[Federal Register Volume 69, Number 227 (Friday, November 26, 2004)]
[Proposed Rules]
[Pages 69178-69242]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-25968]



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Part III





Department of Health and Human Services





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Centers for Medicare & Medicaid Services



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42 CFR Part 416



Medicare Program; Update of Ambulatory Surgical Center List of Covered 
Procedures; Proposed Rule

  Federal Register / Vol. 69, No. 227 / Friday, November 26, 2004 / 
Proposed Rules  

[[Page 69178]]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Part 416

[CMS-1478-P]
RIN: 0938-AM85


Medicare Program; Update of Ambulatory Surgical Center List of 
Covered Procedures

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

ACTION: Proposed rule.

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SUMMARY: This proposed rule would make additions to and deletions from 
the current list of Medicare approved ambulatory surgical center (ASC) 
procedures.

DATES: To be assured consideration, comments must be received at one of 
the addresses provided below, no later than 5 p.m. on January 25, 2005.

ADDRESSES: In commenting, please refer to file code CMS-1478-P. Because 
of staff and resource limitations, we cannot accept comments by 
facsimile (FAX) transmission. You may submit comments in one of three 
ways (no duplicates, please):
    1. Electronically. You may submit electronic comments to http://www.cms.hhs.gov/regulations/ecomments or to http://www.regulations.gov 
(attachments should be in Microsoft Word, WordPerfect, or Excel; 
however, we prefer Microsoft Word).
    2. By mail. You may mail written comments (one original and two 
copies) to the following address ONLY: Centers for Medicare & Medicaid 
Services, Department of Health and Human Services, Attention: CMS-1478-
P, P.O. Box 8013, Baltimore, MD 21244-8013.
    Please allow sufficient time for mailed comments to be received 
before the close of the comment period.
    3. By hand or courier. If you prefer, you may deliver (by hand or 
courier) your written comments (one original and two copies) before the 
close of the comment period to one of the following addresses. If you 
intend to deliver your comments to the Baltimore address, please call 
telephone number (410) 786-7195 in advance to schedule your arrival 
with one of our staff members. Room 445-G, Hubert H. Humphrey Building, 
200 Independence Avenue, SW., Washington, DC 20201; or 7500 Security 
Boulevard, Baltimore, MD 21244-1850.

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

    Comments mailed to the addresses indicated as appropriate for hand 
or courier delivery may be delayed and received after the comment 
period.
    For information on viewing public comments, see the beginning of 
the SUPPLEMENTARY INFORMATION section.

FOR FURTHER INFORMATION CONTACT: Bob Cereghino, (410) 786-4645.

SUPPLEMENTARY INFORMATION:
    Submitting Comments: We welcome comments from the public on all 
issues set forth in this proposed rule to assist us in fully 
considering issues and developing policies. You can assist us by 
referencing the file code CMS-1478-P and the specific ``issue 
identifier'' that precedes the section on which you choose to comment.
    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. After the close of the 
comment period, CMS posts all electronic comments received before the 
close of the comment period on its public Web site. Comments received 
timely will be available for public inspection as they are received, 
generally beginning approximately 3 weeks after publication of a 
document, at the headquarters of the Centers for Medicare & Medicaid 
Services, 7500 Security Boulevard, Baltimore, Maryland 21244, Monday 
through Friday of each week from 8:30 a.m. to 4 p.m. To schedule an 
appointment to view public comments, phone (410) 786-7195.

Copies

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I. Background

A. Legislative History

    Section 1832(a)(2)(F)(i) of the Social Security Act (the Act) 
provides that benefits under the Medicare Supplementary Medical 
Insurance program (Part B) include payment for facility services 
furnished in connection with surgical procedures we specify and which 
are performed in an ambulatory surgical center (ASC). To participate in 
the Medicare program as an ASC, a facility must meet the standards 
specified in section 1832(a)(2)(F)(i) of the Act; in 42 CFR 416.25, 
which sets forth general conditions and requirements for ASCs; and, in 
42 CFR 416, Subpart C, which provides specific conditions for coverage 
for ASCs.
    There are two primary elements in the total cost of performing a 
surgical procedure--the cost of the physician's professional services 
in performing the procedure and the cost of items and services 
furnished by the facility where the procedure is performed (for 
example, surgical supplies and equipment and nursing services). This 
proposed notice addresses the second element, the coverage and payment 
of facility fees for ASC services under the current payment system. As 
we note below, section 626(b) of the Medicare Prescription, Improvement 
and Modernization Act of 2003 (MMA) requires that we develop a revised 
payment system for ASC facility services that would be implemented no 
earlier than January 1, 2006. This proposed rule addresses additions to 
and deletions from the list of Medicare approved ASC procedures prior 
to the implementation of that revised payment system.
    Under the current ASC facility services payment system, the ASC 
payment rate is a standard overhead amount established on the basis of 
our estimate of a fair fee that takes into account the costs incurred 
by ASCs generally in providing facility services in connection with 
performing a specific procedure. The report of the Conference Committee 
accompanying

