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Proposed Rule

Hospital Outpatient Prospective and Ambulatory Surgical Center Payment Systems and Quality Reporting Programs; Electronic Reporting Pilot; Inpatient Rehabilitation Facilities Quality Reporting Program; Quality Improvement Organization Regulations

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ACTION:

Proposed rule.

SUMMARY:

This proposed rule would revise the Medicare hospital outpatient prospective payment system (OPPS) and the Medicare ambulatory surgical center (ASC) payment system for CY 2013 to implement applicable statutory requirements and changes arising from our continuing experience with these systems. In this proposed rule, we describe the proposed changes to the amounts and factors used to determine the payment rates for Medicare services paid under the OPPS and those paid under the ASC payment system. In addition, we are proposing updates and refinements to the requirements for the Hospital Outpatient Quality Reporting (OQR) Program, the ASC Quality Reporting (ASCQR) Program, and the Inpatient Rehabilitation Facility (IRF) Quality Reporting Program. We also are proposing revisions to the electronic reporting pilot for the Electronic Health Record (EHR) Incentive Program, and the various regulations governing Quality Improvement Organizations (QIOs), including the secure transmittal of electronic medical information, beneficiary complaint resolution and notification processes, and technical changes.

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 September 4, 2012.

ADDRESSES:

In commenting, please refer to file code CMS-1589-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-1589-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-1589-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.

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

FOR FURTHER INFORMATION CONTACT:

Marjorie Baldo, (401) 786-4617, for issues related to new CPT and Level II HCPCS codes, exceptions to the 2 times rule, and new technology APCs.

Jennifer Bean, (410) 786-4827, for issues related to the Hospital Outpatient Quality Reporting Program.

Anita Bhatia, (410) 786-7236, for issues related to the ASCQR Program.

Douglas Brown, (410) 786-0028, for issues related to Electronic Health Record Incentive Program Electronic Reporting Pilot.

Carrie Bullock, (401) 786-0378, for issues related to device-dependent APCs, blood products, and no cost/full credit and partial credit devices.

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

Caroline Gallaher, (410) 786-8705, for issues related to Inpatient Rehabilitation Facilities Quality Reporting Program.

Alpha-Banu Huq, (410) 786-8687, for issues related to OPPS drugs, radiopharmaceuticals, biologicals, blood clotting factors, and packaged items/services.

Twi Jackson, (410) 786-1159, for issues related to hospital outpatient visits, extended assessment composite APC, and inpatient-only procedures.

Thomas Kessler, (410) 786-1991, for issues related to QIO regulations.

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

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

Jana Lindquist, (410) 786-4533, for issues related to partial hospitalization and community mental health center issues.

Ann Marshall, (410) 786-3059, for issues related to OPPS supervision, proton beam therapy, and the Hospital Outpatient Payment (HOP) Panel.

John McInnes, (410) 786-0378, for issues related to new technology intraocular lenses (NTIOLs).

Char Thompson, (410) 786-2300, for issues related to OPPS CCRs and ambulatory surgical center (ASC) payments.

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

SUPPLEMENTARY INFORMATION:

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

Comments received timely will also be available for public inspection, generally beginning approximately 3 weeks after publication of the rule, at the headquarters of the Centers for Medicare & Medicaid Services, 7500 Security Boulevard, Baltimore, MD 21244, on Monday through Friday of each week from 8:30 a.m. to 4:00 p.m. EST. To schedule an appointment to view public comments, phone 1-800-743-3951.

Electronic Access

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 in our OPPS/ASC proposed and final rules were published in the Federal Register as part of the annual rulemakings. However, beginning with the CY 2012 proposed 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.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html. The Addenda relating to the ASC payment system are available at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/ASCPayment/index.html. 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

AHA American Hospital Association

AMA American Medical Association

APC Ambulatory Payment Classification

ASC Ambulatory surgical center

ASCQR Ambulatory Surgical Center Quality Reporting

ASP Average sales price

AWP Average wholesale price

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

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

BIPA Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000, Public Law 106-554

BLS Bureau of Labor Statistics

CAH Critical access hospital

CAP Competitive Acquisition Program

CASPER Certification and Survey Provider Enhanced Reporting

CAUTI Catheter associated urinary tract infection

CBSA Core-Based Statistical Area

CCN CMS Certification Number

CCR Cost-to-charge ratio

CDC Centers for Disease Control and Prevention

CEO Chief executive officer

CERT Comprehensive Error Rate Testing

CLFS Clinical Laboratory Fee Schedule

CMHC Community mental health center

CMS Centers for Medicare & Medicaid Services

CPI-U Consumer Price Index for All Urban Consumers

CPT Current Procedural Terminology (copyrighted by the American Medical Association)

CQM Clinical quality measure

CR Change request

CY Calendar year

DFO Designated Federal Official

DRA Deficit Reduction Act of 2005, Public Law 109-171

DSH Disproportionate share hospital

EACH Essential access community hospital

ED Emergency department

E/M Evaluation and management

EHR Electronic health record

ESRD End-stage renal disease

FACA Federal Advisory Committee Act, Public Law 92-463

FDA Food and Drug Administration

FFS [Medicare] Fee-for-service

FY Fiscal year

GAO Government Accountability Office

HAI Healthcare-associated infection

HCERA Health Care and Education Reconciliation Act of 2010, Public Law 111-152

HCPCS Healthcare Common Procedure Coding System

HCRIS Hospital Cost Report Information System

HEU Highly enriched uranium

HIPAA Health Insurance Portability and Accountability Act of 1996, Public Law 104-191

HITECH Health Information Technology for Economic and Clinical Health [Act] (found in the American Recovery and Reinvestment Act of 2009, Pub. L. 111-5)

HOP Hospital Outpatient Payment [Panel]

HOPD Hospital outpatient department

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

ICD Implantable cardioverter defibrillator

ICU Intensive care unit

IHS Indian Health Service

I/OCE Integrated Outpatient Code Editor

IOL Intraocular lens

IOM Institute of Medicine

IORT Intraoperative radiation treatment

IPPS [Hospital] Inpatient Prospective Payment System

IQR [Hospital] Inpatient Quality Reporting

IRF Inpatient rehabilitation facility

IRF-PAI Inpatient Rehabilitation Facility-Patient Assessment Instrument

LDR Low dose rate

LTCH Long-term care hospital

MAC Medicare Administrative Contractor

MAP Measure Application Partnership

MedPAC Medicare Payment Advisory Commission

MEI Medicare Economic Index

MFP Multifactor productivity

MGCRB Medicare Geographic Classification Review Board

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

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

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

MMEA Medicare and Medicaid Extenders Act of 2010, Public Law 111-309

MMSEA Medicare, Medicaid, and SCHIP Extension Act of 2007, Public Law 110-173

MPFS Medicare Physician Fee Schedule

MRA Magnetic resonance angiography

MRI Magnetic resonance imaging

MSA Metropolitan Statistical Area

NCCI National Correct Coding Initiative

NHSN National Healthcare Safety Network

NQF National Quality Forum

NTIOL New technology intraocular lens

NUBC National Uniform Billing Committee

OACT [CMS] Office of the Actuary

OBRA Omnibus Budget Reconciliation Act of 1996, Public Law 99-509

OIG [HHS] Office of the Inspector General

OMB Office of Management and Budget

OPD [Hospital] Outpatient Department

OPPS [Hospital] Outpatient Prospective Payment System

OPSF Outpatient Provider-Specific File

OQR [Hospital] Outpatient Quality Reporting

OT Occupational therapy

PCR Payment-to-cost ratio

PE Practice expense

PHP Partial hospitalization program

PHS Public Health Service [Act], Public Law 96-88

PPI Producer Price Index

PPS Prospective payment system

PPV Pneumococcal pneumonia

PQRS Physician Quality Reporting System

PT Physical therapy

QDC Quality data code

QIO Quality Improvement Organization

RAC Recovery Audit Contractor

RFA Regulatory Flexibility Act

RTI Research Triangle Institute, International

RVU Relative value unit

SCH Sole community hospital

SCOD Specified covered outpatient drugs

SI Status indicator

SIR Standardized infection ratio

SLP Speech-language pathology

TOPs Transitional Outpatient Payments

USPSTF United States Preventive Services Task Force

UTI Urinary tract infection

VBP Value-based purchasing

WAC Wholesale acquisition cost

Table of Contents

I. Summary and Background

A. Executive Summary of This Proposed Rule

1. Purpose

2. Summary of the Major Provisions

3. Summary of Costs and Benefits

B. Legislative and Regulatory Authority for the Hospital OPPS

C. Excluded OPPS Services and Hospitals

D. Prior Rulemaking

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

1. Authority of the Panel

2. Establishment of the Panel

3. Panel Meetings and Organizational Structure

F. Public Comments Received on the CY 2012 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 Costs Used for Ratesetting

a. Claims Preparation

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

(1) Splitting Claims

(2) Creation of “Pseudo” Single Procedure Claims

c. Completion of Claim Records and Geometric Mean Cost Calculations

(1) General Process

(2) Recommendations of the Advisory Panel on Hospital Outpatient Payment Regarding Data Development

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

(1) Device-Dependent APCs

(2) Blood and Blood Products

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

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

(5) Computed Tomography of Abdomen/Pelvis (APCs 0331 and 0334)

(6) Brachytherapy Sources

e. Proposed Calculation of Composite APC Criteria-Based Costs

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

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

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

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

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

(6) Cardiac Resynchronization Therapy Composite APC (APC 0108)

f. Proposed Geometric Mean-Based Relative Payment Weights

3. Proposed Changes to Packaged Services

a. Background

b. Proposed Clarification of Regulations at 42 CFR 419.2(b)

c. Packaging Recommendations of the HOP Panel (“The Panel”) at its February 2012 Meeting

d. Proposed Packaging of Drugs, Biologicals, and Radiopharmaceuticals

(1) Existing Packaging Policies

(2) Clarification of Packaging Policy for Anesthesia Drugs

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

f. Summary of Proposals

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

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. Proposed Payment Adjustment for Certain Cancer Hospitals for CY 2013

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 CY 2012 Level II HCPCS and CPT Codes Effective April 1, 2012 and July 1, 2012 for Which We Are Soliciting Public Comments in This CY 2013 Proposed Rule

2. Proposed Process for New Level II HCPCS Codes That Will Be Effective October 1, 2012 and New CPT and Level II HCPCS Codes That Will Be Effective January 1, 2013 for Which We Will Be Soliciting Public Comments in the CY 2013 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

3. Proposed Payment Adjustment Policy for Radioisotopes Derived From Non-Highly Enriched Uranium Sources

a. Background

b. Proposed Payment Policy

D. Proposed OPPS APC-Specific Policies

1. Placement of Amniotic Membrane (APC 0233)

2. Proton Beam Therapy (APCs 0664 and 0667)

3. Intraoperative Radiation Therapy (IORT) (APC 0412)

a. Background

b. CY 2013 Proposals for CPT Codes 77424, 77425, and 77469

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 2013 Policy

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

a. Background

b. Proposed CY 2013 Policy

3. Proposed Clarification of Existing Device Category Criterion

a. Background

b. Proposed Clarification of CY 2013 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 2013

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

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 CY 2013 Payment Policy

4. Proposed Payment Policy for Therapeutic Radiopharmaceuticals

5. Proposed Payment for Blood Clotting Factors

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

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

A. Background

B. Proposed Estimate of Pass-Through Spending

VII. Proposed OPPS Payment for Hospital Outpatient Visits

A. Background

B. Proposed Policies for Hospital Outpatient Visits

C. Transitional Care Management

VIII. Proposed Payment for Partial Hospitalization Services

A. Background

B. Proposed PHP APC Update for CY 2013

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 for the Supervision of Outpatient Services in Hospitals and CAHs

A. Conditions of Payment for Physical Therapy, Speech-Language Pathology, and Occupational Therapy Services in Hospitals and CAHs

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

XI. Outpatient Status—Solicitation of Public Comments

XII. Proposed CY 2013 OPPS Payment Status and Comment Indicators

A. Proposed CY 2013 OPPS Payment Status Indicator Definitions

B. Proposed CY 2013 Comment Indicator Definitions

XIII. OPPS Policy and Payment Recommendations

A. MedPAC Recommendations

B. GAO Recommendations

C. OIG Recommendations

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

A. Background

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

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

B. 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 2012 for Which We Are Soliciting Public Comments in This CY 2013 OPPS/ASC Proposed Rule

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 2013 OPPS/ASC Final Rule With Comment Period

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

1. Covered Surgical Procedures

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

b. Proposed Covered Surgical Procedures Designated as Office-Based

(1) Background

(2) Proposed Changes for CY 2013 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 2013

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

e. ASC Treatment of Surgical Procedures Proposed for Removal From the OPPS Inpatient List for CY 2013

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 2013

c. Waiver of Coinsurance and Deductible for Certain Preventive Services

d. Payment for the Cardiac Resynchronization Therapy Composite

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

2. Proposed Payment for Covered Ancillary Services

a. Background

b. Proposed Payment for Covered Ancillary Services for CY 2013

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 2013 and Deadline for Public Comments

4. Payment Adjustment

5. Proposed Revisions to the Major NTIOL Criteria Described in 42 CFR 416.195

6. Request for Public Comments on the “Other Comparable Clinical Advantages” Improved Outcome

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 2013 and Future Years

b. Updating the ASC Conversion Factor

3. Display of Proposed CY 2013 ASC Payment Rates

XV. Hospital Outpatient Quality Reporting Program Updates

A. Background

1. Overview

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

3. Measure Updates and Data Publication

a. Process for Updating Quality Measures

b. Publication of Hospital OQR Program Data

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

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

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

2. Suspension of One Chart-Abstracted Measure for the CY 2014 and Subsequent Years Payment Determinations

3. Deferred Data Collection of OP-24: Cardiac Rehabilitation Measure: Patient Referral from an Outpatient Setting for the CY 2014 Payment Determination

D. Quality Measures for CY 2015 Payment Determination

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

F. Proposed Payment Reduction for Hospitals That Fail To Meet the Hospital OQR Program Requirements for the CY 2013 Payment Update

1. Background

2. Proposed Reporting Ratio Application and Associated Adjustment Policy for CY 2013

G. Proposed Requirements for Reporting of Hospital OQR Data for the CY 2014 Payment Determination and Subsequent Years

1. Administrative Requirements for the CY 2014 Payment Determination and Subsequent Years

2. Form, Manner, and Timing of Data Submitted for the Hospital OQR Program for the CY 2014 Payment Determination and Subsequent Years

a. Background

b. General Requirements

c. Proposed Chart-Abstracted Measure Requirements for CY 2014 and Subsequent Payment Determination Years

d. Proposed Claims-Based Measure Data Requirements for the CY 2014 and CY 2015 Payment Determinations

e. Proposed Structural Measure Data Requirements for the CY 2014 Payment Determination and Subsequent Years

f. Proposed Data Submission Requirements for OP-22: ED-Patient Left Before Being Seen for the CY 2015 Payment Determination

g. Proposed Population and Sampling Data Requirements for the CY 2014 Payment Determination and Subsequent Years

3. Proposed Hospital OQR Program Validation Requirements for Chart-Abstracted Measure Data Submitted Directly to CMS for the CY 2014 Payment Determination and Subsequent Years

a. Random Selection of Hospitals for Data Validation of Chart-Abstracted Measures for the CY 2014 Payment Determination and Subsequent Years

b. Targeting and Proposed Targeting Criteria for Data Validation Selection for CY 2014 Payment Determination and for Subsequent Years

c. Proposed Methodology for Encounter Selection for the CY 2014 Payment Determination and Subsequent Years

d. Validation Score Calculation for the CY 2014 Payment Determination and Subsequent Years

H. Proposed Hospital OQR Reconsideration and Appeals Procedures for the CY 2014 Payment Determination and Subsequent Years

I. Proposed Extraordinary Circumstances Extension or Waiver for the CY 2013 Payment Determination and Subsequent Years

J. Electronic Health Records (EHRs)

K. Proposed 2013 Medicare EHR Incentive Program Electronic Reporting Pilot for Eligible Hospitals and CAHs

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

A. Background

1. Overview

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

3. History of the ASCQR Program

B. ASCQR Program Quality Measures

1. Proposed Considerations in the Selection of ASCQR Program Quality Measures

2. ASCQR Program Quality Measures

3. ASC Measure Topics for Future Consideration

4. Clarification Regarding the Process for Updating ASCQR Program Measures

C. Proposed Requirements for Reporting of ASC Quality Data

1. Form, Manner, and Timing for Claims-Based Measures for the CY 2014 Payment Determination and Subsequent Payment Determination Years

a. Background

b. Proposals Regarding Form, Manner, and Timing for Claims-Based Measures for CY 2015 and Subsequent Payment Determination Years

2. Data Completeness and Minimum Threshold for Claims-Based Measures Using QDCs

a. Background

b. Proposals Regarding Data Completeness Requirements for the CY 2015 Payment Determination and Subsequent Payment Determination Years

D. Proposed Payment Reduction for ASCs That Fail To Meet the ASCQR Program Requirements

1. Statutory Background

2. Proposed Reduction to the ASC Payment Rates for ASCs That Fail To Meet the ASCQR Program Requirements Beginning with the CY 2014 Payment Determination and Subsequent Payment Determination Years

XVII. Proposed Inpatient Rehabilitation Facility (IRF) Quality Reporting Program Updates

A. Overview

B. Updates to IRF QRP Measures Which Are Made as a Result of Review by the NQF Process

C. Proposed Process for Retention of IRF Quality Measures Adopted in Previous Rulemaking Cycles

D. Adopted Measures for the FY 2014 Payment Determination

1. Clarification Regarding Existing IRF Quality Measures That Have Undergone Changes During NQF Measure Maintenance Processes

2. Proposed Updates to the “Percent of Residents Who Have Pressure Ulcers That Are New or Worsened” Measure

XVIII. Proposed Revisions to the Quality Improvement Organization (QIO) Regulations (42 CFR Parts 476, 478, and 480)

A. Summary of Proposed Changes

B. Quality of Care Review

1. Beneficiary Complaint Reviews

2. Completion of General Quality of Care Reviews

C. Use of Confidential Information That Explicitly or Implicitly Identifies Patients

D. Secure Transmissions of Electronic Versions of Medical Information

E. Active Staff Privileges

F. Proposed Technical Corrections

XIX. Files Available to the Public Via the Internet

XX. Collection of Information Requirements

A. Legislative Requirements for Solicitation of Comments

B. Proposed Requirements in Regulation Text

C. Proposed Associated Information Collections Not Specified in Regulatory Text

1. Hospital OQR Program

2. Hospital OQR Program Measures for the CY 2013, CY 2014, CY 2015, and CY 2016 Payment Determinations

3. Proposed Hospital OQR Program Validation Requirements for CY 2014

4. Proposed Hospital OQR Program Reconsideration and Appeals Procedures

5. ASCQR Program Requirements

6. IRF QRP

XXI. Response to Comments

XXII. Economic Analyses

A. Regulatory Impact Analysis

1. Introduction

2. Statement of Need

3. Overall Impacts for OPPS and ASC Provisions

4. Detailed Economic Analyses

a. Estimated Effects of Proposed OPPS Changes

(1) Limitations of Our Analysis

(2) Estimated Effects of Proposed OPPS Changes on Hospitals

(3) Estimated Effects of Proposed OPPS Changes on CMHCs

(4) Estimated Effect of Proposed OPPS Changes on Beneficiaries

(5) Estimated Effects of Proposed OPPS Changes on Other Providers

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

(7) Alternative OPPS Policies Considered

b. Estimated Effects of ASC Payment System Proposals

(1) Limitations of Our Analysis

(2) Estimated Effects of ASC Payment System Proposals on ASCs

(3) Estimated Effects of ASC Payment System Proposals on Beneficiaries

(4) Alternative ASC Payment Policies Considered

c. Effects of the Proposed Revisions to the QIO Regulations

d. Accounting Statements and Tables

e. Effects of Proposed Requirements for the Hospital OQR Program

f. Effects of the Proposed EHR Incentive Program Electronic Reporting Pilot

g. Effects of Proposals for the ASCQR Program

h. Effects of Proposed Updates to the IRF QRP

B. Regulatory Flexibility Act (RFA) Analysis

C. Unfunded Mandates Reform Act Analysis

D. Conclusion

XXIII. Federalism Analysis

I. Executive Summary and Background

A. Executive Summary of This Proposed Rule

1. Purpose

In this proposed rule, we are proposing to update the payment policies and payment rates for services furnished to Medicare beneficiaries in hospital outpatient departments and ASCs beginning January 1, 2013. Section 1833(t) of the Social Security Act (the Act) requires us to annually review and update the relative payment weights and conversion factor for services payable under the OPPS. Under section 1833(i) of the Act, we annually review and update the ASC payment rates. We describe these and various other statutory authorities in the relevant sections of this proposed rule.

In addition to establishing payment rates for CY 2013, we are proposing updates and new requirements under the Hospital OQR Program, the ASCQR Program, and the IRF Quality Reporting Program. We also are proposing certain revisions to the electronic reporting pilot for the EHR Incentive Program and to the regulations governing the Quality Improvement Organizations (QIOs), including the secure transmittal of electronic medical information, beneficiary complaint resolution and notification processes, and technical corrections.

2. Summary of the Major Provisions

  • OPPS Update: For CY 2013, we are proposing to increase payment rates under the OPPS by an OPD fee schedule increase factor of 2.1 percent. This increase is based on the projected hospital inpatient market basket percentage increase of 3.0 percent for inpatient services paid under the hospital inpatient prospective payment system (IPPS), minus the proposed multifactor productivity (MFP) adjustment of 0.8 percentage points, and minus a 0.1 percentage point adjustment required by the Affordable Care Act. Under this proposal, we estimate that total payments, including beneficiary cost-sharing for CY 2013 to the more than 4,000 facilities paid under the OPPS (including general acute care hospitals, children's hospitals, cancer hospitals, and community mental health centers (CMHCs)), would be approximately $48.1 billion, an increase of approximately $4.6 billion compared to CY 2012 payments, or $700 million excluding our estimated changes in enrollment, utilization, and case-mix.

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

  • Geometric Mean-Based Relative Payment Weights: CMS has discretion under the statute to set OPPS payments based upon either the estimated mean or median costs of services within an Ambulatory Payment Classification (APC) group, the unit of payment. To improve our cost estimation, for CY 2013, we are proposing to use the geometric mean costs of services within an APC to determine the relative payment weights of services, rather than the median costs that we have used since the inception of the OPPS. Our analysis shows that the proposed change to means would have a limited payment impact on most providers, with a small number experiencing payment gain or loss based on their service-mix.
  • Rural Adjustment: We are proposing to continue an adjustment of 7.1 percent to the OPPS payments to certain rural sole community hospitals (SCHs), including essential access community hospitals (EACHs). This adjustment would apply to all services paid under the OPPS, excluding separately payable drugs and biologicals, devices paid under the pass-through payment policy, and items paid at charges reduced to cost.
  • Cancer Hospital Payment Adjustment: For CY 2013, we are proposing to continue our policy to provide additional payments to cancer hospitals so that the hospital's payment-to-cost ratio (PCR) with the payment adjustment is equal to the weighted average PCR for the other OPPS hospitals using the most recent submitted or settled cost report data. Based on those data, a proposed target PCR of 0.91 would be used to determine the CY 2013 cancer hospital payment adjustment to be paid at cost report settlement. That is, the payment amount associated with the cancer hospital payment adjustment would be the additional payment needed to result in a proposed PCR equal to 0.91 for each cancer hospital.
  • Payment Adjustment Policy for Radioisotopes Derived from Non-Highly Enriched Uranium Sources: The Administration has established an agenda to eliminate domestic reliance on reactors outside of the United States that produce highly enriched uranium (HEU), and to promote the conversion of all medical isotope production to non-HEU sources. We are proposing to exercise our statutory authority to make payment adjustments necessary to ensure equitable payments, to provide an adjustment for CY 2013 to cover the marginal cost of hospital conversion to use of non-HEU sources to obtain radioisotopes used in medical imaging. The adjustment would cover the marginal cost of radioisotopes produced from non-HEU sources over the costs of radioisotopes produced by HEU sources.
  • Payment of Drugs, Biologicals, and Radiopharmaceuticals: For CY 2013, we are proposing to pay for the acquisition and pharmacy overhead costs of separately payable drugs and biologicals that do not have pass-through status at the statutory default of average sales price (ASP) plus 6 percent.
  • Supervision of Hospital Outpatient Therapeutic Services: We are clarifying the application of the supervision regulations to physical therapy, speech-language pathology, and occupational therapy services that are furnished in OPPS hospitals and critical access hospitals (CAHs). We are proposing to extend the enforcement instruction for CAHs and certain small rural hospitals for one final year through CY 2013.
  • Outpatient Status: We are concerned about recent increases in the length of time that Medicare beneficiaries spend as outpatients receiving observation services. In addition, hospitals continue to express concern about Medicare Part B rebilling policies when a hospital inpatient claim is denied because the admission was not medically necessary. We are providing an update on the Part A to Part B Rebilling Demonstration that is in effect for CY 2012 through CY 2014, which was designed to assist us in evaluating these issues. In addition, we are soliciting public comments on potential clarifications or changes to our policies regarding patient status that may be appropriate.
  • Ambulatory Surgical Center Payment Update: For CY 2013, we are proposing to increase payment rates under the ASC payment system by an MFP-adjusted CPI-U update factor of 1.3 percent. This increase is based on a projected CPI-U update of 2.2 percent minus a multifactor productivity adjustment required by the Affordable Care Act that is projected to be 0.9 percent. Based on this update, we estimate that total ASC payments, including beneficiary cost-sharing, for CY 2013 would be approximately $4.103 billion, an increase of approximately $211 million compared to estimated CY 2012 payments.
  • New Technology Intraocular Lenses: We are proposing significant revisions to the regulations governing payments for new technology intraocular lens (NTIOLs), specifically § 416.195(a)(2) and § 416.195(a)(4). We are proposing to revise § 416.195(a)(2) to require that the IOL's FDA-approved labeling contain a claim of a specific clinical benefit based on a new lens characteristic in comparison to currently available IOLs. We are proposing to revise § 416.195(a)(4) to require that any specific clinical benefit referred to in § 416.195(a)(2) must be supported by evidence that demonstrates that the IOL results in a measurable, clinically meaningful, improved outcome.
  • Ambulatory Surgical Center Quality Reporting (ASCQR) Program: For the ASCQR Program, we are seeking public comment on our approach for future measure selection and development as well as proposing certain measures for future inclusion in the ASCQR Program measure set. For the CY 2015 payment determination and subsequent years payment determinations, we are proposing requirements regarding the dates for submission, payment, and completeness for claims-based measures. We also are proposing how the payment rates would be reduced for ASCs that fail to meet program requirements beginning in CY 2014 and are clarifying our policy on updating measures.
  • Hospital Outpatient Quality Reporting (OQR) Program: For the Hospital OQR Program, we are proposing no new measures for CY 2013. We also are proposing no new targeting criteria to select hospitals for validation of medical records. We are confirming the suspension of data collection for specific measures. We are proposing that the criteria we would consider when determining whether to retire measures for the Hospital Inpatient Quality Reporting (IQR) Program are applicable likewise to the Hospital OQR Program. We are proposing that measures adopted in future rulemaking are automatically adopted for all subsequent year payment determinations unless we propose to remove, suspend, or replace them. We are proposing changes to administrative forms used in the program. We are proposing to extend the deadline for submitting a notice of participation form and to enter structural measures data.
  • Electronic Health Record (EHR) Incentive Program: For the EHR Incentive Program, we are proposing to extend the 2012 Medicare EHR Incentive Program Electronic Reporting Pilot for Eligible Hospitals and CAHs through 2013, exactly as finalized for 2012. Other changes to the Medicare and Medicaid EHR Incentive Programs are proposed in a Notice of Proposed Rulemaking published in the Federal Register on March 7, 2012.
  • Inpatient Rehabilitation Facility Quality Reporting Program (IRF QRP): We are proposing to: (1) Adopt updates on a previously adopted measure for the IRF QRP that will affect annual prospective payment amounts in FY 2014; (2) adopt a policy that would provide that any measure that has been adopted for use in the IRF QRP will remain in effect until the measure is actively removed, suspended, or replaced; and (3) adopt policies regarding when notice-and-comment rulemaking will be used to update existing IRF QRP measures.
  • Revisions to the Quality Improvement Organization (QIO) Regulations: We are proposing to revise the QIO program regulations to: (1) Give QIOs the authority to send and receive secure transmissions of electronic versions of medical information; (2) provide more detailed and improved procedures for QIOs when completing Medicare beneficiary complaint reviews and general quality of care reviews, including procedures related to a new alternative dispute resolution process called “immediate advocacy”; (3) increase the information beneficiaries receive in response to QIO review activities; (4) convey to Medicare beneficiaries the right to authorize the release of confidential information by QIOs; and (5) make other technical changes that are designed to improve the regulations. The technical changes to the QIO regulations that we are proposing to improve the regulations reflect CMS' commitment to the general principles of the President's Executive Order on Regulatory Reform, Executive Order 13563 (January 18, 2011).

3. Summary of Costs and Benefits

In sections XXII. and XXIII. of this proposed rule, we set forth a detailed analysis of the regulatory and federalism impacts that the proposed changes would have on affected entities and beneficiaries. Key estimated impacts include the following:

a. Impacts of the OPPS Update

(1) Impacts of All Proposed OPPS Changes

Table 45 in section XXII. of this proposed rule displays the distributional impact to various groups of hospitals and for CMHCs of all the proposed OPPS changes for CY 2013 compared to all estimated OPPS payments in CY 2012. We estimate that the proposals in this proposed rule would result in a 2.1 percent overall increase in OPPS payments to providers. We estimate that the increase in OPPS expenditures, including beneficiary cost-sharing, would be approximately $700 million, not taking into account potential changes in enrollment, utilization, and case mix. Taking into account estimated spending changes that are attributable to these factors, we estimate an increase of approximately $4.6 billion in OPPS expenditures, including beneficiary cost-sharing, for CY 2013 compared to CY 2012 OPPS expenditures. We estimate that total OPPS payments, including beneficiary cost-sharing, would be $48.1 billion for CY 2013.

We estimated the isolated impact of our proposed OPPS policies on CMHCs because CMHCs furnish only partial hospitalization services. Continuing the provider-specific structure that we adopted for CY 2011 and basing payment fully on the data for the type of provider furnishing the service, we estimate a 4.4 percent decrease in CY 2013 payments to CMHCs relative to their CY 2012 payments. This effect is largely attributable to a decline in the relative payment weight for APC 0173 (Level II Partial Hospitalization (4 or more services) for CMHCs) using the proposed geometric mean-based relative payment weights as opposed to median-based relative payment weights.

(2) Impacts of Basing APC Relative Weights on Geometric Mean Costs

We estimate that our proposal to base the APC relative payment weights on the geometric mean costs rather than the median costs of services within an APC would not significantly impact most providers. Payments to low volume urban hospitals and to hospitals for which disproportionate share hospital (DSH) data are not available would increase by an estimated 2.1 and 4.0 percent, respectively. The increase to hospitals without available DSH data is largely attributable to payment increases for partial hospitalization and group psychotherapy services furnished in the hospital. These hospitals are largely non-IPPS psychiatric hospitals. In contrast, payments to CMHCs would decrease by an estimated 6.9 percent due primarily to lower payments for APC 0173 (Level II Partial Hospitalization (4 or more services) for CMHCs).

(3) Impacts of the Updated Wage Indices

We estimate no significant impacts related to updating the wage indices and applying the frontier State wage index. Adjustments to the wage indices other than the frontier State wage adjustment would not significantly affect most hospitals. Overall, urban hospitals would experience no change from CY 2012 to CY 2013, and rural hospitals would experience payment decreases of approximately 0.2 percent. Urban hospitals in the New England and Pacific regions would experience the most significant payment changes with a decrease of 1.2 percent in New England and an increase of 1.6 percent in the Pacific region.

We estimate that all facilities and all hospitals would experience a combined increase of 0.1 percent due to the frontier State wage index, which is not budget neutral. The frontier State wage index would only affect hospitals in the West North Central and Mountain regions, with rural hospitals in those regions experiencing slightly greater percentage payment increases than urban hospitals in those regions.

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

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

(5) Impacts of the OPD Fee Schedule Increase Factor

We estimate that, for most hospitals, the application of the proposed OPD fee schedule increase factor of 2.1 percent to the conversion factor would mitigate the small negative impacts of the budget neutrality adjustments. Certain low volume hospitals and hospitals for which DSH data are not available would experience larger increases ranging from 4.1 percent to 8.3 percent. We estimate that rural and urban hospitals would experience similar increases of approximately 2 percent as a result of the proposed OPD fee schedule increase factor and other budget neutrality adjustments. Classifying hospitals by teaching status or type of ownership suggests that these hospitals would receive similar increases.

b. Impacts of the Proposed ASC Payment Update

For impact purposes, the surgical procedures on the ASC list of covered procedures are aggregated into surgical specialty groups using CPT and HCPCS code range definitions. The percentage change in estimated total payments by specialty groups under the proposed CY 2013 payment rates compared to estimated CY 2012 payment rates range between −2 percent for respiratory system procedures, integumentary system procedures, and cardiovascular system procedures to 5 percent for nervous system procedures.

c. Impacts of the Hospital OQR Program

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

d. Impacts of the EHR Incentive Program Proposal

There are no changes from the 2012 OPPS/ASC final rule to the costs or impact for the proposed 2013 Medicare EHR Incentive Program Electronic Reporting Pilot for Hospitals and CAHs.

e. Impacts of the ASCQR Program

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

B. Legislative and Regulatory Authority for the Hospital OPPS

When Title XVIII of 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, 2000. Implementing regulations for the OPPS are located at 42 CFR Parts 410 and 419.

The Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act of 1999 (BBRA) (Pub. L. 106-113) made major changes in the hospital OPPS. The following Acts made additional changes to the OPPS: the Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000 (BIPA) (Pub. L. 106-554); the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) (Pub. L. 108-173); the Deficit Reduction Act of 2005 (DRA) (Pub. L. 109-171), enacted on February 8, 2006; the Medicare Improvements and Extension Act under Division B of Title I of the Tax Relief and Health Care Act of 2006 (MIEA-TRHCA) (Pub. L. 109-432), enacted on December 20, 2006; the Medicare, Medicaid, and SCHIP Extension Act of 2007 (MMSEA) (Pub. L. 110-173), enacted on December 29, 2007; the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA) (Pub. L. 110-275), enacted on July 15, 2008; the Patient Protection and Affordable Care Act (Pub. L. 111-148), enacted on March 23, 2010, as amended by the Health Care and Education Reconciliation Act of 2010 (Pub. L. 111-152), enacted on March 30, 2010 (These two public laws are collectively known as the Affordable Care Act.); the Medicare and Medicaid Extenders Act of 2010 (MMEA, Pub. L. 111-309); the Temporary Payroll Tax Cut Continuation Act of 2011 (TPTCCA, Pub. L. 112-78), enacted on December 23, 2011; and most recently the Middle Class Tax Relief and Job Creation Act of 2012 (MCTRJCA, Pub. L. 112-96), enacted on February 22, 2012.

Under the OPPS, we pay for hospital outpatient services on a rate-per-service basis that varies according to the APC group to which the service is assigned. We use the Healthcare Common Procedure Coding System (HCPCS) (which includes certain Current Procedural Terminology (CPT) codes) to identify and group the services within each APC. The OPPS includes payment for most hospital outpatient services, except those identified in section I.C. of this 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 CMHCs) and hospital services that are furnished to inpatients who are entitled to Part A and have exhausted their Part A benefits, or who are not so entitled.

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

All services and items within an APC group are comparable clinically and with respect to resource use (section 1833(t)(2)(B) of the Act). In accordance with section 1833(t)(2) of the Act, subject to certain exceptions, items and services within an APC group cannot be considered comparable with respect to the use of resources if the highest median cost (or mean cost, if elected by the Secretary) for an item or service in the APC group is more than 2 times greater than the lowest median cost (or mean cost, if elected by the Secretary) for an item or service within the same APC group (referred to as the “2 times rule”). In implementing this provision, we generally use the cost of the item or service assigned to an APC group.

For new technology items and services, special payments under the OPPS may be made in one of two ways. Section 1833(t)(6) of the Act provides for temporary additional payments, which we refer to as “transitional pass-through payments,” for at least 2 but not more than 3 years for certain drugs, biological agents, brachytherapy devices used for the treatment of cancer, and categories of other medical devices. For new technology services that are not eligible for transitional pass-through payments, and for which we lack sufficient clinical information and cost data to appropriately assign them to a clinical APC group, we have established special APC groups based on costs, which we refer to as New Technology APCs. These New Technology APCs are designated by cost bands which allow us to provide appropriate and consistent payment for designated new procedures that are not yet reflected in our claims data. Similar to pass-through payments, an assignment to a New Technology APC is temporary; that is, we retain a service within a New Technology APC until we acquire sufficient data to assign it to a clinically appropriate APC group.

C. Excluded OPPS Services and Hospitals

Section 1833(t)(1)(B)(i) of the Act authorizes the Secretary to designate the hospital outpatient services that are paid under the OPPS. While most hospital outpatient services are payable under the OPPS, section 1833(t)(1)(B)(iv) of the Act excludes payment for ambulance, physical and occupational therapy, and speech-language pathology services, for which payment is made under a fee schedule. It also excludes screening mammography, diagnostic mammography, and effective January 1, 2011, an annual wellness visit providing personalized prevention plan services. The Secretary exercised the authority granted under the statute to also exclude from the OPPS those services that are paid under fee schedules or other payment systems. Such excluded services include, for example, the professional services of physicians and nonphysician practitioners paid under the MPFS; laboratory services paid under the Clinical Laboratory Fee Schedule (CLFS); services for beneficiaries with end-stage renal disease (ESRD) that are paid under the ESRD composite rate; and services and procedures that require an inpatient stay that are paid under the hospital IPPS. We set forth the services that are excluded from payment under the OPPS in regulations at 42 CFR 419.22.

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

D. Prior Rulemaking

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

Since initially implementing the OPPS, we have published final rules in the Federal Register annually to implement statutory requirements and changes arising from our continuing experience with this system. These rules can be viewed on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html.

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

1. Authority of the Panel

Section 1833(t)(9)(A) of the Act, as amended by section 201(h) of Public Law 106-113, and redesignated by section 202(a)(2) of Public Law 106-113, requires that we consult with an external advisory panel of experts to annually review the clinical integrity of the payment groups and their weights under the OPPS. In CY 2000, based on section 1833(t)(9)(A) of the Act and section 222 of the Public Health Service (PHS) Act, the Secretary established the Advisory Panel on Ambulatory Payment Classification Groups (APC Panel) to fulfill this requirement. In CY 2011, based on section 222 of the PHS Act, which gives discretionary authority to the Secretary to convene advisory councils and committees, the Secretary expanded the panel's scope to include the supervision of hospital outpatient therapeutic services in addition to the APC groups and weights. To reflect this new role of the panel, the Secretary changed the panel's name to the Advisory Panel on Hospital Outpatient Payment (the HOP Panel, or the Panel). The Panel is not restricted to using data compiled by CMS, and in conducting its review it may use data collected or developed by organizations outside the Department.

2. Establishment of the Panel

On November 21, 2000, the Secretary signed the initial charter establishing the HOP Panel, at that time named the APC Panel. This expert panel, which may be composed of up to 19 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 Panel also is charged with advising the Secretary on the appropriate level of supervision for individual hospital outpatient therapeutic services. The Panel is technical in nature, and it is governed by the provisions of the Federal Advisory Committee Act (FACA). Since its initial chartering, the Secretary has renewed the 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 Panel continues to be technical in nature; is governed by the provisions of the FACA; may convene up to three meetings per year; has a Designated Federal Official (DFO); and is chaired by a Federal Official designated by the Secretary. The current charter was amended on November 15, 2011 and the Panel was renamed to reflect expanding the Panel's authority to include supervision of hospital outpatient therapeutic services and to add CAHs to its membership.

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

3. Panel Meetings and Organizational Structure

The Panel has held multiple meetings, with the last meeting taking place on February 27-29, 2012. Prior to each meeting, we publish a notice in the Federal Register to announce the meeting and, when necessary, to solicit nominations for Panel membership and to announce new members.

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

The Data Subcommittee is responsible for studying the data issues confronting the Panel and for recommending options for resolving them. The Visits and Observation Subcommittee reviews and makes recommendations to the Panel on all technical issues pertaining to observation services and hospital outpatient visits paid under the OPPS (for example, APC configurations and APC relative payment weights). The Subcommittee for APC Groups and SI Assignments advises the Panel on the following issues: the appropriate SIs to be assigned to HCPCS codes, including but not limited to whether a HCPCS code or a category of codes should be packaged or separately paid; and the appropriate 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 Panel during a scheduled Panel meeting, and the Panel recommended that the subcommittees continue at the August 2012 Panel meeting. We accepted this recommendation. All subcommittee recommendations are discussed and voted upon by the full Panel.

Discussions of the other recommendations made by the Panel at the February 2012 Panel meeting are included in the sections of this proposed rule that are specific to each recommendation. For discussions of earlier 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.

F. Public Comments Received on the CY 2012 OPPS/ASC Final Rule With Comment Period

We received approximately 61 timely pieces of correspondence on the CY 2012 OPPS/ASC final rule with comment period that appeared in the Federal Register on November 24, 2011 (76 FR 74122), 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 present 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 the 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 not less often than annually and revise the relative payment weights for APCs. In the April 7, 2000 OPPS final rule with comment period (65 FR 18482), we explained in detail how we calculated the relative payment weights that were implemented on August 1, 2000 for each APC group.

For the CY 2013 OPPS, we are proposing to recalibrate the APC relative payment weights for services furnished on or after January 1, 2013, and before January 1, 2014 (CY 2013), using the same basic methodology that we described in the CY 2012 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. Therefore, for the purpose of recalibrating the proposed APC relative payment weights for CY 2013, we used approximately 141 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, 2011, and before January 1, 2012. 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/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html.

