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Proposed Rule

Medicare Program: Proposed Changes to Hospital Outpatient Prospective Payment and Ambulatory Surgical Center Payment Systems and Quality Reporting Programs; Price Transparency of Hospital Standard Charges; Proposed Revisions of Organ Procurement Organizations Conditions of Coverage; Proposed Prior Authorization Process and Requirements for Certain Covered Outpatient Department Services; Potential Changes to the Laboratory Date of Service Policy; Proposed Changes to Grandfathered Children's Hospitals-Within-Hospitals

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Start Preamble Start Printed Page 39398

AGENCY:

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

ACTION:

Proposed rule.

SUMMARY:

This proposed rule proposes revisions to the Medicare hospital outpatient prospective payment system (OPPS) and the Medicare ambulatory surgical center (ASC) payment system for CY 2020 based on 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. In addition, in this proposed rule, we are proposing to establish requirements for all hospitals in the United States for making hospital standard charges available to the public; establish a process and requirements for prior authorization for certain covered outpatient department services; revise the conditions for coverage of organ procurement organizations; and revise the regulations to allow grandfathered children's hospitals-within-hospitals to increase the number of beds without resulting in the loss of grandfathered status. We also solicit comments on potential revisions to the laboratory date of service policy under the Clinical Laboratory Fee Schedule. Finally, we solicit comments on an appropriate remedy in litigation involving our OPPS payment policy for 340B-acquired drugs, which would inform future rulemaking in the event of an adverse decision on appeal in that litigation.

DATES:

Comment period: To be assured consideration, comments on 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 27, 2019.

ADDRESSES:

In commenting, please refer to file code CMS-1717-P when commenting on the issues in this proposed rule. Because of staff and resource limitations, we cannot accept comments by facsimile (FAX) transmission.

Comments, including mass comment submissions, must be submitted in one of the following three ways (please choose only one of the ways listed):

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-1717-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-1717-P, Mail Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850.

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

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

Start Further Info

FOR FURTHER INFORMATION CONTACT:

2-Midnight Rule (Short Inpatient Hospital Stays), contact Lela Strong-Holloway via email Lela.Strong@cms.hhs.gov or at 410-786-3213.

Advisory Panel on Hospital Outpatient Payment (HOP Panel), contact the HOP Panel mailbox at APCPanel@cms.hhs.gov.

Ambulatory Surgical Center (ASC) Payment System, contact Scott Talaga via email Scott.Talaga@cms.hhs.gov or at 410-786-4142.

Ambulatory Surgical Center Quality Reporting (ASCQR) Program Administration, Validation, and Reconsideration Issues, contact Anita Bhatia via email Anita.Bhatia@cms.hhs.gov or at 410-786-7236.

Ambulatory Surgical Center Quality Reporting (ASCQR) Program Measures, contact Vinitha Meyyur via email Vinitha.Meyyur@cms.hhs.gov or at 410-786-8819.

Blood and Blood Products, contact Josh McFeeters via email Joshua.McFeeters@cms.hhs.gov or at 410-786-9732.

Cancer Hospital Payments, contact Scott Talaga via email Scott.Talaga@cms.hhs.gov or at 410-786-4142.

CMS Web Posting of the OPPS and ASC Payment Files, contact Chuck Braver via email Chuck.Braver@cms.hhs.gov or at 410-786-6719.

Control for Unnecessary Increases in Volume of Outpatient Services, contact Elise Barringer via email Elise.Barringer@cms.hhs.gov or at 410-786-9222.

Composite APCs (Low Dose Brachytherapy and Multiple Imaging), contact Elise Barringer via email Elise.Barringer@cms.hhs.gov or at 410-786-9222.

Comprehensive APCs (C-APCs), contact Lela Strong-Holloway via email Lela.Strong@cms.hhs.gov or at 410-786-3213, or Mitali Dayal via email at Mitali.Dayal2@cms.hhs.gov or at 410-786-4329.

CPT and Level II HCPCS Codes, contact Marjorie Baldo via email Marjorie.Baldo@cms.hhs.gov or at 410-786-4617.

Grandfathered Children's Hospitals-within-Hospitals, contact Michele Hudson via email Michele.Hudson@cms.hhs.gov or 410-786-4487.

Hospital Cost Reporting and Chargemaster Comment Solicitation, contact Dr. Terri Postma via email at PriceTransparencyHospitalCharges@cms.hhs.gov.

Hospital Outpatient Quality Reporting (OQR) Program Administration, Validation, and Reconsideration Issues, contact Anita Bhatia via email Anita.Bhatia@cms.hhs.gov or at 410-786-7236.

Hospital Outpatient Quality Reporting (OQR) Program Measures, contact Vinitha Meyyur via email Vinitha.Meyyur@cms.hhs.gov or at 410-786-8819.

Hospital Outpatient Visits (Emergency Department Visits and Critical Care Visits), contact Elise Barringer via email Start Printed Page 39399 Elise.Barringer@cms.hhs.gov or at 410-786-9222.

Inpatient Only (IPO) Procedures List, contact Lela Strong-Holloway via email Lela.Strong@cms.hhs.gov or at 410-786-3213, or Au'Sha Washington via email at Ausha.Washington@cms.hhs.gov or at 410-786-3736.

New Technology Intraocular Lenses (NTIOLs), contact Scott Talaga via email Scott.Talaga@cms.hhs.gov or at 410-786-4142.

No Cost/Full Credit and Partial Credit Devices, contact Scott Talaga via email Scott.Talaga@cms.hhs.gov or at 410-786-4142.

OPPS Brachytherapy, contact Scott Talaga via email Scott.Talaga@cms.hhs.gov or at 410-786-4142.

OPPS Data (APC Weights, Conversion Factor, Copayments, Cost-to-Charge Ratios (CCRs), Data Claims, Geometric Mean Calculation, Outlier Payments, and Wage Index), contact Erick Chuang via email Erick.Chuang@cms.hhs.gov or at 410-786-1816, Steven Johnson via email Steven.Johnson@cms.hhs.gov or at 410-786-3332, or Scott Talaga via email Scott.Talaga@cms.hhs.gov or at 410-786-4142, or Josh McFeeters via email at Joshua.McFeeters@cms.hhs.gov or at 410-786-9732.

OPPS Drugs, Radiopharmaceuticals, Biologicals, and Biosimilar Products, contact Josh McFeeters via email Joshua.McFeeters@cms.hhs.gov or at 410-786-9732.

OPPS New Technology Procedures/Services, contact the New Technology APC mailbox at NewTechAPCapplications@cms.hhs.gov.

OPPS Packaged Items/Services, contact Lela Strong-Holloway via email Lela.Strong@cms.hhs.gov or at 410-786-3213, or Mitali Dayal via email at Mitali.Dayal2@cms.hhs.gov or at 410-786-4329.

OPPS Pass-Through Devices, contact the Device Pass-Through mailbox at DevicePTapplications@cms.hhs.gov.

OPPS Status Indicators (SI) and Comment Indicators (CI), contact Marina Kushnirova via email Marina.Kushnirova@cms.hhs.gov or at 410-786-2682.

Organ Procurement Organization (OPO) Conditions for Coverage (CfCs), contact Alpha-Banu Wilson via email at AlphaBanu.Wilson@cms.hhs.gov or at 410-786-8687, or Diane Corning via email at Diane.Corning@cms.hhs.gov or at 410-786-8486.

Partial Hospitalization Program (PHP) and Community Mental Health Center (CMHC) Issues, contact the PHP Payment Policy Mailbox at PHPPaymentPolicy@cms.hhs.gov.

Price Transparency of Hospital Standard Charges, contact Dr. Terri Postma or Elizabeth November via email at PriceTransparencyHospitalCharges@cms.hhs.gov.

Prior Authorization Process and Requirements for Certain Hospital Outpatient Department Services, contact Thomas Kessler via email at Thomas.Kessler@cms.hhs.gov or at 410-786-1991.

Quality Measurement Relating to Price Transparency, contact Dr. Reena Duseja or Dr. Terri Postma via email at PriceTransparencyHospitalCharges@cms.hhs.gov

Rural Hospital Payments, contact Josh McFeeters via email at Joshua.McFeeters@cms.hhs.gov or at 410-786-9732.

Skin Substitutes, contact Josh McFeeters via email Joshua.McFeeters@cms.hhs.gov or at 410-786-9732.

Supervision of Outpatient Therapeutic Services in Hospitals and CAHs, contact Josh McFeeters via email Joshua.McFeeters@cms.hhs.gov or at 410-786-9732, or Mitali Dayal via email at Mitali.Dayal2@cms.hhs.gov or at 410-786-4329.

All Other Issues Related to Hospital Outpatient and Ambulatory Surgical Center Payments Not Previously Identified, contact Elise Barringer via email Elise.Barringer@cms.hhs.gov or at 410-786-9222.

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 website as soon as possible after they have been received: http://www.regulations.gov/​. Follow the search instructions on that website to view public comments.

Addenda Available Only Through the Internet on the CMS Website

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 website. The Addenda relating to the OPPS are available at: https://www.cms.gov/​Medicare/​Medicare-Fee-for-Service-Payment/​HospitalOutpatientPPS/​index.html. The Addenda relating to the ASC payment system are available at: https://www.cms.gov/​Medicare/​Medicare-Fee-for-Service-Payment/​HospitalOutpatientPPS/​index.html.

Current Procedural Terminology (CPT) Copyright Notice

Throughout this proposed rule, we use CPT codes and descriptions to refer to a variety of services. We note that CPT codes and descriptions are copyright 2018 American Medical Association. All Rights Reserved. CPT is a registered trademark of the American Medical Association (AMA). Applicable Federal Acquisition Regulations (FAR and Defense Federal Acquisition Regulations (DFAR) apply.

Table of Contents

I. Summary and Background

A. Executive Summary of This Document

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)

F. Public Comments Received on the CY 2019 OPPS/ASC Final Rule With Comment Period

II. Proposed Updates Affecting OPPS Payments

A. Proposed Recalibration of APC Relative Payment Weights

B. Proposed Conversion Factor Update

C. Proposed Wage Index Changes

D. Proposed Statewide Average Default Cost-to-Charge Ratios (CCRs)

E. Proposed Adjustment for Rural Sole Community Hospitals (SCHs) and Essential Access Community Hospitals (EACHs) Under Section 1833(t)(13)(B) of the Act for CY 2020

F. Proposed Payment Adjustment for Certain Cancer Hospitals for CY 2020

G. Proposed Hospital Outpatient Outlier Payments

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

I. Proposed Beneficiary Copayments

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

A. Proposed OPPS Treatment of New and Revised HCPCS Codes

B. Proposed OPPS Changes—Variations Within APCs

C. Proposed New Technology APCs

D. Proposed APC-Specific Policies

IV. Proposed OPPS Payment for Devices

A. Pass-Through Payments for Devices

B. Proposed 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 RadiopharmaceuticalsStart Printed Page 39400

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

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 2020

C. Proposed Outlier Policy for CMHCs

D. Update to PHP Allowable HCPCS Codes

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

A. Background

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

X. Proposed Nonrecurring Policy Changes

A. Proposed Changes in the Level of Supervision of Outpatient Therapeutic Services in Hospitals and Critical Access Hospitals (CAHs)

B. Short Inpatient Hospital Stays

C. Method To Control Unnecessary Increases in the Volume of Clinic Visit Services Furnished in Excepted Off-Campus Provider-Based Departments (PBDs)

XI. Proposed CY 2020 OPPS Payment Status and Comment Indicators

A. Proposed CY 2020 OPPS Payment Status Indicator Definitions

B. Proposed CY 2020 Comment Indicator Definitions

XII. MedPAC Recommendations

A. OPPS Payment Rates Update

B. ASC Conversion Factor Update

C. ASC Cost Data

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

A. Background

B. Proposed ASC Treatment of New and Revised Codes

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

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

E. New Technology Intraocular Lenses (NTIOLs)

F. Proposed ASC Payment and Comment Indicators

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

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

A. Background

B. Hospital OQR Program Quality Measures

C. Administrative Requirements

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

E. Proposed Payment Reduction for Hospitals That Fail To Meet the Hospital OQR Program Requirements for the CY 2020 Payment Determination

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

A. Background

B. ASCQR Program Quality Measures

C. Administrative Requirements

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

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

XVI. Proposed Requirements for Hospitals To Make Public a List of Their Standard Charges

A. Introduction and Overview

B. Proposed Definition of “Hospital” and Proposed Special Requirements That Would Apply to Certain Types of Hospitals

C. Proposed Definition of “Items and Services” Provided by Hospitals

D. Proposed Definitions for Types of “Standard Charges”

E. Proposed Requirements for Public Disclosure of All Hospital Standard Charges for All Items and Services

F. Proposed Requirements for Consumer-Friendly Display of the Payer-Specific Negotiated Charges for Selected Shoppable Services

G. Proposed Monitoring and Enforcement of Requirements for Making Standard Charges Public

H. Proposed Appeals Process

XVII. Request for Information (RFI): Quality Measurement Relating to Price Transparency for Improving Beneficiary Access to Provider and Supplier Charge Information

A. Introduction

B. Request for Information

XVIII. Organ Procurement Organizations (OPOs) Conditions for Coverage (CfCs): Proposed Revision of the Definition of “Expected Donation Rate”

A. Background

B. Proposed Revision of the Definition of “Expected Donation Rate”

C. Request for Information Regarding Potential Changes to the Organ Procurement Organization and Transplant Center Regulations

XIX. Clinical Laboratory Fee Schedule: Potential Revisions to the Laboratory Date of Service Policy

A. Background on the Medicare Part B Laboratory Date of Service Policy

B. Medicare DOS Policy and the “14-Day Rule”

C. Billing and Payment for Laboratory Services Under the OPPS

D. ADLTs Under the New Private Payor Rate-Based CLFS

E. Additional Laboratory DOS Policy Exception for the Hospital Outpatient Setting

F. Potential Revisions to Laboratory DOS Policy and Request for Public Comments

XX. Proposed Prior Authorization Process and Requirements for Certain Hospital Outpatient Department (OPD) Services

A. Background

B. Proposal for a Prior Authorization Process for Certain OPD Services

C. Proposed List of Outpatient Department Services Requiring Prior Authorization

XXI. Comment Solicitation on Cost Reporting, Maintenance of Hospital Chargemasters, and Related Medicare Payment Issues

XXII. Proposed Changes to Requirements for Grandfathered Children's Hospitals-Within-Hospitals (HwHs)

XXIII. Files Available to the Public Via the internet

XXIV. Collection of Information Requirements

A. Statutory Requirement for Solicitation of Comments

B. ICRs for the Hospital OQR Program

C. ICRs for the ASCQR Program

D. ICR for Proposal on Hospital Price Transparency

E. ICRs for Proposed Revision of the Definition of “Expected Donation Rate” for Organ Procurement Organizations

F. ICR for Proposed Prior Authorization Process and Requirements for Certain Hospital Outpatient Department (OPD) Services

G. Potential Revisions to Laboratory Date of Service (DOS) Policy

H. Total Reduction in Burden Hours and in Costs

XXV. Response to Comments

XXVI. Economic Analyses

A. Statement of Need

B. Overall Impact for the Provisions of This Proposed Rule

C. Detailed Economic Analyses

D. Effects of the Proposals Relating to Price Transparency in Hospital Standard Charges

E. Effects of Proposed Prior Authorization Process and Requirements for Certain Hospital Outpatient Department (OPD) Services

F. Effects of Proposal Relating to Changes in the Definition of Expected Donation Rate for Organ Procurement Organizations

G. Potential Revisions to the Laboratory Date of Service Policy

H. Effect of Proposed Changes to Requirements for Grandfathered Children's Hospitals-Within-Hospitals (HwHs)

I. Regulatory Review Costs

J. Regulatory Flexibility Act (RFA) Analysis

K. Unfunded Mandates Reform Act Analysis

L. Reducing Regulation and Controlling Regulatory Costs

M. Conclusion

XXVII. 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, 2020. Section 1833(t) of the Social Security Act (the Act) requires us to Start Printed Page 39401annually 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, the relative payment weights, and the wage 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 this proposed rule, we also are proposing to: Establish requirements for all hospitals (including hospitals not paid under the OPPS) in the United States for making hospital standard charges available to the public; establish a process and requirements for prior authorization for certain covered outpatient department services; revise the conditions for coverage for organ procurement organizations; and revise the regulations to allow grandfathered children's hospitals-within-hospitals to increase the number of beds without resulting in the loss of grandfathered status. We also solicit comments on potential revisions to the laboratory date of service policy under the Clinical Laboratory Fee Schedule.

2. Summary of the Major Provisions

  • OPPS Update: For CY 2020, we are proposing to increase the payment rates under the OPPS by an Outpatient Department (OPD) fee schedule increase factor of 2.7 percent. This increase factor is based on the proposed hospital inpatient market basket percentage increase of 3.2 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. Based on this proposed update, we estimate that total payments to OPPS providers (including beneficiary cost-sharing and estimated changes in enrollment, utilization, and case-mix) for CY 2020 would be approximately $79 billion, an increase of approximately $6 billion compared to estimated CY 2019 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 reporting factor of 0.980 to the OPPS payments and copayments for all applicable services.

  • 2-Midnight Rule (Short Inpatient Hospital Stays): For CY 2020, we are proposing to establish a 1-year exemption from Beneficiary and Family-Centered Care Quality Improvement Organizations (BFCC-QIOs) referrals to Recovery Audit Contractors (RACs) and RAC reviews for “patient status” (that is, site-of-service) for procedures that are removed from the inpatient only (IPO) list under the OPPS beginning on January 1, 2020.
  • Comprehensive APCs: For CY 2020, we are proposing to create two new comprehensive APCs (C-APCs). These proposed new C-APCs include the following: C-APC 5182 (Level 2 Vascular Procedures) and proposed C-APC 5461 (Level 1 Neurostimulator and Related Procedures). This proposal would increase the total number of C-APCs to 67.
  • Proposed Changes to the Inpatient Only (IPO) List: For CY 2020, we are proposing to remove one procedure from the inpatient only list and we are seeking public comment on the removal of six procedures from the inpatient only (IPO) list.
  • Method to Control Unnecessary Increases in the Volume of Clinic Visit Services Furnished in Excepted Off-Campus Provider-Based Departments (PBDs): For CY 2020, we are completing the phase-in of the reduction in payment for the clinic visit services described by HCPCS code G0463 furnished in expected off-campus provider-based departments as a method to control uncessary increases in the volume of this service.
  • Device Pass-Through Payment Applications: For CY 2020, we are evaluating seven applications for device pass-through payments and are seeking public comments in this CY 2020 proposed rule on whether these applications meet the criteria for device pass-through payment status.
  • Proposed Changes to Substantial Clinical Improvement Criterion: For CY 2020, we are proposing an alternative pathway to the substantial clinical improvement criterion for devices approved under the FDA Breakthrough Devices Program to qualify for device pass-through status beginning with applications received on or after January 1, 2020.
  • Cancer Hospital Payment Adjustment: For CY 2020, we are proposing to continue to provide additional payments to cancer hospitals so that a 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. However, section 16002(b) of the 21st Century Cures Act requires that this weighted average PCR be reduced by 1.0 percentage point. Based on the data and the required 1.0 percentage point reduction, a proposed target PCR of 0.89 will be used to determine the CY 2020 cancer hospital payment adjustment to be paid at cost report settlement. That is, the payment adjustment will be the additional payments needed to result in a PCR equal to 0.89 for each cancer hospital.
  • Rural Adjustment: For 2020 and subsequent years, we are continuing the 7.1 percent adjustment to OPPS payments for certain rural SCHs, including essential access community hospitals (EACHs). We intend to continue such 7.1 percent adjustment in the absence of data to suggest a different percentage adjustment should apply.
  • 340B -Acquired Drugs: We are proposing to continue to pay ASP−22.5 percent for 340B-acquired drugs including when furnished in nonexcepted off-campus PBDs paid under the PFS. On December 27, 2018, in the case of American Hospital Association et al. v. Azar et al., the United States District Court for the District of Columbia (hereinafter referred to as “the district court”) concluded in the context of reimbursement requests for CY 2018 that the Secretary exceeded his statutory authority by adjusting the Medicare payment rates for drugs acquired under the 340B Program to ASP minus 22.5 percent for that year. CMS respectfully disagreed with the district court's understanding of the scope of CMS' adjustment authority and asked the district court to enter final judgment so as to permit an immediate appeal. On July 10, 2019, the district court granted the government's request and entered final judgment, and the agency does intend to pursue its appeal rights. Nonetheless, CMS is taking the steps necessary to craft an appropriate remedy in the event of an unfavorable decision on appeal. We are soliciting public comments on the appropriate OPPS payment rate for 340B-acquired drugs, including whether a rate of ASP+3 percent could be an appropriate payment amount for these drugs, both for CY 2020 and for purposes of determining the remedy for CYs 2018 and 2019. In addition to comments on the appropriate payment amount for Start Printed Page 39402calculating the remedy for CYs 2018 and 2019 and for use for CY 2020, we also seek public comment on how to structure the remedy for CYs 2018 and 2019. This request for public comment includes comments on whether such a remedy should be retrospective in nature (for example, made on a claim-by-claim basis), whether such a remedy could be prospective in nature (for example, an upward adjustment to 340B claims in the future to account for any underpayments in the past), and whether there is some other mechanism that could produce a result equitable to hospitals that do not acquire drugs through the 340B program while respecting the budget neutrality mandate. In the event of an adverse decision on appeal, we would anticipate proposing the specific remedy for CYs 2018 and 2019, and, if necessary, to the CY 2020 rates, in the next available rulemaking vehicle, which is the CY 2021 OPPS/ASC proposed rule. Those proposals will be informed by the comments solicited in this proposed rule.
  • ASC Payment Update: For CYs 2019 through 2023, we update the ASC payment system using the hospital market basket update. Using the hospital market basket methodology, for CY 2020, we are proposing to increase payment rates under the ASC payment system by 2.7 percent for ASCs that meet the quality reporting requirements under the ASCQR Program. This proposed increase is based on a proposed hospital market basket of 3.2 percent minus a proposed multifactor productivity adjustment required by the Affordable Care Act of 0.5 percentage point. Based on this proposed update, we estimate that total payments to ASCs (including beneficiary cost-sharing and estimated changes in enrollment, utilization, and case-mix) for CY 2020 would be approximately $4.89 billion, an increase of approximately $200 million compared to estimated CY 2019 Medicare payments.
  • Proposed Changes to the List of ASC Covered Surgical Procedures: For CY 2020, we are proposing to add 8 procedures to the ASC list of covered surgical procedures. Additions to the list include a total knee arthroplasty procedure, a mosaicplasty procedure, as well as six coronary intervention procedures. We are soliciting public comments with respect to whether certain other surgical procedures related to the cardiovascular system should be added to the ASC list of covered surgical procedures.
  • Proposed Changes to the Level of Supervision of Outpatient Therapeutic Services in Hospitals and Critical Access Hospitals: For CY 2020, we are proposing to change the minimum required level of supervision from direct supervision to general supervision for all hospital outpatient therapeutic services provided by all hospitals and CAHs. This proposal would ensure a standard minimum level of supervision for each hospital outpatient service furnished incident to a physician's service.
  • Hospital Outpatient Quality Reporting (OQR) Program: For the Hospital OQR Program, we are proposing to remove OP-33: External Beam Radiotherapy for Bone Metastases for the CY 2022 payment determination and subsequent years.
  • Ambulatory Surgical Center Quality Reporting (ASCQR) Program: For the ASCQR Program, we are proposing to adopt one new measure, ASC-19: Facility-Level 7-Day Hospital Visits after General Surgery Procedures Performed at Ambulatory Surgical Centers, beginning with the CY 2024 payment determination and for subsequent years.

Proposed Requirements for Hospitals to Make Public a List of Their Standard Charges: We are proposing to add a new Part 180—Hospital Price Transparency to Title 45 of the Code of Federal Regulations (CFR) which would contain our proposed regulations on price transparency for purposes of section 2718(e) of the PHS Act. In this section, we make proposals related to: (1) A definition of “hospital”; (2) different reporting requirements that would apply to certain hospitals; (3) definitions for two types of “standard charges” (specifically, gross charges and payer-specific negotiated charges) that hospitals would be required to make public, and a request for public comment on other types of standard charges that hospitals should be required to make public; (4) a definition of hospital “items and services” that would include all items and services (including individual items and services and service packages) provided by the hospital to a patient in connection with an inpatient admission or an outpatient department visit; (5) requirements for making public a machine-readable file that contains a hospital's gross charges and payer-specific negotiated charges for all items and services provided by the hospital; (6) requirements for making public payer-specific negotiated charges for select hospital-provided items and services that are “shoppable” and that are displayed in a consumer-friendly manner; (7) monitoring for hospital noncompliance with public disclosure requirements to make public standard charges; (8) actions that would address hospital noncompliance, which include issuing a written warning notice, requesting a corrective action plan, and imposing civil monetary penalties (CMPs) on noncompliant hospitals and publicizing these penalties on a CMS website; and (9) appeals of CMPs.

  • Proposed Prior Authorization Process and Requirements for Certain Hospital Outpatient Department (OPD) Services: We are proposing a prior authorization process using the authority in section 1833(t)(2)(F) of the Act as a method for controlling unnecessary increases in the volume of the following five categories of services: (1) Blepharoplasty, (2) botulinum toxin injections, (3) panniculectomy, (4) rhinoplasty, and (5) vein ablation.
  • Organ Procurement Organizations (OPOs) Conditions for Coverage (CfCs) Proposed Revision of the Definition of “Expected Donation Rate”: We are proposing to revise the definition of “expected donation rate” that is included in the second outcome measure to match the Scientific Registry of Transplant Recipients (SRTR) definition.

We are also proposing to reduce the time period for the second outcome measure and calculate the expected donation rate using 12 out of the 24 months of data (from January 1, 2020 through December 31, 2020) for the 2022 recertification cycle only.

  • Request for Information Regarding Potential Changes to the Organ Procurement Organization and Transplant Center Regulations: We are soliciting public comments regarding what revisions may be appropriate for the current OPO CfCs and the current transplant center CoPs. In addition, we are seeking public comments on two potential outcome measures for OPOs.

3. Summary of Costs and Benefits

In sections XXVI. and XXVII. 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 All OPPS Proposed Changes

Table 41 in section XXVI. of this proposed rule displays the distributional impact of all the proposed OPPS changes on various groups of hospitals and CMHCs for CY 2020 compared to all estimated OPPS payments in CY 2019. We estimate that the policies in this proposed rule would result in a 2.0 percent overall increase in OPPS payments to providers. We estimate that total OPPS payments for Start Printed Page 39403CY 2020, including beneficiary cost-sharing, to the approximately 3,734 facilities paid under the OPPS (including general acute care hospitals, children's hospitals, cancer hospitals, and CMHCs) would increase by approximately $940 million compared to CY 2019 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 we adopted beginning in CY 2011, and basing payment fully on the type of provider furnishing the service, we estimate a 3.9 percent increase in CY 2020 payments to CMHCs relative to their CY 2019 payments.

b. Impacts of the Proposed Updated Wage Indexes

We estimate that our proposed update of the wage indexes based on the FY 2020 IPPS proposed rule wage indexes would result in no estimated payment change for urban hospitals under the OPPS and an estimated increase of 0.8 percent for rural hospitals. These proposed wage indexes include the continued implementation of the OMB labor market area delineations based on 2010 Decennial Census data, with updates, as discussed in section II.C. of this proposed rule.

c. Impacts of the Proposed Rural Adjustment and the Cancer Hospital Payment Adjustment

There are no significant impacts of our proposed CY 2020 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 hospital payment adjustments. While we are proposing to implement the reduction to the cancer hospital payment adjustment required by section 16002 of the 21st Century Cures Act for CY 2020, the target payment-to-cost ratio (PCR) for CY 2020 is 0.89, compared to 0.88 for CY 2019, and therefore has a slight impact on budget neutrality adjustments.

d. Impacts of the Proposed OPD Fee Schedule Increase Factor

For the CY 2020 OPPS/ASC, we are proposing an OPD fee schedule increase factor of 2.7 percent and applying that increase factor to the conversion factor for CY 2020. As a result of the proposed OPD fee schedule increase factor and other budget neutrality adjustments, we estimate that urban hospitals would experience an increase of approximately 2.8 percent and that rural hospitals would experience an increase of 3.0 percent. Classifying hospitals by teaching status, we estimate nonteaching hospitals would experience an increase of 3.0 percent, minor teaching hospitals would experience an increase of 3.1 percent, and major teaching hospitals would experience an increase of 2.3 percent. We also classified hospitals by the type of ownership. We estimate that hospitals with voluntary ownership would experience an increase of 2.7 percent in payments, while hospitals with government ownership would experience an increase of 2.8 percent in payments. We estimate that hospitals with proprietary ownership would an experience an increase of 3.6 percent in payments.

e. Impacts of the Proposed ASC Payment Update

For impact purposes, the surgical procedures on the ASC list of covered procedures are aggregated into surgical specialty groups using CPT and HCPCS code range definitions. The percentage change in estimated total payments by specialty groups under the proposed CY 2020 payment rates, compared to estimated CY 2019 payment rates, generally ranges between an increase of 2 and 5 percent, depending on the service, with some exceptions. We estimate the impact of applying the hospital market basket update to proposed ASC payment rates would increase payments by $100 million under the ASC payment system in CY 2020.

f. Impact of the Proposed Changes to the Hospital OQR Program

Across 3,300 hospitals participating in the Hospital OQR Program, we estimate that our proposed requirements would result in the following changes to costs and burdens related to information collection for the Hospital OQR Program compared to previously adopted requirements: If all proposals are adopted as final, there is a net reduction of one measure reported by hospitals, which would result in a minimal net reduction in burden of $21,379.

g. Impact of the Proposed Changes to the ASCQR Program

Across 3,937 ASCs participating in the ASCQR Program, we estimate that our proposed requirements would not result in changes to costs and burdens related to information collection for the ASCQR Program, compared to previously adopted requirements.

h. Impact of the Proposed Requirements for Hospitals To Make Public a List of Their Standard Charges

We estimate the total annual burden for hospitals to review and post their standard charges to be 12 hours per hospital at $1,017.24 per hospital for a total burden of 72,024 hours (12 hours × 6,002 hospitals) and total cost of $6,105,474 ($1,017.24 × 6,002 hospitals) if our policies, as discussed in section XVI. of this proposed rule are finalized as proposed.

i. Impact of the Proposed Prior Authorization Process and Requirements for Certain Hospital Outpatient Department (OPD) Services

Across all providers, we estimate that the total burden for year one (6 months) would be 73,647 hours and $2,604,281 (Table 48—Year 1 (6 Month) Private Sector Costs of this proposed rule) for the five categories of services for which we are proposing to require prior authorization. In addition, we estimate that the total annual burden, allotted across all providers, would be 125,242 hours and $4,475,116 per year for the services. An annualized burden is estimated at 108,044 hours and $3,851,504. The annualized burden is based on an average of 3 years, that is, 1 year at the 6-month burden and 2 years at the 12-month burden. This accounts for the time associated with submitting the prior authorization request package and related medical documentation to support Medicare payment of the service(s). Medicare would incur $5,787,055 for the first 6 months (Table 49—Year 1 (6 Month) Estimated Annual Medicare Costs of this proposed rule) and $11,571,179 annually therafter, in additional costs associated with processing the prior authorization requests, as well as education, outreach, and systems. Benefits include decreased unnecessary utilization of these OPD services, and subsequently, reduced improper payments made for claims for these services that do not meet Medicare requirements.

j. Impacts of the Proposed Revision of the Definition of “Expected Donation Rate” for Organ Procurement Organizations

All 58 OPOs are required to meet two out of three outcome measures detailed in the OPO CfC regulations at 42 CFR 486.318(b). We are proposing to revise the definition of “expected donation rate” in the OPO CfCs. This revision would eliminate the potential for confusion in the OPO community due to different definitions of the same term. Start Printed Page 39404The proposal would not affect data collection or reporting by the OPTN and SRTR, nor their statistical evaluation of OPO performance. Therefore, it would not result in any quantifiable financial impact.

B. Legislative and Regulatory Authority for the Hospital OPPS

When Title XVIII of the Social Security Act (the Act) was enacted, Medicare payment for hospital outpatient services was based on hospital-specific costs. In an effort to ensure that Medicare and its beneficiaries pay appropriately for services and to encourage more efficient delivery of care, the Congress mandated replacement of the reasonable cost-based payment methodology with a prospective payment system (PPS). The Balanced Budget Act of 1997 (BBA) (Pub. L. 105-33) added section 1833(t) to the Act, authorizing implementation of a PPS for hospital outpatient services. The OPPS was first implemented for services furnished on or after August 1, 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; the Consolidated Appropriations Act, 2016 (Pub. L. 114-113), enacted on December 18, 2015, the 21st Century Cures Act (Pub. L. 114-255), enacted on December 13, 2016; the Consolidated Appropriations Act, 2018 (Pub. L. 115-141), enacted on March 23, 2018; and the Substance Use-Disorder Prevention that Promotes Opioid Recovery and Treatment for Patients and Communities Act (Pub. L. 115-271), enacted on October 24, 2018.

Under the OPPS, we generally 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, as required by section 1833(t)(2)(B) of the Act. In accordance with section 1833(t)(2)(B) 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 Start Printed Page 39405Schedule (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. In addition, section 1833(t)(1)(B)(v) of the Act does not include applicable items and services (as defined in subparagraph (A) of paragraph (21)) that are furnished on or after January 1, 2017 by an off-campus outpatient department of a provider (as defined in subparagraph (B) of paragraph (21). 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 the wage 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 website at: https://www.cms.gov/​Medicare/​Medicare-Fee-for-Service-Payment/​HospitalOutpatientPPS/​Hospital-Outpatient-Regulations-and-Notices.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, 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 Public Health Service 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 HOP 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 Panel, and, at that time, named the APC Panel. This expert panel is composed of appropriate representatives of providers (currently employed full-time, not as consultants, in their respective areas of expertise) who review clinical data and advise 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—

  • May advise on the clinical integrity of Ambulatory Payment Classification (APC) groups and their associated weights;
  • May advise on the appropriate supervision level for hospital outpatient services;
  • Continues to be technical in nature;
  • Is governed by the provisions of the FACA;
  • 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 Panel's charter was also amended on November 6, 2014 (80 FR 23009), and the number of members was revised from up to 19 to up to 15 members. The Panel's current charter was approved on November 19, 2018, for a 2-year period.

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 website at: https://www.cms.gov/​Regulations-and-Guidance/​Guidance/​FACA/​AdvisoryPanelonAmbulatoryPaymentClassificationGroups.html.

3. Panel Meetings and Organizational Structure

The Panel has held many meetings, with the last meeting taking place on August 20, 2018. 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 of which the public should be aware. Beginning in CY 2017, we have transitioned to one meeting per year (81 FR 31941). The next meeting will take place on August 19-20, 2019. Complete information on the 2019 summer meeting, including information related to meeting presentations and submittals, meeting attendance/admittance, and web streaming of the meeting, can be found in the meeting notice published in the Federal Register on June 5, 2019 (84 FR 26117) and available on the website at: https://www.govinfo.gov/​content/​pkg/​FR-2019-06-05/​pdf/​2019-11756.pdf. Registration to attend the meeting in person may be made through the CMS website at: https://www.cms.gov/​apps/​events/​event.asp?​id=​3745.

In addition, 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 include the following:

  • APC Groups and Status Indicator Assignments Subcommittee, which advises the Panel on the appropriate status indicators to be assigned to Start Printed Page 39406HCPCS codes, including but not limited to whether a HCPCS code or a category of codes should be packaged or separately paid, as well as the appropriate APC assignment of HCPCS codes regarding services for which separate payment is made;
  • Data Subcommittee, which is responsible for studying the data issues confronting the Panel and for recommending options for resolving them; and
  • Visits and Observation Subcommittee, which reviews and makes recommendations to the Panel on all technical issues pertaining to observation services and hospital outpatient visits paid under the OPPS.

Each of these subcommittees was established by a majority vote from the full Panel during a scheduled Panel meeting, and the Panel recommended at the August 20, 2018 meeting that the subcommittees continue. We accepted this recommendation.

Discussions of the other recommendations made by the Panel at the August 20, 2018 Panel meeting, namely CPT codes and a comprehensive APC for autologous hematopoietic stem cell transplantation, OPPS payment for outpatient clinic visits and restrictions to service line expansions, and packaging policies, were discussed in the CY 2019 OPPS/ASC final rule with comment period (83 FR 58827). For discussions of earlier Panel meetings and recommendations, we refer readers to previously published OPPS/ASC proposed and final rules, the CMS website mentioned earlier in this section, and the FACA database at http://facadatabase.gov.

F. Public Comments Received on the CY 2019 OPPS/ASC Final Rule With Comment Period

We received over 540 timely pieces of correspondence on the CY 2019 OPPS/ASC final rule with comment period that appeared in the Federal Register on November 30, 2018 (83 FR 61567), 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).

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.

In this CY 2020 OPPS/ASC proposed rule, for CY 2020, we are proposing to recalibrate the APC relative payment weights for services furnished on or after January 1, 2020, and before January 1, 2021 (CY 2020), using the same basic methodology that we described in the CY 2019 OPPS/ASC final rule with comment period (83 FR 58827 through 58828), using updated CY 2018 claims data. That is, we are proposing to recalibrate the relative payment weights for each APC based on claims and cost report data for hospital outpatient department (HOPD) services, using the most recent available data to construct a database for calculating APC group weights.

For the purpose of recalibrating the APC proposed relative payment weights for CY 2020, we began with approximately 164 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, 2018, and before January 1, 2019, before applying our exclusionary criteria and other methodological adjustments. After the application of those data processing changes, we used approximately 88 million final action claims to develop the proposed CY 2020 OPPS payment weights. 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 2020 OPPS/ASC proposed rule on the CMS website at: http://www.cms.gov/​Medicare/​Medicare-Fee-for-Service-Payment/​HospitalOutpatientPPS/​index.html.

Addendum N to this proposed rule (which is available via the internet on the CMS website) includes the proposed list of bypass codes for CY 2020. The proposed list of bypass codes contains codes that were reported on claims for services in CY 2018 and, therefore, includes codes that were in effect in CY 2018 and used for billing, but were deleted for CY 2019. We retained these deleted bypass codes on the proposed CY 2020 bypass list because these codes existed in CY 2018 and were covered OPD services in that period, and CY 2018 claims data were used to calculate proposed CY 2020 payment rates. Keeping these deleted bypass codes on the bypass list potentially allows us to create more “pseudo” single procedure claims for ratesetting purposes. “Overlap bypass codes” that 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 2020 are identified by asterisks (*) in the fourth column of Addendum N.

Table 1 contains the list of codes that we are proposing to remove from the CY 2020 bypass list.

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

For CY 2020, in this CY 2020 OPPS/ASC proposed rule, 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 2020 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 2018 claims data by comparing these claims data to the most recently available hospital cost reports, which, in most cases, are from CY 2017. For the proposed CY 2020 OPPS payment rates, we used the set of claims processed during CY 2018. 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 website 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 2018 (the year of claims data we used to calculate the proposed CY 2020 OPPS payment rates) and found that the National Uniform Billing Committee (NUBC) did not add any new revenue codes to the NUBC 2018 Data Specifications Manual.

In accordance with our longstanding policy, we calculate CCRs for the standard and nonstandard cost centers accepted by the electronic cost report database. In general, the most detailed level at which we calculate CCRs is 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.a.(1) of this proposed rule.

In the CY 2014 OPPS/ASC final rule with comment period (78 FR 74840 through 74847), we finalized our policy of creating new cost centers and distinct CCRs for implantable devices, magnetic resonance imaging (MRIs), computed tomography (CT) scans, and cardiac catheterization. However, in response to the CY 2014 OPPS/ASC proposed rule, commenters reported that some hospitals currently use an imprecise “square feet” allocation methodology for the costs of large moveable equipment like CT scan and MRI machines. They indicated that while CMS recommended using two alternative allocation methods, “direct assignment” or “dollar value,” as a more accurate methodology for directly assigning equipment costs, industry analysis suggested that approximately only half of the reported cost centers for CT scans and MRIs rely on these preferred methodologies. In response to concerns from commenters, we finalized a policy for the CY 2014 OPPS to remove claims from providers that use a cost allocation method of “square feet” to calculate CCRs used to estimate costs associated with the APCs for CT and MRI (78 FR 74847). Further, we finalized a transitional policy to estimate the imaging APC relative payment weights using only CT and MRI cost data from providers that do not use “square feet” as the cost allocation statistic. We provided that this finalized policy would sunset in 4 years to provide a sufficient time for hospitals to transition to a more accurate cost allocation method and for the related data to be available for ratesetting purposes (78 FR 74847). Therefore, beginning CY 2018, with the sunset of the transition policy, we would estimate the imaging APC relative payment weights using cost data from all providers, regardless of the cost allocation statistic employed. However, in the CY 2018 OPPS/ASC final rule with comment period (82 FR 59228 and 59229), we finalized a policy to extend the transition policy for 1 additional year and continued to remove claims from providers that use a cost allocation method of “square feet” to calculate CT and MRI CCRs for the CY 2018 OPPS.

As we discussed in the CY 2018 OPPS/ASC final rule with comment period (82 FR 59228), some stakeholders had raised concerns regarding using claims from all providers to calculate CT and MRI CCRs, regardless of the cost allocations statistic employed (78 FR 74840 through 74847). Stakeholders noted that providers continue to use the “square feet” cost allocation method and that including claims from such providers would cause significant reductions in the imaging APC payment rates.

Table 2 demonstrates the relative effect on imaging APC payments after removing cost data for providers that report CT and MRI standard cost centers using “square feet” as the cost allocation method by extracting HCRIS data on Worksheet B-1. Table 3 provides statistical values based on the CT and MRI standard cost center CCRs using the different cost allocation methods.

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Our analysis shows that since the CY 2014 OPPS in which we established the transition policy, the number of valid MRI CCRs has increased by 17.5 percent to 2,184 providers and the number of valid CT CCRs has increased by 15.1 percent to 2,274 providers. However, as shown in Table 2, nearly all imaging APCs would see an increase in payment rates for CY 2020 if claims from providers that report using the “square feet” cost allocation method were removed. This can be attributed to the generally lower CCR values from providers that use a “square feet” cost allocation method as shown in Table 2.

For the CY 2019 OPPS, in the CY 2019 OPPS/ASC final rule with comment period (83 FR 58831), we extended our transition policy for an additional year and removed claims from providers that use a cost allocation method of “square feet” to calculate CCRs used to estimate costs with the APCs for CT and MRI identified in Table 2.

We note that the CT and MRI cost center CCRs have been available for ratesetting since the CY 2014 OPPS in which we established the transition policy. Since the initial 4-year transition, we have extended the transition an additional 2 years to offer provider flexibility in applying cost allocation methodologies for CT and MRI cost centers other than “square feet.” We believe we have provided sufficient time for providers to adopt an alternative cost allocation methodology for CT and MRI cost centers if they intended to do so. However, many providers continue to use the “square feet” cost allocation methodology, which we believe indicates that these providers believe this methodology is a sufficient method for attributing costs to this cost center. Additionally, we generally believe that increasing the amount of claims data available for use in ratesetting improves our ratesetting process. Therefore, we are proposing that, for the CY 2020 OPPS/ASC proposed rule and final rule with comment period, we will use all claims with valid CT and MRI cost center CCRs, including those that use a “square feet” cost allocation method, to estimate costs for the APCs for CT and MRI identified in Table 2. We do not believe another extension is warranted and Start Printed Page 39409expect to determine the imaging APC relative payment weights for CY 2020 using cost data from all providers, regardless of the cost allocation method employed.

In addition, as we stated in the CY 2014 OPPS/ASC final rule with comment period (78 FR 74845), we have noted the potential impact the CT and MRI CCRs may have on other payment systems. We understand that payment reductions for imaging services under the OPPS could have significant payment impacts under the Physician Fee Schedule (PFS) where the technical component payment for many imaging services is capped at the OPPS payment amount. We will continue to monitor OPPS imaging payments in the future and consider the potential impacts of payment changes on the PFS and the ASC payment system.

2. Proposed Data Development 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 2020. The Hospital OPPS page on the CMS website 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 upon payment of an administrative fee under a CMS data use agreement. The CMS website, http://www.cms.gov/​Medicare/​Medicare-Fee-for-Service-Payment/​HospitalOutpatientPPS/​index.html, includes information about obtaining the “OPPS Limited Data Set,” which now includes the additional variables previously available only in the OPPS Identifiable Data Set, including ICD-10-CM diagnosis codes and revenue code payment amounts. This file is derived from the CY 2018 claims that were used to calculate the proposed payment rates for this CY 2020 OPPS/ASC proposed rule.

Previously, the OPPS established the scaled relative weights, on which payments are based using APC median costs, 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. In this CY 2020 OPPS/ASC proposed rule, we are proposing to continue to use geometric mean costs to calculate the proposed relative weights on which the CY 2020 OPPS payment rates are based.

We used the methodology described in sections II.A.2.a. through II.A.2.c. 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 2020 shown in Addenda A and B to this proposed rule (which are available via the internet on the CMS website). 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.

We note that, under the OPPS, CY 2019 was the first year in which claims data containing lines with the modifier “PN” were available, which indicate nonexcepted items and services furnished and billed by off-campus provider-based departments (PBDs) of hospitals. Because nonexcepted services are not paid under the OPPS, in the CY 2019 OPPS/ASC final rule with comment period (83 FR 58832), we finalized a policy to remove those claim lines reported with modifier “PN” from the claims data used in ratesetting for the CY 2019 OPPS and subsequent years. For the CY 2020 OPPS, we will continue to remove these claim lines with modifier “PN” from the ratesetting process.

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 2020 OPPS/ASC proposed rule on the CMS website at: http://www.cms.gov/​Medicare/​Medicare-Fee-for-Service-Payment/​HospitalOutpatientPPS/​index.html.

a. 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.

In this CY 2020 OPPS/ASC proposed rule, 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 2020 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 Start Printed Page 39410believe that this methodology in CY 2020 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.b.(1). of the CY 2019 OPPS/ASC final rule with comment period (82 FR 58837 through 58843), 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. In this CY 2020 OPPS/ASC proposed rule, 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 would 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 also refer readers to Addendum B to this CY 2020 OPPS/ASC proposed rule (which is available via the internet on the CMS website) for the proposed CY 2020 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) Pathogen-Reduced Platelets Payment Rate

In the CY 2016 OPPS/ASC final rule with comment period (80 FR 70322 through 70323), we reiterated that we calculate payment rates for blood and blood products using our blood-specific CCR methodology, which utilizes actual or simulated CCRs from the most recently available hospital cost reports to convert hospital charges for blood and blood products to costs. Because HCPCS code P9072 (Platelets, pheresis, pathogen reduced or rapid bacterial tested, each unit), the predecessor code to HCPCS code P9073 (Platelets, pheresis, pathogen-reduced, each unit), was new for CY 2016, there were no claims data available on the charges and costs for this blood product upon which to apply our blood-specific CCR methodology. Therefore, we established an interim payment rate for HCPCS code P9072 based on a crosswalk to existing blood product HCPCS code P9037 (Platelets, pheresis, leukocytes reduced, irradiated, each unit), which we believed provided the best proxy for the costs of the new blood product. In addition, we stated that once we had claims data for HCPCS code P9072, we would calculate its payment rate using the claims data that should be available for the code beginning in CY 2018, which is our practice for other blood product HCPCS codes for which claims data have been available for 2 years.

We stated in the CY 2018 OPPS/ASC final rule with comment period (82 FR 59233) that, although our standard practice for new codes involves using claims data to set payment rates once claims data become available, we were concerned that there may have been confusion among the provider community about the services that HCPCS code P9072 described. That is, as early as 2016, there were discussions about changing the descriptor for HCPCS code P9072 to include the phrase “or rapid bacterial tested”, which is a less costly technology than pathogen reduction. In addition, effective January 2017, the code descriptor for HCPCS code P9072 was changed to describe rapid bacterial testing of platelets and, effective July 1, 2017, the descriptor for the temporary successor code (HCPCS code Q9988) for HCPCS code P9072 was changed again back to the original descriptor for HCPCS code P9072 that was in place for 2016.

Based on the ongoing discussions involving changes to the original HCPCS code P9072 established in CY 2016, we believed that claims from CY 2016 for pathogen reduced platelets may have potentially reflected certain claims for rapid bacterial testing of platelets. Therefore, we decided to continue to crosswalk the payment amount for services described by HCPCS code P9073 (the successor code to HCPCS code P9072 established January 1, 2018) to the payment amount for services described by HCPCS code P9037 for CY 2018 (82 FR 59232), as had been done previously, to determine the payment rate for services described by HCPCS code P9072. In the CY 2019 OPPS/ASC proposed rule (83 FR 37058), for CY 2019, we discussed that we had reviewed the CY 2017 claims data for the two predecessor codes to HCPCS code P9073 (HCPCS codes P9072 and Q9988), along with the claims data for the CY 2017 temporary code for pathogen test for platelets (HCPCS code Q9987), which describes rapid bacterial testing of platelets. We found that there were over 2,200 claims billed with either HCPCS code P9072 or Q9988 in the CY 2017 claims data available for CY 2019 rulemaking. Accordingly, we believed that there were a sufficient number of claims to calculate a payment rate for HCPCS code P9073 for CY 2019 without using a crosswalk.