[[Page 69179]]

section 934 of the Omnibus Budget Reconciliation Act of 1980 (OBRA) 
(Pub. L. 96-499), which enacted the ASC benefit in December 1980, 
states that this overhead factor is expected to be calculated on a 
prospective basis using sample survey and similar techniques to 
establish reasonable estimated overhead allowances, which take account 
of volume (within reasonable limits), for each of the listed 
procedures. (See H.R. Rep. No. 96-1479, at 134 (1980)).
    To establish those reasonable estimated allowances for services 
furnished prior to implementation of the revised payment system 
mandated by the MMA, we are required by section 1833(i)(2)(A)(i) of the 
Act, as amended by section 626(b)(1) of MMA, to take into account the 
audited costs incurred by ASCs to perform a procedure, in accordance 
with a survey. Payment for ASC facility services is subject to the 
usual Medicare Part B deductible and coinsurance requirements, and the 
amounts paid by Medicare must be 80 percent of the standard fee.
    Section 1833(i)(1) of the Act requires us to specify, in 
consultation with appropriate medical organizations, surgical 
procedures that can be safely performed in an ASC and to review and 
update the list of ASC procedures at least every two years.
    Section 141(b) of the Social Security Act Amendments of 1994 (SSAA 
1994) requires us to establish a process for reviewing the 
appropriateness of the payment amount provided under section 
1833(i)(2)(A)(iii) of the Act for IOLs with respect to a class of new-
technology IOLs. That process was the subject of a separate final rule 
entitled ``Adjustment in Payment Amounts for New Technology Intraocular 
Lenses Furnished by Ambulatory Surgical Centers,'' published on June 
16, 1999 in the Federal Register (64 FR 32198).

B. Summary of Updates of the ASC List

    Section 934 of the Omnibus Budget Reconciliation Act of 1980 
amended sections 1832(a)(2) and 1833 of the Act to authorize the 
Secretary to specify surgical procedures that, although appropriately 
performed in an inpatient hospital setting, can also be performed 
safely on an ambulatory basis in an ASC, a hospital outpatient 
department, or a rural primary care hospital. The report accompanying 
the legislation explained that the Congress intended procedures 
currently performed on an ambulatory basis in a physician's office that 
do not generally require the more elaborate facilities of an ASC not be 
included in the list of covered procedures (H.R. Rep. No. 96-1167, at 
390, reprinted in 1980 U.S.C.C.A.N. 5526, 5753). In a final rule 
published August 5, 1982 in the Federal Register (47 FR 34082), we 
established regulations that included criteria for specifying which 
surgical procedures were to be included for purposes of implementing 
the ASC facility benefit.
    Subsequently, in accordance with 42 CFR 416.65(c), we published 
updates of the ASC list in the Federal Register on April 21, 1987 (52 
FR 13176), June 1, 1989 (54 FR 23540), December 31, 1991 (56 FR 67666), 
January 26, 1995 (60 FR 5185), and March 28, 2003 (68 FR 15268).
    During years when we do not update the list through the proposed 
rule and comment process in the Federal Register, we revise the list to 
be consistent with annual calendar year changes in codes established by 
the American Medical Association (AMA) Current Procedural Terminology 
(CPT), removing from the ASC list codes that are deleted by CPT and 
adding new codes that replace codes already on the ASC list. These 
annual CPT updates are implemented through program instructions to 
carriers who process ASC claims.

C. Regulatory Requirements

1. Sections 416.65(a) and (b)
    Section 416.65(a) specifies general standards for procedures on the 
ASC list. ASC procedures are those surgical and medical procedures that 
are:
     Commonly performed on an inpatient basis but may be safely 
performed in an ASC;
     Not of a type that are commonly performed or that may be 
safely performed in physicians' offices;
     Limited to procedures requiring a dedicated operating room 
or suite and generally requiring a post-operative recovery room or 
short term (not overnight) convalescent room; and
     Not otherwise excluded from Medicare coverage.
    Specific standards in Sec.  416.65(b) limit ASC procedures to those 
that do not generally exceed 90 minutes operating time and a total of 4 
hours recovery or convalescent time. If anesthesia is required, the 
anesthesia must be local or regional anesthesia, or general anesthesia 
of not more than 90 minutes duration.
    Section 416.65(c) excludes from the ASC list procedures that 
generally result in extensive blood loss, that require major or 
prolonged invasion of body cavities, that directly involve major blood 
vessels, or that are generally emergency or life-threatening in nature.
2. Criteria for Additions to or Deletions From the ASC List
    In April 1987, we adopted quantitative criteria as a tool for 
identifying procedures that were commonly performed either in a 
hospital inpatient setting or in a physician's office. Collectively, 
commenters responding to a notice published on February 16, 1984 in the 
Federal Register (49 FR 6023) had recommended that virtually every 
surgical CPT code be included on the ASC list. Consulting with other 
specialist physicians and medical organizations as appropriate, our 
medical staff reviewed the recommended additions to the list to 
determine which code or series of codes were appropriately performed on 
an ambulatory basis within the framework of the regulatory criteria in 
Sec.  416.65. However, when we arrayed the proposed procedures by the 
site where they were most frequently performed according to our claims 
payment data files (1984 Part B Medicare Data (BMAD)), we found that 
many codes were not commonly performed on an inpatient basis or were 
performed in a physician's office the majority of the time, and, thus, 
would not meet the standards in our regulations. Therefore, we decided 
that if a procedure was performed on an inpatient basis 20 percent of 
the time or less, or in a physician's office 50 percent of the time or 
more, it would be excluded from the ASC list. (See Federal Register 
April 21, 1987 (52 FR 13176).)
    At the time, we believed that these utilization thresholds best 
reflected the legislative objectives of moving procedures from the more 
expensive hospital inpatient setting to the less expensive ASC setting 
without encouraging the migration of procedures from the less expensive 
physician's office setting to the ASC. We applied these quantitative 
standards not only to codes proposed for addition to the ASC list, but 
also to the codes that were currently on the list, to delete codes that 
did not meet the thresholds.
    The trend towards performing surgery on an ambulatory or outpatient 
basis grew steadily, and, by 1995, we discovered that a number of 
procedures that were on the ASC list at the time fell short of the 20 
percent and 50 percent thresholds even though the procedures were 
obviously appropriate in the ASC setting. The most notable of these was 
cataract extraction with intraocular lens insertion, very few cases of 
which were being performed on an inpatient basis by the early 1990s. We 
were also excluding from the ASC list certain