Of the approximately 141 million final action claims for services provided in hospital outpatient settings used to calculate the proposed CY 2013 OPPS payment rates, approximately 113 million claims were the type of bill potentially appropriate for use in setting rates for OPPS services (but did not necessarily contain services payable under the OPPS). Of the approximately 113 million claims, approximately 5 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 108 million claims, we created approximately 110 million single records, of which approximately 74 million were “pseudo” single or “single session” claims (created from approximately 28 million multiple procedure claims using the process we discuss later in this section). Approximately 959,000 claims were trimmed out on cost or units in excess of +/− 3 standard deviations from the geometric mean, yielding approximately 110 million single bills for ratesetting. 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 only use claims (or portions of each claim) that are appropriate for ratesetting purposes. Ultimately, we were able to use for CY 2013 ratesetting some portion of approximately 95 percent of the CY 2011 claims containing services payable under the OPPS.

The proposed APC relative weights and payments for CY 2013 in Addenda A and B to this proposed rule (which are available via the Internet on the CMS Web site) were calculated using claims from CY 2011 that were processed before January 1, 2012. While we have historically based the payments on median hospital costs for services in the APC groups, we are proposing to establish the cost-based relative payment weights of the CY 2013 OPPS using geometric mean costs, as discussed in section II.A.2.f. of this proposed rule. Therefore, on the CMS Web site, along with Addenda A and B, we are providing a file that presents payment information for the proposed CY 2013 OPPS payments based on geometric mean costs compared to those based on median costs. 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 relative costs underpinning the APC relative payment weights and the CY 2013 payment rates.

b. Proposed Use of Single and Multiple Procedure Claims

For CY 2013, in general, we are proposing to continue to use single procedure claims to set the costs on which the APC relative payment weights would be based. We generally use single procedure claims to set the estimated costs for APCs because we believe that the OPPS relative weights on which payment rates are based should be derived from the costs of furnishing one unit of one procedure and because, in many circumstances, we are unable to ensure that packaged costs can be appropriately allocated across multiple procedures performed on the same date of service.

It is generally desirable to use the data from as many claims as possible to recalibrate the APC relative payment weights, including those claims for multiple procedures. As we have for several years, we are 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 2012 OPPS/ASC final rule with comment period (76 FR 74132 through 74134). In addition, for CY 2008, we increased packaging and created the first composite APCs, and continued those policies through CY 2012. Increased packaging and creation of composite APCs also increased the number of bills that we were able to use for ratesetting by enabling us to use claims that contained multiple major procedures that previously would not have been usable. Further, for CY 2009, we expanded the composite APC model to one additional clinical area, multiple imaging services (73 FR 68559 through 68569), which also increased the number of bills we were able to use in developing the OPPS relative weights on which payments are based. We have continued the composite APCs for multiple imaging services through CY 2012, and are proposing to continue this policy for CY 2013. We refer readers to section II.A.2.e. of this proposed rule for a discussion of the use of claims in modeling the 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 2013 OPPS. This methodology enabled us to create, for this proposed rule, approximately 74 million “pseudo” single procedure claims, including multiple imaging composite “single session” bills (we refer readers to section II.A.2.e.(5) of this proposed rule for further discussion), to add to the approximately 36 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 for ratesetting purposes.

For CY 2013, we are proposing to bypass 480 HCPCS codes that are identified in Addendum N to this proposed rule (which is available via the Internet on the CMS Web site). Since the inception of the bypass list, which is the list of codes to be bypassed to convert multiple procedure claims to “pseudo” single procedure claims, we have calculated the percent of “natural” single bills that contained packaging for each HCPCS code and the amount of packaging on each “natural” single bill for each code. Each year, we generally retain the codes on the previous year's bypass list and use the updated year's data (for CY 2013, data available for the February 27, 2012 meeting of the Advisory Panel on Hospital Outpatient Payment (the Panel) from CY 2011 claims processed through September 30, 2011, and CY 2010 claims data processed through June 30, 2011, used to model the payment rates for CY 2012) to determine whether it would be appropriate to propose to add additional codes to the previous year's bypass list. For CY 2013, we are proposing to continue to bypass all of the HCPCS codes on the CY 2012 OPPS bypass list, with the exception of HCPCS codes that we are proposing to be deleted for CY 2013, 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. We also are proposing to add to the bypass list for CY 2013 HCPCS codes not on the CY 2012 bypass list that, using either the CY 2012 final rule data (CY 2010 claims) or the February 27, 2012 Panel data (first 9 months of CY 2011 claims), met the empirical criteria for the bypass list that are summarized below. Finally, to remain consistent with the CY 2013 proposal to develop OPPS relative payment weights based on geometric mean costs, we are proposing that the median cost of packaging criterion instead be based on the geometric mean cost of packaging. The entire list proposed for CY 2013 (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 geometric mean cost of packaging observed in the “natural” single procedure claims is equal to or less than $55. This criterion also limits the amount of error in redistributed costs. During the assessment of claims against the bypass criteria, we do not know the dollar value of the packaged cost that should be appropriately attributed to the other procedures on the claim. Therefore, ensuring that redistributed costs associated with a bypass code are small in amount and volume protects the validity of cost estimates for low cost services billed with the bypassed service.

We note that we are proposing to establish the CY 2013 OPPS relative payment weights based on geometric mean costs. To remain consistent in the metric used for identifying cost patterns, we are proposing to use the geometric mean cost of packaging to identify potential codes to add to the bypass list. The proposal to develop the CY 2013 OPPS relative payment weights based on geometric mean costs is discussed in greater detail in section II.A.2.f. of this proposed rule.

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 increase would prevent continuing decline in the threshold's real value. We are proposing for CY 2013, based on the same rationale described for the CY 2012 OPPS/ASC final rule with comment period (76 FR 74133), to continue to update the packaged cost threshold by the market basket increase. By applying the final CY 2012 market basket increase of 1.90 percent to the prior non-rounded dollar threshold of $52.76 (76 FR 74133), we determined that the threshold remains for CY 2013 at $55 ($53.76 rounded to $55, the nearest $5 increment). Therefore, we are proposing to set the geometric mean packaged cost threshold on the CY 2011 claims at $55 for a code to be considered for addition to the CY 2013 OPPS bypass list.

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

In addition, we 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 2013 OPPS proposal. Some of these codes were identified by CMS medical advisors and some were identified in prior years by commenters with specialized knowledge of the packaging associated with specific services. We also are proposing to continue to include certain HCPCS codes on the bypass list in order to purposefully direct the assignment of packaged costs to a companion code where services always appear together and where there would otherwise be few single procedure claims available for ratesetting. For example, we have previously discussed our reasoning for adding HCPCS code G0390 (Trauma response team associated with hospital critical care service) 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 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 available via the Internet on the CMS Web site).

Addendum N to this proposed rule includes the proposed list of bypass codes for CY 2013. The list of bypass codes contains codes that were reported on claims for services in CY 2011 and, therefore, includes codes that were in effect in 2011 and used for billing but were deleted for CY 2012. We retained these deleted bypass codes on the proposed CY 2013 bypass list because these codes existed in CY 2011 and were covered OPD services in that period, and CY 2011 claims data are used to calculate CY 2013 payment rates. Keeping these deleted bypass codes on the bypass list potentially allows us to create more “pseudo” single procedure claims for ratesetting purposes. “Overlap bypass codes” that were members of the 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 2013 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 2013 bypass list because these codes were either deleted from the HCPCS before CY 2011 (and therefore were not covered OPD services in CY 2011) or were not separately payable codes under the proposed CY 2013 OPPS because these codes are not used for ratesetting (and therefore would not need to be bypassed). None of these proposed deleted codes are “overlap bypass” codes.

Table 1—HCPCS Codes Proposed To Be Removed From the CY 2013 Bypass List

HCPCS CodeHCPCS Short descriptor
76880Us exam, extremity.
86903Blood typing, antigen screen.
92135Ophth dx imaging post seg.
93231Ecg monitor/record, 24 hrs.
93232ECG monitor/report, 24 hrs.
93236ECG monitor/report, 24 hrs.

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

For CY 2013, 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 costs on which the proposed CY 2013 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 2011 claims data from the most recent available hospital cost reports, in most cases, cost reports beginning in CY 2010. For the CY 2013 OPPS proposed rates, we used the set of claims processed during CY 2011. We applied the hospital-specific CCR to the hospital's charges at the most detailed level possible, based on a revenue code-to-cost center crosswalk that contains a hierarchy of CCRs used to estimate costs from charges for each revenue code. That crosswalk is available for review and continuous comment on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html.

To ensure the completeness of the revenue code-to-cost center crosswalk, we reviewed changes to the list of revenue codes for CY 2011 (the year of the claims data we used to calculate the proposed CY 2013 OPPS payment rates) and found that the National Uniform Billing Committee (NUBC) did not add any new revenue codes to the NUBC 2011 Data Specifications Manual.

In accordance with our longstanding policy, we calculated CCRs for the standard and nonstandard cost centers accepted by the electronic cost report database. In general, the most detailed level at which we calculated CCRs was the hospital-specific departmental level. For a discussion of the hospital-specific overall ancillary CCR calculation, we refer readers to the CY 2007 OPPS/ASC final rule with comment period (71 FR 67983 through 67985). One longstanding exception to this general methodology for calculation of CCRs used for converting charges to costs on each claim, as detailed in the CY 2007 OPPS/ASC final rule with comment period, is the calculation of blood costs, as discussed in section II.A.2.d.(2) of this 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 2011 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 2010. For this proposed rule, we used the most recently submitted cost reports to calculate the CCRs to be used to calculate costs for the proposed CY 2013 OPPS payment rates. If the most recently available cost report was submitted but not settled, we looked at the last settled cost report to determine the ratio of submitted to settled cost using the overall ancillary CCR, and we then adjusted the most recent available submitted, but not settled, cost report using that ratio. We then calculated both an overall ancillary CCR and cost center-specific CCRs for each hospital. We used the overall ancillary CCR referenced above in this section 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 costs for CY 2013.

Since the implementation of the OPPS, some commenters have raised concerns about potential bias in the OPPS cost-based weights due to “charge compression,” which is the practice of applying a lower charge markup to higher cost services and a higher charge markup to lower cost services. As a result, the cost-based weights may reflect some aggregation bias, undervaluing high-cost items and overvaluing low-cost items when an estimate of average markup, embodied in a single CCR, is applied to items of widely varying costs in the same cost center. This issue was evaluated in a report by Research Triangle Institute, International (RTI). The RTI final report can be found on RTI's Web site at: http://www.rti.org/reports/cms/HHSM-500-fxsp0;2005-0029I/PDF/Refining_Cost_to_Charge_Ratios_200807_Final.pdf. For a complete discussion of the RTI recommendations, public comments, and our responses, we refer readers to the CY 2009 OPPS/ASC final rule with comment period (73 FR 68519 through 68527).

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

The cost center for “Implantable Devices Charged to Patients” has been available for use for cost reporting periods beginning on or after May 1, 2009. In 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. In preparation for the CY 2013 OPPS/ASC proposed rule, we assessed the availability of data in the “Implantable Devices Charged to Patients” cost center using cost reports in the December 31, 2011 quarter ending update of HCRIS, which was the latest upload of the cost report data that we could use for the CY 2013 proposed rule. We determined that 2,063 hospitals, out of approximately 3,800 hospitals, utilized the “Implantable Devices Charged to Patients” cost center, and we believe that this is a sufficient amount of data from which to generate a meaningful analysis. Therefore, we are proposing to use data from the “Implantable Devices Charged to Patients” cost center to create a distinct CCR for use in calculating the OPPS relative weights for CY 2013. Table 2 below contains a list of APCs that had either a greater than or less than 3.0 percentage point change in cost when the “Implantable Devices Charged to Patients” cost center is used to create a distinct CCR compared to a CCR created from the combination of the “Medical Supplies Charged to Patients” and the “Implantable Devices Charged to Patients” cost centers as was used in the CY 2012 OPPS/ASC final rule with comment period.

Table 2—Percentage Change in APC Cost When the “Implantable Devices Charged to Patients” Cost Center Is Used To Create Distinct CCR

APCAPC descriptorPercentage change in cost
0654Level II Insertion/Replacem of Permanent Pacemaker6.99
0315Level II Implantation of Neurostimulator Generator5.71
0227Implantation of Drug Infusion Device5.65
0386Level II Prosthetic Urological Procedures4.92
0107Insertion of Cardioverter-Defibrillator Pulse Generat4.89
0089Insertion/Replace of Perm Pacemaker and Electrodes4.71
0108Insertion/Replace/Repair of Cardioverter-Defibr Sys4.42
0039Level I Implantation of Neurostimulator Generator4.35
0655Insert/Replac/Conv of a Perm Dual Cham Pacemaker4.20
0680Insertion of Patient Activated Event Recorders3.77
0090Level I Insertion/Replacem of Permanent Pacemaker3.68
0318Implanta of Neurostimulator Pulse Gen and Electrode3.64
0106Insert/Replac of Pacemaker Leads and/or Electrodes3.10
0387Level II Hysteroscopy−3.16
0100Cardiac Stress Tests−3.20
0269Level II Echocardiogram Without Contrast−3.21
8002Level I Extended Assess & Management Composite−3.31
0101Tilt Table Evaluation−3.34
0142Level I Small Intestine Endoscopy−3.49
0084Level I Electrophysiologic Procedures−3.61
8000Cardiac Electrophysiologic Eval and Ablation Compo−3.69
0165Level IV Urinary and Anal Procedures−3.73
0270Level III Echocardiogram Without Contrast−3.73
0679Level II Resuscitation and Cardioversion−3.76
0174Level IV Laparoscopy−3.78
0659Hyperbaric Oxygen−4.01
0085Level II Electrophysiologic Procedures−4.15
0111Blood Product Exchange−4.27
0381Single Allergy Tests−5.10
0370Multiple Allergy Tests−7.46
0012Level I Debridement & Destruction−8.15
0251Level II ENT Procedures−8.46

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 and CY 2009 OPPS/ASC proposed and final rules, RTI also 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 concluded that both the IPPS and the OPPS relative weights would better estimate the costs of those services if CMS were to add standard costs centers for CT scans, MRIs, and cardiac catheterization in order for hospitals to report separately the costs and charges for those services and in order for CMS to calculate unique CCRs to estimate the cost from charges on claims data. We refer readers to the FY 2011 IPPS/LTCH PPS final rule (75 FR 50075 through 50080) for a more detailed discussion on the reasons for the creation of standard cost centers for CT scans, MRIs, and cardiac catheterization. The new standard cost centers for CT scans, MRIs, and cardiac catheterization are effective for cost report periods beginning on or after May 1, 2010, on the revised cost report Form CMS-2552-10. However, because cost reports that were filed on the revised cost report Form CMS-2552-10 are not currently accessible in the HCRIS, we were unable to calculate distinct CCRs for CT scans, MRI, and cardiac catheterization using the new standard cost centers for these services. We believe that we will have cost report data available for an analysis of creating distinct CCRs for CT scans, MRIs, and cardiac catheterization for the CY 2014 OPPS rulemaking.

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 Costs Used for Ratesetting

In this section of this proposed rule, we discuss the use of claims to calculate OPPS payment rates for CY 2013. The Hospital OPPS page on our Web site on which this proposed rule is posted (http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html) provides an accounting of claims used in the development of the proposed payment rates. That accounting provides additional detail regarding the number of claims derived at each stage of the process. In addition, below in this section we discuss the file of claims that comprises the data set that is available for purchase under a CMS data use agreement. Our Web site, http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html, includes information about purchasing the “OPPS Limited Data Set,” which now includes the additional variables previously available only in the OPPS Identifiable Data Set, including ICD-9-CM diagnosis codes and revenue code payment amounts. This file is derived from the CY 2011 claims that were used to calculate the proposed payment rates for the CY 2013 OPPS.

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

We used the methodology described in sections II.A.2.a. through II.A.2.e. of this proposed rule to calculate the geometric mean costs we use to establish the proposed relative weights used in calculating the proposed OPPS payment rates for CY 2013 shown in Addenda A and B to this proposed rule (which are available via the Internet on the CMS Web site). We note that we are providing a file comparing the CY 2013 proposed payments under the geometric mean cost-based OPPS, relative to what they would be under a CY 2013 median-based OPPS. We are providing this file so that the public can provide meaningful comment on our proposal to base the CY 2013 OPPS relative payment weights on geometric mean costs. We refer readers to section II.A.4. of this proposed rule for a discussion of the conversion of APC geometric mean costs to scaled payment weights.

a. Claims Preparation

For this proposed rule, we used the CY 2011 hospital outpatient claims processed before January 1, 2012, to calculate the geometric mean costs of APCs that underpin the proposed relative weights for CY 2013. To begin the calculation of the proposed relative weights for CY 2013, we pulled all claims for outpatient services furnished in CY 2011 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 113 million claims that contain hospital bill types paid under the OPPS.

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

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

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

To convert charges on the claims to estimated cost, we multiplied the charges on each claim by the appropriate hospital-specific CCR associated with the revenue code for the charge as discussed in section II.A.1.c. of this 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 (that exceeded +/−3 standard deviations from the geometric mean after removing error CCRs). In addition, we trimmed the CCRs at the cost center (that is, departmental) level by removing the CCRs for each cost center as outliers if they exceeded +/−3 standard deviations from the geometric mean. We used a four-tiered hierarchy of cost center CCRs, which is the revenue code-to-cost center crosswalk, to match a cost center to every possible revenue code appearing in the outpatient claims that is relevant to OPPS services, with the top tier being the most common cost center and the last tier being the default CCR. If a hospital's cost center CCR was deleted by trimming, we set the CCR for that cost center to “missing” so that another cost center CCR in the revenue center hierarchy could apply. If no other cost center CCR could apply to the revenue code on the claim, we used the hospital's overall ancillary CCR for the revenue code in question as the default CCR. For example, if a visit was reported under the clinic revenue code but the hospital did not have a clinic cost center, we mapped the hospital-specific overall ancillary CCR to the clinic revenue code. The revenue code-to-cost center crosswalk is available for inspection and comment on our Web site: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html. Revenue codes that we do not use in establishing relative costs or to model impacts are identified with an “N” in the revenue code-to-cost center crosswalk.

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

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

We then excluded claims without a HCPCS code. We moved to another file claims that contained 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 arithmetic and geometric mean and median cost and a per day arithmetic and geometric mean and median cost for drugs and nonimplantable biologicals, therapeutic radiopharmaceutical agents, and brachytherapy sources, as well as other information used to set payment rates, such as a unit-to-day ratio for drugs.

In the past several years, we have developed payment policy for nonpass-through separately paid drugs and biologicals based on a redistribution methodology that accounts for pharmacy overhead by allocating cost from packaged drugs to separately paid drugs. This typically would have required us to reduce the cost associated with packaged coded and uncoded drugs in order to allocate that cost. However, for CY 2013, we are proposing to pay for separately payable drugs and biologicals under the OPPS at ASP+6 percent, based upon the statutory default described in section 1833(t)(14)(A)(iii)(II) of the Act. Therefore, under this proposal, we would not redistribute the packaged cost. 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 in CY 2013.

We then removed line-items that were not paid during claim processing, presumably for a line-item rejection or denial. The number of edits for valid OPPS payment in the Integrated Outpatient Code Editor (I/OCE) and elsewhere has grown significantly in the past few years, especially with the implementation of the full spectrum of National Correct Coding Initiative (NCCI) edits. To ensure that we are using valid claims that represent the cost of payable services to set payment rates, we removed line-items with an OPPS status indicator that were not paid during claims processing in the claim year, but have a status indicator of “S,” “T,” “V,” or “X” in the prospective year's payment system. This logic preserves charges for services that would not have been paid in the claim year but for which some estimate of cost is needed for the prospective year, such as services newly proposed to come off the inpatient list for CY 2012 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 2013, we are proposing to continue the policy we implemented for CY 2012 to exclude line-item data for pass-through drugs and biologicals (status indicator “G” for CY 2011) and nonpass-through drugs and biologicals (status indicator “K” for CY 2011) 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 2012 OPPS/ASC final rule with comment period (76 FR 74141) of line-items with a status indicator of “S,” “T,” “V,” or “X,” we believe that unpaid line-items represent services that are invalidly reported and, therefore, should not be used for ratesetting. We believe that removing lines with valid status indicators that were edited and not paid during claims processing increases the accuracy of the data used for ratesetting purposes.

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

(1) Splitting Claims

For the CY 2013 OPPS, we then split the remaining claims into five groups: single majors; multiple majors; single minors; multiple minors; and other claims. (Specific definitions of these groups follow below.) For CY 2013, 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 2013, 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 2013 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 geometric mean costs for composite APCs from multiple procedure major claims is discussed in section II.A.2.e. of this proposed rule.

Specifically, we are proposing to divide the remaining claims into the following five groups:

1. Single Procedure Major Claims: Claims with a single separately payable procedure (that is, status indicator “S,” “T,” “V,” or “X,” which includes codes with status indicator “Q3”); claims with one unit of a status indicator “Q1” code (“STVX-packaged”) where there was no code with status indicator “S,” “T,” “V,” or “X” on the same claim on the same date; or claims with one unit of a status indicator “Q2” code (“T-packaged”) where there was no code with a status indicator “T” on the same claim on the same date.

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

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

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

5. Non-OPPS Claims: Claims that contain no services payable under the OPPS (that is, all status indicators other than those listed for major or minor status). These claims were excluded from the files used for the OPPS. Non-OPPS claims have codes paid under other fee schedules, for example, durable medical equipment 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 for ratesetting. Claims that contain codes to which we have assigned status indicator “Q3” (composite APC members) appear in both the data of the single and multiple major files used in this 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 are proposing to use the bypass codes listed in Addendum N to this proposed rule (which is available via the Internet on our 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 2013 “overlap bypass codes” are listed in Addendum N to this proposed rule (which is available via the Internet on the CMS Web site). When one of the two separately payable procedures on a multiple procedure claim was on the bypass list, we split the claim into two “pseudo” single procedure claim records. The single procedure claim record that contained the bypass code did not retain packaged services. The single procedure claim record that contained the other separately payable procedure (but no bypass code) retained the packaged revenue code charges and the packaged HCPCS code charges. We also removed lines that contained multiple units of codes on the bypass list and treated them as “pseudo” single procedure claims by dividing the cost for the multiple units by the number of units on the line. 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 proposed criteria for the multiple imaging composite APCs, discussed in section II.A.2.e.(5) of this proposed rule, were met. Where the criteria for the imaging composite APCs were met, we created a “single session” claim for the applicable imaging composite service and determined whether we could use the claim in ratesetting. For HCPCS codes that are both conditionally packaged and are members of a multiple imaging composite APC, we first assessed whether the code would be packaged and, if so, the code ceased to be available for further assessment as part of the composite APC. Because the packaged code would not be a separately payable procedure, we considered it to be unavailable for use in setting the composite APC costs on which proposed CY 2013 OPPS payment would be based. Having identified “single session” claims for the imaging composite APCs, we reassessed the claim to determine if, after removal of all lines for bypass codes, including the “overlap bypass codes,” a single unit of a single separately payable code remained on the claim. If so, we attributed the packaged costs on the claim to the single unit of the single remaining separately payable code other than the bypass code to create a “pseudo” single procedure claim. We also identified line-items of overlap bypass codes as a “pseudo” single procedure claim. This allowed us to use more claims data for ratesetting purposes.

We also are proposing to examine 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 2012 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 2012 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 2012 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 geometric mean 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 2012 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 2012 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 2012 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 2012 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 2012 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 2012 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 proposed 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 XII.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 the CY 2013 OPPS.

c. Completion of Claim Records and Geometric Mean Cost Calculations

(1) General Process

We then packaged the costs of packaged HCPCS codes (codes with status indicator “N” listed in Addendum B to this proposed rule (which is referenced in section XIX. 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 3 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 are proposing to continue to compare the final list of packaged revenue codes that we adopt for CY 2013 to the revenue codes that the I/OCE will package for CY 2013 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 2013, as we did for CY 2012, we reviewed the changes to revenue codes that were effective during CY 2011 for purposes of determining the charges reported with revenue codes but without HCPCS codes that we would propose to package for CY 2013. We believe that the charges reported under the revenue codes listed in Table 3 below continue to reflect ancillary and supportive services for which hospitals report charges without HCPCS codes. Therefore, for CY 2013, 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 3 below for purposes of calculating the geometric mean costs on which the proposed CY 2013 OPPS/ASC payment rates are based.

Table 3—Proposed CY 2013 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.
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 2013 OPPS.

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

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

After removing claims for hospitals with error CCRs, claims without HCPCS codes, claims for immunizations not covered under the OPPS, and claims for services not paid under the OPPS, approximately 108 million claims were left. Using these approximately 108 million claims, we created approximately 110 million single and “pseudo” single procedure claims, of which we used slightly more than 110 million single bills (after trimming out approximately 959,000 claims as discussed in section II.A.1.a. of this proposed rule) in the CY 2013 geometric mean cost development and ratesetting.

As discussed above, the OPPS has historically developed the relative weights on which APC payments are based using APC median costs. For the CY 2013 OPPS, we are proposing to calculate the APC relative weights using geometric mean costs, and therefore the following discussion of the two times rule and relative weight development refers to geometric means. For more detail about the CY 2013 OPPS/ASC proposal to calculate relative payment weights based on geometric means, we refer readers to section II.A.2.f. of this proposed rule.

We are proposing to use these claims to calculate the proposed CY 2013 geometric mean costs for each separately payable HCPCS code and each APC. The comparison of HCPCS code-specific and APC geometric mean costs determines the applicability of the 2 times rule. Section 1833(t)(2) of the Act provides that, subject to certain exceptions, the items and services within an APC group shall not be treated as comparable with respect to the use of resources if the highest median cost (or mean cost, if elected by the Secretary) for an item or service within the group is more than 2 times greater than the lowest median cost (or mean cost, if so elected) for an item or service within the same group (the 2 times rule). While we have historically applied the 2 times rule based on median costs, as part of the CY 2013 proposal to develop the OPPS relative payment weights based on geometric mean costs, we also are proposing to apply the 2 times rule based on geometric mean costs. For a detailed discussion of the CY 2013 proposal to develop the APC relative payment weights based on geometric mean costs, we refer readers to section II.A.2.f. of this proposed 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 geometric mean cost to be significant. This longstanding definition of when a HCPCS code is significant for purposes of the 2 times rule was selected because we believe that a subset of 1,000 claims is negligible within the set of approximately 100 million single procedure or single session claims we use for establishing geometric mean costs. Similarly, a HCPCS code for which there are fewer than 99 single bills and which comprises less than 2 percent of the single major claims within an APC will have a negligible impact on the APC geometric mean. We note that this method of identifying significant HCPCS codes within an APC for purposes of the 2 times rule was used in prior years under the median-based cost methodology. Under our CY 2013 proposal to base the relative payment weights on geometric mean costs, we believe that this same consideration for identifying significant HCPCS codes should apply because the principles are consistent with their use in the median-based system. Unlisted codes are not used in establishing the percent of claims contributing to the APC, nor are their costs used in the calculation of the APC geometric mean. Finally, we reviewed the geometric mean costs for the services for which we 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 geometric mean costs and for other reasons. The APC geometric means were recalculated after we reassigned the affected HCPCS codes. Both the HCPCS code-specific geometric means and the APC geometric means were weighted to account for the inclusion of multiple units of the bypass codes in the creation of “pseudo” single procedure claims.

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 geometric mean costs are calculated using variations of the process outlined above. Specifically, section II.A.2.d. of this proposed rule addresses the calculation of single APC criteria-based geometric mean costs. Section II.A.2.e. of this proposed rule discusses the calculation of composite APC criteria-based geometric mean costs. Section VIII.B. of this proposed rule addresses the methodology for calculating the geometric mean costs for partial hospitalization services.

(2) Recommendations of the Advisory Panel on Hospital Outpatient Payment Regarding Data Development

At the February 27-28, 2012 meeting of the Advisory Panel on Hospital Outpatient Payment (the Panel), we provided the Data Subcommittee with a list of all APCs fluctuating by greater than 10 percent when comparing the CY 2012 OPPS final rule median costs based on CY 2010 claims processed through June 30, 2011, to those based on CY 2011 OPPS/ASC final rule data (CY 2009 claims processed through June 30, 2010). The Data Subcommittee reviewed the fluctuations in the APC median costs but did not express particular concerns with the median cost changes.

At the February 27-28, 2012 Panel meeting, the Panel made a number of recommendations related to the data process. The Panel's recommendations and our responses follow.

Recommendation 1: The Panel recommends that the work of the Data Subcommittee continue.

CMS Response to Recommendation 1: We are accepting this recommendation.

Recommendation 2: The Panel recommends that Kari S. Cornicelli, C.P.A., FHFMA, serve as acting chairperson for the winter 2012 meeting of the Data Subcommittee.

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

d. Proposed Calculation of Single Procedure APC Criteria-Based 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 2013, we are proposing to use the standard methodology for calculating costs for device-dependent APCs that was finalized in the CY 2012 OPPS/ASC final rule with comment period (76 FR 74148 through 74151). This methodology utilizes claims data that generally represent the full cost of the required device and the most recent cost report data. Specifically, we are proposing to calculate the costs for device-dependent APCs for CY 2013 using only the subset of single procedure claims from CY 2011 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, 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 costs for device-dependent APCs gives us the most appropriate costs for device-dependent APCs in which the hospital incurs the full cost of the device.

Table 4A below lists the APCs for which we are proposing to use our standard device-dependent APC ratesetting methodology for CY 2013. We refer readers to Addendum A to this proposed rule (which is available via the Internet on the CMS Web site) for the proposed payment rates for these device-dependent APCs for CY 2013.

Table 4A—Proposed CY 2013 Device-Dependent APCs

Proposed CY 2013 APCProposed CY 2013 status indicatorProposed CY 2013 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.
0083TCoronary Angioplasty, Valvuloplasty, and Level 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.
0108TInsertion/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 or Pacing Electrode.
0656TTranscatheter Placement of Intracoronary Drug-Eluting Stents.
0674TProstate Cryoablation.
0680SInsertion of Patient Activated Event Recorders.

(2) Blood and Blood Products

Since the implementation of the OPPS in August 2000, we have made separate payments for blood and blood products through APCs rather than packaging payment for them into payments for the procedures with which they are administered. Hospital payments for the costs of blood and blood products, as 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 2013, 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 costs upon which the proposed CY 2013 payment rates for blood and blood products are based using the actual blood-specific CCR for hospitals that reported costs and charges for a blood cost center and a hospital-specific simulated blood-specific CCR for hospitals that did not report costs and charges for a blood cost center. We note that we used geometric mean unit costs for each blood and blood product to calculate the proposed payment rates, consistent with the methodology proposed for other items and services, discussed in section II.A.2.f. of this proposed rule.

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 2013 would result in costs for blood and blood products that appropriately reflect the relative estimated costs of these products for hospitals without blood cost centers and, therefore, for these blood products in general.

We refer readers to Addendum B to this proposed rule (which is available via the Internet on the CMS Web site) for the proposed CY 2013 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) 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 codebook 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 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 the most recent cost report data to create simulated costs for 12 of the 16 new separately payable codes for CY 2011. Because the endovascular revascularization CPT codes were 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 costs, we selected claims that we believe met 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 costs 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 the 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 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 (75 FR 71845) displayed their final CY 2011 APC assignments and CPT costs. We noted that, because these CPT codes were new for CY 2011, they were 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 CY 2011 and subject to public comment. We specifically requested public comment on our methodology for simulating the costs for these new CY 2011 CPT codes in addition to public comments on the payment rates themselves (75 FR 71845).

As stated in the CY 2012 OPPS/ASC final rule with comment period (76 FR 74156), for CY 2012, we continued to use the CY 2011 methodology in determining the APC assignments for the CPT codes that describe endovascular revascularization of the lower extremity. Because previous endovascular revascularization CPT codes were in existence prior to CY 2011 and assigned to designated APCs, we continued to use existing hospital outpatient claims and cost report data from established codes to simulate estimated costs for the endovascular revascularization CPT codes in determining the appropriate APC assignments for CY 2012, as we did for CY 2011. In the CY 2012 OPPS/ASC final rule with comment period, we also revised the title of APC 0083 from “Coronary or Non-Coronary Angioplasty and Percutaneous Valvuloplasty” to “Coronary Angioplasty, Valvuloplasty, and Level I Endovascular Revascularization of the Lower Extremity”; the title of APC 0229 from “Transcatheter Placement of Intravascular Shunts 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”.

Because the endovascular revascularization of the lower extremity CPT codes were new for CY 2011, CY 2013 is the first year of claims data that are available for ratesetting for these specific CPT codes. For CY 2013, review of the procedures with significant claims data in APCs 0083, 0229, and 0319 shows no 2 times rule violation in these APCs. We believe that the endovascular revascularization CPT codes in APCs 0083, 0229, and 0319 continue to be appropriately placed based on clinical homogeneity and resource costs. Therefore, for CY 2013, we are proposing to continue to assign the endovascular revascularization CPT codes to APCs 0083, 0229, and 0319, as listed in Table 4B below.

Table 4B—Proposed APCs to Which Endovascular Revascularization of the Lower Extremity CPT Codes Would Be Assigned for CY 2013

CY 2012 CPT CodeCY 2012 short descriptorCY 2012 SICY 2012 APCProposed CY 2013 SIProposed CY 2013 APC
37220Iliac revascT0083T0083
37221Iliac revasc w/stentT0229T0229
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
37233Tib/per revasc w/ather add-onT0229T0229
37234Revsc opn/prq tib/pero stentT0083T0083
37235Tib/per revasc stnt & atherT0083T0083

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

For CY 2011, the AMA's CPT Editorial Panel restructured the Cardiac Catheterization section of the CPT codebook so that combinations of services that were previously reported using multiple codes are now reported with one CPT code. This revision deleted several non-congenital cardiac catheterization-related CPT codes from the 93500 series and created new CPT codes in the 93400 series and in the 93500 series. We discussed these coding changes in detail in the CY 2011 OPPS/ASC final rule with comment period (75 FR 71846 through 71849), 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. As discussed in that 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 costs 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 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 the 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 non-congenital catheterization-related CPT codes in APC 0080 (Diagnostic Cardiac Catheterization), to calculate CPT level costs and the cost for APC 0080 of approximately $2,698. We noted that, because the CPT codes listed in Table 11 were new for CY 2011, they were identified with comment indicator “NI” in Addendum B to 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 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 continued to use the CY 2011 methodology in determining the APC assignments for the new cardiac catheterization CPT codes. That is, we continued to use the CY 2011 methodology in determining the APC assignments for the cardiac catheterization CPT codes by using the existing hospital outpatient claims and the cost report data from the predecessor cardiac catheterization CPT codes to simulate an estimated cost for the new cardiac catheterization CPT codes in determining the appropriate APC assignments. Specifically, we used the CY 2010 hospital outpatient claims data and the most recent cost report data to create simulated costs for the new separately payable CPT codes for CY 2012 to determine the payment rates for the cardiac catheterization CPT codes. For CY 2012, we did not make any changes to the CY 2011 APC assignments of any of the codes assigned to APC 0080 because the claims data supported continuation of these APC assignments.

Because the cardiac catheterization CPT codes were new for CY 2011, CY 2013 is the first year of claims data that are available for ratesetting for these specific CPT codes. For CY 2013, our analysis of the CY 2011 claims data available for this proposed rule shows no violation in the 2 times rule for the cardiac catheterization CPT codes because the lowest cost of a CPT code with significant claims data in APC 0080 is approximately $1,716 (for CPT code 93451), while the highest cost of a CPT code with significant claims data is approximately $3,308 (for CPT code 93461). We believe that the cardiac catheterization CPT codes continue to be appropriately placed in APC 0080 based on clinical homogeneity and resource costs. Therefore, for CY 2013, we are proposing to continue to assign the cardiac catheterization CPT codes to APC 0080 as listed below in Table 5.

Table 5—Proposed APCs to Which Non-Congenital Cardiac Catheterization CPT Codes Would Be Assigned for CY 2013

CY 2012 HCPCS codeCY 2012 short descriptorCY 2012 SICY 2012 APCProposed CY 2013 SIProposed CY 2013 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 & hemodynamic measNNANNA
93464Exercise w/hemodynamic measNNANNA
93565Inject l ventr/atrial angioNNANNA
93566Inject r ventr/atrial angioNNANNA
93567Inject suprvlv aortographyNNANNA
93568Inject pulm art hrt cathNNANNA

(5) Computed Tomography of Abdomen/Pelvis (APCs 0331 and 0334)

For CY 2011, the AMA's CPT Editorial Panel established three new codes to describe computed tomography of the abdomen and pelvis. CPT codes 74176 (Computed tomography, abdomen and pelvis; without contrast material), 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) were effective January 1, 2011. As shown in Table 6, for CY 2011, these services were paid in one of two methods under the hospital OPPS. They were either paid separately through a single APC or through a composite APC. We assigned CPT code 74176 to APC 0332 (Computed Tomography Without Contrast), CPT code 74177 to APC 0283 (Computed Tomography With Contrast), and CPT code 74178 to APC 0333 (Computed Tomography Without Contrast Followed By Contrast). We also assigned CPT code 74176 to composite APC 8005 (CT and CTA Without Contrast Composite), and CPT codes 74177 and 74178 to composite 8006 (CT and CTA With Contrast Composite). We assigned the codes to status indicator “Q3” to indicate that the codes were eligible for composite payment under the multiple imaging composite APC methodology when they are furnished with other computed tomography procedures to the same patient on the same day.

Consistent with our longstanding policy for new codes, we assigned these codes to interim APCs for CY 2011, with comment indicator “NI” in Addendum B of the CY 2011 OPPS/ASC final rule with comment period denoting that the codes were new with an interim APC assignment on which comments would be accepted. In accordance with our longstanding policy to provide codes to enable payment to be made for new services as soon as the code is effective, our interim APC assignments for each code were based on our understanding of the resources required to furnish the services and their clinical characteristics as defined in the code descriptors.

Table 6—CY 2011 OPPS APC Assignments for the Computed Tomography of Abdomen and Pelvis CPT Codes

CY 2011 CPT CodeCY 2011 short descriptorCY 2011 SICY 2011 single code APCCY 2011 single code APC payment rateCY 2011 composite APCCY 2011 composite APC payment rate
74176Ct abd & pelvisQ30332$193.858005$420.85
74177Ct abd & pelv w/contrastQ30283299.818006628.61
74178Ct abd & pelv 1/< regnsQ30333334.248006628.61

As we described in the CY 2012 OPPS/ASC final rule with comment period (76 FR 74259), in general, stakeholders who provided comments on the interim assignments of these codes for CY 2011 stated that the most appropriate approach to establishing payment for these new codes was 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 services under the OPPS if we were to establish payment rates for the codes for CY 2012 using claims data that reflect the combined cost of the two predecessor codes. In addition, at the February 28-March 1, 2011 Panel meeting, several presenters reported their concern and disagreement with our single APC assignments for these new codes. The presenters stated that the payment rates for the single APC assignments reflected only half of the true costs of these services based on their internal calculated costs. Similar to the public commenters, the presenters indicated that, prior to CY 2011, these services were reported using a combination of codes, and suggested that CMS revise the methodology to include these combinations of codes to determine accurate payment rates for these services. Specifically, the presenters indicated that simulating the costs for CPT codes 74176, 74177, and 74178 using historical claims data from the predecessor codes would result in the best estimates of costs for these codes and, therefore, the most accurate payment rates.

After examination of our claims data for the predecessor codes, and after considering the various concerns and recommendations that we received on this issue (specifically, the views of the stakeholders who met with us to discuss this issue, the comments received in response to the CY 2011 OPPS/ASC final rule with public comment period, and input from the Panel at its February 28-March 1, 2011 meeting), we proposed to revise our payment methodology for CPT codes 74176, 74177, and 74178 for CY 2012 (76 FR 42235). That is, we proposed to simulate the costs for CPT codes 74176, 74177, and 74178 using historical claims data from the predecessor codes to determine the most accurate payment rates for these codes. This new proposed payment methodology necessitated establishing two new APCs, specifically, APC 0331 (Combined Abdominal and Pelvis CT Without Contrast) to which CPT code 74176 would be assigned, and APC 0334 (Combined Abdominal and Pelvis CT With Contrast) to which CPT codes 74177 and 74178 would be assigned. In addition, we proposed to continue to assign CPT code 74176 to composite APC 8005 and CPT codes 74177 and 74178 to composite APC 8006 for CY 2012.

Based on the feedback that we received from the Panel at its August 10-11, 2011 meeting, and the public comments received on the CY 2012 OPPS/ASC proposed rule in support of the proposed revised payment methodology for CPT codes 74176, 74177, and 74178, we finalized our proposals in the CY 2012 OPPS/ASC final rule with comment period. Specifically, we reassigned CPT code 74176 from APC 0332 to APC 0331, CPT code 74177 from APC 0283 to APC 0334, and CPT code 74178 from APC 0333 to APC 0334. (We refer readers to the CY 2012 OPPS/ASC final rule with comment period for a detailed description of the methodology we used to simulate the costs of these procedures using claims data for the predecessor CPT codes (76 FR 74259 through 74262).) We also continued with our composite APC assignments for these codes. Specifically, we continued to assign CPT code 74176 to composite APC 8005 and CPT codes 74177 and 74178 to composite APC 8006. Table 7 below shows the payment rates for these codes for the CY 2012 update.

