[Federal Register Volume 64, Number 115 (Wednesday, June 16, 1999)]
[Rules and Regulations]
[Pages 32198-32206]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-15067]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Health Care Financing Administration

42 CFR Part 416

[HCFA-3831-F]
RIN 0938-AH15


Medicare Program; Adjustment in Payment Amounts for New 
Technology Intraocular Lenses Furnished by Ambulatory Surgical Centers

AGENCY: Health Care Financing Administration (HCFA), HHS.

ACTION: Final rule.

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SUMMARY: This final rule establishes a process under which interested 
parties may request a review of whether the current Medicare payment 
amount for intraocular lenses furnished by participating ambulatory 
surgical centers is appropriate for a class of new technology 
intraocular lenses. This rule implements section 141(b) of the Social 
Security Act Amendments of 1994, which requires us to develop and 
implement this process.
    This rule also serves as the initial notice to those wishing to 
submit requests for review of the appropriateness of the payment amount 
with respect to a particular intraocular lens, in accordance with 
Sec. 416.195 of this rule.

DATES: Effective date: These regulations are effective on July 16, 
1999.
    Applicability date: We will accept requests for review under this 
part 416, subpart F, until September 14, 1999.

FOR FURTHER INFORMATION CONTACT: Claude Mone, (410) 786-5666.

SUPPLEMENTARY INFORMATION: Copies: To order copies of the Federal 
Register containing this document, send your request to: New Orders, 
Superintendent of Documents, P.O. Box 371954, Pittsburgh, PA 15250-
7954. Specify the date of the issue requested and enclose a check or 
money order payable to the Superintendent of Documents, or enclose your 
Visa or Master Card number and expiration date. Credit card orders can 
also be placed by calling the

[[Page 32199]]

order desk at (202) 512-1800 or by faxing to (202) 512-2250. The cost 
for each copy is $8. As an alternative, you can view and photocopy the 
Federal Register document at most libraries designated as Federal 
Depository Libraries and at many other public and academic libraries 
throughout the country that receive the Federal Register.

I. Background

A. Payment for Ambulatory Surgical Center Facility Services

    Section 1832(a)(2)(F)(i) of the Social Security Act (the Act) 
provides that the scope of benefits under the Medicare supplementary 
medical insurance (Part B) program includes certain services furnished 
in connection with surgical procedures that are performed in an 
ambulatory surgical center (ASC). To participate in the Medicare 
program as an ASC, a facility must meet the standards specified under 
section 1832(a)(2)(F)(i) of the Act and in our regulations at 42 CFR 
part 416. In addition, our regulations at 42 CFR part 416 contain the 
coverage and payment rules for services furnished by participating 
ASCs.
    Section 1833(i)(2)(A) of the Act authorizes us to pay ASCs a 
prospectively-determined rate for facility services. ``Facility 
services'' includes services that are furnished in conjunction with 
covered surgical procedures performed in an ASC. Section 416.61 of our 
regulations sets forth included and excluded facility services. ASC 
payment rates represent our estimate of a fair fee that takes into 
account the costs incurred by ASCs generally in furnishing facility 
services in connection with performing a surgical procedure. ASC 
payment rates do not include physicians' fees and other medical items 
and services, such as laboratory services or prosthetic devices, for 
which separate payment may be authorized under other provisions of the 
Medicare program. However, an intraocular lens (IOL) is included as an 
ASC facility service under section 1833(i)(2)(A)(iii) of the Act.
    Payment for ASC facility services is subject to the usual Medicare 
Part B deductible and coinsurance requirements. Therefore, 
participating ASCs are paid 80 percent of the prospectively-determined 
rate adjusted for regional wage variations. The beneficiary pays a 
coinsurance amount equal to 20 percent of the wage-adjusted ASC 
facility fee.
    Currently, the Medicare program pays an ASC facility fee for 
approximately 2,300 surgical procedures performed in an ASC. These 
surgical procedures are identified by codes established by the American 
Medical Association's Current Procedural Terminology (CPT). We assign 
to each procedure one of eight standard payment rates. Collectively, 
the procedures assigned a particular payment rate constitute an ASC 
payment group. The current payment group rates follow:
Group 1--$312    Group 5--$674
Group 2--$419    Group 6--$785
Group 3--$479    Group 7--$935
Group 4--$591    Group 8--$923

    This is further discussed in our September 4, 1997 proposed rule, 
``Medicare Program; Adjustment in Payment Amounts for New Technology 
Intraocular Lenses'' (62 FR 46699).

B. Payment for Intraocular Lenses Furnished in an Ambulatory Surgical 
Center

    In the proposed rule, we explained that at the inception of the ASC 
benefit on September 7, 1982, Medicare paid 80 percent of the 
reasonable charge for IOLs supplied for insertion concurrent with or 
following cataract surgery performed in an ASC. Subsequently, the 
statute was amended to mandate that we include payment for an IOL 
furnished by an ASC for insertion during or following cataract surgery 
as part of the ASC facility fee rather than paying for the IOL 
separately. Payment included in the facility fee for an IOL must be 
reasonable and related to the cost of acquiring the class of IOL 
involved.
    Thus, for services furnished beginning March 12, 1990, which was 
the effective date of the final notice published in the Federal 
Register on February 8, 1990, entitled ``Revision of Ambulatory Surgery 
Center Payment Rate Methodology'' (55 FR 4526), Medicare included 
payment for an IOL in payment group 6 and payment group 8, the two 
payment groups that include IOL insertion procedures. The Physicians' 
Current Procedural Terminology (CPT) codes for groups 6 and 8 and their 
descriptors follow:

Payment group 6:
    CPT code 66985...........  Insertion of intraocular lens prosthesis
                                (secondary implant), not associated with
                                concurrent cataract removal.
    CPT code 66986...........  Exchange of intraocular lens. (This CPT
                                code was first listed in CPT 1992; we
                                added it to the ASC list effective
                                January 30, 1992.)
Payment group 8:
    CPT code 66983...........  Intracapsular cataract extraction with
                                insertion of intraocular lens prosthesis
                                (one stage procedure).
    CPT code 66984...........  Extracapsular cataract removal with
                                insertion of intraocular lens prosthesis
                                (one stage procedure), manual or
                                mechanical technique (for example,
                                irrigation and aspiration or
                                phacoemulsification).
 

