Skip to Content

Rule

Medicare Program: Hospital Outpatient Prospective Payment and Ambulatory Surgical Center Payment Systems and Quality Reporting Programs; Short Inpatient Hospital Stays; Transition for Certain Medicare-Dependent, Small Rural Hospitals Under the Hospital Inpatient Prospective Payment System; Provider Administrative Appeals and Judicial Review

Document Details

Information about this document as published in the Federal Register.

Document Statistics
Document page views are updated periodically throughout the day and are cumulative counts for this document including its time on Public Inspection. Counts are subject to sampling, reprocessing and revision (up or down) throughout the day.
Enhanced Content

Relevant information about this document from Regulations.gov provides additional context. This information is not part of the official Federal Register document.

Published Document

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

Start Preamble Start Printed Page 70298

AGENCY:

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

ACTION:

Final rule with comment period; final rule.

SUMMARY:

This final rule with comment period revises the Medicare hospital outpatient prospective payment system (OPPS) and the Medicare ambulatory surgical center (ASC) payment system for CY 2016 to implement applicable statutory requirements and changes arising from our continuing experience with these systems. In this final rule with comment period, we describe the 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, this final rule with comment period updates and refines the requirements for the Hospital Outpatient Quality Reporting (OQR) Program and the ASC Quality Reporting (ASCQR) Program.

Further, this document includes certain finalized policies relating to the hospital inpatient prospective payment system: Changes to the 2-midnight rule under the short inpatient hospital stay policy; and a payment transition for hospitals that lost their status as a Medicare-dependent, small rural hospital (MDH) because they are no longer in a rural area due to the implementation of the new Office of Management and Budget delineations in FY 2015 and have not reclassified from urban to rural before January 1, 2016.

In addition, this document contains a final rule that finalizes certain 2015 proposals, and addresses public comments received, relating to the changes in the Medicare regulations governing provider administrative appeals and judicial review relating to appropriate claims in provider cost reports.

DATES:

Effective Date: This final rule with comment period and final rule are effective on January 1, 2016.

Comment Period: To be assured consideration, comments on the payment classifications assigned to HCPCS codes identified in Addenda B, AA, and BB with the “NI” comment indicator and on other areas specified throughout this final rule with comment period must be received at one of the addresses provided in the ADDRESSES section no later than 5 p.m. EST on December 29, 2015.

Application Deadline—New Class of New Technology Intraocular Lenses: Requests for review of applications for a new class of new technology intraocular lenses must be received by 5 p.m. EST on March 1, 2016, at the following address: ASC/NTIOL, Division of Outpatient Care, Mailstop C4-05-17, Centers for Medicare and Medicaid Services, 7500 Security Boulevard, Baltimore, MD 21244-1850.

ADDRESSES:

In commenting, please refer to file code CMS-1633-FC. 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-1633-FC, 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-1633-FC, 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.

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

Start Further Info

FOR FURTHER INFORMATION CONTACT:

Advisory Panel on Hospital Outpatient Payment (HOP Panel), contact Carol Schwartz at (410) 786-0576.

Ambulatory Surgical Center (ASC) Payment System, contact Elisabeth Daniel at (410) 786-0237.

Ambulatory Surgical Center Quality Reporting (ASCQR) Program Administration, Validation, and Reconsideration Issues, contact Anita Bhatia at (410) 786-7236.

Ambulatory Surgical Center Quality Reporting (ASCQR) Program Measures, contact Vinitha Meyyur at (410) 786-8819.

Blood and Blood Products, contact Lela Strong at (410) 786-3213.

Cancer Hospital Payments, contact David Rice at (410) 786-6004.

Chronic Care Management (CCM) Hospital Services, contact Twi Jackson at (410) 786-1159.

CPT and Level II Alphanumeric HCPCS Codes—Process for Requesting Comments, contact Marjorie Baldo at (410) 786-4617.

CMS Web Posting of the OPPS and ASC Payment Files, contact Chuck Braver at (410) 786-9379.

Composite APCs (Extended Assessment and Management, Low Dose Brachytherapy, Multiple Imaging), contact Twi Jackson at (410) 786-1159.

Comprehensive APCs, contact Lela Strong at (410) 786-3213.Start Printed Page 70299

Hospital Observation Services, contact Twi Jackson at (410) 786-1159.

Hospital Outpatient Quality Reporting (OQR) Program Administration, Validation, and Reconsideration Issues, contact Elizabeth Bainger at (410) 786-0529.

Hospital Outpatient Quality Reporting (OQR) Program Measures, contact Vinitha Meyyur at (410) 786-8819.

Hospital Outpatient Visits (Emergency Department Visits and Critical Care Visits), contact Twi Jackson at (410) 786-1159.

Inpatient Only Procedures List, contact Lela Strong at (410) 786-3213.

Medicare Cost Reports: Appropriate Claims and Provider Appeals, contact Kellie Shannon at (410) 786-0416.

New Technology Intraocular Lenses (NTIOLs), contact John McInnes at (410) 786-0791.

No Cost/Full Credit and Partial Credit Devices, contact Carol Schwartz at (410) 786-0576.

OPPS Brachytherapy, contact Elisabeth Daniel at (410) 786-0237.

OPPS Data (APC Weights, Conversion Factor, Copayments, Cost-to-Charge Ratios (CCRs), Data Claims, Geometric Mean Calculation, Outlier Payments, and Wage Index), contact David Rice at (410) 786-6004.

OPPS Drugs, Radiopharmaceuticals, Biologicals, and Biosimilar Products, contact Elisabeth Daniel at (410) 786-0237.

OPPS Exceptions to the 2 Times Rule, contact Marjorie Baldo at (410) 786-4617.

OPPS Packaged Items/Services, contact Elisabeth Daniel at (410) 786-0237.

OPPS Pass-Through Devices and New Technology Procedures/Services, contact Carol Schwartz at (410) 786-0576.

OPPS Status Indicators (SI) and Comment Indicators (CI), contact Marina Kushnirova at (410) 786-2682.

Partial Hospitalization Program (PHP) and Community Mental Health Center (CMHC) Issues, contact Dexter Dickey at (410) 786-6856.

Rural Hospital Payments, contact David Rice at (410) 786-6004.

Stereotactic Radiosurgery Services (SRS), contact Elisabeth Daniel at (410) 786-0237.

Transition for Former Medicare-Dependent, Small Rural Hospitals, contact Shevi Marciano at (410) 786-4487.

Two-Midnight Policy—General Issues, contact Twi Jackson at (410) 786-1159.

Two-Midnight Policy—Medical Review, contact Steven Rubio at (410) 786-1782.

All Other Issues Related to Hospital Outpatient and Ambulatory Surgical Center Payments Not Previously Identified, contact Marjorie Baldo at (410) 786-4617.

End Further Info End Preamble Start Supplemental Information

SUPPLEMENTARY INFORMATION:

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

Alphabetical List of Acronyms Appearing in This Federal Register Document

AHA American Hospital Association

AMA American Medical Association

AMI Acute myocardial infarction

APC Ambulatory Payment Classification

APU Annual payment update

ASC Ambulatory surgical center

ASCQR Ambulatory Surgical Center Quality Reporting

ASP Average sales price

AWP Average wholesale price

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

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

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

BLS Bureau of Labor Statistics

CAH Critical access hospital

CAHPS Consumer Assessment of Healthcare Providers and Systems

CAP Competitive Acquisition Program

C-APC Comprehensive Ambulatory Payment Classification

CASPER Certification and Survey Provider Enhanced Reporting

CAUTI Catheter-associated urinary tract infection

CBSA Core-Based Statistical Area

CCM Chronic care management

CCN CMS Certification Number

CCR Cost-to-charge ratio

CDC Centers for Disease Control and Prevention

CED Coverage with Evidence Development

CERT Comprehensive Error Rate Testing

CFR Code of Federal Regulations

CI Comment indicator

CLABSI Central Line [Catheter] Associated Blood Stream Infection

CLFS Clinical Laboratory Fee Schedule

CMHC Community mental health center

CMS Centers for Medicare & Medicaid Services

CoP Condition of participation

CPI-U Consumer Price Index for All Urban Consumers

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

CR Change request

CRC Colorectal cancer

CSAC Consensus Standards Approval Committee

CT Computed tomography

CV Coefficient of variation

CY Calendar year

DFO Designated Federal Official

DIR Direct or indirect remuneration

DME Durable medical equipment

DMEPOS Durable Medical Equipment, Prosthetic, Orthotics, and Supplies

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

DSH Disproportionate share hospital

EACH Essential access community hospital

EAM Extended assessment and management

EBRT External beam radiotherapyStart Printed Page 70300

ECG Electrocardiogram

ED Emergency department

EDTC Emergency department transfer communication

EHR Electronic health record

EJR Expedited judicial review

E/M Evaluation and management

ESRD End-stage renal disease

ESRD QIP End-Stage Renal Disease Quality Improvement Program

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

FDA Food and Drug Administration

FFS [Medicare] Fee-for-service

FTE Full-time equivalent

FY Fiscal year

GAO Government Accountability Office

GI Gastrointestinal

GME Graduate medical education

HAI Healthcare-associated infection

HCAHPS Hospital Consumer Assessment of Healthcare Providers and Systems

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

HCP Health care personnel

HCPCS Healthcare Common Procedure Coding System

HCRIS Healthcare Cost Report Information System

HCUP Healthcare Cost and Utilization Project

HEU Highly enriched uranium

HH QRP Home Health Quality Reporting Program

HHS Department of Health and Human Services

HIE Health information exchange

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

HOP Hospital Outpatient Payment [Panel]

HOPD Hospital outpatient department

HOP QDRP Hospital Outpatient Quality Data Reporting Program

HPMS Health Plan Management System

IBD Inflammatory bowel disease

ICC Interclass correlation coefficient

ICD Implantable cardioverter defibrillator

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

ICD-10 International Classification of Diseases, Tenth Revision

ICH In-center hemodialysis

IME Indirect medical education

IDTF Independent diagnostic testing facility

IGI IHS Global Insight, Inc.

IHS Indian Health Service

I/OCE Integrated Outpatient Code Editor

IOL Intraocular lens

IORT Intraoperative radiation treatment

IPFQR Inpatient Psychiatric Facility Quality Reporting

IPPS [Hospital] Inpatient Prospective Payment System

IQR [Hospital] Inpatient Quality Reporting

IRF Inpatient rehabilitation facility

IRF QRP Inpatient Rehabilitation Facility Quality Reporting Program

IT Information technology

LCD Local coverage determination

LDR Low dose rate

LTCH Long-term care hospital

LTCHQR Long-Term Care Hospital Quality Reporting

MAC Medicare Administrative Contractor

MACRA Medicare Access and CHIP Reauthorization Act of 2015, Pub. L. 114-10

MAP Measure Application Partnership

MDH Medicare-dependent, small rural hospital

MedPAC Medicare Payment Advisory Commission

MEG Magnetoencephalography

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, Pub. L. 109-432

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

MLR Medical loss ratio

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

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

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

MPFS Medicare Physician Fee Schedule

MR Medical review

MRA Magnetic resonance angiography

MRgFUS Magnetic Resonance Image Guided Focused Ultrasound

MRI Magnetic resonance imaging

MRSA Methicillin-Resistant Staphylococcus Aures

MS-DRG Medicare severity diagnosis-related group

MSIS Medicaid Statistical Information System

MUC Measure under consideration

NCCI National Correct Coding Initiative

NDC National Drug Code

NEMA National Electrical Manufacturers Association

NHSN National Healthcare Safety Network

NOS Not otherwise specified

NPI National Provider Identifier

NPR Notice of program reimbursement

NPWT Negative Pressure Wound Therapy

NQF National Quality Forum

NQS National Quality Strategy

NTIOL New technology intraocular lens

NUBC National Uniform Billing Committee

OACT [CMS] Office of the Actuary

OBRA Omnibus Budget Reconciliation Act of 1996, Pub. L. 99-509

OIG [HHS] Office of the Inspector General

OMB Office of Management and Budget

ONC Office of the National Coordinator for Health Information Technology

OPD [Hospital] Outpatient Department

OPO Organ Procurement Organization

OPPS [Hospital] Outpatient Prospective Payment System

OPSF Outpatient Provider-Specific File

OQR [Hospital] Outpatient Quality Reporting

OT Occupational therapy

PAMA Protecting Access to Medicare Act of 2014, Pub. L. 113-93

PCHQR PPS-Exempt Cancer Hospital Quality Reporting

PCR Payment-to-cost ratio

PDC Per day cost

PDE Prescription Drug Event

PE Practice expense

PEPPER Program Evaluation Payment Patterns Electronic Report

PHP Partial hospitalization program

PHSA Public Health Service Act, Pub. L. 96-88

PMA Premarket approval

PN Pneumonia

POS Place of service

PPI Producer Price Index

PPS Prospective payment system

PQRI Physician Quality Reporting Initiative

PQRS Physician Quality Reporting System

PRM Provider Reimbursement Manual

QDC Quality data code

QIO Quality Improvement Organization

RFA Regulatory Flexibility Act

RHQDAPU Reporting Hospital Quality Data for Annual Payment Update

RTI Research Triangle Institute, International

RVU Relative value unit

SAD Self-administered drug

SAMS Secure Access Management Services

SCH Sole community hospital

SCOD Specified covered outpatient drugs

SES Socioeconomic status

SI Status indicator

SIR Standardized infection ratio

SNF Skilled nursing facility

SRS Stereotactic radiosurgery

SSA Social Security Administration

SSI Surgical site infection

TEP Technical Expert Panel

TIP Transprostatic implant procedure

TOPs Transitional Outpatient Payments

USPSTF United States Preventive Services Task Force

VBP Value-based purchasing

WAC Wholesale acquisition cost

Table of Contents

I. Summary and Background

A. Executive Summary of This Document

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 (the HOP Panel or the Panel)

1. Authority of the Panel

2. Establishment of the Panel

3. Panel Meetings and Organizational Structure

F. Public Comments Received on the CY 2015 OPPS/ASC Final Rule With Comment Period

G. Public Comments Received on the CY 2016 OPPS/ASC Proposed Rule

II. Updates Affecting OPPS Payments

A. Recalibration of APC Relative Payment Weights

1. Database Construction

a. Database Source and Methodology

b. Use of Single and Multiple Procedure Claims

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

2. 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 ClaimsStart Printed Page 70301

(2) Creation of “Pseudo” Single Procedure Claims

c. Completion of Claim Records and Geometric Mean Cost Calculations

(1) General Process

(2) Recommendations of the Panel Regarding Data Development

d. Calculation of Single Procedure APC Criteria-Based Costs

(1) Blood and Blood Products

(2) Brachytherapy Sources

e. Comprehensive APCs (C-APCs) for CY 2016

(1) Background

(2) C-APCs To Be Paid Under the C-APC Payment Policy for CY 2016

(3) CY 2016 Policies for Specific C-APCs

f. Calculation of Composite APC Criteria-Based Costs

(1) Low Dose Rate (LDR) Prostate Brachytherapy Composite APC

(2) Mental Health Services Composite APC

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

3. Changes to Packaged Items and Services

a. Background and Rationale for Packaging in the OPPS

b. Packaging Policies for CY 2016

(1) Ancillary Services

(2) Drugs and Biologicals That Function as Supplies When Used in a Surgical Procedure

(3) Clinical Diagnostic Laboratory Tests

4. Calculation of OPPS Scaled Payment Weights

B. Conversion Factor Update

C. Wage Index Changes

D. Statewide Average Default CCRs

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

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

1. Background

2. Payment Adjustment for Certain Cancer Hospitals for CY 2016

G. Hospital Outpatient Outlier Payments

1. Background

2. Outlier Calculation

3. Final Outlier Calculation

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

I. Beneficiary Copayments

1. Background

2. OPPS Copayment Policy

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

III. OPPS Ambulatory Payment Classification (APC) Group Policies

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

1. Treatment of New CY 2015 Level II HCPCS and CPT Codes Effective April 1, 2015 and July 1, 2015 for Which We Solicited Public Comments in the CY 2016 OPPS/ASC Proposed Rule

2. Process for New Level II HCPCS Codes That Became Effective October 1, 2015 and New Level II HCPCS Codes That Will Be Effective January 1, 2016 for Which We Are Soliciting Public Comments in this CY 2016 OPPS/ASC Final Rule With Comment Period

3. Treatment of New and Revised CY 2016 Category I and III CPT Codes That Will Be Effective January 1, 2016 for Which We Solicited Public Comments in the CY 2016 OPPS/ASC Proposed Rule

B. OPPS Changes—Variations Within APCs

1. Background

2. Application of the 2 Times Rule

3. APC Exceptions to the 2 Times Rule

C. New Technology APCs

1. Background

2. Additional New Technology APC Groups

3. Procedures Assigned to New Technology APCs for CY 2016

a. Transprostatic Urethral Implant Procedure

b. Retinal Prosthesis Implant Procedure

D. OPPS Ambulatory Payment Classification (APC) Group Policies

1. Airway Endoscopy Procedures

2. Cardiovascular Procedures and Services

a. Cardiac Contractility Modulation (CCM) Therapy

b. Cardiac Rehabilitation

c. Cardiac Telemetry

3. Diagnostic Tests and Related Services

4. Excision/Biopsy and Incision and Drainage Procedures

5. Eye Surgery and Other Eye-Related Procedures

a. Implantable Miniature Telescope (CPT Code 0308T)

b. Other Ocular Procedures

6. Gastrointestinal (GI) Procedures

7. Gynecologic Procedures and Services

8. Imaging Services

6. Orthopedic Procedures

9. Skin Procedures

10. Pathology Services

11. Radiology Oncology Procedures and Services

a. Therapeutic Radiation Treatment Preparation

b. Radiation Therapy (Including Brachytherapy)

c. Fractionated Stereotactic Radiosurgery (SRS)

12. Skin Procedures

a. Negative Pressure Wound Therapy (NPWT)

b. Platelet Rich Plasma (PRP)

13. Urology and Related Services

14. Vascular Procedures (Excluding Endovascular Procedures)

15. Other Procedures and Services

a. Ear, Nose, Throat (ENT) Procedures

b. Magnetic Resonance-Guided Focused Ultrasound Surgery (MRgFUS)

c. Stem Cell Transplant

IV. OPPS Payment for Devices

A. Pass-Through Payments for Devices

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

a. Background

b. CY 2016 Policy

2. Annual Rulemaking Process in Conjunction With Quarterly Review Process for Device Pass-Through Payment Applications

a. Background

b. Revision to the Application Process for Device Pass-Through Payments

c. Criterion for Newness

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

a. Background

b. CY 2016 Policy

B. Device-Intensive Procedures

1. Background

2. Changes to Device Edit Policy

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

a. Background

b. Policy for CY 2016

4. Adjustment to OPPS Payment for Discontinued Device-Intensive Procedures

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

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

1. Background

2. Drugs and Biologicals With Expiring Pass-Through Status in CY 2015

3. Drugs, Biologicals, and Radiopharmaceuticals With New or Continuing Pass-Through Status in CY 2016

4. Provisions for Reducing Transitional Pass-Through Payments for Policy-Packaged Drugs and Biologicals to Offset Costs Packaged Into APC Groups

a. Background

b. Payment Offset Policy for Diagnostic Radiopharmaceuticals

c. Payment Offset Policy for Contrast Agents

d. Payment Offset Policy for Drugs, Biologicals, and Radiopharmaceuticals That Function as Supplies When Used in a Diagnostic Test or Procedure (Other Than Diagnostic Radiopharmaceuticals and Contrast Agents and Drugs and Biologicals That Function as Supplies When Used in a Surgical Procedure)

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

1. Background

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

a. Background

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

c. High Cost/Low Cost Threshold for Packaged Skin Substitutes

d. Packaging Determination for HCPCS Codes That Describe the Same Drug or Biological but Different Dosages

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

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

b. CY 2016 Payment Policy

4. Payment Policy for Therapeutic Radiopharmaceuticals

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

6. Payment for Blood Clotting Factors

7. Payment for Nonpass-Through Drugs, Biologicals, and Radiopharmaceuticals With HCPCS Codes but Without OPPS Hospital Claims DataStart Printed Page 70302

C. Self-Administered Drugs (SADs) Technical Correction

D. OPPS Payment for Biosimilar Biological Products

1. Background

2. Payment Policy for Biosimilar Biological Products

3. OPPS Transitional Pass-Through Payment Policy for Biosimilar Biological Products

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

A. Background

B. Estimate of Pass-Through Spending

VII. OPPS Payment for Hospital Outpatient Visits

A. Payment for Hospital Outpatient Clinic and Emergency Department Visits

B. Payment for Critical Care Services

C. Payment for Chronic Care Management Services

VIII. Payment for Partial Hospitalization Services

A. Background

B. PHP APC Update for CY 2016

1. PHP APC Geometric Mean Per Diem Costs

2. PHP Ratesetting Process

a. Development of PHP claims

b. Determination of CCRs for CMHCs and Hospital-Based PHPs

c. Identification of PHP Allowable Charges

d. Determination of PHP APC Per Diem Costs

e. Development of Service Days and Cost Modeling

f. Issues Regarding Correct Coding and Reasonable Charges

C. Separate Threshold for Outlier Payments to CMHCs

IX. Procedures That Will Be Paid Only as Inpatient Procedures

A. Background

B. Changes to the Inpatient Only List

X. Nonrecurring Policy Changes

A. Advance Care Planning Services

B. Changes for Payment for Computed Tomography (CT)

C. Lung Cancer Screening With Low Dose Computed Tomography

D. Payment for Procurement of Corneal Tissue Used in Procedures in the HOPD and the ASC

1. Background

2. CY 2016 Change to Corneal Tissue Payment Policy in the HOPD and the ASC

XI. CY 2016 OPPS Payment Status and Comment Indicators

A. CY 2016 OPPS Payment Status Indicator Definitions

B. CY 2016 Comment Indicator Definitions

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

A. Background

1. Legislative History, 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. Treatment of New and Revised Codes

1. Background on Current Process for Recognizing New and Revised Category I and Category III CPT Codes and Level II HCPCS Codes

2. Treatment of New and Revised Level II HCPCS Codes and Category III CPT Codes Implemented in April 2015 and July 2015 for Which We Solicited Public Comments in the Proposed Rule

3. Process for Recognizing New and Revised Category I and Category III CPT Codes That Will Be Effective January 1, 2016

a. Current Process for Accepting Comments on New and Revised CPT Codes That are Effective January 1

b. Modification of the Current Process for Accepting Comments on New and Revised Category I and III CPT Codes That are Effective January 1

4. Process for New and Revised Level II HCPCS Codes That Will Be Effective October 1, 2015 and January 1, 2016 for Which We Are Soliciting Public Comments in This CY 2016 OPPS/ASC Final Rule With Comment Period

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

1. Covered Surgical Procedures

a. Covered Surgical Procedures Designated as Office-Based

b. ASC Covered Surgical Procedures Designated as Device-Intensive—Finalized Policy for CY 2015 and Policy for CY 2016

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

d. Adjustment to ASC Payments for Discontinued Device-Intensive Procedures

e. Additions to the List of ASC Covered Surgical Procedures

f. ASC Treatment of Surgical Procedures That Are Removed From the OPPS Inpatient List for CY 2016

2. Covered Ancillary Services

a. List of Covered Ancillary Services

b. Exclusion of Corneal Tissue Procurement From the Covered Ancillary Services List When Used for Nontransplant Procedures

c. Removal of Certain Services from the Covered Ancillary Services List That are Not Used as Ancillary and Integral to a Covered Surgical Procedure

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

1. ASC Payment for Covered Surgical Procedures

a. Background

b. Update to ASC Covered Surgical Procedure Payment Rates for CY 2016

c. Waiver of Coinsurance and Deductible for Certain Preventive Services

d. Payment for Cardiac Resynchronization Therapy Services

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

2. Payment for Covered Ancillary Services

a. Background

b. Payment for Covered Ancillary Services for CY 2016

E. New Technology Intraocular Lenses (NTIOLs)

1. NTIOL Application Cycle

2. Requests to Establish New NTIOL Classes for CY 2016

3. Payment Adjustment

4. Newness Criterion

5. Announcement of CY 2016 Deadline for Submitting Requests for CMS Review of Applications for a New Class of NTIOLs

F. ASC Payment and Comment Indicators

1. Background

2. ASC Payment and Comment Indicators

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

1. Background

2. Calculation of the ASC Payment Rates

a. Updating the ASC Relative Payment Weights for CY 2016 and Future Years

b. Updating the ASC Conversion Factor

3. Display of CY 2016 ASC Payment Rates

XIII. Requirements for the Hospital Outpatient Quality Reporting (OQR) Program

A. Background

1. Overview

2. Statutory History of the Hospital OQR Program

B. Hospital OQR Program Quality Measures

1. Considerations in the Selection of Hospital OQR Program Quality Measures

2. Retention of Hospital OQR Program Measures Adopted in Previous Payment Determinations

3. Removal of Quality Measures From the Hospital OQR Program Measure Set

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

b. Criteria for Removal of “Topped-Out” Measures

4. Hospital OQR Program Quality Measures Adopted in Previous Rulemaking

5. Hospital OQR Program Quality Measure Removed for the CY 2017 Payment Determination and Subsequent Years

6. New Hospital OQR Program Quality Measures for the CY 2018 and CY 2019 Payment Determinations and Subsequent Years

a. New Quality Measure for the CY 2018 Payment Determination and Subsequent Years: OP-33: External Beam Radiotherapy (EBRT) for Bone Metastases (NQF #1822)

b. Proposed New Hospital OQR Program Quality Measure for the CY 2019 Payment Determination and Subsequent Years: OP-34: Emergency Department Transfer Communication (EDTC) (NQF #0291)

7. Hospital OQR Program Measures and Topics for Future Consideration

8. Maintenance of Technical Specifications for Quality Measures

9. Public Display of Quality Measures

C. Administrative Requirements

1. QualityNet Account and Security Administrator

2. Requirements Regarding Participation Status

D. Form, Manner, and Timing of Data Submitted for the Hospital OQR Program

1. Change Regarding Hospital OQR Program Annual Percentage Update (APU) Determinations

2. Requirements for Chart-Abstracted Measures Where Patient-Level Data Are Submitted Directly to CMSStart Printed Page 70303

3. Claims-Based Measure Data Requirements

4. Data Submission Requirements for Measure Data Submitted Via a Web-Based Tool

a. Previously Finalized Measures

b. Data Submission Requirements for Web-Based Measure OP-33: External Beam Radiotherapy (EBRT) for Bone Metastases (NQF #1822) for the CY 2018 Payment Determination and Subsequent Years

c. Proposed Data Submission Requirements for Web-Based Measure OP-34: Emergency Department Transfer Communication (EDTC) Measure for the CY 2019 Payment Determination and Subsequent Years

5. Population and Sampling Data Requirements for the CY 2018 Payment Determination and Subsequent Years

6. Hospital OQR Program Validation Requirements for Chart-Abstracted Measure Data Submitted Directly to CMS for the CY 2018 Payment Determination and Subsequent Years

7. Extension or Exemption Process for the CY 2018 Payment Determination and Subsequent Years

8. Hospital OQR Program Reconsideration and Appeals Procedures for the CY 2018 Payment Determination and Subsequent Years

E. Payment Reduction for Hospitals That Fail to Meet the Hospital Outpatient Quality Reporting (OQR) Program Requirements for the CY 2016 Payment Determination

1. Background

2. Reporting Ratio Application and Associated Adjustment Policy for CY 2016

XIV. Requirements for the Ambulatory Surgical Center Quality Reporting (ASCQR) Program

A. Background

1. Overview

2. Statutory History of the Ambulatory Surgical Center Quality Reporting (ASCQR) Program

3. Regulatory History of the ASCQR Program

B. ASCQR Program Quality Measures

1. Considerations in the Selection of ASCQR Program Quality Measures

2. Policies for Retention and Removal of Quality Measures From the ASCQR Program

3. ASCQR Program Quality Measures Adopted in Previous Rulemaking

4. ASCQR Program Quality Measures for the CY 2018 Payment Determination and Subsequent Years

5. ASCQR Program Measures for Future Consideration

a. Normothermia Outcome

b. Unplanned Anterior Vitrectomy

6. Maintenance of Technical Specifications for Quality Measures

7. Public Reporting of ASCQR Program Data

C. Administrative Requirements

1. Requirements Regarding QualityNet Account and Security Administrator

2. Requirements Regarding Participation Status

D. Form, Manner, and Timing of Data Submitted for the ASCQR Program

1. Requirements Regarding Data Processing and Collection Periods for Claims-Based Measures Using Quality Data Codes (QDCs)

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

3. Requirements for Data Submitted Via a CMS Online Data Submission Tool

4. Claims-Based Measure Data Requirements for the ASC-12: Facility 7-Day Risk-Standardized Hospital Visit Rate After Outpatient Colonoscopy Measure for the CY 2018 Payment Determination and Subsequent Years

5. Indian Health Service (IHS) Hospital Outpatient Departments Not Considered ASCs for the Purpose of the ASCQR Program

6. ASCQR Program Validation of Claims-Based and CMS Web-Based Measures

7. Extraordinary Circumstances Extensions or Exemptions for the CY 2018 Payment Determination and Subsequent Years

8. ASCQR Program Reconsideration Procedures

E. Payment Reduction for ASCs That Fail to Meet the ASCQR Program Requirements

XV. Short Inpatient Hospital Stays

A. Background for the 2-Midnight Rule

B. Policy Clarification for Medical Review of Inpatient Hospital Admissions under Medicare Part A

XVI. Transition for Former Medicare-Dependent, Small Rural Hospitals (MDHs) Under the Hospital Inpatient Prospective Payment System

A. Background on the Medicare-Dependent, Small Rural Hospital (MDH) Program

B. Implementation of New OMB Delineations and Urban to Rural Reclassifications

XVII. Final Rule: Appropriate Claims in Provider Cost Reports; Administrative Appeals by Providers and Judicial Review

A. Proposed Changes Included in the FY 2015 IPPS/LTCH PPS Proposed Rule

B. Summary of Related Changes Included in the FY 2015 IPPS/LTCH PPS Final Rule

C. Specific Provisions of the FY 2015 IPPS/LTCH PPS Proposed Rule

1. Background for Payments and Cost Reporting Requirements

2. Background for Administrative Appeals by Providers and Judicial Review

3. Background for Appropriate Claims in Provider Cost Reports

D. Addition to the Cost Reporting Regulations of the Substantive Reimbursement Requirement of an Appropriate Cost Report Claim

1. Proposed Provisions (New § 413.24(j))

2. Statutory Authority and Rationale for Proposed § 413.24(j)

3. Summary of Public Comments, CMS Responses, and Statement of Finalized Policies for § 413.24(j)

E. Revisions to the Provider Reimbursement Appeals Regulations

1. Elimination of the Jurisdictional Requirement of an Appropriate Cost Report Claim

a. Proposed Revisions to §§ 405.1835 and 405.1840

b. Summary of Public Comments and Our Responses and Finalized Policies

2. Board Review of Compliance With Cost Report Claim Requirements Under § 413.24(j)

a. Proposed Addition of New § 405.1873

b. Summary of Public Comments and Our Responses and Finalized Policies

3. Related Revisions to § 405.1875 Regarding Administrator Review

4. Conforming Changes to the Board Appeals Regulations and Corresponding Revisions to the Contractor Hearing Regulations

a. Technical Corrections to 42 CFR part 405, subpart R and All Subparts of 42 CFR Part 413

b. Technical Corrections and Conforming Changes to §§ 405.1801 and 405.1803

c. Technical Corrections and Conforming Changes to §§ 405.1811, 405.1813, and 405.1814

d. Addition of New § 405.1832

e. Revisions to § 405.1834

f. Technical Corrections and Conforming Changes to §§ 405.1836, 405.1837, and 405.1839

F. Collection of Information Requirements

G. Impact of Requiring Appropriate Claims in Provider Cost Reports and Eliminating That Requirement for Administrative Appeals by Providers

XVIII. Files Available to the Public Via the Internet

XIX. Collection of Information Requirements

A. Legislative Requirements for Solicitation of Comments

B. Associated Information Collections Not Specified in Regulatory Text

1. Hospital OQR Program

2. ASCQR Program Requirements

XX. Response to Comments

XXI. Economic Analyses

A. Regulatory Impact Analysis

1. Introduction

2. Statement of Need

3. Overall Impacts for the OPPS and ASC Payment Provisions

4. Detailed Economic Analyses

a. Estimated Effects of OPPS Changes in This Final Rule With Comment Period

(1) Limitations of Our Analysis

(2) Estimated Effects of OPPS Changes on Hospitals

(3) Estimated Effects of OPPS Changes on CMHCs

(4) Estimated Effect of OPPS Changes on Beneficiaries

(5) Estimated Effects of OPPS Changes on Other Providers

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

(7) Alternative OPPS Policies Considered

b. Estimated Effects of CY 2016 ASC Payment System Policies

(1) Limitations of Our Analysis

(2) Estimated Effects of CY 2016 ASC Payment System Policies on ASCs

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

(4) Alternative ASC Payment Policies ConsideredStart Printed Page 70304

c. Accounting Statements and Tables

d. Effects of Requirements for the Hospital OQR Program

e. Effects of Policies for the ASCQR Program

f. Impact of the Policy Change for Medical Review of Inpatient Hospital Admissions Under Medicare Part A

g. Impact of Transition for Former MDHs under the IPPS

B. Regulatory Flexibility Act (RFA) Analysis

C. Unfunded Mandates Reform Act Analysis

D. Conclusion

XXII. Federalism Analysis

I. Summary and Background

A. Executive Summary of This Document

1. Purpose

In this document, we are updating the payment policies and payment rates for services furnished to Medicare beneficiaries in hospital outpatient departments (HOPDs) and ambulatory surgical centers (ASCs) beginning January 1, 2016. Section 1833(t) of the Social Security Act (the Act) requires us to annually review and update the payment rates for services payable under the Hospital Outpatient Prospective Payment System (OPPS). Specifically, section 1833(t)(9)(A) 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. In addition, 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 final rule with comment period. In addition, this document updates and refines the requirements for the Hospital Outpatient Quality Reporting (OQR) Program and the ASC Quality Reporting (ASCQR) Program.

Further, we are making certain changes relating to the hospital inpatient prospective payment system (IPPS): Changes to the 2-midnight rule under the short inpatient hospital stay policy; and a payment transition for hospitals that lost their MDH status because they are no longer in a rural area due to the implementation of the new OMB delineations in FY 2015 and have not reclassified from urban to rural under 42 CFR 412.103 before January 1, 2016.

In addition, we are finalizing certain 2015 proposed policies, and addressing public comments, relating to the changes in the Medicare regulations governing provider administrative appeals and judicial review relating to appropriate claims in provider cost reports.

2. Summary of the Major Provisions

OPPS Update: For CY 2016, we are decreasing the payment rates under the OPPS by an Outpatient Department (OPD) fee schedule increase factor of -0.3 percent. This increase factor is based on the hospital inpatient market basket percentage increase of 2.4 percent for inpatient services paid under the hospital inpatient prospective payment system (IPPS), minus the multifactor productivity (MFP) adjustment of 0.5 percentage point, and minus a 0.2 percentage point adjustment required by the Affordable Care Act. In addition, we are applying a 2.0 percent reduction to the conversion factor to redress the inflation in OPPS payment rates resulting from excess packaged payment under the OPPS for laboratory tests that are excepted from our final CY 2014 laboratory packaging policy, as discussed in section II.B. of this final rule with comment period. Under this rule, we estimate that total payments for CY 2016, including beneficiary cost-sharing, to the approximate 4,000 facilities paid under the OPPS (including general acute care hospitals, children's hospitals, cancer hospitals, and community mental health centers (CMHCs)), will decrease by approximately $133 million compared to CY 2015 payments, excluding our estimated changes in enrollment, utilization, and case-mix.

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

  • Rural Adjustment: We are continuing the adjustment of 7.1 percent to the OPPS payments to certain rural sole community hospitals (SCHs), including essential access community hospitals (EACHs). This adjustment will 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 2016, we are continuing to provide additional payments to cancer hospitals so that the cancer hospital's payment-to-cost ratio (PCR) after the additional payments is equal to the weighted average PCR for the other OPPS hospitals using the most recently submitted or settled cost report data. Based on those data, a target PCR of 0.92 will be used to determine the CY 2016 cancer hospital payment adjustment to be paid at cost report settlement. That is, the payment adjustments will be the additional payments needed to result in a PCR equal to 0.92 for each cancer hospital.
  • Payment of Drugs, Biologicals, and Radiopharmaceuticals: For CY 2016, payment for the acquisition and pharmacy overhead costs of separately payable drugs and biologicals that do not have pass-through status are set at the statutory default of average sales price (ASP) plus 6 percent.
  • Payment of Skin Substitutes: Payment for skin substitutes will utilize the high/low cost APC structure based on exceeding a threshold based on mean unit cost (MUC) or per day cost (PDC). Further, for CY 2016, skin substitutes with pass-through payment status will be assigned to the high cost category. Skin substitutes with pricing information but without claims data to calculate either an MUC or PDC will be assigned to either the high cost or low cost category based on the product's ASP+6 percent payment rate. Moreover, any new skin substitutes without pricing information will be assigned to the low cost category until pricing information is available to compare to the CY 2016 thresholds.
  • Payment of Biosimilar Biological Products: For CY 2016, we are paying for biosimilar biological products based on the payment allowance of the product as determined under section 1847A of the Act. We also are extending pass-through payment eligibility to biosimilar biological products and to set payment at the difference between the amount paid under section 1842(o) of the Act (that is, the payment allowance of the product as determined under section 1847A of the Act) and the otherwise applicable HOPD fee schedule amount.
  • Packaging Policies: In CY 2015, we conditionally packaged certain ancillary services when they are integral, ancillary, supportive, dependent, or adjunctive to a primary service. For CY 2016, we are expanding the set of conditionally packaged ancillary services to include three new APCs.
  • Conditionally Packaged Outpatient Laboratory Tests: For CY 2016, we are conditionally packaging laboratory tests (regardless of the date of service) on a claim with a service that is assigned status indicator “S,” “T,” or “V” unless an exception applies or the laboratory test is “unrelated” to the other HOPD Start Printed Page 70305service or services on the claim. We are establishing a new status indicator “Q4” for this purpose. When laboratory tests are the only services on the claim, a separate payment at CLFS payment rates will be made. The “L1” modifier will still be used for “unrelated” laboratory tests.
  • Comprehensive APCs: We implemented the comprehensive APCs (C-APCs) policy for CY 2015 with a total of 25 C-APCs. In CY 2016, we are not making extensive changes to the already established methodology used for C-APCs. However, we are creating nine new C-APCs that meet the previously established criteria.
  • APC Restructuring: Section 1833(t)(9)(A) 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. For CY 2016, we conducted a comprehensive review of the structure of the APCs and codes and are restructuring the OPPS APC groupings for nine APC clinical families based on the following principles: (1) Improved clinical homogeneity; (2) improved resource homogeneity; (3) reduced resource overlap in longstanding APCs; and (4) greater simplicity and improved understandability of the OPPS APC structure.
  • New Process for Device Pass-Through Payment: Beginning in CY 2016, we are adding a rulemaking component to the current quarterly device pass-through payment application process. Specifically, we are supplementing the quarterly process by including a description of applications received as well as our rationale for approving the application in the next applicable OPPS proposed rule. Applications that we do not approve based on the evidence available during the quarterly review process will be described in the next applicable OPPS proposed rule, unless the applicant withdraws its application. The addition of rulemaking to the device pass-through application process will help achieve the goals of increased transparency and stakeholder input. In addition, this change will align a portion of the OPPS device pass-through payment application process with the already established IPPS application process for new medical services and new technology add-on payments. We also are establishing policy that a device that requires FDA premarket approval or clearance is eligible to apply for device pass-through payment only if it is “new,” meaning that the pass-through payment application is submitted within 3 years from the date of the initial FDA premarket approval or clearance, or, in the case of a delay of market availability, within 3 years of market availability.
  • Two-Midnight Rule: The 2-midnight rule was adopted effective October 1, 2013. Under the 2-midnight rule, an inpatient admission is generally appropriate for Medicare Part A payment if the physician (or other qualified practitioner) admits the patient as an inpatient based upon the expectation that the patient will need hospital care that crosses at least 2 midnights. In assessing the expected duration of necessary care, the physician (or other practitioner) may take into account outpatient hospital care received prior to inpatient admission. If the patient is expected to need less than 2 midnights of care in the hospital, the services furnished should generally be billed as outpatient services. In this final rule, we are modifying our existing “exceptions” policy under which previously the only exceptions to the 2-midnight benchmark were cases involving services designated by CMS as inpatient only, and those published on the CMS Web site or other subregulatory guidance. Specifically, we are finalizing our proposal to also allow exceptions to the 2-midnight benchmark to be determined on a case-by-case basis by the physician responsible for the care of the beneficiary, subject to medical review. However, we continue to expect that stays under 24 hours would rarely qualify for an exception to the 2-midnight benchmark. In addition, we revised our medical review strategy to have Quality Improvement Organization (QIO) contractors conduct reviews of short inpatient stays rather than the Medicare administrative contractors (MACs), and the QIOs assumed medical responsibility for hospital stays affected by the 2-midnight rule on October 1, 2015.
  • Advanced Care Planning (ACP): For CY 2016, we are conditionally packaging payment for the service described by CPT code 99497 (Advance care planning including the explanation and discussion of advance directives such as standard forms (with completion of such forms, when performed), by the physician or other qualified health care professional; first 30 minutes, face-to-face with the patient, family member(s), and/or surrogate). Consequently, this code is assigned to a conditionally packaged payment status indicator of “Q1.” When this service is furnished with another service paid under the OPPS, payment will be package; when it is the only service furnished, payment will be made separately. CPT code 99498 (Advance care planning including the explanation and discussion of advance directives such as standard forms (with completion of such forms, when performed), by the physician or other qualified health care professional; each additional 30 minutes (List separately in addition to code for primary procedure)) is an add-on code and therefore payment for the service described by this code is unconditionally packaged (assigned status indicator “N”) in the OPPS in accordance with 42 CFR 419.2(b)(18).
  • Chronic Care Management (CCM): For CY 2016, we are adding additional requirements for hospitals to bill and receive OPPS payment for CCM services described by CPT code 99490. These requirements include scope of service elements analogous to the scope of service elements finalized as requirements in the CY 2015 Medicare Physician Fee Schedule (MPFS) final rule with comment period (79 FR 6715 through 67728).
  • National Electrical Manufacturers Association (NEMA) Modifier: Effective for services furnished on or after January 1, 2016, section 218(a) of the PAMA amended section 1834 of the Act by establishing a new subsection 1834(p), which reduces payment for the technical component (TC) (and the TC of the global fee) under the MPFS and the OPPS (5 percent in 2016 and 15 percent in 2017 and subsequent years) for applicable computed tomography (CT) services identified by certain CPT HCPCS codes furnished using equipment that does not meet each of the attributes of the National Electrical Manufacturers Association (NEMA) Standard XR-29-2013, entitled “Standard Attributes on CT Equipment Related to Dose Optimization and Management.” The provision requires that information be provided and attested to by a supplier and a hospital outpatient department that indicates whether an applicable CT service was furnished that was not consistent with the NEMA CT equipment standard. To implement this provision, we are establishing a new modifier that will be reported with specific CPT codes, effective January 1, 2016.
  • New Process for Requesting Comments on New and Revised Category I and III CPT Codes: In the CY 2015 OPPS/ASC final rule with comment period (79 FR 66842 through 66844), we finalized a revised process of Start Printed Page 70306assigning APC and status indicators for new and revised Category I and III CPT codes that will be effective January 1. Specifically, we stated that we would include the proposed APC and status indicator assignments for the vast majority of new and revised CPT codes before they are used for payment purposes under the OPPS if the AMA provides CMS with the codes in time for the OPPS/ASC proposed rule. For the CY 2016 OPPS update, we received the CY 2016 CPT codes from AMA for inclusion in the CY 2016 OPPS/ASC proposed rule. We received public comments on the proposed OPPS status indicators for the new CY 2016 CPT codes, which we address in this final rule with comment period.
  • Ambulatory Surgical Center Payment Update: For CY 2016, we are increasing payment rates under the ASC payment system by 0.3 percent for ASCs that meet the quality reporting requirements under the ASCQR Program. This increase is based on a projected CPI-U update of 0.8 percent minus a multifactor productivity adjustment required by the Affordable Care Act of 0.5 percentage point. Based on this update, we estimate that total payments to ASCs (including beneficiary cost-sharing and estimated changes in enrollment, utilization, and case-mix), for CY 2016 will be approximately $4.221 billion, an increase of approximately $128 million compared to estimated CY 2015 Medicare payments. In addition, we are establishing a revised process of assigning ASC payment indicators for new and revised Category I and III CPT codes that would be effective January 1, similar to the OPPS process we finalized in the CY 2015 OPPS/ASC final rule with comment period. Specifically, we are including the proposed ASC payment indicator assignments in the OPPS/ASC proposed rule for the vast majority of new and revised CPT codes before they are used for payment purposes under the ASC payment system if the American Medical Association (AMA) provides CMS with the codes in time for the OPPS/ASC proposed rule. We received public comments on the proposed ASC payment indicators for the new CY 2016 CPT codes, which we address in this final rule with comment period.
  • Hospital Outpatient Quality Reporting (OQR) Program: For the Hospital OQR Program, we are establishing requirements for the CY 2017 payment determination and subsequent years and the CY 2018 payment determination and subsequent years. For CY 2017 and subsequent years, we are: (1) Removing the OP-15: Use of Brain Computed Tomography (CT) in the Emergency Department for Atraumatic Headache measure, effective January 1, 2016 (no data for this measure will be used for any payment determination); (2) changing the deadline for withdrawing from the Hospital OQR Program from November 1 to August 31 and revising the related regulations to reflect this change; (3) transitioning to a new payment determination timeframe that will use only three quarters of data for the CY 2017 payment determination; (4) making conforming changes to our validation scoring process to reflect changes in the APU determination timeframe; (5) changing the data submission timeframe for measures submitted via the CMS Web-based tool (QualityNet Web site) to January 1 through May 15; (6) fixing a typographical error to correct the name of our extension and exception policy to extension and exemption policy; (7) changing the deadline for submitting a reconsideration request to the first business day on or after March 17 of the affected payment year; and (8) amending 42 CFR 419.46(f)(1) and 42 CFR 419.46(e)(2) to replace the term “fiscal year” with the term “calendar year.”

For CY 2018 and subsequent years, we are (1) adding a new measure: OP-33: External Beam Radiotherapy (EBRT) for Bone Metastases (NQF #1822) with a modification to the proposed manner of data submission, and (2) shifting the quarters on which we base payment determinations to again include four quarters of data.

In addition, we are exploring use of electronic clinical quality measures (eCQMs) and whether, in future rulemaking, we will propose that hospitals have the option to voluntarily submit data for the OP-18: Median Time from ED Arrival to ED Departure for Discharged ED Patients measure electronically possibly beginning with the CY 2019 payment determination.

  • Ambulatory Surgical Center Quality Reporting (ASCQR) Program: For the ASCQR Program, we are aligning our policies regarding paid claims to be included in the calculation for all claims-based measures, modifying the submission date for reconsideration requests, modifying our policy for the facility identifier for public reporting of ASCQR Program data, and finalizing our policy to not consider IHS hospital outpatient departments that bill as ASCs to be ASCs for purposes of the ASCQR Program. In addition, we are continuing to use the existing submission deadlines for data submitted via an online data submission tool. We also are codifying a number of existing and new policies. We also address public comments that we solicited in the proposed rule on the possible inclusion of two measures in the ASCQR Program measure set in the future.

3. Summary of Costs and Benefits

In sections XXI. and XXII. of this final rule with comment period, we set forth a detailed analysis of the regulatory and Federalism impacts that the changes will have on affected entities and beneficiaries. Key estimated impacts are described below.

a. Impacts of the OPPS Update

(1) Impacts of All OPPS Changes

Table 70 in section XXI. of this final rule with comment period displays the distributional impact of all the OPPS changes on various groups of hospitals and CMHCs for CY 2016 compared to all estimated OPPS payments in CY 2015. We estimate that the policies finalized in this final rule with comment period will result in a 0.4 percent overall decrease in OPPS payments to providers. We estimate that total OPPS payments for CY 2016, including beneficiary cost-sharing, to the approximate 4,000 facilities paid under the OPPS (including general acute care hospitals, children's hospitals, cancer hospitals, and CMHCs) will decrease by approximately $133 million compared to CY 2015 payments, excluding our estimated changes in enrollment, utilization, and case-mix.

We estimated the isolated impact of our OPPS policies on CMHCs because CMHCs are only paid for partial hospitalization services under the OPPS. Continuing the provider-specific structure that we adopted beginning in CY 2011 and basing payment fully on the type of provider furnishing the service, we estimate a 23.1 percent increase in CY 2016 payments to CMHCs relative to their CY 2015 payments.

(2) Impacts of the Updated Wage Indexes

We estimate that our update of the wage indexes based on the FY 2016 IPPS final wage indexes results in no change for urban hospitals and a 0.4 percent decrease for rural hospitals under the OPPS. These wage indexes include the continued implementation of the OMB labor market area delineations based on 2010 Decennial Census data.Start Printed Page 70307

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

There are no significant impacts of our CY 2016 payment policies for hospitals that are eligible for the rural adjustment or for the cancer hospital payment adjustment. We are not making any change in policies for determining the rural and cancer hospital payment adjustments, and the adjustment amounts do not significantly impact the budget neutrality adjustments for these policies.

