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Proposed Rule

Medicare Program: Hospital Outpatient Prospective Payment and Ambulatory Surgical Center Payment Systems and Quality Reporting Programs; Organ Procurement Organization Reporting and Communication; Transplant Outcome Measures and Documentation Requirements; Electronic Health Record (EHR) Incentive Programs; Payment to Certain Off-Campus Outpatient Departments of a Provider; Hospital Value-Based Purchasing (VBP) Program

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Start Preamble Start Printed Page 45604

AGENCY:

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

ACTION:

Proposed rule.

SUMMARY:

This proposed rule would revise the Medicare hospital outpatient prospective payment system (OPPS) and the Medicare ambulatory surgical center (ASC) payment system for CY 2017 to implement applicable statutory requirements and changes arising from our continuing experience with these systems. In this proposed rule, we describe the proposed changes to the amounts and factors used to determine the payment rates for Medicare services paid under the OPPS and those paid under the ASC payment system. In addition, this proposed rule would update and refine the requirements for the Hospital Outpatient Quality Reporting (OQR) Program and the ASC Quality Reporting (ASCQR) Program.

Further, in this proposed rule, we are proposing to make changes to tolerance thresholds for clinical outcomes for solid organ transplant programs; to Organ Procurement Organizations (OPOs) definitions, outcome measures, and organ transport documentation; and to the Medicare and Medicaid Electronic Health Record Incentive Programs. We also are proposing to remove the HCAHPS Pain Management dimension from the Hospital Value-Based Purchasing (VBP) Program. In addition, we are proposing to implement section 603 of the Bipartisan Budget Act of 2015 relating to payment for certain items and services furnished by certain off-campus outpatient departments of a provider.

DATES:

Comment period: To be assured consideration, comments on all sections of this proposed rule must be received at one of the addresses provided in the ADDRESSES section no later than 5 p.m. EST on September 6, 2016.

ADDRESSES:

In commenting, please refer to file code CMS-1656-P. Because of staff and resource limitations, we cannot accept comments by facsimile (FAX) transmission.

You may submit comments in one of four ways (no duplicates, please):

1. Electronically. You may (and we encourage you to) submit electronic comments on this regulation to http://www.regulations.gov. Follow the instructions under the “submit a comment” tab.

2. By regular mail. You may mail written comments to the following address ONLY:

Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS-1656-P, P.O. Box 8013, Baltimore, MD 21244-1850.

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

3. By express or overnight mail. You may send written comments via express or overnight mail to the following address ONLY:

Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS-1656-P, Mail Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850.

4. By hand or courier. If you prefer, you may deliver (by hand or courier) your written comments before the close of the comment period to either of the following addresses:

a. For delivery in Washington, DC—

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

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

b. For delivery in Baltimore, MD—

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

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

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

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.

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.Start Printed Page 45605

Hospital Value-Based Purchasing (VBP) Program, contact Grace Im at (410) 786-0700.

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

Medicare Electronic Health Record (EHR) Incentive Program, contact Kathleen Johnson at (410) 786-3295 or Steven Johnson at (410) 786-3332.

New Technology Intraocular Lenses (NTIOLs), contact Elisabeth Daniel at (410) 786-0237.

No Cost/Full Credit and Partial Credit Devices, contact Twi Jackson at (410) 786-1159.

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 or Erick Chuang at (410) 786-1816.

OPPS Drugs, Radiopharmaceuticals, Biologicals, and Biosimilar Products, contact Twi Jackson at (410) 786-1159.

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

OPPS Packaged Items/Services, contact Lela Strong at (410) 786-3213.

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.

Organ Procurement Organization (OPO) Reporting and Communication, contact Peggye Wilkerson at (410) 786-4857 or Melissa Rice at (410) 786-3270.

Partial Hospitalization Program (PHP) and Community Mental Health Center (CMHC) Issues, contact Marissa Kellam at (410) 786-3012 or Katherine Lucas at (410) 786-7723.

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

Section 603 of the Bipartisan Budget Act of 2015 (Off-Campus Departments of a Provider), contact David Rice at (410) 786-6004 or Elisabeth Daniel at (410) 786-0237.

Transplant Enforcement, contact Paula DiStabile at (410) 786-3039 or Caecilia Blondiaux at (410) 786-2190.

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

ACOT Advisory Committee on Organ Transplantation

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

AUC Appropriate use criteria

AWP Average wholesale price

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

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

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

BLS Bureau of Labor Statistics

CAH Critical access hospital

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

CfC Conditions of coverage

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, Public Law 109-171

DSH Disproportionate share hospital

EACH Essential access community hospital

EAM Extended assessment and management

ECD Expanded criteria donor

EBRT External beam radiotherapy

ECG Electrocardiogram

ED Emergency department

EDTC Emergency department transfer communication

EHR Electronic health record

E/M Evaluation and management

ESRD End-stage renal disease

ESRD QIP End-Stage Renal Disease Quality Improvement ProgramStart Printed Page 45606

FACA Federal Advisory Committee Act, Public Law 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, Public Law 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, Public Law 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

ICR Information collection requirement

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, Public Law 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, Public Law 109-432

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

MLR Medical loss ratio

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

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

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

MPFS Medicare Physician Fee Schedule

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

NEMA National Electrical Manufacturers Association

NHSN National Healthcare Safety Network

NOTA National Organ and Transplantation Act

NOS Not otherwise specified

NPI National Provider Identifier

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, Public Law 99-509

O/E Observed to expected event

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

OPTN Organ Procurement and Transplantation Network

OQR [Hospital] Outpatient Quality Reporting

OT Occupational therapy

PAMA Protecting Access to Medicare Act of 2014, Public Law 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

PHS  Public Health Service Act, Public Law 96-88

PN Pneumonia

POS Place of service

PPI Producer Price Index

PPS Prospective payment system

PQRI Physician Quality Reporting Initiative

PQRS Physician Quality Reporting System

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

SIA Systems Improvement Agreement

SIR Standardized infection ratio

SNF Skilled nursing facility

SRS Stereotactic radiosurgery

SRTR Scientific Registry of Transplant Recipients

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 in Response to CY 2016 OPPS/ASC Final Rule With Comment Period

II. Proposed Updates Affecting OPPS Payments

A. Proposed Recalibration of APC Relative Payment Weights

1. Database Construction

a. Database Source and Methodology

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

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

a. Recommendations of the Panel Regarding Data Development

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

(1) Blood and Blood Products

(2) Brachytherapy Sources

c. Proposed Comprehensive APCs (C-APCs) for CY 2017

(1) Background

(2) Proposed C-APCs for CY 2017

(a) Proposed Additional CY 2017 C-APCsStart Printed Page 45607

(b) Proposed New Allogeneic Hematopoietic Stem Cell Transplantation (HSCT) C-APC

d. Proposed 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. Proposed Changes to Packaged Items and Services

a. Background and Rationale for Packaging in the OPPS

b. Proposed Clinical Diagnostic Laboratory Test Packaging Policy

(1) Background

(2) Proposed “Unrelated” Laboratory Test Exception

(3) Proposed Molecular Pathology Test Exception

c. Conditional Packaging Status Indicators “Q1” and “Q2”

(1) Background

(2) Proposed Change in Conditional Packaging Status Indicators Logic

4. Proposed Calculation of OPPS Scaled Payment Weights

B. Proposed Conversion Factor Update

C. Proposed Wage Index Changes

D. Proposed Statewide Average Default CCRs

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

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

1. Background

2. Proposed Payment Adjustment for Certain Cancer Hospitals for CY 2017

G. Proposed Hospital Outpatient Outlier Payments

1. Background

2. Proposed Outlier Calculation

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

I. Proposed Beneficiary Copayments

1. Background

2. Proposed OPPS Copayment Policy

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

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

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

1. Proposed Treatment of New CY 2016 Level II HCPCS and CPT Codes Effective April 1, 2016 and July 1, 2016 for Which We Are Soliciting Public Comments in this CY 2017 OPPS/ASC Proposed Rule

2. Proposed Process for New Level II HCPCS Codes That Will Be Effective October 1, 2016 and January 1, 2017 for Which We Will Be Soliciting Public Comments in the CY 2017 OPPS/ASC Final Rule With Comment Period

3. Proposed Treatment of New and Revised CY 2017 Category I and III CPT Codes That Will Be Effective January 1, 2017 for Which We Are Soliciting Public Comments in This CY 2017 OPPS/ASC Proposed Rule

B. Proposed OPPS Changes—Variations Within APCs

1. Background

2. Application of the 2 Times Rule

3. Proposed APC Exceptions to the 2 Times Rule

C. Proposed New Technology APCs

1. Background

2. Proposed Additional New Technology APC Groups

3. Proposed Procedures Assigned to New Technology APC Groups for CY 2017

a. Overall Proposal

b. Retinal Prosthesis Implant Procedures

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

1. Imaging

2. Strapping and Cast Application (APCs 5101 and 5102)

3. Transprostatic Urethral Implant Procedure

IV. Proposed OPPS Payment for Devices

A. Proposed Pass-Through Payments for Devices

1. Expiration Dates for Current Transitional Pass-Through Devices

a. Background

b. Proposed CY 2017 Pass-Through Device Policy

2. New Device Pass-Through Applications

a. Background

b. Applications Received for Device Pass-Through Payment for CY 2017

(1) BioBag® (Larval Debridement Therapy in a Contained Dressing)

(2) ENCORETM Suspension System

(3) Endophys Pressure Sensing System (Endophys PSS) or Endophys Pressure Sensing Kit

3. Proposal to Change the Beginning Eligibility Date for Device Pass-Through Payment Status

4. Proposal To Make the Transitional Pass-Through Payment Period 3 Years for All Pass-Through Devices and Expire Pass-Through Status on a Quarterly Rather Than Annual Basis

(a) Background

(b) Proposed CY 2017 Policy

5. Proposed Changes to Cost-to-Charge Ratios (CCRs) That Are Used To Determine Device Pass-Through Payment

a. Background

b. Proposed CY 2017 Policy

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

a. Background

b. Proposed CY 2017 Policy

B. Proposed Device-Intensive Procedures

1. Background

2. Proposed HCPCS Code-Level Device-Intensive Determination

3. Proposed Changes to Device Edit Policy

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

a. Background

b. Proposed Policy for CY 2017

5. Proposed Payment Policy for Low Volume Device-Intensive Procedures

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

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

1. Background

2. Proposal To Make the Transitional Pass-Through Payment Period 3 Years for All Pass-Through Drugs, Biologicals and Radiopharmaceuticals and Expire Pass-Through Status on a Quarterly Rather Than Annual Basis

3. Proposed Drugs and Biologicals With Expiring Pass-Through Payment Status in CY 2016

4. Proposed Drugs, Biologicals, and Radiopharmaceuticals With New or Continuing Pass-Through Status in CY 2017

5. Proposed Provisions for Reducing Transitional Pass-Through Payments for Policy-Packaged Drugs and Biologicals To Offset Costs Packaged Into APC Groups

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

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

a. Proposed Packaging Threshold

b. Proposed Packaging of Payment for HCPCS Codes That Describe Certain Drugs, Certain Biologicals, and Therapeutic Radiopharmaceuticals Under the Cost Threshold (Threshold Packaging Policy)

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

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

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

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

b. Proposed CY 2017 Payment Policy

c. Biosimilar Biological Products

3. Proposed Payment Policy for Therapeutic Radiopharmaceuticals

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

5. Proposed Payment for Blood Clotting Factors

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

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

A. Background

B. Proposed Estimate of Pass-Through Spending

VII. Proposed OPPS Payment for Hospital Outpatient Visits and Critical Care Services

VIII. Proposed Payment for Partial Hospitalization Services

A. Background

B. Proposed PHP APC Update for CY 2017

1. Proposed PHP APC Changes and Effect on Geometric Mean Per Diem Costs

a. Proposed Changes to PHP APCs

b. Rationale for Proposed Changes in PHP APCsStart Printed Page 45608

c. Alternatives Considered

2. Development of the Proposed PHP APC Geometric Mean Per Diem Costs and Payment Rates

a. CMHC Data Preparation: Data Trims, Exclusions, and CCR Adjustments

b. Hospital-Based PHP Data Preparation: Data Trims and Exclusions

3. PHP Ratesetting Process

C. Proposed Outlier Policy for CMHCs

1. Estimated Outlier Thresholds

2. Proposed CMHC Outlier Cap

3. Implementation Strategy for a Proposed 8-Percent Cap on CMHS Outlier Payments

4. Summary of Proposals

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

A. Background

B. Proposed Changes to the Inpatient Only (IPO) List

C. Solicitation of Public Comments on Possible Removal of Total Knee Arthroplasty (TKA) Procedures From the IPO List

1. Background

2. Discussion of TKA and the IPO List

3. Topics and Questions for Public Comment

X. Proposed Nonrecurring Policy Changes

A. Implementation of Section 603 of the Bipartisan Budget Act of 2015 Relating to Payment for Certain Items and Services Furnished by Certain Off-Campus Departments of a Provider

1. Background

2. Defining Applicable Items and Services and Off-Campus Outpatient Department of a Provider As Set Forth in Sections 1833(t)(21)(A) and (B) of the Act

a. Background on the Provider-Based Status Rules

b. Proposed Exemption of Items and Services Furnished in a Dedicated Emergency Department or an On-Campus PBD as Defined at Sections 1833(t)(21)(B)(i)(I) and (II) of the Act (Excepted Off-Campus PBD)

(1) Dedicated Emergency Departments (EDs)

(2) On-Campus Locations

(3) Within the Distance From Remote Locations

c. Applicability of Exception at Section 1833(t)(21)(B)(ii) of the Act

(1) Relocation of Off-Campus PBDs Excepted Under Section 1833(t)(21)(B)(ii) of the Act

(2) Expansion of Clinical Family of Services at an Off-Campus PBD Excepted Under Section 1833(t)(21)(B)(ii) of the Act

d. Change of Ownership and Excepted Status

e. Comment Solicitation for Data Collection Under Section 1833(t)(21)(D) of the Act

3. Payment for Services Furnished in Off-Campus PBDs to Which Sections 1833(t)(1)(B)(v) and 1833(t)(21) of the Act Apply (Nonexcepted Off-Campus PBDs)

a. Background on Medicare Payment for Services Furnished in an Off-Campus PBD

b. Proposed Payment for Items and Services Furnished in Off-Campus PBD That Are Subject to Sections 1833(t)(1)(B)(v) and (t)(21)(C) of the Act

(1) Definition of “Applicable Payment System” for Nonexcepted Items and Services

(2) Definition of Applicable Items and Services and Section 603 Amendments to Section 1833(t)(1)(B) of the Act and Proposed Payment for Nonexcepted Items and Services for CY 2017

(3) Comment Solicitation on Allowing Direct Billing and Payment for Nonexcepted Items and Services in CY 2018

4. Beneficiary Cost-Sharing

5. Summary of Proposals

6. Proposed Changes to Regulations

B. Changes for Payment for Film X-Ray

C. Changes to Certain Scope of Services Elements for Chronic Care Management (CCM) Services

D. Appropriate Use Criteria for Advanced Diagnostic Imaging Services

XI. Proposed CY 2017 OPPS Payment Status and Comment Indicators

A. Proposed CY 2017 OPPS Payment Status Indicator Definitions

B. Proposed CY 2017 Comment Indicator Definitions

XII. Proposed 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. Proposed 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. Proposed Treatment of New and Revised Level II HCPCS Codes and Category III CPT Codes Implemented in April 2016 and July 2016 for Which We Are Soliciting Public Comments in This Proposed Rule

3. Proposed Process for Recognizing New and Revised Category I and Category III CPT Codes That Will Be Effective January 1, 2017 for Which We Will Be Soliciting Public Comments in the CY 2017 OPPS/ASC Final Rule With Comment Period

4. Proposed Process for New and Revised Level II HCPCS Codes That Will Be Effective October 1, 2016 and January 1, 2017 for Which We Will be Soliciting Public Comments in the CY 2017 OPPS/ASC Final Rule with Comment Period

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

1. Covered Surgical Procedures

a. Proposed Covered Surgical Procedures Designated as Office-Based

b. ASC Covered Surgical Procedures Designated as Device-Intensive—Finalized Policy for CY 2016 and Proposed Policy for CY 2017

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

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

2. Covered Ancillary Services

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

1. Proposed ASC Payment for Covered Surgical Procedures

a. Background

b. Proposed Update to ASC Covered Surgical Procedure Payment Rates for CY 2017

2. Proposed Payment for Covered Ancillary Services

a. Background

b. Proposed Payment for Covered Ancillary Services for CY 2017

E. New Technology Intraocular Lenses (NTIOLs)

1. NTIOL Application Cycle

2. Requests to Establish New NTIOL Classes for CY 2017

3. Payment Adjustment

F. Proposed ASC Payment and Comment Indicators

1. Background

2. Proposed ASC Payment and Comment Indicators

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

1. Background

2. Proposed Calculation of the ASC Payment Rates

a. Updating the ASC Relative Payment Weights for CY 2017 and Future Years

b. Updating the ASC Conversion Factor

3. Display of Proposed CY 2017 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

3. Regulatory 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. Proposed New Hospital OQR Program Quality Measures for the CY 2020 Payment Determination and Subsequent Years

a. OP-35: Admissions and Emergency Department Visits for Patients Receiving Outpatient Chemotherapy Measure

b. OP-36: Hospital Visits after Hospital Outpatient Surgery Measure (NQF #2687)

c. OP-37a-e: Outpatient and Ambulatory Surgery Consumer Assessment of Start Printed Page 45609Healthcare Providers and Systems (OAS CAHPS) Survey Measures

d. Summary of Previously Adopted and Newly Proposed Hospital OQR Program Measures for the CY 2020 Payment Determinations and Subsequent Years

6. Hospital OQR Program Measures and Topics for Future Consideration

a. Future Measure Topics

b. Electronic Clinical Quality Measures

c. Possible Future eCQM: Safe Use of Opioids-Concurrent Prescribing

7. Maintenance of Technical Specifications for Quality Measures

8. 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. Hospital OQR Program Annual Payment Determinations

2. Requirements for Chart-Abstracted Measures Where Patient-Level Data Are Submitted Directly to CMS for the CY 2019 Payment Determination and Subsequent Years

3. Claims-Based Measure Data Requirements for the CY 2019 Payment Determination and Subsequent Years and CY 2020 Payment Determination and Subsequent Years

4. Proposed Data Submission Requirements for the Proposed OP-37a-e: Outpatient and Ambulatory Surgery Consumer Assessment of Healthcare Providers and Systems (OAS CAHPS) Survey-Based Measures for the CY 2020 Payment Determination and Subsequent Years

a. Survey Requirements

b. Vendor Requirements

5. Data Submission Requirements for Previously Finalized Measures for Data Submitted via a Web Based Tool for the CY 2019 Payment Determination and Subsequent Years

6. Population and Sampling Data Requirements for the CY 2019 Payment Determination and Subsequent Years

7. Hospital OQR Program Validation Requirements for Chart-Abstracted Measure Data Submitted Directly to CMS for the CY 2019 Payment Determination and Subsequent Years

8. Proposed Extension or Exemption Process for the CY 2019 Payment Determination and Subsequent Years

9. Hospital OQR Program Reconsideration and Appeals Procedures for the CY 2019 Payment Determination and Subsequent Years—Clarification

E. Proposed Payment Reduction for Hospitals That Fail To Meet the Hospital Outpatient Quality Reporting (OQR) Program Requirements for the CY 2017 Payment Determination

1. Background

2. Proposed Reporting Ratio Application and Associated Adjustment Policy for CY 2017

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

A. Background

1. Overview

2. Statutory History of the 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. Proposed ASCQR Program Quality Measures for the CY 2020 Payment Determination and Subsequent Years

a. ASC-13: Normothermia Outcome

b. ASC-14: Unplanned Anterior Vitrectomy

c. ASC-15a-e: Outpatient and Ambulatory Surgery Consumer Assessment of Healthcare Providers and Systems (OAS CAHPS) Survey Measures

5. ASCQR Program Measure for Future Consideration

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

a. Requirements for Data Submitted via a non-CMS Online Data Submission Tool

b. Requirements for Data Submitted via a CMS Online Data Submission Tool

4. Claims-Based Measure Data Requirements for the CY 2019 Payment Determination and Subsequent Years

5. Proposed Data Submission Requirements for the Proposed ASC-15a-e: Outpatient and Ambulatory Surgery Consumer Assessment of Healthcare Providers and Systems (OAS CAHPS) Survey-Based Measures for the CY 2020 Payment Determination and Subsequent Years

a. Survey Requirements

b. Vendor Requirements

6. Extraordinary Circumstances Extensions or Exemptions for the CY 2019 Payment Determination and Subsequent Years

7. ASCQR Program Reconsideration Procedures

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

XV. Transplant Outcomes: Restoring the Tolerance Range for Patient and Graft Survival

A. Background

B. Proposed Revisions to Performance Thresholds

XVI. Organ Procurement Organizations (OPOs): Changes to Definitions, Outcome Measures, and Documentation Requirements

A. Background

1. Organ Procurement Organizations (OPOs)

2. Statutory Provisions

3. HHS Initiatives Related to OPO Services

4. Requirements for OPOs

B. Proposed Provisions

1. Definition of “Eligible Death”

2. Aggregate Donor Yield for OPO Outcome Performance Measures

3. Organ Preparation and Transport-Documentation With the Organ

XVII. Transplant Enforcement Technical Corrections and Proposals

A. Technical Corrections to Transplant Enforcement Regulatory References

B. Other Proposed Revisions to § 488.61

XVIII. Proposed Changes to the Medicare and Medicaid Electronic Health Record (EHR) Incentive Programs

A. Background

B. Summary of Proposals Included in this Proposed Rule

C. Proposed Revisions to Objectives and Measures for Eligible Hospitals and CAHs

1. Removal of the Clinical Decision Support (CDS) and Computerized Provider Order Entry (CPOE) Objectives and Measures for Eligible Hospitals and CAHs

2. Reduction of Measure Thresholds for Eligible Hospitals and CAHs for 2017 and 2018

a. Proposed Changes to the Objectives and Measures for Modified Stage 2 (42 CFR 495.22) in 2017

b. Proposed Changes to the Objectives and Measures for Stage 3 (42 CFR 495.24) in 2017 and 2018

D. Proposed Revisions to the EHR Reporting Period in 2016 for EPs, Eligible Hospitals and CAHs

1. Definition of “EHR Reporting Period” and “EHR Reporting Period for a Payment Adjustment Year”

2. Clinical Quality Measurement

E. Proposal to Require Modified Stage 2 for New Participants in 2017

F. Proposed Significant Hardship Exception for New Participants Transitioning to MIPS in 2017

G. Proposed Modifications To Measure Calculations for Actions Outside the EHR Reporting Period

XIX. Proposed Additional Hospital Value-Based Purchasing (VBP) Program Policies

A. Background

B. Proposed Removal of the HCAHPS Pain Management Dimension From the Hospital VBP Program

1. Background of the HCAHPS Survey in the Hospital VBP Program

2. Background of the Patient- and Caregiver-Centered Experience of Care/Care Coordination Domain Performance Scoring Methodology

3. Proposed Removal of the HCAHPS Pain Management Dimension From the Hospital VBP Program Beginning With the FY 2018 Program Year

XX. Files Available to the Public Via the InternetStart Printed Page 45610

XXI. Collection of Information Requirements

A. Legislative Requirements for Solicitation of Comments

B. ICRs for the Hospital OQR Program

C. ICRs for the ASCQR Program

D. ICRs Relating to Proposed Changes in Transplant Enforcement Performance Thresholds

E. ICRs for Proposed Changes to Organ Procurement Organizations (OPOs)

F. ICRs Relating to Proposed Changes to Medicare Electronic Health Record (EHR) Incentive Program

G. ICRs Relating to Proposed Additional Hospital VBP Program Policies

H. ICRs for Site Neutral OPPS Payments for Off-Campus Provider-Based Departments Proposals for CY 2017

XXII. Response to Comments

XXIII. 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 Proposed OPPS Changes in This Proposed Rule

(1) Limitations of Our Analysis

(2) Estimated Effects of Proposed OPPS Changes on Hospitals

(3) Estimated Effects of Proposed OPPS Changes on CMHCs

(4) Estimated Effect of Proposed OPPS Changes on Beneficiaries

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

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

(7) Alternative OPPS Policies Considered

b. Estimated Effects of Proposed CY 2017 ASC Payment System Policies

(1) Limitations of Our Analysis

(2) Estimated Effects of Proposed CY 2017 ASC Payment System Policies on ASCs

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

(4) Alternative ASC Payment Policies Considered

c. Accounting Statements and Tables

d. Effects of Proposed Requirements for the Hospital OQR Program

e. Effects of Proposed Policies for the ASCQR Program

f. Effects of Proposed Changes to Transplant Performance Thresholds

g. Effects of Proposed Changes Relating to Organ Procurement Organizations (OPOs)

h. Effects of Proposed Changes Relating to Medicare Electronic Health Record (EHR) Incentive Program

i. Effects of Proposed Requirements for the Hospital VBP Program

j. Effects of Proposed Implementation of Section 603 of the Bipartisan Budget Act of 2015 Relating to Payment for Certain Items and Services Furnished by Certain Off-Campus Departments of a Provider

B. Regulatory Flexibility Act (RFA) Analysis

C. Unfunded Mandates Reform Act Analysis

D. Conclusion

XXIV. Federalism Analysis

Regulation Text

I. Summary and Background

A. Executive Summary of This Document

1. Purpose

In this proposed rule, we are proposing to update the payment policies and payment rates for services furnished to Medicare beneficiaries in hospital outpatient departments (HOPDs) and ambulatory surgical centers (ASCs) beginning January 1, 2017. 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 proposed rule. In addition, this proposed rule would update and refine the requirements for the Hospital Outpatient Quality Reporting (OQR) Program and the ASC Quality Reporting (ASCQR) Program.

In addition, we are proposing changes to the conditions for coverage (CfCs) for organ procurement organizations (OPOs); revisions to the outcome requirements for solid organ transplant programs transplant enforcement and for transplant documentation requirements; a technical correction to enforcement provisions for organ transplant centers; modifications to the Medicare and Medicaid Electronic Health Record (EHR) Incentive Programs to reduce hospital administrative burden and to allow hospitals to focus more on patient care; and the removal of the HCAHPS Pain Management dimension from the Hospital Value-Based Purchasing (VBP) Program.

Further, we are proposing policies to implement section 603 of the Bipartisan Budget Act of 2015 relating to payment for certain items and services furnished by certain off-campus outpatient departments of a provider.

2. Summary of the Major Provisions

  • OPPS Update: For CY 2017, we are proposing to increase the payment rates under the OPPS by an Outpatient Department (OPD) fee schedule increase factor of 1.55 percent. This proposed increase factor is based on the proposed hospital inpatient market basket percentage increase of 2.8 percent for inpatient services paid under the hospital inpatient prospective payment system (IPPS), minus the proposed multifactor productivity (MFP) adjustment of 0.5 percentage point, and minus a 0.75 percentage point adjustment required by the Affordable Care Act. Based on this proposed update, we estimate that proposed total payments to OPPS providers (including beneficiary cost-sharing and estimated changes in enrollment, utilization, and case-mix), for CY 2017 would be approximately $63 billion, an increase of approximately $5.1 billion compared to estimated CY 2016 OPPS payments.

We are proposing to continue 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 proposing to continue the adjustment of 7.1 percent to the OPPS payments to certain rural sole community hospitals (SCHs), including essential access community hospitals (EACHs). This proposed adjustment would apply to all services paid under the OPPS, excluding separately payable drugs and biologicals, devices paid under the pass-through payment policy, and items paid at charges reduced to cost.
  • Cancer Hospital Payment Adjustment: For CY 2017, we are proposing to continue 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 proposed target PCR of 0.92 would be used to determine the CY 2017 cancer hospital payment adjustment to be paid at cost report settlement. That is, the proposed payment adjustments would be the additional payments needed to result in a PCR equal to 0.92 for each cancer hospital.
  • Comprehensive APCs: For CY 2017, we are not proposing extensive changes to the already established methodology Start Printed Page 45611used for C-APCs. However, we are proposing to create 25 new C-APCs that meet the previously established criteria, which, when combined with the existing 37 C-APCs, would bring the total number to 62 C-APCs as of January 1, 2017.
  • Chronic Care Management (CCM): For CY 2017, we are proposing some minor changes to certain CCM scope of service elements. Refer to the CY 2017 MPFS proposed rule for a detailed discussion of these changes to the scope of service elements for CCM. We are proposing that these changes will also apply to CCM furnished to hospital outpatients.
  • Device-Intensive Procedures: For CY 2017, we are proposing that the payment rate for any device-intensive procedure that is assigned to an APC with fewer than 100 total claims for all procedures in the APC be based on the median cost instead of the geometric mean cost. We believe that this approach will mitigate significant year-to-year payment rate fluctuations while preserving accurate claims-data-based payment rates for low volume device-intensive procedures. In addition, we are proposing to revise the device intensive calculation methodology and calculate the device offset amount at the HCPCS code level rather than at the APC level to ensure that device intensive status is properly assigned to all device-intensive procedures.
  • Outpatient Laboratory Tests: For CY 2017, we are proposing to discontinue the use of the “L1” modifier to identify unrelated laboratory tests on claims. In addition, we are proposing to expand the laboratory packaging exclusion that currently applies to Molecular Pathology tests to all laboratory tests designated as advanced diagnostic laboratory tests (ADLTs) that meet the criteria of section 1834A(d)(5)(A) of the Act.
  • Packaging Policies: The OPPS currently packages many categories of items and services that are typically provided as part of the outpatient hospital service (for example, operating and recovery room, anesthesia, among others). Packaging encourages hospital efficiency, flexibility, and long-term cost containment, and it also promotes the stability of payment for services over time. In CY 2014 and 2015, we added several new categories of packaged items and services. Among these were laboratory tests, ancillary services, services described by add-on codes, and drugs used in a diagnostic test or surgical procedure. For CY 2017, we are proposing to align the packaging logic for all of the conditional packaging status indicators so that packaging would occur at the claim level (instead of based on the date of service) to promote consistency and ensure that items and services that are provided during a hospital stay that may span more than one day are appropriately packaged according to OPPS packaging policies.
  • Payment Modifier for X-ray Films: Section 502(b) of Division O, Title V of the Consolidated Appropriations Act, 2016 (Pub. L. 114-113) amended section 1833(t)(16) of the Act by adding new subparagraph (F). New section 1833(t)(16)(F)(i) of the Act provides that, effective for services furnished during 2017 or any subsequent year, the payment under the OPPS for imaging services that are X-rays taken using film (including the X-ray component of a packaged service) that would otherwise be made under the OPPS (without application of this paragraph and before application of any other adjustment) shall be reduced by 20 percent. We are proposing that, effective for services furnished on or after January 1, 2017, hospitals would be required to use a modifier on claims for X-rays that are taken using film. The use of this proposed modifier would result in a 20-percent payment reduction for the X-ray service, as specified under section 1833(t)(16)(F)(i) of the Act, of the determined OPPS payment amount (without application of paragraph (F) and before any other adjustments under section 1833(t)).
  • Payment for Certain Items and Services Furnished by Certain Off-Campus Departments of a Provider: We are proposing to implement section 603 of the Bipartisan Budget Act of 2015 (Pub. L. 114-74). This provision requires that certain items and services furnished in certain off-campus provider-based departments (PBDs) (collectively referenced as nonexcepted items and services) shall not be considered covered OPD services for purposes of OPPS payment and those items and services will instead be paid “under the applicable payment system” beginning January 1, 2017. We are making several proposals relating to which off-campus PBDs and which items and services furnished by such off-campus PBDs may be exempt from application of payment changes under this provision.

In addition, we are proposing that the Medicare Physician Fee Schedule (MPFS) will be the “applicable payment system” for the majority of the items and services furnished by nonexcepted off-campus PBDs. We are proposing that physicians furnishing services in these departments would be paid based on the professional claim and would be paid at the nonfacility rate for services which they are permitted to bill. We are proposing to pay physicians at the nonfacility rate because we are not able to operationalize a mechanism to provide payment to the off-campus PBD for nonexcepted items and services under a payment system other than the OPPS at this time. We are clarifying that, for CY 2017, provided an off-campus PBD can meet all Federal and other requirements, a hospital also has the option of enrolling the off-campus PBD as the provider/supplier it wishes to bill as in order to meet the requirements of that payment system (such as an ASC or a group practice to be paid under the MPFS, in which case the physician would be paid at the facility rate). We intend that this payment proposal would be a transitional policy, applicable in CY 2017 only, while we continue to explore operational changes that would allow a nonexcepted off-campus PBD to bill Medicare under an applicable payment system, which, in the majority of cases, we expect will be the MPFS.

  • Ambulatory Surgical Center Payment Update: For CY 2017, we are proposing to increase payment rates under the ASC payment system by 1.2 percent for ASCs that meet the quality reporting requirements under the ASCQR Program. This proposed increase is based on a projected CPI-U update of 1.7 percent minus a multifactor productivity adjustment required by the Affordable Care Act of 0.5 percentage point. Based on this proposed update, we estimate that proposed total payments to ASCs (including beneficiary cost-sharing and estimated changes in enrollment, utilization, and case-mix), for CY 2017 would be approximately $4.42 billion, an increase of approximately $214 million compared to estimated CY 2016 Medicare payments.
  • Hospital Outpatient Quality Reporting (OQR) Program: For the Hospital OQR Program, we are making proposals for the CY 2018 payment determination, the CY 2019 payment determination and the CY 2020 payment determination and subsequent years. For the CY 2018 payment determination and subsequent years, we are proposing to publicly display data on the Hospital Compare Web site, or other CMS Web site, as soon as possible after measure data have been submitted to CMS. In addition, we are proposing that hospitals will generally have approximately 30 days to preview their data. We are also proposing to announce the timeframes for the preview period on a CMS Web site and/or on our applicable listservs. For the CY 2019 Start Printed Page 45612payment determination and subsequent years, we are proposing to change the timeframe for extraordinary circumstances exemptions (ECE) from 45 days to 90 days from the date that the extraordinary circumstance occurred. For the CY 2020 payment determination and subsequent years, we are proposing to adopt a total of seven measures: Two claims-based measures and five Outpatient and Ambulatory Surgery Consumer Assessment of Healthcare Providers and Systems (OAS CAHPS) Survey-based measures. The two proposed claims-based measures are: (1) OP-35: Admissions and Emergency Department Visits for Patients Receiving Outpatient Chemotherapy and (2) OP-36: Hospital Visits after Hospital Outpatient Surgery (NQF #2687). The five proposed survey-based measures are: (1) OP-37a: OAS CAHPS—About Facilities and Staff; (2) OP-37b: OAS CAHPS—Communication About Procedure; (3) OP-37c: OAS CAHPS—Preparation for Discharge and Recovery; (4) OP-37d: OAS CAHPS—Overall Rating of Facility; and (5) OP-37e: OAS CAHPS—Recommendation of Facility.
  • Ambulatory Surgical Center Quality Reporting (ASCQR) Program: For the ASCQR Program, we are making proposals for the CY 2018 payment determination, 2019 payment determination and CY 2020 payment determination and subsequent years. For the CY 2018 payment determination and subsequent years, we are proposing to publicly display data on the Hospital Compare Web site, or other CMS Web site, as soon as possible after measure data have been submitted to CMS. In addition, we are proposing that ASCs will generally have approximately 30 days to preview their data. We are also proposing to announce the timeframes for the preview period on a CMS Web site and/or on our applicable listservs. For the CY 2019 payment determination and subsequent years, we are proposing to change the submission deadline from August 15 in the year prior to the affected payment determination year to May 15 for all data submitted via a CMS Web-based tool. We also are proposing to extend the submission deadline for Extraordinary Circumstance Extensions and Exemptions requests. For the CY 2020 payment determination and subsequent years, we are proposing to adopt a total of seven measures: Two measures collected via a CMS Web-based tool and five Outpatient and Ambulatory Surgery Consumer Assessment of Healthcare Providers and Systems (OAS CAHPS) Survey-based measures. The two proposed measures that require data to be submitted directly to CMS via a CMS Web-based tool are: (1) ASC-13: Normothermia Outcome and (2) ASC-14: Unplanned Anterior Vitrectomy. The five proposed survey-based measures are: (1) ASC-15a: OAS CAHPS—About Facilities and Staff; (2) ASC-15b: OAS CAHPS—Communication About Procedure; (3) ASC-15c: OAS CAHPS—Preparation for Discharge and Recovery; (4) ASC-15d: OAS CAHPS—Overall Rating of Facility; and (5) ASC-15e: OAS CAHPS—Recommendation of Facility.
  • Hospital Value-Based Purchasing (VBP) Program Update: Section 1886(o) of the Act requires the Secretary to establish a Hospital VBP Program under which value-based incentive payments are made in a fiscal year to hospitals based on their performance on measures established for a performance period for such fiscal year. In this proposed rule, we are proposing to remove the HCAHPS Pain Management dimension of the Hospital VBP Program, beginning with the FY 2018 program year.
  • Medicare and Medicaid Electronic Health Record (EHR) Incentive Programs: In this proposed rule, we are proposing changes to the objectives and measures of meaningful use for Modified Stage 2 and Stage 3 starting with the EHR reporting periods in calendar year 2017. Under both Modified Stage 2 in 2017 and Stage 3 in 2017 and 2018, for eligible hospitals and CAHs attesting under the Medicare EHR Incentive Program, we are proposing to eliminate the Clinical Decision Support (CDS) and Computerized Provider Order Entry (CPOE) objectives and measures, and lower the reporting thresholds for a subset of the remaining objectives and measures, generally to the Modified Stage 2 thresholds. The proposal to reduce measure thresholds is intended to respond to input we have received from hospitals, hospital associations, health systems, and vendors expressing concerns about the established measures. The proposed requirements focus on reducing hospital administrative burden, allowing eligible hospitals and CAHs attesting under the Medicare EHR Incentive Program to focus more on providing quality patient care, as well as focus on updating and optimizing CEHRT functionalities to sufficiently meet the requirements of the EHR Incentive Program and prepare for Stage 3 of meaningful use.

In addition, we are proposing changes to the EHR reporting period in calendar year 2016 for eligible professionals, eligible hospitals, and CAHs; reporting requirements for eligible professionals, eligible hospitals, and CAHs that are new participants in 2017; and the policy on measure calculations for actions outside the EHR reporting period. Finally, we are proposing a one-time significant hardship exception from the 2018 payment adjustment for certain eligible professionals who are new participants in the EHR Incentive Program in 2017 and are transitioning to the Merit-Based Incentive Payment System in 2017. We believe these proposals are responsive to additional stakeholder feedback received through both correspondence and in-person meetings and would result in continued advancement of certified EHR technology utilization, particularly among those eligible professionals, eligible hospitals and CAHs that have not previously achieved meaningful use, and result in a program more focused on supporting interoperability and data sharing for all participants under the Medicare and Medicaid EHR Incentive Programs.

  • Transplant Performance Thresholds. With respect to solid organ transplant programs, we are proposing to restore the effective tolerance range for clinical outcomes that was allowed in our original 2007 rule. These outcomes requirements in the Medicare Conditions of Participation (CoPs) have been affected by the nationwide improvement in transplant outcomes, making it now more difficult for transplant programs to maintain compliance with, in effect, increasingly stringent Medicare standards for patient and graft survival.
  • Organ Procurement Organizations (OPOs) Changes. In this proposed rule, we are proposing to: Change the current “eligible death” definition to be consistent with the OPTN definition; modify CMS current outcome measures to be consistent with yield calculations currently utilized by the SRTR; and modify current requirements for documentation of donor information which is sent to the transplant center along with the organ.

3. Summary of Costs and Benefits

In sections XXIII. and XXIV. of this proposed rule, we set forth a detailed analysis of the regulatory and Federalism impacts that the proposed changes would have on affected entities and beneficiaries. Key estimated impacts are described below.

a. Impacts of the Proposed OPPS Update

(1) Impacts of All OPPS Proposed Changes

Table 30 in section XXIII. of this proposed rule displays the distributional impact of all the proposed OPPS changes on various groups of hospitals and CMHCs for CY 2017 Start Printed Page 45613compared to all estimated OPPS payments in CY 2016. We estimate that the proposed policies in this proposed rule would result in a 1.6 percent overall increase in OPPS payments to providers. We estimate that proposed total OPPS payments for CY 2017, including beneficiary cost-sharing, to the approximate 3,900 facilities paid under the OPPS (including general acute care hospitals, children's hospitals, cancer hospitals, and CMHCs) would increase by approximately $671 million compared to CY 2016 payments, excluding our estimated changes in enrollment, utilization, and case-mix.

We estimated the isolated impact of our proposed 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 an 8.4 percent decrease in CY 2017 payments to CMHCs relative to their CY 2016 payments.

(2) Impacts of the Proposed Updated Wage Indexes

We estimate that our proposed update of the wage indexes based on the FY 2017 IPPS proposed rule wage indexes results in no change for urban hospitals and a 0.3 percent increase 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.

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

There are no significant impacts of our proposed CY 2017 payment policies for hospitals that are eligible for the rural adjustment or for the cancer hospital payment adjustment. We are not proposing to make 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 Proposed OPD Fee Schedule Increase Factor

We estimate that, for most hospitals, the application of the proposed OPD fee schedule increase factor of 1.6 percent to the conversion factor for CY 2017 would mitigate the impacts of the budget neutrality adjustments. As a result of the OPD fee schedule increase factor and other budget neutrality adjustments, we estimate that rural and urban hospitals would experience increases of approximately 1.6 percent for urban hospitals and 2.3 percent for rural hospitals. Classifying hospitals by teaching status or type of ownership suggests that these hospitals will receive similar increases.

b. Impacts of the Proposed ASC Payment Update

For impact purposes, the surgical procedures on the ASC list of covered procedures are aggregated into surgical specialty groups using CPT and HCPCS code range definitions. The proposed percentage change in estimated total payments by specialty groups under the proposed CY 2017 payment rates compared to estimated CY 2016 payment rates ranges between 6 percent for musculoskeletal system procedures and −2 percent for integumentary system procedures.

c. Impacts of the Hospital OQR Program

We do not expect our proposed CY 2017 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 proposed CY 2017 policies to significantly affect the number of ASCs that do not receive a full annual payment update.

e. Impacts for Proposed Implementation of Section 603 of the Bipartisan Budget Act of 2015

We estimate that implementation of section 603 will reduce net OPPS payments by $500 million in CY 2017, relative to a baseline where section 603 was not implemented in CY 2017. We estimate that section 603 would increase payments to physicians under the MPFS by $170 million in CY 2017, resulting in a net Medicare Part B impact from the provision of reducing CY 2017 Part B expenditures by $330 million. These estimates include both the FFS impact of the provision and the Medicare Advantage impact of the provision. These estimates also reflect that the reduced spending from implementation of section 603 results in a lower Part B premium; the reduced Part B spending is slightly offset by lower aggregate Part B premium collections.

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; the Medicare Access and CHIP Reauthorization Act (MACRA) of 2015 (Pub. L. 114-10), enacted April 16, 2015; the Bipartisan Budget Act of 2015 (Pub. L. 114-74), enacted November 2, 2015; and the Consolidated Start Printed Page 45614Appropriations Act, 2016 (Pub. L. 114-113), enacted on December 18, 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 proposed rule. Section 1833(t)(1)(B) of the Act provides for payment under the OPPS for hospital outpatient services designated by the Secretary (which includes partial hospitalization services furnished by CMHCs), and 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 us to provide appropriate and consistent payment for designated new procedures that are not yet reflected in our claims data. Similar to pass-through payments, an assignment to a New Technology APC is temporary; that is, we retain a service within a New Technology APC until we acquire sufficient data to assign it to a clinically appropriate APC group.

C. Excluded OPPS Services and Hospitals

Section 1833(t)(1)(B)(i) of the Act authorizes the Secretary to designate the hospital outpatient services that are paid under the OPPS. While most hospital outpatient services are payable under the OPPS, section 1833(t)(1)(B)(iv) of the Act excludes payment for ambulance, physical and occupational therapy, and speech-language pathology services, for which payment is made under a fee schedule. It also excludes screening mammography, diagnostic mammography, and effective January 1, 2011, an annual wellness visit providing personalized prevention plan services. The Secretary 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 Public Law 106-113, and redesignated by section 202(a)(2) of Public Law 106-113, requires that we consult with an external advisory panel of experts to annually review the clinical integrity of the payment groups and their weights under the OPPS. In CY 2000, based on section 1833(t)(9)(A) of the Act and section 222 of the Public Health Service (PHS) Act, the Secretary established the Advisory Panel on Ambulatory Payment Classification Groups (APC Panel) to fulfill this requirement. In CY 2011, based on section 222 of the PHS Act which gives discretionary authority to the Secretary to convene advisory councils and committees, the Secretary expanded the panel's scope to include the supervision of hospital outpatient therapeutic services in addition to the APC groups and weights. To reflect this new role of the panel, the Secretary changed the panel's name to the Advisory Panel on Hospital Outpatient Payment (the HOP Panel, or the Panel). The Panel is not restricted to using data compiled by CMS, and in conducting its review, it may use data collected or developed by organizations outside the Department.

2. Establishment of the Panel

On November 21, 2000, the Secretary signed the initial charter establishing the HOP Panel, and at that time named the APC Panel. This expert panel is composed of appropriate representatives Start Printed Page 45615of 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 March 14, 2016. 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, to announce new members and to announce any other changes that the public should be aware of. Beginning in CY 2017, we will transition to one meeting per year, which will be scheduled in the summer (81 FR 31941).

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 outpatient visits paid under the OPPS (for example, APC configurations and APC relative payment weights). The Subcommittee for APC Groups and SI Assignments advises the Panel on the following issues: The appropriate 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 March 14, 2016 meeting that the subcommittees continue. We accepted this recommendation.

Discussions of the other recommendations made by the Panel at the March 14, 2016 Panel meeting are included in the sections of this proposed rule that are specific to each recommendation. For discussions of earlier Panel meetings and recommendations, we refer readers to previously published 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 2016 OPPS/ASC Final Rule With Comment Period

We received 25 timely pieces of correspondence on the CY 2016 OPPS/ASC final rule with comment period that appeared in the Federal Register on November 13, 2015 (80 FR 70298), some of which contained comments on the interim APC assignments and/or status indicators of new or replacement Level II HCPCS codes (identified with comment indicator “NI” in OPPS Addendum B, ASC Addendum AA, and ASC Addendum BB to that final rule). Summaries of the public comments on new or replacement Level II HCPCS codes will be set forth in the CY 2017 final rule with comment period under the appropriate subject matter headings.

II. Proposed Updates Affecting OPPS Payments

A. Proposed 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.

For CY 2017, we are proposing to recalibrate the APC relative payment weights for services furnished on or after January 1, 2017, and before January 1, 2018 (CY 2017), using the same basic methodology that we described in the CY 2016 OPPS/ASC final rule with comment period (80 FR 70309 through 70321). That is, we are proposing to recalibrate the relative payment weights for each APC based on claims and cost report data for hospital outpatient department (HOPD) services, using the most recent available data to construct a database for calculating APC group weights. For this proposed rule, for the purpose of recalibrating the proposed APC relative payment weights for CY 2017, 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, 2015, and before January 1, 2016. For exact numbers of claims used and additional details on the claims accounting process, we refer readers to the claims accounting narrative under supporting documentation for this CY 2017 OPPS/ASC proposed rule on the CMS Web site at: http://www.cms.gov/​Medicare/​Medicare-Fee-for-Service-Payment/​HospitalOutpatientPPS/​index.html.

