Skip to Content

We invite you to try out our new beta eCFR site at https://ecfr.federalregister.gov. We’ve made big changes to make the eCFR easier to use. Be sure to leave feedback using the 'Help' button on the bottom right of each page!

Proposed Rule

Medicare Program: Hospital Outpatient Prospective Payment and Ambulatory Surgical Center Payment Systems and Quality Reporting Programs; New Categories for Hospital Outpatient Department Prior Authorization Process; Clinical Laboratory Fee Schedule: Laboratory Date of Service Policy; Overall Hospital Quality Star Rating Methodology; and Physician-Owned Hospitals

This document has a comment period that ends in 14 days. (10/05/2020) Submit a formal comment

Document Details

Information about this document as published in the Federal Register.

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

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

Published Document

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

Start Preamble Start Printed Page 48772

AGENCY:

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

ACTION:

Proposed rule.

SUMMARY:

This proposed rule would revise the Medicare hospital outpatient prospective payment system (OPPS) and the Medicare ambulatory surgical center (ASC) payment system for Calendar Year (CY) 2021 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. Also, 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, this proposed rule would establish and update the Overall Hospital Quality Star Rating beginning with the CY 2021; remove certain restrictions on the expansion of physician-owned hospitals that qualify as “high Medicaid facilities,” and clarify that certain beds are counted toward a hospital's baseline number of operating rooms, procedure rooms, and beds; and add two new service categories to the OPD Prior Authorization Process.

DATES:

To be assured consideration, comments on all sections of this proposed rule must be received at one of the addresses provided in the ADDRESSES section no later than 5 p.m. EST on October 5, 2020.

ADDRESSES:

In commenting, please refer to file code CMS-1736-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-1736-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-1736-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:

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 Mitali Dayal via email Mitali.Dayal2@cms.hhs.gov.

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

Ambulatory Surgical Center Quality Reporting (ASCQR) Program Measures, contact Nicole Hewitt via email Nicole.Hewitt@cms.hhs.gov.

Blood and Blood Products, contact Josh McFeeters via email Joshua.McFeeters@cms.hhs.gov.

Cancer Hospital Payments, contact Scott Talaga via email Scott.Talaga@cms.hhs.gov.

CMS Web Posting of the OPPS and ASC Payment Files, contact Chuck Braver via email Chuck.Braver@cms.hhs.gov.

Composite APCs (Low Dose Brachytherapy and Multiple Imaging), contact Au'Sha Washington via email AuSha.Washington@cms.hhs.gov.

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

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

Hospital Outpatient Quality Reporting (OQR) Program Measures, contact Nicole Hewitt via email Nicole.Hewitt@cms.hhs.gov.

Hospital Outpatient Visits (Emergency Department Visits and Critical Care Visits), contact Elise Barringer via email Elise.Barringer@cms.hhs.gov.

Hospital Quality Star Rating Methodology, contact Annese Abdullah-Mclaughlin via email Annese.Abdullah-Mclaughlin@cms.hhs.gov.

Inpatient Only (IPO) Procedures List, contact Au'Sha Washington via email Ausha.Washington@cms.hhs.gov, or Allison Bramlett via email Allison.Bramlett@cms.hhs.gov, or Lela Strong-Holloway via email Lela.Strong@cms.hhs.gov.

Medical Review of Certain Inpatient Hospital Admissions under Medicare Part A for CY 2021 and Subsequent Years (2-Midnight Rule), contact Lela Strong-Holloway via email Lela.Strong@cms.hhs.gov, or Elise Barringer via email Elise.Barringer@cms.hhs.gov.

New Technology Intraocular Lenses (NTIOLs), contact Scott Talaga via email Scott.Talaga@cms.hhs.gov.

No Cost/Full Credit and Partial Credit Devices, contact Scott Talaga via email Scott.Talaga@cms.hhs.gov.

OPPS Brachytherapy, contact Scott Talaga via email Scott.Talaga@cms.hhs.gov.

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 Scott Talaga via email Scott.Talaga@cms.hhs.gov, or Josh McFeeters via email at Joshua.McFeeters@cms.hhs.gov.

OPPS Drugs, Radiopharmaceuticals, Biologicals, and Biosimilar Products, contact Josh McFeeters via email at Joshua.McFeeters@cms.hhs.gov, or Gil Ngan via email at Gil.Ngan@cms.hhs.gov or, or Cory Duke via email at Cory.Duke@cms.hhs.gov.

OPPS New Technology Procedures/Services, contact the New Technology Start Printed Page 48773APC mailbox at NewTechAPCapplications@cms.hhs.gov.

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

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.

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

Prior Authorization Process and Requirements for Certain Covered Outpatient Department Services, contact Thomas Kessler via email at Thomas.Kessler@cms.hhs.gov.

Rural Hospital Payments, contact Josh McFeeters via email at Joshua.McFeeters@cms.hhs.gov.

Skin Substitutes, contact Josh McFeeters via email Joshua.McFeeters@cms.hhs.gov.

Supervision of Outpatient Therapeutic Services in Hospitals and CAHs, contact Josh McFeeters via email Joshua.McFeeters@cms.hhs.gov.

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/​Hospital-Outpatient-Regulations-and-Notices. The Addenda relating to the ASC payment system are available at: https://www.cms.gov/​Medicare/​Medicare-Fee-for-Service-Payment/​ASCPayment/​ASC-Regulations-and-Notices.

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 2019 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 2020 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 2021

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. 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 OPPS APC-Specific Policies

IV. OPPS Payment for Devices

A. Proposed 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 Radiopharmaceuticals

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

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

A. Background

B. Proposed Estimate of Pass-Through Spending

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

VIII. Payment for Partial Hospitalization Services

A. Background

B. Proposed PHP APC Update for CY 2021

C. Proposed Outlier Policy for CMHCs

IX. Services That Will Be Paid Only as Inpatient Services

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. Proposed Medical Review of Certain Inpatient Hospital Admissions Under Medicare Part A for CY 2021 and Subsequent Years

C. Comment Solicitation on OPPS Payment for Specimen Collection for COVID-19 Tests

XI. Proposed CY 2021 OPPS Payment Status and Comment Indicators

A. Proposed CY 2021 OPPS Payment Status Indicator Definitions

B. Proposed CY 2021 Comment Indicator Definitions

XII. MedPAC Recommendations

A. Proposed OPPS Payment Rates Update

B. Proposed ASC Conversion Factor Update

C. Proposed ASC Cost Data

XIII. 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. Proposed 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 MeasuresStart Printed Page 48774

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

XVI. Proposed Overall Hospital Quality Star Rating Methodology for Public Release in CY 2021 and Subsequent Years

A. Background

B. Critical Access Hospitals in the Overall Star Rating

C. Veterans Health Administration Hospitals in Overall Star Rating

D. History of the Overall Hospital Quality Star Rating

E. Current and Proposed Overall Star Rating Methodology

F. Preview Period

G. Overall Star Rating Suppressions

XVII. Addition of New Service Categories for Hospital Outpatient Department (OPD) Prior Authorization Process

A. Background

B. Controlling Unnecessary Increases in the Volume of Covered OPD Services

XVIII. 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. Proposed Revision to the Laboratory DOS Policy for Cancer-Related Protein-Based MAAAs

XIX. Physician-Owned Hospitals

A. Background

B. Prohibition on Facility Expansion

C. Deference to State Law for Purposes of Determining the Number of Beds for Which a Hospital Is Licensed

XX. Files Available to the Public via the internet

XXI. 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. ICRs for Addition of New Service Categories for Hospital Outpatient Department (OPD) Prior Authorization Process

E. ICRs for the Overall Hospital Quality Star Ratings

F. ICRs for Physician-Owned Hospitals

XXII. Waiver of the 60-Day Delayed Effective Date for the Final Rule

XXIII. Response to Comments

XXIV. Economic Analyses

A. Statement of Need

B. Overall Impact for the Provisions of This Proposed Rule

C. Detailed Economic Analyses

D. Regulatory Review Costs

E. Regulatory Flexibility Act (RFA) Analysis

F. Unfunded Mandates Reform Act Analysis

G. Reducing Regulation and Controlling Regulatory Costs

H. Conclusion

XXV. Federalism Analysis

Regulations Text

I. Summary and Background

A. Executive Summary of This Document

1. Purpose

In this proposed rule, we propose 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, 2021. Section 1833(t) of the Social Security Act (the Act) requires us to annually review and update the payment rates for services payable under the Hospital Outpatient Prospective Payment System (OPPS). Specifically, section 1833(t)(9)(A) of the Act requires the Secretary to review certain components of the OPPS not less often than annually, and to revise the groups, 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. This proposed rule also includes additional policy changes made in accordance with our experience with the OPPS and the ASC payment system and recent changes in our statutory authority. 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.

2. Summary of the Major Provisions

  • OPPS Update: For CY 2021, we propose to increase the payment rates under the OPPS by an Outpatient Department (OPD) fee schedule increase factor of 2.6 percent. This increase factor is based on the proposed hospital inpatient market basket percentage increase of 3.0 percent for inpatient services paid under the hospital inpatient prospective payment system (IPPS), minus the multifactor productivity (MFP) adjustment required by the Affordable Care Act of 0.4 percentage point. Based on this update, we estimate that total payments to OPPS providers (including beneficiary cost-sharing and estimated changes in enrollment, utilization, and case-mix) for calendar year (CY) 2021 would be approximately $83.9 billion, an increase of approximately $7.5 billion compared to estimated CY 2020 OPPS payments.

We propose 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 0.9805 to the OPPS payments and copayments for all applicable services.

  • Partial Hospitalization Update: For CY 2021 OPPS/ASC proposed rule, CMS is proposing to maintain the unified rate structure established in CY 2017, with a single PHP APC for each provider type for days with three or more services per day. CMS is proposing to use the CMHC and hospital-based PHP (HB PHP) geometric mean per diem costs, consistent with existing policy, using updated data for each provider type and a cost floor equal to the CY 2019 final geometric mean per diem cost for each provider type. Accordingly, CMS is proposing to calculate the CY 2021 PHP APC per diem rate for HB PHPs based on updated cost data and to calculate the rate for CMHCs based on the proposed cost floor.
  • Changes to the Inpatient Only (IPO) List: For CY 2021, we propose to eliminate the IPO list over the course of three calendar years beginning with the removal of approximately 300 musculoskeletal-related services. We are also soliciting comments on whether three years is an appropriate time frame for transitioning to eliminate the IPO list; other services that are candidates for removal from the IPO list for CY 2021; and the sequence in which to remove additional clinical families and/or specific services from the IPO list in future rulemaking.
  • Medical Review of Certain Inpatient Hospital Admissions under Medicare Part A for CY 2021 and Subsequent Years (2-Midnight Rule): For CY 2021, we propose to continue a 2-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 Start Printed Page 48775January 1, 2021. We are also seeking comments on whether the 2-year exemption period continues to be appropriate, or if a longer or shorter period may be more warranted.
  • 340B -Acquired Drugs: We propose for CY 2021 and subsequent years to pay for drugs acquired under the 340B program at ASP minus 34.7 percent, plus an add-on of 6 percent of the product's ASP, for a net payment rate of ASP minus 28.7 percent based on the results of the Hospital Acquisition Cost Survey for 340B-Acquired Specified Covered Drugs. Similar to the 340B drug payment policy implemented in CY 2018, we are also proposing that Rural SCHs, PPS-exempt cancer hospitals and children's hospitals would be exempted from the 340B payment policy for CY 2021 and subsequent years. Finally, we note that we propose in the alternative to continue our current policy of paying ASP minus 22.5 percent for 340B-acquired drugs.
  • Comprehensive APCs: For CY 2021, we propose to create two new comprehensive APCs (C-APCs). These new C-APCs include the following: C-APC 5378 (Level 8 Urology and Related Services) and C-APC 5465 (Level 5 Neurostimulator and Related Procedures). Adding these C-APCs would increase the total number of C-APCs to 69.
  • Device Pass-Through Payment Applications: For CY 2021, we have received five applications for device pass-through payments that we discuss in this proposed rule. Two of these applications (CUSTOM FLEX® ARTIFICIAL IRIS and EXALTTM Model D Single-Use Duodenoscope) have received preliminary approval for pass-through payment status through our quarterly review process. CMS is soliciting public comments on these five applications and will make a final determination on these applications in the CY 2021 OPPS/ASC final rule.
  • Changes to the Level of Supervision of Outpatient Therapeutic Services in Hospitals and Critical Access Hospitals: For CY 2021 and subsequent years, we propose to change the minimum default level of supervision for non-surgical extended duration therapeutic services (NSEDTS) to general supervision for the entire service, including the initiation portion of the service, for which we had previously required direct supervision. This would be consistent with the minimum required level of general supervision that currently applies for most outpatient hospital therapeutic services. We also propose that, for CY 2021 and subsequent years, direct supervision for pulmonary rehabilitation, cardiac rehabilitation, and intensive cardiac rehabilitation services would include virtual presence of the physician through audio/video real-time communications technology subject to the clinical judgment of the supervising physician.
  • Cancer Hospital Payment Adjustment: For CY 2021, we propose 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, we propose that a target PCR of 0.89 would be used to determine the CY 2021 cancer hospital payment adjustment to be paid at cost report settlement. That is, the payment adjustments will be the additional payments needed to result in a PCR equal to 0.89 for each cancer hospital.
  • ASC Payment Update: For CYs 2019 through 2023, we adopted a policy to update the ASC payment system using the hospital market basket update. Using the hospital market basket methodology, for CY 2021, we propose to increase payment rates under the ASC payment system by 2.6 percent for ASCs that meet the quality reporting requirements under the ASCQR Program. This proposed increase is based on a hospital market basket percentage increase of 3.0 percent minus a proposed multifactor productivity adjustment required by the Affordable Care Act of 0.4 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 2021 would be approximately 5.45 billion, an increase of approximately 160 million compared to estimated CY 2020 Medicare payments.
  • Changes to the List of ASC Covered Surgical Procedures: For CY 2021, we propose to add eleven procedures to the ASC covered procedures list (CPL), including total hip arthroplasty (CPT 27130). Additionally, we propose two alternatives for changing the way procedures are added to the ASC CPL. Under the first alternative, we propose to establish a nomination process beginning in CY 2021 for procedures that would be added beginning in CY 2022 under which external stakeholders, such as professional specialty societies, would use suggested parameters to nominate procedures that can be safely performed in the ASC setting and meet all other regulatory standards. CMS would review nominated procedures and propose and finalize procedures to be added to the ASC CPL through annual rulemaking.

Under the second alternative proposal, we would revise the criteria for covered surgical procedures for the ASC payment system under 42 CFR 416.166, by keeping the general standards and eliminating five of the general exclusions. The revised criteria would result in the addition of approximately 270 surgery or surgery-like codes to the CPL that are not on the CY 2020 IPO list. Finally, we solicit comment on whether the conditions for coverage for ASCs should be revised if we adopt the second alternative proposal described above.

  • Hospital Outpatient Quality Reporting (OQR) and Ambulatory Surgical Center Quality Reporting (ASCQR) Programs: For the Hospital OQR and ASCQR Programs, we propose to update and refine requirements to further meaningful measurement and reporting for quality of care provided in these outpatient settings while limiting compliance burden. We propose to revise and codify previously finalized administrative procedures and to propose and codify an expanded review and corrections process to further the programs' alignment while clarifying program requirements. We are not proposing any measure additions or removals for either program.
  • Overall Hospital Quality Star Ratings: We propose to establish and update the methodology that would be used to calculate the Overall Hospital Quality Star Ratings beginning with 2021 and for subsequent years. CMS is proposing to, among other proposals, update and simplify how the ratings are calculated, reduce the total number of measure groups, and stratify the Readmission measure group based on the proportion of dual-eligible patients. These changes will simplify the methodology, and therefore, reduce provider burden, improve the predictability of the star ratings, and increase the comparability between hospital star ratings.
  • Addition of New Service Categories for Hospital Outpatient Department Prior Authorization Process: We propose the addition of the following two categories of services to the prior authorization process beginning for dates of service on or after July 1, 2021: (1) Cervical fusion with disc removal and (2) implanted spinal neurostimulators.
  • Clinical Laboratory Date of Service (DOS) Policy: We propose to exclude Start Printed Page 48776cancer-related protein-based MAAAs, which are not generally performed in the HOPD setting, from the OPPS packaging policy and add them to the laboratory DOS provisions at § 414.510(b)(5).
  • Physician-Owned Hospitals: We propose the (1) removal of unnecessary regulatory restrictions on high Medicaid facilities and (2) including beds in a physician-owned hospital's baseline consistent with state law.

3. Summary of Costs and Benefit

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

a. Impacts of All OPPS Changes

Table 55 in section XIX.B of this proposed rule displays the distributional impact of all the OPPS changes on various groups of hospitals and CMHCs for CY 2021 compared to all estimated OPPS payments in CY 2020. We estimate that the policies in this proposed rule would result in a 2.5 percent overall increase in OPPS payments to providers. We estimate that total OPPS payments for CY 2021, including beneficiary cost-sharing, to the approximately 3,628 facilities paid under the OPPS (including general acute care hospitals, children's hospitals, cancer hospitals, and CMHCs) would increase by approximately 1.6 billion compared to CY 2020 payments, excluding our estimated changes in enrollment, utilization, and case-mix.

We estimated the isolated impact of our OPPS policies on CMHCs because CMHCs are only paid for partial hospitalization services under the OPPS. Continuing the provider-specific structure we adopted beginning in CY 2011, and basing payment fully on the type of provider furnishing the service, we estimate a 1.3 percent increase in CY 2021 payments to CMHCs relative to their CY 2020 payments.

b. Impacts of the Proposed Updated Wage Indexes

We estimate that our proposed update of the wage indexes based on the FY 2021 IPPS proposed rule wage indexes would result in an estimated increase of 0.2 percent for urban hospitals under the OPPS and an estimated increase of 0.4 percent for rural hospitals. These 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 CY 2021 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 propose to implement the required reduction to the cancer hospital payment adjustment required by section 16002 of the 21st Century Cures Act for CY 2021, the target payment-to-cost ratio (PCR) for CY 2021 is 0.89, equivalent to the 0.89 target PCR for CY 2020, and therefore has no budget neutrality adjustment.

d. Impacts of the Proposed OPD Fee Schedule Increase Factor

For the CY 2021 OPPS/ASC, we propose to establish an OPD fee schedule increase factor of 2.6 percent and apply that increase factor to the conversion factor for CY 2021. As a result of the 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 3.6 percent. Classifying hospitals by teaching status, we estimate nonteaching hospitals would experience an increase of 3.5 percent, minor teaching hospitals would experience an increase of 3.2 percent, and major teaching hospitals would experience an increase of 1.6 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 a decrease of 0.3 percent in payments. We estimate that hospitals with proprietary ownership would experience an increase of 4.4 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 CY 2021 payment rates, compared to estimated CY 2020 payment rates, generally ranges between an increase of 2 and 5 percent, depending on the service, with some exceptions. We estimate the proposed impact of applying the hospital market basket update to ASC payment rates would increase payments by $160 million under the ASC payment system in CY 2021.

B. Legislative and Regulatory Authority for the Hospital OPPS

When Title XVIII of the Act was enacted, Medicare payment for hospital outpatient services was based on hospital-specific costs. In an effort to ensure that Medicare and its beneficiaries pay appropriately for services and to encourage more efficient delivery of care, the Congress mandated replacement of the reasonable cost-based payment methodology with a prospective payment system (PPS). The Balanced Budget Act of 1997 (BBA) (Pub. L. 105-33) added section 1833(t) to the Act, authorizing implementation of a PPS for hospital outpatient services. The OPPS was first implemented for services furnished on or after August 1, 2000. Implementing regulations for the OPPS are located at 42 CFR parts 410 and 419.

The Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act of 1999 (BBRA) (Pub. L. 106-113) made major changes in the hospital OPPS. The following Acts made additional changes to the OPPS: The Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000 (BIPA) (Pub. L. 106-554); the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) (Pub. L. 108-173); the Deficit Reduction Act of 2005 (DRA) (Pub. L. 109-171), enacted on February 8, 2006; the Medicare Improvements and Extension Act under Division B of Title I of the Tax Relief and Health Care Act of 2006 (MIEA-TRHCA) (Pub. L. 109-432), enacted on December 20, 2006; the Medicare, Medicaid, and SCHIP Extension Act of 2007 (MMSEA) (Pub. L. 110-173), enacted on December 29, 2007; the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA) (Pub. L. 110-275), enacted on July 15, 2008; the Patient Protection and Affordable Care Act (Pub. L. 111-148), enacted on March 23, 2010, as amended by the Health Care and Education Reconciliation Act of 2010 (Pub. L. 111-152), enacted on March 30, 2010 (these two public laws are collectively known as the Affordable Care Act); the Medicare and Medicaid Extenders Act of 2010 (MMEA, Pub. L. 111-309); the Temporary Payroll Tax Cut Continuation Act of 2011 (TPTCCA, Pub. L. 112-78), enacted on December 23, 2011; the Middle Class Tax Relief and Job Creation Act of 2012 (MCTRJCA, Pub. L. 112-96), enacted on Start Printed Page 48777February 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 Schedule (CLFS); services for beneficiaries with end-stage renal disease (ESRD) that are paid under the ESRD prospective payment system; and services and procedures that require an inpatient stay that are paid under the hospital IPPS. 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 Maryland's All-Payer or Total Cost of Care 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.Start Printed Page 48778

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;
  • May advise on OPPS APC rates for covered ASC procedures;
  • 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 (84 FR 26117).

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 19, 2019. Prior to each meeting, we publish a notice in the Federal Register to announce the meeting, announce new members, and 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). In CY 2018, we published a Federal Register notice requesting nominations to fill vacancies on the Panel (83 FR 3715). As published in this notice, CMS is accepting nominations on a continuous basis.

In addition, the Panel has established an administrative structure that, in part, currently includes the use of three subcommittee workgroups to provide preparatory meeting and subject support to the larger panel. The three current subcommittees include the following:

  • APC Groups and Status Indicator Assignments Subcommittee, which advises and provides recommendations to the Panel on the appropriate status indicators to be assigned to HCPCS codes, including but not limited to whether a HCPCS code or a category of codes should be packaged or separately paid, 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 workgroup subcommittees was established by a majority vote from the full Panel during a scheduled Panel meeting, and the Panel recommended at the August 19, 2019, meeting that the subcommittees continue. We accepted this recommendation.

Discussions of the other recommendations made by the Panel at the August 19, 2019 Panel meeting, namely APC assignments for certain CPT codes, a comprehensive APC for skin substitute products, a comprehensive APC for autologous hematopoietic stem cell transplantation, and packaging policies, were discussed in the CY 2020 OPPS/ASC final rule with comment period (84 FR 61148). 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 2020 OPPS/ASC Final Rule With Comment Period

We received approximately 22 timely pieces of correspondence on the CY 2020 OPPS/ASC final rule with comment period that appeared in the Federal Register on November 12, 2019 (84 FR 61142), most of which were outside of the scope of the final rule. In-scope comments related to the interim APC assignments and/or status indicators of new or replacement Level II HCPCS codes (identified with comment indicator “NI” in OPPS Addendum B, ASC Addendum AA, and ASC Addendum BB to that final rule). Summaries of the public comments on topics that were open to comment and our responses to them will be set forth in various sections of the final rule with comment period under the appropriate subject-matter headings.

II. Proposed Updates Affecting OPPS Payments

A. Proposed Recalibration of APC Relative Payment Weights

1. Database Construction

a. Database Source and Methodology

Section 1833(t)(9)(A) of the Act requires that the Secretary review not Start Printed Page 48779less often than annually and revise the relative payment weights for APCs. In the April 7, 2000 OPPS final rule with comment period (65 FR 18482), we explained in detail how we calculated the relative payment weights that were implemented on August 1, 2000 for each APC group.

For the CY 2021 OPPS, we propose to recalibrate the APC relative payment weights for services furnished on or after January 1, 2021, and before January 1, 2022 (CY 2021), using the same basic methodology that we described in the CY 2020 OPPS/ASC final rule with comment period (84 FR 61149), using updated CY 2019 claims data. That is, we propose to recalibrate the relative payment weights for each APC based on claims and cost report data for hospital outpatient department (HOPD) services, using the most recent available data to construct a database for calculating APC group weights.

For the purpose of recalibrating the proposed APC relative payment weights for CY 2021, we began with approximately 167 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, 2019, and before January 1, 2020, before applying our exclusionary criteria and other methodological adjustments. After the application of those data processing changes, we used approximately 87 million final action claims to develop the proposed CY 2021 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 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 2021. The proposed list of bypass codes contains codes that are reported on claims for services in CY 2019 and, therefore, includes codes that were in effect in CY 2019 and used for billing, but were deleted for CY 2020. We propose to retain these deleted bypass codes on the proposed CY 2021 bypass list because these codes existed in CY 2019 and were covered OPD services in that period, and CY 2019 claims data were used to calculate proposed CY 2021 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 were identified by asterisks (*) in the third column of Addendum N to the proposed rule. HCPCS codes that we propose to add for CY 2021 are identified by asterisks (*) in the fourth column of Addendum N.

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

For CY 2021, we propose 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 CY 2021 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 2019 claims data by comparing these claims data to the most recently available hospital cost reports, which, in most cases, are from CY 2018. For the proposed CY 2021 OPPS payment rates, we used the set of claims processed during CY 2019. 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. To ensure the completeness of the revenue code-to-cost center crosswalk, we reviewed changes to the list of revenue codes for CY 2019 (the year of claims data we used to calculate the proposed CY 2021 OPPS payment rates) and updates to the NUBC 2019 Data Specifications Manual. 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.

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 used a less precise “square feet” allocation methodology for the costs of large moveable equipment like CT scan and MRI machines. They indicated that while we 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/ASC final rule with comment period (78 FR 74847) 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. 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 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 in 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) and in the CY 2019 OPPS/ASC final rule with comment period (83 FR 58831), we finalized a policy to extend the transition policy for 1 additional year and we 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 and the CY 2019 OPPS.

As we discussed in the CY 2018 OPPS/ASC final rule with comment period (82 FR 59228), some stakeholders have raised concerns regarding using claims from all providers to calculate CT and MRI CCRs, regardless of the cost allocations statistic employed (78 FR Start Printed Page 4878074840 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 1 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 2 provides statistical values based on the CT and MRI standard cost center CCRs using the different cost allocation methods.

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 18.5 percent to 2,195 providers and the number of valid CT CCRs has increased by 16.3 percent to 2,275 providers. Table 1 displays the impact on proposed OPPS payment rates for CY 2021 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 1.

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 had extended the transition an additional 2 years to offer providers flexibility in applying cost allocation methodologies for CT and MRI cost centers other than “square feet.” In the CY 2020 OPPS/ASC final rule with comment period (84 FR 61152), we finalized a 2-year phased-in approach, as suggested by some commenters, that applied 50 percent of the payment impact from ending the transition in CY 2020 and 100 percent of the payment impact from ending the transition in CY 2021.

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 and many providers continue to use the “square feet” cost allocation methodology, which we Start Printed Page 48781believe 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, as finalized in the CY 2020 OPPS/ASC final rule with comment period (84 FR 61152), in the CY 2021 OPPS we are using 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 1.

As noted earlier, the Deficit Reduction Act (DRA) of 2005 requires Medicare to limit Medicare payment for certain imaging services covered by the Physician Fee Schedule (PFS) to not exceed what Medicare pays for these services under the OPPS. As required by law, for certain imaging series paid for under the PFS, we cap the technical component of the PFS payment amount for the applicable year at the OPPS payment amount (71 FR 69659 through 69661). 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 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 OPPS payment rates for CY 2021. 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, later 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 2020 claims that were used to calculate the proposed payment rates for this CY 2021 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. For CY 2021, we propose to continue to use geometric mean costs to calculate the relative weights on which the proposed 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 OPPS payment rates for CY 2021 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 the claims data used for setting payment rates (CY 2017 data) contained lines with the modifier “PN”, which indicates 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 2021 OPPS, we will continue to remove these claim lines with modifier “PN” from the ratesetting process.

For details of the claims accounting process used in this proposed rule, we refer readers to the claims accounting narrative under supporting documentation for this CY 2021 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.

We propose 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, to address the differences in CCRs and to better reflect hospitals' costs, we propose 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 propose to apply this mean ratio to the overall CCRs of hospitals not reporting costs and charges for blood cost centers on their cost reports to simulate blood-specific CCRs for those hospitals. We propose to calculate the costs upon which the proposed CY 2021 payment rates for blood and blood products are based using the actual blood-specific CCR for hospitals that Start Printed Page 48782reported costs and charges for a blood cost center and a hospital-specific, simulated blood-specific CCR for hospitals that did not report costs and charges for a blood cost center.

We continue to believe that the hospital-specific, simulated blood-specific, CCR methodology better responds to the absence of a blood-specific CCR for a hospital than alternative methodologies, such as defaulting to the overall hospital CCR or applying an average blood-specific CCR across hospitals. Because this methodology takes into account the unique charging and cost accounting structure of each hospital, we believe that it yields more accurate estimated costs for these products. We continue to believe that this methodology in CY 2021 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 we defined a comprehensive APC (C-APC) as a classification for the provision of a primary service and all adjunctive services provided to support the delivery of the primary service. Under this policy, we include the costs of blood and blood products when calculating the overall costs of these C-APCs. We propose 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 propose not to 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 refer readers to Addendum B of this proposed rule (which is available via the internet on the CMS website) for the proposed CY 2021 payment rates for blood and blood products (which are generally 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).

For CY 2021, we propose to continue to establish payment rates for blood and blood products using our blood-specific CCR methodology.

(b) Payment for Blood Not Otherwise Classified (NOC) Code

Recently, providers and stakeholders in the blood products field have reported that product development for new blood products has accelerated. There may be several additional new blood products entering the market by the end of CY 2021, compared to only one or two new products entering the market over the previous 15 to 20 years. To encourage providers to use these new products, providers and stakeholders requested that we establish a new HCPCS code to allow for payment for unclassified blood products prior to these products receiving their own HCPCS code. Under the OPPS, unclassified procedures are generally assigned to the lowest APC payment level of an APC family. However, since blood products are each assigned to their own unique APC, the concept of a lowest APC payment level does not apply in this context.

Starting January 1, 2020, we established a new HCPCS code, P9099 (Blood component or product not otherwise classified) which allows providers to report unclassified blood products. We assigned HCPCS code P9099 to status indicator “E2” (Not payable by Medicare when submitted on an outpatient claim) for CY 2020. We took this action because HCPCS code P9099 potentially could be reported for multiple products with different costs during the same period of time. Therefore, we could not identify an individual blood product HCPCS code that would have a similar cost to HCPCS code P9099, and were not able to crosswalk a payment rate from an established blood product HCPCS code to HCPCS code P9099. Some stakeholders expressed concerns that assigning HCPCS code P9099 to a non-payable status in the OPPS meant that hospitals would receive no payment when they used unclassified blood products. Also, claim lines billed with P9099 are rejected by Medicare, which prevents providers from tracking the utilization of unclassified blood products.

Because of the challenges of determining an appropriate payment rate for unclassified blood products, we are considering packaging the cost of unclassified blood products into their affiliated primary medical procedure. Although we typically do not package blood products under the OPPS, for unclassified blood products, we do not believe it is possible to accurately determine an appropriate rate that would apply for all of the products (potentially several, with varying costs) that may be reported using HCPCS code P9099. Packaging the cost of unclassified blood products into the payment for the primary medical service by assigning HCPCS code P9099 a status indicator of “N” would allow providers to report the cost of unclassified blood products to Medicare. Over time, the costs of unspecified blood products would be reflected in the payment rate for the primary medical service if the blood product remains unclassified. However, we expect that most blood products would seek and be granted more specific coding such that the unclassified HCPCS code P9099 would no longer be applicable. We believe that packaging the costs of unclassified blood products would be an improvement over the current non-payable status for HCPCS code P9099 as it would allow for tracking of the costs and utilization of unclassified blood products.

Another option we considered, but ultimately rejected is similar to our policy under the OPPS to assign NOC codes to the lowest APC within the appropriate clinical family. We could crosswalk and assign the same payment rate for HCPCS code P9099 as HCPCS code P9043 (Infusion, plasma protein fraction (human), 5 percent, 50 ml), which is the lowest cost blood product with a proposed CY 2021 payment rate of $8.02 per unit. This option would provide a small, separate payment for each unclassified blood product service, and, similar to our proposal to package the costs of HCPCS code P9099 into their primary procedure, would allow for tracking of the cost utilization of unclassified blood products. However, given that the cross-walked payment rate is potentially significantly lower than the cost of the product, providers may find that packaging the cost of unclassified blood products into another medical service may generate more payment for the products over time.

Start Printed Page 48783

Thus, for CY 2021, we propose to package the cost of unclassified blood products reported by HCPCS code P9099 into the cost of the associated primary procedure. We propose to change the status indicator for HCPCS code P9099 from “E2” (not payable by Medicare in the OPPS) to “N” (payment is packaged into other services in the OPPS). In addition, we also seek comment on the alternative proposal to make HCPCS code P9099 separately payable with a payment rate equivalent to the payment rate for the lowest cost blood product, HCPCS code P9043 (Infusion, plasma protein fraction (human), 5 percent, 50 ml), with a proposed CY 2021 payment rate of $8.02 per unit. If we were to adopt this option as our final policy, we would also change the status indicator for HCPCS code P9099 from “E2” (not payable by Medicare in the OPPS) to “R” (blood and blood products, paid under OPPS).

(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.

For CY 2021, except where otherwise indicated, we propose to use the costs derived from CY 2019 claims data to set the proposed CY 2021 payment rates for brachytherapy sources because CY 2019 is the year of data we propose to use to set the proposed payment rates for most other items and services that would be paid under the CY 2021 OPPS. With the exception of the proposed payment rate for brachytherapy source C2645 (Brachytherapy planar source, palladium-103, per square millimeter), we propose to base the payment rates for brachytherapy sources on the geometric mean unit costs for each source, consistent with the methodology that we propose for other items and services paid under the OPPS, as discussed in section II.A.2. of this proposed rule. We also propose 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 propose 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 propose 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 2021 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 identified with status indicator “U”.

For CY 2018, we assigned status indicator “U” (Brachytherapy Sources, Paid under OPPS; separate APC payment) to HCPCS code C2645 (Brachytherapy planar source, palladium-103, per square millimeter) in the absence of claims data and established a payment rate using external data (invoice price) at $4.69 per mm2. For CY 2019, in the absence of sufficient claims data, we continued to establish a payment rate for C2645 at $4.69 per mm2. Our CY 2018 claims data available for the final CY2020 OPPS/ASC final rule with comment period, included two claims with a geometric mean cost of HCPCS code C2645 of $1.02 per mm2. In response to comments from stakeholders, we agreed with commenters that given the limited claims data available and a new outpatient indication for C2645, a payment rate for HCPCS code C2645 based on the geometric mean cost of 1.02 per mm2 may not adequately reflect the cost of HCPCS code C2645. In the CY 2020 OPPS/ASC final rule with comment period, we finalized our policy to use 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 CY 2019 payment rate of $4.69 per mm2 for HCPCS code C2645 for CY 2020.

For CY 2021, we propose to continue to assign status indicator “U” to HCPCS code C2645 (Brachytherapy planar source, palladium-103, per square millimeter). For CY 2020, in the absence of sufficient claims data, we continued to establish a payment rate for C2645 at $4.69 per mm2. Our CY 2019 claims data available for the proposed CY 2021 rule, included one claim with over 4,000 units of HCPCS code C2645. The geometric mean cost of HCPCS code C2645 from this one claim is $1.07 per mm2 for CY 2019. We do not believe that this one claim is adequate to establish an APC payment rate for HCPCS code C2645 and to discontinue our use of external data for this brachytherapy source. Therefore, for CY 2021, we propose to continue assigning the brachytherapy source described by HCPCS code C2645 a payment rate of $4.69 mm2 for CY 2021 through use of our equitable adjustment authority.

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 & Medicaid Services, 7500 Start Printed Page 48784Security 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. Comprehensive APCs (C-APCs) for CY 2021

(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;”
  • 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 (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 Start Printed Page 48785comprehensive 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); and
  • Violation of the 2 times rule, as stated in section 1833(t)(2) of the Act and section III.B.2. of this proposed 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 Start Printed Page 48786adjustment 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 2021, we propose 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 complexity adjustments for “J1” and add-on code combinations for CY 2021, along with all of the other proposed complexity adjustments, in Addendum J to this CY 2021 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) 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.