We also performed checks to estimate the share of claims that may have been billed for rapid bacterial testing of platelets as compared to the share of claims that may have been billed for pathogen-reduced, pheresis platelets (based on when HCPCS code P9072 was an active procedure code from January 1, 2017 to June 30, 2017). First, we found that the geometric mean cost for pathogen-reduced, pheresis platelets, as reported by HCPCS code Q9988 when billed separately from rapid bacterial testing of platelets, was $453.87, and that over 1,200 claims were billed for services described by HCPCS code Q9988. Next, we found that the geometric mean cost for rapid bacterial testing of platelets, as reported by HCPCS code Q9987 on claims, was $33.44, and there were 59 claims reported for services described by HCPCS code Q9987, of which 3 were separately paid.

These findings implied that almost all of the claims billed for services reported with HCPCS code P9072 were for pathogen-reduced, pheresis platelets. In addition, the geometric mean cost for services described by HCPCS code P9072, which may have contained rapid bacterial testing of platelets claims, was $468.11, which was higher than the geometric mean cost for services described by HCPCS code Q9988 of $453.87, which should not have contained claims for rapid bacterial testing of platelets. Because the geometric mean for services described by HCPCS code Q9987 was only $33.44, it would be expected that if a significant share of claims billed for services described by HCPCS code P9072 were for the rapid bacterial testing of platelets, the geometric mean cost for services described by HCPCS code P9072 would be lower than the geometric mean cost for services described by HCPCS code Q9988. Instead, we found that the geometric mean cost for services described by HCPCS code Q9988 was higher than the geometric mean cost for services described by HCPCS code P9072.Start Printed Page 39411

However, we received many comments from providers and stakeholders requesting that we not implement our proposal for CY 2019, and instead that we should once again establish the payment rate for HCPCS code P9073 by performing a crosswalk from the payment amount for services described by HCPCS code P9073 to the payment amount for services described by HCPCS code P9037. The commenters were concerned that the payment rate for HCPCS code P9073 calculated by using claims data for that service was too low. Several commenters believed the claim costs for pathogen-reduced platelets were lower than actual costs because of coding errors by providers, providers who did not use pathogen-reduced platelets when billing the service, and confusion over whether to use the hospital CCR or the blood center CCR to report charges for pathogen-reduced platelets. We considered the comments we received and decided not to finalize our proposal for CY 2019 to calculate the payment rate for services described by HCPCS code P9073 using claims payment history. Instead, for CY 2019, we established the payment rate for services described by HCPCS code P9073 by crosswalking the payment rate for the services described by HCPCS code P9073 from the payment rate for services described by HCPCS code P9037 (83 FR 58834).

For CY 2020 and subsequent years, we are proposing to calculate the payment rate for services described by HCPCS code P9073 by using claims payment history, which is the standard methodology used under the OPPS to calculate payment rates for HCPCS codes with at least 2 years of claims history. Claims for HCPCS code P9073 and its predecessor codes have been billed under the OPPS for over 3 years and we believe providers have had sufficient time to become familiar with the services covered by the procedure code and the appropriate charges and CCRs used to report the service. Also, it has been more than a year and half since the issue in which payment for pathogen-reduced platelets and payment for rapid bacterial testing were combined under the same code was resolved. In our analysis of claims data from CY 2018, we found that approximately 4,700 claims have been billed for services described by HCPCS code P9073 and the estimated payment rate for services described by HCPCS code P9073 based on the claims data is approximately $585. The claims-based payment rate for services described by HCPCS code P9073 is approximately $60 less than the estimated crosswalked payment rate using HCPCS code P9037 of approximately $645. The claims data show that services described by HCPCS code P9073 have been reported regularly by providers during CY 2018 and the payment rate is close to the payment rate of the crosswalked payment rate for services described by HCPCS code P9037. Therefore, we believe that the payment rate for services described by HCPCS code P9073 can be determined using claims data without a crosswalk from the payment rate for services described by HCPCS code P9037.

We refer readers to Addendum B of this proposed rule for the proposed payment rate for services described by HCPCS code P9073 reportable under the OPPS. Addendum B is available via the internet on the CMS website.

(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 CY 2020 OPPS/ASC proposed rule, for CY 2020, we are proposing to use the costs derived from CY 2018 claims data to set the proposed CY 2020 payment rates for brachytherapy sources because CY 2018 is the 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 2020 OPPS. We are proposing to base the 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 (Brachytherapy source, stranded, not otherwise specified, per source) and C2699 (Brachytherapy source, non-stranded, not otherwise specified, per source), 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). 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 Pub. L. 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 2020 payment rates for brachytherapy sources are included in Addendum B to this proposed rule (which is available via the internet on the CMS website) and are identified with status indicator “U”. For CY 2020, we are proposing to continue to assign status indicator “U” (Brachytherapy Sources, Paid under OPPS; separate APC payment) to HCPCS code C2645 (Brachytherapy planar source, Start Printed Page 39412palladium-103, per square millimeter). However, our CY 2018 claims data include two claims with over 9,000 units of HCPCS code C2645. For the CY 2019 OPPS/ASC final rule with comment period, our CY 2017 claims data only included one claim with one unit of HCPCS code C2645. Therefore, we believe the CY 2018 claims data are adequate to establish an APC payment rate for HCPCS code C2645 and to discontinue our use of external data for this brachytherapy source. Specifically, we are proposing to set the proposed CY 2020 payment rate at the geometric mean cost of HCPCS code C2645 based on CY 2018 claims data, which is $1.02 per mm2.

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.

b. Proposed Comprehensive APCs (C-APCs) for CY 2020

(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 and added 1 additional level to both the Orthopedic Surgery and Vascular Procedures clinical families, which increased the total number of C-APCs to 37 for CY 2016. In the CY 2017 OPPS/ASC final rule with comment period (81 FR 79584 through 79585), we finalized another 25 C-APCs for a total of 62 C-APCs. In the CY 2018 OPPS/ASC final rule with comment period, we did not change the total number of C-APCs from 62. In the CY 2019 OPPS/ASC final rule with comment period, we created 3 new C-APCs, increasing the total number to 65 (83 FR 58844 through 58846).

Under our C-APC policy, we designate 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 being 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 under the OPPS 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 payment 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 website).

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 to qualifying extended assessment and management encounters through the “Comprehensive Observation Services” C-APC (C-APC 8011). Services within this APC are assigned status indicator “J2”. Specifically, we make a payment through C-APC 8011 for a claim that:

  • Does not contain a procedure described by a HCPCS code to which we have assigned status indicator “T” that is reported with a date of service on the same day or 1 day earlier than the date of service associated with services described by HCPCS code G0378;
  • Contains 8 or more units of services described by HCPCS code G0378 (Hospital observation services, per hour);
  • Contains services provided on the same date of service or 1 day before the date of service for HCPCS code G0378 that are described by one of the following codes: HCPCS code G0379 (Direct admission of patient for hospital observation care) on the same date of service as HCPCS code G0378; CPT code 99281 (Emergency department visit for the evaluation and management of a patient (Level 1)); CPT code 99282 (Emergency department visit for the evaluation and management of a patient (Level 2)); CPT code 99283 (Emergency department visit for the evaluation and management of a patient (Level 3)); CPT code 99284 (Emergency department visit for the evaluation and management of a patient (Level 4)); CPT code 99285 Start Printed Page 39413(Emergency department visit for the evaluation and management of a patient (Level 5)) or HCPCS code G0380 (Type B emergency department visit (Level 1)); HCPCS code G0381 (Type B emergency department visit (Level 2)); HCPCS code G0382 (Type B emergency department visit (Level 3)); HCPCS code G0383 (Type B emergency department visit (Level 4)); HCPCS code G0384 (Type B emergency department visit (Level 5)); CPT code 99291 (Critical care, evaluation and management of the critically ill or critically injured patient; first 30-74 minutes); or HCPCS code G0463 (Hospital outpatient clinic visit for assessment and management of a patient); and
  • Does not contain services described by a HCPCS code to which we have assigned status indicator “J1”.

The assignment of status indicator “J2” to a specific combination of services performed in combination with each other 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 hospital 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 not to be 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 hospital 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 hospital outpatient department services and not therapy services. 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). Line item charges for services included on the C-APC claim are converted to line item costs, which are then summed to develop the estimated APC costs. These claims are then assigned one unit of the service with status indicator “J1” and later used to develop the geometric mean costs for the C-APC relative payment weights. (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, which exclude 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 its comprehensive geometric mean costs. For the minority of claims reporting 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 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 paired “J1” service code combinations or paired 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 apply this type of complexity adjustment when the paired 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); andStart Printed Page 39414
  • Violation of the 2 times rule in the originating C-APC (cost threshold).

These criteria identify paired code combinations that occur commonly and exhibit materially greater resource requirements than the primary service. The CY 2017 OPPS/ASC final rule with comment period (81 FR 79582) included a revision to the complexity adjustment eligibility criteria. Specifically, we finalized a policy to discontinue the requirement that a code combination (that qualifies for a complexity adjustment by satisfying the frequency and cost criteria thresholds described above) also not create a 2 times rule violation in the higher level or receiving APC.

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 there are paired code combinations that meet the complexity adjustment criteria. For a new HCPCS code, we determine initial C-APC assignment and qualification for a complexity adjustment using the best available information, crosswalking the new HCPCS code to a predecessor code(s) 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 claim including 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 claim including a 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 2020, in this CY 2020 OPPS/ASC proposed rule, 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 for the primary “J1” service. 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 (based on meeting the criteria outlined above), 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 to the next higher cost C-APC within the same clinical family of C-APCs. As previously stated, we package payment for add-on codes into the C-APC payment rate. If any add-on code reported in conjunction with the “J1” primary service code does not qualify for a complexity adjustment, payment for the add-on service continues to be packaged into the payment for the primary service and is not reassigned to the next higher cost C-APC. We list the proposed complexity adjustments for “J1” and add-on code combinations for CY 2020, along with all of the other proposed complexity adjustments, in Addendum J to this CY 2020 OPPS/ASC proposed rule (which is available via the internet on the CMS website).

Addendum J to this proposed rule includes the 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 paired 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 paired 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 claims with each of the paired code combinations eligible for a complexity adjustment.

(2) Proposed Additional C-APCs for CY 2020

For CY 2020 and subsequent years, in this CY 2020 OPPS/ASC proposed rule, we are proposing to continue to apply the C-APC payment policy methodology. We refer readers to the CY 2017 OPPS/ASC final rule with comment period (81 FR 79583) for a discussion of the C-APC payment policy methodology and revisions.

Each year, in accordance with section 1833(t)(9)(A) of the Act, we review and revise the services within each APC group and the APC assignments under the OPPS. As a result of our annual review of the services and the APC assignments under the OPPS, in this proposed rule, we are proposing to add two C-APCs under the existing C-APC payment policy in CY 2020: Proposed C-APC 5182 (Level 2 Vascular Procedures); and proposed C-APC 5461 (Level 1 Neurostimulator and Related Procedures). These APCs were selected to be included in this proposed rule because, similar to other C-APCs, these APCs include primary, comprehensive services, such as major surgical procedures, that are typically reported with other ancillary and adjunctive services. Also, similar to other APCs that have been converted to C-APCs, there are higher APC levels within the clinical family or related clinical family of these APCs that have previously been assigned to a C-APC. Table 4 of this proposed rule lists the proposed C-APCs for CY 2020. All C-APCs are displayed in Addendum J to this proposed rule (which is available via the internet on the CMS website). Addendum J to this proposed rule also contains all of the data related to the C-APC payment policy methodology, including the list of proposed complexity adjustments and other information.

We also are considering developing an episode-of-care for skin substitutes and are interested in comments regarding a future C-APC for procedures using skin substitute products furnished in the hospital outpatient department Start Printed Page 39415setting. We note that this comment solicitation is discussed in section V.B.7. of this proposed rule.

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(3) Exclusion of Procedures Assigned to New Technology APCs From the C-APC Policy

Services that are assigned to New Technology APCs are typically new procedures that do not have sufficient claims history to establish an accurate payment for the procedures. 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 (82 FR 59277).

The C-APC payment policy packages payment for adjunctive and secondary items, services, and procedures into the most costly primary procedure under the OPPS at the claim level. Prior to CY 2019 when a procedure assigned to a New Technology APC was included on the claim with a primary procedure, identified by OPPS status indicator “J1”, payment for the new technology service was typically packaged into the payment for the primary procedure. Because the new technology service was not separately paid in this scenario, the overall number of single claims available to determine an appropriate clinical APC for the new service was reduced. This was contrary to the objective of the New Technology APC payment policy, which is to gather sufficient claims data to enable us to assign the service to an appropriate clinical APC.

For example, for CY 2017, there were seven claims generated for HCPCS code 0100T (Placement of a subconjunctival retinal prosthesis receiver and pulse generator, and implantation of intraocular retinal electrode array, with vitrectomy), which involves the use of the Argus® II Retinal Prosthesis System. However, several of these claims were not available for ratesetting because HCPCS code 0100T was reported with a “J1” procedure and, therefore, payment was packaged into the associated C-APC payment. If these services had been separately paid under the OPPS, there would be at least two additional single claims available for ratesetting. As mentioned previously, the purpose of the new technology APC policy is to ensure that there are sufficient claims data for new services, which is particularly important for services with a low volume such as procedures described by HCPCS code 0100T. Another concern is the costs reported for the claims when payment is not packaged for a new technology procedure may not be representative of all of the services included on a claim that is generated, which may also affect our ability to assign the new service to the most appropriate clinical APC.

To address this issue and help ensure that there is sufficient claims data for services assigned to New Technology APCs, in the CY 2019 OPPS/ASC final rule with comment period (83 FR 58847), we excluded payment for any procedure that is assigned to a New Technology APC (APCs 1491 through 1599 and APCs 1901 through 1908) from being packaged when included on a claim with a “J1” service assigned to a C-APC. For CY 2020, we are proposing to continue to exclude payment for any procedure that is assigned to a New Technology APC from being packaged when included on a claim with a “J1” service assigned to a C-APC.

Some stakeholders have raised questions about whether the policy established in the CY 2019 OPPS/ASC final rule with comment period would also apply to comprehensive observation services assigned status indicator “J2.” We recognize that the policy described and adopted in the CY 2019 rulemaking may have been ambiguous with respect to this issue. While our intention in the CY 2019 rulemaking was only to exclude payment for services assigned to New Technology APCs from being bundled into the payment for a comprehensive “J1” service, we believe that there may also be some instances in which it would be clinically appropriate to provide a new technology service when providing comprehensive observation services. We would not generally expect that to be the case, because procedures assigned to New Technology APCs typically are new or low-volume surgical procedures, or are specialized tests to diagnosis a specific condition. In addition, it is highly unlikely a general observation procedure would be assigned to a New Technology APC because there are clinical APCs already established under the OPPS to classify general observation procedures. As we stated in the CY 2016 OPPS/ASC final rule with comment period, observation services may not be used for post-operative recovery and, as such, observation services furnished with services assigned to status indicator “T” will always be packaged (80 FR 70334). Therefore, we are proposing that payment for services assigned to a New Technology APC when included on a claim for a service assigned status indicator “J2” assigned to a C-APC will be packaged into the payment for the comprehensive service. Nonetheless, we are seeking public comments on whether it would be clinically appropriate to exclude payment for any New Technology APC procedures from Start Printed Page 39418being packaged into the payment for a comprehensive “J2” service starting in CY 2020.

c. 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 mental health services and multiple imaging services. (We note that, in the CY 2018 OPPS/ASC final rule with comment period, we finalized a policy to delete the composite APC 8001 (LDR Prostate Brachytherapy Composite) for CY 2018 and subsequent years.) We refer readers to the CY 2008 OPPS/ASC final rule with comment period (72 FR 66611 through 66614 and 66650 through 66652) for a full discussion of the development of the composite APC methodology, and the CY 2012 OPPS/ASC final rule with comment period (76 FR 74163) and the CY 2018 OPPS/ASC final rule with comment period (82 FR 59241 through 59242 and 59246 through 52950) for more recent background.

(1) Mental Health Services Composite APC

In this CY 2020 OPPS/ASC proposed rule, 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.

In the CY 2017 OPPS/ASC final rule with comment period (81 FR 79588 through 79589), we finalized a policy to combine the existing Level 1 and Level 2 hospital-based PHP APCs into a single hospital-based PHP APC, and thereby discontinue 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) and replace them with APC 5863 (Partial Hospitalization (3 or more services per day)).

In the CY 2018 OPPS/ASC proposed rule and final rule with comment period (82 FR 33580 through 33581 and 59246 through 59247, respectively), we proposed and finalized the policy for CY 2018 and subsequent years that, when the aggregate payment for specified mental health services provided by one hospital to a single beneficiary on a single date of service, based on the payment rates associated with the APCs for the individual services, exceeds the maximum per diem payment rate for partial hospitalization services provided by a hospital, those specified mental health services will be paid through composite APC 8010 (Mental Health Services Composite). In addition, we set the payment rate for composite APC 8010 for CY 2018 at the same payment rate that will be paid for APC 5863, which is the maximum partial hospitalization per diem payment rate for a hospital, and finalized a policy that the hospital will continue to be paid the payment rate for composite APC 8010. Under this policy, the I/OCE will 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 5863 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.

In this CY 2020 OPPS/ASC proposed rule, for CY 2020, we are proposing that when the aggregate payment for specified mental health services provided by one hospital to a single beneficiary on a single 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 paid through composite APC 8010 for CY 2020. In addition, we are proposing to set the proposed payment rate for composite APC 8010 at the same payment rate that we are proposing for APC 5863, which is the maximum partial hospitalization per diem payment rate for a hospital, and that the hospital continue to be paid the proposed payment rate for composite APC 8010.

(2) 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 Start Printed Page 39419as 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 CY 2020 OPPS/ASC proposed rule, we are proposing, for CY 2020, to continue to pay for all multiple imaging procedures within an imaging family performed on the same date of service using the multiple imaging composite APC payment methodology. We continue to believe that this policy would reflect and promote the efficiencies hospitals can achieve when performing multiple imaging procedures during a single session.

The proposed CY 2020 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 CY 2018 claims available for the CY 2020 OPPS/ASC 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 have used to calculate the geometric mean costs for these composite APCs since CY 2014, 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 2020 OPPS/ASC proposed rule (which is available via the internet on the CMS website) and are discussed in more detail in section II.A.1.b. of this CY 2020 OPPS/ASC proposed rule.

For this CY 2020 OPPS/ASC proposed rule, we were able to identify approximately 700,000 “single session” claims out of an estimated 4.9 million potential claims for payment through composite APCs from our ratesetting claims data, which represents approximately 14 percent of all eligible claims, to calculate the proposed CY 2020 geometric mean costs for the multiple imaging composite APCs. Table 5 of this CY 2020 OPPS/ASC proposed rule 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 2020.

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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 beneficiary. The OPPS packages Start Printed Page 39424payments 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 occurs 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 payments 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), the CY 2016 OPPS/ASC final rule with comment period (80 FR 70343), the CY 2017 OPPS/ASC final rule with comment period (81 FR 79592), the CY 2018 OPPS/ASC final rule with comment period (82 FR 59250), and the CY 2019 OPPS/ASC final rule with comment period (83 FR 58854). 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, categories of items and services currently packaged in the OPPS are listed in 42 CFR 419.2(b). Our overarching goal is to make payments for all services under the OPPS more consistent with those of a prospective payment system and less like those of a per-service fee schedule, which pays separately for each coded item. As a part of this effort, we have continued to examine the payment for items and services provided under the OPPS to determine which OPPS services can be packaged to further achieve the objective of advancing the OPPS toward a more prospective payment system.

For CY 2020, we examined the items and services currently provided under the OPPS, reviewing categories of integral, ancillary, supportive, dependent, or adjunctive items and services for which we believe payment would be appropriately packaged into payment for the primary service that they support. Specifically, we examined the HCPCS code definitions (including CPT code descriptors) and outpatient hospital billing patterns to determine whether there were categories of codes for which packaging would be appropriate according to existing OPPS packaging policies or a logical expansion of those existing OPPS packaging policies. In this CY 2020 OPPS/ASC proposed rule, for CY 2020, we are proposing to conditionally package the costs of selected newly identified ancillary services into payment with a primary service where we believe that the packaged item or service is integral, ancillary, supportive, dependent, or adjunctive to the provision of care that was reported by the primary service HCPCS code. Below we discuss the proposed changes to the packaging policies beginning in CY 2020.

b. Packaging Policy for Non-Opioid Pain Management Treatments

(1) Background on OPPS/ASC Non-Opioid Pain Management Packaging Policies

In the CY 2018 OPPS/ASC proposed rule (82 FR 33588), within the framework of existing packaging categories, such as drugs that function as supplies in a surgical procedure or diagnostic test or procedure, we requested stakeholder feedback on common clinical scenarios involving currently packaged items and services described by HCPCS codes that stakeholders believe should not be packaged under the OPPS. We also expressed interest in stakeholder feedback on common clinical scenarios involving separately payable HCPCS codes for which payment would be most appropriately packaged under the OPPS. Commenters who responded to the CY 2018 OPPS/ASC proposed rule expressed a variety of views on packaging under the OPPS. In the CY 2018 OPPS/ASC final rule with comment period (82 FR 59255), we summarized these public comments. The public comments ranged from requests to unpackage most items and services that are either conditionally or unconditionally packaged under the OPPS, including drugs and devices, to specific requests for separate payment for a specific drug or device.

In terms of Exparel® in particular, we received several requests to pay separately for the drug Exparel® rather than packaging payment for it as a surgical supply. We had previously stated that we considered Exparel® to be a drug that functions as a surgical supply because it is indicated for the alleviation of postoperative pain (79 FR 66874 and 66875). We had also stated before that we considered all items related to the surgical outcome and provided during the hospital stay in which the surgery is performed, including postsurgical pain management drugs, to be part of the surgery for purposes of our drug and biological surgical supply packaging policy. (We note that Exparel® is a liposome injection of bupivacaine, an amide local anesthetic, indicated for single-dose infiltration into the surgical site to produce postsurgical analgesia. In 2011, Exparel® was approved by the FDA for single-dose infiltration into the surgical site to provide postsurgical analgesia.[1 2] Exparel® had pass-through payment status from CYs 2012 through 2014 and was separately paid under both the OPPS and the ASC payment system during this 3-year period. Beginning in CY 2015, Exparel® was packaged as a surgical supply under both the OPPS and the ASC payment system.)

In the CY 2018 OPPS/ASC final rule with comment period (82 FR 59345), we reiterated our position with regard to Start Printed Page 39425payment for Exparel®, stating that we believed that payment for this drug is appropriately packaged with the primary surgical procedure. We also stated in the CY 2018 OPPS/ASC final rule with comment period that CMS would continue to explore and evaluate packaging policies under the OPPS and consider these policies in future rulemaking.

In addition to stakeholder feedback regarding OPPS packaging policies in response to the CY 2018 OPPS/ASC proposed rule, the President's Commission on Combating Drug Addiction and the Opioid Crisis (the Commission) had recommended that CMS examine payment policies for certain drugs that function as a supply, specifically non-opioid pain management treatments. The Commission was established in 2017 to study ways to combat and treat drug abuse, addiction, and the opioid crisis. The Commission's report [3] included a recommendation for CMS to “. . . review and modify ratesetting policies that discourage the use of non-opioid treatments for pain, such as certain bundled payments that make alternative treatment options cost prohibitive for hospitals and doctors, particularly those options for treating immediate postsurgical pain. . . .” [4] With respect to the packaging policy, the Commission's report states that “. . . the current CMS payment policy for `supplies' related to surgical procedures creates unintended incentives to prescribe opioid medications to patients for postsurgical pain instead of administering non-opioid pain medications. Under current policies, CMS provides one all-inclusive bundled payment to hospitals for all `surgical supplies,' which includes hospital administered drug products intended to manage patients' postsurgical pain. This policy results in the hospitals receiving the same fixed fee from Medicare whether the surgeon administers a non-opioid medication or not.” [5] HHS also presented an Opioid Strategy in April 2017 [6] that aims in part to support cutting-edge research and advance the practice of pain management. On October 26, 2017, the President declared the opioid crisis a national public health emergency under Federal law [7] and this declaration was most recently renewed on April 19, 2019.[8]

For the CY 2019 rulemaking, we reviewed available literature with respect to Exparel®, including a briefing document [9] submitted for the FDA Advisory Committee Meeting held February 14-15, 2018, by the manufacturer of Exparel® that notes that “. . . Bupivacaine, the active pharmaceutical ingredient in Exparel®, is a local anesthetic that has been used for infiltration/field block and peripheral nerve block for decades” and that “since its approval, Exparel® has been used extensively, with an estimated 3.5 million patient exposures in the US.” [10] On April 6, 2018, the FDA approved Exparel®'s new indication for use as an interscalene brachial plexus nerve block to produce postsurgical regional analgesia.[11] We stated in the CY 2019 OPPS/ASC proposed rule that, based on our review of currently available OPPS Medicare claims data and public information from the manufacturer of the drug, we did not believe that the OPPS packaging policy had discouraged the use of Exparel® for either of the drug's indications when furnished in the hospital outpatient department setting.

In the CY 2019 OPPS/ASC proposed rule, in response to stakeholder comments on the CY 2018 OPPS/ASC final rule with comment period (82 FR 59345) and in light of the recommendations regarding payment policies for certain drugs, we evaluated the impact of our packaging policy for drugs that function as a supply when used in a surgical procedure on the utilization of these drugs in both the hospital outpatient department and the ASC setting. Our packaging policy is that the costs associated with packaged drugs that function as a supply are included in the ratesetting methodology for the surgical procedures with which they are billed, and the payment rate for the associated procedure reflects the costs of the packaged drugs and other packaged items and services to the extent they are billed with the procedure. In our evaluation, we used currently available data to analyze the utilization patterns associated with specific drugs that function as a supply over a 5-year time period to determine whether this packaging policy reduced the use of these drugs. If the packaging policy discouraged the use of drugs that function as a supply or impeded access to these products, we would expect to see a significant decline in utilization of these drugs over time, although we note that a decline in utilization could also reflect other factors, such as the availability of alternative products.

The results of the evaluation of our packaging policies under the OPPS and the ASC payment system showed decreased utilization for certain drugs that function as a supply in the ASC setting, in comparison to the hospital outpatient department setting. In light of these results, as well as the Commission's recommendation to examine payment policies for non-opioid pain management drugs that function as a supply, we believed it was appropriate to pay separately for evidence-based non-opioid pain management drugs that function as a supply in a surgical procedure in the ASC setting to address the decreased utilization of these drugs and to encourage use of these types of drugs rather than prescription opioids. Therefore, in the CY 2019 OPPS/ASC final rule with comment period (83 FR 58855 through 58860), we finalized the proposed policy to unpackage and pay separately at ASP+6 percent for the cost of non-opioid pain management drugs that function as surgical supplies when they are furnished in the ASC setting for CY 2019. We also stated that we would continue to analyze the issue of access to non-opioid alternatives in the hospital outpatient department setting and in the ASC setting as we implemented section 6082 of the Substance Use-Disorder Prevention that Promotes Opioid Recovery and Treatment for Patients and Communities (SUPPORT) Act (Pub. L. 115-271) enacted on October 24, 2018 (83 FR 58860 through 58861).

(2) Evaluation and CY 2020 Proposal for Payment for Non-Opioid Alternatives

Section 1833(t)(22)(A)(i) of the Act, as added by section 6082(a) of the SUPPORT Act, states that the Secretary must review payments under the OPPS for opioids and evidence-based non-opioid alternatives for pain management (including drugs and devices, nerve blocks, surgical injections, and neuromodulation) with a goal of Start Printed Page 39426ensuring that there are not financial incentives to use opioids instead of non-opioid alternatives. As part of this review, under section 1833(t)(22)(A)(iii) of the Act, the Secretary must consider the extent to which revisions to such payments (such as the creation of additional groups of covered OPD services to separately classify those procedures that utilize opioids and non-opioid alternatives for pain management) would reduce the payment incentives for using opioids instead of non-opioid alternatives for pain management. In conducting this review and considering any revisions, the Secretary must focus on covered OPD services (or groups of services) assigned to C-APCs, APCs that include surgical services, or services determined by the Secretary that generally involve treatment for pain management. If the Secretary identifies revisions to payments pursuant to section 1833(t)(22)(A)(iii) of the Act, section 1833(t)(22)(C) of the Act requires the Secretary to, as determined appropriate, begin making revisions for services furnished on or after January 1, 2020. Any revisions under this paragraph are required to be treated as adjustments for purposes of paragraph (9)(B), which requires any adjustments to be made in a budget neutral manner. Pursuant to these requirements, in our evaluation of whether there are payment incentives for using opioids instead of non-opioid alternatives, for this CY 2020 OPPS/ASC proposed rule, we used currently available data to analyze the payment and utilization patterns associated with specific non-opioid alternatives, including drugs that function as a supply, nerve blocks, and neuromodulation products, to determine whether our packaging policies have reduced the use of non-opioid alternatives. We focused on covered OPD services for this review, including services assigned to C-APCs, surgical APCs, and other pain management services. We believed that if the packaging policy discouraged the use of these non-opioid alternatives or impeded access to these products, we would expect to see a decline in the utilization over time, although we note that a decline in utilization could also reflect other factors, such as the availability of alternative products.

We evaluated continuous peripheral nerve blocks and neuromodulation alternatives to determine if the current packaging policy represented a barrier to access. For each product, we examined the most recently available Medicare claims data. All of the alternatives examined showed consistent or increasing utilization in recent years, with no products showing decreases in utilization.

We also evaluated drugs that function as surgical supplies over a 6-year time period (CYs 2013 through 2018). During our evaluation, we did not observe significant declines in the total number of units used in the hospital outpatient department for a majority of the drugs included in our analysis. In fact, under the OPPS, we observed the opposite effect for several drugs that function as surgical supplies, including Exparel® (HCPCS code C9290). This trend indicates appropriate packaged payments that adequately reflect the cost of the drug and are not prohibiting beneficiary access.

From CYs 2013 through 2018, we found that there was an overall increase in the OPPS Medicare utilization of Exparel® of approximately 491 percent (from 2.3 million units to 13.6 million units) during this 6-year time period. The total number of claims reporting the use of Exparel® increased by 463 percent (from 10,609 claims to 59,724 claims) over this 6-year time period. This increase in utilization continued, even after the expiration of the 3-year pass-through payment status for this drug in 2014, resulting in a 109-percent overall increase in the total number of units used between CYs 2015 and 2018, from 6.5 million units to 13.6 million units. The number of claims reporting the use of Exparel® increased by 112 percent during this time period, from 28,166 claims to 59,724 claims.

The results of our review and evaluation of our claims data do not provide evidence to indicate that the OPPS packaging policy has had the unintended consequence of discouraging the use of non-opioid treatments for postsurgical pain management in the hospital outpatient department. Therefore, based on this data evaluation, we do not believe that changes are necessary under the OPPS for the packaged drug policy for drugs that function as a surgical supply, nerve blocks, surgical injections, and neuromodulation products when used in a surgical procedure in the OPPS setting at this time.

For Exparel®, we reviewed claims data for development of this CY 2020 OPPS/ASC proposed rule and, based on these data and available literature, we concluded that there is no clear evidence that the OPPS packaging policy discourages the use of Exparel® for either of the drug's indications in the hospital outpatient department setting because the use of Exparel® continues to increase in this setting. Accordingly, we continue to believe it is appropriate to package payment for the use of Exparel®, as we do for other postsurgical pain management drugs, when it is furnished in a hospital outpatient department. In addition, our updated review of claims data showed a continued decline in the utilization of Exparel® in the ASC setting, which we believe supports our proposal to continue paying separately for Exparel® in the ASC setting.

Therefore, for CY 2020, we are proposing to continue our policy to pay separately at ASP+6 percent for the cost of non-opioid pain management drugs that function as surgical supplies in the performance of surgical procedures when they are furnished in the ASC setting and continue to package payment for non-opioid pain management drugs that function as surgical supplies in the performance of surgical procedures in the hospital outpatient department setting for CY 2020. However, we are inviting public comments on this proposal and asking the public to provide peer reviewed evidence, if any, to describe existing evidence-based non-opioid pain management therapies used in the outpatient and ASC setting. We are also inviting the public to provide detailed claims-based evidence to document how specific unfavorable utilization trends are due to the financial incentives of the payment systems rather than other factors.

Multiple stakeholders, largely manufacturers of devices and drugs, have requested separate payments for various non-opioid pain management treatments, such as continuous nerve blocks (including a disposable elastomeric pump that delivers non-opioid local anesthetic to a surgical site or nerve), cooled thermal radiofrequency ablation, and local anesthetics designed to reduce postoperative pain for cataract surgery and other procedures. These stakeholders have suggested various mechanisms through which separate payment or a higher-paying APC assignment for the primary service could be made. The stakeholders have offered surveys, reports, studies, and anecdotal evidence of varying degrees to support why the devices, drugs, or services offer an alternative to or a reduction of the need for opioid prescriptions. The majority of these stakeholder offerings have lacked adequate sample size, contained possible conflicts of interest such as studies conducted by employees of device manufacturers, have not been fully published in peer-reviewed literature, or have only provided anecdotal evidence as to how the drug Start Printed Page 39427or device could serve as an alternative to, or reduce the need for, opioid prescriptions.

After reviewing the data from stakeholders and Medicare claims data, we have not found compelling evidence to suggest that revisions to our OPPS payment policies for non-opioid pain management alternatives are necessary for CY 2020. Additionally, MedPAC's March 2019 Report to Congress supports CMS' conclusion. Specifically, Chapter 16 of MedPAC's report, titled Mandated Report: Opioids and Alternatives in Hospital Settings—Payments, Incentives, and Medicare Data, concludes that there is no clear indication that Medicare's OPPS provides systematic payment incentives that promote the use of opioid analgesics over non-opioid analgesics.[12] However, we are inviting public comments on whether there are other non-opioid pain management alternatives for which our payment policy should be revised to allow separate payment. We are requesting public comments that provide evidence-based support, such as published peer-reviewed literature, that we could use to determine whether these products help to deter or avoid prescription opioid use and addiction as well as evidence that the current packaged payment for such non-opioid alternatives presents a barrier to access to care and therefore warrants revised, including possibly separate, payment under the OPPS. Evidence that current payment policy provides a payment incentive for using opioids instead of non-opioid alternatives should align with available Medicare claims data.

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 2019 OPPS/ASC final rule with comment period (83 FR 58860 through 58861), we applied this policy and calculated the relative payment weights for each APC for CY 2019 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 website) using the APC costs discussed in sections II.A.1. and II.A.2. of that final rule with comment period. For CY 2020, as we did for CY 2019, we are proposing to continue to apply the policy established in CY 2013 and calculate relative payment weights for each APC for CY 2020 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 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 reassigned the outpatient clinic visit HCPCS code G0463 to APC 5012 (Level 2 Examinations and Related Services) (80 FR 70372). For CY 2020, as we did for CY 2019, 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 2020, as we did for CY 2019, 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 geometric mean cost for APC 5012 to derive the unscaled relative payment weight for each APC. The choice of the APC on which to standardize the relative payment weights does not affect payments made under the OPPS because we scale the weights for budget neutrality.

We note that in the CY 2019 OPPS/ASC final rule with comment period (83 FR 59004 through 59015), we discussed our policy, implemented on January 1, 2019, to control for unnecessary increases in the volume of covered outpatient department services by paying for clinic visits furnished at excepted off-campus provider-based department (PBD) at a reduced rate. While the volume associated with these visits is included in the impact model, and thus used in calculating the weight scalar, the policy has a negligible effect on the scalar. Specifically, under this policy, there was no change to the relativity of the OPPS payment weights because the adjustment is made at the payment level rather than in the cost modeling. Further, under this policy, the savings that would result from the change in payments for these clinic visits would not be budget neutral. Therefore, the impact of this policy would generally not be reflected in the budget neutrality adjustments, whether the adjustment is to the OPPS relative weights or to the OPPS conversion factor.

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 2020 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 2019 scaled relative payment weights to the estimated aggregate weight using the proposed CY 2020 unscaled relative payment weights.

For CY 2019, we multiplied the CY 2019 scaled APC relative payment weight applicable to a service paid under the OPPS by the volume of that service from CY 2018 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 2020, we are proposing to apply the same process using the estimated CY 2020 unscaled relative payment weights rather than scaled relative payment weights. We are proposing to calculate the weight scalar by dividing the CY 2019 estimated aggregate weight by the proposed unscaled CY 2020 estimated aggregate weight.

For a detailed discussion of the weight scalar calculation, we refer readers to the OPPS claims accounting document available on the CMS website at: https://www.cms.gov/​Medicare/​Medicare-Fee-for-Service-Payment/​HospitalOutpatientPPS/​index.html. Click on the CY 2020 OPPS proposed rule link and open the claims accounting document link at the bottom of the page.

We are proposing to compare the estimated unscaled relative payment weights in CY 2020 to the estimated total relative payment weights in CY Start Printed Page 394282019 using CY 2018 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 2020 unscaled relative payment weights for purposes of budget neutrality. We are proposing to adjust the estimated CY 2020 unscaled relative payment weights by multiplying them by a proposed weight scalar of 1.4401 to ensure that the proposed CY 2020 relative payment weights are scaled to be budget neutral. The proposed CY 2020 relative payment weights listed in Addenda A and B to this proposed rule (which are available via the internet on the CMS website) were scaled and incorporated 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.2. of this proposed rule) is included in the budget neutrality calculations for the CY 2020 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 2020 IPPS/LTCH PPS proposed rule (84 FR 19401), consistent with current law, based on IHS Global, Inc.'s fourth quarter 2018 forecast of the FY 2020 market basket increase, the proposed FY 2020 IPPS market basket update is 3.2 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 2020.

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, and then revised this methodology, as discussed in the FY 2016 IPPS/LTCH PPS final rule (80 FR 49509). According to the FY 2020 IPPS/LTCH PPS proposed rule (84 FR 19402), the proposed MFP adjustment for FY 2020 is 0.5 percentage point.

For CY 2020, we are proposing that the MFP adjustment for the CY 2020 OPPS is 0.5 percentage point. We are proposing that if more recent data become subsequently available after the publication of this proposed rule (for example, a more recent estimate of the market basket increase and the MFP adjustment), we would use such updated data, if appropriate, to determine the CY 2020 market basket update and the MFP adjustment, which are 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 this CY 2020 OPPS/ASC proposed rule.

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 2.7 percent for the CY 2020 OPPS (which is 3.2 percent, the proposed estimate of the hospital inpatient market basket percentage increase, less the proposed 0.5 percentage point MFP 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 XIV. of this proposed rule.

We are proposing to amend 42 CFR 419.32(b)(1)(iv)(B) by adding a new paragraph (11) to reflect the requirement in section 1833(t)(3)(F)(i) of the Act that, for CY 2020, we reduce the OPD fee schedule increase factor by the MFP adjustment as determined by CMS.

To set the OPPS conversion factor for CY 2020, we are proposing to increase the CY 2019 conversion factor of $79.490 by 2.7 percent. In accordance with section 1833(t)(9)(B) of the Act, we are proposing further to adjust the conversion factor for CY 2020 to ensure that any revisions made to the wage index and rural adjustment were made on a budget neutral basis. We are proposing to calculate an overall budget neutrality factor of 0.9993 for wage index changes. This adjustment is comprised of a 1.0005 proposed budget neutrality adjustment, using our standard calculation, of comparing proposed total estimated payments from our simulation model using the proposed FY 2020 IPPS wage indexes to those payments using the FY 2019 IPPS wage indexes, as adopted on a calendar year basis for the OPPS as well as a 0.9988 proposed budget neutrality adjustment for the proposed CY 2020 5 percent cap on wage index decreases to ensure that this transition wage index is implemented in a budget neutral manner, consistent with the proposed FY 2020 IPPS wage index policy (84 FR 19398). We believe it is appropriate to ensure that this proposed wage index transition policy (that is, the proposed CY 2020 5 percent cap on wage index decreases) does not increase estimated aggregate payments under the OPPS beyond the payments that would be made without this transition policy. We are proposing to calculate this budget neutrality adjustment by comparing total estimated OPPS payments using the FY 2020 IPPS wage index, adopted on a calendar year basis for the OPPS, where a 5 percent cap on wage index decreases is not applied to total estimated OPPS payments where the 5 percent cap on wage index decreases is applied. These two proposed wage index budget neutrality adjustments would maintain budget neutrality for the proposed CY 2020 OPPS wage index (which, as discussed in section II.C of this proposed rule, would use the FY 2020 IPPS post-reclassified wage index and any adjustments, including without limitation any proposed adjustments Start Printed Page 39429finalized under the IPPS to address wage index disparities).

For the CY 2020 OPPS, we are maintaining the current rural adjustment policy, as discussed in section II.E. of this proposed rule. Therefore, the proposed budget neutrality factor for the rural adjustment is 1.0000.

For this CY 2020 OPPS/ASC proposed rule, 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 2020 budget neutrality adjustment factor for the cancer hospital payment adjustment by comparing estimated total CY 2020 payments under section 1833(t) of the Act, including the proposed CY 2020 cancer hospital payment adjustment, to estimated CY 2020 total payments using the CY 2019 final cancer hospital payment adjustment, as required under section 1833(t)(18)(B) of the Act. The proposed CY 2020 estimated payments applying the proposed CY 2020 cancer hospital payment adjustment are the same as estimated payments applying the CY 2019 final cancer hospital payment adjustment. Therefore, we are proposing to apply a budget neutrality adjustment factor of 0.9998 to the conversion factor for the cancer hospital payment adjustment. In accordance with section 16002(b) of the 21st Century Cures Act, we are proposing to apply a budget neutrality factor calculated as if the proposed cancer hospital adjustment target payment-to-cost ratio is 0.90, not the 0.89 target payment-to-cost ratio we are proposing to apply as stated in section II.F. of this proposed rule.

For this CY 2020 OPPS/ASC proposed rule, we estimate that proposed pass-through spending for drugs, biologicals, and devices for CY 2020 would equal approximately $268.8 million, which represents 0.34 percent of total projected CY 2020 OPPS spending. Therefore, the proposed conversion factor would be adjusted by the difference between the 0.14 percent estimate of pass-through spending for CY 2019 and the 0.34 percent estimate of proposed pass-through spending for CY 2020, resulting in a proposed decrease for CY 2020 of 0.20 percent. Proposed estimated payments for outliers would remain at 1.0 percent of total OPPS payments for CY 2020. We estimate for this proposed rule that outlier payments would be 1.03 percent of total OPPS payments in CY 2019; the 1.00 percent for proposed outlier payments in CY 2020 would constitute a 0.03 percent increase in payment in CY 2020 relative to CY 2019.

For this CY 2020 OPPS/ASC 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 0.7 percent (that is, the proposed OPD fee schedule increase factor of 2.7 percent further reduced by 2.0 percentage points). This would result in a proposed reduced conversion factor for CY 2020 of $79.770 for hospitals that fail to meet the Hospital OQR Program requirements (a difference of −1.628 in the conversion factor relative to hospitals that meet the requirements).

In summary, for CY 2020, we are proposing to amend § 419.32 by adding a new paragraph (b)(1)(iv)(B)(11) to reflect the reductions to the OPD fee schedule increase factor that are required for CY 2020 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 $79.770 in the calculation of payments for hospitals that fail to meet the Hospital OQR Program requirements (a difference of −1.628 in the conversion factor relative to hospitals that meet the requirements).

For CY 2020, we are proposing to use a conversion factor of $81.398 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 proposed OPD fee schedule increase factor of 2.7 percent for CY 2020, the required proposed wage index budget neutrality adjustment of approximately 0.9993, the proposed cancer hospital payment adjustment of 0.9998, and the proposed adjustment of −0.20 percentage point of projected OPPS spending for the difference in pass-through spending that resulted in a proposed conversion factor for CY 2020 of $81.398. We refer readers to section XXVI.B. of this proposed rule for a discussion of the estimated effect on the conversion factor of a policy to pay for 340B-acquired drugs at ASP+3 percent, which is a policy on which we solicit comments for potential future rulemaking in the event of an adverse decision on appeal in the ongoing litigation involving our payment policy for 340B-acquired drugs.

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). In this CY 2020 OPPS/ASC proposed rule, we are proposing to continue this policy for the CY 2020 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 the claims accounting narrative included with the supporting documentation for this proposed rule (which is available via the internet on the CMS website), for estimating APC costs, we would standardize 60 percent of estimated claims costs for geographic area wage variation using the same FY 2020 pre-reclassified wage index that CMS is proposing to use under the IPPS 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 Start Printed Page 39430adjustment factor for the OPPS is reasonable and logical, given the inseparable, subordinate status of the HOPD within the hospital overall. In accordance with section 1886(d)(3)(E) of the Act, the IPPS wage index is updated annually.

The Affordable Care Act contained several provisions affecting the wage index. These provisions were discussed in the CY 2012 OPPS/ASC final rule with comment period (76 FR 74191). Section 10324 of the Affordable Care Act added section 1886(d)(3)(E)(iii)(II) to the Act, which defines a frontier State and amended section 1833(t) of the Act to add 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 (3) of our regulations. For the CY 2020 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, the rural floor, and rural floor budget neutrality) is less than 1.00. Because the HOPD receives a wage index based on the geographic location of the specific inpatient hospital with which it is associated, the frontier State wage index adjustment applicable for the inpatient hospital also would apply for any associated HOPD. We refer readers to the FY 2011 through FY 2019 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; for FY 2016, 80 FR 49498; for FY 2017, 81 FR 56922; for FY 2018, 82 FR 38142; and for FY 2019, 83 FR 41380.

In addition to the changes required by the Affordable Care Act, we note that the proposed FY 2020 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 provisions, an adjustment for occupational mix, and an adjustment to the wage index based on commuting patterns of employees (the out-migration adjustment). In addition, we note that, as discussed in the FY 2020 IPPS/LTCH PPS proposed rule (84 FR 19393 through 19399), we proposed a number of policies under the IPPS to address wage index disparities between high and low wage index value hospitals. In particular, in the FY 2020 IPPS/LTCH PPS proposed rule, we proposed to (1) calculate the rural floor without including the wage data of urban hospitals that have reclassified as rural under section 1886(d)(8)(E) of the Act (as implemented in § 412.103) (84 FR 19396 through 19398); (2) remove the wage data of urban hospitals that have reclassified as rural under § 412.103 from the calculation of “the wage index for rural areas in the State” for purposes of applying section 1886(d)(8)(C)(iii) of the Act (84 FR 19398); (3) increase the wage index values for hospitals with a wage index below the 25th percentile wage index value across all hospitals by half the difference between the otherwise applicable final wage index value for a year for that hospital and the 25th percentile wage index value for that year, and to offset the estimated increase in payments to hospitals with wage index values below the 25th percentile by decreasing the wage index values for hospitals with wage index values above the 75th percentile wage index value across all hospitals (84 FR 19394 through 19396); and (4) apply a 5-percent cap for FY 2020 on any decrease in a hospital's final wage index from the hospital's final wage index in FY 2019, as a proposed transition wage index to help mitigate any significant negative impacts on hospitals (84 FR 19398). In addition, in the FY 2020 IPPS/LTCH PPS proposed rule (84 FR 19398), we proposed to apply a budget neutrality adjustment to the standardized amount so that our proposed transition wage index for hospitals that may be negatively impacted (described in item (4) above) would be implemented in a budget neutral manner. Furthermore, in the FY 2020 IPPS/LTCH PPS proposed rule (84 FR 19398 through 19399), we noted that our proposed adjustment relating to the rural floor calculation also would be budget neutral. We refer readers to the FY 2020 IPPS/LTCH PPS proposed rule (84 FR 19373 through 19399) for a detailed discussion of all proposed changes to the FY 2020 IPPS wage indexes.

As discussed in the FY 2015 IPPS/LTCH PPS final rule (79 FR 49951 through 49963) and in each subsequent IPPS/LTCH PPS final rule, including the FY 2019 IPPS/LTCH PPS final rule (83 FR 41362), 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: https://obamawhitehouse.archives.gov/​sites/​default/​files/​omb/​bulletins/​2013/​b13-01.pdf. In the FY 2015 IPPS/LTCH PPS final rule (79 FR 49950 through 49985), for purposes of the IPPS, we adopted the use of the OMB statistical area delineations contained in OMB Bulletin No. 13-01, effective October 1, 2014. For purposes of the OPPS, in the CY 2015 OPPS/ASC final rule with comment period (79 FR 66826 through 66828), we adopted the use of the OMB statistical area delineations contained in OMB Bulletin No. 13-01, effective January 1, 2015, beginning with the CY 2015 OPPS wage indexes. In the FY 2017 IPPS/LTCH PPS final rule (81 FR 56913), we adopted revisions to statistical areas contained in OMB Bulletin No. 15-01, issued on July 15, 2015, which provided updates to and superseded OMB Bulletin No. 13-01 that was issued on February 28, 2013. For purposes of the OPPS, in the CY 2017 OPPS/ASC final rule with comment period (81 FR 79598), we adopted the revisions to the OMB statistical area delineations contained in OMB Bulletin No. 15-01, effective January 1, 2017, beginning with the CY 2017 OPPS wage indexes.