Addendum N to this proposed rule includes the proposed list of bypass codes for CY 2017. The proposed list of bypass codes contains codes that were reported on claims for services in CY 2015 and, therefore, includes codes that were in effect in CY 2015 and used for billing but were deleted for CY 2016. We are retaining these deleted bypass codes on the proposed CY 2017 bypass list because these codes existed in CY 2015 and were covered OPD services in that period, and CY 2015 claims data are used to calculate CY 2017 payment rates. Keeping these deleted bypass codes on the bypass list potentially allows us to create more “pseudo” Start Printed Page 45616single procedure claims for ratesetting purposes. “Overlap bypass codes” that are members of the proposed multiple imaging composite APCs are identified by asterisks (*) in the third column of Addendum N to this proposed rule. HCPCS codes that we are proposing to add for CY 2017 are identified by asterisks (*) in the fourth column of Addendum N.

We are proposing a CY 2017 bypass list of 194 HCPCS codes, as displayed in Addendum N to this proposed rule (which is available via the Internet on the CMS Web site). Table 1 below contains the list of codes that we are proposing to remove from the CY 2017 bypass list.

Table 1—HCPCS Codes Proposed to be removed from the CY 2017 Bypass List

HCPCS CodeHCPCS short descriptor
95925Somatosensory testing.
95808Polysom any age 1-3> param.
90845Psychoanalysis.
96151Assess hlth/behave subseq.
31505Diagnostic laryngoscopy.
95872Muscle test one fiber.

b. Proposed Calculation and Use of Cost-To-Charge Ratios (CCRs)

For CY 2017, we are proposing 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 2017 APC payment rates are based, we calculated hospital-specific overall ancillary CCRs and hospital-specific departmental CCRs for each hospital for which we had CY 2015 claims data by comparing these claims data to the most recently available hospital cost reports, which, in most cases, are from CY 2014. For the proposed CY 2017 OPPS payment rates, we used the set of claims processed during CY 2015. 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 2015 (the year of claims data we used to calculate the proposed CY 2017 OPPS payment rates) and found that the National Uniform Billing Committee (NUBC) did not add any new revenue codes to the NUBC 2015 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.b.(1) of this proposed rule.

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

In this section of this proposed rule, we discuss the use of claims to calculate the proposed OPPS payment rates for CY 2017. The Hospital OPPS page on the CMS Web site on which this proposed rule is posted (http://www.cms.gov/​Medicare/​Medicare-Fee-for-Service-Payment/​HospitalOutpatientPPS/​index.html) provides an accounting of claims used in the development of the proposed payment rates. That accounting provides additional detail regarding the number of claims derived at each stage of the process. In addition, below in this section we discuss the file of claims that comprises the data set that is available for purchase under a CMS data use agreement. 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 2015 claims that were used to calculate the proposed payment rates for the CY 2017 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 2017, we are proposing to continue to use geometric mean costs to calculate the relative weights on which the proposed CY 2017 OPPS payment rates are based.

We used the methodology described in sections II.A.2.a. through II.A.2.d. of this proposed rule to calculate the costs we used to establish the proposed relative payment weights used in calculating the proposed OPPS payment rates for CY 2017 shown in Addenda A and B to this proposed rule (which are available via the Internet on the CMS Web site). We refer readers to section II.A.4. of this proposed rule for a discussion of the conversion of APC costs to scaled payment weights.

For details of the claims process used in this proposed rule, we refer readers to the claims accounting narrative under supporting documentation for this CY 2017 OPPS/ASC proposed rule on the CMS Web site at: http://www.cms.gov/​Medicare/​Medicare-Fee-for-Service-Payment/​HospitalOutpatientPPS/​index.html.

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

At the March 14, 2016 meeting of the Panel, we discussed our standard analysis of APCs, specifically those APCs for which geometric mean costs in the CY 2015 claims data through September 2015 varied significantly from the CY 2014 claims data used for the CY 2016 OPPS/ASC final rule with comment period. At the March 14, 2016 Panel meeting, the Panel made three recommendations related to the data process. The Panel's data-related recommendations and our responses follow.

Recommendation: The Panel recommends that CMS provide the data subcommittee a list of APCs fluctuating significantly in costs prior to each HOP Panel meeting.

CMS Response: We are accepting this recommendation.Start Printed Page 45617

Recommendation: The Panel recommends that the work of the data subcommittee continue.

CMS Response: We are accepting this recommendation.

Recommendation: The Panel recommends that Michael Schroyer continue serving as subcommittee Chair for the August 2016 HOP Panel.

CMS Response: We are accepting this recommendation.

b. Proposed 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.

For CY 2017, we are proposing to continue to establish payment rates for blood and blood products using our blood-specific CCR methodology, which utilizes actual or simulated CCRs from the most recently available hospital cost reports to convert hospital charges for blood and blood products to costs. This methodology has been our standard ratesetting methodology for blood and blood products since CY 2005. It was developed in response to data analysis indicating that there was a significant difference in CCRs for those hospitals with and without blood-specific cost centers, and past public comments indicating that the former OPPS policy of defaulting to the overall hospital CCR for hospitals not reporting a blood-specific cost center often resulted in an underestimation of the true hospital costs for blood and blood products. Specifically, in order to address the differences in CCRs and to better reflect hospitals' costs, we are proposing to continue to simulate blood CCRs for each hospital that does not report a blood cost center by calculating the ratio of the blood-specific CCRs to hospitals' overall CCRs for those hospitals that do report costs and charges for blood cost centers. We also are proposing 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 are proposing to calculate the costs upon which the proposed CY 2017 payment rates for blood and blood products are based using the actual blood-specific CCR for hospitals that reported costs and charges for a blood cost center and a hospital-specific, simulated blood-specific CCR for hospitals that did not report costs and charges for a blood cost center.

We continue to believe that the hospital-specific, 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 2017 would result in costs for blood and blood products that appropriately reflect the relative estimated costs of these products for hospitals without blood cost centers and, therefore, for these blood products in general.

We note that, as discussed in section II.A.2.e. of the CY 2014 OPPS/ASC final rule with comment period (78 FR 74861 through 74910), the CY 2015 OPPS/ASC final rule with comment period (79 FR 66798 through 66810), and the CY 2016 OPPS/ASC final rule with comment period (80 FR 70325 through 70339), we defined a comprehensive APC (C-APC) as a classification for the provision of a primary service and all adjunctive services provided to support the delivery of the primary service. Under this policy, we include the costs of blood and blood products when calculating the overall costs of these C-APCs. We are proposing to continue to apply the blood-specific CCR methodology described in this section when calculating the costs of the blood and blood products that appear on claims with services assigned to the C-APCs. Because the costs of blood and blood products will be reflected in the overall costs of the C-APCs (and, as a result, in the proposed payment rates of the C-APCs), we are proposing to not make separate payments for blood and blood products when they appear on the same claims as services assigned to the C-APCs (we refer readers to the CY 2015 OPPS/ASC final rule with comment period (79 FR 66796)).

We are inviting public comments on these proposals. We refer readers to Addendum B to this proposed rule (which is available via the Internet on the CMS Web site) for the proposed CY 2017 payment rates for blood and blood products (which are identified with status indicator “R”). For a more detailed discussion of the blood-specific CCR methodology, we refer readers to the CY 2005 OPPS proposed rule (69 FR 50524 through 50525). For a full history of OPPS payment for blood and blood products, we refer readers to the CY 2008 OPPS/ASC final rule with comment period (72 FR 66807 through 66810).

(b) Solicitation of Public Comments

As discussed in the CY 2016 OPPS/ASC final rule with comment period (80 FR 70323), we are in the process of examining the current set of HCPCS P-codes for blood products, which became effective many years ago. Because these HCPCS P-codes were created many years ago, we are considering whether this code set could benefit from some code descriptor revisions, updating, and/or consolidation to make these codes properly reflect current product descriptions and utilization while minimizing redundancy and potentially outdated descriptors. We are requesting public comments regarding the adequacy and necessity (in terms of the existing granularity) of the current descriptors for the HCPCS P-codes describing blood products. Specifically, there are three main categories of blood products: Red blood cells; platelets; and plasma. In each of these categories, there are terms that describe various treatments or preparations of the blood products, with each, in several cases, represented individually and in combination. For example, for pheresis platelets, there are codes for “leukocyte reduced,” “irradiated,” “leukocyte reduced + irradiated,” “leukocyte reduced + irradiated + CMV-negative,” among others. We are asking the blood product stakeholder community whether the current blood product HCPCS P-code descriptors with the associated granularity best describe the state of the current technology for blood products that hospitals currently provide to hospital outpatients. In several cases, the hospital costs as calculated from the CMS claims data are similar for blood products of the same type (for example, pheresis platelets) that have different code descriptors, which indicates to us that there is not a significant difference in the resources needed to produce the similar products. Again, we are inviting public comments on the current set of active HCPCS P-codes that describe blood products regarding how the code descriptors could be revised and updated (if necessary) to reflect the current blood products provided to hospital outpatients. The current set of active HCPCS P-codes that describe blood Start Printed Page 45618products can be found in Addendum B to this proposed rule (which is available via the Internet on the CMS Web site).

(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 2016 OPPS/ASC final rule with comment period (80 FR 70323 through 70325) for further discussion of the history of OPPS payment for brachytherapy sources.

In this proposed rule, for CY 2017, we are proposing to use the costs derived from CY 2015 claims data to set the proposed CY 2017 payment rates for brachytherapy sources because CY 2015 is the same year of data we are proposing to use to set the proposed payment rates for most other items and services that would be paid under the CY 2017 OPPS. We are proposing to base the proposed payment rates for brachytherapy sources on the geometric mean unit costs for each source, consistent with the methodology that we are proposing for other items and services paid under the OPPS, as discussed in section II.A.2. of this proposed rule. We also are proposing 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 are proposing 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 2017 and subsequent years, we also are proposing to continue the policy we first implemented in the CY 2010 OPPS/ASC final rule with comment period (74 FR 60537) regarding payment for new brachytherapy sources for which we have no claims data, based on the same reasons we discussed in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66786; which was delayed until January 1, 2010 by section 142 of Public Law 110-275). Specifically, this 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 2017 payment rates for brachytherapy sources are included in Addendum B to this proposed rule (which is available via the Internet on the CMS Web site) and are identified with status indicator “U”. We note that, for CY 2017, we are proposing to assign new proposed status indicator “E2” (Items and Services for Which Pricing Information and Claims Data Are Not Available) to HCPCS code C2644 (Brachytherapy cesium-131 chloride) because this code was not reported on CY 2015 claims. Therefore, we are unable to calculate a proposed payment rate based on the general OPPS ratesetting methodology described earlier. Although HCPCS code C2644 became effective July 1, 2014, and although we would expect that if a hospital furnished a brachytherapy source described by this code in CY 2015, HCPCS code C2644 should appear on the CY 2015 claims, there are no CY 2015 claims reporting this code. In addition, unlike new brachytherapy sources HCPCS codes, we will not consider external data to determine a proposed payment rate for HCPCS code C2644 for CY 2017. Therefore, we are proposing to assign new proposed status indicator “E2” to HCPCS code C2644.

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

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 C4-01-26, 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.

c. Proposed Comprehensive APCs (C-APCs) for CY 2017

(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). In the CY 2016 OPPS/ASC final rule with comment period (80 FR 70332), we finalized 10 additional C-APCs to be paid under the existing C-APC payment policy.

Under this policy, we designated a service described by a HCPCS code assigned to a C-APC as the primary service when the service is identified by 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 Start Printed Page 45619being integral, ancillary, supportive, dependent, and adjunctive to the primary service (hereinafter collectively referred to as “adjunctive services”) and representing components of a complete comprehensive 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 to be separately paid. This includes certain mammography and ambulance services that are not 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). A list of services excluded from the C-APC policy is included in Addendum J to this proposed rule (which is available via the Internet on the CMS Web site).

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 beginning 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. In the CY 2016 OPPS/ASC final rule with comment period, we expanded the C-APC payment methodology with the establishment of status indicator “J2”. The assignment of status indicator “J2” to a specific combination of services performed in combination with each other, as opposed to a single, primary service, allows for all other OPPS payable services and items reported on the claim (excluding services that are not covered OPD services or that cannot by statute be paid for under the OPPS) 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 (80 FR 70333 through 70336).

Services included under the C-APC payment packaging policy, that is, services that are typically adjunctive to the primary service and 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 (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 are deemed to be 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. We refer readers to the July 2016 OPPS Change Request 9658 (Transmittal 3523) for further instructions on reporting these services in the context of a C-APC service.

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 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.

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 Start Printed Page 45620reporting more than one primary service assigned to status indicator “J1” or units thereof, 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 the next 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 in the originating C-APC (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 criteria. For new HCPCS codes, we determine initial C-APC assignments and complexity adjustments using the best available information, crosswalking the new HCPCS codes to predecessor codes when appropriate.

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 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. As noted in the CY 2016 OPPS/ASC final rule with comment period (80 FR 70331), all add-on codes that can be appropriately reported in combination with a base code that describes a primary “J1”service are evaluated for a complexity adjustment.

To determine which combinations of primary service codes reported in conjunction with an add-on code may qualify for a complexity adjustment for CY 2017, we are proposing to 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 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 2017, along with all of the other proposed complexity adjustments, in Addendum J to this proposed rule (which is available via the Internet on the CMS Web site). For CY 2017, we are proposing to discontinue the requirement that a code combination (that qualifies for a complexity adjustment by satisfying the frequency and cost criteria thresholds described earlier) also not create a 2 times rule violation in the higher level or receiving APC (80 FR 70328). We believe that this requirement is not useful because most code combinations fall below our established frequency threshold for considering 2 times rule violations, which is described in section III.B. of this proposed rule. Therefore, because the 2 times rule would not typically apply to complexity-adjusted code combinations, we are proposing to discontinue this requirement.

We are providing in Addendum J to this proposed rule a breakdown of cost statistics for each code combination that would qualify for a complexity adjustment (including primary code and add-on code combinations). Addendum J to this proposed rule also contains summary cost statistics for each of the code combinations that describe a complex code combination that would qualify for a complexity adjustment and are proposed to be reassigned to the next higher cost C-APC within the clinical family. The combined statistics for all proposed reassigned complex code combinations are represented by an alphanumeric code with the first 4 digits of the designated primary service followed by a letter. For example, the proposed geometric mean cost listed in Addendum J for the code combination described by complexity adjustment assignment 3320R, which is assigned to C-APC 5224 (Level 4 Pacemaker and Similar Procedures), includes all code combinations that are proposed to be reassigned to C-APC 5224 when CPT code 33208 is the primary code. Providing the information contained in Addendum J to this proposed rule allows stakeholders the opportunity to better assess the impact associated with the proposed reassignment of each of the code combinations eligible for a complexity adjustment.

(2) Proposed C-APCs for CY 2017

(a) Proposed Additional C-APCs for CY 2017

For CY 2017 and subsequent years, we are proposing to continue to apply the C-APC payment policy methodology made effective in CY 2015, as described in detail below. We are proposing to continue to define the services assigned to C-APCs as primary services or a specific combination of services performed in combination with each other. We also are proposing to Start Printed Page 45621define a C-APC as a classification for the provision of a primary service or specific combination of services and all adjunctive services and supplies provided to support the delivery of the primary or specific combination of services. We also are proposing to continue to follow the C-APC payment policy methodology of packaging all covered OPD services on a hospital outpatient claim reporting a primary service that is assigned to status indicator “J1” or reporting the specific combination of services assigned to status indicator “J2,” excluding services that are not covered OPD services or that cannot by statute be paid under the OPPS.

As a result of our annual review of the services and APC assignments under the OPPS, we are proposing 25 additional C-APCs to be paid under the existing C-APC payment policy beginning in CY 2017. The proposed CY 2017 C-APCs are listed in Table 2 below. All C-APCs, including those effective in CY 2016 and those being proposed for CY 2017, also are displayed in Addendum J to this proposed rule. Addendum J to this proposed rule (which is available via the Internet on the CMS Web site) also contains all of the data related to the C-APC payment policy methodology, including the list of proposed complexity adjustments and other information.

Table 2—Proposed CY 2017 C-APCs

C-APCCY 2017 APC titleClinical familyProposed new C-APC
5072Level 2 Excision/Biopsy/Incision and DrainageEBIDX(*)
5073Level 3 Excision/Biopsy/Incision and DrainageEBIDX(*)
5091Level 1 Breast/Lymphatic Surgery and Related ProceduresBREAS(*)
5092Level 2 Breast/Lymphatic Surgery and Related ProceduresBREAS(*)
5093Level 3 Breast/Lymphatic Surgery & Related ProceduresBREAS
5094Level 4 Breast/Lymphatic Surgery & Related ProceduresBREAS
5112Level 2 Musculoskeletal ProceduresORTHO(*)
5113Level 3 Musculoskeletal ProceduresORTHO(*)
5114Level 4 Musculoskeletal ProceduresORTHO
5115Level 5 Musculoskeletal ProceduresORTHO
5116Level 6 Musculoskeletal ProceduresORTHO
5153Level 3 Airway EndoscopyAENDO(*)
5154Level 4 Airway EndoscopyAENDO(*)
5155Level 5 Airway EndoscopyAENDO(*)
5164Level 4 ENT ProceduresENTXX(*)
5165Level 5 ENT ProceduresENTXX
5166Cochlear Implant ProcedureCOCHL
5191Level 1 Endovascular ProceduresVASCX(*)
5192Level 2 Endovascular ProceduresVASCX
5193Level 3 Endovascular ProceduresVASCX
5194Level 4 Endovascular ProceduresVASCX
5200Implantation Wireless PA Pressure MonitorWPMXX(*)
5211Level 1 Electrophysiologic ProceduresEPHYS
5212Level 2 Electrophysiologic ProceduresEPHYS
5213Level 3 Electrophysiologic ProceduresEPHYS
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
5244Level 4 Blood Product Exchange and Related ServicesSCTXX(*)
5302Level 2 Upper GI ProceduresGIXXX(*)
5303Level 3 Upper GI ProceduresGIXXX(*)
5313Level 3 Lower GI ProceduresGIXXX(*)
5331Complex GI ProceduresGIXXX
5341Abdominal/Peritoneal/Biliary and Related ProceduresGIXXX(*)
5361Level 1 Laparoscopy & Related ServicesLAPXX
5362Level 2 Laparoscopy & Related ServicesLAPXX
5373Level 3 Urology & Related ServicesUROXX(*)
5374Level 4 Urology & Related ServicesUROXX(*)
5375Level 5 Urology & Related ServicesUROXX
5376Level 6 Urology & Related ServicesUROXX
5377Level 7 Urology & Related ServicesUROXX
5414Level 4 Gynecologic ProceduresGYNXX(*)
5415Level 5 Gynecologic ProceduresGYNXX
5416Level 6 Gynecologic ProceduresGYNXX
5431Level 1 Nerve ProceduresNERVE(*)
5432Level 2 Nerve ProceduresNERVE(*)
5462Level 2 Neurostimulator & Related ProceduresNSTIM
5463Level 3 Neurostimulator & Related ProceduresNSTIM
5464Level 4 Neurostimulator & Related ProceduresNSTIM
5471Implantation of Drug Infusion DevicePUMPS
5491Level 1 Intraocular ProceduresINEYE(*)
5492Level 2 Intraocular ProceduresINEYE
5493Level 3 Intraocular ProceduresINEYE
5494Level 4 Intraocular ProceduresINEYE
5495Level 5 Intraocular ProceduresINEYE
Start Printed Page 45622
5503Level 3 Extraocular, Repair, and Plastic Eye ProceduresEXEYE(*)
5504Level 4 Extraocular, Repair, and Plastic Eye ProceduresEXEYE(*)
5627Level 7 Radiation TherapyRADTX
5881Ancillary Outpatient Services When Patient DiesN/A
8011Comprehensive Observation ServicesN/A
* Proposed New C-APC for CY 2017.
C-APC Clinical Family Descriptor Key:
AENDO = Airway Endoscopy.
AICDP = Automatic Implantable Cardiac Defibrillators, Pacemakers, and Related Devices.
BREAS = Breast Surgery.
COCHL = Cochlear Implant.
EBIDX = Excision/Biopsy/Incision and Drainage.
ENTXX = ENT Procedures.
EPHYS = Cardiac Electrophysiology.
EXEYE = Extraocular Ophthalmic Surgery.
GIXXX = Gastrointestinal Procedures.
GYNXX = Gynecologic Procedures.
INEYE = Intraocular Surgery.
LAPXX = Laparoscopic Procedures.
NERVE = Nerve Procedures.
NSTIM = Neurostimulators.
ORTHO = Orthopedic Surgery.
PUMPS = Implantable Drug Delivery Systems.
RADTX = Radiation Oncology.
SCTXX = Stem Cell Transplant.
UROXX = Urologic Procedures.
VASCX = Vascular Procedures.
WPMXX = Wireless PA Pressure Monitor.

(b) Proposed New Allogeneic Hematopoietic Stem Cell Transplantation (HSCT) C-APC

Allogeneic hematopoietic stem cell transplantation (HSCT) involves the intravenous infusion of hematopoietic stem cells derived from the bone marrow, umbilical cord blood, or peripheral blood of a donor to a recipient. Allogeneic hematopoietic stem cell collection procedures, which are performed not on the beneficiary but on a donor, cannot be paid separately under the OPPS because hospitals may bill and receive payment only for services provided to a Medicare beneficiary who is the recipient of the HSCT and whose illness is being treated with the transplant. Currently, under the OPPS, payment for these acquisition services is packaged into the APC payment for the allogeneic HSCT when the transplant occurs in the hospital outpatient setting (74 FR 60575). In the CY 2016 OPPS/ASC final rule with comment period, we assigned allogeneic HSCT to APC 5281 (Apheresis and Stem Cell Procedures), which has a CY 2016 OPPS payment rate of $3,015.

As provided in the Medicare Claims Processing Manual, Pub. 100-04, Chapter 4, section 231.11, donor acquisition charges for allogeneic HSCT may include, but are not limited to, charges for the costs of several services. These services include, but are not necessarily limited to, National Marrow Donor Program fees, if applicable, tissue typing of donor and recipient, donor evaluation, physician pre-procedure donor evaluation services, costs associated with the collection procedure (for example, general routine and special care services, procedure/operating room and other ancillary services, apheresis services, among others), post-operative/post-procedure evaluation of donor, and the preparation and processing of stem cells.

When the allogeneic stem cell transplant occurs in the hospital outpatient setting, providers are instructed to report stem cell donor acquisition charges for allogeneic HSCT separately in Field 42 on Form CMS-1450 (or UB-04) by using revenue code 0819 (Organ Acquisition: Other Donor). Revenue code 0819 charges should include all services required to acquire hematopoietic stem cells from a donor, as defined earlier, and should be reported on the same date of service as the transplant procedure in order to be appropriately packaged for payment purposes. Revenue code 0819 maps to cost center code 086XX (Other organ acquisition where XX is “00” through “19”) and is reported on line 112 (or applicable subscripts of line 112) of the Medicare cost report.

In recent years, we have received comments from stakeholders detailing concerns about the accuracy of ratesetting for allogeneic HSCT (79 FR 40950 through 40951; 79 FR 66809; and 80 FR 70414 through 70415). Stakeholders have presented several issues that could result in an inappropriate estimation of provider costs for these procedures, including outpatient allogeneic HCST reported on claims being identified as multiple procedure claims that are unusable under the standard OPPS ratesetting methodology. Stakeholders also have indicated that the requirement for the reporting of revenue code 0819 on claims reporting allogeneic HSCTs and the lack of a dedicated cost center for stem cell transplantation donor acquisition costs have led to an overly broad CCR being applied to these procedures, which comprise a very low volume of the services reported within the currently assigned cost center. In addition, commenters noted that it is likely that there are services being reported with the same revenue code (0819) and mapped to the same cost center code (086XX) as allogeneic HSCT donor acquisition charges that are unrelated to these services. Lastly, providers have commented that the donor acquisition costs of allogeneic HSCT are much higher relative to their charges when compared to the other items and services that are reported in the current cost center. Providers also have stated that hospitals have difficulty applying an appropriate markup to donor acquisition charges that will sufficiently generate a cost that approximates the total cost of donor acquisition. Through our examination of Start Printed Page 45623the CY 2016 claims data, we believe that the issues presented above provide a persuasive rationale for payment adjustment for donor acquisition costs for allogeneic HCST.

Stakeholders suggested that the establishment of a C-APC for stem cell transplant services would improve payment adequacy by allowing the use of multiple procedure claims, provided CMS also create a separate and distinct CCR for donor search and acquisition charges so that they are not diluted by lower cost services. In the CY 2016 OPPS/ASC final rule with comment period (80 FR 70414 through 70415), we stated that we would not create a new C-APC for stem cell transplant procedures at that time and that we would instead continue to pay for the services through the assigned APCs while continuing to monitor the issue.

Based on our current analysis of this longstanding issue and stakeholder input, for CY 2017, we are proposing to create a new C-APC 5244 (Level 4 Blood Product Exchange and Related Services) and to assign procedures described by CPT code 38240 (Hematopoietic progenitor cell (HPC); allogeneic transplantation per donor) to this C-APC and to assign status indicator “J1” to the code. The creation of a new C-APC for allogeneic HSCT and the assignment of status indicator “J1” to CPT code 38240 would allow for the costs for all covered OPD services, including donor acquisition services, included on the claim to be packaged into the C-APC payment rate. These costs also will be analyzed using our comprehensive cost accounting methodology to establish future C-APC payment rates. We are proposing to establish a payment rate for proposed new C-APC 5244 of $15,267 for CY 2017.

In order to develop an accurate estimate of allogeneic HSCT donor acquisition costs for future ratesetting, for CY 2017 and subsequent years, we are proposing to update the Medicare hospital cost report (Form CMS-2552-10) by adding a new standard cost center 112.50, “Allogeneic Stem Cell Acquisition,” to Worksheet A (and applicable worksheets) with the standard cost center code of “11250.” The proposed new cost center, line 112.50, would be used for the recording of any acquisition costs related to allogeneic stem cell transplants as defined in Section 231.11, Chapter 4, of the Medicare Claims Processing Manual (Pub. 100-04). Acquisition charges for allogeneic stem cell transplants apply only to allogeneic transplants for which stem cells are obtained from a donor (rather than from the recipient). Acquisition charges do not apply to autologous transplants (transplanted stem cells are obtained from the recipient) because autologous transplants involve services provided to a beneficiary only (and not to a donor), for which the hospital may bill and receive payment. Acquisition costs for allogeneic stem cells are included in the prospective payment. This cost center flows through cost finding and accumulates any appropriate overhead costs.

In conjunction with our proposed addition of the new “Allogeneic Stem Cell Acquisition” standard cost center, we are proposing to use the newly created revenue code 0815 (Allogeneic Stem Cell Acquisition Services) to identify hospital charges for stem cell acquisition for allogeneic bone marrow/stem cell transplants. Specifically, for CY 2017 and subsequent years, we are proposing to require hospitals to identify stem cell acquisition charges for allogeneic bone marrow/stem cell transplants separately in Field 42 on Form CMS-1450 (or UB-04), when an allogeneic stem cell transplant occurs. Revenue code 0815 charges should include all services required to acquire stem cells from a donor, as defined above, and should be reported on the same date of service as the transplant procedure in order to be appropriately packaged for payment purposes. The proposed new revenue code 0815 would map to the proposed new line 112.50 (with the cost center code of “11250”) on the Form CMS-2552-10 cost report. In addition, for CY 2017 and subsequent years, we are proposing to no longer use revenue code 0819 for the identification of stem cell acquisition charges for allogeneic bone marrow/stem cell transplants. We are inviting public comments on these proposals.

d. Proposed Calculation of Composite APC Criteria-Based Costs

As discussed in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66613), we believe it is important that the OPPS enhance incentives for hospitals to provide 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 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 this proposed rule, for CY 2017 and subsequent years, we are proposing to continue our composite APC payment policies for LDR prostate brachytherapy services, mental health services, and multiple imaging services, as discussed below.

(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 Start Printed Page 45624are 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.

In this proposed rule, for CY 2017, we are proposing to continue to pay for LDR prostate brachytherapy services using the composite APC payment methodology proposed and implemented for CY 2008 through CY 2016. That is, we are proposing to use CY 2015 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 2016 practice, in this proposed rule, we are proposing not to use the claims that meet these criteria in the calculation of the geometric mean costs of procedures or services assigned to APC 5375 (Level IV Cystourethroscopy and Other Genitourinary Procedures) and APC 5641 (Complex Interstitial Radiation Source Application), the APCs to which CPT codes 55875 and 77778 are assigned, respectively. We are proposing to continue to calculate the proposed geometric mean costs of procedures or services assigned to APCs 5375 and 5641 using single and “pseudo” single procedure claims. 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 also 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 2015 claims data available for this CY 2017 proposed rule, we were able to use 202 claims that contained both CPT codes 55875 and 77778 to calculate the proposed geometric mean cost of approximately $3,581 for these procedures upon which the proposed CY 2017 payment rate for composite APC 8001 is based.

(2) Mental Health Services Composite APC

In this proposed rule, for CY 2017, we are proposing to continue our longstanding policy of limiting the aggregate payment for specified less resource-intensive mental health services furnished on the same date to the payment for a day of partial hospitalization 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 are proposing that when the aggregate payment for specified mental health services provided by one hospital to a single beneficiary on one date of service based on the payment rates associated with the APCs for the individual services exceeds the maximum per diem payment rate for partial hospitalization services provided by a hospital, those specified mental health services would be assigned to composite APC 8010 (Mental Health Services Composite). We also are proposing to continue to set the payment rate for composite APC 8010 at the same payment rate that we are proposing to establish for APC 5862 (Level 2 Partial Hospitalization (4 or more services) for hospital-based PHPs), 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 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 APC 5862 for all of the specified mental health services furnished by the hospital on that single date of service. We continue to believe that the costs associated with administering a partial hospitalization program 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.

(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); and
  • APC 8008 (MRI and MRA with Contrast Composite).

We define the single imaging session for the “with contrast” composite APCs as having at least one or more imaging procedures from the same family performed with contrast on the same date of service. For example, if the hospital performs an MRI without contrast during the same session as at least one other MRI with contrast, the hospital will receive payment 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 this proposed rule, for CY 2017 and subsequent years, we are proposing to continue to pay for all multiple imaging procedures within an imaging family performed on the same date of service Start Printed Page 45625using the multiple imaging composite APC payment methodology. 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 2017 payment rates for the five multiple imaging composite APCs (APCs 8004, 8005, 8006, 8007, and 8008) are based on proposed geometric mean costs calculated from a partial year of CY 2015 claims data available for this 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), are identified by asterisks in Addendum N to this CY 2017 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 this proposed rule.

For this CY 2017 OPPS/ASC proposed rule, we were able to identify approximately 599,294 “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 proposed CY 2017 geometric mean costs for the multiple imaging composite APCs. Table 3 below lists 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 2017.

Table 3—Proposed OPPS Imaging Families and Multiple Imaging Procedure Composite APCs

Family 1—Ultrasound
CY 2017 APC 8004 (ultrasound composite)CY 2017 Approximate APC geometric mean cost = $303
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 2017 APC 8005 (CT and CTA without contrast composite)*CY 2017 Approximate APC geometric mean cost = $292
70450Ct head/brain w/o dye.
70480Ct orbit/ear/fossa w/o dye.
70486Ct maxillofacial w/o dye.
70490Ct soft tissue neck w/o dye.
71250Ct thorax w/o dye.
72125Ct neck spine w/o dye.
72128Ct chest spine w/o dye.
72131Ct lumbar spine w/o dye.
72192Ct pelvis w/o dye.
73200Ct upper extremity w/o dye.
73700Ct lower extremity w/o dye.
74150Ct abdomen w/o dye.
74261Ct colonography, w/o dye.
74176Ct angio abd & pelvis.
CY 2017 APC 8006 (CT and CTA with contrast composite)CY 2017 Approximate APC geometric mean cost = $515
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.
Start Printed Page 45626
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 2017 APC 8007 (MRI and MRA without contrast composite)*CY 2017 Approximate APC geometric mean cost = $587
70336Magnetic image, jaw joint.
70540Mri orbit/face/neck w/o dye.
70544Mr angiography head w/o dye.
70547Mr angiography neck w/o dye.
70551Mri brain w/o dye.
70554Fmri brain by tech.
71550Mri chest w/o dye.
72141Mri neck spine w/o dye.
72146Mri chest spine w/o dye.
72148Mri lumbar spine w/o dye.
72195Mri pelvis w/o dye.
73218Mri upper extremity w/o dye.
73221Mri joint upr extrem w/o dye.
73718Mri lower extremity w/o dye.
73721Mri jnt of lwr extre w/o dye.
74181Mri abdomen w/o dye.
75557Cardiac mri for morph.
75559Cardiac mri w/stress img.
C8901MRA w/o cont, abd.
C8904MRI w/o cont, breast, uni.
C8907MRI w/o cont, breast, bi.
C8910MRA w/o cont, chest.
C8913MRA w/o cont, lwr ext.
C8919MRA w/o cont, pelvis.
C8932MRA, w/o dye, spinal canal.
C8935MRA, w/o dye, upper extr.
CY 2017 APC 8008 (MRI and MRA with contrast composite)CY 2017 approximate APC geometric mean cost = $900
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.
Start Printed Page 45627
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. Proposed 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 variety 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), the CY 2015 OPPS/ASC final rule with comment period (79 FR 66817), and the CY 2016 OPPS/ASC final rule with comment period (80 FR 70343). 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 Start Printed Page 45628prospective 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 2017, we have examined our OPPS packaging policies, reviewing categories of integral, ancillary, supportive, dependent, or adjunctive items and services that are packaged into payment for the primary service that they support. In this CY 2017 proposed rule, we are proposing some modifications to our packaging policies and to package the costs of two drugs that function as supplies in a surgical procedure.

b. Proposed Clinical Diagnostic Laboratory Test Packaging Policy

(1) 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)). In CY 2016, we made some minor modifications to this policy (80 FR 70348 through 70350). 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. Specifically, we conditionally package laboratory tests and only pay separately for laboratory tests when (1) they are the only services provided to a beneficiary on a claim; (2) they are “unrelated” laboratory tests, meaning they are on the same claim as other hospital outpatient services, but are ordered for a different diagnosis than the other hospital outpatient services and are ordered by a different practitioner than the practitioner who ordered the other hospital outpatient services; (3) they are molecular pathology tests; or (4) the laboratory tests are considered preventive services.

(2) Proposed “Unrelated” Laboratory Test Exception

Laboratory tests are separately paid in the HOPD when they are considered “unrelated” laboratory tests. Unrelated laboratory tests are tests on the same claim as other hospital outpatient services, but are ordered for a different diagnosis than the other hospital outpatient services and are ordered by a different practitioner than the practitioner who ordered the other hospital outpatient services. Unrelated laboratory tests are designated for separate payment by hospitals with the “L1” modifier. This is the only use of the “L1” modifier.

For CY 2017, we are proposing to discontinue the unrelated laboratory test exception (and the “L1” modifier) for the following reasons: We believe that, in most cases, “unrelated” laboratory tests are not significantly different than most other packaged laboratory tests provided in the HOPD. Multiple hospitals have informed us that the “unrelated” laboratory test exception is not useful to them because they cannot determine when a laboratory test has been ordered by a different physician and for a different diagnosis than the other services reported on the same claim. We agree with these hospitals, and we also believe that the requirements for “unrelated” laboratory tests (different diagnosis and different ordering physician) do not necessarily correlate with the relatedness of a laboratory test to the other HOPD services that a patient receives during the same hospital stay. In the context of most hospital outpatient encounters, most laboratory tests are related in some way to other services being provided because most common laboratory tests evaluate the functioning of the human body as a physiologic system and therefore relate to other tests and interventions that a patient receives. Also, it is not uncommon for beneficiaries to have multiple diagnoses, and often times the various diagnoses are related in some way. Therefore, the associated diagnosis is not necessarily indicative of how related a laboratory test is to other hospital outpatient services performed during a hospital stay, especially give the granularity of ICD-10 diagnosis coding. Packaging of other ancillary services in the OPPS is not dependent upon a common diagnosis with the primary service into which an ancillary service is packaged. Therefore, we do not believe that this should be a requirement for laboratory test packaging. Furthermore, we believe that just because a laboratory test is ordered by a different physician than the physician who ordered the other hospital outpatient services furnished during a hospital outpatient stay does not necessarily mean that the laboratory test is not related to other services being provided to a beneficiary.

Therefore, because the “different physician, different diagnosis” criteria for “unrelated” laboratory tests do not clearly identify or distinguish laboratory tests that are integral, ancillary, supportive, dependent, or adjunctive to other hospital outpatient services provided to the beneficiary during the hospital stay, we are proposing to no longer permit the use of the “L1” modifier to self-designate an exception to the laboratory test packaging under these circumstances, and seek separate payment for such laboratory tests at the CLFS payment rates. Instead, we are proposing to package any and all laboratory tests if they appear on a claim with other hospital outpatient services. We are inviting public comments on this proposal.

(3) Proposed Molecular Pathology Test Exception

In 2014, we excluded from the laboratory packaging policy molecular pathology tests described by CPT codes in the ranges of 81200 through 81383, 81400 through 81408, and 81479 (78 FR 74939 through 74942). In 2016, we expanded this policy to include not only the original code range but also all new molecular pathology test codes. Molecular pathology laboratory tests were excluded from packaging because we believed that these relatively new tests may have a different pattern of clinical use than more conventional laboratory tests, 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 are packaged (80 FR 70348 through 70350).

In response to the CY 2016 OPPS/ASC proposed rule, commenters argued that CMS' rationale for excluding molecular pathology tests from the laboratory test packaging policy also applies to certain CPT codes that describe some new multianalyte assays with algorithmic analyses (MAAAs).

In the CY 2016 OPPS/ASC final rule with comment period (80 FR 70349 through 70350), we stated that “we may consider whether additional exceptions to the OPPS laboratory test packaging policy should apply to tests other than molecular pathology tests in the future.” After further consideration, we agree with these commenters that the exception that currently applies to molecular pathology tests may be appropriately applied to other laboratory tests that, like molecular pathology tests, are relatively new and may have a different pattern of clinical use than more conventional laboratory tests, 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 are packaged. Therefore, for Start Printed Page 45629CY 2017, we are proposing an expansion of the laboratory packaging exception that currently applies to molecular pathology tests to also apply to all advanced diagnostic laboratory tests (ADLTs) that meet the criteria of section 1834A(d)(5)(A) of the Act. We believe that some of these diagnostic tests that meet these criteria will not be molecular pathology tests but will also have a different pattern of clinical use than more conventional laboratory tests, 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 are packaged. We would assign status indicator “A” (Separate payment under the CLFS) to ADLTs once a laboratory test is designated an ADLT under the CLFS. We are inviting public comments on this proposal.

c. Conditional Packaging Status Indicators “Q1” and “Q2”

(1) Background

Packaged payment versus separate payment of items and services in the OPPS is designated at the code level through the assignment of a status indicator to all CPT and HCPCS codes. One type of packaging in the OPPS is conditional packaging, which means that, under certain circumstances, items and services are packaged, and under other circumstances, they are paid separately. There are several different conditional packaging status indicators. Two of these status indicators indicate package of the services with other services furnished on the same date of service: status indicator “Q1,” which packages items or services on the same date of service with services assigned status indicator “S” (Procedure or Service, Not Discounted When Multiple), “T” (Procedure or Service, Multiple Procedure Reduction Applies), or “V” (Clinic or Emergency Department Visit); and status indicator “Q2,” which packages items or services on the same date of service with services assigned status indicator “T.” Other conditional packaging status indicators, “Q4” (Conditionally packaged laboratory tests) and “J1”/“J2” (Hospital Part B services paid through a comprehensive APC), package services on the same claim, regardless of the date of service.

(2) Proposed Change in Conditional Packaging Status Indicators Logic

We do not believe that some conditional packaging status indicators should package based on date of service, while other conditional packaging status indicators package based on services reported on the same claim. For CY 2017, we are proposing to align the packaging logic for all of the conditional packaging status indicators and change the logic for status indicators “Q1” and “Q2” so that packaging would occur at the claim level (instead of based on the date of service) to promote consistency and ensure that items and services that are provided during a hospital stay that may span more than one day are appropriately packaged according to OPPS packaging policies. We point out that this would increase the conditional packaging of conditionally packaged items and services because conditional packaging would occur whenever a conditionally packaged item or service is reported on the same claim as a primary service without regard to the date of service. We are inviting public comments on this proposal.

4. Proposed Calculation of OPPS Scaled Payment Weights

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 to calculate relative payment weights under the OPPS. In the CY 2016 OPPS/ASC final rule with comment period (80 FR 70350 through 70351), we applied this policy and calculated the relative payment weights for each APC for CY 2016 that were shown in Addenda A and B to that final rule with comment period (which were made available via the Internet on the CMS Web site) using the APC costs discussed in sections II.A.1. and II.A.2. of that final rule with comment period. For CY 2017, we are proposing to continue to apply the policy established in CY 2016 and calculate relative payment weights for each APC for CY 2017 using geometric mean-based APC costs.

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 CY 2016, we deleted APC 0634 and moved the outpatient clinic visit HCPCS code G0463 to APC 5012 (Level 2 Examinations and Related Services) (80 FR 70351). For CY 2017, we are proposing to continue to standardize all of the relative payment weights to APC 5012. 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 2017, we are proposing to assign 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 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 aggregate weight under the OPPS for CY 2017 is neither greater than nor less than the estimated aggregate weight that would have been made without the changes. To comply with this requirement concerning the APC changes, we are proposing to compare the estimated aggregate weight using the CY 2016 scaled relative payment weights to the estimated aggregate weight using the proposed CY 2017 unscaled relative payment weights.

For CY 2016, we multiplied the CY 2016 scaled APC relative payment weight applicable to a service paid under the OPPS by the volume of that service from CY 2015 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 2017, we are proposing to apply the same process using the estimated CY 2017 unscaled relative payment weights rather than scaled relative payment weights. We are proposing to calculate the weight scalar by dividing the CY 2016 estimated aggregate weight by the unscaled CY 2017 estimated aggregate weight.

For a detailed discussion of the weight scalar calculation, we refer Start Printed Page 45630readers 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 2017 OPPS proposed rule link and open the claims accounting document link at the bottom of the page.

In this CY 2017 proposed rule, we are proposing to compare the estimated unscaled relative payment weights in CY 2017 to the estimated total relative payment weights in CY 2016 using CY 2015 claims data, holding all other components of the payment system constant to isolate changes in total weight. Based on this comparison, we are proposing to adjust the calculated CY 2017 unscaled relative payment weights for purposes of budget neutrality. We are proposing to adjust the estimated CY 2017 unscaled relative payment weights by multiplying them by a weight scalar of 1.4059 to ensure that the proposed CY 2017 relative payment weights are scaled to be budget neutral. The proposed CY 2017 relative payment weights listed in Addenda A and B to this proposed rule (which are available via the Internet on the CMS Web site) are scaled and incorporate the recalibration adjustments discussed in sections II.A.1. and II.A.2. of this 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 proposed rule) is included in the budget neutrality calculations for the CY 2017 OPPS.

B. Proposed 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 2017 IPPS/LTCH PPS proposed rule (81 FR 25077), consistent with current law, based on IHS Global Insight, Inc.'s first quarter 2016 forecast of the FY 2017 market basket increase, the proposed FY 2017 IPPS market basket update is 2.8 percent. However, sections 1833(t)(3)(F) and 1833(t)(3)(G)(v) 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 2017.

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 2017 IPPS/LTCH PPS proposed rule (81 FR 25077), we discussed the calculation of the proposed MFP adjustment for FY 2017, which is −0.5 percentage point.

We are proposing that if more recent data become subsequently available after the publication of this CY 2017 OPPS/ASC 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 2017 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 2017 OPPS/ASC final rule with comment period.

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 2017, section 1833(t)(3)(G)(v) of the Act provides a −0.75 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)(v) of the Act, we are proposing to apply a −0.75 percentage point reduction to the OPD fee schedule increase factor for CY 2017.

We note that section 1833(t)(3)(F) of the Act provides that application of this subparagraph may result in the OPD fee schedule increase factor under section 1833(t)(3)(C)(iv) of the Act being less than 0.0 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 proposing to apply an OPD fee schedule increase factor of 1.55 percent for the CY 2017 OPPS (which is 2.8 percent, the proposed estimate of the hospital inpatient market basket percentage increase, less the proposed 0.5 percentage point MFP adjustment, and less the 0.75 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 proposed rule.

In this CY 2017 OPPS/ASC proposed rule, we are proposing to amend 42 CFR 419.32(b)(1)(iv)(B) by adding a new paragraph (8) 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)(v) 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 0.75 percentage point for CY 2017.

To set the OPPS conversion factor for CY 2017, we are proposing to increase the CY 2016 conversion factor of $73.725 by 1.55 percent. In accordance with section 1833(t)(9)(B) of the Act, we are proposing to further adjust the conversion factor for CY 2017 to ensure that any revisions made to the wage index and rural adjustment are made on a budget neutral basis. We are proposing to calculate an overall proposed budget neutrality factor of 1.0000 for wage index changes by comparing proposed total estimated payments from our simulation model using the proposed FY 2017 IPPS wage indexes to those payments using the FY 2016 IPPS wage indexes, as adopted on a calendar year basis for the OPPS.

For CY 2017, we are proposing to maintain the current rural adjustment Start Printed Page 45631policy, as discussed in section II.E. of this proposed rule. Therefore, the proposed budget neutrality factor for the rural adjustment would be 1.0000.

For CY 2017, we are proposing to continue previously established policies for implementing the cancer hospital payment adjustment described in section 1833(t)(18) of the Act, as discussed in section II.F. of this proposed rule. We are proposing to calculate a CY 2017 budget neutrality adjustment factor for the cancer hospital payment adjustment by comparing estimated total CY 2017 payments under section 1833(t) of the Act, including the proposed CY 2017 cancer hospital payment adjustment, to estimated CY 2017 total payments using the CY 2016 final cancer hospital payment adjustment as required under section 1833(t)(18)(B) of the Act. The CY 2017 proposed estimated payments applying the proposed CY 2017 cancer hospital payment adjustment are identical to estimated payments applying the CY 2016 final cancer hospital payment adjustment. Therefore, we are proposing to apply a budget neutrality adjustment factor of 1.0000 to the conversion factor for the cancer hospital payment adjustment.

For CY 2017, we are proposing to apply a budget neutrality adjustment factor of 1.0003 to increase the conversion factor to account for our proposal to package unrelated laboratory tests into OPPS payment.

For this proposed rule, we estimate that proposed pass-through spending for drugs, biologicals, and devices for CY 2017 would equal approximately $148.3 million, which represents 0.24 percent of total projected CY 2017 OPPS spending. Therefore, the proposed conversion factor would be adjusted by the difference between the 0.26 percent estimate of pass-through spending for CY 2016 and the 0.24 percent estimate of proposed pass-through spending for CY 2017, resulting in a proposed adjustment for CY 2017 of 0.02 percent. Proposed estimated payments for outliers would be 1.0 percent of total OPPS payments for CY 2017. We currently estimated that outlier payments will be 0.96 percent of total OPPS payments in CY 2016; the 1.0 percent for proposed outlier payments in CY 2017 would constitute a 0.04 percent increase in payment in CY 2017 relative to CY 2016.

