatient hospital service under Part B in order to determine the start date of the pass-through payment eligibility period until years after an application for pass-through payment for a “new” drug or biological has been submitted. At that later point in time, the pass-through payment eligibility period may be close to expiring, and the result of relying upon our claims data to evaluate an item for its eligibility for pass-through status could be a very short period of pass-through payment for the new drug or biological. Consequently, we believe it would be desirable to identify an appropriate and timely proxy for the date of first payment for the drug or biological as an outpatient hospital service under Part B. We believe the date of first sale for a drug or biological in the U.S. following FDA approval is an appropriate proxy, as explained below, and we are proposing this as the date on which the pass-through payment eligibility period would begin. We also note that, in light of our CY 2010 proposal, described in section V.A.4. of this proposed rule, to treat implantable biologicals as medical devices for purposes of pass-through eligibility and payment under section 1833(t)(6) of the Act, these proposed revisions to the pass-through payment eligibility period for a drug or biological approved for pass-through payment beginning on or after January 1, 2010, would not apply to implantable biologicals, but rather only to nonimplantable biologicals.

We believe that the date of first sale of the drug or nonimplantable biological in the U.S. following FDA approval is an appropriate proxy for the first date of payment for the drug or nonimplantable biological as an outpatient hospital service under Part B for several reasons. We anticipate that Medicare beneficiaries would be among the first to use these drugs and nonimplantable biologicals and that the date of first sale is the date upon which a drug or nonimplantable biological would become available to those beneficiaries and be paid under Part B as an outpatient hospital service. Further, we already use the date of first sale of a drug or biological in the U.S. following FDA approval under the ASP methodology and in the existing OPPS pass-through payment eligibility determination. In determining the ASP for a drug under the ASP payment methodology in section 1847A of the Act, we use the date of first sale of a drug or biological in the U.S. following FDA approval to identify “single source drugs” and “biological products” when determining a payment amount. We also use the date of first sale of a drug or biological in the U.S. under our current OPPS pass-through payment application process to determine if a drug or biological is “new,” that is, whether the item was paid as an outpatient hospital service on or after January 1, 1997. Finally, we do not believe that there is a more accurate and readily available proxy for the first date of payment for a drug or biological under Part B as an outpatient hospital service. In summary, we believe that the date of first sale of the drug or nonimplantable biological in the U.S. following FDA approval is an appropriate proxy for the first date on which payment is made under Part B for the item as an outpatient hospital service because it is an accepted and available indicator of initial payment for the Medicare program.

In proposed new § 419.64(c)(3), we indicate that the date of first sale of a drug or nonimplantable biological in the U.S. following FDA approval would be the start date of the pass-through payment eligibility period for drugs or nonimplantable biologicals approved for pass-through payment beginning on or after January 1, 2010. We also are proposing modifications to § 419.64(c) (2) to specify that our current policy—that the pass-through payment eligibility period of 2 to 3 years begins on the first date that pass-through payment is made for the drug or biological—applies only to drugs and biologicals approved for and receiving pass-through payment on or before December 31, 2009. Although we believe that we have the authority to stop pass-through payments and to recover pass-through payments already made for such drugs and biologicals, we are proposing in these specific limited circumstances to permit pass-through status to continue.

We currently implement new approvals of pass-through status for drugs and biologicals on a quarterly basis, and for CY 2010, we would continue to implement these new approvals on a quarterly basis. We describe our quarterly process for reviewing and approving applications for drugs and biologicals to receive pass-through payment on the CMS Web site at: http://www.cms.hhs.gov/​HospitalOutpatientPPS/​04_​passthrough_​payment.asp. Interested parties may submit a complete application at any time. We typically review and make pass-through status approval decisions about complete applications for initiation of pass-through payment within 4 months of their submission and implement new pass-through status approvals on a quarterly basis through the next available OPPS quarterly update. The CMS Web site provides a timeline showing the relationship between the date of submission of a complete application and the earliest date of pass-through payment that would result from approval of pass-through status for the drug or biological.

Under our current policy, the pass-through payment eligibility period and period of pass-through payment are the same. However, the pass-through payment eligibility period and the period of pass-through payment would not be identical under our proposed policy. For our proposed policy, we need to identify both the pass-through payment eligibility period as well as the period during which pass-through payments would be made, including the respective start and expiration dates of the pass-through payment eligibility period and the period of pass-through payment. The period of pass-through payment would coincide with the time period during which the drug or biological is designated as having pass-through status. (We note that being within the pass-through payment eligibility period alone does not qualify a “new” drug or biological for pass-through payment; the drug or biological must also meet the other requirements for pass-through payment, including that CMS determines that the cost of a drug or biological is not insignificant.) Under our proposal, the pass-through payment eligibility period would run for at least 2 years but no more than 3 years. For example, for a drug with a first date of sale in the United States after FDA approval of May 3, 2009, the pass-through payment eligibility period would start on May 3, 2009. If the pass-through payment eligibility period ran Start Printed Page 35316for 3 years, it would expire on May 2, 2012. We are proposing to modify § 419.64 accordingly by adding new paragraph (c)(3) to state: “For a drug or nonimplantable biological described in paragraph (a)(4) of this section and approved for pass-through payment beginning on or after January 1, 2010—[the pass-through payment eligibility period begins on] the date of first sale of the drug or nonimplantable biological in the United States after FDA approval.” Next, we are proposing that pass-through payment would start on the first day of the calendar quarter following the calendar quarter during which the completed application was approved. We would reflect this in regulation text, in proposed new § 419.64(c)(3), as follows. “Pass-through payment for the drug or nonimplantable biological begins on the first day of the hospital outpatient prospective payment system update (for example, calendar quarter) following the update period during which the drug or nonimplantable biological was approved for pass-through status.” The start date for the period of pass-through payment would be specified in a letter to the applicant conveying pass-through status approval for the new drug or biological and would be the first day of the calendar quarter following the calendar quarter during which a complete pass-through application is approved by CMS for pass-through status.

We also are proposing to expire pass-through status on a quarterly basis. We would use the pass-through payment eligibility period expiration date to determine when the period of pass-through payment would expire. The way we would operationalize this would be to make the last date of the period of pass-through payment be the last day of the calendar quarter that preceded the pass-through payment eligibility period expiration date. This proposal to expire the pass-through status of drugs and nonimplantable biologicals on a quarterly basis would be a departure from our current policy for expiring the pass-through status of drugs and biologicals. Presently, we expire the pass-through status of drugs and biologicals at the end of the calendar year preceding the year of the applicable annual OPPS update. (We discuss our CY 2010 proposal to expire the pass-through status of drugs and biologicals currently receiving pass-through payment that will have already received between 2 and 3 years of pass-through payment by January 1, 2010, in section V.A.2. of this proposed rule.) Because our current pass-through payment eligibility period policy effectively aligns the start of pass-through payment with the beginning of the 2- to 3-year pass-through payment eligibility period, expiration of pass-through status on a calendar year basis affords those drugs and biologicals at least 2 but not more than 3 years of pass-through payment. This would continue to be the case for drugs and biologicals that have been approved for pass-through status and that are receiving pass-through payment on or before December 31, 2009, as reflected in our proposed revision to § 419.64(c) (2). However, beginning in CY 2010, for “new” drugs and nonimplantable biologicals with a pass-through payment eligibility period described by proposed new § 419.64(c)(3), we would expire pass-through status on a quarterly basis. Under the proposed revised definition of the pass-through payment eligibility period, the pass-through payment eligibility period may begin well before application is made for pass-through payment for the drug or nonimplantable biological and pass-through status is approved, which could have the effect of a shorter period of pass-through payment for some drugs and biologicals than would be the case under our current policy. Therefore, we are proposing to expire pass-through status on a quarterly basis to ensure that drugs and nonimplantable biologicals for which a pass-through payment application has been made after the pass-through payment eligibility period has begun can most benefit from pass-through payment. We provide the following examples to illustrate how our proposed policies would work.

First, if CMS receives a complete pass-through payment application on March 1, 2010, for a “new” drug with a date of first sale in the United States after FDA approval of December 15, 2009, the pass-through payment eligibility period would begin on December 15, 2009. If the pass-through payment eligibility period ran for 3 years, it would expire on December 14, 2012. If we process the application and approve pass-through status within 4 months, the period of pass-through payment for that drug would begin on July 1, 2010, because that would be the first day of the calendar quarter following the calendar quarter during which the completed application was approved for pass-through status. The period of pass-through payment would expire no later than September 30, 2012, because that would be the last day of the calendar quarter that preceded the pass-through eligibility period expiration date. We would indicate the drug's change from pass-through to nonpass-through status, as discussed below, in the October 2012 OPPS quarterly update.

In another example, if CMS receives a complete pass-through payment application on December 1, 2009, for a “new” drug with a date of first sale of the drug in the United States after FDA approval of May 3, 2009, the pass-through payment eligibility period for that drug would begin on May 3, 2009, and would end no later than May 2, 2012. If we process the application and approve pass-through status within 4 months, the period of pass-through payment would begin on April 1, 2010, because that would be the first day of the calendar quarter following the calendar quarter during which the completed application was approved for pass-through status, and would end no later than March 31, 2012, because that would be the last day of the calendar quarter that preceded the pass-through payment eligibility period expiration date. We would indicate the drug's change from pass-through to nonpass-through status, as discussed below, in the April 2012 OPPS quarterly update.

In another example, in the case of a complete application for a “new” drug, with a date of first sale of the drug in the United States after FDA approval of November 16, 2006, that is received by December 1, 2009, the pass-through payment eligibility period for that drug would have begun on November 16, 2006. The pass-through payment eligibility period would expire no later than November 15, 2009, because that would be 3 years from the date on which the pass-through payment eligibility period began. In this example, the drug would not be approved for pass-through status because the pass-through payment eligibility period would have already expired. The earliest date that the period of pass-through payment for the drug could have begun would have been April 1, 2010, which would be after the expiration of the pass-through payment eligibility period.

As noted above, for those “new” drugs or biologicals approved for pass-through status beginning in a calendar quarter prior to CY 2010 that are described by § 419.64(c)(2), we would continue our current policy. That means that we would expire pass-through status for the drug or biological at the end of the calendar year after the drug or biological has received at least 2 but not more than 3 years of pass-through payment.

In addition to proposing to expire the pass-through status of “new” drugs and nonimplantable biologicals described by Start Printed Page 35317proposed new § 419.64(c)(3) on a quarterly basis, we also would continue our established policy of determining whether a drug or biological would receive separate payment or packaged payment, after the expiration of the period of pass-through payment, on a calendar year basis through the annual OPPS rulemaking process as described in section V.B.2. of this proposed rule. Under our current drug payment policies, we propose and finalize packaging determinations for drugs and biologicals subject to the OPPS annual drug packaging threshold only once a year based on the most updated claims data and ASP information available for the annual rulemaking cycle. We are not proposing to change this annual packaging determination process. Therefore, after the expiration of pass-through status of a “new” drug or biological in a given year's calendar quarter, we would continue to make separate payment through the end of that calendar year for those drugs and nonimplantable biologicals that would be subject to the drug packaging threshold when they did not have pass-through status (therefore, excluding contrast agents and diagnostic radiopharmaceuticals for CY 2010 which would always be packaged when not on pass-through status) at the applicable OPPS payment rate for separately payable drugs and biologicals without pass-through status for that year, proposed to be ASP+4 percent for CY 2010. We would change their status indicator from “G” (Pass-Through Drugs and Biologicals) to “K” (Nonpass-Through Drugs and Nonimplantable Biologicals) in the applicable quarterly OPPS update that immediately followed the last day of the calendar quarter in which the pass-through status of the drug or nonimplantable biological expired. In our proposed rule for the upcoming prospective payment year that is after the calendar year quarter in which the pass-through status of a drug or nonimplantable biological expired, we would use ASP information and our claims data to assess whether the drug or biological would be packaged or separately payable in the upcoming calendar year. For those drugs with expiring pass-through status that are always packaged when not on pass-through status (“policy-packaged”), specifically diagnostic radiopharmaceuticals and contrast agents for CY 2010 as discussed in section V.B.2.d. of this proposed rule, we would make packaged payment for them for the remainder of the calendar year after the expiration of pass-through payment. We would change their status indicator from “G” to “N” (Items and Services Packaged into APC Rates) in the applicable quarterly OPPS update that immediately followed the last day of the calendar quarter in which the pass-through status of the drug or nonimplantable biological expired. For example, for a drug (excluding contrast agents and diagnostic radiopharmaceuticals) described by proposed new § 419.64(c)(3) with pass-through status expiring on September 30, 2010, we would make separate pass-through payment for the drug at ASP+6 percent until September 30, 2010, and we would then make separate nonpass-through payment for the drug at ASP+4 percent between October 1, 2010 and December 31, 2010. For CY2011, we would use ASP information and our claims data to propose whether the drug would be packaged or separately payable.

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

a. Background

Prior to CY 2008, diagnostic radiopharmaceuticals and contrast agents were paid separately under the OPPS if their mean per day costs were greater than the applicable year's drug packaging threshold. In CY 2008 (72 FR 66768), we began a policy of packaging payment for all nonpass-through diagnostic radiopharmaceuticals and contrast agents as ancillary and supportive items and services into their associated nuclear medicine procedures. Therefore, beginning in CY2008, nonpass-through diagnostic radiopharmaceuticals and contrast agents were not subject to the annual OPPS drug packaging threshold to determine their packaged or separately payable payment status, and instead all nonpass-through diagnostic radiopharmaceuticals and contrast agents were packaged as a matter of policy. For CY 2010, we are proposing to continue to package payment for all nonpass-through diagnostic radiopharmaceuticals and contrast agents as discussed in section V.B.2.d. of this proposed rule.

b. Payment Offset Policy for Diagnostic Radiopharmaceuticals

As previously noted, radiopharmaceuticals are considered to be drugs for OPPS pass-through payment purposes. As described above, section 1833(t)(6)(D)(i) of the Act specifies that the transitional 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 OPD fee schedule amount. There is currently one radiopharmaceutical with pass-through status under the OPPS, HCPCS code C9247 (Iobenguane, I-123, diagnostic, per study dose, up to 10 millicuries). HCPCS code C9247 was granted pass-through status beginning April 1, 2009, and will continue to receive pass-through status in CY 2010. We currently apply the established radiopharmaceutical payment offset policy to pass-through payment for this product. As described earlier in section V.A.3. of this proposed rule, new pass-through diagnostic radiopharmaceuticals would be paid at ASP+6 percent, while those without ASP information would be paid at WAC+6 percent or, if WAC is not available, based on 95 percent of the product's most recently published AWP.