[[Page 69180]]

newer procedures, such as CPT code 66825, Repositioning of intraocular 
lens prosthesis, requiring an incision (separate procedure), that were 
rarely performed on a hospital inpatient basis but that were 
appropriate for the ASC setting. Strict adherence to the same 20 
percent and 50 percent thresholds both to add and remove procedures did 
not provide latitude for minor fluctuations in utilization across 
settings or errors that could occur in the site-of-service data drawn 
from the National Claims History File that we were then using, 
replacing BMAD data, for analysis.
    In an effort to avoid these anomalies but still retain a relatively 
objective standard for determining which procedures should comprise the 
ASC list, we adopted in the Federal Register notice published on 
January 26, 1995 (60 FR 5185) a modified standard for deleting 
procedures already on the list. We deleted from the list only those 
procedures whose combined inpatient, hospital outpatient, and ASC site 
of service volume was less than 46 percent of the procedure's total 
volume and that were either performed 50 percent of the time or more in 
the physician's office or 10 percent of the time or less in an 
inpatient hospital setting. We retained the 20 percent and 50 percent 
standard to determine which procedures would be appropriate additions 
to the ASC list.

D. Office of the Inspector General Recommendations, January 2003

    In January 2003, the Office of the Inspector General (OIG) issued 
the results of a study entitled ``Payments for Procedures in Outpatient 
Departments and Ambulatory Surgical Centers' (OEI-05-00-00340). The 
objective of that study was to determine the extent to which Medicare 
payments for the same procedure codes continue to vary between hospital 
outpatient departments and ambulatory surgical centers and to assess 
the effect of this variance on the Medicare program.
    The OIG concluded, as a result of its study, that there should be a 
greater parity of payments for services performed in an outpatient 
setting and those performed in ASCs. The OIG based this conclusion both 
on its belief that the Congress intended Medicare to be a prudent 
purchaser of services and to pay only for those costs that are 
necessary for the efficient delivery of needed health services and on 
its finding that disparities in Medicare payment amounts for the same 
services furnished in ASCs and hospital outpatient departments resulted 
in an estimated $1.1 billion in additional Medicare program payments. 
The OIG also found that CMS's failure to remove certain procedure codes 
from the list of ASC-approved procedures resulted in an estimated $8 to 
$14 million in additional Medicare program payments.
    The OIG recommended that we--
     Seek authority to set rates that are consistent across 
sites and reflect only the costs necessary for the efficient delivery 
of health services,
     Conduct and use timely ASC-survey data to reevaluate ASC-
payment rates, and
     Remove the procedure codes that meet our criteria for 
removal from the ASC list of covered procedures. (In its final report, 
the OIG included a list of 72 CPT codes that it found, based on its 
analysis of calendar year 1999 data, met our criteria for deletion from 
the ASC list.)
    In our response to the OIG's recommendations, we indicated that we 
would consider the OIG's first recommendation as we develop future 
legislative proposals. In response to the second recommendation, we 
indicated our concerns about using survey data as the basis for setting 
ASC payment rates and that we were considering how to implement the 
survey requirement. (Enactment of section 626(b) of the MMA repealing 
the survey requirement and mandating implementation of a revised 
payment system in accordance with certain requirements set forth in the 
MMA supersedes our earlier response to this OIG recommendation.)
    In this proposed notice, we are taking action to address the OIG's 
third recommendation, that we remove codes that meet our criteria for 
deletion from the ASC list. We did not address this recommendation in 
the March 28, 2003 final rule with comment period, because we had not 
provided an opportunity for public comment on the OIG's recommended 
deletions prior to issuance of the March 28, 2003 final rule. However, 
in this proposed notice, we are proposing to remove 54 of the 72 
procedure codes recommended by the OIG for deletion from our current 
list. These codes are included in the list of proposed deletions in 
Table 2. In section II.C. of this proposed notice, we discuss why we 
are proposing to retain 11 of the procedures recommended for deletion 
by the OIG. Seven codes proposed for deletion by the OIG were removed 
from the ASC list effective July 1, 2003.

E. Current ASC Payment Rates

    Procedures on the ASC list are assigned to one of nine payment 
groups based on our estimate of the costs incurred by the facility to 
perform a procedure. Payment groups 1 through 8 were first implemented 
in September 1990, based on a survey of ASC costs conducted in 1986 (55 
FR 4539). Payment group 9 was added on December 31, 1991 (56 FR 67666) 
to establish a payment rate for extracorporeal shockwave lithotripsy 
(ESWL). There is no clinical consistency among the procedures in a 
payment group. Rather, assignment to a payment group is based solely on 
an estimate of facility costs associated with performing the 
procedures.
    In a proposed rule published on June 12, 1998 in the Federal 
Register (63 FR 32290), we proposed a new ratesetting methodology based 
on ambulatory payment classification (APC) groups that were proposed 
for the new hospital outpatient prospective payment system (OPPS). We 
used data from a survey of ASC costs collected in 1994 as the basis for 
the APC payment rates in the June 12, 1998 proposed rule. The Balanced 
Budget Refinement Act of 1999 (BBRA) (Pub. L. 106-113) required us to 
phase in full implementation of the proposed ASC rates over a 3-year 
period. The Medicare, Medicaid and SCHIP Benefit Improvement and 
Protection Act of 2000 (BIPA) (Pub. L. 106-554) prohibited 
implementation of a revised prospective payment system for ASCs before 
January 1, 2002 and required that, by January 1, 2003, ASC rates be 
rebased using data from a 1999 or later Medicare survey of ASC costs.
    We discuss in the final rule published on March 28, 2003 in the 
Federal Register (68 FR 15270) the reasons why we did not implement the 
requirements set forth in BBRA and BIPA with regard to rebasing ASC 
payment rates. The March 28, 2003 final rule with comment period 
implemented additions to and deletions from the ASC list that had been 
proposed in the June 12, 1998 proposed rule, but did not implement any 
of the other proposed changes, including the proposed ratesetting 
methodology. We indicated that we were studying approaches to 
ratesetting, some of which may require legislative changes.
    Section 626(b) of MMA repeals the requirement that we conduct a 
survey of ASC costs as the basis for rebasing ASC rates and requires us 
to implement a revised payment system between January 1, 2006 and 
January 1, 2008, that takes into account recommendations in the report 
to the Congress that is to be submitted by January 1, 2005 by the 
Comptroller General of the United States. Section 626(b)(1) amends 
section 1833(i)(2) of Act, requiring us to base payment for ASC 
services on survey data prior to implementation of the revised payment 
system. Therefore, the proposed