    Section 4151(c)(3) of the Omnibus Budget Reconciliation Act of 1990 
(OBRA 1990) (Public Law 101-508), enacted on November 5, 1990, froze 
the IOL payment amount at $200 for IOLs furnished by ASCs in 
conjunction with surgery performed during the period beginning November 
5, 1990 and ending December 31, 1992. We continued paying an IOL 
allowance of $200 from January 1, 1993 through December 31, 1993.
    Section 13533 of the Omnibus Budget Reconciliation Act of 1993 
(OBRA 1993) (Public Law 103-66), enacted on August 10, 1993, mandated 
that payment for an IOL furnished by an ASC be equal to $150 beginning 
January 1, 1994 through December 31, 1998.
    In a proposed rule in the June 12, 1998 Federal Register (63 FR 
32290) entitled ``Medicare Program; Update of Ratesetting Methodology, 
Payment Rates, Payment Policies, and the List of Covered Surgical 
Procedures for Ambulatory Surgical Centers Effective October 1, 1998,'' 
we proposed new payment rates and an ambulatory payment classification 
(APC) system based on facility costs and procedure charges collected in 
a 1994 survey of ASCs. In that proposed rule, we stated that the 1994 
survey data revealed that the current IOL allowance of $150 is higher 
than the cost of acquiring the lens. The survey data indicated that the 
weighted mean lens cost was $100, and the weighted median cost was $97. 
We

[[Page 32200]]

stated that before December 31, 1998, we would propose a revised 
payment rate for lens insertion procedures to include an IOL allowance 
that is reasonable and related to the cost of the lens. However, we 
subsequently issued notices in the Federal Register on October 1, 1998 
(63 FR 52663) and November 13, 1998 (63 FR 63430) that extended the 
comment period on the proposed rule and announced that a final rule 
would be issued as soon as possible after January 1, 2000.

II. Provisions of the Proposed Regulations

A. Requirement for Review of Payment for New Technology Intraocular 
Lenses

    On October 31, 1994, the Social Security Act Amendments of 1994 
(SSAA 1994) (Public Law 103-432) were enacted. Section 141(b) of SSAA 
1994 requires us, not later than 1 year after the date of enactment 
(that is, by October 31, 1995), to develop and implement a process 
under which interested parties may request, with respect to a class of 
new technology IOLs, a review of the appropriateness of the payment 
amount provided for IOLs furnished by ASCs under section 
1833(i)(2)(A)(iii) of the Act. Since January 1, 1994, the payment 
amount for IOLs furnished by ASCs under section 1833(i)(2)(A)(iii) of 
the Act has been $150.
    Section 141(b)(1) of SSAA 1994 stipulates that an IOL may not be 
treated as a new technology IOL unless it has been approved by the Food 
and Drug Administration (FDA). Section 141(b)(2) of SSAA 1994 requires 
that, in determining whether to provide a payment adjustment, we take 
into account whether use of the IOL is likely to result in reduced risk 
of intraoperative or postoperative complication or trauma, accelerated 
postoperative recovery, reduced induced astigmatism, improved 
postoperative visual acuity, more stable postoperative vision, or any 
other comparable clinical advantages.
    Section 141(b)(3) of SSAA 1994 requires that we publish at least 
annually a list of the requests received for review of the 
appropriateness of the IOL payment amount with respect to a new 
technology IOL. We must provide a 30-day comment period on the IOLs 
that are the subject of the requests for review. Within 90 days of the 
close of the comment period, we must publish a notice of the 
determinations made with respect to the appropriateness of the IOL 
payment amount for the IOLs for which a review was requested. Any 
adjustment of the IOL payment amount (or payment limit) for a 
particular IOL or class of IOLs that we determine is warranted would be 
effective not later than 30 days following publication of the final 
notice of our determination.
    Implementation of section 141(b) of SSAA 1994 requires three 
principal policy decisions:
     Identification of a class or classes of new technology 
IOLs.
     Determination of whether the current IOL payment amount is 
appropriate for an IOL identified as belonging to a class of new 
technology IOLs.
     Identification of the payment adjustment to be applied if 
the current payment amount is found to be inappropriate.

B. Identification of a Class of New Technology Intraocular Lenses

1. Distinguishing Among Classes of Intraocular Lenses
    In order to prepare the final notice entitled ``Revision of 
Ambulatory Surgery Center Payment Rate Methodology'' (55 FR 4526) that 
was published in the Federal Register on February 8, 1990, we sought 
supporting documentation that would justify pricing IOLs according to 
IOL type or ``class,'' and that would establish the basis for 
distinguishing among different types of IOLs, such as placement of the 
IOL within the eye, either as anterior chamber or posterior chamber 
IOLs; or the style of the IOL, either single-piece or multi-piece; or 
characterization of the IOL as ``advanced technology.''
    On February 22, 1989, the FDA advised us in a letter that its 
premarket approval review process determined whether IOLs were ``safe 
and effective'' not by comparing IOLs with one another, but by 
comparing them with a set of historical IOL data known collectively as 
the ``grid.'' The FDA noted that no additional labeling or advertising 
claims of the superiority of one IOL (or type of IOL) over another had 
been approved at that time; that is, medical benefits of one IOL or 
type of IOL over another had not been proven in the studies that were 
submitted to the FDA. There were no across-the-board differences in the 
indications and contraindications or in the warnings sections of the 
package insert that would imply across-the-board medical benefits for 
one IOL or type of IOL over another.
    The studies that were submitted to HCFA at that time failed to 
yield conclusive evidence of specific clinical conditions or 
indications that required or influenced the use of one IOL over 
another, nor did HCFA find justification for a differentiated price 
structure based on IOL type. We therefore determined that a $200 
payment amount was both reasonable and related to the costs incurred by 
ASCs to acquire IOLs available at that time.
2. Criterion To Define a Class of New Technology Intraocular Lenses
    There still is no universally accepted definition of what 
constitutes a ``class of new technology intraocular lenses.'' Section 
141(b) of SSAA 1994 does not define new technology IOLs other than to 
specify that an IOL may not be treated as a new technology IOL unless 
it has been approved by the FDA. We must therefore first define the 
characteristics that distinguish a ``new technology'' IOL from other 
IOLs in order to comply with section 141(b) of SSAA 1994.
    Section 141(b) of SSAA 1994 requires that we take clinical outcomes 
such as ``reduced risk of intraoperative or postoperative complication 
or trauma'' and ``reduced induced astigmatism'' into account in 
determining whether to provide a payment adjustment with respect to a 
particular IOL. Because they are identified with such specificity, we 
infer that the clinical outcomes listed in the law are intended to 
characterize IOLs that belong to a ``class of new technology 
intraocular lenses,'' the use of which not only produces the specified 
clinical outcomes, but does so to a greater degree than other IOLs. We 
submit that the latter consideration is crucial because of the abundant 
evidence that demonstrates that IOLs have attained a level of technical 
sophistication, clinical success, and patient satisfaction that exceeds 
that of the more than 1 million IOLs implanted during clinical trials 
conducted between 1978 and 1982. (An analysis of the 1978 through 1982 
clinical trial data forms the FDA's ``grid,'' the historical control 
group against which newer IOLs are measured.) To illustrate, 93 percent 
and 96.8 percent of patients in trials of two IOLs that were approved 
in 1994 achieved visual acuity of \20/40\ or better, compared to 88 
percent of patients in the historical control group. The ``best 
cases,'' those without any preoperative ocular pathology or macular 
degeneration at any time, achieved visual acuity of \20/40\ or better 
in 97 percent and 99.5 percent of the patients in the two newer trials, 
compared to 94 percent of the control group grid patients. The high 
level of improved vision and the low rate of adverse effects already 
attainable using currently available IOLs seem to leave little room for 
substantive improvements in the areas listed as desirable outcomes in 
SSAA 1994. At issue, then, is how to