As a payment offset is necessary in order to provide an appropriate transitional pass-through payment, we deduct from the payment for pass-through radiopharmaceuticals an amount that reflects the portion of the APC payment associated with predecessor radiopharmaceuticals in order to ensure no duplicate radiopharmaceutical payment. In CY 2009, we established a policy to estimate the portion of each APC payment rate that could reasonably be attributed to the cost of predecessor diagnostic radiopharmaceuticals when considering a new diagnostic radiopharmaceutical for pass-through payment (73 FR 68638 through 68641). Specifically, we utilize the “policy-packaged” drug offset fraction for APCs containing nuclear medicine procedures, calculated as 1 minus (the cost from single procedure claims in the APC after removing the cost for “policy-packaged” drugs divided by the cost from single procedure claims in the APC). We have previously defined “policy-packaged” drugs and biologicals as nonpass-through diagnostic radiopharmaceuticals, contrast agents, and implantable biologicals (73 FR 68639). We are proposing for CY 2010 to redefine “policy-packaged” drugs as only nonpass-through diagnostic radiopharmaceuticals and contrast agents, as a result of the CY 2010 proposals discussed in sections V.A.4. and V.B.2.d. of this proposed rule that would treat nonpass-through implantable biologicals that are surgically inserted or implanted (through a surgical incision or a natural Start Printed Page 35318orifice) and implantable biologicals that are surgically inserted or implanted (through a surgical incision or a natural orifice) with newly approved pass-through status beginning in CY 2010 or later as devices, rather than drugs. To determine the actual APC offset amount for pass-through diagnostic radiopharmaceuticals that takes into consideration the otherwise applicable OPPS payment amount, we multiply the “policy-packaged” drug offset fraction by the APC payment amount for the nuclear medicine procedure with which the pass-through diagnostic radiopharmaceutical is used and, accordingly, reduce the separate OPPS payment for the pass-through diagnostic radiopharmaceutical by this amount.

We will continue to post annually on the CMS Web site at http://www.cms.hhs.gov/​HospitalOutpatientPPS, a file that contains the APC offset amounts that would be used for that year for purposes of both evaluating cost significance for candidate pass-through device categories and drugs and biologicals, including diagnostic radiopharmaceuticals, and establishing any appropriate APC offset amounts. Specifically, the file will continue to provide, for every OPPS clinical APC, the amounts and percentages of APC payment associated with packaged implantable devices, “policy-packaged” drugs, and “threshold-packaged” drugs and biologicals.

Table 23 below displays the proposed APCs to which nuclear medicine procedures would be assigned in CY 2010 and for which we expect that an APC offset could be applicable in the case of new diagnostic radiopharmaceuticals with pass-through status.

Table 23—Proposed APCs to Which Nuclear Medicine Procedures Would Be Assigned for CY 2010

Proposed CY 2010 APCProposed CY 2010 APC 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.

c. Proposed Payment Offset Policy for Contrast Agents

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 OPD fee schedule amount. There is currently one contrast agent with pass-through status under the OPPS, HCPCS code C9246 (Injection, gadoxetate disodium, per ml). HCPCS code C9246 was granted pass-through status beginning January 1, 2009, and will continue to receive pass-through status in CY 2010. As described earlier in section V.A.3. of this proposed rule, new pass-through contrast agents would be paid at ASP+6 percent, while those without ASP information would be paid at WAC+6 percent or, if WAC is not available, paid based on 95 percent of the product's most recently published AWP.

We believe that a payment offset, similar to the offset currently in place for pass-through devices and diagnostic radiopharmaceuticals, is necessary in order to provide an appropriate transitional pass-through payment for contrast agents because all of these items are packaged when they do not have pass-through status. In accordance with our standard offset methodology, we are proposing to deduct from the payment for pass-through contrast agents an amount that reflects the portion of the APC payment associated with predecessor contrast agents in order to ensure no duplicate contrast agent payment is made.

In CY 2009, we established a policy to estimate the portion of each APC payment rate that could reasonably be attributed to the cost of predecessor diagnostic radiopharmaceuticals when considering a new diagnostic radiopharmaceutical for pass-through payment (73 FR 68638 through 68641). For CY 2010, we are proposing to apply this same policy to contrast agents. Specifically, we are proposing to utilize the “policy-packaged” drug offset fraction for clinical APCs calculated as 1 minus (the cost from single procedure claims in the APC after removing the cost for “policy-packaged” drugs divided by the cost from single procedure claims in the APC). As discussed above, while we have previously defined the “policy-packaged” drugs and biologicals as nonpass-through diagnostic radiopharmaceuticals, contrast agents, and implantable biologicals (73 FR 68639), we are proposing for CY 2010 to redefine “policy-packaged” drugs as only nonpass-through diagnostic radiopharmaceuticals and contrast agents, as a result of the CY 2010 proposal discussed in sections V.A.4. and V.B.2.d. of this proposed rule that would treat all implantable biologicals as devices, rather than drugs. To determine the actual APC offset amount for pass-through contrast agents that takes into consideration the otherwise applicable OPPS payment amount, we are proposing to multiply the “policy-packaged” drug offset fraction by the APC payment amount for the procedure with which the pass-through contrast agent is used and, accordingly, reduce the separate OPPS payment for the pass-through contrast agent by this amount.

We are proposing to continue to post annually on the CMS Web site at http://www.cms.hhs.gov/​HospitalOutpatientPPS, a file that contains the APC offset amounts that would be used for that year for purposes of both evaluating cost significance for candidate pass-through device categories and drugs and biologicals, including contrast agents, and establishing any appropriate APC offset amounts. Specifically, the file will continue to provide, for every OPPS clinical APC, the amounts and percentages of APC payment associated with packaged implantable devices, “policy-packaged” drugs, and “threshold-packaged” drugs and biologicals.

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

1. Background

Under the CY 2009 OPPS, we currently pay for drugs, biologicals, and Start Printed Page 35319radiopharmaceuticals 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 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. (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 Public Law 108-173, set 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 CYs 2008 and 2009, 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 threshold for CYs 2008 and 2009, and our proposed approach for CY 2010 are discussed in more detail in section V.B.2.b. of this proposed rule.

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

a. Background

As indicated in section V.B.1. of this proposed rule, 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)), we set the packaging threshold for establishing separate APCs for drugs and biologicals at $60 for CYs 2008 and 2009.

Following the CY 2007 methodology, for CY 2010 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 ($65.07) to the nearest $5 increment, which yielded a figure of $65. 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 2010 of $65. (For a more detailed discussion of the OPPS drug packaging threshold and the use of the PPI for prescription drugs, we refer readers to the CY 2007 OPPS/ASC final rule with comment period (71 FR 68085 through 68086).)

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

To determine their proposed CY 2010 packaging status, for this proposed rule we calculated the per day cost of all drugs on a HCPCS code-specific basis (with the exception of those drugs and biologicals with multiple HCPCS codes that include different dosages as described in section V.B.2.c. of this proposed rule and excluding diagnostic radiopharmaceuticals and contrast agents that we are proposing to continue to package in CY 2010 as discussed in section V.B.2.d. of this proposed rule), nonimplantable biologicals, and therapeutic radiopharmaceuticals (collectively called “threshold-packaged” drugs) that had a HCPCS code in CY 2008 and were paid (via packaged or separate payment) under the OPPS, using CY 2008 claims data processed before January 1, 2009. In order to calculate the per day costs for drugs, nonimplantable biologicals, and therapeutic radiopharmaceuticals to determine their proposed packaging status in CY 2010, we used the methodology that was described in detail in the CY 2006 OPPS proposed rule (70 FR 42723 through 42724) and finalized in the CY 2006 OPPS final rule with comment period (70 FR 68636 through 70 FR 68638).

To calculate the CY 2010 proposed rule per day costs, we used an estimated payment rate for each drug and nonimplantable biological HCPCS code of ASP+4 percent (which is the payment rate we are proposing for separately payable drugs and nonimplantable biologicals in CY 2010, 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 2008 (data that were used for payment purposes in the physician's office setting, effective April 1, 2009) to determine the proposed rule per day cost.

As is our standard methodology, for CY 2010, we are proposing to use payment rates based on the ASP data from the fourth quarter of CY 2008 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, 2009. For items that did not have an ASP-based payment rate, such as therapeutic radiopharmaceuticals, we used their mean unit cost derived from the CY 2008 hospital claims data to determine their proposed per day cost. We packaged items with a per day cost less than or equal to $65 and identified items with a per day cost greater than $65 as separately payable. Consistent with our past practice, we crosswalked Start Printed Page 35320historical OPPS claims data from the CY 2008 HCPCS codes that were reported to the CY 2009 HCPCS codes that we display in Addendum B to this proposed rule for payment in CY 2010.

Our policy during previous cycles of the OPPS has been to use updated ASP and claims data to make final determinations of the packaging status of HCPCS codes for drugs, nonimplantable biologicals, and therapeutic radiopharmaceuticals for the final rule with comment period. We note that it is also our policy to make an annual packaging determination for a HCPCS code only when we develop the OPPS/ASC final rule for the update year. Only HCPCS codes that are identified as separately payable in the final rule with comment period are subject to quarterly updates. For our calculation of per day costs of HCPCS codes for drugs and nonimplantable biologicals in the CY 2010 OPPS/ASC final rule with comment period, we are proposing to use ASP data from the first quarter of CY 2009, 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, 2009, along with updated hospital claims data from CY 2008. We note that we also would use these data for budget neutrality estimates and impact analyses for the CY 2010 OPPS/ASC final rule with comment period. Payment rates for HCPCS codes for separately payable drugs and nonimplantable 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 2009, 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, 2009. These rates would then be updated in the January 2010 OPPS update, based on the most recent ASP data to be used for physician's office and OPPS payment as of January 1, 2010. For items that do not currently have an ASP-based payment rate, such as therapeutic radiopharmaceuticals, we would recalculate their mean unit cost from all of the CY 2008 claims data and updated cost report information available for the CY 2010 final rule to determine their final per day cost.

Consequently, the packaging status of some HCPCS codes for drugs, nonimplantable biologicals, and therapeutic radiopharmaceuticals in the CY 2010 OPPS/ASC final rule with comment period using the updated data may be different from the same drug HCPCS code's packaging status determined based on the data used for this proposed rule. Under such circumstances, we are proposing to continue the established policies initially adopted for the CY 2005 OPPS (69 FR 65780) in order to more equitably pay for those drugs whose median costs fluctuate relative to the CY 2010 OPPS drug packaging threshold and the drugs' payment status (packaged or separately payable) in CY 2009. Specifically, we are proposing for CY 2010 to apply the following policies to these HCPCS codes for drugs, nonimplantable biologicals, and therapeutic radiopharmaceuticals whose relationship to the $65 drug packaging threshold changes based on the final updated data:

  • HCPCS codes for drugs and nonimplantable biologicals that were paid separately in CY 2009 and that were proposed for separate payment in CY 2010, and then have per day costs equal to or less than $65, based on the updated ASPs and hospital claims data used for the CY 2010 final rule with comment period, would continue to receive separate payment in CY 2010.
  • HCPCS codes for drugs and nonimplantable biologicals that were packaged in CY 2009 and that were proposed for separate payment in CY 2010, and then have per day costs equal to or less than $65, based on the updated ASPs and hospital claims data used for the CY 2010 final rule with comment period, would remain packaged in CY 2010.
  • HCPCS codes for drugs and nonimplantable biologicals for which we proposed packaged payment in CY 2010 but then have per day costs greater than $65, based on the updated ASPs and hospital claims data used for the CY 2010 final rule with comment period, would receive separate payment in CY 2010.

In CY 2005 (69 FR 65779 through 65780), we implemented a policy that exempted the oral and injectable forms of 5-HT3 antiemetic products from our packaging policy, providing separate payment for these drugs regardless of their estimated per day costs through CY 2009. There are currently seven Level II HCPCS codes for 5-HT3 antiemetics that describe four different drugs, specifically dolasetron mesylate, granisetron hydrochloride, ondansetron hydrochloride, and palonosetron hydrochloride. Each of these drugs except palonosetron hydrochloride is available in both injectable and oral forms, so seven HCPCS codes are available to describe the four drugs in all of their forms. As of 2008, both odansetron hydrochloride and granisetron hydrochloride were available in generic versions. We have now paid separately for all 5-HT3 antimetics for 5 years. While we continue to believe that use of these antiemetics is an integral part of an anticancer treatment regimen and that OPPS claims data demonstrate their increasingly common hospital outpatient utilization, we no longer believe that a specific exemption to our standard drug payment methodology is necessary for CY 2010 to ensure access to the most appropriate antiemetic product for Medicare beneficiaries.

We analyzed historical hospital outpatient claims data for the seven 5-HT3 antiemetic products that have been subject to this packaging exemption, and we found that HCPCS code J2405 (Injection, ondansetron hydrochloride, per 1 mg) was the dominant product used in the hospital outpatient setting both before and after the adoption of our 5-HT3 packaging exemption in CY 2005. Prior to this packaging exemption, payment for HCPCS code J2405 was packaged in CY 2004. HCPCS code J2405 was modestly costly relative to the other 5-HT3 antiemetics in CY 2004, but its per day cost still fell below the applicable packaging threshold of $50. Since CY 2005, the injectable form of ondansetron hydrochloride has experienced a significant change in its pricing structure as generic versions of the drug have become available, including a steady decline in its estimated per day cost. Notwithstanding this change in price, we have observed continued growth in its OPPS utilization. For CY 2008, HCPCS code J2405 was the least costly of the seven 5-HT3 antiemetics, with an estimated per day cost of only approximately $1 in CY 2008 (based on July 2008 ASP information), yet we observed that it constituted 88 percent of all treatment days of 5-HT3 antiemetics in the CY 2008 OPPS claims data. Using updated April 2009 ASP information for this CY 2010 proposed rule, we continue to estimate a per day cost of only approximately $1 for HCPCS code J2405. For the five modestly priced 5-HT3 antiemetics, we estimate CY 2010 per day costs between approximately $7 and $50, while we estimate a per day cost for the most costly 5-HT3 antiemetic, J2469 (Injection, palonosetron hcl, 25 mcg), of $174 per day. In light of an anticipated relatively constant pricing structure for these drugs in CY 2010, combined with our experience that prescribing patterns for these 5-HT3 antiemetics are not very sensitive to changes in price, we do not believe that continuing to exempt these drugs from our standard OPPS drug packaging methodology is appropriate for CY 2010. Therefore, for CY 2010, Start Printed Page 35321because we are proposing to no longer exempt the 5-HT3 antiemetic products from our standard packaging methodology, we are proposing to package payment for all of the 5-HT3 antiemetics except palonosetron hydrochloride, consistent with their estimated per day costs from CY 2008 claims data.

