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Proposed Rule

Medicare and Medicaid Programs: Hospital Outpatient Prospective Payment; Ambulatory Surgical Center Payment; Hospital Value-Based Purchasing Program; Physician Self-Referral; and Provider Agreement Regulations on Patient Notification Requirements

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Start Preamble Start Printed Page 42170

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 OPPS. These proposed changes would be applicable to services furnished on or after January 1, 2012.

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 proposed relative payment weights and payment amounts for services furnished in ASCs, specific HCPCS codes to which these proposed changes would apply, and other proposed ratesetting information for the CY 2012 ASC payment system. These proposed changes would be applicable to services furnished on or after January 1, 2012.

We are proposing to revise the requirements for the Hospital Outpatient Quality Reporting (IQR) Program, add new requirements for ASC Quality Reporting System, and make additional changes to provisions of the Hospital Inpatient Value-Based Purchasing (VBP) Program.

We also are proposing to allow eligible hospitals and CAHs participating in the Medicare Electronic Health Record (EHR) Incentive Program to meet the clinical quality measure reporting requirement of the EHR Incentive Program for payment year 2012 by participating in the 2012 Medicare EHR Incentive Program Electronic Reporting Pilot.

In addition, we are proposing to make changes to the rules governing the whole hospital and rural provider exceptions to the physician self-referral prohibition for expansion of facility capacity and changes to provider agreement regulations on patient notification requirements.

DATES:

Comment Period: 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 30, 2011.

ADDRESSES:

In commenting, please refer to file code CMS-1525-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 (and we encourage you to) submit electronic comments on this regulation to http://www.regulations.gov. Follow the instructions under the “submit a comment” tab.

2. By regular mail. You may mail written comments to the following address ONLY: Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS-1525-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 via express or overnight mail to the following address ONLY: Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS-1525-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 before the close of the comment period to either of the following addresses:

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

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

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

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

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

Submission of comments on paperwork requirements. You may submit comments on this document's paperwork requirements by following the instructions at the end of the “Collection of Information Requirements” section in this document.

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

Start Further Info

FOR FURTHER INFORMATION, CONTACT:

Paula Smith, (410) 786-0378, Hospital outpatient prospective payment issues.

Char Thompson, (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 Hospital Outpatient Quality Reporting (OQR) and ASC Quality Reporting Program issues.

Teresa Schell, (410) 786-8651, Physician Ownership and Investment in Hospitals issues.

Georganne Kuberski, (410) 786-0799, Patient Notification Requirements issues.

James Poyer, (410) 786-2261, and Ernessa Brawley (410) 786-2075, Hospital Value-Based Purchasing (VBP) Program issues.

End Further Info End Preamble Start Supplemental Information

SUPPLEMENTARY INFORMATION:

Inspection of Public Comments: All comments received before the close of the comment period are available for viewing by the public, including any personally identifiable or confidential business information that is included in a comment. We post all comments received before the close of the comment period on the following Web site as soon as possible after they have Start Printed Page 42171been received: http://www.regulations.gov. Follow the search instructions on that Web site to view public comments.

Comments received timely will also be available for public inspection, generally beginning approximately 3 weeks after publication of the rule, at the headquarters of the Centers for Medicare & Medicaid Services, 7500 Security Boulevard, Baltimore, MD 21244, on Monday through Friday of each week from 8:30 a.m. to 4 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 Federal Digital System (FDsys), a service of the U.S. Government Printing Office. This database can be accessed via the Internet at http://www.gpo.gov/​fdsys/​.

Addenda Available Only Through the Internet on the CMS Web Site

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

Alphabetical List of Acronyms Appearing in This Federal Register Document

ACEP American College of Emergency Physicians

AHA American Hospital Association

AHIMA American Health Information Management Association

AHRQ Agency for Healthcare Research and Quality

AMA American Medical Association

AMP Average Manufacturer Price

AOA American Osteopathic Association

APC Ambulatory Payment Classification

ARRA American Recovery and Reinvestment Act of 2009, Pub. L. 111-5

ASC Ambulatory Surgical Center

ASP Average Sales Price

AWP Average Wholesale Price

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

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

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

BLS Bureau of Labor Statistics

CAH Critical Access Hospital

CAP Competitive Acquisition Program

CBSA Core-Based Statistical Area

CCN CMS Certification Number

CCR Cost-to-Charge Ratio

CDC Centers for Disease Control

CERT Comprehensive Error Rate Testing

CLFS Clinical Laboratory Fee Schedule

CMHC Community Mental Health Center

CMS Centers for Medicare & Medicaid Services

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

CQM Clinical Quality Measure

CR Cardiac Rehabilitation

CY Calendar Year

DFO Designated Federal Official

DHS Designated Health Service

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

DSH Disproportionate Share Hospital

EACH Essential Access Community Hospital

E/M Evaluation and Management

EHR Electronic Health Record

ESRD End-Stage Renal Disease

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

FAR Federal Acquisition Regulations

FDA Food and Drug Administration

FFS Fee-for-Service

FSS Federal Supply Schedule

FY Fiscal Year

GAO Government Accountability Office

HAC Hospital-Acquired Condition

HAI Healthcare-Associated Infection

HCAHPS Hospital Consumer Assessment of Healthcare Providers and Systems

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

HCP Healthcare Personnel

HCPCS Healthcare Common Procedure Coding System

HCRIS Hospital Cost Report Information System

HHA Home Health Agency

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

HOPD Hospital OutPatient Department

Hospital OQR Hospital Outpatient Quality Reporting

ICR Intensive Cardiac Rehabilitation

IDE Investigational Device Exemption

IHS Indian Health Service

I/OCE Integrated Outpatient Code Editor

IOL Intraocular Lens

IPPS [Hospital] Inpatient Prospective Payment System

MAC Medicare Administrative Contractor

MedPAC Medicare Payment Advisory Commission

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

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

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

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

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

MPFS Medicare Physician Fee Schedule

MSA Metropolitan Statistical Area

NCCI National Correct Coding Initiative

NHSN National Healthcare Safety Network

NCD National Coverage Determination

NQF National Quality Forum

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

OQR Outpatient Quality Reporting

PBD Provider-Based Department

PHP Partial Hospitalization Program

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

RAC Recovery Audit Contractor

RFA Regulatory Flexibility Act

Hospital IQR Hospital Inpatient Quality Reporting

Hospital OQR Hospital Outpatient Quality Reporting

RHHI Regional Home Health Intermediary

SBA Small Business Administration

SCH Sole Community Hospital

SDP Single Drug Pricer

SI Status Indicator

TEP Technical Expert Panel

TOPs Transitional Outpatient Payments

VBP Value-Based Purchasing

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 Ambulatory Surgical Center (ASC) payment system. In addition, we are proposing to make changes to the rules governing limitations on certain physician referrals to hospitals in which physicians have an ownership or investment interest, the provider agreement regulations on patient notification requirements, and the rules governing the Hospital Inpatient Value-Based Purchasing (VBP) Program. The provisions relating to the OPPS are included in sections I. through XII. and Start Printed Page 42172section XIV. and sections XVII. through XXI. of this proposed rule. Addenda A, B, C, D1, D2, E, L, M, and N, which relate to the OPPS, are referenced in section XVII. of this proposed rule and are available via the Internet on the CMS Web site at the URL indicated in section XVII. The provisions related to the ASC payment system are included in sections XIII., XIV., and XVII. through XXI. of this proposed rule. Addenda AA, BB, DD1, DD2, and EE, which relate to the ASC payment system, are referenced in section XVII. of this proposed rule and are available via the Internet on the CMS Web site at the URL indicated in section XVII. The provisions relating to physician referrals to hospitals in which physicians have an ownership or investment interest and to the provider agreement regulations on patient notification requirements are included in section XV., and the provisions relating to the Hospital Inpatient VBP Program are included in section XVI. of this proposed rule.

Table of Contents

I. Background and Summary of the CY 2012 OPPS/ASC Proposed Rule

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

B. Excluded OPPS Services and Hospitals

C. Prior Rulemaking

D. Advisory Panel on Ambulatory Payment Classification (APC) Groups

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 Changes 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 Hospital Outpatient Visits

7. Proposed Payment for Partial Hospitalization Services

8. Proposed Procedures That Would Be Paid Only as Inpatient Procedures

9. Proposed OPPS Policy Changes Relating to Supervision of Hospital Outpatient Services

10. Proposed OPPS Payment Status and Comment Indicators

11. OPPS Policy and Payment Recommendations

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

13. Reporting Quality Data for Annual Payment Rate Updates

14. Proposed Changes to EHR Incentive Program for Eligible Hospitals and CAHs Regarding Electronic Submission of Clinical Quality Measures (CQMs)

15. Proposed Changes to Provisions Relating to Physician Self-Referral Prohibition and Provider Agreement Regulations on Patient Notification Requirements

16. Proposed Changes to the Hospital IQR Program Hospital Inpatient VBP Program

17. Economic and Federalism Analyses

F. Public Comments Received on the CY 2011 OPPS/ASC Final Rule With Comment Period

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 and Use of Cost-to-Charge Ratios (CCRs)

2. Proposed Data Development Process and Calculation of Median Costs

a. Claims Preparation

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

(1) Splitting Claims

(2) Creation of “Pseudo” Single Procedure Claims

c. Completion of Claim Records and Median Cost Calculations

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

(1) Device-Dependent APCs

(2) Blood and Blood Products

(3) Allergy Tests (APCs 0370 and 0381)

(4) Hyperbaric Oxygen Therapy (APC 0659)

(5) Payment for Ancillary Outpatient Services When Patient Expires (APC 0375)

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

(7) Non-Congenital Cardiac Catheterization (APC 0080)

(8) Cranial Neurostimulator and Electrodes (APC 0318)

(9) Brachytherapy Sources

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)

(6) Cardiac Resynchronization Therapy Composite APC (APCs 0108, 0418, 0655, and 8009)

3. Proposed Changes to Packaged Services

a. Background

b. Packaging Issues

(1) CMS Presentation of Findings Regarding Expanded Packaging at the February 28-March 1, 2011 APC Panel

(2) Packaging Recommendations of the APC Panel at Its February 28-March 1, 2011 Meeting

(3) Other Packaging Proposals for CY 2012

4. Proposed Calculation of OPPS Scaled Payment Weights

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 Pub. L. 110-275 (MIPPA)

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

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

1. Background

2. Study of Cancer Hospital Costs Relative to Other Hospitals

3. CY 2011 Proposed Payment Adjustment for Certain Cancer Hospitals

4. Proposed CY 2011 Cancer Hospital Payment Adjustment That Was Not Finalized

5. Proposed Payment Adjustment for Certain Cancer Hospitals for CY 2012

G. Proposed Hospital Outpatient Outlier Payments

1. Background

2. Proposed Outlier Calculation

3. Proposed Outlier Reconciliation

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

I. Proposed Beneficiary Copayments

1. Background

2. Proposed OPPS 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 Comment in this CY 2012 Proposed Rule

2. Proposed Process for New Level II HCPCS Codes and Category I and Category III CPT Codes for Which We Will Be Soliciting Public Comments on the CY 2012 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. Proposed New Technology APCs

1. Background

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

D. Proposed OPPS APC-Specific Policies

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

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

3. Placement of Amniotic Membrane (APCs 0233 and 0244)Start Printed Page 42173

4. Upper Gastrointestinal Services (APCs 0141, 0419, and 0422)

5. Pulmonary Rehabilitation (APC 0102)

6. Insertion/Replacement/Repair of AICD Leads, Generator, and Pacing Electrodes (APC 0108)

IV. Proposed OPPS Payment for Devices

A. Proposed Pass-Through Payments for Devices

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

a. Background

b. Proposed CY 2012 Policy

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

a. Background

b. Proposed CY 2012 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 2012

3. Proposed Drugs, Biologicals, and Radiopharmaceuticals With New or Continuing Pass-Through Status in CY 2012

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

a. Background

b. Proposed 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 of 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

c. Proposed Payment Policy for Therapeutic Radiopharmaceuticals

4. Proposed Payment for Blood Clotting Factors

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

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

A. Background

B. Proposed Estimate of Pass-Through Spending

VII. Proposed OPPS Payment for 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

VIII. Proposed Payment for Partial Hospitalization Services

A. Background

B. Proposed PHP APC Update for CY 2012

C. Proposed Separate Threshold for Outlier Payments to CMHCs

IX. Proposed Procedures That Would Be Paid Only as Inpatient Procedures

A. Background

B. Proposed Changes to the Inpatient List

X. Proposed Policies on the Supervision Standards for Outpatient Services in Hospitals and CAHs

A. Background

B. Issues Regarding the Supervision of Hospital Outpatient Therapeutic Services Raised by Hospitals and Other Stakeholders

1. Independent Review Process

2. Conditions of Payment and Hospital Outpatient Therapeutic Services Described by Different Benefit Categories

C. Proposed Policies on Supervision Standards for Outpatient Therapeutic Services in Hospitals and CAHs

1. Selection of Review Entity

2. Review Process

3. Evaluation Criteria

4. Conditions of Payment and Hospital Outpatient Therapeutic Services Described by Different Benefit Categories

5. Technical Corrections to the Supervision Standards for Hospital Outpatient Therapeutic Services Furnished in Hospitals or CAHs

6. Summary

XI. 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

XII. OPPS Policy and Payment Recommendations

A. MedPAC Recommendations

B. APC Panel Recommendations

C. OIG Recommendations

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

2. Proposed Treatment of New Level II HCPCS Codes and Category III CPT Codes Implemented in April and July 2011

3. Proposed Process for New Level II HCPCS Codes and Category I and Category III CPT Codes for Which We Will Be Soliciting Public Comments in the CY 2012 OPPS/ASC Final Rule With Comment Period

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 for CY 2012 to Covered Surgical Procedures Designated as Office-Based

c. Proposed ASC Covered Surgical Procedures Designated as Device-Intensive

(1) Background

(2) Proposed Changes to List of Covered Surgical Procedures Designated as Device-Intensive for CY 2012

d. ASC Treatment of Surgical Procedures Proposed for Removal from the OPPS Inpatient List for CY 2012

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 2012

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

d. Proposed Payment for the Cardiac Resynchronization Therapy Composite

2. Proposed Payment for Covered Ancillary Services

a. Background

b. Proposed Payment for Covered Ancillary Services for CY 2012Start Printed Page 42174

E. New Technology Intraocular Lenses (NTIOLs)

1. NTIOL Cycle and Evaluation Criteria

2. NTIOL Application Process for Payment Adjustment

3. Requests To Establish New NTIOL Classes for CY 2012 and Deadline for Public Comments

4. Proposed Payment Adjustment

F. Proposed ASC Payment and Comment Indicators

1. Background

2. Proposed ASC Payment and Comment Indicators

G. ASC Policy and Payment Recommendations

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

1. Background

2. Proposed Calculation of the ASC Payment Rates

a. Updating the ASC Relative Payment Weights for CY 2012 and Future Years

b. Updating the ASC Conversion Factor With Application of a Productivity Adjustment to the Update Factor

3. Display of Proposed CY 2012 ASC Payment Rates

XIV. Hospital Outpatient Quality Reporting Program Updates and ASC Quality Reporting

A. Background

1. Overview

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

3. Technical Specification Updates and Data Publication

a. Maintenance of Technical Specifications for Quality Measures

b. Publication of Hospital OQR Program Data

B. Proposed Revision to Measures Previously Adopted for the Hospital OQR Program for the CY 2012, CY 2013, and CY 2014 Payment Determinations

1. Background

2. Proposed Revision to Hospital OQR Program Measures Previously Adopted for the CY 2013 Payment Determination

C. Proposed New Quality Measures for the CY 2014 and CY 2015 Payment Determinations

1. Considerations in Expanding and Updating Quality Measures Under Hospital OQR Program

2. Proposed New Hospital OQR Program Quality Measures for the CY 2014 Payment Determination

a. Proposed New National Healthcare Safety Network (NHSN) Healthcare Associated Infection (HAI) Measure for the CY 2014 Payment Determination: Surgical Site Infection (NQF #0299)

b. Proposed New Chart—Abstracted Measures for CY 2014 Payment Determination

(1) Diabetes: Hemoglobin A1c Management (NQF #0059)

(2) Diabetes Measure Pair: A. Lipid Management: Low Density Lipoprotein Cholesterol (LDL-C) <130, B. Lipid Management: LDL-C <100 (NQF #0064)

(3) Diabetes: Blood Pressure Management (NQF #0061)

(4) Diabetes: Eye Exam (NQF #0055)

(5) Diabetes: Urine Protein Screening (NQF #0062)

(6) Cardiac Rehabilitation: Patient Referral From an Outpatient Setting (NQF #0643)

c. Proposed New Structural Measures

(1) Safe Surgery Checklist Use

(2) Submission of Hospital Outpatient Department Volume for Selected Outpatient Surgical Procedures

3. Proposed Hospital OQR Program Measures for the CY 2015 Payment Determination

a. Proposed Retention of CY 2014 Hospital OQR Measures for the CY 2015 Payment Determination

b. Proposed New NHSN HAI Measure for the CY 2015 Payment Determination

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

E. Proposed Payment Reduction for Hospitals That Fail To Meet the Hospital OQR Requirements for the CY 2012 Payment Update

1. Background

2. Proposed Reporting Ratio Application and Associated Adjustment Policy for CY 2012

F. Extraordinary Circumstances Extension or Waiver for CY 2012 and Subsequent Years

G. Proposed Requirements for Reporting of Hospital OQR Data for CY 2013 and Subsequent Years

1. Administrative Requirements for CY 2013 and Subsequent Years

2. Form, Manner, and Timing of Data Submission for CY 2013 and Subsequent Years

a. Proposed CY 2013 and CY 2014 Data Submission Requirements for Chart-Abstracted Data Submission

b. Proposed Encounter Threshold for Allowance of Sampling for CY 2013 and Subsequent Years

c. Proposed Population and Sampling Data Requirements Beginning With the CY 2013 Payment Determination

d. Proposed Claims-Based Measure Data Requirements for the CY 2013 Payment Determination

e. Proposed Structural Measure Data Requirements for the CY 2013 and CY 2014 Payment Determinations

f. Proposed Data Submission Deadlines for the Proposed NHSN HAI Surgical Site Infection Measure for the CY 2014 Payment Determination

g. Proposed Data Submission Requirements for ED—Patient Left Before Being Seen Measure Data for the CY 2013 and CY 2014 Payment Determinations

3. Hospital OQR Validation Requirements for Chart-Abstracted Data Submitted Directly to CMS: Proposed Data Validation Approach for the CY 2013 Payment Determination

a. Randomly Selected Hospitals

b. Proposed Use of Targeting Criteria for Data Validation Selection for CY 2013

(1) Background

(2) Proposed Targeting Criteria for Data Validation Selection for CY 2013

c. Encounter Selection

d. Validation Score Calculation

4. Additional Data Validation Conditions Under Consideration for CY 2014 and Subsequent Years

H. Proposed Hospital OQR Reconsideration and Appeals Procedures for CY 2013 and Subsequent Years

I. Electronic Health Records (EHRs)

J. 2012 Medicare EHR Incentive Program Electronic Reporting Pilot for Hospitals and CAHs

1. Background

2. Proposed Medicare EHR Incentive Program Electronic Reporting Pilot for Eligible Hospitals and CAHs

3. CQM Reporting Under the Electronic Reporting Pilot

K. Proposed ASC Quality Reporting Program

1. Background

2. ASC Quality Reporting Program Measure Selection

a. Proposed Timetable for Selecting ASC Quality Measures

b. Considerations in the Selection of Measures for the ASC Quality Reporting Program

3. Proposed Quality Measures for ASCs for CY 2014 Payment Determination

a. Proposed Claims-Based Measures Requiring Submission of Quality Data Codes (QDCs) Beginning January 1, 2012

(1) Patient Burns (NQF #0263)

(2) Patient Falls (NQF #0266)

(3) Wrong Site, Wrong Side, Wrong Patient, Wrong Procedure, Wrong Implant (NQF #0267)

(4) Hospital Transfer/Admission (NQF #0265)

(5) Prophylactic IV Antibiotic Timing (NQF #0264)

(6) Ambulatory Patient with Appropriate Method of Surgical Hair Removal (NQF #0515)

(7) Prophylactic Antibiotic Selection for Surgical Patients (NQF #0528)

b. Surgical Site Infection Rate (NQF #0299)

4. Proposed ASC Quality Measures for the CY 2015 Payment Determination

a. Retention of Measures Adopted for the CY 2014 Payment Determination in the CY 2015 Payment Determination

b. Proposed Structural Measures for the CY 2015 Payment Determination

(1) Safe Surgery Checklist Use

(2) ASC Facility Volume Data on Selected ASC Surgical Procedures

5. Proposed ASC Quality Measures for the CY 2016 Payment Determination

a. Retention of Measures Adopted for the CY 2015 Payment Determination in the CY 2016 Payment Determination

b. Proposed HAI Measure: Influenza Vaccination Coverage among Healthcare Personnel (HCP) (NQF #0431)

6. ASC Measure Topics for Future Considerations

7. Technical Specification Updates and Data Publication for the CY 2014 Payment Determination

a. Maintenance of Technical Specifications for Quality Measures

b. Publication of ASC Quality Reporting Program Data

8. Proposed Requirements for Reporting of ASC Quality Data for the CY 2014 Payment DeterminationStart Printed Page 42175

a. Proposed Data Collection and Submission Requirements for the Proposed Claims-Based Measures

b. Proposed Data Submission Deadlines for the Proposed Surgical Site Infection Rate Measure

XV. Proposed Changes to Whole Hospital and Rural Provider Exceptions to the Physician Self-Referral Prohibition: Exception for Expansion of Facility Capacity; and Proposed Changes to Provider Agreement Regulations on Patient Notification Requirements

A. Background

B. Changes Made by the Affordable Care Act

1. Changes Relating to Exception to Ownership and Investment Prohibition (Section 6001(a) of the Affordable Care Act)

2. Provisions of Section 6001(a)(3) of the Affordable Care Act

C. Proposed Changes Relating to the Process for an Exception to the Prohibition on Expansion of Facility Capacity

1. Applicable Hospital

a. Percentage Increase in Population

b. Inpatient Admissions

c. Nondiscrimination

d. Bed Capacity

e. Bed Occupancy

2. High Medicaid Facility

a. Number of Hospitals in County

b. Inpatient Admissions

c. Nondiscrimination

3. Procedures for Submitting a Request

4. Community Input

5. Permitted Increase

a. Amount of Permitted Increase

b. Location of Permitted Increase

6. Decisions

7. Limitation on Review

8. Frequency of Request

D. Proposed Changes Related to Provider Agreement Regulations on Patient Notification Requirements

XVI. Additional Proposals for the Hospital Inpatient Value-Based Purchasing (Hospital VBP) Program

A. Hospital VBP Program

1. Legislative Background

2. Overview of the Hospital Inpatient VBP Program Final Rule

3. Proposed Additional FY 2014 Hospital VBP Program Measures

4. Proposed Minimum Number of Cases and Measures for the Outcome Domain for the FY 2014 Hospital VBP Program

a. Background

b. Proposed Minimum Number of Cases for Mortality Measures, AHRQ Composite Measures, and HAC Measures

c. Proposed Minimum Number of Measures for Outcome Domain

5. Proposed Performance Periods and Baseline Periods for FY 2014 Measures

a. Proposed Clinical Process of Care Domain and Patient Experience of Care Domain Performance Periods and Baseline Periods

b. Proposed Outcome Domain Performance Periods and Baseline Periods

6. Proposed Performance Standards for the FY 2014 Hospital VBP Program

a. Background

(1) Mortality Measures

(2) Proposed Medicare Spending per Beneficiary

b. Proposed Clinical Process of Care and Patient Experience of Care FY 2014 Performance Standards

c. AHRQ Measures

d. HAC Measures

7. Proposed FY 2014 Hospital VBP Program Scoring Methodology

a. Proposed FY 2014 Domain Scoring Methodology

b. Proposed HAC Measure Scoring Methodology

8. Ensuring HAC Reporting Accuracy

9. Proposed Domain Weighting for FY 2014 Hospital VBP Program

B. Proposed Review and Correction Process under the Hospital VBP Program

1. Background

2. Proposed Review and Correction of Data Submitted to the QIO Clinical Warehouse on Chart-Abstracted Process of Care Measures and Measure Rates

3. Proposed Review and Correction Process for Hospital Consumer Assessment of Healthcare Providers and Systems (HCAHPS)

a. Phase One: Review and Correction of HCAHPS Data Submitted to the QIO Clinical Warehouse

b. Phase Two: Review and Correction of the HCAHPS Scores for the Hospital VBP Program

XVII. Files Available to the Public via the Internet

A. Information in Addenda Related to the Proposed CY 2012 Hospital OPPS

B. Information in Addenda Related to the Proposed CY 2012 ASC Payment System

XVIII. Collection of Information Requirements

A. Legislative Requirements for Solicitation of Comments

B. Requirements in Regulation Text

1. ICRs Regarding Basic Commitments of Providers (§ 489.20)

2. ICRs Regarding Exceptions Process Related to the Prohibition of Expansion of Facility Capacity (§ 411.362)

C. Proposed Associated Information Collections Not Specified in Regulatory Text

1. Hospital Outpatient Quality Reporting (Hospital OQR) Program

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

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

b. Additional Proposed Hospital OQR Program Measures for CY 2014

c. Proposed Hospital OQR Program Measures for CY 2015

3. Proposed Hospital OQR Program Validation Requirements for CY 2013

4. Proposed Hospital OQR Program Reconsideration and Appeals Procedures

5. ASC Quality Reporting Program

6. Proposed 2012 Medicare EHR Incentive Program Electronic Reporting Pilot for Hospitals and CAHs

7. Additional Topics

XIX. Response to Comments

XX. Economic Analysis

A. Regulatory Impact Analysis

1. Introduction

2. Statement of Need

3. Overall Impacts for Proposed OPPS and ASC Provisions

4. Detailed Economic Analysis

a. Effects of Proposed OPPS Changes in This Proposed Rule

(1) Limitations of Our Analysis

(2) Estimated Effects of This Proposed Rule on Hospitals

(3) Estimated Effects of This Proposed Rule on CMHCs

(4) Estimated Effect of This Proposed Rule on Beneficiaries

(5) Estimated Effects on Other Providers

(6) Estimated Effects on the Medicare and Medicaid Programs

(7) Alternative Considered

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

(1) Limitations of Our Analysis

(2) Estimated Effects of This Proposed Rule on Payments to ASCs

(3) Estimated Effect of This Proposed Rule on Beneficiaries

(4) Alternatives Considered

c. Accounting Statements and Tables

d. Effect of Proposed Requirements for the Hospital Outpatient Quality Reporting (OQR) Program

e. Effects of Proposed Changes to Physician Self-Referral Regulations

f. Effects of Proposed Changes to Provider Agreement Regulations on Patient Notification Requirements

g. Effect of Additional Proposed Changes to the Hospital VBP Program Requirements

h. Effects of Proposed Medicare EHR Incentive Program Reporting Pilot

B. Regulatory Flexibility Act (RFA) Analysis

C. Unfunded Mandates Reform Act Analysis

D. Conclusion

XXI. Federalism Analysis

Regulation Text

I. Background and Summary of the CY 2012 OPPS/ASC Proposed Rule

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

When Title XVIII of the Social Security Act (the Act) was enacted, Medicare payment for hospital outpatient services was based on hospital-specific costs. In an effort to ensure that Medicare and its beneficiaries pay appropriately for services and to encourage more efficient delivery of care, the Congress mandated replacement of the reasonable cost-based payment methodology with a prospective payment system (PPS). The Balanced Budget Act of 1997 (BBA) (Pub. L. 105-33) added section 1833(t) to the Act authorizing implementation of a PPS for hospital outpatient services. The OPPS was first implemented for services furnished on or after August 1, Start Printed Page 421762000. Implementing regulations for the OPPS are located at 42 CFR part 419.

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

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) (which include certain Current Procedural Terminology (CPT) codes) 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) 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.

The OPPS rate is an unadjusted national payment amount that includes the Medicare payment and the beneficiary copayment. This rate is divided into a labor-related amount and a nonlabor-related amount. The labor-related amount is adjusted for area wage differences using the hospital inpatient wage index value for the locality in which the hospital or CMHC is located.

All services and items within an APC group are comparable clinically and with respect to resource use (section 1833(t)(2)(B) of the Act). In accordance with section 1833(t)(2) of the Act, subject to certain exceptions, items and services within an APC group cannot be considered comparable with respect to the use of resources if the highest median cost (or mean cost, if elected by the Secretary) for an item or service in the APC group is more than 2 times greater than the lowest median cost 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. It also excludes screening mammography, diagnostic mammography, and effective January 1, 2011, an annual wellness visit providing personalized prevention plan services. The Secretary exercised the authority granted under the statute to also exclude from the OPPS those services that are paid under fee schedules or other payment systems. Such excluded services include, for example, the professional services of physicians and nonphysician practitioners paid under the Medicare Physician Fee Schedule (MPFS); laboratory services paid under the Clinical Laboratory Fee Schedule (CLFS); services for beneficiaries with end-stage renal disease (ESRD) that are paid under the ESRD composite rate; and services and procedures that require an inpatient stay that are paid under the hospital inpatient prospective payment system (IPPS). We set forth the services that are excluded from payment under the OPPS in 42 CFR 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 (IHS) 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.gov/​HospitalOutpatientPPS/​. The CY 2011 OPPS/ASC final rule with comment period appears in the November 24, Start Printed Page 421772010 Federal Register (75 FR 71800). 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 2011 OPPS on the basis of claims data from January 1, 2009, through December 31, 2009, and to implement certain provisions of the Affordable Care Act. In addition, we responded to public comments received on the provisions of the CY 2010 final rule with comment period (74 FR 60316) pertaining to the APC assignment of HCPCS codes identified in Addendum B to that rule with the new interim (“NI”) comment indicator, and public comments received on the August 3, 2010 OPPS/ASC proposed rule for CY 2011 (75 FR 46170).

D. Advisory Panel on Ambulatory Payment Classification (APC) Groups

1. Authority of the Advisory Panel on Ambulatory Payment Classification (APC) Groups (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 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 five times: on November 1, 2002; on November 1, 2004; on November 21, 2006; on November 2, 2008 and November 12, 2010. The current charter specifies, among other requirements, that: the 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 Official (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 multiple meetings, with the last meeting taking place on February 28-March 1, 2011. 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 Subcommittee for APC Groups and Status Indicator (SI) Assignments (previously known as the Packaging Subcommittee).

The Data Subcommittee is responsible for studying the data issues confronting the 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 Subcommittee for APC Groups and SI Assignments advises the Panel on the following issues: the appropriate SIs to be assigned to HCPCS codes, including but not limited to whether a HCPCS code or a category of codes should be packaged or separately paid; and the appropriate APCs to be assigned to HCPCS codes regarding services for which separate payment is made.

Each of these subcommittees was established by a majority vote from the full APC Panel during a scheduled APC Panel meeting, and the APC Panel recommended that the subcommittees continue at the February/March 2011 APC Panel meeting. We accept those recommendations of the APC Panel. All subcommittee recommendations are discussed and voted upon by the full APC Panel.

Discussions of the other recommendations made by the APC Panel at the February/March 2011 APC Panel 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. Summary of the Major Contents of This CY 2012 OPPS/ASC Proposed Rule

In this proposed rule, we set forth proposed changes to the Medicare hospital OPPS for CY 2012 to implement statutory requirements and changes arising from our continuing experience with the system. In addition, we set forth proposed changes to the revised Medicare ASC payment system for CY 2012, including proposed updated payment weights, covered surgical procedures, and covered ancillary items and services based on the proposed OPPS update. In addition, we are proposing to make changes to the rules governing limitations on certain physician referrals to hospitals in which physicians have an ownership or investment interest, provider agreement regulations on patient notification requirements, and the rules governing the Hospital Inpatient Value-Based Purchasing (VBP) Program.

The following is a summary of the major changes that we are proposing to make for CY 2012:

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 are proposing 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 Start Printed Page 42178standardized 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, extended by section 3121 of the Affordable Care Act.
  • 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.
  • The proposed establishment of 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.
  • The proposed changes to specific APCs.
  • The proposed movement of procedures from New Technology APCs to clinical APCs.

3. Proposed OPPS Payment for Devices

In section IV. of this proposed rule, we discuss the 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 the proposed CY 2012 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 2012 OPPS transitional pass-through spending for drugs, biologicals, and devices.

6. Proposed OPPS Payment for Hospital Outpatient Visits

In section VII. 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.

7. Proposed Payment for Partial Hospitalization Services

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

8. Proposed Procedures That Would Be Paid Only as Inpatient Procedures

In section IX. 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.

9. Proposed Policies on Supervision Standards for Outpatient Services in Hospitals and CAHs

In section X. of this proposed rule, we discuss proposed policy changes relating to the supervision of outpatient services furnished in hospitals and CAHs.

10. Proposed OPPS Payment Status and Comment Indicators

In section XI. of this proposed rule, we discuss our proposed changes to the definitions of status indicators assigned to APCs and present our proposed comment indicators.

11. OPPS Policy and Payment Recommendations

In section XII. of this proposed rule, we address recommendations made by the Medicare Payment Advisory Commission (MedPAC) in its March 2011 report to Congress, by the Office of Inspector General (OIG), and by the APC Panel regarding the OPPS for CY 2012.

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

In section XIII. of this proposed rule, we discuss the proposed updates of the revised ASC payment system and payment rates for CY 2012.

13. Reporting Quality Data for Annual Payment Rate Updates

In section XIV. of this proposed rule, we discuss the proposed measures for reporting hospital outpatient quality data for the OPD fee schedule increase factor for CY 2013 and subsequent calendar years; set forth the requirements for data collection and submission; and discuss the reduction to the OPPS OPD fee schedule increase factor for hospitals that fail to meet the Hospital OQR Program requirements. We also discuss proposed measures for reporting ASC quality data for the annual payment update factor for CYs 2014, 2015, and 2016; and set forth the requirements for data collection and submission for the annual payment update.

14. Proposed Changes to EHR Incentive Program for Eligible Hospitals and CAHs Regarding Electronic Submission of Clinical Quality Measures (CQMs)

In section XIV.J. of this proposed rule, we are proposing to allow eligible hospitals and CAHs participating in the Medicare EHR Incentive Program to meet the CQM reporting requirement of the EHR Incentive Program for payment year 2012 by participating in the 2012 Medicare EHR Incentive Program Electronic Reporting Pilot.

15. Proposed Changes to Provisions Relating to Physician Self-Referral Prohibition and Provider Agreement Regulations on Patient Notification Requirements

In section XV. of this proposed rule, we present our proposed exception process for expansion of facility capacity under the whole hospital and rural provider exceptions to the physician self-referral law, and proposed changes to the provider agreement regulations on patient notification requirements.

16. Additional Proposed Changes Relating to the Hospital Inpatient VBP Program

In section XVI. of this proposed rule, we present our proposed requirements for the FY 2014 Hospital Inpatient VBP Program.

17. Economic and Federalism Analyses

In sections XX. and XXI. of this proposed rule, we set forth an analysis of the regulatory and federalism impacts that the proposed changes would have on affected entities and beneficiaries.

F. Public Comments Received on the CY 2011 OPPS/ASC Final Rule With Comment Period

We received approximately 43 timely pieces of correspondence on the CY 2011 OPPS/ASC final rule with comment period that appeared in the Federal Register on November 24, 2010 (75 FR 71800), some of which contained multiple comments on the interim APC assignments and/or status indicators of HCPCS codes identified with comment indicator “NI” in Addendum B to that final rule with comment period. We will Start Printed Page 42179present summaries of those public comments on topics open to comment in the CY 2012 OPPS/ASC final rule with comment period and our responses to them under appropriate headings.

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 the CY 2012 OPPS, we are proposing to recalibrate the APC relative payment weights for services furnished on or after January 1, 2012, and before January 1, 2013 (CY 2012), using the same basic methodology that we described in the CY 2011 OPPS/ASC final rule with comment period. 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, using the most recent available data to construct a database for calculating APC group weights. For the purpose of recalibrating the proposed APC relative payment weights for CY 2012, we used approximately 138 million final action claims (claims for which all disputes and adjustments have been resolved and payment has been made) for hospital outpatient department services furnished on or after January 1, 2010, and before January 1, 2011. (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.gov/​HospitalOutpatientPPS/​HORD/​.)

Of the 138 million final action claims for services provided in hospital outpatient settings used to calculate the proposed CY 2012 OPPS payment rates for this proposed rule, approximately 105 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 105 million claims, approximately 3 million claims were not for services paid under the OPPS or were excluded as not appropriate for use (for example, erroneous cost-to-charge ratios (CCRs) or no HCPCS codes reported on the claim). From the remaining approximately 102 million claims, we created approximately 100 million single records, of which approximately 67 million were “pseudo” single or “single session” claims (created from approximately 23 million multiple procedure claims using the process we discuss later in this section). Approximately 888,000 claims were trimmed out on cost or units in excess of ±3 standard deviations from the geometric mean, yielding approximately 99 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 is described in section II.A.1.b. of this proposed rule. This section discusses how we develop “pseudo” single procedure claims (as defined below), with the intention of using more appropriate data from the available claims. In some cases, the bypass process allows us to use some portion of the submitted claim for cost estimation purposes, while the remaining information on the claim continues to be unusable. Consistent with the goal of using appropriate information in our data development process, we are proposing to only use claims (or portions of each claim) that are appropriate for ratesetting purposes. Ultimately, we were able to use for CY 2012 ratesetting some portion of approximately 94 percent of the CY 2010 claims containing services payable under the OPPS.

The proposed APC relative weights and payments for CY 2012 in Addenda A and B to this proposed rule (which are referenced in section XVII. of this proposed rule and available via the Internet on the CMS Web site) were calculated using claims from CY 2010 that were processed before January 1, 2011, and continue to be based on the median hospital costs for services in the APC groups. Under the proposed methodology, we select claims for services paid under the OPPS and match these claims to the most recent cost report filed by the individual hospitals represented in our claims data. We continue to believe that it is appropriate to use the most current full calendar year claims data and the most recently submitted cost reports to calculate the median costs underpinning the APC relative payment weights and the CY 2012 payment rates.

b. Proposed Use of Single and Multiple Procedure Claims

For CY 2012, 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 unit of one procedure and because, in many circumstances, we are unable to ensure that packaged costs can be appropriately allocated across multiple procedures performed on the same date of service.

It is generally desirable to use the data from as many claims as possible to recalibrate the APC relative payment weights, including those claims for multiple procedures. As we have for several years, we are proposing to continue to use date of service stratification and a list of codes to be bypassed to convert multiple procedure claims to “pseudo” single procedure claims. Through bypassing specified codes that we believe do not have significant packaged costs, we are able to use more data from multiple procedure claims. In many cases, this enabled us to create multiple “pseudo” single procedure claims from claims that were submitted as multiple procedure claims spanning multiple dates of service, or claims that contained numerous separately paid procedures reported on the same date on one claim. We refer to these newly created single procedure claims as “pseudo” single procedure claims. The history of our use of a bypass list to generate “pseudo” single procedure claims is well documented, most recently in the CY 2011 OPPS/ASC final rule with comment period (75 FR 71811 through 71822). In addition, for CY 2008, we increased packaging and created the first composite APCs. We have continued our packaging policies and the creation of composite APCs for CY 2009, 2010, and 2011, and we are proposing to continue them for CY 2012. Increased packaging and creation of composite APCs 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), which also increased Start Printed Page 42180the number of bills we were able to use to calculate APC median costs. We have continued the composite APCs for multiple imaging services for CYs 2010 and 2011, and we are proposing to continue to create them for CY 2012. 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 2012 OPPS. This methodology enabled us to create, for this proposed rule, approximately 67 million “pseudo” single procedure claims, including multiple imaging composite “single session” bills (we refer readers to section II.A.2.e.(5) of the proposed rule for further discussion), to add to the approximately 33 million “natural” single procedure claims. For this proposed rule, “pseudo” single procedure and “single session” procedure bills represented approximately 67 percent of all single procedure bills used to calculate median costs.

For CY 2012, we are proposing to bypass 460 HCPCS codes for CY 2012 that are identified in Addendum N to this proposed rule (which is referenced in section XVII. of this proposed rule and available via the Internet on the CMS Web site). Since the inception of the bypass list, which is the list of codes to be bypassed to convert multiple procedure claims to “pseudo” single procedure claims, we have calculated the percent of “natural” single bills that contained packaging for each HCPCS code and the amount of packaging on each “natural” single bill for each code. Each year, we generally retain the codes on the previous year's bypass list and use the updated year's data (for CY 2012, data available for the February 28-March 1, 2011 APC Panel meeting from CY 2010 claims processed through September 30, 2010, and CY 2009 claims data processed through June 30, 2010, used to model the payment rates for CY 2011) to determine whether it would be appropriate to propose to add additional codes to the previous year's bypass list. For CY 2012, we are proposing to continue to bypass all of the HCPCS codes on the CY 2011 OPPS bypass list because they continue to meet the established empirical criteria for the bypass list. We updated HCPCS codes on the CY 2011 bypass list that were mapped to new HCPCS codes for CY 2012 ratesetting by evaluating data for the replacement codes under the empirical criteria described below and also removing the HCPCS codes that we are proposing to be deleted for CY 2012, which are listed in Table 1 of this proposed rule. We also are proposing to remove HCPCS codes that are not separately paid under the OPPS because the purpose of the bypass list is to obtain more data for those codes relevant to ratesetting. None of these deleted codes were “overlap bypass codes” (those HCPCS codes that are both on the bypass list and are members of the multiple imaging composite APCs). We also are proposing to add to the bypass list for CY 2012 all HCPCS codes not on the CY 2011 bypass list that, using either the CY 2011 final rule data (CY 2009 claims) or the February 28-March 1, 2011 APC Panel data (first 9 months of CY 2010 claims), met the empirical criteria for the bypass list that are summarized below. The entire list proposed for CY 2012 (including the codes that remain on the bypass list from prior years) is open to public comment. Because we must make some assumptions about packaging in the multiple procedure claims in order to assess a HCPCS code for addition to the bypass list, we assumed that the representation of packaging on “natural” single procedure claims for any given code is comparable to packaging for that code in the multiple procedure claims. The proposed criteria for the bypass list are:

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

In response to comments to the CY 2010 OPPS/ASC proposed rule requesting that the packaged cost threshold be updated, we considered whether it would be appropriate to update the $50 packaged cost threshold for inflation when examining potential bypass list additions. As discussed in the CY 2010 OPPS/ASC final rule with comment period (74 FR 60328), the real value of this packaged cost threshold criterion has declined due to inflation, making the packaged cost threshold more restrictive over time when considering additions to the bypass list. Therefore, adjusting the threshold by the market basket would prevent continuing decline in the threshold's real value. For CY 2011, based on CY 2009 claims data, we proposed to apply the final market basket of 3.6 percent published in the CY 2009 OPPS/ASC final rule with comment period (73 FR 26584) to the $50 packaged cost threshold used in the CY 2010 OPPS/ASC final rule with comment period (74 FR 60325). This calculation led us to a proposed packaged cost threshold for bypass list additions for CY 2011 of $50 ($51.80 rounded to $50). We stated that we believe that applying the market basket from the year of claims data to the packaged cost threshold, rounded to the nearest $5 increment, would appropriately account for the effects of inflation when considering additions to the bypass list because the market basket increase percentage reflects the extent to which the price of inputs for hospital services has increased compared to the price of inputs for hospital services in the prior year. We are proposing for CY 2012, based on the same rationale described for the CY 2011 OPPS/ASC final rule with comment period (75 CFR 71812), to continue to update the packaged cost threshold by the market basket. By applying the final CY 2011 market basket increase of 1.85 percent to the prior non-rounded dollar threshold of $51.80 (75 FR 71812), we determined that the threshold increases for CY 2012 to $55 ($52.76 rounded to $55, the nearest $5 increment). Therefore, we are proposing to set the median packaged cost threshold on the CY 2010 claims at $55 for a code to be considered for addition to the CY 2012 OPPS bypass list.