Table 7—CY 2012 OPPS APC Assignments for the Computed Tomography of Abdomen and Pelvis CPT Codes

CY 2012 CPT CodeCY 2012 short descriptorCY 2012 SICY 2012 single code APCCY 2012 single code APC payment rateCY 2012 composite APCCY 2012 composite APC payment rate
74176Ct abd & pelvisQ30331$405.178005$431.60
74177Ct abd & pelv w/contrastQ30334580.548006721.12
74178Ct abd & pelv 1/< regnsQ30334580.548006721.12

We stated in the CY 2012 OPPS/ASC final rule with comment period (76 FR 74262) that we would reassess whether there is a continued need for these APCs for the CY 2013 OPPS/ASC update once we have actual charges for these services. Because CPT codes 74176, 74177, and 74178 became effective on January 1, 2011, we have hospital claims data available for these codes that we can use for ratesetting for the first time. Analysis of the latest CY 2011 hospital outpatient claims data for the CY 2013 OPPS/ASC proposed rulemaking update, which is based on claims processed with dates of service from January 1, 2011 through December 31, 2011, reveals a decrease in costs for the three procedures, compared to the costs simulated using predecessor CPT codes for CY 2012. CPT code 74176 shows a cost of approximately $314 based on 312,493 single claims (out of 713,662 total claims), while CPT code 74177 reveals a cost of approximately $476 based on 367,002 single claims (out of 951,296 total claims). In addition, CPT code 74178 shows a cost of approximately $537 based on 184,580 single claims (out of 267,401 total claims). Because we used hospital claims data specific to CPT codes 74176, 74177, and 74178, we believe these costs accurately reflect the resources associated with providing computed tomography of the abdomen and pelvis as described by these CPT codes in the HOPD.

Furthermore, our analysis of the CY 2011 claims data available for this proposed rule shows no 2 times rule violation for either APC 0331 or APC 0334. Therefore, for CY 2013, we are proposing to continue to assign CPT code 74176 to APC 0331 and CPT codes 74177 and 74178 to APC 0334. (Because we have claims data available for these three CPT codes, we will no longer simulate their costs using predecessor codes as we did in CY 2012.) In addition, we are proposing to continue to assign these codes to their existing composite APCs for CY 2013. Specifically, we are proposing to continue to assign CPT code 74176 to composite APC 8005, and to assign CPT codes 74177 and 74178 to composite APC 8006. Table 8 below lists the computed tomography of the abdomen and pelvis CPT codes along with their proposed status indicators, and single and composite APC assignments for CY 2013.

Table 8—Proposed APC Assignments for the Computed Tomography of Abdomen and Pelvis CPT Codes for CY 2013

CY 2012 CPT CodeCY 2012 short descriptorProposed CY 2013 SIProposed CY 2013 single code APCProposed CY 2013 composite APC
74176Ct abd & pelvisQ303318005
74177Ct abd & pelv w/contrastQ303348006
74178Ct abd & pelv 1/> regnsQ303348006

(6) Brachytherapy Sources

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. For the history of OPPS payment for brachytherapy sources, we refer readers to prior OPPS proposed and final rules. As we have stated previously (72 FR 66780, 73 FR 41502, 74 FR 60533 through 60534, 75 FR 71978, and 76 FR 74160), 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 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 averaging the extremely high and low values, in contrast to 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.

Therefore, for CY 2013, we are proposing to use the costs from CY 2011 claims data for setting the proposed CY 2013 payment rates for brachytherapy sources, as we are proposing for most other items and services that would be paid under the CY 2013 OPPS. We based the proposed rates for brachytherapy sources using geometric mean unit costs for each source, consistent with the methodology proposed for other items and services, discussed in section II.A.2.f. of this proposed rule. 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 period (72 FR 66785). 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 Pub. L. 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 and CY 2012, 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 specified at 42 CFR 419.43(d). In addition, implementation of prospective payment for brachytherapy sources provides opportunities for eligible hospitals to receive additional payments in CY 2013 under certain circumstances through the 7.1 percent rural adjustment, as described in section II.E. of this proposed rule.

We refer readers to Addendum B to this proposed rule (which is available via the Internet on the CMS Web site) for the proposed CY 2013 payment rates for brachytherapy sources, identified with status indicator “U”. We are inviting public comment on this proposed policy and also requesting recommendations 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 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 policies for extended assessment and management services, low dose rate (LDR) prostate brachytherapy, cardiac electrophysiologic evaluation and ablation services, mental health services, multiple imaging services, and cardiac resynchronization therapy services. We refer readers to the CY 2008 OPPS/ASC final rule with comment period for a full discussion of the development of the composite APC methodology (72 FR 66611 through 66614 and 66650 through 66652) and the CY 2012 OPPS/ASC final rule with comment period (76 FR 74163) for more recent background.

For CY 2013, we are proposing to continue our composite policies for extended assessment and management services, LDR prostate brachytherapy, cardiac electrophysiologic evaluation and ablation services, mental health services, multiple imaging services, and cardiac resynchronization therapy 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), II.A.2.e.(5), and II.A.2.e.(6), respectively, of this proposed rule.

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

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 2013. Beginning in 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 the two composite APCs as appropriate. We refer readers to the CY 2012 OPPS/ASC final rule with comment period (76 FR 74163 through 74165) for a full discussion of this longstanding policy.

For CY 2013, we are proposing to continue the extended assessment and management composite APC payment methodology and criteria for APCs 8002 and 8003 that we finalized for CYs 2009 through 2012. 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 also are proposing to calculate the costs for APCs 8002 and 8003 using the same methodology that we used to calculate the costs for composite APCs 8002 and 8003 for the CY 2008 OPPS (72 FR 66649). That is, we are proposing to use all single and “pseudo” single procedure claims from CY 2011 that met the criteria for payment of each composite APC and apply the standard packaging and trimming rules to the claims before calculating the proposed CY 2013 costs. The proposed CY 2013 cost resulting from this methodology for composite APC 8002 is approximately $446, which was calculated from 17,072 single and “pseudo” single bills that met the required criteria. The proposed CY 2013 cost for composite APC 8003 is approximately $813, which was calculated from 255,231 single and “pseudo” single bills that met the required criteria.

At its February 2012 meeting, the Advisory Panel on Hospital Outpatient Payment (the Panel) recommended that CMS continue to report clinic/emergency department visit and observation claims data and, if CMS identifies changes in patterns of utilization or cost, that CMS bring those issues to the Visits and Observation Subcommittee. Additionally, the Panel recommended that CMS examine data for discharge status, point of entry, age, primary and secondary diagnoses, and type of hospital (teaching, nonteaching, rural, urban) for patients receiving greater than 48 hours of observation services, if available, and report the findings to the Visits and Observation Subcommittee. The Panel recommended that the Visits and Observation Subcommittee review claims data for HCPCS code G0379 (Direct referral of patient for hospital observation care), and consider the appropriate APC group for the code. The Panel also recommended that the results of CMS' study on unconditionally packaged HCPCS code G0378 (Hospital observation service, per hour) be presented to the Visits and Observation Subcommittee. The Panel recommended that the work of the Visits and Observation Subcommittee continue. We are accepting these recommendations and will provide the requested data to the Panel at a future meeting.

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

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

For CY 2013, we are proposing to continue to pay for LDR prostate brachytherapy services using the composite APC methodology proposed and implemented for CY 2008 through CY 2012. That is, we are proposing to use CY 2011 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 2012 practice, we are proposing not to use the claims that meet these criteria in the calculation of the 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. We are proposing that the costs for APCs 0163 and 0651 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 cost upon which to base the composite APC payment rate.

Using a partial year of CY 2011 claims data available for this CY 2013 proposed rule, we were able to use 650 claims that contained both CPT codes 55875 and 77778 to calculate the cost upon which the proposed CY 2013 payment for composite APC 8001 is based. The proposed cost for composite APC 8001 for CY 2013 is approximately $3,362.

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

Effective January 1, 2008, we established APC 8000 (Cardiac Electrophysiologic Evaluation and Ablation Composite) to pay for a composite service made up of at least one specified electrophysiologic evaluation service and one specified electrophysiologic ablation service. Correctly coded claims for these services often include multiple codes for component services that are reported with different CPT codes and that, prior to CY 2008, were always paid separately through different APCs (specifically, APC 0085 (Level II Electrophysiologic Evaluation), APC 0086 (Ablate Heart Dysrhythm Focus), and APC 0087 (Cardiac Electrophysiologic Recording/Mapping)). Calculating a composite APC for these services allowed us to utilize many more claims than were available to establish the individual APC costs for these services, and advanced our stated goal of promoting hospital efficiency through larger payment bundles. In order to calculate the cost upon which the payment rate for composite APC 8000 is based, we used multiple procedure claims that contained at least one CPT code from Group A for evaluation services and at least one CPT code from Group B for ablation services reported on the same date of service on an individual claim. Table 9 in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66656) identified the CPT codes that are assigned to Groups A and B. For a full discussion of how we identified the Group A and Group B procedures and established the payment rate for the cardiac electrophysiologic evaluation and ablation composite APC, we refer readers to the CY 2008 OPPS/ASC final rule with comment period (72 FR 66655 through 66659). Where a service in Group A is furnished on a date of service that is different from the date of service for a 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 2013, 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 2012. We continue to believe that the cost for these services 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. Consistent with our CY 2008 through CY 2012 practice, we are proposing not to use the claims that meet the composite payment criteria in the calculation of the costs for APCs 0085 and 0086, to which the CPT codes in both Groups A and B for composite APC 8000 are otherwise assigned. The costs for APCs 0085 and 0086 would continue to be calculated using single procedure claims.

For CY 2013, using a partial year of CY 2011 claims data available for this proposed rule, we were able to use 11,358 claims containing a combination of Group A and Group B codes to calculate a proposed cost of approximately $11,458 for composite APC 8000.

Table 9 below lists the proposed groups of procedures upon which we would base composite APC 8000 for CY 2013.

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

Codes used in combinations: At least one in Group A and one in Group BCY 2012 CPT CodeProposed single code CY 2013 APCProposed CY 2013 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 2013, 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 treatments for CY 2013. We refer readers to the April 7, 2000 OPPS final rule with comment period (65 FR 18452 to 18455) for the initial discussion of this longstanding policy and the CY 2012 OPPS/ASC final rule with comment period (76 FR 74168) for more recent background.

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

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

Effective January 1, 2009, we provide a single payment each time a hospital bills more than one imaging procedure within an imaging family on the same date of service, in order to reflect and promote the efficiencies hospitals can achieve when performing multiple imaging procedures during a single session (73 FR 41448 through 41450). We utilize three imaging families based on imaging modality for purposes of this methodology: (1) Ultrasound; (2) computed tomography (CT) and computed tomographic angiography (CTA); and (3) magnetic resonance imaging (MRI) and magnetic resonance angiography (MRA). The HCPCS codes subject to the multiple imaging composite policy and their respective families are listed in Table 8 of the CY 2012 OPPS/ASC final rule with comment period (76 FR 74171 through 74175).

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.

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).

For CY 2013, we are proposing to continue to pay for all multiple imaging procedures within an imaging family performed on the same date of service using the multiple imaging composite payment methodology. We continue to believe that this policy would continue to reflect and promote the efficiencies hospitals can achieve when performing multiple imaging procedures during a single session. The proposed CY 2013 payment rates for the five multiple imaging composite APCs (APC 8004, APC 8005, APC 8006, APC 8007, and APC 8008) are based on costs calculated from a partial year of CY 2011 claims available for this CY 2013 OPPS/ASC proposed rule that qualified for composite payment under the current policy (that is, those claims with more than one procedure within the same family on a single date of service). To calculate the proposed costs, we used the same methodology that we used to calculate the final CY 2012 costs for these composite APCs, as described in the CY 2012 OPPS/ASC final rule with comment period (76 FR 74169). The imaging HCPCS codes that we removed from the bypass list for purposes of calculating the proposed multiple imaging composite APC costs, pursuant to our established methodology (76 FR 74169), appear in Table 11 of this proposed rule.

We were able to identify approximately 1.0 million “single session” claims out of an estimated 1.5 million potential composite cases from our ratesetting claims data, more than half of all eligible claims, to calculate the proposed CY 2013 costs for the multiple imaging composite APCs.

Table 10 below lists the proposed HCPCS codes that would be subject to the multiple imaging composite policy and their respective families and approximate proposed composite APC costs for CY 2013. Table 11 below lists the OPPS imaging family services that overlap with HCPCS codes on the proposed CY 2013 bypass list.

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

Family 1—Ultrasound
Proposed CY 2013 APC 8004 (Ultrasound Composite)Proposed CY 2013 Approximate APC Cost = $201
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 2013 APC 8005 (CT and CTA without Contrast Composite)*Proposed CY 2013 Approximate APC Cost = $412
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 2013 APC 8006 (CT and CTA with Contrast Composite)Proposed CY 2013 Approximate APC Cost = $700
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 2013 APC 8007 (MRI and MRA without Contrast Composite)*Proposed CY 2013 Approximate APC Cost = $725
70336Magnetic image, jaw joint.
70540Mri orbit/face/neck w/o dye.
70544Mr angiography head w/o dye.
70547Mr angiography neck w/o dye.
70551Mri brain w/o dye.
70554Fmri brain by tech.
71550Mri chest w/o dye.
72141Mri neck spine w/o dye.
72146Mri chest spine w/o dye.
72148Mri lumbar spine w/o dye.
72195Mri pelvis w/o dye.
73218Mri upper extremity w/o dye.
73221Mri joint upr extrem w/o dye.
73718Mri lower extremity w/o dye.
73721Mri jnt of lwr extre w/o dye.
74181Mri abdomen w/o dye.
75557Cardiac mri for morph.
75559Cardiac mri w/stress img.
C8901MRA w/o cont, abd.
C8904MRI w/o cont, breast, uni.
C8907MRI w/o cont, breast, bi.
C8910MRA w/o cont, chest.
C8913MRA w/o cont, lwr ext.
C8919MRA w/o cont, pelvis.
C8932MRA, w/o dye, spinal canal.
C8935MRA, w/o dye, upper extr.
Proposed CY 2013 APC 8008 (MRI and MRA with Contrast Composite)Proposed CY 2013 Approximate APC Cost = $1,066
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 APC 8007.

Table 11—Proposed OPPS Imaging Family Services Overlapping With HCPCS Codes on the CY 2013 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.
70544Mri 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 (APC 0108)

Cardiac resynchronization therapy (CRT) uses electronic devices to sequentially pace both sides of the heart to improve its output. CRT utilizing a pacing electrode implanted in combination with an implantable cardioverter defibrillator (ICD) is known as CRT-D. Hospitals commonly report the implantation of a CRT-D system using CPT codes 33225 (Insertion of pacing electrode, cardiac venous system, for left ventricular pacing, at time of insertion of pacing cardioverter-defibrillator or pacemaker pulse generator (including upgrade to dual chamber system) (List separately in addition to code for primary procedure)) and 33249 (Insertion or repositioning of electrode lead(s) for single or dual chamber pacing cardioverter-defibrillator and insertion of pulse generator). As described in the CY 2012 OPPS/ASC final rule with comment period (76 FR 74176), over the past several years, stakeholders have pointed out significant fluctuations in the payment rate for CPT code 33225 and that, because the definition of CPT code 33225 specifies that the pacing electrode is inserted at the same time as an ICD or pacemaker, CMS would not have many valid claims upon which to calculate an accurate cost. In response to these concerns, we established a policy beginning in CY 2012 to recognize CPT codes 33225 and 33249 as a single, composite service when the procedures are performed on the same day and to assign them to APC 0108 (Insertion/Replacement/Repair of AICD Leads, Generator, and Pacing Electrodes) when they appear together on a claim with the same date of service. We refer readers to the CY 2012 OPPS/ASC final rule with comment period (76 FR 74176 through 74182) for a full description of how we developed this policy.

As described in the CY 2012 OPPS/ASC final rule with comment period (76 FR 74182), hospitals continue to use the same CPT codes to report CRT-D implantation services, and the I/OCE will identify when the combination of CPT codes 33225 and 33249 on the same day qualify for composite service payment. We make a single composite payment for such cases. When not performed on the same day as the service described by CPT code 33225, the service described by CPT code 33249 is also assigned to APC 0108. When not performed on the same day as the service described by CPT code 33249, the service described by CPT code 33225 is assigned to APC 0655.

We refer readers to the CY 2012 OPPS/ASC final rule with comment period (76 FR 74176 through 74182) for a full description of how we developed this policy.

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

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

For CY 2013, we are proposing to continue to recognize CRT-D as a single, composite service as described above and finalized in the CY 2012 OPPS/ASC final rule with comment period. By continuing to recognize these procedures as a single, composite service, we are able to use a higher volume of correctly coded claims for CPT code 33225, which, because of its add-on code status, is always performed in conjunction with another procedure and, therefore, to address the inherent ratesetting challenges associated with CPT code 33225. We also note that this policy is consistent with the principles of a prospective payment system, specifically to place similar services that utilize technologies with varying costs in the same APC in order to promote efficiency and decision making based on individual patient's clinical needs rather than financial considerations. In calculating the costs upon which the payment rate for APC 0108 is based for CY 2013, for this proposed rule, we included single procedure claims for the individual services assigned to APC 0108, as well as single procedure claims that contain the composite CRT-D service, defined as the combination of CPT codes 33225 and 33249 with the same date of service. We were able to use 9,790 single bills from the CY 2013 proposed rule claims data to calculate a proposed cost of approximately $31,491 for APC 0108. Because CPT codes 33225 and 33249 may be treated as a composite service for payment purposes, we are proposing to continue to assign them status indicator “Q3” (Codes that may be paid through a composite APC) in Addendum B to this proposed rule. The assignment of CPT codes 33225 and 33249 to APC 0108 when treated as a composite service is also reflected in Addendum M to this proposed rule (which is available via the Internet on the CMS Web site).

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

f. Proposed Geometric Mean-Based Relative Payment Weights

When the Medicare program was first implemented, payment for hospital services (inpatient and outpatient) was based on hospital-specific reasonable costs attributable to furnishing services to Medicare beneficiaries. Although payment for most Medicare hospital inpatient services became subject to a PPS under section 1886(d) of the Act in 1983, Medicare hospital outpatient services continued to be paid based on hospital-specific costs. This methodology for payment provided little incentive for hospitals to furnish such outpatient services efficiently and in a cost effective manner. At the same time, advances in medical technology and changes in practice patterns were bringing about a shift in the site of medical care from the inpatient setting to the outpatient setting.

In the Omnibus Budget Reconciliation Act of 1986 (OBRA 1986) (Pub. L. 99-509), the Congress paved the way for development of a PPS for hospital outpatient services. Section 9343(g) of OBRA 1986 mandated that fiscal intermediaries require hospitals to report claims for services under the Healthcare Common Procedure Coding System (HCPCS). Section 9343(c) of OBRA 1986 extended the prohibition against unbundling of hospital services under section 1862(a)(14) of the Act to include outpatient services as well as inpatient services. The codes under the HCPCS enabled us to determine which specific procedures and services were billed, while the extension of the prohibition against unbundling ensured that all nonphysician services provided to hospital outpatients were reported on hospital bills and captured in the hospital outpatient data that were used to develop an outpatient PPS.

The brisk increase in hospital outpatient services further led to an interest in creating payment incentives to promote more efficient delivery of hospital outpatient services through a Medicare outpatient PPS. Section 9343(f) of OBRA 1986 and section 4151(b)(2) of the Omnibus Budget Reconciliation Act of 1990 (OBRA 1990) (Pub. L. 101-508), required that we develop a proposal to replace the hospital outpatient payment system with a PPS and submit a report to the Congress on the proposed system. The statutory framework for the OPPS was established by the Balanced Budget Act (BBA) of 1997 (Pub. L. 105-33) with section 4523 amending section 1833 of the Act by adding subsection (t), which provides for a PPS for hospital outpatient department services and the BBRA of 1999 (Pub. L. 106-113), with section 201 further amending section 1833(t) of the Act. The implementing regulations for these statutory authorities were codified at 42 CFR Part 419, effective for services furnished on or after August 1, 2000.

Section 1833 of the Act set forth the methodological requirements for developing the PPS for hospital outpatient services (the OPPS). At the onset of the OPPS, there was significant concern over observed increases in the volume of outpatient services, and corresponding rapidly growing beneficiary coinsurance. Accordingly, much of the focus was on finding ways to address those issues. The OPPS statute, section 1833(t)(2)(C) of the Act, initially provided that relative payment weights for covered outpatient department services be established based on median costs under section 4523(a) of the BBA of 1997. Later, section 201(f) of the BBRA of 1999 amended section 1833(t)(2)(C) of the Act to allow the Secretary the discretion to base the establishment of relative payment weights on either median or mean hospital costs. Since the OPPS was initially implemented, we have established relative payment weights based on the median hospital costs for both statistical reasons and timely implementation concerns. The proposed rule for the OPPS was published prior to the passage of the BBRA of 1999, which amended the Act to permit the use of mean costs. At that time, we noted that making payment for hospital outpatient services based on the median cost of each APC was a way of discouraging upcoding that occurs when individual services that are similar have disparate median costs, as well as associating services for which there are low claims volume into the appropriate classifications based on clinical patterns and their resource consumption (63 FR 47562).

As discussed in the CY 2000 OPPS final rule with comment period (65 FR 18482 through 18483), initial implementation of the payment system for hospital outpatient services was delayed due to multiple extensions of the proposed rule comment period, Year 2000 (Y2K) system concerns, and other systems challenges in developing the OPPS. Even though the BBRA of 1999 passed during that period of time, and provided the Secretary with the discretion to establish relative payment weights under the OPPS based on mean hospital costs, we determined that reconstructing the database to evaluate the impact of using mean costs would have postponed implementation of the OPPS further. There were important challenges at the time, including being responsive to stakeholder comments regarding the initial OPPS and addressing implementation issues so that the payment and claims processing systems would work correctly. To do so in a timely manner was critical; therefore, median costs were selected as an appropriate metric on which to base payment relativity, both based on the statistical reasons noted above, and practical implementation concerns.

In addition to the reasons discussed above, developing relative payment weights based on median costs was a way of attenuating the impact of cost outlier cases. In an environment where facility coding practices were still in their infancy, median costs served to minimize the impact of any coding errors. Using median costs to establish service cost relativity served the same function as any measure of central tendency (including means), ensuring that the payment weights used in the OPPS would, in general, account for the variety of costs associated with providing a service.

Since the beginning of the OPPS and throughout its development, we have striven to find ways to improve our methods for estimating the costs associated with providing services. The dialogue with the public regarding these issues, the meaningful information and recommendations that the Panel (previously the APC Panel) has provided, and the policies we have established to better derive the costs on which OPPS payment is calculated have contributed to improving cost estimation. However, challenges remain in our continuing effort to better estimate the costs associated with providing services. These challenges include our limited ability to obtain more meaningful information from the claims and cost report data available and ensuring that the approach used to calculate the payments for services accurately captures the relative costs associated with providing them. Over the years, we have implemented many changes to the OPPS cost modeling process to help address these challenges.

To obtain more information from the claims data we have available, we first began bypassing codes from the standard process to develop “pseudo” single claims in CY 2003 (67 FR 66746). In CY 2006, this concept later evolved into the bypass list (and its corresponding criteria for addition) which allows us to extract more cost information from claims that would otherwise be unusable for modeling service cost (70 FR 68525). In CY 2008, we examined clinical areas where packaging of services was appropriate, which allows us to use more claims in modeling the payments for primary procedures and encourage providers to make cost efficient choices where possible (72 FR 66610 through 66649). In the CY 2008 OPPS/ASC final rule with comment period (72 FR 66590), we noted that this packaging approach increased the number of “natural” single bills, while simultaneously reducing the universe of codes requiring single bills for ratesetting. Beginning in CY 2008, we also established composite APCs for services that are typically provided together in the same encounter, allowing us to use even more previously unusable claims (due to containing multiple separately payable major codes) for modeling service cost, as well as develop APCs that reflect the combined encounter (72 FR 66650 through 66658). We have implemented many steps to obtain more information from the claims and cost report data available to us, and continue to examine ways in which we can derive more meaningful information on service costs for use in ratesetting.

In our experience in working with the OPPS, we also have implemented many processes to ensure that the cost information we derive from cost reports and claims data is accurate. In the beginning of the OPPS, we implemented a cost trim of three standard deviations outside the geometric mean cost, similar to the cost data trim in the IPPS, because it would ensure that the most aberrant data were removed from ratesetting (65 FR 18484). We also have implemented similar trims to the hospital departmental CCR and claims based unit data related to the services (71 FR 67985 through 67987).

During the CY 2008 rulemaking cycle, we contracted with Research Triangle Institute, International (RTI) to examine possible improvements to the OPPS cost estimation process after they had investigated similar issues in the IPPS setting (72 FR 66659 through 66602). There was significant concern that charge compression, which results from the hospital practice of attaching a higher mark-up to charges for low cost supplies and a lower mark-up to charges for higher cost supplies, was influencing the cost estimates on which the OPPS relative payment weights are based. Based on RTI's recommendations, in CY 2009, we finalized modifications to the Medicare cost report form to create an “Implantable Medical Devices Charged to Patients” cost center to address public commenter concerns related to charge compression in the “Medical Supplies Charged to Patients” cost center (73 FR 48458 through 48467). These modifications helped to address potential issues related to hospital markup practices and how they are reflected in the CCRs in the Medicare cost reporting form.

In CY 2010, we incorporated a line item trim into our data process that removed lines that were eligible for OPPS payment in the claim year but received no payment, presumably because of a line item rejection or denial due to claims processing edits (74 FR 60359). This line item trim was developed with the goal of using additional lines to model prospective payment.

In addition to these process changes that were designed to include more accurate cost data in ratesetting, we have developed a number of nonstandard modeling processes to support service or APC specific changes. For example, in the device dependent APCs, we have incorporated edits into the cost estimation process to ensure that the full cost of the device is incorporated into the primary procedure.

While we have already implemented numerous changes to the data process in order to obtain accurate resource cost estimates associated with providing a procedure, we continue to examine possible areas of improvement. In the past, commenters have expressed concern over the degree to which payment rates reflect the costs associated with providing a service, believing that, in some cases, high cost items or services that might be packaged are not accordingly reflected in the payment weights (72 FR 66629 through 66630 and 66767). As mentioned above, in the CY 2008 OPPS/ASC final rule with comment period, we developed a packaging policy that identified a number of clinical areas where services would be commonly performed in a manner that was typically ancillary and supportive to other primary procedures. Packaging for appropriate clinical areas provides an incentive for efficient and cost-effective delivery of services. In that final rule with comment period, we recognized that there were strengths and weaknesses associated with using median costs as the metric for developing the OPPS payment weights (72 FR 66615). Medians are generally more stable than means because they are less sensitive to extreme observations, but they also do not reflect subtle changes in cost distributions. As a result, the use of medians rather than means under the OPPS usually results in relative weight estimates being less sensitive to packaging decisions, as well as changes in the cost model due to factors such as the additional claims processed between the proposed rule and the final rule.

The OPPS, like other prospective payment systems, relies on the concept of averaging, where the payment may be more or less than the estimated costs of providing a service or package of services for a particular patient (73 FR 68570). Establishing the cost-based relative payment weights based on a measure of central tendency, such as means or medians, ensures that the payments for the package of services should generally account for the variety of costs associated with providing those services. Prospective payments are ultimately adjusted for budget neutrality and updated by an OPD update factor, which affects the calculated payments, but the accuracy of the cost-based weights is critical in ensuring that the relative payment weights are adjusted appropriately.

We recognize that median costs have historically served and may continue to serve as an appropriate measure on which to establish relative payments weights. However, as discussed above, the metric's resistance to outlier observations is balanced by its limited ability to be reflective of changes to the dataset used to model cost or changes beyond the center of the dataset. While there was significant concern in the initial years of the OPPS regarding outlier cost values and the possible introduction of potentially aberrant values in the cost modeling, hospital experience in coding under the system, the data modeling improvements we have made to obtain more accurate cost information while removing erroneous data, and other changes in our experience with the system have all lessened the potential impact of error values (rather than actual, accurate cost outliers). As noted above, over the history of the OPPS, we have made multiple refinements to the data process to better capture service costs, respond to commenter concerns regarding the degree to which OPPS relative payment weights accurately reflect service cost and APC payment volatility from year to year, and better capture the variety of resource cost associated with providing a service as provided under section 1833(t)(2)(C) of the Act. For CY 2013, we are proposing to shift the basis for the CY 2013 APC relative payment weights that underpin the OPPS from median costs to geometric means based costs.

Geometric means better encompass the variation in costs that occur when providing a service because, in addition to the individual cost values that are reflected by medians, geometric means reflect the magnitude of the cost measurements, and are thus more sensitive to changes in the data. We believe developing the OPPS relative payment weights based on geometric mean costs would better capture the range of costs associated with providing services, including those cases involving high cost packaged items or services, and those cases where very efficient hospitals have provided services at much lower costs. The use of geometric mean costs also would allow us to detect changes in the cost of services earlier, because changes in cost often diffuse into the industry over time as opposed to impacting all hospitals equally at the same time. Medians and geometric means both capture the impact of uniform changes, that is, those changes that influence all providers, but only geometric means capture cost changes that are introduced slowly into the system on a case-by-case or hospital-by-hospital basis.

An additional benefit of this proposal relates to the two times rule, described in section III.B. of this proposed rule, which is our primary tool for identifying clinically similar services that have begun to deviate in terms of their financial resource requirements. Basing HCPCS projections on geometric mean costs would increase the sensitivity of this tool as we configure the APC mappings because it would allow us to detect differences when higher costs occur in a subset of services even if the number of services does not change. This information would allow us to better ensure that the practice patterns associated with all the component codes appropriately belong in the same APC.

In addition to better incorporating those cost values that surround the median and, therefore, describing a broader range of clinical practice patterns, basing the relative payment weights on geometric mean costs may also promote better stability in the payment system. In the short term, geometric mean-based relative payment weights would make the relative payment weights more reflective of the service costs. Making this change also may promote more payment stability in the long term by including a broader range of observations in the relative payment weights, making them less susceptible to gaps in estimated cost near the median observation and also making changes in the relative payment weight a better function of changes in estimated service costs.

We note that this proposed change would bring the OPPS in line with the IPPS, which utilizes hospital costs derived from claims and cost report data to calculate prospective payments, and specifically, mean costs rather than median costs to form the basis of the relative payment weights associated with each of the payment classification groups. We stated in the CY 2012 OPPS/ASC final rule with comment period (76 FR 74181) our intent to explore methods to ensure our payment systems do not provide inappropriate payment incentives to provide services in one setting of care as opposed to another setting of care based on financial considerations rather than clinical needs. By adopting a means cost based approach to calculating relative payment weights under the OPPS, we expect to achieve greater consistency between the methodologies used to calculate payment rates under the IPPS and the OPPS, which would put us in a better position from an analytic perspective to make cross-system comparisons and examine issues of payment parity.

For the reasons described above, we are proposing to establish the CY 2013 OPPS relative payment weights based on geometric mean costs. While this would involve a change to the metric used to develop the relative payment weights, the use of claims would not be affected. We are proposing to continue subsetting claims using the data processes for modeling the standard APCs and the criteria-based APCs described in section II.A.2. of this proposed rule, where appropriate. The reasoning behind implementing modeling edits or changes in the criteria-based APCs would not be affected because the process of developing the relative payment weights based on a measure of central tendency is the last step of the modeling process, and occurs only once the set of claims used in ratesetting has been established.

One important step that occurs after the development of relative payment weights is the assignment of individual HCPCS codes (services) to APCs. In our analysis of the impacts of a process conversion to geometric means, we determined that the change to means would not significantly influence the application of the 2 times rule. Very few services would need to be shifted to new APCs because of 2 times rule violations as the use of geometric means would resolve some violations that would exist under medians even as it creates others due to new cost projections. The net impact of the proposed change results in seven more violations of the 2 times rule created by the entire rebasing process than would exist if median-based values were used.

During the development of this proposal, we also determined that the cumulative effect of data shifts over the 12 years of OPPS introduced a number of inconsistencies in the APC groupings based on clinical and resource homogeneity. We believe that a shift to payments derived from geometric means would improve our ability to identify resource distinctions between previously homogenous services, and we intend to use this information over the next year to reexamine our APC structure and assignments to consider further ways of increasing the stability of payments for individual services over time.

We note that this proposal to establish all OPPS relative payment weights using geometric mean costs would apply to all APCs that would have previously been paid based on median costs. In addition, we are proposing that the relative payment weights for line item based payments such as brachytherapy sources, which are discussed in section II.A.2.d.(6) of this proposed rule, as well as blood and blood products, which are discussed in II.A.2.d.(2) of this proposed rule, be calculated based on their geometric mean costs for the CY 2013 OPPS.

The CY 2013 proposal to base relative payment weights on geometric mean costs would specifically include the CMHC and hospital-based partial hospitalization program APCs, which were previously based on median per diem costs. Their estimated payments would continue to be included in the budget neutral weight scaling process, and their treatment is similar to other nonstandard APCs discussed in section II.A. of this proposed rule. The process for developing a set of claims that is appropriate for modeling these APCs would continue to be the same as in recent years, with the only proposed difference being that a geometric mean per diem cost would be calculated rather than a median per diem cost. The proposed CY 2013 partial hospitalization payment policies are described in section VIII. of this proposed rule.

We believe it is important to make the transition from medians to means across all APCs in order to capture the complete range of costs associated with all services, and to ensure that the relative payment weights of the various APCs are properly aligned. If some OPPS payments calculated using relative payment weights are based on means while others are based on medians, the ratio of the two payments will not accurately reflect the ratio of the relative costs reported by the hospitals. This is of particular significance in the process of establishing the budget neutral weight scaler, discussed in section II.A.4. of this proposed rule.

We note that the few proposed exceptions to the applications of the geometric mean-based relative payment weights would be the same exceptions that exist when median-based weights are applied, including codes paid under different payment systems or not paid under the OPPS, items and services not paid by Medicare, items or services paid at reasonable cost or charges reduced to cost, among others. For more information about the various proposed payment status indicators for CY 2013, we refer readers to Addendum D1 to this proposed rule (which are available via the Internet on the CMS Web site).

We are proposing for CY 2013 that payment for nonpass-through separately payable drugs and biologicals will continue to be developed through its own separate process. Payments for drugs and biologicals are included in the budget neutrality adjustments, under the requirements in section 1833(t)(9)(B) of the Act, but the budget neutral weight scaler is not applied to their payments because they are developed through a separate methodology, outside the relative payment weight based process. We note that, for CY 2013, we are proposing to pay for nonpass-through separately payable drugs and biologicals under the OPPS at ASP+6 percent, based upon the statutory default described in section 1833(t)(14)(A)(iii)(II) of the Act. Also, as is our standard methodology, for CY 2013, we are proposing to use payment rates based on the ASP data from the fourth quarter of CY 2011 for budget neutrality estimates, packaging determinations, and the impact analyses. For items that did not have an ASP-based payment rate, such as some therapeutic radiopharmaceuticals, we are proposing to use their mean unit cost derived from the CY 2011 hospital claims data to determine their per day cost. The proposed nonpass-through separately payable drug and biological payment policy for CY 2013 is described in greater detail in section V.B. of this proposed rule.

Under the revised ASC payment system that was effective January 1, 2008, we established a standard ASC ratesetting methodology that bases payment for most ASC covered surgical procedures and some covered ancillary services on the OPPS relative payment weights (72 FR 42491 through 42493). Therefore, because we are proposing to calculate CY 2013 OPPS relative payment weights using geometric mean costs, we also are proposing that CY 2013 ASC payment rates under the standard ASC ratesetting methodology would be calculated using the OPPS relative payment weights that are based on geometric mean costs. We note that proposing to base the relative payment weights on geometric mean costs rather than median costs affects the proposed CY 2013 payment rates. Differences in the proposed payment rates, as with any changes from year to year, affect other parts of the OPPS, including the proposed copayments described in section II.I. of this proposed rule as well as the proposed fixed-dollar outlier threshold described in section II.G. of this proposed rule.

Under this CY 2013 proposal to base the relative payment weights on geometric means, we also are proposing to revise the related regulations that currently reflect a median cost-based OPPS to instead reflect a geometric mean cost-based OPPS. Specifically, we are proposing to revise 42 CFR 419.31, which describes the 2 times rule discussed in section III.B. of this proposed rule and the development of weights based on the cost metrics discussed in section II.A.4 of this proposed rule.

In the Addenda to this proposed rule (which are available via Internet on the CMS Web site), we are including a comparison file that identifies differences in the proposed payments between a geometric means-based OPPS and a median-based OPPS. In section XXII. of this proposed rule, which discusses the regulatory impact analysis, we are providing an additional column in the impact tables for the OPPS that identifies the estimated impact due to APC recalibration of a geometric means-based OPPS as well as a column that estimates the impact of recalibration based on CY 2011 claims and historical cost report data. We are including in the Addenda to this proposed rule (which is available via the Internet on the CMS Web site) data that compare the budget neutral OPPS payments based on geometric means to the budget neutral OPPS payments based on medians. As depicted in the impact tables, many provider categories would experience limited impacts under the proposal to base the OPPS relative payment weights on geometric means. We note that the impact tables only estimate the OPPS payment impact based on the most current available claims and cost report data, and that providers' actual payments may vary, depending on the mix of services provided in the actual claims year. Also, the budget neutral payment adjustments ensure that, under either a geometric mean-based system or a median cost-based system, aggregate OPPS payments would remain the same.

Section XXII. of this proposed rule contains an OPPS provider impact table that estimates the effect of proposed policy changes and budget neutrality adjustments on provider payment under the CY 2013 OPPS. Column 3 of the impact table shows the estimated impact by provider category of calculating the CY 2013 OPPS payments based on geometric mean costs rather than median cost. While the proposal to shift the basis for relative payment weights to geometric mean costs may involve some changes to the relative weights on which OPPS payments are based, providers generally experience limited impacts to payment as a result of the CY 2013 proposal. Those provider categories that improve significantly as a result of the proposal to base the CY 2013 relative payment weights on geometric mean costs generally included non-IPPS hospitals that provided psychiatric, hospital-based partial hospitalization, and other services whose relative payment weights improved based on geometric mean costs. As noted above, we recognize that there may be fluctuations in the relative payment weights based on this CY 2013 proposal, but we believe that this proposal represents an improvement that more accurately estimates the costs associated with providing services.

In our experience developing the OPPS, we have implemented many changes to obtain more cost information from the claims and cost report data available to us, in an effort to arrive at more accurate estimates of service cost. Many of those changes are described above and in prior OPPS final rules. Despite the challenges created by the complexity of the data and the diversity of facility accounting systems, we continue to examine possible process and data changes that may further improve precision, validity, and utility. Commenters have historically expressed concerns about the degree to which OPPS relative payment weights are reflective of the service costs associated with providing them, APC payment rate volatility from year to year, and other cost modeling related issues. We recognize that some of those issues will continue because they are related to naturally occurring changes in the economic environment, clinical practice, and the nature of payment systems, among other reasons. However, we believe that basing the OPPS relative payment weights on geometric means would better capture the range of costs associated with providing services, improve payment accuracy while limiting year-to-year volatility, and allow reconfigurations in the APC environment using a metric that provides greater computational depth. For these reasons, and those discussed above, we are proposing to base the CY 2013 OPPS/ASC relative payment weights on geometric mean costs.

3. Proposed Changes to Packaged Services

a. Background

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

We assign status indicator “N” to those HCPCS codes of dependent services 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 to 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 with one or more separately paid primary services with the status indicator of “S,” “T,” “V,” or “X” furnished in the hospital outpatient encounter. A T-packaged code describes a code whose payment is only packaged with 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 XII.A.1. of this proposed rule and Addendum D1, which is available via the Internet on the CMS Web site with other Addenda, for a complete listing of status indicators and the meaning of each status indicator.

Hospitals include HCPCS codes and charges for packaged services on their claims, and the estimated costs associated with those packaged services are then added to the costs of separately payable procedures on the same claims to establish prospective payment rates. We encourage hospitals to report all HCPCS codes that describe packaged services provided, unless the CPT Editorial Panel or CMS provides 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 Medicare beneficiaries.

In addition to the packaged items and services listed in 42 CFR 419.2(b), in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66610 through 66659), we adopted the packaging of payment for items and services in seven categories with the primary diagnostic or therapeutic modality to which we believe these items and services are typically ancillary and supportive. The seven categories are: (1) Guidance services; (2) image processing services; (3) intraoperative services; (4) imaging supervision and interpretation services; (5) diagnostic radiopharmaceuticals; (6) contrast media; and (7) observation services. We specifically chose these categories of HCPCS codes for packaging because we believe that the items and services described by the codes in these categories are typically ancillary and supportive to a primary diagnostic or therapeutic modality and, in those cases, are an integral part of the primary service they support. Packaging under the OPPS also includes composite APCs, which are described in section II.A.2.e. of this proposed rule.

b. Proposed Clarification of the Regulations at 42 CFR 419.2(b)

We are proposing to clarify the regulatory language at 42 CFR 419.2(b) to make explicit that the OPPS payments for the included costs of the nonexclusive list of items and services covered under the OPPS referred to in this paragraph are packaged into the payments for the related procedures or services with which such items and services are provided. This proposed clarification is consistent with our interpretation and application of § 419.2(b) since the inception of the OPPS. We invite public comments on this proposed clarification.

c. Packaging Recommendations of the HOP Panel (“The Panel”) at Its February 2012 Meeting

During its February 2012 meeting, the Panel made five recommendations related to packaging and to the function of the subcommittee. One additional recommendation that originated from the APC Groups and Status Indicator (SI) Assignment Subcommittee about observation services is discussed in section II.A.2.e. of this proposed rule. The report of the February 2012 meeting of the Panel may be found on the CMS Web site at: http://www.cms.gov/FACA/05_AdvisoryPanelonAmbulatoryPaymentClassificationGroups.asp.

Below we present each of the Panel's five packaging recommendations and our responses to those recommendations.

Panel Recommendation: CMS should delete HCPCS code G0259 (Injection procedure for sacroiliac joint; arthrography) and HCPCS code G0260 (Injection procedure for sacroiliac joint; provision of anesthetic, steroid and/or other therapeutic agent, with or without arthrography), and instead use CPT code 27096 (Injection procedure for sacroiliac joint, anesthetic/steroid, with image guidance (fluoroscopy or CT) including arthrography, when performed) with a status indicator of “T,” and assign CPT code 27096 to APC 0207 (Level III Nerve Injections).

CMS Response: For CY 2012, we assigned CPT code 27096 to status indicator “B,” meaning that this code is not payable under the OPPS. In order to receive payment for procedures performed on the sacroiliac joint with or without arthrography or with image guidance under the OPPS, hospitals must use either HCPCS code G0259, which is assigned to status indicator “N” for CY 2012, or HCPCS code G0260, which is assigned to status indicator “T” for CY 2012, as appropriate. CMS created HCPCS codes G0259 and G0260 to separate and distinguish the image guidance procedure from the therapeutic injection procedure for the sacroiliac joint. As stated above, guidance procedures are packaged under the OPPS because we believe that they are typically ancillary and supportive to a primary diagnostic or therapeutic modality and are an integral part of the primary service they support.

