[Federal Register Volume 70, Number 217 (Thursday, November 10, 2005)]
[Rules and Regulations]
[Pages 68516-68980]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-22136]
[[Page 68515]]
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Part II
Book 2 of 2 Books
Pages 68515-69040
Department of Health and Human Services
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Centers for Medicare & Medicaid Services
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42 CFR Parts 419 and 485
Medicare Program; Changes to the Hospital Outpatient Prospective
Payment System and Calendar Year 2006 Payment Rates; Final Rule
Federal Register / Vol. 70, No. 217 / Thursday, November 10, 2005 /
Rules and Regulations
[[Page 68516]]
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Centers for Medicare & Medicaid Services
42 CFR Parts 419 and 485
[CMS-1501-FC]
RIN 0938-AN46
Medicare Program; Changes to the Hospital Outpatient Prospective
Payment System and Calendar Year 2006 Payment Rates
AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.
ACTION: Final rule with comment period.
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SUMMARY: This final rule with comment period revises the Medicare
hospital outpatient prospective payment system to implement applicable
statutory requirements and changes arising from our continuing
experience with this system and to implement certain related provisions
of the Medicare Prescription Drug, Improvement, and Modernization Act
(MMA) of 2003. In addition, the final rule with comment period
describes changes to the amounts and factors used to determine the
payment rates for Medicare hospital outpatient services paid under the
prospective payment system. This final rule with comment period also
changes the requirement for physician oversight of mid-level
practitioners in critical access hospitals (CAHs).
In this final rule with comment period, we also are responding to
public comments received on the November 15, 2004, final rule with
comment period pertaining to the ambulatory payment classification
(APC) group assignment of Healthcare Common Procedure Coding System
(HCPCS) codes identified in Addendum B of that rule with the new
interim (NI) comment indicator. These changes are applicable to
services furnished on or after January 1, 2006.
DATES: Effective Date: This final rule with comment period is effective
on January 1, 2006.
Comment Date: We will consider comments on the payment
classification assigned to HCPCS codes identified in Addendum B with
the NI comment code and other areas specified through the preamble if
we receive them at the appropriate address, as provided below, no later
than 5 p.m. on January 9, 2006.
ADDRESSES: In commenting, please refer to file code CMS-1501-FC.
Because of staff and resource limitations, we cannot accept comments by
facsimile (FAX) transmission.
You may submit comments in one of four ways (no duplicates,
please):
1. Electronically. You may submit electronic comments on specific
issues in this final rule with comment period to http://www.cms.hhs.gov/regulations/ecomments. (Attachments should be in
Microsoft Word, WordPerfect, or Excel; however, we prefer Microsoft
Word).
2. By regular 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-1501-FC, P.O. Box 8016, Baltimore, MD 21244-8018.
3. By express or overnight mail. You may send 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-1501-FC, Mail Stop C4-26-05, 7500
Security Boulevard, Baltimore, MD 21244-1850.
4. By hand or courier. If you prefer, you may deliver (by hand or
courier) your written comments (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 Hubert H. Humphrey Building
is not readily available to persons without Federal Government
identification, commenters are encouraged to leave their comments in
the CMS drop slots located in the main lobby of the building. A stamp-
in clock is available for persons wishing to retain 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.
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. CMS posts all electronic
comments received before the close of the comment period on its public
Web site as soon as possible after they have been received. Hard copy
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, MD
21244-1850, Monday through Friday of each week from 8:30 a.m. to 4 p.m.
To schedule an appointment to view public comments, phone 1-800-743-
3951.
Requirements for Issuance of Regulations: Section 902 of the
Medicare Prescription Drug, Improvement, and Modernization Act of 2003
(MMA), Pub. L. 108-173, amended section 1871(a) of the Act and requires
the Secretary, in consultation with the Director of the Office of
Management and Budget, to establish and publish timelines for the
publication of Medicare final regulations based on the previous
publication of a Medicare proposed or interim final regulation. Section
902 of Pub. L. 108-173 also states that the timelines for these
regulations may vary but shall not exceed 3 years after publication of
the preceding proposed or interim final regulation except under
exceptional circumstances.
This final rule with comment period finalizes provisions set forth
in the CY 2006 OPPA proposed rule (70 FR 42674, July 25, 2005). In
addition, this final rule has been published within the 3-year time
limit imposed by section 902 of Pub. L. 108-173. This final rule also
finalizes the November 15, 2004 final rule with comment period (69 FR
65681) to address public comments pertaining to the APC group
assignment of HCPCS codes identified in Addendum B of that rule with
the NI comment indicator. Again, we finalized the rule within the 3-
year timeframe imposed under section 902 of Pub. L. 108-173. Therefore,
we believe that the final rule is in accordance with the Congress'
intent to ensure timely publication of final regulations.
FOR FURTHER INFORMATION, CONTACT: Rebecca Kane, (410) 786-0378,
Outpatient prospective payment issues and Suzanne Asplen, (410) 786-
4558, Partial hospitalization and community mental health centers
issues.
SUPPLEMENTARY INFORMATION:
Electronic Access
This Federal Register document is available from the Federal
Register online database through GPO Access, a service of the U.S.
Government Printing Office. The Web site address is: http://www.gpoaccess.gov/fr/index.html.
[[Page 68517]]
Alphabetical List of Acronyms Appearing in the Final Rule With Comment
Period
ACEP American College of Emergency Physicians
AHA American Hospital Association
AHIMA American Health Information Management Association
AMA American Medical Association
APC Ambulatory payment classification
AMP Average manufacturer price
ASP Average sales price
ASC Ambulatory surgical center
AWP Average wholesale price
BBA Balanced Budget Act of 1997, Pub. L. 105-33
BIPA Medicare, Medicaid, and SCHIP Benefits Improvement and
Protection Act of 2000, Pub. L. 106-554
BBRA Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act of
1999, Pub. L. 106-113
CAH Critical access hospital
CBSA Core-Based Statistical Areas
CCR (Cost center specific) Cost-to-charge ratio
CMHC Community mental health center
CMS Centers for Medicare & Medicaid Services (formerly known as the
Health Care Financing Administration)
CNS Clinical nurse specialist
CORF Comprehensive outpatient rehabilitation facility
CPT [Physicians'] Current Procedural Terminology, Fourth Edition,
2005, copyrighted by the American Medical Association
CRNA Certified registered nurse anesthetist
CY Calendar year
DMEPOS Durable medical equipment, prosthetics, orthotics, and
supplies
DMERC Durable medical equipment regional carrier
DRGY Diagnosis-related group
DSH Disproportionate share hospital
EACH Essential Access Community Hospital
E/M Evaluation and management
EPO Erythropoietin
ESRD End-stage renal disease
FACA Federal Advisory Committee Act, Pub. L. 92-463
FDA Food and Drug Administration
FI Fiscal intermediary
FSS Federal Supply Schedule
FY Federal fiscal year
GAO Government Accountability Office
HCPCS Healthcare Common Procedure Coding System
HCRIS Hospital Cost Report Information System
HHA Home health agency
HIPAA Health Insurance Portability and Accountability Act of 1996,
Pub. L. 104-191
ICD-9-CM International Classification of Diseases, Ninth Edition,
Clinical Modification
IME Indirect medical education
IPPS (Hospital) Inpatient prospective payment system
IVIG Intravenous immune globulin
LTC Long-term care
MedPAC Medicare Payment Advisory Commission
MDH Medicare-dependent hospital
MMA Medicare Prescription Drug, Improvement, and Modernization Act
of 2003, Pub. L. 108-173
MSA Metropolitan Statistical Area
NCCI National Correct Coding Initiative
NCD National Coverage Determination
NP Nurse practitioner
OCE Outpatient Code Editor
OMB Office of Management and Budget
OPD (Hospital) Outpatient department
OPPS (Hospital) Outpatient prospective payment system
PA Physician assistant
PHP Partial hospitalization program
PM Program memorandum
PPI Producer Price Index
PPS Prospective payment system
PPV Pneumococcal pneumonia (virus)
PRA Paperwork Reduction Act
QIO Quality Improvement Organization
RFA Regulatory Flexibility Act
RRC Rural referral center
SBA Small Business Administration
SCH Sole community hospital
SDP Single drug pricer
SI Status indicator
TEFRA Tax Equity and Fiscal Responsibility Act of 1982, Pub. L. 97-
248
TOPS Transitional outpatient payments
USPDI United States Pharmacopoeia Drug Information
To assist readers in referencing sections contained in this
document, we are providing the following outline of contents:
Outline of Contents
I. Background
A. Legislative and Regulatory Authority for the Hospital
Outpatient Prospective Payment System
B. Excluded OPPS Services and Hospitals
C. Prior Rulemaking
D. APC Advisory Panel
1. Authority for the APC Panel
2. Establishment of the APC Panel
3. APC Panel Meetings and Organizational Structure
E. Provisions of the Medicare Prescription Drug, Improvement,
and Modernization Act of 2003 That Will Be Implemented in CY 2006
1. Hold Harmless Provisions
2. Study and Authorization of Adjustment for Rural Hospitals
3. Payment for ``Specified Covered Outpatient Drugs''
4. Adjustment in Payment Rates for ``Specified Covered
Outpatient Drugs'' for Overhead Costs
5. Budget Neutrality Adjustment
F. CMS' Commitment to New Technologies
G. Summary of the Provisions of the CY 2006 OPPS Proposed Rule
H. Public Comments Received on the CY 2006 OPPS Proposed Rule
I. Public Comments Received on the November 15, 2004 OPPS Final
Rule With Comment Period
II. Updates Affecting Payments for CY 2006
A. Recalibration of APC Relative Weights for CY 2006
1. Database Construction
a. Database Source and Methodology
b. Use of Single and Multiple Procedure Claims
2. Calculation of Median Costs for CY 2006
3. Calculation of Scaled OPPS Payment Weights
4. Changes to Packaged Services
a. Background
b. Responses to the APC Panel Recommendations
B. Payment for Partial Hospitalization
1. Background
2. PHP APC Update for CY 2006
3. Separate Threshold for Outlier Payments to CMHCs
C. Conversion Factor Update for CY 2006
D. Wage Index Changes for CY 2006
E. Statewide Average Default Cost-to-Charge Ratios (CCRs)
F. Expiring Hold Harmless Provision for Transitional Corridor
Payments for Certain Rural Hospitals
G. Adjustment for Rural Hospitals
1. Factors Contributing to Unit Cost Differences Between Rural
Hospitals and Urban Hospitals and Associated Explanatory Variables
2. Results
H. Hospital Outpatient Outlier Payments
I. Calculation of the National Unadjusted Medicare Payment
J. Beneficiary Copayments for CY 2006
1. Background
2. Copayment for CY 2006
3. Calculation of the Unadjusted Copayment Amount for CY 2006
III. Ambulatory Payment Classification (APC) Group Policies
A. Introduction
1. Treatment of New HCPCS Codes Discussed in the CY 2006 OPPS
Proposed Rule
2. Treatment of New CY 2006 HCPCS Codes
3. Treatment of New Mid-Year Category III CPT Codes
B. Variations within APCs
1. Background
2. Application of the 2 Times Rule
a. APC 0146: Level I Sigmoidoscopy
b. APC 0342: Level I Pathology
c. Other Comments on the Proposed List of APC Assignments to
Address 2 Times Violations
3. Exceptions to the 2 Times Rule
C. New Technology APCs
1. Introduction
2. Refinement of New Technology Cost Bands
3. Requirements for Assigning Services to New Technology APCs
4. New Technology Services
a. Ablation of Bone Tumors
b. Breast Brachytherapy
c. Enteryx Procedure
d. Extracorporeal Shock Wave Treatment
e. GreenLight Laser
f. Magnetoencephalography (MEG)
g. Positron Emission Tomography (PET) Scans
h. Proton Beam Treatment
i. Smoking Cessation Counseling
j. Stereoscopic Kv X-ray
k. Stereotactic Radiosurgery (SRS)
D. APC-Specific Policies
1. Cardiac and Vascular Procedures
a. Acoustic Heart Sound Recording and Analysis
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b. Cardiac Electrophysiologic Services (APC 0087)
c. Cardioverter-Defibrillator Implantation (APCs 0107 and 0108)
d. Endovenous Ablation (APC 0092)
e. External Counterpulsation Therapy (APC 0678)
f. Intracardiac Echocardiography (APC 0670)
g. Percutaneous Thrombectomy and Thrombolysis (APC 0676)
h. Coronary Flow Reserve (APCs 0416 and 0670)
i. Vascular Access Procedures (APCs 0621, 0622, and 0623)
2. Radiology, Radiation Oncology, and Nuclear Medicine
a. Angiography and Venography (APCs 0279, 0280, and 0668)
b. Brachytherapy (APCs 0312, 0313, and0651)
c. Computed Tomography (APCs 0283 and 0333)
d. Computed Tomographic Angiography (APC 0333)
e. Computed Tomographic Guidance (APC 0332)
f. Computerized Reconstruction (APC 0417)
g. Diagnostic Computed Tomographic Colonography (APC 0333)
h. Intensity Modulated Radiation Therapy (IMRT) (APCs 0310 and
0412)
i. Kidney Imaging (APC 0267)
j. Magnetic Resonance Guided Focused Ultrasound Ablation (APC
0193)
k. Non-Imaging Nuclear Medicine Studies (APC 0389)
l. Therapeutic Radiation Treatment (APC 0304)
m. Urinary Bladder Study (APC 0340)
3. Gastrointestinal and Genitourinary Procedures
a. Cystourethroscopy with Lithotripsy (APC 0163)
b. GI Stenting (APC 0384)
c. Insertion of Uterine Tandems and/or Vaginal Ovoids for
Clinical Brachytherapy (APC 0192)
d. Laparoscopic Ablation Procedures (APC 0131)
e. Plicator Procedure (APC 0422)
f. Prostate Cryosurgery (APC 0674)
g. Stretta Procedure (APC 0422)
h. Urological Stenting Procedures (APCs 0163 and 0164)
4. Other Surgical Services
a. Excision-Malignant Lesions (APCs 0019 and 0020)
b. External Fixation (APCs 0046 and 0050)
c. Intradiscal Annuloplasty (APC 0203)
d. Kyphoplasty (APC 0051)
e. Neurostimulator Electrode Implantation (APCs 0040 and 0225)
f. Neurostimulator Generator Implantation (APC 0222)
g. Thoracentesis/Lavage (APC 0070)
5. Other Services
a. Allergy Testing (APC 0370)
b. Apheresis (APC 0112)
c. Audiology (APCs 0364, 0365, and 0366)
d. Bone Marrow Harvesting (APC 0111)
e. Computer Assisted Navigational Procedures
f. Hyperbaric Oxygen Therapy (APC 0659)
g. Ophthalmology Examinations (APC 0601)
h. Pathology Services
i. Photodynamic Therapy of the Skin (APC 0013)
j. Wound Care
IV. Payment Changes for Devices
A. Device-Dependent APCs
1. Public Comments and Our Responses on the November 15, 2004
Final Rule With Comment Period
2. CY 2006 Proposal, APC Panel Recommendations, and Responses to
Public Comments Received
a. APC Panel Recommendations
b. Public Comments Received and Our Responses
(1) Adjustment of Median Costs
(2) Effects of Inconsistent Markup of Charges
(3) Effects of Multiple Procedure Reduction
(4) Impact of Proposed Rates on Access to Care
(5) Addition of Other APCs as Device-Dependent APCs
(6) Instructions on Reporting Device Charges
(7) Application of Wage Index to Package Containing Device
(8) Recalls of High Cost Devices
(9) Separate Payment for High Cost Devices
B. Pass-Through Payments for Devices
1. Expiration of Transitional Pass-Through Payments for Certain
Devices
2. Proposed and Final Policy for CY 2006
C. Other Policy Issues Relating to Pass-Through Device
Categories
1. Provisions for Reducing Transitional Pass-Through Payments to
Offset Costs Packaged into APC Groups
a. Background
b. Policy for CY 2006
2. Criteria for Establishing New Pass-Through Device Categories
a. Surgical Insertion and Implantation Criterion
(1) Public Comments Received on November 15, 2004 OPPS Final
Rule with Comment Period and Our Responses
(2) Public Comments Received on the CY 2006 OPPS Proposed Rule
and Our Responses
b. Existing Device Category Criterion
V. Payment Changes for Drugs, Biologicals, and Radiopharmaceutical
Agents
A. Transitional Pass-Through Payment for Additional Costs of
Drugs and Biologicals
1. Background
2. Expiration in CY 2005 of Pass-Through Status for Drugs and
Biologicals
3. Drugs and Biologicals With Pass-Through Status in CY 2006
B. Payment for Drugs, Biologicals, and Radiopharmaceutical
Agents Without Pass-Through Status
1. Background
2. Criteria for Packaging Payment for Drugs, Biologicals, and
Radiopharmaceutical Agents
3. Payment for Drugs, Biologicals, and Radiopharmaceutical
Agents Without Pass-Through Status That Are Not Packaged
a. Payment for Specified Covered Outpatient Drugs
(1) Background
(2) Changes for CY 2006 Related to Pub. L. 108-173
(3) Data Sources Available for Setting CY 2006 Payment Rates
(4) CY 2006 Payment Policy for Radiopharmaceutical Agents
(5) MedPAC Report on APC Payment Rate Adjustment of Specified
Covered Outpatient Drugs
b. CY 2006 Payment for Nonpass-Through Drugs, Biologicals, and
Radiopharmaceutical Agents With HCPCS Codes But Without OPPS
Hospital Claims Data
C. Coding and Billing Changes for Specified Covered Outpatient
Drugs
1. Background
2. CY 2006 Payment Policy
D. Payment for New Drugs, Biologicals, and Radiopharmaceutical
Agents Before HCPCS Codes Are Assigned
1. Background
2. CY 2006 Payment Policy
E. Payment for Vaccines
F. Changes in Payments for Single Indication Orphan Drugs
VI. Estimate of Transitional Pass-Through Spending in CY 2006 for
Drugs, Biologicals, and Devices
A. Total Allowed Pass-Through Spending
B. Estimate of Pass-Through Spending for CY 2006
VII. Brachytherapy Payment Changes
A. Background
B. Changes Related to Pub. L. 108-173
C. CY 2006 Payment Policy
VIII. Coding and Payment for Drug Administration
A. Background
B. Policy Changes for Drug Administration for CY 2006
C. Policy Changes for Vaccine Administration for CY 2006
IX. Hospital Coding for Evaluation and Management (E/M) Services
X. Payment for Blood and Blood Products
A. Background
B. Policy Changes for CY 2006
XI. Payment for Observation Services
A. Background
B. CY 2006 Coding Changes for Observation Services and Direct
Admission to Observation
C. Criteria for Separate Payment for Direct Admission to
Observation
D. Criteria for Separately Payable Observation Services (APC
0339)
1. Diagnosis Requirements
2. Observation Time
3. Additional Hospital Services
4. Physician Evaluation
XII. Procedures That Will Be Paid Only as Inpatient Procedures
A. Background
B. Policy Changes to the Inpatient List
C. Ancillary Outpatient Services When Patient Expires
XIII. Indicator Assignments
A. Status Indicator Assignments
B. Comment Indicators for the CY 2006 OPPS Final Rule
XIV. Nonrecurring Policy Changes
A. Payment for Multiple Diagnostic Imaging Procedures
B. Interrupted Procedure Payment Policies (Modifiers -52, -73,
and -74)
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XV. OPPS Policy and Payment Recommendations
A. MedPAC Recommendations
1. Report to the Congress: Medicare Payment Policy (March 2005)
2. Report to the Congress: Issues in a Modernized Medicare
Program--Payment for Pharmacy Handling Costs in Hospitals
B. APC Panel Recommendations
C. GAO Recommendations
XVI. Physician Oversight of Nonphysician Practitioners in Critical
Access Hospitals
A. Background
B. Proposed Policy Change in Proposed Rule
C. Public Comments Received on Proposed Rule and Our Responses
D. Final Policy
XVII. Files Available to the Public via the Internet
XVIII. Collection of Information Requirements
XIX. Regulatory Impact Analysis
A. OPPS: General
1. Executive Order 12866
2. Regulatory Flexibility Act (RFA)
3. Small Rural Hospitals
4. Unfunded Mandates
5. Federalism
B. Impact of Changes in this Final Rule with Comment Period
C. Alternatives Considered
1. Option Considered for Payment Policy for Separately Payable
Drugs and Biologicals
2. Payment Adjustment for Rural SCHs
3. Change in the Percentage of Total OPPS Payments Dedicated to
Outlier Payments
D. Limitations of Our Analysis
E. Estimated Impacts of this Final Rule with Comment Period on
Hospitals
F. Estimated Impact of the Change in Outlier Policy
G. Accounting Statement
H. Estimated Impacts of this Final Rule with Comment Period on
Beneficiaries
XX. Waiver of Proposed Rulemaking
Regulation Text
Addenda
Addendum A--List of Ambulatory Payment Classification (APCs)
with Status Indicators, Relative Weights, Payment Rates, and
Copayment Amounts--CY 2006
Addendum B--Payment Status by HCPCS Code and Related
Information--CY 2006
Addendum D1--Payment Status Indicators for the Hospital
Outpatient Prospective Payment System
Addendum D2--Comment Indicators
Addendum E--CPT Codes That Are Paid Only as Inpatient Procedures
Addendum L-Out-Migration Wage Adjustment for CY 2006
I. Background
A. Legislative and Regulatory Authority for the Hospital Outpatient
Prospective Payment System
When the Medicare statute was originally enacted, Medicare payment
for hospital outpatient services was based on hospital-specific costs.
In an effort to ensure that Medicare and its beneficiaries pay
appropriately for services and to encourage more efficient delivery of
care, the Congress mandated replacement of the reasonable cost-based
payment methodology with a prospective payment system (PPS). The
Balanced Budget Act of 1997 (BBA) (Pub. L. 105-33), enacted on August
5, 1997, added section 1833(t) to the Social Security Act (the Act)
authorizing implementation of a PPS for hospital outpatient services.
The Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act of
1999 (BBRA) (Pub. L. 106-113), enacted on November 29, 1999, made major
changes that affected the hospital outpatient PPS (OPPS). The Medicare,
Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000
(BIPA) (Pub. L. 106-554), enacted on December 21, 2000, made further
changes in the OPPS. Section 1833(t) of the Act was also amended by the
Medicare Prescription Drug, Improvement, and Modernization Act of 2003
(MMA), Pub. L. 108-173, enacted on December 8, 2003. (Discussion of
provisions related specifically to the CY 2006 OPPS is included in
sections II.C., II.F., II.G., and V.B.3.a.(2) of this final rule with
comment period.) The OPPS was first implemented for services furnished
on or after August 1, 2000. Implementing regulations for the OPPS are
located at 42 CFR Part 419.
Under the OPPS, we pay for hospital outpatient services on a rate-
per-service basis that varies according to the ambulatory payment
classification (APC) group to which the service is assigned. We use
Healthcare Common Procedure Coding System (HCPCS) codes (which include
certain Current Procedural Terminology (CPT) codes) and descriptors to
identify and group the services within each APC group. The OPPS
includes payment for most hospital outpatient services, except those
identified in section I.B. of this final rule with comment period.
Section 1833(t)(1)(B)(ii) of the Act provides for Medicare payment
under the OPPS for certain services designated by the Secretary that
are furnished to inpatients who have exhausted their Part A benefits or
who are otherwise not in a covered Part A stay. Section 611 of Pub. L.
108-173 provided for Medicare coverage of an initial preventive
physical examination, subject to the applicable deductible and
coinsurance, as an outpatient department service, payable under the
OPPS. In addition, the OPPS includes payment for partial
hospitalization services furnished by community mental health centers
(CMHCs).
The OPPS rate is an unadjusted national payment amount that
includes the Medicare payment and the beneficiary copayment. This rate
is divided into a labor-related amount and a nonlabor-related amount.
The labor-related amount is adjusted for area wage differences using
the inpatient hospital wage index value for the locality in which the
hospital or CMHC is located.
All services and items within an APC group are comparable
clinically and with respect to resource use (section 1833(t)(2)(B) of
the Act). In accordance with section 1833(t)(2) of the Act, subject to
certain exceptions, services and items within an APC group cannot be
considered comparable with respect to the use of resources if the
highest median (or mean cost, if elected by the Secretary) for an item
or service in the APC group is more than 2 times greater than the
lowest median cost for an item or service within the same APC group
(referred to as the ``2 times rule''). In implementing this provision,
we use the median cost of the item or service assigned to an APC group.
Special payments under the OPPS may be made for new technology
items and services in one of two ways. Section 1833(t)(6) of the Act
provides for temporary additional payments or ``transitional pass-
through payments'' for certain drugs, biological agents, brachytherapy
devices used for the treatment of cancer, and categories of medical
devices for at least 2 but not more than 3 years. For new technology
services that are not eligible for pass-through payments and for which
we lack sufficient data to appropriately assign them to a clinical APC
group, we have established special APC groups based on costs, which we
refer to as ``APC cost bands.'' These cost bands allow us to price
these new procedures more appropriately and consistently. Similar to
pass-through payments, these special payments for new technology
services are also temporary; that is, we retain a service within a new
technology APC group until we acquire adequate data to assign it to a
clinically appropriate APC group.
B. Excluded OPPS Services and Hospitals
Section 1833(t)(1)(B)(i) of the Act authorizes the Secretary to
designate the hospital outpatient services that are paid under the
OPPS. While most hospital outpatient services are payable under the
OPPS, section 1833(t)(1)(B)(iv) of the Act excluded payment for
ambulance, physical and occupational therapy, and speech-
[[Page 68520]]
language pathology services, for which payment is made under a fee
schedule. Section 614 of Pub. L. 108-173 amended section
1833(t)(1)(B)(iv) of the Act to exclude OPPS payment for screening and
diagnostic mammography services. The Secretary exercised the broad
authority granted under the statute to exclude from the OPPS those
services that are paid under fee schedules or other payment systems.
Such excluded services include, for example, the professional services
of physicians and nonphysician practitioners paid under the Medicare
Physician Fee Schedule (MPFS); laboratory services paid under the
clinical diagnostic laboratory fee schedule; services for beneficiaries
with end-stage renal disease (ESRD) that are paid under the ESRD
composite rate; services and procedures that require an inpatient stay
that are paid under the hospital inpatient prospective payment system
(IPPS); and certain services furnished to inpatients of hospitals that
do not submit claims for outpatient services under Medicare Part B. We
set forth the services that are excluded from payment under the OPPS in
Sec. 419.22 of the regulations.
Under Sec. 419.20 of the regulations, we specify the types of
hospitals and entities that are excluded from payment under the OPPS.
These excluded entities include Maryland hospitals, but only for
services that are paid under a cost containment waiver in accordance
with section 1814(b)(3) of the Act; critical access hospitals (CAHs);
hospitals located outside of the 50 States, the District of Columbia,
and Puerto Rico; and Indian Health Service hospitals.
C. Prior Rulemaking
On April 7, 2000, we published in the Federal Register a final rule
with comment period (65 FR 18434) to implement a prospective payment
system for hospital outpatient services. The hospital OPPS was first
implemented for services furnished on or after August 1, 2000. Section
1833(t)(9) of the Act requires the Secretary to review certain
components of the OPPS not less often than annually and to revise the
groups, relative payment weights, and other adjustments to take into
account changes in medical practice, changes in technology, and the
addition of new services, new cost data, and other relevant information
and factors. Since implementing the OPPS, we have published final rules
in the Federal Register annually to implement statutory requirements
and changes arising from our experience with this system. For a full
discussion of the changes to the OPPS, we refer readers to these
Federal Register final rules.\1\
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\1\ Interim final rule with comment period, August 3, 2000 (65
FR 47670); interim final rule with comment period, November 13, 2000
(65 FR 67798); final rule and interim final rule with comment
period, November 2, 2001 (66 FR 55850 and 55857); final rule,
November 30, 2001 (66 FR 59856); final rule, December 31, 2001 (66
FR 67494); final rule, March 1, 2002 (67 FR 9556); final rule,
November 1, 2002 (67 FR 66718); final rule with comment period,
November 7, 2003 (68 FR 63398); correction of the November 7, 2003
final rule with comment period, December 31, 2003 (68 FR 75442);
interim final rule with comment period, January 6, 2004 (69 FR 820);
and final rule with comment period, November 15, 2004 (69 FR 65681).
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On November 15, 2004, we published in the Federal Register a final
rule with comment period (69 FR 65681) that revised the OPPS to update
the payment weights and conversion factor for services payable under
the calendar year (CY) 2005 OPPS on the basis of claims data from
January 1, 2003 through December 31, 2003, and to implement certain
provisions of Pub. L. 108-173. In addition, we responded to public
comments received on the January 6, 2004 interim final rule with
comment period relating to Pub. L. 108-173 provisions that were
effective January 1, 2004, and finalized those policies. Further, we
responded to public comments received on the November 7, 2003 final
rule with comment period pertaining to the APC assignment of HCPCS
codes identified in Addendum B of that rule with the NI comment
indicator; and public comments received on the August 16, 2004 OPPS
proposed rule (69 FR 50448).
Subsequent to publishing the November 15, 2004 final rule with
comment period, we published a correction of final rule with comment
period on December 30, 2004 (69 FR 78315). This document corrected
technical errors that appeared in the November 15, 2004 final rule with
comment period. It also provided additional information about the CY
2005 wage indices for the OPPS that was not published in the November
15, 2004 final rule with comment period.
D. APC Advisory Panel
1. Authority of the APC Panel
Section 1833(t)(9)(A) of the Act, as amended by section 201(h) of
the BBRA of 1999, requires that we consult with an outside panel of
experts to review the clinical integrity of the payment groups and
weights under the OPPS. The Advisory Panel on Ambulatory Payment
Classification (APC) Groups (the APC Panel), discussed under section
I.D.2. of this preamble, fulfills this requirement. The Act further
specifies that the APC Panel will act in an advisory capacity. This
expert panel, which may be composed of up to 15 representatives of
hospitals and other Medicare providers subject to the OPPS (currently
employed full-time and in their respective areas of expertise), reviews
and advises CMS about the clinical integrity of the APC groups and
their weights. For purposes of this Panel, consultants or independent
contractors are not considered to be full-time employees. The APC Panel
is not restricted to using our data and may use data collected or
developed by organizations outside the Department in conducting its
review.
2. Establishment of the APC Panel
On November 21, 2000, the Secretary originally signed the charter
establishing the APC Panel. The APC Panel is technical in nature and is
governed by the provisions of the Federal Advisory Committee Act
(FACA), as amended (Pub. L. 92-463). Since its initial chartering, the
Secretary has twice renewed the APC Panel's charter: on November 1,
2002, and on November 1, 2004. The renewed charter indicates that the
APC Panel continues to be technical in nature; is governed by the
provisions of FACA with a Designated Federal Official (DFO) to oversee
the day-to-day administration of the FACA requirements and to provide
to the Committee Management Officer all committee reports for
forwarding to the Library of Congress; may convene up to three meetings
per year; and is chaired by a Federal official who also serves as a CMS
medical officer.
Originally, in establishing the APC Panel, we solicited members in
a notice published in the Federal Register on December 5, 2000 (65 FR
75943). We received applications from more than 115 individuals who
nominated either colleagues or themselves. After carefully reviewing
the applications, we chose 15 highly qualified individuals to serve on
the APC Panel. Because four APC Panel members' terms of office expired
on March 31, 2004, we published a Federal Register notice on January
23, 2004 (69 FR 3370) that solicited nominations for APC Panel
membership. From the 24 nominations that we received, we chose four new
members. Six members' terms expired on March 31, 2005; therefore, a
Federal Register notice was published on February 25, 2005, requesting
nominations to the APC Panel. We received only 13 nominations before
the nomination period closed on March 15, 2005. Consequently, we
extended the deadline for nominations to May 9, 2005, and announced the
extension in the Federal Register on April 8, 2005 (70 FR 18028). From
a total of 26 nominees from the two notices, we
[[Page 68521]]
chose 6 new members who were announced in the Federal Register on
August 26, 2005 (70 FR 50358). The entire APC Panel membership and
information pertaining to it, including Federal Register notices,
meeting dates, agenda topics, and meeting reports are identified on the
CMS Web site: http://www.cms.hhs.gov/faca/apc/apcmem.asp.
3. APC Panel Meetings and Organizational Structure
The APC Panel first met on February 27, February 28, and March 1,
2001. Since that initial meeting, the APC Panel has held seven
subsequent meetings. The most recent meeting took place on August 17
and 18, 2005, which was announced in the meeting notice published on
July 8, 2005 (70 FR 39514). Prior to each of these biennial meetings,
we published a notice in the Federal Register to announce each meeting
and, when necessary, to solicit and announce nominations for APC Panel
membership. For a more detailed discussion about these announcements,
refer to the following Federal Register notices: December 5, 2000 (65
FR 75943), December 14, 2001 (66 FR 64838), December 27, 2002 (67 FR
79107), July 25, 2003 (68 FR 44089), December 24, 2003 (68 FR 74621),
August 5, 2004 (69 FR 47446), December 30, 2004 (69 FR 78464), and July
8, 2005 (70 FR 39514).
During these meetings, the APC Panel established its operational
structure that, in part, includes the use of three subcommittees to
facilitate its required APC review process. Currently, the three
subcommittees are the Data Subcommittee, the Observation Subcommittee,
and the Packaging Subcommittee. The Data Subcommittee is responsible
for studying the data issues confronting the APC Panel and for
recommending viable options for resolving them. This subcommittee was
initially established on April 23, 2001, as the Research Subcommittee
and reestablished as the Data Subcommittee on April 13, 2004, February
11, 2005, and August 15, 2005. The Observation Subcommittee, which was
established on June 24, 2003, and reestablished with new members on
March 8, 2004, February 11, 2005, and August 15, 2005, reviews and
makes recommendations to the APC Panel on all issues pertaining to
observation services paid under the OPPS, such as coding and
operational issues. The Packaging Subcommittee, which was established
on March 8, 2004, and reestablished with new members on February 11,
2005, and August 15, 2005, studies and makes recommendations on issues
pertaining to services that are not separately payable under the OPPS
but are bundled or packaged APC payments. Each of these subcommittees
was established by a majority vote of the APC Panel during a scheduled
APC Panel meeting. All subcommittee recommendations are discussed and
voted upon by the full APC Panel.
For a detailed discussion of the APC Panel meetings, refer to the
hospital OPPS final rules cited in section I.C. of this preamble. Full
discussion of the recommendations resulting from the APC Panel's
February 2005 and August 2005 meetings are included in the sections of
this preamble that are specific to each recommendation.
E. Provisions of the Medicare Prescription Drug, Improvement, and
Modernization Act of 2003 That Will Be Implemented in CY 2006
On December 8, 2003, the Medicare Prescription Drug, Improvement,
and Modernization Act of 2003 (MMA), Pub. L. 108-173, was enacted. Pub.
L. 108-173 made changes to the Act relating to the Medicare OPPS. In
the January 6, 2004 interim final rule with comment period and the
November 15, 2004 final rule with comment period, we implemented
provisions of Pub. L. 108-173 relating to the OPPS that were effective
for CY 2004 and CY 2005, respectively. Provisions of Pub. L. 108-173
that were implemented in CY 2004 or CY 2005, and that are continuing in
CY 2006, are discussed throughout this final rule with comment period.
Moreover, in this final rule with comment period, we finalize our
proposal to implement the following provisions of Pub. L. 108-173 that
affect the OPPS beginning in CY 2006:
1. Hold Harmless Provisions
Section 411 of Pub. L. 108-173 amended section 1833(t)(7)(D)(i) of
the Act and extended the hold harmless provision for small rural
hospitals having 100 or fewer beds through December 31, 2005. Section
411 of Pub. L. 108-173 further amended section 1833(t)(7) of the Act to
provide that hold harmless transitional corridor payments shall apply
through December 31, 2005 to sole community hospitals (SCHs) (as
defined in section 1886(d)(5)(D)(iii) of the Act) located in a rural
area. In accordance with these provisions, effective January 1, 2006,
we proposed to discontinue transitional corridor payments for small
rural hospitals having 100 or fewer beds and for SCHs located in a
rural area.
2. Study and Authorization of Adjustment for Rural Hospitals
Section 411(b) of Pub. L. 108-173 added a new paragraph (13) to
section 1833(t) of the Act to authorize an ``Adjustment for Rural
Hospitals.'' This provision requires us to conduct a study to determine
if costs incurred by hospitals located in rural areas by APCs exceed
those costs incurred by hospitals located in urban areas. This
provision further requires us to provide for an appropriate adjustment
by January 1, 2006, if we find that the costs incurred by hospitals
located in rural areas exceed those costs incurred by hospitals located
in urban areas. In accordance with these provisions, effective January
1, 2006, as we proposed, we are implementing an adjustment for rural
sole community hospitals (SCHs), as discussed below.
3. Payment for ``Specified Covered Outpatient Drugs''
Section 621(a)(1) of Pub. L. 108-173 added section 1833(t)(14) to
the Act that specifies payments for certain ``specified covered
outpatient drugs'' beginning in 2006. Specifically, section
1833(t)(14)(A)(iii)(I) of the Act states that such payment shall be
equal to what we determine to be the average acquisition cost for the
drug, taking into account hospital acquisition cost survey data
furnished by the Government Accountability Office (GAO). Section
1833(t)(14)(A)(iii)(II) of the Act further notes that if hospital
acquisition cost data are not available, payment for specified covered
outpatient drugs shall equal the average price for the drug established
under section 1842(o), section 1847(A), or section 1847(B) of the Act
as calculated and adjusted by the Secretary as necessary. Both payment
approaches are subject to adjustments under section 1833(t)(14)(E) of
the Act as discussed below.
4. Adjustment in Payment Rates for ``Specified Covered Outpatient
Drugs'' for Overhead Costs
Section 621(a)(1) of Pub. L. 108-173 added section 1833(t)(14)(E)
to the Act. Section 1833(t)(14)(E)(ii) of the Act authorizes us to make
an adjustment to payments for ``specified covered outpatient drugs'' to
take into account overhead and related expenses such as pharmacy
services and handling costs, based on recommendations contained in a
report prepared by the Medicare Payment Advisory Commission (MedPAC).
5. Budget Neutrality Adjustment
Section 621(a)(1) of Pub. L. 108-173 amended the Act by adding
section
[[Page 68522]]
1833(t)(14)(H), which requires that additional expenditures resulting
from adjustments in APC payment rates for specified covered outpatient
drugs be taken into account beginning in CY 2006 and continuing in
subsequent years, in establishing the OPPS conversion, weighting, and
other adjustment factors.
F. CMS' Commitment to New Technologies
As we indicated in the CY 2006 proposed rule, CMS is committed to
ensuring that Medicare beneficiaries will have timely access to new
medical treatments and technologies that are well-evaluated and
demonstrated to be effective. We launched the Council on Technology and
Innovation (CTI) to provide the Agency with improved methods for
developing practical information about the clinical benefits of new
medical technologies to result in faster and more efficient coverage
and payment of these medical technologies. The CTI supports CMS efforts
to develop better evidence on the safety, effectiveness, and cost of
new and approved technologies to help promote their more effective use.
We want to provide doctors and patients with better information
about the benefits of new medical treatments or technologies, or both,
especially compared to other treatment options. We also want
beneficiaries to have access to valuable new medical innovations as
quickly and efficiently as possible. We note there are a number of
payment mechanisms in the OPPS and the IPPS designed to achieve
appropriate payment of promising new technologies. In the OPPS,
qualifying new medical devices may be paid on a cost basis by means of
transitional pass-through payments, in addition to the APC payments for
the procedures which utilize the devices. In addition, qualifying new
services may be assigned for payment to New Technology APCs or, if
appropriate, to regular clinical APCs. In the IPPS, qualifying new
technologies may receive add-on payments to the standard diagnosis-
related group (DRG) payments. We also note that collaborative efforts
are underway to facilitate coordination between the Food and Drug
Administration (FDA) and CMS with regard to streamlining the CMS
coverage process by which new technologies come to the marketplace.
To promote timely access to new medical treatments and
technologies, in the CY 2006 OPPS proposed rule, we proposed
enhancements to both the OPPS pass-through payment criteria for devices
as discussed in section IV.D.2. of that rule and the qualifying process
for assignment of new services to New Technology APCs or regular
clinical APCs discussed in section III.C.3. of that rule. In the CY
2006 OPPS proposed rule, we proposed to make device pass-through
eligibility available to a broader range of qualifying devices. We also
proposed to change the application and review process for assignment of
new services to New Technology APCs to promote thoughtful review of the
coding, clinical use and efficacy of new services by the wider medical
community, encouraging appropriate dissemination of new technologies.
We received a large number of public comments generally supporting
our commitment to new technologies. Many of these comments in support
of this commitment were stated in the context of our proposals to
enhance the OPPS pass-through payment criteria for devices or the
application requirements for assignment of a service to a New
Technology APC. Specific comments are addressed in those respective
sections.
G. Summary of the Provisions of the CY 2006 OPPS Proposed Rule
On July 25, 2005, we published a proposed rule in the Federal
Register (70 FR 42674) that set forth proposed changes to the Medicare
hospital OPPS for CY 2006 to implement statutory requirements and
changes arising from our continuing experience with the system, to
implement provisions of Pub. L. 108-173 specified in sections II.C.,
II.F., II.G., and V.B.3.a.(2) of this preamble, and to change the
requirement for physician oversight of nonphysician practitioners in
CAHs that will be effective for services furnished on or after January
1, 2006. Subsequent to publishing the proposed rule, we published a
correction of the proposed rule on August 26, 2005 (70 FR 50679) that
corrected technical errors that appeared in the proposed rule. The
following is a summary of the major changes included in the CY 2006
OPPS proposed rule that we proposed to make:
1. Updates to Payments for CY 2006
In the proposed rule, we set forth--
The methodology used to recalibrate the proposed APC
relative payment weights and the proposed recalibration of the relative
payment weights for CY 2006.
The proposed payment for partial hospitalization,
including the proposed separate threshold for outlier payments for
CMHCs.
The proposed update to the conversion factor used to
determine payment rates under the OPPS for CY 2006.
The proposed retention of our current policy to apply the
IPPS wage indices to wage adjust the APC median costs in determining
the OPPS payment rate and the copayment standardized amount for CY
2006.
The proposed update of statewide average default cost-to-
charge ratios.
Proposed changes relating to the expiring hold harmless
payment provision.
Proposed changes to payment for rural SCHs for CY 2006.
Proposed changes in the way we calculate hospital
outpatient outlier payments for CY 2006.
Calculation of the proposed national unadjusted Medicare
OPPS payment.
The proposed beneficiary copayment for OPPS services for
CY 2006.
2. Ambulatory Payment Classification (APC) Group Policies
In the proposed rule, we discussed establishing a number of new
APCs and making changes to the assignment of HCPCS codes under a number
of existing APCs based on our analyses of Medicare claims data and
recommendations of the APC Panel. We also discussed the application of
the 2 times rule and proposed exceptions to it; proposed changes for
specific APCs; the proposed refinement of the New Technology cost
bands; the proposed movement of procedures from the New Technology
APCs; and the proposed additions of new procedure codes to the APC
groups.
3. Payment Changes for Devices
In the proposed rule, we discussed proposed changes to the device-
dependent APCs, to related regulations under Sec. Sec. 419.66(b)(3)
and 419.66(c)(1), and to the pass-through payment for three categories
of devices.
4. Payment Changes for Drugs, Biologicals, and Radiopharmaceutical
Agents
In the proposed rule, we discussed proposed payment changes for
drugs, biologicals, radiopharmaceutical agents, and vaccines.
5. Estimate of Transitional Pass-Through Spending in CY 2006 for Drugs,
Biologicals, and Devices
In the proposed rule, we discussed the proposed methodology for
estimating total pass-through spending and whether there should be a
pro rata reduction for transitional pass-through drugs, biologicals,
radiopharmacials, and categories of devices for CY 2006.
[[Page 68523]]
6. Brachytherapy Payment Changes
In the proposed rule, we included a discussion of our proposal
concerning coding and payment for the sources of brachytherapy.
7. Coding and Payment for Drug Administration
In the proposed rule, we discussed our proposed coding and payment
changes for drug administration services.
8. Hospital Coding for Evaluation and Management (E/M) Services
In the proposed rule, we discussed our proposal for developing
coding guidelines for evaluation and management services.
9. Payment for Blood and Blood Products
In the proposed rule, we discussed our proposed payment changes for
blood and blood products.
10. Payment for Observation Services
In the proposed rule, we discussed our proposed criteria and coding
changes for observation services.
11. Procedures That Will Be Paid Only as Inpatient Services
In the proposed rule, we discussed the procedures that we proposed
to remove from the inpatient list and assign to APCs.
12. Indicator Assignments
In the proposed rule, we discussed proposed changes to the list of
status indicators assigned to APCs and presented our comment indicators
that we proposed to use in this final rule with comment period.
13. Nonrecurring Policy Changes
In the proposed rule, we discussed proposed changes in payments for
multiple diagnostic imaging procedures and proposed changes in payment
policy for interrupted procedures.
14. OPPS Policy and Payment Recommendations
In the proposed rule, we addressed recommendations made by MedPAC,
the APC Panel, and the GAO regarding the OPPS for CY 2006.
15. Physician Oversight in Critical Access Hospitals
In the proposed rule, we discussed physician oversight for services
provided by nonphysician practitioners such as physician assistants,
nurse practitioners, and clinical nurse specialists in CAHs.
H. Public Comments Received on the CY 2006 OPPS Proposed Rule
We received over 1,000 timely pieces of correspondence containing
multiple comments on the CY 2006 OPPS proposed rule. Summaries of the
public comments and our responses to those comments are set forth in
the various sections under the appropriate headings.
Comment: One commenter objected to the short time between the end
of the comment period and the effective date of the final rule. The
commenter stated that the brief time period gives inadequate time for
systems and software changes. The commenter asked that the proposed
rule be published July 1 and that the final rule be published no later
than October 1 of each year. The commenter indicated that hospitals
need the extra month to implement the OPPS because it is much more
complex for hospitals to implement than the IPPS.
Response: We understand the commenter's concern about the
difficulty of implementing the annual OPPS update in 60 days. We do our
best to issue the proposed rule and the final rule as promptly as
possible and to make all of the supporting documentation available on
the CMS Web site as soon as we can. However, factors such as the use of
the most recent claims data and cost report data on which we base the
proposed and final rates delay the issuance of the proposed rule and
the final rule. Hospital delays in submission of hospital bills are an
important factor in timing of the OPPS updates as well, because we want
to use as many claims as possible in setting the OPPS rates. Moreover,
we cannot issue the final rule until the HCPCS code files for the
forthcoming year are final because we assign a stataus indicator to
each HCPCS code in the OPPS OCE. The HCPCS files are not final until
they are published in October.
Comment: Commenters asked that CMS include an indirect medical
education adjustment in the OPPS because it is the only major Medicare
payment system that does not include a teaching adjustment. One
commenter asked that CMS conduct a study to determine the special roles
and costs related to medical education and the appropriateness of
including a teaching hospital adjustment.
Response: We have not developed an indirect medical education add-
on payment made under the OPPS because the statute does not provide for
this adjustment, and we are not convinced that it would be appropriate
in a budget-neutral payment system where such changes would result in
reduced payments to all other hospitals. Moreover, in the final rule,
we have developed payment weights that we believe resolve many of the
public concerns regarding appropriate payments for new technology
services and device-dependent procedures, which we believe are
furnished largely by teaching hospitals. In addition, the application
of the wage index adjustment to 60 percent of the APC payment package
(especially for APCs into which expensive devices are packaged) tends
to benefit teaching hospitals, which are predominantly located in hgh-
cost areas. These and other payment changes should help ensure
equitable payment for all hospitals within the constraints of the
statute.
I. Public Comments Received on the November 15, 2004 Final Rule With
Comment Period
We received approximately 55 timely pieces of correspondence on the
November 5, 2004 final rule with comment period, some of which
contained multiple comments on the APC assignment of HCPCS codes
identified with the NI comment indicator in Addendum B of that final
rule with comment period and on the surgical insertion and implantation
device criterion. Summaries of those public comments and our responses
to those comments are set forth in the various sections under the
appropriate headings.
II. Updates Affecting Payments for CY 2006
A. Recalibration of APC Relative Weights for CY 2006
1. Database Construction
a. Database Source and Methodology. Section 1833(t)(9)(A) of the
Act requires that the Secretary review and revise the relative payment
weights for APCs at least annually. In the April 7, 2000 OPPS final
rule (65 FR 18482), we explained in detail how we calculated the
relative payment weights that were implemented on August 1, 2000, for
each APC group. Except for some reweighting due to a small number of
APC changes, these relative payment weights continued to be in effect
for CY 2001. This policy is discussed in the November 13, 2000 interim
final rule (65 FR 67824 through 67827).
In the CY 2005 OPPS proposed rule (70 FR 42680), we proposed to use
the same basic methodology that we described in the April 7, 2000 final
rule to recalibrate the APC relative payment
[[Page 68524]]
weights for services furnished on or after January 1, 2006, and before
January 1, 2007. That is, we would recalibrate the relative payment
weights for each APC based on claims and cost report data for
outpatient services. We proposed to use the most recent available data
to construct the database for calculating APC group weights. For the
purpose of recalibrating APC relative payment weights for CY 2006, we
used approximately 137 million final action claims for hospital OPD
services furnished on or after January 1, 2004, and before January 1,
2005. Of the 137 million final action claims for services provided in
hospital outpatient settings, 109 million claims were of the type of
bill potentially appropriate for use in setting rates for OPPS services
(but did not necessarily contain services payable under the OPPS). Of
the 109 million claims, we were able to use 52.7 million whole claims
to set the proposed OPPS APC relative weights for CY 2006 OPPS. From
the 52.7 million whole claims, we created 87.9 million single records,
of which 54.9 million were ``pseudo'' single claims (created from
multiple procedure claims using the process we discuss in this
section).
As we proposed, the final APC relative weights and payments for CY
2006 in Addenda A and B to this final rule with comment period were
calculated using claims from this period that had been processed before
June 30, 2005, and continue to be based on the median hospital costs
for services in the APC groups. We selected claims for services paid
under the OPPS and matched these claims to the most recent cost report
filed by the individual hospitals represented in our claims data.
We received numerous public comments concerning our proposed data
source and methodology for recalibrating the APC relative weights for
CY 2006. A summary of the comments and our responses are discussed
below.
Comment: Commenters stated that many APC rates fluctuate
dramatically, and the instability in the system makes it very hard for
hospitals to budget and plan services from year to year. Among the
services identified as issues of specific concern were clinic visits,
application of brachytherapy sources, drugs and biologicals, and
device-intensive APCs. Some commenters recommended that CMS limit
increases and decreases for all APCs to no more than a 5-percent shift
(increase or decrease) from one year to another. Commenters emphasized
that fluctuations in payment rates for device-dependent procedures from
year to year impact manufacturers' abilities to contract effectively
with hospitals to provide a stable purchasing environment and, thereby,
impede innovation and adversely impact beneficiaries.
Response: We understand the commenters' concerns about the need for
sufficient stability in the OPPS so that hospitals can plan and budget.
We have given this issue much consideration. We recognize that reliance
on single procedure claims may result in fewer claims for some services
than for others. For example, median costs for services such as office
visits, for which the volume of single bills is very high, would
generally be more stable than the median costs for services for which
we have very few single procedure claims. We will continue to explore
changes we could effectuate to enable us to use even more claims on the
premise that using more claims data will enhance stability.
However, we note that the statutory design of the OPPS and the
rapid evolution in the delivery of outpatient hospital services include
many elements that may be responsible for some of the fluctuation in
rates from year to year. For example, the ``2 times rule'' imposed by
the law requires the movement of some procedures from one APC to
another each year. Moreover, the OPPS is based on procedure coding for
which there are hundreds of changes each year. In addition, the entry
of new technology into a budget neutral payment system results in a
shift of funds away from previously existing services to provide
payments for new services. These systemic factors are valid reflections
of the changes in services in the outpatient department, and shifts in
payment legitimately mirror those changes.
Comment: Commenters stated that the entire OPPS is underfunded
because it pays only 87 percent of the costs of services to Medicare
beneficiaries. One commenter indicated that the underfunding of
services to Medicare patients is particularly severe for
disproportionate share hospitals and hospitals with level I trauma
centers and, therefore, will inhibit access to care for Medicare
beneficiaries and other individuals.
Response: Our early analyses indicated that the OPPS was, in its
inception, based on payment that was less than cost due to statutory
reductions in payment for hospital outpatient costs prior to the
enactment of the BBA, which authorized the current OPPS. Certain
fundamental statutory features of the OPPS dictate such a finding. For
example, the base amounts upon which the OPPS was established, the
rules concerning budget neutrality, and subsequent out-year adjustments
such as annual reductions in coinsurance and adjustments to outlier and
pass-through payment allocations are established in statute and, as
such, would require legislation to amend.
Comment: Commenters supported use of the most recent claims data
for recalibrating the APC relative weights but in many cases wanted CMS
to adjust the claims data for particular services of interest to them
in ways that will result in higher payment for those specified
services. Other commenters supported use of proprietary, confidential
external data in lieu of claims data to set the median costs on which
the rates are based for selected services because they believe that the
use of claims data results in median costs that are less than the costs
of the services being furnished. Some commenters asked CMS to establish
a representative sample of hospitals from which data would be collected
for use in place of claims data or to validate the data derived from
claims.
Response: We believe that, in a budget neutral relative payment
system such as the OPPS, it is important that the relative weights be
based on a uniform source of data processed in a standardized way. We
believe that Medicare claims data are the most uniform data source
available to us. Moreover, the weights derived from such a system are
the vehicles for distributing Medicare payments for outpatient hospital
services fairly among all hospitals that furnish outpatient hospital
services to Medicare beneficiaries. We are committed to using claims
data in a uniform manner, to the maximum extent possible, to develop
the relative weights from which payment rates are calculated. We do not
see a compelling need to use external data to set or adjust median
costs for device-dependent APCs for the CY 2006 OPPS. Therefore, for
the CY 2006 OPPS, we have not substituted external data for Medicare
claims data for the purpose of setting the median costs on which the
relative weights are based.
After carefully considering all comments received, we are
finalizing our data source and methodology for the recalibration of CY
2006 APC relative weights as proposed without modification.
b. Use of Single and Multiple Procedure Claims. For CY 2006, we
proposed to continue to use single procedure claims to set the medians
on which the APC relative payment weights would be based. As noted in
the November 15, 2004 final rule with
[[Page 68525]]
comment period, we have received many requests asking that we ensure
that the data from claims that contain charges for multiple procedures
are included in the data from which we calculate the relative payment
weights (69 FR 65730 through 65731). Requesters believe that relying
solely on single procedure claims to recalibrate APC relative payment
weights fails to take into account data for many frequently performed
procedures, particularly those commonly performed in combination with
other procedures. They believe that, by depending upon single procedure
claims, we base relative payment weights on the least costly services,
thereby introducing downward bias to the medians on which the weights
are based.
We agree that, optimally, it is desirable to use the data from as
many claims as possible to recalibrate the APC relative payment
weights, including those with multiple procedures. We generally use
single procedure claims to set the median costs for APCs because we
are, so far, unable to ensure that packaged costs can be appropriately
allocated across multiple procedures performed on the same date of
service. However, by bypassing specified codes that we believe do not
have significant packaged costs, we are able to use more data from
multiple procedure claims. In many cases, this enables us to create
multiple ``pseudo'' single claims from claims that, as submitted,
contained multiple separately paid procedures on the same claim. We
have used the date of service on the claims and a list of codes to be
bypassed to create ``pseudo'' single claims from multiple procedure
claims the same as we did in recalibrating the CY 2005 APC relative
payment weights. We refer to these newly created single procedure
claims as ``pseudo'' singles because they were submitted by providers
as multiple procedure claims.
For CY 2003, we created ``pseudo'' single claims by bypassing HCPCS
codes 93005 (Electrocardiogram, tracing), 71010 (Chest x-ray), and
71020 (Chest x-ray) on a submitted claim. However, we did not use
claims data for the bypassed codes in the creation of the median costs
for the APCs to which these three codes were assigned because the level
of packaging that would have remained on the claim after we selected
the bypass code was not apparent and, therefore, it was difficult to
determine if the medians for these codes would be correct.
For CY 2004, we created ``pseudo'' single claims by bypassing these
three codes and also by bypassing an additional 269 HCPCS codes in
APCs. We selected these codes based on a clinical review of the
services and because it was presumed that these codes had only very
limited packaging and could appropriately be bypassed for the purpose
of creating ``pseudo'' single claims. The APCs to which these codes
were assigned were varied and included mammography, cardiac
rehabilitation, and Level I plain film x-rays. To derive more
``pseudo'' single claims, we also split the claims where there were
dates of service for revenue code charges on that claim that could be
matched to a single procedure code on the claim on the same date.
As in CY 2003, we did not include the claims data for the bypassed
codes in the creation of the APCs to which the 269 codes were assigned
because, again, we had not established that such an approach was
appropriate and would aid in accurately estimating the median costs for
those APCs. For CY 2004, from about 16.3 million otherwise unusable
claims, we used about 9.5 million multiple procedure claims to create
about 27 million ``pseudo'' single claims. For CY 2005, we identified
383 bypass codes and from approximately 24 million otherwise unusable
claims, we used about 18 million multiple procedure claims to create
about 52 million ``pseudo'' single claims.
For CY 2006, we proposed to continue using date of service matching
as a tool for creation of ``pseudo'' single claims and to continue the
use of a bypass list to create ``pseudo'' single claims. The process we
proposed for CY 2006 OPPS resulted in our being able to use some part
of 90 percent of the total claims that are eligible for use in OPPS
rate-setting and modeling in developing this final rule with comment
period. This process enabled us to use, for CY 2006, 88 million single
bills for rate-setting: 55 million ``pseudo'' singles and 34 million
``natural'' single bills (bills that were submitted containing only one
separately payable major HCPCS code). (These numbers do not sum to 88
million because more than 800,000 single bills were removed when we
trimmed at the HCPCS level at +/-3 standard deviations from the
geometric mean.)
We proposed to bypass the 404 codes identified in Table 1 of the
proposed rule (70 FR 42682) to create new single claims and to use the
line-item costs associated with the bypass codes on these claims in the
creation of the median costs for the APCs into which they are assigned.
Of the codes on that list, 385 were used for bypass in CY 2005. For CY
2006, we proposed to continue the use of the codes on the CY 2005 OPPS
bypass list and expand it by adding those codes that, using data
presented to the APC Panel at its February 2005 meeting, met the same
empirical criteria as those used in CY 2005 to create the bypass list.
Our examination of the data against the criteria for inclusion on the
bypass list, as discussed below for the addition of new codes, shows
that the empirically selected codes used for bypass for the CY 2005
OPPS generally continue to meet the criteria or come very close to
meeting the criteria, and we have received no comments against
bypassing them.
As we proposed, in this final rule with comment period, we used the
following empirical criteria that were developed by reviewing the
frequency and magnitude of packaging in the single claims for payable
codes other than drugs and biologicals. We assumed that the
representation of packaging on the single claims for any given code is
comparable to packaging for that code in the multiple claims:
There were 100 or more single claims for the code. This
number of single claims ensured that observed outcomes were
sufficiently representative of packaging that might occur in the
multiple claims.
Five percent or fewer of the single claims for the code
had packaged costs on that single claim for the code. This criterion
results in limiting the amount of packaging being redistributed to the
payable procedure remaining on the claim after the bypass code is
removed and ensures that the costs associated with the bypass code
represent the cost of the bypassed service.
The median cost of packaging observed in the single claim
was equal to or less than $50. This limits the amount of error in
redistributed costs.
The code is not a code for an unlisted service.
As stated in the proposed rule (70 FR 42681), we also added to the
bypass list three codes (CPT codes 51701, 51702, and 51703 for bladder
catheterization) which do not meet these criteria. These codes have
been packaged and have never been paid separately. For that reason,
when these were the only services provided to the beneficiary, no
payment was made to the hospital. The APC Panel's Packaging
Subcommittee recommended that we make separate payment when they are
the only service on the claim. See section II.A.4. of this preamble for
further discussion of our policy to pay these services separately. We
added these codes to the bypass list because changing them from
packaged to separately paid would result in a reduction of the number
of single bills on which we could base median costs
[[Page 68526]]
for other major separately paid procedures that are billed on the same
claim with these procedure codes. Single bills which contain other
procedures would become multiple procedure claims when these bladder
catheterization codes were converted from packaged to separately paid
status.
As explained in the CY 2006 proposed rule (70 FR 42682), we
examined the packaging on the single procedure claims in the CY 2004
data for these codes. We found that none of these three codes met the
empirical standards for the bypass list. However, we believe that when
these services are performed on the same date as another separately
paid procedure, any packaging that appears on the claim would
appropriately be associated with the other procedures and not with
these codes. Therefore, we believe that bypassing them does not
adversely affect the medians for other procedures. Moreover, future
separate payment for these codes does not harm the hospitals that
furnish these services, in view of the historical absence of separate
payment for them under the OPPS in the past. Hence, we proposed to pay
separately for these codes and to add them to the bypass list for the
CY 2006 OPPS.
In the CY 2006 proposed rule, we specifically invited public
comments on the proposed ``pseudo'' single process, including the
bypass list and the criteria. A summary of the many comments we
received and our responses follow:
Comment: Some commenters supported use of multiple procedure claims
through application of the bypass list and date of service
stratification. Other commenters stated that these processes may result
in more claims but not necessarily better data for rate-setting. Many
commenters objected to the use of single procedure claims as the basis
for setting the relative weights because they believed that using
single procedure claims limits the claims data to the simplest and
least costly cases. They proposed CPT code or APC specific strategies
for using multiple procedure claims in ways that would apply only to
the services of interest to them that could not be generalized across
multiple procedure claims for all services. The commenters indicated
that the use of single procedure claims greatly limits the number of
claims that are used for setting median costs and weights, and that the
OPPS relative weights would be greatly improved if we could use all of
the claims data. They indicated that the use of single procedure claims
causes medians to be set based on incorrectly coded claims for the many
add-on codes that can only be billed properly when they are billed with
the base code to which they are attached. In addition, they indicated
that many services are so routinely furnished in combination with other
services that use of single procedure claims will never result in
appropriate median costs for these procedures.