  • 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 2012 OPPS proposal. Some of these Start Printed Page 42181codes were identified by CMS medical advisors and some were identified in prior years by commenters with specialized knowledge of the packaging associated with specific services. We also are proposing to continue to include on the bypass list certain HCPCS codes in order to purposefully direct the assignment of packaged costs to a companion code where services always appear together and where there would otherwise be few single procedure claims available for ratesetting. For example, we have previously discussed our reasoning for adding HCPCS code G0390 (Trauma response team associated with hospital critical care service) and the CPT codes for additional hours of drug administration to the bypass list (73 FR 68513 and 71 FR 68117 through 68118).

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

Addendum N to this proposed rule includes the proposed list of bypass codes for CY 2012. The list of bypass codes contains codes that were reported on claims for services in CY 2010 and, therefore, includes codes that were in effect in 2010 and used for billing but were deleted for CY 2011. We retained these deleted bypass codes on the proposed CY 2012 bypass list because these codes existed in CY 2010 and were covered OPD services in that period, and CY 2010 claims data are used to calculate 2012 payment rates. Keeping these deleted bypass codes on the bypass list potentially allowed us to create more “pseudo” single procedure claims for ratesetting purposes. “Overlap bypass codes” that were members of the proposed multiple imaging composite APCs are identified by asterisks (*) in the third column of Addendum N to this proposed rule. HCPCS codes that we are proposing to add for CY 2012 are identified by asterisks (*) in the fourth column of Addendum N.

Table 1 below contains the list of codes that we are proposing to remove from the CY 2012 bypass list because these codes were either deleted from the HCPCS before CY 2010 (and therefore were not covered OPD services in CY2010) or were not separately payable codes under the proposed CY 2012 OPPS because these codes are not used for ratesetting (and therefore would not need to be bypassed). None of these proposed deleted codes were “overlap bypass” codes.

Table 1—HCPCS Codes Proposed To Be Removed From the CY 2012 Bypass List

HCPCS CodeHCPCS Short descriptor
29220Strapping of low back
78350Bone mineral, single photon
90816Psytx, hosp, 20-30 min
90818Psytx, hosp, 45-50 min
90826Intac psytx, hosp, 45-50 min
99241Office consultation
99242Office consultation
99243Office consultation
99244Office consultation
99245Office consultation
0144TCT heart wo dye; qual calc

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

For CY 2012, we are proposing to continue to use the hospital-specific overall ancillary and departmental CCRs to convert charges to estimated costs through application of a revenue code-to-cost center crosswalk. To calculate the APC median costs on which the proposed CY 2012 APC payment rates are based, we calculated hospital-specific overall ancillary CCRs and hospital-specific departmental CCRs for each hospital for which we had CY 2010 claims data from the most recent available hospital cost reports, in most cases, cost reports beginning in CY 2009. For the CY 2012 OPPS proposed rates, we used the set of claims processed during CY 2010. We applied the hospital-specific CCR to the hospital's charges at the most detailed level possible, based on a revenue code-to-cost center crosswalk that contains a hierarchy of CCRs used to estimate costs from charges for each revenue code. That crosswalk is available for review and continuous comment on the CMS Web site at: http://www.cms.gov/​HospitalOutpatientPPS/​03_​crosswalk.asp#TopOfPage.

To ensure the completeness of the revenue code-to-cost center crosswalk, we reviewed changes to the list of revenue codes for CY 2010 (the year of the claims data we used to calculate the proposed CY 2012 OPPS payment rates). For CY 2010, the National Uniform Billing Committee added revenue codes 860 (Magnetoencephalography (MEG); general classification) and 861 (Magnetoencephalography (MEG)). For purposes of applying a CCR to charges reported under revenue codes 860 and 861, we are proposing to use nonstandard Medicare cost report cost center 3280 (Electrocardiogram (EKG) and Electroencephalography (EEG)) as the primary cost center and to use standard cost center 5400 (Electroencephalography (EEG)) as the secondary cost center. We believe that MEG, which evaluates brain activity, is similar to EEG, which also evaluates brain activity, and that the few hospitals that furnish MEG are likely to furnish it in the same department of the hospital in which they furnish EEG services. Therefore, we believe that the CCRs that we apply to the EEG revenue codes are more likely to result in a more accurate estimated cost for MEG than would the application of the hospital-specific overall ancillary CCR. For hospitals that report charges under revenue code 860 or 861 but do not report costs on their cost report under cost center 3280 or 5400, we are proposing to apply the hospital-specific overall CCR to the charges reported under revenue code 860 or 861 for purposes of estimating the cost of these services. We note that revenue codes with effective dates in CY 2011 are not relevant to this process because these new revenue codes were not applicable to claims for services furnished during CY 2010.

In accordance with our longstanding policy, we calculated CCRs for the standard and nonstandard cost centers accepted by the electronic cost report database. In general, the most detailed level at which we calculated CCRs was the hospital-specific departmental level. Start Printed Page 42182For a discussion of the hospital-specific overall ancillary CCR calculation, we refer readers to the CY 2007 OPPS/ASC final rule with comment period (71 FR 67983 through 67985). One longstanding exception to this general methodology for calculation of CCRs used for converting charges to costs on each claim is the calculation of median blood costs, as discussed in section II.A.2.d.(2) of this proposed rule and which has been our standard policy since the CY 2005 OPPS.

For the CCR calculation process, we used the same general approach that we used in developing the final APC rates for CY 2007 and thereafter, using the revised CCR calculation that excluded the costs of paramedical education programs and weighted the outpatient charges by the volume of outpatient services furnished by the hospital. We refer readers to the CY 2007 OPPS/ASC final rule with comment period for more information (71 FR 67983 through 67985). We first limited the population of cost reports to only those for hospitals that filed outpatient claims in CY 2010 before determining whether the CCRs for such hospitals were valid.

We then calculated the CCRs for each cost center and the overall ancillary CCR for each hospital for which we had claims data. We did this using hospital-specific data from the Hospital Cost Report Information System (HCRIS). We used the most recent available cost report data, in most cases, cost reports with cost reporting periods beginning in CY 2009. For this proposed rule, we are using the most recently submitted cost reports to calculate the CCRs to be used to calculate median costs for the proposed CY 2012 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 then calculated both an overall ancillary CCR and cost center-specific CCRs for each hospital. We used the overall ancillary CCR referenced in this section II.A.1.c. of this proposed rule for all purposes that require use of an overall ancillary CCR. We are proposing to continue this longstanding methodology for the calculation of median costs for CY 2012.

Since the implementation of the OPPS, some commenters have raised concerns about potential bias in the OPPS cost-based weights due to “charge compression,” which is the practice of applying a lower charge markup to higher cost services and a higher charge markup to lower cost services. As a result, the cost-based weights may reflect some aggregation bias, undervaluing high-cost items and overvaluing low-cost items when an estimate of average markup, embodied in a single CCR, is applied to items of widely varying costs in the same cost center.

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 cost-based relative weights, particularly with regard to the impact on inpatient diagnosis-related group (DRG) payments, and to consider methods to better capture the variation in cost and charges for individual services when calculating costs for the IPPS relative weights across services in the same cost center. RTI issued a report in March 2007 with its findings on charge compression, which is available on the CMS Web site at: http://www.cms.gov/​reports/​downloads/​Dalton.pdf. Although this report was focused largely on charge compression in the context of the IPPS cost-based relative weights, because several of the findings were relevant to the OPPS, we discussed that report in the CY 2008 OPPS/ASC proposed rule (72 FR 42641 through 42643) and discussed those findings again in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66599 through 66602).

In August 2007, we contracted with RTI to evaluate the cost estimation process for the OPPS relative weights because its 2007 report had concentrated on IPPS DRG cost-based relative weights. The results of RTI's analyses had implications for both the OPPS APC cost-based relative weights and the IPPS MS-DRG (Medicare severity) cost-based 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).

We addressed the RTI finding that there was aggregation bias in both the IPPS and the OPPS cost estimation of expensive and inexpensive medical supplies in the FY 2009 IPPS final rule. Specifically, we finalized our proposal for both the OPPS and IPPS to create one cost center for “Medical Supplies Charged to Patients” and one cost center for “Implantable Devices Charged to Patients,” essentially splitting the then current CCR for “Medical Supplies and Equipment” into one CCR for low-cost medical supplies and another CCR for high-cost implantable devices in order to mitigate some of the effects of charge compression. Accordingly, in Transmittal 20 of the Provider Reimbursement Manual, Part II (PRM-II), Chapter 36, Form CMS-2552-96, which was issued in July 2009, we created a new subscripted Line 55.01 on Worksheet A for the “Implantable Devices Charged to Patients” cost center. This new subscripted cost center, placed under the standard line for “Medical Supplies Charged to Patients,” is available for use for cost reporting periods beginning on or after May 1, 2009. A subscripted cost center is the addition of a separate new cost center line and description which bears a logical relationship to the standard cost center line and is located immediately following a standard cost center line. Subscripting a cost center line adds flexibility and cost center expansion capability to the cost report. For example, Line 55 of Worksheet A on Form CMS 2552-96 (the Medicare hospital cost report) is “Medical Supplies Charged to Patients.” The additional cost center, which isolates the costs of “Implantable Medical Supplies Charged to Patients”, was created by adding subscripted Line 55.01 to Worksheet A and is defined 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 investigations devices) (73 FR 48458).

In preparation for the FY 2012 IPPS proposed rule and this CY 2012 OPPS proposed rule, we have assessed the availability of data in the “Implantable Devices Charged to Patients” cost center. In order to develop a robust analysis regarding the use of cost data from the “Implantable Devices Charged to Patients” cost center, we believe that it is necessary to have a critical mass of cost reports filed with data in this cost center. The cost center for “Implantable Devices Charged to Patients” is effective for cost reporting periods beginning on or after May 1, 2009. We have checked the availability of CY 2009 cost reports in the December 31, 2010 quarter ending update of HCRIS, which is the latest upload of CY 2009 cost report data that we could use for this proposed rule. We have determined that there are only 437 hospitals that have completed the “Implantable Devices Charged to Patients” cost center (out of approximately 3,500 IPPS hospitals). We do not believe this is a sufficient Start Printed Page 42183amount of data from which to generate a meaningful analysis. Therefore, we are not proposing to use data from the “Implantable Devices Charged to Patients” cost center to create a distinct CCR for Implantable Devices Charged to Patients for use in calculating the OPPS relative weights for CY 2012. We will reassess the availability of data for the “Implantable Devices Charged to Patients” cost center for the CY 2013 OPPS rulemaking cycle. Because there is approximately a 3-year lag in the availability of cost report data for IPPS and OPPS ratesetting purposes in a given calendar year, we believe we may be able to use data from the revised Medicare hospital cost report form to estimate costs from charges for implantable devices for the CY 2013 OPPS relative weights. For a complete discussion of the rationale for the creation of the new cost center for “Implantable Devices Charged to Patients,” public comments, and our responses, we refer readers to the FY 2009 IPPS final rule (73 FR 48458 through 45467).

In the CY 2009 OPPS/ASC final rule with comment period, we indicated that we would be making some other OPPS-specific changes in response to the RTI report recommendations. Specifically, these changes included modifications to the cost reporting software and the addition of three new nonstandard cost centers. With regard to modifying the cost reporting preparation software in order to offer additional descriptions for nonstandard cost centers to improve the accuracy of reporting for nonstandard cost centers, we indicated that the change would be made for the next release of the cost report software. These changes have been made to the cost reporting software with the implementation of CMS Transmittal 21, under Chapter 36 of the PRM-II, available on the CMS Web site at: http://www.cms.hhs.gov/​Manuals/​PBM/​, which is effective for cost reporting periods ending on or after October 1, 2009.

We also indicated that we intended to add new nonstandard cost centers for “Cardiac Rehabilitation,” “Hyperbaric Oxygen Therapy,” and “Lithotripsy.” We note that, in January 2010, CMS issued Transmittal 21 which updated the PRM-II, Chapter 36, Form CMS-2552-96. One of the updates in this transmittal established nonstandard cost centers for “Cardiac Rehabilitation,” “Hyperbaric Oxygen Therapy,” and “Lithotripsy” for use on Worksheet A. These three new nonstandard cost centers became available for cost reporting periods ending on or after October 1, 2009, and are included in the revenue code to cost center crosswalk we are proposing to use for calculating payment rates for CY 2012 OPPS. Specifically, the nonstandard cost centers are: 3120 (Cardiac Catheterization Laboratory); 3230 (CAT Scan); 3430 (Magnetic Resonance Imaging (MRI)). The revenue code to cost center crosswalk that we are proposing to use for purposes of estimating the median costs of items and services for the CY 2012 OPPS is available for review and continuous comment (outside of comment on this proposed rule) on the CMS Web site at: http://www.cms.gov/​HospitalOutpatientPPS/​03_​crosswalk.asp#TopOfPage.

Furthermore, in the FY 2011 IPPS/LTCH PPS final rule (75 FR 50075 through 50080), we finalized our proposal to create new standard cost centers for “Computed Tomography (CT),” “Magnetic Resonance Imaging (MRI),” and “Cardiac Catheterization,” and to require that hospitals report the costs and charges for these services under new cost centers on the revised Medicare cost report Form CMS 2552-10. As we discussed in the FY 2009 IPPS/LTCH PPS and CY 2009 OPPS/ASC proposed and final rules, RTI found that the costs and charges of CT scans, MRI, and cardiac catheterization differ significantly from the costs and charges of other services included in the standard associated cost center. RTI also concluded that both the IPPS and OPPS relative weights would better estimate the costs of those services if CMS were to add standard costs centers for CT scans, MRI, and cardiac catheterization in order for hospitals to report separately the costs and charges for those services and in order for CMS to calculate unique CCRs to estimate the cost from charges on claims data. (We refer readers to the FY 2011 IPPS/LTCH PPS final rule (75 FR 50075 through 50080) for a more detailed discussion on the reasons for the creation of standard cost centers for CT scans, MRI, and cardiac catheterization.) The new standard cost centers for MRI, CT scans, and cardiac catheterization are effective for cost report periods beginning on or after May 1, 2010, on the revised cost report Form CMS-2552-10. CMS issued the new hospital cost report Form CMS-2552-10 on December 30, 2010. The new cost report form can be accessed at the CMS Web site at: https://www.cms.gov/​Manuals/​PBM/​itemdetail.asp?​filterType=​none&​filterByDID=​-99&​sortByDID=​1&​sortOrder=​ascending&​itemID=​CMS021935&​intNumPerPage=​10. Once at this Web site, users should double click on “Chapter 40.”

We believe that improved cost report software, the incorporation of new standard and nonstandard cost centers, and the 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. We will continue our standard practice of examining ways in which we can improve the accuracy of our cost estimation processes.

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 proposed OPPS payment rates for CY 2012. 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.gov/​HospitalOutpatientPPS. The accounting of claims used in the development of this proposed rule is included on the CMS Web site under supplemental materials for this CY 2012 OPPS/ASC 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 comprises the data set that is available for purchase under a CMS data use agreement. Our CMS Web site, http://www.cms.gov/​HospitalOutpatientPPS, includes information about purchasing the “OPPS Limited Data Set,” which now includes the additional variables previously available only in the OPPS Identifiable Data Set, including ICD-9-CM diagnosis codes and revenue code payment amounts. This file is derived from the CY 2010 claims that were used to calculate the proposed payment rates for the CY 2012 OPPS.

We used the methodology described in sections II.A.2.a. through II.A.2.e. of this proposed rule to calculate the median costs we use to establish the relative weights used in calculating the proposed OPPS payment rates for CY 2012 shown in Addenda A and B to this proposed rule (which are referenced in section XVII. of this proposed rule and available via the Internet on the CMS Web site). We refer readers to section II.A.4. of this proposed rule for a discussion of the conversion of APC median costs to scaled payment weights.

a. Claims Preparation

For this proposed rule, we used the CY 2010 hospital outpatient claims Start Printed Page 42184processed before January 1, 2011, to calculate the median costs of APCs that underpin the proposed relative weights for CY 2012. To begin the calculation of the relative weights for CY 2012, we pulled all claims for outpatient services furnished in CY 2010 from the national claims history file. This is not the population of claims paid under the OPPS, but all outpatient claims (including, for example, critical access hospital (CAH) claims and hospital claims for clinical laboratory services for persons who are neither inpatients nor outpatients of the hospital).

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

We divided the remaining claims into the three groups shown below. Groups 2 and 3 comprise the 105 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).

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

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

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

We then excluded claims without a HCPCS code. We moved to another file claims that contained 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 to a separate file (the lines stay on the claim, but are copied onto another file). No claims were deleted when we copied these lines onto another file. These line-items are used to calculate a per unit mean and median cost and a per day mean and median cost for drugs and nonimplantable biologicals, therapeutic radiopharmaceutical agents, and brachytherapy sources, as well as other information used to set payment rates, such as a unit-to-day ratio for drugs.

In the CY 2010 OPPS/ASC final rule with comment period (74 FR 60517), we first adopted a policy to redistribute some portion of total cost of packaged drugs and biologicals to the separately payable drugs and biologicals as acquisition and pharmacy overhead and handling costs. As discussed further in section V.B.3. of this proposed rule, we are proposing to continue this policy for CY 2012. Therefore, 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 with HCPCS codes, whether separately paid or packaged, 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 2011 ASP amount multiplied by total units for each drug or biological in the CY 2010 claims data). These values are ASP+11 percent (for all drugs and biologicals with HCPCS codes, whether separately paid or packaged), ASP-2 percent (for drugs and biologicals that are separately paid), and ASP+188 percent (for drugs and biologicals that have HCPCS codes and that are packaged), respectively. As we discuss in section V.B.3. of this proposed rule, we are proposing to redistribute $161 million of the total cost in our claims data for coded packaged drugs and biologicals with an ASP to payment for separately payable drugs and biologicals. We also are proposing to redistribute an additional $54 million from the cost of uncoded packaged drugs billed under pharmacy revenue code series 025X (Pharmacy (also see 063X, an extension of 025X)), 026X (IV Therapy), and 063X (Pharmacy—Extension of 025X). This total excludes the cost of diagnostic and therapeutic radiopharmaceuticals because they are not reported under pharmacy revenue codes or under the pharmacy cost center on the hospital cost report. Our CY 2012 proposal to redistribute $215 million in estimated costs from coded and uncoded packaged drugs to separately payable drugs represents the $200 million in total packaged drug costs Start Printed Page 42185redistributed from the CY 2011 OPPS/ASC final rule with comment period (75 FR 71967), updated by the PPI for Pharmaceuticals for Human Use.

Redistributing a total of $161 million in pharmacy overhead cost from packaged drugs and biologicals reduces the $705 million cost of packaged drugs and biologicals with HCPCS codes and ASPs to $544 million, approximately a 23-percent reduction. Redistributing $54 million from the cost of uncoded packaged drugs and biologicals reduces the $502 million cost of uncoded drugs and biologicals to $448 million, approximately an 11-percent reduction. To implement our proposed CY 2012 policy to redistribute $161 million from the pharmacy overhead cost of coded packaged drugs and biologicals to separately payable drugs and biologicals and $54 million from the cost of uncoded packaged drugs, we multiplied the cost of each packaged drug or biological with a HCPCS code and ASP pricing information in our CY 2010 claims data by 0.77, and we multiplied all uncoded packaged pharmacy drug costs in our CY 2010 claims data, excluding those for diagnostic radiopharmaceuticals, by 0.89. We also added the redistributed $215 million to the total cost of separately payable drugs and biologicals in our CY 2010 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 from ASP−2 percent to ASP+4 percent. We refer readers to section V.B.3. of this proposed rule for a complete discussion of our proposed policy to pay for separately paid drugs and biologicals and pharmacy overhead for CY 2012.

We then removed line-items that were not paid during claim processing, presumably for a line-item rejection or denial. The number of edits for valid OPPS payment in the Integrated Outpatient Code Editor (I/OCE) and elsewhere has grown significantly in the past few years, especially with the implementation of the full spectrum of National Correct Coding Initiative (NCCI) edits. To ensure that we are using valid claims that represent the cost of payable services to set payment rates, we removed line-items with an OPPS status indicator that were not paid during claims processing in the claim year, but have a status indicator of “S,” “T,” “V,” or “X” in the proposed year's payment system. This logic preserves charges for services that would not have been paid in the claim year but for which some estimate of cost is needed for the proposed year, such as services newly proposed to come off the inpatient list for CY 2011 that were assigned status indicator “C” in the claim year. It also preserves charges for packaged services so that the costs can be included in the cost of the services with which they are reported, even if the CPT codes for the packaged services were not paid because the service is part of another service that was reported on the same claim or the code otherwise violates claims processing edits.

For CY 2012, we are proposing to continue the policy we implemented for CY 2011 to exclude line-item data for pass-through drugs and biologicals (status indicator “G” for CY 2010) and nonpass-through drugs and biologicals (status indicator “K” for CY 2010) where the charges reported on the claim for the line were either denied or rejected during claims processing. Removing lines that were eligible for payment but were not paid ensures that we are using appropriate data. The trim avoids using cost data on lines that we believe were defective or invalid because those rejected or denied lines did not meet the Medicare requirements for payment. For example, edits may reject a line for a separately paid drug because the number of units billed exceeded the number of units that would be reasonable and, therefore, is likely a billing error (for example, a line reporting 55 units of a drug for which 5 units is known to be a fatal dose). As with our trimming in the CY 2011 OPPS/ASC final rule with comment period (75 FR 71828) of line items with a status indicator of “S,” “T,” “V,” or “X,” we believe that unpaid line-items represent services that are invalidly reported and, therefore, should not be used for ratesetting. We believe that removing lines with valid status indicators that were edited and not paid during claims processing increases the accuracy of the single bills used to determine the mean unit costs for use in the ASP+X calculation described in section V.B.3. of this proposed rule with comment period.

b. Splitting Claims and Creation of “Pseudo” Single Procedure 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.) For CY 2012, 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 2012, 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 composite APC based on composite-specific criteria or paid separately through single code APCs when the criteria are not met. As discussed in the CY 2009 OPPS/ASC final rule with comment period (73 FR 68709), we established status indicators “Q1,” “Q2,” and “Q3” to facilitate identification of the different categories of codes. We are proposing to treat these codes in the same manner for data purposes for CY 2012 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. Codes with status indicator “Q1” or “Q2” are carried through the data either with status indicator “N” as packaged or, if they meet the criteria for separate payment, they are given the status indicator of the APC to which they are assigned and are considered as “pseudo” single procedure claims for major codes. Codes assigned status indicator “Q3” are paid under individual APCs unless they occur in the combinations that qualify for payment as composite APCs and, therefore, they carry the status indicator of the individual APC to which they are assigned through the data process and are treated as major codes during both the split and “pseudo” single creation process. The calculation of the median costs for composite APCs from multiple procedure 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 Procedure Major Claims: Claims with a single separately payable procedure (that is, status indicator “S,” “T,” “V,” or “X,” which includes codes with status indicator “Q3”); claims with one unit of a status indicator “Q1” code (“STVX-packaged”) where there was no code with status indicator “S,” “T,” “V,” or “X” on the same claim on the same date; or claims with one unit of a status indicator “Q2” code (“T-packaged”) where there was no code with a status indicator “T” on the same claim on the same date.Start Printed Page 42186

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

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

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

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

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

(2) Creation of “Pseudo” Single Procedure Claims

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

We also used the bypass codes listed in Addendum N to this proposed rule (which is referenced in section XVII. of this proposed rule and available via the Internet on the CMS Web site) and discussed in section II.A.1.b. of this proposed rule to remove separately payable procedures which we determined contained limited or no packaged costs or that were otherwise suitable for inclusion on the bypass list from a multiple procedure bill. As discussed above, we ignore the “overlap bypass codes,” that is, those HCPCS codes that are both on the bypass list and are members of the multiple imaging composite APCs, in this initial assessment for “pseudo” single procedure claims. The proposed CY 2012 “overlap bypass codes” are listed in Addendum N to this proposed rule (which is referenced in section XVII. of this proposed rule and available via the Internet on the CMS Web site). When one of the two separately payable procedures on a multiple procedure claim was on the bypass list, we split the claim into two “pseudo” single procedure claim records. The single procedure claim record that contained the bypass code did not retain packaged services. The single procedure claim record that contained the other separately payable procedure (but no bypass code) retained the packaged revenue code charges and the packaged HCPCS code charges. We also removed lines that contained multiple units of codes on the bypass list and treated them as “pseudo” single procedure claims by dividing the cost for the multiple units by the number of units on the line. 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 procedure claim from that residual claim record, which retained the costs of packaged revenue codes and packaged HCPCS codes. This enabled us to use claims that would otherwise be multiple procedure claims and could not be used.

We then assessed the claims to determine if the criteria for the multiple imaging composite APCs, discussed in section II.A.2.e.(5) of this 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 procedure claim. We also identified line-items of overlap bypass codes as a “pseudo” single procedure claim. This allowed us to use more claims data for ratesetting purposes.

We also examined the multiple procedure minor claims to determine whether we could create “pseudo” single procedure claims. Specifically, where the claim contained multiple codes with status indicator “Q1” (“STVX-packaged”) on the same date of service or contained multiple units of a single code with status indicator “Q1,” we selected the status indicator “Q1” HCPCS code that had the highest CY Start Printed Page 421872011 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 2011 relative weight to create a “pseudo” single procedure claim for that code: Additional units of the status indicator “Q1” HCPCS code with the highest CY 2011 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 the selected code from the data status indicator of “N” to the status indicator of the APC to which the selected procedure was assigned for further data processing and considered this claim as a major procedure claim. We used this claim in the calculation of the APC median cost for the status indicator “Q1” HCPCS code.

Similarly, where a multiple procedure minor claim contained multiple codes with status indicator “Q2” (“T-packaged”) or multiple units of a single code with status indicator “Q2,” we selected the status indicator “Q2” HCPCS code that had the highest CY 2011 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 2011 relative weight to create a “pseudo” single procedure claim for that code: Additional units of the status indicator “Q2” HCPCS code with the highest CY 2011 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.

Where a multiple procedure minor claim contained multiple codes with status indicator “Q2” (“T-packaged”) and status indicator “Q1” (“STVX-packaged”), we selected the T-packaged status indicator “Q2” HCPCS code that had the highest relative weight for CY 2011 and set the units to one on that HCPCS code to reflect our policy of paying only one unit of a code with a status indicator of “Q2.” We then packaged all costs for the following into a single cost for the selected (“T packaged”) HCPCS code to create a “pseudo” single procedure claim for that code: Additional units of the status indicator “Q2” HCPCS code with the highest CY 2011 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 2011 relative weights. If a status indicator “Q1” HCPCS code had a higher CY 2011 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 then applied our process for creating “pseudo” single procedure claims to the conditionally packaged codes that do not meet the criteria for packaging, which enabled us to create single procedure claims from them, where they meet the criteria for single procedure claims. Conditionally packaged codes are identified using status indicators “Q1” and “Q2,” and are described in section XI.A.1. of this proposed rule.

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

We are proposing to continue to apply this methodology for the purpose of creating pseudo single procedure claims for CY 2012 OPPS.

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

As noted in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66606), for the CY 2008 OPPS, we adopted an APC Panel recommendation that CMS should review the final list of packaged revenue codes for consistency with OPPS policy and ensure that future versions of the I/OCE edit accordingly. As we have in the past, we will continue to compare the final list of packaged revenue codes that we adopt for CY 2012 to the revenue codes that the I/OCE will package for CY 2012 to ensure consistency.

In the CY 2009 OPPS/ASC final rule with comment period (73 FR 68531), we replaced the NUBC standard abbreviations for the revenue codes listed in Table 2 of the CY 2009 OPPS/ASC proposed rule with the most current NUBC descriptions of the revenue code categories and subcategories to better articulate the meanings of the revenue codes without changing the proposed list of revenue codes. In the CY 2010 OPPS/ASC final rule with comment period (74 FR 60362 through 60363), we finalized changes to the packaged revenue code list based on our examination of the updated NUBC codes and public comment to the CY 2010 proposed list of packaged revenue codes. For CY 2012, as we did for CY 2011, we reviewed the changes to revenue codes that were effective during CY 2010 for purposes of determining the charges reported with revenue codes but without HCPCS codes that we would propose to package for the CY 2012 OPPS. We believe that the charges reported under the revenue codes listed in Table 2 below continue to reflect ancillary and supportive services for which hospitals report charges without HCPCS codes. Therefore, for CY 2012, we are proposing to continue to package the costs that we derive from the charges reported without HCPCS code under the revenue codes displayed in Table 2 below for purposes of calculating the median costs on which the CY 2012 OPPS are based.Start Printed Page 42188

Table 2—Proposed CY 2012 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.
0261IV 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.
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.
0392Administration, Processing and Storage for Blood and Blood Components; Processing and Storage.
0399Administration, Processing and Storage for Blood and Blood Components; Other Blood Handling.
0621Medical Surgical Supplies—Extension of 027X; Supplies Incident to Radiology.
0622Medical Surgical Supplies—Extension of 027X; Supplies Incident to Other DX Services.
0623Medical 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.
0710Recovery Room; General Classification.
0720Labor Room/Delivery; General Classification.
0721Labor Room/Delivery; Labor.
0732EKG/ECG (Electrocardiogram); Telemetry.
0762Specialty Services; Observation Hours.
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.
Start Printed Page 42189
0942Other Therapeutic Services (also see 095X, an extension of 094x); Education/Training.
0943Other Therapeutic Services (also see 095X, an extension of 094X), Cardiac Rehabilitation.
0948Other Therapeutic Services (also see 095X, an extension of 094X), Pulmonary Rehabilitation.

In accordance with our longstanding policy, we are proposing to continue to exclude: (1) Claims that had zero costs after summing all costs on the claim; and (2) claims containing packaging flag number 3. Effective for services furnished on or after July 1, 2004, the I/OCE assigned packaging flag number 3 to claims on which hospitals submitted token charges less than $1.01 for a service with status indicator “S” or “T” (a major separately payable service under the OPPS) for which the fiscal intermediary or MAC was required to allocate the sum of charges for services with a status indicator equaling “S” or “T” based on the relative weight of the APC to which each code was assigned. We do not believe that these charges, which were token charges as submitted by the hospital, are valid reflections of hospital resources. Therefore, we deleted these claims. We also deleted claims for which the charges equaled the revenue center payment (that is, the Medicare payment) on the assumption that, where the charge equaled the payment, to apply a CCR to the charge would not yield a valid estimate of relative provider cost. We are proposing to continue these processes for the CY 2012 OPPS.

For the remaining claims, we then standardized 60 percent of the costs of the claim (which we have previously determined to be the labor-related portion) for geographic differences in labor input costs. We made this adjustment by determining the wage index that applied to the hospital that furnished the service and dividing the cost for the separately paid HCPCS code furnished by the hospital by that wage index. The claims accounting that we provide for the proposed and final rule contains the formula we use to standardize the total cost for the effects of the wage index. As has been our policy since the inception of the OPPS, we 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.

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

After removing claims for hospitals with error CCRs, claims without HCPCS codes, claims for immunizations not covered under the OPPS, and claims for services not paid under the OPPS, approximately 102 million claims were left. Using these 102 million claims, we created approximately 100 million single and “pseudo” single procedure claims, of which we used slightly more than 99.5 million single bills (after trimming out approximately 888,000 claims as discussed above in this section) in the proposed CY 2012 median development and ratesetting.

We used these claims to calculate the proposed CY 2012 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). We note that, for purposes of identifying significant HCPCS for examination in the 2 times rule, we consider codes that have more than 1,000 single major claims or codes that have both greater than 99 single major claims and contribute at least 2 percent of the single major claims used to establish the APC median cost to be significant (75 FR 71832). This longstanding definition of when a HCPCS code is significant for purposes of the 2 times rule was selected because we believe that a subset of 1,000 claims is negligible within the set of approximately 100 million single procedure or single session claims we use for establishing median costs. Similarly, a HCPCS code for which there are fewer than 99 single bills and which comprises less than 2 percent of the single major claims within an APC will have a negligible impact on the APC median. Unlisted codes are not used in establishing the percent of claims contributing to the APC, nor are their costs used in the calculation of the APC median. Finally, we reviewed the median costs for the services for which we are proposing to pay separately under this proposed rule, and we reassigned HCPCS codes to different APCs where it was necessary to ensure clinical and resource homogeneity within the APCs. Section III. of this proposed rule includes a discussion of many of the HCPCS code assignment changes that resulted from examination of the median costs 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 procedure claims.

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

APC Panel Recommendations Regarding Data Development: At the February 28-March 1, 2011 APC Panel Meeting, we provided the APC Panel Data Subcommittee with a list of all APCs fluctuating by greater than 10 percent when comparing the CY 2011 Start Printed Page 42190OPPS final rule median costs based on CY 2009 claims processed through June 30, 2010, to those based on CY 2010 OPPS/ASC final rule data (CY 2008 claims processed through June 30, 2009). We included explanatory data where possible to allow the Data Subcommittee to focus on APC median changes that required more investigation, based on its request (75 FR 71834). The APC Panel Data Subcommittee reviewed the fluctuations in the APC median costs but did not express particular concerns with the median cost changes.

We also provided the APC Panel Data Subcommittee with a summary of cost and CCR data related to the Myocardial Positron Emission Tomography (PET) imaging APC, APC 0307, as well as the associated diagnostic radiopharmaceutical, Rb82 rubidium, based on a request for data related to the decline in the APC median cost from the CY 2010 OPPS final rule to the CY 2011 OPPS proposed rule. The Data Subcommittee noted a decline in the CCRs associated with the HCPCS codes in APC 0307, as well as declines in the line-item costs of the associated diagnostic radiopharmaceutical.

At the February 28-March 1, 2011 APC Panel Meeting, the APC Panel made a number of recommendations related to the data process. The Panel's recommendations and our responses follow.

Recommendation 1: The Panel commends the CMS staff for responding to the data requests of the Data Subcommittee.

CMS Response to Recommendation 1: We appreciate this recommendation.

Recommendation 2: The Panel recommends that the work of the Data Subcommittee continue.

CMS Response to Recommendation 2: We are accepting this recommendation.

Recommendation 3: The Panel recommends that Agatha Nolen, D.Ph., M.S., F.A.S.H.P., serve as acting chairperson for the winter 2011 meeting of the Data Subcommittee.

CMS Response to Recommendation 3: We are accepting this recommendation.

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 2012, we are proposing to use the standard methodology for calculating median costs for device-dependent APCs that was finalized in the CY 2011 OPPS/ASC final rule with comment period (75 FR 71834 through 71837). (We refer readers to sections II.D.6. and II.A.e.6. of this proposed rule for detailed explanations of the proposed nonstandard methodology regarding cardiac resynchronization therapy.) This methodology utilizes claims data that generally represent the full cost of the required device. Specifically, we are proposing to calculate the median costs for device-dependent APCs for CY 2012 using only the subset of single procedure claims from CY 2010 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 procedure-to-device edits require that when a particular procedural HCPCS code is billed, the claim must also contain an appropriate device code, while the device-to-procedure edits require that a claim that contains one of a specified set of device codes also contain an appropriate procedure code. We continue to believe the standard methodology for calculating median costs for device-dependent APCs gives us the most appropriate median costs for device-dependent APCs in which the hospital incurs the full cost of the device.

Table 3 below lists the APCs for which we are proposing to use our standard device-dependent APC ratesetting methodology (as explained in the CY 2011 OPPS/ASC final rule with comment period (75 FR 71834 through 71837)) for CY 2012. We note that there are five proposed device-dependent APC title changes and one proposed deletion for CY 2012. As discussed in detail in section II.A.2.d.(6) of this proposed rule, we are proposing to change the title of APC 0083 from “Coronary or Non-Coronary Angioplasty and Percutaneous Valvuloplasty” to “Level I Endovascular Revascularization of the Lower Extremity”; the title of APC 0229 from “Transcatheter Placement of Intravascular Shunt and Stents” to “Level II Endovascular Revascularization of the Lower Extremity”; and the title of APC 0319 from “Endovascular Revascularization of the Lower Extremity” to “Level III Endovascular Revascularization of the Lower Extremity.” We also are proposing to change the title of APC 0040 from “Percutaneous Implantation of Neurostimulator Electrodes” to “Level I Implantation/Revision/Replacement of Neurostimulator Electrodes,” and the title of APC 0061 from “Laminectomy, Laparoscopy, or Incision for Implantation of Neurostimulator Electrodes” to “Level II Implantation/Revision/Replacement of Neurostimulator Electrodes,” as discussed in section III.D.1. of this proposed rule. In addition, as discussed in section II.A.2.e.(6) of this proposed rule, we are proposing to delete APC 0418 (Insertion of Left Ventricular Pacing Electrode) for CY 2012.

As we discuss in detail in section III.D.6. of this proposed rule, we are proposing to limit the payment for services that are assigned to APC 0108 to the proposed IPPS standardized payment amount for MS-DRG 227 (Cardiac Defibrillator Implant without Cardiac Catheterization and without Medical Complications and Comorbidities) because we do not believe that it would be equitable to pay more under the OPPS for services assigned to APC 0108 than under the IPPS. In other words, we are proposing to pay APC 0108 at the lesser of the APC 0108 median cost or the IPPS standardized payment rate for MS-DRG 227. We are proposing to continue to apply the device edits and other standard features of the device-dependent APCs to APC 0108, but we are proposing to limit the payment amount under the OPPS to the amount of payment established for MS-DRG 227 under the IPPS.

We refer readers to Addendum A to this proposed rule (which is referenced in section XVII. of this proposed rule and available via the Internet on the CMS Web site) for the proposed payment rates for these APCs for CY 2012.Start Printed Page 42191

Table 3—Proposed CY 2012 Device-Dependent APCS

Proposed CY 2012 APCProposed CY 2012 status indicatorProposed CY 2012 APC title
0039SLevel I Implantation of Neurostimulator Generator.
0040SLevel I Implantation/Revision/Replacement of Neurostimulator Electrodes.
0061SLevel II Implantation/Revision/Replacement of Neurostimulator Electrodes.
0082TCoronary or Non-Coronary Atherectomy.
0083TLevel I Endovascular Revascularization of the Lower Extremity.
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.
0108 *TInsertion/Replacement/Repair of AICD Leads, Generator, and Pacing Electrodes.
0115TCannula/Access Device Procedures.
0202TLevel VII Female Reproductive Procedures.
0227TImplantation of Drug Infusion Device.
0229TLevel II Endovascular Revascularization of the Lower Extremity.
0259TLevel VII ENT Procedures.
0293TLevel V Anterior Segment Eye Procedures.
0315SLevel II Implantation of Neurostimulator Generator.
0318SImplantation of Cranial Neurostimulator Pulse Generator and Electrode.
0319TLevel III Endovascular Revascularization of the Lower Extremity.
0384TGI Procedures with Stents.
0385SLevel I Prosthetic Urological Procedures.
0386SLevel II Prosthetic Urological Procedures.
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.
* OPPS CY 2012 payment for APC 0108 is proposed to be paid at the lesser of the APC 0108 median cost or the standardized payment rate for MS-DRG 227 under the IPPS. We refer readers to section III.D.6. of this proposed rule for more information.

(2) Blood and Blood Products

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

For CY 2012, 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 public comments indicating that the former OPPS policy of defaulting to the overall hospital CCR for hospitals not reporting a blood-specific cost center often resulted in an underestimation of the true hospital costs for blood and blood products. Specifically, in order to address the differences in CCRs and to better reflect hospitals' costs, we 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 2012 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 Start Printed Page 42192simulated blood-specific CCR for hospitals that did not report costs and charges for a blood cost center.

We continue to believe the hospital-specific, blood-specific CCR methodology best responds to the absence of a blood-specific CCR for a hospital than alternative methodologies, such as defaulting to the overall hospital CCR or applying an average blood-specific CCR across hospitals. Because this methodology takes into account the unique charging and cost accounting structure of each hospital, we believe that it yields more accurate estimated costs for these products. We believe that continuing with this methodology in CY 2012 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 blood products in general.

We refer readers to Addendum B to this proposed rule (which is referenced in section XVII. of this proposed rule and available via the Internet on the CMS Web site) for the proposed CY 2012 payment rates for blood and blood products (which are identified with status indicator “R”). For a more detailed discussion of the blood-specific CCR methodology, we refer readers to the CY 2005 OPPS proposed rule (69 FR 50524 through 50525). For a full history of OPPS payment for blood and blood products, we refer readers to the CY 2008 OPPS/ASC final rule with comment period (72 FR 66807 through 66810).

(3) Allergy Tests (APCs 0370 and 0381)

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 2012. Multiple allergy tests are currently assigned to APC 0370 (Allergy Tests), with a median cost calculated based on the standard OPPS methodology. For CY 2012, we are proposing to continue to use the standard OPPS methodology to set the APC payment rate for APC 0370, which has a proposed APC median cost of approximately $97 based on 283 claims.