(4) Impacts of the OPD Fee Schedule Increase Factor

As a result of the OPD fee schedule increase factor, the 2.0 percent reduction to the conversion factor to redress the inflation in OPPS payment rates resulting from excess packaged payment under the OPPS for laboratory tests that are excepted from our final CY 2014 laboratory packaging policy, and other budget neutrality adjustments, we estimate that urban and rural hospitals will experience decreases of approximately 0.4 percent for urban hospitals and 0.6 percent for rural hospitals. Classifying hospitals by teaching status or type of ownership suggests that these hospitals will receive similar decreases.

b. Impacts of the 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 CY 2016 payment rates compared to estimated CY 2015 payment rates ranges between 5 percent for auditory system services and −5 percent for hematologic and lymphatic system procedures.

c. Impacts of the Hospital OQR Program

We do not expect our CY 2016 policies to significantly affect the number of hospitals that do not receive a full annual payment update.

d. Impacts of the ASCQR Program

We do not expect our CY 2016 policies to significantly affect the number of ASCs that do not receive a full annual payment update.

B. Legislative and Regulatory Authority for the Hospital OPPS

When Title XVIII of the Social Security 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; the Middle Class Tax Relief and Job Creation Act of 2012 (MCTRJCA, Pub. L. 112-96), enacted on February 22, 2012; the American Taxpayer Relief Act of 2012 (Pub. L. 112-240), enacted January 2, 2013; the Pathway for SGR Reform Act of 2013 (Pub. L. 113-67) enacted on December 26, 2013; the Protecting Access to Medicare Act of 2014 (PAMA, Pub. L. 113-93), enacted on March 27, 2014; and the Medicare Access and CHIP Reauthorization Act (MACRA) of 2015 (Pub. L. 114-10), enacted April 16, 2015.

Under the OPPS, we pay for hospital Part B 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 final rule with comment period. 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 certain inpatient hospital services that are paid under Medicare Part B.

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 Start Printed Page 70308us 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 exercises the authority granted under the statute to also exclude from the OPPS certain services that are paid under fee schedules or other payment systems. Such excluded services include, for example, the professional services of physicians and nonphysician practitioners paid under the Medicare Physician Fee Schedule (MPFS); certain 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 prospective payment system; 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 that are excluded from payment under the OPPS. These excluded hospitals include: critical access hospitals (CAHs); hospitals located in Maryland and paid under the Maryland All-Payer Model; 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)(A) 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)

1. Authority of the Panel

Section 1833(t)(9)(A) of the Act, as amended by section 201(h) of Pub. L. 106-113, and redesignated by section 202(a)(2) of Pub. L. 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, and at that time named the APC Panel. This expert panel is composed of appropriate representatives of providers (currently employed full-time, not as consultants, in their respective areas of expertise), reviews clinical data, and advises CMS about the clinical integrity of the APC groups and their payment weights. Since CY 2012, 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). 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 Panel's charter was amended on November 15, 2011, renaming the Panel and expanding the Panel's authority to include supervision of hospital outpatient therapeutic services and to add Critical Access Hospital (CAH) representation to its membership. The current charter was renewed on November 6, 2014 (80 FR 23009) and the number of panel members was revised from up to 19 to up to 15 members.

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/​Regulations-and-Guidance/​Guidance/​FACA/​AdvisoryPanelonAmbulatoryPaymentClassificationGroups.html.

3. Panel Meetings and Organizational Structure

The Panel has held multiple meetings, with the last meeting taking place on August 24, 2015. 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.

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 Start Printed Page 70309outpatient 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 status indicators 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 APC assignment of 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 at the August 24, 2015 meeting that the subcommittees continue. We accepted this recommendation.

Discussions of the other recommendations made by the Panel at the August 24, 2015 Panel meeting are included in the sections of this final rule with comment period that are specific to each recommendation. For discussions of earlier Panel meetings and recommendations, we refer readers to previously published OPPS/ASC proposed and final rules, the CMS Web site mentioned earlier in this section, and the FACA database at: http://facadatabase.gov/​.

F. Public Comments Received on the CY 2015 OPPS/ASC Final Rule With Comment Period

We received approximately 38 timely pieces of correspondence on the CY 2015 OPPS/ASC final rule with comment period that appeared in the Federal Register on November 10, 2014 (79 FR 66770), as well as in the correction notice that was published on February 24, 2015 (80 FR 9629), some of which contained comments on the interim APC assignments and/or status indicators of new or replacement HCPCS codes (identified with comment indicator “NI” in Addenda B, AA, and BB to that final rule). Summaries of the public comments on new or replacement codes are set forth in this CY 2016 OPPS/ASC final rule with comment period under the appropriate subject-matter headings.

G. Public Comments Received on the CY 2016 OPPS/ASC Proposed Rule

We received approximately 670 timely pieces of correspondence on the CY 2016 OPPS/ASC proposed rule that appeared in the Federal Register on July 8, 2015 (80 FR 39200). We note that we received some public comments that were outside the scope of the proposed rule. Out-of-scope public comments are not addressed in this CY 2016 OPPS/ASC final rule with comment period. Summaries of the public comments that are within the scope of the proposed rule and our responses are set forth in the various sections of this final rule with comment period under the appropriate headings.

II. Updates Affecting OPPS Payments

A. Recalibration of APC Relative Payment 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.

In the CY 2016 OPPS/ASC proposed rule (80 FR 39210), for the CY 2016 OPPS, we proposed to recalibrate the APC relative payment weights for services furnished on or after January 1, 2016, and before January 1, 2017 (CY 2016), using the same basic methodology that we described in the CY 2015 OPPS/ASC final rule with comment period. That is, we proposed 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 2016, we used approximately 151 million final action claims (claims for which all disputes and adjustments have been resolved and payment has been made) for HOPD services furnished on or after January 1, 2014, and before January 1, 2015. For this final rule with comment period, for the purpose of recalibrating the final APC relative payment weights for CY 2016, we used approximately 163 million final action claims (claims for which all disputes and adjustments have been resolved and payment has been made) for HOPD services furnished on or after January 1, 2014, and before January 1, 2015. For exact numbers of claims used, we refer readers to the claims accounting narrative under supporting documentation for the CY 2016 OPPS/ASC proposed rule and this final rule with comment period on the CMS Web site at: http://www.cms.gov/​Medicare/​Medicare-Fee-for-Service-Payment/​HospitalOutpatientPPS/​index.html.

Of the approximately 163 million final action claims for services provided in hospital outpatient settings used to calculate the CY 2016 OPPS payment rates for this final rule with comment period, approximately 125 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 125 million claims, approximately 3 million claims were not for services paid under the OPPS or were excluded as not appropriate for use (for example, erroneous cost-to-charge ratios (CCRs) or no HCPCS codes reported on the claim). From the remaining approximately 122 million claims, we created approximately 95 million single records, of which approximately 43 million were “pseudo” single or “single session” claims (created from approximately 52 million multiple procedure claims using the process we discuss later in this section). Approximately 3 million claims were trimmed out on cost or units in excess of +/−3 standard deviations from the geometric mean or other trims, yielding approximately 92 million single claims for ratesetting. As described in section II.A.2. of this final rule with comment period, our data development process is designed with the goal of using appropriate cost information in setting the APC relative payment weights. The bypass process is described in section II.A.1.b. of this final rule with comment period. 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.

The final APC relative weights and payments for CY 2016 in Addenda A and B to this final rule with comment period (which are available via the Internet on the CMS Web site) were calculated using claims from CY 2014 that were processed through June 30, 2015. While prior to CY 2013 we historically based the payments on median hospital costs for services in the APC groups, beginning with the CY 2013 OPPS, we established the cost-based relative payment weights for the OPPS using geometric mean costs, as Start Printed Page 70310discussed in the CY 2013 OPPS/ASC final rule with comment period (77 FR 68259 through 68271). For the CY 2016 OPPS, as we proposed, we used this same methodology, basing payments on geometric mean costs. Under this 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 2016 payment rates.

b. Use of Single and Multiple Procedure Claims

For CY 2016, in general, we proposed to continue to use single procedure claims to set the costs on which the APC relative payment weights are 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 proposed 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 2015 OPPS/ASC final rule with comment period (79 FR 66780 through 66783). In addition, for CY 2008 (72 FR 66614 through 66664), we increased packaging and created the first composite APCs, and continued those policies through CY 2015. 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 2015, and we proposed to continue this policy for CY 2016. We refer readers to section II.A.2.f. of the CY 2015 OPPS/ASC final rule with comment period (79 FR 66810 through 66816) for a discussion of the use of claims in modeling the costs for composite APCs and to section II.A.3. of the CY 2015 OPPS/ASC final rule with comment period (79 FR 66817 through 66823) for a discussion of our packaging policies for CY 2015. In addition, we proposed to establish additional packaging policies for the CY 2016 OPPS, as discussed in section II.A.3. of this final rule with comment period.

In the proposed rule, we proposed to continue to apply these processes to enable us to use as much claims data as possible for ratesetting for the CY 2016 OPPS. This methodology enabled us to create, for the proposed rule, approximately 38 million “pseudo” single procedure claims, including multiple imaging composite “single session” bills (we refer readers to section II.A.2.f.(4) of the proposed rule for further discussion), to add to the approximately 49 million “natural” single procedure claims.

In addition, we proposed to continue our broader initiative to review, revise, and reorganize APCs across the OPPS to collectively group services that are clinically similar and have similar resource costs within the same APC. The restructuring of APCs are discussed in the applicable sections of this final rule with comment period. In conjunction with this initiative, we proposed to renumber the APCs (except for the composite APCs) primarily to achieve consecutive numbering of APCs within each clinical family of APCs, as discussed in section III.D. of this final rule with comment period. For the proposed rule, we provided a crosswalk from the existing APC numbers to the proposed new APC renumber in Addendum Q to the proposed rule (which is available via the Internet on the CMS Web site).

For CY 2016, in the proposed rule, we proposed to bypass 197 HCPCS codes that were identified in Addendum N to the 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 claims that contained packaging for each HCPCS code and the amount of packaging on each “natural” single claim 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 2016, data available for the proposed rule from CY 2014 claims processed through December 31, 2014) to determine whether it would be appropriate to add additional codes to the previous year's bypass list. For CY 2016, we proposed to continue to bypass all of the HCPCS codes on the CY 2015 OPPS bypass list, with the exception of HCPCS codes that we proposed to delete for CY 2016, which were listed in Table 1 of the proposed rule. (We refer readers to Addendum N to the CY 2015 OPPS/ASC final rule with comment period for the CY 2015 OPPS bypass list. Addendum N is available via the Internet on the CMS Web site.) We also proposed 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. Some of the codes we proposed to remove from the CY 2016 bypass list were affected by the CY 2016 proposed packaging policy, discussed in section II.A.3. of this final rule with comment period. Some of the codes we proposed to remove have packaged cost patterns associated with their natural single major claims that would no longer meet the bypass list criterion of 5 percent or fewer of the single major claims having packaged costs on the claim. In addition, we proposed to add to the bypass list for CY 2016 HCPCS codes that are not on the CY 2015 bypass list that, using the proposed rule data (CY 2014 claims), met the empirical criteria for the bypass list that are summarized below. Finally, to remain consistent with the CY 2016 proposal to continue to develop OPPS relative payment weights based on geometric mean costs, we also proposed to establish that the packaged cost criterion would continue to be based on the geometric mean cost. The entire list proposed for CY 2016 (including the codes that remain on the bypass list from prior years) was open to public comment in the CY 2016 OPPS/ASC Start Printed Page 70311proposed rule. 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 were:

  • 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, as we did for CY 2015, we proposed to continue to establish the CY 2016 OPPS relative payment weights based on geometric mean costs. To remain consistent in the metric used for identifying cost patterns, we proposed to use the geometric mean cost of packaging to identify potential codes to add to the bypass list.

In response to public comments on 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. Based on the same rationale described for the CY 2015 OPPS/ASC final rule with comment period (79 FR 66781), we proposed for CY 2016 to continue to update the packaged cost threshold by the market basket increase. By applying the final CY 2015 market basket increase of 2.2 percent (79 FR 66825) to the prior nonrounded dollar threshold of $55.66 (79 FR 66781), we determined that the proposed threshold would remain for CY 2016 at $55 ($56.88 rounded to $55, the nearest $5 increment). Therefore, we proposed to set the geometric mean packaged cost threshold based on the CY 2014 claims data at $55 for a code to be considered for addition to the CY 2016 OPPS bypass list.

For inclusion on the bypass list, a code cannot be a code for an unlisted service. Unlisted codes do not describe a specific service and, therefore, their costs would not be appropriate for bypass list purposes.

In addition, we proposed to continue to include on the bypass list HCPCS codes that we believe have minimal associated packaging, based on our clinical assessment of the complete CY 2016 OPPS proposal. Some of these codes were identified by CMS, and some were identified in prior years by commenters with specialized knowledge of the packaging associated with specific services. We also proposed 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) to the bypass list (73 FR 68513).

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” claims, 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 the proposed rule and this final rule with comment period for further discussion of the treatment of “overlap bypass codes.”) This process also created multiple imaging composite “single session” claims that could be used for calculating composite APC costs. “Overlap bypass codes” that are members of the proposed multiple imaging composite APCs were identified by asterisks (*) in Addendum N to the proposed rule (which is available via the Internet on the CMS Web site).

Addendum N to the proposed rule included the proposed list of bypass codes for CY 2016. The proposed list of bypass codes contains codes that were reported on claims for services in CY 2014 and, therefore, includes codes that were in effect in CY 2014 and used for billing but were deleted for CY 2015. We retained these deleted bypass codes on the proposed CY 2016 bypass list because these codes existed in CY 2014 and were covered OPD services in that period, and CY 2014 claims data are used to calculate CY 2016 payment rates. Keeping these deleted bypass codes on the bypass list potentially allowed us to create more “pseudo” single procedure claims for ratesetting purposes. “Overlap bypass codes” that were members of the proposed multiple imaging composite APCs were identified by asterisks (*) in the third column of Addendum N to the proposed rule. HCPCS codes that we proposed to add for CY 2016 were identified by asterisks (*) in the fourth column of Addendum N.

We did not receive any public comments on our proposals for use of single and multiple procedure code claims for ratesetting. Therefore, we are adopting as final the proposed “pseudo” single claims process and the final CY 2016 bypass list of 197 HCPCS codes, as displayed in Addendum N to this final rule with comment period (which is available via the Internet on the CMS Web site). Table 1 below contains the list of codes that we are removing from the CY 2016 bypass list.Start Printed Page 70312

Table 1—HCPCS Codes Removed from the CY 2016 Bypass List

HCPCS codeHCPCS short descriptor
11057Trim skin lesions over 4.
57454Bx/curett of cervix w/scope.
88348Electron microscopy.
92240Icg angiography.
92546Sinusoidal rotational test.

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

In the CY 2016 OPPS/ASC proposed rule (80 FR 39213), we proposed to continue to use the hospital-specific overall ancillary and departmental cost-to-charge ratios (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 2016 APC payment rates were based, we calculated hospital-specific overall ancillary CCRs and hospital-specific departmental CCRs for each hospital for which we had CY 2014 claims data by comparing these claims data to the most recently available hospital cost reports, which, in most cases, were from CY 2013. For the CY 2016 OPPS proposed rates, we used the set of claims processed during CY 2014. 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 2014 (the year of claims data we used to calculate the proposed CY 2016 OPPS payment rates) and found that the National Uniform Billing Committee (NUBC) did not add any new revenue codes to the NUBC 2014 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). The calculation of blood costs is a longstanding exception (since the CY 2005 OPPS) to this general methodology for calculation of CCRs used for converting charges to costs on each claim. This exception is discussed in detail in the CY 2007 OPPS/ASC final rule with comment period and discussed further in section II.A.2.d.(1) of the proposed rule and this final rule with comment period.

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 hospitals that filed outpatient claims in CY 2014 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, which, in most cases, were from cost reports with cost reporting periods beginning in CY 2013. For the proposed rule, we used the most recently submitted cost reports to calculate the CCRs to be used to calculate costs for the proposed CY 2016 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 for all purposes that require use of an overall ancillary CCR. We proposed to continue this longstanding methodology for the calculation of costs for CY 2016.

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 the 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-500-2005-0029I/​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,” a summary of public comments received, and our responses to those public comments, 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 the CY 2013 OPPS/ASC final rule with comment period, we determined that a significant volume of hospitals were utilizing the “Implantable Devices Charged to Patients” cost center. Because a sufficient amount of data from which to generate a meaningful analysis was available, we established in the CY 2013 OPPS/ASC final rule with comment period a policy to create a distinct CCR using the “Implantable Devices Charged to Patients” cost center (77 FR 68225). We retained this policy through CY Start Printed Page 703132015, and we proposed to continue this practice for the CY 2016 OPPS.

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 these 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, MRIs, 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 payment 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 were effective for cost report periods beginning on or after May 1, 2010, on the revised cost report Form CMS-2552-10.

Using the June 2015 HCRIS update to estimate costs in the final CY 2016 OPPS ratesetting process, of the 3,830 impact providers, we were able to calculate a valid implantable device CCR for 2,969 hospitals (78 percent), a valid MRI CCR for 2,080 hospitals (54 percent), a valid CT scan CCR for 2,166 hospitals (57 percent), and a valid Cardiac Catheterization CCR for 1,434 hospitals (37 percent).

In our CY 2014 OPPS/ASC proposed rule discussion (78 FR 43549), we noted that, for CY 2014, the estimated changes in geometric mean estimated APC cost of using data from the new standard cost centers for CT scans and MRIs appeared consistent with RTI's analysis of cost report and claims data in the July 2008 final report (pages 5 and 6). RTI concluded that “in hospitals that aggregate data for CT scanning, MRI, or nuclear medicine services with the standard line for Diagnostic Radiology, costs for these services all appear substantially overstated, while the costs for plain films, ultrasound and other imaging procedures are correspondingly understated.” We also noted that there were limited additional impacts in the implantable device-related APCs from adopting the new cost report Form CMS 2552-10 because we had used data from the standard cost center for implantable medical devices beginning in CY 2013 OPPS ratesetting, as discussed above.

As we indicated in prior rulemaking (77 FR 68223 through 68225), once we determined that cost report data for the new standard cost centers were sufficiently available, we would analyze that data and, if appropriate, we would propose to use the distinct CCRs for new standard cost centers described above in the calculation of the OPPS relative payment weights. As stated in the CY 2014 OPPS/ASC final rule with comment period (78 FR 74847), we conducted our analysis and concluded that we should develop distinct CCRs for each of the new cost centers and use them in ratesetting. Therefore, we began in the CY 2014 OPPS, continued in the CY 2015 OPPS, and we proposed to retain this practice for the CY 2016 OPPS, to calculate the OPPS relative payment weights using distinct CCRs for cardiac catheterization, CT scan, MRI, and implantable medical devices. Section XIX. of the proposed rule and section XXI. of this final rule with comment period include the impacts of calculating the CY 2016 OPPS relative payment weights using these standard cost centers that were adopted in CY 2014.

In the CY 2014 OPPS/ASC final rule with comment period (78 FR 74847), we finalized a policy to remove claims from providers that use a cost allocation method of “square feet” to calculate CCRs used to estimate costs associated with the CT and MRI APCs. This change allows hospitals additional time to use one of the more accurate cost allocation methods, and thereby improve the accuracy of the CCRs on which the OPPS relative payment weights are developed. In Table 2 below, we display CCR values for providers based on various cost allocation methods.

Table 2—CCR Statiscal Values Based on Use of Different Cost Allocation Methods

Cost allocation methodCTMRI
Median CCRMean CCRMedian CCRMean CCR
All Providers0.04360.05820.08740.1111
Square Feet Only0.03610.05070.07800.1026
Direct Assign0.06380.07160.10760.1273
Dollar Value0.05080.06670.09720.1204
Direct Assign and Dollar Value0.05080.06680.09760.1203

As part of this transitional policy to estimate the CT and MRI APC relative payment weights using only cost data from providers that do not use “square feet” as the cost allocation statistic, we adopted a policy in the CY 2014 OPPS/ASC final rule with comment period that we will sunset this policy in 4 years once the updated cost report data become available for ratesetting purposes. We stated that we believe 4 years is sufficient time for hospitals that have not done so to transition to a more accurate cost allocation method and for the related data to be available for ratesetting purposes. Therefore, in CY 2018, we will estimate the CT and MRI APC relative payment weights using cost data from all providers, regardless of the cost allocation statistic employed. In Table 3 below, we display the impact of excluding claims based on the “square feet” cost allocation method from estimates of CT and MRI costs in CY 2016.Start Printed Page 70314

Table 3—Percent Change in Estimated Cost for CT and MRI APCs When Excluding Claims From Providers Using “Square Feet” as the Cost Allocation Method

CY 2016 APCCY 2016 APC descriptorPercent change
5570 *Computed Tomography without Contrast15.4
5571 *Level 1 Computed Tomography with Contrast and Computed Tomography Angiography10.2
5572 *Level 2 Computed Tomography with Contrast and Computed Tomography Angiography10.5
5581 *Magnetic Resonance Imaging and Magnetic Resonance Angiography without Contrast8.1
5582 *Magnetic Resonance Imaging and Magnetic Resonance Angiography with Contrast6.2
8005CT & CTA without Contrast Composite13.7
8006CT & CTA with Contrast Composite9.8
8007MRI & MRA without Contrast Composite6.9
8008MRI & MRA with Contrast Composite6.8
* Renumbered APC for CY 2016.

In summary, we proposed to continue to use data from the “Implantable Devices Charged to Patients” and “Cardiac Catheterization” cost centers to create distinct CCRs for use in calculating the OPPS relative payment weights for the CY 2016 OPPS. For the “Magnetic Resonance Imaging (MRI)” and “Computed Tomography (CT) Scan” APCs identified in Table 3 of the proposed rule, we proposed to continue our policy of removing claims from cost modeling for those providers using “square feet” as the cost allocation statistic for CY 2016.

Comment: Several commenters supported CMS' proposal to continue removing claims submitted by providers that use the “square feet” cost allocation methodology from cost modeling for the CT and MRI APCs. A few commenters suggested that CMS continue its policy of removing claims from providers that use this method for the CY 2018 OPPS update and subsequent calendar years.

Response: We appreciate the commenters' support. As described in the CY 2014 OPPS/ASC final rule with comment period (78 FR 74847), the current policy of calculating CT and MRI APC relative payment weights using only data from providers that do not use the “square feet” cost allocation method was part of a transitional policy to allow providers to adopt cost allocation methods that improve data and payment accuracy. In the CY 2014 OPPS/ASC final rule with comment period, we noted that we would sunset that policy in 4 years and estimate the CY 2018 CT and MRI APC relative payment weights using cost data from all providers, regardless of which cost allocation method the provider employed. While some commenters believe that we should continue this transition policy of excluding “square feet” data from OPPS ratesetting for the CY 2018 OPPS update and subsequent calendar years, we believe that we have given providers sufficient time to adopt one of the more precise cost allocation methodologies.

After consideration of the public comments we received, we are finalizing our proposal to continue to use data from the “Implantable Devices Charged to Patients” and “Cardiac Catheterization” cost centers to create distinct CCRs for use in calculating the OPPS relative payment weights for the CY 2016 OPPS. For the “Magnetic Resonance Imaging (MRI)” and “Computed Tomography (CT) Scan” APCs identified in Table 3 above, we are continuing our policy of removing claims from providers that use the “square feet” cost allocation methodology for CY 2016 CT and MRI APC cost modeling.

2. Data Development Process and Calculation of Costs Used for Ratesetting

In this section of this final rule with comment period, we discuss the use of claims to calculate the OPPS payment rates for CY 2016. The Hospital OPPS page on the CMS Web site on which this final rule with comment period 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 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. The CMS 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 2014 claims that were used to calculate the proposed and final payment rates for the CY 2016 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 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 the CY 2013 OPPS/ASC final rule with comment period (77 FR 68259 through 68271), we finalized the use of geometric mean costs to calculate the relative weights on which the CY 2013 OPPS payment rates were based. While this policy changed the cost metric on which the relative payments are based, the data process in general remained the same, under the methodologies that we used to obtain appropriate claims data and accurate cost information in determining estimated service cost. For CY 2016, we proposed to continue to use geometric mean costs to calculate the relative weights on which the CY 2016 OPPS payment rates are based.

We used the methodology described in sections II.A.2.a. through II.A.2.f. of this final rule with comment period to calculate the costs we used to establish the relative payment weights used in calculating the OPPS payment rates for CY 2016 shown in Addenda A and B to this final rule with comment period (which are available via the Internet on the CMS Web site). We refer readers to section II.A.4. of the proposed rule and this final rule with comment period for a discussion of the conversion of APC costs to scaled payment weights.

Comment: A few commenters suggested that CMS increase the transparency of its cost estimation process and provide additional detail on how various types of HCPCS code are treated within CMS' claims processing.

Response: We thank the commenters for these suggestions. We have updated the claims accounting narrative for this Start Printed Page 70315final rule with comment period to include additional information on the requested various types of HCPCS code where feasible. This updated claims accounting narrative is available on the 2016 OPPS Final Rule page of the CMS Web site (http://www.cms.gov/​Medicare/​Medicare-Fee-for-Service-Payment/​HospitalOutpatientPPS/​index.html ).

Comment: One commenter suggested that CMS present proposals for significant payment changes, such as expanded packaging, APC configurations, or new comprehensive APCs, at least 1 year before issuance of a proposed rule. The commenter believed that this would increase the transparency of policy changes and facilitate stakeholder review and analysis of the proposed changes.

Response: We thank the commenter for this suggestion. We believe that, for each proposed policy change, we assess the appropriate timeframe for implementation and will continue to do so in the future. We understand that modeling the OPPS is time-consuming and technically complex, and we strive to aid these efforts by providing numerous data files, public use files, and narrative descriptions of the claims accounting process for each rule.

a. Claims Preparation

For the proposed rule, we used the CY 2014 hospital outpatient claims processed through December 31, 2014, to calculate the geometric mean costs of APCs that underpin the proposed relative payment weights for CY 2016. For this final rule with comment period, we used the CY 2014 hospital outpatient claims processed through June 30, 2015, to calculate the geometric mean costs of APCs that underpin the final relative payment weights for CY 2016. To begin the calculation of the relative payment weights for CY 2016, we selected all claims for outpatient services furnished in CY 2014 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 tests 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 claims are submitted by providers to Medicare with the knowledge that no payment would be made. For example, providers submit claims with a condition code 21 to elicit an official denial notice from Medicare to document that a service is not covered under the OPPS. 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 125 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 rates.

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.

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 final rule with comment period. 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 on the CMS Web site at: 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 excluding all claims from 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 only influenza and pneumococcal pneumonia (PPV) vaccines. Influenza and PPV vaccines are paid at reasonable cost; 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.

Prior to CY 2013, our payment policy for nonpass-through separately paid drugs and biologicals was based on a redistribution methodology that accounted for pharmacy overhead by allocating cost from packaged drugs to separately paid drugs. This methodology typically would have required us to reduce the cost associated Start Printed Page 70316with packaged coded and uncoded drugs in order to allocate that cost. However, for CY 2013, we paid 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. Under that policy, we did not redistribute the pharmacy overhead costs from packaged drugs to separately paid drugs. We retained the CY 2013 payment policy for separately payable drugs and biologicals through CY 2015, and as we proposed, we are continuing this payment policy for CY 2016. We refer readers to section V.B.3. of this final rule with comment period for a complete discussion of our CY 2016 payment policy for separately paid drugs and biologicals.

We then removed line-items that were not paid during claims 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,” and “V” 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 removed from the inpatient list for CY 2015 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 2016, we proposed to continue the policy we implemented for CY 2013 and retained in subsequent years to exclude line-item data for pass-through drugs and biologicals (status indicator “G” for CY 2013) and nonpass-through drugs and biologicals (status indicator “K” for CY 2013) 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 2015 OPPS/ASC final rule with comment period (79 FR 66788) of line-items with a status indicator of “S,” “T,” or “V,” we believe that unpaid line-items represent services that are invalidly reported and, therefore, should not be used for ratesetting (we note that the deletion of status indicator “X” was finalized in the CY 2015 OPPS/ASC final rule with comment period (79 FR 66821)). 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.

For the CY 2016 OPPS, as part of our proposal and adoption of our proposal to continue packaging payment for clinical diagnostic laboratory tests, as we proposed, we also are applying the line item trim to these services if they did not receive payment in the claims year. Removing these lines ensures that, in establishing the CY 2016 OPPS relative payment weights, we appropriately allocate the costs associated with packaging these services. Additional details and a summary of public comments received and our responses regarding packaging payment for clinical laboratory tests can be found in section II.A.3.b.(3) of this final rule with comment period.

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

(1) Splitting Claims

In the CY 2016 OPPS/ASC proposed rule (80 FR 39217), for the CY 2016 OPPS, we proposed to then split the remaining claims into five groups: Single majors; multiple majors; single minors; multiple minors; and other claims. (Specific definitions of these groups are presented below.) We note that, in the CY 2015 OPPS/ASC final rule with comment period (79 FR 66819 through 66821), we deleted status indicator “X” and revised the title and description of status indicator “Q1” to reflect that deletion. We also finalized the creation of status indicator “J1” in the CY 2015 OPPS/ASC final rule with comment period (79 FR 66800 through 66809) to reflect the comprehensive APCs (C-APCs). For CY 2016, we proposed to define major procedures as any procedure described by a HCPCS code that is assigned a status indicator of “J1,” “J2,” “S,” “T,” or “V,” to define minor procedures as any procedure described by a HCPCS code that is assigned a status indicator of “F,” “G,” “H,” “K,” “L,” “R,” “U,” or “N,” and to classify “other” procedures as any procedure described by a HCPCS code that is assigned a status indicator other than one that we have classified as major or minor. For CY 2016, we proposed to continue to assign status indicator “R” to HCPCS codes for blood and blood products; status indicator “U” to HCPCS codes for brachytherapy sources; status indicator “Q1” to all HCPCS “STV-packaged codes”; status indicator “Q2” to all HCPCS “T-packaged codes”; status indicator “Q3” to all HCPCS 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; and new status indicator “Q4” to HCPCS codes for laboratory tests that will be conditionally packaged on a claim with a service that is assigned status indicator “S,” “T,” or “V” unless an exception applies or the laboratory test is “unrelated” to the other HOPD service or services on the claim. For more information on status indicator “Q4,” we refer readers to section II.A.3.b.(3) of this final rule with comment period.

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 proposed to treat these codes in the same manner for data purposes for CY 2016 as we have treated them since CY 2008. Specifically, for CY 2016, we are continuing to evaluate whether the criteria for separate payment of codes with a status indicator of “Q1” or “Q2” are met in determining whether they are treated as major or minor codes. Claims containing codes with a status indicator of “Q1” or “Q2” are processed through the data system either with status indicator “N” to indicate that the services are packaged for payment or, if they meet the criteria for separate payment, they are assigned the status indicator of the APC to which they are assigned and are considered as “pseudo” single procedure claims for major codes. Claims containing codes that are assigned status indicator “Q3” are paid under individual APCs unless they occur in the combinations that qualify for payment as composite APCs Start Printed Page 70317and, therefore, they are assigned 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.f. of this final rule with comment period. HCPCS codes with status indicator “Q4” only appear in the OPPS model if they are packaged on a claim with a service that is assigned status indicator “S,” “T,” or “V.”

Specifically, we proposed 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,” or “V” which includes codes with status indicator “Q3”); claims with status indicator “J1” or “J2,” which receive special processing for C-APCs, as discussed in section II.A.2.e. of this final rule with comment period; claims with one unit of a status indicator “Q1” code (“STV-packaged”) where there was no code with status indicator “S,” “T,” or “V” 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,” or “V” 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” or “V”). 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” (“STV-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” (“STV-packaged”) or more than one unit of a code with status indicator “Q1” but no codes with status indicator “S,” “T,” or “V” 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, 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” (“STV-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 final rule with comment period, depending on the specific composite calculation.

In the CY 2016 OPPS/ASC proposed rule (80 FR 39217), we proposed to adjust the claims sorting process to determine whether a claim has a bilateral procedure modifier (Modifier 50) before claims are assigned to one of the five claims categories. This proposed adjustment shifts some claims that might otherwise be considered a single major procedure claim to the multiple major procedure claim category due to the presence of the bilateral modifier. We stated that we believe that this proposed adjustment more accurately sorts claims that have a bilateral modifier.

We did not receive any public comments on the proposed process to categorize claims used in CY 2016 OPPS cost modeling. Therefore, we are finalizing our policy as proposed.

(2) Creation of “Pseudo” Single Procedure Claims

To develop “pseudo” single procedure claims for the 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 procedure claim).

We also proposed to use the bypass codes listed in Addendum N to the proposed rule (which is available via the Internet on the CMS Web site) and discussed in section II.A.1.b. of the proposed rule and this final rule with comment period 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 ignored the “overlap bypass codes,” that is, those HCPCS codes that were 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 2016 “overlap bypass codes” were listed in Addendum N to the 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. If 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, Start Printed Page 70318which retained the costs of packaged revenue codes and packaged HCPCS codes. This enabled us to use claims that would otherwise be multiple procedure claims and could not be used.

We then assessed the claims to determine if the criteria for the multiple imaging composite APCs, discussed in section II.A.2.f.(3) of the proposed rule and this final rule with comment period, were met. If 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 will not be a separately payable procedure, we considered it to be unavailable for use in setting the composite APC costs on which the CY 2016 OPPS relative payment weights are 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 examined the multiple procedure minor claims to determine whether we could create “pseudo” single procedure claims. Specifically, where the claim contained multiple codes with status indicator “Q1” (“STV-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 2015 relative payment weight, 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 “Q1.” We then packaged all costs for the following into a single cost for the “Q1” HCPCS code that had the highest CY 2015 relative payment weight to create a “pseudo” single procedure claim for that code: additional units of the status indicator “Q1” HCPCS code with the highest CY 2015 relative payment 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, we proposed that if 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 2015 relative payment weight 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 “Q2” HCPCS code that had the highest CY 2015 relative payment weight to create a “pseudo” single procedure claim for that code: Additional units of the status indicator “Q2” HCPCS code with the highest CY 2015 relative payment 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.

If a multiple procedure minor claim contained multiple codes with status indicator “Q2” (“T-packaged”) and status indicator “Q1” (“STV-packaged”), we selected the T-packaged status indicator “Q2” HCPCS code that had the highest relative payment weight for CY 2015 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 2015 relative payment weight; other codes with status indicator “Q2”; codes with status indicator “Q1” (“STV-packaged”); and other packaged HCPCS codes and packaged revenue code costs. We selected status indicator “Q2” HCPCS codes instead of “Q1” HCPCS codes because “Q2” HCPCS codes have higher CY 2015 relative payment weights. If a status indicator “Q1” HCPCS code had a higher CY 2015 relative payment weight, it became 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 revised 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, if they met the criteria for single procedure claims. Conditionally packaged codes are identified using status indicators “Q1” and “Q2,” and are described in section XI.A. of this final rule with comment period.

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 procedure modifier (Modifier 50) 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 did not receive any public comments on our proposed methodology for creating “pseudo” single procedure claims. Therefore, we are finalizing our proposal to continue to apply the methodology described above for the purpose of creating “pseudo” single procedure claims for the CY 2016 OPPS. The final CY 2016 bypass codes and “overlap bypass codes” are listed in Addendum N to this final rule with comment period (which is available via the Internet on the CMS Web site).

c. Completion of Claim Records and Geometric Mean Cost Calculations

(1) General Process

We proposed to then package the costs of packaged HCPCS codes (codes with status indicator “N” listed in Addendum B to the proposed rule (which is 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 Start Printed Page 70319services reported under packaged revenue codes in Table 4 of the proposed rule (Table 4 below in this final rule with comment period) that appeared on the claim without a HCPCS code into the cost of the single major procedure remaining on the claim. For a more complete discussion of our CY 2016 OPPS packaging policy, we refer readers to section II.A.3. of this final rule with comment period.

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 continuing to compare the final list of packaged revenue codes that we adopt for CY 2016 to the revenue codes that the I/OCE will package for CY 2016 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 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 on the CY 2010 proposed list of packaged revenue codes.

For CY 2016, as we did for CY 2015, we reviewed the changes to revenue codes that were effective during CY 2014 for purposes of determining the charges reported with revenue codes but without HCPCS codes that we proposed to package for CY 2016. We stated in the proposed rule that we believe that the charges reported under the revenue codes listed in Table 4 of the proposed rule continue to reflect ancillary and supportive services for which hospitals report charges without HCPCS codes. Therefore, for CY 2016, we proposed to continue to package the costs that we derive from the charges reported without HCPCS codes under the revenue codes displayed in Table 4 of the proposed rule for purposes of calculating the geometric mean costs on which the CY 2016 OPPS/ASC payment rates are based.

Comment: One commenter suggested that CMS revisit its ratesetting methodology to prevent items or services that are more costly than a primary service from being packaged into the payment for the primary service. The commenter also suggested that only items or services that are clinically relevant to a primary service be packaged for payment with a primary service.

Response: We thank the commenter for these suggestions. Since the beginning of the OPPS and throughout its development, we have striven to find ways to improve our methodologies for estimating the costs associated with providing services, including our methodology for packaging services. We will continue to look at ways to improve our ratesetting process, including improving our packaging logic, in future payment years. We only assign packaged status indicators to services that we determine are ancillary, supportive, dependent, or adjunctive to a primary service. We disagree with the commenter that only payment for less costly services should be packaged into payment for a primary service, as the cost of a packaged service relative to a primary service is not necessarily determinative of packaged status.

For the reasons set forth in the proposed rule, we are finalizing the proposed packaged revenue codes for CY 2016, without modification, which are identified in Table 4 below.

Table 4—CY 2016 Packaged Revenue Codes

Revenue codeDescription
250Pharmacy; General Classification.
251Pharmacy; Generic Drugs.
252Pharmacy; Non-Generic Drugs.
254Pharmacy; Drugs Incident to Other Diagnostic Services.
255Pharmacy; Drugs Incident to Radiology.
257Pharmacy; Non-Prescription.
258Pharmacy; IV Solutions.
259Pharmacy; Other Pharmacy.
260IV Therapy; General Classification.
261IV Therapy; Infusion Pump.
262IV Therapy; IV Therapy/Pharmacy Svcs.
263IV Therapy; IV Therapy/Drug/Supply Delivery.
264IV Therapy; IV Therapy/Supplies.
269IV Therapy; Other IV Therapy.
270Medical/Surgical Supplies and Devices; General Classification.
271Medical/Surgical Supplies and Devices; Non-sterile Supply.
272Medical/Surgical Supplies and Devices; Sterile Supply.
275Medical/Surgical Supplies and Devices; Pacemaker.
276Medical/Surgical Supplies and Devices; Intraocular Lens.
278Medical/Surgical Supplies and Devices; Other Implants.
279Medical/Surgical Supplies and Devices; Other Supplies/Devices.
280Oncology; General Classification.
289Oncology; Other Oncology.
331Radiology—Therapeutic and/or Chemotherapy Administration; Chemotherapy Admin—Injected.
332Radiology—Therapeutic and/or Chemotherapy Administration; Chemotherapy Admin—Oral.
335Radiology—Therapeutic and/or Chemotherapy Administration; Chemotherapy Admin—IV.
343Nuclear Medicine; Diagnostic Radiopharmaceuticals.
344Nuclear Medicine; Therapeutic Radiopharmaceuticals.
360Operating Room Services; General Classification.
361Operating Room Services; Minor Surgery.
362Operating Room Services; Organ Transplant—Other than Kidney.
369Operating Room Services; Other OR Services.
Start Printed Page 70320
370Anesthesia; General Classification.
371Anesthesia; Anesthesia Incident to Radiology.
372Anesthesia; Anesthesia Incident to Other DX Services.
379Anesthesia; Other Anesthesia.
390Administration, Processing and Storage for Blood and Blood Components; General Classification.
392Administration, Processing and Storage for Blood and Blood Components; Processing and Storage.
399Administration, Processing and Storage for Blood and Blood Components; Other Blood Handling.
410Respiratory Services; General Classification.
412Respiratory Services; Inhalation Services.
413Respiratory Services; Hyperbaric Oxygen Therapy.
419Respiratory Services; Other Respiratory Services.
621Medical Surgical Supplies—Extension of 027X; Supplies Incident to Radiology.
622Medical Surgical Supplies—Extension of 027X; Supplies Incident to Other DX Services.
623Medical Supplies—Extension of 027X, Surgical Dressings.
624Medical Surgical Supplies—Extension of 027X; FDA Investigational Devices.
630Pharmacy—Extension of 025X; Reserved.
631Pharmacy—Extension of 025X; Single Source Drug.
632Pharmacy—Extension of 025X; Multiple Source Drug.
633Pharmacy—Extension of 025X; Restrictive Prescription.
681Trauma Response; Level I Trauma.
682Trauma Response; Level II Trauma.
683Trauma Response; Level III Trauma.
684Trauma Response; Level IV Trauma.
689Trauma Response; Other.
700Cast Room; General Classification.
710Recovery Room; General Classification.
720Labor Room/Delivery; General Classification.
721Labor Room/Delivery; Labor.
722Labor Room/Delivery; Delivery Room.
724Labor Room/Delivery; Birthing Center.
729Labor Room/Delivery; Other Labor Room/Delivery.
732EKG/ECG (Electrocardiogram); Telemetry.
760Specialty Services; General Classification.
761Specialty Services; Treatment Room.
762Specialty services; Observation Hours.
769Specialty Services; Other Specialty Services.
770Preventive Care Services; General Classification.
801Inpatient Renal Dialysis; Inpatient Hemodialysis.
802Inpatient Renal Dialysis; Inpatient Peritoneal Dialysis (Non-CAPD).
803Inpatient Renal Dialysis; Inpatient Continuous Ambulatory Peritoneal Dialysis (CAPD).
804Inpatient Renal Dialysis; Inpatient Continuous Cycling Peritoneal Dialysis (CCPD).
809Inpatient Renal Dialysis; Other Inpatient Dialysis.
810Acquisition of Body Components; General Classification.
819Acquisition of Body Components; Other Donor.
821Hemodialysis—Outpatient or Home; Hemodialysis Composite or Other Rate.
824Hemodialysis—Outpatient or Home; Maintenance—100%.
825Hemodialysis—Outpatient or Home; Support Services.
829Hemodialysis—Outpatient or Home; Other OP Hemodialysis.
942Other Therapeutic Services (also see 095X, an extension of 094x); Education/Training.
943Other Therapeutic Services (also see 095X, an extension of 094X), Cardiac Rehabilitation.
948Other Therapeutic Services (also see 095X, an extension of 094X), Pulmonary Rehabilitation.

In accordance with our longstanding policy, we proposed 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 after July 1, 2014, 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 Medicare Administrative Contractor (MAC) was required to allocate the sum of charges for services with a status indicator equaling “S” or “T” based on the relative payment 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 continuing these processes for the CY 2016 OPPS.

For the remaining claims, we then standardized 60 percent of the costs of the claim (which we have previously determined to be the labor-related portion) for geographic differences in labor input costs. We made this adjustment by determining the wage index that applied to the hospital that furnished the service and dividing the cost for the separately paid HCPCS code furnished by the hospital by that wage index. The claims accounting that we provide for the proposed rule and final rule with comment period contains the formula we use to standardize the total cost for the effects of the wage index. As Start Printed Page 70321has been our policy since the inception of the OPPS, we used 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. We used these pre-reclassified wage indices for standardization using the new OMB labor market area delineations described in section II.C. of this final rule with comment period.

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

After removing claims for hospitals with error CCRs, claims without HCPCS codes, claims for immunizations not covered under the OPPS, and claims for services not paid under the OPPS, approximately 122 million claims remained. Using these approximately 122 million claims, we created approximately 95 million single and “pseudo” single procedure claims, of which we used approximately 92 million single claims (after trimming out approximately 3 million claims as discussed in section II.A.1.a. of this final rule with comment period) in the CY 2016 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 CYs 2013, 2014, and 2015 OPPS, we calculated the APC relative payment weights using geometric mean costs, and we are continuing this practice for CY 2016. Therefore, the following discussion of the 2 times rule violation and the development of the relative payment weight refers to geometric means. For more detail about the CY 2016 OPPS/ASC policy to calculate relative payment weights based on geometric means, we refer readers to section II.A.2.c. of this final rule with comment period.

We used these claims to calculate the CY 2016 geometric mean costs for each separately payable procedure described by the 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, in the CY 2013 OPPS/ASC final rule with comment period (77 FR 68270), as part of the CY 2013 policy to develop the OPPS relative payment weights based on geometric mean costs, we also applied the 2 times rule based on geometric mean costs. For the CY 2016 OPPS, as we proposed, we are continuing to develop the APC relative payment weights based on geometric mean costs.

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 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 92 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 claims 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 2016 policy to continue 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 cost methodology. 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 will pay separately under this final rule with comment period, and we reassigned HCPCS codes to different APCs where it was necessary to ensure clinical and resource homogeneity within the APCs. 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., II.A.2.f., and VIII.B. of this final rule with comment period, in some cases, APC geometric mean costs were calculated using variations of the process outlined above. Specifically, section II.A.2.d. of this final rule with comment period addresses the calculation of single APC criteria-based geometric mean costs. Section II.A.2.f. of this final rule with comment period discusses the calculation of composite APC criteria-based geometric mean costs. Section VIII.B. of this final rule with comment period addresses the methodology for calculating the geometric mean costs for partial hospitalization services.

We did not receive any public comments on our proposal for completion of claims records and calculation of geometric means cost. Therefore, we are adopting the geometric means calculation process that we proposed as final. We are finalizing our proposed methodology for calculating geometric means costs for purposes of creating relative payment weights and subsequent APC payment rates for the CY 2016 OPPS.

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

At the August 24, 2015 meeting of the Panel, we discussed our standard analysis of APCs, specifically those APCs for which geometric mean costs in the proposed rule run of CY 2014 claims data varied significantly from the CY 2013 claims data used for the CY 2015 OPPS/ASC final rule with comment period. We also discussed the “pseudo” single development process for the CY 2015 OPPS/ASC final rule with comment period.

At the August 24, 2015 Panel meeting, the Panel made two recommendations related to the data process. The Panel's data-related recommendations and our responses follow.

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

CMS Response: We are accepting this recommendation.

Recommendation: The Panel recommends that CMS provide the Panel with a list of APCs fluctuating Start Printed Page 70322significantly in costs at the next Panel meeting.

CMS Response: We are accepting this recommendation.

Recommendation: The Panel recommends that Michael Schroyer serve as Chair of the Data Subcommittee.

CMS Response: We are accepting this recommendation.

d. Calculation of Single Procedure APC Criteria-Based Costs

(1) Blood and Blood Products

(a) Methodology

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.

In the CY 2016 OPPS/ASC proposed rule (80 FR 39222), for CY 2016, we proposed 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 proposed 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 also proposed to 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 proposed to calculate the costs upon which the CY 2016 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 stated in the proposed rule that we continue to believe that the hospital-specific simulated blood-specific CCR methodology better responds to the absence of a blood-specific CCR for a hospital than alternative methodologies, such as defaulting to the overall hospital CCR or applying an average blood-specific CCR across hospitals. Because this methodology takes into account the unique charging and cost accounting structure of each hospital, we believe that it yields more accurate estimated costs for these products. We continue to believe that this methodology in CY 2016 will 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 invited public comments on this proposal to continue this longstanding methodology.

Comment: Commenters supported the proposal to continue to separately pay for blood and blood products using a blood-specific CCR methodology.

Response: We appreciate the commenters' support.

Comment: Numerous commenters (various hospitals, blood centers, associations, and other stakeholders) expressed concern regarding the proposed CY 2016 payment rates for blood and blood products. The commenters believed that the proposed payment rates do not accurately reflect the cost of collecting, processing, and distributing blood products to patients. The commenters noted that the payment rates did not align with the costs statistics data provided with the proposed rule, and therefore the commenters believed that the CY 2016 proposed payment rates for blood and blood products were produced in error.

Response: We acknowledge that an error occurred in the calculation of the proposed CY 2016 payment rates for blood and blood products included in the proposed rule. The payment rates included in the proposed rule erroneously were not calculated using the hospital-specific simulated blood-specific CCR methodology described in the proposed rule (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). As a result of correcting this error, payment rates for blood and blood products increased approximately 10 percent to 60 percent from the proposed CY 2016 payment rates. We have corrected this error in this final rule with comment period and the final CY 2016 payment rates reflect this correction.

After consideration of the public comments we received, we are finalizing, without modification, our CY 2016 proposal to continue to establish payment rates for blood and blood products using our blood-specific CCR methodology. The final CY 2016 payment rates for blood and blood products (which are identified with status indicator “R”) are reflective of the use of the hospital-specific simulated blood-specific CCR methodology and can be found in Addendum B to this final rule with comment period (which is available via the Internet on the CMS Web site).

(b) New HCPCS Codes for Pathogen-Reduced Blood Products

For CY 2016, the HCPCS Workgroup established three new HCPCS P-codes for new pathogen-reduced blood products, effective January 1, 2016, as follows:

  • P9070 (Plasma, pooled multiple donor, pathogen reduced, frozen, each unit);
  • P9071 (Plasma (single donor), pathogen reduced, frozen, each unit); and
  • P9072 (Platelets, pheresis, pathogen reduced, each unit).

The term “pathogen reduction” describes various techniques (including treatment with Amotosalen and UVA light) used on blood products to eliminate certain pathogens and reduce the risk of transfusion-associated infections. As discussed above, we calculate 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. Because these three HCPCS P-codes are new for CY 2016, there are currently no claims data on the charges and costs for these blood products upon which to apply our blood-specific CCR methodology. Therefore, we are establishing interim payment rates for these three HCPCS P-codes based on a crosswalk to existing blood product HCPCS codes that we believe provide the best proxy for the costs of the three new blood products described by the above listed new HCPCS P-codes. Table 5 below list the new pathogen-reduced blood products Start Printed Page 70323HCPCS P-codes and their payment crosswalks.