Response: We share the commenters' desire to use as much claims
data as possible to set the relative weights for the OPPS services. We
continue to explore ways to use more data from multiple procedure
claims. Specifically, we are looking at the extent to which the many
add-on codes (codes that are reported for services furnished only as an
adjunct to another service) can be packaged to create more single
claims. We are also exploring strategies for using data from correctly
coded multiple procedure claims containing both base and add-on codes
to ascertain the incremental costs of the add-on services. We also
expect to explore other generally applicable strategies, such as
apportioning packaging based on submitted charges that would enable us
to use multiple procedure claims.
We are disinclined to focus on service-specific strategies for
using multiple procedure claims because those that have been suggested
to us are not generally applicable to multiple procedure claims across
all services, but rather are focused on increasing the median costs of
particular services to the exclusion of all other services. As we
indicated above, we believe that it is important in a relative weight
system that, to the maximum extent possible, the same claims and the
same processing rules apply to all services so that the resulting
relative weights are uniformly created and serve all hospitals fairly.
Comment: One commenter asked why only some of the office visit and
consultation services are included in the bypass list (for example, CPT
codes 99213 and 99214 are on the list) but CPT codes 99211, 99212 and
99215 are not. The commenter believed that the cited unlisted codes
should also be on the list. Other commenters did not believe that CPT
codes 99213 and 99214 met the criteria for inclusion as bypass codes
and believed that they should be removed from the list.
Response: We have included below data calculated from the APC Panel
data for use in setting the bypass list for the CY 2006 proposed rule
and this final rule with comment period. These data show that CPT codes
99213 and 99214 meet the criteria for inclusion as bypass codes, and
that CPT codes 99211, 99212 and 99215 exceed the 5-percent limit for
single bills containing packaging:
------------------------------------------------------------------------
Percent of
Median amount single bills
HCPCS Short descriptor of packaging for the code
on single containing
bills packaging
------------------------------------------------------------------------
99211................. Office/ $11.98 6.15
outpatient
visit, est.
99212................. Office/ 10.88 5.43
outpatient
visit, est.
99213................. Office/ 11.72 3.87
outpatient
visit, est.
99214................. Office/ 12.76 3.63
outpatient
visit, est.
00215................. Office/ 12.76 8.62
outpatient
visit, est.
------------------------------------------------------------------------
Comment: Commenters supported the use of the bypass list but were
concerned that the inclusion of services on the bypass list may
systematically result in lower costs for the procedures that are
included on the list than if they had not been included on the list.
Response: We established the bypass list criteria for the purpose
of limiting any potential adverse impact on the medians for the
services on the bypass list. We believe that the requirement that a
code cannot be placed on the bypass list if more than 5 percent of the
single bills for that code contain packaging or if the median packaging
for the code exceeds $50, is a strong deterrent to systematic reduction
of medians for services on the bypass list. We have received no
comments on the appropriateness or inappropriateness of the bypass
criteria, and thus, we have not changed them for the CY 2006 OPPS.
Comment: Commenters asked CMS to carefully consider the impact of
add-on codes on the creation of multiple
[[Page 68527]]
procedure claims and urged CMS to not disqualify a claim because of the
presence of an add-on code that is packaged. In the case of add-on
codes that are separately paid, one commenter urged CMS to apportion
the packaged charges between the base code and the add-on code so that
the data from the multiple procedure claim can be used. Some commenters
asked CMS to place all add-on codes, both packaged and separately paid,
on the bypass list to create more single procedure claims.
Response: The presence of an add-on code with a status indicator of
``N'' because it is a packaged service does not currently disqualify
the claim as a multiple procedure claim. The claim is considered to be
a single procedure claim and the cost of the packaged add-on code is
treated like any other packaged drug, device, or supply or other
packaged cost. However, the presence of an add-on code that is
separately paid but not on the bypass list does currently cause the
claim to be a multiple procedure claim that is not used because of the
difficulties in determining how to apportion the packaging on the claim
between the two separately paid procedure codes.
We disagree that all add-on codes could safely be added to the
bypass list. Many add-on codes use significant resources that are
reported as packaged charges in support of the add-on code. For
example, CPT code 33225 (Left ventricular lead add-on) requires more
than an hour of additional operating room time and also requires a
device with significant cost when the service is furnished in
conjunction with a base service. If we were to include CPT code 33225
on the bypass list, only the line-item charge for the CPT code would be
attributed to the procedure code. Neither the device cost (which is
packaged), nor the share of other costs attributable to the service
(for example, drugs, supplies, and extended operating room time) would
be attributed to CPT code 33225. They would both be packaged into the
base code. The single procedure claims for CPT code 33225 would not
reflect the costs of the device or extended operating room time. In
addition, the single procedure claims for the base code would reflect
packaging that is not properly associated with that procedure.
However, we recognize that the add-on codes present a significant
data problem because they can never be correctly billed unless they are
also billed on the same claim with a base code to which they add
services. We are undertaking a study of add-on codes to determine
whether there are add-on codes that are now separately paid that should
become packaged, and thus would provide more single procedure claims.
With respect to the add-on codes for which packaging is not
appropriate, we will be exploring methods that would enable us to
systematically calculate valid median costs for the add-on codes from
multiple procedure claims and thus create a more robust set of valid
claims for rate-setting. We anticipate working with the APC Panel
members on this issue.
Comment: Commenters asked CMS to assign a flag to claims that
became pseudo singles in the claims included in the public use files so
that it would be easier for commenters to model future proposed
policies.
Response: The public use files (the limited data set and the
beneficiary encrypted data set) contain claims as submitted to CMS.
Therefore, to flag the pseudo single claims in the public use file is
not possible because the pseudo single claims may be part, but not all,
of the submitted claim. Even if we did flag the claim, the user would
still have to replicate the process to create pseudo single claims. We
note that we have greatly increased the information we issued regarding
how we process the claims to acquire the median costs, and we
understand that outside replication of our medians has improved.
Comment: Commenters asked whether CMS disregards line item charges
for drugs, biologicals, and radiopharmaceutical agents and items with
status indicators ``K'' and ``G'' for purposes of creating pseudo
singles claims.
Response: The presence on a claim of a code and charge for a drug,
biological, or radiopharmaceutical agent, whether separately paid or
packaged, has no impact on determining whether the claim is a single
procedure claim.
After carefully considering all public comments received, we are
adopting as final the proposed ``pseudo'' single process and the bypass
codes listed in Table 1 without modification.
BILLING CODE 4120-01-P
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BILLING CODE 4120-01-C
2. Calculation of Median Costs for CY 2006
In this section of the preamble, we discuss the use of claims to
calculate the OPPS payment rates for CY 2006. The hospital outpatient
prospective payment page on the CMS Web site on which this final rule
with comment period is posted provides an accounting of claims used in
the development of the final rates: http://www.cms.hhs.gov/providers/hopps. The accounting of claims used in the development of this final
rule with comment period is included on the Web site under supplemental
materials for the CY 2006 final rule with comment period. That
accounting provides additional detail regarding the number of claims
derived at each stage of the process. In addition, below we discuss the
files of claims that comprise the data sets that are available for
purchase under a CMS data user contract. Our CMS Web site, http://www.cms.hhs.gov/providers/hopps, includes information about purchasing
the following two OPPS data files: ``OPPS Limited Data Set'' and ``OPPS
Identifiable Data Set.''
As we proposed, we used the following methodology to establish the
relative weights to be used in calculating the OPPS payment rates for
CY 2006 shown in Addendum A and in Addendum B to this final rule with
comment period. This methodology is as follows:
We used outpatient claims for the full CY 2004 to set the relative
weights for CY 2006. To begin the calculation of the relative weights
for CY 2006, we pulled all claims for outpatient services furnished in
CY 2004 from the national claims history file. This is not the
population of claims paid under the OPPS, but all outpatient claims
(including, for example, CAH claims, and hospital claims for clinical
laboratory services for persons who are neither inpatients nor
outpatients of the hospital).
We then excluded claims with condition codes 04, 20, 21, and 77.
These are claims that providers submitted to Medicare knowing that no
payment will be made. For example, providers submit claims with a
condition code 21 to elicit an official denial notice from Medicare and
document that a service is not covered. We then excluded claims for
services furnished in Maryland, Guam, and the U.S. Virgin Islands
because hospitals in those geographic areas are not paid under the
OPPS.
We divided the remaining claims into the three groups shown below.
Groups 2 and 3 comprise the 109 million claims that contain hospital
bill types paid under the OPPS.
1. Claims that were not bill types 12X, 13X, 14X (hospital bill
types), or 76X (CMHC bill types). Other bill types are not paid under
the OPPS and, therefore, these claims were not used to set OPPS
payment.
2. Claims that were bill types 12X, 13X, or 14X (hospital bill
types). These claims are hospital outpatient claims.
3. Claims that were bill type 76X (CMHC). (These claims are later
combined with any claims in item 2 above with a condition code 41 to
set the per diem partial hospitalization rate determined through a
separate process.)
For the cost-to-charge ratio (CCR) calculation process, we used the
same approach as we used in developing the final APC rates for CY 2005
(69 FR 65744). That is, we first limited the population of cost reports
to only those for hospitals that filed outpatient claims in CY 2004
before determining whether the CCRs for such hospitals were valid. This
initial limitation changed the distribution of CCRs used during the
trimming process discussed below.
We then calculated the CCRs at a departmental level and overall for
each hospital for which we had claims data. We did this using hospital-
specific data from the Healthcare Cost Report Information System
(HCRIS). We used the most recent available cost report data, in most
cases, cost reports for CY 2002 or CY 2003. For this final rule with
comment period, we used the most recent cost report available, whether
submitted or settled. If the most recent available cost report was
submitted but not settled, we looked at the last settled cost report to
determine the ratio of submitted to settled cost, and we then adjusted
the most recent available submitted but not settled cost report using
that ratio.
The overall hospital-specific CCR is the total of costs and charges
in those cost centers where we believe that a significant portion of
the costs and charges are for services paid under the OPPS. We have
included the list of the cost centers that we use in our overall CCR
calculation on our Web site along with our cost center to revenue code
crosswalk, which we discuss below. We do not include the costs and
charges generated by nursing schools or paramedical education programs
in our cost and charge totals.
We then flagged CAH claims, which are not paid under the OPPS, and
claims from hospitals with invalid CCRs. The latter included claims
from hospitals without a CCR; those from hospitals paid an all-
inclusive rate; those from hospitals with obviously erroneous CCRs
(greater than 90 or less than .0001); and those from hospitals with
CCRs that were identified as outliers (3 standard deviations from the
geometric mean after removing error CCRs). In addition, we trimmed the
CCRs at the departmental level by removing the CCRs for each cost
center as outliers if they exceeded +/-3 standard deviations of the
geometric mean. This is the same methodology that we used in developing
the final CY 2005 CCRs. For CY 2006, as proposed, we trimmed at the
departmental CCR level to eliminate aberrant CCRs that, if found in
high volume hospitals, could skew the medians. We used a four-tiered
hierarchy of cost center CCRs to match a cost center to a revenue code,
with the top tier being the most common cost center and the last tier
being the default CCR. If a hospital's departmental CCR was deleted by
trimming, we set the departmental CCR for that cost center to
``missing,'' so that another departmental CCR in the revenue center
hierarchy could apply. If no other departmental CCR could apply to the
revenue code on the claim, we used the hospital's overall CCR for the
revenue code in question. The hierarchy of CCRs is available for
inspection and comment at the CMS Web site: http://www.cms.hhs.gov/providers/hopps/default.asp.
We then converted the charges on the claim by applying the CCR that
we believed was best suited to the revenue code indicated on the line
with the charge. Table 2 of the proposed rule (70 FR 42690) contained a
list of the allowed revenue codes. Revenue codes not included in Table
2 are those not allowed under the OPPS because their services cannot be
paid under the OPPS (for example, inpatient room and board charges)
and, thus charges with those revenue codes were not packaged for
creation of the OPPS median costs. If a hospital did not have a CCR
that was appropriate to the revenue code reported for a line-item
charge (for example, a visit reported under the clinic revenue code,
but the hospital did not have a clinic cost center), we applied the
hospital-specific overall CCR, except as discussed in section X. of
this preamble for calculation of costs for blood.
Thus, we applied CCRs as described above to claims with bill types
12X, 13X, or 14X, excluding all claims from CAHs and hospitals in
Maryland, Guam, and the U.S. Virgin Islands, and claims from all
hospitals for which CCRs were flagged as invalid.
We identified claims with condition code 41 as partial
hospitalization services of CMHCs and moved them to
[[Page 68538]]
another file. These claims were combined with the 76X claims identified
previously to calculate the partial hospitalization per diem rate.
We then excluded claims without a HCPCS code. We also moved claims
for observation services to another file. We moved to another file
claims that contained nothing but flu and pneumococcal pneumonia
(``PPV'') vaccine. Influenza and PPV vaccines are paid at reasonable
cost and, therefore, these claims are not used to set OPPS rates. We
note that the two above mentioned separate files containing partial
hospitalization claims and the observation services claims are included
in the files that are available for purchase as discussed above.
We next copied line-item costs for drugs, blood, and devices (the
lines stay on the claim, but are copied off onto another file) to a
separate file. No claims were deleted when we copied these lines onto
another file. These line-items are used to calculate the per unit
median for drugs, radiopharmaceutical agents, and blood and blood
products. The line-item costs were also used to calculate the per
administration cost of drugs, biologicals (other than blood and blood
products), and radiopharmaceutical agents.
We then divided the remaining claims into five groups.
1. Single Major Claims: Claims with a single separately payable
procedure, all of which would be used in median setting.
2. Multiple Major Claims: Claims with more than one separately
payable procedure or multiple units for one payable procedure. As
discussed below, some of these can be used in median setting.
3. Single Minor Claims: Claims with a single HCPCS code that is not
separately payable. These claims may have a single packaged procedure
or a drug code.
4. Multiple Minor Claims: Claims with multiple HCPCS codes that are
not separately payable without examining dates of service. For example,
pathology codes are not used unless the pathology service is the single
code on the bill or unless the pathology code is on a separate date of
service from the other procedure on the claim. The multiple minor file
has claims with multiple occurrences of pathology codes, with packaged
costs that cannot be appropriately allocated across the multiple
pathology codes. However, by matching dates of service for the code and
the reported costs through the ``pseudo'' single creation process
discussed earlier, a claim with multiple pathology codes may become
several ``pseudo'' single claims with a unique pathology code and its
associated costs on each day. These ``pseudo'' singles for the
pathology codes would then be considered a separately payable code and
would be used the same as claims in the single major claim file.
5. Non-OPPS Claims: Claims that contain no services payable under
the OPPS. These claims are excluded from the files used for the OPPS.
Non-OPPS claims have codes paid under other fee schedules, for example,
durable medical equipment or clinical laboratory.
We note that the claims listed in numbers 1, 2, 3, and 4 above are
included in the data files that can be purchased as described above.
We set aside the single minor claims and the non-OPPS claims
(numbers 3 and 5 above) because we did not use either in calculating
median cost. We then examined the multiple major and multiple minor
claims (numbers 2 and 4 above) to determine if we could convert any of
them to single major claims using the process described previously. We
first grouped items on the claims by date of service. If each major
procedure on the claim had a different date of service and if the line-
items for packaged HCPCS and packaged revenue codes had dates of
service, we split the claim into multiple ``pseudo'' single claims
based on the date of service.
After those single claims were created, we used the list of
``bypass codes'' listed in Table 1 of the proposed rule and this final
rule with comment period to remove separately payable procedures that
we determined contain limited costs or no packaged costs from a
multiple procedure bill. A discussion of the creation of the list of
bypass codes used for the creation of ``pseudo'' single claims is
contained in section II.A.1.b. of this preamble.
When one of the two separately payable procedures on a multiple
procedure claim was on the bypass code list, we split the claim into
two single procedure claims records. The single procedure claim record
that contained the bypass code did not retain packaged services. The
single procedure claim record that contained the other separately
payable procedure (but no bypass code) retained the packaged revenue
code charges and the packaged HCPCS charges. This enables us to use a
claim that would otherwise be a multiple procedure claim and could not
be used.
We excluded those claims that we were not able to convert to
singles even after applying both of the techniques for creation of
``pseudo'' singles. We then packaged the costs of packaged HCPCS codes
(codes with status indicator ``N'' listed in Addendum B to this final
rule with comment period) and packaged revenue codes into the cost of
the single major procedure remaining on the claim. The list of packaged
revenue codes is shown below in Table 2. These are the same as those
published in Table 2 of the proposed rule (70 FR 42690).
After removing claims for hospitals with error CCRs, claims without
HCPCS codes, claims for immunizations not covered under the OPPS, and
claims for services not paid under the OPPS, 58.4 million claims were
left. Of these million claims, we were able to use some portion of 52.7
million whole claims (90.24 percent of the potentially usable claims)
to create the 88 million single and ``pseudo'' single claims for use in
the CY 2006 median payment rate-setting.
We also excluded (1) claims that had zero costs after summing all
costs on the claim and (2) claims containing token charges (charges of
less than $1.01) or for which intermediary systems had allocated
charges as if the charges were submitted on the claim. We deleted
claims containing token charges because we do not believe that a charge
of less than $1.01 would yield a cost that would be valid to set
weights for a significant separately paid service. Moreover, effective
for services furnished on or after July 1, 2004, the OCE assigns
payment flag number 3 to claims on which hospitals submitted token
charges for a service with status indicator ``S'' or ``T'' (a major
separately paid service under OPPS) for which the intermediary is
required to allocate the sum of charges for services with a status
indicator equaling ``S'' or ``T'' based on the weight for the APC to
which each code is assigned. We do not believe that these charges,
which were token charges as submitted by the hospital, are valid
reflections of hospital resources. Therefore, we deleted these claims.
For the remaining claims, we then wage adjusted 60 percent of the
cost of the claim (which we have previously determined to be the labor-
related portion), as has been our policy since the initial
implementation of the OPPS, to adjust for geographic variation in
labor-related costs. We made this adjustment by determining the wage
index that applied to the hospital that furnished the service and
dividing the cost for the separately paid HCPCS code furnished by the
hospital by that wage index. As has been our policy since the inception
of the OPPS, we use the pre-reclassified wage indices for
standardization because we believe that they better reflect the true
costs of items and services in the area in which the hospital is
located than the post-
[[Page 68539]]
reclassification wage indices, and would result in the most accurate
adjusted median costs.
We then excluded claims that were outside 3 standard deviations
from the geometric mean cost for each HCPCS code. We used the remaining
claims to calculate median costs for each separately payable HCPCS
code; first, to determine the applicability of the ``2 times'' rule,
and second, to determine APC medians based on the claims containing the
HCPCS codes assigned to each APC. As stated previously, section
1833(t)(2) of the Act provides that, subject to certain exceptions, the
items and services within an APC group cannot be considered comparable
with respect to the use of resources if the highest median (or mean
cost, if elected by the Secretary) for an item or service in the group
is more than 2 times greater than the lowest median cost for an item or
service within the same group (``the 2 times rule''). Finally, we
reviewed the medians and reassigned HCPCS codes to different APCs as
deemed appropriate. Section III.B. of this preamble includes a
discussion of the HCPCS code assignment changes that resulted from
examination of the medians and for other reasons. The APC medians were
recalculated after we reassigned the affected HCPCS codes.
A detailed discussion of the medians for blood and blood products
is included in section X. of this preamble. A discussion of the medians
for APCs that require one or more devices when the service is performed
is included in section IV.A. of this preamble. A discussion of the
median for observation services is included in section XI. of this
preamble and a discussion of the median for partial hospitalization is
included below in section II.B. of this preamble.
We received a number of public comments concerning our proposed
data processes for calculating the CY 2006 OPPS relative weights and
median costs. A summary of the comments and our responses follow:
Comment: Commenters stated that the proposed rule did not provide
adequate information for hospitals to evaluate the impact of each of
the proposed policy changes independently or in combination. They
requested that CMS provide a public use file that shows the impact of
each individual proposed change in methodology so that providers can
determine how the changes would affect their own operations and provide
a basis for comments.
Response: We currently provide provider-specific tables that we
understand are very accurate in estimating the payments individual
hospitals will receive. While we wish to make available to the public
as much hospital-specific information as possible, there are limits to
the resources available to us to provide hospital-specific information.
Generally, we provide a broad range of information to the public. We
make available our claims data in the form of both a limited data set
and a beneficiary encrypted data set for use by the public, including
hospitals. In addition, in both the OPPS proposed and final rules each
year, we give a detailed description of how we process the paid claims
to derive the median costs and how we create relative weights from the
median costs. Many different organizations with a broad range of
divergent interests currently use this information provided to the
public to generate extraordinarily detailed reports and data of
interest to them. As this is public information, we would expect that
hospital associations and hospitals could do the same, either directly
or using alternative sources to determine the impact of various policy
options.
Comment: One commenter strongly opposed the requirement that all
OPPS encounters furnished on the same day must be billed on a single
claim. Some commenters believed that this increases the number of
claims that cannot be used for ratesetting by creating multiple
procedure claims and creates a needless burden on hospitals to ensure
that all encounters on the same date of service are billed on the same
claim.
Response: We agree and we have revised our policy governing how
services on the same date of service must be billed. See Change Request
4047, Transmittal 711, dated October 14, 2005 for a complete discussion
of our current policy. Under this change in policy, there are instances
where nonrepetitive OPPS services that are furnished on the same date
of service may be billed on different claims as long as all charges
that pertain to each service are also reported on the same claim as the
HCPCS code that describes that service. We emphasize that it is vitally
important to us that all of the charges that pertain to a separately
paid service be included on the same claim with the service being
billed so that the claim will accurately reflect the full cost of the
service. If, for example, charges for a packaged drug, recovery room
time, and sterile supplies that were used in providing a surgical
service are not included on the claim with the HCPCS code and line-item
charge for the use of the operating room for the surgical procedure,
those charges for drugs, recovery room, and supplies will not be
packaged with the charge for the OR time for the surgical procedure and
that claim will incorrectly and inadvertently lower the median cost for
that surgical procedure. This is especially the case if the service is
a low volume service. Also, this revised billing policy cannot apply to
services for which we use claim-specific OCE logic to determine
payments, such as drug administration and observation services, because
the OCE claim-by-claim logic cannot function properly if all services
provided by a hospital that are related to the services subject to the
OCE logic are not reported on the same claim.
Comment: One commenter supported deletion of claims with token or
nominal charges (for example, a very small charge such as $1) but was
concerned about exclusion of claims containing multiple surgical or
cardiac catheterization services because such exclusions may
significantly reduce the number of claims used for rate-setting. The
commenter noted that CMS has long permitted hospitals to show a token
charge on the line-item with separately paid procedures when they were
performed at the same session as a surgical procedure for which a
charge is shown as operating room time. Another commenter wanted claims
that contain a single payable APC line to be included even if there are
token charges on other nonpayable lines on the claim.
Response: The submission of claims for multiple separately paid
procedures with the same date of service on which there is a charge for
operating room time for one of the HCPCS codes and token charges on the
lines for the other separately paid HCPCS codes reflects a difficulty
with using multiple procedure claims. (For example, a claim contains
three separately paid surgical services, with a charge of $2,000 for
one and charges of $1 for each of the others, plus a single charge each
for drugs, sterile supplies, and recovery room time.) We note if we
were to use such claims and allocate packaging to each separately paid
procedure (on some basis yet to be determined) and then divide the
claim into multiple claims, we would be using claims records that would
contain nothing but packaged costs and a token charge for some of those
services. Similarly, if we were to focus solely on the procedure with
the line charge of $2,000 and attribute all the packaging to it, we
would be overstating the packaging for that service because some of it
rightfully belongs with the other two separately paid procedures for
which there was a token charge. We acknowledge the commenters' concern
and we will continue to pursue an
[[Page 68540]]
appropriate way to allocate the costs on these types of claims.
After carefully reviewing all public comments received, we are
finalizing the process for calculating median costs and the list of
packaged services shown in Table 2 for OPPS services furnished on or
after January 1, 2006, as proposed without modification. Table 2
contains the list of packaged services by revenue code that we used in
developing the APC relative weights listed in Addenda A and B of this
final rule with comment period.
We note that comments and responses regarding aspects of median
cost and relative weight calculations specific to particular services
or particular categories of services are also found in specifically
identified sections of this preamble.
BILLING CODE 4120-01-C
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BILLING CODE 4120-01-P
3. Calculation of Scaled OPPS Payment Weights
Using the median APC costs discussed previously, we calculated the
final relative payment weights for each APC for CY 2006 shown in
Addenda A and B to this final rule with comment period. As in prior
years, we scaled all the relative payment weights to APC 0601 (Mid
Level Clinic Visit) because it is one of the most frequently performed
services in the hospital outpatient setting. We assigned APC 0601 a
relative payment weight of 1.00 and divided the median cost for each
APC by the median cost for APC 0601 to derive the relative payment
weight for each APC. Using CY 2004 data, the median cost for APC 0601
is $60.19 for CY 2006.
Section 1833(t)(9)(B) of the Act requires that APC reclassification
and recalibration changes, wage index changes, and other adjustments be
made in a manner that assures that aggregate payments under the OPPS
for CY 2006 are neither greater than nor less than the aggregate
payments that would have been made without the changes. To comply with
this requirement concerning the APC changes, we compared aggregate
payments using the CY 2005 relative weights to aggregate payments using
the CY 2006 final relative weights. Based on this comparison, we
adjusted the relative weights for purposes of budget neutrality. The
unscaled relative payment weights were adjusted by 1.012508103 for
budget neutrality. The final relative payment weights are listed in
Addenda A and B to this final rule with comment period. The final
relative payment weights incorporate the recalibration adjustments
discussed in sections II.A.1. and 2. of this preamble.
Section 1833(t)(14)(H) of the Act, as added by section 621(a)(1) of
Pub. L. 108-173, states that ``Additional expenditures resulting from
this paragraph shall not be taken into account in establishing the
conversion factor, weighting and other adjustment factors for 2004 and
2005 under paragraph (9) but shall be taken into account for subsequent
years.'' Section 1833(t)(14) of the Act provides the payment rates for
certain ``specified covered outpatient drugs.'' Therefore, the cost of
those specified covered outpatient drugs (as discussed in section V. of
this preamble) is included in the budget neutrality calculations for CY
2006 OPPS.
Under section 1833(t)(16)(C) of the Act, as added by section
621(b)(1) of Pub. L. 108-173, payment for devices of brachytherapy
consisting of a seed or seeds (or radioactive source) is to be made at
charges adjusted to cost for services furnished on or after January 1,
2004, and before January 1, 2006. As we stated in our January 6, 2004
interim final rule, charges for the brachytherapy sources will not be
used in determining outlier payments and payments for these items will
be excluded from budget neutrality calculations for the CY 2006 OPPS.
(We provide a discussion of brachytherapy payment issues at section
VII. of this final rule with comment period.)
Comment: One commenter indicated that CMS should convene a panel to
look at additional data submission requirements that the panel believes
would greatly enhance both the reliability of the data and its
subsequent use for ratesetting. Specifically, the commenter urged CMS
to consider whether to require hospitals to identify the APCs that
apply to multiple procedure claims or develop a system that groups
multiple procedure claims in a fashion that is analogous to the
inpatient prospective payment system.
Response: We fail to understand how hospital reporting of the APCs
that apply to services on claims would resolve the issue of how to
distribute packaged costs, such as drugs and recovery room time, among
multiple procedures billed on the same claim. Therefore, we do not
support imposing this reporting burden on hospitals. With respect to
grouping procedures into combination APCs for purposes of dealing
effectively with services that commonly appear in specific combinations
together on claims, we proposed creation of combination APCs for the CY
2004 OPPS to deal with very frequent combinations of services. While we
chose not to implement this approach for the CY 2004 OPPS, largely in
response to public comments, we have not ruled out such an approach in
the future as a way to effectively calculate median costs and set
payment rates for services for which the norm is provision in
combinations with other services.
4. Changes to Packaged Services
a. Background. Payments for packaged services under the OPPS are
bundled into the payments providers receive for separately payable
services provided on the same day. Packaged services are identified by
the status indicator ``N.'' Hospitals include charges for packaged
services on their claims, and the costs associated with these packaged
services are then bundled into the costs for separately payable
procedures on the claims for purposes of median cost calculations.
Hospitals may use CPT codes to report any packaged services that were
performed, consistent with CPT coding guidelines.
As a result of requests from the public, a Packaging Subcommittee
to the APC Panel was established to review all the procedural CPT codes
with a status indicator of ``N.'' Providers have often suggested that
many packaged services could be provided alone, without any other
separately payable services on the claim, and requested that these
codes not be assigned status indicator ``N.'' As stated in the proposed
rule, the Packaging Subcommittee reviewed every code that was packaged
in the CY 2004 OPPS (70 FR 42691). Based on comments we have received
and their own expert judgment, the subcommittee identified a set of
packaged codes that are often provided separately and subsequently
reviewed utilization and median cost data for these codes. One of the
main criteria utilized by the Packaging Subcommittee to determine
whether a code should become unpackaged was how likely it was for the
code to be billed without any other separately payable services on the
claim. Another criterion used to determine whether a code should become
unpackaged was how likely it was for the costs of the packaged code to
be appropriately mapped to the separately payable codes with which it
was performed. The Packaging Subcommittee also examined median costs
from hospital claims for packaged services.
The Packaging Subcommittee identified areas for change for some
packaged CPT codes that they believed could frequently be provided to
patients as the sole service on a given date and that required
significant hospital resources as determined from hospital claims data.
During the February 2005 meeting, the APC Panel accepted the report of
the Packaging Subcommittee and recommended:
(1) That packaged codes be reviewed by the Panel individually.
(2) That the Packaging Subcommittee continue to meet throughout the
year to discuss problematic packaged codes.
(3) That CMS assign a modifier to CPT codes 36540 (Collect blood,
venous device); 36600 (Withdrawal of arterial blood); and 51701
(Insertion of non-indwelling bladder catheter), for use when there are
no other separately payable codes on the claim. The modifier would flag
the OCE to assign payment to the claim.
(4) That CMS maintain the current packaged status indicator for CPT
code 76937 (Ultrasound guidance for vascular access).
[[Page 68543]]
(5) That CMS change the status indicators for CPT immunization
administration codes 90471 and 90472 to allow separate payment and
ensure consistency with other injection codes.
(6) That CMS gather more data on CPT code 94762 (Overnight pulse
oximetry) to determine how often this code is billed without any other
separately payable codes and whether it is performed more frequently
alone in rural settings than other settings.
(7) No changes to the packaged status of CPT codes 77790 (Radiation
source handling) and 94760 and 94761 (both codes are for procedures to
measure blood oxygen levels).
(8) That CMS provide education and consistent guidelines to
providers and fiscal intermediaries on correct billing for packaged
codes in general, and in particular for CPT codes 36540, 36600, 51701,
and the recommended modifier, if approved.
(9) That the Packaging Subcommittee review CPT codes 42550
(Injection for salivary x-ray) and 38792 (Sentinel node imaging).
(10) That CPT code 97602 (Nonselective wound care) be referred to
the Physician Payment Group within CMS for evaluation of its bundled
status as it relates to services provided under the OPPS and that the
Physician Payment Group report its conclusions back to the Panel.
In addition, during its August 2005 meeting, the APC Panel accepted
the report of the Packaging Subcommittee and made the following
recommendations:
(1) No change to the CY 2005 status indicator of 76937 (N-
packaged), ultrasound guidance for vascular access, but requested that
CMS collect available hospital claims data on that code for further
consideration by the Packaging Subcommittee at the next available
meeting.
(2) No change to the CY 2005 status indicator of CPT code 38792 (N-
packaged), sentinel node identification, but requested that CMS collect
available hospital claims data on that code for further consideration
by the Packaging Subcommittee by the next scheduled meeting.
(3) No change to the CY 2005 status indicator of CPT code 42550 (N-
packaged), injection for salivary x-ray.
(4) That CMS collect additional data on CPT code 36500, venous
catheterization for selective blood organ sampling, and the
corresponding radiological supervision and interpretation code, 75893,
including a list of other codes with which these codes are most
frequently billed, for consideration by the Packaging Subcommittee.
(5) No change to the CY 2005 status indicator of CPT code 0069T (N-
packaged), acoustic heart sound services.
(6) That CMS collect additional data on CPT 94762, overnight pulse
oximetry, including a list of other codes with which this code is most
frequently billed, for consideration by the Packaging Subcommittee.
b. Responses to the APC Panel Recommendations
For CY 2006, we proposed to maintain CPT codes 36540 (Collect blood
venous device) and 36600 (Withdrawal of arterial blood) as packaged
services and not adopt the APC Panel's recommendation to assign a
modifier to the codes. We noted in our proposed rule that CPT code
36540 was also bundled under the Medicare Physician Fee Schedule
(MPFS), and our data demonstrated that the service was generally billed
with other separately payable services (70 FR 42691). We also had
relatively few single claims for CPT code 36600, compared to the
procedure's overall frequency. Both of these codes had relatively low
hospital resource utilization. As these procedures were almost always
provided with other separately payable services, hospitals' payments
for those other services included the costs of CPT codes 36540 and
36600. With respect to the APC Panel's recommendation that the OPPS
make payment for one of these services if the code had a modifier
appended signifying that it was the only service provided on a day,
there is currently no appropriate CPT modifier that could be appended
to signal this circumstance. A new HCPCS modifier would not be
appropriate because the packaged codes recommended by the APC Panel for
separate payment when billed alone are CPT codes.
We received a few public comments concerning this proposal.
Comment: Commenters stated that CPT 36540 should not be assigned
status indicator ``N'' because drawing blood for laboratory work from a
venous access device requires that a registered nurse assess the
patient and then use a sterile kit to perform the blood draw. They
objected to having to report an E/M visit code in order to receive
payment for the service when it is the only service provided. The
commenters requested that CMS assign the proposed status indicator
``Q'' for CPT code 36540 so that the OPPS could make payment when it is
the only service provided. Similarly, at least one commenter asked that
CMS assign the ``Q'' status indicator to CPT code 36600.
Response: We continue to believe that the services described by CPT
codes 36540 and 36600 are almost always provided in conjunction with
other separately payable services in the hospital outpatient department
setting. Our data do not support making these services separately
payable. We proposed the new ``Q'' status indicator for services that
may be separately payable or packaged depending on special
circumstances for CY 2006 only for observation services. Codes assigned
this status indicator will require the application of OCE logic to
determine the codes' payment status and identify separate payment if
appropriate, and then application of the same logic in our data
processing to develop median costs for those services for future OPPS
updates. We seek to gain some experience with such logic in the OCE and
our data processing for observation services prior to considering any
expansion of the use of status indicator ``Q.'' Use of the ``Q''
modifier for procedures that are sometimes packaged would require
ongoing maintenance of a list of codes for which this status indicator
may be used and their APC assignments if separately paid, as well as
additional claims and data processing activities.
After carefully reviewing all comments received, for CY 2006 we are
adopting as final without modification our proposal to retain CPT codes
36540 and 36600 as packaged services and not adopt the APC Panel's
recommendation to assign a modifier for use when the services are
provided with no other separately payable services on the same day.
For CY 2006, we proposed to pay separately for CPT code 51701
(Insertion of non-indwelling bladder catheter), and to map it to APC
0340 (Minor Ancillary Procedures), with status indicator ``X'', and a
median cost of $39.00. The APC Panel recommended that we pay separately
for this code only when there are no other separately payable services
on the claim. However, we proposed to pay separately for this code
every time it is billed. We believed that it was more appropriate to
make payment for each procedure, rather than increase hospitals'
administrative burden by requiring specific coding changes to indicate
that there were no other separately payable procedures on the claim.
Based on our review of the data, the cost for this procedure was not
insignificant, and the volume of single and multiple claims was modest.
When we reviewed related codes, including CPT code 51702 (Insertion of
temporary
[[Page 68544]]
indwelling bladder catheter, simple) and CPT code 51703 (Insertion of
temporary indwelling bladder catheter, complicated), we noted that
these codes also had substantial median costs and a moderate volume of
single claims. Therefore, for CY 2006, we proposed to pay separately
for CPT codes 51702 and 51703, mapping them to APC 0340 with a median
cost of $39.00 and APC 0164 (Level I Urinary and Anal Procedures) with
a median cost of $72.00, respectively. We proposed that CPT codes
51701, 51702, and 51703 be placed on the bypass list, as discussed in
section II.A.1.b. of this final rule with comment period.
The comments we received supported our proposal. Accordingly, we
are finalizing our proposal to pay separately for CPT codes 51701 and
51702, and to assign them to APC 0340 with status indicator ``X,'' and
a median cost of $36.00 for CY 2006. We are also finalizing our
proposal to pay separately for CPT code 51703, and to assign it to APC
0164 with status indicator ``T,'' and a median cost of $69.00 for CY
2006.
For CY 2006, we proposed to accept the APC Panel recommendation
that CPT code 76937 (Ultrasound guidance for vascular access) remain
packaged. We were concerned that there might be unnecessary overuse of
this procedure if it were separately payable. In addition, we believed
that the service would always be provided with another separately
payable procedure, so its costs would be appropriately bundled with the
definitive vascular access service. As stated in the CY 2005 final rule
with comment period (69 FR 65697), CMS and the Packaging Subcommittee
reviewed CY 2004 claims data for CPT code 76937 and determined that
this code should remain packaged.
We received several public comments in response to our proposal.
Comment: A few commenters requested that some radiologic guidance
codes, such as CPT code 76937 for ultrasound guidance for vascular
access and CPT code 75998 for fluoroscopic guidance for central venous
access device placement, become separately payable instead of packaged.
The commenters stated that each guidance code could be reported with
several separately payable procedure codes, thereby skewing the median
costs for the procedures and not providing appropriate payment for the
procedures when radiologic guidance was used. In addition, one
commenter expressed concern that the codes have been packaged due to
concern over unnecessary utilization. The commenter stated that an
audit is a more appropriate way to prevent unnecessary utilization. In
addition, the commenters cited a finding published in a June 2001
report by the Agency for Healthcare Research and Quality, that use of
ultrasound guidance reduces relative risk for complications during a
central venous catheter insertion by 78 percent, as a reason that
separate payment should be made for CPT code 76937. The commenters also
stated that assignment of packaged status to these codes conflicts with
CMS' policy as stated in its CY 2003 OPPS final rule, to pay separately
for all radiology guidance codes.
Response: OPPS hospital claims data reveal that out of the total
instances of CPT code 76937 appearing on claims used for setting
payment rates for CY 2006, CPT code 76937 was billed with four
separately payable codes for insertion of central venous access devices
84 percent of the time. This indicates, as might be expected, that the
costs for CPT code 76937 are typically packaged into four CPT codes,
36556, 36558, 36561, and 36569, the most commonly billed codes under
the OPPS for vascular access device insertion. The data for CPT code
75998 reveal similar patterns of utilization and packaging. Of the
total instances of CPT code 75998 appearing on claims used for setting
payment rates for CY 2006, code 75998 was billed with the same four
separately payable codes for insertion of central venous access devices
70 percent of the time. This indicates that the costs for fluoroscopic
guidance for central venous access device placement are typically
packaged into the same CPT codes as the costs for ultrasound guidance
for vascular access. Of single claims used for setting payment rates
for CY 2006 for those four CPT codes describing the insertion of
vascular access devices, ultrasound guidance was reported from 16 to 34
percent of the time, and fluoroscopic guidance was billed from 29 to 52
percent of the time. For the same four CPT codes, one or more forms of
guidance (fluoroscopic and/or ultrasound) were reported on 41 to 64
percent of the single claims utilized for rate-setting. Thus, overall
for these vascular access device insertion services, guidance was used
in at least 41 percent of the single claim cases, a very significant
proportion of the time. If anything, this percentage may underestimate
the utilization of guidance for the insertion of vascular access
devices, as we have been told that hospitals may not always code
separately for packaged services for which no separate payment is made.
Hospital claims data from CY 2004 yield a median cost of $61.00 for
ultrasound guidance and $73.00 for fluoroscopic guidance for vascular
access. The costs for these guidance procedures are relatively low
compared with the CY 2006 payment rates for the separately payable
services they most frequently accompany, which range from almost $500
to about $1,600. We note that, in general, our payment rates for
vascular access device services for CY 2006 are significantly greater
than our CY 2005 payment rates for the same services because more
specific CY 2004 data available for CPT codes that were new in CY 2004
permitted us to reconfigure the APCs containing vascular access device
procedures to improve clinical and resource coherence. In addition, our
hospital claims data demonstrate that in CY 2004 guidance services were
used frequently for the insertion of vascular access devices, and we
have no evidence that patients lacked appropriate access to guidance
services necessary for the safe insertion of vascular access devices in
the hospital outpatient setting. We believe the increased CY 2006
payment rates for insertion of vascular access devices should result in
preservation of appropriate access to medically reasonable and
necessary ultrasound and fluoroscopic guidance procedures used to
facilitate the insertion of the devices.
If we were to unpackage CPT codes 76937 and 75998, single bills
available to develop median costs for vascular access device insertion
services would be significantly reduced. In addition, separate payment
for an ancillary guidance service always performed in conjunction with
other separately payable services could lead to overutilization of the
ancillary service, for which payment is more appropriately bundled into
the prospectively established payment for the procedure to insert the
vascular access device. Our statement regarding paying separately for
radiology guidance services in the CY 2003 final rule with comment
period was made in the context of our explanation regarding our
decision to unpackage certain radiology guidance procedures that had
first been packaged for CY 2002, and does not necessarily apply to all
radiology guidance services. As for all HCPCS codes, we will continue
to evaluate each service, including radiology guidance services, for
its most appropriate OPPS payment status, including packaged versus
separately payable designation, on a case-by-case basis according to
the clinical and resource characteristics of the procedure and the
other services with which it would likely be billed.
[[Page 68545]]
We will share the CY 2004 and early CY 2005 hospital claims data
concerning these vascular access guidance services with the APC Panel
Packaging Subcommittee, as recommended by the APC Panel, for their
review prior to the next biannual APC Panel meeting.
After carefully considering the public comments received, we are
adopting as final without modification our proposal to accept the APC
Panel's recommendation that CPT code 76937 remains a packaged service
for CY 2006. In addition, we are finalizing our proposal to continue to
package CPT code 75998 for CY 2006.
We refer the reader to section VIII. of this preamble on drug
administration regarding the APC Panel's recommendation concerning CPT
codes 90471 and 90472.
For CY 2006, we proposed to accept the APC Panel recommendation to
gather data and review CPT code 94762 to determine how often this code
was billed without any other separately payable codes on the same date
of service and whether it was performed more frequently alone in rural
settings than other settings. During the August 2005 APC Panel meeting,
we presented data to the APC Panel regarding CPT code 94762. CY 2004
OPPS hospital claims data indicated at that time that CPT code 94762
was billed only 1,145 times without any separately payable codes on the
claim, which was only 1.5 percent of all units of code 94762 billed.
Fifty-two percent of the 1,145 single occurrences of CPT code 94762
were provided by rural hospitals. Fifty-two percent was particularly
high considering that, when reviewing both single and multiple
procedure claims, the data indicated that CPT code 94762 was provided
by rural hospitals only 12 percent of the time. The data revealed that
rural hospitals were more likely than urban hospitals to bill CPT code
94762 without any separately payable codes on the claim. For purposes
of this analysis, a rural hospital was defined as any hospital that is
considered rural for payment purposes. In general, this included
geographically rural providers as well as providers that were
reclassified to rural areas for wage index classification.
We recognize that the data used in the analysis are somewhat
limited. Because CPT 94762 is a packaged code and does not receive
separate payment, it is possible that an unknown number of hospitals
chose not to submit claims to CMS when CPT code 94762 was provided
without other separately payable services on their claims.
Comment: Several comments requested that CMS change the status
indicator for CPT code 94762 from ``N'' to ``X'' and that the service
be assigned to APC 0369, (Level III Pulmonary Tests). They stated that
because noninvasive ear or pulse oximetry for oxygen saturation, by
continuous overnight monitoring, is a prerequisite for proving the
medical necessity for home oxygen therapy, this is often the only
service provided to beneficiaries during their hospital outpatient
visits. The commenters stated that no E/M service is necessary and that
it should be possible to receive payment for CPT code 94762 when it is
the only service provided.
Response: We continue to believe that the packaged status of CPT
code 94762 is appropriate. As discussed during the August 2005 APC
Panel meeting, our data do not support separate payment for this
service because 98.5 percent of the time, it is provided with
separately payable services, and is rarely the only service provided in
hospital settings on a single date of service to a Medicare
beneficiary.
After carefully considering the public comments received, for CY
2006 we are accepting the APC Panel's recommendations to retain as a
packaged service CPT code 94762. We will share the CY 2004 and early CY
2005 hospital claims data concerning CPT code 94762 with the APC Panel
Packaging Subcommittee as recommended by the APC Panel, for its review
during the next biannual APC Panel meeting.
For CY 2006, we proposed to accept the APC Panel recommendations
that CPT codes 77790 (Radiation handling), 94760 (Pulse oximetry for
oxygen saturation, single determination), and 94761 (Pulse oximetry for
oxygen saturation, multiple determinations) remain packaged. We state
our belief that CPT code 77790 was integral to the provision of
brachytherapy and should always be billed on the same day with
brachytherapy sources and their loading, ensuring that the provider
would receive appropriate payment for the radiation source handling
bundled with the payment for the brachytherapy service. The small
number of single claims for this code in our data verified that this
code was rarely billed alone without other payable services on the
claim, and those few single claims might be miscoded claims. Our data
review of CPT codes 94760 and 94761 revealed that these codes had low
resource utilization, and were most frequently provided with other
services. Similar to CPT code 77790, there were many fewer single
claims for CPT codes 94760 and 94761 than multiple procedure claims
that included CPT codes 94760 and 94761. CPT codes 94760 and 94761
describe services that were very commonly performed in the hospital
outpatient setting, and unpackaging these codes would likely
significantly decrease the number of single claims available for use in
calculating median costs for other services.
We did not receive any public comments concerning our proposal.
Therefore, for CY 2006 we are finalizing, without modification, our
proposal to accept the APC Panel's recommendations to retain as
packaged services CPT codes 77790, 94760, and 94761.
For CY 2006, we proposed to accept the APC Panel recommendation to
gather data and review CPT codes 42550 (injection for salivary x-ray),
and 38792 (sentinel node identification) with the Packaging
Subcommittee. In the proposed rule, we stated that this would include
analyzing single and multiple procedure claims volume and resource
utilization data, and reviewing those studies with the Packaging
Subcommittee. During the August 2005 APC Panel meeting, the Panel
recommended that we continue to package CPT codes 42550 and 38792 for
CY 2006. We believed that CPT code 42550 was appropriately packaged, as
were other injection codes that were integral to the provision of some
separately payable procedures. In addition, we agreed with the APC
Panel that CPT code 38792 was appropriately packaged because we
believed that it would almost always be provided with other separately
payable procedures on the same date of service, such as nuclear
medicine services or surgical procedures.
We received a few public comments regarding our proposal to retain
as packaged CPT code 38792.
Comment: The commenters stated that CPT 38792 is sometimes the only
service provided in the hospital outpatient department, and that
separate payment under the OPPS should be allowed. They stated that
there are instances in which the injection for the X-ray is provided in
the hospital outpatient department, and then the beneficiary goes to a
different setting outside the hospital for the surgery. The commenters
requested that CMS assign the proposed ``Q'' status indicator to this
procedure code to make separate payment possible under the OPPS.
Response: We believe that the most appropriate course of action
with regard to CPT code 38792 is to retain its packaged status and to
collect
[[Page 68546]]
additional data and, as recommended by the APC Panel, to then present
those data to the Packaging Subcommittee during our next meeting with
them. Based on our CY 2004 claims data, we had only four single claims
for CPT code 38792. We continue to believe that payment for the
injection service is most appropriately packaged with other separately
payable services provided on the same date of service, most likely
imaging or surgical procedures.
After carefully reviewing and considering the public comments
received for CY 2006, we are accepting the APC Panel's recommendations
to retain as packaged services CPT codes 38792 and 42550. Payment for
those injection services is most appropriately bundled with the
payments for other separately payable services provided on the same
day.
We will share the CY 2004 and early CY 2005 hospital claims data
concerning CPT 38792 with the APC Panel Packaging Subcommittee as
recommended by the APC Panel, for its review during the next biannual
APC Panel meeting.
As we proposed, we referred CPT code 97602 (Nonselective wound
care) for MPFS evaluation of its bundled status as CPT code 97602
relates to services provided under the OPPS.
We received several public comments concerning our proposed
treatment of CPT code 97602 for CY 2006, with assignment of status
indicator ``A.''. Those comments and others related to wound care
services are addressed in section III.D.5.j. of this preamble.
During the August 2005 APC Panel meeting, the Panel recommended
that CMS collect additional data on CPT code 36500 (Venous
catheterization for selective blood organ sampling) and the
corresponding radiological supervision and interpretation code, 75893.
We received several clinical scenarios from a provider, indicating that
CPT codes 36500 and 75893, both packaged services, were frequently
provided on a claim without any separately payable codes. In those
cases, the provider did not receive any payment. We believed it was
unlikely that these two procedures would be reported without any other
separately payable codes on the claim. Our early review of several
clinical scenarios revealed that other separately payable codes would
likely be provided on the same claim.
We received one comment in response to our proposal to retain
packaged status for CPT codes 36500 and 75893.
Comment: One commenter requested that CMS allow separate payment
for CPT codes 36500 and 75893 when these services are the only services
on the claim. The commenter stated that there are many times that these
are the only procedures performed during a hospital outpatient
encounter.
Response: Our data do not support separate payment for these
procedures at this time. After considering the comment and the APC
Panel's recommendation, we will collect and review additional data to
determine which codes are most frequently billed on claims with CPT
codes 36500 and 75893. We will share the CY 2004 and early CY 2005
hospital claims data for these venous catheterization and radiological
supervision services as recommended by the APC Panel, for its review
prior to the next biannual APC Panel meeting.
During the August 2005 APC Panel meeting, the Panel recommended
that CMS maintain the packaged status of CPT 0069T (Acoustic heart
sound recording and computer analysis only). This code is indicated as
an add-on code to an electrocardiography service, according to the
American Medical Association's CY 2005 CPT book. Therefore, we believed
this code was appropriately packaged because it was integrally related
to the provision of electrocardiography, and should never be performed
alone.
We received several comments regarding CPT 0069T in response to the
code's new interim designation in the CY 2005 final rule with comment
period and to our proposal for CY 2006.
Comment: Several commenters requested that CMS change the status
indicator for CPT code 0069T (Acoustic heart sound recording and
computer analysis only). The commenters requested that CMS assign the
procedure to APC 0099 with an ``S'' status indicator rather than ``N,''
as was the CY 2005 and proposed CY 2006 status indicator for code
0069T. The commenters indicated that the test's status as a packaged
procedure results in inequitable payment to hospitals. They stated that
the cost of an EKG with the acoustic heart sound recording is $55,
whereas the cost of an EKG without such recording is only $31. They
added that because CMS has packaged the procedure, the hospital is
underpaid by $24 for each test it performs.
Response: It is our understanding that the acoustic heart sound
recording and analysis is intended for a specific, targeted group of
patients to enhance the provider's ability to diagnose heart failure.
The technology always is performed in conjunction with an EKG and as
such is ideal for packaging. It is up to hospitals to increase their
charges to reflect the additional costs for those EKGs that include the
acoustic heart sound recording. If the hospital uses the test according
to the manufacturer's guidelines, the costs will be distributed over
the large number of EKGs that are performed in the hospital outpatient
department and, over time, the additional costs will be recognized in
the OPPS rates as increased payments for other services provided on the
same day, likely EKGs. We are accepting the Panel's recommendation that
we maintain the packaged status of CPT code 0069T for CY 2006. We will
review claims data as they become available for the CY 2007 OPPS
update.
We also received several comments that requested status indicator
changes for other CPT codes, not previously brought before the
Packaging Subcommittee.
Comment: Commenters suggested that the following packaged
procedures should be made separately payable: CPT code 96523
(Irrigation of implanted venous access device for drug delivery systems
(new code for CY 2006)); CPT code 76001 (Fluoroscopy, physician time
more than one hour); CPT code 76003 (Fluoroscopic guidance for needle
placement); CPT code 76005 (Fluoroscopic guidance and location of
needle or catheter tip); CPT code 74328 (Endoscopic catheterization of
the biliary ductal system, radiological supervision and
interpretation); CPT code 74329 (Endoscopic catheterization of the
pancreatic ductal system, radiological supervision and interpretation);
CPT code 74330 (Combined endoscopic catheterization of the biliary and
pancreatic ductal systems, radiological supervision and
interpretation); HCPCS code P9612 (Catheterization for collection of
specimen); and HCPCS code G0269 (Placement of occlusive device into
either a venous or arterial access site, post surgical or
interventional procedure).
Response: We believe that the commenters' suggestions bear closer
examination. We will not make any changes to the packaged status of
these services at this time. Rather, we will collect data related to
the costs and utilization of these services for presentation to the
Packaging Subcommittee of the APC Panel. We note that the status
indicator of CPT code 96523, a new CPT code for CY 2006, is subject to
comment in this final rule with comment period. We will discuss with
the Packaging Subcommittee, on an ongoing basis, packaged procedures
for which status indicator changes have been suggested by the public.
The ongoing process allows members some additional time to
[[Page 68547]]
consider the issues we bring to them prior to the twice yearly meetings
where the subcommittee makes its recommendations to the full APC Panel.
Additional issues and new data concerning the packaging status of
codes will be shared with the APC Panel Packaging Subcommittee for its
consideration as information becomes available. We continue to
encourage submission of common clinical scenarios involving currently
packaged HCPCS codes to the Packaging Subcommittee for its ongoing
review. Additional detailed suggestions for the Packaging Subcommittee
should be submitted to [email protected], with ``Packaging
Subcommittee'' in the subject line.
B. Payment for Partial Hospitalization
1. Background
Partial hospitalization is an intensive outpatient program of
psychiatric services provided to patients as an alternative to
inpatient psychiatric care for beneficiaries who have an acute mental
illness. A partial hospitalization program (PHP) may be provided by a
hospital to its outpatients or by a Medicare-certified CMHC. Section
1833(t)(1)(B)(i) of the Act provides the Secretary with the authority
to designate the hospital outpatient services to be covered under the
OPPS. Section 419.21(c) of the Medicare regulations that implement this
provision specifies that payments under the OPPS will be made for
partial hospitalization services furnished by CMHCs. Section
1883(t)(2)(C) of the Act requires that we establish relative payment
weights based on median (or mean, at the election of the Secretary)
hospital costs determined by 1996 claims data and data from the most
recent available cost reports. Payment to providers under the OPPS for
PHPs represents the provider's overhead costs associated with the
program. Because a day of care is the unit that defines the structure
and scheduling of partial hospitalization services, we established a
per diem payment methodology for the PHP APC, effective for services
furnished on or after August 1, 2000. For a detailed discussion, refer
to the April 7, 2000 OPPS final rule (65 FR 18452).
2. PHP APC Update for CY 2006
To calculate the final CY 2006 PHP per diem payment, we initially
used the same methodology that was used to compute the CY 2005 PHP per
diem payment. For CY 2005, the per diem amount was based on 12 months
of hospital and CMHC PHP claims data (for services furnished from
January 1, 2003 through December 31, 2003). We used data from all
hospital bills reporting condition code 41, which identifies the claim
as partial hospitalization, and all bills from CMHCs because CMHCs are
Medicare providers only for the purpose of providing partial
hospitalization services. We used CCRs from the most recently available
hospital and CMHC cost reports to convert each provider's line-item
charges as reported on bills, to estimate the provider's cost for a day
of PHP services. Per diem costs were then computed by summing the line-
item costs on each bill and dividing by the number of days on the bill.
In a Program Memorandum issued on January 17, 2003 (Transmittal A-
03-004), we directed fiscal intermediaries to recalculate hospital and
CMHC CCRs using the most recently settled cost reports by April 30,
2003. Following the initial update of CCRs, fiscal intermediaries were
further instructed to continue to update a provider's CCR and enter
revised CCRs into the outpatient provider specific file. Therefore, for
CMHCs, we used CCRs from the outpatient provider specific file.
Historically, the median per diem cost for CMHCs has greatly
exceeded the median per diem cost for hospital-based PHPs and has
fluctuated significantly from year to year while the median per diem
cost for hospital-based PHPs has remained relatively constant ($200-
$225). We believe that CMHCs may have increased and decreased their
charges in response to Medicare payment policies. As discussed in more
detail in the next section and in the final rule establishing the CY
2004 OPPS (68 FR 63470), we believe that some CMHCs manipulated their
charges in order to inappropriately receive outlier payments.
In the CY 2003 update, the difference in median per diem cost for
CMHCs and hospital-based PHPs was so great, $685 for CMHCs and $225 for
hospital-based PHPs, that we applied an adjustment factor of .583 to
CMHC costs to account for the difference between ``as submitted'' and
``final settled'' cost reports. By doing so, the CMHC median per diem
cost was reduced to $384, resulting in a combined hospital-based and
CMHC PHP median per diem cost of $273. As with all APCs in the OPPS,
the median cost for each APC was scaled to be relative to the cost of a
mid-level office visit and the conversion factor was applied. The
resulting per diem rate for PHP for CY 2003 was $240.03.
In the CY 2004 OPPS update, the median per diem cost for CMHCs grew
to $1038, while the median per diem cost for hospital-based PHPs was
again $225. After applying the .583 adjustment factor to the median
CMHC per diem cost, the median CMHC per diem cost was $605. Since the
CMHC median per diem cost exceeded the average per diem cost of
inpatient psychiatric care, we proposed a per diem rate for CY 2004
based solely on hospital-based PHP data. The proposed PHP per diem for
CY 2004, after scaling, was $208.95. However, by the time we published
the OPPS final rule with comment period for CY 2004, we had received
updated CCRs for CMHCs. Using the updated CCRs significantly lowered
the CMHC median per diem cost to $440. As a result, we determined that
the higher per diem cost for CMHCs was not due to the difference
between ``as submitted'' and ``final settled'' cost reports, but were
the result of excessive increases in charges which may have been done
in order to receive higher outlier payments. Therefore, in calculating
the PHP median per diem cost for CY 2004, we did not apply the .583
adjustment factor to CMHC costs to compute the PHP APC. Using the
updated CCRs for CMHCs, the combined hospital-based and CMHC median per
diem cost for PHP was $303. After scaling, we established the CY 2004
PHP APC of $286.82.
Then, in the CY 2005 OPPS update, the CMHC median per diem cost was
$310 and the hospital-based PHP median per diem cost was $215. No
adjustments were determined to be necessary and, after scaling, the
combined median per diem cost of $289 was reduced to $281.33. We
believed that the reduction in the CMHC median per diem cost indicated
that the use of updated CCRs had accounted for the previous increase in
CMHC charges, and represented a more accurate estimate of CMHC per diem
costs for PHP.
As discussed in the proposed rule (70 FR 42693), for CY 2006, we
analyzed 12 months of data for hospital and CMHC PHP claims for
services furnished between January 1, 2004, and December 31, 2004. The
data indicated that the median per diem cost for CMHCs had dropped to
$143, while the median per diem cost for hospital-based PHPs was $209.
It appears that CMHCs significantly reduced their charges in CY 2004
compared to CY 2003. The average charge per day for CMHCs in CY 2003
was $1,184 and in CY 2004, the CMHC average charge per day dropped to
$765. We have determined that a combination of lower charges and
slightly lower CCRs for CMHCs resulted in a significant decline in the
CMHC median per diem cost.
[[Page 68548]]
Following the methodology used for the CY 2005 OPPS update, the
combined hospital-based and CMHC median per diem cost would be $149, a
decrease of 48 percent compared to the CY 2005 combined median per diem
amount. We believed that after scaling this amount to the cost of a
mid-level office visit, the resulting APC rate would be too low to
cover the per diem cost for all PHPs.
As stated in the proposed rule (70 FR 42693), we considered three
alternatives to our update methodology for the PHP APC for CY 2006 that
would mitigate this drastic reduction in payment for PHP. One
alternative was to base the PHP APC on hospital-based PHP data alone.
The median per diem cost of hospital-based PHPs has remained in the
$200-225 range over the last 5 years, while the median per diem cost
for CMHC PHPs has fluctuated significantly from a high of $1,037 to a
low of $143. Under this alternative, we would have used $209, the
median per diem cost for hospital-based PHPs during CY 2004 to
establish the PHP APC for CY 2006. However, we believed using this
amount would also result in an unacceptable drop in Medicare payments
for all PHPs in CY 2006 compared to payments in CY 2005.
The second alternative we considered was to apply a different
trimming methodology to CMHC costs in an effort to eliminate the effect
of data for those CMHCs that appeared to have excessively increased
their charges in order to receive outlier payments. We compared CMHC
per diem costs in CY 2003 to CMHC per diem costs in CY 2004 and
determined the percentage change. Initially, we trimmed CMHCs claims
where the CMHC's per diem costs changed by 50 percent or more from CY
2003 to CY 2004. After combining the remaining CMHC claims with the
hospital-based PHP claims, we calculated a median per diem cost of
$160.75. We then analyzed the resulting median per diem cost if we
trimmed CMHC claims where the difference in CMHC per diem costs from
2003 to 2004 was 25 percent. This trimming approach resulted in a
combined CMHC and hospital-based PHP median per diem cost of $176. We
also trimmed the CMHC claims from the CY 2003 data to see how trimming
aberrant data would have affected the combined hospital/CMHC median per
diem cost. We found that trimming the claims from the CMHCs with a 25
percent difference in per diem cost from CY 2003 to CY 2004 reduced the
$289 median per diem cost to $218.
We believe it is important to eliminate aberrant data and we
believe trimming certain CMHC data will provide an incentive for CMHCs
to stabilize their charges so that we can use their data in future
updates of the PHP APC. However, we believe that the trimming methods
described above will also result in an unacceptably large decrease in
payment. In addition, the trimming method we used was based on
percentage change in cost per day, and may not have identified all the
CMHCs that may have manipulated their charges in order to receive more
outlier payments, for example, CMHCs with high charges and no reduction
in charges compared to CY 2003.
Although we prefer to use both CMHC and hospital data to establish
the PHP APC, as stated in the proposed rule (70 FR 42693) we continue
to be concerned about the volatility of the CMHC data. The analyses we
conducted for the proposed rule seem to indicate that eliminating
aberrant CMHC data results in a median per diem cost more in line with
hospital data. We stated in the proposed rule that we would continue to
analyze the CMHC data in developing payment rates, and cautioned that
we may use only hospital data in the future if the data continue to be
unstable.