[[Page 32201]]

recognize IOLs that exceed the already superior levels of performance 
of IOLs readily accessible in the current market to such an extent that 
they warrant being recognized as belonging to a separate and distinct 
class of IOLs. We proposed that the criterion for identifying an IOL to 
be treated as a new technology IOL be that all claims of the IOL's 
clinical advantages and superiority over existing IOLs must have been 
approved by the FDA for labeling and advertising purposes. An 
explanation of the reasons for relying on the FDA's determination is 
explained in the proposed rule (62 FR 46700 through 46701). We received 
favorable public comments on the proposal and adopted them in this 
final rule.
3. Five-Year Limit on Subsets of ``New Technology''
    We proposed to impose certain constraints on payment adjustments 
that result from the process that is the subject of this rule. For 
instance, we did not believe that all IOLs that could satisfy the 
overall criteria of ``new technology'' in the proposed rule would 
necessarily be of the same type or category. Rather, based on our 
assessment of the kinds of IOLs that are currently in clinical trials, 
we believe ``new technology'' IOLs could logically be grouped into 
smaller subsets of ``new technology,'' each of which is defined or 
identified by a common salient feature or characteristic, such as 
fabrication from the same material, or being multifocal in design, or 
designed to correct astigmatism.
    For payment purposes, after we accept an IOL as satisfying the 
criterion for belonging to a ``class of new technology lenses,'' we 
proposed to assign that IOL to a subset of IOLs with which it shares a 
common feature that distinguishes it from other ``new technology'' 
IOLs. We further proposed to set the lifespan of each subset of ``new 
technology'' IOLs at 5 years. That is, beginning the sixth year 
following our initial recognition of a ``new technology'' subset, the 
new technology attribute that the IOLs in the subset have in common 
would cease to be considered a characteristic of ``new technology,'' 
and the Medicare payment adjustment for IOLs in that subset would be 
discontinued. We would not have considered for payment adjustment any 
other IOLs whose primary distinguishing feature was that attribute. For 
IOLs approved at the beginning of the fifth year of the subset term, 
Medicare would have paid any ``new technology'' adjustment for 1 year 
only.
    We proposed a 5-year limit because defining a ``new technology'' 
characteristic as ``new'' for fewer than 5 years did not seem fair to 
manufacturers whose model(s) of the new technology IOL may receive FDA 
approval sometime after the original IOL that opened the subset within 
the class of ``new technology'' IOLs receives its premarket approval. 
But to define a ``new technology'' characteristic as ``new'' for more 
than 5 years seemed to impose an unnecessary and unwarranted drain on 
the Medicare trust fund, given the natural course of market forces that 
have repeatedly succeeded in reducing IOL costs in a few years 
following introduction of a modification or innovation in design or 
material.

C. Appropriateness of Payment Amount

    SSAA 1994 requires us to review the appropriateness of the current 
IOL payment amount with respect to a class of new technology IOLs. 
Because SSAA 1994 itself does not provide explicit guidance on the 
standard for judging the appropriateness of the current IOL payment 
amount, we looked to section 1833(i)(2)(A)(iii) of the Act, which 
requires that the IOL payment amount included in the ASC facility fee 
be reasonable and related to the cost of acquiring the class of IOL 
involved. Therefore, after we determine that an IOL meets the criterion 
that qualifies it to be treated as a new technology IOL under the 
process in this rule, we reasoned that we must next determine if the 
current IOL payment amount is reasonable and related to the cost of 
acquiring that IOL. We have reconsidered this issue in light of the 
public comments, which are addressed later in this final rule.
    We also proposed that in order to determine IOL acquisition costs, 
we would be required to survey purchasers and audit invoices. The OIG 
conducted such a survey in preparing its 1994 report entitled 
Acquisition Costs of Prosthetic Intraocular Lenses, OEI-05-92-01030. 
(Copies can be obtained from the Office of Inspector General, 
Department of Health and Human Services, (312) 353-4124.) The OIG found 
that when IOL payments were fixed at $200, ASCs could acquire and were 
acquiring IOLs for an average of $126 in 1991 and $112 in 1992. This 
does not take into account discounts available to the majority of 
purchasers because the financial arrangements took many forms, only a 
few of which were straightforward rebates or price reductions. The OIG 
also discovered that the newest type of IOL available at the time of 
its review (a foldable, ultraviolet-absorbing, silicone IOL) was 
obtainable within relatively the same price range as other IOLs in the 
study (from $75 to $475 for the foldable IOLs, compared to a range of 
$30 to $450 for rigid IOLs). The OIG determined that ASCs were buying 
foldable IOLs for $125 or less, at a time when the Medicare IOL payment 
amount was $200.
    We received several public comments concerning this proposal. We 
have reconsidered the process for adjusting payments for new technology 
IOLs in light of these comments, and we are no longer requiring the 
submission of data concerning the costs of acquiring the new technology 
IOL in order to determine the appropriateness of the IOL payment 
amount. Rather, as we discuss in the Analysis and Responses to Public 
Comments section of this rule, once an IOL is determined to be a new 
technology IOL, we will pay a flat premium in the amount of $50, over 
and above the payment allowance already included in the ASC facility 
fee for a standard IOL.