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additions to the ASC list in this proposed notice are assigned to one 
of the existing nine ASC payment groups and rates that are derived from 
data collected in the 1986 survey of ASC costs, updated for inflation. 
The proposed payment group for each addition to the ASC list in this 
proposed notice is based on the payment group to which procedures 
currently on the list, which our medical advisors judged to be similar 
in terms of time and resource inputs, are assigned. As of April 1, 
2004, in accordance with the requirements in section 626(a) of MMA and 
instructions that we issued to our contractors who process ASC claims 
in Transmittal 51, Change Request 3082, on February 6, 2004, the ASC 
payment rates are the following:

Group 1, $333
Group 2, $446
Group 3, $510
Group 4, $630
Group 5, $717
Group 6, $826 ($676 plus $150 for IOL)
Group 7, $995
Group 8, $973 ($823 plus $150 for IOL)
Group 9, $1339

II. Provisions of the Proposed Notice

A. Proposed Additions

(If you choose to comment on issues in this section, please include 
the caption ``PROPOSED ADDITIONS'' at the beginning of your 
comments.)
1. Proposed Additions Recommended by Commenters and Other Interested 
Parties
    Commenters recommended that the codes in Table 1 be added to the 
list of Medicare-approved ASC procedures. These proposed additions are 
based on comments and recommendations that have been communicated to us 
by trade associations, medical specialty societies, physicians, ASC 
staff, and other individuals and organizations since the close of the 
extended comment period for the June 12, 1998 proposed rule, which 
ended July 30, 1999. After careful review by our medical staff to 
determine whether these procedures are consistent with our criteria 
(see section I.C.2 of this proposed notice), we agree with commenters 
that the procedures in Table 1 are appropriate and safely performed in 
an ASC setting. Therefore, we are proposing to add the following CPT 
codes to the ASC list and to assign them to the payment group that is 
designated for each code:

                                   Table 1.--Proposed Additions Recommended by Commenters and Other Interested Parties
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                  HCPCS code                                              Short descriptor                              Payment group    Payment amount
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15001.........................................  Skin graft add-on...................................................                 1              $333
15836.........................................  Excise excessive skin tissue........................................                 3               510
15839.........................................  Excise excessive skin tissue........................................                 3               510
21120.........................................  Reconstruction of chin..............................................                 7               995
21125.........................................  Augmentation, lower jaw bone........................................                 7               995
29873.........................................  Knee arthroscopy/surgery............................................                 3               510
30220.........................................  Insert nasal septal button..........................................                 3               510
31500.........................................  Insert emergency airway.............................................                 1               333
31603.........................................  Incision of windpipe................................................                 1               333
35475.........................................  Repair arterial blockage............................................                 9             1,339
35476.........................................  Repair venous blockage..............................................                 9             1,339
36834.........................................  Repair AV aneurysm..................................................                 3               510
37205.........................................  Transcatheter stent.................................................                 9             1,339
37206.........................................  Transcatheter stent add-on..........................................                 9             1,339
37500.........................................  Endoscopy ligate perf veins.........................................                 3               510
42665.........................................  Ligation of salivary duct...........................................                 7               995
44397.........................................  Colonoscopy w/stent.................................................                 1               333
45327.........................................  Proctosigmoidoscopy w/stent.........................................                 1               333
45341.........................................  Sigmoidoscopy w/ultrasound..........................................                 1               333
45342.........................................  Sigmoidoscopy w/us guide bx.........................................                 1               333
45345.........................................  Sigmoidoscopy w/stent...............................................                 1               333
45387.........................................  Colonoscopy w/stent.................................................                 1               333
57288.........................................  Repair bladder defect...............................................                 5               717
62264.........................................  Epidural lysis on single day........................................                 1               333
67343.........................................  Release eye tissue..................................................                 7               995
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2. CPT Code Changes in 2004
    Effective for services furnished on or after January 1, 2004, we 
revised the ASC list to reflect changes in the 2004 CPT (Transmittal 
AB-03-137, Change Request 2890, issued August 29, 2003). We deleted 
from the ASC list the following codes that were discontinued in the 
2004 CPT:

----------------------------------------------------------------------------------------------------------------
                 HCPCS code                                            Short descriptor
----------------------------------------------------------------------------------------------------------------
36488......................................  Insertion of catheter, vein.
36489......................................  Insertion of catheter, vein.
36490......................................  Insertion of catheter, vein.
36491......................................  Insertion of catheter, vein.
36530......................................  Insertion of infusion pump.
36531......................................  Revision of infusion pump.
36532......................................  Removal of infusion pump.
36533......................................  Insertion of access device.
36534......................................  Revision of access device.
36535......................................  Removal of access device.
----------------------------------------------------------------------------------------------------------------