Table 5—New Pathogen-Reduced Blood Products HCPCS P-Codes and Interim Payment Rates and Crosswalks for CY 2016

New CY 2016 HCPCS P-codeNew HCPCS P-code long descriptorCrosswalked HCPCS P-codeCrosswalked HCPCS P-code long descriptorFinal CY 2016 OPPS payment amount
P9070Plasma, pooled multiple donor, pathogen reduced, frozen, each unitP9059Fresh frozen plasma between 8-24 hours of collection, each unit$73.08
P9071Plasma (single donor), pathogen reduced, frozen, each unitP9017Fresh frozen plasma (single donor), frozen within 8 hours of collection, each unit72.56
P9072Platelets, pheresis, pathogen reduced, each unitP9037Platelets, pheresis, leukocytes reduced, irradiated, each unit641.85

These interim payment rates are open for public comment in this CY 2016 final rule with comment period. Specifically, the new HCPCS P-codes are flagged with comment indicator “NI” in Addendum B to this final rule with comment period to indicate that we have assigned the codes an interim OPPS payment status for CY 2016 and are seeking public comments on the APC and status indicator assignments. Once we have claims data for these new HCPCS P-codes, we will calculate payment rates using the claims data that should be available for these new codes beginning in CY 2018, which is our practice for other blood products for which claims data have been available for 2 years.

During the process of creating these new HCPCS P-codes for the three pathogen-reduced blood products, we examined the current set of HCPCS P-codes, which became effective many years ago. We believe that the HCPCS P-codes for these products could benefit from a careful examination and review with possible revision and updating to make the HCPCS P-codes describing blood products reflect current product descriptions and utilization while minimizing redundancy and potentially outdated descriptors. Therefore, we intend in future rulemaking to evaluate the set of HCPCS P-codes and propose revisions that may be necessary to create a current and robust code set for blood products.

(2) Brachytherapy Sources

Section 1833(t)(2)(H) of the Act mandates 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 statute provides certain criteria for the additional groups. For the history of OPPS payment for brachytherapy sources, we refer readers to prior OPPS final rules, such as the CY 2012 OPPS/ASC final rule with comment period (77 FR 68240 through 68241). As we have stated in prior OPPS updates, we believe that adopting the general OPPS prospective payment methodology for brachytherapy sources is appropriate for a number of reasons (77 FR 68240). The general OPPS 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 costs. We believe that the OPPS methodology, as opposed to payment based on hospitals' charges adjusted to cost, also would 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. We refer readers to the CY 2015 OPPS/ASC final rule with comment period (79 FR 66796 through 66798) for further discussion of the history of OPPS payment for brachytherapy sources.

In the CY 2016 OPPS/ASC proposed rule (80 FR 39222), for CY 2016, we proposed to use the costs derived from CY 2014 claims data to set the proposed CY 2016 payment rates for brachytherapy sources, as we proposed to use to set the proposed payment rates for most other items and services that would be paid under the CY 2016 OPPS. We based the proposed payment rates for brachytherapy sources on the geometric mean unit costs for each source, consistent with the methodology proposed for other items and services paid under the OPPS, as discussed in section II.A.2. of the proposed rule and this final rule with comment period. We also proposed to continue the other payment policies for brachytherapy sources that we finalized and first implemented in the CY 2010 OPPS/ASC final rule with comment period (74 FR 60537). We proposed to pay for the stranded and nonstranded not otherwise specified (NOS) codes, HCPCS codes C2698 and C2699, at a rate equal to the lowest stranded or nonstranded prospective payment rate for such sources, respectively, on a per source basis (as opposed to, for example, 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). For CY 2016 and subsequent years, we also proposed 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 delayed until January 1, 2010 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.

The proposed CY 2016 payment rates for brachytherapy sources were included in Addendum B to the proposed rule (which is available via the Internet on the CMS Web site) and were identified with status indicator “U.”

We invited public comments on this proposed policy. We also requested recommendations for new HCPCS codes to describe new brachytherapy sources consisting of a radioactive isotope, including a detailed rationale to support recommended new sources.

Comment: One commenter expressed concern regarding the outpatient Start Printed Page 70324hospital claims data that CMS used to set the prospective payment rates for brachytherapy sources. The commenter stated that high dose rate (HDR) brachytherapy devices are renewable because the devices have a 90-day use span and are used in the treatment of multiple patients during this 90-day span. According to the commenter, the true cost of treatment involving brachytherapy sources depends on the number of patients treated by a hospital within a 90-day period, as well as the number of treatments required and the intensity of the treatments. For this reason, the commenter believed that it is difficult to establish fair and adequate prospective payment rates for brachytherapy sources. The commenter also noted that the brachytherapy source payment data continue to show huge variation in per unit cost across hospitals.

In addition, the commenter believed that CMS' claims data contain rank order anomalies, causing the usual cost relationship between the high activity palladium-103 source (HCPCS code C2635, Brachytherapy source, non-stranded, high activity, palladium-103, greater than 2.2 mci (NIST) per source) and the low activity palladium-103 sources (HCPCS code C2640, Brachytherapy source, stranded, palladium-103, per source and HCPCS code C2641, Brachytherapy source, non-stranded, palladium-103, per source) to be reversed. The commenter noted that the proposed geometric mean costs of the brachytherapy source HCPCS codes are approximately $35, $72, and $72, respectively. The commenters stated that, based on its experience, stranded palladium-103 sources (HCPCS code C2640) always cost more than non-stranded palladium-103 sources (HCPCS code C2641), which is not reflected in the proposed rule claims data that CMS used. The commenter expressed concern that payment for brachytherapy sources are unstable and fluctuate significantly since CMS implemented the prospective payment methodology based on source-specific median cost in CY 2010 and geometric mean unit cost in CY 2013.

Response: As stated above, we believe that geometric mean costs based on hospital claims data for brachytherapy sources have produced reasonably consistent per-source cost estimates over the past several years, comparable to the patterns we have observed for many other OPPS services whose payments are set based upon relative payment weights from claims data. We believe that our per-source payment methodology specific to each source's radioisotope, radioactive intensity, and stranded or non-stranded configuration, supplemented by payment based on the number of sources used in a specific clinical case, adequately accounts for the major expected sources of variability across treatments. (We refer readers to 72 FR 66782; 74 FR 60534; 75 FR 71979; 76 FR 74161; 77 FR 68241; 78 FR 74861; and 79 FR 66796.) We believe that the CY 2014 brachytherapy source claims data used for CY 2016 ratesetting produce adequate payment rates for brachytherapy sources. In addition, as we have explained previously, a prospective payment system relies upon the concept of averaging, where the payment may be more or less than the estimated cost of providing a service for a particular patient. With the exception of outlier cases, the payment for services is adequate to ensure access to appropriate care. In the case of brachytherapy sources for which the law requires separate payment groups, without packaging, the costs of these individual items could be expected to show greater variation than some other APCs under the OPPS because higher variability in costs for some component items and services is not balanced with lower variability in costs for others, and because relative payment weights are typically estimated using a smaller set of claims. Nevertheless, we believe that prospective payment rates for brachytherapy sources based on geometric mean costs of the services reported on claims calculated according to the standard OPPS methodology are appropriate and provide hospitals with the greatest incentives for efficiency in furnishing brachytherapy treatment.

Under the OPPS, it is the relativity of costs, not the absolute costs, that is important, and we believe that brachytherapy sources are appropriately paid according to the standard OPPS approach. Furthermore, some sources may have geometric mean costs and payment rates based on 50 or fewer providers because it is not uncommon for OPPS rates to be based on claims from a relatively small number of hospitals that furnished the service in the year of claims data available for the OPPS update year. Fifty hospitals may report hundreds of brachytherapy sources on claims for many cases and comprise the universe of providers using particular low volume sources, for which we are required to pay separately by statute. Further, our methodology for estimating geometric mean costs for brachytherapy sources utilizes all line-item charges for those sources, which allows us to use all hospital reported charge and estimated cost information to set payment rates for these items. Therefore, no brachytherapy source claims are excluded from the calculation of geometric means costs. We have no reason to believe that prospective payment rates based on claims data from those providers furnishing a particular source do not appropriately reflect the cost of that source to hospitals. As with most other OPPS services, we note that the geometric mean costs for brachytherapy sources are based upon the costs of those providers' sources in CY 2014. Hospitals individually determine their charge for an item or service, and one of Medicare's primary requirements for setting a charge is that it be reasonably and consistently related to the cost of the item or service for that facility. (We refer readers to the Medicare Provider Reimbursement Manual, Part I, Section 2203, which is available on the CMS Web site at: http://www.cms.gov/​Regulations-and-Guidance/​Guidance/​Manuals/​Paper-Based-Manuals-Items/​CMS021929.html?​DLPage=​1&​DLSort=​0&​DLSortDir=​ascending.) We then estimate a cost from that charge using the hospital's most recent Medicare hospital cost report data in our standard OPPS ratesetting process.

We acknowledge that HDR brachytherapy sources such as HDR iridium-192 have a fixed active life and must be replaced every 90 days. As a result, a hospital's per treatment cost for the source would be dependent on the number of treatments furnished per source. The cost of the brachytherapy source must be amortized over the life of the source. Therefore, when establishing charges for HDR iridium-192, we expect hospitals to project the number of treatments that would be provided over the life of the source and establish charges for the source accordingly (72 FR 66783; 74 FR 60535; 75 FR 71980; 76 FR 74162; 77 FR 68242; and 78 FR 74861). For most payable services under the OPPS, our practice is to establish prospective payment rates based on the geometric mean costs determined from hospitals' claims data to provide incentives for efficient and cost effective delivery of these services.

With regard to the commenter's stated concerns relating to the differences in costs for high-activity and low-activity palladium-103 sources, our claims data consistently have shown higher average costs for low-activity palladium-103 sources. For the high-activity palladium-103 sources described by HCPCS code C2635, our claims data showed that 9 hospitals submitted claims for this source in CY 2014, compared to 91 and 145 hospitals that submitted claims for the low-activity palladium-103 sources described by Start Printed Page 70325HCPCS codes C2640 and C2641, respectively. It is clear from these claims data that fewer hospitals furnished the high-activity palladium-103 source than the low-activity palladium-103 sources, and we expect that the hospital cost distribution for those hospitals could be different than the cost distribution of the large numbers of hospitals reporting the low-activity palladium-103 sources, as previously stated (74 FR 60535; 75 FR 71979; 76 FR 74162; 77 FR 68242; and 78 FR 74861). These varied cost distributions clearly contribute to the observed relationship in geometric mean cost between the different types of sources. However, we see no reason why our standard ratesetting methodology for brachytherapy sources that relies on all claims data from all hospitals furnishing brachytherapy sources would not yield valid geometric mean costs for those hospitals furnishing the different brachytherapy sources upon which CY 2016 prospective payments are based.

Comment: A number of commenters noted that the proposed CY 2016 payment rate for brachytherapy sources described by HCPCS code C2616 (Brachytx, non-str, yttrium-90) would not adequately cover a hospital's true cost for purchasing the device. The commenters expressed concern that the claims data used to calculate the CY 2016 proposed payment rate does not accurately represent charges for the Y-90 brachytherapy devices and the CY 2015 purchase price incurred by hospitals. In addition, the commenters believed that inconsistent or incorrect reporting (or both) of revenue codes for the use of Y-90 brachytherapy devices adversely affected the proposed CY 2016 payment rate for HCPCS code C2616.

Response: As illustrated in Table 6 below, the CY 2016 geometric mean cost of brachytherapy sources described by HCPCS code C2616 for this final rule with comment period is approximately $16,760, compared with approximately $16,160 for CY 2015, and $16,890 for CY 2014. Furthermore, we note that the CY 2016 geometric mean cost is based on a greater number of providers, days, and units in comparison to CY 2014 and CY 2015.

Table 6—Cost Statistics for Brachytheraopy Sources Described by HCPCS Code C2616 for CY 2014 Through CY 2016

Calendar yearHCPCS codeNumber of providersDaysUnitsGeometric mean unit cost
2014C26162462,2372,237$16,888.06
2015C26162992,4642,46416,164.79
2016C26163523,1533,15316,764.72

We believe that some variation in relative cost from year to year is to be expected in a prospective payment system, particularly for low-volume items.

For all APCs whose payment rates are based upon relative payment weights, we note that the quality and accuracy of reported units and charges significantly influence the final geometric mean costs that are the basis for our payments. Beyond our standard OPPS trimming methodology (described in section II.A.2. for this final rule with comment period) that we apply to those claims that have passed various types of claims processing edits, it is not our policy to critique the accuracy of hospital coding and charging for the purpose of ratesetting. Moreover, we do not believe it is necessary to incorporate external cost data from manufacturers of Y-90 brachytherapy sources (or any other brachytherapy sources) because, in a relative weight system like the OPPS, it is the relativity of the costs of services to one another, rather than absolute cost, that is important in setting payment rates. External data lack relativity to the estimated costs derived from the claims and cost report data and generally are not appropriate for determining relative weights that result in payment rates when costs derives from hospital claims and cost report data for services are available.

After consideration of the public comments we received, we are finalizing our proposal to continue to set the payment rates for brachytherapy sources using our established prospective payment methodology, which is based on geometric mean costs. The CY 2016 final payment rates for brachytherapy sources are found in Addendum B to this final rule with comment period (which is available via the Internet on the CMS Web site).

As stated in the proposed rule, we continue to invite hospitals and other parties to submit recommendations to us for new codes to describe new brachytherapy sources. Such recommendations should be directed to the Division of Outpatient Care, Mail Stop C4-03-27, 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. Comprehensive APCs (C-APCs) for CY 2016

(1) Background

In the CY 2014 OPPS/ASC final rule with comment period (78 FR 74861 through 74910), we finalized a comprehensive payment policy that packages payment for adjunctive and secondary items, services, and procedures into the most costly primary procedure under the OPPS at the claim level. The policy was finalized in CY 2014, but the effective date was delayed until January 1, 2015, to allow additional time for further analysis, opportunity for public comment, and systems preparation. The comprehensive APC (C-APC) policy was implemented effective January 1, 2015, with modifications and clarifications in response to public comments received regarding specific provisions of the C-APC policy (79 FR 66798 through 66810).

A C-APC is defined as a classification for the provision of a primary service and all adjunctive services provided to support the delivery of the primary service. We established C-APCs as a category broadly for OPPS payment and implemented 25 C-APCs beginning in CY 2015 (79 FR 66809 through 66810).

Under this policy, we designated a HCPCS code assigned to a C-APC as the primary service (identified by a new OPPS status indicator “J1”). When such a primary service is reported on a hospital outpatient claim, taking into consideration the few exceptions that are discussed below, we make payment for all other items and services reported on the hospital outpatient claim as being integral, ancillary, supportive, dependent, and adjunctive to the primary service (hereinafter collectively referred to as “adjunctive services”) and representing components of a complete Start Printed Page 70326comprehensive service (78 FR 74865 and 79 FR 66799). Payments for adjunctive services are packaged into the payments for the primary services. This results in a single prospective payment for each of the primary, comprehensive services based on the costs of all reported services at the claim level.

Services excluded from the C-APC policy include services that are not covered OPD services, services that cannot by statute be paid for under the OPPS, and services that are required by statute that must be separately paid. This includes certain mammography and ambulance services that are not ever covered OPD services in accordance with section 1833(t)(1)(B)(iv) of the Act; brachytherapy seeds, which also are required by statute to receive separate payment under section 1833(t)(2)(H) of the Act; pass-through drugs and devices, which also require separate payment under section 1833(t)(6) of the Act; self-administered drugs (SADs) that are not otherwise packaged as supplies because they are not covered under Medicare Part B under section 1861(s)(2)(B) of the Act, and certain preventive services (78 FR 74865 and 79 FR 66800 through 66801).

The C-APC policy payment methodology set forth in the CY 2014 OPPS/ASC final rule with comment period for the C-APCs and modified and implemented in CY 2015 is summarized as follows (78 FR 74887 and 79 FR 66800):

Basic Methodology. As stated in the CY 2015 OPPS/ASC final rule with comment period, we define the C-APC payment policy as including all covered OPD services on a hospital outpatient claim reporting a primary service that is assigned to status indicator “J1,” excluding services that are not covered OPD services or that cannot by statute be paid for under the OPPS. Services and procedures described by HCPCS codes assigned to status indicator “J1” are assigned to C-APCs based on our usual APC assignment methodology by evaluating the geometric mean costs of the primary service claims to establish resource similarity and the clinical characteristics of each procedure to establish clinical similarity within each APC.

Services included under the C-APC payment packaging policy, that is, services that are typically adjunctive to the primary service, provided during the delivery of the comprehensive service, include diagnostic procedures, laboratory tests, and other diagnostic tests and treatments that assist in the delivery of the primary procedure; visits and evaluations performed in association with the procedure; uncoded services and supplies used during the service; durable medical equipment as well as prosthetic and orthotic items and supplies when provided as part of the outpatient service; and any other components reported by HCPCS codes that represent services that are provided during the complete comprehensive service, except the excluded services that are described below (78 FR 74865 and 79 FR 66800).

In addition, payment for outpatient department services that are similar to therapy services and delivered either by therapists or nontherapists is included as part of the payment for the packaged complete comprehensive service. These services that are provided during the perioperative period are adjunctive services and not therapy services as described in section 1834(k) of the Act, regardless of whether the services are delivered by therapists or other nontherapist health care workers. We have previously noted that therapy services are those provided by therapists under a plan of care in accordance with section 1835(a)(2)(C) and section 1835(a)(2)(D) of the Act and are paid for under section 1834(k) of the Act, subject to annual therapy caps as applicable (78 FR 74867 and 79 FR 66800). However, certain other services similar to therapy services are considered and paid for as outpatient department services. Payment for these nontherapy outpatient department services that are reported with therapy codes and provided with a comprehensive service is included in the payment for the packaged complete comprehensive service. We note that these services, even though they are reported with therapy codes, are outpatient department services and not therapy services. Therefore, the requirement for functional reporting under the regulations at 42 CFR 410.59(a)(4) and 42 CFR 410.60(a)(4) does not apply.

Items included in the packaged payment provided in conjunction with the primary service also include all drugs, biologicals, and radiopharmaceuticals, regardless of cost, except those drugs with pass-through payment status and those drugs that are usually self-administered (SADs), unless they function as packaged supplies (78 FR 74868 through 74869 and 74909 and 79 FR 66800). We refer readers to Section 50.2M, Chapter 15, of the Medicare Benefit Policy Manual for a description of our policy on SADs treated as hospital outpatient supplies, including lists of SADs that function as supplies and those that do not function as supplies.

Items and services excluded from the C-APC payment policy include: SADs that are not considered supplies because they are not covered under Medicare Part B under section 1861(s)(2)(B) of the Act; services excluded from the OPPS according to section 1833(t)(1)(B) of the Act, including recurring therapy services, which we considered unrelated to the comprehensive service (defined as therapy services reported on a separate facility claim for recurring services), ambulance services, diagnostic and screening mammography, the annual wellness visit providing personalized prevention plan services, and pass-through drugs and devices that are paid according to section 1833(t)(6) of the Act.

We also excluded preventive services. For a description of the preventive services that are excluded from the C-APC payment policy, we refer readers to the CY 2015 OPPS/ASC final rule with comment period (79 FR 66800 through 66801) and the list below in Table 7, which also includes any new preventive services added for CY 2016.

Other exclusions include brachytherapy services and pass-through drugs, biologicals, and devices that are required by statute to be separately payable (78 FR 74868 and 74909 and 79 FR 66801). In addition, we also excluded services assigned to OPPS status indicator “F,” which are services not paid under the OPPS and are instead paid on a reasonable cost basis (that is, certain certified registered nurse assistant (CRNA) services, Hepatitis B vaccines, and corneal tissue acquisition, which is not part of a comprehensive service for CY 2015). In Table 7 below, we list the services that are excluded from the C-APC payment policy.

Table 7—Comprehensive APC Payment Policy Exclusions for CY 2016

Ambulance services;
Brachytherapy;
Start Printed Page 70327
Diagnostic and mammography screenings;
Physical therapy, speech-language pathology and occupational therapy services—Therapy services reported on a separate facility claim for recurring services;
Pass-through drugs, biologicals, and devices;
Preventive services defined in 42 CFR 410.2:
• Annual wellness visits providing personalized prevention plan services
• Initial preventive physical examinations
• Pneumococcal, influenza, and hepatitis B vaccines and administrations
• Mammography Screenings
• Pap smear screenings and pelvic examination screenings
• Low Dose Computed Tomography
• Prostate cancer screening tests
• Colorectal cancer screening tests
• Diabetes outpatient self-management training services
• Bone mass measurements
• Glaucoma screenings
• Medical nutrition therapy services
• Cardiovascular screening blood tests
• Diabetes screening tests
• Ultrasound screenings for abdominal aortic aneurysm
• Additional preventive services (as defined in section 1861(ddd)(1) of the Act);
Self-administered drugs (SADs)—Drugs that are usually self-administered and do not function as supplies in the provision of the comprehensive service;
Services assigned to OPPS status indicator “F” (certain CRNA services, Hepatitis B vaccines and corneal tissue acquisition);
Services assigned to OPPS status indicator “L” (influenza and pneumococcal pneumonia vaccines); and
Certain Part B inpatient services—Ancillary Part B inpatient services payable under Part B when the primary “J1” service for the claim is not a payable Medicare Part B inpatient service (for example, exhausted Medicare Part A benefits, beneficiaries with Part B only).

We define each hospital outpatient claim reporting a single unit of a single primary service assigned to status indicator “J1” as a single “J1” unit procedure claim (78 FR 74871 and 79 FR 66801). We sum all line item charges for services included on the C-APC claim, convert the charges to costs, and calculate the “comprehensive” geometric mean cost of one unit of each service assigned to status indicator “J1.” (We note that we use the term “comprehensive” to describe the geometric mean cost of a claim reporting “J1” service(s) or the geometric mean cost of a C-APC, inclusive of all of the items and services included in the C-APC service payment bundle.) Charges for services that would otherwise be separately payable are added to the charges for the primary service. This process differs from our traditional cost accounting methodology only in that all such services on the claim are packaged (except certain services as described above). We apply our standard data trims, excluding claims with extremely high primary units or extreme costs.

The comprehensive geometric mean costs are used to establish resource similarity and, along with clinical similarity, dictate the assignment of the primary services to the C-APCs. We establish a ranking of each primary service (single unit only) to be assigned to status indicator “J1” according to their comprehensive geometric mean costs. For the minority of claims reporting more than one primary service assigned to status indicator “J1” or units thereof (approximately 20 percent of CY 2014 claims), we identify one “J1” service as the primary service for the claim based on our cost-based ranking of primary services. We then assign these multiple “J1” procedure claims to the C-APC to which the service designated as the primary service is assigned. If the reported “J1” services reported on a claim map to different C-APCs, we designate the “J1” service assigned to the C-APC with the highest comprehensive geometric mean cost as the primary service for that claim. If the reported multiple “J1” services on a claim map to the same C-APC, we designate the most costly service (at the HCPCS code level) as the primary service for that claim. This process results in initial assignments of claims for the primary services assigned to status indicator “J1” to the most appropriate C-APCs based on both single and multiple procedure claims reporting these services and clinical and resource homogeneity.

Complexity Adjustments. We use complexity adjustments to provide increased payment for certain comprehensive services. We apply a complexity adjustment by promoting qualifying “J1” service code combinations or code combinations of “J1” services and certain add-on codes (as described further below) from the originating C-APC (the C-APC to which the designated primary service is first assigned) to a higher paying C-APC in the same clinical family of C-APCs, if reassignment is clinically appropriate and the reassignment would not create a violation of the 2 times rule in the receiving APC (the higher paying C-APC in the same clinical family of C-APCs). We implement this type of complexity adjustment when the code combination represents a complex, costly form or version of the primary service according to the following criteria:

  • Frequency of 25 or more claims reporting the code combination (frequency threshold); and
  • Violation of the 2 times rule (cost threshold).

After designating a single primary service for a claim, we evaluate that service in combination with each of the other procedure codes reported on the claim assigned to status indicator “J1” (or certain add-on codes) to determine if they meet the complexity adjustment Start Printed Page 70328criteria. For new HCPCS codes, we determine initial C-APC assignments and complexity adjustments using the best data available, crosswalking the new HCPCS codes to predecessor codes wherever possible.

Once we have determined that a particular code combination of “J1” services (or combinations of “J1” services reported in conjunction with certain add-on codes) represents a complex version of the primary service because it is sufficiently costly, frequent, and a subset of the primary comprehensive service overall according to the criteria described above, we promote the complex version of the primary service as described by the code combination to the next higher cost C-APC within the clinical family, unless the APC reassignment is not clinically appropriate, the reassignment would create a violation of the 2 times rule in the receiving APC, or the primary service is already assigned to the highest cost APC within the C-APC clinical family or assigned to the only C-APC in a clinical family. We do not create new APCs with a comprehensive geometric mean cost that is higher than the highest geometric mean cost (or only) C-APC in a clinical family just to accommodate potential complexity adjustments. Therefore, the highest payment for any code combination for services assigned to a C-APC would be the highest paying C-APC in the clinical family (79 FR 66802).

We package payment for all add-on codes into the payment for the C-APC. However, certain primary service-add-on combinations may qualify for a complexity adjustment. First, the add-on code must be an eligible add-on code. The list of add-on codes that are eligible for complexity adjustment evaluation was included in Table 8 of the CY 2015 OPPS/ASC final rule with comment period (79 FR 66810), and also was identified as Addendum J to the proposed rule (which is available via the Internet on the CMS Web site). In the CY 2016 OPPS/ASC proposed rule (80 FR 39225), for CY 2016, we did not propose to add any add-on codes to the list of add-on codes that are evaluated for a complexity adjustment when performed in conjunction with a primary C-APC procedure.

To determine which combinations of primary service codes reported in conjunction with an eligible add-on code may qualify for a complexity adjustment for CY 2016, we apply the frequency and cost criteria thresholds discussed above, testing claims reporting one unit of a single primary service assigned to status indicator “J1” and any number of units of a single add-on code. If the frequency and cost criteria thresholds for a complexity adjustment are met, and reassignment to the next higher cost APC in the clinical family is appropriate, we make a complexity adjustment for the code combination; that is, we reassign the primary service code reported in conjunction with the eligible add-on code combination to a higher cost C-APC within the same clinical family of C-APCs. If any add-on code combination reported in conjunction with the primary service code does not qualify for a complexity adjustment, payment for these services is packaged within the payment for the complete comprehensive service. We list the complexity adjustments proposed for add-on code combinations for CY 2016, along with all of the other complexity adjustments, in Addendum J to this final rule with comment period (which is available via the Internet on the CMS Web site).

We are providing in Addendum J to this final rule with comment period a breakdown of cost statistics for each code combination that will qualify for a complexity adjustment (including primary code and add-on code combinations). Addendum J to this final rule with comment period also contains summary cost statistics for each of the code combinations that describe a complex code combination that will qualify for a complexity adjustment and will be reassigned to the next higher cost C-APC within the clinical family. The combined statistics for all reassigned complex code combinations are represented by an alphanumeric code with the last 4 digits of the designated primary service followed by “A” (indicating “adjustment”). For example, the geometric mean cost listed in Addendum J for the code combination described by complexity adjustment assignment 3208A, which is assigned to renumbered C-APC 5223 (Level 3 Pacemaker and Similar Procedures) (previously APC 0089), includes all code combinations that are reassigned to renumbered C-APC 5223 when CPT code 33208 is the primary code. Providing the information contained in Addendum J in this final rule with comment period allows stakeholders the opportunity to better assess the impact associated with the reassignment of each of the code combinations eligible for a complexity adjustment.

(2) C-APCs To Be Paid Under the C-APC Payment Policy for CY 2016

(a) CY 2016 C-APCs

In the CY 2016 OPPS/ASC proposed rule (80 FR 39225), for CY 2016, we proposed to continue to apply the C-APC payment policy methodology made effective in CY 2015, as described in detail below. We proposed to continue to define the services assigned to C-APCs as primary services, and to define a C-APC as a classification for the provision of a primary service and all adjunctive services and supplies provided to support the delivery of the primary service. We also proposed to follow the C-APC payment policy methodology of including all covered OPD services on a hospital outpatient claim reporting a primary service that is assigned to status indicator “J1,” excluding services that are not covered OPD services or that cannot by statute be paid under the OPPS.

As indicated in the CY 2016 OPPS/ASC proposed rule (80 FR 39225), after our annual review of the OPPS, we proposed to establish nine additional C-APCs to be paid under the existing C-APC payment policy beginning in CY 2016. All C-APCs, including those effective in CY 2016 and those being proposed for CY 2016, were displayed in Table 6 of the proposed rule with the proposed new C-APCs denoted with an asterisk. Addendum J to the proposed rule (which is available via the Internet on the CMS Web site) contained all of the data related to the C-APC payment policy methodology, including the list of proposed complexity adjustments.

Comment: Several commenters generally supported the concept of creating larger payment bundles under the OPPS. The commenters endorsed the C-APC payment policy and the proposal to establish nine additional C-APCs for CY 2016 to be paid under the existing policy.

Response: We appreciate the commenters' support.

Comment: Some commenters expressed concerns that the C-APC payment rates do not accurately reflect all of the costs associated with the primary service and all adjunctive services. Many of these commenters opposed the expansion of the C-APC policy and requested a delay in the implementation of the proposed CY 2016 C-APCs until the effect of the existing C-APCs can be assessed. Other commenters stated that the C-APC payment rates may not appropriately account for the cost of recurring services such as radiation oncology and dialysis that are unrelated to the primary service, but may be included in a C-Start Printed Page 70329APC claim. Some commenters also requested CMS to provide for transparency in the development of C-APC payment rates and data inputs.

Response: We do not believe that we should delay implementation of the proposed CY 2016 C-APCs to allow time for assessment of the effect of the existing C-APCs. It is unclear what specific analyses the commenters are requesting we perform before establishing additional C-APCs. In addition, we believe we have provided adequate information to enable stakeholders sufficient time to perform independent analysis of the proposed C-APC payment rates and their effects.

We believe that the additional nine C-APCs that we proposed for CY 2016 and the existing 25 C-APCs meet the established C-APC criteria. In addition, the commenters did not present any data or evidence that would suggest that the C-APC payment methodology used to calculate the CY 2016 payment rates is inappropriate. We calculate payment rates for C-APCs with the same basic methodology used to calculate payment rates for other APCs. We calculated the final relative payment weights for C-APCs by using relative costs derived from our standard process as described earlier in section II.A. of this final rule with comment period. Specifically, after converting charges to costs on the claims, we identified all claims reporting a single procedure described by a HCPCS code assigned to status indicator “J1” as constituting a comprehensive service. These claims were, by definition, classified as single major procedure claims. Any claims that contained more than one of these procedures were identified but were included in calculating the cost of the procedure that had the greatest cost when traditional HCPCS level accounting was applied. All other costs were summed to calculate the total cost of the comprehensive service, and statistics for those services were calculated in the usual manner. Claims with extreme costs were excluded in accordance with our usual process. We used the final relative payment weights of these comprehensive services to calculate final payments following our standard methodology. We believe that the C-APC payment methodology is consistent with our goal of making the OPPS more like a prospective payment system and less like a fee schedule. As is our current practice, we intend to continue to review and monitor all of our payment rates to ensure that they are accurate and reflect the average resource costs of furnishing a service or set of services. In the event that we discover inaccuracies in the development of payment rates, CMS will take appropriate action and make adjustments as necessary.

With respect to the public comments regarding the inclusion of unrelated services on a C-APC claim, we note that we have responded to similar comments in a prior rulemaking. We refer readers to the CY 2014 OPPS/ASC final rule with comment period (78 FR 74865) and CY 2015 OPPS/ASC final rule with comment period (79 FR 66804 and 66806) for a complete discussion of this issue. We believe that the central attribute of the C-APC payment policy is the packaging of all the services related to the primary service, with the exception of those services described above that, according to the statute, cannot be packaged or the list of preventive services that generally would not be provided at the time of a major procedure assigned to a C-APC. We believe that other services performed at the time of major procedures included in C-APCs can reasonably be considered to be related to the primary service or procedure. Therefore, we consider all services reported on the claim to be related to the primary service and include these services in establishing the payment rate for the C-APC. We do not believe that a significant amount of unrelated services would be billed on the claim for the primary service.

Further, we note that the comments received regarding this issue were primarily concerned with unrelated services reported on claims spanning 30 days. We have previously issued manual guidance in the Internet Only Manual, Pub. 100-4, Chapter 1, Section 50.2.2, that states that only recurring services should be billed monthly. We also have specified that, in the event that a recurring service occurs on the same day as an acute service that falls within the span of the recurring service claim, hospitals should bill separately for recurring services on a monthly claim (repetitive billing) and submit a separate claim for the acute service (79 FR 66804). In addition, we have instructed hospitals that laboratory tests ordered by unrelated providers for unrelated medical conditions may be billed on a 14X bill-type (78 FR 74926).

Lastly, we do not believe that it would be an undue hardship for some hospitals to alter their processes in order to submit separate claims for services that are unrelated both clinically and in regard to time to the comprehensive service.

In response to comments requesting additional transparency of the development of C-APCs and their proposed cost, we believe that the data made available to the public as part of the proposed rule was appropriate, clear, and sufficient. For further information on our data process, we refer readers to section II.A.1.b. of this final rule with comment period.

Comment: A few commenters requested that CMS provide more clarity regarding the definition of adjunctive services.

Response: A description of services that are considered to be adjunctive to the primary comprehensive service is provided in the CY 2014 OPPS/ASC final rule with comment period (78 FR 74865) as well as the CY 2015 OPPS/ASC final rule with comment period (79 FR 66800). As previously stated, adjunctive services include services that are integral, ancillary, supportive, or dependent that are provided during the delivery of the comprehensive service. This includes the diagnostic procedures, laboratory tests and other diagnostic tests, and treatments that assist in the delivery of the primary procedure; visits and evaluations performed in association with the procedure; uncoded services and supplies used during the service; outpatient department services delivered by therapists as part of the comprehensive service; durable medical equipment as well as prosthetic and orthotic items and supplies when provided as part of the outpatient service; and any other components reported by HCPCS codes that are provided during the comprehensive service, except for mammography services and ambulance services, which are never payable as OPD services in accordance with section 1833(t)(1)(B)(iv) of the Act.

Comment: One commenter expressed concerns regarding payment for durable medical equipment that is included on the claim with a primary service and packaged into the C-APC payment for the service. The commenter stated that, with the implementation of the C-APC payment policy, these items and services are no longer paid under separate fee schedules and their costs are included in determining the relative weights for the C-APCs. Further, the commenter stated that CMS did not provide any evidence that funds were added to the OPPS for these packaged groups and that not adding these funds could potentially add costs to the payment system without increasing payment rates. In addition, the commenter expressed concerns that the relative weights of the new C-APCs will increase, in turn causing the relative weights of other APCs to decrease, which would unfairly decrease payment rates for those other separately paid procedures.Start Printed Page 70330

Response: The costs of durable medical equipment, prosthetics, and orthotics have been accounted for in the OPPS. Funds were transferred from the DMEPOS Fee Schedule to the OPPS to account for costs of durable medical equipment. We refer readers to the CY 2015 OPPS/ASC final rule with comment period (79 FR 66823) for a discussion of the redistribution from the DMEPOS Fee Schedule to the OPPS of approximately $1 million.

Also, with regard to the effect of the increase in the relative weights for the C-APCs, we disagree with the commenters that payment rates for other separately paid procedures are unfairly reduced. Because funds were transferred from the DMEPOS Fee Schedule to account for the costs of durable medical equipment, the relativity of the OPPS payment weights has not been distorted. This accounting for additional DME costs would make the relative payment weights of OPPS services (both comprehensive and noncomprehensive) reflective of their estimated costs. Further, in a budget neutral system, changes to any OPPS relative payment weights have redistributional effects throughout the system and any policy changes or data updates have the potential to cause these effects.

Comment: One commenter opposed CMS' proposal to assign the procedure described by new CPT code 0392T (Laparoscopy, surgical, esophageal sphincter augmentation procedure, placement of sphincter augmentation device (i.e., magnetic band)) to C-APC 5362 (Level 2 Laparoscopy). Although the commenter did not suggest a specific APC or C-APC to which the procedure should be assigned, the commenter stated that the proposed C-APC assignment for the procedure described by CPT code 0392T results in a significant payment reduction for the procedure and creates a situation where the cost of the device represents approximately 51 percent of the payment rate for C-APC 5362. Therefore, the commenter requested that CMS consider an alternative APC assignment for this procedure. Another commenter suggested that CMS create a third level to the C-APC structure for the Laparoscopic Procedures clinical family that includes laparoscopic procedures with a mean geometric cost that is greater than $8,000.

Response: We disagree with the commenter's request. As a part of our broader efforts to thoroughly review, revise, and consolidate APCs to improve both resource and clinical homogeneity, we proposed a two-level APC structure for laparoscopy procedures for CY 2016. This proposal reduced the levels in the Laparoscopic Procedures clinical family from four levels in CY 2015 to two levels proposed for CY 2016. The procedure described by CPT code 0392T is similar in terms of clinical characteristics to the other procedures assigned to C-APC 5362 (Level 2 Laparoscopy), which has the highest payment rate in this clinical family. In addition, CPT code 0392T replaced HCPCS code C9737 (Laparoscopy, surgical, esophageal sphincter augmentation with device (e.g., magnetic band)), beginning July 1, 2015. In CY 2015, the procedure described by HCPCS code C9737 was assigned to APC 0174 (Level 4 Laparoscopy). Because CPT code 0392T describes the same procedure as HCPCS code C9737, we proposed to assign the new CPT code to the same APC and status indicator as its predecessor HCPCS C-code. In addition, because CPT code 0392T is new for CY 2015 and we do not have claims data for ratesetting purposes for this code, we used the geometric mean cost of the predecessor HCPCS code (C9737) as a proxy for the APC assignment. The geometric mean cost of the procedure described by HCPCS code C9737 is approximately $9,779 and the geometric mean cost of C-APC 5362 is approximately $7,179, which comprises significant services ranging in cost from approximately $6,139 to approximately $9,551. Therefore, the assignment of CPT code 0392T to C-APC 5362 is based on similar resource use and does not result in a violation of the 2 times rule. In addition, CPT code 0392T is a laparoscopic procedure that is similar in clinical characteristics to other procedures assigned to C-APC 5362. Once we have available claims data for the procedure described by CPT code 0392T, we intend to reevaluate this APC assignment under the yearly review of APC assignments.

We believe that the procedures assigned to C-APC 5362 have similar resource utilization and do not create a violation of the 2 times rule within the C-APC. Therefore, we do not believe that creating another level in the structure of this clinical family is warranted.

Comment: One commenter recommended that the Neurostimulators C-APC clinical family be restructured to: (1) Assign all of the single and multiple lead combination procedures to C-APC 5462 (Level 2 Neurostimulators); (2) assign all of the single generators (without placement of a lead) and low cost combination full system implants (one generator and one or more leads) to C-APC 5463 (Level 3 Neurostimulator); and (3) assign all of the multiple generators for bilateral procedures and high cost full system implants (one generator and one or more leads) to C-APC 5464 (Level 4 Neurostimulators). The commenter noted that it appears that the procedures assigned to the Neurostimulators C-APC clinical family were based on the comparable cost of the procedures alone rather than also factoring in clinical similarity. The commenter believed that the recommended restructuring would improve the clinical coherence of the procedures assigned to the neurostimulators C-APC family and increase the stability of the C-APC.

Response: We do not believe that we should restructure the Neurostimulators C-APC clinical family as recommended by the commenter. We note that APC groupings are based on two factors, clinical similarity and resource similarity. The highest level in this APC series includes various combinations of neurostimulator generator implantation procedures with or without leads (and no other types of procedures) within the specified cost range. The commenter suggested that we define clinical similarity very narrowly with strict adherence to the CPT code descriptors. If the OPPS were a fee schedule that did not assign procedures to groups, this could be an acceptable approach. However, the OPPS is a prospective payment system that uses APC groupings of clinically similar services. We believe that the proposed structure of this C-APC clinical family best meets the objective of both clinical and resource homogeneity within the context of a prospective payment system.

Comment: A few commenters requested that CMS make modifications to the C-APC complexity adjustment policy. Some commenters requested that CMS revise the criteria for a claim to qualify for a complexity adjustment beyond the current frequency and cost thresholds to account for the patient acuity experienced at institutions such as academic medical centers, cancer hospitals, and trauma centers. Other commenters requested that CMS consider the inclusion of three or more primary “J1” codes in the evaluation of complexity adjustments instead of the current code pair comparison policy. The commenter believed that the reliance on code combinations based on cost ranking of codes would lead to instability in the complexity adjustments from year to year, and would not take into consideration a large number of comprehensive claims with multiple “J1” services.

Response: While we acknowledge the challenges involved with treating Start Printed Page 70331complex patients, as discussed in the CY 2015 OPPS/ASC final rule with comment period (79 FR 66805), OPPS payments are not currently based on patient severity or diagnosis like payments under the IPPS. Therefore, we are unable to make adjustments based on these factors.

With regard to considering the inclusion of three or more primary “J1” services in evaluation of complexity adjustments, we reiterate our statement in the CY 2015 OPPS/ASC final rule with comment period (79 FR 66806) in which we disagreed that assigning complexity adjustments based on cost ranking of primary and secondary codes is either insufficient or would result in instability of the complexity adjustments in future years. Ranking “J1” services based on comprehensive geometric mean costs to determine the primary “J1” service on a claim does not result in instability in the evaluation of complexity adjustments because, by definition, the complexity adjustment is for costly cases relative to the primary (most costly) “J1” service. We proposed complexity adjustments for certain code pairs to provide a higher payment by promoting the claim for high cost procedure pairs consisting of a primary comprehensive procedure and a secondary comprehensive procedure that represent sufficiently frequent and sufficiently costly comprehensive procedure pairs to the next higher paying APC within a clinical family, such that these claims are separated from and provided a higher payment than all of the services that are accounted for in the APC assignment of the primary service. We do not believe that providing a complexity adjustment to any claim that has three or more “J1” services or to all claims reporting code pairs of “J1” services that meet the cost and frequency criteria would adequately serve the stated purpose of the policy. The intent of the complexity adjustment policy is to identify a limited number of costly procedure pairs that would qualify for a higher payment at the next higher paying C-APC within the clinical family, not to unpackage and separately pay for all of the high cost services that are associated with the primary “J1” procedure.

Comment: One commenter requested that CMS allow any add-on codes describing status indicator “J1” procedures to be eligible for complexity adjustments when the codes appear on the claim in combination with a primary “J1”service. The commenter noted that the current list of add-on codes eligible for complexity adjustments includes only add-on codes formerly assigned to device-dependent APCs. The commenter further reasoned that, because CMS has extended the concept of C-APCs beyond the original policy of applying the comprehensive APC methodology to device-dependent APCs, the list of eligible add-on procedures should be expanded as well.

Response: We agree with the commenters. The current policy allows add-on codes that were (prior to CY 2015) assigned to device-dependent APCs to be evaluated for a complexity adjustment when provided in combination with a primary “J1” service. This policy was adopted because the original group of C-APCs was primarily the former device-dependent APCs; therefore, the add-on codes that were evaluated for a complexity adjustment were consistent with the codes assigned as primary “J1”services under the original C-APCs. As we expand the number of C-APCs, we believe that we must also expand the number of add-on codes that can be evaluated for a complexity adjustment beyond only those add-on codes that were once assigned to device-dependent APCs. Therefore, we are revising the list of add-on codes that are evaluated for a complexity adjustment to include all add-on codes that can be appropriately reported in combination with a base code that describes a primary “J1”service.

In order to qualify for a complexity adjustment, the primary service add-on combination must meet the frequency (25 or more claims reporting the code combination) and cost (no violation of the 2 times rule) thresholds discussed above. Table 8 of the CY 2015 OPPS/ASC final rule with comment period (79 FR 66810) (now also Table 8 in this final rule with comment period) has been updated to include the additional add-on codes that can be evaluated for a complexity adjustment.

Table 8—Final CY 2016 Packaged CPT Add-On Codes That Are Evaluated for a Complexity Adjustment

CY 2016 CPT/HCPCS add-on codeCY 2016 short descriptor
C9601Perc drug-el cor stent bran.
C9603Perc d-e cor stent ather br.
C9605Perc d-e cor revasc t cabg b.
C9608Perc d-e cor revasc chro add.
G0289Arthro, loose body + chondro.
0172TLumbar spine process addl.
0205TInirs each vessel add-on.
0289TLaser inc for pkp/lkp donor.
0290TLaser inc for pkp/lkp recip.
0291TIv oct for proc init vessel.
0294TIns lt atrl mont pres lead.
0376TInsert ant segment drain int.
0396TIntraop kinetic balnce sensr.
0397TErcp w/optical endomicroscpy.
20930Sp bone algrft morsel add-on.
20931Sp bone algrft struct add-o.
20936Sp bone agrft local add-on.
20937Sp bone agrft morsel add-on.
20938Sp bone agrft struct add-on.
22515Perq vertebral augmentation.
22552Addl neck spine fusion.
22585Additional spinal fusion.
22614Spine fusion extra segment.
22632Spine fusion extra segment.
22840Insert spine fixation device.
22841Insert spine fixation device.
22842Insert spine fixation device.
22843Insert spine fixation device.
22844Insert spine fixation device.
22845Insert spine fixation device.
22846Insert spine fixation device.
22847Insert spine fixation device.
22848Insert spine fixation device.
22851Apply spine prosth device.
22858Second level cer diskectomy.
27358Remove femur lesion/fixation.
29826Shoulder arthroscopy/surgery.
33225L ventric pacing lead add-on.
37222Iliac revasc add-on.
37223Iliac revasc w/stent add-on.
37232Tib/per revasc add-on.
37233Tibper revasc w/ather add-on.
37234Revsc opn/prq tib/pero stent.
37235Tib/per revasc stnt & ather.
37237Open/perq place stent ea add.
37239Open/perq place stent ea add.
38900Io map of sent lymph node.
43273Endoscopic pancreatoscopy.
43283Lap esoph lengthening.
43338Esoph lengthening.
49326Lap w/omentopexy add-on.
49327Lap ins device for rt.
49435Insert subq exten to ip cath.
Start Printed Page 70332
57267Insert mesh/pelvic flr addon.
60512Autotransplant parathyroid.
63035Spinal disk surgery add-on.
63043Laminotomy addl cervical.
63044Laminotomy addl lumbar.
63048Remove spinal lamina add-on.
63057Decompress spine cord add-on.
63066Decompress spine cord add-on.
63076Neck spine disk surgery.
65757Prep corneal endo allograft.
66990Ophthalmic endoscope add-on.
92921Prq cardiac angio addl art.
92925Prq card angio/athrect addl.
92929Prq card stent w/angio addl.
92934Prq card stent/ath/angio.
92938Prq revasc byp graft addl.
92944Prq card revasc chronic addl.
92973Prq coronary mech thrombect.
92974Cath place cardio brachytx.
92978Intravasc us heart add-on.
92998Pul art balloon repr precut.
93462L hrt cath trnsptl puncture.
93463Drug admin & hemodynmic meas.
93571Heart flow reserve measure.
93609Map tachycardia add-on.
93613Electrophys map 3d add-on.
93621Electrophysiology evaluation.
93622Electrophysiology evaluation.
93623Stimulation pacing heart.
93655Ablate arrhythmia add on.
93657Tx l/r atrial fib addl.
93662Intracardiac ecg (ice).

After consideration of the public comments we received, we are finalizing our proposal with a slight modification to establish 10 additional C-APCs to be paid under the existing C-APC payment policy beginning in CY 2016. Because an additional level 5 was added to the musculoskeletal procedures APC series (we refer readers to section III.D.9. of this final rule with comment period), the final number of additional C-APCs for CY 2016 is 10. In addition, we are adopting a final policy to include all add-on codes that are paired with a primary service assigned status indicator “J1” to be evaluated to qualify for a complexity adjustment as shown in Table 8 above. All C-APCs, including those newly added for CY 2016, are displayed in Table 9 of this final rule with comment period with the new C-APCs denoted with an asterisk. Addendum J to this final rule with comment period (which is available via the Internet on the CMS Web site) contains all of the data related to the C-APC payment policy methodology, including the list of complexity adjustments.