In the proposed rule, we stated that we considered a third
alternative that would lessen the PHP payment reduction for CY 2006,
yet provide an adequate payment amount to promote access to the partial
hospitalization benefit for Medicare beneficiaries (70 FR 42694). Using
this approach, for CY 2006, we proposed to apply a 15-percent reduction
in the combined hospital-based and CMHC median per diem cost that was
used to establish the CY 2005 PHP APC. We scaled that amount relative
to the cost of a mid-level office visit to establish the PHP APC for CY
2006. We believed a reduction in the CY 2005 median per diem cost would
strike an appropriate balance between using the best available data and
providing adequate payment for a program that often spans 5-6 hours a
day. We believed 15 percent was an appropriate reduction because it
recognizes decreases in median per diem costs in both the hospital data
and the CMHC data, and also reduces the risk of any adverse impact on
access to these services that might result from a large single-year
rate reduction. However, we proposed that the reduction in payments for
PHP be a transitional measure, and proposed to continue to monitor CMHC
costs and charges for these services and work with CMHCs to improve
their reporting so that payments can be calculated based on better
empirical data, consistent with the approach we have used to calculate
payments in other areas of the OPPS.
We received 58 public comments in response to this proposal. A
summary of the comments is provided below along with our responses.
Comment: In general, the commenters expressed concern that a
reduction in the PHP rate of 15 percent would lead to the closure of
many PHPs and that limited access to this crucial service would result
in more costly inpatient hospital care as the only alternative. CMHCs
commented that their costs are higher than hospitals', with most in the
$300 to $400 range. Another commenter indicated that a per diem rate of
$300 to $350 was more appropriate than our proposed amount.
A few commenters also suggested alternatives such as including
prior years' CMHC data trended forward based on medical inflation,
using a rolling-average or maintaining the CY 2005 payment rate for PHP
services furnished in CY 2006.
Response: For the final rule, we analyzed 12 months of more current
data for hospital and CMHC PHP claims for services furnished between
January 1, 2004 and December 31, 2004. This claims data is more current
in that it includes claims paid through June 30, 2005. We also used the
most currently available cost-to-charge ratios to estimate costs. Using
this updated data, we recreated the analysis performed for this year's
proposed rule to determine if the significant factors we used in
determining the proposed PHP rate had changed. The median per diem cost
for CMHCs increased slightly to $154, while the median per diem cost
for hospital-based PHPs decreased slightly to $201. The CY 2004 average
charge per day for CMHCs was $760 similar to the figure noted in the
proposed rule ($765) but still significantly lower than what is noted
for CY 2003 ($1,184). We continue to believe that a combination of
reduced charges and slightly lower CCRs for CMHCs resulted in a
significant decline in the CMHC median per diem cost between CY 2003
and CY 2004.
Following the methodology used for the CY 2005 OPPS update, the
combined hospital-based and CMHC median per diem cost would be $161, a
decrease of 44 percent compared to the CY 2005 combined median per diem
amount. While this figure is somewhat higher than the $149 combined
median in the proposed rule, we believe that this amount is still too
low to cover the cost for all PHPs.
As we did in the proposed rule, we again considered three
alternatives to our update methodology for the PHP
[[Page 68549]]
APC for CY 2006 that would mitigate the payment differences for PHP
services. The first alternative was to base the PHP APC on hospital-
based PHP data alone. Using the most recent years available data, the
median per diem cost of hospital-based PHPs for CY 2004 is $201,
somewhat less than the $209 median per diem cost of hospital-based PHP
using the proposed rule CY 2004 data. We continue to believe that using
$201 would be too low for all PHPs in CY 2006. However, we do believe
the decrease from $209 to $201 from the proposed rule to this final
rule with comment continues the trend in lower per diem costs for
hospital-based PHPs.
The second alternative we considered was to apply the same trimming
methodology noted in the proposed rule to CMHC costs in an effort to
eliminate the effect of data for those CMHCs that appeared to have
excessively increased their charges in order to receive outlier
payments. Again, using the most recent available data, we compared CMHC
per diem costs in CY 2003 to CMHC per diem cost in CY 2004 and
determined the percentage change. Initially, we trimmed CMHC claims
where the CMHC's per diem costs changed by 50 percent or more from CY
2003 to CY 2004. After combining the remaining CMHC claims with the
hospital-based PHP claims, we calculated a median per diem cost of
$165, slightly more than noted in the proposed rule. Again, this
approach still produced a per diem cost we believe is too low. We then
trimmed CMHC claims where the difference in CMHC per diem costs from
2003 to 2004 were 25 percent or more. This trimming variant produced a
CMHC median per diem cost of $172 for CY 2004.
We continue to believe that trimming certain aberrant CMHC data
will provide an incentive for CMHCs to stabilize their charges so that
we can use their data in future updates of the PHP APC. However, the
two trimming methods described above produce median per diem costs that
we believe are too low for the CY 2006 PHP APC rate.
The CY 2004 claims data coincides with the effective date of the
separate CMHC outlier threshold policy which became effective January
1, 2004. We believe that this policy may have, in part, contributed to
the rapid decreases in CMHC's per diem charges in CY 2004. If so, we
may see charges stabilize in the CY 2005 claims data which would enable
us to use the CMHC data to compute the CY 2007 rate.
We proposed a 15 percent reduction to the combined hospital-based
and CMHC median per diem cost for CY 2006. We have conducted further
analysis of more complete CY 2004 claims data combined with more
recently available cost-to-charge ratios. The newer data continue to
produce a combined hospital-based and CMHC median per diem cost that is
an unacceptable decrease from CY 2005 PHP APC rate. We continue to
believe that 15 percent is an appropriate reduction because it
recognizes decreases in median per diem costs in the hospital data and
the CMHC data, and also reduces the risk of adverse impact on access to
these services that might result from a large single-year rate
reduction.
To apply this methodology, we reduce $289 (the CY 2005 combined
hospital-based and CMHC median per diem cost) by 15 percent, resulting
in a combined median per diem cost of $245.65. After scaling, the
resulting APC final rate for PHP of $246.04 for CY 2006, of which
$49.21 is the beneficiary's coinsurance.
Comment: A few commenters stated that CMHC facility costs increased
in virtually every area including salaries, benefits, supplies,
insurance, dietary support, transportation, communications and
administrative support and that they experienced overall increases in
expenses of more than 5 percent in most areas. These commenters
requested that CMS increase the per diem rate paid for PHP services
consistent with the inflation rate for the medical industry. Another
commenter suggested we use inpatient costs per day as the basis for the
PHP median per diem cost. This commenter suggested that CMS develop an
adjustment factor relative to the inpatient psychiatric facility
prospective payment system per diem base rate to form the basis for the
PHP per diem rate.
Response: The statute does not provide for the update strategies
suggested by these commenters and is specific as to the update
methdology.
Comment: A few commenters indicated that the methodology used to
compute the PHP APC distorts per diem costs because the claims include
non-paid days.
Response: If a provider has charges on a bill for which they do not
receive payment, this will be reflected in that provider's cost-to-
charge ratio. This lower cost-to-charge ratio will be applied to the
larger charges and will result in the appropriate cost per diem.
Comment: A few commenters stated that they are unable to collect
coinsurance from their patients, that Medicaid cuts have made it more
difficult to stay viable, and that the proposed rate reduction would
cause PHP programs to close.
Response: The Medicare bad debt policy and Medicaid payment
policies are beyond the scope of the July 25, 2005 OPPS proposed rule.
We note the bad debt policy can be located in the Medicare Provider
Reimbursement Manual, Pub. 15, Chapter 3 or through the following link:
http://www.cms.hhs.gov/manuals/pub151/PUB_15_1.asp.
Comment: With respect to the methodology used to establish the PHP
APC amount, commenters expressed concern that data from settled cost
reports fails to include costs reversed on appeal and that there are
inherent problems in using claims data from a different time period
like available cost-to-charge ratios on settled cost reports.
These commenters also stated that this can only artificially lower
the actual median costs. The commenters claims that when cost reports
are settled, generally 2 years or more after the actual year of
services, they have operated on actual revenues of 80 percent of the
per diem.
Response: We use the best available data in computing the APCs.
With respect to PHP services, we specifically issued a Program
Memorandum on January 17, 2003 directing FIs to update the cost-to-
charge ratios on an on-going basis whenever a more recent full year
cost report is available. In this way, we hoped to minimize the time
lag between the cost-to-charge ratios and claims data.
Comment: One commenter related that administrative costs for CMHCs
continue to be a major impediment to operating PHPs for Medicare
beneficiaries. Medicare does not cover transportation to and from
programs and does not cover meals. Almost all programs offer
transportation because in most cases Medicare beneficiaries with
serious mental illnesses would not be able to access these programs
without the transportation.
Response: The services that are covered as part of a PHP are
specified in section 1861(ff) of the Act. Meals and transportation are
specifically excluded under section 1861(ff)(2)(I) of the Act.
Comment: Several commenters simply summed the payment rates for
three Group Therapy Sessions (APC 0325) and one Extended Individual
Therapy Session (APC 0323) and requested that amount as the minimum for
a day of PHP. These same commenters then questioned why the per diem
amount is considerably less than the combined cost of these services.
Response: We do not believe this is an appropriate comparison. It
is important to note that the APC services cited by
[[Page 68550]]
the commenter (APC 0325 and APC 0323) are not PHP services, but rather
single outpatient therapeutic sessions. PHP is a complete program of
services with efficiencies and economies of scale provided in contrast
to individual psychotherapy services. We also believe that the
commenters used only the median cost from single bills, for example,
where group psychotherapy was the only service furnished. As stated
earlier, we used data from PHP programs (both hospitals and CMHCs) to
determine the median cost of a day of PHP. PHP is a complete program of
services with efficiencies and economies of scale provided in contrast
to individual psychotherapy services.
The PHP APC (0033) reflects the program of services provided in
that it consists of the cost of all services provided each day and does
not reflect a sole service. Although we require that each PHP day
include a psychotherapy service, we do not specify the specific mix of
other services provided and have focused our analysis on the cost per
day rather than the cost of each service furnished within the day.
Comment: One commenter requested that the same provisions given to
rural hospital outpatient departments also be given to rural CMHCs.
Response: We believe the commenter may be referring to the
statutory hold harmless provisions. Section 1833(t)(7)(D) of the Act
authorizes such payments, on a permanent basis, for children's
hospitals and cancer hospitals and, through CY 2005, for rural
hospitals having 100 or fewer beds and sole community hospitals in
rural areas. Section 1866(t)(7)(D) of the Act does not authorize hold
harmless payments to CMHC providers.
Comment: We received several comments from CMHCs stating that their
costs are higher as hospitals can share and spread their costs to other
departments. These commenters also indicated that the CMHC patient
acuity level is more intense than the hospital patients as hospital
outpatient departments need only provide 1 or 2 therapies, yet still
receive the full per diem.
Response: By definition, a PHP bill must have at least 3 partial
hospitalization HCPCS codes for each day of service, one of which must
be a psychotherapy HCPCS code (other than brief psychotherapy). This
requirement is applied to all partial hospitalization bills, whether
provided in an outpatient hospital department or in a CMHC. Therefore,
hospital outpatient departments must provide the same level of program
intensity and must provide for the same level of patient acuity as
CMHCs in order to receive payment.
Comment: A few commenters requested that CMS revise the CMHC cost
report form (CMS-2088) to include a field which allows the CMHC to
report its Medicare PHP days. They also recommended that we revise
settlement worksheet D on the CMS-2088 to include new fields that
display the Medicare PHP cost per day and separate PHP reimbursement
between outlier and non-outlier reimbursement (since the current cost
report form commingles both types of reimbursement). Finally, the
commenters recommended that we revise the CMHC Provider Statistical &
Reimbursement Report Type: 76P to include a field which reports actual
paid Medicare PHP days.
Response: We appreciate the commenters suggestions for improving
the Medicare cost report for CMHCs. We plan to explore these and other
modifications to improve CMHC cost reporting so that we may use CMHC
data in future ratesetting.
Comment: A few commenters stated that hospitals that offer partial
hospitalization services should not be penalized for the instability in
data reporting that stems from CMHCs.
Response: We believe hospitals-based PHPs have actually benefited
from our combining hospital and CMHC data to compute the PHP APC rate.
The median calculated from hospital outpatient department PHPs has
consistently been far less then the median amount that is computed for
CMHCs.
Comment: One commenter who represents CMHCs expressed frustration
over several unsuccessful attempts at becoming a member of the APC
panel.
Response: The qualifications and selection of the APC Panel members
is outside the scope of this regulation. We refer the commenter to
http://www.cms.hhs.gov/faca/apc/default.asp for information on the APC
panel.
3. Separate Threshold for Outlier Payments to CMHCs
In the November 7, 2003 final rule with comment period (68 FR
63469), we indicated that, given the difference in PHP charges between
hospitals and CMHCs, we did not believe it was appropriate to make
outlier payments to CMHCs using the outlier percentage target amount
and threshold established for hospitals. There was a significant
difference in the amount of outlier payments made to hospitals and
CMHCs for PHP. Further analysis indicated the use of OPPS outlier
payments for CMHCs was contrary to the intent of the general OPPS
outlier policy. Therefore, for CYs 2004 and 2005, we established a
separate outlier threshold for CMHCs. We designated a portion of the
estimated 2.0 percent outlier target amount specifically for CMHCs,
consistent with the percentage of projected payments to CMHCs under the
OPPS in each of those years, excluding outlier payments.
As stated in the November 15, 2004 final rule with comment period,
CMHCs were projected to receive 0.6 percent of the estimated total OPPS
payments in CY 2005 (69 FR 65848). The CY 2005 CMHC outlier threshold
is met when the cost of furnishing services by a CMHC exceeds 3.5 times
the PHP APC payment amount. The current outlier payment percentage is
50 percent of the amount of costs in excess of the threshold.
CMS and the Office of the Inspector General are continuing to
monitor the excessive outlier payments to CMHCs. As previously stated,
we used CY 2004 claims data to calculate the CY 2006 per diem payment.
These data show the effect of the separate outlier threshold for CMHCs
that was effective January 1, 2004. During CY 2004, the separate
outlier threshold for CMHCs resulted in $1.8 million in outlier
payments to CMHCs, within the 2.0 percent of total OPPS payments
identified for CMHCs. In contrast, for CY 2003, more than $30 million
was paid to CMHCs in outlier payments. We believe this difference in
outlier payments indicates that the separate outlier threshold for
CMHCs has been successful in keeping outlier payments to CMHCs in line
with the percentage of OPPS payments made to CMHCs.
In the proposed rule, CMHCs were projected to receive 0.6 percent
of the estimated total OPPS payments in CY 2006. As noted in section
II.H. of this preamble, for CY 2006, we proposed to set the target for
hospital outpatient outlier payments at 1.0 percent of total OPPS
payments. We also proposed allocate a portion of that 1.0 percent, 0.6
percent (or 0.006 percent of total OPPS payments), to CMHCs for PHP
services. As discussed in section II.G. below, we proposed to set a
dollar threshold in addition to an APC multiplier threshold for
hospital OPPS outlier payments. However, because PHP is the only APC
for which CMHCs may receive payment under the OPPS, we would not expect
to redirect outlier payments by imposing a dollar threshold. Therefore,
we did not set a dollar threshold for CMHC outliers. We proposed to set
the outlier threshold for CMHCs for CY 2006 at 3.45 percent times the
APC payment amount and the CY 2006 outlier payment percentage
applicable to costs in excess of the threshold at 50 percent. As we did
with the hospital
[[Page 68551]]
outlier threshold, we used hospital charge inflation factor to inflate
charges to CY 2006.
We received no comments on our proposal. As discussed in section
II.H, using more recent data for this final rule, we set the target for
hospital outpatient outlier payments at 1.0 percent of total OPPS
payments. We also allocate a portion of that 1.0 percent, 0.6 percent
(or 0.006 percent of total OPPS payments), to CMHCs for PHP services.
As we proposed, we set a dollar threshold in addition to an APC
multiplier threshold for hospital OPPS outlier payments. However,
because PHP is the only APC for which CMHCs may receive payment under
the OPPS, we would not expect to redirect outlier payments by imposing
a dollar threshold. Therefore, we did not set a dollar threshold for
CMHC outliers. For CY 2006, we set the outlier threshold for CMHCs at
3.40 percent times the APC payment amount and the CY 2006 outlier
payment percentage applicable to costs in excess of the threshold at 50
percent. As we did with the hospital outlier threshold, we used
hospital charge inflation factor to inflate charges to CY 2006.
C. Conversion Factor Update for CY 2006
Section 1833(t)(3)(C)(ii) of the Act requires us to update the
conversion factor used to determine payment rates under the OPPS on an
annual basis. Section 1833(t)(3)(C)(iv) of the Act provides that, for
CY 2006, the update is equal to the hospital inpatient market basket
percentage increase applicable to hospital discharges under section
1886(b)(3)(B)(iii) of the Act.
The forecast of the hospital market basket increase for FY 2006
published in the IPPS final rule on August 12, 2005, is 3.7 percent (70
FR 47392), rather than the 3.2 percent forecast published in the IPPS
proposed rule on May 4, 2005 (70 FR 23384) and referenced in the CY
2006 OPPS proposed rule. To set the OPPS proposed conversion factor for
CY 2006, we increased the CY 2005 conversion factor of $56.983, as
specified in the November 15, 2004 final rule with comment period (69
FR 65842), by 3.7 percent.
In accordance with section 1833(t)(9)(B) of the Act, we further
adjusted the conversion factor for CY 2005 to ensure that the revisions
we are making to our updates by means of the wage index are made on a
budget neutral basis. We calculated a budget neutrality factor of
1.001485209 for wage index changes by comparing total payments from our
simulation model using the FY 2006 IPPS final wage index values to
those payments using the current (FY 2005) IPPS wage index values. In
addition, to accommodate the rural adjustment discussed in section
II.G. of this preamble, we calculated a budget neutrality factor of
0.99614506 by comparing payments with the rural adjustment to those
without. For CY 2006, we estimate that allowed pass-through spending
will equal approximately $45.5 million, which represents 0.17 percent
of total OPPS projected spending for CY 2006. The conversion factor is
also adjusted by the difference between the 2.0 percent pass-through
set-aside and the 0.17 percent estimate of pass-through spending.
Finally, decreasing payments for outliers to 1.0 percent of total
payments, as proposed, returned 1.0 percent to the conversion factor.
The market basket increase update factor of 3.7 percent for CY
2006, the required wage index budget neutrality adjustment of
approximately 1.001485209, the return of 1.0 percent in total payments
from a reduced outlier target, the return of 1.83 percent of the pass-
through set-aside, and the adjustment for the rural payment adjustment
of 0.99614506 result in a conversion factor for CY 2006 of $59.511.
We received several public comments on the proposed conversion
factor update for CY 2006.
Comment: Several commenters requested CMS to revise the market
basket update included in the final OPPS rule to include a 3.7 percent
market basket update, consistent with the IPPS final rule.
Response: We have used a 3.7 percent market basket increase update
factor in our conversion factor calculation for the CY 2006 OPPS
update.
Comment: One commenter suggested that CMS increase total payments
to hospitals by 3.2 percent and not the 1.9 percent total payment
increase indicated in the regulatory impact analysis section of the
proposed rule.
Response: The 1.9 percent reported in column 6 of Table 33 in the
regulatory analysis section of the proposed rule is not the 3.2 percent
that appears in column 5 because it models all payments to hospitals.
The 1.9 percent reflects the loss of payment for drugs outside of OPPS
authorized by Pub. L. 108-173, that expires in CY 2006. The statute
requires CMS to take into account, for purposes of establishing a
budget neutral CY 2006 update, the additional costs associated with
payments for specified covered outpatient drugs. The regulatory impact
analysis accompanying this final rule with comment period demonstrates
a similar loss. The market basket increase update factor of 3.7 percent
is offset by the drug payments in CY 2006 that were made outside the
system in CY 2005, to result in an overall increase of 2.2 percent.
Accordingly, we are finalizing the conversion factor update for CY
2006 of $59.511.
D. Wage Index Changes for CY 2006
Section 1833(t)(2)(D) of the Act requires the Secretary to
determine a wage adjustment factor to adjust, for geographic wage
differences, the portion of the OPPS payment rate and the copayment
standardized amount attributable to labor and labor-related cost. This
adjustment must be made in a budget neutral manner. As we have done in
prior years, we proposed to adopt the IPPS wage indices and extend
these wage indices to TEFRA hospitals that participate in the OPPS but
not the IPPS.
As discussed in section II.A. of this preamble, we standardize 60
percent of estimated costs (labor-related costs) for geographic area
wage variation using the IPPS wage indices that are calculated prior to
adjustments for reclassification to remove the effects of differences
in area wage levels in determining the OPPS payment rate and the
copayment standardized amount.
As published in the original OPPS April 7, 2000 final rule (65 FR
18545), OPPS has consistently adopted the final IPPS wage indices as
the wage indices for adjusting the OPPS standard payment amounts for
labor market differences. As initially explained in the September 8,
1998 OPPS proposed rule, we believed and continue to believe that using
the IPPS wage index as the source of an adjustment factor for OPPS is
reasonable and logical, given the inseparable, subordinate status of
the hospital outpatient within the hospital overall. In accordance with
section 1886(d)(3)(E) of the Act, the IPPS wage index is updated
annually. In the CY 2006 OPPS proposed rule, in accordance with our
established policy, we proposed to use the FY 2006 final version of
these wage indices with any corrections posted on the CMS Web site, to
determine the wage adjustments for the OPPS payment rate and copayment
standardized amount that we will publish in our final rule for CY 2006.
We note that the FY 2006 IPPS wage indices continue to reflect a
number of changes implemented in FY 2005 as a result of the new OMB
standards for defining geographic statistical areas, the implementation
of an occupational mix adjustment as part of the wage index,
[[Page 68552]]
and new wage adjustments provided for under Pub. L. 108-173. The
following is a brief summary of the proposed changes in the FY 2005
IPPS wage indices, continued for FY 2006, and any adjustments that we
are applying to the OPPS for CY 2006. We refer the reader to the FY
2006 IPPS final rule (70 FR 47363 through 47387, August 12, 2005) for a
detailed discussion of the changes to the wage indices. In this final
rule with comment period, we are not reprinting the FY 2006 IPPS wage
indices referenced in the discussion below, with the exception of the
out-migration wage adjustment table (Addendum L of this final rule with
comment period). We refer readers to the CMS Web site for the OPPS at
http://www.cms.hhs.gog/providers/hopps. At this Web site, the reader
will find a link to the FY 2006 IPPS wage indices tables and any
corrections made to them.
1. The continued use of the new Core Based Statistical Areas
(CBSAs) issued by the Office of Management and Budget (OMB) as revised
standards for designating geographical statistical areas based on the
2000 Census data, to define labor market areas for hospitals for
purposes of the IPPS wage index. The OMB revised standards were
published in the Federal Register on December 27, 2000 (65 FR 82235),
and OMB announced the new CBSAs on June 6, 2003, through an OMB
bulletin. In the FY 2005 hospital IPPS final rule, CMS adopted the new
OMB definitions for wage index purposes. In the FY 2006 IPPS final
rule, we again stated that hospitals located in MSAs will be urban and
hospitals that are located in Micropolitan Areas or Outside CBSAs will
be rural. To help alleviate the decreased payments for previously urban
hospitals that became rural under the new MSA definitions, we allowed
these hospitals to maintain their assignment to the MSA where they
previously had been located for the 3-year period from FY 2005 through
FY 2007. To be consistent with IPPS, we will continue the policy we
began in CY 2005 of applying the same criterion to TEFRA hospitals paid
under the OPPS but not under the IPPS and to maintain that MSA
designation for determining a wage index for the specified period.
Beginning in FY 2008, these hospitals will receive their statewide
rural wage index, although those hospitals paid under the IPPS will be
eligible to apply for reclassification. In addition to this ``hold
harmless'' provision, the FY 2005 IPPS final rule implemented a 1-year
transition for hospitals that experienced a decrease in their FY 2005
wage index compared to their FY 2004 wage index due solely to the
changes in labor market definitions. These hospitals received 50
percent of their wage indices based on the new MSA configurations and
50 percent based on the FY 2004 labor market areas. In the FY 2006 IPPS
final rule, we discussed the cessation of the 1-year transition and
announced that hospitals will receive 100 percent of their wage index
based upon the new CBSA configurations beginning in FY 2006. Again, for
the sake of consistency with IPPS, TEFRA hospitals will receive 100
percent of their wage index based upon the new CBSA configurations
beginning in CY 2006.
2. We are applying the occupational mix adjustment for FY 2006 IPPS
to 10 percent of the average hourly wage and leave 90 percent of the
average hourly wage unadjusted for occupational mix. As noted in the FY
2006 IPPS final rule, we are, essentially, using the same CMS Wage
Index Occupational Mix Survey and Bureau of Labor Statistics data to
calculate the adjustment. Because there are no significant differences
between the FY 2005 and the FY 2006 occupational mix survey data and
results, we believe it is appropriate to adopt the IPPS rule and apply
the same occupational mix adjustment to 10 percent of the FY 2006 wage
index.
3. The reclassifications of hospitals to geographic areas for
purposes of the wage index. For purposes of the OPPS wage index, we are
adopting all of the IPPS reclassifications for FY 2006, including
reclassifications that the Medicare Geographic Classification Review
Board (MGCRB) approved under the one-time appeal process for hospitals
under section 508 of Pub. L. 108-173. We note that section 508
reclassifications will terminate March 31, 2007.
4. We are continuing to apply an adjustment to the wage index to
reflect the ``out-migration'' of hospital employees who reside in one
county but commute to work in a different county with a higher wage
index, in accordance with section 505 of Pub. L. 108-173 (FY 2006 IPPS
final rule (70 FR 47383 and 47384, August 12, 2005)). Hospitals paid
under the IPPS located in the qualifying section 505 ``out-migration''
counties receive a wage index increase unless they have already been
reclassified under section 1886(d)(10) of the Act, redesignated under
section 1886(d)(8)(B) of the Act, or reclassified under section 508. As
discussed in the FY 2006 IPPS final rule, we finalized our policy that
reclassified hospitals not receive the out-migration adjustment unless
they waive their reclassified status. For OPPS purposes, we are
continuing our policy from CY 2005 to apply the same 505 criterion to
TEFRA hospitals paid under the OPPS but not paid under the IPPS.
Because TEFRA hospitals cannot reclassify under sections 1886(d)(8) and
1886(d)(10) of the Act or section 508, they are eligible for the out-
migration adjustment. Therefore, TEFRA hospitals located in a
qualifying section 505 county will also receive an increase to their
wage index under OPPS. Addendum L to this final rule with comment
period lists all hospitals that will receive an out-migration
adjustment to their wage index in 2006 including TEFRA hospitals that
will receive an out-migration adjustment under this OPPS final rule
with comment period. (See also Table 4J of the Addendum to the FY 2006
IPPS final rule).
We used the final FY 2006 IPPS indices to adjust the payment rates
and coinsurance amounts that are included in this OPPS final rule with
comment period for CY 2006. With the exception of reclassifications
resulting from the implementation of the one-time appeal process under
section 508 of Pub. L. 108-173, all changes to the wage index resulting
from geographic labor market area reclassifications or other
adjustments must be incorporated in a budget neutral manner.
Accordingly, in calculating the OPPS budget neutrality estimates for CY
2006, we have included the wage index changes that result from MGCRB
reclassifications, implementation of section 505 of Pub. L. 108-173,
and other refinements made in the FY 2006 IPPS final rule, such as the
hold harmless provision for hospitals changing status from urban to
rural under the new CBSA geographic statistical area definitions.
However, section 508 set aside $900 million to implement the section
508 reclassifications. We considered the increased Medicare payments
that the section 508 reclassifications would create in both the IPPS
and OPPS when we determined the impact of the one-time appeal process.
Because the increased OPPS payments already counted against the $900
million limit, we did not consider these reclassifications when we
calculated the OPPS budget neutrality adjustment.
We received two public comments on the application of the FY 2006
IPPS wage indices under the OPPS.
Comment: One commenter supported our proposal to extend the IPPS
wage indices to OPPS because this simplifies payment for hospitals.
One commenter suggested that OPPS use different labor share
percentages for hospitals with a wage index below 1.0
[[Page 68553]]
and hospitals with a wage index above 1.0. The commenter specifically
cited the requirement in Pub. L. 108-173 that IPPS use a larger labor
share percentage for hospitals with wage indexes over 1.0 and a
relatively smaller labor share percentage for hospitals with wage
indexes less than 1.0. This commenter specifically requested that CMS
use a labor share of 50 percent for hospitals with wage indexes less
than 1.0.
Response: Section 403 of Pub. L. 108-173 requires that IPPS
hospitals be paid using a labor-related share of 62 percent unless this
labor-related share would result in lower payments than would otherwise
be made. Unlike IPPS, OPPS has no mandate to reduce the labor-related
share. The OPPS labor-related share was determined through regression
analyses conducted for the initial OPPS proposed rule (63 FR 47581,
September 8, 1998). Those analyses identified 60 percent as the
appropriate labor share for outpatient services. We confirmed that this
labor-related share is still appropriate during our regression analysis
for the payment adjustment for rural hospitals in this final rule. In
these regression equations, the coefficient of the hospital wage index
is the estimated percentage change in unit costs attributable to a 1
unit percent increase in the wage index, which is an estimate of the
share of outpatient unit costs attributable to labor. Both Table 5 and
Table 6 in section II.G. of this preamble indicate a coefficient of 63
percent for the wage index. In light of both analyses, we believe that
the current 60 percent labor-related share remains appropriate for OPPS
payment purposes.
After carefully considering the public comments received, we are
finalizing our wage index adjustment policy for CY 2006 OPPS as
proposed without modification.
E. Statewide Average Default Cost-to-Charge Ratios (CCRs)
CMS uses CCRs to determine outlier payments, payments for pass-
through devices, and monthly interim transitional corridor payments
under the OPPS. Some hospitals do not have a valid CCR. These hospitals
include, but are not limited to, hospitals that are new and have not
yet submitted a cost report, hospitals that have a CCR that falls
outside predetermined floor and ceiling thresholds for a valid CCR, or
hospitals that have recently given up their all-inclusive rate status.
Last year, we updated the default urban and rural CCRs for CY 2005 in
our final rule, published on November 15, 2004 (69 FR 65821 through
65825). As we proposed, in this final rule with comment period, we have
updated the default ratios using the most recent cost report data for
CY 2006.
We calculated the statewide default CCRs using the same CCRs that
we use to adjust charges to costs on claims data. Table 3 of the
proposed rule (70 FR 42696) listed the proposed CY 2006 default urban
and rural CCRs by State. These CCRs are the ratio of total costs to
total charges from each provider's most recently submitted cost report,
for those cost centers relevant to outpatient services. We also
adjusted these ratios to reflect final settled status by applying the
differential between settled to submitted costs and charges from the
most recent pair of settled to submitted cost reports.
For the proposed rule, 80.79 percent of the submitted cost reports
represented data for CY 2003. We have since updated the cost report
data we use to calculate cost to charge ratios with additional
submitted cost reports for CY 2004. For the final rule, 51.66 percent,
the majority of the submitted reports utilized in the default ratio
calculation, were for CY 2003. We only used valid CCRs to calculate
these default ratios. That is, we removed the CCRs for all-inclusive
hospitals, CAHs, and hospitals in Guam and the U.S. Virgin Islands
because these entities are not paid under the OPPS, or in the case of
all-inclusive hospitals, because their CCRs are suspect. We further
identified and removed any obvious error CCRs and trimmed any outliers.
We limited the hospitals used in the calculation of the default CCRs to
those hospitals that billed for services under the OPPS during CY 2003.
Finally, we calculated an overall average CCR, weighted by a
measure of volume for CY 2003, for each State except Maryland. This
measure of volume is the total lines on claims and is the same one that
we use in our impact tables. For Maryland, we used an overall weighted
average CCR for all hospitals in the Nation as a substitute for
Maryland CCRs, which appeared in Table 3. Very few providers in
Maryland are eligible to receive payment under the OPPS, which limits
the data available to calculate an accurate and representative CCR. The
overall decrease in default statewide CCRs can be attributed to the
general decline in the ratio between costs and charges widely observed
in the cost report data.
We did not receive any public comments concerning the proposed
statewide average default CCRs. Therefore, we are finalizing them as
shown in Table 3 below for OPPS services furnished on or after January
1, 2006.
BILLING CODE 4120-01-C
[[Page 68554]]
[GRAPHIC] [TIFF OMITTED] TR10NO05.010
[[Page 68555]]
[GRAPHIC] [TIFF OMITTED] TR10NO05.011
BILLING CODE 4120-01-P
F. Expiring Hold Harmless Provision for Transitional Corridor Payments
for Certain Rural Hospitals
When the OPPS was implemented, every provider was eligible to
receive an additional payment adjustment (transitional corridor
payment) if the payments it received for covered OPD services under the
OPPS were less than the payments it would have received for the same
services under the prior reasonable cost-based system (section
1833(t)(7) of the Act). Section 1833(t)(7) of the Act provides that the
transitional corridor payments are temporary payments for most
providers, with two exceptions, to ease their transition from the prior
reasonable cost-based payment system to the OPPS system. Cancer
hospitals and children's hospitals receive the transitional corridor
payments on a permanent basis. Section 1833(t)(7)(D)(i) of the Act
originally provided for transitional corridor payments to rural
hospitals with 100 or fewer beds for covered OPD services furnished
before January 1, 2004. However, section 411 of Pub. L. 108-173 amended
section 1833(t)(7)(D)(i) of the Act to extend these payments through
December 31, 2005, for rural hospitals with 100 or fewer beds. Section
411 also extended the transitional corridor payments to SCHs located in
rural areas for services
[[Page 68556]]
furnished during the period that begins with the provider's first cost
reporting period beginning on or after January 1, 2004, and ends on
December 31, 2005. Accordingly, the authority for making transitional
corridor payments under section 1833(t)(7)(D)(i) of the Act, as amended
by section 411 of Pub. L. 108-173, will expire for rural hospitals
having 100 or fewer beds and SCHs located in rural areas on December
31, 2005. For CY 2006, transitional corridor payments will continue to
be available to cancer and children's hospitals. (We note that the
succeeding section II.G. of this preamble discusses an additional
provision of section 411 of Pub. L. 108-173 that related to a study to
determine appropriate adjustment to payments for rural hospitals under
the OPPS beginning January 2006.)
We received four public comments concerning this hold harmless
policy.
Comment: The commenters expressed concern about the impact that the
expiration of the transitional corridor hold harmless payments would
have on small rural hospitals because these are vulnerable facilities
that provide important access to care in their communities.
One commenter recommended that the provision be expanded to
permanently extend the hold harmless payments to small rural hospitals
and rural SCHs, as is currently the case for cancer hospitals and
children's hospitals. Two commenters referenced efforts by a large
hospital association to work with Congress on legislation to provide
for this expansion.
Response: We appreciate the comments that were submitted and we
have carefully reviewed each of them. As the commenters acknowledge,
section 1833(t)(7)(D) of the Act, as amended by section 411 of Pub. L.
108-173, provides that OPPS transitional corridor payments will expire
for rural hospitals having 100 or fewer beds and SCHs located in rural
areas on December 31, 2005. Therefore, we are providing for the
termination of these payments in this final rule with comment period.
However, as noted in section II.G. of this final rule with comment
period, we are providing a 7.1 percent adjustment for rural sole
community hospitals in accordance with section 411 of Pub. L. 108-173.
G. Adjustment for Rural Hospitals
Section 411 of Pub. L. 108-173 added a new paragraph (13) to
section 1833(t) of the Act. New section 1833(t)(13)(A) specifically
instructs the Secretary to conduct a study to determine if rural
hospital outpatient costs exceed urban hospital outpatient costs.
Moreover, under new section 1833(t)(13)(B) of the Act, the Secretary is
given authorization to provide an appropriate adjustment to rural
hospitals by January 1, 2006, if rural hospital costs are determined to
be greater than urban hospital costs.
As described in our CY 2006 OPPS proposed rule, we used regression
analysis to study the differences in outpatient cost per unit between
rural and urban hospitals because we believed that a simple comparison
of unit costs would not capture the myriad of factors that contribute
to observed costs, including labor supply, complexity, and volume of
services. For this final rule with comment period, we reran these
regression analyses that we conducted in the proposed rule and
conducted additional analyses in response to issues raised in public
comments.
For this final rule with comment period, our regression analysis
included all 4,088 hospitals billing under OPPS for which we could
model accurate cost per unit estimates. For each hospital, total
outpatient costs and descriptive information were derived from a more
complete set of CY 2004 Medicare claims than was used in the analysis
for the proposed rule and the hospital's most recently submitted cost
report. The description of claims used, our methodology for creating
costs from charges, and a description of the specific hospitals
included in our modeling are discussed in section II. A. of this
preamble. We excluded separately payable drugs and biologicals,
services receiving pass-through payments, and any service paid under a
separate payment system from our analysis. We excluded the 49 hospitals
in Puerto Rico because their wage indices and unit costs are so
different that they would have skewed results. Finally, we excluded
facilities whose unit outpatient costs were outside of 3 standard
deviations from the geometric mean unit outpatient cost.
We calculated the total unit outpatient cost for each hospital by
dividing total outpatient cost by the total number of APC units
discounted for the joint performance of multiple surgical procedures.
(See section II.G.1. below for a definition of discounted units.) As in
the analysis for the proposed rule, we modeled both explanatory and
payment regression models. In an ``explanatory model'' approach, all
variables that are hypothesized to be important determinants of cost
are included in the cost regression, whether or not they are going to
be used as payment adjustments. We used the explanatory regression
models to assess which class of rural hospitals, if any, is
significantly more costly than urban hospitals. In a ``payment model''
approach, the only independent variables included in the cost
regression are those variables considered for payment adjustments. We
used the payment model to determine the amount of the adjustment for
any class of hospitals identified as significantly more costly in the
explanatory model. The regression equations for both models were
specified in double logarithmetic form. The dependent variable in the
explanatory regression equation was unit outpatient cost. The dependent
variable in the payment regressions was standardized unit outpatient
costs, that is, unit outpatient costs adjusted to reflect unit payment
by dividing through by the provider's service-mix index which was
adjusted by the provider's wage index. The service-mix index is a
measure of the resource intensity of services provided by each
hospital. Both regression equation models included quantitative
independent variables transformed into natural logarithms and
categorical independent variables. Categorical independent (dummy)
variables included hospital characteristics such as rural location or
type of hospital (short stay or specialty hospital). In regression
analysis, dummy variables capture the difference in means of the
dependent variable in the class of hospitals of interest and all other
hospitals, holding all other variables in the equation constant.
1. Factors Contributing to Unit Cost Differences Between Rural
Hospitals and Urban Hospitals and Associated Explanatory Variables
For this final rule with comment period, we retained the same set
of explanatory variables as used in the regression analysis for the
proposed rule because we believe that these variables capture the most
important factors contributing to differences in unit costs between
rural and urban hospitals.
First, unit outpatient costs are expected to vary directly
with the prices of inputs used to produce outpatient services,
especially labor. Wage rates tend to be lower in rural areas than in
urban areas. We used the OPPS hospital wage index for CY 2006 as our
measure of relative differences in labor input costs.
Second, there may be economies of scale in producing
outpatient services, which imply that unit costs will vary inversely
with the volume of outpatient services provided. We used the total
number of discounted units as our indicator of volume. Discounted units
[[Page 68557]]
are the total number of units after we adjust for the multiple
procedure reduction of 50 percent that applies to payment for surgical
services when two surgical procedures are performed during the same
operative session. For example, if a procedure is paid at 100 percent
of payment 1,000 times and the same procedure is paid at 50 percent of
payment 100 times, the discounted units for that procedure equal 1,050
units (the sum of 1,000 units at full payment plus 100 units at 50
percent payment).
Third, independent of the volume of outpatient services,
hospitals that provide more complex outpatient services are expected to
have higher unit costs than hospitals with less complex service-mixes.
Typically, greater complexity involves a combination of higher
equipment and labor costs. Rural hospitals usually have less volume and
perform less complex services than urban hospitals. We used a service-
mix index defined as the ratio of the number of discounted units
weighted by APC relative weights divided by the number of unweighted
discounted units as our measure of complexity. The service-mix index
reflects the average APC weight of each facility's outpatient services.
From our analysis, we also believe that the number of beds captures
variation in unit costs attributable to the additional complexity of
services performed by a hospital that is not explained by their service
mix index.
Fourth, the size of a hospital may influence the volume
and service-mix of outpatient services. Large hospitals generally
provide a wider range of more complex services than do small hospitals.
Large hospitals may also have larger volumes in ancillary departments
that are shared between outpatient and inpatient services, and as a
result, benefit from greater economies of scale than do small
hospitals. Rural hospitals tend to be smaller than urban hospitals. Our
primary measure of outpatient volume is discounted units of APCs, which
only reflects the volume of Medicare services paid under the outpatient
PPS. This measure does not include the inpatient utilization of shared
ancillary departments or non-Medicare outpatient services. For all of
these reasons, it seems appropriate to include a broader measure of
facility size in the explanatory regression model. Therefore, as
explained below, we used the total number of facility beds to measure
facility size. Unit outpatient costs may be positively or negatively
related to facility size depending on whether complexity effects, noted
above, or scale economies are more important.
In addition to the above factors, we included additional
categorical variables to indicate the types of specialty hospitals that
participate in OPPS, specifically cancer, children's, long-term care,
rehabilitation, and psychiatric hospitals because we do not believe
that the costs, volume, and service-mix associated with these hospitals
looks like the costs, volume, and service mix of a typical OPPS
provider.
Finally, we included several categorical variables for
rural/urban location and type of rural hospital to capture variation
unexplained by the other independent variables in the model. Urban
hospitals are the reference group for all of the different types of
hospitals examined included in the regressions equations below. Table 4
provides descriptive statistics for the dependent variables and key
independent variables by urban and rural status. Without controlling
for the other influences on per unit cost, rural hospitals have a lower
cost per unit than urban hospitals. However, when standardized for the
service-mix wage indices, average unit costs are nearly identical
between urban and rural hospitals.
Table 4.--Means and Standard Deviations (In Parenthesis) for Key Variables by Rural and Urban Location
----------------------------------------------------------------------------------------------------------------
Rural Urban
---------------------------------------------------
Variable Standard Standard
Means Deviation Means Deviation
----------------------------------------------------------------------------------------------------------------
Unit Outpatient Cost........................................ $157.57 ($64.94) $188.76 ($93.53)
Standardized Unit Outpatient Cost........................... $75.51 ($55.70) $73.54 ($40.98)
Wage Index.................................................. 0.8807 (0.1012) 1.0212 (0.1479)
Service-Mix Index........................................... 2.3636 (0.9357) 2.7544 (1.6037)
Outpatient Volume........................................... 21,021 (21,770) 38,469 (46,925)
Beds........................................................ 78 (56) 196 (170)
Number of Hospitals......................................... 1,206 ........... 2,882
----------------------------------------------------------------------------------------------------------------
2. Results
For this final rule with comment period, we began our analysis by
rerunning the regression models that we had examined for the proposed
rule. As a group, all rural hospitals continue to demonstrate weak
evidence of slightly higher unit costs than urban hospitals, after
controlling for labor input prices, service-mix complexity, volume,
facility size, and type of hospital. In the explanatory model,
regressing unit costs on all of the independent variables discussed
above, the coefficient for the rural categorical variable was 0.024
(p=0.0613). If the unit costs of rural hospitals are the same as the
unit costs of urban hospitals, the probability of observing a value as
extreme as or more extreme than 2.4 percent would be approximately 6
percent or less. This suggests that rural hospitals are approximately
2.4 percent more costly than urban hospitals after accounting for the
impact of other explanatory variables. This is the same coefficient
observed in the regression analyses for the proposed rule. The results
of this regression appear in Table 5. This regression demonstrated
reasonably good explanatory power with an adjusted R2 of 0.54
(rounded). Adjusted R2 is the percentage of variation in the dependent
variable explained by the independent variables and is a standard
measure of how well the regression model fits the data. The regression
coefficients of the key explanatory variables all move in the expected
direction: positive for the wage index, indicating that rural hospitals
can be expected to have lower unit outpatient costs because they tend
to be located in areas with lower wage rates; positive for the
outpatient service-mix index, consistent with the hypothesis that rural
hospitals' less complex outpatient service-mixes result in lower unit
costs than those of the typical urban hospital; negative for outpatient
service volume, implying that, on average, rural hospitals' lower
service volumes are a source of higher unit cost compared to urban
hospitals; and positive for the
[[Page 68558]]
facility size variable (beds), suggesting that facility size is more
reflective of complexity than any economies of scale. The payment
regression that accompanies this explanatory model indicates an
adjustment for all rural hospitals of 4.3 percent.
BILLING CODE 4120-01-P
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BILLING CODE 4120-01-C
As we did for our proposed rule, we divided rural hospitals into
categories that reflected their eligibility for the expiring hold
harmless provision under section 1833(t)(7)(D) of the Act in order to
determine whether the small difference in costs was uniform across
classes of rural hospitals or whether all of the variation was
attributable to a specific type of rural hospitals. Specifically, we
divided rural hospitals into rural SCHs, rural hospitals with 100 or
fewer beds that are not rural SCHs, and other rural hospitals. The
first two categories of rural hospitals are currently eligible for
payments under the expiring hold harmless provision.
As indicated in the proposed rule, we found that rural SCHs
demonstrated significantly higher cost per unit than urban hospitals
after controlling for labor input prices, service-mix complexity,
volume, facility size, and type of hospital. The results of this
regression appear in Table 6. With the exception of the new rural
variables, the independent variables have the same sign and
significance as in Table 5. Rural SCHs have a positive and significant
coefficient. The rural SCH variable has an explanatory regression
coefficient of 0.06044 and an observed probability of 0.0003. If the
unit costs of rural SCHs are the same as those of urban hospitals, the
probability of observing a value as extreme or more extreme than 6.2
percent would be less than 0.1 percent. This is sufficient evidence to
accept that rural SCHs are more costly than urban hospitals, holding
all other variables constant.
Notably, we observe no significant difference between all small
rural hospitals with 100 or fewer beds and urban hospitals or between
other rural hospitals and urban hospitals. In the explanatory
regression presented in Table 6, the dummy variable for small rural
hospitals has an observed coefficient of 0.01203 and an associated
probability of 0.4748. If the unit costs of small rural hospitals are
the same as those of urban hospitals, the probability of observing a
value as extreme or more extreme than 1.2 percent would be less than 50
percent. With such a high probability, there is insufficient evidence
to conclude that rural hospitals with 100 or fewer beds are more costly
than urban hospitals, holding all other variables constant. The results
are almost identical when
[[Page 68559]]
volume and facility size are not included in the equation. Finally, the
dummy variable for other rural hospitals has an observed coefficient of
-0.01646 and an associated probability of 0.4545. If the unit costs of
other rural hospitals are the same as those of urban hospitals, the
probability of observing a value as extreme or more extreme than -1.7
percent would be less than 50 percent. These results are also present
when facility size and volume are not included in the equation. As with
small rural hospitals, this is insufficient evidence to conclude that
other rural hospitals are more costly than urban hospitals. Further,
for this group of rural hospitals, the coefficient is negative,
indicating lower cost per unit.
[GRAPHIC] [TIFF OMITTED] TR10NO05.013
Based on the above analysis, we continue to believe that a payment
adjustment for rural SCHs is warranted. The accompanying payment
regression, also appearing in Table 6, indicates a cost impact of 7.1
percent. Thus, in accordance with the authority provided in section
1833(t)(13)(B) of the Act, as added by section 411 of Pub. L. 108-173,
we are implementing a 7.1 percent payment increase for rural SCHs for
CY 2006. This adjustment will apply to all services and procedures paid
under the OPPS, excluding drugs, biologicals, and services paid under
the pass-through payment policy. As stated in the proposed rule, this
adjustment is budget neutral, and will be applied before calculating
outliers and coinsurance. We will not reestablish the adjustment amount
on an annual basis, but we may review the adjustment in the future, and
if appropriate, may revise the adjustment. Additional descriptive
statistics are available on the CMS Web site.
We received 19 public comments concerning these results.
Comment: Several commenters supported our proposed payment
increased for rural SCHs of 6.6 percent.
Response: We appreciate the commenters' support. As we discussed
above, based on our most recent analysis, we are implementing an
adjustment of 7.1 percent in this final rule with comment period. We
believe that an adjustment at this level remains consistent with the
views expressed by the commenters.
Comment: Several commenters expressed concern that the regression
analysis, as presented, does not separately set out the regression
results for rural hospitals with 100 or fewer beds that are not rural
SCHs. They indicate that, while CMS stated that this class of hospitals
did not demonstrate significance in the explanatory regression
analyses, it did not definitively display these results. The
[[Page 68560]]
commenters highlighted the importance of showing these results because
these are the facilities that will be losing their hold harmless
protection in CY 2006. One of the commenters cited MedPAC's 2005 Report
to Congress, which noted that previous MedPAC research indicated higher
costs for low-volume hospitals which are predominantly rural. The
commenters urged CMS to specifically report the regression results with
small rural hospitals with 100 or fewer beds identified separately.
Response: We agree with the commenters that we should identify
small rural hospitals with 100 or fewer beds separately in the
analysis. The results in Table 6 demonstrate that small rural hospitals
with 100 or fewer beds do not appear to have unit costs different from
those of urban hospitals after controlling for other contributors to
unit cost, including volume.
Comment: Several commenters requested clarification on the
definition of rural in order to assess which hospitals would be
eligible for the rural adjustment. The commenters asked: Would a SCH
located in a rural area that has been reclassified for wage index
purposes into an urban area be eligible for the SCH adjustment? Would a
SCH located in an urban area that has been reclassified for wage index
purposes into a rural area be eligible for the SCH adjustment?
Response: SCHs will be considered rural for the rural adjustment,
and for purposes of the OPPS rural adjustment only, under section
1833(t)(13)(B) of the Act if a hospital is geographically located in a
rural area or has been reclassified to a rural area for wage index
purposes. Therefore, a SCH located in a rural area that has been
reclassified for wage index purposes into an urban area will be
eligible for the adjustment, regardless of whether the SCH has been
reclassified to an urban area for wage index purposes. In addition, a
SCH located in an urban area that has been reclassified for wage index
purposes into a rural area also will be eligible for the adjustment.
New Sec. 419.43(g)(1)(ii) of the regulations, which we are finalizing
in this final rule with comment period, will provide that an SCH is
eligible for the adjustment if the hospital is ``located in a rural
area as defined in Sec. 412.64(b) of this chapter or is treated as
being located in a rural area under Sec. 412.103.'' To clarify the
text in response to the comments received, we are referencing Sec.
412.103 in the final regulation text instead of the reference to
section 1886(d)(8)(E) of the Act. This definition of a ``SCH located in
a rural area'' only will apply for the purposes of the rural adjustment
in this rule.
Comment: One commenter asked if rural SCHs that are participating
in the Rural Community Hospital Demonstration Program would be eligible
for the rural adjustment.
Response: Rural SCHs participating in the Rural Community Hospital
Demonstration Program are eligible to receive this rural adjustment.
The Rural Community Hospital Demonstration Program, authorized under
section 410A of Pub. L 108-173, assesses whether rural hospitals will
benefit from cost-based reimbursement and is limited to payment for
inpatient services. Although SCHs participating in the demonstration
program are not eligible to receive traditional SCH payments made under
the IPPS, these hospitals retain their SCH status.
Comment: Several commenters requested clarification of whether CMS
intends to make this adjustment available beyond CY 2006, and whether
it intends to reestablish the adjustment amount on an annual basis.
Response: We will not reestablish the adjustment amount on an
annual basis, but we may review the adjustment in the future and, if
appropriate, revise the adjustment.
Comment: A few commenters requested that CMS extend the rural
adjustment to CMHCs or make some other special allowance or provision
for their rural location.
Response: Section 1833(t)(13)(A) of the Act limits the scope of
this analysis and any adjustment to comparing rural and urban hospitals
costs.
Comment: Several commenters requested that CMS extend the proposed
rural adjustment to all SCHs, not just rural hospitals, under its
equitable adjustment authority in section 1833(t)(2)(E) of the Act. The
commenters described the necessary access to services that urban SCHs
provide and highlighted that both urban and rural SCHs have been
recognized for special protections by Congress in other payment systems
because they are the sole source of inpatient hospital services
reasonably available to Medicare beneficiaries.
One commenter used the public use file that CMS provided on its Web
site and conducted detailed analyses to assess the appropriateness of
an adjustment for urban SCHs. The commenter compared urban SCHs, rural
SCHs, other urban hospitals, and other rural hospitals on the number of
beds, their service mix, and wage index. The commenter also conducted
regression analysis. The first model the commenter examined included a
variable for rural location and a variable for SCH status in addition
to the other variables used in CMS' explanatory model. The commenter
reported that the SCH variable is significant, suggesting that SCHs are
more costly than other non-SCHs controlling for rural or urban status.
The commenter concluded that the results indicated SCHs are
significantly more costly than hospitals that are not SCHs and that
geographic location does not influence this finding.
The same commenter also examined an explanatory model that
resembled CMS' explanatory model. The commenter indicated that this
model included separate variables for urban SCHs, rural SCHs, and all
other rural hospitals in order to isolate the unit cost differences
between urban SCHs and other hospitals. The commenter reported that, in
this model, the unit costs of urban SCHs were not significantly
different from urban, non-SCH unit costs. With regard to this last
finding, the commenter suggested that the lack of significance is less
important than the comparability in the magnitude of the coefficient
for rural and urban SCHs, and that both types of hospitals have
coefficients at 6 percent. Finally, the commenter examined the
significance of the rural indicator in an explanatory regression model
conducted only with SCH hospitals. Within this population, the
commenter reported that all explanatory variables are statistically
significant, except an indicator for rural status, and suggested that
this finding further supports extending the adjustment to urban SCHs.
The commenter concluded by requesting that CMS repeat its regression to
confirm that SCH status, and not geographic location, is indicative of
higher costs, and if it finds this to be true, to appropriately adjust
for higher costs.
Response: We do not believe it is sufficient to confirm that all
SCHs are significantly more costly than non-SCHs, as the commenter
demonstrated in its first regression model because the statutory
authority for this adjustment is to be based upon the comparison
between urban and rural hospitals. The regression model that includes a
variable for SCH status and a variable for rural location only confirms
that all SCHs have higher costs than hospitals that are not SCHs and
that, having controlled for SCH status, rural and urban hospitals are
not different. Rural SCHs comprise 90 percent of all SCH, and are the
basis for the observed significance on the SCH variable.
Notwithstanding the mandate for this rural adjustment, we believe that
urban SCHs would have to demonstrate strong
[[Page 68561]]
empirical evidence that they are significantly more costly than other
urban hospitals. We do not find the strong empirical evidence
supporting an adjustment for urban SCHs, as we do for rural SCHs.
In many respects, urban SCHs look like urban hospitals on some of
the key variables presented in Table 4. Urban SCHs have a mean cost per
unit of $183.89, and urban hospitals have a mean cost per unit of
$188.76. Urban SCHs have a mean standardized unit cost of $74.01, and
all urban hospitals have a mean standardized cost of $73.54. Finally,
urban SCHs have a mean volume of 36,714, and urban hospitals have a
mean volume of 38,469. Similar to the commenter, we also ran an
explanatory regression analysis that included urban SCHs as a separate
class of hospitals in addition to rural SCHs, small rural hospitals,
and other rural hospitals. In these results, the coefficient associated
with urban SCHs was 0.05960 and the associated probability was 0.1624.
If the unit costs of urban SCHs are the same as those of urban
hospitals, the probability of observing a value as extreme or more
extreme than 6.1 percent would be less than 20 percent. We acknowledge
the commenter's statement that the size of the coefficient on the urban
SCH dummy variable is comparable to that on the dummy variable for
rural SCHs. However, we do not believe that the size of the coefficient
is sufficient evidence. The lack of significance associated with such a
large coefficient is attributable to the much higher standard error
accompanying urban SCHs compared to rural SCHs. Higher standard error
indicates that there is large variability in unit costs for urban SCHs
after controlling for all other variables in the equation. Some urban
SCHs may have unit costs as high as rural SCHs, but clearly many do
not. We believe that this observation accounts for the lack of
significance on the rural variable in the commenter's regression
analyses, which was limited to the population of SCHs.
Comment: One commenter requested that CMS examine whether the
outpatient costs of Medicare-Dependent Small Rural Hospitals (MDHs), a
subgroup of rural hospitals, are higher than urban hospitals'
outpatient costs, and provide an adjustment to payments if appropriate.
Response: We did not find any evidence that rural MDHs are more
costly than urban hospitals. We ran an explanatory regression analysis
that included rural MDHs as a separate class of small rural hospitals
from other small rural hospitals because 90 percent of rural MDHs were
also small rural hospitals. We also included all of the other variables
in Table 6 above, including rural SCHs and other rural hospitals. In
these results, the coefficient associated with rural MDHs was -0.01955,
with an associated probability of 0.4438. If the unit costs of MDHs are
the same as those of urban hospitals, the probability of observing a
value as extreme or more extreme than 2 percent would be less than 50
percent.
Comment: One commenter argued that CMS excluded variables from the
regression model that control for ``financial pressure'' and ``market
structure.'' The commenter argued that higher costs can be the result
of inefficient operations as much as they could also be the result of
higher input costs created by rural location, and that measures of
financial pressure or market structure would capture any variation in
unit cost attributable to a lack of local competition. The commenter
suggested that SCHs may be inefficient because they already have
special payment status under the IPPS and the OPPS. Finally, the
commenter suggested that, because beneficiaries' access to care is the
central objective of any payment policy, CMS should consider a low-
volume adjustment that better captures higher costs that the hospital
cannot control. At the same time, the commenter acknowledged that
section 1833(t)(13)(A) of the Act specifically requires an analysis of
urban and rural costs.
Response: While it is not inappropriate to include additional
variables in the explanatory regression analysis, we first note that
section 1833(t)(13)(A) of the Act specifically calls a determination of
whether costs faced by rural hospitals are higher than those faced by
urban hospitals. For this reason, we believe that the model in Table 6
ably controls for scale efficiencies in a comparison of urban and rural
costs. Our adjusted R2 of 54 percent also demonstrates a relatively
good fit. We acknowledge that some of the SCHs eligible for the
adjustment may also be more costly because of inefficiencies due to
limited competition or because they currently receive special payment
status under the IPPS and the OPPS. However, we also agree with the
commenter that beneficiary access is an important goal. We believe that
the current model is sufficiently robust to identify hospitals with
significantly higher costs such that payment under the OPPS alone might
impact beneficiary access. The SCH status of these hospitals suggests
that they are important to beneficiary access. Rural SCHs receive their
designation because they are the only, or one of a few, sources of care
for beneficiaries. For example, these hospitals may be the only
immediately available source of emergency services for Medicare
beneficiaries.
In accordance with the authority provided in section 1833(t)(13)(B)
of the Act, as added by section 411 of Pub. L. 108-173, we are
finalizing our policy by including a payment adjustment for rural SCHs
of 7.1 percent and finalizing the regulation text at Sec. 419.43(g) as
noted above.
H. Hospital Outpatient Outlier Payments
Currently, the OPPS pays outlier payments on a service-by-service
basis. For CY 2005, the outlier threshold is met when the cost of
furnishing a service or procedure by a hospital exceeds 1.75 times the
APC payment amount and exceeds the APC payment rate plus a $1,175
fixed-dollar threshold. We introduced a fixed-dollar threshold in CY
2005 in addition to the traditional multiple threshold in order to
better target outliers to those high cost and complex procedures where
a very costly service could present a hospital with significant
financial loss. If a provider meets both of these conditions, the
multiple threshold and the fixed-dollar threshold, the outlier payment
is calculated as 50 percent of the amount by which the cost of
furnishing the service exceeds 1.75 times the APC payment rate. For a
discussion on CMHC outliers, see section II.B.3. of this final rule
with comment period.
As explained in our CY 2005 final rule with comment period (69 FR
65844), we set our projected target for aggregate outlier payments at
2.0 percent of aggregate total payments under the OPPS. Our outlier
thresholds were set so that estimated CY 2005 aggregate outlier
payments would equal 2.0 percent of aggregate total payments under the
OPPS.
For CY 2006, we proposed to set our projected target for aggregate
outlier payments at 1.0 percent of aggregate total payments under the
OPPS. A portion of that 1.0 percent, an amount equal to 0.6 percent of
outlier payments, would be allocated to CMHCs for partial
hospitalization program service outliers. In support of this decision,
we cited MedPAC's March 2004 Report to Congress, in which MedPAC
recommended that Congress pursue the statutory change needed to
eliminate the outlier policy under the OPPS. We specifically
highlighted several of the reasons given by MedPAC for the elimination
of the outlier policy because they are equally applicable to any
[[Page 68562]]
reduction in the size of the percentage of OPPS payments dedicated to
outlier payments. One of MedPAC's arguments included the very narrow
definition of many APCs with limited packaging frequently resulting in
multiple service payments for any given claim. In addition, we noted
that outlier policies are susceptible to ``gaming'' through charge
inflation and that the OPPS is the only ambulatory payment system with
an outlier policy. Finally, we cited MedPAC's observation that the
distribution of outlier payments benefits some hospital groups more
than others.
In order to ensure that estimated CY 2006 aggregate outlier
payments would equal 1.0 percent of estimated aggregate total payments
under the OPPS, we proposed that the outlier threshold be modified so
that outlier payments are triggered when the cost of furnishing a
service or procedure by a hospital exceeds 1.75 times the APC payment
amount and exceeds the APC payment rate plus a $1,575 fixed-dollar
threshold. Ultimately, we chose to modify the fixed dollar threshold to
target 1.0 percent of estimated aggregate total payment under the OPPS
and not to modify the current 1.75 multiple in order to further our
policy of targeting outlier payments to complex and expensive
procedures with sufficient variability to pose a financial risk for
hospitals. We note that modifying the multiple threshold would have
done less to target outlier payments to complex and expensive
procedures.