To address this issue and 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 finalized excluding 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. In the CY 2020 OPPS/ASC final rule with comment period, we finalized that payment for services assigned to a New Technology APC procedures would be excluded from being packaged into the payment for comprehensive observation services assigned status indicator “J2” when they are included on a claim with a “J2” service starting in CY 2020 (84 FR 61167).

(3) Additional C-APCs for CY 2021

For CY 2021 and subsequent years, we propose 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, we are not proposing to convert any conventional Start Printed Page 48787APCs to C-APCs in CY 2021. However, as discussed in section III.D.7, we propose to create an additional level for Urology and Related Services C-APCs and, as discussed in section III.D.1, we propose to create an additional level for Neurostimulator and Related Procedures C-APCs Table 3 lists the proposed C-APCs for CY 2021, all of which were established in past rules. 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 complexity adjustments and other information.

Start Printed Page 48788

Start Printed Page 48789

Start Printed Page 48790

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

We propose 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.

We propose 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 2021. In addition, we propose to set the proposed payment rate for composite APC 8010 at the same payment rate that we proposed 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.

We propose 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 2021.

(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, 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 Start Printed Page 48791resonance angiography (MRA). The HCPCS codes subject to the multiple imaging composite policy and their respective families are listed in Table 12 of the CY 2014 OPPS/ASC final rule with comment period (78 FR 74920 through 74924).

While there are three imaging families, there are five multiple imaging composite APCs due to the statutory requirement under section 1833(t)(2)(G) of the Act that we differentiate payment for OPPS imaging services provided with and without contrast. While the ultrasound procedures included under the policy do not involve contrast, both CT/CTA and MRI/MRA scans can be provided either with or without contrast. The five multiple imaging composite APCs established in CY 2009 are:

  • APC 8004 (Ultrasound Composite);
  • APC 8005 (CT and CTA without Contrast Composite);
  • APC 8006 (CT and CTA with Contrast Composite);
  • APC 8007 (MRI and MRA without Contrast Composite); and
  • APC 8008 (MRI and MRA with Contrast Composite).

We define the single imaging session for the “with contrast” composite APCs as having at least one or more imaging procedures from the same family performed with contrast on the same date of service. For example, if the hospital performs an MRI without contrast during the same session as at least one other MRI with contrast, the hospital will receive payment based on the payment rate for APC 8008, the “with contrast” composite APC.

We make a single payment for those imaging procedures that qualify for payment based on the composite APC payment rate, which includes any packaged services furnished on the same date of service. The standard (noncomposite) APC assignments continue to apply for single imaging procedures and multiple imaging procedures performed across families. For a full discussion of the development of the multiple imaging composite APC methodology, we refer readers to the CY 2009 OPPS/ASC final rule with comment period (73 FR 68559 through 68569).

For CY 2021, we propose 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 2021 payment rates for the five multiple imaging composite APCs (APCs 8004, 8005, 8006, 8007, and 8008) were based on proposed geometric mean costs calculated from CY 2019 claims available for this CY 2021 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 2021 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 2021 OPPS/ASC proposed rule.

For this CY 2021 OPPS/ASC proposed rule, we were able to identify approximately 964,000 “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 2021 geometric mean costs for the multiple imaging composite APCs. Table 4 of this CY 2021 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 2021.

Table 4 lists the HCPCS codes that we propose would be subject to the multiple imaging composite APC policy and their respective families and approximate composite APC final geometric mean costs for CY 2021.

Start Printed Page 48792

Start Printed Page 48793

Start Printed Page 48794

Start Printed Page 48795

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 payments 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 may occur if separate payment is provided for the item.Start Printed Page 48796

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), the CY 2019 OPPS/ASC final rule with comment period (83 FR 58854), and the CY 2020 OPPS/ASC final rule with comment period (84 FR 61173). 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 2021, 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 CY 2021, we propose no changes to this policy. We will continue to conditionally package the costs of selected newly identified ancillary services into payment for 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 in CY 2021.

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. The public comments ranged from requests to unpackage most items and services that are unconditionally packaged under the OPPS, including drugs and devices, to specific requests for separate payment for a specific drug or device.

In the CY 2018 OPPS/ASC final rule with comment period (82 FR 52485), we reiterated our position with regard to payment for Exparel®, a non-opioid analgesic that functions as a surgical supply, 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 we would continue to explore and evaluate packaging policies under the OPPS and consider these policies in future rulemaking.

In the CY 2019 OPPS/ASC final rule with comment period (83 FR 58855 through 58860), we finalized a 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 due to decreased utilization in the ASC setting.

For the CY 2020 OPPS/ASC proposed rule (84 FR 39423 through 39427), as required by section 1833(t)(22)(A)(i) of the Act, as added by section 6082(a) of the SUPPORT Act, we reviewed 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 ensuring that there are not financial incentives to use opioids instead of non-opioid alternatives. 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. For the CY 2020 OPPS/ASC proposed rule (84 FR 39423 through 39427), we proposed 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 to 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. In the CY 2020 OPPS/ASC final rule with comment period (84 FR 61173 through 61180), after reviewing data from stakeholders and Medicare claims data, we did not find compelling Start Printed Page 48797evidence to suggest that revisions to our OPPS payment policies for non-opioid pain management alternatives were necessary for CY 2020. We finalized our proposal to continue to unpackage and pay separately at ASP+6 percent for the cost of non-opioid pain management drugs that function as surgical supplies when furnished in the ASC setting for CY 2020. Under this policy, the only drug that meets these criteria is Exparel.

(2) Evaluation and CY 2021 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 ensuring 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.

As noted in the background section above, we conducted an evaluation to determine whether there are payment incentives for using opioids instead of non-opioid alternatives in the CY 2020 OPPS/ASC final rule with comment period (84 FR 61176 through 61180). The results of our review and evaluation of our claims data did not provide evidence to indicate that the OPPS packaging policy had the unintended consequence of discouraging the use of non-opioid treatments for postsurgical pain management in the hospital outpatient department. Higher utilization may be a potential indicator that the packaged payment is not causing an access to care issue and that the payment rate for the primary procedure adequately reflects the cost of the drug. Our updated review of claims data showed a continued decline in the utilization of Exparel® in the ASC setting, which supported our proposal to continue paying separately for Exparel® in the ASC setting. Decreased utilization could potentially indicate that the packaging policy is discouraging use of that treatment and that providers are choosing less expensive treatments. However, it is difficult to attribute causality of changes in utilization to Medicare packaging payment policy only. We believe that unpackaging and paying separately for Exparel addresses decreased utilization because it eliminates any potential Medicare payment disincentive for the use of this non-opioid alternative, rather than prescription opioids.

We believe we fulfilled the statutory requirement to review payments for opioids and evidence-based non-opioid alternatives to ensure that there are not financial incentives to use opioids instead of non-opioid alternatives in CY 2020 OPPS/ASC rulemaking. We are committed to evaluating our current policies to adjust payment methodologies, if necessary, in order to ensure appropriate access for beneficiaries amid the current opioid epidemic. However, we do not believe conducting a similar CY 2021 review would yield significantly different outcomes or new evidence that would prompt us to change our payment policies under the OPPS or ASC payment system.

Therefore, for CY 2021, we propose 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 to 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 2021.

c. Clinical Diagnostic Laboratory Tests Packaging Policy

(1) Background

Prior to CY 2014, clinical diagnostic laboratory tests were excluded from payment under the hospital OPPS because they were paid separately under the Clinical Laboratory Fee Schedule (CLFS). Section 1833(t)(1)(B)(i) of the Act authorizes the Secretary to designate the hospital outpatient services that are paid under the OPPS. Under this authority, the Secretary excluded from the OPPS those services that are paid under fee schedules or other payment systems. Because laboratory services are paid separately under the CLFS, laboratory tests were excluded from separate payment under the OPPS. We codified this policy at 42 CFR 419.22(l).

However, in CY 2014, we revised the categories of packaged items and services under the OPPS to include certain laboratory tests. We stated that certain laboratory tests, similar to other covered outpatient services that are packaged under the OPPS, are typically integral, ancillary, supportive, dependent, or adjunctive to a primary hospital outpatient service and should be packaged under the hospital OPPS. We stated that laboratory tests and their results support clinical decision making for a broad spectrum of primary services provided in the hospital outpatient setting, including surgery and diagnostic evaluations (78 FR 74939). Consequently, we finalized the policy to package payment for most laboratory tests in the OPPS when they are integral, ancillary, supportive, dependent, or adjunctive to a primary service or services provided in the hospital outpatient setting (78 FR 74939 through 74942 and 42 CFR 419.2(b)(17)). In the same final rule, we clarified that certain laboratory tests would be excluded from packaging. Specifically, we stated that laboratory tests would be paid separately under the CLFS when the laboratory test is the only service provided to a beneficiary or when a laboratory test is conducted on the same date of service as the primary service but is ordered for a different purpose than the primary service by a practitioner different than the practitioner who ordered the primary service or when the laboratory test is a molecular pathology test (78 FR 74942). As explained in the CY 2014 OPPS/ASC final rule, we excluded molecular pathology tests from packaging because we believe these tests are relatively new and may have a different pattern of clinical use, which may make them generally less tied to a primary service in the hospital outpatient setting than the more common and routine laboratory tests that we package (78 FR 74939). Based on these changes, we revised the regulation text at §  419.2(b) Start Printed Page 48798and §  419.22(l) to reflect this laboratory test packaging policy.

In CY 2016, we made some modifications to this policy (80 FR 70348 through 70350). First, we clarified that all molecular pathology tests would be excluded from our packaging policy, including any new codes that also describe molecular pathology tests. In the CY 2014 OPPS/ASC final rule, we stated that only those molecular pathology codes described by CPT codes in the ranges of 81200 through 81383, 81400 through 81408, and 81479 were excluded from OPPS packaging (78 FR 74939 through 74942). However, in 2016, we expanded this policy to include not only the original code range but also all new molecular pathology test codes (80 FR 70348). Secondly, we excluded preventive laboratory tests from OPPS packaging and provided that they would be paid separately under the CLFS. Laboratory tests that are considered preventive are listed in Section 1.2, Chapter 18 of the Medicare Claims Processing Manual (Pub. 100-04). As stated in the CY 2016 OPPS/ASC final rule, we make an exception to conditional packaging of ancillary services for ancillary services that are also preventive services (80 FR 70348). For consistency, we excluded from OPPS packaging those laboratory tests that are classified as preventive services. In addition, we modified our conditional packaging policy so that laboratory tests provided during the same outpatient stay (rather than specifically provided on a same date of service as the primary service) are considered as integral, ancillary, supportive, dependent, or adjunctive to a primary service or services, except when a laboratory test is ordered for a different diagnosis and by a different practitioner than the practitioner who ordered the other hospital outpatient services. We explained in the CY 2016 OPPS/ASC final rule that this modification did not affect our policy to provide separate payment for laboratory tests: (1) If they are the only services furnished to an outpatient and are the only services on a claim and have a payment rate on the CLFS; or (2) if they are ordered for a different diagnosis than another hospital outpatient service by a practitioner different than the practitioner who ordered the other hospital outpatient service (80 FR 70349 through 70350).

In CY 2017, we modified the policy to remove the “unrelated” laboratory test exclusion and to expand the laboratory test packaging exclusion to apply to laboratory tests designated as advanced diagnostic laboratory tests (ADLTs) under the CLFS. We clarified that the exception would only apply to those ADLTs that meet the criteria of section 1834A(d)(5)(A) of the Act, which are defined as tests that provide an analysis of multiple biomarkers of DNA, RNA, or proteins combined with a unique algorithm to yield a single patient-specific result (81 FR 79592-79594).

(2) Current Categories of Clinical Diagnostic Laboratory Tests Excluded From OPPS Packaging

Under our current policy, certain clinical diagnostic laboratory tests (CDLTs) that are listed on the CLFS are packaged as integral, ancillary, supportive, dependent, or adjunctive to the primary service or services provided in the hospital outpatient setting during the same outpatient encounter and billed on the same claim. While we package most CDLTs under the OPPS, when a CDLT is listed on the CLFS and meets one of the following four criteria, we do not pay for the test under the OPPS, but rather, we pay for it under the CLFS when it is: (1) The only service provided to a beneficiary on a claim; (2) considered a preventive service; (3) a molecular pathology test; or (4) an advanced diagnostic laboratory test (ADLT) that meets the criteria of section 1834A(d)(5)(A) of the Act. Generally, when laboratory tests are not packaged under the OPPS and are listed on the CLFS, they are paid under the CLFS instead of the OPPS.

(3) Proposed New Category of Laboratory Tests Excluded From OPPS Packaging

(a) Background on Protein-Based MAAAs

As part of recent rulemaking cycles, stakeholders have suggested that some protein-based Multianalyte Assays with Algorithmic Analyses (MAAAs) may have a pattern of clinical use that makes them relatively unconnected to the primary hospital outpatient service (84 FR 61439). In the CY 2018 OPPS/ASC final rule (82 FR 59299), we stated that stakeholders indicated that certain protein-based MAAAs, specifically those described by CPT codes 81490, 81503, 81535, 81536, 81538, and 81539, are generally not performed in the HOPD setting and have similar clinical patterns of use as the DNA and RNA-based MAAA tests that are assigned to status indicator “A” under the OPPS and are paid separately under the CLFS. Notably, all of the tests described by these CPT codes (with the exception of CPT code 81490, which we discuss below) are cancer-related protein-based MAAAs. In the same final rule, stakeholders suggested that, based on the June 23, 2016 CLFS final rule entitled “Medicare Program; Medicare Clinical Diagnostic Laboratory Tests Payment System,” in which CMS defined an ADLT under section 1834A(d)(5)(A) of the Act to include DNA, RNA, and protein-based tests, they believe that the reference to “protein-based tests” in the definition applies equally to the tests they identified, that is, protein-based MAAAs. Consequently, the stakeholders believed that protein-based MAAAs should be excluded from OPPS packaging and paid separately under the CLFS. We note that one of the protein-based MAAAs previously requested by stakeholders to be excluded from OPPS packaging policy is CPT code 81538 (Oncology (lung), mass spectrometric 8-protein signature, including amyloid a, utilizing serum, prognostic and predictive algorithm reported as good versus poor overall survival), which has been designated as an ADLT under section 1834A(d)(5)(A) of the Act as of December 21, 2018. Therefore, CPT code 81538 is currently excluded from the OPPS packaging policy and paid under the CLFS instead of the OPPS when it also meets the laboratory DOS requirements.

(b) CY 2021 Proposal for Cancer-Related Protein-Based MAAAs

Since publishing the CY 2020 OPPS/ASC final rule, we have continued to consider previous stakeholder requests to exclude some protein-based MAAAs from the OPPS packaging policy. After further review of this issue, we believe that cancer-related protein-based MAAAs, in particular, may be relatively unconnected to the primary hospital outpatient service during which the specimen was collected from the patient. Similar to molecular pathology tests, which are currently excluded from the OPPS packaging policy, cancer-related protein-based MAAAs appear to have a different pattern of clinical use, which may make them generally less tied to the primary service in the hospital outpatient setting than the more common and routine laboratory tests that are packaged.

As we noted above, commenters to the CY 2018 OPPS/ASC final rule identified specific cancer-related protein-based MAAAs as tests that are generally not performed in the HOPD setting (82 FR 59299). In fact, those tests identified by commenters are used to guide future surgical procedures and chemotherapeutic interventions. Treatments that are based on the results of cancer-related protein-based MAAAs are typically furnished after the patient is no longer in the hospital, in which Start Printed Page 48799case they are not tied to the same hospital outpatient encounter during which the specimen was collected.

For these reasons, we propose to exclude cancer-related protein-based MAAAs from the OPPS packaging policy and pay for them separately under the CLFS.

The AMA CPT 2020 manual currently describes MAAAs, in part, as “procedures that utilize multiple results derived from panels of analyses of various types, including molecular pathology assays, fluorescent in situ hybridization assays, and non-nucleic acid based assays (for example, proteins, polypeptides, lipids, carbohydrates).” [1] The code descriptors of MAAAs include several specifics, including but not limited to disease type (for example, oncology, autoimmune, tissue rejection), and material(s) analyzed (for example, DNA, RNA, protein, antibody). As the AMA CPT 2020 manual describes a MAAA, and the code descriptor of each MAAA distinguishes MAAAs that are cancer-related assays from those that test for other disease types, the AMA CPT manual is a useful tool to identify cancer-related MAAAs that are “protein-based”. Accordingly, using the AMA CPT 2020 manual criteria to identify a MAAA that is cancer-related, and, of those tests, identifying the ones whose analytes test proteins, we have determined there are currently six cancer-related protein-based MAAAs: CPT codes 81500, 81503, 81535, 81536, 81538 and 81539. As discussed previously in this section, CPT code 81538 has been designated as an ADLT under section 1834A(d)(5)(A) of the Act as of December 21, 2018 and therefore, is already paid under the CLFS instead of the OPPS when it meets the laboratory DOS requirements. As such, we propose to assign status indicator “A” (“Not paid under OPPS. Paid by MACs under a fee schedule or payment system other than OPPS”) to cancer-related protein-based MAAAs as described by CPT codes 81500, 81503, 81535, 81536, and 81539. We would apply this policy to cancer-related protein-based MAAAs that do not currently exist, but that are developed in the future.

We note that commenters to the CY 2018 OPPS/ASC final rule also identified CPT code 81490 as a protein-based MAAA that should be excluded from the OPPS packaging policy and paid outside of the OPPS. However, the results for the test described by CPT code 81490 are used to determine disease activity in rheumatoid arthritis patients, guide current therapy to reduce further joint damage, and may be tied to the primary hospital outpatient service, that is, the hospital outpatient encounter during which the specimen was collected. Therefore, we believe that payment for CPT code 81490 remains appropriately packaged under the OPPS.

We refer readers to section XVIII. of this proposed rule regarding our proposed revision to the laboratory date of service policy for cancer-related protein-based MAAAs.

4. 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 2020 OPPS/ASC final rule with comment period (84 FR 61180 through 61182), we applied this policy and calculated the relative payment weights for each APC for CY 2020 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 2021, as we did for CY 2020, we propose to continue to apply the policy established in CY 2013 and calculate relative payment weights for each APC for CY 2021 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 2021, as we did for CY 2020, we propose 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 2021, as we did for CY 2020, we propose 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) and the CY 2020 OPPS/ASC final rule with comment period (84 FR 61365 through 61369), we discuss 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 is 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 result from the change in payments for these clinic visits are not budget neutral. Therefore, the impact of this policy will generally not be reflected in the budget neutrality adjustments, whether the adjustment is to the OPPS relative weights or to the OPPS conversion factor. We note that the volume control method for clinic visit services furnished by non-excepted off-campus PBDs is subject to litigation. For a full discussion of this policy and the litigation, we refer readers to the CY 2020 OPPS/ASC final rule with comment period (84 FR 61142).

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 Start Printed Page 488002021 is neither greater than nor less than the estimated aggregate weight that would have been calculated without the changes. To comply with this requirement concerning the APC changes, we propose to compare the estimated aggregate weight using the CY 2020 scaled relative payment weights to the estimated aggregate weight using the proposed CY 2021 unscaled relative payment weights.

For CY 2020, we multiplied the CY 2020 scaled APC relative payment weight applicable to a service paid under the OPPS by the volume of that service from CY 2019 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 2021, we propose to apply the same process using the estimated CY 2021 unscaled relative payment weights rather than scaled relative payment weights. We propose to calculate the weight scalar by dividing the CY 2020 estimated aggregate weight by the unscaled CY 2021 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 2021 OPPS proposed rule link and open the claims accounting document link at the bottom of the page.

We propose to compare the estimated unscaled relative payment weights in CY 2021 to the estimated total relative payment weights in CY 2020 using CY 2019 claims data, holding all other components of the payment system constant to isolate changes in total weight. Based on this comparison, we propose to adjust the calculated CY 2021 unscaled relative payment weights for purposes of budget neutrality. We propose to adjust the estimated CY 2021 unscaled relative payment weights by multiplying them by a proposed weight scalar of 1.4443 to ensure that the proposed CY 2021 relative payment weights are scaled to be budget neutral. The proposed CY 2021 relative payment weights listed in Addenda A and B to this proposed rule (which are available via the internet on the CMS website) are scaled and incorporate the recalibration adjustments discussed in sections II.A.1. and II.A.2. of this proposed rule.

Section 1833(t)(14) of the Act provides the payment rates for certain SCODs. Section 1833(t)(14)(H) of the Act provides that additional expenditures resulting from this paragraph shall not be taken into account in establishing the conversion factor, weighting, and other adjustment factors for 2004 and 2005 under paragraph (9), but shall be taken into account for subsequent years. Therefore, the cost of those SCODs (as discussed in section V.B.2. of proposed rule) is included in the budget neutrality calculations for the CY 2021 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 2021 IPPS/LTCH PPS proposed rule (85 FR 32738), consistent with current law, based on IHS Global, Inc.'s fourth quarter 2019 forecast of the FY 2021 market basket increase, the proposed FY 2021 IPPS market basket update was 3.0 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 2021.

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 2021 IPPS/LTCH PPS proposed rule (85 FR 32739), the proposed MFP adjustment for FY 2021 was 0.4 percentage point.

Therefore, we propose that the MFP adjustment for the CY 2021 OPPS is 0.4 percentage point. We also propose 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/or the MFP adjustment), we will use such updated data, if appropriate, to determine the CY 2021 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 the CY 2021 OPPS/ASC final 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 propose for CY 2021 an OPD fee schedule increase factor of 2.6 percent for the CY 2021 OPPS (which is the proposed estimate of the hospital inpatient market basket percentage increase of 3.0 percent, less the proposed 0.4 percentage point MFP adjustment).

We propose that hospitals that fail to meet the Hospital OQR Program reporting requirements would be subject to an additional reduction of 2.0 percentage points from the OPD fee schedule increase factor adjustment to the conversion factor that would be used to calculate the OPPS payment rates 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 the proposed rule.

The adjustment described in section 1833(t)(3)(F)(ii) was required only through 2019. The requirement in section 1833(t)(3)(F)(i) of the Act that we reduce the OPD fee schedule increase factor by the productivity adjustment described in section 1886(b)(3)(B)(xi)(II), however, applies for 2012 and subsequent years, and thus, continues to apply. In the CY 2020 OPPS/ASC final rule with comment period, we inadvertently did not amend the regulation at 42 CFR 419.32(b)(1)(iv)(B) to reflect that the adjustment required by section 1833(t)(3)(F)(i) of the Act is the only adjustment under section 1833(t)(3)(F) that applies in CY 2020 and subsequent years. Accordingly, we propose to Start Printed Page 48801amend our regulation at 42 CFR 419.32(b)(1)(iv)(B) by adding a new paragraph (b)(1)(iv)(B)(11) to provide that, for CY 2020 and subsequent years, we reduce the OPD fee schedule increase factor by the MFP adjustment as determined by CMS.

To set the OPPS conversion factor for CY 2021, we propose to increase the CY 2020 conversion factor of $80.793 by 2.6 percent. In accordance with section 1833(t)(9)(B) of the Act, we propose further to adjust the conversion factor for CY 2021 to ensure that any revisions made to the wage index and rural adjustment were made on a budget neutral basis. We propose to calculate an overall budget neutrality factor of 1.0017 for wage index changes. This adjustment was comprised of a 1.0027 proposed budget neutrality adjustment, using our standard calculation, of comparing proposed total estimated payments from our simulation model using the proposed FY 2021 IPPS wage indexes to those payments using the FY 2020 IPPS wage indexes, as adopted on a calendar year basis for the OPPS as well as a 0.9990 proposed budget neutrality adjustment for the proposed CY 2021 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 2021 IPPS wage index policy (85 FR 32706). We believe it is appropriate to ensure that this proposed wage index transition policy (that is, the proposed CY 2021 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 propose to calculate this budget neutrality adjustment by comparing total estimated OPPS payments using the FY 2021 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 2021 OPPS wage index (which, as we discuss in section II.C of the proposed rule, would use the FY 2021 IPPS post-reclassified wage index and any adjustments, including without limitation any adjustments finalized under the IPPS related to the proposed adoption of the revised OMB delineations).

For the CY 2021 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.

We propose 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 propose to calculate a CY 2021 budget neutrality adjustment factor for the cancer hospital payment adjustment by comparing estimated total CY 2021 payments under section 1833(t) of the Act, including the proposed CY 2021 cancer hospital payment adjustment, to estimated CY 2021 total payments using the CY 2020 final cancer hospital payment adjustment, as required under section 1833(t)(18)(B) of the Act. The proposed CY 2021 estimated payments applying the proposed CY 2021 cancer hospital payment adjustment were the same as estimated payments applying the CY 2020 final cancer hospital payment adjustment. Therefore, we propose to apply a budget neutrality adjustment factor of 1.0000 to the conversion factor for the cancer hospital payment adjustment. In accordance with section 16002(b) of the 21st Century Cures Act, we are applying a budget neutrality factor calculated as if the proposed cancer hospital adjustment target payment-to-cost ratio was 0.90, not the 0.89 target payment-to-cost ratio we applied as stated in section II.F. of the proposed rule.

For this CY 2021 OPPS/ASC proposed rule, we estimated that proposed pass-through spending for drugs, biologicals, and devices for CY 2021 would equal approximately $783.2 million, which represented 0.93 percent of total projected CY 2021 OPPS spending. Therefore, the proposed conversion factor would be adjusted by the difference between the 0.88 percent estimate of pass-through spending for CY 2020 and the 0.93 percent estimate of proposed pass-through spending for CY 2021, resulting in a proposed decrease to the conversion factor for CY 2021 of 0.05 percent.

We also estimate a 0.85 percent upward adjustment to nondrug OPPS payment rates as a result of our payment proposal for separately payable nonpass-through drugs purchased under the 340B Program. Applying the proposed payment policy for drugs purchased under the 340B Program, as described in section V.B.6. of this proposed rule, results in an estimated reduction of approximately $427 million in separately paid OPPS drug payments. To ensure budget neutrality under the OPPS after applying this proposed payment methodology for drugs purchased under the 340B Program, we propose to apply an offset of approximately $427 million to the OPPS conversion factor, which would result in an adjustment of 1.0085 to the OPPS conversion factor.

Proposed estimated payments for outliers would remain at 1.0 percent of total OPPS payments for CY 2021. We estimate for the proposed rule that outlier payments would be 1.01 percent of total OPPS payments in CY 2020; the 1.00 percent for proposed outlier payments in CY 2021 would constitute a 0.01 percent decrease in payment in CY 2021 relative to CY 2020.

For this CY 2021 OPPS/ASC proposed rule, we also propose 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 propose to make all other adjustments discussed above, but use a reduced OPD fee schedule update factor of 0.6 percent (that is, the proposed OPD fee schedule increase factor of 2.6 percent further reduced by 2.0 percentage points). This would result in a proposed reduced conversion factor for CY 2021 of $82.065 for hospitals that fail to meet the Hospital OQR Program requirements (a difference of -1.632 in the conversion factor relative to hospitals that met the requirements).

In summary, for CY 2021, we propose 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, CY 2021, and subsequent years to satisfy the statutory requirements of section 1833(t)(3)(F) of the Act. We propose to use a reduced conversion factor of $82.065 in the calculation of payments for hospitals that fail to meet the Hospital OQR Program requirements (a difference of -1.632 in the conversion factor relative to hospitals that met the requirements).

For CY 2021, we propose to use a conversion factor of $83.697 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 2.6 percent for CY 2021, the required proposed wage index budget neutrality adjustment of approximately 1.0017, the proposed cancer hospital payment adjustment of 1.0000, and the proposed adjustment of 0.05 percentage point of projected OPPS spending for the difference in pass-through spending that resulted in a Start Printed Page 48802proposed conversion factor for CY 2021 of $83.697.

C. Proposed Wage Index Changes

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

The OPPS labor-related share is 60 percent of the national OPPS payment. This labor-related share is based on a regression analysis that determined that, for all hospitals, approximately 60 percent of the costs of services paid under the OPPS were attributable to wage costs. We confirmed that this labor-related share for outpatient services is appropriate during our regression analysis for the payment adjustment for rural hospitals in the CY 2006 OPPS final rule with comment period (70 FR 68553). We propose to continue this policy for the CY 2021 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 2021 pre-reclassified wage index that we would 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 adjustment factor for the OPPS is reasonable and logical, given the inseparable, subordinate status of the HOPD within the hospital overall. In accordance with section 1886(d)(3)(E) of the Act, the IPPS wage index is updated annually.

The Affordable Care Act contained several provisions affecting the wage index. These provisions were discussed in the CY 2012 OPPS/ASC final rule with comment period (76 FR 74191). Section 10324 of the Affordable Care Act added section 1886(d)(3)(E)(iii)(II) to the Act, which defines a frontier State and amended section 1833(t) of the Act to add 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 CY 2021, we propose 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, we stated that 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 2020 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; for FY 2019, 83 FR 41380; and for FY 2020, 84 FR 42312.

In addition to the changes required by the Affordable Care Act, we note that the proposed FY 2021 IPPS wage indexes continue to reflect a number of adjustments implemented in past years, including, but not limited to, reclassification of hospitals to different geographic areas, the rural floor provisions, an adjustment for occupational mix, an adjustment to the wage index based on commuting patterns of employees (the out-migration adjustment), and an adjustment to the wage index for certain low wage index hospitals to help address wage index disparities between low and high wage index hospitals. We refer readers to the FY 2021 IPPS/LTCH PPS proposed rule (85 FR 32695 through 32734) for a detailed discussion of all proposed changes to the FY 2021 IPPS wage indexes.

Furthermore, 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 2020 IPPS/LTCH PPS final rule (84 FR 42300), 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 Start Printed Page 48803and 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.

On April 10, 2018 OMB issued OMB Bulletin No. 18-03 which superseded the August 15, 2017 OMB Bulletin No. 17-01. On September 14, 2018, OMB issued OMB Bulletin No. 18-04 which superseded the April 10, 2018 OMB Bulletin No. 18-03. Typically, interim OMB bulletins (those issued between decennial censuses) have only contained minor modifications to labor market delineations. However, as we stated in the FY 2021 IPPS/LTCH PPS proposed rule (85 FR 32696 through 32697), the April 10, 2018 OMB Bulletin No. 18-03 and the September 14, 2018 OMB Bulletin No. 18-04 included more modifications to the labor market areas than are typical for OMB bulletins issued between decennial censuses, including some material modifications that have a number of downstream effects, such as IPPS hospital reclassification changes. These bulletins established revised delineations for Metropolitan Statistical Areas, Micropolitan Statistical Areas, and Combined Statistical Areas, and provided guidance on the use of the delineations of these statistical areas. A copy of OMB Bulletin No. 18-04 may be obtained at https://www.whitehouse.gov/​wpcontent/​uploads/​2018/​09/​Bulletin-18-04.pdf. According to OMB, “[t]his bulletin provides the delineations of all Metropolitan Statistical Areas, Metropolitan Divisions, Micropolitan Statistical Areas, Combined Statistical Areas, and New England City and Town Areas in the United States and Puerto Rico based on the standards published on June 28, 2010 (75 FR 37246), and Census Bureau data.”

As noted previously, while OMB Bulletin No. 18-04 is not based on new census data, it includes some material changes to the OMB statistical area delineations. Specifically, under the revised OMB delineations, there would be some new CBSAs, urban counties that would become rural, rural counties that would become urban, and some existing CBSAs would be split apart. In addition, we stated in the FY 2021 IPPS/LTCH PPS proposed rule that the revised OMB delineations would affect various hospital reclassifications, the outmigration adjustment (established by section 505 of Pub. L. 108-173), and treatment of hospitals located in certain rural counties (that is, “Lugar” hospitals) under section 1886(d)(8)(B) of the Act. We refer readers to the FY 2021 IPPS/LTCH PPS proposed rule for a complete discussion of the revised OMB delineations we propose to adopt under the IPPS and the effects of these revisions on the FY 2021 IPPS wage indexes (85 FR 32696 through 32707, 32717 through 32728). We stated in the FY 2021 IPPS/LTCH PPS proposed rule that we believe using the revised delineations based on OMB Bulletin No. 18-04 would increase the integrity of the IPPS wage index system by creating a more accurate representation of geographic variations in wage levels. Therefore, in the FY 2021 IPPS/LTCH PPS proposed rule, we proposed to implement the revised OMB delineations as described in the September 14, 2018 OMB Bulletin No. 18-04, effective October 1, 2020 beginning with the FY 2021 IPPS wage index. In addition, in the FY 2021 IPPS/LTCH PPS proposed rule, we proposed to apply a 5 percent cap for FY 2021 on any decrease in a hospital's final wage index from the hospital's final wage index for FY 2020 as a proposed transition wage index to help mitigate any significant negative impacts of adopting the revised OMB delineations (85 FR 32706 through 32707).

As further discussed below, in this CY 2021 OPPS proposed rule, we propose to adopt these updated OMB delineations and related IPPS wage index adjustments to calculate the CY 2021 OPPS wage indexes. Similar to our discussion in the FY 2021 IPPS/LTCH PPS proposed rule, we believe using the revised delineations based on OMB Bulletin No. 18-04 would increase the integrity of the OPPS wage index system by creating a more accurate representation of geographic variations in wage levels.

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 CY 2021, under the OPPS, we are continuing to use only the FIPS county codes for purposes of crosswalking counties to CBSAs.

We propose to use the FY 2021 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 2021. Therefore, any adjustments for the FY 2021 IPPS post-reclassified wage index, including, but not limited to, any adjustments that we may finalize related to the proposed adoption of the revised OMB delineations (such as a cap on wage index decreases and revisions to hospital reclassifications), would be reflected in the final CY 2021 OPPS wage index beginning on January 1, 2021. (We refer readers to the FY 2021 IPPS/LTCH PPS proposed rule (85 FR 32695 through 32734) and the proposed FY 2021 hospital wage index files posted on the CMS website.) With regard to budget neutrality for the CY 2021 OPPS wage index, we refer readers to section II.B. of this CY 2021 OPPS/ASC proposed rule. We continue to believe that using the IPPS post-reclassified 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 was paid under the IPPS, based on its geographic location and any applicable wage index adjustments. In this CY 2021 OPPS/ASC proposed rule, we propose to continue this policy for CY 2021, and are including a brief summary of the major proposed FY Start Printed Page 488042021 IPPS wage index policies and adjustments that we propose to apply to these hospitals under the OPPS for CY 2021, which we have summarized below. We refer readers to the FY 2021 IPPS/LTCH PPS proposed rule (85 FR 32695 through 32734) for a detailed discussion of the proposed changes to the FY 2021 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 2021, we propose to continue our policy of allowing non-IPPS hospitals paid under the OPPS to qualify for the outmigration adjustment if they are located in a section 505 out-migration county (section 505 of the MMA). Furthermore, the wage index that would apply for CY 2021 to non-IPPS hospitals paid under the OPPS would continue to include the rural floor adjustment and adjustments to the wage index finalized in the FY 2020 IPPS/LTCH PPS final rule to address wage index disparities (84 FR 42325 through 42336). In addition, we propose that the wage index that would apply to non-IPPS hospitals paid under the OPPS would include any adjustments we may finalize for the FY 2021 IPPS post-reclassified wage index related to the adoption of the revised OMB delineations, as discussed earlier in this proposed rule.

For CMHCs, for CY 2021, we propose 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 propose that the wage index that would apply to CMHCs would include any adjustments we may finalize for the FY 2021 IPPS post-reclassified wage index related to the adoption of the revised OMB delineations, as discussed earlier in this proposed rule. In addition, we propose that the wage index that would apply to CMHCs for CY 2021 would continue to include the rural floor adjustment and adjustments to the wage index finalized in the FY 2020 IPPS/LTCH PPS final rule to address wage index disparities. Also, we propose that the wage index that would apply to CMHCs would not include the outmigration adjustment because that adjustment only applies to hospitals.

Table 4 associated with the FY 2021 IPPS/LTCH PPS proposed rule (available via the internet on the CMS website at: https://www.cms.gov/​Medicare/​Medicare-Fee-for-Service-Payment/​AcuteInpatientPPS/​index) identifies counties that would be eligible for the out-migration adjustment. Table 2 associated with the FY 2021 IPPS/LTCH PPS proposed rule (available for download via the website above) identifies IPPS hospitals that would receive the out-migration adjustment for FY 2021. We are including the outmigration adjustment information from Table 2 associated with the FY 2021 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 outmigration adjustment under this CY 2021 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: https://www.cms.gov/​Medicare/​Medicare-Fee-for-Service-Payment/​HospitalOutpatientPPS/​index. At this link, readers will find a link to the proposed FY 2021 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, we use 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), we use the statewide average default CCRs to determine the payments mentioned earlier if it is not possible 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. We also use 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 2021 OPPS proposed rule Claims Accounting Narrative that is posted on our website. We propose to update the default ratios for CY 2021 using the most recent cost report data. We will update these ratios in the final rule with comment period if more recent cost report data are available.