D. Payment Adjustment When Current Payment Amount Is Inappropriate

    The final step in the process that was the subject of the proposed 
rule involved determining the amount of a payment adjustment if we find 
that the current IOL payment amount is inappropriate. Among the factors 
that we proposed in order to determine the amount of the adjustment to 
be made if the current IOL allowance was found to be inappropriate with 
respect to the acquisition cost of the particular IOL were the 
following:
     Market projections based on anticipated clinical 
indications of need for the IOL and the percent of the Medicare 
population expected to present that need on an annual basis.
     Additional incremental costs incurred to manufacture a new 
technology IOL relative to the cost of manufacturing other IOLs, such 
as the cost attributable to using a more sophisticated piece of 
machinery or the cost of fabricating a new IOL material.
     Additional costs incurred to conduct clinical trials that 
document for FDA approval the clinical superiority of the IOL relative 
to the costs incurred to conduct clinical trials for other IOLs.
     Research and development costs incurred that exceed those 
associated with other IOLs approved by the FDA.
     Current and historical pricing, sales volume, and 
revenues.
     A reasonable rate of return and profit based on the 
manufacturer's investment in the IOL.

[[Page 32202]]

    We considered other options for determining the amount of an 
adjustment to be made if the current payment amount was found to be 
inappropriate for an IOL being reviewed under the provisions in this 
rule including--
     Application of a single flat, across-the-board percentage 
increase to the IOL payment amount for every IOL that we determined 
satisfied the criteria defining a ``new technology'' IOL.
     The percent of the IOL industry's investment in research 
and development that ultimately leads to innovations in IOLs.
     The percentage of sales attributable to an IOL for which a 
review was requested.
    We rejected these options at that time, primarily because we 
believed they were inconsistent with the overall statutory mandate that 
payment be reasonable and related to the cost of acquiring an IOL. We 
received public comments concerning this position, and one commenter 
expressly disagreed with our interpretation of the statute. We have 
reconsidered our position in light of this comment. Further discussion 
can be found in the Analysis of and Responses to Public Comments 
section.

E. Implementation of the Payment Adjustment

1. Two-Year Limit on Payment Adjustment
    A related issue pertains to the appropriate length of time the 
adjusted payment amount would be allowed by Medicare for a particular 
``new technology'' IOL. We proposed to allow a single IOL the benefit 
of any payment adjustment determined to be appropriate for a period of 
2 years following the review process in this rule. At the conclusion of 
the 2-year payment adjustment period, Medicare payment for the IOL 
would then revert to the standard payment rate for IOLs furnished by an 
ASC that is in effect at that time.
    Supporting a 2-year payment limit is the OIG's 1994 report 
(Acquisition Costs of Prosthetic Intraocular Lenses, OEI-05-92-01030), 
which found a decrease in IOL prices generally over a 2-year period 
ranging from 11 to 14 percent in various settings. We assume this 
decrease is attributable to technology diffusion and the associated 
development of similar lenses by competing firms. We believe a 
desirable new technology IOL with demonstrated clinical superiority 
would be subject to equivalent conditions, and thus experience a 
similar drop in acquisition cost over a 2-year period. However, after 
considering the public comments on this issue, we have developed an 
alternative to this 2-year payment adjustment. See the Analysis of and 
Responses to Public Comments section for further discussion.
2. Operational Payment Principles
    The payment adjustments we publish in the Federal Register would be 
implemented prospectively, effective 30 days from the date of their 
publication. This implementation date of a payment adjustment is 
required under section 141(b) of SSAA 1994.
    We proposed to apply the same payment adjustment amount established 
for the first IOL or IOLs approved within a new technology subset to 
all IOLs that we subsequently accept as satisfying the criteria for 
``new technology'' that are assigned to the same subset. If a new 
technology IOL were to qualify under more than one subset of 
technology, and the subsets had different payment rates, the IOL would 
be paid for at the higher (or highest) applicable rate.
    We expect that more than one manufacturer would be working to 
develop IOLs that rely on the same or similar technology that defines 
``new technology'' under the provisions of this rule. If we were to 
make a payment adjustment under the provisions in this rule, the 
payment adjustment amount would have been based on information 
regarding IOL production, acquisition costs, and IOL benefits that is 
submitted by the manufacturer or manufacturers that first request 
review for a particular type of new technology IOLs. Manufacturers 
would have had 3 years during which to submit requests for review of 
equivalent IOLs approved by the FDA that were in a ``new technology'' 
subset already approved by us and still benefit from the full 2-year 
payment adjustment term. Requests for review of an IOL submitted during 
the third year of a technology's designation as ``new'' would only have 
had the benefit of a payment adjustment for 1 year. Again, we have 
modified this proposal. Further discussion can be found in the Analysis 
of and Responses to Public Comments section.
    If an interested party wants an IOL to be considered for a payment 
adjustment under section 141(b) of SSAA 1994, that interested party 
must request a review in accordance with the process in this final 
rule.
    We will assign codes to be used to bill for IOLs that qualify for 
the payment adjustment. The list of these IOLs, with the appropriate 
billing code, will be published periodically in the Federal Register. 
Billing for any other IOLs using ``new technology'' billing codes may 
constitute fraud.

F. Review and Adjustment Process

    In this section of the proposed rule, we described the process that 
we intended to implement in order to determine the appropriateness of 
IOL pricing as required under section 141(b) of SSAA 1994. The process, 
which was designed to be repeated annually on a 365-day cycle, would 
have involved publishing a series of Federal Register notices with 
built-in comment periods and allowance of time to review the 
appropriateness of payment amounts for new technology IOLs. However, 
since we are revising this review process, we believe we can shorten 
the timeframe to accomplish this to 180 days. For a further discussion 
of this issue see the Analysis of and Responses to Public Comments 
section.