On August 15, 2017, OMB issued OMB Bulletin No. 17-01, which provided updates to and superseded OMB Bulletin No. 15-01 that was issued on July 15, 2015. The attachments to OMB Bulletin No. 17-01 provided detailed information on the update to the statistical areas since July 15, 2015, and were based on the application of the 2010 Standards for Delineating Metropolitan and Micropolitan Statistical Areas to Census Bureau population estimates for July 1, 2014 and July 1, 2015. In the CY 2019 OPPS/ASC final rule with comment period (83 FR 58863 through 58865), we adopted the updates set forth in OMB Bulletin No. 17-01, effective January 1, 2019, beginning with the CY 2019 wage index. We continue to 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. For a complete discussion of the adoption of the Start Printed Page 39431updates set forth in OMB Bulletin No. 17-01, we refer readers to the CY 2019 OPPS/ASC final rule with comment period (83 FR 58864 through 58865).

As we stated in the FY 2020 IPPS/LTCH PPS proposed rule (84 FR 19374), for the FY 2020 IPPS wage indexes, we would continue to use the OMB delineations that were adopted, beginning with FY 2015 (based on the revised delineations issued in OMB Bulletin No. 13-01) to calculate the area wage indexes, with updates as reflected in OMB Bulletin Nos. 15-01 and 17-01. Similarly, in this CY 2020 OPPS/ASC proposed rule, for the CY 2020 OPPS wage indexes, we would continue to use the OMB delineations that were adopted under the OPPS, beginning with CY 2015 (based on the revised delineations issued in OMB Bulletin No. 13-01) to calculate the area wage indexes, with updates as reflected in OMB Bulletin Nos. 15-01 and 17-01.

CBSAs are made up of one or more constituent counties. Each CBSA and constituent county has its own unique identifying codes. The FY 2018 IPPS/LTCH PPS final rule (82 FR 38130) discussed the two different lists of codes to identify counties: Social Security Administration (SSA) codes and Federal Information Processing Standard (FIPS) codes. Historically, CMS listed and used SSA and FIPS county codes to identify and crosswalk counties to CBSA codes for purposes of the IPPS and OPPS wage indexes. However, the SSA county codes are no longer being maintained and updated, although the FIPS codes continue to be maintained by the U.S. Census Bureau. The Census Bureau's most current statistical area information is derived from ongoing census data received since 2010; the most recent data are from 2015. The Census Bureau maintains a complete list of changes to counties or county equivalent entities on the website at: https://www.census.gov/​geo/​reference/​county-changes.html (which, as of May 6, 2019, migrated to: https://www.census.gov/​programs-surveys/​geography.html). In the FY 2018 IPPS/LTCH PPS final rule (82 FR 38130), for purposes of crosswalking counties to CBSAs for the IPPS wage index, we finalized our proposal to discontinue the use of the SSA county codes and begin using only the FIPS county codes. Similarly, for the purposes of crosswalking counties to CBSAs for the OPPS wage index, in the CY 2018 OPPS/ASC final rule with comment period (82 FR 59260), we finalized our proposal to discontinue the use of SSA county codes and begin using only the FIPS county codes for the purposes of crosswalking counties to CBSAs for the OPPS wage index. For CY 2020, under the OPPS, we are continuing to use only the FIPS county codes for purposes of crosswalking counties to CBSAs.

In this CY 2020 OPPS/ASC proposed rule, we are proposing to use the FY 2020 hospital IPPS post-reclassified wage index for urban and rural areas as the wage index for the OPPS to determine the wage adjustments for both the OPPS payment rate and the copayment standardized amount for CY 2020. Therefore, any adjustments for the FY 2020 IPPS post-reclassified wage index, including, but not limited to, any proposed policies finalized under the IPPS to address wage index disparities between low and high wage index value hospitals as discussed above and in the FY 2020 IPPS/LTCH PPS proposed rule at 84 FR 19393 through19399, would be reflected in the final CY 2020 OPPS wage index beginning on January 1, 2020. (We refer readers to the FY 2020 IPPS/LTCH PPS proposed rule (84 FR 19373 through 19399) and the proposed FY 2020 hospital wage index files posted on the CMS website.) With regard to budget neutrality for the CY 2020 OPPS wage index, we refer readers to section II.B. of this proposed rule. We continue to believe that using the IPPS wage index as the source of an adjustment factor for the OPPS is reasonable and logical, given the inseparable, subordinate status of the HOPD within the hospital overall.

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. In this CY 2020 OPPS/ASC proposed rule, we are proposing to continue this policy for CY 2020, and are including a brief summary of the major proposed FY 2020 IPPS wage index policies and adjustments that we are proposing to apply to these hospitals under the OPPS for CY 2020, which we have summarized below. We refer readers to the FY 2020 IPPS/LTCH PPS proposed rule (84 FR 19373 through 19399) for a detailed discussion of the proposed changes to the FY 2020 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 are eligible for the out-migration wage index adjustment if they are located in a section 505 out-migration county. This is the same out-migration adjustment policy that applies if the hospital were paid under the IPPS. For CY 2020, 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). In addition, for non-IPPS hospitals paid under the OPPS, we are proposing to apply any proposed policies that are finalized under the IPPS relating to wage index disparities as discussed earlier in this proposed rule and in the FY 2020 IPPS/LTCH PPS proposed rule at 84 FR 19393 through 19399. We also are proposing that the wage index that would apply to non-IPPS hospitals for CY 2020 would include the rural floor adjustment.

For CMHCs, for CY 2020, 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. We also are proposing to apply any proposed policies that are finalized under the IPPS relating to wage index disparities as discussed earlier in this proposed rule and in the FY 2020 IPPS/LTCH PPS proposed rule at 84 FR 19393 through 19399. In addition, we are proposing that the wage index that would apply to CMHCs for CY 2020 would include the rural floor adjustment. Also, we are proposing that the wage index that would apply to CMHCs would not include the out-migration adjustment because that adjustment only applies to hospitals.

Table 4 associated with the FY 2020 IPPS/LTCH PPS proposed rule (available via the internet on the CMS website at: http://www.cms.gov/​Medicare/​Medicare-Fee-for-Service-Payment/​AcuteInpatientPPS/​index.html) identifies counties eligible for the out-migration adjustment. Table 2 associated with the FY 2020 IPPS/LTCH PPS proposed rule (available for download via the website above) identifies IPPS hospitals that would receive the out-migration adjustment for FY 2020. We are including the out-migration adjustment information from Table 2 associated with the FY 2020 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 this CY Start Printed Page 394322020 OPPS/ASC proposed rule. Addendum L is available via the internet on the CMS website. We refer readers to the CMS website 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 2020 IPPS wage index tables and Addendum L.

D. Proposed Statewide Average Default Cost-to-Charge Ratios (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. For certain hospitals, under the regulations at 42 CFR 419.43(d)(5)(iii), CMS uses the statewide average default CCRs to determine the payments mentioned earlier if it is unable to determine an accurate CCR for a hospital in certain circumstances. This includes 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 whose 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).

We discussed 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 details on our process for calculating the statewide average CCRs, we refer readers to the CY 2020 OPPS proposed rule Claims Accounting Narrative that is posted on the CMS website. In this CY 2020 OPPS/ASC proposed rule, we are proposing to update the default ratios for CY 2020 using the most recent cost report data. We will update these ratios in the final rule if more recent cost report data are available.

Beginning with this CY 2020 proposed rule, we are no longer publishing a table in the Federal Register containing the statewide average CCRs in the annual OPPS proposed rule and final rule. These CCRs with the upper limit will be available for download with each OPPS calendar year proposed rule and final rule on the CMS website. We refer the reader to the CMS website at: https://www.cms.gov/​Medicare/​Medicare-Fee-for-Service-Payment/​HospitalOutpatientPPS/​Hospital-Outpatient-Regulations-and-Notices.html; click on the link on the left of the page titled “Hospital Outpatient Regulations and Notices” and then select the relevant regulation to download the statewide CCRs and upper limit in the downloads section of the web page.

E. Proposed Adjustment for Rural Sole Community Hospitals (SCHs) and Essential Access Community Hospitals (EACHs) Under Section 1833(t)(13)(B) of the Act for CY 2020

In the CY 2006 OPPS final rule with comment period (70 FR 68556), we finalized a payment increase for rural sole community hospitals (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, items paid at charges reduced to costs, 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 essential access community hospitals (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 2019. 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 2020 OPPS, we are proposing to continue the current 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, brachytherapy sources, items paid at charges reduced to costs, and devices paid under the pass-through payment policy.

F. Proposed Payment Adjustment for Certain Cancer Hospitals for CY 2020

1. Background

Since the inception of the OPPS, which was authorized by the Balanced Budget Act of 1997 (BBA) (Pub. L. 105-33), Medicare has paid the 11 hospitals that meet the criteria for cancer hospitals identified in section 1886(d)(1)(B)(v) of the Act under the OPPS for covered outpatient hospital services. These cancer hospitals are exempted from payment under the IPPS. With the Medicare, Medicaid and SCHIP Balanced Budget Refinement Act of 1999 (Pub. L. 106-113), Congress established section 1833(t)(7) of the Act, “Transitional Adjustment to Limit Decline in Payment,” to determine OPPS payments to cancer and children's hospitals based on their pre-BBA payment amount (often referred to as “held harmless”).

As required under section 1833(t)(7)(D)(ii) of the Act, a cancer hospital receives the full amount of the difference between payments for covered outpatient services under the OPPS and a “pre-BBA amount.” That is, cancer hospitals are permanently held harmless to their “pre-BBA amount,” and they receive transitional outpatient payments (TOPs) or hold harmless payments to ensure that they do not Start Printed Page 39433receive 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 higher than those of other hospitals, 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 recently 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 was 0.90. 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). For CY 2017, the target PCR was 0.91, as discussed in the CY 2017 OPPS/ASC final rule with comment period (81 FR 79603 through 79604). For CY 2018, the target PCR was 0.88, as discussed in the CY 2018 OPPS/ASC final rule with comment period (82 FR 59265 through 59266). For CY 2019, the target PCR was 0.88, as discussed in the CY 2019 OPPS/ASC final rule with comment period (83 FR 58871 through 58873).

2. Proposed Policy for CY 2020

Section 16002(b) of the 21st Century Cures Act (Pub. L. 114-255) amended section 1833(t)(18) of the Act by adding subparagraph (C), which requires that in applying 42 CFR 419.43(i) (that is, the payment adjustment for certain cancer hospitals) for services furnished on or after January 1, 2018, the target PCR adjustment be reduced by 1.0 percentage point less than what would otherwise apply. Section 16002(b) also provides that, in addition to the percentage reduction, the Secretary may consider making an additional percentage point reduction to the target PCR that takes into account payment rates for applicable items and services described under section 1833(t)(21)(C) of the Act for hospitals that are not cancer hospitals described under section 1886(d)(1)(B)(v) of the Act. Further, in making any budget neutrality adjustment under section 1833(t) of the Act, the Secretary shall not take into account the reduced expenditures that result from application of section 1833(t)(18)(C) of the Act.

For CY 2020, we are proposing to provide additional payments to the 11 specified cancer hospitals so that each cancer hospital's final PCR is equal to the weighted average PCR (or “target PCR”) for the other OPPS hospitals, using the most recent submitted or settled cost report data that were available at the time of the development of this proposed rule, reduced by 1.0 percentage point, to comply with section 16002(b) of the 21st Century Cures Act.

We are not proposing an additional reduction beyond the 1.0 percentage point reduction required by section 16002(b) for CY 2020. To calculate the proposed CY 2020 target PCR, we are using 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 2020 OPPS. Using these cost report data, we are including 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 2018 claims data that we used to model the impact of the proposed CY 2020 APC relative payment weights (3,770 hospitals) because it is appropriate to use the same set of hospitals that are being used to calibrate the modeled CY 2020 OPPS. The cost report data for the hospitals in this dataset were from cost report periods with fiscal year ends ranging from 2016 to 2018. We then removed the cost report data of the 49 hospitals located in Puerto Rico from our dataset because we did not believe their cost structure reflected 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 23 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 3,539 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 were approximately 90 percent of reasonable cost (weighted average PCR of 0.90). Therefore, after applying the 1.0 percentage point reduction, as required by section 16002(b) of the 21st Century Cures Act, we are proposing that the payment amount associated with the cancer hospital payment Start Printed Page 39434adjustment to be determined at cost report settlement would be the additional payment needed to result in a proposed target PCR equal to 0.89 for each cancer hospital.

Table 6 shows the estimated percentage increase in OPPS payments to each cancer hospital for CY 2020, due to the cancer hospital payment adjustment policy. The actual amount of the CY 2020 cancer hospital payment adjustment for each cancer hospital will be determined at cost report settlement and will depend on each hospital's CY 2020 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 provide for TOPs for cancer hospitals. The TOPs will be assessed, as usual, after all payments, including the cancer hospital payment adjustment, have been made for a cost reporting period.

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 2019, 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 $4,825 (the fixed-dollar amount threshold) (83 FR 58874 through 58875). 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 OPPS. Our estimate of total outlier payments as a percent of total CY 2018 OPPS payments, using CY 2018 claims available for this CY 2020 OPPS/ASC proposed rule, is approximately 1.0 percent of the total aggregated OPPS payments. Therefore, for CY 2018, we estimated that we paid the outlier target of 1.0 percent of total aggregated OPPS payments. Using an updated claims dataset for this CY 2020 OPPS proposed rule, we estimate that we paid Start Printed Page 39435approximately 1.03 percent of the total aggregated OPPS payments in outliers for CY 2018.

For this CY 2020 OPPS/ASC proposed rule, using CY 2018 claims data and CY 2019 payment rates, we estimate that the aggregate outlier payments for CY 2019 would be approximately 1.03 percent of the total CY 2019 OPPS payments. We are providing estimated CY 2020 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 website at: https://www.cms.gov/​Medicare/​Medicare-Fee-for-Service-Payment/​HospitalOutpatientPPS/​index.html.

2. Proposed Outlier Calculation for CY 2020

For CY 2020, 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.C. of this proposed rule, we are proposing to continue our longstanding policy that if a CMHC's cost for partial hospitalization services, paid under 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.C. of this proposed rule.

To ensure that the estimated CY 2020 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 $4,950.

We calculated the proposed fixed-dollar threshold of $4,950 using the standard methodology most recently used for CY 2019 (83 FR 58874 through 58875). For purposes of estimating outlier payments for the proposed rule, we are using the hospital-specific overall ancillary CCRs available in the April 2019 update to the Outpatient Provider-Specific File (OPSF). The OPSF contains provider-specific data, such as the most current CCRs, which are maintained by the MACs and used by the OPPS Pricer to pay claims. The claims that we use to model each OPPS update lag by 2 years.

In order to estimate the CY 2020 hospital outlier payments for this proposed rule, we inflate the charges on the CY 2018 claims using the same inflation factor of 1.11189 that we used to estimate the proposed IPPS fixed-dollar outlier threshold for the FY 2020 IPPS/LTCH PPS proposed rule (84 FR 19596). We used an inflation factor of 1.05446 to estimate CY 2019 charges from the CY 2018 charges reported on CY 2018 claims. The methodology for determining this charge inflation factor is discussed in the FY 2019 IPPS/LTCH PPS final rule (83 FR 41717 through 41718). 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 is 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 do not apply a CCR inflation adjustment factor. Therefore, we are proposing to apply the same CCR inflation adjustment factor that we proposed to apply for the FY 2020 IPPS outlier calculation to the CCRs used to simulate the proposed CY 2020 OPPS outlier payments to determine the fixed-dollar threshold. Specifically, for CY 2020, we are proposing to apply an adjustment factor of 0.97517 to the CCRs that were in the April 2019 OPSF to trend them forward from CY 2019 to CY 2020. The methodology for calculating the proposed adjustment is discussed in the FY 2020 IPPS/LTCH PPS proposed rule (84 FR 19597).

To model hospital outlier payments for the proposed rule, we are applying the overall CCRs from the April 2019 OPSF after adjustment (using the proposed CCR inflation adjustment factor of 0.97517 to approximate CY 2020 CCRs) to charges on CY 2018 claims that were adjusted (using the proposed charge inflation factor of 1.11189 to approximate CY 2020 charges). We simulated aggregated CY 2020 hospital outlier payments using these costs for several different fixed-dollar thresholds, holding the 1.75 multiplier 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 2020 OPPS payments. We are estimating that a proposed fixed-dollar threshold of $4,950, combined with the proposed multiplier 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 continuing 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 referred readers to section XIV. 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 2020 OPPS/ASC proposed rule, the payment rate for most services and procedures for which payment is made under the OPPS is the product of the Start Printed Page 39436conversion factor calculated in accordance with section II.B. of this proposed rule and the 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 website) 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 website) was calculated by multiplying the proposed CY 2020 scaled weight for the APC by the proposed CY 2020 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 XIV. of this proposed rule.

Below we demonstrate the steps used 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 website), in a circumstance in which the multiple procedure discount does not apply, the procedure is not bilateral, and conditionally packaged services (status indicator of “Q1” and “Q2”) qualify for separate payment. We note that, although blood and blood products with status indicator “R” and brachytherapy sources with status indicator “U” are not subject to wage adjustment, they are subject to reduced payments when a hospital fails to meet the Hospital OQR Program requirements.

Individual providers interested in calculating the payment amount that they will 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 website) should follow the formulas presented in the following steps. For purposes of the payment calculations below, we refer to the national unadjusted payment rate for hospitals that meet the requirements of the Hospital OQR Program as the “full” national unadjusted payment rate. We refer to the national unadjusted payment rate for hospitals that fail to meet the requirements of the Hospital OQR Program as the “reduced” national unadjusted payment rate. The reduced national unadjusted payment rate is calculated by multiplying the reporting ratio of 0.980 times the “full” national unadjusted payment rate. The national unadjusted payment rate used in the calculations below is either the full national unadjusted payment rate or the reduced national unadjusted payment rate, depending on whether the hospital met its Hospital OQR Program requirements in order to receive the full CY 2020 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 2020 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 wage index values assigned to each area reflect the geographic statistical areas (which are based upon OMB standards) to which hospitals are assigned for FY 2020 under the IPPS, reclassifications through the Medicare Geographic Classification Review Board (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 2020 IPPS wage indexes, as applied to the CY 2020 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 website) contains the qualifying counties and the associated wage index increase developed for the proposed FY 2020 IPPS, which are listed in Table 2 associated with the FY 2020 IPPS/LTCH PPS proposed rule and available via the internet on the CMS website at: http://www.cms.gov/​Medicare/​Medicare-Fee-for-Service-Payment/​AcuteInpatientPPS/​index.html. (Click on the link on the left side of the screen titled “FY 2020 IPPS Proposed Rule Home Page” and select “FY 2020 Proposed Rule Tables.”) 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). Start Printed Page 39437

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 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 are using 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 2020 full national unadjusted payment rate for APC 5071 is approximately $617.00. The proposed reduced national unadjusted payment rate for APC 5071 for a hospital that fails to meet the Hospital OQR Program requirements is approximately $604.66. This reduced rate is calculated by multiplying the reporting ratio of 0.980 by the full unadjusted payment rate for APC 5071.

The proposed FY 2020 wage index for a provider located in CBSA 35614 in New York, which includes the proposed adoption of IPPS 2020 wage index policies, is 1.2747. The labor-related portion of the proposed full national unadjusted payment is approximately $471.89 (.60 * $617.00 * 1.2747). The labor-related portion of the proposed reduced national unadjusted payment is approximately $462.46 (.60 * 604.66 * 1.2747). The nonlabor-related portion of the proposed full national unadjusted payment is approximately $246.80 (.40 * $617.00). The nonlabor-related portion of the proposed reduced national unadjusted payment is approximately $241.86. (.40 * $604.66). The sum of the labor-related and nonlabor-related portions of the proposed full national adjusted payment is approximately $718.69 ($471.89. + $246.80). The sum of the portions of the proposed reduced national adjusted payment is approximately $704.32 ($462.46. + $241.86).

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 (including items such as drugs and biologicals) performed in a year to the amount of the inpatient hospital deductible for that year.

Section 4104 of the Affordable Care Act eliminated the Medicare 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 2020, 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 discussed 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, 2020 are included in Addenda A and B to this proposed rule (which are available via the internet on the CMS website).

As discussed in section XIV.E. of this proposed rule, for CY 2020, 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.Start Printed Page 39438

  • 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 the 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 achieves a 20-percent copayment percentage when fully phased in and gives the Secretary the authority to set rules for determining copayment amounts for new services. We further noted that the use of this methodology would, in general, reduce the beneficiary coinsurance rate and copayment amount for APCs for which the payment rate changes as the result of the reconfiguration of APCs and/or recalibration of relative payment weights (68 FR 63459).

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, $617.00 is approximately 20 percent of the proposed full national unadjusted payment rate of $123.40. 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 website), 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, 2020, are shown in Addenda A and B to this proposed rule (which are available via the internet on the CMS website). 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 CY 2020 OPD fee schedule increase factor discussed in section II.B. of this proposed rule.

In addition, as noted earlier, 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 and Revised HCPCS Codes

Payment for OPPS procedures, services, and items are generally based on medical billing codes, specifically, HCPCS codes, that are reported on HOPD claims. The HCPCS is divided into two principal subsystems, referred to as Level I and Level II of the HCPCS. Level I is comprised of CPT (Current Procedural Terminology), a numeric and alphanumeric coding system maintained by the American Medical Association (AMA), and consist of Category I, II, and III CPT codes. Level II, which is maintained by CMS, is a standardized coding system that is used primarily to identify products, supplies, and services not included in the CPT codes. HCPCS codes are used to report surgical procedures, medical 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, diagnostic and therapeutic services, and vaccine codes;
  • Category III CPT codes, which describe new and emerging technologies, services, and procedures; andStart Printed Page 39439
  • Level II HCPCS codes (also known as alphanumeric codes), which are used primarily to identify drugs, devices, ambulance services, durable medical equipment, orthotics, prosthetics, supplies, temporary surgical procedures, and medical services not described by CPT codes.

CPT codes are established by the American Medical Association (AMA) while the Level II HCPCS codes are established by the CMS HCPCS Workgroup. These codes are updated and changed throughout the year. CPT and Level II HCPCS code changes that affect the OPPS are published through the annual rulemaking cycle and through the OPPS quarterly update Change Requests (CRs). Generally, these code changes are effective January 1, April 1, July 1, or October 1. CPT code changes are released by the AMA while Level II HCPCS code changes are released to the public via the CMS HCPCS website. CMS recognizes the release of new CPT and Level II HCPCS codes and makes the 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 codes to interim status indicators (SIs) and APCs. These interim assignments are finalized in the OPPS/ASC final rules. This quarterly process offers hospitals access to codes that more accurately describe items or services furnished and provides payment for these items or services in a timelier manner than if we waited for the annual rulemaking process. We solicit public comments on the new CPT and Level II HCPCS codes and finalize our proposals through our annual rulemaking process.

We note that, under the OPPS, the APC assignment determines the payment rate for an item, procedure, or service. Those items, procedures, or services not paid separately under the hospital OPPS are assigned to appropriate status indicators. Certain payment status indicators provide separate payment while other payment status indicators do not. In section XI. of this proposed rule (Proposed CY 2020 OPPS Payment Status and Comment Indicators), we discuss the various status indicators used under the OPPS. We also provide a complete list of the status indicators and their definitions in Addendum D1 to this CY 2020 OPPS/ASC proposed rule.

1. April 2019 Codes for Which We Are Soliciting Public Comments in This Proposed Rule

For the April 2019 update, there were no new CPT codes. However, eight new Level II HCPCS codes were established and made effective on April 1, 2019. These codes and their long descriptors are listed in Table 7. Through the April 2019 OPPS quarterly update CR (Transmittal 4255, Change Request 11216, dated March 15, 2019), we recognized several new Level II HCPCS codes for separate payment under the OPPS. In this CY 2020 OPPS/ASC proposed rule, we are soliciting public comments on the proposed APC and status indicator assignments for the codes listed Table 7. The proposed status indicator, APC assignment, and payment rate for each HCPCS code can be found in Addendum B to this proposed rule. The complete list of status indicators and corresponding definitions used under the OPPS can be found in Addendum D1 to this proposed rule. These new codes that are effective April 1, 2019 are assigned to comment indicator “NP” in Addendum B to this proposed rule to indicate that the codes are assigned to an interim APC assignment and that comments will be accepted on their interim APC assignments. Also, the complete list of comment indicators and definitions used under the OPPS can be found in Addendum D2 to this proposed rule. We note that OPPS Addendum B, Addendum D1, and Addendum D2 are available via the internet on the CMS website.

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2. July 2019 HCPCS Codes for Which We Are Soliciting Public Comments in This Proposed Rule

For the July 2019 update, 58 new codes were established and made effective July 1, 2019. The codes and long descriptors are listed in Table 8. Through the July 2019 OPPS quarterly update CR (Transmittal 4313, Change Request 11318, dated May 24, 2019), we recognized several new codes for separate payment and assigned them to appropriate interim OPPS status indicators and APCs. In this CY 2020 OPPS/ASC proposed rule, we are soliciting public comments on the proposed APC and status indicator assignments for the codes implemented on July 1, 2019, all of which are listed in Table 8. The proposed status indicator, APC assignment, and payment rate for each HCPCS code can be found in Addendum B to this proposed rule. The complete list of status indicators and corresponding definitions used under the OPPS can be found in Addendum D1 to this proposed rule. These new codes that are effective July 1, 2019 are assigned to comment indicator “NP” in Addendum B to this proposed rule to indicate that the codes are assigned to an interim APC assignment and that comments will be accepted on their interim APC assignments. Also, the complete list of comment indicators and definitions used under the OPPS can be found in Addendum D2 to this proposed rule. We note that OPPS Addendum B, Addendum D1, and Addendum D2 are available via the internet on the CMS website.

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3. October 2019 HCPCS Codes for Which We Will Be Soliciting Public Comments in the CY 2020 OPPS/ASC Final Rule With Comment Period

As has been our practice in the past, we will solicit comments on the new CPT and Level II HCPCS codes that will be effective October 1, 2019 in the CY 2020 OPPS/ASC final rule with comment period, thereby allowing us to finalize the status indicators and APC assignments for the codes in the CY 2021 OPPS/ASC final rule with comment period. The Level II HCPCS codes will be released to the public through the October 2019 OPPS Update CR and the CMS HCPCS website while the CPT codes will be released to the public through the AMA website.

For CY 2020, 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 HCPCS codes that are effective October 1, 2019 to indicate that we are assigning them an interim status indicator, which is subject to public comment. We will be inviting public comments in the CY 2020 OPPS/ASC final rule with comment period on the status indicator and APC assignments, which would then be finalized in the CY 2021 OPPS/ASC final rule with comment period.

4. January 2020 HCPCS Codes

a. New Level II HCPCS Codes for Which We Will Be Soliciting Public Comments in the CY 2020 OPPS/ASC Final Rule With Comment Period

Consistent with past practice, we will solicit comments on the new Level II HCPCS codes that will be effective January 1, 2020 in the CY 2020 OPPS/ASC final rule with comment period, thereby allowing us to finalize the status indicators and APC assignments for the codes in the CY 2021 OPPS/ASC final rule with comment period. Unlike the CPT codes that are effective January 1 and are included in the OPPS/ASC proposed rules, and except for the G-codes listed in Addendum O of this proposed rule, most Level II HCPCS codes are not released until sometime around November to be effective January 1. Because these codes are not available until November, we are unable to include them in the OPPS/ASC proposed rules. Therefore, these Level II HCPCS codes will be released to the public through the CY 2020 OPPS/ASC final rule with comment period, January 2020 OPPS Update CR, and the CMS HCPCS website.

For CY 2020, 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 the new HCPCS codes that will be effective January 1, 2020 to indicate that we are assigning them an interim status indicator, which is subject to public comment. We will be inviting public comments in the CY 2020 OPPS/ASC final rule with comment period on the status indicator and APC assignments, which would then be finalized in the CY 2021 OPPS/ASC final rule with comment period.

b. CPT Codes for Which We Are Soliciting Public Comments in This Proposed Rule

In the CY 2015 OPPS/ASC final rule with comment period (79 FR 66841 through 66844), we finalized a revised process of assigning APC and status indicators for new and revised Category I and III CPT codes that would be effective January 1. Specifically, for the new/revised CPT codes that we receive in a timely manner from the AMA's CPT Editorial Panel, we finalized our proposal to include the codes that would be effective January 1 in the OPPS/ASC proposed rules, along with proposed APC and status indicator assignments for them, and to finalize the APC and status indicator assignments in the OPPS/ASC final rules beginning with the CY 2016 OPPS update. For those new/revised CPT codes that were received too late for inclusion in the OPPS/ASC proposed rule, we finalized our proposal to establish and use HCPCS G-codes that mirror the predecessor CPT codes and retain the current APC and status indicator assignments for a year until we can propose APC and status indicator assignments in the following year's rulemaking cycle. We note that even if we find that we need to create HCPCS G-codes in place of certain CPT codes for the PFS proposed rule, we do not anticipate that these HCPCS G-codes will always be necessary for OPPS purposes. We will make every effort to Start Printed Page 39450include 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 2020 OPPS update, we received the CPT codes that will be effective January 1, 2020 from AMA in time to be included in this proposed rule. The new, revised, and deleted CPT codes can be found in Addendum B to this proposed rule (which is available via the internet on the CMS website). We note that the new and revised CPT codes are assigned to comment indicator “NP” in Addendum B of this proposed rule 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 note 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 the long descriptors for the new and revised CY 2020 CPT codes in Addendum O to this proposed rule (which is available via the internet on the CMS website) 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 2020 OPPS/ASC Proposed Rule 5-Digit AMA Placeholder Code”. The final CPT code numbers will be included in the CY 2020 OPPS/ASC final rule with comment period.

In summary, we are soliciting public comments on the proposed CY 2020 status indicators and APC assignments for the new and revised CPT codes that will be effective January 1, 2020. Because the CPT codes listed in Addendum B appear with short descriptors only, we list them again in Addendum O to this proposed rule with long descriptors. In addition, we are proposing to finalize the status indicator and APC assignments for these codes (with their final CPT code numbers) in the CY 2020 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 website).

Finally, in Table 9, we summarize our current process for updating codes through our OPPS quarterly update CRs, seeking public comments, and finalizing the treatment of these codes under the OPPS.

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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 regulations at 42 CFR 419.31. We use Level I (also known as CPT codes) and Level II HCPCS codes (also known as alphanumeric 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 regulations at 42 CFR 419.2(b). 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 2020, 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

Section 1833(t)(9)(A) of the Act requires the Secretary to review, not less often than annually, and revise the APC groups, the relative payment weights, and the wage and other adjustments described in paragraph (2) to take into account changes in medical practice, changes in technology, the addition of new services, new cost data, and other relevant information and factors. Section 1833(t)(9)(A) of the Act also requires the Secretary to consult with an expert outside advisory panel composed of an appropriate selection of representatives of providers to review (and advise the Secretary concerning) the clinical integrity of the APC groups and the relative payment weights. We note that the HOP Panel recommendations for specific services for the CY 2020 OPPS update will be discussed in the relevant specific sections throughout the CY 2020 OPPS/ASC final rule with comment period.

In addition, section 1833(t)(2) of the Act provides that, subject to certain exceptions, the items and services within an APC group cannot be considered comparable with respect to the use of resources if the highest cost for an item or service in the group is more than 2 times greater than the lowest cost for an item or service within the same group (referred to as the “2 times rule”). 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 both have more 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 or fewer 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 that comprises less than 2 percent of the single major claims within an APC will have a negligible impact on the APC cost (75 FR 71832). In this section of this proposed rule, for CY 2020, we are proposing to make exceptions to this limit on the variation of costs within each APC group in unusual cases, such as for certain low-volume items and services.

For the CY 2020 OPPS update, 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 2020 OPPS/ASC proposed rule. Rather, it is published and made available via the internet on the CMS website at: https://www.cms.gov/​Medicare/​Medicare-Fee-for-Service-Payment/​HospitalOutpatientPPS/​index.html. To eliminate a violation of the 2 times rule and 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 2020 included in this proposed rule are related to changes in costs of services that were observed in the CY 2018 claims data newly available for CY 2020 ratesetting. Addendum B to this CY 2020 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 July 1, 2019 OPPS Addendum B Update (available via the internet on the CMS website 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 to make for CY 2020, 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;Start Printed Page 39452
  • Clinical homogeneity;
  • Hospital outpatient setting utilization;
  • Frequency of service (volume); and
  • Opportunity for upcoding and code fragments.

Based on the CY 2018 claims data available for this CY 2020 proposed rule, we found 18 APCs with violations of the 2 times rule. We applied the criteria as described above to identify the APCs for which we are proposing to make exceptions under the 2 times rule for CY 2020, and found that all of the 18 APCs we identified meet the criteria for an exception to the 2 times rule based on the CY 2018 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 only has two HCPCS codes assigned to it that have a similar geometric mean costs and do not create a 2 time rule violation. Therefore, we have only identified those APCs, including those with criteria-based costs, such as device-dependent CPT/HCPCS codes, with violations of the 2 times rule.

We note that, for cases in which a recommendation by the HOP Panel appears to result in or allow a violation of the 2 times rule, we may accept the HOP 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 10 of this proposed rule lists the 18 APCs that we are proposing to make an exception for under the 2 times rule for CY 2020 based on the criteria cited above and claims data submitted between January 1, 2018, and December 31, 2018, and processed on or before December 31, 2018. For the final rule with comment period, we intend to use claims data for dates of service between January 1, 2018, and December 31, 2018, that were processed on or before June 30, 2019, and updated CCRs, if available. The proposed 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 website at: http://www.cms.gov/​Medicare/​Medicare-Fee-for-Service-Payment/​HospitalOutpatientPPS/​Hospital-Outpatient-Regulations-and-Notices.html.

C. Proposed New Technology APCs

1. Background

In the CY 2002 OPPS final rule (66 FR 59903), we finalized changes to the time period in which a service can be 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.

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 Start Printed Page 39453consistent across payment levels and refined the cost bands for these APCs to retain two parallel sets of New Technology APCs, one set with a status indicator of “S” (Significant Procedures, Not Discounted when Multiple. Paid under OPPS; separate APC payment) and the other set with a status indicator of “T” (Significant Procedure, Multiple Reduction Applies. Paid under OPPS; separate APC payment). These current New Technology APC configurations allow us to price new technology services more appropriately and consistently.

For CY 2019, there were 52 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 1908 (New Technology—Level 52 ($145,001-$160,000)). We note that the cost bands for the New Technology APCs, specifically, APCs 1491 through 1599 and 1901 through 1908, vary with increments ranging from $10 to $14,999. 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 ($501-$600)) is made at $550.50.

Under the OPPS, one of our goals is to make payments that are appropriate for the services that are necessary for the treatment of Medicare beneficiaries. The OPPS, like other Medicare payment systems, is budget neutral and increases are limited to the annual hospital inpatient market basket increase adjusted for multifactor productivity. We believe that our payment rates generally reflect the costs that are associated with providing care to Medicare beneficiaries. Furthermore, we believe that our payment rates are adequate to ensure access to services (80 FR 70374).

For many emerging technologies, there is a transitional period during which utilization may be low, often because providers are first learning about the technologies and their clinical utility. Quite often, parties request that Medicare make higher payment amounts under the New Technology APCs for new procedures in that transitional phase. These requests, and their accompanying estimates for expected total patient utilization, often reflect very low rates of patient use of expensive equipment, resulting in high per-use costs for which requesters believe Medicare should make full payment. Medicare does not, and we believe should not, assume responsibility for more than its share of the costs of procedures based on projected utilization for Medicare beneficiaries and does not set its payment rates based on initial projections of low utilization for services that require expensive capital equipment. For the OPPS, we rely on hospitals to make informed business decisions regarding the acquisition of high-cost capital equipment, taking into consideration their knowledge about their entire patient base (Medicare beneficiaries included) and an understanding of Medicare's and other payers' payment policies. (We refer readers to the CY 2013 OPPS/ASC final rule with comment period (77 FR 68314) for further discussion regarding this payment policy.)

We note that, in a budget neutral system, payments may not fully cover hospitals' costs in a particular circumstance, including those for the purchase and maintenance of capital equipment. We rely on hospitals to make their decisions regarding the acquisition of high-cost equipment with the understanding that the Medicare program must be careful to establish its initial payment rates, including those made through New Technology APCs, for new services that lack hospital claims data based on realistic utilization projections for all such services delivered in cost-efficient hospital outpatient settings. As the OPPS acquires claims data regarding hospital costs associated with new procedures, we regularly examine the claims data and any available new information regarding the clinical aspects of new procedures to confirm that our OPPS payments remain appropriate for procedures as they transition into mainstream medical practice (77 FR 68314). For CY 2020, we are including the proposed payment rates for New Technology APCs 1491 through 1599 and 1901 through 1908 in Addendum A to this CY 2020 OPPS/ASC proposed rule (which is available via the internet on the CMS website).

2. Establishing Payment Rates for Low-Volume New Technology Procedures

Procedures that are assigned to New Technology APCs are typically new procedures that do not have sufficient claims history to establish an accurate payment for the procedures. One of the objectives of establishing New Technology APCs is to generate sufficient claims data for a new procedure so that it can be assigned to an appropriate clinical APC. Some procedures that are assigned to New Technology APCs have very low annual volume, which we consider to be fewer than 100 claims. We consider procedures with fewer than 100 claims annually as low-volume procedures because there is a higher probability that the payment data for a procedure may not have a normal statistical distribution, which could affect the quality of our standard cost methodology that is used to assign services to an APC. In addition, services with fewer than 100 claims per year are not generally considered to be a significant contributor to the APC ratesetting calculations and, therefore, are not included in the assessment of the 2 times rule. As we explained in the CY 2019 OPPS/ASC final rule with comment period (83 FR 58890), we were concerned that the methodology we use to estimate the cost of a procedure under the OPPS by calculating the geometric mean for all separately paid claims for a HCPCS procedure code from the most recent available year of claims data may not generate an accurate estimate of the actual cost of the procedure for these low-volume procedures.

In accordance with section 1833(t)(2)(B) of the Act, services classified within each APC must be comparable clinically and with respect to the use of resources. As described earlier, assigning a procedure to a new technology APC allows us to gather claims data to price the procedure and assign it to the APC with services that use similar resources and are clinically comparable. However, where utilization of services assigned to a New Technology APC is low, it can lead to wide variation in payment rates from year to year, resulting in even lower utilization and potential barriers to access to new technologies, which ultimately limits our ability to assign the service to the appropriate clinical APC. To mitigate these issues, we determined in the CY 2019 OPPS/ASC final rule with comment period that it was appropriate to utilize our equitable adjustment authority at section 1833(t)(2)(E) of the Act to adjust how we determined the costs for low-volume services assigned to New Technology APCs (83 FR 58892 through 58893). We have utilized our equitable adjustment authority at section 1833(t)(2)(E) of the Act, which states that the Secretary shall establish, in a budget neutral manner, other adjustments as determined to be necessary to ensure equitable payments, to estimate an appropriate payment amount for low-volume new technology procedures in the past (82 FR 59281). Although we Start Printed Page 39454have used this adjustment authority on a case-by-case basis in the past, we stated in the CY 2019 OPPS/ASC final rule with comment period that we believe it is appropriate to adopt an adjustment for low-volume services assigned to New Technology APCs in order to mitigate the wide payment fluctuations that have occurred for new technology services with fewer than 100 claims and to provide more predictable payment for these services.

For purposes of this adjustment, we stated that we believe that it is appropriate to use up to 4 years of claims data in calculating the applicable payment rate for the prospective year, rather than using solely the most recent available year of claims data, when a service assigned to a New Technology APC has a low annual volume of claims, which, for purposes of this adjustment, we define as fewer than 100 claims annually. We adopted a policy to consider procedures with fewer than 100 claims annually as low-volume procedures because there is a higher probability that the payment data for a procedure may not have a normal statistical distribution, which could affect the quality of our standard cost methodology that is used to assign services to an APC. We explained that we were concerned that the methodology we use to estimate the cost of a procedure under the OPPS by calculating the geometric mean for all separately paid claims for a HCPCS procedure code from the most recent available year of claims data may not generate an accurate estimate of the actual cost of the low-volume procedure. Using multiple years of claims data will potentially allow for more than 100 claims to be used to set the payment rate, which would, in turn, create a more statistically reliable payment rate.

In addition, to better approximate the cost of a low-volume service within a New Technology APC, we stated that we believe using the median or arithmetic mean rather than the geometric mean (which “trims” the costs of certain claims out) could be more appropriate in some circumstances, given the extremely low volume of claims. Low claim volumes increase the impact of “outlier” claims; that is, claims with either a very low or very high payment rate as compared to the average claim, which would have a substantial impact on any statistical methodology used to estimate the most appropriate payment rate for a service. We also explained that we believe having the flexibility to utilize an alternative statistical methodology to calculate the payment rate in the case of low-volume new technology services would help to create a more stable payment rate. Therefore, in the CY 2019 OPPS/ASC final rule with comment period (83 FR 58893), we established that, in each of our annual rulemakings, we will seek public comments on which statistical methodology should be used for each low-volume service assigned to a New Technology APC. In the preamble of each annual rulemaking, we stated that we would present the result of each statistical methodology and solicit public comment on which methodology should be used to establish the payment rate for a low-volume new technology service. In addition, we will use our assessment of the resources used to perform a service and guidance from the developer or manufacturer of the service, as well as other stakeholders, to determine the most appropriate payment rate. Once we identify the most appropriate payment rate for a service, we will assign the service to the New Technology APC with the cost band that includes its payment rate.

Accordingly for CY 2020, we are proposing to continue our policy adopted in CY 2019 under which we will utilize our equitable adjustment authority under section 1833(t)(2)(E) of the Act to calculate the geometric mean, arithmetic mean, and median using multiple years of claims data to select the appropriate payment rate for purposes of assigning services with fewer than 100 claims per year to a New Technology APC. Additional details on our policy is available in the CY 2019 OPPS/ASC final rule with comment period (83 FR 58892 through 58893).

3. Procedures Assigned to New Technology APC Groups for CY 2020

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.

In addition, 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), where we obtain new information that was not available at the time of our initial New Technology APC assignment, 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 2020, in this proposed rule, 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).

a. Magnetic Resonance-Guided Focused Ultrasound Surgery (MRgFUS) (APCs 1575, 5114, and 5414)

Currently, there are four CPT/HCPCS codes that describe magnetic resonance image-guided, high-intensity focused ultrasound (MRgFUS) procedures, three of which we are proposing to continue to assign to standard APCs, and one that we are proposing to continue to assign to a New Technology APC for CY 2020. These codes include CPT codes 0071T, 0072T, and 0398T, and HCPCS code C9734. CPT codes 0071T and 0072T describe procedures for the treatment of uterine fibroids, CPT code 0398T describes procedures for the treatment of essential tremor, and HCPCS code C9734 describes procedures for pain palliation for metastatic bone cancer.

As shown in Table 11 of this CY 2020 OPPS/ASC proposed rule, and as listed in Addendum B to this CY 2020 OPPS/ASC proposed rule, we are proposing to continue to assign the procedures described by CPT codes 0071T and 0072T to APC 5414 (Level 4 Gynecologic Procedures) for CY 2020. We also are proposing to continue to assign the APC to status indicator “J1” (Hospital Part B services paid through a comprehensive APC). In addition, we are proposing to continue to assign the services described by HCPCS code C9734 (Focused ultrasound ablation/therapeutic intervention, other than uterine leiomyomata, with magnetic resonance (mr) guidance) to APC 5115 (Level 5 Musculoskeletal Procedures) for CY 2020. We also are proposing to continue to assign HCPCS code C9734 to status indicator “J1”. We refer readers to Addendum B to this proposed rule for the proposed payment rates for CPT codes 0071T and 0072T and HCPCS code C9734 under the OPPS. Addendum B is available via the internet on the CMS website.Start Printed Page 39455

For the procedure described by CPT code 0398T, we have identified 37 paid claims from CY 2016 through CY 2018 (1 claim in CY 2016, 11 claims in CY 2017, and 25 claims in CY 2018). We note that the procedure described by CPT code 0398T was first assigned to a New Technology APC in CY 2016. Accordingly, there are 3 years of claims data available for the OPPS ratesetting purposes. The payment amounts for the claims vary widely, with a cost of approximately $29,254 for the sole CY 2016 claim, a geometric mean cost of approximately $4,647 for the 11 claims from CY 2017, and a geometric mean cost of approximately $11,716 for the 25 claims from CY 2018. We are concerned about the large fluctuation in the cost of the procedure described by CPT code 0398T from year to year and the relatively small number of claims available to establish a payment rate for the service. To be in accordance with section 1833(t)(2)(B) of the Act, we must establish that services classified within each APC are comparable clinically and with respect to the use of resources.

Therefore, as discussed in section III.C.2. of this proposed rule, we are proposing to apply the policy we adopted in CY 2019, under which we will utilize our equitable adjustment authority under section 1833(t)(2)(E) of the Act to calculate the geometric mean, arithmetic mean, and median costs using multiple years of claims data to select the appropriate payment rate for purposes of assigning CPT code 0398T to a New Technology APC. We believe using this approach to assign CPT code 0398T to a New Technology APC is more likely to yield a payment rate that will be representative of the cost of the procedure described by CPT code 0398T, despite the fluctuating geometric mean costs for the procedure available in the claims data used for this proposed rule. We continue to believe that the situation for the procedure described by CPT code 0398T is unique, given the limited number of claims for the procedure and the high variability for the cost of the claims, which makes it challenging to determine a reliable payment rate.

Our analysis found that the estimated geometric mean cost of the 37 claims was approximately $8,829, the estimated arithmetic mean cost of the claims was approximately $10,021, and the median cost of the claims was approximately $11,985. While the results of using different methodologies range from approximately $8,800 to nearly $12,000, two of the estimates fall within the cost bands of New Technology APC 1575 (New Technology—Level 38 ($10,001-$15,000)), with a proposed payment rate of $12,500.50. Consistent with our policy stated in section III.C.2. of this proposed rule, we are presenting the result of each statistical methodology in this preamble, and we are seeking public comments on which methodology should be used to establish payment for the procedures described by CPT code 0398T. We note that we believe that the median cost estimate is the most appropriate representative cost of the procedure described by CPT code 0398T because it is consistent with the payment rates established for the procedure from CY 2017 to CY 2019 and does not involve any trimming of claims. Calculating the payment rate using either the geometric mean cost or the arithmetic mean cost would involve trimming the one paid claim from CY 2016, because the paid amount for the claim of $29,254 is substantially larger than the amount for any other paid claim reported for the procedure described by CPT code 0398T. The median cost estimate for CPT code 0398T also falls within the same New Technology APC cost band that was used to set the payment rate for CY 2019, which is $12,500.50 for this procedure. Therefore, for purposes of determining the proposed CY 2020 payment rate, we are proposing to estimate the cost for the procedure described by CPT code 0398T by calculating the median cost of the 37 paid claims for the procedures in CY 2016 through CY 2018, and assigning the procedure described by CPT code 0398T to the New Technology APC that includes the estimated cost. Accordingly, we are proposing to maintain the procedure described by CPT code 0398T in APC 1575 (New Technology—Level 38 ($10,001-$15,000)), with a proposed payment rate of $12,500.50 for CY 2020. We refer readers to Addendum B to this proposed rule for the proposed payment rates for all codes reportable under the OPPS. Addendum B is available via the internet on the CMS website.

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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 the use of the Argus® II Retinal Prosthesis System. This first retinal prosthesis was approved by the Food and Drug Administration (FDA) in 2013 for adult patients diagnosed with severe to profound 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 this status 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 device described by HCPCS code C1841 was assigned to OPPS status indicator “N” to indicate that payment for the device is packaged and included in the payment rate for the surgical procedure described by CPT code 0100T. For CY 2016, the procedure described by CPT code 0100T was assigned to New Technology APC 1599, with a payment rate of $95,000, which was the highest paying New Technology APC for that year. This payment included 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) believed that the CY 2016 payment rate for the procedure involving the Argus® II System was insufficient to cover the hospital cost of performing the procedure, which includes the cost of the retinal prosthesis at the retail price of approximately $145,000.

For CY 2017, analysis of the CY 2015 OPPS claims data used for the CY 2017 OPPS/ASC final rule with comment period showed 9 single claims (out of 13 total claims) for the procedure described by CPT code 0100T, with a geometric mean cost of approximately $142,003 based on claims submitted between January 1, 2015, through December 31, 2015, and processed through June 30, 2016. Based on the CY 2015 OPPS claims data available for the final rule with comment period and our understanding of the Argus® II procedure, we reassigned the procedure described by CPT code 0100T from New Technology APC 1599 to New Technology APC 1906, with a final payment rate of $150,000.50 for CY 2017. We noted that this payment rate included the cost of both the surgical procedure (CPT code 0100T) and the retinal prosthesis device (HCPCS code C1841).

For CY 2018, the reported cost of the Argus® II procedure based on CY 2016 hospital outpatient claims data for 6 claims used for the CY 2018 OPPS/ASC final rule with comment period was approximately $94,455, which was more than $55,000 less than the payment rate for the procedure in CY 2017, but closer to the CY 2016 payment rate for the procedure. We noted that the costs of the Argus® II procedure are extraordinarily high compared to many other procedures paid under the OPPS. In addition, the number of claims submitted has been very low and has not exceeded 10 claims within a single year. We believed that it is important to mitigate significant payment differences, especially shifts of several tens of thousands of dollars, while also basing payment rates on available cost information and claims data. In CY 2016, the payment rate for the Argus® II procedure was $95,000.50. The payment rate increased to $150,000.50 in CY 2017. For CY 2018, if we had established the payment rate based on updated final rule claims data, the payment rate would have decreased to $95,000.50 for CY 2018, a decrease of $55,000 relative to CY 2017. We were concerned that these large fluctuations in payment could potentially create an access to care issue for the Argus® II procedure, and we wanted to establish a payment rate to mitigate the potential sharp decline in payment from CY 2017 to CY 2018.