We calculated the fixed-dollar threshold for the proposed rule
using the same methodology as we did in CY 2005. The claims that we use
to model each OPPS lag by 2 years. For this final rule with comment
period, we used CY 2004 claims to model the CY 2006 payment system. In
order to estimate CY 2006 outlier payments for the proposed rule, we
inflated the charges on the CY 2004 claims using the same inflation
factor of 1.0865 that we used to estimate the IPPS fixed-dollar outlier
threshold for the IPPS FY 2006 proposed rule. For 2 years, the
inflation factor is 1.1804. The methodology for determining this charge
inflation factor was discussed at length in the IPPS proposed rule (70
FR 47493, August 12, 2005). As we stated in our final rule for 2005, we
believe that the use of this charge inflation factor is appropriate for
OPPS because, with the exception of the routine service cost centers,
hospitals use the same cost centers to capture costs and charges across
inpatient and outpatient services (69 FR 65845, November 15, 2004). As
also noted in the IPPS final rule, we believe that a charge inflation
factor is more appropriate than an adjustment to costs because this
methodology closely captures how actual outlier payments are made and
calculated (70 FR 47495, August 12, 2005). We then applied the overall
cost-to-charge ratio (CCR) that we calculate from each Hospital's Cost
Report (CMS-2552-96) as part of our process for estimating median APC
costs. The calculation of this overall CCR is discussed in greater
detail in section II.A. of this preamble. We estimated outlier payments
using these costs for several different fixed-dollar thresholds,
holding the 1.75 multiple constant until the aggregated outlier
payments equaled 1.0 percent of aggregated total payments under the
OPPS. In addition, for CY 2006, we proposed an outlier threshold for
CMHCs of 3.45 times the APC payment rate.
For this final rule with comment period, we recalculated the fixed-
dollar threshold in light of updated claims data, a revised charge
inflation estimate, and more timely CCRs. As in the proposed rule, we
did not change the multiple threshold of 1.75 times the APC payment
rate, but concentrated on adjusting the fixed-dollar threshold. We
again used the same inflation factor that we used to estimate the IPPS
fixed-dollar threshold. Because the charge inflation factor for the
IPPS was revised to 14.94 percent for 2 years in the IPPS FY 2006 final
rule (70 FR 47493, August 12, 2005), we inflated charges on all CY 2004
OPPS claims by 1.1494.
We then applied the hospital specific overall CCR which we
calculated for purposes of our APC cost estimation. We simulated
aggregated outlier payments using these costs for several different
fixed dollar thresholds holding the 1.75 multiple constant until the
total outlier payments equaled 1.0 percent of aggregated total OPPS
payments. We estimate that a threshold of $1,250 combined with the
multiple threshold of 1.75 times the APC payment rate will allocate 1.0
percent of aggregated total OPPS payments to outlier payments. We used
a lower charge inflation factor of 14.94 percent to increase charges to
reflect 2006 dollars. The proposed fixed dollar threshold declined to
$1,250 from $1,575 in the proposed rule primarily because we used the
lower charge inflation factor of 1.1494.
The following is an example of an outlier calculation for CY 2006
under our final policy. A hospital charges $26,000 for a procedure. The
APC payment for the procedure is $3,000, including a rural adjustment,
if applicable. Using the provider's CCR of 0.30, the estimated cost to
the hospital is $7,800. To determine whether this provider is eligible
for outlier payments for this procedure, the provider must determine
whether the cost for the service exceeds both the APC outlier cost
threshold (1.75 x APC payment) and the fixed-dollar threshold ($1,250 +
APC payment). In this example, the provider meets both criteria:
(1) $7,800 exceeds $5,250 (1.75 x $3,000)
(2) $7,800 exceeds $4,250 ($1,250 + $3,000)
To calculate the outlier payment, which is 50 percent of the amount
by which the cost of furnishing the service exceeds 1.75 times the APC
rate, subtract $5,250 (1.75 x $3,000) from $7,800 (resulting in
$2,550). The provider is eligible for 50 percent of the difference, in
this case $1,275 ($2,550/2). The formula is (cost-(1.75 x APC payment
rate))/2.
For CMHCs, in CY 2005, the outlier threshold is met when the cost
of furnishing a service or procedure by a CMHC exceeds 3.5 times the
APC payment rate. If a CMHC provider meets this condition, the outlier
payment is calculated as 50 percent of the amount by which the cost
exceeds 3.5 times the APC payment rate. For this final rule with
comment period, updated data reduces the multiple outlier threshold for
CMHCs to 3.4. The outlier threshold for a CMHC is met when the cost of
furnishing a service or procedure by a CMHC exceeds 3.4 times the APC
payment rate. If a CMHC provider meets this condition, the outlier
payment is calculated as 50 percent of the amount by which the cost
exceeds 3.4 times the APC payment rate.
We received 25 public comments concerning our proposed outlier
policy.
Comment: One commenter supported CMS' decision to reduce the
percentage of total payments set aside for outlier payments from 2.0
percent to 1.0 percent.
Response: We appreciate the commenter's support. Although the
fixed-dollar threshold has changed due to more accurate data than in
the proposed rule, we do not believe that this change would impact the
views expressed by the commenter.
Comment: Several commenters expressed concern that, in light of an
increase in the threshold from $1,175 to $1,575, CMS may have set the
threshold for outlier payments too high. They requested clarification
as to how CMS determined that a $400 increase in the fixed-dollar
threshold was appropriate and how the $1,575 fixed-dollar threshold was
calculated. The commenters specifically noted that in the IPPS final
rule CMS reduced the charge inflation factor used to set the fixed-
dollar threshold from 18.04
[[Page 68563]]
percent to 14.94 percent, and suggested that CMS make a similar
adjustment to the OPPS methodology.
Response: As discussed above, for the proposed rule, we used a
charge inflation factor of 1.1804 to inflate the charges on CY 2004
claims to CY 2006 dollars. We then applied the overall CCR that we
calculate as part of our APC median estimation process to those
inflated charges to estimate costs. We compared these estimated costs
to 1.75 times the proposed APC payment amount and to the APC payment
amount plus a number of fixed-dollar thresholds until we identified a
threshold that produced total outlier payments equal to 1.0 percent of
total aggregated OPPS payments. This methodology increased the fixed-
dollar threshold by $400.
We repeated the same estimation process for this final rule, using
a complete set of CY 2004 claims, the updated charge inflation estimate
of 14.94 percent from the IPPS final rule, as requested by commenters,
and each hospital's overall CCR, as calculated for our APC median
setting process. The final fixed dollar threshold for OPPS 2006 is
$1,250 plus the APC payment rate, and the final multiple threshold is
1.75 times the APC payment rate.
Comment: Commenters expressed concern that CMS has never reported
the actual amount of outlier payments for the OPPS made in past years.
They noted that CMS routinely reports prior year outlier payments for
the IPPS. The commenters also expressed concern that CMS may not spend
the percentage of total aggregated OPPS payment set aside each year for
outlier payments. One commenter hypothesized that outlier payments had
been underspent in previous years, and that the proposed reduction in
outlier payments was designed to realign the policy with actual
payment. The commenters urged CMS to publish data on actual outlier
payments made in CY 2004 and prior years in the final rule. They also
recommended that actual outlier payments for CY 2005 OPPS be reported
as soon as CMS is able to obtain accurate data and that CMS continue to
report these data in the future.
Response: As we have stated in prior rules (see for example 69 FR
65847, November 15, 2004), we have not provided aggregate outlier
payments for past years because we do not use those estimates to set
the outlier thresholds and because we make outpatient claims available.
However, we understand that providers might wish to know this
information, especially in light of recent changes in the OPPS outlier
policy. In the final set of CY 2004 OPPS claims, aggregated outlier
payments were 2.5 percent of aggregated total OPPS payments. In the
final set of CY 2003 OPPS claims, aggregated outlier payments were 3.1
percent of aggregated total OPPS payments. For both years, the
estimated outlier payments were set at 2 percent of total aggregated
OPPS payments. At this time, we cannot make accurate estimates about
aggregated total outlier payments for CY 2005, but we intend to provide
this information in our proposed rule for CY 2007. We intend to
continue reporting the percentage of total payments made in outlier
payments for the most recent and complete set of claims in future
rules. We note above our reasons for proposing to reduce the projected
target percent of total aggregated OPPS payments attributable to
outlier payments.
Comment: Several commenters suggested that CMS did not provide
sufficient analytic support to justify a reduction in outlier payments
from 2.0 percent to 1.0 percent, relying only on MedPAC's
recommendations. The commenters urged CMS not to change its outlier
policy or to delay implementation until greater technical analyses
could be conducted. One commenter suggested that, without CMS'
technical analyses, stakeholders cannot conduct their own analyses. The
commenters frequently questioned our reference to the March 2004 MedPAC
Report to Congress and stated that outlier payments are not evenly
distributed among hospitals as justification for reducing the
percentage of total payments dedicated to outlier payments. They noted
that differences in outlier payments would be expected for hospitals
serving different populations. Several commenters cited the continued
instability in rates as a reason for continuing at 2.0 percent. One
commenter specifically hypothesizes that instability in payment rates
may be attributable to a lack of stability in unit costs, suggesting a
continued need for outlier payments. Another commenter acknowledged
that the variability in costs for APCs was clearly less than that for
DRGs, but that the current policy of setting aside two percent of total
payments, already accounted for this difference.
Response: Our decision to reduce the projected target amount of
total payments set aside for outlier payments is based on the technical
analyses that MedPAC conducted in its March 2004 Report to Congress
demonstrating that the CY 2004 OPPS outlier policy was ineffective at
addressing complex cases of financial risk and on the arguments that
MedPAC made against outlier payments. As noted above, MedPAC argued
that the fairly narrow definition of the APC groups makes outlier
payments less necessary for the OPPS, that the limited packaging in
OPPS frequently resulting in multiple service payments for any given
claim, and that the susceptibility to ``gaming'' through charge
inflation continues. MedPAC's 2004 Report to Congress also suggested
that our outlier policy could be redistributing outlier payments among
hospitals based on cost structures or charging patterns rather than
differences in case-mix. We agree with the commenters that an unequal
distribution of outlier payments according to differences in case mix
is appropriate, the concern is that different case mix does not account
for outlier payment distributions.
We do not believe that the moderate fluctuation in APC payment
rates that continues to be present in the OPPS is an adequate argument
against reducing the percentage of aggregated total OPPS payments set
aside for outlier payments for several reasons: changes in payment
rates appropriately reflect changes in costs, the variability of costs
is less for complex and expensive procedures, and outlier payments in
OPPS target services not cases. As discussed in section II.A. of this
preamble, we believe that the moderate changes in the payment rates
remaining after the system has been operating for several years is, in
large part, a function of the small APC group size and service basis.
The small group size of the APCs makes changes in service costs more
transparent than if groups were larger. Aggregation generally reduces
variation. Changes in payment rates from year to year appropriately
reflect true changes in the cost of a specific service. Changes in cost
and charging patterns captured in a provider's cost report will lead to
changes in the median cost of services from year to year. In addition,
we are required to adjust the APCs each year to ensure that groups are
comparable with ``respect to the use of resources.'' The ``2 times''
rule requires that the highest median cost for an item or service
within the group not be greater than two times the lowest median cost.
The ``2 times'' rule specifically limits the amount of variability of
unit costs in any group, forcing the APC payment rates to reflect
changes in costs. It embeds some fluctuation into APC payment rates,
but also reduces the need for an expansive outlier policy.
The observed variability in unit costs is greater for low cost and
simple procedures and smaller for complex, expensive procedures. In its
2004 Report to Congress, MedPAC found that
[[Page 68564]]
the highest variability in estimated costs was associated with the
lowest cost items. This observation continues to be true in the CY 2004
claims. On average, HCPCS codes with low median costs demonstrate
greater variability, as measured by the coefficient of variation, than
HCPCS codes with high median costs. The coefficient of variation is the
percent of the standard deviation accounted for by the mean and enables
a relative comparison of variation across groups. This trend also is
evident in the APC coefficient of variation. The bottom 50 percent of
APCs arrayed by median costs have an average coefficient of variation
of 82 percent, whereas the top 50 percent of APCs, arrayed by median
cost, have an average coefficient of variation of 63 percent.
Finally, OPPS outlier payments are targeted to services, rather
than cases. Unlike the IPPS, outlier payments are not for extremely
costly patients but extremely costly services. In many cases, an
extremely costly case in the outpatient setting may not warrant an
outlier payment because no specific service was excessively costly. The
small number of services included in any APC group means that the
provider will receive payment for most services billed on a claim.
Reducing total outlier payments to 1.0 percent of total OPPS payments
effectively raises the payment for all other services because the
foregone 1.0 percent of total spending is returned to the conversion
factor. We acknowledge the comment stating that the comparative
difference in cost variability between the IPPS and the OPPS is already
accounted for in the difference between the 5 to 6 percent estimated
outlier target under IPPS and the 2 percent projected outlier estimate
under OPPS. However, we believe that setting total outlier payments at
1.0 percent of total aggregated OPPS payments sets aside an appropriate
amount of dollars for unexpected and costly services.
Comment: One commenter indicated concern that CMS proposed an
additional change to the outlier payments before having one year of
experience with the fixed-dollar threshold introduced in CY 2005.
Response: We do not believe that these two policies are related.
The amount of total aggregated OPPS payments set aside for outlier
payments is an entirely different policy from the manner in which those
payments are distributed to hospitals. We did not institute the fixed-
dollar threshold to reduce outlier payments, but rather to target
payments to expensive and costly cases. The fixed-dollar threshold will
continue to have this effect within a smaller amount of outlier
payments.
Comment: Several commenters suggested that CMS did not sufficiently
demonstrate the impact on hospitals of reducing the percentage of
estimated total payments dedicated to outlier payments 2.0 percent to
1.0 percent and requested this analysis. The commenters expressed
concern that hospitals providing sophisticated and expensive
technologies to very sick patients would be placed at greater risk of
financial loss. Most of the commenters suggested that the reduction in
the outlier percentage be delayed until CMS can fully evaluate the
impact, while other commenters simply urged for a return to the 2-
percent target amount.
Response: For the proposed rule, we did not include a specific
analysis of the redistributive impact of outliers because the fixed-
dollar threshold policy did not change, only the aggregate amount of
dollars paid. We did include outlier payments in our impact tables, and
we made the amount of outlier payment estimated for each hospital
available on our Web site. However, we appreciate commenters' desire to
more fully view the impact of the outlier policy. For this final rule
with comment period, we have provided a separate table in our
regulatory impact analysis, section XIX of this preamble, showing the
differences in total aggregated OPPS payment for CY 2006 attributable
to the change in the outlier policy. We estimate that no class of
hospital will experience more than a 1 percent change in total payments
due to outlier payments and many classes of hospitals receive greater
payments.
Comment: Several commenters suggested that CMS pay outlier claims
at the same rate at which inpatient outlier claims are paid, that is,
80 percent of cost. Various rationales were provided, including
consistency with the IPPS, ensuring that hospitals can recoup the
variable costs of providing expensive care, and improving the adequacy
of payments.
Response: We believe that the payment percentage of 50 percent is
appropriate for the OPPS because, in general, a costly OPPS service
poses less of a financial risk for hospitals than a costly case under
the IPPS. If we did increase the payment percentage to 80 percent, we
would have to compensate elsewhere to maintain the 1.0 percent set
aside for outlier payments, probably by raising the fixed-dollar
threshold. Changing the payment percentage to 80 percent would merely
concentrate a more generous outlier payment on a much smaller number of
extremely costly services each year.
Comment: One commenter recommended a new methodology for estimating
the fixed-dollar outlier threshold for both the OPPS and the IPPS. The
commenter suggested that, in addition to inflating charges from CY 2004
to CY 2006, CMS also should adjust CCRs to reflect proportionally
slower inflation in costs. The commenter believed that this would
result in deflating overall CCRs. The commenter specifically
recommended that CMS update the CCRs for the OPPS to the latest
available hospital-specific data.
Response: We agree with the commenter that the CCRs that we use to
set the outlier thresholds should be as recent as possible. We also
believe that these CCRs should reflect, as closely as possible, the
actual CCRs that the fiscal intermediary will use to determine outlier
payments in CY 2006. As we did for the IPPS final rule (70 FR 47493,
August 12, 2005), we used the overall CCRs from the most recent
provider-specific file, in this case, the July 2005 OPSF, to estimate
costs from inflated charges on CY 2004 claims. The OPSF contains CCRs
from each provider's most recent tentatively settled cost report.
Because of the time it takes to complete cost reports and upload them
in the fiscal intermediaries' standard systems, for at least part of CY
2006, the CCRs on the OPSF are the same ones that the fiscal
intermediaries will use to determine outlier payments. However, unlike
the IPPS, the overall CCRs on the OPSF are higher than those that we
use to estimate APC medians. The median overall CCR that we calculate
from each hospital's cost report as a default CCR in estimating costs
from charges in order to set relative weights is 0.305, whereas the
median overall CCR on the OPSF is 0.32. Were we to use the CCRs from
the OSPF, the fixed dollar threshold would increase, from $1,250 to
$1,800.
We will consider using the CCRs found in the OSPF for the CY 2007
OPPS outlier calculations, similar to our calculations under IPPS.
However, in view of the newness of a fixed-dollar threshold for OPPS
outlier payments and our concern that using the OSPF CCRs for this
final rule would result in an $1,800 fixed dollar threshold that is
considerably higher than the proposed threshold, we have decided to use
the CCRs that we calculated for the APC median setting process for our
outlier calculations as we have in past years. These CCRs are timely,
as the majority of them are created from cost reports with fiscal years
beginning in 2004 and 2003.
Comment: One commenter requested that CMS reverse its decision to
reduce
[[Page 68565]]
the percentage of total payments attributable to outlier payments to 1
percent and return outlier payments to the target level of 3 percent
established under the Balanced Budget Act (BBA) of 1997.
Response: For all of the reasons stated above, we do not believe
that outlier payments should be increased to 3 percent of total
payments. We further note that the BBA, as revised by the Balanced
Budget Refinement Act (BBRA) of 1999, set an upper limit of ``no more
than'' 3.0 percent for outlier policies, giving the Secretary the
discretion to set a lower estimated target percent.
Comment: One commenter expressed concern that decreasing the
outlier pool and increasing the fixed dollar threshold may encourage
greater packaging in order to increase procedure charges.
Response: We do not believe that greater packaging is an issue for
the OPPS outlier policy. Should providers choose to package more
services into the charges for payable procedures and not report
packaged services, over time, those higher costs would lead to higher
payment rates for payable procedures. This would, in turn, increase the
fixed dollar outlier threshold. Further, rolling the charges for
packaged services into the charges for payable procedures is expected
under OPPS.
Comment: One commenter requested that CMS describe the services
that qualify for outlier payments.
Response: The actual services that qualify for outlier payments
under the fixed dollar threshold policy introduced in CY 2005 will
likely be quite similar to those receiving payments under 2005 OPPS. As
noted above, at this time, we do not have a complete set of CY 2005
claims. However, in our analysis replicating the analysis done by
MedPAC in its March 2004 Report to Congress, we estimate that costly
services such as APC 0246 (Cataract Procedures with IOL Insert), APC
0080 (Diagnostic Cardiac Catheterization), and APC 0131 (Level II
Laparoscopy) would receive a large percentage of outlier payments under
the fixed-dollar threshold policy.
Accordingly, after considering the public comments received, for CY
2006, we are finalizing the OPPS outlier policy of two thresholds for
hospitals of a multiple threshold of 1.75 times the APC payment amount
and a fixed dollar threshold of $1,250 plus the APC payment amount and
one threshold for CMHCs of 3.4 times the APC payment amount.
I. Calculation of the National Unadjusted Medicare Payment
The basic methodology for determining prospective payment rates for
OPD services under the OPPS is set forth in existing regulations at
Sec. 419.31 and Sec. 419.32. The payment rate for services and
procedures for which payment is made under the OPPS is the product of
the conversion factor calculated in accordance with section II.C. of
this final rule with comment period and the relative weight determined
under section II.A. of this final rule with comment period. Therefore,
the national unadjusted payment rate for APCs contained in Addendum A
to this final rule with comment period and for HCPCS codes to which
payment under the OPPS has been assigned in Addendum B to this final
rule with comment period (Addendum B is provided as a convenience for
readers) was calculated by multiplying the final CY 2006 scaled weight
for the APC by the final CY 2006 conversion factor.
However, to determine the payment that will be made in a calendar
year under the OPPS to a specific hospital for an APC for a service
other than a drug, in a circumstance in which the multiple procedure
discount does not apply, we take the following steps:
Step 1. Calculate 60 percent (the labor-related portion) of the
national unadjusted payment rate. Since initial implementation of the
OPPS, we have used 60 percent to represent our estimate of that portion
of costs attributable, on average, to labor. (Refer to the April 7,
2000 final rule with comment period (65 FR 18496 through 18497) for a
detailed discussion of how we derived this percentage.)
Step 2. Determine the wage index area in which the hospital is
located and identify the wage index level that applies to the specific
hospital. The wage index values assigned to each area reflect the new
geographic statistical areas as a result of revised OMB standards
(urban and rural) to which hospitals are assigned for FY 2006 under the
IPPS, reclassifications through the Medicare Classification Geographic
Review Board, section 1866(d)(8)(B) ``Lugar'' hospitals, and section
401 of Pub. L. 108-173, and the reclassifications of hospitals under
the one-time appeals process under section 508 of Pub. L. 108-173. The
wage index values include the occupational mix adjustment described in
section II.D. of this final rule with comment period that was developed
for the FY 2006 IPPS.
Step 3. Adjust the wage index of hospitals located in certain
qualifying counties that have a relatively high percentage of hospital
employees who reside in the county, but who work in a different county
with a higher wage index, in accordance with section 505 of Pub. L.
108-173. Addendum L contains the qualifying counties and the final wage
index increase developed for the FY 2006 IPPS. This step is to be
followed only if the hospital has chosen not to accept reclassification
under Step 2 above.
Step 4. Multiply the applicable wage index determined under Steps 2
and 3 by the amount determined under Step 1 that represents the labor-
related portion of the national unadjusted payment rate.
Step 5. Calculate 40 percent (the nonlabor-related portion) of the
national unadjusted payment rate and add that amount to the resulting
product of Step 4. The result is the wage index adjusted payment rate
for the relevant wage index area.
Step 6. If a provider is a SCH, as defined in Sec. 419.92, and
located in a rural area, as defined in Sec. 412.63(b), or is treated
as being located in a rural area under Sec. 412.103 of the Act,
multiply the wage index adjusted payment rate by 1.071 to calculate the
total payment.
We received no public comments concerning our proposal for
calculating the national unadjusted Medicare payment rate. Therefore;
we are adopting as final, for OPPS services furnished on or after
January 1, 2006, our proposed methodology for calculating the national
unadjusted Medicare payment amount.
J. Beneficiary Copayments for CY 2006
1. Background
Section 1833(t)(3)(B) of the Act requires the Secretary to set
rules for determining copayment amounts to be paid by beneficiaries for
covered OPD services. Section 1833(t)(8)(C)(ii) of the Act specifies
that the Secretary must reduce the national unadjusted copayment amount
for a covered OPD service (or group of such services) furnished in a
year in a manner so that the effective copayment rate (determined on a
national unadjusted basis) for that service in the year does not exceed
specified percentages. For all services paid under the OPPS in CY 2006,
and in calendar years thereafter, the specified percentage is 40
percent of the APC payment rate. Section 1833(t)(3)(B)(ii) of the Act
provides that, for a covered OPD service (or group of such services)
furnished in a year, the national unadjusted coinsurance amount cannot
be less than 20 percent of the OPD fee schedule amount.
[[Page 68566]]
2. Copayment for CY 2006
For CY 2006, we proposed to determine copayment amounts for new and
revised APCs using the same methodology that we implemented for CY 2004
(see the November 7, 2003 OPPS final rule with comment period, 68 FR
63458). We used the same methodology to determine the final unadjusted
copayment amounts for services payable under the OPPS that will be
effective January 1, 2006. These copayment amounts are shown in
Addendum A and Addendum B of this final rule with comment period.
3. Calculation of the Unadjusted Copayment Amount for CY 2006
To calculate the unadjusted copayment amount for an APC group, take
the following steps:
Step 1. Calculate the beneficiary payment percentage for the APC by
dividing the APC's national unadjusted copayment by its payment rate.
For example, using APC 0001, $7.00 is 29 percent of $23.79.
Step 2. Calculate the wage adjusted payment rate for the APC, for
the provider in question, as indicated in section II.I. of this
preamble.
Step 3. Multiply the percentage calculated in Step 1 by the payment
rate calculated in Step 2. The result is the wage-adjusted copayment
amount for the APC.
We received two public comments concerning our proposed methodology
for calculating the beneficiary unadjusted copayment amount.
Comment: One commenter recommended that CMS maintain the
coinsurance amount above 40 percent of the APC payment amount as the
proposed payment rate for CY 2006 is lower than the CY 2005 payment
rate when adjusted for inflation.
Response: We appreciate the commenter's recommendation but note
that the statute does not provide for this. Section 1833(t)(8)(C)(ii)
of the Act specifies that the Secretary must reduce the national
unadjusted copayment amount for a covered OPD service (or group of such
services) furnished in a year in a manner so that the effective
copayment rate (determined on a national unadjusted basis) for that
service in the year does not exceed specified percentages. For all
services paid under the OPPS in CY 2006, and in calendar years
thereafter, that specified percentage is 40 percent of the APC payment
rate.
Comment: One commenter objected to beneficiaries being liable for
more than 20 percent of the Medicare payment rate for services paid
under the OPPS. The commenter acknowledged that the law limits the
copayment for a single service to the amount of the inpatient
deductible, but objected to there being no limit to the amount of
coinsurance that a beneficiary can incur per year or even for a single
outpatient encounter. The commenter acknowledged that the amount of
beneficiary copayment liability is set in statute but urged CMS to work
with Congress to restore beneficiary coinsurance of hospital outpatient
services to the level it views as appropriate.
Response: As the commenter indicated, the level of beneficiary
coinsurance is set based on specific statutory criteria.
Comment: One commenter recommended that CMS work with Congress to
restore the beneficiary coinsurance for hospital outpatient services to
the appropriate level. By ``appropriate,'' we assume the commenter
means that coinsurance for all OPPS services should be 20 percent,
which is the coinsurance rate for other services paid under Medicare
Part B.
Response: We appreciate the commenter's recommendation and will
take it into consideration. However, until the statute at section
1833(t)(8)(C)(ii) of the Act is revised, the Secretary must adhere to
the current requirements of the law, which caps the beneficiary
coinsurance payment at 40 percent of the APC payment rate. In addition,
the law requires that the coinsurance amount be no less than 20 percent
of the APC rate.
Accordingly, we are adopting as final, for OPPS services furnished
on or after January 1, 2006, our proposed methodology for calculating
the beneficiary unadjusted copayment amount.
III. Ambulatory Payment Classification (APC) Group Policies
A. Introduction
1. Treatment of New HCPCS Codes Discussed in the CY 2006 OPPS
Proposed Rule
During the second quarter of CY 2005, we created 11 HCPCS codes
that were not addressed in the November 15, 2004 final rule with
comment period that updated the CY 2005 OPPS. (Table 14 of the CY 2006
OPPS proposed rule.) We have designated the payment status of those
codes and added them to the April update of the CY 2005 OPPS
(Transmittal 514). In the proposed rule, we also solicited public
comments on the proposed APC assignments of these services.
Table 7.--New HCPCS Codes Implemented in April 2005
------------------------------------------------------------------------
HCPCS code Description
------------------------------------------------------------------------
C9127................................ Injection, paclitaxel protein-
bound particles, per 1 mg.
C9128................................ Injection, pegaptamib sodium, per
0.3 mg.
C9223................................ Injection, adenosine for
therapeutic or diagnostic use, 6
mg (not to be used to report any
adenosine phosphate compounds,
instead use A9270).
C9440................................ Vinorelbine tartrate, brand name,
per 10 mg.
C9723................................ Dynamic infrared blood perfusion
imaging (DIRI).
C9724................................ Endoscopic full-thickness
plication in the gastric cardia
using endoscopic plication
system (EPS); includes
endoscopy.
Q4079................................ Injection, natalizumab, 1 mg.
Q9941................................ Injection, Immune Globulin,
Intravenous, Lyophilized, 1 g.
Q9942................................ Injection, Immune Globulin,
Intravenous, Lyophilized, 10 mg.
Q9943................................ Injection, Immune Globulin,
Intravenous, Non-Lyophilized, 1
g.
Q9944................................ Injection, Immune Globulin,
Intravenous, Non-Lyophilized, 10
mg.
------------------------------------------------------------------------
Further, consistent with our annual APC updating policy, we
proposed to assign the new HCPCS codes for CY 2006 to the appropriate
APCs and incorporate them into our final rule with comment period for
CY 2006.
We did not receive any public comments on the new procedural C
codes, their status indicators, or their APC assignments for the two
new OPPS procedures (C9723 and C9724) implemented in April 2005.
Therefore, we are adopting as final our proposal to assign these HCPCS
codes C9723 and
[[Page 68567]]
C9724 for CY 2006 to the appropriate APCs, as shown in Addendum B of
this final rule with comment period, without modification.
We received a number of public comments related to drugs described
by new HCPCS codes implemented in April 2005 in the OPPS; specifically,
HCPCS codes C9127, C9128, C9223, C9440, Q4079, Q9941, Q9942, Q9943, and
Q9944. See section V. of this preamble (Payment Changes for Drugs,
Biologicals, and Radiopharmaceutical Agents) for a discussion of these
comments, including comment summaries, our responses and a description
of our final OPPS payment policies. In addition, our final payment
policy for CY 2006 is included in Addendum B of this final rule with
comment period.
2. Treatment of New CY 2006 HCPCS Codes
In the proposed rule, we proposed that we would assign new HCPCS
codes for CY 2006 to appropriate APCs and/or status indicators and that
we would implement them in our final rule. However, we received some
comments regarding individual new HCPCS codes that commenters expect to
be implemented for the first time in the CY 2006 OPPS. We do not
specifically respond to those comments in this final rule. We could not
discuss APC and/or status indicator assignments for new CY 2006 HCPCS
codes in the proposed rule because the new CY 2006 HCPCS codes were not
available when we issued the proposed rule. Rather, as has been our
practice in the past, we implement new HCPCS codes in the OPPS final
rule, at which time we invite public comment about our treatment of the
new codes. We subsequently respond to those comments in the final rule
for the following year's OPPS update.
New 2006 HCPCS codes are designated in Addendum B with Comment
Indicator ``NI.'' The status indicator and/or APC assignments for all
HCPCS codes flagged with Comment Indicator ``NI'', which are new 2006
HCPCS codes, are subject to public comment.
3. Treatment of New Mid-Year Category III CPT Codes
Twice each year, the AMA issues Category III CPT codes, which the
AMA defines as temporary codes for emerging technology, services, and
procedures. The AMA established these codes to allow collection of data
specific to the service described by the code which otherwise could
only be reported using a Category I CPT unlisted code. The AMA releases
Category III CPT codes in January, for implementation beginning the
following July, and in July, for implementation beginning the following
January. In the past, CMS has treated new Category III CPT codes
implemented in July of the previous year or January of the OPPS update
year in the same manner that new Category I CPT codes and new Level II
HCPCS codes implemented in January of the OPPS update year are treated;
that is, we provide APC and/or status indicator assignments in the
final rule updating the OPPS for the following calendar year. New
Category I and Category III CPT codes, as well as new Level II HCPCS
codes, are flagged with Comment Indicator ``NI'' in Addendum B of the
final rule to indicate that we are assigning them an interim payment
status which is subject to public comment following publication of the
final rule that implements the annual OPPS update.
We are concerned that not recognizing for 6 months (from July to
January) the Category III codes that the AMA releases each January for
implementation in July may hinder timely collection of data pertinent
to the services described by the codes. Moreover, delay in recognizing
these codes could inhibit access to the services they describe because
of provider reluctance to furnish a service that defaults to the OPPS
payment assigned to unlisted codes. Also, we have on occasion found
redundancy between Category III CPT codes and some of the C-codes,
which are only payable under the OPPS and created by us in response to
applications for New Technology services. Therefore, beginning in CY
2006, we are modifying this process and recognizing Category III CPT
codes that are released by the AMA in January to be effective beginning
July of the same calendar year in which they are issued, rather than
deferring recognition of those codes to the following calendar year
update of the OPPS. Adopting this approach means that new Category III
CPT codes will be recognized under the OPPS biannually rather than
annually.
Some of the new Category III CPT codes may describe services that
our medical advisors determine to be similar in clinical
characteristics and resource use to HCPCS codes in an existing APC. In
these instances, we may assign the Category III CPT code to the
appropriate clinical APC. Other Category III CPT codes may describe
services that our medical advisors determine are not compatible with an
existing clinical APC, yet are appropriately provided in the hospital
outpatient setting. In these cases, we may assign the Category III CPT
code to what we estimate is an appropriately priced New Technology APC.
In other cases, we may assign a Category III CPT code one of several
non-separately payable status indicators, including N, C, B, or E,
which we feel is appropriate for the specific code. We expect that we
will already have received applications for New Technology status for
some of the services described by new Category III CPT codes, which may
assist us in determining appropriate APC assignments. If the AMA
establishes a Category III CPT code for a service for which an
application has been submitted to CMS for New Technology status, CMS
may not have to issue a temporary Level II HCPCS code to describe the
service, as has often been the case in the past when Category III CPT
codes were only recognized by the OPPS on an annual basis.
Therefore, beginning in July 2006, CMS will implement in the
regular quarterly update of the OPPS the Category III CPT codes that
the AMA releases in January 2006 for implementation in July 2006. CMS
will implement in the January 2007 update of the OPPS the Category III
CPT codes that the AMA releases in July 2006, and so forth.
B. Variations Within APCs
1. Background
Section 1833(t)(2)(A) of the Act requires the Secretary to develop
a classification system for covered hospital outpatient services.
Section 1833(t)(2)(B) provides that this classification system may be
composed of groups of services, so that services within each group are
comparable clinically and with respect to the use of resources. In
accordance with these provisions, we developed a grouping
classification system, referred to as the Ambulatory Payment
Classification Groups (or APCs), as set forth in Sec. 419.31 of the
regulations. We use Level I and Level II HCPCS codes and descriptors to
identify and group the services within each APC. The APCs are organized
such that each group is homogeneous both clinically and in terms of
resource use. Using this classification system, we have established
distinct groups of surgical, diagnostic, partial hospitalization
services, and medical visits. We also have developed separate APC
groups for certain medical devices, drugs, biologicals,
radiopharmaceuticals, and brachytherapy devices.
We have packaged into each procedure or service within an APC group
the cost associated with those items or services that are directly
related
[[Page 68568]]
and integral to performing a procedure or furnishing a service.
Therefore, we do not make separate payment for packaged items or
services. For example, packaged items and services include: use of an
operating, treatment, or procedure room; use of a recovery room; use of
an observation bed; anesthesia; medical/surgical supplies;
pharmaceuticals (other than those for which separate payment may be
allowed under the provisions discussed in section V of this preamble);
and incidental services such as venipuncture. Our packaging methodology
is discussed in section II.A. of this final rule with comment period.
Under the OPPS, we pay for hospital outpatient services on a rate-
per-service basis that varies according to the APC group to which the
service is assigned. Each APC weight represents the hospital median
cost of the services included in that APC relative to the hospital
median cost of the services included in APC 0601 (Mid-Level Clinic
Visits). The APC weights are scaled to APC 0601 because a mid-level
clinic visit is one of the most frequently performed services in the
outpatient setting.
Section 1833(t)(9)(A) of the Act requires the Secretary to review
the components of the OPPS not less than annually and to revise the
groups and relative payment weights and make other adjustments to take
into account changes in medical practice, changes in technology, and
the addition of new services, new cost data, and other relevant
information and factors. Section 1833(t)(9)(A) of the Act, as amended
by section 201(h) of the BBRA of 1999, also requires the Secretary,
beginning in CY 2001, to consult with an outside panel of experts to
review the APC groups and the relative payment weights (the APC Panel
recommendations for CY 2006 OPPS and our responses to them are
discussed in sections III.B. and III.C.4. of this preamble).
Finally, as discussed earlier, section 1833(t)(2) of the Act
provides that, subject to certain exceptions, the items and services
within an APC group cannot be considered comparable with respect to the
use of resources if the highest median (or mean cost, if elected by the
Secretary) for an item or service in the group is more than 2 times
greater than the lowest median cost for an item or service within the
same group (referred to as the ``2 times rule''). We use the median
cost of the item or service in implementing this provision. The statute
authorizes the Secretary to make exceptions to the 2 times rule in
unusual cases, such as low-volume items and services.
2. Application of the 2 Times Rule
In accordance with section 1833(t)(2) of the Act and Sec. 419.31
of the regulations, we annually review the items and services within an
APC group to determine, with respect to comparability of the use of
resources, if the median of the highest cost item or service within an
APC group is more than 2 times greater than the median of the lowest
cost item or service within that same group (``2 times rule''). We make
exceptions to this limit on the variation of costs within each APC
group in unusual cases such as low-volume items and services. The
statute provides no exception in the case of a drug or biological that
has been designated as an orphan drug under section 526 of the Federal
Food, Drug, and Cosmetic Act because these drugs are assigned to
individual APCs.
During the APC Panel's February 2005 meeting, we presented median
cost and utilization data for the period of January 1, 2004, through
September 30, 2004, concerning a number of APCs that violated the 2
times rule and asked the APC Panel for its recommendation. After
carefully considering the information and data we presented, the APC
Panel recommended moving a total of 65 HCPCS codes from their currently
assigned APCs to different APCs to resolve the 2 times rule violations.
Of the 65 HCPCS code reassignments recommended by the APC Panel, we
concurred with 58 of the recommended reassignments. Therefore, we
proposed to reassign the HCPCS codes as indicated in Table 7 of the
proposed rule (70 FR 42703).
The seven HCPCS code movements that the APC Panel recommended, but
upon further review we proposed not to accept, are discussed below. We
include in our discussion the assignments we also proposed and the
final assignments for CY 2006.
a. APC 0146: Level I Sigmoidoscopy, APC 0147: Level II
Sigmoidoscopy, APC 0428: Level III Sigmoidoscopy. APCs 0146 and 0147
were exceptions to the 2 times rule in CY 2005. At the time of the
proposed rule, our analysis of those two APCs based on partial year CY
2004 data revealed greater violations of the 2 times rule and changing
relative frequencies of simple and complex procedures in these two
APCs. Thus, for CY 2006 the APC Panel assisted us in reconfiguring
these two APCs into three related APCs to resolve the two times
violations and improve their clinical and resource homogeneity based on
the partial CY 2004 hospital claims data and to remove these APCs from
the list of exceptions. The APC Panel recommended maintaining CPT codes
45303 (Proctosigmoidoscopy, rigid; with dilation) and 45305
(Proctosigmoidoscopy, rigid; with biopsy, single or multiple) in APC
0146 because the median cost for these codes appeared too high, and
they believed that the CY 2004 claims were aberrant. In addition, the
APC Panel recommended that CMS move CPT code 45309
(Proctosigmoidoscopy, rigid; with removal of single tumor, polyp, or
other lesion by snare technique) from APC 0147 and assign it to a new
proposed APC 0428. Based on the results of our review of several years
of claims data and our study of hospital resource homogeneity, we
disagreed that those claims data were aberrant. We proposed to move CPT
codes 45303 and 45305 to APC 0147 and to keep CPT 45309 in APC 0147, to
resolve the 2 times rule violation.
We received no public comments concerning our proposed APC
assignments for CPT codes 45303, 45305 and 45309 and are making final
our proposal, without modification.
b. APC 0342: Level I Pathology, APC 0433: Level II Pathology, APC
0343: Level III Pathology. To resolve a 2 times rule violation, the APC
Panel recommended moving CPT codes 88108 (Cytopathology, concentration
technique, smears and interpretation) and 88112 (Cytopathology,
selective cellular enhancement technique with interpretation, except
vaginal or cervical) from APC 0343 to a proposed new APC 0433. The APC
Panel also recommended moving CPT codes 88319 (Determinitive
histochemistry or cytochemistry to identify enzyme constituents) and
88321 (Consultation and report on referred slides prepared elsewhere)
from APC 0342 to a proposed new APC 0433. Based on the results of our
review of several years of hospital claims data and our study of
hospital resource homogeneity, we proposed a different way to resolve
the 2 times rule violation. We proposed to place CPT codes 88319 and
88112 in APC 0343 and to place CPT codes 88108 and 88321 in new APC
0433.
We received no public comments concerning our proposal.
We will finalize, without modification our proposal to assign CPT
codes 88112 and 88319 to APC 0343 and to assign CPT codes 88108 and
88321 to new APC 0433.
c. Other Comments on the Proposed List of APC Assignments to
Address 2 Times Violations. We received a few comments concerning our
proposed reassignments for several of the other
[[Page 68569]]
HCPCS codes (for example, CPT codes 57155, 75790, and 88187) indicated
in Table 7 of the proposed rule (70 FR 42703) and the responses are
included in clinically relevant sections, elsewhere in this preamble.
After carefully reviewing our final data and all comments received
concerning our proposed assignments of the 58 HCPCS codes, we are
finalizing those assignments as proposed.
3. Exceptions to the 2 Times Rule
As discussed earlier, we may make exceptions to the 2 times limit
on the variation of costs within each APC group in unusual cases such
as low-volume items and services. At the time of the proposed rule,
taking into account the APC changes that we proposed for CY 2006 based
on the APC Panel recommendations discussed in section III.B.1. of this
preamble and the use of CY 2004 claims data to calculate the median
costs of procedures classified in the APCs, we reviewed all the APCs to
determine which APCs would not satisfy the 2 times rule criteria. We
used the following criteria to decide whether to propose exceptions to
the 2 times rule for affected APCs:
Resource homogeneity
Clinical homogeneity
Hospital concentration
Frequency of service (volume)
Opportunity for upcoding and code fragments.
For a detailed discussion of these criteria, refer to the April 7,
2000 OPPS final rule with comment period (65 FR 18457).
Table 8 published in the proposed rule (70 FR 42705) listed the
APCs that we proposed to exempt from the 2 times rule based on the
criteria cited above. For cases in which a recommendation by the APC
Panel appeared to result in or allow a violation of the 2 times rule,
we generally accepted the APC Panel's recommendation because those
recommendations were based on explicit consideration of resource use,
clinical homogeneity, hospital specialization, and the quality of the
data used to determine the APC payment rates that we proposed for CY
2006. The median costs for hospital outpatient services for these and
all other APCs can be found on the CMS Web site: http//www.cms.hhs.gov.
We received a number of comments about some of the procedures
assigned to APCs that we proposed to make exempt from the 2 times rule
for CY 2006. Those discussions are elsewhere in the preamble, in
sections related to the types of procedures that were the subject of
the comments.
For the proposed rule the listed exceptions to the 2 times rule
were based on data from January 1, 2004 through September 30, 2004. For
this final rule with comment period, we used data from January 1, 2004
through December 31, 2004. Thus, after responding to all of the
comments on the proposed rule and making changes to APCs based on those
comments, we analyzed the full CY 2004 data to identify APCs with 2
times rule violations.
Based on those final data, we found that there were 41 APCs with 2
times violations. We were able to remedy two violations of the 2 times
rule that appeared in the final data for APC 0363 (Level I
Otorhinolaryngologic Function Tests) and APC 0010, (Level I Destruction
of Lesion). We moved CPT code 92588 (Evoked otoacoustic emissions;
comprehensive or diagnostic evaluation) from APC 0363 to APC 0660
(Level II Otorhinolaryngologic Function Tests) to address a 2-times
violation in APC 0363. We applied the criteria as described earlier to
finalize the APCs that are exceptions to the 2 times rule for CY 2006.
Listed below in Table 8 is the final revised list of APCs that are
exceptions to the 2 times rule for CY 2006.
BILLING CODE 4120-01-P
[[Page 68570]]
[GRAPHIC] [TIFF OMITTED] TR10NO05.014
[[Page 68571]]
BILLING CODE 4120-01-C
C. New Technology APCs
1. Introduction
In the November 30, 2001 final rule (66 FR 59903), we finalized
changes to the time period a service was eligible for payment under a
New Technology APC. Beginning in CY 2002, we retain services within New
Technology APC groups until we gather sufficient claims data to enable
us to assign the service to a clinically appropriate APC. This policy
allows us to move a service from a New Technology APC in less than 2
years if sufficient data are available. It also allows us to retain a
service in a New Technology APC for more than 3 years if sufficient
data upon which to base a decision for reassignment have not been
collected.
Every year we receive many requests for higher payment amounts for
specific procedures under the OPPS because they require the use of
expensive equipment. We are taking this opportunity to respond in
general to the issue of hospitals' capital expenditures as they relate
to the OPPS and Medicare.
Under the OPPS, our goal is to make payments that are appropriate
for the services that are necessary for treatment of Medicare
beneficiaries. The OPPS and most other Medicare payment systems are
budget neutral and so, although we do not pay full hospital costs for
procedures, we believe that our payment rates generally reflect the
costs that are associated with providing care to Medicare beneficiaries
in cost-efficient settings. Further, we believe that our rates are
adequate to assure access to services for most beneficiaries.
For many emerging technologies there is a transitional period
during which utilization may be low, often because providers are first
learning about the techniques and their clinical utility. Quite often,
the requests for higher payment amounts are for new procedures in that
transitional phase. The requests, and their accompanying estimates for
expected Medicare beneficiary or total patient utilization, often
reflect very low rates of patient use, resulting in high per use costs
for which requestors believe Medicare should make full payment.
Medicare does not, and we believe should not, assume responsibility for
more than its share of the costs of procedures based on Medicare
beneficiary projected utilization and does not set its payment rates
based on initial projections of low utilization for services that
require expensive capital equipment. For the OPPS, we rely on hospitals
to make their business decisions regarding acquisition of high cost
capital equipment taking into consideration their knowledge about their
entire patient base (Medicare beneficiaries included) and an
understanding of Medicare's and other payors' payment policies.
As stated earlier, in a budget neutral environment we do not make
payments that fully cover hospitals' costs, including those for the
purchase and maintenance of capital equipment. We rely on providers to
make their decisions regarding the acquisition of high cost equipment
with the understanding that the Medicare program must be careful to
establish its initial payment rates for new services that lack hospital
claims data based on realistic utilization projections for all such
services delivered in cost efficient hospital outpatient settings. As
the OPPS acquires claims data regarding hospital costs associated with
new procedures, we will regularly examine the claims data and any
available new information regarding the clinical aspects of new
procedures to confirm that our OPPS payments remain appropriate for
procedures as they transition into mainstream medical practice.
2. Refinement of New Technology Cost Bands
In the November 7, 2003 final rule with comment period, we last
restructured the New Technology APC groups to make the cost intervals
more consistent across payment levels (68 FR 63416). We established
payment levels in $50, $100, and $500 intervals and expanded the number
of New Technology APCs. We also retained two parallel sets of New
Technology APCs, one set with a status indicator of ``S'' (Significant
Procedure, Not Discounted When Multiple) and the other set with a
status indicator of ``T'' (Significant Procedures, Multiple Reduction
Applies). We did this restructuring because the number of procedures
assigned to New Technology APCs had increased, and narrower cost bands
were necessary to avoid significant payment inaccuracies for new
technology services. Therefore, we dedicated two new series of APCs to
the restructured New Technology APCs, which allowed us to narrow the
cost bands and afforded us the flexibility to create additional bands
as future needs dictated.
As the number of procedures that qualify for placement in the New
Technology APCs has continued to increase over the past 2 years, we
recognized that the $0 to $50 cost band represented by ``S'' status APC
1501 (New Technology, Level I, $0-$50) and ``T'' status APC 1538 (New
Technology, Level I, $0-$50) spanned too broad of a cost interval to
accurately represent the lower costs of an ever-increasing number of
procedures that are appropriate for New Technology APC assignment.
Therefore, we proposed to refine this cost band to five $10 increments,
resulting in the creation of an additional 10 New Technology APCs to
accommodate the two parallel sets of New Technology APCs, one set with
a status indicator of ``S'' and the other set with a status indicator
of ``T.'' We also proposed to eliminate the two $0 to $50 cost band New
Technology APCs 1501 and 1538, so that the cost bands of all New
Technology APCs would continue to be mutually exclusive. Table 9
published in the proposed rule (70 FR 42706) contained a listing of the
10 additional New Technology APCs that we proposed for CY 2006.
As we explained in the November 30, 2001 final rule (66 FR 59897),
we generally keep a procedure in the New Technology APC to which it is
initially assigned until we have collected data sufficient to enable us
to move the procedure to a clinically appropriate APC. However, in
cases where we find that our original New Technology APC assignment was
based on inaccurate or inadequate information, or where the New
Technology APCs are restructured, we may, based on more recent resource
utilization information (including claims data) or the availability of
refined New Technology APC bands, reassign the procedure or service to
a different New Technology APC that most appropriately reflects its
cost. Therefore, we proposed to discontinue New Technology APCs 1501
and 1538, and reassign the procedures currently assigned to them to
proposed New Technology APCs 1491 through 1500. Table 10 published in
our proposed rule (70 FR 42707) summarized these proposed New
Technology APC reassignments.
We received no public comments in response to our proposed
refinement of the New Technology APC cost bands. Therefore, for CY
2006, we are finalizing our proposal to discontinue New Technology APCs
1501 and 1538, and reassign the procedures currently assigned to them
to New Technology APCs 1491 through 1500. Table 9 lists the final New
Technology APCs 1491 through 1500 for CY 2006.
[[Page 68572]]
Table 9.--New Technology APCs for CY 2006
------------------------------------------------------------------------
Final CY
Status 2006
APC Descriptor Indicator payment
rate
------------------------------------------------------------------------
1491.............. New Technology--Level IA S $5
($0-$10).
1492.............. New Technology--Level IB S 15
($10-$20).
1493.............. New Technology--Level IC S 25
($20-$30).
1494.............. New Technology--Level ID S 35
($30-$40).
1495.............. New Technology--Level IE S 45
($40-$50).
1496.............. New Technology--Level IA T 5
($0-$10).
1497.............. New Technology--Level IB T 15
($10-$20).
1498.............. New Technology--Level IC T 25
($20-$30).
1499.............. New Technology--Level ID T 35
($30-$40).
1500.............. New Technology--Level IE T 45
($40-$50).
------------------------------------------------------------------------
3. Requirements for Assigning Services to New Technology APCs
In the April 7, 2000, final rule (65 FR 18477), we created a set of
New Technology APCs to pay for certain new technology services under
the OPPS. We described a group of criteria for use in determining
whether a service is eligible for assignment to a New Technology APC.
We subsequently modified this set of criteria in our November 30, 2001,
final rule (66 FR 59897 to 59901), effective January 1, 2002. These
modifications were based on changes in the data (we were no longer
required to use CY 1996 data to set payment rates) and on our
continuing experience with the assignment of services to New Technology
APCs.
In the course of reviewing applications for New Technology APC
assignments under the OPPS, we have encountered many situations in
which there is extremely limited clinical experience with new
technology services regarding their use and efficacy in the typical
Medicare population. In some cases, there has been ambiguity regarding
how the new technology services fit within the standard coding
framework for established procedures, and there may be no specific
coding available for the new technology services in other settings or
for use by other payers. Nevertheless, applicants requesting assignment
of services to New Technology APCs request that we provide billing and
payment mechanisms under the OPPS for the new technology services
through the establishment of codes, descriptors, and payment rates. As
stated in section I.F. of this preamble, we remain committed to the
overarching goal of ensuring that Medicare beneficiaries have timely
access to the most effective new medical treatments and technologies in
clinically appropriate settings. In the CY 2006 proposed rule, we
indicated that we believed that our current New Technology APC
assignment process helps to assure such access, and that an enhancement
to the New Technology APC application process might further encourage
appropriate dissemination of and Medicare beneficiary access to new
technology services.
We are interested in promoting review of the coding, clinical use,
and efficacy of new technology services by the greater medical
community through our New Technology APC application and review process
for the OPPS. Therefore, in addition to our current information
requirements at the time of application, we proposed to require that an
application for a code for a new technology service be submitted to the
American Medical Association's (AMA's) CPT Editorial Panel before we
accept a New Technology APC application for review. In making this
proposal, we specifically indicated that we would not change our
current criteria for assignment of a service to a New Technology APC.
Rather, the intent of the proposed new requirement was to encourage
timely review of a new service or procedure by the wider medical
community as CMS is reviewing it for possible new coding and assignment
to a New Technology APC under the OPPS. The AMA's CPT Editorial Panel
has only one CPT code application that is used by applicants requesting
consideration for either Category I or III codes. We indicated that we
would accept either a Category I or Category III code application to
the CPT Editorial Panel. The application requests relevant clinical
information regarding new services, including their appropriate use and
the patient populations expected to benefit from the services, which
would provide us with useful additional information. CPT code
applications are reviewed by the CPT Editorial Panel, whose members
bring diverse clinical expertise to that review. In the proposed rule,
we indicated our belief that consideration by the CPT Editorial Panel
might facilitate appropriate dissemination of the new technology
services across delivery settings and bring to light other needed
coding changes or clarifications. We further proposed that a copy of
the submitted CPT application be filed with us as part of the
application for a New Technology APC assignment under the OPPS, along
with CPT's letter acknowledging or accepting the coding application. We
reminded the public that we do not consider an application complete
until all informational requirements are provided. In addition, we
reminded the public that when we assign a new service a HCPCS code and
provide for payment under the OPPS, these actions do not imply coverage
by the Medicare program, but indicate only how the procedure or service
may be paid if covered by the program. Fiscal intermediaries must
determine whether a service meets all program requirements for
coverage, for example, that it is reasonable and necessary to treat the
beneficiary's condition and whether it is excluded from payment. CMS
may also make National Coverage Determinations (NCDs) on new technology
procedures.
We received a large number of public comments concerning our
proposal.
Comment: Many commenters suggested that the AMA CPT Editorial Panel
may not be the most appropriate forum for a federally mandated
decision. Some of these commenters pointed out that meetings of the
panel and the considerations on which it bases decisions are not open
to the public. Other commenters questioned whether there is an inherent
conflict in the proposal, as CMS and the AMA are distinctly separate
organizations with different objectives and constituencies, so that it
may not be in the interest of Medicare beneficiaries to tie CMS policy
to proceedings of the AMA. Other commenters suggested that even the
requirement that the AMA acknowledge receipt of the coding application
suggests that the AMA has potential ``veto'' power over CMS authority
and
[[Page 68573]]
may thus constitute an unlawful delegation of federal decision making.
Response: We wish to clarify that it was not our proposal to rely
upon the decisions of the CPT Editorial Panel. Nor did we propose to
adopt the objectives or policies of the AMA or the CPT Editorial Panel.
Rather, we proposed only to require initiation of the process for
obtaining a CPT code in order to foster the common objective of
appropriately recognizing new technology services and properly coding
those services. Under our proposal, we would continue to make
determinations about the need for new HCPCS codes and about appropriate
assignments to New Technology APCs to establish payment rates
completely independently of the CPT Editorial Panel. We also proposed
only that the applicant show us a letter of acknowledgement or receipt
from the AMA, not that the AMA would send us such a letter or withhold
such a letter as a way to exercise veto power.
Comment: One commenter stated that while it is possible for
manufacturers to file CPT applications to the AMA, the AMA has usually
discouraged this practice and specialty societies have been slow to
support CPT applications not vetted through them. Another commenter
indicated that manufacturers are often not in receipt of letters from
the AMA indicating receipt of a CPT coding application, and hence may
not be able to provide these letters with their application for New
Technology APC assignment. Other commenters claimed that if a
manufacturer waits to gather clinical and utilization information
sufficient to support a Category I code, the application may no longer
meet CMS's definition of ``truly new'' and may be ineligible for a New
Technology APC assignment.
Response: Our proposal did not specifically require that
manufacturers submit applications to the CPT Editorial Panel. In fact,
we specifically proposed only that such an application ``be
submitted,'' and did not stipulate the identity of the applicant. In
addition, we were not proposing to require that manufacturers provide
us with copies of letters they had received directly from the AMA. We
understand, however, that manufacturers ordinarily work in concert with
the actual applicants for new CPT codes, and expect that it is
reasonable for a manufacturer to be able to obtain such a letter. We
also specifically required only the initiation of the application
process, not the receipt of a positive (or negative) decision by the
CPT Editorial Panel, in order to prevent the process from delaying our
decision beyond the point at which a New Technology APC assignment is
appropriate. Our proposal was meant only to encourage the appropriate
dissemination of information, data collection, and review by the wider
medical community concerning new technologies. Finally, it is worth
emphasizing that while our objective is to consider for assignment to
New Technology APCs services that represent technologies that are
``truly new,'' for designation under the OPPS we specifically rely on
our criteria which require that a service or procedure not be described
by any existing HCPCS code or combination of codes, that it cannot be
adequately represented in the claims data being used for the most
current annual OPPS update, and that there is no appropriate clinical
APC for its assignment. We do not believe that our proposal to require
initiation of the CPT application process would result in delays beyond
the point at which these criteria could still be met.
Comment: One commenter stated that there are only three submission
deadlines per year for CPT applications, which do not comport to the
quarterly schedule for filing New Technology applications to CMS.
Response: The filing dates for New Technology applications are
informational dates published on our website as reference points for
application receipt related to the earliest date for adding a new code
for an approved service to a New Technology APC, that is, the beginning
of the following quarter. The actual dates for adding new services, if
approved, are often later than the next quarter, depending on specific
issues related to comprehensive evaluation of a specific application,
which often involves requests for additional information.
Comment: One commenter recommended as an alternative that CMS
create codes for qualifying services and assign them to a New
Technology APC and stipulate that those applicants must apply to the
CPT Editorial Panel for a new code within one year.
Response: We do not believe that it would be advisable to accept
this recommendation. First, we do not have a policy of making
contingent approvals for payment. All requirements for Medicare payment
must be met at the time a code and payment rate are established. In
addition, this recommendation would require establishing a mechanism to
monitor compliance with the condition of approval. Finally, the
necessity of withdrawing some HCPCS codes from coding and payment
because of non-compliance has great potential for causing confusion
among providers.
Comment: One commenter stated that our concern about limited
experience with new technologies in the Medicare population is more
appropriately related to coverage of new procedures, rather than to
coding issues. Assignment of a service to a New Technology APC is meant
to create a mechanism for gathering utilization data, and does not
guarantee coverage and payment of a technology. Coverage for new
technologies remains the discretion of Medicare contractors, unless CMS
makes a national coverage determination. This commenter claimed that
the proposal to require a CPT coding application implies that CMS would
be effectively removing the Medicare contractors from the coverage
decision-making process.
Response: We do not believe that our proposal would have the effect
of removing Medicare contractors from the process of making coverage
decisions, or otherwise usurp the role of the coverage decision-making
process. Rather, the proposal would serve merely to promote evaluation
of new services by the wider medical community, so that the results of
this evaluation could serve to assist in broader distribution of new
clinical information, establishment of appropriate standard coding, and
wider dissemination of promising technologies. Even when the CPT
Editorial Panel establishes a new code, Medicare contractors have
discretion to make local coverage decisions, and CMS retains the right
to make national coverage determinations with regard to the procedure
or service.
Comment: Some commenters indicated that there are unique payment
concerns related to applying for a Category III CPT code, asserting
that many Medicare contractors view Category III CPT codes as an
indication that a technology is experimental or investigational. One
commenter provided as an example a proposed and final policy of one CMS
contractor not to cover any technologies described by Category III CPT
codes, ``since these codes have been created to track new, unproven
therapies and tests.'' Another commenter claimed that assignment of a
Category III CPT code often results in non-coverage decisions by both
local carriers and fiscal intermediaries.
Response: The example provided by commenters about the implications
of Category III CPT codes for coverage decisions by Medicare
contractors appears to be relevant outside the context of the OPPS,
mainly within the physician payment context. We have been unable to
identify any fiscal
[[Page 68574]]
intermediary that has adopted any such broad noncoverage policy
regarding Category III CPT codes.
Comment: One group of commenters urged us not to adopt the proposed
requirement that a CPT application submission to the AMA's CPT
Editorial Panel be required before we accept a New Technology APC
application for review. These commenters asserted that a CPT coding
application, in and of itself, will not provide us with input from the
greater medical community, unless we wait until the CPT Editorial Panel
has made a coding decision and that decision has been made public.
Because of the timing of the CPT code review process, it is not
reasonable for CMS to wait until the CPT Editorial Panel has made a
public coding decision, which can take 6-12 months for an internal
decision, and 6-24 months before publishing a coding decision for a
Category I code. These commenters also believed that this requirement
would delay access to new services, asserting that applying for a CPT
code is a lengthy process and involves months of gathering information
on the technology and its use, working with relevant specialty
societies to obtain support for a new code and to develop a clinical
vignette, and consulting within the CPT Editorial Panel. In order to
obtain a Category I code, the new technology must have widespread usage
across the country and in multiple locations, and its efficacy must be
documented in U.S. peer-reviewed journal articles. Other commenters
stated that a number of issues regarding the CPT coding process make
our proposal impractical, in addition to the lack of a guaranteed
timely review by the CPT Editorial Panel. The AMA does not have
``official'' evidence and utilization thresholds for coding
applications. However, commenters indicated that physician specialty
societies often require certain thresholds of utilization or clinical
evidence be met before a Category I CPT application for a new service
is submitted, and there is considerable variation in such thresholds
among the specialty societies. If a manufacturer submits an application
without society support or before there is widespread utilization, the
application is more likely to be denied or assigned a Category III CPT
code, even if that was not requested. Some commenters indicated that
there are payment concerns in applying for a Category III CPT code,
asserting that most private payers view Category III CPT codes as
indication that a technology is experimental or investigational, and
therefore refuse to cover procedures or services described by Category
III CPT codes. These commenters asserted that because of the risk of
non-coverage of Category III CPT codes, manufacturers may forego
applying for New Technology APC assignments, or will be hesitant to
apply for both a New Technology APC assignment and CPT code
simultaneously. Without unique service codes, it will be more difficult
for CMS to track new services and eventually to assign them to
clinically appropriate APCs. The result will be fewer New Technology
APC applications, and less beneficiary access to new technologies. A
few commenters asserted that little would be gained by the mere filing
of a CPT application without a coding determination from the CPT
Editorial Panel, because the information in both applications is
similar. One commenter suggested that if there is information from the
CPT application that CMS requires to evaluate the New Technology APC
application, we should add such questions to our application.
In lieu of using the CPT coding process to encourage review by the
wider medical community, a few commenters recommend that CMS appoint a
standing advisory committee of clinical representatives, or another
independent group of medical experts from specialties and hospitals, to
review New Technology APC applications and provide input to CMS. Other
commenters also suggested that we convene an independent group of
medical experts to assist in the review of applications as necessary.