Table 9—Final CY 2016 C-APCs

CY 2016 C-APC +CY 2016 APC Group titleClinical familyNew C-APC
5222Level 2 Pacemaker and Similar ProceduresAICDP
5223Level 3 Pacemaker and Similar ProceduresAICDP
5224Level 4 Pacemaker and Similar ProceduresAICDP
5231Level 1 ICD and Similar ProceduresAICDP
5232Level 2 ICD and Similar ProceduresAICDP
5093Level 3 Breast/Lymphatic Surgery and Related ProceduresBREAS
5165Level 5 ENT ProceduresENTXX*
5166Level 6 ENT ProceduresENTXX
5211Level 1 Electrophysiologic ProceduresEPHYS
5212Level 2 Electrophysiologic ProceduresEPHYS
5213Level 3 Electrophysiologic ProceduresEPHYS
5492Level 2 Intraocular ProceduresEYEXX*
5493Level 3 Intraocular ProceduresEYEXX
5494Level 4 Intraocular ProceduresEYEXX
5331Complex GI ProceduresGIXXX
5415Level 5 Gynecologic ProceduresGYNXX
5416Level 6 Gynecologic ProceduresGYNXX*
5361Level 1 LaparoscopyLAPXX*
5362Level 2 LaparoscopyLAPXX*
5462Level 2 Neurostimulator and Related ProceduresNSTIM
5463Level 3 Neurostimulator and Related ProceduresNSTIM
5464Level 4 Neurostimulator and Related ProceduresNSTIM
5123Level 3 Musculoskeletal ProceduresORTHO*
5124Level 4 Musculoskeletal ProceduresORTHO
5125Level 5 Musculoskeletal ProceduresORTHO*
5471Implantation of Drug Infusion DevicePUMPS
5627Level 7 Radiation TherapyRADTX
5375Level 5 Urology and Related ServicesUROXX*
5376Level 6 Urology and Related ServicesUROXX
5377Level 7 Urology and Related ServicesUROXX
5191Level 1 Endovascular ProceduresVASCX
5192Level 2 Endovascular ProceduresVASCX
5193Level 3 Endovascular ProceduresVASCX
5881Ancillary Outpatient Services When Patient ExpiresN/A*
8011Comprehensive Observation ServicesN/A*
+ We refer readers to section III.D. of this final rule with comment period for a discussion of the overall restructuring and renumbering of APCs.Start Printed Page 70333
* New C-APC for CY 2016.
Clinical Family Descriptor Key:
AICDP = Automatic Implantable Cardiac Defibrillators, Pacemakers, and Related Devices.
BREAS = Breast Surgery.
ENTXX = ENT Procedures.
EPHYS = Cardiac Electrophysiology.
EYEXX = Ophthalmic Surgery.
GIXXX = Gastrointestinal Procedures.
GYNXX = Gynecologic Procedures.
LAPXX = Laparoscopic Procedures.
NSTIM = Neurostimulators.
ORTHO = Orthopedic Surgery.
PUMPS = Implantable Drug Delivery Systems.
RADTX = Radiation Oncology.
UROXX = Urologic Procedures.
VASCX = Vascular Procedures.

(b) Observation Comprehensive APC (C-APC 8011)

As part of our expansion of the C-APC payment policy methodology, we have identified an instance where we believe that comprehensive payments are appropriate, that is, when a claim contains a specific combination of services performed in combination with each other, as opposed to the presence of a single primary service identified by status indicator “J1.” To recognize such instances, in the CY 2016 OPPS/ASC proposed rule (80 FR 39226), for CY 2016, we proposed to create a new status indicator “J2” to designate specific combinations of services that, when performed in combination with each other and reported on a hospital Medicare Part B outpatient claim, would allow for all other OPPS payable services and items reported on the claim (excluding all preventive services and certain Medicare Part B inpatient services) to be deemed adjunctive services representing components of a comprehensive service and resulting in a single prospective payment for the comprehensive service based on the costs of all reported services on the claim. Additional information about the proposed new status indicator “J2” and its proposed C-APC assignment is provided below.

It has been our longstanding policy to provide payment to hospitals in certain circumstances when extended assessment and management of a patient occur (79 FR 66811 through 66812). Currently, payment for all qualifying extended assessment and management encounters is provided through APC 8009 (Extended Assessment and Management (EAM) Composite) (79 FR 66811 through 66812). Under this policy, we allow services identified by the following to qualify for payment through EAM composite APC 8009: A clinic visit (described by HCPCS code G0463); a Level 4 or 5 Type A ED visit (described by CPT codes 99284 or 99285); a Level 5 Type B ED visit (described by HCPCS code G0384); and a direct referral for observation (described by HCPCS code G0379), or critical care services (described by CPT code 99291) provided by a hospital in conjunction with observation services of substantial duration (8 or more hours) (provided the observation was not furnished on the same day as surgery or postoperatively) (79 FR 66811 through 66812).

For CY 2016, we proposed to pay for all qualifying extended assessment and management encounters through a newly created “Comprehensive Observation Services” C-APC (C-APC 8011) and to assign the services within this APC to proposed new status indicator “J2,” as described earlier in this section. Specifically, we proposed to make a C-APC payment through the proposed new C-APC 8011 for claims that meet the following criteria:

  • The claims do not contain a procedure described by a HCPCS code to which we have assigned status indicator “T” that is reported with a date of service on the same day or 1 day earlier than the date of service associated with services described by HCPCS code G0378;
  • The claims contain 8 or more units of services described by HCPCS code G0378 (Observation services, per hour);
  • The claims contain services described by one of the following codes: HCPCS code G0379 (Direct referral of patient for hospital observation care) on the same date of service as services described by HCPCS code G0378; CPT code 99284 (Emergency department visit for the evaluation and management of a patient (Level 4)); CPT code 99285 (Emergency department visit for the evaluation and management of a patient (Level 5)) or HCPCS code G0384 (Type B emergency department visit (Level 5)); CPT code 99291 (Critical care, evaluation and management of the critically ill or critically injured patient; first 30-74 minutes); or HCPCS code G0463 (Hospital outpatient clinic visit for assessment and management of a patient) provided on the same date of service or 1 day before the date of service for services described by HCPCS code G0378; and
  • The claims do not contain services described by a HCPCS code to which we have assigned status indicator “J1.”

We proposed to utilize all of the claims that meet the above criteria in ratesetting for the proposed new C-APC 8011, and to develop the geometric mean costs of the comprehensive service based on the costs of all reported OPPS payable services reported on the claim (excluding all preventive services and certain Medicare Part B inpatient services). The proposed CY 2016 geometric mean cost resulting from this methodology was approximately $2,111, based on 1,191,120 claims used for ratesetting.

With the proposal to establish a new C-APC 8011 to capture qualifying extended assessment and management encounters that currently are paid using composite APC 8009, in the CY 2016 OPPS/ASC proposed rule, we correspondingly proposed to delete APC 8009, as it would be replaced with proposed new C-APC 8011.

As stated earlier, we proposed to assign certain combinations of procedures within proposed new C-APC 8011 to the proposed new status indicator “J2,” to distinguish the new C-APC 8011 from the other C-APCs. Comprehensive payment would be made through the new C-APC 8011 when a claim contains a specific combination of services performed in combination with each other, as opposed to the presence of a single primary service identified by status indicator “J1.” We believe that a distinction in the status indicator is necessary to distinguish between the logic required to identify when a claim qualifies for payment through a C-APC because of the presence of a status indicator “J1” procedure on the claim versus when a claim qualifies for payment through a C-APC because of the presence of a specific combination of services on the claim. Specifically, for proposed new C-APC 8011, we believe the assignment of certain combinations Start Printed Page 70334of services that qualify under proposed new C-APC 8011 to the new proposed status indicator “J2” is necessary because claims containing procedures assigned status indicator “T” that are performed on the same day or day before observation care is provided would not be payable through the proposed new C-APC 8011, and the initial “J1” logic would not exclude claims containing procedures assigned status indicator “T” from qualifying for payment through another appropriately assigned C-APC based on the primary “J1” procedure.

For claims reporting services assigned to status indicator “J1” that qualify for payment through a C-APC and services assigned to status indicator “J2” that qualify for payment through a C-APC, we proposed that payment for services would be made through the C-APC to which the primary “J1” procedure is assigned or through the C-APC to which the primary “J2” procedures is assigned, and all of the OPPS payable services performed would be deemed adjunctive services to the primary status indicator “J1” service, including the specific combination of services performed in combination with each other that would otherwise qualify for payment through a C-APC based on the primary procedure being assigned to status indicator “J2.” We proposed that the presence of the specific combination of services performed in combination with each other that would otherwise qualify the service for payment through a C-APC because it is assigned to status indicator “J2” on a hospital outpatient claim would not result in a complexity adjustment for the service qualifying for payment through a C-APC because the primary procedure is assigned to status indicator “J1.”

Under the C-APC payment policy, we note that, instead of paying copayments for a number of separate services that are generally, individually subject to the copayment liability cap at section 1833(t)(8)(C)(i) of the Act, beneficiaries can expect to pay a single copayment for the comprehensive service that would be subject to the copayment liability cap. As a result, we expect that this policy likely reduces the possibility that the overall beneficiary liability exceeds the cap for most of these types of claims.

Comment: Many commenters, including MedPAC, supported the proposal to create new C-APC 8011. The majority of those commenters who supported the proposal requested that CMS not allow any claims reporting a surgical procedure (assigned status indicator “T”) to qualify for payment through C-APC 8011, regardless of whether the procedure assigned status indicator “T” was furnished before or after observation services (described by HCPCS code G0378) were provided. A few other commenters who supported the proposal requested that CMS make separate payment for services assigned to the proposed new C-APC 8011 and the procedure assigned status indicator “T,” when a procedure assigned status indicator “T” was furnished after observation services were provided as part of an encounter that would otherwise qualify for payment through the proposed new C-APC 8011. One commenter requested that CMS package payment for all procedures assigned status indicator “T” into the payment for the services through the proposed new C-APC 8011, regardless of whether the procedure assigned status indicator “T” was provided prior to or after the furnishing the services described by HCPCS code G0378 when both services are present on a claim that would otherwise qualify for payment through the proposed new C-APC 8011. Other commenters recommended that CMS make modifications to the proposal, including creating a cost threshold to exclude relative high-cost but low frequency services from being packaged into the payment for services assigned to C-APC 8011; excluding the payment for specified covered outpatient drugs (SCODs) from being packaged into the payment for proposed new C-APC 8011; establishing multiple observation C-APCs; and creating a complexity adjustment factor for services assigned to proposed new C-APC 8011 similar to the complexity adjustment used for services assigned status indicator “J1” and paid through other C-APCs.

Response: We appreciate the commenters' support of our proposal to create new C-APC 8011. In response to comments pertaining to packaging the payment for procedures assigned status indicator “T” into the payment for proposed new C-APC 8011, we are sensitive to commenters' concerns regarding packaging payment for potentially high-cost surgical procedures into the payment for an observation C-APC and agree that claims reporting procedures assigned status indicator “T” should not qualify for payment through C-APC 8011, regardless of whether the procedure assigned status indicator “T” was furnished before or after observation services (described by HCPCS code G0378) were provided. We believe that excluding all claims reporting procedures assigned status indicator “T” from qualifying for payment through the new C-APC 8011 will eliminate any need to create a cost threshold to exclude payment for relative high-cost but low frequency services from being packaged into the payment for C-APC 8011, as well as eliminate any need to create a complexity adjustment factor for services assigned to C-APC 8011 or to create multiple observation C-APCs.

While we believe that payment for surgical procedures should not be packaged into the payment for services assigned to C-APC 8011, we do not believe that separate payment should be made for both C-APC 8011 and the procedure assigned status indicator “T” when the procedure assigned status indicator “T” was provided as part of an encounter that would otherwise qualify for payment through the proposed new C-APC 8011.

Accordingly, we are adopting a policy that payment for observation services will always be packaged when furnished with a procedure assigned status indicator “T.” For CY 2016, consistent with our modified final policy discussed in this final rule with comment period, payment for observation services will be packaged into the surgical procedure when comprehensive observation services are furnished with a procedure assigned status indicator “T,” while eligible separately payable services will receive separate payment.

In addition, we do not believe that payment for SCODs should be excluded from packaging into the payment made through C-APC 8011 because the services are considered supportive and ancillary when furnished during an outpatient observation encounter and, therefore, are appropriate for inclusion in the comprehensive payment through C-APC 8011.

Comment: A number of commenters who supported the proposal suggested that CMS include all emergency department (ED) visits as eligible services paid through C-APC 8011, as opposed to limiting the eligible services to only high-level ED visits.

Response: We agree with the commenters' suggestion that CMS assign all ED visits to C-APC 8011, rather than only the high-level ED visits, because we believe that all ED visits should be eligible to trigger C-APC payment in the same fashion that all clinic visits are eligible to trigger C-APC payment to C-APC 8011. We believe that including all ED visits in C-APC 8011 is more consistent with our comprehensive payment policy. Allowing all ED visits to be eligible to trigger C-APC payment through C-APC 8011 means that we will make C-APC payment for the full spectrum of ED and clinic visits when furnished in conjunction with 8 or more Start Printed Page 70335hours of observation and without a surgical procedure.

Comment: One commenter requested that CMS withdraw its requirement to “carve out,” or not include under the reported observation hours, the number of hours associated with active monitoring.

Response: We disagree with the commenter. Consistent with Section 290.2.2 of Chapter 4 of the Medicare Claims Processing Manual, observation services should not be billed concurrently with diagnostic or therapeutic services for which active monitoring is a part of the procedure.

Comment: Some commenters expressed concern that the proposed payment rate for C-APC 8011 does not adequately cover the costs of the services involved, and may result in a disincentive for hospitals to establish policies that result in premature discharge of these patients.

Response: The proposed geometric mean cost of C-APC 8011 upon which the CY 2016 proposed payment rate is based, represents the geometric mean cost of all services reported on claims that qualified for payment through the former EAM composite APC. Based on the approximately 1.2 million claims used for ratesetting for C-APC 8011, we believe that the CY 2016 geometric mean cost and associated CY 2016 payment rate appropriately reflect the appropriate comprehensive payment for encounters qualifying for payment through C-APC 8011. Accordingly, we do not believe the proposed payment rate for C-APC 8011 would incentivize hospitals to prematurely discharge patients.

Comment: A few commenters expressed concern that, because the breadth of services that may be included in these observation stays varies widely based on the specific diagnoses associated with the stay, critical care hospitals and those hospitals in areas with low socio-demographic status may be disproportionately penalized by receiving payment for services through C-APC 8011. Another commenter expressed concern that the proposed creation of C-APC 8011 would incentivize use of the least expensive test for complex Medicare patients with serious life-threatening symptoms, regardless of what may be the best test for a patient at a given time based on the physician's clinical judgment.

Response: We do not agree with the commenters' assertion that the creation of new C-APC 8011 would incentivize hospitals to furnish the cheapest test to complex Medicare patients at the expense of what may be the most appropriate course of treatment because we believe that hospitals provide appropriate reasonable and necessary care that is in the best interest of the patient, and if furnishing a more costly test represents the most appropriate course of treatment, hospitals would provide such a service. As noted earlier in this section, the payment rate for C-APC 8011 was based on all services reported on claims that previously qualified for the EAM composite APC. Therefore, we believe the payment rate appropriately reflects the average resources expended in furnishing comprehensive observation services. In addition, we have no reason or evidence to support the commenters' assertion that critical care hospitals and those in areas with low socio-demographic status may be disproportionately penalized by receiving payment for services through C-APC 8011, as the commenter did not explain the basis for this assertion. We believe that hospitals will continue to provide appropriate care that is reasonable and necessary. We note that, as part of our annual rulemaking cycle, we will continue to examine the claims data and monitor any changes in the provision of care associated with furnishing observation services and payment through C-APC 8011.

Comment: A number of commenters requested that CMS provide additional transparency on the development of C-APC 8011 and its proposed cost, as well as assess the risk of care fragmentation and analyze the impact of the C-APC payment methodology on a variety of factors such as length of stay, patient diagnosis, and patient age. One commenter asked CMS to remind providers of the critical importance of reporting all services provided to patients, regardless of whether they are separately paid or not.

Response: In response to comments requesting additional transparency on the development of C-APC 8011 and its proposed cost, we believe that the data made available to the public as part of the addenda to the proposed rule was appropriate, clear, and sufficient. For further information on our data process, we refer readers to section II.A.1.b. of this final rule with comment period. Furthermore, as indicated earlier in this section, as part of our annual rulemaking cycle, we will continue to examine the claims data and monitor any changes in the provision of care, including care fragmentation and other factors such as length of stay associated with furnishing observation services and payment through C-APC 8011. We also remind providers to report all services provided to patients, regardless of whether they are separately paid or not.

A number of comments presented specific issues pertaining to self-administered drugs, long observation stays, outpatient observation notice, and the 3-day inpatient stay requirement for Medicare paid skilled nursing facility (SNF) coverage. We did not propose or discuss policies in the proposed rule that implicated any of the specific issues raised by the commenters. Therefore, we believe these comments are outside the scope of the proposed rule, and we are not responding to them in this final with comment period.

After consideration of the public comments we received, effective beginning CY 2016, we are finalizing our proposals to delete APC 8009, to establish new C-APC 8011, and to develop the geometric mean costs of the C-APCs based on the costs of all reported OPPS payable services reported on the claim (excluding all preventive services and certain Medicare Part B inpatient services). We also are finalizing our proposal to pay for all qualifying extended assessment and management encounters through C-APC 8011 and to assign the services within this APC to proposed new status indicator “J2.” In addition, we are modifying our proposed criteria for services to qualify for comprehensive payment through C-APC 8011 and how we identify all claims used in ratesetting for the new C-APC 8011. Specifically, we are adopting the following two modifications to our proposal: (1) The criteria for services to qualify for payment through C-APC 8011 and the claims identified for purposes of ratesetting for C-APC 8011 will exclude all claims containing a status indicator “T” procedure from qualification; and (2) any level ED visit is an eligible service that could trigger qualification and payment through C-APC 8011, as opposed to only high-level emergency department visits. The finalized criteria for services to qualify for payment through C-APC 8011 are listed below. All claims meeting these criteria will be utilized in ratesetting purposes for C-APC 8011 for CY 2016.

  • The claims do not contain a procedure described by a HCPCS code to which we have assigned status indicator “T”;
  • The claims contain 8 or more units of services described by HCPCS code G0378 (Observation services, per hour);
  • The claims contain services provided on the same date of service or 1 day before the date of service for HCPCS code G0378 that are described by one of the following codes: HCPCS code G0379 (Direct referral of patient for hospital observation care) on the same date of service as HCPCS code G0378; Start Printed Page 70336CPT code 99281 (Emergency department visit for the evaluation and management of a patient (Level 1)); CPT code 99282 (Emergency department visit for the evaluation and management of a patient (Level 2)); CPT code 99283 (Emergency department visit for the evaluation and management of a patient (Level 3)); CPT code 99284 (Emergency department visit for the evaluation and management of a patient (Level 4)); CPT code 99285 (Emergency department visit for the evaluation and management of a patient (Level 5)) or HCPCS code G0380 (Type B emergency department visit (Level 1)); HCPCS code G0381 (Type B emergency department visit (Level 2)); HCPCS code G0382 (Type B emergency department visit (Level 3)); HCPCS code G0383 (Type B emergency department visit (Level 4)); HCPCS code G0384 (Type B emergency department visit (Level 5)); CPT code 99291 (Critical care, evaluation and management of the critically ill or critically injured patient; first 30-74 minutes); or HCPCS code G0463 (Hospital outpatient clinic visit for assessment and management of a patient); and
  • The claims do not contain a service that is described by a HCPCS code to which we have assigned status indicator “J1.”

The final CY 2016 geometric mean cost for C-APC 8011 resulting from this methodology is approximately $2,275, based on 1,338,889 claims used for ratesetting.

(3) CY 2016 Policies for Specific C-APCs

(a) Stereotactic Radiosurgery (SRS)

With the advent of C-APCs, the OPPS consists of a wide array of payment methodologies, ranging from separate payment for a single service to a C-APC payment for an entire outpatient encounter with multiple services. As described above, our C-APC payment policy generally provides payment for a primary service and all adjunctive services provided to support the delivery of the primary service, with certain exceptions, reported on the same claim, regardless of the date of service. Since implementation of the C-APC policy and subsequent claims data analyses, we have observed circumstances in which necessary services that are appropriately included in an entire outpatient encounter payment are furnished prior to a primary “J1” service and billed separately. That is, our analysis of billing patterns associated with certain procedures assigned status indicator “J1” indicates that providers are reporting planning services, imaging tests, and other “planning and preparation” services that are integrally associated with the direct provision of the primary “J1” service on a separate claim. The physician practice patterns associated with reporting the provision of various stereotactic radiosurgery (SRS) treatments presents an example of this issue.

Section 634 of the American Taxpayer Relief Act (ATRA) of 2012 (Pub. L. 112-240) amended section 1833(t)(16) of the Act by adding a new subparagraph (D) to require that OPPS payments for Cobalt-60 based SRS (also referred to as gamma knife) be reduced to equal that of payments for robotic linear accelerator-based (LINAC) SRS, for covered OPD services furnished on or after April 1, 2013. This payment reduction does not apply to hospitals in rural areas, rural referral centers, or SCHs. In the CY 2015 OPPS/ASC final rule with comment period (79 FR 66809), we created C-APC 0067 (which was proposed to be renumbered to C-APC 5631 for CY 2016) for procedures involving single-session cranial SRS services. Because section 1833(t)(16)(D) of the Act requires equal payment for SRS delivered by Cobalt-60 based or LINAC based technology, proposed renumbered C-APC 5631 includes two types of services involving SRS delivery instruments, which are described by HCPCS code 77371 (Radiation treatment delivery, stereotactic radiosurgery [SRS], complete course of treatment cranial lesion(s) consisting of 1 session; multi-source Cobalt 60-based) and HCPCS code 77372 (Linear accelerator based) (79 FR 66862).

As discussed in the CY 2016 OPPS/ASC proposed rule (80 FR 39228), based on our analysis of CY 2014 claims data (the data used to develop the proposed CY 2016 payment rates), we identified differences in the billing patterns for SRS procedures delivered using Cobalt-60 based and LINAC based technologies. In particular, our claims data analysis results revealed that services involving SRS delivered by Cobalt-60 based technologies (as described by HCPCS code 77371) typically included SRS treatment planning services (for example, imaging studies, radiation treatment aids, and treatment planning) and the actual deliveries of SRS treatment on the same date of service and reported on the same claim. In contrast, claims data analysis results revealed that services involving SRS delivered by LINAC-based technologies (as described by HCPCS code 77372) frequently included services related to SRS treatment (for example, imaging studies, radiation treatment aids, and treatment planning) that were provided on different dates of services and reported on claims separate from the actual delivery of SRS treatment. Because services involving Cobalt-60 based and LINAC-based technologies are proposed to be assigned to proposed renumbered C-APC 5631, the costs of both technologies are reflected in the C-APC payment rate.

The policy intent of C-APCs is to bundle payment for all services related and adjunctive to the primary “J1” procedure. In light of this, we believe that all essential planning and preparation services also should be paid through the C-APC. For accuracy of payment, we make a single payment through the C-APC that includes payment for these essential planning and preparation services, and we do not pay separately for C-APC services when they are furnished prior to delivery of the primary “J1” procedure and reported on separate claims. Procedures involving SRS services are just one example of where this may be occurring under our C-APC payment policy.

As a result of our SRS claims data findings, in the CY 2016 OPPS/ASC proposed rule (80 FR 39228), for CY 2016, we proposed to change payment for SRS treatment under proposed renumbered C-APC 5631 by identifying any services that are differentially reported using HCPCS codes 77371 and 77372 on the same claim and on claims one month prior to the delivery of SRS services in proposed renumbered C-APC 5631, including planning and preparation services, and removing these claims from our C-APC geometric mean cost calculations for CY 2016 and CY 2017, while we collect data using a modifier, which is discussed in greater detail below. For any of the services that we remove from the C-APC payment bundle, we proposed that those services would receive separate payment even when appearing in combination with a primary “J1” procedure (described either by HCPCS code 77371 or 77372) on the same claim for both CY 2016 and CY 2017. Specifically, we proposed to apply this treatment for the following codes for planning and preparation services:

  • CT localization (HCPCS codes 77011 and 77014);
  • MRI imaging (HCPCS codes 70551, 70552, and 70553);
  • Clinical treatment planning (HCPCS codes 77280, 77285, 77290, and 77295); and
  • Physics consultation (HCPCS code 77336).

We invited public comments on our proposal to remove claims reporting planning and preparation service for SRS treatment from our geometric mean Start Printed Page 70337cost calculation for the CY 2016 and CY 2017 payment rate for proposed renumbered C-APC 5631 and to allow for separate payment of these same services during CY 2016 and CY 2017 using either modality. As discussed in detail below, our long-term goal is to create a single prospective payment for the entire outpatient encounter by packaging payment for all C-APC services, including all planning and preparation services that occur prior to the primary “J1” procedure.

Comment: Several commenters supported our policy proposal to remove claims reporting planning and preparation services from the geometric mean cost calculations for proposed renumbered C-APC 5631. The commenters believed that because of the coding changes implemented over the past few years to describe SRS delivery by LINAC-based and Cobalt-60 based technologies, hospitals have incorrectly coded claims reporting SRS services. To remedy perceived payment inaccuracies for C-APC 5631, the commenters urged CMS to adopt the policy as proposed.

Response: We appreciate the commenters' support of our proposal.

Comment: In contrast, many commenters opposed the policy proposal regarding payment for SRS services and recommended that CMS leave the four identified categories of services within the C-APC payment methodology for CY 2016 and work with stakeholders to improve the coding guidance for SRS services.

Response: As we stated in the proposed rule, the policy intent of the C-APCs is to bundle payment for all services related and adjunctive to the primary “J1” procedure. In light of this, we believe that all services that are adjunctive to the primary service should be paid through the C-APC. However, our claims analysis has shown that the services described by HCPCS codes that we proposed to exclude from the C-APC payment were frequently reported on a separate claim than the primary “J1” SRS service and, therefore, received separate payment in addition to the full C-APC payment. Therefore, to collect claims data on the adjunctive services for the SRS “J1” procedures and to ensure appropriate ratesetting for the SRS C-APC in the future, we believe it is necessary to unbundle payment for the adjunctive services for CY 2016 and CY 2017. Because the intent of a C-APC is to bundle payment for all services related and adjunctive to the primary “J1” procedure, we agree that coding and billing guidance and instructions for SRS services should reflect the inclusion of the comprehensive services that were furnished in conjunction with the primary “J1” service and we proposed the use of a modifier to better identify when related comprehensive services were being billed separately.

Comment: One commenter requested clarification on how CMS will pay for planning and preparation services performed prior to the actual delivery of the SRS service, such as basic dosimetry (CPT code 77300), since CMS did not specifically propose to remove these costs from the calculation of C-APC 5631.

Response: Only the above-identified 10 planning and preparation CPT codes that we proposed to remove from the C-APC bundle payment for SRS delivery services will be paid for separately in CY 2016 when furnished to a beneficiary within one month of the SRS treatment. For CY 2016 and CY 2017, these codes will not be included in the C-APC payment for SRS even if they are furnished on the same date of service. The services that we did not propose to remove from the geometric mean cost calculations will continue to be paid through C-APC 5631 (for CY 2016, this will be C-APC 5627). However, we remind hospitals that procedure codes related to the primary SRS service should either be reported on the same claim, or, if furnished on a different date than the primary service, must include modifier “CP” that we are adopting in this final rule with comment period (as discussed in detail below).

Comment: Commenters requested that CMS provide additional guidance on the specific items and services, apart from the four identified categories, that are to be reported with the proposed modifier as integral, ancillary, supportive, dependent, and adjunctive to either HCPCS code 77371 or 77372. Commenters also asked for clarification on the time period in which CMS will consider the delivery of a service to be adjunctive to the primary “J1” SRS treatment.

Response: As we stated in the proposed rule, any service that is integral, ancillary, supportive, dependent and adjunctive to the primary “J1” service identified by either HCPCS code 77371 or 77372 that is reported on a different claim than the primary “J1” service must be billed with the HCPCS modifier. We believe that hospitals, physicians, and other clinical staff that furnish comprehensive services are in a position to identify these types of related services. We do not believe that it is feasible or practicable for us to identify all of the services that could potentially be related to a primary “J1” service given differences in medical practice. We expect providers to identify any adjunctive services provided within 30 days prior to SRS treatment.

After consideration of the public comments we received, for CY 2016 and CY 2017, we are finalizing our proposal to remove planning and preparation services (identified by the following 10 specific HCPCS codes: 70551, 70552, 70553, 77011, 77014, 77280, 77285, 77290, 77295, and 77336) from the geometric mean cost calculations for proposed C-APC 5631 which, beginning in CY 2016, will be C-APC 5627 (Level 7 Radiation Therapy). In addition, for CY 2016 and CY 2017, we will separately pay for planning and preparation services adjunctive to the delivery of the SRS treatment through either modality, regardless of whether they are furnished on the same date of service as the primary “J1” SRS service.

(b) Data Collection for Nonprimary Services in C-APCs

As mentioned above, provider practice patterns can create a need for hospitals to perform services that are integral, ancillary, supportive, dependent, and adjunctive, hereinafter collectively referred to as “adjunctive services”, to a comprehensive service prior to the delivery of that service—for example, testing leads for a pacemaker insertion or planning for radiation treatment. As the C-APC policy continues to expand, we need a mechanism to identify these adjunctive services that are furnished prior to the delivery of the associated primary “J1” service so that payments under the encounter-based C-APC will be more accurate.

To meet this objective, in the CY 2016 OPPS/ASC proposed rule (80 FR 39228), for CY 2016, we proposed to establish a HCPCS modifier to be reported with every service code that describes an adjunctive service to a comprehensive service, but is reported on a different claim. We proposed that the modifier would be reported on UB-04 form (CMS Form 1450) for hospital outpatient services. Specifically, hospitals would report this modifier for services that are adjunctive to a primary procedure code assigned a status indicator “J1” and that are reported on a different claim than the primary “J1” service. The collection of this information would allow us to begin to assess the accuracy of the claims data used to set payment rates for C-APC services. This information would be useful in refining our C-APC ratesetting process. Based on the collection of these data, we envision creating a single encounter payment for primary “J1” services that reflects the costs of all of the resources used during Start Printed Page 70338the delivery of the primary services. We also would discontinue separate payment for any of these packaged adjunctive services, even when furnished prior to delivery of the primary “J1”service. As noted above, we proposed to use the modifier to identify planning and preparation services for primary “J1” procedures involving SRS services with this goal in mind.

We invited additional public comments on whether to adopt a condition code as early as CY 2017, which would replace this modifier to be used for CY 2016 data collection, for collecting this service-level information.

Comment: Overall, few commenters supported CMS' proposed policy to collect claims data on the costs of adjunctive services furnished prior to a primary “J1” procedure and reported on a different claim. Those commenters who supported the policy proposal encouraged CMS to implement this proposal to begin an effort to include the costs of all planning and preparation services in the payment bundles for C-APCs.

Response: We appreciate the commenters' support.

Comment: A significant number of commenters opposed the proposed policy to require hospitals to report a modifier with every HCPCS code that describes services that are adjunctive to a comprehensive service (as described by a “J1” status indicator), but reported on a different claim. The commonly cited concerns among the commenters who opposed the proposed policy were as follows:

  • Definition of related and adjunctive services. Commenters requested that CMS provide greater clarity on the definition of adjunctive services. Specifically, the commenters recommended that CMS identify and propose adjunctive services by HCPCS code for each primary “J1” service, similar to the SRS C-APC proposal, so that hospitals will know which HCPCS codes describing adjunctive services to report with the modifier. Without specific guidance from CMS on the scope of these adjunctive services, some commenters expressed uncertainty about their ability to accurately report services using the modifier.
  • Operational challenges and administrative burden. Commenters asserted that operationalizing new reporting requirements for modifiers is challenging because it requires a manual claims review to determine appropriateness of a modifier. In addition, commenters recommended that CMS delay implementation or withdraw the proposed modifier for C-APC adjunctive services data collection so that facilities can successfully implement ICD-10 and accurately use the PO modifier and the new modifier 59 subset X (E,S,P, and U).

Response: We appreciate the thoughtful comments that were submitted and, based on the above-mentioned issues, particularly the desire for CMs to provide additional information pertaining to adjunctive services for each C-APC raised by the commenters, are modifying our proposal to only require that the modifier be used with respect to reporting adjunctive services related to primary “J1” SRS services that are reported separately on different claims. We believe that it is appropriate to finalize our proposal to require the use of the modifier for adjunctive SRS services based on our analysis of claims data and information submitted by stakeholders who are familiar with the distinct processes of care for each type of SRS technology. We are not finalizing our proposal to require the use of the modifier for reporting any other C-APC services at this time. We will take these comments into consideration if we propose a modifier for the other C-APCs in future rulemaking.

Comment: Several commenters raised technical questions about the application of the proposed adjunctive services modifier. Specifically, commenters posed the following questions:

  • Should facilities report adjunctive planning and preparation services when furnished in a setting outside of the HOPD?
  • Are adjunctive services limited to preoperative testing and planning services only?
  • Does the modifier apply to services performed by different physicians within a health system?

Response: As noted above, we are finalizing our proposal to require the use of the modifier for reporting adjunctive and related services to a primary “J1” SRS procedure at this time. We intend to issue further subregulatory guidance on use of the modifier with respect to SRS services prior to January 1, 2016. The commenters' technical questions will be addressed in that guidance.

Comment: One commenter supported the use of a modifier over a condition code to report adjunctive services. The commenter stated that because CMS proposed to require the use of the modifier for CY 2016, it is less burdensome to continue its use in subsequent years than switch to a condition code. In addition, several commenters asked CMS to delay implementation of the requirement to use the adjunctive services modifier until additional clarifying instruction is provided on how to identify adjunctive services furnished prior to a primary “J1” service. Alternatively, commenters recommended that CMS follow a step-wise roll out approach and propose select C-APCs through annual rulemaking for which the use of the adjunctive services modifier will be required.

Response: We appreciate the feedback from the commenter regarding the preference for use of a modifier rather than a condition code. For CY 2016, we are finalizing a policy to only require the use of the HCPCS code modifier for adjunctive services related to primary “J1” SRS services (described by HCPCS codes 77371 and 77372) that are reported on a separate claim than the primary “J1” service. In response to comments on additional clarification on how to identify adjunctive services, we have identified these services for SRS treatments in this final rule with comment period. Because we are not adopting a policy to require the use of this HCPCS modifier for other C-APCs at this time, we are not providing additional information relating to adjunctive services for other C-APCs in this final rule with comment period.

After consideration of the public comments we received we are finalizing our proposal, with modification. Specifically, for CY 2016 and CY 2017, we are adopting a policy to require the use of a HCPCS code modifier for adjunctive SRS C-APC services that are reported separate from the primary “J1” SRS service. Effective January 1, 2016, hospitals must use the HCPCS code modifier “CP” (Adjunctive service related to a procedure assigned to a comprehensive ambulatory payment classification (C-APC) procedure, but reported on a different claim) to report adjunctive service(s) related to a primary “J1” SRS services that is reported on a separate claim than the primary “J1” service. With respect to other C-APCs, we are not adopting a policy to require the use of the HCPCS code modifier to identify adjunctive services that are reported separately at this time, but may consider doing so in the future.

(c) Payment for Claims Reporting Inpatient Only Services Performed on a Patient Who Dies Before Admission

Currently, composite APC 0375 (Ancillary Outpatient Services When Patient Dies) packages payment for all services provided on the same date as an inpatient only procedure that is performed on an emergence basis on an outpatient who dies before admission Start Printed Page 70339when the modifier “-CA” appears on the claim. For CY 2016, we proposed to provide payment through proposed renumbered C-APC 5881 for all services reported on the same claim as an inpatient only procedure with the modifier “-CA.” We stated in the proposed rule that this proposal provides for all services reported on the same claim as an inpatient only procedure with modifier “-CA” would be paid through a single prospective payment for the comprehensive service. In the CY 2016 OPPS/ASC proposed rule (80 FR 39228), we proposed to renumber APC 0375 as APC 5881 (Ancillary Outpatient Services When Patient Dies) for CY 2016.

We did not receive any public comments on this proposal. Therefore, we are finalizing, without modification, our proposal to provide payment through renumbered C-APC 5881 for all services provided on the same date and reported on the same claim as an inpatient only procedure with the modifier “-CA.”

f. 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 necessary, high quality 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, mental health services, and multiple imaging services. We refer readers to the CY 2008 OPPS/ASC final rule with comment period for a full discussion of the development of the composite APC methodology (72 FR 66611 through 66614 and 66650 through 66652) and the CY 2012 OPPS/ASC final rule with comment period (76 FR 74163) for more recent background.

In the CY 2016 OPPS/ASC proposed rule (80 FR 39228 through 39232), for CY 2016, we proposed to continue our composite APC payment policies for LDR prostate brachytherapy services, mental health services, and multiple imaging services, as discussed below. For CY 2016, we proposed to discontinue our composite APC payment policies for qualifying extended assessment and management services (APC 8009) and to pay for these services through proposed new C-APC 8011 (Comprehensive Observation Services), as presented in a proposal included under section II.A.2.e. of the proposed rule. As a result, we proposed to delete APC 8009 for CY 2016.

We noted that we finalized a policy to discontinue our composite APC payment policies for cardiac electrophysiologic evaluation and ablation services (APC 8000), and to pay for these services through C-APC 0086 (Level III Electrophysiologic Procedures), as presented in a proposal included under section II.A.2.e. of the CY 2015 OPPS/ASC proposed rule (79 FR 66800 through 66810). As a result, in the CY 2015 OPPS/ASC final rule with comment period, we deleted APC 8000 for CY 2015 (79 FR 66810). For CY 2016, we proposed to continue to pay for cardiac electrophysiologic evaluation and ablation services through existing C-APC 0086 (that was proposed to be renumbered C-APC 5213).

(1) Low Dose Rate (LDR) Prostate Brachytherapy Composite APC

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 base the payment for composite APC 8001 (LDR Prostate Brachytherapy Composite) on the geometric mean 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 services and a detailed description of how we developed the LDR prostate brachytherapy composite APC. (We note that, for CY 2016, we did not propose to renumber composite APC 8001 as part of our overall APC restructuring and renumbering discussed in section III.D. of the proposed rule.)

In the CY 2016 OPPS/ASC proposed rule (80 FR 39229), for CY 2016, we proposed to continue to pay for LDR prostate brachytherapy services using the composite APC payment methodology proposed and implemented for CY 2008 through CY 2015. That is, we proposed to use CY 2014 claims reporting charges for both CPT codes 55875 and 77778 on the same date of service with no other separately paid procedure codes (other than those on the bypass list) to calculate the proposed payment rate for composite APC 8001. Consistent with our CY 2008 through CY 2015 practice, in the proposed rule, we proposed to not use the claims that meet these criteria in the calculation of the geometric mean costs of procedures or services assigned to APC 0163 (Level IV Cystourethroscopy and Other Genitourinary Procedures) (which was proposed to be renumbered APC 5375 in the proposed rule) and APC 0651 (Complex Interstitial Radiation Source Application) (which was proposed to be renumbered APC 5641 in the proposed rule), the APCs to which CPT codes 55875 and 77778 are assigned, respectively. We proposed to continue to calculate the proposed geometric mean costs of procedures or services assigned to proposed renumbered APCs 5375 and 5641 using single and “pseudo” single procedure claims. We stated that we continue to believe that composite APC 8001 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 Start Printed Page 70340also stated that we continue to believe that data from claims reporting both services required for LDR prostate brachytherapy provide the most accurate geometric mean cost upon which to base the proposed composite APC payment rate.

Using a partial year of CY 2014 claims data available for the CY 2016 proposed rule, we were able to use 226 claims that contained both CPT codes 55875 and 77778 to calculate the proposed geometric mean cost of approximately $3,807 for these procedures upon which the proposed CY 2016 payment rate for composite APC 8001 was based.

Comment: One commenter expressed concern that the proposed CY 2016 payment rate for APC 8001 is based only on 226 claims that reported both CPT codes 55875 and 77778 on the same date of service, a significant decrease in the number of claims used from the CY 2015 final rule ratesetting, which was based on 406 available claims.

Response: We were able to identify 240 claims in the CY 2014 claims data available for this CY 2016 final rule, which we used to set the final CY 2016 payment rate for APC 8001 (which has a geometric mean cost of approximately $3,542), compared to the 226 claims that were available and used for ratesetting for the CY 2016 proposed rule (which had a geometric mean cost of approximately $3,807). With regard to the commenters' concern regarding the decrease in the number of claims available for CY 2016 ratesetting relative to the number of claims available for CY 2015 ratesetting, we note that there is typically some fluctuation in costs from year to year. We acknowledge that the number of claims available and used for ratesetting for APC 8001 has continuously decreased over recent years. However, the percentage of single frequency claims compared to total claims that were available and that we were able to use for ratesetting in this final rule with comment period is comparable to prior years.

After consideration of the public comment we received, we are finalizing our proposal, without modification, to continue to use the payment rate for composite APC 8001 to pay for LDR prostate brachytherapy services for CY 2016 and to set the payment rate for this APC using our established methodology.

(2) Mental Health Services Composite APC

In the CY 2016 OPPS/ASC proposed rule (80 FR 39229 through 39230), for CY 2016, we proposed 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 services provided by a hospital, which we consider to be the most resource-intensive of all outpatient mental health services. We refer readers to the April 7, 2000 OPPS final rule with comment period (65 FR 18452 through 18455) for the initial discussion of this longstanding policy and the CY 2012 OPPS/ASC final rule with comment period (76 FR 74168) for more recent background.

Specifically, we proposed 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 payment rate for partial hospitalization services provided by a hospital, those specified mental health services would be assigned to proposed renumbered composite APC 8010 (Mental Health Services Composite) (existing APC 0034). We also proposed to continue to set the payment rate for proposed renumbered composite APC 8010 at the same payment rate that we proposed to establish for proposed renumbered APC 5862 (Level 2 Partial Hospitalization (4 or more services) for hospital-based PHPs) (existing APC 0176), which is the maximum partial hospitalization per diem payment rate for a hospital, and that the hospital continue to be paid the payment rate for proposed renumbered composite APC 8010. Under this policy, the I/OCE would continue to determine whether to pay for these specified mental health services individually, or to make a single payment at the same payment rate established for proposed renumbered APC 5862 (existing APC 0176) for all of the specified mental health services furnished by the hospital on that single date of service. We stated that we continue to believe that the costs associated with administering a partial hospitalization program at a hospital represent the most resource-intensive of all outpatient mental health services. Therefore, we do not believe that we should pay more for mental health services under the OPPS than the highest partial hospitalization per diem payment rate for hospitals.

We did not receive any public comments on this proposal. Therefore, we are finalizing our CY 2016 proposal, without modification, 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 payment rate for partial hospitalization services provided by a hospital, those specified mental health services will be assigned to renumbered composite APC 8010 (Mental Health Services Composite) (existing APC 0034) for CY 2016. For CY 2016, we also will continue to set the payment rate for renumbered composite APC 8010 (existing APC 0034) at the same payment rate that we established for renumbered APC 5862 (Level 2 Partial Hospitalization (4 or more services) for hospital-based PHPs) (existing APC 0176), which is the maximum partial hospitalization per diem payment rate for a hospital, and that the hospital will continue to be paid the payment rate for renumbered composite APC 8010.

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

Effective January 1, 2009, we provide a single payment each time a hospital submits a claim for 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 12 of the CY 2014 OPPS/ASC final rule with comment period (78 FR 74920 through 74924).

While there are three imaging families, there are five multiple imaging composite APCs due to the statutory requirement under 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 under 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); andStart Printed Page 70341
  • APC 8008 (MRI and MRA with Contrast Composite).

(We note that we did not propose to renumber these composite APCs as part of our overall restructuring and renumbering of APCs as discussed in section III.D. of the proposed rule.)

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 based on the payment rate for APC 8008, the “with contrast” composite APC.

We make a single payment for those imaging procedures that qualify for payment based on the composite APC payment rate, which includes 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).

In the CY 2016 OPPS/ASC proposed rule (80 FR 39230), for CY 2016, we proposed 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 APC payment methodology. We stated that we continue to believe that this policy will reflect and promote the efficiencies hospitals can achieve when performing multiple imaging procedures during a single session.

The proposed CY 2016 payment rates for the five multiple imaging composite APCs (APCs 8004, 8005, 8006, 8007, and 8008) were based on proposed geometric mean costs calculated from a partial year of CY 2014 claims available for the proposed rule that qualified for composite payment under the current policy (that is, those claims reporting more than one procedure within the same family on a single date of service). To calculate the proposed geometric mean costs, we used the same methodology that we used to calculate the final CY 2014 and CY 2015 geometric mean costs for these composite APCs, as described in the CY 2014 OPPS/ASC final rule with comment period (78 FR 74918). The imaging HCPCS codes referred to as “overlap bypass codes” that we removed from the bypass list for purposes of calculating the proposed multiple imaging composite APC geometric mean costs, in accordance with our established methodology as stated in the CY 2014 OPPS/ASC final rule with comment period (78 FR 74918), were identified by asterisks in Addendum N to the proposed rule (which is available via the Internet on the CMS Web site) and are discussed in more detail in section II.A.1.b. of the proposed rule and this final rule with comment period.

For the CY 2016 OPPS/ASC proposed rule, we were able to identify approximately 584,194 “single session” claims out of an estimated 1.5 million potential claims for payment through composite APCs from our ratesetting claims data, which represents approximately 39 percent of all eligible claims, to calculate the proposed CY 2016 geometric mean costs for the multiple imaging composite APCs. Table 7 of the proposed rule listed the proposed HCPCS codes that would be subject to the multiple imaging composite APC policy and their respective families and approximate composite APC proposed geometric mean costs for CY 2016.

Comment: One commenter supported CMS' decision to not propose any new multiple imaging composite APCs and requested that CMS provide stakeholders with the opportunity to meaningfully comment on any new composite APCs that the agency may propose in the future.

Response: We appreciate the commenter's support.

After consideration of the public comment we received, we are finalizing our proposal to continue the use of multiple imaging composite APCs to pay for services providing more than one imaging procedure from the same family on the same date, without modification. For this CY 2016 final rule with comment period, we were able to identify approximately 616,602 “single session” claims out of an estimated 1.6 million potential claims for payment through composite APCs from our ratesetting claims data, which represents approximately 38 percent of all eligible claims, to calculate the final CY 2016 geometric mean costs for the multiple imaging composite APCs. Table 10 below lists the HCPCS codes that are subject to the multiple imaging composite APC policy and their respective families and approximate composite APC geometric mean costs for CY 2016.

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

Family 1—Ultrasound
CY 2016 APC 8004 (Ultrasound Composite)CY 2016 Approximate APC Geometric Mean Cost = $296
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
CY 2016 APC 8005 (CT and CTA without Contrast Composite) *CY 2016 Approximate APC Geometric Mean Cost = $325
70450Ct head/brain w/o dye.
70480Ct orbit/ear/fossa w/o dye.
70486Ct maxillofacial w/o dye.
Start Printed Page 70342
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.
CY 2016 APC 8006 (CT and CTA with Contrast Composite)CY 2016 Approximate APC Geometric Mean Cost = $548
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 assigns the procedure to APC 8006 rather than APC 8005.
Family 3—MRI and MRA with and without Contrast
CY 2016 APC 8007 (MRI and MRA without Contrast Composite) *CY 2016 Approximate APC Geometric Mean Cost = $631
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.
Start Printed Page 70343
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.
CY 2016 APC 8008 (MRI and MRA with Contrast Composite)CY 2016 Approximate APC Geometric Mean Cost = $945
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.
70547Mr angiography neck w/o 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 assigns the procedure to APC 8008 rather than APC 8007.

3. Changes to Packaged Items and Services

a. Background and Rationale for Packaging in the OPPS

Like other prospective payment systems, the OPPS relies on the concept of averaging to establish a payment rate for services. The payment may be more or less than the estimated cost of providing a specific service or a bundle of specific services for a particular patient. The OPPS packages payment for multiple interrelated items and services into a single payment to create incentives for hospitals to furnish services most efficiently and to manage their resources with maximum flexibility. Our packaging policies support our strategic goal of using larger payment bundles in the OPPS to maximize hospitals' incentives to provide care in the most efficient manner. For example, where there are a Start Printed Page 70344variety of devices, drugs, items, and supplies that could be used to furnish a service, some of which are more costly than others, packaging encourages hospitals to use the most cost-efficient item that meets the patient's needs, rather than to routinely use a more expensive item, which often results if separate payment is provided for the item.

Packaging also encourages hospitals to effectively 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 delivery. 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 may reduce the importance of refining service-specific payment because packaged payments include costs associated with higher cost cases requiring many ancillary items and services and lower cost cases requiring fewer ancillary items and services. Because packaging encourages efficiency and is an essential component of a prospective payment system, packaging payment for items and services that are typically integral, ancillary, supportive, dependent, or adjunctive to a primary service has been a fundamental part of the OPPS since its implementation in August 2000. For an extensive discussion of the history and background of the OPPS packaging policy, we refer readers to the CY 2000 OPPS final rule (65 FR 18434), the CY 2008 OPPS/ASC final rule with comment period (72 FR 66580), the CY 2014 OPPS/ASC final rule with comment period (78 FR 74925), and the CY 2015 OPPS/ASC final rule with comment period (79 FR 66817). Over the last 15 years, as we have refined our understanding of the OPPS as a prospective payment system, we have packaged numerous services that were originally paid separately. As we continue to develop larger payment groups that more broadly reflect services provided in an encounter or episode of care, we have expanded the OPPS packaging policies. Most, but not necessarily all, items and services currently packaged in the OPPS are listed in 42 CFR 419.2(b). Our overarching goal is to make OPPS payments for all services paid under the OPPS more consistent with those of a prospective payment system and less like those of a per service fee schedule, which pays separately for each coded item. As a part of this effort, we have continued to examine the payment for items and services provided under the OPPS to determine which OPPS services can be packaged to further achieve the objective of advancing the OPPS toward a more prospective payment system.