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 with comment period. These CCRs with the upper limit will be available for download with each OPPS CY proposed rule and final rule on the CMS website. We refer readers to our 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 2021

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 Start Printed Page 48805rural 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 our regulations at § 419.43(g) to clarify that essential access community hospitals (EACHs) are also 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 CY 2021, we propose 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 2021

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), the Congress established section 1833(t)(7) of the Act, “Transitional Adjustment to Limit Decline in Payment,” to determine OPPS payments to cancer and children's hospitals based on their pre-BBA payment amount (often referred to as “held harmless”).

As required under section 1833(t)(7)(D)(ii) of the Act, a cancer hospital receives the full amount of the difference between payments for covered outpatient services under the OPPS and a “pre-BBA amount.” That is, cancer hospitals are permanently held harmless to their “pre-BBA amount,” and they receive transitional outpatient payments (TOPs) or hold harmless payments to ensure that they do not receive a payment that is lower in amount under the OPPS than the payment amount they would have received before implementation of the OPPS, as set forth in section 1833(t)(7)(F) of the Act. The “pre-BBA amount” is the product of the hospital's reasonable costs for covered outpatient services occurring in the current year and the base payment-to-cost ratio (PCR) for the hospital defined in section 1833(t)(7)(F)(ii) of the Act. The “pre-BBA amount” and the determination of the base PCR are defined at 42 CFR 419.70(f). TOPs are calculated on Worksheet E, Part B, of the Hospital Cost Report or the Hospital Health Care Complex Cost Report (Form CMS-2552-96 or Form CMS-2552-10, respectively), as applicable each year. Section 1833(t)(7)(I) of the Act exempts TOPs from budget neutrality calculations.

Section 3138 of the Affordable Care Act amended section 1833(t) of the Act by adding a new paragraph (18), which instructs the Secretary to conduct a study to determine if, under the OPPS, outpatient costs incurred by cancer hospitals described in section 1886(d)(1)(B)(v) of the Act with respect to APC groups exceed outpatient costs incurred by other hospitals furnishing services under section 1833(t) of the Act, as determined appropriate by the Secretary. Section 1833(t)(18)(A) of the Act requires the Secretary to take into consideration the cost of drugs and biologicals incurred by cancer hospitals and other hospitals. Section 1833(t)(18)(B) of the Act provides that, if the Secretary determines that cancer hospitals' costs are 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). For CY 2020, the target PCR was 0.89, as discussed in the CY 2020 OPPS/ASC final rule with comment period (83 FR 61190 through 61192).Start Printed Page 48806

2. Proposed Policy for CY 2021

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 § 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.

We propose to provide additional payments to the 11 specified cancer hospitals so that each cancer hospital's final PCR is equal to the weighted average PCR (or “target PCR”) for the other OPPS hospitals, using the most recent submitted or settled cost report data that were available at the time of the development of the 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 2021. To calculate the proposed CY 2021 target PCR, we are using the same extract of cost report data from HCRIS, as discussed in section II.A. of this CY 2021 OPPS/ASC proposed rule and proposed rule, used to estimate costs for the CY 2021 OPPS. Using these cost report data, we included data from Worksheet E, Part B, for each hospital, using data from each hospital's most recent cost report, whether as submitted or settled.

We then limited the dataset to the hospitals with CY 2019 claims data that we used to model the impact of the proposed CY 2021 APC relative payment weights (3,527 hospitals) because it is appropriate to use the same set of hospitals that are being used to calibrate the modeled CY 2021 OPPS. The cost report data for the hospitals in this dataset were from cost report periods with fiscal year ends ranging from 2014 to 2019. 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 14 hospitals because these hospitals had cost report data that were not complete (missing aggregate OPPS payments, missing aggregate cost data, or missing both), so that all cost reports in the study would have both the payment and cost data necessary to calculate a PCR for each hospital, leading to a proposed analytic file of 3,464 hospitals with cost report data.

Using this smaller dataset of cost report data, we estimate 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 propose that the payment amount associated with the cancer hospital payment adjustment to be determined at cost report settlement would be the additional payment needed to result in a proposed target PCR equal to 0.89 for each cancer hospital.

Table 5 shows the estimated percentage increase in OPPS payments to each cancer hospital for CY 2021, due to the cancer hospital payment adjustment policy. The actual amount of the CY 2021 cancer hospital payment adjustment for each cancer hospital will be determined at cost report settlement and will depend on each hospital's CY 2021 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.

Start Printed Page 48807

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 2020, 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 $5,075 (the fixed-dollar amount threshold) (84 FR 61192 through 61194). 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 2019 OPPS payments, using CY 2019 claims available for this CY 2021 OPPS/ASC proposed rule is approximately 1.0 percent of the total aggregated OPPS payments. Therefore, for CY 2019, 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 2021 OPPS/ASC proposed rule, we estimate that we paid approximately 1.01 percent of the total aggregated OPPS payments in outliers for CY 2019.

For this CY 2021 OPPS/ASC proposed rule, using CY 2019 claims data and CY 2020 payment rates, we estimated that the aggregate outlier payments for CY 2020 would be approximately 1.01 percent of the total CY 2020 OPPS payments. We provided estimated CY 2021 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. Outlier Calculation for CY 2021

For CY 2021, we propose to continue our policy of estimating outlier payments to be 1.0 percent of the estimated aggregate total payments under the OPPS. We propose 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 Start Printed Page 48808proposed CMHC outlier threshold as a proportion of total estimated OPPS outlier payments. As discussed in section VIII.C. of this CY 2021 OPPS/ASC proposed rule, we proposed 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 CY 2021 OPPS/ASC proposed rule and proposed rule.

To ensure that the estimated CY 2021 aggregate outlier payments would equal 1.0 percent of estimated aggregate total payments under the OPPS, we proposed that the hospital outlier threshold be set so that outlier payments would be triggered when a hospital's cost of furnishing a service exceeds 1.75 times the APC payment amount and exceeds the APC payment amount plus $5,300.

We calculated the proposed fixed-dollar threshold of $5,300 using the standard methodology most recently used for CY 2020 (84 FR 61192 through 61194). For purposes of estimating outlier payments for the proposed rule, we used 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 2021 hospital outlier payments for the proposed rule, we inflated the charges on the CY 2019 claims using the same inflation factor of 1.131096 that we used to estimate the IPPS fixed-dollar outlier threshold for the FY 2021 IPPS/LTCH PPS proposed rule (85 FR 32098). We used an inflation factor of 1.06353 to estimate CY 2020 charges from the CY 2019 charges reported on CY 2019 claims. The methodology for determining this charge inflation factor is discussed in the FY 2020 IPPS/LTCH PPS final rule (84 FR 42044 through 42701). 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 did not apply a CCR inflation adjustment factor. Therefore, we propose to apply the same CCR inflation adjustment factor that we propose to apply for the FY 2021 IPPS outlier calculation to the CCRs used to simulate the proposed CY 2021 OPPS outlier payments to determine the fixed-dollar threshold. Specifically, for CY 2021, we propose to apply an adjustment factor of 0.975271 to the CCRs that were in the April 2020 OPSF to trend them forward from CY 2020 to CY 2021. The methodology for calculating the proposed adjustment is discussed in the FY 2021 IPPS/LTCH PPS proposed rule (85 FR 32098).

To model hospital outlier payments for the proposed rule, we applied the overall CCRs from the April 2020 OPSF after adjustment (using the proposed CCR inflation adjustment factor of 0.976271 to approximate CY 2021 CCRs) to charges on CY 2019 claims that were adjusted (using the proposed charge inflation factor of 1.131096 to approximate CY 2021 charges). We simulated aggregated CY 2021 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 2021 OPPS payments. We estimated that a proposed fixed-dollar threshold of $5,300, 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 proposed 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, as we proposed, 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 refer 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 2021 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 conversion 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 2021 scaled weight for the APC by the CY 2021 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 Start Printed Page 48809provided 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 CY under the OPPS to a hospital that fulfills the Hospital OQR Program requirements and to a hospital that fails to meet the Hospital OQR Program requirements for a service that has any of the following status indicator assignments: “J1”, “J2”, “P”, “Q1”, “Q2”, “Q3”, “Q4”, “R”, “S”, “T”, “U”, or “V” (as defined in Addendum D1 to the proposed rule, which is available via the internet on the CMS 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 noted 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 the 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 0.9805 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 to receive the full CY 2021 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, for the CY 2021 OPPS wage index, we propose to adopt the updated OMB delineations based on OMB Bulletin No. 18-04 and any related IPPS wage index adjustments that may be finalized in the FY 2021 IPPS/LTCH PPS final rule, as discussed in section II.C. of this proposed rule. The wage index values assigned to each area would reflect the geographic statistical areas (which are based upon OMB standards) to which hospitals are assigned for FY 2021 under the IPPS, reclassifications through the Medicare Geographic Classification Review Board (MGCRB), section 1886(d)(8)(B) “Lugar” hospitals, and reclassifications under section 1886(d)(8)(E) of the Act, as implemented in § 412.103 of the regulations. We also propose to continue to apply for the CY 2021 OPPS wage index any other adjustments for the FY 2021 IPPS post-reclassified wage index, including, but not limited to, the rural floor adjustment, a wage index floor of 1.00 in frontier states, in accordance with section 10324 of the Affordable Care Act of 2010, and an adjustment to the wage index for certain low wage index hospitals. For further discussion of the wage index we propose to apply for the CY 2021 OPPS, we refer readers to section II.C. of this proposed rule.

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 2021 IPPS, which are listed in Table 2 associated with the FY 2021 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 2021 IPPS Proposed Rule Home Page” and select “FY 2021 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).

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.

Start Printed Page 48810

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 previously. 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 2021 full national unadjusted payment rate for APC 5071 is $634.92. The proposed reduced national unadjusted payment rate for APC 5071 for a hospital that fails to meet the Hospital OQR Program requirements is $622.54. This reduced rate is calculated by multiplying the reporting ratio of 0.9805 by the full unadjusted payment rate for APC 5071.

The proposed FY 2021 wage index for a provider located in CBSA 35614 in New York, which includes the proposed adoption of IPPS 2021 wage index policies, is 1.3376. The labor-related portion of the proposed full national unadjusted payment is approximately $509.56 (.60 * $634.92 * 1.3376). The labor-related portion of the proposed reduced national unadjusted payment is approximately $499.62 (.60 * $622.54 * 1.3376). The nonlabor-related portion of the proposed full national unadjusted payment is approximately $253.97 (.40 * $634.92). The nonlabor-related portion of the proposed reduced national unadjusted payment is approximately $249.02 (.40 * $622.54). The sum of the labor-related and nonlabor-related portions of the proposed full national adjusted payment is approximately $763.53 ($509.56 + $253.97). The sum of the portions of the proposed reduced national adjusted payment is approximately $748.64 ($499.62 + $249.02).

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 CYs 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 2021, we propose 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 propose to use the same standard rounding principles that we have historically used in instances where the application of our standard copayment methodology would result in a copayment amount that is less than 20 percent and cannot be rounded, under standard rounding principles, to 20 percent. (We refer readers to the CY 2008 OPPS/ASC final rule with comment period (72 FR 66687) in which we discuss our rationale for applying these rounding principles.) The proposed national unadjusted copayment amounts for services payable under the OPPS that would be effective January 1, 2021 are included in Addenda A and B to the proposed rule (which are available via the internet on the CMS website).

As discussed in section XIV.E. of this proposed rule, for CY 2021, the Medicare beneficiary's minimum unadjusted copayment and national unadjusted copayment for a service to which a reduced national unadjusted payment rate applies will equal the product of the reporting ratio and the national unadjusted copayment, or the product of the reporting ratio and the minimum unadjusted copayment, respectively, for the service.

We note that OPPS copayments may increase or decrease each year based on changes in the calculated APC payment rates, due to updated cost report and claims data, and any changes to the OPPS cost modeling process. However, as described in the CY 2004 OPPS final rule with comment period, the development of the copayment methodology generally moves beneficiary copayments closer to 20 percent of OPPS APC payments (68 FR 63458 through 63459).

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

  • When an APC group consists solely of HCPCS codes that were not paid under the OPPS the prior year because they were packaged or excluded or are new codes, the unadjusted copayment amount would be 20 percent of the APC payment rate.
  • If a new APC that did not exist during the prior year is created and consists of HCPCS codes previously assigned to other APCs, the copayment amount is calculated as the product of the APC payment rate and the lowest coinsurance percentage of the codes comprising the new APC.
  • If no codes are added to or removed from an APC and, after recalibration of its relative payment weight, the new payment rate is equal to or greater than the prior year's rate, the copayment amount remains constant (unless the resulting coinsurance percentage is less than 20 percent).
  • If no codes are added to or removed from an APC and, after recalibration of its relative payment weight, the new payment rate is less than the prior year's rate, the copayment amount is calculated as the product of the new payment rate and the prior year's coinsurance percentage.
  • If HCPCS codes are added to or deleted from an APC and, after recalibrating its relative payment weight, holding its unadjusted copayment amount constant results in a Start Printed Page 48811decrease 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, $126.99 is approximately 20 percent of the full national unadjusted payment rate of $634.92. For APCs with only a minimum unadjusted copayment in Addenda A and B to 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 proposed rule. Calculate the rural adjustment for eligible providers, as indicated in Step 6 under section II.H. of 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 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 0.9805.

The proposed unadjusted copayments for services payable under the OPPS that will be effective January 1, 2021, are shown in Addenda A and B to 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 CY 2021 OPD fee schedule increase factor discussed in section II.B. of 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. OPPS Ambulatory Payment Classification (APC) Group Policies

A. Proposed OPPS Treatment of New and Revised HCPCS Codes

Payments 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) codes, a numeric and alphanumeric coding system maintained by the American Medical Association (AMA), and consists 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; and
  • 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 Start Printed Page 48812assignments 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 2021 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 2021 OPPS/ASC proposed rule.

1. April 2020 HCPCS Codes for Which We Are Soliciting Public Comments in This Proposed Rule

For the April 2020 update, 13 new HCPCS codes were established and made effective on April 1, 2020. These codes and their long descriptors are listed in Table 6. Through the April 2020 OPPS quarterly update CR (Transmittal 10013, Change Request 11691, dated March 25, 2020), we recognized several new HCPCS codes for separate payment under the OPPS. In this CY 2021 OPPS/ASC proposed rule, we are soliciting public comments on the proposed APC and status indicator assignments for the codes listed Table 6. 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, 2020 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.

Start Printed Page 48813

Start Printed Page 48814

2. July 2020 HCPCS Codes for Which We Are Soliciting Public Comments in This Proposed Rule

For the July 2020 update, over 100 new codes were established and made effective July 1, 2020. The codes and long descriptors are listed in Table 7. Through the July 2020 OPPS quarterly update CR (Transmittal10207, Change Request 11814, dated July 2, 2020), we recognized several new codes for separate payment and assigned them to appropriate interim OPPS status indicators and APCs. In this CY 2021 OPPS/ASC proposed rule, we are soliciting public comments on the proposed APC and status indicator assignments for the codes implemented on July 1, 2020, all of which are listed in 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 July 1, 2020 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.

Start Printed Page 48815

Start Printed Page 48816

Start Printed Page 48817

Start Printed Page 48818

Start Printed Page 48819

Start Printed Page 48820

Start Printed Page 48821

Start Printed Page 48822

Start Printed Page 48823

3. October 2020 HCPCS Codes for Which We Will Be Soliciting Public Comments in the CY 2021 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, 2020 in the CY 2021 OPPS/ASC final rule with comment period, thereby allowing us to finalize the status indicators and APC assignments for the codes in the CY 2022 OPPS/ASC final rule with comment period. The HCPCS codes will be released to the public through the October 2020 OPPS Update CR and the CMS HCPCS website while the CPT codes will be released to the public through the AMA website.

For CY 2021, we propose 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, 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 2021 OPPS/ASC final rule with comment period on the status indicator and APC assignments, which would then be finalized in the CY 2022 OPPS/ASC final rule with comment period.

4. January 2021 HCPCS Codes

a. New Level II HCPCS Codes for Which We Will Be Soliciting Public Comments in the CY 2021 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, 2021 in the CY 2021 OPPS/ASC final rule with comment period, thereby allowing us to finalize the status indicators and APC assignments for the codes in the CY 2022 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 HCPCS C-codes and 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 2021 OPPS/ASC final rule with comment period, January 2021 OPPS Update CR, and the CMS HCPCS website.

For CY 2021, we propose 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 Level II HCPCS codes that will be effective January 1, 2021 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 2021 OPPS/ASC final rule with comment period on the status indicator and APC assignments, which would then be finalized in the CY 2022 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 Start Printed Page 48824current 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 include proposed APC and status indicator assignments for all new and revised CPT codes that the AMA makes publicly available in time for us to include them in the proposed rule, and to avoid the resort to HCPCS G-codes and the resulting delay in utilization of the most current CPT codes. Also, we finalized our proposal to make interim APC and status indicator assignments for CPT codes that are not available in time for the proposed rule and that describe wholly new services (such as new technologies or new surgical procedures), solicit public comments, and finalize the specific APC and status indicator assignments for those codes in the following year's final rule.

For the CY 2021 OPPS update, we received the CPT codes that will be effective January 1, 2021 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 2021 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 2021 OPPS/ASC Proposed Rule 5-Digit AMA Placeholder Code”. The final CPT code numbers will be included in the CY 2021 OPPS/ASC final rule with comment period.

In summary, we are soliciting public comments on the proposed CY 2021 status indicators and APC assignments for the new and revised CPT codes that will be effective January 1, 2021. 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 propose to finalize the status indicator and APC assignments for these codes (with their final CPT code numbers) in the CY 2021 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 8, 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.

Start Printed Page 48825

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 devices, drugs, biologicals, therapeutic radiopharmaceuticals, and brachytherapy devices that are not packaged into the payment for the service.

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 2021, we propose 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 Start Printed Page 48826representatives 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 2021 OPPS update will be discussed in the relevant specific sections throughout the CY 2021 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 2021, we propose 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 2021 OPPS update, we have identified the APCs with violations of the 2 times rule. Therefore, we propose 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 2021 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 propose 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 2021 included in this proposed rule are related to changes in costs of services that were observed in the CY 2019 claims data newly available for CY 2021 ratesetting. Addendum B to this CY 2021 OPPS/ASC proposed rule identifies with a comment indicator “CH” those procedure codes for which we propose a change to the APC assignment or status indicator, or both, that were initially assigned in the July 1, 2020 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 propose to make for CY 2021, we reviewed all of the APCs to determine which APCs would not meet the requirements of the 2 times rule. We used the following criteria to evaluate whether to propose exceptions to the 2 times rule for affected APCs:

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

Based on the CY 2019 claims data available for this CY 2021 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 propose to make exceptions under the 2 times rule for CY 2021, 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 2019 claims data available for this proposed rule. We note that 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 similar geometric mean costs and do not create a 2 times 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 9 of this proposed rule lists the 18 APCs for which we propose to make an exception under the 2 times rule for CY 2021 based on the criteria cited above and claims data submitted between January 1, 2019, and December 31, 2019, and processed on or before December 31, 2019. For the final rule with comment period, we intend to use claims data for dates of service between January 1, 2019, and December 31, 2019, that were processed on or before June 30, 2020, 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.

Start Printed Page 48827

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

For CY 2020, 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 reflect the costs that are associated with providing care to Medicare beneficiaries and 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 Start Printed Page 48828projections 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 2021, we included the proposed payment rates for New Technology APCs 1491 to 1599 and 1901 through 1908 in Addendum A to this CY 2021 OPPS/ASC proposed rule (which is available via the internet on the CMS website).

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

Services that are assigned to New Technology APCs are typically new services that do not have sufficient claims history to establish an accurate payment for the services. One of the objectives of establishing New Technology APCs is to generate sufficient claims data for a new service so that it can be assigned to an appropriate clinical APC. Some services that are assigned to New Technology APCs have very low annual volume, which we consider to be fewer than 100 claims. We consider services with fewer than 100 claims annually to be low-volume services because there is a higher probability that the payment data for a service 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 service under the OPPS by calculating the geometric mean for all separately paid claims for a HCPCS service code from the most recent available year of claims data may not generate an accurate estimate of the actual cost of the service for these low-volume services.

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 service to a new technology APC allows us to gather claims data to price the service 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 services in the past (82 FR 59281). Although we have 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 services with fewer than 100 claims annually as low-volume services because there is a higher probability that the payment data for a service 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 service 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 service. 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 Start Printed Page 48829we 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 2021, we propose to continue 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 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 2021

As we described 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 2021, we propose 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 propose to continue to assign to standard APCs, and one that we propose to continue to assign to a New Technology APC for CY 2021. 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.

For the procedure described by CPT code 0398T, we have identified 149 paid claims for CY 2019 with a geometric mean of $12,798.38. The number of claims for the service means that the procedure is no longer a low-volume new technology service, and we will use the geometric mean of the CY 2019 claims data to determine the cost of the service for its APC assignment. We reviewed the OPPS to determine whether CPT code 0398T could be assigned to a clinical APC. The most appropriate clinical APC family for the service would be the Neurostimulator and Related Procedures APC series (APC 5461-5464). However, there is large payment rate difference between Level 2 Neurostimulator and Related Procedures (APC 5462) with a payment rate of $6,169.27 and Level 3 Neurostimulator and Related Procedures (APC 5463) with a payment rate of $19,737.37. Based on the geometric mean cost of CPT code 0398T available for this proposed rule, we believe the payment rate for APC 5462 would be too low for CPT code 0398T since it is more than $6,000 less than the geometric mean cost for CPT code 0398T, and we believe the payment rate for APC 5463 would be too high since it is around $6,800 more than the geometric mean cost for CPT code 0398T.

In addition, given the significant difference in the payment rate between APC 5462 and 5463, we believe a restructuring of this APC family would be appropriate. We believe creating an additional payment level between the two existing APC levels would allow for a smoother distribution of the costs between the different levels based on their resource costs and clinical characteristics. Please refer to section III.D.1 for detailed explanation of our proposal to reorganize the Neurostimulator and Related Procedures APCs (APCs 5461-5464). Reorganizing the Neurostimulator and Related Procedures APCs would create a proposed Level 3 APC to be referred to as “Proposed APC 5463” with a payment rate of approximately $12,286 that is close to the geometric mean of CPT code 0398T which is approximately $12,798. The payment rate of proposed APC 5463 is representative of the cost of the service described by CPT code 0398T. Therefore, we propose to reassign the service described by CPT code 0398T to the proposed new Level 3 APC for Neurostimulator and Related Procedures (Proposed APC 5463) for CY 2021. The current and proposed APC assignments, status indicators, and payment rates for CPT code 0398T are found in Table 10. We refer readers to Addendum B of the 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.

Start Printed Page 48830

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 Start Printed Page 48831in 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 final 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.

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 payment 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, 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 fell within the same New Technology APC cost band ($145,001- $160,000), where the Argus® II procedure was assigned for CY 2019. Consistent with our policy stated in section III.C.2, we presented the result of each statistical methodology in the proposed rule, and we sought 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 fell within the cost band for New Technology APC 1908, with the estimated cost being between $145,001 and $160,000. Accordingly, we assigned CPT code 0100T in APC 1908 (New Technology— Level 52 ($145,001-$160,000)), with a payment rate of $152,500.50 for CY 2020.

For CY 2021, 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. As previously mentioned, 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 2021, we propose 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.

For CY 2021, we identified 35 claims reporting the procedure described by CPT code 0100T for the 4-year period of CY 2016 through CY 2019. We found the geometric mean cost for the procedure described by CPT code 0100T to be approximately $148,807, the arithmetic mean cost to be approximately $154,504, and the median cost to be approximately $151,974. All three potential statistical methodologies used to estimate the cost of the Argus® II procedure fall within the cost band for New Technology APC Start Printed Page 488321908, with the estimated cost being between $145,001 and $160,000.

Accordingly, we propose 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 2021. 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 the 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.

c. Administration of Subretinal Therapies Requiring Vitrectomy

CPT code J3398 (Injection, voretigene neparvovec-rzyl, 1 billion vector genomes) is a gene therapy for a rare mutation-associated retinal dystrophy. Voretigene neparvovec-rzyl (Luxturna®), was approved by the FDA in December of 2017, and is indicated as an adeno-associated virus vector-based gene therapy indicated for the treatment of patients with confirmed biallelic RPE65 mutation-associated retinal dystrophy.[2] This therapy is administered through a subretinal injection, which stakeholders describe as an extremely delicate and sensitive surgical procedure. The FDA package insert describes one of the steps for administering Luxturna as, “after completing a vitrectomy, identify the intended site of administration. The subretinal injection can be introduced via pars plana.” 1

Stakeholders, including the manufacturer of Luxturna®, recommend HCPCS code 67036 (Vitrectomy, mechanical, pars plana approach) for the administration of the gene therapy.[3] However, the manufacturer contends the administration is not currently described by any existing codes as HCPCS code 67036 (Vitrectomy, mechanical, pars plana approach) does not account for the administration itself. For J3398, a typical patient would receive a standard dose of 150 billion vector genomes, with an approximate payment rate of $436,575 (we refer readers to Addendum B of this proposed rule for the proposed payment rate associated with J3398).

It is important to note that CPT code J3398 was granted drug pass-through status under the OPPS as of July 1, 2018 and is assigned to status indicator “G”. (We refer readers to Addendum D of this proposed rule for the list of proposed status indicator definitions for CY2021). J3398 is scheduled to have its drug pass-through status expire June 30, 2021, at which point J3398 would be packaged into the payment for any primary service with which it is billed when that primary service is assigned to a comprehensive APC (C-APC). A C-APC packages payment for adjunctive and secondary items, services, and procedures into the most costly primary procedure (For a full discussion and background on C-APCs, see section II.A.2.b). Based on information from the manufacturer of Luxturna, we believe that CPT code J3398 (Injection, voretigene neparvovec-rzyl, 1 billion vector genomes) would commonly be billed with the service described by HCPCS code 67036 (Vitrectomy, mechanical, pars plana approach), which describes the administration of the gene therapy, and which is assigned to a comprehensive APC, (APC 5492—Level 2 Intraocular Procedures). Thus, when its pass-through status expires, payment for CPT code J3398, the primary therapy, would be inappropriately packaged into payment for HCPCS code 67036, its administration procedure.

CMS recognizes the necessity to accurately describe the unique administration procedure that is required to administer the therapy described by CPT J3398. We propose to establish a new HCPCS code, C97X1 (Vitrectomy, mechanical, pars plana approach, with subretinal injection of pharmacologic/biologic agent) to describe this process. We believe that this new HCPCS code accurately describes the service associated with intraocular administration of HCPCS code J3398. CMS recognizes that HCPCS code 67036 represents a similar procedure and process that approximates similar resource utilization that is associated with C97X1. CMS also recognizes that it is not prudent for the code that describes the administration of this gene therapy, C97X1, to be assigned to the same C-APC that is assigned to HCPCS code 67036, as this would inappropriately package the primary therapy, J3398, into the code that represents the process to administer the gene therapy.

For CY 2021, we propose to assign the services described by C97X1 to a new technology payment band based on the geometric mean cost for HCPCS code 67036. For CY 2021, HCPCS code 67036 has a geometric mean cost of $3407.84. Therefore, for CY 2021 we propose to assign C97X1 to APC 1561—New Technology—Level 24 ($3001-$3500). Please see Table 11 for proposed descriptors and APC assignment.

Start Printed Page 48833

d. 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 (for example, aspiration[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.

In claims data available for CY 2019 for this proposed rule, there were 4 claims reported for bronchoscopy with transbronchial ablation of lesions by microwave energy. Given the low volume of claims for the service, we propose for CY 2021 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 to calculate an appropriate payment rate for purposes of assigning bronchoscopy with transbronchial ablation of lesions by microwave energy to a New Technology APC. We found the geometric mean cost for the service to be approximately $4,051, the arithmetic mean cost to be approximately $4,067, and the median cost to be approximately $4,067. All three potential statistical methodologies used to estimate the cost of the service procedure fall within the cost band for New Technology APC 1563, with the estimated cost being between $4,001 and $4,500. Accordingly, we propose to change the assignment of the HCPCS code C9751 to APC 1563 (New Technology—Level 26 ($4001-$4500)), with a proposed payment rate of $4,250.50 for CY 2021. Details regarding HCPCS code C9751 are shown in Table 12.

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 services paid under the OPPS, payment for analytics that are performed after the main diagnostic/image procedure are packaged into the payment for the primary service. However, in CY 2018, we determined that HeartFlow should receive a separate payment because the service 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. We did not have Medicare claims data in CY 2019 for CPT code 0503T, and we continued to assign the service to New Technology APC 1516 (New Technology—Level 16 ($1,401-$1,500)), with a payment rate of $1,450.50.

CY 2020 was the first year we had Medicare claims data to calculate the cost of HCPCS code 0503T. For the CY 2020 OPPS/ASC final rule, there were 957 claims with CPT code 0503T of which 101 of the claims were single frequency claims that were used to calculate the geometric mean of the procedure. We planned to use the geometric mean to report the cost of HeartFlow. However, the number of single frequency claims for CPT code 0503T was below the low-volume payment policy threshold for the proposed rule, and the number of single frequency claims was only two claims above the threshold for the new technology APC low-volume policy for the final rule. Therefore, we decided to use our equitable adjustment authority under section 1833(t)(2)(E) of the Act to Start Printed Page 48834calculate the geometric mean, arithmetic mean, and median using the CY 2018 claims data to determine an appropriate payment rate for HeartFlow using our new technology APC low-volume payment policy. While the number of single frequency claims was just above our threshold to use the low-volume payment policy, we still had concerns about the normal cost distribution of the claims used to calculate the payment rate for Heartflow, and we decided the low-volume payment policy would be the best approach to address those concerns.

Our analysis found that the geometric mean cost for CPT code 0503T was $768.26, the arithmetic mean cost for CPT code 0503T was $960.12 and that the median cost for CPT code 0503T was $900.28. Of the three cost methods, the highest amount was for the arithmetic mean. The arithmetic mean fell within the cost band for New Technology APC 1511 (New Technology—Level 11 ($901-$1,000)) with a payment rate of $950.50. The arithmetic mean helped to account for some of the higher costs of CPT code 0503T identified by the developer and other stakeholders that may not have been reflected by either the median or the geometric mean.

For CY 2021, we observed a significant increase in the number of claims billed with CPT code 0503T that are available for this proposed rule. Specifically, using the most recently available data for this proposed rule (that is, CY 2019), we identified 2,820 claims billed with CPT code 0503T including 415 single frequency claims. These totals are well above the threshold of 100 claims for a procedure to be evaluated using the new technology APC low-volume policy. Therefore, we propose to use our standard methodology rather than the low-volume methodology we previously used to determine the cost of CPT code 0503T.

Our analysis found the geometric mean cost for CPT code 0503T is approximately $851. Therefore, we propose to reassign the service described by CPT code 0503T in order to adjust the payment rate to better reflect the cost for the service. While we considered proposing to reassign CPT code 0503T to APC 5724 (Level 4—Diagnostic Tests and Related Services), which has a payment rate of around $903 based on the clinical and resource similarity to other services within that APC, we did not propose such reassignment because the payment rate for the new technology APC is closer to the geometric mean costs of CPT code 0503T. Nonetheless, we welcome comments on whether reassignment to the clinical APC would be more appropriate. Therefore, we propose to reassign the service described by CPT code 0503T to New Technology APC 1510 (New Technology—Level 10 ($801-$900)), with a proposed payment rate of $850.50 for CY 2021.

f. Cardiac Positron Emission Tomography (PET)/Computed Tomography (CT) Studies

Effective January 1, 2020, we assigned three CPT codes (78431, 78432, and 78433) that describe the services associated with cardiac PET/CT studies to New Technology APCs. Table 13 reports code descriptors, status indicators, and APC assignments for these CPT codes. CPT code 78431 was assigned to APC 1522 (New Technology—Level 22 ($2,001-$2,500)) with a payment rate of $2,250.50. CPT codes 78432 and 78433 were assigned to APC 1523 (New Technology—Level 23 ($2,501-$3,000)) with a payment rate of $ 2,750.50.

We have not received any claims that have been billed with CPT codes 78431, 78432, or 78433. Therefore, we propose to continue to assign these CPT codes to the same new technology APCs as they were in CY 2020. The proposed CY 2021 payment rate for the codes can be found in Addendum B to this proposed rule (which is available via the internet on the CMS website).

Start Printed Page 48835

g. Pathogen Test for Platelets/Rapid Bacterial Testing

For the July 2017 update, the HCPCS Workgroup established HCPCS code Q9987 (Pathogen(s) test for platelets) effective July 1, 2017. This new code and the OPPS APC assignment was announced in the July 2017 OPPS quarterly update CR (Transmittal 3783, Change Request 10122, dated May 26, 2017). Because HCPCS code Q9987 represented a test to identify bacterial or other pathogen contamination in blood platelets, we assigned the code to a new technology APC, specifically, New Technology APC 1493 (New Technology-Level 1C ($21-$30)) with a status indicator “S” and a payment rate of $25.50. We note that temporary HCPCS code Q9987 was subsequently deleted on December 31, 2017, and replaced with permanent HCPCS code P9100 (Pathogen(s) test for platelets) effective January 1, 2018. For the January 2018 update, we continued to assign the new code to the same APC and status indicator as its predecessor code. Specifically, we assigned HCPCS code P9100 to New Technology APC 1493 and status indicator “S”. For the CY 2019 update, we made no change to the APC or status indicator assignment for P9100, however, for the CY 2020 update, we revised the APC assignment from New Technology APC 1493 to 1494 (New Technology—Level 1D ($31-$40) based on the latest claims data Start Printed Page 48836used to set the payment rates for CY 2020. We discussed the revision in the CY 2020 OPPS/ASC final rule (84 FR 61219) and indicated that the reassignment to APC 1494 appropriately reflected the cost of the service.

For the CY 2021 update, we believe that we have sufficient claims data to reassign the code from a New Technology APC to a clinical APC and note that HCPCS code P9100 has been assigned to a New Technology APC for over 3 years. As stated in section III.D. (New Technology APCs), a service is paid under a New Technology APC until sufficient claims data have been collected to allow CMS to assign the procedure to a clinical APC group that is appropriate in clinical and resource terms. We expect this to occur within two to three years from the time a new HCPCS code becomes effective. However, if we are able to collect sufficient claims data in less than 2 years, we would consider reassigning the service to an appropriate clinical APC. Since HCPCS code P9100 has been assigned to a new technology APC since July 2017, we believe that we should reassign the code to a clinical APC. Specifically, our claims data for this proposed rule shows a geometric mean cost of approximately $30 for HCPCS code P9100 based on 70 single claims (out of 1,835 total claims). Based on resource cost and clinical homogeneity to the other services assigned to APC 5732 (Level 2 Minor Procedures), we believe that HCPCS code P9100 should be reassigned to clinical APC 5732 whose geometric mean cost is approximately $33.

As we have stated several times since the implementation of the OPPS on August 1, 2000, we review, on an annual basis, the APC assignments for all services and items paid under the OPPS based on our analysis of the latest claims data. For the CY 2021 OPPS update, based on claims submitted between January 1, 2019, and December 30, 2019, our analysis of the latest claims data for this proposed rule supports reassigning HCPCS code P9100 to APC 5732 based on its clinical and resource homogeneity to the procedures and services in the APC. Therefore, we propose to reassign HCPCS code P9100 from New Technology APC 1494 to clinical APC 5732 for CY 2021. The proposed CY 2021 payment rate for HCPCS code P9100 can be found in Addendum B to this proposed rule with comment period. In addition, we refer readers to Addendum D1 of this proposed rule with comment period for the status indicator (SI) meanings for all codes reported under the OPPS. Both Addendum B and D1 are available via the internet on the CMS website.

h. V-Wave Interatrial Shunt Procedure (HCPCS Code C9758; APC 1589)

A randomized, double-blinded control IDE study is currently in progress for the V-Wave interatrial shunt. The V-Wave interatrial shunt is for patients with severe symptomatic heart failure and is designed to regulate left atrial pressure in the heart. All participants who passed initial screening for the study receive a right heart catheterization procedure described by CPT code 93451 (Right heart catheterization including measurement(s) of oxygen saturation and cardiac output, when performed). Participants assigned to the experimental group also receive the V-Wave interatrial shunt procedure while participants assigned to the control group only receive right heart catheterization. The developer of V-Wave was concerned that the current coding of these services by Medicare would reveal to the study participants whether they have received the interatrial shunt because an additional procedure code, CPT code 93799 (Unlisted cardiovascular service or procedure), would be included on the claims for participants receiving the interatrial shunt. Therefore, we created a temporary HCPCS code to describe the V-wave interatrial shunt procedure for both the experimental group and the control group in the study. Specifically, we established HCPCS code C9758 (Blinded procedure for NYHA class III/IV heart failure; transcatheter implantation of interatrial shunt or placebo control, including right heart catheterization, trans-esophageal echocardiography (TEE)/intracardiac echocardiography (ICE), and all imaging with or without guidance (for example, ultrasound, fluoroscopy), performed in an approved investigational device exemption (IDE) study) to describe the service, and we assigned the service to New Technology APC 1589 (New Technology—Level 38 ($10,001-$15,000)).