We believe that the existence of HCPCS codes G0259 and G0260 is necessary to assign appropriate packaged payment for the image guidance procedure, according to our established packaging policy, and separate payment for the therapeutic injection procedure. Therefore, we are not accepting the Panel's recommendation and are proposing to follow previously established policy and to continue to assign HCPCS code G0259 to status indicator “N,” HCPCS code G0260 to status indicator “T,” and CPT code 27096 to status indicator “B” for CY 2013.

Panel Recommendation: CMS provide data to the APC Groups and SI Subcommittee on the following arthrography services, so that the Subcommittee can consider whether the SI for these services should be changed from “N” to “S”:

  • HCPCS code 21116 (Injection procedure for temporomandibular joint arthrography);
  • HCPCS code 23350 (Injection procedure for shoulder arthrography or enhanced CT/MRI shoulder arthrography);
  • HCPCS code 24220 (Injection procedure for elbow arthrography);
  • HCPCS code 25246 (Injection procedure for wrist arthrography);
  • HCPCS code 27093 (Injection procedure for hip arthrography; without anesthesia);
  • HCPCS code 27095 (Injection procedure for hip arthrography; with anesthesia);
  • HCPSC code 27096 (Injection procedure for sacroiliac joint, anesthetic/steroid with image guidance (fluoroscopy or CT) including arthrography when performed);
  • HCPCS code 27370 (Injection procedure for knee arthrography); and
  • HCPCS code 27648 (Injection procedure for ankle arthrography).

CMS Response: We are accepting the Panel's recommendation that CMS provide data to the APC Groups and SI Assignment Subcommittee on HCPCS codes 21116, 23350, 24220, 25246, 27093, 27095, 27096, 27370, and 27648 at a future Panel meeting.

Panel Recommendation: CMS change the status indicator for HCPCS code 19290 (Preoperative placement of needle localization wire, breast) from “N” to “Q1” and continue to monitor the frequency of the code when used in isolation.

CMS Response: We agree with the Panel that proposing a status indicator of “Q1” is appropriate for HCPCS code 19290. This status indicator would allow for separate payment when this procedure is performed alone or packaged payment when this procedure is performed with an associated surgical procedure. Therefore, we are accepting the Panel's recommendation and are proposing to assign HCPCS code 19290 to APC 0340 (Minor Ancillary Procedures) and status indicator “Q1” for the CY 2013 OPPS. APC 0340 has a proposed cost of approximately $50.19 for CY 2013.

Panel Recommendation: Judith Kelly, R.H.I.T., R.H.I.A., C.C.S., remain the chair of the APC Groups and SI Subcommittee.

CMS Response: We are accepting the Panel's recommendation that Judith Kelly, R.H.I.T., R.H.I.A., C.C.S., continue to chair the APC Groups and SI Assignment Subcommittee.

Panel Recommendation: The work of the APC Groups and SI Assignment Subcommittee continue.

CMS Response: We are accepting the Panel's recommendation that the work of the APC Groups and SI Assignment Subcommittee continue.

d. Proposed Packaging of Drugs, Biologicals, and Radiopharmaceuticals

(1) Existing Packaging Policies

In the OPPS, we currently package five categories of drugs, biologicals, and radiopharmaceuticals (unless temporary pass-through status applies): (1) Those with per day costs at or below the packaging threshold; (2) diagnostic radiopharmaceuticals; (3) contrast agents; (4) anesthesia drugs; and (5) drugs treated as surgical supplies. Anesthesia drugs are discussed further in section II.A.3.c.(2) of this proposed rule. For detailed discussions of the established packaging policies for diagnostic radiopharmaceuticals and contrast agents, we refer readers to the CY 2008 OPPS/ASC final rule with comment period (72 FR 66765 through 66768). For further details on drugs treated as surgical supplies, we refer readers to the CY 2003 OPPS final rule (67 FR 66767) and Chapter 15, Section 50.2 of the Medicare Benefit Policy Manual.

(2) Clarification of Packaging Policy for Anesthesia Drugs

It has been longstanding OPPS policy to package “anesthesia” and “supplies and equipment for administering and monitoring anesthesia or sedation,” as described in 42 CFR 419.2(b)(4) and (b)(5). As described above, items and services paid under the OPPS that are typically ancillary and supportive to a primary diagnostic or therapeutic modality and, in those cases, are considered dependent items and services are packaged into the payment of their accompanying independent primary service. In accordance with our current policy on packaging items and services, drugs that are used to produce anesthesia in all forms are ancillary and supportive to a primary diagnostic or therapeutic modality, and are included in our definition of “anesthesia” as described in § 419.2(b)(4) and (b)(5). However, we recognize that some anesthesia drugs may qualify for transitional pass-through status under section 1833(t)(6) of the Act. Therefore, in this proposed rule, we are clarifying that our general policy is to package drugs used to produce anesthesia, and that those anesthesia drugs with pass-through status will be packaged upon the expiration of pass-through status. We are inviting public comment on our clarification of the existing packaging policies for anesthesia drugs under § 419.2(b)(4) and (b)(5).

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

Prior to CY 2008, the methodology of calculating a product's estimated per day cost and comparing it to the annual OPPS drug packaging threshold was used to determine the packaging status of drugs, biologicals, and radiopharmaceuticals under the OPPS (except for the CYs 2005 through 2009 exemption for 5-HT3 antiemetics). However, as established in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66766 through 66768), we began packaging payment for all diagnostic radiopharmaceuticals and contrast agents into the payment for the associated procedure, regardless of their per day costs. In addition, in CY 2009, we adopted a policy that packaged the payment for nonpass-through implantable biologicals into payment for the associated surgical procedure on the claim, regardless of their per day cost (73 FR 68633 through 68636). We refer to diagnostic radiopharmaceuticals and contrast agents collectively as “policy-packaged” drugs. We refer to implantable biologicals as “devices” because, in CY 2010, we finalized a policy to treat implantable biologicals as devices for OPPS payment purposes (74 FR 60471 through 60477).

As set forth at § 419.2(b), as a prospective payment system, the OPPS establishes a national payment rate, standardized for geographical wage differences, that includes operating and capital-related costs that are directly related and integral to performing a procedure or furnishing a service on an outpatient basis, and in general, these costs include, but are not limited to, implantable prosthetics, implantable durable medical equipment, and medical and surgical supplies. Packaging costs into a single aggregate payment for a service, encounter, or episode-of-care is a fundamental principle that distinguishes a prospective payment system from a fee schedule. In general, packaging the costs of items and services into the payment for the primary procedure or service with which they are associated encourages hospital efficiency and also enables hospitals to manage their resources with maximum flexibility.

Prior to CY 2008, we noted that the proportion of drugs, biologicals, and radiopharmaceuticals that were separately paid under the OPPS had increased in recent years, a pattern that we also observed for procedural services under the OPPS. Our final CY 2008 policy that packaged payment for all nonpass-through diagnostic radiopharmaceuticals and contrast agents, regardless of their per day costs, contributed significantly to expanding the size of the OPPS payment bundles and is consistent with the principles of a prospective payment system.

As discussed in more detail in the CY 2009 OPPS/ASC final rule with comment period (73 FR 68645 through 68649), we presented several reasons supporting our initial policy to package payment of diagnostic radiopharmaceuticals and contrast agents into their associated procedures on a claim. Specifically, we stated that we believed packaging was appropriate because: (1) The statutorily required OPPS drug packaging threshold had expired; (2) diagnostic radiopharmaceuticals and contrast agents function effectively as supplies that enable the provision of an independent service, rather than serving themselves as a therapeutic modality; and (3) section 1833 (t)(14)(A)(iii) of the Act required that payment for specified covered outpatient drugs (SCODs) be set prospectively based on a measure of average hospital acquisition cost (76 FR 74307).

Therefore, we believe it is appropriate to propose to continue to treat diagnostic radiopharmaceuticals and contrast agents differently from specified covered outpatient drugs (SCODs) for CY 2013. Therefore, we are proposing to continue packaging payment for all contrast agents and diagnostic radiopharmaceuticals, collectively referred to as “policy-packaged” drugs, regardless of their per day costs, for CY 2013. We also are proposing to continue to package the payment for diagnostic radiopharmaceuticals into the payment for the associated nuclear medicine procedure and to package the payment for contrast agents into the payment for the associated echocardiography imaging procedure, regardless of whether the agent met the OPPS drug packaging threshold. We refer readers to the CY 2010 OPPS/ASC final rule with comment period for a detailed discussion of nuclear medicine and echocardiography services (74 FR 35269 through 35277).

For CY 2013, we are proposing to make an additional payment of $10 for diagnostic radiopharmaceuticals that utilize the Tc-99m radioisotope produced by non-HEU methods. We are proposing to base this payment on the best available estimations of the marginal costs associated with non-HEU radioisotope production, pursuant to our authority described in section 1833(t)(2)(E) of the Act which allows us to establish “other adjustments as determined to be necessary to ensure equitable payments” under the OPPS. We describe this proposed policy in further detail in section III.C.3. of this proposed rule.

In the CY 2009 OPPS/ASC final rule with comment period (73 FR 68634), we began packaging the payment for all nonpass-through implantable biologicals into payment for the associated surgical procedure because we consider these products to always be ancillary and supportive to independent services, similar to implantable nonbiological devices that are always packaged. We continued to follow this policy in CY 2012 (76 FR 74306 through 74310). Specifically, we continue to package payment for nonpass-through implantable biologicals, also known as devices that are surgically inserted or implanted (through a surgical incision or a natural orifice) into the body. For CY 2013, we are proposing to continue to apply the policies finalized in CY 2012, to package payment for nonpass-through implantable biologicals (“devices”) that are surgically inserted or implanted (through a surgical incision or a natural orifice) into the body.

Although our final CY 2009 policy (which we are proposing to continue for CY 2013 as discussed below) packaged payment for all diagnostic radiopharmaceuticals and contrast agents into the payment for their associated procedures, we are proposing to continue to provide payment for these items in CY 2013 based on a proxy for average acquisition cost, as we did in CY 2009. We continue to believe that the line-item estimated cost for a diagnostic radiopharmaceutical or contrast agent in our claims data is a reasonable approximation of average acquisition and preparation and handling costs for diagnostic radiopharmaceuticals and contrast agents, respectively. As we discussed in the CY 2009 OPPS/ASC final rule with comment period (73 FR 68645), we believe that hospitals have adapted to the CY 2006 coding changes for radiopharmaceuticals and responded to our instructions to include charges for radiopharmaceutical handling in their charged for the radiopharmaceutical products. Further, because the standard OPPS packaging methodology packaged the total estimated cost of each diagnostic radiopharmaceutical and contrast agent on each claim (including the full range of costs observed on the claims) with the costs of associated procedures for ratesetting, this packaging approach is consistent with considering the average cost for diagnostic radiopharmaceuticals and contrast agents. In addition, as we noted in the CY 2009 OPPS/ASC final rule with comment period (72 FR 68646), these drugs, biologicals, or radiopharmaceuticals for which we have not established a separate APC and, therefore, for which payment would be packaged rather than separately provided under the OPPS, are considered to not be SCODs. Similarly, drugs and biologicals with per day costs of less than $80 in CY 2013, which is the proposed packaging threshold for CY 2013, that are packaged and for which a separate APC has not been established also are not SCODs. This reading is consistent with our proposed payment policy whereby we package payment for diagnostic radiopharmaceuticals and contrast agents and provide payment for these products through payment for their associated procedures.

f. Summary of Proposals

The HCPCS codes that we are proposing for unconditionally packaged (for which we are proposing to continue to assign status indicator “N”), or conditionally packaged (for which we are proposing continue to assign status indicators “Q1,” “Q2,” or “Q3”), are displayed in Addendum B of this proposed rule (which is available via the Internet on the CMS Web site). The supporting documents for this CY 2013 OPPS/ASC proposed rule, including, but not limited to, Addendum B, are available on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html. To view the proposed status indicators by HCPCS code in Addendum B, select “CMS 1589-P” and then select the folder labeled “2013 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.

4. Proposed Calculation of OPPS Scaled Payment Weights

For CY 2013, we are proposing to calculate the relative payment weights for each APC for CY 2013 shown in Addenda A and B to this proposed rule (which are available via the Internet on the CMS Web site) using the APC costs discussed in sections II.A.1. and II.A.2. of this proposed rule. In years prior to CY 2007, we standardized all the relative payment weights to APC 0601 (Mid-Level Clinic Visit) because mid-level clinic visits were among the most frequently performed services in the hospital outpatient setting. We assigned APC 0601 a relative payment weight of 1.00 and divided the median cost for each APC by the median cost for APC 0601 to derive the relative payment weight for each APC.

Beginning with the CY 2007 OPPS (71 FR 67990), we standardized all of the relative payment weights for APC 0606 (Level 3 Clinic Visits) because we deleted APC 0601 as part of the reconfiguration of the clinic visit APCs. We selected APC 0606 as the base because APC 0606 was the mid-level clinic visit APC (that is, Level 3 of five levels). For CY 2013, we are proposing to base the relative payment weights on which OPPS payments will be made by using geometric mean costs, as described in section II.A.2.f. of this proposed rule. However, in an effort to maintain consistency in calculating unscaled weights that represent the cost of some of the most frequently provided services, we are proposing to continue to use the cost of the mid-level clinic visit APC (APC 0606) in calculating unscaled weights. Following our general methodology for establishing relative payment weights derived from APC costs, but using the proposed CY 2013 geometric mean cost for APC 0606, for CY 2013, we are proposing to assign APC 0606 a relative payment weight of 1.00 and to divide the geometric mean cost of each APC by the proposed geometric mean cost for APC 0606 to derive the proposed unscaled relative payment weight for each APC. The choice of the APC on which to base the proposed relative payment weights for all other APCs does not affect the payments made under the OPPS because we scale the weights for budget neutrality.

Section 1833(t)(9)(B) of the Act requires that APC reclassification and recalibration changes, wage index changes, and other adjustments be made in a budget neutral manner. Budget neutrality ensures that the estimated aggregate weight under the OPPS for CY 2013 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 2012 scaled relative payment weights to the estimated aggregate weight using the proposed CY 2013 unscaled relative payment weights. For CY 2012, we multiplied the CY 2012 scaled APC relative weight applicable to a service paid under the OPPS by the volume of that service from CY 2011 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 2013, we are proposing to perform the same process using the proposed CY 2013 unscaled weights rather than scaled weights. We then calculate the proposed weight scaler by dividing the CY 2012 estimated aggregate weight by the proposed CY 2013 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/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html. We are proposing to include estimated payments to CMHCs in our comparison of estimated unscaled weights in CY 2013 to estimated total weights in CY 2012 using CY 2011 claims data, holding all other components of the payment system constant to isolate changes in total weight. Based on this comparison, we adjusted the proposed unscaled relative payment weights for purposes of budget neutrality. The proposed CY 2013 unscaled relative payment weights were adjusted by multiplying them by a proposed weight scaler of 1.3504 to ensure that the proposed CY 2013 relative payment weights are budget neutral.

Section 1833(t)(14) of the Act provides the payment rates for certain SCODs. Section 1833(t)(14)(H) of the Act states that “Additional expenditures resulting from this paragraph shall not be taken into account in establishing the conversion factor, weighting, and other adjustment factors for 2004 and 2005 under paragraph (9), but shall be taken into account for subsequent years.” Therefore, the cost of those SCODs (as discussed in section V.B.3. of this proposed rule) was included in the proposed budget neutrality calculations for the CY 2013 OPPS.

We note that we are providing additional information, in association with this proposed rule, so that the public can provide meaningful comment on our proposal to base the CY 2013 OPPS relative payment weights on geometric mean costs. We will make available online a file that compares the calculated CY 2013 proposed OPPS payments using geometric mean costs to those that would be calculated based on median costs. The proposed scaled relative payment weights listed in Addenda A and B to this proposed rule (which are 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 2013 IPPS/LTCH PPS proposed rule (77 FR 27975), consistent with current law, based on IHS Global Insight, Inc.'s first quarter 2012 forecast of the FY 2013 market basket increase, the proposed FY 2013 IPPS market basket update is 3.0 percent. However, sections 1833(t)(3)(F) and 1833(t)(3)(G)(ii) of the Act, as added by section 3401(i) of Public Law 111-148 and as amended by section 10319(g) of that law and further amended by section 1105(e) of Public Law 111-152, provide adjustments to the OPD fee schedule increase factor for CY 2013.

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 that section. Specifically, section 1833(t)(3)(F)(i) of the Act requires that, for 2012 and subsequent years, the OPD fee schedule increase factor under subparagraph (C)(iv) be reduced by the productivity adjustment described in section 1886(b)(3)(B)(xi)(II) of the Act. Section 1886(b)(3)(B)(xi)(II) of the Act defines the productivity adjustment as equal to the 10-year moving average of changes in annual economy-wide, private nonfarm business multifactor productivity (MFP) (as projected by the Secretary for the 10-year period ending with the applicable fiscal year, year, cost reporting period, or other annual period) (the “MFP adjustment”). In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51689 through 51692), we finalized our methodology for calculating and applying the MFP adjustment. In the FY 2013 IPPS/LTCH PPS proposed rule (77 FR 27975 through 27976), we discuss the calculation of the proposed MFP adjustment for FY 2013, which is 0.8 percentage point.

We are proposing that if more recent data are subsequently available after the publication of this proposed rule (for example, a more recent estimate of the market basket increase and the MFP adjustment), we would use such data, if appropriate, to determine the CY 2013 market basket update and the MFP adjustment, components in calculating the OPD fee schedule increase factor under sections 1833(t)(3)(C)(iv) and (F) of the Act, in the CY 2013 OPPS/ASC final rule with comment period.

In addition, section 1833(t)(3)(F)(ii) of the Act requires that for, each of 2010 through 2019, the OPD fee schedule increase factor under section 1833(t)(3)(C)(iv) of the Act be reduced by the adjustment described in section 1833(t)(3)(G) of the Act. For CY 2013, section 1833(t)(3)(G)(ii) of the Act provides a 0.1 percentage point reduction to the OPD fee schedule increase factor under section 1833(t)(3)(C)(iv) of the Act. Therefore, in accordance with sections 1833(t)(3)(F)(ii) and 1833(t)(3)(G)(ii) of the Act, we are proposing to apply a 0.1 percentage point reduction to the OPD fee schedule increase factor for CY 2013.

We note that section 1833(t)(3)(F) of the Act provides that application of this subparagraph may result in the OPD fee schedule increase factor under section 1833(t)(3)(C)(iv) of the Act being less than 0.0 for a year, and may result in payment rates under the OPPS for a year being less than such payment rates for the preceding year. As described in further detail below, we are proposing to apply an OPD fee schedule increase factor of 2.1 percent for the CY 2013 OPPS (3.0 percent, which is the proposed estimate of the hospital inpatient market basket percentage increase, less the proposed 0.8 percentage point MFP adjustment, less the 0.1 percentage point additional adjustment).

We note that hospitals that fail to meet the Hospital OQR Program reporting requirements would to be subject to an additional reduction of 2.0 percentage points from the OPD fee schedule increase factor adjustment to the conversion factor that would be used to calculate the OPPS payment rates made for their services, as required by section 1833(t)(17) of the Act. As a result, those hospitals failing to meet the Hospital OQR Program reporting requirements would receive an OPD fee schedule increase factor of 0.1 (3.0 percent, which is the proposed estimate of the hospital inpatient market basket percentage increase, less the proposed 0.8 percentage point MFP adjustment, less the 0.1 percentage point additional adjustment, less 2.0 percentage point for the Hospital OQR Program reduction). For further discussion of the Hospital OQR Program, we refer readers to section XV.F. of this proposed rule.

In this proposed rule, we are proposing to amend 42 CFR 419.32(b)(1)(iv)(B) by adding a new paragraph (4) to reflect the requirement in section 1833(t)(3)(F)(i) of the Act that, for CY 2013, 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 an additional 0.1 percentage point for CY 2013.

To set the OPPS conversion factor for CY 2013, we are proposing to increase the CY 2012 conversion factor of $70.016 by 2.1 percent. In accordance with section 1833(t)(9)(B) of the Act, we are proposing to further adjust the conversion factor for CY 2013 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 an overall proposed budget neutrality factor of 1.0003 for wage index changes by comparing proposed total estimated payments from our simulation model using the proposed FY 2013 IPPS wage indices to those payments using the current (FY 2012) IPPS wage indices, as adopted on a calendar year basis for the OPPS (77 FR 27946 through 27955).

For CY 2013, we are not proposing to make a change to our rural adjustment policy, as discussed in section II.E. of this proposed rule. Therefore, the proposed budget neutrality factor for the rural adjustment is 1.0000.

For CY 2013, we are proposing to continue previously established policies for implementing the cancer hospital payment adjustment described in section 1833(t)(18) of the Act, as discussed in section II.F. of this proposed rule. We are proposing to calculate a CY 2013 budget neutrality adjustment factor for the cancer hospital payment adjustment by comparing the estimated total CY 2013 payments under section 1833(t) of the Act including the proposed CY 2013 cancer hospital payment adjustment to the estimated CY 2013 total payments using the CY 2012 final cancer hospital payment adjustment under sections 1833(t)(18)(B) and 1833(t)(2)(E) of the Act. The difference in the CY 2013 estimated payments due to applying the proposed CY 2013 cancer hospital payment adjustment relative to the CY 2012 final cancer hospital payment adjustment does not have a significant impact on the budget neutrality calculation. Therefore, we are proposing to apply a proposed budget neutrality adjustment factor of 1.0000 to the conversion factor to ensure that the cancer hospital payment adjustment is budget neutral.

For this proposed rule, we estimate that pass-through spending for both drugs and biologicals and devices for CY 2013 would equal approximately $84 million, which represents 0.18 percent of total projected CY 2013 OPPS spending. Therefore, the proposed conversion factor would also be adjusted by the difference between the 0.22 percent estimate of pass-through spending for CY 2012 and the 0.18 percent estimate of CY 2013 pass-through spending, resulting in a proposed adjustment for CY 2013 of 0.04 percent. Finally, estimated payments for outliers would remain at 1.0 percent of total OPPS payments for CY 2013.

The proposed OPD fee schedule increase factor of 2.1 percent for CY 2013 (that is, the estimate of the hospital inpatient market basket percentage increase of 3.0 percent less the proposed 0.8 percentage point MFP adjustment and less the 0.1 percentage point required under section 1833(t)(3)(F) of the Act), the required proposed wage index budget neutrality adjustment of approximately 1.0003, the proposed cancer hospital payment adjustment of 1.000, and the proposed adjustment of 0.04 percent of projected OPPS spending for the difference in the pass-through spending result in a proposed conversion factor for CY 2013 of $71.537.

Hospitals that fail to meet the reporting requirements of the Hospital OQR Program would continue to be subject to a further reduction of 2.0 percentage points to the OPD fee schedule increase factor adjustment to the conversion factor that would be used to calculate the OPPS payment rates made for their services as required by section 1833(t)(17) of the Act. For a complete discussion of the Hospital OQR Program requirements and the payment reduction for hospitals that fail to meet those requirements, we refer readers to section XV.F. of this proposed rule. To calculate the proposed CY 2013 reduced market basket conversion factor for those hospitals that fail to meet the requirements of the Hospital OQR Program for the full CY 2013 payment update, we are proposing to make all other adjustments discussed above, but using a proposed reduced OPD fee schedule update factor of 0.1 percent (that is, the proposed OPD fee schedule increase factor of 2.1 percent further reduced by 2.0 percentage points as required by section 1833(t)(17)(A)(i) of the Act for failure to comply with the Hospital OQR requirements). This results in a proposed reduced conversion factor for CY 2013 of $70.106 for those hospitals that fail to meet the Hospital OQR requirements (a difference of -$1.431 in the conversion factor relative to those hospitals that met the Hospital OQR requirements).

In summary, for CY 2013, we are proposing to use a conversion factor of $71.537 in the calculation of the national unadjusted payment rates for those items and services for which payment rates are calculated using geometric mean costs. For further discussion on the proposal to base the CY 2013 OPPS relative payment weights using geometric mean costs, we refer readers to section II.A.2.f. of this proposed rule. We are proposing to amend § 419.32(b)(1)(iv)(B) by adding a new paragraph (4) to reflect the reductions to the OPD fee schedule increase factor that are required for CY 2013 in order to satisfy the statutory requirements of sections 1833(t)(3)(F) and (t)(3)(G)(ii) of the Act. We are proposing to use a reduced conversion factor of $70.106 in the calculation of payments for hospitals that fail to comply with the Hospital OQR Program requirements to reflect the reduction to the OPD fee schedule increase factor that is required by section 1833(t)(17) of the Act.

C. Proposed Wage Index Changes

Section 1833(t)(2)(D) of the Act requires the Secretary to determine a wage adjustment factor to account for geographic wage differences in a portion of the OPPS payment rate, which includes the copayment standardized amount and is attributable to labor and labor-related costs. 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 2013 OPPS. We refer readers to section II.H. of this proposed rule for a description and example of how the wage index for a particular hospital is used to determine the payment for the hospital.

As discussed in section II.A.2.c. of this proposed rule, for estimating APC costs, we standardize 60 percent of estimated claims costs for geographic area wage variation using the same FY 2013 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 also applies to that hospital under the OPPS. As initially explained in the September 8, 1998 OPPS proposed rule (63 FR 47576), we believed that using the IPPS wage index as the source of an adjustment factor for the OPPS is reasonable and logical, given the inseparable, subordinate status of the HOPD within the hospital overall. In accordance with section 1886(d)(3)(E) of the Act, the IPPS wage index is updated annually.

The Affordable Care Act contained provisions affecting the wage index. These provisions were discussed in the CY 2012 OPPS/ASC final rule with comment period (77 FR 74191). As discussed in that final rule with comment period, section 10324 of the Affordable Care Act requires a “frontier State” wage index floor of 1.00 in certain cases. For the CY 2013 OPPS, we are proposing to implement this provision in the same manner as we did for CY 2012. That is, frontier State hospitals would receive a wage index of 1.00 if the otherwise applicable wage index (including reclassification, rural floor, and rural floor budget neutrality) is less than 1.00. Similar to our current policy for HOPDs that are affiliated with multicampus hospital systems, the HOPD 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 and FY 2012 IPPS/LTCH PPS final rules (75 FR 50160 through 50161 and 76 FR 51586, respectively) and the FY 2013 IPPS/LTCH PPS proposed rule (77 FR 27951) 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 2013 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 (the out-migration adjustment). We refer readers to the FY 2013 IPPS/LTCH PPS proposed rule (77 FR 27946 through 27955) for a detailed discussion of all proposed changes to the FY 2013 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 102 of the Medicare and Medicaid Extender Act, extended through FY 2011, section 508 reclassifications as well as certain special exceptions. The most recent extension of these special wage indices was included in section 302 of the Temporary Payroll Tax Cut Continuation Act of 2011 (Pub. L. 112-78), as amended by section 3001 of the Middle Class Tax Relief and Job Creation Act of 2012 (Pub. L. 112-96). These legislative provisions extended certain section 508 reclassifications and special exception wage indices for a 6-month period during FY 2012, from October 1, 2011 through March 31, 2012. We implemented this latest extension in a notice (CMS-1442-N) published in the Federal Register on April 20, 2012 (77 FR 23722). Therefore, the extension is no longer applicable, effective with FY 2013. As we did for CY 2010, we revised wage index values for certain special exception hospitals from January 1, 2012 through June 30, 2012, 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 end date under the OPPS for certain nonsection 508 and nonspecial exception providers to receive special wage indices was June 30, 2012, instead of March 31, 2012, so that these providers also received a full 6 months of payment under the revised wage index comparable to the IPPS.

For purposes of the OPPS, we are proposing to continue our policy in CY 2013 of allowing non-IPPS hospitals paid under the OPPS to qualify for the out-migration adjustment if they are located in a section 505 out-migration county (section 505 of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA)). We note that, because non-IPPS hospitals cannot reclassify, they are eligible for the out-migration wage adjustment. Table 4J listed in the FY 2013 IPPS/LTCH PPS proposed rule (and made available via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) identifies counties eligible for the out-migration adjustment and hospitals that would receive the adjustment for FY 2013. We note that, beginning with FY 2012, under the IPPS, an eligible hospital that waives its Lugar status in order to receive the out-migration adjustment has effectively waived its deemed urban status and, thus, is rural for all purposes under the IPPS, including being considered rural for the disproportionate share hospital (DSH) payment adjustment, effective for the fiscal year in which the hospital receives the out-migration adjustment. We refer readers to the FY 2013 IPPS/LTCH PPS proposed rule (77 FR 27952) for a more detailed discussion on the Lugar redesignation waiver for the out-migration adjustment). As we have done in prior years, we are including Table 4J 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 2013 OPPS. Addendum L is available via the Internet on the CMS Web site.

In response to concerns frequently expressed by providers and other relevant parties that the current wage index system does not effectively reflect the true variation in labor costs for a large cross-section of hospitals, two studies were undertaken by the Department. First, section 3137(b) of the Affordable Care Act required the Secretary to submit to Congress a report that includes a plan to comprehensively reform the Medicare wage index applied under section 1886(d) of the Act. In developing the plan, the Secretary was directed to take into consideration the goals for reforming the wage index that were set forth by the Medicare Payment Advisory Commission (MedPAC) in its June 2007 report entitled “Report to Congress: Promoting Greater Efficiency in Medicare” and to “consult with relevant affected parties.” Second, the Secretary commissioned the Institute of Medicine (IOM) to “evaluate hospital and physician geographic payment adjustments, the validity of the adjustment factors, measures and methodologies used in those factors, and sources of data used in those factors.” Reports on both of these studies for geographic adjustment to hospital payments recently have been released. For summaries of the studies, their findings, and recommendations on reforming the wage index system, we refer readers to section IX.B. of the preamble of the FY 2013 IPPS/LTCH PPS proposed rule (77 FR 28116 through 28119).

As stated earlier in this section, we continue to believe that using the IPPS wage index as the source of an adjustment factor for the OPPS is reasonable and logical, given the inseparable, subordinate status of the HOPD within the hospital overall. Therefore, we are proposing to use the final FY 2013 IPPS wage indices for calculating OPPS payments in CY 2013. 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 2013 IPPS wage indices referenced in this discussion of the wage index. We refer readers to the CMS Web site for the OPPS at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html. At this link, readers will find a link to the proposed FY 2013 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 2013 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 2013, 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 2013 OPPS relative weights. Table 12 below lists the proposed CY 2013 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 the final settled status by applying the differential between settled to submitted overall CCRs for the cost centers relevant to outpatient services from the most recent pair of final settled and submitted cost reports. We then weight each hospital's CCR by the volume of separately paid line-items on hospital claims that correspond 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 2013 OPPS/ASC proposed rule, approximately 62 percent of the submitted cost reports utilized in the default ratio calculations represented data for cost reporting periods ending in CY 2010, and approximately 38 percent were for cost reporting periods ending in CY 2009. 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 2012 and CY 2013 are modest and the few significant changes are associated with areas that have a small number of hospitals.

Table 12 below lists the proposed statewide average default CCRs for OPPS services furnished on or after January 1, 2013.

Table 12—Proposed CY 2013 Statewide Average CCRs

StateUrban/ruralProposed CY 2013 default CCRPrevious default CCR (CY 2012 OPPS final rule)
ALASKARURAL0.4890.487
ALASKAURBAN0.3030.305
ALABAMARURAL0.2080.210
ALABAMAURBAN0.1930.194
ARKANSASRURAL0.2190.221
ARKANSASURBAN0.2330.245
ARIZONARURAL0.2380.237
ARIZONAURBAN0.1910.190
CALIFORNIARURAL0.1920.193
CALIFORNIAURBAN0.2030.201
COLORADORURAL0.3310.342
COLORADOURBAN0.2270.226
CONNECTICUTRURAL0.3640.365
CONNECTICUTURBAN0.2870.288
DISTRICT OF COLUMBIAURBAN0.3000.302
DELAWARERURAL0.2800.280
DELAWAREURBAN0.3490.347
FLORIDARURAL0.1820.182
FLORIDAURBAN0.1660.164
GEORGIARURAL0.2370.238
GEORGIAURBAN0.2130.214
HAWAIIRURAL0.3230.321
HAWAIIURBAN0.3060.306
IOWARURAL0.2970.296
IOWAURBAN0.2670.269
IDAHORURAL0.4170.417
IDAHOURBAN0.3570.353
ILLINOISRURAL0.2390.238
ILLINOISURBAN0.2300.230
INDIANARURAL0.2850.292
INDIANAURBAN0.2560.262
KANSASRURAL0.2760.279
KANSASURBAN0.2110.208
KENTUCKYRURAL0.2150.217
KENTUCKYURBAN0.2410.239
LOUISIANARURAL0.2420.247
LOUISIANAURBAN0.2250.224
MARYLANDRURAL0.2750.276
MARYLANDURBAN0.2460.246
MASSACHUSETTSRURAL0.4270.427
MASSACHUSETTSURBAN0.3220.322
MAINERURAL0.4450.438
MAINEURBAN0.4490.453
MICHIGANRURAL0.3030.305
MICHIGANURBAN0.3020.305
MINNESOTARURAL0.4700.482
MINNESOTAURBAN0.3210.320
MISSOURIRURAL0.2420.243
MISSOURIURBAN0.2630.260
MISSISSIPPIRURAL0.2260.224
MISSISSIPPIURBAN0.1830.189
MONTANARURAL0.4310.434
MONTANAURBAN0.3840.386
NORTH CAROLINARURAL0.2530.251
NORTH CAROLINAURBAN0.2540.257
NORTH DAKOTARURAL0.3220.322
NORTH DAKOTAURBAN0.4140.421
NEBRASKARURAL0.3180.318
NEBRASKAURBAN0.2540.252
NEW HAMPSHIRERURAL0.3170.323
NEW HAMPSHIREURBAN0.2920.291
NEW JERSEYURBAN0.2070.212
NEW MEXICORURAL0.2560.264
NEW MEXICOURBAN0.2780.288
NEVADARURAL0.2340.233
NEVADAURBAN0.1620.167
NEW YORKRURAL0.4200.419
NEW YORKURBAN0.3670.356
OHIORURAL0.3210.320
OHIOURBAN0.2370.234
OKLAHOMARURAL0.2390.239
OKLAHOMAURBAN0.2130.217
OREGONRURAL0.3140.311
OREGONURBAN0.3350.328
PENNSYLVANIARURAL0.2660.270
PENNSYLVANIAURBAN0.2000.199
PUERTO RICOURBAN0.5040.492
RHODE ISLANDURBAN0.2640.270
SOUTH CAROLINARURAL0.2100.211
SOUTH CAROLINAURBAN0.2150.214
SOUTH DAKOTARURAL0.3070.307
SOUTH DAKOTAURBAN0.2520.252
TENNESSEERURAL0.2100.211
TENNESSEEURBAN0.1950.199
TEXASRURAL0.2350.236
TEXASURBAN0.2050.196
UTAHRURAL0.3730.379
UTAHURBAN0.3590.359
VIRGINIARURAL0.2270.226
VIRGINIAURBAN0.2370.239
VERMONTRURAL0.4080.407
VERMONTURBAN0.3840.384
WASHINGTONRURAL0.3660.368
WASHINGTONURBAN0.3010.298
WISCONSINRURAL0.3520.351
WISCONSINURBAN0.3100.311
WEST VIRGINIARURAL0.2810.280
WEST VIRGINIAURBAN0.3410.337
WYOMINGRURAL0.3790.386
WYOMINGURBAN0.3010.302

E. Proposed OPPS Payments to Certain Rural and Other Hospitals

1. Hold Harmless Transitional Payment Changes

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 TOPs were temporary payments for most providers and intended to ease their transition from the prior reasonable cost-based payment system to the OPPS system. There are two types of hospitals excepted from the policy described above, cancer hospitals and children's hospitals. Specifically, such a hospital could receive TOPs to the extent its PPS amount was less than its pre-BBA amount in the applicable year. Section 1833(t)(7)(D)(i) of the Act originally provided for TOPs 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 (the Medicare Prescription Drug, Improvement, and Modernization Act of 2003) 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 TOPs 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 TOPs 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 (the Deficit Reduction Act of 2005) extended 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. Section 5105 of Public Law 109-171 also reduced the TOPs to rural hospitals from 100 percent of the difference between the provider's OPPS payments and the pre-BBA amount. This provision provided that, in cases in which the OPPS payment was less than the provider's pre-BBA amount, the amount of payment would be 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 applied to essential access community hospitals (EACHs), which are considered to be SCHs under section 1886(d)(5)(D)(iii)(III) of the Act. Accordingly, by law, 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 authorized under section 411 of Public Law 108-173. 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 with 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 (the Medicare Improvements for Patients and Providers Act of 2008) 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 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 stated 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 (Pub. L. 111-148) 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, and section 3121(b) of the Affordable Care Act removed 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 self-implementing 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 1 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) of the Act). 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 to the hospital 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 1 year the hold harmless provision for an SCH (as defined in section 1886(d)(5)(D)(iii) of the Act (including EACHs) and removed 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 to the hospital is increased by 85 percent of the amount of the difference between the two payments. Effective for services provided on or after January 1, 2012, a rural hospital with 100 or fewer beds that is not an SCH and an SCH (including EACHs) are no longer be eligible for TOPs, in accordance with section 108 of the MMEA. In the CY 2012 OPPS/ASC final rule with comment period (76 FR 74199), we revised our regulations at § 419.70(d) to conform the regulation text to the self-implementing provisions of section 108 of the MMEA described above.

Subsequent to issuance of the CY 2012 OPPS/ASC final rule with comment period, section 308 of the Temporary Payroll Tax Cut Continuation Act of CY 2011 (Pub. L. 112-78), as amended by section 3002 of the Middle Class Tax Relief and Jobs Creation Act (Pub. L. 112-96), extended through December 31, 2012, 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) of the Act). Therefore, for such a hospital, for services furnished before January 1, 2013, 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.

Section 308 of Public Law 112-78 also extended through February 29, 2012 the hold harmless provision for an SCH (as defined in section 1886(d)(5)(D)(iii) of the Act), including an EACH, without the bed size limitation. Therefore, for such hospitals, for services furnished before March 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. However, section 3002 of Public Law 112-96 extended through December 31, 2012, the hold harmless provision for an SCH (as defined in section 1886(d)(5)(D)(iii) of the Act), including an EACH, that has no more than 100 beds. Therefore, for such hospitals, for services furnished before January 1, 2013, 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. Accordingly, we are proposing to revise § 419.70(d) of the regulations to reflect the TOPs extensions and amendments described in section 308 of Public Law 112-78 and section 3002 of Public Law 112-96.

Effective for services provided on or after March 1, 2012, SCHs (including EACHs) with greater than 100 beds are no longer eligible for TOPs, in accordance with section 308 of Public Law 112-78. Effective for services provided on or after January 1, 2013, a rural hospital with 100 or fewer beds that is not an SCH and an SCH (including an EACH) are no longer eligible for TOPs, in accordance with section 3002 of Public Law 112-96.

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 outlier payments and copayment. As we 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 2012. 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 2013 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 (76 FR 46232). We intend to reassess the 7.1 percent adjustment in the future by examining differences between urban hospitals' costs and rural hospitals' costs using updated claims data, 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 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 reporting 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.

Section 3138 of the Affordable Care Act amended section 1833(t) of the Act by adding a new paragraph (18), which instructs the Secretary to conduct a study to determine if, under the OPPS, outpatient costs incurred by cancer hospitals described in section 1886(d)(1)(B)(v) of the Act with respect to APC groups exceed the costs incurred by other hospitals furnishing services under section 1833(t) of the Act, as determined appropriate by the Secretary. In addition, section 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 under section 1833(t)(2)(E) of the Act to reflect these higher costs. After conducting the study required by section 3138, we determined in 2012 that outpatient costs incurred by the 11 specified cancer hospitals were greater than the costs incurred by other OPPS hospitals. For a complete discussion regarding the cancer hospital cost study, we refer readers to the CY 2012 OPPS/ASC final rule with comment period (76 FR 74200 through 74201).

Based on our findings that costs incurred by cancer hospitals were greater than the costs incurred by other OPPS hospitals, we finalized a policy to provide a payment adjustment to the 11 specified cancer hospitals that reflects the higher outpatient costs as discussed in the CY 2012 OPPS/ASC final rule with comment period (76 FR 74202 through 74206). Specifically, we adopted a policy to provide additional payments to each of the 11 cancer hospitals so that each cancer hospital's final PCR for services provided in a given calendar year is equal to the weighted average PCR (which we refer to as the “target PCR”) for other hospitals paid under the OPPS. The target PCR is set in advance of the calendar year and is calculated using the most recent submitted or settled cost report data that are available at the time of final rulemaking for the calendar year. The amount of the payment adjustment is made on an aggregate basis at cost report settlement. We note that the changes made by section 1833(t)(18) of the Act do not affect the existing statutory provisions that provide for TOPs for cancer hospitals. The TOPs are assessed as usual after all payments, including the cancer hospital payment adjustment, have been made for a cost reporting period. For CY 2012, the target PCR for purposes of the cancer hospital payment adjustment is 0.91.

2. Proposed Payment Adjustment for Certain Cancer Hospitals for CY 2013

For CY 2013, we are proposing to continue our policy to provide additional payments to cancer hospitals so that each cancer hospital's final PCR is equal to the weighted average PCR (or “target PCR”) for the other OPPS hospitals using the most recent submitted or settled cost report data that are available at the time of this proposed rule. To calculate the proposed CY 2013 target PCR, we used the same extract of cost report data from HCRIS, as discussed in section II.A of this proposed rule, used to estimate costs for the CY 2013 OPPS. Using these cost report data, we included data from Worksheet E, Part B, for each hospital, using data from each hospital's most recent cost report, whether as submitted or settled. We then limited the dataset to the hospitals with CY 2011 claims data that we used to model the impact of the proposed CY 2013 APC relative weights (3,975 hospitals) because it is appropriate to use the same set of hospitals that we are using to calibrate the modeled CY 2013 OPPS. The cost report data for the hospitals in this dataset were from cost report periods with fiscal year ends ranging from 2010 to 2011. We then removed the cost report data of the 48 hospitals located in Puerto Rico from our dataset because we do not believe that their cost structure reflects the costs of most hospitals paid under the OPPS and, therefore, their inclusion may bias the calculation of hospital-weighted statistics. We also removed 177 hospitals with cost report data that were not complete (missing aggregate OPPS payments, missing aggregate cost data, or missing both), so that all cost reports in the study would have both the payment and cost data necessary to calculate a PCR for each hospital, leading to a proposed analytic file of 3,750 hospitals with cost report data.