In accordance with section 1833(t)(2)(B) of the Act, we must establish that services classified within each APC are comparable clinically and with respect to the use of resources. Therefore, for CY 2018, we used our equitable adjustment authority under section 1833(t)(2)(E) of the Act, which states that the Secretary shall establish, in a budget neutral manner, other adjustments as determined to be necessary to ensure equitable payments, to maintain the payment rate for this procedure, despite the lower geometric mean costs available in the claims data used for the final rule with comment period. For CY 2018, we reassigned the Argus® II procedure to APC 1904 (New Technology—Level 50 ($115,001-$130,000)), which established a payment rate for the Argus® II procedure of $122,500.50, which was the arithmetic mean of the payment rates for the procedure for CY 2016 and CY 2017.

For CY 2019, the reported cost of the Argus® II procedure based on the geometric mean cost of 12 claims from the CY 2017 hospital outpatient claims data was approximately $171,865, which was approximately $49,364 more than the payment rate for the procedure for CY 2018. In the CY 2019 OPPS/ASC Start Printed Page 39458final rule with comment period, we continued to note that the costs of the Argus® II procedure are extraordinarily high compared to many other procedures paid under the OPPS (83 FR 58897 through 58898). In addition, the number of claims submitted continued to be very low for the Argus® II procedure. We stated that we continued to believe that it is important to mitigate significant payment fluctuations for a procedure, especially shifts of several tens of thousands of dollars, while also basing payment rates on available cost information and claims data because we are concerned that large decreases in the payment rate could potentially create an access to care issue for the Argus® II procedure. In addition, we indicated that we wanted to establish a payment rate to mitigate the potential sharp increase in payment from CY 2018 to CY 2019, and potentially ensure a more stable payment rate in future years.

In accordance with section 1833(t)(2)(B) of the Act, we must establish that services classified within each APC are comparable clinically and with respect to the use of resources. Therefore, as discussed in section III.C.2. of the CY 2019 OPPS/ASC final rule with comment period (83 FR 58892 through 58893), we used our equitable adjustment authority under section 1833(t)(2)(E) of the Act, which states that the Secretary shall establish, in a budget neutral manner, other adjustments as determined to be necessary to ensure equitable payments, to establish a payment rate that is more representative of the likely cost of the service. We stated that we believed the likely cost of the Argus® II procedure is higher than the geometric mean cost calculated from the claims data used for the CY 2018 OPPS/ASC final rule with comment period but lower than the geometric mean cost calculated from the claims data used for the CY 2019 OPPS/ASC final rule with comment period.

For CY 2019, we analyzed claims data for the Argus® II procedure using 3 years of available data from CY 2015 through CY 2017. These data included claims from the last year that the Argus® II received transitional device pass-through payments (CY 2015) and the first 2 years since device pass-through payment status for the Argus® II expired. We found that the geometric mean cost for the procedure was approximately $145,808, the arithmetic mean cost was approximately $151,367, and the median cost was approximately $151,266. As we do each year, we reviewed claims data regarding hospital costs associated with new procedures. We regularly examine the claims data and any available new information regarding the clinical aspects of new procedures to confirm that OPPS payments remain appropriate for procedures like the Argus® II procedure as they transition into mainstream medical practice (77 FR 68314). We noted that the proposed payment rate included both the surgical procedure (CPT code 0100T) and the use of the Argus® II device (HCPCS code C1841). For CY 2019, the estimated costs using all three potential statistical methods for determining APC assignment under the New Technology low-volume policy fell within the cost band of New Technology APC 1908, which is between $145,001 and $160,000. Therefore, we reassigned the Argus® II procedure (CPT code 0100T) to APC 1908 (New Technology—Level 52 ($145,001-$160,000)), with a payment rate of $152,500.50 for CY 2019.

For CY 2020, the number of reported claims for the Argus® II procedure continues to be very low with a substantial fluctuation in cost from year to year.

The high annual variability of the cost of the Argus® II procedure continues to make it difficult to establish a consistent and stable payment rate for the procedure. In accordance with section 1833(t)(2)(B) of the Act, we are required to establish that services classified within each APC are comparable clinically and with respect to the use of resources. Therefore, for CY 2020, we are proposing to apply the policy we adopted in CY 2019, under which we utilize our equitable adjustment authority under section 1833(t)(2)(E) of the Act to calculate the geometric mean, arithmetic mean, and median costs using multiple years of claims data to select the appropriate payment rate for purposes of assigning the Argus® II procedure (CPT code 0100T) to a New Technology APC.

We identified 35 claims reporting the procedure described by CPT code 0100T for the 4-year period of CY 2015 through CY 2018. We found the geometric mean cost for the procedure described by CPT code 0100T to be approximately $146,059, the arithmetic mean cost to be approximately $152,123, and the median cost to be approximately $151,267. All of the resulting estimates from using the three statistical methodologies fall within the same New Technology APC cost band ($145,001-$160,000), where the Argus® II procedure is assigned for CY 2019. Consistent with our policy stated in section III.C.2. of this proposed rule, we are presenting the result of each statistical methodology in this preamble, and we are seeking public comments on which method should be used to assign procedures described by CPT code 0100T to a New Technology APC. All three potential statistical methodologies used to estimate the cost of the Argus® II procedure fall within the cost band for New Technology APC 1908, with the estimated cost being between $145,001 and $160,000. Accordingly, we are proposing to maintain the assignment of the procedure described by CPT code 0100T in APC 1908 (New Technology—Level 52 ($145,001-$160,000)), with a proposed payment rate of $152,500.50 for CY 2020. We note that the proposed payment rate includes both the surgical procedure (CPT code 0100T) and the use of the Argus® II device (HCPCS code C1841). We refer readers to Addendum B to this proposed rule for the proposed payment rates for all codes reportable under the OPPS. Addendum B is available via the internet on the CMS website.

As we discussed in the CY 2019 OPPS/ASC final rule with comment period (83 FR 58898), the claims data from CY 2017 showed another payment issue with regard to the Argus® II procedure. We found that payment for the Argus® II procedure was sometimes bundled into the payment for another procedure. Therefore in CY 2019, we implemented a policy to exclude payment for all procedures assigned to New Technology APCs from being bundled into the payment for procedures assigned to a C-APC. For CY 2020, we are proposing to continue this policy as described in section II.A.2.b.(3) of this proposed rule. Our proposal would continue to exclude payment for any procedure that is assigned to a New Technology APC from being packaged when included on a claim with a service assigned to status indicator “J1”. While we are not proposing to exclude payment for a procedure assigned to a New Technology APC from being packaged when included on a claim with a service assigned to status indicator “J2”, we are seeking public comments on this issue.

c. Bronchoscopy With Transbronchial Ablation of Lesion(s) by Microwave Energy

Effective January 1, 2019, CMS established HCPCS code C9751 (Bronchoscopy, rigid or flexible, transbronchial ablation of lesion(s) by microwave energy, including fluoroscopic guidance, when performed, with computed tomography acquisition(s) and 3-D rendering, computer-assisted, image-guided navigation, and endobronchial ultrasound (EBUS) guided transtracheal and/or transbronchial sampling (e.g., Start Printed Page 39459aspiration[s]/biopsy[ies]) and all mediastinal and/or hilar lymph node stations or structures and therapeutic intervention(s)). This microwave ablation procedure utilizes a flexible catheter to access the lung tumor via a working channel and may be used as an alternative procedure to a percutaneous microwave approach. Based on our review of the New Technology APC application for this service and the service's clinical similarity to existing services paid under the OPPS, we estimated the likely cost of the procedure would be between $8,001 and $8,500. We have not received any claims data for this service. Therefore, we are proposing to continue to assign the procedure described by HCPCS code C9751 to New Technology APC 1571 (New Technology—Level 34 ($8,001-$8,500)), with a proposed payment rate of $8,250.50 for CY 2020. Details regarding HCPCS code C9751 are shown in Table 12.

d. Pathogen Test for Platelets

As stated in the CY 2018 OPPS/ASC final rule with comment period (82 FR 59281), HCPCS code P9100 is used to report any test used to identify bacterial or other pathogen contamination in blood platelets. Currently, there are two rapid bacterial detection tests cleared by the FDA that are described by HCPCS code P9100. According to their instructions for use, rapid bacterial detection tests should be performed on platelets from 72 hours after collection. Currently, certain rapid and culture-based tests can be used to extend the dating for platelets from 5 days to 7 days. Blood banks and transfusion services may test and use 6-day old to 7-day old platelets if the test results are negative for bacterial contamination.

HCPCS code P9100 was assigned in CY 2019 to New Technology APC 1493 (New Technology—Level 1C ($21-$30)), with a payment rate of $25.50. For CY 2020, based on CY 2018 claims data, there are approximately 1,100 claims reported for this service with a geometric mean cost of approximately $32. This geometric mean cost would result in the assignment of the service described by HCPCS code P9100 to a New Technology APC, based on the associated cost band, with a higher payment rate than where the service is currently assigned. Therefore, for CY 2020, we are proposing to reassign the service described by HCPCS code P9100 to New Technology APC 1494 (New Technology—Level 1D ($31-$40)), with a proposed payment rate of $35.50.

e. Fractional Flow Reserve Derived From Computed Tomography (FFRCT)

Fractional Flow Reserve Derived From Computed Tomography (FFRCT), also known by the trade name HeartFlow, is a noninvasive diagnostic service that allows physicians to measure coronary artery disease in a patient through the use of coronary CT scans. The HeartFlow procedure is intended for clinically stable symptomatic patients with coronary artery disease, and, in many cases, may avoid the need for an invasive coronary angiogram procedure. HeartFlow uses a proprietary data analysis process performed at a central facility to develop a three-dimensional image of a patient's coronary arteries, which allows physicians to identify the fractional flow reserve to assess whether or not patients should undergo further invasive testing (that is, a coronary angiogram).

For many procedures in the OPPS, payment for analytics that are performed after the main diagnostic/image procedure are packaged into the payment for the primary procedure. However, in CY 2018, we determined that HeartFlow should receive a separate payment because the procedure is performed by a separate entity (that is, a HeartFlow technician who conducts computer analysis offsite) rather than the provider performing the CT scan. We assigned CPT code 0503T, which describes the analytics performed, to New Technology APC 1516 (New Technology—Level 16 ($1,401-$1,500)), with a payment rate of $1,450.50 based on pricing information provided by the developer of the procedure that indicated the price of the procedure was approximately $1,500.

For CY 2020, based on our analysis of the CY 2018 claims data, we found that over 840 claims had been submitted for payment for HeartFlow during CY 2018. The estimated geometric mean cost of HeartFlow is $788.19, which is over $660 lower that the payment rate for CY 2019 of $1,450.50. Therefore, for CY 2020, we are proposing to reassign the service described by CPT code 0503T in order to adjust the payment rate to better reflect the cost for the service. We are proposing to reassign the service described by CPT code 0503T to New Technology APC 1509 (New Technology—Level 9 ($701-$800)), with a proposed payment rate of $750.50 for Start Printed Page 39460CY 2020. We are seeking public comments on this proposal.

D. Proposed APC Specific Policies

1. Intraocular Procedures (APCs 5491 Through 5494)

In prior years, CPT code 0308T (Insertion of ocular telescope prosthesis including removal of crystalline lens or intraocular lens prosthesis) was assigned to the APC 5495 (Level 5 Intraocular Procedures) based on its estimated costs. In addition, its relative payment weight has been based on its median cost under our payment policy for low-volume device-intensive procedures because the APC contained a low volume of claims. The low-volume device-intensive procedures payment policy is discussed in more detail in section III.C.2. of this proposed rule.

In the CY 2019 OPPS/ASC proposed rule, we proposed to reassign CPT code 0308T from APC 5495 to APC 5493 (Level 3 Intraocular Procedures), based on the data for two claims available for ratesetting for the proposed rule, and to delete APC 5495 (83 FR 37096 through 37097). However in the CY 2019 OPPS/ASC final rule with comment period, based on updated data on a single claim available for ratesetting for the final rule, we modified our proposal and reassigned procedure code CPT code 0308T to the APC 5494 (Level 4 Intraocular Procedures) (83 FR 58917 through 58918). We made this change based on the similarity of the estimated cost for the single claim of $12,939.75 compared to that of the APC ($11,427.14). However, this created a discrepancy in payments between the OPPS setting and the ASC setting in which the ASC payments would be higher than the OPPS payments for the same service because of the intersection of the estimated cost for the encounter determined under a comprehensive methodology within the OPPS and the estimated cost determined under the payment methodology for device-intensive services within the ASC payment system.

In reviewing the claims data available for this proposed rule for CY 2020 OPPS ratesetting, we found several claims reporting the procedure described by CPT code 0308T. Based on the claims data, the procedure would have a geometric mean cost of $28,122.51 and a median cost of $19,864.38. These cost statistics are significantly higher than the geometric mean cost of the other procedure assigned to APC 5494, that is, the procedure described by CPT code 67027 (Implant eye drug system), which has a geometric mean cost of $12,296.27. In addition, if we continued to assign the procedure described by CPT code 0308T to APC 5494 (the Level 4 Intraocular Procedures APC), the discrepancy between payments within the OPPS and the ASC payment system would also continue to exist. As a result, we are proposing to reestablish APC 5495 (Level 5 Intraocular Procedures) because we believe that the procedure described by CPT code 0308T would be most appropriately placed in this APC based on its estimated cost. Assignment of the procedure to the Level 5 Intraocular Procedures APC is consistent with its historical placement and would also address the large differential discrepancy in payment for the procedure between the OPPS and the ASC payment system. We note that, based on data available for the proposed rule, the proposed payment rate for this procedure when performed in an ASC, as discussed in more detail in section XIII.D.1.c. of this proposed rule, would be no higher than the OPPS payment rate for this procedure performed in the hospital outpatient setting. We will continue to monitor the volume of claims data available for the procedure for ratesetting purposes.

Therefore, for CY 2020, we are proposing to reestablish APC 5495 (Level 5 Intraocular Procedures) and reassign the procedure described by CPT code 0308T from APC 5494 to APC 5495. Under this proposal, the proposed CY 2020 OPPS payment rate for the service would be established based on its median cost, as discussed in section V.A.5. of this proposed rule, because it is a device-intensive procedure assigned to an APC with fewer than 100 total annual claims within the APC.

2. Musculoskeletal Procedures (APCs 5111 Through 5116)

Prior to the CY 2016 OPPS, payment for musculoskeletal procedures was primarily divided according to anatomy and the type of musculoskeletal procedure. As part of the CY 2016 reorganization to better structure the OPPS payments towards prospective payment packages, we consolidated those individual APCs so that they became a general Musculoskeletal APC series (80 FR 70397 through 70398).

In the CY 2018 OPPS/ASC final rule with comment period (82 FR 59300), we continued to apply a six-level structure for the Musculoskeletal APCs because doing so provided an appropriate distinction for resource costs at each level and provided clinical homogeneity. However, we indicated that we would continue to review the structure of these APCs to determine whether additional granularity would be necessary.

In the CY 2019 OPPS proposed rule (83 FR 37096), we recognized that commenters had previously expressed concerns regarding the granularity of the current APC levels and, therefore, requested comment on the establishment of additional levels. Specifically, we solicited comments on the creation of a new APC level between the current Level 5 and Level 6 within the Musculoskeletal APC series. While some commenters provided suggested APC reconfigurations and requests for change to APC assignments, many commenters requested that we maintain the current six-level structure and continue to monitor the claims data as they become available. Therefore, in the CY 2019 OPPS/ASC final rule with comment period, we maintained the six-level APC structure for the Musculoskeletal Procedures APCs (83 FR 58920 through 58921).

Based on the claims data available for this CY 2020 OPPS/ASC proposed rule, we continue to believe that the six-level APC structure for the Musculoskeletal Procedures APC series is appropriate. Therefore, we are proposing to maintain the APC structure for the CY 2020 OPPS update.

We note that this is the first year for which claims data are available for the total knee arthroplasty procedure described by CPT code 27447, which was removed from the inpatient only list in the CY 2018 OPPS/ASC final rule with comment period (82 FR 59382 through 59385). Based on approximately 60,000 hospital outpatient claims reporting the procedure that are available for ratesetting in this proposed rule, the geometric mean cost is approximately $12,472.05, which is similar to the geometric mean cost for APC 5115 (Level 5 Musculoskeletal Procedures) of $11,879.66, and within a range of the lowest geometric mean cost of the significant procedure costs of $9,969.37 and the highest geometric mean cost of the significant procedure costs of $12,894.18. Therefore, we believe that the assignment of the procedure described by CPT code 27447 in the Level 5 Musculoskeletal Procedures APC series remains appropriate and, therefore, we are proposing to continue to assign CPT code 27447 to APC 5115 (Level 5 Musculoskeletal Procedures) for CY 2020.

We also are proposing to remove the procedure described by CPT code 27130 (Total hip arthroplasty) from the CY 2020 OPPS inpatient only list. Based on the estimated costs derived from in the available claims data, as well as the 50th Start Printed Page 39461percentile IPPS payment for TKA/THA procedures without major complications or comorbidities (MS-DRG 470) of approximately $11,900 for FY 2020 when the procedure is performed on an inpatient basis, we believe that it is appropriate to assign the procedure described by CPT code 27130 to the Level 5 Musculoskeletal Procedures APC series, which has a geometric mean cost of $11,879.66. Therefore, for CY 2020, we also are proposing to assign the procedure described by CPT code 27130 to APC 5115. We note that we will monitor the claims data reflecting these procedures as they become available. For a more detailed discussion of the procedures that are being proposed to be removed from the inpatient only (IPO) list for CY 2020 under the OPPS, we refer readers to section IX. of this proposed rule.

Table 13 displays the CY 2020 Musculoskeletal Procedures APC series' structure and APC geometric mean costs.

IV. Proposed OPPS Payment for Devices

A. Pass-Through Payment for Devices

1. Beginning Eligibility Date for Device Pass-Through Status and Quarterly Expiration of Device Pass-Through Payments

a. Background

Under section 1833(t)(6)(B)(iii) of the Act, the period for which a device category eligible for transitional pass-through payments under the OPPS can be in effect is at least 2 years but not more than 3 years. Prior to CY 2017, our regulation at 42 CFR 419.66(g) provided that this pass-through payment eligibility period began on the date CMS established a particular transitional pass-through category of devices, and we based the pass-through status expiration date for a device category on the date on which pass-through payment was effective for the category. In the CY 2017 OPPS/ASC final rule with comment period (81 FR 79654), in accordance with section 1833(t)(6)(B)(iii)(II) of the Act, we amended § 419.66(g) to provide that the pass-through eligibility period for a device category begins on the first date on which pass-through payment is made under the OPPS for any medical device described by such category.

In addition, prior to CY 2017, our policy was to propose and finalize the dates for expiration of pass-through status for device categories as part of the OPPS annual update. This means that device pass-through status would expire at the end of a calendar year when at least 2 years of pass-through payments had been made, regardless of the quarter in which the device was approved. In the CY 2017 OPPS/ASC final rule with comment period (81 FR 79655), we changed our policy to allow for quarterly expiration of pass-through payment status for devices, beginning with pass-through devices approved in CY 2017 and subsequent calendar years, to afford a pass-through payment period that is as close to a full 3 years as possible for all pass-through payment devices. We refer readers to the CY 2017 OPPS/ASC final rule with comment period (81 FR 79648 through 79661) for a full discussion of the changes to the device pass-through payment policy. 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. Expiration of Transitional Pass-Through Payments for Certain 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 is one device category eligible for pass-through payment: HCPCS code C1822 (Generator, neurostimulator (implantable), high frequency, with rechargeable battery and charging system), which was established effective January 1, 2019. The pass-through payment status of the device category for HCPCS code C2624 will expire on December 31, 2022. Therefore, HCPCS code C2624 will continue to receive device pass-through payments in CY 2020.

2. New Device Pass-Through Applications

a. Background

Section 1833(t)(6) of the Act provides for 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 pass-through payments. As part of implementing the statute through regulations, we have continued to Start Printed Page 39462believe 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). We note that, in section IV.A.4. of this proposed rule, we are proposing an alternative pathway that would grant fast-track device pass-through payment under the OPPS for devices approved under the FDA Breakthrough Device Program for OPPS device pass-through payment applications received on or after January 1, 2020. We refer the reader to section IV.A.4. of this proposed rule for a complete discussion on this proposal.

As specified in regulations at 42 CFR 419.66(b)(1) through (3), to be eligible for transitional pass-through payment under the OPPS, a device must meet the following criteria:

  • 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 meet 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;
  • 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
  • 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 § 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 payment 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 cryoablation, which are exempt from the cost requirements as specified 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 CMS 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 meet all of 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 through 70418).

More details on the requirements for device pass-through payment applications are included on the CMS website 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 or to discuss application criteria, including the substantial clinical improvement criterion.

b. Applications Received for Device Pass-Through Payment for CY 2020

We received seven complete applications by the March 1, 2019 quarterly deadline, which was the last quarterly deadline for applications to be received in time to be included in this CY 2020 OPPS/ASC proposed rule. We received one of the applications in the second quarter of 2018, three of the applications in the fourth quarter of 2018, and three of the applications in the first quarter of 2019. None of the applications were approved for device pass-through payment during the quarterly review process.

Applications received for the later deadlines for the remaining 2019 quarters (June 1, September 1, and December 1), if any, will be presented in the CY 2021 OPPS/ASC proposed rule. We note that the quarterly application process and requirements Start Printed Page 39463have not changed in light of the addition of rulemaking review. Detailed instructions on submission of a quarterly device pass-through payment application are included on the CMS website at: https://www.cms.gov/​Medicare/​Medicare-Fee-for-Service-Payment/​HospitalOutpatientPPS/​Downloads/​catapp.pdf. A discussion of the applications received by the March 1, 2019 deadline is presented below.

(1) Surefire® SparkTM Infusion System

TriSalus Life Sciences submitted an application for a new device category for transitional pass-through payment status for the Surefire® SparkTM Infusion System. The Surefire® SparkTM Infusion System is described as a flexible, ultra-thin microcatheter with a self-expanding, nonocclusive one-way microvalve at the distal end. The applicant stated that it has designed the Pressure Enabled Drug DeliveryTM technology of the Surefire® SparkTM Infusion System to overcome intratumoral pressure in solid tumors and improve distribution and penetration of therapy during Transcatheter Arterial Chemoembolization (TACE) procedures. TACE is a minimally invasive, image-guided procedure used to infuse a high dose of chemotherapy into liver tumors. According to the applicant, the pliable, one-way valve at the distal tip of the Surefire® SparkTM Infusion System creates a temporary local increase in pressure during infusion, opening up collapsed vessels in tumors, which enables perfusion and therapy delivery in areas inaccessible to the systemic circulation, a positive hydrostatic pressure gradient, and restores convective flow to enable therapy to penetrate deeper into the tumor. During the TACE procedure, the physician first gains catheter access into the arterial system of the hepatic arteries through a small incision in the groin or the wrist. The applicant stated that the physician then uses real-time fluoroscopic guidance to navigate the Surefire® SparkTM Infusion System into the blood vessels feeding the tumors, infusing the chemotherapy and embolic materials through the Surefire® SparkTM Infusion System until the tumor bed is completely saturated.

With respect to the newness criterion at § 419.66(b)(1), the FDA granted 510(k) premarket clearance as of April 3, 2018. The application for a new device category for transitional pass-through payment status for the Surefire® SparkTM Infusion System was received on November 29, 2018, which is within 3 years of the date of the initial FDA approval or clearance. We are inviting public comments on whether the Surefire® SparkTM Infusion System meets the newness criterion.

With respect to the eligibility criterion at § 419.66(b)(3), according to the applicant, the use of the Surefire® SparkTM Infusion System is integral to the service of providing delivery of chemotherapy into liver tumors, is used for one patient only, comes in contact with human skin, and is applied in or on a wound or other skin lesion. The applicant also claimed the Surefire® SparkTM Infusion System meets the device eligibility requirements of § 419.66(b)(4) because it is not an instrument, apparatus, implement, or items for which depreciation and financing expenses are recovered, and it is not a supply or material furnished incident to a service. We are inviting public comments on whether the Surefire® SparkTM Infusion System meets the eligibility criteria at § 419.66(b).

The criteria for establishing new device categories are specified at § 419.66(c). The first criterion, at § 419.66(c)(1), provides that CMS determines that a device to be included in the category is not appropriately described by any of the existing categories or by any category previously in effect, and was not being paid for as an outpatient service as of December 31, 1996. We have identified several existing pass-through payment categories that may be applicable to the Surefire® SparkTM Infusion System. The Surefire® SparkTM Infusion System may be described by HCPCS code C1887 (Catheter, guiding (may include infusion/perfusion capability)). The applicant describes the Surefire® SparkTM Infusion System as a device used in vascular interventional procedures to deliver diagnostic and therapeutic agents in the peripheral vasculatures. The CMS List of Device Category Codes for Present or Previous Pass-Through Payment and Related Definitions describes HCPCS code C1887 as intended for the introduction of interventional/diagnostic devices into the coronary or peripheral vascular systems. The Surefire® SparkTM Infusion System may also be described by HCPCS code C1751 (Catheter, infusion, inserted peripherally, centrally or midline (other than hemodialysis)). The applicant describes the Surefire® SparkTM Infusion System as being inserted through a small incision in the groin or the wrist. We are inviting public comments on this issue.

The second criterion for establishing a device category, at § 419.66(c)(2), provides that CMS determines that a device to be included in the category has demonstrated that it will 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. With respect to this criterion, the applicant submitted four studies to support the claim that their technology represents a substantial clinical improvement over existing technologies. The applicant asserts that the Surefire® SparkTM Infusion System represents a substantial clinical improvement over existing technologies because it offers a treatment option that no other catheters currently available can provide. The manufacturer notes that the self-expanding, nonocclusive, one-way valve can infuse therapy at pressure higher than the baseline mean arterial pressure, and this pressurized delivery opens up collapsed vessels in tumors and enables perfusion and therapy delivery into hypoxic areas of the liver tumors. The applicant also believes that the Surefire® SparkTM Infusion System represents a substantial clinical improvement because the technology has shown improved tumor response rates in hepatocellular carcinoma, as well as a decrease in the rate of disease recurrence and the need for subsequent treatment.

The first pilot study of nine patients being treated for hepatocellular carcinoma, who received infusions via both a conventional end-hole catheter and an antireflux microcatheter, demonstrated statistically significant reductions in downstream distribution of embolic particles with the antireflux catheter and increases in tumor deposition (p<0.05).[13] The second singlecenter retrospective study was conducted with 22 patients treated for hepatocellular carcinoma with the Surefire® SparkTM Infusion System and TACE. As assessed by MRI, there appeared to be overall disease response in 91 percent of patients and 85 percent of lesions and complete response in 32 percent of patients and 54 percent of lesions.[14] In the first study for a case-control series, 19 patients undergoing treatment using SIS-TACE had a statistically significant improvement in Start Printed Page 39464disease response rate compared to 19 patients treated with end-hole microcatheters, 78.9 percent compared to 36.8 percent for initial overall response rate (p = 0.008).[15] In the second study, a multi-center registry of 72 patients demonstrated high response rate when compared to historical control at 6 months follow-up.[16]

Based on the information submitted by the applicant, one concern is that large-scale studies with long-term follow-up are limited. Also, the majority of studies presented had a sample size of less than 25 and the highest sample size presented was less than 100 patients. Additionally, patient follow-up occurred mostly within a 3 to 6 month timeframe with few studies occurring beyond this range.

Another concern is that none of the studies presented improvements in mortality with the use of the Surefire® SparkTM Infusion System. Outcomes focused primarily on tumor response rates and lesion size, based upon imaging. Additional data on mortality endpoints would be helpful to fully assess substantial clinical improvement.

We are inviting public comments on whether the Surefire® SparkTM Infusion System meets the substantial clinical improvement criterion.

The third criterion for establishing a device category, at § 419.66(c)(3), requires us to determine that the cost of the device is not insignificant, as described in § 419.66(d). Section 419.66(d) includes three cost significance criteria that must each be met. The applicant provided the following information in support of the cost significance requirements. The applicant stated that the Surefire® SparkTM Infusion System would be reported with CPT code 37243, which is assigned to APC 5193 (Level 3 Endovascular Procedures). To meet the cost criterion for device pass-through payment status, a device must pass all three tests of the cost criterion for at least one APC. For our calculations, we used APC 5193, which has a CY 2019 payment rate of $9,669.04. Beginning in CY 2017, we calculated the device offset amount at the HCPCS/CPT code level instead of the APC level (81 FR 79657). CPT code 37243 had a device offset amount of $3,894.69 at the time the application was received. According to the applicant, the cost of the Surefire® SparkTM Infusion System is $7,750.

Section 419.66(d)(1), the first cost significance requirement, provides that the estimated average reasonable cost of devices in the category must exceed 25 percent of the applicable APC payment amount for the service related to the category of devices. The estimated average reasonable cost of $7,750 for the Surefire® SparkTM Infusion System is 80.2 percent of the applicable APC payment amount for the service related to the category of devices of $9,669.04 ($7,750/$9,669.04 × 100 = 80.2 percent). Therefore, we believe the Surefire® SparkTM Infusion System meets the first cost significance requirement.

The second cost significance requirement, at § 419.66(d)(2), provides that the estimated average reasonable cost of the devices in the category must exceed the cost of the device-related portion of the APC payment amount for the related service by at least 25 percent, which means 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). The estimated average reasonable cost of $7,750 for the Surefire® SparkTM Infusion System exceeds the cost of the device-related portion of the APC payment amount for the related service of $3,894.69 by 199 percent ($7,750/$3,894.69) × 100 = 198.99 percent). Therefore, we believe that the Surefire® SparkTM Infusion System meets the second cost significance requirement.

The third cost significance requirement, at § 419.66(d)(3), provides that 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 must exceed 10 percent of the APC payment amount for the related service. The difference between the estimated average reasonable cost of $7,750 for the SparkTM Infusion System and the portion of the APC payment amount for the device of $3,894.69 exceeds the APC payment amount for the related service of $9,669.04 by 40 percent (($7,750−$3,894.69)/$9,669.04) × 100 = 39.87 percent). Therefore, we believe that the Surefire® SparkTM Infusion System meets the third cost significance requirement.

We are inviting public comments on whether the Surefire® SparkTM Infusion System meets the device pass-through payment criteria discussed in this section, including the cost criterion.

(2) TracPatch

According to the applicant, TracPatch is a wearable device which utilizes an accelerometer, temperature sensor and step counter to allow the surgeon and patient to monitor recovery and help ensure critical milestones are being met. The applicant states that TracPatch utilizes wearable monitoring technology and methods in an effort to enhance the rehabilitation experience for both patients and physicians. Accelerometers are utilized to recognize and record the results when patients perform standard physical therapy exercises, in addition to providing standard step count and high-acceleration events that may indicate a fall. A temperature sensor monitors the skin temperature near the joint.

TracPatch is described by the applicant as a 24/7 remote monitoring wearable device that captures a patient's key daily activities: Such as range of motion progress, exercise compliance, and ambulation. TracPatch is used for pre- and post-operative patient monitoring, patient engagement, data analytics and post-op cost reduction.

According to the applicant, the wearable devices stick on the skin above and below the knee. The wearables are applied before total knee surgery to determine a patient's baseline activity levels, and then again after surgery to allow the patient and surgeon to monitor activity, pain, range of motion and physical therapy. The use of the Bluetooth connectivity allows the device to be paired with any smartphone and the TracPatch cloud allows for unlimited data collection and storage. The applicant states that TracPatch includes a web dashboard and computer application, which permit a health care provider to monitor a patient's recovery in real-time, allowing for immediate care adjustments and the ability for providers and patients to respond to issues that may occur during recovery from surgery.

With respect to the newness criterion at § 419.66(b)(1), the applicant stated that TracPatch does not need FDA clearance because it is a Class I device that would be assigned to a generic category of devices described in title 21 of the Code of Federal Regulations, parts 862 through 892 (21 CFR parts 862 through 892) that do not require FDA clearance. However, the applicant did not identify which category of exempted devices that TracPatch would be assigned. The applicant also stated that TracPatch will be introduced into the market in 2019, which would be within 3 years of the device pass-through payment application for TracPatch that Start Printed Page 39465was received in March 2019. We are inviting public comments on whether the TracPatch is exempt from FDA clearance and if the TracPatch meets the newness criterion.

With respect to the eligibility criterion at § 419.66(b)(3), the applicant claimed that the TracPatch is an integral part of monitoring the range of motion for a knee prior to and after total knee arthroplasty, is used for one patient only, and is placed on the skin above and below the knee and secured by Velcro strips. The applicant stated that the device is not surgically implanted or inserted into the patient and is not applied in or on a wound or other skin lesion. We have concerns with the TracPatch's eligibility with respect to the criterion at § 419.66(b)(3) because to be eligible for pass-through payment a device must be surgically implanted or inserted into the patient or applied in a wound or on other skin lesions. In addition, the applicant stated that the TracPatch meets the device eligibility requirements of § 419.66(b)(4) because it is not an instrument, apparatus, implement, or item for which depreciation and financing expenses are recovered. We have determined that TracPatch is not a material or supply furnished incident to a service. We are inviting public comments on whether the TracPatch meets the eligibility criterion.

The criteria for establishing new device categories are specified at § 419.66(c). The first criterion, at § 419.66(c)(1), provides that CMS determines that a device to be included in the category is not appropriately described by any existing categories or by any category previously in effect, and was not being paid for as an outpatient service as of December 31, 1996. With respect to the existence of a previous pass-through device category that describes the TracPatch, the applicant suggested a category descriptor of “Real time patient monitoring surface sensor technology for pre and post-op Total Knee Arthroplasty.” We have not identified an existing pass-through payment category that describes the TracPatch, but we welcome public comments on this topic.

The second criterion for establishing a device category, at § 419.66(c)(2), provides that CMS determines that a device to be included in the category has demonstrated that it will 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. The applicant asserted that use of the TracPatch significantly improves clinical outcomes for a patient population because the TracPatch allows both real-time and remote monitoring of the knee after total knee arthroplasty, which allows providers to make care decisions with up-to-the-minute data. The applicant noted that health care providers have instant access to a patient's pre-operative and post-operative data and can adjust care plans based on the data. The applicant stated that physicians will be able to preoperatively monitor patient activity to set a clinical baseline, but surgeons will also be able to monitor how their patients are recovering long after they have been discharged, which the applicant claims will ultimately result in fewer patients being readmitted to the hospital and higher success rates of surgery. The applicant asserted that the use of the TracPatch will result in decreased rate of subsequent diagnostics and therapeutic interventions and physician visits. The applicant also noted that the TracPatch system will allow physicians to monitor their patients in real-time and take corrective actions in a timely manner, which will result in reduced recovery time as well as improved patient outcomes.

Although the applicant presented these claims, the applicant provided no clinical research evidence to support them; only the testimonials from practicing physicians and large hospital systems were presented. The testimonials addressed the benefits of remote data monitoring and stated that the real-time data would provide better information to understand the effectiveness of surgeries performed, according to one provider. However, there were no reference articles submitted to support the claims made in the application and the testimonials nor were any data provided on the clinical effectiveness of the use of the TracPatch. We are concerned that, without clinical data to support the applicant's claims, we do not have sufficient information to determine whether the use of the TracPatch is a substantial clinical improvement over the current methods to monitor recovery from total knee arthroplasty. We are inviting public comments on whether the TracPatch meets the substantial clinical improvement criterion.

The third criterion for establishing a device category, at § 419.66(c)(3), requires us to determine that the cost of device is not insignificant, as described in § 419.66(d). Section 419.66(d) includes three cost significance criteria that must each be met. With respect to the cost criterion, the applicant stated that the use of the TracPatch would be reported with either CPT code 99453 (Remote monitoring of physiologic parameter(s) (e.g., weight, blood pressure, pulse oximetry, respiratory flow rate), initial; set-up and patient education on use of equipment) or CPT code 99454 (Remote monitoring of physiologic parameter(s) (e.g., weight, blood pressure, pulse oximetry, respiratory flow rate), initial; device(s) supply with daily recording(s) or programmed alert(s) transmission, each 30 days). CPT code 99453 is assigned to APC 5012 (Clinic Visits and Related Services), with a proposed CY 2020 payment rate of $120.16, and there is no device offset for the procedure. CPT code 99454 is assigned to APC 5741 (Level 1 Electronic Analysis of Devices), with a proposed CY 2020 payment rate of $38.04, and there is no device offset for the procedure. The applicant stated that the cost of the TracPatch device is $3,250.

Section 419.66(d)(1), the first cost significance requirement, provides that the estimated average reasonable cost of devices in the category must exceed 25 percent of the applicable APC payment amount for the service related to the category of devices. The cost of $3,250 for the TracPatch exceeds the applicable APC amount for CPT code 99454 of $38.04 by 8,543.64 percent ($3,250/$38.04 × 100 = 8,543.64 percent). Therefore, the TracPatch appears to meet the first cost significance requirement.

The second cost significance requirement, at § 419.66(d)(2), provides that the estimated average reasonable cost of devices in the category must exceed the cost of the device-related portion of the APC payment amount by at least 25 percent, which means the device cost needs to be at least 125 percent of the device offset amount (the device-related portion of the APC found on the offset list). The two procedure codes that would be billed for the use of the TracPatch do not have a device offset amount, which means the TracPatch would appear to meet the second cost significance requirement.

Section 419.66(d)(3), the third cost significance requirement, provides 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 exceeds 10 percent of the APC payment amount for the related service. The difference between the cost of $3,250 for the TracPatch and the portion of the APC payment for the device of $0.00 exceeds 10 percent at 8,543.64 percent (($3,250 − $0.00)/$38.04 × 100 = 8,543.64 percent). Therefore, the TracPatch Start Printed Page 39466appears to meet the third cost significance requirement and, therefore, satisfies the cost significance criterion. We are inviting public comments on whether the TracPatch meets the device pass-through payment criteria discussed in this section.

(3) Vagus Nerve Stimulation (VNS) Therapy® System for Treatment Resistant Depression (TRD)

LivaNova USA Inc. submitted an application for the Vagus Nerve Stimulation (VNS) Therapy® System for Treatment Resistant Depression (TRD). According to the applicant, the VNS Therapy® System consists of two implantable components: A programmable electronic pulse generator and a bipolar electrical lead that is connected to the programmable electronic pulse generator. The applicant stated that the surgical procedure to implant the VNS Therapy® System involves subcutaneous implanting of the pulse generator in the intraclavicular region as well as insertion of the bipolar electrical lead which entails wrapping two spiral electrodes around the cervical portion of the left vagus nerve within the carotid sheath.

According to the applicant, following implant and recovery, the physician programs the pulse generator to intermittently stimulate the vagus nerve at a level that balances efficacy and patient tolerability. The pulse generator delivers electrical stimulation via the bipolar electrical lead to the cervical portion of the left vagus nerve within the carotid sheath thereby relaying information to the brain stem modulating structures relevant to depression. Stimulation typically consists of a 30-second period of “on time,” during which the device stimulates at a fixed level of output current, followed by a 5-minute “off time” period of no stimulation.

The applicant states that a hand-held programmer is utilized to program the pulse generator stimulation parameters, including the current charge, pulse width, pulse frequency, and the on/off stimulus time, which is also known as the on/off duty cycle. Initial settings can be adjusted to enhance the tolerability of the device as well as its clinical effects on the patient. The generator runs continuously, but patients can temporarily turn off the device by holding a magnet over it. The generator can also be turned on and off by the programmer.

The applicant states that the VNS Therapy® System provides indirect modulation of brain activity through the stimulation of the vagus nerve. The vagus nerve, the tenth cranial nerve, has parasympathetic outflow that regulates the autonomic (that is, involuntary) functions of heart rate and gastric acid secretion, and also includes the primary functions of sensation from the pharynx, muscles of the vocal cords and swallowing. It is a nerve that carries both sensory and motor information to and from the brain. Importantly, the vagus nerve has influence over widespread brain areas and it is believed that electrical stimulation of the vagus nerve alters various networks of the brain in order to treat psychiatric disease.

With respect to the newness criterion at § 419.66(b)(1), the applicant received FDA clearance for the VNS Therapy® System for TRD through the premarket approval (PMA) process on July 15, 2005, and the VNS Therapy® for TRD device was introduced to the market in September 2005. However, on May 4, 2007, a national coverage determination (NCD 160.18) was released prohibiting Medicare from covering the use of the VNS Therapy® System for TRD. This NCD remained in effect until February 15, 2019, when CMS determined that the VNS Therapy® for TRD could receive payment if the service was performed in CMS-approved coverage with evidence development (CED) studies. Although the VNS Therapy® System for TRD was introduced to the market in September 2005, Medicare has only covered it for slightly more than 11/2 years. However, § 419.66(b)(1) states that a pass-through payment application for a device must be received within 3 years of when the device either received FDA approval or was introduced to the market. The applicant stated that the VNS Therapy® System for TRD was introduced to the market in September 2005, which means the device pass-through payment application would have needed to have been submitted to CMS by September 2008. However, the pass-through application for the device was not received by CMS until March 2019.

In addition, it appears that the neurostimulator device for the VNS Therapy® System for TRD is the same device that has been used since 1997 to treat epilepsy.[17] The applicant stated the following three differences between the two devices: (1) How the device is programmed to treat epilepsy versus TRD; (2) how the external magnets of the device are used for epilepsy treatment as compared to TRD treatment; and (3) that the battery life of the device to treat epilepsy is different than the battery life of the device when treating TRD. However, it is not clear that these differences demonstrate that the actual device used to treat TRD is any different than the device used to treat epilepsy.

Based on the information presented, we are inviting public comments on whether the VNS Therapy® System for TRD meets the newness criterion.

With respect to the eligibility criterion at § 419.66(b)(3), the applicant claimed that the VNS Therapy® System for TRD is an integral part of a procedure to provide adjunctive treatment of chronic or recurrent depression in adult patients that have failed four or more antidepressant treatments. The VNS Therapy® System for TRD is used for one patient only, comes in contact with human tissue, and is surgically implanted or inserted into the patient. In addition, the applicant stated that the VNS Therapy® System for TRD meets the device eligibility requirements of § 419.66(b)(4) because it is not an instrument, apparatus, implement, or item for which depreciation and financing expenses are recovered. We have determined that the VNS Therapy® for TRD is not a material or supply furnished incident to a service. We are inviting public comments on whether the VNS Therapy® for TRD meets the eligibility criterion.

The criteria for establishing new device categories are specified at § 419.66(c). The first criterion, at § 419.66(c)(1), provides that CMS determines that a device to be included in the category is not appropriately described by any existing categories or by any category previously in effect, and was not being paid for as an outpatient service as of December 31, 1996. With respect to the existence of a previous pass-through device category that describes the device used for the VNS Therapy® System for TRD, the applicant suggested a category descriptor of “Generator, neurostimulator (implantable), treatment resistant depression, non-rechargeable.” However, the device category represented by HCPCS code C1767 is described as “Generator, neurostimulator (implantable), non-rechargeable,” which appears to encompass the device category descriptor for the VNS Therapy® System for TRD suggested by the applicant. The applicant asserts that the device category descriptor for HCPCS code C1767 is overly broad and noted the establishment of HCPCS code C1823 (Generator, neurostimulator (implantable), nonrechargeable, with transvenous sensing and stimulation leads), effective January 1, 2019, as an Start Printed Page 39467example of where a new device category for a nonrechargeable neurostimulation system to treat central sleep apnea was carved out from the broad category described by HCPCS code C1767.

The applicant believes its proposed category for the device for the VNS Therapy® System for TRD should qualify for a similar carve-out. However, HCPCS code C1823 was established due to specific device features which distinguish that device category from HCPCS code C1767. The applicant for the VNS Therapy® System for TRD requested a new device category based on a beneficiary's diagnosis, but OPPS does not differentiate payment by diagnosis. We welcome public comments on whether the proposed device category for the VNS Therapy® for TRD is not described by any existing categories or by any category previously in effect and meets the requirements of § 419.66(c)(1).

The second criterion for establishing a device category, at 419.66(c)(2), provides that CMS determines that a device to be included in the category has demonstrated that it will 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. The applicant stated that the VNS Therapy® System for TRD would be a substantial clinical improvement because it is a treatment option for beneficiaries that have failed four or more antidepressant treatments. Patients with residual depressive symptoms despite treatment may be demonstrating TRD, but a universally accepted definition of TRD has yet to be achieved.[18] The applicant described the VNS Therapy® System for TRD as a treatment option for beneficiaries who have exhausted all other available options to treat depression. The applicant also provided studies to show how beneficial impacts on the quality of life by using the VNS Therapy® System for TRD can be maintained for multiple years. These studies have been fully reviewed and discussed by the CMS Coverage and Analysis Group's (CAG) national coverage determination with coverage with evidence development for VNS therapy for TRD.[19]

We reviewed the studies provided by the applicant to determine if the VNS Therapy® for TRD and its associated device offered a treatment option for patients unresponsive to or ineligible for currently available treatments. Our review also examined whether the VNS Therapy® System for TRD provides a benefit relative to a previously established device category or other available treatment. To show that the VNS Therapy® for TRD provides a relative benefit, the applicant submitted the same studies it had submitted to the CMS CAG in October 2017. These studies had been submitted as a part of a request to reconsider the NCD in place at that time that prohibited Medicare from providing coverage for the VNS Therapy® System for TRD. Therefore, our review focuses on and is consistent with the eight studies discussed in detail in the “Decision Memo for Vagus Nerve Stimulation (VNS) for Treatment Resistant Depression (TRD)” (CAG-00313R2).[20] We also reviewed an additional study submitted by the applicant for this device pass-through application.

The first study was a randomized control trial.[21] The study was a double-blind, randomized, multi-centered study and its goal was to compare the clinical outcomes in patients diagnosed with TRD of three VNS dose response curves with variable output currents and pulse widths, but with the same duty cycle and pulse frequency. Groups were designated high, medium and low dose and a total of 331 patients participated in the study. Enrollment criteria included: Individuals 18 years of age or older with a diagnosis of a chronic (>2 years) or recurrent (≥2 prior episodes) MDD or bipolar disorder and a current diagnosis of MDE as defined by the DSM-4 and determined using the Mini- International Neuropsychiatric Interview; a history of failure to respond to four or more adequate dose/duration of antidepressant treatment trials from at least two different antidepressant treatment categories as documented through medical history and record review; a minimum pre-study and baseline score of 24 on the MADRS, with no greater than a 25-percent decrease between the pre-study and baseline visits; current recipient of at least one antidepressant treatment (medication or ECT); and a stable regimen of all current antidepressant treatments for at least 4 weeks before the baseline visit. Furthermore, patients with bipolar disease had to be receiving a mood stabilizer at baseline. Exclusion criteria included a history of psychotic disorder, a history of rapid cycling bipolar disorder, a current history of bipolar disorder mixed phase, a history of borderline personality disorder, clinically significant suicidal intent at the time of screening, a history of drug/alcohol dependence in the last year, and a previous history of use of VNS. The only study personnel unblinded to the assignment of treatment groups were study programmers at each site and clinical engineers who were employed by the sponsor to monitor the programmers.

Eligible patients were implanted with a VNS Therapy® System for TRD device and then randomized to low, medium or high target settings. The low dose was chosen to deliver active stimulation at the lowest available setting for amplitude of output current with a narrow pulse width (0.25 mA; 130 μs). The high dose was chosen to be consistent with higher levels of stimulation, often seen in the treatment of epilepsy (1.25-1.5mA; 250 μs). The medium dose was chosen to track closely to the high dose, but without overlap (0.5-1.0 mA; 250 μs), potentially providing a better opportunity to demonstrate efficacy versus the low dose.

The study authors reported that in neither the acute nor the long-term phase were there any significant differences in response or remission rates among the treatment groups (response was defined as ≥50 percent improvement from baseline; remission was defined as ≤14 on the Inventory of Depressive Symptomatology Clinician Administered Version (IDS-C)). However, the authors stated that although effect sizes were limited, statistically significant decreases in mean depression scores (based on IDS-C) were observed in all groups. Mean IDS-C scores decreased approximately 15 points from baseline through week 50. The authors concluded that within the limits of this study, the VNS Therapy® System for TRD provided as adjunctive treatment to patients diagnosed with TRD as described above offers significant improvement at study endpoint as compared with baseline and that the effect is durable over 1 year. The authors also stated that higher electrical dose parameters were associated with higher response durability.

The second study by Aaronson et al. was a prospective, multi-center, open label, nonrandomized, longitudinal, naturalistic, observational post Start Printed Page 39468marketing FDA surveillance study for which a registry was designed to follow the clinical response and outcome over 5 years of patients with a major depressive disorder (MDD), including those with unipolar or bipolar depression.[22] Patients participating in this study were recruited by physician referral and received treatment as usual (TAU) and VNS or just TAU. Subjects included those who were being evaluated for surgery or anesthesia to undergo VNS implantation, patients who had signed consent forms to receive a VNS device, patients who had scheduled VNS implantation surgery, and patients who had completed participation in a previous study termed the D-21 study [NCT 00305565: Study Comparing Outcomes for Patients With Treatment Resistant Depression Who Receive VNS Therapy at Different Doses].