For this proposed rule, we also are proposing 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 are proposing to make all other adjustments discussed above, but use a reduced OPD fee schedule update factor of −0.45 percent (that is, the proposed OPD fee schedule increase factor of 1.55 percent further reduced by 2.0 percentage points). This would result in a proposed reduced conversion factor for CY 2017 of 73.411 for hospitals that fail to meet the Hospital OQR requirements (a difference of −1.498 in the conversion factor relative to hospitals that met the requirements).

In summary, for CY 2017, we are proposing to amend § 419.32(b)(1)(iv)(B) by adding a new paragraph (8) to reflect the reductions to the OPD fee schedule increase factor that are required for CY 2017 to satisfy the statutory requirements of sections 1833(t)(3)(F) and (t)(3)(G)(v) of the Act. We are proposing to use a reduced conversion factor of 73.411 in the calculation of payments for hospitals that fail to meet the Hospital OQR Program requirements (a difference of −1.498 in the conversion factor relative to hospitals that met the requirements).

For CY 2017, we are proposing to continue previously established policies for implementing the cancer hospital payment adjustment described in section 1833(t)(18) of the Act, as discussed in section II.F. of this proposed rule.

As a result of these proposed policies, the proposed OPD fee schedule increase factor for the CY 2017 OPPS is 1.55 percent (which is 2.8 percent, the estimate of the hospital inpatient market basket percentage increase, less the 0.5 percentage point MFP adjustment, and less the 0.75 percentage point additional adjustment). For CY 2017, we are proposing to use a conversion factor of $74.909 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 1.55 percent for CY 2017, the required wage index budget neutrality adjustment of approximately 1.0000, the cancer hospital payment adjustment of 1.0000, the packaging of unrelated laboratory tests adjustment factor of 1.0003, and the adjustment of −0.06 percentage point of projected OPPS spending for the difference in the pass-through spending and outlier payments that result in a proposed conversion factor for CY 2017 of $74.909.

C. Proposed 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 proposed rule.

The OPPS labor-related share is 60 percent of the national OPPS payment. This labor-related share is based on a regression analysis that determined that, for all hospitals, approximately 60 percent of the costs of services paid under the OPPS were attributable to wage costs. We confirmed that this labor-related share for outpatient services is appropriate during our regression analysis for the payment adjustment for rural hospitals in the CY 2006 OPPS final rule with comment period (70 FR 68553). We are proposing to continue this policy for the CY 2017 OPPS. We refer readers to section II.H. of this proposed rule 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 proposed rule, for estimating APC costs, we standardize 60 percent of estimated claims costs for geographic area wage variation using the same proposed FY 2017 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 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 Start Printed Page 45632in 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 at § 419.43(c)(2) and (c)(3) of our regulations. For the CY 2017 OPPS, we are proposing 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 floors, 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 FY 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 proposed FY 2017 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 floor 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 2017 IPPS/LTCH PPS proposed rule (81 FR 25062 through 25076) for a detailed discussion of all proposed changes to the FY 2017 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 49489 and 49494 through 49496), 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, effective October 1, 2014.

Generally, OMB issues major revisions to statistical areas every 10 years, based on the results of the decennial census. However, OMB occasionally issues minor updates and revisions to statistical areas in the years between the decennial censuses. On July 15, 2015, OMB issued OMB Bulletin No. 15-01, which provides updates to and supersedes OMB Bulletin No. 13-01 that was issued on February 28, 2013. The attachment to OMB Bulletin No. 15-01 provides detailed information on the update to statistical areas since February 28, 2013. The updates provided in OMB Bulletin No. 15-01 are based on the application of the 2010 Standards for Delineating Metropolitan and Micropolitan Statistical Areas to Census Bureau population estimates for July 1, 2012 and July 1, 2013. The complete list of statistical areas incorporating these changes is provided in the attachment to OMB Bulletin No. 15-01. According to OMB, “[t]his bulletin establishes revised delineations for the Nation's Metropolitan Statistical Areas, Micropolitan Statistical Areas, and Combined Statistical Areas. The bulletin also provides delineations of Metropolitan Divisions as well as delineations of New England City and Town Areas.” A copy of this bulletin may be obtained on the Web site at: https://www.whitehouse.gov/​omb/​bulletins_​default.

OMB Bulletin No. 15-01 made the following changes that are relevant to the IPPS and OPPS wage index:

  • Garfield County, OK, with principal city Enid, OK, which was a Micropolitan (geographically rural) area, now qualifies as an urban new CBSA 21420 called Enid, OK.
  • The county of Bedford City, VA, a component of the Lynchburg, VA CBSA 31340, changed to town status and is added to Bedford County. Therefore, the county of Bedford City (SSA State county code 49088, FIPS State County Code 51515) is now part of the county of Bedford, VA (SSA State county code 49090, FIPS State County Code 51019). However, the CBSA remains Lynchburg, VA, 31340.
  • The name of Macon, GA, CBSA 31420, as well as a principal city of the Macon-Warner Robins, GA combined statistical area, is now Macon-Bibb County, GA. The CBSA code remains as 31420.

In the FY 2017 IPPS/LTCH PPS proposed rule (81 FR 25062), we proposed to implement these revisions, effective October 1, 2016, beginning with the FY 2017 wage indexes. In the FY 2017 IPPS/LTCH PPS proposed rule, we proposed to use these new definitions to calculate area IPPS wage indexes in a manner that is generally consistent with the CBSA-based methodologies finalized in the FY 2005 and the FY 2015 IPPS final rules. We believe that it is important for the OPPS to use the latest labor market area delineations available as soon as is reasonably possible in order to maintain a more accurate and up-to-date payment system that reflects the reality of population shifts and labor market conditions. Therefore, for purposes of the OPPS, we are proposing to implement these revisions to the OMB statistical area delineations, effective January 1, 2017, beginning with the CY 2017 OPPS wage indexes. Tables 2 and 3 for the FY 2017 IPPS/LTCH PPS proposed rule and the County to CBSA Crosswalk File and Urban CBSAs and Constituent Counties for Acute Care Hospitals File posted on the CMS Web site reflect these CBSA changes. We are inviting public comments on these proposals for the CY 2017 OPPS wage indexes.

For this CY 2017 OPPS/ASC proposed rule, we are proposing to use the proposed FY 2017 hospital IPPS post-reclassified wage index for urban and rural areas as the proposed wage index for the OPPS to determine the wage adjustments for both the OPPS payment rate and the copayment standardized amount for CY 2017. Thus, any adjustments that were proposed for the FY 2017 IPPS post-reclassified wage index would be reflected in the proposed CY 2017 OPPS wage index, including the revisions to the OMB labor market delineations discussed Start Printed Page 45633above, as set forth in OMB Bulletin No. 15-01. (We refer readers to the FY 2017 IPPS/LTCH PPS proposed rule (81 FR 25062 through 25076) and the proposed FY 2017 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 are proposing to continue this policy for CY 2017. The following is a brief summary of the major proposed FY 2017 IPPS wage index policies and adjustments that we are proposing to apply to these hospitals under the OPPS for CY 2017. We further refer readers to the FY 2017 IPPS/LTCH PPS proposed rule (81 FR 25062 through 25076) for a detailed discussion of the proposed changes to the FY 2017 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 2017, we are proposing 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 2017 OPPS, consistent with the FY 2017 IPPS/LTCH PPS proposed rule (81 FR 25066 through 25067), this 3-year transition will continue for the third year in CY 2017.

In addition, for the FY 2017 IPPS, we proposed to extend the imputed floor policy (both the original methodology and alternative methodology) for another year, through September 30, 2017 (81 FR 25067 through 25068). For purposes of the CY 2017 OPPS, we also are proposing 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 2017, we are proposing 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, for CMHCs previously located in urban CBSAs that were designated as rural under the revised OMB labor market area delineations in OMB Bulletin No. 13-01, 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.

Table 2 associated with the FY 2017 IPPS/LTCH PPS proposed 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 would receive the adjustment for FY 2017. We are including the out-migration adjustment information from Table 2 associated with the FY 2017 IPPS/LTCH PPS proposed rule as Addendum L to this proposed rule with the addition of non-IPPS hospitals that would receive the section 505 out-migration adjustment under the CY 2017 OPPS. Addendum L is available via the Internet on the CMS Web site. With the exception of the proposed out-migration wage adjustment table (Addendum L to this proposed rule, which is available via the Internet on the CMS Web site), which includes non-IPPS hospitals paid under the OPPS, we are not reprinting the proposed FY 2017 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 proposed FY 2017 IPPS wage index tables and Addendum L.

D. Proposed Statewide Average Default CCRs

In addition to using CCRs to estimate costs from charges on claims for ratesetting, CMS uses overall hospital-specific CCRs calculated from the hospital's most recent cost report to determine outlier payments, payments for pass-through devices, and monthly interim transitional corridor payments under the OPPS during the PPS year. 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 proposed rule, we are proposing to update the default ratios for CY 2017 using the most recent cost report data. We discuss our policy for using default CCRs, including setting the ceiling threshold for a valid CCR, in the CY 2009 OPPS/ASC final rule with comment period (73 FR 68594 through 68599) in the context of our adoption of an outlier reconciliation policy for cost reports beginning on or after January 1, 2009.

For detail on our process for calculating the statewide average CCRs, we refer readers to the CY 2017 OPPS NPRM Claims Accounting Narrative that is posted on the CMS Web site. Table 4 below lists the proposed statewide Start Printed Page 45634average default CCRs for OPPS services furnished on or after January 1, 2017.

TABLE 4—Proposed CY 2017 Statewide Average CCRs

StateUrban/RuralProposed CY 2017 default CCRPrevious default CCR (CY 2016 OPPS final rule)
ALASKARURAL0.4720.588
ALASKAURBAN0.2610.269
ALABAMARURAL0.2070.224
ALABAMAURBAN0.1620.168
ARKANSASRURAL0.2150.223
ARKANSASURBAN0.2080.218
ARIZONARURAL0.2510.246
ARIZONAURBAN0.1710.170
CALIFORNIARURAL0.1880.179
CALIFORNIAURBAN0.1870.190
COLORADORURAL0.3560.366
COLORADOURBAN0.2100.208
CONNECTICUTRURAL0.4450.366
CONNECTICUTURBAN0.2560.257
DISTRICT OF COLUMBIAURBAN0.2930.298
DELAWAREURBAN0.3030.308
FLORIDARURAL0.1700.170
FLORIDAURBAN0.1450.150
GEORGIARURAL0.2420.251
GEORGIAURBAN0.1920.199
HAWAIIRURAL0.3400.339
HAWAIIURBAN0.3230.313
IOWARURAL0.2950.305
IOWAURBAN0.2470.256
IDAHORURAL0.3380.337
IDAHOURBAN0.4520.459
ILLINOISRURAL0.2400.234
ILLINOISURBAN0.2070.208
INDIANARURAL0.2770.314
INDIANAURBAN0.2330.237
KANSASRURAL0.2810.287
KANSASURBAN0.1990.209
KENTUCKYRURAL0.1930.202
KENTUCKYURBAN0.1900.203
LOUISIANARURAL0.2250.256
LOUISIANAURBAN0.2000.202
MASSACHUSETTSRURAL0.3240.324
MASSACHUSETTSURBAN0.3260.330
MAINERURAL0.4520.470
MAINEURBAN0.4180.395
MARYLANDRURAL0.2690.277
MARYLANDURBAN0.2300.234
MICHIGANRURAL0.2930.317
MICHIGANURBAN0.3190.319
MINNESOTARURAL0.4140.449
MINNESOTAURBAN0.3260.377
MISSOURIRURAL0.2270.238
MISSOURIURBAN0.2630.253
MISSISSIPPIRURAL0.2350.235
MISSISSIPPIURBAN0.1680.169
MONTANARURAL0.4700.480
MONTANAURBAN0.3650.403
NORTH CAROLINARURAL0.2320.229
NORTH CAROLINAURBAN0.2280.235
NORTH DAKOTARURAL0.4110.443
NORTH DAKOTAURBAN0.3330.355
NEBRASKARURAL0.2840.283
NEBRASKAURBAN0.2390.238
NEW HAMPSHIRERURAL0.3090.306
NEW HAMPSHIREURBAN0.2790.306
NEW JERSEYURBAN0.1930.194
NEW MEXICORURAL0.2400.280
NEW MEXICOURBAN0.2860.290
NEVADARURAL0.1990.219
NEVADAURBAN0.1290.146
NEW YORKRURAL0.3030.311
Start Printed Page 45635
NEW YORKURBAN0.3040.298
OHIORURAL0.2960.295
OHIOURBAN0.2070.212
OKLAHOMARURAL0.2290.255
OKLAHOMAURBAN0.1850.192
OREGONRURAL0.2640.265
OREGONURBAN0.3320.341
PENNSYLVANIARURAL0.2830.277
PENNSYLVANIAURBAN0.1860.195
PUERTO RICOURBAN0.5850.590
RHODE ISLANDURBAN0.2920.290
SOUTH CAROLINARURAL0.1890.188
SOUTH CAROLINAURBAN0.1940.197
SOUTH DAKOTARURAL0.3760.367
SOUTH DAKOTAURBAN0.2280.224
TENNESSEERURAL0.1820.198
TENNESSEEURBAN0.1790.177
TEXASRURAL0.2230.238
TEXASURBAN0.1750.179
UTAHRURAL0.3680.493
UTAHURBAN0.3100.325
VIRGINIARURAL0.1880.195
VIRGINIAURBAN0.2310.233
VERMONTRURAL0.4350.434
VERMONTURBAN0.3360.336
WASHINGTONRURAL0.2790.349
WASHINGTONURBAN0.3010.308
WISCONSINRURAL0.3670.317
WISCONSINURBAN0.2910.296
WEST VIRGINIARURAL0.2720.276
WEST VIRGINIAURBAN0.2850.294
WYOMINGRURAL0.4450.433
WYOMINGURBAN0.3200.311

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

In the CY 2006 OPPS final rule with comment period (70 FR 68556), we finalized a payment increase for rural SCHs of 7.1 percent for all services and procedures paid under the OPPS, excluding drugs, biologicals, brachytherapy sources, and devices paid under the pass-through payment policy in accordance with section 1833(t)(13)(B) of the Act, as added by section 411 of 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 Public Law 105-33, a hospital can no longer become newly classified as an EACH.

This adjustment for rural SCHs is budget neutral and applied before calculating outlier payments and 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 2016. 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 2017 OPPS, we are proposing 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 (80 FR 39244).

F. Proposed 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 Start Printed Page 45636that 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. For CY 2016, the target PCR was 0.92, as discussed in the CY 2016 OPPS/ASC final rule with comment period (80 FR 70362 through 70363).

2. Proposed Payment Adjustment for Certain Cancer Hospitals for CY 2017

For CY 2017, we are proposing 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 are available at the time of the development of this proposed rule. To calculate the proposed CY 2017 target PCR, we used the same extract of cost report data from HCRIS, as discussed in section II.A. of this proposed rule, used to estimate costs for the CY 2017 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 2015 claims data that we used to model the impact of the proposed CY 2017 APC relative payment weights (3,716 hospitals) because it is appropriate to use the same set of hospitals that we are using to calibrate the modeled CY 2017 OPPS. The cost report data for the hospitals in this dataset were from cost report periods with fiscal year ends ranging from 2014 to 2015. We then removed the cost report data of the 50 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 14 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 3,652 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 proposing that the payment amount associated with the cancer hospital payment adjustment to be determined at cost report settlement would be the additional payment needed to result in a proposed target PCR equal to 0.92 for each cancer hospital. Table 5 below indicates the proposed estimated percentage increase in OPPS payments to each cancer hospital for CY 2017 due to the cancer hospital payment adjustment policy.

The actual amount of the CY 2017 cancer hospital payment adjustment for each cancer hospital will be determined at cost report settlement and will depend on each hospital's CY 2017 payments and costs. We note that the requirements contained in section 1833(t)(18) of the Act do not affect the existing statutory provisions that Start Printed Page 45637provide 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.

Table 5—Proposed Estimated CY 2017 Hospital-Specific Payment Adjustment for Cancer Hospitals To Be Provided at Cost Report Settlement

Provider No.Hospital nameProposed estimated percentage increase in OPPS payments for CY 2017
050146City of Hope Comprehensive Cancer Center27.2
050660USC Norris Cancer Hospital15.3
100079Sylvester Comprehensive Cancer Center33.8
100271H. Lee Moffitt Cancer Center & Research Institute28.7
220162Dana-Farber Cancer Institute51.4
330154Memorial Sloan-Kettering Cancer Center46.9
330354Roswell Park Cancer Institute31.4
360242James Cancer Hospital & Solove Research Institute39.4
390196Fox Chase Cancer Center17.9
450076M.D. Anderson Cancer Center54.0
500138Seattle Cancer Care Alliance60.4

G. Proposed 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 2016, the outlier threshold was met when the hospital's cost of furnishing a service exceeded 1.75 times (the multiplier threshold) the APC payment amount and exceeded the APC payment amount plus $3,250 (the fixed-dollar amount threshold) (80 FR 70365). 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 2015 OPPS payment, using CY 2015 claims available for this proposed rule and the revised OPPS expenditure estimate for the FY 2016 President's Budget, is approximately 1.0 percent of the total aggregated OPPS payments. Therefore, for CY 2015, we estimate that we paid the outlier target of 1.0 percent of total aggregated OPPS payments.

Using CY 2015 claims data and CY 2016 payment rates, we currently estimate that the aggregate outlier payments for CY 2016 will be approximately 1.0 percent of the total CY 2016 OPPS payments. We provide estimated CY 2017 outlier payments for hospitals and CMHCs with claims included in the claims data that we used to model impacts in the Hospital-Specific Impacts—Provider-Specific Data file on the CMS Web site at: http://www.cms.gov/​Medicare/​Medicare-Fee-for-Service-Payment/​HospitalOutpatientPPS/​index.html.

2. Proposed Outlier Calculation

For CY 2017, we are proposing to continue our policy of estimating outlier payments to be 1.0 percent of the estimated aggregate total payments under the OPPS. We are proposing that a portion of that 1.0 percent, an amount equal to less than 0.01 percent of outlier payments (or 0.0001 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 this proposed rule, we are proposing to continue our longstanding policy that if a CMHC's cost for partial hospitalization services, paid under proposed APC 5853 (Partial Hospitalization for CMHCs), exceeds 3.40 times the payment rate for proposed APC 5853, the outlier payment would be calculated as 50 percent of the amount by which the cost exceeds 3.40 times the proposed APC 5853 payment rate. For further discussion of CMHC outlier payments, we refer readers to section VIII.D. of this proposed rule.

To ensure that the estimated CY 2017 aggregate outlier payments would equal 1.0 percent of estimated aggregate total payments under the OPPS, we are proposing that the hospital outlier threshold be set so that outlier payments would be triggered when a hospital's cost of furnishing a service exceeds 1.75 times the APC payment amount and exceeds the APC payment amount plus $3,825.

We calculated the proposed fixed-dollar threshold of $3,825 using the standard methodology most recently used for CY 2016 (80 FR 70364 through 70365). For purposes of estimating outlier payments for this proposed rule, we used the hospital-specific overall ancillary CCRs available in the April 2016 update to the Outpatient Provider-Specific File (OPSF). The OPSF Start Printed Page 45638contains 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 2017 hospital outlier payments for this proposed rule, we inflated the charges on the CY 2015 claims using the same inflation factor of 1.0898 that we used to estimate the IPPS fixed-dollar outlier threshold for the FY 2017 IPPS/LTCH PPS proposed rule (81 FR 25270 through 25273). We used an inflation factor of 1.0440 to estimate CY 2016 charges from the CY 2015 charges reported on CY 2015 claims. The methodology for determining this charge inflation factor is discussed in the FY 2017 IPPS/LTCH PPS proposed rule (81 FR 25271). As we stated in the CY 2005 OPPS final rule with comment period (69 FR 65845), we believe that the use of these charge inflation factors are appropriate for the OPPS because, with the exception of the inpatient routine service cost centers, hospitals use the same ancillary and outpatient cost centers to capture costs and charges for inpatient and outpatient services.

As noted in the CY 2007 OPPS/ASC final rule with comment period (71 FR 68011), we are concerned that we could systematically overestimate the OPPS hospital outlier threshold if we did not apply a CCR inflation adjustment factor. Therefore, we are proposing to apply the same CCR inflation adjustment factor that we are proposing to apply for the FY 2017 IPPS outlier calculation to the CCRs used to simulate the proposed CY 2017 OPPS outlier payments to determine the fixed-dollar threshold. Specifically, for CY 2017, we are proposing to apply an adjustment factor of 0.9696 to the CCRs that were in the April 2016 OPSF to trend them forward from CY 2016 to CY 2017. The methodology for calculating this proposed adjustment is discussed in the FY 2017 IPPS/LTCH PPS proposed rule (81 FR 25272).

To model hospital outlier payments for the proposed rule, we applied the overall CCRs from the April 2016 OPSF after adjustment (using the proposed CCR inflation adjustment factor of 0.9696 to approximate CY 2017 CCRs) to charges on CY 2015 claims that were adjusted (using the proposed charge inflation factor of 1.0898 to approximate CY 2017 charges). We simulated aggregated CY 2017 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 2017 OPPS payments. We estimated that a proposed fixed-dollar threshold of $3,825, 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 are proposing that, if a CMHC's cost for partial hospitalization services, paid under APC 5853, exceeds 3.40 times the payment rate for APC 5853, the outlier payment would be calculated as 50 percent of the amount by which the cost exceeds 3.40 times the APC 5853 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 are proposing 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 proposed rule.

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

The basic methodology for determining prospective payment rates for HOPD services under the OPPS is set forth in existing regulations at 42 CFR part 419, subparts C and D. For this CY 2017 OPPS/ASC proposed rule, the proposed payment rate for most services and procedures for which payment is made under the OPPS is the product of the proposed conversion factor calculated in accordance with section II.B. of this proposed rule and the proposed relative payment weight determined under section II.A. of this proposed rule. Therefore, the proposed national unadjusted payment rate for most APCs contained in Addendum A to this proposed rule (which is available via the Internet on the CMS Web site) and for most HCPCS codes to which separate payment under the OPPS has been assigned in Addendum B to this proposed rule (which is available via the Internet on the CMS Web site) was calculated by multiplying the proposed CY 2017 scaled weight for the APC by the proposed CY 2017 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 proposed rule.

We demonstrate below 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 this proposed rule, which is available via the Internet on the CMS Web site), in a circumstance in which the multiple procedure discount does not apply, the procedure is not bilateral, and conditionally packaged services (status indicator of “Q1” and “Q2”) qualify for separate payment. We note that, although blood and blood products with status indicator “R” and brachytherapy sources with status indicator “U” are not subject to wage adjustment, they are subject to reduced payments when a hospital fails to meet the Hospital OQR Program requirements.Start Printed Page 45639

Individual providers interested in calculating the payment amount that they would receive for a specific service from the national unadjusted payment rates presented in Addenda A and B to this proposed rule (which are available via the Internet on the CMS Web site) should follow the formulas presented in the following steps. For purposes of the payment calculations below, we refer to the proposed national unadjusted payment rate for hospitals that meet the requirements of the Hospital OQR Program as the “full” national unadjusted payment rate. We refer to the proposed 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 proposed 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 proposed full CY 2017 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 proposed CY 2017 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 proposed rule. The proposed wage index values assigned to each area reflect the geographic statistical areas (which are based upon OMB standards) to which hospitals are proposed to be assigned for FY 2017 under the IPPS, reclassifications through the MGCRB, section 1886(d)(8)(B) “Lugar” hospitals, reclassifications under section 1886(d)(8)(E) of the Act, as defined in § 412.103 of the regulations, and hospitals designated as urban under section 601(g) of Public Law 98-21. (For further discussion of the proposed changes to the FY 2017 IPPS wage indexes, as applied to the CY 2017 OPPS, we refer readers to section II.C. of this proposed rule. We are proposing to continue to apply a wage index floor of 1.00 to frontier States, in accordance with section 10324 of the Affordable Care Act 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 Public Law 108-173. Addendum L to this proposed rule (which is available via the Internet on the CMS Web site) contains the qualifying counties and the proposed associated wage index increase developed for the FY 2017 IPPS, which are listed in Table 2 in the FY 2017 IPPS/LTCH PPS proposed rule and available via the Internet on the CMS Web site at: http://www.cms.gov/​Medicare/​Medicare-Fee-for-Service-Payment/​AcuteInpatientPPS/​index.html. This step is to be followed only if the hospital is not reclassified or redesignated under section 1886(d)(8) or section 1886(d)(10) of the Act.

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

The formula below is a mathematical representation of Step 4 and adjusts the labor-related portion of the national 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.

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 proposed 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 APC 5071 (Level 1 Excision/Biopsy/Incision and Drainage). The proposed CY 2017 full national unadjusted payment rate for APC 5071 is approximately $531.31. The proposed reduced national unadjusted payment rate for APC 5071 for a hospital that fails to meet the Hospital OQR Program requirements is approximately $520.68. This proposed reduced rate is calculated by multiplying the proposed reporting ratio of 0.980 by the proposed full unadjusted payment rate for APC 5071.

The proposed FY 2017 wage index for a provider located in CBSA 35614 in New York is 1.2775. The labor-related portion of the proposed full national unadjusted payment is approximately $407.25 (.60 * $531.31 * 1.2775). The labor-related portion of the proposed reduced national unadjusted payment is approximately $399.10 (.60 * $520.68 * 1.2775). The nonlabor-related portion of the proposed full national unadjusted payment is approximately $212.52 (.40 * $531.31). The nonlabor-related portion of the proposed reduced national unadjusted payment is approximately Start Printed Page 45640$208.27 (.40 * $520.68). The sum of the labor-related and nonlabor-related portions of the proposed full national adjusted payment is approximately $619.77 ($407.25 + $212.52). The sum of the portions of the proposed reduced national adjusted payment is approximately $607.37 ($399.10 + $208.27).

I. Proposed Beneficiary Copayments

1. Background

Section 1833(t)(3)(B) of the Act requires the Secretary to set rules for determining the unadjusted copayment amounts to be paid by beneficiaries for covered OPD services. Section 1833(t)(8)(C)(ii) of the Act specifies that the Secretary must reduce the national unadjusted copayment amount for a covered OPD service (or group of such services) furnished in a year in a manner so that the effective copayment rate (determined on a national unadjusted basis) for that service in the year does not exceed a specified percentage. As specified in section 1833(t)(8)(C)(ii)(V) of the Act, the effective copayment rate for a covered OPD service paid under the OPPS in CY 2006, and in calendar years thereafter, shall not exceed 40 percent of the APC payment rate.

Section 1833(t)(3)(B)(ii) of the Act provides that, for a covered OPD service (or group of such services) furnished in a year, the national unadjusted copayment amount cannot be less than 20 percent of the OPD fee schedule amount. However, section 1833(t)(8)(C)(i) of the Act limits the amount of beneficiary copayment that may be collected 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. Proposed OPPS Copayment Policy

For CY 2017, we are proposing to determine copayment amounts for new and revised APCs using the same methodology that we implemented beginning in CY 2004. (We refer readers to the November 7, 2003 OPPS final rule with comment period (68 FR 63458).) In addition, we are proposing to use the same standard rounding principles that we have historically used in instances where the application of our standard copayment methodology would result in a copayment amount that is less than 20 percent and cannot be rounded, under standard rounding principles, to 20 percent. (We refer readers to the CY 2008 OPPS/ASC final rule with comment period (72 FR 66687) in which we discuss our rationale for applying these rounding principles.) The proposed national unadjusted copayment amounts for services payable under the OPPS that would be effective January 1, 2017, are shown in Addenda A and B to this proposed rule (which are available via the Internet on the CMS Web site). As discussed in section XIII.E. of this proposed rule, for CY 2017, the proposed Medicare beneficiary's minimum unadjusted copayment and national unadjusted copayment for a service to which a reduced national unadjusted payment rate applies will equal the product of the reporting ratio and the national unadjusted copayment, or the product of the reporting ratio and the minimum unadjusted copayment, respectively, for the service.

We note that 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 recalibrating 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 Start Printed Page 45641recalibration of relative payment weights (68 FR 63459).

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

Individuals interested in calculating the national copayment liability for a Medicare beneficiary for a given service provided by a hospital that met or failed to meet its Hospital OQR Program requirements should follow the formulas presented in the following steps.

Step 1. Calculate the beneficiary payment percentage for the APC by dividing the APC's national unadjusted copayment by its payment rate. For example, using APC 5071, $106.26 is approximately 20 percent of the proposed full national unadjusted payment rate of $531.31. For APCs with only a minimum unadjusted copayment in Addenda A and B to this proposed rule (which are available via the Internet on the CMS Web site), the beneficiary payment percentage is 20 percent.

The formula below is a mathematical representation of Step 1 and calculates 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 proposed rule. Calculate the rural adjustment for eligible providers as indicated in Step 6 under section II.H. of this proposed rule.

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

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

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

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

Step 4. For a hospital that failed to meet its Hospital OQR Program requirements, multiply the copayment calculated in Step 3 by the reporting ratio of 0.980.

The proposed unadjusted copayments for services payable under the OPPS that would be effective January 1, 2017, are shown in Addenda A and B to this proposed rule (which are available via the Internet on the CMS Web site). We note that the proposed national unadjusted payment rates and copayment rates shown in Addenda A and B to this proposed rule reflect the proposed full CY 2017 OPD fee schedule increase factor discussed in section II.B. of this proposed rule.

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. Proposed OPPS Ambulatory Payment Classification (APC) Group Policies

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

CPT and Level II HCPCS codes are used to report procedures, services, items, and supplies under the hospital OPPS. Specifically, CMS recognizes the following codes on OPPS claims:

  • Category I CPT codes, which describe 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 indicator (SI) and APC assignments. 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 comments 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 proposed rule provides a discussion of the various status indicators used under the OPPS. Certain payment status indicators provide separate payment while other payment status indicators do not.

In Table 6 below, we summarize our current 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 6—Comment Timeframe for New or Revised HCPCS Codes

OPPS quarterly update CRType of codeEffective dateComments soughtWhen finalized
April 1, 2016Level II HCPCS CodesApril 1, 2016CY 2017 OPPS/ASC proposed ruleCY 2017 OPPS/ASC final rule with comment period.
July 1, 2016Level II HCPCS CodesJuly 1, 2016CY 2017 OPPS/ASC proposed ruleCY 2017 OPPS/ASC final rule with comment period.
Category I (certain vaccine codes) and III CPT codesJuly 1, 2016CY 2017 OPPS/ASC proposed ruleCY 2017 OPPS/ASC final rule with comment period.
October 1, 2016Level II HCPCS CodesOctober 1, 2016CY 2017 OPPS/ASC final rule with comment periodCY 2018 OPPS/ASC final rule with comment period.
Start Printed Page 45642
January 1, 2017Level II HCPCS CodesJanuary 1, 2017CY 2017 OPPS/ASC final rule with comment periodCY 2018 OPPS/ASC final rule with comment period.
Category I and III CPT Codes.*January 1, 2017CY 2017 OPPS/ASC proposed ruleCY 2017 OPPS/ASC final rule with comment period.
* 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. We refer readers to section III.A.3. of this CY 2017 OPPS/ASC proposed rule for further discussion of this issue.

1. Proposed Treatment of New CY 2016 Level II HCPCS and CPT Codes Effective April 1, 2016 and July 1, 2016 for Which We Are Soliciting Public Comments in This CY 2017 OPPS/ASC Proposed Rule

Through the April 2016 OPPS quarterly update CR (Transmittal 3471, Change Request 9549, dated February 26, 2016), and the July 2016 OPPS quarterly update CR (Transmittal 3523, Change Request 9658, dated May 13, 2016), we recognized several new HCPCS codes for separate payment under the OPPS.

Effective April 1, 2016, we made effective 10 new Level II HCPCS codes and also assigned them to appropriate interim OPPS status indicators and APCs. Through the April 2016 OPPS quarterly update CR, we allowed separate payment for 10 new Level II HCPCS codes. Table 7 below lists the 10 Level II HCPCS codes that were allowed for separate payment effective April 1, 2016.

In this CY 2017 OPPS/ASC proposed rule, we are soliciting public comments on the proposed APC and status indicator assignments for the Level II HCPCS codes implemented on April 1, 2016 and listed in Table 7 of this proposed rule. The proposed payment rates for these codes, where applicable, can be found in Addendum B to this proposed rule (which is available via the Internet on the CMS Web site).

Table 7—New Level II HCPCS Codes Implemented in April 2016

CY 2016 HCPCS CodeCY 2016 Long descriptorProposed CY 2017 status indicatorProposed CY 2017 APC
C9137Injection, Factor VIII (antihemophilic factor, recombinant) PEGylated, 1 I.UG1844
C9138Injection, Factor VIII (antihemophilic factor, recombinant) (Nuwiq), 1 I.UG1846
C9461Choline C 11, diagnostic, per study doseG9461
C9470Injection, aripiprazole lauroxil, 1 mgG9470
C9471Hyaluronan or derivative, Hymovis, for intra-articular injection, 1 mgG9471
C9472Injection, talimogene laherparepvec, 1 million plaque forming units (PFU)G9472
C9473Injection, mepolizumab, 1 mgG9473
C9474Injection, irinotecan liposome, 1 mgG9474
C9475Injection, necitumumab, 1 mgG9475
J7503Tacrolimus, extended release, (Envarsus XR), oral, 0.25 mgG1845

Effective July 1, 2016, 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 2016 OPPS quarterly update CR (Transmittal 3523, Change Request 9658, dated May 13, 2016), we assigned interim OPPS status indicators and APCs for nine new Category III CPT codes and nine Level II HCPCS codes that were made effective July 1, 2016. Specifically, as displayed in Table 8 below, we made interim OPPS status indicators and APC assignments for Category III CPT codes 0438T, 0440T, 0441T, 0442T, and 0443T, and Level II HCPCS codes C9476, C9477, C9478, C9479, C9480, Q5102, Q9981, Q9982, and Q9983. We note that Category III CPT codes 0437T, 0439T, 0444T, and 0445T are assigned to OPPS status indicator “N” to indicate that the services described by the codes are packaged and their payment is included in the primary procedure codes reported with these codes.

In addition, we note that HCPCS code Q9982 replaced HCPCS code C9459 (Flutemetamol f18, diagnostic, per study dose, up to 5 millicuries), effective July 1, 2016. Similarly, HCPCS code Q9983 replaced HCPCS code C9458 (Florbetaben f18, diagnostic, per study dose, up to 8.1 millicuries), effective July 1, 2016. Because HCPCS code Q9982 and Q9983 describe the same drugs as HCPCS code C9459 and C9458, respectively, we are proposing to continue their pass-through payment status, and assign the HCPCS Q-codes to the same APC and status indicators as their predecessor HCPCS C-codes, as shown in Table 8.

In addition, the CPT Editorial Panel established CPT code 0438T, effective July 1, 2016. We note that CPT code 0438T replaced HCPCS code C9743 (Injection/implantation of bulking or spacer material (any type)), effective July 1, 2016. Because CPT code 0438T describes the same procedure as HCPCS code C9743, we are proposing to assign the CPT code to the same APC and status indicator as its predecessor HCPCS C-code, as shown in Table 8.

In this CY 2017 OPPS/ASC proposed rule, we are soliciting public comments on the proposed APC and status indicator assignments for the CPT and Level II HCPCS codes implemented on July 1, 2016. Table 8 below lists the CPT and Level II HCPCS codes that were implemented on July 1, 2016, along with the proposed status indicators and proposed APC assignments for CY 2017.Start Printed Page 45643

Table 8—New Category III CPT and Level II HCPCS Codes Implemented in July 2016

CY 2016 CPT/HCPCS CodeCY 2016 Long descriptorProposed CY 2017 status indicatorProposed CY 2017 APC
C9476Injection, daratumumab, 10 mgG9476
C9477Injection, elotuzumab, 1 mgG9477
C9478Injection, sebelipase alfa, 1 mgG9478
C9479Injection, ciprofloxacin otic suspension, per vialG9479
C9480Injection, trabectedin, 0.1 mgG9480
Q5102Injection, Infliximab, Biosimilar, 10 mgK1847
Q9981Rolapitant, oral, 1 mgK1761
Q9982 *Flutemetamol F18, diagnostic, per study dose, up to 5 millicuriesG9459
Q9983 **Florbetaben f18, diagnostic, per study dose, up to 8.1 millicuriesG9458
0437TImplantation of non-biologic or synthetic implant (eg, polypropylene) for fascial reinforcement of the abdominal wall (List separately in addition to primary procedure)NN/A
0438T ***Transperineal placement of biodegradable material, peri-prostatic (via needle), single or multiple, includes image guidanceT5374
0439TMyocardial contrast perfusion echocardiography; at rest or with stress, for assessment of myocardial ischemia or viability (List separately in addition to primary procedure)NN/A
0440TAblation, percutaneous, cryoablation, includes imaging guidance; upper extremity distal/peripheral nerveJ15361
0441TAblation, percutaneous, cryoablation, includes imaging guidance; lower extremity distal/peripheral nerveJ15361
0442TAblation, percutaneous, cryoablation, includes imaging guidance; nerve plexus or other truncal nerve (eg, brachial plexus, pudendal nerve)J15361
0443TReal time spectral analysis of prostate tissue by fluorescence spectroscopyT5373
0444TInitial placement of a drug-eluting ocular insert under one or more eyelids, including fitting, training, and insertion, unilateral or bilateralNN/A
0445TSubsequent placement of a drug-eluting ocular insert under one or more eyelids, including re-training, and removal of existing insert, unilateral or bilateralNN/A
* HCPCS code C9459 (Flutemetamol f18, diagnostic, per study dose, up to 5 millicuries) was deleted June 30, 2016, and replaced with HCPCS code Q9982 effective July 1, 2016.
** HCPCS code C9458 (Florbetaben f18, diagnostic, per study dose, up to 8.1 millicuries) was deleted June 30, 2016, and replaced with HCPCS code Q9983 effective July 1, 2016.
*** HCPCS code C9743 (Injection/implantation of bulking or spacer material (any type) with or without image guidance (not to be used if a more specific code applies) was deleted June 30, 2016 and replaced with CPT code 0438T effective July 1, 2016.

In summary, we are soliciting public comments on the proposed CY 2017 status indicators and APC assignments for the Level II HCPCS codes and the Category III CPT codes that were made effective April 1, 2016, and July 1, 2016. These codes are listed in Tables 7 and 8 of this proposed rule. We also are proposing to finalize the status indicator and APC assignments and payment rates for these codes in the CY 2017 OPPS/ASC final rule with comment period. The proposed payment rates for these codes can be found in Addendum B to this proposed rule (which is available via the Internet on the CMS Web site).

2. Proposed Process for New Level II HCPCS Codes That Will Be Effective October 1, 2016 and January 1, 2017 for Which We Will Be Soliciting Public Comments in the CY 2017 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 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 via the CMS HCPCS Web site, and also through the January OPPS quarterly update CRs. In the past, we also released new Level II HCPCS codes that are effective October 1 through the October OPPS quarterly update CRs and incorporated these new codes in the final rule with comment period, thereby updating the OPPS for the following calendar year.

For CY 2017, we are proposing to continue our established policy of assigning comment indicator “NI” in Addendum B to the OPPS/ASC final rule with comment period to those new Level II HCPCS codes that are effective October 1 and January 1 to indicate that we are assigning them an interim payment status which is subject to public comment. Specifically, the Level II HCPCS codes that will be effective October 1, 2016 and January 1, 2017 would be flagged with comment indicator “NI” in Addendum B to the CY 2017 OPPS/ASC final rule with comment period to indicate that we have assigned the codes an interim OPPS payment status for CY 2017. We will be inviting public comments in the CY 2017 OPPS/ASC final rule with comment period on the status indicator, APC assignments, and payment rates for these codes that would be finalized in the CY 2018 OPPS/ASC final rule with comment period.

3. Proposed Treatment of New and Revised CY 2017 Category I and III CPT Codes That Will Be Effective January 1, 2017, for Which We Are Soliciting Public Comments in This CY 2017 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 Start Printed Page 45644propose APC and status indicator assignments in the following year's rulemaking cycle. We note 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 the resort to HCPCS G-codes and the resulting delay in utilization of the most current CPT codes. Also, 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 2017 OPPS update, we received the CY 2017 CPT codes from AMA in time for inclusion in this CY 2017 OPPS/ASC proposed rule. The new and revised CY 2017 Category I and III CPT codes can be found in Addendum B to this proposed rule (which is available via the Internet on the CMS Web site) and are 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 status indicator.

Further, we remind 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 are including the 5-digit placeholder codes and their long descriptors for the new and revised CY 2017 CPT codes in Addendum O to this proposed rule (which is available via the Internet on the CMS Web site) so that the public can adequately comment on our proposed APCs and status indicator assignments. The 5-digit placeholder codes can be found in Addendum O, specifically under the column labeled “CY 2017 OPPS/ASC Proposed Rule 5-Digit Placeholder Code,” to this proposed rule. The final CPT code numbers will be included in the CY 2017 OPPS/ASC final rule with comment period. We note that not every code listed in Addendum O is subject to comment. For the new/revised Category I and III CPT codes, we are requesting comments on only those codes that are assigned to comment indicator “NP.”

In summary, we are soliciting public comments on the proposed CY 2017 status indicators and APC assignments for the new and revised Category I and III CPT codes that will be effective January 1, 2017. The CPT codes are listed in Addendum B to this proposed rule with short descriptors only. We list them again in Addendum O to this proposed rule with long descriptors. We also are proposing to finalize the status indicator and APC assignments for these codes (with their final CPT code numbers) in the CY 2017 OPPS/ASC final rule with comment period. The proposed status indicator and APC assignment for these codes can be found in Addendum B to this proposed rule (which is available via the Internet on the CMS Web site).

B. Proposed OPPS Changes—Variations Within APCs

1. Background

Section 1833(t)(2)(A) of the Act requires the Secretary to develop a classification system for covered hospital outpatient department services. Section 1833(t)(2)(B) of the Act provides that the Secretary may establish groups of covered OPD services within this classification system, so that services classified within each group are comparable clinically and with respect to the use of resources. In accordance with these provisions, we developed a grouping classification system, referred to as Ambulatory Payment Classifications (APCs), as set forth in § 419.31 of the regulations. We use Level I and Level II HCPCS codes to identify and group the services within each APC. The APCs are organized such that each group is homogeneous both clinically and in terms of resource use. Using this classification system, we have established distinct groups of similar services. We also have developed separate APC groups for certain medical devices, drugs, biologicals, therapeutic radiopharmaceuticals, and brachytherapy devices 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 ancillary and supportive to a primary diagnostic or therapeutic modality and, in those cases, are an integral part of the primary service they support. 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 proposed rule.

Under the OPPS, we generally pay for covered 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. For CY 2017, we are proposing 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 APC 5012 (Clinic Visits and Related Services). The APC relative payment weights are scaled to 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.

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 Start Printed Page 456451,000 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 this section of this proposed rule, for CY 2017, we are proposing to make exceptions to this limit on the variation of costs within each APC group in unusual cases, such as low-volume items and services.

For the CY 2017 OPPS, we have identified the APCs with violations of the 2 times rule. Therefore, we are proposing changes to the procedure codes assigned to these APCs in Addendum B to this proposed rule. We note that Addendum B does not appear in the printed version of the Federal Register as part of this CY 2017 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/​index.html. In these cases, to eliminate a violation of the 2 times rule or to improve clinical and resource homogeneity, we are proposing 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 2017 included in this proposed rule are related to changes in costs of services that were observed in the CY 2015 claims data newly available for CY 2017 ratesetting. We also are proposing changes to the status indicators for some procedure codes that are not specifically and separately discussed in this proposed rule. In these cases, we are proposing 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 2017. Addendum B to this CY 2017 OPPS/ASC proposed rule identifies with a comment indicator “CH” those procedure codes for which we are proposing a change to the APC assignment or status indicator, or both, that were initially assigned in the April 1, 2016 OPPS Addendum B Update (available via the Internet on the CMS Web site at: https://www.cms.gov/​Medicare/​Medicare-Fee-for-Service-Payment/​HospitalOutpatientPPS/​Addendum-A-and-Addendum-B-Updates.html).

3. Proposed APC Exceptions to the 2 Times Rule

Taking into account the APC changes that we are proposing for CY 2017, 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 2015 claims data available for this CY 2017 proposed rule, we found 4 APCs with violations of the 2 times rule. We applied the criteria as described above to identify the APCs that we are proposing to make exceptions for under the 2 times rule for CY 2017, and identified 4 APCs that met the criteria for an exception to the 2 times rule based on the CY 2015 claims data available for this proposed rule. We did not include in that determination those APCs where a 2 times rule violation was not a relevant concept, such as APC 5401 (Dialysis), which has a proposed APC geometric mean cost of approximately $585. Therefore, we have only identified those APCs, including those with criteria-based costs, such as device-dependent CPT/HCPCS codes, with 2 times rule violations.

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 9 of this proposed rule lists the 4 APCs that we are proposing to make exceptions for under the 2 times rule for CY 2017 based on the criteria cited above and claims data submitted between January 1, 2015, and December 31, 2015, and processed on or before December 31, 2015. For the final rule with comment period, we intend to use claims data for dates of service between January 1, 2015, and December 31, 2015, that were processed on or before June 30, 2016, and updated CCRs, if available.

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

Table 9—Proposed APC Exceptions to the 2 Times Rule for CY 2017

Proposed CY 2017 APCProposed CY 2017 APC title
5521Level 1 Diagnostic Radiology without Contrast.
5735Level 5 Minor Procedures.
5771Cardiac Rehabilitation.
5841Psychotherapy.

C. Proposed New Technology APCs

1. Background

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

For CY 2016, there are 48 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 1599 (New Technology—Level 48 ($90,001-$100,000)). 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 Start Printed Page 45646New Technology APC configurations allow us to price new technology services more appropriately and consistently.

We note that the cost bands for the New Technology APCs, specifically, APCs 1491 through 1599, vary with increments ranging from $10 to $10,000. 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 7 ($500-$600)) is made at approximately $550.

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 during 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 that 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 APCs.

2. Proposed Additional New Technology APC Groups

As stated above, for the CY 2016 update, there are 48 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, we are proposing to expand the New Technology APC groups by adding 3 more levels, specifically, adding New Technology Levels 49 through 51. We are proposing this expansion to accommodate the assignment of retinal prosthesis implantation procedures to a New Technology APC, which is discussed in section III.C.3. of this proposed rule. Therefore, for the CY 2017 OPPS update, we are proposing to establish six new groups of New Technology APCs—APCs 1901 through 1906 (for New Technology APC Levels 49 through 51) with procedures assigned to both OPPS status indicators “S” and “T.” These new groups of APCs have the same payment levels with one set subject to the multiple procedure payment reduction (procedures assigned to status indicator “T”) and the other set not subject to the multiple procedure payment reduction (procedures assigned to 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 assignment. Table 10 below includes the complete list of the proposed additional six New Technology APC groups for CY 2017.

Table 10—Proposed Additional New Technology APC Groups for CY 2017

Proposed New CY 2017 APCProposed CY 2017 APC group titleProposed status indicator
1901New Technology—Level 49 ($100,001-$120,000)S
1902New Technology—Level 49 ($100,001-$120,000)T
1903New Technology—Level 50 ($120,001-$140,000)S
1904New Technology—Level 50 ($120,001-140,000)T
1905New Technology—Level 51 ($140,001-$160,000)S
1906New Technology—Level 51 ($140,001-160,000)T

The proposed payment rates for New Technology APC 1901 through 1906 can be found in Addendum A to this proposed rule (which is available via the Internet on the CMS Web site).