No claims have been reported for HCPCS code C9758. Therefore, we propose to continue to assign the service to New Technology APC 1589 for CY 2021. Details about the HCPCS code and its APC assignment are shown in Table 14. The proposed CY 2021 payment rate for V-Wave interatrial shunt procedure can be found in Addendum B to proposed rule (which is available via the internet on the CMS website).

Start Printed Page 48837

i. Supervised Visits for Esketamine Self-Administration (HCPCS Codes G2082 and G2083 APCs 1508 and 1511)

On March 5, 2019, the U.S. Food and Drug Administration (FDA) approved SpravatoTM (esketamine) nasal spray, used in conjunction with an oral antidepressant, for treatment of depression in adults who have tried other antidepressant medicines but have not benefited from them (treatment-resistant depression (TRD)). Because of the risk of serious adverse outcomes resulting from sedation and dissociation caused by Spravato administration, and the potential for abuse and misuse of the product, it is only available through a restricted distribution system under a Risk Evaluation and Mitigation Strategy (REMS). A REMS is a drug safety program that the FDA can require for certain medications with serious safety concerns to help ensure the benefits of the medication outweigh its risks.

A treatment session of esketamine consists of instructed nasal self-administration by the patient, followed by a period of post-administration observation of the patient under direct supervision of a health care professional. Esketamine is a noncompetitive N-methyl D-aspartate (NMDA) receptor antagonist. It is a nasal spray supplied as an aqueous solution of esketamine hydrochloride in a vial with a nasal spray device. This is the first FDA approval of esketamine for any use. Each device delivers two sprays containing a total of 28 mg of esketamine. Patients would require either two (2) devices (for a 56mg dose) or three (3) devices (for an 84 mg dose) per treatment.

Because of the risk of serious adverse outcomes resulting from sedation and dissociation caused by Spravato administration, and the potential for abuse and misuse of the product, Spravato is only available through a restricted distribution system under a REMS; patients must be monitored by a health care provider for at least 2 hours after receiving their Spravato dose; the prescriber and patient must both sign a Patient Enrollment Form; and the product will only be administered in a certified medical office where the health care provider can monitor the patient. Please refer to the CY 2020 PFS final rule and interim final rule for more information about supervised visits for esketamine self-administration (84 FR 63102 through 63105).

To facilitate prompt beneficiary access to the new, potentially life-saving treatment for TRD using esketamine, we created two new HCPCS G codes, G2082 and G2083, effective January 1, 2020. HCPCS code G2082 is for an outpatient visit for the evaluation and management of an established patient that requires the supervision of a physician or other qualified health care professional and provision of up to 56 mg of esketamine nasal self-administration and includes 2 hours post-administration observation. HCPCS code G2082 was assigned to New Technology APC 1508 (New Technology—Level 8 ($601-$700)) with a payment rate of $650.50. HCPCS code G2083 describes a similar service to HCPCS code G2082, but involves the administration of more than 56 mg of esketamine. HCPCS code G2083 was assigned to New Technology APC 1511 (New Technology—Level 11 ($901-$1,000)) with a payment rate of $950.50.

No Medicare OPPS claims have been reported for either HCPCS code G2082 or G2083. Therefore, we propose to continue to assign HCPCS code G2082 to New Technology APC 1508 and to assign HCPCS code G2083 to New Technology APC 1511. Details about the HCPCS codes and their APC assignments are shown in Table G15 below. The proposed CY 2021 payment rate for esketamine self-administration can be found in Addendum B to proposed rule (which is available via the internet on the CMS website).

Start Printed Page 48838

D. Proposed OPPS APC-Specific Policies

1. Neurostimulator and Related Procedures (APCs 5461 Through 5465)

In the CY 2015 OPPS/ASC final rule (79 FR 66807 through 66808), we finalized a restructuring of what were previously several neurostimulator procedure-related APCs into a four-level series. Since CY 2015, the four-level APC structure for the series has remained unchanged. In addition to that restructuring, in the CY 2015 OPPS/ASC final rule, we also made the Level 2 through 4 APCs comprehensive APCs (79 FR 66807 through 66808). Later, in the CY 2020 OPPS final rule, we also established the Level 1 Neurostimulator and Related Procedure APC (APC 5461) as a comprehensive APC (84 FR 61162 through 61166).

In reviewing the claims data available for CY 2021 OPPS proposed rule, we believe that it is appropriate to create an additional Neurostimulator and Related Procedures level, between the current Level 2 and 3 APCs. Creating this APC allows for a smoother distribution of the costs between the different levels based on their resource costs and clinical characteristics. Therefore, for the CY 2021 OPPS, we propose to establish a five-level APC structure for the Neurostimulator and Related Procedures series. We note that in addition to creating this new level, we also propose to assign CPT 0398T (Magnetic resonance image guided high intensity focused ultrasound (mrgfus), stereotactic ablation lesion, intracranial for movement disorder including stereotactic navigation and frame placement when performed) to this new Level 3 APC, as discussed in further detail in section III.C.3.A of this proposed rule with comment period.

Table 16 displays the proposed CY 2021 Neurostimulator and Related Procedures APC series' structure and APC geometric mean costs

Start Printed Page 48839

2. IDx-DR: Artificial Intelligence System To Detect Diabetic Retinopathy (APC 5732)

As stated in a press release issued by the FDA on April 11, 2018, the IDx-DR is the “first medical device to use artificial intelligence to detect greater than a mild level of the eye disease diabetic retinopathy in adults who have diabetes” (https://www.fda.gov/​news-events/​press-announcements/​fda-permits-marketing-artificial-intelligence-based-device-detect-certain-diabetes-related-eye). Approved for marketing by the FDA in April 2018, the artificial intelligence algorithm provides a clinical decision without the need for a clinician to also interpret the image. A provider uploads the digital images of the patient's retinas to a cloud server on which the IDx-DR software is installed, and once analysis is completed, the provider is given one of the following two results:

  • More than mild diabetic retinopathy detected: Refer to an eye care professional; or
  • negative for more than mild diabetic retinopathy; rescreen in 12 months.

The test itself generally takes about 5 minutes to complete and does not need to be performed by a clinician. The test associated with the IDx-DR technology will receive a new CPT code effective January 1, 2021, and with the establishment of the new code, the CPT Editorial Panel is also revising the descriptors associated with existing CPT codes 92227 and 92228 to appropriately differentiate them from the IDx-DR test.

Based on our evaluation of the service, we believe that IDx-DR is a diagnostic test that should be payable under the hospital OPPS, similar to existing CPT codes 92227 and 92228, which are assigned to APC 5732 (Level 2 Minor Procedures) and status indicator “Q1.” Based on its clinical similarity to CPT codes 92227 (Remote imaging for detection of retinal disease (for example, retinopathy in a patient with diabetes) with analysis and report under physician supervision, unilateral or bilateral) and 92228 (Remote imaging for monitoring and management of active retinal disease (eg, diabetic retinopathy) with physician review, interpretation and report, unilateral or bilateral), we believe that the IDx-DR test should also be assigned to APC 5732 (Level 2 Minor Procedures) and status indicator “Q1.” Consequently, we propose to assign the new IDx-DR CPT code to APC 5732 with a proposed payment rate of $33.16 for CY 2021. We note that we propose to assign the code to status indicator “Q1” to indicate that the code is conditionally packaged when performed with another service on the same day. Because the IDx-DR test will most often be performed as part of a visit, we believe that packaging the cost into the primary service is appropriate. We note that under the OPPS, the current E&M visit code (G0463) is paid separately when not billed with a C-APC, and we believe this payment includes the cost of providing the IDx-DR test. Generally, our process for tests with minimal costs is to package the cost into the primary service. Because the IDx-DR test will generally be part of another service provided on the same day, and involve minimal cost, we believe that conditionally packaging the payment for the 5-minute IDx-DR test is appropriate for this test in the hospital outpatient setting.

In summary, we propose to assign the new CPT code associated with IDx-DR to APC 5732 and status indicator “Q1”. Table 17 lists the proposed APC and SI for placeholder CPT code 9225X, which is associated with the IDx-DR test. The final CPT code number for placeholder code 9225X will be included in the CY 2021 OPPS/ASC final rule with comment period. The proposed CY 2021 payment rate for CPT code 9225X can be found in Addendum B to this proposed rule with comment period. In addition, we refer readers to Addendum D1 of this proposed rule with comment period for the status indicator (SI) meanings for all codes reported under the OPPS. Both Addendum B and D1 are available via the internet on the CMS website. Furthermore, for discussion on the proposed PFS payment for placeholder CPT code 9225X, refer to the CY 2021 PFS Proposed Rule.

Start Printed Page 48840

3. Intraocular Procedures (APCs 5491 Through 5495)

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 the proposed rule.

In the CY 2019 OPPS, we assigned 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 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 significantly lower than the OPPS payments for the same service because of the difference in 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 CY 2020 OPPS rulemaking, we reestablished APC 5495 (Level 5 Intraocular Procedures) because we believed that the procedure described by CPT code 0308T would be most appropriately placed in the APC based on its estimated cost (84 FR 61249 through 61250). Assignment of the procedure to the Level 5 Intraocular Procedures APC was consistent with its historical placement and would also address the large discrepancy in payment for the procedure between the OPPS and the ASC payment system. We note that we also implemented a policy where the payment for a service when performed in an ASC (84 FR 61399 through 61400), would be no higher than the OPPS payment rate for the service when performed in the hospital outpatient setting.

In reviewing the claims data available for CY 2021 ratesetting, there was a single claim containing the code 0308T that was unable to be used for the ratesetting process. In addition, this code and its APC have historically had relatively low claims volume for ratesetting purposes. While there are no claims usable for ratesetting in the CY 2021 OPPS proposed data under our standard process, we still need to determine a payment weight for the APC. We believe that the most recently available data that we used to set payment for this service in the CY 2020 OPPS final rule is an appropriate proxy for both the procedure's estimated cost and its relative payment weight. We note that this proposed policy to use prior year claims data in ratesetting is similar to the application of a geometric mean cost floor to the Partial Hospitalization APCs, as initially established in the CY 2020 OPPS/ASC final rule (84 FR 61339 through 61347). Therefore, we believe it is appropriate to propose to use the median cost of $20,229.78 for CPT 0308T, calculated from claims data used in the CY 2020 OPPS final rule, to establish the payment weight for the CY 2021 OPPS for CPT code 0308T. We will continue to monitor the claims available for ratesetting as they are available for the CY 2021 OPPS final rule.

To summarize, for CY 2021, we propose to assign 0308T a payment weight based on the most recently available data, from the CY 2020 OPPS final rule, and therefore propose to assign CPT code 0308T to APC 5495 (Level 5 Intraocular Procedures). Under this proposal, the proposed CY 2021 OPPS payment rate for the service would be established based on the median cost, as discussed in section V.A.5. of the proposed rule, because it is a device intensive procedure assigned to an APC with fewer than 100 total annual claims within the APC. Therefore, the proposed APC assignment for CPT 0308T would be based on the CY 2019 OPPS final rule median cost of $20,229.78.

4. 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 Start Printed Page 48841for 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 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 2021 OPPS/ASC proposed rule, we continue to believe that the six-level APC structure for the Musculoskeletal Procedures APC series is appropriate. Therefore, we propose to maintain the APC structure for the CY 2021 OPPS update.

In the CY 2020 OPPS/ASC final rule, we discussed issues related to the APC assignment of CPT code 22869 (Insertion of interlaminar/interspinous process stabilization/distraction device, without open decompression or fusion, including image guidance when performed, lumbar; single level) to APC 5115 (84 FR 61253 through 61254). Specifically, commenters believed that the code was inappropriately assigned to APC 5115 due to one hospital inaccurately reporting its costs and charges. While we recognized the concerns that the commenters described, we noted that it is generally not our policy to judge the accuracy of hospital coding and charging for purposes of ratesetting. For the CY 2021 OPPS, the geometric mean cost of CPT code 22869 has increased slightly relative to the prior year, from $11,023.45 to $12,788.56. However, the geometric mean costs of the Level 5 and Level 6 Musculoskeletal Procedures APCs are $12,102.02 and $15,975.08, respectively, and so, based on the data that is available, we continue to believe that it is appropriate to assign CPT code 22869 to APC 5115 (Level 5 Musculoskeletal Procedures APC).

For the CY 2021 OPPS, we also propose to remove codes that were previously on the Inpatient Only List and assign them to clinical APCs. Many of these codes are being proposed for APC assignment to the Musculoskeletal Procedures APC series, and so there may be effects on the geometric means as the limited claims data for those codes is included in OPPS ratesetting. For a more detailed discussion of the proposal to remove certain codes from the inpatient only list, please see section IX.B. of this proposed rule,

Table 18 displays the proposed CY 2021 Musculoskeletal Procedures APC series' structure and APC geometric mean costs.

5. Noncontact Real-Time Fluorescence Wound Imaging/MolecuLight (APC 5722)

For the July 2020 update, the CPT Editorial Panel established two new codes, specifically, CPT codes 0598T and 0599T, to report noncontact real-time fluorescence wound imaging for bacterial presence in chronic and acute wounds. The codes and their long descriptors are listed in Table 7 (New HCPCS Codes Effective July 1, 2020) above. We note that CMS recently received a new technology application for the MolecuLight i: X procedure, which is described by CPT codes 0598T and 0599T. In determining the appropriate payment for CPT code 0598T, we considered whether there should be separate or conditionally packaged payment for the procedure since the use of the MolecuLight imaging device will most often involve another procedure or service during the same session (for example, debridement of the wound, laboratory service, or another skin-related procedure). In addition, we considered whether the code should be placed in either the Diagnostic Procedures or Minor Procedures APC group. Based on our review of the application and input from our physicians, we assigned CPT code 0598T to APC 5722 ((Level 2 Diagnostic Tests and Related Services) Start Printed Page 48842and status indicator “T” with a payment rate of $253.10 effective July 1, 2020. In addition, because CPT code 0599T is an add-on code, we assigned the code to status indicator “N” to indicate that the payment is included in the primary procedure. We note that the new technology application indicated a higher projected cost involving care in an operating room (OR), however, based on our review of the MolecuLight service, we removed all OR-associated costs because it is not clear to us that the test would routinely be performed in the OR setting. However, we are soliciting public comments from hospital-based providers that have used MolecuLight on the appropriate OPPS payment, particularly with respect to the cost of providing the service in the hospital outpatient setting as well as the performance of the procedure. We note, as indicated in Table 8 (Comment Timeframe for New and Revised HCPCS Codes), that we are seeking comments on CPT codes that are effective July 1, 2020 in this proposed rule, particularly with respect to the APC and SI assignments, and will finalize them in the CY 2021 OPPS/ASC final rule with comment period.

In summary, we propose to assign CPT code 0598T to APC 5722 (Diagnostic Tests and Related Services) with status indicator “T” and CPT code 0599T to status indicator “N” for CY 2021. The proposed CY 2021 payment rate for CPT code 0598T can be found in Addendum B to this proposed rule with comment period. In addition, we refer readers to Addendum D1 of this proposed rule with comment period for the status indicator (SI) meanings for all codes reported under the OPPS. Both Addendum B and D1 are available via the internet on the CMS website.

6. Pathogen Test for Platelets/Rapid Bacterial Testing (APC 5732)

For CY 2020, the HCPCS code associated with pathogen test for platelets or rapid bacterial testing was assigned to a new technology APC 1494 (New Technology—Level 1D ($31-$40). For the CY 2021 update, we propose to revise the APC assignment for this HCPCS code from New Technology APC 1494 to clinical APC 5732 (level 2 Minor Procedures). Refer to section III.C. of this proposed rule for the full discussion on the proposal.

7. Urology and Related Services (APCs 5371 Through 5378)

For the CY 2020 OPPS/ASC final rule with comment period (84 FR 61268), we received a public comment suggesting we revise the assignments for the services assigned to the Urology & Related Services APCs. The commenter specifically noted that a reorganization for APCs 5374 through 5376 would be appropriate but added that there are other inconsistencies across services within the urology APCs. We stated in that same final rule that we would consider revisions to the urology APCs in future rulemaking.

Currently, for CY 2020, there are seven levels of APCs for urology services. We have reviewed the CY 2020 geometric mean cost for APCs 5371 through 5377 and, after our analysis of the claims data for this proposed rule, we believe that a modification to the urology APCs is appropriate.

For the CY 2021 OPPS/ASC proposed rule, we evaluated the claims data and noted the large geometric mean cost differential between APC 5376 (level 6) and APC 5377 (level 7) has continued to grow. This differential in the geometric mean cost from APC 5376 to APC 5377 would have been about $9,700, with the geometric mean cost for APC 5377 being about 220 percent of the geometric mean cost of APC 5376. With claims data available for this CY 2021 OPPS proposed rule with comment period showing an unusually large difference between the geometric mean costs of the Level 6 Urology APC and the Level 7 Urology APC on both a dollar and percentage basis, we believe that creating an additional APC in the urology and related series will provide an appropriate structure distinguishing between clinical and cost similarity for the procedures in the different levels. Therefore, for CY 2021, we propose to create an additional urology and related services APC 5378 (level 8) and re-organize the current APC 5376 (level 6) and 5377 (level 7). As a result, we propose a total of eight levels in the urology and related services series. We believe this re-organization would address the lack of an appropriate level for procedures with geometric mean costs that fall between current APC 5376 and current APC 5377.

We note that the proposed re-organization re-assigns CPT 53440 (Male sling procedure) and CPT 0548T (Transperineal periurethral balloon continence device; bilateral placement, including cystoscopy and fluoroscopy) from the current APC 5376 to APC 5377.

In addition, this proposed revision reassigns the following services from APC 5377 to APC 5378:

  • CPT 54416 (Removal and replacement of non-inflatable (semi-rigid) or inflatable (self-contained) penile prosthesis at the same operative session).
  • CPT 53444 (Insert tandem cuff).
  • CPT 54410 (Removal and replacement of all component(s) of a multi-component, inflatable penile prosthesis at the same operative session).
  • CPT 54411 (Removal and replacement of all components of a multi-component inflatable penile prosthesis through an infected field at the same operative session, including irrigation and debridement of infected tissue).
  • CPT 54401 (Insertion of penile prosthesis; inflatable (self-contained)).
  • CPT 54405 (Insertion of multi-component, inflatable penile prosthesis, including placement of pump, cylinders, and reservoir).
  • CPT 53447 (Removal and replacement of inflatable urethral/bladder neck sphincter including pump, reservoir, and cuff at the same operative session).
  • CPT 53445 (Insertion of inflatable urethral/bladder neck sphincter, including placement of pump, reservoir, and cuff).

We note that the APC reassignment for these 10 codes results in geometric mean costs for Levels 6, 7, and 8 of the urology APCs that we believe more appropriately align with the geometric mean costs for services in these APCs than the current structure. Specifically, as listed in Table 19, the geometric mean cost of $8,089.78 for APC 5376, $11,275.15 for APC 5377, and $18,015.54 for APC 5378 reduces the unusually large gaps on both a dollar and percentage basis in geometric mean costs between each APC level.

Start Printed Page 48843

In summary, to lessen the large payment gaps on both a dollar and percentage basis between APCs 5376 and 5377, we propose to establish APC 5378 (Level 8 Urology and Related Services) with status indicator “J1” for CY 2021. The proposed CY 2021 payment rates for all the urology APCs, specifically APCs 5371 through 5378, can be found in Addendum A to this proposed rule with comment period. In addition, we refer readers to Addendum D1 of this proposed rule with comment period for the status indicator (SI) meanings for all codes reported under the OPPS. Both Addendum A and D1 are available via the internet on the CMS website.

IV. OPPS Payment for Devices

A. Proposed Pass-Through Payment for Devices

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

a. Background

The intent of transitional device pass-through payment, as implemented at 42 CFR 419.66, is to facilitate access for beneficiaries to the advantages of new and truly innovative devices by allowing for adequate payment for these new devices while the necessary cost data is collected to incorporate the costs for these devices into the procedure APC rate (66 FR 55861). 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 current 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 are 7 device categories eligible for pass-through payment: C1823-Generator, neurostimulator (implantable), nonrechargeable, with transvenous sensing and stimulation leads); C1824-Generator, cardiac contractility modulation (implantable); C1982-Catheter, pressure-generating, one-way valve, intermittently occlusive; C1839-Iris prosthesis; C1734-Orthopedic/device/drug matrix for opposing bone-to-bone or soft tissue-to bone (implantable); C2596-Probe, image-guided, robotic, waterjet ablation; and C1748-Endoscope, single-use (that is disposable), Upper GI, imaging/illumination device (insertable).

The pass-through payment status of the device category for HCPCS code C1823 will end on December 31, 2021; the pass-through payment status of the device category for HCPCS code C1748 will end on June 30, 2022; and the pass-through payment status of the device categories for HCPCS codes C1824, C1982, C1839, C1734, and C2596 will end on December 31, 2022. Table 20 shows the expiration of transitional Start Printed Page 48844pass-through payments for these devices. All of these HCPCS codes will have pass-through payment status and will continue to receive pass-through payments in CY 2021.

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 believe that it is important for hospitals to receive pass-through payments for devices that offer substantial clinical improvement in the treatment of Medicare beneficiaries to facilitate access by beneficiaries to the advantages of the new technology. Conversely, we have noted that the need for additional payments for devices that offer little or no clinical improvement over previously existing devices is less apparent. In such cases, these devices can still be used by hospitals, and hospitals will be paid for them through appropriate APC payment. Moreover, a goal is to target pass-through payments for those devices where cost considerations might be most likely to interfere with patient access (66 FR 55852; 67 FR 66782; and 70 FR 68629). We note that, as discussed in section IV.A.4. of this CY 2021 OPPS/ASC proposed rule, we created an alternative pathway in the CY 2020 OPPS/ASC final rule that granted 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 readers to section IV.A.4. of this CY 2021 OPPS/ASC proposed rule for a complete discussion of this pathway.

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 marketing authorization (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 marketing authorization, if required, unless there is a documented, verifiable delay in U.S. market availability after FDA marketing authorization 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 Start Printed Page 48845expenses 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 cost 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).

In the CY 2020 annual rulemaking process, we finalized an alternative pathway for devices that receive Food and Drug Administration (FDA) marketing authorization and are granted a Breakthrough Device designation (84 FR 61295). Under this alternative pathway, devices that are granted a FDA Breakthrough Device designation are not 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 do need to meet the other requirements for pass-through payment status in our regulation at § 419.66. Devices that have received FDA marketing authorization, are part of the Breakthrough Devices Program, and meet the other criteria in regulation can be approved through the quarterly process and announced through that process (81 FR 79655). Proposals regarding these devices and whether pass-through payment status should continue to apply are included in the next applicable OPPS rulemaking cycle. This process promotes timely pass-through payment status for innovative devices, while also recognizing that such devices may not have a sufficient evidence base to demonstrate substantial clinical improvement at the time of FDA marketing authorization.

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 2021

We received five complete applications by the March 1, 2020 quarterly deadline, which was the last quarterly deadline for applications to be received in time to be included in this CY 2021 OPPS/ASC proposed rule. We received one of the applications in the second quarter of 2019, two of the applications in the fourth quarter of 2019, and two of the applications in the first quarter of 2020. Two of the applications were approved for device pass-through payment during the quarterly review process: CUSTOM FLEX® ARTIFICIAL IRIS and EXALTTM Model D Single-Use Duodenoscope. CUSTOM FLEX® ARTIFICIAL IRIS received fast-track approval under the alternative pathway effective January 1, 2020. EXALTTM Model D Single-Use Duodenoscope received fast-track approval under the alternative pathway effective July 1, 2020. As previously stated, all applications that are preliminarily approved upon quarterly review will automatically be included in the next applicable OPPS annual rulemaking cycle. Therefore, CUSTOM FLEX® ARTIFICIAL IRIS and EXALTTM Model D Single-Use Duodenoscope are discussed below in section IV.2.b.1.

Applications received for the later deadlines for the remaining 2020 quarters (June 1, September 1, and December 1), if any, will be presented in the CY 2022 OPPS/ASC proposed rule. We note that the quarterly application process and requirements have not changed in light of the addition of rulemaking review. Detailed instructions on submission of a quarterly device pass-through 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, 2020 deadline is presented below.

1. Alternative Pathway Device Pass-Through Applications

We received three device pass-through applications by the March 2020 quarterly application deadline for devices that have received FDA marketing authorization and a Breakthrough Device designation from FDA, and therefore are eligible to apply under the alternative pathway. As stated Start Printed Page 48846above in section IV.2.a, under this alternative pathway, devices that are granted a FDA Breakthrough Device designation are not evaluated in terms of the current substantial clinical improvement criterion at § 419.66(c)(2)(i) for purposes of determining device pass-through payment status, but will need to meet the other requirements for pass-through payment status in our regulation at § 419.66.

(1) CUSTOM FLEX® ARTIFICIA LIRIS

VEO Ophthalmics submitted an application for a new device category for transitional pass-through payment status for the CUSTOM FLEX® ARTIFICIAL IRIS by the June 2019 quarterly deadline. The CUSTOM FLEX® ARTIFICIAL IRIS device is described as a foldable iris prosthesis that is custom-made for each individual patient who requires one. The applicant states that the CUSTOM FLEX® ARTIFICIAL IRIS comes in two models—With Fiber or Fiber Free. The two models are identical in every respect except that the With Fiber model has a polyester meshwork layer embedded in it to provide adequate tear strength to withstand suturing.

The applicant provides that the CUSTOM FLEX® ARTIFICIAL IRIS is intended to serve as an artificial iris prosthesis, inserted at the time of cataract surgery or during a subsequent stand-alone procedure. The CustomFlexTM Artificial Iris is indicated for use in children and adults for the treatment of full or partial aniridia resulting from congenital aniridia, acquired defects, or other conditions associated with full or partial aniridia. The conditions that the CUSTOM FLEX® ARTIFICIAL IRIS treats are rare; congenital aniridia is present in approximately 1.8 in 100,000 live births (1 in 40,000 to 1 in 100,000),[4-2] congenital IridoCorneal Endothelial Syndrome (ICE) syndrome is even less common (incidence not available). Iris defects such as iatrogenic iridodialysis as a complication of cataract surgery has variable prevalence, ranging from 0-0.84 percent of surgeries,[3 4 5 6 7 8] and may occur in approximately 0.2 percent of blunt orbital trauma.[9] Although rare, these conditions are cosmetically and functionally limiting. The applicant provides that in addition to a noticeably absent or irregular iris/pupil, affected patients frequently experience photophobia (light sensitivity) and glare as well as symptoms such as dry eye.[10 11]

According to the applicant, currently available treatments for symptomatic glare, photophobia, and cosmesis are limited, and an FDA-approved, commercially available iris prosthesis fills a needed gap. Alternatives include tinted spectacles or contact lenses, iris reconstruction (for example, pupilloplasty or iridodialysis repair), and corneal tattooing.10 Among these, tinted spectacles can provide some symptomatic relief, but the applicant states that they do not address the underlying problem and cannot be used in all settings. Iris reconstruction requires that sufficient iris tissue be present. Tinted contact lenses and corneal tattooing are cosmetically not ideal and have an associated risk of corneal infection (corneal ulcer and infectious keratitis). According to the applicant, in addition, corneal tattooing has risk of surface toxicity, anterior segment inflammation, and/or corneal epithelial defect. The only other artificial iris devices in the U.S. were previously available under FDA compassionate use exemption (Morcher 50F, 96F; Ophtec 311 aniridia lens).10 However, these devices are no longer available following FDA approval of the CUSTOM FLEX® ARTIFICIAL IRIS.

With respect to the newness criterion at § 419.66(b)(1), the FDA granted the CUSTOM FLEX® ARTIFICIAL IRIS premarket approval (PMA) (P170039) on May 30, 2018 for use in the treatment of full or partial aniridia resulting from congenital or acquired defects and was designated a Breakthrough Device by FDA on December 21, 2017. The applicant provided that there was a roughly 3-month market delay after receipt of PMA approval while final labeling in its printed form was submitted to FDA and FDA completed its review and approval process. The applicant notes that commercial availability of the device commenced on September 12, 2018 after it received FDA approval for the final labeling. We received the application for a new device category for transitional pass-through payment status for the CUSTOM FLEX® ARTIFICIAL IRIS on May 31, 2019, which is within 3 years of the date of the initial FDA marketing authorization. We are inviting public comment on whether the CUSTOM FLEX® ARTIFICIAL IRIS meets the newness criterion.

With respect to the eligibility criterion at § 419.66(b)(3), the applicant states that the device is implanted via injection through a 2.75-4 mm clear corneal incision. Depending on the site of implantation (capsular bag, ciliary sulcus, sutured to sclera), the device is cut (trephined) to the correct diameter. The device can also be sutured to an intraocular lens if an intraocular lens is also implanted at the time of surgery. The applicant further provides that the CUSTOM FLEX® ARTIFICIAL IRIS is integral to the service provided, is used for one patient only, comes in contact with human tissue, and is surgically implanted. The applicant also claimed that the CUSTOM FLEX® ARTIFICIAL IRIS 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, and it is not a supply or material furnished incident to a service. We are inviting public comment on whether the CUSTOM FLEX® ARTIFICIAL IRIS 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. Upon review, it does not appear that there are any other existing pass-through payment categories that might Start Printed Page 48847apply to the CUSTOMFLEX® ARTIFICIAL IRIS and 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 either of the following: (i) 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; or (ii) for devices for which pass-through status will begin on or after January 1, 2020, as an alternative to the substantial clinical improvement criterion, the device has received FDA marketing authorization and is part of the FDA's Breakthrough Devices Program. As stated in section IV.2.a above, devices that apply under the alternative pathway for devices with a FDA marketing authorization and that have a Breakthrough Device designation are not subject to evaluation for substantial clinical improvement (84 FR 61295). The CUSTOM FLEX® ARTIFICIAL IRIS received FDA marketing authorization and a Breakthrough Devices designation from FDA on December 21, 2017.

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 CUSTOM FLEX® ARTIFICIAL IRIS would be reported with CPT code 66999—Unlisted procedure, anterior segment of eye, which was assigned to APC 5491 (Level 1 Intraocular Procedures) for Calendar Year (CY) 2020. 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 5491, which had a CY 2019 payment rate of $1,917. 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 66999 had a device offset amount of $149.80 at the time the application was received. According to the applicant, the cost of the CUSTOM FLEX® ARTIFICIAL IRIS is $7,700, for both the Fiber Free and with Fiber models.

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 $7,700 for the CUSTOM FLEX® ARTIFICIAL IRIS is 402 percent of the applicable APC payment amount for the service related to the category of devices of $1,917 (($7,700/$1,917) × 100 = 402 percent). Therefore, we believe the CUSTOM FLEX® ARTIFICIAL IRIS 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 $7,700 for the CUSTOM FLEX® ARTIFICIAL IRIS is 5,140 percent of the cost of the device-related portion of the APC payment amount for the related service of $150 (($7,700/$150) × 100 = 5,140 percent).

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 $7,700 for the CUSTOM FLEX® ARTIFICIAL IRIS and the portion of the APC payment amount for the device of $1,917 is 394 percent of the APC payment amount for the related service of $150 (($7,700−$150)/$1,917) × 100 = 394 percent). Therefore, we believe that the CUSTOM FLEX® ARTIFICIAL IRIS meets the third cost significance requirement.

We are inviting public comment on whether the CUSTOM FLEX® ARTIFICIAL IRIS meets the device pass-through payment criteria discussed in this section, including the cost criterion.

As stated above, we received the application for the CUSTOMFLEX® ARTIFICIAL IRIS application by the June 1, 2019 quarterly deadline and preliminarily approved for transitional pass-through payment under the alternative pathway for CY 2020, effective January 1, 2020. We are inviting public comment on whether the CUSTOM FLEX® ARTIFICIAL IRIS should continue to receive transitional pass-through payment under the alternative pathway for devices that are FDA market authorized and that have a FDA Breakthrough Device designation.

(2) EXALTTM Model D Single-Use Duodenoscope

Boston Scientific Corporation submitted an application before the March 2020 quarterly deadline for a new device category for transitional pass-through payment status for the EXALTTM Model D Single-Use Duodenoscope. The EXALTTM Model D Single-Use Duodenoscope is described as a sterile, single-use, flexible duodenoscope used to examine the duodenum and perform endoscopic retrograde cholangiopancreatography (ERCP) procedures by facilitating access to the pancreaticobiliary system. The applicant stated that it has designed the technology of the EXALTTM Model D Single-Use Duodenoscope to eliminate the risk of nosocomial infections due to improper reprocessing of a reusable duodenoscope. As stated above, the EXALTTM Model D Single-Use Duodenoscope is used during ERCP procedures that are performed to examine bile and pancreatic ducts. According to the applicant, the EXALTTM Model D Single-Use Duodenoscope enables passage and manipulation of accessory devices in the pancreaticobiliary system for diagnostic and therapeutic purposes, as necessary. During the ERCP procedure, the physician inserts the duodenscope through the patient's mouth, down the esophagus, into the stomach, and then into the first part of the small intestine (duodenum). The applicant stated that during ERCP a cannula is passed through the duodenoscope via a working channel and used to cannulate a small opening on the duodenal wall. Once that step is complete, the physician injects contrast while x-rays are taken to study the bile and/or pancreatic ducts. If the physician identifies an area that warrants further investigation, accessory devices can be inserted through the working channel of the scope and into the pancreaticobiliary system for diagnosis or treatment. According to the applicant, after the conclusion of the procedure, the single-use EXALTTM Model D Single-Use Duodenoscope device has no further medical use and is fully disposable.

With respect to the newness criterion at § 419.66(b)(1), FDA granted 510(k) premarket clearance (K193202) as of December 13, 2019. Prior to 510(k) clearance, the applicant received Breakthrough Device designation from FDA on November 19, 2019. We received the application for a new device category for transitional pass-Start Printed Page 48848through payment status for the EXALTTM Model D Single-Use Duodenoscope on January 17, 2020, which is within 3 years of the date of the initial FDA marketing authorization. We are inviting public comment on whether the EXALTTM Model D Single-Use Duodenoscope meets the newness criterion.

With regard to the eligibility criterion at § 419.66(b)(3), according to the applicant, the EXALTTM Model D Single-Use Duodenoscope is integral to the ERCP service provided, is used for one patient only, and is surgically inserted as it is inserted through the patient's mouth, down the esophagus, into the stomach, and then into the first part of the small intestine. The applicant also stated that the EXALTTM Model D Single-Use Duodenoscope 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, 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. With respect to the existence of a previous pass-through device category that describes EXALTTM Model D Single-Use Duodenoscope, the applicant suggested a category descriptor of “Duodenoscope, single-use.” The applicant also provided an existing device category “C1749, Endoscope, retrograde imaging/illumination colonoscope device (implantable),” for pass-through payment for another endoscope and explained why they believe the category descriptor is not applicable to EXALTTM Model D Single-Use Duodenoscope. The applicant stated that HCPCS C1749 does not appropriately describe the EXALT Model D, as C1749 is intended to describe endoscopic imaging devices that are inserted through a colonoscope and into the colon. The applicant argues that EXALT Model D is the first and only single-use duodenoscope through which devices can be passed, and it is utilized in ERCP procedures. The applicant further states that the scope that is the subject of this request provides access to a different part of the anatomy, specifically, the pancreaticobiliary system and facilitates access for diagnostic and therapeutic purposes, as opposed to the devices described by C1749, which are endoscopic imaging devices that are inserted through a colonscope and into the colon, providing access to a different part of the anatomy. Upon review, we agree with the applicant that it does not appear that there are any other existing pass-through payment categories that might apply and we are inviting public comment on this issue.