The VNS arm included 335 patients without prior VNS treatment as well as 159 patients who received VNS treatment in the previous D-21 investigation. The TAU arm contained 301 patients. Eligibility criteria for the study included: Age 18 years or older; a current major depressive disorder diagnosed according to DSM-IV-TR criteria and confirmed by the Mini International Neuropsychiatric Interview of at least 2 years in duration (unipolar or bipolar depression) or a history of at least three depressive episodes including the current major depression episode; and a history of inadequate response to at least four depression treatments (including maintenance pharmacotherapy, psychotherapy and ECT). Maintenance pharmacotherapy was defined as dosage per Physician's Desk Reference labeling for a minimum of 4 weeks. Exclusion criteria included a history of schizophrenia, schizoaffective disorder, other psychotic disorder, current psychosis, history of rapid cycling bipolar disorder and a CGI score <4. Other than the patients from the D-21 study, the individuals in the study had not previously experienced VNS.

All patients (except those who participated in the D-21 study) were allowed to choose the treatment arm of their choice. However, the patients could be assigned to receive the alternate treatment due to various reasons (for example, availability of surgical implantation at a site, failure to receive insurance coverage for the procedure, availability of donated VNS devices, among others). There were no restrictions on concomitant treatments.

Post baseline follow-up visits for all patients were scheduled to occur at 3, 6, 9, 12, 18, 24, 30, 36, 42, 48, 54, and 60 months. During these scheduled visits, data were collected on medical status, need for adjustment of mood disorder therapy and concomitant treatments. Also, various depression scale ratings were collected as well as data concerning mortality and suicidality. Central raters (un-blinded nurses with special training) conducted an assessment of suicidality via telephone after each patient visit.

Propensity scores were used to adjust for imbalance of baseline prognostic factors between treatment arms. The ITT population included those study participants who completed a baseline visit, received their respective treatment and completed at least one post-baseline treatment.

Of the 494 patients in the VNS arm, 300 (61 percent) completed all 5 years of data. It is noted that the D-21 patients rolled over into this study at various time points after implantation. Of the 301 TAU patients, 138 (46 percent) completed all 5 years of data.

Approximately 70 percent of all study participants were female and over 90 percent were Caucasian in both groups. A diagnosis of severe recurrent major depressive disorder was reported in 46 percent of the patients in the VNS arm and 32 percent in the TAU arm. A diagnosis of primary bipolar I or bipolar II disorder was reported in 28 percent of patients in the VNS arm and 24 percent in the TAU arm. Other psychiatric diagnoses included moderate recurrent major depression, moderate single episode major depression, severe recurrent major depression, and severe single episode major depression. Fifty-seven percent of the VNS group and 40 percent of the TAU group had experienced past treatments of ECT.

Of the patients who withdrew early, 40 percent (195) were from the VNS arm and 54 percent (163) were from the TAU arm. The investigators observed that reasons for early withdrawal were similar between the treatment arms. It was also noted that after premature closure of a study site where 48 patients were participating in the TAU arm, most of the patients at that site were either lost to follow up or were dropped from the study for nonadherence.

The primary efficacy measure was a response rate, defined as a decrease of ≥50 percent in baseline Montgomery-Äsberg Depression Rating Scale (MADRS) score at any post-baseline visit during the study. The study authors report a 5-year cumulative response rate of 67.6 percent [95 percent CI = 63.4, 71.7] in the VNS group and 40.9 percent [95 percent CI = 35.4, 47.1] in the TAU group (p <0.001). Also, the authors note that the cumulative percentage of first-time responders in the VNS Therapy® System arm was approximately double that in the TAU arm at all post-baseline points in time through the 5 years of the study. The authors concluded that adjunctive treatment with the use of the VNS Therapy® System device resulted in superior outcomes in both effectiveness and mortality over a 5-year period compared with treatment as usual for patients diagnosed with chronic, severe TRD.

A third study by Conway et al. compared quality of life (QoL) changes associated with treatment using VNS + TAU versus TAU in patients diagnosed with unipolar and bipolar TRD.[23] QoL data were gathered on all patients using the patient reported Quality of Life Enjoyment and Satisfaction Questionnaire Short Form (Q-LES-Q-SF), as well as the clinician reported CGI-I scale.

The data were collected as part of the 5 year registry described in Aaronson et al. (2017), noted above. However, the patient population analyzed was somewhat different, in that patients who rolled over from the previous D-21 study (Aaronson et al., 2017) were excluded so that all subjects had the same follow-up period. Furthermore, patients who were not depressed at baseline according to their MADRS scores, were also excluded. Therefore, the data from 328 patients treated with VNS + TAU and 271 patients treated with TAU were analyzed.

Females comprised 68.6 percent of the VNS + TAU group and 70.8 percent of the TAU group; 97 percent of the VNS + TAU group and 90.8 percent of the TAU group were Caucasian. Major depressive disorder was diagnosed in 70.4 percent of the VNS + TAU group and 78.2 percent of the TAU group. Bipolar I or II disorder (most recent episode depressed) was diagnosed in 29.6 percent of the VNS + TAU group and 21.7 percent of the TAU group.

Paired data analysis (for example, change in Q-LES-Q-SF versus percent change in MADRS score) were matched by assigned visit number; however these assessments for any given month might have taken place on separate visits (visit window was ±45 days until 1 year of Start Printed Page 39469follow-up; thereafter ±90 days). The authors report that the time difference between the paired measures was similar between the two groups and was a median of 4 weeks. Missing data were excluded if one component of a paired observation was lacking.

Among the results, the authors reported that on average, there was a comparative QoL advantage observed for the VNS + TAU group as early as 3 months, which was sustained throughout the 5-year study. The VNS + TAU treatment group demonstrated a significantly greater improvement in Q-LES-Q-SF scores than the TAU treatment group for the same percentage drop in MADRS score from baseline. The authors reported a similar pattern when the Clinical Global Impression (CGI) score was used. The authors concluded that adjunctive treatment using the VNS Therapy® System for TRD provided greater and sustained improvements in QoL as compared to TAU alone. Further, TRD patients treated with THE VNS Therapy® System for TRD experienced clinically meaningful QoL improvements even with symptom reduction less than the traditional 50 percent reduction used to describe a “response” to treatment.

The goal of the fourth study by Olin et al. was to characterize all-cause mortality rate and suicide risk in patients diagnosed with TRD who were treated with standard TAU and those treated with VNS + TAU.[24]

The study was an observational, open label, longitudinal, multi-center registry. The registry was a post-market surveillance study required by the FDA as a condition of approval of the TRD indication for VNS therapy to evaluate long-term patient outcomes. Patients were followed for 60 months, until withdrawal from the study, death or study completion.

Patients in the VNS + TAU group had been followed for an average of 3.2 years; those in the TAU group had been followed for 2.1 years. Because baseline characteristics of each group showed areas of imbalance, the use of propensity score modeling was required.

Suicidal ideation was evaluated by a central ratings group using both the Assessment of Suicidality (AOS) [Has the patient made a suicidal gesture or attempt since the last visit; yes or no] and MADRS Item 10, score ≥4, [“Probably better off dead. Suicide thoughts are common, and suicide is considered a possible solution, but without specific plans or intention”]. Among other criteria, eligible patients for the Registry were: Individuals who had been diagnosed with a current MDE according to the DSM-IV-TR criteria; individuals who had been in the current depressive episode for at least 2 years or had experienced at least three lifetime MDEs (including the current episode); individuals who had an inadequate response to four or more adequate antidepressive treatments; and individuals who had a CGI-S of 4 or greater. Exclusion criteria included schizophrenia, schizoaffective disorder, any other psychotic disorder, a history of rapid cycling bipolar disorder, or previous use of VNS.

After completing a screening visit, patients self-selected the treatment course that they believed was the best medical option. However, after the study started, there were some treatment arm changes due to the implementation of a Medicare noncoverage policy and subsequent lack of reimbursement for the VNS procedure. The authors stated that they believed that the majority of individuals who chose VNS + TAU did so as a final alternative when all other treatments failed.

There were 335 patients in the VNS + TAU group and 301 subjects in the TAU group. Average age of all patients was between 48 and 50 years. In the VNS + TAU group, 68.4 percent of patients were female; 96.4 percent were Caucasian. In the TAU group, 70.1 percent of the patients were female; 91 percent were Caucasian. Major depressive disorder was diagnosed in 71.1 percent of the VNS + TAU group and 76.4 percent of the TAU group. Bipolar disorder was diagnosed in 28.9 percent of the VNS + TAU group and 23.6 percent of the TAU group. In the VNS + TAU group, 58.2 percent of patients had a history of ECT; in the TAU group, 45.2 percent had a history of ECT treatment.

The authors found that the standardized all-cause mortality (4.46 [VNS + TAU] versus 8.06 [TAU only] per 1,000 person years) and suicide rates (0.88 [VNS + TAU] versus 1.61 [TAU only] per 1,000 person years) for patients treated with VNS + TAU were approximately half that of the patients treated only with TAU. However, the specific results were not statistically different due to the low mortality rates in both groups. Similar results were noted when stratifying by propensity score quintiles.

However, both groups had a significantly higher rate of suicide relative to the U.S. population; VNS + TAU 5.72 (95 percent CI; 0.07, 31.82) and TAU 9.98 (95 percent CI; 0.13, 55.55). The authors stated that individuals treated with VNS + TAU had a 10 percent—20 percent reduction in the risk of suicidality as compared to individuals treated with TAU alone, as measured by the MADRS Item 10 score. However, when the Assessment of Suicidality was used, no statistical difference was noted between treatment groups.

The authors further noted that the side effects profiles as measured by the Frequency, Intensity and Burden of Side Effects Rating questionnaire demonstrated that the percentage of unacceptable side effects for VNS + TAU was higher than that of TAU; however, this difference lessens over time.

The authors concluded that treatment with adjunctive VNS in this population can potentially lower the risk of all-cause mortality, suicide and suicide attempts.

The fifth study by Berry et al. performed a Bayesian meta-analysis of patient level data from six clinical studies that had been previously performed and supported by the manufacturer of the VNS Therapy® System for TRD device (Cyberonics).[25] The investigations included in the meta-analysis were two single arm studies of VNS + TAU, a randomized trial of VNS + TAU versus TAU, a single arm study of patients receiving only TAU, a randomized trial of VNS + TAU comparing different VNS intensities, and a nonrandomized registry of patients who received either VNS + TAU or TAU.

The MADRS and CGI-I were selected as the primary endpoints for the meta-analysis, though they were not necessarily the primary outcome measures in the individual studies analyzed. Outcomes of interest were response, remission and sustained response based on these scales of disease severity. Response was assessed across five of the six studies using the MADRS and defined as a follow up score of at least a 50 percent reduction compared to baseline score. Response per the CGI Improvement subscale (CGI-I) was defined as a follow-up score of 1—“very much improved” or 2—“much improved.” Remission was assessed using the MADRS (score at follow up <10 points). The study designs of the original investigations included in the meta-analysis necessitated that the TAU group data be Start Printed Page 39470limited to two trials for the CGI-I scale and one trial for the MADRS scale.

Because only one of the studies randomized patients to VNS + TAU or TAU groups, the authors used propensity scores to control for potential differences between treatment groups. The researchers calculated propensity scores using standard methods and included the score in mixed effects repeated measures models to account for the fact that the patients in all of the different studies arrived at their assessment points at different points in real time.

In the final analysis, there were 425 TAU patients, and 1,035 VNS + TAU patients. The authors reported that while outcomes for both groups tended to improve, those who were treated with VNS + TAU demonstrated better outcomes over 96 weeks of treatment. The repeated measures analysis showed that, compared to patients who received TAU only, those who received VNS + TAU had lower MADRS scores (mean difference −3.26 points; 95 percent CI: −3.99, −2.54). The odds of a MADRS response in the VNS + TAU group was 3.19 times greater (95 percent CI: 2.12, 4.66) and the odds of a MADRS remission was 4.99 times greater (95 percent CI: 2.93, 7.76) than those individuals who received TAU alone. Similarly, those in the VNS + TAU group had lower CGI-I scores (mean difference of −0.49 points; 95 percent CI: −0.59, −0.39) and had 7 times the odds of a CGI-I response (95 percent CI: 4.63, 10.83) compared to individuals receiving TAU alone. The authors concluded that the Bayesian meta-analysis demonstrated consistent superiority of VNS + TAU as compared to the use of TAU alone. The authors stated that, for patients diagnosed with TRD, treatment using VNS + TAU has greater response and remission rates that are more likely to persist than TAU.

The sixth study was another meta-analysis study, by Cimpianu et al., involving a systematic review that summarized the evidence regarding the use of invasive and noninvasive VNS for the treatment of TRD and other psychiatric disorders.[26] The study authors searched through the PubMed/MEDLINE database (up to September 2016) to identify relevant publications for their review.

The authors noted that very few studies exhibited a double-blind randomized sham controlled design; instead the majority were single blinded, open label observational or cohort investigations. Nonetheless, the text of the review pertaining to invasive VNS in the treatment of depressive disorders focused on those studies that used a randomized double blind design in at least one period (beginning) of a trial. However, of those investigations described, the authors observed that, for the most part, effect sizes were either not reported at all or were not reported in detail.

The authors found that the application of the VNS Therapy® System for TRD received a mixed recommendation in national guidelines. They stated that there is a consensus in the field that further randomized controlled studies, as well as long term naturalistic studies are needed for the future evaluation of the efficacy of VNS for the treatment of depression.

The seventh study was a meta-analysis study as well. Daban et al. performed a systematic review of studies published between 2000 and September 2007, found in the Medline, Psychological Abstracts and Current Content databases, that evaluated the safety and efficacy of VNS therapy in TRD patients.[27] The authors reviewed 6 short-term studies and 12 long-term studies. The measured outcomes consisted of baseline depression severity compared to ratings 2 weeks after implantation and after 3 months in acute and long-term studies and also after 6, 9, 12, and subsequent months in long-term studies. The authors stated their review demonstrated that VNS therapy has been reported to have antidepressant effects in open and long-term studies and that these effects may be sustained. However, they also noted that the evidence base is weak and the only blinded randomized trial was inconclusive, and they suggest more double-blinded, sham-controlled, randomized studies be conducted.

The eighth and final study discussed in the NCD with CED reconsideration decision memo was also a meta-analysis study. This study, by Martin et al., performed a systematic review to determine the efficacy of VNS for the treatment of depression.[28] In order to achieve this goal, a review of the pertinent scientific literature available until December 2010 was conducted. The databases searched were Medline/PubMed, Embase, The Cochrane Controlled Trials Register, Pascal Biomed and CINAL. References found on the web pages of ongoing clinical trials were also examined. Selection criteria included any RCT or pre/post design study, in which depressive symptomatology was measured and the intervention studied was VNS. The outcomes assessed were levels of depression severity as measured by depression symptomatology scales and percentage of responders, defined as subjects whose symptomatology scores demonstrated ≥50 percent change from baseline. The outcomes were analyzed in the short term (≤12 weeks), medium term (>12 and <48 weeks) and long term (>48 weeks).

In their literature search, the authors found only one randomized controlled trial involving VNS for treatment of depression. The primary outcome was a response rate as measured by the Hamilton Depression Rating Scale (HDRS). No statistically significant differences between the active and the placebo group were noted. However, the meta analysis of efficacy for the uncontrolled pre/post studies, showed a significant reduction in HDRS scores and the percentage of responders was 31.8 percent ([23.2 percent-41.8 percent]. p<0.001). To study the cause of this heterogeneity, a meta-regression was performed, which implied that an 84 percent variation in effect size across the studies was explained by baseline severity of depression (p<0.0001). In the uncontrolled pre/post studies that were meta-analyzed, the incidence density of suicide or attempted suicides was practically identical in the studies of the use of VNS and selective serotonin reuptake inhibitors. Therefore, the authors stated that the use of VNS did not appear to provoke suicide conduct any more than treatment with the comparator antidepressant.

The authors concluded that insufficient data exist to describe VNS as an effective treatment for depression. Moreover, they stated that the ability of the uncontrolled studies to show causality is limited and positive outcomes might be caused by placebo effect, regression to the mean, spontaneous remission, differences in patient characteristics or the Hawthorn effect (the alteration of behavior by subjects in a study because they are aware of being observed). They stated that evidence to determine the benefit (or not) of VNS therapy should be based on long-term clinical trials with a control group aimed at monitoring the possible latency involved in the effect of the use of VNS, as well as the associated adverse effects.Start Printed Page 39471

The applicant submitted an additional study by Kumar et al. This was an observational study attempting to compare the duration of treatment response for patients that received VNS and treatment as usual (TAU) together as compared to the duration of response for patients receiving only TAU.[29] Data from 271 participants receiving TAU and 328 participants receiving VNS + TAU were analyzed. Response was defined as ≥50 percent decrease in baseline MADRS score at post-baseline visit and was considered retained until the decrease was <40 percent. In the VNS + TAU group, 62.5 percent (205/328) of participants had a first response over 5 years compared with 39.9 percent (108/271) in the TAU group. The time to first response was significantly shorter for VNS + TAU participants than for TAU participants (P<0.01). The authors of the study concluded that combining VNS therapy with TAU for patients having severe TRD leads to a faster response and a greater likelihood of response to treatment as compared to TAU alone. Also, the duration of the treatment response is longer for those receiving VNS + TAU.

With regard to the studies presented, we are concerned that the clinical utility of the VNS Therapy® System for TRD has not been well demonstrated by the applicant. The majority of the studies presented were case series, open labeled, or not randomized. The literature presented did not appear to have comparator arms with current treatment options like Magnetic Stimulation (TMS). We note that the CMS CAG found that all of the studies they reviewed and submitted for this application indicated some positive findings regarding clinical improvement with the use of VNS therapy. However, the CMS CAG also identified significant issues with the studies that either reduced the overall quality and strength of evidence and/or the clinical significance of the outcomes. Nevertheless, some of the published evidence suggests that the use of VNS is a promising treatment for patients diagnosed with TRD, which contributed to CMS CAG's decision to propose coverage with evidence development.

We are inviting public comments on whether the VNS Therapy® System for TRD meets the substantial clinical improvement criterion.

The third criterion for establishing a device category at § 419.66(c)(3) requires us to determine that the cost of the device is not insignificant, as described in § 419.66(d). Section 419.66(d) includes three cost significance criteria that must each be met. With respect to the cost criterion, the applicant stated that the VNS Therapy® System for TRD would be reported with CPT code 64568 (Incision for implantation of cranial nerve (e.g., vagus nerve) neurostimulator electrode array and pulse generator), which is assigned to APC 5464 (Level 4 Neurostimulator and Related Services). The proposed CY 2020 payment rate for CPT code 64568 is $28,511.24, with a device offset of $24,168.98. The applicant stated that the cost of the VNS Therapy® System for TRD device is $42,000.

Section 419.66(d)(1), the first cost significance requirement, provides that the estimated average reasonable cost of devices in the category must exceed 25 percent of the applicable APC payment amount for the service related to the category of devices. The cost of $42,000 for the VNS Therapy® System for TRD device exceeds the applicable APC amount for CPT code 64568 of $28,511.24 by 147.31 percent ($42,000/$28,511.24 × 100 = 147.31 percent). Therefore, the VNS Therapy® System for TRD appears to meet the first cost significance requirement.

The second cost significance requirement, at § 419.66(d)(2), provides that the estimated average reasonable cost of devices in the category must exceed the cost of the device-related portion of the APC payment amount by at least 25 percent, which means the device cost needs to be at least 125 percent of the device offset amount (the device-related portion of the APC found on the offset list). The estimated cost of $42,000 for the VNS Therapy® System for TRD device exceeds the device-related portion of the APC amount for the related service of $24,168.98 by 173.78 percent ($42,000/$24,168.98 × 100 = 173.78 percent). Therefore, the VNS Therapy® System for TRD appears to meet the second cost significance requirement.

Section 419.66(d)(3), the third cost significance requirement, requires 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 exceeds 10 percent of the APC payment amount for the related service. The difference between cost of $42,000 for the VNS Therapy® System for TRD and the portion of the APC payment for the device of $24,168.98 exceeds 10 percent at 62.54 percent (($42,000−$24,168.98)/$28,511.24 × 100 = 62.54 percent). Therefore, the VNS Therapy® System for TRD appears to meet the third cost significance requirement and, therefore, satisfies the cost significance criterion. We are inviting public comments on whether the VNS Therapy® System for TRD meets the device pass-through payment criteria discussed in this section, including the cost criterion.

(4) Optimizer® System

Impulse Dynamics submitted an application for a new device category for transitional pass-through payment status for the Optimizer® System. According to the applicant, the Optimizer® System is an implantable device that delivers Cardiac Contractility Modulation (CCM) therapy for the treatment of patients with moderate to severe chronic heart failure. CCM therapy is intended to treat patients with persistent symptomatic heart failure despite receiving guideline directed medical therapy (GDMT). The applicant stated that the Optimizer System consists of the Optimizer Implantable Pulse Generator (IPG), Optimizer Mini Charger, and Omni II Programmer with Omni Smart Software. Lastly, the applicant stated that the Optimizer® System delivers CCM signals to the myocardium. CCM signals are nonexcitatory electrical signals applied during the cardiac absolute refractory period that, over time, enhance the strength of cardiac muscle contraction.

With respect to the newness criterion at § 419.66(b)(1), the applicant received a Category B-3 Investigational Device Exemption (IDE) from the FDA on April 6, 2017. Subsequently, the applicant received its premarket approval (PMA) application from the FDA on March 21, 2019. We received the application for a new device category for transitional pass-through payment status for the Optimizer® System on February 26, 2019, which is within 3 years of the date of the initial FDA approval or clearance. We are inviting public comments on whether the Optimizer® System meets the newness criterion.

With respect to the eligibility criterion at § 419.66(b)(3), according to the applicant, the Optimizer® System is integral to the CCM therapy service provided, is used for one patient only, comes in contact with human skin, and is applied in or on a wound or other skin lesion. The applicant also stated that the Optimizer® System meets the device eligibility requirements of § 419.66(b)(4) because it is not an instrument, apparatus, implement, or items for which depreciation and financing expenses are recovered, and it Start Printed Page 39472is not a supply or material furnished incident to a service.

The criteria for establishing new device categories are specified at § 419.66(c). The first criterion, at § 419.66(c)(1), provides that CMS determines that a device to be included in the category is not appropriately described by any of the existing categories or by any category previously in effect, and was not being paid for as an outpatient service as of December 31, 1996. We have not identified an existing pass-through payment category that describes the Optimizer® System.

The second criterion for establishing a device category, at § 419.66(c)(2), provides that CMS determines that a device to be included in the category has demonstrated that it will 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. The applicant stated that the use of CCM significantly improves clinical outcomes for a patient population compared to currently available treatments. With respect to this criterion, the applicant submitted studies that examined the impact of CCM on quality of life, exercise tolerance, hospitalizations, and mortality.

The applicant noted that the use of the Optimizer® System significantly improves clinical outcomes for patients with moderate-to-severe chronic heart failure, and specifically improves exercise tolerance, quality of life, and functional status of patients that are otherwise underserved. The applicant claims that the Optimizer® System fulfills an unmet need because there is currently no therapeutic medical device therapies available for the 70 percent of heart failure patients who have New York Heart Association (NYHA) Class III heart failure, normal QRS duration and reduced ejection fraction (EF).

The applicant presented several studies to support these claims. According to the applicant, the results of a randomized clinical study in which patients with NYHA functional Class III, ambulatory Class IV heart failure despite OMT, an EF from 25-45 percent, or a normal sinus rhythm with QRS duration <130 ms (n=160) were randomized to continued medical therapy (n=86) or CCM with the Optimizer® System (n=74) for 24 weeks showed a statistically significant improvement in the primary endpoint of peak oxygen consumption (pVO2 = 0.84, 95 percent Bayesian credible interval 0.123 to 1.52) compared with the patients who were randomized to continued medical therapy.[30] The secondary endpoint of quality of life, measured by Minnesota Living with Heart Failure Questionnaire (MLWHFQ) (p<0.001), 6-minute hall walk test (p=0.02), and an NYHA function class assessment (p<0.001) were better in the treatment group versus control group. The secondary endpoint of heart failure-related hospitalizations was lowered from 10.8 percent to 2.9 percent (p=0.048). The applicant also reported a registry study of 140 patients with a left ventricular ejection fraction from 25-45 percent receiving CCM therapy with a primary endpoint of comparing observed survival to Seattle Heart Failure Model (SHFM) predicted survival over 3 years of follow-up. All patients implanted with the Optimizer® System at participating centers were offered participation and 72 percent of patients agreed to enroll in the registry. There were improvements in quality of life markers (MLWHFQ) and a 75-percent reduction in heart failure hospitalizations (p<0.0001). Survival at 3 years was similar between the two study arms with CCM at 82.8 percent [73.4 percent-89.1 percent] and SHFM at 76.7 percent (p = 0.16). However, for patients with a left ventricular ejection fraction from 35-45 percent receiving CCM therapy, the 3-year mortality for CCM therapy was significantly better than predicted with 88 percent for CCM compared to 74.7 percent for SHFM (p=0.0463).[31] The applicant presented a randomized, double blind, crossover study of CCM signals with 164 patients with EF ≤35 percent and NYHA Class II (24 percent) or III (76 percent) symptoms who received a CCM pulse generator. After the 6-month treatment period, results indicated statistically significantly improved peak VO2 and MLWHFQ (p=0.03 for each parameter), concluding that CCM signals appear to be safe for patients and that exercise tolerance and quality of life were significantly better while patients were receiving active CCM treatment.[32]

A study was conducted with 68 consecutive heart failure patients with NYHA Class II or III symptoms, QRS duration ≤130 ms, and who had been implanted with a CCM device between May 2002 and July 2013 in Germany. Based upon pre-implant SHFM survival rates, 4.5 years mean follow-up, and an average patient age of 61 years old, the study found lower mortality rates for CCM therapy group with 0 percent at 1 year, 3.5 percent at 2 years, and 14.2 percent at 5 years, compared to 6.1 percent, 11.8 percent, and 27.7 percent predicted by SHFM, respectively (p=0.007). [33] In a study on long-term outcomes, 41 consecutive heart failure patients with left ventricular ejection fraction (EF) <40 percent receiving CCM therapy were compared to a control group of 41 similar heart failure patients and primarily evaluated for all-cause mortality, as well as heart failure hospitalization, cardiovascular death, and a death and heart failure hospitalization composite. After 6 years of follow-up, the results showed that all-cause mortality was lower for the CCM group as compared to the control group (39 percent versus 71 percent respectively, p=0.001), especially among patients with EF ≥25-40 percent with 36 percent for the CCM group versus 80 percent for the control group (p<0.001). Although heart failure hospitalization was similar between the treatment and control cohorts, there was a significantly lower heart failure hospitalization rate for CCM patients with EF ≥25-40 percent (36 percent versus 64 percent respectively, p=0.005).[34] The applicant also presented additional studies [35 36] that presented similar conclusions to the studies discussed above, noting that CCM therapy provided improvements in quality of life, exercise capacity, NYHA class, and mortality rates.

We noted several concerns with the studies presented by the applicant. One Start Printed Page 39473concern regarding the evidence for the Optimizer® System involves the mixed mortality outcomes presented. Three studies showed significantly lower mortality rates with the use of CCM compared to controls or predicted mortality. Each of these studies focused on slightly different mortality outcomes, including all-cause mortality, a composite of death and heart failure hospitalization, and cardiac mortality rates from 1 to 5 years. Two studies show mixed results. For the first, 3-year survival was not significant for the overall population, despite a significantly higher survival rate found in a subpopulation. For the second, mortality rates were significant compared to predictions at 1 year, but not 3 years. The final study did not report significance in its overall survival at 2 years. Although the studies and trials presented show improvements in mortality when evaluating CCM therapy with comparators, the studies have small sample sizes and limited timeframes for measuring survival. Additionally, three studies compared observed mortality rates to statistically projected mortality rates. In the two studies with observed mortality rates, the overall improvement in mortality was not significant, despite some significance found in subanalyses. These issues raise concerns about the strength of the conclusions related to the use of CCM therapy improving patient outcomes.

Another concern with the studies presented for the Optimizer® System is that the included study population may not be necessarily representative of the Medicare beneficiary population. Several studies had a predominantly white, male patient population, which could make generalization of study results to a more diverse Medicare population difficult. Additionally, the average age of patients for several studies was under 65 years old, which may also be a limitation in applying these study results to the Medicare population.

Overall, there is a lack of evidence from large trials for the CCM therapy provided by the Optimizer® System. The studies presented had sample sizes fewer than 500 patients. Other limitations include the potential placebo effects and selection bias that may have impacted study results. Only two studies presented were randomized and only one of those two was a double-blinded study. For the remaining studies, no blinding occurred to minimize potential biases, which indicates that patients and researchers knew they were receiving CCM therapy. This is a limitation because observed outcomes may be impacted by the placebo effect. Although most studies matched participants for similar demographics, there could be systematic differences and unmeasured bias between the two groups beyond the similarities addressed in the study that could affect outcomes. The lack of randomization may have implications for the strength of the studies' conclusions.

Based upon the evidence presented, we are inviting public comments on whether the Optimizer® System meets the substantial clinical improvement criterion.

The third criterion for establishing a device category, at § 419.66(c)(3), requires us to determine that the cost of the device is not insignificant, as described in § 419.66(d). Section 419.66(d) includes three cost significance criteria that must each be met. The applicant provided the following information in support of the cost significance requirements. The applicant stated that the Optimizer® System would be reported with CPT codes 0408T, 0409T, 0410T, 0411T, 0412T, 0413T, 0414T, 0415T, 0416T, 0417T, and 0418T. The associated APCs are APC 5231 (Level 1 ICD and Similar Procedures) and APC 5222 (Level 2 Pacemaker and Similar Procedures). To meet the cost criterion for device pass-through payment status, a device must pass all three tests of the cost criterion for at least one APC. For our calculations, we used APC 5222, which had a CY 2019 payment rate of $7,404.11 at the time the application was received. Beginning in CY 2017, we calculate the device offset amount at the HCPCS/CPT code level instead of the APC level (81 FR 79657). CPT code 0410T had a device offset amount of $2,295.27 at the time the application was received. According to the applicant, the cost of the Optimizer® System was $15,700.

Section 419.66(d)(1), the first cost significance requirement, provides that the estimated average reasonable cost of devices in the category must exceed 25 percent of the applicable APC payment amount for the service related to the category of devices. The estimated average reasonable cost of $15,700 for the Optimizer® System exceeds 212 percent of the applicable APC payment amount for the service related to the category of devices of $7,404.11 ($15,700/$7,404.11 × 100 = 212 percent). Therefore, we believe the Optimizer® System meets the first cost significance requirement.

The second cost significance requirement, at § 419.66(d)(2), provides that the estimated average reasonable cost of the devices in the category must exceed the cost of the device-related portion of the APC payment amount for the related service by at least 25 percent, which means 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). The estimated average reasonable cost of $15,700 for the Optimizer® System exceeds the cost of the device-related portion of the APC payment amount for the related service of $2,295.27 by 684 percent ($15,700/$2,295.27) × 100 = 684 percent. Therefore, we believe that the Optimizer® System meets the second cost significance requirement.

The third cost significance requirement, at § 419.66(d)(3), provides that 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 must exceed 10 percent of the APC payment amount for the related service. The difference between the estimated average reasonable cost of $15,700 for the Optimizer® System and the portion of the APC payment amount for the device of $2,295.27 exceeds the APC payment amount for the related service of $7,404.11 by 181 percent (($15,700−$2,295.27)/$7,404.11) × 100 = 181 percent). Therefore, we believe that the Optimizer® System meets the third cost significance requirement.

We are inviting public comments on whether the Optimizer® System meets the device pass-through payment criteria discussed in this section, including the cost criterion for device pass-through payment status.

(5) AquaBeam® System

PROCEPT BioRobotics Corporation submitted an application for a new device category for transitional pass-through payment status for the AquaBeam® System as a resubmission of their CY 2019 application. The AquaBeam® System is intended for the resection and removal of prostate tissue in males suffering from lower urinary tract symptoms (LUTS) due to benign prostatic hyperplasia (BPH). The applicant stated that this is a very common condition typically occurring in elderly men. The clinical symptoms of this condition can include diminished urinary stream and partial urethral obstruction.[37] According to the applicant, the AquaBeam® system resects the prostate to relieve symptoms of urethral compression. The resection is performed robotically using a high Start Printed Page 39474velocity, nonheated sterile saline water jet (in a procedure called Aquablation). The applicant stated that the AquaBeam® System utilizes real-time intra-operative ultrasound guidance to allow the surgeon to precisely plan the surgical resection area of the prostate and then the system delivers Aquablation therapy to accurately resect the obstructive prostate tissue without the use of heat. The materials submitted by the applicant state that the AquaBeam® System consists of a disposable, single-use handpiece as well as other components that are considered capital equipment.

With respect to the newness criterion at § 419.66(b)(1), the FDA granted a De Novo request classifying the AquaBeam® System as a Class II device under section 513(f)(2) of the Federal Food, Drug, and Cosmetic Act on December 21, 2017. The application for a new device category for transitional pass-through payment status for the AquaBeam® System was received on March 1, 2018, which is within 3 years of the date of the initial FDA approval or clearance. We are inviting public comments on whether the AquaBeam® System meets the newness criterion.

With respect to the eligibility criterion at § 419.66(b)(3), according to the applicant, the AquaBeam® System is integral to the service provided, is used for one patient only, comes in contact with human skin, and is applied in or on a wound or other skin lesion. The applicant also claimed the AquaBeam® System meets the device eligibility requirements of § 419.66(b)(4) because it is not an instrument, apparatus, implement, or items for which depreciation and financing expenses are recovered, and it is not a supply or material furnished incident to a service. However, in the CY 2019 OPPS/ASC proposed and final rules, we cited the CY 2000 OPPS interim final rule with comment period (65 FR 67804 through 67805), where we explained how we interpreted § 419.43(e)(4)(iv). We stated that we consider a device to be surgically implanted or inserted if is surgically inserted or implanted via a natural or surgically created orifice, or inserted or implanted via a surgically created incision. We also stated that we do not consider an item used to cut or otherwise create a surgical opening to be a device that is surgically implanted or inserted. We consider items used to create incisions, such as scalpels, electrocautery units, biopsy apparatuses, or other commonly used operating room instruments, to be supplies or capital equipment, not eligible for transitional pass-through payments. We stated that we believe the function of these items is different and distinct from that of devices that are used for surgical implantation or insertion. Finally, we stated that, generally, we would expect that surgical implantation or insertion of a device occurs after the surgeon uses certain primary tools, supplies, or instruments to create the surgical path or site for implanting the device. In the CY 2006 OPPS final rule with comment period (70 FR 68329 and 68630), we adopted as final our interpretation that surgical insertion or implantation criteria include devices that are surgically inserted or implanted via a natural or surgically created orifice, as well as those devices that are inserted or implanted via a surgically created incision. We reiterated that we maintain all of the other criteria in § 419.66 of the regulations, namely, that we do not consider an item used to cut or otherwise create a surgical opening to be a device that is surgically implanted or inserted.

The applicant resubmitted their application with additional information that they believe supports their stance that the device should be considered eligible under the device pass-through payment eligibility criteria. The applicant stated that the AquaBeam® System's handpiece is temporarily surgically inserted into the urethra via the urinary meatus. The applicant indicated that the AquaBeam® System's handpiece does not create an incision or surgical opening or pathway, but instead ablates prostate tissue. The applicant further stated that the device only cuts the prostatic tissue after being inserted into the prostatic urethra and therefore it should be considered eligible. The applicant also stated that the prostatic urethra tissue is cut because it is at the center of the obstruction in the prostate. Additionally, the applicant explained that to relieve the symptoms of BPH, both the prostatic urethra and prostate tissue encircling the prostatic urethra must be ablated, or cut, to relieve the symptoms of BPH and provide some additional clearance for future swelling or growth of the prostate. The applicant stated that the prostatic urethra tissue is not cut or disturbed to access the prostate tissue underneath, but the removal of the prostatic urethra is a key aspect of treating the obstruction that causes BPH symptoms. Finally, the applicant believes that clinically the distinction between the prostatic urethra tissue and the prostate tissue are not meaningful in the context of a BPH surgical intervention. We are inviting public comments on whether the AquaBeam® System meets the eligibility criteria at § 419.66(b).

The criteria for establishing new device categories are specified at § 419.66(c). The first criterion, at § 419.66(c)(1), provides that CMS determines that a device to be included in the category is not appropriately described by any of the existing categories or by any category previously in effect, and was not being paid for as an outpatient service as of December 31, 1996. We have not identified an existing pass-through payment category that describes the AquaBeam® System. The applicant proposed a category descriptor for the AquaBeam® System of “Probe, image guided, robotic resection of prostate.” We are inviting public comments on whether the AquaBeam® System meets this criterion.

The second criterion for establishing a device category, at § 419.66(c)(2), provides that CMS determines that a device to be included in the category has demonstrated that it will 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. The applicant stated that the AquaBeam® System provides a substantial clinical improvement as the first autonomous tissue resection robot for the treatment of lower urinary tract symptoms due to BPH. The applicant further provided that the AquaBeam® System is also a substantial clinical improvement because the Aquablation procedure demonstrated superior efficacy and safety for larger prostates (prostates sized 50-80 mL) as compared to transurethral resection of the prostate (TURP). The applicant also believes that the Aquablation procedure would provide better outcomes for patients with large prostates (>80 mL) who may undergo open prostatectomy whereas the open prostatectomy procedure would require a hospital inpatient admission. With respect to this criterion, the applicant submitted several articles that examined the use of a current standard treatment for BPH—transurethral prostatectomy TURP, including complications associated with the procedure and the comparison of the effectiveness of TURP to other modalities used to treat BPH, including holmium laser enucleation of the Start Printed Page 39475prostate (HoLEP) [38] and photoselective vaporization (PVP).[39]

The most recent clinical study involving the AquaBeam® System was an accepted manuscript describing a double-blind trial that compared men treated with the AquaBeam® System versus men treated with traditional TURP.[40] This was a multicenter study in 4 countries with 17 sites, 6 of which contributed 5 patients or fewer. Patients were randomized to receive treatment with either the AquaBeam® System or TURP in a two-to-one ratio. With exclusions and dropouts, 117 patients were treated with the AquaBeam® System and 67 patients with TURP. The data on efficacy supported the equivalence of the two procedures based upon noninferiority analysis. The safety data were reported as showing superiority of the AquaBeam® System over TURP, although the data were difficult to track because adverse consequences were combined into categories. The applicant claimed that the International Prostate Symptom Scores (IPPS) were significantly improved in AquaBeam® System patients as compared to TURP patients in men whose prostate was greater the 50 ml in size. The applicant also claimed that the proportion of men with a worsening of sexual function (as shown with a decrease in Male Sexual Health Questionnaire for Ejaculatory Dysfunction (MSHQ) score of at least 2 points or a decrease in International Index of Erectile Function (IIEF-5) score of at least 6 points by 6 months) was lower for the Aquablation procedure at 32.9 percent compared to the TURP groups at 52.8 percent.

Although there may be some evidence of the improved safety of the AquaBeam® System over TURP, we believe that the comparison of the AquaBeam® System with TURP does not recognize that there are other treatment modalities available that are likely to have a similar safety profile as the AquaBeam® System. No studies comparing other treatment modalities were cited to show that the AquaBeam® System is a significant improvement over other available procedures.

Based on the evidence submitted with the application, we are concerned that there is a lack of sufficient evidence that the AquaBeam® System provides a substantial clinical improvement over other similar products, particularly in the outpatient setting where large prostates are less likely to be treated. We are inviting public comments on whether the AquaBeam® System meets the substantial clinical improvement criterion.

The third criterion for establishing a device category, at § 419.66(c)(3), requires us to determine that the cost of the device is not insignificant, as described in § 419.66(d). Section 419.66(d) includes three cost significance criteria that must each be met. The applicant provided the following information in support of the cost significance requirements. The applicant stated that the AquaBeam® System would be reported with CPT code 0421T. CPT code 0421T is assigned to APC 5375 (Level 5 Urology and Related Services). To meet the cost criterion for device pass-through payment status, a device must pass all three tests of the cost criterion for at least one APC. For our calculations, we used APC 5375, which has a CY 2018 payment rate of $3,706.03. Beginning in CY 2017, we calculate the device offset amount at the HCPCS/CPT code level instead of the APC level (81 FR 79657). CPT code 0421T had device offset amount of $0.00 at the time the application was received. According to the applicant, the cost of the handpiece for the AquaBeam® System is $2,500.

Section 419.66(d)(1), the first cost significance requirement, provides that the estimated average reasonable cost of devices in the category must exceed 25 percent of the applicable APC payment amount for the service related to the category of devices. The estimated average reasonable cost of $2,500 for the AquaBeam® System exceeds 25 percent of the applicable APC payment amount for the service related to the category of devices of $3,706.03 ($2,500/$3,706.03 × 100 = 67.5 percent). Therefore, we believe the AquaBeam® System meets the first cost significance requirement.

The second cost significance requirement, at § 419.66(d)(2), provides that the estimated average reasonable cost of the devices in the category must exceed the cost of the device-related portion of the APC payment amount for the related service by at least 25 percent, which means 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). The estimated average reasonable cost of $2,500 for the AquaBeam® System exceeds the cost of the device-related portion of the APC payment amount for the related service of $0.00 by at least 25 percent. Therefore, we believe that the AquaBeam® System meets the second cost significance requirement.

The third cost significance requirement, at § 419.66(d)(3), provides that 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 must exceed 10 percent of the APC payment amount for the related service. The difference between the estimated average reasonable cost of $2,500 for the AquaBeam® System and the portion of the APC payment amount for the device of $0.00 exceeds the APC payment amount for the related service of $3,706.03 by 68 percent (($2,500 − $0.00)/$3,706.03 × 100 = 67.5 percent). Therefore, we believe that the AquaBeam® System meets the third cost significance requirement.

We are inviting public comments on whether the AquaBeam® System meets the device pass-through payment criteria discussed in this section, including the cost criterion.

(6) EluviaTM Drug-Eluting Vascular Stent System

Boston Scientific Corporation submitted an application for new technology add-on payments for the EluviaTM Drug-Eluting Vascular Stent System for FY 2020. According to the applicant, the EluviaTM system is a sustained-release drug-eluting stent indicated for improving luminal diameter in the treatment of peripheral artery disease (PAD) with symptomatic de novo or restenotic lesions in the native superficial femoral artery (SFA) and/or the proximal popliteal artery (PPA) with reference vessel diameters (RVD) ranging from 4.0 to 6.0 mm and total lesion lengths up to 190 mm.

The applicant stated that PAD is a circulatory condition in which narrowed arteries reduce blood flow to the limbs, usually in the legs. Symptoms of PAD may include lower extremity pain due to varying degrees of ischemia, claudication which is characterized by pain induced by exercise and relieved with rest. According to the applicant, risk factors for PAD include individuals who are age 70 years old and older; individuals who are between the ages of 50 years old and 69 years old with a history of smoking or diabetes; individuals who are between the ages of 40 years old and 49 years old with diabetes and at least one other risk factor for atherosclerosis; leg symptoms Start Printed Page 39476suggestive of claudication with exertion, or ischemic pain at rest; abnormal lower extremity pulse examination; known atherosclerosis at other sites (for example, coronary, carotid, renal artery disease); smoking; hypertension, hyperlipidemia, and homocysteinemia.[41] PAD is primarily caused by atherosclerosis—the buildup of fatty plaque in the arteries. PAD can occur in any blood vessel, but it is more common in the legs than the arms. Approximately 8.5 million people in the United States have PAD, including 12 to 20 percent of individuals who are age 60 years old and older.[42]

Management of the disease is aimed at improving symptoms, improving functional capacity, and preventing amputations and death. Management of patients who have been diagnosed with lower extremity PAD may include medical therapies to reduce the risk for future cardiovascular events related to atherosclerosis, such as myocardial infarction, stroke, and peripheral arterial thrombosis. Such therapies may include antiplatelet therapy, smoking cessation, lipid-lowering therapy, and treatment of diabetes and hypertension. For patients with significant or disabling symptoms unresponsive to lifestyle adjustment and pharmacologic therapy, intervention (percutaneous, surgical) may be needed. Surgical intervention includes angioplasty, a procedure in which a balloon-tip catheter is inserted into the artery and inflated to dilate the narrowed artery lumen. The balloon is then deflated and removed with the catheter. For patients with limb-threatening ischemia (for example, pain while at rest and/or ulceration), revascularization is a priority to reestablish arterial blood flow. According to the applicant, treatment of the SFA is problematic due to multiple issues including high rate of restenosis and significant forces of compression.

The applicant describes the EluviaTM Drug-Eluting Vascular Stent System as a sustained-release drug-eluting self-expanding, nickel titanium alloy (nitinol) mesh stent used to reestablish blood flow to stenotic arteries. According to the applicant, the EluviaTM stent is coated with the drug paclitaxel, which helps prevent the artery from restenosis. The applicant stated that EluviaTM's polymer-based drug delivery system is uniquely designed to sustain the release of paclitaxel beyond 1 year to match the restenotic process in the SFA. According to the applicant, the EluviaTM Drug-Eluting Vascular Stent System is comprised of: (1) The implantable endoprosthesis; and (2) the stent delivery system (SDS). On both the proximal and distal ends of the stent, radiopaque markers made of tantalum increase visibility of the stent to aid in placement. The tri-axial designed delivery system consists of an outer shaft to stabilize the stent delivery system, a middle shaft to protect and constrain the stent, and an inner shaft to provide a guide wire lumen. The delivery system is compatible with 0.035 in (0.89 mm) guide wires. The EluviaTM stent is available in a variety of diameters and lengths. The delivery system is offered in 2 working lengths (75 cm and 130 cm).

With respect to the newness criterion at § 419.66(b)(1), EluviaTM received FDA premarket approval (PMA) on September 18, 2018. The application for a new device category for transitional pass-through payment status for EluviaTM was received on November 15, 2018, which is within 3 years of the date of the initial FDA approval or clearance. We are inviting public comments on whether the EluviaTM Drug-Eluting Vascular Stent System meets the newness criterion. With respect to the eligibility criterion at § 419.66(b)(3), according to the applicant, the EluviaTM Drug-Eluting Vascular Stent System is integral to the service provided, is used for one patient only, comes in contact with human skin, and is applied in or on a wound or other skin lesion. The applicant also claimed that the EluviaTM Drug-Eluting Vascular Stent System meets the device eligibility requirements of § 419.66(b)(4) because it is not an instrument, apparatus, implement, or items for which depreciation and financing expenses are recovered, and it is not a supply or material furnished incident to a service. We are inviting public comments on whether the EluviaTM Drug-Eluting Vascular Stent System meets the eligibility criterion at § 419.66(b).

The criteria for establishing new device categories are specified at § 419.66(c). The first criterion, at § 419.66(c)(1), provides that CMS determines that a device to be included in the category is not appropriately described by any of the existing categories or by any category previously in effect, and was not being paid for as an outpatient service as of December 31, 1996. We have not identified an existing pass-through payment category that describes the EluviaTM Drug-Eluting Vascular Stent System. The applicant proposed a category descriptor for the EluviaTM Drug-Eluting Vascular Stent System of “Stent, non-coronary, polymer matrix, minimum 12-month sustained drug release, with delivery system.” We are inviting public comments on this issue.

The second criterion for establishing a device category, at § 419.66(c)(2), provides that CMS determines that a device to be included in the category has demonstrated that it will 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. With respect to this criterion, the applicant submitted several articles that examined the use of a current standard treatment for peripheral artery disease (PAD) with symptomatic de novo or restenotic lesions in the native superficial femoral artery (SFA) and/or proximal popliteal artery (PPA), with claims of substantial clinical improvement in achieving superior primary patency; reducing the rate of subsequent therapeutic interventions; decreasing the number of future hospitalizations or physician visits; reducing hospital readmission rates; reducing the rate of device-related complications; and achieving similar functional outcomes and EQ-5D index values while associated with half the rate of target lesion revascularizations (TLRs) procedures.

The applicant submitted the results of the MAJESTIC study, a single-arm, first-in-human study of the EluviaTM Drug-Eluting Vascular Stent System. The MAJESTIC [43] study is a prospective, multi-center, single-arm, open-label study. According to the applicant, the MAJESTIC study demonstrated long-term treatment durability among patients whose femoropopliteal arteries were treated with the EluviaTM stent. The applicant asserts that the MAJESTIC study demonstrates the sustained impact of the EluviaTM stent on primary patency. The MAJESTIC study enrolled 57 patients who had been diagnosed with symptomatic lower limb ischemia and lesions in the SAF or PPA. Efficacy measures at 2 years included primary patency, defined as duplex ultrasound peak systolic velocity ratio of less than 2.5 and the absence of Start Printed Page 39477TLR or bypass. Safety monitoring through 3 years included adverse events and TLR. The 24-month clinic visit was completed by 53 patients; 52 had Doppler ultrasound evaluable by the core laboratory, and 48 patients had radiographs taken for stent fracture analysis. The 3-year follow-up was completed by 54 patients. At 2 years, 90.6 percent (48/53) of the patients had improved by 1 or more Rutherford categories as compared with the pre-procedure level without the need for TLR (when those with TLR were included, 96.2 percent sustained improvement); only 1 patient exhibited a worsening in level, 66.0 percent (35/53) of the patients exhibited no symptoms (Category 0) and 24.5 percent (13/53) had mild claudication (Category 1) at the 24-month visit. Mean ABI improved from 0.73 ± 0.22 at baseline to 1.02 ± 0.20 at 12 months and 0.93 ± 0.26 at 24 months. At 24 months, 79.2 percent (38/48) of the patients had an ABI increase of at least 0.1 compared with baseline or had reached an ABI of at least 0.9. The applicant also noted that at 12 months the Kaplan-Meier estimate of primary patency was 96.4 percent.