3. Proposed Procedures Assigned to New Technology APC Groups for CY 2017

a. Overall Proposal

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, for CY 2017, we are proposing 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).

b. Retinal Prosthesis Implant Procedure

CPT code 0100T (Placement of a subconjunctival retinal prosthesis receiver and pulse generator, and implantation of intra-ocular retinal electrode array, with vitrectomy) describes the implantation of a retinal prosthesis, specifically, a procedure involving use of the Argus® II Retinal Prosthesis System. This first retinal prosthesis was approved by the FDA in 2013 for adult patients diagnosed with advanced retinitis pigmentosa. Pass-through payment status was granted for the Argus® II device under HCPCS code C1841 (Retinal prosthesis, includes all internal and external components) beginning October 1, 2013, and expired on December 31, 2015. We note that after pass-through payment status expires for a medical device, the payment for the device is packaged into the payment for the associated surgical procedure. Consequently, for CY 2016, the procedure described by HCPCS code Start Printed Page 45647C1841 was assigned to OPPS status indicator “N” to indicate that payment for the procedure is packaged and included in the payment rate for the surgical procedure described by CPT code 0100T. For CY 2016, CPT code 0100T is assigned to APC 1599 (New Technology—Level 48 ($90,001-$100,000)), which has a CY 2016 payment rate of $95,000. This payment includes both the surgical procedure (CPT code 0100T) and the use of the Argus® II device (HCPCS code C1841). However, stakeholders (including the device manufacturer and hospitals) believe that the CY 2016 payment rate for procedures involving the Argus® II System is insufficient to cover the hospital cost of performing the procedure, which includes the cost of the retinal prosthesis, which has a retail price of approximately $145,000.

For the CY 2017 update, analysis of the CY 2015 OPPS claims data used for this CY 2017 proposed rule shows 5 single claims (out of 7 total claims) for CPT code 0100T, with a geometric mean cost of approximately $141,900 based on claims submitted between January 1, 2015, through December 31, 2015, and processed through December 31, 2015. We note that the final payment rate in the CY 2017 OPPS/ASC final rule with comment period will be based on claims submitted between January 1, 2015, through December 31, 2015, and processed through June 30, 2016. Based on the latest OPPS claims data available for this proposed rule and our further understanding of the Argus® II procedure, we are proposing to reassign the procedure described by CPT code 0100T from APC 1599 to APC 1906 (New Technology—Level 51 ($140,001-$160,000)), which has a proposed payment rate of approximately $150,000 for CY 2017. We believe that APC 1906 is the most appropriate APC assignment for the Argus® II procedure described by CPT code 0100T. We note that this payment rate includes the cost of both the surgical procedure, including the cost of the retinal prosthesis (noted above) (CPT code 0100T), and the cost of the Argus® II device (HCPCS code C1841). We are inviting public comments on this proposal.

D. Proposed OPPS APC-Specific Policies

1. Imaging

As a part of our CY 2016 comprehensive review of the structure of the APCs and procedure code assignments, we restructured the APCs that contain imaging services (80 FR 70392). The purpose of this restructuring of the OPPS APC groupings for imaging services was to improve the clinical and resource homogeneity of the services classified within the imaging APCs. Recently some stakeholders that provide imaging services in hospitals recommended some further restructuring of the OPPS imaging APCs, again for the purpose of improving the clinical and resource homogeneity of the services classified within these APCs. After reviewing the stakeholder recommendations, we agree that further improvements can be achieved by making further changes to the structure of the APC groupings of the imaging procedures classified within the imaging APCs. Therefore, for CY 2017, we are proposing to make further changes to the structure of the imaging APCs. Below in Table 11 we list the CY 2016 imaging APCs, and in Table 12 we list our proposed CY 2017 changes to the imaging APCs. This proposal would consolidate the imaging APCs from 17 APCs in CY 2016 to 8 in CY 2017. The specific APC assignments for each service grouping are listed in Addendum B to this proposed rule, which is available via the Internet on the CMS Web site. We note that some of the imaging procedures are assigned to APCs that are not listed in the tables below (for example, the vascular procedures APCs). Also, the nuclear medicine services APCs are not included in this proposal. We are inviting public comments on our proposal to consolidate the imaging APCs from 17 APCs in CY 2016 to 8 in CY 2017.

Table 11—CY 2016 Imaging APCs

CY 2016 APCCY 2016 APC Group titleCY 2016 status indicator
5521Level 1 X-Ray and Related ServicesS
5522Level 2 X-Ray and Related ServicesS
5523Level 3 X-Ray and Related ServicesS
5524Level 4 X-Ray and Related ServicesS
5525Level 5 X-Ray and Related ServicesS
5526Level 6 X-Ray and Related ServicesS
5531Level 1 Ultrasound and Related ServicesS
5532Level 2 Ultrasound and Related ServicesS
5533Level 3 Ultrasound and Related ServicesS
5534Level 4 Ultrasound and Related ServicesS
5561Level 1 Echocardiogram with ContrastS
5562Level 1 Echocardiogram with ContrastS
5570Computed Tomography without ContrastS
5571Level 1 Computed Tomography with Contrast and Computed Tomography AngiographyS
5572Level 2 Computed Tomography with Contrast and Computed Tomography AngiographyS
5581Magnetic Resonance Imaging and Magnetic Resonance Angiography without ContrastS
5582Magnetic Resonance Imaging and Magnetic Resonance Angiography with ContrastS

Table 12—Proposed CY 2017 Imaging APCs

Proposed CY 2017 APCProposed CY 2017 APC group titleProposed CY 2017 status indicator
5521Level 1 Diagnostic Radiology without ContrastS
5522Level 2 Diagnostic Radiology without ContrastS
5523Level 3 Diagnostic Radiology without ContrastS
Start Printed Page 45648
5524Level 4 Diagnostic Radiology without ContrastS
5525Level 5 Diagnostic Radiology without ContrastS
5571Level 1 Diagnostic Radiology with ContrastS
5572Level 2 Diagnostic Radiology with ContrastS
5573Level 3 Diagnostic Radiology with ContrastS

2. Strapping and Cast Application (APCs 5101 and 5102)

For the CY 2016 update, APCs 5101 (Level 1 Strapping and Cast Application) and 5102 (Level 2 Strapping and Cast Application) are assigned to OPPS status indicator “S” (Procedure or Service, Not Discounted When Multiple; Paid under OPPS; separate APC payment) to indicate that the procedures and/or services assigned to these APCs are not discounted when two or more services are billed on the same date of service.

For the CY 2017 update, based on our review of the procedures assigned to APCs 5101 and 5102, we are proposing to revise the status indicator assignment for these procedures from “S” to “T” (Procedure or Service, Multiple Procedure Reduction Applies; Paid under OPPS; separate APC payment) to indicate that the services are paid separately under OPPS, but a multiple procedure payment reduction applies when two or more services assigned to status indicator “T” are billed on the same date of service. Because the procedures assigned to APCs 5101 and 5102 are primarily associated with surgical treatments, we believe that the proposed reassignment of these procedures to status indicator “T” is appropriate and ensures adequate payment for the procedures, even when the multiple procedure discounting policy applies. Consequently, we also are proposing to revise the status indicator assignment for APCs 5101 and 5102 from “S” to “T” for the CY 2017 OPPS update to appropriately categorize the procedures assigned to these two APCs.

3. Transprostatic Urethral Implant Procedure

The procedure described by HCPCS code C9740 (Cystourethroscopy, with insertion of transprostatic implant; 4 or more implants) is one of two procedure codes associated with the UroLift System, which is used to treat patients diagnosed with benign prostatic hyperplasia (BPH). This procedure code was assigned to New Technology APC 1564 (New Technology—Level 27 ($4500-$5000) with a payment rate of $4,750 on April 1, 2014, when the HCPCS C-code was established. We continued this APC assignment for CY 2015. For the CY 2016 update, we revised the APC assignment for the procedure described by HCPCS code C9740 from APC 1564 to APC 1565 (New Technology—Level 28 ($5000-$5500), with a payment rate of $5,250 based on the OPPS claims data used for the CY 2016 OPPS ratesetting. We further discussed the APC reassignment for the procedure described by HCPCS code C9740 in the CY 2016 OPPS/ASC final rule (80 FR 70376 through 70377).

For the CY 2017 update, review of our claims data for the procedure described by HCPCS code C9740 shows a geometric mean cost of approximately $6,312 based on 585 single claims (out of 606 total claims), which is based on claims submitted between January 1, 2015 through December 31, 2015 and processed through December 31, 2015. We note that the final CY 2017 payment rates that will be included in the CY 2017 OPPS/ASC final rule with comment period will be based on claims submitted between January 1, 2015, through December 31, 2015, and processed through June 30, 2016. Based on the latest OPPS claims data available for this proposed rule, we are proposing to reassign the procedure described by HCPCS code C9740 from APC 1565 to APC 5376 (Level 6 Urology and Related Services), which has a geometric mean cost of approximately $7,723. We believe that the proposed reassignment is appropriate because the geometric mean cost of approximately $6,312 for the procedure described by HCPCS code C9740 is similar to the geometric mean cost of $7,723 for APC 5376. Therefore, we are proposing to reassign the procedure described by HCPCS code C9740 from APC 1565 to APC 5376 for the CY 2017 update. The proposed CY 2017 payment rate for the procedure described by HCPCS code C9740 is included in Addendum B to this proposed rule (which is available via the Internet on the CMS Web site).

IV. Proposed OPPS Payment for Devices

A. Proposed Pass-Through Payments for Devices

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

a. Background

Section 1833(t)(6)(B)(iii) of the Act sets forth the period for which a device category eligible for transitional pass-through payments under the OPPS may be in effect. The implementing regulation at 42 CFR 419.66(g) provides that this pass-through payment eligibility period begins on the date CMS establishes a particular transitional pass-through category of devices. The eligibility period is for at least 2 years but no more than 3 years. We may establish a new device category for pass-through payment in any quarter. Under our current policy, we base the pass-through status expiration date for a device category on the date on which pass-through payment is effective for the category; that is, the date CMS establishes a particular category of devices eligible for transitional pass-through payments. We propose and finalize the dates for expiration of pass-through status for device categories as part of the OPPS annual update.

We also have an established policy to package the costs of the devices that are no longer eligible for pass-through payments into the costs of the procedures with which the devices are reported in the claims data used to set the payment rates (67 FR 66763).

b. Proposed CY 2017 Pass-Through Devices

As stated earlier, section 1833(t)(6)(B)(iii) of the Act requires that, under the OPPS, a category of devices be eligible for transitional pass-through payments for at least 2 years, but not more than 3 years. There currently are four device categories eligible for pass-through payment: (1) HCPCS code C2624 (Implantable wireless pulmonary artery pressure sensor with delivery catheter, including all system components), which was established effective January 1, 2015; (2) HCPCS Start Printed Page 45649code C2623 (Catheter, transluminal angioplasty, drug-coated, non-laser), which was established effective April 1, 2015; (3) HCPCS code C2613 (Lung biopsy plug with delivery system), which was established effective July 1, 2015; and (4) HCPCS code C1822 (Generator, neurostimulator (implantable), high frequency, with rechargeable battery and charging system), which was established effective January 1, 2016. The pass-through payment status of the device category for HCPCS code C2624 will end on December 31, 2016. Therefore, in accordance with our current policy, we are proposing, beginning in CY 2017, to package the costs of the device described by HCPCS code C2624 into the costs related to the procedure with which the device is reported in the hospital claims data. The other three codes listed will continue with pass-through status in CY 2017.

2. New Device Pass-Through Applications

a. Background

Section 1833(t)(6) of the Act provides for temporary additional payments, referred to as “transitional pass-through payments,” for devices and section 1833(t)(6)(B) of the Act requires CMS to use categories in determining the eligibility of devices for transitional pass-through payments. As part of implementing the statute through regulations, we have continued to believe that it is important for hospitals to receive pass-through payments for devices that offer substantial clinical improvement in the treatment of Medicare beneficiaries to facilitate access by beneficiaries to the advantages of the new technology. Conversely, we have noted that the need for additional payments for devices that offer little or no clinical improvement over previously existing devices is less apparent. In such cases, these devices can still be used by hospitals, and hospitals will be paid for them through appropriate APC payment. Moreover, a goal is to target pass-through payments for those devices where cost considerations might be most likely to interfere with patient access (66 FR 55852; 67 FR 66782; and 70 FR 68629).

As specified in regulations at 42 CFR 419.66(b)(1) through (b)(3), to be eligible for transitional pass-through payment under the OPPS, a device must meet the following criteria: (1) If required by FDA, the device must have received FDA approval or clearance (except for a device that has received an FDA investigational device exemption (IDE) and has been classified as a Category B device by the FDA), or another appropriate FDA exemption; and the pass-through payment application must be submitted within 3 years from the date of the initial FDA approval or clearance, if required, unless there is a documented, verifiable delay in U.S. market availability after FDA approval or clearance is granted, in which case CMS will consider the pass-through payment application if it is submitted within 3 years from the date of market availability; (2) the device is determined to be reasonable and necessary for the diagnosis or treatment of an illness or injury or to improve the functioning of a malformed body part, as required by section 1862(a)(1)(A) of the Act; and (3) the device is an integral part of the service furnished, is used for one patient only, comes in contact with human tissue, and is surgically implanted or inserted (either permanently or temporarily), or applied in or on a wound or other skin lesion. In addition, according to 42 CFR 419.66(b)(4), a device is not eligible to be considered for device pass-through payment if it is any of the following: (1) Equipment, an instrument, apparatus, implement, or item of this type for which depreciation and financing expenses are recovered as depreciation assets as defined in Chapter 1 of the Medicare Provider Reimbursement Manual (CMS Pub. 15-1); or (2) a material or supply furnished incident to a service (for example, a suture, customized surgical kit, or clip, other than a radiological site marker).

Separately, we use the following criteria, as set forth under § 419.66(c), to determine whether a new category of pass-through devices should be established. The device to be included in the new category must—

  • Not be appropriately described by an existing category or by any category previously in effect established for transitional pass-through payments, and was not being paid for as an outpatient service as of December 31, 1996;
  • Have an average cost that is not “insignificant” relative to the payment amount for the procedure or service with which the device is associated as determined under § 419.66(d) by demonstrating: (1) The estimated average reasonable costs of devices in the category exceeds 25 percent of the applicable APC payment amount for the service related to the category of devices; (2) the estimated average reasonable cost of the devices in the category exceeds the cost of the device-related portion of the APC payment amount for the related service by at least 25 percent; and (3) the difference between the estimated average reasonable cost of the devices in the category and the portion of the APC payment amount for the device exceeds 10 percent of the APC payment amount for the related service (with the exception of brachytherapy and temperature-monitored cryoblation, which are exempt from the cost requirements as noted at §§ 419.66.(c)(3) and (e); and
  • Demonstrate a substantial clinical improvement, that is, substantially improve the diagnosis or treatment of an illness or injury or improve the functioning of a malformed body part compared to the benefits of a device or devices in a previously established category or other available treatment.

Beginning in CY 2016, we changed our device pass-through evaluation and determination process. Device pass-through applications are still submitted to us through the quarterly subregulatory process, but the applications will be subject to notice-and-comment rulemaking in the next applicable OPPS annual rulemaking cycle. Under this process, all applications that are preliminarily approved upon quarterly review will automatically be included in the next applicable OPPS annual rulemaking cycle, while submitters of applications that are not approved upon quarterly review will have the option of being included in the next applicable OPPS annual rulemaking cycle or withdrawing their application from consideration. Under this notice-and-comment process, applicants may submit new evidence, such as clinical trial results published in a peer-reviewed journal, or other materials for consideration during the public comment process for the proposed rule. This process allows those applications that we are able to determine meets all the criteria for device pass-through payment under the quarterly review process to receive timely pass-through payment status, while still allowing for a transparent, public review process for all applications (80 FR 70417).

More details on the requirements for device pass-through payment applications are included on the CMS Web site in the application form itself at: http://www.cms.gov/​Medicare/​Medicare-Fee-for-Service-Payment/​HospitalOutpatientPPS/​passthrough_​payment.html, in the “Downloads” section. In addition, CMS is amenable to meeting with applicants or potential applicants to discuss research trial design in advance of any device pass-through application, so that the criterion of substantial clinical improvement is fully understood and can be met.Start Printed Page 45650

b. Applications Received for Device Pass-Through Payment for CY 2017

We received three applications by the March 1, 2016 quarterly deadline, which is the last quarterly deadline in time for this CY 2017 OPPS/ASC proposed rule. None of these three applications was approved for device pass-through payment during the quarterly review process. Applications received for the later deadlines for the remaining 2016 quarters (June 1, September 1, and December 1) will be presented in the CY 2018 OPPS/ASC proposed rule. We note that the quarterly application process and requirements have not changed in light of the addition of rulemaking review. Detailed instructions on submission of a quarterly device pass-through application are included on the CMS Web site at: https://www.cms.gov/​Medicare/​Medicare-Fee-for-Service-Payment/​HospitalOutpatientPPS/​Downloads/​catapp.pdf. A discussion of the three applications received by the March 1, 2016 deadline is presented below.

(1) BioBag® (Larval Debridement Therapy in a Contained Dressing)

BioMonde US, LLC submitted an application for a new device pass-through category for the BioBag® (larval debridement therapy in a contained dressing) (hereinafter referred to as the BioBag®). According to the applicant, BioBag® is a biosurgical wound treatment (“maggot therapy”) consisting of disinfected, living larvae (Lucilia sericata) in a polyester net bag; the larvae remove dead tissue from wounds. The BioBag® is indicated for debridement of nonhealing necrotic skin and soft tissue wounds, including pressure ulcers, venous stasis ulcers, neuropathic foot ulcers, and nonhealing traumatic or postsurgical wounds. Debridement, which is the action of removing devitalized tissue and bacteria from a wound, is required to treat or prevent infection and to allow the wound to progress through the healing process. This system contains disinfected, living larvae that remove the dead tissue from wounds and leave healthy tissue undisturbed. The larvae are provided in a sterile polyester net bag, available in different sizes. The only other similar product is free-range (that is, uncontained) larvae. Free-range larvae are not widely used in the United States because application is time consuming, there is a fear of larvae escaping from the wound, and there are concerns about proper and safe handling of the larvae. The total number of treatment cycles depends on the characteristics of the wound, the response of the wound, and the aim of the therapy. Most ulcers are completely debrided within 1 to 6 treatment cycles.

With respect to newness criterion at § 419.66(b)(1), the applicant received FDA clearance for BioBag® through the premarket notification section 510(k) process on August 28, 2013, and its March 1, 2016 application was within 3 years of FDA clearance. The applicant claims that BioBag® is an integral part of the wound debridement, is used for one patient only, comes in contact with human skin, and is applied in or on a wound. In addition, the applicant stated that BioBag® is not an instrument, apparatus, or item for which depreciation and financing expenses are recovered. We believe that BioBag could be considered to be a surgical supply similar to a surgical dressing that facilitates either mechanical or autolytic debridement (for example, hydrogel dressings), and therefore ineligible for device pass-through payments under the provisions of § 419.66(b)(4)(ii). We are inviting public comment on whether BioBag® should be eligible under § 419.66(b) to be considered for device pass-through payment.

With respect to the existence of a previous pass-through device category that describes the BioBag®, the applicant proposed a category descriptor of “Larval therapy for the debridement of necrotic non-healing skin and soft tissue wounds.” We have not identified an existing pass-through category that describes the BioBag®, but we welcome public comments on this issue.

With respect to the cost criterion, the applicant stated that BioBag® would be reported with CPT code 97602 (Removal of devitalized tissue from wound(s), non-selective debridement, without anesthesia (e.g., wet-to-moist dressings, enzymatic, abrasion), including topical application(s), wound assessment, and instruction(s) for ongoing care, per session). CPT code 97602 is assigned to APC 5051 (Level 1 Skin Procedures), with a CY 2016 payment rate of $117.83, and the device offset is $1.18. The price of BioBag® varies with the size of the bag ($375 to $435 per bag), and bag size selection is based on the size of the wound. To meet the cost significance criterion, there are three cost significance subtests that must be met and calculations are noted below. The first cost significance is that the device cost needs to be at least 25 percent of the applicable APC payment rate to reach cost significance, as follows for the highest-priced BioBag®: $435/117.83 × 100 = 369 percent. Thus, BioBag® meets the first cost significance test. The second cost significance test is that the device cost needs to be at least 125 percent of the offset amount (the device-related portion of the APC found on the offset list): $435/1.18 × 100 = 36864 percent. Thus, BioBag® meets the second cost significance test. The third cost significance test is that the difference between the estimated average reasonable cost of the devices in the category and the portion of the APC payment amount determined to be associated with the device in the associated APC exceeds 10 percent of the total APC payment: ($435−1.18)/117.83 × 100 = 368 percent. Thus, BioBag® meets the third cost significance test and satisfies the cost significance criterion.

With respect to the substantial clinical improvement criterion, the applicant cited a total of 18 articles relating to wound debridement, and most of these articles discussed the use of larval therapy for the treatment of ulcers. One peer-reviewed journal article described a randomized controlled trial with 267 subjects who received loose larvae, bagged larvae, or hydrogel intervention.[1] Results of the study showed that the time to healing was not significantly different between the three groups, but that larval therapy significantly reduced the time to debridement (hazard ratio for the combined larvae group compared with hydrogel was 2.31 (95 percent confidence interval 1.65 to 3.24; P < 0.001)); and mean ulcer related pain scores were higher in either larvae group compared with hydrogel (mean difference in pain score: loose larvae versus hydrogel 46.74 (95 percent confidence interval 32.44 to 61.04), P < 0.001; bagged larvae versus hydrogel 38.58 (23.46 to 53.70), P < 0.001).

Another article described a study of 88 patients (of which 64 patients completed the study) and patients either received a larval therapy dressing (BioFOAM) or hydrogel.[2] Because the study did not use BioBag® and there was a large drop-out rate that was not fully explained, we did not find this article helpful in determining whether the BioBag® provides a substantial clinical improvement compared to existing wound debridement modalities.

Another article that the applicant submitted was a meta-analysis of maggot debridement therapy compared to standard therapy for diabetic foot Start Printed Page 45651ulcers.[3] It compared four studies with a total of 356 participants and the authors concluded that maggot debridement therapy “may be a scientific and effective therapy in treatment of diabetic foot ulcers” but “the evidence is too weak to routinely recommend it for treatment.”

There were some additional articles provided that included a case series of maggot therapy with no control group, a retrospective study with free-range maggot therapy, maggot therapy as treatment of last resort, in vitro studies, economic modeling for wound therapy, an informational review of maggot debridement therapy and other debridement therapies, and research on other wound therapy options. These remaining articles did not assist in assessing substantial clinical improvement of BioBag® compared to existing treatments. Based on the evidence submitted with the application, we are not yet convinced that the BioBag® provides a substantial clinical improvement over other treatments for wound debridement. We are inviting public comments on whether the BioBag® meets the substantial clinical improvement criterion.

(2) EncoreTM Suspension System

Siesta Medical, Inc. submitted an application for a new device pass-through category for the Encore Suspension System (hereinafter referred to as the EncoreTM System). According to the application, the EncoreTM System is a kit of surgical instruments and implants that are used to perform an adjustable hyoid suspension. In this procedure, the hyoid bone (the U-shaped bone in the neck that supports the tongue) and its muscle attachments to the tongue and airway are pulled forward with the aim of increasing airway size and improving airway stability in the retrolingual and hypopharyngeal airway (airway behind and below the base of tongue). This procedure is indicated for the treatment of mild or moderate obstructive sleep apnea (OSA) and/or snoring, when the patient is unable to tolerate continuous positive airway pressure (CPAP). The current alternative to the hyoid suspension is the hyo-thyroid suspension technique (hyothyroidpexy). The EncoreTM System is designed for hyoid bone suspension to the mandible bone using bone screws and suspension lines. The EncoreTM System kit contains the following items:

  • Integrated suture passer pre-loaded with polyester suture;
  • Three bone screws and two bone screw inserters;
  • Suspension line lock tool;
  • Threading tool for suspension lines; and
  • Four polyester suspension lines.

With regard to the newness criterion, the EncoreTM System received FDA clearance through the section 510(k) process on March 26, 2014. Accordingly, it appears that the EncoreTM System is new for purposes of evaluation for device pass-through payments.

Several components of the EncoreTM System appear to be either instruments or supplies, which are not eligible for pass-through according to § 419.66(b)(4)(i) and (ii). For instance, the suture passer is an instrument and the suture is a supply, the bone screw inserters are instruments, the suspension line lock tool is an instrument, the threading tool for suspension lines is an instrument, and the polyester suspension lines are similar to sutures and therefore are supplies. With respect to the presence of a previously established code, the only implantable devices in the kit are the bone screws, and by the applicant's own admission the bone screws are described by the existing pass-through category HCPCS code C1713 (Anchor/screw for opposing bone-to-bone or soft tissue-to-bone (implantable)). We are inviting public comments on whether the EncoreTM System bone screws are described by a previously existing category and also whether the remaining kit components are supplies or instruments.

With regard to the cost criterion, the applicant stated that the EncoreTM System would be used in the procedure described by CPT code 21685 (Hyoid myotomy and suspension). CPT code 21685 is assigned to APC 5164 (Level 4 ENT Procedures) with a CY 2016 payment rate of $1616.90, and the device offset is $15.85. The price of the EncoreTM System as stated in the application is $2,200. To meet the cost criterion, there are three cost significance subtests that must be met and the calculations are noted below. The first cost significance is that the device cost needs to be at least 25 percent of the applicable APC payment rate to reach cost significance: $2,200/$1,616.90 × 100 percent = 136 percent. Thus, the EncoreTM System meets the first cost significance test. The second cost significance test is that the device cost needs to be at least 125 percent of the offset amount (the device-related portion of the APC found on the offset list): $2,200/$15.85 × 100 percent = 13880 percent. Thus, the EncoreTM System meets the second cost significance test. The third cost significance test is that the difference between the estimated average reasonable cost of the devices in the category and the portion of the APC payment amount determined to be associated with the device in the associated APC exceeds 10 percent of the total APC payment: ($2,200 − $15.85)/$1,616.90 × 100 percent = 135 percent. Thus, the EncoreTM System meets the third cost significance test. Based on the costs submitted by the applicant and the calculations noted earlier, the EncoreTM System meets the cost criterion. However, we have concerns about whether the cost criterion would be met if based only on the kit components that are not supplies, not instruments, and not described by an existing category (if any).

With regard to the substantial clinical improvement criterion, the applicant provided a thorough review of the hyoid myotomy with suspension and other surgical procedures that treat mild or moderate obstructive sleep apnea. However, specific data addressing substantial clinical improvement with the EncoreTM System was lacking.

The application included information on a case series of 17 obstructive apnea patients who received an Encore hyo-mandibular suspension as well as a previous or concurrent uvulopalatopharyngoplasty (UPPP). According to the application, the 17 patients studied demonstrated a 76 percent surgical success, and 73 percent median reduction in the Respiratory Disturbance Index (RDI) at 3 months, significantly reduced surgical time, and one infection requiring device removal. This study was a retrospective, single center study with no comparator.

In addition, the American Academy of Otolaryngology Head and Neck Surgery (AAOHNS) “Position Statement: Tongue Based Procedures” (accessed on 3.30.2016 and located at: http://www.entnet.org/​node/​215) considers the Hyoid myotomy and suspension “effective and non-investigational with proven clinical results when considered as part of the comprehensive surgical management of symptomatic adult patients with mild obstructive sleep apnea (OSA) and adult patients with moderate and severe OSA assessed as having tongue base or hypopharyngeal obstruction.” The AMA CPT Editorial Panel created CPT code 21685 (Hyoid myotomy and suspension) in 2004. The AAOHNS statement and the age of the CPT code indicate that this is an Start Printed Page 45652established surgical procedure. The EncoreTM System is a new kit of surgical instruments and implantable materials that are used to perform this procedure. According to the EncoreTM System's section 510(k) Summary, “[t]he fundamental scientific technology and technological characteristics of the EncoreTM System are the same as the predicate devices,” which includes the Medtronic AirVance System (another surgical kit used on CPT code 21685). The applicant claimed several advantages of the EncoreTM System over the AirVance System that relate to greater ease of use for the surgeon and better long-term stability. However, there are no studies comparing the EncoreTM System to the AirVance System. There is no clinical data provided by the applicant to suggest that the EncoreTM System kit provides a substantial clinical improvement over other instruments/implants that are used to perform Hyoid myotomy and suspension. We are inviting public comments on whether the EncoreTM System meets the substantial clinical improvement criterion.

(3) Endophys Pressure Sensing System (Endophys PSS) or Endophys Pressure Sensing Kit

Endophys Holdings, LLC. Submitted an application for a new device pass-through category for the Endophys Pressure Sensing System or Endophys Pressure Sensing Kit (hereinafter referred to as the Endophys PSS). The applicant proposed a category descriptor within either the HCPCS code C18XX series or the HCPCS code C26XX series and described by the applicant as a stand-alone catheterization sheath that is inserted percutaneously during intravascular diagnostic or interventional procedures. When applied intravascularly, the two separate functions delivering an improved patient outcome include: (1) Continuous intra-arterial blood pressure monitoring using a high-precision Fabry-Perot pressure sensor located within the device anterior approaching the distal tip of the system; and (2) a conduit that allows the introduction of other devices for cardiovascular or percutaneous interventional procedures.

The Endophys PSS is an introducer sheath (including a dilator and guidewire) with an integrated fiber optic pressure transducer for blood pressure monitoring. The Endophys PSS is used with the Endophys Blood Pressure Monitor to display blood pressure measurements. The sheath is inserted percutaneously during intravascular diagnostic or interventional procedures, typically at the site of the patient's femoral artery. This device facilitates the introduction of diagnostic and interventional devices into the coronary and peripheral vessels while continuously sensing and reporting blood pressure during the interventional procedure. Physicians would use this device to pass guidewires, catheters, stents, and coils, to perform the diagnostic or therapeutic treatment on the coronary or other vasculature. The Endophys PSS provides continuous blood pressure monitor information to the treating physician so that there is no need for an additional arterial access site for blood pressure monitoring.

With respect to the newness criterion, the Endophys PSS received FDA clearance through the section 510(k) process on January 7, 2015, and therefore is new. According to the applicant, the Endophys PSS is an integral part of various endovascular procedures, is used for one patient only, comes in contact with human skin, and is surgically implanted. Endophys PSS is not an instrument, apparatus, implement or item for which depreciation and financing expenses are recovered, and it is not a supply or material.

With respect to the presence of a previously established category, based on our review of the application, we believe that Endophys PSS may be described by HCPCS code C1894 (Introducer/sheath, other than guiding, other than intracardiac electrophysiological, non-laser). The FDA section 510(k) Summary Product Description Section in the application describes the Endophys PSS as an introducer sheath with an integrated fiber optic pressure transducer. Because the Endophys PSS is an introducer sheath that is not guiding, not intracardiac electrophysiological, and not a laser, we believe that it is described by the previously existing category of HCPCS code C1894 established for transitional pass-through payments. We are inviting public comment on whether Endophys PSS is described by a previously existing category.

With respect to the cost criterion, according to the applicant, the Endophys PSS would be reported with CPT code 36620 (Arterial catheterization or cannulation for sampling, monitoring or transfusion (separate procedure); percutaneous). CPT code 36620 is assigned status indicator “N”, which means its payment is packaged under the OPPS. The applicant stated that its device can be used in many endovascular procedures that are assigned to the APCs listed below:

APCDescription
5188Diagnostic Cardiac Catheterization.
5191Level 1 Endovascular Procedures.
5526Level 6 X-Ray and Related Services.
5183Level 3 Vascular Procedures.
5181Level 1 Vascular Procedures.
5182Level 2 Vascular Procedures.
5291Thrombolysis and Other Device Revisions.

To meet the cost criterion for device pass-through payment, a device must pass all three tests for cost threshold for at least one APC. For our calculations, we used APC 5291 (Thrombolysis and Other Device Revisions), which has a CY 2016 payment rate of $199.80 and the device offset of $3.38. According to the applicant, the cost of the Endophys PSS is $2,500. The first cost significance test is that the device cost needs to be at least 25 percent of the applicable APC payment rate to reach cost significance: $2,500/199.80 × 100 percent = 1251 percent. Thus, the Endophys PSS meets the first cost significance test. The second cost significance test is that the device cost needs to be at least 125 percent of the offset amount (the device-related portion of the APC found on the offset list): $2,500/3.38 × 100 percent = 73964 percent. Thus, the Endophys PSS meets the second cost significance test. The third cost significance test is that the difference between the estimated average reasonable cost of the devices in the category and the portion of the APC payment amount determined to be associated with the device in the associated APC exceeds 10 percent of the total APC payment: ($2,500−3.38)/199.80 × 100 percent = 1250 percent. Thus, the Endophys PSS meets the third cost significance test. Based on the costs submitted by the applicant and the above calculations, the Endophys PSS meets the cost criterion. We are inviting public comments on this issue.

With respect to the substantial clinical improvement criterion, the applicant stated that the Endophys PSS represents a substantial clinical improvement over existing medical therapies because the Endophys PSS includes a built-in pressure sensor, which eliminates the need for a second arterial line to monitor the blood pressure. The applicant stated that the Endophys PSS reduces the time to treatment for the patient (because there is no time needed to establish the second arterial line) and reduces potential complications associated with the second arterial line. While several references were provided in support of this application, there were minimal direct clinical data provided on the Start Printed Page 45653Endophys PSS to support substantial clinical improvement. The application included slides with statements pertaining to cost savings, reduced morbidity and life saving for a study of 36 patients, but a published study was not submitted and additional information on study design and other details of the study were not provided. Also, the applicant provided six physician testimonials citing support for the Endophys PSS based on between one and six patient experiences with the device.

The published articles provided with the application did not provide any information based on usage of the Endophys PSS. Topics addressed in the references included: articles on intraarterial treatment for acute ischemic stroke; references providing education on blood pressure measurement and monitoring; articles on complications during percutaneous coronary intervention; and a reference on ultrasound guided placement of arterial cannulas in the critically ill. Given the paucity of studies using the Endophys PSS, we have not been persuaded that the threshold for substantial clinical improvement has been met. We are inviting public comments on whether the Endophys PSS meets the substantial clinical improvement criterion.

3. Proposal To Change the Beginning Eligibility Date for Device Pass-Through Payment Status

The regulation at 42 CFR 419.66(g) currently provides that the pass-through payment eligibility period begins on the date CMS establishes a category of devices. We are proposing to amend § 419.66(g) such that it more accurately comports with section 1833(t)(6)(B)(iii)(II)) of the Act, which provides that the pass-through eligibility period begins on the first date on which pass-through payment is made. We recognize that there may be a difference between the establishment of a pass-through category and the date of first pass-through payment for a new pass-through device for various reasons. In most cases, we would not expect this proposed change in the beginning pass-through eligibility date to make any difference in the anticipated pass-through expiration date. However, in cases of significant delay from the date of establishment of a pass-through category to the date of the first pass-through payment, by using the date that the first pass-through payment was made rather than the date on which a device category was established could result in an expiration date of device pass-through eligibility that is later than it otherwise would have been had the clock began on the date the category was first established. We are inviting public comments on our proposal.

4. Proposal To Make the Transitional Pass-Through Payment Period 3 Years for All Pass-Through Devices and Expire Pass-Through Status on a Quarterly Rather Than Annual Basis

a. Background

As required by statute, transitional pass-through payments for a device described in section 1833(t)(6)(B)(iii) of the Act can be made for a period of at least 2 years, but not more than 3 years, beginning on the first date on which pass-through payment was made for the product. Our current policy is to accept pass-through applications on a quarterly basis and to begin pass-through payments for new pass-through devices on a quarterly basis through the next available OPPS quarterly update after the approval of a device's pass-through status. However, we expire pass-through status for devices on a calendar-year basis through notice-and-comment rulemaking rather than on a quarterly basis. Device pass-through status currently expires at the end of a calendar year when at least 2 years of pass-through payments have been made, regardless of the quarter in which it was initially approved. This means that the duration of the pass-through eligibility for a particular device will depend upon when during a year the applicant applies and is approved for pass-through payment. For example, a new pass-through device with pass-through status effective on April 1 would receive 2 years and 3 quarters of pass-through status while a pass-through device with pass-through status effective on October 1 would receive 2 years and 1 quarter of pass-through status.

b. Proposed CY 2017 Policy

We are proposing, beginning with pass-through devices newly approved in CY 2017 and subsequent calendar years, to allow for a quarterly expiration of pass-through status for devices to afford a pass-through period that is as close to a full 3 years as possible for all pass-through payment devices. This proposed change would eliminate the variability of the pass-through eligibility period, which currently varies based on the timing of the particular application. For example, under this proposal, for a device with pass-through first effective on October 1, 2017, pass-through status would expire on September 30, 2020. We believe that the payment adjustment for transitional pass-through payments for devices under the OPPS is intended to provide adequate payment for new innovative technology while we collect the necessary data to incorporate the costs for these devices into the calculation of the associated procedure payment rate (66 FR 55861). We believe that the 3-year maximum pass-through period for all pass-through devices will better insure robust data collection and more representative procedure payments once the pass-through devices are packaged. We are inviting public comments on this proposal.

5. Proposed Changes to Cost-to-Charge Ratios (CCRs) That Are Used To Determine Device Pass-Through Payments

a. Background

Section 1833(t)(6)(D)(ii) of the Act and 42 CFR 419.66(h) describe how payment will be determined for device pass-through devices. Currently, transitional pass-through payments for devices are calculated by taking the hospital charges for each billed device, reducing them to cost by use of the hospital's average CCR across all outpatient departments, and subtracting an amount representing the device cost contained in the APC payments for procedures involving that device (65 FR 18481 and 65 FR 67809). In the original CY 2000 OPPS final rule, we stated that we would examine claims in order to determine if a revenue center-specific set of CCRs should be used instead of the average CCR across all outpatient departments (65 FR 18481).

In the FY 2009 IPPS final rule (73 FR 48458 through 48467), CMS created a cost center for “Medical Supplies Charged to Patients,” which are generally low cost supplies, and another cost center for “Implantable Devices Charged to Patients,” which are generally high-cost implantable devices. This change was in response to a Research Triangle Institute, International (RTI) study that was discussed in the FY 2009 IPPS final rule and which determined that there was charge compression in both the IPPS and the OPPS cost estimation of expensive and inexpensive medical supplies. Charge compression can result in undervaluing high-cost items and overvaluing low-cost items when an estimate of average markup, embodied in a single CCR (such as the hospital wide CCR) is applied to items of widely varying costs in the same cost center. By splitting medical supplies and implantable devices into two cost centers, some of the effects of charge compression were mitigated. The cost center for “Implantable Devices Charged to Patients” has been available for use Start Printed Page 45654for OPPS cost reporting periods beginning on or after May 1, 2009.

In CY 2013, we began using data from the “Implantable Devices Charged to Patients” cost center to create a distinct CCR for use in calculating the OPPS relative payment weights for CY 2013 (77 FR 68225). Hospitals have adapted their cost reporting and coding practices in order to report usage to the “Implantable Devices Charged to Patients” cost center, resulting in sufficient data to perform a meaningful analysis. However, we have continued to use the hospital-wide CCR in our calculation of device pass-through payments. We have received a request to consider using the “Implantable Devices Charged to Patients” CCR in the calculation of device pass-through payment and have evaluated this request. An analysis of the CCR data for this proposed rule indicates that about two-thirds of providers have an “Implantable Devices Charged to Patients” CCR. For the hospitals that have an “Implantable Devices Charged to Patients” CCR, the median is 0.3911, compared with a median hospital-wide CCR of 0.2035.

b. Proposed CY 2017 Policy

We are proposing to use the more specific “Implantable Devices Charged to Patients” CCR instead of the less specific average hospital-wide CCR to calculate transitional pass-through payments for devices, beginning with device pass-through payments in CY 2017. When the CCR for the “Implantable Devices Charged to Patients” CCR is not available for a particular hospital, we would continue to use the average CCR across all outpatient departments to calculate pass-through payments. We believe using the “Implantable Devices Charged to Patients” CCR will provide more accurate pass-through payments for most device pass-through payment recipients and will further mitigate the effects of charge compression. We are inviting public comments on this proposal.

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

a. Background

Section 1833(t)(6)(D)(ii) of the Act sets the amount of additional pass-through payment for an eligible device as the amount by which the hospital's charges for a device, adjusted to cost (the cost of the device), exceeds the portion of the otherwise applicable Medicare outpatient department fee schedule amount (the APC payment amount) associated with the device. We have an established policy to estimate the portion of each APC payment rate that could reasonably be attributed to the cost of the associated devices that are eligible for pass-through payments (66 FR 59904) for purposes of estimating the portion of the otherwise applicable APC payment amount associated with pass-through devices. For eligible device categories, we deduct an amount that reflects the portion of the APC payment amount that we determine is associated with the cost of the device, defined as the device APC offset amount, from the charges adjusted to cost for the device, as provided by section 1833(t)(6)(D)(ii) of the Act, to determine the pass-through payment amount for the eligible device. We have an established methodology to estimate the portion of each APC payment rate that could reasonably be attributed to the cost of an associated device eligible for pass-through payment, using claims data from the period used for the most recent recalibration of the APC rates (72 FR 66751 through 66752). In the unusual case where the device offset amount exceeds the device pass-through payment amount, the regular APC rate would be paid and the pass-through payment would be $0.

b. Proposed CY 2017 Policy

For CY 2017, we are proposing to calculate the portion of the otherwise applicable Medicare OPD fee schedule amount, for each device-intensive procedure payment rate that can reasonably be attributed to (that is, reflect) the cost of an associated device (the device offset amount) at the HCPCS code level rather than at the APC level (which is an average of all codes assigned to an APC). We refer readers to section IV.B. of this proposed rule for a discussion of this proposal. Otherwise, we will continue our established practice of reviewing each new pass-through device category to determine whether device costs associated with the new category replace device costs that are already packaged into the device implantation procedure. If device costs that are packaged into the procedure are related to the new category, then according to our established practice we will deduct the device offset amount from the pass-through payment for the device category. The list of device offsets for all device procedures will be posted on the CMS Web site at: http://www.cms.gov/​Medicare/​Medicare-Fee-for-Service-Payment/​HospitalOutpatientPPS/​index.html .

B. Proposed Device-Intensive Procedures

1. Background

Under the OPPS, device-intensive APCs are defined as those APCs with a device offset greater than 40 percent (79 FR 66795). In assigning device-intensive status to an APC, the device costs of all of the procedures within the APC are calculated and the geometric mean device offset of all of the procedures must exceed 40 percent. Almost all of the procedures assigned to device-intensive APCs utilize devices, and the device costs for the associated HCPCS codes exceed the 40-percent threshold. The no cost/full credit and partial credit device policy (79 FR 66872 through 66873) applies to device-intensive APCs and is discussed in detail in section IV.B.4. of this proposed rule. A related device policy is the requirement that certain procedures assigned to device-intensive APCs require the reporting of a device code on the claim (80 FR 70422). For further background information on the device-intensive APC policy, we refer readers to the CY 2016 OPPS/ASC final rule with comment period (80 FR 70421 through 70426).

2. Proposed HCPCS Code-Level Device-Intensive Determination

As stated above, currently the device-intensive methodology assigns device-intensive status to all procedures requiring the implantation of a device, which are assigned to an APC with a device offset greater than 40 percent. Historically, the device-intensive designation has been at the APC level and applied to the applicable procedures within that given APC. For CY 2017, we are proposing to modify the methodology for assigning device-intensive status. Specifically, for CY 2017, we are proposing to assign device-intensive status to all procedures that require the implantation of a device and have an individual HCPCS code-level device offset of greater than 40 percent, regardless of the APC assignment, as we no longer believe that device-intensive status should be based on APC assignment because APC groupings of clinically similar procedures do not necessarily factor in device cost similarity. In 2016, we restructured many of the APCs, and this resulted in some procedures with significant device costs not being assigned device-intensive status because they were not assigned to a device-intensive APC. Under our proposal, all procedures with significant device costs (defined as a device offset of more than 40 percent) would be assigned device-intensive Start Printed Page 45655status, regardless of their APC placement. Also, we believe that a HCPCS code-level device offset would, in most cases, be a better representation of a procedure's device cost than an APC-wide average device offset based on the average device offset of all of the procedures assigned to an APC. Unlike a device offset calculated at the APC level, which is a weighted average offset for all devices used in all of the procedures assigned to an APC, a HCPCS code-level device offset is calculated using only claims for a single HCPCS code. We believe that such a methodological change would result in a more accurate representation of the cost attributable to implantation of a high-cost device, which would ensure consistent device-intensive designation of procedures with a significant device cost. Further, we believe a HCPCS code-level device offset would remove inappropriate device-intensive status to procedures without a significant device cost but which are granted such status because of APC assignment.

Under our proposal, procedures that have an individual HCPCS code-level device offset of greater than 40 percent would be identified as device-intensive procedures and would be subject to all the CY 2016 policies applicable to procedures assigned device-intensive status under our established methodology, including our policies on device edits and device credits. Therefore, under our proposal, all procedures requiring the implantation of a medical device and that have an individual HCPCS code-level device offset of greater than 40 percent would be subject to the device edit and no cost/full credit and partial credit device policies, discussed in sections IV.B.3. and IV.B.4. of this proposed rule, respectively. We are proposing to amend the regulation at § 419.44(b)(2) to reflect that we would no longer be designating APCs as device-intensive, and instead would be designating procedures as device-intensive.

In addition, for new HCPCS codes describing procedures requiring the implantation of medical devices that do not yet have associated claims data, we are proposing to apply device-intensive status with a default device offset set at 41 percent until claims data are available to establish the HCPCS code-level device offset for the procedures. This default device offset amount of 41 percent would not be calculated from claims data; instead it would be applied as a default until claims data are available upon which to calculate an actual device offset for the new code. The purpose of applying the 41 percent default device offset to new codes that describe procedures that implant medical devices would be to ensure ASC access for new procedures until claims data become available. However, in certain rare instances, for example, in the case of a very expensive implantable device, we may temporarily assign a higher offset percentage if warranted by additional information such as pricing data from a device manufacturer. Once claims data are available for a new procedure requiring the implantation of a medical device, device-intensive status would be applied to the code if the HCPCS code-level device offset is greater than 40 percent, according to our proposed policy of determining device-intensive status by calculating the HCPCS code-level device offset. The full listing of proposed device-intensive procedures is included in a new Addendum P to this proposed rule (which is available via the Internet on the CMS Web site).

3. Proposed Changes to the Device Edit Policy

In the CY 2015 OPPS/ASC final rule with comment period (79 FR 66795), we finalized a policy and implemented claims processing edits that require any of the device codes used in the previous device-to-procedure edits to be present on the claim whenever a procedure code assigned to any of the APCs listed in Table 5 of the CY 2015 OPPS/ASC final rule with comment period (the CY 2015 device-dependent APCs) is reported on the claim. In addition, in the CY 2016 OPPS/ASC final rule with comment period (80 FR 70422), we modified our previously existing policy and applied the device coding requirements exclusively to procedures that require the implantation of a device that are assigned to a device-intensive APC. In the CY 2016 OPPS/ASC final rule with comment period, we also finalized our policy that the claims processing edits are such that any device code, when reported on a claim with a procedure assigned to a device-intensive APC (listed in Table 42 of the CY 2016 OPPS/ASC final rule with comment period (80 FR 70422)) will satisfy the edit.