For CY 2016, we have examined the items and services currently provided under the OPPS, reviewing categories of integral, ancillary, supportive, dependent, or adjunctive items and services for which we believe payment would be appropriately packaged into payment of the primary service that they support. Specifically, we examined the HCPCS code definitions (including CPT code descriptors) to determine whether there were categories of codes for which packaging would be appropriate according to existing OPPS packaging policies or a logical expansion of those existing OPPS packaging policies. In general, in the CY 2016 OPPS/ASC proposed rule (80 FR 39233 through 39236), for CY 2016, we proposed to package the costs of selected newly identified ancillary services into payment with a primary service where we believe that the proposed packaged item or service is integral, ancillary, supportive, dependent, or adjunctive to the provision of care that was reported by the primary service HCPCS code. Below we discuss the items and services that we proposed to package beginning in CY 2016 and are finalizing in this final rule with comment period.

b. Packaging Policies for CY 2016

(1) Ancillary Services

In the CY 2015 OPPS/ASC final rule with comment period (79 FR 66819 through 66822), we conditionally packaged payment for ancillary services assigned to APCs with a geometric mean cost of less than or equal to $100 (prior to application of the conditional packaging status indicator). The ancillary services that we identified are primarily minor diagnostic tests and procedures that are often performed with a primary service, although there are instances where hospitals provide such services alone and without another primary service during the same encounter. Under this policy, we assigned the conditionally packaged services to status indicator “Q1,” which indicates that the service is separately payable when not billed on the same date of service as a HCPCS code assigned status indicator “S,” “T,” or “V.” Exclusions to this ancillary service packaging policy include preventive services, certain psychiatric and counseling-related services, and certain low-cost drug administration services. The policy adopted in CY 2015 was proposed in response to public comments on the CY 2014 ancillary packaging proposal, which expressed concern that certain low volume but relatively costly ancillary services would have been packaged into high volume but relatively inexpensive primary services (for example, a visit) (74 FR 74945). We noted in the CY 2015 OPPS/ASC final rule with comment period that the $100 geometric mean cost limit target was a selection criterion for the initial set of services in conditionally packaged ancillary service APCs under this packaging policy. The $100 geometric mean cost target was not intended to be a threshold above which ancillary services will not be packaged, but was a basis for selecting the initial set of APCs under the conditional packaging policy for ancillary services, which would likely be updated and expanded upon in the future. An increase in the geometric mean cost of any of those packaged APCs to above $100 in future years does not change the conditionally packaged status of services assigned to the APCs selected in CY 2015 in a future year. When we finalized this policy, we stated that we would continue to consider services in these APCs to be conditionally packaged and would review the conditionally packaged status of ancillary services annually. The ancillary services packaging policy is codified in the regulations at 42 CFR 419.2(b)(7).

For CY 2016, as we did in CY 2015, we examined categories of ancillary services that are integral, ancillary, supportive, dependent, or adjunctive items and services for which we believe payment would be appropriately packaged into payment of the primary services that they support. As previously stated, the $100 geometric mean cost target we adopted in CY 2015 was not intended to be a threshold above which ancillary services will not be packaged, but was a basis for selecting the initial set of APCs under the conditional packaging policy for ancillary services, which would likely be updated and expanded upon in the future. Accordingly, in the CY 2016 OPPS/ASC proposed rule (80 FR 39233), for CY 2016, we proposed to not limit our examination to ancillary service APCs with a geometric mean cost of $100 or less. The geometric mean cost limit of $100 only applied in 2015, and it is no longer relevant. We stated in the Start Printed Page 70345proposed rule that we believe there are some ancillary services that are assigned to APCs with a geometric mean cost above $100, but for which conditional packaging is appropriate, given the context in which the service is performed. For CY 2016, we proposed to evaluate categories of ancillary services by considering the clinical similarity of such categories of services to the currently conditionally packaged ancillary services that have already been determined to be integral, ancillary, supportive, dependent, or adjunctive to a primary service. Under this proposal, we identified services in certain APCs that meet these criteria. Specifically, for CY 2016, we proposed to expand the set of conditionally packaged ancillary services to include services in the three APCs listed in Table 8 of the proposed rule (80 FR 39234) (APC 5734 (Level 4 Minor Procedures); APC 5673 (Level 3 Pathology); and APC 5674 (Level 4 Pathology)). Ancillary services in the APCs in Table 8 of the proposed rule are typically furnished with a higher paying, separately payable primary procedure.

However, to avoid packaging a subset of high-cost pathology services into lower cost and possibly nonprimary services (for example, low-cost imaging services) frequently billed with some of the services assigned to Level 3 and Level 4 pathology APCs, we proposed to package Level 3 and 4 pathology services only when they are billed with a surgical service. We believe that pathology services are routine tests that are typically performed ancillary or adjunctive to another primary service, most commonly surgery, to establish or confirm a diagnosis. For the Level 3 and 4 pathology APCs, we proposed that the assigned status indicator would be “Q2” (“T packaging”). The HCPCS codes that we proposed to conditionally package as ancillary services for CY 2016 were displayed in Addendum B to the CY 2016 OPPS/ASC proposed rule (which is available via the Internet on the CMS Web site). The supporting documents for the proposed rule are available at the CMS Web site at: http://www.cms.hhs.gov/​Medicare/​Medicare-Fee-for-Service-Payment/​HospitalOutpatientPPS/​index.html.

Comment: Several commenters supported designating as conditionally packaged the services assigned to APCs 5734, 5673, and 5674.

Response: We appreciate the commenters' support.

Comment: Several commenters objected to the conditional packaging proposal. Some commenters objected because they believed that CMS has finalized too many new packaging policies in recent years. Other commenters objected to the proposed conditionally packaging of the services in the Levels 3 and 4 Pathology APCs because they believed that these more expensive pathology tests (as compared to the services assigned to the Levels 1 and 2 Pathology APCs) could be packaged with less costly surgical procedures.

Response: The number of other recent packaging proposals in the CY 2014 and CY 2015 OPPS/ASC final rules with comment periods has no bearing on this CY 2016 packaging proposal. The CY 2016 packaging proposal is based on the payment packaging principles specified earlier. We believe that these three APCs consist of services that are generally integral, ancillary, supportive, dependent, or adjunctive to a primary service. In addition, because this proposal is for conditional packaging, if the services are provided alone, the services would be separately paid. We also have not stated that more costly services cannot be packaged into less costly services.

After consideration of the public comments we received, we are finalizing our proposal to conditionally packaged ancillary services assigned to APCs 5734, 5673, and 5674 for CY 2016. The three APCs and their CY 2016 final status indicators and payment rates are displayed in Table 11 below.

Table 11—APCs for Conditionally Packaged Ancillary Services for CY 2016

Renumbered CY 2016 APCCY 2016 APC titleCY 2016 OPPS status indicatorCY 2016 payment rate
5734Level 4 Minor ProceduresQ1$119.58
5673Level 3 PathologyQ2229.13
5674Level 4 PathologyQ2459.96

The HCPCS codes that we are conditionally packaging as ancillary services for CY 2016 are displayed in Addendum B to this CY 2016 OPPS/ASC final rule with comment period (which is available via the Internet on the CMS Web site). The supporting documents for the final rule with comment period are available at the CMS Web site at: http://www.cms.hhs.gov/​Medicare/​Medicare-Fee-for-Service-Payment/​HospitalOutpatientPPS/​index.html.

In addition, in the CY 2016 OPPS/ASC proposed rule (80 FR 39234), we proposed to continue to exclude certain services from this ancillary services packaging policy. As established in CY 2015, preventive services, certain psychiatric and counseling-related services, and certain low-cost drug administration services are separately payable under the OPPS (79 FR 66819). Preventable services that would continue to be exempted from the ancillary service packaging policy for CY 2016 were listed in Table 9 of the proposed rule.

Comment: Several commenters supported this proposal.

Response: We appreciate the commenters' support.

After consideration of the public comments we received, we are finalizing our policy to continue to exempt preventive services from the ancillary services packaging policy for CY 2016. Preventive services that will continue to be exempted from the ancillary service packaging policy for CY 2016 and subsequent years are listed in Table 12 below.

Table 12—Preventive Services Exempted From the Ancillary Services Packaging Policy

HCPCS codeShort descriptorCY 2016 status indicatorCY 2016 APC
76977Us bone density measureS5732
Start Printed Page 70346
77078Ct bone density axialS5521
77080Dxa bone density axialS5522
77081Dxa bone density/peripheralS5521
G0117Glaucoma scrn hgh risk direcS5732
G0118Glaucoma scrn hgh risk direcS5732
G0130Single energy x-ray studyS5521
G0389Ultrasound exam aaa screenS5531
G0404Ekg tracing for initial prevS5731
Q0091Obtaining screen pap smearS5731

(2) Drugs and Biologicals That Function as Supplies When Used in a Surgical Procedure

In the CY 2014 OPPS/ASC final rule with comment period (78 FR 74930 through 74939), we finalized a policy at 42 CFR 419.2(b)(16) to unconditionally package all drugs and biologicals that function as supplies when used in a surgical procedure. As noted in that final rule with comment period, supplies are a large category of items that typically are either for single patient use or have a shorter life span in use than equipment. Supplies can be anything that is not equipment and include not only minor, inexpensive, or commodity-type items but also include a wide range of products used in the hospital outpatient setting, including certain implantable medical devices, drugs, biologicals, or radiopharmaceuticals (78 FR 74390). When evaluating whether a particular drug may meet the criteria for packaging under this policy, we do not consider low drug product utilization and/or drug product cost (as compared to the primary service APC payment) to be factors in our determination (79 FR 66875). We unconditionally package all drugs and biologicals that function as supplies in a surgical procedure (79 FR 74930).

For CY 2016, we conducted a comprehensive review of CY 2015 separately payable OPPS drugs; that is, drugs with either a status indicator of “G” or “K.” For each separately payable drug, we reviewed the FDA-approved label and conducted a clinical review to determine whether a drug is indicated for use in a surgical procedure. Based on our clinical review, in the CY 2016 OPPS/ASC proposed rule (80 FR 39235), for CY 2016, we proposed to package payment for the four drugs that were listed in Table 10 of the proposed rule (80 FR 39235) based on their primary function as a supply in a surgical procedure, which typically means that the drug or biological is integral to or dependent on or supportive of or adjunctive to a surgical procedure (HCPCS code J0583 (Injection, bivalirudin, 1 mg); HCPCS code J7315 (Mitomycin, ophthalmic, 0.2 mg); HCPCS code C9447 (Injection, phenylephrine and ketorolac, 4 ml vial); and HCPCS code J0130 (Injection abciximab, 10 mg)). We noted in the proposed rule that one drug, described by HCPCS code C9447, whose payment would otherwise be packaged in CY 2016, currently has pass-through payment status. Therefore, we did not propose to package payment for the drug described by HCPCS code C9447 for CY 2016. Instead, we proposed to package payment for this drug for CY 2018, after its drug pass-through payment status has expired.

Comment: A few commenters requested that CMS not package the drug described by HCPCS code J7315 as a surgical supply. One commenter in particular believed that, because the drug mitomycin is not necessarily required in all trabeculectomies, the packaging regulation for drugs and biologicals that function as supplies when used in a surgical procedure specified at § 419.2(b)(16) of the regulations should not apply to HCPCS code J7315.

Response: We addressed a similar comment and explained this packaging policy as it applies to HCPCS code J7315 in the CY 2014 OPPS/ASC final rule with comment period (78 FR 74938). We are repeating some of the points made in our response here. First, HCPCS code J7315 describes a drug. Second, indication for the drug described by HCPCS code J7315 is “for use as an adjunct to ab externo glaucoma surgery” (emphasis added). The drugs that function as surgical supplies packaging policy specified at § 419.2(b)(16) applies to all drugs and biologicals that are either integral or ancillary or supportive or dependent or adjunctive to a surgical procedure (78 FR 74938). Because the drug described by HCPCS code J7315 is an adjunct to surgery (the drug's only indication), payment for the drug is packaged in CY 2016 in accordance with § 419.2(b)(16). For purposes of packaging payment, it does not matter in what percentage of trabeculectomies the drug described by HCPCS code J7315 is used. Packaging policies apply both to products that are used as a necessary ingredient to a procedure (meaning that the test or procedure cannot be performed without the product) and to products that are optional and only occasionally used with a procedure. The frequency of use relative to overall procedure frequency is not a factor in determining whether a drug or biological is packaged under § 419.2(b)(16). With packaging of a drug or biological payment into the procedure payment, surgeons, hospitals, and ASCs can weigh the clinical utility of the product for a particular case against the cost of the product (because payment is fixed for the overall procedure and includes all supplies). If the clinical utility of a product is high relative to the cost, hospitals and ASCs (on an order by a physician) would be more likely to use the product. If the opposite is true, they would be less likely to use a product. Packaging policies support the medically necessary use of products and should restrain use that may be more a matter of convenience than of medical necessity. Therefore, we are finalizing our proposal to package the drug described by HCPCS code J7315 (and assign it status indicator “N”) for CY 2016 and subsequent years.

Comment: One commenter expressed concern that mitomycin is overused in trabeculectomies. The commenter believed that target intraocular pressures (IOPs) should be better tailored to the individual patient rather than always aiming for very low IOPs that are achievable with mitomycin. The commenter stated that the current CMS payment policy of separate payment for mitomycin may encourage the use of mitomycin in trabeculectomy.Start Printed Page 70347

Response: We appreciate this thoughtful comment. As stated above, we believe that packaging payment for mitomycin will require facilities to focus on the clinical utility of mitomycin in a particular case because using the packaged drug will be a cost that must be covered by the trabeculectomy procedure payment. On the contrary, separate payment for drugs creates a financial incentive for hospitals and ASCs to use drugs because they are paid an additional amount at ASP+6 percent. In addition, if the facility acquires a drug whose payment is at less than ASP, the profit for using the drug is even greater than 6 percent of the drug's ASP.

Comment: One commenter requested that CMS not package the drug described by HCPCS code C9447 (phenylephrine and ketorolac) as a surgical supply beginning in CY 2018. While the commenter did not disagree that the drug would be subject to the packaging regulation at § 419.2(b)(16), the commenter predicted that packaging of this drug will result in the use of lower quality alternative drugs. In addition, the commenter requested that, if CMS packages payment for the drug described by HCPCS code C9447, CMS create a separate APC with higher payment rates for procedures that use packaged drugs.

Response: Because the drug described by HCPCS code C9447 functions as a surgical supply in cataract surgery, payment for the drug will be packaged under § 419.2(b)(16) after its pass-through status expires beginning in CY 2018. Which particular drugs surgeons, hospitals, and ASCs will employ to perform cataract surgery is a matter of choice by the physician and the facility. Through packaging of the payment for supplies into the payment for the procedure, CMS generally leaves decision-making about which packaged services to use during a procedure in the hands of physicians and providers. We believe that pass-through payment status should facilitate the use of the drug described by HCPCS code C9447. With the packaging of the payment for the drug described by HCPCS code C9447 into the cataract surgery procedure payment, we believe surgeons, hospitals, and ASCs can weigh the clinical utility of the product for a particular case against the cost of the product (because payment is fixed for the overall procedure and includes all supplies). If the clinical utility of the drug is high relative to its cost, hospitals and ASCs (on an order by a physician) would be more likely to use the product. If the opposite is true, they would be less likely to use the product. If successful cataract surgery depends upon the use of the drug described by HCPCS code C9447, we expect that hospitals and ASCs will bear the additional cost of the drug. As noted above, packaging policies support the medically necessary use of products and should restrain use that may be more a matter of convenience than of medical necessity.

We are finalizing our proposal to package the drug described by HCPCS code C9447 (and assign it status indicator “N”) beginning in CY 2018 and subsequent years. We are not creating a separate APC with a higher payment for cataract surgery that uses the drug described by HCPCS code C9447, as the commenter requested. We believe that doing so would be inconsistent with the packaging policy. The payment for cataract surgery is a total payment that includes all necessary equipment and supplies, including drugs and biologicals that are employed before, during, and after a surgery.

Comment: One commenter requested that CMS not package payment for the drug described by HCPCS code J0583. The commenter stated that, because HCPCS code J0583 describes a specified covered outpatient drug (SCOD), the drug cannot be packaged because of the specific statutory payment methodology that applies to SCODs. The commenter also requested that, if CMS finalizes the proposal to package payment for the drug described by HCPCS code J0583 as a surgical supply, CMS should also package payment for the drugs described by HCPCS codes J1327 (Eptifibatide) and J3246 (Tirofiban hydrochloride) to ensure that the packaging policy is not implemented in an arbitrary and capricious manner.

Response: We have previously explained why SCODs can be packaged in the OPPS (72 FR 66766). The drug described by HCPCS code J0583 is indicated for various types of patients undergoing percutaneous coronary intervention (PCI), which we consider to be a surgical procedure for purposes of this packaging policy. The drugs described by HCPCS codes J1327 and J3246 mentioned by the commenter have other indications besides facilitating PCI. The drugs described by HCPCS codes J1327 and J3246 are indicated for the treatment of acute coronary syndrome (ACS). These drugs were not among the drugs proposed to be packaged as surgical supplies because they have nonsurgical indications.

Comment: A few commenters requested that CMS revise its packaging policy to unpackage payment for diagnostic radiopharmaceuticals, stress agents, and Cysview. The commenters believed that packaging payment for these products limits patient access.

Response: We disagree with the commenters that packaging limits patient access to diagnostic radiopharmaceuticals, stress agents, and Cysview. We believe that unconditionally packaging diagnostic radiopharmaceuticals, stress agents, Cysview, and other drugs and biologicals that function as surgical supplies establishes better incentives to ensure clinically appropriate patient care.

As discussed in the CY 2014 OPPS/ASC final rule with comment period (78 FR 74925 through 74926), 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. There are many items and services in the OPPS in which use of the item or service may increase the cost per case above that of the average or typical case, and there are cases where no additional items or services are necessary and the cost of a typical case is much less than the average. This is a fundamental aspect of a prospective payment system. Overall, we believe that OPPS payments reflect average estimated costs for both situations and encourage the hospital to assess the appropriate use of those additional items and services in diagnosing bladder cancer and other diseases.

While we continuously examine our claims data to identify data anomalies or inconsistencies in billing patterns, we also welcome and appreciate public comments that support claims data on how our packaging policy may adversely impacts patient access.

After consideration of the public comments we received, we are finalizing our proposal to package payment for the four discussed drugs. We are not modifying our drug packaging policy and will continue to package drugs and biologicals that function as supplies when used in a surgical procedure as codified at 42 CFR 419.2(b)(15) and (b)(16). Table 13 below lists the drugs that we are finalizing as unconditionally packaged surgical supplies beginning in the calendar year indicated in the table.Start Printed Page 70348

Table 13—Drugs Packaged as Surgical Supplies

HCPCS codeDescriptorCY 2015 status indicatorPrimary use in surgical procedureFirst calendar year packaged
J0583Injection, bivalirudin, 1 mgKPercutaneous Coronary Intervention[PCI]/PCTA [percutaneous transluminal coronary angioplasty] procedures2016
J7315Mitomycin, ophthalmic, 0.2 mgGGlaucoma surgery2016
C9447Injection, phenylephrine and ketorolac, 4 ml vialGCataract surgery2018
J0130Injection abciximab, 10 mgKPCI procedure2016

(3) Clinical Diagnostic Laboratory Tests

(a) Background

In CY 2014, we finalized a policy to package payment for most clinical diagnostic laboratory tests in the OPPS (78 FR 74939 through 74942 and 42 CFR 419.2(b)(17)). Under current policy, certain clinical diagnostic laboratory tests that are listed on the Clinical Laboratory Fee Schedule (CLFS) are packaged in the OPPS as integral, ancillary, supportive, dependent, or adjunctive to the primary service or services provided in the hospital outpatient setting on the same date of service as the laboratory test. Specifically, we conditionally package laboratory tests and only pay separately for a laboratory test when (1) it is the only service provided to a beneficiary on a given date of service; or (2) it is conducted on the same date of service as the primary service, but is ordered for a different diagnosis than the other hospital outpatient services and ordered by a practitioner different than the practitioner who ordered the other hospital outpatient services. Also excluded from this conditional packaging policy are molecular pathology tests described by CPT codes in the ranges of 81200 through 81383, 81400 through 81408, and 81479 (78 FR 74939 through 74942), which are assigned status indicator “A” in Addendum B to this final rule with comment period (which is available at the CMS Web site at: http://www.cms.hhs.gov/​Medicare/​Medicare-Fee-for-Service-Payment/​HospitalOutpatientPPS/​index.html). When laboratory tests are not packaged under the OPPS and are listed on the CLFS, they are paid at the CLFS payment rates outside the OPPS under Medicare Part B.

To implement our packaging policy in CY 2014, we assigned status indicator “N,” which describes unconditionally packaged items and services, to all laboratory tests paid at the CLFS rates except molecular pathology tests. We indicated in the CY 2014 OPPS/ASC final rule with comment period (78 FR 74939) that hospitals should use the 14X bill type for laboratory tests to bill and receive separate payment for laboratory tests that are the only services provided on a date of service and laboratory tests provided on the same date of service as another hospital outpatient service but ordered for a different diagnosis than the primary service and ordered by a different practitioner than the practitioner who ordered the other hospital outpatient service. Therefore, under our final policy, we relied on hospitals to identify when laboratory tests should be separately paid and bill those laboratory tests on a 14X bill type.

Upon implementation of this final policy in January 2014, the National Uniform Billing Committee (NUBC) expressed concern that the 14X bill type was not an appropriate choice of bill type for billing for laboratory tests other than for laboratory tests on referred specimens and requested that CMS find another mechanism for hospitals to bill for separately payable laboratory tests. (We refer readers to our Medicare Learning Network article on this issue on the CMS Web site at: http://www.cms.gov/​Outreach-and-Education/​Medicare-Learning-Network-MLN/​MLNMattersArticles/​Downloads/​SE1412.pdf.) In Transmittal 2971, Change Request 8776, July 2014 Update of the Hospital Outpatient Prospective Payment System (OPPS), which is available on the CMS Web site at: http://www.cms.gov/​Regulations-and-Guidance/​Guidance/​Transmittals/​downloads/​R2971CP.pdf, we implemented modifier “L1” (Separately payable laboratory test) to be used in lieu of the 14X bill type. Specifically, we stated that hospitals should use the “L1” modifier to indicate when laboratory tests meet either of the two exceptions for separate payment described above.

(b) CY 2016 Laboratory Test Packaging Proposals and Finalized Policies

In the CY 2016 OPPS/ASC proposed rule (80 FR 39235 through 39236), for CY 2016 and subsequent years, we proposed a few revisions to the laboratory packaging policy. First, with regard to the particular molecular pathology tests in the code range expressly excluded from the previous policy, we proposed to expand this exclusion to exclude all molecular pathology tests from our packaging policy, including any new codes that also describe molecular pathology tests. In our rationale for excluding these laboratory tests from our final packaging policy in the CY 2014 OPPS/ASC final rule with comment period (78 FR 74939), we stated that we did not propose to package molecular pathology laboratory tests because we believed that these relatively new tests may have a different pattern of clinical use, which may make them generally less tied to a primary service in the hospital outpatient setting than the more common and routine laboratory tests that we proposed to package. As stated in the CY 2016 OPPS/ASC proposed rule, we believe that this rationale remains applicable and may be appropriately extended to any new molecular pathology tests. Therefore, for CY 2016, we proposed to assign all laboratory tests that describe molecular pathology tests status indicator “A” in Addendum B to the proposed rule (which is available via the Internet on the CMS Web site), which means that they would be separately paid at the CLFS rates outside of the OPPS.

Second, in the CY 2016 OPPS/ASC proposed rule (80 FR 39236), we proposed for CY 2016 to make separate payment for preventive laboratory tests and we assigned them status indicator “A” in Addendum B to the proposed rule. Laboratory tests that are considered preventive are listed in Section 1.2, Chapter 18 of the Medicare Claims Processing Manual (Pub. 100-04). We currently make an exception to conditional packaging of ancillary services for ancillary services that are also preventive services (79 FR 66819). We stated in the proposed rule that, for consistency, we believe that such an Start Printed Page 70349exception should also apply to laboratory tests that are classified as preventive services.

Finally, for CY 2016, we proposed in the CY 2016 OPPS/ASC proposed rule (80 FR 39236) to modify our current conditional packaging policy that laboratory tests are integral, ancillary, supportive, dependent, or adjunctive to a primary service or services provided in the hospital outpatient setting when those services are provided on the same date of service as the primary service and when they are ordered for the same diagnosis and by the same practitioner as the practitioner who ordered the other hospital outpatient service. Specifically, we proposed to consider laboratory tests provided during the same outpatient stay (rather than specifically provided on a same date of service as the primary service) as integral, ancillary, supportive, dependent, or adjunctive to a primary service or services, except when a laboratory test is ordered for a different diagnosis and by a different practitioner than the practitioner who ordered the other hospital outpatient services. In some cases, outpatient hospital stays span more than a single date. For laboratory tests reported on a claim with a primary service, we stated in the proposed rule that we do not believe that a different date of service for the laboratory test affects whether that test is integral, ancillary, supportive, dependent, or adjunctive to the primary service or services provided in the HOPD. Further, as we discussed in the proposed rule, in reviewing our CY 2014 claims data, we observed hospitals indicating separate payment by reporting the “L1” modifier for only a few laboratory tests reported on different days than another hospital outpatient service. We concluded that hospitals generally do not view laboratory tests occurring on a different day than a primary service during an outpatient stay as a reason for separate payment. Therefore, we proposed to package laboratory tests that are reported on the same claim with a primary service, regardless of the date of service.

As stated in the proposed rule (80 FR 39236), this proposal does not affect our existing policy to provide separate payment for laboratory tests: (1) If they are the only services furnished to an outpatient and are the only services on a claim and have a payment rate on the CLFS; or (2) if they are ordered for a different diagnosis than another hospital outpatient service by a practitioner different than the practitioner who ordered the other hospital outpatient service (78 FR 74942). As indicated in the proposed rule, we also plan to continue to have hospitals report the “L1” modifier to identify any clinically “unrelated” laboratory tests that are furnished on the same claim as OPPS services, but are ordered by a different practitioner and for a different diagnosis than the other hospital outpatient service. However, for ease of administration, we also proposed to implement claims processing edits through a new conditional packaging status indicator “Q4” that would identify 13X bill type claims where there are only laboratory HCPCS codes that appear on the CLFS; automatically change their status indicator to “A”; and pay them separately at the CLFS payment rates. For such claims, the “L1” modifier would not be used (80 FR 39236). Status indicator “Q4” is defined as “packaged APC payment if billed on the same claim as a HCPCS code assigned status indicator “J1,” “J2,” “S,” “T,” “V,” “Q1,” “Q2,” or “Q3,” otherwise separately paid, and would apply to conditionally packaged laboratory tests. In our CY 2014 claims data, we observed some claims reporting laboratory services and no other OPPS services that were not paid because the hospital did not appropriately report the “L1” modifier. We further believe that the status indicator “N” for unconditional packaging does not accurately reflect the payment status of these laboratory tests. These tests may be eligible to receive separate payment at the CLFS payment rates in several circumstances as discussed above. With the assignment of the proposed “Q4” modifier to laboratory tests, we proposed that modifier “L1” would only be used to identify “unrelated” laboratory tests that are ordered for a different diagnosis and by a different practitioner than the other hospital outpatient services on the claim.

We invited public comments on these proposals.

Comment: Many commenters agreed with expanding the molecular pathology test exception to include new molecular pathology tests, and not only the tests listed in the CY 2014 OPPS/ASC final rule with comment period. In addition, many commenters agreed with the proposal for separate payment for preventive laboratory tests.

Response: We appreciate the commenters' support for these proposals.

Comment: A few commenters disagreed with the assignment of status indicator “E” (Not paid by Medicare when submitted on outpatient claims) for the following CPT codes that describe new multianalyte assays with algorithmic analyses (MAAAs):

  • CPT code 81490 (Autoimmune (rheumatoid arthritis), analysis of 12 biomarkers using immunoassays, utilizing serum, prognostic algorithm reported as a disease activity score);
  • CPT code 81535 (Oncology (gynecologic), live tumor cell culture and chemotherapeutic response by DAPI stain and morphology, predictive algorithm reported as a drug response score; first single drug or drug combination);
  • CPT code 81536 (Oncology (gynecologic), live tumor cell culture and chemotherapeutic response by DAPI stain and morphology, predictive algorithm reported as a drug response score; each additional single drug or drug combination (List separately in addition to code for primary procedure)); and
  • CPT code 81538 (Oncology (lung), mass spectrometric 8-protein signature, including amyloid A, utilizing serum, prognostic and predictive algorithm reported as good versus poor overall survival).

In addition, the commenters agreed with CMS' designation of certain other MAAAs as separately paid molecular pathology tests, but requested that CMS also assign status indicator “A” to the four MAAAs codes listed above. The commenters believed that the rationale stated in the proposed rule for not packaging payment for molecular pathology laboratory tests (that is, that “we believed that these relatively new tests [molecular pathology laboratory tests] may have a different pattern of clinical use, which may make them generally less tied to a primary service in the hospital outpatient setting than the more common and routine laboratory tests that we . . . package” (80 FR 39236)) applies equally to the four new nonmolecular pathology MAAAs listed above, and for this reason, payment for these MAAAs should also not be packaged.

Response: We agree in part with the commenters. We agree that the MAAAs codes in question should not be assigned status indicator “E” for CY 2016 because there is some local Medicare coverage for these codes. However, the proposal was limited to molecular pathology laboratory tests and not to any laboratory test that could possibly fit into the molecular pathology test exception rationale. While we did not propose to extend the packaging exception that applies to molecular pathology laboratory tests to these nonmolecular pathology MAAAs laboratory tests, we may consider whether additional exceptions to the OPPS laboratory test packaging policy should apply to tests other than Start Printed Page 70350molecular pathology tests in the future. For CY 2016, the four MAAAs codes listed above are assigned status indicator “Q4.”

Comment: Many commenters supported the proposed “Q4” status indicator for conditionally packaged laboratory tests. The commenters expressed their appreciation for the administrative convenience this policy will afford hospitals in receiving separate payment without the use of a modifier for laboratory tests provided without other hospital services. However, some commenters objected to the associated logic of applying laboratory test packaging at the claim level instead of at the date of service level. These commenters believed that laboratory tests performed during an outpatient hospital stay but on a different date of service might not be ancillary to a primary service on a different date of service. Some commenters also believed that payment for laboratory tests should not be packaged into payment for other conditionally packaged services that are assigned status indicator “Q1” or “Q2,” because they were concerned that the cost of some packaged laboratory tests could exceed the cost of other conditionally packaged services into which the laboratory tests are packaged.

Response: We appreciate the commenters' support for the proposed “Q4” status indicator. However, we believe that the “Q4” status indicator should apply at the claim level. We believe that it is appropriate to package payment for laboratory tests that are provided on a different date of service than other hospital services. For example, a patient could be seen in the emergency room and receive some laboratory tests prior to midnight and receive the remainder of the services after midnight on a different date of service. This order of services should not affect whether the laboratory tests are packaged. Therefore, we believe that the “Q4” status indicator should identify packaging of laboratory tests into procedures on the same claim, regardless of the date of service, unless an exception applies. Regarding the commenters' concern about costly laboratory tests possibly being packaged into less costly services that are assigned status indicator “Q1” or “Q2,” it is possible that this could happen but, given the low cost of most laboratory tests relative to most other hospital outpatient services, we do not believe that this would be a common occurrence. In addition, packaging in the OPPS is not limited to only ancillary or subordinate services that are lower cost than a primary service. In some cases, the packaged services can have a higher cost than the primary service.

After consideration of the public comments we received, we are finalizing the changes to the laboratory test packaging policy as proposed, with one modification. We are assigning status indicator “Q4” (instead of “E”) to CPT codes 81490, 81535, 81536, and 81538. Status indicator assignments for laboratory tests are included in Addendum B to this final rule with comment period (which is available at the CMS Web site at: http://www.cms.hhs.gov/​Medicare/​Medicare-Fee-for-Service-Payment/​HospitalOutpatientPPS/​index.html). When laboratory tests are not packaged under the OPPS and are listed on the CLFS, they are paid at the CLFS payment rates outside the OPPS under Medicare Part B.

4. Calculation of OPPS Scaled Payment Weights

In the CY 2016 OPPS/ASC proposed rule (80 FR 39236 through 39237), we proposed to calculate the relative payment weights for each APC shown in Addenda A and B to the 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 the proposed rule. Prior to CY 2007, we standardized all of 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 an initial unscaled relative payment weight for each APC.

Beginning with the CY 2007 OPPS (71 FR 67990), we standardized all of the relative payment weights to the median cost of 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 APC because it was the mid-level clinic visit APC (that is, Level 3 of 5 levels). We established a policy in the CY 2013 OPPS/ASC final rule with comment period (77 FR 68283) of using geometric mean-based APC costs rather than median-based APC costs to calculate relative payment weights. In the CY 2016 OPPS/ASC proposed rule (80 FR 39236 through 39237), we proposed to continue this policy for CY 2016 and subsequent years.

As noted earlier for CY 2012 and CY 2013, outpatient clinic visits were assigned to one of five levels of clinic visit APCs, with APC 0606 representing a mid-level clinic visit. In the CY 2014 OPPS/ASC final rule with comment period (78 FR 75036 through 75043), we finalized a new policy that created alphanumeric HCPCS code G0463 (Hospital outpatient clinic visit for assessment and management of a patient), representing any and all clinic visits under the OPPS. HCPCS code G0463 was assigned to APC 0634 (Hospital Clinic Visits). We also finalized a policy to use CY 2012 claims data to develop the CY 2014 OPPS payment rates for HCPCS code G0463 based on the total geometric mean cost of the levels one through five CPT E/M codes for clinic visits previously recognized under the OPPS (CPT codes 99201 through 99205 and 99211 through 99215). In addition, we finalized a policy to no longer recognize a distinction between new and established patient clinic visits.

For the CY 2014 and CY 2015 OPPS final rules with comment period, we standardized all of the relative payment weights to the geometric mean cost of APC 0634 as discussed in section VII. of the CY 2015 OPPS/ASC final rule with comment period (79 FR 66823). As noted in section VII. of the CY 2016 proposed rule, for CY 2016, we proposed to delete APC 0634 and to move the outpatient clinic visit HCPCS code G0463 to APC 0632 (Level 2 Examinations and Related Services) (80 FR 39237). Accordingly, for CY 2016 and subsequent years, we proposed to standardize all of the relative payment weights to APC 0632. As stated in the proposed rule, we believe that standardizing relative payment weights to the geometric mean of the APC to which HCPCS code G0463 is assigned maintains consistency in calculating unscaled weights that represent the cost of some of the most frequently provided OPPS services. For CY 2016, we proposed to renumber APC 0632 as APC 5012 (Level 2 Examination and Related Services). For CY 2016, we proposed to assign proposed renumbered APC 5012 a relative payment weight of 1.00 and to divide the geometric mean cost of each APC by the proposed geometric mean cost for proposed renumbered APC 5012 to derive the proposed unscaled relative payment weight for each APC. The choice of the APC on which to standardize the proposed relative payment weights does not affect 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 Start Printed Page 70351aggregate weight under the OPPS for CY 2016 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 proposed to compare the estimated aggregate weight using the CY 2015 scaled relative payment weights to the estimated aggregate weight using the proposed CY 2016 unscaled relative payment weights.

We did not receive any public comments on our proposal to use the geometric mean cost of renumbered APC 5012 to standardize relative payment weights. Therefore, we are finalizing the use of the relative payment weight of 1.00 for APC 5012 to derive the unscaled relative payment weight for each APC.

For CY 2015, we multiplied the CY 2015 scaled APC relative payment weight applicable to a service paid under the OPPS by the volume of that service from CY 2014 claims to calculate the total relative payment weight for each service. We then added together the total relative payment weight for each of these services in order to calculate an estimated aggregate weight for the year. For CY 2016, we proposed to apply the same process using the estimated CY 2016 unscaled relative payment weights rather than scaled relative payment weights. We proposed to calculate the weight scaler by dividing the CY 2015 estimated aggregate weight by the unscaled CY 2016 estimated aggregate weight (80 FR 39237).

For a detailed discussion of the weight scalar 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 . Click on the CY 2016 OPPS final rule link and open the claims accounting document link at the bottom of the page.

In the CY 2016 OPPS/ASC proposed rule (80 FR 39237), we proposed to compare the estimated unscaled relative payment weights in CY 2016 to the estimated total relative payment weights in CY 2015 using CY 2014 claims data, holding all other components of the payment system constant to isolate changes in total weight. Based on this comparison, we proposed to adjust the calculated CY 2016 unscaled relative payment weights for purposes of budget neutrality. We proposed to adjust the estimated CY 2016 unscaled relative payment weights by multiplying them by a weight scaler of 1.3823 to ensure that the proposed CY 2016 relative payment weights are scaled to be budget neutral. The proposed CY 2016 relative payment weights listed in Addenda A and B to the proposed rule (which are available via the Internet on the CMS Web site) were scaled and incorporated the recalibration adjustments discussed in sections II.A.1. and II.A.2. of the proposed rule.

Section 1833(t)(14) of the Act provides the payment rates for certain SCODs. Section 1833(t)(14)(H) of the Act provides 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 final rule with comment period) is included in the budget neutrality calculations for the CY 2016 OPPS.

We did not receive any public comments on the proposed weight scaler calculation. Therefore, we are finalizing the calculation process described in the proposed rule without modification. Using updating final rule claims data, we are updating the estimated CY 2016 unscaled relative payment weights by multiplying them by a weight scaler of 1.3852 to ensure that the final CY 2016 relative payment weights are scaled to be budget neutral.

B. Conversion Factor Update

Section 1833(t)(3)(C)(ii) of the Act requires the Secretary to update the conversion factor used to determine the 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 2016 IPPS/LTCH PPS final rule (80 FR 49508), consistent with current law, based on IHS Global Insight, Inc.'s second quarter 2015 forecast of the FY 2016 market basket increase, the FY 2016 IPPS market basket update is 2.4 percent. However, sections 1833(t)(3)(F) and 1833(t)(3)(G)(iv) of the Act, as added by section 3401(i) of the Patient Protection and Affordable Care Act of 2010 (Pub. L. 111-148) and as amended by section 10319(g) of that law and further amended by section 1105(e) of the Health Care and Education Reconciliation Act of 2010 (Pub. L. 111-152), provide adjustments to the OPD fee schedule increase factor for CY 2016.

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 2016 IPPS/LTCH PPS final rule (80 FR 49509), we discussed the calculation of the final MFP adjustment for FY 2016, which is a 0.5 percentage point reduction.

In the CY 2016 OPPS/ASC proposed rule, we proposed that if more recent data became subsequently available after the publication of the proposed rule (for example, a more recent estimate of the market basket increase and the MFP adjustment), we would use such updated data, if appropriate, to determine the CY 2016 market basket update and the MFP adjustment, components in calculating the OPD fee schedule increase factor under sections 1833(t)(3)(C)(iv) and 1833(t)(3)(F) of the Act, in the CY 2016 OPPS/ASC final rule with comment period. Consistent with that proposal, and the FY 2016 IPPS/LTCH PPS final rule, we applied the updated final FY 2016 market basket percentage increase and the MFP adjustment to the OPD fee schedule increase factor for the CY 2016 OPPS.

In addition, section 1833(t)(3)(F)(ii) of the Act requires that, for each of years 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 2016, section 1833(t)(3)(G)(iv) of the Act provides a −0.2 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)(iv) of the Act, in the CY 2016 OPPS/ASC proposed rule, we proposed to apply a 0.2 percentage point reduction to the OPD fee schedule increase factor for CY 2016.

We note that section 1833(t)(3)(F) of the Act provides that application of this subparagraph may result in the OPD fee Start Printed Page 70352schedule increase factor under section 1833(t)(3)(C)(iv) of the Act being less than 0.0 percent for a year, and may result in OPPS payment rates being less than rates for the preceding year. As described in further detail below, we are applying an OPD fee schedule increase factor of 1.7 percent for the CY 2016 OPPS (which is 2.4 percent, the final estimate of the hospital inpatient market basket percentage increase, less the final 0.5 percentage point MFP adjustment, and less the 0.2 percentage point additional adjustment).

Hospitals that fail to meet the Hospital OQR Program reporting requirements are 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 for their services, as required by section 1833(t)(17) of the Act. For further discussion of the Hospital OQR Program, we refer readers to section XIII. of this final rule with comment period.

In the CY 2016 OPPS/ASC proposed rule, we proposed to amend 42 CFR 419.32(b)(1)(iv)(B) by adding new paragraph (7) to reflect the requirement in section 1833(t)(3)(F)(i) of the Act that, for CY 2016, we reduce the OPD fee schedule increase factor by the MFP adjustment as determined by CMS, and to reflect the requirement in section 1833(t)(3)(G)(iv) 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 0.2 percentage point for CY 2016.

We did not receive any public comments on our proposed adjustments to the OPD fee schedule increase factor or on the proposed changes to the regulations at 42 CFR 419.32(b)(1)(iv)(B). For the reasons discussed above, we are adjusting the OPD fee schedule increase factor and finalizing the changes to the regulations as proposed.

To set the OPPS conversion factor for the CY 2016 proposed rule, we increased the CY 2015 conversion factor of $74.173 by 1.9 percent. In accordance with section 1833(t)(9)(B) of the Act, we further adjusted the conversion factor for CY 2016 to ensure that any revisions made to the wage index and rural adjustment were made on a budget neutral basis. We calculated an overall budget neutrality factor of 0.9993 for wage index changes by comparing total estimated payments from our simulation model using the FY 2016 IPPS wage indexes to those payments using the FY 2015 IPPS wage indexes, as adopted on a calendar year basis for the OPPS.

For the CY 2016 proposed rule, we maintained the current rural adjustment policy, as discussed in section II.E. of this final rule with comment period. Therefore, we set the budget neutrality factor for the rural adjustment is 1.0000.

For the CY 2016 proposed rule, we proposed 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 final rule with comment period. Consistent with that policy, we calculated a CY 2016 budget neutrality adjustment factor for the cancer hospital payment adjustment by comparing estimated total CY 2016 payments under section 1833(t) of the Act, including the CY 2016 cancer hospital payment adjustment, to estimated CY 2016 total payments using the CY 2015 final cancer hospital payment adjustment as required under section 1833(t)(18)(B) of the Act. The CY 2016 estimated payments applying the CY 2016 cancer hospital payment adjustment are identical to estimated payments applying the CY 2015 final cancer hospital payment adjustment. Therefore, we applied a budget neutrality adjustment factor of 1.0000 to the conversion factor for the cancer hospital payment adjustment.

For the proposed rule, we estimated that pass-through spending for drugs, biologicals, and devices for CY 2016 would equal approximately $136.8 million, which represented 0.25 percent of total projected CY 2016 OPPS spending. Therefore, the conversion factor was adjusted by the difference between the 0.13 percent estimate of pass-through spending for CY 2015 and the 0.25 percent estimate of pass-through spending for CY 2016, resulting in an adjustment for CY 2016 of −0.12 percent. Estimated payments for outliers remained at 1.0 percent of total OPPS payments for CY 2016. We estimated for the proposed rule that outlier payments would be 0.95 percent of total OPPS payments in CY 2015; the 1.0 percent for outlier payments in CY 2016 would constitute a 0.05 percent increase in payment in CY 2016 relative to CY 2015.

We did not receive any public comments on our proposed general methodology for calculating the CY 2016 conversion factor. Therefore, we are finalizing the methodology in this final rule with comment period.

In the CY 2016 OPPS/ASC proposed rule (80 FR 39238), we also proposed to exercise our authority in section 1833(t)(3)(C)(iii) of the Act to further adjust the conversion factor to eliminate the effect of coding and classification changes that we believe resulted in a change in aggregate payments that do not reflect real changes in service-mix related to our final policy to package certain clinical diagnostic laboratory tests in the CY 2014 OPPS/ASC final rule with comment period (78 FR 74939 through 74942). Below we discuss our proposed and final adjustment to the conversion factor to redress the inflation in the OPPS payment rates for CY 2016 resulting from excess packaged payment under the OPPS for laboratory tests that we now understand continue to be paid separately outside the OPPS.

The current clinical diagnostic laboratory test packaging policy packages payment for laboratory tests in the OPPS when they are integral, ancillary, supportive, dependent, or adjunctive to a primary service or services provided in the hospital outpatient setting. Under current policy, payment for a laboratory test is not packaged when: (1) A laboratory test is the only service provided to the beneficiary on that date of service; or (2) a laboratory test is conducted on the same date of service as the primary service but is ordered for a different purpose than the primary service by a practitioner different than the practitioner who ordered the primary service. The laboratory tests falling under these two exceptions continue to be paid separately at the CLFS payment rates outside the OPPS.

In addition, we exclude payment for molecular pathology tests described by CPT codes in the ranges of 81200 through 81383, 81400 through 81404, and 81479 from packaging (78 FR 74939). In section II.A.3.b.(3) of the proposed rule, we proposed to expand this exclusion to exclude all molecular pathology tests from our packaging policy, including any new codes that also describe molecular pathology tests. Finally, we continue to pay separately for referred specimens billed on a 14X bill type because these services will always consist only of laboratory services. We also make separate (that is, not packaged) payment for laboratory tests billed on a 12X (inpatient Part B) bill type claim when billed for reasons other than rebilling for a denied Part A claim, such as inpatient Part B coverage following exhausted Part A benefits. We refer readers to section II.A.3.b.(3) of this final rule with comment period for a detailed discussion of our laboratory test packaging policy exceptions and to review our proposals, and final policy, to modify our laboratory test packaging policy in light of current experience with this policy.

In monitoring aggregate payments for CY 2014, we observed that OPPS Start Printed Page 70353spending for hospital outpatient services experienced double digit growth in 2014 compared to typical growth of 6 to 8 percent, due to our CY 2014 final policy to package laboratory services, without a comparable reduction in spending for laboratory services paid at the CLFS payment rates outside the OPPS. As part of our CY 2014 final policy to package certain clinical diagnostic laboratory tests, we both revised the OPPS relative payment weights to reflect packaged laboratory services, and we increased the OPPS relative weight scaler to reflect the estimated total cost of packaged laboratory services. In calculating the appropriate increase to the weight scaler for CY 2014, we estimated that we spent approximately $2.4 billion on laboratory services on 13X type bill claims, and we incorporated this aggregate amount of weight into our estimate of the 2013 relative weight when calculating the budget neutral weight scaler to scale all relative weights for CY 2014, except those with a fixed payment amount such as drugs paid at ASP+6 percent (78 FR 74948 through 74949). An adjustment to the overall weight scaler has a comparable effect on final payment as an adjustment to the conversion factor. We also assumed that separate payment would continue for laboratory services billed on 14X bill type claims for referred specimens and for select inpatient Part B claims billed on a 12X bill type claim. Thus, we stated that we expected to experience an increase in OPPS spending due to our final packaging policy and a commensurate reduction in overall payment for Medicare Part B laboratory tests paid at the CLFS rates outside the OPPS.

However, as we discussed in the CY 2016 OPPS/ASC proposed rule (80 FR 39239), upon reviewing actual claims for CY 2014, we observed an unexpectedly high volume of laboratory tests associated with $1 billion in spending for exceptions to our packaging policy for laboratory tests that continued to receive separate payment at the CLFS payment rates outside the OPPS. We did not observe a significant change in the overall volume of laboratory services being furnished. Specifically, we observed a pronounced shift in volume from billing on the 13X bill type claims to the 14X bill type claims beginning January 1, 2014, consistent with our final rule policy and then shifting back to the 13X bill type claims with an “L1” modifier when our instructions on billing for laboratory tests that are excepted from our laboratory packaging policy were implemented in July 2014. (We refer readers to Transmittal 2971, Change Request 8776, July 2014 Update of the Hospital Outpatient Prospective Payment System (OPPS), which is available on the CMS Web site at: http://www.cms.gov/​Regulations-and-Guidance/​Guidance/​Transmittals/​downloads/​R2971CP.pdf.) Because we did not observe a significant change in the number of laboratory services in our claims data, we concluded that the changes in aggregate payments under the OPPS were a result of changes in pricing alone and did not reflect real changes in service-mix.

Therefore, we overestimated the adjustment necessary to account for the new policy to package laboratory tests and underestimated the amount of spending that would continue for laboratory tests paid at the CLFS rates outside the OPPS by approximately $1 billion. This $1 billion effectively resulted in inflation in the OPPS payment rates resulting from excess packaged payment under the OPPS for laboratory tests for all OPPS services and duplicate payments for certain laboratory tests because we are paying the laboratory tests through packaged payment incorporated into the OPPS payment rates as well as through separate payment at the CLFS payment rates outside the OPPS.

Section 1833(t)(3)(C)(iii) of the Act specifies that if the Secretary determines the adjustments for service-mix for a previous year (or estimates that such adjustments for a future year) did (or are likely to) result in a change in aggregate payments during the year that are a result of changes in the coding or classification of covered OPD services that do not reflect real changes in service-mix, the Secretary may adjust the conversion factor for subsequent years so as to eliminate the effect of such coding or classification changes. Based on this authority, we proposed a reduction of 2.0 percentage points to the proposed CY 2016 conversion factor to redress inappropriate inflation in the OPPS payment rates and prevent CY 2016 payment rates from including $1 billion in excess packaged payment. We also used the “L1” modifier information on the CY 2014 claims data that we use to model the OPPS to identify which laboratory services should be packaged into the associated OPPS services when establishing the proposed CY 2016 relative weights. We proposed this reduction in order to eliminate the effect of the coding and classification changes for payment for laboratory tests that resulted in changes in aggregate payments, but which did not result in real changes in service-mix under the OPPS. If we had been able to accurately forecast the amount of continued spending on separately payable laboratory tests that would continue in CY 2014 at the CLFS rates outside the OPPS, we would have incorporated a reduced amount of estimated spending into our CY 2014 OPPS budget neutrality calculations in CY 2014 rulemaking.