With regard to the EluviaTM stent achieving superior primary patency, the applicant submitted the results of the IMPERIAL [44] study in which the EluviaTM stent is compared, head-to-head, to the Zilver® PTX Drug-Eluting stent. The IMPERIAL study is a global, multi-center, randomized controlled trial consisting of 465 subjects. Eligible patients were aged 18 years old or older and had a diagnosis of symptomatic lower-limb ischaemia, defined as Rutherford Category 2, 3, or 4 and stenotic, restenotic (treated with a drug-coated balloon greater than 12 months before the study or standard percutaneous transluminal angioplasty only), or occlusive lesions in the native SFA or PPA, with at least 1 infrapopliteal vessel patent to the ankle or foot. Patients had to have stenosis of 70 percent or more (via angiographic assessment), vessel diameter between 4 mm and 6 mm, and total lesion length between 30 mm and 140 mm.

Patients who had previously stented target lesion/vessels treated with drug-coated balloon less than 12 months prior to randomization/enrollment and patients who had undergone prior surgery of the SFA/PPA in the target limb to treat atherosclerotic disease were excluded from the study. Two concurrent single-group (EluviaTM only) substudies were done: A nonblinded, nonrandomized pharmacokinetic sub-study and a nonblinded, nonrandomized study of patients who had been diagnosed with long lesions (greater than 140 mm in diameter).

The IMPERIAL study is a prospective, multi-center, single-blinded randomized, controlled (RCT) noninferiority trial. Patients were randomized (2:1) to implantation of either a paclitaxel-eluting polymer stent (EluviaTM) or a paclitaxel-coated stent (Zilver® PTX) after the treating physician had successfully crossed the target lesion with a guide wire. The primary endpoints of the study are Major Adverse Events defined as all causes of death through 1 month, Target Limb Major Amputation through 12 months and/or Target Lesion Revascularization (TLR) procedure through 12 months and primary vessel patency at 12 months post-procedure. Secondary endpoints included the Rutherford categorization, Walking Impairment Questionnaire, and EQ-5D assessments at 1 month, 6 months, and 12 months post-procedure. Patient demographic and characteristics were balanced between the EluviaTM stent and Zilver® PTX stent groups.

The applicant noted that lesion characteristics for the patients in the EluviaTM stent versus the Zilver® PTX stent arms were comparable. Clinical follow-up visits related to the study were scheduled for 1 month, 6 months, and 12 months after the procedure, with follow-up planned to continue through 5 years, including clinical visits at 24 months and 5 years and clinical or telephone follow-up at 3 and 4 years.

The applicant asserted that in the IMPERIAL study the EluviaTM stent demonstrated superior primary patency over the Zilver® PTX stent, 86.8 percent versus 77.5 percent, respectively (p=0.0144). The noninferiority primary efficacy endpoint was also met. The applicant asserts that the superior primary patency results at the SFA are noteable because the SFA presents unique challenges with respect to maintaining long-term patency. There are distinct pathological differences between the SFA and coronary arteries. The SFA tends to have higher levels of calcification and chronic total occlusions when compared to coronary arteries. Following an intervention within the SFA, the SFA produces a healing response which often results in restenosis or re-narrowing of the arterial lumen. This cascade of events leading to restenosis starts with inflammation, followed by smooth muscle cell proliferation and matrix formation.[45] Because of the unique mechanical forces in the SFA, this restenotic process of the SFA can continue well beyond 300 days from the initial intervention. Results from the IMPERIAL study showed that primary patency at 12 months, by Kaplan-Meier estimate, was significantly greater for EluviaTM than for Zilver® PTX, 88.5 percent and 79.5 percent, respectively (p=0.0119). According to the applicant, these results are consistent with the 96.4 percent primary patency rate at 12 months in the MAJESTIC study.

The IMPERIAL study included two concurrent single-group (EluviaTM only) substudies: A nonblinded, nonrandomized pharmacokinetic substudy and a nonblinded, nonrandomized study of patients with long lesions (greater than 140 mm in diameter). For the pharmacokinetic sub-study, patients had venous blood drawn before stent implantation and at intervals ranging from 10 minutes to 24 hours post implantation, and again at either 48 hours or 72 hours post implantation. The pharmacokinetics sub-study confirmed that plasma paclitaxel concentrations after EluviaTM stent implantation were well below thresholds associated with toxic effects in studies in patients who had been diagnosed with cancer (0.05 μM or ~43 ng/mL).

The IMPERIAL substudy long lesion subgroup consisted of 50 patients with average lesion length of 162.8 mm that were each treated with two EluviaTM stents. According to the applicant, 12-month outcomes for the long lesion subgroup are 87 percent primary patency and 6.5 percent TLR. According to the applicant, in a separate subgroup analysis of patients 65 years old and older (Medicare population), the primary patency rate in the EluviaTM stent group is 92.6 percent, compared to 75.0 percent for the Zilver® PTX stent group (p=0.0386).

With regard to reducing the rate of subsequent therapeutic interventions, secondary outcomes in the IMPERIAL study included repeat re-intervention on the same lesion, referred to as target lesion revascularization (TLR), over the 12 months following the index procedure. The rate of subsequent interventions, or TLRs, in the EluviaTM stent group was 4.5 percent compared to 9.0 percent in the Zilver® PTX stent group. The applicant asserted that the TLR rate in the EluviaTM stent group Start Printed Page 39478represents a substantial reduction in reintervention on the target lesion compared to that of the Zilver® PTX stent group (at a p=0.067 p-value). The Eluvia® stent group clinically driven TLR rates through 12 months following the index procedure were likewise lower for U.S. patients age 65 and older as well as for those with medically treated diabetes (confidential and unpublished as of the date of the device transitional pass-through payment application, data on file with Boston Scientific). In the subgroup of U.S. patients age 65 and older, the rates of TLR were 2.4 percent in the EluviaTM group compared to 3.1 percent in the Zilver® PTX group, and in the subgroup of medically treated diabetes patients, the rates of TLR were 3.7 percent compared to 13.6 percent in the Zilver® PTX group (p=0.0269).

With regard to decreasing the number of future hospitalizations or physician visits, the applicant asserted that the substantial reduction in the lesion revascularization rate led to a reduced need to provide additional intensive care, distinguishing the EluviaTM stent group from the Zilver® PTX stent group. In the IMPERIAL study, the EluviaTM-treated patients required fewer days of re-hospitalization. Patients in the EluviaTM group averaged 13.9 days of rehospitalization for all adverse events compared to 17.7 days of rehospitalization for patients in the Zilver® PTX stent group. Patients in the EluviaTM group were rehospitalized for 2.8 days for TLR/Total Vessel Revascularization (TVR) compared to 7.1 days in the Zilver® PTX stent group. Lastly, patients in the EluviaTM stent group were rehospitalized for 2.7 days for procedure/device-related adverse events compared to 4.5 days from the Zilver® PTX stent group.

Regarding reduction in hospital readmission rates, the applicant asserted that patients treated in the EluviaTM stent group experienced reduced rates of hospital readmission following the index procedure compared to those in the Zilver® PTX stent group. Hospital readmission rates at 12 months were 3.9 percent for the EluviaTM stent group compared to 7.1 percent for the Zilver® PTX stent group. Similar results were noted at 1 and 6 months; 1.0 percent versus 2.6 percent and 2.4 percent versus 3.8 percent, respectively.

With regard to reducing the rate of device-related complications, the applicant asserted that while the rates of adverse events were similar in total between treatment arms in the IMPERIAL study, there were measurable differences in device-related complications. Device-related adverse-events were reported in 8 percent of the patients in the EluviaTM stent group compared to 14 percent of the patients in the Zilver® PTX stent group.

Lastly, the applicant asserted that while functional outcomes appear similar between the EluviaTM and Zilver® PTX stent groups at 12 months, these improvements for the Zilver® PTX stent group are associated with twice as many TLRs to achieve similar EQ-5D index values.[46] Secondary endpoints improved after stent implantation and were generally similar between the groups. At 12 months, of the patients with complete Rutherford assessment data, 241 (86 percent) of the 281 patients in the EluviaTM group and 120 (85 percent) of the 142 patients in the Zilver® PTX group had symptoms reported as Rutherford Category 0 or 1 (none to mild claudication). The mean ankle-brachial index was 1.0 (SD 0.2) in both groups at 12 months (baseline mean ankle-brachial index 0.7 [SD 0.2] for EluviaTM; 0.8 [0.2] for Zilver® PTX), with sustained hemodynamic improvement for approximately 80 percent of the patients in both groups. Walking function improved significantly from baseline to 12 months in both groups, as measured with the Walking Impairment Questionnaire and the 6-minute walk test. In both groups, the majority of patients had sustained improvement in the mobility dimension of the EQ-5D, and approximately half had sustained improvement in the pain or discomfort dimension. No significant between-group differences were observed in the Walking Impairment Questionnaire, 6-minute walk test, or EQ-5D. Secondary endpoint results for the EluviaTM stent and Zilver® PTX stent groups are as follows:

Start Printed Page 39479

We note that the IMPERIAL study, which showed significant differences in primary patency at 12 months, was designed for noninferiority and not superiority. Therefore, we are concerned that results showing primary patency at 12 months may not be valid given the study design. We also are concerned that the results of a recently published meta-analysis of randomized controlled trials of the risk of death associated with the use of paclitaxel-coated balloons and stents in the femoropopliteal artery of the leg, which found that there is increased risk of death following application of paclitaxel-coated balloons and stents in the femoropopliteal artery of the lower limbs and that further investigations are urgently warranted,[47] although the EluviaTM system was not included in the meta-analysis. We are concerned that the findings from this study indicate that the data suggesting that drug-coated stents are substantially clinically improved are unconfirmed. We are inviting public comments on whether the EluviaTM Drug-Eluting Vascular Stent System meets the substantial clinical improvement criterion, including the implications of the meta-analysis results with respect to a finding of substantial clinical improvement for the EluviaTM system.

We further note that the applicant for the EluviaTM Drug Eluting Vascular Stent System also applied for the IPPS new technology add-on payment (FY 2020 IPPS/LTCH PPS proposed rule; 86 FR 19314). In the FY 2020 IPPS/LTCH PPS proposed rule, we discuss several publicly available comments that also raised concerns relating to substantial clinical improvement. We list several of those concerns below. While the EluviaTM IMPERIAL study does cite a reduced rate of “Subsequent Therapeutic Interventions”, public comments for the IPPS proposed rule note that “Subsequent Therapeutic Interventions” was not further defined in the New Technology Town Hall presentation nor in the IMPERIAL study. The commenters stated that it would appear from the presentation materials, however, that this claim refers specifically to “target lesion revascularizations (TLR)”, which does not appear statistically significant.

With regard to the applicant's assertion that the use of the EluviaTM stent reduces hospital readmission rates, a commenter noted that during the New Technology Town Hall presentation, the presenter noted that the EluviaTM group had a hospital readmission rate at 12 months of 3.9 percent compared to the Zilver® PTX group's rate of 7.1 percent, and that no p-value was included on the slide used for the presentation to offer an assessment of the statistical significance of this difference. The commenter noted that the manufacturer of the EluviaTM stent did not discuss this particular hospital readmission rate data comparison in the main body of the Lancet paper; however, the data could be found in the online appendix and is shown as not statistically significant.

With regards to longer-term data on the Zilver® PTX stent and the EluviaTM stent, the commenter noted that in the commentary in The Lancet paper accompanying the IMPERIAL study, Drs. Salvatore Cassese and Robert Byrne write that a follow-up duration of 12 months is insufficient to assess late failure, which is not infrequently observed. According to Drs. Cassese and Byrne, the preclinical models of restenosis after stenting of peripheral arteries have shown that stents permanently overstretch the arterial wall, thus stimulating persistent neointimal growth, which might cause a catch-up phenomenon and late failure. The Lancet paper noted that, in this regard, data on outcomes beyond 1 year will be important to confirm the durability of the efficacy of the EluviaTM stent.[48] The commenter stated that, at this point in time, very limited longer-term data are available on the use of the EluviaTM stent and that the IMPERIAL study offers only 12-month data, although data out to 3 years have been published from the relatively small 57-patient single-arm MAJESTIC study. The commenter noted that the MAJESTIC study demonstrates a decrease in primary patency from 96.4 percent at 1 year to 83.5 percent at 2 years; and a doubling in TLR rates from 1 year to 2 years (3.6 percent to 7.2 percent) and again from 2 years to 3 years (7.2 percent to 14.7 percent). The commenter stated that this is not inconsistent with Drs. Cassese and Byrne's commentary regarding late failure, and that the relatively small, single-arm design of the study does not lend itself well to direct comparison to other SFA treatment options such as the Zilver® PTX stent.

The commenter also stated that EluviaTM's lack of long-term data contrasts with 5-year data that is available from the Zilver® PTX stent's pivotal 479-patient RCT comparing the use of the Zilver® PTX stent to angioplasty (with a sub-randomization comparing provisional use of Zilver® PTX stenting to bare metal Zilver stenting in patients experiencing an acute failure of percutaneous transluminal angioplasty (PTA)). The commenter believed that these 5-year data demonstrate that the superiority of the use of the Zilver® PTX stent demonstrated at 12 and 24 months is maintained through 5 years compared to PTA and provisional bare metal stenting, and actually increases rather than decreases over time. The commenter also believed that, given that these stent devices are permanent implants and they are used to treat a chronic disease, long-term data are important to fully understand an SFA stent's clinical benefits. The commenter stated that with 5-year data available to support the ongoing safety and effectiveness of the use of the Zilver® PTX stent, but no such corresponding data available for the use of the EluviaTM stent, it seems incongruous to suggest that the use of the EluviaTM stent results in a substantial clinical improvement compared to the Zilver® PTX stent.

The commenter further stated that, in addition to the limited long-term data available for the EluviaTM stent, there is also a lack of clinical data for the use of the EluviaTM stent to confirm the benefit of the device outside of a strictly controlled clinical study population. The commenter stated that, in contrast, the Zilver® PTX stent has demonstrated comparable outcomes across a broad patient population, including a 787 patient study conducted in Europe with 2-year follow-up and a 904-patient study of all-comers (no exclusion criteria) in Japan with 5-year follow-up completed. The commenter believed that, with no corresponding data for the use of the EluviaTM stent in a broad patient population, it seems unreasonable to suggest that the use of the EluviaTM stent results in a substantial clinical improvement compared to the Zilver® PTX stent.

Based on the evidence submitted with the application, we are concerned that there is a lack of sufficient evidence that the EluviaTM Vascular Drug-Eluting Stent System provides a substantial clinical improvement over other similar products. We are inviting public comments on whether EluviaTM Vascular Drug-Eluting Stent System meets the substantial clinical improvement criterion.

The third criterion for establishing a device category, at § 419.66(c)(3), requires us to determine that the cost of the device is not insignificant, as described in § 419.66(d). Section Start Printed Page 39480419.66(d) includes three cost significance criteria that must each be met. The applicant provided the following information in support of the cost significance requirements. The applicant stated that use of the EluviaTM stent would be reported with CPT code 37226, which is assigned to APC 5193 (Level 3 Endovascular Procedures). To meet the cost criterion for device pass-through payment status, a device must pass all three tests of the cost criterion for at least one APC. For our calculations, we used APC 5193, which has a CY 2019 payment rate of $10,509.72. Beginning in CY 2017, we calculate the device offset amount at the HCPCS/CPT code level instead of the APC level (81 FR 79657). CPT code 37226 had a device offset amount of $4,996.32. According to the applicant, the cost of the EluviaTM Vascular Drug-Eluting Stent System is $1,995 to $2,895 per stent, with each procedure requiring approximately 2.2 stents per procedure at an average device cost of $5,768 per procedure.

Section 419.66(d)(1), the first cost significance requirement, provides that the estimated average reasonable cost of devices in the category must exceed 25 percent of the applicable APC payment amount for the service related to the category of devices. The estimated average reasonable cost of the EluviaTM stent exceeds 25 percent of the applicable APC payment amount for the service related to the category of devices of $10,509.72−(($5,768/$10,509.72) × 100 = 55 percent). Therefore, we believe that the EluviaTM Vascular Drug-Eluting Stent System meets the first cost significance requirement.

The second cost significance requirement, at § 419.66(d)(2), provides that the estimated average reasonable cost of the devices in the category must exceed the cost of the device-related portion of the APC payment amount for the related service by at least 25 percent, which means 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). The estimated average reasonable cost of $5,768 for the EluviaTM stent exceeds the cost of the device-related portion of the APC payment amount for the related service of $4,996.32 by less than 25 percent (($5,768/$4,996.32) × 100 = 115 percent). Therefore, we do not believe that the EluviaTM Vascular Drug-Eluting Stent System meets the second cost significance requirement.

The third cost significance requirement, at § 419.66(d)(3), provides that 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 must exceed 10 percent of the APC payment amount for the related service. The difference between the estimated average reasonable cost of $5,768 for the EluviaTM stent and the portion of the APC payment amount for the device of $4,996.32 does not exceed 10 percent of the APC payment amount for the related service of $10,509.72 (($5,768 − $4,996.32)/$10,509.72 × 100 = 7.3 percent). Therefore, we do not believe that the EluviaTM Vascular Drug-Eluting Stent System meets the third cost significance requirement.

We are inviting public comments on whether the EluviaTM Vascular Drug-Eluting Stent System meets the device pass-through payment criteria discussed in this section, including the cost criterion.

(7) AUGMENT® Bone Graft

Wright Medical submitted an application for a new device category for transitional pass-through payment status for the AUGMENT® Bone Graft. The applicant describes AUGMENT® Bone Graft as a device/drug indicated for use as an alternative to autograft in arthrodesis of the ankle and/or hindfoot where the need for supplemental graft material is required. The applicant stated that the product has two components: Recombinant human platelet-derived growth factor-BB (rhPDGF-BB) solution (0.3 mg/mL) and Beta-tricalcium phosphate (β-TCP) granules (1000 − 2000 μm). The two components are combined at the point of use and applied to the surgical site. The beta-TCP provides a porous osteoconductive scaffold for new bone growth and the rhPDGF-BB, which act as an osteoinductive chemo-attractant and mitogen for cells involved in wound healing and through promotion of angiogenesis.

According to the applicant, the AUGMENT® Bone Graft is indicated for use in arthrodesis of the ankle and/or hindfoot due to osteoarthritis, post-traumatic arthritis (PTA), rheumatoid arthritis, psoriatic arthritis, avascular necrosis, joint instability, joint deformity, congenital defect or joint arthropathy as an alternative to autograft in patients needing graft material. Osteoarthritis is the most common joint disease among middle aged and older individuals and has been shown to also have health related mental and physical disabilities, which can be compared to the severity as patients with end-stage hip arthritis.[49] Additionally, post-traumatic arthritis develops after an acute direct trauma to the joint and can cause 12 percent of all osteoarthritis cases.[50] Common causes leading to PTOA include intra-articular fractures and meniscal, ligamentous and chondral injuries.[51] The ankle is cited as the most affected joint, reportedly accounting for 54 to 78 percent of over 300,000 injuries occurring in the USA annually. The applicant stated that autologous bone graft has often been used in ankle arthrodesis. Autologous bone is retrieved from a donor site, which may require an incision separate from the arthrodesis.[52] The applicant stated that, in these procedures, harvested autologous bone graft is implanted to stimulate healing between the bones across a diseased joint. The applicant further stated that the procedures may require the use of synthetic bone substitutes to fill the bony voids or gaps or to serve as an alternative to the autograft where autograft is not feasible. The applicant stated that the AUGMENT® Bone Graft removes the need for autologous retrieval. The applicant noted that during the procedure, the surgeon prepares the joint for the graft application and locates any potential bony defect, then applying and packing the AUGMENT® Bone Graft into the joint defects intended for arthrodesis.

With respect to the newness criterion at § 419.66(b)(1), the FDA granted the AUGMENT® Bone Graft premarket approval on September 1, 2015. The application for a new device category for transitional pass-through payment status for the AUGMENT® Bone Graft was received May 31, 2018, which is within 3 years of the date of the initial FDA approval or clearance. We are inviting public comments on whether the AUGMENT® Bone Graft meets the newness criterion.

With respect to the eligibility criterion at § 419.66(b)(3), according to the applicant, the use of the AUGMENT® Bone Graft is integral to the service provided, is used for one patient only, comes in contact with human skin, and is applied in or on a wound or other skin lesion. The applicant also claimed that the AUGMENT® Bone Graft meets the device eligibility requirements of § 419.66(b)(4) because it is not an Start Printed Page 39481instrument, apparatus, implement, or items for which depreciation and financing expenses are recovered, and it is not a supply or material furnished incident to a service.

The criteria for establishing new device categories are specified at § 419.66(c). The first criterion, at § 419.66(c)(1), provides that CMS determines that a device to be included in the category is not appropriately described by any of the existing categories or by any category previously in effect, and was not being paid for as an outpatient service as of December 31, 1996. We have not identified an existing pass-through payment category that describes the AUGMENT® Bone Graft. The applicant proposed a category descriptor for the AUGMENT® of “rhPDGF-BB and β-TCP as an alternative to autograft in arthrodesis of the ankle and/or hindfoot.”

The second criterion for establishing a device category, at § 419.66(c)(2), provides that CMS determines that a device to be included in the category has demonstrated that it will 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. The applicant claims that the AUGMENT® Bone Graft provides a substantial clinical improvement over autograft procedures by reducing pain at the autograft donor site. With respect to this criterion, the applicant submitted data that examined the use of autograft arthrodesis of the ankle and/or hind foot and arthrodesis with the use of the AUGMENT® Bone Graft.

In a randomized, nonblinded, placebo controlled, noninferiority trial of the AUGMENT® Bone Graft versus autologous bone graft, the AUGMENT® arm showed equivalence bone bridging as demonstrated by CT, pain on weight bearing, The American Orthopaedic Foot & Ankle Society Ankle-Hindfoot (AOFAS-AHS) score, and the Foot Function Index to autologous bone graft. The study noted that patients experienced significantly decreased (in fact no) pain due to elimination of the donor site procedure. In the autograft group, at 6 months, 18/142 patients (13 percent) experienced pain >20 mm (of 100 mm) on the Visual Analog Scale (VAS) at the autograft donor site as compared to 0/272 in the AUGMENT® Bone Graft group. At 12 months, 13/142 autograft patients (9 percent) had pain defined as >20 mm VAS as compared to 0/272 AUGMENT® patients.[53] The VAS has patients mark a visual representation of pain on a ruler based scale from 1 to 100. The measured distance (in mm) on the 10-cm line between the “no pain” anchor and the patient's mark represents the level of pain. We are concerned that we are unable to sufficiently determine substantial clinical improvement using the provided data, given that a comparison to alternatives to autologous bone graft, such as the reamer-irrigator-aspirator (RIA) technique were not evaluated. Specifically, the RIA technique has been suggested in a number of studies to be a viable alternative to bone autograft, because autogenous bone graft can be readily obtained without the need for additional incisions, therefore eliminating pain from an incisional site.[54] Another concern is the time period of the study because certain ankle arthrodesis complications such as ankle replacement and repeat arthrodesis can happen more than 2 years after the initial surgery.[55] A long-term study of at least 60 months is currently underway in order to assess long-term safety and efficacy, looking at the following 4 primary outcomes: Bone bridging as demonstrated by CT, pain on weight bearing, The American Orthopaedic Foot & Ankle Society Ankle-Hindfoot (AOFAS-AHS) score, and the Foot Function Index. We believe that this long-term study is necessary for meaningful information about long-term efficacy of the Augment® Bone Graft. Further, there was a notable difference in the infection rate, musculoskeletal and tissue disorders, and pain in extremity for those in the AUGMENT® Bone Graft group. These findings were unfortunately not tested for significance and also were not necessarily focused on relevance to the procedure. Should these be significant and related to the device, these findings would suggest that the adverse outcomes due to the Augment® Bone Graft may outweigh its potential benefits.

We are inviting public comments on whether the AUGMENT® Bone Graft meets the substantial clinical improvement criterion.

The third criterion for establishing a device category, at § 419.66(c)(3), requires us to determine that the cost of the device is not insignificant, as described in § 419.66(d). Section 419.66(d) includes three cost significance criteria that must each be met. The applicant provided the following information in support of the cost significance requirements. The applicant stated that the use of the AUGMENT® Bone Graft would be reported with CPT code 27870 (Arthrodesis, ankle, open), which is assigned to APC 5115 (Level 5 Musculoskeletal Procedures). To meet the cost criterion for device pass-through payment status, a device must pass all three tests of the cost criterion for at least one APC. For our calculations, we used APC 5115, which has a CY 2019 payment rate of $10,122.92. Beginning in CY 2017, we calculate the device offset amount at the HCPCS/CPT code level instead of the APC level (81 FR 79657). CPT code 27870 had a device offset amount of $4,553.29. According to the applicant, the cost of the AUGMENT® Bone Graft is $3,077 per device/drug combination. The applicant further provided a weighted average cost of the graft, accounting for how many procedures required one, two, or three AUGMENT® Bone Graft device/drug kits, equaling a weighted average cost of $6,020.22.

Section 419.66(d)(1), the first cost significance requirement, provides that the estimated average reasonable cost of devices in the category must exceed 25 percent of the applicable APC payment amount for the service related to the category of devices. The estimated average reasonable cost of the AUGMENT® Bone Graft is more than 25 percent of the applicable APC payment amount [56] for the service related to the category of devices of $10,122.92 (($6,020.22/$10,122.92) × 100 = 59 percent)). Therefore, we believe that the AUGMENT® Bone Graft meets the first cost significance requirement.

The second cost significance requirement, at § 419.66(d)(2), provides that the estimated average reasonable cost of the devices in the category must exceed the cost of the device related portion of the APC payment amount for the related service by at least 25 percent, which means 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). The estimated average reasonable cost of $6,020.22 for AUGMENT® Bone Graft Start Printed Page 39482exceeds the cost of the device-related portion of the APC payment amount for the related service of $4,553.29 by at least 25 percent (($6,020.22/$4,553.29) × 100 = 132 percent). Therefore, we have concerns about whether the AUGMENT® Bone Graft meets the second cost significance requirement.

The third cost significance requirement, at § 419.66(d)(3), provides that 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 must exceed 10 percent of the APC payment amount for the related service. The difference between the estimated average reasonable cost of $6,020.22 for the AUGMENT® Bone Graft and the portion of the APC payment amount for the device of $4,553.29 exceeds the APC payment amount for the related service of $10,122.92 by more than 10 percent (($6,020.22−$4,553.29)/$10,122.92 × 100 = 15 percent). Therefore, we believe that AUGMENT® Bone Graft meets the third cost significance test. We are inviting public comments on whether the AUGMENT® Bone Graft meets the device pass-through payment criteria discussed in this section, including the cost criterion.

3. Request for Information and Potential Revisions to the OPPS Device Pass-Through Substantial Clinical Improvement Criterion in the FY 2020 IPPS/LTCH PPS Proposed Rule

As mentioned earlier, section 1833(t)(6) of the Act provides for 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 pass-through payments. Separately, the criteria as set forth under § 419.66(c) are used to determine whether a new category of pass-through payment devices should be established. One of these criteria, at § 419.66(c)(2), states that CMS determines that a device to be included in the category has demonstrated that it will 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. CMS considers the totality of the substantial clinical improvement claims and supporting data, as well as public comments, when evaluating this aspect of each application. CMS summarizes each applicant's claim of substantial clinical improvement as part of its discussion of the entire application in the relevant proposed rule, as well as any concerns regarding those claims. In the relevant final rule for the OPPS, CMS responds to public comments and discusses its decision to approve or deny the application for separate transitional pass-through payments.

Over the years, applicants and commenters have indicated that it would be helpful for CMS to provide greater guidance on what constitutes “substantial clinical improvement.” In the FY 2020 IPPS/LTCH PPS proposed rule (84 FR 19368 through 19371), we requested information on the substantial clinical improvement criterion for OPPS transitional pass-through payments for devices and stated that we were considering potential revisions to that criterion. In particular, we sought public comments in the FY 2020 IPPS/LTCH PPS proposed rule on the type of additional detail and guidance that the public and applicants for device pass-through transitional payment would find useful (84 FR 19367 to 19369). This request for public comments was intended to be broad in scope and provide a foundation for potential rulemaking in future years. We refer readers to the FY 2020 IPPS/LTCH proposed rule for the full text of this request for information.

In addition to this broad request for public comments for potential rulemaking in future years, in order to respond to stakeholder feedback requesting greater understanding of CMS' approach to evaluating substantial clinical improvement, we also solicited comments from the public in the FY 2020 IPPS/LTCH PPS proposed rule (84 FR 19369 through 19371) on specific changes or clarifications to the IPPS and OPPS substantial clinical improvement criterion that CMS might consider making in the FY 2020 IPPS/LTCH PPS final rule to provide greater clarity and predictability. We refer readers to the FY 2020 IPPS/LTCH PPS proposed rule for complete details on those potential revisions. We note that any responses to public comments we receive on potential revisions to the OPPS substantial clinical improvement criterion in response to the FY 2020 IPPS/LTCH PPS proposed rule, as well as any revisions that might be adopted, will be included in the CY 2020 OPPS/ASC final rule and will inform future OPPS rulemaking. We further invite public comment on this topic in this rule.

4. Proposed Alternative Pathway to the OPPS Device Pass-Through Substantial Clinical Improvement Criterion for Transformative New Devices

Since 2001 when we first established the substantial clinical improvement criterion, the FDA programs for helping to expedite the development and review of transformative new technologies that are intended to treat serious conditions and address unmet medical needs (referred to as FDA's expedited programs) have continued to evolve in tandem with advances in medical innovations and technology. There is currently one expedited FDA program for devices, the Breakthrough Devices Program. The 21st Century Cures Act (Cures Act) (Pub. L. 144-255) established the Breakthrough Devices Program to expedite the development of, and provide for priority review of, medical devices and device-led combination products that provide for more effective treatment or diagnosis of life-threatening or irreversibly debilitating diseases or conditions and which meet one of the following four criteria: (1) That represent breakthrough technologies; (2) for which no approved or cleared alternatives exist; (3) that offer significant advantages over existing approved or cleared alternatives, including the potential, compared to existing approved alternatives, to reduce or eliminate the need for hospitalization, improve patient quality of life, facilitate patients' ability to manage their own care (such as through self-directed personal assistance), or establish long-term clinical efficiencies; or (4) the availability of which is in the best interest of patients.

Some stakeholders over the years have requested that devices that receive marketing authorization and are part of an FDA expedited program be deemed as representing a substantial clinical improvement for purposes of OPPS device pass-through status. We understand this request would arguably create administrative efficiency because the commenters currently view the two sets of criteria as the same, overlapping, similar, or otherwise duplicative or unnecessary.

The Administration is committed to addressing barriers to health care innovation and ensuring Medicare beneficiaries have access to critical and life-saving new cures and technologies that improve beneficiary health outcomes. As detailed in the President's FY 2020 Budget (we refer readers to HHS FY 2020 Budget in Brief, Improve Medicare Beneficiary Access to Breakthrough Devices, pp. 84-85), HHS is pursuing several policies that will instill greater transparency and consistency around how Medicare covers and pays for innovative technology.

Therefore, given the FDA programs for helping to expedite the development Start Printed Page 39483and review of transformative devices that meet expedited program criteria (that is, new devices that treat serious or life-threatening diseases or conditions for which there is an unmet medical need), we considered whether it would also be appropriate to similarly facilitate access to these transformative new technologies for Medicare beneficiaries taking into consideration that marketing authorization (that is, Premarket Approval (PMA); 510(k) clearance; or the granting of a De Novo classification request) for a product that is the subject of one of FDA's expedited programs could lead to situations where the evidence base for demonstrating substantial clinical improvement in accordance with CMS' current standard has not fully developed at the time of FDA marketing authorization (that is, PMA; 510(k) clearance; the granting of a De Novo classification request) (as applicable). We also considered whether FDA marketing authorization of a product that is part of an FDA expedited program is evidence that the product is sufficiently different from existing products for purposes of newness.

After consideration of these issues, and consistent with the Administration's commitment to addressing barriers to health care innovation and ensuring Medicare beneficiaries have access to critical and life-saving new cures and technologies that improve beneficiary health outcomes, we concluded that it would be appropriate to develop an alternative pathway for transformative medical devices. In situations where a new medical device is part of the Breakthrough Devices Program and has received FDA marketing authorization (that is, the device has received PMA; 510(k) clearance; or the granting of a De Novo classification request), we are proposing an alternative outpatient pass-through pathway to facilitate access to this technology for Medicare beneficiaries beginning with applications received for pass-through payment on or after January 1, 2020.

We continue to believe that hospitals should receive pass-through payments for devices that offer clear clinical improvement and that cost considerations should not interfere with patient access. In light of the criteria applied under the FDA's Breakthrough Devices Program, and because we recognize that the technology may not have a sufficient evidence base to demonstrate substantial clinical improvement at the time of FDA marketing authorization, we are proposing to amend the OPPS device transitional pass-through payment regulations to create an alternative pathway to demonstrating substantial clinical improvement that would enable devices approved under the FDA Breakthrough Devices Program to qualify for our quarterly approval process for device pass-through payment under the OPPS for pass-through payment applications received on or after January 1, 2020. With this proposal, OPPS device pass-through payment applicants approved under the FDA Breakthrough Devices Program would not be evaluated in terms of the current substantial clinical improvement criterion at § 419.66(c)(2) for the purposes of determining device pass-through payment status, but would continue to need to meet the other requirements for pass-through payment status in our regulation at § 419.66. Devices approved under the Breakthrough Devices Program that are approved for OPPS device transitional pass-through payment can be approved through the quarterly process and would be announced through that process (81 FR 79655). Finally, we would include proposals regarding these devices and whether pass-through payment status should continue to apply in the next applicable OPPS rulemaking cycle.

As such, we are proposing to revise paragraph (c)(2) under § 419.66. Under proposed revised paragraph (c)(2), we are proposing to establish an alternative pathway where applications for device pass-through payment status for new medical devices received on or after January 1, 2020 that are a part of FDA's Breakthrough Devices Program and have received FDA marketing authorization (that is, the device has received PMA, 510(k) clearance, or the granting of a De Novo classification request) will not be evaluated for substantial clinical improvement for the purposes of determining device pass-through payment status. Under this proposed alternative pathway, a medical device that has received FDA marketing authorization (that is, has been approved or cleared by, or had a De Novo classification request granted by, the FDA) and that is part of the FDA's Breakthrough Devices Program would still need to meet the eligibility criteria under § 419.66(b), the other criteria for establishing device categories under § 419.66(c), and the cost criterion under § 419.66(d). We note that this proposal aligns with a proposal in the FY 2020 IPPS/LTCH PPS proposed rule (84 FR 19371 through 19373) and will help achieve the goals of expedited access to innovative therapies and further reduce administrative burden.

B. Proposed Device-Intensive Procedures

1. Background

Under the OPPS, prior to CY 2017, device-intensive status for procedures was determined at the APC level for APCs with a device offset percentage greater than 40 percent (79 FR 66795). Beginning in CY 2017, CMS began determining device-intensive status at the HCPCS code level. In assigning device-intensive status to an APC prior to CY 2017, the device costs of all the procedures within the APC were calculated and the geometric mean device offset of all of the procedures had to exceed 40 percent. Almost all of the procedures assigned to device-intensive APCs utilized devices, and the device costs for the associated HCPCS codes exceeded 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 was 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).

a. HCPCS Code-Level Device-Intensive Determination

As stated earlier, prior to CY 2017, the device-intensive methodology assigned device-intensive status to all procedures requiring the implantation of a device that were assigned to an APC with a device offset greater than 40 percent and, beginning in CY 2015, that met the three criteria listed below. Historically, the device-intensive designation was at the APC level and applied to the applicable procedures within that APC. In the CY 2017 OPPS/ASC final rule with comment period (81 FR 79658), we changed our methodology to assign device-intensive status at the individual HCPCS code level rather than at the APC level. Under this policy, a procedure could be assigned device-intensive status regardless of its APC assignment, and device-intensive APCs were no longer applied under the OPPS or the ASC payment system.

We believe that a HCPCS code-level device offset is, in most cases, 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 Start Printed Page 39484the 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 this methodological change results in a more accurate representation of the cost attributable to implantation of a high-cost device, which ensures consistent device-intensive designation of procedures with a significant device cost. Further, we believe a HCPCS code-level device offset removes inappropriate device-intensive status for procedures without a significant device cost that are granted such status because of APC assignment.

Under our existing policy, procedures that meet the criteria listed below in section IV.B.1.b. of this proposed rule are identified as device-intensive procedures and are subject to all the policies applicable to procedures assigned device-intensive status under our established methodology, including our policies on device edits and no cost/full credit and partial credit devices discussed in sections IV.B.3. and IV.B.4. of this proposed rule, respectively.

b. Use of the Three Criteria To Designate Device-Intensive Procedures

We clarified our established policy in the CY 2018 OPPS/ASC final rule with comment period (82 FR 52474), where we explained that device-intensive procedures require the implantation of a device and additionally are subject to the following criteria:

  • All procedures must involve implantable devices that would be reported if device insertion procedures were performed;
  • 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
  • The device offset amount must be significant, which is defined as exceeding 40 percent of the procedure's mean cost.

We changed our policy to apply these three criteria to determine whether procedures qualify as device-intensive in the CY 2015 OPPS/ASC final rule with comment period (79 FR 66926), where we stated that we would apply the no cost/full credit and partial credit device policy—which includes the three criteria listed above—to all device-intensive procedures beginning in CY 2015. We reiterated this position in the CY 2016 OPPS/ASC final rule with comment period (80 FR 70424), where we explained that we were finalizing our proposal to continue using the three criteria established in the CY 2007 OPPS/ASC final rule with comment period for determining the APCs to which the CY 2016 device intensive policy will apply. Under the policies we adopted in CYs 2015, 2016, and 2017, all procedures that require the implantation of a device and meet the above criteria are assigned device-intensive status, regardless of their APC placement.

2. Device-Intensive Procedure Policy for CY 2019 and Subsequent Years

As part of CMS' effort to better capture costs for procedures with significant device costs, in the CY 2019 OPPS/ASC final rule with comment period (83 FR 58944 through 58948), for CY 2019, we modified our criteria for device-intensive procedures. We had heard from stakeholders that the criteria excluded some procedures that stakeholders believed should qualify as device-intensive procedures. Specifically, we were persuaded by stakeholder arguments that procedures requiring expensive surgically inserted or implanted devices that are not capital equipment should qualify as device-intensive procedures, regardless of whether the device remains in the patient's body after the conclusion of the procedure. We agreed that a broader definition of device-intensive procedures was warranted, and made two modifications to the criteria for CY 2019 (83 FR 58948). First, we allow procedures that involve surgically inserted or implanted, single-use devices that meet the device offset percentage threshold to qualify as device-intensive procedures, regardless of whether the device remains in the patient's body after the conclusion of the procedure. We established this policy because we no longer believe that whether a device remains in the patient's body should affect its designation as a device-intensive procedure, as such devices could, nonetheless, comprise a large portion of the cost of the applicable procedure. Second, we modified our criteria to lower the device offset percentage threshold from 40 percent to 30 percent, to allow a greater number of procedures to qualify as device-intensive. We stated that we believe allowing these additional procedures to qualify for device-intensive status will help ensure these procedures receive more appropriate payment in the ASC setting, which will help encourage the provision of these services in the ASC setting. In addition, we stated that this change would help to ensure that more procedures containing relatively high-cost devices are subject to the device edits, which leads to more correctly coded claims and greater accuracy in our claims data. Specifically, for CY 2019 and subsequent years, we finalized that device-intensive procedures will be subject to the following criteria:

  • All procedures must involve implantable devices assigned a CPT or HCPCS code;
  • The required devices (including single-use devices) must be surgically inserted or implanted; and
  • The device offset amount must be significant, which is defined as exceeding 30 percent of the procedure's mean cost (83 FR 58945).

In addition, to further align the device-intensive policy with the criteria used for device pass-through payment status, we finalized, for CY 2019 and subsequent years, that for purposes of satisfying the device-intensive criteria, a device-intensive procedure must involve a device that:

  • Has received FDA marketing authorization, has received an FDA investigational device exemption (IDE), and has been classified as a Category B device by the FDA in accordance with 42 CFR 405.203 through 405.207 and 405.211 through 405.215, or meets another appropriate FDA exemption from premarket review;
  • Is an integral part of the service furnished;
  • Is used for one patient only;
  • Comes in contact with human tissue;
  • Is surgically implanted or inserted (either permanently or temporarily); and
  • Is not either of the following:

(a) Equipment, an instrument, apparatus, implement, or item of this type for which depreciation and financing expenses are recovered as depreciable assets as defined in Chapter 1 of the Medicare Provider Reimbursement Manual (CMS Pub. 15-1); or

(b) A material or supply furnished incident to a service (for example, a suture, customized surgical kit, scalpel, or clip, other than a radiological site marker) (83 FR 58945).

In addition, for new HCPCS codes describing procedures requiring the implantation of medical devices that do not yet have associated claims data, in the CY 2017 OPPS/ASC final rule with comment period (81 FR 79658), we finalized a policy for CY 2017 to apply device-intensive status with a default device offset set at 41 percent for new HCPCS codes describing procedures requiring the implantation or insertion of a medical device that did not yet have associated claims data until claims data are available to establish the HCPCS code-level device offset for the procedures. This default device offset Start Printed Page 39485amount of 41 percent was not calculated from claims data; instead, it was applied as a default until claims data were 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 or insert medical devices was to ensure ASC access for new procedures until claims data become available.

As discussed in the CY 2019 OPPS/ASC proposed rule and final rule with comment period (83 FR 37108 through 37109 and 58945 through 58946, respectively), in accordance with our policy stated above to lower the device offset percentage threshold for procedures to qualify as device-intensive from greater than 40 percent to greater than 30 percent, for CY 2019 and subsequent years, we modified this policy to apply a 31-percent default device offset to new HCPCS codes describing procedures requiring the implantation of a medical device that do not yet have associated claims data until claims data are available to establish the HCPCS code-level device offset for the procedures. In conjunction with the policy to lower the default device offset from 41 percent to 31 percent, we continued our current policy of, in certain rare instances (for example, in the case of a very expensive implantable device), temporarily assigning a higher offset percentage if warranted by additional information such as pricing data from a device manufacturer (81 FR 79658). Once claims data are available for a new procedure requiring the implantation of a medical device, device-intensive status is applied to the code if the HCPCS code-level device offset is greater than 30 percent, according to our policy of determining device-intensive status by calculating the HCPCS code-level device offset.

In addition, in the CY 2019 OPPS/ASC final rule with comment period, we clarified that since the adoption of our policy in effect as of CY 2018, the associated claims data used for purposes of determining whether or not to apply the default device offset are the associated claims data for either the new HCPCS code or any predecessor code, as described by CPT coding guidance, for the new HCPCS code. Additionally, for CY 2019 and subsequent years, in limited instances where a new HCPCS code does not have a predecessor code as defined by CPT, but describes a procedure that was previously described by an existing code, we use clinical discretion to identify HCPCS codes that are clinically related or similar to the new HCPCS code but are not officially recognized as a predecessor code by CPT, and to use the claims data of the clinically related or similar code(s) for purposes of determining whether or not to apply the default device offset to the new HCPCS code (83 FR 58946). Clinically related and similar procedures for purposes of this policy are procedures that have little or no clinical differences and use the same devices as the new HCPCS code. In addition, clinically related and similar codes for purposes of this policy are codes that either currently or previously describe the procedure described by the new HCPCS code. Under this policy, claims data from clinically related and similar codes are included as associated claims data for a new code, and where an existing HCPCS code is found to be clinically related or similar to a new HCPCS code, we apply the device offset percentage derived from the existing clinically related or similar HCPCS code's claims data to the new HCPCS code for determining the device offset percentage. We stated that we believe that claims data for HCPCS codes describing procedures that have minor differences from the procedures described by new HCPCS codes will provide an accurate depiction of the cost relationship between the procedure and the device(s) that are used, and will be appropriate to use to set a new code's device offset percentage, in the same way that predecessor codes are used. If a new HCPCS code has multiple predecessor codes, the claims data for the predecessor code that has the highest individual HCPCS-level device offset percentage is used to determine whether the new HCPCS code qualifies for device-intensive status. Similarly, in the event that a new HCPCS code does not have a predecessor code but has multiple clinically related or similar codes, the claims data for the clinically related or similar code that has the highest individual HCPCS level device offset percentage is used to determine whether the new HCPCS code qualifies for device-intensive status.

As we indicated in the CY 2019 OPPS/ASC proposed rule and final rule with comment period, additional information for our consideration of an offset percentage higher than the default of 31 percent for new HCPCS codes describing procedures requiring the implantation (or, in some cases, the insertion) of a medical device that do not yet have associated claims data, such as pricing data or invoices from a device manufacturer, 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 21244-1850, or electronically at outpatientpps@cms.hhs.gov. Additional information can be submitted prior to issuance of an OPPS/ASC proposed rule or as a public comment in response to an issued OPPS/ASC proposed rule. Device offset percentages will be set in each year's final rule.

For CY 2020, we are not proposing any changes to our device-intensive policy. The full listing of the proposed CY 2020 device-intensive procedures can be found in Addendum P to this CY 2020 OPPS/ASC proposed rule (which is available via the internet on the CMS website).

3. 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.

In the CY 2017 OPPS/ASC final rule with comment period (81 FR 79658 through 79659), we changed our policy for CY 2017 and subsequent years to apply the CY 2016 device coding requirements to the newly defined device-intensive procedures. For CY 2017 and subsequent years, we also specified that any device code, when reported on a claim with a device-intensive procedure, will satisfy the edit. In addition, we created HCPCS code C1889 to recognize devices furnished during a device-intensive procedure that are not described by a specific Level II HCPCS Category C-code. Reporting HCPCS code C1889 with a device-intensive procedure will satisfy the edit requiring a device code to be reported on a claim with a device-intensive procedure. In the CY 2019 OPPS/ASC final rule with comment period, we revised the description of Start Printed Page 39486HCPCS code C1889 to remove the specific applicability to device-intensive procedures (83 FR 58950). For CY 2019 and subsequent years, the description of HCPCS code C1889 is “Implantable/insertable device, not otherwise classified”.

We are not proposing any changes to this policy for CY 2020.

4. 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 offset amount when a hospital furnishes a specified device without cost or with a full credit and by 50 percent of the device offset amount when the hospital receives partial credit in the amount of 50 percent or more of the cost for the specified device. 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 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. Policy for No Cost/Full Credit and Partial Credit Devices

In the CY 2017 OPPS/ASC final rule with comment period (81 FR 79659 through 79660), for CY 2017 and subsequent years, we finalized our policy to reduce OPPS payment for device-intensive procedures, by the full or partial credit a provider receives for a replaced device, when a hospital furnishes a specified device without cost or with a full or partial credit. Under our current policy, hospitals 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.

We are not proposing any changes to our no cost/full credit and partial credit device policies in this proposed rule.

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

In 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 noted that, as stated in the CY 2017 OPPS/ASC proposed rule (81 FR 45656), we proposed 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). 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 proposed and finalized 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 the CY 2017 OPPS/ASC final rule with comment period (81 FR 79660 through 79661), we established our current policy 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 Start Printed Page 39487applied to the procedure described by CPT code 0308T in CY 2016. The CY 2018 final rule geometric mean cost for the procedure described by CPT code 0308T (based on 19 claims containing the device HCPCS C-code, in accordance with the device-intensive edit policy) was approximately $21,302, and the median cost was approximately $19,521. The final CY 2018 payment rate (calculated using the median cost) was approximately $17,560.

In the CY 2019 OPPS/ASC final rule with comment period (83 FR 58951), for CY 2019, we continued with our policy of establishing 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 based on calculations using the median cost instead of the geometric mean cost. For more information on the specific policy for assignment of low-volume device-intensive procedures for CY 2019, we refer readers to section III.D.13. of the CY 2019 OPPS/ASC final rule with comment period (83 FR 58917 through 58918).

For CY 2020, we are proposing to continue our current policy of establishing 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 using the median cost instead of the geometric mean cost. For CY 2020, this policy would apply to CPT code 0308T, which we are proposing to assign to APC 5495 (Level 5 Intraocular Procedures) in this proposed rule. The CY 2020 proposed rule geometric mean cost for the procedure described by CPT code 0308T (based on 7 claims containing the device HCPCS C-code, in accordance with the device-intensive edit policy) is approximately $28,237, and the median cost is approximately $19,270. The proposed CY 2020 payment rate (calculated using the median cost) is approximately $19,740 and can be found in Addendum B to this proposed rule (which is available via the internet on the CMS website).

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. A “biological” as used in this proposed rule includes (but is not necessarily limited to) a “biological product” or a “biologic” as defined under section 351 of 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 for rare disease and conditions, 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 those types of drugs or biologicals mentioned above that are hospital outpatient services under Medicare Part B for which transitional pass-through 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 2020 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 website).