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

In the CY 2008 OPPS/ASC final rule with comment period (72 FR 66776), we began recognizing, for OPPS payment purposes, multiple HCPCS codes reporting different dosages for the same covered Part B drugs or biologicals in order to reduce hospitals' administrative burden by permitting them to report all HCPCS codes for drugs and biologicals. In general, prior to CY 2008, the OPPS recognized for payment only the HCPCS code that described the lowest dosage of a drug or biological. We extended this recognition to multiple HCPCS codes for several other drugs under the CY 2009 OPPS (73 FR 68665). During CYs 2008 and 2009, we applied a policy that assigned the status indicator of the previously recognized HPCCS code to the associated newly recognized code(s), reflecting the new code(s)' packaged or separately payable status. In the CY 2008 OPPS/ASC final rule with comment period (72 FR 66775), we explained that once claims data were 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, established HCPCS code-specific methodology for determining a code's packaging status for a given update year. However, we also stated that we planned to closely follow our claims data to ensure that our annual packaging determinations for the different HCPCS codes describing the same drug or biological did not create inappropriate payment incentives for hospitals to report certain HCPCS codes instead of others.

CY 2008 is the first year of claims data for the HCPCS codes describing different dosages of the same drug or biological that were newly recognized in CY 2008. Applying our standard HCPCS code-specific packaging determination methodology as described in section V.B.2.b. of this proposed rule, we found that our CY 2008 claims data would result in several different packaging determinations for different codes describing the same drug or biological. Furthermore, our claims data include few units and days for a number of these newly recognized HCPCS codes, resulting in our concern that these data reflect claims from only a small number of hospitals, even though the drug or biological itself may be reported by many other hospitals under the most common HCPCS code. We are concerned about proposing different packaging determinations for multiple HCPCS codes for the same drug or biological driven by different costs associated with the varying dosages of the same drug or biological and a small number of claims for the less common dosages that are not representative of the costs of all hospitals billing for the drug or biological. This is especially true when the general policy of the current CMS HCPCS Workgroup is to establish a single HCPCS code for a drug or biological, with a dosage that would allow accurate reporting of a patient dose for all anticipated clinical uses of the drug or biological.

Based on these findings from our first available claims data for the newly recognized HCPCS codes, we believe that adopting our standard HCPCS code-specific packaging determinations for these codes could lead to payment incentives for hospitals to report certain HCPCS codes instead of others, particularly because we do not currently require hospitals to report all drug and biological HCPCS codes under the OPPS in consideration of our previous policy that generally recognized only the lowest dosage HCPCS code for a drug or biological for OPPS payment. Therefore, for CY 2010 we are proposing to make packaging determinations on a drug-specific basis, rather than a HCPCS code-specific basis, for those HCPCS codes that describe the same drug or biological but different dosages. To identify all HCPCS codes for drugs and biologicals to which this proposed policy would apply, we first included the drugs and biologicals with multiple HCPCS codes that we newly recognized for payment in CY 2008 and CY 2009. We then reviewed all of the remaining drug and biological HCPCS codes to identify other drugs and biologicals for which longstanding OPPS policy recognized for payment multiple HCPCS codes for different dosages of the same drug or biological, so that our CY 2010 proposal would apply to the packaging determinations for these drugs and biologicals and their associated HCPCS codes. All of the drug and biological HCPCS codes that we are proposing to be subject to this drug-specific packaging determination methodology are listed in Table 24 below.

In order to propose a packaging determination that is consistent across all HCPCS codes that describe different dosages of the same drug or biological, we aggregated both our CY 2008 claims data and our pricing information at ASP+4 percent across all of the HCPCS codes that describe each distinct drug or biological in order to determine the mean units per day of the drug or biological in terms of the HCPCS code with the lowest dosage descriptor. We then multiplied the weighted average ASP+4 percent payment amount across all dosage levels of a specific drug or biological by the estimated units per day for all HCPCS codes that describe each drug or biological from our claims data to determine the estimated per day cost of each drug or biological at less than or equal to $65 (whereupon all HCPCS codes for the same drug or biological would be packaged) or greater than $65 (whereupon all HCPCS codes for the same drug or biological would be separately payable). The proposed packaging status of each drug and biological HCPCS code to which this methodology would apply is displayed in Table 24.

Table 24—HCPCS Codes to Which the Proposed CY 2010 Drug-Specific Packaging Determination Methodology Applies

CY 2009 HCPCS codeCY 2009 long descriptorProposed CY 2010 SI
J0530Injection, penicillin g benzathine and penicillin g procaine, up to 600,000 unitsN
J0540Injection, penicillin g benzathine and penicillin g procaine, up to 1,200,000 unitsN
J0550Injection, penicillin g benzathine and penicillin g procaine, up to 2,400,000 unitsN
J0560Injection, penicillin g benzathine, up to 600,000 unitsN
J0570Injection, penicillin g benzathine, up to 1,200,000 unitsN
J0580Injection, penicillin g benzathine, up to 2,400,000 unitsN
Start Printed Page 35322
J1380Injection, estradiol valerate, up to 10 mgN
J0970Injection, estradiol valerate, up to 40 mgN
J1390Injection, estradiol valerate, up to 20 mgN
J1020Injection, methylprednisolone acetate, 20 mgN
J1030Injection, methylprednisolone acetate, 40 mgN
J1040Injection, methylprednisolone acetate, 80 mgN
J1070Injection, testosterone cypionate, up to 100 mgN
J1080Injection, testosterone cypionate, 1 cc, 200 mgN
J1440Injection, filgrastim (g-csf), 300 mcgK
J1441Injection, filgrastim (g-csf), 480 mcgK
J1460Injection, gamma globulin, intramuscular, 1 ccK
J1470Injection, gamma globulin, intramuscular, 2 ccK
J1480Injection, gamma globulin, intramuscular, 3 ccK
J1490Injection, gamma globulin, intramuscular, 4 ccK
J1500Injection, gamma globulin, intramuscular, 5 ccK
J1510Injection, gamma globulin, intramuscular, 6 ccK
J1520Injection, gamma globulin, intramuscular, 7 ccK
J1530Injection, gamma globulin, intramuscular, 8 ccK
J1540Injection, gamma globulin, intramuscular, 9 ccK
J1550Injection, gamma globulin, intramuscular, 10 ccK
J1560Injection, gamma globulin, intramuscular, over 10 ccK
J1642Injection, heparin sodium, (heparin lock flush), per 10 unitsN
J1644Injection, heparin sodium, per 1000 unitsN
J1850Injection, kanamycin sulfate, up to 75 mgN
J1840Injection, kanamycin sulfate, up to 500 mgN
J2270Injection, morphine sulfate, up to 10 mgN
J2271Injection, morphine sulfate, 100mgN
J2320Injection, nandrolone decanoate, up to 50 mgK
J2321Injection, nandrolone decanoate, up to 100 mgK
J2322Injection, nandrolone decanoate, up to 200 mgK
J2788Injection, rho d immune globulin, human, minidose, 50 micrograms (250 i.u.)K
J2790Injection, rho d immune globulin, human, full dose, 300 micrograms (1500 i.u.)K
J2920Injection, methylprednisolone sodium succinate, up to 40 mgN
J2930Injection, methylprednisolone sodium succinate, up to 125 mgN
J3120Injection, testosterone enanthate, up to 100 mgN
J3130Injection, testosterone enanthate, up to 200 mgN
J3471Injection, hyaluronidase, ovine, preservative free, per 1 usp unit (up to 999 usp units)N
J3472Injection, hyaluronidase, ovine, preservative free, per 1000 usp unitsN
J7050Infusion, normal saline solution, 250 ccN
J7040Infusion, normal saline solution, sterile (500 ml=1 unit)N
J7030Infusion, normal saline solution, 1000 ccN
J7515Cyclosporine, oral, 25 mgN
J7502Cyclosporine, oral, 100 mgN
J8520Capecitabine, oral, 150 mgK
J8521Capecitabine, oral, 500 mgK
J9060Injection, cisplatin, powder or solution, per 10 mgN
J9062Cisplatin, 50 mgN
J9070Injection, cyclophosphamide, 100 mgN
J9080Cyclophosphamide, 200 mgN
J9090Cyclophosphamide, 500 mgN
J9091Injection, cyclophosphamide, 1.0 gramN
J9092Cyclophosphamide, 2.0 gramN
J9093Injection, cyclophosphamide, lyophilized, 100 mgN
J9094Cyclophosphamide, lyophilized, 200 mgN
J9095Cyclophosphamide, lyophilized, 500 mgN
J9096Injection, cyclophosphamide, lyophilized, 1.0 gramN
J9097Cyclophosphamide, lyophilized, 2.0 gramN
J9100Injection, cytarabine, 100 mgN
J9110Injection, cytarabine, 500 mgN
J9130Injection, dacarbazine, 100 mgN
J9140Injection, dacarbazine, 200 mgN
J9250Injection, methotrexate sodium, 5 mgN
J9260Methotrexate sodium, 50 mgN
J9280Injection, mitomycin, 5 mgK
J9290Mitomycin, 20 mgK
J9291Mitomycin, 40 mgK
J9370Injection, vincristine sulfate, 1 mgN
J9375Vincristine sulfate, 2 mgN
J9380Vincristine sulfate, 5 mgN
Start Printed Page 35323
Q0164Prochlorperazine maleate, 5 mg, oral, fda approved prescription anti-emetic, for use as a complete therapeutic substitute for an iv anti-emetic at the time of chemotherapy treatment, not to exceed a 48 hour dosage regimenN
Q0165Prochlorperazine maleate, 10 mg, oral, fda approved prescription anti-emetic, for use as a complete therapeutic substitute for an iv anti-emetic at the time of chemotherapy treatment, not to exceed a 48 hour dosage regimenN
Q0167Dronabinol, 2.5 mg, oral, fda approved prescription anti-emetic, for use as a complete therapeutic substitute for an iv anti-emetic at the time of chemotherapy treatment, not to exceed a 48 hour dosage regimenN
Q0168Dronabinol, 5 mg, oral, fda approved prescription anti-emetic, for use as a complete therapeutic substitute for an iv anti-emetic at the time of chemotherapy treatment, not to exceed a 48 hour dosage regimenN
Q0169Promethazine hydrochloride, 12.5 mg, oral, fda approved prescription anti-emetic, for use as a complete therapeutic substitute for an iv anti-emetic at the time of chemotherapy treatment, not to exceed a 48 hour dosage regimenN
Q0170Promethazine hydrochloride, 25 mg, oral, fda approved prescription anti-emetic, for use as a complete therapeutic substitute for an iv anti-emetic at the time of chemotherapy treatment, not to exceed a 48 hour dosage regimenN
Q0171Chlorpromazine hydrochloride, 10 mg, oral, fda approved prescription anti-emetic, for use as a complete therapeutic substitute for an iv anti-emetic at the time of chemotherapy treatment, not to exceed a 48 hour dosage regimenN
Q0172Chlorpromazine hydrochloride, 25 mg, oral, fda approved prescription anti-emetic, for use as a complete therapeutic substitute for an iv anti-emetic at the time of chemotherapy treatment, not to exceed a 48 hour dosage regimenN
Q0175Perphenazine, 4 mg, oral, fda approved prescription anti-emetic, for use as a complete therapeutic substitute for an iv anti-emetic at the time of chemotherapy treatment, not to exceed a 48 hour dosage regimenN
Q0176Perphenazine, 8 mg, oral, fda approved prescription anti-emetic, for use as a complete therapeutic substitute for an iv anti-emetic at the time of chemotherapy treatment, not to exceed a 48 hour dosage regimenN
Q0177Hydroxyzine pamoate, 25 mg, oral, fda approved prescription anti-emetic, for use as a complete therapeutic substitute for an iv anti-emetic at the time of chemotherapy treatment, not to exceed a 48 hour dosage regimenN
Q0178Hydroxyzine pamoate, 50 mg, oral, fda approved prescription anti-emetic, for use as a complete therapeutic substitute for an iv anti-emetic at the time of chemotherapy treatment, not to exceed a 48 hour dosage regimenN

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

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

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. 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.

We believe that packaging the payment for diagnostic radiopharmaceuticals and contrast agents into the payment for their associated procedures continues to be appropriate for CY 2010. As discussed in more detail the CY 2009 OPPS/ASC final rule with comment period (73 FR 68645 through 68649), we presented several reasons supporting our initial policy to package payment of diagnostic radiopharmaceuticals and contrast agents into their associated procedures on a claim. Specifically, we stated that we believed packaging was appropriate because: (1) The statutory requirement that we must pay separately for drugs Start Printed Page 35324and biologicals for which the per day cost exceeds $50 under section 1833(t)(16)(B) of the Act has expired; (2) we believe that diagnostic radiopharmaceuticals and contrast agents function effectively as supplies that enable the provision of an independent service; and (3) section 1833(t)(14)(A)(iii) of the Act requires that payment for specified covered outpatient drugs (SCODs) be set prospectively based on a measure of average hospital acquisition cost. For these reasons, we continue to believe that our proposal to continue to treat diagnostic radiopharmaceuticals and contrast agents differently from other SCODs is appropriate for CY 2010. Therefore, we are proposing to continue packaging payment for all contrast agents and diagnostic radiopharmaceuticals, collectively referred to as “policy-packaged” drugs, regardless of their per day costs, for CY 2010.

For more information on how we are proposing to set CY 2010 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.

In CY 2009 (73 FR 68634), we began packaging the payment for all nonpass-through implantable biologicals into payment for the associated surgical procedure. Because implantable biologicals may sometimes substitute for nonbiological devices, we noted that if we were to provide separate payment for implantable biologicals without pass-through status, we would potentially be providing duplicate device payment, both through the packaged nonbiological device cost already included in the surgical procedure's payment and separate biological payment. We concluded that we saw no basis for treating implantable biological and nonbiological 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, in CY 2009, we adopted a final policy to package payment for all nonpass-through implantable biologicals that are surgically inserted or implanted (through a surgical incision or a natural orifice), like our longstanding policy that packages payment for all implantable nonbiological devices without pass-through status.

For CY 2010, we continue to believe that the policy to package payment for implantable devices that are integral to the performance of separately paid procedures should also apply to payment for all implantable biologicals without pass-through status, when those biologicals function as implantable devices. Therefore, we are proposing to continue to package payment for nonpass-through implantable biologicals that are surgically inserted or implanted (through a surgical incision or a natural orifice) into the body, referred to as devices, in CY 2010. In accordance with this proposal, two of the products with expiring pass-through status for CY 2010 are biologicals that are solely surgically implanted according to their FDA-approved indications. These products are described by HCPCS codes C9354 (Acellular pericardial tissue matrix of non-human origin (Veritas), per square centimeter) and C9355 (Collagen nerve cuff (NeuroMatrix), per 0.5 centimeter length). Like the three implantable biologicals with expiring pass-through status in CY 2009 that were discussed in the CY2009 OPPS/ASC final rule with comment period (73 FR 68633 through 68634), we believe that the two biologicals specified above with expiring pass-through status for CY 2010 differ from other biologicals paid under the OPPS in that they specifically function as surgically implanted devices. As a result of the proposed CY 2010 packaged payment methodology for all nonpass-through implantable biologicals, we are proposing to package payment for HCPCS codes C9354 and C9355 and assign them status indicator “N” for CY 2010. 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 in CY 2010. Moreover, for nonpass-through biologicals that 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.