We conducted several analyses to better understand the derivation of the overestimated adjustment made in CY 2014. These efforts included an attempt to determine how much spending at the CLFS payment rates outside the OPPS should have been packaged in CY 2014 with full knowledge of the actual volume for exceptions to our final laboratory tests packaging policy now that CY 2014 claims data are available for review. This assessment required some assumptions about what payment would have been at the CY 2014 CLFS payment amounts using the CLFS national limitation amount (NLA) price or the mode price among jurisdictions where an NLA did not exist for all laboratory services in 12X, 13X, and 14X bill type claims less actual payments for those same services and the $2.4 billion in packaged payments. We adjusted our total estimates for incomplete claims data because the data that we use to model the proposed rule are data from CY 2014 claims processed as of December 31, 2014, estimated at 90 percent based on historical claims data. As a result of this analysis, we estimated that we included a gross estimate of roughly $1.1 billion in excess packaged payment in the CY 2014 OPPS payment rates for laboratory tests that were paid separately, as demonstrated by actual CY 2014 claims data. We also did a more straightforward analysis assessing total payment for our exceptions policy, in which we looked at the change in payment on 14X bill type claims for the first part of CY 2014 along with any payment for laboratory services billed with the “L1” modifier. This analysis resulted in a similar estimate of roughly $1.003 billion. Because both analyses resulted in an approximate $1 billion estimate of spending at the CLFS rates outside the OPPS that was packaged into the OPPS, we stated that we believe that a prospective adjustment to remove $1 billion from the CY 2016 OPPS payment rates would realign total aggregate OPPS payments to reflect the resources associated with OPPS services. When we calculated the $1 billion as a percent of actual total spending for OPPS services in CY 2014 (approximately $50 billion), we determined an estimated 2.0 percent Start Printed Page 70354reduction to total spending to be applied to the conversion factor in CY 2016. Therefore, in the CY 2016 OPPS/ASC proposed rule, we proposed to apply a 2.0 percent adjustment to the proposed CY 2016 conversion factor to redress the inflation in the OPPS payment rates resulting from excess packaged payment under the OPPS for laboratory tests we now understand continue to be paid at the CLFS rates outside the OPPS for CY 2016 and subsequent years.

We also stated in the proposed rule that, for the CY 2017 OPPS rulemaking, we plan to review actual CY 2015 claims data and assess whether our proposed adjustment for CY 2016 accurately adjusted for the inflation in the OPPS payment rates under current policy.

We provided a summary file of our analysis of separate payment at the CLFS rates outside the OPPS for laboratory services that are exceptions to our packaging policy which is available in the “Downloads” section of the CMS Web site accompanying the proposed rule (http://www.cms.gov/​Medicare/​Medicare-Fee-for-Service-Payment/​HospitalOutpatientPPS/​Hospital-Outpatient-Regulations-and-Notices.html). We noted that the “OPPS limited data set” that we make available to accompany each proposed and final rule is not a complete set of institutional Part B claims, containing only the 12X, 13X, and 14X bill types that we use to model the OPPS rates and excluding claims weeded or trimmed as discussed in our claims accounting document (http://www.cms.gov/​Medicare/​Medicare-Fee-for-Service-Payment/​HospitalOutpatientPPS/​Hospital-Outpatient-Regulations-and-Notices.html).

For the proposed rule, we also proposed that 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. For hospitals that fail to meet the requirements of the Hospital OQR Program, we proposed to make all other adjustments discussed above, but use a reduced OPD fee schedule update factor of −0.1 percent (that is, the proposed OPD fee schedule increase factor of 1.9 percent further reduced by 2.0 percentage points). This would result in a proposed reduced conversion factor for CY 2016 of $72.478 for hospitals that fail to meet the Hospital OQR requirements (a difference of −1.451 in the conversion factor relative to hospitals that meet the requirements).

Comment: MedPAC and other commenters commended CMS for recognizing that an adjustment to OPPS payment rates was warranted in light of the effects of the laboratory services packaging policy. MedPAC noted that the proposal to adjust payment rates to prevent continued excess payment is consistent with adjustments CMS has made in IPPS, Medicare Advantage, and the home health prospective payment system in the past.

Response: We appreciate the commenters' support.

Comment: Several commenters suggested that the purpose of the proposed adjustment was to recoup overpayments in CY 2014 and CY 2015, and that recouping overpayments made in prior years was inconsistent with a prospective payment system.

Response: The proposed −2.0 percent adjustment to the conversion factor would not recoup “overpayments” made for CYs 2014 and 2015. When we classified laboratory tests as OPPS packaged services in 2014, we increased the conversion factor to account for that change, which resulted in excess payment being built into the rates. The proposal to apply a −2.0 percent adjustment to the conversion factor is intended to address the effects of the OPPS classification changes on OPPS payments for CY 2016 that do not reflect real changes in service-mix. If we do not adjust the conversion factor, the excess payment built into the rates would carry through to the CY 2016 OPPS rates.

Comment: A few commenters suggested that the proposed adjustment to the conversion factor was unfairly applied across the board to OPPS services. The commenters suggested that the adjustment should only apply to services that have packaged laboratory tests.

Response: The proposed adjustment to reduce the conversion factor would apply to all OPPS services, but we also established relative weights in a manner that would target payment effects on services whose payment rates previously reflected excess packaged payment for laboratory services. In modeling the CY 2016 OPPS, we did not include costs for laboratory tests that were billed separately in CY 2014 for purposes of calculating the relative weights of all services. This means that services with excess payment due to packaged laboratory tests in CYs 2014 and 2015 would have had the additional weight for those laboratory services removed from their weight calculation for CY 2016. With that weight removed, all other services would have a higher relative weight than they otherwise would if the costs for those packaged laboratory services had been included in the model. As a result, the proposed adjustment to the conversion factor in conjunction with the relative weights primarily affects the payment for services that previously included excess packaged payment for laboratory tests. Section 1833(t)(3)(C)(iii) of the Act authorizes the agency to adjust the conversion factor, and adjustments to payment rates such as this are often applied across the board to all services.

Comment: One commenter questioned the legality of CMS using section 1833(t)(3)(C)(iii) of the Act as the authority to make the conversion factor adjustment because the commenter viewed the 2.0 percent reduction as a correction to an error CMS made in CY 2014, not an adjustment for service-mix.

Response: The commenter misunderstands the basis for the proposed adjustment. Section 1833(t)(3)(C)(iii) of the Act provides that, if the Secretary determines that adjustments for service-mix for a previous year resulted in (or are likely to result in) a change in aggregate payments that are a result of changes in the coding or classification of covered OPD services that do not reflect real changes in service-mix, the Secretary may adjust the conversion factor for subsequent years to eliminate the effect of such coding or classification changes. This authority applies to the proposed adjustment.

The increase in aggregate OPPS payments for CY 2014 did not reflect real changes in the service-mix for CY 2014, but, rather, was attributable to classification changes relating to the packaging of laboratory tests in the OPPS.

As we noted in the CY 2016 OPPS proposed rule (80 FR 39239), in our claims data, we did not observe a significant change in the overall volume of laboratory services being furnished in CY 2014. Because we did not observe such a change, and because these services that we packaged continued to be billed and paid separately, we concluded, and confirmed based on several analyses, that the changes in aggregate payments under the OPPS for CY 2014 were the result of classification changes and not real changes in service-mix. In addition, as stated above, the excess built into the rates for CY 2014 and CY 2015 would carry through to the CY 2016 OPPS rates in the absence of an adjustment. Accordingly, we determined that the classification changes relating to packaged laboratory services would likely result in a change in aggregate payments for CY 2016 that does not reflect real changes in service-mix. In accordance with section Start Printed Page 703551833(t)(3)(C)(iii) of the Act, our proposal to adjust the conversion factor was intended to eliminate the effect of the classification changes for CY 2016.

The Secretary's adjustment is consistent with the statute, is reasonable, and is not arbitrary or capricious. We note that section 1833(t)(12) of the Act precludes administrative and judicial review of the Secretary's calculations under section 1833(t)(3) of the Act, including adjustments under section 1833(t)(3)(C)(iii) of the Act.

Comment: Some commenters suggested that CMS implement a transition period for the conversion factor adjustment so that the adjustment is phased in over several years.

Response: We recognize that the adjustment to the conversion factor is significant for CY 2016, but we do not believe a transition period for the adjustment to the conversion factor is appropriate in this situation because it would allow the excess packaged payments built into the rates for CY 2014 and CY 2015 to continue into CY 2016. We believe it is appropriate to adjust for this excess packaged payment as soon as possible.

Comment: Several commenters suggested that CMS present its analysis of the need for this adjustment to the Advisory Panel on Hospital Outpatient Payment (HOP) in the spring of 2016 before implementing this adjustment to allow the HOP Panel to opine on whether this adjustment is warranted.

Response: As we indicated earlier, we believe it is appropriate to make this adjustment for the CY 2016 payment rates because otherwise the excess packaged payments built into the rates for CY 2014 and CY 2015 would continue into CY 2016. If we waited to present this issue to the HOP Panel, we would not be able to implement this adjustment until the CY 2017 payment year.

Comment: One commenter suggested that the increase in “unrelated” laboratory services paid under the CLFS in CY 2014 might be a continuation of the broader trend of inpatient services transitioning to outpatient services and might not be related to the laboratory packaging policy implemented in CY 2014.

Response: Our actuaries' analyses included in conjunction with the proposed rule (80 FR 39239 and the “Summary Analysis Supporting Adjustment for Excess Laboratory Packaging” on the OPPS Web site at: https://www.cms.gov/​Medicare/​Medicare-Fee-for-Service-Payment/​HospitalOutpatientPPS/​Hospital-Outpatient-Regulations-and-Notices-Items/​CMS-1633-P.html) indicate that the total amount of laboratory services performed in the outpatient setting did not increase and that the number of laboratory services performed in the outpatient setting that were deemed “unrelated” to OPPS services in CY 2014 were greater than we had estimated they would be with the implementation of the laboratory services packaging policy. As a result, we believe that the higher than expected number of “unrelated” laboratory services is reflective of the classification changes related to the laboratory packaging policy and not due to services moving from the inpatient setting to the outpatient setting.

Comment: Several commenters suggested that CMS not implement this adjustment because CMS had not specified in the CY 2014 OPPS final rule that $2.4 billion was being included in the CY 2014 OPPS payment rates to account for newly packaged laboratory services. The commentators indicated that CMS did not specify in the CY 2014 OPPS final rule or in the CY 2016 OPPS proposed rule whether CMS was excluding from the $2.4 billion estimate “unrelated” laboratory services that under CMS' CY 2014 policy would be separately paid.

Response: The proposed adjustment to the conversion factor would affect OPPS payments for CY 2016, not CY 2014. In the CY 2014 OPPS/ASC final rule with comment period, we discussed the incorporation of the payment weights for outpatient laboratory tests previously paid at the CLFS payment rates (78 FR 74948 through 74949). The calculation of the OPPS relative weights and payment rates for CY 2014 reflects estimates attributable to packaged laboratory services. While we did not specify the estimated dollar amount ($2.4 billion) attributable to packaged laboratory services in the CY 2014 final rule with comment period, we did specify in the CY 2016 OPPS/ASC proposed rule that an estimated $2.4 billion was effectively added to the OPPS payment system to account for packaged laboratory services in the CY 2014 OPPS/ASC final rule with comment period. Insofar as hospitals may have received significant windfalls for CY 2014 and CY 2015, presumably commenters do not intend to challenge the payments for those years (at least with respect to the incorporation of packaged laboratory services). With respect to the OPPS ratesetting process for CY 2016, we referenced the $2.4 billion estimate in the CY 2016 OPPS/ASC proposed rule (as explained above) and thus commenters had notice of the estimate for purposes of commenting on the proposed adjustment in the CY 2016 OPPS/ASC proposed rule.

Comment: Several commenters suggested that CMS not implement this adjustment because the “Summary Analysis Supporting Adjustment for Excess Laboratory Packaging,” released with the CY 2016 OPPS/ASC proposed rule, included data that were not publicly available. The commenters indicated that this summary analysis included CY 2014 data processed through May 31, 2015, while the OPPS limited data set released with the proposed rule included data processed through December 31, 2014. In addition, the commenters noted that the summary analysis displayed monthly data that are not available in the OPPS limited data set. The commenters also noted that CMS did not detail every assumption made in calculating the proposed adjustment, and that without these details it would be difficult for commenters to replicate our actuaries' analysis.

Response: The “Summary Analysis Supporting Adjustment for Excess Laboratory Packaging” was provided in conjunction with the proposed rule to give stakeholders/commenters additional information about our methodology for determining the amount of the proposed adjustment, even though the data used for purposes of the summary analysis were not the same exact data used for purposes of the proposed rule. For the supplemental summary analysis, we used the most recent data available to us, CY 2014 claims processed through May 31, 2015, which we estimated to be approximately 98 percent complete. The limited data set (LDS) used for the proposed rule was approximately 90 percent complete. While having 90 percent of claims, as opposed to 98 percent, may have made it difficult for stakeholders to exactly replicate our results, we note that the 90 percent LDS yielded very similar results to the 98 percent dataset, and we believe it would have been sufficient to enable stakeholders to meaningfully comment on the proposed adjustment. Likewise, we provided the table in the supplemental analysis with the data presented by month because we believed it would help stakeholders better understand the proposed adjustment, even if these data are not replicable using the LDS. Specifically, we believed that the monthly breakdown of unrelated laboratory test billing would show that unrelated laboratory test billing was fairly consistent across CY 2014 and that the mid-year change in billing methodology Start Printed Page 70356did not affect billing of unrelated laboratory tests in CY 2014.

We performed multiple analyses to better understand the effect of the classification changes relating to packaged laboratory services on aggregate payments, in order to determine the amount of the proposed adjustment described in the proposed rule (80 FR 39239 through 39240). As mentioned earlier in this section and explained in the proposed rule, in one analysis, we analyzed actual claims data for CY 2014 (using data available for the CY 2016 proposed rule) to determine an estimate of the total dollar amount that “should have been” packaged into the OPPS for laboratory services in CY 2014 if we had had perfect information about billing patterns of unrelated services when making our original proposal for CY 2014. We first estimated how much we would have paid if all laboratory services were paid at CLFS NLA rates and had not been packaged under the OPPS. To do this, we began with the CY 2014 claims data which we used for the CY 2016 proposed rule. We identified the number of billed laboratory services for each laboratory test and associated the CY 2014 CLFS NLA payment rate with that utilization to determine a total payment amount in CY 2014 for laboratory services at NLA payment rates. We would expect final CLFS payment to be less than total payment at NLA amounts because the CLFS pays the “lesser of” the fee schedule amount, the NLA, or changes (section 1833(a)(1)(D) of the Act). The NLA establishes a ceiling on possible payment. We estimated an overall adjustment factor of 0.88 from the difference in total estimated NLA payment in CY 2012 rates and total final actual CLFS payment on the claims. We used that factor to adjust estimated total payment amounts for laboratory services at NLA payment rates in CY 2014 claims to better reflect what actual payment would have been in CY 2014 under CLFS payment methodologies. In addition, we adjusted the payment amounts to account for the difference between CY 2014 claims data and CY 2012 claims data and to account for the fact that the CY 2014 claims data was only 90 percent complete for the CY 2016 proposed rule. Using our standard methodology, we adjusted these data to account for what they would have shown had they been complete at the time of our analysis. We then examined actual CY 2014 claims data to estimate how much was paid separately for laboratory services in CY 2014. The difference between these estimates reflects a reasonable approximation of the payment that would have been packaged into OPPS for laboratory services in CY 2014 if we had had perfect information about billing patterns of unrelated services when making our original proposal for CY 2014. This analysis indicates that we included a gross estimate of roughly $1 billion in packaged payment in the CY 2014 OPPS payment rates for laboratory tests that ultimately were paid separately in CY 2014 (that is, excess packaged payment for laboratory services).

We also performed an analysis to assess the total payment for laboratory services that were billed on an OPPS claim, but were paid separately in CY 2014 because they were unrelated to the OPPS services. Specifically, using CY 2014 data processed through May 31, 2015, we observed that laboratory services billed on the 14X claim increased immediately beginning in January 2014 (as displayed in the “Summary Analysis Supporting Adjustment for Excess Laboratory Packaging” posted with the CY 2016 OPPS/ASC proposed rule) corresponding with use of the 14X bill type to report “unrelated” laboratory services. Beginning in July 2014, corresponding with the change in billing policy to bill “unrelated” laboratory services on a 13X bill type with the “L1” modifier, we observed most of the increase in 14X billing shifting to the 13X bill type with the “L1” modifier (again, as displayed in the “Summary Analysis Supporting Adjustment for Excess Laboratory Packaging” posted with the CY 2016 OPPS/ASC proposed rule). Summing the total increase in 14X billing in CY 2014 (compared to CY 2013) and the total amount billed on 13X claims with an “L1” modifier in CY 2014 resulted in a similar estimate of approximately $1 billion in “unrelated” laboratory services. Because both analyses resulted in an approximate $1 billion estimate of spending at the CLFS rates outside the OPPS that was packaged into the OPPS, we stated that we believe that a prospective adjustment to remove this $1 billion from the OPPS would realign total aggregate OPPS payments to reflect the resources associated with OPPS services. We calculated the $1 billion as a percent of $50 billion (the approximate actual total spending for OPPS services in CY 2014), which is 2.0 percent. Therefore, based on our analysis of the effects of the classification changes for CY 2014, we proposed a 2.0 percent downward adjustment to the conversion factor for CY 2016. In addition to the proposed rule itself, we provided a significant amount of additional information in the “Summary Analysis Supporting Adjustment for Excess Laboratory Packaging,” including a description of our actuaries' details and methods for its analysis, the adjustment input quantities, and outpatient monthly unrelated laboratory test billing. We believe the detail included in the proposed rule and in conjunction with the proposed rule was sufficient for stakeholders to be able to understand CMS' methodology for determining the amount of the proposed adjustment.

Comment: Several commenters suggested that CMS not implement this adjustment because the CY 2014 data year was an inappropriate base year for analysis of the laboratory packing proposal because of the changing methodology for reporting “unrelated” laboratory services during CY 2014. Many of these commenters suggested that CMS should wait until CY 2015 data are available before making an adjustment.

Response: As noted in the proposed rule (80 FR 39239) and illustrated in the “Outpatient Unrelated Lab Billing Shift Quantities” chart in the “Summary Analysis Supporting Adjustment for Excess Laboratory Packaging” files released in conjunction with the CY 2016 OPPS proposed rule, monthly total “unrelated” laboratory test billing was very consistent throughout CY 2014, with most “unrelated” laboratory test billing shifting from the 14X claim to the 13X claim with the “L1” modifier in July 2014. Because monthly total “unrelated” billing was consistent over the CY 2014 payment year, we do not believe that the mid-year change in how providers were to bill for “unrelated” laboratory services led to an increase in billing for such services in CY 2014. We believe that the consistency in the CY 2014 “unrelated” billing patterns across different billing instructions shows that the change in billing requirements for reporting unrelated laboratory services in CY 2014 did not cause a higher than expected amount of unrelated laboratory service payments in CY 2014. We continue to believe that the CY 2014 data regarding “unrelated” billing are appropriate for purposes of determining whether an adjustment to the conversion factor is warranted for CY 2016 and the amount of any adjustment. We will monitor “unrelated” laboratory test billing patterns in the CY 2015 OPPS claims data as we establish ratesetting for the CY 2017 OPPS payments to confirm this conclusion.

Comment: Several commenters suggested that CMS not implement this adjustment because CMS did not specify Start Printed Page 70357whether the proposed changes to laboratory test packaging policy in the CY 2016 OPPS/ASC proposed rule were factored into the −2.0 percent adjustment to the conversion factor to address excess packaged payment for laboratory services.

Response: The proposed adjustment to the conversion factor for CY 2016 is based on the effects of the OPPS classification changes implemented for CY 2014; the proposed adjustment is not based on the proposed classification changes for CY 2016. We did not propose an adjustment to the conversion factor based on classification changes for CY 2016, but we will monitor the effects of those changes. At this time, we do not believe that a separate adjustment to the conversion factor based on CY 2016 classification changes is warranted. Our analysis indicates that the estimated effect of the CY 2016 classification changes on shifts between aggregate payments for laboratory tests paid separately using CLFS payment rates and those packaged under the OPPS is small and that, if we did make an adjustment to account for those changes, it would be a further reduction to OPPS payments. We will examine CY 2015 claims data when we set CY 2017 OPPS payment rates.

After consideration of the public comments we received, we are finalizing our proposal to adjust the CY 2016 conversion factor by -2.0 percent to eliminate the effects of classification changes on aggregate payments that do not reflect real changes in service-mix.

In summary, for CY 2016, we are finalizing our proposal to amend § 419.32(b)(1)(iv)(B) by adding a new paragraph (7) to reflect the reductions to the OPD fee schedule increase factor that are required for CY 2016 to satisfy the statutory requirements of sections 1833(t)(3)(F) and (t)(3)(G)(iv) of the Act. We are using a reduced conversion factor of $72.251 in the calculation of payments for hospitals that fail to meet the Hospital OQR Program requirements (a difference of −$1.474 in the conversion factor relative to hospitals that meet the requirements).

For CY 2016, we are continuing 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 final rule with comment period.

As a result of these finalized policies, the OPD fee schedule increase factor for the CY 2016 OPPS is 1.7 percent (which is 2.4 percent, the estimate of the hospital inpatient market basket percentage increase, less the 0.5 percentage point MFP adjustment, and less the 0.2 percentage point additional adjustment). For CY 2016, we are using a conversion factor of $73.725 in the calculation of the national unadjusted payment rates for those items and services for which payment rates are calculated using geometric mean costs. That is, the OPD fee schedule increase factor of 1.7 percent for CY 2016, the required wage index budget neutrality adjustment of 0.9992, the cancer hospital payment adjustment of 0.9994, the −2.0 percent adjustment to the conversion factor to eliminate the effects of classification changes that would otherwise result in an increase in aggregate OPPS payments (due to excess packaged payment under the OPPS for laboratory tests), and the adjustment of −0.13 percentage point of projected OPPS spending for the difference in the pass-through spending result in a conversion factor for CY 2016 of $73.725.

C. Wage Index Changes

Section 1833(t)(2)(D) of the Act requires the Secretary to determine a wage adjustment factor to adjust the portion of payment and coinsurance attributable to labor-related costs for relative differences in labor and labor-related costs across geographic regions in a budget neutral manner (codified at 42 CFR 419.43(a)). This portion of the OPPS payment rate is called the OPPS labor-related share. Budget neutrality is discussed in section II.B. of this final rule with comment period.

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, in the CY 2016 OPPS/ASC proposed rule, we proposed to continue this policy for the CY 2016 OPPS. We refer readers to section II.H. of this final rule with comment period for a description and an example of how the wage index for a particular hospital is used to determine payment for the hospital.

As discussed in section II.A.2.c. of this final rule with comment period, for estimating APC costs, we standardize 60 percent of estimated claims costs for geographic area wage variation using the same FY 2016 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 copayment amount.

Under 42 CFR 419.41(c)(1) and 419.43(c) (published in the original OPPS April 7, 2000 final rule with comment period (65 FR 18495 and 18545)), the OPPS adopted the final fiscal year IPPS post-reclassified wage index as the calendar year wage index for adjusting the OPPS standard payment amounts for labor market differences. Therefore, 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 believe that using the IPPS wage index as the source of an adjustment factor for the OPPS is reasonable and logical, given the inseparable, subordinate status of the HOPD within the hospital overall. In accordance with section 1886(d)(3)(E) of the Act, the IPPS wage index is updated annually.

The Affordable Care Act contained several provisions affecting the wage index. These provisions were discussed in the CY 2012 OPPS/ASC final rule with comment period (76 FR 74191). Section 10324 of the Affordable Care Act added section 1886(d)(3)(E)(iii)(II) to the Act, which defines a frontier State and amended section 1833(t) of the Act to add new paragraph (19), which requires a frontier State wage index floor of 1.00 in certain cases, and states that the frontier State floor shall not be applied in a budget neutral manner. We codified these requirements in § 419.43(c)(2) and (c)(3) of our regulations. For the CY 2016 OPPS, we proposed to implement this provision in the same manner as we have since CY 2011. Under this policy, the frontier State hospitals would receive a wage index of 1.00 if the otherwise applicable wage index (including reclassification, rural and imputed floor, and rural floor budget neutrality) is less than 1.00. Because the HOPD receives a wage index based on the geographic location of the specific inpatient hospital with which it is associated, the frontier State wage index adjustment applicable for the inpatient hospital also would apply for any associated HOPD. We refer readers to the following sections in the FY 2011 through FY 2016 IPPS/LTCH PPS final rules for discussions 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: for FY 2011, 75 FR 50160 through 50161; for Start Printed Page 70358FY 2012, 76 FR 51793, 51795, and 51825; for FY 2013, 77 FR 53369 through 53370; for FY 2014, 78 FR 50590 through 50591; for FY 2015, 79 FR 49971; and for FY 2016, 80 FR 49498.

In addition to the changes required by the Affordable Care Act, we note that the FY 2016 IPPS wage indexes 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 and imputed 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 2016 IPPS/LTCH PPS final rule (80 FR 49488 through 49508) for a detailed discussion of all changes to the FY 2016 IPPS wage indexes. 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.

As discussed in the FY 2015 IPPS/LTCH PPS final rule (79 FR 49951 through 49963) and the FY 2016 IPPS/LTCH PPS final rule (80 FR 49488 through 49513), the Office of Management and Budget (OMB) issued revisions to the labor market area delineations on February 28, 2013 (based on 2010 Decennial Census data), that included a number of significant changes such as new Core Based Statistical Areas (CBSAs), urban counties that became rural, rural counties that became urban, and existing CBSAs that were split apart (OMB Bulletin 13-01). This bulletin can be found at: http://www.whitehouse.gov/​sites/​default/​files/​omb/​bulletins/​2013/​b13-01.pdf. In the FY 2015 IPPS/LTCH PPS final rule (79 FR 49950 through 49985), we adopted the use of the OMB labor market area delineations that were based on the 2010 Decennial Census data.

In the CY 2016 OPPS/ASC proposed rule, we proposed to use the FY 2016 hospital IPPS post-reclassified wage index for urban and rural areas as the wage index for the OPPS to determine the wage adjustments for both the OPPS payment rate and the copayment standardized amount for CY 2016. Thus, any adjustments that were proposed for the FY 2016 IPPS post-reclassified wage index would be reflected in the proposed CY 2016 OPPS wage index. (We referred readers to the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24463 through 24477) and the proposed FY 2016 hospital wage index files posted on the CMS Web site.)

Hospitals that are paid under the OPPS, but not under the IPPS, do not have an assigned hospital wage index under the IPPS. Therefore, for non-IPPS hospitals paid under the OPPS, it is our longstanding policy to assign the wage index that would be applicable if the hospital were paid under the IPPS, based on its geographic location and any applicable wage index adjustments. We proposed to continue this policy for CY 2016. The following is a brief summary of the major FY 2016 IPPS wage index policies and adjustments that we proposed to apply to these hospitals under the OPPS for CY 2016. We further refer readers to the FY 2016 IPPS/LTCH PPS final rule (80 FR 49488 through 49508) for a detailed discussion of the final changes to the FY 2016 IPPS wage indexes.

It has been our longstanding policy to allow non-IPPS hospitals paid under the OPPS to qualify for the out-migration adjustment if they are located in a section 505 out-migration county (section 505 of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA)). Applying this adjustment is consistent with our policy of adopting IPPS wage index policies for hospitals paid under the OPPS. We note that, because non-IPPS hospitals cannot reclassify, they would be eligible for the out-migration wage adjustment if they are located in a section 505 out-migration county. This is the same out-migration adjustment policy that would apply if the hospital were paid under the IPPS. For CY 2016, we proposed to continue our policy 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 MMA).

As stated earlier, in the FY 2015 IPPS/LTCH PPS final rule, we adopted the OMB labor market area delineations issued by OMB in OMB Bulletin No. 13-01 on February 28, 2013, based on standards published on June 28, 2010 (75 FR 37246 through 37252) and the 2010 Census data to delineate labor market areas for purposes of the IPPS wage index. For IPPS wage index purposes, for hospitals that were located in urban CBSAs in FY 2014 but were designated as rural under these revised OMB labor market area delineations, we generally assigned them the urban wage index value of the CBSA in which they were physically located for FY 2014 for a period of 3 fiscal years (79 FR 49957 through 49960). To be consistent, we applied the same policy to hospitals paid under the OPPS but not under the IPPS so that such hospitals will maintain the wage index of the CBSA in which they were physically located for FY 2014 for 3 calendar years (until December 31, 2017). Thus, for the CY 2016 OPPS, consistent with the FY 2016 IPPS/LTCH PPS final rule (80 FR 49494 through 49496), this 3-year transition will continue for the second year in CY 2016. For CY 2015, we also finalized a 1-year blended wage index for all hospitals that experienced any decrease in their actual payment wage index exclusively due to the implementation of the new OMB delineations. In the CY 2015 OPPS/ASC final rule with comment period, for purposes of the OPPS, we finalized a policy to apply this 1-year, 50-percent transition blend to hospitals paid under the OPPS but not under the IPPS. Therefore, this one-year transition blend does not apply for the CY 2016 OPPS wage index because it expires at the end of CY 2015.

In addition, for the FY 2016 IPPS, we extended the imputed floor policy (both the original methodology and alternative methodology) for another year, through September 30, 2016 (80 FR 49497 through 49498). For purposes of the CY 2016 OPPS, we also proposed to apply the imputed floor policy to hospitals paid under the OPPS but not under the IPPS so long as the IPPS continues an imputed floor policy.

For CMHCs, for CY 2016, we proposed to continue to calculate the wage index by using the post-reclassification IPPS wage index based on the CBSA where the CMHC is located. As with OPPS hospitals and for the same reasons, in CY 2015, we applied a 1-year, 50/50 blended wage index to CMHCs that would receive a lower wage index due to the new OMB labor market area delineations. However, this blended wage index does not apply in CY 2016 because it expires at the end of CY 2015. In addition, as with OPPS hospitals and for the same reasons, for CMHCs previously located in urban CBSAs that were designated as rural under the new OMB labor market area delineations, we finalized a policy to maintain the urban wage index value of the CBSA in which they were physically located for CY 2014 for 3 calendar years (until December 31, 2017). Consistent with our current policy, the wage index that applies to CMHCs includes both the imputed floor adjustment and the rural floor adjustment, but does not include the out-migration adjustment because that adjustment only applies to hospitals.

Comment: One commenter noted that the IPPS wage index does not account for the difficulty of recruiting health professionals to rural areas. The Start Printed Page 70359commenter suggested that a higher wage index for rural areas would help these hospitals recruit professionals from other areas to underserved rural areas.

Response: Section 1833(t)(2)(D) of the Act requires the Secretary to determine a wage adjustment factor to adjust the portion of payment and coinsurance attributable to labor-related costs for relative differences in labor and labor-related costs across geographic regions in a budget neutral manner. We continue to believe that using the IPPS wage index as the source of the OPPS wage index is reasonable and logical, given the inseparable, subordinate status of the HOPD within the hospital. As we discussed in the FY 2015 IPPS/LTCH PPS final rule (79 FR 49951), we believe that the IPPS wage index reflects the reality of population shifts and labor market conditions, and provides an accurate representation of geographic variation in wage levels.

After consideration of the public comment we received, we are finalizing our proposal, without modification, to continue to use an OPPS labor-related share of 60 percent of the national OPPS payment for the CY 2016 OPPS. We also are finalizing the use of the final FY 2016 IPPS post-reclassified wage index for urban and rural areas in its entirety, including the frontier State wage index floor, the rural floor, geographic reclassifications, and all other applicable wage index adjustments, as the final CY 2016 wage index for OPPS hospitals and CMHCs based on where the facility is located for both the OPPS payment rate and the copayment standardized amount, as discussed above and as set forth in the CY 2016 OPPS/ASC proposed rule (80 FR 39240 through 39242). We refer readers to the FY 2016 IPPS/LTCH PPS final rule (80 FR 49488 through 49508) and the final FY 2016 hospital wage index files posted on the CMS Web site. For non-IPPS hospitals under the OPPS, we are finalizing our proposal to continue to assign the wage index that would be applicable if the hospital were paid under the IPPS, based on its geographic location and any applicable wage index adjustments. We also are finalizing our proposal to apply the imputed floor policy to hospitals paid under the OPPS but not under the IPPS so long as the IPPS continues an imputed floor policy, which CMS has extended for an additional year under the IPPS in the FY 2016 IPPS/LTCH PPS final rule. In addition, we are finalizing our proposal to continue our policy 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 MMA). The new Table 2 from the FY 2016 IPPS/LTCH PPS final rule (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 IPPS hospitals that will receive the adjustment for FY 2016. (We note that the new FY 2016 IPPS Table 2 consolidates information on counties eligible for the out-migration adjustment that was previously issued as Table 4J.) We are including the out-migration adjustment information from the new consolidated Table 2 from the FY 2016 IPPS/LTCH PPS final rule as Addendum L to this final rule with comment period with the addition of non-IPPS hospitals that will receive the section 505 out-migration adjustment under the CY 2016 OPPS. Addendum L is available via the Internet on the CMS Web site. With the exception of the out-migration wage adjustment table (Addendum L to this final rule with comment period, 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 final FY 2016 IPPS wage indexes 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 final FY 2016 IPPS wage index tables and Addendum L.

D. 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. MACs 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 MAC 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, hospitals that have not accepted assignment of an existing hospital's provider agreement, and hospitals that 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 final rule with comment period, as we proposed, we are updating the default ratios for CY 2016 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.

In the CY 2016 OPPS/ASC proposed rule (80 FR 39242), for CY 2016, we proposed 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 2016 OPPS relative payment weights. Table 11 published in the proposed rule (80 FR 39243) listed the proposed CY 2016 default urban and rural CCRs by State and compared them to the CY 2015 default CCRs. These proposed CCRs represented 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 proposed 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 proposed to weight each hospital's CCR by the volume of separately paid line-items on hospital claims corresponding to the year of the majority of cost reports used to calculate the overall CCRs. We refer readers to the CY 2008 OPPS/ASC final rule with comment period (72 FR 66680 through 66682) and prior OPPS rules for a more detailed discussion of our established methodology for calculating the statewide average default CCRs, including the hospitals used in our calculations and our trimming criteria.

For 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 Start Printed Page 70360hospital'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 2015 and CY 2016 are modest and the few significant changes are associated with areas that have a small number of hospitals.

We did not receive any public comments on our CY 2016 proposal. Therefore, we are finalizing our proposal, without modification, to apply our standard methodology of calculating the statewide average default CCRs using the same hospital overall CCRs that we used to adjust charges to costs on claims data for setting the final CY 2016 OPPS relative payment weights.

Table 14 below lists the statewide average default CCRs for OPPS services furnished on or after January 1, 2016.

TABLE 14—CY 2016 Statewide Average CCRs

StateUrban/ruralCY 2016 default CCRPrevious default CCR (CY 2015 OPPS final rule)
ALASKARURAL0.5880.439
ALASKAURBAN0.2690.294
ALABAMARURAL0.2240.235
ALABAMAURBAN0.1680.186
ARKANSASRURAL0.2230.262
ARKANSASURBAN0.2180.239
ARIZONARURAL0.2460.228
ARIZONAURBAN0.1700.181
CALIFORNIARURAL0.1790.178
CALIFORNIAURBAN0.1900.196
COLORADORURAL0.3660.410
COLORADOURBAN0.2080.219
CONNECTICUTRURAL0.3660.339
CONNECTICUTURBAN0.2570.273
DISTRICT OF COLUMBIAURBAN0.2980.299
DELAWAREURBAN0.3080.314
FLORIDARURAL0.1700.180
FLORIDAURBAN0.1500.156
GEORGIARURAL0.2510.256
GEORGIAURBAN0.1990.211
HAWAIIRURAL0.3390.337
HAWAIIURBAN0.3130.307
IOWARURAL0.3050.321
IOWAURBAN0.2560.269
IDAHORURAL0.3370.353
IDAHOURBAN0.4590.463
ILLINOISRURAL0.2340.252
ILLINOISURBAN0.2080.217
INDIANARURAL0.3140.334
INDIANAURBAN0.2370.262
KANSASRURAL0.2870.300
KANSASURBAN0.2090.231
KENTUCKYRURAL0.2020.231
KENTUCKYURBAN0.2030.212
LOUISIANARURAL0.2560.272
LOUISIANAURBAN0.2020.209
MASSACHUSETTSRURAL0.3240.326
MASSACHUSETTSURBAN0.3300.333
MAINERURAL0.4700.430
MAINEURBAN0.3950.432
MARYLANDRURAL0.2770.296
MARYLANDURBAN0.2340.244
MICHIGANRURAL0.3170.371
MICHIGANURBAN0.3190.320
MINNESOTARURAL0.4490.485
MINNESOTAURBAN0.3770.347
MISSOURIRURAL0.2380.267
MISSOURIURBAN0.2530.274
MISSISSIPPIRURAL0.2350.247
MISSISSIPPIURBAN0.1690.181
MONTANARURAL0.4800.501
MONTANAURBAN0.4030.386
NORTH CAROLINARURAL0.2290.280
NORTH CAROLINAURBAN0.2350.246
NORTH DAKOTARURAL0.4430.660
NORTH DAKOTAURBAN0.3550.395
NEBRASKARURAL0.2830.290
NEBRASKAURBAN0.2380.255
NEW HAMPSHIRERURAL0.3060.362
NEW HAMPSHIREURBAN0.3060.280
Start Printed Page 70361
NEW JERSEYURBAN0.1940.202
NEW MEXICORURAL0.2800.296
NEW MEXICOURBAN0.2900.294
NEVADARURAL0.2190.241
NEVADAURBAN0.1460.149
NEW YORKRURAL0.3110.333
NEW YORKURBAN0.2980.340
OHIORURAL0.2950.317
OHIOURBAN0.2120.222
OKLAHOMARURAL0.2550.282
OKLAHOMAURBAN0.1920.203
OREGONRURAL0.2650.287
OREGONURBAN0.3410.352
PENNSYLVANIARURAL0.2770.283
PENNSYLVANIAURBAN0.1950.197
PUERTO RICOURBAN0.5900.577
RHODE ISLANDURBAN0.2900.297
SOUTH CAROLINARURAL0.1880.191
SOUTH CAROLINAURBAN0.1970.207
SOUTH DAKOTARURAL0.3670.286
SOUTH DAKOTAURBAN0.2240.214
TENNESSEERURAL0.1980.203
TENNESSEEURBAN0.1770.188
TEXASRURAL0.2380.251
TEXASURBAN0.1790.203
UTAHRURAL0.4930.481
UTAHURBAN0.3250.335
VIRGINIARURAL0.1950.219
VIRGINIAURBAN0.2330.241
VERMONTRURAL0.4340.439
VERMONTURBAN0.3360.353
WASHINGTONRURAL0.3490.300
WASHINGTONURBAN0.3080.330
WISCONSINRURAL0.3170.328
WISCONSINURBAN0.2960.294
WEST VIRGINIARURAL0.2760.312
WEST VIRGINIAURBAN0.2940.300
WYOMINGRURAL0.4330.429
WYOMINGURBAN0.3110.262

E. 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 the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) (Pub. L. 108-173). Section 1833(t)(13) of the Act provided 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 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) of the regulations to clarify that EACHs also are eligible to receive the rural SCH adjustment, assuming these entities otherwise meet the rural adjustment criteria. Currently, two hospitals are classified as EACHs, and as of CY 1998, under section 4201(c) of Pub. L. 105-33, a hospital can no longer become newly classified as an EACH.

This adjustment for rural SCHs is budget neutral and applied before calculating outlier payments and copayments. We stated in the CY 2006 OPPS final rule with comment period (70 FR 68560) that 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 2015. 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 2016 OPPS, we proposed to continue our policy of a 7.1 percent payment adjustment that is done in a budget neutral manner for rural SCHs, including EACHs, for all services and procedures paid under the OPPS, Start Printed Page 70362excluding separately payable drugs and biologicals, devices paid under the pass-through payment policy, and items paid at charges reduced to costs (80 FR 39244).

Comment: Several commenters supported the proposed policy of a 7.1 percent payment adjustment.

Response: We appreciate the commenters' support.

Comment: A few commenters suggested that CMS perform a new analysis to determine if a different rural adjustment amount is warranted. The commenters noted that they performed their own analysis which suggested that a higher adjustment was warranted for SCHs and that an adjustment was warranted for small rural hospitals that were not SCHs. One commenter suggested that CMS revisit its original analysis because an adjustment for rural SCHs may no longer be warranted.

Response: We plan to review whether a revised analysis is warranted for future rulemaking.

After consideration of the public comments we received, we are finalizing our proposal for CY 2016 to continue our policy of a 7.1 percent payment adjustment that is done in a budget neutral manner 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.

F. OPPS Payment 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) (Pub. L. 105-33), Medicare has paid the 11 hospitals that meet the criteria for cancer hospitals identified in section 1886(d)(1)(B)(v) of the Act under the OPPS for covered outpatient hospital services. These cancer hospitals are exempted from payment under the IPPS. With the Medicare, Medicaid and SCHIP Balanced Budget Refinement Act of 1999 (Pub. L. 106-113), Congress established section 1833(t)(7) of the Act, “Transitional Adjustment to Limit Decline in Payment,” to determine OPPS payments to cancer and children's hospitals based on their pre-BBA payment amount (often referred to as “held harmless”).

As required under section 1833(t)(7)(D)(ii) of the Act, a cancer hospital receives the full amount of the difference between payments for covered outpatient services under the OPPS and a “pre-BBA amount.” That is, cancer hospitals are permanently held harmless to their “pre-BBA amount,” and they receive transitional outpatient payments (TOPs) or hold harmless payments to ensure that they do not receive a payment that is lower in amount under the OPPS than the payment amount they would have received before implementation of the OPPS, as set forth in section 1833(t)(7)(F) of the Act. The “pre-BBA amount” is the product of the hospital's reasonable costs for covered outpatient services occurring in the current year and the base payment-to-cost ratio (PCR) for the hospital defined in section 1833(t)(7)(F)(ii) of the Act. The “pre-BBA amount” and 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 Cost Report or the Hospital Health Care Complex Cost Report (Form CMS-2552-96 or Form CMS-2552-10, respectively) 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 outpatient costs incurred by other hospitals furnishing services under section 1833(t) of the Act, as determined appropriate by the Secretary. Section 1833(t)(18)(A) of the Act requires the Secretary to take into consideration the cost of drugs and biologicals incurred by cancer hospitals and other hospitals. Section 1833(t)(18)(B) of the Act provides that, if the Secretary determines that cancer hospitals' costs are greater than other hospitals' costs, the Secretary shall provide an appropriate adjustment under section 1833(t)(2)(E) of the Act to reflect these higher costs. In 2011, after conducting the study required by section 1833(t)(18)(A) of the Act, we determined 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 these findings, we finalized a policy to provide a payment adjustment to the 11 specified cancer hospitals that reflects their 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 the 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 CYs 2012 and 2013, the target PCR for purposes of the cancer hospital payment adjustment was 0.91. For CY 2014, the target PCR for purposes of the cancer hospital payment adjustment was 0.89. For CY 2015, the target PCR was 0.90, as discussed in the CY 2015 OPPS/ASC final rule with comment period correction notice (80 FR 9629).

2. Payment Adjustment for Certain Cancer Hospitals for CY 2016

For CY 2016, we proposed to continue our policy to provide additional payments to the 11 specified 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 were available at the time of the development of the CY 2016 OPPS/ASC proposed rule (80 FR 39245). To calculate the proposed CY 2016 target PCR, we used the same extract of cost report data from HCRIS, as discussed in section II.A. of the proposed rule, used to estimate costs for the CY 2016 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 2014 claims data that we used to model the impact of the proposed CY 2016 APC relative payment weights (3,794 hospitals) because it is appropriate to use the same set of hospitals that we are using to calibrate the modeled CY 2016 OPPS. The cost report data for the hospitals in this dataset were from cost report periods with fiscal year ends ranging Start Printed Page 70363from 2013 to 2014. We then removed the cost report data of the 47 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 the cost report data of 18 hospitals because these hospitals had 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 3,729 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 90 percent of reasonable cost (weighted average PCR of 0.90). Therefore, we proposed 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 PCR equal to 0.90 for each cancer hospital. Table 12 published in the proposed rule indicated the proposed estimated percentage increase in OPPS payments to each cancer hospital for CY 2016 due to the cancer hospital payment adjustment policy.

We indicated that the actual amount of the CY 2016 cancer hospital payment adjustment for each cancer hospital will be determined at cost report settlement and will depend on each hospital's CY 2016 payments and costs. We noted that the requirements contained in section 1833(t)(18) of the Act do not affect the existing statutory provisions that provide for TOPs for cancer hospitals. The TOPs will be assessed as usual after all payments, including the cancer hospital payment adjustment, have been made for a cost reporting period.

Comment: Several commenters supported the proposed cancer hospital payment adjustment for CY 2016.

Response: We appreciate the commenters' support.

After consideration of the public comments we received, we are finalizing the proposed methodology for calculating the cancer hospital payment adjustment for CY 2016. For this final rule with comment period, we are using the most recent cost report data through September 30, 2015 to update the adjustment. This update yields a target PCR of 0.92. We limited the dataset to the hospitals with CY 2014 claims data that we used to model the impact of the CY 2016 APC relative payment weights (3,781 hospitals) because it is appropriate to use the same set of hospitals that we are using to calibrate the modeled CY 2016 OPPS. The cost report data for the hospitals in this dataset were from cost report periods with fiscal year ends ranging from 2012 to 2015. We then removed the cost report data of the 49 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 the cost report data of 11 hospitals because these hospitals had 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 3,721 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 92 percent of reasonable cost (weighted average PCR of 0.92). Therefore, we are finalizing 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 PCR equal to 0.92 for each cancer hospital.

Table 15 below indicates estimates in percentage terms of the CY 2016 payment adjustment for each cancer hospital. The actual amount of the CY 2016 cancer hospital payment adjustment for each cancer hospital will be determined at cost report settlement and will depend on each hospital's CY 2016 payments and costs.

TABLE 15—Estimated CY 2016 Hospital-Specific Payment Adjustment for Cancer Hospitals to be Provided at Cost Report Settlement

Provider No.Hospital nameEstimated percentage increase in OPPS payments for CY 2016
050146City of Hope Comprehensive Cancer Center21.6
050660USC Norris Cancer Hospital21.9
100079Sylvester Comprehensive Cancer Center25.1
100271H. Lee Moffitt Cancer Center & Research Institute27.3
220162Dana-Farber Cancer Institute51.1
330154Memorial Sloan-Kettering Cancer Center46.9
330354Roswell Park Cancer Institute31.4
360242James Cancer Hospital & Solove Research Institute35.4
390196Fox Chase Cancer Center23.7
450076M.D. Anderson Cancer Center50.9
500138Seattle Cancer Care Alliance57.3

G. Hospital Outpatient Outlier Payments

1. Background

The OPPS provides outlier payments to hospitals to help mitigate the financial risk associated with high-cost and complex procedures, where a very costly service could present a hospital with significant financial loss. As explained in the CY 2015 OPPS/ASC final rule with comment period (79 FR 66832 through 66834), we set our projected target for aggregate outlier payments at 1.0 percent of the estimated aggregate total payments under the OPPS for the prospective year. Outlier payments are provided on a service-by-service basis when the cost of a service exceeds the APC payment amount multiplier threshold (the APC payment amount multiplied by a certain amount) as well as the APC payment amount plus a fixed-dollar amount threshold (the APC payment plus a certain amount of dollars). In CY 2015, the outlier threshold was met when the hospital's Start Printed Page 70364cost of furnishing a service exceeded 1.75 times (the multiplier threshold) the APC payment amount and exceeded the APC payment amount plus $2,775 (the fixed-dollar amount threshold) (79 FR 66834). If the cost of a service exceeds both the multiplier 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 amount. Beginning with CY 2009 payments, outlier payments are subject to a reconciliation process similar to the IPPS outlier reconciliation process for cost reports, as discussed in the CY 2009 OPPS/ASC final rule with comment period (73 FR 68594 through 68599).

It has been our policy 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 estimate of total outlier payments as a percent of total CY 2014 OPPS payment, using CY 2014 claims available for this final rule with comment period and the revised OPPS expenditure estimate for the FY 2016 President's Budget Mid-Session Review, is approximately 0.9 percent of the total aggregated OPPS payments. Therefore, for CY 2014, we estimate that we paid 0.1 percentage points below the CY 2014 outlier target of 1.0 percent of total aggregated OPPS payments.

Using CY 2014 claims data and CY 2015 payment rates, we currently estimate that the aggregate outlier payments for CY 2015 will be approximately 0.9 percent of the total CY 2015 OPPS payments. The difference between 0.9 percent and the 1.0 percent target is reflected in the regulatory impact analysis in section XXI. of this final rule with comment period. We provide estimated CY 2016 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. Outlier Calculation

In the CY 2016 OPPS/ASC proposed rule (80 FR 39246), we proposed to continue our policy of estimating outlier payments to be 1.0 percent of the estimated aggregate total payments under the OPPS. We proposed that a portion of that 1.0 percent, an amount equal to 0.49 percent of outlier payments (or 0.0049 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.D. of the proposed rule and this final rule with comment period, we proposed to continue our longstanding policy that if a CMHC's cost for partial hospitalization services, paid under either proposed renumbered APC 5851 (Level 1 Partial Hospitalization (3 services) for CMHCs) (existing APC 0172) or proposed renumbered APC 5852 (Level 2 Partial Hospitalization (4 or more services) for CMHCs) (existing APC 0173), exceeds 3.40 times the payment rate for proposed renumbered APC 5852, the outlier payment would be calculated as 50 percent of the amount by which the cost exceeds 3.40 times the proposed renumbered APC 5852 payment rate. For further discussion of CMHC outlier payments, we refer readers to section VIII.D. of the proposed rule and this final rule with comment period.