A number of other commenters, principally from hospitals and
hospital associations, supported our proposal to require a CPT
application prior to our consideration of a New Technology APC
application because they favored less ambiguity in the coding
framework. Some of these commenters said that there is a proliferation
of C-codes and G-codes, which are burdensome to hospitals as such codes
are often not recognized by other payers, and our proposal will
minimize the need for expedited issuance of C-codes or G-codes. They
asserted that hospitals would benefit by reduced duplication of codes
for services recognized by Medicare and other payers. Other commenters
claimed that the correct process for coding new services is to start by
way of the CPT Editorial Panel review process rather than the New
Technology APC application process. Other commenters also supported the
requirement on the grounds that the CPT review process is rigorous,
including input by physician specialty societies, which indicates the
level of acceptance of a new technology in the medical community,
relevant to the OPPS because physicians perform new technology
procedures in the hospital setting. One commenter indicated that there
may be specific occasions when it is necessary to submit applications
to the CPT Editorial Panel and CMS simultaneously. Another commenter
requested that we recognize potential delays resulting from this
additional step and expedite our review of New Technology APC
applications. Finally, one commenter indicated appreciation of the
reasons for the proposal, but asked that this new requirement remain as
stated, that an application needs to be submitted to the AMA CPT
Editorial Panel, but that it did not necessarily need to be reviewed
and processed by the CPT Editorial Panel prior to CMS's consideration
of the New Technology APC application.
Response: In light of the strong division among the commenters on
the merits of our proposal to require that a CPT coding request be
submitted prior to submission of a New Technology APC application, we
have decided not to adopt this proposal at this time. Many of the
comments reflect confusion about the specifics of the proposal.
Therefore, we are concerned that, because the commenters did not
understand some specifics of this proposal during their review of the
CY 2006 proposed rule, we may similarly not be in a position to
understand all the implications of the concerns noted by the
commenters. In particular, we did not intend to tie our decision-making
regarding applications for New Technology APC assignment to the CPT
Editorial Panel process, but wished to promote review of the coding,
clinical use, and efficacy of new technology services by the wider
medical community to facilitate the swift spread of promising new
technologies into medical practice.
While we are deferring our proposal, we continue to believe that
timely review of potential new services by the wider medical community
is valuable, given our experience that many services that have
requested OPPS coding and assignment to a New Technology APC have
demonstrated limited clinical efficacy. We also continue to believe
that new technology services deserve timely standard and comprehensive
coding established through the CPT Editorial Panel review process to
permit appropriate payment and data collection regarding their
utilization patterns and clinical outcomes. We also do not agree with
many of the criticisms directed against the proposal. For example, as
stated previously, we do not agree that
[[Page 68575]]
our proposal to have applicants file a CPT coding request before
submission of a New Technology APC application would make the CPT
coding process a Federal decisionmaking forum. This is because we would
not require a decision to be made by the CPT Editorial Panel. However,
in light of the numerous and considered comments opposed to the
proposal, we are not proceeding with it at this time.
At the same time, we remain committed to the general goal of
promoting review of the coding, clinical use, and efficacy of new
technology services by the wider medical community. We continue to
believe that such broad and early review of new technology procedures
would enhance our ability to make appropriate initial and subsequent
decisions on assignments of new services to New Technology APCs and
would facilitate the more rapid dissemination of promising new
technologies to all service settings and appropriate patient
populations. Therefore, we will continue to study how to best achieve
these goals of timely review of new technologies by the general medical
community to validate their clinical worth and distinctiveness in
comparison with existing services and to promote more rapid
dissemination of effective new procedures throughout standard medical
practice. In doing so, we will continue to consider whether the
proposal we advanced would serve that goal. We would specifically
welcome further input on this proposal or alternatives to it. We may
reintroduce this proposal or advance alternative approaches at a later
date.
As a preliminary matter, we are not inclined to accept one
alternative recommended by some commenters. Specifically, we are not
inclined to establish a standing advisory committee to provide input on
New Technology applications to the OPPS, as some have suggested. A
standing committee involving outside experts would add additional
review time that would impede upon our application process, as well as
prevent us from evaluating New Technology applications for addition to
the OPPS on a quarterly basis, as appropriate. We prefer to maintain
the flexibility that our current process provides. In addition, the
specific medical expertise required to evaluate new technologies would
likely vary widely from application to application. This factor would
render consultation with a standing advisory committee with fairly
stable membership more difficult to maintain.
4. New Technology Services
a. Ablation of Bone Tumors
Comment: One commenter requested that we reassign CPT code 20982
(Ablation, bone tumor(s) (eg, osteoid osteoma, metastasis)
radiofrequency, percutaneous, including computed tomographic guidance)
from New Technology Level XX, APC 1557 to New Technology Level XXII,
APC 1559. The commenter stated that the procedure has been in New
Technology APC 1557 for 2 years, and that the payment rate for that APC
is not adequate to cover the hospitals' costs. The commenter asserted
that assignment to that APC was based on inadequate information. The
commenter used physician practice expense data to estimate costs to
perform the ablation procedure, and stated that the costs far surpass
the OPPS payment amount, largely due to the high cost of the necessary
radiofrequency probe. Further, the commenter added that its analysis
found that 2 of the 16 single claims CMS used to calculate the median
cost for CPT code 20982 for the proposed rule were inaccurate because
no charge for the ablation device, as indicated by the absence of a
separate supply charge, was included. The commenter believed that those
two claims had a significant effect on the median cost for CPT code
20982, because of the small number of claims for the procedure. The
commenters' analysis further showed that the median cost for these
procedures was $2,156 based on 14 claims that included a supply charge.
Response: As we have stated in this preamble, we are committed to
relying on our claims data for making APC assignments as much as
possible. While we appreciate the external data provided by the
commenter regarding the costs of supplies associated with the practice
expense inputs for the Medicare Physician Fee Schedule, that payment
system utilizes a different methodology for establishing payment for
services that is not directly applicable to payment rates under the
OPPS. In the case of CPT code 20982, we believe that our hospital
claims data are adequate to support our proposal to maintain the
service in New Technology APC 1557 for CY 2006. CPT code 20982 was a
new code for CY 2004 so we have 1 year of hospital data for this
procedure. For CPT code 20982, we have 17 single claims from CY 2004
with a procedure-specific median cost of $1,578. As we do not require
that hospitals bill a separate supply charge for the probe that is used
for this service because there is no specific device C-code available,
we have no reason to believe that claims for CPT code 20982 without a
separate supply charge do not contain charges for all costs associated
with the procedure. The catheter charges may be wrapped into the charge
for the procedure itself. The code-specific median indicates that even
the current New Technology APC payment at $1,850 may be too high, but
given the information provided by the commenter and the relatively low
number of CY 2004 claims available for calculating the median cost for
CPT code 20982, we are finalizing our proposal for CY 2006 and are
retaining CPT code 20982 for at least 1 more year in New Technology APC
1557.
b. Breast Brachytherapy
Comment: In response to the November 15, 2004 final rule with
comment period (69 FR 65682), one commenter applauded our assignment of
CPT codes 19296 (Placement of radiotherapy afterloading balloon
catheter into the breast for interstitial radioelement application) and
19298 (Placement of radiotherapy afterloading balloon catheters,
multiple tube and button type, into the breast for interstitial
radioelement application) to New Technology APC 1524 (Level XIV $3000-
$3500), and CPT code 19297 (Placement of radiotherapy afterloading
balloon catheter into the breast for interstitial radioelement
application; concurrent with partial mastectomy) to New Technology APC
1523 (Level XXIII $2500-$3000) for CY 2005. The commenter stated that
these payment amounts adequately cover the costs of the applicator
devices involved in the procedures.
Response: We agree with the commenter's acknowledgement that the
payment amounts that we assigned to CPT codes 19296, 19297, and 19298
for CY 2005 adequately cover the resource costs associated with these
procedures. Therefore, for CY 2006, we are maintaining CPT codes 19296
and 19298 in New Technology APC 1524 and CPT code 19297 in New
Technology APC 1523.
c. Enteryx Procedure
A new CPT code, 0133T (Upper gastrointestinal endoscopy, including
esophagus, stomach, and either the duodenum and/or jejunum as
appropriate, with injection of implant material into and along the
muscle of the lower esophageal sphincter (e.g., for treatment of
gastroesophageal reflux disease)), was created for implementation
January 1, 2006 to describe the procedure currently coded under the
OPPS as HCPCS code C9704 (Injection or insertion of inert substance
[[Page 68576]]
for submucosal/intramuscular injections(s) into the upper
gastrointestinal tract, under fluoroscopic guidance). For CY 2005,
C9704 was assigned to New Technology APC 1556, with a payment rate of
$1,750. As discussed below, we determined an appropriate APC assignment
for this procedure for CY 2006. However, in the period between
publication of the proposed rule and the end of the comment period, the
product manufacturer recalled this product and the Food and Drug
Administration has warned physicians about the danger of its use.
In our analyses to determine the most appropriate APC assignment
for the new CPT code, we found that the most accurate payment will be
made by retaining the procedure's current APC assignment. We did not
automatically assign CPT code 0133T to APC 1556 because that CPT code
explicitly includes the endoscopy that is integral to the service,
whereas the current C-code does not. For that reason we calculated the
claims-based median cost for the procedure by using single claims for
HCPCS code C9704, on the premise that if the procedure required
endoscopy and the endoscopy was not separately billed then the
endoscopy charges were reflected in the charges for HCPCS code C9704 as
well as claims for HCPCS code C9704 that had a charge for an endoscopy
included to assure us that we were capturing the charges for the entire
procedure from as many claims as possible. Thus, to determine an
appropriate APC placement for CPT code 0133T we analyzed all single
claims for HCPCS code C9704, as well as claims that had HCPCS code
C9704 combined with either CPT code 43234 (Upper gastrointestinal
endoscopy, simple primary examination (e.g., with small diameter
flexible endoscope)), or CPT code 43235 (Upper gastrointestinal
endoscopy including esophagus, stomach, and either the duodenum and/or
jejunum as appropriate; diagnostic, with or without collection of
specimen(s) by brushing or washing).
The median cost from these claims which would crosswalk to the new
CPT code is $1,660. Therefore, we believe that it is still appropriate
to retain the procedure, coded for CY 2006 as CPT code 0133T, in New
Technology APC 1556 rather than assigning it to a different New
Technology APC or a clinical APC at this time. We will be deleting
HCPCS code C9704. As with all procedures assigned to New Technology
APCs, we will reevaluate it for next year to determine whether
assignment to a clinical APC is more appropriate.
d. Extracorporeal Shock Wave Treatment
Comment: Several commenters to both the November 15, 2004 final
rule with comment period and to our July 25, 2005 proposed rule opposed
our placement of new HCPCS codes for high energy Extracorporeal Shock
Wave Therapy (ESWT) services into New Technology APC 1547. In response
to a New Technology application for ESWT, we created new codes for high
energy ESWT for chronic lateral epicondylitis (C9720-tennis elbow) and
for chronic plantar fasciitis (C9721) effective January 1, 2005, and
placed them into New Technology APC 1547, with a payment rate of $850
for CY 2005. A number of commenters requested that these ESWT services
be placed in New Technology APC 1559, which has a payment rate of
$2,250. A manufacturer of ESWT equipment, who commented, cited our
regulations (42 CFR Sec. 419.31) in stating that APC groups ``must
be'' comparable in terms of clinical use and resources required. This
commenter, as well as another manufacturer, claimed that New Technology
APC 1547 does not cover the costs of the ESWT procedures for chronic
lateral epicondylitis and for chronic plantar fasciitis. The commenters
provided their estimated costs of the procedure at about $2,300 per
service for both clinical indications. One commenter also indicated
that it understood that the AMA's CPT Editorial Panel intended to issue
new codes for the two high energy ESWT services beginning in CY 2006.
It stated that when these new CPT codes become effective, providers and
payers will be faced with two different sets of codes for high energy
ESWT, the CPT codes and the HCPCS C-codes, and this will cause
difficulties with provider billing and reimbursement.
Commenting parties expressed their belief that our placement of
ESWT did not cover the costs of ESWT for plantar fasciitis, claiming
that the ESWT equipment costs between $250,000 and $400,000 for each
unit, varying by manufacturer, and summarizing other additional costs,
such as those for an annual maintenance contract, a specialized
technician, and anesthesia, along with a specialized transport vehicle
for the ESWT equipment. Commenters asserted that high energy ESWT is
comparable to the resource costs of services in Level II Foot
Musculoskeletal Procedures, APC 0056 with a CY 2005 payment rate of
$2,380.72, except that ESWT includes the capital costs for the
equipment, transport vehicle, and technician mentioned earlier. The
commenters also stated that high energy ESWT has a similar technology
and cost structure, including technological devices, maintenance
contracts, and specialized technical personnel, to extracorporeal shock
wave lithotripsy, for the fragmentation of kidney stones. These
commenters proposed that high energy ESWT be placed in APC 1559. One
hospital indicated that its average cost for ESWT is $2,100. Another
commenter who compared high energy ESWT with lithotripsy stated that if
we wished to compare ESWT with the costs of other procedures, then we
should use lithotripsy, which also employs high energy extracorporeal
shock waves, but for the treatment of kidney stones. The commenter
claimed that many of the other costs associated with the two procedures
were similar as well, with the exception of an imaging component used
with lithotripsy. The commenter noted that lithotripsy's APC
assignment, APC 0169, has a payment rate close to that of New
Technology APC 1559. Another commenter, commenting only on HCPCS code
C9721, recommended that high energy ESWT for treatment of chronic
plantar fasciitis be placed in either clinical APC 0055 (Level I Foot
Musculoskeletal Procedures) or APC 0056 (Level II Foot Musculoskeletal
Procedures), claiming that it fits most closely clinically to
procedures in APC 0055, and that high energy ESWT is more homogeneous
to either APC 0055 or 0056 clinically and economically than to its
assigned New Technology APC. The commenter also stated that any new CPT
code beginning in CY 2006 for high energy ESWT for chronic plantar
fasciitis should replace HCPCS code C9721 and should be placed in APC
0055 or 0056.
Response: When we determine that a new service is eligible for
placement into a New Technology APC, we then perform our own cost
analysis and cost estimate, in addition to taking the projected costs
submitted in a New Technology APC application into consideration. As we
stated in our November 30, 2001 final rule (66 FR 59900) concerning
placement of new services into APCs, ``* * * we will not limit our
determination of the cost of the procedure to information submitted by
the applicant. Our staff will obtain information on cost from other
appropriate sources before making a determination of the cost of the
procedure to hospitals.'' We compared the necessary hospital resources
such as procedure room time, personnel, anesthesia and other resources
of the ESWT procedure to various other procedures for which we have
historical
[[Page 68577]]
hospital claims data. Additionally, we took into consideration
projected costs submitted in the New Technology APC application,
including the capital costs and equipment utilization assumptions,
concluding that HCPCS codes C9720 and C9721 should be assigned to New
Technology APC 1547. New Technology APCs, by their very definition, do
not contain services that are clinically homogeneous, but instead,
based solely on hospital resource considerations, the services have
estimated costs that place them into the same New Technology payment
band. In contrast, services assigned to the same clinical APC are
homogeneous with respect to both their clinical characteristics and
hospital resource utilization.
There are new CPT codes for CY 2006 that describe high energy ESWT
services, and hospitals providing these services in CY 2006 will use
the CPT codes to report them instead of the two predecessor C codes. In
particular, CPT code 0102T (Extracorporeal shock wave, high energy,
performed by a physician, requiring anesthesia other than local,
involving lateral humeral epicondyle) will replace HCPCS code C9720. In
addition, CPT code 28890 (Extracorporeal shock wave, high energy,
performed by a physician, requiring anesthesia other than local,
including ultrasound guidance, involving the plantar fascia) will
replace HCPCS code C9721. We have closely reviewed the hospital cost
information provided by the commenters, along with our CY 2004 hospital
claims data for other outpatient hospital services. We are not
confident yet, in the absence of hospital claims data for the
predecessor C codes or the new CPT codes, that we can appropriately
place CPT codes 0102T and 28890 in clinical APCs where they would share
clinical and resource homogeneity with other services. Therefore, for
CY 2006 we are assigning CPT codes 0102T and 28890 to New Technology
APC 1547 with a payment rate of $850. We believe that the payment rate
is appropriate based on all cost and utilization information available
to us regarding high energy ESWT and other services provided in a
hospital outpatient setting.
Comment: One commenter, the applicant for assignment of high energy
ESWT to a New Technology APC, claimed that our assignment of ESWT to a
New Technology APC violates the Administrative Procedure Act (APA). The
commenter asserted that the OPPS proposed rule published August 16,
2004 (69 FR 50448) failed to mention ESWT or its placement in an APC.
Moreover, the commenter claimed that our lack of discussion of our
methodology made proper comments difficult if not impossible. The
commenting party claimed that finalizing a rule without explanation is
unlawful. The commenter furthermore claimed that the placement of ESWT
in APC 1547 was arbitrary, capricious, and in excess of statutory
authority in violation of the Administrative Procedure Act. The
commenter claimed that it appeared that CMS ignored the applicant's
data that it submitted regarding resource use, instead comparing the
resource costs for ESWT with entirely different procedures, resulting
in inaccurate conclusions regarding the costs of ESWT services.
Moreover, the commenter claimed that we have improperly classified ESWT
into the same APC as endoscopic epidural lysis, which it claims
violated the statutory requirement to group procedures based on both
costs and clinical and resource comparability.
Response: We disagree that our assignment of ESWT to New Technology
APC 1547 was arbitrary, capricious, and in violation of the APA or the
Medicare statute. As stated in our response above, we perform our own
cost analysis and estimate the cost of any eligible new service, while
taking the projected hospital costs submitted in the New Technology APC
application into consideration. As we have indicated above, our
November 30, 2001 final rule concerning placement of new services into
APCs states that we do not limit our determination of the cost of the
procedure to information submitted by the applicant. We obtain
information on costs from other appropriate sources before making a
determination of the cost of the procedure to hospitals. In the case of
the ESWT procedures, our clinical review team of physicians compared
the resources such as procedure room time, anesthesia, and other
resources of the ESWT procedure to the resources of various other
outpatient hospital procedures for which we have historical hospital
claims data. We believe that our claims data on other procedures in
terms of hospital resource use yield relevant cost information for use
in developing cost estimates for new procedures without a claims
history. As explained above, we took the New Technology APC applicant's
costs into account as we reviewed its projected hospital costs
thoroughly and, in particular, utilized information regarding expected
service frequency, capital equipment, and other costs in our total cost
estimate for the procedures. As discussed earlier, assignment to a New
Technology APC does not imply clinical homogeneity with other services
assigned to the same New Technology APC. We also note that we could not
have included these two C-codes in the proposed rule for CY 2005, since
we had not yet completed our evaluation of the New Technology APC
application and rendered a decision until well after that proposed rule
was published. As we have announced numerous times elsewhere, we will
add New Technology service codes and assign their payment rates in our
quarterly updates, where applicable and available, to facilitate timely
integration of new codes into the OPPS. The timing of the ESWT
procedures decision made the addition of the codes and payment rates
coincident with our CY 2005 final rule publication. In order to have
provided a discussion of the codes in a proposed rule, implementation
of the codes would have been delayed a full year.
e. GreenLight Laser
During the August 2005 APC Panel meeting, the Panel recommended
accepting CMS' proposed creation of APC 0429 for CY 2006 and the
inclusion of HCPCS C9713, which describes use of the GreenLight Laser
System, in this APC. We received several public comments concerning the
reassignment of HCPCS codes C9713, 52647, 52648, 50080, and 50081 to
APC 0429.
Comment: Several commenters requested that CMS maintain HCPCS code
C9713 in its New Technology APC for one more year, which would give
hospitals more time to learn how to correctly code for this service.
The commenters stated that our proposed reassignment of the procedure
to a clinical APC was premature because the decision was based on only
9 months of claims data. They suggested that many hospitals may not
even have known about the new HCPCS code C9713 because it was not
implemented until April 5, 2004, and, therefore, CMS received even
fewer correctly coded claims than the true number of outpatient
hospital services actually described by HCPCS code C9713 that were
performed on Medicare beneficiaries during the 9 month period.
The commenters pointed out that there is evidence that hospitals
have not been using the HCPCS code properly and reminded us that some
members of the APC Panel stated that their hospitals were not coding
these procedures correctly.
The commenters stated that the short period of time for collection
of claims data and the low median cost calculated for HCPCS code C9713
based on those claims support their conjecture that the claims are not
correct, and that the
[[Page 68578]]
procedure should remain in its CY 2005 New Technology APC for at least
one more year to allow for collection of more accurate claims data.
Response: For CY 2006, CPT revised the descriptors of two procedure
codes for prostate laser procedures described by CPT codes 52647 and
52648. The revised CPT code descriptors are as follows: 52647 (Laser
coagulation of prostate, including control of postoperative bleeding,
complete (vasotomy, meatotomy, cystourethroscopy, urethral calibration
and /or dilation, and internal urethrotomy are included if performed);
and 52648 (Laser vaporization of prostate, including control of
postoperative bleeding, complete (vasectomy, meatotomy,
cystourethroscopy, urethral calibration and/or dilation internal
urethrotomy and transurethral resection of prostate are included if
performed). These descriptors for the CPT codes will be implemented on
January 1, 2006. Our policy in the OPPS is to maintain only one HCPCS
code that describes a specific procedure, and to the extent possible
adopt CPT coding for services provided under the OPPS. In this case we
determined, based on our review of the new descriptors, that procedures
reported using HCPCS code C9713 in CY 2005 could be appropriately
billed with CPT codes for CY 2006.
We also concluded that the resource use and clinical aspects of the
laser vaporization procedure reported with HCPCS code C9713 and of the
prostate procedures reported using CPT codes 52647 and 52648 prior to
revision were so similar that it was appropriate to move, as proposed,
the CY 2004 hospital claims data for HCPCS code C9713 to APC 0429 to
contribute to the APC's median cost calculation for CY 2006. In
addition, there was no reason to postpone adoption of the revised CPT
codes for use in the OPPS. Although we had less than a full year of
hospital claims data available for HCPCS code C9713, we had well over
1,600 single claims upon which to calculate median costs for the
procedure, and those claims data confirmed the resource similarity of
this service to the services coded by CPT codes 52647 and 52648. The
medians for these three procedures only range from $2,475 to $2,602 and
the clinical indications for the procedures are also similar. For CY
2006 we are adopting the newly available revised CPT codes for
reporting the procedure previously described by HCPCS code C9713 and
deleting HCPCS code C9713, effective January 1, 2006.
Creation of a new Level V APC 0042 for Cystourethroscopy and Other
Genitourinary Procedures, the level to which we assigned the CY 2004
data for the prostate laser procedures described by HCPCS code C9713
and CPT codes 52647 and 52648, along with cost data for two other
procedures also reassigned to that APC, resulted in tighter median cost
distributions within all levels of the APCs for cystouresthroscopy and
other genitourinary procedures. We are confident in the median costs
for all of these prostate procedures because we have over 1,000 single
claims for each of those procedures.
Although HCPCS code C9713 was placed in a New Technology APC for
only one year, assignment to an appropriate clinical APC is always our
goal for procedures that spend time assigned to New Technology APCs. In
this case, the creation of a Category I CPT code that describes the
procedure reported by HCPCS code C9713 during CY 2004 and CY 2005 in
the OPPS occurred more quickly than is often the case. We believe that
the procedure's assignment with similar procedures to a new clinical
APC is appropriate and will result in accurate payment. Also, we expect
that adoption of a revised CPT code for reporting the noncontact laser
vaporization of the prostate procedure will reduce hospitals'
administrative burden as they will be able report CPT codes for
prostate services provided in CY 2006, rather than C-codes specific to
the OPPS.
After carefully considering all comments we received, we are
finalizing, without modification, our proposal to assign CPT codes
52647, 52648, 50080, and 50081 to new APC 0429, Level V
Cystourethroscopy and Other Genitourinary Procedures. The CY 2004
hospital claims data for HCPCS code C9713 have been assigned to APC
0429 for purposes of establishing the final CY 2006 payment rate for
that APC.
f. Magnetoencephalography (MEG)
We proposed to reassign MEG procedures to clinical APC 0043, using
CY 2004 claims data to establish median costs on which payments would
be based.
We received a number of public comments concerning the reassignment
of CPT codes 95965, 95966, 95967.
Comment: A number of commenters addressed our proposal to assign
magnetoencephalography (MEG) procedures to APC 0430. There are three
MEG procedures affected by our proposal: CPT code 95965, MEG recording
and analysis for spontaneous brain magnetic activity; CPT code 95966,
MEG for evoked magnetic fields, single modality; and CPT code 95967,
MEG for evoked magnetic fields, each additional modality to be listed
separately in addition to CPT code 95965 for primary procedure. Each of
those procedures is currently assigned to a separate New Technology
APC, and the commenters believed that they should remain in those APCs
for CY 2006. The commenters believed that assignment to APC 0430 was
inappropriate because the proposed payment level of $674 was inadequate
to cover the costs of the procedures and because the procedures should
not be assigned to only one level as their required hospital resources
differ significantly.
The commenters stated that the median costs based on CMS' hospital
claims data are erroneous because hospitals are not providing accurate
charges for the procedures. Further, they stated that our data did not
represent the true costs of the procedures because MEG procedures are
performed on very few Medicare patients.
In addition to the written comments we received on our proposed
rule, hospital and manufacturer representatives made presentations to
the APC Panel during its August 2005 meeting. At that time, the Panel
recommended that CMS retain the MEG procedures in their current New
Technology APCs and that we collect more external data and provide a
detailed review of the data for the Panel's consideration at its next
meeting.
Response: The MEG procedures have been assigned to New Technology
APCs for 4 years. In CY 2002, all three services were assigned a
payment rate of $150 in a single New Technology APC. As these CPT codes
were new for CY 2002 and, therefore, first open to comment in the CY
2002 final rule, we received several comments regarding the costs of
the services. For CY 2003, all three services were assigned to higher
paying New Technology APCs, with a rate of $2,250 for CPT code 95965,
$1,375 for CPT code 95966, and $875 for CPT code 95967. For CY 2004 and
CY 2005, the procedures were again assigned to higher paying New
Technology APCs, with CPT code 95965 moving to a rate of $5,250; CPT
code 95966 to a rate of $1,450; and CPT code 95967 to a rate of $950.
For CY 2006, we proposed to assign these procedures to one new
clinical APC because assignment to New Technology APCs is generally
temporary while we are gathering hospitals claims data, and we now have
3 years of data upon which to base clinical APC assignments. Over the
entire 3-year period, the median costs
[[Page 68579]]
for all 3 services, especially CPT code 95965, have generally been far
less than the OPPS payment rates. In fact, the CY 2005 median cost
(based on CY 2003 claims data) for CPT code 95965 was only 16 percent
of the payment rate, and for CY 2006 the median cost (based on CY 2004
claims) was only 12 percent of the rate.
These procedures are rarely performed on Medicare beneficiaries
and, therefore, we have a small number of claims now and have no
expectation that the volume will increase. Patients targeted for MEG
investigation procedures are typically between 17 and 32 years old.
Furthermore, industry expectations are that the technology's growth
will be in installations outside of hospitals. Nevertheless, almost all
services with ongoing expectations of low volume for Medicare
beneficiaries, including obstetrical services, reside in clinical APCs,
not New Technology APCs. From CY 2003 claims data we were able to use
20 of the 21 claims submitted for CPT code 95965, 7 of the 7 claims
submitted for CPT code 95966, and 4 of the 6 submitted for CPT code
95967 to calculate median costs of the procedures. For CY 2006 based on
CY 2004 hospital claims data, we were able to use 10 of the 10 claims
submitted for CPT code 95965 and 3 of the 4 submitted for CPT code
95966, while we had no claims for CPT code 95967.
In contrast to the comments, we are committed to relying
increasingly on those data, especially in a case like this where the
few hospitals that offer this technology have been billing these
procedures for at least four years and the technology is no longer new.
However, we also are sensitive to the potential access effects of
relying on a low volume of claims to establish payment rates, as well
as to the APC Panel's recommendation regarding these procedures as
noted by the commenters. Therefore, for CY 2006 we considered charge
and cost information provided to us during the comment period in
addition to our claims data. A commenter provided total charge
information billed to multiple payers, including Medicare, for MEG
services from one hospital which showed charges of about $10,500. Also
included in the information we received during the comment period were
cost estimates for the procedures from various sources, and the
estimates of costs varied considerably. For example, we were provided
with estimates of hospital costs per case for CPT code 95965 that
ranged from $8,321 to $4,054. We believe that some of that variation
may be due to differences in the number of cases used in amortization
estimates, as the costs of the equipment used in MEG procedures are
significant. However, the fact that volume varies from one provider to
another does not mean that we will base our payments on the high cost
per case that results from allocating costs over only a few cases. In
the case of MEG, we are especially sensitive to this given the very low
level of Medicare beneficiary participation in the technology because
of the clinical circumstances in which MEG services are typically
provided. The OPPS payment rates for services need to make appropriate
payments for the services provided to Medicare beneficiaries,
recognizing that, as a budget neutral payment system, the OPPS does not
pay the full hospital costs of services. We expect that our payment
rates generally will reflect the costs that are associated with
providing care to Medicare beneficiaries in cost-efficient settings.
We agree with the APC Panel and the commenters that there are no
currently existing clinical APCs containing other services where MEG
services could be appropriately assigned, based on clinical and
resource homogeneity with other OPPS services. We carefully considered
our claims data, information provided by commenters, and the APC Panel
recommendation that we retain the MEG procedures in New Technology
APCs. As a result of this analysis, we determined that using a 50/50
blend of the code-specific median costs from our most recent CY 2004
hospital claims data and the CY 2005 code-specific payment amounts as
the basis for assignment of the procedures for CY 2006 would be one way
to recognize both the current payment rates for the procedures, which
were originally based on the theoretical costs to hospitals of
providing MEG services, and the median costs based upon our hospital
claims data regarding actual MEG services provided to Medicare
beneficiaries by hospitals. Accordingly, for CY 2006, because we are
not fully confident in our claims data for MEG procedures and there are
no clinical APCs containing other services that share clinical and
hospital resource characteristics with MEG procedures, we believe that
it is most appropriate to place MEG services in New Technology APCs for
CY 2006 to accommodate these adjusted costs. We agree with the
commenters that these APCs should be ``S'' status so no multiple
procedure reduction will apply, as we are determining an adjusted cost
for each specific MEG service. For CPT codes 95965 and 95966, we
averaged the services' median costs from CY 2004 claims data with their
CY 2005 payment rates to determine adjusted costs for the procedures
and, therefore, their appropriate New Technology APC assignments. There
were no CY 2004 claims for CPT code 95967, and thus, no median cost to
use for such an adjustment. For that procedure, we based the New
Technology APC assignment on the historical relationship (66 percent in
CY 2005) between the New Technology APC payment for that procedure and
the New Technology APC payment for CPT code 95966, the code to which
CPT code 95967 is an add-on. We used 66 percent of our CY 2006 payment
rate for CPT code 95966 to determine the adjusted cost of CPT code
95967 and establish the New Technology payment amount for CPT code
95967 for CY 2006. The table below provides the CY 2006 payment rates
and the resulting APC assignments for MEG services.
As suggested by the APC Panel, we will continue to study the APC
assignments for these procedures over the coming year and invite
members of the public to submit any information they believe will be
helpful to us. We have given these procedures special consideration
through this adjustment methodology for CY 2006 to help assure that
Medicare beneficiaries have appropriate access to MEG services. With an
additional year of data and improved consistency of billing by
hospitals providing MEG services, we are hopeful that the claims-based
median costs of these services in future years will more consistently
and appropriately reflect hospitals' costs of providing MEG procedures.
Table 10.--CY 2006 APC Assignments for MEG Services
----------------------------------------------------------------------------------------------------------------
CY 2006
CPT CY 2006 median CY 2005 Adjusted cost payment amount/
cost payment APC
----------------------------------------------------------------------------------------------------------------
95965........................................... $644.71 $5,250 $2,947.35 $2,750/1523
95966........................................... 1,013.34 1,450 1,231.67 1,250/1514
95967........................................... N/A 950 818.97 850/1510
----------------------------------------------------------------------------------------------------------------
[[Page 68580]]
g. Positron Emission Tomography (PET) Scans
(1) Nonmyocardial PET Scans
Positron emission tomography (PET) serves an important role in the
clinical care of many Medicare beneficiaries. As stated in the November
15, 2004 final rule with comment period (69 FR 65716), we believe there
are sufficient claims data to assign nonmyocardial PET scans to a
single clinical APC. However, to minimize any potential impact that a
payment reduction resulting from this move might have had on
beneficiary access to this technology, we set the CY 2005 OPPS payment
for nonmyocardial PET scans based on a 50/50 blend of their CY 2005
median cost and the payment rate of the CY 2004 New Technology APC to
which they were assigned. Therefore, nonmyocardial PET scans were
assigned to New Technology APC 1513 (New Technology--Level XIV ($1,000-
$1,200) for a blended payment rate of $1,150 in CY 2005.
At the February 2005 APC Panel meeting, the Panel agreed with a
presenter's assertion that the resource costs associated with
nonmyocardial PET scans are similar to the costs associated with
myocardial PET scans, and recommended that myocardial PET scans be
placed in the same New Technology APC 1513 in which the nonmyocardial
PET scans currently reside. Furthermore, presenters at the February
2005 APC Panel meeting expressed concern that movement of nonmyocardial
PET scans from their New Technology APC to lower paying clinical APC
0285 could impede beneficiary access to this technology, similar to
concerns articulated by commenters in previous years.
As a result of a recent Medicare national coverage determination
(Publication 100-3, Medicare Claims Processing Manual section 220.6),
effective January 28, 2005, we discontinued the PET G-codes listed in
Table 10, and activated the CPT codes listed below in Table 11 for
myocardial and nonmyocardial PET scans and concurrent PET/CT scans for
anatomical localization. These lists of codes along with claims
processing instructions, are provided in Change Request 3756,
Transmittal 514, Publication 100-04, Medicare Claims Processing Manual.
[GRAPHIC] [TIFF OMITTED] TR10NO05.015
Table 12.--CPT Codes for Covered PET Scan Indications Effective for
Dates of Service on or After January 28, 2005
------------------------------------------------------------------------
CPT code Description
------------------------------------------------------------------------
78459................................ Myocardial imaging, positron
emission tomography (PET),
metabolic evaluation.
78491................................ Myocardial imaging, positron
emission tomography (PET),
perfusion, single study at rest
or stress.
78492................................ Myocardial imaging, positron
emission tomography (PET),
perfusion, multiple studies at
rest and/or stress.
78608................................ Brain imaging, positron emission
tomography (PET); metabolic
evaluation.
78811................................ Tumor imaging, positron emission
tomography (PET); limited area
(e.g., chest, head/neck).
78812................................ Tumor imaging, positron emission
tomography (PET); skull base to
mid thigh.
78813................................ Tumor imaging, positron emission
tomography (PET); whole body.
78814................................ Tumor imaging, positron emission
tomography (PET) with
concurrently acquired computed
tomography (CT) for attenuation
correction and anatomical
localization; limited area
(e.g., chest, head/neck).
78815................................ Tumor imaging, positron emission
tomography (PET) with
concurrently acquired computed
tomography (CT) for attenuation
correction and anatomical
localization; skull base to mid
thigh.
78816................................ Tumor imaging, positron emission
tomography (PET) with
concurrently acquired computed
tomography (CT) for attenuation
correction and anatomical
localization; whole body.
------------------------------------------------------------------------
In the CY 2006 OPPS proposed rule, we proposed to maintain CPT
codes 78608, 78609, 78811, 78812, and 78813 for nonmyocardial PET scans
in New Technology APC 1513 (New Technology--Level XIII, $1,100-$1,200)
at a payment rate of $1,150, the same APC placement as their
predecessor G-codes, to ensure continuing beneficiary
[[Page 68581]]
access to this technology. We also proposed to maintain CPT codes
78814, 78815, and 78816, which describe concurrent PET/CT scans for
anatomical localization, in New Technology APC 1514 (New Technology--
Level XIV, $1,200-$1,300) at a payment rate of $1,250, based on input
claiming that the costs associated with PET/CT technology are higher
than the costs of PET technology alone.
Comment: Several commenters to the November 15, 2004 final rule
with comment period (69 FR 65682) urged that we replace the G-codes for
PET procedures with the established CPT codes for PET scans, while
commenters to the July 25, 2005 proposed rule (70 FR 42674) applauded
our transition to the CPT codes for PET scans. These commenters stated
that movement to the established CPT codes for PET scans would greatly
reduce the burden on hospitals of tracking and billing the G codes
which are not recognized by other payors, and would allow for more
uniform hospital billing of these scans. Furthermore, while a few
commenters urged that we increase the payment for PET scans, the
majority of commenters supported our proposal to maintain nonmyocardial
PET scans in New Technology APC 1513 (paying $1,150), consistent with
the payment level under their predecessor G-codes. Commenters stated
that hospital claims data do not accurately reflect the costs of
providing these services, and beneficiary access to this technology
would be threatened if hospital claims data alone were used to set the
CY 2006 payment rates.
Response: We agree with commenters that movement from the G-codes
to the established CPT codes for PET scans allows for more uniform
billing of these scans. Furthermore, we concur, in general, with
commenters' recommendations that the payment levels under the
established CPT codes for PET scans be consistent with the payment
levels under their predecessor G-codes. Therefore, we are maintaining
newly established CPT codes 78608, 78811, 78812, and 78813 for
nonmyocardial PET scans in New Technology APC 1513 (New Technology--
Level XIII, $1,100-$1,200) at a payment rate of $1,150. In addition,
for myocardial PET scans we are assigning CPT codes 78459 and 78491 to
newly established APC 0306 (Myocardial Positron Emission Tomography
(PET) imaging, single study, metabolic evaluation) and CPT code 78492
to newly established APC 0307 (Myocardial Positron Emission Tomography
(PET) imaging, multiple studies), where the APC medians have been
calculated based on data from their predecessor G-codes, as discussed
in more detail below. However, we are changing the status indicator for
CPT code 78609 (Brain imaging, PET; perfusion evaluation) from ``S''
(separately paid under the OPPS) to ``E'' (not paid under the OPPS)
retroactive to January 28, 2005, as historically there has been and
currently there remains no coverage for this service under the Medicare
program.
Comment: Numerous comments applauded our recognition of the newly
established CPT codes for concurrent PET/CT scans and acknowledgement
of the clinical usefulness of concurrent PET/CT scans for attenuation
correction and anatomical localization in the management of patients
with cancer. However, several commenters expressed concern that the
proposed assignment of PET/CT scans (CPT codes 78814, 78815, and 78816)
to New Technology APC 1514 (paying $1,250) may not adequately cover the
costs of providing PET/CT services. These commenters explained that
hospitals incur more capital and maintenance costs with PET/CT than
with conventional PET. For instance, a large trade association
commented that a new PET/CT scanner costs approximately $1.8 million,
compared to $1.2 million for a conventional PET scanner. Another
commenter quoted annual maintenance costs of approximately $240,000 for
a new PET/CT scanner, compared to $120,000 for a conventional PET
scanner. These commenters asserted that the proposed payment rate for
PET/CT scans does not recognize the additional diagnostic benefits
provided by concurrent PET/CT scans over traditional diagnostic PET and
CT scans. These commenters further explained that the CT scan performed
during a PET/CT is not limited to one part of the body but includes the
entire area imaged by the PET scan and, therefore, is more efficient
than performing one PET scan plus several separate CT scans for
different regions of the body. Several commenters recommended that we
assign the newly established CPT codes for PET/CT scans (CPT codes
77814, 78815, and 78816) to New Technology APC 1519 (paying $1,750)
based on external data and an economic analysis submitted by one of the
commenters, which reported the costs of providing a PET/CT scan at
approximately $1,717. In contrast, a leading mobile provider of PET/CT
scans reported an average cost of $1,485 for providing a PET/CT scan,
which included FDG, mileage to sites, technologists, supplies,
equipment maintenance, and scheduling.
Response: While we acknowledge that concurrent PET/CT scans for
attenuation correction and anatomical localization in the management of
patients with cancer may be clinically useful, we have received no
convincing data that support the assignment of PET/CT scans (CPT codes
78814, 78815, and 78816) to an APC paying higher than $1,250. The
external data and economic analysis submitted by one of the commenters
failed to meet the criterion for consideration of external data that we
proposed in our August 12, 2003 proposed rule (68 FR 47987) and
finalized in our November 7, 2003 final rule (68 FR 63424). The
external data and analysis was not provided with the level of detail
that would have allowed us to verify the claims data nor to have
adjusted the claims data should we have determined an adjustment was
necessary. Furthermore, one commenter reported an average cost of
$1,485 for providing a PET/CT scan, which included FDG, among other
related costs. Considering that FDG will be paid separately at charges
adjusted to cost for CY 2006 (estimated typically to be about $250),
the payment rate of $1,250 for PET/CT scans (not including FDG)
adequately covers the cost of $1,485 that this commenter reported for
providing PET/CT scans (including FDG). While we acknowledge that PET/
CT scanners may be more costly to purchase and maintain than dedicated
PET scanners, a PET/CT scanner is versatile and may also be used to
perform individual CT scans, thereby potentially expanding its use if
PET/CT scan demand is limited. Therefore, for CY 2006, we are
maintaining CPT codes 78814, 78815, and 78816, which describe
concurrent PET/CT scans for attenuation correction and anatomical
localization, in New Technology APC 1514 (New Technology--Level XIV,
$1,200-$1,300) at a payment rate of $1,250.
Comment: One commenter expressed concern that the proposed payment
rate of $1,250 for a PET/CT scan may not cover the costs of a
diagnostic CT when performed in conjunction with a PET/CT scan. The
commenter stated that although many of the technical resources for
acquiring diagnostic CT data when performed as a single acquisition
with a PET/CT scan are the same as for the CT for attenuation
correction and anatomical localization, the initial capital costs are
greater for a PET/CT scanner capable of performing a diagnostic CT. In
addition, there are added costs for acquiring the diagnostic CT data
such as for the contrast agent and appropriate personnel. This
commenter expressed interest in a continued dialogue with CMS on the
issue of appropriate payment for the
[[Page 68582]]
technical costs of performing a diagnostic CT acquired simultaneously
with a PET/CT scan.
Response: We appreciate the commenter's concerns regarding
appropriate billing and OPPS payment for a PET scan with CT for
attenuation correction and anatomical localization and a diagnostic CT
scan performed as a single acquisition. We will consider this issue
should we issue more specific hospital billing guidance regarding
various combinations of medically reasonable and necessary PET and CT
scans.
(2) Myocardial PET Scans
Comment: Two commenters to the November 15, 2004 final rule with
comment period (69 FR 65682) urged CMS to delete HCPCS code G0230 (PET
imaging, metabolic assessment for myocardial viability following
inconclusive SPECT study) and recognize CPT code 78459 (myocardial
imaging, positron emission tomography, metabolic evaluation) by
changing its status indicator from ``B'' to ``S.''
Response: As a result of a recent Medicare national coverage
determination Publication 100-3, Medicare Claims Processing Manual
section 220.6), effective January 28, 2005, we discontinued HCPCS code
G0230 and activated CPT code 78459, changing its status indicator from
``B'' to ``S.'' For CY 2006, we are maintaining CPT code 78459 as the
active code for billing ``myocardial imaging, positron emission
tomography, metabolic evaluation.''
Comment: Several commenters to the November 15, 2004 final rule
with comment period (69 FR 65682) and the CY 2006 OPPS proposed rule
(70 FR 42674) stated that the payment rate for APC 0285 does not
accurately reflect the costs associated with performing multiple
studies of PET myocardial perfusion imaging. They noted that, as
configured, APC 0285 violated the two times rule for CY 2005 and was
proposed as an exception to the two times rule for CY 2006. These
commenters suggested that CMS split myocardial PET scans into two APCs
to distinguish the resource consumption differences between single-
study and multiple-study PET imaging.
Response: We agree with commenters that the significant cost
differences between single study and multiple studies myocardial PET
imaging services reflected in our historical hospital claims data for
the G-code myocardial PET scan services support the splitting of APC
0285 into two myocardial PET scan APCs for more accurate rate-setting
for these services for CY 2006. Furthermore, the splitting of APC 0285
resolves the two times violation that occurred in the CY 2006 proposed
rule configuration of APC 0285. Therefore, we are assigning single-
study myocardial PET imaging procedures and metabolic evaluation of
myocardial PET imaging to APC 0306 (Myocardial Positron Emission
Tomography (PET) imaging, single study, metabolic evaluation) with a
median cost of $800, based on the CY 2004 hospital claims data for the
predecessor G-codes that have been replaced with CPT codes 78459 and
78491. In addition, we are assigning multiple-study myocardial PET
imaging procedures to APC 0307 (Myocardial Positron Emission Tomography
(PET) imaging, multiple studies) with a median cost of $2,482, based on
the CY 2004 hospital claims data for the predecessor G-codes that have
been replaced with CPT code 78492.
Comment: One commenter explained that myocardial PET perfusion
studies may be performed with or without gating similar to myocardial
SPECT procedures. However, for myocardial PET perfusion studies, there
are no additional codes to describe gating; therefore, the provider
receives the same payment regardless of having performed a gated study
versus a non-gated study. The commenter requested that the payment rate
for myocardial PET perfusion studies be adjusted to assure proper
payment for gated studies.
Response: While we recognize that the CPT codes describing
myocardial PET scans make no distinction between gated and non-gated
studies, we received numerous comments urging that we discontinue the
G-codes for PET scans and recognize these CPT codes for PET scans.
Furthermore, the splitting of the myocardial PET scans into two APCs to
distinguish single-study imaging from multiple-study imaging, as
discussed in detail above, may improve payment for certain gated
studies that involve multiple studies and address the commenter's
concern for adequate payment for gated studies.
h. Proton Beam Treatment
In the CY 2005 OPPS proposed rule (69 FR 50467), we proposed to
reassign CPT codes 77523 (Proton treatment delivery, intermediate) and
77525 (Proton treatment delivery, complex) from New Technology APC 1511
(New Technology, Level XI, $900-$1,000) to clinical APC 0419 (Proton
Beam Therapy, Level II). In response to this proposal, we received
numerous comments urging that we maintain CPT codes 77523 and 77525 in
New Technology APC 1511 at a payment rate of $950 for CY 2005, arguing
that the proposed payment rate of $678 for CY 2005 would halt diffusion
of this technology and negatively impact patient access to this cancer
treatment. Commenters explained that the low volume of claims submitted
by only two facilities provided volatile and insufficient data for
movement into the proposed clinical APC 0419. They further explained
that the extraordinary capital expense of between $70 and $125 million
and high operating costs of a proton beam facility necessitate adequate
payment for this service to protect the financial viability of this
emerging technology.
In the November 15, 2004 final rule with comment period (69 FR
65719 through 65720), we considered the concerns expressed by numerous
commenters that patient access to proton beam therapy might be impeded
by a significant reduction in OPPS payment. Therefore, we set the CY
2005 payment rate for CPT codes 77523 and 77525 by calculating a 50/50
blend of the median cost for intermediate and complex proton beam
therapies of $690 derived from CY 2003 claims and the CY 2004 New
Technology payment rate of $950. We used the result of this calculation
($820) to assign intermediate and complex proton beam therapies (CPT
codes 77523 and 77525) to New Technology APC 1510 (New Technology--
Level X ($800-$900) for a blended payment rate of $850 for CY 2005.
Our examination of the CY 2004 claims data has revealed a second
year of a stable, albeit modest, number of claims on which to set the
CY 2006 payment rates for CPT codes 77523 and 77525. However, unlike
the median of $690 for the proposed CY 2005 Level II proton beam
radiation therapy clinical APC containing CPT codes 77523 and 77525
derived from the CY 2003 claims data, the median for a comparable Level
II proton beam radiation therapy clinical APC was $934 derived from
partial CY 2004 claims data at the time of development of the CY 2006
proposed rule. This more recent median appears to more accurately
reflect the significant capital expense and high operating costs of a
proton beam therapy facility, and supports patient access to proton
beam therapy. Therefore, we proposed to move CPT codes 77523 and 77525
from New Technology APC 1510 to clinical APC 0667 (Level II Proton Beam
Radiation Therapy) based on a median cost of $934 for CY 2006.
Comment: Numerous commenters applauded our proposal to reassign CPT
codes 77523 (Proton treatment delivery, intermediate) and 77525 (Proton
[[Page 68583]]
treatment delivery, complex) from New Technology APC 1510 (New
Technology--Level X ($800-$900) to clinical APC 0667 (Level II Proton
Beam Radiation Therapy), setting payment on the median cost of $1,133
derived from the CY 2004 claims, an increase from the median cost of
$934 in the proposed rule. Commenters also supported our proposal to
maintain CPT codes 77520 (Proton treatment delivery; simple, without
compensation) and 77522 (Proton treatment delivery; simple, with
compensation) in APC 0664 (Level I Proton Beam Radiation Therapy),
setting the payment on the median cost of $947 derived from the full
year CY 2004 claims. Commenters stated that these proposed payments
more accurately reflect the significant capital expense and operating
costs of a proton beam therapy center. Commenters also were pleased
with our proposal to maintain separate APCs for distinguishing simple
from intermediate and complex proton beam therapies, stating that the
distinction is necessary to differentiate between the resource demands
of the different treatment levels. Commenters urged CMS to continue
protecting beneficiary access to this technology, especially during
this early stage of clinical adoption to ensure economic viability of
both existing facilities and those in various stages of construction
and development.
Response: We agree with commenters that the CY 2004 median cost
data for proton beam therapy services more accurately reflect the
significant capital expense and high operating costs of a proton beam
therapy facility. Furthermore, our reassignment of CPT codes 77523 and
77525 from New Technology APC 1510 to clinical APC 0667 based on the
improved median cost data and stable frequency is consistent with our
policy of transitioning New Technology services into a clinically
appropriate APC with payment based on median cost data once the data
for these services become sufficiently stable to protect patient access
to such services. Therefore, we are finalizing our proposal to reassign
intermediate and complex proton beam therapy services (CPT codes 77523
and 77525) from New Technology APC 1510 to clinical APC 0667, and to
maintain simple proton beam therapy services (CPT codes 77520 and
77522) in APC 0664 for CY 2006.
i. Smoking Cessation Counseling
Comment: Two commenters expressed concern about our proposal to
move smoking cessation HCPCS codes G0375 (Smoking and tobacco-use
cessation counseling visit; 3-10 minutes) and G0376 (Smoking and
tobacco-use cessation counseling visit; greater than 10 minutes) from
their current New Technology APC 1501 (Level I, $0-$50) with a payment
rate of $25, to New Technology APC 1491 (Level IA, $0-$10) with a
payment rate of $5. Both commenters contended that the current payment
rate of $25 is not sufficient to cover resources associated with this
type of visit. Both commenters expressed the conviction that, once
claims data reflecting the costs of the service become available, it
would become clear that a payment rate closer to $52 is warranted. One
commenter urged us to maintain these codes in their current New
Technology APC until provider claims data become available. The other
commenter took the position that placement in a New Technology APC is
not appropriate, as the services could reasonably be placed in an
existing clinical APC. Specifically, this commenter recommended that
HCPCS codes G0375 and G0376 be assigned immediately to APC 0600 (Low
Level Clinic Visits), which the commenter considers appropriate in
terms of resource costs and clinical characteristics. Finally, both
commenters pointed out that there was an inconsistency in our tables in
the proposed rule with regard to the APC assignments of codes G0375 and
G0376. Specifically, Table 10 in the proposed rule (70 FR 42706) showed
HCPCS code G0375 assigned to New Technology APC 1491 (with a payment
rate of $5), while HCPCS code G0376 was assigned to New Technology APC
1492 (with a payment rate of $15). However, Addendum B of the proposed
rule (70 FR 42936) showed both HCPCS codes G0375 and G0376 assigned to
New Technology APC 1491 (with a payment rate of $5).
Response: We thank the commenters for bringing to our attention a
typographical error that appeared in Table 10 of the proposed rule (70
FR 42706). This error did not come to our attention in time for
correction. Our intent, as indicated in Addendum B, was to assign both
HCPCS codes G0375 and G0376 to APC 1491 (with a payment rate of $5). We
regret the error. We do not agree with the commenter who suggested that
it is appropriate at this time to remove HCPCS codes G0375 and G0376
from assignment to a New Technology APC and to assign them to clinical
APC 0600 (Low Level Clinic Visits). One purpose of assignment to a New
Technology APC is to provide an opportunity to collect claims data from
our system, in order to allow for the ultimate placement of a code in
the most appropriate clinical APC in terms of hospital resource
requirements. At this time, we lack any data that would justify placing
these codes in the clinical APC recommended by the commenter or in any
other clinical APC. We believe that these smoking cessation services,
because they are so specifically defined with respect to coding and
coverage, may not require similar hospital resources as those required
of other services assigned to APC 0600. As two specific G-codes were
developed for these new smoking cessation services, the specific
services likely bear little clinical resemblance to many of the
evaluation and management services assigned to APC 0600, whose median
cost currently reflects CY 2004 claims from hospitals. We also cannot
agree with the commenter recommending placement of these codes in one
or more higher-paying New Technology APCs. Our proposal to reassign
these codes from their current New Technology APC 1501 (with a payment
rate of $25) to New Technology APC 1491 (with a payment rate of $5) was
based on our assessment that the hospital facility resources required
for this service are likely to be very limited. At the time of
activation of these new G-codes in CY 2005, New Technology APC 1501 was
the New Technology APC applicable to new OPPS services with expected
hospital costs of between $0 and $50. As we proposed to refine the New
Technology cost bands for CY 2006 and are finalizing that proposal in
this final rule, we believe that for CY 2006 assignment of the smoking
cessation G-codes to New Technology APC 1491 now more appropriately
reflects the hospital resources required for these services. Therefore,
for CY 2006, we are finalizing that proposal in this final rule.
However, for CY 2007 rate-setting, we will reassess the APC placement
of these codes in light of the available partial year CY 2005 hospital
claims data.
j. Stereoscopic Kv X-ray
Comment: A number of commenters addressed our creation of a new
code for stereoscopic kilovolt x-ray imaging, HCPCS code C9722
(Stereoscopic kilovolt x-ray imaging with infrared tracking for
localization of target volume), and assignment of the service to a New
Technology APC. Commenters stated that the ``definition,'' which
appears to refer to the code descriptor, combines two technologies into
one HCPCS code. A commenter claimed that this descriptor excludes other
superior technologies to acquire kilovolt (kV) x-ray images for
localization of target volume that do not rely on infrared
[[Page 68584]]
tracking. Commenters asserted that the key feature of the service is
the use of kV x-ray imaging for localization of target volume, while
the infrared tracking feature is used for patient monitoring only to
ensure immobilization, not for positioning and localization. A
commenter stated that many kV x-ray systems do not use infrared
tracking. The commenters, including a number of cancer centers,
recommended modifying the descriptor of HCPCS code C9722 to
``Stereoscopic kV x-ray imaging with or without infrared tracking for
localization of target volume,'' claiming that this would allow
hospitals equal reimbursement for providing the service regardless of
the vendor from whom they bought the kV x-ray equipment. One commenter
stated that the kV x-ray is part of Image Guided Radiation Therapy
(IGRT), a new generation of conformal radiation therapy techniques, and
that it was working with the CPT Editorial Panel to submit CPT
applications for stereoscopic x-ray guidance, as well as other IGRT
technologies. A commenter stated that there is a new CPT code for
stereoscopic x-ray guidance effective January 1, 2006, and recommended
that we crosswalk HCPCS code C9722 to the new CPT code.
Response: The AMA's CPT Editorial Panel created new CPT code 77421,
``Stereoscopic X-ray guidance for localization of target volume for the
delivery of radiation therapy'', which will be effective January 1,
2006. We will replace HCPCS code C9722 with CPT code 77421 for CY 2006,
mapping the new code to the same New Technology APC as for CY 2005--APC
1502. As with the instructions embedded in the descriptor for HCPCS
code C9722, CPT code 77421 should not be reported with the five G-codes
for stereotactic radiosurgery treatment to be billed under the OPPS in
CY 2006. As CPT code 77421 makes no reference to infrared tracking, the
commenters' concerns are addressed by the use of this CPT code and its
descriptor.
k. Stereotactic Radiosurgery (SRS)
In a correction to the November 7, 2003 final rule with comment
period, issued on December 31, 2003 (68 FR 75442), we considered a
commenter's request to combine HCPCS codes G0242 (Cobalt 60-based
stereotactic radiosurgery planning) and HCPCS code G0243 (Cobalt 60-
based stereotactic radiosurgery delivery) into a single procedure code
in order to capture the costs of this treatment in single procedure
claims because the majority of patients receive the planning and
delivery of this treatment on the same day. We responded to the
commenter's request by explaining that several other commenters stated
that HCPCS code G0242 was being misused to code for the planning phase
of linear accelerator-based stereotactic radiosurgery planning. Because
the claims data for HCPCS code G0242 represented costs for linear
accelerator-based stereotactic radiosurgery planning (due to misuse of
the code), in addition to Cobalt 60-based stereotactic radiosurgery
planning, we were uncertain of how to combine these data with HCPCS
code G0243 to determine an accurate payment rate for a combined code
for planning and delivery of Cobalt 60-based stereotactic radiosurgery.
In consideration of the misuse of HCPCS code G0242 and the
potential for causing greater confusion by combining HCPCS codes G0242
and G0243 into a single procedure code, for CY 2004 we created a
planning code for linear accelerator-based stereotactic radiosurgery
(HCPCS code G0338) to distinguish this service from Cobalt 60-based
stereotactic radiosurgery planning. We maintained both HCPCS codes
G0242 and G0243 for the planning and delivery of Cobalt 60-based
stereotactic radiosurgery, consistent with the use of the two G-codes
for planning (HCPCS code G0338) and delivery (HCPCS codes G0173, G0251,
G0339, G0340, as applicable) of each type of linear accelerator-based
stereotactic radiosurgery (SRS). We indicated that we intended to
maintain these new codes in their current New Technology APCs until we
had sufficient hospital claims data reflecting the costs of the
services to consider moving them to clinical APCs.
During the February 2005 APC Panel meeting, the APC Panel discussed
the clinical and resource cost similarities between planning for Cobalt
60-based and linear accelerator-based SRS. The APC Panel also discussed
the use of CPT codes instead of specific G-codes to describe the
services involved in SRS planning, noting the clinical similarities in
radiation treatment planning regardless of the mode of treatment
delivery. Acknowledging the possible need for CMS to separately track
planning for SRS, the APC Panel eventually recommended that we create a
single HCPCS code to encompass both Cobalt 60-based and linear
accelerator-based SRS planning. However, a hospital association and
other presenters at the APC Panel meeting urged that we discontinue the
use of G-codes for SRS planning, and instead, recognize the current CPT
codes that describe the specific component services involved in SRS
planning to reduce the burden on hospitals of maintaining duplicative
codes for the same services to accommodate different payers. Lastly,
one presenter urged that we combine HCPCS codes G0242 (Cobalt 60-based
stereotactic radiosurgery planning) and G0243 (Cobalt 60-based
stereotactic radiosurgery delivery) into a single procedure code to
reflect that the majority of patients receive the planning and delivery
of this treatment on the same day as a single fully integrated service.
The APC Panel recommended that we make no changes to the coding or
APC placement of SRS delivery codes G0173, G0243, G0251, G0339, and
G0340 for CY 2006. We first established the above full group of
delivery codes in CY 2004, so we have only one year of hospital claims
data reflecting costs of all of the services. In addition, presenters
to the APC Panel described current ongoing deliberations amongst
interested professional societies around the descriptions and coding
for SRS. The APC Panel and presenters suggested that we wait for the
outcome of these deliberations prior to making any significant changes
to SRS delivery coding or payment rates.
In an effort to balance the recommendations of the APC Panel with
the recommendations of presenters at the APC Panel meeting, in
accordance with the APC Panel recommendations, we proposed to make no
changes to the APC placement of the following SRS treatment delivery
codes for CY 2006: HCPCS codes G0173, G0243, G0251, G0339, and G0340.
In the CY 2006 proposed rule, we acknowledged concerns expressed by
some presenters urging that we discontinue the use of the G-codes for
SRS planning, and instead, recognize the current CPT codes that
describe the specific component services involved in SRS planning to
reduce the burden on hospitals of maintaining duplicative codes for the
same services to accommodate different payers. In addition, we
indicated that we had no need to separately track SRS planning
services, which share clinical and resource homogeneity with other
radiation treatment planning services described by current CPT codes.
When HCPCS code G0242 was established for SRS planning, several
radiology planning services were considered in determining its APC
placement. In the November 30, 2001 final rule, in which we described
our determination of the total cost for SRS planning based on our
claims experience, we added together the median costs of the following
CPT codes
[[Page 68585]]
that we found to be regularly billed with SRS delivery (CPT code 61793
in the available hospital data): 77295, 77300, 77370, and 77315. In the
CY 2006 proposed rule, our examination of the costs from the CY 2004
claims data available to us at that time for the above-mentioned CPT
codes closely approximated the CY 2004 median costs reported for HCPCS
codes G0242 and G0338. The APC median costs for the above-mentioned CPT
codes based on the CY 2004 claims data utilized for the proposed rule
totaled $1,297, while the median cost for HCPCS code G0242 was $1,366
and the median cost for HCPCS code G0338 was $1,100 based on the
partial year CY 2004 claims data. In addition, three of the above-
mentioned CPT codes were included on the proposed bypass list for CY
2006, so we did not anticipate that the billing of these codes on the
same day as an SRS treatment service would cause significant problems
with multiple bills for SRS services. Therefore, we proposed to
discontinue HCPCS codes G0242 and G0338 for the reporting of charges
for SRS planning under the OPPS, and to instruct hospitals to bill
charges for SRS planning using all of the available CPT codes that most
accurately reflect the services provided.
We acknowledged one APC Panel presenter's concern that the coding
structure of Cobalt 60-based SRS, using either the current SRS planning
G-code or the appropriate CPT codes for planning services as we
proposed for CY 2006, might not necessarily reflect the same day,
integrated Cobalt 60-based SRS service furnished to the majority of
patients receiving Cobalt 60-based SRS. Thus, we specifically requested
public comment on the clinical, administrative, or other concerns that
could arise if we were to bundle Cobalt 60-based SRS planning services,
currently reported using HCPCS code G0242 and proposed for CY 2006 to
be billed using the appropriate CPT codes for planning services, into
the Cobalt 60-based SRS treatment service, currently reported under the
OPPS using HCPCS code G0243. Under such a scenario, the SRS treatment
service described by HCPCS code G0243 would be placed in a higher
paying New Technology APC to reflect payment for the costs of the SRS
planning and delivery as an integrated service. Hospitals would be
prohibited from billing other radiation planning services along with
the Cobalt 60-based SRS treatment delivery code. In contrast to Cobalt
60-based SRS coding, we did not consider bundling the planning for
linear accelerator-based SRS with the treatment delivery services,
given the various timeframes for planning that may occur with linear
accelerator-based SRS.