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 (as defined in the CPT code descriptor) of these CPT codes to describe all of the tests provided. Services assigned to APC 0381 (Single Allergy Tests) reflect the CPT codes that describe single allergy tests in which CPT instructions direct providers to specify the number of tests performed, whereas the procedures in APC 0370 describe multiple allergy tests per encounter; therefore, for these procedures, only one unit of the service is billed even if multiple tests are performed. Our CY 2010 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 $51, significantly higher than the CY 2011 OPPS/ASC final rule median cost of approximately $33 that was 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 calculated a proposed “per unit” median cost for APC 0381, based upon 601 claims containing multiple units or multiple occurrences of a single CPT code. The proposed CY 2012 median cost for APC 0381 using the “per unit” methodology is approximately $34. For a full discussion of the “per unit” methodology for APC 0381, we refer readers to the CY 2008 OPPS/ASC final rule with comment period (72 FR 66737).

(4) Hyperbaric Oxygen Therapy (APC 0659)

Since the implementation of OPPS in August 2000, the OPPS has recognized HCPCS code C1300 (Hyperbaric oxygen under pressure, full body chamber, per 30-minute interval) for hyperbaric oxygen therapy (HBOT) provided in the hospital outpatient setting. In the CY 2005 final rule with comment period (69 FR 65758 through 65759), we finalized a “per unit” median cost calculation for APC 0659 (Hyperbaric Oxygen) using only claims with multiple units or multiple occurrences of HCPCS code C1300 because delivery of a typical HBOT service requires more than 30-minutes. We observed that claims with only a single occurrence of the code were anomalies, either because they reflected terminated sessions or because they were incorrectly coded with a single unit. In the same rule, we also established that HBOT would not generally be furnished with additional services that might be packaged under the standard OPPS APC median cost methodology. This enabled us to use claims with multiple units or multiple occurrences. Finally, we also used each hospital's overall CCR to estimate costs for HCPCS code C1300 from billed charges rather than the CCR for the respiratory therapy or other departmental cost centers. Our rationale for using the hospital's overall CCR can be found in the CY 2005 OPPS final rule with comment period (69 FR 65758 through 65759). 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 several years.

For CY 2012, we are proposing to continue using the same methodology to estimate a “per unit” median cost for HCPCS code C1300. This methodology results in a proposed APC median cost of approximately $107 using 370,519 claims with multiple units or multiple occurrences for HCPCS code C1300 for CY 2012.

(5) Payment for Ancillary Outpatient Services When Patient Expires (APC 0375)

In the November 1, 2002 final rule with comment period (67 FR 66798), we discussed the creation of the new HCPCS modifier “-CA” to address situations where a procedure on the OPPS inpatient list must be performed to resuscitate or stabilize a patient (whose status is that of an outpatient) with an emergent, life-threatening condition, and the patient dies before being admitted as an inpatient. HCPCS modifier “-CA” is defined as a procedure payable only in the inpatient setting when performed emergently on an outpatient who expires prior to admission. In Transmittal A-02-129, issued on January 3, 2003, we instructed hospitals on the use of this modifier. For a complete description of the history of the policy and the development of the payment methodology for these services, we refer readers to the CY 2007 OPPS final rule with comment period (71 FR 68157 through 68158).

For CY 2012, 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 Start Printed Page 42193services that meet the specific conditions for using HCPCS modifier “-CA.” That is, we are proposing to calculate the relative payment weight for APC 0375 by using all claims reporting a status indicator “C” (inpatient procedures)appended with HCPCS modifier “-CA.” For the history and detailed explanation of the methodology, we refer readers to the CY 2004 OPPS final rule (68 FR 63467 through 63468), We continue to believe that this established ratesetting 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 HCPCS modifier “-CA” according to the policy initially established in CY 2003. We note that the claims frequency for APC 0375 has been relatively stable over the past few years. We note that the median cost for APC 0375 has decreased based on the CY 2010 OPPS claims data used for the development of the proposed rates for CY 2012 compared to that for CY 2011. 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 HCPCS modifier “-CA” appended to an inpatient only 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 HCPCS modifier “-CA.” Table 4 below shows the number of claims, and the median costs for APC 0375 for CYs 2007, 2008, 2009, 2010, and 2011, and the proposed median cost for APC 0375 for CY 2012. For CY 2012, we are proposing a median cost of approximately $5,711 for APC 0375 based on 155 claims.

TABLE 4—Claims for Ancillary Outpatient Services When Patient Expires (-CA Modifier) for CYs 2007 Through 2012

Prospective payment yearNumber of claimsAPC median cost
CY 2007260$3,549
CY 20081834,945
CY 20091685,545
CY 20101825,911
CY 20111686,304
CY 20121555,711*
*Proposed median cost.

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

For the CY 2011 update, the AMA's CPT Editorial Panel created 16 new CPT codes in the Endovascular Revascularization section of the 2011 CPT code book to describe endovascular revascularization procedures of the lower extremity performed for occlusive disease. In the CY 2011 OPPS/ASC final rule with comment period (75 FR 71841 through 71845), we discussed the process and methodology by which we assigned the new CY 2011 endovascular revascularization CPT codes to APCs that we believe are comparable with respect to clinical characteristics and resources required to furnish the services. Specifically, we were able to use the existing CY 2009 hospital outpatient claims data and most recent cost report data to create simulated medians for 12 of the 16 new separately payable codes for CY 2011. Because the endovascular revascularization CPT codes are new for CY 2011, we used our CY 2009 single and “pseudo” single claims data to simulate the new CY 2011 CPT code definitions. As shown in Table 7 of the CY 2011 OPPS/ASC final rule with comment period (75 FR 71844), many of the new endovascular revascularization CPT codes were previously reported using a combination of CY 2009 CPT codes. In order to simulate median costs, we selected claims that we believe meet the definition for each of the new endovascular revascularization CPT codes. Table 7 showed the criteria we applied to select a claim to be used in the calculation of the median cost for the new codes (shown in Column A). As we stated in the CY 2011 OPPS/ASC final rule with comment period (75 FR 71842), we developed these criteria based on our clinicians' understanding of services that were reported by CY 2009 CPT codes that, in various combinations, reflect the services provided that are described by the new CPT codes for CY 2011.

After determining the simulated median costs for the procedures, we assigned each CPT code to appropriate APCs based on their clinical homogeneity and resource use. Of the 16 new codes, we assigned 9 CPT codes to APC 0083 (Coronary or Non-Coronary Angioplasty and Percutaneous Valvuloplasty) and 5 CPT codes to APC 0229 (Transcatheter Placement of Intravascular Shunts), and created new APC 0319 (Endovascular Revascularization of the Lower Extremity) for 2 CPT codes. Table 8 of the CY 2011 OPPS/ASC final rule with comment period displayed their final CY 2011 APC assignments and CPT median costs (75 FR 71845). We noted that because these CPT codes are new for CY 2011, they are identified with comment indicator “NI” in Addendum B to the CY 2011 OPPS/ASC final rule with comment period to identify them as a new interim APC assignment for the new year and subject to public comment. We specifically requested public comment on our methodology for simulating the median costs for these new CY 2011 CPT codes in addition to public comments on the payment rates themselves (75 FR 71845).

At its February 28-March 1, 2011 meeting, the APC Panel recommended that CMS provide data to allow the Panel to investigate and monitor the APC weights for the lower extremity revascularization procedures in light of CPT coding changes for CY 2011. We are accepting the APC Panel's recommendation and will provide additional data to the Panel at an upcoming meeting.

For CY 2012, we are proposing to continue with the CY 2011 methodology that was described previously in this section in determining the APC assignments for the CPT codes that describe endovascular revascularization of the lower extremity. The predecessor endovascular revascularization CPT codes were in existence prior to CY 2011 and were assigned to APCs based on claims data and cost report data. Given that these data are available for the services described by the predecessor endovascular revascularization CPT codes, we are proposing to continue for CY 2012 to use the existing hospital outpatient claims and cost report data from the previous endovascular revascularization CPT codes to simulate an estimated median cost for the new endovascular revascularization CPT codes in determining the appropriate APC assignments. As has been our practice since the implementation of the OPPS in 2000, we review our latest claims data for ratesetting and, if necessary, revise the APC assignments for the upcoming year. In this case, review of the procedures with significant claims data in APC 0083 showed a 2 times rule violation. Specifically, APC 0083, as it was initially configured, showed that the range of the CPT median costs for the procedures with significant claims data was approximately between $3,252 (for CPT code 35476 (Transluminal balloon angioplasty, percutaneous; venous)) and $7,174 (for CPT code 37221 (Revascularization, endovascular, open or percutaneous, iliac artery, unilateral, initial vessel; with Start Printed Page 42194transluminal stent placement(s), includes angioplasty within the same vessel, when performed)), resulting in a 2 times rule violation. Because of its median cost, we believe that CPT code 37221 would be more appropriately placed in APC 0229, which had an initial estimated median cost of approximately $8,606, based on the clinical and resource characteristics of other procedures also assigned to APC 0229. Therefore, for CY 2012, we are proposing to revise the APC assignment for CPT code 37221, from APC 0083 to APC 0229, to accurately reflect the cost and clinical feature of the procedure. This proposed reassignment of CPT code 37221 from APC 0083 to APC 0029 eliminates the 2 times rule violation for APC 0083 noted above. Based on this reconfiguration, the CY 2010 claims data available for this proposed rule were used to calculate a median cost of approximately $4,683 for APC 0083, approximately $8,218 for APC 0229, and approximately $14,556 for APC 0319. All three proposed median costs for CY 2012 are significantly greater than the CY 2011 OPPS/ASC final rule median costs of approximately $3,740 for APC 0083, approximately $7,940 for APC 0229, and approximately $13,751 for APC 0319.

In addition, we are proposing to revise the APC titles for APCs 0083, 0229, and 0319 to better describe the procedures assigned to these APCs. Specifically, we are proposing to revise the APC title for APC 0083 from “Coronary or Non-Coronary Angioplasty and Percutaneous Valvuloplasty” to “Level I Endovascular Revascularization of the Lower Extremity”; for APC 0229, from “Transcatheter Placement of Intravascular Shunt and Stents” to “Level II Endovascular Revascularization of the Lower Extremity”; and for APC 0319, from “Endovascular Revascularization of the Lower Extremity” to “Level III Endovascular Revascularization of the Lower Extremity.”

We are soliciting public comments on the proposed status indicators and APC assignments for the endovascular revascularization of the lower extremity CPT codes. Table 5 below lists the endovascular revascularization of the lower extremity CPT codes along with their proposed status indicator and APC assignments for CY 2012.

Table 5—Proposed APCS To Which Endovascular Revascularization of the Lower Extremity CPT Codes Would Be Assigned for CY 2012

CY 2011 HCPCS codeCY 2011 short descriptorCY 2011 SICY 2011 APCProposed CY 2012 SIProposed CY 2012 APC
37220Iliac revascT0083T0083
37221Iliac revasc w/stentT0083T0229
37222Iliac revasc add-onT0083T0083
37223Iliac revasc w/stent add-onT0083T0083
37224Fem/popl revas w/tlaT0083T0083
37225Fem/popl revas w/atherT0229T0229
37226Fem/popl revasc w/stentT0229T0229
37227Fem/popl revasc stnt & atherT0319T0319
37228Tib/per revasc w/tlaT0083T0083
37229Tib/per revasc w/atherT0229T0229
37230Tib/per revasc w/stentT0229T0229
37231Tib/per revasc stent & atherT0319T0319
37232Tib/per revasc add-onT0083T0083
37233Tibper revasc w/ather add-onT0229T0229
37234Revsc opn/prq tib/pero stentT0083T0083
37235Tib/per revasc stnt & atherT0083T0083

(7) Non-Congenital Cardiac Catheterization (APC 0080)

For CY 2011, the AMA CPT Editorial Panel deleted 19 non-congenital cardiac catheterization-related CPT codes and replaced them with 20 new CPT codes in the Cardiac Catheterization and Injection-Related section of the 2011 CPT Code Book to describe more precisely the specific services provided during cardiac catheterization procedures. In particular, the CPT Editorial Panel deleted 19 non-congenital cardiac catheterization-related CPT codes from the 93500 series and created 14 new CPT codes in the 93400 series and 6 in the 93500 series. We discussed these coding changes in detail in the CY 2011 OPPS/ASC final rule with comment period, along with the process by which we assigned the new CPT codes to APCs that we believe are comparable with respect to clinical characteristics and resources required to furnish the cardiac catheterization services described by the new CPT codes (75 FR 71846 through 71849). As discussed in the final rule with comment period, we were able to use the existing CY 2009 hospital outpatient claims data and the most recent cost report data to create simulated medians for the new separately payable CPT codes for CY 2011. Specifically, to estimate the hospital costs associated with the 20 new non-congenital cardiac catheterization-related CPT codes based on their CY 2011 descriptors, we used claims and cost report data from CY 2009. Because of the substantive coding changes associated with the new non-congenital cardiac catheterization-related CPT codes for CY 2011, we used our CY 2009 single and “pseudo” single claims data to simulate the new CY 2011 CPT code definitions. We stated that many of the new CPT codes were previously reported using multiple CY 2009 CPT codes, and we provided a crosswalk of the new CY 2011 cardiac catheterization CPT codes mapped to the CY 2009 cardiac catheterization CPT codes in Table 11 of the CY 2011 OPPS/ASC final rule with comment period (75 FR 71849). Table 11 showed the criteria we applied to select a claim to be used in the calculation of the median cost for the new codes (shown in column A). As we stated in the CY 2011 OPPS/ASC final rule with comment period (75 FR 71847 through 71848), we developed these criteria based on our clinicians' understanding of services that were reported by CY 2009 CPT codes that, in various combinations, reflect the services provided that are described in the new CPT codes. We used approximately 175,000 claims for the new non-congenital catheterization-related CPT codes, together with the single and “pseudo” single procedure claims for the remaining congenital Start Printed Page 42195catheterization-related CPT codes in APC 0080, to calculate CPT level median costs and the median cost for APC 0080 of approximately $2,698. We noted that, because the CPT codes listed in Table 11 are new for CY 2011, they were identified with comment indicator “NI” in Addendum B of that final rule with comment period to identify them as subject to public comment. We specifically requested public comment on our methodology for simulating the median costs for these new CY 2011 CPT codes, in addition to public comments on the payment rates themselves (75 FR 71848).

For CY 2012, we are proposing to continue with the CY 2011 methodology in determining the APC assignments for the cardiac catheterization CPT codes. The predecessor cardiac catheterization CPT codes were in existence prior to CY 2011 and were assigned to APC 0080 based on claims data and cost report data. Given that these data are available for the services described by the predecessor cardiac catheterization CPT codes, for CY 2012, we are proposing to continue to use the existing hospital outpatient claims and cost report data from the predecessor cardiac catheterization CPT codes to simulate an estimated median cost for the new cardiac catheterization CPT codes in determining the appropriate APC assignments. As has been our practice since the implementation of the OPPS in 2000, we review our latest claims data for ratesetting and, if necessary, revise the APC assignments for the upcoming year. Based on analysis of the CY 2010 claims data available for this proposed rule, the proposed median cost for APC 0080 is approximately $2,822 for CY 2012, which is slightly greater than the median cost of approximately $2,698 for the CY 2011 OPPS/ASC final rule with comment period. For CY 2012, we are not proposing any changes to the CY 2011 APC assignments of any of the codes assigned to APC 0080 because the claims data available for this proposed rule support continuation of these APC assignments.

We are soliciting public comments on the proposed status indicators and the APC assignments for the CY 2012 cardiac catheterization CPT codes. Table 6 below lists the CY 2011 cardiac catheterization CPT codes along with their proposed status indicators, APC assignments, and payment rates for CY 2012.

Table 6—Proposed APCs To Which Non-Congenital Cardiac Catheterization CPT Codes Would Be Assigned for CY 2012

CY 2011 HCPCS CodeCY 2011 short descriptorCY 2011 SICY 2011 APCProposed CY 2012 SIProposed CY 2012 APC
93451Right heart cathT0080T0080
93452Left hrt cath w/ventrclgrphyT0080T0080
93453R&l hrt cath w/ventriclgrphyT0080T0080
93454Coronary artery angio s&iT0080T0080
93455Coronary art/grft angio s&iT0080T0080
93456R hrt coronary artery angioT0080T0080
93457R hrt art/grft angioT0080T0080
93458L hrt artery/ventricle angioT0080T0080
93459L hrt art/grft angioT0080T0080
93460R&l hrt art/ventricle angioT0080T0080
93461R&l hrt art/ventricle angioT0080T0080
93462L hrt cath trnsptl punctureT0080T0080
93463Drug admin & hemodynmic measNNANNA
93464Exercise w/hemodynamic measNNANNA
93563Inject congenital card cathNNANNA
93564Inject hrt congntl art/grftNNANNA
93565Inject l ventr/atrial angioNNANNA
93566Inject r ventr/atrial angioNNANNA
93567Inject suprvlv aortographyNNANNA
93568Inject pulm art hrt cathNNANNA

(8) Cranial Neurostimulator and Electrodes (APC 0318)

For CY 2011, the AMA CPT Editorial Panel created a new CPT code 64568 (Incision for implantation of cranial nerve (e.g., vagus nerve) neurostimulator electrode array and pulse generator) and indicates that it describes the services formerly included in the combinations of (1) CPT code 64573 (Incision for implantation of neurostimulator electrodes; cranial nerve) and CPT code 61885 (Insertion or replacement of cranial neurostimulator pulse generator or receiver, direct or inductive coupling; with connection to a single electrode array); or (2) CPT code 64573 and CPT code 61886 (Insertion or replacement of cranial neurostimulator pulse generator or receiver, direct or inductive coupling; with connection to two or more electrode arrays). As we discussed in the CY 2011 OPPS/ASC final rule with comment period (75 FR 71850), our standard process for assigning new CPT codes to APCs is to assign the code to the APC that we believe contains services that are comparable with respect to clinical characteristics and resources required to furnish the service. A new CPT code is given a comment indicator of “NI” to identify it as a new interim APC assignment for the first year and the APC assignment for the new code is then open to public comment. In some, but not all, cases, we are able to use the existing data from established codes to simulate an estimated median cost for the new code to guide us in the assignment of the new code to an APC. For CY 2011, in the case of the new neurostimulator electrode and pulse generator implantation CPT code, we were able to use the existing CY 2009 claims and most current cost report data to create a simulated median cost.

Specifically, to estimate the hospital costs of CPT code 64568 based on its CY 2011 descriptor, we used CY 2009 claims and the most recent cost report data, using the single and “pseudo” single claims within this data set to simulate the definition of this service. We selected claims with CPT code 64573 on which CPT code 61885 or 61886 was also present and consistent Start Printed Page 42196with the description of the new CPT code 64568. We treated the summed costs on these claims as if they were a single procedure claim for CPT code 64568. We created an estimated median cost of approximately $22,562 for CPT code 64568 from 298 single claims to set a final payment rate for CY 2011 for the new code. We created APC 0318 (Implantation of Cranial Neurostimulator Pulse Generator and Electrode) for CY 2011, to which CPT code 64568 is the only procedure assigned. APC 0225 (Implantation of Neurostimulator Electrodes, Cranial Nerve), which contained only the predecessor CPT code 64573, was deleted effective January 1, 2011. We noted that, because CPT code 64568 is new for CY 2011, it was identified with comment indicator “NI” in Addendum B of the CY 2011 OPPS/ASC final rule with comment period to identify it as subject to public comment. We specifically requested public comment on our methodology for simulating the median costs for this new CY 2011 CPT code, in addition to public comments on the payment rate itself (75 FR 71850).

For CY 2012, we are proposing to use the same methodology we used in CY 2011 to estimate the hospital costs of CPT code 64568. We created an estimated median cost of approximately $24,267 for CPT code 64568 from 332 single claims to set a proposed payment rate for APC 0318 for CY 2012. We are proposing to maintain CPT code 64568 as the only code assigned to APC 0318 for CY 2012. We continue to request public comment on our proposed methodology for simulating the median cost for this CPT code introduced in CY 2011, in addition to public comments on the proposed payment rate itself.

(9) 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 in which payment is based on charges adjusted to cost. 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.

Subsequent to the MMA, various amendments to the Act were made that resulted in the extension of the payment period for brachytherapy sources based on a hospital's charges adjusted to cost through December 31, 2009. The CY 2011 OPPS/ASC final rule with comment period summarizes these amendments to the Act and our proposals to pay for brachytherapy sources at prospective payment rates based on their source specific median costs from CY 2007 through CY 2009 (75 FR 71977 through 71981).

In the CY 2010 OPPS/ASC final rule with comment period (74 FR 60533 through 60537), we adopted for CY 2010 the general OPPS prospective payment methodology for brachytherapy sources, consistent with section 1833(t)(2)(C) of the Act, with payment rates based on source-specific median costs. For CY 2011, we continued to use the general OPPS prospective payment methodology for brachytherapy sources, consistent with section 1833(t)(2)(C) of the Act (75 FR 71980). We also finalized our proposals to continue the policy we first implemented in the CY 2010 OPPS/ASC final rule with comment period (74 FR 60537 and 75 FR 71980) regarding payment for new brachytherapy sources for which we have no claims data, based on the same reasons we discussed in the 2008 OPPS/ASC final rule with comment period (72 FR 66786; which was superseded by section 142 of Pub. L. 110-275). That policy is intended to enable us to 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.

Consistent with our policy regarding APC payments made on a prospective basis, for CYs 2010 and 2011, we finalized proposals to subject brachytherapy sources to outlier payments under section 1833(t)(5) of the Act, and also to subject brachytherapy source payment weights to scaling for purposes of budget neutrality (75 FR 71980 through 71981 and 75 FR 60537). Hospitals could receive outlier payments for brachytherapy sources if the costs of furnishing brachytherapy sources meet the criteria for outlier payment. In addition, as noted in the CY 2010 and CY 2011 OPPS/ASC final rules with comment period (74 FR 60534 and 75 FR 71978 and 71979, respectively), implementation of prospective payments for brachytherapy sources provided opportunities for eligible hospitals to receive additional payments in CY 2010 and CY 2011 under certain circumstances through the 7.1 percent rural adjustment, as described in section II.E. of this final rule with comment period.

(B) Proposed OPPS Payment Policy

As we have stated previously (72 FR 66780, 73 FR 41502, 74 FR 60533 through 60534, and 75 FR 71978), 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 eliminating some of the extremely high and low payment amounts resulting from payment based on hospitals' charges adjusted to cost. We believe that the OPPS prospective payment methodology, as opposed to payment based on hospitals' charges adjusted to cost, would also provide hospitals with incentives for efficiency in the provision of brachytherapy services to Medicare beneficiaries. Moreover, this approach is consistent with our payment methodology for the vast majority of items and services paid under the OPPS.

For CY 2012, we are proposing to use the median costs from CY 2010 claims data for setting the proposed CY 2012 payment rates for brachytherapy sources, as we are proposing for most other items and services that will be paid under the CY 2012 OPPS. We are proposing to continue the other payment policies for brachytherapy sources we finalized and first implemented in the CY 2010 OPPS/ASC final rule with comment period (74 FR 60537). We are proposing to pay for the stranded and non-stranded NOS codes, HCPCS codes C2698 and C2699, at a rate equal to the lowest stranded or non-stranded prospective payment rate for such sources, respectively, on a per source basis (as opposed, for example, to a per mCi), which is based on the policy we established in the CY 2008 OPPS/ASC final rule with comment Start Printed Page 42197period (72 FR 66785). The proposed payment methodology for NOS sources would provide payment to a hospital for new sources and, at the same time, encourage interested parties to quickly bring new sources to our attention so that specific coding and payment could be established.

We also are proposing to continue the policy we first implemented in the CY 2010 OPPS/ASC final rule with comment period (74 FR 60537) regarding payment for new brachytherapy sources for which we have no claims data, based on the same reasons we discussed in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66786; which was superseded for a period of time by section 142 of Public Law 110-275). That policy is intended to enable us to assign new HCPCS codes for new brachytherapy sources to their own APCs, with prospective payment rates set based on our consideration of external data and other relevant information regarding the expected costs of the sources to hospitals.

Consistent with our policy regarding APC payments made on a prospective basis, as we did for CY 2011, we are proposing to subject brachytherapy sources to outlier payments under section 1833(t)(5) of the Act, and also to subject brachytherapy source payment weights to scaling for purposes of budget neutrality. Hospitals can receive outlier payments for brachytherapy sources if the costs of furnishing brachytherapy sources meet the criteria for outlier payment. In addition, as noted in the CY 2010 and CY 2011 OPPS/ASC final rules with comment period (74 FR 60534 and 75 FR 71978 through 71979, respectively), implementation of prospective payments for brachytherapy sources would provide opportunities for eligible hospitals to receive additional payments in CY 2012 under certain circumstances through the 7.1 percent rural adjustment, as described in section II.E. of this proposed rule.

Therefore, we are proposing to pay for brachytherapy sources at prospective payment rates based on their source-specific median costs for CY 2012. We refer readers to Addendum B to this proposed rule (which is referenced in section XVII. of this proposed rule and available via the Internet on the CMS Web site) for the proposed CY 2012 payment rates for brachytherapy sources, identified with status indicator “U.” For more detailed discussion of the legislative history surrounding brachytherapy sources and our proposed and final policies for CY 2004 through CY 2011, we refer readers to the CY 2011 OPPS/ASC final rule with comment period (75 FR 71977 through 71981).

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

e. 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).

For CY 2012, we are proposing to continue, with some modifications, 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. We also are proposing to create a new composite APC for cardiac resynchronization therapy services, as discussed in section II.A.2.e.(6) of this proposed rule.

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

For CY 2012, 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 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 for observation services 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 through 66649), 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 Start Printed Page 42198management composite APCs to be paid are provided below in the description of the claims that were selected for the calculation of the proposed CY 2012 median costs for these composite APCs. We are not proposing to change these criteria for the CY 2012 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 also issued guidance clarifying the correct method for reporting the starting time for observation services (sections 290.2.2 through 290.5 in the Medicare Claims Processing Manual (Pub. 100-4), Chapter 4, through Transmittal 1745, Change Request 6492, issued May 22, 2009 and implemented July 6, 2009). We are not proposing to change these reporting requirements for the CY 2012 OPPS.

For CY 2012, we are proposing to continue the extended assessment and management composite APC payment methodology for APCs 8002 and 8003. 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 and 8003 using all single and “pseudo” single procedure claims for CY 2010 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 procedure 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 eight 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 HCPCS code G0378; or CPT code 99205 (Office or other outpatient visit for the evaluation and management of a new patient (Level 5)); or CPT code 99215 (Office or other outpatient visit for the evaluation and management of an established patient (Level 5)) provided on the same date of service or one day before the date of service for HCPCS code G0378.
  • In the case of composite APC 8003, CPT code 99284 (Emergency department visit for the evaluation and management of a patient (Level 4)); CPT code 99285 (Emergency department visit for the evaluation and management of a patient (Level 5)); CPT code 99291 (Critical care, evaluation and management of the critically ill or critically injured patient; first 30-74 minutes); or HCPCS code G0384 (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 CY 2009 OPPS/ASC final rule with comment period (73 FR 68684), we added HCPCS code G0384 to the eligibility criteria for composite APC 8003 for CY 2009.)

As discussed further in section VII. of this proposed rule, and consistent with our CY 2008, CY 2009, CY 2010, and CY 2011 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 0630), we utilize our methodology that excludes those claims for visits that are eligible for payment through the two extended assessment and management composite APCs, that is APC 8002 or APC 8003. We believe that this approach results in the most accurate cost estimates for APCs 0604 through 0617 and 0626 through 0630 for CY 2012.

At its February 28-March 1, 2011 meeting, the APC Panel recommended that CMS consider expanding the extended assessment and management composite APCs for CY 2012. We are accepting this recommendation.

Consistent with our acceptance of the APC Panel's recommendation, we have examined various ways of potentially expanding the current extended assessment and management composite APCs to further limit the possibility that total beneficiary copayments would exceed the inpatient deductible during extended observation encounters. At this time, we have decided not to pursue for CY 2012 the expanded extended assessment and management composite APCs that we analyzed because, while the composites that we modeled would serve to further limit the number of beneficiaries with copayments that exceeded the inpatient deductible, the modeled composites also had the effect of possibly increasing copayments by a small amount for the majority of beneficiaries undergoing extended observation. In addition, expanded assessment and management composite APCs do not address certain concerns about extended observation services raised by stakeholders at CMS' observation listening session last year (that is, observation time not counting towards the 3-day prior hospitalization requirement for the skilled nursing facility benefit). We will continue our efforts to model other composite structures for a possible new extended assessment and management composite structure for CY 2013.

In summary, for CY 2012, we are proposing to continue to include composite APCs 8002 and 8003 in the OPPS. We are proposing to continue the extended assessment and management composite APC payment methodology and criteria that we finalized for CYs 2009, 2010, and 2011. We also are proposing to calculate the median costs for APCs 8002 and 8003 using the same methodology that we used to calculate the medians for composite APCs 8002 and 8003 for the CY 2008 OPPS (72 FR 66649). That is, we used all single and “pseudo” single procedure claims from CY 2010 that met the criteria for payment of each composite APC and applied the standard packaging and trimming rules to the claims before calculating the proposed CY 2012 median costs. The proposed CY 2012 median cost resulting from this methodology for composite APC 8002 is approximately $395, which was calculated from 16,770 single and “pseudo” single bills that met the required criteria. The proposed CY 2012 median cost for composite APC 8003 is approximately $735, which was calculated from 225,874 single and “pseudo” single bills that met the required criteria.

(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 Start Printed Page 42199codes 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 mainly 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 began providing a single payment for LDR prostate brachytherapy when the composite service, reported as CPT codes 55875 and 77778, is furnished in a single hospital encounter. We based the payment for composite APC 8001 (LDR Prostate Brachytherapy Composite) on the 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 have continued 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 2012, we are proposing to continue paying for LDR prostate brachytherapy services using the composite APC methodology proposed and implemented for CY 2008 through CY 2011. That is, we are proposing to use CY 2010 claims on which both CPT codes 55875 and 77778 were billed on the same date of service with no other separately paid procedure codes (other than those on the bypass list) to calculate the payment rate for composite APC 8001. Consistent with our CY 2008 through CY 2011 practice, we are proposing not to 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 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 2010 claims data available for this CY 2012 proposed rule, we were able to use 556 claims that contained both CPT codes 55875 and 77778 to calculate the median cost upon which the proposed CY 2012 payment for composite APC 8001 is based. The proposed median cost for composite APC 8001 for CY 2012 is approximately $3,364. This is an increase compared to the CY 2011 final median cost for this composite APC of approximately $3,195 based on 849 single bill claims from a full year of CY 2009 claims data. The proposed CY 2012 median cost for this composite APC is slightly less than $3,555, the sum of the proposed median costs for APCs 0163 and 0651 ($2,658 + $897), 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 2012 median cost for composite APC 8001 of approximately $3,364, calculated from claims we believe to be correctly coded, would result in a reasonable and appropriate payment rate for this service in CY 2012.

(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 assigned to groups A and B. For a full discussion of how we identified the group A and group B procedures and established the payment rate for the cardiac electrophysiologic evaluation and ablation composite APC, we refer readers to the CY 2008 OPPS/ASC final rule with comment period (72 FR 66655 through 66659). Where a service in group A is furnished on a date of service that is different from the date of service Start Printed Page 42200for 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 2012, we are proposing to continue to pay for cardiac electrophysiologic evaluation and ablation services using the composite APC methodology proposed and implemented for CY 2008 through CY 2011. Consistent with our CY 2008 through CY 2011 practice, we are proposing not to 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 would 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.

For CY 2012, using a partial year of CY 2010 claims data available for this proposed rule, we were able to use 11,156 claims containing a combination of group A and group B codes and calculate a proposed median cost of approximately $11,598 for composite APC 8000. This is an increase compared to the CY 2011 final median cost for this composite APC of approximately $10,673 based on a full year of CY 2009 claims data. We believe the proposed median cost of $11,598 calculated from a high volume of correctly coded multiple procedure claims would result in an accurate and appropriate proposed payment for cardiac electrophysiologic evaluation and ablation services when at least one evaluation service is furnished during the same clinical encounter as at least one ablation service.

Table 7 below list the groups of procedures upon which we based proposed composite APC 8000 for CY 2012.

Table 7—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 2011 CPT CodeProposed single code CY 2012 APCProposed CY 2012 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 2012, 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 2012. We refer readers to the April 7, 2000 OPPS final rule with comment period (65 FR 18452 through 18455) for the initial discussion of this longstanding policy. 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.

As discussed in detail in section VIII. of this proposed rule, for CY 2012, we are proposing to continue using a provider-specific two tiered payment approach for partial hospitalization services that distinguishes payment made for services furnished in a CMHC from payment made for services furnished in a hospital. Specifically, we are proposing one APC for partial hospitalization program days with three services furnished in a CMHC (APC 0172, (Level I Partial Hospitalization (3 services) for CMHCs) and one APC for days with four or more services furnished in a CMHC (APC 0173, Level II Partial Hospitalization (4 or more services) for CMHCs). We are proposing that the payment rates for these two APCs be based upon the median per diem costs calculated using data only from CMHCs. Similarly, we are proposing one APC for partial hospitalization program days with three services furnished in a hospital (APC 0175, Level I Partial Hospitalization (3 services) for Hospital-Based PHPs), and one APC for days with four or more services furnished in a hospital (APC 0176, Level II Partial Hospitalization (4 or more services) for Hospital-Based PHPs). We are proposing that the payment rates for these two APCs be based on the median per diem costs calculated using data only from hospitals.

Because our longstanding policy of limiting the aggregate payment for specified less resource-intensive mental health services furnished on the same date to the payment rate for the most Start Printed Page 42201resource-intensive of all outpatient mental health treatment, we are proposing to continue to set the CY 2012 payment rate for APC 0034 (Mental Health Services Composite) at the same rate as we are proposing for APC 0176, 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 0176. 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 have the same payment rate as APC 0176 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 2012 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 0176 per diem rate for partial hospitalization for all of the specified mental health services furnished by the hospital on that single date of service.

(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 recommendations 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: (1) Ultrasound; (2) computed tomography (CT) and computed tomographic angiography (CTA); and (3) magnetic resonance imaging (MRI) and magnetic resonance angiography (MRA). The HCPCS codes subject to the multiple imaging composite policy and their respective families are listed in Table 13 of the CY 2011 OPPS/ASC final rule with comment period (75 FR 71859 through 71860).

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 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).

At its February 2010 meeting, the APC Panel recommended that CMS continue providing analysis on an ongoing basis of the impact on beneficiaries of the multiple imaging composite APCs as data become available. In the CY 2011 OPPS/ASC proposed rule, we indicated that we were accepting this recommendation and would provide the requested analysis to the APC Panel at a future meeting (75 FR 46212). At the February 28-March 1, 2011 APC Panel meeting, CMS staff provided an updated analysis of the multiple imaging composite APCs to the Panel, comparing partial year CY 2010 imaging composite cost and utilization data to comparable CY 2009 data in order to meet the APC Panel request that we provide analysis of the impact on beneficiaries of the multiple imaging composite APCs.

For CY 2012, 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. The proposed CY 2012 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 2010 claims available for this proposed rule that qualified for composite payment under the current policy (that is, those claims with more than one procedure within the same family on a single date of service). To calculate the proposed median costs, we used the same methodology that we used to calculate the final CY 2011 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 9 of this proposed rule. (We note that, consistent with our proposal in section II.A.1.b. of this proposed rule to add CPT code 71550 (Magnetic resonance (e.g., proton) imaging, chest (e.g., for evaluation of hilar and mediastinal lymphadenopathy); without contrast material(s)) to the list of bypass codes for CY 2012, we also are proposing to add CPT code 71550 to the list of proposed OPPS imaging family services overlapping with HCPCS codes on the Start Printed Page 42202proposed CY 2012 bypass list.) We integrated the identification of imaging composite “single session” claims, that is, claims with multiple imaging procedures within the same family on the same date of service, into the creation of “pseudo” single procedure 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.”

As discussed in detail in section III.D.2. of this proposed rule, we are proposing to establish two APCs to which we would propose to assign the codes created for CY 2011 by the AMA's CPT Editorial Board for combined abdominal and pelvis CT services. Specifically, we are proposing to create new APC 0331 (Combined Abdominal and Pelvis CT Without Contrast), to which we are proposing to assign CPT code 74176 (Computed tomography, abdomen and pelvis; without contrast material); and we are proposing to create new APC 0334 (Combined Abdominal and Pelvis CT With Contrast), to which we are proposing to assign CPT codes 74177 (Computed tomography, abdomen and pelvis; with contrast material(s)) and 74178 (Computed tomography, abdomen and pelvis; without contrast material in one or both body regions, followed by contrast material(s) and further sections in one or both body regions) for the CY 2012 OPPS. As noted and listed in section III.D.2. of this proposed rule, we selected claims of predecessor codes of new CPT codes 74176, 74177, and 74178 to calculate the costs of proposed new APCs 0331 and 0334, respectively. Therefore, we are proposing not to use those claims listed in Table 21 in section III.D.2. of this proposed rule in calculating the costs of APCs 8005 and 8006.

We were able to identify 1 million “single session” claims out of an estimated 2 million potential composite cases from our ratesetting claims data, or approximately half of all eligible claims, to calculate the proposed CY 2012 median costs for the multiple imaging composite APCs. We list in Table 8 below the HCPCS codes that would be subject to the proposed multiple imaging composite policy, the approximate proposed median costs for the imaging composite APCs, and their respective families for CY 2012. The HCPCS codes listed in Table 8 are assigned status indicated “Q3”' in Addendum B to this proposed rule (which is referenced in section XVII. of this proposed rule and available via the Internet on the CMS Web site) to identify their status as potentially payable through a composite APC. Their proposed composite APC assignment is identified in Addendum M to this proposed rule (which is referenced in section XVII. of this proposed rule and available via the Internet on the CMS Web site). Table 9 below lists the OPPS imaging family services that overlap with HCPCS codes on the proposed CY 2012 bypass list.

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

Family 1—Ultrasound
Proposed CY 2012 APC 8004 (Ultrasound Composite)Proposed CY 2012 Approximate APC Median Cost = $197
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 2012 APC 8005 (CT and CTA Without Contrast Composite)*Proposed CY 2012 Approximate APC Median Cost = $445
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.
74261Ct colonography, w/o dye.
74176Ct angio abd & pelvis.
Proposed CY 2012 APC 8006 (CT and CTA With Contrast Composite)Proposed CY 2012 Approximate APC Median Cost = $744
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.
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.
74262Ct colonography, w/dye.
75635Ct angio abdominal arteries.
74177Ct angio abd & pelv w/contrast.
74178Ct angio abd & pelv 1+ regns.
* 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 2012 APC 8007 (MRI and MRA Without Contrast Composite)*Proposed CY 2012 Approximate APC Median Cost = $718
70336Magnetic image, jaw joint.
Start Printed Page 42203
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.
C8932MRA, w/o dye., spinal canal.
C8935MRA, w/o dye., upper extr.
Proposed CY 2012 APC 8008 (MRI and MRA with Contrast Composite)Proposed CY 2012 Approximate APC Median Cost = $1,032
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.
C8931MRA, w/dye., spinal canal.
C8933MRA, w/o & w/dye., spinal canal.
C8934MRA, w/dye., upper extremity.
C8936MRA, w/o & w/dye., upper extr.
* 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 9—Proposed OPPS Imaging Family Services Overlapping With HCPCS Codes on the Proposed CY 2012 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.
71550Mri chest w/o dye.
72141Mri neck spine w/o dye.
72146Mri chest spine w/o dye.
72148Mri lumbar spine w/o dye.
73218Mri upper extremity w/o dye.
73221Mri joint upr extrem w/o dye.
73718Mri lower extremity w/o dye.
73721Mri jnt of lwr extre w/o dye.

(6) Cardiac Resynchronization Therapy Composite APC (APCs 0108, 0418, 0655, and 8009)

Cardiac resynchronization therapy (CRT) uses electronic devices to sequentially pace both sides of the heart to improve its output. CRT utilizes a pacing electrode implanted in combination with either a pacemaker or an implantable cardioverter defibrillator (ICD). CRT performed by the implantation of an ICD along with a pacing electrode is referred to as “CRT-D.” CRT performed by the implantation of a pacemaker along with a pacing electrode is referred to as “CRT-P.”

CRT-D procedures are described by combinations of CPT codes for the insertion of pulse generators and the insertion of the leads associated with ICDs, along with the insertion of the pacing electrode. For the implantation of a pulse generator, hospitals may use CPT code 33240 (Insertion of single or dual chamber pacing cardioverter-defibrillator pulse generator), which is the only CPT code assigned to APC 0107 (Insertion of Cardioverter-Defibrillator) for CY 2011. For the implantation of a pulse generator and leads, hospitals may use CPT code 33249 (Insertion or repositioning of electrode lead(s) for single or dual chamber pacing cardioverter-defibrillator and insertion of pulse generator), which is the only CPT code assigned to APC 0108 (Insertion/Replacement/Repair of Cardioverter-Defibrillator Leads) for CY 2011.

For CRT-P, hospitals may use CPT codes 33206 (Insertion or replacement of permanent pacemaker with transvenous electrode(s); atrial) and 33207 (Insertion or replacement of permanent pacemaker with transvenous electrode(s); ventricular), which are Start Printed Page 42204assigned to APC 0089 (Insertion/Replacement of Permanent Pacemaker and Electrodes) for CY 2011. Hospitals also may use CPT code 33208 (Insertion or replacement of permanent pacemaker with transvenous electrode(s); atrial and ventricular), for the implantation of a pacemaker with leads, which is assigned to APC 0655 (Insertion/Replacement/Conversion of a Permanent Dual Chamber Pacemaker).

When CRT-P is provided, hospitals would report CPT code 33206, 33207, or 33208 codes for ICD or pacemaker insertion, along with CPT code 33225 (Insertion of pacing electrode, cardiac venous system, for left ventricular pacing, at time of insertion of pacing cardioverter-defibrillator or pacemaker pulse generator (including upgrade to dual chamber system)), for implantation of the pacing electrode, which is assigned to APC 0418 (Insertion of Left Ventricular Pacing Electrode) for CY 2011.

A number of commenters who responded to prior OPPS proposed rules, as well as public presenters to the APC Panel, have recommended that CMS establish new composite APCs for CRT-D, citing significant fluctuations in the median cost for CPT code 33225 and the payment rate for APC 0418. The commenters and presenters have pointed out that, because the definition of CPT code 33225 specifies that the pacing electrode is inserted at the same time as an ICD or pacemaker, CMS would not have many valid single or pseudo single claims upon which to calculate an accurate median cost. These commenters and presenters also asserted that claims data for these services demonstrate that the percentage of single claims available for use in CRT ratesetting is very low compared to the total number of claims submitted for CRT-D or CRT-P services. The APC Panel at its February and August 2009 meetings recommended that CMS evaluate the implications of the creation of a new composite APC for CRT-D and recommended that CMS reconsider creating a composite APC or group of composite APCs for CRT-D and CRT-P. While we did not propose any new composite APCs for CY 2010 or CY 2011, we accepted both of these APC Panel recommendations (75 FR 71852).