[[Page 69182]]

    We added to the ASC list the following new codes created in the 
2004 CPT to replace the discontinued codes:

--------------------------------------------------------------------------------------------------------------------------------------------------------
                  HCPCS code                                              Short descriptor                              Payment group    Payment amount
--------------------------------------------------------------------------------------------------------------------------------------------------------
36555.........................................  Insert non-tunnel cv cath...........................................                 1              $333
36556.........................................  Insert non-tunnel cv cath...........................................                 1               333
36557.........................................  Insert tunneled cv cath.............................................                 2               446
36558.........................................  Insert tunneled cv cath.............................................                 2               446
36560.........................................  Insert tunneled cv cath.............................................                 3               510
36561.........................................  Insert tunneled cv cath.............................................                 3               510
36563.........................................  Insert tunneled cv cath.............................................                 3               510
36565.........................................  Insert tunneled cv cath.............................................                 3               510
36566.........................................  Insert tunneled cv cath.............................................                 3               510
36568.........................................  Insert tunneled cv cath.............................................                 1               333
36569.........................................  Insert tunneled cv cath.............................................                 1               333
36570.........................................  Insert tunneled cv cath.............................................                 3               510
36571.........................................  Insert tunneled cv cath.............................................                 3               510
36575.........................................  Repair tunneled cv cath.............................................                 2               446
36576.........................................  Repair tunneled cv cath.............................................                 2               446
36578.........................................  Replace tunneled cv cath............................................                 2               446
36580.........................................  Replace tunneled cv cath............................................                 1               333
36581.........................................  Replace tunneled cv cath............................................                 2               446
36582.........................................  Replace tunneled cv cath............................................                 3               510
36583.........................................  Replace tunneled cv cath............................................                 3               510
36584.........................................  Replace tunneled cv cath............................................                 1               333
36585.........................................  Replace tunneled cv cath............................................                 3               510
36589.........................................  Removal tunneled cv cath............................................                 1               333
36590.........................................  Removal tunneled cv cath............................................                 1               333
--------------------------------------------------------------------------------------------------------------------------------------------------------

B. Proposed Deletions

(If you choose to comment on issues in this section, please include 
the caption ``PROPOSED DELETIONS'' at the beginning of your 
comments.)

    Our medical advisors, in accordance with the statutory requirement 
that we review and update the ASC list at least every two years, 
reviewed the current ASC list against the criteria discussed in section 
I.C.2 of this proposed rule. We also carefully considered and took into 
account deletions recommended by medical specialty societies and other 
commenters. Further, we reviewed the codes that the OIG recommended be 
deleted from the ASC list. (See section I.D. of this proposed rule). In 
most cases, our medical advisors agreed that the procedures recommended 
by the OIG for deletion no longer meet the criteria for ASC procedures, 
and we are proposing to delete most of those codes from the ASC list, 
as indicated in Table 2. We removed the following seven codes 
recommended for deletion by the OIG from the ASC list effective July 1, 
2003: 21920, 42104, 51725, 56405, 56605, 62367, and 62368. However, 
there are 11 codes the OIG recommended for deletion that we believe 
should remain on the ASC list for reasons that we discuss in section 
II.C of this proposed notice. Based on our review, we are proposing to 
delete from the ASC list the codes listed in Table 2, for the reasons 
specified.
    Rationale for deletion is indicated as follows:
    1. Procedure is performed in physician's office more than 50 
percent of the time.
    2. Medical specialty organizations recommended deletion because of 
safety concerns.
    3. Procedure is performed predominantly in the inpatient setting.
    4. OIG recommended for deletion and CMS medical advisors concur.

                                 Table 2.--Proposed Deletions From the ASC List
----------------------------------------------------------------------------------------------------------------
            HCPCS code                                   Short descriptor                           Rationale
----------------------------------------------------------------------------------------------------------------
11404.............................  Removal of skin lesion....................................                 4
11424.............................  Removal of skin lesion....................................                 4
11444.............................  Removal of skin lesion....................................                 4
11446.............................  Removal of skin lesion....................................                 4
11604.............................  Removal of skin lesion....................................                 4
11624.............................  Removal of skin lesion....................................                 4
11644.............................  Removal of skin lesion....................................                 4
12021.............................  Closure of split wound....................................                 4
13100.............................  Repair of wound or lesion.................................                 4
13101.............................  Repair of wound or lesion.................................                 4
13120.............................  Repair of wound or lesion.................................                 4
13121.............................  Repair of wound or lesion.................................                 4
13131.............................  Repair of wound or lesion.................................                 4
13132.............................  Repair of wound or lesion.................................                 4
13150.............................  Repair of wound or lesion.................................                 4
13151.............................  Repair of wound or lesion.................................                 4
13152.............................  Repair of wound or lesion.................................                 4
14000.............................  Skin tissue rearrangement.................................                 4
14020.............................  Skin tissue rearrangement.................................                 4

[[Page 69183]]