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

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

Section 1833(t)(14) of the Act defines certain separately payable radiopharmaceuticals, drugs, and biologicals and mandates specific payments for these items. Under section 1833(t)(14)(B)(i) of the Act, a “specified covered outpatient drug” 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 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.

Section 1833(t)(14)(E) of the Act provides for an adjustment in OPPS payment rates for overhead and related expenses, such as pharmacy services and handling costs. Section 1833(t)(14)(E)(i) of the Act required MedPAC to study pharmacy overhead and to make recommendations to the Secretary regarding whether, and if so how, a payment adjustment should be made to compensate hospitals for them. Section 1833(t)(14)(E)(ii) of the Act authorizes the Secretary to adjust the weights for ambulatory procedure classifications for SCODs to take into account the findings of the MedPAC study.

In the CY 2006 OPPS proposed rule (70 FR 42728), we discussed the June 2005 report by MedPAC regarding pharmacy overhead costs in HOPDs and summarized the findings of that study:Start Printed Page 35325

  • 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 reflect 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 (70 FR 42729). 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 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 (70 FR 42730). We also proposed: (1) To combine several overhead categories recommended by MedPAC; (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 CY 2006 claims data available for the CY 2008 OPPS.

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 to establish charges for HCPCS codes for pharmacy overhead and to report them. Therefore, we did not finalize this proposal for CY 2006. Instead, we established payment for separately payable drugs and biologicals at ASP+6 percent, which we calculated by comparing the estimated aggregate cost of separately payable drugs and biologicals in our claims data to the estimated aggregate ASP dollars for separately payable drugs and biologicals, using the ASP as a proxy for average acquisition cost (70 FR 68642). Hereinafter, we refer to this methodology as our standard drug payment methodology. We concluded that payment for drugs and biologicals and pharmacy overhead at a combined ASP+6 percent rate would serve as the best proxy for the combined acquisition and overhead costs of each of these products.

In the CY 2007 OPPS/ASC final rule with comment period (71 FR 68091), we finalized our proposed policy to provide 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 that we finalized was higher than the equivalent average ASP-based amount calculated from claims of ASP+4 percent according to our standard drug payment methodology, but we adopted payment at ASP+6 percent for stability while we continued to examine the issue of the costs of pharmacy overhead in the HOPD.

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 payable 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 this 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. 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). 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 concerns expressed by the APC Panel and public commenters, 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 according to our standard drug payment methodology, 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.

For CY 2009, we proposed to pay separately payable drugs and biologicals at ASP+4 percent, including both SCODs and other drugs without CY 2009 OPPS pass-through status, based on our standard drug payment methodology, and we also proposed to split the Drugs Charged to Patients cost center into two cost centers: One for drugs with high pharmacy overhead costs and one for drugs with low pharmacy overhead costs (73 FR 41492). We noted that we expected that CCRs from the 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 overhead costs. After consideration of the public comments received and the APC Panel recommendations, we finalized a CY 2009 policy (73 FR 68659) to provide payment for separately payable Start Printed Page 35326nonpass-through drugs and biologicals based on costs calculated from hospital claims at a 1-year transitional rate of ASP+4 percent, in the context of an equivalent average ASP-based payment rate of ASP+2 percent calculated according to our standard drug payment methodology from the final rule claims and cost report data. We did not finalize our proposal to split the single standard Drugs Charged to Patients cost center into two cost centers largely due to concerns raised to us by hospitals about the associated administrative burden. Instead, we indicated in the CY 2009 OPPS/ASC final rule with comment period (73 FR 68659) that we would continue to explore other potential approaches to improve our drug cost estimation methodology, thereby increasing payment accuracy for separately payable drugs and biologicals.

In response to the CMS proposals for the CY 2008 and CY 2009 OPPS, a group of pharmacy stakeholders (hereinafter referred to as the pharmacy stakeholders), including some cancer hospitals, some pharmaceutical manufacturers, and some hospital and professional associations, commented that CMS should pay an acquisition cost of ASP+6 percent for separately payable drugs, should substitute ASP+6 percent for the packaged cost of all packaged drugs and biologicals on procedure claims, and should redistribute the difference between the aggregate estimated packaged drug cost in claims and payment for all drugs, including packaged drugs at ASP+6 percent, as separate pharmacy overhead payments for separately payable drugs. They indicated that this approach would preserve the aggregate drug cost observed in the claims data, while significantly increasing payment accuracy for individual drugs and procedures using packaged drugs. Their suggested approach would provide a separate overhead payment for each separately payable drug or biological at one of three different levels, depending on the pharmacy stakeholders' assessment of the complexity of pharmacy handling associated with each specific drug or biological (73 FR 68651 through 68652). Each separately payable drug or biological HCPCS code would be assigned to one of the three overhead categories, and the separate pharmacy overhead payment applicable to the category would be made when each of the separately payable drugs or biologicals was paid.

At the February 2009 meeting, the APC Panel recommended that CMS pay for the acquisition cost of all separately payable drugs at no less than ASP+6 percent. The APC Panel also recommended that CMS package payment at ASP+6 percent on claims for all drugs that are not separately payable and use the difference between these rates and CMS' cost derived from charges to create a pool to provide more appropriate payment for pharmacy service costs and that CMS pay for pharmacy services costs using this pool, applying a tiered approach to payments based on some objective criteria related to the pharmacy resources required for groups of drugs. The APC Panel further recommended that, if CMS does not implement the drug payment recommendations specified above, CMS should exclude data from hospitals that participate in the 340B Federal drug pricing program from its ratesetting calculations for drugs and CMS should pay 340B hospitals in the same manner as it pays non-340B hospitals. Hospitals that participate in the 340B program are generally hospitals that serve a disproportionate share of low-income patients and receive disproportionate share payments under the IPPS. These facilities may acquire outpatient drugs and biologicals at prices that are substantially below ASP because the 340B program requires drug manufacturers to provide outpatient drugs to eligible entities at a reduced price and these reduced price sales are not included in the ASP submissions of manufacturers to Medicare. Public presenters at the February 2009 APC Panel meeting emphasized that the purpose of the 340B Federal drug pricing program is to ensure access to drugs for low-income patients by supplementing the higher cost of providing care to low-income patients born by hospitals serving a disproportionate share of these patients. The agenda, recommendations, and report from the February 2009 APC Panel meeting are posted on the CMS Web site at: http://www.cms.hhs.gov/​FACA. We respond to these APC Panel recommendations in our discussion of the proposed CY 2010 policy that follows.

b. Proposed Payment Policy

Section 1833(t)(14)(A)(iii) of the Act, as described above, continues to be applicable to determining payments for SCODs for CY 2010. This provision requires that 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) of the Act authorizes the Secretary to adjust APC weights to take into account the 2005 MedPAC report relating to overhead and related expenses, such as pharmacy services and handling costs. Since CY 2006, when we first adopted our standard methodology of paying for separately payable drugs and biologicals based on the equivalent average ASP-based payment rate calculated from claims and cost report data, we have applied this methodology to payment for all separately payable drugs and biologicals without pass-through status, both SCODs and other drugs and biologicals that do not meet the statutory definition of SCODs. We have seen no reason to distinguish SCODs from these other separately payable drugs and biologicals, and under our standard drug payment methodology, we have used the costs from hospital claims data as a proxy for the average hospital acquisition cost that the statute requires for payment of SCODs and to provide payment for the associated pharmacy overhead cost.

We are proposing that, for CY 2010, we would make payment for separately payable drugs and biologicals not receiving pass-through payment at ASP+4 percent, which would continue to include payment for both the acquisition costs of separately payable drugs and biologicals and the pharmacy overhead costs applicable to these separately payable drugs and biologicals. Based on the rationale described below, we believe that approximately $150 million of the estimated $395 million total in pharmacy overhead cost, specifically between one-third and one-half of that cost, included in our claims data for packaged drugs and biologicals above the aggregate ASP dollars of these packaged products should be attributed to separately payable drugs and biologicals to provide an adjustment for the pharmacy overhead costs of these separately payable products. As a result, we also are proposing to reduce the cost of packaged drugs and biologicals that is included in the payment for procedural APCs to offset the $150 million adjustment to payment for separately payable drugs and biologicals. We are proposing that any redistribution of pharmacy overhead cost that may arise from CY 2010 final rule data would occur only from some drugs and Start Printed Page 35327biologicals to other drugs and biologicals, thereby maintaining the estimated total cost of drugs and biologicals (no redistribution of cost would occur from other services to drugs and biologicals or vice versa) that we calculate based on the charges and costs reported by hospitals on claims and cost reports.

Using our CY 2010 proposed rule data, and applying our longstanding methodology for calculating the total cost of separately payable drugs and biologicals in our claims compared to the ASP dollars for the same drugs and biologicals, without applying the proposed overhead cost redistribution, we determined that the estimated aggregate cost of separately payable drugs and biologicals (status indicators “K” and “G”), including acquisition and pharmacy overhead costs, is equivalent to ASP-2 percent. Therefore, under our standard drug payment methodology, we would pay for separately payable drugs and biologicals at ASP−2 percent for CY 2010, their equivalent average ASP-based payment rate. We also determined that the estimated aggregate cost of packaged drugs and biologicals (status indicator “N”), including acquisition and pharmacy overhead costs, is equivalent to ASP+247 percent. We found that the estimated aggregate cost for all drugs and biologicals (status indicators “N,” “K,” and “G”), including acquisition and pharmacy overhead costs, is equivalent to ASP+13 percent. For a detailed explanation of our standard process for these calculations, we refer readers to the CY 2006 OPPS proposed rule (70 FR 42725). Table 25 summarizes these findings.

Table 25—Standard Drug Payment Methodology Using CY 2010 OPPS Proposed Rule Data: ASP+X Calculation

Total ASP dollars for drugs and biologicals in claims data (in millions) *Total cost of drugs and biologicals in claims data (in millions) **Ratio of cost to ASPASP+X percent
Packaged Drugs and Biologicals$160$5553.47ASP+247
Separately Payable Drugs and Biologicals2,5892,5390.98ASP-2
All Drugs and Biologicals2,7493,0941.13ASP+13
* Total April 2009 ASP dollars (ASP multiplied by drug or biological units in CY 2008 claims) for drugs and biologicals with a HCPCS code and ASP information.
** Total cost in the CY 2008 claims data for drugs and biologicals with a HCPCS code and April 2009 ASP information.

We recognize that there may be concern over whether the actual full cost (acquisition and pharmacy overhead) of separately payable drugs and biologicals could be 2 percent less than ASP for these products, although we do not have ASP information specifically for their sales to hospitals. Similarly, we acknowledge that a full cost (acquisition and pharmacy overhead) of ASP+247 percent for packaged drugs may seem relatively high. When we subtract the total ASP dollars for packaged drugs and biologicals in the CY 2008 claims data ($160 million), our proxy for their acquisition cost, from the total cost of packaged drugs and biologicals in the same claims ($555 million), we find that the difference, which we view as the pharmacy overhead cost currently attributed to packaged drugs and biologicals is $395 million. While we currently have no way of assessing whether this current distribution of overhead cost to packaged drugs and biologicals is appropriate, we acknowledge that the current method of converting billed charges to costs has the potential to “compress” the calculated costs to some degree. Further, we recognize that the attribution of pharmacy overhead costs to packaged or separately payable drugs and biologicals through our standard drug payment methodology of a combined payment for acquisition and pharmacy overhead costs depends, in part, on the treatment of all drugs and biologicals each year under our annual drug packaging threshold. Changes to the packaging threshold may result in changes to payment for the overhead cost of drugs and biologicals that do not reflect actual changes in hospital pharmacy overhead cost for those products. For these reasons, we believe that some portion, but not all, of the $395 million in total overhead cost that is associated with packaged drugs and biologicals based on our standard drug payment methodology should, at least for CY 2010, be attributed to separately payable drugs and biologicals. Although we believe that for CY 2010 it would be prudent to redistribute some pharmacy overhead cost between packaged drugs and biologicals at ASP+247 percent and separately payable drugs at ASP−2 percent that would result from our standard drug payment methodology, the amount of overhead cost redistribution that would be appropriate between the packaged and separately payable drugs and biologicals in a payment system that is fundamentally based on averages is not fully evident. Pharmacy overhead cost includes, but is not limited to, some costs of indirect overhead that are shared by all hospital items and services, such as administrative and general costs, capital costs, staff benefits, and other facility costs. With regard to these indirect overhead costs, the amount of indirect overhead cost that is attributable to an inexpensive (typically packaged) drug is the same in dollar value as the amount of indirect overhead cost that is attributable to an extremely costly drug (typically separately payable). Hence, the indirect overhead costs that are common to all drugs and biologicals have no relationship to the cost of an individual drug or biological, or to the complexity of the handling, preparation, or storage of that individual drug or biological. Therefore, we believe that the indirect overhead cost alone for an inexpensive drug or biological could be far in excess of the ASP for that inexpensive product.

Layered on these indirect overhead costs are the pharmacy overhead direct costs of staff, supplies, and equipment that are directly attributable only to the storage, handling, preparation, and distribution of drugs and biologicals and which do vary, sometimes considerably, depending upon the drug being furnished. As we indicate above, in its June 2005 Report to Congress, MedPAC found that drugs can be categorized into seven different categories based on the handling costs (that is, the direct costs) incurred (70 FR 42729). Similarly, the pharmacy stakeholders, whose suggested approach the APC Panel Start Printed Page 35328recommended that we accept for CY 2010, identified three categories of pharmacy overhead complexity with variable costs, to which they assigned individual drugs and biologicals for purposes of implementing their recommended redistribution of the difference between aggregate dollars for all drugs and biologicals at ASP+6 percent and aggregate cost for all drugs and biologicals in the claims data as additional pharmacy overhead payments.

We acknowledge that the observed combined payment for acquisition and pharmacy overhead costs of ASP−2 percent for separately payable drugs and biologicals may be too low and ASP+247 percent for packaged drugs and biologicals in the CY 2010 claims data may be too high. However, we also believe that the pharmacy stakeholders' recommendation to set packaged drug and biologicals dollars to ASP+6 percent is inappropriate given our understanding that an equal allocation of indirect overhead costs among packaged and separately payable drugs and biologicals would lead to a higher observed ASP+X percent than ASP+6 percent for packaged drugs and biologicals. As discussed above, the indirect overhead costs that are common to all drugs and biologicals have no relationship to the cost of an individual drug or biological, or to the complexity of the handling, preparation, or storage of that individual drug or biological. Therefore, we believe that the indirect overhead cost alone for an inexpensive drug or biological which would be packaged could be far in excess of the ASP for that inexpensive product. In contrast, we would expect that the indirect overhead cost alone for an expensive drug or biological which would be separately paid could be far less than the ASP for that expensive product.