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 website 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 described on the CMS website at: https://www.cms.gov/​Medicare/​Medicare-Fee-for-Service-Payment/​HospitalOutpatientPPS/​passthrough_​payment.html.

2. Three-Year Transitional Pass-Through Payment Period for All Pass-Through Drugs, Biologicals, and Radiopharmaceuticals and Quarterly Expiration of Pass-Through Status

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 newly approved 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, prior to CY 2017, we expired pass-through status for drugs and biologicals on an annual basis through notice-and-comment rulemaking (74 FR 60480). In the CY 2017 OPPS/ASC final rule with comment period (81 FR 79662), we finalized a policy change, 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, biologicals, and radiopharmaceuticals to afford a pass-through payment period that is as close to a full 3 years as possible for all Start Printed Page 39488pass-through drugs, biologicals, and radiopharmaceuticals.

This change eliminated the variability of the pass-through payment eligibility period, which previously varied based on when a particular application was initially received. We adopted this change for pass-through approvals beginning on or after CY 2017, to allow, on a prospective basis, for the maximum pass-through payment period for each pass-through drug without exceeding the statutory limit of 3 years. Notice of drugs whose pass-through payment status is ending during the calendar year will continue to be included in the quarterly OPPS Change Request transmittals.

3. Proposed Drugs and Biologicals With Expiring Pass-Through Payment Status in CY 2019

We are proposing that the pass-through payment status of six drugs and biologicals would expire on December 31, 2019 as listed in Table 14. These drugs and biologicals will have received OPPS pass-through payment for 3 years during the period of January 1, 2017 until December 31, 2019.

In accordance with the policy finalized in CY 2017 and described earlier, pass-through payment status for drugs and biologicals newly approved in CY 2017 and subsequent years will expire on a quarterly basis, with a pass-through payment period as close to 3 years as possible. With the exception of those groups of drugs and biologicals that are always packaged when they do not have pass-through payment 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 payment 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 to be $130 for CY 2020), as discussed further in section V.B.2. of this proposed rule. We are proposing that if the estimated per day cost for the drug or biological is less than or equal to the applicable OPPS drug packaging threshold, we would package payment for the drug or biological into the payment for the associated procedure in the upcoming calendar year. If the estimated per day cost of the drug or biological is greater than the OPPS drug packaging threshold, we are proposing to provide separate payment at the applicable relative ASP-based payment amount (which is proposed at ASP+6 percent for CY 2020, as discussed further in section V.B.3. of this proposed rule).

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 website).

4. Proposed Drugs, Biologicals, and Radiopharmaceuticals With New or Continuing Pass-Through Payment Status in CY 2020

We are proposing to continue pass-through payment status in CY 2020 for 61 drugs and biologicals. These drugs and biologicals, which were approved for pass-through payment status between April 1, 2017 and April 1, 2019 are listed in Table 15. The APCs and HCPCS codes for these drugs and biologicals approved for pass-through payment status on or after January 1, 2020 are assigned status indicator “G” in Addenda A and B to this proposed rule (which are available via the internet on the CMS website). In addition, there are four drugs and biologicals that have already had 3 years of pass-through payment status but for which pass-through payment status is required to be extended for an additional 2 years, effective October 1, 2018 under section 1833(t)(6)(G) of the Act, as added by section 1301(a)(1)(C) of the Consolidated Appropriations Act of 2018 (Pub. L. 115-141). That means the last 9 months of pass-through status for these drugs will occur in CY 2020. Because of this requirement, these drugs and biologicals are also included in Table 15, which brings the total number of drugs and biologicals with proposed pass-through payment status in CY 2020 to 65.

Section 1833(t)(6)(D)(i) of the Act sets the amount of pass-through payment for pass-through drugs and biologicals (the Start Printed Page 39489pass-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 2020, we are proposing to continue to pay for pass-through drugs and biologicals at ASP+6 percent, equivalent to the payment rate these drugs and biologicals would receive in the physician's office setting in CY 2020. We are proposing that a $0 pass-through payment amount would be paid for pass-through drugs and biologicals under the CY 2020 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: Anesthesia drugs; drugs, biologicals, and radiopharmaceuticals that function as supplies when used in a diagnostic test or procedure (including contrast agents, diagnostic radiopharmaceuticals, and stress agents); 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 2020 minus a payment offset for any predecessor drug products contributing to the pass-through payment as described in section V.A.6. of this proposed rule. We are making this proposal because, if not for the pass-through payment status of these policy-packaged products, payment for these products would be packaged into the associated procedure.

We are proposing to continue to update pass-through payment rates on a quarterly basis on the CMS website during CY 2020 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 payment 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).

For CY 2020, consistent with our CY 2019 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 2020, we are proposing to follow the standard ASP methodology to determine the pass-through payment rate that drugs receive under section 1842(o) of the Act, which is proposed at ASP+6 percent. If ASP data are not available for a radiopharmaceutical, we are proposing to provide pass-through payment at WAC+3 percent (consistent with our proposed policy in section V.B.2.b. of this proposed rule), the equivalent payment provided to pass-through payment drugs and biologicals without ASP information. Additional detail and comments on the WAC+3 percent payment policy can be found in section V.B.2.b. of this proposed rule. 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 drugs and biologicals that we are proposing to continue to have pass-through payment status on or after January 1, 2020 or that have been granted pass-through payment status as of April 2019 are shown in Table 15.

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5. Proposed Drugs, Biologicals, and Radiopharmaceuticals With Pass-Through Status as a Result of Section 1301 of the Consolidated Appropriations Act of 2018 (Pub. L. 115-141)

As mentioned earlier, section 1301(a)(1) of the Consolidated Appropriations Act of 2018 (Pub. L. 115-141) amended section 1833(t)(6) of the Act and added a new section 1833(t)(6)(G), which provides that for drugs or biologicals whose period of pass-through payment status ended on December 31, 2017 and for which payment was packaged into a covered hospital outpatient service furnished beginning January 1, 2018, such pass-through payment status shall be extended for a 2-year period beginning on October 1, 2018 through September 30, 2020. There are four products whose period of drug and biological pass-through payment status ended on December 31, 2017 and for which payment would have been packaged beginning January 1, 2018. These products were listed in Table 39 of the CY 2019 OPPS/ASC final rule with comment period (83 FR 58962).

Starting in CY 2019, the HCPCS code Q4172 (PuraPly, and PuraPly Antimicrobial, any type, per square centimeter) was discontinued. In its place, two new HCPCS codes were established—Q4195 (Puraply, per square centimeter) and Q4196 (Puraply am, per square centimeter). Because these HCPCS codes are direct successors to HCPCS code Q4172, the provisions of section 1833(t)(6)(G) of the Act apply to HCPCS codes Q4195 and Q4196, and these codes are listed in Table 16. For CY 2020, we are proposing to continue pass-through payment status for the drugs and biologicals listed in Table 16 of this proposed rule (we note that these drugs and biologicals are also listed in Table 15 of this proposed rule) through September 30, 2020 as required in section 1833(t)(6)(G) of the Act, as added by section 1301(a)(1)(C) of the Consolidated Appropriations Act of 2018. The APCs and HCPCS codes for these drugs and biologicals approved for pass-through payment status are assigned status indicator “G” in Addenda A and B to this proposed rule (which are available via the internet on the CMS website).

We are proposing to continue to update pass-through payment rates for HCPCS codes Q4195 and Q4196 along with the other three drugs and biologicals covered by section 1833(t)(6)(G) of the Act on a quarterly basis on the CMS website during CY 2020 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. The replacement of HCPCS code Q4172 by HCPCS codes Q4195 and Q4196 means there are five HCPCS codes for drugs and biologicals covered by section 1833(t)(6)(G) of the Act. For a full description of this policy, we refer readers to the CY 2019 OPPS/ASC final rule with comment period (83 FR 58960 through 58962).

The five HCPCS codes for drugs and biologicals that we are proposing would have pass-through payment status for CY 2020 under section 1833(t)(6)(G) of the Act, as added by section 1301(a)(1)(C) of the Consolidated Appropriations Act of 2018, are shown in Table 16. Included as two of the five HCPCS codes for drugs and biologicals with pass-through payment status for CY 2020 are HCPCS codes Q4195 (Puraply, per square centimeter) and Q4196 (Puraply am, per square centimeter). PuraPly and PuraPly AM are skin substitute products that were approved for pass-through payment status on January 1, 2015 through the drug and biological pass-through payment process. Beginning on April 1, 2015, skin substitute products are evaluated for pass-through payment status through the device pass-through payment process. However, we stated in the CY 2015 OPPS/ASC final rule with comment period (79 FR 66887) that skin substitutes that are approved for pass-through payment status as biologicals effective on or before January 1, 2015 would continue to be paid as pass-through biologicals for the duration of their pass-through payment period. Because PuraPly and PuraPly AM were approved for pass-through payment status through the drug and biological pass-through payment pathway, we finalized a policy to consider both PuraPly and PuraPly AM to be drugs or biologicals as described by section 1833(t)(6)(G) of the Act, as added by section 1301(a)(1)(C) of the Consolidated Appropriations Act of 2018, and to be eligible for extended pass-through payment under our proposal for CY 2020 (83 FR 58961 through 58962).

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

Under the regulations at 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 comment period (80 FR 70430 through 70432). For CY 2020, as we did in CY 2019, 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 payment offset may be applicable for pass-through diagnostic radiopharmaceuticals, pass-through contrast agents, pass-through stress agents, and pass-through skin substitutes are identified in Table 17.

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We are proposing to continue to post annually on the CMS website at: https://www.cms.gov/​Medicare/​Medicare-Fee-for-Service-Payment/​HospitalOutpatientPPS/​Annual-Policy-Files.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 payment 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 $125 for CY 2019 (83 FR 58963 through 58964).

Following the CY 2007 methodology, for this CY 2020 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 2020 and rounded the resulting dollar amount ($131.19) to the nearest $5 increment, which yielded a figure of $130. 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 series code WPUSI07003) from CMS' Office of the Actuary. For this CY 2020 OPPS/ASC proposed rule, based on these calculations using the CY 2007 OPPS methodology, we are proposing a packaging threshold for CY 2020 of $130.

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 2020 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 2018 and were paid (via packaged or separate payment) under the OPPS. We used data from CY 2018 claims processed before January 1, 2019 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 2020: 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 2020, we used the methodology that was Start Printed Page 39497described 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 2020, as discussed in more detail in section V.B.2.b. of this proposed rule) to calculate the CY 2020 proposed rule per day costs. We used the manufacturer-submitted ASP data from the fourth quarter of CY 2018 (data that were used for payment purposes in the physician's office setting, effective April 1, 2019) to determine the proposed rule per day cost.

As is our standard methodology, for CY 2020, we are proposing to use payment rates based on the ASP data from the first quarter of CY 2019 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 website) 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, 2019. 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 2018 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 $130, and identify items with a per day cost greater than $130 as separately payable unless they are policy-packaged. Consistent with our past practice, we cross-walked historical OPPS claims data from the CY 2018 HCPCS codes that were reported to the CY 2019 HCPCS codes that we display in Addendum B to this proposed rule (which is available via the internet on the CMS website) for proposed payment in CY 2020.

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 2020 OPPS/ASC proposed rule, we are proposing to use ASP data from the fourth quarter of CY 2018, which is the basis for calculating payment rates for drugs and biologicals in the physician's office setting using the ASP methodology, effective April 1, 2019, along with updated hospital claims data from CY 2018. We note that we also are proposing to use these data for budget neutrality estimates and impact analyses for this CY 2020 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 with comment period will be based on ASP data from the third quarter of CY 2019. 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, 2019. These payment rates would then be updated in the January 2020 OPPS update, based on the most recent ASP data to be used for physician's office and OPPS payment as of January 1, 2020. 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 2018 claims data and updated cost report information available for the CY 2020 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 proposed rule may be different from the same drugs' HCPCS codes' packaging status determined based on the data used for the final rule with comment period. Under such circumstances, we are proposing to continue to follow the established policies initially adopted for the CY 2005 OPPS (69 FR 65780) in order to more equitably pay for those drugs whose costs fluctuate relative to the proposed CY 2020 OPPS drug packaging threshold and the drug's payment status (packaged or separately payable) in CY 2019. 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). Specifically, for CY 2020, consistent with our historical practice, we are proposing to apply the following policies to these HCPCS codes for drugs, biologicals, and therapeutic radiopharmaceuticals whose relationship to the drug packaging threshold changes based on the updated drug packaging threshold and on the final updated data:

  • HCPCS codes for drugs and biologicals that were paid separately in CY 2019 and that are proposed for separate payment in CY 2020, and that then have per day costs equal to or less than the CY 2020 final rule drug packaging threshold, based on the updated ASPs and hospital claims data used for the CY 2020 final rule, would continue to receive separate payment in CY 2020.
  • HCPCS codes for drugs and biologicals that were packaged in CY 2019 and that are proposed for separate payment in CY 2020, and that then have per day costs equal to or less than the CY 2020 final rule drug packaging threshold, based on the updated ASPs and hospital claims data used for the CY 2020 final rule, would remain packaged in CY 2020.
  • HCPCS codes for drugs and biologicals for which we proposed packaged payment in CY 2020 but that then have per-day costs greater than the CY 2020 final rule drug packaging threshold, based on the updated ASPs and hospital claims data used for the CY 2020 final rule, would receive separate payment in CY 2020.

c. Policy Packaged Drugs, Biologicals, and Radiopharmaceuticals

As mentioned earlier in this section, in the OPPS, we package several categories of drugs, biologicals, and radiopharmaceuticals, regardless of the cost of the products. Because the products are packaged according to the policies in 42 CFR 419.2(b), we refer to these packaged drugs, biologicals, and radiopharmaceuticals as “policy-packaged” drugs, biologicals, and radiopharmaceuticals. These policies are either longstanding or based on longstanding principles and inherent to the OPPS and are as follows:

  • Anesthesia, certain drugs, biologicals, and other pharmaceuticals; medical and surgical supplies and equipment; surgical dressings; and devices used for external reduction of fractures and dislocations (§ 419.2(b)(4));
  • Intraoperative items and services (§ 419.2(b)(14));
  • Drugs, biologicals, and radiopharmaceuticals that function as supplies when used in a diagnostic test or procedure (including, but not limited to, diagnostic radiopharmaceuticals, contrast agents, and pharmacologic stress agents) (§ 419.2(b)(15)); and
  • Drugs and biologicals that function as supplies when used in a surgical procedure (including, but not limited to, Start Printed Page 39498skin substitutes and similar products that aid wound healing and implantable biologicals) (§ 419.2(b)(16)).

The policy at § 419.2(b)(16) is broader than that at § 419.2(b)(14). As we stated in the CY 2015 OPPS/ASC final rule with comment period: “We consider all items related to the surgical outcome and provided during the hospital stay in which the surgery is performed, including postsurgical pain management drugs, to be part of the surgery for purposes of our drug and biological surgical supply packaging policy” (79 FR 66875). The category described by § 419.2(b)(15) is large and includes diagnostic radiopharmaceuticals, contrast agents, stress agents, and some other products. The category described by § 419.2(b)(16) includes skin substitutes and some other products. We believe it is important to reiterate that cost consideration is not a factor when determining whether an item is a surgical supply (79 FR 66875).

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 2020.

For CY 2020, in order to propose a packaging determination that is consistent across all HCPCS codes that describe different dosages of the same drug or biological, we aggregated both our CY 2018 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 2020 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 2018 claims data to make the proposed packaging determinations for these drugs: HCPCS code J1840 (Injection, kanamycin sulfate, up to 500 mg); HCPCS code J1850 (Injection, kanamycin sulfate, up to 75 mg); HCPCS code J3472 (Injection, hyaluronidase, ovine, preservative free, per 1,000 usp units); HCPCS code J7100 (Infusion, dextran 40, 500 ml); and HCPCS code J7110 (Infusion, dextran 75, 500 ml).

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 2020 drug packaging threshold of $130 (so that all HCPCS codes for the same drug or biological would be packaged) or greater than the proposed CY 2020 drug packaging threshold of $130 (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 2020 is displayed in Table 18.

Start Printed Page 39499

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 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.Start Printed Page 39500
  • 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 for purposes of paragraph (14). We 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.[57]

It has been our policy since CY 2006 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 2020 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 CYs 2014 through 2019.

b. Proposed CY 2020 Payment Policy

For CY 2020, we are proposing to continue our payment policy that has been in effect since CY 2013 to 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 to continue to pay for separately payable nonpass-through drugs acquired with a 340B discount at a rate of ASP minus 22.5 percent, but are also soliciting comments on alternative policies as well as the appropriate remedy for CYs 2018 and 2019 in the event that we do not prevail on appeal in the pending litigation, as discussed in greater detail later in this section. We refer readers to the CY 2018 OPPS/ASC final rule with comment period (82 FR 59353 through 59371) and the CY 2019 OPPS/ASC final rule with comment period (83 FR 58979 through 58981) for more information about how the payment rate for drugs acquired with a 340B discount was established.

In the case of a drug or biological during an initial sales period in which data on the prices for sales for the drug or biological are not sufficiently available from the manufacturer, section 1847A(c)(4) of the Act permits the Secretary to make payments that are based on WAC. Under section 1833(t)(14)(A)(iii)(II), the amount of payment for a separately payable drug equals the average price for the drug for the year established under, among other authorities, section 1847A of the Act. As explained in greater detail in the CY 2019 PFS final rule, under section 1847A(c)(4), although payments may be based on WAC, unlike section 1847A(b) of the Act (which specifies that payments using ASP or WAC must be made with a 6 percent add-on), section 1847A(c)(4) of the Act does not require that a particular add-on amount be applied to WAC-based pricing for this initial period when ASP data is not available. Consistent with section 1847A(c)(4) of the Act, in the CY 2019 PFS final rule (83 FR 59661 to 59666), we finalized a policy that, effective January 1, 2019, WAC-based payments for Part B drugs made under section 1847A(c)(4) of the Act will utilize a 3-percent add-on in place of the 6-percent add-on that was being used according to our policy in effect as of CY 2018. For the CY 2019 OPPS, we followed the same policy finalized in the CY 2019 PFS final rule (83 FR 59661 to 59666). For the CY 2020 OPPS, we are proposing to continue to utilize a 3 percent add-on instead of a 6-percent add-on for WAC-based drugs pursuant to our authority under section 1833(t)(14)(A)(iii)(II) of the Act, which provides, in part, that the amount of payment for a SCOD is the average price of the drug in the year established under section 1847A of the Act. We also are proposing to apply this provision to non-SCOD separately payable drugs. Because we are proposing to establish the average price for a WAC-based drug under section 1847A of the Act as WAC+3 percent instead of WAC+6 percent, we believe it is appropriate to price separately payable WAC-based drugs at the same amount under the OPPS. We are proposing that, if finalized, our proposal to pay for drugs or biologicals at WAC+3 percent, rather than WAC+6 percent, would apply whenever WAC-based pricing is used for a drug or biological. For drugs and biologicals that would otherwise be subject to a payment reduction because they were acquired under the 340B Program, the 340B Program rate (in this case, WAC minus 22.5 percent) would continue to apply. We refer readers to the CY 2019 PFS final rule (83 FR 59661 to 59666) for additional background on this proposal.

We are proposing that payments for separately payable drugs and biologicals are included in the budget neutrality adjustments, under the requirements in section 1833(t)(9)(B) of the Act. We also are proposing that the budget neutral weight scalar not be 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 Start Printed Page 39501(available via the internet on the CMS website), which illustrate the proposed CY 2020 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, 2019, or WAC, AWP, or mean unit cost from CY 2018 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 2020 payment rates. This is because payment rates for drugs and biologicals with ASP information for January 2020 will be determined through the standard quarterly process where ASP data submitted by manufacturers for the third quarter of CY 2019 (July 1, 2019 through September 30, 2019) will be used to set the payment rates that are released for the quarter beginning in January 2020 near the end of December 2019. 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 2019 are based on mean unit cost in the available CY 2018 claims data. If ASP information becomes available for payment for the quarter beginning in January 2020, 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 2019 ASP data) that do not have ASP information available for the quarter beginning in January 2020. These drugs and biologicals would then be paid based on mean unit cost data derived from CY 2018 hospital claims. Therefore, the proposed payment rates listed in Addenda A and B to this proposed rule are not for January 2020 payment purposes and are only illustrative of the CY 2020 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 and CY 2017, 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 (for CY 2016, 80 FR 70445 through 70446; and for CY 2017, 81 FR 79674). In the CY 2018 OPPS/ASC proposed rule (82 FR 33630), for CY 2018, we proposed to continue this same payment policy for biosimilar biological products.

In the CY 2018 OPPS/ASC final rule with comment period (82 FR 59351), we noted that, with respect to comments we received regarding OPPS payment for biosimilar biological products, in the CY 2018 PFS final rule, CMS finalized a policy to implement separate HCPCS codes for biosimilar biological products. Therefore, consistent with our established OPPS drug, biological, and radiopharmaceutical payment policy, HCPCS coding for biosimilar biological products is based on policy established under the CY 2018 PFS final rule.

In the CY 2018 OPPS/ASC final rule with comment period (82 FR 59351), after consideration of the public comments we received, we finalized our proposed payment policy for biosimilar biological products, with the following technical correction: All biosimilar biological products are eligible for pass-through payment and not just the first biosimilar biological product for a reference product. In the CY 2019 OPPS/ASC proposed rule (83 FR 37123), for CY 2019, we proposed to continue the policy in place from CY 2018 to make all biosimilar biological products eligible for pass-through payment and not just the first biosimilar biological product for a reference product.

In addition, in CY 2018, we adopted a policy that biosimilars without pass-through payment status that were acquired under the 340B Program would be paid the ASP of the biosimilar minus 22.5 percent of the reference product's ASP (82 FR 59367). We adopted this policy in the CY 2018 OPPS/ASC final rule with comment period because we believe that biosimilars without pass-through payment status acquired under the 340B Program should be treated in the same manner as other drugs and biologicals acquired through the 340B Program. As noted earlier, biosimilars with pass-through payment status are paid their own ASP+6 percent of the reference product's ASP. Separately payable biosimilars that do not have pass-through payment status and are not acquired under the 340B Program are also paid their own ASP+6 percent of the reference product's ASP. If a biosimilar does not have ASP pricing, but instead has WAC pricing, the WAC pricing add-on of either 3 percent or 6 percent is calculated from the biosimilar's WAC and is not calculated from the WAC price of the reference product.

As noted in the CY 2019 OPPS/ASC proposed rule (83 FR 37123), several stakeholders raised concerns to us that the current payment policy for biosimilars acquired under the 340B Program could unfairly lower the OPPS payment for biosimilars not on pass-through payment status because the payment reduction would be based on the reference product's ASP, which would generally be expected to be priced higher than the biosimilar, thus resulting in a more significant reduction in payment than if the 22.5 percent was calculated based on the biosimilar's ASP. We agreed with stakeholders that the current payment policy could unfairly lower the price of biosimilars without pass-through payment status that are acquired under the 340B Program. In addition, we believed that these changes would better reflect the resources and production costs that biosimilar manufacturers incur. We also believed this approach is more consistent with the payment methodology for 340B-acquired drugs and biologicals, for which the 22.5 percent reduction is calculated based on the drug or biological's ASP, rather than the ASP of another product. In addition, we believed that paying for biosimilars acquired under the 340B Program at ASP minus 22.5 percent of the biosimilar's ASP, rather than 22.5 percent of the reference product's ASP, will more closely approximate hospitals' acquisition costs for these products.

Accordingly, in the CY 2019 OPPS/ASC proposed rule (83 FR 37123), for CY 2019, we proposed changes to our Medicare Part B drug payment methodology for biosimilars acquired under the 340B Program. Specifically, for CY 2019 and subsequent years, in accordance with section 1833(t)(14)(A)(iii)(II) of the Act, we proposed to pay nonpass-through biosimilars acquired under the 340B Program at ASP minus 22.5 percent of the biosimilar's ASP instead of the biosimilar's ASP minus 22.5 percent of the reference product's ASP. This proposal was finalized without modification in the CY 2019 OPPS/ASC final rule with comment period (83 FR 58977).

For CY 2020, we are proposing to continue our policy to make all biosimilar biological products eligible for pass-through payment and not just the first biosimilar biological product for a reference product. We also are proposing to continue our policy to pay nonpass-through biosimilars acquired under the 340B Program at the biosimilar's ASP minus 22.5 percent of the biosimilar's ASP instead of the biosimilar's ASP minus 22.5 percent of the reference product's ASP, in accordance with section 1833(t)(14)(A)(iii)(II) of the Act. In Start Printed Page 39502addition, as discussed further below, we are soliciting comments on the appropriate remedy in the event of an adverse decision on appeal in the litigation related to our policy for payment of 340B-acquired drugs and biologicals, and we are specifically soliciting comments here on whether paying for 340B-acquired biosimilars at ASP+3 percent of the reference product's ASP would be an appropriate policy in line with that discussion.

3. Proposed Payment Policy for Therapeutic Radiopharmaceuticals

For CY 2020, we are proposing to continue the payment policy for therapeutic radiopharmaceuticals that began in CY 2010. We pay for separately payable 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 2020. Therefore, we are proposing for CY 2020 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 2018 mean unit cost data derived from hospital claims data for payment rates for therapeutic radiopharmaceuticals for which ASP data are unavailable and to update the payment rates for separately payable therapeutic radiopharmaceuticals according to our usual process for updating the payment rates for separately payable drugs and biologicals on a quarterly basis if updated ASP information is unavailable. 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 2020 payment rates for nonpass-through, separately payable therapeutic radiopharmaceuticals are included in Addenda A and B to this proposed rule (which are available via the internet on the CMS website).

4. Proposed Payment for Blood Clotting Factors

For CY 2019, 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 (83 FR 58979). That is, for CY 2019, 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 2019 updated furnishing fee was $0.220 per unit.

For CY 2020, 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 PFS 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 website at: http://www.cms.gov/​Medicare/​Medicare-Fee-for-Service-Part-B-Drugs/​McrPartBDrugAvgSalesPrice/​index.html.

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

For CY 2020, we are proposing to continue to use the same payment policy as in CY 2019 for nonpass-through drugs, biologicals, and radiopharmaceuticals with HCPCS codes but without OPPS hospital claims data, which describes how we determine the payment rate for drugs, biologicals, or radiopharmaceuticals without an ASP. For a detailed discussion of the payment policy and methodology, we refer readers to the CY 2016 OPPS/ASC final rule with comment period (80 FR 70442 through 70443). The proposed CY 2020 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 website.

The proposed CY 2020 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 website.

6. CY 2020 OPPS Payment Methodology for 340B Purchased Drugs

In the CY 2018 OPPS/ASC proposed rule (82 FR 33558 through 33724), we proposed changes to the Medicare Part B drug payment methodology for 340B hospitals. We proposed these changes to better, and more accurately, reflect the resources and acquisition costs that these hospitals incur. We believed that such changes would allow Medicare beneficiaries (and the Medicare program) to pay a more appropriate amount when hospitals participating in the 340B Program furnish drugs to Medicare beneficiaries that are purchased under the 340B Program. Subsequently, in the CY 2018 OPPS/ASC final rule with comment period (82 FR 59369 through 59370), we finalized our proposal and adjusted the payment rate for separately payable drugs and biologicals (other than drugs on pass-through payment status and vaccines) acquired under the 340B Program from average sales price (ASP)+6 percent to ASP minus 22.5 percent. We stated that our goal was to make Medicare payment for separately payable drugs more aligned with the resources expended by hospitals to acquire such drugs, while recognizing the intent of the 340B Start Printed Page 39503Program to allow covered entities, including eligible hospitals, to stretch scarce resources in ways that enable hospitals to continue providing access to care for Medicare beneficiaries and other patients. Critical access hospitals are not included in this 340B policy change because they are paid under section 1834(g) of the Act. We also excepted rural sole community hospitals, children's hospitals, and PPS-exempt cancer hospitals from the 340B payment adjustment in CY 2018. In addition, as stated in the CY 2018 OPPS/ASC final rule with comment period, this policy change does not apply to drugs on pass-through payment status, which are required to be paid based on the ASP methodology, or vaccines, which are excluded from the 340B Program.

In the CY 2017 OPPS/ASC final rule with comment period (81 FR 79699 through 79706), we implemented section 603 of the Bipartisan Budget Act of 2015. As a general matter, applicable items and services furnished in certain off-campus outpatient departments of a provider on or after January 1, 2017 are not considered covered outpatient services for purposes of payment under the OPPS and are paid “under the applicable payment system,” which is generally the Physician Fee Schedule (PFS). However, consistent with our policy to pay separately payable, covered outpatient drugs and biologicals acquired under the 340B Program at ASP minus 22.5 percent, rather than ASP+6 percent, when billed by a hospital paid under the OPPS that is not excepted from the payment adjustment, in the CY 2019 OPPS/ASC final rule with comment period (83 FR 59015 through 59022), we finalized a policy to pay ASP minus 22.5 percent for 340B-acquired drugs and biologicals furnished in nonexcepted off-campus PBDs paid under the PFS. We adopted this payment policy effective for CY 2019 and for subsequent years.

As discussed in the CY 2019 OPPS/ASC proposed rule (83 FR 37125), another topic that had been brought to our attention since we finalized the payment adjustment for 340B-acquired drugs in the CY 2018 OPPS/ASC final rule with comment period was whether drugs that do not have ASP pricing but instead receive WAC or AWP pricing are subject to the 340B payment adjustment. We did not receive public comments on this topic in response to the CY 2018 OPPS/ASC proposed rule. However, we since heard from stakeholders that there had been some confusion about this issue. We clarified in the CY 2019 proposed rule that the 340B payment adjustment applies to drugs that are priced using either WAC or AWP, and it has been our policy to subject 340B-acquired drugs that use these pricing methodologies to the 340B payment adjustment since the policy was first adopted. The 340B payment adjustment for WAC-priced drugs is WAC minus 22.5 percent and AWP-priced drugs have a payment rate of 69.46 percent of AWP when the 340B payment adjustment is applied. The 69.46 percent of AWP is calculated by first reducing the original 95 percent of AWP price by 6 percent to generate a value that is similar to ASP or WAC with no percentage markup. Then we apply the 22.5 percent reduction to ASP/WAC-similar AWP value to obtain the 69.46 percent of AWP, which is similar to either ASP minus 22.5 percent or WAC minus 22.5 percent. The number of separately payable drugs receiving WAC or AWP pricing that are affected by the 340B payment adjustment is small—consisting of less than 10 percent of all separately payable Medicare Part B drugs in April 2018.

Furthermore, data limitations previously inhibited our ability to identify which drugs were acquired under the 340B Program in the Medicare OPPS claims data. This lack of information within the claims data has limited researchers' and our ability to precisely analyze differences in acquisition cost of 340B and non-340B acquired drugs with Medicare claims data. Accordingly, in the CY 2018 OPPS/ASC proposed rule (82 FR 33633), we stated our intent to establish a modifier, to be effective January 1, 2018, for hospitals to report with separately payable drugs that were not acquired under the 340B Program. Because a significant portion of hospitals paid under the OPPS participate in the 340B Program, we stated our belief that it is appropriate to presume that a separately payable drug reported on an OPPS claim was purchased under the 340B Program, unless the hospital identifies that the drug was not purchased under the 340B Program. We stated in the CY 2018 proposed rule that we intended to provide further details about this modifier in the CY 2018 OPPS/ASC final rule with comment period and/or through subregulatory guidance, including guidance related to billing for dually eligible beneficiaries (that is, beneficiaries covered under Medicare and Medicaid) for whom covered entities do not receive a discount under the 340B Program. As discussed in the CY 2018 OPPS/ASC final rule with comment period (82 FR 59369 through 59370), to effectuate the payment adjustment for 340B-acquired drugs, CMS implemented modifier “JG”, effective January 1, 2018. Hospitals paid under the OPPS, other than a type of hospital excluded from the OPPS (such as critical access hospitals or those hospitals paid under the Maryland waiver), or excepted from the 340B drug payment policy for CY 2018, are required to report modifier “JG” on the same claim line as the drug HCPCS code to identify a 340B-acquired drug. For CY 2018, rural sole community hospitals, children's hospitals and PPS-exempt cancer hospitals are excepted from the 340B payment adjustment. These hospitals are required to report informational modifier “TB” for 340B-acquired drugs, and continue to be paid ASP+6 percent.

We refer readers to the CY 2018 OPPS/ASC final rule with comment period (82 FR 59353 through 59370) for a full discussion and rationale for the CY 2018 policies and use of modifier “JG”.

In the CY 2019 OPPS/ASC proposed rule (83 FR 37125), for CY 2019, we proposed to continue the 340B Program policies that were implemented in CY 2018 with the exception of the way we calculate payment for 340B-acquired biosimilars (that is, we proposed to pay for nonpass-through 340B-acquired biosimilars at ASP minus 22.5 percent of the biosimilar's ASP, rather than of the reference product's ASP). More information on our revised policy for the payment of biosimilars acquired through the 340B Program is available in section V.B.2.c. of the CY 2019 OPPS/ASC final rule with comment period. For CY 2019, we proposed, in accordance with section 1833(t)(14)(A)(iii)(II) of the Act, to pay for separately payable Medicare Part B drugs (assigned status indicator “K”), other than vaccines and drugs on pass-through payment status, that meet the definition of “covered outpatient drug” as defined in section 1927(k) of the Act, that are acquired through the 340B Program at ASP minus 22.5 percent when billed by a hospital paid under the OPPS that is not excepted from the payment adjustment. Medicare Part B drugs or biologicals excluded from the 340B payment adjustment include vaccines (assigned status indicator “F”, “L” or “M”) and drugs with OPPS transitional pass-through payment status (assigned status indicator “G”). As discussed in section V.B.2.c. of the CY 2019 OPPS/ASC proposed rule, we proposed to pay nonpass-through biosimilars acquired under the 340B Program at the biosimilar's ASP minus 22.5 percent of the biosimilar's ASP. We also proposed for CY 2019 that Medicare would continue to pay for Start Printed Page 39504drugs or biologicals that were not purchased with a 340B discount at ASP+6 percent.

As stated earlier, to effectuate the payment adjustment for 340B-acquired drugs, CMS implemented modifier “JG”, effective January 1, 2018. For CY 2019, we proposed that hospitals paid under the OPPS, other than a type of hospital excluded from the OPPS, or excepted from the 340B drug payment policy for CY 2018, continue to be required to report modifier “JG” on the same claim line as the drug HCPCS code to identify a 340B-acquired drug. We also proposed for CY 2019 that rural sole community hospitals, children's hospitals, and PPS-exempt cancer hospitals continue to be excepted from the 340B payment adjustment. We proposed for CY 2019 that these hospitals be required to report informational modifier “TB” for 340B-acquired drugs, and continue to be paid ASP+6 percent. In the CY 2019 OPPS/ASC final rule with comment period (83 FR 58981), after consideration of the public comments we received, we finalized our proposals without modification.

Our CY 2018 and 2019 OPPS payment policies for 340B-acquired drugs are the subject of ongoing litigation. On December 27, 2018, in the case of American Hospital Association et al. v. Azar et al., the United States District Court for the District of Columbia (hereinafter referred to as “the district court”) concluded in the context of reimbursement requests for CY 2018 that the Secretary exceeded his statutory authority by adjusting the Medicare payment rates for drugs acquired under the 340B Program to ASP minus 22.5 percent for that year.[58] In that same decision, the district court recognized the “`havoc that piecemeal review of OPPS payment could bring about' in light of the budget neutrality requirement,” and ordered supplemental briefing on the appropriate remedy.[59] On May 6, 2019, after briefing on remedy, the district court issued an opinion that reiterated that the 2018 rate reduction exceeded the Secretary's authority, and declared that the rate reduction for 2019 (which had been finalized since the Court's initial order was entered) also exceeded his authority.[60] Rather than ordering HHS to pay plaintiffs their alleged underpayments, however, the district court recognized that crafting a remedy is “no easy task, given Medicare's complexity,” [61] and initially remanded the issue to HHS to devise an appropriate remedy while also retaining jurisdiction. The district court acknowledged that “if the Secretary were to retroactively raise the 2018 and 2019 340B rates, budget neutrality would require him to retroactively lower the 2018 and 2019 rates for other Medicare Part B products and services.” [62] Id. at 19. “And because HHS has already processed claims under the previous rates, the Secretary would potentially be required to recoup certain payments made to providers; an expensive and time-consuming prospect.” [63]

CMS respectfully disagreed with the district court's understanding of the scope of its adjustment authority and asked the district court to enter final judgment so as to permit an immediate appeal. On July 10, 2019, the district court granted the government's request and entered final judgment, and the agency does intend to pursue its appeal rights. Nonetheless, CMS is taking the steps necessary to craft an appropriate remedy in the event of an unfavorable decision on appeal.

Devising an appropriate remedy requires an opportunity for public input. First, these types of changes to the OPPS must be budget neutral, and reversal of the policy change, which raised rates for non-drug items and services to the tune of an estimated $1.7 billion for 2018 alone, could have a significant economic impact on the approximately 3,900 facilities that are reimbursed for outpatient items and services covered under the OPPS. Second, any remedy is likely to significantly affect beneficiary cost-sharing. The items and services that could be affected by the remedy were provided to millions of different Medicare beneficiaries, who, by statute, are required to pay cost-sharing for such items and services, which is usually 20 percent of the total Medicare payment rate.

CMS is soliciting initial public comment on how to formulate a solution that accounts for all of the complexities that the district court recognized. We intend to use this public input to further inform the steps that are required under the Administrative Procedure Act to provide adequate notice and an opportunity for meaningful comment on our proposed policies, which would entail devising the specific remedy itself, presenting the specific budget neutrality implications of that remedy in the proposed rule, and potentially calculating all the different payment rates under the OPPS for 340B-acquired drugs, as well as all other items and services under the OPPS. (In essence, we would need to provide hospitals with sufficient notice of the impact of the remedy on their rates to enable them to comment meaningfully on the proposed rule.) Our own best practices for preparing notices of proposed rulemaking dictate that we begin policy development in the year before the proposed rule is issued, and that we begin the rule drafting process in the first quarter of each year.

In order to comply with the requirements of the Administrative Procedure Act and our regulatory development process and calendar, we would anticipate proposing the specific remedy for CYs 2018 and 2019, as well as changes to the CY 2020 rates, in the next available rulemaking vehicle, which is the CY 2021 OPPS/ASC proposed rule. Those proposals will be informed by the comments solicited in this proposed rule. Specifically, we are using this proposed rule to solicit comment in advance of next year's rulemaking on approaches to the CY 2018 and 2019 remedy, as well as how best to address CY 2020 rates, so we are poised to propose those policies in the CY 2021 rule if necessary.

Thus, for CY 2020 we are proposing to continue to pay ASP-22.5 percent for 340B-acquired drugs including when furnished in nonexcepted off-campus PBDs paid under the PFS. Our proposal would continue the 340B Program policies that were implemented in CY 2018 with the exception of the way we are calculating payment for 340B-acquired biosimilars, which is discussed in section V.B.2.c. of the CY 2019 OPPS/ASC final rule with comment period, and would continue the policy we finalized in CY 2019 to pay ASP minus 22.5 percent for 340B-acquired drugs and biologicals furnished in nonexcepted off-campus PBDs paid under the PFS.

We also seek public comment on the appropriate OPPS payment rate for 340B-acquired drugs, including whether a rate of ASP+3 percent could be an appropriate remedial payment amount for these drugs, both for CY 2020 and for purposes of determining the remedy for CYs 2018 and 2019. To be sure, this amount would result in payment rates that are well above the actual costs hospitals incur in purchasing 340B drugs, and it is being proposed solely because of the court decision. However, to the extent the courts are limiting the Start Printed Page 39505size of the payment reduction the agency can permissibly apply, the agency believes it could be appropriate to apply a payment reduction that is at the upper end of that limit, to the extent it has been or could be clearly defined, given the substantial discounts that hospitals receive through the 340B program. For example, absent further guidance from the Court of Appeals on what it believes is an appropriate “adjustment” amount, CMS could look to the district court's December 27, 2018 opinion, which cites to payment reductions of 0.2 percent and 2.9 percent as “not significant enough” to fall outside of the Secretary's authority to “adjust” ASP.[64] This payment rate would apply to 340B-acquired drugs and biologicals billed by a hospital paid under the OPPS that are not excepted from the payment adjustment and to 340B-acquired drugs and biologicals furnished in nonexcepted off-campus PBDs paid under the PFS. We welcome public comments on payment rates other than ASP+3 percent that commenters believe would be appropriate for purposes of addressing CY 2020 payment as an alternative to our proposal above, as well as for potential future rulemaking related to CY 2018 and 2019 underpayments.

In addition to comments on the appropriate payment amount for calculating the remedy for CYs 2018 and 2019 and for use for CY 2020, we also seek public comment on how to structure the remedy for CYs 2018 and 2019. This request for public comment includes comments on whether such a remedy should be retrospective in nature (for example, made on a claim-by-claim basis), whether such a remedy could be prospective in nature (for example, an upward adjustment to 340B claims in the future to account for any underpayments in the past), and whether there is some other mechanism that could produce a result equitable to hospitals that do not acquire drugs through the 340B program while respecting the budget neutrality mandate.

One potential remedy for alleged underpayments in 2018 and 2019 would involve making additional payments to the parties who have demonstrated harm from the alleged underpayments (which could be defined as hospitals that submitted a claim for drug payment with the “JG” modifier in CYs 2018 and 2019) outside the normal claims process. Under this approach, we would calculate the amount that such hospitals should have been paid and would utilize our Medicare contractors to make one payment to each affected hospital. This approach—one additional payment made to each affected hospital by our contractors—is a different approach than reprocessing each and every claim submitted by plaintiff hospitals for 2018 and 2019. Then, depending on when a final decision is rendered, the Secretary would propose to budget-neutralize those additional expenditures for each of CYs 2018 and 2019. For example, if the Court of Appeals were to render a decision in February of 2020, under such an approach we might propose those additional payments and an appropriate budget neutrality adjustment for each of CYs 2018, 2019, and, if necessary, 2020, in time for the CY 2021 rule. We note that we would need to receive a final decision from the Court of Appeals sufficiently early in CY 2020 (likely by March 1, 2020) to make it potentially possible for us to propose and finalize an appropriate remedy and budget neutrality adjustments in the CY 2021 rulemaking. We solicit public comment on this approach as well as other suggested approaches from commenters.

In considering these potential future proposals, we note that we would rely on our statutory authority under section 1833(t)(14) for determining the OPPS payment rates for drugs and biologicals as well as section 1833(t)(9)(A) of the Act to review certain components of the OPPS not less often than annually and to revise the groups, relative payment weights, and other adjustments. In addition, we note that under section 1833(t)(14)(H) of the Act, any adjustments made by the Secretary to payment rates using the statutory formula outlined in section 1833(t)(14)(A)(iii)(II) of the Act are required to be taken into account under the budget neutrality requirements outlined in section 1833(t)(9)(B) of the Act. We are soliciting public comments on the best, most appropriate way to maintain budget neutrality, either under a retrospective claim-by-claim approach, with a prospective approach, or any other proposed remedy. We also solicit comments on whether, depending on the amount of those additional expenditures, we should consider spreading out the relevant budget neutrality adjustment across multiple years. We would be interested to receive public comment on the advantages and disadvantages of such an approach.

In addition, we are interested in public comments on the best, most appropriate treatment of Medicare beneficiary cost-sharing responsibilities under any proposed remedy. These issues—the statutory budget neutrality requirement and beneficiary cost-sharing—are extremely difficult to balance, and we are interested in stakeholder comments as we continue to review the viability of alternative remedies in the event of an adverse decision from the Court of Appeals.

We refer readers to the CY 2018 OPPS/ASC final rule with comment period (82 FR 59369 through 59370) and the CY 2019 OPPS/ASC final rule with comment period (83 FR 58976 through 58977 and 59015 through 59022) for more detail on the policies implemented in CY 2018 and CY 2019 for drugs acquired through the 340B Program.

7. 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).

Skin substitutes assigned to the high cost group are described by HCPCS codes 15271 through 15278. Skin substitutes assigned to the low cost group are described by HCPCS codes C5271 through C5278. Geometric mean costs for the various procedures are calculated using only claims for the skin substitutes that are assigned to each group. Specifically, claims billed with HCPCS code 15271, 15273, 15275, or 15277 are used to calculate the geometric mean costs for procedures assigned to the high cost group, and claims billed with HCPCS code C5271, C5273, C5275, or C5277 are used to calculate the geometric mean costs for procedures assigned to the low cost group (78 FR 74935).

Each of the HCPCS codes described above are assigned to one of the following three skin procedure APCs according to the geometric mean cost for the code: APC 5053 (Level 3 Skin Procedures): HCPCS codes C5271, C5275, and C5277); APC 5054 (Level 4 Skin Procedures): HCPCS codes C5273, 15271, 15275, and 15277); or APC 5055 (Level 5 Skin Procedures): HCPCS code 15273). In CY 2019, the payment rate for Start Printed Page 39506APC 5053 (Level 3 Skin Procedures) was $482.89, the payment rate for APC 5054 (Level 4 Skin Procedures) was $1,548.96, and the payment rate for APC 5055 (Level 5 Skin Procedures) was $2,766.13. This information also is available in Addenda A and B of the CY 2019 OPPS/ASC final rule with comment period (which is available via the internet on the CMS website).

We have continued the high cost/low cost categories policy since CY 2014, and we are proposing to continue it for CY 2020. 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 a discussion of the high cost/low cost methodology that was adopted in CY 2016 and has been in effect since then, we refer readers to the CY 2016 OPPS/ASC final rule with comment period (80 FR 70434 through 70435). For CY 2020, consistent with our policy since CY 2016, we are proposing to continue to determine the high cost/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 CY 2020, as we did for CY 2019, we are proposing to assign each skin substitute that exceeds either the MUC threshold or the PDC threshold to the high cost group. In addition, as described in more detail later in this section, for CY 2020, as we did for CY 2019, we are proposing to assign any skin substitute with a MUC or a PDC that does not exceed either the MUC threshold or the PDC threshold to the low cost group. For CY 2020, we are proposing that any skin substitute product that was assigned to the high cost group in CY 2019 would be assigned to the high cost group for CY 2020, regardless of whether it exceeds or falls below the CY 2020 MUC or PDC threshold. This policy was established in the CY 2018 OPPS/ASC final rule with comment period (82 FR 59346 through 59348).

For this CY 2020 OPPS/ASC proposed rule, consistent with the methodology as established in the CY 2014 through CY 2017 final rules with comment period, we analyzed CY 2018 claims data to calculate the MUC threshold (a weighted average of all skin substitutes' MUCs) and the PDC threshold (a weighted average of all skin substitutes' PDCs). The proposed CY 2020 MUC threshold is $49 per cm2 (rounded to the nearest $1) and the proposed CY 2020 PDC threshold is $789 (rounded to the nearest $1).

For CY 2020, we are proposing to continue to assign skin substitutes with pass-through payment status to the high cost category. We are proposing 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 are proposing to use WAC+3 percent to assign a product to either the high cost or low cost category. Finally, if neither ASP nor WAC is available, we would use 95 percent of AWP to assign a skin substitute to either the high cost or low cost category. We are proposing to continue to use WAC+3 percent instead of WAC+6 percent to conform to our proposed policy described in section V.B.2.b. of this proposed rule to establish a payment rate of WAC+3 percent for separately payable drugs and biologicals that do not have ASP data available. New skin substitutes without pricing information would be assigned to the low cost category until pricing information is available to compare to the CY 2020 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).

Some skin substitute manufacturers have raised concerns about significant fluctuation in both the MUC threshold and the PDC threshold from year to year. The fluctuation in the thresholds may result in the reassignment of several skin substitutes from the high cost group to the low cost group which, under current payment rates, can be a difference of approximately $1,000 in the payment amount for the same procedure. In addition, these stakeholders were concerned that the inclusion of cost data from skin substitutes with pass-through payment status in the MUC and PDC calculations would artificially inflate the thresholds. Skin substitute stakeholders requested that CMS consider alternatives to the current methodology used to calculate the MUC and PDC thresholds and also requested that CMS consider whether it might be appropriate to establish a new cost group in between the low cost group and the high cost group to allow for assignment of moderately priced skin substitutes to a newly created middle group.

We share the goal of promoting payment stability for skin substitute products and their related procedures as price stability allows hospitals using such products to more easily anticipate future payments associated with these products. We have attempted to limit year-to-year shifts for skin substitute products between the high cost and low cost groups through multiple initiatives implemented since CY 2014, including: Establishing separate skin substitute application procedure codes for low-cost skin substitutes (78 FR 74935); using a skin substitute's MUC calculated from outpatient hospital claims data instead of an average of ASP+6 percent as the primary methodology to assign products to the high cost or low cost group (79 FR 66883); and establishing the PDC threshold as an alternate methodology to assign a skin substitute to the high cost group (80 FR 70434 through 70435).

To allow additional time to evaluate concerns and suggestions from stakeholders about the volatility of the MUC and PDC thresholds, in the CY 2018 OPPS/ASC proposed rule (82 FR 33627), we proposed that a skin substitute that was assigned to the high cost group for CY 2017 would be assigned to the high cost group for CY 2018, even if it does not exceed the CY 2018 MUC or PDC thresholds. We finalized this policy in the CY 2018 OPPS/ASC final rule with comment period (82 FR 59347). We stated in the CY 2018 OPPS/ASC proposed rule that the goal of our proposal to retain the same skin substitute cost group assignments in CY 2018 as in CY 2017 was to maintain similar levels of payment for skin substitute products for CY 2018 while we study our skin substitute payment methodology to determine whether refinement to the existing policies is consistent with our policy goal of providing payment stability for skin substitutes.