The second criterion for establishing a device category, at § 419.66(c)(2), provides that CMS determines either of the following: (i) 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; or (ii) for devices for which pass-through status will begin on or after January 1, 2020, as an alternative to the substantial clinical improvement criterion, the device has received FDA marketing authorization and is part of the FDA's Breakthrough Devices Program. As previously discussed in section 2.a above, we finalized the alternative pathway for devices that receive FDA marketing authorization and are granted a Breakthrough Device designation in the CY 2020 OPPS/ASC final rule (84 FR 61295). The EXALTTM Model D Single-Use Duodenoscope has marketing authorization and a Breakthrough Device designation from the FDA and therefore is not evaluated based on substantial clinical improvement.

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 EXALTTM Model D Single-Use Duodenoscope would be reported with CPT code 43274 which is associated with APC 5331 (Complex GI 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. We used APC 5331 for our calculations, which had a CY 2020 payment rate of $4,780.30 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 43274 had a device offset amount of $1,287.81 at the time the application was received. According to the applicant, the cost of the EXALTTM Model D Single-Use Duodenoscope is $2,930.

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 $2,930 for the EXALTTM Model D Single-Use Duodenoscope is 61 percent of the applicable APC payment amount for the service related to the category of devices of $4,780.30 ($2,930/$4,780.30 × 100 = 61.3 percent). Therefore, we believe the EXALTTM Model D Single-Use Duodenoscope 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 $2,930 for the EXALTTM Model D Single-Use Duodenoscope is 228 percent of the cost of the device-related portion of the APC payment amount for the related service of $1,287.81 ($2,930/$1,287.81) × 100 = 227.5 percent. Therefore, we believe that the EXALTTM Model D Single-Use Duodenoscope 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 $2,930 for the EXALTTM Model D Single-Use Duodenoscope and the portion of the APC payment amount for the device of $1,287.81 is 34 percent of the APC payment amount for the related service of $4,780.30 (($2,930−$1,287.81)/$4,780.30) × 100 = 34.4 percent). Therefore, we believe that the EXALTTM Model D Single-Use Duodenoscope meets the third cost significance requirement. We are inviting public comment on whether the EXALTTM Model D Single-Use Duodenoscope meets the device pass-Start Printed Page 48849through payment criteria discussed in this section, including the cost criterion.

As specified above, the EXALTTM Model D Single-Use Duodenoscope application was preliminarily approved for transitional pass-through payment under the alternative pathway effective July 1, 2020. We are inviting public comment on whether the EXALTTM Model D Single-Use Duodenoscope should continue to receive transitional pass-through payment under the alternative pathway for devices that are FDA market authorized and that have a FDA Breakthrough Device designation.

(3) BAROSTIM NEOTM System

CVRx, Inc. submitted an application for the BAROSTIM NEOTM System by the December 2019 quarterly deadline. The applicant provides that the BAROSTIM NEOTM is indicated for the treatment of symptoms of patients with advanced heart failure. The applicant asserts that the BAROSTIM therapy triggers the body's main cardiovascular reflex to regulate blood pressure and address the underlying causes of the progression of heart failure. According to the applicant, increased sympathetic and decreased parasympathetic activity contribute to heart failure (HF) symptoms and disease progression. Barostim's mechanism of action is stimulating the carotid baroreceptor which results in centrally mediated reduction of sympathetic and increase in parasympathetic activity. A single 2mm coated electrode with a 7mm silicone backer is sutured to the carotid artery to activate the baroreceptors. It is connected to an implantable pulse generator in the chest which provides control of baroreflex activation energy. The BAROSTIM NEOTM System uses CVRx patented BAROSTIM THERAPYTM technology to trigger the body's own natural systems (baroreflex) by electrically activating the carotid baroreceptors, the body's natural cardiovascular regulation sensors.

According to the applicant, in conditions such as hypertension and heart failure, it is believed the baroreceptors, the body's natural sensors, are not functioning properly and are not sending sufficient signals to the brain. This results in the brain sending signals to other parts of the body (heart, blood vessels, kidneys) to constrict the blood vessels, retain water and salt by the kidneys and increase stress-related hormones. The applicant provides that when the baroreceptors are activated by the BAROSTIM NEOTM system, signals are sent through neural pathways to the brain. In response, the brain works to counteract this stimulation by sending signals to other parts of the body (heart, blood vessels, and kidneys) that relax the blood vessels and inhibit the production of stress-related hormones. These changes act to reduce cardiac after-load and enable the heart to increase blood output, while maintaining or reducing its workload. Parameters are programmed into the Implantable Pulse Generator (IPG) using telemetry via a wireless external programming system. The applicant states that the BAROSTIM NEOTM System is fully programmable to adjust the therapy to each patient's need.

With respect to the newness criterion at § 419.66(b)(1), the FDA granted the BAROSTIM NEOTM System a premarket approval (P180050) and a Breakthrough Device designation on August 16, 2019 for the improvement of symptoms of heart failure—quality of life, six-minute hall walk, and functional status—for patients who remain symptomatic despite treatment with guideline-directed medical therapy, are New York Heart Association (NYHA) Class III or Class II (who had a recent history of Class III), have a left ventricular ejection fraction ≤ 35 percent, a NT-proBNP < 1600 pg/ml and excluding patients indicated for Cardiac Resynchronization Therapy (CRT) according to AHA/ACC/ESC guidelines. We received the application for a new device category for transitional pass-through payment status for the BAROSTIM NEOTM on November 27, 2019, which is within 3 years of the date of the initial FDA marketing authorization. We are inviting public comment on whether the BAROSTIM NEOTM meets the newness criterion.

With respect to the eligibility criterion at § 419.66(b)(3), according to the applicant, the use of BAROSTIM NEOTM is integral to the service of providing baroflex therapyTM, is used for one patient only, comes in contact with human skin and is surgically implanted or inserted. The applicant also claimed the BAROSTIM NEOTM 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, and it is not a supply or material furnished incident to a service. We are inviting public comments on whether the BAROSTIM NEOTM 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 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 BAROSTIM NEOTM, the applicant suggested a category descriptor of “Generator, neurostimulator (implantable), non-rechargeable with carotid sinus stimulation lead.” The applicant also provided a list of current and expired device categories for pass-through payment for other neurostimulation systems and their rationale for why they believe the category descriptors are not applicable to BAROSTIM NEOTM.

The applicant stated that BAROSTIM NEOTM is not described by existing device category C1767, Generator, neurostimulator (implantable), non-rechargeable. The applicant stated that similar to the traditional spinal cord stimulation (SCS) systems included in this category, the BAROSTIM NEOTM System is not rechargeable; however, it is the only system that works to deliver CVRx's proprietary baroreflex activation therapy (BAT). The applicant provided that BAT uses afferent signaling to the brain by stimulating the carotid artery to reduce the sympathetic signal and increase the parasympathetic signal. The applicant stated that this unique therapy works to rebalance the autonomic input to the heart to improve heart failure symptoms.

Additionally, the applicant stated that traditional devices provide pain relief by disrupting the pain signals traveling between the spinal cord's nervous system and the brain, but the BAROSTIM NEO System uses the generator to stimulate the baroreceptors in the carotid artery to treat the symptoms of patients with advanced heart failure. The applicant stated that the BAROSTIM NEO generator is unique in its capability to drive electricity up to 20 mA/100 Hz with sufficient battery capacity to provide the required therapy through the BAROSTIM NEOTM carotid sinus lead. The applicant described that the BAROSTIM NEOTM carotid sinus lead is sutured to the carotid wall, where the baroreceptors (stretch fibers) are located. Electrical current radiating from the carotid sinus lead activates the baroreceptors. When activated, the baroreceptors send efferent signals through the Carotid Sinus Nerve to the brain. The brain interprets these afferent signals and reacts by reducing the sympathetic tone and increasing the parasympathetic tone. The applicant states that the BAROSTIM NEOTM System is the only device currently approved by FDA that leverages this mechanism of action to treat the Start Printed Page 48850symptoms of patients with advanced heart failure.

The applicant stated that BAROSTIM NEOTM is not described by existing device category C1823, Generator, neurostimulator (implantable), non-rechargeable, with transvenous sensing and stimulation leads. The applicant states that existing device category C1823 is exclusively used to describe a complete system comprised of a generator implanted in the chest, a stimulation lead attached to the phrenic nerve and a sensing lead to control the function of the diaphragm for the treatment of moderate to severe central sleep apnea. The applicant states that the BAROSTIM NEOTM System utilizes a single stimulation lead positioned on the carotid artery to stimulate baroreceptors. The stimulation of the baroreceptors creates afferent nerve traffic through the Carotid Sinus Nerve, and results in the activation of the baroreflex. The applicant again states that the BAROSTIM NEOTM System is the only device currently approved by FDA that leverages this mechanism of action to improve quality of life and functional status in heart failure.

The applicant also provided that BAROSTIM NEOTM is not described by existing device category C1778, Lead, neurostimulator (implantable). The applicant stated that leads used in traditional neurostimulation are implanted on nerves (for example, spinal cord, peripheral nerves). The applicant stated that in contrast, the BAROSTIM NEO carotid sinus lead is sutured onto the carotid artery and is the only lead that is designed to be secured on an arterial wall to stimulate sensors located inside the arterial wall (baroreceptors). The applicant provided that stimulation is delivered to the arterial wall, where the baroreceptors (stretch fibers) are located. The applicant stated that the BAROSTIM NEOTM generator is uniquely designed to send electric current via the BAROSTIM NEOTM carotid sinus lead and that the BAROSTIM NEOTM carotid sinus lead is uniquely designed to only interface with the BAROSTIM NEO generator. Again, the applicant provided that the BAROSTIM NEOTM System is the only device currently approved by FDA that leverages this mechanism of action to treat the symptoms of patients with advanced heart failure.

We are concerned that the BAROSTIM NEOTM System may be appropriately described by existing pass-through payment categories. Specifically, we believe that Barostim may be appropriately described by C1767 as the Barostim device consists of a generator, a neurostimulator, and a lead. We are inviting public comment on this issue.

The second criterion for establishing a device category, at § 419.66(c)(2), provides that CMS determines either of the following: (i) 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; or (ii) for devices for which pass-through status will begin on or after January 1, 2020, as an alternative to the substantial clinical improvement criterion, the device has received FDA marketing authorization and is part of the FDA's Breakthrough Devices Program. As stated in section 2.a above, devices that apply under the alternative pathway for devices with a FDA marketing authorization and that have a Breakthrough Device designation are not subject to evaluation for substantial clinical improvement (84 FR 61295). Barostim has FDA marketing authorization and a Breakthrough Device designation.

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 BAROSTIM NEOTM would be reported with CPT code 0266T, which they consider to be a total system code. CPT code 0266T is assigned to APC 5464 (Level 4 Neurostimulator and Related 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 5464, which has a CY 2020 payment rate of $29,115.50. 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 0266T had a device offset amount of $24,253 at the time the application was received. According to the applicant, the cost of the BAROSTIM NEOTM is $35,000.

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 estimated average reasonable cost of $35,000 for the BAROSTIM NEOTM is 120 percent of the applicable APC payment amount for the service related to the category of devices of $29,116 (($35,000/29,116) × 100 = 120.2 percent). Therefore, we believe the BAROSTIM NEOTM 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 $35,000 for the BAROSTIM NEOTM is 144 percent of the cost of the device-related portion of the APC payment amount for the related service of $24,253 (($35,000/$24,253) × 100 = 144.3 percent). Therefore, we believe that the BAROSTIM NEOTM 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 $35,000 for BAROSTIM NEOTM and the portion of the APC payment amount for the device of $24,253 is 37 percent of the APC payment amount for the related service of $29,116 (($35,000−$24,253)/$29,116) × 100 = 36.9 percent). Therefore, we believe that the BAROSTIM NEOTM System meets the third cost significance requirement.

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

2. Traditional Device Pass-Through Applications

(1) Hemospray® Endoscopic Hemostat

Cook Medical submitted an application for a new device category for transitional pass-through payment status for the Hemospray® Endoscopic Hemostat (Hemospray) for CY 2021. Hemospray® Endoscopic Hemostat is a prescription use device consisting of a hemostatic agent and a delivery system. The hemostatic agent is an inert, bentonite powder, naturally sourced from aluminum phyllosilicate clay, developed for endoscopic hemostasis. Start Printed Page 48851According to the applicant, Hemospray® is indicated by the FDA for hemostasis of nonvariceal gastrointestinal bleeding. Using an endoscope to access the gastrointestinal tract, the Hemospray delivery system is passed through the accessory channel of the endoscope and positioned just above the bleeding site without making contact with the GI tract wall. The Hemospray® powder is propelled through the application catheter, either a 7 or 10 French polyethylene catheter, by release of CO2 from the cartridge located in the device handle and sprayed onto the bleeding site. Bentonite can absorb five to ten times its weight in water and swell up to 15 times its dry volume. Bentonite rapidly absorbs water and becomes cohesive to itself and adhesive to tissue, forming a physical barrier to aqueous fluid (for example, blood). Hemospray® is not absorbed by the body and does not require removal as it passes through the GI tract within 72 hours. Hemospray® is single-use and disposable.

With respect to the newness criterion at § 419.66(b)(1), the FDA granted a de novo request classifying the Hemospray® Endoscopic Hemostat (Hemospray®) as a Class II device under section 513(f)(2) of the Federal Food, Drug, and Cosmetic Act on May 7, 2018. We received the application for a new device category for transitional pass-through payment status for the Hemospray® Endoscopic Hemostat on December 2, 2019, which is within 3 years of the date of the initial FDA marketing authorization. We are inviting public comments on whether Hemospray® meets the newness criterion.

With respect to the eligibility criterion at § 419.66(b)(3), according to the applicant, Hemospray® 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 Hemospray® 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, and it is not a supply or material furnished incident to a service. We are inviting public comments on whether Hemospray® 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 yet identified an existing pass-through payment category that describes Hemospray®. We are inviting public comment on whether Hemospray® meets the device category criterion.

The second criterion for establishing a device category, at § 419.66(c)(2), provides that CMS determines either of the following: (i) 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; or (ii) for devices for which pass-through status will begin on or after January 1, 2020, as an alternative to the substantial clinical improvement criterion, the device has received FDA marketing authorization and is part of the FDA's Breakthrough Devices Program. The applicant stated that Hemospray® represents a substantial clinical improvement over existing technologies. With respect to this criterion, the applicant submitted studies that examined the impact of Hemospray® on endoscopic hemostasis outcomes, rebleeding occurrence, and mortality.

According to the applicant, Hemospray® is a topically applied mineral powder that offers a novel primary treatment option for endoscopic bleeding management, serves as an option for patients who fail conventional endoscopic treatments, and serves as an alternative to interventional radiology hemostasis (IRH) and surgery. Broadly, the applicant outlined two treatment areas in which it stated Hemospray® would provide a substantial clinical improvement: (1) As a primary treatment or a rescue treatment after the failure of a conventional method, and (2) in use for the treatment of malignant lesions. The applicant provided seven articles specifically for the purpose of addressing the substantial clinical improvement criterion.

The first article provided by the applicant was a prospective single armed multicenter phase two safety and efficacy study performed in France.[15] From March 2013 to January 2015, 64 endoscopists in 20 centers enrolled 202 patients in the study in which Hemospray® was used as either a first line treatment (46.5 percent) or salvage therapy (53.5 percent) following unsuccessful treatment with another method. The indication for Hemospray® as a first-line therapy or salvage therapy was at the discretion of the endoscopist. Of the 202 patients, the mean age was 68.9, 69.3 percent were male, and all patients were classified into four primary etiologic groups: Ulcers (37.1 percent), malignant lesions (30.2 percent), post-endoscopic bleeding (17.3 percent), and other (15.3 percent). Patients were further classified by the American Society of Anesthesiologist (ASA) physical status scores with 4.5 percent as a normal healthy patient, 24.3 percent as a patient with mild systemic disease, 46 percent as a patient with severe systemic disease, 22.8 percent as a patient with severe systemic disease that is a constant threat to life, and 2.5 percent as a moribund patient who is not expected to survive without an operation.[6 7] Immediate hemostasis was achieved in 96.5 percent across all patients; among treatment subtypes immediate hemostasis was achieved in 96.8 percent of first-line treated patients and 96.3 percent of salvage therapy patients. At day 30 the overall rebleeding was 33.5 percent of 185 patients with cumulative incidences of 41.4 percent for ulcers, 37.7 percent for malignant lesions, 17.6 percent for post-endoscopic bleedings, and 25 percent for others. When Hemospray® was used as a first-line treatment, rebleeding at day 30 occurred in 26.5 percent (22/83) of overall lesions, 30.8 percent of ulcers, 33.3 percent of malignant lesions, 13.6 percent of post-endoscopic bleedings, and 22.2 percent of other. When Hemospray® was used as a salvage therapy, rebleeding at day 30 occurred in 39.2 percent (40/102) of overall lesions, 43.9 percent of ulcers, 50.0 percent of malignant lesions, 25.0 percent of post-endoscopic bleedings, and 26.3 percent for others. According to the article, the favorable hemostatic results seen from Hemospray® are due to its threefold mechanism of action: formation of a mechanical barrier; concentration of clotting factors at the bleeding site; and enhancement of clot formation.[8] No severe adverse events Start Printed Page 48852were noted, however the authors note the potential for pain exists due to the use of carbon dioxide. Lastly, the authors stated that while Hemospray® was found to reduce the need for radiological embolization and surgery as salvage therapies, it was not found to be better than other hemostatic methods in terms of preventing rebleeding of ulcers.

The applicant provided a second article consisting of an abstract from another systematic review article.[9] The abstract purports to cover a review of prospective, retrospective, and randomized control trials evaluating Hemospray® as a rescue therapy. Eighty-five articles were initially identified and 23 were selected for review. Of those, 5 studies were selected which met the inclusion criteria of the analysis. The median age of patients was 69; 68 percent were male. The abstract concludes that when used as a rescue therapy after the failure of conventional endoscopic modalities, in nonvariceal gastrointestinal bleeding, Hemospray® seems to have significantly higher rates of immediate hemostasis.

A third article provided by the applicant described a single-arm retrospective analytical study of 261 enrolled patients conducted at 21 hospitals in Spain.[10] The mean age was 67 years old, 69 percent of patients were male, and the overall technical success, defined as correct assembled and delivery of Hemospray® to a bleeding lesion, was 97.7 percent (95.1 percent-99.2 percent). The most common causes of bleeding in patients were peptic ulcer (28 percent), malignancy (18.4 percent), therapeutic endoscopy-related (17.6 percent), and surgical anastomosis (8.8 percent). Overall, 93.5 percent (89.5 percent to 96 percent) of procedures achieved hemostasis. Recurrent bleeding, defined as (1) a new episode of bleeding symptoms, (2) a decrease in hemoglobin of >2 g/dL within 48 hours of an index endoscopy or >3g/dL in 24 hours, or (3) direct visualization of active bleeding at the previously treated lesion on repeat endoscopy, had a cumulative incidence at 3 and 30 days of 16.1 percent (11.9 percent-21 percent) and 22.9 percent (17.8 percent-28.3 percent) respectively. The overall risk of Hemospray® failure at 3 and 30 days was 21.1 percent (16.4 percent-26.2 percent) and 27.4 percent (22.1 percent-32.9 percent) respectively with no statistically significant differences (p = 0.07) between causes at 30 days (for example, peptic ulcer, malignancy, anastomosis, therapeutic endoscopy-related, and other causes). With the use of multivariate analysis spurting bleeding vs. nonspurting bleeding (subdistribution hazard ratio [sHR] 1.97 (1.24-3.13)), hypotension vs. normotensive (sHR 2.14 (1.22-3.75)), and the use of vasoactive drugs (sHR 1.80 (1.10-2.95)) were independently associated with Hemospray® failure. The overall 30-day survival was 81.9 percent (76.5 percent-86.1 percent) with 46 patients dying during follow-up and 22 experiencing bleeding related deaths; twenty patients (7.6 percent) with intraprocedural hemostasis died before day 30. The authors indicated the majority of Hemospray® failures occurred within the first 3 days and the rate of immediate hemostasis was similar to literature reports of intraprocedural success rates of over 90 percent. The authors stated that the hemostatic powder of Hemospray® is eliminated from the GI tract as early as 24 hours after use, which could explain the wide ranging recurrent bleeding percentage. The authors reported that importantly, adverse events are rare, but cases of abdominal distension, visceral perforation, transient biliary obstruction, and splenic infarct have been reported; one patient involved in this study experienced an esophageal perforation without a definitive causal relationship.

A fourth article provided by the applicant described a single-arm multicenter prospective registry involving 314 patients in Europe which collected data on days 0, 1, 3, 7, 14, and 30 after endotherapy with Hemospray®.[11] The outcomes of interest in this study were immediate endoscopic hemostasis (observed cessation of bleeding within 5 minutes post Hemospray® application) with secondary outcomes of rebleeding immediately following treatment and during follow-up, 7 and 30 day all-cause mortality, and adverse events. The sample was 74 percent male with a median age of 71 with the most common pathologies of peptic ulcer (53 percent), malignancy (16 percent), post-endoscopic bleeding (16 percent), bleeding from severe inflammation (11 percent), esophageal variceal bleeding (2.5 percent), and cases with no obvious cause (1.6 percent). The median baseline Blatchford score (BS) and RS were 11 and 7 respectively. The BS ranges from 0 to 23 with higher scores indicating increasing risk for required endoscopic intervention and is based upon the blood urea nitrogen, hemoglobin, systolic blood pressure, pulse, presence of melena, syncope, hepatic disease, and/or cardiac failure.[12] The RS ranges from 0 to 11 with higher scores indicating worse potential outcomes and is based upon age, presence of shock, comorbidity, diagnosis, and endoscopic stigmata of recent hemorrhage.[13] Immediate hemostasis was achieved in 89.5 percent of patients following the use of Hemospray®; only the BS was found to have a positive correlation with treatment failure in multivariate analysis (OR 1.21 (1.10-1.34)). Rebleeding occurred in 10.3 percent of patients who achieved immediate hemostasis again with only the BS having a positive correlation with rebleeding (OR: 1.13 (1.03-1.25)). At 30 days the all-cause mortality was 20.1 percent with 78 percent of these patients having achieved immediate endoscopic hemostasis and a cause of death resulting from the progression of other comorbidities. A subgroup analysis of treatment type (monotherapy, combination therapy, and rescue therapy groups) was performed showing no statistically significant difference in immediate hemostasis across groups (92.4 percent, 88.7 percent, and 85.5 percent respectively). Higher all-cause mortality rates at 30 days were highest in the monotherapy group (25.4 percent, p = 0.04) as compared to all other groups. According to the authors, in comparison to major recent studies they were able to show lower rebleeding rates overall and in all subgroups despite the high-risk population.[14] The authors further note limitations in that the inclusion of patients was nonconsecutive and at the discretion of the endoscopist, at the time of the endoscopy, which allows for the potential introduction of selection bias, which may have affected these study results.

Start Printed Page 48853

The fourth article also described the utility of Hemospray® in the treatment of malignant lesions. According to the applicant, malignant lesions pose a significant clinical challenge as successful hemostasis rates are as low as 40 percent with high recurrent bleeding over 50 percent within 1 month following standard treatments.[15 16] The applicant added that bleeding from tumors is often diffuse and consists of friable mucosa decreasing the utility of traditional treatments (for example, ligation, cautery). From the fourth article, the applicant noted that 50 patients were treated for malignant bleeding with an overall immediate hemostasis in 94 percent of patients.[17] Of the 50 patients, 33 were treated with Hemospray® alone, 11 were treated with Hemospray® as the final treatment, and 4 were treated with Hemospray® as a rescue therapy of which 100 percent, 84.6 percent and 75 percent experienced immediate hemostasis respectively.[18] Similarly, from the first discussed article, the applicant noted that among malignant bleeding patients, 95.1 percent achieved immediate hemostasis with lower rebleeding rates at 8 days when Hemospray® was used as a primary treatment as compared to when used as a rescue therapy (17.1 percent vs. 46.7 percent respectively).[19] The applicant concluded that Hemospray® may provide an advantage as a primary treatment to patients with malignant bleeding.

The applicant provided a fifth article, which consisted of a journal pre-proof article detailing a 1:1 randomized control trial of 20 patients treated with Hemospray® versus the standard of care (for example, thermal and injection therapies) in the treatment of malignant gastrointestinal bleeding.[20] The goals of this pilot study were to determine the feasibility of a definitive trial. The primary outcome of the study was immediate hemostasis (absence of bleeding after 3 minutes) with secondary outcomes of recurrent bleeding at days 1, 3, 30, 90, and 180 and adverse events at days 1, 30, and 180. The mean age of patients was 67.2, 75 percent were male, and on average patients presented with 2.9 ± 1.7 comorbidities. All patients had active bleeding at endoscopy and the majority of patients had an ASA score of 2 (45 percent) or 3 (40 percent). Immediate hemostasis was achieved in 90 percent of Hemospray® patients and 40 percent of standard of care patients (5 injection alone, 3 thermal, 1 injection with clips, and 1 unknown). Of those patients in the control group, 83.3 percent crossed over to the Hemospray® treatment. One patient died while being treated with Hemospray® from exsanguination; post-mortem examination demonstrated that bleeding was caused by rupture of a malignant inferior mesenteric artery aneurysm. Overall, 86.7 percent of patients treated with Hemospray® initially or as crossover treatment achieved hemostasis. Recurrent bleeding was lower in the Hemospray® group (20 percent) as compared to the control group (60 percent) at 180 days. Forty percent of the treated group received blood transfusions as compared to 70 percent of the control group. The overall length of stay was 14.6 days among treated patients as compared to 9.4 in the control group. Mortality at 180 days was 80 percent in both the treated and control groups. The authors noted the potential for operator bias in the use of Hemospray® prior to switching to another method when persistent bleeding exists. Lastly, the authors noted that while they did not occur during this study, there are concerns around the risks of perforation, obstruction, and systemic embolization with the use of Hemospray®.

A sixth article provided by the applicant was a case-controlled study with 10 patients with active upper gastrointestinal bleeding from tumor compared with 10 conventional therapy patients selected as historical controls, matched by type of tumor.[21] The study evaluated efficacy for tumor-related bleeding and compared Hemospray® to conventional therapies, specifically examining 14-day rebleeding rates, lengths of hospital stay (LOS), and mortality rate at 30-day follow up. Historical controls were selected from patient medical records from 2010 to 2014. Among the patients who received Hemospray®, the 14-day rebleeding rate (10 percent vs. 30 percent; P = 0.60). and the 30-day mortality rates (10 percent vs. 30 percent, P = 0.7) were three times lower compared to the control group; neither rate was statistically significant. There was no difference in LOS between the Hemospray® and conventional therapy patients.

A seventh article provided by the applicant described a single-arm multicenter retrospective study from 2011 to 2016 involving 88 patients who bled as a result of either a primary GI tumor or metastases to the GI tract.[22] In this study the authors define immediate hemostasis as no further bleeding at least one minute after treatment with Hemospray® and recurrent bleeding was suspected if one of seven criteria were met: (1) Hematemesis or bloody nasogastric tube >6 hours after endoscopy; (2) melena after normalization of stool color; (3) hematochezia after normalization of stool color or melena; (4) development of tachycardia or hypotension after >1 hour of vital sign stability without other cause; (5) decrease in hemoglobin level greater than or equal to 3 hours apart; (6) tachycardia or hypotension that does not resolve within 8 hours after index endoscopy; or (7) persistent decreasing hemoglobin of >3 g/dL in 24 hours associated with melena or hematochezia). The sample for this study consisted of 88 patients (with a mean age of 65 years old and 70.5 percent male) of which 33.3 percent possessed no co-morbid illness, and 25 percent were on current antiplatelet/anticoagulant medication. The mean BS was 8.7 plus or minus 3.7 with a range from 0 to 18. Overall, 72.7 percent of patients had a stage 4 adenocarcinoma, squamous cell carcinoma, or lymphoma. Immediate hemostasis was achieved in 97.7 percent of patients. Recurrent bleeding occurred among 13 of 86 (15 percent) and 1 of 53 (1.9 percent) at 3 and 30 days, respectively. A total of 25 patients (28.4 percent) died during the 30-day follow up period. Overall, 27.3 percent of patients re-bled within 30 days after treatment of which half were within 3 days. Using multivariate analysis, the authors found patients with good performance status, no end-Start Printed Page 48854stage cancer, or receiving any combination of definitive hemostasis treatment modalities had significantly greater survival. The authors acknowledged the recurrent bleeding rate post Hemospray® treatment at 30 days of 38 percent is comparable with that seen in sole conventional hemostatic techniques and state this implies that Hemospray® does not differ from conventional techniques and remains unsatisfactory.

Ultimately, the applicant concluded nonvariceal gastrointestinal bleeding is associated with significant morbidity and mortality in older patients with multiple co-morbid conditions. Inability to achieve hemostasis and early rebleeding are associated with increased cost and greater resource utilization. According to the applicant, patients with bleeding from malignant lesions have few options that can provide immediate hemostasis without further disrupting fragile mucosal tissue and worsening the active bleed. The applicant stated Hemospray® is an effective agent that provides immediate hemostasis in patients with GI bleeding as part of multimodality treatment, as well as when used to rescue patients who have failed more conventional endoscopic modalities. Furthermore, the applicant stated that in patients with malignant bleeding in the GI tract, Hemospray® provides a high rate of immediate hemostasis and fewer recurrent bleeding episodes, which, in combination with definitive cancer treatment, may lead to improvements in long term survival. Lastly, the applicant stated Hemospray® is an important new technology that permits immediate and long-term hemostasis in GI bleeding cases where standard of care treatment with clip ligation or cautery are not effective.

We note that the majority of studies provided lack a comparator when assessing the effectiveness of Hemospray®. Three of the articles provided are systematic reviews of the literature. While we find these articles helpful in establishing a background for the use of Hemospray®, we are concerned that they may not provide strong evidence of substantial clinical improvement. Four studies appear to be single-armed studies assessing the efficacy of Hemospray® in the patient setting. In all of these articles, comparisons are made between Hemospray® and standard of care treatments; however, without the ability to control for factors such as study design, patient characteristics, etc., it is difficult to determine if any differences seen result from Hemospray® or confounding variables. Furthermore, within the retrospective and prospective studies lacking a control subset, some level of selection bias appears to potentially be introduced in that providers may be allowed to select the manner and order in which patients are treated, thereby potentially influencing outcomes seen in these studies.

Additionally, one randomized control trial provided by the applicant appears to be in the process of peer-review and is not yet published. Furthermore, this article is written as a feasibility study for a potentially larger randomized control trial and contains a sample of only 20 patients. This small sample size leaves us concerned that the results are not representative of the larger Medicare population. Lastly, as described we are concerned the control group can receive one of multiple treatments which lack a clear designation methodology beyond physician choice. For instance, 50 percent of the control patients received injection therapy alone, which according to the literature provided by the applicant is not an acceptable treatment for endoscopic bleeding. Accordingly, it is not clear whether performance seen in the treated group as compared to the control group is due to Hemospray® itself or due to confounding factors.

Third, we are concerned with the samples chosen in many of the studies presented. Firstly, the Medicare population is approximately 54 percent female and 46 percent male.[23] Many of the samples provided by the applicant are overwhelmingly male. Secondly, many of the studies provided were performed in European and other settings outside of the United States. We are therefore concerned that the samples chosen within the literature provided may not represent the Medicare population.

Lastly, we are concerned about the potential for adverse events resulting from Hemospray®. It is unclear from the literature provided by the applicant what the likelihood of these events is and whether or not an evaluation for the safety of Hemospray® was performed. About one-third of the articles submitted specifically addressed adverse events with Hemospray®. However, the evaluation of adverse events was limited and most of the patients in the studies died of disease progression. A few of the provided articles mention the potential for severe adverse reactions (for example, abdominal distension, visceral perforation, biliary obstruction, splenic infarct). Specifically, one article [24] recorded adverse events related to Hemospray®, including abdominal distention and esophageal perforation.

According to information submitted by the applicant, Cook Medical is voluntarily recalling Hemospray® Endoscopic Hemostat due to complaints received that the handle and/or activation knob on the device in some cases has cracked or broken when the device is activated and in some cases has caused the carbon dioxide cartridge to exit the handle. The applicant stated that Cook Medical has received 1 report of a superficial laceration to the user's hand that required basic first aid; however, there have been no reports of laceration, infection, or permanent impairment of a body structure to users or to patients due to the carbon dioxide cartridge exiting the handle. The applicant stated that Cook Medical has initiated an investigation and will determine the appropriate corrective action(s) to prevent recurrence of this issue. According to the applicant, although the recall does restrict availability of the device, they wish to continue their application as they believe the use of Hemospray® significantly improves clinical outcomes for certain patient populations compared to currently available treatments.

Based upon the evidence presented, we are inviting public comments on whether the Hemospray® Endoscopic Hemostat 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 Hemospray® would be reported with HCPCS codes 43227, 43255, 44366, 44378, 44391, 45334, and 45382. 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 5312, which had a CY 2020 payment rate of $1,004.10 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 Start Printed Page 4885579657). HCPCS code 45382 had a device offset amount of $33.54 at the time the application was received. According to the applicant, the cost of the Hemospray® Endoscopic Hemostat 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 Hemospray® is 249 percent of the applicable APC payment amount for the service related to the category of devices of $1004.10 (($2,500/$1,004.10) × 100 = 249 percent). Therefore, we believe Hemospray® 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 Hemospray® is 7,454 percent of the cost of the device-related portion of the APC payment amount for the related service of $33.54 (($2,500/$33.54) × 100 = 7,453.8 percent). Therefore, we believe that Hemospray® 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 Hemospray® and the portion of the APC payment amount for the device of $33.54 is 246 percent of the APC payment amount for the related service of $1004.10 t ((($2,500−$33.54)/$ 1,004.10) × 100 = 245.6 percent). Therefore, we believe that Hemospray® meets the third cost significance requirement.

We are inviting public comment on whether the Hemospray® Endoscopic Hemostat meets the device pass-through payment criteria discussed in this section, including the cost criterion for device pass-through payment status.

(2) The SpineJack® Expansion Kit

Stryker, Inc., submitted an application for a new device category for transitional pass-through payment status for the SpineJack® Expansion Kit (hereinafter referred to as the SpineJack® system) by the March 2020 quarterly deadline. The applicant described the SpineJack® system as an implantable fracture reduction system, which is indicated for use in the reduction of painful osteoporotic vertebral compression fractures (VCFs) and is intended to be used in combination with Stryker VertaPlex and VertaPlex High Viscosity (HV) bone cement.

The applicant described the SpineJack® system as including two cylindrical implants constructed from Titanium-6-Aluminum-4-Vanadium (Ti6Al4V) with availability in three sizes: 4.2 mm (12.5 mm expanded), 5.0 mm (17 mm expanded) and 5.8 mm (20 mm expanded). The applicant explained implant size selection is based upon the internal cortical diameter of the pedicle. According to the SpineJack® system Instructions for Use, the use of two implants is recommended to treat a fractured VB. According to the applicant, multiple VBs can also be treated in the same operative procedure as required. Additionally, the applicant explained that titanium alloy allows for plastic deformation when it encounters the hard cortical bone of the endplate yet still provides the lift force required to restore midline VB height in the fractured vertebra. The applicant stated that the SpineJack® system notably contains a self-locking security mechanism that restricts further expansion of the device when extreme load forces are concentrated on the implant. As a result, the applicant stated that this feature significantly reduces the risk of vertebral endplate breakage while it further allows functional recovery of the injured disc.[25]

The applicant stated that the implants are then progressively expanded though actuation of an implant tube that pulls the two ends of the implant towards each other in situ to mechanically restore VB height. The applicant explained that the mechanical working system of the implant allows for a progressive and controlled reduction of the vertebral fracture.[26] The applicant stated that when expanded, each SpineJack® implant exerts a lifting pressure on the fracture through a mechanism that may be likened to the action of a scissor car jack, and that the longitudinal compression on the implant causes it to open in a craniocaudal direction. The applicant explained that the implant is locked into the desired expanded position as determined and controlled by the treating physician.[27]

The applicant further explained that the expansion of the SpineJack® implants creates a preferential direction of flow for the bone cement and once the desired expansion has been obtained, polymethylmethacrylate (PMMA) bone cement is deployed from the center of the implant into the VB. The applicant stated that when two implants are symmetrically positioned in the VB, this allows for a more homogenous spread of PMMA bone cement. The applicant stated that the interdigitation of bone cement creates a broad supporting ring under the endplate, which is essential to confer stability to the VB.