As discussed in detail above, the APC Panel recommended that CMS
create a single HCPCS code to encompass both Cobalt 60-based and linear
accelerator-based SRS planning. Furthermore, the Panel recommended that
we make no changes to the coding or APC placement of SRS treatment
delivery HCPCS codes G0173, G0243, G0251, G0339, and G0340 for CY 2006.
For reasons discussed below, we are discontinuing HCPCS codes G0242
and G0338 for the reporting of charges for SRS planning under the OPPS
for CY 2006, and instructing hospitals to bill charges for SRS
planning, regardless of the mode of treatment delivery, using all of
the available CPT codes that most accurately reflect the services
provided. In addition, while we are reassigning HCPCS code G0243 to
clinical APC 0127 for CY 2006, we are making no changes to the APC
placement of SRS treatment delivery HCPCS codes G0173, G0251, G0339,
and G0340.
We received a number of public comments on these SRS issues.
Comment: We received numerous comments supporting our proposal to
discontinue HCPCS codes G0242 (Cobalt 60-based stereotactic
radiosurgery planning) and G0338 (Linear accelerator-based SRS
planning) for the reporting of charges for SRS planning, and to
instruct hospitals to bill charges for SRS planning using available CPT
codes that most accurately reflect the services provided. These
commenters agreed that available CPT codes more accurately describe the
services involved in SRS planning and are less administratively
burdensome for providers because other payors recognize them. Some
commenters urged that we retain separate codes for reporting the
planning and treatment delivery of Cobalt 60-based SRS, whether through
the use of existing G-codes (HCPCS codes G0242 and G0243) or through
available CPT codes. Several of these commenters explained that
although the planning and treatment delivery of Cobalt 60-based SRS
most often occur on the same date of service, there are instances in
which the planning and treatment are not delivered on the same date of
service due to an unanticipated problem that arises during the planning
that precludes the treatment delivery. In such instances where only
planning for the Cobalt 60-based SRS is performed, commenters stated
that CMS would need to clarify how providers should bill these services
if separate codes are not maintained for the planning and treatment
delivery of Cobalt 60-based SRS. Commenters expressed concern that
combining the planning code (HCPCS code G0242) and treatment delivery
code (HCPCS code G0243) for Cobalt 60-based SRS into a single
combination code would necessitate the use of a modifier when they are
not performed on the same date of service and would complicate the
billing of these services and increase the administrative burden on
hospitals. One commenter suggested that, if we decide to maintain HCPCS
code G0242 for Cobalt 60-based SRS planning rather than transition to
the CPT codes, we consider placing the planning code (HCPCS code G0242)
on the bypass list as an alternative solution to generating more single
bills for future rate-setting, rather than combining the planning and
treatment delivery codes for Cobalt 60-based SRS into a single
combination code.
In contrast, a few commenters urged that we continue to recognize
HCPCS codes G0242 and G0338 for the reporting of SRS planning rather
than transition to the available CPT codes that describe these
services. These commenters predicted that another year of stability
would allow CMS to collect more reliable data for use in setting the CY
2008 payment rates for SRS planning services.
Many commenters urged that we refrain from treating various forms
of SRS (i.e., Cobalt 60-based and linear accelerator-based) differently
by ``bundling'' planning into the treatment delivery for Cobalt 60-
based SRS by creating a single combination code, while ``unbundling''
planning and treatment delivery for linear accelerator-based SRS by
paying separately for these services. These commenters asserted that
the planning and treatment delivery of SRS, regardless of the form of
delivery, are clinically distinct services that should be reported
separately to distinguish their distinct resource requirements. One
commenter refuted claims that the administration of the planning and
treatment delivery of SRS on the same date of service is unique to
Cobalt 60-based SRS, arguing that the planning and treatment delivery
of LINAC-based SRS likewise are typically performed on the same day,
and that a mere time proximity of the two services does not necessitate
a single combination code for either form of SRS. Several commenters
cautioned against establishing different coding schemes for various SRS
services that would likely cause confusion for coders, inaccurate
coding, and unreliable data for future rate setting.
[[Page 68586]]
Numerous other commenters urged CMS to combine the planning code
(HCPCS code G0242) and treatment delivery code (HCPCS code G0243) for
Cobalt 60-based SRS into a single surgical code, preferably CPT code
61793 (stereotactic radiosurgery, particle beam, gamma ray, or linear
accelerator, one or more sessions), which would replace all of the SRS
G codes regardless of the mode of delivery. These commenters stated
that the planning and treatment delivery of Cobalt 60-based SRS are
always performed on the same day and that a single combination code
would be less confusing for coders, provide more accurate claims data,
and result in a more appropriate payment for Cobalt 60-based SRS. While
some of these commenters urged that we assign this single combination
code to a higher paying New Technology APC consistent with its CY 2004
median cost data until more accurate cost data are available for
determining an appropriate clinical APC, other commenters strongly
opposed the designation of Cobalt 60-based SRS as a new technology
service, noting that Cobalt 60-based SRS became a standard of care for
treating cancer patients over two decades ago and a new technology
label is no longer appropriate. Commenters stated that CMS' designation
of Cobalt 60-based SRS as a new technology service has led other
insurers to consider the treatment to be experimental, which frequently
delays, and sometimes prevents, access to treatment for critically ill
patients. These commenters urged that we assign this new combination
code reflecting planning and delivery of Cobalt 60-based SRS to a
surgical APC and set the payment based on the median cost calculated
from the CY 2004 hospital claims data. Some of these commenters
recommended that this single combination code describe all forms of
SRS, while other commenters emphasized the importance of maintaining
separate combination codes for Cobalt 60-based SRS and LINAC-based SRS
to distinguish the significant clinical and resource cost differences
associated with these services.
One commenter urged that if CMS replaces the G-codes for SRS
planning with available CPT codes describing these services, we should
not assign HCPCS code G0243 (Cobalt 60-based SRS treatment delivery) to
a New Technology APC paying higher than its CY 2005 payment rate of
$5,250. This commenter supported our proposal to make no changes to the
APC placement of SRS treatment delivery codes that describe a complete
course of treatment in one session, stating that the proposed payment
of $5,250 for all single session SRS treatment services for CY 2006 is
appropriate based on the hospital resources involved in furnishing
these services.
Response: We thank the many commenters for their insightful
thoughts and recommendations for the reporting of hospital charges for
SRS services under the OPPS for CY 2006. In recognition of the
heightened level of diligence that the current coding scheme for SRS
services requires of hospital coders to ensure that charges for these
services are reported under the appropriate G-code, we carefully
considered several options for simplifying the coding scheme for SRS
services while maintaining a certain level of data specificity to
reflect the differential clinical considerations and hospital resource
utilization that are necessary to inform future rate setting.
First, we considered several recommendations by commenters to
bundle the planning for Cobalt 60-based SRS into the treatment delivery
(HCPCS code G0243) for Cobalt 60-based SRS by either establishing a
single combination G-code describing both the planning and delivery of
Cobalt 60-based SRS or by instructing providers to report CPT code
61793 for such services. However, we agree with the majority of
commenters who expressed strong opposition to a single combination G-
code or CPT code to report the planning and treatment delivery of
Cobalt 60-based SRS, noting the following concerns: (1) The
administrative burden on providers of maintaining duplicative codes for
SRS planning to accommodate various payors (that is, G-codes for
Medicare and CPT codes for non-Medicare payors); (2) the added
complexity of attaching a modifier to the code for instances when
planning and delivery are not provided on the same date of service
because treatment does not proceed due to an unanticipated problem; (3)
the confusion for coders and unreliable data that could emanate from
inconsistent coding schemes for different forms of SRS (that is, Cobalt
60-based and LINAC-based SRS); and (4) the nonspecificity of the
descriptor for CPT code 61793 which describes all forms of SRS
treatment delivery and makes no mention of SRS planning services. We
also agree with the majority of commenters who stated that the G-codes
(G0242 and G0338) for SRS planning are duplicative of existing CPT
codes that adequately describe such services and that are much less
administratively burdensome on hospitals because they are recognized by
non-Medicare payors. Furthermore, our analysis of the CY 2004 claims
data revealed that the median costs for HCPCS codes G0242 and G0338
closely approximated the sum of the median costs for the CPT codes
(77295, 77300, 77315, 77370) that were most commonly billed under the
OPPS for SRS planning prior to the establishment of HCPCS codes G0242
and G0338. In addition, we remind commenters that three of the above-
mentioned CPT codes are included on the bypass list for CY 2006, so we
do not anticipate that the billing of these codes on the same day as an
SRS treatment delivery service will cause significant problems with
multiple bills for SRS services, eliminating any need for recognizing a
single combination G-code or CPT code which describes both planning and
treatment delivery SRS services for the purpose of generating more
single bills. Finally, based on additional confirmation from commenters
that the similarities in clinical characteristics and resource costs
associated with treatment planning for services delivering radiation,
regardless of the mode of treatment delivery, dispel the need to
separately track planning services for SRS, we are discontinuing HCPCS
codes G0242 and G0338 for the reporting of charges for SRS planning
under the OPPS for CY 2006, and instructing hospitals to bill charges
for SRS planning, regardless of the mode of treatment delivery, using
all of the available CPT codes that most accurately reflect the
services provided.
We also agree with the majority of commenters who strongly urged
that we reassign HCPCS code G0243 (Cobalt 60-based treatment delivery)
from New Technology APC 1528 to a clinical APC, pointing out that
Cobalt 60-based SRS became a standard of care for treating cancer
patients over two decades ago and, therefore, a new technology label no
longer appropriately describes the service. Furthermore, the median
costs from hospital claims for HCPCS code G0243 based on a significant
number of single claims each year have been quite stable over the past
three years, supporting movement of this service out of a New
Technology APC and into a clinical APC based on its median cost data
from CY 2004. Therefore, we are reassigning HCPCS code G0243 from New
Technology APC 1528 to clinical APC 0127 and setting its payment rate
based on a median cost of $7,297 for CY 2006.
Lastly, we agree with commenters who emphasized the significant
clinical and resource cost differences associated with the treatment
delivery of Cobalt 60-based SRS and LINAC-based SRS, and
[[Page 68587]]
that establishment of a single code to describe all forms of SRS
treatment delivery would result in a loss of essential data specificity
for determining appropriate future payment rates for these services.
For instance, based on the CY 2004 claims data, the median costs for
the various forms of SRS treatment delivery ranged from $2,502 to
$7,296. These significant differences in median cost data emphasize the
importance of maintaining different codes that distinguish the various
forms of SRS treatment delivery for the purpose of setting the most
appropriate payment rates for these services. We believe it would be
premature, as well, to move the LINAC-based SRS treatment delivery
procedures to clinical APCs for CY 2006 because we have only one year
of claims data reflecting their current coding structure, although we
have hundreds of single claims for some of the services. We will be
examining our claims data carefully for the next OPPS update, because
we will then have 2 years of data for these LINAC-based SRS treatment
delivery services now assigned to New Technology APCs. Therefore, we
are maintaining HCPCS codes G0173 and G0339 in New Technology APC 1528,
HCPCS code G0251 in New Technology APC 1513, and HCPCS code G0340 in
New Technology APC 1525 for CY 2006. And as mentioned elsewhere in this
section, we are reassigning HCPCS code G0243 from New Technology APC
1528 to clinical APC 0127.
Comment: One commenter urged that we create a new CPT code titled
``Surgeon-based Gamma Stereotactic Radiosurgery, complete course, one
procedure, per lesion'' to describe Cobalt 60-based SRS planning and
treatment delivery and assign this CPT code to a new surgical APC
titled ``Surgeon-based Gamma Stereotactic Radiosurgery.'' This
commenter recommended that we set the payment rate of this new APC
based on the combined median costs from claims data for HCPCS codes
G0242 and G0243.
Response: We appreciate the commenter's suggestion; however, CMS
does not possess the authority to create CPT codes, which are
established and maintained by the American Medical Association.
Furthermore, under the OPPS, we do not label APCs according to the type
of clinician delivering the service (that is, surgeon versus non-
surgeon) because such categorization is irrelevant to establishing
payment for hospital services billed under the OPPS. Rather, we provide
titles for clinical APCs that describe the actual hospital services
assigned to the APCs for which providers should report their hospital
costs and charges. In addition, as discussed above, we agree with the
majority of commenters who opposed the recognition of a single
combination code (that is, CPT code 61793) for the planning and
delivery of Cobalt 60-based SRS services, for reasons stated
previously, i.e. the administrative burden of maintaining duplicative
codes, the added complexity of attaching a modifier to the code for
instances when planning and delivery are not provided on the same date
of service because treatment does not proceed due to an unanticipated
problem, the confusion for coders and unreliable data that could
emanate from inconsistent coding schemes for different forms of SRS
(that is, Cobalt 60-based and LINAC-based SRS), and the nonspecificity
of the descriptor for CPT code 61793 which describes all forms of SRS
treatment delivery and makes no mention of SRS planning services.
Therefore, as discussed elsewhere in this section, for CY 2006, we are
discontinuing HCPCS code G0242 and recognizing existing CPT codes for
the reporting of Cobalt 60-based SRS planning, and moving HCPCS code
G0243 (Cobalt 60-based SRS treatment delivery) from New Technology APC
1528 to clinical APC 0127 based on a median cost of $7,296.
Comment: Several commenters recommended that we make HCPCS code
G0339 (Image guided, robotic, linear accelerator-based (LINAC) SRS
treatment delivery, complete session, first session of fractionated
treatment) a permanent code and continue to pay this service at the CY
2005 payment rate of $5,250. These commenters also recommended that we
eliminate HCPCS code G0340 (Image guided, robotic, linear accelerator-
based (LINAC) SRS treatment delivery, fractionated treatment, 2nd-5th
sessions) and instruct hospitals to report HCPCS code G0339 for all
fractionated treatment sessions, stating that the resource costs are
the same for each session regardless of the number of treatment
sessions that the patient receives.
Response: We disagree with the commenters' assertions that the
resource costs are the same for each session of image-guided, robotic
LINAC-based SRS treatment delivery regardless of the number of
treatment sessions that the patient receives. Based on CY 2004 claims
data, the median cost for HCPCS code G0339 ($4,917) was considerably
higher than the median cost for HCPCS code G0340 ($2,502), and does not
support the elimination of HCPCS code G0340 or its payment at a rate
comparable to the payment rate for HCPCS code G0339. As the SRS
treatment delivery G-codes are national Level II HCPCS codes that we
utilize for billing SRS treatments in the OPPS, we are uncertain what
changes the commenter would like us to make for the codes to be
``permanent.'' Therefore, for CY 2006, we are maintaining HCPCS code
G0339 in New Technology APC 1528, and HCPCS code G0340 in New
Technology APC 1525.
Comment: One commenter urged CMS to assign HCPCS codes G0251 and
G0340, for fractionated non-robotic and image-guided robotic LINAC-
based SRS respectively, to the same APC, contending that these
procedures involve similar resources and should be paid equally. In
contrast, another commenter asserted that image-guided robotic LINAC-
based SRS is substantially more resource intensive than non-robotic
LINAC-based SRS, and that CMS should maintain HCPCS code G0251 in a
separate APC from HCPCS code G0340 to distinguish their levels of
resource requirements.
Response: We began recognizing HCPCS code G0251 to describe
fractionated sessions of non-robotic LINAC-based SRS treatment delivery
in CY 2004, which yielded no single procedure claims data for HCPCS
code G0251 to substantiate a similarity or lack of similarity of its
resource costs in comparison with HCPCS code G0340 (fractionated, 2nd-
5th sessions, image-guided robotic LINAC-based SRS treatment delivery).
However, the large divergence in the median cost of $2,802 for the
complete session of non-robotic LINAC-based SRS treatment delivery
(HCPCS code G0173), in comparison with the median cost of $4,917 for
the complete and first fractionated sessions of image-guided robotic
LINAC-based SRS treatment delivery (HCPCS code G0339), indicates that
fractionated image-guided robotic LINAC-based SRS treatment delivery is
likely substantially more resource intensive than fractionated non-
robotic LINAC-based SRS treatment delivery. Therefore, for CY 2006, we
are maintaining HCPCS code G0251 in New Technology APC 1513 and HCPCS
code G0340 in New Technology APC 1525. However, for CY 2007, we will
reexamine our APC placement of HCPCS codes G0251 and G0340 based on CY
2005 hospital claims data.
Comment: One commenter to the November 15, 2004 final rule with
comment period (69 FR 65682) disagreed with CMS' statement that CPT
codes 0082T (Stereotactic body radiation, treatment delivery, one or
more treatment areas, per day) and
[[Page 68588]]
0083T (Stereotactic body radiation therapy, treatment management, per
day) are bundled into the current G-codes for SRS treatment delivery.
The commenter stated that stereotactic body radiation treatment
delivery and management are new technologies and, thus, are not
included in the current G-codes for SRS treatment delivery; however,
the commenter provided no cost data nor any explanation as to how
stereotactic body radiation treatment differs from the current
procedures described by the G-codes for SRS treatment delivery.
Instead, the commenter simply requested that CMS designate these new
tracking codes for stereotactic body radiation treatment delivery and
management as new technology services and assign these codes to a New
Technology APC.
Response: We disagree with the commenter's unsubstantiated
assertion that the current G-codes for SRS treatment delivery do not
already describe or include some services that could also be identified
as stereotactic body radiation treatment delivery and management
described by CPT codes 0082T and 0083T, respectively. Furthermore, we
received no evidence to support the commenter's assertion that these
services represent new technologies that could not be represented in
our hospital claims data. Therefore, for CY 2006, we are maintaining
CPT code 0082T with a status indicator of ``B'' because we consider an
alternate code to be available for billing this service under the OPPS.
Likewise, for CY 2006, we are maintaining CPT code 0083T with a status
indicator of ``N'', indicating that the charges for this service are
packaged into the payment for other services paid separately under the
OPPS.
D. APC--Specific Policies
We received many comments on our proposed changes to specific
groups of services as discussed in the CY 2006 OPPS proposed rule
preamble and displayed in Addendum B. We have grouped these comments,
and our responses, into five general clinical categories as shown
below.
We received one comment that generally addresses our APC assignment
methodology.
Comment: One commenter objected to the placement of codes for
unlisted services in the lowest APC that is clinically appropriate and
to the lack of discussion of this policy in the CY 2006 OPPS proposed
rule. The commenter asked that CMS examine claims data and match
unlisted services to the diagnosis to determine if there is a more
appropriate APC than the lowest level.
Response: We discussed this policy in the CY 2005 OPPS proposed
rule which we published on August 16, 2004 (69 FR 50448), and we made
our existing policy final in the November 15, 2004 final rule (69 FR
65682). We proposed no changes to this policy in the CY 2006 OPPS
proposed rule (which we published on July 25, 2005 (70 FR 42674)) and,
therefore, we have not changed the policy. The HCPCS codes for unlisted
services should be used only if there is no existing code that can be
used alone or with existing modifiers to report the service that was
furnished. We believe that their use should be very rare. We do not
believe that examination of the diagnoses on claims for unlisted
procedures would enable us to properly place the codes into APCs
because there are so many different types of services at different
levels of resource use that could apply to a single diagnosis. There is
a 2-year lag between the year of hospital claims data and the OPPS
payment rates that are established based on the data. New procedure-
specific HCPCS codes are developed on an annual basis, and there are
continuous changes in procedures for many diagnoses as medical practice
evolves. Therefore, we have no confidence that the array of unlisted
services billed by hospitals, and by implication their median costs, in
a given year for patients with certain diagnoses would necessarily have
any relationship to unlisted services, and their median costs, billed 2
years later for patients with the same diagnoses. Moreover, placing
unlisted services in the lowest level APC encourages use of existing
codes where it is possible and also encourages development of new HCPCS
codes for services for which codes do not exist.
1. Cardiac and Vascular Procedures
a. Acoustic Heart Sound Recording and Analysis
Comment: One commenter requested that CMS change the status
indicator for CPT code 0069T (Acoustic heart sound recording and
computer analysis only). The commenter requested that we assign the
procedure to APC 0099 with an ``S'' status indicator rather than ``N,''
as is currently assigned to CPT code 0069T. The commenter stated that
the test's current status as a packaged procedure results in
inequitable payment to the hospital. They stated that the cost of an
EKG with the acoustic heart sounds recording is $55 whereas, the cost
of an EKG without is $31, and that because we have packaged the
procedure, the hospital is underpaid by $24 for each test it performs.
Response: It is our understanding that the acoustic heart sound
recording and analysis is intended for a specific, targeted group of
patients to enhance the provider's ability to diagnose heart failure.
The technology, as described by CPT code 0069T, always is performed in
conjunction with an EKG and as such is ideal for packaging. It is the
hospitals responsibility to increase their charges to reflect the
additional costs for those EKGs that include the acoustic heart sound
recording. If the hospital uses the test according to the manufacturer
guidelines, the costs will be distributed over the large number of EKGs
that are performed in the hospital outpatient department and, over
time, the additional costs may be recognized in the OPPS rates as
increased median costs for EKGs in general.
Comment: One commenter requested that CPT code 0069T (Acoustic
heart sound recording and computer analysis only) become separately
payable. The commenter was concerned that CMS interpreted the code to
be an add-on code to an EKG procedure. The commenter clarified that CPT
code 0069T is often used as a stand-alone procedure, provided without
an EKG procedure.
Response: We are accepting the APC Panel's recommendations that CPT
code 0069T remain packaged for CY 2006. The Panel reviewed this code
and determined it to be an add-on code to an electrocardiography
service, as indicated by the American Medical Association's descriptor
of this code. In addition, we are concerned that there may be
unnecessary utilization of this procedure if it is separately payable
because it is an add-on code to EKG services, for which there were
almost 6 million claims under the OPPS in CY 2004. Lastly, we continue
to believe that this service is a minor procedure that may be performed
quickly accompanied by an EKG and likely other separately payable
services, and thus is appropriately packaged.
b. Cardiac Electrophysiologic Services (APC 0087)
Comment: Commenters objected to the decline in proposed payment
rate for APC 0087 from prior years. They also objected to what they
view as a two times violation in APC 0087 and asked that we move
electrophysiologic ``mapping'' CPT codes 93609, 93613, and 93631 to APC
0086 because the CPT code median costs for these codes are much higher
than the median costs for the other codes in APC 0087. They state that
because ``mapping'' CPT codes 93609, 93613, and 93631 are billed with
other cardiac electrophysiologic services
[[Page 68589]]
already assigned to APC 0086, then these ``mapping'' services should
also be assigned to the same clinical APC. They also asked that we use
only claims that contain the device codes required for these CPT codes
in setting the median cost for the APC into which CMS places these
codes.
Response: We disagree that there is a 2 times violation, under our
rules, in APC 0087. The law permits an exception to the two times rule
for ``low volume items and services.'' We define any service that does
not meet our test as a ``significant service'' to be a ``low volume
item or service.'' A significant service is a service with a single
bill frequency greater than 1,000 (which no services in APC 0087 meet)
or a service with a single bill frequency greater than 99 and more than
2 percent of the single bills (which no services in APC 0087 meet).
Because APC 0087 does not have any codes which meet the test of being
significant, all of the codes in APC 0087 are ``low volume'' under our
definition, and there is no two times violation.
Notwithstanding the absence of a 2 times violation under our rules,
we acknowledge the commenter's concerns, and we will ask for the APC
Panel's views regarding the assignment of these codes to APC 0087 in
preparation for the CY 2007 OPPS update. We also recognize that, for
many of the procedures assigned to APC 0087, multiple procedure claims
are the norm. We will also work with the APC Panel to develop potential
strategies which could enable us to use more claims for rate setting
for these cardiac electrophysiologic services. We disagree, however,
that because the electrophysiology ``mapping'' codes are performed with
other cardiac electrophysiology studies, the clinical and resource
characteristics of the ``mapping'' procedures necessarily are similar
to the base services provided.
See section IV.A. for our discussion of adjustments to median costs
for device-dependent APCs for the CY 2006 OPPS. See Table 16 for the
adjusted median cost for APC 0087 for the CY 2006 OPPS.
c. Cardioverter-Defibrillator Implantation (APC 0107, 0108)
The median costs for APC 0107 (Implantation of Cardioverter-
Defibrillator) and APC 0108 (Insertion/Replacement/Repair of
Cardioverter-Defibrillator Leads and Insertion of Cardioverter-
Defibrillator) have been adjusted each year since CY 2003 when pass-
through payment expired for cardioverter-defibrillators, because the
unadjusted medians have differed significantly from the prior year's
payment medians. Moreover, because we use single procedure claims to
set the median costs, the median costs for these APCs have always been
set on a relatively small number of claims as compared to the total
frequency of claims for the services under the OPPS. For example, for
the CY 2006 OPPS proposed rule, the unadjusted median cost for APC 0107
was set based on 445 single procedure claims, which is 5.5 percent of
the 8,073 claims on which a procedure code in the APC was billed.
Similarly, the unadjusted median cost for APC 0108 was set based on 520
single procedure claims, which is 8.7 percent of the 6,003 claims on
which a procedure code in the APC was billed. Commenters have
frequently told us that using the single procedure median costs for
these APCs does not accurately reflect the costs of the procedures
because claims from typical clinical circumstances involving multiple
procedures, which constitute the majority of claims under these APCs,
are not used to establish the medians.
At the February 2005 APC Panel meeting, the APC Panel recommended
that CMS package CPT codes 93640 and 93641 (electrophysiologic
evaluation at time of initial implantation or replacement of
cardioverter-defibrillator leads). The APC Panel recommended that we
always package the costs for these codes because the definitions of the
codes state that these evaluations are done at the time of lead
implantation. Therefore, CPT codes 93640 and 93641 would never be
correctly reported without a code in APC 0107 or APC 0108 also being
reported. In addition, when a service assigned to APC 0107 or APC 0108
is provided, we would expect that CPT codes 93640 or 93641 for
electrophysiologic evaluation and testing would also be performed
frequently, and CY 2004 claims data for services in APC 0107 and APC
0108 confirm this. The APC Panel believed that packaging the costs of
CPT codes 93640 and 93641 would result in more single bills available
for setting the median costs for APC 0107 and APC 0108, and thus would
likely yield more appropriate median costs for those APCs. Those
medians would then include the costs of the electrophysiologic testing
commonly performed at the time of the implantable cardioverter-
defibrillator (ICD) insertion.
The APC Panel further recommended that CMS treat CPT code 33241
(Subcutaneous removal of cardioverter-defibrillator) as a bypass code
when the code appeared on the same claims with services assigned to APC
0107 or APC 0108. The APC Panel recommended bypassing charges for this
code only when it appeared on the same claim with codes in APC 0107 or
APC 0108, because when a cardioverter defibrillator (ICD) is removed
and replaced in the same operative session, it is appropriate to
attribute all of the packaged costs on the claim to the implantation of
the device rather than to the removal of the device. The line costs for
CPT code 33241 that are removed from the claims in this case would be
discarded and would not be used to set the median cost for APC 0105
(the APC in which the code is located).
We modeled the median costs that would be calculated for APCs 0107
and 0108, if we were to make the changes recommended by the APC Panel
for these APCs, under four possible scenarios: (1) The cardioverter-
defibrillator device is inserted without removal or testing; (2) the
device is inserted and tested with no removal; (3) the device is
removed and inserted but not tested; and (4) the device is removed,
inserted, and tested. For each unique scenario, we then compared the
sum of the unadjusted median costs, the sum of the proposed adjusted
median costs and the sum of the costs that we modeled using the APC
Panel recommendations. These results were shown in the proposed rule in
Tables 16 and 17.
We proposed to set the medians for these APCs at 85 percent of
their CY 2005 payment medians and based our modeling of the scalar and
the impact analysis on that proposal, although we believed that the APC
Panel recommendations have significant merit, particularly when we move
to complete reliance on claims data in updating the OPPS for CY 2007.
Although we proposed to adjust the median costs for these APCs in the
same manner as other device-dependent APCs, we stated in the proposed
rule that we will consider, based on the public comments, whether it
would be appropriate to apply the multiple procedure claims methodology
to these APCs for the CY 2006 OPPS. We specifically invited public
comments on the APC Panel recommendations regarding packaging and
bypassing services frequently performed with procedures assigned to APC
0107 and APC 0108, with the goal of increasing single bills available
for rate-setting in order to improve the accuracy of median costs based
upon hospital claims.
We received many public comments concerning our proposal.
Comment: Many commenters stated that the payments CMS proposed for
APCs 0107 and 0108 are inadequate to cover the acquisition costs of the
[[Page 68590]]
devices, much less the full hospital costs of providing the services.
They asserted that the proposed payments for APCs 0107 and 0108 are
only 84 percent of the cost of the device alone, leaving the hospital
with an out of pocket loss for the device and no payment for the
service costs. They indicated that if the proposed payment rates are
made final, APCs 0107 and 0108 will have incurred reductions of 20.5
percent and 29.4 percent respectively since CY 2002. They urged that
CMS use external data for the device portion of the median cost or at a
minimum, accept the APC Panel recommendation to set the payment rate
for APCs 0107 and 0108 at no less than the CY 2005 OPPS payment rate
updated by the full market basket increase. They say that beneficiary
access to care will be inhibited by continued inadequate payments for
these services.
Response: We have considered the comments and, as proposed, will
adjust the medians for the services in APCs 0107 and 0108 under the
same policy being applied to other device-dependent APCs. See section
IV.A. of this preamble for our discussion of the use of external data,
and requests to update the CY 2005 OPPS median costs and payment rates
by the market basket for purposes of setting the CY 2006 OPPS payments.
Also see section IV. A. of this preamble for our discussion of
adjustments to median costs for device-dependent APCs. See Table 16 for
the CY 2006 adjusted median costs for device-dependent APCs, including
APCs 0107 and 0108.
Comment: One commenter supported the recommendations of the APC
Panel that CMS package CPT codes 93640 and 93641 (electrophysiologic
evaluation at time of initial implantation or replacement of
cardioverter-defibrillator) and treat CPT code 33241 (subcutaneous
removal of cardioverter-defibrillator) as a bypass code when it appears
on claims with services assigned to APCs 0107 or 0108. The commenter
believed that these changes would result in a more robust set of claims
to be used to set the median costs for APCs 0107 and 0108. Other
commenters indicate that with or without these changes, the increased
volume of claims is unlikely to result in adequate median costs for
these procedures.
Response: We believe that it may be appropriate to package CPT
codes 93640 and 93641 into the services assigned to APCs 0107 and 0108,
and that it may be appropriate to bypass CPT code 33241 only when it
appears on the same claim with codes in APCs 0107 or 0108, and we will
explore doing this in the future. The APC Data Subcommittee will
continue to advise us on efforts to increase the amount of usable
claims data for services that very frequently are provided along with
other separately payable procedures.
As noted above, consistent with payment for other device-dependent
APCs, the CY 2006 OPPS payment for APCs 0107 and 0108 is set based on
90 percent of the CY 2005 OPPS adjusted median cost. See Table 16 for a
complete listing of device-dependent APCs and the adjusted median costs
on which the payment rates are based.
d. Endovenous Ablation (APC 0092)
Comment: One commenter addressed our final rule (November 15, 2004)
regarding the APC assignment of new CPT codes 36475 (Endovenous
radiofrequency ablation, first vein) and 36476 (Endovenous
radiofrequency ablation, vein add-on). The commenter asserted that the
assignment to APC 0092 (Level I Vascular Ligation) was inappropriate
and results in payment that is inadequate to cover the costs of the
procedure. The commenter recommended creation of two new APCs, Level I
and Level II endovenous ablation procedures, and advocated assignment
of both CPT codes 36475 and 36476 to the higher of the two levels. The
commenter stated that radiofrequency (RF) ablation procedures are quite
different from other vein stripping methods and require substantially
more operating room time and hospital resources than do vein stripping
or endovenous laser procedures.
Further, the commenter stated that our assignment of CPT codes
36475 and 36476 to APC 0092 was inconsistent with the cost data CMS
analyzed for making pass-through payments for the ablation catheter
(HCPCS code C1888, which expires December 31, 2005). The commenter
asserted that we failed to add the costs for the ablation device into
the procedure when we made the assignment to APC 0092. The commenter
also stated that hospitals and the manufacturer have submitted cost
information and charge data to CMS that support assignment of the
procedures to an APC with a payment rate of about $2,500.
We received one comment, from the same commenter, on our proposed
rule. The commenters stated that the RF ablation procedures are more
like those assigned to APC 0086, Ablate Heart Dysrythm Focus, than
those in APC 0092 (Level I Vascular Ligation). Similar to its comment
on the final rule, the commenter recommended that CMS reassign CPT
codes 36475 and 36476 to a new APC with a payment amount of
approximately $2,800. The commenter also recommended that we assign new
CPT codes 36478 (Endovenous ablation therapy of incompetent vein,
extremity, inclusive of all imaging guidance and monitoring,
percutaneous, laser; first vein treated) and 36479 (Endovenous ablation
therapy of incompetent vein, extremity, inclusive of all imaging
guidance and monitoring, percutaneous, laser; second and subsequent
veins treated in a single extremity, each through separate access
sites) to the lower level of the two new endovascular ablation
procedure APCs that they requested, with a payment rate of
approximately $2,300.
In its proposed rule comments, the commenter provided detailed
information about the costs of the endovenous ablation procedures from
the practice expense cost inputs for the Medicare Physician Fee
Schedule. The commenter based its recommendations for OPPS payment on
those data and provided prices for the RF ablation catheter ($680) and
the laser fiber kit ($325), as well as for the capital equipment for
each procedure type.
Response: Prior to the CY 2005 implementation of CPT codes 36475
and 36476 for radiofrequency ablation and CPT codes 36478 and 36479 for
laser ablation, the radiofrequency ablation device used in the
endovenous ablation procedure was coded using HCPCS code C1888
(Catheter, ablation, non-cardiac, endovascular) and was separately paid
as a pass-through until December 31, 2004 when the pass-through status
expired.
We received a significant number of bills for HCPCS code C1888
(1787 units) in CY 2004 and considered the median cost ($636) based on
those bills, along with clinical information and historical hospital
claims data for other OPPS services in making the APC assignments of
the new CPT codes. We assigned all RF and laser endovenous ablation
procedures for the first vein and second and subsequent veins to APC
0092, status indicator ``T,'' with other vein procedures and a CY 2005
payment rate of $1,538. However, in response to the comment we
reconsidered our decision. While there are no two times rule violations
for APCs 0092 and 0091 for CY 2006, the median costs for individual
procedures assigned to those APCs significantly overlap. Nevertheless,
APC 0091 has a somewhat higher payment rate for CY 2006. Given the
costs for the disposables and other resources used in delivery of both
laser and RF endovenous ablation services, we determined that
assignment to the higher paying of these APCs was a more
[[Page 68591]]
accurate placement than APC 0092 as we proposed. Therefore, for CY
2006, CPT codes 36475, 36476, 36478, and 36479 will be assigned to APC
0091. The ``T'' status of the APC should ensure appropriate payment
when ablation of more than one vein is performed in an operative
session. For CY 2007 we will have hospital claims data for those codes
for the first time, and, with the assistance of the APC Panel, we will
reconsider the APC assignments for them and the other procedures
assigned to APCs 0091 and 0092 because we believe that for procedures
assigned to APCs 0091 and 0092 CY 2007 APC reconfiguration may be
advisable.
e. External Counterpulsation Therapy (APC 0678)
Comment: One commenter submitted comments about external
counterpulsation therapy (EECP, HCPCS code G0166). The commenter
requested that we base the CY 2006 payment for this procedure on the
OPPS relative weight for the procedure from CY 2005. The commenter was
concerned because the OPPS rate for this procedure has decreased every
year since CY 2000, and they believed that the lower payments might
result in diminished beneficiary access to the therapy. The commenter
believed that the low costs in the CMS data may be due to hospitals
filing inaccurate claims.
Response: Although the OPPS payment rate for EECP has decreased
every year since CY 2000 as noted by the commenter, we are committed to
relying on our hospital claims data for this APC. In addition, we note
that the total numbers of OPPS claims for this service have increased
over the past several years, from 26,836 in CY 2002, to 37,568 in CY
2003, and again to 40,362 in our most recent claims data for CY 2004.
We have no reason to believe that Medicare beneficiaries are having
trouble accessing this therapy. Hospitals have been billing Medicare
for EECP since CY 2000 and so should be filing accurate bills. The
procedure is in an APC that has no other procedures that can affect its
median, and the median cost for the CY 2006 OPPS is based on more than
38,000 single claims. Therefore, we will finalize our proposed CY 2006
APC assignment and payment rate for APC 0678, based on our standard
OPPS methodology.
f. Intracardiac Echocardiography (APC 0670)
Comment: One comment submitted comments about the APC assignment
for CPT code 93662 (Intracardiac echocardiography during therapeutic/
diagnostic intervention, including imaging supervision and
interpretation). The commenter objected to the procedure's assignment
to APC 0670 (Level II Intravascular and Intracardiac Ultrasound and
Flow Reserve) for several reasons. First among those reasons was that
the procedure should not be assigned to the same APC as is CPT code
92978, Intravascular ultrasound (coronary vessel or graft) during
diagnostic evaluation and/or therapeutic intervention including imaging
supervision, interpretation and report. The commenter stated that the
two procedures are dissimilar clinically and with respect to resource
consumption. The differences between the two procedures listed by the
commenter were: the intracardiac echocardiography (ICE) procedure can
be used to image the entire heart rather than just a coronary vessel as
does the intravascular ultrasound (IVUS) procedure; ICE is closely
associated with electrophysiology and interventional cardiology
procedures; IVUS is an imaging technique used as an adjunct to
coronary/peripheral stent deployment; IVUS catheters cost from $500 to
$700 whereas ICE catheters cost from $900 to $2,800; and the mean and
median costs for the procedures are very different.
Response: The ICE procedure is a CPT code ``add-on,'' and so
normally is not reported alone on OPPS bills. For that reason, only 10
of the 541 claims for the procedure were single claims that we could
use to calculate its procedure-specific median cost of $1,815. In fact,
all four of the procedures assigned to APC 0670 are ``add-on'' codes,
and two of the procedures had no single claims for CY 2004 because one
of the codes, CPT code 31620 (Endobronchial ultrasound (EBUS) during
bronchoscopic diagnostic or therapeutic intervention(s)), was new for
CY 2005 and CPT code 93571 (Intravascular Doppler velocity and/or
pressure derived coronary flow reserve measurement (coronary vessel or
graft) during coronary angiography including pharmacologically induced
stress; initial vessel) was packaged under the OPPS in CY 2004 and when
unpackaged for CY 2005, no single claims were available. The fourth
code in APC 0670, CPT code 92978, the IVUS procedure, had a median cost
of $1,505 and 115 single claims and, therefore, had a disproportionate
influence on the median cost for the APC.
We do not agree that there are no significant clinical similarities
among the procedures assigned to APC 0670. These similarities include
their ``add-on'' status and their use of intravascular or
intrabronchial catheters or wires with complex capabilities to provide
clinical information, such as images or flow data. The hospital
resources required for all of these services are highly related to the
costs of the technologies used for the procedures. In general, our
hospital claims data are quite consistent with assignment of CPT code
93662 to APC 0670 with a median cost of $1,505 for CY 2006, along with
the other services previously described. We note that our CY 2004 total
claims volume for CPT code 93662 almost doubled between CY 2003 and CY
2004, providing no evidence that Medicare beneficiaries are having
trouble accessing this service.
As discussed elsewhere in this preamble, we are working on
alternative strategies for determining the costs for procedures that
are reported as CPT ``add-on'' codes. When we are better able to
identify those costs, we will reevaluate the assignment of the ICE and
IVUS procedures. At this time, however, we believe that APC 0670 is the
most appropriate assignment for CPT codes 93662 and 92978.
g. Percutaneous Thrombectomy and Thrombolysis (APC 0676)
Comment: One commenter submitted comments regarding the APC
assignment for CPT code 92973, Percutaneous transluminal coronary
thrombectomy and CPT code 37195 (Thrombolysis, cerebral, by intravenous
infusion). The commenter stated that the payment rate for APC 0676
(Thrombolysis and Thrombectomy) was based largely on only one of the
procedures assigned to the APC, CPT code 36550 (Declotting by
thrombolytic agent of implanted vascular access device or catheter),
and that it was inappropriately low for CPT codes 92973 and 37195. The
commenter stated that the procedures coded by CPT codes 92973 and 37195
require a mechanical device costing hundreds of dollars or significant
quantities of expensive lytic agents, respectively. The comment also
suggested that the difficulty that CMS has in obtaining accurate cost
data for these procedures is due to the fact that they are rarely
reported as single claims, and that next year there will be new codes
for percutaneous thrombectomy that will help to remedy that situation.
Response: For CY 2006, we proposed to retain CPT code 92973 in APC
0676 and to remove CPT code 37195 from the inpatient list and assign it
to APC 0676 as well. The median cost for each of these procedures was
based on one single claim each, out of 149 and 28 total claims
respectively. The very low volume of single claims is expected for
these two procedures because CPT code
[[Page 68592]]
92973 is an ``add-on'' code and would not be expected to be reported
alone, and CPT code 37195 was on the inpatient list in CY 2004, and
therefore, we do not have many outpatient hospital claims for it.
The commenter's point that the APC 0676 payment rate was based
mainly on one of the other procedures assigned to that APC is correct.
The procedure coded with CPT code 36550 (Declotting by thrombolytic
agent of implanted vascular access device or catheter) had a very high
volume of single claims with a procedure-specific median cost of $128
so that its claims disproportionately influenced the APC median cost of
$135. There were 5,099 single claims for that procedure and the next
highest volume of single claims in APC 0676 was only 439 claims for CPT
code 37201 (Transcatheter therapy, infusion for thrombolysis other than
coronary).
While we acknowledge the small number of claims for CPT code 92973,
we agree with the commenter than its continued assignment to APC 0676
could lead to significant underpayment for this service that utilizes a
costly catheter. Therefore, we will reassign CPT code 92973 to APC 0088
(Thrombectomy) with an APC median of $2,171 for CY 2006, where other
procedures that are more clinically and resource coherent with CPT code
92973 reside. As this service is an ``add-on'' code to other surgical
procedures and is assigned status indicator ``T,'' we expect that its
payment rate will be reduced by 50 percent when it is correctly billed
with other surgical procedures.
With respect to CPT code 37195, we will finalize its assignment to
APC 0676 for CY 2006. We expect that the lytic drugs that will be
administered to a patient during this procedure will generally be
separately payable under the OPPS, as well as some of the other
services that typically will be provided to a patient receiving
cerebral thrombolysis by intravenous infusion. While we expect that
performance of this procedure in the hospital outpatient setting will
remain rare, we believe that APC 0676 should make appropriate payment
for CPT code 37195 for CY 2006. As always, we will examine the costs
from hospital claims as new data become available to ensure that the
OPPS payment is appropriate.
h. Coronary Flow Reserve (APCs 0416 and 0670)
Comment: One commenter requested that CMS make permanent the
revised APC 0670 (Level II Intravascular and Intracardiac Ultrasound
and Flow Reserve) and new APC 0416 (Level I Intravascular and
Intracardiac Ultrasound and Flow Reserve), as presented in the November
15, 2004 final rule. In addition, the commenter requested that we
reactivate discontinued HCPCS code C3556 which was used previously for
three specific brands of sensors, including guidewire-mounted coronary
flow reserve sensors. The commenter believed that the requirement to
report HCPCS device codes for device-dependent APCs would result in
inaccurate cost information for the flow reserve sensors because these
devices are currently coded using HCPCS code C1769 which is also used
to code all types of guidewires.
Response: We appreciate the comment concerning these new and
revised APCs as we published them in the November 15, 2004 final rule.
We have made those changes final.
Beginning April 1, 2001, many manufacturer and device-specific
HCPCS codes established for device pass-through payment purposes were
discontinued in favor of more general codes to describe categories of
devices. HCPCS code C3556 was discontinued as of April 1, 2001 as part
of that action. The guidewire-mounted coronary flow reserve sensors
previously reported with HCPCS code C3556 were cross-walked to HCPCS
code C1769, which was established for coding guidewires. The Medicare,
Medicaid and SCHIP Benefits Improvement and Protection Act (BIPA) of
2000 required us to establish categories, or types, of devices and no
longer create codes to describe each device specifically. Further, we
do not create new device codes unless one is needed to support accurate
payment for devices that meet our criteria for transitional pass-
through payment. There is no such need in this case as the guidewire-
mounted coronary flow reserve sensor received its full period of device
pass-through payments.
We do not believe that use of HCPCS code C1769 will result in
inaccurate cost data for coronary flow reserve measurement services.
Reporting the device code on claims for device-dependent procedures is
meant to ensure that the bills upon which we rely for calculation of
the median costs include the device costs integral to the procedures.
We base this policy on our belief that if a hospital includes the code
for the device on the bill, even though there is no separate payment
for the device, the bill is more likely to be an accurate and complete
report of hospital charges (and thereby, costs). We expect that
hospitals reporting the required guidewire device C-code along with a
coronary flow reserve measurement service will provide an appropriate
charge for the device used in the procedure.
The new requirement for device coding is one technique that we
believe will help us to address the ongoing problem of hospitals
inadvertently failing to accurately and fully bill the charges for all
hospital resources utilized to perform procedures. By requiring that
the device code be on the claim, we are more confident that the device
costs have been included in the hospital's bill and that we will
capture accurate costs for rate setting for the procedure as a whole.
i. Vascular Access Procedures (APCs 0621, 0622, and 0623)
Many of the codes that currently describe vascular access
procedures were new in the CY 2004 version of CPT and were assigned
into APC groups by crosswalking the newly created CPT codes to the
deleted codes' APC assignments. Although the new codes were implemented
in January 2004, because of the delay between a bill being submitted to
Medicare and when the bill data are viable for analysis, we did not
have cost and utilization data for the new codes available for analysis
until this year in preparation for the CY 2006 OPPS.
Since those original APC assignments were made, we have received
requests from the public for specific APC assignment changes. We were
reluctant to make changes without data to support reassignments and,
therefore, made few changes to those original APC assignments.
As an outcome of an analysis of procedure-specific median costs and
2 times rule violations in preparation for the CY 2006 update of the
OPPS, for the proposed rule we developed a new APC configuration for
vascular access procedure codes and several other related codes. The
proposed new assignments were supported by CY 2004 hospital claims data
and are based on median cost and clinical considerations.
Thus, for CY 2006 we proposed to reassign many of the CPT codes
that are currently in the following APCs:
APC 0032 (Insertion of Central Venous/Arterial Catheter)
APC 0109 (Removal of Implanted Devices)
APC 0115 (Cannula/Access Device Procedures)
APC 0119 (Implantation of Infusion Pump)
APC 0124 (Revision of Implanted Infusion Pump)
APC 0187 (Miscellaneous Placement/Repositioning)
The configuration that we proposed placed all of the procedures
currently
[[Page 68593]]
assigned to APC 0187 into more clinically appropriate APCs. We also
proposed to reassign all of the vascular access procedure codes
currently assigned to any of the identified APCs to existing or newly
reconfigured clinical APCs to create more clinical and median cost
homogeneity. As a result of the proposed reassignments, those clinical
APCs were comprised of a different mix of codes than is currently the
case for the CY 2005 OPPS. There were no codes assigned to APC 0187
because the only procedures that remained in APC 0187 after reassigning
the vascular access procedures as we proposed were CPT code 75940 (X-
ray placement of vein filter) and CPT code 76095 (Stereotactic breast
biopsy), which we reassigned to more clinically appropriate APCs. We
proposed to reassign CPT code 75940 to APC 0297 (Level II Therapeutic
Radiologic Procedures) and CPT code 76095 to APC 0264 (Level II
Miscellaneous Radiology Procedures).
We proposed to create three new clinical APCs, APC 0621 (Level I
Vascular Access Codes), APC 0622 (Level II Vascular Access Codes), and
APC 0623 (Level III Vascular Access Codes) and assign procedures to
each of these based on median cost and clinical homogeneity. We also
proposed to rename APCs 0109 and 0115 as follows: APC 0109 (Removal of
Implanted Devices); and APC 0115 (Cannula/Access Device Procedures).
We presented this proposal to the APC Panel at its February 2005
meeting. The APC Panel was supportive of the proposed reassignments and
recommended that we make these changes. Therefore, for the stated
reasons we proposed the APC modifications for CY 2006 OPPS as
summarized in Table 13 of the proposed rule (70 FR 42713).
We received a few comments on our proposal.
Comment: All of the comments were supportive of our reconfiguration
of the APCs and encouraged us to make the proposal final.
Response: We appreciate the commenters' support.
Therefore, we are finalizing our proposal without modification for
FY 2006.
BILLING CODE 4120-01-P
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[GRAPHIC] [TIFF OMITTED] TR10NO05.016
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BILLING CODE 4120-01-C
2. Radiology, Radiation Oncology, and Nuclear Medicine
a. Angiography and Venography (APCs 0279, 0280, and 0668)
Comment: One commenter supported our proposal to reassign CPT code
75790 (Angiography, arteriovenous shunt, radiological supervision and
interpretation) from APC 0281 (Venography of Extremity) to APC 0279
(Level II Angiography and Venography except Extremity). However, this
same commenter objected to our proposal to move CPT codes 75820
(Venography, extremity, unilateral, radiological supervision and
interpretation) and 75822 (Venography, extremity, unilateral,
radiological supervision and interpretation) from APC 0281 (Venography
of Extremity) to APC 0668 (Level I Angiography and Venography except
Extremity). The commenter contended that CPT codes 75790, 75820, and
75822 share similar clinical characteristics and resource requirements
and, therefore, should be mapped to the same APC 0279. For instance,
the commenter stated that all three services require the use of
guidewires, catheters, local anesthetic, and contrast. Furthermore, the
commenter asserted that CPT code 75822 involves a bilateral procedure
which requires much higher resource costs than other services assigned
to APC 0668. Lastly, the commenter stated that CPT codes 75790, 75820,
and 75822 share similar clinical characteristics with CPT code 75658
(Angiography, brachial, retrograde, radiological supervision and
interpretation), which currently resides in APC 0279, differing only
with respect to whether a vein is accessed versus an artery in an
extremity. The commenter urged that CMS reassign CPT codes 75790,
75820, and 75822 to APC 0279 for CY 2006. In addition, the commenter
recommended that CMS modify the title of APC 0668 to exclude language
referring to extremities based on the commenter's belief that none of
the other CPT codes assigned to APC 0668 relate to extremities.
Response: Based on our analysis of our CY 2004 claims data we
disagree with the commenter that services described by CPT codes 75790,
75820, and 75822 require similar hospital resources. CPT code 75790 has
a median cost of $548, based on over 18,000 single claims from CY 2004,
and is assigned to APC 0279 (Level II Angiography and Venography),
which has a median cost of $517. We believe that this APC appropriately
reflects the clinical and hospital resource characteristics of CPT code
75790 and provides appropriate payment to hospitals for this service.
In contrast, CPT code 75720 has a median cost of only $258, based
on almost 3,500 single claims that represent over half of the total
claims for the service. Similarly, CPT code 75722 has a median cost of
$349, based on over 2,400 claims that represent more than half of the
total claims for the service. Both of these procedures are assigned to
APC 0668 which has a median cost of $375. We believe that APC 0668
appropriately reflects the clinical and hospital resource
characteristics of both of these procedures. Thus, although these three
codes were assigned to the same clinical APC 0281 for CY 2005, when we
eliminated that APC and reassigned the three services, we were able to
place them in such a way as to provide more accurate payments for each
of the services.
We appreciate the commenter's drawing our attention to the phrase
``Except Extremity'' that remained in the APC titles for APCs 0668,
0279, and 0280 after we eliminated the CY 2005 APC for extremity
venography services. For CY 2006, we have removed the phrase ``Except
Extremity'' from the APC title for APCs 0668, 0279, and 0280, so they
are now renamed Levels I, II, and III Angiography and Venography,
respectively.
b. Brachytherapy (APCs 0312, 0313, and 0651)
Comment: Commenters objected to the proposed reduction in the
payment rates for APCs 0312, 0313 and 0651 for the CY 2006 OPPS. They
indicated that the reductions could result in decreased access to care.
They recommended that CMS use only claims on which a brachythearpy
source appears with the procedure code, which they describe as
``correctly coded'' claims, as the basis for the median cost
calculations for these APCs. They indicated that using only claims on
which the brachytherapy source code was billed results in median costs
that are higher than the median costs calculated using all single
procedure claims. At its August 2005 meeting, the APC Panel recommended
that we evaluate this proposal. The commenters also asked that CMS
expand the adjustment proposed for selected device dependent APCs to
APCs 0312, 0313 and 0651. They asked that CMS consider alternative
methodologies to utilize single and multiple procedure claims for rate
setting purposes so that more claims could be used. They also asked
that CMS use external proprietary and confidential data to determine
median costs for rate-setting. They said that because brachytherapy
sources are required to furnish these services, they should be treated
like device dependent APCs with regard to adjustment of medians and
required editing for the presence of sources on the claims.
Response: We have not accepted the commenters' recommendations to
use external data for the reasons we cite in the discussion of external
data in section II. of this preamble. Moreover, we have not accepted
the recommendation that we use only claims that contain a brachytherapy
source on the claim to calculate the median costs for APCs 0312, 0313,
and 0651 because we believe that the presence of a source on the claim
is not relevant, since sources are paid separately. While the median
costs presented by the commenters based on claims that contain sources
resulted in higher median costs, we do not see a valid reason to limit
the claims to claims with sources because the presence of the source is
not relevant to the median cost of the procedural APC. We have no
reason to believe that the claims without sources on the claim do not
contain the full charges for the procedural services furnished. We have
applied adjustments to the median costs for device dependent APCs for
CY 2006 because of the difficulties in ensuring device charges are
fully reflected on claims for these services, thus allowing appropriate
packaging of the device costs into the APC payments. This rationale
does not apply to the APCs for application of brachytherapy sources, so
we have not applied the device dependent APC median adjustment policy
to APCs 0312, 0313, and 0651 for CY 2006.
We disagree that these services should be treated like device
dependent APCs solely because they require brachytherapy sources. The
critical distinction is that the APC payment for device dependent APCs
includes payment for the packaged devices, while payment for these
brachytherapy source application APCs is exclusive of payment for the
sources, which are paid on the basis of charges reduced to cost. The
editing for the presence of key devices on claims for services assigned
device dependent APCs is not ``correct coding'' editing. Instead, the
edit is made to maximize the likelihood that the charge for the
principle device required to perform the service is included on the
claim so that we will capture the cost of the device in setting the
median cost for the APC.
Although the brachytherapy procedure comments have largely
[[Page 68596]]
focused on the payment for CPT code 77778, the application of the
brachytherapy sources, we note that all the related procedures, such as
needle or catheter use and placement, must be considered for a full
analysis of payment for brachytherapy services. The brachytherapy
source application service is but one component of the entire
procedure. The hospital also bills for the placement of the needles or
catheters, the imaging and planning services, and is paid separately
for the sources at charges reduced to costs.
Because of the particularly large drop in median cost from the
median based on CY 2003 data compared to the median cost based on CY
2004 claims data for APC 0651, we extensively reviewed the cost of APC
0651, which is most commonly billed for the provision of interstitial
prostate brachytherapy and frequently appears on the same claim with
CPT code 55859, the code for placement of needles or catheters into the
prostate. Contrary to the commenters' belief that ``correctly coded''
claims for CPT code 77778 also contain brachytherapy sources, in most
cases of prostate brachytherapy both CPT codes 55859 and 77778 are
found on the same claim with a radiologic guidance code (often CPT
codes 76000 or 76965) and/or with a radiation planning code (usually
CPT code 77290). This results in a correctly coded claim for
interstitial brachytherapy designated as a multiple procedure claim.
Furthermore, these claims not only contain the two major procedures
(CPT codes 55859 and 77778), but they also often contain the three
ancillary procedures (CPT codes 76000, 76965 and/or 77290), which are
not on the bypass list because they have packaging in excess of $50 or
they have packaging on more than 5 percent of single bills.
In our review, we identified 11,341 claims containing both CPT
codes 55859 and 77778 on the same date of service. We then looked for
claims in this subgroup that contained no separately paid codes other
than the three ancillary services (after we applied the bypass list and
removed any codes on it). This gave us 7,533 claims containing CPT
codes 55859 and 77778 with no other major procedures except for the 3
ancillary services. We believe that claims with CPT codes 55859, 77778
and one or more of these 3 ancillary services represent the most
typical combinations of services furnished when brachytherapy sources
are applied. We then calculated two combination median costs: a
combination package and combination bypass. The first combination
median cost was calculated by treating these three codes as if they
were grouped into one comprehensive service by adding the costs of
these codes to the costs on the claim for CPT codes 55859 and 77778 and
all other packaged costs. This ``combination group median'' is
$3,187.86. This ``combination group median'' overstates the costs of
CPT codes 55859 and 77778 by the extent to which the costs of the three
ancillary services and the packaging that is associated with them are
reflected in it. We then calculated a second combination median cost in
which we treated these three ancillary codes as if they were on the
bypass list by removing the line item charges for these codes and
associated all packaging on the claim with CPT codes 55859 and 77778.
This ``combination bypass median'' is $2,968.64. This ``combination
bypass median'' overstates the costs of CPT codes 55859 and 77778 to
the extent that the packaged costs associated with the 3 ancillary
services are reflected in it.
We then compared the sum of the single bill medians calculated from
our OPPS stated methodology for CPT codes 55859 and 77778 to both of
these combination medians. The sum of the single bill medians for these
codes (without any costs from the three ancillary procedures) is
$2,662.62. We then summed the medians for CPT codes 55859, 77778,
76000, and 77290, a typical combination of codes for these services,
resulting in a sum of $2,975.50, similar in range to both the
``combination group median'' and the ``combination bypass median.''
Under our analysis, the sum of the single bill medians for
insertion of needles or catheters in the prostate and the application
of brachytherapy sources is well within the range of the combination
medians we calculated based on the multiple procedure claims.
Accordingly, we have no reason to believe that the single bill median
costs for the services reported by CPT codes 55859 and 77778 do not
otherwise appropriately reflect the costs for those services.
Therefore, we have used the standard OPPS methodology for clinical
brachytherapy services to set the payment rates for the CY 2006 OPPS.
Comment: One commenter stated that date of service stratification
results in pseudo single claims for APCs 0312 and 0651 that lack
packaging because all packaging on the claim has the same date of
service as the other procedure on the claim (i.e. not the procedure
code in APC 0312 or 0651). The commenter indicated that the median
costs for these ``pseudo no package'' claims is significantly lower
than the medians for other single procedure bills for these services
and, therefore, should be deleted from the claims used to set the
median costs for these APCs.
Response: We have no basis to believe that the charges for the
procedure code are not all-inclusive charges for all packaged items and
services associated with the procedure when a single charge appears for
a procedure code. Again, we encourage hospitals to bill all relevant
HCPCS codes that appropriately reflect the services provided.
c. Computed Tomography (APCs 0283 and 0333)
Comment: One commenter supported our proposal to pay separately for
low osmolar contrast material (LOCM) and most magnetic resonance
contrast agents. However, the commenter expressed concern that the
separate payment for these agents will not adequately compensate for
the reduced payment which CMS proposed for APCs 0283 (CT with contrast)
and 0333 (CT and CTA without contrast followed by contrast). The
commenter stated that they did not understand CMS' rationale for
proposing to reduce payments for APCs 0283 and 0333 to a level that
results in an overall net loss for contrast-enhanced CT studies.
Response: We do not agree with the commenter's assertion that the
proposed CY 2006 payment rates for APCs 0283 and 0333 will necessarily
reduce overall payments for contrast-enhanced CT studies. First, the
proposed CY 2006 payments for APCs 0283 and 0333 decreased by less than
3 percent compared to their CY 2005 payment rates. Second, our proposal
to pay separately for LOCM products (HCPCS codes Q9945 through Q9951)
as a result of the mean costs per day of their predecessor codes (HCPCS
codes A4644 through A4646) exceeding $50, may increase overall payments
for some contrast-enhanced CT studies while decreasing overall payments
for other contrast-enhanced CT studies, depending on the volume and
concentration of the LOCM used. The CY 2006 final payment rates for
APCs 0283 and 0333 were calculated from CY 2004 hospital claims data
utilizing the standard OPPS methodology based on our comprehensive
payment policies for CY 2006, which include unpackaging LOCM.
Therefore, hospital charges for LOCM in association with single
claims for services assigned to APCs 0283 and 0333 were not packaged
into the median cost calculations for these APCs. As a result, we would
expect the APC payment rates for APCs 0283 and 0333 to decline slightly
for CY 2006. For CY 2006, we are applying our standard
[[Page 68597]]
OPPS rate setting methodology using CY 2004 hospital claims data to set
the payment rates for APCs 0283 and 0333, and are paying separately for
LOCM based on the payment methodology described in section V.B.3.a.(3)
of this preamble.
d. Computed Tomographic Angiography (APC 0333)
In Addendum B of the CY 2006 proposed rule (70 FR 42776), we
proposed to maintain a number of imaging procedures discussed below in
their CY 2005 APCs.
Comment: Several comments expressed concern that the CY 2006
proposed payment rate for Computerized Tomographic Angiography (CTA)
procedures (APC 0662) continues to be lower than the proposed payment
rate for conventional CT procedures. These commenters recommended that
CMS set the payment rate for CTA procedures at a level equal to the
payment for a CT scan (APC 0333) plus a three-dimensional image
reconstruction (APC 0282) by either increasing the payment for APC 0662
or reassigning CTA procedures to an existing APC whose payment rate
more closely reflects the resource costs of performing CTA procedures.
Response: As we stated in the November 15, 2004 final rule with
comment period (69 FR 65722), accurate cost information about the cost
of image reconstruction for CTA specifically, and for CT alone as
utilized with CTA, would be required in order to implement the
commenter's suggestion that we make the payment rate for CTA (APC 0662)
equal to the sum of the rates for CT alone (APC 333) plus image
reconstruction (APC 282). Such cost information is not available. The
CY 2004 image reconstruction CPT code 76375 (coronal, sagittal,
multiplanar, oblique, 3-dimensional and/or holographic reconstruction
of computed tomography, magnetic resonance imaging, or other
tomographic modality) is not limited to image reconstruction performed
for CTA and may be used in a number of other procedures. Based on the
available CPT codes for CTA, we would not expect any current
utilization of CPT code 76375 to be for CTA post-image processing,
unless there was no appropriate CTA code to describe the body region
imaged, which we believe would rarely be the case. In addition, we
would not expect our current cost data for CTA alone to necessarily
reflect the resources utilized for the CT portion of CTA.