Using this smaller dataset of cost report data, we estimated that, on average, the OPPS payments to other hospitals furnishing services under the OPPS are approximately 91 percent of reasonable cost (weighted average PCR of 0.91). Based on these data, we are proposing a target PCR of 0.91 that would be used to determine the CY 2013 cancer hospital payment adjustment that would be paid at cost report settlement. Therefore, we are proposing that the payment amount associated with the cancer hospital payment adjustment to be determined at cost report settlement would be the additional payment needed to result in a proposed target PCR equal to 0.91 for each cancer hospital.

G. Proposed Hospital Outpatient Outlier Payments

1. Background

Currently, the OPPS provides outlier payments on a service-by-service basis. In CY 2011, the outlier threshold was determined to be met when the cost of furnishing a service or procedure by a hospital exceeds 1.75 times the APC payment amount and exceeds the APC payment rate plus a $2,025 fixed-dollar threshold. We introduced a fixed-dollar threshold in CY 2005, in addition to the traditional multiple threshold, in order to better target outlier payments to those high cost and complex procedures where a very costly service could present a hospital with significant financial loss. If the cost of a service meets both of these conditions, the multiple threshold and the fixed-dollar threshold, the outlier payment is calculated as 50 percent of the amount by which the cost of furnishing the service exceeds 1.75 times the APC payment rate. Before CY 2009, this outlier payment had historically been considered a final payment by longstanding OPPS policy. However, we implemented a reconciliation process similar to the IPPS outlier reconciliation process for cost reports with cost reporting periods beginning on or after January 1, 2009, in our CY 2009 OPPS/ASC final rule with comment period (73 FR 68594 through 68599).

It has been our policy for the past several years to report the actual amount of outlier payments as a percent of total spending in the claims being used to model the proposed OPPS. Our current estimate of total outlier payments as a percent of total CY 2011 OPPS payment, using available CY 2011 claims and the revised OPPS expenditure estimate for the 2012 Trustee's Report, is approximately 1.06 percent of the total aggregated OPPS payments. Therefore, for CY 2011, we estimate that we paid 0.06 percent above the CY 2011 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 2011 claims data and CY 2012 payment rates, we currently estimate that the aggregate outlier payments for CY 2012 will be approximately 1.03 percent of the total CY 2012 OPPS payments. The difference between 1.0 percent and 1.03 percent is reflected in the regulatory impact analysis in section XXII. of this proposed rule. We note that we provide proposed estimated CY 2013 outlier payments for hospitals and CMHCs with claims included in the claims data that we used to model impacts in the Hospital-Specific Impacts—Provider-Specific Data file on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html.

2. Proposed Outlier Calculation

For CY 2013, we are proposing to continue our policy of estimating outlier payments to be 1.0 percent of the estimated aggregate total payments under the OPPS for outlier payments. We are proposing that a portion of that 1.0 percent, an amount equal to 0.12 percent of outlier payments (or 0.0012 percent of total OPPS payments) would be allocated to CMHCs for PHP outlier payments. This is the amount of estimated outlier payments that would result from the proposed CMHC outlier threshold as a proportion of total estimated OPPS outlier payments. As discussed in section VIII.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 2013 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 $2,400 fixed-dollar threshold. This proposed threshold reflects the methodology discussed below in this section, as well as the proposed APC recalibration for CY 2013.

We calculated the proposed fixed-dollar threshold for this proposed rule using largely the same methodology as we did in CYs 2011 and 2012 (75 FR 71887 through 71889 and 76 FR 74207 through 74209). For purposes of estimating outlier payments for this proposed rule, we used the hospital-specific overall ancillary CCRs available in the April 2012 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 2011 claims to model the CY 2013 OPPS. In order to estimate the proposed CY 2013 hospital outlier payments for this proposed rule, we inflated the charges on the CY 2011 claims using the same inflation factor of 1.1406 that we used to estimate the IPPS fixed-dollar outlier threshold for the FY 2013 IPPS/LTCH PPS proposed rule (77 FR 28142). We used an inflation factor of 1.0680 to estimate CY 2012 charges from the CY 2011 charges reported on CY 2011 claims. The methodology for determining this charge inflation factor is discussed in the FY 2013 IPPS/LTCH PPS proposed rule (77 FR 28142). 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, for this CY 2013 OPPS/ASC proposed rule, we are proposing to apply the same CCR inflation adjustment factor that we are proposing to apply for the proposed FY 2013 IPPS outlier calculation to the CCRs used to simulate the proposed CY 2013 OPPS outlier payments that determine the fixed-dollar threshold. Specifically, for CY 2013, we are proposing to apply an adjustment factor of 0.9790 to the CCRs that were in the April 2012 OPSF to trend them forward from CY 2012 to CY 2013. The methodology for calculating this proposed adjustment was discussed in the FY 2013 IPPS/LTCH PPS proposed rule (77 FR 28142 through 28144). We note that due to the issue described in the IPPS proposed rule correction notice published on June 11, 2012, the operating and capital CCR inflation factors were reversed (77 FR 34326). In estimating the proposed CY 2013 OPPS fixed-dollar outlier threshold, we have applied the corrected CCR inflation factor.

Therefore, to model hospital outlier payments for this CY 2013 OPPS/ASC proposed rule, we applied the overall CCRs from the April 2012 OPSF file after adjustment (using the proposed CCR inflation adjustment factor of 0.9644 to approximate CY 2013 CCRs) to charges on CY 2011 claims that were adjusted (using the proposed charge inflation factor of 1.1406 to approximate CY 2013 charges). We simulated aggregated CY 2013 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 2013 OPPS payments. We estimated that a proposed fixed-dollar threshold of $2,400, 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 $2,400 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 reduced national unadjusted payment rates that will apply to certain outpatient items and services furnished by hospitals that are required to report outpatient quality data and that fail to meet the Hospital OQR Program requirements. For hospitals that fail to meet the Hospital OQR Program requirements, we 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 XV. of this proposed rule.

3. Proposed 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 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, and as we have previously discussed in the CY 2009 OPPS/ASC final rule with comment period (73 FR 68596), we are proposing for CY 2013, to not 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 conversion factor calculated in accordance with section II.B. of this proposed rule and the relative weight determined under section II.A. of this proposed rule. Therefore, the proposed national unadjusted payment rate for most APCs contained in Addendum A to this proposed rule (which is available via the Internet on the CMS Web site) and for most HCPCS codes to which separate payment under the OPPS has been assigned in Addendum B to this proposed rule (which is available via the Internet on the CMS Web site) was calculated by multiplying the proposed CY 2013 scaled weight for the APC by the proposed CY 2013 conversion factor.

We note that section 1833(t)(17) of the Act, which applies to hospitals as defined under section 1886(d)(1)(B) of the Act, requires that hospitals that fail to submit data required to be submitted on quality measures selected by the Secretary, in the form and manner and at a time specified by the Secretary, incur a reduction of 2.0 percentage points to their OPD fee schedule increase factor, that is, the annual payment update factor. The application of a reduced OPD fee schedule increase factor results in reduced national unadjusted payment rates that apply to certain outpatient items and services provided by hospitals that are required to report outpatient quality data and that fail to meet the Hospital OQR Program (formerly referred to as the Hospital Outpatient Quality Data Reporting Program (HOP QDRP)) requirements. For further discussion of the payment reduction for hospitals that fail to meet the requirements of the Hospital OQR Program, we refer readers to section XV. 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 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 2013 OPPS fee schedule increase factor of 2.1 percent.

Step 1. Calculate 60 percent (the labor-related portion) of the national unadjusted payment rate. Since the initial implementation of the OPPS, we have used 60 percent to represent our estimate of that portion of costs attributable, on average, to labor. We refer readers to the April 7, 2000 OPPS final rule with comment period (65 FR 18496 through 18497) for a detailed discussion of how we derived this percentage. 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) to which hospitals are assigned for FY 2013 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 extended section 508 and certain additional special exception hospital reclassifications from October 1, 2010 through September 30, 2011. Section 302 of the Temporary Payroll Tax Cut Continuation Act of 2011 (Pub. L. 112-78) as amended by section 3001 of the Middle Class Tax Relief and Job Creation Act of 2012 (Pub. L. 112-96) extended section 508 and certain additional special exception hospital reclassifications from October 1, 2011 through March 31, 2012. Therefore, these reclassifications will not apply to the CY 2013 OPPS. (For further discussion of the proposed changes to the FY 2013 IPPS wage indices, as applied to the CY 2013 OPPS, we refer readers to section II.C. of this proposed rule). We are proposing to continue to apply 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 available via the Internet on the CMS Web site) contains the qualifying counties and the associated proposed wage index increase developed for the FY 2013 IPPS and listed as Table 4J in the FY 2013 IPPS/LTCH PPS proposed rule and available via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html. This step is to be followed only if the hospital is not reclassified or redesignated under section 1886(d)(8) or section 1886(d)(10) of the Act.

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

The formula below is a mathematical representation of Step 4 and adjusts the labor-related portion of the national 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 an SCH, set forth in the regulations at § 412.92, or an EACH, which is considered to be an SCH under section 1886(d)(5)(D)(iii)(III) of the Act, and located in a rural area, as defined in § 412.64(b), or is treated as being located in a rural area under § 412.103, multiply the wage index adjusted payment rate by 1.071 to calculate the total payment.

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

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

We have provided examples below of the calculation of both the full and reduced national unadjusted payment rates that will apply to certain outpatient items and services performed by hospitals that meet and that fail to meet the Hospital OQR Program requirements, using the steps outlined above. For purposes of this example, we 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 2013 full national unadjusted payment rate for APC 0019 is $337.48. The proposed reduced national unadjusted payment rate for a hospital that fails to meet the Hospital OQR Program requirements is $330.73. This proposed reduced rate is calculated by multiplying the reporting ratio of 0.980 by the full unadjusted payment rate for APC 0019.

The proposed FY 2013 wage index for a provider located in CBSA 35644 in New York is 1.2991. The proposed labor-related portion of the full national unadjusted payment is $263.05 (.60 * $337.48 * 1.2991). The labor-related portion of the proposed reduced national unadjusted payment is $257.79 (.60 * $330.73 * 1.2991). The nonlabor-related portion of the full national unadjusted payment is $134.99 (.40 * $337.48). The nonlabor-related portion of the proposed reduced national unadjusted payment is $132.29 (.40 * $330.73). The sum of the labor-related and nonlabor-related portions of the proposed full national adjusted payment is $398.04 ($263.05 + $134.99). The sum of the reduced national adjusted payment is $390.08 ($257.79 + $132.29).

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, the effective copayment rate for a covered OPD service paid under the OPPS in CY 2006, and in calendar years thereafter, shall not exceed 40 percent of the APC payment rate.

Section 1833(t)(3)(B)(ii) of the Act provides that, for a covered OPD service (or group of such services) furnished in a year, the national unadjusted copayment amount cannot be less than 20 percent of the OPD fee schedule amount. However, section 1833(t)(8)(C)(i) of the Act limits the amount of beneficiary copayment that may be collected 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/ASC final rule with comment period (75 FR 72013).

2. Proposed OPPS Copayment Policy

For CY 2013, we are proposing to determine copayment amounts for new and revised APCs using the same methodology that we implemented beginning in CY 2004. (We refer readers to the November 7, 2003 OPPS final rule with comment period (68 FR 63458).) In addition, we are proposing to use the same standard rounding principles that we have historically used in instances where the application of our standard copayment methodology would result in a copayment amount that is less than 20 percent and cannot be rounded, under standard rounding principles, to 20 percent. (We refer readers to the CY 2008 OPPS/ASC final rule with comment period (72 FR 66687) in which we discuss our rationale for applying these rounding principles.) The proposed national unadjusted copayment amounts for services payable under the OPPS that would be effective January 1, 2013, are shown in Addenda A and B to this proposed rule (which are available via the Internet on the CMS Web site). As discussed in section XV. of this proposed rule, for CY 2013, the proposed Medicare beneficiary's minimum unadjusted copayment and national unadjusted copayment for a service to which a reduced national unadjusted payment rate applies will equal the product of the reporting ratio and the national unadjusted copayment, or the product of the reporting ratio and the minimum unadjusted copayment, respectively, for the service.

We note that APC copayments may increase or decrease each year based on changes in the calculated APC payment rates due to updated cost report and claims data, and any changes to the OPPS cost modeling process. The CY 2013 proposal to base APC relative weights on geometric mean costs also affects proposed APC payment rates and, through them, the corresponding beneficiary copayments. However, as described in the CY 2004 OPPS/ASC final rule with comment period, the development of the copayment methodology generally moves beneficiary copayments closer to 20 percent of OPPS APC payments (68 FR 63458 through 63459). For a more detailed discussion of the proposal to base the APC relative payment weights on geometric mean costs, we refer readers to section II.A.2.f. of this proposed rule.

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, $67.50 is 20 percent of the full national unadjusted payment rate of $337.48. For APCs with only a minimum unadjusted copayment in Addenda A and B of this proposed rule (which are available via the Internet on the CMS Web site), the beneficiary payment percentage is 20 percent.

The formula below is a mathematical representation of Step 1 and calculates 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, 2013, are shown in Addenda A and B to this proposed rule (which are 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 2013 OPD fee schedule increase factor discussed in section II.B. 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:

  • Category I CPT codes, which describe medical services and procedures;
  • Category III CPT codes, which describe new and emerging technologies, services, and procedures; and
  • Level II HCPCS codes, which are used primarily to identify products, supplies, temporary procedures, and services not described by CPT codes.

CPT codes are established by the American Medical Association (AMA) and the Level II HCPCS codes are established by the CMS HCPCS Workgroup. These codes are updated and changed throughout the year. CPT and HCPCS code changes that affect the OPPS are published both through the annual rulemaking cycle and through the OPPS quarterly update Change Requests (CRs). CMS releases new Level II HCPCS codes to the public or recognizes the release of new CPT codes by the AMA and makes these codes effective (that is, the codes can be reported on Medicare claims) outside of the formal rulemaking process via OPPS quarterly update CRs. This quarterly process offers hospitals access to codes that may more accurately describe items or services furnished and/or provides payment or more accurate payment for these items or services in a timelier manner than if CMS waited for the annual rulemaking process. We solicit public comments on these new codes and finalize our proposals related to these codes through our annual rulemaking process. In Table 13 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. Because the payment rates associated with codes effective July 1 are not available to us in time for incorporation into the Addenda of this proposed rule, the Level II HCPCS codes and the Category III CPT codes implemented through the July 2012 OPPS quarterly update CR could not be included in Addendum B to this proposed rule. Nevertheless, we are requesting public comments on the codes included in the July 2012 OPPS quarterly update and including these codes in the preamble to this proposed rule.

Table 13—Comment Timeframe for New or Revised HCPCS Codes

OPPS quarterly update CRType of codeEffective dateComments soughtWhen finalized
April l, 2012Level II HCPCS CodesApril 1, 2012CY 2013 OPPS/ASC proposed ruleCY 2013 OPPS/ASC final rule with comment period.
July 1, 2012Level II HCPCS CodesJuly 1, 2012CY 2013 OPPS/ASC proposed ruleCY 2013 OPPS/ASC final rule with comment period.
Category I (certain vaccine codes) and III CPT codesJuly 1, 2012CY 2013 OPPS/ASC proposed ruleCY 2013 OPPS/ASC final rule with comment period.
October 1, 2012Level II HCPCS CodesOctober 1, 2012CY 2013 OPPS/ASC final rule with comment periodCY 2014 OPPS/ASC final rule with comment period.
January 1, 2013Level II HCPCS CodesJanuary 1, 2013CY 2013 OPPS/ASC final rule with comment periodCY 2014 OPPS/ASC final rule with comment period.
Category I and III CPT CodesJanuary 1, 2013CY 2013 OPPS/ASC final rule with comment periodCY 2014 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 solicited public comments in this CY 2013 OPPS/ASC proposed rule or whether we will be soliciting public comments in the CY 2013 OPPS/ASC final rule with comment period. We note that we sought public comments in the CY 2012 OPPS/ASC final rule with comment period on the new CPT and Level II HCPCS codes that were effective January 1, 2012. We also sought public comments in the CY 2012 OPPS/ASC final rule with comment period on the new Level II HCPCS codes effective October 1, 2011. These new codes, with an effective date of October 1, 2011, or January 1, 2012, 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 2012 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 2012 OPPS/ASC final rule with comment period. We will respond to public comments and finalize our interim OPPS treatment of these codes in the CY 2013 OPPS/ASC final rule with comment period.

1. Proposed Treatment of New CY 2012 Level II HCPCS and CPT Codes Effective April 1, 2012 and July 1, 2012 for Which We Are Soliciting Public Comments in This CY 2013 Proposed Rule

Through the April 2012 OPPS quarterly update CR (Transmittal 2418, Change Request 7748, dated March 2, 2012) and the July 2012 OPPS quarterly update CR (Transmittal 2483, Change Request 7847, dated June 8, 2012), we recognized several new HCPCS codes for separate payment under the OPPS. Effective April 1 and July 1 of CY 2012, we made effective 13 new Level II HCPCS codes and 7 Category III CPT codes. Specifically, 5 new Level II HCPCS codes were effective for the April 2012 update and another 8 new Level II HCPCS codes were effective for the July 2012 update for a total of 13. Seven new Category III CPT codes were effective for the July 2012 update. Of the 13 new Level II HCPCS codes, we recognized for separate payment 11 of these codes, and of the 7 new Category III CPT codes, we recognized for separate payment all 7 new Category III CPT codes, for a total of 18 new Level II HCPCS and Category III CPT codes that are recognized for separate payment for CY 2013.

Through the April 2012 OPPS quarterly update CR, we allowed separate payment for each of the five new Level II HCPCS codes. Specifically, as displayed in Table 14 below, we provided separate payment for the following HCPCS codes:

  • HCPCS code C9288 (Injection, centruroides (scorpion) immune f(ab)2 (equine), 1 vial)
  • HCPCS code C9289 (Injection, asparaginase Erwinia chrysanthemi, 1,000 international units (I.U.))
  • HCPCS code C9290 (Injection, bupivacaine liposome, 1 mg)
  • HCPCS code C9291 (Injection, aflibercept, 2 mg vial)
  • HCPCS code C9733 (Non-ophthalmic fluorescent vascular angiography)

In this proposed rule, we are proposing to assign the Level II HCPCS codes listed in Table 14 to the specific proposed APCs and status indicators for CY 2013.

Table 14—Level II HCPCS Codes With a Change in OPPS Status Indicator or Newly Implemented in April  2012

CY 2012 HCPCS CodeCY 2012 long descriptorProposed CY 2013 status indicatorProposed CY 2013 APC
C9288Injection, centruroides (scorpion) immune f(ab)2 (equine), 1 vialG9288
C9289Injection, asparaginase Erwinia chrysanthemi, 1,000 international units (I.U.)G9289
C9290Injection, bupivacaine liposome, 1 mgG9290
C9291*Injection, aflibercept, 2 mg vialG9291
C9733Non-ophthalmic fluorescent vascular angiographyQ20397
* Level II HCPCS code C9291 (Injection, aflibercept, 2 mg vial) was deleted June 30, 2012, and replaced with HCPCS code Q2046 effective July 1, 2012.

Through the July 2012 OPPS quarterly update CR, which included HCPCS codes that were made effective July 1, 2012, we allowed separate payment for six of the eight new Level II HCPCS codes. Specifically, as displayed in Table 15 of this proposed rule, we provided separate payment for the following HCPCS codes:

  • HCPCS code C9368 (Grafix core, per square centimeter)
  • HCPCS code C9369 (Grafix prime, per square centimeter)
  • HCPCS code Q2045 (Injection, human fibrinogen concentrate, 1 mg)
  • HCPCS code Q2046 (Injection, aflibercept, 1 mg)
  • HCPCS code Q2048 (Injection, doxorubicin hydrochloride, liposomal, doxil, 10 mg)
  • HCPCS code Q2049 (Injection, doxorubicin hydrochloride, liposomal, imported lipodox, 10 mg)

We note that three of the Level II HCPCS Q-codes that were made effective July 1, 2012, were previously described by HCPCS J-codes or C-codes that were separately payable under the hospital OPPS. First, HCPCS code Q2045 replaced HCPCS code J1680 (Injection, human fibrinogen concentrate, 100 mg), beginning July 1, 2012. HCPCS code J1680 was assigned to status indicator “K” (Nonpass-through drugs and nonimplantable biologicals, including therapeutic radiopharmaceuticals; paid under OPPS; separate APC payment) on January 1, 2012. However, because HCPCS code J1680 is replaced by HCPCS code Q2045 effective July 1, 2012, we changed its status indicator to “E” (Not Payable by Medicare) effective July 1, 2012. Because HCPCS code Q2045 describes the same drug as HCPCS code J1680, we continued its separate payment status and assigned it to status indicator “K” effective July 1, 2012. However, because the dosage descriptor for HCPCS code Q2045 is not the same as HCPCS code J1680, we assigned HCPCS code Q2045 to a new APC to maintain data consistency for future rulemaking. Specifically, HCPCS code Q2045 is assigned to APC 1414 (Human fibrinogen conc inj) effective July 1, 2012.

Second, HCPCS code Q2046 replaced HCPCS code C9291 (Injection, aflibercept, 2 mg vial) effective July 1, 2012. HCPCS code C9291 was assigned pass-through status when it was made effective April 1, 2012. Because HCPCS code Q2046 describes the same product as HCPCS code C9291, we continued its pass-through status and assigned HCPCS code Q2046 to status indicator “G” as well as assigned it to the same APC, specifically APC 9291 (Injection, aflibercept), effective July 1, 2012. HCPCS code C9291 is deleted effective June 30, 2012.

Third, the HCPCS Workgroup replaced HCPCS code J9001 (Injection, doxorubicin hydrochloride, all lipid formulations, 10 mg) with new HCPCS code Q2048, effective July 1, 2012. Consequently, the status indicator for HCPCS code J9001 is changed to “E” (Not Payable by Medicare) effective July 1, 2012. Because HCPCS code Q2048 describes the same drug as HCPCS code J9001, we continued its separate payment status and assigned HCPCS code Q2048 to status indicator “K” effective July 1, 2012. In addition, because, HCPCS code Q2049 is similar to HCPCS code Q2048, we assigned HCPCS code Q2049 to status indicator “K” effective July 1, 2012.

Of the 15 HCPCS codes that were made effective July 1, 2012, we did not recognize for separate payment two HCPCS codes because they are both paid under a payment system other than OPPS. Specifically, HCPCS code Q2047 (Injection, peginesatide, 0.1 mg (for ESRD on dialysis)) is assigned to status indicator “A” (Not paid under OPPS; paid by fiscal intermediaries/MACs under a fee schedule or payment system other than OPPS), and HCPCS code Q2034 (Influenza virus vaccine, split virus, for intramuscular use (Agriflu)) is assigned to status indicator “L” (Not paid under OPPS; paid at reasonable cost).

Table 15 below includes a complete list of the Level II HCPCS codes that were made effective July 1, 2012, with their proposed status indicators, proposed APC assignments, and proposed payment rates for CY 2013.

Table 15—New Level II HCPCS Codes Implemented in July 2012

CY 2012 HCPCS codeCY 2012 long descriptorProposed CY 2013 status indicatorProposed CY 2013 APCProposed CY 2013 payment rate
C9368Grafix core, per square centimeterG9368$7.96
C9369Grafix prime, per square centimeterG93690.61
Q2034Influenza virus vaccine, split virus, for intramuscular use (Agriflu)LN/AN/A
Q2045 *Injection, human fibrinogen concentrate, 1 mgK14140.73
Q2046 **Injection, aflibercept, 1 mgG1420980.50
Q2047Injection, peginesatide, 0.1 mg (for ESRD on dialysis)AN/AN/A
Q2048 ***Injection, doxorubicin hydrochloride, liposomal, doxil, 10 mgK7046537.21
Q2049 †Injection, doxorubicin hydrochloride, liposomal, imported lipodox, 10 mgK1421498.26
* HCPCS code Q2045 replaced HCPCS code J1680 effective July 1, 2012. The status indicator for HCPCS code J1680 was changed to “E” (Not Payable by Medicare) effective July 1, 2012. The proposed payment rate for HCPCS code Q2045 is based on ASP+6 percent.
** HCPCS code Q2046 replaced HCPCS code C9291 effective July 1, 2012.
*** HCPCS code Q2048 replaced HCPCS code J9001 effective July 1, 2012. The status indicator for HCPCS code J9001 was changed to “E” (Not Payable by Medicare) effective July 1, 2012. The proposed payment rate for HCPCS code Q2048 is based on ASP+6 percent.
† The proposed payment rate for HCPCS code Q2049 is based on ASP+6 percent.

For CY 2013, 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 CPT vaccine codes and Category III CPT codes that are released on the AMA Web site in January are made effective in July of the same year through the July quarterly update CR, consistent with the AMA's implementation date for the codes. For the July 2012 update, there were no new Category I CPT vaccine codes. Through the July 2012 OPPS quarterly update CR (Transmittal 2483, Change Request 7847, dated June 8, 2012), we allowed separate payment for all seven new Category III CPT codes effective July 1, 2012. Specifically, as displayed in Table 16 of this proposed rule, we allowed separate payment for the following Category III CPT codes:

  • CPT code 0302T (Insertion or removal and replacement of intracardiac ischemia monitoring system including imaging supervision and interpretation when performed and intra-operative interrogation and programming when performed; complete system (includes device and electrode))
  • CPT code 0303T (Insertion or removal and replacement of intracardiac ischemia monitoring system including imaging supervision and interpretation when performed and intra-operative interrogation and programming when performed; electrode only)
  • CPT code 0304T (Insertion or removal and replacement of intracardiac ischemia monitoring system including imaging supervision and interpretation when performed and intra-operative interrogation and programming when performed; device only)
  • CPT code 0305T (Programming device evaluation (in person) of intracardiac ischemia monitoring system with iterative adjustment of programmed values, with analysis, review, and report)
  • CPT code 0306T (Interrogation device evaluation (in person) of intracardiac ischemia monitoring system with analysis, review, and report)
  • CPT code 0307T (Removal of intracardiac ischemia monitoring device)
  • CPT code 0308T (Insertion of ocular telescope prosthesis including removal of crystalline lens)

Table 16 below lists the Category III CPT codes that were implemented in July 2012, along with their proposed status indicators, proposed APC assignments, where applicable, and proposed payment rates for CY 2013.

Table 16—New Category III CPT Codes Implemented in July 2012

CY 2012 CPT codeCY 2012 long descriptorProposed CY 2013 status indicatorProposed CY 2013 APCProposed CY 2013 payment rate
0302TInsertion or removal and replacement of intracardiac ischemia monitoring system including imaging supervision and interpretation when performed and intra-operative interrogation and programming when performed; complete system (includes device and electrode)T0089$8,275.79
0303TInsertion or removal and replacement of intracardiac ischemia monitoring system including imaging supervision and interpretation when performed and intra-operative interrogation and programming when performed; electrode onlyT01063,780.92
0304TInsertion or removal and replacement of intracardiac ischemia monitoring system including imaging supervision and interpretation when performed and intra-operative interrogation and programming when performed; device onlyT00906,663.83
0305TProgramming device evaluation (in person) of intracardiac ischemia monitoring system with iterative adjustment of programmed values, with analysis, review, and reportS069033.92
0306TInterrogation device evaluation (in person) of intracardiac ischemia monitoring system with analysis, review, and reportS069033.92
0307TRemoval of intracardiac ischemia monitoring deviceT01051,718.55
0308TInsertion of ocular telescope prosthesis including removal of crystalline lensT02341,669.74

We are soliciting public comments on the CY 2013 proposed status indicators and the proposed APC assignments and payment rates for the Level II HCPCS codes and the Category III CPT codes that were effective April 1, 2012, and July 1, 2012, through the respective OPPS quarterly update CRs. These codes are listed in Tables 14, 15, and 16 of this proposed rule. We are proposing to finalize their status indicators and their APC assignments and payment rates, if applicable, in the CY 2013 OPPS/ASC final rule with comment period. Because the new Category III CPT and Level II HCPCS codes that become effective for July are not available to us in time for incorporation into the Addenda to this OPPS/ASC proposed rule, our policy is to include the codes, their proposed status indicators, proposed APCs (where applicable), and proposed payment rates (where applicable) in the preamble to the proposed rule but not in the Addenda to the proposed rule. These codes are listed in Tables 15 and 16, respectively. We are proposing to incorporate these codes into Addendum B to the CY 2013 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 2012 OPPS update CR and displayed in Table 14 are included in Addendum B to this proposed rule (which is available via the Internet on the CMS Web site), where their proposed CY 2013 payment rates are also shown.

2. Proposed Process for New Level II HCPCS Codes That Will Be Effective October 1, 2012 and New CPT and Level II HCPCS Codes That Will Be Effective January 1, 2013 for Which We Will Be Soliciting Public Comments in the CY 2013 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. For CY 2013, these codes will be 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. In addition, the CPT and Level II HCPCS codes that will be effective January 1, 2013, will be flagged with comment indicator “NI” in Addendum B to the OPPS/ASC final rule with comment period. Specifically, the status indicator and the APC assignment and payment rate, if applicable, for all such codes flagged with comment indicator “NI” are open to public comment in the final rule with comment period, and we respond to these comments in the 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 2013. Specifically, for CY 2013, we are proposing to include in Addendum B to the CY 2013 OPPS/ASC final rule with comment period the new Category I and III CPT codes effective January 1, 2013 (including the Category III CPT codes that are released by the AMA in July 2012) that would be incorporated in the January 2013 OPPS quarterly update CR and the new Level II HCPCS codes, effective October 1, 2012, or January 1, 2013, that would be released by CMS in its October 2012 and January 2013 OPPS quarterly update CRs. The October 1, 2012 and January 1, 2013 codes would be flagged with comment indicator “NI” in Addendum B to the CY 2013 OPPS/ASC final rule with comment period to indicate that we have assigned them an interim OPPS payment status for CY 2013. We are proposing that their status indicators and their APC assignments and payment rates, if applicable, would be open to public comment and would be finalized in the CY 2014 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 have also 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:

(a) Use of an operating, treatment, or procedure room;

(b) Use of a recovery room;

(c) Observation services;

(d) Anesthesia;

(e) Medical/surgical supplies;

(f) Pharmaceuticals (other than those for which separate payment may be allowed under the provisions discussed in section V. of this proposed rule);

(g) Incidental services such as venipuncture;

(h) 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 2012 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, multiple imaging services, and cardiac resynchronization therapy 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 cost of the services included in that APC, relative to the hospital 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. Section 1833(t)(9)(A) of the Act also requires the Secretary to consult with an expert outside advisory panel composed of an appropriate selection of representatives of providers to review (and advise the Secretary concerning) the clinical integrity of the APC groups and the relative payment weights recommendations for specific services for the CY 2013 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 cost for an item or service in the group is more than 2 times greater than the lowest cost for an item or service within the same group (referred to as the “2 times rule”). For CY 2013, we are proposing to use the cost of the item or service in implementing this provision, as discussed in section II.A.2.f. of this proposed rule. The statute authorizes the Secretary to make exceptions to the 2 times rule in unusual cases, such as low-volume items and services (but the Secretary may not make such an exception in the case of a drug or biological that has been designated as an orphan drug under section 526 of the Federal Food, Drug, and Cosmetic Act).

2. Application of the 2 Times Rule

In accordance with section 1833(t)(2) of the Act and § 419.31 of the regulations, we annually review the items and services within an APC group to determine, with respect to comparability of the use of resources, if the cost of the highest cost item or service within an APC group is more than 2 times greater than the cost of the lowest cost item or service within that same group. In making this determination, we consider only those HCPCS codes that are significant based on the number of claims. We note that, for purposes of identifying significant HCPCS codes for examination 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 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 costs. Similarly, a HCPCS code for which there are fewer than 99 single bills and which comprises less than 2 percent of the single major claims within an APC will have a negligible impact on the APC cost. In 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 2013.

We have identified APCs with 2 times violations for which we are proposing changes to their HCPCS codes' APC assignments in Addendum B (available via the Internet on the CMS Web site) 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. In many cases, the proposed HCPCS code reassignments and associated APC reconfigurations for CY 2013 included in the proposed rule are related to changes in costs of services that were observed in the CY 2011 claims data newly available for CY 2013 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 2013. In addition, we are proposing to rename existing APCs or create new clinical APCs to complement proposed HCPCS code reassignments. Addendum B to this CY 2013 OPPS/ASC proposed rule identifies with a comment indicator “CH” those HCPCS codes for which we are proposing a change to the APC assignment or status indicator, or both, that were initially assigned in the April 2012 Addendum B Update (available via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html.

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 2013, we reviewed all the APCs to determine which APCs would not satisfy the 2 times rule. Then we used the following criteria to decide whether to propose exceptions to the 2 times rule for affected APCs:

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

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

Table 17 of this proposed rule lists 21 APCs that we are proposing to exempt from the 2 times rule for CY 2013 based on the criteria cited above and based on claims data processed from January 1, 2011, through December 31, 2011. For the final rule with comment period, we plan to use claims data for dates of service between January 1, 2011, and December 31, 2011, that were processed on or before June 30, 2012, and updated CCRs, if available. Based on the CY 2011 claims data, we found 21 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 2013, and identified 21 APCs that meet the criteria for exception to the 2 times rule for this proposed rule. We have not included in this count those APCs where a 2 times violation is not a relevant concept, such as APC 0375 (Ancillary Outpatient Services when Patient Expires), with an APC cost set based on multiple procedure claims. Therefore, we have identified only APCs, including those with criteria-based costs, such as device-dependent APCs, with 2 times rule violations. These proposed APC exceptions are listed in Table 17 below.

Table 17—Proposed APC Exceptions to the 2 Times Rule for CY 2013

Proposed CY 2013 APCProposed CY 2013 APC title
0006Level I Incision & Drainage.
0012Level I Debridement & Destruction.
0045Bone/Joint Manipulation Under Anesthesia.
0057Bunion Procedures.
0060Manipulation Therapy.
0105Repair/Revision/Removal of Pacemakers, AICDs, or Vascular Devices.
0128Echocardiogram with Contrast.
0152Level I Percutaneous Abdominal and Biliary Procedures.
0173Level II Partial Hospitalization (4 or more services) for CMHCs.
0230Level I Eye Tests & Treatments.
0272Fluoroscopy.
0325Group Psychotherapy.
0330Dental Procedures.
0340Minor Ancillary Procedures.
0369Level III Pulmonary Tests.
0403Level I Nervous System Imaging.
0409Red Blood Cell Tests.
0604Level 1 Hospital Clinic Visits.
0655Insertion/Replacement/Conversion of a Permanent Dual Chamber Pacemaker or Pacing.
0688Revision/Removal of Neurostimulator Pulse Generator Receiver.
0690Level I Electronic Analysis of Devices.

The proposed 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/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html.

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” (Paid under OPPS; separate APC payment) and the other set with a status indicator of “T” (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 projected utilization for Medicare beneficiaries 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 circumstance, 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, for CY 2013, we are proposing to retain services within New Technology APC groups until we gather sufficient claims data to enable us to assign the service to a clinically appropriate APC. The flexibility associated with this policy allows us to move a service from a New Technology APC in less than 2 years if sufficient 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.

Currently, in CY 2012, there are three procedures described by HCPCS G-codes 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 1505 (New Technology—Level V ($300-$400)); HCPCS code G0418 (Surgical pathology, gross and microscopic examination for prostate needle saturation biopsy sampling, 41-60 specimens) is assigned to New Technology APC 1506 (New Technology—Level VI ($400-$500)); 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 1508 (New Technology—Level VIII ($600-$700)). These HCPCS codes have been assigned to New Technology APCs since CY 2009.

Analysis of the hospital outpatient data for claims submitted for CY 2011 indicates that prostate saturation biopsy procedures are rarely performed on Medicare beneficiaries. For OPPS claims submitted from CY 2010 through CY 2011, our claims data show no single claim submitted for HCPCS code G0417 in CY 2010 or in CY 2011. Similarly, our claims data did not show any hospital outpatient claims for HCPCS codes G0418 and G0419 from either CY 2010 or CY 2011. Given the continued lack of cost data for these HCPCS codes, we are proposing to reassign these procedures to an APC that is appropriate from a clinical standpoint. Specifically, we are proposing to reassign HCPCS G-codes G0417, G0418, and G0419 to clinical APC 0661 (Level V Pathology), which has a proposed APC cost of approximately $160 for CY 2013. We believe that all three procedures, as described by HCPCS codes G0417, G0418, and G0419, are comparable clinically to other pathology services currently assigned to APC 0661 and likely require similar resources.

Table 18 below lists the HCPCS G-codes and associated status indicators that we are proposing to reassign from New Technology APCs 1505, 1506, and 1508 to APC 0661 for CY 2013.

Table 18—Proposed Reassignment of Procedures Assigned to New Technology APCs for CY 2013

CY 2012 HCPCS CodeCY 2012 Short DescriptorCY 2012 SICY 2012 APCProposed CY 2013 SIProposed CY 2013 APC
G0417Sat biopsy prostate 21-40S1505X0661
G0418Sat biopsy prostate 41-60S1506X0661
G0419Sat biopsy prostate: >60S1508X0661

3. Proposed Payment Adjustment Policy for Radioisotopes Derived From Non-Highly Enriched Uranium Sources

a. Background

Radioisotopes are widely used in modern medical imaging, particularly for cardiac imaging and predominantly for the elderly (Medicare) population. Technetium-99 (Tc-99m), the radioisotope used in the majority of such diagnostic imaging services, is currently produced in legacy reactors outside of the United States using highly enriched uranium (HEU).

The Administration has established an agenda to eliminate domestic reliance on these reactors, and is promoting the conversion of all medical radioisotope production to non-HEU sources. Alternative methods for producing Tc-99m without HEU are technologically and economically viable, and conversion to such production has begun and is expected to be completed within a 5-year time period. We expect this change in the supply source for the radioisotope used for modern medical imaging will introduce new costs into the payment system that are not accounted for in the historical claims data.

Full Cost Recovery, which is routinely considered in CMS reimbursement, is the accounting practice used by producers and suppliers to describe the recovery of all contributing costs. Unlike legacy sources that often benefit from government subsidized multi-function facilities, the cost of these alternative methods will be increased over the cost of medical radioisotopes produced using HEU because hospitals' payments to producers and suppliers will have to cover capital expense (such as, for example, the cost of building new reactors, particle accelerators, or other very long term investments), as well as all other new industry-specific ancillary costs (such as, for example, the cost of long-term storage of radioactive waste). Hospitals that use medical radioisotopes that are produced from non-HEU sources can expect producers and suppliers to pass on to them the full impact of these costs.

In the short term, some hospitals will be able to depend on low cost legacy producers using aging subsidized reactors while other hospitals will be forced to absorb the full cost of non-HEU alternative sources. Over several years, we believe that these cost differentials will promote increased regional shortages and create larger cost differentials and greater cost variations between hospitals. As a result, we believe this change in supply source will create a significant payment inequity among hospitals resulting from factors that are outside of normal market forces.

b. Proposed Payment Policy

We are proposing to exercise our authority to establish “other adjustments as determined to be necessary to ensure equitable payments” under the OPPS in accordance with section 1833(t)(2)(E) of the Act. We do not believe that we can ensure equitable payments to hospitals over the next 4 to 5 years in the absence of an adjustment to account for the significant payment inequities created by factors that will likely arise due to the change in supply source for the radioisotope used commonly in modern medical imaging procedures. We are proposing to provide an adjustment for the marginal cost for radioisotopes produced from non-HEU sources over the costs for radioisotopes produced by HEU sources. We believe such an adjustment would ensure equitable payments in light of the Administration's HEU agenda, market influences, cost differentials, and cost variations that will create significant payment inequities among hospitals.

For CY 2013, we are proposing to make an additional payment of $10, which is an amount based on the best available estimations of the marginal costs associated with non-HEU Tc-99m production as calculated using Full Cost Recovery. We are proposing to establish a new HCPCS code, QXXXX (Tc-99m from non-HEU source, full cost recovery add-on, per dose) to describe the Tc-99m radioisotope produced by non-HEU methods and used in a diagnostic procedure. Hospitals would be able to report this code once per dose along with any diagnostic scan or scans using Tc-99m as long as the Tc-99m doses used can be certified by the hospital as coming from non-HEU sources and have been priced using a Full Cost Recovery accounting methodology. The code would pay hospitals for the additional (marginal) cost of using Tc-99m from a non-HEU source.

Hospitals would not be required to make a separate certification of the non-HEU source on the claim; the inclusion of the proposed new HCPCS QXXXX code on the claim would indicate that the hospital has met the conditions of the service definition as it does for any billed service. However, in the event of an audit, hospitals would be expected to be able to produce documentation that the individual dose delivered to the patient was completely produced from a non-HEU source. We are proposing three ways in which hospitals could accomplish this.

First, the hospital could produce documentation such as invoices or patient dose labels or tracking sheets that indicated that the patient's dose was completely produced from non-HEU sources and priced based on Full Cost Recovery. In this first case, the supplier would be expected to be able to trace a specific dose to a completely non-HEU batch. Current pharmacy recordkeeping is generally able to trace all components of radiopharmaceuticals back to their source production batches. A hospital would not be compliant with the code definition if the documentation indicated the supplier had produced a mixed batch and labeled a fraction of the doses equal to the non-HEU fraction in the batch.