Therefore, we believe that some middle ground would represent the most accurate redistribution of pharmacy overhead cost. The assumption that approximately one-third to one-half of the total pharmacy overhead cost currently associated with packaged drugs and biologicals is a function of both charge compression and our choice of an annual drug packaging threshold offers a more appropriate allocation of drug and biological cost to separately payable drugs and biologicals. One-third of the $395 million of pharmacy overhead cost associated with packaged drugs and biologicals is $132 million, whereas one-half is $198 million. Within the one-third to one-half parameters, we are proposing that reallocating $150 million in drug and biological cost observed in the claims data from packaged drugs and biologicals to separately payable drugs and biologicals for CY 2010 would more appropriately distribute pharmacy overhead cost among packaged and separately payable drugs and biologicals than either of the two other options, that is, paying for separately payable drugs and biologicals at ASP−2 percent according to our standard drug payment methodology or adopting the pharmacy stakeholders' recommendation. If we attribute $150 million in additional cost to the payment for the drugs and biologicals we are proposing to pay separately for the CY 2010 OPPS, we calculate a payment rate for separately payable drugs and biologicals of ASP+4 percent as displayed in Table 26. Thus, we are proposing a pharmacy overhead adjustment for separately payable drugs and biologicals in CY 2010 that would result in their payment at ASP+4 percent. We would accomplish this adjustment by redistributing one-third to one-half of the pharmacy overhead cost of packaged drugs and biologicals ($150 million), which represents a reduction in the packaged drug and biological cost in the CY 2010 claims data of 27 percent.

Table 26—Proposed CY 2010 Pharmacy Overhead Adjustment Payment Methodology for Separately Payable and Packaged Drugs and Biologicals

Total ASP dollars for drugs and biologicals in claims data (in millions) *Total cost of drugs and biologicals in claims data after adjustment (in millions) **Ratio of cost to ASP (column C/ column B)ASP+X percent
Packaged Drugs and Biologicals$160$4052.53ASP+153
Separately Payable Drugs and Biologicals2,5892,6891.04ASP+4
All Drugs and Biologicals2,7493,0941.13ASP+13
* Total April 2009 ASP dollars (ASP multiplied by drug or biological units in CY 2008 claims) for drugs and biologicals with a HCPCS code and ASP information.
** Total cost in the CY 2008 claims data for drugs and biologicals with a HCPCS code and April 2009 ASP information.

We note that we are not proposing to redistribute pharmacy overhead cost from packaged to separately payable drugs and biologicals utilizing a methodology that would provide a separate pharmacy overhead payment for each separately payable drug and biological based on its pharmacy complexity. The OPPS is a prospective payment system that provides payment for groups of services and we believe that it is important, at a minimum, to maintain the current size of the OPPS payment bundles, in order to encourage efficiency in the hospital outpatient setting. As we stated in the CY2008 OPPS/ASC final rule with comment period (72 FR 66613), we believe it is important that the OPPS create incentives for hospitals to provide only necessary, high quality care and to provide that care as efficiently as possible. We have considered in recent years how we could increase packaging under the OPPS in a manner that would create incentives for efficiency while providing hospitals with flexibility to provide care in the most appropriate way for each Medicare beneficiary. Hospitals have repeatedly explained that they consider the acquisition and pharmacy overhead costs of drugs in setting their charges for drugs, and we have continued to provide a single payment for the acquisition and pharmacy overhead costs of separately payable drugs and biologicals under the OPPS consistent with this hospital charging practice. While we have worked to develop, and are now proposing, a refined payment methodology for drugs and biologicals for the CY 2010 OPPS that we believe would pay more accurately for the pharmacy overhead cost of packaged Start Printed Page 35329and separately payable drugs and biologicals, we do not believe it would be appropriate to unbundle the current single combined payment for the acquisition and overhead costs of a separately payable drug into two distinct payments, a drug payment and a pharmacy overhead payment. Furthermore, we note that section 1833(t)(14)(E)(ii) of the Act specifically authorizes the Secretary to adjust the APC payment weights for SCODs to take into account the recommendations of MedPAC on pharmacy overhead costs. We believe our proposed CY 2010 approach that would adjust the APC payment for separately payable drugs and biologicals to more accurately pay for their associated pharmacy overhead cost, rather than provide a separate payment for a drug's pharmacy overhead cost each time the product is separately paid, is consistent with this statutory provision. Therefore, we are proposing to continue to make a single bundled payment for the acquisition and pharmacy overhead costs of separately payable drugs and biologicals under the CY 2010 OPPS, an approach we believe both continues to encourage hospital efficiencies in the provision of drugs and biologicals to Medicare beneficiaries in the hospital outpatient setting and improves payment accuracy for the acquisition and pharmacy overhead costs of drugs and biologicals.

To confirm the portion of the $395 million in estimated pharmacy overhead cost currently associated with packaged drugs and biologicals that should be attributable to separately payable drugs and biologicals, we used information from a variety of sources in order to corroborate the appropriateness of our proposal to redistribute between one-third and one-half of the difference ($150 million) between the aggregate claims cost for packaged drugs and biologicals and ASP dollars for the same drugs and biologicals to separately payable drugs and biologicals. In order to improve the accuracy of payment for separately payable drugs and biologicals, we would incorporate an adjustment for pharmacy overhead and pay for these drugs and biologicals at ASP+4 percent. We would also improve the accuracy of payment for procedures using packaged drugs and biologicals by reducing the packaged drug and biological cost by 27 percent. We used our claims data, the April 2009 ASP information, and information provided by MedPAC and the pharmacy stakeholders to estimate an appropriate portion of the pharmacy overhead cost currently associated with packaged drugs and biologicals that may be attributed to the pharmacy overhead cost of separately payable drugs and biologicals. We conducted two separate analyses described below which confirm that our proposal to redistribute $150 million in pharmacy overhead cost currently associated with the cost of packaged drugs and biologicals is appropriate.

We began this exercise with three fundamental assumptions. The first assumption is that the hospital acquisition cost of separately payable drugs and biologicals, on average, is not less than 100 percent of ASP. We believe that this assumption is valid because we have been told that hospitals pay a range of prices for the same drug or biological. Some hospitals may be able to take advantage of volume and group purchasing to achieve significant discounts for certain drugs and biologicals, but other hospitals may pay more than average for drugs and biologicals because of their low volume usage or a hospital's remote geographic location. Further, hospitals often serve as community care resources so they must provide drugs and biologicals to meet the needs of all of the patients who present to their facilities for care. The amounts and nature of those drugs and biologicals may vary significantly and unpredictably over time, particularly for smaller hospitals, due to changing availability of other care settings in their communities, such as physicians' offices, or emergencies, and this variability may constrain hospitals' ability to purchase all necessary quantities of certain drugs and biologicals based on best price contractual agreements negotiated in advance. Hence, we believe that the ASP is likely a fair estimate of hospitals' average acquisition cost of drugs and biologicals in general, excluding direct and indirect overhead costs.

The second assumption is that packaged drugs and biologicals, as a group, typically have an aggregate absolute pharmacy overhead cost (direct and indirect) that exceeds the acquisition cost of the packaged drugs and biologicals. We believe that this assumption is appropriate because packaged drugs and biologicals carry the same absolute amount of indirect overhead cost per drug or biological administered as separately payable drugs and biologicals and because many packaged drugs and biologicals have extremely low ASPs but some of the same direct costs (for example, recordkeeping, storage, safety precautions, and disposal requirements) as separately payable drugs and biologicals. Our claims data show that the weighted average ASP for the drugs and biologicals we are proposing to package for CY 2010 is approximately $7 per day per packaged drug or biological, and we believe that it is a reasonable assumption that the full pharmacy overhead cost for a drug or biological (direct and indirect) equals or exceeds that amount.

Our final assumption is that, on average, the pharmacy overhead cost of separately payable drugs and biologicals, as a group, is not greater than the acquisition cost of the separately payable drugs and biologicals. We believe that this assumption is appropriate because separately payable drugs and biologicals carry the same absolute amount of indirect pharmacy overhead cost per drug or biological administered as packaged drugs and biologicals. While we have been told by MedPAC and the pharmacy stakeholders that separately payable drugs and biologicals generally have direct pharmacy overhead costs that are significantly higher than the direct overhead costs of packaged drugs and biologicals, we do not believe that they exceed the acquisition cost of separately payable drugs and biologicals. The weighted average ASP for the drugs and biologicals we are proposing for separate payment for CY 2010 is approximately $954 per day per separately payable drug or biological. We do not believe that the full pharmacy overhead cost for a separately payable drug or biological would, on average, exceed $954 per day for a single drug or biological. Hence, we believe these last two assumptions about the relationship of ASP to full pharmacy overhead cost (direct and indirect) for packaged and separately payable drugs and biologicals are appropriate for purposes of these analyses.

Having made these assumptions, we reduced the $395 million in estimated pharmacy overhead cost that exceeds the ASP dollars for packaged drugs and biologicals (their average acquisition cost) by $50 million. Fifty million dollars in additional cost would be necessary to raise the estimated cost calculated for separately payable drugs and biologicals from hospital claims data from 98 percent of ASP to 100 percent of ASP, in order to reach our estimate of the average hospital acquisition cost of separately payable drugs and biologicals of ASP. This left $345 million in estimated residual pharmacy overhead cost that continued to be associated with packaged drugs and biologicals. We believe that a portion of this cost has been associated with packaged drugs and biologicals in our claims data, both due to charge Start Printed Page 35330compression and our choice of an annual drug packaging threshold, and would continue to be less accurately associated with packaged drugs and biologicals were we not to engage in further redistribution of that portion of this residual pharmacy overhead cost of packaged drugs and biologicals.

We then performed two analyses using information provided by the MedPAC Report (June 2005 Report to Congress) and by the pharmacy stakeholders (February 2009 presentation to the APC Panel and other meetings with CMS) that we applied to our claims data to estimate the amount of residual pharmacy overhead cost associated with packaged drugs and biologicals that should more accurately be attributed to separately payable drugs and biologicals. To perform these analyses, we used claims data only for those drugs and biologicals described by HCPCS codes that met the following criteria:

  • The proposed CY 2010 OPPS status indicator for the HCPCS code was “G” for pass-through drugs and biologicals (excluding pass-through radiopharmaceuticals), “K” for separately payable drugs and biologicals that do not have pass-through status, or “N” for packaged drugs and biologicals, where the packaging status of these nonpass-through drugs and biologicals was determined by an estimate of cost per day based on ASP+4 percent;
  • April 2009 pricing information based on the ASP methodology (other than mean cost from claims data) was available for the HCPCS code, and we would use the ASP methodology to pay for the HCPCS code if it had a status indicator of “K” or “G”; and
  • CY 2008 OPPS claims data included claims for the HCPCS code or an equivalent predecessor code.

We first converted six of the seven categories that MedPAC recommended be created for reporting pharmacy overhead costs to three CMS categories (low, medium, and high), as we had proposed for the CY 2006 OPPS (70 FR 42729 through 42730); the seventh MedPAC category was not pertinent for this exercise because it is for the overhead cost attributable to radiopharmaceuticals. The CMS categories are defined as: Low (Orals); medium (Injection/Sterile Preparation; Single IV Solution/Sterile Preparation; Compounded Reconstituted IV Preparations); and high (Specialty IV or Agents requiring special handling in order to preserve their therapeutic value; Cytotoxic Agents in all formulations requiring personal protective equipment). We then derived a relative overhead weight for each of the three CMS categories by averaging the overhead weights for the six pertinent MedPAC categories. These averages were not weighted. The derived relative overhead weights for the CMS categories are as follows: Low = 1.00 (corresponding to MedPAC Category 1); medium = 3.61 (corresponding to MedPAC Categories 1, 2, and 3); and high = 11.11 (corresponding to MedPAC categories 5 and 6).

We also calculated a relative overhead weight for each of the three categories of pharmacy overhead complexity that were provided by the pharmacy stakeholders, using the different fixed dollar amounts that these stakeholders recommended that CMS pay for pharmacy overhead costs if we were to make such payments for “all drugs” (packaged and separately payable). The pharmacy stakeholders' categories are defined as: Low (Dispense without manipulation: e.g., oral drugs, pre-filled syringes); medium (Injectable drug with one step manipulation: e.g., simple injections); and high (Multiple step injectable products and chemotherapy that require safety considerations). The pharmacy stakeholders' relative overhead weights are as follows: Low = 1; medium = 2.67; and high = 5.50.

Using the pharmacy stakeholders' overhead categories (low, medium, and high) and incorporating the pharmacy stakeholders' assignments of specific drugs and biologicals to levels of pharmacy complexity that they previously provided to CMS, we then assigned the remaining HCPCS codes for drugs and biologicals (approximately 50 percent of all drug and biological HCPCS codes qualifying for this exercise) based on our understanding of the characteristics of the categories. Similarly, we assigned all drug and biological HCPCS codes to the CMS categories created from the MedPAC groups for the derived relative overhead weights based on the definitions of those categories. Although the subsequent analytic processes were identical, we performed these analyses separately using the derived CMS overhead category weights (results are in Table 27) and using the pharmacy stakeholders' overhead category weights (results are in Table 28).

Specifically, we assigned the overhead weights to each drug and biological in the set of drugs and biologicals qualifying for this exercise. We then calculated a per unit overhead cost by dividing the total relative weight for all drugs and biologicals in this exercise (low, medium, and high) into the residual pharmacy overhead cost from packaged drugs and biologicals of $345 million. Using the relative weights for each scenario, we estimated the exact per unit pharmacy overhead cost reallocation for each low, medium, and high pharmacy overhead category. We then added this payment amount to ASP for each drug and biological and reassessed the amount of total claims cost for separately payable and packaged drugs and biologicals and calculated our standard ratio of aggregate claims cost to aggregate ASP dollars for separately payable and packaged drugs and biologicals. The results of these analyses are shown in Tables 27 and 28 below.

Table 27—Estimated Redistribution of Pharmacy Overhead Costs Using Relative Weights Derived From MedPAC Pharmacy Overhead Categories and CY 2010 OPPS Proposed Rule Data

Total ASP dollars for drugs and biologicals in claims data (in millions) *Total cost of drugs and biologicals in claims data after adjustment (in millions) **Ratio of cost to ASP (column C/ column B)ASP+X percent
Packaged Drugs and Biologicals$160$3902.44ASP+144
Separately Payable Drugs and Biologicals2,5892,7041.04ASP+4
All Drugs2,7493,0941.13ASP+13
* Total April 2009 ASP dollars (ASP multiplied by drug or biological units in CY 2008 claims) for drugs and biologicals with a HCPCS code and ASP information.Start Printed Page 35331
** Total cost in the CY 2008 claims data after adjustment for drugs and biologicals with a HCPCS code and April 2009 ASP information.