In response to the APC Panel recommendations and the comments we have received, we have evaluated the implications of creating four composite APCs for CRT, which would include the ICD and pacemaker insertion procedures listed previously in this section (described by CPT codes 33240, 33249, 33206, 33207, and 33208) performed in combination with the insertion of a pacing electrode (described by CPT code 33225). Table 10 below outlines the four potential composite APCs that we modeled. Specifically, we provide a description of each potential composite APC, the combination of CPT codes that we used to define the potential composite APC, the frequency of claims that met the definition of the potential composite APC that could be used to calculate a median cost for the potential composite APC, and the median cost calculated for the potential composite APC. Table 10 below contains the results from our calculations for the four potential composite APCs using CY 2010 claims data available for this proposed rule, that is, those claims processed between January 1 and December 31, 2010.

Table 10—Potential Composite APCs

Potential composite APCDescriptionComponent APCsCPT codesCY 2010 frequencyCY 2012 payment estimate
ACardiac Resynchronization Therapy—ICD Pulse Generator and Leads0418 010733225 3324021$35,623
BCardiac Resynchronization Therapy—ICD Pulse Generator0418 010833225 332492,35838,854
CCardiac Resynchronization Therapy—Pacemaker Pulse Generator, and Leads (Atrial or Ventricular)0418 008933225 33206 332078417,306
DCardiac Resynchronization Therapy—Pacemaker Pulse Generator, and Leads (Atrial and Ventricular)0418 065533225 3320831418,705

For CY 2012, under the authority of section 1833(t)(1)(B) of the Act, we are proposing to create a new composite APC 8009 (Cardiac Resynchronization Therapy with Defibrillator Composite), listed as potential composite APC “B” in Table 10 above, for CRT-D services. This proposed composite APC is the only modeled composite in the study as shown above in Table 10, with significant claims volume, and would combine a procedure currently in APC 0418 with a procedure currently in APC 0108 (Insertion/Replacement/Repair of Cardioverter-Defibrillator Leads) when performed on the same date of service. Specifically, we are proposing to create composite APC 8009, which would be used when CPT 33249 and CPT 33225 are performed on the same day, in order to recognize the inherent challenges in calculating accurate median costs for CPT code 33225 based on single procedure claims utilized in standard OPPS ratesetting methodology, and to address commenters' concerns regarding the fluctuations in median costs for APC 0418. We believe a composite payment methodology is appropriate for these services and would result in more accurate payment for these services because such a methodology is specifically designed to provide payment for two or more procedures when they are provided in the same encounter, thus enabling us to use more claims data and to use claims data that more accurately represents the full cost of the services when they are furnished in the same encounter. We also believe that there is sufficient claims volume for CPT 33249 and CPT 33225 provided in the same encounter to warrant creation of the composite APC. In addition, we believe that the claims volume for CPT 33249 and CPT 33225 is sufficient to demonstrate that these services are commonly performed together. While the other combinations of CRT procedures listed in Table 10 may also be performed together, we are not proposing to implement composite APCs for these services because of the low frequency with which CPT code 33225 is reported with other CPT codes for ICD and pacemaker insertion in the claims data. As we have stated previously (74 FR 60392), because of the complex claims processing and ratesetting logic involved, in the past, we have explored composite APCs only for combinations of services that are commonly performed together. Because Start Printed Page 42205of the low frequency of the other combinations of CRT procedures listed in Table 10, we do not consider them to be commonly performed together.

Under the authority of section 1833(t)(2)(E) of the Act, we also are proposing to cap the payment rate for composite APC 8009 at the most comparable Medicare-severity diagnosis-related group (MS-DRG) payment rate established under the IPPS that would be provided to acute care hospitals for providing CRT-D services to hospital inpatients. Specifically, we are proposing to pay APC 8009 at the lesser of the APC 8009 median cost or the IPPS payment rate for MS-DRG 227 (Cardiac Defibrillator Implant without Cardiac Catheterization without Major Complication or Comorbidity), as adopted in the FY 2012 IPPS/LTCH PPS final rule. We would establish the OPPS payment amount at the FY 2012 IPPS standardized payment amount for MS-DRG 227. In the FY 2012 IPPS/LTCH proposed rule, this amount is $26,364.93. We calculated the standardized payment rate for MS-DRG 227 ($26,364.93) by multiplying the normalized weight from Table 5 of the FY 2012 IPPS/LTCH PPS proposed rule (5.1370) by the sum of the nonlablor and labor-related shares of the proposed FY 2012 IPPS operating standardized amount (nonwage-adjusted) ($5,132.36) which were obtained from Table 1B. For further detail on the calculation of the IPPS proposed FY 2012 payments rates, we refer readers to the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 26028 through 26029).

We consider the standardized payment rate for MS-DRG 227 to represent appropriate payment for a comparable package of services furnished to outpatients. We believe that, because this MS-DRG includes defibrillator implantation for those inpatients without major complications or comorbidities, it represents the payment made for hospital inpatients who are most similar to patients who would receive CRT-D on an outpatient basis, because hospital outpatients are generally less sick than hospital inpatients and because patients who had complications or comorbitities would be most likely to be admitted to inpatient status to receive CRT-D therapy. Similar to the proposed payment rate for composite APC 8009, the proposed payment rate for MS-DRG 227 includes the device costs associated with CRT-D along with the service costs associated with CPT codes 33249 and 33225, which are the procedures that are reported for implanting those devices. We believe that we should not pay more for these services under the proposed OPPS composite APC payment than under the IPPS because the OPPS payment would, by definition, include fewer items and services than the corresponding IPPS MS-DRG payment. For example, the IPPS MS-DRG payment includes payment for drugs and diagnostic tests that would be separately payable under the OPPS. A payment cap is necessary, therefore, to ensure that we do not create an inappropriate payment incentive to provide CRT-D services in one setting of care over another by paying more for CRT-D in the outpatient setting compared to the inpatient setting. We also believe that limiting payment for CRT-D services under the OPPS to the IPPS MS-DRG payment will ensure appropriate and equitable payment to hospitals because patients who receive these services in the hospital outpatient setting are not as sick as patients who have been admitted to receive this same service in the hospital inpatient setting. Therefore, we expect it would be less costly to provide care for these patients, who would also spend less time in the facility. For more detail and how this payment rate was calculated, we refer readers to section III. D. 6 of this proposed rule.

In order to ensure that hospitals correctly code for CRT services in the future, we are proposing to create claim processing edits that would return claims to providers unless CPT code 33225 is billed in conjunction with one of the following CPT codes, as specified by AMA in the CPT code book:

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

Finally, in order to reduce the extent to which payment rates for the two services currently assigned to APC 0418, described by CPT codes 33224 and 33225, might continue to fluctuate, we also are proposing to move CPT 33225 from APC 0418 to APC 0108. We believe that moving these codes to APCs that have higher volumes of services to which they are more similar in clinical characteristics and median costs will increase the stability of the payments for these services from year to year. In general, a higher volume of services across multiple procedures within an APC results in more stable APC median costs and, therefore, in the payment rate from one year to the next. We also are proposing to change the name of APC 0108 from “Insertion/Replacement/Repair of Cardioverter-Defibrillator Leads” to “Insertion/Replacement/Repair of AICD Leads, Generator, and Pacing Electrodes.” Similarly, we are proposing to move CPT 33224 from APC 0418 to APC 0655 and to change the name of APC 0655 from “Insertion/Replacement/Conversion of a Permanent Dual Chamber Pacemaker” to “Insertion/Replacement/Conversion of a Permanent Dual Chamber Pacemaker or Pacing Electrode.” We believe that moving CPT code 33224 into APC 0655 will promote stability in payment for CPT code 33224 because CPT code 33224 would then be in an APC with similar median costs but with a higher volume of services and, therefore, will benefit from the stability in APC median cost and payment rate that generally results as the volume of services within an APC increases. Because these proposed actions would result in APC 0418 containing no CPT codes, we are proposing to delete APC 0418.

In summary, for CY 2012, we are proposing to create a composite for CRT-D services billed with CPT code 33225 and CPT code 33249 on the same date of service (Composite APC 8009 Start Printed Page 42206(Cardiac Resynchronization Therapy—ICD Pulse Generator and Leads)), for which we are proposing that payment would be capped at the IPPS payment rate for MS-DRG 227. In other words, we would pay APC 8009 at the lesser of the APC 8009 median cost or the IPPS standardized payment for MS-DRG 227. We also are proposing to implement claims processing edits that would return to providers incorrectly coded claims on which a pacing electrode insertion (CPT code 33225) is billed without an ICD or pacemaker insertion. Finally, we are proposing to delete APC 0418, and to redistribute its component CPT codes (33225 and 33224) to APCs 0108 and 0655. The proposed changes would all be made in a budget neutral manner, in the same way that payment for other composite APCs and the reassignment of codes to APCs are budget neutral within the OPPS. We refer readers to section II.A.4 of this proposed rule for a discussion of the scaling of payment weights for budget neutrality.

3. 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 payment for multiple interrelated services into a single payment creates 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. Packaging payments into larger payment bundles promotes the stability of payment for services over time. Finally, packaging 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. For these reasons, packaging payment for services that are typically ancillary and supportive to a primary service has been a fundamental part of the OPPS since its implementation in August 2000.

We 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 outpatient encounter. “STVX-packaged codes” and “T-packaged codes” are paid separately in those uncommon cases when they do not meet their respective criteria for packaged payment. “STVX-packaged codes” and “T-packaged codes” are conditionally packaged. We refer readers to section XI.A.1. of this proposed rule and Addenda D1 (which is referenced in section XVII. of this proposed rule and available via the Internet on the CMS Web site) with other Addenda, for a complete listing of proposed status indicators and the meaning of each.

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

Hospitals include HCPCS codes and charges for packaged services on their claims, and the estimated costs associated with those packaged services are then added to the costs of separately payable procedures on the same claims 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 provide other guidance. The appropriateness of the OPPS payment rates depends on the quality and completeness of the claims data that hospitals submit for the services they furnish to our Medicare beneficiaries.

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

In addition, in the CY 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 Start Printed Page 42207imaging services provided with contrast and without contrast as required by section 1833(t)(2)(G) of the Act. The multiple imaging composite APCs are: (1) APC 8004 (Ultrasound Composite); (2) APC 8005 (CT and CTA without Contrast Composite); (3) APC 8006 (CT and CTA with Contrast Composite); (4) APC 8007 (MRI and MRA without Contrast Composite); and (5) 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.

We recognize that decisions about packaging and bundling payment involve a balance between ensuring that payment is adequate to enable the hospital to provide quality care and establishing incentives for efficiency through larger units of payment. Therefore, we invite public comments regarding our packaging proposals for the CY 2012 OPPS.

b. Packaging Issues

(1) CMS Presentation of Findings Regarding Expanded Packaging at the February 28-March 1, 2011 APC Panel Meeting

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 I.D. of this proposed rule, the APC Panel advises CMS on the clinical integrity of payment groups and their weights, and the APC Panel has had a Packaging Subcommittee that is now renamed the Subcommittee for APC Groups and Status Indicator (SI) Assignments to reflect that its function has expanded to include assisting CMS with assignment of HCPCS codes to APCs. As part of its function, the APC Panel 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. The APC Panel has considered packaging issues at several earlier meetings. For discussions of earlier APC Panel meetings and recommendations, we refer readers to previously published hospital OPPS/ASC proposed and final rules on the CMS Web site at: http://www.cms.gov/​HospitalOutpatientPPS/​HORD/​list.asp.

(2) Packaging Recommendations of the APC Panel at Its February 28-March 1, 2011 Meeting

During the February 28-March 1, 2011 APC Panel meeting, the APC Panel accepted the report of the Subcommittee for APC Groups and Status Indicator (SI) Assignment, heard several public presentations related to packaged services, discussed the deliberations of the subcommittee, and made five recommendations related to packaging and to the function of the subcommittee. The Report of the February 28-March 1, 2011 meeting of the APC Panel may be found at the Web site at: http://www.cms.gov/​FACA/​05_​AdvisoryPanelonAmbulatoryPaymentClassificationGroups.asp.

To summarize, the APC Panel made five recommendations regarding the packaging of payment under the CY 2012 OPPS. Below we present each of these five packaging recommendations and our responses to those recommendations. One recommendation that evolved from the discussions of the APC Groups and Status Indicator Subcommittee that is specific to HCPCS codes is discussed in section III.D. of this proposed rule.

APC Panel Recommendation 4: That HCPCS code 31627 (Bronchoscopy, rigid or flexible, including fluoroscopic guidance, when performed; with computer-assisted, image-guided navigation (List separately in addition to code for primary procedure[s])) continue to be assigned a status indicator of “N.” The Panel further recommended that CMS continue to collect claims data for HCPCS code 31627.

CMS Response to Recommendation 4: HCPCS code 31627 was new for CY 2010, and we assigned a new interim status indicator of “N” in our CY 2010 OPPS/ASC final rule with comment period based on our policy of packaging guidance and intraoperative services that are ancillary and dependent upon an independent separately paid procedure. At the APC Panel's February 2010 meeting, the manufacturer of the electromagnetic navigation bronchoscopy (ENB) technology, one of several technologies that can be used to perform the service described by HCPCS code 31627, asserted that use of the ENB technology during a bronchoscopy procedure enables access to distal lesions that are otherwise not accessible without use of the ENB technology. The manufacturer also stated that without separate payment for the ENB technology, hospitals would likely not adopt the technology and the population that would likely benefit from the ENB technology would not have access to this technology. In response to the manufacturer's presentation at the February 2010 Panel meeting, the APC Panel asked CMS to consider whether HCPCS code 31627 should be packaged or paid separately; and if it should be paid separately, the APC Panel asked CMS to investigate the appropriate APC assignment. The report of the February 2010 APC Panel meeting is available at http://www.cms.gov/​FACA/​05_​AdvisoryPanelonAmbulatoryPaymentClassificationGroups.asp.

We stated in the CY 2011 OPPS/ASC proposed rule (75 FR 46223) that we considered and analyzed the information available to us for HCPCS code 31627 and believed that the code described a procedure that is supportive of and ancillary to the primary diagnostic or therapeutic modality. Therefore, we proposed to package payment for HCPCS code 31627. We stated that, by proposing to package payment for this procedure, we would be treating it in the same manner as similar computer-assisted, navigational diagnostic procedures that are supportive of and ancillary to a primary diagnostic or therapeutic modality.

At its August 23-24, 2010 meeting, the APC Panel listened to discussions regarding whether HCPCS code 31627 should remain packaged for CY 2011. After hearing presentations from the public, the APC Panel recommended that CMS continue to package payment for HCPCS code 31627 into payment for the major separately paid procedure with which it is performed and asked that CMS bring claims data on the cost of HCPCS code 31627 to the APC Panel's winter 2011 meeting for review. After consideration of all of the information provided by commenters on this issue, and hearing the discussion of the issue by the APC Panel at its August 23-24, 2010 meeting, we accepted the APC Panel's recommendation to continue to package payment for HCPCS code 31627 into the payment for the major separately paid procedure with which it is reported for CY 2011. In addition, we also accepted the APC Panel's recommendation that CMS bring claims data [for HCPCS code 31627 to the winter 2011 APC Panel meeting. The report of the August 2010 APC Panel meeting is available at http://www.cms.gov/​FACA/​05_​AdvisoryPanelonAmbulatoryPaymentClassificationGroups.asp.

At its meeting on February 28-March 1, 2011, the APC Panel listened to a public presentation in which the manufacturer of the ENB technology requested that HCPCS code 31627 be paid separately on the basis that the cost Start Printed Page 42208of the technology is substantially higher than the OPPS payment for APC 0076 (Level I Endoscopy Lower Airway), the APC to which most bronchoscopy codes are assigned and into which payment for HCPCS code 31627 is packaged. The manufacturer stated that if CMS does not pay HCPCS code 31627 separately, hospitals will not furnish the procedure to hospital outpatients.

In response to the request of the APC Panel at its August 2010 meeting, we presented the available data on HCPCS code 31627 that could be derived from the hospital outpatient claims that were paid under the OPPS for services on and after January 1, 2010 through and including September 30, 2010, as processed through the CMS common working file by December 31, 2010. Specifically, using the limited set of APC Panel data, CMS found that 119 hospitals billed for 573 units of HCPCS code 31627, and that HCPCS code 31627 had a median cost of approximately $329 per unit. We also found that HCPCS code 31627 is reported on 0 to 4 percent of the claims for bronchoscopy codes with which CPT guidance states that it is permissible to report HCPCS code 31627, with the exception of HCPCS code 31626 (Bronchoscopy, rigid or flexible, including fluoroscopic guidance, when performed; with placement of fiducial markers, single or multiple). HCPCS code 31627 was reported on approximately 52% of claims for HCPCS code 31626 in the APC Panel data. The APC Panel considered this information in its formulation of Recommendation 4 that CMS continue to package payment for HCPCS code 31627 into the payment for the bronchoscopy code with which HCPCS code 31627 is reported. Subsequent to the APC Panel meeting, examination and analysis of the CY 2012 proposed rule data found that 149 hospitals reported 867 units of HCPCS code 31627, and that HCPCS code 31627 has a proposed rule median cost of approximately $344 per unit.

After considering the public presentation and the information presented by CMS staff, the APC Panel recommended that HCPCS code 31627 continue to be assigned a status indicator of “N.” The Panel further recommended that CMS continue to collect claims data for HCPCS code 31627. We are proposing to accept both of the APC Panel's recommendations for the CY 2012 OPPS. Specifically, we are proposing to assign HCPCS code 31627 to status indicator “N” for the CY 2012 OPPS and, therefore, are proposing to package payment for the procedure into payment for the bronchoscopy to which we believe that it is ancillary and supportive. As with all packaged items and services, the cost we calculate for CPT code 31627 will be added to the costs on the single bill for the bronchoscopy code with which the service reported by CPT code 31627 is furnished, and therefore, the cost of CPT code 31627 will be incorporated into the payment for the APC to which that bronchoscopy code is assigned. We continue to believe that HCPCS code 31627, for which there are several different technologies, describes a service that is supportive and ancillary to the primary bronchoscopy procedure with which it must be reported, as defined by CPT. HCPCS code 31627 describes a computer assisted image guided navigation service that is not furnished without a bronchoscopy. As defined by CPT, HCPCS code 31627 may only be furnished in addition to a bronchocsopy service and therefore we believe that it is ancillary and supportive to the bronchsocopy service with which it must be reported. We agree to provide further claims information on HCPCS code 31627 to the APC Panel when it becomes available.

APC Panel Recommendation 5: That CMS consider a more appropriate APC assignment for HCPCS code 31626 (Bronchoscopy, rigid or flexible, including fluoroscopic guidance, when performed; with placement of fiducial markers), the most common code with which HCPCS code 31627 was billed in 2010.

CMS Response to Recommendation 5: We are accepting this recommendation, and therefore are proposing to reassign HCPCS code 31626 (which has a proposed CY 2012 APC median cost of approximately $2,708) from APC 0076 (which has a proposed CY 2012 APC median cost of approximately $751) to APC 0415 (Level II Endoscopy Lower Airway), which has a proposed CY 2012 APC median cost of approximately $2,007. We agree with the APC Panel that it appears that the proposed APC median cost of HCPCS code 31626 of $2,708 justifies placement in an APC that has a median cost that is more similar to the APC median cost for this code. We believe that APC 0415 is the most appropriate clinically similar APC because the proposed CY 2012 median cost for APC 0415 of $2,007 is more similar in clinical resource for HCPCS code 31626 than the proposed CY 2012 median cost for APC 0076 of $715.

APC Panel Recommendation 6: That Judith Kelly, R.H.I.T., R.H.I.A., C.C.S., continue to chair the APC Groups and Status Indicator (SI) Assignments Subcommittee for 2011.

CMS Response to Recommendation 6: We are accepting the APC Panel's recommendation that Judith Kelly, R.H.I.T., R.H.I.A., C.C.S. continue to chair the APC Groups and Status Indicator Assignments Subcommittee for 2011.

APC Panel Recommendation 7: That CMS furnish the results of its investigation of claims that contain the following unconditionally packaged codes without separately paid procedures:

  • HCPCS code G0177 (Training and educational services related to the care and treatment of patient's disabling mental health problems per session (45 minutes or more));
  • HCPCS code G0378 (Hospital observation service, per hour);
  • HCPCS code 75940 (Percutaneous placement of IVC filter, radiological supervision and interpretation);
  • HCPCS code 76937 (Ultrasound guidance for vascular access requiring ultrasound evaluation of potential access sites, documentation of selected vessel patency, concurrent realtime ultrasound visualization of vascular needle entry, with permanent recording and reporting (List separately in addition to code for primary procedure)).

CMS Response to Recommendation 7: We are accepting the APC Panel's recommendation that CMS furnish the results of its investigation of claims that contain the unconditionally packaged codes: HCPCS code G0177, HCPCS code G0378, HCPCS code 75940, and HCPCS code 76937 at a future APC Panel meeting.

APC Panel Recommendation 8: That the work of the APC Groups and Status Indicator (SI) Assignments Subcommittee continue.

CMS Response to Recommendation 8: We are accepting the APC Panel's recommendation that the work of the APC Groups and Status Indicator Assignments Subcommittee continue.

(3) Other Packaging Proposals for CY 2012

The HCPCS codes for which we are proposing that payment be packaged into payment for the separately paid procedures with which the codes are reported either unconditionally (for which we are proposing to continue to assign status indicator “N”), or conditionally (for which we are proposing to continue to assign status indicators “Q1”, “Q2”, or “Q3”) are displayed in Addendum B of this proposed rule (which is referenced in section XVIII. of this proposed rule and available via the Internet on the CMS Web site). The supporting documents Start Printed Page 42209for this CY 2012 OPPS/ASC proposed rule, including but not limited to Addendum B, are available at http://www.cms.hhs.gov/​HospitalOutpatientPPS/​HORD. To view the proposed status indicators by HCPCS code in Addendum B, select CMS 1525-P and then select the folder labeled “2012 OPPS Proposed Rule Addenda” from the list of supporting files. Open the zipped file and select Addendum B, which is available as both an Excel file and a text file.

The proposed continuation of our standard policy regarding packaging of drugs and biologicals, implantable biologicals, contrast agents and diagnostic radiopharmaceuticals is discussed in section V.B. of this proposed rule. We note that an implantable biological that is surgically inserted or implanted through a surgical incision or a natural orifice is commonly referred to throughout this proposed rule as an “implantable biological.”

The proposed creation of a new composite APC for CY 2012 for payment of the insertion of cardiac resynchronization devices is discussed in section II.A.2.e.(6) of this proposed rule.

4. Proposed Calculation of OPPS Scaled Payment Weights

Using the APC median costs discussed in sections II.A.1. and II.A.2. of this proposed rule, we calculated the proposed relative payment weights for each APC for CY 2012 shown in Addenda A and B to this proposed rule (which are referenced in section XVIII. of this proposed rule and available via the Internet on the CMS Web site). 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 2012, 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 CY 2012 median cost for APC 0606, for CY 2012 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 the estimated aggregate weight under the OPPS for CY 2012 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 the estimated aggregate weight using the CY 2011 scaled relative weights to the estimated aggregate weight using the proposed CY 2012 unscaled relative weights. For CY 2011, we multiplied the CY 2011 scaled APC relative weight applicable to a service paid under the OPPS by the volume of that service from CY 2010 claims to calculate the total weight for each service. We then added together the total weight for each of these services in order to calculate an estimated aggregate weight for the year. For CY 2012, we performed the same process using the proposed CY 2012 unscaled weights rather than scaled weights. We then calculated the weight scaler by dividing the CY 2011 estimated aggregate weight by the proposed CY 2012 estimated aggregate weight. The service-mix is the same in the current and prospective years because we use the same set of claims for service volume in calculating the aggregate weight for each year. For a detailed discussion of the weight scaler calculation, we refer readers to the OPPS claims accounting document available on the CMS Web site at: http://www.cms.gov/​HospitalOutpatientPPS/​. We included payments to CMHCs in our comparison of estimated unscaled weight in CY 2012 to estimated total weight in CY 2011 using CY 2010 claims data, holding all other components of the payment system constant to isolate changes in total weight. Based on this comparison, we adjusted the unscaled relative weights for purposes of budget neutrality. The proposed CY 2012 unscaled relative payment weights were adjusted by multiplying them by a proposed weight scaler of 1.4647 to ensure that the proposed CY 2012 relative weights are budget neutral.

Section 1833(t)(14) of the Act provides the payment rates for certain “specified covered outpatient drugs.” That section states that “Additional expenditures resulting from this paragraph shall not be taken into account in establishing the conversion factor, weighting and other adjustment factors for 2004 and 2005 under paragraph (9) but shall be taken into account for subsequent years.” Therefore, the cost of those specified covered outpatient drugs (as discussed in section V.B.3. of this proposed rule) was included in the proposed budget neutrality calculations for the CY 2012 OPPS.

The proposed scaled relative payment weights listed in Addenda A and B to this proposed rule (which are referenced in section XVII. of this proposed rule and available via the Internet on the CMS Web site) incorporate the proposed recalibration adjustments discussed in sections II.A.1. and II.A.2. 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 by applying the OPD fee schedule increase factor. For purposes of section 1833(t)(3)(C)(iv) of the Act, subject to sections 1833(t)(17) and 1833(t)(3)(F) of the Act, the OPD fee schedule increase factor is equal to the hospital inpatient market basket percentage increase applicable to hospital discharges under section 1886(b)(3)(B)(iii) of the Act. In the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 25949), consistent with current law, based on IHS Global Insight, Inc.'s first quarter 2011 forecast of the FY 2012 market basket increase, we proposed that the FY 2012 IPPS market basket update would be 2.8 percent. However, sections 1833(t)(3)(F) and 1833(t)(3)(G)(ii) of the Act, as added by section 3401(i) of the Pub. L. 111-148 and as amended by section 10319(g) of such law and further amended by section 1105(e) of Public Law 111-152, provide adjustments to the OPD fee schedule update for CY 2012.

Specifically, section 1833(t)(3)(F) requires that the OPD fee schedule increase factor under subparagraph (C)(iv) be reduced by the adjustments described in section 1833(t)(3)(F) of the Start Printed Page 42210Act. Specifically, section 1833(t)(3)(F)(i) of the Act requires that the OPD fee schedule increase factor under subparagraph (C)(iv) be reduced by the productivity adjustment described in section 1886(b)(3)(B)(xi)(II) of the Act for 2012 and subsequent years. Section 1886(b)(3)(B)(xi)(II) of the Act defines the productivity adjustment as equal to the 10-year moving average of changes in annual economy-wide, private nonfarm business multifactor productivity (MFP) (as projected by the Secretary for the 10-year period ending with the applicable fiscal year, year, cost reporting period, or other annual period) (the “MFP adjustment”). We refer readers to the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 25949 through 25951) for a discussion of the calculation of the MFP adjustment. The proposed MFP adjustment for FY 2012 is estimated to be 1.2 percentage points.

We are proposing to reduce the OPD fee schedule increase factor for CY 2012 by the proposed MFP adjustment of 1.2 percentage points for FY 2012. Since the OPD fee schedule increase factor is based on the IPPS hospital inpatient market basket percentage increase, we believe that it is appropriate to apply the same MFP adjustment that is used to reduce the IPPS market basket increase to the OPD fee schedule increase factor. Consistent with the FY 2012 IPPS/LTCH PPS proposed rule, we are also proposing that if more recent data are subsequently available (for example, a more recent estimate of the market basket and MFP adjustment), we would use such data, if appropriate, to determine the FY 2012 market basket update and MFP adjustment in the CY 2012 final rule. We believe that it is appropriate to apply the MFP adjustment, which is calculated on a fiscal year basis, to the OPD fee schedule increase factor, which is used to update the OPPS payment rates on a calendar year basis, because we believe that it is appropriate for the numbers associated with both components of the calculation (the underlying OPD fee schedule increase factor and the productivity adjustment) to be aligned so that changes in market conditions are aligned.

In addition, section 1833(t)(3)(F)(ii) of the Act requires that the OPD fee schedule increase factor under subparagraph (C)(iv) be reduced by the adjustment described in subparagraph (G) for each of 2010 through 2019. For CY 2012, section 1833(t)(3)(G)(ii) of the Act provides a 0.1 percentage point reduction to the OPD fee schedule increase factor under subparagraph (C)(iv). Therefore, we are proposing to apply a 0.1 percentage point reduction to the OPD fee schedule increase factor.

We note that section 1833(t)(F) of the Act provides that application of this subparagraph may result in the increase factor under subparagraph (C)(iv) being less than 0.0 for a year, and may result in payment rates under the payment system under this subsection for a year being less than such payment rates for the preceding year. As described in further detail below, we are proposing an OPD fee schedule increase factor of 1.5 percent for the CY 2012 OPPS (2.8 percent, which is the proposed estimate of the hospital market basket increase, less the proposed 1.2 percentage points MFP adjustment, less the 0.1 percentage point additional adjustment).

We are proposing to revise 42 CFR 419.32 to reflect the requirement in section 1833(t)(3)(F)(i) of the Act that, for CY 2012, we reduce the OPD fee schedule increase factor by the multifactor productivity adjustment as determined by CMS, and to reflect the requirement in section 1833(t)(3)(G)(ii) of the Act, as required by section 1833(t)(3)(F)(ii) of the Act, that we reduce the OPD fee schedule increase factor by 0.1 percentage point for CY 2012. We also are proposing to amend § 419.32 (iv)(A) to indicate that the hospital inpatient market basket percentage increase applicable under section 1886(b)(3)(B)(iii) of the Act is further reduced by the adjustments necessary to satisfy the requirements in sections 1833(t)(3)(F) and (t)(3)(G) of the Act.

Hospitals that fail to meet the reporting requirements of the Hospital OQR Program would continue to be subject to a further reduction of additional 2.0 percentage points from the OPD fee schedule increase factor adjustment to the conversion factor that would be used to calculate the OPPS payment rates made for their services as required by section 1833(t)(17) of the Act. For a complete discussion of the Hospital OQR requirements and the payment reduction for hospitals that fail to meet those requirements, we refer readers to section XIV. of this proposed rule.

To set the OPPS conversion factor for CY 2012, we are proposing to increase the CY 2011 conversion factor of $68.876 by 1.5 percent. In accordance with section 1833(t)(9)(B) of the Act, we are proposing to further adjust the conversion factor for CY 2012 to ensure that any revisions we make to the updates for a revised wage index and rural adjustment are made on a budget neutral basis. We calculated a proposed overall budget neutrality factor of 1.0003 for wage index changes by comparing total estimated payments from our simulation model using the FY 2012 IPPS proposed wage indices to those payments using the current (FY 2011) IPPS wage indices, as adopted on a calendar year basis for the OPPS. For CY 2012, we are not proposing to make a change to our rural adjustment policy. Therefore, the proposed budget neutrality factor for the rural adjustment would be 1.0000. For CY 2012, we are proposing a cancer hospital payment adjustment policy, as discussed in section II.F. of this proposed rule, and, therefore, we applied a proposed budget neutrality adjustment of 0.9927 to adjust the conversion factor for that proposed policy. We calculated the proposed cancer hospital budget neutrality factor of 0.9927 by comparing total estimated payments from our simulation model for CY 2012 including the proposed payment adjustment for cancer hospitals to total estimated payments from our simulation model for CY 2012 without the proposed payment adjustment for cancer hospitals.

For this proposed rule, we estimate that pass-through spending for both drugs and biologicals and devices for CY 2012 would equal approximately $64.5 million, which represents 0.15 percent of total projected CY 2012 OPPS spending. Therefore, the conversion factor would also be adjusted by the difference between the 0.15 percent estimate of pass-through spending for CY 2011 and the 0.15 percent estimate of CY 2012 pass-through spending. Finally, estimated payments for outliers remain at 1.0 percent of total OPPS payments for CY 2012.

The proposed OPD fee schedule increase factor of 1.5 percent for CY 2012 (that is, the estimate of the hospital market basket increase of 2.8 percent less the 1.2 percentage points MFP adjustment and less the 0.1 percentage point adjustment which are necessary in order to comply with the requirements of the Affordable Care Act), the required proposed wage index budget neutrality adjustment of approximately 1.0003, the proposed cancer hospital payment adjustment of 0.9927, and the proposed adjustment of 0.00 percent of projected OPPS spending for the difference in the pass-through spending result in a proposed conversion factor for CY 2012 of $69.420, which reflects the full OPD fee schedule increase, after including the adjustments necessary to comply with the requirements of the Affordable Care Act.

To calculate the proposed CY 2012 reduced market basket conversion factor for those hospitals that fail to meet the requirements of the Hospital OQR Program for the full CY 2012 payment Start Printed Page 42211update, we are proposing to make all other adjustments discussed above, but would use a proposed reduced OPD fee schedule update factor of −0.5 percent (that is, the proposed OPD fee schedule increase factor further reduced by 2.0 percentage points as required by section 1833(t)(17)(A)(i) of the Act for failure to comply with the Hospital OQR requirements). This resulted in a proposed reduced conversion factor for CY 2012 of $68.052 for those hospitals that fail to meet the Hospital OQR requirements (a difference of −$1.368 in the proposed conversion factor relative to those hospitals that met the Hospital OQR requirements).

In summary, for CY 2012, we are proposing to use a conversion factor of $69.420 in the calculation of the national unadjusted payment rates for those items and services for which payment rates are calculated using median costs. We are proposing to amend § 419.32(b)(1)(iv)(B) by adding a new paragraph (3) to reflect the reductions to the OPD fee schedule increase factor that are required for CY 2012 in order to satisfy the statutory requirements of sections 1833(t)(3)(F) and (t)(3)(G)(ii) of the Act. We also are proposing to amend § 419.32(b)(1)(iv)(A) to indicate that the hospital inpatient market basket percentage increase is reduced by the adjustments described in § 419.32(b)(1)(iv)(B). We are proposing to use a reduced conversion factor of $68.052 in the calculation of payments for hospitals that fail to comply with the Hospital OQR requirements to reflect the reduction to the OPD fee schedule increase factor that is required by section 1833(t)(17) of the Act for these hospitals.

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 portion of the OPPS payment rate is called the OPPS labor-related share. This adjustment must be made in a budget neutral manner and budget neutrality is discussed in section II.B. of this 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, for all hospitals, approximately 60 percent of the costs of services paid under the OPPS were attributable to wage costs. We confirmed that this labor-related share for outpatient services is appropriate during our regression analysis for the payment adjustment for rural hospitals in the CY 2006 OPPS final rule with comment period (70 FR 68553). Therefore, we are not proposing to revise this policy for the CY 2012 OPPS. We refer readers to section II.H. of this proposed rule for a description and example of how the proposed wage index for a particular hospital is used to determine the proposed 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 proposed FY 2012 pre-reclassified wage index that the IPPS uses to standardize costs. This standardization process removes the effects of differences in area wage levels from the determination of a national unadjusted OPPS payment rate and the copayment amount.

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

The Affordable Care Act contains provisions that affect the proposed FY 2012 IPPS wage index values, including revisions to the reclassification wage comparability criteria that were finalized in the FY 2009 IPPS final rule (73 FR 48568 through 48570), and the application of rural floor budget neutrality on a national, rather than State-specific, basis through a uniform, national adjustment to the area wage index (76 FR 26021). In addition, section 10324 of the Affordable Care Act requires CMS to establish an adjustment to create a wage index floor of 1.00 for hospitals located in States determined to be frontier States.

Section 10324 specifies that, for services furnished beginning CY 2011, the wage adjustment factor applicable to any hospital outpatient department that is located in a frontier State (as defined in section 1886(d)(3)(E)(iii)(II) of the Act) may not be less than 1.00. Further, section 10324 states that this adjustment to the wage index for these outpatient departments should not be made in a budget neutral manner. As such, for the CY 2012 OPPS, we are proposing to continue to adjust the FY 2012 IPPS wage index, as adopted on a calendar year basis for the OPPS, for all hospitals paid under the OPPS, including non-IPPS hospitals (providers that are not paid under the IPPS) located in a frontier State, to 1.00 in instances where the proposed FY 2012 wage index (that reflects Medicare Geographic Classification Review Board (MGCRB) reclassifications, the application of the rural floor, and the rural floor budget neutrality adjustment) for these hospitals is less than 1.00. Similar to our current policy for HOPDs that are affiliated with multicampus hospital systems, we fully expect that the HOPD would receive a wage index based on the geographic location of the specific inpatient hospital with which it is associated. Therefore, if the associated hospital is located in a frontier State, the wage index adjustment applicable for the hospital would also apply for the affiliated HOPD. We refer readers to the FY 2011 IPPS/LTCH PPS final rule (75 FR 50160) for a detailed discussion regarding this provision, including our methodology for identifying which areas meet the definition of frontier States as provided for in section 1886(d)(3)(E)(iii)(II)) of the Act.

In addition to the changes required by the Affordable Care Act, we note that the proposed FY 2012 IPPS wage indices continue to reflect a number of adjustments implemented over the past few years, including, but not limited to, reclassification of hospitals to different geographic areas, the rural floor provisions, an adjustment for occupational mix, and an adjustment to the wage index based on commuting patterns of employees (out-migration adjustment). We refer readers to the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 25880 through 25888) for a detailed discussion of all proposed changes to the FY 2012 IPPS wage indices. In addition, we refer readers to the CY 2005 OPPS final rule with comment period (69 FR 65842 through 65844) and subsequent OPPS rules for a detailed discussion of the history of these wage index adjustments as applied under the OPPS.

Section 3137 of the Affordable Care Act extended, through FY 2010, section 508 reclassifications as well as certain special exceptions. The most recent extension of the provision was included in section 102 of the Medicare and Medicaid Extender Act, which extends, Start Printed Page 42212through FY 2011, section 508 reclassifications as well as certain special exceptions. The latest extension of these provisions expires on September 30, 2011, and will no longer be applicable effective with FY 2012. As we did for CY 2010, we revised wage index values for certain special exception hospitals from January 1, 2011 through December 31, 2011, under the OPPS, in order to give these hospitals the special exception wage indices under the OPPS for the same time period as under the IPPS. In addition, because the OPPS pays on a calendar year basis, the effective date under OPPS for all other non-section 508 and non-special exception providers is July 1, 2011, instead of April 1, 2011, so that these providers may also receive a full 6 months of payment under the revised wage index comparable to IPPS.

For purposes of the OPPS, we are proposing to continue our policy in CY 2012 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 (section 505 of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA)). We note that, because non-IPPS hospitals cannot reclassify, they are eligible for the out-migration wage adjustment. Table 4J listed in the FY 2012 IPPS/LTCH PPS proposed rule (and made available via the Internet on the CMS Web site at: http://www.cms.hhs.gov/​AcuteInpatientPPS/​01_​overview.asp) identifies counties eligible for the proposed out-migration adjustment and providers proposed to receive the adjustment for FY 2012. We note that, beginning with FY 2012, we proposed under the IPPS that an eligible hospital that waives its Lugar status in order to receive the out-migration adjustment has effectively waived its deemed urban status and, thus, is rural for all purposes under the IPPS, including being considered rural for the disproportionate share hospital (DSH) payment adjustment, effective for the fiscal year in which the hospital receives the out-migration adjustment. We refer readers to the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 25885) for more detailed discussion on the proposed Lugar redesignation waiver for the out-migration 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 2012 OPPS. Addendum L is referenced in section XVII. of this proposed rule and available via the Internet on the CMS Web site.

As stated earlier in this section, our longstanding policy for OPPS has been to adopt the final wage index used in IPPS. Therefore, for calculating proposed OPPS payments in CY 2012, we use the proposed FY 2012 IPPS wage indices. However, section 1833(t)(2)(D) of the Act confers broad discretionary authority upon the Secretary in determining the wage adjustment factor used under the OPPS. Specifically, this provision provides that “subject to paragraph (19), the Secretary shall determine a wage adjustment factor to adjust the portion of payment and coinsurance attributable to labor-related costs for relative differences in labor and labor-related costs across geographic regions. * * *” In other prospective payment systems, we do not adopt the adjustments applied to the IPPS wage index, such as the outmigration adjustment, reclassifications, and the rural floor. For the OPPS, using the hospital IPPS wage index as the source of an adjustment factor for geographic wage differences has in the past been both reasonable and logical, given the inseparable, subordinate status of the outpatient department within the hospital overall.

However, in recent years, we have become concerned that hospitals converting status significantly inflates wage indexes across a State, in a manner that was not intended by the Congress. In the FY 2008 IPPS final rule (72 FR 47324 and 47325), we discussed a situation where a CAH may have converted back to IPPS status in order to increase the rural floor.

The FY 2012 IPPS/LTCH PPS proposed rule (76 FR 26060) shows the impact of the CAH conversion. Hospitals in one State can expect an approximate 8-percent increase in IPPS payments due to the conversion and resulting increase of the rural floor. Our concern is that the manipulation of the rural floor is of sufficient magnitude that it requires all hospital wage indexes to be reduced approximately 0.62 percent as a result of nationwide budget neutrality for the rural floor (or more than a 0.4 percent total payment reduction to all IPPS hospitals).

In addition to the CAH conversion, we recently received two requests from urban hospitals to convert to rural hospital status under section 1886(d)(8)(E) of the Act, which would inflate other States' rural floors, through the conversion of what would otherwise be urban hospitals to rural status. While we recognize that conversions from urban-to-rural status are permitted under section 1886(d)(8)(E) of the Act, we do not believe Congress anticipated individual urban to rural conversion allowing payment redistributions of this magnitude.

We believe the above discussions demonstrate that, as a result of hospital actions not envisioned by Congress, the rural floor is resulting in significant disparities in wage index and, in some cases, resulting in situations where all hospitals in a State receive a wage index higher than that of the single highest wage index urban hospital in the State. As stated above, the statute does not require the Secretary to use the IPPS wage adjustment factor to wage adjust OPPS payments and copayments, nor to apply to OPPS payment and copayment calculation the same adjustment that the law requires be applied to the IPPS wage adjustment factor.