According to the applicant, osteoporosis is one of the most common bone diseases worldwide that disproportionately affects aging individuals. The applicant explained that in 2010, approximately 54 million Americans aged 50 years or older had osteoporosis or low bone mass,[28] which resulted in more than 2 million osteoporotic fragility fractures in that year alone.[29] The applicant stated it has been estimated that more than 700,000 VCFs occur each year in the United States (U.S.),[30] and of these VCFs, about 70,000 result in hospital admissions with an average length of stay of 8 days per patient.[31] Furthermore, the applicant noted that in the first year after a painful vertebral fracture, patients have been found to require primary care services at a rate 14 times Start Printed Page 48856greater than the general population.[32] The applicant explained that medical costs attributed to VCFs in the U.S. exceeded $1 billion in 2005 and are predicted to surpass $1.6 billion by 2025.[33]

The applicant explained that osteoporotic VCFs occur when the vertebral body (VB) of the spine collapses and can result in chronic disabling pain, excessive kyphosis, loss of functional capability, decreased physical activity, and reduced quality of life. The applicant stated that as the spinal deformity progresses, it reduces the volume of the thoracic and abdominal cavities, which may lead to crowding of internal organs. The applicant noted that the crowding of internal organs may cause impaired pulmonary function, abdominal protuberance, early satiety and weight loss. The applicant indicated that other complications may include bloating, distention, constipation, bowel obstruction, and respiratory disturbances such as pneumonia, atelectasis, reduced forced vital capacity and reduced forced expiratory volume in 1 second.

The applicant explained that the SpineJack® implants provide symmetric, broad load support for osteoporotic vertebral collapse, which is based upon precise placement of bilateral “struts” that are encased in PMMA bone cement, whereas BKP and vertebroplasty (VP) do not provide structural support via an implanted device. The applicant explained that the inflatable balloon tamps utilized in BKP are not made from titanium and are not a permanent implant. According to the applicant, the balloon tamps are constructed from thermoplastic polyurethane, which have limited load bearing capacity. The applicant noted that although the balloon tamps are expanded within the VB to create a cavity for bone cement, they do not remain in place and are removed before the procedure is completed. The applicant explained that partial lift to the VB is obtained during inflation, resulting in kyphotic deformity correction and partial gains in anterior VB height restoration, but inflatable balloon tamps are deflated prior to removal so some of the VB height restoration obtained is lost upon removal of the bone tamps. According to the applicant, BKP utilizes the placement of PMMA bone cement to stabilize the fracture and does not include an implant that remains within the VB to maintain fracture reduction and midline VB height restoration.

The applicant stated that if VB collapse is >50 percent of the initial height, segmental instability will ensue. As a result, the applicant explained that adjacent levels of the VB must support the additional load and this increased strain on the adjacent levels may lead to additional VCFs. Furthermore, the applicant summarized that VCFs also lead to significant increases in morbidity and mortality risk among elderly patients, as evidenced by a 2015 study by Edidin et al., in which researchers investigated the morbidity and mortality of patients with a newly diagnosed VCF (n = 1,038,956) between 2005 to 2009 in the U.S. Medicare population. For the osteoporotic VCF subgroup, the adjusted 4-year mortality was 70 percent higher in the conservatively managed group than in the balloon kyphoplasty procedures (BKP)-treated group, and 17 percent lower in the BKP group than in the vertebroplasty (VP) group. According to the applicant, when evaluating treatment options for osteoporotic VCFs, one of the main goals of treatment is to restore the load bearing bone fracture to its normal height and stabilize the mechanics of the spine by transferring the adjacent level pressure loads across the entire fractured vertebra and in this way, the intraspinal disc pressure is restored and the risk of adjacent level fractures (ALFs) is reduced.

The applicant explained that treatment of osteoporotic VCFs in older adults most often begins with conservative care, which includes bed rest, back bracing, physical therapy and/or analgesic medications for pain control. According to the applicant, for those patients that do not respond to conservative treatment and continue to have inadequate pain relief or pain that substantially impacts quality of life, vertebral augmentation (VA) procedures may be indicated. The applicant explained that VP and BKP are two minimally invasive percutaneous VA procedures that are most often used in the treatment of osteoporotic VCFs and another VA treatment option includes the use of a spiral coiled implant made from polyetheretherketone (PEEK), which is part of the Kiva® system.

According to the applicant, among the treatment options available, BKP is the most commonly performed procedure and the current gold standard of care for VA treatment. The applicant stated that it is estimated that approximately 73 percent of all vertebral augmentation procedures performed in the United States between 2005 and 2010 were BKP.[34] According to the applicant, the utilization of the Kiva® system is relatively low in the U.S. and volume information was not available in current market research data.[35]

The applicant stated that VA treatment with VP may alleviate pain, but it cannot restore VB height or correct spinal deformity. The applicant stated that BKP attempts to restore VB height, but the temporary correction obtained cannot be sustained over the long term. The applicant stated that the Kiva® implant attempts to mechanically restore VB height, but it has not demonstrated superiority to BKP for this clinical outcome.[36]

The applicant provided additional detail comparing the construction and mechanism of action for other VA treatments, provided below. According to the applicant the Kiva® system is constructed of a nitinol coil and PEEK-OPTIMA sheath, with sizes including a 4-loop implant (12 mm expanded) and a 5-loop implant (15 mm expanded) and unlike the SpineJack® system, is not made of titanium and does not include a locking scissor jack design. The applicant stated that the specific mechanism of action for the Kiva® system is different from the SpineJack® system. The applicant explained that during the procedure that involves implanting the Kiva® system, nitinol coils are inserted into the VB to form a cylindrical columnar cavity. The applicant stated that the PEEK-OPTIMA is then placed over the nitinol coil. The applicant explained that the nitinol coil is removed from the VB and the PEEK material is filled with PMMA bone cement. The applicant stated that the deployment of 5 coils equates to a maximum height of 15 mm. The applicant stated that the lifting direction of the Kiva implant is caudate and unidirectional. According to the applicant, in the KAST (Kiva Safety and Effectiveness Trial) pivotal study, it was reported that osteoporotic VCF patients treated with the Kiva® system had an average of 2.6 coils deployed.[37] Start Printed Page 48857Additionally, in a biomechanical comparison conducted for the Kiva® system and BKP using a loading cycle of 200-500 Newtons in osteoporotic human cadaver spine segments filled with bone cement, there were no statistically significant differences observed between the two procedures for VB height restoration, stiffness at high or low loads, or displacement under compression.[38]

The applicant summarized the differences and similarities of the SpineJack®, BKP, and PEEK coiled implant as follows: (1) With respect to construction, SpineJack® is made of Titanium-6-Aluminum-4-Vanadium compared to thermoplastic polyurethanes for BKP and nitinol and PEEK for the PEEK coiled implant; (2) with respect to mechanism of action, the SpineJack® uses a locking scissor jack encapsulated in PMMA bone cement compared to hydrodynamic cavity creation and PMMA cavity filler for BKP and coil cavity creation and PEEK implant filled with PMMA bone cement for the PEEK coiled implant; (3) with respect to plastic deformation, SpineJack® and BKP allow for plastic deformation while the PEEK coiled implant does not; (4) with respect to craniocaudal expansion, SpineJack® allows for craniocaudal expansion, whereas BKP and the PEEK coiled implant do not; (5) with respect to bilateral load support, SpineJack® provides bilateral load support whereas BKP and the PEEK coiled implant do not; and (6) with respect to lift pressure of >500 N, SpineJack® provides lift pressure of >500 N whereas BKP and the PEEK coiled implant do not. The applicant summarized that the SpineJack® system is uniquely constructed and utilizes a different mechanism of action than BKP, which is the gold standard of treatment for osteoporotic VCFs, and that the construction and mechanism of action of the SpineJack® system is further differentiated when compared with the PEEK coiled implant.

With respect to the newness criterion, the SpineJack® Expansion Kit received FDA 510(k) clearance on August 30, 2018, based on a determination of substantial equivalence to a legally marketed predicate device. The applicant explained that although the SpineJack® Expansion Kit received FDA 510(k) clearance on August 30, 2018, due to the time required to prepare for supply and distribution channels, it was not available on the U.S. market until October 2018. As we discussed previously, the SpineJack® Expansion Kit is indicated for use in the reduction of painful osteoporotic VCFs and is intended to be used in combination with Stryker VertaPlex and VertaPlex High Viscosity (HV) bone cements. We received the application for a new device category for transitional pass-through payment status for the SpineJack® Expansion Kit on February 4, 2020, which is within 3 years of the date of the initial FDA marketing authorization. We are inviting public comments on whether the SpineJack® Expansion Kit meets the newness criterion.

With respect to the eligibility criterion at § 419.66(b)(3), according to the applicant, the use of the SpineJack® Expansion Kit is integral to the service of reducing painful osteoporotic vertebral compression fractures (VCFs), is used for one patient only, comes in contact with human skin, and is surgically implanted or inserted into the patient. Specifically, the applicant explained that the SpineJack® system is designed to be implanted into a collapsed vertebral body (VB) via a percutaneous transpedicular approach under fluoroscopic guidance. According to the applicant, the implants remain within the VB with the delivered bone cement. The applicant also claimed the SpineJack® Expansion Kit 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, and it is not a supply or material furnished incident to a service. We are inviting public comments on whether the SpineJack® Expansion Kit 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. The applicant describes the SpineJack® Expansion Kit as an implantable fracture reduction system used to treat vertebral compression fractures (VCFs). The applicant reported that it does not believe that the SpineJack® Expansion Kit is described by an existing category and requested category descriptor “Vertebral body height restoration device, scissor jack (implantable).” We have identified one existing pass-through payment categories that may be applicable to SpineJack® Expansion Kit. The SpineJack® Expansion Kit may be described by HCPCS code C1821 (interspinous process distraction device (implantable)). 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 either of the following: (i) 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; or (ii) for devices for which pass-through status will begin on or after January 1, 2020, as an alternative to the substantial clinical improvement criterion, the device has received FDA marketing authorization and is part of the FDA's Breakthrough Devices Program. With respect to the substantial clinical improvement criterion, the applicant submitted 8 studies and 19 other references to support assertions that the treatment of osteoporotic vertebral compression fracture (VCF) patients with the SpineJack® system represents a substantial clinical improvement over existing technologies because clinical research supports that it reduces future interventions, hospitalizations, and physician visits through a decrease in adjacent level fractures (ALFs), which the applicant stated are clinically significant adverse events associated with osteoporotic VCF. The applicant also stated that treatment with the SpineJack® system greatly reduces pain scores and pain medication use when compared to BKP, which the applicant stated is the current gold standard in vertebral augmentation (VA) treatment.

The applicant explained that the SpineJack® system has been available for the treatment of patients with osteoporotic VCFs for over 10 years in Europe. The applicant explained that, as a result, the SpineJack® implant has been extensively studied, and claims from smaller studies are supported by the results from a recent, larger prospective, randomized study known as the SAKOS (SpineJack® versus Kyphoplasty in Osteoporotic Patients) study. The applicant cited the SAKOS study [39] in support of multiple Start Printed Page 48858substantial clinical improvement claims: Reduction in adjacent level fractures, superiority in mid-vertebral body height restoration, and pain relief. The applicant explained that the SAKOS study was the pivotal trial conducted in support of the FDA 510(k) clearance for the SpineJack® system and that the intent of the study was to compare the safety and effectiveness of the SpineJack® system with the KyphX Xpander Inflatable Bone Tamp (BKP) for treatment of patients with painful osteoporotic VCFs in order to establish a non-inferiority finding for use of the SpineJack® system versus balloon kyphoplasty procedure (BKP).

The SAKOS study is a prospective, international, randomized, non-inferiority study comparing a titanium implantable vertebral augmentation device (TIVAD), the SpineJack® system, versus BKP in the reduction of vertebral compression fractures with a 12-month follow-up. The primary endpoint was a 12-month responder rate based on a composite of three components: (1) Reduction in VCF fracture-related pain at 12 months from baseline by >20 mm as measured by a 100-mm Visual Analog Scale (VAS) measure; (2) maintenance or functional improvement of the Oswestry Disability Index (ODI) score at 12 months from baseline; and (3) absence of device-related adverse events or symptomatic cement extravasation requiring surgical reintervention or retreatment at the index level. If the primary composite endpoint was successful, a fourth component (absence of ALF) was added to the three primary components for further analysis. If the analysis of this additional composite endpoint was successful, then midline target height restoration at 6 and 12 months was assessed. According to the applicant, freedom from ALFs and midline VB height restoration were two additional superiority measures that were tested. According to the SAKOS study, secondary clinical outcomes included changes from baseline in back pain intensity, ODI score, EuroQol 5-domain (EQ-5D) index score (to evaluate quality of life), EQ-VAS score, ambulatory status, analgesic consumption, and length of hospital stay. Radiographic endpoints included restoration of vertebral body height (mm), and Cobb angle at each follow-up visit. Adverse events (AEs) were recorded throughout the study period. The applicant explained that researchers did not blind the treating physicians or patients, so each group was aware of the treatment allocation prior to the procedure; however, the three independent radiologists that performed the radiographic reviews were blinded to the personal data of the patients, study timepoints, and results of the study.

The SAKOS study recruited patients from 13 hospitals across 5 European countries and randomized 152 patients with osteoporotic vertebral compression fractures (OVCFs) (1:1) to either SpineJack® or BKP procedures. Specifically, patients were considered eligible for inclusion if they met a number of criteria, including: (1) At least 50 years of age; (2) had radiographic evidence of one or two painful VCF between T7 and L4, aged less than 3 months, due to osteoporosis; (3) fracture(s) that showed loss of height in the anterior, middle, or posterior third of the VB ≥15 percent but ≤40 percent; and (4) patient failed conservative medical therapy, defined as either having a VAS back pain score of ≥50 mm at 6 weeks after initiation of fracture care or a VAS pain score of ≥70 percent mm at 2 weeks after initiation of fracture care. Eleven of the originally recruited patients were subsequently excluded from surgery (9 randomized to SpineJack® and 2 to BKP). A total of 141 patients underwent surgery, and 126 patients completed the 12-month follow-up period (61 TIVAD and 65 BKP). The applicant contended that despite the SAKOS study being completed outside the U.S., results are applicable to the Medicare patient population, noting that 82 percent (116 of 141) of the patients in the SAKOS trial that received treatment (SpineJack® system or BKP) were age 65 or older. The applicant explained further that the FDA evaluated the applicability of the SAKOS clinical data to the U.S. population and FDA concluded that although the SAKOS study was performed in Europe, the final study demographics were very similar to what has been reported in the literature for U.S.-based studies of BKP. The applicant also explained that FDA determined that the data was acceptable for the SpineJack® system 510(k) clearance, including two clinical superiority claims versus BKP.

The SAKOS study reported that analysis on the intent to treat population using the observed case method resulted in a 12-month responder rate of 89.8 percent and 87.3 percent, for SpineJack® and BKP respectively (p = 0.0016). The additional composite endpoint analyzed in observed cases resulted in a higher responder rate for SpineJack® compared to BKP at both 6 months (88.1 percent vs. 60.9 percent; p < 0.0001) and 12 months (79.7 percent vs. 59.3 percent; p < 0.0001). Midline VB height restoration, tested for superiority using a t test with one-sided 2.5 percent alpha in the ITT population, was greater with SpineJack® than BKP at 6 months (1.14 ± 2.61 mm vs 0.31 ± 2.22 mm; p = 0.0246) and at 12 months (1.31 ± 2.58 mm vs. 0.10 ± 2.23 mm; p = 0.0035), with similar results in the per protocol (PP) population.

Also, according to the SAKOS study, decrease in pain intensity versus baseline was more pronounced in the SpineJack® group compared to the BKP group at 1 month (p = 0.029) and 6 months (p = 0.021). At 12 months, the difference in pain intensity was no longer statistically significant between the groups, and pain intensity at 5 days post-surgery was not statistically different between the groups. The SAKOS study publication also reported that at each timepoint, the percentage of patients with reduction in pain intensity >20 mm was ≥90 percent in the SpineJack® group and ≥80 percent in the BKP group, with a statistically significant difference in favor of SpineJack® at 1-month post-procedure (93.8 percent vs 81.4 percent; p = 0.03). The study also reported: (1) No statistically significant difference in disability (ODI score) between groups during the follow-up period, although there was a numerically greater improvement in the SpineJack® group at most time points; (2) at each time point, the percentage of patients with maintenance or improvement in functional capacity was at or close to 100 percent; and (3) in both groups, a clear and progressive improvement in quality of life was observed throughout the 1-year follow-up period without any statistically significant between-group differences.

In the SAKOS study, both groups had similar proportions of VCFs with cement extravasation outside the treated VB (47.3 percent for TIVAD, 41.0 percent for BKP; p = 0.436). No symptoms of cement leakage were reported. The SAKOS study also reported that the BKP group had a rate of adjacent fractures more than double the SpineJack® group (27.3 percent vs. 12.9 percent; p = 0.043). The SAKOS study also reported that the BKP group had a rate of non-adjacent subsequent thoracic fractures nearly 3 times higher than the SpineJack® group (21.9 percent vs. 7.4 percent) (a p-value was not reported for this result). The most common AEs reported over the study period were backpain (11.8 percent with SpineJack®, 9.6 percent with BKP), new lumbar vertebral fractures (11.8 percent with SpineJack®, 12.3 percent with Start Printed Page 48859BKP), and new thoracic vertebral fractures (7.4 percent with SpineJack®, 21.9 percent with BKP). The most frequent SAEs were lumbar vertebral fractures (8.8 percent with SpineJack®; 6.8 percent with BKP) and thoracic vertebral fractures (5.9 percent with SpineJack®, 9.6 percent with BKP). We also note that the length of hospital stay (in days) for osteoporotic VCF patients treated in the SAKOS trial was 3.8 ± 3.6 days for the SpineJack® group and 3.3 ± 2.4 days for the BKP group (p = 0.926, Wilcoxon test).

The applicant also submitted additional studies, which are described in more detail in this section, related to the applicant's specific assertions regarding substantial clinical improvement.

As stated previously, the applicant stated that the SpineJack® system represents a substantial clinical improvement over existing technologies because it will reduce future interventions, hospitalizations, and physician visits through a decrease in ALFs. The applicant explained that ALFs are considered clinically significant adverse events associated with osteoporotic VCFs, citing studies by Lindsay et al.[40] and Ross et al.[41] The applicant explained that these studies reported, respectively, that having one or more VCFs (irrespective of bone density) led to a 5-fold increase in the patient's risk of developing another vertebral fracture, and the presence of two or more VCFs at baseline increased the risk of ALF by 12-fold. The applicant stated that analysis of the additional composite endpoint in the SAKOS study demonstrated statistical superiority of the SpineJack® system over BKP (p < 0.0001) for freedom from ALFs at both 6 months (88.1 percent vs. 60.9 percent) and 12 months (79.7 percent vs. 59.3 percent) post-procedure. The applicant noted that the results were similar on both the intent to treat and PP patient populations. In addition, the applicant stated the SpineJack® system represents a substantial clinical improvement because in the SAKOS study, compared to patients treated with the SpineJack® system, BKP-treated patients had more than double the rate of ALFs (27.3 percent vs. 12.9 percent; p = 0.043) and almost triple the rate of non-adjacent thoracic VCFs (21.9 percent vs. 7.4 percent).

The applicant also stated superiority with respect to mid-vertebral body height restoration with the SpineJack® system. The applicant explained that historical treatments of osteoporotic VCFs have focused on anterior VB height restoration and kyphotic Cobb angle correction; however, research indicates that the restoration of middle VB height may be as important as Cobb angle correction in the prevention of ALFs.[42] According to the applicant, the depression of the mid-vertebral endplate leads to decreased mechanics of the spinal column by transferring the person's weight to the anterior wall of the level adjacent to the fracture, and as a result the anterior wall is the most common location for ALFs. The applicant further stated that by restoring the entire fracture, including mid-VB height, the vertebral disc above the superior vertebral endplate is re-pressurized and transfers the load evenly, preventing ALFs.[43] The applicant stated that the SpineJack® system showed superiority over BKP with regard to midline VB height restoration at both 6 and 12 months, pointing to the SAKOS study results in the intent to treat population at 6 months (1.14 ± 2.61 mm vs 0.31 ± 2.22 mm; p = 0.0246) and 12 months (1.31 ± 2.58 mm vs. 0.10 ± 2.23 mm; p = 0.0035) post-procedure. The applicant noted that similar results were also observed in the PP population (134 patients in the intent-to-treat population without any major protocol deviations).

The applicant also provided two prospective studies, a retrospective study, and two cadaveric studies in support of its assertions regarding superior VB height restoration. The applicant stated that in a prospective comparative study by Noriega D., et al.,[44] VB height restoration outcomes utilizing the SpineJack® system were durable out to 3 years. This study was a safety and clinical performance pilot that randomized 30 patients with painful osteoporotic vertebral compression fractures to SpineJack® (n = 15) or BKP (n = 15).[45] Twenty-eight patients completed the 3-year study (14 in each group). The clinical endpoints of analgesic consumption, back pain intensity, ODI, and quality of life were recorded preoperatively and through 36-months post-surgery.[46] Spine X-rays were also taken 48 hours prior to the procedure and at 5 days, 6, 12, and 36 months post-surgery.[47] The applicant explained that over the 3-year follow-up period, VB height restoration and kyphosis correction was better compared to BKP, specifically that VB height restoration and kyphotic correction was still evident at 36 months with a greater mean correction of anterior VB height (10 ± 13 percent vs 2 ± 8 percent for BKP, p = 0.007) and midline VB height (10 ± 11 percent vs 3 ± 7 percent for BKP, p = 0.034), while there was a larger correction of the VB angle (− 4.97° ± 5.06° vs 0.42° ± 3.43°; p = 0.003) for the SpineJack® group. The applicant stated that this study shows superiority with regards to VB height restoration.

The applicant stated that Arabmotlagh M., et al., also supported superiority with regard to VB height restoration. Arabmotlagh M., et al. reported an observational case series (with no comparison group) of SpineJack®. They enrolled 42 patients with osteoporotic vertebral compression fracture of the thoracolumbar, who were considered for kyphoplasty, 31 of whom completed the clinical and radiological evaluations up to 12 months after the procedure.[48] According to materials provided by the applicant, the purpose of the study was to evaluate the efficacy of kyphoplasty with the SpineJack® system to correct the kyphotic deformity and to analyze parameters affecting the restoration and maintenance of spinal alignment. The applicant explained that the mean VB height calculated prior to fracture was 2.8 cm (standard deviation (SD) of 0.47), which decreased to 1.5 cm (SD of 0.59) after the fracture. According to the applicant, following the procedure performed with the SpineJack® device, the VB height significantly increased to 1.9 cm (SD of 0.64; p < 0.01), but was reduced to 1.8 cm (SD of 0.61; p < 0.01) at 12 months post-procedure. We note that according to Arabmotlagh M., et al., these results were specifically for mean anterior VB height. The study does not Start Printed Page 48860appear to report results for midline VB height.[49] The applicant also stated that the mean kyphotic angle (KA) calculated prior to fracture was −1° (SD of 5.8), which increased to 13.4° (SD of 8.1) after the fracture. The applicant also stated that following the procedure performed with the SpineJack® device, KA significantly decreased to 10.8° (SD of 9.1; p < 0.01); however, KA correction was lost at 12 months post-procedure with an increase to 13.3° (SD of 9.5; p < 0.01).

The applicant provided a Lin et al., retrospective study of 75 patients that compared radiologic and clinical outcomes of kyphoplasty with the SpineJack® system to vertebroplasty (VP) in treating osteoporotic vertebral compression fractures to support its assertions regarding superiority with regard to midline VB height restoration.[50] The applicant stated that the radiologic outcomes from this study were: (1) The mean KA and mean KA restoration were more efficient after SpineJack® than VP at all time points (up to 1 year), except for mean KA observed postoperatively at 1 week; and (2) the mean middle VB heights and mean VB height restoration were more favorable after SpineJack® than VP.[51] We note that this study did not compare the SpineJack® system to BKP, which the applicant stated is the gold-standard in vertebral augmentation.

In the two cadaveric studies, Kruger A., et al. (2013) and Kruger A., et al. (2015), wedge compression fractures were created in human cadaveric vertebrae by a material testing machine and the axial load was increased until the height of the anterior edge of the VB was reduced by 40 percent.[52] The VBs were fixed in a clamp and loaded with 100 N in a custom made device. In Kruger A., et al. (2013), vertebral heights were measured at the anterior wall as well as in the center of the vertebral bodies in the medial sagittal plane in 36 human cadaveric vertebrae pre- and post-fracture as well as after treatment and loading in (twenty-seven vertebrae were treated with SpineJack® with different cement volumes (maximum, intermediate, and no cement), and 9 vertebrae were treated with BKP). In Kruger A., et al. (2015), anterior, central, and posterior height as well as the Beck index were measured in 24 vertebral bodies pre-fracture and post-fracture as well as after treatment (twelve treated with SpineJack® and twelve treated with BKP). The applicant stated that Kruger A., et al. (2013) showed superiority on VB height restoration and height maintenance, and summarized that: (1) Height restoration was significantly better for the SpineJack® group compared to BKP; (2) height maintenance was dependent on the cement volume used; and (3) the group with the SpineJack® without cement nevertheless showed better results in height maintenance, yet the statistical significance could not be demonstrated.[53] The applicant stated that Kruger A., et al. (2015) showed superiority on VB height restoration, because the height restoration was significantly better in the SpineJack® group compared with the BKP group. The applicant explained that the clinical implications include a better restoration of the sagittal balance of the spine and a reduction of the kyphotic deformity, which may relate to clinical outcome and the biological healing process.[54]

The applicant also stated that use of the SpineJack® system represents a substantial clinical improvement with respect to pain relief. According to the applicant, pain is the first and most prominent symptom associated with osteoporotic VCFs, which drives many elderly patients to seek hospital treatment and negatively impacts on their quality of life. The applicant provided the SAKOS randomized controlled study, a prospective consecutive observational study, and a retrospective case series to support its assertions regarding pain relief with the SpineJack® system. The applicant cited the SAKOS trial for statistically significant greater pain relief achieved at 1 month and 6 months after surgery with the SpineJack® system. The applicant summarized that in the SAKOS trial: (1) Progressive improvement in pain relief was observed over the follow-up period in the SpineJack® system group only; (2) the decrease in pain intensity versus baseline was more pronounced in the SpineJack® system group compared to the BKP group at 1 month (p = 0.029) and 6 months (p = 0.021); and (3) at each time point, the percentage of patients with reduced pain intensity >20 mm was ≥90 percent in the SpineJack® system group and ≥80 percent in the BKP group, with a statistically significant difference in favor of the SpineJack® system at 1 month post-procedure (93.8 percent vs 81.5 percent; p = 0.030). The applicant also noted that although continued pain score improvements were seen out to 1 year for patients treated with the SpineJack® system, the difference between the treatment groups did not meet statistical significance (p = 0.061). The applicant also explained that in the SAKOS study, at 5 days after surgery, there were significantly fewer patients taking central analgesic agent medications in the SpineJack® implant-treated group as compared to those in the BKP-treated group (SJ 7.4 percent vs. BKP 21.9 percent, p = 0.015). According to the applicant, central analgesic agents included medications such as non-steroidal anti-inflammatory drugs (NSAIDS), salicylates, or opioid analgesics.

The applicant also cited a prospective consecutive observational study by Noriega D., et al. for statistically significant pain relief immediately after surgery and at both 6 and 12 months. Noriega D., et al. was a European multicenter, single-arm registry study that aimed to confirm the safety and clinical performance of the SpineJack® system for the treatment of vertebral compression fractures of traumatic origin (no comparison procedure).[55] The study enrolled 103 patients (median age: 61.6 years) with 108 VCFs due to trauma (n = 81), or traumatic VCF with associated osteoporosis (n = 22) who had a SpineJack® procedure. Twenty-three patients withdrew from the study before the 12-month visit. The study reported a significant improvement in back pain at 48 hours after SpineJack® procedure, with the mean VAS pain score decreasing from 6.6 ± 2.6 cm at baseline to 1.4 ± 1.3 cm (mean change: −5.2 ± 2.7 cm; p < 0.001) (median relative decrease in pain intensity of 81.5 percent) for the total study population. Noriega D., et al. also reported that the improvement was maintained over the 12-month follow-up period and similar results were observed with both pure traumatic VCF Start Printed Page 48861and traumatic VCF in patients with osteoporosis. The traumatic VCF with osteoporosis sub-group had a mean change of −5.5 (SD = 1.9) (median relative change of 81.0 percent) (p < 0.001) at 48 hours post-surgery (n = 22), and −5.7 (SD = 2.3) mean change (90.3 percent median relative change) (p < 0.001) at 12 months (n = 16). The applicant stated that this study supported a claim of statistically significant pain relief immediately after surgery and at both 6 and 12 months. The applicant summarized that (1) Pain relief and improvements in pain scores were statistically significant immediately after treatment (48-72 hours) and at 6 and 12 months following surgery (p < 0.001); and (2) the mean improvement between baseline and at 48-72 hours after the procedure (n = 31) was−4.6 (2.6) (p < 0.001), while the mean improvement between baseline and at the 12-month follow-up (n = 22) was−6.0 (3.4) (p < 0.001). We note that Noriega D., et al. did not report results for 6 months (although it does include results for 3 months versus baseline) and does not include the results of mean improvement stated by the applicant.[56] It is also unclear if the applicant intended to rely on the overall results of the study or the subgroup of traumatic VCF with osteoporosis.

The applicant also cited a retrospective case series, Renaud C., et al., for statistically significant pain relief after surgery with the SpineJack® system. Renaud C., et al., included 77 patients with a mean age of 60.9 years and 83 VCFs (51 due to trauma and 32 to osteoporosis) treated with 164 SpineJack® devices (no comparison procedure).[57] The applicant summarized that: (1) Pain relief was statistically significant (p < 0.001), with a pain score decrease from 7.9 pre-operatively to 1.8 at 1 month after the procedure; (2) the pain score improvement was 77 percent at hospital discharge and gradually increased to 86 percent after 1 year following surgery; and (3) the study outcomes demonstrated that the SpineJack® system provided both immediate and long-lasting pain relief.

We note that the results of the SAKOS trial do not appear to have been corroborated in any other randomized controlled study. Additionally, although the applicant stated that BKP is the gold standard in VA, there appears to be a lack of data comparing the SpineJack® system to other existing technology, such as the PEEK coiled implant (Kiva® system), particularly since the PEEK coiled system was considered the predicate device for the SpineJack 510(k). Furthermore, there appears to be a lack of data comparing the SpineJack® system to conservative medical therapy. We note there is an active study posted on clinicaltrials.gov comparing SpineJack® system to conservative orthopedic management consisting of brace and pain medication in acute stable traumatic vertebral fractures in subjects aged 18 to 60 years old. The clinicaltrials.gov entry indicates that findings should be forthcoming in 2020. Additionally, we note that the recent systematic reviews of the management of vertebral compression fracture (Buchbinder et al. for Cochrane (2018), Ebeling et al. (2019) for the American Society for Bone and Mineral Research (ASBMR)), do not support vertebral augmentation procedures due to lack of evidence compared to conservative medical management.[58] The ASBMR recommended more rigorous study of treatment options including “larger sample sizes, inclusion of a placebo control and more data on serious AEs (adverse events).”

We are inviting public comment on whether the SpineJack® 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 SpineJack® system would be reported with CPT code 22513, which is assigned to APC 5114 (Level 4 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 5114, which has a CY 2019 payment rate of $5,891.95. 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 22513 had a device offset amount of $1,127 at the time the application was received. According to the applicant, the cost of the SpineJack® system is $5,623.[59]

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 $5,622.64 for the SpineJack® system is 94 percent of the applicable APC payment amount for the service related to the category of devices of SpineJack® system (($5,622.64/$5,981.28) × 100 = 94 percent). Therefore, we believe the SpineJack® 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 $5,622.64 for the SpineJack® system is 499 percent of the cost of the device-related portion of the APC payment amount for the related service of $1,126.87(($5,622.64/$1,126.87) × 100 = 499 percent). Therefore, we believe that the SpineJack® 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 $5,622.64 for the SpineJack® system and the portion of the APC payment amount for the device of $1,126.87 is 75 percent of the APC payment amount for the related service of $5,987.28 (($5,622.64−$1,126.87)/$5,981.28) = 75.2 percent). Therefore, we believe that the SpineJack® Expansion Kit meets the third cost significance requirement.

We are inviting public comment on whether the SpineJack® Expansion Kit meets the device pass-through payment Start Printed Page 48862criteria discussed in this section, including the cost criterion.

3. Technical Clarification to the Alternative Pathway to the OPPS Device Pass-Through Substantial Clinical Improvement Criterion for Certain Transformative New Devices

As described previously, in the CY 2020 annual rulemaking process, we finalized an alternative pathway for devices that receive Food and Drug Administration (FDA) marketing authorization and are granted a Breakthrough Device designation (84 FR 61295 through 61297). Under this alternative pathway, devices that are granted an FDA Breakthrough Device designation are not evaluated in terms of the current substantial clinical improvement criterion at § 419.66(c)(2) for purposes of determining device pass-through payment status, but will need to meet the other requirements for pass-through payment status in our regulation at § 419.66. Similarly, in the FY 2020 IPPS/LTCH PPS final rule, we finalized an alternative pathway for new technology add-on payments for certain transformative new devices. Under the existing regulations at § 412.87(c), to be eligible for approval for IPPS new technology add-on payments under this alternative pathway, the device must be part of the FDA's Breakthrough Devices Program and have received FDA marketing authorization.

We have received questions from the public regarding CMS's intent with respect to the “marketing authorization” required for purposes of approval under the alternative pathway for certain transformative new devices at § 412.87(c). Some of the public appear to assert that so long as a technology has received marketing authorization for any indication, even if that indication differs from the indication for which the technology was designated by FDA as part of the Breakthrough Devices Program, the technology would meet the marketing authorization requirement at § 412.87(c). Because of this potential confusion, we clarified in the FY 2021 IPPS/LTCH PPS proposed rule that an applicant cannot combine a marketing authorization for an indication that differs from the technology's indication under the Breakthrough Device Program, and for which the applicant is seeking to qualify for the new technology add-on payment, for purposes of approval under the alternative pathway for certain transformative devices (85 FR 32692).

We are clarifying in this proposed rule that the same policy applies for purposes of the OPPS alternative pathway policy. Specifically, we are clarifying that under the OPPS, in order to be eligible for the alternative pathway, the device must receive marketing authorization for the indication covered by the Breakthrough Devices Program designation and we are making a conforming change to the regulations at 419.66(c)(2). We also note that the transitional pass-through payment application for the device must be received within 2 to 3 years of the initial FDA marketing authorization (or a verifiable market delay) for the device for the indication covered by the Breakthrough Devices Program designation.

In summary, in this CY 2021 OPPS/ASC proposed rule, we propose to amend the regulations in § 419.66(c)(2)(ii) to state that “A new medical device is part of the FDA's Breakthrough Devices Program and has received marketing authorization for the indication covered by the Breakthrough Device designation.”

4. Comment Solicitation on Continuing To Provide Separate Payment in CYs 2022 and Future Years for Devices With OPPS Device Pass-Through Payment Status During the COVID-19 Public Health Emergency (PHE)

In this proposed rule, we are soliciting comments on whether we should adjust future payments for devices currently eligible to receive transitional pass-through payments that may have been impacted by the PHE, and if so, how we should implement that adjustment and for how long the adjustment should apply. On January 31, 2020, HHS Secretary Azar determined that a PHE exists retroactive to January 27, 2020 [60] under section 319 of the Public Health Service Act (42 U.S.C. 247d) in response to COVID-19, and on April 21, 2020 Secretary Azar renewed, effective April 26, 2020 and again effective July 25, 2020, the determination that a PHE exists.[61] On March 13, 2020, the President of the United States declared that the COVID-19 outbreak in the United States constitutes a national emergency,[62] retroactive to March 1, 2020. Due to the PHE, we received multiple inquiries from stakeholders regarding potential adjustments to the pass-through payment for devices with OPPS transitional pass-through payment status that may be impacted by the PHE. According to stakeholders, healthcare resources have been triaged to assist in the COVID-19 pandemic response effort, which has reduced utilization for devices receiving transitional pass-through payment, particularly for devices used in services that could be considered elective. Stakeholders cited the CMS recommendations issued on March 18, 2020 to postpone elective surgeries due to the COVID-19 PHE.[63] Stakeholders claim that devices on pass-through status are frequently used during such elective procedures, and that CMS's ability to calculate appropriate payment for services that include these devices once the devices transition off of pass-through status could be hindered by a reduction in claims being submitted with these devices during the PHE.