To ensure that the estimated CY 2016 aggregate outlier payments would equal 1.0 percent of estimated aggregate total payments under the OPPS, we proposed that the hospital outlier threshold be set so that outlier payments would be triggered when a hospital's cost of furnishing a service exceeds 1.75 times the APC payment amount and exceeds the APC payment amount plus $3,650.

We calculated the proposed fixed-dollar threshold of $3,650 using the standard methodology most recently used for CY 2015 (79 FR 66833 through 66834). For purposes of estimating outlier payments for the proposed rule, we used the hospital-specific overall ancillary CCRs available in the April 2015 update to the Outpatient Provider-Specific File (OPSF). The OPSF contains provider-specific data, such as the most current CCRs, which are maintained by the MACs and used by the OPPS Pricer to pay claims. The claims that we use to model each OPPS update lag by 2 years.

In order to estimate the CY 2016 hospital outlier payments for the proposed rule, we inflated the charges on the CY 2014 claims using the same inflation factor of 1.0985 that we used to estimate the IPPS fixed-dollar outlier threshold for the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24632 through 24633). We used an inflation factor of 1.0481 to estimate CY 2015 charges from the CY 2014 charges reported on CY 2014 claims. The methodology for determining this charge inflation factor is discussed in the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24632). As we stated in the CY 2005 OPPS final rule with comment period (69 FR 65845), we believe that the use of these charge inflation factors are appropriate for the OPPS because, with the exception of the inpatient routine service cost centers, hospitals use the same ancillary and outpatient cost centers to capture costs and charges for inpatient and outpatient services.

As noted in the CY 2007 OPPS/ASC final rule with comment period (71 FR 68011), we are concerned that we could systematically overestimate the OPPS hospital outlier threshold if we did not apply a CCR inflation adjustment factor. Therefore, we proposed to apply the same CCR inflation adjustment factor that we proposed to apply for the FY 2016 IPPS outlier calculation to the CCRs used to simulate the proposed CY 2016 OPPS outlier payments to determine the fixed-dollar threshold. Specifically, for CY 2016, we proposed to apply an adjustment factor of 0.9795 to the CCRs that were in the April 2015 OPSF to trend them forward from CY 2015 to CY 2016. The methodology for calculating this proposed adjustment is discussed in the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24633) and finalized in the FY 2016 IPPS/LTCH PPS final rule (80 FR 49784).

To model hospital outlier payments for the proposed rule, we applied the overall CCRs from the April 2015 OPSF after adjustment (using the proposed CCR inflation adjustment factor of 0.9795 to approximate CY 2016 CCRs) to charges on CY 2014 claims that were adjusted (using the proposed charge inflation factor of 1.0985 to approximate CY 2016 charges). We simulated aggregated CY 2016 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 2016 OPPS payments. We estimated that a proposed fixed-dollar threshold of $3,650, 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. For CMHCs, we proposed that, if a CMHC's cost for partial hospitalization services, paid under either proposed renumbered APC 5851 (existing APC 0172) or proposed renumbered APC 5852 (existing APC 0173), exceeds 3.40 times the payment rate for proposed Start Printed Page 70365renumbered 5852, the outlier payment would be calculated as 50 percent of the amount by which the cost exceeds 3.40 times the proposed renumbered APC 5852 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 section 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 proposed to continue the policy that we implemented in CY 2010 that the hospitals' costs will 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 XIII. of this final rule with comment period.

Comment: A few commenters suggested that the proposed outlier fixed dollar threshold of $3,650 was too high for CMS to pay the target aggregate outlier payment amount of 1.0 percent of the estimated aggregate total payments under the OPPS for the prospective year. The commenters noted that 2014 and 2015 estimated outlier payments were below 1.0 percent, despite a lower fixed-dollar threshold.

Response: As indicated earlier, we introduced a fixed-dollar 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. We maintain the target outlier percentage of 1.0 percent of estimated aggregate total payment under the OPPS and have a fixed-dollar threshold so that OPPS outlier payments are made only when the hospital would experience a significant loss for supplying a particular service. While the commenters expressed concern based on the assumption that OPPS outlier payments would decrease under an increased fixed-dollar threshold, we note that the threshold may increase or decrease from year to year, to maintain the 1.0 percent outlier spending target. The methodology we use to calculate the fixed-dollar threshold for the prospective payment year factors is based on several data inputs that may change from prior payment years. For instance, updated hospital CCR data and changes to the OPPS payment methodology influence projected outlier payments in the prospective year. For this final rule with comment period, we used the same methodology for calculating the outlier fixed-dollar threshold that we used for the proposed rule but used updated data. However, these updated data inputs for this final rule with comment period do yield a lower threshold than for the proposed rule.

3. Final Outlier Calculation

Consistent with historical practice, we used updated data for this final rule with comment period for outlier calculations. For CY 2016, we are applying the overall CCRs from the July 2015 OPSF file after adjustment (using the CCR inflation adjustment factor of 0.9701 to approximate CY 2016 CCRs) to charges on CY 2014 claims that were adjusted (using the charge inflation factor of 1.0766 to approximate CY 2016 charges). These are the same CCR adjustment and charge inflation factors that were used to set the IPPS fixed-dollar thresholds for the FY 2016 IPPS/LTCH PPS final rule (80 FR 49784). We simulated aggregated CY 2016 hospital outlier payments using these costs for several different fixed-dollar thresholds, holding the 1.75 multiple threshold constant and assuming that outlier payments will 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 2016 OPPS payments. We estimated that a fixed-dollar threshold of $3,250, combined with the multiple threshold of 1.75 times the APC payment rate, will allocate 1.0 percent of aggregated total OPPS payments to outlier payments. For CMHCs, if a CMHC's cost for partial hospitalization services, paid under either renumbered APC 5851 (existing APC 0172) or renumbered APC 5852 (existing APC 0173), exceeds 3.40 times the payment rate for renumbered APC 5852, the outlier payment will be calculated as 50 percent of the amount by which the cost exceeds 3.40 times the renumbered APC 5852 payment rate.

H. 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 CY 2016 OPPS/ASC final rule with comment period, 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 final rule with comment period and the relative payment weight determined under section II.A. of this final rule with comment period. Therefore, the national unadjusted payment rate for most APCs contained in Addendum A to this final rule with comment period (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 final rule with comment period (which is available via the Internet on the CMS Web site) was calculated by multiplying the CY 2016 scaled weight for the APC by the CY 2016 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 XIII. of this final rule with comment period.

In the CY 2016 OPPS/ASC proposed rule (80 FR 39247 through 39249), we demonstrated the steps on 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: “J1,” “J2,” “P,” “Q1,” “Q2,” “Q3,” “Q4,” “R,” “S,” “T,” “U,” or “V” (as defined in Addendum D1 to the proposed rule, which is available via the Internet on the CMS Web site), in a circumstance in Start Printed Page 70366which 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. We note that, in the CY 2015 OPPS/ASC final rule with comment period (79 FR 66799), we created new status indicator “J1” to reflect the comprehensive APCs discussed in section II.A.2.e. of this final rule with comment period. We also note that we deleted status indicator “X” as part of the CY 2015 packaging policy for ancillary services, discussed in section II.A.3. of this final rule with comment period. In the CY 2016 OPPS/ASC proposed rule, we proposed to create new status indicator “J2” to reflect the new C-APC 8011 (Comprehensive Observation Services) and new status indicator “Q4” to reflect conditionally packaged laboratory tests. In this CY 2016 OPPS/ASC final rule with comment period, we are finalizing the new status indicators “J2” and “Q4” as proposed, as discussed in sections II.A.2.e.(2) and II.A.3.b.(3) of this final rule with comment period, respectively.

We did not receive any public comments on these steps under the methodology that we included in the proposed rule to determine the APC payments for CY 2016. Therefore, we are using the steps in the methodology specified below, as we proposed, to demonstrate the calculation of the final CY 2016 OPPS payments using the same parameters.

Individual providers interested in calculating the payment amount that they will receive for a specific service from the national unadjusted payment rates presented in Addenda A and B to this final rule with comment period (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 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 2016 OPPS fee schedule increase factor.

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

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. We note that under the CY 2016 OPPS policy for continuing to use the OMB labor market area delineations based on the 2010 Decennial Census data for the wage indexes used under the IPPS, a hold harmless policy for the wage index may apply, as discussed in section II.C. of this final rule with comment period. 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 2016 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 Pub. L. 98-21. (For further discussion of the changes to the FY 2016 IPPS wage indexes, as applied to the CY 2016 OPPS, we refer readers to section II.C. of this final rule with comment period.) As we proposed, we are continuing to apply a wage index floor of 1.00 to frontier States, in accordance with section 10324 of the Affordable Care Act of 2010.

Step 3. Adjust the wage index of hospitals located in certain qualifying counties that have a relatively high percentage of hospital employees who reside in the county, but who work in a different county with a higher wage index, in accordance with section 505 of Pub. L. 108-173. Addendum L to this final rule with comment period (which is available via the Internet on the CMS Web site) contains the qualifying counties and the associated wage index increase developed for the FY 2016 IPPS, which are listed in Table 2 in the FY 2016 IPPS/LTCH PPS final rule (80 FR 49326) 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 unadjusted 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, as 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.Start Printed Page 70367

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

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

We are providing 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 used a provider that is located in Brooklyn, New York that is assigned to CBSA 35614. This provider bills one service that is assigned to renumbered APC 5072 (Level 2 Excision/Biopsy/Incision and Drainage) (previously APC 0019). The CY 2016 full national unadjusted payment rate for APC 5072 is approximately $480.64. The reduced national unadjusted payment rate for renumbered APC 5072 for a hospital that fails to meet the Hospital OQR Program requirements is approximately $471.03. This reduced rate is calculated by multiplying the reporting ratio of 0.980 by the full unadjusted payment rate for renumbered APC 5072.

The FY 2016 wage index for a provider located in CBSA 35614 in New York is 1.2991. The labor-related portion of the full national unadjusted payment is approximately $374.64 (.60 * $480.64 * 1.2991). The labor-related portion of the reduced national unadjusted payment is approximately $367.15 (.60 * $471.03 * 1.2991). The nonlabor-related portion of the full national unadjusted payment is approximately $192.26 (.40 * $480.64). The nonlabor-related portion of the reduced national unadjusted payment is approximately $188.41 (.40 * $471.03). The sum of the labor-related and nonlabor-related portions of the full national adjusted payment is approximately $566.90 ($374.64 + $192.26). The sum of the portions of the reduced national adjusted payment is approximately $555.56 ($367.15 + $188.41).

I. 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 for a procedure performed in a year to the amount of the inpatient hospital deductible for that year.

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 colonoscopies, 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. OPPS Copayment Policy

In the CY 2016 OPPS/ASC proposed rule (80 FR 39249), for CY 2016, we proposed 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 proposed 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, 2016, were shown in Addenda A and B to the proposed rule (which are available via the Internet on the CMS Web site). As discussed in section XIII.E. of the proposed rule and this final rule with comment period, for CY 2016, the 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 OPPS 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. However, as described in the CY 2004 OPPS 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).

In the CY 2004 OPPS final rule with comment period (68 FR 63459), we adopted a new methodology to calculate unadjusted copayment amounts in situations including reorganizing APCs, and we finalized the following rules to determine copayment amounts in CY 2004 and subsequent years.

  • When an APC group consists solely of HCPCS codes that were not paid under the OPPS the prior year because they were packaged or excluded or are new codes, the unadjusted copayment amount would be 20 percent of the APC payment rate.
  • If a new APC that did not exist during the prior year is created and consists of HCPCS codes previously assigned to other APCs, the copayment amount is calculated as the product of the APC payment rate and the lowest coinsurance percentage of the codes comprising the new APC.
  • If no codes are added to or removed from an APC and, after recalibration of its relative payment weight, the new payment rate is equal to or greater than the prior year's rate, the copayment amount remains constant (unless the resulting coinsurance percentage is less than 20 percent).
  • If no codes are added to or removed from an APC and, after recalibration of its relative payment weight, the new payment rate is less than the prior year's rate, the copayment amount is calculated as the product of the new payment rate and the prior year's coinsurance percentage.
  • If HCPCS codes are added to or deleted from an APC, and, after Start Printed Page 70368recalibrating its relative payment weight, holding its unadjusted copayment amount constant results in a decrease in the coinsurance percentage for the reconfigured APC, the copayment amount would not change (unless retaining the copayment amount would result in a coinsurance rate less than 20 percent).
  • If HCPCS codes are added to an APC, and, after recalibrating its relative payment weight, holding its unadjusted copayment amount constant results in an increase in the coinsurance percentage for the reconfigured APC, the copayment amount would be calculated as the product of the payment rate of the reconfigured APC and the lowest coinsurance percentage of the codes being added to the reconfigured APC.

We noted in that CY 2004 OPPS final rule with comment period that we would seek to lower the copayment percentage for a service in an APC from the prior year if the copayment percentage was greater than 20 percent. We noted that this principle was consistent with section 1833(t)(8)(C)(ii) of the Act, which accelerates the reduction in the national unadjusted coinsurance rate so that beneficiary liability will eventually equal 20 percent of the OPPS payment rate for all OPPS services to which a copayment applies, and with section 1833(t)(3)(B) of the Act, which is consistent with the Congressional goal of achieving a 20-percent copayment percentage when fully phased in and gives the Secretary the authority to set rules for determining copayment amounts for new services. We further noted that the use of this methodology would, in general, reduce the beneficiary coinsurance rate and copayment amount for APCs for which the payment rate changes as the result of the reconfiguration of APCs and/or recalibration of relative payment weights (68 FR 63459). We believe the proposed reorganization of APCs discussed in section III.D. of the proposed rule and finalized under section III.D. of this final rule with comment period hastens this movement toward copayments equal to 20 percent of an APC for reorganized APCs that previously had copayment percentages greater than 20 percent.

We did not receive any comments on the copayment percentage. For the reasons set forth in this final rule with comment period, we are finalizing our proposed CY 2016 copayment methodology without modification.

3. 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 renumbered APC 5072 (previously APC 0019), $96.13 is approximately 20 percent of the full national unadjusted payment rate of $480.64. For APCs with only a minimum unadjusted copayment in Addenda A and B to this final rule with comment period (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 the 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 final rule with comment period. Calculate the rural adjustment for eligible providers as indicated in Step 6 under section II.H. of this final rule with comment period.

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 payment percentage to the adjusted payment rate for a service calculated under section II.H. of this final rule with comment period, 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 unadjusted copayments for services payable under the OPPS that are effective January 1, 2016, are shown in Addenda A and B to this final rule with comment period (which are available via the Internet on the CMS Web site). We note that the national unadjusted payment rates and copayment rates shown in Addenda A and B to this final rule with comment period reflect the full CY 2016 OPD fee schedule increase factor discussed in section II.B. of this final rule with comment period.

In addition, as noted above, section 1833(t)(8)(C)(i) of the Act limits the amount of beneficiary copayment that may be collected for a procedure performed in a year to the amount of the inpatient hospital deductible for that year.

III. OPPS Ambulatory Payment Classification (APC) Group Policies

A. 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 surgical procedures and medical services;
  • 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. Based on our review, we assign the new CPT and Level II HCPCS codes to interim status indicators (SIs) and APCs. These interim assignments are finalized in the OPPS/ASC final rules. This quarterly process offers hospitals access to codes that may more accurately describe items or services furnished and provides payment or more accurate payment for these items or services in a timelier manner than if we waited for the annual rulemaking process. We solicit public Start Printed Page 70369comments on these new codes and finalize our proposals related to these codes through our annual rulemaking process.

We note that, under the OPPS, the APC assignment determines the payment rate for an item, procedure, or service. For those items, procedures, or services not paid separately under the hospital OPPS, they are assigned to appropriate status indicators. Section XI. of this final rule with comment period provides a discussion of the various status indicators used under the OPPS. Certain payment indicators provide separate payment while others do not.

In Table 16 below, we summarize our comment process for updating codes through our OPPS quarterly update CRs, seeking public comments, and finalizing the treatment of these new codes under the OPPS.

Table 16—Comment Timeframe for New or Revised HCPCS Codes

OPPS quarterly update CRType of codeEffective dateComments soughtWhen finalized
April 1, 2015Level II HCPCS CodesApril 1, 2015CY 2016 OPPS/ASC proposed ruleCY 2016 OPPS/ASC final rule with comment period.
July 1, 2015Level II HCPCS CodesJuly 1, 2015CY 2016 OPPS/ASC proposed ruleCY 2016 OPPS/ASC final rule with comment period.
Category I (certain vaccine codes) and III CPT codesJuly 1, 2015CY 2016 OPPS/ASC proposed ruleCY 2016 OPPS/ASC final rule with comment period.
October 1, 2015Level II HCPCS CodesOctober 1, 2015CY 2016 OPPS/ASC final rule with comment periodCY 2017 OPPS/ASC final rule with comment period.
January 1, 2016Level II HCPCS CodesJanuary 1, 2016CY 2016 OPPS/ASC final rule with comment periodCY 2017 OPPS/ASC final rule with comment period.
Category I and III CPT CodesJanuary 1, 2016CY 2016 OPPS/ASC proposed ruleCY 2016 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 the CY 2016 OPPS/ASC proposed rule or whether we are soliciting public comments in this CY 2016 OPPS/ASC final rule with comment period. We note that we sought public comments in the CY 2015 OPPS/ASC final rule with comment period on the interim APC and status indicator assignments for new CPT and Level II HCPCS codes that were effective January 1, 2015. We also sought public comments in the CY 2015 OPPS/ASC final rule with comment period on the interim APC and status assignments for new Level II HCPCS codes that became effective October 1, 2014. These new and revised codes, with an effective date of October 1, 2014, or January 1, 2015, 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 2015 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, and were subject to public comment following publication of the CY 2015 OPPS/ASC final rule with comment period. We are responding to public comments and finalizing our interim OPPS treatment of these codes in this CY 20165 OPPS/ASC final rule with comment period.

Further, we received public comments on some new codes that were assigned to comment indicator “NI” in Addendum B of the CY 2015 OPPS/ASC final rule with comment period. We also received public comments on new CPT codes that will be effective January 1, 2016, that were assigned to comment indicator “NP” in Addendum B of the CY 2016 OPPS/ASC proposed rule. We respond to those comments in section III.C. of this CY 2016 OPPS/ASC final rule with comment period.

1. Treatment of New CY 2015 Level II HCPCS and CPT Codes Effective April 1, 2015 and July 1, 2015 for Which We Solicited Public Comments in the CY 2016 OPPS/ASC Proposed Rule

Through the April 2015 OPPS quarterly update CR (Transmittal 3217, Change Request 9097, dated March 13, 2015), and the July 2015 OPPS quarterly update CR (Transmittal 3280, Change Request 9205, dated June 5, 2015), we recognized several new HCPCS codes for separate payment under the OPPS.

Effective April 1, 2015, we made effective eight new Level II HCPCS codes and also assigned them to appropriate interim OPPS status indicators and APCs. Through the April 2015 OPPS quarterly update CR, we allowed separate payment for eight new Level II HCPCS codes. Specifically, as displayed in Table 14 of the CY 2016 proposed rule (80 FR 39251), we provided separate payment for HCPCS codes C2623, C9445, C9448, C9449, C9450, C9451, C9452, and Q9975. We note that HCPCS code C9448 was deleted on June 30, 2015, and replaced with HCPCS code Q9978, effective July 1, 2015.

In the CY 2016 OPPS/ASC proposed rule, we solicited public comments on the proposed APC and status indicator assignments for the Level II HCPCS codes implemented on April 1, 2015 and listed in Table 14 of the proposed rule (80 FR 39251). Specifically, we solicited public comments on HCPCS codes C2623, C9445, C9448, C9449, C9450, C9451, C9452, and Q9975. We note that HCPCS code C9448 was deleted on June 30, 2015, and replaced with HCPCS code Q9978, effective July 1, 2015. We indicated that the proposed payment rates for these codes, where applicable, could be found in Addendum B to the proposed rule (which is available via the Internet on the CMS Web site).

For the CY 2016 update, the HCPCS Workgroup replaced the temporary drug HCPCS C-codes and Q-codes that were listed in Table 14 of the proposed rule with permanent HCPCS J-codes effective January 1, 2016. Because the replacement HCPCS J-codes describe the Start Printed Page 70370same drugs with the same dosage descriptors as their predecessor HCPCS C-codes and Q-codes, they will continue to receive pass-through payment status in CY 2016. Therefore, we are assigning the replacement HCPCS J-codes to the same APCs and status indicators as their predecessor HCPCS codes, as shown in Table 17 below.

We did not receive any public comments on the proposed APC and status indicator assignments for the new Level II HCPCS codes implemented in April 2015. Therefore, we are finalizing the proposed APC assignments and status indicators for the new Level II HCPCS codes implemented in April 2015, as indicated in Table 17 below. The final payment rates for these codes, where applicable, can be found in Addendum B to this final rule with comment period (which is available via the Internet on the CMS Web site).

Table 17—Final CY 2016 Status Indicators and APC Assignments for the New Level II HCPCS Codes That Were Implemented in April 2015

CY 2015 CPT/HCPCS codeCY 2016 CPT/HCPCS codeCY 2016 long descriptorFinal CY 2016 status indicatorFinal CY 2016 APC
C2623C2623Catheter, transluminal angioplasty, drug-coated, non-laserH2623
C9445J0596Injection, c1 esterase inhibitor (recombinant), Ruconest, 10 unitsG9445
C9448 *J8655Netupitant 300 mg and palonosetron 0.5 mgG9448
C9449J9039Injection, blinatumomab, 1 microgramG9449
C9450J7313Injection, fluocinolone acetonide intravitreal implant, 0.01 mgG9450
C9451J2547Injection, peramivir, 1 mgG9451
C9452J0695Injection, ceftolozane 50 mg and tazobactam 25 mgG9452
Q9975 **J7205Injection, factor viii fc fusion (recombinant), per iuG1656
* HCPCS code C9448 was deleted on June 30, 2015, and replaced with HCPCS code Q9978, effective July 1, 2015.
** HCPCS code C9136 (Injection, factor viii, fc fusion protein (recombinant), per i.u.) was deleted on March 31, 2015 and replaced with HCPCS code Q9975.

Effective July 1, 2015, we made effective several new CPT and Level II HCPCS codes and also assigned them to appropriate interim OPPS status indicators and APCs. Through the July 2015 OPPS quarterly update CR (Transmittal 3280, Change Request 9205, dated June 5, 2015), we assigned interim OPPS status indicators and APCs for two new Category III CPT codes and eight Level II HCPCS codes that were made effective July 1, 2015. Specifically, as displayed in Table 15 of the CY 2016 proposed rule (80 FR 39252), we made interim OPPS status indicators and APC assignments for Category III CPT codes 0392T and 0393T, and Level II HCPCS codes C2613, C9453, C9454, C9455, Q5101, Q9976, Q9977, and Q9978. We note that CPT code 0392T replaced HCPCS code C9737 (Laparoscopy, surgical, esophageal sphincter augmentation with device (e.g., magnetic band)), beginning July 1, 2015. Because CPT code 0392T describes the same procedure as HCPCS code C9737, we proposed to assign the CPT code to the same APC and status indicator as its predecessor HCPCS C-code, as shown in Table 15 of the proposed rule.

Table 15 of the proposed rule (89 FR 39252) listed the CPT and Level II HCPCS codes that were implemented on July 1, 2015, along with the proposed status indicators, proposed APC assignments, and proposed payment rates, where applicable, for CY 2016. We solicited public comments on the proposed APC and status indicator assignments.

One commenter addressed CPT code 0392T which relates to gastrointestinal procedures and services and which replaced HCPCS code C9737. We have responded to this comment in section II.A.2.e. of this final rule with comment period. We did not receive any public comments on the proposed APC and status indicator assignments for Category III CPT code 0393T and Level II HCPCS codes C2613, C9453, C9454, C9455, Q9976, Q9977, and Q9978 for CY 2016.

In this final rule with comment period, we are adopting as final, without modification, the proposed APC and status indicator assignments for CPT code 0393T and for Level II HCPCS codes C2613, C9453, C9454, C9455, Q9976, Q9977, Q9978. However, we are finalizing the APC and status indicator assignments for HCPCS code Q5101 (Zarxio) with modification. Specifically, we are assigning HCPCS code Q5101 to APC 1822 and status indicator “G” (pass-through drugs and biologicals). We noted in the CY 2016 OPPS/ASC proposed rule (80 FR 39252) that Zarxio (the drug described by HCPCS code Q5101) was currently not being marketed. However, once pricing information was made available, the drug would be paid separately under the OPPS. Zarxio was marketed on September 3, 2015, and therefore, we began making separate payments under the OPPS beginning on this date. From September 3, 2015, through December 31, 2015, HCPCS code Q5101 is assigned status indicator “K” (Nonpass-through drugs and nonimplantable biologicals, including therapeutic radiopharmaceuticals). Because Zarxio has been approved for pass-through status beginning January 1, 2016, we are changing its OPPS status indicator from “K” to “G” beginning January 1, 2016.

For the CY 2016 update, the HCPCS Workgroup replaced temporary HCPCS codes C9453, C9454, C9455, and Q9978 with permanent HCPCS J codes effective January 1, 2016. Because the replacement HCPCS J- codes describe the same drugs with the same dosage descriptors as their predecessor HCPCS C codes and Q codes, they will continue to receive pass-through payment status in CY 2016. Therefore, we are assigning the replacement HCPCS J-codes to the same APCs and status indicators as their predecessor HCPCS codes, as shown in Table 18 below. Table 18 lists the final APCs and status indicator assignments for the new category III CPT and Level II HCPCS codes that were implemented on July 1, 2015. The final payment rates for these codes, where applicable, can be found in Addendum B to this final rule with comment period (which is available via the Internet on the CMS Web site).Start Printed Page 70371

Table 18—Final CY 2016 Status Indicators and APC Assignments for the New Category III CPT and Level II HCPCS Codes Implemented in July 2015

CY 2015 CPT/HCPCS codeCY 2016 CPT/HCPCS codeCY 2016 long descriptorFinal CY 2016 status indicatorFinal CY 2016 APC
C2613C2613Lung biopsy plug with delivery systemH2613
C9453J9299Injection, nivolumab, 1 mgG9453
C9454J2502Injection, pasireotide long acting, 1 mgG9454
C9455J2860Injection, siltuximab, 10 mgG9455
Q5101 *Q5101*Injection, Filgrastim (G-CSF), Biosimilar, 1 microgramG1822
Q9976J1443Injection, ferric pyrophosphate citrate solution, 0.1 mg of ironEN/A
Q9977Q9977 **Compounded Drug, Not Otherwise ClassifiedDN/A
Q9978J8655Netupitant 300 mg and palonosetron 0.5 mgG9448
0392T0392TLaparoscopy, surgical, esophageal sphincter augmentation procedure, placement of sphincter augmentation device (ie, magnetic band)J15362
0393T0393TRemoval of esophageal sphincter augmentation deviceQ25361
* HCPCS code Q5101, which described the drug Zarxio, was approved by the FDA on March 6, 2015. Separate payment for Zarxio was effective September 3, 2015, the date the drug was marketed.
** HCPCS code Q9977 will be deleted December 31, 2015, and a replacement code will not be established.

2. Process for New Level II HCPCS Codes That Became Effective October 1, 2015 and New Level II HCPCS Codes That Will Be Effective January 1, 2016 for Which We Are Soliciting Public Comments in This CY 2016 OPPS/ASC Final Rule With Comment Period

As has been our practice in the past, we incorporate those new Level II HCPCS codes that are effective October 1 and January 1 in the final rule with comment period thereby updating the OPPS for the following calendar year. These codes are released to the public through the October and January OPPS quarterly update CRs and via the CMS HCPCS Web site (for Level II HCPCS codes). For CY 2016, these codes are flagged with comment indicator “NI” in Addendum B to this OPPS/ASC final rule with comment period to indicate that we are assigning them an interim payment status which is subject to public comment. Specifically, the status indicators and the APC assignments for codes flagged with comment indicator “NI” are open to public comment in this final rule with comment period, and we will respond to these public comments in the OPPS/ASC final rule with comment period for the next year's OPPS/ASC update. In the CY 2016 OPPS/ASC proposed rule (80 FR 39252 through 39253), we proposed to continue this process for CY 2016. Specifically, for CY 2016, we proposed to include in Addendum B to the CY 2016 OPPS/ASC final rule with comment period the following new HCPCS codes:

  • New Level II HCPCS codes effective October 1, 2015, that would be incorporated in the October 2015 OPPS quarterly update CR;
  • New Level II HCPCS codes effective January 1, 2016, that would be incorporated in the January 2016 OPPS quarterly update CR.

As stated above, the October 1, 2015 and January 1, 2016 codes are flagged with comment indicator “NI” in Addendum B to this CY 2016 OPPS/ASC final rule with comment period to indicate that we have assigned the codes an interim OPPS payment status for CY 2016. We are inviting public comments on the interim status indicator and APC assignments and payment rates for these codes, if applicable, that will be finalized in the CY 2017 OPPS/ASC final rule with comment period.

3. Treatment of New and Revised CY 2016 Category I and III CPT Codes That Will Be Effective January 1, 2016, for Which We Solicited Public Comments in the CY 2016 OPPS/ASC Proposed Rule

In the CY 2015 OPPS/ASC final rule with comment period (79 FR 66841 through 66844), we finalized a revised process of assigning APC and status indicators for new and revised Category I and III CPT codes that would be effective January 1. Specifically, for the new/revised CPT codes that we receive in a timely manner from the AMA's CPT Editorial Panel, we finalized our proposal to include the codes that would be effective January 1 in the OPPS/ASC proposed rules, along with proposed APC and status indicator assignments for them, and to finalize the APC and status indicator assignments in the OPPS/ASC final rules beginning with the CY 2016 OPPS update. For those new/revised CPT codes that were received too late for inclusion in the OPPS/ASC proposed rule, we finalized our proposal to establish and use HCPCS G codes that mirror the predecessor CPT codes and retain the current APC and status indicator assignments for a year until we can propose APC and status indicator assignments in the following year's rulemaking cycle. We noted that even if we find that we need to create HCPCS G-codes in place of certain CPT codes for the MPFS proposed rule, we do not anticipate that these HCPCS G codes will always be necessary for OPPS purposes. We will make every effort to include proposed APC and status indicator assignments for all new and revised CPT codes that the AMA makes publicly available in time for us to include them in the proposed rule, and to avoid establishing HCPCS G codes and the resulting delay in utilization of the most current CPT codes. In addition, we finalized our proposal to make interim APC and status indicator assignments for CPT codes that are not available in time for the proposed rule and that describe wholly new services (such as new technologies or new surgical procedures), solicit public comments, and finalize the specific APC and status indicator assignments for those codes in the following year's final rule.

For the CY 2016 OPPS update, we received the CY 2016 CPT codes from AMA in time for inclusion in the CY 2016 OPPS/ASC proposed rule. In the proposed rule (80 FR 39253), we indicated that the new and revised CY 2016 Category I and III CPT codes can be found in OPPS Addendum B to the proposed rule and were assigned to new comment indicator “NP” to indicate that the code is new for the next calendar year or the code is an existing code with substantial revision to its code descriptor in the next calendar year as compared to current calendar year with a proposed APC assignment and that comments will be accepted on the proposed APC assignment and Start Printed Page 70372status indicator. We refer readers to section XI.B. of the CY 2016 OPPS/ASC proposed rule for further discussion on the proposed new comment indicator “NP.”

Further, in the proposed rule, we reminded readers that the CPT code descriptors that appear in Addendum B are short descriptors and do not accurately describe the complete procedure, service, or item described by the CPT code. Therefore, we included the long descriptors for the new and revised CY 2016 CPT codes in Addendum O to the proposed rule (which is available via the Internet on the CMS Web site) so that the public could adequately comment on our proposed APCs and status indicator assignments. Because CPT procedure codes are 5 alpha-numeric characters and CMS systems only utilize 5-character HCPCS codes, we stated that we developed alternative 5-character placeholder codes for the proposed rule. We indicated that the placeholder codes can be found in Addendum O, specifically under the column labeled “CY 2016 OPPS/ASC Proposed Rule 5-Digit CMS Placeholder Code,” to the proposed rule. We also indicated that the final CPT code numbers would be included in this CY 2016 OPPS/ASC final rule with comment period. We note that not every code listed in Addendum O of the proposed rule was subject to comment. For the new/revised Category I and III CPT codes, we requested public comments on only those codes that were assigned to comment indicator “NP.” We indicated that public comments would not be accepted for new Category I CPT laboratory codes that were not assigned to “NP” comment indicator in Addendum O to the proposed rule. We stated that comments to these codes must be submitted at the Clinical Laboratory Fee Schedule (CLFS) Public Meeting, which was scheduled for July 16, 2015.

In summary, we solicited public comments on the proposed CY 2016 status indicators and APC assignments for the new and revised Category I and III CPT codes that will be effective January 1, 2016. The CPT codes are listed in Addendum B to the proposed rule with short descriptors only. We listed them again in Addendum O to the proposed rule with long descriptors. We also proposed to finalize the status indicator and APC assignments for these codes (with their final CPT code numbers) in the CY 2016 OPPS/ASC final rule with comment period.

Commenters addressed several of the new CPT codes that were assigned to comment indicator “NP” in Addendum B of the CY 2016 OPPS/ASC proposed rule. We respond to those comments in section III.D. of this CY 2016 OPPS/ASC final rule with comment period.

The final status indicators, APC assignments, and payment rates for the new CPT codes that will be effective January 1, 2016 can be found in Addendum B to this final rule with comment period (which is available via the Internet on the CMS Web site).

B. 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 (OPD) services. Section 1833(t)(2)(B) of the Act provides that the Secretary may establish groups of covered OPD services within this classification system, so that services classified within each group are comparable clinically and with respect to the use of resources. In accordance with these provisions, we developed a grouping classification system, referred to as Ambulatory Payment Classifications (APCs), as set forth in § 419.31 of the regulations. We use Level I and Level II HCPCS codes to identify and group the services within each APC. The APCs are organized such that each group is homogeneous both clinically and in terms of resource use. Using this classification system, we have established distinct groups of similar services. We also have developed separate APC groups for certain medical devices, drugs, biologicals, therapeutic radiopharmaceuticals, and brachytherapy devices that are not packaged into the payment for the procedure.

We have packaged into the payment for each procedure or service within an APC group the costs associated with those items and services that are typically integral, ancillary, supportive, dependent, or adjunctive to a primary service. Therefore, we do not make separate payment for these packaged items or services. In general, packaged items and services include, but are not limited to the items and services listed in § 419.2(b) of the regulations. A further discussion of packaged services is included in section II.A.3. of this final rule with comment period.

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. In the CY 2016 OPPS/ASC proposed rule (80 FR 39254), for CY 2016, we proposed that each APC relative payment weight represents the hospital cost of the services included in that APC, relative to the hospital cost of the services included in proposed renumbered APC 5012 (Level 2 Examinations and Related Services) (existing APC 0632). The APC relative payment weights were scaled to proposed renumbered APC 5012 because it is the hospital clinic visit APC and clinic visits are among the most frequently furnished services in the hospital outpatient setting. We noted that, historically, we have proposed APC relative payment weights relative to the hospital costs of services included in existing APC 0634. In the proposed rule, we proposed to reassign HCPCS code G0463 (Hospital outpatient clinic visit for assessment and management of a patient) from existing APC 0634 to proposed renumbered APC 5012 (for CY 2015, this is existing APC 0632). Proposed new APC 5012 includes other services that are clinically similar with similar resource costs to the service described by HCPCS code G0463, such as HCPCS code G0402 (Initial preventive physical examination). Accordingly, for the CY 2016 OPPS update, we proposed to delete existing APC 0634 and replace it with proposed renumbered APC 5012.

In the CY 2016 OPPS/ASC proposed rule (80 FR 39254), for CY 2016, we proposed that each APC relative payment weight represents the hospital cost of the services included in that APC, relative to the hospital cost of the services included in proposed renumbered APC 5012 (existing APC 0632).

We did not receive any public comments on the proposed reassignment for HCPCS code G0463 from APC 0634 to proposed renumbered APC 5012. However, some commenters expressed concern about CMS' use of a single clinic visit code (HCPCS G0463) and a single APC payment for all clinic Evaluation and Management (E/M) visits. We refer readers to section VII. of this CY 2016 OPPS/ASC final rule with comment period for a discussion of public comments and our responses and our finalized policies on payments for hospital outpatient visits for CY 2016.

In this final rule with comment period, we are finalizing our proposal, without modification, to assign HCPCS code G0463 to APC 5012 and to delete existing APC 0634 because it will be replaced with APC 5012, effective January 1, 2016.Start Printed Page 70373

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 highest cost for an item or service in the APC group is more than 2 times greater than the lowest cost for an item or service within the same APC group (referred to as the “2 times 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). In determining the APCs with a 2 times rule violation, we consider only those HCPCS codes that are significant based on the number of claims. We note that, for purposes of identifying significant procedure codes for examination under the 2 times rule, we consider procedure codes that have more than 1,000 single major claims or procedure 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 procedure code is significant for purposes of the 2 times rule was selected because we believe that a subset of 1,000 claims (or less than 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 procedure code for which there are fewer than 99 single claims 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 the CY 2016 OPPS/ASC proposed rule (80 FR 39254), for CY 2016, we proposed 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 the CY 2016 OPPS, we identified the APCs with violations of the 2 times rule. Therefore, we proposed changes to the procedure codes assigned to these APCs in Addendum B to the proposed rule. We noted that Addendum B does not appear in the printed version of the Federal Register as part of the CY 2016 OPPS/ASC proposed rule. Rather, it is published and made available via the Internet on the CMS Web site at: http://www.cms.gov/​Medicare/​Medicare-Fee-for-Service-Payment/​HospitalOutpatientPPS/​Hospital-Outpatient-Regulations-and-Notices.html. In these cases, to eliminate a violation of the 2 times rule or to improve clinical and resource homogeneity, we proposed to reassign these procedure codes to new APCs that contain services that are similar with regard to both their clinical and resource characteristics. In many cases, the proposed procedure code reassignments and associated APC reconfigurations for CY 2016 included in the proposed rule are related to changes in costs of services that were observed in the CY 2014 claims data newly available for CY 2016 ratesetting. We also proposed changes to the status indicators for some procedure codes that were not specifically and separately discussed in the proposed rule. In these cases, we proposed to change the status indicators for these procedure 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 2016. In addition, we proposed to rename existing APCs or create new clinical APCs to complement the proposed procedure code reassignments. Addendum B to the CY 2016 OPPS/ASC proposed rule identified with a comment indicator “CH” those procedure codes for which we proposed a change to the APC assignment or status indicator, or both, that were initially assigned in the July 1, 2015 OPPS Addendum B Update (available via the Internet on the CMS Web site at: http://www.cms.gov/​Medicare/​Medicare-Fee-for-Service-Payment/​HospitalOutpatientPPS/​Hospital-Outpatient-Regulations-and-Notices.html). In contrast, Addendum B to this final rule with comment period (available via the Internet on the CMS Web site) identifies with the “CH” comment indicator the final CY 2016 changes compared to the HCPCS codes' status as reflected in the October 2015 Addendum B update.

3. APC Exceptions to the 2 Times Rule

Taking into account the APC changes that we proposed for CY 2016, we reviewed all of the APCs to determine which APCs would not meet the requirements of the 2 times rule. We used the following criteria to evaluate 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.

Based on the CY 2014 claims data that were available for the CY 2016 proposed rule, we identified three APCs with violations of the 2 times rule. We applied the criteria as described above to identify the APCs that we proposed to make exceptions for under the 2 times rule for CY 2016. We did not include in that determination those APCs where a 2 times rule violation was not a relevant concept, such as existing APC 0375 (proposed for CY 2016 to be renumbered APC 5881 (Ancillary Outpatient Services When Patient Dies)), which had a proposed APC payment rate for a single service of $5,653.37. (We note that, in section II.A.2.e. of this final rule with comment period, we are converting renumbered APC 5881 to a comprehensive APC for CY 2016. However, the APC cost is still not relevant to determine whether there is a violation of the 2 times rule in that comprehensive APC.) We only identified those APCs, including those with criteria-based costs, with violations of the 2 times rule. 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).

We note that, for cases in which a recommendation by the Panel appears to result in or allow a violation of the 2 times rule, we may accept the Panel's recommendation because those recommendations are based on explicit consideration (that is, a review of the latest OPPS claims data and group discussion of the issue) of resource use, clinical homogeneity, site of service, and the quality of the claims data used to determine the APC payment rates.

Table 16 of the proposed rule (80 FR 39255) listed the three APCs that we proposed to make exceptions for under the 2 times rule for CY 2016 based on the criteria cited above and claims data submitted between January 1, 2014, and December 31, 2014, and processed on or before December 31, 2014. We stated in the proposed rule that, for the final rule with comment period, we intended to use claims data for dates of service between January 1, 2014, and December 31, 2014, that were processed on or before June 30, 2015, and updated CCRs, if available. For this final rule with comment period, after we reassigned some codes, a violation of the 2 times rule no longer exists in APCs 5221 and 5673.

We applied the criteria described earlier to determine whether to make exceptions to the 2 times rule for three APCs: APC 5165 (Level 5 ENT Procedures); APC 5731 (Level 1 Minor Start Printed Page 70374Procedures) and APC 5841 (Psychotherapy). Based on our analysis of the updated CY 2014 claims data available for this final rule with comment period (and consideration of any related finalized changes to APC assignments), we determined that APCs 5165, 5731 and 5841 meet the exceptions criteria because these APC groupings optimize resource and clinical homogeneity. Therefore, we are making these three APCs exceptions to the 2 times rule.

Furthermore, although APC 5165 does not appear with a 2 times rule indicator in the 2 times rule document that is posted with the CY 2016 OPPS/ASC final rule data files, an exception to the 2 times rule is required so that a complexity adjustment is not made for CPT 60252 from APC 5165 to APC 5166.

After consideration of the public comments we received and our review of the CY 2014 costs from hospital claims and cost report data available for this final rule with comment period, we are finalizing three exceptions to the 2 times rule: APCs 5165, 5731 and 5841. We are not finalizing our proposal to make exceptions for APC 5221 and APC 5673. Table 19 below lists the three APCs that we are excepting from the 2 times rule for CY 2016 based on the criteria above and a review of updated claims data. The geometric mean costs for hospital outpatient services for these and all other APCs that were used in the development of this final rule with comment period can be found on the CMS Web site at: http://www.cms.gov/​Medicare/​Medicare-Fee-for-Service-Payment/​HospitalOutpatientPPS/​Hospital-Outpatient-Regulations-and-Notices.html.

Table 19—Final APC Exceptions to the 2 Times Rule for CY 2016

CY 2016 APCCY 2016 APC title
5165Level 5 ENT Procedures.
5731Level 1 Minor Procedures.
5841Psychotherapy.

The final costs for hospital outpatient services for these and all other APCs that were used in the development of this final rule with comment period can be found on the CMS Web site at: http://www.cms.gov/​Medicare/​Medicare-Fee-for-Service-Payment/​HospitalOutpatientPPS/​Hospital-Outpatient-Regulations-and-Notices.html.

C. New Technology APCs

1. Background

In the November 30, 2001 final rule (66 FR 59903), we finalized changes to the time period a service was eligible for payment under a New Technology APC. Beginning in CY 2002, we retain services within New Technology APC groups until we gather sufficient claims data to enable us to assign the service to 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.

Currently, there are 37 New Technology APC levels, ranging from the lowest cost band assigned to APC 1491 (New Technology—Level 1A ($0—$10)) through the highest cost band assigned to APC 1574 (New Technology—Level XXXVII ($9,500—$10,000)). In the CY 2004 OPPS final rule with comment period (68 FR 63416), we restructured the New Technology APCs to make the cost intervals more consistent across payment levels and refined the cost bands for these APCs to retain two parallel sets of New Technology APCs, one set with a status indicator of “S” (Significant Procedures, Not Discounted when Multiple. Paid under OPPS; separate APC payment) and the other set with a status indicator of “T” (Significant Procedure, Multiple Reduction Applies. Paid under OPPS; separate APC payment). These current New Technology APC configurations allow us to price new technology services more appropriately and consistently. We note that we did not propose to renumber the New Technology APCs in the CY 2016 OPPS/ASC proposed rule.

We note that the cost bands for the New Technology APCs, specifically, APCs 1491 through 1574, vary with increments ranging from $10 to $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.

Every year we receive several requests for higher payment amounts under the New Technology APCs for specific procedures paid 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, and we believe that our payment 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 the 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. However, we believe that it is most appropriate to set payment rates based on costs that are associated with providing care to Medicare beneficiaries. As claims data for new services become available, we use these data to establish payment rates for new technology.

2. Additional New Technology APC Groups

Currently, there are 37 levels of New Technology APC groups with two parallel status indicators; one set with a status indicator of “S” and the other set with a status indicator of “T.” To improve our ability to pay appropriately for new technology services and procedures, in the CY 2016 OPPS/ASC proposed rule (80 FR 39256), we proposed to expand the New Technology APC groups by adding 9 more levels, specifically, adding New Technology Levels 38 through 46. We proposed this expansion to accommodate the assignment of the retinal prosthesis implantation procedure to a New Technology APC, which is discussed further below. Therefore, for the CY 2016 OPPS update, we proposed to establish a new set of New Technology APCs 1575 through 1583 (for Levels 38 through 46) with OPPS status indicator “S” and a Start Printed Page 70375new set of New Technology APCs 1585 through 1593 (for Levels 38 through 46) with OPPS status indicator “T.” These two new sets of APCs have the same payment levels with one set subject to the multiple procedure payment reduction (status indicator “T”) and the other set not subject to the multiple procedure payment reduction (status indicator “S”). Each proposed set of new technology APC groups has identical group titles, payment rates, and minimum unadjusted copayments, but a different status indicator. Table 17 of the proposed rule included the complete list of the proposed additional 18 New Technology APCs for CY 2016.

Comment: One commenter noted that the inconsistency in the increment increases in the new levels for the New Technology APCs, specifically that Level 38 through Level 41 increased in increments of $5,000, while Level 42 through Level 46 increased in increments of $10,000. The commenter suggested that increments of $5,000 is more appropriate and provides more accurate payment for providers as well as consistency among payment levels beginning at Level 38.

Response: As stated above, for CY 2015, there are 37 levels of New Technology APC groups with two parallel status indicators; one set with a status indicator of “S” and the other set with a status indicator of “T.” The cost bands for these 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 1530 (New Technology—Level 30 ($6,000-$6,500)) is made at $6,250. We believe that the increments for New Technology APC Levels 38 through 46 are appropriate because they maintain a similar proportionality to the total payment as the original New Technology APCs, and they allow us to price new technology procedures and services on a temporary basis with sufficient accuracy without an excessive and cumbersome number of cost bands. We will monitor these APCs during our annual review and establish New Technology APC cost bands in the future as warranted.

Comment: Several commenters supported expanding the New Technology APCs by adding New Technology Levels 38 through 46. They believed that the addition of these new cost bands provides flexibility for CMS to properly assign qualifying services and technologies to the most appropriate payment level, as well as an opportunity for the collection of more accurate claims data to ensure appropriate payments when the procedures and services transition out of the New Technology APC cost bands to clinical APCs. The commenters also recommended revising the payment level descriptions for the New Technology APCs by adding one dollar to the lower end of the payment range (for example, Level 1502 at $51-$100) for the various levels to avoid pricing overlap. In addition, the commenters suggested that CMS remain open to the idea of creating new payment band levels in the future, as needed, to accommodate the growing number of new procedures, services, and technologies that can be safely performed and delivered in the hospital outpatient setting.

Response: We appreciate the commenters' support for our proposal to add New Technology Levels 38 through 46 for CY 2016. However, because the payment rate for each New Technology APC is at the midpoint of the specified range, we do not believe that revising the limits of these ranges for the New Technology APCs is necessary to eliminate what commenters believe is a pricing overlap. In addition, when we lack claims data (as we do for new services that have not be reported on hospital outpatient claims), our cost estimates typically suggest a range as represented by a New Technology APC cost band. These estimates are not so precise that they result in an exact dollar amount that would correspond to a dollar amount limit of a New Technology APC range. We typically estimate an approximate range that we believe corresponds to the approximate cost of the new service and match that range to the closest New Technology APC. Therefore, the overlap of the limits of the ranges of adjacent New Technology APCs makes no difference.

We agree with the commenters that adding New Technology APC cost bands on an as needed basis is appropriate. In addition to the additional New Technology APCs that we proposed, we are establishing two additional New Technology APC levels (4 new APCs in total, for which two APCs are assigned status indicator “S” and two APCs are status indicator “T”). These APCs are depicted in Table 20.

Table 20—Additional New Technology APCs for CY 2016

APC No.APC titleStatus indicator
1584New Technology—Level 47 ($80,000-$90,000)S
1585New Technology—Level 48 ($90,000-$100,000)S
1598New Technology—Level 47 ($80,000-$90,000)T
1599New Technology—Level 48 ($90,000-$100,000)T

The explanation as to why we are creating these additional New Technology APCs is contained below in the discussion of the New Technology APC for the retinal prosthesis implant procedure.