We are considering adopting a policy that would address situations where IPPS wage index adjustments, such as the rural floor, are resulting in significant fluctuations in the wage index. One option would be to not apply the rural floor wage index at all in the OPPS where the rural floor is set by a snall number of hospitals and results in a rural floor that benefits all hospitals in the State. Alternatively, we could apply within State rural budget neutrality to the OPPS wage index as we did for both the IPPS and OPPS wage index beginning in FY 2009. We are seeking public comment on whether to: (1) Adopt the IPPS wage index for the OPPS in its entirety including the rural floor, geographic reclassifications and all other wage index adjustments; (2) adopt the IPPS wage index for the OPPS in its entirety except when a small number of hospitals set the rural floor for the benefit of all other hospitals in the State; (3) adopt the IPPS wage index for the OPPS in its entirety except apply rural floor budget neutrality within each State instead of nationally; or (4) adopt another decision rule for when the rural floor should not be applied in the OPPS when we have concerns about disproportionate impact.

We also are requesting public comments on an option that we are considering adopting for both the IPPS and the OPPS, where we would determine the applicable rural wage index floor using only data from those hospitals geographically rural under OMB and the Census Bureau's MSA designations, and without including wage data associated with hospitals reclassified from urban to rural status under section 1886(d)(8)(E) of the Act. Such a policy would eliminate the incentive to reclassify from urban to rural status primarily to increase rural floors across a State, and would ensure Start Printed Page 42213that the rural floor is based upon hospitals located in rural areas.

With the exception of the proposed out-migration wage adjustment table (Addendum L to this proposed rule, which is available via the Internet on the CMS Web site), which includes non-IPPS hospitals paid under the OPPS, we are not reprinting the proposed FY 2012 IPPS wage indices referenced in this discussion of the wage index. We refer readers to the CMS Web site for the OPPS at: http://www.cms.gov/​HospitalOutpatientPPS/​. At this link, readers will find a link to the proposed FY 2012 IPPS 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 overall hospital-specific CCRs calculated from the hospital's most recent cost report to determine outlier payments, payments for pass-through devices, and monthly interim transitional corridor payments under the OPPS during the PPS year. Medicare contractors cannot calculate a CCR for some hospitals because there is no cost report available. For these hospitals, CMS uses the statewide average default CCRs to determine the payments mentioned above until a hospital's Medicare contractor is able to calculate the hospital's actual CCR from its most recently submitted Medicare cost report. These hospitals include, but are not limited to, hospitals that are new, have not accepted assignment of an existing hospital's provider agreement, and have not yet submitted a cost report. CMS also uses the statewide average default CCRs to determine payments for hospitals that appear to have a biased CCR (that is, the CCR falls outside the predetermined ceiling threshold for a valid CCR) or for hospitals in which the most recent cost report reflects an all-inclusive rate status (Medicare Claims Processing Manual (Pub. 100-04), Chapter 4, Section 10.11). In this proposed rule, we are proposing to update the default ratios for CY 2012 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 2012, we are proposing to continue to use our standard methodology of calculating the statewide average default CCRs using the same hospital overall CCRs that we use to adjust charges to costs on claims data for setting the proposed CY 2012 OPPS relative weights. Table 11 below lists the proposed CY 2012 default urban and rural CCRs by State and compares them to last year's default CCRs. These proposed CCRs represent the ratio of total costs to total charges for those cost centers relevant to outpatient services from each hospital's most recently submitted cost report, weighted by Medicare Part B charges. We also are proposing to adjust ratios from submitted cost reports to reflect final settled status by applying the differential between settled to submitted overall CCRs for the cost centers relevant to outpatient services from the most recent pair of final settled and submitted cost reports. We then weight each hospital's CCR by the volume of separately paid line-items on hospital claims corresponding to the year of the majority of cost reports used to calculate the overall CCRs. We refer readers to the CY 2008 OPPS/ASC final rule with comment period (72 FR 66680 through 66682) and prior OPPS rules for a more detailed discussion of our established methodology for calculating the statewide average default CCRs, including the hospitals used in our calculations and our trimming criteria.

For this CY 2012 OPPS/ASC proposed rule, approximately 87 percent of the submitted cost reports utilized in the default ratio calculations represented data for cost reporting periods ending in CY 2009 and 13 percent were for cost reporting periods ending in CY 2008. For Maryland, we used an overall weighted average CCR for all hospitals in the Nation as a substitute for Maryland CCRs. Few hospitals in Maryland are eligible to receive payment under the OPPS, which limits the data available to calculate an accurate and representative CCR. The weighted CCR is used for Maryland because it takes into account each hospital's volume, rather than treating each hospital equally. We refer readers to the CY 2005 OPPS final rule with comment period (69 FR 65822) for further discussion and the rationale for our longstanding policy of using the national average CCR for Maryland. In general, observed changes in the statewide average default CCRs between CY 2011 and CY 2012 are modest and the few significant changes are associated with areas that have a small number of hospitals.

Table 11 below lists the proposed statewide average default CCRs for OPPS services furnished on or after January 1, 2012.

Table 11—Proposed CY 2012 Statewide Average CCRs

StateUrban/ruralProposed CY 2012 default CCRPrevious default CCR (CY 2011 OPPS final rule)
ALASKARURAL0.4870.479
ALASKAURBAN0.3210.315
ALABAMARURAL0.2130.212
ALABAMAURBAN0.1910.193
ARKANSASRURAL0.2250.223
ARKANSASURBAN0.2740.282
ARIZONARURAL0.2360.231
ARIZONAURBAN0.1930.202
CALIFORNIARURAL0.1890.195
CALIFORNIAURBAN0.2020.205
COLORADORURAL0.3450.350
COLORADOURBAN0.2250.233
CONNECTICUTRURAL0.3560.356
CONNECTICUTURBAN0.2920.291
DISTRICT OF COLUMBIAURBAN0.3010.313
DELAWARERURAL0.2800.279
DELAWAREURBAN0.3470.362
Start Printed Page 42214
FLORIDARURAL0.1830.185
FLORIDAURBAN0.1700.172
GEORGIARURAL0.2410.246
GEORGIAURBAN0.2140.220
HAWAIIRURAL0.3200.356
HAWAIIURBAN0.3060.308
IOWARURAL0.2970.252
IOWAURBAN0.2720.288
IDAHORURAL0.4160.419
IDAHOURBAN0.3780.384
ILLINOISRURAL0.2450.251
ILLINOISURBAN0.2400.239
INDIANARURAL0.2980.302
INDIANAURBAN0.2680.270
KANSASRURAL0.2820.286
KANSASURBAN0.2090.215
KENTUCKYRURAL0.2230.220
KENTUCKYURBAN0.2450.244
LOUISIANARURAL0.2560.256
LOUISIANAURBAN0.2260.235
MARYLANDRURAL0.2800.284
MARYLANDURBAN0.2510.256
MASSACHUSETTSURBAN0.3200.314
MAINERURAL0.4400.460
MAINEURBAN0.4600.450
MICHIGANRURAL0.3130.312
MICHIGANURBAN0.3140.320
MINNESOTARURAL0.4820.483
MINNESOTAURBAN0.3260.311
MISSOURIRURAL0.2480.258
MISSOURIURBAN0.2670.264
MISSISSIPPIRURAL0.2260.229
MISSISSIPPIURBAN0.1860.182
MONTANARURAL0.4340.444
MONTANAURBAN0.3980.399
NORTH CAROLINARURAL0.2560.254
NORTH CAROLINAURBAN0.2640.264
NORTH DAKOTARURAL0.3220.351
NORTH DAKOTAURBAN0.4290.360
NEBRASKARURAL0.3230.328
NEBRASKAURBAN0.2520.259
NEW HAMPSHIRERURAL0.3230.323
NEW HAMPSHIREURBAN0.2920.290
NEW JERSEYURBAN0.2210.221
NEW MEXICORURAL0.2660.277
NEW MEXICOURBAN0.2860.307
NEVADARURAL0.2420.269
NEVADAURBAN0.1690.178
NEW YORKRURAL0.4100.415
NEW YORKURBAN0.3500.375
OHIORURAL0.3240.327
OHIOURBAN0.2410.241
OKLAHOMARURAL0.2480.260
OKLAHOMAURBAN0.2200.208
OREGONRURAL0.3020.306
OREGONURBAN0.3270.340
PENNSYLVANIARURAL0.2700.275
PENNSYLVANIAURBAN0.2000.210
PUERTO RICOURBAN0.4900.505
RHODE ISLANDURBAN0.2870.284
SOUTH CAROLINARURAL0.2220.222
SOUTH CAROLINAURBAN0.2170.227
SOUTH DAKOTARURAL0.3090.316
SOUTH DAKOTAURBAN0.2530.251
TENNESSEERURAL0.2120.221
TENNESSEEURBAN0.2010.204
TEXASRURAL0.2390.245
TEXASURBAN0.2100.216
Start Printed Page 42215
UTAHRURAL0.3850.386
UTAHURBAN0.3590.362
VIRGINIARURAL0.2380.241
VIRGINIAURBAN0.2570.263
VERMONTRURAL0.4150.411
VERMONTURBAN0.3650.365
WASHINGTONRURAL0.3660.367
WASHINGTONURBAN0.3170.327
WISCONSINRURAL0.4070.412
WISCONSINURBAN0.3270.334
WEST VIRGINIARURAL0.2830.291
WEST VIRGINIAURBAN0.3350.337
WYOMINGRURAL0.3850.393
WYOMINGURBAN0.3020.296

E. Proposed OPPS Payments to Certain Rural and Other Hospitals

1. Hold Harmless Transitional Payment Changes Made by Pub. L. 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 sole community hospitals (SCHs) located in rural areas for services furnished during the period that began with the provider's first cost reporting period beginning on or after January 1, 2004, and ending on December 31, 2005. Accordingly, the authority for making 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 amounts for CY 2006, by 90 percent of the amount of that difference for CY 2007, and by 85 percent of the amount of that difference for CY 2008.

For CY 2006, we implemented section 5105 of Public Law 109-171 through Transmittal 877, issued on February 24, 2006. In 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.

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 amounts for CY 2009.

For CY 2009, we revised our regulations at §§ 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 made a technical correction to the heading of § 419.70(d)(5) to correctly identify the policy as described in the subsequent regulation text. The paragraph heading now indicates that the adjustment applies to small SCHs, rather than to rural SCHs.

In the CY 2010 OPPS/ASC final rule with comment period (74 FR 60425), we Start Printed Page 42216stated that, effective for services provided on or after January 1, 2010, rural hospitals and SCHs (including EACHs) having 100 or fewer beds would no longer be eligible for TOPs, in accordance with section 147 of Public Law 110-275. However, subsequent to issuance of the CY 2010 OPPS/ASC final rule with comment period, section 3121(a) of the Affordable Care Act amended section 1833(t)(7)(D)(i)(III) of the Act by extending the period of TOPs to rural hospitals that are not SCHs with 100 beds or fewer for 1 year, for services provided before January 1, 2011. Section 3121(a) of the Affordable Care Act amended section 1833(t)(7)(D)(i)(III) of the Act and extended the period of TOPs to SCHs (including EACHs) for 1 year, for services provided before January 1, 2011, with section 3121(b) of the Affordable Care Act removing the 100-bed limitation applicable to such SCHs for covered OPD services furnished on and after January 1, 2010, and before January 1, 2011. In accordance with section 3121 of the Affordable Care Act, when the OPPS payment is less than the provider's pre-BBA amount, the amount of payment is increased by 85 percent of the amount of the difference between the two payment amounts for CY 2010. Accordingly, in the CY 2011 OPPS/ASC final rule with comment period (75 FR 71882), we updated § 419.70(d) of the regulations to reflect the TOPs extensions and amendments described in section 3121 of the Affordable Care Act.

Section 108 of the Medicare and Medicaid Extenders Act of 2010 (MMEA) (Pub. L. 111-309) extended for one year the hold harmless provision for a rural hospital with 100 or fewer beds that is not an SCH (as defined in section 1886(d)(5)(D)(iii). Therefore, for such a hospital, for services furnished before January 1, 2012, when the PPS amount is less than the provider's pre-BBA amount, the amount of payment is increased by 85 percent of the amount of the difference between the two payments. In addition, section 108 of the MMEA also extended for one year the hold harmless provision for an SCH (as defined in section 1886(d)(5)(D)(iii) of the Act (including EACHs) removing the 100-bed limit applicable to such SCHs for covered OPD services furnished on or after January 1, 2010 and before January 1, 2012. Therefore, for such hospitals, for services furnished before January 1, 2012, when the PPS amount is less than the provider's pre-BBA amount, the amount of payment is increased by 85 percent of the amount of the difference between the two payments. We are proposing to revise our regulations at § 419.70(d) to conform the regulation text to the self-implementing provisions of section 108 of the MMEA described above.

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

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

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

This adjustment for rural SCHs is budget neutral and applied before calculating 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 CYs 2008 through 2011. 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 2012 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 (75 FR 46232). 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 reports, and provider information.

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

1. Background

Since the inception of the OPPS, which was authorized by the Balanced Budget Act of 1997 (BBA), Medicare has paid cancer hospitals identified in section 1886(d)(1)(B)(v) of the Act (cancer hospitals) under the OPPS for covered outpatient hospital services. There are 11 cancer hospitals that meet the classification criteria in section 1886(d)(1)(B)(v) of the Act. These 11 cancer hospitals are exempted from payment under the IPPS. With the Medicare, Medicaid and SCHIP Balanced Budget Refinement Act of 1999, Congress created section 1833(t)(7) of the Act, “Transitional Adjustment to Limit Decline in Payment,” to serve as a permanent payment floor by limiting cancer hospitals' potential losses under the OPPS. Through section 1833(t)(7)(D)(ii) of the Act, a cancer hospital receives the full amount of the difference between payments for covered outpatient services under the OPPS and a “pre-BBA” amount. That is, cancer hospitals are permanently held harmless to their “pre-BBA” amount, and they receive Transitional Outpatient Payments (TOPs) to ensure that they do not receive a payment that is lower under the OPPS than the payment they would have received before implementation of the OPPS, as set forth in section 1833(t)(7)(F) of the Act. The “pre-BBA” payment amount is an amount equal to the product of the reasonable cost of the hospital for covered outpatient services for the portions of the hospital's cost Start Printed Page 42217reporting period (or periods) occurring in the current year and the base payment-to-cost ratio (PCR) for the hospital. The “pre-BBA” amount, including the determination of the base PCR, are defined at 42 CFR 419.70(f). TOPs are calculated on Worksheet E, Part B, of the Hospital and Hospital Health Care Complex Cost Report (Form CMS-2552-96 or Form CMS-2552-10, as applicable) each year. Section 1833(t)(7)(I) of the Act exempts TOPs from budget neutrality calculations. Almost all of the 11 cancer hospitals receive TOPs each year. The volume weighted average payment-to-cost ratio (PCR) for the cancer hospitals is 0.83, or outpatient payment with TOPs to cancer hospitals is 83 percent of reasonable cost.

Section 3138 of the Affordable Care Act instructs the Secretary to conduct a study to determine if, under the OPPS, outpatient costs incurred by cancer hospitals described in section 1886(d)(1)(B)(v) of the Act with respect to ambulatory payment classification (APC) groups exceed the costs incurred by other hospitals furnishing services under section 1833(t) of the Act as determined appropriate by the Secretary. In addition, section 3138 of the Affordable Care Act requires the Secretary to take into consideration the cost of drugs and biologicals incurred by such hospitals when studying cancer hospital costliness. Further, section 3138 of the Affordable Care Act provides that if the Secretary determines that cancer hospitals' costs with respect to APC groups are determined to be greater than the costs of other hospitals furnishing services under section 1833(t) of the Act, the Secretary shall provide an appropriate adjustment to reflect these higher costs. Cancer hospitals described in section 1886(d)(1)(B)(v) of the Act remain eligible for TOPs (which are not budget neutral) and outlier payments (which are budget neutral).

2. Study of Cancer Hospitals' Costs Relative to Other Hospitals

It has been our standard analytical approach to use a combination of explanatory and payment regression models to assess the costliness of a class of hospitals while controlling for other legitimate influences of costliness, such as ability to achieve economies of scale, to ensure that costliness is due to the type of hospital and to identify appropriate payment adjustments. We used this approach in our CY 2006 OPPS final rule with comment period to establish the 7.1 percent payment adjustment for rural SCHs (70 FR 68556 through 68561). In our discussion for the CY 2006 OPPS proposed rule, we stated that a simple comparison of unit costs would not be sufficient to assess the costliness of a class of hospitals because the costs faced by individual hospitals, whether urban or rural, are a function of many varying factors, including local labor supply and the complexity and volume of services provided (70 FR 42699).

In constructing our analysis of cancer hospitals' costs with respect to APC groups relative to other hospitals, we considered whether our standard analytical approach to use a combination of explanatory and payment regression models would lead to valid results for this particular study, or whether we should develop a different or modified analytic approach. We note that the analyses presented in the CY 2006 OPPS proposed and final rules were designed to establish an adjustment for a large class of rural hospitals. In contrast, section 3138 of the Affordable Care Act is specifically limited to identifying an adjustment for 11 cancer hospitals to the extent their costs with respect to APC groups exceeded those costs incurred by other hospitals furnishing services under section 1833(t) of the Act. With such a small sample size (11 out of approximately 4,000 hospitals paid under the OPPS), we were concerned that the standard explanatory and payment regression models used to establish the rural hospital adjustment would lead to imprecise estimates of payment adjustments for this small group of hospitals. Further, section 3138 of the Affordable Care Act specifies explicitly that cost comparisons between classes of hospitals must include the cost of drugs and biologicals. In our CY 2006 analysis of rural hospitals, we excluded the cost of drugs and biologicals in our model because the extreme units associated with proper billing for some drugs and biologicals can bias the calculation of a service mix index, or volume weighted average APC relative weight, for each hospital (70 FR 42698). Therefore, we chose not to pursue our standard combination of explanatory and payment regression modeling to determine a proposed cancer hospital adjustment.

As discussed in the CY 2011 OPPS/ASC proposed rule (75 FR 46235), while we chose not to use our standard models to calculate a proposed cancer hospital adjustment, we determined it still would be appropriate to construct our usual provider-level analytical dataset consisting of variables related to assessing costliness with respect to APC groups, including average cost per unit for a hospital and the hospital's average APC relative weight as an indicator of the hospital's resource intensity, as measured by the APC relative weights. We used these variables to calculate univariate statistics that describe the costliness with respect to APC groups and related aspects of cancer hospitals and other hospitals paid under the OPPS. While descriptive statistics cannot control for the myriad factors that contribute to observed costs, we believed that stark differences in cost between cancer hospitals and other hospitals paid under the OPPS that would be observable by examining descriptive univariate statistics would provide some indication of relative costliness. We began our analysis of the cancer hospitals by creating an analytical dataset of hospitals billing under the OPPS for CY 2009 (a total of 3,933) that were included in our claims dataset for establishing the CY 2011 OPPS proposed APC relative weights. This analytical dataset included the 3,933 OPPS hospitals' total estimated cost (including packaged cost), total lines, total discounted units as modeled for CY 2011 OPPS payment, and the average weight of their separately payable services (total APC weight divided by total units) as modeled for the CY 2011 OPPS. We then summarized estimated utilization and payment for each hospital (“hospital-level”). These files consist of hospital-level aggregate costs (including the cost of packaged items and services), total estimated discounted units under the modeled proposed CY 2011 OPPS, total estimated volume of number of occurrences of separately payable HCPCS codes under the modeled proposed CY 2011 OPPS, and total relative weight of separately payable services under the modeled proposed CY 2011 OPPS. After summarizing modeled payment to the hospital-level, we removed 48 hospitals in Puerto Rico from our dataset because we did not believe that their cost structure reflected the costs of most hospitals paid under the OPPS and because they could bias the calculation of hospital-weighted statistics. We then removed an additional 66 hospitals with a cost per unit of more than 3 standard deviations from the geometric mean (mean of the natural log) because including outliers in hospital-weighted descriptive statistics also could bias those statistics. This resulted in a dataset with 11 cancer hospitals and 3,808 other hospitals.

We included the following standard hospital-level variables that describe hospital costliness in our analysis file: outpatient cost per discounted unit Start Printed Page 42218under the modeled CY 2011 OPPS (substituting a cost per administration, rather than a cost per unit, for drugs and biologicals); each hospital's proposed CY 2011 wage index as a measure of relative labor cost; the service mix index, or volume-weighted average proposed CY 2011 APC relative weight (including a simulated weight for drugs and biologicals created by dividing the CY 2010 April ASP-based payment amount at ASP+6 percent appearing in Addendum A and B of the proposed rule by the proposed conversion factor of $68.267); outpatient volume based on number of occurrences of HCPCS codes in the CY 2009 claims data; and number of beds. We used these variables because they are key indicators of costliness with respect to APC groups under the modeled OPPS system, and they allowed us to assess the relative costliness of classes of hospitals under the proposed CY 2011 OPPS. A hospital's service mix index is a measure of resource intensity of the services provided by the hospital as measured by the proposed CY 2011 OPPS relative weights, and standardizing the cost per discounted unit by the service mix index creates an adjusted cost per unit estimate that reflects the remaining relative costliness of a hospital remaining after receiving the estimated payments that we proposed to make under the CY 2011 OPPS. In short, if a class of hospitals demonstrates higher cost per unit after standardization by service mix, it is an early indication that the class of hospitals may be significantly more costly in the regression models. We used these data to calculate the descriptive univariate statistics for cancer hospitals appearing in Table 12 below. We note that because drugs and biologicals are such a significant portion of the services that the cancer hospitals provide, and because section 3138 of the Affordable Care Act explicitly requires us to consider the cost of drugs and biologicals, we included the cost of these items in our total cost calculation for each hospital, counting each occurrence of a drug in the modeled proposed CY 2011 data (based on units in CY 2009 claims data). That is, we sought to treat each administration of a drug or biological as one unit.

In reviewing these descriptive statistics, we observed that cancer hospitals had a standardized cost per discounted unit of $150.12 compared to a standardized cost per discounted unit of $94.14 for all other hospitals. That is, cancer hospitals' average cost per discounted unit remained high even after accounting for payment under the modeled proposed CY 2011 payment system, which is not true for all other hospitals. Observing such differences in standardized cost per discounted unit led us to conclude that cancer hospitals are more costly with respect to APC groups than other hospitals furnishing services under the OPPS, even without the inferential statistical models that we typically employ.

Table 12—Means and Standard Deviations for Key Variables by Cancer and Non-Cancer OPPS Hospitals

VariableCancer hospitalsNon-cancer hospitals
MeanStandard deviationMeanStandard deviation
Outpatient Cost per Unit *$344.20(64.68)$264.11(165.86)
Unit Cost Standardized by Service Mix Wage Indices$150.12(31.64)$94.14(81.19)
Wage Index1.10(0.13)0.98(0.16)
Service Mix Index *2.19(0.26)3.18(2.25)
Outpatient Volume192,197(186,063)34,578(43,094)
Beds173(162.33)173(171.46)
Number of Hospitals113,808
* Includes drugs and biologicals based on per administration rather than per unit.

3. CY 2011 Proposed Payment Adjustment for Certain Cancer Hospitals

Having reviewed the cost data from the standard analytic database and determined that cancer hospitals are more costly with respect to APC groups than other hospitals furnishing services under the OPPS system, we decided to examine hospital cost report data from Worksheet E, Part B (where TOPs are calculated on the Hospital and Hospital Health Care Complex Cost Report each year) in order to determine whether our findings were further supported by cost report data and to determine an appropriate proposed payment adjustment methodology for CY 2011 based on cost report data. Analyses on our standard analytic database and descriptive statistics presented in Table 12 above did not consider TOPs in assessing costliness of cancer hospitals relative to other hospitals furnishing services under section 1833(t) of the Act. There were several reasons for this. One, TOPs have no associated relative weight that could be included in an assessment of APC-based payment. TOPs are paid at cost report settlement on an aggregate basis, not on a per service basis, and we would have no way to break these payments down into a relative weight to incorporate these retrospective aggregate payments in the form of a relative weight. In addition, section 3138 of the Affordable Care Act requires that any cancer adjustment be made within the budget neutral system, and TOPs are not part of the budget neutral payment system. The cost report data we selected for the analysis were limited to the OPPS-specific payment and cost data available on Worksheet E, Part B. These data include aggregate OPPS payments, including outlier payments and the cost of medical and other health services. These aggregate measures of cost and payment also include the cost and payment for drugs and biologicals and other adjustments that we typically include in our regression modeling, including wage index adjustment and rural adjustment, if applicable. While these cost report data cannot provide an estimate of cost per unit after controlling for other potential factors that could influence cost per unit, we used this aggregate cost and payment data to examine the cancer hospitals' OPPS PCR and OPPS PCR with TOPs, and compare these to the OPPS PCR for other hospitals. PCRs calculated from the most recent cost report data available at the time of the CY 2011 OPPS/ASC proposed rule also indicated that costs relative to payments at cancer hospitals were higher than those at other hospitals paid under the OPPS (that is, cancer hospitals have lower PCRs). In order to calculate PCRs for hospitals paid under the OPPS (including cancer hospitals), we used the same extract of cost report data from the Hospital Cost Report Information System (HCRIS) that we used to calculate the CCRs that were used to estimate median costs for the CY 2011 Start Printed Page 42219OPPS. We limited the dataset to the hospitals with CY 2009 claims data that we used to model the CY 2011 proposed APC relative weights.

We estimated that, on average, the OPPS payments to the 11 cancer hospitals, not including TOPs, were approximately 62 percent of reasonable cost (that is, we calculated a PCR of 0.615 for the cancer hospitals), whereas we estimated that, on average, the OPPS payments to other hospitals furnishing services under the OPPS were approximately 87 percent of reasonable cost (resulting in a PCR of 0.868). When TOPS were included in the calculation of the PCR, cancer hospitals, as a group, received payments that were approximately 83 percent of reasonable cost, which was still lower than the average PCR of other OPPS hospitals of approximately 87 percent of reasonable cost.

Based on our findings that cancer hospitals, as a class, have a significantly lower volume weighted average PCR than the volume weighted PCR of other hospitals furnishing services under the OPPS and our findings that the cancer hospitals cost per discounted unit standardized for service mix remains much higher than the standardized cost per discounted unit of all other hospitals, we proposed an adjustment for cancer hospitals to reflect these higher costs, effective January 1, 2011. For purposes of calculating a proposed adjustment, we chose to rely on this straightforward assessment of payments and costs from the cost report data because of the concerns outlined above with respect to the small number of hospitals, and because of the challenges associated with accurately including drug and biological costs in our standard regression models. We believed that an appropriate adjustment would redistribute enough payments from other hospitals furnishing services under the OPPS to the cancer hospitals to give cancer hospitals a PCR that was comparable to the average PCR for other hospitals furnishing services under the OPPS. Therefore, we proposed a hospital-specific payment adjustment determined as the percentage of additional payment needed to raise each cancer hospital's PCR to the weighted average PCR for other hospitals furnishing services under the OPPS (0.868) in the CY 2011 dataset. This would be accomplished by adjusting each cancer hospital's OPPS payment by the percentage difference between the hospital's individual PCR (without TOPs) and the weighted average PCR of the other hospitals furnishing services under the OPPS. This cancer hospital payment adjustment proposed for CY 2011 would have resulted in an estimated aggregate increase in OPPS payments to cancer hospitals of 41.2 percent and a net increase in total payments, including TOPs, of 5 percent for CY 2011.

4. Proposed CY 2011 Cancer Hospital Payment Adjustment That Was Not Finalized

The public comments associated with the cancer hospital adjustment that we proposed for CY 2011 are detailed in the CY 2011 OPPS/ASC final rule with comment period (75 FR 71886 through 71887). Many commenters urged CMS to consider TOPs when calculating the cancer hospital payment adjustment stating that the proposed methodology results, largely, in a change in the form of outpatient payments to cancer hospitals by shifting payment from hold harmless payment under the TOPs provision to APC payments. Noting that the majority of cancer care provided in the country is provided by the non-cancer hospitals that would experience a payment reduction under the CY 2011 proposal, commenters also suggested that the associated budget neutral payment reduction of 0.7 percent was not appropriate or equitable to other OPPS hospitals. Commenters also expressed concern that the proposed payment adjustment would increase beneficiary copayments. That is, they believed that the proposed cancer hospital adjustment would increase APC payments and, because beneficiary copayment is a percentage of the APC payment, Medicare beneficiaries seeking services at the 11 designated cancer hospitals would experience higher copayments due to the proposed methodology. These commenters strongly encouraged CMS to implement the adjustment in a way that does not increase beneficiary copayments. These commenters also indicated that CMS should have taken into account the concentration of outpatient services at the designated cancer hospitals, as compared to other OPPS hospitals, and adjust the PCR benchmark higher. The commenters argued that other PPS hospitals have the ability to improve their Medicare margins through other payment systems, but that cancer hospitals receive the majority of their Medicare payments through the OPPS. One commenter suggested that the CMS analysis was inadequate to conclude that costs are higher in cancer hospitals and that an adjustment is warranted. As indicated in the CY 2011 OPPS/ASC final rule with comment period (75 FR 71887), because the many public comments we received identified a broad range of very important issues and concerns associated with the proposed cancer hospital payment adjustment, we determined that further study and deliberation was necessary and, therefore, we did not finalize the CY 2011 proposed payment adjustment for certain cancer hospitals.

5. Proposed Payment Adjustment for Certain Cancer Hospitals for CY 2012

During our deliberations that occurred subsequent to the CY 2011 OPPS/ASC final rule, we reconfirmed that TOPs could not be included when establishing the PCR target given the current statutory language in section 1833(t)(18) of the Act that was to capture costliness with respect to APC groups. Specifically, section 1833(t)(18)(A) of the Act requires the Secretary to determine if, under the OPPS, costs incurred by cancer hospitals with respect to APC groups exceed those costs incurred by other hospitals furnishing services under the OPPS. As discussed in the CY 2011 OPPS/ASC proposed rule and final rule with comment period, TOPs payments are not paid on a service specific basis, and we have no way to break these payments down into a relative weight that could be included in an assessment of an APC-based payment. Because section 1833(t)(18)(A) of the Act ties the assessment of the costs incurred by the 11 cancer hospitals to APC groups, we cannot include TOPs, which are not tied to APC groups, in such assessment. In addition, section 1833(t)(7)(D)(ii) of the Act (the hold harmless provision for cancer hospitals) provides that this adjustment is applied for covered OPD services for which the “PPS amount” is less than the “pre-BBA” amount. The “PPS amount” means, with respect to covered OPD services, “the amount payable under this title [Title 18] for such services (determined without regard to this paragraph) * * *” (See section 1833(t)(7)(E) of the Act). Under this provision, the cancer adjustment must be included in the calculation of the “PPS amount” because it is an integral component of “the amount payable under this title.” Further, we note that the Affordable Care Act requires that any cancer hospital payment adjustment be made within the budget neutral system. We note that TOPs are not part of the budget neutral payment system.

In addition, we have revisited the issue of whether payments associated with the cancer hospital payment adjustment can be excluded from the amount of payment on which the copayment amount is determined. We continue to believe that the statute requires such payment to be included in Start Printed Page 42220the amount of payment upon which the copayment amount is determined. Specifically, section 1833(t)(8) of the Act sets forth the methodology for calculating the copayment amount under section 1833(t). Section 1833(t)(8)(A) of the Act states the following: “Except as provided in subparagraphs (B) and (C), the copayment amount under this subsection is the amount by which the amount described in paragraph (4)(B) exceeds the amount of payment determined under paragraph (4)(C).” We note that the amount in paragraph (4)(B) incorporates the amount calculated under subparagraph (A) of section 1833(t)(4) of the Act which provides that the “Medicare OPD fee schedule amount (computed under paragraph (3)(D)) for the service or group and year is adjusted for relative differences in the cost of labor and other factors determined by the Secretary, as computed under paragraphs (2)(D) and (2)(E).” The reference to “factors computed under paragraphs* * * (2)(E)” includes a cancer hospital payment adjustment because it is required to be provided under paragraph (2)(E). Therefore, the statute is clear that the cancer hospital payment adjustment is a component of the payment amount upon which the beneficiary copayment is determined.

Finally, though commenters suggested that CMS take into account the cancer hospitals' significant Medicare outpatient concentration relative to that of other OPPS hospitals when establishing an appropriate PCR benchmark, we believe it is inappropriate to incorporate the payments associated with other Medicare payment systems when determining a payment adjustment under the OPPS.

After a thorough review and deliberation of the issues associated with the cancer hospital payment adjustment proposed for CY 2011, we continue to believe a straightforward and appropriate method to adjust payments of cancer hospitals described in section 1886(d)(1)(B)(v) of the Act in order to reflect their higher costs with respect to APC groups is to propose to redistribute enough payments from other hospitals furnishing services under the OPPS to the cancer hospitals to give each cancer hospital a PCR that is comparable to the weighted average PCR for other hospitals furnishing services under section 1833(t) of the Act. Therefore, as explained in more detail below, for services furnished on and after January 1, 2012, we are proposing that, for a cancer hospital with an individual PCR (as determined by the Secretary) below the weighted average PCR for other hospitals furnishing services under section 1833(t) of the Act (as determined by the Secretary) (Target PCR), we would make a hospital-specific payment adjustment by adjusting the wage-adjusted OPPS payment for covered OPD services (except for devices receiving pass-through status as defined in 42 CFR 419.66) by the percent difference between the hospital's individual PCR and the weighted average PCR of other hospitals furnishing services under section 1833(t) of the Act in the CY 2012 dataset. With respect to such hospitals, for devices receiving pass-through status as defined in 42 CFR 419.66 which are furnished on and after January 1, 2012, we are proposing a zero percent adjustment. For a cancer hospital with an individual PCR (as determined by the Secretary) above the weighted average PCR for other hospitals furnishing services under section 1833(t) of the Act (as determined by the Secretary), we are proposing a zero percent adjustment for covered hospital outpatient services furnished on and after January 1, 2012.

In order to calculate PCRs for hospitals furnishing services under the OPPS (including cancer hospitals) for the proposed CY 2012 cancer hospital payment adjustment, we used the same extract of cost report data from HCRIS, as discussed in section II.A of this proposed rule, used to estimate median costs for the proposed CY 2012 OPPS. Using these cost report data, we included data from Worksheet E, Part B, for each hospital, using data from each hospital's most recent cost report, whether as submitted or settled. We then limited the data set to the hospitals with CY 2010 claims data that we use to model the impact of the CY 2012 proposed APC relative weights (4,009 hospitals) because it is appropriate to use the same set of hospitals that we are using to calibrate the modeled proposed CY 2012 OPPS. The cancer hospitals in this dataset largely had cost report data from cost reporting periods ending in FY 2009 and FY 2010. The cost report data for the other hospitals were from cost report periods with fiscal year ends ranging from 2008 to 2010. We then removed the cost report data for 47 hospitals from Puerto Rico from our data set because we do not believe that their cost structure reflects the costs of most hospitals paid under the OPPS and therefore their inclusion may bias the calculation of hospital-weighted statistics. We also removed 206 hospitals with cost report data that were not complete (missing OPPS payments, including outliers, missing aggregate cost data, or both), so that all cost reports in the study would have both the payment and cost data necessary to calculate a PCR for each hospital, leading to a final analytic file of 3,756 hospitals with cost report data. We believe that the costs and PPS payments reported on Worksheet E, Part B, for the hospitals included in our CY 2012 modeling should be sufficiently accurate for assessing the hospital's relative costliness because all of the key elements that we believe are necessary for the analysis (payment and cost) are contained on this worksheet.

Using this smaller dataset of cost report data, we estimate that, on average, the OPPS payments to the 11 cancer hospitals, not including TOPs, are approximately 65 percent of reasonable cost (that is, we calculated a PCR of 0.647 for the cancer hospitals), whereas, we estimate that, on average, the OPPS payments to other hospitals furnishing services under the OPPS are approximately 90 percent of reasonable cost (resulting in a PCR of 0.901). Individual cancer hospitals' OPPS PCRs range from approximately 0.56 to approximately 0.82.

As indicated above, we are proposing that, for a cancer hospital with an individual PCR below the weighted average PCR for other hospitals furnishing services under the OPPS in the CY 2012 dataset, we would make a hospital-specific payment adjustment by adjusting the wage-adjusted OPPS payment for covered OPD services (except devices receiving pass-through status because these items and services are always paid at the estimated full cost and, therefore, no payment adjustment is necessary) furnished on and after January 1, 2012, by the percent difference between the hospital's individual PCR and the weighted average PCR of other hospitals furnishing services under the OPPS in the CY 2012 dataset. This proposed methodology would result in the proposed percentage payment adjustments for the 11 cancer hospitals appearing in Table 13 below. In addition, we note that we are proposing to amend 42 CFR 419.43 by adding a new paragraph (i). Proposed new paragraph (i)(1) would specify that CMS provides for a payment adjustment for covered hospital outpatient services furnished on or after January 1, 2012, by cancer hospitals described in section 1886(d)(1)(B)(v) of the Act. Proposed new paragraph (i)(2) would specify how the amount of the payment adjustment to cancer hospitals is established. Proposed new paragraph (i)(3) would specify that this payment adjustment would be budget neutral, consistent Start Printed Page 42221with section 1833(t)(18)(B) of the Act. Proposed new paragraph (i)(4) would specify the services or groups that are excluded from qualifying for the cancer hospital payment adjustment. In the event that a cancer hospital has a PCR that is higher than the weighted average PCR for other OPPS hospitals furnishing services under the OPPS, we are proposing that the specific hospital would receive a zero percent adjustment. We believe that this would indicate that the cancer hospital's costs do not exceed the costs incurred by other hospitals furnishing services under the OPPS and, therefore, a payment adjustment above zero percent would not be necessary.

We note that the proposed payment adjustment for all cancer hospitals would result in an estimated aggregate increase in OPPS payments to cancer hospitals of 39 percent for CY 2012 and an estimated net increase in total payments, including TOPs, of 9 percent, based on cost report data. The dataset of hospital cost report data that we used to model this proposed payment adjustment for cancer hospitals is available under supporting documentation for this proposed rule on the CMS Web site at: http://www.cms.gov/​HospitalOutpatientPPS/​HORD/​.

Table 13—Proposed CY 2012 Hospital-Specific Payment Adjustment for Cancer Hospitals Without Regard to TOPS and Outlier Payments

Provider numberHospital namePercent increase without TOPs or outlier payment
050146City of Hope Helford Clinical Research Hospital10.1
050660USC Kenneth Norris Jr. Cancer Hospital15.7
100079University of Miami Hospital & Clinic27.6
100271H. Lee Moffitt Cancer Center & Research Institute21.6
220162Dana-Farber Cancer Institute54.4
330154Memorial Hospital for Cancer and Allied Diseases39.4
330354Roswell Park Cancer Institute24.3
360242James Cancer Hospital & Solove Research Institute30.1
390196Hospital of the Fox Chase Cancer Center15.3
450076University of Texas M. D. Anderson Cancer Center61.8
500138Seattle Cancer Care Alliance43.7
Proposed Aggregate Payment Adjustment39.3

Because section 7101 of the Affordable Care Act expanded the 340B drug program to include certain cancer hospitals, we believe that the PCRs and any cancer hospital payment adjustment should be recalculated annually. The 340B drug program allows certain hospitals to purchase certain outpatient drugs at reduced prices. The Affordable Care Act provision was effective for drugs purchased on or after January 1, 2010. Inclusion of cancer hospitals in the 340B drug program should lower drug costs at these cancer hospitals going forward and, therefore, may cause significant changes in each cancer hospital's PCR compared to the previous year's calculation. Therefore, we are proposing to recalculate the PCR of each cancer hospital and the weighted average PCR of the other hospitals furnishing services under 1833(t) on an annual basis in order to determine an appropriate hospital specific payment adjustment to cancer hospitals each year.

We note that the changes made by section 3138 of the Affordable Care Act do not affect the existing statutory provisions that provide for outlier payment for all hospitals paid under the OPPS, including cancer hospitals and TOPs for cancer hospitals. Because outlier payments are made within budget neutrality, outlier payments are assessed after all budget neutral payments for an individual service have been made, including the cancer hospital payment adjustment. The TOPs are assessed after all payments have been made for a cost reporting period. Further, both outlier payments and TOPs serve as a safety net for hospitals, although outliers are budget neutral and TOPs are not, and TOPs are limited to certain hospitals. Outliers and TOPs are assessed after final payments have been made. If this proposed payment adjustment is finalized, we estimate that there would be no cancer hospitals that would continue to receive TOPs. We are proposing to update the hospital-specific cancer hospital payment adjustments in Table 13 using the more recent cost reports that will become available for the CY 2012 OPPS/ASC final rule with comment period.

G. Proposed Hospital Outpatient Outlier Payments

1. Background

Currently, the OPPS pays outlier payments on a service-by-service basis. For CY 2011, 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 $2,025 fixed-dollar threshold. We introduced a fixed-dollar threshold in CY 2005, in addition to the traditional multiple threshold, in order to better target 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. Our current estimate of total outlier payments as a percent of total CY 2010 OPPS payment, using available CY 2010 claims and the revised OPPS expenditure estimate for the Presidential Budget for FY 2012, is Start Printed Page 42222approximately 1.11 percent of the total aggregated OPPS payments. Therefore, for CY 2010, we estimate that we paid at 0.11 percent above the CY 2010 outlier target of 1.0 percent of total aggregated OPPS payments.

As explained in the CY 2011 OPPS/ASC final rule with comment period (75 FR 71887 through 71889), we set our projected target for aggregate outlier payments at 1.0 percent of the estimated aggregate total payments under the OPPS for CY 2011. The outlier thresholds were set so that estimated CY 2011 aggregate outlier payments would equal 1.0 percent of the total estimated aggregate payments under the OPPS. Using CY 2010 claims data and CY 2011 payment rates, we currently estimate that the aggregate outlier payments for CY 2011 would be approximately 1.06 percent of the total CY 2011 OPPS payments. The difference between 1.0 percent and 1.06 percent is reflected in the regulatory impact analysis in section XX. of this proposed rule. We note that we provide estimated CY 2012 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

We are proposing for CY 2012 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 0.14 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 VIII.C. of this proposed rule, for CMHCs, we are proposing to continue our longstanding policy that if a CMHC's cost for partial hospitalization services, paid under either APC 0172 (Level I Partial Hospitalization (3 services) for CMHCs) or APC 0173 (Level II Partial Hospitalization (4 or more services) for CMHCs), exceeds 3.40 times the payment for APC 0173, the outlier payment would be calculated as 50 percent of the amount by which the cost exceeds 3.40 times the APC 0173 payment rate. For further discussion of CMHC outlier payments, we refer readers to section VIII.C. of this proposed rule.

To ensure that the estimated CY 2012 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 $2,100 fixed-dollar threshold. This proposed threshold reflects the methodology discussed below in this section, as well as the proposed APC recalibration for CY 2012.