Second, a hospital could produce documentation that the entire batch of Tc-99m doses derives from non-HEU sources for a specified period of time, for example, the time that a single non-HEU based generator is in use. This approach would obviate the need for specific dose tracking from a claims audit perspective, although that information is typically required for other purposes. An attestation from the generator supplier would be sufficient evidence for the hospital, as would invoices that showed that all Tc-99m during a specified period came from inherently non-HEU alternative sources.

Third, if the industry should implement labeling of generators and/or doses with labels attesting to 100 percent non-HEU sources priced at Full Cost Recovery, documentation of labeled isotope usage using either the specific dose approach or the 100 percent hospital usage approach could provide evidence of hospital compliance. The hospital would be required to retain appropriate documentation within the hospital (including pharmacy) records but would not need to keep any specific documentation within the individual medical record. Also, we would consider a dose to be priced for Full Cost Recovery when the supplier could attest that the supply chain adheres to usual industry practices to account for Full Cost Recovery, specifically including the capital cost of sustainable production and the environmental cost of waste management.

To reduce the administrative overhead for hospitals, we are proposing not to require hospitals to separately track additional costs for the non-HEU Tc-99m, but to include the cost of the radioisotope in the cost of the diagnostic radiopharmaceutical as usual, reporting only a token $1 charge for the HCPCS QXXXX code line. We would continue to calculate the total costs of radionuclide scans using claims data, and would periodically recalculate the estimated marginal cost of non-HEU Full Cost Recovery sources using models relying on the best available industry reports and projections, and would adjust the payment for HCPCS QXXXX code accordingly, reducing the payment for the scans by the amount of cost paid through HCPCS QXXXX code payment. We believe this proposal would allow us to continuously compensate for unanticipated changes in Tc-99m cost attributable to new non-HEU supply sources.

D. Proposed OPPS APC-Specific Policies

1. Placement of Amniotic Membrane (APC 0233)

In CY 2011, 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 established 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 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 65778 to APC 0239 (Level II Repair and Plastic Eye Procedures), which had a payment rate of approximately $559, and CPT code 65779 to APC 0255 (Level II Anterior Segment Eye Procedures), which had a payment rate of approximately $519.

In addition, consistent with our longstanding policy for new codes, we assigned these two new CPT codes to interim APCs for CY 2011. Specifically, we assigned 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 the codes were new with an interim APC assignment that were subject to public comment. In accordance with our longstanding policy, our interim APC assignments for each code was based on our understanding of the resources required to furnish the service as defined in the code descriptor and on input from our physicians.

At the Panel's February 28-March 1, 2011 meeting, a presenter requested the reassignment of CPT codes 65778 and 65779 to APC 0244 (Corneal and Amniotic Membrane Transplant), 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 procedures described by CPT codes 65778 and 65779 are very similar to the procedure described by CPT code 65780.

The Panel recommended that CMS reassign the APC assignments for both CPT codes 65778 and 65779. Specifically, the Panel recommended the reassignment of CPT code 65778 from APC 0239 to APC 0233(Level III Anterior Segment Eye Procedures), and the reassignment of CPT code 65779 from APC 0255 to APC 0233. In addition, the Panel recommended that CMS furnish data when data become available for these two codes. We noted at that time that because these codes were effective January 1, 2011, the first available claims data for these codes would be for the CY 2013 OPPS rulemaking cycle.

We accepted the Panel's recommendations. However, in the CY 2012 OPPS/ASC final rule with comment period (76 FR 74247), we indicated that, while we agreed with the Panel's recommendation to reassign CPT codes 65778 and 65779 to APC 0233, we believed that CPT code 65778 should be assigned to a conditionally packaged status indicator of “Q2” to indicate that the procedure would be packaged when it is reported with another procedure that is also assigned to status indicator “T”; but in all other circumstances, the code would be paid separately. Because the procedure described by CPT code 65778 would rarely be provided as a separate, stand-alone service in the HOPD, and because the procedure would almost exclusively be provided in addition to and following another procedure or service, we proposed to reassign CPT code 65778 to a conditionally packaged status indicator of “Q2.” In addition, our medical advisors indicated 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.

At the August 10-11, 2011 Panel Meeting, a presenter urged the Panel to recommend to CMS not to conditionally package CPT code 65778 for CY 2012, and instead, assign it to status indicator “T.” Based on information presented at the meeting, and after further discussion on the issue, the Panel recommended that CMS reassign the status indicator for CPT code 65778 from conditionally packaged “Q2” to status indicator “T.” Several commenters also urged CMS not to finalize its proposal to conditionally package CPT code 65778 by assigning it a status indicator “Q2” and instead adopt the Panel's recommendation to assign status indicator “T.”

After consideration of the Panel's August 2011 recommendation and the public comments that we received to the CY 2012 OPPS/ASC proposed rule, we finalized our proposal and reassigned the status indicator for CPT code 65778 from “T” to “Q2” effective January 1, 2012 (76 FR 74246). Given the clinical characteristics of this procedure, we believed that conditionally packaging CPT code 65778 was appropriate under the OPPS.

For the CY 2013 OPPS update, we are proposing to continue to assign CPT code 65778 to its conditionally packaged status of “Q2.” Similarly, we believe that we should assign CPT code 65779 to a conditionally packaged status of “Q2.” Therefore, for CY 2013, we are proposing to revise the status indicator for CPT code 65779 from status indicator “T” to “Q2” to indicate that the procedure would be packaged when it is reported with another procedure that is also assigned to status indicator “T,” but in all other circumstances, the code would be paid separately. This reassignment would enable hospitals to perform either procedures (CPT code 65778 or 65779) when appropriate, and would not differentiate one procedure from the other because of the status indicator assignment under the OPPS.

As indicated at the February 28-March 1, 2011 Panel meeting, because CPT codes 65778 and 65779 were effective January 1, 2011, the first available claims data for these codes would be in CY 2012 for the CY 2013 OPPS rulemaking. We now have claims data for CPT codes 65778 and 65779, and our data show that both procedures are performed in the HOPD setting. Analysis of the CY 2011 claims data available for this proposed rule, which is based on claims processed from January 1 through December 31, 2011, reveals that the estimated cost for CPT code 65778 is approximately $1,025 based on 33 single claims (out of 130 total claims), and the estimated cost for CPT code 65779 is approximately $2,303 based on 35 single claims (out of 260 total claims). Based on the clinical similarity to other procedures currently assigned to APC 0233, and because there is no violation with the 2 times rule, we believe that we should continue to assign both CPT codes 65778 and 65779 to APC 0233, which has a proposed cost of approximately $1,150. Review of the procedures assigned to APC 0233 shows that the range of the CPT cost for the procedures with significant claims data is between approximately $859 (for CPT code 65400 (Removal of eye lesion)) and approximately $1,397 (for CPT code 66840 (Removal of lens material)).

In summary, for CY 2013, we are proposing to continue to assign CPT code 65778 to its conditionally packaged status of “Q2” and to reassign the status indicator for CPT code 65779 from “T” to “Q2,” similar to CPT code 65778. In addition, we are proposing to continue to assign both CPT codes 65778 and 65779 to APC 0233, which has a proposed cost of approximately $1,150. Both procedures and their CY 2013 proposed APC assignments are displayed in Table 19 below.

Table 19—Proposed APC Assignments for CPT Codes 65778 and 65779 for CY 2013

CY 2012 HCPCS codeCY 2012 short descriptorCY 2012 SICY 2012 APCProposed CY 2013 SIProposed CY 2013 APC
65778Cover eye w/membraneQ20233Q20233
65779Cover eye w/membrane sutureT0233Q20233

2. Proton Beam Therapy (APCs 0664 and 0667)

APC 0664 (Level I Proton Beam Radiation Therapy) includes two procedures, CPT code 77520 (Proton treatment delivery; simple, without compensation) with an estimated cost of approximately $331 (based on 185 single claims of 185 total claims submitted for CY 2011); and CPT code 77522 (Proton treatment delivery; simple, with compensation) with an estimated cost of approximately $1,191 (based on 14,279 single claims of 15,405 total claims submitted for CY 2011). APC 0667 (Level II Proton Beam Radiation Therapy) also includes two procedures, CPT code 77523 (Proton treatment delivery, intermediate) with an estimated cost of approximately $920 (based on 3,009 single claims of 3,202 total claims submitted for CY 2011), and CPT code 77525 (Proton treatment delivery, complex) with an estimated cost of approximately $483 (based on 1,400 single claims of 1,591 total claims submitted for CY 2011). Based on these CY 2011 claims data, the estimated cost of APC 0664 is approximately $1,171, and the estimated cost of APC 0667 is approximately $750.

Because only three providers bill Medicare for these services, their payment rates, which are set annually based on claims data according to the standard OPPS ratesetting methodology, may fluctuate significantly from year to year. For CY 2013, the estimated cost of APC 0664 is approximately the same as its CY 2012 payment rate of $1,184. However, the estimated cost of APC 0667 has decreased substantially, which is largely attributable to cost changes for CPT code 77523. For CY 2013, we are proposing to improve the resource homogeneity within the proton beam APCs by including the services requiring fewer resources in APC 0664 (Level I) and the services requiring greater resources in APC 0667 (Level II). Specifically, we are proposing to reassign CPT code 77522 to APC 0667 and to reassign CPT code 77525 to APC 0664. Under the proposed reassignment, the estimated cost of APC 0664 is $462 and the estimated cost of APC 0667 is $1,138. We are inviting public comments on this proposal.

3. Intraoperative Radiation Therapy (IORT) (APC 0412)

a. Background

The AMA CPT Editorial Panel created three new Category I CPT codes for intraoperative radiation therapy (IORT), effective January 1, 2012: CPT codes 77424 (Intraoperative radiation treatment delivery, x-ray, single treatment session); 77425 (Intraoperative radiation treatment delivery, electrons, single treatment session); and 77469 (Intraoperative radiation treatment management). As with all new CPT codes for CY 2012, these three codes were included in Addendum B to the CY 2012 OPPS/ASC final rule with comment period (available via the CMS Web site), effective on January 1, 2012. In accordance with our standard practice each year, our clinicians review the many CPT code changes that will be effective in the forthcoming year and make decisions regarding status indicators and/or APC assignments based on their understanding of the nature of the services. We are unable to include proposed status indicators and/or APC assignments in the proposed rule for codes that are not announced by the AMA CPT Editorial Panel prior to the issuance of the proposed rule. Therefore, in accordance with our longstanding policy, we include, in the final rule with comment period, interim status indicators and/or APC assignments for all new CPT codes that are announced by the AMA CPT Editorial Panel subsequent to the issuance of the OPPS/ASC proposed rule to enable payment for new services as soon as the codes are effective.

We identified the new codes for IORT for CY 2012 in Addendum B to the CY 2012 OPPS/ASC final rule with comment period as being open to public comment by showing a comment indicator of “NI” and made interim status indicator assignments for each of these new IORT codes, based on our understanding of the clinical nature of the services they describe. Specifically, for CY 2012, we packaged these IORT service codes with the surgical procedures with which they are billed, assigning them interim status indicators of “N” (Items and Services Packaged into APC Rates). We did so based on a policy that was adopted in the CY 2008 OPPS final rule with comment period (72 FR 66610 through 66659) to package services that are typically ancillary and supportive of a principal diagnostic or therapeutic procedure, which would generally include intraoperative services. Because IORT are intraoperative services furnished as a single dose during the time of the related surgical session, we packaged them into the payment for the principal surgical procedures with which they are performed based on claims data used for the CY 2012 OPPS/ASC final rule with comment period.

Subsequent to issuance of the CY 2012 OPPS/ASC final rule with comment period, stakeholders provided comments on the interim status of these IORT service codes for CY 2012, asserting that these services are not ancillary to the surgical procedures, urging us to unpackage these codes, and requesting that we assign them to an APC reflective of the resources used to provide the IORT services. The stakeholders argued that IORT services described by CPT codes 77424 and 77425 are separate, distinct, and independent radiation treatment services from the surgical services to remove a malignant growth. According to the commenters, IORT is performed separately by a radiation oncologist and a medical physicist when there is concern for residual unresected cancer because of narrow margins related to the surgical resection.

b. CY 2013 Proposals for CPT Codes 77424, 77425, and 77469

Based on the comments and information received on the proposed IORT policies contained in the CY 2012 OPPS/ASC final rule with comment period, and after further review and consideration of those comments and the clinical nature of the IORT procedures, we agree that IORT services are not the typical intraoperative services that we package, as they are not integral to or dependent upon the surgical procedure to remove a malignancy that precedes IORT. Therefore, for CY 2013, we are proposing to unpackage CPT codes 77424 and 77425, and assign them to APC 0412, currently entitled “IMRT Treatment Delivery.” IORT treatment services are clinically similar to other radiation treatment forms, such as IMRT treatment, which are assigned to APC 0412. Furthermore, we are proposing to change the title of APC 0412 to “Level III Radiation Therapy” to encompass a greater number of clinically similar radiation treatment modalities. The proposed rule cost of APC 0412 based on CY 2011 claims data is approximately $496. As is our normal procedure for new CPT codes, we will monitor hospitals' costs for furnishing the services described by CPT codes 77424 and 77425.

We believe that CPT code 77469 should receive equal treatment to other radiation management codes, such as CPT code 77431 (Radiation therapy management with complete course of therapy consisting of 1 or 2 fractions only) and CPT code 77432 (Stereotactic radiation treatment management of cranial lesion(s) (complete course of treatment consisting of 1 session)), which are assigned status indicator “B” (Codes that are not recognized by OPPS when submitted on an outpatient hospital Part B bill type (12x and 13x)) and are not paid under the OPPS. Therefore, we are proposing that the appropriate status indicator code assignment for CPT code 77469 be “B” for nonpayable status under the OPPS for CY 2013, a change from its current CY 2012 status indicator assignment of “N” for packaged payment status.

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, which 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 are four device categories eligible for pass-through payment. These device categories are described by HCPCS code C1749 (Endoscope, retrograde imaging/illumination colonoscope device (implantable)), which we made effective for pass-through payment October 1, 2010; HCPCS codes C1830 (Powered bone marrow biopsy needle) and C1840 (Lens, intraocular (telescopic)), which we made effective for pass-through payment October 1, 2011; and HCPCS code C1886 (Catheter, extravascular tissue ablation, any modality (insertable)), which we made effective for pass-through payment January 1, 2012. In the CY 2012 OPPS/ASC final rule with comment period, we finalized the expiration of pass-through payment for C1749, which will expire after December 31, 2012 (76 FR 74278). Therefore, after December 31, 2012, we will package the C1749 device costs into the costs of the procedures with which the devices are reported in the hospital claims data used in OPPS ratesetting.

b. Proposed CY 2013 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 categories C1830 and C1840 were established for pass-through payments on October 1, 2011, 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 2013. Also, device pass-through category C1886 was established for pass-through payments on January 1, 2012, and will have been eligible for pass-through payments for at least 2 years but less than 3 years as of the end of CY 2013. Therefore, we are proposing a pass-through payment expiration date for device categories C1830, C1840, and C1886 of December 31, 2013. Under our proposal, beginning January 1, 2014, device categories C1830, C1840, and C1886 will no longer be eligible for pass-through payments, and their respective device costs would be packaged into the costs of the procedures with which the devices are reported in the claims data.

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

a. Background

Section 1833(t)(6)(D)(ii) of the Act sets the amount of additional pass-through payment for an eligible device as the amount by which the hospital's charges for a device, adjusted to cost (cost of device) exceeds the portion of the otherwise applicable Medicare outpatient department fee schedule amount (APC payment amount) associated with the device. 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) for purposes of estimating the portion of the otherwise applicable APC payment amount associated with the device. For eligible device categories, we deduct 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, from the charges adjusted to cost for the device, as provided by section 1833(t)(6)(D)(ii) of the Act, to determine the eligible device's pass-through payment amount. 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 2012 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/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html. 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).

Beginning in CY 2010, we include packaged costs related to implantable biologicals in the device offset calculations in accordance with our policy that the pass-through evaluation process and 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 (74 FR 60476).

b. Proposed CY 2013 Policy

For CY 2013, we are proposing to continue our 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. We are proposing to continue our policy, for CY 2013, 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 are proposing to 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 2013, 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 2013 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.

In addition, we are proposing to update, on the CMS Web site at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html, the list of all procedural APCs with the final CY 2013 portions (once available at the time of final rulemaking) 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 2013 device pass-through payment applications and by CMS in reviewing those applications.

3. Proposed Clarification of Existing Device Category Criterion

a. Background

Section 1833(t)(6)(B)(ii)(IV) of the Act directs the Secretary to establish a new device category for pass-through payment for which none of the pass-through categories in effect (or that were previously in effect) is appropriate. Commenters who responded to our various proposed rules, as well as applicants for new device categories, had expressed concern that some of our existing and previously in effect device category descriptors were overly broad, and that the device category descriptors as they are currently written may preclude some new technologies from qualifying for establishment of a new device category for pass-through payment (70 FR 68630 through 68631). As a result of these comments, we finalized a policy, effective January 1, 2006, to create an additional category for devices that meet all of the criteria required to establish a new category for pass-through payment in instances where we believe that an existing or previously in effect category descriptor does not appropriately describe the new device. Accordingly, effective January 1, 2006, we revised § 419.66(c)(1) of the regulations to reflect this policy change. In order to determine if a new device is appropriately described by any existing or previously in effect category of devices, we apply two tests based upon our evaluation of information provided to us in the device category application. First, an applicant for a new device category must show that its device is not similar to devices (including related predicate devices) whose costs are reflected in the currently available OPPS claims data in the most recent OPPS update. Second, an applicant must demonstrate that utilization of its device provides a substantial clinical improvement for Medicare beneficiaries compared with currently available treatments, including procedures utilizing devices in any existing or previously in effect device categories. We consider a new device that meets both of these tests not to be appropriately described by any existing or previously in effect pass-through device categories (70 FR 68630 through 68631).

b. Proposed Clarification of CY 2013 Policy

For CY 2013, we are proposing to clarify the test that requires an applicant for a new device category to show that its device is not similar to devices (including related predicate devices) whose costs are reflected in the currently available OPPS claims data in the most recent OPPS update. We are clarifying that this test includes showing that a new device is not similar to predicate devices that once belonged in any existing or previously in effect pass-through device categories. Under this test, a candidate device may not be considered to be appropriately described by any existing or previously in effect pass-through device categories if the applicant adequately demonstrates that the candidate device is not similar to devices (including related predicate devices) that belong or once belonged to an existing or any previously in effect device category, and that the candidate device is not similar to devices whose costs are reflected in the OPPS claims data in the most recent OPPS update. The substantial clinical improvement criterion, which also must be satisfied in every case, as indicated in § 419.66(c)(2) of our regulations, is separate from the criterion that a candidate device not be similar to devices in any existing or previously in effect pass-through categories. We are inviting public comments regarding this proposed clarification.

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

1. Background

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 cost or with full credit, the hospital is instructed to report a token device charge of less than $1.01. In cases in which the device being inserted is an upgrade (either of the same type of device or to a different type of device) with a full credit for the device being replaced, the hospital is instructed to report as the device charge the difference between its usual charge for the device being implanted and its usual charge for the device for which it received full credit. In CY 2008, we expanded this payment adjustment policy to include cases in which hospitals receive partial credit of 50 percent or more of the cost of a specified device. Hospitals are instructed to append the “FC” modifier to the procedure code that reports the service provided to furnish the device when they receive a partial credit of 50 percent or more of the cost of the new device. We 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 2013, 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. (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.)

For CY 2013, 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. 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 2013 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 2012 continue to meet the criteria for CY 2013, and to determine whether other APCs to which the policy did not apply in CY 2012 would meet the criteria for CY 2013. Based on the CY 2011 claims data available for this proposed rule, we are not proposing any changes to the APCs and devices to which this policy applies.

Table 20 below lists the proposed APCs to which the payment adjustment policy for no cost/full credit and partial credit devices would apply in CY 2013 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 already 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 21 below lists the proposed devices to which the payment adjustment policy for no cost/full credit and partial credit devices would apply in CY 2013. 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 2013, consistent with the three criteria discussed earlier in this section, based on the final CY 2011 claims data available for the CY 2013 OPPS/ASC final rule with comment period.

We are proposing, for CY 2013, that OPPS payments for implantation procedures to which the “FB” modifier is appended are reduced by 100 percent of the device offset for no cost/full credit cases when both a device code listed in Table 21 below is present on the claim, and the procedure code maps to an APC listed in Table 20 below. We also are 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 21 is present on the claim and the procedure code maps to an APC listed in Table 20. 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.

Table 20—Proposed APCs to Which the No Cost/Full Credit and Partial Credit Device Adjustment Policy Would Apply in CY 2013

Proposed CY 2013 APCProposed CY 2013 APC TitleProposed CY 2013 device offset percentage for no cost/ full credit caseProposed CY 2013 device offset percentage for partial credit case
0039Level I Implantation of Neurostimulator Generator8643
0040Level I Implantation/Revision/Replacement of Neurostimulator Electrodes5528
0061Level II Implantation/Revision/Replacement of Neurostimulator Electrodes6633
0089Insertion/Replacement of Permanent Pacemaker and Electrodes7035
0090Insertion/Replacement of Pacemaker Pulse Generator7135
0106Insertion/Replacement of Pacemaker Leads and/or Electrodes4824
0107Insertion of Cardioverter-Defibrillator8342
0108Insertion/Replacement/Repair of AICD Leads, Generator, and Pacing Electrodes8442
0227Implantation of Drug Infusion Device8241
0259Level VII ENT Procedures8442
0315Level II Implantation of Neurostimulator Generator8844
0318Implantation of Cranial Neurostimulator Pulse Generator and Electrode8744
0385Level I Prosthetic Urological Procedures6331
0386Level II Prosthetic Urological Procedures7035
0425Level II Arthroplasty or Implantation with Prosthesis5829
0648Level IV Breast Surgery5025
0654Insertion/Replacement of a permanent dual chamber pacemaker7437
0655Insertion/Replacement/Conversion of a Permanent Dual Chamber Pacemaker or Pacing Electrode7337
0680Insertion of Patient Activated Event Recorders7437

Table 21—Proposed Devices to Which the No Cost/Full Credit and Partial Credit Device Adjustment Policy Would Apply in CY 2013

Proposed CY 2013 device HCPCS CodeProposed CY 2013 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 2013 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 available via the Internet on the CMS Web site.

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 schedule 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. However, we note that the Part B drug CAP program has been postponed since CY 2009, and such a program is not proposed to be reinstated for CY 2013.

This methodology for determining the pass-through payment amount is set forth in regulations at 42 CFR 419.64. These regulations 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.gov/Medicare/Medicare-Fee-for-Service-Part-B-Drugs/McrPartBDrugAvgSalesPrice/index.html.

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). 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. For CY 2012, we estimated the OPPS pass-through payment for drugs and biologicals to be $19 million. Our proposed OPPS pass-through payment estimate for drugs and biologicals in CY 2013 is $32 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.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/passthrough_payment.html.

2. Proposed Drugs and Biologicals With Expiring Pass-Through Status in CY 2012

We are proposing that the pass-through status of 23 drugs and biologicals would expire on December 31, 2012, as listed in Table 22 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, 2012. These drugs and biologicals were approved for pass-through status on or before January 1, 2011. 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 and contrast agents, 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), 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+6 percent for CY 2013, as discussed further in section V.B.3. of this proposed rule). Section II.A.3.d. of this proposed rule discusses the packaging of all nonpass-through contrast agents and diagnostic radiopharmaceuticals.

Table 22—Proposed Drugs and Biologicals for Which Pass-Through Status Will Expire December 31, 2012

Proposed CY 2013 HCPCS CodeProposed CY 2013 long descriptorProposed CY 2013 SIProposed CY 2013 APC
C9275Injection, hexaminolevulinate hydrochloride, 100 mg, per study doseNN/A
C9279Injection, ibuprofen, 100 mgNN/A
C9367Skin substitute, Endoform Dermal Template, per square centimeterK9367
J0221Injection, alglucosidase alfa, (lumizyme), 10 mgK1413
J0588Injection, incobotulinumtoxin A, 1 unitK9278
J0597Injection, C-1 esterase inhibitor (human), Berinert, 10 unitsK9269
J0775Injection, collagenase clostridium histolyticum, 0.01 mgK1340
J0840Injection, crotalidae polyvalent immune fab (ovine), up to 1 gramK9274
J0897Injection, denosumab, 1 mgK9272
J1290Injection, ecallantide, 1 mgK9263
J1557Injection, immune globulin (Gammaplex), intravenous, non-lyophilized (e.g. liquid), 500 mgK9270
J3095Injection, telavancin, 10 mgK9258
J3262Injection, tocilizumab, 1 mgK9264
J3357Injection, ustekinumab, 1 mgK9261
J3385Injection, velaglucerase alfa, 100 unitsK9271
J7183Injection, von Willebrand factor complex (human), Wilate, per 100 IU VWF: RCONN/A
J7335Capsaicin 8% patch, per 10 square centimetersK9268
J8562Fludarabine phosphate, oral, 10 mgK
J9043Injection, cabazitaxel, 1 mgK1339
J9302Injection, ofatumumab, 10 mgK9260
J9307Injection, pralatrexate, 1 mgK9259
J9315Injection, romidepsin, 1 mgK9265
Q2043Sipuleucel-t, minimum of 50 million autologous cd54+ cells activated with pap-gm-csf, including leukapheresis and all other preparatory procedures, per infusionK9273

3. Proposed Drugs, Biologicals, and Radiopharmaceuticals With New or Continuing Pass-Through Status in CY 2013

We are proposing to continue pass-through status in CY 2013 for 21 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, 2012. These drugs and biologicals, which were approved for pass-through status between April 1, 2011 and July 1, 2012, are listed in Table 23 below. The APCs and HCPCS codes for these drugs and biologicals approved for pass-through status through April 1, 2012 are assigned status indicator “G” in Addenda A and B of this proposed rule and available via the Internet on the CMS Web site.

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 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 2013, the amount that drugs and biologicals receive under section 1842(o) of the Act.

Thus, for CY 2013, 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 2013. We are proposing that a $0.00 pass-through payment amount would be paid for most pass-through drugs and biologicals under the CY 2013 OPPS because the difference between the amount authorized under section 1842(o) of the Act, which is ASP+6 percent, and the portion of the otherwise applicable OPD fee schedule that the Secretary determines is appropriate, proposed at ASP+6 percent, is $0.

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 procedure. Therefore, we are proposing that the difference between ASP+6 percent and the “policy-packaged” drug APC offset amount for the associated clinical APC in which the drug or biological is utilized would be the CY 2013 pass-through payment amount for these policy-packaged products.

In addition, we are proposing to continue to update pass-through payment rates on a quarterly basis on the CMS Web site during CY 2013 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).

In CY 2013, as is consistent with our CY 2012 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 2013, 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 II.A.3.d. of this proposed rule, over the last 5 years, we implemented a policy whereby payment for all nonpass-through diagnostic radiopharmaceuticals and contrast agents, 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 2013. As stated earlier, pass-through payment is the difference between the amount authorized under section 1842(o) of the Act 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 is 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 2012, 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 2013. Similarly, we are proposing that the associated copayment amount for pass-through anesthesia drugs that would otherwise be packaged if the item did not have pass-through status would be zero for CY 2013. As discussed in further detail in section II.3.c.2. of this proposed rule, we are clarifying that our general policy is to package drugs used for anesthesia, and that those anesthesia drugs with pass-through status will be packaged upon the expiration of pass-through status.

The separate OPPS payment to a hospital for the pass-through diagnostic radiopharmaceutical, contrast agent, or anesthesia drug 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 this proposed rule (which are available via the Internet on the CMS Web site).

The 21 drugs and biologicals that we are proposing to continue on pass-through status for CY 2013 or that have been granted pass-through status as of July 2012 are displayed in Table 23.

Table 23—Proposed Drugs and Biologicals With Pass-Through Status in CY 2013

Proposed CY 2013 HCPCS codeCY 2013 Long descriptorProposed CY 2013 SIProposed CY 2013 APC
A9584Iodine I-123 ioflupane, diagnostic, per study dose, up to 5 millicuriesG9406
C9285Lidocaine 70 mg/tetracaine 70 mg, per patchG9285
C9286Injection, belatacept, 1 mgG9286
C9287Injection, brentuximab vedotin, 1 mgG9287
C9288Injection, centruroides (scorpion) immune f(ab)2 (equine), 1 vialG9288
C9289Injection, asparaginase Erwinia chrysanthemi, 1,000 international units (I.U.)G9289
C9290Injection, bupivicaine liposome, 1 mgG9290
C9366EpiFix, per square centimeterG9366
C9368 **Grafix core, per square centimeterG9368
C9369 **Grafix prime, per square centimeterG9369
J0131Injection, acetaminophen, 10 mgG9283
J0490Injection, belimumab, 10 mgG1353
J0638Injection, canakinumab, 1mgG1311
J0712Injection, ceftaroline fosamil, 10 mgG9282
J1572Injection, immune globulin, (flebogamma/flebogamma dif), intravenous, non-lyophilized (e.g. liquid), 500 mgG0947
J2507Injection, pegloticase, 1 mgG9281
J7180Injection, factor xiii (antihemophilic factor, human), 1 i.uG1416
J9179Injection, eribulin mesylate, 0.1 mgG1426
J9228Injection, ipilimumab, 10 mgG9284
Q2046 *Injection, aflibercept, 1 mgG1420
Q4124Oasis Ultra Tri-Layer matrix, per square centimeterG9365
* HCPCS code Q2046 replaced HCPCS code C9291 effective July 1, 2012. Because the payment rate associated with this code effective July 1, 2012 is not available to us in time for incorporation into the Addenda of this proposed rule, the Level II HCPCS codes and the Category III CPT codes implemented through the July 2012 OPPS quarterly update CR could not be included in Addendum B to this proposed rule.
** Because the payment rates associated with these codes effective July 1, 2012 are not available to us in time for incorporation into the Addenda of this proposed rule, the Level II HCPCS codes and the Category III CPT codes implemented through the July 2012 OPPS quarterly update CR could not be included in Addendum B to this proposed rule.

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 2013, we are proposing to continue to package payment for all nonpass-through diagnostic radiopharmaceuticals and contrast agents, as discussed in section II.A.3.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 and the otherwise applicable OPD fee schedule amount. There is currently one radiopharmaceutical with pass-through status under the OPPS, HCPCS code A9584 (Iodine I-123 ioflupane, diagnostic, per study dose, up to 5 millicuries). This product, which is presently referred to using HCPCS code A9584, was granted pass-through status using HCPCS code C9406 beginning July 1, 2011, and we are proposing that it continue receiving pass-through status in CY 2013. 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 use the “policy-packaged” drug offset fraction for APCs containing nuclear medicine procedures, calculated as 1 minus the following: 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/Medicare/Coding/OutpatientCodeEdit/index.html.

For CY 2013 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 24 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 2012, we finalized a policy to apply the diagnostic radiopharmaceutical offset policy to payment for pass-through diagnostic radiopharmaceuticals, as described above. For CY 2013, we are proposing to continue to apply the diagnostic radiopharmaceutical offset policy to payment for pass-through diagnostic radiopharmaceuticals.

Table 24 below displays the proposed APCs to which nuclear medicine procedures would be assigned in CY 2013 and for which we expect that an APC offset could be applicable in the case of diagnostic radiopharmaceuticals with pass-through status.

Table 24—Proposed APCs to Which Nuclear Medicine Procedures Would Be Assigned for CY 2013

Proposed CY 2013 APCProposed CY 2013 APC title
0308Positron Emission Tomography (PET) Imaging.
0377Level II Cardiac Imaging.
0378Level II Pulmonary Imaging.
0389Level I Non-imaging Nuclear Medicine.
0390Level I Endocrine Imaging.
0391Level II Endocrine Imaging.
0392Level II Non-imaging Nuclear Medicine.
0393Hematologic Processing & Studies.
0394Hepatobiliary Imaging.
0395GI Tract Imaging.
0396Bone Imaging.
0397Vascular Imaging.
0398Level I Cardiac Imaging.
0400Hematopoietic Imaging.
0401Level I Pulmonary Imaging.
0402Level II Nervous System Imaging.
0403Level I Nervous System Imaging.
0404Renal and Genitourinary Studies.
0406Level I Tumor/Infection Imaging.
0408Level III Tumor/Infection Imaging.
0414Level II Tumor/Infection Imaging.

c. Proposed Payment Offset Policy for Contrast Agents

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 and the otherwise applicable OPD fee schedule amount. There currently are no contrast agents with pass-through status under the OPPS. As described 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.

Although there are no contrast agents with pass-through status, we believe that a payment offset is necessary in the event that a new contrast agent is approved for pass-through status during CY 2013, in order to provide an appropriate transitional pass-through payment for them 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 2013 to deduct from the payment for new pass-through contrast agents that are approved for pass-through status as a drug or biological during CY 2013, 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 2013, as we did in CY 2012, 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 2013 to recognize that when a contrast agent with pass-through status is billed with any procedural APC listed in Table 25 of this proposed rule, 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/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html a file that contains the APC offset amounts that will be used for that year for purposes of both evaluating cost significance for candidate pass-through device categories and drugs and biologicals, including contrast agents, and establishing any appropriate APC offset amounts. Specifically, the file will continue to provide the amounts and percentages of APC payment associated with packaged implantable devices, “policy-packaged” drugs, and “threshold-packaged” drugs and biologicals for every OPPS clinical APC.

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 24 above and these APCs are displayed in Table 25 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 2013, 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 25, 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 25—Proposed APCs to Which a Contrast Agent Offset May Be Applicable for CY 2013

Proposed CY 2013 APCProposed CY 2013 APC title
0080Diagnostic Cardiac Catheterization.
0082Coronary or Non-Coronary Atherectomy.
0083Coronary Angioplasty, Valvuloplasty, and Level I Endovascular Revascularization
0093Vascular Reconstruction/Fistula Repair without Device.
0104Transcathether Placement of Intracoronary Stents.
0128Echocardiogram with Contrast.
0152Level I Percutaneous Abdominal and Biliary Procedures.
0229Level II Endovascular Revascularization of the Lower Extremity.
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.
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 2012 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.

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; for CY 2011, we set the packaging threshold at $70; and for CY 2012, we set the packaging threshold at $75.

Following the CY 2007 methodology, for this CY 2013 proposed rule, we used the most recently available 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 2013 and rounded the resulting dollar amount ($81.59) 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 2013; rather, this change in terminology reflects a change to the BLS naming convention for this series.) We refer below to this series generally as the PPI for Prescription Drugs.

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 2013 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 the proposed CY 2013 packaging status for all nonpass-through drugs and biologicals that are not policy packaged for this proposed rule, we calculated on a HCPCS code-specific basis the per day cost of all drugs, nonimplantable biologicals, and therapeutic radiopharmaceuticals (collectively called “threshold-packaged” drugs) that had a HCPCS code in CY 2011 and were paid (via packaged or separate payment) under the OPPS. We used data from CY 2011 claims processed before January 1, 2012 for this calculation. However, we did not perform this calculation for those drugs and biologicals with multiple HCPCS codes that include different dosages as described in section V.B.2.c. of this proposed rule or for diagnostic radiopharmaceuticals, contrast agents, and implantable biologicals that we are proposing to continue to package in CY 2013, as discussed in section V.B.2.d. of this proposed rule.

In order to calculate the per day costs for drugs, nonimplantable biologicals, and therapeutic radiopharmaceuticals to determine their proposed packaging status in CY 2013, 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). For each drug and nonimplantable biological HCPCS code, we used an estimated payment rate of ASP+6 percent (which is the payment rate we are proposing for separately payable drugs and nonimplantable biologicals for CY 2013, as discussed in more detail in section V.B.3.b. of this proposed rule) to calculate the CY 2013 proposed rule per day costs. We used the manufacturer submitted ASP data from the fourth quarter of CY 2011 (data that were used for payment purposes in the physician's office setting, effective April 1, 2012) to determine the proposed rule per day cost.

As is our standard methodology, for CY 2013 we are proposing to use payment rates based on the ASP data from the fourth quarter of CY 2011 for budget neutrality estimates, packaging determinations, impact analyses, and completion of Addenda A and B to this proposed rule (which are available via the Internet on the CMS Web site) because these are the most recent data available for use at the time of development of this proposed rule. These data were also the bases for drug payments in the physician's office setting, effective April 1, 2012. 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 2011 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 identify 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 2011 HCPCS codes that were reported to the CY 2012 HCPCS codes that we display in Addendum B of this proposed rule (which is available via the Internet on the CMS Web site) for payment in CY 2013.

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 OPPS/ASC 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 with comment period 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 2013 OPPS/ASC final rule with comment period, we are proposing to use ASP data from the first quarter of CY 2012, 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, 2012, along with updated hospital claims data from CY 2011. We note that we also are proposing to use these data for budget neutrality estimates and impact analyses for the CY 2013 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 2012. These data 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, 2012. These physician's office payment rates would then be updated in the January 2013 OPPS update, based on the most recent ASP data to be used for physician's office and OPPS payment as of January 1, 2013. 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 2011 claims data and updated cost report information available for the CY 2013 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 2013 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 cost fluctuates relative to the proposed CY 2013 OPPS drug packaging threshold and the drug's payment status (packaged or separately payable) in CY 2012. Specifically, for CY 2013, consistent with our historical practice, 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 based on the updated drug packaging threshold and on the final updated data:

  • HCPCS codes for drugs and nonimplantable biologicals that were paid separately in CY 2012 and that are proposed for separate payment in CY 2013, and that then have per day costs equal to or less than $80, based on the updated ASPs and hospital claims data used for this CY 2013 proposed rule, would continue to receive separate payment in CY 2013.
  • HCPCS codes for drugs and nonimplantable biologicals that were packaged in CY 2012 and that are proposed for separate payment in CY 2013, and that then have per day costs equal to or less than $80, based on the updated ASPs and hospital claims data used for this CY 2013 proposed rule, would remain packaged in CY 2013.
  • HCPCS codes for drugs and nonimplantable biologicals for which we are proposing packaged payment in CY 2013 but then have per day costs greater than $80, based on the updated ASPs and hospital claims data used for this CY 2013 proposed rule, would receive separate payment in CY 2013.

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 included 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 2013, 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 drug-specific basis, rather than a HCPCS code-specific basis, for those HCPCS codes that describe the same drug or biological but different dosages in CY 2013.

For CY 2013, 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 2011 claims data and our pricing information at ASP+6 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. HCPCS codes J3472 (Injection, hyaluronidase, ovine, preservative free, per 1000 usp units), Q0171 (Chlorpromazine 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 regimen), Q0172 (Chlorpromazine hydrochloride, 25 mg, oral, FDA approved prescription anti-emetic, for use as a complete therapeutic substitute for an IV anti-emetic at the time of chemotherapy treatment, not to exceed a 48-hour dosage regimen), Q0175 (Perphenazine, 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 regimen), Q0176 (Perphenazine, 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 regimen), Q0177 (Hydroxyzine 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 regimen), and Q0178 (Hydroxyzine pamoate, 50 mg, oral, FDA approved prescription anti-emetic, for use as a complete therapeutic substitute for an IV anti-emetic at the time of chemotherapy treatment, not to exceed a 48-hour dosage regimen) did not have pricing information available for the ASP methodology and, as is our current policy for determining the packaging status of other drugs, we used the mean unit cost available from the fourth quarter CY 2011 claims data to make the packaging determinations for these drugs. For all other drugs and biologicals that have HCPCS codes describing different dosages, we then multiplied the weighted average ASP+6 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 26 below.

Table 26—Proposed HCPCS Codes to Which the CY 2013 Drug-Specific Packaging Determination Methodology Would Apply

Proposed CY 2013 HCPCS codeProposed CY 2013 long descriptorProposed CY 2013 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 ccN
J1560Injection, gamma globulin, intramuscular over 10 ccN
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 dosage regimenN
Q0165Prochlorperazine maleate, 10 mg, oral, FDA approved prescription anti-emetic, for use as a complete therapeutic substitute for an IV anti-emetic at the time of chemotherapy treatment, not to exceed a 48-hour dosage regimenN
Q0167Dronabinol, 2.5 mg, oral, FDA approved prescription anti-emetic, for use as a complete therapeutic substitute for an IV anti-emetic at the time of chemotherapy treatment, not to exceed a 48-hour dosage regimenN
Q0168Dronabinol, 5 mg, oral, FDA approved prescription anti-emetic, for use as a complete therapeutic substitute for an IV anti-emetic at the time of chemotherapy treatment, not to exceed a 48-hour dosage regimenN
Q0169Promethazine hydrochloride, 12.5 mg, oral, FDA approved prescription anti-emetic, for use as a complete therapeutic substitute for an IV 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
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 chemotherapy treatment, not to exceed a 48-hour dosage regimenN
Q0175Perphenazine, 4 mg, oral, FDA approved prescription anti-emetic, for use as a complete therapeutic substitute for an IV anti-emetic at the time of chemotherapy treatment, not to exceed a 48-hour dosage regimenN
Q0176Perphenazine, 8 mg, oral, FDA approved prescription anti-emetic, for use as a complete therapeutic substitute for an IV anti-emetic at the time of chemotherapy treatment, not to exceed a 48-hour dosage regimenN
Q0177Hydroxyzine pamoate, 25 mg, oral, FDA approved prescription anti-emetic, for use as a complete therapeutic substitute for an IV anti-emetic at the time of chemotherapy treatment, not to exceed a 48-hour dosage regimenN
Q0178Hydroxyzine pamoate, 50 mg, oral, FDA approved prescription anti-emetic, for use as a complete therapeutic substitute for an IV anti-emetic at the time of chemotherapy treatment, not to exceed a 48-hour dosage regimenN

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

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

Section 1833(t)(14) of the Act defines certain separately payable radiopharmaceuticals, drugs, and biologicals and mandates specific payments for these items. Under section 1833(t)(14)(B)(i) of the Act, a “specified covered outpatient drug” is a covered outpatient drug, as defined in section 1927(k)(2) of the Act, for which a separate APC has been established and that either is a radiopharmaceutical agent or is a drug or biological for which payment was made on a pass-through basis on or before December 31, 2002.