G. Requirements for Content of a Request To Review

    In the proposed rule, interested parties requesting a review of the 
IOL payment amount with respect to a particular IOL would have been 
required to submit the following: identification of the individual IOL 
under consideration as a ``new technology'' IOL for which a payment 
review is requested, including the name of the manufacturer, model 
number, trade name, and the date the FDA granted premarket approval for 
the IOL; a copy of the FDA's summary of safety and effectiveness; a 
copy of the labeling claims of specific clinical advantages approved by 
the FDA; reports of modifications made after FDA approval; development 
and manufacturing costs of the ``new technology'' IOL relative to the 
costs of manufacturing other approved IOLs; the costs of conducting 
clinical trials for the IOL in question relative to the costs of 
conducting clinical trials for other approved IOLs; indications and 
contraindications for use; epidemiological data indicating demand for 
the IOL; sales price, sales history, and revenues, and prices and 
projected revenues during the period of the payment adjustment; names 
of purchasers; and other information we consider appropriate for making 
a determination. Because of the revisions made to this process in the 
final rule, interested parties will not be required to submit 
information that is related to costs or sales as stated above. For a 
further discussion of this issue, see the Analysis of and Responses to 
Public Comments section.
    Interested parties should be aware that 45 CFR 5.65(c) provides 
that a

[[Page 32203]]

submitter of information may designate all or part of the information 
as being exempt from mandatory disclosure under Exemption 4 of the 
Freedom of Information Act.

III. Analysis of and Responses to Public Comments

    We received 16 timely items of correspondence. The comments were 
from ophthalmologists, professional organizations, IOL manufacturers, 
and ASCs. A summary of the major issues and our responses follow:
    Comment: Several commenters suggested that, in addition to using 
FDA product labeling to identify what qualifies as a new technology 
lens, we should also consider data from well-designed and controlled 
health outcomes and economic studies through consultation with medical 
and industry experts.
    Response: As we stated in the proposed rule, we considered 
convening an expert panel to evaluate claims of the clinical 
superiority of an IOL. Because the expertise and review process already 
exist within another Health and Human Services agency, namely the FDA, 
it would be duplicative for us to convene such a panel of experts. We, 
therefore, are not accepting this suggestion, and will rely on the FDA 
approval process for labeling and advertising purposes to determine 
that an IOL will be treated as a new technology lens.
    Comment: Several commenters disagreed with the 2-year payment limit 
on single model new technology IOLs and the 5-year limit on the 
adjustment for subsets of new technology IOLs. The commenters thought 
that the payment adjustment should be extended to 7 years.
    Response: After carefully considering the arguments made by these 
commenters, we believe we can resolve this issue with a compromise. We 
will extend the payment limit for single model new technology IOLs to 5 
years beginning with the date that we recognize this particular IOL as 
a new technology IOL. Any subsequent IOL with the same characteristics 
will receive the payment adjustment for the remainder of the 5-year 
period established by the initial new technology IOL. For example, if 
new technology IOL ``A'' is recognized to receive a payment adjustment 
effective July 1, 1999, the payment adjustment would expire on June 30, 
2004. The payment adjustment would then terminate, and revert back to 
the standard IOL payment rate in effect at that time. If new technology 
IOL ``B'' is recognized to receive a payment adjustment effective July 
1, 2000, and has the same characteristics as ``A,'' the payment 
adjustment for ``B'' would expire on June 30, 2004, and then revert 
back to the IOL payment rate in effect at that time.
    We realize that we cited the 1994 OIG report (Acquisition Costs of 
Prosthetic Intraocular Lenses, OEI-05-92-01030), which found a decrease 
in IOL prices generally over a 2-year period ranging from 11 to 14 
percent in various settings. However, we believe that the initial 
developer of a particular new technology lens should have some 
advantage over subsequent developers of a similar lens, and 
consequently we are extending the payment adjustment limit to 5 years 
for those initial developers. We do not believe, however, that 
extending the limit to 7 years is justified, given the data presented 
in the above-mentioned OIG report.
    Comment: One commenter disagreed with our view that the overall 
statutory mandate would have precluded the adoption of a single flat 
rate across-the-board percentage increase. That commenter indicated 
that ``the new technology IOL enabling legislation provides no specific 
guidance on the standard for judging the appropriateness of the current 
IOL payment vis-a-vis the rate adjustment for the new technology IOL. 
Given the fact that the purpose of the new technology IOL provision is 
to facilitate beneficiary access to new IOL technology, we do not 
believe the Congress would have intended HCFA to rely on historical 
pricing data. With a new lens, there will be no history. Awaiting the 
submission of acquisition data would delay the ability of providers to 
purchase the products under current facility reimbursement 
constraints.''
    Response: In developing the process for adjusting payment rates for 
new technology IOLs that we proposed in the September 4, 1997 Federal 
Register, we rejected applying a single flat, across-the-board 
percentage increase to the IOL payment amount for every IOL that we had 
determined satisfied the definition of new technology IOLs (62 FR 
46702). Initially, we rejected that approach, believing that it might 
be viewed as inconsistent with a statutory requirement in section 
1833(i)(2)(c) of the Act that the ASC allowance for IOLs be reasonable 
and related to IOL acquisition costs. We have reconsidered our 
interpretation in light of the public comment.
    While it is true that section 141(b) of SSAA 1994 refers to section 
1833(i)(2)(A)(iii) of the Act, the reference does not require the 
conclusion that the amount of an adjustment for new technology IOLs 
must also be reasonable and related to the cost of acquiring the IOL. 
Indeed, the commenter's point is well taken that by focussing on the 
clinical advantages of new technology IOLs, the Congress was attempting 
to encourage beneficiary access to new technologies. The statutory 
reference to section 1833(i)(2)(A)(iii) of the Act thus requires a 
comparison of the clinical advantages of new technology to the standard 
technology, and an adjustment to the payment rate to reflect the added 
benefits of the new technology. It does not require a comparison of the 
costs of acquiring standard IOLs to the costs of acquiring new 
technology IOLs in determining the amount of any adjustment. We agree 
that the statute can be reasonably interpreted to permit an adjustment 
that is not related to the cost of acquiring the particular new 
technology IOL. Since the flat rate adjustment for new technology IOLs 
was one of the more frequently suggested comments, we have decided to 
adopt this recommended approach.
    Comment: Several commenters recommended that we develop a standard 
payment rate that would apply to any lens that we find is in compliance 
with the definition of a new technology IOL under the provisions of 
this regulation. Commenters suggested as a new technology IOL premium 
either a flat dollar amount between $50 and $75 or an amount equal to 
between 30 percent and 50 percent of the allowance for a standard IOL.
    One consequence of this approach would be to reduce the data 
collection burden associated with our proposed requirement that 
interested parties submit information related to manufacturing, 
selling, overhead, and research and development costs, reducing the 
burden for manufacturers. In other words, our determination that a lens 
meets the criteria for being considered a new technology IOL would 
alone be sufficient to trigger a payment adjustment. Several commenters 
argued that the clinical outcomes resulting from use of the new 
technology IOL so substantially exceed the outcomes expected from a 
standard IOL as to justify payment of a premium. By definition, the 
payment allowance for a standard IOL could not be appropriate for a new 
technology IOL because the new technology IOL affords so many more 
clinical advantages and outcomes than a standard IOL, and the new 
technology IOL's additional features would not have been realized 
without additional costs having been incurred.
    Response: Having considered these comments, we have decided to 
modify our original proposal and to adopt