We calculated the proposed fixed-dollar threshold for this proposed rule using largely the same methodology as we did in CY 2011 (75 FR 71887 through 71889). For purposes of estimating outlier payments for the proposed rule, we used the hospital-specific overall ancillary CCRs available in the April 2011 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 2010 claims to model the CY 2012 OPPS. In order to estimate the proposed CY 2012 hospital outlier payments for this proposed rule, we inflated the charges on the CY 2010 claims using the same inflation factor of 1.0908 that we used to estimate the IPPS fixed-dollar outlier threshold for the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 26024). We used an inflation factor of 1.0444 to estimate CY 2011 charges from the CY 2010 charges reported on CY 2010 claims. The methodology for determining this charge inflation factor is discussed in the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 26024). As we stated in the CY 2005 OPPS final rule with comment period (69 FR 65845), we believe that the use of these charge inflation factors are appropriate for the OPPS because, with the exception of the inpatient routine service cost centers, hospitals use the same ancillary and outpatient cost centers to capture costs and charges for inpatient and outpatient services.

As noted in the CY 2007 OPPS/ASC final rule with comment period (71 FR 68011), we are concerned that we could systematically overestimate the OPPS hospital outlier threshold if we did not apply a CCR inflation adjustment factor. Therefore, we are proposing to apply the same CCR inflation adjustment factor that we are proposing to apply for the FY 2012 IPPS outlier calculation to the CCRs used to simulate the proposed CY 2012 OPPS outlier payments that determine the fixed-dollar threshold. Specifically, for CY 2012, we are proposing to apply an adjustment of 0.9850 to the CCRs that were in the April 2011 OPSF to trend them forward from CY 2011 to CY 2012. The methodology for calculating this proposed adjustment is discussed in the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 26024 through 26025).

Therefore, to model hospital outlier payments for this CY 2012 OPPS/ASC proposed rule, we applied the overall CCRs from the April 2011 OPSF file after adjustment (using the proposed CCR inflation adjustment factor of 0.9850 to approximate CY 2012 CCRs) to charges on CY 2010 claims that were adjusted (using the proposed charge inflation factor of 1.0908 to approximate CY 2012 charges). We simulated aggregated CY 2012 hospital outlier payments using these costs for several different fixed-dollar thresholds, holding the 1.75 multiple threshold constant and assuming that outlier payments would continue to be made at 50 percent of the amount by which the cost of furnishing the service would exceed 1.75 times the APC payment amount, until the total outlier payments equaled 1.0 percent of aggregated estimated total CY 2012 OPPS payments. We estimate that a proposed fixed-dollar threshold of $2,100, 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 threshold of $2,100 are met. For CMHCs, we are proposing that, 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 Start Printed Page 42223reduced national unadjusted payment rates that will apply to certain outpatient items and services furnished by hospitals that are required to report outpatient quality data and that fail to meet the Hospital OQR requirements. For hospitals that fail to meet the Hospital OQR requirements, we are proposing to continue our policy that we implemented in CY 2010 that the hospitals' costs would be compared to the reduced payments for purposes of outlier eligibility and payment calculation. For more information on the Hospital OQR Program, we refer readers to section XIV. 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 more fully ensures accurate outlier payments for those facilities that have CCRs that fluctuate significantly relative to the CCRs of other facilities, and that receive a significant amount of outlier payments (73 FR 68598). As under the IPPS, we do not adjust the fixed-dollar threshold or the amount of total OPPS payments set aside for outlier payments for reconciliation activity because such action would be contrary to the prospective nature of the system. Our proposed outlier threshold calculation assumes that overall ancillary CCRs accurately estimate hospital costs based on the information available to us at the time we set the prospective fixed-dollar outlier threshold. For these reasons, as we have previously discussed in the CY 2009 OPPS/ASC final rule with comment period (73 FR 68596), we are not proposing to incorporate any assumptions about the effects of reconciliation into our calculation of the OPPS fixed-dollar outlier threshold.

H. 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. For this proposed rule, the payment rate for most services and procedures for which payment is made under the OPPS is the product of the proposed conversion factor calculated in accordance with section II.B. of this proposed rule and the proposed 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 (which is referenced in section XVII. of this proposed rule and available via the Internet on the CMS Web site) and for most HCPCS codes to which separate payment under the OPPS has been assigned in Addendum B to this proposed rule (which is referenced in section XVII. of this proposed rule and available via the Internet on the CMS Web site) was calculated by multiplying the proposed CY 2012 scaled weight for the APC by the proposed CY 2012 conversion factor.

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

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

Individual providers interested in calculating the payment amount that they would receive for a specific service from the national unadjusted payment rates presented in Addenda A and B to this proposed rule (which are referenced in section XVII. of this proposed rule and available via the Internet on the CMS Web site) should follow the formulas presented in the following steps. For purposes of the payment calculations below, we refer to the proposed national unadjusted payment rate for hospitals that meet the requirements of the Hospital OQR Program as the “full” national unadjusted payment rate. We refer to the national unadjusted payment rate for hospitals that fail to meet the requirements of the Hospital OQR Program as the “reduced” national unadjusted payment rate. The reduced national unadjusted payment rate is calculated by multiplying the reporting ratio of 0.980 times the “full” national unadjusted payment rate. The national unadjusted payment rate used in the calculations below is either the full national unadjusted payment rate or the reduced national unadjusted payment rate, depending on whether the hospital met its Hospital OQR Program requirements in order to receive the full CY 2012 OPPS fee schedule increase factor of 1.50 percent.

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 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) Start Printed Page 42224to which hospitals are assigned for FY 2012 under the IPPS, reclassifications through the MGCRB, section 1886(d)(8)(B) “Lugar” hospitals, reclassifications under section 1886(d)(8)(E) of the Act, as defined in § 412.103 of the regulations, and hospitals designated as urban under section 601(g) of Public Law 98-21. We note that the reclassifications of hospitals under section 508 of Public Law 108-173, as extended by sections 3137 and 10317 of the Affordable Care Act, expired on September 30, 2010. Section 102 of the Medicare and Medicaid Extenders Act of 2010 extends Section 508 and certain additional special exception hospital reclassifications from October 1, 2010 through September 30, 2011. Therefore, these reclassifications will not apply to the CY 2012 OPPS. (For further discussion of the changes to the FY 2012 IPPS wage indices, as applied to the CY 2012 OPPS, we refer readers to section II.C. of this proposed rule.) We are proposing to continue applying a wage index floor of 1.00 to frontier states, in accordance with section 10324 of the Affordable Care Act.

Step 3. Adjust the wage index of hospitals located in certain qualifying counties that have a relatively high percentage of hospital employees who reside in the county, but who work in a different county with a higher wage index, in accordance with section 505 of Public Law 108-173. Addendum L to this proposed rule (which is referenced in section XVII. of this proposed rule and available via the Internet on the CMS Web site) contains the qualifying counties and the associated proposed wage index increase developed for the FY 2012 IPPS and listed as Table 4J in the FY 2012 IPPS/LTCH PPS proposed rule and available via the Internet on the CMS Web site at: http://www.cms.hhs.gov/​AcuteInpatientPPS/​01_​overview.asp. This step is to be followed only if the hospital is not reclassified or redesignated under section 1886(d)(8) or section 1886(d)(10) of the Act.

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

The formula below is a mathematical representation of Step 4 and adjusts the labor-related portion of the national 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 proposed 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 Hospital OQR Program requirements, using the steps outlined above. For purposes of this example, we use a provider that is located in Brooklyn, New York that is assigned to CBSA 35644. This provider bills one service that is assigned to APC 0019 (Level I Excision/Biopsy). The proposed CY 2012 full national unadjusted payment rate for APC 0019 is $338.51. The proposed reduced national unadjusted payment rate for a hospital that fails to meet the Hospital OQR Program requirements is $331.74. This reduced rate is calculated by multiplying the reporting ratio of 0.980 by the full unadjusted payment rate for APC 0019.

The proposed FY 2012 wage index for a provider located in CBSA 35644 in New York is 1.3190. The proposed labor-related portion of the full national unadjusted payment is $267.90 (.60 * $338.51 *1.3190). The proposed labor-related portion of the reduced national unadjusted payment is $262.54 (.60 * $331.74 * 1.3190). The proposed nonlabor-related portion of the full national unadjusted payment is $135.40 (.40 * $338.51). The proposed nonlabor-related portion of the reduced national unadjusted payment is $132.70 (.40 * $331.74). The sum of the labor-related and nonlabor-related portions of the full national adjusted payment is $403.30 ($267.90 + $135.40). The sum of the reduced national adjusted payment is $395.24 ($262.54 + $132.70).

I. 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. However, section 1833(t)(8)(C)(i) of the Act limits the amount of beneficiary copayment that may be collected to the amount of the inpatient deductible. Section 4104 of the Affordable Care Act eliminated the Part B coinsurance for preventive services furnished on and after January 1, 2011 that meet certain requirements, including flexible sigmoidoscopies and screening colonscopies, and waived the Part B deductible for screening colonoscopies that become diagnostic during the procedure. Our discussion of the changes made by the Affordable Care Act with regard to copayments for preventive services furnished on and after January 1, 2011 may be found in section XII.B. of the CY 2011 OPPS final rule (75 FR 72013).

2. Proposed OPPS Copayment Policy

For CY 2012, 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 Start Printed Page 42225addition, 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 proposed national unadjusted copayment amounts for services payable under the OPPS that would be effective January 1, 2012, are shown in Addenda A and B to this proposed rule (which are referenced in section XVII. of this proposed rule and available via the Internet on the CMS Web site). As discussed in section XIV.E. of this proposed rule, for CY 2012, the proposed Medicare beneficiary's minimum unadjusted copayment and national unadjusted copayment for a service to which a reduced national unadjusted payment rate applies would equal the product of the reporting ratio and the national unadjusted copayment, or the product of the reporting ratio and the minimum unadjusted copayment, respectively, for the service.

3. 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 Hospital OQR Program requirements should follow the formulas presented in the following steps.

Step 1. Calculate the beneficiary payment percentage for the APC by dividing the APC's national unadjusted copayment by its payment rate. For example, using APC 0019, $67.71 is 20 percent of the full national unadjusted payment rate of $338.51. For APCs with only a minimum unadjusted copayment in Addenda A and B of this proposed rule (which are referenced in section XVII. of this proposed rule and available via the Internet on the CMS Web site), the beneficiary payment percentage is 20 percent.

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

B is the beneficiary payment percentage.

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

Step 2. Calculate the appropriate wage-adjusted payment rate for the APC for the provider in question, as indicated in Steps 2 through 4 under section II.H. of this proposed rule. Calculate the rural adjustment for eligible providers as indicated in Step 6 under section II.H. 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.H. 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 Hospital OQR Program requirements, multiply the copayment calculated in Step 3 by the reporting ratio of 0.980.

The proposed unadjusted copayments for services payable under the OPPS that would be effective January 1, 2012, are shown in Addenda A and B to this proposed rule (which are referenced in section XVII. of this proposed rule and available via the Internet on the CMS Web site). We note that the proposed national unadjusted payment rates and copayment rates shown in Addenda A and B to this proposed rule reflect the proposed full CY 2012 OPD fee schedule increase factor discussed in section XIV.E. of this proposed rule.

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

III. 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 American Medical Association (AMA) and the Level II HCPCS codes are established by the CMS HCPCS Workgroup. These codes are updated and changed throughout the year. CPT and HCPCS code changes that affect the OPPS are published both through the annual rulemaking cycle and through the OPPS quarterly update Change Requests (CRs). CMS releases new Level II HCPCS codes to the public or recognizes the release of new CPT codes by the AMA and makes these codes effective (that is, the codes can be reported on Medicare claims) outside of the formal rulemaking process via OPPS quarterly update CRs. This quarterly process offers hospitals access to codes that may more accurately describe items or services furnished and/or provides payment or more accurate payment for these items or services in a timelier manner than if CMS waited for the annual rulemaking process. We solicit comments on these new codes and finalize our proposals related to these codes through our annual rulemaking process. In Table 14 below, we summarize our proposed process for updating codes through our OPPS quarterly update CRs, seeking public comments, and finalizing their treatment under the OPPS. We note that because of the timing of the publication of this proposed rule, the codes that will be implemented through the July 2011 OPPS quarterly update are not included in Addendum B of this proposed rule (which is referenced in section XVII. of this proposed rule and available via the Internet on the CMS Web site), while those codes based upon the April 2011 OPPS quarterly update are included in Addendum B.Start Printed Page 42226

Table 14—Comment Timeframe for New or Revised HCPCS Codes

OPPS quarterly update CRType of codeEffective dateComments soughtWhen finalized
April l, 2011Level II HCPCS CodesApril 1, 2011CY 2012 OPPS/ASC proposed ruleCY 2012 OPPS/ASC final rule with comment period.
July 1, 2011Level II HCPCS CodesJuly 1, 2011CY 2012 OPPS/ASC proposed ruleCY 2012 OPPS/ASC final rule with comment period.
Category I (certain vaccine codes) and III CPT codesJuly 1, 2011CY 2012 OPPS/ASC proposed ruleCY 2012 OPPS/ASC final rule with comment period.
October 1, 2011Level II HCPCS CodesOctober 1, 2011CY 2012 OPPS/ASC final rule with comment periodCY 2013 OPPS/ASC final rule with comment period.
January 1, 2012Level II HCPCS CodesJanuary 1, 2012CY 2012 OPPS/ASC final rule with comment periodCY 2013 OPPS/ASC final rule with comment period.
Category I and III CPT CodesJanuary 1, 2012CY 2012 OPPS/ASC final rule with comment periodCY 2013 OPPS/ASC final rule with comment period.

This process is discussed in detail below. We have separated our discussion into two sections based on whether we are proposing to solicit public comments in this CY 2012 OPPS/ASC proposed rule or whether we will be soliciting public comments in the CY 2012 OPPS/ASC final rule with comment period. We note that we sought public comment in the CY 2011 OPPS/ASC final rule with comment period on the new CPT and Level II HCPCS codes that were effective January 1, 2011. We also sought public comments in the CY 2011 OPPS/ASC final rule with comment period on the new Level II HCPCS codes effective October 1, 2010. These new codes, with an effective date of October 1, 2010, or January 1, 2011, 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 2011 OPPS/ASC final rule with comment period to indicate that we were assigning them an interim payment status and an APC and payment rate, if applicable, which were subject to public comment following publication of the CY 2011 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 2012 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 CY 2012 Proposed Rule

Through the April 2011 OPPS quarterly update CR (Transmittal 2174, Change Request 7342, dated March 18, 2011) and the July 2011 OPPS quarterly update CR (Transmittal 2234, Change Request 7443, dated May 27, 2011), we recognized several new HCPCS codes for separate payment under the OPPS. Effective April 1 and July 1 of CY 2011, we made effective a total of 22 new Level II HCPCS codes and 14 Category III CPT codes. Specifically, 5 new Level II HCPCS codes were effective for the April 2011 update and another 17 new Level II HCPCS codes were effective for the July 2011 update for a total of 22. Fourteen new Category III CPT codes were effective for the July 2011 update. Of the 22 new Level II HCPCS codes, we recognized for separate payment 16 of these codes, and of the 14 new Category III CPT codes, we recognized for separate payment 12 of these codes, for a total of 28 new HCPCS codes that are recognized for separate payment for CY 2012.

Through the April 2011 OPPS quarterly update CR, we allowed separate payment for each of the five new Level II HCPCS codes. Specifically, as displayed in Table 15 below, we provided separate payment for the following HCPCS codes:

  • HCPCS code C9280 (Injection, eribulin mesylate, 1 mg)
  • HCPCS code C9281 (Injection, pegloticase, 1 mg)
  • HCPCS code C9282 (Injection, ceftaroline fosamil, 10 mg)
  • HCPCS code Q2040 (Injection, incobotulinumtoxin A, 1 unit)
  • HCPCS code C9729 (Percutaneous laminotomy/laminectomy (intralaminar approach) for decompression of neural elements, (with ligamentous resection, discectomy, facetectomy and/or foraminotomy, when performed) any method under indirect image guidance, with the use of an endoscope when performed, single or multiple levels, unilateral or bilateral; lumbar)

We note that HCPCS code Q2040 replaced HCPCS code C9278 (Injection, incobotulinumtoxin A, 1 unit) beginning April 1, 2010. HCPCS code C9278 was effective January 1, 2011, and deleted March 30, 2011, because it was replaced with HCPCS code Q2040. HCPCS code C9278 was assigned to pass-through status beginning January 1, 2011, when the code was implemented. Because HCPCS code Q2040 describes the same drug as HCPCS code C9278, we are continuing its pass-through status and assigning the HCPCS Q-code to the same APC and status indicator as its predecessor HCPCS C-code, as shown in Table 15 below. Specifically, HCPCS code Q2040 is assigned to APC 9278 and status indicator “G.”

We are proposing to assign the Level II HCPCS codes listed in Table 15 to the specific proposed APCs and status indicators set forth in this proposed rule.

Table 15—LEVEL II HCPCS Codes With a Change in OPPS Status Indicator or Newly Implemented in April 2011

CY 2011 HCPCS codeCY 2011 long descriptorProposed CY 2012 status indicatorProposed CY 2012 APC
C9280Injection, eribulin mesylate, 1 mgG9280
Start Printed Page 42227
C9281Injection, pegloticase, 1 mgG9281
C9282Injection, ceftaroline fosamil, 10 mgG9282
C9729Percutaneous laminotomy/laminectomy (intralaminar approach) for decompression of neural elements, (with ligamentous resection, discectomy, facetectomy and/or foraminotomy, when performed) any method under indirect image guidance, with the use of an endoscope when performed, single or multiple levels, unilateral or bilateral; lumbarT0208
Q2040*Injection, incobotulinumtoxin A, 1 unitG9278
*Level II HCPCS code C9278 was deleted March 31, 2011, and replaced with HCPCS code Q2040 effective April 1, 2011.

Through the July 2011 OPPS quarterly update CR, which included HCPCS codes that were made effective July 1, 2011, we allowed separate payment for 11 of the 17 new Level II HCPCS codes. Specifically, as displayed in Table 16 of this proposed rule, we provided separate payment for the following HCPCS codes:

  • HCPCS code C9283 (Injection, acetaminophen, 10 mg)
  • HCPCS code C9284 (Injection, ipilimumab, 10 mg)
  • HCPCS code C9285 (Lidocaine 70 mg/tetracaine 70 mg, per patch)
  • HCPCS code C9365 (Oasis Ultra Tri-Layer matrix, per square centimeter)
  • HCPCS code C9406 (Iodine I-123 ioflupane, diagnostic, per study dose, up to 5 millicuries)
  • HCPCS code C9730 (Bronchoscopic bronchial thermoplasty with imaging guidance (if performed), radiofrequency ablation of airway smooth muscle, 1 lobe)
  • HCPCS code C9731 (Bronchoscopic bronchial thermoplasty with imaging guidance (if performed), radiofrequency ablation of airway smooth muscle, 2 or more lobes)
  • HCPCS code Q2041 (Injection, von willebrand factor complex (human), Wilate, 1 i.u. vwf:rco)
  • HCPCS code Q2042 (Injection, hydroxyprogesterone caproate, 1 mg)
  • HCPCS code Q2043 (Sipuleucel-t, minimum of 50 million autologous cd54+ cells activated with pap-gm-csf, including leukapheresis and all other preparatory procedures, per infusion)
  • HCPCS code Q2044 (Injection, belimumab, 10 mg)

We note that two of the Level II HCPCS Q-codes that were made effective July 1, 2011, were previously described by a HCPCS J-code and a C-code that were assigned to pass-through status under the hospital OPPS. Specifically, HCPCS code Q2041 replaced HCPCS code J7184 (Injection, von willebrand factor complex (human), Wilate, per 100 iu vwf:rco) beginning July 1, 2011. HCPCS code J7184 was assigned to pass-through status when it was made effective January 1, 2011; however, the code is “Not Payable by Medicare” because HCPCS code J7184 is replaced with HCPCS code Q2041 effective July 1, 2011. Therefore, HCPCS code J7184 was reassigned to status indicator “E” effective July 1, 2011. Because HCPCS code J7184 describes the same drug as HCPCS code Q2041, we continued its pass-through status and assigned HCPCS code Q2041 to status indicator “G” effective July 1, 2011. However, because the dosage descriptor for HCPCS code Q2041 is not the same as HCPCS code J7184, we reassigned HCPCS code Q2041 to a new APC to maintain data consistency for future rulemaking. Specifically, HCPCS code Q2041 was assigned to APC 1352 effective July 1, 2011. In addition, HCPCS code Q2043 replaced HCPCS code C9273 (Sipuleucel-t, minimum of 50 million autologous cd54+ cells activated with pap-gm-csf, including leukapheresis and all other preparatory procedures, per infusion) beginning July 1, 2011. HCPCS code C9273 was assigned to pass-through status when it was made effective October 1, 2010. Because HCPCS code Q2043 describes the same product as HCPCS code C9273, we continued its pass-through status and assigned HCPCS code Q2043 to status indicator “G” as well as assigned it to the same APC, specifically APC 9273, effective July 1, 2011.

Of the 17 HCPCS codes that were made effective July 1, 2011, we did not recognize for separate payment 6 HCPCS codes that describe durable medical equipment (DME) because DME is paid under the Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS) Fee Schedule and not the OPPS. These codes are listed in Table 16 below, and are assigned to either status indicator “Y” or “A” effective July 1, 2011.

Table 16 below includes a complete list of the Level II HCPCS codes that were made effective July 1, 2011, with their proposed status indicators, APC assignments, and payment rates for CY 2012.

TABLE 16—New Level II HCPCS Codes Implemented in July 2011

CY 2011 HCPCS codeCY 2011 long descriptorProposed CY 2012 status indicatorProposed CY 2012 APCProposed CY 2012 payment rate
C9283Injection, acetaminophen, 10 mgG9283$0.11
C9284Injection, ipilimumab, 1 mgG9284127.20
C9285Lidocaine 70 mg/tetracaine 70 mg, per patchG928513.57
C9365Oasis Ultra Tri-Layer matrix, per square centimeterG936510.60
C9406Iodine I-123 ioflupane, diagnostic, per study dose, up to 5 millicuriesG94061,908.00
C9730Bronchoscopic bronchial thermoplasty with imaging guidance (if performed), radiofrequency ablation of airway smooth muscle, 1 lobeT04151,971.77
C9731Bronchoscopic bronchial thermoplasty with imaging guidance (if performed), radiofrequency ablation of airway smooth muscle, 2 or more lobesT04151,971.77
Start Printed Page 42228
K0741Portable gaseous oxygen system, rental, includes portable container, regulator, flowmeter, humidifier, cannula or mask, and tubing, for cluster headachesYNANA
K0742Portable oxygen contents, gaseous, 1 month's supply = 1 unit, for cluster headaches, for initial months supply or to replace used contentsYNANA
K0743Suction pump, home model, portable, for use on woundsYNANA
K0744Absorptive wound dressing for use with suction pump, home model, portable, pad size 16 square inches or lessANANA
K0745Absorptive wound dressing for use with suction pump, home model, portable, pad size more than 16 square inches but less than or equal to 48 square inchesANANA
K0746Absorptive wound dressing for use with suction pump, home model, portable, pad size greater than 48 square inchesANANA
Q2041Injection, von willebrand factor complex (human), Wilate, 1 i.u. vwf:rcoG13520.88
Q2042Injection, hydroxyprogesterone caproate, 1 mgK13542.90
Q2043Sipuleucel-t, minimum of 50 million autologous cd54+ cells activated with pap-gm-csf, including leukapheresis and all other preparatory procedures, per infusionG927332,860.00
Q2044Injection, belimumab, 10 mgG135339.15

For CY 2012, 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 quarterly update CR, consistent with the AMA's implementation date for the codes. Through the July 2011 OPPS quarterly update CR, we allow separate payment for 12 of the 14 new Category III CPT codes effective July 1, 2011. Specifically, as displayed in Table 17 of this proposed rule, we allow separate payment for the following CPT codes:

  • CPT code 0263T (Intramuscular autologous bone marrow cell therapy, with preparation of harvested cells, multiple injections, one leg, including ultrasound guidance, if performed; complete procedure including unilateral or bilateral bone marrow harvest)
  • CPT code 0264T (Intramuscular autologous bone marrow cell therapy, with preparation of harvested cells, multiple injections, one leg, including ultrasound guidance, if performed; complete procedure excluding bone marrow harvest)
  • CPT code 0265T (Intramuscular autologous bone marrow cell therapy, with preparation of harvested cells, multiple injections, one leg, including ultrasound guidance, if performed; unilateral or bilateral bone marrow harvest only for intramuscular autologous bone marrow cell therapy)
  • CPT code 0267T (Implantation or replacement of carotid sinus baroreflex activation device; lead only, unilateral (includes intra-operative interrogation, programming, and repositioning, when performed))
  • CPT code 0268T (Implantation or replacement of carotid sinus baroreflex activation device; pulse generator only (includes intra-operative interrogation, programming, and repositioning, when performed))
  • CPT code 0269T (Revision or removal of carotid sinus baroreflex activation device; total system (includes generator placement, unilateral or bilateral lead placement, intra-operative interrogation, programming, and repositioning, when performed))
  • CPT code 0270T (Revision or removal of carotid sinus baroreflex activation device; lead only, unilateral (includes intra-operative interrogation, programming, and repositioning, when performed))
  • CPT code 0271T (Revision or removal of carotid sinus baroreflex activation device; pulse generator only (includes intra-operative interrogation, programming, and repositioning, when performed))
  • CPT code 0272T (Interrogation device evaluation (in person), carotid sinus baroreflex activation system, including telemetric iterative communication with the implantable device to monitor device diagnostics and programmed therapy values, with interpretation and report (e.g., battery status, lead impedance, pulse amplitude, pulse width, therapy frequency, pathway mode, burst mode, therapy start/stop times each day))
  • CPT code 0273T (Interrogation device evaluation (in person), carotid sinus baroreflex activation system, including telemetric iterative communication with the implantable device to monitor device diagnostics and programmed therapy values, with interpretation and report (e.g., battery status, lead impedance, pulse amplitude, pulse width, therapy frequency, pathway mode, burst mode, therapy start/stop times each day); with programming)
  • CPT 0274T (Percutaneous laminotomy/laminectomy (intralaminar approach) for decompression of neural elements, (with or without ligamentous resection, discectomy, facetectomy and/or foraminotomy) any method under indirect image guidance (e.g., fluoroscopic, CT), with or without the use of an endoscope, single or multiple levels, unilateral or bilateral; cervical or thoracic)
  • CPT 0275T (Percutaneous laminotomy/laminectomy (intralaminar approach) for decompression of neural elements, (with or without ligamentous resection, discectomy, facetectomy and/or foraminotomy) any method under indirect image guidance (e.g., fluoroscopic, CT), with or without the use of an endoscope, single or multiple levels, unilateral or bilateral; lumbar) (As published in the July 2011 OPPS quarterly update CR, CPT code 0275T replaced Level II HCPCS code C9729 effective July 1, 2011.)

We note that Category III CPT codes 0262T (Implantation of catheter-delivered prosthetic pulmonary valve, endovascular approach) and 0266T (Implantation or replacement of carotid sinus baroreflex activation device; total system (includes generator placement, unilateral or bilateral lead placement, Start Printed Page 42229intra-operative interrogation, programming, and repositioning, when performed)) are assigned to status indicator “C” (Inpatient Procedures) under the hospital OPPS beginning July 1, 2011. We believe these procedures should only be paid when provided in the inpatient setting because of the clinical circumstances under which these procedures are performed. There are no new Category I Vaccine CPT codes for the July 2011 update.

Table 17 below lists the Category III CPT codes that were implemented in July 2011 for which we are proposing to allow separate payment, along with their proposed status indicators, proposed APC assignments, and proposed payment rates for CY 2012.

Table 17—Category III CPT Codes Implemented in July 2011

CY 2011 CPT codeCY 2011 long descriptorProposed CY 2012 status indicatorProposed CY 2012 APCProposed CY 2012 payment rate
0262TImplantation of catheter-delivered prosthetic pulmonary valve, endovascular approachCNANA
0263TIntramuscular autologous bone marrow cell therapy, with preparation of harvested cells, multiple injections, one leg, including ultrasound guidance, if performed; complete procedure including unilateral or bilateral bone marrow harvestS0112$2,166.33
0264TIntramuscular autologous bone marrow cell therapy, with preparation of harvested cells, multiple injections, one leg, including ultrasound guidance, if performed; complete procedure excluding bone marrow harvestS01122,166.33
0265TIntramuscular autologous bone marrow cell therapy, with preparation of harvested cells, multiple injections, one leg, including ultrasound guidance, if performed; unilateral or bilateral bone marrow harvest only for intramuscular autologous bone marrow cell therapyS01122,166.33
0266TImplantation or replacement of carotid sinus baroreflex activation device; total system (includes generator placement, unilateral or bilateral lead placement, intra-operative interrogation, programming, and repositioning, when performed)CNANA
0267TImplantation or replacement of carotid sinus baroreflex activation device; lead only, unilateral (includes intra-operative interrogation, programming, and repositioning, when performed)T06871,496.15
0268TImplantation or replacement of carotid sinus baroreflex activation device; pulse generator only (includes intra-operative interrogation, programming, and repositioning, when performed)S003914,743.58
0269TRevision or removal of carotid sinus baroreflex activation device; total system (includes generator placement, unilateral or bilateral lead placement, intra-operative interrogation, programming, and repositioning, when performed)T02212,567.33
0270TRevision or removal of carotid sinus baroreflex activation device; lead only, unilateral (includes intra-operative interrogation, programming, and repositioning, when performed)T06871,496.15
0271TRevision or removal of carotid sinus baroreflex activation device; pulse generator only (includes intra-operative interrogation, programming, and repositioning, when performed)T06882,003.33
0272TInterrogation device evaluation (in person), carotid sinus baroreflex activation system, including telemetric iterative communication with the implantable device to monitor device diagnostics and programmed therapy values, with interpretation and report (e.g., battery status, lead impedance, pulse amplitude, pulse width, therapy frequency, pathway mode, burst mode, therapy start/stop times each day)S021880.78
0273TInterrogation device evaluation (in person), carotid sinus baroreflex activation system, including telemetric iterative communication with the implantable device to monitor device diagnostics and programmed therapy values, with interpretation and report (e.g., battery status, lead impedance, pulse amplitude, pulse width, therapy frequency, pathway mode, burst mode, therapy start/stop times each day); with programmingS021880.78
0274TPercutaneous laminotomy/laminectomy (intralaminar approach) for decompression of neural elements, (with or without ligamentous resection, discectomy, facetectomy and/or foraminotomy) any method under indirect image guidance (e.g., fluoroscopic, CT), with or without the use of an endoscope, single or multiple levels, unilateral or bilateral; cervical or thoracicT02083,535.92
0275TPercutaneous laminotomy/laminectomy (intralaminar approach) for decompression of neural elements, (with or without ligamentous resection, discectomy, facetectomy and/or foraminotomy) any method under indirect image guidance (e.g., fluoroscopic, CT), with or without the use of an endoscope, single or multiple levels, unilateral or bilateral; lumbarT02083,535.92
Start Printed Page 42230

We are soliciting public comments on the CY 2012 proposed status indicators and the proposed APC assignments and payment rates, if applicable, for the Level II HCPCS codes and the Category III CPT codes that are newly recognized in April or July 2011 through the respective OPPS quarterly update CRs. These codes are listed in Tables 15, 16, and 17 of this proposed rule. We are proposing to finalize their status indicators and their APC assignments and payment rates, if applicable, in the CY 2012 OPPS/ASC final rule with comment period. Because the July 2011 OPPS quarterly update CR is issued close to the publication of this proposed rule, the Level II HCPCS codes and the Category III CPT codes implemented through the July 2011 OPPS quarterly update CR could not be included in Addendum B to this proposed rule, but these codes are listed in Tables 16 and 17, respectively. We are proposing to incorporate these codes into Addendum B to the CY 2012 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 2011 OPPS update CR and displayed in Table 15 are included in Addendum B to this proposed rule (which is referenced in section XVII. of this proposed rule and available via the Internet on the CMS Web site), where their proposed CY 2012 payment rates also are shown.

2. Proposed Process for New Level II HCPCS Codes and Category I and Category III CPT Codes for Which We Will Be Soliciting Public Comments on the CY 2012 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 final rule with comment period, and we respond to these comments in the OPPS/ASC final rule with comment period for the next calendar year's OPPS/ASC update. We are proposing to continue this process for CY 2012. Specifically, for CY 2012, we are proposing to include in Addendum B (which is available via the Internet on the CMS Web site) to the CY 2012 OPPS/ASC final rule with comment period the new Category I and III CPT codes effective January 1, 2012 (including the Category III CPT codes that were released by the AMA in July 2011) that would be incorporated in the January 2012 OPPS quarterly update CR and the new Level II HCPCS codes, effective October 1, 2011, or January 1, 2012, that would be released by CMS in its October 2011 and January 2012 OPPS quarterly update CRs. These codes would be flagged with comment indicator “NI” in Addendum B to the CY 2012 OPPS/ASC final rule with comment period to indicate that we have assigned them an interim OPPS payment status for CY 2012. Their status indicators and their APC assignments and payment rates, if applicable, would be open to public comment in the CY 2012 OPPS/ASC final rule with comment period and would be finalized in the CY 2013 OPPS/ASC final rule with comment period. We note that the Category III CPT codes that were released by the AMA in July 2011 that are subject to comment in this CY 2012 OPPS/ASC proposed rule, and are listed in Table 17, will not be assigned to comment indicator “NI” in Addendum B because comments about these codes will be addressed in the CY 2012 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 hospital outpatient department services. Section 1833(t)(2)(B) of the Act provides that the Secretary may establish groups of covered OPD services within this classification system, so that services classified within each group are comparable clinically and with respect to the use of resources. In accordance with these provisions, we developed a grouping classification system, referred to as Ambulatory Payment Classifications (APCs), as set forth in § 419.31 of the regulations. We use Level I and Level II HCPCS codes to identify and group the services within each APC. The APCs are organized such that each group is homogeneous both clinically and in terms of resource use. Using this classification system, we have established distinct groups of similar services. We also have developed separate APC groups for certain medical devices, drugs, biologicals, therapeutic radiopharmaceuticals, and brachytherapy devices.

We have packaged into payment for each procedure or service within an APC group the costs associated with those items or services that are directly related to, and supportive of, performing the main independent procedures or furnishing the 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.3. of this proposed rule.

In CY 2008, we implemented composite APCs to provide a single payment for groups of services that are typically performed together during a single clinical encounter and that result in the provision of a complete service (72 FR 66650 through 66652). Under CY 2011 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 Start Printed Page 42231hospital 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 hospital clinic visit APC (the Level 3 hospital clinic visit CPT code out of five levels), and because middle level hospital clinic visits are among the most frequently furnished services in the hospital outpatient setting.

Section 1833(t)(9)(A) of the Act requires the Secretary to review, on a recurring basis occurring no less than annually and revise the groups, the relative payment weights, and the wage and other adjustments to take into account changes in medical practice, changes in technology, the addition of new services, new cost data, and other relevant information and factors; the Act further requires us to repeat this process on a basis that is not less often than annually. Section 1833(t)(9)(A) of the Act also requires the Secretary, beginning in CY 2001, to consult with an expert outside advisory panel composed of an appropriate selection of representatives of providers to review (and advise the Secretary concerning) the clinical integrity of the APC groups and the relative payment weights (the APC Panel recommendations for specific services for the CY 2012 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 of the item or service in implementing this provision. The statute authorizes the Secretary to make exceptions to the 2 times rule in unusual cases, such as low-volume items and services (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. In making this determination, we consider only those HCPCS codes that are significant based on the number of claims. We note that, for purposes of identifying significant HCPCS for examination in the 2 times rule, we consider codes that have more than 1,000 single major claims or codes that have both greater than 99 single major claims and contribute at least 2 percent of the single major claims used to establish the APC median cost to be significant (75 FR 71832). This longstanding definition of when a HCPCS code is significant for purposes of the 2 times rule was selected because we believe that a subset of 1,000 claims is negligible within the set of approximately 100 million single procedure or single session claims we use for establishing median costs. Similarly, a HCPCS code for which there are fewer than 99 single bills and which comprises less than 2 percent of the single major claims within an APC will have a negligible impact on the APC median. In this proposed rule, we are proposing to make exceptions to this limit on the variation of costs within each APC group in unusual cases, such as low volume items and services for CY 2012.

During the APC Panel's February 2011 meeting, we presented median cost and utilization data for services furnished during the period of January 1, 2010, through September 30, 2010, about which we had concerns or about which the public had raised concerns regarding their APC assignments, status indicator assignments, or payment rates. The discussions of most service-specific issues, the APC Panel recommendations, if any, and our proposals for CY 2012 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 (available via the Internet) 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 2012 included in this proposed rule are related to changes in median costs of services that are observed in the CY 2010 claims data newly available for CY 2012 ratesetting. We also are proposing changes to the status indicators for some codes that are not specifically and separately discussed in this proposed rule. In these cases, we are proposing to change the status indicators for some codes because we believe that another status indicator would more accurately describe their payment status from an OPPS perspective based on the policies that we are proposing for CY 2012.

Addendum B to this proposed rule (which is referenced in section XVII. of this proposed rule and available via the Internet on the CMS Web site) 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 2011 Addendum B update (via Transmittal 2174, Change Request 7342, dated March 18, 2011).

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 2012 based on the APC Panel recommendations that are 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 (which is referenced in section XVII. of this proposed rule and available via the Internet on the CMS Web site), and the use of CY 2010 claims data to calculate the median costs of procedures classified in the APCs, we reviewed all the APCs to determine which APCs would not satisfy the 2 times rule. We used the following criteria to decide whether to propose exceptions to the 2 times rule for affected APCs:

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

For a detailed discussion of these criteria, we refer readers to the April 7, 2000 OPPS final rule with comment period (65 FR 18457 and 18458).Start Printed Page 42232

Table 18 of this proposed rule lists 17 APCs that we are proposing to exempt from the 2 times rule for CY 2012 based on the criteria cited above and based on claims data processed from January 1, 2010, through September 30, 2010. For the final rule with comment period, we plan to use claims data for dates of service between January 1, 2010, and December 31, 2010, that were processed on or before June 30, 2011, and updated CCRs, if available. Based on our analysis of CY 2010 claims data in preparation for this proposed rule, we found 17 APCs with 2 times rule violations. We applied the criteria as described earlier to identify the APCs that we are proposing as exceptions to the 2 times rule for CY 2012, and identified 17 APCs that meet the criteria for exception to the 2 times rule for this proposed rule. These proposed APC exceptions are listed in Table 18 below. 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 2010 claims data used to determine the APC payment rates that we are proposing for CY 2012. The proposed 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.gov/​HospitalOutpatientPPS/​01_​overview.asp.

Table 18—Proposed APC Exceptions to the 2 Times Rule for CY 2012

Proposed CY 2012 APCProposed CY 2012 APC title
0016Level IV Debridement & Destruction.
0057Bunion Procedures.
0058Level I Strapping and Cast Application.
0060Manipulation Therapy.
0080Diagnostic Cardiac Catheterization.
0105Repair/Revision/Removal of Pacemakers, AICDs, or Vascular Devices.
0235Level I Posterior Segment Eye Procedures.
0245Level I Cataract Procedures without IOL Insert.
0263Level I Miscellaneous Radiology Procedures.
0340Minor Ancillary Procedures.
0347Level III Transfusion Laboratory Procedures.
0367Level I Pulmonary Test.
0369Level III Pulmonary Tests.
0432Health and Behavior Services.
0604Level 1 Hospital Clinic Visits.
0660Level II Otorhinolaryngologic Function Tests.
0667Level II Proton Beam Radiation Therapy.

C. Proposed New Technology APCs

1. Background

In the November 30, 2001 final rule (66 FR 59903), we finalized changes to the time period a service was eligible for payment under a New Technology APC. Beginning in CY 2002, we retain services within New Technology APC groups until we gather sufficient claims data to enable us to assign the service to an appropriate clinical APC. This policy allows us to move a service from a New Technology APC in less than 2 years if sufficient data are available. It also allows us to retain a service in a New Technology APC for more than 2 years if sufficient data upon which to base a decision for reassignment have not been collected.

We note that the cost bands for New Technology APCs range from $0 to $50 in increments of $10, from $50 to $100 in increments of $50, from $100 to $2,000 in increments of $100, and from $2,000 to $10,000 in increments of $500. These cost bands identify the APCs to which new technology procedures and services with estimated service costs that fall within those cost bands are assigned under the OPPS. Payment for each APC is made at the mid-point of the APC's assigned cost band. For example, payment for New Technology APC 1507 (New Technology—Level VII ($500—$600)) is made at $550. Currently, there are 82 New Technology APCs, ranging from the lowest cost band assigned to APC 1491 (New Technology—Level IA ($0-$10)) through the highest cost band assigned to APC 1574 (New Technology—Level XXXVII ($9,500-$10,000). In CY 2004 (68 FR 63416), we last restructured the New Technology APCs to make the cost intervals more consistent across payment levels and refined the cost bands for these APCs to retain two parallel sets of New Technology APCs, one set with a status indicator of “S”' (Significant 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.

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

Under the OPPS, one of our goals is to make payments that are appropriate for the services that are necessary for the treatment of Medicare beneficiaries. The OPPS, like other Medicare payment systems, is budget neutral and increases are limited to the annual hospital inpatient market basket increase. We believe that our payment rates generally reflect the costs that are associated with providing care to Medicare beneficiaries in cost-efficient settings, and we believe that our rates are adequate to ensure access to services.

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

We note that, in a budget neutral environment, payments may not fully cover hospitals' costs in a particular Start Printed Page 42233circumstance, including those for the purchase and maintenance of capital equipment. We rely on hospitals to make their decisions regarding the acquisition of high cost equipment with the understanding that the Medicare program must be careful to establish its initial payment rates, including those made through New Technology APCs, for new services that lack hospital claims data based on realistic utilization projections for all such services delivered in cost-efficient hospital outpatient settings. As the OPPS acquires claims data regarding hospital costs associated with new procedures, we regularly examine the claims data and any available new information regarding the clinical aspects of new procedures to confirm that our OPPS payments remain appropriate for procedures as they transition into mainstream medical practice.

2. 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, we are proposing for CY 2012 to retain services within New Technology APC groups until we gather sufficient claims data to enable us to assign the service to a clinically appropriate APC. The flexibility associated with this policy allows us to move a service from a New Technology APC in less than 2 years if sufficient claims data are available. It also allows us to retain a service in a New Technology APC for more than 2 years if sufficient claims data upon which to base a decision for reassignment have not been collected. Table 19 below lists the HCPCS codes and associated status indicators that we are proposing to reassign from a New Technology APC to a clinically appropriate APC or to a different New Technology APC for CY 2012.