Commenters provided no evidence suggesting that Medicare
beneficiaries have experienced difficulty accessing these services in
the hospital outpatient setting. To the contrary, our number of claims
for CTA procedures increased steadily between CY 2002 and CY 2003 and
nearly doubled from CY 2003 to CY 2004. Furthermore, we used over 50
percent (99,000 single claims out of nearly 180,000 total claims) of
the CY 2004 claims for CTA procedures to calculate the CY 2006 payment
rate for these services.
We now have several years of robust claims data for CTA procedures
and have no reason to doubt this data. Based on the full year of CY
2004 data, the median costs for the APCs 0333 (CT) and 0662 (CTA) are
about equal, and have decreased minimally from their median costs based
on CY 2003 claims data. Because hospitals set their own charges for
services, which we then convert to costs, we still see no reason why
adding the costs for CT alone plus the costs for image reconstruction
would necessarily provide a better estimate of costs for CTA than our
analysis of our specific CTA claims. Furthermore, no other existing
clinical APC appears to contain services that share more clinical and
resource cost homogeneity with CTA procedures than APC 0662, whose
median cost reflects solely the claims data from 8 CTA procedures. For
this reason, we are not reassigning CTA procedures to any other
clinical APC(s) for CY 2006. Instead, for CY 2006, we are applying our
standard OPPS rate-setting methodology for calculating the payment rate
for CTA procedures residing in APC 0662. Once again, we encourage all
hospitals to take all actions necessary to ensure that they are billing
accurately and including in their charges all resources utilized to
deliver CTA services.
e. Computed Tomographic Guidance (APC 0332)
Comment: One commenter objected to the proposed payment rate of
$194 for CPT code 76362 (Computed tomography guidance for, and
monitoring of, visceral tissue ablation), which was proposed to be
assigned to APC 0332 (Computerized Axial Tomography and Computerized
Angiography without Contrast) for CY 2006. The commenter said that,
although CMS included only 9 single claims in the calculation of the
$371 median cost for CPT code 76362 in the proposed rule, they
identified 202 single bills with a median cost of $580 for CPT code
76362. The commenter indicated that it found that CPT code 76362 was
not being treated as a major procedure in CMS' median cost
calculations, and it could not determine if CMS packaged the cost for
CPT code 76362 into the payment for the other separately payable
procedure on the claim. The commenter indicated that it simulated
removing the exception (although they did not specify what they did)
and by doing so found 202 single bills with a median cost of $580 for
the code. The commenter asked that we place CPT code 76362 in New
Technology APC 1507 (Level VII $500-$600) so that payment would be set
at $550. The commenter also requested that CMS add CPT code 76362 to
the bypass list in future years.
Response: We do not agree that CPT code 76362 would be
appropriately assigned to New Technology APC 1507 because CT is not a
new technology. The use of CT guidance for and monitoring of visceral
tissue ablation is a more recent application of this well-established
technology. We acknowledge that we have few single bills upon which to
base our calculation of the median cost of this service, but this is
consistent with our expectations based on the nature of the service. We
believe that all correctly coded claims would also include a CPT code
for the specific ablation service that was monitored using CT and
billed along with CPT code 76362.
We believe that the primary costs directly attributable to CTP code
76362, as opposed to the accompanying ablation procedure, are the
hospital resources required for the lengthy operation of the necessary
CT scanner. In examining the clinical characteristics of the use of CT
for visceral tissue ablation, we believe that the CT use time for the
procedure, although variable depending on the specific ablation
procedure provided, would typically be longer than the CT use time for
most noncontrast CTs assigned to APC 0332.
Because the commenter indicated their comfort with CPT code 76362
being added to the bypass list, we analyzed the line item charges for
all units of service of CPT code 76362 billed by hospitals in CY 2004.
The median charge per unit based on over 1,000 units was $1,165.
Application of a hospital average CCR of 0.28 for the diagnostic
radiology cost center to the median charge of $1,165 for CPT code 76362
yielded a procedure-specific line item cost of approximately $325 for
this service. This is quite consistent with our final single claim
median cost of $363 based on 9 single claims.
Therefore, we are reassigning CPT code 76362 to APC 0333
(Computerized Axial Tomography and Computerized Angiography Without
Contrast Followed by Contrast) with an APC median cost of $303 for CY
2006, where
[[Page 68598]]
CT procedures that include both noncontrast and contrast studies in one
examination session reside. We believe that, although the ablation
monitoring service is not necessarily provided both without and with
contrast, the longer time of use of the CT scanner for CPT code 76362
is more consistent with the scanner use time for services assigned to
APC 0333. In addition, the median cost of APC 0333 is similar to the
median cost of CPT code 76362 based on single claims and to the other
cost estimate based on our analysis of all billed units of the code.
With respect to the commenter's data findings, CPT code 76362 is
considered to be a minor procedure (notwithstanding the status
indicator of ``S''), because it so frequently occurs on the same claim
as other separately paid procedures and is ancillary to them. As such,
when a minor procedure is on the same claim as a major procedure, the
claim is considered to be a single major procedure claim and the costs
of the minor procedure are not used to set the median for the minor
procedure, nor are they packaged into the payment for the major
procedure. The only single claims that are used in the calculation of
the median cost for the minor procedure code and, therefore, for the
APC to which the code is assigned are single minor procedure claims
which are derived from circumstances in which the minor procedure
appears alone on a claim or when it appears as one of several multiple
minor procedures on a claim and can be split off because the services
have different dates of service.
We considered making CPT code 76362 a major procedure and adding
the service to the bypass list. However, the code does not meet the
empirical criteria we have established for considering new additions to
the bypass list. Of the total claims for CPT code 76362, we had only 9
single procedure claims (less than the 100 required for a code to go
onto the bypass list); 6 of the 9 claims (67 percent) contained
packaged services (more than the 5 percent limit) that yielded a median
of $1,231 (considerably above the $50 median limit). Hence, because the
data for CPT code 76362 from CY 2004 do not meet any of the criteria
for addition of the code to the bypass list, we will not convert it to
a major procedure and add it to the bypass list for CY 2006. However,
we will consider for CY 2007 whether we should make an exception to our
empirical criteria for additions to the bypass list for services such
as CPT code 76362. We will continue to develop a more appropriate
median cost for the procedure and it seems plausible that the procedure
should have very little associated packaging.
f. Computerized Reconstruction (APC 0417)
Comment: One comment expressed concern about the payment rate for
HCPCS code G0288 (Reconstruction, computed tomographic angiography of
aorta for preoperative planning and evaluation post vascular surgery).
The commenter was concerned because the proposed rule indicated that
the rate for HCPCS code G0288 would decrease for CY 2006, continuing a
trend of decreases that began in CY 2004. The commenter made several
recommendations to CMS that it believed would help to limit the
decreased rate for CY 2006 and to prevent continuation of the downward
trend for coming years. The first recommendation was for CMS to mandate
which revenue code hospitals are to use to report HCPCS code G0288. The
commenter recommended use of revenue code 0780, Telemedicine. This was
based on their finding that hospitals used 17 different revenue codes
to report HCPCS code G0288. The commenter stated that more consistent
use of a revenue code would alleviate the effects of providers not
billing charges high enough to result in cost findings near the
acquisition costs.
Next, the commenter recommended that for CY 2006, CMS use the
hospital overall CCRs to calculate the median for HCPCS code G0288. The
commenter believed use of the overall CCRs would increase the median
for APC 0417 to approximately $415.
Third, the commenter recommended as a fallback measure, in case the
first two recommendations could not be implemented, that CMS should use
the CY 2005 rate, adjusted upward in accordance with the CY 2006
conversion factor, for APC 0417 in CY 2006.
Finally, the commenter requested that the descriptor for HCPCS code
G0288 be revised to read, ``Three-dimensional pre-operative and post-
operative computer-aided measurement planning and simulation in
accordance with measurements and modeling specifications of the Society
for Vascular Surgery.'' They stated that the revised descriptor would
ensure that the code would be used more accurately.
Response: Regarding the commenter's last request, that we revise
the descriptor for HCPCS code G0288, we do not believe that is
necessary. HCPCS code G0288 was revised in CY 2004 to clarify that the
service can be provided for both treatment planning prior to surgery
and for postsurgical monitoring. Other than this one comment, we have
had no indication that there is confusion among providers about when to
use the code. In addition, we generally allow hospitals to allocate
their charges across revenue codes as they feel is appropriate to their
specific institutional settings, and we see no reason to deviate from
this policy for the service described by HCPCS code G0288. We do not
understand how specifying a revenue code for reporting would
necessarily ensure adequate hospital charges for the service.
In response to the commenter's recommendations regarding our
hospital cost data, we conducted a detailed examination of our CY 2004
claims data and, like the commenter, found that hospitals used 17
different revenue codes to report HCPCS code G0288. However, we also
found that although 8 different cost centers for HCPCS code G0288 were
used in our conversion of charges to costs for the service, for 83
percent of the approximately 5,300 single bills utilized for rate
setting we converted hospital charges to costs using one cost center,
namely Diagnostic Radiology. Therefore, while we acknowledge that
utilizing an overall hospital CCR for HCPCS code G0288 yields a higher
median cost, $335 for APC 0417 based on our analysis, as opposed to a
median cost of $235 utilizing our standard revenue code to cost center
crosswalk, we do not believe that it would be appropriate to substitute
specific hospital overall CCRs in our calculation of this APC's median.
We utilize one hospital-specific departmental CCR for the conversion of
charges to costs for most of the single claims, and we have no reason
to believe that the CCR in this case is inappropriate. Also, hospitals
should bill adequate and complete charges for the service to account
for all of the hospital resources required.
Additionally, we see no reason to adjust the payment rate for APC
0417 to the CY 2005 rate adjusted upward in accordance with the CY 2006
conversion factor. We note that despite reductions in payment rates
over the last several years, the number of total procedures billed
under the OPPS for HCPCS code G0288 has continued to rise from 2,065 in
CY 2002, to 4,733 in CY 2003, and most recently to 8,421 in CY 2004. We
have no evidence that Medicare beneficiaries are having trouble
accessing this service based on our hospital claims information.
Therefore, we believe that it is appropriate for us to use our
historical hospital cost data as the basis for the CY 2006 payment
amount, and we are
[[Page 68599]]
finalizing our payment rate for APC 0417 at $235.66 for CY 2006.
g. Diagnostic Computed Tomographic Colonography (APC 0333)
We proposed to reassign CPT 0067T (diagnostic computed tomographic
colonography (CTC-Dx)) to APC 0333 (CT and CTA without contrast
followed by contrast) for CY 2006.
Comment: One commenter responded to the November 15, 2004 final
rule with comment period (69 FR 65682), explaining that CPT code 0067T
(diagnostic computed tomographic colonography (CTC-Dx)) was established
in CY 2005 to replace the previous coding scheme for CT colonography
involving two computed tomography (CT) scans (i.e., abdomen and pelvis)
and three-dimensional image reconstruction. Furthermore, the commenter
explained that the two CT components of a CTC-Dx may be administered in
a variety of ways: (1) CT without contrast, (2) CT with contrast, or
(3) CT without contrast followed by a CT scan with contrast. The
commenter stated that CMS' assignment of CPT code 0067T to APC 0332 (CT
and CTA without contrast) for CY 2005 failed to recognize the cost
differential between a CT scan and the variety of ways in which a CTC-
Dx scan is administered, along with the costs associated with the
three-dimensional image reconstruction. The commenter urged CMS to
reconsider the APC placement of CPT code 0067T, taking into account its
advantages as a less invasive and less costly alternative to a
colonoscopy.
Response: Due to the recent establishment of CPT code 0067T in CY
2005, we will have no hospital claims data for determining its resource
requirements until CY 2007. For CY 2005, we assigned CPT code 0067T to
APC 0332 (CT and CTA without contrast) because we considered the
clinical characteristics of CTC-Dx to be relatively similar to other
services assigned to APC 0332. We thank the commenter for bringing to
our attention the variety of ways in which a CTC-Dx can be
administered, notably a CT scan without contrast followed by a CT scan
with contrast. In light of this additional information, for CY 2006 we
proposed to reassign CPT 0067T to APC 0333 (CT and CTA without contrast
followed by contrast), where similar services reside involving a CT
scan without contrast followed by a CT scan with contrast. We are
finalizing our proposal to reassign CPT 0067T to APC 0333 for CY 2006.
However, in preparation for CY 2007 rate setting, we will reexamine the
APC placement of CPT code 0067T based on available CY 2005 hospital
claims data.
h. Intensity Modulated Radiation Therapy (IMRT) (APCs 0310 and 0412)
In Addendum B of the CY 2006 proposed rule, we proposed to maintain
CPT code 77301 (Radiotherapy dose plan, intensity modulated radiation
therapy (IMRT)) in APC 0310 (Level III Therapeutic Radiation Treatment
Preparation) based on the CY 2004 hospital claims data submitted for
CPT code 77301. In addition, we proposed to maintain CPT codes 0073T
(Compensator-based IMRT treatment delivery) and 77418 (Multileaf
collimator-based intensity modulated treatment delivery) in APC 0412
(IMRT treatment delivery) for CY 2006.
We received several public comments related to IMRT issues.
Comment: One commenter expressed concern that the proposed payment
rate for CPT code 77301 does not reflect the actual physics planning
time and resources for this procedure. The commenter recommended that
we take into consideration the costs associated with IMRT planning for
a typical head and neck case, including the time spent by the
dosimetrists, physicists, and physicians, when setting the payment for
CPT code 77301.
Response: The proposed procedure-specific median cost of $827 for
CPT code 77301 was calculated using 16,417 single procedure claims out
of 16,885 total claims (97 percent of the total claims). We proposed to
maintain CPT code 77301 in APC 0310 (Level III Therapeutic Radiation
Treatment Preparation) grouped with only one other service, CPT code
77295 (Set radiation therapy field), whose proposed median procedure-
specific cost of $844 had the effect of increasing the proposed payment
for CPT code 77301 due to its significantly higher single frequency of
claims used to set the payment for APC 0310. We have no reason to
believe that the single procedure claims for CPT code 77301 that
represent IMRT planning for head and neck treatment reflect more
accurate costs and charges than those claims for CPT 77301 that
represent IMRT planning for other body areas. Thus, we would have no
justification for discarding such a subset of claims that appear to be
accurately reported under CPT code 77301, but merely require less
resource utilization for certain covered clinical indications. Rather,
the high percentage of single procedure claims for this service, which
remains at 97 percent for the final rule data, along with its
relatively stable median cost for several years, confirms our belief
that the CY 2006 median cost for CPT code 77301 accurately reflects
hospitals' costs for the service. We believe these data represent, on
average, the resources consumed by hospitals for the provision of IMRT
planning services. We note that the OPPS does not provide payment for
physicians' professional services that may be required for procedures.
Therefore, for CY 2006, we are maintaining CPT code 77301 in APC 0310
with an APC median cost of $825, higher than the final code-specific
median cost of CPT code 77301 of $786.
Comment: In response to the November 15, 2004 final rule with
comment period (69 FR 65682) and the CY 2006 OPPS proposed rule (70 FR
42674), several commenters applauded our decision to establish a
national payment rate for category III CPT code 0073T for compensator-
based IMRT treatment delivery. These commenters stated that our
decision to pay for compensator-based IMRT treatment delivery will
encourage patient access and diffusion of this cost-effective
technology. Furthermore, these commenters agreed with our rationale to
assign CPT codes 0073T (Compensator-based IMRT treatment delivery) and
77418 (Multileaf collimator-based IMRT treatment delivery) to the same
APC 0412 (IMRT treatment delivery) for rate setting purposes, noting
that the IMRT treatment delivery costs are virtually identical for both
modalities. In contrast, one commenter to the November 15, 2004 final
rule with comment period (69 FR 65682) was opposed to the assignment of
CPT code 0073T to APC 0412. This commenter explained that CPT code
0073T was created specifically to distinguish compensator-based IMRT
treatment delivery from multileaf collimator-based IMRT treatment
delivery, described by CPT code 77418. The commenter believed that the
assignment of CPT codes 0073T and 77418 to the same APC 0412 precludes
CMS from collecting distinct claims data for each code, and urged CMS
to assign CPT code 0073T to a New Technology APC and reserve APC 0412
for CPT code 77418.
Response: Our decision to place CPT codes 0073T and 77418 in the
same APC 0412 supports the clinical homogeneity of APC 0412. Because we
had no CY 2003 claims data for the newly established Category III CPT
code 0073T, we concluded that its resource costs were likely reflected
to some degree in the costs and charges reported for CPT code 77418,
considering that this was the only CPT code available to providers for
the billing of compensator-based IMRT treatment delivery prior to
January 1, 2005. Contrary to a belief held by one of the commenters,
the assignment of CPT codes 0073T and
[[Page 68600]]
74418 to the same APC 0412 for payment purposes does not preclude CMS
from collecting distinct claims data for these two codes. Once the CY
2005 claims data for CPT code 0073T become available for setting the CY
2007 payment rate, we will reexamine the APC placement of CPT code
0073T. In the meantime, for CY 2006 we will maintain CPT codes 0073T
and 77418 in the same APC 0412.
Comment: One commenter explained that, effective January 1, 2005,
the descriptor for CPT code 77418 (Multileaf collimator-based intensity
modulated treatment delivery) was changed to explicitly exclude
compensator-based IMRT treatment delivery and a new Category III code
0073T was created to describe compensator-based IMRT delivery. This
commenter requested that we either update the December 19, 2003
Medicare Program Transmittal 32 (CR 3007) or issue a new Medicare
Program Transmittal to include compensator-based IMRT treatment
delivery code 0073T. The commenter provided CMS with recommended
language to clarify the billing of compensator-based IMRT treatment
delivery under the OPPS for CY 2006.
Response: We appreciate the commenter bringing to our attention the
need to update our billing guidance to reflect the newly established
Category III CPT code 0073T for the billing of compensator-based IMRT
treatment delivery. We thank the commenter for providing CMS with
recommended language and will consider such language as we revise our
guidance on the billing of compensator-based IMRT treatment delivery
under the OPPS for CY 2006.
i. Kidney Imaging (APC 0267)
Comment: One commenter expressed concern that CMS's proposed
reassignment of CPT code 78700 (Kidney imaging, static) from APC 0404
(Level I Renal and Genitourinary Studies) to APC 0267 (Level III
Diagnostic Ultrasound) disrupts the clinical homogeneity of the two
APCs. The commenter stated that the resource requirements and clinical
characteristics of kidney imaging have not changed in the past year and
urged CMS to maintain CPT code 78700 in APC 0404 for CY 2006.
Response: We agree with the commenter's observation that the
clinical attributes of CPT code 78700 more closely resemble the
services assigned to APC 0404 rather than APC 0267. Although our
proposal to reassign CPT code 78700 to APC 0267 was based on its median
cost data collected for the proposed rule, the more recent median cost
data from CY 2004 for CPT code 78700 do not preclude its return to APC
0404. Therefore, in the interest of preserving the clinical homogeneity
of APCs 0267 and 0404, we are not adopting our proposed reassignment
and will retain CPT code 78700 in APC 0404 for CY 2006.
j. Magnetic Resonance Guided Focused Ultrasound Ablation (APC 0193)
We received one public comment on the CY 2006 OPPS proposed rule
concerning the APC assignments for HCPCS codes 0071T and 0072T, along
with several related comments on the November 15, 2004 final rule with
comment period.
Comment: Several commenters submitted comments on the November 15,
2004 final rule regarding the APC assignments of magnetic resonance
guided focused ultrasound (MRgFUS) therapy for uterine fibroids. We
proposed to retain magnetic resonance guided focused ultrasound
(MRgFUS) procedures in APC 0193 for CY 2006. The commenters believed
that the procedure's assignment to APC 0193 (Level V Female
Reproductive Procedures) resulted in significant underpayment. They
asserted that MRgFUS is a new technology and that CMS should assign the
two Category III CPT codes to two separate New Technology APCs, based
on external cost data, until adequate claims data are available upon
which to base assignments to clinical APCs.
More recently, hospital and manufacturer representatives made a
presentation at the August 2005 meeting of the APC Panel and also
commented on our July 25, 2005 proposed rule. The Panel recommended
that CMS work with stakeholders to assign CPT codes 0071T and 0072T,
focused ultrasound ablation of uterine leiomyomata including magnetic
resonance guidance, to an appropriate New Technology APC(s).
The procedures are coded with Category III CPT codes 0071T (Focused
ultrasound ablation of uterine leiomyomata, including MR guidance;
total leiomyomata volume less than 200 cc of tissue) and 0072T (Focused
ultrasound ablation of uterine leiomyomata, including MR guidance;
total leiomyomata volume greater or equal to 200 cc of tissue). These
codes were new CPT codes in CY 2006. The commenters and the presenters
at the APC Panel suggested that we assign CPT code 0071T to New
Technology APC 1528 (Level XXV) and CPT code 0072T to New Technology
APC 1532 (Level XXVI).
Response: In light of the additional information that has been
presented to us, we agree that it would be more accurate to assign the
two procedures to separate APCs to account for the higher level of
resources required to ablate the larger growths. However, we do not
agree that it is most appropriate to assign MRgFUS procedures to New
Technology APCs 1528 and 1532. Although FDA approval of one specific
ablation technology was relatively recent, MRgFUS therapy bears a
significant relationship to technologies already in widespread use in
hospitals, in particular MRI and ultrasound services. The use of
focused ultrasound for thermal tissue ablation has been in development
for decades, and the recent application of MRI to focused ultrasound
therapy provides monitoring capabilities that may make the therapy more
clinically useful. We believe that MRgFUS therapy is a new and
integrated application of existing technologies (MRI and ultrasound)
and, therefore, is not necessarily most accurately assigned to a New
Technology APC. We believe that the technology used in this service
fits as well into existing clinical APCs for female reproductive
services, as do many other modalities that are currently assigned to
those clinical groups. In addition, MRgFUS procedures are most often
performed on younger women and are only seldom performed on Medicare
beneficiaries. We believe that placing them in clinical APCs with other
female reproductive procedures will enable us both to set accurate
payment amounts and to maintain appropriate clinical homogeneity of the
APCs.
Cost data for MRgFUS procedures provided to us for two hospitals
showed high, but disparate costs. The costs per case reported by each
of the hospitals were significantly different from one another and were
much higher than reports of costs from other publicly available
sources. We suspect that much of the variation reflects differences in
capital costs and projections of utilization and procedure times, as
well as in the types of personnel used to perform the procedures. We
understand that the MRI equipment can also be used to perform
conventional MRI procedures, and the MRI equipment costs should be
allocated accordingly so that amortization of the costs will be shared
by those tests. The OPPS payment rates for services need to make
appropriate payments for the services to Medicare beneficiaries,
recognizing that, as a budget neutral payment system, the OPPS does not
pay the full hospital costs of services. We expect that our
[[Page 68601]]
payment rates generally will reflect the costs that are associated with
providing care to Medicare beneficiaries in cost-efficient settings.
We compared the necessary hospital resources for the MRgFUS
procedures, including specialized equipment, MRI/procedure room time,
personnel, anesthesia and other required resources, to various other
procedures for which we have historical hospital claims data.
Additionally, we took into consideration projected costs for the MRgFUS
procedures submitted to us, and other available information regarding
the clinical characteristics and costs of those services. Upon
consideration of all of the information available to us, we have
determined that a higher level of payment would be more appropriate for
the MRgFUS procedures. However, we are rejecting the recommendation of
the APC Panel, and we will assign CPT codes 0071T and 0072T to APC 0195
(Level IX Female Reproductive Procedures) and 0202 (Level X Female
Reproductive Procedures), respectively for CY 2006. These new APC
assignments provide significantly higher payment rates than we proposed
for these services in CY 2006. We believe that these placements in APCs
0195 and 0202 will provide appropriate payments for MRgFUS services to
provide access for Medicare beneficiaries who need them.
k. Non-Imaging Nuclear Medicine Studies (APC 0389)
In Addendum B of the CY 2006 proposed rule (70 FR 42776), we
proposed to maintain CPT codes 78270 (Vitamin B-12 absorption study;
without intrinsic factor), 78271 (Vitamin B-12 absorption study; with
intrinsic factor), and 78272 (Vitamin B-12 absorption study; with and
without intrinsic factor) in APC 0389 (Non-Imaging Nuclear Medicine)
for CY 2006.
We received one public comment related to the above-mentioned
nuclear medicine procedures.
Comment: One commenter expressed concern that the resource
requirements associated with CPT codes 78271 (Vitamin B-12 absorption
study; with intrinsic factor), and 78272 (Vitamin B-12 absorption
study; with and without intrinsic factor) far exceed the median cost of
APC 0389 (Non-imaging Nuclear Medicine) in which they reside. The
commenter noted that the exceptionally low single claim counts for
these procedures have little or no impact on the overall median cost
for APC 0389 due to the thousands of other single claim counts for
lower cost CPT codes that reside in APC 0389. To protect beneficiary
access to these services, the commenter requested that CMS consider
either freezing the payment rate for APC 0389 at its CY 2005 payment
rate or buffering the proposed 12 percent decrease from its CY 2005
payment rate. The commenter noted that, in addition to underpayment for
the nuclear medicine procedures, the three radiopharmaceuticals that
could be used in the tests ( C1079--Supply of radiopharmaceutical
diagnostic imaging agent, cyanocobalamin Co-57/58, per 0.5 mCi; C9013--
Supply of Co-57 cobaltous chloride, radiopharmaceutical diagnostic
imaging agent; and Q3012--Supply of oral radiopharmaceutical diagnostic
imaging agent, cyanocobalamin cobalt Co-57, per 0.5 mCi) were proposed
to change from status indicator ``K'' in CY 2005 to status indicator
``N'' for CY 2006. The commenter was concerned that the packaging of
the necessary radiopharmaceuticals, in addition to the reduced payment
rate for the tests, could threaten Medicare beneficiaries' access to
these procedures.
Response: While we acknowledge the commenter's concern that the
procedure-specific median costs for CPT codes 78271 ($244) and 78272
($310) appear to far exceed the median cost of APC 0389 ($86) for CY
2006 based on the CY 2004 hospital claims data, we remind the commenter
that the exceptionally low single claim counts that they brought to our
attention for CPT codes 78271 (9 single claims) and 78272 (5 single
claims) significantly increase the volatility of their median costs
from year-to-year. Moreover, the higher CY 2005 single claim counts for
CPT codes 78271 (209 single claims) and 78272 (133 single claims) based
on the CY 2003 hospital claims data yielded lower median costs for CPT
codes 78271 ($98) and 78272 ($159). These lower median costs may have
been due to separate CY 2005 payments for the required
radiopharmaceuticals, in comparison with the median costs from CY 2004
claims developed based on the CY 2006 payment policy of packaging the
radiopharmaceuticals.
In reviewing the claims data for all of the CPT codes assigned to
APC 0389 for CY 2005, we noted that, in addition to CPT codes 78271 and
78272, several other services had consistently higher procedure-
specific median costs than the CY 2006 APC median cost ($86), including
CPT code 78003 (Thyroid uptake; stimulation, suppression or discharge);
CPT code 78190 (Kinetics, study or platelet survival, with or without
differential organ/tissue localization); CPT code 78270 (Vitamin B-12
absorption study; without intrinsic factor); and CPT code 78191
(Platelet survival study) with median costs of $167, $170, $186, and
$384, respectively. As these services were all low volume, with fewer
than 100 claims each, there was no two times violation in APC 0389,
despite the finding that the least expensive procedure assigned to APC
0389 had a median cost of $76. The higher level of hospital resources
required for the more costly non-imaging nuclear medicine procedures
was notable.
While we will not adjust the CY 2006 median cost of APC 0389 by
using its CY 2005 median cost or dampening the decline between CY 2005
and CY 2006 as suggested by the commenter, we acknowledge that the
structure of the APC would benefit from reconfiguration. Therefore, we
are splitting the services assigned to APC 0389 for CY 2005 into two
groupings for CY 2006: APC 0389, Level I Non-Imaging Nuclear Medicine;
and newly created APC 0392, Level II Non-Imaging Nuclear Medicine. The
assignment of CPT codes to these two APCs is shown in Table 14 below.
Table 14.--Assignment of CPT Codes to APCs 0389 and 0392 for CY 2006
------------------------------------------------------------------------
APC 0389 APC 0392
------------------------------------------------------------------------
78725, Kidney function study........... 78003, Thyroid, stimulation,
suppression.
78000, Thyroid, single uptake.......... 78190, Platelet survival,
kinetics.
78001, Thyroid, multiple uptakes....... 78191, Platelet survival.
78999U, Nuclear diagnostic exam........ 78270, Vitamin B-12 absorption
exam; without intrinsic
factor.
78271, Vitamin B-12 absorption
exam; with intrinsic factor.
78272, Vitamin B-12 absorption
exam; with and without
intrinsic factor.
------------------------------------------------------------------------
[[Page 68602]]
In this reconfiguration, the median cost of APC 0389 for CY 2006 is
$85, and the median cost for APC 0392 is $209. We believe that these
new APC configurations will result in more accurate payments for non-
imaging nuclear medicine studies, by improving clinical and resource
homogeneity within the groupings. We note that for the purposes of any
studies contemplated by the commenter, different codes will be
available for reporting the required radiopharmaceuticals in the CY
2006 OPPS. Specifically HCPCS code C9013 will be deleted, HCPCS code
A9546 (Cobalt CO-57/58, cyanocobalamin, diagnostic, per study dose, up
to 1 microcurie) will replace HCPCS code C1079, and HCPCS code A9559
(Cobalt CO-57 cyanocobalamin, oral, diagnostic, per study dose, up to 1
microcurie) will replace HCPCS code Q3012. We anticipate that these new
permanent HCPCS codes for radiopharmaceuticals will simplify billing
and provide more accurate hospital claims data as the basis for
potential packaging determinations in future years. With the transition
to these new radiopharmaceutical HCPCS codes, we will closely monitor
the claims data for APCs 0389 and 0392 in the future, as any changes in
the packaging status of required radiopharmaceuticals could affect the
median costs of services assigned to them and alter the resource
homogeneity of the groupings.
l. Therapeutic Radiation Treatment (APC 0304)
Comment: One commenter objected to our proposal to maintain CPT
code 77370 (Radiation physics consult) in APC 0304 (Level I Therapeutic
Radiation Treatment Preparation) for CY 2006, noting that the procedure
experienced over a 50 percent decrease in its payment rate between CYs
2004 and 2005. The commenter explained that this procedure often
involves a significant amount of time spent by the physics department
in developing the treatment planning, immobilization, and proper beam
placement for the patient. The commenter requested that CMS consider
the amount of time spent by the physicists and dosimetrists in
collaborating with the physician when determining the APC placement of
CPT code 77370 for CY 2006.
Response: The CY 2006 median cost of $140 for CPT code 77370 is
based on 96 percent of the CY 2004 total claims (41,123 single
procedure claims out of 42,753 total claims). Similarly, the CY 2005
median cost of $136 for CPT code 77370 was based on 95 percent of the
CY 2003 total claims (40,723 single procedure claims out of 42,985
total claims). The robust claims data reported by hospitals over the
past several years support the placement of CPT code 77370 in APC 0304
for CY 2006. Furthermore, the commenter provided no supporting evidence
that the proposed payment of $105 for CY 2006 would jeopardize
beneficiary access to this service. Therefore, for CY 2006 we are
maintaining CPT code 77370 in APC 0304.
m. Urinary Bladder Study (APC 0340)
At the February 2005 APC panel meeting, the APC Panel recommended
that we move CPT code 78730 (Urinary bladder residual study) from APC
0340 (Minor Ancillary Procedures) to APC 0404 (Level I Renal and
Genitourinary Studies) for CY 2006, suggesting that the CY 2003 data
for CPT code 78730 may have been derived from incorrectly coded
hospital claims. For reasons discussed in detail below, we are
maintaining CPT code 78730 in APC 0340 for CY 2006.
We received a number of public comments related to such imaging
procedures.
Comment: One commenter stated that the resource requirements of CPT
code 78730 (Urinary bladder residual study) do not resemble other
services assigned to APC 0340 (Minor Ancillary Procedures). The
commenter explained that the high volume and low median cost data for
CPT code 78730 resulted from inappropriate use of this code to report
other services unrelated to nuclear medicine. The commenter noted that
during the February 2005 APC Panel meeting, the APC Panel recommended
that CMS move CPT code 78730 from APC 0340 to APC 0404 (Level I Renal
and Genitourinary Studies), suggesting that the CY 2003 data for CPT
code 78730 may have been derived from incorrectly coded hospital
claims. The commenter urged CMS to recognize the full costs associated
with the nuclear medicine aspects of the procedure by reassigning CPT
code 78730 to APC 0404 for CY 2006.
Response: In the November 15, 2004 final rule with comment period
(69 FR 65705), we noted that CPT code 78730 was originally created and
valued for the MPFS as a procedure requiring the services of a nuclear
medicine technician, but that the use of the code subsequently had
changed to be used primarily by urologists rather than by nuclear
medicine physicians. While we reassigned CPT code 78730 to APC 0340 for
CY 2005 based on robust CY 2003 claims data, we solicited other
physician specialties to submit resource data for us to review in the
context of our hospital claims data so that we could reexamine the
appropriate APC placement of CPT code 78730 for CY 2006. While we
acknowledge the commenter's repeated concern that the median cost for
CPT code 78730 may reflect miscoded claims, the commenter again
provided no supporting evidence of what they believe to be the true
resource costs associated with CPT code 78730. If some of the reported
claims data are inaccurate, we have no way to determine which claims
are more or less accurate than others. Rather, a relatively stable
number of single procedure claims has generated a consistent median
cost for CPT code 78730 over the past four years (that is, ranging from
$39 based on the CY 2001 claims data to $53 based on the CY 2004 claims
data) and supports our assignment of CPT code 78730 to APC 0340 with an
APC median cost of $36, as opposed to APC 0404 with an APC median cost
of $217. Therefore, we are maintaining CPT code 78730 in APC 0340 for
CY 2006. However, in preparation for the CY 2007 OPPS update, we will
reexamine the APC placement of CPT code 78730 by reviewing any resource
data submitted by commenters in the context of our CY 2005 hospital
claims data. Commenters may wish to identify approaches to
distinguishing correctly coded claims so that we could develop a
procedure-specific median cost based on correctly coded hospital claims
data. As the commenter believes the vast majority of claims for CPT
code 78730 were miscoded over many years, they may wish to explore a
change in the code with the AMA's CPT Editorial Panel or request their
dissemination of guidance on use of the code, to clarify the code's
intended use and assist providers in correctly billing for services
provided.
3. Gastrointestinal and Genitourinary Procedures
a. Cystourethroscopy With Lithotripsy (APC 0163)
Comment: A few commenters requested that CMS assign CPT code 52353
(Cystourethroscopy, with ureteroscopy and/or pyeloscopy; with
lithotripsy) to the new APC 0429 (Level V Cystourethroscopy and other
Genitourinary Procedures). The commenters stated that this procedure
has been grouped into the same APC (0163, Level IV Cystourethroscopy
and other Genitourinary Procedures) with many of the procedures that we
reassigned into APC 0429 and that CPT code 52353 should also be
assigned to that APC. They stated that the procedure described by CPT
code 52353
[[Page 68603]]
is used for the same indications as are those in APC 0429, and that
much of the same capital equipment is used to perform CPT code 52353
and those in APC 0429.
The commenters asserted that although the median cost in CMS's
hospital claims data for CPT code 52353 is lower than those for
procedures in APC 0429, its median cost is the highest in APC 0163 and
its costs are actually higher than reflected in the claims data since
hospitals are failing to report all of the costs associated with the
flexible ureteroscope required for the procedure.
Based on their analysis of the proposed rule data, the commenters
found that assignment of CPT code 52353 to APC 0429 would only result
in small decreases in the median costs for both APCs 0163 and 0429.
They estimated that the median cost for APC 0163 would drop by
approximately $19 and that the median cost for APC 0429 would decrease
by approximately $100. They stated that these drops would not represent
payment disruptions for the other procedures in the APCs.
Response: The median cost for CPT code 52353, $2,117, is the
highest in APC 0163, but the procedure-specific median costs in APC
0163 vary from lowest to highest by very little. The median cost for
APC 0163 is $1,997, only $120 lower than the code-specific median cost
for CPT code 52353.
The median cost for APC 0429 is $2,502, and the median costs of the
individual procedures with more than 50 single claims assigned to that
APC (representing a total of 13,200 claims) vary from $2,475 to $2,602,
a difference of only $127. We believe that the decrease in the APC 0429
median that would result from assignment of CPT code 52353 (14,570
claims) would unfairly disadvantage the procedures that we proposed to
assign there, and that the $100 drop that the commenters referred to as
not representing payment disruptions would not be viewed similarly by
hospitals billing for the procedures we proposed for assignment to APC
0429. In addition, we have no reason to doubt the accuracy of our
median cost for CPT code 52353 based on thousands of CY 2004 single
hospital claims, nor do we understand why hospitals would
differentially not be including charges for the costs of all required
equipment and supplies for this procedure on their hospital claims in
comparison with their billing for other procedures. Any small
underpayment that would result from the continued assignment of CPT
code 52353 to APC 0163 would be less than the potential for overpayment
if the code were moved to APC 0429, which contains some procedures that
have different clinical characteristics and services with higher median
costs.
We will reevaluate the APC assignment for CPT code 52353 for CY
2007 and finalize our proposal, without modification, to retain it in
APC 0163 for CY 2006.
b. GI Stenting (APC 0384)
Comment: Commenters, including the APC Panel, asked that we use
only claims containing devices to set the APC median cost for APC 0384,
or alternatively, freeze the 2006 CY OPPS payment rate at the CY 2005
OPPS payment.
Response: We considered the comments and have decided to apply the
same policy to these services that we will apply to other device-
dependent APCs. In the case of this APC, the median on which the CY
2006 OPPS payments will be based was calculated using claims that
contain the device codes applicable to the services assigned to APC
0384. See the discussion of payment for device dependent APCs in
section VI.A for our discussion of adjustments to median costs for
device-dependent APCs. See Table 16 for the median cost on which the CY
2006 payment rate for APC 0384 is based.
Comment: Some commenters, including the APC Panel, recommended that
we establish a separate APC for CPT codes 43268 and 43269 for
endoscopic retrograde cholangiopancreatography (ERCP) services because
they believed that these services use fluoroscopy while the other codes
in APC 0384 do not. Other commenters opposed this change because they
said that all services in APC 0384 require use of similar supplies,
equipment, and fluoroscopic assistance. They indicated that the
hospital resources that are required to furnish a specific GI stenting
service are determined more by nuances arising from gaining access to
the site at which the stent will be placed, sedating the patient, and
providing fluoroscopic monitoring, than by the specific location where
the stent is being placed.
Response: We did not create a new APC for ECRP-related stent
procedures because those procedures are appropriately placed with the
other services in APC 0384, both with respect to clinical
characteristics and resources used, particularly in view of the
clinical rationale provided by the commenters. In addition, the number
of single claims available for establishing payment rates for APC 0384
is already relatively small. We are concerned that if we were to move
the two ERCP procedures to another APC, there would be very few single
claims remaining in APC 0384 to establish that APC's median cost.
c. Insertion of Uterine Tandems and/or Vaginal Ovoids for Clinical
Brachytherapy (APC 0192)
Comment: Several commenters disagreed with our proposal to reassign
CPT code 57155 (Insertion of uterine tandems and/or vaginal ovoids for
clinical brachytherapy) from APC 0193 (Level V Female Reproductive
Procedures) to 0192 (Level IV Female Reproductive Procedures). The
commenters were concerned that the reassignment would result in a 66
percent decrease in payment, and that there was no discussion of the
reassignment in the proposed rule. They requested that the procedure be
retained in its current CY 2005 APC assignment, and that in the future
CMS discuss all changes to APC assignments in the preambles of their
proposed rules. They asserted that there have been no changes in the
technology or provision of these services that would justify a
reduction in payment and that the dramatic decrease in payment amount
proposed by CMS would have a negative effect on Medicare beneficiaries'
access to this important treatment for vaginal and/or uterine cancer.
Response: The procedure described by CPT code 57155 is for the
insertion of the ``holders'' for brachytherapy sources when
brachytherapy is to be delivered to specific sites. The procedure to
load the radioactive elements and the brachytherapy sources themselves
are separately payable under the OPPS. CPT code 57155 was first
reassigned from APC 0192 to APC 0193 for CY 2004 Hospital claims data
from CY 2002, utilized for the CY 2004 OPPS update, yielded a code-
specific median cost for CPT code 57155 of about $743, based on 132
single claims. However, CY 2003 data, utilized for the CY 2005 OPPS
update, provided a code-specific median for CPT code 57155 of
approximately $232 based on 350 single claims, creating a 2 times
violation in APC 0193. For CY 2005, our final OPPS payment policy
specifically excepted APC 0193 from the two times rule in light of this
violation.
While we did not propose to reassign CPT code 57155 for the CY 2005
OPPS, we now have a second year of hospital claims data from CY 2004
that indicate that CPT code 57155 should be assigned to a lower level
Female Reproductive Procedures APC. Therefore, in addendum B of the
proposed rule, we proposed to reassign CPT code 57155 to APC 0193. The
median cost for CPT code 57155 of $353 based on 867 single claims is in
the same range as the
[[Page 68604]]
medians for other procedures assigned to APC 192 for CY 2006, making it
an appropriate placement for CPT code 57155. If CPT code 57155 were to
be assigned to APC 0193 which has a median cost of about $870, we would
once again have to except APC 0193 from the two times rule for CY 2006.
Based on stable claims data for the past 2 years and significant
numbers of single bills, we used our standard OPPS methodology and the
updated CY 2004 claims data to determine that hospital claims data for
CPT code 57155 are accurate and appropriate to use for making the CY
2006 APC assignment for CPT code 57155. Therefore, we will finalize our
proposal to assign CPT code 57155 to APC 0192.
d. Laparoscopic Ablation Procedures (APC 0131)
Comment: One commenter requested that CMS reassign CPT code 47370
(Laparoscopy, surgical; ablation of one or more liver tumor(s);
radiofrequency) to APC 0132 (Level III Laparoscopy). The procedure is
currently assigned to APC 0131, Level II Laparoscopy, and the commenter
stated that the costs for the procedure far exceed the payment rate in
that APC. The commenter analyzed OPPS claims for CYs 2002, 2003, and
2004 and found that the median cost for that procedure has been more
than ``two times greater than the median of the lowest cost item or
service'' in APC 0131 during all of those years. Further, they asserted
that the procedure's median cost is actually more similar to those of
the procedures assigned to APC 0132.
Response: We examined our median cost data for the years referenced
in the comment and concur with their findings that the median cost for
CPT code 47370 has been notably higher than those for other procedures
in APC 0131 for several years. For CY 2006, we have 28 single claims,
and the procedure-specific median cost of $5,088 is significantly
higher than the median costs for most of the procedures assigned to APC
0131. The median cost for CPT code 47370 also is higher than the median
costs for other procedures currently assigned to APC 0132. We believe
that for purposes of clinical homogeneity, APC 0132 is the most
appropriate APC assignment for the procedure but we will continue to
monitor it for future APC assignment changes. For CY 2006, we will
assign CPT code 47370 to APC 0132 (Level III Laparoscopy).
Comment: One commenter requested that CMS reassign CPT code 50542
(Laparoscopy, surgical; ablation of renal mass lesion(s)) to APC 0132
(Level III Laparoscopy). The procedure is currently assigned to APC
0131 (Level II Laparoscopy), and the commenter stated that the costs
for the procedure far exceed the payment rate in that APC. The
commenter analyzed OPPS claims and found that two of the 11 single
claims available for the proposed rule did not reflect separate charges
for the ablation device and was concerned that with so few claims,
these two apparently incorrect claims may have a significant effect on
the median cost.
Response: We examined our median cost data for CY 2005 and CY 2006.
For CY 2005, there were 11 single claims used for the final rule median
and the assignment of the procedure to APC 0131 was appropriate. For CY
2006, we have 16 single claims and the median cost is significantly
higher than the median costs for most of the procedures assigned to APC
131. The median cost for CPT code 50542 is $3,940, within the range of
median costs for procedures assigned to APC 0132 for CY 2006. We will
assign CPT code 50542 to APC 0132 (Level III Laparoscopy) for CY 2006.
e. Plicator Procedure (APC 0422)
Comment: One commenter submitted comments about the APC assignment
for new HCPCS code C9724 (EPS gastric cardia plicator) used in the
treatment of gastroesophageal reflux disease (GERD). The commenter
suggested that the procedure's assignment to APC 0422 (Level II Upper
GI Procedures) is inappropriate because it is a new technology and that
placement violates the OPPS two times rule. The commenter recommended
that we assign the procedure to an APC with a higher payment rate and
suggested that we may want to create a level III upper GI procedures
APC. They reported that the cost of the Plicator Procedure kit
($1,795), in addition to the endoscopy (approximately $460) is two
times more costly than CPT 43228 (Esophagoscopy, rigid or flexible;
with ablation of tumor(s), polyp(s), or other lesion(s), not amenable
to removal by hot biopsy forceps, bipolar cautery or snare technique),
a high volume procedure that is also assigned to APC 0422.
Response: In April 2004, CMS received an application for this
procedure to qualify for payment as a New Technology under the OPPS. In
April 2005, CMS assigned it to HCPCS code C9724 and placed it in APC
0422 for payment under the OPPS. We have no claims data for the
procedure due to its very recent HCPCS code assignment. We assigned it
to APC 0422 because there are other endoscopic procedures for the
treatment of GERD assigned to that APC and we believed, based on
specific information available to us about the plicator service and
hospital cost and clinical information regarding other services payable
under the OPPS, that APC 0422 was an appropriate assignment for HCPCS
code C9724. We continue to believe that is the most appropriate APC
placement for the procedure. We will reevaluate that assignment when we
have claims data on which to base a reassignment.
We find that there is no basis for the suggestion that assignment
of HCPCS code C9724 represents a two times rule violation because there
are no data for HCPCS code C9724 to compare to median costs for the
other significant procedures assigned to that APC.
We are finalizing our proposal to assign HCPCS code C9724 to APC
0422 for CY 2006.
f. Prostate Cryosurgery (APC 0674)
For CY 2006 OPPS, we proposed to set the payment rate for APC 0674
(Prostate Cryoablation) based on an unadjusted median cost of $5,780.
We received many public comments concerning the payment for prostate
cryoablation.
Comment: Commenters objected to the proposed payment rate for
cryoablation of the prostate (APC 0674) because they believed that the
proposed payment was not sufficient to cover the cost of the procedure.
The commenters indicated that a hospital incurs costs of greater than
$9,000 to furnish the service. Commenters furnished copies of bills,
invoices and cancelled checks intended to substantiate their claims
that the total costs are in excess of $9,000 because the costs of the
probes alone are no less than $4,000. They indicated that the proposed
Medicare payment rate, if implemented, would result in a shortfall of
over $3,000 per case. Commenters said that hospitals tend to under
report and under charge their true costs for cryosurgery procedures,
and that there are incentives to resist billing changes that would
result in higher charges for the procedures. Commenters said that CMS
should recalculate the median cost for APC 0674 by excluding claims
that do not have a charge of at least $6,000 under either HCPCS code
C2618 or revenue codes 270, 272 or 278 because any charge for
cryoablation probes less than $6,000 would be inadequate to result in a
reasonable cost for the device. Commenters indicated that, at a
minimum, CMS should not set the payment rate for APC 0674 at less than
the CY 2005 payment rate plus inflation.
Response: We share the commenters' concern that these services
continue to be available to Medicare beneficiaries
[[Page 68605]]
and we will pay APC 0674 under the general policy which we apply to
device-dependent APCs. Under this general policy, we have set the
median cost for APC 0674 using only claims that contain the device code
for the cryoablation probes used in this service. See section IV.A. for
our discussion of adjustments to median costs for device dependent
APCs. See Table 16 for the adjusted median cost for APC 0674 for CY
2006.
Comment: Commenters indicated that the proposed Medicare payment
rate would result in reduced or no access for Medicare beneficiaries.
One commenter stated that in the past 2 years, a total of 29 hospitals
either ceased performing or elected not to start a cryosurgery program
due to inadequate Medicare payment. Commenters stated that inadequate
payment under the OPPS would result in hospitals providing more
expensive care in the inpatient setting under DRG 315 that could be
much more costly to Medicare.
Response: Our review of the claims from hospitals used to set the
median costs for APC 0674 shows that from CYs 2003 to 2004, the number
of claims for APC 0674 grew from 1,516 to 2,328 or by 35 percent in one
year. Similarly, the number of hospital providers furnishing the
service grew from 222 to 317 or by 30 percent in one year. Neither the
growth in the number of claims or the number of hospitals furnishing
the service indicates that there is a barrier to access to care.
Moreover, while 29 hospitals may have ceased performing the procedure
or decided not to begin a cryosurgery program, the growth in hospitals
furnishing the service from CYs 2003 to 2004 is substantial. This is
particularly meaningful because the device came off of pass-through
payment in CY 2004 and the payment for the device was packaged into the
payment for the procedure in CY 2004, rather than being paid separately
under the pass-through payment methodology. We see no reason to believe
that Medicare beneficiaries have problems in accessing this service.
Moreover, as commenters indicate in the discussion of calculation of
payment weights, hospitals take many factors into consideration in
determining whether to offer a service, only one of which is the rate
of Medicare payment.
g. Stretta Procedure (APC 0422)
CPT code 43257, effective January 1, 2005, is used for
esophagoscopy with delivery of thermal energy to the muscle of the
lower esophageal sphincter and/or gastric cardia for the treatment of
gastresophageal reflux disease. This code describes the Stretta
procedure, including use of the Stretta System and all endoscopies
associated with the Stretta procedure. Prior to CY 2005, the Stretta
procedure was recognized under HCPCS code C9701 in the OPPS. For the CY
2005 OPPS, HCPCS code C9701 was deleted and CPT code 43257 was utilized
for the Stretta procedure. In CY 2005, the Stretta procedure was
transitioned from a New Technology APC to clinical APC 0422 (Level II
Upper GI Procedures) based on several years of hospital cost data.
Procedures within APC 0422 were similar to the Stretta procedure in
terms of clinical characteristics and resource use.
We received several public comments in response to the CY 2005
methodology for calculating the median cost for APC 0422 set forth in
our CY 2005 OPPS final rule with comment period.
Comment: Commenters objected to the APC assignment of the Stretta
procedure (HCPCS code C9701 in 2003; CPT code 43257 beginning in 2004)
to APC 0422. Commenters indicated that CMS should recalculate the
median cost for the procedure by packaging in the costs of all
endoscopies (regardless of CPT code) that were performed on the same
date as the Stretta procedure and assigning the procedure to a New
Technology APC based on the recalculated median cost. They said that
absent this change, CMS should clarify that hospitals may bill and will
be paid for each endoscopy done at the time of the Stretta procedure.
Commenters asked that we make these changes effective January 1, 2005.
Response: We did not make these changes for CY 2005 because we
believe that we correctly calculated the median cost for the Stretta
procedure by incorporating the cost of a single endoscopy (CPT codes
43234 and 43235) when billed into the reported median cost for Stretta
in the calculation of the final rule median cost for the new CPT code
43257 for CY 2005, based on the codes hospitals correctly reported in
CY 2004 for the full Stretta service. Moreover, we believe that
assignment of the procedure to the APC that contains similar procedures
for the treatment of gastroesophageal reflux disease is appropriate.
Therefore, we believe that the Stretta procedure is placed in an APC
for CY 2005 which is appropriate both with regard to clinical
characteristics and resource use. As the code descriptor for CPT code
43257 includes upper gastrointestinal endoscopy, we do not expect that
hospitals would separately bill for each endscopy done at the time of
the Stretta procedure.
For CY 2006, we proposed to use both CY 2004 single claims for
HCPCS code C9701 and multiple procedure claims containing one unit of
HCPCS code C9701 and one unit of either CPT code 43234 or CPT code
43235 to calculate the Stretta procedure's contribution to the median
for APC 0422. Claims reporting one endoscopy code (CPT code 43234 or
CPT code 43235) along with HCPCS code C9701 were included in the
proposed median calculation because, in CY 2002, CMS authorized the
separate and additional billing of a single endoscopy code with HCPCS
code C9701, while CPT code 43257 now includes all endoscopies performed
during the procedure.
Using this proposed methodology, we calculated a median cost for
CPT code 43257 (HCPCS code C9701 in the CY 2004 claims data) of $1,669.
Using these claims in the calculation of the median cost for APC 0422,
we calculated a median cost of $1,386. We proposed to use this
methodology, applied to the more complete final rule with comment
period claims set, to calculate the final CY 2006 OPPS median cost for
APC 0422.
We received several public comments on our proposed methodology for
calculating the median cost for APC 0422.
Comment: One commenter objected to the proposed payment for CPT
code 43257, the Stretta procedure for the CY 2006 OPPS. The commenter
indicated that the payment would create economic disincentives to the
utilization of the service and might ultimately impose greater costs on
Medicare and its beneficiaries. The commenter asked that CMS create a
new APC to which we would assign CPT code 43257 and CPT code 0008T, and
that we use a different methodology from that proposed to calculate the
median cost. The commenter indicated that because CPT codes 43228 and
43830 have higher volumes but lower costs, the inclusion of them in the
same APC as CPT code 43257 does not enable payment of CPT code 43257 at
a level that is appropriate to pay the costs of the service. Therefore,
the commenter requested that we create a new clinical APC to enable
higher payment for CPT code 43257. The commenter believed that creating
the new APC is analogous to what CMS proposed to do for vascular access
devices for the CY 2006 OPPS.
The commenter also asked that CMS undertake special claims
manipulation to establish the median cost for the new APC. The
commenter's preference was that we add the median cost for CPT code
43235 to the cost of all claims for
[[Page 68606]]
HCPCS code C9701 (CPT code 43257 in 2005) which did not also contain at
least one unit of an endoscopy code on the claim. These inflated claims
costs would then be combined with all claims for HCPCS code C9701 which
also contain at least one unit of an endoscopy code and with the claims
for CPT code 0008T to set the median cost for the APC they wanted us to
create. The commenter offered a less preferred alternative of using
only claims that contained both HCPCS code C9701 and CPT codes 43234,
42235 or any other endoscopy code to calculate the median cost, which
would not yield as robust a set of claims for median setting.
Response: We have not created a new APC for CPT code 43257 and CPT
code 0008T, and we have kept them both in APC 0422 for the CY 2006
OPPS. The services reported by these CPT codes are clinically similar
to the other procedures in APC 0422. In addition the resources used to
furnish the services are very similar to the other services in APC 0442
based on hospital claims data. We see no reason to create a new APC for
CPT codes 43257 and 0008T.
We also have not undertaken the special claims manipulation that
the commenter requested. We do not believe that it is valid to add the
median cost for an endoscopy to the costs for claims for which an
endoscopy is not billed on the same claim. Similarly, we do not believe
that it is valid to include all of the charges for endoscopies other
than a single unit of CPT code 43234 or 43235 in the calculation of the
median cost for the Stretta procedure. As the commenter indicates,
endoscopy is a fundamental part of the Stretta service described by CPT
code 43257. Therefore, there is every reason to believe that a hospital
included all charges pertaining to the service in the charge for C9701
(the predecessor of CPT code 43257).
To set the median cost for APC 0422, we used all single procedure
claims for CPT code 43257, and we also used claims with CPT code 43257
which contained one and only one unit of either CPT codes 43234 or
43235 on the same date of service. We packaged the costs of the single
unit of the additional endoscopy and used these claims records in the
calculation of the median cost for APC 0422.
For CY 2006 OPPS, the payment for APC 0422 is based on the median
cost of $1,434 that was derived from this process. The median for CPT
code 43257 which we derived from this process is $1,669. CPT codes
43257 and 0008T remain assigned to APC 0422.
h. Urological Stenting Procedures (APCs 0163 and 0164)
Comment: A few commenters requested reassignment of two urology
procedures to newly created APC 0429 (Level V Cystourethroscopy). The
commenters requested that CPT codes 0084T (Insertion of a temporary
prostatic urethral stent) and 52282 (Cystourethroscopy, with insertion
of urethral stent) be assigned to the new APC.
CPT 52282 is currently assigned to APC 0163 (Level IV
Cystourethroscopy and other Genitourinary Procedures) and the
commenters stated that it is neither clinically similar to the other
procedures in that APC nor is it similar in terms of hospital
resources. Those commenters also stated that CPT code 0084T is better
suited for assignment to APC 0429 than to APC 0164 (Level I Urinary and
Anal Procedures), to which it is currently assigned.
The commenters requested that if we do not reassign CPT codes 52282
and 0084T to APC 0429, that we at least move CPT code 52282 to APC 0385
(Level I Prosthetic Urological Procedures), where it was assigned for
CY 2004. They stated that CMS moved it from APC 0385 for CY 2005
because CMS determined that the urethral stent being implanted was not
a prosthetic device, a decision with which they strongly disagree. They
asserted that the urethral stent, like collagen implants injected into
the urethra and other devices, meets the Medicare definition of a
prosthetic device and should be assigned to an APC in line with that
designation.
Response: Based on careful examination of the claims data and the
comments, we continue to find that assignment for these procedures to
APCs 0163 and 0164 is appropriate. The median cost for CPT code 52282,
$1,955, is considered within the range of median costs for the other
procedures assigned to APC 0163. The APC median cost is $1,997, and the
narrow procedure-specific range of median costs within the APC is
$1,730 to $2,117. In contrast, the median cost for APC 0385, $4,384, is
more than twice that of the median cost of CPT code 52282. In addition,
the median cost for APC 0429 of $2,501 is significantly higher that the
median cost for CPT code 52282.
While APC 0385 (Level I Prosthetic Urological Procedures), as its
title suggests, was established as an APC for some urological
procedures requiring prosthetics, it is not required that all
procedures utilizing urological prosthetics be assigned to an APC with
``prosthetic'' in the title. Instead, urological procedures that do, or
do not, utilize prosthetics, like other services paid under the OPPS,
are assigned to APCs based on clinical and resource homogeneity with
other services in those clinical APCs. CPT code 52282 for
cystourethroscopy with insertion of a urethral stent shares common
clinical characteristics with other cystourethrscopy services also
assigned to APC 0163. Therefore, we continue to believe that APC 0163
is the most appropriate APC assignment for CPT code 52282 for CY 2006.
In addition, we have no claims data for CPT code 0084T because it
was a new code for CY 2005. We assigned it to APC 0164 based on
available information regarding the specific service, as well as
clinical and cost information for other hospital services payable under
the OPPS. CPT Changes: An Insider's View 2005, describes CPT code 0084T
as the prepping of a patient for a typical sterile urethral device
insertion procedure, followed by activities to select and deploy the
stent in the prostatic urethra, and assessment of the patient's ability
to void prior to discharge from the clinic. As stated earlier, we based
our assignment for CPT code 0084T on the expected clinical and hospital
resource characteristics of the service, rather than on whether or not
the procedure required a prosthetic. Procedures utilizing urological
prosthetics do not necessarily show the most clinical and resource
compatability with other services assigned to APCs with prosthetic
urological procedures in their APC titles, as such individual
procedures may exhibit a wide range of clinical and cost differences.
We assigned CPT code 0084T to a clinical APC that includes other
urinary and anal procedures. We do not agree that its assignment to APC
0429, the highest level cytourethroscopy APC that contains complex
laser prostate and percutaneous nephrostolithotomy procedures with a
median cost of $2,502, is an appropriate placement for CPT code 0084T
for CY 2006. We continue to believe that APC 0164 is the most
appropriate APC assignment for CPT code 0084T for CY 2006. We will have
CY 2005 claims data for CPT code 0084T and will reassess its APC
assignment based on those data for the CY 2007 OPPS update.
We are finalizing, without modification, our proposal to retain CPT
code 52282 in APC 0163 and CPT code 0084T in APC 0164 for CY 2006.
[[Page 68607]]
4. Other Surgical Services
a. Excision-Malignant Lesions (APCs 0019 and 0020)
Comment: One commenter submitted comments regarding CPT codes 11620
(Excision, malignant lesion, excised diameter 0.5 cm or less) and the
code 11621 (excised diameter 0.6 to 1.0 cm). The commenter,
representing a hospital, stated that there appeared to be an error in
the placement of CPT code 11620 in APC 0020 (Level II Excision/Biopsy)
and CPT code 11621 in APC 0019 (Level I Excision/Biopsy) because CPT
code 11621 is the more invasive procedure of the two, yet it had been
placed in an APC with a lower payment rate for CY 2006.
Response: This is not an error. APCs are arranged based on a
combination of considerations, including clinical homogeneity and
median costs from hospital claims data reflecting hospital resources
used. We have several hundred single claims for CY 2003 and CY 2004 for
each of the services. Our data for these years consistently show that
CPT code 11621 was performed almost twice as often as CPT code 11620,
but it also had a consistently lower median cost, reflecting less
hospital resources required for the excision of a larger lesion in
comparison with a smaller lesion. Based on CY 2004 hospital claims
data, CPT code 11621 has a median cost of about $314 based on 659
single claims and is appropriately assigned to APC 0019, with a median
cost of about $247. To place CPT code 11621 in APC 0020 (median cost of
about $413) would create a significant overpayment. Conversely, CY 2004
claims data reveal a median cost of about $511 for CPT code 11620,
based on 347 single claims, and therefore, the code is appropriately
placed in APC 0020.
There could be many reasons why the hospital claims data reflect
greater resource utilization for the procedure that the commenter
believes is ``less invasive,'' such as different supplies or equipment
used for smaller excisions or variations in surgical techniques and
related procedural times depending on the size of the lesion. We feel
confident that our stable median cost data accurately reflect that the
hospital resources are greater for the excision procedure described by
CPT code 11620, and therefore, will finalize our proposed CY 2006 APC
assignments for CPT code 11620 in APC 0020 and for CPT code 11621 in
APC 0019.
b. External Fixation (APCs 0046 and 0050)
Comment: One commenter suggested that the current configuration of
APC 0046 (Open/Percutaneous Treatment Fracture or Dislocation)
significantly underpays procedures that involve external fixation
devices. The commenter gave several recommendations on ways to realign
the procedures. First, they recommended that CMS distinguish procedures
that involve external fixation devices by allowing hospitals to bill
either CPT code 20690 (Application of a uniplane, unilateral, external
fixation system) or CPT code 20692 (Application of multiplane,
unilateral, external fixation system) together with a fracture
procedure code, and that these combinations of codes would be placed in
a new APC specifically for ``fracture procedures with fixation
devices.'' The commenter reasoned that establishing one or two new APCs
for these procedures when billed together would eliminate the ongoing
two times rule violation, preserve clinical homogeneity, and more
appropriately reimburse hospitals. Second, if CMS were to establish two
new APCs, one should be for lower extremity fractures and the second
should include upper extremity fractures.