Table 28—Estimated Redistribution of Pharmacy Overhead Cost Using Relative Weights Calculated From Pharmacy Stakeholders Recommended Pharmacy Overhead Payment Levels and CY 2010 Propposed Rule Data

Total ASP dollars for drugs and biologicals in claims data (in millions) *Total cost of drugs and biologicals in claims data after adjustment (in millions) **Ratio of cost to ASP (column C/ column B)ASP+X percent
Packaged Drugs and Biologicals$160$4022.51ASP+151
Separately Payable Drugs and Biologicals2,5892,6921.04ASP+4
All Drugs and Biologicals2,7493,0941.13ASP+13
* Total April 2009 ASP dollars (ASP multiplied by drug units in CY 2008 claims) for drugs with a HCPCS code and ASP information.
** Total cost in the CY 2008 claims data after adjustment for drugs with a HCPCS code and April 2009 ASP information.

As shown in Tables 27 and 28, the ratio of adjusted cost in the claims data for separately payable drugs and biologicals to ASP increased compared to the value derived from our standard methodology and declined for packaged drugs and biologicals compared to the value calculated according to our standard drug payment methodology as shown in Table 26. Specifically, under our standard methodology without adjustment of the pharmacy overhead cost currently attributed to packaged drugs and biologicals, packaged drugs and biologicals would be paid at ASP+247 percent. Using the CMS overhead weights, this value declined to ASP+144 percent and using the pharmacy stakeholders' overhead weights, it declined to ASP+151 percent.

Under our standard drug payment methodology, without adjustment of the pharmacy overhead cost currently attributed to separately payable drugs and biologicals, separately payable drugs and biologicals would be paid at ASP−2 percent. Assuming a base average acquisition cost for all drugs and biologicals of ASP and using the CMS overhead weights to redistribute the residual $345 million in pharmacy overhead cost associated with packaged drugs and biologicals in the claims data, this value increased to ASP+4 percent, and using the pharmacy stakeholders' overhead weights to redistribute the residual $345 million in pharmacy overhead cost, this value also increased to ASP+4 percent.

Based on these analyses, we estimate that we would redistribute $165 million in pharmacy overhead cost from packaged to separately payable drugs and biologicals by setting the average acquisition cost for all drugs and biologicals to ASP and using the CMS overhead weights, and we would redistribute $153 million in pharmacy overhead cost from packaged to separately payable drugs and biologicals by setting the average acquisition cost for all drugs and biologicals to ASP and using the pharmacy stakeholders' overhead weights. These observed outcomes are consistent with our CY 2010 proposal to redistribute between one-third and one-half of the $395 million of pharmacy overhead cost currently associated with packaged drugs and biologicals to separately payable drugs and biologicals. These values are also consistent with the $150 million we are proposing to redistribute from the cost of packaged drugs and biologicals to separately payable drugs and biologicals for CY 2010, which would represent a reduction in the cost of packaged drugs and biologicals of 27 percent.

After we performed these analyses, the pharmacy stakeholders provided us with updated assignments of CY 2009 drug HCPCS codes to their recommended levels of pharmacy complexity. We then assigned the remaining HCPCS codes for drugs and biologicals that the pharmacy stakeholders had not assigned based on our understanding of the characteristics of their categories. We recalibrated our model to incorporate the updated information. We observed no substantive changes in our findings, with the revised overhead category assignments redistributing $159 million from packaged to separately payable drugs and biologicals and resulting in an ASP+X percentage of ASP+4 percent for separately payable drugs and biologicals and ASP+148 percent for packaged drugs and biologicals.

This analysis based on our synthesis of existing data and information from a variety of sources supports the appropriateness of a redistribution of the magnitude we are proposing for CY 2010. We believe that our analyses of the claims data using the CMS relative overhead weights derived from the 2005 MedPAC pharmacy overhead study and using the pharmacy overhead category payments, levels of complexity, and assignments of drugs provided by the pharmacy stakeholders (where available), confirm that payment for separately payable drugs and biologicals at ASP+4 percent represents a reasonable aggregate adjustment for the pharmacy overhead cost of these separately payable drugs and biologicals, compared to the payment that would result from the standard drug payment methodology. Payment for separately payable drugs at ASP+4 percent would ensure that hospitals are paid appropriately for the average hospital acquisition cost and the pharmacy overhead cost that our analyses show would be appropriately redistributed from the estimated cost of drugs that we are proposing to package for CY 2010.

Our proposal for CY 2010 relies upon the premise of providing a pharmacy overhead adjustment to payment for separately payable drugs by redistributing pharmacy overhead cost from packaged drugs to separately payable drugs. Therefore, regardless of whether similar analyses for the CY 2010 OPPS/ASC final rule based on updated claims and cost report data result in a different payment level for separately payable drugs than ASP+4 percent, we believe that any redistributed amount of pharmacy overhead cost should be removed from the estimated cost of packaged drugs and biologicals. We are proposing to redistribute pharmacy overhead cost within the estimated total amount of acquisition and overhead cost for all drugs and biologicals that has been Start Printed Page 35332reported to us by hospitals by making a pharmacy overhead adjustment to payment for separately payable drugs and biologicals that is based upon a partial redistribution of the pharmacy overhead cost of packaged drugs and biologicals. As described previously in this section, we are proposing that any redistribution of pharmacy overhead cost that may arise from CY 2010 final rule claims data would occur only from some drugs and biologicals to other drugs and biologicals, thereby maintaining the estimated total cost of drugs and biologicals (no redistribution of cost would occur from other services to drugs and biologicals or vice versa). While there is some evidence that relatively more pharmacy overhead cost should be associated with separately payable drugs and biologicals and less pharmacy overhead cost should be associated with packaged drugs and biologicals in order to improve payment accuracy, the recent RTI report on the OPPS' hospital-specific CCR methodology (“Refining Cost to Charge Ratios for Calculating APC and DRG Relative Payment Weights,” July 2008 final report), the June 2005 MedPAC study of hospital outpatient pharmacy overhead costs, and our claims analyses discussed in this proposed rule present no evidence that the total cost of drugs and biologicals (including acquisition and overhead costs) is understated in claims in relation to the costs of other services paid under the OPPS. Therefore, to improve the distribution of pharmacy overhead cost within the total estimated cost for all drugs and biologicals, without adversely affecting the relativity of payment weights for all services paid under the OPPS, we believe that it is most appropriate to redistribute pharmacy overhead cost only within the total estimated cost of packaged and separately payable drugs and biologicals. By redistributing pharmacy overhead cost only within the total estimated cost of packaged and separately payable drugs and biologicals, we would maintain a constant total cost of drugs and biologicals under the OPPS as reported to us by hospitals, without redistributing cost from other OPPS services to the cost of drugs and biologicals under the budget neutral OPPS.

While we agree conceptually with the APC Panel that a redistribution of pharmacy overhead cost in our claims data from packaged to separately payable drugs and biologicals is appropriate, we are not proposing to accept the APC Panel's recommendations that CMS pay for the acquisition cost of all separately payable drugs at no less than ASP+6 percent because, as we discussed previously in this section, our analyses of claims data indicate that appropriate payment for the acquisition and pharmacy overhead costs of separately payable drugs would be ASP+4 percent. We also are not accepting the APC Panel's recommendation that CMS package the cost of packaged drugs at ASP+6 percent, use the difference between this cost and CMS' cost derived from charges to provide more appropriate payment for pharmacy services costs, and pay for pharmacy services using this amount by applying a tiered approach to payments based on criteria related to the pharmacy resources required for groups of drugs. We believe that the recommendation to package the cost of packaged drugs at ASP+6 percent would underpay for the pharmacy overhead cost of packaged drugs, which we expect would be higher in relation to ASP than the pharmacy overhead cost of separately payable drugs. Further, as discussed earlier in this section, because the OPPS is a prospective payment system that relies on payment for groups of services to encourage hospital efficiencies, we do not believe payment for pharmacy overhead costs that is separate from the OPPS payment for the acquisition costs of drugs would be appropriate.

The APC Panel further recommended that, if CMS did not adopt a methodology consistent with their recommendations summarized above, CMS should exclude data from hospitals that participate in the 340B program from its ratesetting calculations for drugs and that CMS should pay 340B hospitals in the same manner as it pays non-340B hospitals. We are not accepting the APC Panel's recommendation that CMS propose to exclude data from hospitals that participate in the 340B program from its ratesetting calculations for drugs. For CY 2010, we note that we are proposing a drug payment methodology that partially resembles the methodology recommended by the APC Panel because the proposal incorporates a redistribution of pharmacy overhead cost from packaged to separately payable drugs and biologicals. However, excluding data from hospitals that participate in the 340B program from our ASP+X calculation, but paying those hospitals at that derived payment amount, would effectively redistribute payment to drugs and biologicals from payment for other services under the OPPS, and we do not believe this redistribution would be appropriate. We are accepting the APC Panel recommendation that CMS propose to pay 340B hospitals in the same manner as non-340B hospitals are paid. Commenters on the CY 2009 OPPS/ASC final rule with comment period were generally opposed to differential payment for hospitals based on their 340B participation status, and we do not believe it would be appropriate to exclude claims from this subset of hospitals in the context of our CY 2010 proposal to pay all hospitals at the same rate for separately payable drugs and biologicals. Moreover, as discussed above, while we are not proposing to adopt the APC Panel's specific recommended methodology to redistribute pharmacy overhead cost that would otherwise by paid through payment for packaged drugs, our proposed CY 2010 pharmacy adjustment methodology that would result in the payment of separately payable drugs and biologicals at ASP+4 percent incorporates a more limited redistribution of pharmacy overhead cost that would, nevertheless, preserve the aggregate drug cost in the claims, a result consistent with the APC Panel's recommendations. Therefore, we believe that it is appropriate to propose to pay 340B hospitals at the same rates that we are proposing to pay non-340B hospitals, and we are proposing to include the claims and cost report data for 340B hospitals in the data we have used for our analyses in order to calculate the proposed payment rates for drugs and biologicals and other services for the CY 2010 OPPS.

In conclusion, we are proposing for CY 2010 to redistribute between one-third and one-half of the difference between the aggregate claims cost for packaged drugs and biologicals and ASP dollars for those products, which results in payment for the acquisition and pharmacy overhead costs of separately payable drugs and biologicals that do not have pass-through payment status of ASP+4 percent. This payment amount reflects an APC drug payment adjustment for pharmacy overhead cost. To accomplish this payment adjustment, we also are proposing to reduce the cost of packaged drugs and biologicals that is incorporated into the payment for procedural APCs by the amount of pharmacy overhead cost that is redistributed from packaged drugs and biologicals to the payment for separately payable drugs and biologicals. This proposal is based on the proposed redistribution of $150 million (through a 27 percent reduction in packaged drug and biological cost), between one-third and one-half of the Start Printed Page 35333pharmacy overhead cost (the cost above ASP) of packaged drugs and biologicals in hospital outpatient claims, to the cost of separately payable drugs and biologicals, preserving the aggregate cost of all drugs and biologicals observed in the most recent claims and cost report data available for this proposed rule. We are further proposing that the claims data for 340B hospitals be included in the calculation of payment for drugs and biologicals under the CY 2010 OPPS, and that 340B hospitals would be paid the same amounts for separately payable drugs and biologicals as hospitals that do not participate in the 340B program. Finally, we are proposing that, in accordance with our standard drug payment methodology, the estimated payments for separately payable drugs and biologicals would be taken into account in the calculation of the weight scaler that would apply to the relative weights for all procedural services (but would not to separately payable drug and biologicals) paid under the OPPS, as required by section 1833(t)(14)(H) of the Act.

4. Proposed Payment for Blood Clotting Factors

For CY 2009, we are providing payment for blood clotting factors under the OPPS at ASP+4 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 2009 updated furnishing fee is $0.164 per unit.

For CY 2010, 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. 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 2008 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/​.

5. Proposed Payment for Therapeutic Radiopharmaceuticals

a. Background

Section 303(h) of Public Law 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 also are 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 OPPS 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. The methodology of providing separate radiopharmaceutical payment based on charges adjusted to cost through application of an 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 that we discussed in the 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). After considering the options and the public comments received, we finalized a CY 2008 methodology to provide 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 were 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 were unavailable (72 FR 66772). In addition, we finalized a policy to package payment for all diagnostic radiopharmaceuticals (defined as those 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 for therapeutic radiopharmaceuticals 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 the final CY 2008 methodology of providing a prospective payment for therapeutic radiopharmaceuticals, section 106(b) of Public Law 110-173 was enacted on Start Printed Page 35334December 29, 2007, that specified payment for therapeutic radiopharmaceuticals based on individual hospital charges adjusted to cost. Therefore, hospitals continued 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. As we stated in the CY2009 OPPS/ASC proposed rule (73 FR 41493), thereafter, the OPPS would provide 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.

Following issuance of the CY 2009 OPPS/ASC proposed rule, section 142 of Public Law 110-275 amended section 1833(t)(16)(C) of the Act, as amended by section 106(a) of Public Law 110-173, to further extend the payment period for therapeutic radiopharmaceuticals based on hospital's charges adjusted to cost through December 31, 2009. Therefore, we are continuing to pay hospitals for therapeutic radiopharmaceuticals at charges adjusted to cost through the end of CY 2009.

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. 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 established ASP procedures referenced at section 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 was 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, and should also identify the relevant 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.

We received public 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.

In the CY 2009 OPPS/ASC proposed rule (73 FR 41495), we proposed to allow manufacturers to submit ASP information for any separately payable therapeutic radiopharmaceutical for payment purposes under the OPPS. If ASP information was not submitted or appropriately certified by the manufacturer for a given calendar year quarter, then for that quarter we proposed to provide prospective payment based on the therapeutic radiopharmaceuticals mean cost from hospital claims data. However, as stated above, section 142 of Public Law 110-275 amended section 1833(t)(16)(C) of the Act, as amended by section 106(a) of Public Law 110-173, to further extend the payment period for therapeutic radiopharmaceuticals based on hospital's charges adjusted to cost through December 31, 2009, so we did not finalize this proposal. We note that, in response to our proposed therapeutic radiopharmaceutical payment methodology for CY 2009, we received a number of public comments that were supportive of the proposal for future years.

At the February 2009 meeting of the APC Panel, the APC Panel recommended that CMS use the ASP methodology to pay for therapeutic radiopharmaceuticals and, where ASP data are not available, to pay based on mean costs from claims data for CY 2010. We are accepting this recommendation, and for CY 2010, we are proposing to allow manufacturers to submit ASP information for any separately payable therapeutic radiopharmaceutical in order for therapeutic radiopharmaceuticals to be paid based on ASP beginning in CY 2010 under the OPPS. Similar to our CY 2009 proposal, we are not proposing to compel manufacturers to submit ASP information. Also, as discussed in the CY 2009 OPPS/ASC proposed rule (73 FR 41495), 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 Start Printed Page 35335separately 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 continue to 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, 2010, we would need to receive ASP information from the manufacturer no later than November 1, 2009, that would reflect therapeutic radiopharmaceutical sales in the third quarter of CY 2009 (July 1, 2009, through September 30, 2009). These data would not be available for publication in the CY 2010 OPPS/ASC final rule with comment period but would be included in the January 2010 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 4 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 2010 quarter is not available, we would rely on the CY 2008 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 to provide 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.