[[Page 32204]]

instead payment of a flat, across-the-board $50 premium for any lens 
for which a payment review is requested in accordance with the 
provisions of the final regulations and that we find to comply with the 
definition of a new technology IOL. We will adopt this $50 payment at 
least until July 16, 2002.
    During this 3-year period, we will monitor whether the flat payment 
of $50 has provided beneficiaries access to new technology. We will 
also monitor market parameters for IOLs. After this 3-year period, we 
may adjust our payment rate for NTIOLs through proposed and final 
rulemaking for ambulatory surgical centers.
    The effect of adopting this approach will be to permit an expedited 
consideration of a request for payment review, and a standard $50 
payment adjustment for any lens that we determine is a new technology 
IOL. We believe that a flat $50 premium per new technology IOL is a 
reasonable amount and is enough to encourage manufacturers to continue 
their IOL research and development programs. In fact, an industry-
sponsored study found that the use of a certain type of new technology 
IOL, such as a multi-focal lens, enables a certain percentage of 
cataract patients to forego Medicare-reimbursed post-cataract 
eyeglasses. A payment adjustment of $50 for this type of lens seems to 
be justified since it offers certain benefits to both the beneficiary 
and the Medicare program. A flat rate adjustment also will expedite our 
review process and gives Medicare beneficiaries quicker access to new 
technology. By adopting a flat dollar amount, rather than a percentage 
of the standard IOL allowance, we hold the premium constant against 
potential increases or reductions in the IOL allowance for standard 
lenses.
    Comment: Several commenters stated that the application process is 
cumbersome, time-consuming, and not possible due to the proprietary 
nature of the information that will have to be supplied by IOL 
manufacturers. Along the same line, several commenters thought that we 
should make the adjusted payment amount available within 90 to 180 
days.
    Response: As discussed above, by adopting a flat rate payment 
amount of $50, the time required for the application process would be 
dramatically reduced. The payment adjustment amount could be 
implemented within 180 days after receipt of the request to review a 
new technology IOL.
    The commenters were also concerned that due to the proprietary 
nature of the information that would have to have been supplied, 
businesses could be reluctant to submit the requested information. By 
reducing the types of data necessary to make the determination, the 
final rule should alleviate some of the public's concern. In addition, 
as we stated in the proposed rule, 45 CFR 5.65(c) provides that a 
submitter of information may designate all or part of the information 
that he or she is submitting as being exempt from mandatory disclosure 
under Exemption 4 of the Freedom of Information Act. We reiterate that 
we will abide by the submitter's request if the submitter wishes any 
information to be withheld from disclosure.
    Comment: Two commenters requested that we provide for appeals of 
our new technology IOL decisions.
    Response: The SSAA 1994 does not require any appeal of this 
determination. Moreover, section 1869 of the Act already provides 
beneficiaries and certain other individuals the ability to challenge 
the amount of benefits paid if a claim is denied. We do not believe 
additional appeal rights are warranted and, therefore, are not 
accepting this comment.
    Comment: Two commenters thought that interested parties who request 
a payment adjustment for new technology IOLS should be able to 
demonstrate that the payment adjustment be continued past the time 
limit.
    Response: As discussed earlier in this section, we are increasing 
the time limit for an adjusted payment from 2 years to 5 years for the 
initial new technology IOL approved for the adjusted payment. Any 
subsequent new technology IOL with the same characteristics as the 
initial IOL will get the adjusted payment for the remainder of the 5-
year period. Given the data presented in the 1994 OIG report, we 
believe this extension is sufficient to alleviate the need for a 
demonstration to extend payment beyond this time period.

IV. Provisions of the Final Regulations

    In response to the comments we received, we are making several 
revisions to the proposed rule that we believe will streamline the 
process for determining an appropriate payment amount for new 
technology IOLS.
    We are revising Sec. 416.185, ``Payment review process.'' In the 
proposed rule, interested parties seeking an adjustment in the current 
IOL payment rate for a new technology lens would have been required to 
submit information related to manufacturing, selling, overhead, 
research and development costs in addition to any other information 
that would be considered appropriate in determining a payment 
adjustment. In the final rule, we are eliminating the need for this 
information to establish a payment adjustment. Instead, we are 
establishing a flat rate adjustment of $50 over the current rate for 
standard IOLs for 3 years beginning on July 16, 1999. After this 3-year 
period, we may adjust our payment rate for IOLs through proposed and 
final rulemaking for ambulatory surgical centers.
    This change also has an impact on Sec. 416.195, ``A request to 
review.'' In this section of the proposed rule, we were requiring 
documented evidence of the cost of the IOL and the manufacturer's 
investment in the IOL. This will no longer be necessary, since the 
final rule establishes a flat rate payment adjustment.
    Another revision to the proposed rule is Sec. 416.200, 
``Application of the payment adjustment.'' In the proposed rule, a 
single model IOL was recognized for a payment adjustment for a period 
of 2 years. We have revised that provision to extend the payment 
adjustment period to 5 years for the first IOL in a subset that we 
approve for the payment adjustment. Any subsequent IOL with the same 
characteristics as the first IOL recognized for a payment adjustment 
would receive the adjustment for the remainder of the 5-year period 
established by the first recognized IOL.
    With these revisions to the proposed rule in place, we will then be 
able to shorten the time it takes to complete the review process in 
order to establish a payment adjustment. The proposed rule set up a 
365-day cycle for the completion of this process. Although we are still 
required to publish two Federal Register notices in this review 
process, one with a 30-day comment period showing the list of requests 
received, and another within 90 days after the close of the comment 
period indicating the determinations that were made, we should be able 
to decrease the time to 180 days.
    Finally, this rule will serve as the initial notice to those 
wishing to submit requests for review of the appropriateness of the 
payment amount with respect to a particular IOL, in accordance with 
Sec. 416.195 of this rule. We will accept requests for 60 days 
following the effective date of this regulation. Subsequent requests 
for review of payment amounts will be made in accordance with the 
regulations as stated in this final rule. Please submit requests to: 
Grant Bagley, M.D., Director, Coverage and Analysis Group, Office of 
Clinical Standards and Quality, S3-02-01, 7500 Security Boulevard, 
Baltimore, Maryland 21244.