Transitional pass-through payment for devices is described in section 1833(t)(6) of the Act. It is intended as an interim measure to allow for adequate payment of new innovative technology while we collect the necessary data to incorporate the costs for these items into the procedure APC rate (66 FR 55861). As previously stated, transitional pass-through payments for devices can be made for a period of at least 2 years, but not more than 3 years, beginning on the first date on which pass-through payment was made for the device.

In response to stakeholder concerns regarding reduced utilization of procedures that include pass-through devices during the PHE, we are specifically requesting public comment on utilizing our equitable adjustment authority under section 1833(t)(2)(E) of the Act to provide separate payment for some period of time after pass-through status ends for these devices in order to account for the period of time that utilization for the devices was reduced due to the PHE. Any rulemaking on this issue in response to this comment solicitation would be included in the CY 2022 OPPS/ASC proposed rule and would consider the impact of the PHE on devices with OPPS device pass-through payment status during the PHE. Note that OPPS device pass-through payment status generally lasts three years, and none of the devices with less than three years of pass-through payment status at the start of the PHE have pass-through payment status set to end before December 31st, 2021.Start Printed Page 48863

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 CY 2021 OPPS/ASC 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 the APC level, which is a weighted average offset for all devices used in all of the procedures assigned to an APC, a HCPCS code-level device offset is calculated using only claims for a single HCPCS code. We believe that 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 CY 2021 OPPS/ASC 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 the CY 2021 OPPS/ASC 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 previously—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 previously described 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 our 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 allowed 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 a procedure's 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 Start Printed Page 48864are 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 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 the 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 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 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 amount 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 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 previously 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 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 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 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 & Start Printed Page 48865Medicaid 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.

In response to stakeholder requests for additional detail on our device-intensive methodology, we have updated our claims accounting narrative with a description of our device offset percentage calculation. Our claims accounting narrative for this proposed rule can be found under supporting documentation for the CY 2021 OPPS/ASC proposed rule on our website at: http://www.cms.gov/​Medicare/​Medicare-Fee-for-Service-Payment/​HospitalOutpatientPPS/​index.html.

For CY 2021, we are not proposing any changes to our device-intensive policy.

The full listing of the proposed CY 2021 device-intensive procedures can be found in Addendum P to this CY 2021 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 HCPCS 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 2021.

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 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.Start Printed Page 48866

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 a 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.

In the CY 2014 OPPS/ASC final rule with comment period (78 FR 75005 through 75007), we adopted a policy of reducing OPPS payment for specified APCs when a hospital furnishes a specified device without cost or with a full or partial credit by the lesser of the device offset amount for the APC or the amount of the credit. Although we adopted this change in policy in the preamble of the CY 2014 OPPS/ASC final rule with comment period and discussed it in subregulatory guidance, including Chapter 4, Section 61.3.6 of the Medicare Claims Processing Manual, we inadvertently did not make conforming changes to the regulation text. In particular, we did not change our regulation at 42 CFR 419.45(b)(1) and (2), which describes the amount of the reduction in the APC payment in situations where the beneficiary receives an implanted device that is replaced without cost to the provider or the beneficiary or where the provider receives a full or partial credit for the cost of a replaced device and which continues to state that the amount of the reduction is the device offset amount. Therefore, in this CY 2021 OPPS/ASC proposed rule, we are changing our regulation at § 419.45(b)(1) and (2) to conform with the policy we adopted in CY 2014. In particular, we are revising our regulations at § 419.45(b)(1) to state that, for situations in which a beneficiary has received an implanted device that is replaced without cost to the provider or the beneficiary, or where the provider receives full credit for the cost of a replaced device, the amount of reduction to the APC payment is calculated by reducing the APC payment amount by the lesser of the amount of the credit or the device offset amount that would otherwise apply if the procedure assigned to the APC had transitional pass-through status under § 419.66. Additionally, we are revising our regulation at § 419.45(b)(2) to state that, for situations in which the provider receives partial credit for the cost of a replaced device, but only where the amount of the device credit is greater than or equal to 50 percent of the cost of the replacement device being implanted, the amount of the reduction to the APC payment is calculated by reducing the APC payment amount by the lesser of the amount of the credit or the device offset amount that would otherwise apply if the procedure assigned to the APC had transitional-pass through status under § 419.66. The revisions to § 419.45(b)(1) and (2) appear in section XXVII. of this proposed rule.

5. 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 previously for the policy applied 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 $21,302, and the median cost was $19,521. The final CY 2018 payment rate (calculated using the median cost) was $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 finalized our policy to continue 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. In CY 2020, this policy applied to CPT code 0308T which we assigned to APC 5495 (Level 5 Intraocular Procedures) in the CY 2020 OPPS/ASC final rule with comment period (84 FR 61301).

For CY 2021, we propose 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 2021, this policy would not apply to any procedure. As discussed in section, III.D.3., we received no claims data with CPT code 0308T for this OPPS/ASC proposed rule, which we previously assigned as a low-volume device-intensive procedure for CY 2017 through CY 2020. As such, we propose to assign 0308T a payment weight based on the most recently Start Printed Page 48867available data, from the CY 2020 OPPS final rule, and therefore propose to assign CPT code 0308T to APC 5495 (Level 5 Intraocular Procedures). Additionally, in the absence of CY 2019 claims data for this CY 2021 OPPS/ASC proposed rule, we propose to use the most recently available data, from the CY 2020 OPPS final rule, to establish the device offset percentage for 0308T. Therefore, the proposed CY 2021 device offset percentage for CPT code 0308T is based on the CY 2020 OPPS final rule device offset percentage of 82.21 percent for CPT code 0308T. For more discussion on the APC assignment and payment rate for CPT code 0308T, see section III.D.3. of this proposed rule.

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 the 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 the 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 diseases 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 2021 pass-through drugs and biologicals and their designated APCs are assigned status indicator “G” in Addenda A and B to the 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 the 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 our 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 our 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 pass-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. Drugs and Biologicals With Expiring Pass-Through Payment Status in CY 2020

There are 28 drugs and biologicals whose pass-through payment status will expire during CY 2020 as listed in Table 21. Most of these drugs and biologicals will have received OPPS pass-through payment for 3 years during the period of April 1, 2017 through December 31, 2020. However, there are two groups of drugs and biologicals included in Table Start Printed Page 4886821 whose current period of OPPS pass-through payment is less than 3 years. The first group are five drugs and biologicals that have already had 3 years of pass-through payment status but for which pass-through payment status was extended for an additional 2 years from October 1, 2018 until September 30, 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 (Pub. L. 115-141). The drugs covered by this provision include: HCPCS code A9586 (Florbetapir f18, diagnostic, per study dose, up to 10 millicuries); HCPCS code J1097 (Phenylephrine 10.16 mg/ml and ketorolac 2.88 mg/ml ophthalmic irrigation solution, 1 ml); HCPCS code Q4195 (Puraply, per square centimeter); HCPCS code Q4196 (Puraply am, per square centimeter); and HCPCS code Q9950 (Injection, sulfur hexafluoride lipid microspheres, per ml). The second group are two diagnostic radiopharmaceuticals, HCPCS code Q9982 (Flutemetamol F18, diagnostic, per study dose, up to 5 millicuries) and HCPCS code Q9983 (Florbetaben F18, diagnostic, per study dose, up to 8.1 millicuries) whose pass-through payment status was extended for an additional 9 months from January 1, 2020 to September 30, 2020 under Division N, Title I, Subtitle A, Section 107(a) of the Further Consolidated Appropriations Act of 2020, which amended section 1833(t)(6) of the Social Security Act and added a new section 1833(t)(6)(J) to the Act.

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 2021), as discussed further in section V.B.2. of this proposed rule. We proposed 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 proposed to provide separate payment at the applicable relative ASP-based payment amount (which is proposed at ASP+6 percent for non-340B drugs for CY 2021, as discussed further in section V.B.3. of this proposed rule).

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

Start Printed Page 48869

Start Printed Page 48870

4. Drugs, Biologicals, and Radiopharmaceuticals With Pass-Through Payment Status Expiring in CY 2021

We propose to end pass-through payment status in CY 2021 for 26 drugs and biologicals. These drugs and biologicals, which were approved for pass-through payment status between April 1, 2018 and January 1, 2019, are listed in Table 22. The APCs and HCPCS codes for these drugs and biologicals, which have pass-through payment status that will end by December 31, 2021, 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 sets the amount of pass-through payment for pass-through drugs and biologicals (the pass-through payment amount) as the difference between the amount authorized under section 1842(o) of the Act and the portion of the otherwise applicable OPD fee schedule that the Secretary determines is associated with the drug or biological. For CY 2021, we propose 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 2021. We propose that a $0 pass-through payment amount would be paid for pass-through drugs and biologicals under the CY 2021 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 proposed that their pass-through payment amount would be equal to ASP+6 percent for CY 2021 minus a payment offset for the portion of the otherwise applicable OPD fee schedule that the Secretary determines is associated with the drug or biological as described in section V.A.6. of this proposed rule. We propose this policy 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 propose to continue to update pass-through payment rates on a quarterly basis on the CMS website during CY 2021 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 2021, consistent with our CY 2020 policy for diagnostic and therapeutic radiopharmaceuticals, we propose 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 2021, we propose 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 proposed to provide pass-through payment at WAC+3 percent (consistent with our proposed policy in section V.B.2.b. of the proposed rule), the equivalent payment provided to pass-through payment drugs and biologicals without ASP information. Additional detail on the WAC+3 percent payment policy can be found in section V.B.2.b. of the proposed rule. If WAC information also is not available, we propose to provide payment for the pass-through radiopharmaceutical at 95 percent of its most recent AWP.

The drugs and biologicals that we propose to have pass-through payment status expire between March 31, 2021 and December 31, 2021 are shown in Table 22.

Start Printed Page 48871

Start Printed Page 48872

5. Drugs, Biologicals, and Radiopharmaceuticals With Pass-Through Payment Status Continuing in CY 2021

We propose to continue pass-through payment status in CY 2021 for 46 drugs and biologicals. These drugs and biologicals, which were approved for pass-through payment status beginning between April 1, 2019 and April 1, 2020 are listed in Table 23. The APCs and HCPCS codes for these drugs and biologicals, which have pass-through payment status that will continue after December 31, 2021, 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 sets the amount of pass-through payment for pass-through drugs and biologicals (the pass-through payment amount) as the difference between the amount authorized under section 1842(o) of the Act and the portion of the otherwise applicable OPD fee schedule that the Secretary determines is associated with the drug or biological. For CY 2021, we propose 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 2021. We propose that a $0 pass-through payment amount would be paid for pass-through drugs and biologicals under the CY 2021 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 Start Printed Page 48873supplies 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 proposed that their pass-through payment amount would be equal to ASP+6 percent for CY 2021 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 propose this policy 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 propose to continue to update pass-through payment rates on a quarterly basis on our website during CY 2021 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 2021, consistent with our CY 2020 policy for diagnostic and therapeutic radiopharmaceuticals, we propose 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 2021, we propose 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 proposed to provide pass-through payment at WAC+3 percent (consistent with our proposed policy in section V.B.2.b. of the proposed rule), the equivalent payment provided to pass-through payment drugs and biologicals without ASP information. Additional detail on the WAC+3 percent payment policy can be found in section V.B.2.b. of the proposed rule. If WAC information also is not available, we propose to provide payment for the pass-through radiopharmaceutical at 95 percent of its most recent AWP.

The drugs and biologicals that we propose to have pass-through payment status expire after December 31, 2021 are shown in Table 23.

Start Printed Page 48874

Start Printed Page 48875

6. 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 Start Printed Page 48876the 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 2021, as we did in CY 2020, we propose 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 24.

We propose to continue to post annually on our 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 $130 for CY 2020 (84 FR 61312 through 61313).

Following the CY 2007 methodology, for this CY 2021 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 2021 and rounded the resulting dollar amount ($130.95) 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 2021 OPPS/ASC proposed rule, based on these calculations using the CY 2007 OPPS methodology, we propose a packaging threshold for CY 2021 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 2021 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 Start Printed Page 48877radiopharmaceuticals (collectively called “threshold-packaged” drugs) that had a HCPCS code in CY 2019 and were paid (via packaged or separate payment) under the OPPS. We used data from CY 2019 claims processed before January 1, 2020 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 the proposed rule, or for the following policy-packaged items that we propose to continue to package in CY 2021: 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 2021, we use the methodology that was described in detail in the CY 2006 OPPS proposed rule (70 FR 42723 through 42724) and finalized in the CY 2006 OPPS final rule with comment period (70 FR 68636 through 68638). For each drug and biological HCPCS code, we used an estimated payment rate of ASP+6 percent (which is the payment rate we propose for separately payable drugs and biologicals (other than 340B drugs) for CY 2021, as discussed in more detail in section V.B.2.b. of the proposed rule) to calculate the CY 2021 proposed rule per day costs. We used the manufacturer-submitted ASP data from the fourth quarter of CY 2019 (data that were used for payment purposes in the physician's office setting, effective April 1, 2020) to determine the proposed rule per day cost.

As is our standard methodology, for CY 2021, we propose to use payment rates based on the ASP data from the fourth quarter of CY 2019 for budget neutrality estimates, packaging determinations, impact analyses, and completion of Addenda A and B to the 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 the proposed rule. These data also were the basis for drug payments in the physician's office setting, effective April 1, 2020. 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 2019 hospital claims data to determine their per day cost.

We propose 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 2019 HCPCS codes that were reported to the CY 2020 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 2021.

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 2021 OPPS/ASC proposed rule, we proposed to use ASP data from the fourth quarter of CY 2019, 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, 2020, along with updated hospital claims data from CY 2019. We note that we also propose to use these data for budget neutrality estimates and impact analyses for this CY 2021 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 second quarter of CY 2020. 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, 2020. These payment rates would then be updated in the January 2021 OPPS update, based on the most recent ASP data to be used for physicians' office and OPPS payment as of January 1, 2021. For items that do not currently have an ASP-based payment rate, we proposed to recalculate their mean unit cost from all of the CY 2019 claims data and update cost report information available for the CY 2021 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 the 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 proposed 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 2021 OPPS drug packaging threshold and the drug's payment status (packaged or separately payable) in CY 2020. 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 2021, consistent with our historical practice, we proposed 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 2020 and that are proposed for separate payment in CY 2021, and that then have per day costs equal to or less than the CY 2021 final rule drug packaging threshold, based on the updated ASPs and hospital claims data used for the CY 2021 final rule, would continue to receive separate payment in CY 2021.
  • HCPCS codes for drugs and biologicals that were packaged in CY 2020 and that are proposed for separate payment in CY 2021, and that then have per day costs equal to or less than the CY 2021 final rule drug packaging threshold, based on the updated ASPs and hospital claims data used for the CY 2021 final rule, would remain packaged in CY 2021.
  • HCPCS codes for drugs and biologicals for which we proposed packaged payment in CY 2021 but that then have per-day costs greater than the CY 2021 final rule drug packaging threshold, based on the updated ASPs and hospital claims data used for the CY 2021 final rule, would receive separate payment in CY 2021.

c. Policy Packaged Drugs, Biologicals, and Radiopharmaceuticals

As mentioned earlier in this section, under the OPPS, we package several categories of nonpass-through 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 Start Printed Page 48878radiopharmaceuticals 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, skin 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. 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 believe 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 proposed 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 2021.

For CY 2021, 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 2019 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 2021 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 2019 claims data to make the proposed packaging determinations for these drugs: HCPCS code C9257 (Injection, bevacizumab, 0.25 mg); 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 1000 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 2021 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 2021 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 2021 is displayed in Table 25.

Start Printed Page 48879

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

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

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

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

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

Section 1833(t)(14)(A)(iii) of the Act requires that payment for SCODs in CY 2006 and subsequent years be equal to the average acquisition cost for the drug Start Printed Page 48880for 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.[64]

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 2021 OPPS/ASC proposed rule, we proposed 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 have continued this policy of paying for separately payable drugs and biologicals at the statutory default for CYs 2014 through 2020.

b. Proposed CY 2021 Payment Policy

For CY 2021, we propose to continue our payment policy that has been in effect since CY 2013 to pay for separately payable drugs and biologicals, with the exception of 340B-acquired drugs, at ASP+6 percent in accordance with section 1833(t)(14)(A)(iii)(II) of the Act (the statutory default). We propose to pay for separately payable nonpass-through drugs acquired with a 340B discount at a net rate of ASP minus 28.7 percent (as described in section V.B.6). We refer readers to the CY 2018 OPPS/ASC final rule with comment period (82 FR 59353 through 59371), the CY 2019 OPPS/ASC final rule with comment period (83 FR 58979 through 58981), and the CY 2020 OPPS/ASC final rule with comment period (84 FR 61321 through 61327) for more information about our current payment policy for drugs and biologicals acquired with a 340B discount.

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) of the Act, 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) of the Act, 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). In the CY 2020 OPPS/ASC final rule with comment period, we adopted a policy to utilize a 3-percent add-on instead of a 6-percent add-on for drugs that are paid based on WAC under section 1847A(c)(4) of the Act pursuant to our authority under section 1833(t)(14)(A)(iii)(II) (84 FR 61318). For CY 2021, we propose 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 propose to apply this provision to non-SCOD separately payable drugs. Because we propose 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 propose 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 under 1847A(c)(4). For drugs and biologicals that would otherwise be subject to a payment reduction because they were acquired under the 340B Program, the payment amount for these drugs (proposed as a net rate of WAC minus 28.7 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 policy.

We propose that payments for separately payable drugs and biologicals would be included in the budget neutrality adjustments, under the requirements in section 1833(t)(9)(B) of the Act. We also propose that the budget neutral weight scalar would not be applied in determining payments for these separately payable 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 48881(available via the internet on the CMS website), which illustrate the proposed CY 2021 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, 2020, or WAC, AWP, or mean unit cost from CY 2019 claims data and updated cost report information available for the proposed rule. In general, these published payment rates are not the same as the actual January 2021 payment rates. This is because payment rates for drugs and biologicals with ASP information for January 2021 will be determined through the standard quarterly process where ASP data submitted by manufacturers for the third quarter of CY 2020 (July 1, 2020 through September 30, 2020) will be used to set the payment rates that are released for the quarter beginning in January 2021 near the end of December 2020. In addition, payment rates for drugs and biologicals in Addenda A and B to the proposed rule for which there was no ASP information available for April 2020 are based on mean unit cost in the available CY 2019 claims data. If ASP information becomes available for payment for the quarter beginning in January 2021, 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 the proposed rule (reflecting April 2020 ASP data) that do not have ASP information available for the quarter beginning in January 2021. These drugs and biologicals would then be paid based on mean unit cost data derived from CY 2019 hospital claims. Therefore, the proposed payment rates listed in Addenda A and B to the proposed rule are not for January 2021 payment purposes and are only illustrative of the CY 2021 OPPS payment methodology using the most recently available information at the time of issuance of the 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 the 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 plus 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 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 noted that we believed that these changes would better reflect the resources and production costs that biosimilar manufacturers incur. We also stated that we believe 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 explained that 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), 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 2021, we propose 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 propose to continue our current policy for paying for nonpass-through biosimilars acquired under the 340B program, except that we propose to pay for these biosimilars at the biosimilar's ASP minus 28.7 percent of the biosimilar's ASP instead of the biosimilar's ASP minus 28.7 percent of the reference Start Printed Page 48882product's ASP, in accordance with section 1833(t)(14)(A)(iii)(II) of the Act. ASP minus 28.7 percent reflects the proposed net payment rate.

3. Payment Policy for Therapeutic Radiopharmaceuticals

For CY 2021, we propose 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 2021. Therefore, we propose for CY 2021 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 propose to rely on CY 2019 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 2021 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. Payment for Blood Clotting Factors

For CY 2020, 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 2020, 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 2020 updated furnishing fee was $0.226 per unit.

For CY 2021, we propose 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 propose 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 our website at: http://www.cms.gov/​Medicare/​Medicare-Fee-for-Service-Part-B-Drugs/​McrPartBDrugAvgSalesPrice/​index.html.

We propose to provide payment for blood clotting factors under the same methodology as other separately payable drugs and biologicals under the OPPS and to continue payment of an updated furnishing fee. We will announce the actual figure of the percent change in the applicable CPI and the updated furnishing fee calculation based on that figure through the applicable program instructions and posting on the CMS website.

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

For CY 2021, we propose to continue to use the same payment policy as in CY 2020 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 2021 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 2021 OPPS Payment Methodology for 340B Purchased Drugs

a. Overview and Background

Section Overview

Under the OPPS, payment rates for drugs are typically based on their average acquisition cost. This payment is governed by section 1847A of the Act, which generally sets a default rate of average sales price (ASP) plus 6 percent for certain drugs; however, the Secretary has statutory authority to adjust that rate under the OPPS. As described below, beginning in CY 2018, the Secretary adjusted the 340B drug payment rate to ASP minus 22.5 percent to approximate a minimum average discount for 340B drugs, which was based on findings of the GAO and MedPAC that hospitals were acquiring drugs at a significant discount under HRSA's 340B Drug Pricing Program. As described in the following sections, the United States District Court for the District of Columbia (the district court) concluded that the Secretary lacks the authority to bring the default rate in line with average acquisition cost unless the Secretary obtains survey data from hospitals on their acquisition costs. Although HHS disagrees with that ruling and appealed the decision, HHS meanwhile gathered the relevant survey data from 340B hospitals. As described in detail below, those survey data confirm that the ASP minus 22.5 percent rate is generous to 340B hospitals, and the survey data supports Start Printed Page 48883an even lower payment rate. The following sections expand upon the points discussed in this overview.

Background

In the CY 2018 OPPS/ASC proposed rule (82 FR 33558 through 33724), we proposed changes to the OPPS payment methodology for drugs and biologicals (hereinafter referred to collectively as “drugs”) acquired under the 340B Program. We proposed these changes to better, and more accurately, reflect the resources and acquisition costs that these hospitals incur. We stated our belief 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 with pass-through payment status and vaccines) acquired under the 340B Program from average sales price (ASP) plus 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 Program 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 paid under the OPPS and therefore, are not subject to the OPPS payment policy for 340B-acquired drugs. 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 with 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 non-excepted off-campus PBDs paid under the PFS. We adopted this payment policy effective for CY 2019 and subsequent years.

We clarified in the CY 2019 OPPS/ASC proposed rule (83 FR 37125) that the 340B payment adjustment applies to drugs that are priced using either WAC or AWP, and that 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. 340B-acquired drugs that are priced using AWP are paid an adjusted amount of 69.46 percent of AWP. 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.

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, we 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, were 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 were excepted from the 340B payment adjustment. These hospitals were 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 modifiers “JG” and “TB”.

In the CY 2019 OPPS/ASC final rule with comment period (83 FR 58981), we continued the Medicare 340B payment policies that were implemented in CY 2018 for CY 2019 and adopted a policy 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. In the CY 2020 OPPS/ASC final rule with comment period (84 FR 61321) we continued the 340B policies that were implemented in CY 2018 and CY 2019.

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 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.[65] 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.[66] 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.[67] 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,” [68] 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.” [69] Id. at 19. “And because Start Printed Page 48884HHS 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.” [70]

We respectfully disagreed with the district court's understanding of the scope of the Secretary's adjustment authority. On July 10, 2019, the district court entered final judgment. The agency appealed to the D.C. Circuit, and on July 31, 2020 the court entered an opinion reversing the district court's judgement in this matter. Nonetheless, we stated in the CY 2020 OPPS/ASC final rule with comment period that we were taking the steps necessary to craft an appropriate remedy in the event of an unfavorable decision on appeal. Notably, after the CY 2020 OPPS/ASC proposed rule was issued, we announced in the Federal Register (84 FR 51590) our intent to conduct a 340B hospital survey to collect drug acquisition cost data for certain quarters within CY 2018 and 2019. We stated that such survey data may be used in setting the Medicare payment amount for drugs acquired by 340B hospitals for cost years going forward, and also may be used to devise a remedy for prior years if the district court's ruling is upheld on appeal. The district court itself acknowledged that CMS may base the Medicare payment amount on average acquisition cost when survey data are available.[71] No 340B hospital disputed in the rulemakings for CY 2018 and 2019 that the ASP minus 22.5 percent formula was a conservative adjustment that represented the minimum discount that hospitals receive for drugs acquired through the 340B program, which is significant because 340B hospitals have internal data regarding their own drug acquisition costs. We stated in the CY 2020 OPPS/ASC final rule with comment period that we thus anticipated that survey data collected for CY 2018 and 2019 would confirm that the ASP minus 22.5 percent rate is a conservative amount that overcompensates covered entity hospitals for drugs acquired under the 340B program. We also explained that a remedy that relies on such survey data could avoid the complexities referenced in the district court's opinion.

We noted that under current law, any changes to the OPPS must be budget neutral, and reversal of the payment adjustment for 340B drugs, which raised rates for non-drug items and services by an estimated $1.6 billion for 2018 alone, could have a significant economic impact on the approximately 3,900 facilities that are paid for outpatient items and services covered under the OPPS. In addition, we stated that any remedy that increases payments to 340B hospitals could significantly affect beneficiary cost-sharing. The items and services that could be affected by the remedy were provided to millions of Medicare beneficiaries, who, by law, are required to pay cost-sharing for most items and services, which is usually 20 percent of the total Medicare payment rate. Accordingly, we solicited comments on how to formulate an appropriate remedy in the event of an unfavorable decision on appeal. Those comments are summarized in the CY 2020 OPPS/ASC final rule with comment period (84 FR 61323 through 61327).

b. Hospital Acquisition Cost Survey for 340B-Acquired Specified Covered Outpatient Drugs (SCODs)

As discussed in the CY 2020 OPPS/ASC final rule with comment period (84 FR 61326), we announced in the Federal Register (84 FR 51590) our intent to conduct a 340B hospital survey to collect drug acquisition cost data for the fourth quarter of CY 2018 and the first quarter of CY 2019. We noted that the survey data may be used in setting the Medicare payment amount for drugs acquired by 340B hospitals for cost years going forward, and also may be used to devise a remedy for prior years in the event of an adverse decision on appeal in the pending litigation. We explained that our current policy to adjust payment for drugs acquired under the 340B program was the subject of litigation and while we believed we would prevail on appeal, we also believed it was prudent to use the Secretary's existing authority to collect survey data to set OPPS payment rates for drugs acquired under the 340B Program at rates based on hospitals' costs to acquire such drugs. We believe it is appropriate for the Medicare program to pay for SCODs purchased under the 340B program at a rate that approximates what hospitals actually pay to acquire the drugs, and we believe it is inappropriate for Medicare to subsidize other programs through Medicare payments for separately payable drugs. We stated that this approach will ensure that the Medicare program uses Medicare trust fund dollars prudently, while maintaining beneficiary access to these drugs and allowing beneficiary cost-sharing to be based on the amounts hospitals actually pay to acquire the drugs.

Section 1833(t)(14)(D)(i)(I) of the Act required the Comptroller General of the United States to conduct a survey in each of 2004 and 2005 to determine the hospital acquisition cost for each SCOD and, not later than April 1, 2005, to furnish data from such surveys to the Secretary for purposes of setting payment rates under the OPPS for SCODs for 2006. The Comptroller General was then required to make recommendations to the Secretary under section 1833(t)(14)(D)(i)(II) of the Act regarding the frequency and methodology of subsequent surveys to be conducted by the Secretary under clause (ii). Clause (ii) of section 1833(t)(14)(D) of the Act provides that the Secretary, taking into account such recommendations, shall conduct periodic subsequent surveys to determine the hospital acquisition cost for SCODs for use in setting payment rates under subparagraph (A) of section 1833(t)(14).

In response to the requirements at section 1833(t)(14)(D)(i)(I) and (II) of the Act, the Government Accountability Office (GAO) surveyed hospitals and prepared a report that included its recommendations for the Secretary regarding the frequency and methodology for subsequent surveys.[72] While GAO recognized that collecting accurate and current drug price data was important to ensure the agency does not pay too much or too little for drugs, GAO's 2006 report recommended that CMS conduct a streamlined hospital survey once or twice per decade because of the significant operational difficulties and burden that such a survey would place on hospitals and CMS.[73] In response to questions about whether the data undercounted rebates, GAO acknowledged that their data did not include drug rebates or 340B rebates as part of its calculation.[74] In the CY 2006 OPPS final rule, we explained that the data collected by the GAO was ultimately not used to set payment rates, in part because the data did not fully account for rebates from manufacturers or other price concessions or payments from group purchasing organizations made to hospitals (70 FR 68640). Instead, we adopted a policy to pay hospitals at ASP+6 percent because we believed ASP+6 percent was a reasonable level of payment for both the hospital acquisition and pharmacy overhead cost of drugs and biologicals (70 FR 68642).

Start Printed Page 48885

Between 2006 and 2017, we have generally paid for separately payable drugs for which ASP data is available at ASP plus 6 percent. Beginning in 2018, we adopted the current policy to pay for 340B-acquired drugs at ASP−22.5 percent to better align Medicare payment with acquisition costs for 340B-acquired drugs. The Medicare Payment Advisory Commission (MedPAC) has consistently stated that Medicare should institute policies that improve the program's value to beneficiaries and taxpayers. For example, in its March 2019 Report to the Congress, MedPAC noted that outpatient payments increased in part due to rapid growth in Part B drug spending. MedPAC stated this rapid growth in OPPS specifically, was “largely driven by the substantial margins for drugs obtained through the 340B Drug Pricing Program.” [75] While we continue to believe that ASP+6 percent represents a reasonable proxy for Part B drug acquisition costs for most hospitals, we do not believe the same is true for hospitals that acquire Part B drugs under the 340B program since such hospitals are able to purchase drugs at deeply discounted 340B ceiling prices or at even lower “sub-ceiling” prices. For this reason, we concluded that it was appropriate to survey 340B hospitals to gather drug acquisition cost data for drugs acquired under the 340B program to allow us to pay hospitals for these drugs at amounts that approximate the hospitals' acquisition costs.

Population of Surveyed Hospitals

Because of our longstanding belief that ASP plus 6 percent is a reasonable proxy for hospital acquisition costs and overhead for separately payable drugs, we did not believe it was necessary or appropriate to burden hospitals that are not eligible to acquire drugs under the 340B program with a drug acquisition cost survey where we have a proxy for hospital acquisition costs for those drugs. ASP data does not, however, include 340B drug prices. (CY 2011 OPPS/ASC final rule with comment period (75 FR 71800, 71960)). When GAO surveyed hospitals in 2005, it found that the survey “created a considerable burden for hospitals as the data suppliers and considerable costs for GAO as the data collector,” and recommended that CMS survey hospitals only once or twice per decade to “occasionally validat[e] CMS's proxy for SCODs' average acquisition costs—the [ASP] data that manufacturers report.” GAO Report to Congress: Survey Shows Price Variation and Highlights Data Collection Lessons and Outpatient Rate-Setting Challenges for CMS, 4 (April 2006). Section 1833(t)(14)(D)(ii) requires the Secretary, in conducting periodic subsequent surveys, to take into account GAO's recommendations on the frequency and methodology of subsequent surveys. We considered GAO's conclusion that the 2005 survey created “considerable burden” for hospitals and, thus, only surveyed 340B hospitals given our belief that the current payment rate for non-340B hospitals continues to be an appropriate rate. For the same reason, we also limited the data we requested from 340B hospitals to acquisition costs for 340B-acquired drugs, rather than for drugs purchased outside the 340B program for 340B participating hospitals. We note that section 1833(t)(14)(D)(ii) refers to use of surveys conducted by the Secretary to determine the hospital acquisition costs for SCODs in setting payment rates under subparagraph (A). Therefore, we believe it is appropriate to read the two provisions together that permit the Secretary to survey 340B hospitals only and formulate a 340B payment policy for this hospital group that is distinct from the payment policy for non-340B hospitals.

Survey Methodology

Under the authority at section 1833(t)(14)(D)(ii) to conduct periodic subsequent surveys to determine hospital acquisition costs, we administered the survey to 1,422 340B entities between April 24 and May 15, 2020. We requested that all hospitals that participated in the 340B program, including rural sole community hospitals (SCHs), children's hospitals, and PPS-exempt cancer hospitals (which are currently exempt from the Medicare 340B payment rate adjustment), supply their average acquisition cost for each SCOD purchased under the 340B program during in the last quarter of CY 2018 (October 1, 2018 through December 31, 2018) and/or first quarter of 2019 (January 1, 2019 through March 31, 2019), which could be the 340B ceiling price, a 340B sub-ceiling price, or another amount, depending on the discounts the hospital received when it acquired a particular drug. The ceiling price is the maximum amount covered entities may permissibly be required to pay for a drug under section 340B(a)(1) of the Public Health Service Act, so we would not expect any 340B hospital to have acquisition costs for any acquired drug that are greater than the ceiling price. For this reason, where the acquisition price for a particular drug was not available or submitted in response to the survey, we stated that we would use the 340B ceiling price for that drug as a proxy for the hospitals' acquisition cost in order to produce the most conservative drug discount for when data was missing or not submitted.

We incorporated valuable input from stakeholders on the development and construction of the 340B acquisition cost survey. We collected the stakeholders' input in two rounds of public comment through the survey Paperwork Reduction Act (PRA) submission process. We published the initial 340B drug hospital acquisition cost survey proposal in the Federal Register (84 FR 51590) for a 60-day public comment period that began September 30, 2019 and ended November 29, 2019. After incorporating comments from the 60-day public comment period, we released a revised 340B acquisition cost survey proposal in the Federal Register (85 FR 7306) for a 30-day public comment period from February 7, 2020 to March 9, 2020.

After incorporating the stakeholders' comments and suggestions from the second public comment period, OMB approved CMS' survey design (OMB control number 0938-1374, expires 10/31/2021), and CMS released the 340B acquisition cost survey to the relevant 340B hospitals under the OPPS. As mentioned earlier in this section, the survey was open from April 24, 2020, to May 15, 2020. The survey sample was 100 percent of the potential respondent universe, or all hospitals that acquired drugs under the 340B Program and were paid for those drugs under OPPS in the fourth quarter of 2018 and/or the first quarter of 2019. We provided respondents with two options to complete the survey: the Detailed Survey and the Quick Survey.

Respondents that selected the Detailed Survey provided acquisition costs for each individual SCOD. We requested that these respondents report the net acquisition cost for each SCOD that they acquired under the 340B program (that is, the sub-ceiling price after all applicable discounts). We stated that if the acquisition cost for the SCOD was unknown, the respondent may leave the field blank and we would use the 340B ceiling price as a proxy for the acquisition cost for that drug. In the survey instructions, we stated that acquisition cost for purposes of the survey meant the price that the hospitals paid upon receiving the product, including, but not limited to, Start Printed Page 48886prices paid for 340B drugs purchased via a replenishment model under the 340B program, or under penny pricing. We explained that applicable discounts are any discounts below the discounted ceiling price. We also made clear that for purposes of the survey the 340B drug acquisition cost should be reported regardless of whether the drug was dispensed at all, or whether the drug was dispensed in multiple settings. We only requested the acquisition cost of the drugs acquired under the 340B program during the specified timeframes: the fourth quarter of 2018 and/or the first quarter of 2019. We also stated that acquisition costs for drugs acquired by 340B hospitals outside of the 340B program should not be submitted in response to the survey.

The Quick Survey option allowed the hospital to indicate that it preferred that CMS utilize the 340B ceiling prices obtained from (HRSA) as reflective of their hospital acquisition costs. Additionally, we stated that in instances where the acquisition price for a particular drug is not available or submitted in response to the survey, we would use the 340B ceiling price for that drug as a proxy for the hospitals' acquisition cost because the price for a drug acquired under the 340B program cannot be higher than the 340B ceiling price by statute. Finally, we noted that where a hospital did not affirmatively respond to the Detailed or Quick Survey within the open period of response, we would use the 340B ceiling prices in lieu of their responses because the ceiling price represents the highest possible price that a 340B hospital could permissibly be required to pay for a 340B-acquired drug.

c. Analysis of Hospital Acquisition Cost Survey Data for 340B Drugs

The results of the survey, which closed on May 15, 2020 are as follows: Seven percent (n=100) of surveyed hospitals affirmatively responded via the Detailed Survey option; 55 percent (n=780) of surveyed hospitals affirmatively responded via the Quick Survey option; and the remaining 38 percent (n=542) of surveyed hospitals did not respond affirmatively to either survey option. As previously noted, we applied 340B ceiling prices for hospitals that did not affirmatively respond to the survey; such action may skew the survey results towards the minimum average discount (that is, the ceiling price) that a 340B hospital would receive on a drug.