After consideration of the public comments we received, we are finalizing our proposal, with a modification, to add New Technology Levels 38 through 46 for CY 2016. We also are adding two additional levels, New Technology Levels 47 and 48. Table 21 below includes the final complete list of the additional 22 New Technology APC groups for CY 2016.Start Printed Page 70376

Table 21—Additional New Technology APC Groups for CY 2016

New CY 2016 APCCY 2016 APC group titleFinal CY 2016 status indicator
1575New Technology—Level 38 ($10,000-$15,000)S
1576New Technology—Level 39 ($15,000-$20,000)S
1577New Technology—Level 40 ($20,000-$25,000)S
1578New Technology—Level 41 ($25,000-$30,000)S
1579New Technology—Level 42 ($30,000-$40,000)S
1580New Technology—Level 43 ($40,000-$50,000)S
1581New Technology—Level 44 ($50,000-$60,000)S
1582New Technology—Level 45 ($60,000-$70,000)S
1583New Technology—Level 46 ($70,000-$80,000)S
1584New Technology—Level 47 ($80,000-$90,000)S
1585New Technology—Level 48 ($90,000-$100,000)S
1589New Technology—Level 38 ($10,000-$15,000)T
1590New Technology—Level 39 ($15,000-$20,000)T
1591New Technology—Level 40 ($20,000-$25,000)T
1592New Technology—Level 41 ($25,000-$30,000)T
1593New Technology—Level 42 ($30,000-$40,000)T
1594New Technology—Level 43 ($40,000-$50,000)T
1595New Technology—Level 44 ($50,000-$60,000)T
1596New Technology—Level 45 ($60,000-$70,000)T
1597New Technology—Level 46 ($70,000-$80,000)T
1598New Technology—Level 47 ($80,000-$90,000)T
1599New Technology—Level 48 ($90,000-$100,000)T

The final payment rates for New Technology APC groups 1575 through 1598 (with status indicator “S”) and APC groups 1585 through 1599 (with status indicator “T”) can be found in Addendum A to this final rule with comment period (which is available via the Internet on the CMS Web site).

3. Procedures Assigned to New Technology APC Groups for CY 2016

As we explained in the CY 2002 OPPS final rule with comment period (66 FR 59902), we generally retain a procedure in the New Technology APC to which it is initially assigned until we have obtained sufficient claims data to justify reassignment of the procedure to a clinically appropriate APC. However, in cases where we find that our initial 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 more appropriately reflects its cost (66 FR 59903).

Consistent with our current policy, in the CY 2016 OPPS/ASC proposed rule (80 FR 39256), for CY 2016, we proposed to retain services within New Technology APC groups until we obtain sufficient claims data to justify reassignment of the service to a clinically appropriate APC. The flexibility associated with this policy allows us to reassign 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 obtained (66 FR 59902).

We did not receive any public comments related to this proposal. Therefore, we are finalizing our CY 2016 proposal, without modification, to retain services within New Technology APCs until we gather sufficient claims data to assign the services to a clinically appropriate APC. Thus, a service can be assigned to a New Technology APC for more than 2 years if we have insufficient claims data to reassign the service to a clinical APC, or it could be reassigned to a clinical APC in less than 2 years if we have adequate claims data.

In the CY 2016 OPPS/ASC proposed rule (80 FR 39256), we proposed to assign two surgical procedures to New Technology APCs. Specifically, we proposed to continue to assign HCPCS code C9740 (Cystourethroscopy, with insertion of transprostatic implant; 4 or more implants) to New Technology APC 1564 (New Technology—Level 27 ($4,500-$5,000)) and to reassign CPT code 0100T (Placement of a subconjunctival retinal prosthesis receiver and pulse generator, and implantation of intra-ocular retinal electrode array, with vitrectomy) from APC 0673 (Level 2 Intraocular Procedures) to proposed newly established New Technology APC 1593 (New Technology—Level 46 ($70,000-$80,000) to pay appropriately for the procedures.

a. Transprostatic Urethral Implant Procedure

Currently, in CY 2015, there is one procedure that is receiving payment through a New Technology APC. Specifically, the surgical procedure described by HCPCS code C9740 is assigned to New Technology APC 1564 (New Technology—Level 27 ($4,500-$5,000)), with a payment rate of $4,750. This procedure was assigned to New Technology APC 1564 on April 1, 2014, when the HCPCS C-code was established.

For the CY 2016 OPPS update, based on our review of the claims data for HCPCS code C9740 from April through December 2014, we found 100 single claims (out of 128 total claims) with a geometric mean cost of approximately $5,648. Because there is not a full year of claims data and only 100 single claims are in our database for HCPCS code C9740, in the CY 2016 OPPS/ASC proposed rule, we proposed to maintain the assignment of HCPCS code C9740 to New Technology APC 1564 for CY 2016. As described in section IV.B. of the proposed rule, we note that, based on the costs of the device relative to the procedure in this APC, the procedures assigned to APC 1564 would be device-intensive for CY 2016. The proposed CY 2016 payment rate for HCPCS code C9740 was included in Addendum B to Start Printed Page 70377the proposed rule (which is available via the Internet on the CMS Web site).

Comment: Several commenters supported CMS' proposal to retain HCPCS code C9740 in New Technology APC 1564 for CY 2016. The commenters stated that retaining this surgical procedure in a new technology APC for another year will allow CMS to continue collecting the claims data necessary to identify an appropriate APC assignment for the procedure. The commenters also supported the proposed designation of APC 1564 as a device-intensive APC so that the procedure assigned to the APC can be performed and paid adequately in the ASC setting. However, one commenter disagreed with the APC assignment for HCPCS code C9740. The commenter believed that, based on the cost data, HCPCS code C9740 should be assigned to New Technology APC 1567 (New Technology—Level 30 ($6,000-$6,500)), with a payment rate of approximately $6,250.

Response: Based on the latest claims data used for this final rule with comment period, which is based on claims submitted between January 1, 2014, and December 31, 2014, and processed on or before June 30, 2015, we are reassigning HCPCS code C9740 from New Technology APC 1564 to New Technology APC 1565 (New Technology—Level 28 ($5,000-$5,500)). Specifically, we found a geometric mean cost of approximately $5,627 based on 130 single claims (out of 161 total claims) for HCPCS code C9740, which is comparable to the payment rate of $5,250 for New Technology APC 1565. We note that HCPCS code C9740 is the only code assigned to New Technology APC 1565. We do not believe HCPCS code C9740 should be assigned to either New Technology APC 1566 (New Technology—Level 29 ($5500-$6000)), with a payment rate of approximately $5,750 or New Technology APC 1567 (New Technology—Level 30 ($6000-$6500)), with a payment rate of approximately $6,250) because the payment rates for these APCs are significantly higher than the geometric mean cost of approximately $5,627 for HCPCS code C9740. Therefore, in this final rule with comment period, we are revising the APC assignment for HCPCS code C9740 to New Technology APC 1565 for CY 2016. We note that HCPCS code C9740 is the only procedure assigned to New Technology APC 1565, which is a device-intensive APC for CY 2016. We anticipate that the CY 2015 claims data (which will be used for CY 2017 ratesetting) for HCPCS code C9740 will be sufficient for the assignment of the code to a clinical APC in CY 2017.

Comment: One commenter suggested that CMS reassign HCPCS code C9739 (Cystourethroscopy, with insertion of transprostatic implant; 1 to 3 implants), from clinical APC 5374 (Level 4 Urology and Related Services) to C-APC 5375 (Level 5 Urology and Related Services). The commenter believed that, similar to HCPCS code C9740, HCPCS code C9739 should be assigned to a device-intensive APC. In addition, the commenter believed that because both procedures describe an Urolift implant procedure and the only difference is that HCPCS code C9739 involves 1 to 3 transprostatic implants while HCPCS code C9740 involves 4 or more implants, both procedure codes should be assigned to device-intensive APCs.

Response: We agree with the commenter's suggestion to assign HCPS code C9739 to APC 5375. Analysis of the latest claims data used for this final rule revealed a geometric mean cost of approximately $4,263 based on 53 single claims (out of 54 total claims) for HCPCS code C9739. We believe that the geometric mean cost for HCPCS code C9739 is similar to other procedures assigned to APC 5375, which has a geometric mean cost of approximately $3,551. Therefore, for CY 2016, we are reassigning HCPCS code C9739 to APC 5375.

Comment: One commenter suggested that a device HCPCS C-code or HCPCS code L8699 (Prosthetic implant, not otherwise specified) should be required on all claims that report HCPCS code C9739 or C9740. The commenter reported that, based on the review of the CY 2016 OPPS/ASC proposed rule claims data, approximately 50 percent of the claims did not have a device code reported, thus making it impossible to determine the number of implants used. The commenter requested the establishment of device edits to ensure that implant costs are included in the claims to facilitate ratesetting.

Response: We do not believe that we should establish device edits for every procedure code, including HCPCS code C9739 or C9740. We rely on hospitals to report procedures, services, and items accurately. As we have stated in previous final rules, it is extremely important that hospitals use all of the required HCPCS codes to report the performance of all services they furnish, consistent with the code descriptors, CPT and/or CMS instructions, and correct coding principles, whether payment for the services is made separately or packaged. The accuracy 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.

However, in the CY 2016 OPPS/ASC proposed rule, we proposed to establish claims processing edits such that a device HCPCS code must be reported on the same claim form for any procedure code assigned to a device-intensive APC (80 FR 39268). We further stated that claims submitted with a procedure code requiring a device that is assigned to a device-intensive APC but without any device HCPCS code on the claim would be returned to the provider. We are finalizing this proposal for CY 2016. Specifically, only the procedures that require the implantation of a device that are assigned to a device-intensive APC will require a device code on the claim and claims processing edits will apply only to those APCs that are listed in Table 42 of this final rule with comment period. Further discussion of this final policy can be found in section IV.B. of this final rule with comment period. Because HCPCS code C9740 is assigned to a device-intensive APC for CY 2016, we expect hospitals to report the appropriate device code with the implant procedure. In this case, we also would expect hospitals to report HCPCS code L8699 when reporting HCPCS code C9740. This will ensure that device costs are always reported on the claim and are appropriately captured in claims that CMS uses for ratesetting.

In summary, after consideration of the public comments we received, we are finalizing our proposals, with modification. Specifically, we are reassigning HCPCS code C9740 from New Technology APC 1564 to New Technology APC 1565, and reassigning HCPCS code C9739 from clinical APC 5374 to APC 5375 for CY 2016. We note that the APC to which HCPCS code C9740 is assigned is designated as a device-intensive APC, which will require reporting the appropriate device code (in this case, HCPCS code L8699) when the surgical procedure describing HCPCS C9740 is reported on the claim. The final CY 2016 payment rates for HCPCS codes C9739 and C9740 are included in Addendum B to this final rule with comment period (which is available via the Internet on the CMS Web site).

b. Retinal Prosthesis Implant Procedure

CPT code 0100T describes the implantation of a retinal prosthesis. This surgical procedure is currently assigned to APC 0673, which has a CY 2015 payment rate of approximately $3,123. The retinal prosthesis device that is used in the procedure described by CPT code 0100T is described by HCPCS code C1841 (Retinal prosthesis, Start Printed Page 70378includes all internal and external components). The first retinal prosthesis (Argus® II Retinal Prosthesis System) was approved by the FDA in 2013 for adult patients with advanced retinitis pigmentosa. Pass-through status was granted for HCPCS code C1841 beginning October 1, 2013, and is proposed to expire on December 31, 2015. We refer readers to section IV.A.1.b. of this final rule with comment period for the discussion of the expiration of pass-through for HCPCS code C1841.

After pass-through status expires for a medical device, the payment for the device is packaged into the payment for the associated surgical procedure. The surgical procedure in which the Argus device (HCPCS code C1841) is implanted is described by CPT code 0100T. Review of the CY 2014 OPPS claims data used for the CY 2016 OPPS/ASC proposed rule showed only one single claim for CPT code 0100T with HCPCS code C1841 on the claim. Due to the newness of this surgical procedure and its associated implantable device and the extremely low number of CY 2014 HOPD claims for this procedure, in the CY 2016 OPPS/ASC proposed rule (80 FR 39257), we proposed to reassign CPT code 0100T from existing APC 0673 (Level III Intraocular Procedures) to proposed newly established New Technology APC 1593 (New Technology—Level 46 ($70,000-$80,000)), with a payment of approximately $75,000 for CY 2016. We refer readers to section III.C.2. of the proposed rule and this final rule with comment period for a discussion of the proposed expansion of the New Technology APC levels. We stated in the proposed rule (80 FR 39257) that “[w]e are proposing a CY 2016 OPPS payment of approximately $75,000 for proposed new APC 1593, which would be the payment for CPT code 0100T (not including the retinal prosthesis), plus the proposed maximum FY 2016 IPPS new technology add-on payment for a case involving the Argus® II Retinal Prosthesis System of $72,028.75 (80 FR 24425).” In the proposed rule (80 FR 39257), we also stated that we believe that, given the newness of this procedure and the severe paucity of OPPS claims data, this approach provides a reasonable payment amount that is similar to the payment for the same procedure provided in the hospital inpatient setting. Once we have more claims data, we indicated that we will reassess the APC placement of the retinal prosthesis implantation procedure in light of our standard rate setting methodology. We invited public comments on this proposal.

Comment: Several commenters expressed concern over the proposed payment rate of $75,000 for CPT code 0100T. The commenters reported that the cost of the Argus II device is approximately $144,000 while the cost of the surgical procedure to implant the device is between approximately $5,000 and $10,000. The commenters urged CMS to establish a payment rate of approximately $150,000 to accurately pay hospitals for the full cost of providing the procedure and furnishing the device. Other commenters reported confusion about the proposed policy. Based on their reading of the proposal, the commenters believed that CMS is proposing to pay (1) $75,000 for New Technology APC 1593 plus (2) the IPPS New Technology payment amount of approximately $72,029, which would result in a total procedure payment of approximately $147,029. The commenters requested clarification on the proposed total procedure payment. Another commenter indicated that a total payment of $75,000 for the device and surgical procedure is inappropriate and further disagreed with CMS' use of the IPPS new technology add-on payment as a proxy for the Argus II procedure cost because this add-on payment is set at 50 percent of costs of the new technology.

Response: We appreciate the commenters' request for clarification. In the CY 2016 OPPS/ASC proposed rule, we proposed to pay for the surgical implant procedure including the retinal prosthesis device under newly proposed New Technology APC 1593. The following sentence in the proposed rule (80 FR 39257) may be the source of some commenters' confusion: “[w]e are proposing a CY 2016 OPPS payment of approximately $75,000 for proposed new APC 1593, which would be the payment for CPT code 0100T (not including the retinal prosthesis), plus the proposed maximum FY 2016 IPPS new technology add-on payment for a case involving the Argus® II Retinal Prosthesis System of $72,028.75.” What we meant by that sentence is the payment amount of $75,000 for APC 1593 would be comprised of the approximate sum of: (1) The payment amount for the procedure ($3,123, which is the CY 2015 payment rate for the procedure described by CPT code 0100T); and (2) the payment amount for the device ($72,028.75—the proposed IPPS payment amount for the device). That is, the approximate $75,000 payment for APC 1593 is the total payment amount, which includes payment for both the procedure and the device.

The final rule claims data contain additional claims data for CPT code 0100T. There are 5 total claims (2 single claims) with a geometric mean cost of approximately $95,866. Although this remains a very low volume of claims, we prefer to base the cost estimate for this procedure (which include the cost of the device) on the hospital outpatient claims data rather than using the IPPS new technology add-on payment as a proxy for the procedure cost. However, we do not believe that there are a sufficient number of claims upon which to base a clinical APC for the retinal prosthesis procedure. Therefore, we are creating a New Technology APC (Level 48) for CPT code 0100T with the cost band range of $90,000 to $100,000 and a payment amount of $95,000. In addition, because the proposed additional New Technology APCs ended with Level 46 ($70,000-$80,000), we also are creating a New Technology Level 47 with the cost band range of $80,000 to $90,000 and a payment amount of $85,000 to fill in the gap between New Technology APC Level 46 and Level 48.

Comment: One commenter recommended the establishment of a HCPCS G-code for the Argus implant procedure and the assignment of this G-code to a new technology APC with a payment rate of $150,000.

Response: We disagree with establishing a HCPCS G-code and assigning it to a new technology APC with a payment rate of $150,000 because CPT code 0100T accurately describes the procedure associated with implanting the Argus II device.

Comment: One commenter recommended, as an alternative to the New Technology APC payment, that CMS continue to pay separately for CPT code 0100T and HCPCS code C1841. Specifically, the commenter requested that CMS pay separately for surgical procedure CPT code 0100T and also extend the pass-through status for the device HCPCS code C1841 through December 31, 2016 because of very limited claims data.

Response: We stated in the CY 2016 OPPS/ASC proposed rule that pass-through payment status for device HCPCS code C1841 would expire on December 31, 2015 because it was approved for pass-through status effective October 1, 2013 (80 FR 39264). We also proposed to package and assign device HCPCS code C1841 to OPPS status indicator “N” to indicate that the payment for this code would be included in the surgical procedure CPT code 0100T. We do not agree that Start Printed Page 70379extending the pass-through status would be appropriate because we believe it would be inconsistent with the statutory pass-through provision. Section 1833(t)(6)(B)(iii) requires that, under the OPPS, a category of devices be eligible for transitional pass-through payments for at least 2 years, but not more than 3 years.

After consideration of the public comments we received, we are assigning CPT code 0100T to New Technology APC 1599, which has a final payment of $95,000 for CY 2016. This payment rate includes the payment for the retinal prosthesis system as well as all other items and supplies used in the surgical procedure to implant the device. Because payment for retinal prosthesis is included in CPT code 100T, we are finalizing our proposal to assign HCPCS code C1841 to OPPS status indicator “N” to indicate that this code is packaged under the hospital OPPS. We also are designating APC 1599 as a device-intensive APC because almost all of the cost of the implantation procedure is attributable to the cost of the device. Because CPT code 0100T is assigned to a device-intensive APC, a device HCPCS C-code will be required on claims with CPT code 0100T according to the device edit policy described in section IV. of this final rule with comment period.

D. OPPS Ambulatory Payment Classification (APC) Group Policies

Section 1833(t)(9)(A) of the Act requires the Secretary to review, not less often than annually, and to revise the groups, relative payment weights, and the wage and other adjustments to take into account changes in medical practices, changes in technology, the addition of new services, new cost data, and other relevant information and factors. Therefore, every year we review and revise the APC assignments for many procedure codes and diagnosis codes based on our evaluation of these factors using the latest OPPS claims data. Although we do not discuss every APC change in the proposed and final rules, these changes are listed in the OPPS Addendum B of the proposed and final rules. Specifically, procedure and diagnosis codes with revised APC and/or status indicator assignments are identified by comment indicator “CH” (Active HCPCS code in current year and next calendar year, status indicator and/or APC assignment has changed) in the OPPS Addendum B payment file.

In our efforts to improve clinical and resource homogeneity among the APC groupings and update the hospital OPPS, we conducted a comprehensive review of the current structure of the APCs and codes assignments for CY 2015. Consequently, as part of our broader efforts to thoroughly review, revise, and consolidate APCs to improve both resource and clinical homogeneity, we proposed in the CY 2015 OPPS/ASC proposed rule (79 FR 40981 through 40983) to restructure the first set of clinical families, specifically the ophthalmology and gynecology APCs. We proposed to restructure the APCs for these clinical families based on the following principles:

  • Improved clinical homogeneity;
  • Improved resource homogeneity;
  • Reduced resource overlap in APCs within a clinical family; and
  • Greater simplicity and improved understanding of the structure of the APCs.

Based on our review, for CY 2015, we finalized the APC restructuring for the ophthalmology and gynecology APCs. For the complete discussion on the APC restructuring for the ophthalmology APCs, we refer readers to the CY 2015 OPPS/ASC final rule with comment period (79 FR 66857 through 66859). Similarly, for the complete discussion on the APC restructuring for the gynecology APCs, we refer readers to the CY 2015 OPPS/ASC final rule with comment period (79 FR 66849 through 66851).

For the CY 2016 update, as a part of our continued review of the structure of the APCs, in the CY 2016 OPPS/ASC proposed rule (80 FR 39257), we proposed to restructure nine APC clinical families based on the same principles used for restructuring the ophthalmology and gynecology APCs for CY 2015. We discuss below our proposed restructuring for the nine APC clinical families. We note that, in conjunction with the proposed restructuring, we proposed to renumber several families of APCs to provide consecutive APC numbers for consecutive APC levels within a clinical family for improved identification of APCs and ease of understanding the APC groupings. For example, the seven APC levels for urology procedures were proposed to be renumbered as APC 5371 (Level 1 Urology and Related Services), APC 5372 (Level 2 Urology and Related Services), APC 5373 (Level 3 Urology and Related Services), APC 5374 (Level 4 Urology and Related Services), APC 5375 (Level 5 Urology and Related Services), APC 5376 (Level 6 Urology and Related Services), and APC 5377 (Level 7 Urology and Related Services). We stated in the proposed rule that we believe that consecutive numbering of the APCs will enhance the public understanding of the APC groups and will make it easier for them to communicate to the agency about issues concerning APCs. We note that, under this initiative, we did not propose to change the numbering of the composite APCs or the New Technology APCs for CY 2016.

Comment: Several commenters expressed concern about the lack of detail in the proposed rule on the proposed consolidation and restructuring of the nine APC groups. The commenters stated that CMS provided few details in the proposed rule to enable commenters to adequately assess the full impact of the proposed APC reconfiguration, and requested a delay in the implementation of the proposal until more information is available. They also stated that CMS did not provide impact tables to show the projected impact that the proposed APC consolidation would have on Medicare payments by departments or specialties, or provide the rationale behind the decisions for each combination of APC groups, which they believed further complicated analysis of each proposed APC group. Some commenters indicated that they had difficulty analyzing the impact and interrelationship of the different proposed policies to adequately determine Medicare payments to hospitals. Several commenters requested that CMS not finalize the proposal and stated that the proposed APC groupings do not reflect clinical or resource homogeneity. Some commenters believed that CMS should develop and establish criteria before finalizing the reconfiguration of the nine APC groups.

However, many other commenters supported the consolidation and restructuring of the nine clinical family APCs but requested modification to the APC groupings. In particular, the commenters requested the reassignment of several procedures and services to certain APCs for the final rule. In addition, several commenters requested further information in the final rule, and urged CMS to include a separate impact analysis for each restructured APC clinical family showing the distributional impact of the restructuring across CMS' usual categories (such as urban/rural location, bed size, type of ownership and teaching status).

Response: Based on our experience with the existing APCs under the OPPS, we believe that establishing more inclusive categories of procedures and services is more appropriate for future ratesetting under the OPPS. Therefore, we believe that the proposed restructured APCs have a more clinically appropriate granularity, while improving resource similarity. We also Start Printed Page 70380believe the proposed restructure and consolidation of APCs more appropriately categorizes all of the procedures and services within each of the nine APC groups such that the procedures and services within each proposed newly configured APC are more comparable with respect to clinical characteristics and resource use.

In addition, we disagree that we should delay or not finalize the proposed consolidation and restructuring of the nine APC groups pending provision of the extensive data that the commenters requested. We make available a considerable amount of data for public analysis each year for both the proposed rule and the final rule. While we are not developing and providing the extensively detailed information that the commenters requested, we are providing the public use files of claims and a detailed narrative description of our data process that the public can use to perform any desired analyses (available at https://www.cms.gov/​Medicare/​Medicare-Fee-for-Service-Payment/​HospitalOutpatientPPS/​Hospital-Outpatient-Regulations-and-Notices.html.

We note that we included the impact of the CY 2016 OPPS proposals on payment to different classes of hospitals in Table 65 of the proposed rule (80 FR 39362 through 39363). We believe our estimate of the impact of these proposed changes provided valuable information to hospitals. We believe that it would be impractical and nonproductive to develop impact tables for each of the primary clinical families that were proposed to be reorganized. Hospitals generally do not perform a limited set of services confined to one clinical family. Therefore, we believe that impacts reflecting the interaction and collective effect of the proposed APC restructuring best depict how most hospitals will fare under the proposed reorganization. Many commenters submitted comments relating to particular services and were able to provide detailed analysis in their comments based on the data and other information provided with the proposed rule.

Further, we do not agree that we should develop and establish additional criteria before finalizing the proposed consolidation and restructuring of the nine APC groups. The OPPS statute provides that procedures grouped in APCs must be similar clinically and in terms of resource use. In various sections of this final rule with comment period, we have applied those criteria and responded to many of the public comments we received, which included evaluations of the recommended changes to the APC assignments, based on those criteria. Each year, under the OPPS, we revise and make changes to the APC groupings based on the latest hospital outpatient claims data to appropriately place procedures and services in APCs based on clinical characteristics and resource similarity.

Therefore, after consideration of the public comments we received, we are finalizing, with some modifications that are discussed below in the sections specific to each clinical family, the proposed consolidation and restructuring of the nine clinical families of APCs for CY 2016. Each of the nine clinical families, the public comments we received, and our responses on those families are discussed below. The final payment rates for the nine individual clinical family APCs are included in Addendum A to this final rule with comment period.

1. Airway Endoscopy Procedures

As a part of our CY 2016 comprehensive review of the structure of the APCs and procedure code assignments, we examined the APCs that contain airway endoscopy procedures. In the CY 2016 OPPS/ASC proposed rule (80 FR 39257), for CY 2016, we proposed to restructure the OPPS APC groupings for airway endoscopy procedures to more appropriately reflect the costs and clinical characteristics of the procedures within each APC grouping in the context of the OPPS. The current APCs for airway endoscopy procedures are divided into upper airway and lower airway endoscopy APC series. After reviewing these APCs, we believe that consolidating the current upper airway and lower airway APC series into a single APC grouping for airway endoscopy procedures would result in improved resource homogeneity for the various airway endoscopy procedures, while maintaining clinical homogeneity. Therefore, for CY 2016, we proposed to restructure and consolidate the APCs that include airway endoscopy procedures into a single APC grouping. Table 18 of the proposed rule listed the current CY 2015 APCs that contain the airway endoscopy procedures, and Table 19 of the proposed rule listed the proposed CY 2016 APCs that would result from our consolidation and restructuring of the current airway endoscopy procedure APCs into a single APC grouping. The proposed restructured/renumbered CY 2016 airway endoscopy APCs were: Proposed APC 5151 (Level 1Airway Endoscopy); proposed APC 5152 (Level 2 Airway Endoscopy); proposed APC 5153 (Level 3 Airway Endoscopy); proposed APC 5154 (Level 4 Airway Endoscopy); and proposed APC 5155 (Level 5 Airway Endoscopy.

We invited public comments on this proposal.

Comment: Several commenters supported the proposed restructuring of the airway endoscopy APCs. However, the commenters submitted a list of procedure codes (indicated in Table 22 below) that they requested CMS to reassign to higher-level APCs in the airway endoscopy grouping based on greater resource similarity of the procedures described by the codes listed by the commenters compared to the procedures described by the proposed codes assigned to the proposed APCs. In addition, the HOP Panel recommended that CMS reassign the procedures described by CPT codes 31652 and 31653 from proposed APC 5153 to proposed APC 5154 because the Panel agreed with the presenter that the procedures described by these new codes are most similar to the procedures assigned to CPT code 31629, which is assigned to APC 5154. One commenter requested that CMS assign the procedure described by CPT code 31652 to APC 5154 and the procedure described by CPT code 31653 to APC 5155. Another commenter requested that CMS reassign the procedure described by CPT code 31515 from proposed APC 5152 to proposed APC 5154 because the commenter believed that this procedure is more clinically similar to other procedures (described by CPT codes 31629 and 31645) assigned to proposed APC 5154. One commenter requested that CMS create a Level 6 Airway Endoscopy APC and assign the procedures described by CPT codes 31636, 31634, and 31647 to this newly APC because the costs of these procedures are not similar to the costs of other procedures assigned to APC 5155.

Response: We agree in part with the commenters' requested code reassignments and with the Panel's recommendation. However, we do not believe that the procedure described by CPT code 31515 should be reassigned to proposed APC 5154, that the procedure described by CPT code 31653 should be assigned to proposed APC 5153 instead of proposed APC 5155, or that we should create a Level 6 Airway Endoscopy APC. We are reassigning seven of the eight recommended procedure codes (as listed in Table 22 below) to the next higher level airway endoscopy APC to improve the resource homogeneity of all the procedures assigned to the airway endoscopy APCs. We do not agree with the commenter Start Printed Page 70381that the procedure described by CPT code 31515 should be assigned to the higher level APC 5154 instead of APC 5152. The geometric mean cost of the procedure described by CPT code 31515 is approximately $444, and the geometric mean cost of APC 5152 is approximately $393. The geometric mean cost of APC 5154 is approximately $2,084. We believe that, given the significant difference in resource use and similarity between the procedure described by CPT code 31515 and the procedures assigned to APC 5154, assigning the procedure described by CPT code 31515 to APC 5154 would be an inappropriate APC assignment. We also believe that, based on the clinical characteristics of the new airway endoscopy procedure grouping described by CPT code 31653, the procedure is most appropriately assigned to APC 5154, which is one level higher than what was proposed. In addition, we do not believe it is necessary to create a sixth level to the Airway Endoscopy APC grouping to appropriately pay for the procedures described by CPT codes 31636, 31634, and 31647. The procedures described by these CPT codes are low volume procedures, and even if the procedures represented a significant volume in the CY 2014 claims data, assigning these procedures to APC 5155 would not result in a violation of the 2 times rule for the APC.

Table 22 below shows the airway endoscopy procedure codes with the commenters' specific APC recommendations and the final CMS decisions, final APC assignment, and final status indicator assignment for CY 2016.

Table 22—Airway Endoscopy Procedure Codes With Commenters' Specific APC Recommendations and Final CMS Decisions

CPT/HCPCS codeShort descriptorProposed CY 2016 SIProposed CY 2016 APCCommenter requested APCCMS DecisionFinal CY 2016 SIFinal CY 2016 APC
31295Sinus endo w/balloon dilT51545155AgreeT5155
31296Sinus endo w/balloon dilT51545155AgreeT5155
31297Sinus endo w/balloon dilT51545155AgreeT5155
31515Laryngoscopy for aspirationT51525154DisagreeT5152
31626Bronchoscopy w/markersT51545155AgreeT5155
31628Bronchoscopy/lung bx eachT51535154AgreeT5154
31652 *Bronch ebus samplng 1/2 nodeT51535154AgreeT5154
31653 **Bronch ebus samplng 3/> nodeT51535154AgreeT5154
* CPT code 31652 will be effective January 1, 2016. This code was listed as code 3160A (the 5-digit CMS placeholder code) in Addendum B, O, and Q2 of the CY 2016 OPPS/ASC proposed rule.
** CPT code 31653 will be effective January 1, 2016. This code was listed as code 3160B (the 5-digit CMS placeholder code) in Addendum B, O, and Q2 of the CY 2016 OPPS/ASC proposed rule.

Comment: One commenter requested that CMS assign status indicator “T” (instead of status indicator “N”) to new CY 2016 CPT codes 0406T (Nasal endoscopy, surgical, ethmoid sinus, placement of drug eluting implant) and 0407T (Nasal endoscopy, surgical, ethmoid sinus, placement of drug eluting implant; with biopsy, polypectomy or debridement). (We note that CPT codes 0406T and 0407T were listed as 040XF and 040XG, respectively, in Addendum B, O, and Q2 of the CY 2016 OPPS/ASC proposed rule.) The commenter suggested, as an alternative, that these codes be assigned status indicator “Q2” (T-packaged). In addition, the commenter recommended that CMS assign CPT code 0406T to APC 5153 and CPT code 0407T to APC 5154. The commenter believed that these procedures should be paid separately under the OPPS because they are performed as standalone surgical procedures according to the code descriptors.

Response: We disagree with the commenter that the procedures described by CPT codes 0406T and 0407T are performed as standalone procedures. We believe that procedures describing the placement of a drug-eluting sinus implant under the OPPS are performed as part of several more comprehensive and extensive endoscopic sinus surgical procedures. Therefore, we are finalizing our proposal to package payment for the procedures described by CPT codes 0406T and 0407T, and to assign these procedures to status indicator “N” for CY 2016.

After consideration of the public comments we received, we are finalizing the proposed structure of the airway endoscopy APCs with the code reassignments shown in Table 22 above. Table 23 below lists the final CY 2016 APCs that result from our consolidation and restructuring of the current airway endoscopy procedure APCs into a single APC grouping. The procedures assigned to each APC are listed in Addendum B to this final rule with comment period, which is available via the Internet on the CMS Web site.

Table 23—Final CY 2016 Airway Endoscopy APCs

Final CY 2016 APCCY 2016 APC group title
5151Level 1 Airway Endoscopy.
5152Level 2 Airway Endoscopy.
5153Level 3 Airway Endoscopy.
5154Level 4 Airway Endoscopy.
5155Level 5 Airway Endoscopy.

2. Cardiovascular Procedures and Services

a. Cardiac Contractility Modulation (CCM) Therapy

In Addendum B to the CY 2016 OPPS/ASC proposed rule, we proposed to assign 11 new CY 2016 cardiac contractility modulation (CCM) therapy system CPT codes to various APCs, which are listed in Table 24 below. We also assigned these codes to comment indicator “NP” in Addendum B to the proposed rule to indicate that the codes are new for CY 2016 with a proposed APC assignment and that public comments would be accepted on their proposed APC assignments. We note these codes will be effective January 1, 2016. However, in the proposed rule, the codes were listed as 04XX1 through 04XX (the 5-digit CMS placeholder code) in Addendum B, O, and Q2 of the CY 2016 OPPS/ASC proposed rule.Start Printed Page 70382

Table 24—Proposed CY 2016 OPPS APCs and Status Indicators for the Cardiac Contractility Modulation CPT Procedure Codes

CY 2016 OPPS/ASC proposed rule 5-digit CMS placeholder codeCY 2016 CPT codeShort descriptorProposed CY 2016 OPPS status indicatorProposed CY 2016 OPPS APC
04XX10408TInsj/rplc cardiac modulj sysJ15223
04XX20409TInsj/rplc cardiac modulj pls gnJ15223
04XX30410TInsj/rplc car modulj atr eltJ15222
04XX40411TInsj/rplc car modulj vnt eltJ15222
04XX50412TRmvl cardiac modulj pls genJ15222
04XX60413TRmvl car modulj tranvns eltQ25221
04XX70414TRmvl & rpl car modulj pls gnJ15224
04XX80415TRepos car modulj tranvns eltT5181
04XX90416TReloc skin pocket pls genT5054
04X100417TPrgrmg eval cardiac moduljQ15741
04X110418TInterro eval cardiac moduljQ15741

Comment: One commenter disagreed with CMS' proposed APC assignments for certain cardiac contractility modulation (CCM) Category III CPT codes that are new in CY 2016 and therefore do not have associated claims data available. Specifically, the commenter requested four CPT codes be reassigned to the following APCs:

  • CPT code 408T (Insertion or replacement of permanent cardiac contractility modulation system, including contractility evaluation when performed, and programming of sensing and therapeutic parameters; pulse generator with transvenous electrodes) to APC 5232 (Level 2 ICD and Similar Procedures);
  • CPT code 0409T (Insertion or replacement of permanent cardiac contractility modulation system, including contractility evaluation when performed, and programming of sensing and therapeutic parameters; pulse generator only) to APC 5231 (Level 1 ICD and Similar Procedures);
  • CPT code 0412T (Removal of permanent cardiac contractility modulation system; pulse generator only) to APC 5221 (Level 1 Pacemaker and Similar Procedures); and
  • CPT code 0414T (Removal and replacement of permanent cardiac contractility modulation system pulse generator only) to APC 5231 (Level 1 ICD and Similar Procedures).

The commenter believed that the three codes for inserting or replacing the system or pulse generator are more similar clinically and in device complexity and resource use to implantable cardioverter-defibrillators (ICD) procedures. In addition, the commenter stated that the procedure time and device costs for CCM procedures exceed those for pacemaker procedures. The commenter believed the recommended APC assignment for removal of the CCM pulse generator codes better aligns with other similar removal procedure codes.

Response: We agree with the commenter that there would be greater homogeneity, both clinically and in terms of resource use, by reassigning CCM procedures for insertion and/or replacement of the CCM device (described by CPT code 0409T) from the pacemaker APCs to the ICD APCs. We also agree with the commenter that procedures for removal of the CCM device (described by CPT codes 0412T and 0414T) are more homogenous clinically and in terms of resource use with pacemaker procedures. Therefore, we are accepting the commenter's recommendation to reassign the procedures described by CPT codes 0409T and 0414T to APC 5231 and to reassign the procedures described by CPT code 0412T to APC 5221. However, we disagree with the commenter's recommendation to reassign the procedure described by CPT 0408T to APC 5232. Based on the latest available hospital claims data used for this final rule with comment period, we believe that the procedure described by CPT code 0408T should be assigned to APC 5231 because of its clinical and resource homogeneity with other procedures assigned to APC 5231. Table 24 below summarizes the commenter's requested APC assignment for each of the codes along with our decision and the final APC and status indicator assignments.

Table 24—Cardiac Contractility Modulation Procedure Codes With Commenter's Recommended Specific APC Assigment, Final CMS Decision, and Final APC and Status Indicator Assignment

CPT/HCPCS codeShort descriptorProposed CY 2016 status indicatorProposed CY 2016 APCCommenter requested APCCMS decisionFinal CY 2016 status indicatorFinal CY 2016 APC
0408TInsj/rplc cardiac modulj sysJ152235232DisagreeJ15231
0409TInsj/rplc cardiac modulj pls gnJ152235231AgreeJ15231
0412TRmvl cardiac modulj pls genJ152225221AgreeQ25221
0414TRmvl & rpl car modulj pls gnJ152245231AgreeJ15231

The final status indicator, APC assignment, and payment rate for these codes, where applicable, can be found in Addendum B to this final rule with comment period (which is available via the Internet on the CMS Web site).

b. Cardiac Rehabilitation

Currently, there are four established CPT/HCPCS codes that describe cardiac rehabilitation services:Start Printed Page 70383

  • CPT code 93797 (Physician or other qualified health care professional services for outpatient cardiac rehabilitation; without continuous ECG monitoring (per session));
  • CPT code 93798 (Physician or other qualified health care professional services for outpatient cardiac rehabilitation; with continuous ECG monitoring (per session));
  • HCPCS code G0422 (Intensive cardiac rehabilitation; with or without continuous ECG monitoring with exercise, per session); and
  • HCPCS code G0423 (Intensive cardiac rehabilitation; with or without continuous ECG monitoring without exercise, per session).

In CY 2015, we assigned all four of these codes to APC 0095 (Cardiac Rehabilitation), which has a geometric mean cost of approximately $107. In the CY OPPS/ASC 2016 proposed rule, we discussed that the costs for the two intensive cardiac rehabilitation codes had increased, such that the geometric mean costs for the four cardiac rehabilitation codes that we calculated based on the CY 2014 hospital claims data available for the proposed rule were as follows: For CPT code 93797, the geometric mean cost was approximately $102. For CPT code 93798, the geometric mean cost was approximately $111. For HCPCS code G0422, the geometric mean cost was approximately $262). For HCPCS code G0423, the geometric mean cost was approximately $493. In the proposed rule, we stated that if we grouped all four of these codes into a single APC, a 2 times rule violation would result. Therefore, we proposed two levels of cardiac rehabilitation for CY 2016: APC 5771 (Level 1 Cardiac Rehabilitation), which contained the two standard cardiac rehabilitation codes (CPT codes 93797 and 93798); and APC 5772 (Level 2 Cardiac Rehabilitation), which contained the two intensive cardiac rehabilitation codes (HCPCS codes G0422 and G0423).

Our analysis of the latest CY 2014 hospital claims data available for this final rule with comment period revealed that the geometric mean costs of the intensive cardiac rehabilitation codes have decreased to levels that are more consistent with the prior year's geometric mean costs for these codes. The geometric mean costs for the four codes, using the latest available final rule claims data, are as follows: For CPT code 93797, the geometric mean cost is approximately $100. For CPT code 93798, the geometric mean cost is approximately $109. For HCPCS code G0422, the geometric mean cost is approximately $149. For HCPCS code G0423, the geometric mean cost is approximately $158. Therefore, because the geometric mean costs for all four codes based on the latest available final rule data are relatively similar, we believe that the current CY 2015 single APC configuration for cardiac rehabilitation is more appropriate than the two levels we proposed for CY 2016 and ensures that the procedures assigned to the APC do not cause a violation of the 2 times rule. Analysis using the latest available final rule claims data showed that the 2 time rule violation that existed with the data for the proposed rule no longer exists. Therefore, for CY 2016, we are assigning all four of the cardiac rehabilitation codes (CPT codes 93797 and 93798 and HCPCS code G0422 and G0423) to new APC 5771 (Cardiac Rehabilitation), with a geometric mean cost of approximately $109.

c. Cardiac Telemetry

For CY 2016, we proposed to reassign the procedure described by CPT code 93229 (External mobile cardiovascular telemetry with electrocardiographic recording, concurrent computerized real time data analysis and greater than 24 hours of accessible ECG data storage (retrievable with query) with ECG triggered and patient selected events transmitted to a remote attended surveillance center for up to 30 days; technical support for connection and patient instructions for use, attended surveillance, analysis and transmission of daily and emergent data reports as prescribed by a physician or other qualified health care professional) from APC 0213 (Level 1 Extended EEG, sleep, and Cardiovascular Studies) to proposed APC 5722 (Level 2 Diagnostic Tests and Related Services), with a proposed payment rate of approximately $220.

Comment: One commenter disagreed with the proposed APC assignment for the procedure described by CPT code 93229 to proposed APC 5722. The commenter stated that the proposed payment rate for APC 5722 does not accurately reflect the full cost of providing the service described by CPT code 93229. The commenter also stated that hospitals are miscoding the service, and as a result, the proposed payment for this service is significantly understated. The commenter noted that, based on its internal analysis, several hospitals reported costs under $100 for services described by CPT code 93229. The commenter stated that when this service is provided under the MPFS, the payment is valued at $680.05. The commenter believed that the true cost of providing this service is closer to $795, and recommended that CMS reassign the services described by CPT code 93229 to proposed APC 5724 (Level 4 Diagnostic Tests and Related Services), with a proposed payment rate of approximately $880.

Response: As we stated in the CY 2015 OPPS/ASC final rule with comment period (79 FR 66847), CPT code 93229 became effective January 1, 2009. We believe that 5 years is sufficient time for hospital coders to understand the procedure described by CPT code 93229 and how to appropriately report this service on hospital claims. Based on our analysis of the CY 2014 hospital outpatient claims data used for this final rule with comment period, we are unable to determine whether hospitals are miscoding the service described by CPT code 93229. It is generally not our policy to judge the accuracy of hospital coding and charging for purposes of ratesetting (75 FR 71838). We rely on hospitals to accurately report the use of HCPCS codes in accordance with their code descriptors and CPT and CMS instructions, as applicable, and to report services on claims and charges and costs for the services on their Medicare hospital cost report appropriately. However, we do not specify the methodologies that hospitals use to set charges for this or any other service.

We acknowledge that payment under the MPFS is made separately for the procedure described by CPT code 93229. However, the MPFS and the OPPS are different payment systems with entirely different ratesetting methodologies. Each is established under a different set of regulatory and statutory principles and the policies established under the physician fee schedule do not have bearing on the payment policies under the OPPS. For example, the OPPS uses actual annual hospital claims data to calculate payment rates, while the MPFS relies on estimates of relative value units (RVUs) from the American Medical Association/Specialty Society Relative Value Update Committee (RUC).

Furthermore, as has been our practice since the implementation of the OPPS in 2000, we review, on an annual basis, the APC assignments for the procedures and services paid under the OPPS. Based on the latest hospital outpatient claims data used for this final rule with comment period, our analysis does not support the assignment of the procedure described by CPT code 93229 to APC 5724. We examined the latest hospital outpatient claims data for CPT code 93229 for dates of service between January 1, 2014, and December 31, 2014, that were processed on or before June 30, 2014. Our analysis of the claims data Start Printed Page 70384shows a geometric mean cost of approximately $170 for CPT code 93229 based on 2,153 single claims (out of 3,554 total claims). We do not believe that it is appropriate to assign CPT code 93229 to APC 5724 because its geometric mean cost is approximately $896, which is significantly higher than the geometric mean cost of approximately $170 for CPT code 93229, and assigning CPT code 93229 to APC 5724 would result in an overpayment for the procedure. We believe that APC 5722 is the most appropriate APC assignment for the procedure described by CPT code 93229 based on its clinical and resource homogeneity to the other diagnostic tests and procedures assigned to this APC.

After consideration of the public comment we received, we are finalizing our proposal, without modification, to reassign the procedure described by CPT code 93229 to APC 5722 for CY 2016. The final payment rate for CPT code 93229 can be found in Addendum B to this final rule with comment period, which is available via the Internet on the CMS Web site.

3. Diagnostic Tests and Related Services

As a part of our CY 2016 comprehensive review of the structure of the APCs and procedure code assignments, we examined the APCs that contain diagnostic tests and related services. For CY 2016, we proposed to restructure the OPPS APC groupings for diagnostic tests and related services to more appropriately reflect the costs and clinical characteristics of the services within each APC grouping in the context of the OPPS. The current APCs for diagnostic tests and related services are divided according to organ system or physiologic test type. After reviewing these APCs, we believe that the current APC structure is based on clinical categories that do not necessarily reflect the significant differences in the delivery of these services in the HOPD. The current level of granularity for these APCs results in groupings that are unnecessarily narrow for the purposes of a prospective payment system. Therefore, in the CY 2016 OPPS/ASC proposed rule (80 FR 39258), for CY 2016, we proposed to restructure and consolidate the APCs that include diagnostic tests and related services. We believe that this proposed restructuring and consolidation of APCs into larger APC groupings would more appropriately reflect a prospective payment system that is based on payment groupings and not code-specific payment rates, while maintaining clinical and resource homogeneity. Table 20 of the proposed rule listed the current CY 2015 APCs that contain nonimaging diagnostic tests, and Table 21 of the proposed rule listed the CY 2016 APCs that would result from our proposed consolidation and restructuring of the current diagnostic test and related services APCs. We invited public comments on this proposal.

Comment: A few commenters requested that CMS unpackage the payment for cochlear implant procedures described by CPT codes 92601 through 92604, and the procedures for programming an auditory brainstem implant described by CPT code 92640, and to assign these procedure codes to status indicator “S” instead of status indicator “Q1.” The commenters stated that these services are independent evaluations that are generally not related to other diagnostic tests or therapeutic services. Instead, according to these commenters, these procedures are very specific services used in the treatment for a limited population of patients with cochlear implants. One commenter provided a summary of an analysis of the claims data that it believed supports the position that payment for these services are often packaged with other unrelated OPPS services. One commenter requested that CMS unpackage the payment for procedures described by CPT code 92557 (Comprehensive audiometry threshold evaluation and speech recognition (92553 and 92556)) because payments for these procedures are packaged with payment for other unrelated services a majority of the time.

Response: We agree with the commenters regarding the cochlear implant procedures described by CPT codes 92601 through 92604 and CPT code 92640. After further review of the clinical context in which these services are performed in the HOPD, we believe that separate payment (identified by status indicator “S”) for these services is more appropriate than a conditional packaged payment triggered by status indicator “Q1.” Therefore, we are changing the status indicator assignments for these five procedure codes from “Q1” to “S” for CY 2016.

With regard to the procedure described by CPT code 92557, we disagree with the commenter. We believe that audiometry is an ancillary diagnostic test that is appropriately conditionally packaged similar to many other diagnostic tests. Hearing loss has multiple potential etiologies and an evaluation of the auditory system is an important part of various diagnostic tests. It is not relevant that this service is performed by an audiologist because several different kinds of services are performed in the HOPD by various health care professionals, depending upon their area of expertise. In addition, the professional that performs the service is not a prerequisite for payment packaging determinations. We note that, under the hospital OPPS, when a conditionally packaged service is performed on a different date of service and separate from other services, it is paid separately.

Comment: One commenter supported the proposed restructuring of the diagnostic test APCs. However, the commenter suggested that, because the procedures assigned to APC 5761 (Level 1 Audiometry) and APC 5762 (Level 2 Audiometry) are diagnostic tests, these procedures should be assigned to either the newly reorganized diagnostic test APCs or to one of the minor procedure APCs to which similar procedure are assigned.

Response: We agree, in principle, with the commenter that it would be consistent with the new diagnostic test APCs structure, which includes all forms of diagnostic tests except audiometry, to also assign the audiometry procedure codes in the two audiometry APCs to one of the diagnostic test APCs or, in some cases, to one of the minor procedure APCs. Therefore, for CY 2016, we are reassigning all of the procedures in APCs 5761 and 5762 as shown in Table 25 below. In addition, we are deleting APCs 5761 and 5762. In Table 25 below, we summarize the commenter's requested APC assignment for each of the procedure codes along with our decision and the final APC assignment.

Table 25—Reassignment of Codes Currently Assigned to Level 1 and 2 Audiometry

CPT/HCPCS codeProposed CY 2016 APCCommenter/requested APCCMS decisionFinal CY 2016 APC
0208T5761No RecommendationN/A5732
0209T5761No RecommendationN/A5732
Start Printed Page 70385
0210T5761No RecommendationN/A5732
0211T5761No RecommendationN/A5732
0212T5762No RecommendationN/A5721
9255057625721Agree5721
9255257625721Disagree5734
925535762No RecommendationN/A5721
9255557615732Agree5732
9255657615732Agree5732
9255757625721 or 5722Agree5721
9256157625734Agree5734
9256257625721Agree5721
925635761No RecommendationN/A5732
925645761No RecommendationN/A5732
9256557615732Agree5732
9256757615732Agree5732
9257057625721Agree5721
925715761No RecommendationN/A5732
925725762No RecommendationN/A5721
925755761No RecommendationN/A5732
9257657615732Agree5732
9257757625721Disagree5723
9257957625721Agree5721
9258257625721Agree5721
9258357615732Agree5732
9259657615732Agree5732
9260157625721 or 5722Agree5721
9260257625721 or 5722Agree5721
9260357625721 or 5722Agree5721
9260457625721 or 5722Agree5721
9262057625721Agree5721
92625