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

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

Section 1833(t)(14)(A)(iii) of the Act requires that payment for SCODs in CY 2006 and subsequent years be equal to the average acquisition cost for the drug for that year as determined by the Secretary, subject to any adjustment for overhead costs and taking into account the hospital acquisition cost survey data collected by the Government Accountability Office (GAO) in CYs 2004 and 2005, and later periodic surveys conducted by the Secretary as set forth in the statute. If hospital acquisition cost data are not available, the law requires that payment be equal to payment rates established under the methodology described in section 1842(o), section 1847A, or section 1847B of the Act, as calculated and adjusted by the Secretary as necessary. Most physician Part B drugs are paid at ASP+6 percent pursuant to section 1842(o) and section 1847A of the Act.

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

It has been our longstanding policy to treat all separately payable drugs and biologicals, which includes SCODs, and drugs and biological that are not SCODs, the same. Therefore, we apply the payment methodology in section 1833(t)(14)(A)(iii)(I) of the Act to SCODs, as required by statute, but we also apply it to separately payable drugs and biologicals that are not SCODs, which is a policy choice rather than a statutory requirement. Later in the discussion of our proposed policy for CY 2013, we are proposing to apply section 1833(t)(14)(A)(iii)(II) of the Act to all separately payable drugs and biologicals. Although we do not distinguish SCODs in that discussion, we note that we are required to apply section 1833(t)(14)(A)(iii)(II) of the Act to SCODs, but we are choosing to apply it to other separately payable drugs and biologicals, consistent with our history of using the same payment methodology for all separately payable drugs and biologicals.

In the CY 2006 OPPS proposed rule (70 FR 42728 through 42731), we discussed the June 2005 report by MedPAC regarding pharmacy overhead costs in HOPDs and summarized the findings of that study. In response to the MedPAC findings, in the CY 2006 OPPS proposed rule (70 FR 42729), we discussed our belief that, because of the varied handling resources required to prepare different forms of drugs, it would be impossible to exclusively and appropriately assign a drug to a certain overhead category that would apply to all hospital outpatient uses of the drug. Therefore, our CY 2006 OPPS proposal included a proposal to establish three distinct Level II HCPCS C-codes and three corresponding APCs for drug handling categories to differentiate overhead costs for drugs and biologicals (70 FR 42730). We also proposed: (1) To combine several overhead categories recommended by MedPAC; (2) to establish three drug handling categories, as we believed that larger groups would minimize the number of drugs that may fit into more than one category and would lessen any undesirable payment policy incentives to utilize particular forms of drugs or specific preparation methods; (3) to collect hospital charges for these HCPCS C-codes for 2 years; and (4) to ultimately base payment for the corresponding drug handling APCs on CY 2006 claims data available for the CY 2008 OPPS.

In the CY 2006 OPPS final rule with comment period (70 FR 68659 through 68665), we discussed the public comments we received on our proposal regarding pharmacy overhead. The overwhelming majority of commenters did not support our proposal regarding pharmacy overhead and urged us not to finalize this policy, as it would be administratively burdensome for hospitals to establish charges for HCPCS codes for pharmacy overhead and to report them. Therefore, we did not finalize this proposal for CY 2006. Instead, we established payment for separately payable drugs and biologicals at ASP+6 percent, which we calculated by comparing the estimated aggregate cost of separately payable drugs and biologicals in our claims data to the estimated aggregate ASP dollars for separately payable drugs and biologicals, using the ASP as a proxy for average acquisition cost (70 FR 68642). Hereinafter, we refer to this methodology as our standard drug payment methodology. We concluded that payment for drugs and biologicals and pharmacy overhead at a combined ASP+6 percent rate would serve as an acceptable proxy for the combined acquisition and overhead costs of each of these products.

In the CY 2007 OPPS/ASC final rule with comment period (71 FR 68091), we finalized our proposed policy to provide a single payment of ASP+6 percent for the hospital's acquisition cost for the drug or biological and all associated pharmacy overhead and handling costs. The ASP+6 percent rate that we finalized was higher than the equivalent average ASP-based amount calculated from claims of ASP+4 percent according to our standard drug payment methodology, but we adopted payment at ASP+6 percent for stability while we continued to examine the issue of the costs of pharmacy overhead in the HOPD and awaited the accumulation of CY 2006 data as discussed in the prior year's rule.

In the CY 2008 OPPS/ASC proposed rule (72 FR 42735), in response to ongoing discussions with interested parties, we proposed to continue our methodology of providing a combined payment rate for drug and biological acquisition and pharmacy overhead costs while continuing our efforts to improve the available data. We also proposed to instruct hospitals to remove the pharmacy overhead charge for both packaged and separately payable drugs and biologicals from the charge for the drug or biological and report the pharmacy overhead charge on an uncoded revenue code line on the claim. We believed that this would provide us with an avenue for collecting pharmacy handling cost data specific to drugs in order to package the overhead costs of these items into the associated procedures, most likely drug administration services. Similar to the public response to our CY 2006 pharmacy overhead proposal, the overwhelming majority of commenters did not support our CY 2008 proposal and urged us to not finalize this policy (72 FR 66761). At its September 2007 meeting, the APC Panel recommended that hospitals not be required to separately report charges for pharmacy overhead and handling and that payment for overhead be included as part of drug payment. The APC Panel also recommended that CMS continue to evaluate alternative methods to standardize the capture of pharmacy overhead costs in a manner that is simple to implement at the organizational level (72 FR 66761). Because of concerns expressed by the APC Panel and public commenters, we did not finalize the proposal to instruct hospitals to separately report pharmacy overhead charges for CY 2008. Instead, in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66763), we finalized a policy of providing payment for separately payable drugs and biologicals and their pharmacy overhead at ASP+5 percent as a transition from their CY 2007 payment of ASP+6 percent to payment based on the equivalent average ASP-based payment rate calculated from hospital claims according to our standard drug payment methodology, which was ASP+3 percent for the CY 2008 OPPS/ASC final rule with comment period. Hospitals continued to include charges for pharmacy overhead costs in the line-item charges for the associated drugs reported on claims.

For CY 2009, we proposed to pay separately payable drugs and biologicals at ASP+4 percent, including both SCODs and other drugs without CY 2009 OPPS pass-through status, based on our standard drug payment methodology. We also continued to explore mechanisms to improve the available data. We proposed to split the “Drugs Charged to Patients” cost center into two cost centers: One for drugs with high pharmacy overhead costs and one for drugs with low pharmacy overhead costs (73 FR 41492). We noted that we expected that CCRs from the proposed new cost centers would be available in 2 to 3 years to refine OPPS drug cost estimates by accounting for differential hospital markup practices for drugs with high and low overhead costs. After consideration of the public comments received and the APC Panel recommendations, we finalized a CY 2009 policy (73 FR 68659) to provide payment for separately payable nonpass-through drugs and biologicals based on costs calculated from hospital claims at a 1-year transitional rate of ASP+4 percent, in the context of an equivalent average ASP-based payment rate of ASP+2 percent calculated according to our standard drug payment methodology from the final rule claims data and cost report data. We did not finalize our proposal to split the single standard “Drugs Charged to Patients” cost center into two cost centers largely due to concerns raised by hospitals about the associated administrative burden. Instead, we indicated in the CY 2009 OPPS/ASC final rule with comment period (73 FR 68659) that we would continue to explore other potential approaches to improve our drug cost estimation methodology, thereby increasing payment accuracy for separately payable drugs and biologicals.

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

In the CY 2010 OPPS/ASC proposed rule (74 FR 35332), we acknowledged the limitations of our data and our availability to find a method to improve that data in a way that did not impose unacceptable administrative burdens on providers. Accepting that charge compression was a reasonable but unverifiable supposition, we proposed to redistribute between one-third and one-half of the estimated overhead cost associated with coded packaged drugs and biologicals with an ASP, which resulted in our proposal to pay for the acquisition and pharmacy overhead costs of separately payable drugs and biologicals that did not have pass-through payment status at ASP+4 percent. We calculated estimated overhead cost for coded packaged drugs and biologicals by determining the difference between the aggregate claims cost for coded packaged drugs and biologicals with an ASP and the ASP dollars (ASP multiplied by the drug's or biological's units in the claims data) for those same coded drugs and biologicals; this difference was our estimated overhead cost for coded packaged drugs and biologicals. In our rationale described in the CY 2010 OPPS/ASC proposed rule (74 FR 35326 through 35333), we stated that we believed that approximately $150 million of the estimated $395 million total in pharmacy overhead cost, specifically between one-third and one-half of that cost, included in our claims data for coded packaged drugs and biologicals with reported ASP data should be attributed to separately payable drugs and biologicals and that the $150 million serves as the adjustment for the pharmacy overhead costs of separately payable drugs and biologicals. As a result, we also proposed to reduce the costs of coded drugs and biologicals that are packaged into payment for procedural APCs to offset the $150 million adjustment to payment for separately payable drugs and biologicals. In addition, we proposed that any redistribution of pharmacy overhead cost that may arise from the CY 2010 final rule data would occur only from some drugs and biologicals to other drugs and biologicals, thereby maintaining the estimated total cost of drugs and biologicals that we calculate based on the charges and costs reported by hospitals on claims and cost reports. As a result of this approach, no redistribution of cost would occur from other services to drugs and biologicals or vice versa.

While we had no way of assessing whether this current distribution of overhead cost to coded packaged drugs and biologicals with an ASP was appropriate, we acknowledged that the established method of converting billed charges to costs had the potential to “compress” the calculated costs to some degree. Further, we recognized that the attribution of pharmacy overhead costs to packaged or separately payable drugs and biologicals through our standard drug payment methodology of a combined payment for acquisition and pharmacy overhead costs depends, in part, on the treatment of all drugs and biologicals each year under our annual drug packaging threshold. Changes to the packaging threshold may result in changes to payment for the overhead cost of drugs and biologicals that do not reflect actual changes in hospital pharmacy overhead cost for those products. For these reasons, we stated that we believed some portion, but not all, of the total overhead cost that is associated with coded packaged drugs and biologicals (the difference between aggregate cost for those drugs and biologicals on the claims and ASP dollars for the same drugs and biologicals), based on our standard drug payment methodology, should, at least for CY 2010, be attributed to separately payable drugs and biologicals.

We acknowledged that the observed combined payment for acquisition and pharmacy overhead costs of ASP-2 percent for separately payable drugs and biologicals may be too low and ASP+247 percent for coded packaged drugs and biologicals with reported ASP data in the CY 2010 claims data may be too high (74 FR 35327 and 35328). Therefore, we stated that a middle ground would represent the most accurate redistribution of pharmacy overhead cost. Our assumption was that approximately one-third to one-half of the total pharmacy overhead cost currently associated with coded packaged drugs and biologicals in the CY 2008 claims data offered a more appropriate allocation of drug and biological cost to separately payable drugs and biologicals (74 FR 35328). One third of the $395 million of pharmacy overhead cost associated with packaged drugs and biologicals was $132 million, whereas one-half was $198 million.

Within the one-third to one-half parameters, we proposed reallocating $150 million in drug and biological cost observed in the claims data from coded packaged drugs and biologicals with an ASP to separately payable drugs and biologicals for CY 2010 for their pharmacy overhead costs. Based on this redistribution, we proposed a CY 2010 payment rate for separately payable drugs and biologicals of ASP+4 percent.

In the CY 2010 OPPS final rule with comment period, we adopted a transitional payment rate of ASP+4 percent based on a pharmacy overhead adjustment methodology for CY 2010 that redistributed $200 million from packaged drug and biological cost to separately payable drug cost (74 FR 60499 through 60518). This $200 million included the proposed $150 million redistribution from the pharmacy overhead cost of coded packaged drugs and biologicals for which an ASP is reported and an additional $50 million dollars from the total uncoded drug and biological cost to separately payable drugs and biologicals as a conservative estimate of the pharmacy overhead cost of uncoded packaged drugs and biologicals that should be appropriately associated with the cost of separately payable drugs and biologicals (74 FR 60517). We stated that this was an intentionally conservative estimate as we could not identify definitive evidence that uncoded packaged drug and biological cost included a pharmacy overhead amount comparable to that of coded packaged drugs and biologicals with an ASP. We stated that we could not know the amount of overhead associated with these drugs without making significant assumptions about the amount of pharmacy overhead cost associated with the drugs and biologicals captured by these uncoded packaged drug costs (74 FR 60511 through 60513). In addition, as in prior years, we reiterated our commitment to continue in our efforts to refine our analyses.

For CY 2011, we continued the CY 2010 pharmacy overhead adjustment methodology (74 FR 60500 through 60512). Consistent with our supposition that the combined payment for average acquisition and pharmacy overhead costs under our standard methodology may understate the cost of separately payable drugs and biologicals and related pharmacy overhead for those drugs and biologicals, we redistributed $150 million from the pharmacy overhead cost of coded packaged drugs and biologicals with an ASP and redistributed $50 million from the cost of uncoded packaged drugs and biologicals, for a total redistribution of $200 million from costs for coded and uncoded packaged drugs to separately payable drugs and biologicals, with the result that we pay separately paid drugs and biologicals at ASP+5 percent for CY 2011. The redistribution amount of $150 million in overhead cost from coded packaged drugs and biologicals with an ASP and $50 million in costs from uncoded packaged drugs and biologicals without an ASP were within the parameters established in the CY 2010 OPPS/ASC final rule. In addition, as in prior years, we described some of our work to improve our analyses during the preceding year, including an analysis of uncoded packaged drug and biological cost and our evaluation of the services with which uncoded packaged drug cost appears in the claims data. We conducted this analysis in an effort to assess how much uncoded drugs resemble coded packaged drugs (75 FR 71966). We stated that, in light of this information, we were not confident that the drugs captured by uncoded drug cost are the same drugs captured by coded packaged drug cost, and therefore, we did not believe we could assume that they are the same drugs, with comparable overhead and handling costs. Without being able to calculate the ASP for these uncoded packaged drugs and biologicals and without being able to gauge the magnitude of overhead complexity associated with these drugs and biologicals, we did not believe that we should have assumed that the same amount of proportional overhead should be redistributed between coded and uncoded packaged drugs, and therefore, we redistributed $50 million from uncoded packaged drugs and $150 million from coded packaged drugs (75 FR 71966). We reiterated our commitment to continue to refine our drug pricing methodology and noted that we would continue to pursue the most appropriate methodology for establishing payment for drugs and biologicals under the OPPS and continue to evaluate the appropriateness of this methodology when we establish each year's payment for drugs and biologicals under the OPPS (75 FR 71967).

For CY 2012, we continued our overhead adjustment methodology of redistributing 1/3 to 1/2 of allocated overhead for coded packaged drugs or $150 million plus an additional $50 million in allocated overhead for uncoded packaged drugs. Additionally, we finalized a policy to update these amounts by the PPI for pharmaceuticals and redistributed $161 million in allocated overhead from coded packaged drugs and $54 million from uncoded packaged drugs. We further finalized a policy to hold the redistributed proportion of packaged drugs constant between the proposed and the final rule, which increased the final redistribution amount in the CY 2012 final rule to $240.3 million ($169 million from coded packaged drugs and $71.3 million from uncoded packaged drugs). This approach resulted in a final payment rate of ASP+4 percent for separately payable drugs.

b. Proposed CY 2013 Payment Policy

In reexamining our current drug payment methodology for this CY 2013 OPPS/ASC proposed rule, we reviewed our past efforts to determine an appropriate payment methodology for drugs and biologicals, as described above. Since the inception of the OPPS, we have remained committed to establishing a drug payment methodology that is predictable, accurate, and appropriate. Pharmacy stakeholders and the hospital community have also, throughout the years, continually emphasized the importance of both predictable and accurate payment rates for drugs, noting that a payment methodology that emphasizes predictability and accuracy leads to appropriate payment rates that reflect the cost of drugs and biologicals (including overhead) in HOPDs. Pertinent stakeholders also have noted that predictable and accurate payment rates minimize the effect of anomalies in the claims data that may incorrectly influence the future payment for services. We understand that, with predictable payment rates, hospitals are better able to plan for the future.

As discussed above, since CY 2006, we have attempted to establish a drug payment methodology that reflects hospitals' acquisition costs for drugs and biologicals while taking into account relevant pharmacy overhead and related handling expenses. We have attempted to collect more data on hospital overhead charges for drugs and biologicals by making several proposals that would require hospitals to change the way they report the cost and charges for drugs. None of these proposals were adopted due to significant stakeholder concern, including that hospitals stated that it would be administratively burdensome to report hospital overhead charges. We established a payment policy for separately payable drugs and biologicals, authorized by section 1833(t)(14)(A)(iii)(I) of the Act, based on an ASP+X amount that is calculated by comparing the estimated aggregate cost of separately payable drugs and biologicals in our claims data to the estimated aggregate ASP dollars for separately payable drugs and biologicals, using the ASP as a proxy for average acquisition cost (70 FR 68642). As we previously stated, we refer to this methodology as our standard drug payment methodology.

In CY 2010, taking into consideration comments made by the pharmacy stakeholders and acknowledging the limitations of the reported data due to charge compression and hospitals' reporting practices, we added an “overhead adjustment” (an internal adjustment of the data) by redistributing cost from coded and uncoded packaged drugs and biologicals to separately payable drugs in order to provide more appropriate payments for drugs and biologicals in the HOPD. We continued this overhead adjustment methodology through CY 2012, and further refined our overhead adjustment methodology by finalizing a policy to update the redistribution amount for inflation and keep the redistribution ratio constant between the proposed rule and the final rule.

Application of the standard drug payment methodology, with the overhead adjustment, has always yielded a finalized payment rate in the range of ASP+4 percent to ASP+6 percent for nonpass-through separately payable drugs. We believe that the historic ASP+4 to ASP+6 percentage range is an appropriate payment rate for separately payable drugs and biologicals administered within the HOPD, including acquisition and pharmacy overhead and related expenses. However, because of continuing uncertainty about the full cost of pharmacy overhead and acquisition cost, based in large part on the limitations of the submitted hospital charge and claims data for drugs, we are concerned that the continued use of our current standard drug payment methodology (including the overhead adjustment) still may not appropriately account for average acquisition and pharmacy overhead cost and, therefore, may result in payment rates that are not as predictable, accurate, or appropriate as they could be.

Section 1833(t)(14)(A)(iii)(II) of the Act requires an alternative methodology for determining payment rates for SCODs wherein, if hospital acquisition cost data are not available, payment shall be equal (subject to any adjustment for overhead costs) to payment rates established under the methodology described in section 1842(o), section 1847A, or section 1847B of the Act, as calculated and adjusted by the Secretary as necessary. Considering stakeholder and provider feedback, continued limitations of the hospital claims and cost data on drugs and biologicals, and Panel recommendations, we are proposing for CY 2013 to pay for separately payable drugs and biologicals at ASP+6 percent based on section 1833 (t)(14)(A)(iii)(II) of the Act, hereinafter referred to as the statutory default.

As noted above, section 1833(t)(14)(A)(iii)(II) of the Act authorizes the Secretary to calculate and adjust, as necessary, the average price for a drug in the year established under section 1842(o), 1847A, or 1847B of the Act, as the case may be, in determining payment for SCODs. Pursuant to sections 1842(o) and 1847A of the Act, physician Part B drugs are paid at ASP+6 percent. We believe that proposing the statutory default of ASP+6 percent is appropriate at this time as it yields increased predictability in payment for separately payable drugs and biologicals under the OPPS. We believe that ASP+6 percent is an appropriate payment amount because it is consistent with payment amounts yielded by our drug payment methodologies over the past 7 years. We are proposing that the ASP+6 percent payment amount for separately payable drugs and biologicals requires no further adjustment, and represents the combined acquisition and pharmacy overhead payment for drugs and biologicals for CY 2013.

Our goals continue to be to develop a method that accurately and predictably estimates acquisition and overhead costs for separately payable drugs and biologicals in order to pay for them appropriately. If a better payment methodology is developed in the future, then the proposed policy to pay ASP+6 according to the statutory default would be an interim step in the development of this payment policy. We recognize the challenges in doing so given current data sources and the objective of maintaining the smallest administrative burden possible.

We are proposing that payments for separately payable drugs and biologicals are included in the budget neutrality adjustments, under the requirements in section 1833(t)(9)(B) of the Act, and that the budget neutral weight scaler is not applied in determining payments for these separately paid drugs and biologicals.

At the February 2012 Panel meeting, the Panel made four recommendations on drugs and biologicals paid under the OPPS. First, the Panel recommended that CMS require hospitals to bill all drugs that are described by Healthcare Common Procedure Coding System (HCPCS) codes under revenue code 0636. While we agree that drugs and biologicals may be reported under revenue code 0636, we believe that drugs and biologicals may also be appropriately reported in revenue code categories other than revenue code 0636, including but not limited to, revenue codes 025x and 062x. As we stated in the CY 2011 OPPS/ASC final rule with comment period (75 FR 71966), we recognize that hospitals may carry the costs of drugs and biologicals in multiple cost centers and that it may not be appropriate to report the cost of all drugs and biologicals in one specified revenue code. Additionally, we generally require hospitals to follow National Uniform Billing Committee (NUBC) guidance for the choice of an appropriate revenue code that is also appropriate for the hospital's internal accounting processes. Therefore, we are not accepting the Panel's recommendation to require hospitals to bill all drugs that are described by HCPCS codes under revenue code 0636. However, we continue to believe that OPPS ratesetting is most accurate when hospitals report charges for all items and services that have HCPCS codes using those HCPCS codes, regardless of whether payment for the items and services is packaged. It is our standard ratesetting methodology to rely on hospital cost report and charge information as it is reported to us through the claims data. We continue to believe that more complete data from hospitals identifying the specific drugs that were provided during an episode of care may improve payment accuracy for drugs in the future. Therefore, we continue to encourage hospitals to change their reporting practices if they are not already reporting HCPCS codes for all drugs and biologicals furnished, whether specific HCPCS codes are available for those drugs and biologicals.

Second, the Panel recommended that CMS exclude data from hospitals that participate in the 340B program from its ratesetting calculations for drugs. Under the proposed statutory default payment rate of ASP+6 percent, hospitals' 340B status does not affect the drug payment rate.

Third, the Panel recommended that CMS freeze the packaging threshold at $75 until the drug payment issue is more equitably addressed. The OPPS is based on the concept of payment for groups of services that share clinical and resource characteristics. We believe that the packaging threshold is reasonable based on the initial establishment in law of a $50 threshold for the CY 2005 OPPS, that updating the $50 threshold is consistent with industry and government practices, and that the PPI for Prescription Drugs is an appropriate mechanism to gauge Part B drug inflation. Therefore, we are not accepting the Panel's recommendation to freeze the packaging threshold at $75 until the drug payment issue is more equitably addressed. Instead, as discussed in section V.B.2. of this proposed rule, we are proposing an OPPS drug packaging threshold for CY 2013 of $80. However, we do believe that we have addressed the drug payment issue by proposing to pay for separately paid drugs and biologicals at ASP+6 percent for CY 2013 based upon the statutory default.

Finally, the Panel recommended that CMS pay hospitals for separately payable drugs at a rate of average sales price (ASP) + 6 percent. This Panel recommendation is consistent with our CY 2013 proposed payment rate based upon the statutory default under section 1833(t)(14)(A)(iii)(II) of the Act, which authorizes us to pay for drugs and biologicals under the OPPS at ASP+6 percent, when hospital acquisition cost data are not available.

4. Proposed Payment Policy for Therapeutic Radiopharmaceuticals

Beginning in CY 2010 and continuing for CY 2012, we established a policy to pay for separately paid therapeutic radiopharmaceuticals under the ASP methodology adopted for separately payable drugs and biologicals. We allow manufacturers to submit the ASP data in a patient-specific dose or patient-ready form in order to properly calculate the ASP amount for a given HCPCS code. If ASP information is unavailable for a therapeutic radiopharmaceutical, then we base therapeutic radiopharmaceutical payment on mean unit cost data derived from hospital claims. We believe that the rationale outlined in the CY 2010 OPPS/ASC final rule with comment period (74 FR 60524 through 60525) for applying the principles of separately payable drug pricing to therapeutic radiopharmaceuticals continues to be appropriate for nonpass-through separately payable therapeutic radiopharmaceuticals in CY 2013. Therefore, we are proposing for CY 2013 to pay all nonpass-through, separately payable therapeutic radiopharmaceuticals at ASP+6 percent, based on the statutory default described in section 1833(t)(14)(A)(iii)(II) of the Act. We are proposing to continue to set payment rates for therapeutic radiopharmaceuticals based on ASP information, if available, for a “patient ready” dose and updated on a quarterly basis for products for which manufacturers report ASP data. For a full discussion of how a “patient ready” dose is defined, we refer readers to the CY 2010 OPPS/ASC final rule with comment period (74 FR 60520 through 60521). We also are proposing to rely on CY 2011 mean unit cost data derived from hospital claims data for payment rates for therapeutic radiopharmaceuticals for which ASP data are unavailable and to update the payment rates for separately payable therapeutic radiopharmaceuticals, according to our usual process for updating the payment rates for separately payable drugs and biologicals, on a quarterly basis if updated ASP information is available. For a complete history of the OPPS payment policy for therapeutic radiopharmaceuticals, we refer readers to the CY 2005 OPPS final rule with comment period (69 FR 65811), the CY 2006 OPPS final rule with comment period (70 FR 68655), and the CY 2010 OPPS/ASC final rule with comment period (74 FR 60524).

The proposed CY 2013 payment rates for nonpass-through separately payable therapeutic radiopharmaceuticals are included in Addenda A and B to this proposed rule (which are available via the Internet on the CMS Web site).

5. Proposed Payment for Blood Clotting Factors

For CY 2012, we provided payment for blood clotting factors under the same methodology as other nonpass-through separately payable drugs and biologicals under the OPPS and continued paying an updated furnishing fee. That is, for CY 2012, we provided payment for blood clotting factors under the OPPS at ASP+4 percent, plus an additional payment for the furnishing fee. We note that when blood clotting factors are provided in physicians' offices under Medicare Part B and in other Medicare settings, a furnishing fee is also applied to the payment. The CY 2012 updated furnishing fee is $0.181 per unit.

For CY 2013, we are proposing to pay for blood clotting factors at ASP+6 percent, consistent with our proposed payment policy for other nonpass-through separately payable drugs and biologicals, and to continue our policy for payment of the furnishing fee using an updated amount. Our policy to pay for a furnishing fee for blood clotting factors under the OPPS is consistent with the methodology applied in the physician office and inpatient hospital setting, and first articulated in the CY 2006 OPPS final rule with comment period (70 FR 68661) and later discussed in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66765). The proposed furnishing fee update is based on the percentage increase in the Consumer Price Index (CPI) for medical care for the 12-month period ending with June of the previous year. Because the Bureau of Labor Statistics releases the applicable CPI data after the MPFS and OPPS/ASC proposed rules are published, we are not able to include the actual updated furnishing fee in the proposed rules. Therefore, in accordance with our policy, as finalized in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66765), we are proposing to announce the actual figure for the percent change in the applicable CPI and the updated furnishing fee calculated based on that figure through applicable program instructions and posting on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Part-B-Drugs/McrPartBDrugAvgSalesPrice/index.html.

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

The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (Pub. L. 108-173) did not address the OPPS payment in CY 2005 and after for drugs, biologicals, and radiopharmaceuticals that have assigned HCPCS codes, but that do not have a reference AWP or approval for payment as pass-through drugs or biologicals. Because there is no statutory provision that dictated payment for such drugs, biologicals, and radiopharmaceuticals in CY 2005, and because we had no hospital claims data to use in establishing a payment rate for them, we investigated several payment options for CY 2005 and discussed them in detail in the CY 2005 OPPS final rule with comment period (69 FR 65797 through 65799).

For CYs 2005 to 2007, we implemented a policy to provide separate payment for new drugs, biologicals, and radiopharmaceuticals with HCPCS codes (specifically those new drug, biological, and radiopharmaceutical HCPCS codes in each of those calendar years that did not crosswalk to predecessor HCPCS codes) but which did not have pass-through status, at a rate that was equivalent to the payment they received in the physician's office setting, established in accordance with the ASP methodology for drugs and biologicals, and based on charges adjusted to cost for radiopharmaceuticals. For CYs 2008 and 2009, we finalized a policy to provide payment for new drugs (excluding contrast agents and diagnostic radiopharmaceuticals) and biologicals (excluding implantable biologicals for CY 2009) with HCPCS codes, but which did not have pass-through status and were without OPPS hospital claims data, at ASP+5 percent and ASP+4 percent, respectively, consistent with the final OPPS payment methodology for other separately payable drugs and biologicals. New therapeutic radiopharmaceuticals were paid at charges adjusted to cost based on the statutory requirement for CY 2008 and CY 2009 and payment for new diagnostic radiopharmaceuticals was packaged in both years.

For CY 2010, we continued to provide payment for new drugs (excluding contrast agents) and nonimplantable biologicals with HCPCS codes that do not have pass-through status and are without OPPS hospital claims data at ASP+4 percent, consistent with the CY 2010 payment methodology for other separately payable nonpass-through drugs and nonimplantable biologicals. We also finalized a policy to extend the CY 2009 payment methodology to new therapeutic radiopharmaceutical HCPCS codes, consistent with our final policy in the CY 2010 OPPS/ASC final rule with comment period (74 FR 60581 through 60526), providing separate payment for therapeutic radiopharmaceuticals that do not crosswalk to CY 2009 HCPCS codes, do not have pass-through status, and are without OPPS hospital claims data at ASP+4 percent. This policy was continued in the CY 2011 OPPS/ASC final rule with comment period (75 FR 71970 through 71973), paying for new drugs, nonimplantable biologicals, and radiopharmaceuticals that do not crosswalk to CY 2010 HCPCS codes, do not have pass-through status, and are without OPPS hospital claims data at ASP+5 percent and the CY 2012 OPPS/ASC final rule with comment period at ASP+4 percent (76 FR 74330 through 74332).

For CY 2013, we are proposing to provide payment for new CY 2013 drugs (excluding contrast agents and diagnostic radiopharmaceuticals), nonimplantable biologicals, and therapeutic radiopharmaceuticals, at ASP+6 percent, consistent with the proposed CY 2013 payment methodology for other separately payable nonpass-through drugs, nonimplantable biologicals, and therapeutic radiopharmaceuticals to pay at ASP+6 percent based on the statutory default. We believe this proposed policy would ensure that new nonpass-through drugs, nonimplantable biologicals and therapeutic radiopharmaceuticals would be treated like other drugs, nonimplantable biologicals, and therapeutic radiopharmaceuticals under the OPPS.

We also are proposing to continue to package payment for all new nonpass-through diagnostic radiopharmaceuticals and contrast agents with HCPCS codes but without claims data (those new CY 2013 diagnostic radiopharmaceuticals, contrast agents, and implantable biological HCPCS codes that do not crosswalk to predecessor HCPCS codes). This is consistent with the proposed policy packaging all existing nonpass-through diagnostic radiopharmaceuticals and contrast agents, as discussed in more detail in section II.A.3.d. of this proposed rule.

In accordance with the OPPS ASP methodology, in the absence of ASP data, for CY 2013, we are proposing to continue the policy we implemented beginning in CY 2005 of using the WAC for the product to establish the initial payment rate for new nonpass-through drugs and biologicals with HCPCS codes, but which are without OPPS claims data and are not diagnostic radiopharmaceuticals and contrast agents. However, we noted that if the WAC is also unavailable, we would make payment at 95 percent of the product's most recent AWP. We also are proposing to assign status indicator “K” (for separately paid nonpass-through drugs and nonimplantable biologicals, including therapeutic radiopharmaceuticals) to HCPCS codes for new drugs and nonimplantable biologicals without OPPS claims data and for which we have not granted pass-through status. With respect to new, nonpass-through drugs, nonimplantable biologicals, and therapeutic radiopharmaceuticals for which we do not have ASP data, we are proposing that once their ASP data become available in later quarterly submissions, their payment rates under the OPPS would be adjusted so that the rates would be based on the ASP methodology and set to the finalized ASP-based amount (proposed for CY 2013 at ASP+6 percent) for items that have not been granted pass-through status. This proposed policy, which utilizes the ASP methodology that requires us to use WAC data when ASP data are unavailable and 95 percent of AWP when WAC and ASP data are unavailable, for new nonpass-through drugs and biologicals with an ASP, is consistent with prior years' policies for these items, and would ensure that new nonpass-through drugs, nonimplantable biologicals, and therapeutic radiopharmaceuticals would be treated like other drugs, nonimplantable biologicals, and therapeutic radiopharmaceuticals under the OPPS, unless they are granted pass-through status.

Similarly, we are proposing to continue to base the initial payment for new therapeutic radiopharmaceuticals with HCPCS codes, but which do not have pass-through status and are without claims data, on the WACs for these products if ASP data for these therapeutic radiopharmaceuticals are not available. If the WACs are also unavailable, we are proposing to make payment for new therapeutic radiopharmaceuticals at 95 percent of the products' most recent AWP because we would not have mean costs from hospital claims data upon which to base payment. As we are proposing with new drugs and biologicals, we are proposing to continue our policy of assigning status indicator “K” to HCPCS codes for new therapeutic radiopharmaceuticals without OPPS claims data for which we have not granted pass-through status.

Consistent with other ASP-based payment, for CY 2013 we are proposing to announce any changes to the payment amounts for new drugs and biologicals in the CY 2013 OPPS/ASC final rule with comment period and also on a quarterly basis on the CMS Web site during CY 2013 if later quarter ASP submissions (or more recent WACs or AWPs) indicate that changes to the payment rates for these drugs and biologicals are necessary. The payment rates for new therapeutic radiopharmaceuticals would also be changed accordingly based on later quarter ASP submissions. We note that the new CY 2013 HCPCS codes for drugs, biologicals and therapeutic radiopharmaceuticals are not available at the time of development of this proposed rule. However, these agents will be included in Addendum B to the CY 2013 OPPS/ASC final rule with comment period (which will be available via the Internet on the CMS Web site), where they will be assigned comment indicator “NI.” This comment indicator reflects that their interim final OPPS treatment is open to public comment in the CY 2013 OPPS/ASC final rule with comment period.

There are several nonpass-through drugs and biologicals that were payable in CY 2011 and/or CY 2012 for which we did not have CY 2011 hospital claims data available for this proposed rule and for which there are no other HCPCS codes that describe different doses of the same drug, but which have pricing information available for the ASP methodology. We note that there are currently no therapeutic radiopharmaceuticals in this category. In order to determine the packaging status of these products for CY 2013, we calculated an estimate of the per day cost of each of these items by multiplying the payment rate of each product based on ASP+6 percent, similar to other nonpass-through drugs and biologicals paid separately under the OPPS, by an estimated average number of units of each product that would typically be furnished to a patient during one day in the hospital outpatient setting. This rationale was first adopted in the CY 2006 OPPS/ASC final rule with comment period (70 FR 68666 and 68667).

We are proposing to package items for which we estimated the per day administration cost to be less than or equal to $80, which is the general packaging threshold that we are proposing for drugs, nonimplantable biologicals, and therapeutic radiopharmaceuticals in CY 2013. We are proposing to pay separately for items with an estimated per day cost greater than $80 (with the exception of diagnostic radiopharmaceuticals and contrast agents, which we are proposing to continue to package regardless of cost as discussed in more detail in section II.A.3.d. of this proposed rule) in CY 2013. We are proposing that the CY 2013 payment for separately payable items without CY 2011 claims data would be ASP+6 percent, similar to payment for other separately payable nonpass-through drugs and biologicals under the OPPS. In accordance with the ASP methodology paid in the physician's office setting, in the absence of ASP data, we are proposing to use the WAC for the product to establish the initial payment rate. However, we note that if the WAC is also unavailable, we would make payment at 95 percent of the most recent AWP available.

The proposed estimated units per day and status indicators for these items are displayed in Table 27 below.

Table 27—Drugs and Biologicals Without CY 2011 Claims Data

CY 2013 HCPCS codeCY 2013 long descriptorEstimated average number of units per dayProposed CY 2013 SIProposed CY 2013 APC
C9367Skin substitute, Endoform Dermal Template, per square centimeter55K9367
J0630Injection, calcitonin salmon, up to 400 units1.5K1433
J2793Injection, Rilonacept320K1291
J7196Injection, antithrombin recombinant, 50 IU268K1332
J8562Fludarabine phosphate, oral, 10 mg1K1339
J9065Injection, cladribine, per 1 mg10K0858
J9151Injection, daunorubicin citrate, liposomal formulation, 10 mg5K0821
J0205Injection, alglucerase, per 10 units420K0900
J2724Injection, protein c concentrate, intravenous, human, 10 iu1540K1139
Q0515Injection, sermorelin acetate, 1 microgram70K3050
J2513Injection, pentastarch, 10% solution, 100 ml4NN/A
J3355Injection, urofollitropin, 75 IU2K1741
90581Anthrax vaccine, for subcutaneous or intramuscular use1K1422
J2265Injection, minocycline hydrochloride, 1 mg300K1423
J8650Nabilone, oral, 1 mg4K1424

Finally, there were 19 drugs and biologicals, shown in Table 28 below, that were payable in CY 2011, but for which we lacked CY 2011 claims data and any other pricing information for the ASP methodology for this CY 2013 OPPS/ASC proposed rule. In CY 2009, for similar items without CY 2007 claims data and without pricing information for the ASP methodology, we stated that we were unable to determine their per day cost and we packaged these items for the year, assigning these items status indicator “N.”

For CY 2010, we finalized a policy to change the status indicator for drugs and biologicals previously assigned a payable status indicator to status indicator “E” (Not paid by Medicare when submitted on outpatient claims (any outpatient bill type)) whenever we lacked claims data and pricing information and were unable to determine the per day cost. In addition, we noted that we would provide separate payment for these drugs and biologicals if pricing information reflecting recent sales became available mid-year in CY 2010 for the ASP methodology. If pricing information became available, we would assign the products status indicator “K” and pay for them separately for the remainder of CY 2010. We continued this policy for CY 2011 and CY 2012 (75 FR 71973 and 76 FR 74334).

For CY 2013, we are proposing to continue to assign status indicator “E” to drugs and biologicals that lack CY 2011 claims data and pricing information for the ASP methodology. All drugs and biologicals without CY 2011 hospital claims data and data based on the ASP methodology that are assigned status indicator “E” on this basis at the time of this proposed rule for CY 2013 are displayed in Table 28 below. If pricing information becomes available, we are proposing to assign the products status indicator “K” and pay for them separately for the remainder of CY 2013.

Table 28—Drugs and Biologicals Without CY 2011 Claims Data and Without Pricing Information for the ASP Methodology

CY 2013 HCPCS codeCY 2013 long descriptorProposed CY 2013 SI
90296Diphtheria antitoxin, equine, any routeE
90393Vaccina immune globulin, human, for intramuscular useE
J3305Injection, trimetrexate glucuronate, per 25 mgE
90706Rubella virus vaccine, live, for subcutaneous useE
90725Cholera vaccine for injectable useE
90727Plague vaccine, for intramuscular useE
J0190Injection, biperiden lactate, per 5 mgE
J1452Injection, fomivirsen sodium, intraocular, 1.65 mgE
J1835Injection, itraconazole, 50 mgE
J2670Injection, tolazonline hcl, up to 25 mgE
J2940Injection, somatrem, 1 mgE
J3305Injection, trimetrexate glucuronate, per 25 mgE
J3320Injection, spectinomycin dihydrochloride, up to 2 gmE
J9165Injection, diethylstilbestrol diphosphate, 250 mgE
J9212Injection, interferon alfacon-1, recombinant, 1 microgramE
Q4117Hyalomatrix, per square centimeterE
Q4120Matristem Burn matrix, per square centimeterE
Q4126Memoderm, per square centimeterE
Q4127Talymed, per square centimeterE

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

A. Background

Section 1833(t)(6)(E) of the Act limits the total projected amount of transitional pass-through payments for drugs, biologicals, radiopharmaceuticals, and categories of devices for a given year to an “applicable percentage,” currently not to exceed 2.0 percent of total program payments estimated to be made for all covered services under the hospital OPPS furnished for that year.

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

For devices, developing an estimate of pass-through spending in CY 2013 entails estimating spending for two groups of items. The first group of items consists of device categories that were recently made eligible for pass-through payment and that will continue to be eligible for pass-through payment in CY 2013. The CY 2008 OPPS/ASC final rule with comment period (72 FR 66778) describes the methodology we have used in previous years to develop the pass-through spending estimate for known device categories continuing into the applicable update year. The second group contains items that we know are newly eligible, or project may be newly eligible, for device pass-through payment in the remaining quarters of CY 2012 or beginning in CY 2013. The sum of the CY 2013 pass-through estimates for these two groups of device categories would equal the total CY 2013 pass-through spending estimate for device categories with pass-through status. We base the device pass-through estimated payments for each device category on the amount of payment as established in section 1833(t)(6)(D)(ii) of the Act, and as outlined in previous rules, including the CY 2012 OPPS/ASC final rule with comment period (76 FR 74335 through 74336). We note that, beginning in CY 2010, the pass-through evaluation process and pass-through payment for implantable biologicals newly approved for pass-through payment beginning on or after January 1, 2010, that are surgically inserted or implanted (through a surgical incision or a natural orifice), is the device pass-through process and payment methodology (74 FR 60476). As has been our past practice (76 FR 74335), we include an estimate of any implantable biologicals eligible for pass-through payment in our estimate of pass-through spending for devices.