Currently, in CY 2011, there are three procedures described by a HCPCS G-code receiving payment through a New Technology APC. Specifically, HCPCS code G0417 (Surgical pathology, gross and microscopic examination for prostate needle saturation biopsy sampling, 21-40 specimens) is assigned to New Technology APC 1506 (New Technology—Level VI ($400-$500)); HCPCS code G0418 (Surgical pathology, gross and microscopic examination for prostate needle saturation biopsy sampling, 41-60 specimens) is assigned to New Technology APC 1511 (New Technology—Level XI ($900-$1,000)); and HCPCS code G0419 (Surgical pathology, gross and microscopic examination for prostate needle saturation biopsy sampling, greater than 60 specimens) is assigned to New Technology APC 1513 (New Technology—Level XIII ($1,100-$1,200)).

Analysis of our hospital outpatient data for claims submitted for CY 2010 indicates that prostate saturation biopsy procedures are rarely performed on Medicare patients. For OPPS claims submitted from CY 2009 through CY 2010, our claims data show that there were only five claims submitted for HCPCS code G0417 in CY 2009 and only one in CY 2010 with a proposed median cost of approximately $532. Our claims data did not show any hospital outpatient claims for HCPCS codes G0418 and G0419 from either CY 2009 or CY 2010.

While we believe that these procedures will always be low volume, given the number of specimens being collected, we believe that we should continue their New Technology payments for another year for HCPCS codes G0417, G0418, and G0419 to see if more claims data become available. For CY 2012, we are proposing to revise the APC assignments for these procedures and continue the New Technology APC payments for HCPCS G-codes G0417, G0418, and G0419. Specifically, we are proposing to reassign HCPCS code G0417 from APC 1506 to APC 1505 (New Technology-Level V ($300-$400)), HCPCS code G0418 from APC 1511 to APC 1506 (New Technology—Level VI ($400-$500)), and HCPCS G0419 code from APC 1513 to APC 1508 (New Technology—Level VIII ($600-$700)). We believe that the proposed revised APC assignments would more appropriately reflect the procedures described by these three HCPCS G-codes, based on clinical and resource considerations. These procedures and their proposed APC assignments are displayed in Table 19.

Table 19—Proposed Reassignment of Procedures Assigned to New Technology APCs for CY 2012

CY 2011 HCPCS codeCY 2011 short descriptorCY 2011 SICY 2011 APCProposed CY 2012 SIProposed CY 2012 APC
G0417Sat biopsy prostate 21-40S1506S1505
G0418Sat biopsy prostate 41-60S1511S1506
G0419Sat biopsy prostate: >60S1513S1508

D. Proposed OPPS APC-Specific Policies

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

For CY 2011, we continued to assign CPT codes 63661 (Removal of spinal neurostimulator electrode percutaneous array(s), including fluoroscopy, when performed), 63662 (Removal of spinal neurostimulator electrode plate/paddle(s) placed via laminotomy or laminectomy, including fluoroscopy, when performed), 63663 (Revision, including replacement, when performed, of spinal neurostimulator electrode percutaneous array(s), including fluoroscopy, when performed), and 63664 (Revision, including replacement, when performed, of spinal neurostimulator electrode plate/paddle(s) placed via laminotomy or laminectomy, including fluoroscopy, when performed) to APC 0687 (Revision/Removal of Neurostimulator Electrodes), which had a CY 2011 final rule median cost of approximately $1,480. These codes were created effective for services performed Start Printed Page 42234on or after January 1, 2010, when the AMA CPT Editorial Board deleted CPT code 63660 (Revision or removal of spinal neurostimulator electrode percutaneous array(s) or plate/paddle(s)) and created new CPT codes 63661, 63662, 63663, and 63664 to differentiate between revision and removal procedures, and to also differentiate between percutaneous leads (arrays) and surgical leads (plates/paddles).

As discussed in the CY 2011 OPPS/ASC final rule with comment period (75 FR 71913), we have received several comments objecting to the placement of CPT codes 63663 and 63664 in APC 0687 because, the commenter stated, these codes are used to report both revision and replacement of neurostimulator electrodes. The commenters believed that the use of hospital resources is substantially greater when neurostimulator electrodes are being replaced rather than revised. We responded to these comments by stating that we did not have CY 2009 claims data on the cost of these codes upon which to make an assessment of whether there is a meaningful difference between the cost of revising the electrodes or replacing them, and that we were not convinced by the commenters stating that the use of the CPT codes for these services and the assignment of the codes for revision/replacement of neurostimulator electrodes to APC 0687 was inappropriate. We further stated that the OPPS is a payment system of averages in which the payment for a service is based on the estimated relative cost of the service, including a range of supply and other input costs, as well as other services in the same APC that are comparable in resource cost and clinical homogeneity. We noted that we expect that hospital charges for a service, which are derived from the cost of a service, can vary across individual patients. Therefore, we expect variability in the estimated cost of a service, across cases in a hospital and among hospitals, to be reflected at some level in the final APC relative payment weight. We indicated that we would examine estimated costs for these CPT codes in the CY 2010 claims data that we would use to model the CY 2012 proposed rule when these data became available.

At its February 28-March 1, 2011 meeting, the APC Panel recommended that CMS provide more data on CPT codes 63663, 63664, and 64569 (Revision or replacement of cranial nerve (e.g., vagus nerve) neurostimulator electrode array, including connection to existing pulse generator) to determine whether they represent primarily device replacements or device revisions. We are accepting this recommendation and have examined the CY 2010 claims data available for this proposed rule to compare the frequency of claims containing CPT codes 63663 or 63664 that were billed with HCPCS C1778 (Lead, neurostimulator (implantable)) or C1897 (Lead, neurostimulator test kit (implantable)) to the frequency of claims with CPT codes 63663 or 63664 billed without HCPCS codes C1778 and C1897, in order to determine whether they represent primarily device replacements or device revisions. We found that 61 percent of claims containing CPT codes 63663 or 63664 did not contain HCPCS code C1778 or C1897, while 39 percent of claims with CPT codes 63663 or 63664 did contain HCPCS code C1778 or C1897. Because the majority of the claims did not contain HCPCS code C1778 or C1897, these findings suggest that these CPT codes are used to describe mainly device revision procedures, although there are a significant number of cases of device replacement procedures in the claims data. We will present the requested data for CPT code 64569 at a future meeting of the APC Panel.

We also have completed an examination of the estimated costs for CPT codes 63661, 63662, 63663, and 63664 now that claims data for these CPT codes are available for the first time since they became effective on January 1, 2010. Based on the partial year claims data available for this proposed rule, the proposed median costs for CPT codes 63661 and 63662 are approximately $1,167 and $2,190, respectively. The claims data show a median cost of approximately $4,316 for CPT code 63663 and a median cost of approximately $4,883 for CPT code 63664, which constitute a 2 times rule violation within APC 0687.

In order to resolve the 2 times rule violation in APC 0687, we are proposing to move CPT codes 63663 and 63664 from APC 0687 to APC 0040 (Percutaneous Implantation of Neurostimulator Electrodes), which has a CY 2012 proposed median cost of approximately $4,516 that is more consistent with the median costs for CPT codes 63663 and 63664. We also are proposing to change the title of APC 0040 to “Level I Implantation/Revision/Replacement of Neurostimulator Electrodes” to reflect that the APC would include revision and replacement procedures beginning in CY 2012, and to change the title of APC 0061 from “Laminectomy, Laparoscopy, or Incision for Implantation of Neurostimulator Electrodes” to “Level II Implantation/Revision/Replacement of Neurostimulator Electrodes” to be consistent with the APC 0040 title change. We believe that CPT codes 63661 and 63662 continue to be placed appropriately in APC 0687 because their CY 2012 proposed CPT median costs of approximately $1,167 and $2,190, respectively, are consistent with the overall proposed APC 0687 median cost of approximately $1,492 and because they describe only device removal procedures.

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

The AMA CPT Editorial Panel created three new codes for computed tomography (CT) of abdominal and pelvis that were effective January 1, 2011: CPT code 74176 (Computed tomography, abdomen and pelvis; without contrast material); CPT code 74177 (Computed tomography, abdomen and pelvis; with contrast material(s)); and CPT code 74178 (Computed tomography, abdomen and pelvis; without contrast material in one or both body regions, followed by contrast material(s) and further sections in one or both body regions). As with all new CPT codes for CY 2011, these new codes were announced through the publication of the CY 2011 CPT in November 2010, effective on January 1, 2011.

In accordance with our longstanding policy, we made an interim APC assignment for each new code for CY 2011 based on our understanding of the resources required to furnish the service as the service was defined in the new code (75 FR 71898). Specifically, for CY 2011, we assigned new CPT code 74176 to APC 0332 (Computed Tomography Without Contrast), which has a CY 2011 payment rate of approximately $194; we assigned CPT code 74177 to APC 0283 (Computed Tomography With Contrast), which has a CY 2011 payment rate of $300; and we assigned CPT code 74178 to CPT code 0333 (Computed Tomography Without Contrast Followed by With Contrast), which has a CY 2011 payment rate of $334. For CY 2011, we also made these codes eligible for composite payment under the multiple imaging composite APC methodology when they are furnished with other CT procedures to the same patient on the same day.

As is our standard practice each year, our clinicians review each of the many CPT code changes that will be effective in the forthcoming year and make a decision regarding status indicator and/or APC assignment based on their understanding of the nature of the services furnished. We are unable to Start Printed Page 42235include a proposed status indicator and/or APC assignment in the proposed rule for codes that are not announced by the AMA CPT Editorial Board prior to the proposed rule. Therefore, in accordance with our longstanding policy, we include, in the final rule with comment period, an interim status indicator and/or APC assignment for all new CPT codes that are announced by the AMA CPT Editorial Board subsequent to the OPPS/ASC proposed rule to enable payment to be made for new services as soon as the code is effective. In accordance with our longstanding practice, we identified the new codes for abdominal/pelvis CT for CY 2011 in Addendum B of the CY 2011 OPPS/ASC final rule with comment period as having new interim APC assignments by showing a comment indicator of “NI,” and we provided a public comment period. As we do with all new CPT codes, we will respond to the public comments in the OPPS/ASC final rule with comment period for CY 2012. This longstanding process enables us to pay for new services as soon as the new CPT codes for them go into effect, despite the fact that they first become publicly available at the same time the final rule with comment period for the upcoming year is made public.

At its February 28-March 1, 2011 meeting, the APC Panel heard public presentations on this issue and recommended that CMS provide more data on the new CPT codes for combined abdomen and pelvis CT as soon as these data are available. We are accepting this recommendation, and we will provide claims data as soon as the data are available. We note that because these codes were effective January 1, 2011, the first available claims data for these codes will be the APC Panel claims data for the CY 2013 OPPS rulemaking. These data will be for dates of service January 1, 2011 through and including September 30, 2011, as processed through the Common Working File on or before September 30, 2011.

In general, stakeholders who provided comments on the interim assignment of these codes for CY 2011 stated that the most appropriate approach to establishing payment for these new codes is to assign these procedures to APCs that recognize that each of the new codes reflects the reporting under a single code of two services that were previously reported under two separate codes and that, therefore, payments would be more accurate and better reflective of the relative cost of the services under the OPPS if we were to establish payment rates for the codes for CY 2012 using claim data that reflect the combined cost of the two predecessor codes. They noted that when these services were reported in CY 2010 using two CPT codes, rather than a single code, the services that are being reported under CPT code 74176 were assigned to imaging composite APC 8005 (CT and CTA without Contrast) for which the CY 2010 payment was $419.45. Similarly, the services being reported under CPT code 74177 or CPT code 74178 were assigned to composite APC 8006 (CT and CTA with Contrast) for which the CY 2010 payment was $628.49. They indicated that they believed that simulating the median cost for CPT codes 74176, 74177, and 74178 using historic claims data from the predecessor codes in a manner similar to that used to create the composite APC medians would result in the best estimates of costs for these codes and, therefore, the most accurate payment rate for these codes.

After considering the presentations at the APC Panel meeting, the views of stakeholders who met with us to discuss this issue, and the comments in response to the CY 2011 final rule with public comment period, and after examining our claims data for the predecessor codes, we believe that establishment of payment rates for these services based on historic claims data for the combinations of predecessor codes that are now reported by CPT codes 74176, 74177, and 74178 would result in a more accurate and appropriate payment for these services for CY 2012 because it would take into account the full cost of both services that are now reported by a single CPT code. We believe that the best way to secure the most appropriate payments for CY 2012 is to use the claims data from the predecessor codes under which the new codes were reported for CY 2010 to simulate median costs for the new codes and to create APCs that are appropriate to the services. To do so should reflect both the full cost of the service as reported by the new code and should also reflect the efficiencies of reporting the service represented by the single new code. Therefore, we are proposing to establish two APCs to which we would propose to assign the combined abdominal and pelvis CT services. Specifically, we are proposing to create new APC 0331 (Combined Abdominal and Pelvis CT Without Contrast), to which we are proposing to assign CPT code 74176 and for which we are proposing to base the CY 2012 OPPS payment rate on a median cost of approximately $417. We also are proposing to create new APC 0334 (Combined Abdominal and Pelvis CT With Contrast), to which we are proposing to assign CPT codes 74177 and 74178 for the CY 2012 OPPS and for which we are proposing to base the CY 2012 OPPS payment rate on a median cost of approximately $592. We are proposing to create two new APCs to which to assign these codes, rather than one, because CPT code 74176 is furnished without contrast, while CPT codes 74177 and 74178 are furnished with contrast. Section 1833(t)(2)(G) of the Act requires that services with contrast may not be assigned to APCs that contain services without contrast, and therefore, we could not assign CPT code 74176, which does not require contrast, to the same APC as CPT codes 74177 and 74178, which require contrast.

We are proposing to create new APC 0331 to which we would assign CPT code 74176 and to create new APC 0334 to which we would assign CPT codes 74177 and 74178 because the proposed methodology for simulating the median costs for CPT codes 74176, 74177, and 74178, which uses claims data for the predecessor codes is unique to these CPT codes. Therefore, we believe that it is appropriate to create APCs comprised only of services for which we calculated medians using claims data for the predecessor codes. To the extent this policy is finalized, we would reassess whether it continues to be appropriate to pay these codes under APCs 0331 and 0334 once the median costs for the proposed CY 2013 OPPS are calculated using our standard methodology, based on hospitals' CY 2011 charges for CPT codes 74176, 74177, and 74178.

To calculate the median costs for proposed APCs 0331 and 0334 for CY 2012, we selected claims that contained one unit of both of the predecessor CPT codes that appear in the CY 2011 CPT for CPT codes 74676, 74677, and 74678. The predecessor codes are limited to the codes in Table 20 below.

Table 20—CPT Codes That Were Combined To Create New Abdominal and Pelvis CPT Codes for CY 2011

CPT CodeDescriptor
72192Computed tomography, pelvis; without contrast material.
72193Computed tomography, pelvis; with contrast material(s).
72194Computed tomography, pelvis; without contrast material, followed by contrast material(s) and further sections.
74150Computed tomography, abdomen; without contrast material.
Start Printed Page 42236
74160Computed tomography, abdomen; with contrast material(s).
74170Computed tomography, abdomen; without contrast material, followed by contrast material(s) and further sections.

For purposes of selecting claims to be used to calculate simulated median costs, we selected only claims that contained one (and only one) unit of each of the predecessor codes in the allowed combinations identified in Table 21 below. We used only claims that contained one and only one unit of each of the code combinations because we believe that it represents the best simulation of the definition of the new codes. Where more than one unit of either or both codes were reported, the claim would be paid under an imaging composite APC, not under APC 0331 or 0334. For median calculation, claims that contained more than one unit of either or both codes were assigned to the applicable imaging composite APC. We refer readers to section II.A.2.e.5 of this proposed rule for discussion of the imaging composite APCs.

Table 21—Combinations of Predecessor CPT Codes Used To Simulate Median Costs for the Combined Abdominal and Pelvis CT Codes That Are New for CY 2011

Combined abdominal and pelvis CT codePredecessor CT abdomen without contrastPredecessor CT pelvis without contrastPredecessor CT abdomen with contrastPredecessor CT pelvis with contrast
741767415072192
741777416072193
741787415072193
741787415072194
741787219274160
741787416072194
741787219274170
741787417072193
741787417072194

After we selected the claims that contained one and only one unit of each code in each combination, we deleted claims that contained other separately paid HCPCS codes if those codes did not appear on the bypass list (we refer readers to section II.A.1.b. of this proposed rule and to Addendum N, which is referenced in section XVII. of this proposed rule and available via the Internet on the CMS Web site). We bypassed the costs for codes that appeared on the bypass list to create simulated single procedure claims for CPT codes 74178, 74177, and 74178. Using the remaining simulated single procedure claims for the combined abdominal and pelvis CT services, we applied our standard trimming, packaging, and wage standardization methodology to calculate the median cost for each combined abdominal and pelvis CT code for the two proposed APCs. We refer readers to section II.A.2.c. of this proposed rule for discussion of our standard trimming, packaging, and wage standardization methodology.

We found that using this proposed methodology resulted in a simulated median cost for CPT code 74176 of approximately $417, and that, because we are proposing that CPT code 74176 would be the only HCPCS code assigned to APC 0331, the simulated median cost for APC 0331 also would be approximately $417. We found that using this proposed methodology, the simulated median cost for CPT code 74177 was approximately $570 and the simulated median cost for CPT code 74178 was approximately $638, and that the simulated median cost for proposed APC 0334 was approximately $592. We are proposing to use this simulation methodology to establish proposed median costs for proposed APCs 0331 and 0334 for the CY 2012 OPPS.

We also are proposing that, in cases where CPT code 74176 is reported with CT codes that describe CT services for other regions of the body other than the abdomen and pelvis in which contrast is not used, it would be assigned to imaging composite APC 8005 (CT and CTA Without Contrast), for which we are proposing a median cost of approximately $445 for the CY 2012 OPPS. In cases where CPT code 74177 or 74178 is reported with CT codes that describe CT services for regions of the body other than abdomen and pelvis in which contrast is used, we are proposing that the code would be assigned to APC 8006 (CT and CTA With Contrast), for which we are proposing a median cost of approximately $744 for the CY 2012 OPPS. We are proposing to assign CPT codes 74176 to imaging composite APC 8005 and to assign CPT codes 74177 and 74178 to imaging composite APC 8006 because the predecessor codes for CPT codes 74176, 74177 and 74178 (identified in Table 20), continue to be reported when either abdominal CT or pelvis CT (but not both) is furnished, and we are proposing to continue to assign them to imaging composite APCs 8005 and 8006. We believe that it would be inconsistent with our proposed imaging composite policy if we did not propose to assign CPT codes 74176, 74177, and 74178 to the applicable imaging composite APC for CY 2012. We refer readers to section II.A.2.e.(5) of this proposed rule for the discussion of the calculation of our proposed median costs for APCs 8005 and 8006 for CY 2012.

In summary, we are proposing to establish new APCs 0331 and 0334 to which we would assign the abdominal and pelvis CT codes that were created by the AMA CPT Editorial Panel for CY 2011 and to use the simulation methodology we describe above to establish simulated median costs on which we would base the CY 2012 payment rates because we believe that to do so would result in relative payment weights for these new services that will more accurately reflect the resources required to furnish these services as defined by CPT than would be true of continued assignment of the codes to the single service APCs to which we made interim assignments for Start Printed Page 42237CY 2011. We note that claims and cost data for these services will be available for the CY 2013 OPPS rulemaking, and we will reassess the payment policy for these codes based on the cost data that are used to establish the CY 2013 OPPS median cost and payment rates.

3. Placement of Amniotic Membrane (APCs 0233 and 0244)

For the CY 2011 update, the AMA CPT Editorial Panel revised the long descriptor for CPT code 65780 (Ocular surface reconstruction; amniotic membrane transplantation, multiple layers) to include the words “multiple layers” to further clarify the code descriptor. In addition, the AMA CPT Editorial Panel created two new CPT codes that describe the placement of amniotic membrane on the ocular surface without reconstruction; one describing the placement of a self-retaining (non-sutured/non-glued) device on the surface of the eye, and the other describing a single layer of amniotic membrane sutured to the surface of the eye. Specifically, the AMA CPT Editorial Panel created CPT codes 65778 (Placement of amniotic membrane on the ocular surface for wound healing; self-retaining) and 65779 (Placement of amniotic membrane on the ocular surface for wound healing; single layer, sutured), effective January 1, 2011.

As has been our practice since the implementation of the OPPS in 2000, we carefully review all new procedures before assigning them to an APC. In determining the APC assignments for CPT codes 65778 and 65779, we took into consideration the clinical and resource characteristics involved with placement of amniotic membrane products on the eye for wound healing via a self-retaining device and a sutured, single-layer technique. In the CY 2011 OPPS/ASC final rule with comment period (75 FR 72402), we assigned CPT code 65780 to APC 0244 (Corneal and Amniotic Membrane Transplant) with a CY 2011 payment rate of approximately $2,681. We assigned CPT code 65778 to APC 0239 (Level II Repair and Plastic Eye Procedures) with a payment rate of approximately $559, and CPT code 65779 to APC 0255 (Level II Anterior Segment Eye Procedures) with a payment rate of approximately $519. In addition, we assigned both CPT codes 65778 and 65779 to comment indicator “NI” in Addendum B of the CY 2011 OPPS/ASC final rule with comment period to indicate that both codes were new codes for CY 2011 with an interim APC assignment subject to public comment. We will address any public comments on issues regarding these new codes in the CY 2012 OPPS/ASC final rule with comment period.

At the APC Panel at the February 28-March 1, 2011 meeting, a presenter requested the reassignment of both new CPT codes 65778 and 65779 to APC 0244, which is the same APC to which CPT code 65780 is assigned. The presenter indicated that prior to CY 2011, the procedures described by CPT codes 65578 and 65779 were previously reported under the original version of CPT code 65780, which did not specify “multiple layers,” and as such these new codes should continue to be assigned to APC 0244. Further, the presenter stated that the costs of the new procedures described by CPT codes 65778 and 65779 are very similar to the procedure described by CPT code 65780.

The APC Panel recommended that CMS reassign both CPT codes 65778 and 65779 to APC 0233 (Level III Anterior Segment Eye Procedures), citing clinical similarity to procedures already in APC 0233. Based on clinical as well as resource similarity to the other procedures currently assigned to APC 0233, we are proposing to accept the APC Panel's recommendations to reassign CPT code 65778 from APC 0239 to APC 0233 and to reassign CPT code 65779 from APC 0255 to APC 0233. However, based upon our further review and analysis of the clinical characteristics of the procedure described by CPT code 65778, we also are proposing to conditionally package CPT code 65778. The service described by CPT code 65778 would rarely be provided as a separate, stand-alone service in the HOPD; it would almost exclusively be provided in addition to another procedure or service. Our medical advisors indicate that the procedure described by CPT code 65778 is not significantly different than placing a bandage contact lens on the surface of the eye to cover a corneal epithelial defect. CPT code 65778 describes the simple placement of a special type of bandage (a self-retaining amniotic membrane device) on the surface of the eye, which would most commonly be used in the HOPD to cover the surface of the eye after a procedure that results in a corneal epithelial defect. Given the characteristics of this procedure and its likely use in the HOPD, we are proposing to conditionally package CPT code 65778 for CY 2012 and reassign its status indicator from “T” to “Q2” to indicate that the procedure is packaged when it is billed on the same date with another procedure or service that is also assigned to status indicator “T.” Otherwise, separate payment would be made for the procedure.

In summary, for CY 2012, we are proposing to reassign CPT code 65778 from APC 0239 to APC 0233 with a conditionally packaged status, to reassign CPT code 65779 from APC 0255 to APC 0233, which has a proposed median cost of approximately $1,214, and to continue to assign CPT code 65780 to APC 0244, which has a proposed median cost of approximately $2,767.

As has been our practice since the implementation of the OPPS, we annually review all the items and services within an APC group to determine, with respect to comparability of the use of resources, for any 2 times violations. In making this determination, we review our claims data and determine whether we need to make changes to the current APC assignments for the following year. Because CPT codes 65778 and 65779 are new for CY 2011, and we have no claims data for the CY 2012 update, we will again reevaluate the status indicator and APC assignments for CPT codes 65778, 65779, and 65780 in CY 2012 for the CY 2013 OPPS rulemaking cycle. The amniotic membrane procedures and their CY 2012 proposed APC assignments are displayed in Table 22 below.

Table 22—Proposed APC Assignment for the Amniotic Membrane Procedures for CY 2012

CY 2011 HCPCS codeCY 2011 short descriptorCY 2011 SICY 2011 APCProposed CY 2012 SIProposed CY 2012 APC
65778Cover eye w/membraneT0239Q20233
65779Cover eye w/membrane sutureT0255T0233
65780Ocular reconst transplantT0244T0244
Start Printed Page 42238

4. Upper Gastrointestinal Services (APCs 0141, 0419, and 0422)

For CY 2011, there are two upper gastrointestinal (GI) procedure APCs, APC 0141 (Level I Upper GI Procedures), which has a CY 2011 national unadjusted payment rate of $611.73, and APC 0422 (Level II Upper GI Procedures), which has a CY 2011 national unadjusted payment rate of $1,148.75. In the CY 2011 OPPS/ASC proposed rule, we proposed to reconfigure APCs 0141 (Level I Upper GI Procedures) and APC 0442 (Level II Upper GI Procedures) by moving several CPT codes from APC 0141 to APC 0422. We received public comments on the proposed rule objecting to our proposal on the basis that the reconfiguration would reduce the median cost and, therefore, the payment for services to which APC 0422 was assigned and would not maintain the clinical homogeneity of these services. Instead commenters, including the applicable medical specialty societies, asked that we reconfigure APCs 0141 and 0422 to create three APCs by adding a new APC for upper GI procedures. They also recommended a HCPCS configuration that they believed would provide payment rates that would more accurately reflect the median costs of the services in APCs 0141 and 0422. We finalized our proposed changes to APCs 0141 and 0422 for CY 2011 without establishing a third APC for upper GI procedures for the reasons discussed in the CY 2011 OPPS/ASC final rule with public comment period (75 FR 71907).

However, when we developed the median costs for APCs 0141 and 0422 using CY 2010 claims data for discussion at the APC Panel meeting of February 28-March 1, 2011, we observed that there was a 2 times violation for APC 0141 that had not existed for CY 2010 OPPS. For the APC Panel meeting, we simulated the HCPCS and APC median costs that would result from the reconfiguration that was recommended by the stakeholders in their comments on the CY 2011 OPPS/ASC final rule with comment period, and we discussed the results with the APC Panel. The APC Panel recommended that CMS create an intermediate level upper GI procedures APC (APC Panel Recommendation 13). The APC Panel recommendations and report may be found at the APC Panel Web site, located at: http://www.cms.gov/​FACA/​05_​AdvisoryPanelonAmbulatoryPaymentClassificationGroups.asp.

For the reasons we discuss below, we are accepting the APC Panel recommendation to propose to establish three levels of upper GI procedure APCs and to propose to adopt the reconfiguration recommended by stakeholders because we believe that the proposed reconfiguration will provide payments that are more closely aligned with the median costs of the services. Creating an intermediate APC for upper GI procedures provides APC median costs that are more closely aligned with the median costs for the many CPT codes for upper GI procedures, and therefore, the APC median costs better reflect the resources required to provide these services as defined by the CPT codes for them. Moreover, the proposed reconfiguration resolves the 2 times rule violation that would result in APC 0141 if we were to apply the CY 2011 APC configuration to the CY 2012 proposed rule data. Therefore, we believe that we would need to propose to reassign HCPCS codes regardless of whether we created the intermediate APC for CY 2012. We believe that the proposed reconfiguration to create the intermediate APC is the most appropriate means of avoiding a 2 times violation that would otherwise exist for CY 2012 and that the resulting median costs will provide payments that are more reflective of the relative costs of the services being furnished.

Therefore, for CY 2012, we are proposing to create new APC 0419 (Level II Upper GI Procedures), as recommended by the stakeholders, and we are proposing to reassign HCPCS codes previously assigned to APCs 0141 and 0422 to the three APC configuration. Table 23 below contains the proposed HCPCS reassignments for CY 2012 using the proposed three APC reconfiguration. We believe that this proposed reconfiguration classifies upper GI CPT codes in groups that demonstrate the best clinical and resource homogeneity. For APC 0141, we calculated a proposed rule median cost for CY 2012 of approximately $603. For proposed new APC 0419, we calculated a proposed rule median cost of approximately $904. For APC 0422, we calculated a proposed rule median cost of approximately $1,833.

Table 23—Proposed Reconfiguration of Upper GI Procedure Codes for CY 2012

APCHCPCSSIDescriptionMedianSingle bill frequencyPercent single billsTotal frequency
0141Level I Upper GI Procedures$602.59
43831TPlace gastrostomy tube0.0000
43510TSurgical opening of stomach186.3311
43999TStomach surgery procedure238.681,7322,128
43204TEsoph scope w/sclerosis inj361.5026
43761TReposition gastrostomy tube496.12361602
43235TUppr gi endoscopy diagnosis538.3870,88520124,837
43200TEsophagus endoscopy592.171,0165,513
43239TUpper gi endoscopy biopsy618.39260,42273516,015
43202TEsophagus endoscopy biopsy619.634611,244
43248TUppr gi endoscopy/guide wire621.0916,548537,741
43234TUpper gi endoscopy exam644.39510872
43247TOperative upper GI endoscopy656.885,028116,489
43236TUppr gi scope w/submuc inj660.413,36918,141
43600TBiopsy of stomach666.46514
43243TUpper gi endoscopy & inject748.56161326
43241TUpper GI endoscopy with tube782.08164462
43499TEsophagus surgery procedure2,158.455281,375
0419Level II Upper GI Procedures903.97
91111TEsophageal capsule endoscopy730.216979
43250TUpper GI endoscopy/tumor730.6794913,083
43201TEsoph scope w/submucous inj760.7999256
43251TOperative upper GI endoscopy793.292,976310,936
43237TEndoscopic us exam esoph796.01369696
Start Printed Page 42239
43259TEndoscopic ultrasound exam811.7013,2341521,312
43246TPlace gastrostomy tube814.3715,2051720,923
43231TEsoph endoscopy w/us exam822.22346455
43244TUpper GI endoscopy/ligation875.565,10066,916
43215TEsophagus endoscopy881.45220858
43255TOperative upper GI endoscopy882.093,81047,517
43458TDilate esophagus890.281451,305
43217TEsophagus endoscopy890.3624104
49446TChange g-tube to g-j perc891.78389681
43205TEsophagus endoscopy/ligation894.22121142
43249TEsoph endoscopy dilation897.8319,3512250,173
49440TPlace gastrostomy tube perc899.691,77022,823
43245TUppr gi scope dilate strictr919.772,48935,401
43226TEsoph endoscopy dilation925.4574111,138
43240TEsoph endoscope w/drain cyst953.863285
49441TPlace duod/jej tube perc976.70136232
43220TEsoph endoscopy dilation1,011.565931908
43232TEsoph endoscopy w/us fn bx1,017.09351425
44100TBiopsy of bowel1,028.66522
43238TUppr gi endoscopy w/us fn bx1,115.06383539
43242TUppr gi endoscopy w/us fn bx1,125.4712,2601416,443
43258TOperative upper GI endoscopy1,138.385,654610,278
43227TEsoph endoscopy repair1,405.462539
43830TPlace gastrostomy tube1,721.16150288
0422Level III Upper GI Procedures1,833.15
43216TEsophagus endoscopy/lesion1,416.111231
43870TRepair stomach opening1,651.04954153
43257TUppr gi scope w/thrml txmnt1,724.9546262
43228TEsoph endoscopy ablation1,829.562,518933,022
C9724TEPS gast cardia plic5,957.9238169

5. Pulmonary Rehabilitation (APC 0102)

Section 144(a)(1) of Public Law 110-275 (MIPPA) added section 1861(fff) to the Act to provide Medicare Part B coverage and payment for a comprehensive program of pulmonary rehabilitation services furnished to beneficiaries with chronic obstructive pulmonary disease, effective January 1, 2010. Accordingly, in the CY 2010 OPPS/ASC final rule with comment period, we established a policy to pay for pulmonary rehabilitation services furnished as a part of the comprehensive pulmonary rehabilitation program benefit (74 FR 60567). There was and continues to be no single CPT code that fully and accurately describes the comprehensive pulmonary rehabilitation benefit provided in section 1861(fff) of the Act. Moreover, there were no alphanumeric HCPCS codes that described the comprehensive pulmonary rehabilitation benefit in effect for CY 2008 (on which the CY 2010 OPPS was based) or CY 2009 (on which the CY 2011 OPPS was based). Therefore, for CY 2010, we created new HCPCS code G0424 (Pulmonary rehabilitation, including exercise (includes monitoring), one hour, per session, up to two sessions per day) and assigned the code to APC 0102 (Level II Pulmonary Treatment), which we also created for CY 2010 OPPS. Because none of the pulmonary treatment codes for which there were charges for CY 2008 or CY 2009 accurately described the comprehensive pulmonary rehabilitation service for which MIPPA provided coverage, we did not assume that the charge reported on any one of the previously existing HCPCS codes under which pulmonary treatments were reported would represent the full charge for the comprehensive pulmonary rehabilitation service.

Instead, for the CY 2010 OPPS, which was based on claims for services in CY 2008, we calculated a median “per session” cost that we simulated from historical hospital claims data for pulmonary therapy services that were billed in combination with one another, much like we create composite APC median costs by summing the costs of multiple procedures that are typically provided on the same date. Our methodology for calculating the “per session” median cost that we used as the basis for the CY 2010 OPPS payment rate for HCPCS code G0424 and APC 0102 is discussed in detail in the CY 2010 OPPS final rule with comment period (74 FR 60567 through 60570).

Specifically, to simulate the “per session” median cost of new HCPCS code G0424 from claims data for existing services, we used only claims that contained at least one unit of HCPCS code G0239 (Therapeutic procedures to improve respiratory function or increase strength or endurance of respiratory muscles, two or more individuals (includes monitoring), the group code that is without limitation on time duration, and one unit of HCPCS code G0237 (Therapeutic procedures to increase strength or endurance of respiratory muscles, one on one, face to face, per 15 minutes (includes monitoring) or HCPCS code G0238 (Therapeutic procedures to improve respiratory function or increase strength or endurance of respiratory muscles, one on one, face to face, per 15 minutes (includes monitoring), the individual, face-to-face codes that report 15 minutes of service, on the same date of service. We reasoned that patients in a pulmonary rehabilitation program would typically receive individual and group services in each session of approximately 1 hour in duration. This was consistent with public comments that suggested that pulmonary rehabilitation is often provided in group sessions in the HOPD, although patients commonly require additional one-on-one care in order to fully participate in Start Printed Page 42240the program. We note that our use of “per session” claims reporting one unit of HCPCS code G0237 or G0238 and one unit of HCPCS code G0239 in this simulation methodology was also consistent with our overall finding of approximately 2.4 service units of the HCPCS G-codes per day on a single date of service, usually consisting of both individual and group services, for patients receiving pulmonary therapy services in the HOPD based upon CY 2008 claims. We concluded that the typical session of pulmonary rehabilitation would be 1 hour based on public comments that indicated that a session of pulmonary rehabilitation is typically 1 hour and based on our findings that the most commonly reported HCPCS code for pulmonary treatment is HCPCS code G0239, which has no time definition for this group service.

We included all costs of the related tests and assessment services (CPT codes 94620 (Pulmonary stress testing; simple (e.g., 6-minute walk test, prolonged exercise test for bronchospasm with pre- and post-spirometry and oximetry)); 94664 (Demonstration and/or evaluation of patient utilization of an aerosol generator, nebulizer, metered dose inhaler or IPPB device); and 94667 (Manipulation chest wall, such as cupping, percussion and vibration to facilitate lung function; initial demonstration and/or evaluation), and all CPT codes for established patient clinic visits, on the same date of service as the HCPCS G-codes in the claims we used to simulate the median cost for HCPCS code G0424. After identifying these “per session” claims, which we believe to represent 1 hour of care, we summed the costs on them and calculated the median cost for the set of selected claims. In light of the cost and clinical similarities of pulmonary rehabilitation and the existing services described by HCPCS codes G0237, G0238, and G0239 and the CPT codes for related assessments and tests, and the significant number of “per session” hospital claims we found, we believed that the simulated median cost for HCPCS code G0424, constructed to include the costs of these services where furnished, was our best estimate of the expected hospital cost of a pulmonary rehabilitation session, given that we did not have hospital charges for the comprehensive pulmonary rehabilitation service provided by MIPPA for which we created HCPCS code G0424.

We used the resulting simulated median “per session” cost of approximately $50 as the basis for the payment for pulmonary rehabilitation service for CY 2010, the first year in which the comprehensive pulmonary rehabilitation benefit was covered. For CY 2011, which was based on claims for services furnished in CY 2009, we continued to assign HCPCS code G0424 to APC 0102 and to apply the simulation methodology that we used in CY 2010 to claims for services in CY 2009 to calculate a median “per session” cost simulated from historical hospital claims data for similar pulmonary therapy services for the CY 2011 OPPS. The CY 2011 OPPS final rule median cost of approximately $62 resulted in a national unadjusted payment rate for CY 2011 of approximately $63.

For the CY 2012 OPPS, however, we have a very robust set of claims for HCPCS code G0424 on which hospitals reported the charges for the comprehensive pulmonary rehabilitation service for which MIPPA provided the pulmonary rehabilitation benefit beginning on January 1, 2010. Specifically, the CY 2012 OPPS proposed rule data, based on CY 2010 claims, contained a total frequency of 393,056 lines of HCPCS code G0424, of which we were able to use 391,901 single procedure bills or almost 100 percent of the claims submitted for HCPCS code G0424. This is an extremely robust volume of single procedure bills containing charges for HCPCS code G0424 on which to base a median cost. In general, we have found that higher volumes of single bills both in absolute numbers and as a percentage of total frequency provide very stable estimates of hospital costs.

Therefore, we are proposing that the payment rate for HCPCS code G0424 and, therefore, for APC 102, would be based on the median cost for the service as derived from claims for services furnished in CY 2010 and the most current available cost report information, using our longstanding process for estimating the median cost of a service described by a HCPCS code. We refer readers to section II. of this proposed rule for a description of our longstanding standard process for calculating the median costs on which the OPPS payment rates are based. Using our standard median calculation process for HCPCS code G0424 results in a proposed median cost of approximately $38 for HCPCS code G0424 and, therefore, for APC 0102. Given that the volume of claims in the CY 2012 OPPS proposed rule data is so robust for HCPCS code G0424, we believe that the proposed median cost we calculated for HCPCS code G0424 is a valid reflection of the relative cost of the comprehensive pulmonary rehabilitation service described by HCPCS code G0424 and that the proposed median cost for HCPCS code G0424 is an appropriate basis on which to establish the proposed national unadjusted payment rate for APC 0102.

We recognize that there is a significant difference between our simulated median cost for CY 2011 and the CY 2012 proposed rule median cost of approximately $38 that is derived from application of our standard median calculation process to hospital claims data for CY 2010. We believe that this difference arises because the median simulation methodology we used for CY 2010 and CY 2011 selected claims that contained multiple procedures and packaged the costs of numerous services into the “per session” cost for the simulated code where numerous services appeared on the same date of service. Our simulation methodology assumed that hospitals would include the charges for these additional services in their CY 2010 charges for HCPCS code G0424 because the services are included in the definition of comprehensive pulmonary rehabilitation.

In response to the CY 2012 OPPS proposed median of approximately $38 for HCPCS code G0424, we looked at our claims data in more depth. We found that 1,048 hospitals, approximately 25 percent of hospitals paid under the OPPS, reported HCPCS code G0424 and that the median line item median cost (exclusive of packaging) was approximately $38, virtually no different from the median cost per unit that we derived from the single bills. We also examined the charges that were submitted for HCPCS code G0424 in CY 2010 and the CCRs that were applied to the charges for HCPCS code G0424 to calculate the estimated median cost for the code for this CY 2012 proposed rule. We also looked at the revenue codes under which charges for HCPCS code G0424 were reported and the percentage of cost that was associated with packaged costs, such as oxygen, drugs, and medical supplies. We found that the median line item charge for HCPCS code G0424 in the CY 2012 proposed rule data was approximately $150 and that the median CCR was 0.29. We also found that the most frequently reported revenue code for HCPCS code G0424 was revenue code 410 (Respiratory therapy), approximately 108,000 single bills, and with revenue code 948 (Pulmonary Rehabilitation), approximately 81,000 single bills, being the second most commonly reported revenue code for HCPCS code G0424. We found that only Start Printed Page 422410.02 percent of the cost of HCPCS code G0424 was packaged cost (for example, oxygen, drugs, and supplies). In general, our detailed examination of total and line item charges for pulmonary rehabilitation, the CCRs used to reduce the charges to estimated costs on the single bills, the revenue codes reported, and the absence of packaging on the single bills supports the proposed median cost of $38 per unit as a valid estimate of the relative cost of one unit of HCPCS code G0424.

In summary, our examination of the claims and cost data for HCPCS code G0424 causes us to believe that the proposed median cost that we calculated from claims data for HCPCS code G0424 was calculated correctly according to our longstanding standard median cost calculation methodology. Therefore, we are proposing to base the CY 2012 OPPS payment rate for HCPCS code G0424 and APC 0102 on the median cost that we derive from applying our standard median calculation methodology to the CY 2010 charges and cost data for HCPCS code G0424.

6. Insertion/Replacement/Repair of AICD Leads, Generator, and Pacing Electrodes (APC 0108)

For CY 2011, only HCPCS code 33249 (Insertion or repositioning of electrode lead(s) for single or dual chamber pacing cardioverter-defibrillator and insertion of pulse generator) is assigned to APC 0108 (Insertion/Replacement/Repair of Cardioverter Defibrillator Leads). HCPCS code 33249, and therefore APC 0108, has a CY 2011 OPPS median cost of $26,543.91 on which the CY 2011 national unadjusted payment rate is based. For CY 2011, there are two HCPCS codes assigned to APC 0418: CPT code 33225 (Insertion of pacing electrode, cardiac venous system, for left ventricular pacing, at time of insertion of pacing cardioverter-defibrillator or pacemaker pulse generator (including upgrade to dual chamber system) (List separately in addition to code for primary procedure)), and CPT code 33224 (Insertion of pacing electrode, cardiac venous system, for left ventricular pacing, with attachment to previously placed pacemaker or pacing cardioverter-defibrillator pulse generator (including revision of pocket, removal, insertion, and/or replacement of generator)). APC 0418 is titled “Insertion of left ventricular pacing electrode” for CY 2011. APC 0418 has a CY 2011 median cost of $10,516.97 on which the CY 2011 payment rate for HCPCS codes 33225 and 33224 are based. Both APCs 0108 and 0418 are device-dependent APCs for which the criteria and process used for calculating the median costs are discussed in section II.A.2.d.1. of this proposed rule.