We also examined the hospital characteristics of those hospitals that submitted either a Detailed or Quick Survey to the general 340B survey population. The characteristics we analyzed included hospital bed count, teaching hospital status, hospital type, and geographic classification as a rural or urban hospital. Our findings showed that the survey respondent hospitals were generally similar to the general 340B survey population.

d. Proposed Payment Policy for Drugs Acquired Under the 340B Program for CY 2021 and Subsequent Years

(1) Grouping Hospitals by 340B Covered Entity Status

Section 1833(t)(14)(A)(iii)(I) authorizes the Secretary to set the amount of payment for SCODs at an amount equal to the average acquisition cost for the drug for that year (which, at the option of the Secretary, may vary by hospital group (as defined by the Secretary based on volume of covered OPD services or other relevant characteristics)), as determined by the Secretary taking into account the hospital acquisition cost survey data under subparagraph (D). In this proposed rule, we are exercising the authority to vary the amount of payment for the group of hospitals that is enrolled in the 340B program because their drug acquisition costs vary significantly from those not enrolled in that program. Section 1833(t)(14)(A)(iii) of the Act allows the Secretary to exercise discretion to vary payment by hospital group, “as defined by the Secretary based on the volume of covered OPD services or other relevant characteristics.” We believe that is it within the Secretary's authority to distinguish between hospital groups based on whether or not they are covered entities under section 340B(a)(4) of the PHSA that are eligible to receive drugs and biologicals at discounted rates under the 340B program. We believe that the significant drug acquisition cost discounts that 340B covered entity hospitals receive enable these hospitals to acquire drugs at much lower costs than non-340B hospitals incur for the same drugs. Accordingly, we propose to use 340B covered entity status as a relevant characteristic to group hospitals for purposes of payment based on average acquisition cost under section 1833(t)(14)(A)(iii)(I).

(2) Applying a Single Reduction Amount to ASP for 340B-Acquired Drugs

Section 1833(t)(14)(A)(iii)(I) provides that the payment amount for a SCOD for a year is equal to the average acquisition cost for the drug “as determined by the Secretary taking into account” the survey data collected under subparagraph (D). We interpret the reference to acquisition costs being “determined” by the Secretary, “taking into account” survey data, to give us discretion to determine the appropriate payment rate based on data collected from the hospital acquisition cost survey for 340B drugs. We propose to apply a single discount factor to ASP for drugs acquired by 340B hospitals in lieu of calculating individual acquisition cost amounts for 340B-acquired drugs. We note that 340B ceiling prices are protected from disclosure both because the prices themselves are sensitive, and because they could potentially be used to reverse-engineer average manufacturer prices, which are protected under section 1927(b)(3)(D). We also pledged confidentiality of individual responses regarding acquisition prices for each SCOD to the extent required by law. Given that the survey data is heavily weighted towards 340B ceiling prices (because 340B ceiling prices were used for any SCODs within the Detailed Survey for which a hospital did not provide responses, for hospitals that selected the Quick Survey option, and for hospitals that did not affirmatively respond) and since ceiling prices are protected by law from public disclosure, we are instead proposing to establish one aggregate discount amount relative to ASP for SCODs acquired under the 340B program rather than proposing drug-specific prices, which could reveal sensitive or protected pricing information.

(3) Methodology To Calculate ASP Reduction Amount Based on Survey Data

As described in detail in the following sections, we analyzed the survey results and applied various statistical methodologies to determine an appropriate average or typical amount by which to reduce ASP that would approximate hospital acquisition costs for 340B drugs and biologicals. In fairness to hospitals, we generally chose methodologies that yield the most conservative reduction to ASP when establishing the payment rate, and thus would be most generous to hospitals. This includes the use of 340B ceiling prices, which must be kept confidential, where applicable in the survey results. Based on our analysis of the available information, we estimate that the typical acquisition cost for 340B drugs for hospitals paid under the OPPS is ASP minus 34.7 percent.

We determined the average discount of 34.7 percent by assessing a number of factors including: Multiple measures of central tendencies (arithmetic mean, Start Printed Page 48887median, geometric mean); the effect of including penny priced drugs; mapping of multi-source NDCs to a single HCPCS code; weighting values by volume/utilization; and applying trimming methodologies to remove anomalous or outlier data. The analysis of each of these variables is discussed in the next section.

(a) Selecting an Averaging Methodology

When determining the appropriate average reduction amount relative to ASP for 340B drugs, we assessed multiple measures of central tendencies, including the arithmetic mean, median, and geometric mean, on the typical 340B discount based on drug acquisition cost survey data. Based upon the cumulative data from the Detailed Survey option, the Quick Survey option, and imputed responses for hospitals that did not affirmatively respond, we analyzed the effects of each averaging method, combining the data from all three sources in both survey quarters (fourth quarter 2018 and first quarter 2019). Using the raw data without accounting for outliers, we determined that the arithmetic mean would result in an average discount from ASP of approximately 66.3 percent; the median would result in an average discount from ASP of approximately 70.4 percent, and the geometric mean would result in an average discount from ASP of approximately 58.3 percent.

Under the OPPS, we generally calculate resource costs for a given service using the geometric mean. The geometric mean minimizes the effects of the outliers without ignoring them. Minimizing outliers is consistent with our methodology to estimate an average or typical 340B discount that is representative across all 340B SCODs. Therefore, we propose to utilize the geometric mean discount to ASP from both survey quarters—2018 Q4 and 2019 Q1—as a component of our overall analysis of the survey data. Without any further adjustments, applying the geometric mean to the survey results would result in an average drug acquisition cost estimate of ASP minus 58.3 percent for 340B acquired drugs.

(b) Volume Weighting Survey Data

While we realize the geometric mean minimizes the effects of some outliers, it does not take into consideration several other important factors. Notably, we believe that in calculating the average discount that 340B drugs receive relative to ASP, we should take into account how often those drugs were billed by all hospitals under the OPPS for 2018 and 2019, to give a better reflection of each drug's overall utilization under the OPPS. Therefore, we volume-weighted the drug discounts determined from the survey to mirror the drug utilization in the OPPS. That is, drugs that were commonly used were assigned a higher weight while those less commonly used were assigned a lower weight. We incorporated volume weighting into our analysis by assessing the utilization rate of each individual drug (using its HCPCS code) under the OPPS for CY 2018 and CY 2019. Specifically, we calculated the average discount by taking the utilization of each drug under the OPPS into account to arrive at a case-weighted average for each HCPCS code. For example, a highly utilized HCPCS code for an oncology drug would be weighted higher than that of a drug for snake anti-venom that has a relative low utilization in the OPPS. The data for CY 2018 Q4 was volume weighted based upon OPPS utilization during CY 2018 as determined using OPPS claims data. The data for CY 2019 Q1 was volume weighted based upon OPPS utilization during CY 2019 as determined using OPPS claims data. This resulted in a change in the geometric mean to an average discount of 58.0 percent from 58.3 percent non-weighted.

(c) Addressing HCPCS Code With Multiple NDCs

In addition, a small portion of the SCODs that were subject to the 340B drug acquisition cost survey contain multiple NDCs that map to a single HCPCS code. This is because these drugs are multiple source drugs, meaning that they were manufactured by different entities and have varying package sizes or strengths, and thus, multiple different NDCs for the same drug. For payment purposes under the OPPS, we pay for drug products based on the drug's HCPCS code, regardless of which NDC is used. Hospitals that completed the Detailed Survey option were instructed to report their average acquisition costs for each drug during the surveyed quarters per HCPCS code. However, for those hospitals that opted for the Quick Survey option or that did not affirmatively respond, we were unable to determine which combination of NDCs mapped to the HCPCS codes these entities would have used during the given quarters. Therefore, we analyzed the effects of averaging all of the NDCs' acquisition costs for a given HCPCS when determining the average discount, as well as selecting the NDC with the highest acquisition cost for a given HCPCS code and using that NDC's acquisition cost amount to determine the average discount. When we calculate the average discount using an average of the acquisition costs for all of the NDCs assigned to the HCPCS code, the average volume weighted geometric mean discount off of ASP is 58.0 percent. The 58.0 percent was calculated by taking all of the various NDCs (across various manufacturers, package sizes, and strengths) for the same drug and averaging the unit costs together in order to arrive at a single amount for each HCPCS code for a drug. When we calculated the average discount using the highest acquisition cost NDC for each HCPCS code for a drug, the average volume weighted geometric mean discount from ASP is 47.0 percent. This was achieved by analyzing all of the various NDCs (across various manufacturers, package sizes, and strengths) assigned to the HCPCS code for the same drug and selecting the NDC that has the highest unit cost in order to arrive at a single cost for each HCPCS code. Consistent with the general principle of choosing the methodological approach that is most generous to hospitals, we propose to use the highest acquisition cost NDC for each HCPCS code for a drug to determine the average 340B discount.

(d) Addressing Penny Pricing in the Survey Data

As part of our analysis of the survey data, we examined the effect of including “penny priced” drugs on the average discount off of ASP. The 340B ceiling price is statutorily defined as the Average Manufacturer Price (AMP) reduced by the rebate percentage, which is commonly referred to as the Unit Rebate Amount (URA).[76] The calculation of the 340B ceiling price is defined in section 340B(a)(1) of the PHSA. Penny pricing occurs when, under section 1927(c)(2)(A) of the Social Security Act, the AMP increases at a rate faster than inflation, in which case the manufacturer is required to pay an additional rebate amount, which is reflected in an increased URA and could result in a 340B ceiling price of zero. We propose to exclude penny priced drugs to remove outliers that may distort the average discount in order to provide the most conservative estimate of the average 340B discount from ASP. HRSA noted in the 340B Drug Pricing Program Ceiling Price and Manufacturer Civil Monetary Penalties Regulation Final Rule (82 FR 1210) that although infrequent, that there are instances when the 340B ceiling price is zero. HRSA did not believe that it is consistent with the statutory scheme to Start Printed Page 48888set the price at zero. In this circumstance, HRSA required that manufacturers charge a $0.01 for the drug, which they believed best effectuates the statutory scheme by requiring a payment.[77]

We acknowledge that penny pricing of drugs is not intended to be permanent and, by its very nature, is dynamic, meaning the select group of drugs to which penny pricing applies could vary from quarter to quarter. We analyzed the inclusion and exclusion of penny pricing on the overall average discount of 340B drugs compared to ASP. As expected, we found that the excluding penny pricing provides a much more conservative estimate of the average 340B discount from ASP relative to including penny pricing. When we excluded penny pricing, the geometric mean volume weighted average discount, using the highest NDC for a drug's HCPCS code, decreased to 40.9 percent from 47.0 percent. We observed penny pricing in less than 10 percent of the drugs surveyed. Because penny pricing is dynamic and the drugs to which it applies may vary from quarter to quarter, we believe it is appropriate to propose to exclude penny pricing from our survey analysis, although we acknowledge that penny pricing, when it does apply, represents the acquisition cost for the drug to which it applies.

We are concerned that including a discount of a penny priced drug from the two quarters surveyed may inappropriately increase the average discount, where the drug may not have been priced based on penny pricing in following or preceding quarters. However, it also is the case that a drug could have penny pricing for any given quarter and it could be appropriate to include penny priced drugs in the calculation of the average acquisition cost because in such cases, penny prices do represent the maximum (ceiling) price the 340B hospital would pay for that drug. Nonetheless, in order to provide for a more conservative discount estimate, we propose to exclude penny priced drugs at this time from our analysis, but we welcome public comment on whether such policy accurately represents 340B-drug acquisition costs.

(e) Addressing Outliers

In response to the Detailed Survey, hospitals provided some drug acquisition cost data that exceeded 340B ceiling prices, and in some cases even exceeded the ASP or ASP+6 percent payment rate for certain drugs. As previously noted, covered entities cannot be required to pay more than the ceiling price to acquire a drug under the 340B program. Therefore, we attributed any Detailed Survey acquisition cost data greater than the ceiling price to potential data entry error, for instance, miscalculation or incorrect decimal point placement. However, because hospitals may have been overcharged for their drug acquisition costs and could have accurately reported acquisition costs greater than the HRSA ceiling price, we did not eliminate these data from our calculations. Instead, consistent with our standard methodology for processing extreme outliers under the OPPS, we excluded responses for any SCODs that were three standard deviations from the geometric mean. We believe applying a three standard deviation limit to the reported acquisition data is appropriate because it removes outliers from both the high and low reported values. In addition, applying a three standard deviations limit may be more representative of the respondents' acquisition cost, even though it may not eliminate some data values that are above the ceiling price. While this approach means that some values above the ceiling price will be included in our data analysis, we are not proposing to trim them because we propose to apply a standard trimming methodology. The cumulative application of this trimming methodology, along with other methodologies applied to the survey data described above, results in an average acquisition cost for drugs that hospitals acquire under the 340B program of ASP minus 34.7 percent. For the reasons previously discussed, we propose to exclude survey data from the Detailed Survey that is more than three standard deviations from the mean. We note that we also explored capping any survey submissions received at the 340B ceiling price, as no covered entity can be required to pay more than the ceiling price. This approach, holding all other methodological approaches constant, would have resulted in an average acquisition cost of ASP minus 41.5 percent for drugs acquired under the 340B program.

Table 26, Aggregate 340B Drug Program Cost Savings Percentage Relative to ASP, shows the aggregate 340B drug program discount percentage relative to ASP using several different statistical measures. In this table, we outlined some additional figures following a similar path as described above. For example, we arrived at the 33.8 percent figure in the table under median, and penny pricing excluded, by initially choosing the median as the averaging methodology, and then performing trimming methodologies as described above, which include volume weighting by HCPCS, using the highest NDC per HCPCS, and using only data within three standard deviations of the median. This would have resulted in a final proposed discount of 33.8 percent. While this final discount appears more generous to hospitals than our proposal, we do not believe it is appropriate. Specifically, we believe using the geometric mean as outlined in the methodology above is the most generous methodology for establishing a final discount amount that also maintains accuracy and consistency with past OPPS practices. As described previously, under the OPPS, we generally calculate resource costs for a given service using the geometric mean. The geometric mean minimizes the effects of the outliers without ignoring them. As an additional example, under the arithmetic mean methodology with penny pricing included in table 26, the final determined discount was determined to be 23.1 percent. We arrived at this figure of 23.1 percent by initially choosing the arithmetic mean as the averaging methodology, and then performing trimming methodologies as described above, with the exception of including penny prices in this figure. Similar to the discussion above regarding the use of the median, we do not think utilizing the arithmetic mean is appropriate or consistent with the averaging methodologies historically used under the OPPS. The arithmetic mean could easily skew towards outlier data and anomalous data not captured by previously described trimming methodologies. Additionally, with this 23.1 percent figure, while penny pricing is a valid maximum (i.e., ceiling) price for drugs to which it applies, as noted above we believe it would be appropriate to exclude penny priced drugs for purposes of our proposal.

We believe the manner in which we arrived at the proposed payment amount of ASP minus 34.7 percent for 340B-acquired drugs is the most appropriate and accurate method of determining the average discount or typical discount. We believe it is reflective of stakeholder's actual acquisition costs, and is as generous as possible without compromising accuracy. We also believe the geometric mean is the most appropriate averaging methodology as it mitigates the effects of outliers relative to the arithmetic mean and median and is consistent with OPPS payment methodologies. Although ceiling prices are protected by Start Printed Page 48889statute and the respondents to the survey were given a pledge of confidentiality, we are exploring and seek comment on the possibility of providing microdata to qualified researchers through their restricted access infrastructure, in accordance with best practices for transparency.

(4) Determining an Add-on Payment for 340B Drugs

Under the OPPS, Medicare pays separately payable drugs at rates that approximate their acquisition costs, such as at ASP or WAC. These drugs typically also receive an add-on payment. Under the OPPS, section 1833(t)(14)(E) authorizes, but does not require, the Secretary to make an adjustment to payment rates for SCODs to take into account overhead and related expenses, such as pharmacy services and handling costs.

In the MedPAC report from 2005,[78] MedPAC recommended that the Secretary:

  • Establish separate, budget neutral payments to cover the costs that hospitals incur for handling separately paid drugs, biologicals, and radiopharmaceuticals;
  • define a set of handling fee APCs that group drugs, biologicals, and radiopharmaceuticals based on attributes of the products that affect handling costs;
  • instruct hospitals to submit charges for those APCs; and
  • base payment rates for the handling fee APCs on submitted charges, reduced to costs.

Because we took a conservative approach in estimating the average acquisition costs for 340B-acquired drugs, we do not believe that it is imperative to establish an add-on for overhead and handling as we believe that such a conservative estimate may already account for the costs of overhead and handling. In addition, our current 340B drug payment policy under the OPPS pays separately payable drugs at ASP minus 22.5 percent with no add-on payment because this payment rate represents the minimum average discount that a 340B entity would receive on a drug. We believe hospitals receive a significant margin on 340B drugs under our current policy, so an additional add-on payment is not necessary. Nonetheless, under the methodology in section 1847A, the Part B payments for separately payable drugs and biologicals furnished by practitioners and certain suppliers generally include an add-on set at 6 percent of the ASP for the specific drug. As discussed in the CY 2019 Physician Fee Schedule final rule with comment period (83 FR 59661-59662) the 6 percent add-on is widely believed to include services associated with drug acquisition that are not separately paid for, such as handling, storage, and other overhead. We realize that the acquisition costs for drugs acquired under the 340B program are significantly lower than for those drugs purchased outside of the 340B program, so we did not find it appropriate to base the add-on for 340B drugs on the 340B acquisition cost as previously discussed. However, we believe that it is reasonable to assume that a given drug will have similar overhead and other administrative costs regardless of whether the drug was purchased under the 340B Program or a by non-340B entity. Additionally, utilizing a drug add-on will ensure a level of payment parity with the add-on that applies to Part B drugs outside of the 340B program.

Therefore, for CY 2021 and subsequent years, we propose to pay for drugs acquired under the 340B program at ASP minus 34.7 percent, plus an add-on of 6 percent of the product's ASP, for a net payment rate of ASP minus 28.7 percent. Under this payment methodology, each drug would receive the same add-on payment regardless of whether it is paid at the 340B rate or at the traditional ASP rate for drugs not purchased under the 340B program. We note that this add-on percentage would be more generous to hospitals than adding 6 percent of the reduced 340B rate. As an example, assuming a non-340B drug is paid its ASP of $1,000 and $60 for the 6 percent add-on, the 340B rate would be $653 ($1,000−$347) plus $60 or $713 total, instead of $653 plus $39.18 (6 percent of the reduced rate of $653) which would equal $39.18 or $692.18 total. We propose that this payment methodology would be our Medicare payment policy for 340B-acquired drugs going forward for CY 2021 and subsequent years.

(5) 340B Payment Policy for Drugs for Which ASP Is Unavailable

As we clarified in the CY 2019 OPPS/ASC proposed rule, 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. We propose the 340B payment adjustment for WAC-priced drugs mirror that of ASP payment with Start Printed Page 48890payment being WAC minus 34.7 percent plus 6 percent of the drug's WAC, except for when WAC plus 3 percent policy applies under 1847A(c)(4) and as discussed in V.B.2.b., for which we would propose a payment rate of WAC minus 34.7 percent plus 3 percent of the drug's WAC. Previously, AWP-priced drugs have had a payment rate of 69.46 percent of AWP when the 340B payment adjustment is applied. The 69.46 percent of AWP was 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 applied 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. Similarly, for CY 2021, we propose to pay for drugs paid at AWP under the 340B program at 95 percent AWP first reduced by 6 percent to generate a value that is similar to ASP or WAC with no percentage mark up. Then we propose to apply the net 28.7 percent reduction resulting in a payment rate of 63.90 percent of AWP.

(6) 340B Payment Policy Exemptions

In the CY 2018 OPPS/ASC proposed rule, we sought public comment on whether, due to access to care issues, certain groups of hospitals, such as those with special adjustments under the OPPS (for example, children's hospital or PPS-exempt cancer hospitals) should be excepted from a policy to adjust OPPS payments for drugs acquired under the 340B program. Specifically, in accordance with section 1833(t)(7)(D)(ii) of the Act, we make transitional outpatient payments (TOPs) to both children's and PPS-exempt cancer hospitals. This means that these hospitals are permanently held harmless to their “pre-BBA amount,” and they receive hold harmless payments to ensure that they do not receive a payment that is lower in amount under the OPPS than the payment amount they would have received before implementation of the OPPS. Accordingly, if we were to reduce drug payments to these hospitals on a per claim basis, it is very likely that the reduction in payment would be paid back to these hospitals at cost report settlement, given the TOPs structure. Taking into consideration the comments regarding rural hospitals, we believed further study on the effect of the 340B drug payment policy was warranted for classes of hospitals that receive statutory payment adjustments under the OPPS. Accordingly, we believed and continue to believe it is appropriate to exempt children's and PPS-exempt cancer hospitals from the alternative 340B drug payment methodology.

In addition to the children's and PPS-exempt cancer hospitals, Medicare has long recognized the particularly unique needs of rural communities and the financial challenges rural hospital providers face. Across the various Medicare payment systems, CMS has established a number of special payment provisions for rural providers to maintain access to care and to deliver high quality care to beneficiaries in rural areas. With respect to the OPPS, section 1833(t)(13) of the Act provided the Secretary the authority to make an adjustment to OPPS payments for rural hospitals, effective January 1, 2006, if justified by a study of the difference in costs by APC between hospitals in rural areas and hospitals in urban areas. Our analysis showed a difference in costs for rural SCHs. Therefore, for the CY 2006 OPPS, we finalized a payment adjustment for rural SCHs of 7.1 percent for all services and procedures paid under the OPPS, excluding separately payable drugs and biologicals, brachytherapy sources, and devices paid under the pass-through payment policy, in accordance with section 1833(t)(13)(B) of the Act. We have continued this 7.1 percent payment adjustment since 2006.

For CY 2021 and subsequent years, similar to previous years, we propose that rural sole community hospitals (as described under the regulations at 42 CFR 412.92 and designated as rural for Medicare purposes), children's hospitals, and PPS-exempt cancer hospitals would be excepted from the 340B payment adjustment and that these hospitals continue to report informational modifier “TB” for 340B-acquired drugs, and continue to be paid ASP+6 percent. We may revisit our policy to exempt rural SCHs, as well as other hospital designations for exemption from the 340B drug payment reduction, in future rulemaking.

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. Similarly, for CY 2021, we propose to pay nonpass-through biosimilars acquired under the 340B Program at the biosimlar's ASP minus the net payment discount reduction, 34.7 percent plus an add on of 6 percent, of the biosimilar's ASP, for a net payment rate of the biosimilar's ASP minus 28.7 percent of the biosimilar's ASP.

e. Alternative Proposal To Continue Policy To Pay ASP−22.5 Percent

Previously, we adopted the OPPS 340B payment policy based on the average minimum discount for 340B-acquired drugs being approximately ASP minus 22.5 percent. The estimated discount was based on a MedPAC analysis identifying 22.5 percent as a conservative minimum discount that 340B entities receive when they purchased drugs under the 340B program, which we discussed in the CY 2018 OPPS/ASC final rule with comment period (82 FR 52496). We continue to believe that ASP minus 22.5 percent is an appropriate payment rate for 340B-acquired drugs under the authority of 1833(t)(14)(A)(iii)(II) for the reasons we stated when we adopted this policy in CY 2018 (82 FR 59216). On July 31, 2020, the D.C. Circuit reversed the decision of the district court, holding that this interpretation of the statute was reasonable. Therefore, we also propose in the alternative that the agency could continue the current Medicare payment policy for CY 2021. If adopted, this proposed policy would continue the current Medicare payment policy for CY 2021 and subsequent years.

Summary

In summary, we propose for CY 2021 and subsequent years to pay for drugs acquired under the 340B program at ASP minus 34.7 percent, plus an add-on of 6 percent of the product's ASP, for a net payment rate of ASP minus 28.7 percent using the authority under section 1833(t)(14)(A)(iii)(I) of the Act. This proposal includes our previously discussed methodology used to arrive at the 34.7 percent average discount that we propose to apply to all drugs acquired under the 340B program. This methodology includes using the geometric mean of the survey data, volume weighting the average based upon utilization of the drug in the OPPS, using the highest priced NDC when multiple NDCs are available for a single HCPCS code, eliminating penny pricing from the average, and eliminating any data outside of 3 standard deviations from the mean when calculating the average discount of 34.7 percent. Our intent is that, if finalized, this payment methodology would apply begin January 1, 2021 and any changes to this permanent payment policy would be required to be adopted through notice and comment rulemaking. We are also proposing that Rural SCHs, PPS-exempt cancer hospitals and children's hospitals would be exempted from the 340B Start Printed Page 48891payment policy for CY 2021 and subsequent years. Finally, we note that we propose in the alternative to continue our current policy of paying ASP minus 22.5 percent for 340B-acquired drugs as we prevailed on appeal to the D.C. Circuit in the litigation.

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

a. Background

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 package 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 earlier 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 2020, the payment rate for APC 5053 (Level 3 Skin Procedures) was $497.02, the payment rate for APC 5054 (Level 4 Skin Procedures) was $1,622.74, 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 2020 OPPS/ASC final rule with comment period, correction notice (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 propose to continue it for CY 2021. 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). Beginning in CY 2016 and in subsequent years, we adopted a policy where we determined 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. We assigned each skin substitute that exceeded either the MUC threshold or the PDC threshold to the high cost group. In addition, we assigned 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 (84 FR 61327 through 61328).

However, some skin substitute manufacturers have raised concerns about significant fluctuation in both the MUC threshold and the PDC threshold from year to year using the methodology developed in CY 2016. 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 are 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 request for comments in the CY 2018 OPPS/ASC proposed rule about possible refinements to the Start Printed Page 48892existing 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.

For CY 2020, we sought more extensive comments on the two policy ideas that generated the most comment from the CY 2019 comment solicitation. One of the ideas was to establish a payment episode between 4 to 12 weeks where a lump-sum payment would be made to cover all of the care services needed to treat the wound. There would be options for either a complexity adjustment or outlier payments for wounds that require a large amount of resources to treat. The other policy idea 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.

b. Discussion of CY 2019 and CY 2020 Comment Solicitations for Episode-Based Payment for Graft Skin Substitute Procedures

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 have 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 believe 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 encouraged us to continue to study the issues with episode-based payment. Therefore, we sought 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 sought comments on was whether 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.

Several commenters were in favor of establishing a comprehensive APC with either an option for a complexity adjustment or outlier payments to pay for higher cost skin substitute application procedures. The commenters supported the idea of having a traditional comprehensive APC payment for standard wound care cases with a complexity adjustment or outlier payment to handle complicated or costly cases. However, they also expressed concerns about how many payment levels would be available in the skin substitute procedures APC group since a complexity adjustment can only be used if there is an existing higher-paying APC to which the service receiving the complexity adjustment may be assigned. A couple of commenters wanted more opportunities for services to receive a complexity adjustment through using clusters of procedure codes that reflect the full range of wound care services a beneficiary receives instead of using code pairs to determine if a complexity adjustment should apply. Other commenters suggested that episodic payments be risk-adjusted to account for clinical conditions and co-morbidities of beneficiaries with outlier payments and that complexity adjustments be linked to beneficiaries with more comorbidities.

Some commenters opposed the idea of a complexity adjustment for skin Start Printed Page 48893substitute application procedures. The commenters stated there was not enough detail in the comment solicitation to understand how a complexity adjustment would work with an episodic payment arrangement. Commenters also expressed concerns that payment rates for comprehensive APCs may not be representative of the wound care services that would be paid within those APCs. One commenter stated that payment policy is not the right way to resolve issues with the over-utilization and inappropriate use of skin substitutes because they are concerned that major changes in payment methodology, such as episodic payment, could lead to serious issues with the care beneficiaries receive. In recent meetings, stakeholders have expressed concerns that establishing a comprehensive APC for graft skin substitute procedures could lead to other unrelated wound care services such as hyperbaric oxygen treatments being bundled into those procedures. Some stakeholders have provided suggestions to provide additional payment for the treatment of complicated wounds, similar to a complexity adjustment, without bundling unrelated wound care services.

The additional comments we received in CY 2020 related to including a complexity adjustment with an episode-based payment, along with the comments we received on episode-based payment in general from the CY 2019 comment solicitation show, that there are many issues that continue to require study for this payment methodology. In addition, we also need more time to assess the benefits and drawbacks of episode-based payment as compared to other possible options to change the payment methodology for graft skin substitute procedures. Therefore in CY 2021, we will continue our review of the feasibility of using episode-based payment for graft skin substitute procedures, and we will not propose any episode-based payment for these procedures.

c. Discussion of CY 2019 and CY 2020 Comment Solicitations To Have a Single Payment Category for Graft Skin Substitute Procedures

Another policy option on which we solicited comments in CY 2019 and CY 2020 was 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. Under this option, the only available procedure codes to bill for graft skin substitute 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 substitute procedures for a given CPT code 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”.

Commenters and stakeholders who support this option believed it would remove the incentives for manufacturers to develop and providers to use high cost skin substitute products and would lead to the use of lower cost, quality products. Commenters and stakeholders note that lower Medicare payments for graft skin substitute procedures would lead to lower copayments for beneficiaries. In addition, commenters and stakeholders believe a single payment category would reduce incentives to apply skin substitute products in excessive amounts. Commenters and stakeholders also believe a single payment category is clinically justified because they stated that many studies have shown that no one skin substitute product is superior to another. Supporters of a single payment category believed it would simplify coding for providers and reduce administrative burden. Finally, some stakeholders believe that a single payment category policy could serve as a transitional payment policy for graft skin substitute products while we continue to study the feasibility of establishing an episode-based payment for skin substitutes.

Most commenters and stakeholders were opposed to a single payment category for skin substitute products. Commenters and stakeholders stated that the large difference in resource costs between higher cost and lower cost skin substitute products would provide an incentive for hospitals to use the most inexpensive products, which would hurt both product innovation and the quality of care beneficiaries receive. Commenters and stakeholders were concerned that a single payment category would encourage providers to choose financial benefit over clinical efficacy when determining which skin substitute products to use.

These commenters and stakeholders also stated that a single payment category would increase incentives for providers to use cheaper products that require more applications to generate more revenue and emphasize volume over value. A couple of commenters believed that overall Medicare spending on skin substitutes would be higher with a single payment category than under the current payment methodology, which has separate payment for higher cost and lower cost skin substitutes. The reason spending would go up according to the commenters is the overpayment for low cost skin substitutes by Medicare would exceed the savings Medicare would receive on reduced payments for higher cost skin substitutes.

Further, commenters and stakeholders stated that a single payment rate would lead to too much heterogeneity in the products receiving payment through the skin substitute application procedures. That is, the same payment rate would apply to skin substitute products whether they cost less than $10 per cm2 or over $200 per cm2 and regardless of the type of wound they treat. Commenters and stakeholders would prefer to have multiple payment categories where the payment rate is more reflective of the cost of the product. Commenters and stakeholders believe that a single payment category would discourage providers from treating more complicated wounds and wounds larger than 100 cm2.

The responses to the comment solicitation demonstrated 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 some of the concerns commenters who oppose a single Start Printed Page 48894payment 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. Accordingly in CY 2020, we solicited 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 included—

  • 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.

Those commenters in favor of a single payment category did not see a need for a transition period or wanted only a one-year transition period. Conversely, those commenters opposed to a single payment category either who did mention the idea of a transition period or wanted it to last multiple years, with one commenter suggesting a transition period of four years. In the end, having a transition period before establishing a single payment category did not affect the views of commenters who were initially opposed to establishing a single payment category as they continued to be against the policy option.

Based on the comments received regarding establishing a single payment category for graft skin substitute procedures, we need more time to consider the trade-offs between potential benefits of a single category against the potential substantial drawbacks. We also need to consider the merits of this policy option compared to episode-based payment for graft skin substitute procedures. Therefore, we are not proposing a single payment category for graft skin substitute procedures for CY 2021.

d. Proposals for Packaged Skin Substitutes for CY 2021

For CY 2021, consistent with our policy since CY 2016, we propose 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. Consistent with the methodology as established in the CY 2014 through CY 2018 final rules with comment period, we analyzed CY 2019 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 2021 MUC threshold is $47 per cm2 (rounded to the nearest $1) and the proposed CY 2021 PDC threshold is $936 (rounded to the nearest $1). We also propose to clarify that our definition of skin substitutes includes synthetic skin substitute products in addition to biological skin substitute products as described in section V.B.7.d. of this proposed rule. We also want to clarify that the availability of an HCPCS code for a particular human cell, tissue, or cellular or tissue-based product (HCT/P) does not mean that that product is appropriately regulated solely under section 361 of the PHS Act and the FDA regulations in 21 CFR part 1271. Manufacturers of HCT/Ps should consult with the FDA Tissue Reference Group (TRG) or obtain a determination through a Request for Designation (RFD) on whether their HCT/Ps are appropriately regulated solely under section 361 of the PHS Act and the regulations in 21 CFR part 1271.

For CY 2021, as we did for CY 2020, we propose to assign each skin substitute that exceeds either the MUC threshold or the PDC threshold to the high cost group. In addition, we propose 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 2021, we propose that any skin substitute product that was assigned to the high cost group in CY 2020 would be assigned to the high cost group for CY 2021, regardless of whether it exceeds or falls below the CY 2021 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 CY 2021, we propose to continue to assign skin substitutes with pass-through payment status to the high cost category. We propose 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 propose 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 propose to use 95 percent of AWP to assign a skin substitute to either the high cost or low cost category. We propose 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 2021 MUC and PDC thresholds. 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). Table 27 displays the final CY 2021 cost category assignment for each skin substitute product.

Start Printed Page 48895

Start Printed Page 48896

Start Printed Page 48897

e. Proposal To Allow Synthetic Skin Graft Sheet Products To Be Reported With Graft Skin Substitute Procedure Codes

The CY 2014 OPPS/ASC final rule with comment period describes skin substitute products as “. . . a category of products that are most commonly used in outpatient settings for the treatment of diabetic foot ulcers and venous leg ulcers . . . [T]hese products do not actually function like human skin that is grafted onto a wound; they are not a substitute for a skin graft. Instead, these products are applied to wounds to aid wound healing and through various mechanisms of action they stimulate the host to regenerate lost tissue.” (78 FR 74930 through 74931) The CY 2014 final rule also described skin substitutes as “. . . a class of products that we treat as biologicals . . .” and mentioned that prior to CY 2014, skin substitutes were separately paid in the OPPS as if they were biologicals according to the ASP methodology (78 FR 74930 through 74931).

The 2014 rule did not specifically mention whether synthetic products could be considered to be skin substitute products in the same manner as biological products, because there were no synthetic products at that time that were identified as skin substitute products. Then in 2018, a manufacturer made a request that an entirely synthetic product that it claimed is used in the same manner as biological skin substitutes receive a HCPCS code that would allow the product to be billed with graft skin substitute procedure codes, including CPT codes 15271 through 15278 and C5271 through C5278 starting in 2019. Initially, the synthetic product was not described as a graft skin substitute product. However, we now believe that both biological and synthetic products could be considered to be skin substitutes for Medicare payment purposes.

This view is supported by a paper referenced in a report we cited in the CY 2014 OPPS/ASC final rule with comment period titled “Skin Substitutes for Treating Chronic Wounds Technology Assessment Report at ES-2”, which is available on the AHRQ website at: https://www.ahrq.gov/​sites/​default/​files/​wysiwyg/​research/​findings/​ta/​skinsubs/​HCPR0610_​skinsubst-final.pdf. That paper, titled “Regenerative medicine in dermatology: Biomaterials, tissue engineering, stem cells, gene transfer and beyond” by Dieckmann et al.,[79] states that skin substitutes should be divided into two broad categories: Biomaterial and cellular. The paper explains that “. . . biomaterial skin substitutes do not contain cells (acellular) and are derived from natural or synthetic sources . . .” [80] The paper continues by describing biomaterial skin substitutes further: “Synthetic sources include various degradable polymers such as polylactide and polyglycolide. Whether natural or synthetic, the biomaterial provides an extracellular matrix that allows for infiltration of surrounding Start Printed Page 48898cells.” [81] The paper by Dieckmann et al. confirms that skin substitute products may be synthetic products as well as biological products.

Therefore, for CY 2021 we propose to include synthetic products in addition to biological products in our description of skin substitutes. Our new description would define skin substitutes as a category of biological and synthetic products that are most commonly used in outpatient settings for the treatment of diabetic foot ulcers and venous leg ulcers. We also propose to retain the additional description of skin substitute products from the CY 2014 OPPS final rule which states “. . . that skin substitute products do not actually function like human skin that is grafted onto a wound; they are not a substitute for a skin graft. Instead, these products are applied to wounds to aid wound healing and through various mechanisms of action they stimulate the host to regenerate lost tissue . . .” (78 FR 74930 through 74931).

VI. 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 es