We stated in the CY 2018 OPPS/ASC final rule with comment period (82 FR 59347) that we would continue to study issues related to the payment of skin substitutes and take these comments into consideration for future rulemaking. We received many responses to our requests for comments in the CY 2018 OPPS/ASC proposed Start Printed Page 39507rule about possible refinements to the existing payment methodology for skin substitutes that would be consistent with our policy goal of providing payment stability for these products. In addition, several stakeholders have made us aware of additional concerns and recommendations since the release of the CY 2018 OPPS/ASC final rule with comment period. As discussed in the CY 2019 OPPS/ASC final rule with comment period (83 FR 58967 through 58968), we identified four potential methodologies that have been raised to us that we encouraged the public to review and provide comments on. We stated in the CY 2019 OPPS/ASC final rule with comment period that we were especially interested in any specific feedback on policy concerns with any of the options presented as they relate to skin substitutes with differing per day or per episode costs and sizes and other factors that may differ among the dozens of skin substitutes currently on the market. We also specified in the CY 2019 OPPS/ASC final rule with comment period that we were interested in any new ideas that are not represented below along with an analysis of how different skin substitute products would fare under such ideas. Finally, we stated that we intend to explore the full array of public comments on these ideas for the CY 2020 rulemaking, and we indicated that we will consider the feedback received in response to our requests for comments in developing proposals for CY 2020.

a. Discussion of CY 2019 Comment Solicitation for Episode-Based Payment and Solicitation of Additional Comments for CY 2020

The methodology that commenters discussed most in response to our comment solicitation in CY 2019 and that stakeholders raised in subsequent meetings we have had with the wound care community has been a lump-sum “episode-based” payment for a wound care episode. Commenters that supported an episode-based payment believe that it would allow health care professionals to choose the best skin substitute to treat a patient's wound and would give providers flexibility with the treatments they administer. These commenters also believe an episode-based payment helps to reduce incentives for providers to use excessive applications of skin substitute products or use higher cost products to generate more payment for the services they furnish. In addition, they believe that episode-based payment could help with innovations with skin substitutes by encouraging the development of products that require fewer applications. These commenters noted that episode-based payment would make wound care payment more predictable for hospitals and provide incentives to manage the cost of care that they furnish. Finally, commenters for an episode-based payment believe that workable quality metrics can be developed to monitor the quality of care administered under the payment methodology and limit excessive applications of skin substitutes.

However, many commenters opposed establishing an episode-based payment. One of the main concerns of commenters who opposed episode-based payment was that wound care is too complex and variable to be covered through such a payment methodology. These commenters stated that every patient and every wound is different; therefore, it would be very challenging to establish a standard episode length for coverage. They noted that it would be too difficult to risk-stratify and specialty-adjust an episode-based payment, given the diversity of patients receiving wound care and their providers who administer treatment, as well as the variety of pathologies covered in treatment. Also, these commenters questioned how episodes would be defined for patients when they are having multiple wounds treated at one time or had another wound develop while the original wound was receiving treatment. These commenters expressed concerns that episode-based payment would be burdensome both operationally and administratively for providers. They believe that CMS will need to create a large number of new APCs and HCPCS codes to account for all of the patient situations that would be covered with an episode-based payment, which would increase burdens on providers. Finally, these commenters had concerns about the impacts of episode-based payment on the usage of higher cost skin substitute products. They believed that a single payment could discourage the use of higher-cost products because of the large variability in the cost of skin substitute products, which could limit innovations for skin substitute products.

The wide array of views on episode-based payment for skin substitute products and the unforeseen issues that may arise from the implementation of such a policy make us reluctant to present a proposal for this CY 2020 proposed rule without more review of the issues involved with episode-based payment. Therefore, we are seeking further comments from stakeholders and other interested parties regarding skin substitute payment policies that could be applied in future years to address concerns about excessive utilization and spending on skin substitute products, while avoiding administrative issues such as establishing additional HCPCS codes to describe different treatment situations. One possible policy construct that we are seeking comments on would be to establish a payment period for skin substitute application services (CPT codes 15271 through 15278 and HCPCS codes C5271 through C5278) between 4 weeks and 12 weeks. Under this option, we could also assign CPT codes 15271, 15273, 15275, and 15277, and HCPCS codes C5271, C5273, C5275, and C5277 to comprehensive APCs with the option for a complexity adjustment that would allow for an increase in the standard APC payment for more resource-intensive cases. Our research has found that most wound care episodes require one to three skin substitute applications. Those cases would likely receive the standard APC payment for the comprehensive procedure. Then the complexity adjustment could be applied for the relatively small number of cases that require more intensive treatments. We look forward to comments from stakeholders and other interested parties on this possible policy construct.

b. Potential Revisions to the OPPS Payment Policy for Skin Substitutes: Comment Solicitation for CY 2020

In addition to possible future rulemaking based on the responses to the comment solicitations in the preceding section, we are considering adopting for CY 2020 another payment methodology that generated significant public comments in response to the CY 2019 comment solicitation. That option would be to eliminate the high cost and low cost categories for skin substitutes and have only one payment category and set of procedure codes for the application of all graft skin substitute products. The only available procedure codes to bill for skin substitute graft procedures would be CPT codes 15271 through 15278. HCPCS codes C5271 through C5278 would be eliminated. Providers would bill CPT codes 15271 through 15278 without having to consider either the MUC or PDC of the graft skin substitute product used in the procedure. There would be only one APC for the graft skin substitute application procedures described by CPT codes 15271 (Skin sub graft trnk/arm/leg), 15273 (Skin sub grft t/arm/lg child), 15275 (Skin sub graft face/nk/hf/g), and 15277 (Skn sub grft f/n/hf/g child). The payment rate would be the geometric mean of all graft skin substitutes procedures for a given CPT Start Printed Page 39508code that are covered through the OPPS. For example under the current skin substitute payment policy, there are two procedure codes (CPT code 15271 and HCPCS code C5271) that are reported for the procedure described as “application of skin substitute graft to trunk, arms, legs, total wound surface area up to 100 sq cm; first 25 sq cm or less wound surface area”. The geometric mean cost for CPT code 15271 is currently $1,572.17 and the geometric mean cost for HCPCS code C5271 is $728.28. If this policy option was implemented, only CPT code 15271 would be available in the OPPS, and the geometric mean cost for the procedure code would be $1,465.18.

Commenters that supported this option believe this would remove the incentives for manufacturers to develop and providers to use high cost skin substitute products and lead to the use of lower-cost, quality products. Commenters noted that lower Medicare payments for graft skin substitute procedures would lead to lower copayments for beneficiaries. In addition, commenters believed a single payment category would reduce incentives to apply skin substitute products in excessive amounts. Commenters also believed a single payment category is clinically justified because many studies have shown that no one skin substitute product is superior to another. Finally, supporters of a single payment category believed it will simplify coding for providers and reduce administrative burden.

There were also commenters that raised concerns that a single payment category would not offer providers incentives to furnish quality care and would reduce the use of higher-cost skin substitute products. Eliminating the high cost and low cost payment categories also does not maintain homogeneity among APC assignments for services using skin substitutes according to opponents of the single payment category. Commenters stated that instead of having categories grouped by the relative cost of products, there would be only one category to cover the payment of products with a mean unit cost ranging from less than $1 to over $750. Commenters believed a single payment category would favor inexpensive products, which could limit innovation, and could eliminate all but the most inexpensive products from the market. Finally, opponents of a single payment category believed a single payment category would discourage the treatment of wounds that are difficult and costly to treat.

The responses to the comment solicitation show the potential of a single payment category to reduce the cost of wound care services for graft skin substitute procedures for both beneficiaries and Medicare in general. In addition, a single payment category may help to lower administrative burden for providers. Conversely, we are cognizant of other commenters' concerns that a single payment category may hinder innovation of new graft skin substitute products and cause some products that are currently well-utilized to leave the market. Nonetheless, we are persuaded that a single payment category could potentially provide a more equitable payment for many products used with graft skin substitute procedures, while recognizing that procedures performed with expensive skin substitute products would likely receive substantially lower payment.

We believe a more equitable payment rate for graft skin substitute procedures could substantially reduce the amount Medicare pays for these procedures. We welcome suggestions or other information regarding the possibility of utilizing a single payment category to pay for skin substitute products under the OPPS, and, depending on the information we receive in response to this request, we may consider modifying our skin substitute payment policy in the CY 2020 OPPS/ASC final rule with comment period.

We believe some of the concerns commenters who oppose a single payment category for skin substitute products raised might be mitigated if stakeholders have a period of time to adjust to the changes inherent in establishing a single payment category. We are soliciting public comments that provide additional information about how commenters believe we should transition from the current low cost/high cost payment methodology to a single payment category.

Such suggestions to facilitate the payment transition from a low cost/high cost payment methodology to a single payment category methodology could include, but are not limited to—

  • Delaying implementation of a single category payment for 1 or 2 years after the payment methodology is adopted; and
  • Gradually lowering the MUC and PDC thresholds over 2 or more years to add more graft skin substitute procedures into the current high cost group until all graft skin substitute procedures are assigned to the high cost group and it becomes a single payment category.

We are seeking commenters' feedback on these ideas, or other approaches, to mitigate challenges that could impact providers, manufacturers, and other stakeholders if we establish a single payment category, which we might include as part of a final skin substitute payment policy that we would adopt in the CY 2020 OPPS/ASC final rule with comment period.

c. Proposals for Packaged Skin Substitutes

To allow stakeholders time to analyze and comment on the issues discussed above, we are proposing for CY 2020 to continue our policy established in CY 2018 to assign skin substitutes to the low cost or high cost group. Specifically, we are proposing to assign a skin substitute with a MUC or a PDC that does not exceed either the MUC threshold or the PDC threshold to the low cost group, unless the product was assigned to the high cost group in CY 2019, in which case we would assign the product to the high cost group for CY 2020, regardless of whether it exceeds the CY 2020 MUC or PDC threshold. We also are proposing to assign to the high cost group any skin substitute product that exceeds the CY 2020 MUC or PDC thresholds and assign to the low cost group any skin substitute product that does not exceed the CY 2020 MUC or PDC thresholds and was not assigned to the high cost group in CY 2019. We are proposing to continue to use payment methodologies including ASP+6 percent and 95 percent of AWP for skin substitute products that have pricing information but do not have claims data to determine if their costs exceed the CY 2020 MUC. In addition, we are proposing to use WAC+3 percent for skin substitute products that do not have ASP pricing information or have claims data to determine if those products' costs exceed the CY 2020 MUC. We are proposing to continue our established policy to assign new skin substitute products without pricing information to the low cost group. We look forward to public comments on our proposals.

Table 19 displays the proposed CY 2020 cost category assignment for each skin substitute product.

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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 Start Printed Page 39511covered 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 neutral, as required by section 1833(t)(6)(E) of the Act.

For devices, developing a proposed estimate of pass-through spending in CY 2020 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 2020. 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 2019 or beginning in CY 2020. The sum of the proposed CY 2020 pass-through spending estimates for these two groups of device categories equals the proposed total CY 2020 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 methodology 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, 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 2020, we are also 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. Our estimate of drug and biological pass-through payment for CY 2020 for this group of items is $224.1 million, as discussed below, because we are proposing to pay for most nonpass-through separately payable drugs and biologicals under the CY 2020 OPPS at ASP+6 percent with the exception of 340B-acquired separately payable drugs that are paid at ASP minus 22.5 percent, and because we are proposing to pay for CY 2020 pass-through payment drugs and biologicals at ASP+6 percent, as we discuss in section V.A. of this proposed rule. We refer readers to section V.B.6 of this proposed rule where we solicit comments on an appropriate remedy in litigation involving our OPPS payment policy for 340B purchased drugs, which would inform CY 2021 rulemaking in the event of an adverse decision on appeal in that litigation.

Furthermore, payment for certain drugs, specifically diagnostic radiopharmaceuticals and contrast agents without pass-through payment 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. In 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 2020. Therefore, our proposed estimate of pass-through payment for policy-packaged drugs and biologicals with pass-through payment status approved prior to CY 2020 is not $0, as discussed below. In section V.A.5. of this proposed rule, we discussed 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 spending 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 2020. 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 2019 or beginning in CY 2020. The sum of the CY 2020 pass-through spending estimates for these two groups of drugs and biologicals equals the total CY 2019 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 2020, consistent with section 1833(t)(6)(E)(ii)(II) of the Act and our OPPS policy from CY 2004 Start Printed Page 39512through CY 2019 (82 FR 59371 through 59373).

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 2020, there is one active category for CY 2020. The active category is described by HCPCS code C1823 (Generator, neurostimulator (implantable), nonrechargeable, with transvenous sensing and stimulation leads). Based on the information from the device manufacturer, we are estimating that 100 devices will receive payment in the OPPS in CY 2019 at an estimated cost of $5,655 per device. Therefore, we are proposing an estimate for the first group of devices of $565,500. In estimating our proposed CY 2020 pass-through spending for device categories in the second group, we included: Device categories that we knew at the time of the development of the proposed rule will be newly eligible for pass-through payment in CY 2020; additional device categories that we estimated could be approved for pass-through status subsequent to the development of the proposed rule and before January 1, 2020; and contingent projections for new device categories established in the second through fourth quarters of CY 2020. For CY 2020, 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 proposed estimate of CY 2020 pass-through spending for this second group of device categories is $10 million.

To estimate proposed CY 2020 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 at least one quarter in CY 2020, we are proposing to use the most recent Medicare hospital outpatient 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 2020 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 2020, we estimated 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. Separately payable drugs are paid at a rate of ASP+6 percent with the exception of 340B-acquired drugs that are paid at ASP minus 22.5 percent. Therefore, the payment rate difference between the pass-through payment amount and the nonpass-through payment amount is $224.1 million 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 2020 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, which we estimate for CY 2020 to be $17.0 million. For this proposed rule, using the proposed methodology described above, we calculated a CY 2020 proposed spending estimate for this first group of drugs and biologicals that includes drugs currently on pass-through payment status that would otherwise be separately payable or policy-packaged of approximately $241.1 million.

To estimate proposed CY 2020 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 2020, additional drugs and biologicals that we estimated could be approved for pass-through status subsequent to the development of this proposed rule and before January 1, 2020 and projections for new drugs and biologicals that could be initially eligible for pass-through payment in the second through fourth quarters of CY 2020), 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 2020 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 2020 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 $17.1 million.

In summary, in accordance with the methodology described earlier in this section, for this proposed rule, we estimate that total pass-through spending for the device categories and the drugs and biologicals that are continuing to receive pass-through payment in CY 2020 and those device categories, drugs, and biologicals that first become eligible for pass-through payment during CY 2020 is approximately $268.8 million (approximately $10.6 million for device categories and approximately $258.2 million for drugs and biologicals) which represents 0.34 percent of total projected OPPS payments for CY 2020 (approximately $80 billion). Therefore, we estimate that pass-through spending in CY 2020 would not amount to 2.0 percent of total projected OPPS CY 2020 program spending.

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

For CY 2020, we are proposing to continue with 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 our payment policy for critical care services for CY 2020. 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). In this proposed rule, we are seeking public comments on any changes to these codes that we should consider for future rulemaking cycles. We continue to encourage commenters to provide the data and analysis necessary to justify any suggested changes.

In the CY 2019 OPPS/ASC final rule with comment period (83 FR 59004 through 59015), we adopted a method to control unnecessary increases in the Start Printed Page 39513volume of covered outpatient department services under section 1833(t)(2)(F) of the Act by utilizing a Medicare Physician Fee Schedule (PFS)-equivalent payment rate for the hospital outpatient clinic visit (HCPCS code G0463) when it is furnished by excepted off-campus provider-based departments (PBDs). As discussed in section X.D of this proposed rule and the CY 2019 final rule (FR 58818 through 59179), CY 2020 will be the second year of the 2-year transition of this policy, and in CY 2020, these departments will be paid the site-specific PFS rate for the clinic visit service. For a full discussion of this policy, we refer readers to that final rule with comment period.

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, which includes, but is not limited to, conditions such as depression, schizophrenia, and substance use disorders. 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 hospitalization 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 a distinct and organized intensive ambulatory treatment service, offering less than 24-hour-daily care, in a location other than an individual's home or 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 outpatient department (OPD) services to be covered under the OPPS. The Medicare regulations that implement this provision specify, at 42 CFR 419.21, that payments under the OPPS will be made for partial hospitalization services furnished by CMHCs as well as Medicare Part B services furnished to hospital outpatients designated by the Secretary, which include partial hospitalization services (65 FR 18444 through 18445).

Section 1833(t)(2)(C) of the Act requires the Secretary, in part, 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. Since 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, along with 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 with comment period, 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-tier 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). Additionally, 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-tier 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 APC 0176 (for Level 2 services)), based on each provider type's own unique data. 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 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 Start Printed Page 39514hospitalization 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.

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 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 PHP 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 75047 through 75050).

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 described our extensive analysis of the claims and cost data and ratesetting methodology. We found aberrant data from some hospital-based PHP providers that were not captured using the existing OPPS ±3 standard deviation trims for extreme cost-to-charge ratios (CCRs) and 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. Consequently, we implemented a trim to remove hospital-based PHP service days that use a CCR that was greater than 5 to calculate costs for at least one of their component services, and a trim on CMHCs with a geometric mean cost per day that is above or below 2 (±2) standard deviations from the mean. 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 services.

In addition, in the CY 2016 OPPS/ASC final rule with comment period (80 FR 70459 through 70460), we corrected a cost inversion that occurred in the final rule data with respect to hospital-based PHP providers. 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.

Finally, we renumbered the PHP APCs, which were previously APCs 0172 and 0173 for CMHCs' partial hospitalization Level 1 and Level 2 services, and APCs 0175 and 0176 for hospital-based partial hospitalization Level 1 and Level 2 services to APCs 5851 and 5852 for CMHCs' partial hospitalization Level 1 and Level 2 services, and APCs 5861 and 5862 for hospital-based partial hospitalization Level 1 and Level 2 services, 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 CY 2017 OPPS/ASC final rule with comment period (81 FR 79687 through 79691), we continued 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, we finalized a policy 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 believed 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, for example by avoiding the cost inversions for hospital-based PHPs addressed in the CY 2016 and CY 2017 OPPS/ASC final rules with comment period (80 FR 70459 and 81 FR 79682). We also implemented an 8-percent outlier cap for CMHCs to mitigate potential outlier billing vulnerabilities by limiting the impact of inflated CMHC charges on outlier payments. We stated that we will continue to monitor the trends in outlier payments and consider policy adjustments as necessary.

For a comprehensive description of PHP payment policy, including a detailed methodology for determining PHP per diem amounts, we refer readers to the CY 2016 and CY 2017 OPPS/ASC final rules with comment period (80 FR 70453 through 70455 and 81 FR 79678 through 79680).

In the CYs 2018 and 2019 OPPS/ASC final rules with comment period (82 FR 59373 through 59381, and 83 FR 58983 through 58998, respectively), we continued 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. We also continued to designate a portion of the estimated 1.0 percent hospital outpatient outlier threshold specifically for CMHCs, consistent with the percentage of projected payments to CMHCs under the Start Printed Page 39515OPPS, excluding outlier payments. In the CY 2019 OPPS/ASC final rule with comment period (83 FR 58997 through 58998), we also included proposed updates to the PHP allowable HCPCS codes. Specifically, we proposed to delete 6 psychological and neuropsychological testing CPT codes, which affect PHPs, and to add 9 new codes as replacements. We refer readers to section VIII.D. of this proposed rule for a discussion of those proposed updates and the applicability for CY 2020.

B. Proposed PHP APC Update for CY 2020

1. Proposed PHP APC Geometric Mean Per Diem Costs

In summary, for CY 2020, we are proposing to use the CY 2020 CMHC geometric mean per diem cost and the CY 2020 hospital-based PHP geometric mean per diem cost, each calculated in accordance with our existing methodology, but with a cost floor equal to the CY 2019 final geometric mean per diem cost for CMHCs of $121.62 and for hospital-based PHPs of $222.76 (83 FR 58991), as the basis for developing the CY 2020 PHP APC per diem rates. As part of this proposal, in the final rule with comment period, we are proposing that we would use the most recent updated claims and cost data to calculate CY 2020 geometric mean per diem costs.

Also, we are proposing to continue to use CMHC APC 5853 (Partial Hospitalization (3 or More Services Per Day)) and hospital-based PHP APC 5863 (Partial Hospitalization (3 or More Services Per Day)). These proposals are discussed in more detail below.

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

In preparation for CY 2020 and subsequent years, we followed the PHP ratesetting methodology described in section VIII.B.2. of the CY 2016 OPPS/ASC final rule with comment period (80 FR 70462 through 70466) to calculate the PHP APCs' geometric mean per diem costs and payment rates for APCs 5853 and 5863, incorporating the modifications made in the CY 2017 OPPS/ASC final rule with comment period. As discussed in section VIII.B.1. of the CY 2017 OPPS/ASC final rule with comment period (81 FR 79680 through 79687), the proposed geometric mean per diem cost for hospital-based PHP APC 5863 would be based upon actual hospital-based PHP claims and costs for PHP service days providing 3 or more services. Similarly, the proposed geometric mean per diem cost for CMHC APC 5853 would be based upon actual CMHC claims and costs for CMHC service days providing 3 or more services.

The CMHC or hospital-based PHP APC per diem costs are the provider-type specific costs derived from the most recent claims and cost data. The CMHC or hospital-based PHP APC per diem payment rates are the national unadjusted payment rates calculated from the CMHC or hospital-based PHP APC geometric mean per diem costs, after applying the OPPS budget neutrality adjustments described in section II.A.4. of this proposed rule.

As previously stated, in this CY 2020 OPPS/ASC proposed rule, we applied our established methodologies in calculating the CY 2020 geometric mean per diem costs and payment rates, including the application of a ±2 standard deviation trim on costs per day for CMHCs and a CCR greater than 5 hospital service day trim for hospital-based PHP providers. These two trims were finalized in the CY 2016 OPPS/ASC final rule with comment period (80 FR 70455 through 70462) for CY 2016 and subsequent years.

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

For CY 2020, prior to calculating the geometric mean per diem cost for CMHC APC 5853, we prepared the data by first applying trims and data exclusions, and assessing CCRs as described in the CY 2016 OPPS/ASC final rule with comment period (80 FR 70463 through 70465), so that ratesetting is not skewed by providers with extreme data. Before any trims or exclusions were applied, there were 41 CMHCs in the PHP claims data file. Under the ±2 standard deviation trim policy, we excluded any data from a CMHC for ratesetting purposes when the CMHC's geometric mean cost per day was more than ±2 standard deviations from the geometric mean cost per day for all CMHCs. In applying this trim for CY 2020 ratesetting, no CMHCs had geometric mean costs per day below the trim's lower limit of $21.13 or had geometric mean costs per day above the trim's upper limit of $506.11. Therefore, we did not exclude any CMHCs because of the ±2 standard deviation trim.

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). For CY 2020, no CMHC was missing wage index data for all of its service days and, therefore, no CMHC was excluded.

In addition to our trims and data exclusions, before calculating 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 greater than 1 to the statewide hospital CCR (80 FR 70457). For CY 2020, there were no CMHCs in the outpatient provider specific file (OPSF) that showed CCRs greater than 1. Therefore, it was not necessary to default any CMHC to its statewide hospital CCR for ratesetting.

In summary, these data preparation steps did not adjust the CCR for any CMHCs shown in the OPSF with a CCR greater than 1 during our ratesetting process. We also did not exclude any CMHCs for other missing data or for failing the ±2 standard deviation trim, resulting in the inclusion of all 41 CMHCs. There were 188 CMHC claims removed during data preparation steps because they either had no PHP-allowable codes or had zero payment days, leaving 10,271 CMHC claims in our CY 2020 proposed rule ratesetting modeling.

After applying all of the above trims, exclusions, and adjustments, we followed the methodology described in the CY 2016 OPPS/ASC final rule with comment period (80 FR 70464 through 70465) and modified in the CY 2017 OPPS/ASC final rule with comment period (81 FR 79687 through 79688, and 79691) to calculate a CMHC APC geometric mean per diem cost.[65] The calculated CY 2020 geometric mean per diem cost for all CMHCs for providing 3 or more services per day (CMHC APC 5853) is $103.42, a decrease from Start Printed Page 39516$121.62 calculated last year for CY 2019 ratesetting (83 FR 58986 through 58989).

Due to this fluctuation, we investigated why the calculated CMHC APC geometric mean per diem cost had decreased from the prior year, and found that a single large provider that reported low costs per day was heavily influencing the calculated geometric mean per diem cost. Because this provider had a high number of paid PHP days, and because the CMHC data set is so small (n=41), this provider had a significant influence on the calculated CY 2020 CMHC APC geometric mean per diem cost. In the case of PHPs provided by CMHCs, we note that we have an unusually low number of PHP providers in our ratesetting dataset (41 CMHCs compared to 364 hospital-based PHPs) that provide a small volume of services and, therefore, account for a limited amount of payments, relative to the rest of OPPS payments (total CY 2018 CMHC payments are estimated to be approximately 0.02 percent of all OPPS payments).

We are concerned that a CMHC APC geometric mean per diem cost of $103.42 would not support ongoing access to PHPs in CMHCs. This cost is nearly a 15 percent decrease from the final CY 2019 CMHC geometric mean per diem cost. We believe access to partial hospitalization services and PHPs is better supported when the geometric mean per diem cost does not fluctuate greatly. In addition, while the CMHC APC 5853 is described as providing 3 or more partial hospitalization services per day (81 FR 79680), 95 percent of CMHC paid days in CY 2018 were for providing 4 or more services per day. To be eligible for a PHP, a patient must need at least 20 hours of therapeutic services per week, as evidenced in the patient's plan of care (42 CFR 410.43(c)(1)). To meet those patient needs, most PHP provider paid days are for providing 4 or more services per day (we refer readers to Table 22.—Percentage of PHP Days by Service Unit Frequency of this proposed rule). Therefore, the CMHC APC 5853 is actually heavily weighted to the cost of providing 4 or more services. The per diem costs for CMHC APC 5853 have been calculated as $124.92, $143.22, and $121.62 for CY 2017 (81 FR 79691), CY 2018 (82 FR 59378), and CY 2019 (83 FR 58991), respectively. We do not believe it is likely that the actual cost of providing partial hospitalization services through a PHP by CMHCs has suddenly declined when costs generally increase over time. We are concerned by this fluctuation, which we believe is influenced by data from a single large provider.

Therefore, rather than simply proposing to use the calculated CY 2020 CMHC APC geometric mean per diem cost for CY 2020 ratesetting, we are instead proposing to use the CY 2020 CMHC APC geometric mean per diem cost, calculated in accordance with our existing methodology, but with a cost floor equal to the CY 2019 final geometric mean per diem cost for CMHCs of $121.62 (83 FR 58991), as the basis for developing the CY 2020 CMHC APC per diem rate. As part of this proposal, in the final rule with comment period, we are proposing that we would use the most recent updated claims and cost data to calculate CY 2020 CMHC geometric mean per diem cost. This proposal aligns with our proposal for hospital-based PHPs. We believe using the CY 2019 CMHC geometric mean per diem cost as the floor is appropriate because it is based on very recent CMHC PHP claims and cost data and would help to protect provider access by preventing wide fluctuation in the per diem costs for CMHC APC 5853. Because the calculated amount of $103.42 is less than the final CY 2019 CMHC APC geometric mean per diem cost of $121.62, the inclusion of a cost floor means that the proposed CY 2020 CMHC geometric mean per diem cost at the time of the development of this proposed rule is $121.62. The inclusion of the cost floor would protect CMHCs if the final CY 2020 calculated per diem cost still results in an amount that is less than $121.62. We believe this proposal for CY 2020 ratesetting allows us to use the most recent or very recent CMHC claims and cost reporting data while still protecting provider access. To be clear, this policy would only apply for the CY 2020 ratesetting.

In crafting this proposal, we also considered proposing a 3-year rolling average calculated using the final PHP geometric mean per diem costs, by provider type, from CY 2018 (82 FR 59378), CY 2019 (83 FR 58991), and the calculated CY 2020 geometric mean per diem costs of $103.42 discussed earlier in this section for CMHCs and the calculated CY 2020 geometric mean per diem costs for hospital-based PHPs discussed in section VIII.B.2.b. of this proposed rule. The 3-year rolling averages results in geometric mean per diem cost for CMHCs that would have been $122.75 and for hospital-based PHPs that would have been $209.79. While we believe this option would have avoided the fluctuation in the geometric mean per diem cost and, therefore, supported access to PHPs provided by CMHCs, it would have maintained the fluctuation in the geometric mean per diem costs used to derive the hospital-based PHP APC per diem payment rates. This is further discussed in the hospital-based PHP section VIII.B.2.b. of this proposed rule. In addition, we believe that it is necessary to recalculate the CMHC geometric mean per diem cost for the final rule with comment period using updated claims and cost data, and simply proposing to use a 3-year rolling average for the CMHC geometric mean per diem cost for CY 2020 would not have allowed us to do so. Therefore, we believe that it is more appropriate to propose to use the final CY 2019 geometric mean per diem costs, by provider type, as the cost floor for use with the calculated CY 2020 PHP geometric mean per diem costs, by provider type, because those CY 2019 per diem costs are based on very recent CMHC and hospital-based PHP claims and cost data, are the easiest to understand, and would result in proposed geometric mean per diem costs which would support access for both CMHCs and hospital-based PHPs.

We estimate the aggregate difference in the (prescaled) CMHC geometric mean per diem costs for CY 2020 from proposing the CMHC cost floor amount of $121.62 rather than the calculated CMHC geometric mean per diem cost of $103.42 to be $1.4 million. We refer readers to section XXVI. of this proposed rule for payment impacts, which are budget neutral.

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

For this CY 2020 proposed rule, we prepared data consistent with our policies as described in the CY 2016 OPPS/ASC final rule with comment period (80 FR 70463 through 70465) for hospital-based PHP providers, which is similar to that used for CMHCs. The CY 2018 PHP claims included data for 427 hospital-based PHP providers for our calculations in this CY 2020 OPPS/ASC proposed rule.

Consistent with our policies as stated in the CY 2016 OPPS/ASC final rule with comment period (80 FR 70463 through 70465), we prepared the data by applying trims and data exclusions. We applied a trim on hospital service days for hospital-based PHP providers with a CCR greater than 5 at the cost center level. To be clear, the CCR greater than 5 trim is a service day-level trim in contrast to the CMHC ±2 standard deviation trim, which is a provider-level trim. Applying this CCR greater than 5 trim removed affected service days from 1 hospital-based PHP provider with a CCR of 6.944 from our proposed rule ratesetting. However, 100 percent of the Start Printed Page 39517service days for this 1 hospital-based PHP provider had at least 1 service associated with a CCR greater than 5, so the trim removed this provider entirely from our proposed rule ratesetting. In addition, 60 hospital-based PHPs were removed for having no PHP costs and, therefore, no days with PHP payment. Two hospital-based PHPs were removed because none of their days included PHP-allowable HCPCS codes. No hospital-based PHPs were removed for missing wage index data, nor were any hospital-based PHPs removed by the OPPS ±3 standard deviation trim on costs per day. (We refer readers to the OPPS Claims Accounting Document, available online at https://www.cms.gov/​Medicare/​Medicare-Fee-for-Service-Payment/​HospitalOutpatientPPS/​Downloads/​CMS-1695-FC-2019-OPPS-FR-Claims-Accounting.pdf.)

Overall, we removed 63 hospital-based PHP providers [(1 with all service days having a CCR greater than 5) + (60 with zero daily costs and no PHP payment) + (2 with no PHP-allowable HCPCS codes)], resulting in 364 (427 total−63 excluded) hospital-based PHP providers in the data used for calculating ratesetting. In addition, 3 hospital-based PHP providers were defaulted to their overall hospital ancillary CCRs due to outlier cost center CCR values.

After completing these data preparation steps, we calculated the CY 2020 geometric mean per diem cost for hospital-based PHP APC 5863 for hospital-based partial hospitalization services by following the methodology described in the CY 2016 OPPS/ASC final rule with comment period (80 FR 70464 through 70465) and modified in the CY 2017 OPPS/ASC final rule with comment period (81 FR 79687 and 79691).[66] The calculated CY 2020 hospital-based PHP APC geometric mean per diem cost for hospital-based PHP providers that provide 3 or more services per service day (hospital-based PHP APC 5863) is $198.53, a decrease from $222.76 calculated last year for CY 2019 ratesetting (83 FR 58989 through 58991).

Due to this fluctuation, we investigated why this calculated hospital-based PHP APC geometric mean per diem cost decreased from the prior year, and found that a single provider with a large number of paid PHP service days had a significant decrease in its cost per day and, therefore, was heavily influencing the data. We are concerned that a hospital-based PHP APC geometric mean per diem cost of $198.53 would not support ongoing access to hospital-based PHPs. This cost is nearly an 11 percent decrease from the final CY 2019 hospital-based PHP geometric mean per diem cost. We believe access is better supported when the geometric mean per diem cost does not fluctuate greatly. In addition, while the hospital-based PHP APC 5863 is described as providing payment for the cost of 3 or more services per day (81 FR 79680), 89 percent of hospital-based PHP paid service days in CY 2018 were for providing 4 or more services per day. To be eligible for a PHP, a patient must need at least 20 hours of therapeutic services per week, as evidenced in the patient's plan of care (42 CFR 410.43(c)(1)). To meet those patient needs, most PHP paid service days provide 4 or more services (we refer readers to Table 22.—Percentage of PHP Days by Service Unit Frequency in this proposed rule). Therefore, the hospital-based PHP APC 5863 is actually heavily weighted to the cost of providing 4 or more services. The per diem costs for hospital-based PHP APC 5863 have been calculated as $213.14, $208.09, and $222.76 for CY 2017 (81 FR 79691), CY 2018 (82 FR 59378), and CY 2019 (83 FR 58991), respectively. We do not believe that it is likely that the cost of providing hospital-based PHP services has suddenly declined when costs generally increase over time. We are concerned by this fluctuation, which we believe is influenced by data from a single large provider that had low service costs per day.

Therefore, rather than proposing the calculated CY 2020 hospital-based PHP APC geometric mean per diem cost, we are instead proposing to use the CY 2020 hospital-based PHP APC geometric mean per diem cost, calculated in accordance with our existing methodology, but with a cost floor equal to the CY 2019 final geometric mean per diem cost for hospital-based PHPs of $222.76 (83 FR 58991), as the basis for developing the CY 2020 hospital-based PHP APC per diem rate. As part of this proposal, in the final rule with comment period, we are proposing that we would use the most recent updated claims and cost data to calculate CY 2020 geometric mean per diem costs. This proposal aligns with our proposal for CMHCs. We believe using the CY 2019 hospital-based PHP per diem cost as the floor is appropriate because it is based on very recent hospital-based PHP claims and cost data and would help to protect provider access by preventing wide fluctuation in the per diem costs for hospital-based APC 5863. Because the calculated amount of $198.53 is less than the final CY 2019 hospital-based PHP APC geometric mean per diem cost of $222.76, the inclusion of a cost floor means that the proposed CY 2020 hospital-based PHP geometric mean per diem cost, as of the time of this proposed rule, is $222.76. The inclusion of the cost floor would protect hospital-based PHPs if the final CY 2020 calculated hospital-based PHP APC geometric mean per diem cost results in an amount that is still less than $222.76. We believe this proposal for CY 2020 ratesetting allows us to use the most recent or very recent hospital-based PHP claims and cost reporting data while still protecting provider access. To be clear, this policy would only apply for the CY 2020 ratesetting.

In crafting this proposal, we also considered proposing a 3-year rolling average calculated using the final PHP geometric mean per diem costs, by provider type, from CY 2018 (82 FR 59378) and CY 2019 (83 FR 58991), and the calculated CY 2020 geometric mean per diem cost of $198.53 discussed earlier in this section for hospital-based PHPs. As discussed previously in this section, the 3-year rolling average per diem cost floor for CMHCs would have been $122.75, but the resulting rolling average per diem cost floor for hospital-based PHPs would have been $209.79. While we believe that this option would have supported access to CMHCs, as discussed previously, it would have resulted in a geometric mean per diem cost for the hospital-based PHP APC which still would have been a decrease from the hospital-based PHP APC geometric mean per diem cost of $222.76 finalized in CY 2019 (83 FR 58991). In addition, we believe that it is necessary to recalculate the hospital-Start Printed Page 39518based PHP geometric mean per diem cost for the final rule using updated claims and cost data and simply proposing to use a 3-year rolling average per diem cost floor for the hospital-based PHP APC per diem costs for CY 2020 would not have allowed us to do so. We are concerned that this 3-year rolling average per diem cost would continue to result in a fluctuation in the cost of a hospital providing 4 or more hospital-based PHP services per day. We believe that it is important to support access to partial hospitalization services in both CMHCs and in hospital-based PHPs, and note that hospital-based PHPs provide 80 percent of all paid PHP service days. Therefore, we believe that it is more appropriate to propose to use the final CY 2019 geometric mean per diem costs, by provider type, as the cost floor for use with the calculated CY 2020 PHP geometric mean per diem costs, by provider type, because those CY 2019 per diem costs are based on very recent CMHC and hospital-based PHP claims and cost data, are the easiest to understand, and would result in proposed geometric mean per diem costs which would help to protect provider access by preventing wide fluctuation in the per diem costs for both CMHCs and hospital-based PHPs.

We estimate the aggregate difference in the (prescaled) hospital-based PHP geometric mean per diem costs for CY 2020 from proposing the hospital-based PHP cost floor amount of $222.76 rather than the calculated hospital-based PHP geometric mean per diem cost of $198.53 to be $9.3 million. We refer readers to section XXVI. of this proposed rule for payment impacts, which are budget neutral.

In summary, for CY 2020, we are proposing to use the calculated CY 2020 CMHC geometric mean per diem cost and the calculated CY 2020 hospital-based PHP geometric mean per diem cost, each calculated in accordance with our existing methodology, but with a cost floor equal to the CY 2019 final geometric mean per diem costs as the basis for developing the CY 2020 PHP APC per diem rates. Because the CY 2020 calculated geometric mean per diem costs for these provider types were both less than their respective final CY 2019 APC geometric mean per diem costs, the inclusion of a cost floor in this proposal means that both the proposed CY 2020 CMHC geometric mean per diem cost and the proposed CY 2020 hospital-based PHP geometric mean per diem cost, as of the time of this proposed rule, are $121.62 and $222.76, respectively. As part of this proposal, in the final rule with comment period, we are proposing that we would use the most recent updated claims and cost data to calculate CY 2020 geometric mean per diem costs. The inclusion of a cost floor, which is based on very recent data, would protect providers should the final CY 2020 calculated per diem costs for CMHCs or for hospital-based PHPs result in amounts that are still less than the final CY 2019 CMHC and hospital-based PHP geometric mean per diem costs.

These proposed CY 2020 PHP geometric mean per diem costs are shown in Table 20, and are used to derive the proposed CY 2020 PHP APC per diem rates for CMHCs and hospital-based PHPs. The proposed CY 2020 PHP APC per diem rates are included in Addendum A to this proposed rule (which is available on the CMS website at: https://www.cms.gov/​Medicare/​Medicare-Fee-for-Service-Payment/​HospitalOutpatientPPS/​Hospital-Outpatient-Regulations-and-Notices.html).67

3. PHP Service Utilization Updates

a. Provision of Individual Therapy

In the CY 2016 OPPS/ASC final rule with comment period (81 FR 79684 through 79685), we expressed concern over the low frequency of individual therapy provided to beneficiaries. The CY 2018 claims data used for this CY 2020 proposed rule revealed some changes in the provision of individual therapy compared to CY 2015, CY 2016, and CY 2017 claims data as shown in the Table 21.

Start Printed Page 39519

As shown in Table 21, the CY 2018 claims show that both CMHCs and hospital-based PHPs have slightly increased the provision of individual therapy on days with 4 or more services, compared to CY 2017 claims. However, on days with 3 services, CMHCs decreased the provision of individual therapy, while hospital-based PHPs provided the same level of individual therapy as in CY 2017.

b. Provision of 3-Service Days

In the CY 2018 OPPS/ASC proposed rule and final rule with comment period (82 FR 33640 and 82 FR 59378), we stated that we are aware that our single-tier payment policy may influence a change in service provision because providers are able to obtain payment that is heavily weighted to the cost of providing 4 or more services when they provide only 3 services. We indicated that we are interested in ensuring that providers furnish an appropriate number of services to beneficiaries enrolled in PHPs. Therefore, with the CY 2017 implementation of CMHC APC 5853 and hospital-based PHP APC 5863 for providing 3 or more PHP services per day, we are continuing to monitor utilization of days with only 3 PHP services.

For this CY 2020 OPPS/ASC proposed rule, we used the CY 2018 claims data. Table 22 shows the utilization findings based on the most recent claims data.

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As shown in Table 22, the CY 2018 claims data used for this proposed rule showed that PHPs maintained an appropriately low utilization of 3 service days compared to the 3 prior claim years. Compared to CY 2017, in CY 2018 hospital-based PHPs provided slightly more days with 3 services only, more days with 4 services only, and fewer days with 5 or more services. Compared to CY 2017, in CY 2018 CMHCs decreased their provision of 3 service days, slightly increased their provision of days with 4 services, but have decreased their provision of days with 5 or more services.

The CY 2017 data are the first year of claims data to reflect the change to the single-tier PHP APCs. As we noted in the CY 2017 OPPS/ASC final rule with comment period (81 FR 79685), we will continue to monitor the provision of days with only 3 services, particularly now that the single-tier PHP APCs 5853 and 5863 are established for providing 3 or more services per day for CMHCs and hospital-based PHPs, respectively.

It is important to reiterate our expectation that days with only 3 services are meant to be an exception and not the typical PHP day. In the CY 2009 OPPS/ASC final rule with comment period (73 FR 68694), we clearly stated that we consider the acceptable minimum units of PHP services required in a PHP day to be 3 and explained that it was never our intention that 3 units of service represent the number of services to be provided in a typical PHP day. PHP is furnished in lieu of inpatient psychiatric hospitalization and is intended to be more intensive than a half-day program. We further indicated that a typical PHP day should generally consist of 5 to 6 units of service (73 FR 68689). We explained that days with only 3 units of services may be appropriate to bill in certain limited circumstances, such as when a patient might need to leave early for a medical appointment and, therefore, would be unable to complete a full day of PHP treatment. At that time, we noted that if a PHP were to only provide days with 3 services, it would be difficult for patients to meet the eligibility requirement in 42 CFR 410.43(c)(1) that patients must require a minimum of 20 hours per week of therapeutic services as evidenced in their plan of care (73 FR 68689).

C. Proposed Outlier Policy for CMHCs

In this CY 2020 OPPS/ASC proposed rule, for CY 2020, we are proposing to continue to calculate the CMHC outlier percentage, cutoff point and percentage payment amount, outlier reconciliation, outlier payment cap, and fixed-dollar threshold according to previously established policies. These topics are discussed in more detail below. We refer readers to section II.G. of this proposed rule for our general policies for hospital outpatient outlier payments.

1. Background

As discussed in the CY 2004 OPPS final rule with comment period (68 FR 63469 through 63470), we noted a significant difference in the amount of outlier payments made to hospitals and CMHCs for PHP services. Given the difference in PHP charges between hospitals and CMHCs, we did not believe it was appropriate to make outlier payments to CMHCs using the outlier percentage target amount and threshold established for hospitals. Therefore, beginning in CY 2004, we created a separate outlier policy specific to the estimated costs and OPPS payments provided to CMHCs. 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. This 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 (82 FR 59381). In contrast, in CY 2003, more than $30 million was paid to CMHCs in outlier payments (82 FR 59381).

2. CMHC Outlier Percentage

In the CY 2018 OPPS/ASC final rule with comment period (82 FR 59267 through 59268), we described the current outlier policy for hospital outpatient payments and CMHCs. We Start Printed Page 39521note that we also discussed our outlier policy for CMHCs in more detail in section VIII. C. of that same final rule (82 FR 59381). We set our projected target for all OPPS aggregate outlier payments at 1.0 percent of the estimated aggregate total payments under the OPPS (82 FR 59267). We estimate CMHC per diem payments and outlier payments by using the most recent available utilization and charges from CMHC claims, updated CCRs, and the updated payment rate for APC 5853. For increased transparency, we are providing a more detailed explanation of the existing calculation process for determining the CMHC outlier percentages below. As previously stated, we are proposing to continue to calculate the CMHC outlier percentage according to previously established policies, and we are not proposing any changes to our current methodology for calculating the CMHC outlier percentage for CY 2020. To calculate the CMHC outlier percentage, we follow three steps:

  • Step 1: We multiply the OPPS outlier threshold, which is 1.0 percent, by the total estimated OPPS Medicare payments (before outliers) for the prospective year to calculate the estimated total OPPS outlier payments:

(0.01 × Estimated Total OPPS Payments) = Estimated Total OPPS Outlier Payments.

  • Step 2: We estimate CMHC outlier payments by taking each provider's estimated costs (based on their allowable charges multiplied by the provider's CCR) minus each provider's estimated CMHC outlier multiplier threshold (we refer readers to section VIII.C.3. of this proposed rule). That threshold is determined by multiplying the provider's estimated paid days by 3.4 times the CMHC PHP APC payment rate. If the provider's costs exceed the threshold, we multiply that excess by 50 percent, as described in section VIII.C.3. of this proposed rule, to determine the estimated outlier payments for that provider. CMHC outlier payments are capped at 8 percent of the provider's estimated total per diem payments (including the beneficiary's copayment), as described in section VIII.C.5. of this proposed rule, so any provider's costs that exceed the CMHC outlier cap would have its payments adjusted downward. After accounting for the CMHC outlier cap, we sum all of the estimated outlier payments to determine the estimated total CMHC outlier payments.

(Each Provider's Estimated Costs—Each Provider's Estimated Multiplier Threshold) = A. If A is greater than 0, then (A × 0.50) = Estimated CMHC Outlier Payment (before cap) = B. If B is greater than (0.08 × Provider's Total Estimated Per Diem Payments), then cap-adjusted B = (0.08 × Provider's Total Estimated Per Diem Payments); otherwise, B = B. Sum (B or cap-adjusted B) for Each Provider = Total CMHC Outlier Payments.

  • Step 3: We determine the percentage of all OPPS outlier payments that CMHCs represent by dividing the estimated CMHC outlier payments from Step 2 by the total OPPS outlier payments from Step 1:

(Estimated CMHC Outlier Payments/Total OPPS Outlier Payments).

In CY 2019, we designated approximately 0.01 percent of that estimated 1.0 percent hospital outpatient outlier threshold for CMHCs (83 FR 58996), based on this methodology. In this proposed rule, we are proposing to continue to use the same methodology for CY 2020. Therefore, based on our CY 2020 payment estimates, CMHCs are projected to receive 0.02 percent of total hospital outpatient payments in CY 2020, excluding outlier payments. We are proposing to designate approximately less than 0.01 percent of the estimated 1.0 percent hospital outpatient outlier threshold for CMHCs. This percentage is based upon the formula given in Step 3 above.

3. Cutoff Point and Percentage Payment Amount

As described in the CY 2018 OPPS/ASC final rule with comment period (82 FR 59381), our policy has been to pay CMHCs for outliers if the estimated cost of the day exceeds a cutoff point. In CY 2006, we set the cutoff point for outlier payments at 3.4 times the highest CMHC PHP APC payment rate implemented for that calendar year (70 FR 68551). For CY 2018, the highest CMHC PHP APC payment rate is the payment rate for CMHC PHP APC 5853. In addition, in CY 2002, the final OPPS outlier payment percentage for costs above the multiplier threshold was set at 50 percent (66 FR 59889). In CY 2018, we continued to apply the same 50 percent outlier payment percentage that applies to hospitals to CMHCs and continued to use the existing cutoff point (82 FR 59381). Therefore, for CY 2018, we continued to pay for partial hospitalization services that exceeded 3.4 times the CMHC PHP APC payment rate at 50 percent of the amount of CMHC PHP APC geometric mean per diem costs over the cutoff point. For example, for CY 2018, if a CMHC's cost for partial hospitalization services paid under CMHC PHP APC 5853 exceeds 3.4 times the CY 2018 payment rate for 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 CY 2018 payment rate for CMHC PHP APC 5853 [0.50 × (CMHC Cost−(3.4 × APC 5853 rate))].

In this CY 2020 OPPS/ASC proposed rule, for CY 2020, in accordance with our existing policy, we are proposing to continue to pay for partial hospitalization services that exceed 3.4 times the proposed CMHC PHP APC payment rate at 50 percent of the CMHC PHP APC geometric mean per diem costs over the cutoff point. That is, for CY 2020, if a CMHC's cost for partial hospitalization services paid under CMHC PHP APC 5853 exceeds 3.4 times the proposed payment rate for CMHC APC 5853, the outlier payment would be calculated as [0.50 × (CMHC Cost−(3.4 × APC 5853 rate))].

4. Outlier Reconciliation

In the CY 2009 OPPS/ASC final rule with comment period (73 FR 68594 through 68599), we established an outlier reconciliation policy to address charging aberrations related to OPPS outlier payments. We addressed vulnerabilities in the