As part of our proposal described in section IV.B.2. of this proposed rule to no longer recognize device-intensive APCs and instead recognize device-intensive procedures based on their individual HCPCS code-level device offset being greater than 40 percent, for CY 2017, we are proposing to modify our existing device edit policy. Specifically, for CY 2017 and subsequent years, we are proposing to apply the CY 2016 device coding requirements to the newly defined (individual HCPCS code-level device offset greater than 40 percent) device-intensive procedures. In addition, we are proposing that any device code, when reported on a claim with a device-intensive procedure, would satisfy the edit.

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

a. Background

To ensure equitable OPPS payment when a hospital receives a device without cost or with full credit, in CY 2007, we implemented a policy to reduce the payment for specified device-dependent APCs by the estimated portion of the APC payment attributable to device costs (that is, the device offset) when the hospital receives a specified device at no cost or with full credit (71 FR 68071 through 68077). Hospitals were instructed to report no cost/full credit device cases on the claim using the “FB” modifier on the line with the procedure code in which the no cost/full credit device is used. In cases in which the device is furnished without cost or with full credit, hospitals were instructed to report a token device charge of less than $1.01. In cases in which the device being inserted is an upgrade (either of the same type of device or to a different type of device) with a full credit for the device being replaced, hospitals were instructed to report as the device charge the difference between the hospital's usual charge for the device being implanted and the hospital's usual charge for the device for which it received full credit. In CY 2008, we expanded this payment adjustment policy to include cases in which hospitals receive partial credit of 50 percent or more of the cost of a specified device. Hospitals were instructed to append the “FC” modifier to the procedure code that reports the service provided to furnish the device when they receive a partial credit of 50 percent or more of the cost of the new device. We refer readers to the CY 2008 OPPS/ASC final rule with comment period for more background information on the “FB” and “FC” modifiers payment adjustment policies (72 FR 66743 through 66749).

In the CY 2014 OPPS/ASC final rule with comment period (78 FR 75005 through 75007), beginning in CY 2014, we modified our policy of reducing OPPS payment for specified APCs when a hospital furnishes a specified device without cost or with a full or partial credit. For CY 2013 and prior years, our policy had been to reduce OPPS payment by 100 percent of the device Start Printed Page 45656offset amount when a hospital furnishes a specified device without cost or with a full credit and by 50 percent of the device offset amount when the hospital receives partial credit in the amount of 50 percent or more of the cost for the specified device. For CY 2014, we reduced OPPS payment, for the applicable APCs, by the full or partial credit a hospital receives for a replaced device. Specifically, under this modified policy, hospitals are required to report on the claim the amount of the credit in the amount portion for value code “FD” (Credit Received from the Manufacturer for a Replaced Medical Device) when the hospital receives a credit for a replaced device that is 50 percent or greater than the cost of the device. For CY 2014, we also limited the OPPS payment deduction for the applicable APCs to the total amount of the device offset when the “FD” value code appears on a claim. For CY 2015, we continued our existing policy of reducing OPPS payment for specified APCs when a hospital furnishes a specified device without cost or with a full or partial credit and to use the three criteria established in the CY 2007 OPPS/ASC final rule with comment period (71 FR 68072 through 68077) for determining the APCs to which our CY 2015 policy will apply (79 FR 66872 through 66873). In the CY 2016 OPPS/ASC final rule with comment period (80 FR 70424), we finalized our policy to no longer specify a list of devices to which the OPPS payment adjustment for no cost/full credit and partial credit devices would apply and instead apply this APC payment adjustment to all replaced devices furnished in conjunction with a procedure assigned to a device-intensive APC when the hospital receives a credit for a replaced specified device that is 50 percent or greater than the cost of the device.

b. Proposed Policy for CY 2017

For CY 2017, we are proposing modifications to our current policy for reducing OPPS payment by the full or partial credit a provider receives for a replaced device, in conjunction with our proposal above to recognize the newly defined (individual HCPCS level device offset greater than 40 percent) device-intensive procedures. For CY 2017 and subsequent years, we are proposing to reduce OPPS payment for specified procedures when a hospital furnishes a specified device without cost or with a full or partial credit. Specifically, for CY 2017, we are proposing to continue to reduce the OPPS payment, for the device-intensive procedures, by the full or partial credit a provider receives for a replaced device. Under this proposed policy, hospitals would continue to be required to report on the claim the amount of the credit in the amount portion for value code “FD” when the hospital receives a credit for a replaced device that is 50 percent or greater than the cost of the device.

For CY 2017 and subsequent years, we also are proposing to determine which procedures our proposed policy would apply to using three criteria analogous to the three criteria established in the CY 2007 OPPS/ASC final rule with comment period for determining the APCs to which our existing policy applies (71 FR 68072 through 68077). Specifically, for CY 2017 and subsequent years, we are proposing to use the following three criteria for determining the procedures to which our proposed policy would apply: (1) All procedures must involve implantable devices that would be reported if device insertion procedures were performed; (2) the required devices must be surgically inserted or implanted devices that remain in the patient's body after the conclusion of the procedure (at least temporarily); and (3) the procedure must be device-intensive; that is, the device offset amount must be significant, which is defined as exceeding 40 percent of the procedure's mean cost. We continue to believe these criteria are appropriate because no-cost devices and device credits are likely to be associated with particular cases only when the device must be reported on the claim and is of a type that is implanted and remains in the body when the beneficiary leaves the hospital. We believe that the reduction in payment is appropriate only when the cost of the device is a significant part of the total cost of the procedure into which the device cost is packaged, and that the 40-percent threshold is a reasonable definition of a significant cost. As noted earlier in this section, procedures with a device offset that exceed the 40-percent threshold are called device-intensive procedures.

5. Proposed Payment Policy for Low-Volume Device-Intensive Procedures

For CY 2016, we used our equitable adjustment authority under section 1833(t)(2)(E) of the Act and used the median cost (instead of the geometric mean cost per our standard methodology) to calculate the payment rate for the implantable miniature telescope procedure described by CPT code 0308T (Insertion of ocular telescope prosthesis including removal of crystalline lens or intraocular lens prosthesis), which is the only code assigned to APC 5494 (Level 4 Intraocular Procedures) (80 FR 70388). We note that we are proposing to reassign the procedure described by CPT code 0308T to APC 5495 (Level 5 Intraocular Procedures) for CY 2017, but it would be the only procedure code assigned to APC 5495. The payment rates for a procedure described by CPT code 0308T (including the predecessor HCPCS code C9732) were $15,551 in CY 2014, $23,084 in CY 2015, and $17,551 in CY 2016. The procedure described by CPT code 0308T is a high-cost device-intensive surgical procedure that has a very low volume of claims (in part because most of the procedures described by CPT code 0308T are performed in ASCs), and we believe that the median cost is a more appropriate measure of the central tendency for purposes of calculating the cost and the payment rate for this procedure because the median cost is impacted to a lesser degree than the geometric mean cost by more extreme observations. We stated that, in future rulemaking, we would consider proposing a general policy for the payment rate calculation for very low-volume device-intensive APCs (80 FR 70389).

For CY 2017, we are proposing a payment policy for low-volume device-intensive procedures that is similar to the policy applied to the procedure described by CPT code 0308T in CY 2016. In particular, we are proposing that the payment rate for any device-intensive procedure that is assigned to a clinical APC with fewer than 100 total claims for all procedures in the APC be calculated using the median cost instead of the geometric mean cost, for the reasons described above for the policy applied to the procedure described by CPT code 0308T in CY 2016. We believe that this approach will help to mitigate to some extent significant year-to-year payment rate fluctuations while preserving accurate claims data-based payment rates for low-volume device-intensive procedures. For CY 2017, this policy would only apply to a procedure described by CPT code 0308T in APC 5495 because this APC is the only APC containing a device-intensive procedure with less than 100 total claims in the APC. The CY 2017 proposed rule geometric mean cost for the procedure described by CPT code 0308T (based on 30 claims) is approximately $7,762, and the median cost is approximately $15,567. The proposed CY 2017 payment rate (calculated using the median cost) is approximately $17,188.90. We are inviting public comments on this proposal.Start Printed Page 45657

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

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

1. Background

Section 1833(t)(6) of the Act provides for temporary additional payments or “transitional pass-through payments” for certain drugs and biologicals. Throughout this proposed rule, the term “biological” is used because this is the term that appears in section 1861(t) of the Act. “Biological” as used in this proposed rule includes (but is not necessarily limited to) “biological product” or “biologic” as defined in the Public Health Service Act. As enacted by the Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act of 1999 (BBRA) (Pub. L. 106-113), this pass-through payment provision requires the Secretary to make additional payments to hospitals for: Current orphan drugs, as designated under section 526 of the Federal Food, Drug, and Cosmetic Act; current drugs and biologicals and brachytherapy sources used in cancer therapy; and current radiopharmaceutical drugs and biologicals. “Current” refers to drugs or biologicals that are outpatient hospital services under Medicare Part B for which payment was made on the first date the hospital OPPS was implemented.

Transitional pass-through payments also are provided for certain “new” drugs and biologicals that were not being paid for as an HOPD service as of December 31, 1996 and whose cost is “not insignificant” in relation to the OPPS payments for the procedures or services associated with the new drug or biological. For pass-through payment purposes, radiopharmaceuticals are included as “drugs.” As required by statute, transitional pass-through payments for a drug or biological described in section 1833(t)(6)(C)(i)(II) of the Act can be made for a period of at least 2 years, but not more than 3 years, after the payment was first made for the product as a hospital outpatient service under Medicare Part B. Proposed CY 2017 pass-through drugs and biologicals and their designated APCs are assigned status indicator “G” in Addenda A and B to this proposed rule (which are available via the Internet on the CMS Web site).

Section 1833(t)(6)(D)(i) of the Act specifies that the pass-through payment amount, in the case of a drug or biological, is the amount by which the amount determined under section 1842(o) of the Act for the drug or biological exceeds the portion of the otherwise applicable Medicare OPD fee schedule that the Secretary determines is associated with the drug or biological. The methodology for determining the pass-through payment amount is set forth in regulations at 42 CFR 419.64. These regulations specify that the pass-through payment equals the amount determined under section 1842(o) of the Act minus the portion of the APC payment that CMS determines is associated with the drug or biological. Section 1847A of the Act establishes the average sales price (ASP) methodology, which is used for payment for drugs and biologicals described in section 1842(o)(1)(C) of the Act furnished on or after January 1, 2005. The ASP methodology, as applied under the OPPS, uses several sources of data as a basis for payment, including the ASP, the wholesale acquisition cost (WAC), and the average wholesale price (AWP). In this proposed rule, the term “ASP methodology” and “ASP-based” are inclusive of all data sources and methodologies described therein. Additional information on the ASP methodology can be found on the CMS Web site at: http://www.cms.gov/​Medicare/​Medicare-Fee-for-Service-Part-B-Drugs/​McrPartBDrugAvgSalesPrice/​index.html.

The pass-through application and review process for drugs and biologicals is explained on the CMS Web site at: http://www.cms.gov/​Medicare/​Medicare-Fee-for-Service-Payment/​HospitalOutpatientPPS/​passthrough_​payment.html.

2. Proposal To Make the Transitional Pass-Through Payment Period 3 Years for All Pass-Through Drugs, Biologicals, and Radiopharmaceuticals and Expire Pass-Through Status on a Quarterly Rather Than Annual Basis

As required by statute, transitional pass-through payments for a drug or biological described in section 1833(t)(6)(C)(i)(II) of the Act can be made for a period of at least 2 years, but not more than 3 years, after the payment was first made for the product as a hospital outpatient service under Medicare Part B. Our current policy is to accept pass-through applications on a quarterly basis and to begin pass-through payments for new pass-through drugs and biologicals on a quarterly basis through the next available OPPS quarterly update after the approval of a product's pass-through status. However, we expire pass-through status for drugs and biologicals on an annual basis through notice-and-comment rulemaking (74 FR 60480). This means that because the 2-year to 3-year pass-through payment eligibility period starts on the date of first pass-through payment under 42 CFR 419.64(c)(2), the duration of pass-through eligibility for a particular drug or biological will depend upon when during a year the applicant applies for pass-through status. Under the current policy, a new pass-through drug or biological with pass-through status effective on January 1 would receive 3 years of pass-through status; a pass-through drug with pass-through status effective on April 1 would receive 2 years and 3 quarters of pass-through status; a pass-through drug with pass-through status effective on July 1 would receive 2 and 1/2 years of pass-through status; and a pass-through drug with pass-through status effective on October 1 would receive 2 years and 3 months (a quarter) of pass-through status.

We are proposing, beginning with pass-through drugs and biologicals newly approved in CY 2017 and subsequent calendar years, to allow for a quarterly expiration of pass-through payment status for drugs and biologicals to afford a pass-through period that is as close to a full 3 years as possible for all pass-through payment drugs, biologicals, and radiopharmaceuticals. This proposed change would eliminate the variability of the pass-through payment eligibility period, which currently varies based on the timing of the particular application, as we now believe that the timing of a pass-through payment application should not determine the duration of pass-through payment status. For example, for a drug with pass-through status first effective on April 1, 2017, pass-through status would expire on March 31, 2020. This approach would allow for the maximum pass-through period for each pass-through drug without exceeding the statutory limit of 3 years. We are inviting public comments on this proposal.

3. Proposed Drugs and Biologicals With Expiring Pass-Through Payment Status in CY 2016

We are proposing that the pass-through status of 15 drugs and biologicals would expire on December 31, 2016, as listed in Table 13 below. All of these drugs and biologicals will have received OPPS pass-through payment for at least 2 years and no more than 3 years by December 31, 2016. These drugs and biologicals were approved for pass-through status on or before January 1, 2015. With the exception of those groups of drugs and biologicals that are always packaged Start Printed Page 45658when they do not have pass-through status (specifically, anesthesia drugs; drugs, biologicals, and radiopharmaceuticals that function as supplies when used in a diagnostic test or procedure (including diagnostic radiopharmaceuticals, contrast agents, and stress agents); and drugs and biologicals that function as supplies when used in a surgical procedure), our standard methodology for providing payment for drugs and biologicals with expiring pass-through status in an upcoming calendar year is to determine the product's estimated per day cost and compare it with the OPPS drug packaging threshold for that calendar year (which is proposed at $110 for CY 2017), as discussed further in section V.B.2. of this proposed rule. If the estimated per day cost for the drug or biological is less than or equal to the applicable OPPS drug packaging threshold, we are proposing to package payment for the drug or biological into the payment for the associated procedure in the upcoming calendar year. If the estimated per day cost of the drug or biological is greater than the OPPS drug packaging threshold, we are proposing to provide separate payment at the applicable relative ASP-based payment amount (which is proposed at ASP+6 percent for CY 2017, as discussed further in section V.B.3. of this proposed rule).

Table 13—Proposed Drugs and Biologicals for Which Pass-Through Payment Status Expires December 31, 2016

CY 2016 HCPCS CodeCY 2016 Long descriptorCY 2016 Status indicatorCY 2016 APC
C9497Loxapine, inhalation powder, 10 mgG9497
J1322Injection, elosulfase alfa, 1mgG1480
J1439Injection, ferric carboxymaltose, 1 mgG9441
J1447Injection, TBO-Filgrastim, 1 microgramG1748
J3145Injection, testosterone undecanoate, 1 mgG1487
J3380Injection, vedolizumab, 1 mgG1489
J7181Injection, factor xiii a-subunit, (recombinant), per iuG1746
J7200Factor ix (antihemophilic factor, recombinant), Rixubus, per i.u.G1467
J7201Injection, factor ix, fc fusion protein (recombinant), per iuG1486
J7205Injection, factor viii fc fusion (recombinant), per iuG1656
J7508Tacrolimus, extended release, (astagraf xl), oral, 0.1 mgG1465
J9301Injection, obinutuzumab, 10 mgG1476
J9308Injection, ramucirumab, 5 mgG1488
J9371Injection, Vincristine Sulfate Liposome, 1 mgG1466
Q4121Theraskin, per square centimeterG1479

The proposed packaged or separately payable status of each of these drugs or biologicals is listed in Addendum B to this proposed rule (which is available via the Internet on the CMS Web site).

4. Proposed Drugs, Biologicals, and Radiopharmaceuticals With New or Continuing Pass-Through Payment Status in CY 2017

We are proposing to continue pass-through payment status in CY 2017 for 38 drugs and biologicals. None of these drugs and biologicals will have received OPPS pass-through payment for at least 2 years and no more than 3 years by December 31, 2016. These drugs and biologicals, which were approved for pass-through status between January 1, 2014, and July 1, 2016, are listed in Table 14 below. The APCs and HCPCS codes for these drugs and biologicals approved for pass-through status through July 1, 2016 are assigned status indicator “G” in Addenda A and B to this proposed rule (which are available via the Internet on the CMS Web site).

Section 1833(t)(6)(D)(i) of the Act sets the amount of pass-through payment for pass-through drugs and biologicals (the pass-through payment amount) as the difference between the amount authorized under section 1842(o) of the Act and the portion of the otherwise applicable OPD fee schedule that the Secretary determines is associated with the drug or biological. For CY 2017, we are proposing to continue to pay for pass-through drugs and biologicals at ASP+6 percent, equivalent to the rate these drugs and biologicals would receive in the physician's office setting in CY 2017. We are proposing that a $0 pass-through payment amount would be paid for pass-through drugs and biologicals under the CY 2017 OPPS because the difference between the amount authorized under section 1842(o) of the Act, which is proposed at ASP+6 percent, and the portion of the otherwise applicable OPD fee schedule that the Secretary determines is appropriate, which is proposed at ASP+6 percent, is $0.

In the case of policy-packaged drugs (which include the following: Contrast agents; diagnostic radiopharmaceuticals; anesthesia drugs; drugs, biologicals, and radiopharmaceuticals that function as supplies when used in a diagnostic test or procedure; and drugs and biologicals that function as supplies when used in a surgical procedure), we are proposing that their pass-through payment amount would be equal to ASP+6 percent for CY 2017 because, if not for their pass-through status, payment for these products would be packaged into the associated procedure.

In addition, we are proposing to continue to update pass-through payment rates on a quarterly basis on the CMS Web site during CY 2017 if later quarter ASP submissions (or more recent WAC or AWP information, as applicable) indicate that adjustments to the payment rates for these pass-through drugs or biologicals are necessary. For a full description of this policy, we refer readers to the CY 2006 OPPS/ASC final rule with comment period (70 FR 68632 through 68635).

In CY 2017, as is consistent with our CY 2016 policy for diagnostic and therapeutic radiopharmaceuticals, we are proposing to provide payment for both diagnostic and therapeutic radiopharmaceuticals that are granted pass-through payment status based on the ASP methodology. As stated earlier, for purposes of pass-through payment, we consider radiopharmaceuticals to be drugs under the OPPS. Therefore, if a diagnostic or therapeutic radiopharmaceutical receives pass-through payment status during CY 2017, we are proposing to follow the standard ASP methodology to determine the pass-through payment rate that drugs Start Printed Page 45659receive under section 1842(o) of the Act, which is proposed at ASP+6 percent. If ASP data are not available for a radiopharmaceutical, we are proposing to provide pass-through payment at WAC+6 percent, the equivalent payment provided to pass-through drugs and biologicals without ASP information. If WAC information also is not available, we are proposing to provide payment for the pass-through radiopharmaceutical at 95 percent of its most recent AWP.

The 38 drugs and biologicals that we are proposing to continue to have pass-through payment status for CY 2017 or have been granted pass-through payment status as of July 2016 are shown in Table 14 below.

Table 14—Proposed Drugs and Biologicals With Pass-Through Payment Status in CY 2017

CY 2016 HCPCS CodeCY 2017 HCPCS CodeCY 2017 Long descriptorProposed CY 2017 status indicatorProposed CY 2017 APC
A9586A9586Florbetapir f18, diagnostic, per study dose, up to 10 millicuriesG1664
C9137C9137Injection, Factor VIII (antihemophilic factor, recombinant) PEGylated, 1 I.U.G1844
C9138C9138Injection, Factor VIII (antihemophilic factor, recombinant) (Nuwiq), 1 I.U.G1846
C9349C9349PuraPly, and PuraPly Antimicrobial, any type, per square centimeterG1657
C9447C9447Injection, phenylephrine and ketorolac, 4 ml vialG1663
C9460C9460Injection, cangrelor, 1 mgG9460
C9461C9461Choline C 11, diagnostic, per study doseG9461
C9470C9470Injection, aripiprazole lauroxil, 1 mgG9470
C9471C9471Hyaluronan or derivative, Hymovis, for intra-articular injection, 1 mgG9471
C9472C9472Injection, talimogene laherparepvec, 1 million plaque forming units (PFU)G9472
C9473C9473Injection, mepolizumab, 1 mgG9473
C9474C9474Injection, irinotecan liposome, 1 mgG9474
C9475C9475Injection, necitumumab, 1 mgG9475
C9476C9476Injection, daratumumab, 10 mgG9476
C9477C9477Injection, elotuzumab, 1 mgG9477
C9478C9478Injection, sebelipase alfa, 1 mgG9478
C9479C9479Instillation, ciprofloxacin otic suspension, 6 mgG9479
C9480C9480Injection, trabectedin, 0.1 mgG9480
J0596J0596Injection, c1 esterase inhibitor (recombinant), Ruconest, 10 unitsG9445
J0695J0695Injection, ceftolozane 50 mg and tazobactam 25 mgG9452
J0875J0875Injection, dalbavancin, 5 mgG1823
J1833J1833Injection, isavuconazonium sulfate, 1 mgG9456
J2407J2407Injection, oritavancin, 10 mgG1660
J2502J2502Injection, pasireotide long acting, 1 mgG9454
J2547J2547Injection, peramivir, 1 mgG9451
J2860J2860Injection, siltuximab, 10 mgG9455
J3090J3090Injection, tedizolid phosphate, 1 mgG1662
J7313J7313Injection, fluocinolone acetonide intravitreal implant, 0.01 mgG9450
J7503J7503Tacrolimus, extended release, (envarsus xr), oral, 0.25 mgG1845
J8655J8655Netupitant 300 mg and palonosetron 0.5 mgG9448
J9032J9032Injection, belinostat, 10 mgG1658
J9039J9039Injection, blinatumomab, 1 microgramG9449
J9271J9271Injection, pembrolizumab, 1 mgG1490
J9299J9299Injection, nivolumab, 1 mgG9453
Q5101Q5101Injection, Filgrastim (G-CSF), Biosimilar, 1 microgramG1822
Q9950Q9950Injection, sulfur hexafluoride lipid microsphere, per mlG9457
Q9982Q9982Flutemetamol F18, diagnostic, per study dose, up to 5 millicuriesG9459
Q9983Q9983Florbetaben F18, diagnostic, per study dose, up to 8.1 millicuriesG9458

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

Under 42 CFR 419.2(b), nonpass-through drugs, biologicals, and radiopharmaceuticals that function as supplies when used in a diagnostic test or procedure are packaged in the OPPS. This category includes diagnostic radiopharmaceuticals, contrast agents, stress agents, and other diagnostic drugs. Also under 42 CFR 419.2(b), nonpass-through drugs and biologicals that function as supplies in a surgical procedure are packaged in the OPPS. This category includes skin substitutes and other surgical-supply drugs and biologicals. As described earlier, section 1833(t)(6)(D)(i) of the Act specifies that the transitional pass-through payment amount for pass-through drugs and biologicals is the difference between the amount paid under section 1842(o) of the Act and the otherwise applicable OPD fee schedule amount. Because a payment offset is necessary in order to provide an appropriate transitional pass-through payment, we deduct from the pass-through payment for policy packaged drugs, biologicals, and radiopharmaceuticals an amount reflecting the portion of the APC payment associated with predecessor products in order to ensure no duplicate payment is made. This amount reflecting the portion of the APC payment associated with predecessor products is called the payment offset.

The payment offset policy applies to all policy packaged drugs, biologicals, and radiopharmaceuticals. For a full description of the payment offset policy as applied to diagnostic radiopharmaceuticals, contrast agents, stress agents, and skin substitutes, we refer readers to the discussion in the CY 2016 OPPS/ASC final rule with Start Printed Page 45660comment period (80 FR 70430 through 70432). For CY 2017, as we did in CY 2016, we are proposing to continue to apply the same policy packaged offset policy to payment for pass-through diagnostic radiopharmaceuticals, pass-through contrast agents, pass-through stress agents, and pass-through skin substitutes. The proposed APCs to which a diagnostic radiopharmaceutical payment offset may be applicable are the same as for CY 2016 (80 FR 70430). Also, the proposed APCs to which a contrast agent payment offset may be applicable, a stress agent payment offset, or a skin substitute payment offset are also the same as for CY 2016 (80 FR 70431 through 70432).

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

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

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

a. Proposed Packaging Threshold

In accordance with section 1833(t)(16)(B) of the Act, the threshold for establishing separate APCs for payment of drugs and biologicals was set to $50 per administration during CYs 2005 and 2006. In CY 2007, we used the four quarter moving average Producer Price Index (PPI) levels for Pharmaceutical Preparations (Prescription) to trend the $50 threshold forward from the third quarter of CY 2005 (when the Pub. L. 108-173 mandated threshold became effective) to the third quarter of CY 2007. We then rounded the resulting dollar amount to the nearest $5 increment in order to determine the CY 2007 threshold amount of $55. Using the same methodology as that used in CY 2007 (which is discussed in more detail in the CY 2007 OPPS/ASC final rule with comment period (71 FR 68085 through 68086)), we set the packaging threshold for establishing separate APCs for drugs and biologicals at $100 for CY 2016 (80 FR 70433).

Following the CY 2007 methodology, for this CY 2017 OPPS/ASC proposed rule, we used the most recently available four quarter moving average PPI levels to trend the $50 threshold forward from the third quarter of CY 2005 to the third quarter of CY 2017 and rounded the resulting dollar amount ($109.03) to the nearest $5 increment, which yielded a figure of $110. In performing this calculation, we used the most recent forecast of the quarterly index levels for the PPI for Pharmaceuticals for Human Use (Prescription) (Bureau of Labor Statistics (BLS) series code WPUSI07003) from CMS' Office of the Actuary (OACT). We refer below to this series generally as the PPI for Prescription Drugs. Based on these calculations, we are proposing a packaging threshold for CY 2017 of $110.

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

To determine the proposed CY 2017 packaging status for all nonpass-through drugs and biologicals that are not policy packaged, we calculated, on a HCPCS code-specific basis, the per day cost of all drugs, biologicals, and therapeutic radiopharmaceuticals (collectively called “threshold-packaged” drugs) that had a HCPCS code in CY 2015 and were paid (via packaged or separate payment) under the OPPS. We used data from CY 2015 claims processed before January 1, 2016 for this calculation. However, we did not perform this calculation for those drugs and biologicals with multiple HCPCS codes that include different dosages, as described in section V.B.1.d. of this proposed rule, or for the following policy-packaged items that we are proposing to continue to package in CY 2017: Anesthesia drugs; drugs, biologicals, and radiopharmaceuticals that function as supplies when used in a diagnostic test or procedure; and drugs and biologicals that function as supplies when used in a surgical procedure.

In order to calculate the per day costs for drugs, biologicals, and therapeutic radiopharmaceuticals to determine their proposed packaging status in CY 2017, we used the methodology that was described in detail in the CY 2006 OPPS proposed rule (70 FR 42723 through 42724) and finalized in the CY 2006 OPPS final rule with comment period (70 FR 68636 through 68638). For each drug and biological HCPCS code, we used an estimated payment rate of ASP+6 percent (which is the payment rate we are proposing for separately payable drugs and biologicals for CY 2017, as discussed in more detail in section V.B.2.b. of this proposed rule) to calculate the CY 2017 proposed rule per day costs. We used the manufacturer submitted ASP data from the fourth quarter of CY 2015 (data that were used for payment purposes in the physician's office setting, effective April 1, 2016) to determine the proposed rule per day cost.

As is our standard methodology, for CY 2017, we are proposing to use payment rates based on the ASP data from the first quarter of CY 2016 for budget neutrality estimates, packaging determinations, impact analyses, and completion of Addenda A and B to this proposed rule (which are available via the Internet on the CMS Web site) because these are the most recent data available for use at the time of development of this proposed rule. These data also were the basis for drug payments in the physician's office setting, effective April 1, 2016. For items that did not have an ASP-based payment rate, such as some therapeutic radiopharmaceuticals, we used their mean unit cost derived from the CY 2015 hospital claims data to determine their per day cost.

We are proposing to package items with a per day cost less than or equal to $110, and identify items with a per day cost greater than $110 as separately payable. Consistent with our past practice, we cross-walked historical OPPS claims data from the CY 2015 HCPCS codes that were reported to the CY 2016 HCPCS codes that we display in Addendum B to this proposed rule (which is available via the Internet on the CMS Web site) for proposed payment in CY 2017.

Our policy during previous cycles of the OPPS has been to use updated ASP and claims data to make final determinations of the packaging status of HCPCS codes for drugs, biologicals, and therapeutic radiopharmaceuticals for the OPPS/ASC final rule with comment period. We note that it is also our policy to make an annual packaging determination for a HCPCS code only when we develop the OPPS/ASC final rule with comment period for the update year. Only HCPCS codes that are identified as separately payable in the final rule with comment period are subject to quarterly updates. For our calculation of per day costs of HCPCS codes for drugs and biologicals in this CY 2017 OPPS/ASC proposed rule, we are proposing to use ASP data from the Start Printed Page 45661first quarter of CY 2016, which is the basis for calculating payment rates for drugs and biologicals in the physician's office setting using the ASP methodology, effective July 1, 2016, along with updated hospital claims data from CY 2015. We note that we also are proposing to use these data for budget neutrality estimates and impact analyses for this CY 2017 OPPS/ASC proposed rule.

Payment rates for HCPCS codes for separately payable drugs and biologicals included in Addenda A and B for the final rule will be based on ASP data from the second quarter of CY 2016. These data will be the basis for calculating payment rates for drugs and biologicals in the physician's office setting using the ASP methodology, effective October 1, 2016. These payment rates would then be updated in the January 2017 OPPS update, based on the most recent ASP data to be used for physician's office and OPPS payment as of January 1, 2017. For items that do not currently have an ASP-based payment rate, we are proposing to recalculate their mean unit cost from all of the CY 2015 claims data and updated cost report information available for the CY 2017 final rule with comment period to determine their final per day cost.

Consequently, the packaging status of some HCPCS codes for drugs, biologicals, and therapeutic radiopharmaceuticals in this CY 2017 OPPS/ASC proposed rule may be different from the same drug HCPCS code's packaging status determined based on the data used for the CY 2017 OPPS/ASC final rule with comment period. Under such circumstances, we are proposing to continue to follow the established policies initially adopted for the CY 2005 OPPS (69 FR 65780) in order to more equitably pay for those drugs whose cost fluctuates relative to the proposed CY 2017 OPPS drug packaging threshold and the drug's payment status (packaged or separately payable) in CY 2016. These established policies have not changed for many years and are the same as described in the CY 2016 OPPS/ASC final rule with comment period (80 FR 70434).

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

In the CY 2014 OPPS/ASC final rule with comment period (78 FR 74938), we unconditionally packaged skin substitute products into their associated surgical procedures as part of a broader policy to package all drugs and biologicals that function as supplies when used in a surgical procedure. As part of the policy to finalize the packaging of skin substitutes, we also finalized a methodology that divides the skin substitutes into a high cost group and a low cost group, in order to ensure adequate resource homogeneity among APC assignments for the skin substitute application procedures (78 FR 74933). We continued the high cost/low cost categories policy in CY 2015 and CY 2016, and are proposing to continue it for CY 2017. Under this current policy, skin substitutes in the high cost category are reported with the skin substitute application CPT codes and skin substitutes in the low cost category are reported with the analogous skin substitute HCPCS C-codes. For a discussion of the CY 2014 and CY 2015 methodologies for assigning skin substitutes to either the high cost group or the low cost group, we refer readers to the CY 2014 OPPS/ASC final rule with comment period (78 FR 74932 through 74935) and the CY 2015 OPPS/ASC final rule with comment period (79 FR 66882 through 66885).

For CY 2017, as in CY 2016, we are proposing to determine the high/low cost status for each skin substitute product based on either a product's geometric mean unit cost (MUC) exceeding the geometric MUC threshold or the product's per day cost (PDC) (the total units of a skin substitute multiplied by the mean unit cost and divided by the total number of days) exceeding the PDC threshold. For a discussion of the CY 2016 high cost/low cost methodology, we refer readers to the CY 2016 OPPS/ASC final rule with comment period (80 FR 70434 through 70435). We are proposing to assign skin substitutes that exceed either the MUC or PDC threshold to the high cost group. We are proposing to assign skin substitutes with an MUC or a PDC that does not exceed either the MUC threshold or the PDC threshold to the low cost group. For CY 2017, we analyzed CY 2015 claims data to calculate the MUC threshold (a weighted average of all skin substitutes' MUCs) and PDC threshold (a weighted average of all skin substitutes' PDCs). The proposed CY 2017 MUC threshold is $25 per cm2 (rounded to the nearest $1) and the proposed CY 2017 PDC threshold is $729 (rounded to the nearest $1).

For CY 2017, as in CY 2016, we are proposing to continue to assign skin substitutes with pass-through payment status to the high cost category, and to assign skin substitutes with pricing information but without claims data to calculate a geometric MUC or PDC to either the high cost or low cost category based on the product's ASP+6 percent payment rate as compared to the MUC threshold. If ASP is not available, we would use WAC+6 percent or 95 percent of AWP to assign a product to either the high cost or low cost category. New skin substitutes without pricing information would be assigned to the low cost category until pricing information is available to compare to the CY 2017 MUC threshold. For a discussion of our existing policy under which we assign skin substitutes without pricing information to the low cost category until pricing information is available, we refer readers to the CY 2016 OPPS/ASC final rule with comment period (80 FR 70436). In addition, as in CY 2016, we are proposing for CY 2017 that a skin substitute that is both assigned to the high cost group in CY 2016 and also exceeds either the MUC or PDC in this proposed rule for CY 2017 would be assigned to the high cost group for CY 2017, even if it no longer exceeds the MUC or PDC CY 2017 thresholds based on updated claims data and pricing information used in the CY 2017 final rule with comment period. Table 15 below displays the proposed CY 2017 high cost or low cost category assignment for each skin substitute product.

Table 15—Proposed Skin Substitute Assignments to High Cost and Low Cost Groups for CY 2017

CY 2017 HCPCS CodeCY 2017 Short descriptorProposed CY 2017 high/low assignment
C9349*PuraPly, PuraPly antimicHigh.
C9363Integra Meshed Bil Wound MatHigh.
Q4100Skin Substitute, NOSLow.
Q4101ApligrafHigh.
Q4102Oasis Wound MatrixLow.
Start Printed Page 45662
Q4103Oasis Burn MatrixHigh.
Q4104Integra BMWDHigh.
Q4105Integra DRTHigh.
Q4106DermagraftHigh.
Q4107GraftJacketHigh.
Q4108Integra MatrixHigh.
Q4110PrimatrixHigh.
Q4111GammagraftLow.
Q4115AlloskinLow.
Q4116AllodermHigh.
Q4117HyalomatrixLow.
Q4119Matristem Wound MatrixLow.
Q4120Matristem Burn MatrixHigh.
Q4121TheraskinHigh.
Q4122DermacellHigh.
Q4123AlloskinHigh.
Q4124Oasis Tri-layer Wound MatrixLow.
Q4126Memoderm/derma/tranz/integupHigh.
Q4127TalymedHigh.
Q4128Flexhd/Allopatchhd/MatrixhdHigh.
Q4129Unite BiomatrixHigh.
Q4131EpifixHigh.
Q4132Grafix CoreHigh.
Q4133Grafix PrimeHigh.
Q4134hMatrixLow.
Q4135MediskinLow.
Q4136EzdermLow.
Q4137Amnioexcel or Biodexcel, 1cmHigh.
Q4138Biodfence DryFlex, 1cmHigh.
Q4140Biodfence 1cmHigh.
Q4141Alloskin ac, 1cmHigh.
Q4143Repriza, 1cmHigh.
Q4146Tensix, 1cmHigh.
Q4147Architect ecm, 1cmHigh.
Q4148Neox 1k, 1cmHigh.
Q4150Allowrap DS or Dry 1 sq cmHigh.
Q4151AmnioBand, Guardian 1 sq cmHigh.
Q4152Dermapure 1 square cmHigh.
Q4153Dermavest 1 square cmHigh.
Q4154Biovance 1 square cmHigh.
Q4156Neox 100 1 square cmHigh.
Q4157Revitalon 1 square cmHigh.
Q4158MariGen 1 square cmHigh.
Q4159Affinity 1 square cmHigh.
Q4160NuShield 1 square cmHigh.
Q4161Bio-Connekt per square cmLow.
Q4162Amnio bio and woundex flowLow.
Q4163Amnion bio and woundex sq cmLow.
Q4164Helicoll, per square cmHigh.
Q4165Keramatrix, per square cmLow.
* Pass-through payment status in CY 2017.

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

In the CY 2010 OPPS/ASC final rule with comment period (74 FR 60490 through 60491), we finalized a policy to make a single packaging determination for a drug, rather than an individual HCPCS code, when a drug has multiple HCPCS codes describing different dosages because we believed that adopting the standard HCPCS code-specific packaging determinations for these codes could lead to inappropriate payment incentives for hospitals to report certain HCPCS codes instead of others. We continue to believe that making packaging determinations on a drug-specific basis eliminates payment incentives for hospitals to report certain HCPCS codes for drugs and allows hospitals flexibility in choosing to report all HCPCS codes for different dosages of the same drug or only the lowest dosage HCPCS code. Therefore, we are proposing to continue our policy to make packaging determinations on a drug-specific basis, rather than a HCPCS code-specific basis, for those HCPCS codes that describe the same drug or biological but different dosages in CY 2017.

For CY 2017, in order to propose a packaging determination that is consistent across all HCPCS codes that Start Printed Page 45663describe different dosages of the same drug or biological, we aggregated both our CY 2015 claims data and our pricing information at ASP+6 percent across all of the HCPCS codes that describe each distinct drug or biological in order to determine the mean units per day of the drug or biological in terms of the HCPCS code with the lowest dosage descriptor. The following drugs did not have pricing information available for the ASP methodology for this CY 2017 OPPS/ASC proposed rule, and as is our current policy for determining the packaging status of other drugs, we used the mean unit cost available from the CY 2015 claims data to make the proposed packaging determinations for these drugs: HCPCS code J1840 (Injection, kanamycin sulfate, up to 500 mg), J1850 (Injection, kanamycin sulfate, up to 75 mg) and HCPCS code J3472 (Injection, hyaluronidase, ovine, preservative free, per 1000 usp units).

For all other drugs and biologicals that have HCPCS codes describing different doses, we then multiplied the proposed weighted average ASP+6 percent per unit payment amount across all dosage levels of a specific drug or biological by the estimated units per day for all HCPCS codes that describe each drug or biological from our claims data to determine the estimated per day cost of each drug or biological at less than or equal to the proposed CY 2017 drug packaging threshold of $110 (so that all HCPCS codes for the same drug or biological would be packaged) or greater than the proposed CY 2017 drug packaging threshold of $110 (so that all HCPCS codes for the same drug or biological would be separately payable). The proposed packaging status of each drug and biological HCPCS code to which this methodology would apply in CY 2017 is displayed in Table 16 below.

Table 16—Proposed HCPCS Codes to Which the CY 2017 Drug-Specific Packaging Determination Methodology Applies

CY 2017 HCPCS CodeCY 2017 Long descriptorProposed CY 2017 SI
C9257Injection, bevacizumab, 0.25 mgK
J9035Injection, bevacizumab, 10 mgK
J1020Injection, methylprednisolone acetate, 20 mgN
J1030Injection, methylprednisolone acetate, 40 mgN
J1040Injection, methylprednisolone acetate, 80 mgN
J1460Injection, gamma globulin, intramuscular, 1 ccK
J1560Injection, gamma globulin, intramuscular, over 10 ccK
J1642Injection, heparin sodium, (heparin lock flush), per 10 unitsN
J1644Injection, heparin sodium, per 1000 unitsN
J1850Injection, kanamycin sulfate, up to 75 mgN
J1840Injection, kanamycin sulfate, up to 500 mgN
J2788Injection, rho d immune globulin, human, minidose, 50 micrograms (250 i.u.)N
J2790Injection, rho d immune globulin, human, full dose, 300 micrograms (1500 i.u.)N
J2920Injection, methylprednisolone sodium succinate, up to 40 mgN
J2930Injection, methylprednisolone sodium succinate, up to 125 mgN
J3471Injection, hyaluronidase, ovine, preservative free, per 1 usp unit (up to 999 usp units)N
J3472Injection, hyaluronidase, ovine, preservative free, per 1000 usp unitsN
J7050Infusion, normal saline solution, 250 ccN
J7040Infusion, normal saline solution, sterile (500 ml = 1 unit)N
J7030Infusion, normal saline solution, 1000 ccN
J7515Cyclosporine, oral, 25 mgN
J7502Cyclosporine, oral, 100 mgN
J8520Capecitabine, oral, 150 mgN
J8521Capecitabine, oral, 500 mgN
J9250Methotrexate sodium, 5 mgN
J9260Methotrexate sodium, 50 mgN

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

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

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

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

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

Section 1833(t)(14)(A)(iii) of the Act requires that payment for SCODs in CY 2006 and subsequent years be equal to the average acquisition cost for the drug for that year as determined by the Secretary, subject to any adjustment for overhead costs and taking into account the hospital acquisition cost survey data collected by the Government Accountability Office (GAO) in CYs 2004 and 2005, and later periodic surveys conducted by the Secretary as set forth in the statute. If hospital acquisition cost data are not available, the law requires that payment be equal to payment rates established under the methodology described in section 1842(o), section 1847A, or section 1847B of the Act, as calculated and adjusted by the Secretary as necessary. Start Printed Page 45664We refer to this alternative methodology as the “statutory default.” Most physician Part B drugs are paid at ASP+6 percent in accordance with section 1842(o) and section 1847A of the Act.

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

It has been our longstanding policy to apply the same treatment to all separately payable drugs and biologicals, which include SCODs, and drugs and biologicals that are not SCODs. Therefore, we apply the payment methodology in section 1833(t)(14)(A)(iii) of the Act to SCODs, as required by statute, but we also apply it to separately payable drugs and biologicals that are not SCODs, which is a policy determination rather than a statutory requirement. In this CY 2017 OPPS/ASC proposed rule, we are proposing to apply section 1833(t)(14)(A)(iii)(II) of the Act to all separately payable drugs and biologicals, including SCODs. Although we do not distinguish SCODs in this discussion, we note that we are required to apply section 1833(t)(14)(A)(iii)(II) of the Act to SCODs, but we also are applying this provision to other separately payable drugs and biologicals, consistent with our history of using the same payment methodology for all separately payable drugs and biologicals.

For a detailed discussion of our OPPS drug payment policies from CY 2006 to CY 2012, we refer readers to the CY 2013 OPPS/ASC final rule with comment period (77 FR 68383 through 68385). In the CY 2013 OPPS/ASC final rule with comment period (77 FR 68386 through 68389), we first adopted the statutory default policy to pay for separately payable drugs and biologicals at ASP+6 percent based on section 1833(t)(14)(A)(iii)(II) of the Act. We continued this policy of paying for separately payable drugs and biologicals at the statutory default for CY 2014, CY 2015, and CY 2016 (80 FR 70440).

b. Proposed CY 2017 Payment Policy

For CY 2017 and subsequent years, we are proposing to continue our payment policy that has been in effect from CY 2013 to present and pay for separately payable drugs and biologicals at ASP+6 percent in accordance with section 1833(t)(14)(A)(iii)(II) of the Act (the statutory default). We are proposing that the ASP+6 percent payment amount for separately payable drugs and biologicals requires no further adjustment and represents the combined acquisition and pharmacy overhead payment for drugs and biologicals. We also are proposing that payments for separately payable drugs and biologicals are included in the budget neutrality adjustments, under the requirements in section 1833(t)(9)(B) of the Act, and that the budget neutral weight scaler is not applied in determining payments for these separately paid drugs and biologicals.

We note that separately payable drug and biological payment rates listed in Addenda A and B to this proposed rule (available via the Internet on the CMS Web site), which illustrate the proposed CY 2017 payment of ASP+6 percent for separately payable nonpass-through drugs and biologicals and ASP+6 percent for pass-through drugs and biologicals, reflect either ASP information that is the basis for calculating payment rates for drugs and biologicals in the physician's office setting effective April 1, 2016, or WAC, AWP, or mean unit cost from CY 2015 claims data and updated cost report information available for this proposed rule. In general, these published payment rates are not the same as the actual January 2017 payment rates. This is because payment rates for drugs and biologicals with ASP information for January 2017 will be determined through the standard quarterly process where ASP data submitted by manufacturers for the third quarter of 2016 (July 1, 2016 through September 30, 2016) will be used to set the payment rates that are released for the quarter beginning in January 2017 near the end of December 2016. In addition, payment rates for drugs and biologicals in Addenda A and B to this proposed rule for which there was no ASP information available for April 2016 are based on mean unit cost in the available CY 2015 claims data. If ASP information becomes available for payment for the quarter beginning in January 2017, we will price payment for these drugs and biologicals based on their newly available ASP information. Finally, there may be drugs and biologicals that have ASP information available for this proposed rule (reflecting April 2016 ASP data) that do not have ASP information available for the quarter beginning in January 2017. These drugs and biologicals would then be paid based on mean unit cost data derived from CY 2015 hospital claims. Therefore, the proposed payment rates listed in Addenda A and B to this proposed rule are not for January 2017 payment purposes and are only illustrative of the proposed CY 2017 OPPS payment methodology using the most recently available information at the time of issuance of this proposed rule.

c. Biosimilar Biological Products

For CY 2016, we finalized a policy to pay for biosimilar biological products based on the payment allowance of the product as determined under section 1847A of the Act and to subject nonpass-through biosimilar biological products to our annual threshold-packaged policy (80 FR 70445 through 70446). For CY 2017, we are proposing to continue this same payment policy for biosimilar biological products.

3. Proposed Payment Policy for Therapeutic Radiopharmaceuticals

For CY 2017, we are proposing to continue the payment policy for therapeutic radiopharmaceuticals that began in CY 2010. We pay for separately paid therapeutic radiopharmaceuticals under the ASP methodology adopted for separately payable drugs and biologicals. If ASP information is unavailable for a therapeutic radiopharmaceutical, we base therapeutic radiopharmaceutical payment on mean unit cost data derived from hospital claims. We believe that the rationale outlined in the CY 2010 OPPS/ASC final rule with comment period (74 FR 60524 through 60525) for applying the principles of separately payable drug pricing to therapeutic radiopharmaceuticals continues to be appropriate for nonpass-through, separately payable therapeutic radiopharmaceuticals in CY 2017. Therefore, we are proposing for CY 2017 to pay all nonpass-through, separately payable therapeutic radiopharmaceuticals at ASP+6 percent, based on the statutory default described in section 1833(t)(14)(A)(iii)(II) of the Act. For a full discussion of ASP-based payment for therapeutic radiopharmaceuticals, we refer readers to the CY 2010 OPPS/ASC final rule with comment period (74 FR 60520 through 60521). We also are proposing to rely on CY 2015 mean unit cost data derived from hospital claims data for payment rates for therapeutic Start Printed Page 45665radiopharmaceuticals for which ASP data are unavailable and to update the payment rates for separately payable therapeutic radiopharmaceuticals according to our usual process for updating the payment rates for separately payable drugs and biologicals on a quarterly basis if updated ASP information is available. For a complete history of the OPPS payment policy for therapeutic radiopharmaceuticals, we refer readers to the CY 2005 OPPS final rule with comment period (69 FR 65811), the CY 2006 OPPS final rule with comment period (70 FR 68655), and the CY 2010 OPPS/ASC final rule with comment period (74 FR 60524). The proposed CY 2017 payment rates for nonpass-through, separately payable therapeutic radiopharmaceuticals are in Addenda A and B to this proposed rule (which are available via the Internet on the CMS Web site).