 
14021.............................  Skin tissue rearrangement.................................                 4
14040.............................  Skin tissue rearrangement.................................                 4
14041.............................  Skin tissue rearrangement.................................                 4
14060.............................  Skin tissue rearrangement.................................                 4
14061.............................  Skin tissue rearrangement.................................                 4
15732.............................  Muscle-skin graft, head/neck..............................                 2
15734.............................  Muscle-skin graft, trunk..................................                 2
15738.............................  Muscle-skin graft, leg....................................                 2
15740.............................  Island pedicle flap graft.................................                 4
19100.............................  Bx breast percut w/o image................................                 4
20670.............................  Removal of support implant................................                 4
21040.............................  Removal of jaw bone lesion................................                 1
21050.............................  Removal of jaw joint......................................                 2
21206.............................  Reconstruct upper jaw bone................................                 1
21210.............................  Face bone graft...........................................                 1
21249.............................  Reconstruction of jaw.....................................                 1
21325.............................  Treatment of nose fracture................................                 1
21355.............................  Treat cheek bone fracture.................................                 1
21440.............................  Treat dental ridge fracture...............................                 1
21485.............................  Reset dislocated jaw......................................                 1
22305.............................  Treat spine process fracture..............................                 4
23600.............................  Treat humerus fracture....................................                 4
23620.............................  Treat humerus fracture....................................                 4
24576.............................  Treat humerus fracture....................................                 1
24670.............................  Treat ulnar fracture......................................                 4
25505.............................  Treat fracture of radius..................................                 1
26605.............................  Treat metacarpal fracture.................................                 4
27520.............................  Treat kneecap fracture....................................                 4
27760.............................  Treatment of ankle fracture...............................                 4
27780.............................  Treatment of fibula fracture..............................                 4
27786.............................  Treatment of ankle fracture...............................                 4
27808.............................  Treatment of ankle fracture...............................                 4
28400.............................  Treatment of heel fracture................................                 4
30801.............................  Cauterization, inner nose.................................                 4
30915.............................  Ligation, nasal sinus artery..............................                 2
30920.............................  Ligation, upper jaw artery................................                 2
31233.............................  Nasal/sinus endoscopy, dx.................................                 4
31235.............................  Nasal/sinus endoscopy, dx.................................                 4
31237.............................  Nasal/sinus endoscopy, surg...............................                 4
31238.............................  Nasal/sinus endoscopy, surg...............................                 4
38505.............................  Needle biopsy, lymph nodes................................                 4
40700.............................  Repair cleft lip/nasal....................................                 2
40701.............................  Repair cleft lip/nasal....................................                 2
40814.............................  Excise/repair mouth lesion................................                 4
41009.............................  Drainage of mouth lesion..................................                 1
41010.............................  Incision of tongue fold...................................                 1
41112.............................  Excision of tongue lesion.................................                 4
41520.............................  Reconstruction, tongue fold...............................                 1
41800.............................  Drainage of gum lesion....................................                 1
41827.............................  Excision of gum lesion....................................                 1
42000.............................  Drainage mouth roof lesion................................                 1
42107.............................  Excision lesion, mouth roof...............................                 1
42200.............................  Reconstruct cleft palate..................................                 2
42205.............................  Reconstruct cleft palate..................................                 2
42210.............................  Reconstruct cleft palate..................................                 2
42215.............................  Reconstruct cleft palate..................................                 2
42220.............................  Reconstruct cleft palate..................................                 2
42409.............................  Drainage of salivary cyst.................................                 1
42425.............................  Excise parotid gland/lesion...............................                 3
42860.............................  Excision of tonsil tags...................................                 1
42892.............................  Revision pharyngeal walls.................................                 3
52000.............................  Cystoscopy................................................                 4
52281.............................  Cystoscopy and treatment..................................                 4
53850.............................  Prostatic microwave thermotx..............................                 1
55700.............................  Biopsy of prostate........................................                 4
58820.............................  Drain ovary abscess, open.................................                 3
60000.............................  Drain thyroid/tongue cyst.................................                 1
64420.............................  N block inj, intercost, sng...............................                 4
64430.............................  N block inj, pudendal.....................................                 1
64736.............................  Incision of chin nerve....................................                 1
65800.............................  Drainage of eye...........................................                 1
65805.............................  Drainage of eye...........................................                 4

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67141.............................  Treatment of retina.......................................                 4
68340.............................  Separate eyelid adhesions.................................                 1
68810.............................  Probe nasolacrimal duct...................................                 4
69145.............................  Remove ear canal lesion(s)................................                 4
69450.............................  Eardrum revision..........................................                 2
69725.............................  Release facial nerve......................................                 1
69740.............................  Repair facial nerve.......................................                 2
69745.............................  Repair facial nerve.......................................                 2
69840.............................  Revise inner ear window...................................                 1
----------------------------------------------------------------------------------------------------------------

C. Procedures Recommended for Deletion by OIG That We Propose To Retain 
on the ASC List

(If you choose to comment on issues in this section, please include 
the caption ``DELETIONS RECOMMENDED BY OIG'' at the beginning of 
your comments.)

    Our medical staff carefully reviewed the 72 codes recommended by 
the OIG for deletion from the ASC list to determine if they meet the 
criteria for ASC procedures. We agreed that 54 of the codes on the 
current ASC list recommended for deletion by the OIG no longer meet our 
criteria, and we are proposing to delete them from the ASC list (see 
Table 2). However, our medical advisors determined that for health and 
safety reasons, the following codes should be retained on the list:

----------------------------------------------------------------------------------------------------------------
                 HCPCS code                                            Short descriptor
----------------------------------------------------------------------------------------------------------------
30802......................................  Cauterization, inner nose.
31525......................................  Diagnostic laryngoscopy.
31570......................................  Laryngoscopy with injection.
45305......................................  Proctosigmoidoscopy w/bx.
46050......................................  Incision of anal abscess.
51710......................................  Change of bladder tube.
51726......................................  Complex cystometrogram.
51772......................................  Urethra pressure profile.
52285......................................  Cystoscopy and treatment.
67031......................................  Laser surgery, eye strands.
67921......................................  Repair eyelid defect.
----------------------------------------------------------------------------------------------------------------

    CPT codes 30802, 31525 and 31570, according to our 2002 claims 
data, are being performed less than 50 percent in a physician office. 
Therefore, we are retaining these codes on the ASC list. While the 
remaining eight procedures may be safely performed in a physician's 
office for the majority of patients, our medical advisors believe that, 
in certain cases, the patient's health or medical condition may demand 
the more extensive services afforded by ASCs in order to ensure a safe 
surgical outcome. Therefore, we are proposing not to delete these codes 
from the ASC list.