[[Page 32205]]

V. Collection of Information Requirements

    Under the Paperwork Reduction Act (PRA) of 1995, we are required to 
provide 60-day notice in the Federal Register and solicit public 
comment before a collection of information requirement is submitted to 
the Office of Management and Budget (OMB) for review and approval. In 
order to fairly evaluate whether an information collection should be 
approved by OMB, section 3506(c)(2)(A) of the PRA of 1995 requires that 
we solicit comment on the following issues:
     The need for the information collection and its usefulness 
in carrying out the proper functions of our agency.
     The accuracy of our estimate of the information collection 
burden.
     The quality, utility, and clarity of the information to be 
collected.
     Recommendations to minimize the information collection 
burden on the affected public, including automated collection 
techniques.
    Therefore, we are soliciting public comment on the information 
collection requirement discussed below.

Section 416.195  A Request To Review

    Section 416.195(a) states that the request must include all of the 
following information:
    (1) The name of the manufacturer, the model number, and the trade 
name of the IOL.
    (2) A copy of the FDA's summary of the IOL's safety and 
effectiveness.
    (3) A copy of the labeling claims of specific clinical advantages 
approved by the FDA for the IOL.
    (4) A copy of the IOL's original FDA approval notification.
    (5) Reports of modifications made subsequent to original FDA 
approval.
    (6) Other information that HCFA finds necessary for identification 
of the IOL.
    We believe the above requirement is not subject to the Act in 
accordance with 5 CFR 1320.3(c)(4) since this requirement does not 
collect information from 10 or more entities on an annual basis.
    We have submitted a copy of this final rule to OMB for its review 
of the information collection requirements described above.
    If you comment on any of these information collection and 
recordkeeping requirements, please mail copies directly to the 
following:

Health Care Financing Administration, Office of Information Services, 
Security and Standards Group, Division of HCFA Enterprise Standards, 
Room N2-14-26, 7500 Security Boulevard, Baltimore, MD 21244-1850, ATTN: 
Louis Blank, HCFA-3831-F
    and
Office of Information and Regulatory Affairs, Office of Management and 
Budget, Room 10235, New Executive Office Building, Washington, DC 
20503, Attn: Allison Eydt, HCFA Desk Officer

VI. Regulatory Impact Statement

    We generally prepare a regulatory flexibility analysis that is 
consistent with the Regulatory Flexibility Act (RFA) (5. U.S.C. 601 
through 612) unless the Secretary certifies that a rule not have a 
significant economic impact on a substantial number of small entities. 
For purposes of the RFA, we consider all manufacturers of IOLs, ASCs, 
hospital outpatient departments, and physicians who perform IOL 
insertion surgery to be small entities. Individuals and States are not 
included in the definitions of a small entity. We are not preparing a 
regulatory flexibility analysis because we have determined, and the 
Secretary certifies, that this regulation will not have a significant 
economic impact on a substantial number of small entities.
    Also, section 1102(b) of the Act requires the Secretary to prepare 
a regulatory impact analysis if a rule will have a significant impact 
on the operations of a substantial number of small rural hospitals. 
This analysis must conform to the provisions of section 604 of the RFA. 
For purposes of section 1102(b) of the Act, we define a small rural 
hospital as a hospital that is located outside of a Metropolitan 
Statistical Area and has fewer than 50 beds. We are not preparing a 
rural hospital impact statement because we have determined, and the 
Secretary certifies, that this regulation will not have a significant 
impact on the operations of a substantial number of small rural 
hospitals.
    Although this rule is not an ``economically significant'' rule 
under Executive Order 12866, we present below a voluntary analysis of 
the effects of this rule because many beneficiaries who undergo IOL 
insertion surgery following a cataract extraction could be affected.
    We believe that the fiscal impact of this rule will be negligible. 
We do not expect that making this payment adjustment will have an 
impact on the availability or prices of other IOLs. We do not expect 
that is will affect competition, employment, or investment. The ocular 
implant industry is mature, with a successful product readily available 
to purchasers. Our data suggest that we pay, under the Medicare 
program, more than the acquisition cost for most of the IOLs used 
today. In our June 12, 1998 proposed rule, ``Medicare Program; Update 
of Ratesetting Methodology, Payment Rates, Payment Policies, and the 
List of Covered Surgical Procedures for Ambulatory Surgical Centers 
Effective October 1, 1998'' (63 FR 32303), we stated that we would be 
proposing a new payment amount for the standard IOL that reflects the 
cost of acquiring the lens. New technology IOLs will achieve 
improvements in only small segments of the industry, since the majority 
of IOLs function superbly. The IOLs under development that we are aware 
of will substitute for spectacles in some cases, and in others will 
allow the patient to wear a single vision prescription rather than 
bifocals.
    In accordance with the provisions of Executive Order 12866, this 
regulation was reviewed by the Office of Management and Budget.

List of Subjects in 42 CFR Part 416

    Health facilities, Kidney diseases, Medicare, Reporting and 
recordkeeping requirements.

    For the reasons set forth in the preamble, 42 CFR part 416 is 
amended as follows:

PART 416--AMBULATORY SURGICAL SERVICES

    1. The authority citation for part 416 continues to read as 
follows:

    Authority: Secs. 1102 and 1871 of the Social Security Act (42 
U.S.C. 1302 and 1395hh).

    2. A new subpart F, consisting of Secs. 416.180, 416.185, 416.190, 
416.195, and 416.200, is added to read as follows:

Subpart F--Adjustment in Payment Amounts for New Technology Intraocular 
Lenses Furnished by Ambulatory Surgical Centers

Sec.
416.180  Definitions.
416.185  Payment review process.
416.190  Who may request a review.
416.195  A request to review.
416.200  Application of the payment adjustment.