Recognizing that we may need to utilize mean unit cost data to pay for therapeutic radiopharmaceuticals in CY 2010 if ASP data are not submitted, we evaluated the mean unit cost information in the CY 2010 claims data for all therapeutic radiopharmaceuticals for this proposed rule. We noticed that we had numerous claims with service units greater than one for HCPCS code A9543 (Yttrium Y-90 ibritumomab tiuxetan, therapeutic, per treatment dose, up to 40 millicuries) and A9545 (Iodine I-131 tositumomab, therapeutic, per treatment dose), when the long descriptors for these therapeutic radiopharmaceuticals clearly indicate “per treatment dose” and, therefore, we would expect the service units on every claim to be one. In contrast, the other six therapeutic radiopharmaceuticals that would be separately payable in CY 2010 all include “per millicurie” in their HCPCS code descriptors, so reporting multiple service units for those items could be appropriate. We do not believe that hospitals billing more than one unit of HCPCS codes A9543 orA9545 on a claim are correctly reporting these products and, therefore, we believe these claims are incorrectly coded. Although we do not normally examine hospital reporting patterns for individual services, pricing an individual item, such as a therapeutic radiopharmaceutical with low volume, may argue for more aggressive trimming to remove inaccurate claims. Therefore, we removed all claims with units greater than one for these two therapeutic radiopharmaceuticals before estimating their mean unit costs. Because we do not have ASP data for therapeutic radiopharmaceuticals that were used for payment in April 2009, 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, subject to the additional trimming of incorrectly coded claims for HCPCS codes A9543 and A9545 as described above.

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 2010 (that is, ASP information reflective of third quarter CY 2009 sales are not submitted in October 2009), then the next opportunity to begin payment based on ASP data for a therapeutic radiopharmaceutical would be April 2010 if ASP data reflective of fourth quarter CY 2009 sales were submitted in January 2010.

Table 29—Proposed CY 2010 Separately Payable Therapeutic Radiopharmaceuticals

CY 2009 HCPCS CodeCY 2009 short descriptorProposed CY 2010 APCProposed CY 2010 SI
A9517I131 iodide cap, rx1064K
A9530I131 iodide sol, rx1150K
A9543Y90 ibritumomab, rx1643K
A9545I131 tositumomab, rx1645K
A9563P32 Na phosphate1675K
A9564P32 chromic phosphate1676K
Start Printed Page 35336
A9600Sr89 strontium0701K
A9605Sm 153 lexidronm0702K

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

Public Law 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, biologicals and radiopharmaceuticals in CY 2005, and because we had no hospital claims data to use in establishing a payment rate for them, we investigated several payment options for CY 2005 and discussed them in detail in the CY 2005 OPPS final rule with comment period (69 FR 65797 through 65799).

For CYs 2005 to 2007, we implemented a policy to provide separate payment for new drugs, biologicals, and radiopharmaceuticals with HCPCS codes (specifically those new drug, biological, and radiopharmaceutical HCPCS codes in each of those calendar years that did not crosswalk to predecessor HCPCS codes) but which did not have pass-through status, at a rate that was equivalent to the payment they received in the physician's office setting, established in accordance with the ASP methodology for drugs and biologicals, and based on charges adjusted to cost for radiopharmaceuticals. For CYs 2008 and 2009, we finalized a policy to provide payment for new drugs (excluding contrast agents) and biologicals (excluding implantable biologicals for CY 2009) with HCPCS codes, but which did not have pass-through status and were without OPPS hospital claims data, at ASP+5 percent and ASP+4 percent, respectively, consistent with the final OPPS payment methodology for other separately payable drugs and biologicals. New therapeutic radiopharmaceuticals were paid at charges adjusted cost based on the statutory requirement for CY 2008 and CY 2009 and payment for new diagnostic radiopharmaceuticals was packaged in both years. For CY 2010, we are proposing to continue the CY 2009 payment methodology for new drugs (excluding contrast agents) and nonimplantable biologicals and extend the methodology to payment for new therapeutic radiopharmaceuticals, when their period of payment at charges adjusted to cost no longer would apply. Therefore, for CY 2010, we are proposing to provide payment for new drugs (excluding contrast agents), nonimplantable biologicals, and therapeutic radiopharmaceuticals with HCPCS codes (those new CY 2010 drug (excluding contrast agents), nonimplantable biological, and therapeutic radiopharmaceutical HCPCS codes that do not crosswalk to CY 2009 HCPCS codes), but which do not have pass-through status and are without OPPS hospital claims data, at ASP+4 percent, consistent with the proposed CY 2010 payment methodology for other separately payable nonpass-through drugs, nonimplantable biologicals, and therapeutic radiopharmaceuticals. We believe this proposed policy would ensure that new nonpass-through drugs, nonimplantable biologicals, and therapeutic radiopharmaceuticals would be treated like other drugs, nonimplantable biologicals, and therapeutic radiopharmaceuticals under the OPPS, unless they are granted pass-through status. Only if they are pass-through drugs, nonimplantable biologicals, or therapeutic radiopharmaceuticals would they receive a different payment for CY 2010, 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, contrast agents, and implantable biologicals with HCPCS codes (those new CY 2010 diagnostic radiopharmaceutical, contrast agent, and implantable biological HCPCS codes that do not crosswalk to predecessor HCPCS codes), consistent with the proposed packaging of all existing nonpass-through diagnostic radiopharmaceuticals, contrast agents and implantable biologicals, as discussed in more detail in section V.B.2.d. of this proposed rule.

In accordance with the OPPS ASP methodology, in the absence of ASP data, we are proposing, for CY 2010, 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 also are proposing to assign status indicator “K” to HCPCS codes for new drugs and nonimplantable biologicals without OPPS claims data and for which we have not granted pass-through status. 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 would be based on the ASP methodology and set to the finalized ASP-based amount (proposed for CY 2010 at ASP+4 percent) for items that have not been granted pass-through status.

For CY 2010, we also are proposing to base payment for new therapeutic radiopharmaceuticals with HCPCS codes as of January 1, 2010, 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 are proposing to 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 granted pass-through status.

Consistent with other ASP-based payments, for CY 2010, we are proposing to make any changes to the payment amounts for new drugs and biologicals in the CY 2010 OPPS/ASC final rule with comment period and also on a quarterly basis on the CMS Web site during CY 2010 if later quarter ASP submissions (or more recent WACs or Start Printed Page 35337AWPs) indicate that changes to the payment rates for these drugs and biologicals are necessary. The payment rates for new therapeutic radiopharmaceuticals would also be changed accordingly, based on later quarter ASP submissions. We note that the new CY 2010 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 2010 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 public comment on the CY 2010 OPPS/ASC final rule with comment period.

There are several nonpass-through drugs and biologicals that were payable in CY 2008 and/or CY 2009 for which we do not have any CY 2008 hospital claims data available for this proposed rule and for which there are no other HCPCS codes that describe different doses of the same drug but for which we do have pricing information for the ASP methodology. We note that there are currently no therapeutic radiopharmaceuticals in this category. In order to determine the packaging status of these items for CY2010, 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 estimated the per administration cost to be less than or equal to $65, which is the general packaging threshold that we are proposing for drugs, nonimplantable biologicals, and therapeutic radiopharmaceuticals in CY 2010. We are proposing to pay separately for items with an estimated per day cost greater than $65 (with the exception of diagnostic radiopharmaceuticals, contrast agents and implantable biologicals, which we are proposing to continue to package regardless of cost, as discussed in more detail in section V.B.2.d. of this proposed rule) in CY 2010. We are proposing that the CY 2010 payment for separately payable items without CY 2008 claims data would be ASP+4 percent, similar to payment for 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 are proposing to 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 30 lists all of the nonpass-through drugs and biologicals without available CY 2008 claims data to which these policies would apply in CY 2010.

Table 30—Drugs and Biologicals Without CY 2008 Claims Data

CY 2009 HCPCS codeCY 2009 long descriptorEstimated average number of units per administrationProposed CY 2010 SIProposed CY 2010 APC
90681Rotavirus vaccine, human, attenuated, 2 dose schedule, live, for oral use1K1239
90696Diphtheria, tetanus toxoids, acellular pertussis vaccine and poliovirus vaccine, inactivated (DTaP-IPV), when administered to children 4 through 6 years of age, for intramuscular use1N
J0364Injection, apomorphine hydrochloride, 1 mg12N
J2724Injection, protein c concentrate, intravenous, human, 10 iu2240K1139
J3355Injection, urofollitropin, 75 IU2K1741
J9215Injection, interferon, alfa-n3, (human leukocyte derived), 250,000 iu5K0865

Finally, there are eight drugs and biologicals, shown in Table 31 below, that were payable in CY 2008, but for which we lack CY 2008 claims data and any other pricing information for the ASP methodology. In CY 2009, for similar items without CY 2007 claims data and without pricing information for the ASP methodology, we stated that we were unable to determine their per day cost and we packaged these items for the year, assigning these items status indicator “N.”

For CY 2010, we are proposing to change the status indicator for the eight drugs and biologicals shown in Table 31 below to status indicator “E” (Not paid by Medicare when submitted on outpatient claims (any outpatient bill type)) as these drugs and biologicals are not currently sold or have been identified as obsolete. In addition, we are proposing to provide separate payment for these drugs and biologicals if pricing information reflecting recent sales becomes available mid-year in CY 2010 for the ASP methodology. If pricing information becomes available, we would assign the products status indicator “K” and pay for them separately for the remainder of CY 2010.

Table 31—Drugs and Biologicals Without Information on per day Cost and Without Pricing Information for the ASP Methodology

CY 2009 HCPCS codeCY 2009 short descriptorProposed CY 2010 SI
90296Diphtheria antitoxinE
90581Anthrax vaccine, scE
90727Plague vaccine, imE
J0128Abarelix injectionE
J0350Injection anistreplase 30 uE
J0395Arbutamine hcl injectionE
J1452Intraocular Fomivirsen naE
J2460Oxytetracycline injectionE
Start Printed Page 35338

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 total program payments estimated to be made under section 1833(t) of the Act for all covered services furnished for that year 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 in order to ensure that total estimated pass-through spending for the prospective payment year is budget neutral as required by section 1883(t)(6)(E) of the Act.

For devices, developing an estimate of pass-through spending in CY 2010 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 2010. 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 remaining quarters of CY 2009 or beginning in CY 2010. As discussed in section V.A.4. of this proposed rule, because we are proposing that, beginning in CY 2010, the pass-through evaluation process and pass-through payment for implantable biologicals newly approved for pass-through payment beginning on or after January 1, 2010, that are always surgically inserted or implanted (through a surgical incision or a natural orifice) would be the device pass-through process and payment methodology only, the estimate of pass-through spending for these implantable biologicals newly eligible for pass-through payment beginning in CY 2010 would be included in the pass-through spending estimate for this second group of device categories. The sum of the CY 2010 pass-through estimates for these two groups of device categories would equal the total CY 2010 pass-through spending estimate for device categories with pass-through status.

For devices eligible for pass-through payment, section 1833(t)(6)(D)(ii) of the Act establishes the pass-through amount as the amount by which the hospital's charges for the device, adjusted to cost, exceeds the portion of the otherwise applicable Medicare OPD fee schedule that the Secretary determines is associated with the device. As discussed in section IV.A.2. of this proposed rule, we deduct from the pass-through payment for an identified device category eligible for pass-through payment an amount that reflects the portion of the APC payment amount that we determine is associated with the cost of the device, defined as the device APC offset amount, when we believe that predecessor device costs for the device category newly approved for pass-through payment (hereinafter referred to as the new device category) are already packaged into the existing APC structure. For each device category that becomes newly eligible for device pass-through payment, including an implantable biological under our CY 2010 proposal, we estimate pass-through spending to be the difference between payment for the device category and the device APC offset amount, if applicable, for the procedures that would use the device. If we determine that predecessor device costs for the new device category are not already included in the existing APC structure, the pass-through spending estimate for the device category would be the full payment at charges adjusted to cost.

For drugs and biologicals eligible for pass-through payment, section 1833(t)(6)(D)(i) of the Act establishes the pass-through payment amount as the amount by which the amount authorized under section 1842(o) of the Act (or, if the drug or biological is covered under a competitive acquisition contract under section 1847B of the Act, an amount determined by the Secretary equal to the average price for the drug or biological for all competitive acquisition areas and year established under such section as calculated and adjusted by the Secretary) exceeds the portion of the otherwise applicable fee schedule amount that the Secretary determines is associated with the drug or biological. Because we are proposing to pay for most nonpass-through separately payable drugs and nonimplantable biologicals under the CY 2010 OPPS at ASP+4 percent, which represents the otherwise applicable fee schedule amount associated with most pass-through drugs and biologicals, and because we would pay for pass-through drugs and nonimplantable biologicals at ASP+6 percent or the Part B drug CAP rate, if applicable, our estimate of drug and nonimplantable biological pass-through payment for CY 2010 is not zero. Furthermore, payment for certain drugs, specifically diagnostic radiopharmaceuticals, contrast agents, and implantable biologicals without pass-through status, would always be packaged into payment for the associated procedures because these products would never be separately paid. However, all pass-through diagnostic radiopharmaceuticals and contrast agents and those implantable biologicals with pass-through status approved prior to CY 2010 would be paid based at ASP+6 percent or the Part B drug CAP rate, if applicable, like other pass-through drugs and biologicals. Therefore, our estimate of pass-through payment for all diagnostic radiopharmaceuticals and contrast agents and those implantable biologicals with pass-through status approved prior to CY 2010 is also not zero.

In section V.A.6. of this proposed rule, we discuss our proposal to determine if the cost of certain “policy-packaged” drugs, including diagnostic radiopharmaceuticals and contrast agents, are already packaged into the existing APC structure. If we determine that a “policy-packaged” drug approved for pass-through payment resembles predecessor diagnostic radiopharmaceuticals and contrast agents already included in the costs of the APCs that would be associated with the drug receiving pass-through payment, we are proposing to offset the amount of pass-through payment for diagnostic radiopharmaceuticals and contrast agents. For these drugs, the APC offset amount would be the portion of the APC payment for the specific procedure being performed with the diagnostic radiopharmaceutical or contrast agent receiving pass-through payment that is attributable to diagnostic radiopharmaceuticals and contrast agents, which we refer to as the Start Printed Page 35339“policy-packaged” drug APC offset amount. If we determine that an offset is appropriate for a specific diagnostic radiopharmaceutical or contrast agent receiving pass-through payment, we would reduce our estimate of pass-through payment for these drugs by this amount. We have not established a policy to offset pass-through payment for implantable biologicals when approved for pass-through payment as a drug or biological, that is, for CY 2009 and earlier, so we would consider full payment at ASP+6 percent for these implantable biologicals receiving biological pass-through payment in our estimate of CY 2010 pass-through spending for drugs and biologicals.