D. Proposed Changes in Response to Public Comments on the March 28, 
2003 Final Rule With Comment Period

    Only certain designated codes that we identified in the Addendum of 
the March 28, 2003 final rule with comment period published in the 
Federal Register (68 FR 15268) were subject to public comment during 
the 60-day comment period following publication of the rule. That is, 
we solicited comment on new codes created by CPT in 1999, 2000, 2001, 
2002, and 2003 that we believe meet our criteria for the ASC list, but 
were not included in the additions to the ASC list that we proposed in 
the June 12, 1998 proposed rule and, therefore, were not among the 
proposed additions to the ASC list that we made final in the March 2003 
final rule with comment period. We received more than 100 timely 
comments, the overwhelming majority of which addressed payment rates, 
codes, and issues other than the designated codes for which comments 
were solicited. Because these other issues were not subject to public 
comment, we are not responding to comments on them in this proposed 
notice. However, we did review recommended additions to and deletions 
from the ASC list and, where appropriate, we included those codes in 
Table 1 and Table 2, above. Only seven commenters addressed the 
designated codes that were subject to public comment.
    None of the commenters disagreed with the designated codes for 
which we requested comment on as additions to the ASC list. However, 
the seven commenters that addressed the designated codes that were 
subject to public comment disagreed with the payment group assignments 
for several of those codes. We address those comments below.
    Comment: Seven commenters recommended that the following CPT codes 
be assigned to a higher payment group for which we requested comment in 
the March 28, 2003 final rule with comment period: CPT codes 29827, 
43231, 43232, 43240, 43242, 43256, 52344, 52345, and 52346.
    Response: We did not make final the payment groups and rates based 
on data collected in a 1994 survey of ASC costs that we had proposed in 
the June 12, 1998 proposed rule. Because provisions in BIPA prohibited 
us from using the 1994 survey data to set rates, we had no data upon 
which to base payment rate assignments or changes in the March 28, 2003 
final rule with comment period. Therefore, we assigned both the 
proposed and final additions to the ASC list in the March 28 final rule 
with comment period to payment groups to which related codes already on 
the list, that are similar in terms of time and resource inputs, are 
assigned. Although commenters expressed concern that the payment group 
assignments for the nine codes listed above were too low, they did not 
furnish information or data to demonstrate that resource costs for the 
codes were similar to resource costs associated with codes in higher

[[Page 69185]]

payment groups. We reviewed the payment group assignments proposed for 
the nine codes cited by the commenters, and our medical advisors 
determined that, in the absence of corroborative data to the contrary, 
the payment groups proposed for the codes were appropriate and 
consistent with the method we explained in the March 28, 2003 final 
rule. Therefore, we are not proposing changes based on these comments 
in this proposed rule.

III. Collection of Information Requirements

    This document does not impose information collection and 
recordkeeping requirements. Consequently, it need not be reviewed by 
the Office of Management and Budget under the authority of the 
Paperwork Reduction Act of 1995 (44 U.S.C. 35).

IV. Response to Comments

    Because of the large number of public comments we normally receive 
on Federal Register documents, we are not able to acknowledge or 
respond to them individually. We will consider all comments we receive 
by the date and time specified in the ``DATES'' section of this 
preamble, and, when we proceed with a subsequent document, we will 
respond to the comments in the preamble to that document.

V. Regulatory Impact Statement

A. Overall Impact

    We have examined the impact of this proposed rule as required by 
Executive Order 12866 (September 1993, Regulatory Planning and Review), 
the Regulatory Flexibility Act (RFA) (September 16, 1980, Pub. L. 96-
354), section 1102(b) of the Social Security Act, the Unfunded Mandates 
Reform Act of 1995 (Pub. L. 104-4), and Executive Order 13132.
    Executive Order 12866 directs agencies to assess all costs and 
benefits of available regulatory alternatives and, if regulation is 
necessary, to select regulatory approaches that maximize net benefits 
(including potential economic, environmental, public health and safety 
effects, distributive impacts, and equity). A regulatory impact 
analysis (RIA) must be prepared for major rules with economically 
significant effects ($100 million or more in any 1 year). Our Actuary 
has prepared a fiscal impact estimate. As shown in the table below, for 
fiscal years 2005 through 2009, the effect on Medicare program 
expenditures if we implement the additions to and deletions from the 
ASC list proposed in this proposed rule is estimated to have zero 
impact in 2005, increasing to $20 million savings per year from 2007 
through 2009. We expect the estimated savings to result from procedures 
proposed for deletion moving to a less costly office or clinic setting, 
and proposed additions shifting to ASCs from the more costly hospital 
setting. Therefore, this notice will not have a major impact on the 
Medicare budget.