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

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

The United States would like to eliminate domestic reliance on these reactors, and is promoting the conversion of all medical radioisotope production to non-HEU sources. Alternative methods for producing Tc-99m without HEU are technologically and economically viable, and conversion to such production has begun. We expect that this change in the supply source for the radioisotope used for modern medical imaging will introduce new costs into the payment system that are not accounted for in the historical claims data.

Therefore, beginning in CY 2013, we finalized a policy to provide an additional payment of $10 for the marginal cost for radioisotopes produced by non-HEU sources (77 FR 68323). Under this policy, hospitals report HCPCS code Q9969 (Tc-99m from non-highly enriched uranium source, full cost recovery add-on per study dose) once per dose along with any diagnostic scan or scans furnished using Tc-99m as long as the Tc-99m doses used can be certified by the hospital to be at least 95 percent derived from non-HEU sources (77 FR 68321).

We stated in the CY 2013 OPPS/ASC final rule with comment period (77 FR 68321) that our expectation is that this additional payment will be needed for the duration of the industry's conversion to alternative methods to producing Tc-99m without HEU. We also stated that we would reassess, and propose if necessary, on an annual basis whether such an adjustment continued to be necessary and whether any changes to the adjustment were warranted (77 FR 68316). We have reassessed this payment for CY 2017 and did not identify any new information that would cause us to modify payment. Therefore, for CY 2017, we are proposing to continue to provide an additional $10 payment for radioisotopes produced by non-HEU sources.

5. Proposed Payment for Blood Clotting Factors

For CY 2016, we provided payment for blood clotting factors under the same methodology as other nonpass-through separately payable drugs and biologicals under the OPPS and continued paying an updated furnishing fee (80 FR 70441). That is, for CY 2016, we provided payment for blood clotting factors under the OPPS at ASP+6 percent, plus an additional payment for the furnishing fee. We note that when blood clotting factors are provided in physicians' offices under Medicare Part B and in other Medicare settings, a furnishing fee is also applied to the payment. The CY 2016 updated furnishing fee was $0.202 per unit.

For CY 2017, we are proposing to pay for blood clotting factors at ASP+6 percent, consistent with our proposed payment policy for other nonpass-through, separately payable drugs and biologicals, and to continue our policy for payment of the furnishing fee using an updated amount. Our policy to pay for a furnishing fee for blood clotting factors under the OPPS is consistent with the methodology applied in the physician's office and in the inpatient hospital setting. These methodologies were first articulated in the CY 2006 OPPS final rule with comment period (70 FR 68661) and later discussed in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66765). The proposed furnishing fee update is based on the percentage increase in the Consumer Price Index (CPI) for medical care for the 12-month period ending with June of the previous year. Because the Bureau of Labor Statistics releases the applicable CPI data after the MPFS and OPPS/ASC proposed rules are published, we are not able to include the actual updated furnishing fee in the proposed rules. Therefore, in accordance with our policy, as finalized in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66765), we are proposing to announce the actual figure for the percent change in the applicable CPI and the updated furnishing fee calculated based on that figure through applicable program instructions and posting on the CMS Web site at: http://www.cms.gov/​Medicare/​Medicare-Fee-for-Service-Part-B-Drugs/​McrPartBDrugAvgSalesPrice/​index.html.

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

For CY 2017, we are proposing to continue to use the same payment policy as in CY 2016 for nonpass-through drugs, biologicals, and radiopharmaceuticals with HCPCS codes but without OPPS hospital claims data (80 FR 70443). The proposed CY 2017 payment status of each of the nonpass-through drugs, biologicals, and radiopharmaceuticals with HCPCS codes but without OPPS hospital claims data is listed in Addendum B to this proposed rule, which is available via the Internet on the CMS Web site.

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

A. Background

Section 1833(t)(6)(E) of the Act limits the total projected amount of transitional pass-through payments for drugs, biologicals, radiopharmaceuticals, and categories of devices for a given year to an “applicable percentage,” currently not to exceed 2.0 percent of total program payments estimated to be made for all covered services under the OPPS furnished for that year. If we estimate before the beginning of the calendar year that the total amount of pass-through payments in that year would exceed the applicable percentage, section 1833(t)(6)(E)(iii) of the Act requires a uniform prospective reduction in the amount of each of the transitional pass-through payments made in that year to ensure that the limit is not exceeded. We estimate the pass-through spending to determine whether payments exceed the applicable percentage and the appropriate prorata reduction to the conversion factor for the projected level of pass-through spending in the following year to ensure that total estimated pass-through spending for the prospective payment year is budget Start Printed Page 45666neutral, as required by section 1833(t)(6)(E) of the Act.

For devices, developing an estimate of pass-through spending in CY 2017 entails estimating spending for two groups of items. The first group of items consists of device categories that are currently eligible for pass-through payment and that will continue to be eligible for pass-through payment in CY 2017. The CY 2008 OPPS/ASC final rule with comment period (72 FR 66778) describes the methodology we have used in previous years to develop the pass-through spending estimate for known device categories continuing into the applicable update year. The second group of items consists of items that we know are newly eligible, or project may be newly eligible, for device pass-through payment in the remaining quarters of CY 2016 or beginning in CY 2017. The sum of the CY 2017 pass-through spending estimates for these two groups of device categories equals the total CY 2017 pass-through spending estimate for device categories with pass-through payment status. We base the device pass-through estimated payments for each device category on the amount of payment as established in section 1833(t)(6)(D)(ii) of the Act, and as outlined in previous rules, including the CY 2014 OPPS/ASC final rule with comment period (78 FR 75034 through 75036). We note that, beginning in CY 2010, the pass-through evaluation process and pass-through payment for implantable biologicals newly approved for pass-through payment beginning on or after January 1, 2010, that are surgically inserted or implanted (through a surgical incision or a natural orifice) use the device pass-through process and payment methodology (74 FR 60476). As has been our past practice (76 FR 74335), in this proposed rule for CY 2017, we are proposing to include an estimate of any implantable biologicals eligible for pass-through payment in our estimate of pass-through spending for devices. Similarly, we finalized a policy in CY 2015 that applications for pass-through payment for skin substitutes and similar products be evaluated using the medical device pass-through process and payment methodology (76 FR 66885 through 66888). Therefore, as we did beginning in CY 2015, for CY 2017, we also are proposing to include an estimate of any skin substitutes and similar products in our estimate of pass-through spending for devices.

For drugs and biologicals eligible for pass-through payment, section 1833(t)(6)(D)(i) of the Act establishes the pass-through payment amount as the amount by which the amount authorized under section 1842(o) of the Act (or, if the drug or biological is covered under a competitive acquisition contract under section 1847B of the Act, an amount determined by the Secretary equal to the average price for the drug or biological for all competitive acquisition areas and year established under such section as calculated and adjusted by the Secretary) exceeds the portion of the otherwise applicable fee schedule amount that the Secretary determines is associated with the drug or biological. Because we are proposing to pay for most nonpass-through separately payable drugs and biologicals under the CY 2017 OPPS at ASP+6 percent, and because we are proposing to pay for CY 2017 pass-through drugs and biologicals at ASP+6 percent, as we discussed in section V.A. of this proposed rule, our estimate of drug and biological pass-through payment for CY 2017 for this group of items is $0, as discussed below.

Furthermore, payment for certain drugs, specifically diagnostic radiopharmaceuticals and contrast agents without pass-through status, is packaged into payment for the associated procedures, and these products will not be separately paid. In addition, we policy-package all nonpass-through drugs, biologicals, and radiopharmaceuticals that function as supplies when used in a diagnostic test or procedure and drugs and biologicals that function as supplies when used in a surgical procedure, as discussed in section II.A.3. of this proposed rule. We are proposing that all of these policy-packaged drugs and biologicals with pass-through payment status would be paid at ASP+6 percent, like other pass-through drugs and biologicals, for CY 2017. Therefore, our estimate of pass-through payment for policy-packaged drugs and biologicals with pass-through payment status approved prior to CY 2017 is not $0, as discussed below. In section V.A.4. of this proposed rule, we discuss our policy to determine if the costs of certain policy-packaged drugs or biologicals are already packaged into the existing APC structure. If we determine that a policy-packaged drug or biological approved for pass-through payment resembles predecessor drugs or biologicals already included in the costs of the APCs that are associated with the drug receiving pass-through payment, we are proposing to offset the amount of pass-through payment for the policy-packaged drug or biological. For these drugs or biologicals, the APC offset amount is the portion of the APC payment for the specific procedure performed with the pass-through drug or biological, which we refer to as the policy-packaged drug APC offset amount. If we determine that an offset is appropriate for a specific policy-packaged drug or biological receiving pass-through payment, we are proposing to reduce our estimate of pass-through payments for these drugs or biologicals by this amount.

Similar to pass-through estimates for devices, the first group of drugs and biologicals requiring a pass-through payment estimate consists of those products that were recently made eligible for pass-through payment and that will continue to be eligible for pass-through payment in CY 2017. The second group contains drugs and biologicals that we know are newly eligible, or project will be newly eligible in the remaining quarters of CY 2016 or beginning in CY 2017. The sum of the CY 2017 pass-through spending estimates for these two groups of drugs and biologicals equals the total CY 2017 pass-through spending estimate for drugs and biologicals with pass-through payment status.

B. Proposed Estimate of Pass-Through Spending

We are proposing to set the applicable pass-through payment percentage limit at 2.0 percent of the total projected OPPS payments for CY 2017, consistent with section 1833(t)(6)(E)(ii)(II) of the Act and our OPPS policy from CY 2004 through CY 2016 (80 FR 70446 through 70448).

For the first group, consisting of device categories that are currently eligible for pass-through payment and will continue to be eligible for pass-through payment in CY 2017, there are three active categories for CY 2017. For CY 2016, we established one new device category subsequent to the publication of the CY 2016 OPPS/ASC proposed rule, HCPCS code C1822 (Generator, neurostimulator (implantable), high frequency, with rechargeable battery and charging system), that was effective January 1, 2016. We estimate that the device described by HCPCS code C1822 will cost $1 million in pass-through expenditures in CY 2017. Effective April 1, 2015, we established that the device described by HCPCS code C2623 (Catheter, transluminal angioplasty, drug-coated, non-laser) will be eligible for pass-through payment. We estimate that the device described by HCPCS code C2623 will cost $97 million in pass-through expenditures in CY 2017. Effective July 1, 2015, we established that the device described by HCPCS code C2613 (Lung biopsy plug with delivery system) will be eligible for pass-through payment. We estimate that the device described by HCPCS code Start Printed Page 45667C2613 will cost $4.7 million in pass-through expenditures in CY 2017. Based on the three device categories of HCPCS codes C1822, C2623, and C2613, we are proposing an estimate for the first group of devices of $102.7 million.

In estimating our proposed CY 2017 pass-through spending for device categories in the second group, we include: Device categories that we knew at the time of the development of this proposed rule will be newly eligible for pass-through payment in CY 2017; additional device categories that we estimate could be approved for pass-through status subsequent to the development of the proposed rule and before January 1, 2017; and contingent projections for new device categories established in the second through fourth quarters of CY 2017. We are proposing to use the general methodology described in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66778), while also taking into account recent OPPS experience in approving new pass-through device categories. For this proposed rule, the estimate of CY 2017 pass-through spending for this second group of device categories is $10 million.

To estimate proposed CY 2017 pass-through spending for drugs and biologicals in the first group, specifically those drugs and biologicals recently made eligible for pass-through payment and continuing on pass-through payment status for CY 2017, we proposed to use the most recent Medicare physician claims data regarding their utilization, information provided in the respective pass-through applications, historical hospital claims data, pharmaceutical industry information, and clinical information regarding those drugs or biologicals to project the CY 2017 OPPS utilization of the products.

For the known drugs and biologicals (excluding policy-packaged diagnostic radiopharmaceuticals, contrast agents, drugs, biologicals, and radiopharmaceuticals that function as supplies when used in a diagnostic test or procedure, and drugs and biologicals that function as supplies when used in a surgical procedure) that will be continuing on pass-through payment status in CY 2017, we estimate the pass-through payment amount as the difference between ASP+6 percent and the payment rate for nonpass-through drugs and biologicals that will be separately paid at ASP+6 percent, which is zero for this group of drugs. Because payment for policy-packaged drugs and biologicals is packaged if the product was not paid separately due to its pass-through payment status, we are proposing to include in the CY 2017 pass-through estimate the difference between payment for the policy-packaged drug or biological at ASP+6 percent (or WAC+6 percent, or 95 percent of AWP, if ASP or WAC information is not available) and the policy-packaged drug APC offset amount, if we determine that the policy-packaged drug or biological approved for pass-through payment resembles a predecessor drug or biological already included in the costs of the APCs that are associated with the drug receiving pass-through payment. For this proposed rule, using the proposed methodology described above, we calculated a CY 2017 proposed spending estimate for this first group of drugs and biologicals of approximately $19.0 million.

To estimate proposed CY 2017 pass-through spending for drugs and biologicals in the second group (that is, drugs and biologicals that we knew at the time of development of the proposed rule were newly eligible for pass-through payment in CY 2017, additional drugs and biologicals that we estimated could be approved for pass-through status subsequent to the development of the proposed rule and before January 1, 2016, and projections for new drugs and biologicals that could be initially eligible for pass-through payment in the second through fourth quarters of CY 2017), we are proposing to use utilization estimates from pass-through applicants, pharmaceutical industry data, clinical information, recent trends in the per unit ASPs of hospital outpatient drugs, and projected annual changes in service volume and intensity as our basis for making the CY 2017 pass-through payment estimate. We also are proposing to consider the most recent OPPS experience in approving new pass-through drugs and biologicals. Using our proposed methodology for estimating CY 2017 pass-through payments for this second group of drugs, we calculated a proposed spending estimate for this second group of drugs and biologicals of approximately $16.6 million.

In summary, in accordance with the methodology described earlier in this section, for this proposed rule, we estimate that proposed total pass-through spending for the device categories and the drugs and biologicals that are continuing to receive pass-through payment in CY 2017 and those device categories, drugs, and biologicals that first become eligible for pass-through payment during CY 2017 would be approximately $148.3 million (approximately $112.7 million for device categories and approximately $35.6 million for drugs and biologicals), which represents 0.24 percent of total projected OPPS payments for CY 2017. Therefore, we estimate that proposed pass-through spending in CY 2017 would not amount to 2.0 percent of total projected OPPS CY 2017 program spending.

VIII. Proposed OPPS Payment for Hospital Outpatient Visits and Critical Care Services

For CY 2017, we are proposing to continue with and are not proposing any changes to our current clinic and emergency department (ED) hospital outpatient visits payment policies. For a description of the current clinic and ED hospital outpatient visits policies, we refer readers to the CY 2016 OPPS/ASC final rule with comment period (80 FR 70448). We also are proposing to continue with and are not proposing any change to our payment policy for critical care services for CY 2017. For a description of the current payment policy for critical care services, we refer readers to the CY 2016 OPPS/ASC final rule with comment period (80 FR 70449), and for the history of the payment policy for critical care services, we refer readers to the CY 2014 OPPS/ASC final rule with comment period (78 FR 75043). We are seeking public comments on any changes to these codes that we should consider for future rulemaking cycles. We encourage those parties who comment to provide the data and analysis necessary to justify any proposed changes.

VIII. Proposed Payment for Partial Hospitalization Services

A. Background

A partial hospitalization program (PHP) is an intensive outpatient program of psychiatric services provided as an alternative to inpatient psychiatric care for individuals who have an acute mental illness. Section 1861(ff)(1) of the Act defines partial hospitalization services as the items and services described in paragraph (2) prescribed by a physician and provided under a program described in paragraph (3) under the supervision of a physician pursuant to an individualized, written plan of treatment established and periodically reviewed by a physician (in consultation with appropriate staff participating in such program), which sets forth the physician's diagnosis, the type, amount, frequency, and duration of the items and services provided under the plan, and the goals for treatment under the plan. Section 1861(ff)(2) of the Act describes the items and services included in partial Start Printed Page 45668hospitalization services. Section 1861(ff)(3)(A) of the Act specifies that a PHP is a program furnished by a hospital to its outpatients or by a community mental health center (CMHC) (as defined in subparagraph (B)), and which is a distinct and organized intensive ambulatory treatment service offering less than 24-hour-daily care other than in an individual's home or in an inpatient or residential setting. Section 1861(ff)(3)(B) of the Act defines a CMHC for purposes of this benefit.

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

Section 1833(t)(2)(C) of the Act requires the Secretary to establish relative payment weights for covered OPD services (and any groups of such services described in section 1833(t)(2)(B) of the Act) based on median (or, at the election of the Secretary, mean) hospital costs using data on claims from 1996 and data from the most recent available cost reports. In pertinent part, section 1833(t)(2)(B) of the Act provides that the Secretary may establish groups of covered OPD services, within a classification system developed by the Secretary for covered OPD services, so that services classified within each group are comparable clinically and with respect to the use of resources. In accordance with these provisions, we have developed the PHP APCs. Because a day of care is the unit that defines the structure and scheduling of partial hospitalization services, we established a per diem payment methodology for the PHP APCs, effective for services furnished on or after July 1, 2000 (65 FR 18452 through 18455). Under this methodology, the median per diem costs were used to calculate the relative payment weights for the PHP APCs. Section 1833(t)(9)(A) of the Act requires the Secretary to review, not less often than annually, and revise the groups, the relative payment weights, and the wage and other adjustments described in section 1833(t)(2) of the Act to take into account changes in medical practice, changes in technology, the addition of new services, new cost data, and other relevant information and factors.

We began efforts to strengthen the PHP benefit through extensive data analysis and policy and payment changes finalized in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66670 through 66676). In that final rule, we made two refinements to the methodology for computing the PHP median: The first remapped 10 revenue codes that are common among hospital-based PHP claims to the most appropriate cost centers; and the second refined our methodology for computing the PHP median per diem cost by computing a separate per diem cost for each day rather than for each bill.

In CY 2009, we implemented several regulatory, policy, and payment changes, including a two-tiered payment approach for partial hospitalization services under which we paid one amount for days with 3 services under PHP APC 0172 (Level 1 Partial Hospitalization) and a higher amount for days with 4 or more services under PHP APC 0173 (Level 2 Partial Hospitalization) (73 FR 68688 through 68693). We also finalized our policy to deny payment for any PHP claims submitted for days when fewer than 3 units of therapeutic services are provided (73 FR 68694). Furthermore, for CY 2009, we revised the regulations at 42 CFR 410.43 to codify existing basic PHP patient eligibility criteria and to add a reference to current physician certification requirements under 42 CFR 424.24 to conform our regulations to our longstanding policy (73 FR 68694 through 68695). We also revised the partial hospitalization benefit to include several coding updates (73 FR 68695 through 68697). For CY 2010, we retained the two-tiered payment approach for partial hospitalization services and used only hospital-based PHP data in computing the PHP APC per diem costs, upon which PHP APC per diem payment rates are based. We used only hospital-based PHP data because we were concerned about further reducing both PHP APC per diem payment rates without knowing the impact of the policy and payment changes we made in CY 2009. Because of the 2-year lag between data collection and rulemaking, the changes we made in CY 2009 were reflected for the first time in the claims data that we used to determine payment rates for the CY 2011 rulemaking (74 FR 60556 through 60559).

In the CY 2011 OPPS/ASC final rule with comment period (75 FR 71994), we established four separate PHP APC per diem payment rates: Two for CMHCs (APC 0172 (for Level 1 services) and APC 0173 (for Level 2 services)) and two for hospital-based PHPs (APC 0175 (for Level 1 services) and 0176 (for Level 2 services)), based on each provider type's own unique data. In addition, in accordance with section 1301(b) of the Health Care and Education Reconciliation Act of 2010 (HCERA 2010), we amended the description of a PHP in our regulations to specify that a PHP must be a distinct and organized intensive ambulatory treatment program offering less than 24-hour daily care other than in an individual's home or in an inpatient or residential setting. In accordance with section 1301(a) of HCERA 2010, we revised the definition of a CMHC in the regulations to conform to the revised definition now set forth under section 1861(ff)(3)(B) of the Act (75 FR 71990). For CY 2011, we also instituted a 2-year transition period for CMHCs to the CMHC APC per diem payment rates based solely on CMHC data. Under the transition methodology, CMHC PHP APCs Level 1 and Level 2 per diem costs were calculated by taking 50 percent of the difference between the CY 2010 final hospital-based PHP median costs and the CY 2011 final CMHC median costs and then adding that number to the CY 2011 final CMHC median costs. A 2-year transition under this methodology moved us in the direction of our goal, which is to pay appropriately for partial hospitalization services based on each provider type's data, while at the same time allowing providers time to adjust their business operations and protect access to care for Medicare beneficiaries. We also stated that we would review and analyze the data during the CY 2012 rulemaking cycle and, based on these analyses, we might further refine the payment mechanism. We refer readers to section X.B. of the CY 2011 OPPS/ASC final rule with comment period (75 FR 71991 through 71994) for a full discussion.

For CY 2012, as discussed in the CY 2012 OPPS/ASC final rule with comment period (76 FR 74348 through 74352), we determined the relative payment weights for partial hospitalization services provided by CMHCs based on data derived solely from CMHCs and the relative payment weights for partial hospitalization services provided by hospital-based PHPs based exclusively on hospital data.

In the CY 2013 OPPS/ASC final rule with comment period, we finalized our proposal to base the relative payment weights that underpin the OPPS APCs, including the four PHP APCs (APCs 0172, 0173, 0175, and 0176), on geometric mean costs rather than on the median costs. We established these four Start Printed Page 45669PHP APC per diem payment rates based on geometric mean cost levels calculated using the most recent claims and cost data for each provider type. For a detailed discussion on this policy, we refer readers to the CY 2013 OPPS/ASC final rule with comment period (77 FR 68406 through 68412).

In the CY 2014 OPPS/ASC proposed rule (78 FR 43621 through 43622), we solicited comments on possible future initiatives that may help to ensure the long-term stability of PHPs and further improve the accuracy of payment for PHP services, but proposed no changes. In the CY 2014 OPPS/ASC final rule with comment period (78 FR 75050 through 75053), we summarized the comments received on those possible future initiatives. We also continued to apply our established policies to calculate the four PHP APC per diem payment rates based on geometric mean per diem costs using the most recent claims data for each provider type. For a detailed discussion on this policy, we refer readers to the CY 2014 OPPS/ASC final rule with comment period (78 FR 75050 through 75053).

In the CY 2015 OPPS/ASC final rule with comment period (79 FR 66902 through 66908), we continued to apply our established policies to calculate the four PHP APC per diem payment rates based on PHP APC geometric mean per diem costs, using the most recent claims and cost data for each provider type.

In the CY 2016 OPPS/ASC final rule with comment period (80 FR 70455 through 70465), we again continued to apply our established policies to calculate the four PHP APC per diem payment rates based on PHP APC geometric mean per diem costs, using the most recent claims and cost data for each provider type. We also implemented a trim to remove hospital-based PHP service days that use a CCR that was greater than 5 (CCR > 5) to calculate costs for at least one of their component services, and a trim on CMHCs with an average cost per day that is above or below 2 (±2) standard deviations from the mean. We also renumbered the PHP APCs which were previously 0172, 0173, 0175, and 0176, to 5851, 5852, 5861, and 5862, respectively. For a detailed discussion of the PHP ratesetting process, we refer readers to the CY 2016 OPPS/ASC final rule with comment period (80 FR 70462 through 70467).

In the effort to increase the accuracy of the PHP per diem costs, in the CY 2016 OPPS/ASC final rule with comment period (80 FR 70455 through 70461), we completed an extensive analysis of the claims and cost data, which included provider service usage, coding practices, and the ratesetting methodology. This extensive analysis identified provider coding errors that were inappropriately removing costs from ratesetting, and aberrant data from several providers that were affecting the calculation of the proposed PHP geometric mean per diem costs. Aberrant data are claims and/or cost data that are so abnormal that they skew the resulting geometric mean per diem costs. For example, we found claims with excessive CMHC charges resulting in CMHC geometric mean costs per day that were approximately the same as or more than the daily payment for inpatient psychiatric facility services. For an outpatient program like the PHP, which does not incur room and board costs such as an inpatient stay would, these costs per day were excessive. In addition, we found some CMHCs had very low costs per day (less than $25 per day). We stated in the CY 2016 OPPS/ASC final rule with comment period (80 FR 70456) that, without using a trimming process, the data from these providers would inappropriately skew the geometric mean per diem cost for Level 2 CMHC PHP services. Further analysis of the data confirmed that there were a few providers with extreme cost per day values, which led us to propose and finalize a ±2 standard deviation trim on CMHC costs per day.

During our claims and cost data analysis, we also found aberrant data from some hospital-based PHP providers. The existing OPPS ±3 standard deviation trim removed very extreme CCRs by defaulting two providers that failed this trim to their overall hospital ancillary CCR. However, the calculation of the ±3 standard deviations used to define the trim was influenced by these two providers, which had extreme CCRs greater than 175. Because these two hospital-based PHP providers remained in the data when we calculated the boundaries of the OPPS ±3 standard deviation trim in the CY 2016 ratesetting, the upper limit of the trim boundaries was fairly high, at 28.3446. As such, some aberrant CCRs were not trimmed out, and still had high values ranging from 6.3840 to 19.996. We note that, as stated in CY 2016 OPPS/ASC proposed rule (80 FR 39242 and 39293) and reiterated in the CY 2016 OPPS/ASC final rule with comment period (80 FR 70456), OPPS defines a biased CCR as one that falls outside the predetermined ceiling threshold for a valid CCR; using CY 2014 cost report data, that threshold is 1.5.

In order to reduce or eliminate the impact of aberrant data received from a few CMHCs and hospital-based PHP providers in the claims data used for ratesetting, we finalized the application of a ±2 standard deviation trim on cost per day for CMHCs and a CCR>5 hospital service day trim for hospital-based PHP providers for CY 2016 and subsequent years (80 FR 70456 through 70459). In addition, in the CY 2016 OPPS/ASC final rule with comment period (80 FR 70459 through 70460), a cost inversion occurred in the final rule data with respect to hospital-based PHP providers. A cost inversion exists when the Level 1 PHP APC geometric mean per diem cost for providing exactly 3 services per day exceeds the Level 2 PHP APC geometric mean per diem cost for providing 4 or more services per day. We corrected the cost inversion with an equitable adjustment to the actual geometric mean per diem costs by increasing the Level 2 hospital-based PHP APC geometric mean per diem costs and decreasing the Level 1 hospital-based PHP APC geometric mean per diem costs by the same factor, to result in a percentage difference equal to the average percent difference between the hospital-based Level 1 PHP APC and the Level 2 PHP APC for partial hospitalization services from CY 2013 through CY 2015.

For a comprehensive description on the background of PHP payment policy, we refer readers to the CY 2016 OPPS/ASC final rule with comment period (80 FR 70453 through 70455).

B. Proposed PHP APC Update for CY 2017

1. Proposed PHP APC Changes and Effects on Geometric Mean Per Diem Costs

For CY 2017, we are proposing to continue to apply our established policies to calculate the PHP APC per diem payment rates based on geometric mean per diem costs using the most recent claims and cost data for each provider type. However, as explained in greater detail below, we are proposing to combine the Level 1 and Level 2 PHP APCs for CMHCs and to combine the Level 1 and Level 2 APCs for hospital-based PHPs because we believe this would best reflect actual geometric mean per diem costs going forward, provide more predictable per diem costs, particularly given the small number of CMHCs, and generate more appropriate payments for these services by avoiding the cost inversions that hospital-based PHPs experienced in the CY 2016 OPPS/ASC final rule with comment period (80 FR 70459).Start Printed Page 45670

a. Proposed Changes to PHP APCs

In this CY 2017 OPPS/ASC proposed rule, we are proposing to combine the existing two-tiered PHP APCs for CMHCs into a single PHP APC and the existing two-tiered hospital-based PHP APCs into a single PHP APC. Specifically, we are proposing to replace existing CMHC PHP APCs 5851 (Level 1 Partial Hospitalization (3 services) for CMHCs) and 5852 (Level 2 Partial Hospitalization (4 or more services) for CMHCs) with proposed new CMHC PHP APC 5853 (Partial Hospitalization (3 or More Services Per Day)), and to replace existing hospital-based PHP APCs 5861 (Level 1 Partial Hospitalization (3 services) for Hospital-based PHPs) and 5862 (Level 2 Partial Hospitalization (4 or more services) for Hospital-based PHPs) with proposed new hospital-based PHP APC 5863 (Partial Hospitalization (3 or More Services Per Day)). In conjunction with this proposal, we are proposing to combine the geometric mean per diem costs for the existing Level 1 and Level 2 PHP APCs for CMHCs (APC 5851 and APC 5852, respectively) to calculate the proposed geometric mean per diem costs for proposed new PHP APC 5853 for CMHCs, and to combine the geometric mean per diem costs for the existing Level 1 and Level 2 PHP APCs for hospital-based PHPs (APC 5861 and APC 5862, respectively) to calculate the proposed geometric mean per diem costs for proposed new PHP APC 5863 for hospital-based PHPs, for CY 2017 and subsequent years. Further, we are proposing to compute the proposed new CMHC PHP APC 5853 proposed geometric mean per diem costs for partial hospitalization services provided by CMHCs using only CY 2015 CMHC claims data and the most recent cost data, and to compute the proposed hospital-based PHP APC 5863 proposed geometric mean per diem costs for partial hospitalization services provided by hospital-based PHPs using only CY 2015 hospital-based PHP claims data and the most recent cost data. We discuss these computations under section VIII.B.2 of this preamble. The proposed geometric mean per diem costs are shown in Table 19 in section VIII.B.2. of this proposed rule.

b. Rationale for Proposed Changes in PHP APCs

One of the primary reasons for our proposal to replace the existing Level 1 and Level 2 PHP APCs with a single PHP APC, by provider type, is because the proposed new PHP APCs would avoid any further issues with cost inversions, and, therefore, generate more appropriate payment for the services provided by specific provider types. As previously stated, a cost inversion exists when the Level 1 PHP APC geometric mean per diem cost for providing exactly 3 services per day exceeds the Level 2 PHP APC geometric mean per diem cost for providing 4 or more services per day, and, as we noted in last year's final rule with comment period, we do not believe that it would be reasonable or appropriate to pay more for fewer services provided per day and to pay less for more services provided per day (80 FR 70459 through 70460).

To determine if the issue with hospital-based cost inversions that occurred in the data used for the CY 2016 OPPS/ASC final rule with comment period (80 FR 70459) would continue, we calculated the CY 2017 hospital-based PHP APC geometric mean per diem costs separately for Level 1 and Level 2 partial hospitalization services provided by hospital-based PHPs. After applying our established trims and exclusions, we determined that the CY 2017 Level 1 hospital-based PHP APC geometric mean per diem cost would be $241.08 and the CY 2017 Level 2 hospital-based PHP APC geometric mean per diem cost would be $187.06, which again demonstrates an inversion.

We analyzed the CY 2015 hospital-based PHP claims data used for this CY 2017 proposed rule to determine the source of the inversion between the Level 1 and Level 2 hospital-based PHP APCs geometric mean per diem costs, and found that 13 hospital-based PHPs had high geometric mean per diem costs per day. Two of those providers account for 11.5 percent of Level 1 hospital-based PHP service days, but only 1.9 percent of Level 2 hospital-based PHP service days. Eleven of those 13 providers only reported costs for Level 1 hospital-based PHP service days, which increased the geometric mean per diem costs for the Level 1 hospital-based PHP APC. There also were 3 hospital-based PHP providers with very low geometric mean costs per day that accounted for approximately 28 percent of the Level 2 hospital-based PHP service days, which decreased the geometric mean per diem costs for the Level 2 hospital-based PHP APC. High volume providers heavily influence the cost data, and we believe that the high volume providers with very low Level 2 hospital-based PHP geometric mean per diem costs per day and high volume providers with very high Level 1 hospital-based PHP geometric mean per diem costs per day contributed to the inversion between the hospital-based PHP APCs Level 1 and Level 2 geometric mean per diem costs.

In developing the proposal to collapse the Level 1 and Level 2 PHP APCs into one APC each for CMHCs and hospital-based providers, we reviewed the reasons why we structured the existing PHP APCs into a two-tiered payment distinguished by Level 1 and Level 2 services for both provider types in the CY 2009 OPPS/ASC final rule with comment period (73 FR 68688 through 68693), to determine whether the rationales continued to be applicable. In the CY 2009 OPPS/ASC final rule with comment period, we referenced the CY 2008 OPPS/ASC final rule with comment period (72 FR 66672), which noted that a significant portion of PHP service days actually provided fewer than three services to Medicare beneficiaries. In our CY 2009 OPPS/ASC final rule with comment period, we noted that PHP service days that provide exactly three services should only occur in limited circumstances. We were concerned about paying providers a single per diem payment rate when a significant portion of the PHP service days provided 3 services, and believed it was appropriate to pay a higher rate for more intensive service days.

We evaluated the frequency of claims reporting Level 1 and Level 2 PHP service days in Table 17 below to determine if a significant portion of PHP service days only provided exactly 3 services. Table 17 shows that the frequency of claims reporting PHP service days providing exactly 3 services (Level 1 services) has decreased greatly from 73 percent of CMHC PHP service days in the CY 2009 rulemaking to 4 percent of CMHC PHP service days in this CY 2017 proposed rulemaking, and from 29 percent of hospital-based PHP service days in the CY 2009 rulemaking to 12 percent of hospital-based PHP service days in this CY 2017 proposed rulemaking. Level 1 PHP service days now represent a small portion of PHP service days, particularly for CMHCs, as shown in Table 17 below. Based on this decline in the frequency of claims reporting Level 1 service days, we believe that the need for the PHP APC Level 1 and Level 2 payment tiers that was present in CY 2009 no longer exists. The utilization data in Table 17 indicate that for the CY 2017 rulemaking year, the Level 2 CMHC PHP service days and the hospital-based PHP Level 2 service days are 96 percent and 88 percent, respectively. Because Level 1 service days are now less common for both provider types, we believe it is no longer necessary to pay a higher rate when 4 or more services are provided compared to when only 3 services are Start Printed Page 45671provided. Our proposed new PHP APCs 5853 and 5863 are based on cost data for 3 or more services per day (by provider type). Therefore the combined cost data used to derive proposed new PHP APCs 5853 and 5863 result in appropriate per diems based on costs for providing 3 or more services per day.

Table 17—Utilization of PHP Level 1 Days (Providing Exactly 3 Services per Day) and PHP Level 2 Days (Providing 4 or More Services per Day), From CY 2007 Through CY 2015 Claims

Rulemaking yearClaims yearCMHC Level 1 days (%)CMHC Level 2 days (%)Hospital- based PHP Level 1 days (%)Hospital- based PHP Level 2 days (%)
CY 2009CY 200773272971
CY 2010CY 200866342575
CY 2011CY 20092981882
CY 2012CY 20102981981
CY 2013CY 20113971189
CY 2014CY 20124961189
CY 2015CY 20136941189
CY 2016CY 20145951189
CY 2017CY 20154961288

When we implemented the PHP APCs Level 1 and Level 2 payment tiers in our CY 2009 rulemaking, we noted that we wanted to provide PHPs with flexibility in scheduling patients. Both the industry and CMS recognized that there may be limited circumstances when it is appropriate for PHPs to receive payment for days when exactly 3 units of service are provided (73 FR 68688 through 68689). Allowing PHPs to receive payment for a Level 1 service day where exactly 3 services are provided gives PHPs some flexibility in scheduling their patients. Our proposal to replace the existing two-tiered PHP APCs with proposed new PHP APCs 5853 and 5863 would provide payment for providing 3 or more services per day by CMHCs and hospital-based PHPs, respectively. Therefore, this flexibility in scheduling remains.

Another primary reason for proposing to replace the Level 1 and Level 2 PHP APCs with a single PHP APC, by provider type, is the decrease in the number of PHPs, particularly CMHCs. With a small number of providers, data from large providers with a high percentage of all PHP service days and unusually high or low geometric mean costs per day will have a more pronounced effect on the PHP APCs geometric mean per diem costs, skewing the costs up or down. That effect would be magnified by continuing to split the geometric mean per diem costs further by distinguishing Level 1 and Level 2 PHP services. Creating a single PHP APC for each provider type providing 3 or more partial hospitalization services per day should reduce these cost fluctuations and provide more stability in the PHP APC geometric mean per diem costs.

We also note that our proposal to replace the existing Level 1 and Level 2 PHP APCs by provider type with a single PHP APC for each provider type is permissible under the applicable statute and regulatory provisions. Section 1833(t)(2)(B) of the Act provides that the Secretary may establish groups of covered OPD services, within a classification system developed by the Secretary for covered OPD services, so that services classified within each group are comparable clinically and with respect to the use of resources. Moreover, the language that follows paragraph (t)(2) of section 1833 of the Act provides that, for purposes of subparagraph (B), items and services within a group shall not be treated as comparable with respect to use of resources if the highest mean cost for an item or services is more than two times greater than the lowest mean cost for an item or service within the group, with some exceptions. Section 419.31 of our regulations implements this statutory provision, providing that CMS classify outpatient services and procedures that are comparable clinically and in terms of resource use into APC groups. We believe our proposal to replace the existing Level 1 and Level 2 PHP APCs for both provider types with a single PHP APC, by provider type, is supported by the statute and regulations and will continue to pay for partial hospitalization services appropriately based upon actual provider costs.

Both of the existing Level 1 and Level 2 PHP APCs are comprised of services described by the same HCPCS codes. Therefore, the types of services provided under the two payment tiers are the same. The difference is in the quantity of the services provided, where the Level 1 PHP APCs provide for payment for providing exactly 3 services per day, while the Level 2 PHP APCs provide for payment for providing 4 or more services per day. Because the difference in the Level 1 and the Level 2 PHP APCs is in the quantity of the services provided, we would expect that the resource use (that is, the geometric mean per diem cost) for providing partial hospitalization services under Level 1 would represent approximately 75 percent or less of the resource use for providing partial hospitalization services under Level 2, by provider type. Table 18 shows a clear trend for hospital-based PHPs, where the geometric mean per diem costs for providing Level 1 partial hospitalization services have approached the geometric mean per diem costs for providing Level 2 partial hospitalization services, until they exceed the geometric mean per diem costs for providing Level 2 partial hospitalization services beginning in CY 2016. As the percentages in Table 18 approach 100 percent, the Level 1 and the Level 2 PHP APC geometric mean per diem costs become closer to each other, demonstrating similar resource use. The trend is less clear for CMHCs, but the data still show the cost difference between the two tiers narrowing, except in CY 2016. We are not sure why the cost difference is wider among CMHCs in CY 2016 and welcome public comments that can help explain the difference.Start Printed Page 45672

Table 18—Trends in Level 1 Per Diem Costs as a Percentage of Level 2 Per Diem Costs

CY 2013 (%)CY 2014 (%)CY 2015 (%)CY 2016 (%)CY 2017 (%)
CMHCs—Level 1 PHP APC per diem costs/Level 2 PHP APC per diem costs77.588.684.466.185.5
Hospital-based PHPs—Level 1 PHP APC per diem costs/Level 2 PHP APC per diem costs79.289.091.6* 110.0* 128.9
* Cost inversions occurred with the Level 1 PHP APC per diem costs exceeding the Level 2 PHP APC per diem costs.

We evaluated the provision of more costly individual therapy in our CY 2017 analyses to determine if there were differences in its provision for PHP APC Level 1 service days compared to PHP APC Level 2 service days, by provider type, because this could affect our expected difference in resource use (that is, geometric mean per diem costs) between the two payment tiers. We found that individual therapy was provided in roughly the same proportion under the two payment tiers for hospital-based PHPs (in 1.3 percent of PHP APC Level 1 service days and in 1.5 percent of PHP APC Level 2 service days). However, we found that individual therapy was provided less frequently under the Level 1 CMHC PHP service days than under the Level 2 CMHC PHP service days (2.1 percent versus 5.1 percent). The greater frequency of CMHCs' providing more costly individual therapy under Level 2 PHP service days should increase resource use for the more costly partial hospitalization services provided under Level 2 CMHC PHP service days, widening the cost difference between Level 1 and Level 2 CMHC PHP service days. However, as noted previously, that is not what the data show.

As we have described earlier, the services provided under the Level 1 and Level 2 PHP APC payment tiers are comparable clinically and in terms of resource use. Therefore, based on the authority provided under section 1833(t)(2)(B) of the Act and our regulations at § 419.31(a)(1), and because of the policy concerns noted above, we are proposing to replace the Level 1 and Level 2 PHP APCs, by provider type, with a single PHP APC for each provider type for CY 2017 and subsequent years.

Our proposal to replace the existing Level 1 and Level 2 PHP APCs for both provider types with a single PHP APC, by provider type, is designed to continue to pay for partial hospitalization services appropriately based upon actual provider costs. We believe that section 1833(t)(2)(B) of the Act and our regulations at § 419.31(a)(1) provide the Secretary with the authority to classify services that are comparable clinically and in terms of resource use under a single APC grouping, which is the basis for our proposal to replace the existing Level 1 and Level 2 PHP APCs for CMHCs and hospital-based PHPs for providing partial hospitalization services with a single PHP APC for each specific provider type. In addition, we believe that our proposal to combine the PHP APCs two-tiered payment structure by provider type would more appropriately pay providers for partial hospitalization services provided to Medicare beneficiaries and avoid cost inversions in the future. Our proposal to combine the PHP APC payment tiers by provider type also would provide more predictable per diem costs, particularly given the small number of CMHCs and the cost inversions that hospital-based PHPs have experienced. The cost inversions between PHP APC Level 1 and Level 2 service days in the hospital-based PHP claims data and the small number of CMHCs are the two primary reasons for our proposal to replace the two-tiered PHP APCs with a single PHP APC for each provider type. The small percentage of all PHP service days for partial hospitalization services provided under the Level 1 PHP APCs further supports our proposal to replace the two-tiered PHP APCs with a single PHP APC for each provider type. As noted previously, we believe that the need for the PHP APC Level 1 and Level 2 payment tiers that was present in CY 2009 no longer exists.

In summary, we are proposing to create proposed new CMHC PHP APC 5853 to pay CMHCs for partial hospitalization services provided to Medicare beneficiaries for providing 3 or more services per PHP service day to replace existing CMHC PHP APCs 5851 and 5852 for CY 2017 and subsequent years. We also are proposing to create proposed new hospital-based PHP APC 5863 to pay hospital-based PHPs for partial hospitalization services provided to Medicare beneficiaries for providing 3 or more services per PHP service day to replace existing hospital-based PHP APCs 5861 and 5862 for CY 2017 and subsequent years. We discuss the proposed geometric mean per diem cost for proposed new CMHC APC 5853 and the proposed geometric mean per diem cost for proposed new hospital-based PHP APC 5863 in section VIII.B.2. of this proposed rule.

If our CY 2017 proposals are implemented, we would pay both CMHCs and hospital-based PHP providers the same payment rate for providing 3 partial hospitalization services in a single service day as is paid for providing 4 or more services in a single service day by the specific provider type. We remind providers that because PHP services are intensive outpatient services, our regulations at § 410.43(c)(1) require that PHPs provide each beneficiary at least 20 hours of services each week. We reiterate that this 20 hour per week requirement is a minimum requirement, and have noted in multiple prior OPPS/ASC final rules with comment periods that a typical PHP program would include 5 to 6 hours per day (70 FR 68548, 71 FR 67999, 72 FR 66671, and 73 FR 68687). We want providers to continue to have flexibility in providing PHP services, and we will continue to monitor the utilization of providing 3 services per service day for those limited circumstances when a 3-service day is appropriate. We are considering multiple options for enhancing monitoring of providers to assure that they meet the 20 hours of services per week requirement, and we will communicate how we intend to undertake such enhanced monitoring in subregulatory guidance in the future.

Finally, we are concerned by the low frequency of providing individual therapy, which we noted earlier in this section, and we will be monitoring its provision. We believe that appropriate treatment for PHP patients includes some individual therapy. We encourage providers to examine their provision of individual therapy to PHP patients, to ensure that patients are receiving all of the services that they may need.

c. Alternatives Considered

We considered several alternatives to replacing the Level 1 and Level 2 PHP APCs with a single new APC for each PHP provider type. We investigated whether we could maintain the Level 1 Start Printed Page 45673and Level 2 PHP APCs if the PHP APC per diem costs were based upon unit costs. However, the same data issues that affected per diem costs also affected unit costs. The hospital-based unit cost data also were inverted such that a Level 1 service day would be more costly than a Level 2 service day. As we have previously noted, we do not believe that it is appropriate to pay more for providing Level 1 services than for providing Level 2 services because only 3 services are provided during Level 1 service days and 4 or more services are provided during Level 2 service days.

We also considered continuing the two-tiered PHP APC payment structure by provider type, and addressing future cost inversions as they arise. Under this alternative, we could propose to use a default methodology for handling cost inversions by only combining the two-tiered PHP APC structure for the provider type with inverted data, and only for the affected calendar year. However, we believe that it could be confusing if one provider type was paid for PHP services based on a two-tiered payment structure, while the other provider type was paid based on a single APC grouping. We also believe that providers would prefer the predictability of knowing whether they would be paid using a single PHP APC or using two-tiered PHP APCs for Level 1 and Level 2 services.

Another alternative for handling cost inversions could be to apply an equitable adjustment. However, the level of adjustment required would vary depending on the degree of the inversion, which also could fluctuate from year to year. Again, we believe that providers would prefer the predictability afforded by avoiding cost inversions altogether, rather than being subject to an ad hoc adjustment as cost inversions arise.

We considered whether we should adjust our data trims, but we determined that the cause of the cost inversion was not due to providers with aberrantly high CCRs or costs per day. Rather, we believe that the cause of the cost inversion was largely the influence of high volume providers with high (but not inappropriately high) Level 1 service day costs and low (but not inappropriately low) Level 2 service day costs in the CY 2015 hospital-based PHP claims data used for this CY 2017 proposed rule. This suggested that adjusting data trims may not be an effective method for resolving the inversion. Nevertheless, we reconsidered our analysis of the CY 2015 claims data for hospital-based PHPs by testing a stricter trim on hospital-based PHP data using the published upper limit CCR that hospitals use for calculating outliers rather than the existing CCR>5 trim. This test of a stricter CCR trim did not remove the inversion, and as a result, we are not proposing to change the existing CCR>5 trim on hospital-based PHP service days for our CY 2017 ratesetting.