We note that the Part B drug CAP program has been suspended beginning January 1, 2009. We refer readers to the Medicare Learning Network (MLN) Matters Special Edition article SE0833 for more information on this suspension. As of the publication of this proposed rule, the Part B drug CAP program has not been reinstituted. Therefore, for this proposed rule, we will continue to not have an effective Part B drug CAP rate for pass-through drugs and biologicals. 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 2010. The second group contains drugs and nonimplantable biologicals that we know are newly eligible, or project would be newly eligible, beginning in CY 2010. The sum of the CY 2010 pass-through estimates for these two groups of drugs and biologicals would equal the total CY 2010 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 2010, consistent with our OPPS policy from CY 2004 through 2009. As we discuss in section IV.A. of this proposed rule, there are currently no device categories receiving pass-through payment in CY 2009 that would continue for payment during CY 2010. 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 2010, and the estimate for this group is $0.

As stated earlier, we are proposing in section V.A.4. of this proposed rule to specify that, beginning in CY 2010, the pass-through evaluation process and pass-through payment for implantable biologicals that are always surgically inserted or implanted (through a surgical incision or a natural orifice) would be the device pass-through process and payment methodology only. Therefore, we are proposing to continue considering existing implantable biologicals approved for pass-through payment under the drugs and biologicals pass-through provision prior to CY 2010 as drugs and biologicals for pass-through payment estimate purposes. These implantable biologicals that have been approved for pass-through status prior to CY 2010 would continue to be considered drugs and biologicals until they expire from pass-through status. Therefore, the pass-through spending estimate for this first group of pass-through devices would not include currently eligible implantable biologicals that have been granted pass-through status prior to CY 2010.

In section V.A.4. of this proposed rule, we are proposing that payment for implantable biologicals newly eligible for pass-through payment beginning in CY 2010 would be based on hospital charges adjusted to cost, rather than the ASP methodology that is applicable to pass-through drugs and biologicals. Therefore, we are proposing that, beginning in CY 2010, the estimate of pass-through spending for implantable biologicals first paid as pass-through devices in CY 2010 be based on the payment methodology for pass-through devices, and be included in the device pass-through spending estimate.

In estimating CY 2010 pass-through spending for device categories in the second group, that is, device categories that we knew at the time of the development of this proposed rule would be newly eligible for pass-through payment in CY 2010 (of which there are none), additional device categories (including categories that would describe implantable biologicals) that we estimate could be approved for pass-through status subsequent to the development of this proposed rule and before January 1, 2010, and contingent projections for new categories (including categories that would describe implantable biologicals in the second through fourth quarters of CY 2010), 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. There are no new device categories (including categories that would describe implantable biologicals) for CY 2010 of which we are aware at the time of development of this proposed rule. The estimate of CY 2010 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 2010 incorporates CY 2010 estimates of pass-through spending for known device categories continuing in CY 2010, those known or projected to be first effective January 1, 2010, and those device categories projected to be approved during subsequent quarters of CY 2009 or CY 2010, our proposed estimate of total pass-through spending for device categories is $10.0 million for CY 2010.

To estimate CY 2010 pass-through spending for drugs and biologicals in the first group, specifically those drugs (including radiopharmaceuticals and contrast agents) and biologicals (including implantable biologicals) recently made eligible for pass-through payment and continuing into CY 2010, 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 those drugs or biologicals, in order to project the CY 2010 OPPS utilization of the products. For the known drugs and biologicals (excluding diagnostic radiopharmaceuticals, contrast agents, and implantable biologicals) that would continue on pass-through status in CY 2010, 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 2010 OPPS utilization of these products. Because payment for a diagnostic radiopharmaceutical or contrast agent would be packaged if the product were not paid separately due to its pass-through status, we include in the pass-through estimate the difference between payment for the drug or biological at ASP+6 percent (or WAC+6 percent, or 95 percent of AWP, if ASP information is not available) and the “policy-packaged” drug APC offset amount, if we have determined that the diagnostic radiopharmaceutical or contrast agent approved for pass-through payment resembles predecessor diagnostic radiopharmaceuticals and contrast agents already included in the costs of the APCs that would be associated with the drug receiving pass-through payment. Because payment for an Start Printed Page 35340implantable biological continuing on pass-through status in CY 2010 would be packaged if the product were not paid separately due to its pass-through status and because we have not established a pass-through payment offset policy for implantable biologicals when approved for pass-through payment as biologicals, that is, for CY 2009 and earlier, we include in the pass-through spending estimate the full payment for these implantable biological at ASP+6 percent (or WAC+6 percent or 95 percent of AWP, if ASP is not available). Based on the results of these analyses, we are proposing the estimated pass-through spending attributable to the first group (that is, the known drugs and biologicals, including implantable biologicals continuing with pass-through eligibility in CY 2010) described above to be approximately $8.9 million for CY 2010. This $8.9 million estimate of CY 2010 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 2010; these products are displayed in Table 22 in section V.A.3. of this proposed rule.

To estimate CY 2010 pass-through spending for drugs and nonimplantable biologicals in the second group (that is, drugs and nonimplantable biologicals that we know at the time of development of this proposed rule would be newly eligible for pass-through payment in CY 2010 (of which there are none), additional drugs and nonimplantable biologicals that we estimate could be approved for pass-through status subsequent to the development of this proposed rule and before January 1, 2010, and projections for new drugs and nonimplantable biologicals that could be initially eligible for pass-through payment in the second through fourth quarters of CY 2010, we are proposing to use utilization estimates from pass-through applicants, pharmaceutical industry data, clinical information, recent trends in the per unit ASPs of hospital outpatient drugs, and projected annual changes in service volume and intensity as our basis for making the CY 2010 pass-through payment estimate. We also are considering the most recent OPPS experience in approving new pass-through drugs and nonimplantable biologicals. As noted earlier, consistent with our proposal discussed in section V.A.4. of this proposed rule, we are proposing to include new implantable biologicals that we would expect to be approved for pass-through status as devices beginning in CY 2010 in the second group of items considered for device pass-through estimate purposes. Therefore, we are not including implantable biologicals in the second group of items in the drug and biological pass-through spending estimate. We also are proposing in section V.A.5. of this proposed rule to revise our pass-through payment policy regarding “new” drugs and biologicals that were not receiving hospital outpatient payment as of December 31, 1996 and that also meet the other criteria for receiving pass-through payment. Specifically, we are proposing to change the start date of the pass-through payment eligibility period for a “new” drug or biological from the first date on which pass-through payment is made to the date on which payment is first made for a drug or biological as an outpatient hospital service under Part B, using the date of first sale of the drug or biological in the United States after FDA approval as a proxy, to better reflect the statutory provisions for pass-through payment under section 1833(t)(6) of the Act. As we developed our CY 2010 estimate of pass-through spending, we considered the most recent OPPS experience in approving new pass-through drugs and nonimplantable biologicals. We note that a number of the drugs and biologicals currently receiving pass-through payment in CY 2009 would not be eligible for pass-through payment under the proposed revised definition of the pass-through payment eligibility period. Therefore, we have reduced our estimate of CY 2010 pass-through spending for new drugs and nonimplantable biologicals that could be initially eligible for pass-through payment beginning in CY 2010 to take into consideration the potential effect of our proposed CY 2010 pass-through payment eligibility period policy on the future number of drugs and biologicals newly approved for pass-through payment in comparison with our historical OPPS experience over the past several years.

Based on the results of these analyses, we are proposing the estimated pass-through spending attributable to this second group of drugs and biologicals to be approximately $19.1 million for CY 2010. We note that, as discussed in section V.A. of this proposed rule, radiopharmaceuticals are considered drugs for pass-through purposes. Therefore, we have included radiopharmaceuticals as drugs in our proposed CY 2010 pass-through spending estimate.

In accordance with the comprehensive methodology described above in this section, 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 2010 and those device categories, drugs, and nonimplantable biologicals that first become eligible for pass-through status during CY 2010, would be approximately $38 million, which represents 0.12 percent of total OPPS projected payments for CY 2010. Because we estimate that pass-through spending in CY 2010 would not amount to 2.0 percent of total projected OPPS CY 2010 program spending, we are proposing to return 1.88 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 (MMA), mandated the creation of additional groups of covered OPD services that classify devices of brachytherapy consisting of a seed or seeds (or radioactive source) (“brachytherapy sources”) separately from other services or groups of services. The additional groups must reflect the number, isotope, and radioactive intensity of the brachytherapy sources furnished and include separate groups for palladium-103 and iodine-125 sources.

Section 1833(t)(16)(C) of the Act, as added by section 621(b)(1) of Public Law 108-173, established payment for brachytherapy sources furnished from January 1, 2004, through December 31, 2006, based on a hospital's charges for each brachytherapy source furnished adjusted to cost. Under section 1833(t)(16)(C) of the Act, charges for the brachytherapy sources 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.

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 68115).

Subsequent to publication of the CY 2007 OPPS/ASC final rule with comment period, section 107 of Public Start Printed Page 35341Law 109-432 (MIEA-TRHCA) amended section 1833 of the Act. Specifically, section 107(a) of Public Law 109-432 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 based on charges adjusted to cost for CY 2007.

Section 107(b)(1) of Public Law 109-432 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 sources furnished on or after July 1, 2007, in addition to the existing requirements for separate payment groups based on the number, isotope, and radioactive intensity of brachytherapy sources under section 1833(t)(2)(H) of the Act. Section 107(b)(2) of Public Law 109-432 authorized the Secretary to implement this requirement by “program instruction or otherwise.” We note that public commenters who responded to the CY 2007 OPPS/ASC 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 through a transmittal, effective July 1, 2007 (Transmittal 1259, dated June 1, 2007). Based on public comments received on the CY 2007 OPPS/ASC 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.

In Transmittal 1259, we indicated that if we receive information that any of the other sources now designated as non-stranded are also FDA-approved and 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. We established HCPCS code C2698 (Brachytherapy source, stranded, not otherwise specified, per source) for stranded NOS sources and HCPCS code 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 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 the 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 would provide opportunities for hospitals to receive additional payments under certain circumstances through the 7.1 percent rural SCH adjustment.

For CY 2008, we also proposed and finalized a policy regarding payment for new brachytherapy sources for which we have no claims data (72 FR 42749 and 72 FR 66786, respectively). We indicated we would 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. Finally, we proposed and finalized our policy to discontinue using status indicator “H” (Pass-Through Device Categories. Separate cost based pass-through payment; not subject to co-payment) because we would not be paying charges adjusted to costs after December 31, 2007, and instead adopted a policy of using status indicator “K” (which includes, among others, “Brachytherapy Sources. Paid under OPPS; separate APC payment”) for CY 2008 (72 FR 42749 and 72 FR 66785, respectively).

After we finalized these proposals for CY 2008, section 106(a) of Public Law 110-173 (MMSEA) extended the charges-adjusted-to-cost payment methodology for brachytherapy sources for an additional 6 months, through June 30, 2008. Because our final CY 2008 policies paid for brachytherapy sources at prospective rates based on median costs, we were unable to implement these policies during this extension.

In the CY 2009 OPPS/ASC proposed rule (73 FR 41502), we again proposed prospective payment rates for brachytherapy sources for CY 2009. We proposed to pay for brachytherapy sources at prospective rates based on their source-specific median costs as calculated from CY 2007 claims data available for CY 2009 ratesetting. Subsequent to issuance of the CY 2009 OPPS/ASC proposed rule, Public Law 110-275 (MIPPA) was enacted on July 15, 2008. Section 142 of Public Law 110-275 amended section 1833(t)(16)(C) of the Act, as amended by section 106(a) of Public Law 110-173 (MMSEA), to further extend the payment period for brachytherapy sources based on a hospital's charges adjusted to cost from July 1, 2008, through December 31, 2009. Therefore, we continued to pay for brachytherapy sources at charges adjusted to cost in CY 2008 from July 1 through December 31, and we maintained the assignment of status indicator “H” to brachytherapy sources for claims processing purposes in CY 2008. For CY 2009, we have continued to pay for all separately payable brachytherapy sources based on a hospital's charges adjusted to cost. Because brachytherapy sources are paid at charges adjusted to cost, we did not subject them to outlier payments under section 1833(t)(5) of the Act, or subject brachytherapy source payment weights to scaling for purposes of budget neutrality. Moreover, during the CY 2009 period of payment at charges adjusted to cost, brachytherapy sources are not eligible for the 7.1 percent rural SCH adjustment (as discussed in detail in section I I.E. of this proposed rule).

Furthermore, for CY 2009, we did not adopt the policy we established in the CY 2008 OPPS/ASC final rule with comment period of paying stranded and non-stranded NOS codes for brachytherapy sources, C2698 and C2699, based on a rate equal to the lowest stranded or non-stranded prospective payment for such sources. Also, for CY 2009, we did not adopt the policy we established in the CY 2008 OPPS/ASC final rule with comment period regarding payment for new brachytherapy sources for which we have no claims data. NOS HCPCS codes C2698 and C2699 and newly established specific source codes are paid at charges adjusted to cost through December 31, 2009, consistent with section 142 of Public Law 110-275.

For CY 2009, we finalized our proposal to create new status indicator “U” (Brachytherapy Sources. Paid Start Printed Page 35342under OPPS; separate APC payment) for brachytherapy source payment, instead of using status indicator “K” as proposed and finalized for CY 2008 for prospective payment, or status indicator “H,” used during the period of charges adjusted to cost payment. As noted in the CY 2009 OPPS/ASC final rule with comment period (73 FR 68670), assigning a status indicator, such as status indicator “K,” to several types of items and services with potentially differing payment policies added unnecessary complexity to our operations. Status indicator “U” is used only for brachytherapy sources, regardless of their specific payment methodology for any period of time.

At the February 2009 meeting, the APC Panel recommended paying for brachytherapy sources in CY 2010 using a prospective payment methodology based on median costs from claims data. The APC Panel reviewed CY 2007 and CY 2008 brachytherapy source median costs from claims data and noted the stability of the data from year to year.

B. Proposed OPPS Payment Policy

Under section 142 of Public Law 110-275, payment for brachytherapy sources is mandated at charges adjusted to cost only through CY 2009. For CY 2010, we are proposing to adopt the general OPPS prospective payment methodology for brachytherapy sources, consistent with section 1833(t)(2)(C) of the Act.

As we have previously stated (72 FR 66780 and 73 FR 41502), we believe that adopting the general OPPS prospective payment methodology for brachytherapy sources is appropriate for a number of reasons. The general OPPS payment methodology uses median costs based on claims data to set the relative payment weights for hospital outpatient services. This payment methodology results in more consistent, predictable, and equitable payment amounts per source across hospitals by eliminatin