------------------------------------------------------------------------
                                                             Cost  (tens
                             FY                                  of $
                                                              millions)
------------------------------------------------------------------------
2005.......................................................            0
2006.......................................................          -10
2007.......................................................          -20
2008.......................................................          -20
2009.......................................................          -20
------------------------------------------------------------------------

    The RFA requires agencies to analyze options for regulatory relief 
of small businesses. For purposes of the RFA, small entities include 
small businesses, nonprofit organizations, and government agencies. 
Most hospitals and most other providers and suppliers are small 
entities, either because of their nonprofit status or because they have 
revenues of $6 million to $29 million in any 1 year. According to small 
business associations, approximately 73 percent of all ASCs are 
considered small entities because they have revenues of $11.5 million 
or less. Individuals and States are not included in the definition of a 
small entity.
    Section 1102(b) of the Act requires us to prepare a regulatory 
impact analysis if a proposed rule may 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 100 beds. This notice does not have 
a significant impact on the operations of small rural hospitals.
    Section 202 of the Unfunded Mandates Reform Act of 1995 also 
requires that agencies assess anticipated costs and benefits before 
issuing any rule that may result in expenditure in any 1 year by State, 
local or tribal governments, in the aggregate, or by the private 
sector, of $110 million. This proposed rule will not have an effect on 
the governments mentioned, and the private sector costs will be less 
than the $110 million threshold.
    Executive Order 13132 establishes certain requirements that an 
agency must meet when it promulgates a final rule that imposes 
substantial direct requirement costs on State and local governments, 
preempts State law, or otherwise has Federalism implications. This rule 
will not have a substantial effect on State or local governments.

B. Anticipated Effects

    The entities affected by this proposed notice are Medicare 
certified ASCs, physician offices and clinics, hospitals, and 
beneficiaries. No other providers are affected. This proposed rule will 
not affect State or local governments. There are more than 3,000 ASCs 
currently certified by Medicare, nearly three-quarters of which fit the 
definition of a ``small entity''.
    This proposed rule would add 25 CPT codes to the ASC list of 
approved procedures. Professional societies, physicians, ASC 
administrators, and ASC associations recommended most of the codes 
proposed for addition to the ASC list. Currently, the procedures that 
we propose to add to the ASC list are performed predominantly in a 
hospital outpatient setting. Our medical advisors agree that the 
proposed additions meet the criteria for ASC procedures that are 
discussed in section I.C.2 of this preamble and that they can be safely 
and appropriately performed in an ASC.
    Currently, if ASCs perform the 25 procedures proposed for addition, 
Medicare does not allow payment of an ASC facility fee. By adding these 
procedures to the ASC list, ASCs would benefit because Medicare would 
allow payment of a facility fee for the procedures. ASCs could serve a 
greater number of beneficiaries if they are able to offer an increased 
number of surgical services, and beneficiaries would have an additional 
setting from which to choose were it necessary for them to have one of 
these surgical procedures performed. We expect that most of the 
physician office volume for the proposed additions will, to the limited 
extent they are performed in physician offices, migrate to an ASC 
setting. This would increase Medicare program spending and beneficiary 
copayment amounts because the ASC facility fee for these procedures 
exceeds the practice expense payment that is allowed when the 
procedures are performed in an office setting. However, cases would 
also move to the ASC setting from hospital outpatient departments. To 
the extent that hospital outpatient utilization decreases and ASC 
utilization increases, the Medicare program will realize a savings 
because the ASC facility fee for most of the proposed additions to the 
ASC list is lower than the payment rate for the same procedures under 
the OPPS. Beneficiary copayments will also decrease for those 
procedures for which

[[Page 69186]]

the beneficiary coinsurance under the OPPS exceeds 20 percent. Because 
hospitals perform a much higher volume of ambulatory surgeries overall 
than are performed in ASCs, we do not expect significant hospital 
revenue losses from procedures proposed for addition to the ASC list 
shifting to the ASC setting.
    In addition, we are proposing to delete 105 procedures from the 
existing ASC list. There are a few codes that we are proposing to 
delete on the basis of recommendations from physicians or specialty 
societies because the procedures do not meet our safety criteria; 
however, these codes are very seldom performed in ASCs, so deleting 
these codes from the list will have no effect on ASCs or beneficiaries. 
As we explained above, most of the codes that we are proposing to 
delete are procedures that are being performed primarily in a physician 
office setting, and they do not require the more elaborate resources of 
an ASC to be safely performed. Because many of the procedures that we 
propose to delete from the ASC list are for reconstructive surgery, 
ASCs that limit their services to this specialty would no longer 
receive a Medicare facility fee for these procedures and could be 
adversely affected. However, we do not believe that deleting these 
procedures from the ASC list would limit beneficiary access or 
compromise patient safety because the procedures are being widely and 
safely performed in either an office or hospital outpatient setting. 
Further, the Medicare program would realize substantial savings from 
discontinuing payment to ASCs for the codes that we propose to delete 
from the ASC list because payment when these procedures are performed 
in a hospital or physician office setting is lower than the current ASC 
payments for the same procedures.
    For the above reasons, we are not preparing analyses for either the 
RFA or section 1102(b) of the Act because we have determined, and we 
certify, that this notice would not have a significant economic impact 
on a substantial number of small entities or a significant impact on 
the operations of a substantial number of small rural hospitals.

C. Alternatives Considered

    We are issuing this proposed notice to meet a statutory requirement 
to update the list of approved ASC procedures biennially. We last 
updated the ASC list effective July 1, 2003. We implement the biennial 
update of the list through notice in the Federal Register and give 
interested parties an opportunity to comment on proposed additions to 
and deletions from the ASC list. If we do not update the ASC list by 
July 2005, we would be out of compliance with the statute, and we would 
be denying beneficiary access to surgical procedures in the ASC setting 
that meet our criteria and are safely and appropriately performed in an 
ASC.
    In accordance with the provisions of Executive Order 12866, this 
proposed regulation was reviewed by the Office of Management and 
Budget.

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

    Dated: June 10, 2004.
Mark B. McClellan,
Administrator, Centers for Medicare Medicaid Services.

    Approved: August 6, 2004.
Tommy G. Thompson,
Secretary.
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