2. Development of the Proposed PHP APC Geometric Mean Per Diem Costs and Payment Rates

For CY 2017 and subsequent years, generally, we are proposing to follow the detailed PHP ratesetting methodology described in section VIII.B.2.e. of the CY 2016 OPPS/ASC final rule with comment period (80 FR 70462 through 70466) to determine the proposed PHP APCs' geometric mean per diem costs and to calculate the proposed payment rates for the two proposed single hospital-based PHP APC and CMHC APC. However, as discussed in section VIII.B.1. of this preamble, in support of our CY 2017 proposals to establish single PHP APCs for hospital-based PHPs and CMHCs, we are proposing to combine the geometric mean per diem costs for the two existing hospital-based PHP APCs to calculate a proposed geometric mean per diem cost for proposed new PHP APC 5863. Currently, hospital-based PHP service days with exactly 3 service units (based on allowable PHP HCPCS codes) are assigned to Level 1 PHP APC 5861, and hospital-based PHP service days with 4 or more service units (based on allowable PHP HCPCS codes) are assigned to Level 2 PHP APC 5862. Under our CY 2017 proposal, instead of separating the service days among these two APCs, we are proposing to combine the service days so that hospital-based PHP service days that provide 3 or more service units per day (based on allowable PHP HCPCS codes) are assigned to proposed new PHP APC 5863. We then are proposing to continue to follow the existing methodology to its end to calculate the proposed geometric mean per diem cost for proposed new PHP APC 5863. Therefore, the proposed geometric mean per diem cost for proposed new PHP APC 5863 would be based upon actual hospital-based PHP claims and costs for PHP service days providing 3 or more services.

Similarly, we are proposing to combine the geometric mean per diem costs for the two existing CMHC PHP APCs to calculate a proposed geometric mean per diem cost for proposed new CMHC PHP APC 5853. Currently, CMHC PHP service days with exactly 3 service units (based on allowable PHP HCPCS codes) are assigned to Level 1 CMHC PHP APC 5851, and CMHC PHP service days with 4 or more service units (based on allowable PHP HCPCS codes) are assigned to Level 2 CMHC PHP APC 5852. Under our CY 2017 proposal, instead of separating the service days among these two APCs, we are proposing to combine the service days so that CMHC PHP service days that provide 3 or more service units (based on allowable PHP HCPCS codes) are assigned to proposed new PHP APC 5853. We then are proposing to continue to follow the existing PHP ratesetting methodology described in section VIII.B.2.e. of the CY 2016 OPPS/ASC final rule with comment period (80 FR 70462 through 70466) to its end to calculate the proposed geometric mean per diem cost for proposed new PHP APC 5853. Therefore, the proposed geometric mean per diem cost for proposed new PHP APC 5853 would be based upon actual CMHC claims and costs for CMHC PHP service days providing 3 or more services.

To prevent confusion, we refer to the per diem costs listed in Table 17 of this proposed rule as the proposed PHP APC per diem costs or the proposed PHP APC geometric mean per diem costs, and the per diem payment rates listed in Addendum A to this proposed rule (which is available via the Internet on the CMS Web site) as the proposed PHP APC per diem payment rates or the proposed PHP APC geometric mean per diem payment rates. The PHP APC per diem costs are the provider-specific costs derived from the most recent claims and cost data. The PHP APC per diem payment rates are the national unadjusted payment rates calculated from the PHP APC per diem costs, after applying the OPPS budget neutrality adjustments described in section II.A.4. of this proposed rule.

We are proposing to apply our established methodologies in developing the geometric mean per diem costs and payment rates under this proposal, including the application of a ±2 standard deviation trim on costs per day for CMHCs and a CCR>5 hospital service day trim for hospital-based PHP providers. These two trims were finalized in our CY 2016 OPPS/ASC final rule with comment period (80 FR 70456 through 70459) for CY 2016 and subsequent years.

a. CMHC Data Preparation: Data Trims, Exclusions, and CCR Adjustments

Prior to calculating the proposed geometric mean per diem cost for proposed new CMHC PHP APC 5853, we prepared the data by first applying trims and data exclusions, and assessing CCRs as described in the CY 2016 Start Printed Page 45674OPPS/ASC final rule with comment period (80 FR 70463 through 70465), so that our ratesetting is not skewed by providers with extreme data. Under the ±2 standard deviation trim policy, we exclude any data from a CMHC for ratesetting purposes when the CMHC's geometric mean cost per day is more than ±2 standard deviations from the geometric mean cost per day for all CMHCs. By applying this trim for CY 2017 ratesetting, three CMHCs with geometric mean per diem costs per day below the trim's lower limit of $42.83 were excluded from the proposed ratesetting for CY 2017. We also apply the OPPS ±3 standard deviation trim on CCRs to exclude any data from CMHCs with CCRs above or below this range. This trim resulted in the exclusion of one CMHC with a very low CCR of 0.001. Both of these standard deviation trims removed a number of providers from ratesetting whose data would have skewed the calculated proposed geometric mean per diem cost downward.

In accordance with our PHP ratesetting methodology, we also remove service days with no wage index values because we use the wage index data to remove the effects of geographic variation in costs prior to APC geometric mean per diem cost calculation (80 FR 70465). In our proposed CY 2017 ratesetting, one CMHC was excluded because it was missing wage index data for all of its service days.

In addition to our trims and data exclusions, before determining the PHP APC geometric mean per diem costs, we also assess CCRs (80 FR 70463). Our longstanding PHP OPPS ratesetting methodology defaults any CMHC CCR>1 to the statewide hospital ancillary CCR (80 FR 70457). In our proposed CY 2017 ratesetting, we identified one CMHC that had a CCR>1. This CMHC's CCR was 1.185 and was defaulted to its appropriate statewide hospital ancillary CCR for proposed CY 2017 ratesetting purposes.

These data preparation steps adjusted the CCR for 1 CMHC and excluded 5 CMHCs, resulting in the inclusion of a total of 46 CMHCs in our CY 2017 ratesetting modeling, and the removal of 643 CMHC claims from the 17,033 total CMHC claims used. We believe that excluding providers with extremely low geometric mean costs per day or extremely low CCRs protects CMHCs from having that data inappropriately skew the calculation of the proposed CMHC PHP APC geometric mean per diem cost. Moreover, we believe that these trims, exclusions, and adjustments help prevent inappropriate fluctuations in the PHP APC geometric mean per diem payment rates.

After applying all of the above trims, exclusions, or adjustments, the proposed geometric mean per diem cost for all CMHCs for providing 3 or more services per day (proposed new CMHC PHP APC 5853) is $135.30.

b. Hospital-Based PHP Data Preparation: Data Trims and Exclusions

We followed a data preparation process for hospital-based PHP providers that is similar to that used for CMHCs by applying trims and data exclusions as described in the CY 2016 OPPS/ASC final rule with comment period (80 FR 70463 to 70465) so that our ratesetting is not skewed by providers with extreme data. Before any trimming or exclusions, there were 404 hospital-based PHP providers in the claims data. For hospital-based PHP providers, we apply a trim on hospital service days when the CCR is greater than 5 at the cost center level. The CCR>5 hospital service day trim removes hospital-based PHP service days that use a CCR>5 to calculate costs for at least one of their component services. Unlike the ±2 standard deviation trim, which excludes CMHC providers that fail the trim, the CCR>5 trim excludes any hospital-based PHP service day where any of the services provided on that day are associated with a CCR>5. Applying this trim removed service days from 8 hospital-based PHP providers with CCRs ranging from 5.8763 to 19.9996. However, all of the service days for these eight hospital-based PHP providers had at least one service associated with a CCR>5, so the trim removed these providers entirely from ratesetting. In addition, the OPPS ±3 standard deviation trim on costs per day removed four providers from ratesetting.

Finally, we excluded 13 hospital-based PHP providers that reported zero daily costs on their claims, in accordance with our PHP ratesetting policy (80 FR 70465). Therefore, we excluded a total of 25 hospital-based PHP providers, resulting in 379 hospital-based PHP providers in the data used for ratesetting. After completing these data preparation steps, we calculated the proposed geometric mean per diem cost for proposed new hospital-based PHP APC 5863 for hospital-based PHP services. The proposed geometric mean per diem cost for hospital-based PHP providers that provide 3 or more services per service day (proposed hospital-based PHP APC 5863) is $192.57.

Currently, the Level 2 hospital-based PHP per diem costs serve as the cap for all outpatient mental health services provided in a single service day. If our proposal to replace the existing two-tiered PHP APCs structure with a single APC grouping for these services by specific provider type is finalized, the proposed outpatient mental health cap would be the geometric mean per diem costs for proposed new hospital-based PHP APC 5863.

The proposed CY 2017 PHP APC geometric mean per diem costs for the proposed new CMHC and hospital-based PHP APCs are shown in Table 19 below. The proposed PHP APC payment rates are included in Addendum A to this proposed rule (which is available at: https://www.cms.gov/​Medicare/​Medicare-Fee-for-Service-Payment/​HospitalOutpatientPPS/​Hospital-Outpatient-Regulations-and-Notices.html).

Table 19—Proposed CY 2017 PHP APC Geometric Mean Per Diem Costs

Proposed CY 2017 APCGroup titleProposed PHP APC geometric mean per diem costs
5853Partial Hospitalization (3 or more services per day) for CMHCs$135.30
5863Partial Hospitalization (3 or more services per day) for hospital-based PHPs192.57

We are inviting public comments on these proposals.

3. PHP Ratesetting Process

While PHP services are part of the OPPS, PHP ratesetting has some unique aspects. To foster understanding and transparency, we provided a detailed explanation of the PHP APC ratesetting process in the CY 2016 OPPS/ASC final Start Printed Page 45675rule with comment period (80 FR 70462 through 70467). The OPPS ratesetting process includes various steps as part of its data development process, such as CCR determination and calculation of geometric mean per diem costs, identification of allowable charges, development of the APC relative payment weights, calculation of the APC payment rates, and establishment of outlier thresholds. We refer readers to section II. of this proposed rule and encourage readers to review these discussions to increase their overall understanding of the entire OPPS ratesetting process. We also refer readers to the OPPS Claims Accounting narrative, which is a supporting document to this proposed rule, available on the CMS Web site at: http://www.cms.gov/​Medicare/​Medicare-Fee-for-Service-Payment/​HospitalOutpatientPPS/​Hospital-Outpatient-Regulations-and-Notices.html; click on the link to this proposed rule to find the Claims Accounting narrative. We encourage CMHCs and hospital-based PHPs to review their accounting and billing processes to ensure that they are following these procedures, which should result in greater accuracy in setting the PHP payment rates.

C. Proposed Outlier Policy for CMHCs

1. Estimated Outlier Threshold

As discussed in the CY 2004 OPPS final rule with comment period (68 FR 63469 through 63470), after examining the costs, charges, and outlier payments for CMHCs, we believed that establishing a separate OPPS outlier policy for CMHCs would be appropriate. A CMHC-specific outlier policy would direct OPPS outlier payments towards the genuine cost of outlier cases, and address situations where charges were being inflated to enhance outlier payments.

We created a separate outlier policy that would be specific to the estimated costs and OPPS payments provided to CMHCs. Beginning in CY 2004, we designated a portion of the estimated OPPS outlier threshold specifically for CMHCs, consistent with the percentage of projected payments to CMHCs under the OPPS each year, excluding outlier payments, and established a separate outlier threshold for CMHCs.

The separate outlier threshold for CMHCs resulted in $1.8 million in outlier payments to CMHCs in CY 2004, and $0.5 million in outlier payments to CMHCs in CY 2005. In contrast, in CY 2003, more than $30 million was paid to CMHCs in outlier payments. We note that, in the CY 2009 OPPS/ASC final rule with comment period, we also established an outlier reconciliation policy to address charging aberrations related to OPPS outlier payments (73 FR 68594 through 68599).

In this CY 2017 proposed rule, we are proposing to continue to designate a portion of the estimated 1.0 percent outlier threshold specifically for CMHCs, consistent with the percentage of projected payments to CMHCs under the OPPS in CY 2017, excluding outlier payments. CMHCs are projected to receive 0.03 percent of total OPPS payments in CY 2017, excluding outlier payments. As we do for each rulemaking cycle, we have updated the CMHC CCRs and claims data used to model the PHP payments rates. This results in CMHC outliers being paid under limited circumstances associated with costs from complex cases, rather than as a substitute for the standard PHP payment to CMHCs. Therefore, we are proposing to designate less than 0.01 percent of the estimated 1.0 percent outlier threshold for CMHCs.

Based on our simulations of CMHC payments for CY 2017, in this proposed rule, we are proposing to continue to set the cutoff point for CY 2017 at 3.4 times the highest CMHC PHP APC payment rate implemented for that calendar year, which for CY 2017 is the proposed payment rate for proposed new CMHC PHP APC 5853. In addition, we are proposing to continue to apply the same outlier payment percentage that applies to hospitals. Therefore, for CY 2017, we are proposing to continue to pay 50 percent of CMHC PHP APC geometric mean per diem costs over the cutoff point. For example, for CY 2017, if a CMHC's cost for partial hospitalization services paid under proposed new CMHC PHP APC 5853 exceeds 3.4 times the proposed payment rate for proposed new CMHC PHP APC 5853, the outlier payment would be calculated as 50 percent of the amount by which the cost exceeds 3.4 times the payment rate for proposed new CMHC PHP APC 5853.

In section II.G. of this proposed rule, for the hospital outpatient outlier payment policy, we are proposing to set a dollar threshold in addition to an APC multiplier threshold. Because the PHP APCs are the only APCs for which CMHCs may receive payment under the OPPS, we would not expect to redirect outlier payments by imposing a dollar threshold. Therefore, we are not proposing to set a dollar threshold for CMHC outlier payments.

In summary, in this section, we are proposing to continue to calculate our CMHC outlier threshold and CMHC outlier payments according to our established policies.

2. Proposed CMHC Outlier Cap

Prior to receipt of CY 2015 preliminary claims data, we analyzed CY 2014 CMHC final claims data and found that CMHC outlier payments began to increase similarly to the way they had prior to CY 2004. While many CMHCs had little or no outlier payments, three CMHCs had very high charges for their CMHC services, which resulted in their collecting large outlier payments that exceeded their total per diem payments. CMHC total per diem payments are comprised of the Medicare CMHC total per diem payments and the beneficiary share of those per diem payments. In total, Medicare paid CMHCs $6.2 million in outlier payments in CY 2014, which was 36 percent of all CMHC total per diem payments. Contrast that 36 percent with the OPPS outlier threshold of 1 percent of total OPPS payments (with the CMHC threshold being a fraction of that 1 percent, based on the percentage of projected per diem payments to CMHCs under the OPPS). In CY 2014, three CMHCs accounted for 98 percent of all CMHC outlier payments that year and received outlier payments that ranged from 104 percent to 713 percent of their total per diem payments.

When a CMHC's outlier payments approach or exceed its total per diem payments, it suggests that outlier payments are not being used as intended for exceptional high cost patients, but instead as a routine supplement to the per diem payment because outlier payments are being made for nearly all patients. The OPPS outlier policy is intended to compensate providers for treating exceptionally resource-intensive patients. As we noted in our CY 2004 OPPS/ASC final rule with comment period (68 FR 63470), outlier payments were never intended to be made for all patients and used as a supplement to the per diem payment amount. Sections 1833(t)(5)(A) and (B) of the Act specify that outlier payments are to approximate the marginal cost of care when charges, adjusted to cost, exceed a cutoff point established by the Secretary. As stated previously, for CMHCs, that cutoff point is 3.4 times the highest CMHC APC payment rate (PHP APC 0173). In the CY 2014 claims, that meant a CMHC was eligible for an outlier payment for a given day if the cost for that day was greater than 3.4 times CMHC APC 0173 rate for Level II services, or 3.4 times $111.73, which equals $379.88 before wage adjustment.

We examined the total average cost per day for the three CMHCs with outlier payments that were more than 100 percent of their regular payments. Start Printed Page 45676In CY 2014, these three CMHCs had a total average cost per day of $1,065, which exceeded the FY 2014 daily payment rate for inpatient psychiatric care of $713.19. We do not believe that the cost of a day of intensive outpatient CMHC services, which usually comprises 4 hours of services (mostly group therapy), should equal or exceed the cost of a 24-hour period of inpatient care, which includes 24-hour nursing care, active psychiatric treatment, room and board, drugs, and laboratory tests. Because the outpatient PHP daily rate includes payment for fewer items and services than the inpatient psychiatric facility daily rate, we believe that the cost of a day of outpatient PHP care should be significantly less than the cost of a day of inpatient psychiatric care. Therefore, we believe that those three CMHCs with total average cost per day of $1,065 demonstrated excessive outlier payments.

We believe that these excessive outlier payments to some CMHCs are the result of inflated costs, which result from artificially inflated charges. Costs are calculated by multiplying charges by the cost-to-charge ratio. The cost-to-charge ratio used for calculating outlier payments has established upper limits for hospitals and for CMHCs (we refer readers to the CY 2016 OPPS/ASC final rule with comment period (80 FR 70456) and the Medicare Claims Processing Internet-only Manual, chapter 4, section 10.11.9, available at https://www.cms.gov/​Regulations-and-Guidance/​Guidance/​Manuals/​Downloads/​clm104c04.pdf). Inflated costs, therefore, usually result from inflated charges, and lead to excessive outlier payments. We also believe that these excessive outlier payments do not approximate the marginal cost of care when costs exceed the established cutoff point, as specified in sections 1833(t)(5)(A) and (B) of the Act. The resulting outlier payments would be inappropriate. We are entrusted with paying CMHCs that are participating in Medicare accurately. Therefore, outlier payments resulting from inflated costs need to be addressed. We also are concerned that if these CMHCs continue this pattern of inflated charges for partial hospitalization services, CMHCs will continue to receive a disproportionate share of outlier payments compared to other OPPS providers that do not artificially inflate their charges, thereby limiting outlier payments for truly deserving cases.

At this point in time, and based on our available claims data, we chose to apply 30 percent of total per diem payments as a cutoff point for reasonable outlier payments. In the CY 2014 claims data, the average charge per day for the 3 CMHCs that received outlier payments ≥30 percent of their total per diem payments was $3,233, which was nearly 8 times greater than the average charge per day for the CMHCs that received outlier payments <30 percent of their total per diem payments. In our review of CY 2015 claims data for this CY 2017 rulemaking, the average charge per day for the CMHCs that received outlier payments ≥30 percent of their total per diem payments was $1,583, which was more than 3 times greater than the average charge per day for the CMHCs that received outlier payments <30 percent of their total per diem payments.

In our review of CY 2015 claims data for this CY 2017 rulemaking, Medicare paid CMHCs $3.2 million in outlier payments, with over 99 percent of those payments made to 4 CMHCs. These outlier payments were 26 percent of all CMHC total per diem payments, and ranged from 39 percent to 179 percent of the individual CMHC's total per diem payments. Total outlier payments to CMHCs decreased from $6.2 million in CY 2014 to $3.2 million in CY 2015 because the CMHC that received the largest outlier payments in CY 2014 no longer had outlier payments in CY 2015. This CMHC revised its charge structure downward. However, two additional CMHCs that did not receive outlier payments in CY 2014 began receiving outlier payments in CY 2015 that were ≥30 percent of their total payments, which suggests a growing problem.

Under the current outlier reconciliation process, a MAC will reconcile a CMHC's outlier payments at the time of final cost report settlement if the CMHC's CCR has changed by 0.10 or more and if the CMHC received any outlier payments. This process is described in Section 10.7.2, Chapter 4, of the Medicare Claims Processing Manual, which is available at: https://www.cms.gov/​Regulations-and-Guidance/​Guidance/​Manuals/​Downloads/​clm104c04.pdf. Typically, final cost report settlement occurs within 12 months of the MAC's acceptance of the cost report. However, because cost reports are filed up to 5 months after the CMHC's fiscal year end, CMHC outlier reconciliation can occur more than a year after outlier overpayments are made. Long timeframes between outlier payment and outlier reconciliation at final cost report settlement have also allowed cases with outlier overpayments to continue and to grow. For example, one CMHC with inflated charges in CY 2013 continued to have inflated charges in CY 2014, and received more than double its CY 2013 outlier payments in CY 2014. This CMHC did not receive outlier payments in CY 2015 because it revised its charge structure downward and, therefore, no longer had costs qualifying for outlier payments.

Although efforts geared towards limiting very high outlier payments to CMHCs are occurring, such as the outlier reconciliation process, these efforts typically occur after the outlier payments are made. We would prefer to focus on stopping questionable outlier payments before they occur, to avoid the risk that a provider would be unable to repay Medicare after those overpayments occur. Therefore, we considered whether a broader, supplementary policy change to our CMHC outlier payment policy might also be warranted to mitigate possible billing vulnerabilities associated with very high outlier payments, while at the same time ensuring that we adhere to the existing statutory requirements related to covering the marginal cost of care for exceptionally resource-intensive patients. We want to ensure that CMHCs that provide services that represent the cost of care for legitimate high-cost cases are able to continue to receive outlier payments.

Given these program integrity concerns and our longstanding history of introducing CMHC-specific outlier policies when necessary (the CMHC-specific outlier threshold and the CMHC-specific reconciliation process), we are proposing to implement a CMHC outlier payment cap to be applied at the provider level, such that in any given year, an individual CMHC would receive no more than a set percentage of its CMHC total per diem payments in outlier payments. This outlier payment cap would only affect CMHCs, and would not affect other provider types. This outlier payment cap would be in addition to and separate from the current outlier policy and reconciliation policy in effect. We are proposing that the CMHC outlier payment cap be set at 8 percent of the CMHC's total per diem payments. As noted previously, each CMHC's total per diem payments are comprised of its Medicare CMHC total per diem payments plus the total beneficiary share of those per diem payments. If implemented, this proposal would mean that a CMHC's total outlier payments in a calendar year could not exceed 8 percent of its total per diem payments in that year.

To determine this proposed CMHC outlier cap percentage, we performed analyses to model the impact that a variety of cap percentages would have on CMHC outlier payments. We want to Start Printed Page 45677ensure that any outlier cap policy would not disadvantage CMHCs with truly high-cost patients that merit an outlier payment, while also protecting the benefit from making payments for outlier cases that exceed the marginal cost of care. We used CY 2015 preliminary claims data to perform a detailed impact analysis of CMHC outlier payments. We will not have final CY 2015 claims data until after this proposed rule is published, but we will update this analysis using final claims data for our CY 2017 OPPS/ASC final rule with comment period. Out of 51 CMHCs with paid claims in CY 2015, 9 CMHCs received outlier payments. We separated these 9 CMHCs into 4 CMHCs that received outlier payments ≥30 percent of their total CMHC payments in CY 2015, and 5 CMHCs that received had outlier payments <30 percent of their total CMHC payments in CY 2015.

The 5 CMHCs that received outlier payments that were <30 percent of their total per diem payments received a total of $11,496 in outlier payments. We believe that these 5 CMHCs are representative of the types of CMHCs we are most concerned about that would be disadvantaged with an outlier payment policy that includes a cap at the individual CMHC level. We tested the effects of CMHC outlier caps ranging from 3 percent to 10 percent on these two groups of CMHCs. Our analysis focused on total CMHC per diem payments, total CMHC outlier payments, and percentage reductions in payments if a CMHC outlier payment cap were imposed, as shown in Table 20 below.

Table 20—Effect of CMHC Outlier Cap Simulation on Outlier Payments

Simulated outlier payments
Total per diem paymentsActual outlier payments3% cap5% cap6% cap8% cap10% cap
All 51 CMHCs12,316,1823,222,896
5 CMHCs with Outlier Payments <30 Percent of Total Per Diem Payments9,471,38011,4964,1966,4657,5999,86812,136
Reduction in Outlier Payments7,2995,0313,8961,6280
Percent Reduction
Number of CMHCs Affected11110
4 CMHCs with Outlier Payments ≥30 Percent2,844,8023,211,40185,344142,240170,688227,584284,480
Reduction in Outlier Payments3,137,5523,080,6563,052,2082,995,3122,938,416
Percent Reduction97.7%95.9%95.0%93.3%91.5%
Based on CY 2015 preliminary claims data.
Note: Of 51 CMHCs in CY 2015 claims data, 9 received outlier payments; 4 CMHCs of those 9 CMHCs received outlier payments ≥30 percent of their total per diem payments. Two of these 4 CMHCs received outlier payments that were >100 percent of their total per diem payments.

The table above shows that 4 out of the 5 CMHCs that received outlier payments <30 percent of their total per diem payments received outlier payments that were less than 1 percent of their total per diem payments and, therefore, would be unaffected by a CMHC outlier payment cap. The 5th CMHC received outlier payments that were 9.4 percent of its total per diem payments and is the only CMHC that would have been affected by a CMHC outlier payment cap applied at the provider level. The effect on this CMHC is shown under the various cap percentage options. At the 8 percent level, this CMHC's outlier payments would have been reduced by $1,628. A 10-percent cap would have had no effect on this CMHC. The difference in total outlier payments to all CMHCs between the 8 percent and 10 percent cap levels was relatively small (about $58,000).

We also conducted our CMHC outlier cap analysis using final CY 2014 claims data. When we evaluated the effect of the different CMHC provider-level outlier cap percentages on the CMHCs with outlier payments < 30 percent of their total per diem payments, using the final CY 2014 claims data, we found that 5 CMHCs would be affected by an 8 percent cap, and 4 CMHCs would be affected by a 10-percent cap, with a difference in outlier payments of only $4,069. However, an 8-percent cap compared to a 10-percent cap saved more than $37,000 in outlier payments to the CMHCs that were charging excessively (data not shown).

We considered both the CY 2014 and CY 2015 claims data as we sought to balance our concern about disadvantaging CMHCs with our interest in protecting the benefit from excessive outlier payments by proposing an 8-percent CMHC outlier payment cap. An 8-percent CMHC outlier payment cap would mitigate potential inappropriate outlier billing vulnerabilities by limiting the impact of inflated CMHC charges on outlier payments. The 8-percent cap would have reduced outlier payments to the 3 CMHCs that received outlier payments ≥30 percent of their total per diem payments in CY 2015 by $3.0 million dollars, or 93.3 percent.

Therefore, for CY 2017 and subsequent years, we are proposing to apply a CMHC outlier payment cap of 8 percent to each CMHC's total per diem payments, such that in any given calendar year, an individual CMHC would not receive more than 8 percent of its CMHC total per diem payments in outlier payments. We are inviting public comment on the CMHC provider-level outlier cap percentage.

Our existing outlier reconciliation policy would continue to remain in effect with the proposed CMHC outlier payment cap serving as a complement. We are proposing to revise § 419.43(d) of the regulations by adding a paragraph (7) to require that CMHC outlier payments for the calendar year be subject to a CMHC outlier payment cap, applied at the individual CMHC level, that is, 8 percent of each CMHC's total per diem payments for that same calendar year.

We will continue to monitor the trends in outlier payments and if our proposed CMHC outlier payment cap is implemented, we would also monitor these policy effects. We also would analyze CMHC outlier payments at the provider level, relative to the proposed 8 percent CMHC outlier cap. Finally, we will continue to utilize program integrity efforts, as necessary, for those CMHCs receiving excessive outlier payments.Start Printed Page 45678

3. Implementation Strategy for a Proposed 8-Percent Cap on CMHC Outlier Payments

CMS envisions that the proposed 8-percent CMHC cap on outlier payments would be managed by the claims processing system. If the proposed CMHC outlier payment cap is finalized, we would provide detailed information on our implementation strategy through sub-regulatory channels. However, to foster a clearer understanding of the proposed CMHC outlier payment cap, we are providing the following high-level summary of the preliminary approach we envision.

For each CMHC, for a given calendar year, the claims processing system would maintain a running tally of year-to-date (YTD) total CMHC per diem payments (Medicare payments and the beneficiary share) and YTD actual CMHC outlier payments. YTD outlier payments for that calendar year could never exceed 8 percent of YTD CMHC total per diem payments for that CMHC for that calendar year. For example, we could determine whether or not a given outlier payment exceeds the 8-percent cap on a “rolling” basis. Under such an implementation approach, for each CMHC, the claims processing system would maintain a running tally of the YTD total CMHC per diem payments. The claims processing system would ensure that each time an outlier claim for a CMHC is processed, actual outlier payments would never exceed 8 percent of the CMHC's YTD total payments. While a CMHC would receive its per diem payment timely, the outlier portion of the claim would be paid as the CMHC's YTD payments support payment of the outlier. As part of our routine claims processing, we would utilize a periodic review process under which outlier payments that were withheld would subsequently be paid if the CMHC's total payments have increased to the point that its outlier payments can be made. This process would result in additional cash flow to CMHCs. As noted previously, we also would maintain our existing outlier reconciliation policy, which is applied at the time of cost report final settlement if the CMHC's CCR changed by 0.10 or more. With regard to revenue tracking by CMHCs, distinct coding would be used on the CMHC's remittance advice when outlier payments are withheld, assisting receivables accountants in identifying and accounting for the differences between expected and actual payments.

4. Summary of Proposals

In summary, for CY 2017, we are proposing to:

  • Continue to designate a portion of the estimated 1.0 percent outlier threshold specifically for CMHCs, consistent with the percentage of projected payments to CMHCs under the OPPS in CY 2017, excluding outlier payments;
  • Implement an 8-percent cap on CMHC outlier payments at the individual CMHC provider level for CY 2017 and subsequent years;
  • Continue to set the cutoff point for CMHC outlier payments in CY 2017 at 3.4 times the highest CMHC PHP APC payment rate implemented for that calendar year, which for CY 2017 is proposed new CMHC PHP APC 5853; and
  • Continue to pay 50 percent of CMHC APC geometric mean per diem costs over the cutoff point in CY 2017.

We believe that these CMHC outlier proposals would minimize the impact of inflated CMHC charges on outlier payments, would result in a better approximation of the marginal cost of care beyond the applicable cutoff point compared to the current process, and better target outlier payments to truly exceptionally high-cost cases. We are inviting public comments on these proposals.

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

A. Background

We refer readers to the CY 2012 OPPS/ASC final rule with comment period (76 FR 74352 through 74353) for a full historical discussion of our longstanding policies on how we identify procedures that are typically provided only in an inpatient setting (referred to as the inpatient only (IPO) list) and, therefore, will not be paid by Medicare under the OPPS, and on the criteria that we use to review the IPO list each year to determine whether or not any procedures should be removed from the list. The complete list of codes (IPO list) that we are proposing to be paid by Medicare in CY 2017 as inpatient only procedures is included as Addendum E to this proposed rule (which is available via the Internet on the CMS Web site).

B. Proposed Changes to the Inpatient Only (IPO) List

For CY 2017, we are proposing to use the same methodology (described in the November 15, 2004 final rule with comment period (69 FR 65834)) of reviewing the current list of procedures on the IPO list to identify any procedures that may be removed from the list. The established criteria upon which we make such a determination are as follows:

1. Most outpatient departments are equipped to provide the services to the Medicare population.

2. The simplest procedure described by the code may be performed in most outpatient departments.

3. The procedure is related to codes that we have already removed from the IPO list.

4. A determination is made that the procedure is being performed in numerous hospitals on an outpatient basis.

5. A determination is made that the procedure can be appropriately and safely performed in an ASC, and is on the list of approved ASC procedures or has been proposed by us for addition to the ASC list.

Using the above-listed criteria, we are proposing to remove the following six codes (four spine procedure codes and two laryngoplasty codes) from the IPO list for CY 2017:

  • CPT code 22840 (Posterior non-segmental instrumentation (e.g., Harrington rod technique, pedicle fixation across 1 interspace, atlantoaxial transarticular screw fixation, sublaminar wiring at C1, facet screw fixation) (List separately in addition to code for primary procedure));
  • CPT code 22842 (Posterior segmental instrumentation (e.g., pedicle fixation, dual rods with multiple hooks and sublaminar wires); 3 to 6 vertebral segments (List separately in addition to code for primary procedure));
  • CPT code 22845 (Anterior instrumentation; 2 to 3 vertebral segments (List separately in addition to code for primary procedure));
  • CPT code 22858 (Total disc arthroplasty (artificial disc), anterior approach, including discectomy with end plate preparation (includes osteophytectomy for nerve root or spinal cord decompression and microdissection); second level, cervical (List separately in addition to code for primary procedure));
  • CPT code 31584 (Laryngoplasty; with open reduction of fracture); and
  • CPT code 31587 (Laryngoplasty, cricoid split).

We reviewed the clinical characteristics of the four spine procedure codes and related evidence, including input from multiple physician specialty societies whose members specialize in spine surgery, and determined the four spine procedure codes listed above to be appropriate candidates for removal from the IPO list. These four spine procedure codes are Start Printed Page 45679add-on codes to procedures that are currently performed in the HOPD and describe variations of (including additional instrumentation used with) the base code procedure. Therefore, we believe these spine procedures satisfy criterion 3 as they are related to codes that we have already removed from the IPO list. Because these four spine procedure codes are add-on codes, in accordance with the regulations at 42 CFR 419.2(b)(18), we are proposing to package them with the associated procedure and assign them status indicator “N.”

We also reviewed the clinical characteristics of the two laryngoplasty procedure codes and related evidence, and determined that the two laryngoplasty procedure codes listed above are appropriate candidates for removal from the IPO list because we believe they satisfy criterion 3 listed above: The procedure is related to codes that we have already removed from the IPO list. These two codes are related to and clinically similar to CPT code 21495 (Open treatment of hyoid fracture), which is currently not on the IPO list. We are proposing that the two laryngoplasty procedure codes would be assigned to APC 5165 (Level 5 ENT Procedures) with status indicator “J1.”

C. Solicitation of Public Comments on the Possible Removal of Total Knee Arthroplasty (TKA) Procedure From the IPO List

1. Background

Total knee arthroplasty (TKA) or total knee replacement, CPT code 27447 (Arthroplasty, knee, condyle and plateau; medical and lateral compartments with or without patella resurfacing (total knee arthroplasty)), has traditionally been considered an inpatient surgical procedure. The procedure was placed on the original IPO list in the 2000 OPPS final rule (65 FR 18781). In 2000, the primary factors that were used to determine the assignment of a procedure to the IPO list were as follows: (1) The invasive nature of the procedure; (2) the need for at least 24 hours of postoperative care; and (3) the underlying physical condition of the patient who would require the surgery (65 FR 18443 and 18455). In 2000, the geometric mean average length of stay for the DRG to which an uncomplicated TKA procedure was assigned was 4.6 days, and in 2016, the average length of stay for a current uncomplicated TKA procedure for the MS-DRG is 2.8 days.

Recent innovations have enabled surgeons to perform TKA on an outpatient basis on non-Medicare patients (both in the HOPD and in the ASC). In this context, “outpatient” services include both same day outpatient surgery (that is, the patient goes home on the same day that the outpatient surgery was performed) and outpatient surgery that includes one overnight hospital stay for recovery from the surgery. These innovations in TKA care include minimally invasive techniques, improved perioperative anesthesia, alternative postoperative pain management, and expedited rehabilitation protocols. Patients generally benefit from a shorter hospital stay. Some of these benefits include a likelihood of fewer complications, more rapid recovery, increased patient satisfaction, recovery at home with the assistance of family members, and a likelihood of overall improved outcomes. On the contrary, unnecessary inpatient hospitalization exposes patients to the risk of hospital-acquired conditions such as infections and a host of other iatrogenic mishaps.

Like most surgical procedures, TKA needs to be tailored to the individual patient's needs. Patients with a relatively low anesthesia risk and without significant comorbidities who have family members at home who can assist them would likely be good candidates for an outpatient TKA procedure. On the other hand, patients with severe illnesses aside from their osteoarthritis would more likely require inpatient hospitalization and possibly post-acute care in a skilled nursing facility or other facility. Surgeons who have discussed outpatient TKA procedures with us have emphasized the importance of careful patient selection and strict protocols to optimize outpatient TKA outcomes. These protocols typically manage all aspects of the patient's care, including the at-home preoperative and postoperative environment, anesthesia, pain management, and rehabilitation to maximize rapid recovery and ambulation.

In the CY 2013 OPPS/ASC proposed rule, we proposed to remove the procedure described by CPT code 27447 from the IPO list (77 FR 45153). We proposed to remove the procedure described by CPT code 27447 from the IPO list because we believed that the procedure could be appropriately provided and paid for as a hospital outpatient procedure for some Medicare beneficiaries, based upon the five evaluation criteria for removal from the IPO list discussed earlier. The public comments we received on the CY 2013 proposal varied. There were several surgeons and other stakeholders who supported the proposal. They believed that, given thorough preoperative screening by medical teams with significant experience and expertise involving knee replacement procedures, the TKA procedure could be provided on an outpatient basis for some Medicare beneficiaries. These commenters discussed recent advances in total knee replacement technology and surgical care protocols, including improved perioperative anesthesia, and expedited rehabilitation protocols, as well as significant enhancements to the postoperative process, such as improvements in pain management, early mobilization, and careful monitoring. These commenters also stated that early preventive intervention for the most common medical complications has decreased the average length of hospital stays to the point that a TKA procedure can now be performed on an outpatient basis in certain cases. The commenters noted significant success involving same day discharge for patients who met the screening criteria and whose experienced medical teams were able to perform the procedure early enough in the day for the patients to achieve postoperative goals, allowing home discharge by the end of the day. The commenters believed that the benefits of providing TKA on an outpatient basis will lead to significant enhancements in patient well-being and cost savings to the Medicare program, including shorter hospital stays resulting in fewer medical complications, improved results, and enhanced patient satisfaction. However, the majority of the commenters disagreed with the CY 2013 proposal and believed that it would be unsafe to perform outpatient TKA for Medicare beneficiaries. (We refer readers to 77 FR 68419 for a discussion of these comments.) After consideration of these public comments, we decided not finalize the proposal, and the procedure described by CPT code 27447 remains on the IPO list.

We also note that not uncommonly we receive questions from the public about the IPO list that lead us to believe that some members of the public may misunderstand certain aspects of the IPO list. Therefore, two important principles of the IPO list must be reiterated at the outset of this discussion. First, just because a procedure is not on the IPO list does not mean that the procedure cannot be performed on an inpatient basis. IPO list procedures must be performed on an inpatient basis (regardless of the expected length of the hospital stay) in order to qualify for Medicare payment, but procedures that are not on the IPO list can be and very often are performed Start Printed Page 45680on individuals who are inpatients (as well as individuals who are hospital outpatients and ASC patients). Second, the IPO list status of a procedure has no effect on the MPFS professional payment for the procedure. Whether or not a procedure is on the IPO list is not in any way a factor in the MPFS payment methodology.

2. Discussion of TKA and the IPO List

Since 2000, when the IPO list was established, there have been significant developments in both TKA technique and patient care. The advances in TKA technique and patient care are discussed in general terms above. As noted above, in 2000, the criteria by which procedures were reviewed to determine IPO list assignment were as follows: (1) The invasive nature of the procedure; (2) the need for at least 24 hours of postoperative care; and (3) the underlying physical condition of the patient who would require the surgery. In order to discuss the possibility of removing TKA procedures from the IPO list, we believe it is helpful to explore each of these criteria in turn as they apply to present-day TKA. Then we are asking the public to comment on a list of questions that relate to considering removing TKA from the IPO list in the future.

The first criterion was “the invasive nature of the procedure.” We elaborated on this criterion in the 2000 OPPS final rule by stating: “We believe that certain surgically invasive procedures on the brain, heart, and abdomen, such as craniotomies, coronary artery bypass grafting, and laparotomies, indisputably require inpatient care, and therefore are outside the scope of outpatient services” (65 FR 18456). TKA does not invade the brain, heart, or abdomen; instead, like several other outpatient orthopedic surgeries, it is an operation on the knee joint. A similar procedure described by CPT code 27446 (Arthroplasty, knee, condyle and plateau; medical OR lateral compartment) (unicompartmental knee replacement) was removed from the IPO list on January 1, 2002, and also was added to the ASC covered surgical procedures list in 2008. The degree of invasiveness of TKA as compared to other major surgical procedures would not appear to prohibit its removal from the IPO list.

The second IPO list criterion from the 2000 OPPS final rule is “the need for at least 24 hours of postoperative recovery time or monitoring before the patient can be safely discharged.” Currently, for procedures that are not on the IPO list, services furnished to patients requiring 24 hours of postoperative recovery time may be payable as either outpatient services or inpatient services, depending on the condition of the patient. Therefore, the need for at least 24 hours of postoperative recovery time or monitoring in many cases should not require IPO list placement.

The third criterion is “the underlying physical condition of the patient who would require the surgery.” For this criterion to be the basis of an IPO list assignment seems to presume a relatively homogeneous and morbid patient population undergoing the surgical procedure. Otherwise, patients with a good underlying physical condition could be considered for outpatient surgery while those with a poor underlying physical condition might be more appropriate for inpatient admission. TKA candidates, although they all have osteoarthritis severe enough to warrant knee replacement, are a varied group in which the anticipated length of hospitalization is dictated more by comorbidities and diseases of other organ systems. Some patients may be appropriate for outpatient surgery while others may be appropriate for inpatient surgery.

3. Topics and Questions for Public Comment

We are seeking public comments on whether we should remove the procedure described by CPT code 27447 from the IPO list from all interested parties, including the following groups or individuals: Medicare beneficiaries and advocate associations for Medicare beneficiaries; orthopedic surgeons and physician specialty societies that represent orthopedic surgeons who perform TKA procedures; hospitals and hospital trade associations; and any other interested stakeholders. We are seeking public comments on any of the topics discussed earlier in addition to the following questions:

1. Are most outpatient departments equipped to provide TKA to some Medicare beneficiaries?

2. Can the simplest procedure described by CPT code 27447 be performed in most outpatient departments?

3. Is the procedure described by CPT code 27447 sufficiently related to or similar to the procedure described by CPT code 27446 such that the third criterion listed at the beginning of this section for identifying procedures that may be removed from the IPO list, that is, the procedure under consideration for removal from the IPO list is related to codes that we have already removed from the IPO, is satisfied?

4. How often is the procedure described by CPT code 27447 being performed on an outpatient basis (either in an HOPD or ASC) on non-Medicare patients?

5. Would it be clinically appropriate for some Medicare beneficiaries in consultation with his or her surgeon and other members of the medical team to have the option of a TKA procedure as a hospital outpatient, which may or may not include a 24-hour period of recovery in the hospital after the operation?

6. CMS is currently testing two episode-based payment models that include TKA: The Comprehensive Care for Joint Replacement (CJR) Model and the Bundled Payment for Care Improvements (BPCI) Model. These models hold hospitals and, in the case of the BPCI, physicians and postacute care providers, responsible for the quality and cost of an episode of care. Providers participating in the CJR model or BPCI Models 2 and 4 initiate episodes with admission to the hospital of a beneficiary who is ultimately discharged under an included MS-DRG. Both initiatives include MS-DRGs 469 (Major Joint Replacement or Reattachment of Lower Extremity with MCC) and 470 (Major Joint Replacement or Reattachment of Lower Extremity without MCC). Depending on the model, the episode ends 30 to 90 days postdischarge in order to cover the period of recovery for beneficiaries. Episodes include the inpatient stay and all related items and services paid under Medicare Part A and Part B for all Medicare fee-for-service (FFS) beneficiaries, with the exception of certain exclusions.

In the BPCI and CJR models, services are paid on an FFS basis with a retrospective reconciliation for all episodes included in a defined time period (quarterly in BPCI and annually in CJR). At reconciliation, actual spending is compared to a target price. The target price is based on historical episode spending. If CMS were to remove the procedure described by CPT code 27447 from the IPO list and pay for outpatient TKA procedures, the historical episode spending data may no longer be an accurate predictor of episode spending for beneficiaries receiving inpatient TKA procedures. As such, establishing an accurate target price based on historical data would become more complicated. This is because some patients who previously would have received a TKA procedure in an inpatient setting may receive the procedure on an outpatient basis if the procedure is removed from the IPO list.

We are seeking comment on how CMS could modify the CJR and BPCI models if the TKA procedure were to be moved off the IPO list. Specifically, we are seeking comment on how to reflect the Start Printed Page 45681shift of some Medicare beneficiaries from an inpatient TKA procedure to an outpatient TKA procedure in the BPCI and CJR model pricing methodologies, including target price calculations and reconciliation processes. Some of the issues CMS faces include the lack of historical data on both the outpatient TKA episodes and the average episode spending for beneficiaries who would continue to receive the TKA procedure on an inpatient basis. Because historically the procedure described by CPT code 27447 has been on the IPO list, there is no claims history for beneficiaries receiving TKA on an outpatient basis. In addition, we are seeking public comment on the postdischarge care patterns for Medicare beneficiaries that may receive an outpatient TKA procedure if it were removed from the IPO list and how this may be similar or different from these beneficiaries' historical postdischarge care patterns. For example, Medicare beneficiaries who are appropriate candidates for an outpatient TKA procedure may be those who, in the past, would have received outpatient physical therapy services as follow-up care after an inpatient TKA procedure. CMS would need to develop a methodology to ensure model target prices account for the potentially higher risk profiles of Medicare beneficiaries who would continue to receive TKA procedures in inpatient settings.

X. Proposed Nonrecurring Policy Changes

A. Implementation of Section 603 of the Bipartisan Budget Act of 2015 Relating to Payment for Certain Items and Services Furnished by Certain Off-Campus Departments of a Provider

1. Background

In recent years, the research literature and popular press have documented the increased trend toward hospital acquisition of physician practices, integration of those practices as a department of the hospital, and the resultant increase in the delivery of physician's services in a hospital setting. When a Medicare beneficiary receives services in an off-campus department of a hospital, the total payment amount for the services made by Medicare is generally higher than the total payment amount made by Medicare when the beneficiary receives those same services in a physician's office. Medicare pays a higher amount because it generally pays two separate claims for these services—one under the OPPS for the institutional services and one under the MPFS for the professional services furnished by a physician or other practitioner. Medicare beneficiaries are responsible for the cost-sharing liability, if any, for both of these claims, often resulting in significantly higher total beneficiary cost-sharing than if the service had been furnished in a physician's office.

Section 603 of the Bipartisan Budget Act of 2015 (Pub. L. 114-74), enacted on November 2, 2015, amended section 1833(t) of the Act. Specifically, this provision amended the OPPS statute at section 1833(t) by amending paragraph (1)(B) and adding a new paragraph (21). As a general matter, under section 1833(t)(1)(B)(v) and (t)(21) of the Act, applicable items and services furnished by certain off-campus outpatient departments of a provider on or after January 1, 2017, will not be considered covered OPD services as defined under section 1833(t)(1)(B) for purposes of payment under the OPPS and will instead be paid “under the applicable payment system” under Medicare Part B if the requirements for such payment are otherwise met. We note that, in order to be considered part of a hospital, an off-campus department of a hospital must meet the provider-based criteria established under 42 CFR 413.65. Accordingly, in this proposed rule, we refer to an “off-campus outpatient department of a provider,” which is the term used in section 603, as an “off-campus outpatient provider-based department” or an “off-campus PBD.”

As noted earlier, section 603 of Public Law 114-74 made two amendments to section 1833 of the Act—one amending paragraph (t)(1)(B) and the other adding new paragraph (t)(21). The provision amended section 1833(t)(1)(B) by adding a new clause (v), which excludes from the definition of “covered OPD services” applicable items and services (defined in paragraph (t)(21)(A)) that are furnished on or after January 1, 2017 by an off-campus PBD, as defined in paragraph (t)(21)(B). The second amendment added a new paragraph (t)(21), which defines the terms “applicable items and services” and “off-campus outpatient department of a provider,” requires the Secretary to establish a new payment policy for such applicable items and services furnished by an off-campus PBD on or after January 1, 2017, provides that hospitals shall report on information as needed for implementation of the provision, and establishes a limitation on administrative and judicial review on certain determinations and information.