In the CY 2010 claims data used for this CY 2012 proposed rule, HCPCS code 33249 has a median cost of approximately $27,020 based on 6,139 single bills; HCPCS code 33225 has a median cost of approximately $34,018 based on 458 single bills, and HCPCS code 33224 has a median cost of approximately $12,418 based on 201 single bills. We are proposing to retain HCPCS code 33249 in APC 0108 but to reassign HCPCS code 33225 to APC 0108 on the basis that these codes are similar in clinical characteristics and median cost. We are proposing to revise the title of APC 0108 to read “Insertion/Replacement/Repair of AICD Leads, Generator, and Pacing Electrodes” for CY 2012. Under our standard methodology, using CY 2010 claims data, we calculated a median cost of approximately $27,361 for APC 0108.

We also are proposing to assign HCPCS code 33224 to APC 0655 because it is similar in clinical characteristics and median costs to the other services in APC 0655, and to revise the title of APC 0655 to read “Insertion/Replacement/Conversion of a Permanent Dual Chamber Pacemaker or Pacing Electrode.” We are proposing a CY 2012 OPPS median cost for APC 0655 of approximately $9,785 upon which we are proposing to base the CY 2012 OPPS payment rate. We are proposing the changes to the titles of APCs 0108 and 0655 to better describe the proposed content of the APCs. Because the reassignment of HCPCS code 33225 to APC 0108 and HCPCS 33244 to APC 0655 would result in APC 0418 containing no HCPCS codes, we are proposing to delete APC 0418.

As we discuss in detail in section III.D. of this proposed rule, we are proposing that HCPCS codes 33249 and 33225 would be paid under APC 0108 only if they are not reported on the same date of service. We are proposing that, when HCPCS codes 33249 and 33225 are reported on the same date of service, they would be paid through proposed new composite APC 8009 (Cardiac Resynchronization Therapy with Defibrillator Composite) and that the payment rate for proposed composite APC 8009 would be limited to the proposed IPPS standardized payment amount for MS-DRG 227 (Cardiac Defibrillator Implant without Cardiac Catheterization and without Medical Complications and Comorbidities), which is currently estimated to be $26,364.93. In other words, we are proposing to pay APC 8009 at the lesser of the APC 8009 median cost or the IPPS standardized payment rate for MS-DRG 227. We calculated the standardized payment rate for MS-DRG 227 ($26,364.93) by multiplying the normalized weight from Table 5 of the FY 2012 IPPS/LTCH PPS proposed rule (5.1370) by the sum of the nonlabor and labor-related shares of the proposed FY 2012 IPPS operating standardized amount (nonwage-adjusted) labor-related share $3,182.06 + nonlabor-related share $1,950.30 = $5,132.36) which were obtained from Table1B. For further detail on the calculation of the IPPS proposed FY 2012 payment rates, we refer readers to the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 26028 through 26029).

In addition, under the authority of section 1833(t)(2)(E) of the Act, which gives the Secretary the authority to make adjustments to ensure equitable payments, we are proposing to limit the payment for services that are assigned to APC 0108, to the proposed IPPS standardized payment amount for MS-DRG 227. In other words, we are proposing to pay APC 0108 at the lesser of the APC 0108 median cost or the IPPS standardized payment rate for MS-DRG 227. We believe that MS-DRG 227 is the most comparable DRG to APC 0108 because, like APC 0108, MS-DRG 227 includes implantation of a defibrillator in patients who do not have medical complication or comorbidities. If we were to base payment for APC 0108 on our calculated median cost of approximately $27,361, it would result in a payment under the CY 2012 OPPS that would exceed our proposed standardized payment under the IPPS for MS-DRG 227 of $26,364.93. We do not believe that it would be equitable to pay more for the implantation of a cardioverter defibrillator or implantation of a left ventricular pacing electrode for an outpatient encounter, which, by definition, includes fewer items and services than an inpatient stay during which the patient has the same procedure. In contrast, the amount Medicare would pay for an inpatient stay includes continuous skilled nursing care, room and board, all medications, and all diagnostic tests for an average of 3 days.

We believe that limiting OPPS payment for the services described by HCPCS codes 33249 and 33225 to the IPPS MS-DRG payment will ensure sufficient, appropriate, and equitable payment to hospitals because patients who receive these services in the hospital outpatient setting are not as sick as patients who have been admitted to receive this same service in the hospital inpatient setting. Therefore, we Start Printed Page 42242expect it would be less costly to care for these patients as outpatients, who would also spend less time in the facility and receive fewer services. In addition, we believe that a payment cap is necessary to ensure that we do not create an inappropriate payment incentive to implant ICDs and left ventricular leads in one setting of care over another by paying more in the outpatient setting compared to the inpatient setting.

We are proposing to continue all other standard policies that apply to device-dependent procedures, including the procedure-to-device edits that were established beginning in the CY 2005 OPPS for claims processing and median calculation; and calculation of and application of device offset amounts when pass-through devices are used and when an “FB” or “FC” modifier is attached to the line for either CPT code 33249 or 33225. However, for CY 2012, we are proposing that if the APC 0108 median cost that we will calculate for the CY 2012 OPPS/ASC final rule exceeds the FY 2012 IPPS standardized payment rate for MS-DRG 227, as adopted in the FY 2012 IPPS/LTCH PPS final rule, we would establish the OPPS payment amount at the IPPS standardized payment rate for MS-DRG 227 for FY 2012. In the FY 2012 IPPS/LTCH PPS proposed rule, this amount is $26,364.93. If the median cost for APC 0108 as calculated using the CY 2012 OPPS/ASC final rule data is less than the FY 2012 IPPS standardized payment rate for MS-DRG 227, we would base the payment for APC 0108 on the CY 2012 OPPS/ASC final rule median cost for APC 0108. These proposed changes would be made in a budget neutral manner, in the same way that payment for other APCs is budget neutral within the OPPS.

IV. Proposed OPPS Payment for Devices

A. Proposed Pass-Through Payments for Devices

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

a. Background

Section 1833(t)(6)(B)(iii) of the Act requires that, under the OPPS, a category of devices be eligible for transitional pass-through payments for at least 2, but not more than 3, years. This 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 date for a device category on the date on which pass-through payment is effective for the category. The date on which a pass-through 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 that are no longer eligible for pass-through payments into the costs of the procedures with which the devices are reported in the claims data used to set the payment rates (67 FR 66763). Brachytherapy sources, which are now separately paid in accordance with section 1833(t)(2)(H) of the Act, are an exception to this established policy.

There currently is one new device category eligible for pass-through payment, described by HCPCS code C1749 (Endoscope, retrograde imaging/illumination colonoscope device (implantable), which we announced in the October 2010 OPPS Update (Transmittal 2050, Change Request 7117, dated September 17, 2010). There are no categories for which we proposed expiration of pass-through status in CY 2011. If we create new device categories for pass-through payment status during the remainder of CY 2011, 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.

b. Proposed CY 2012 Policy

As stated above, 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. Device pass-through category C1749 was established for pass-through payments on October 1, 2010, and will have been eligible for pass-through payments for more than 2 years but less than 3 years as of the end of CY 2012. Therefore, we are proposing an expiration date for pass-through payment for device category C1749 of December 31, 2012. Therefore, under our proposal, beginning January 1, 2013, device category C1749 will no longer be eligible for pass-through payments.

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 2011 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.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).

As of CY 2009, the costs of implantable biologicals without pass-through status are packaged into the payment for the procedures in which they are inserted or implanted because implantable biologicals without pass-through status are not separately paid (73 FR 68633 through 68636). For CY 2010, we finalized a new policy to specify 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; also referred to as “implantable Start Printed Page 42243biologicals”) 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. As a result, for CY 2010, we included implantable biologicals in our calculation of the device APC offset amounts (74 FR 60476). We calculated and set the device APC offset amount for a newly established device pass-through category, which could include 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 are considered devices rather than drugs for purposes of pass-through evaluation and payment under our established policy, the device APC offset amounts include the costs of implantable biologicals. For CY 2010, we also finalized a policy to utilize the 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, for CY 2010, we no longer used 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 (74 FR 60463).

For CY 2011, we continued our policy 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.

b. Proposed CY 2012 Policy

We are proposing to continue our policy, for CY 2012, 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. The rationale for this policy is provided in the CY 2010 OPPS/ASC final rule with comment period (74 FR 60471 through 60477). We also 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. In addition, we 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)).

For CY 2012, we also are proposing to continue our policy established in CY 2010 to include implantable biologicals in our calculation of the device APC offset amounts. In addition, we are proposing to continue 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 2012 using the same methodology we have historically used to calculate and set device APC offset amounts for device categories eligible for pass-through payment, and to include the costs of implantable biologicals in the calculation of the device APC offset amounts, as we first finalized and implemented for CY 2010.

In addition, we are proposing to update, on the CMS Web site at http://www.cms.gov/​HospitalOutpatientPPS, the list of all procedural APCs with the final CY 2012 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 CY 2012 device pass-through payment applications and by CMS in reviewing those applications.

In summary, for CY 2012, consistent with the policy established for CY 2010, we are proposing to continue the following policies related to pass-through payment for devices: (1) treating 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 on or after January 1, 2010, as devices for purposes of the OPPS pass-through evaluation process and payment methodology; (2) including implantable biologicals in calculating the device APC offset amounts; (3) using the device APC offset amounts to evaluate whether the cost of a device (defined to include implantable biologicals) 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; and (4) reducing device pass-through payments based on device costs already included in the associated procedural APCs, when we determine that device costs associated with the new category are already packaged into the existing APC structure.

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, do not contain the “FB” modifier signifying that the device was furnished without cost or with a full credit, and do not contain the “FC” modifier signifying that the device was furnished with partial credit. As discussed in section II.A.2.d.(1) of this proposed rule, we are proposing to continue to use our standard ratesetting methodology for device-dependent APCs for CY 2012.

To ensure equitable payment when the hospital receives a device without cost or with full credit, in CY 2007, we implemented a policy to reduce the payment for specified device-dependent APCs by the estimated portion of the APC payment attributable to device costs (that is, the device offset) when the hospital receives a specified device at no cost or with full credit (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 Start Printed Page 42244cost 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 2012, we are proposing to continue the existing 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 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.

For CY 2012, 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 also 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. As we stated in the CY 2011 OPPS/ASC final rule with comment period (75 FR 71925), we continue to believe 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 2012 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 applied in CY 2011 continue to meet the criteria for CY 2012, and to determine whether other APCs to which the policy did not apply in CY 2011 would meet the criteria for CY 2012. Based on the CY 2010 claims data available for this proposed rule, we are not proposing any changes to the APCs and devices to which this policy applies. However, as discussed in section II.A.2.e.(6) of this proposed rule, we are proposing to delete APC 0418 (Insertion of Left Ventricular Pacing Electrode) for CY 2012 and, therefore, are proposing to remove this APC from the list of APCs to which the no cost/full credit and partial credit device adjustment policy would apply in CY 2012.

Table 24 below lists the proposed APCs to which the payment adjustment policy for no cost/full credit and partial credit devices would apply in CY 2012 and displays the proposed payment adjustment percentages for both no cost/full credit and partial credit circumstances. We are proposing that the no cost/full credit adjustment for each APC to which this policy would continue to apply would be the device offset percentage for the APC (the estimated percentage of the APC cost that is attributable to the device costs that are packaged into the APC). We also are proposing that the partial credit device adjustment for each APC would continue to be 50 percent of the no cost/full credit adjustment for the APC.

Table 25 below lists the proposed devices to which the payment adjustment policy for no cost/full credit and partial credit devices would apply in CY 2012. In the CY 2012 OPPS/ASC final rule with comment period, we will update the lists of APCs and devices to which the no cost/full credit and partial credit device adjustment policy would apply for CY 2012, consistent with the three selection criteria discussed earlier in this section, based on the final CY 2010 claims data available for the final rule with comment period.

We are proposing, for CY 2012, that OPPS payments for implantation procedures to which the “FB” modifier is appended be reduced by 100 percent of the device offset for no cost/full credit cases when both a device code listed in Table 25 below, is present on the claim and the procedure code maps to an APC listed in Table 24 below. We are also proposing that OPPS payments for implantation procedures to which the “FC” modifier is appended are reduced by 50 percent of the device offset when both a device code listed in Table 25 is present on the claim and the procedure code maps to an APC listed in Table 24. Beneficiary copayment is based on the reduced amount when either the “FB” modifier 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.Start Printed Page 42245

Table 24—Proposed APCs to Which the No Cost/Full Credit and Partial Credit Device Adjustment Policy Would Apply in CY 2012

Proposed CY 2012 APCProposed CY 2012 APC titleProposed CY 2012 device offset percentage for no cost/full credit caseProposed CY 2012 device offset percentage for partial credit case
0039Level I Implantation of Neurostimulator Generator85%43%
0040Level I Implantation/Revision/Replacement of Neurostimulator Electrodes54%27%
0061Level II Implantation/Revision/Replacement of Neurostimulator Electrodes64%32%
0089Insertion/Replacement of Permanent Pacemaker and Electrodes71%35%
0090Insertion/Replacement of Pacemaker Pulse Generator73%37%
0106Insertion/Replacement of Pacemaker Leads and/or Electrodes43%21%
0107Insertion of Cardioverter-Defibrillator88%44%
0108Insertion/Replacement/Repair of Cardioverter-Defibrillator Leads87%43%
0227Implantation of Drug Infusion Device81%40%
0259Level VII ENT Procedures83%41%
0315Level II Implantation of Neurostimulator Generator88%44%
0318Implantation of Cranial Neurostimulator Pulse Generator and Electrode86%43%
0385Level I Prosthetic Urological Procedures61%30%
0386Level II Prosthetic Urological Procedures70%35%
0425Level II Arthroplasty or Implantation with Prosthesis60%30%
0648Level IV Breast Surgery44%22%
0654Insertion/Replacement of a permanent dual chamber pacemaker74%37%
0655Insertion/Replacement/Conversion of a permanent dual chamber pacemaker73%37%
0680Insertion of Patient Activated Event Recorders72%36%

Table 25—Proposed Devices to Which the No Cost/Full Credit and Partial Credit Device Adjustment Policy Would Apply In CY 2012

CY 2012 Device HCPCS codeCY 2012 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.
L8680Implt neurostim elctr each.
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 biologicals (also referred to as biologics). 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 biologicals and brachytherapy sources used for the treatment of cancer; and current radiopharmaceutical drugs and biologicals. For those drugs and biologicals 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 biologicals 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 a period of at least 2 years, but not more than 3 years, after the product's first payment as a hospital outpatient service under Medicare Part B. Proposed CY 2012 pass-through drugs and biologicals and their designated APCs are assigned status indicator “G” in Addenda A and B to this proposed rule, which are referenced in section XVII. of this proposed rule and available via the Internet.

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 for the drug or biological exceeds the portion of the otherwise applicable Medicare OPD fee Start Printed Page 42246schedule that the Secretary determines is associated with the drug or biological. If the drug or biological is covered under a competitive acquisition contract under section 1847B of the Act, the pass-through payment amount is 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. As we noted in the CY 2009 OPPS/ASC final rule with comment period (73 FR 68633), the Part B drug CAP program was postponed beginning in CY 2009 (Medicare Learning Network (MLN) Matters Special Edition 0833, available via the Web site: http://www.cms.gov). As of publication of this proposed rule, the postponement of the Part B drug CAP program remains in effect, and there is no effective CAP program rate for pass-through drugs and biologicals as of January 1, 2009. Consistent with what we indicated in the CY 2011 OPPS/ASC final rule with comment period (75 FR 71928), if the program is reinstituted during CY 2012 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 all drugs and biologicals with pass-through status.

This methodology for determining the pass-through payment amount is set forth in regulations at 42 CFR 419.64, which specify 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 average sales price (ASP) methodology, which is used for payment for drugs and biologicals described in section 1842(o)(1)(C) of the Act 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, the wholesale acquisition cost (WAC), and the 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.

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. For CY 2010, we estimated the OPPS pass-through payment estimate for drugs and biologicals to be $35.5 million. For CY 2011, we estimated the OPPS pass-through payment for drugs and biologicals to be $15.5 million. Our proposed OPPS pass-through payment estimate for drugs and biologicals in CY 2012 is $19 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 2012

We are proposing that the pass-through status of 19 drugs and biologicals would expire on December 31, 2011, as listed in Table 26 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, 2011. These drugs and biologicals were approved for pass-through status on or before January 1, 2010. 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 $80 for CY 2012), 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 of the drug or biological 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 2012, as discussed further in section V.B.3. of this proposed rule). Section V.B.2.d. of this proposed rule discusses the packaging of all nonpass-through contrast agents, diagnostic radiopharmaceuticals, and implantable biologicals.

Table 26—Proposed Drugs and Biologicals for Which Pass-Through Status Will Expire December 31, 2011

Proposed CY 2012 HCPCS codeCY 2012 long descriptorProposed CY 2012 SIProposed CY 2012 APC
A9582Iodine I-123 iobenguane, diagnostic, per study dose, up to 15 millicuriesNN/A
A9583Injection, gadofosveset trisodium, 1 mlNN/A
C9250Human plasma fibrin sealant, vapor-heated, solvent-detergent (Artiss), 2 mlK9250
C9360Dermal substitute, native, non-denatured collagen, neonatal bovine origin (SurgiMend Collagen Matrix), per 0.5 square centimetersK9360
C9361Collagen matrix nerve wrap (NeuroMend Collagen Nerve Wrap), per 0.5 centimeter lengthNN/A
C9362Porous purified collagen matrix bone void filler (Integra Mozaik Osteoconductive Scaffold Strip), per 0.5 ccNN/A
C9363Skin substitute, Integra Meshed Bilayer Wound Matrix, per square centimeterK9363
C9364Porcine implant, Permacol, per square centimeterNN/A
J0598Injection, C-1 esterase inhibitor (human), Cinryze, 10 unitsK9251
J0641Injection, levoleucovorin calcium, 0.5 mgK1236
Start Printed Page 42247
J0718Injection, certolizumab pegol, 1 mgK9249
J1680Injection, human fibrinogen concentrate, 100 mgK1290
J2426Injection, paliperidone palmitate, 1 mgK9255
J2562Injection, plerixafor, 1 mgK9252
J7312Injection, dexamethasone intravitreal implant, 0.1 mgK9256
J8705Topotecan, oral, 0.25 mgK1238
J9155Injection, degarelix, 1 mgK1296
J9328Injection, temozolomide, 1 mgK9253
Q0138Injection, Ferumoxytol, for treatment of iron deficiency anemia, 1 mgK1297

3. Proposed Drugs, Biologicals, and Radiopharmaceuticals With New or Continuing Pass-Through Status in CY 2012

We are proposing to continue pass-through status in CY 2012 for 33 drugs and biologicals. None 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, 2011. These drugs and biologicals, which were approved for pass-through status between April 1, 2010 and July 1, 2011, are listed in Table 27 below. The APCs and HCPCS codes for these drugs and biologicals approved for pass-through status through April 1, 2011, are assigned status indicator “G” in Addenda A and B, which are referenced in section XVIII of this proposed rule and available via the Internet.

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 propose to continue to provide payment for drugs and biologicals with pass-through status at a rate of ASP+6 percent in CY 2012, the amount that drugs and biologicals receive under section 1842(o) of the Act. Thus, for CY 2012, 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 2012. Therefore, the difference between ASP+4 percent that we are proposing to pay for nonpass-through separately payable drugs under the CY 2012 OPPS and ASP+6 percent would be the CY 2012 pass-through payment amount for these drugs and biologicals. In the case of pass-through contrast agents and diagnostic radiopharmaceuticals, 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. We note that we are proposing to expire pass-through status for the remaining three implantable biologicals approved on or before January 1, 2010, under pass-through status as a drug or biological. Therefore, as described in the CY 2010 OPPS/ASC final rule with comment period (74 FR 60476) and as proposed in this proposed rule, implantable biologicals that are surgically inserted or implanted (through a surgical incision or a natural orifice) would be evaluated under the device pass-through process and paid according to the device payment methodology. Payment for nonpass-through implantable biologicals would continue to be packaged into the payment for the associated procedure as described in section V.B.2.d. of this proposed rule.

In addition, we are proposing to continue to update pass-through payment rates on a quarterly basis on the CMS Web site during CY 2012 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. For a full description of this policy, we refer readers to the CY 2006 OPPS/ASC final rule with comment period (70 FR 42722 and 42723). If the Part B drug CAP is reinstated during CY 2012, and a drug or biological that has been granted pass-through status for CY 2012 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 adjustments to the payment rates for these drugs and biologicals on a quarterly basis, as appropriate. As is our standard methodology, we annually review new permanent HCPCS codes and delete temporary HCPCS C-codes if an alternate permanent HCPCS code is available for purposes of OPPS billing and payment.

In CY 2012, as is consistent with our CY 2011 policy for diagnostic and therapeutic 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. Therefore, if a diagnostic or therapeutic radiopharmaceutical receives pass-through status during CY 2012, we are proposing to follow the standard ASP methodology to determine the pass-through payment rate that drugs receive under section 1842(o) of the Act, which 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 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.

As discussed in more detail in section V.B.2.d. of this proposed rule, over the last 4 years, we implemented a policy whereby payment for all nonpass-through diagnostic Start Printed Page 42248radiopharmaceuticals, contrast agents, and implantable biologicals is packaged into payment for the associated procedure. We are proposing to continue the packaging of these items, regardless of their per day cost, in CY 2012. 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)) 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 APC offset amount for the associated clinical APC in which the drug or biological is utilized. The calculation of the “policy-packaged” drug APC offset amounts are described in more detail in section IV.A.2. of this proposed rule. 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 those 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, as we did in CY 2011, we are proposing to continue to set the associated copayment amount for pass-through diagnostic radiopharmaceuticals and contrast agents that would otherwise be packaged if the item did not have pass-through status to zero for CY 2012. The separate OPPS payment to a hospital for the pass-through diagnostic radiopharmaceutical or contrast agent, 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 proposing to not publish a copayment amount for these items in Addenda A and B to the proposed rule (which are referenced in section XVII. of this proposed rule and available via the Internet on the CMS Web site).

The 33 drugs and biologicals that we are proposing to continue on pass-through status for CY 2012 or that have been granted pass-through status as of July 2011 are displayed in Table 27. We note that, for CY 2010 and the first two quarters of CY 2011, HCPCS code J1572 (Injection, immune globulin, (flebogamma/flebogamma dif), intravenous, non-lyophilized (e.g. liquid), 500 mg) was assigned a status indicator of “K,” meaning that this product was paid separately as a nonpass-through separate payable drug. Beginning on July 1, 2011, HCPCS code J1572 is assigned a status indicator of “G” and will be given pass-through status for at least 2, but not more than 3, years. The payment rate reflecting a pass-through payment amount of ASP+6 percent is not included in Addenda A and B of this proposed rule because these Addenda solely reflect codes and prices effective as of the second quarter of CY 2011, or April 2011.

Table 27—Proposed Drugs and Biologicals With Pass-Through Status in CY 2012

Proposed CY 2012 HCPCS codeCY 2012 long descriptorProposed CY 2012 SIProposed CY 2012 APC
C9270Injection, immune globulin (Gammaplex), intravenous, non-lyophilized (e.g. liquid), 500 mgG9270
C9272Injection, denosumab, 1 mgG9272
C9274Crotalidae polyvalent immune fab (ovine), 1 vialG9274
C9275Injection, hexaminolevulinate hydrochloride, 100 mg, per study doseG9275
C9276Injection, cabazitaxel, 1 mgG9276
C9277Injection, alglucosidase alfa (Lumizyme), 1 mgG9277
C9279Injection, ibuprofen, 100 mgG9279
C9280Injection, eribulin mesylate, 1 mgG9280
C9281Injection, pegloticase, 1 mgG9281
C9282Injection, ceftaroline fosamil, 10 mgG9282
C9283 **Injection, acetaminophen, 10 mgG9283
C9284 **Injection, ipilimumab, 1 mgG9284
C9285 **Lidocaine 70 mg/tetracaine 70 mg, per patchG9285
C9365 **Oasis Ultra Tri-Layer Matrix, per square centimeterG9365
C9367Skin substitute, Endoform Dermal Template, per square centimeterG9367
C9406 **Iodine I-123 ioflupane, diagnostic, per study dose, up to 5 millicuriesG9406
J0597Injection, C-1 Esterase inhibitor (human), Berinert, 10 unitsG9269
J0775Injection, collagenase clostridium histolyticum, 0.01 mgG1340
J1290Injection, ecallantide, 1 mgG9263
J1572 ***Injection, immune globulin, (flebogamma/flebogamma dif), intravenous, non-lyophilized (e.g. liquid), 500 mgG0947
J3095Injection, telavancin, 10 mgG9258
J3262Injection, tocilizumab, 1 mgG9624
J3357Injection, ustekinumab, 1 mgG9261
J3385Injection, velaglucerase alfa, 100 unitsG9271
J7335Capsaicin 8% patch, per 10 square centimetersG9268
J8562Fludarabine phosphate, oral, 10 mgG1339
J9302Injection, ofatumumab, 10 mgG9260
J9307Injection, pralatrexate, 1 mgG9259
J9315Injection, romidepsin, 1 mgG9625
Start Printed Page 42249
Q2040Injection, incobotulinumtoxin A, 1 unitG9278
Q2041 **Injection, von willebrand factor complex (human), Wilate, 1 i.u. vwf:rcoG1352
Q2043 *Sipuleucel-T, minimum of 50 million autologous CD54+ cells activated with PAP-GM-CSF, including leukapheresis and all other preparatory procedures, per infusionG9273
Q2044 **Injection, belimumab, 10 mgG1353
* HCPCS code C9273 was deleted June 30, 2011, and replaced with HCPCS code Q2043 effective July 1, 2011.
** These HCPCS codes are effective July 1, 2011, and are not included in the Addenda to this proposed rule.
*** HCPCS code J1572 has a status indicator of “G,” effective July 1, 2011.

4. 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 CY 2008, 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 2012, 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. Proposed 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) of the Act (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 C9406 (Iodine I-123 ioflupane, diagnostic, per study dose, up to 5 millicuries). HCPCS code C9406 was granted pass-through status beginning July 1, 2011, and is proposed to continue receiving pass-through status in CY 2012. 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, we are proposing that 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, payment would be based on 95 percent of the product's most recently published AWP.

Because a payment offset is necessary in order to provide an appropriate transitional pass-through payment, we deduct from the pass-through payment for radiopharmaceuticals an amount reflecting the portion of the APC payment associated with predecessor radiopharmaceuticals in order to ensure no duplicate radiopharmaceutical 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). 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). In the CY 2010 OPPS/ASC final rule with comment period (74 FR 60480 through 60484), we finalized a policy to redefine “policy-packaged” drugs as only nonpass-through diagnostic radiopharmaceuticals and contrast agents, as a result of the policy discussed in sections V.A.4. and V.B.2.d. of the CY 2010 OPPS/ASC final rule with comment period (74 FR 60471 through 60477 and 60495 through 60499, respectively) that treats nonpass-through implantable biologicals that are surgically inserted or implanted (through a surgical incision or a natural orifice) 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.

Beginning in CY 2011 and as discussed in the CY 2011 OPPS/ASC final rule with comment period (75 FR 71934 through 71936), we finalized a policy to require hospitals to append modifier “FB” to specified nuclear medicine procedures when the diagnostic radiopharmaceutical is received at no cost/full credit. These instructions are contained within the I/OCE CMS specifications on the CMS Web site at http://www.cms.gov/​OutpatientCodeEdit/​02_​OCEQtrReleaseSpecs.asp#TopOfPage. For CY 2012 and future years, we are proposing to continue to require hospitals to append modifier “FB” to specified nuclear medicine procedures when the diagnostic radiopharmaceutical is received at no cost/full credit. In addition, we are proposing to continue to require that when a hospital bills with an “FB” modifier with the nuclear medicine scan, the payment amount for procedures in the APCs listed in Table Start Printed Page 4225028 of this proposed rule would be reduced by the full “policy-packaged” offset amount appropriate for diagnostic radiopharmaceuticals. Finally, we also are proposing to continue to require hospitals to report a token charge of less than $1.01 in cases in which the diagnostic radiopharmaceutical is furnished without cost or with full credit.

For CY 2011, we finalized a policy to apply the diagnostic radiopharmaceutical offset policy to payment for pass-through diagnostic radiopharmaceuticals, as described above. For CY 2012, we are proposing to continue to apply the diagnostic radiopharmaceutical offset policy to payment for pass-through diagnostic radiopharmaceuticals. Table 28 displays the proposed APCs to which nuclear medicine procedures would be assigned in CY 2012 and for which we expect that an APC offset could be applicable in the case of diagnostic radiopharmaceuticals with pass-through status.

Table 28—Proposed APCs To Which Nuclear Medicine Procedures Would Be Assigned for CY 2012

Proposed CY 2012 APCCY 2012 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 II Tumor/Infection Imaging.
0414Level II Tumor/Infection Imaging.

c. Proposed Payment Offset Policy for Contrast Agents

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) of the Act (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 C9275 (Injection, hexaminolevulinate hydrochloride, 100 mg, per study dose). HCPCS code C9275 was granted pass-through status beginning January 1, 2011, and is proposed to continue with pass-through status in CY 2012. 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, payment would be based on 95 percent of the product's most recently published AWP.

We believe that a payment offset 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 for CY 2012 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 2010, we established a policy to estimate the portion of each APC payment rate that could reasonably be attributed to the cost of predecessor contrast agents when considering new contrast agents for pass-through payment (74 FR 60482 through 60484). For CY 2012, as we did in CY 2011, we are proposing to continue 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). In CY 2010, we finalized a policy to redefine “policy-packaged” drugs as only nonpass-through diagnostic radiopharmaceuticals and contrast agents (74 FR 60495 through 60499). 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 apply this methodology for CY 2012 to recognize that when a contrast agent with pass-through status is billed with any procedural APC listed in Table 29, a specific offset based on the procedural APC would be applied to payments for the contrast agent to ensure that duplicate payment is not made for the contrast agent.

We are proposing to continue to post annually on the CMS Web site at http://www.cms.gov/​HospitalOutpatientPPS a file that contains the APC offset amounts that will be used for that year for purposes of both evaluating cost Start Printed Page 42251significance 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.

Proposed procedural APCs for which we expect a contrast offset could be applicable in the case of a pass-through contrast agent have been identified as any procedural APC with a “policy-packaged” drug amount greater than $20 that is not a nuclear medicine APC identified in Table 28 above and these APCs are displayed in Table 29 below. The methodology used to determine a proposed threshold cost for application of a contrast agent offset policy is described in detail in the CY 2010 OPPS/ASC final rule with comment period (70 FR 60483 through 60484). For CY 2012, we are proposing to continue to recognize that when a contrast agent with pass-through status is billed with any procedural APC listed in Table 29, a specific offset based on the procedural APC would be applied to payment for the contrast agent to ensure that duplicate payment is not made for the contrast agent.

Table 29—Proposed APCs to Which a Contrast Agent Offset May Be Applicable for CY 2012

Proposed CY 2012 APCProposed CY 2012 APC title
0080Diagnostic Cardiac Catheterization.
0082Coronary or Non-Coronary Atherectomy.
0083Coronary or Non-Coronary Angioplasty and Percutaneous Valvulopasty.
0093Vascular Reconstruction/Fistula Repair without Device.
0104Transcathether Placement of Intracoronary Stents.
0128Echocardiogram with Contrast.
0152Level I Percutaneous Abdominal and Biliary Procedures.
0229Transcathether Placement of Intravascular Shunts.
0278Diagnostic Urography.
0279Level II Angiography and Venography.
0280Level III Angiography and Venography.
0283Computed Tomography with Contrast.
0284Magnetic Resonance Imaging and Magnetic Resonance Angiography with Contrast.
0333Computed Tomography without Contrast followed by Contrast.
0334Combined Abdomen and Pelvis CT with Contrast
0337Magnetic Resonance Imaging and Magnetic Resonance Angiography without Contrast followed by Contrast.
0375Ancillary Outpatient Services When Patient Expires.
0383Cardiac Computed Tomographic Imaging.
0388Discography.
0418Insertion of Left Ventricular Pacing Elect.
0442Dosimetric Drug Administration.
0653Vascular Reconstruction/Fistula Repair with Device.
0656Transcatheter Placement of Intracoronary Drug-Eluting Stents.
0662CT Angiography.
0668Level I Angiography and Venography.
8006CT and CTA with Contrast Composite.
8008MRI and MRA with Contrast Composite.

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

1. Background

Under the CY 2011 OPPS, we currently pay for drugs, biologicals, and radiopharmaceuticals that do not have pass-through status in one of two ways: as a packaged payment included in the payment for the associated service; or as a 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 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 were not new and did not have pass-through status was established at $60. For CY 2010, the packaging threshold for drugs, biologicals, and radiopharmaceuticals that were not new and did not have pass-through status was established at $65. For CY 2011, the packaging threshold for drugs, biologicals, and radiopharmaceuticals that were not new and did not have pass-through status was established at $70. The methodology used to establish the $55 Start Printed Page 42252threshold for CY 2007, the $60 threshold for CYs 2008 and 2009, the $65 threshold for CY 2010, the $70 threshold for CY 2011, and our proposed approach for CY 2012 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 four quarter moving average Producer Price Index (PPI) levels for Pharmaceutical Preparations (Prescription) 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. For CY 2010, we set the packaging threshold at $65; and for CY 2011, we set the packaging threshold at $70.

Following the CY 2007 methodology, for CY 2012, we used updated four quarter moving average PPI levels to trend the $50 threshold forward from the third quarter of CY 2005 to the third quarter of CY 2012 and again rounded the resulting dollar amount ($77.63) to the nearest $5 increment, which yielded a figure of $80. In performing this calculation, we used the most recent forecast of the quarterly index levels for the PPI for Pharmaceuticals for Human Use (Prescription) (Bureau of Labor Statistics (BLS) series code WPUSI07003) from CMS' Office of the Actuary (OACT). We note that we are not proposing a change to the PPI that is used to calculate the threshold for CY 2012; however, this change in terminology reflects a change to the BLS naming convention for this series. We refer to this series generally as the PPI for Prescription Drugs below. We chose this PPI as it reflects price changes associated with the average mix of all pharmaceuticals in the overall economy. In addition, we chose this price series because it is publicly available and regularly published, improving public access and transparency. Forecasts of the PPI for Prescription Drugs are developed by IHS Global Insight, Inc., a nationally recognized economic and financial forecasting firm. 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 2012 of $80. (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 2012 packaging status for this proposed rule, we calculated 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, contrast agents, and implantable biologicals that we are proposing to continue to package in CY 2012, as discussed in section V.B.2.d. of this proposed rule) the per day cost of all drugs, nonimplantable biologicals, and therapeutic radiopharmaceuticals (collectively called “threshold-packaged” drugs) that had a HCPCS code in CY 2010 and were paid (via packaged or separate payment) under the OPPS, using CY 2010 claims data processed before January 1, 2011. In order to calculate the per day costs for drugs, nonimplantable biologicals, and therapeutic radiopharmaceuticals to determine their proposed packaging status in CY 2012, 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 2012 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 for CY 2012, 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 2010 (data that were used for payment purposes in the physician's office setting, effective April 1, 2011) to determine the proposed rule per day cost.

As is our standard methodology, for CY 2012, we are proposing to use payment rates based on the ASP data from the fourth quarter of CY 2010 for budget neutrality estimates, packaging determinations, impact analyses, and completion of Addenda A and B to this proposed rule (which are referenced in section XVII. of this proposed rule and available via the Internet) because these are the most recent data available for use at the time of development of this proposed rule. These data were also the basis for drug payments in the physician's office setting, effective April 1, 2011. For items that did not have an ASP-based payment rate, such as some therapeutic radiopharmaceuticals, we used their mean unit cost derived from the CY 2010 hospital claims data to determine their per day cost. We are proposing to package items with a per day cost less than or equal to $80 and identified items with a per day cost greater than $80 as separately payable. Consistent with our past practice, we crosswalked historical OPPS claims data from the CY 2010 HCPCS codes that were reported to the CY 2011 HCPCS codes that we display in Addendum B of this proposed rule (which is referenced in section XVII. of this proposed rule and available via the Internet) for payment in CY 2012.

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 will be subject to quarterly updates. For our calculation of per day costs of HCPCS codes for drugs and nonimplantable biologicals in the CY 2012 OPPS/ASC final rule with comment period, we are proposing to use ASP data from the first quarter of CY 2011, 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, 2011, along with Start Printed Page 42253updated hospital claims data from CY 2010. We note that we also are proposing to use these data for budget neutrality estimates and impact analyses for the CY 2012 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 the final rule with comment period will be based on ASP data from the second quarter of CY 2011, which will be the basis for calculating payment rates for drugs and biologicals in the physician's office setting using the ASP methodology, effective October 1, 2011. These rates would then be updated in the January 2012 OPPS update, based on the most recent ASP data to be used for physician's office and OPPS payment as of January 1, 2012. For items that do not currently have an ASP-based payment rate, we are proposing to recalculate their mean unit cost from all of the CY 2010 claims data and updated cost report information available for the CY 2012 final rule with comment period to determine their final per day cost.

Consequently, the packaging status of some HCPCS codes for drugs, nonimplantable biologicals, and therapeutic radiopharmaceuticals in this CY 2012 OPPS/ASC proposed rule may be different from the same drug HCPCS code's packaging status determined based on the data used for the final rule with comment period. Under such circumstances, we are proposing to continue to follow the established policies initially adopted for the CY 2005 OPPS (69 FR 65780) in order to more equitably pay for those drugs whose median cost fluctuates relative to the proposed CY 2012 OPPS drug packaging threshold and the drug's payment status (packaged or separately payable) in CY 2011. Specifically, for CY 2012, we are proposing to apply the following policies to these HCPCS codes for drugs, nonimplantable biologicals, and therapeutic radiopharmaceuticals whose relationship to the proposed $80 drug packaging threshold changes:

  • HCPCS codes for drugs and nonimplantable biologicals that were paid separately in CY 2011 and that are proposed for separate payment in CY 2012, and that then have per day costs equal to or less than $80, based on the ASPs and hospital claims data used for this CY 2012 proposed rule, would continue to receive separate payment in CY 2012.
  • HCPCS codes for drugs and nonimplantable biologicals that were packaged in CY 2011 and that are proposed for separate payment in CY 2012, and that then have per day costs equal to or less than $80, based on the ASPs and hospital claims data used for this CY 2012 proposed rule, would remain packaged in CY 2012.
  • HCPCS codes for drugs and nonimplantable biologicals for which we are proposing packaged payment in CY 2012 but then have per day costs greater than $80, based on the ASPs and hospital claims data used for this CY 2012 proposed rule, would receive separate payment in CY 2012.

In the CY 2010 OPPS/ASC final rule with comment period (74 FR 60485 through 60489), we implemented a policy to treat oral and injectable forms of 5-HT3 antiemetics comparably to all other threshold packaged drugs, nonimplantable biologicals, and therapeutic radiopharmaceuticals under our standard packaging methodology of packaging drugs with a per day cost less than $65. We are proposing for CY 2012 to continue our policy of not exempting these 5-HT3 antiemetic products from our standard packaging methodology. For CY 2012, we are proposing to package payment for all of the 5-HT3 antiemetics except palonosetron hydrochloride, which for CY 2012 has a estimated per day cost, from the CY 2010 claims data, above the proposed CY 2012 drug packaging threshold. Our rationale for this policy is outlined in the CY 2010 OPPS/ASC final rule with comment period (74 FR 60487 through 60488).

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 HCPCS code to the associated newly recognized code(s), reflecting the packaged or separately payable status of the new code(s). 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.

In the CY 2010 OPPS/ASC final rule with comment period (74 FR 60490 through 60491), we finalized a policy to make a single packaging determination for a drug, rather than an individual HCPCS code, when a drug has multiple HCPCS codes describing different dosages. We analyzed CY 2008 claims data for the HCPCS codes describing different dosages of the same drug or biological that were newly recognized in CY 2008 and found that our claims data would result in several different packaging determinations for different codes describing the same drug or biological. Furthermore, we found that our claims data would include few units and days for a number of newly recognized HCPCS codes, resulting in our concern that these data reflected 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. Based on these findings from our first available claims data for the newly recognized HCPCS codes, we believed 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. For CY 2012, we continue to believe that adopting the standard HCPCS code-specific packaging determinations for these codes could lead to payment incentives for hospitals to report certain HCPCS codes for drugs instead of others. Making packaging determinations on a drug-specific basis eliminates these incentives and allows hospitals flexibility in choosing to report all HCPCS codes for different dosages of the same drug or only the lowest dosage HCPCS code. Therefore, we are proposing to continue our policy to make packaging determinations on a Start Printed Page 42254drug-specific basis, rather than an HCPCS code-specific basis, for those HCPCS codes that describe the same drug or biological but different dosages in CY 2012.

For CY 2012, 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 2010 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. All HCPCS codes listed in Table 30 below had ASP pricing information available for this CY 2012 OPPS/ASC proposed rule. Therefore, we multiplied the weighted average ASP+4 percent per unit 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 $80 (whereupon all HCPCS codes for the same drug or biological would be packaged) or greater than $80 (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 30 below.

Table 30.—Proposed Hcpcs Codes To Which the CY 2012 Drug—Specific Packaging Determination Methodology Would Apply

Proposed CY 2012 HCPCS codeProposed CY 2012 long descriptorProposed CY 2012 SI
C9257Injection, bevacizumab, 0.25 mgK
J9035Injection, bevacizumab, 10 mgK
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
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
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
J9250Methotrexate sodium, 5 mgN
J9260Methotrexate sodium, 50 mgN
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 doseage 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 doseage 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 antiemetic 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 antiemetic at the time of chemotherapy treatment, not to exceed a 48-hour dosage regimenN
Start Printed Page 42255
Q0171Chlorpromazine hydrochloride, 10 mg, oral, FDA approved prescription antiemetic, for use as a complete therapeutic substitute for an IV antiemetic 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 chemotheapy 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
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