Subpart F--Adjustment in Payment Amounts for New Technology 
Intraocular Lenses Furnished by Ambulatory Surgical Centers


Sec. 416.180  Definitions.

    As used in this subpart, the following definitions apply:
    Class of new technology intraocular lenses (IOLs) means all of the 
IOLs, collectively, that HCFA determines meet the definition of ``new 
technology IOL'' under the provisions of this subpart.

[[Page 32206]]

    Interested party means any individual, partnership, corporation, 
association, society, scientific or academic establishment, 
professional or trade organization, or any other legal entity.
    New technology IOL means an IOL that HCFA determines has been 
approved by the FDA for use in labeling and advertising the IOL's 
claims of specific clinical advantages and superiority over existing 
IOLs with regard to reduced risk of intraoperative or postoperative 
complication or trauma, accelerated postoperative recovery, reduced 
induced astigmatism, improved postoperative visual acuity, more stable 
postoperative vision, or other comparable clinical advantages.
    New technology subset means a group of IOLs that HCFA determines 
meet the criterion for being treated as new technology IOLs and that 
share a common feature or features that distinguish them from other 
IOLs. For example, all new technology IOLs that are made of a 
particular bioengineered material could comprise one subset, while all 
that rely on a particular optical innovation could comprise another.


Sec. 416.185  Payment review process.

    (a) HCFA publishes a Federal Register notice announcing the 
deadline and requirements for submitting a request for HCFA to review 
payment for an IOL.
    (b) HCFA receives a request to review the appropriateness of the 
payment amount for an IOL.
    (c) HCFA compiles a list of the requests it receives and identifies 
the IOL manufacturer's name, the model number of the IOL to be 
reviewed, the interested party or parties that submit requests, and a 
summary of the interested party's grounds for requesting review of the 
appropriateness of the IOL payment amount.
    (d) HCFA publishes the list of requests in a Federal Register 
notice with comment period, giving the public 30 days to comment on the 
IOLs for which review was requested.
    (e) HCFA reviews the information submitted with the request to 
review, any timely public comments that are submitted regarding the 
list of IOLs published in the Federal Register, and any other timely 
information that HCFA deems relevant to decide whether to provide a 
payment adjustment as specified in Sec. 416.200. HCFA makes a 
determination of whether the IOL meets the definition of a new 
technology IOL in Sec. 416.180.
    (f) If HCFA determines that a lens is a new technology IOL, HCFA 
establishes a payment adjustment as follows:
    (1) Before July 16, 2002--$50.
    (2) After July 16, 2002--$50 or the amount announced through 
proposed and final rulemaking in connection with ambulatory surgical 
center services.
    (g) HCFA designates a predominant characteristic of a new 
technology IOL that both sets it apart from other IOLs and links it 
with other similar IOLs with the same characteristic to establish a 
specific subset of new technology within the ``class of new technology 
IOLs.''
    (h) Within 90 days of the end of the comment period following the 
Federal Register notice identified in paragraph (d) of this section, 
HCFA publishes in the Federal Register its determinations with regard 
to IOLs that it has determined are ``new technology'' lenses that 
qualify for a payment adjustment.
    (i) Payment adjustments are effective beginning 30 days after the 
publication of HCFA's determinations in the Federal Register.


Sec. 416.190  Who may request a review.

    Any party who is able to furnish the information required in 
Sec. 416.195 may request that HCFA review the appropriateness of the 
payment amount provided under section 1833(i)(2)(A)(iii) of the Act 
with respect to an IOL that meets the definition of a new technology 
IOL in Sec. 416.180.


Sec. 416.195  A request to review.

    (a) Content of a request. The request must include all of the 
following information:
    (1) The name of the manufacturer, the model number, and the trade 
name of the IOL.
    (2) A copy of the FDA's summary of the IOL's safety and 
effectiveness.
    (3) A copy of the labeling claims of specific clinical advantages 
approved by the FDA for the IOL.
    (4) A copy of the IOL's original FDA approval notification.
    (5) Reports of modifications made after the original FDA approval.
    (6) Other information that HCFA finds necessary for identification 
of the IOL.
    (b) Confidential information. To the extent that information 
received from an IOL manufacturer can reasonably be characterized as a 
trade secret or as privileged or confidential commercial or financial 
information, HCFA maintains the confidentiality of the information and 
protects it from disclosure not otherwise authorized or required by 
Federal law as allowed under Exemption 4 of the Freedom of Information 
Act (5 U.S.C. 552(b)(4)) and, with respect to trade secrets, the Trade 
Secrets Act (18 U.S.C. 1905).


Sec. 416.200  Application of the payment adjustment.

    (a) HCFA recognizes the IOL(s) that define a new technology subset 
for purposes of this subpart as belonging to the class of new 
technology IOLs for a period of 5 years effective from the date that 
HCFA recognizes the first new technology IOL for a payment adjustment.
    (b) Any IOL that HCFA subsequently recognizes as belonging to a new 
technology subset receives the new technology payment adjustment for 
the remainder of the 5-year period established with HCFA's recognition 
of the first IOL in the subset.
    (c) Beginning 5 years after the effective date of HCFA's initial 
recognition of a new technology subset, payment adjustments cease for 
all IOLs that HCFA designates as belonging to that subset and payment 
reverts to the standard payment rate set under section 
1833(i)(2)(A)(iii) of the Act for IOL insertion procedures performed in 
ASCs.
    (d) ASCs that furnish an IOL designated by HCFA as belonging to the 
class of new technology IOLs must submit claims using specific billing 
codes to receive the new technology IOL payment adjustment.

(Sections 1832(a)(2)(F)(i) and 1833(i)(2)(a) of the Social Security 
Act (42 U.S.C. 1395k(a)(2)(F)(i) and 1395l(i)(2)(a)))

(Catalog of Federal Domestic Assistance Program No. 93.774, 
Medicare--Supplementary Medical Insurance Program)

    Dated: January 15, 1999.
Nancy-Ann Min DeParle,
Administrator, Health Care Financing Administration.

    Dated: March 8, 1999.
Donna E. Shalala,
Secretary.
[FR Doc. 99-15067 Filed 6-14-99; 8:45 am]
BILLING CODE 4120-01-P