In defining the term “off-campus outpatient department of a provider,” section 1833(t)(21)(B)(i) of the Act specifies that the term means a department of a provider (as defined at 42 CFR 413.65(a)(2) as that regulation was in effect on November 2, 2015, the date of enactment of Public Law 114-74) that is not located on the campus of such provider, or within the distance from a remote location of a hospital facility. Section 1833(t)(21)(B)(ii) of the Act excepts from the definition of “off-campus outpatient department of a provider,” for purposes of paragraphs (1)(B)(v) and (21)(B), an off-campus PBD that was billing under subsection (t) with respect to covered OPD services furnished prior to the date of enactment of paragraph (t)(21), that is, November 2, 2015. We are proposing to refer to this exception as providing “excepted” status to certain off-campus PBDs and certain items and services furnished by such excepted off-campus PBDs, which would continue to be paid under the OPPS. Moreover, as noted earlier, because the definition of “applicable items and services” specifically excludes items and services furnished by a dedicated emergency department as defined at 42 CFR 489.24(b) and the definition of “off-campus outpatient department of a provider” does not include PBDs located on the campus of a hospital or within the distance (described in the definition of campus at 413.65(a)(2)) from a remote location of a hospital facility, the items and services furnished by these excepted off-campus PBDs on or after January 1, 2017 will continue to be paid under the OPPS.

In this proposed rule, we are making a number of proposals to implement section 603 of Public Law 114-74. Broadly, we are proposing to do three things: (1) Define applicable items and services in accordance with section 1833(t)(21)(A) of the Act for purposes of determining whether such items and services are covered OPD services under section 1833(t)(1)(B)(v) of the Act or whether payment for such items and services shall instead be made under section 1833(t)(21)(C) of the Act; (2) define off-campus PBD for purposes of sections 1833(t)(1)(B)(v) and (t)(21) of the Act; and (3) establish policies for payment for applicable items and services furnished by an off-campus PBD (nonexcepted items and services) under section 1833(t)(21)(C) of the Act. To do so, in this rule, we are proposing policies that define whether certain items and services furnished by a given off-campus PBD may be considered excepted and, thus, continue to be paid under the OPPS; establish the requirements for the off-campus PBDs to maintain excepted status (both for the excepted off-campus PBD and for the items and services furnished by such Start Printed Page 45682excepted off-campus PBDs); and describe the applicable payment system for nonexcepted items and services. In addition, we are soliciting public comments on information collection requirements for implementing this provision in accordance with section 1833(t)(21)(D) of the Act.

There is no legislative history on record regarding section 603 of Public Law 114-74. However, the Congressional Budget Office estimated program savings for this provision of approximately $9.3 billion over a 10-year period. In January 2016, we posted a notice on the CMS Web site that informed stakeholders that we expected to present our proposals for implementing section 603 of Public Law 114-74 in the CY 2017 OPPS/ASC proposed rule. Because we had already received several inquiries or suggestions from stakeholders regarding implementation of the section 603 provision, we provided a dedicated email address for stakeholders to provide information they believed was relevant in formulating these proposals. We have considered this stakeholder feedback in developing this proposed rule.

2. Defining Applicable Items and Services and an Off-Campus Outpatient Department of a Provider as Set Forth in Sections 1833(t)(21)(A) and (B) of the Act

a. Background on the Provider-Based Status Rules

Since the beginning of the Medicare program, some hospitals, which we refer to as “main providers,” have functioned as a single entity while owning and operating multiple departments, locations, and facilities. Having clear criteria for provider-based status is important because this designation can result in additional Medicare payments under the OPPS for services provided at the provider-based facility and may also increase the coinsurance liability of Medicare beneficiaries receiving those services. The current criteria for provider-based status are located in the regulations at 42 CFR 413.65.

When a facility or organization has provider-based status, it is considered to be part of the hospital. The hospital as a whole, including all of its PBDs, must meet all Medicare conditions of participation and conditions of payment that apply to hospitals. In addition, a hospital bills for services furnished by its provider-based facilities and organizations using the CMS Certification Number of the hospital. One type of facility or organization that a hospital may treat as provider-based is an off-campus outpatient department. In order for the hospital to do so, the off-campus outpatient department must meet certain requirements under 42 CFR 413.65, including, but not limited to:

  • It generally must be located within a 35-mile radius of the campus of the main hospital;
  • Its financial operations must be fully integrated within those of the main provider;
  • Its clinical services must be integrated with those of the main hospital (for example, the professional staff at the off-campus outpatient department must have clinical privileges at the main hospital, the off-campus outpatient department medical records must be integrated into a unified retrieval system (or cross reference) of the main hospital), and patients treated at the off-campus outpatient department who require further care must have full access to all services of the main hospital;
  • It is held out to the public as part of the main hospital.

Section 603 makes certain distinctions with respect to whether a department of the hospital is “on” campus or “off” campus and also excludes from the definition of “off-campus outpatient department of a provider” a department of a provider within the distance from a remote location of a hospital facility. Below, we provide some details on the definitions of the terms “campus” and “remote locations.”

Section 413.65(a)(2) of the regulations defines a “campus” as “[T]he physical area immediately adjacent to the provider's main buildings, other areas and structures that are not strictly contiguous to the main buildings but are located within 250 yards of the main buildings, and any other areas determined on an individual case basis, by the CMS Regional Office, to be part of the provider's campus.”

In developing the provider-based rules, CMS also recognized that many hospitals operated fully integrated, though geographically separate, inpatient facilities. While the initial scope of provider-based rulemaking primarily concerned situations with outpatient departments, we believed the policies set forth were equally applicable to inpatient facilities. Therefore, CMS also finalized a regulatory definition for a “remote location of a hospital” at 42 CFR 413.65(a)(2) as “a facility or an organization that is either created by, or acquired by, a hospital that is a main provider for the purpose of furnishing inpatient hospital services under the name, ownership, and financial and administrative control of the main provider, in accordance with the provisions of this section. A remote location of a hospital comprises both the specific physical facility that serves as the site of services for which separate payment could be claimed under the Medicare or Medicaid program, and the personnel and equipment needed to deliver the services at that facility. The Medicare conditions of participation do not apply to a remote location of a hospital as an independent entity. For purposes of this part, the term `remote location of a hospital' does not include a satellite facility as defined in §§ 412.22(h)(1) and 412.25(e)(1) of this chapter.”

Under the provider-based rules, we consider these inpatient “remote locations” to be “off-campus,” and CMS reiterated this position in the FY 2003 IPPS/LTCH PPS final rule (67 FR 50081 through 50082). Hospitals that comprise several sites at which both inpatient and outpatient care are furnished are required to designate one site as its “main” campus for purposes of the provider-based rules. Thus, any facility not located on that main campus would be considered “off-campus” and must satisfy the provider-based rules in order to be treated by the main hospital as provider-based.

For Medicare purposes, a hospital that wishes to add an off-campus PBD must submit an amended Medicare provider enrollment form detailing the name and location of the provider-based facility within 90 days of adding the new facility to the hospital. In addition, a hospital may ask CMS to make a determination that a facility or organization has provider-based status by submitting a voluntary attestation to its MAC, for final review by the applicable CMS Regional Office, attesting that the facility meets all applicable provider-based criteria in the regulations. If no attestation is submitted and CMS later determines that the hospital treated a facility or organization as provider-based when the facility or organization did not meet the requirements for provider-based status, CMS will recover the difference between the amount of payments actually made to the hospital and the amount of payments that CMS estimates should have been made for items and services furnished at the facility in the absence of compliance with the provider-based requirements for all cost reporting periods subject to reopening. However, if the hospital submits a complete attestation of compliance with the provider-based status requirement for a facility or organization that has not previously been found by CMS to have Start Printed Page 45683been inappropriately treated as provider based, but CMS subsequently determines that the facility or organization does not meet the requirements for provider-based status, CMS will recover the difference between the amount of payments actually made to the hospital since the date the attestation was submitted and the amount of payments that CMS estimates should have been made in the absence of compliance with the provider-based requirements.

Historically, PBDs billed as part of the hospital and could not be distinguished from the main hospital or other PBDs within the claims data. In CY 2015 OPPS/ASC final rule with comment period (79 FR 66910 through 66914), CMS adopted a voluntary claim modifier “PO” to identify services furnished in off-campus PBDs (other than emergency departments, remote locations and satellite locations of the hospital) to collect data that would help identify the type and costs of services typically furnished in off-campus PBDs. Based on the provision in the CY 2015 OPPS/ASC final rule with comment period, use of this modifier became mandatory beginning in CY 2016. While the modifier identifies that the service was provided in an off-campus PBD, it does not identify the type of PBD in which services were furnished, nor does it distinguish between multiple PBDs of the same hospital. As discussed later in this section, we are soliciting public comments on the type of information that would be needed to identify nonexcepted PBDs for purposes of section 603, although we are not proposing to collect such information for CY 2017.

b. Proposed Exemption of Items and Services Furnished in a Dedicated Emergency Department or by an Off-Campus PBD as Defined at Sections 1833(t)(21)(B)(i)(I) and (II) of the Act (Excepted Off-Campus PBD)

(1) Dedicated Emergency Departments (EDs)

Section 1833(t)(21)(A) of the Act specifies that, for purposes of paragraph (1)(B)(v) and [paragraph [21] of section 1833(t), the term “applicable items and services” means items and services other than items and services furnished by a dedicated emergency department (as defined in 42 CFR 489.24(b)). Existing regulations at § 489.24(b) define an ED as any department or facility of the hospital, regardless of whether it is located on or off the main hospital campus, that meets at least one of the following requirements:

  • It is licensed by the State in which it is located under applicable State law as an emergency room or emergency department;
  • It is held out to the public (by name, posted signs, advertising, or other means) as a place that provides care for emergency medical conditions on an urgent basis without requiring a previously scheduled appointment; or
  • During the calendar year immediately preceding the calendar year in which a determination under this section is being made, based on a representative sample of patient visits that occurred during that calendar year, it provides at least one-third of all of its outpatient visits for the treatment of emergency medical conditions on an urgent basis without requiring a previously scheduled appointment.

Accordingly, based on existing regulations, an ED may furnish both emergency and nonemergency services as long as the requirements under § 489.24(b) are met. In accordance with section 1833(t)(21)(A) of the Act and regulations at § 489.24(b), we are proposing that all services furnished in an ED, whether or not they are emergency services, would be exempt from application of sections 1833(t)(1)(B)(v) and 1833(t)(21) of the Act, and thus continue to be paid under the OPPS. Moreover, we are proposing to define “applicable items and services” to which sections 1833(t)(1)(B)(v) and (t)(21)(A) of the Act apply to include all items and services not furnished by a dedicated ED as described in the regulations at 42 CFR 489.24(b).

(2) On-Campus Locations

As noted earlier, section 1833 (t)(21)(B)(i) of the Act defines the term “off-campus outpatient department of a provider” for purposes of paragraphs (t)(1)(B)(v) and (t)(21) as a department of a provider (as defined at 42 CFR 413.65(a)(2) as that term is in effect as of November 2, 2015), that is not located on the campus of that provider or within the distance (described in the definition of campus at § 413.65(a)(2)) from a remote location of a hospital facility (as defined in § 413.65(a)(2)). We believe that the statutory language refers to such departments as defined by the regulations at § 413.65 as they existed at the time of enactment of Public Law 114-74. The existing regulatory definition of a “department of a provider” includes both the specific physical facility that serves as the site of services of a type for which payment could be claimed under the Medicare or Medicaid program, and the personnel and equipment needed to deliver the services at that facility. We used the existing regulatory definition of a department of a provider as a guide in designing our proposals to implement section 603 of Public Law 114-74.

We are not proposing to change the existing definition of “campus” located at § 413.65(a)(2) of our regulations and believe hospitals can adequately determine whether their departments are on-campus, including by using the current provider-based attestation process described in § 413.65(b) to affirm their on-campus status. Currently, the CMS Regional Offices review provider-based attestations to determine whether a facility is within full compliance of the provider-based rules, and hospitals that ask for a provider-based determination are required to specify whether they are seeking provider-based status for an on-campus or off-campus facility or organization. If a CMS Regional Office determines that a department is not in full compliance with the provider-based rules, hospitals may utilize the reconsideration process described under § 413.65(j) and the administrative appeal process described at 42 CFR part 498. As we gain experience under section 603 of Public Law 114-74, we may consider issuing further guidance regarding provider-based attestations if needed.

In accordance with section 1833(t)(21)(B)(i)(I) of the Act, we are proposing that on-campus PBDs and the items and services provided by such a department would be excepted from application of sections 1833(t)(1)(B)(v) and (t)(21) of the Act.

(3) Within the Distance From Remote Locations

In addition to the statutory exception for off-campus PBDs located on the campus of a provider, section 1833(t)(21)(B)(i)(II) of the Act excepts from the definition of off-campus PBDs those that are not located within the distance (as described in the definition of campus at § 413.65(a)(2)) from a “remote location” (as also defined at § 413.65(a)(2)) of a hospital facility. The “distance” described in the definition of “campus” at § 413.65(a)(2) is 250 yards. While hospitals that operate remote locations are referred to as “multicampus” hospitals, as discussed previously, under current provider-based rules, a hospital is only allowed to have a single “main” campus for each hospital. Therefore, when determining whether an off-campus PBD meets the exception set forth at section 1833(t)(21)(B)(i)(II) of the Act, we are proposing that the off-campus PBD must be located at or within the distance of Start Printed Page 45684250 yards from a remote location of a hospital facility. Hospitals should use surveyor reports or other appropriate documentation to ensure that their off-campus PBDs are within 250 yards (straight-line) from any point of a remote location for this purpose.

c. Applicability of Exception at Section 1833(t)(21)(B)(ii) of the Act

Section 1833(t)(21)(B)(ii) of the Act states that, for purposes of sections 1833(t)(1)(B)(v) and 1833(t)(21) of the Act, the term “off-campus outpatient department of a provider” shall not include a department of a provider (that is, an off-campus PBD) (as so defined) that was billing under this subsection, that is, the OPPS, with respect to covered OPD services furnished prior to November 2, 2015. We are proposing that, as provided in section 1833(t)(21)(B)(ii) of the Act, if an off-campus PBD meets this exception, sections 1833(t)(1)(B)(v) and 1833(t)(21) of the Act do not apply to that department or to the types of items and services furnished by that department (to be discussed in greater detail below) that were being billed under the OPPS prior to November 2, 2015.

A major concern with determining the scope of the exception set forth at section 1833(t)(21)(B)(ii) of the Act for purposes of applying sections 1833(t)(1)(B)(v) and 1833(t)(21) of the Act is determining how relocation of the physical location or expansion of services lines furnished at the “excepted” off-campus PBD affects the excepted status of the off-campus PBD itself and the items and services furnished by that excepted off-campus PBD.

We have heard from some providers that they believe that section 1833(t)(21)(B)(ii) of the Act specifically excepted off-campus PBDs billing for covered OPD services furnished before November 2, 2015, and that these excepted departments should remain excepted, regardless of whether they relocate or expand services, or both. These providers noted that the exception for certain off-campus PBDs states that section 1833(t)(21)(B)(ii) of the Act does not include an off-campus PBD (as so defined) that was billing under this subsection with respect to covered OPD services furnished prior to the date of the enactment of this paragraph. These providers argued that, because the statute does not include a specific limitation on relocation or expansion of services, no limitation should be applied.

Providers also have suggested that off-campus PBDs should be able to relocate and maintain excepted status as long as the structure of the PBD is substantially similar to the PBD prior to the relocation. Some stakeholders have suggested that the criteria for defining substantially similar could be based on maintaining similar personnel, space, patient population, or equipment, or a combination of these factors.

We believe that section 1833(t)(21)(B)(ii) of the Act excepted off-campus PBDs as they existed at the time that Public Law 114-74 was enacted, including those items and services furnished and billed by such a PBD prior to that time. Thus, as noted above, we have developed our proposals in defining the scope of the excepted off-campus PBD and the items and services it furnishes based on the existing regulatory definition of department of a provider, which speaks to both the specific physical facility that serves as the site of services of a type for which payment could be claimed under the Medicare or Medicaid program and the personnel and equipment needed to deliver the services at that facility.

Below we are making a number of proposals regarding the scope of the exception at section 1833(t)(21)(B)(ii) of the Act for purposes of applying sections 1833(t)(1)(B)(v) and (t)(21) of the Act. These proposals are made in accordance with our belief that section 603 of Public Law 114-74 is intended to curb the practice of hospital acquisition of physician practices that then result in receiving additional Medicare payment for similar services.

(1) Relocation of Off-Campus PBDs Excepted Under Section 1833(t)(21)(B)(ii) of the Act

In considering how relocation of an excepted off-campus PBD could affect application of sections 1833(t)(1)(B)(v) and (t)(21) of the Act, we are concerned that if we propose to permit excepted off-campus PBDs to relocate and continue such status, hospitals would be able to relocate excepted off-campus PBDs to larger facilities, purchase additional physician practices, move these practices into the larger relocated facilities, and receive OPPS payment for services furnished by these physicians, which we believe section 603 of Public Law 114-74 intended to preclude.

As previously stated, we believe that section 603 of Public Law 114-74 applies to off-campus PBDs as they existed at the time of enactment and only excepts those items and services that were being furnished and billed by off-campus PBDs prior to November 2, 2015.

After reviewing the statutory authority, and the concerns noted earlier, we are proposing that, for purposes of paragraphs (t)(1)(B)(v) and (t)(21) of section 1833 of the Act, excepted off-campus PBDs and the items and services that are furnished by such departments would no longer be excepted if the excepted off-campus PBD moves or relocates from the physical address that was listed on the provider's hospital enrollment form as of November 1, 2015. In the case of addresses with multiple units, such as a multi-office building, the unit number is considered part of the address; in other words, an excepted hospital PBD could not purchase and expand into other units in its building, and remain excepted. Once an excepted off-campus PBD has relocated, we are proposing that both the off-campus PBD itself and the items and services provided at that off-campus PBD would no longer be excepted, that is considered to be an excepted off-campus PBD for which the items and services furnished are covered OPD services payable under the OPPS, and instead, would be subject to paragraphs (1)(B)(v) and (21) of section 1833(t) of the Act.

Hospitals have expressed concern that there may be instances when an excepted off-campus PBD may need to relocate, including, for example, to meet Federal or State requirements, or due a natural disaster. We recognize that there may be circumstances beyond the hospital's control where an excepted off-campus PBD must move from the location in which it existed prior to November 2, 2015. We are soliciting public comments on whether we should develop a clearly defined, limited relocation exception process, similar to the disaster/extraordinary circumstance exception process under the Hospital VBP program (as implemented in the FY 2014 IPPS/LTCH PPS final rule; 78 FR 50704) for hospitals struck by a natural disaster or experiencing extraordinary circumstances (under which CMS allows a hospital to request a Hospital VBP Program exception within 90 days of the natural disaster or other extraordinary circumstance) that would allow off-campus PBDs to relocate in very limited situations, and that mitigate the potential for the hospital to avoid application of sections 1833(t)(1)(B)(v), and (t)(21)(C) of the Act. In addition, we are seeking public comments on whether we should consider exceptions for any other circumstances that are completely beyond the control of the hospital, and, if so, what those specific circumstance would be.Start Printed Page 45685

(2) Expansion of Clinical Family of Services at an Off-Campus PBD Excepted Under Section 1833(t)(21)(B)(ii) of the Act

We have received questions from some hospitals regarding whether an excepted off-campus PBD can expand the number or type of services the department furnishes and maintain excepted status for purposes of paragraphs (1)(B)(v) and (21) of section 1833(t) of the Act. As mentioned earlier in the relocation discussion, we have heard that some providers believe that section 1833(t)(21)(B)(ii) of the Act specifically excepted departments, pointing out that the statute is not written with any limiting language and that excepted departments should remain excepted, regardless of whether these departments expand either the number of services or the types of services they provide. Under this interpretation, section 1833(t)(21)(B)(ii) of the Act would limit only the number of excepted off-campus PBDs a hospital can have to the number of off-campus PBDs that were billing Medicare for covered OPD services furnished prior to enactment of Public Law 114-74.

We believe that section 1833(t)(21)(B)(ii) of the Act excepts off-campus PBDs and the items and services that are furnished by such excepted off-campus PBDs for purposes of paragraphs (1)(B)(v) and (21) of section 1833(t) of the Act as they were being furnished on the date of enactment of section 603 of Public Law 114-74, as guided by our regulatory definition of department of a provider. Thus, we are proposing that the excepted off-campus PBD would be limited to seeking payment under the OPPS for the provision of items and services it was furnishing prior to the date of enactment of section 603 of Public Law 114-74 only. Moreover, we are proposing that items and services that are not part of a clinical family of services furnished and billed by the excepted off-campus PBD prior to November 2, 2015 would be subject to paragraphs (1)(B)(v) and (21) of section 1833(t) of the Act, that is, not payable under the OPPS.

As noted earlier, we believe that the amendments to section 1833(t) of the Act were intended to address items and services furnished at physicians' offices that are converted to hospital off-campus PBDs on or after November 2, 2015 from being paid at OPPS rates. One issue we contemplated in considering how expanded services should affect excepted status is how it could affect payment to physicians' offices purchased after the date of enactment of section 603. We are concerned that if excepted off-campus PBDs could expand the types of services provided at the excepted off-campus PBDs and also be paid OPPS rates for these new types of services, hospitals may be able to purchase additional physician practices and add those physicians to existing excepted off-campus PBDs. This could result in newly purchased physician practices furnishing services that are paid at OPPS rates, which we believe these amendments to section 1833(t) of the Act are intended to address.

After reviewing the statutory authority and the concerns raised by commenters noted above, we are proposing, for purposes of paragraphs (1)(B)(v) and (21) of section 1833(t) of the Act, that excepted status of items and services furnished in excepted off-campus PBDs is limited to the items and services (defined as clinical families of services below) such department was billing for under the OPPS and were furnished prior to November 2, 2015. We are proposing that if an excepted off-campus PBD furnishes services from a clinical family of services that it did not furnish prior to November 2, 2015, and thus did not also bill for, these new or expanded clinical families of services would not be covered OPD services, and instead would be subject to paragraphs (1)(B)(v) and (21) of section 1833(t) of the Act as described in section X.A.1.c. of this proposed rule. We note that we are proposing not to limit the volume of excepted items and services within a clinical family of services that an excepted off-campus PBD could furnish.

In summary, our proposals related to expansion of clinical families of services are as follows: We are proposing that service types be defined by the 19 clinical families of hospital outpatient service types described in Table 21 below. Moreover, we are proposing that if an excepted off-campus PBD furnished and billed for any specific service within a clinical family of services prior to November 2, 2015, such clinical family of services would be excepted and be eligible to receive payment under the OPPS. However, we are proposing that if an excepted off-campus PBD furnishes services from a clinical family of services that such department did not furnish and bill for prior to November 2, 2015, those services would be subject to sections 1833(t) (1)(B)(v) and (t)(21) of the Act in CY 2017 and subsequent years. We refer readers to Addendum B to this proposed rule (which is available via the Internet on the CMS Web site) for which HCPCS codes map to each clinical family of services. If we add a new HCPCS code or APC in future years, we will provide mapping to these clinical families of services, where relevant.

In addition, we considered, but are not proposing in this proposed rule, to specify a specific timeframe in which service lines had to be billed under the OPPS for covered OPD services furnished prior to November 2, 2015. We are seeking public comment on whether we should adopt a specific timeframe for which the billing had to occur, such as CY 2013 through November 1, 2015.

Table 21—Proposed Clinical Families of Services for Purposes of Section 603 Implementation

Clinical familiesAPCs
Advanced Imaging5523-25, 5571-73, 5593-4.
Airway Endoscopy5151-55.
Blood Product Exchange5241-44.
Cardiac/Pulmonary Rehabilitation5771, 5791.
Clinical Oncology5691-94.
Diagnostic tests5721-24, 5731-35, 5741-43.
Ear, Nose, Throat (ENT)5161-66.
General Surgery5051-55, 5061, 5071-73, 5091-94, 5361-62.
Gastrointestinal (GI)5301-03, 5311-13, 5331, 5341.
Gynecology5411-16.
Minor Imaging5521-22, 5591-2.
Musculoskeletal Surgery5111-16, 5101-02.
Nervous System Procedures5431-32, 5441-43, 5461-64, 5471.
Ophthalmology5481, 5491-95, 5501-04.
Pathology5671-74.
Start Printed Page 45686
Radiation Oncology5611-13, 5621-27, 5661.
Urology5371-77.
Vascular/Endovascular/Cardiovascular5181-83, 5191-94, 5211-13, 5221-24, 5231-32.
Visits and Related Services5012, 5021-25, 5031-35, 5041, 5045, 5821-22, 5841.

Under our proposal, while excepted off-campus PBDs would not be eligible to receive OPPS payments for expanded clinical families of services, such excepted off-campus PBDs would continue to be eligible to receive OPPS payment for clinical families of services that were furnished and billed prior to that date. We discuss later in this section how we are proposing to pay for expanded items and services that are furnished at excepted off-campus PBDs, that is, are nonexcepted items and services.

We are seeking public comments on these proposals. In addition, we are seeking public comments on our proposed categories of clinical families of services, and our proposal not to limit the volume of services furnished within a clinical family of services that the hospital was billing prior to November 2, 2015.

d. Change of Ownership and Excepted Status

Under current policy, provider-based status is defined as the relationship between a facility and a main provider. If a Medicare-participating hospital, in its entirety, is sold or merges with another hospital, a PBD's provider-based status generally transfers to new ownership as long as the transfer would not result in any material change of provider-based status. A provider-based approval letter for such a department would be considered valid as long as the new owners accepted the prior hospital's provider agreement, consistent with other hospital payment policies.

We have received inquiries regarding whether excepted off-campus PBDs would maintain excepted status if a hospital were purchased by a new owner, if a hospital merged with another provider, or if only an excepted off-campus PBD were sold to another hospital.

We are proposing that excepted status for the off-campus PBD would be transferred to new ownership only if ownership of the main provider is also transferred and the Medicare provider agreement is accepted by the new owner. If the provider agreement is terminated, all excepted off-campus PBDs and the excepted items and services furnished by such off-campus PBD would no longer be excepted for purposes of paragraphs (1)(B)(v) and (21) of section 1833(t) of the Act. We are proposing that individual excepted off-campus PBDs cannot be transferred from one hospital to another and maintain excepted status. We are soliciting public comments on these proposals.

e. Comment Solicitation for Data Collection Under Section 1833(t)(21)(D) of the Act

Hospitals are required to include all practice locations on the CMS 855 enrollment form. Beginning in March 2011 and ending in March 2015, in accordance with section 1866(j) of the Act, CMS conducted a revalidation process where all actively enrolled hospitals were required to complete a new CMS 855 enrollment form to (1) initially enroll in Medicare, (2) add a new practice location, or (3) revalidate existing enrollment information.

Collection and retention of Medicare enrollment data have been authorized through a Paperwork Reduction Act notice in the Federal Register. The authority for the various types of data to be collected is found in multiple sections of the Act and the Code of Federal Regulations; specifically, in sections 1816, 1819, 1833, 1834, 1842, 1861, 1866, and 1891 of the Act, and 42 CFR Chapter IV, Subchapter A.

Sections 1833(t)(21)(A) and (B) of the Act exempt both certain off-campus PBDs and the items and services furnished in certain types of off-campus PBDs from application of sections 1833(t)(1)(B)(v) and (21) of the Act. However, while the Medicare enrollment process requires that a hospital identify the name and address of each of its off-campus PBDs, such departments bill under the CMS Certification Number of the hospital, rather than a separate identifier. Accordingly, at this time, we are unable to automate a process by which we could link hospital enrollment information to claims processing information to identify items and services to specific off-campus PBDs of a hospital. In order to accurately identify items and services furnished by each off-campus PBD (exempt or not) and to actively monitor the expansion of clinical family of services at excepted off-campus PBDs, we are seeking public comments on whether to require hospitals to self-report this information to us (via their MAC) using the authority under section 1833(t)(21)(D) of the Act to collect information as necessary to implement the provision.

Specifically, we are seeking public comments on whether hospitals should be required to separately identify all individual excepted off-campus PBD locations, the date that each excepted off-campus PBD began billing and the clinical families of services (shown earlier in Table 21) that were provided by the excepted off-campus PBD prior to the November 2, 2015 date of enactment. If we were to require hospitals to report this information, we would expect to collect this information through a newly developed form which would be available for download on the CMS Web site.

3. Payment for Services Furnished in Off-Campus PBDs to Which Sections 1833(t)(1)(B)(v) and 1833(t)(21) of the Act Apply (Nonexcepted Off-Campus PBDs)

a. Background on Medicare Payment for Services Furnished in an Off-Campus PBD

As previously noted, under existing policies, Medicare generally makes two types of payments for items and services furnished in an off-campus PBD: (1) Payment for the items and services furnished by the off-campus PBD (that is, the facility) where the procedure is performed (for example, surgical supplies, equipment, and nursing services); and (2) payment for the physician's professional services in furnishing the service(s).

The first type of payment is made under the OPPS. Items and services furnished in an off-campus PBD are billed using HCPCS codes and paid under the OPPS according to the APC group to which the item or service is assigned. The OPPS includes payment for most hospital outpatient services, except those identified in section I.C. of this proposed rule. Section 1833(t)(1)(B) of the Act generally outlines what are covered OPD services eligible for Start Printed Page 45687payment under the OPPS. Sections 1833(t)(1)(B)(i) through (iii) of the Act provide for Medicare payment under the OPPS for hospital outpatient services designated by the Secretary (which includes partial hospitalization services furnished by community mental health centers (CMHCs)), certain items and services that are furnished to inpatients who have exhausted their Part A benefits or who are otherwise not in a covered Part A stay, and certain implantable items. Section 1833(t)(1)(B)(iv) and new subsection (v) list those items and services that are not covered OPD services and, therefore, not eligible for Medicare payment under the OPPS.

The second type of payment for services furnished in an off-campus PBD is for physicians' services and is made under the MPFS at the MPFS “facility rate.” For most MPFS services, Medicare maintains two separate payment rates: One that assumes a payment is also made to the facility (the facility rate); and another that assumes the professional furnishes and incurs the full costs associated with furnishing the service (the nonfacility rate). The MPFS facility rate is based on the relative resources involved in furnishing a service when separate Medicare payment is also made to the facility, usually through an institutional payment system, like the OPPS. The MPFS nonfacility rate, which reflects all of the direct and indirect practice expenses involved in furnishing the particular services, is paid in a variety of settings such as physician offices, where Medicare does not make a separate, institutional payment to the facility.

Under Medicare Part B, the beneficiary is responsible for paying cost-sharing, which is generally about 20 percent of both the OPPS hospital payment amount and the MPFS allowed amount. Because the sum of the OPPS payment and the MPFS facility payment for most services is greater than the MPFS nonfacility payment for most services, there is generally a greater cost to both the beneficiary and the Medicare program for services furnished in facilities paid through both an institutional payment system like the OPPS and the MPFS.

The incentives for hospital acquisition of physician practices and the resultant higher payments for the same types of services have been the topic of several reports in the popular media and by governmental agencies. For example, the Medicare Payment Advisory Commission (MedPAC) stated in its March 2014 Report to Congress that Medicare pays more than twice as much for a level II echocardiogram in an outpatient facility ($453) as it does in a freestanding physician office ($189) (based on CY 2014 payment rates). The report determined that the payment difference creates a financial incentive for hospitals to purchase freestanding physicians' offices and convert them to HOPDs without changing their location or patient mix. (MedPAC March 2014 Report to Congress, Chapter 3.) The Government Accountability Office (GAO) also published a report in response to a Congressional request about hospital vertical consolidation. Vertical consolidation is a financial arrangement that occurs when a hospital acquires a physician practice and/or hires physicians to work as salaried employees. In addition, the Office of Inspector General (OIG) published a report in June 2016 entitled “CMS Is Taking Steps To Improve Oversight of Provider-Based Facilities, But Vulnerabilities Remain” (OEI-04-12-00380), in which it highlighted concerns about provider-based status in light of the higher costs to both the Medicare program and Medicare beneficiaries relative to when the same services are furnished in the physician office setting. These types of reports highlight the types of concerns we believe Congress may have been trying to address when it legislated section 603 of Public Law 114-74. As we developed our proposal to implement section 603, we took into consideration the concerns described above, the specific statutory language, and the available discretion found in that statutory language.

As described in detail above and below, section 603 of Public Law 114-74, through amendments to section 1833(t) at paragraphs (1)(B)(v) and (21), provides that items and services furnished by nonexcepted off-campus PBDs and certain items and services furnished by excepted off-campus PBDs are not covered OPD services under the OPPS, and that payment shall be made for those applicable items and services under the applicable payment system if the requirements for such payment are otherwise met. However, the statutory amendments do not reference or define a specific applicable payment system under which payment shall be made.

We have established and maintained institutional Medicare payment systems based on specific statutory requirements and on how particular institutions provide particular kinds of services and incur particular kinds of costs. The rules regarding provider and supplier enrollment, conditions of participation, coverage, payment, billing, cost reporting, and coding vary across these institutional payment systems. While some of the requirements are explicitly described in statute and others are captured in CMS regulatory rules or subregulatory guidance, the requirements are unique to the particular type of institution.

Section 1833(t)(21)(C) of the Act provides for the availability of payment under other payment systems for items and services furnished by nonexcepted off-campus PBDs and for certain items and services furnished by excepted off-campus PBDs that are not covered OPD services under the OPPS (for example, expanded clinical families of services). We refer to these items and services collectively as “nonexcepted items and services.” Section 1833(t)(21)(C) of the Act provides that payments for these nonexcepted items and services furnished by an off-campus outpatient department of a provider shall be made under the applicable payment system under Medicare Part B (other than under this subsection, that is OPPS), if the requirements for such payment are otherwise met.

While we intend to provide a mechanism for an off-campus PBD to bill and receive payment for furnishing nonexcepted items and services under an applicable payment system that is not the OPPS, at this time, there is no straightforward way to do that before January 1, 2017. At a minimum, numerous complex systems changes would need to be made to allow an off-campus PBD to bill and be paid as another provider or supplier type. For example, currently, off-campus PBDs bill under the OPPS for their services on an institutional claim, whereas physicians and other suppliers bill under the MPFS on a practitioner claim; and there are numerous systems edits designed to be sure that entities enrolled in Medicare bill for their services only within their own payment systems. The Medicare system that is used to process professional claims (the Multi-Carrier System or “MCS”) was not designed to accept nor process institutional OPPS claims. Rather, OPPS claims are processed through an entirely separate system referred to as the Fiscal Intermediary Standard System or “FISS” system. To permit an off-campus PBD to bill under a different payment system than the OPPS would require significant changes to these complex systems as well as other systems involved in the processing of Medicare Part B claims. We are not suggesting these operational issues are insurmountable, but they are multifaceted and will require time and care to resolve. As such, we are not able to propose at this time a mechanism for an off-campus PBD to bill and receive Start Printed Page 45688payment for nonexcepted items and services furnished on or after January 1, 2017, under an applicable payment system that is not the OPPS.

As described in greater detail below, in order to begin implementing the requirements of section 603 of Public Law 114-74, we are proposing to specify that the applicable payment system for purposes of section 1833(t)(21)(C) of the Act is the MPFS. While we do not believe there is a way to permit off-campus PBDs to bill for nonexcepted items and services they furnish under the MPFS beginning January 1, 2017, we are actively exploring options that would allow off-campus PBDs to bill for these services under another payment system, such as the MPFS, and be paid at the applicable rate under such system beginning in CY 2018. We are soliciting public comment on the changes that might need to be made to enrollment forms, claim forms, the hospital cost report, as well as any other operational changes that might need to be made in order to allow an off-campus PBD to bill for nonexcepted items and services under a payment system other than the OPPS in a way that provides accurate payments under such payment system and minimizes burden on both providers and Medicare beneficiaries. Accordingly, we intend the policy we are proposing in this proposed rule to be a temporary, 1-year solution until we can adapt our systems to accommodate payment to off-campus PBDs for the nonexcepted items and services they furnish under the applicable payment system, other than OPPS.

b. Proposed Payment for Applicable Items and Services Furnished in Off-Campus PBDs That Are Subject to Sections 1833(t)(1)(B)(v) and (21) of the Act

(1) Definition of “Applicable Payment System” for Nonexcepted Items and Services

In this section, we describe our interpretation and proposed implementation of section 1833(t)(21)(C) of the Act, as it applies to nonexcepted items and services for CY 2017 only. Section 1833(t)(21)(C) of the Act requires that payments for nonexcepted items and services be made under the applicable payment system under Medicare Part B (other than under this subsection; that is, the OPPS) if the requirements for such payment are otherwise met. While section 1833(t)(21)(C) of the Act clearly specifies that payment for nonexcepted items and services shall not be made under subsection (t) of section 1833 (that is, the OPPS), it does not define the term “applicable payment system.” In analyzing the term “applicable payment system,” we considered whether and how the requirements for payment could be met under alternative payment systems in order to pay for nonexcepted items and services, and considered several other payment systems under which payment is made for similar items and services, such as the ASC payment system, the MPFS, or the CLFS.

As noted above, many off-campus PBDs were initially enrolled in Medicare as freestanding physician practices, and were converted as evidenced by the rapid growth of vertical hospital consolidation and hospital acquisition of physician practices.[4] Before these physician practices were converted to off-campus PBDs, the services furnished in these locations, were paid under the MPFS using an appropriate place of service code that identified the location as a nonfacility setting. This would trigger Medicare payment under the MPFS at the nonfacility rate, which includes payment for the “practice expense” resources involved in furnishing services. Many physician practices that were acquired by a hospital became provider-based to the hospital in accordance with the regulations at 42 CFR 413.65. Once a hospital-acquired physician practice became provider-based, the location became an off-campus PBD eligible to bill Medicare under the OPPS for its facility services, while physicians' services furnished in the off-campus PBD were paid at the facility rate under the MPFS. Because many of the services furnished in off-campus PBDs are identical to those furnished in freestanding physician practices, as discussed later in this section, we are proposing to designate the applicable payment system for the payment of the majority of nonexcepted items and services to be the MPFS. Specifically, we are proposing that, because we currently do not have a mechanism to pay the off-campus PBD for nonexcepted items and services, the physician or practitioner would bill and be paid for items and services in the off-campus PBD under the MPFS at the nonfacility rate instead of the facility rate.

When items and services similar to those often furnished by off-campus PBDs are furnished outside of a setting with an applicable Medicare institutional payment system, Medicare payment is generally made under the MPFS under one of several different benefit categories of Medicare benefit such as physician's services, diagnostic tests, preventive services, or radiation treatment services. Although section 1833(t)(1)(B)(v) of the Act specifically carves out from the definition of covered OPD services those items and services defined at section 1833(t)(21)(A) of the Act furnished by certain off-campus PBDs defined by section 1833(t)(21)(B) of the Act, the amendments to section 1833(t) of the Act do not specify that the off-campus outpatient departments of a provider are no longer considered a PBD part of the hospital. This nuance made it difficult for us to determine how to provide payment for the hospital-based portion of the services under MPFS because, as previously noted, Medicare payment processing systems were not designed to allow these off-campus PBDs to bill for their hospital services under a payment system other than OPPS.

Currently, a hospital (including a PBD) does not meet the requirements to bill under another payment system; that is, a hospital and its departments are enrolled as such in the Provider Enrollment, Chain and Ownership System (PECOS) and may only submit institutional claims for payment of covered OPD services under the hospital OPPS under the CMS Certification Number of the hospital. As explained above, there are several other Medicare payment systems for other types of providers and suppliers. Many of these are designed for particular kinds of institutional settings, are specifically authorized by law, and have their own regulations, payment methodologies, rates, enrollment and billing requirements, and in some cases, cost reporting requirements. While the services furnished in a PBD may be the same or similar to those that are furnished in other sites of service, for Medicare purposes, an off-campus PBD is considered to be part of the hospital that meets the requirements for payment under the OPPS for covered OPD services. There currently is no mechanism for it to be paid under a different payment system. In order to allow an off-campus PBD to bill under the MPFS for nonexcepted items and services, we believe it would be necessary to establish a new provider/supplier type (for nonexcepted off-Start Printed Page 45689campus PBDs) that could bill and be paid under the MPFS for nonexcepted items and services using the professional claim. At this time, we are not proposing new mechanisms to allow an off-campus PBD to bill and receive payment from Medicare for nonexcepted items and services as currently enrollment as a hospital based department. However, as described in detail later in this section, we are soliciting comment on changes that would need to be made in order to allow an off-campus PBD to bill for nonexcepted items services it furnishes under a payment system other than the OPPS.

Accordingly, for CY 2017, we are proposing the MPFS to be the applicable payment system for nonexcepted items and services that, but for section 603, would have otherwise been paid under the OPPS; and that payment would be made for applicable nonexcepted items and services to the physician or practitioner under the MPFS at the nonfacility rate because no separate facility payment would be made to the hospital. We note that the hospital may continue to bill for services that are not paid under the OPPS, such as laboratory services.

(2) Definition of Applicable Items and Services and Section 603 Amendment to Section 1833(t)(1)(B) of the Act and Proposed Payment for Nonexcepted Items and Services for CY 2017

(a) Background

Section 1833(t)(21)(A) of the Act defines the term “applicable items and services” for purposes of paragraph (t)(1)(B)(v) and paragraph (t)(21) to mean items and services (other than those furnished by a dedicated emergency department). Paragraph (1)(B)(v) then specifically carves out from the definition of covered OPD services, that is, those applicable items and services that are furnished on or after January 1, 2017, by an off-campus PBD, as defined in paragraph (t)(21)(B). Thus, such applicable items and services are not eligible for payment under the OPPS because they are not covered OPD services. Under our proposals, this would mean that all items and services furnished by a nonexcepted off-campus PBD and those nonexcepted items and services furnished by an excepted off-campus PBD (collectively references as nonexcepted items and services) are applicable items and services under the statute. Therefore, instead of being eligible for payment under the OPPS as covered OPD services, paragraph (t)(21)(C) requires that, for nonexcepted items and services, payment shall be made under the applicable payment system, other than OPPS, if the requirements for such payment are otherwise met. In other words, the payment requirement under paragraph (t)(21)(C) applies to items and services furnished by nonexcepted off-campus PBDs and for expanded clinical families of services furnished by excepted off-campus PBDs (nonexcepted items and services).

(b) Proposed Payment Policy for CY 2017

In accordance with sections 1833(t)(1)(B)(v) and 1833(t)(21)(C) of the Act, payment for nonexcepted items and services as defined in section X.A.2. of this proposed rule will no longer be made under the OPPS, effective January 1, 2017. Instead, we are proposing that, for items and services for which payment can be made to a billing physician or practitioner under the MPFS, the physician or practitioner furnishing such services in the off-campus PBD would bill under the MPFS at the nonfacility rate. As discussed earlier in this section, we do not believe that, under current systems, an off-campus PBD could be paid for its facility services under the MPFS, but are actively exploring options that would allow for this beginning in CY 2018. Alternatively, an off-campus PBD would have the option to enroll as a freestanding facility or supplier in order to bill for the nonexcepted items and services it furnishes (which is different from billing only for reassigned physicians' services) under the MPFS.

At this time, we are not proposing a change in payment policy under the MPFS regarding these nonexcepted items and services. However, in the CY 2017 MPFS proposed rule, we are proposing to amend our regulations and subregulatory guidance to specify that physicians and nonphysician practitioners furnishing professional services would be paid the MPFS nonfacility rate when billing for such services because there will be no accompanying Medicare facility payment for nonexcepted items and services furnished in that setting. The MPFS nonfacility rate is calculated based on the full costs of furnishing a service, including, but not limited, to space, overhead, equipment, and supplies. Under the MPFS, there are many services that include both a professional component and a technical component. Similarly, there are some services that are defined as either a “professional-only” or “technical-only” service. The professional component is based on the relative resource costs of the physician's work involved in furnishing the service and is generally paid at a single rate under the MPFS, regardless of where the service is performed. The technical component portion of the service is based on the relative resource costs of the nonphysician clinical staff who perform the test, medical equipment, medical supplies, and overhead expenses. When the service is furnished in a setting where Medicare makes a separate payment to the facility under an institutional payment system, the technical component is not paid under the MPFS because the practitioner/supplier did not incur the cost of furnishing the technical component. Rather, it would be paid to the facility under the applicable institutional payment system.

If an off-campus PBD that furnishes nonexcepted items and services wishes to bill Medicare for those services, it could choose to meet the requirements to bill and receive payment under a payment system other than the OPPS by enrolling the off-campus PBD as another provider/supplier type. For example, an off-campus PBD could enroll in Medicare as an appropriate alternative provider or supplier type (such as an ASC or physician group practice). The enrolled provider/supplier would then be able to bill and be paid under the payment system for that type of Medicare enrolled entity. For example, if an off-campus PBD were to enroll as a group practice, it would bill on the professional claim and be paid under the MPFS at the nonfacility rate in accordance with laws and regulations that apply under the MPFS.

We recognize that our proposal to pay under the MPFS for all nonexcepted items and services furnished to beneficiaries may result in hospitals establishing business arrangements with the physicians or nonphysician practitioners who bill under the MPFS. We are interested in public comments regarding the impact of other billing and claims submission rules, the fraud and abuse laws, and other statutory and regulatory provisions on our proposals. Specifically, we are interested in public comments regarding the limitations of section 1815(c) of the Act and 42 CFR 424.73 (the reassignment rules); the limitations of section 1842(n) of the Act and 42 CFR 414.50 (the anti-markup prohibition); the application of section 1877 of the Act and 42 CFR 411.350 through 411.389 (the physician self-referral provisions) to any compensation arrangements that may arise; and the application of section 1128B(b) of the Act (the Federal anti-kickback statute) to arrangements between hospitals and the physicians and other nonphysician Start Printed Page 45690practitioners who refer to them. We will consider these laws and regulations as well, and look forward to reviewing public comments on the anticipated impact of these provisions on our proposed policy and any possible future proposals.

We note that there are some services that off-campus departments may furnish that are not billed or paid under the OPPS. For example, although laboratory tests are generally packaged under the OPPS, there are some circumstances in which hospitals are permitted to bill for certain laboratory tests and receive separate payment under the CLFS. These circumstances include:

  • Outpatient laboratory tests are the only services provided. If the hospital provides outpatient laboratory tests only and no other hospital outpatient services are reported on the same claim.
  • Unrelated outpatient laboratory tests. If the hospital provides an outpatient laboratory test on the same claim as other hospital outpatient services that is clinically unrelated to the other hospital outpatient services (that is, the laboratory test is ordered by a different practitioner than the practitioner who ordered the other hospital outpatient services and for a different diagnosis than the other hospital outpatient services). We note that this exception is being proposed for deletion for CY 2017. We refer readers to section II.B.3.b.(2) of this proposed rule for a discussion of this policy.
  • Molecular pathology laboratory tests and advanced diagnostic laboratory tests (ADLTs) (proposed for CY 2017 in section II.B.3.b.(3) of this proposed rule).
  • Laboratory tests that are preventive services.

Under our proposal, if a laboratory test furnished by a nonexcepted off-campus PBD is eligible for separate payment under the CLFS, the hospital may continue to bill for it and receive payment under the CLFS. In addition, a bill may be submitted under the MPFS by the practitioner (or hospital for physicians who have reassigned their benefit), provided that the practitioner meets all the MPFS requirements. Consistent with cost reporting guidance and Medicare Program Reimbursement Manual, Part 1, Chapter 23, Section 2302.8, hospitals should report these laboratory services on a reimbursable cost center on the hospital cost report.

In addition, with respect to partial hospitalization programs (PHP) (intensive outpatient psychiatric day treatment p