For drugs and nonimplantable biologicals eligible for pass-through payment, section 1833(t)(6)(D)(i) of the Act establishes the pass-through payment amount as the amount by which the amount authorized under section 1842(o) of the Act (or, if the drug or biological is covered under a competitive acquisition contract under section 1847B of the Act, an amount determined by the Secretary equal to the average price for the drug or biological for all competitive acquisition areas and year established under such section as calculated and adjusted by the Secretary) exceeds the portion of the otherwise applicable fee schedule amount that the Secretary determines is associated with the drug or biological. We note that the Part B drug CAP program has been postponed since CY 2009, and such a program is not proposed to be reinstated for CY 2013. Because we are proposing to pay for most nonpass-through separately payable drugs and nonimplantable biologicals under the CY 2013 OPPS at ASP+6 percent, which represents the otherwise applicable fee schedule amount associated with most pass-through drugs and nonimplantable biologicals, and because we are proposing to pay for CY 2013 pass-through drugs and nonimplantable biologicals at ASP+6 percent, our estimate of drug and nonimplantable biological pass-through payment for CY 2013 for this group of items would be zero, as discussed below. Furthermore, payment for certain drugs, specifically diagnostic radiopharmaceuticals and contrast agents, without pass-through status, will always be packaged into payment for the associated procedures because these products will never be separately paid. However, all pass-through diagnostic radiopharmaceuticals and contrast agents with pass-through status approved prior to CY 2013 would be paid at ASP+6 percent like other pass-through drugs and nonimplantable biologicals. Therefore, our estimate of pass-through payment for all diagnostic radiopharmaceuticals and contrast agents with pass-through status approved prior to CY 2013 is not zero. In section V.A.4. of this proposed rule, we discuss our proposed policy to determine if the cost of certain “policy-packaged” drugs, including diagnostic radiopharmaceuticals and contrast agents, are already packaged into the existing APC structure. If we determine that a “policy-packaged” drug approved for pass-through payment resembles predecessor diagnostic radiopharmaceuticals or contrast agents already included in the costs of the APCs that would be associated with the drug receiving pass-through payment, we are proposing to offset the amount of pass-through payment for diagnostic radiopharmaceuticals or contrast agents. For these drugs, the APC offset amount would be the portion of the APC payment for the specific procedure performed with the pass-through radiopharmaceuticals or contrast agents, which we refer to as the “policy-packaged” drug APC offset amount. If we determine that an offset is appropriate for a specific diagnostic radiopharmaceutical or contrast agent receiving pass-through payment, we are proposing to reduce our estimate of pass-through payment for these drugs by this amount.

Similar to pass-through estimates for devices, the first group of drugs and nonimplantable biologicals requiring a pass-through payment estimate consists of those products that were recently made eligible for pass-through payment for CY 2012 and that will continue to be eligible for pass-through payment in CY 2013. The second group contains drugs and nonimplantable biologicals that we know are newly eligible, or project will be newly eligible, in the remaining quarters of CY 2012 or beginning in CY 2013. The sum of the CY 2013 pass-through estimates for these two groups of drugs and nonimplantable biologicals would equal the total CY 2013 pass-through spending estimate for drugs and nonimplantable biologicals with pass-through status.

B. Proposed Estimate of Pass-Through Spending

We are proposing to set the applicable pass-through payment percentage limit at 2.0 percent of the total projected OPPS payments for CY 2013, consistent with section 1833(t)(6)(E)(ii)(II) of the Act, and our OPPS policy from CY 2004 through CY 2012 (76 FR 74336).

For the first group of devices for pass-through payment estimation purposes, there currently are three device categories eligible for pass-through payment for CY 2013: C1830 (Powered bone marrow biopsy needle); C1840 (Lens, intraocular (telescopic)); and C1886 (Catheter, extravascular tissue ablation, any modality (insertable)). We estimate that CY 2013 pass-through expenditures related to these three eligible device categories will be approximately $42 million. In estimating our proposed CY 2013 pass-through spending for device categories in the second group we include: Device categories that we know at the time of the development of this proposed rule would be newly eligible for pass-through payment in CY 2013 (of which there are none); additional device categories that we estimate could be approved for pass-through status subsequent to the development of this proposed rule and before January 1, 2013; and contingent projections for new device categories established in the second through fourth quarters of CY 2013. We are proposing to use the general methodology described in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66778), while also taking into account recent OPPS experience in approving new pass-through device categories. For this proposed rule, the estimate of CY 2013 pass-through spending for this second group of device categories is $10 million. Using our established methodology, we are proposing that the total estimated pass-through spending for device categories for CY 2013 (spending for the first group of device categories ($42 million) plus spending for the second group of device categories ($10 million)) be $52 million.

To estimate proposed CY 2013 pass-through spending for drugs and nonimplantable biologicals in the first group, specifically those drugs (including radiopharmaceuticals and contrast agents) and nonimplantable biologicals recently made eligible for pass-through payment and continuing on pass-through status for CY 2013, we are proposing to utilize the most recent Medicare physician's office data regarding their utilization, information provided in the respective pass-through applications, historical hospital claims data, pharmaceutical industry information, and clinical information regarding those drugs or nonimplantable biologicals, to project the CY 2013 OPPS utilization of the products.

For the known drugs and nonimplantable biologicals (excluding diagnostic radiopharmaceuticals and contrast agents) that would be continuing on pass-through status in CY 2013, we estimate the proposed pass-through payment amount as the difference between ASP+6 percent and the proposed payment rate for nonpass-through drugs and nonimplantable biologicals that would be separately paid at ASP+6 percent, which is zero for this group of drugs. Because payment for a diagnostic radiopharmaceutical or contrast agent would be packaged if the product were not paid separately due to its pass-through status, we are proposing to include in the proposed CY 2013 pass-through estimate the difference between payment for the drug or biological at ASP+6 percent (or WAC+6 percent, or 95 percent of AWP, if ASP or WAC information is not available) and the “policy-packaged” drug APC offset amount, if we have determined that the diagnostic radiopharmaceutical or contrast agent approved for pass-through payment resembles predecessor diagnostic radiopharmaceuticals or contrast agents already included in the costs of the APCs that would be associated with the drug receiving pass-through payment. For this CY 2013 proposed rule, we are proposing to continue to use the above described methodology to calculate a proposed spending estimate for this first group of drugs and nonimplantable biologicals to be approximately $13 million.

To estimate proposed CY 2013 pass-through spending for drugs and nonimplantable biologicals in the second group (that is, drugs and nonimplantable biologicals that we know at the time of development of this proposed rule would be newly eligible for pass-through payment in CY 2013, additional drugs and nonimplantable biologicals that we estimate could be approved for pass-through status subsequent to the development of this proposed rule and before January 1, 2013, and projections for new drugs and nonimplantable biologicals that could be initially eligible for pass-through payment in the second through fourth quarters of CY 2013), we are proposing to use utilization estimates from pass-through applicants, pharmaceutical industry data, clinical information, recent trends in the per unit ASPs of hospital outpatient drugs, and projected annual changes in service volume and intensity as our basis for making the proposed CY 2013 pass-through payment estimate. We also are considering the most recent OPPS experience in approving new pass-through drugs and nonimplantable biologicals. Using our proposed methodology for estimating CY 2013 pass-through payments for this second group of drugs, we calculated a proposed spending estimate for this second group of drugs and nonimplantable biologicals to be approximately $19 million.

As discussed in section V.A. of this proposed rule, radiopharmaceuticals are considered drugs for pass-through purposes. Therefore, we include radiopharmaceuticals in our proposed CY 2013 pass-through spending estimate for drugs and nonimplantable biologicals. Our proposed CY 2013 estimate for total pass-through spending for drugs and nonimplantable biologicals (spending for the first group of drugs and nonimplantable biologicals ($13 million) plus spending for the second group of drugs and nonimplantable biologicals ($19 million)) equals $32 million.

In summary, in accordance with the methodology described above in this section, for this proposed rule, we estimate that total pass-through spending for the device categories and the drugs and nonimplantable biologicals that are continuing to receive pass-through payment in CY 2013 and those device categories, drugs, and biologicals that first become eligible for pass-through payment during CY 2013 would be approximately $84 million (approximately $52 million for device categories and approximately $32 million for drugs and nonimplantable biologicals), which represents 0.18 percent of total projected OPPS payments for CY 2013. We estimate that pass-through spending in CY 2013 would not amount to 2.0 percent of total projected OPPS CY 2013 program spending.

VII. Proposed OPPS Payment for Hospital Outpatient Visits

A. Background

Currently, hospitals report HCPCS visit codes to describe three types of OPPS services: clinic visits, emergency department visits, and critical care services, including trauma team activation. For CY 2013, we are proposing to continue to recognize these CPT and HCPCS codes describing clinic visits, Type A and Type B emergency department visits, and critical care services, which are listed below in Table 29, for CY 2013. We refer readers to the CY 2012 OPPS/ASC final rule with comment period (76 FR 74338 through 74346) for a full discussion of our longstanding policy on OPPS payment for hospital outpatient visits.

Table 29—Proposed HCPCS Codes Used To Report Clinic and Emergency Department Visits and Critical Care Services

CY 2013 HCPCS codeCY 2013 descriptor
Clinic Visit HCPCS Codes
99201Office or other outpatient visit for the evaluation and management of a new patient (Level 1).
99202Office or other outpatient visit for the evaluation and management of a new patient (Level 2).
99203Office or other outpatient visit for the evaluation and management of a new patient (Level 3).
99204Office or other outpatient visit for the evaluation and management of a new patient (Level 4).
99205Office or other outpatient visit for the evaluation and management of a new patient (Level 5).
99211Office or other outpatient visit for the evaluation and management of an established patient (Level 1).
99212Office or other outpatient visit for the evaluation and management of an established patient (Level 2).
99213Office or other outpatient visit for the evaluation and management of an established patient (Level 3).
99214Office or other outpatient visit for the evaluation and management of an established patient (Level 4).
99215Office or other outpatient visit for the evaluation and management of an established patient (Level 5).
Emergency Department Visit HCPCS Codes
99281Emergency department visit for the evaluation and management of a patient (Level 1).
99282Emergency department visit for the evaluation and management of a patient (Level 2).
99283Emergency department visit for the evaluation and management of a patient (Level 3).
99284Emergency department visit for the evaluation and management of a patient (Level 4).
99285Emergency department visit for the evaluation and management of a patient (Level 5).
G0380Type B emergency department visit (Level 1).
G0381Type B emergency department visit (Level 2).
G0382Type B emergency department visit (Level 3).
G0383Type B emergency department visit (Level 4).
G0384Type B emergency department visit (Level 5).
Critical Care Services HCPCS Codes
99291Critical care, evaluation and management of the critically ill or critically injured patient; first 30-74 minutes.
99292Critical care, evaluation and management of the critically ill or critically injured patient; each additional 30 minutes.
G0390Trauma response associated with hospital critical care service.

B. Proposed Policies for Hospital Outpatient Visits

For CY 2013, we are proposing to continue our longstanding policies related to hospital outpatient visits, which includes clinic visits, emergency department visits, and critical care services. Specifically, we are proposing to continue to recognize the definitions of a new patient and an established patient, which are based on whether the patient has been registered as an inpatient or outpatient of the hospital within the 3 years prior to a visit. We also are proposing to continue to apply our policy of calculating costs for clinic visits under the OPPS using historical hospital claims data through five levels of clinic visit APCs (APCs 0604 through 0608). In addition, we are proposing to continue to recognize Type A emergency departments and Type B emergency departments for payment purposes under the OPPS, and to pay for Type A emergency department visits based on their costs through the five levels of Type A emergency department APCs (APCs 0609 and 0613 through 0616) and to pay for Type B emergency department visits based on their costs through the five levels of Type B emergency department APCs (APCs 0626 through 0630). We refer readers to Addendum B to this proposed rule (which is available via the Internet on the CMS Web site) for the proposed APC assignments and payment rates for these hospital outpatient visits. Finally, we are continuing to instruct hospitals to report facility resources for clinic and emergency department hospital outpatient visits using the CPT E/M codes and to develop internal hospital guidelines for reporting the appropriate visit level. We note that our continued expectation is that hospitals' internal guidelines will comport with the principles listed in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66805). We encourage hospitals with specific questions related to the creation of internal guidelines to contact their servicing fiscal intermediary or MAC. We refer readers to the CY 2012 OPPS/ASC final rule with comment period (76 FR 74338 through 74346) for a full historical discussion of these longstanding policies.

We also are proposing to continue the methodology established in the CY 2011 OPPS/ASC final rule with comment period for calculating a payment rate for critical care services that includes packaged payment of ancillary services. For CY 2010 and in prior years, the AMA CPT Editorial Panel defined critical care CPT codes 99291 (Critical care, evaluation and management of the critically ill or critically injured patient; first 30-74 minutes) and 99292 (Critical care, evaluation and management of the critically ill or critically injured patient; each additional 30 minutes (List separately in addition to code for primary service)) to include a wide range of ancillary services such as electrocardiograms, chest X-rays and pulse oximetry. As we have stated in manual instruction, we expect hospitals to report in accordance with CPT guidance unless we instruct otherwise. For critical care in particular, we instructed hospitals that any services that the CPT Editorial Panel indicates are included in the reporting of CPT code 99291 (including those services that would otherwise be reported by and paid to hospitals using any of the CPT codes specified by the CPT Editorial Panel) should not be billed separately. Instead, hospitals were instructed to report charges for any services provided as part of the critical care services. In establishing payment rates for critical care services, and other services, CMS packages the costs of certain items and services separately reported by HCPCS codes into payment for critical care services and other services, according to the standard OPPS methodology for packaging costs (Medicare Claims Processing Manual, Pub. 100-04, Chapter 4, Section 160.1).

For CY 2011, the AMA CPT Editorial Panel revised its guidance for the critical care codes to specifically state that, for hospital reporting purposes, critical care codes do not include the specified ancillary services. Beginning in CY 2011, hospitals that report in accordance with the CPT guidelines should report all of the ancillary services and their associated charges separately when they are provided in conjunction with critical care. Because the CY 2011 payment rate for critical care services was based on hospital claims data from CY 2009, during which time hospitals would have reported charges for any ancillary services provided as part of the critical care services, we stated in the CY 2011 OPPS/ASC final rule with comment period that we believed it was inappropriate to pay separately in CY 2011 for the ancillary services that hospitals may now report in addition to critical care services (75 FR 71988). Therefore, for CY 2011, we continued to recognize the existing CPT codes for critical care services and established a payment rate based on historical data, into which the cost of the ancillary services was intrinsically packaged. We also implemented claims processing edits that conditionally package payment for the ancillary services that are reported on the same date of service as critical care services in order to avoid overpayment. We noted in the CY 2011 OPPS/ASC final rule with comment period that the payment status of the ancillary services would not change when they are not provided in conjunction with critical care services. We assigned status indicator “Q3” (Codes That May Be Paid Through a Composite APC) to the ancillary services to indicate that payment for these services is packaged into a single payment for specific combinations of services and made through a separate APC payment or packaged in all other circumstances, in accordance with the OPPS payment status indicated for status indicator “Q3” in Addendum D1 to the CY 2011 OPPS/ASC final rule with comment period. The ancillary services that were included in the definition of critical care prior to CY 2011 and that are conditionally packaged into the payment for critical care services when provided on the same date of service as critical care services for CY 2011 were listed in Addendum M to that final rule with comment period.

Because the CY 2012 costs for critical care services were based upon CY 2010 claims data, which reflect the CPT billing guidance that was in effect prior to CY 2011, in the CY 2012 OPPS/ASC final rule with comment period (76 FR 74343 through 74344), we continued the methodology established in the CY 2011 OPPS/ASC final rule with comment period of calculating a payment rate for critical care services based on our historical claims data, into which the cost of the ancillary services is intrinsically packaged for CY 2012. We also continued to implement claims processing edits that conditionally package payment for the ancillary services that are reported on the same date of service as critical care services in order to avoid overpayment.

As discussed in section II.A.2.f. of this proposed rule, we are proposing to establish the CY 2013 relative payment weights upon which OPPS payment is based using geometric mean costs. The CY 2011 hospital claims data on which the proposed CY 2013 payment rates are based reflect the first year of claims billed under the revised CPT guidance to allow the reporting of all the ancillary services and their associated charges separately when they are provided in conjunction with critical care. Because our proposal to establish relative payment weights based on geometric mean cost data for CY 2013 represents a change from our historical practice to base payment rates on median costs and because we now have hospital claims data for the first time reflecting the revised coding guidance for critical care, we reviewed the CY 2011 hospital claims data available for this proposed rule and determined that the data show increases in both the mean and median line item costs as well as the mean and median line item charges for CPT code 99291, when compared to CY 2010 hospital claims data. Specifically, the mean and median line item costs increased 13 percent and 16 percent, respectively, and the mean and median line item charges increased 11 percent and 14 percent, respectively. Additionally, when compared to CY 2010 hospital claims data, CY 2011 hospital claims data show no substantial change in the ancillary services that are present on the same claims as critical care services, and also show continued low volumes of many ancillary services. Had the majority of hospitals changed their billing practices to separately report and charge for the ancillary services formerly included in the definition of critical care CPT codes 99291 and 99292, we would have expected to see a decrease in the costs and charges for these CPT codes, and a significant increase in ancillary services reported on the same claims. The lack of a substantial change in the services reported on critical care claims, along with the increases in the line item costs and charges for critical care services, strongly suggests that many hospitals did not change their billing practices for CPT code 99291 following the revision to the CPT coding guidance effective January 1, 2011.

In light of not having claims data to support a significant change in hospital billing practices, we continue to believe that it is inappropriate to pay separately in CY 2013 for the ancillary services that hospitals may now report in addition to critical care services. Therefore, for CY 2013, we are proposing to continue our CY 2011 and CY 2012 policy to recognize the existing CPT codes for critical care services and establish a payment rate based on historical claims data. We also are proposing to continue to implement claims processing edits that conditionally package payment for the ancillary services that are reported on the same date of service as critical care services in order to avoid overpayment. We will continue to monitor the hospital claims data for CPT code 99291 in order to determine whether revisions to this policy are warranted based on changes in hospitals' billing practices.

C. Transitional Care Management

In the CY 2013 MPFS proposed rule, we discuss a multiple year strategy exploring the best means to encourage the provision of primary care and care coordination services to Medicare beneficiaries. As part of the strategy discussed in that proposed rule, we are proposing to address the non-face-to-face work involved in hospital or SNF discharge care coordination by creating a HCPCS G-code for care management involving the transition of a beneficiary from care furnished by a treating physician during a hospital stay (inpatient, outpatient observation services, or outpatient partial hospitalization), SNF stay, or CMHC partial hospitalization program to care furnished by the beneficiary's physician or qualified nonphysician practitioner in the community. As discussed in the CY 2013 MPFS proposed rule, care management involving the transition of a beneficiary from care furnished by a treating physician during a hospital or a SNF stay to the beneficiary's primary physician or qualified nonphysician practitioner in the community could avoid adverse events such as readmissions or subsequent illnesses, improve beneficiary outcomes, and avoid a financial burden on the health care system. Successful efforts to improve hospital discharge care coordination and care transitions could improve the quality of care while simultaneously decreasing costs.

The proposed HCPCS G-code included in the CY 2013 MPFS proposed rule, GXXX1, specifically describes post-discharge transitional care management services, which include all non-face-to-face services related to the transitional care management, furnished by the community physician or nonphysician practitioner within 30 calendar days following the date of discharge from an inpatient acute care hospital, psychiatric hospital, LTCH, SNF, and IRF; discharge from hospital outpatient observation or partial hospitalization services; or discharge from a PHP at a CMHC, to the community-based care. The post-discharge transitional care management services include non-face-to-face care management services provided by clinical staff member(s) or office-based case manager(s) under the supervision of the community physician or qualified nonphysician practitioner.

Transitional care management services include:

1. Assuming responsibility for the beneficiary's care without a gap.

2. Establishing or adjusting a plan of care to reflect required and indicated elements, particularly in light of the services furnished during the stay at the specified facility and to reflect the result of communication with beneficiary.

3. Communication (direct contact, telephone, electronic) with the beneficiary and/or caregiver, including education of the patient and/or caregiver within 2 business days of discharge based on a review of the discharge summary and other available information such as diagnostic test results.

While we do not pay for physician or nonpractitioner professional services under the OPPS (42 CFR 419.22), we recognize that certain elements of the transitional care coordination services described by proposed HCPCS code GXXX1 could be provided to a hospital outpatient as an ancillary or supportive service in conjunction with a primary diagnostic or therapeutic service that would be payable under the OPPS, such as a clinic visit. As described in section II.A.3. of this proposed rule, we package payment for services that are typically ancillary and supportive to a primary service. While we do not make separate payment for such services, their costs are included in the costs of other services furnished by the hospital to the beneficiary on the same day. Because we believe that transitional care management services may be ancillary and supportive to a primary service provided to a hospital outpatient, for purposes of OPPS payment, we are proposing to assign HCPCS code (GXXX1), a status indicator of “N” (Items and Services Packaged into APC Rates) signifying that its payment is packaged. We refer readers to the CY 2013 MPFS proposed rule for a full discussion of post-discharge transitional care management services in particular and, more broadly, the multiple year strategy exploring the best means to encourage primary care and care coordination services.

VIII. Proposed Payment for Partial Hospitalization Services

A. Background

Partial hospitalization is an intensive outpatient program of psychiatric services provided to patients as an alternative to inpatient psychiatric care for individuals who have an acute mental illness. Section 1861(ff)(1) of the Act defines partial hospitalization services as “the items and services described in paragraph (2) prescribed by a physician and provided under a program described in paragraph (3) under the supervision of a physician pursuant to an individualized, written plan of treatment established and periodically reviewed by a physician (in consultation with appropriate staff participating in such program), which plan sets forth the physician's diagnosis, the type, amount, frequency, and duration of the items and services provided under the plan, and the goals for treatment under the plan.” Section 1861(ff)(2) of the Act describes the items and services included in partial hospitalization services. Section 1861(ff)(3)(A) of the Act specifies that a partial hospitalization program (PHP) is a program furnished by a hospital to its outpatients or by a community mental health center (CMHC) (as defined in subparagraph (B)), and “which is a distinct and organized intensive ambulatory treatment service offering less than 24-hour-daily care other than in an individual's home or in an inpatient or residential setting.” Section 1861(ff)(3)(B) of the Act defines community mental health center.

Section 1833(t)(1)(B)(i) of the Act provides the Secretary with the authority to designate the OPD services to be covered under the OPPS. The Medicare regulations that implement this provision specify, at 42 CFR 419.21, that payments under the OPPS will be made for partial hospitalization services furnished by CMHCs as well as Medicare Part B services furnished to hospital outpatients designated by the Secretary, which include partial hospitalization services (65 FR 18444 through 18445).

Section 1833(t)(2)(C) of the Act, in pertinent part, requires the Secretary to “establish relative payment weights for covered OPD services (and any groups of such services described in subparagraph (B)) based on median (or, at the election of the Secretary, mean) hospital costs” using data on claims from 1996 and data from the most recent available cost reports. In pertinent part, subparagraph (B) provides that the Secretary may establish groups of covered OPD services, within a classification system developed by the Secretary for covered OPD services, so that services classified within each group are comparable clinically and with respect to the use of resources. In accordance with these provisions, we have developed the APCs. Section 1833(t)(9)(A) of the Act requires the Secretary to “review not less often than annually and revise the groups, the relative payment weights, and the wage and other adjustments described in paragraph (2) 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.”

Because a day of care is the unit that defines the structure and scheduling of partial hospitalization services, we established a per diem payment methodology for the PHP APCs, effective for services furnished on or after July 1, 2000 (65 FR 18452 through 18455). Under this methodology, the median per diem costs have been used to calculate the relative payment weights for PHP APCs.

From CY 2003 through CY 2006, the median per diem costs for CMHCs fluctuated significantly from year to year, while the median per diem costs for hospital-based PHPs remained relatively constant. We were concerned that CMHCs may have increased and decreased their charges in response to Medicare payment policies. Therefore, we began efforts to strengthen the PHP benefit through extensive data analysis and policy and payment changes in the CY 2008 update (72 FR 66670 through 66676). We made two refinements to the methodology for computing the PHP median: the first remapped 10 revenue codes that are common among hospital-based PHP claims to the most appropriate cost centers; and the second refined our methodology for computing the PHP median per diem cost by computing a separate per diem cost for each day rather than for each bill. We refer readers to a complete discussion of these refinements in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66670 through 66676).

In CY 2009, we implemented several regulatory, policy, and payment changes, including a two-tiered payment approach for PHP services under which we paid one amount for days with 3 services (APC 0172 (Level I Partial Hospitalization)) and a higher amount for days with 4 or more services (APC 0173 (Level II Partial Hospitalization)). We refer readers to section X.B. of the CY 2009 OPPS/ASC final rule with comment period (73 FR 68688 through 68693) for a full discussion of the two-tiered payment system. In addition, for CY 2009, we finalized our policy to deny payment for any PHP claims submitted for days when fewer than 3 units of therapeutic services are provided (73 FR 68694).

Furthermore, for CY 2009, we revised the regulations at 42 CFR 410.43 to codify existing basic PHP patient eligibility criteria and to add a reference to current physician certification requirements at 42 CFR 424.24 to conform our regulations to our longstanding policy (73 FR 68694 through 68695). These changes have helped to strengthen the PHP benefit. We also revised the partial hospitalization benefit to include several coding updates. We refer readers to section X.C.3. of the CY 2009 OPPS/ASC final rule with comment period (73 FR 68695 through 68697) for a full discussion of these requirements.

For CY 2010, we retained the two-tiered payment approach for PHP services and used only hospital-based PHP data in computing the per diem payment rates. We used only hospital-based PHP data because we were concerned about further reducing both PHP APC per diem payment rates without knowing the impact of the policy and payment changes we made in CY 2009. Because of the 2-year lag between data collection and rulemaking, the changes we made in CY 2009 were reflected for the first time in the claims data that we used to determine payment rates for the CY 2011 rulemaking (74 FR 60556 through 60559).

In CY 2011, in accordance with section 1301(b) of the Health Care and Education Reconciliation Act of 2010 (HCERA 2010), we amended the description of a PHP in our regulations to specify that a PHP must be a distinct and organized intensive ambulatory treatment program offering less than 24-hour daily care “other than in an individual's home or in an inpatient or residential setting.” In addition, in accordance with section 1301(a) of HCERA 2010, we revised the definition of a CMHC in the regulations to conform to the revised definition now set forth at section 1861(ff)(3)(B) of the Act. We discussed our finalized policies for these two provisions of HCERA 2010 under section X.C. of the CY 2011 OPPS/ASC final rule with comment period (75 FR 71990).

In the CY 2011 OPPS/ASC final rule with comment period (75 FR 71994), we also established four separate PHP APC per diem payment rates, two for CMHCs (for Level I and Level II services) and two for hospital-based PHPs (for Level I and Level II services). In the CY 2011 OPPS/ASC proposed rule, we proposed that CMHC APC medians would be based only on CMHC data and hospital-based PHP APC medians would be based only on hospital-based PHP data (75 FR 46300). As stated in the CY 2011 OPPS/ASC proposed rule (75 FR 46300) and the final rule with comment period (75 FR 71991), for CY 2011, using CY 2009 claims data, CMHC costs had significantly decreased again. We attributed the decrease to the lower cost structure of CMHCs compared to hospital-based PHP providers, and not the impact of CY 2009 policies. CMHCs have a lower cost structure than hospital-based PHP providers, in part because the data showed that CMHCs provide fewer PHP services in a day and use less costly staff than hospital-based PHPs. Therefore, it was inappropriate to continue to treat CMHCs and hospital-based providers in the same manner regarding payment, particularly in light of such disparate differences in costs. We also were concerned that paying hospital-based PHP programs at a lower rate than their cost structure reflects could lead to hospital-based PHP program closures and possible access problems for Medicare beneficiaries, given that hospital-based programs offer the widest access to PHP services because they are located across the country. Creating the four payment rates (two for CMHCs and two for hospital-based PHPs) based on each provider's data supported continued access to the PHP benefit, while also providing appropriate payment based on the unique cost structures of CMHCs and hospital-based PHPs. In addition, separation of data by provider type was supported by several hospital-based PHP commenters who responded to the CY 2011 OPPS/ASC proposed rule (75 FR 71992).

For CY 2011, we instituted a 2-year transition period for CMHCs to the CMHC APC per diem payment rates based solely on CMHC data. For CY 2011, under the transition methodology, CMHC APC Level I and Level II per diem costs were calculated by taking 50 percent of the difference between the CY 2010 final hospital-based medians and the CY 2011 final CMHC medians and then adding that number to the CY 2011 final CMHC medians. A 2-year transition under this methodology moved us in the direction of our goal, which is to pay appropriately for PHP services based on each provider type's data, while at the same time allowing providers time to adjust their business operations and protect access to care for beneficiaries. We also stated that we would review and analyze the data during the CY 2012 rulemaking cycle and may, based on these analyses, further refine the payment mechanism. We refer readers to section X.B. of the CY 2011 OPPS/ASC final rule with comment period (75 FR 71991 through 71994) for a full discussion.

After publication of the CY 2011 OPPS/ASC final rule with comment period, a CMHC and one of its patients filed an application for a preliminary injunction, challenging the OPPS payment rates for PHP services provided by CMHCs in CY 2011 as adopted in the CY 2011 OPPS/ASC final rule with comment period (75 FR 71995). We refer readers to the court case, Paladin Cmty. Mental Health Ctr. v. Sebelius, No. 10-949, 2011 WL 3102049 (W.D.Tex. 2011), aff'd, No. 11-50682, 2012 WL 2161137 (5th Cir. June 15, 2012) (Paladin). The plaintiffs in the Paladin case challenged the agency's use of cost data derived from both hospitals and CMHCs in determining the relative payment weights for the OPPS payment rates for PHP services furnished by CMHCs, alleging that section 1833(t)(2)(C) of the Act requires that such relative payment weights be based on cost data derived solely from hospitals. As discussed above, section 1833(t)(2)(C) of the Act requires CMS to “establish relative payment weights for covered OPD services (and any groups of such services * * *) * * * based on * * * hospital costs.” Numerous courts have held that “based on” does not mean “based exclusively on.” On July 25, 2011, the District Court dismissed the plaintiffs' complaint and application for preliminary injunction for lack of subject-matter jurisdiction, which the plaintiffs appealed to the United States Court of Appeals for the Fifth Circuit. On June 15, 2012, the Court of Appeals affirmed the District Court's dismissal for lack of subject-matter jurisdiction and found that the Secretary's payment rate determinations for PHP services are not a facial violation of a clear statutory mandate. (Paladin at *6).

For CY 2012, as discussed in the CY 2012 OPPS/ASC final rule with comment period (76 FR 74348 through 74352), we determined the relative payment weights for PHP services provided by CMHCs based on data derived solely from CMHCs and the relative payment weights for hospital-based PHP services based exclusively on hospital data. The statute is reasonably interpreted to allow the relative payment weights for the OPPS payment rates for PHP services provided by CMHCs to be based solely on CMHC data and relative payment weights for hospital-based PHP services to be based exclusively on hospital data. Section 1833(t)(2)(C) of the Act requires the Secretary to “establish relative payment weights for covered OPD services (and any groups of such services described in subparagraph (B)) based on * * * hospital costs.” In pertinent part, subparagraph (B) provides that “the Secretary may establish groups of covered OPD services * * * so that services classified within each group are comparable clinically and with respect to the use of resources.” In accordance with subparagraph (B), we developed the APCs, as set forth in § 419.31 of the regulations (65 FR 18446 and 18447; 63 FR 47559 through 47562 and 47567 through 47569). As discussed above, PHP services are grouped into APCs.

Based on section 1833(t)(2)(C) of the Act, we believe that the word “establish” can be interpreted as applying to APCs at the inception of the OPPS in 2000 or whenever a new APC is added to the OPPS. In creating the original APC for PHP services (APC 0033), we did “establish” the initial relative payment weight for PHP services, provided in both hospital-based and CMHC-based settings, only on the basis of hospital data. Subsequently, from CY 2003 through CY 2008, the relative payment weights for PHP services were based on a combination of hospital and CMHC data. Similarly, we established new APCs for PHP services based exclusively on hospital data. For CY 2009, we adopted a two-tiered APC methodology (in lieu of the original APC 0033) under which CMS paid one rate for days with 3 services (APC 0172) and a different payment rate for days with 4 or more services (APC 0173). These two new APCs were established using only hospital data. For CY 2011, we added two new APCs (APCs 0175 and 0176) for PHP services provided by hospitals and based the relative payment weights for these APCs solely on hospital data. APCs 0172 and 0173 were designated for PHP services provided by CMHCs and were based on a mixture of hospital and CMHC data. As the Secretary argued in the Paladin case, the courts have consistently held that the phrase “based on” does not mean “based exclusively on.” Thus, the relative payment weights for the two APCs for PHP services provided by CMHCs in CY 2011 were “based on” hospital data, no less than the relative payment weights for the two APCs for hospital-based PHP services.

Although we used hospital data to establish the relative payment weights for APCs 0033, 0172, 0173, 0175, and 0176 for PHP services, we believe that we have the authority to discontinue the use of hospital data in determining the OPPS relative payment weights for PHP services provided by CMHCs. Other parts of section 1833(t)(2)(C) of the Act make plain that the data source for the relative payment weights is subject to change from one period to another. Section 1833(t)(2)(C) of the Act provides that, in establishing the relative payment weights, “the Secretary shall [ ] us[e] data on claims from 1996 and us[e] data from the most recent available cost reports.” However, we used 1996 data (plus 1997 data) in determining only the original relative payment weights for 2000; in the ensuing calendar year updates, we continually used more recent cost report data.

Moreover, section 1833(t)(9)(A) of the Act requires the Secretary to “review not less often than annually and revise the groups, the relative payment weights, and the wage and other adjustments described in paragraph (2) 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.” For purposes of the CY 2012 update, we exercised our authority under section 1833(t)(9)(A) of the Act to change the data source for the relative payment weights for PHP services provided by CMHCs based on “new cost data, and other relevant information and factors.”

B. Proposed PHP APC Update for CY 2013

As discussed in section II.A.2.g. of this proposed rule, for CY 2013, we are proposing to develop the relative payment weights that underpin the OPPS using geometric means rather than the current median-based methodology. This proposal to base the relative payment weights on geometric means would also apply to the per diem costs used to determine the relative payment weights for the four PHP APCs. For PHP APCs, as with all other OPPS APCs, the proposal to base the relative payment weights on geometric means rather than medians would not affect the general process to establish appropriate claims for modeling. As with the current median-based methodology, the PHP APC payment rates would continue to be calculated by computing a separate per diem cost for each day of PHP. When there are multiple days of PHP services entered on a claim, a unique cost would continue to be computed for each day of care. However, a geometric mean would be used to calculate the per diem costs rather than a median. The process would still be repeated separately for CMHCs and hospital-based PHPs using that provider's claims data for the two categories of days with 3 services and days with 4 or more services. The four PHP APC per diem costs would continue to be included in the scaling of all APCs in OPPS to the mid-level office visit (APC 0606). Again, for a detailed discussion of the proposed CY 2013 OPPS weight scaler, we refer readers to section II.A.4. of this proposed rule.

For CY 2013, using CY 2011 claims data, we computed proposed CMHC PHP APC geometric mean per diem costs for Level I (3 services per day) and Level II (4 or more services per day) services using only CY 2011 CMHC claims data, and proposed hospital-based PHP APC geometric mean per diem costs for Level I and Level II services using only CY 2011 hospital-based PHP claims data. These proposed geometric mean per diem costs are shown in Table 30 below.

Table 30—Proposed CY 2013 Geometric Mean Per Diem Costs for CMHC and Hospital-Based PHP Services, Based on CY 2011 Claims Data

APCGroup titleProposed geometric mean per diem costs
0172Level I Partial Hospitalization (3 services) for CMHCs$87.76
0173Level II Partial Hospitalization (4 or more services) for CMHCs111.89
0175Level I Partial Hospitalization (3 services) for hospital-based PHPs182.66
0176Level II Partial Hospitalization (4 or more services) for hospital-based PHPs232.74

Under the CY 2013 proposal to base the OPPS relative payment weights on geometric mean costs, the proposed geometric mean per diem costs for CMHCs would continue to be substantially lower than the proposed geometric mean per diem costs for hospital-based PHPs for the same units of service. For CY 2013, the proposed geometric mean per diem costs for days with 3 services (Level I) is approximately $88 for CMHCs and approximately $183 for hospital-based PHPs. The proposed geometric mean per diem costs for days with 4 or more services (Level II) is approximately $112 for CMHCs and approximately $233 for hospital-based PHPs. This analysis indicates that there continues to be fundamental differences between the cost structures of CMHCs and hospital-based PHPs.

The CY 2013 proposed geometric mean per diems costs for CMHCs calculated under the proposed CY 2013 methodology using CY 2011 claims data also have decreased compared to the CY 2012 final median per diem costs for CMHCs established in the CY 2012 OPPS/ASC final rule with comment period (76 FR 74352), with per diem costs for Level I services decreasing from approximately $98 to approximately $88, and costs for Level II services decreasing from approximately $114 to approximately $112. In contrast, the CY 2013 proposed geometric mean per diem costs for hospital-based PHPs calculated under the proposed CY 2013 methodology using CY 2011 claims data have increased compared to the CY 2012 final median per diem costs for hospital-based PHPs, with per diem costs for Level I services increasing from approximately $161 to approximately $183, and per diem costs for Level II services increasing from approximately $191 to approximately $233.

To provide a comparison, we also calculated PHP median per diem costs for CY 2013 using CY 2011 claims data. We computed median per diem costs for each provider type using that provider's claims data for Level I services and for Level II services. These comparative median per diem costs are shown in Table 31 below.

Table 31—Comparative PHP Median Per Diem Costs for CMHC and Hospital-Based PHP Services, Based on CY 2011 Claims Data

APCGroup titleComparative median per diem costs
0172Level I Partial Hospitalization (3 services) for CMHCs$87.52
0173Level II Partial Hospitalization (4 or more services) for CMHCs121.27
0175Level I Partial Hospitalization (3 services) for hospital-based PHPs163.86
0176Level II Partial Hospitalization (4 or more services) for hospital-based PHPs224.57

The proposed geometric mean per diem costs for hospital-based PHPs for Level I and Level II services calculated under the proposed CY 2013 methodology using CY 2011 claims data would be higher than the median per diem costs calculated under the current median-based methodology, using CY 2011 claims data. For hospital-based PHPs, the per diem costs would increase from approximately $164 under the current median-based methodology to approximately $183 under the proposed geometric mean-based methodology for Level I services, and from approximately $225 to approximately $233 for Level II services.

The proposed geometric mean per diem costs for CMHCs for Level I services calculated under the proposed CY 2013 methodology using CY 2011 claims data would be approximately the same as the median per diem costs calculated under the current median-based methodology, using CY 2011 claims data. The proposed geometric mean per diem costs for CMHCs for Level II services calculated under the proposed CY 2013 methodology using CY 2011 claims data would be slightly lower than the median per diem costs calculated under the current median-based methodology, using CY 2011 claims data. For CMHCs, the per diem costs would be approximately $88 under both the current median-based methodology and the proposed geometric mean-based methodology for CMHC Level I services, and would decrease from approximately $121 under the current median-based methodology to approximately $112 under the proposed geometric mean-based methodology for CMHC Level II services.

The data analysis also shows that the median per diem costs for CMHCs continue to be substantially lower than the median per diem costs for hospital-based PHPs for the same units of service provided. The median per diem costs for Level I services is approximately $88 for CMHCs and approximately $164 for hospital-based PHPs. The median per diem costs for Level II services is approximately $121 for CMHCs and approximately $225 for hospital-based PHPs. The significant difference in per diem costs between CMHCs and hospital-based PHPs emphasizes the distinct cost structures between the two provider types.

Finally, the data analysis indicates that CMHC median per diem costs for Level I services would have decreased from CY 2012 final median per diem costs (using CY 2010 claims data) (established in the CY 2012 OPPS/ASC final rule with comment period (76 FR 74352)) to CY 2013 (using CY 2011 claims data) from approximately $98 to approximately $88, using only CMHC claims data. The CMHC median per diem costs for Level II services would have slightly increased from CY 2012 final median per diem costs (using CY 2010 claims data) to CY 2013 (using CY 2011 claims data) from approximately $114 to approximately $121, using only CMHC claims data. Hospital-based PHP median per diem costs for Level I and Level II services would have increased from the CY 2012 final median per diem costs (using CY 2010 claims data) to CY 2013 (using CY 2011 claims data) from approximately $161 to approximately $164 for Level I services and from approximately $191 to approximately $225 for Level II services, using only hospital claims data.

In summary, while we have historically based the OPPS payments on median costs for services in the APC groups, for CY 2013, we are proposing to calculate the relative payment weights for the OPPS APCs using geometric means, including the four PHP APCs, as discussed in section II.A.2.g. of this proposed rule. The proposed CY 2013 geometric mean per diem costs for the PHP APCs are shown in Tables 32 and 33 below. We invite public comments on these proposals. We will continue our efforts to explore payment reforms that will support quality and result in greater payment accuracy and reduction of fraud and abuse within the partial hospitalization program.

Table 32—Proposed CY 2013 Geometric Mean Per Diem Costs for CMHC PHP Services

APCGroup titleProposed mean per diem costs
0172Level I Partial Hospitalization (3 services) for CMHCs$87.76
0173Level II Partial Hospitalization (4 or more services) for CMHCs111.89

Table 33—Proposed CY 2013 Geometric Mean Per Diem Costs for Hospital-Based PHP Services

APCGroup titleProposed mean per diem costs
0175Level I Partial Hospitalization (3 services) for hospital-based PHPs$182.66
0176Level II Partial Hospitalization (4 or more services) for hospital-based PHPs$232.74

C. Proposed Separate Threshold for Outlier Payments to CMHCs

In the CY 2004 OPPS final rule with comment period (68 FR 63469 through 63470), we indicated that, given the difference in charges for PHP services provided between hospitals and CMHCs, we did not believe it was appropriate to make outlier payments to CMHCs using the outlier percentage target amount and threshold established for hospitals. Prior to that time, there was a significant difference in the amount of outlier payments made to hospitals and CMHCs for PHP services. Therefore, we designated a portion of the estimated OPPS outlier target amount specifically for CMHCs, consistent with the percentage of projected payments to CMHCs under the OPPS each year, excluding outlier payments. In addition, further analysis indicated that using the same OPPS outlier threshold for both hospitals and CMHCs did not limit outlier payments to high-cost cases and resulted in excessive outlier payments to CMHCs. Therefore, beginning in CY 2004, we established a separate outlier threshold for CMHCs. The separate outlier threshold for CMHCs has resulted in more commensurate outlier payments.

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

We are proposing to continue our policy of identifying 1.0 percent of the aggregate total payments under the OPPS for outlier payments for CY 2013. We are proposing tha