Response: CPT codes 20690 and 20692 are currently in APC 0050, and
no changes were proposed for the CY 2006 OPPS. There are no 2 times
violations in the APC in which they are located, and each of these
codes represents 1 percent or less of the total volume in the APC.
Therefore, we see no reason to create a new APC for these codes as we
believe APC 0050 provides appropriate payment to hospitals when
services described by CPT codes 20690 and 20692 are provided and billed
in accordance with correct coding guidelines. However, the CPT codes
for treatment of a fracture often include ``with'' or ``without
fixation'' in the definition of the code. Where fixation is included in
the definition of the code, it would be miscoding to also report 20690
or 20692; these codes should be reported if, and only if, fixation is
not included in the CPT code for treatment of the fracture. Providers
should review the CPT instructions and look to the AMA's guidance on
coding if they have questions about when these codes should be
reported.
We do acknowledge, however, that we have excepted APC 0046 from the
two times rule for several years, as we will again for CY 2006. This is
a large APC to which many procedures are assigned, and the median costs
of the significant procedures in this APC range from a low of about
$1,231 to a high of approximately $3,460. We will ask the APC Panel at
its next biannual meeting to consider whether this APC could be
reconfigured to improve its clinical and resource homogeneity.
c. Intradiscal Annuloplasty (APC 0203)
Comment: During the August 2005 meeting of the APC Panel, there was
one presentation by a provider in support of a higher payment amount
for intradiscal annuloplasty procedures. The presenter provided
clinical and cost information to the Panel and stated that the
procedures' current assignments to APC 0203 (Level IV Nerve Injections)
did not describe the clinical features or hospital resources associated
with CPT codes 0062T (Percutaneous intradiscal annuloplasty, any
method, unilateral or bilateral including fluoroscopic guidance; single
level) and 0063T (Percutaneous intradiscal annuloplasty, any method,
unilateral or bilateral including fluoroscopic guidance; one or more
additional levels). Further, the presenter suggested that a more
appropriate APC assignment that would achieve more clinical and
hospital resource homogeneity would be either APC 0050 (Level II
Musculoskeletal Procedures except Hand and Foot), or APC 0051 (Level
III Musculoskeletal Procedures except Hand and Foot). The APC Panel
agreed with the presenter and recommended that CMS assign the procedure
to either APC 0050 or 0051.
Commenters on our proposed rule also requested that CMS assign CPT
codes 0062T and 0063T to an APC that more accurately reflects the level
of the procedures' resource use. The commenters also suggested that
placement in either APC 0050 or 0051 would be the most appropriate from
both clinical and payment aspects. They, like the presenter to the APC
Panel, believed that a musculoskeletal APC was a more clinically
accurate description of the procedure than its CY 2005 assignment with
nerve injections in APC 0203.
Response: CPT codes 0062T and 0063T were new for January 2005.
Thus, we had no hospital claims data upon which to base our APC
assignment of these procedures, and we were interested in the
additional information that was provided to us for our CY 2006 update
to the OPPS. Commenters indicated that performance of the procedures
requires a single use electrothermal catheter that costs more than
$1,000 and operating room time of one hour. In addition, other more
costly capital equipment is required in comparison with procedures
assigned to
[[Page 68608]]
APC 0203. The presenter to the APC Panel stated that the procedure
costs range from $4,000 to about $7,000.
We found the information provided in the APC Panel presentation and
the public comments to the proposed rule, in addition to the APC
Panel's recommendation and historical hospital claims data regarding
other services payable under the OPPS, to be convincing in favor of
assignment of this procedure to APC 0050, with an APC median cost of
$1,423 for CY 2006. We agree that placement in APC 0050 will result in
more accurate payment and more APC clinical homogeneity for the
procedure. For our CY 2007 update, we will have hospital claims data
for the procedure and we will reevaluate the assignment.
d. Kyphoplasty (APC 0051)
Comment: Two commenters on the November 15, 2004 final rule with
comment period (69 FR 65681), a device manufacturer and an orthopedic
surgeon, commended CMS for creating C-codes (HCPCS codes C9718
Kyphoplasty, one vertebral body, unilateral or bilateral injection; and
C9719, Kyphoplasty, each additional vertebral body) for this procedure
in the hospital outpatient setting. The commenters stated, however,
that placement in APC 0051, Level III Musculoskeletal Procedures Except
Hand and Foot, (CY 2005 payment rate of $2,043) does not appropriately
reflect the hospital resources used in performing these procedures, and
that these assignments violate the two times rule because the resources
associated with kyphoplasty are more than two times the cost of the
resources for procedures in APC 0051. Both commenters recommended that
kyphoplasty procedures be placed in APC 0425, Level II Arthroplasty
with Prosthesis, at a CY 2005 payment rate of $5,562 in order to better
reflect the clinical features and resources needed to perform the
procedures. One commenter alternatively suggested creating a new APC
solely for kyphoplasty.
Additionally, these two commenters also submitted new comments to
the July 25, 2005 proposed rule containing new recommendations
pertaining to the same issues. The commenters recommended that CMS
either reassign kyphoplasty procedures to APC 0681 (Knee Arthroplasty)
with a payment rate of $8,103 or create a new APC for kyphoplasty
titled ``Vertebral spinal augmentation and stabilization using balloon
inflation'' with a payment rate of $8,750. They also repeated their
prior recommendation to place kyphoplasty services in APC 0425;
however, one commenter suggested that this should only be a ``stop gap
measure'' for one year until CMS can gather claims data. This commenter
also recommended that if the CPT codes for kyphoplasty have a status
indicator of ``T,'' they should then be placed in the same APC, as the
add-on code would be subject to the multiple procedure reduction. The
commenters reasoned that movement to a new APC would better reflect the
clinical resources used and referenced outside data showing hospital
median charges that range from $4,500 to $41,000, with an average
charge of approximately $15,700.
A third individual commenter representing a hospital recommended
that CMS either increase reimbursement for kyphoplasty, or change its
status indicator to ``C'' to be more consistent with InterQual
``Guidelines for Surgery and Procedures in the Inpatient Setting'' and
the Ingenix Cross Coder.
Response: For CY 2005, CMS created two C-codes for the kyphoplasty
procedure: C9718 Kyphoplasty, one vertebral body, unilateral or
bilateral injection and HCPCS code C9719 Kyphoplasty, one vertebral
body, unilateral or bilateral injection; each additional vertebral body
(List separately in addition to code for primary procedure). These
procedures were placed in APC 0051 with a ``T'' status indicator
because we believed that this APC was appropriate for these procedures
in terms of clinical characteristics and resource costs.
Though we do not yet have claims data, we have been told that a
bone biopsy is performed more than half the time in addition to the
kyphoplasty procedure. For CY 2005, under the OPPS the bone biopsy
could be billed separately along with one or more of the kyphoplasty C-
codes. The typical deep bone biopsy code used for a vertebral body
procedure, CPT code 20225, was assigned to APC 0020 (Level II Excision/
Biopsy), which had a ``T'' status indicator and a payment rate of $434
for CY 2005. Both the biopsy and kyphoplasty procedures had a status
indicator of ``T''; therefore, when performed together the hospital
would receive fifty percent of the payment rate for the bone biopsy
($217). We have been told that hospitals typically also bill one or
more fluoroscopy codes for necessary guidance, such as CPT codes 76003
(Fluroscopic guidance for needle placement), or 76005 (Fluroscopic
guidance and localization of needle or catheter tip for spine or
paraspinous diagnosis or therapeutic injection procedures, including
neurolytic agent destruction), along with the kyphoplasty procedure,
and we note that these fluoroscopic services were packaged for CY 2005.
Thus, for CY 2005 payment to a hospital providing a single level
kyphoplasty procedure and billing packaged fluoroscopic guidance that
was also accompanied by a bone biopsy would be about $2,260.
For CY 2006, several new CPT codes were created to describe the
kyphoplasty procedure. These codes are:
CPT 22523--Percutaneous vertebral augmentation, including
cavity creation (fracture reduction and bone biopsy included when
performed) using mechanical device, one vertebral body, unilateral or
bilateral cannulation (e.g., kyphoplasty); thoracic
CPT 22524--Percutaneous vertebral augmentation, including
cavity creation (fracture reduction and bone biopsy included when
performed) using mechanical device, one vertebral body, unilateral or
bilateral cannulation (e.g., kyphoplasty); lumbar
CPT 22525--Percutaneous vertebral augmentation, including
cavity creation (fracture reduction and bone biopsy included when
performed) using mechanical device, one vertebral body, unilateral or
bilateral cannulation (e.g., kyphoplasty); each additional thoracic or
lumbar vertebral body (List separately in addition to code for primary
procedure)
CPT codes 22523 and 22524 generally correspond to C code C9718, and
CPT code 22525 generally corresponds to C code C9719. We will be
deleting the two kyphoplasty C-codes for CY 2006, and hospitals will
use the appropriate CPT codes to bill for kyphoplasty services. The new
CPT codes include a bone biopsy when performed so hospitals will no
longer separately bill CPT code 20225 when a bone biopsy accompanies a
kyphoplasty procedure.
CPT code 76012 (Radiological supervision and interpretation,
percutaneous vertebroplasty or vertebral augmentation including cavity
creation, per vertebral body; under fluoroscopic guidance) for
fluoroscopic guidance also has changed in definition for CY 2006 to
include specific reference to vertebral augmentation including cavity
creation, which is characteristic of the kyphoplasty procedure. For CY
2006, hospitals using fluoroscopic guidance for kyphoplasty would bill
CPT code 76012, which has a status indicator S and is assigned to APC
0274 for calendar year CY 2006 with a payment rate of $173.53. Thus,
while a hospital providing a kyphoplasty service in CY 2006 will no
longer receive separate payment under the OPPS for an accompanying bone
biopsy, hospitals
[[Page 68609]]
will be able to bill for and receive separate payment for necessary
fluoroscopic guidance. Thus, if there were no change for CY 2006 in the
assignment of kyphoplasty services to APC 0051, as they were initially
placed for CY 2005, payment to a hospital providing a single level
kyphoplasty procedure and billing separately payable fluoroscopic
guidance that was also accompanied by a bone biopsy would be about
$2,352.
Based on modifications in coding associated with the change from C-
codes to new CPT codes and additional clinical and hospital resource
information, we believe it is appropriate to move the kyphoplasty
procedures from APC 0051 to another APC for CY 2006. As we originally
developed C-codes for outpatient hospital billing of kyphoplasty
services after extensive clinical review, we do not agree with one
commenter that kyphoplasty should by placed on the OPPS inpatient list.
In addition, as kyphoplasty procedures do not entail implantation of a
prosthesis, we do not agree with the commenters that kyphoplasty is
comparable to services that require a prosthesis and, therefore, we
will not place the new CPT codes in APC 0425 (Level II Arthroplasty
with prosthesis). We also will not place the new CPT codes in APC 0681
(Knee arthroplasty) because we do not believe that the services are
clinically coherent with knee arthroscopy procedures, and because we do
not believe that resources required for kyphoplasty warrant that level
of payment. We also will not create a separate APC solely for
kyphoplasty procedures because we have no claims data from CY 2004 upon
which to base a calculation of median cost for such an APC.
After considering the additional comments submitted, we have
decided to place CPT codes 22523, 22524, and 22525 in APC 0052 (Level
IV Musculoskeletal Procedures Except Hand and Foot) for CY 2006, based
on clinical and resource compatibility with other procedures assigned
to that APC. We agree with the commenters that the initial level
procedures and the add-on code for each additional level should be
assigned to the same ``T'' status APC. Although we received outside
data on hospital charges and costs for this procedure, the data that
was presented to us was highly variable in terms of charges and
presented cost data for only one hospital. We will examine the median
costs from hospital claims data for these services when it becomes
available for the CY 2007 OPPS update.
e. Neurostimulator Electrode Implantation (APCs 0040 and 0225)
Comment: Commenters, including the APC Panel, recommended that the
services currently assigned to APCs 0040 (percutaneous implantation of
neurostimulators electrodes, excluding cranial nerve) and 0225
(implantation of neurostimulators electrodes, cranial nerve) be
reorganized into three APCs, based on clinically coherent groupings of
percutaneous, laminectomy or incision, and cranial neurostimulator
electrode implantation. They indicated that such a realignment would
enhance clinical and cost congruence of the procedure groupings. Other
commenters objected to the reassignment of CPT code 63655 from APC 0225
to APC 0040.
Response: We agree with the proposal for creation of a new
neurostimulator electrode implantation APC and have made the change.
CPT codes 63655 (from APC 0225), 64575 (from APC 0040), 64577 (from APC
0225), 64580 (from APC 0225) and 64581 (from APC 0040) have been
reassigned to newly created APC 0061 (Laminectomy or incision for
implantation of neurostimulators electrodes, excluding cranial nerve).
See section IV. A. for our discussion of adjustments to median
costs for device-dependent APCs. See Table 16 for the adjusted median
costs for APCs 0040, 0225 and 0061 for CY 2006.
f. Neurostimulator Generator Implantation (APC 0222)
Comment: Commenters indicated that the proposed payment for
neurostimulator generator implantation is inadequate and that CMS
should use external data to set the payment rates. They explained that
if payment rates were not increased, providers would cease providing
the services. They asked that CMS set the median cost at the CY 2005
OPPS payment median inflated by the market basket.
Response: The proposed payment for APC 0222 (Implantation of
neurological device) was based on a median cost that was set at 85
percent of the CY 2005 payment median. As with some other device-
dependent APCs, the median cost on which the CY 2006 OPPS payment rate
will be based will be set at 90 percent of the CY 2005 OPPS payment
median. See the discussion of device-dependent APCs in section IV.A of
this preamble.
Comment: Commenters objected to the payment for rechargeable
neurostimulators under APC 0222 because they said that the payment rate
for APC 0222 is inadequate for the payment of nonrechargeable devices,
and that hospitals will not permit implantation of the rechargeable
neurostimulators for this inadequate payment. They stated that CMS
recognized the need for additional payment for rechargeable
neurostimulators when it provided a new technology add-on payment under
the IPPS for 2006, and that CMS should create a new category for
rechargeable neurostimulators and should grant pass-through status for
rechargeable neurostimulators for the CY 2006 OPPS.
Response: CMS does not announce decisions regarding pass-through
status in regulations. There are many new items and services that fall
under existing categories and pass-through status for each is
determined on the merits of the specific application. When and if pass-
through status for rechargeable neurostimulators is granted, it will be
implemented through the OCE with creation of an appropriate category
and status indicator assignment. Additions to the items qualifying for
pass-through status are announced in quarterly updates of the OPPS
claims processing and billing instructions sent to our contractors and
posted on the CMS Web site.
g. Thoracentesis/Lavage (APC 0070)
Comment: One commenter said that CPT code 32019 (Insert pleural
catheter) should be assigned to APC 0652 (Insertion of intraperitoneal
catheters) because the clinical and resource characteristics of APC
0652 are more appropriate to CPT code 32019 than are the
characteristics of APC 0070, the code's placement for CY 2005. The
commenter indicated that APC 0070 is not an appropriate placement for
CPT code 32019 because it is not like CPT code 32020 (tube thoracostomy
with or without water seal) to which it is often compared and is
assigned to APC 0070. The commenter stated that CPT code 32020 is a
short term procedure, typically done at bedside with a single
percutaneous incision, and uses a catheter with a simpler and different
design. The commenter stated that CPT code 32019 is a long term
procedure, typically done in a treatment room, using multiple incisions
and subcutaneous tunneling, and a catheter with a more complex design.
The commenter did not specifically describe the clinical or resource
characteristics of APC 0652 that justify the conclusion that CPT code
32019 is more appropriately placed in APC 0652.
Response: We agree that the procedure reported by CPT code 32019 is
likely more resource intensive than CPT code 32020 and other higher
[[Page 68610]]
volume codes in APC 0070. Therefore, we are reassigning CPT code 32019
to APC 0427 (level III tube changes and repositioning) for the CY 2006.
We do not agree that it is necessarily similar in resource use to the
insertion of intraperitoneal catheter or cannula procedures currently
assigned to APC 0652. We will examine the claims data for this code and
review that decision when there are claims data for the code, which was
new for CY 2004 and for which no cost data are available for use in the
CY 2006 OPPS.
5. Other Services
a. Allergy Testing (APC 0370)
A number of providers have expressed confusion related to the
reporting of units for allergy testing described by CPT codes 95004
through 95078. Most of the CPT codes in the code range are assigned to
APC 0370 (Allergy Tests) for the CY 2005 OPPS. Nine of those CPT codes
instruct providers to specify the number of tests or use the singular
word ``test'' in their descriptors, while five of them do not contain
such an instruction or do not contain ``tests'' or ``testing'' in their
descriptors. Some providers have stated that the lack of clarity
related to the reporting of units has resulted in erroneous reporting
of charges for multiple allergy tests under one unit (that is, ``per
visit'') for the CPT codes that instruct providers to specify the
number of tests.
In light of the variable hospital billing that may be inconsistent
with the CPT code descriptors, we carefully examined the CY 2004 single
and multiple procedure claims data for the allergy test codes that
reside in APC 0370 to set the CY 2006 payment rates. Our examination of
the CY 2004 claims data revealed that many of the services for which
providers billed multiple units of an allergy test reported a
consistent charge for each unit. Conversely, some providers that billed
only a single unit of an allergy test reported a charge many times
greater than the ``per test'' charge reported by providers billing
multiple units of an allergy test.
Our analysis of the claims data appeared to validate reports made
by a number of providers that the charges reported on many of the
single procedure claims represent a ``per visit'' charge, rather than a
``per test'' charge, including claims for the allergy test codes that
instruct providers to specify the number of tests. Because the OPPS
relies only on these single procedure claims in establishing payment
rates, we believed that this inaccurate coding would have resulted in
an inflated CY 2006 median cost for services that were in the CY 2005
configuration of APC 0370.
Therefore, we proposed to move the allergy test CPT codes that
instruct providers to specify the number of tests or use the singular
word ``test'' in their descriptors from APC 0370 to proposed APC 0381
(Single Allergy Tests) for CY 2006. We proposed to calculate a ``per
unit'' median cost for proposed APC 0381 using a total of 306 claims
containing multiple units or multiple occurrences of a single CPT code.
Packaging on the claims was allocated equally to each unit of the CPT
code. Using this ``per unit'' methodology, we proposed a median cost
for APC 0381 of $11 for CY 2006. Because we believed the single
procedure claims for the codes remaining in APC 0370 reflected accurate
coding of these services, we proposed to use the standard OPPS
methodology to calculate the median for APC 0370. Table 12 as published
in the proposed rule (70 FR 42711) listed the proposed assignment of
CPT codes to APC 0370 and proposed APC 0381 for CY 2006.
We received one public comment concerning our proposed policy
changes for allergy test procedures.
Comment: One commenter supported our proposal to move the allergy
test CPT codes into two APC configurations to differentiate between CPT
codes that represent ``per visit'' and ``per test'' services.
Response: We agree with the commenter that differentiating single
allergy tests (``per test'') from multiple allergy tests (``per
visit'') by assigning these services to two different APCs provides
hospital coders with better clarity for billing these services and more
accurately places these tests with like services sharing similar
resource costs. Therefore, for CY 2006, we are finalizing our proposal
to assign single allergy tests to newly established APC 0381 and
maintaining multiple allergy tests in APC 0370. We expect that the
improved clinical and resource homogeneity of these APCs, along with
improved hospital coding of these services, will result in more
accurate claims data for setting the CY 2008 payment rates for these
services. In the meantime, for CY 2006, we are finalizing our proposal
to calculate a ``per unit'' median cost for APC 0381 using a total of
340 claims containing multiple units or multiple occurrences of a
single CPT code. Using this ``per unit'' methodology, we are setting
the payment rate for APC 0381 based on a median cost of $11 for CY
2006. Because we believe the single procedure claims for the codes
remaining in APC 0370 reflect accurate coding of these services, we are
finalizing our proposal to use the standard OPPS methodology to
calculate the median for APC 0370. Table 15 lists the assignment of CPT
codes to APCs 0370 and 0381 for CY 2006. We will be providing billing
guidance to hospitals in CY 2006 clarifying the billing of allergy
testing services under the OPPS that should be reported with charges
per test rather than per visit, so that the accuracy of hospital claims
data improves and allows us in the future to calculate median costs for
both APCs 0370 and 0381 using our standard OPPS process.
Table 15.--Assignment of CPT Codes to APC 0370 and APC 0381 for CY 2006
------------------------------------------------------------------------
APC 0370 APC 0381
------------------------------------------------------------------------
95056, Photosensitivity tests.......... 95004, Percutaneous allergy
skin tests.
95060, Eye allergy tests............... 95010, Percutaneous allergy
titrate test.
95078, Provocative testing............. 95015, Intradermal allergy
titrate-drug/bug.
95180, Rapid desensitization........... 95024, Intradermal allergy
test, drug/bug.
95199U, Unlisted allergy/clinical 95027, Intradermal allergy
immunologic service or procedure. titrate-airborne.
95028, Intradermal allergy test-
delayed type.
95044, Allergy patch tests.
95052, Photo patch test.
95065, Nose allergy test.
------------------------------------------------------------------------
[[Page 68611]]
b. Apheresis (APC 0112)
Comment: Several commenters commended our proposal to reassign CPT
code 36515 (Therapeutic apheresis; with extracorporeal immunoadsorption
and plasma reinfusion) from APC 0111 (Blood product exchange) to APC
0112 (Apheresis, Photopheresis, and Plasmapheresis) for CY 2006. These
commenters stated that the resource requirements and the clinical
characteristics of CPT code 36515 more closely resemble the services
assigned to APC 0112. However, these commenters expressed concern that
the proposed 25 percent reduction in payment for APC 0112 (from $2,127
in CY 2005 to $1,590 proposed for CY 2006) will not cover the costs
associated with the disposable supplies, specially trained medical
staff, and equipment used in conjunction with the services assigned to
APC 0112 and described by CPT codes 36515, 36516 (Therapeutic
apheresis; with extracorporeal selective adsorption or selective
filtration and plasma reinfusion), and 36522 (Photopheresis,
extracorporeal). For example, commenters explained that the cost of the
disposable supplies alone for CPT codes 36515 and 36516 nearly equals
the proposed payment for APC 0112. One commenter provided practice
expense information from the Medicare Physician Fee Schedule to
substantiate supply costs of over $1,400 for CPT codes 36515 and 36516
and over $900 for CPT code 36522. Many commenters alleged that over
half the hospitals reporting claims for CPT codes 36515 and 36516 in CY
2004 did not fully reflect the costs of the disposables in their
charges for the procedure. Some of these commenters stated that
hospitals that charge separately for the disposables are likely to
charge more accurately for the full procedure than hospitals that
bundle the entire costs of the disposable supplies into their charge
for the procedure. These commenters urged that CMS set the payment rate
for APC 0112 based only on claims where separate charges for supplies
have been identified. Other commenters recommended that we exclude the
CY 2004 claims data for CPT codes 36515 and 36516 and set the payment
rate for APC 0112 based solely on the claims for CPT code 36522, whose
proposed CPT code median cost appeared to be accurate to the majority
of commenters. In addition, several commenters urged that we reexamine
our calculation of the median cost for APC 0112 for errors in the
computation, due to their observation that the proposed median cost of
APC 0112 was significantly lower than the proposed median cost for CPT
code 36522, which comprised 83 percent of the single claims used to set
the proposed payment rate for APC 0112.
One commenter noted that CPT code 36516 is utilized for billing
LDL-apheresis treatments, and expressed concern that only 40 percent of
the CY 2004 claims used to calculate the proposed payment for CPT code
36516 actually reported diagnoses consistent with LDL-apheresis
treatments on the claim. This commenter provided a list of hospitals
which the commenter believed to be misreporting CPT code 36516, based
on the commenter's experience as a distributor and knowledge of the
market, and requested that we exclude the claims for CPT codes 36515
and 36516 submitted by these providers when calculating the payment
rate for APC 0112. Another commenter provided a detailed analysis of
the claims for CPT codes 36515, 36516, and 36522 that we used to
calculate the proposed payment rate for APC 0112. Based on this claims
analysis, of the 24 providers that billed CPT code 36515, 29 percent
reported costs for the entire procedure at or below $170, and 67
percent reported medical supply costs at or below $1,412. The commenter
also noted that nearly half of the single claims for CPT code 36515
were not billed with ICD-9 codes that supported the medical necessity
of protein A column apheresis, leading the commenter to conclude that
such providers were miscoding the services they performed. For
instance, the commenter suspected that several hospitals may have
incorrectly billed CPT code 36515 when reporting the collection of
venous blood by venipuncture (CPT code 36415) based on the charges
reported by these hospitals matching a typical charge for venipuncture.
Further claims analysis also revealed that, of the 46 providers that
billed CPT code 36516, 63 percent reported medical supply costs at or
below $1,485. Furthermore, the commenters said that only 44 percent of
the single claims for CPT code 36516 were billed with ICD-9 diagnosis
codes that supported the medical necessity of LDL-apheresis. The
commenter concluded that the underreporting of costs and assignment of
inappropriate ICD-9 diagnosis codes to claims reporting CPT codes 36515
and 36516 were strong indicators that many providers failed to include
the charges for medical supplies on the claims for CPT codes 36515 and
36516 or miscoded the services they provided.
Several commenters suggested that because the procedures assigned
to APC 0112 utilize device systems to modify or selectively remove
agents from the blood, these services should be treated in a manner
similar to either device dependent APCs or blood and blood products.
For instance, commenters recommended that we apply the same methodology
to APC 0112 as we proposed to apply to blood and blood products,
limiting the decrease in median cost to 10 percent on the basis that
the services assigned to APC 0112 could be considered closely related
to blood and blood products. Alternatively, these commenters suggested
that we should consider treating APC 0112 as a device dependent APC,
limiting the decrease in median cost to 15 percent on the basis that
the device systems are integral to the procedures assigned to APC 0112
and comprise a significant cost component of these procedures. One of
these commenters urged that we add APC 0112 to the list of device
dependent APCs, and set the payment floor at 100 percent of the CY 2005
payment rate plus the market basket update for all device dependent
APCs.
Response: We appreciate commenters' concerns that we use accurate
and complete claims data to develop the median cost to set the payment
rate for APC 0112 for CY 2006. In response to requests by several
commenters that we reexamine our calculation of the median cost for APC
0112, we closely studied the single claims charge and cost
distributions for CPT codes 36515, 36516, and 36522, those single
claims we used to set the payment rate for APC 0112. First, we noted
that we had 4,828 single bills drawn from a total of 6,071 bills for
services in APC 0112, allowing us to use approximately 80 percent of
all claims in establishing the median cost for APC 0112. This large
percentage of single bills held true for each of the 3 CPT codes
assigned to the APC as well. The availability of almost 5,000 single
bills for rate setting, a 15 percent increase over the number of single
bills available for the CY 2005 OPPS update, increases our confidence
in the accuracy of the median cost of APC 0112 calculated for CY 2006.
Next, we confirmed that we made no errors in the calculation of the
APC median cost. The apparent inconsistency between the relatively high
median cost of CPT code 36522, which provided the majority of single
claims for APC 0112, and the relatively lower APC median cost was
explained by the observed distribution of costs of single claims for
all of the services assigned to APC 0112. Almost half of the costs of
single claims for CPT code 36522 are closer to the APC median. The cost
of single claims for CPT code
[[Page 68612]]
36522 at the 45th percentile is $1,597.45. We applied all of our usual
processes, including standard trimming, to the calculation of the APC
median cost.
In our analysis of the distributions of costs from claims for all
three CPT codes assigned to APC 0112, we observed that CPT code 36515,
in particular, had some claims with very low costs of less than $200 up
through the 50th percentile of claims costs. While, in the commenters'
opinions, claims with even higher costs could not have represented the
full costs of the procedures, we were not confident that we had reason
to exclude claims with higher costs in calculating the median cost of
APC 0112. Therefore, we identified 12 hospital providers submitting
claims for CPT code 36515 with the lowest fifteen percent of costs and
then recalculated the median cost for APC 0112, excluding all claims
for CPT code 36515 reported by these 12 providers. We found essentially
no change in the median cost of APC 0112 in this recalculation, as
compared with its median cost based on all single claims.
Because commenters suggested that we set the APC median cost using
only claims with medical supply revenue code charges, we proceeded to
analyze all single claims for APC 0112 for the presence of separate
line item charges under revenue codes 270 (Medical/Surgical Supplies)
and 272 (Sterile Supplies) that could most likely represent separate
charges for the costly disposables that commenters indicated are
required for all 3 CPT codes assigned to the APC. The median cost for
claims with medical supply revenue code charges is higher, at $2,800,
compared with the median cost for claims without medical supply revenue
code charges, $1,400. However, we do not believe it is appropriate to
subset the claims based on the presence of medical supply revenue code
charges for calculating the median APC cost for several reasons. First,
we noted that between 80 and 90 percent of the single claims for each
CPT code and, consequently, of all single bills used to estimate the
median cost for APC 0112 did not have separate charges under one of the
two specified revenue codes. This is fully consistent with our past
guidance to hospitals that it is appropriate to bundle the costs of all
supplies (excluding implantable devices with active device codes) into
the line item charges for the procedures with which they were used. For
those claims billed with charges in the 270 and 272 medical supply
revenue codes, we observed that the specific median cost associated
with those revenue codes was only $349. Because this median cost is
well below the approximately $900-1,400 cost commenters expected for
the disposable supplies, we are not convinced that the bills with
separate revenue code charges are truly more reflective of the full
costs of the apheresis procedures. Finally, we observed that there were
actually higher total costs in the distribution of those claims without
separate billing of revenue code charges, up to $12,296 in comparison
with a maximum of $10,131 for those claims with separate revenue codes
charges. Considering the small percentage of providers reporting
separate supply charges for CPT codes 36515, 36516, and 36522 under
revenue codes 0270 and 0272, and the low median cost for such revenue
code charges, the majority of providers appear more likely to have
included their disposable supply charges in their overall charges for
the procedures rather than to have reported such charges under a supply
revenue code. We have no reason to believe, based on our analysis, that
the claims with separate charges for supplies are more correctly coded
or more accurately reflective of the costs of services assigned to APC
0112.
In conclusion, we are not making any adjustments to our standard
processes for developing APC median costs for CY 2006 for APC 0112. We
will not screen claims for the presence of specified diagnoses that the
commenters feel are appropriately treated with these procedures and
assume that all other claims are miscoded. The three services treat a
number of different medical conditions, and while there are some local
coverage policies for the procedures, it would be difficult to identify
the correct ICD-9 diagnosis coding for those claims reflecting all of
the cases of appropriate utilization of these services. We are not
calculating the payment rate for APC 0112 based solely on those claims
where separate charges for supplies have been identified. Although we
recognize that some of the charges reported for CPT codes 36515 and
36516 in particular are unexpectedly low, we disagree with those
commenters who asserted that the hospital claims data for CPT codes
36515 and 36516 are flawed to the extent that would justify discarding
all such claims and basing the payment rate for APC 0112 solely on
claims for CPT code 36522. We will not exclude all claims for two of
the three procedures assigned to APC 112 to calculate the APC's median
cost, because we believe that the APC median cost should reflect the
variable costs of all services assigned to it. Consistent with details
provided in the comments, we do not believe that the costs of
procedures described by CPT codes 36515, 36516, and 36522 are the same,
as the services are each provided using very specific disposable
supplies for patients with different clinical conditions. In addition,
we do not agree with those commenters who argued that the services
described by CPT codes 36515, 36516, and 36522 should be treated in a
manner similar to either device dependent APCs or blood and blood
products by mitigating their payment reductions. We do not consider a
procedure requiring a disposable supply to be a device dependent APC,
which utilizes implantable devices. In addition, we do not believe that
the data concerns regarding these procedures that treat the blood are
similar to the supply and availability challenges associated with
maintaining the nation's blood supply. Therefore, for CY 2006, we are
applying our standard OPPS rate-setting methodology to all single
claims for APC 0112, setting the payment rate for APC 0112 based on a
median cost of $1,568.
c. Audiology (APCs 0364, 0365, and 0366)
Comment: One commenter, an association representing audiologists,
requested more detailed explanation for several proposed movements of
CPT codes among APCs. We proposed for CY 2006 to make the following APC
migrations: CPT codes 92533 (audiometry, air & bone) and 92572
(staggered spondaic word test) from APC 0364 to APC 0365; CPT code
92561 (Bekesy audiometry, diagnosis) from APC 0365 to APC 0364; and CPT
code 92577 (Stenger test, speech) from APC 0365 to APC 0366. The
commenter did not object to the changes.
Response: With respect to proposed APC reassignments of services
that are not specifically discussed in the proposed rule, in general we
proposed changes to improve the clinical and resource homogeneity of
the involved APCs, and, in particular, to address violations of the two
times rule resulting from variable median costs.
In this instance, CPT code 92561 was moved from the Level II
Audiometry APC to the Level I Audiometry APC because the data from CY
2004 hospital claims showed that the code-specific median cost of $19
for CPT code 92561 was most compatible with the median cost of APC
0364, at $27. To leave the code in APC 0365 would create a significant
overpayment, and there was another clinically appropriate APC
[[Page 68613]]
available. A similar rationale applied to CPT code 92577, whose code-
specific median cost of $108 was more coherent with the median cost of
APC 0366 (Level III Audiometry) of $100 than the median cost of the
Level II APC at $80. While we excepted APC 0364, the CY 2005 APC
assignment for CPT code 92553, from the two times rule for CY 2005, we
proposed to move CPT code 92553 to APC 0365 for CY 2006 to eliminate
our need to except APC 0364 from the two times rule for CY 2006. When
compared with the median costs of other procedures in APC 0365, the
median cost of CPT code 92553 of $43 was reasonably consistent with the
median costs of other codes assigned to APC 0365 and to the overall APC
median cost of $71. Due to this code's significant volume of single
claims and stable median costs, we believed that it was appropriate to
propose its reassignment based on both clinical and hospital resource
considerations. We are finalizing our APC assignments for CPT codes
92561, 92577, and 92553 as proposed for CY 2006.
We proposed to move CPT code 92572 (staggered spondaic word test)
from APC 0364 to APC 0365 for CY 2006 because we believed that its
resource requirements, as reflected in hospital claims data, were more
consistent with other services assigned to APC 0365 than to procedures
assigned to APC 0364. CY 2003 hospital claims data for CPT code 92572
revealed a median cost of about $100 based on 19 single claims. CY 2004
claims data, based on 10 single claims, yielded a median cost of about
$167. Although the median does not appear to be as stable for this code
as the others discussed nor is the volume of claims large, upon review
of final CY 2004 hospital claims data in response to this comment and
examination of the clinical characteristics of the service, we believe
that CPT code 92572 is most appropriately assigned to APC 0366 for CY
2006. Therefore, we will not finalize our proposal to move CPT code
92572 to APC 0365, but will instead reassign the service to APC 0366
for the CY 2006 OPPS.
d. Bone Marrow Harvesting (APC 0111)
Comment: Several commenters stated that the proposed payment of
$735 for CPT code 38230 (Bone marrow harvesting for transplantation)
does not adequately cover the costs of providing this service. These
commenters called our attention to the large difference in the proposed
median cost of $1,209 for CPT code 38230 and the proposed median cost
of $747 for APC 0111, where CPT code 38230 resides. Commenters also
noted the volatility of the CPT code median as a result of the
extremely low frequency of 9 claims, noting that the costs of these
claims ranged from $140 to $66,770. Commenters strongly urged CMS to
reassign CPT code 38230 from APC 0111 (Blood product exchange) to APC
0123 (Bone marrow harvesting and bone marrow/stem cell transplant) to
more accurately reflect the high cost of this procedure and to improve
the clinical homogeneity of the two APCs, stating that the APC title
for APC 0123 is more applicable to CPT code 38230 than the title of APC
0111.
Response: Hospitals have reported a consistently low median costs
for CPT code 38230 for the past several years, prompting us to reassign
this service to a lower paying APC, from APC 0123 to APC 0111, for CY
2005. However, closer analysis of this code-specific low median cost
leads us to suspect that a number of providers are likely billing this
code for services that are not described by CPT code 38230, bone marrow
harvesting for transplantation. Considering the typical clinical
characteristics of the service, we would expect the costs of the
necessary hospital resources to more closely approximate the median
costs of services assigned to APC 0123 for CY 2006. Therefore, we will
return CPT code 38230 to APC 0123 for CY 2006. However, we will
reevaluate the appropriateness of this APC assignment during the OPPS
update for CY 2007. In the meantime, we advise providers to exercise
greater care when reporting CPT code 38230 to ensure that this code is
billed correctly only for services described by the CPT code and that
all costs associated with providing the bone marrow harvesting
procedure are included in charges on the claims for the service.
e. Computer Assisted Navigational Procedures
Comment: Two commenters expressed concern about computer assisted
navigation for orthopedic procedures (CPT codes 0054T, 0055T, and
0056T). Both commenters were concerned that CMS had not assigned these
procedures to an APC for OPPS payment, but instead had proposed their
status indicators as ``B'' while another computer assisted navigational
procedure, CPT code 61795 (Stereotactic computer assisted volumetric
(navigational) procedure, intracranial, extracranial, or spinal), had
previously been assigned status indicator ``S'' in APC 302 (Level III
Radiation Therapy). Both commenters recommended that orthopedic
computer assisted navigational procedures should be assigned to APC
0302 with the other computer assisted navigational procedures, or
alternatively each procedure (CPT codes 61795, 0054T, 0055T, and 0056T)
should be placed in a new clinical APC with a payment rate equaling the
payment rate of APC 0302.
Response: We agree with the commenters that these computer assisted
navigational procedures share a common technological theme in their
clinical use during surgical procedures and may use comparable hospital
resources. We, therefore, will place CPT codes 0054T, 0055T, and 0056T
in APC 0302 with CPT 61795 for CY 2006. We will also give APC 0302 a
new name, ``Computer Assisted Navigational Procedures,'' because the
APC contains only these four services and is thus most appropriately
described by that title.
f. Hyperbaric Oxygen Therapy (APC 0659)
When hyperbaric oxygen therapy (HBOT) is prescribed for promoting
the healing of chronic wounds, it typically is prescribed on average
for 90 minutes, which would be billed using multiple units of HBOT to
achieve full body hyperbaric oxygen therapy. In addition to the
therapeutic time spent at full hyperbaric oxygen pressure, treatment
involves additional time for achieving full pressure (descent),
providing air breaks to prevent neurological and other complications
from occurring during the course of treatment, and returning the
patient to atmospheric pressure (ascent). The OPPS recognizes HCPCS
code C1300 (Hyperbaric oxygen under pressure, full body chamber, per 30
minute interval) for HBOT provided in the hospital outpatient setting.
We explained in the August 16, 2004 proposed rule (69 FR 50495)
that our CY 2003 claims data revealed that many providers were
improperly reporting charges for 90 to 120 minutes under only one unit
rather than three or four units of HBOT. This inaccurate coding
resulted in an inflated median cost of $177.96 for HBOT, derived using
single service claims and ``pseudo'' single service claims. Because of
these single claims coding anomalies, we proposed to calculate a ``per
unit'' median cost for APC 0659, using only multiple units or multiple
occurrences of HBOT, excluding claims with only one unit of HBOT and
excluding packaged costs. To convert HBOT charges to costs, we used the
CCR from the respiratory therapy cost center when available; otherwise,
we used the hospital's overall CCR. Using this ``per unit''
methodology, we proposed a median cost for APC 0659 of $82.91 for CY
2005.
[[Page 68614]]
In the November 15, 2004 final rule with comment period (69 FR
65758), we agreed with commenters that there was sufficient evidence
that the CCR for HBOT was not reflected solely in the respiratory
therapy cost center; rather, the CCR for HBOT was reflected in a
variety of cost centers. Therefore, we calculated a ``per unit'' median
cost of $93.26 for HBOT, using only multiple units or multiple
occurrences of HBOT and each hospital's overall CCR.
Our examination of the CY 2004 single procedure claims filed for
HCPCS code C1300 revealed similar coding anomalies to those encountered
in the CY 2003 single procedure claims data. Therefore, for CY 2006
rate-setting, we recalculated a ``per unit'' median cost for HCPCS code
C1300 using only multiple units or multiple occurrences of HBOT and
each hospital's overall CCR, which is the same methodology we used for
setting the CY 2005 payment rate for HBOT. Excluding claims with only
one unit of HBOT, we used a total of 41,152 claims to calculate the
proposed median for APC 0659 for CY 2006. Applying the methodology
described above, we proposed a median cost for APC 0659 of $93.37 for
CY 2006.
We received several public comments concerning our proposed APC
payment for HBOT.
Comment: Several commenters approved of our decision to rely on
each hospital's overall CCR rather than the respiratory therapy CCR in
our calculation of HBOT median costs. However, the commenters noted
that most hospitals providing HBOT services report the costs and
charges associated with providing this service on a separate line of
their cost report. These commenters further encouraged us to use the
CCR specific to HBOT for hospitals that report HBOT separately. They
also asked CMS to encourage hospitals not reporting costs and charges
for HBOT separately, to do so in the future.
Response: Unfortunately, the Healthcare Cost Report Information
System (HCRIS), the electronic database of the Hospital Cost Report
(CMS-2552-96) that we use to estimate costs from charges, rolls up
costs and charges on each hospital's cost report into a standard list
of cost centers. Because HBOT is not included on the standard list of
cost centers, CMS does not have readily available information about the
specific costs and charges that each institution garners in providing
HBOT services. Until last year, we had hypothesized that most hospitals
providing HBOT services reported the costs and charges for those
services as a separate line item in their respiratory therapy cost
center. Commenters convinced us that hospitals did not report their
HBOT costs and charges in a uniform location on their cost report. In
the final rule for CY 2005, we used the overall CCR for each hospital
rather than the respiratory therapy CCR to calculate the median cost
for HBOT (APC 0659). While we could encourage hospitals to report their
costs and charges for HBOT separately, at this time extra effort by
hospitals would not allow us to improve the accuracy of our HBOT median
cost calculation because we lose line-item specificity when the data is
entered into HCRIS.
Comment: One commenter commissioned a study to analyze our rate-
setting methodology and conducted an independent survey of hospitals
that provide HBOT services. Surveys conducted in CYs 2004 and 2005
asked all hospitals providing HBOT services to identify the standard
cost center associated with the line on their cost report where the
hospital reports costs and charges for HBOT: 206 hospitals, or 44
percent of all hospitals providing HBOT services, responded to one of
the surveys. The commenter believes that the survey results are
generalizable to all hospitals providing HBOT services because the
demographics of those hospitals not responding to the surveys are
comparable to those responding to the surveys. For each of the
responding hospitals, the survey results provided the standard cost
center on each hospital cost report. The study calculated an HBOT CCR
for each hospital based on the costs and charges in the associated
standard cost center, not just the costs and charges for HBOT. On the
basis of these results, the study then generalized an HBOT CCR to the
56 percent of hospitals not responding to the surveys. Specifically,
the study simulated HBOT CCRs for each of the non-responding hospitals
by applying a methodology that generalized to the non-responding
hospitals HBOT-specific findings from similar hospitals. The study
results led the commenter to conclude that the proposed median cost of
$93.37 was too low, and that a more accurate estimate of median cost
per unit is $118.94. On the basis of this analysis the commenter
requested that CMS use the median cost of $118.94 to set the payment
rate for APC 0659. The commenter noted that APC 0659, where the HCPCS
code for HBOT (C1300) is assigned, is unusual as it is one of only a
few APCs that contain only one HCPCS code. They concluded that as no
averaging of the costs of services occurs, any changes in the median
cost for C1300 in APC 0659 have a particularly great impact on the APC
median, as compared to changes in the median cost for a procedure
assigned to an APC to which multiple services are assigned.
Response: We receive many submissions of external data from
commenters supporting their requests for higher median cost estimates
for specific procedures. In many cases, submitted data have not met the
minimum standards required for setting payment rates. We have
previously provided preferred characteristics of external data to be
submitted in comments regarding devices (68 FR 47987). While we have
not specifically provided criteria for non-device external data, the
subset of our published characteristics that could be applicable to a
service such as HBOT include the public availability of the data, its
representativeness of a diverse group of hospitals both by location and
type, and its identification of its data sources. As part of the CY
2005 study, hospitals gave their consent for their identification and
cost report information to be made public, an essential characteristic
of data submitted as part of a public comment. The submitted HBOT CY
2005 survey data represent a varied group of 120 hospitals, both by
location and type of hospital, as well as 31 percent of the population
of total hospitals providing HBOT services according to CY 2004
hospital claims. Inclusion of HBOT survey data from the CY 2004 survey
increases the response rate to 44 percent. The survey results provide
us with the specific standard cost center in which costs and charges
for HBOT are located for the responding hospitals, allowing us to
relate the HBOT charge data to cost-to-charge information provided in
hospital cost reports for these hospitals. We are appreciative of this
study in that it provides us with some useful information as we examine
our payment for HBOT services.
These survey results based on this modest response may, therefore,
be representative of the 464 hospitals that submitted HBOT claims to
the OPPS in CY 2004. However, only a small minority of OPPS hospitals
actually provides HBOT services, and there is such significant regional
variation in the frequency of billing of hospital outpatient HBOT
services that it is unlikely to be fully explained by the different
health characteristics of regional populations. We understand that HBOT
may also be provided in freestanding centers, and the business
decisions around its location may depend upon the local healthcare
infrastructure. Therefore, while the
[[Page 68615]]
responding hospitals may be similar to the non-responding hospitals
with respect to hospital category and geographic location, we are not
confident that these characteristics alone signify that the minority of
responding hospitals is truly reflective of the relatively small number
of OPPS providers billing for HBOT. In addition, we are not certain
that comparability of hospitals with respect to their category and
geographic location is related to individual hospital decisions about
where to include HBOT costs and charges on their Medicare cost reports.
Therefore, we are not convinced that it would be appropriate to
generalize these HBOT cost center findings to non-responding hospitals
to calculate an adjusted payment rate for HBOT.
In addition to our concern about generalizability based on the
methodology discussed above, we have several additional reservations
about employing the approach recommended by the commenter without the
benefit of additional comment from other parties. First, employing this
approach may establish an important precedent, which may well be cited
by other commenters concerned with the median costs of other services.
The OPPS is a prospective payment system that relies upon the coherent
grouping of services that share clinical as well as resource
utilization characteristics and the packaging of many ancillary
services to determine payments. We are concerned that differentially
employing methods that depend on additional external collection of
information from hospitals may have unintended and potentially negative
consequences in a payment system based on averages and relative values.
It stands to reason that, as in the case of HBOT, commenters will only
submit special surveys and proposals to refine rate-setting when they
have at least a strong reason to believe that such customized methods
will increase the rates for the specific services in which they are
interested. In a budget-neutral payment system based on relative
weights, this poses the risk that using this specific external
information for select services will actually distort the process of
establishing the relative weights in favor of some services but to the
disadvantage of other services where such information is not available
or not as potentially influential based on the APC assignments of those
services. In a relative system such as the OPPS, it may be more
important to employ a consistent set of data than to adopt specially
``enhanced'' data and methods for some services, but not for all
services generally. Indeed, a consistent data set may be more likely to
yield accurate relative values than a mixed data set consisting of both
values calculated from hospital claims data and values determined by
enhanced methods.
Lastly, our capacity to review, evaluate, and adapt special
approaches to increase payment levels for individual services in the
OPPS is necessarily limited. Based on all of our concerns previously
discussed, it is consequently important that we obtain some idea of the
extent of other possible requests for use of special methods and non-
claims based data to increase payment levels for particular services or
groups of services before setting such a precedent for one specific
OPPS service, where there appear to be no pressing access concerns
based on our OPPS payment rates to date. Our hospital claims data
reveal steadily increasing frequencies of HBOT claims, from 101,843
services in CY 2002, to 188,604 services in CY 2003, and once again to
242,558 services in CY 2004. This more than doubling of HBOT services
in hospital outpatient departments over a 2-year time period indicates
that Medicare beneficiaries are unlikely to be experiencing difficulty
in accessing medically necessary HBOT services in the context of the
OPPS payment rates for HBOT.
Before we engage in further rulemaking, we therefore specifically
invite input on other situations where special approaches may be
appropriate and where high quality external data might be made
available. We are interested in the possible merits of these other
approaches and in potential criteria that we might use to assess when a
special methodology should be employed. We believe these comments can
help us to develop options for consideration for the CY 2007 OPPS
update. In the meantime, we intend to continue our efforts to improve
the precision of the OPPS relative weights by increasing our use of
multiple procedure claims and refining our cost estimation process.
While we solicit additional public comment on this subject matter,
for CY 2006 rate-setting we are finalizing our proposal to recalculate
a ``per unit'' median cost for HCPCS code C1300 using only multiple
units or multiple occurrences of HBOT and each hospital's overall CCR,
which is the same methodology we used for setting the CY 2005 payment
rate for HBOT. Excluding claims with only one unit of HBOT, we used a
total of 47,101 claims to calculate the final median cost for APC 0659
for CY 2006. Applying the methodology described above, we are setting
the final payment rate for APC 0659 based on a median cost of $90.09
for CY 2006.
Comment: One commenter pointed out that they had difficulty
replicating CMS's median cost estimate, in part because the public
dataset that we make available included cost data calculated with the
respiratory therapy CCR, that the calculation of the ``overall CCR''
was not sufficiently defined in regulations to be replicated, and that
using the cost centers marked with a ``Y'' on the ``Revenue Code to
Cost Center Crosswalk Description'' did not yield an overall CCR
comparable to the one that we used.
Response: We acknowledge the commenter's concern regarding the
accessibility and quality of data available to replicate CMS's median
cost calculations. While we believe that we have fulfilled our public
obligation to provide access to data to support public comments, users
of the data can sometimes identify improvements. We agree that the
overall CCR calculation should be more transparent. We have provided
additional information about this calculation both in the final rule
under our discussion of APC median calculations and on our Web site. We
also agree that we should have placed the hospital specific overall CCR
to estimate costs for HBOT on our public use file. We will remedy this
for the CY 2007 rulemaking process.
g. Ophthalmology Examinations (APC 0601)
Comment: One commenter, representing eye physicians and surgeons,
agreed with our decision to exempt the APC 0235 (Level I Posterior
Segment Eye Procedures) from the 2 times rule for CY 2006. The
commenter also agreed with our proposal to move several other
ophthalmology procedures into higher paying APC groups (CPT codes
65265, 65285, 66220, 67025, 67027, 67036, 67038, 67039, and 67121). See
70 FR 42704, July 25, 2005 for a table including the proposed changes.
However, this commenter disagreed with the proposal to move CPT
codes 92004 (eye exam, new patient) and 92014 (eye exam, established
patient) from APC 0602 (High Level Clinic Visits) to APC 0601 (Mid
Level Clinic Visits). The commenter urged CMS to reconsider this
decision and keep these codes in APC 0602.
Response: At its February 2005 meeting, the APC Panel recommended
that CMS restructure APCs 0601 and 0602 to eliminate violations of the
two times rule. At the time of the proposed rule for CY 2006, the
available median cost data for these two codes showed
[[Page 68616]]
that the hospital resources for both codes were more homogenous with
other services assigned to the mid level clinic visit APC 0601, as
compared to services assigned to the high level clinic visit APC 0602.
Keeping these codes in APC 0602 for CY 2006 would have resulted in
significant overpayments for both codes based on historical hospital
claims data.
We now have additional claims data, reflecting more complete median
costs for both codes from CY 2004 claims. Upon review of CPT code
92004, its median cost of $82 based on almost 21,000 single claims is
more consistent with the median costs of other services assigned to APC
0602 ($88), and assigning this code to APC 0602 for CY 2006 would not
cause a two times rule violation. We, therefore we will not finalize
our CY 2006 proposal to move CPT code 92004 to APC 0601, but instead we
will reassign CPT code 92004 back to APC 0602 for CY 2006. However, the
median cost of CPT code 92014 ($67) based on nearly 100,000 single
claims remains more consistent with the median cost of APC 0601 ($60).
Based on OPPS hospital claims data, hospitals are consistently
reporting higher costs for comprehensive eye exams for new patients in
comparison with comprehensive eye exams for established patients. These
differences in costs likely result from the additional hospital
resources required to provide eye exams to new patients, in keeping
with current clinical practice. To return CPT code 92014 to APC 0602
for CY 2006 would significantly overpay comprehensive eye examinations
for established patients. We therefore finalize our CY 2006 proposal to
assign CPT code 92014 to APC 0601.
h. Pathology Services
Comment: One commenter supported the proposed status indicator of B
for HCPCS codes D0472-D0999 because the commenter indicated that
providers should bill the appropriate CPT code in place of these codes.
The commenter urged CMS to require its contractors to deny claims for
HCPCS codes D0472-D0999.
Response: We agree that these HCPCS codes duplicate existing CPT
codes and therefore have designated them as not payable or recognized
under OPPS. As a practical matter, this change in status indicator has
little or no impact on providers because of this entire code series, in
all of CY 2004, only 3 units of HCPCS code D0999 were billed by
hospitals under OPPS. This CY 2006 final rule with comment period
applies to payments under the OPPS and a comment that we should deny
claims for these codes submitted by all other providers in all other
settings is outside the scope of this final rule.
Comment: One commenter objected to payment of CPT code 86586 under
the OPPS and asked that we place it on the clinical laboratory fee
schedule for CY 2006 because currently, the only source of payment is
under the OPPS and therefore independent laboratories cannot be paid
for it.
Response: We agree with this comment and we will pay for this code
under the clinical lab fee schedule in CY 2006. This code will
therefore not be paid under the OPPS in 2006.
Comment: One commenter objected to payment being made under the
OPPS for CPT codes 80500-80502 and 88187-88189, which are for physician
interpretation and report services. The commenter asked that we change
their status indicators to ``M'' so that the codes would not be
billable to a fiscal intermediary nor payable under the OPPS. The
commenter believed that these services should only be paid to
physicians on claims submitted by carriers.
Response: These services currently have status indicator ``X'' and
are separately paid under OPPS. We believe that payment to hospitals is
appropriate because of the resources hospitals furnish for the
physician to be able to perform these services in a hospital (that is,
space, computer, office supplies, medical records system).
i. Photodynamic Therapy of the Skin (APC 0013)
Comment: One commenter supported the proposed move of CPT code
96567 (Photodynamic Therapy of the Skin) from APC 0013, with a proposed
payment rate of $66, to APC 0016 with a proposed payment rate of $153.
The commenter also expressed appreciation that the drug used with this
procedure (HCPCS code J7308) is paid separately and not bundled into
the payment for the procedure. The commenter asked that CMS continue to
monitor the median costs reported by hospitals so that Medicare
beneficiaries may continue to have access to this procedure and the
drug associated with the procedure.
Response: We appreciate the thoughtful comments submitted by this
pharmaceutical manufacturer. We will finalize the placement of CPT code
96567 in APC 0016 as proposed. As always, we will continue to monitor
claims data submitted by hospitals to ensure appropriate payment for
all procedures.
j. Wound Care
As stated in the July 25, 2005 proposed rule (70 FR 42692), based
upon a recommendation from the APC Panel we referred CPT code 97602
(non-selective wound care) for MPFS evaluation of its bundled status in
relation to services provided under the OPPS. In the proposed rule for
CY 2006, we assigned CPT code 97602 a status indicator of ``A,''
meaning that while it was not payable under the OPPS, it was payable
under a fee schedule other than the OPPS, specifically the MPFS. We
explained that, under the MPFS, the nonselective wound care services
described by CPT code 97602 are ``bundled'' into the selective wound
care debridement codes (CPT codes 97597 and 97598). Furthermore, under
the MPFS, a separate payment is never made for ``bundled'' services
and, because of this designation, the provider does not receive
separate payment for furnishing non-selective wound care services
described by CPT code 97602.
We received several public comments concerning our proposed
treatment of CPT code 97602 under the OPPS.
Comment: Several commenters objected to our proposal to maintain a
status indicator of ``A'' for CPT code 97602, which does not allow for
separate payment under the OPPS. These commenters contended that CMS'
recognition of this code only under the MPFS as a bundled service is
equivalent to CMS asking hospitals to furnish but not charge for this
service. They asserted that our decision not to pay for this service
under the OPPS is based on a misclassification of this code as an
``always therapy'' service. They further explained that registered
nurses, as opposed to physical therapists, routinely perform non-
selective wound care services in the hospital outpatient setting. These
commenters urged CMS to acknowledge non-selective wound care as meeting
the definition of covered outpatient therapeutic services under the
OPPS. Two commenters requested that we assign the newly proposed status
indicator ``Q'' to CPT code 97602 so that separate payment can be made
under the OPPS when this is the only payable service provided under the
OPPS. These two commenters also suggested that we pay this service at
the same payment rate as services assigned to APC 0600 (Low Level
Clinic Visits).
Another commenter strongly recommended that CMS also review our
status indicator assignment of ``A'' to CPT codes 97605 (Negative
pressure wound therapy; total wound(s) surface area less than or equal
to 50 sq. cm.) and 97606 (Negative pressure wound
[[Page 68617]]
therapy; total wound(s) surface area greater than 50 sq. cm.), in
addition to CPT code 97602 as mentioned by other commenters and
discussed above. The commenter urged that we pay separately for these
services under the OPPS, emphasizing that these codes represent
comprehensive wound care management and are typically not performed
with any other service. Furthermore, the commenter objected to our
designation of CPT codes 97602, 97605, and 97606 as ``always therapy''
services, contending that these services are often performed by
registered nurses and should be classified as ``sometimes therapy''
services and assigned a status indicator of ``S'' which pays separately
under the OPPS. Finally, this commenter recommended that we assign CPT
codes 97602, 97605, and 97606 to New Technology APC 1502 (Level II $50-
$100) with a payment rate of $75 for CY 2006 until we can collect
hospital claims data to aid us in assigning these services to a
clinical APC based on hospital median costs.
Response: We thank the commenters for their views on the
classification and payment status of wound care services under the
OPPS. Pursuant to a congressional mandate (Balanced Budget Act of 1997,
Pub. L. 105-33) to pay for all therapy services under one prospective
payment system, as provided under section 1834(k)(5) of the Act, we
created a therapy code list to identify and track outpatient therapy
services paid under the MPFS. We provide this list of therapy codes
along with their respective designation in the Medicare Claims
Processing Manual Pub. 100-04, section 20. We define an ``always
therapy'' service as a service that must be performed by a qualified
therapist under a certified therapy plan of care, and a ``sometimes
therapy'' service as a service that may be performed by a non-therapist
outside of a certified therapy plan of care. As recommended by the
commenters, we have carefully reviewed our designation of CPT codes
97602, 97605, and 97606 as ``always therapy'' codes and our assignment
of payment status indicator ``A'' to these codes under the OPPS. In
light of the comments, we have also reexamined our classification of
CPT codes 97597 (selective wound care; total wound(s) surface area less
than or equal to 20 sq. cm.) and 97598 (selective wound care; total
wound(s) surface area greater than 20 sq. cm.) as ``sometimes therapy''
codes with respect to payment under the OPPS. The past implications of
designating CPT codes 97602, 97605, and 97606 as ``always therapy''
services, in addition to assigning these codes a status indicator of
``A'' under the OPPS indicating they were to be paid off the MPFS, were
that hospitals may have been unable to bill and be paid for these
services when they were provided as non-therapy in the hospital
outpatient setting. When some of these OPPS services were packaged
under the MPFS, hospitals received no separate payment, and when other
services were paid off the MPFS, the services were required to meet the
criteria for therapy services. However, this requirement for payment to
hospitals only as therapy services was inconsistent with Medicare's
designation of CPT codes 97597 and 97598 as ``sometimes therapy''
services, that could be appropriately provided either as therapy
services or as non-therapy services. Therefore, for CY 2006, we are
reclassifying CPT codes 97602, 97605, and 97606 as ``sometimes
therapy'' services that may be appropriately provided either as therapy
or non-therapy services, as well as maintaining our designation of CPT
codes 97597 and 97598 as ``sometimes therapy'' services.
In order to pay hospitals accurately when delivering these
``sometimes therapy'' services independent of a therapy plan of care,
we are establishing payment rates for CPT codes 97597, 97598, 97602,
97605, and 97606 under the OPPS when performed as non-therapy services
in the hospital outpatient setting. To further clarify, hospitals will
receive separate payment under the OPPS when they bill for wound care
services described by CPT codes 97597, 97598, 97602, 97605, and 97606
that are furnished to hospital outpatients by non-therapists
independent of a therapy plan of care. In contrast, when such services
are performed by a qualified therapist under an approved therapy plan
of care, providers should attach an appropriate therapy modifier (that
is, GP for physical therapy, GO for occupational therapy, and GN for
speech-language pathology) and/or report their charges under a therapy
revenue code (that is, 420, 430, or 440) to receive payment under the
MPFS. The OCE logic will either assign these services to the
appropriate APC for payment under the OPPS if the services are non-
therapy, or will direct contractors to the MPFS established payment
rates if the services are identified on hospital claims with a therapy
modifier or therapy revenue code as therapy.
Under the OPPS, we considered several options for determining the
APC placement of CPT codes 97597, 97598, 97602, 97605, and 97606. As
two commenters suggested, we considered placing these codes in APC 0600
(Low Level Clinic Visits); however, we concluded that these services do
not share similar enough characteristics in terms of clinical
homogeneity and resource requirements to other services assigned to APC
0600. In particular, specialized supplies are likely necessary for the
procedures, unlike many of the supplies used in services assigned to
APC 0600. Likewise, we also considered one commenter's recommendation
to assign CPT codes 97597, 97598, 97602, 97605, and 97606 to New
Technology APC 1502 with a payment rate of $75. However, because we do
not consider wound care services to be appropriately described by a new
technology designation under the OPPS, nor do we expect the resource
intensity of these services to approach $75, we are not assigning these
services to New Technology APC 1502. Instead, we sought to place these
codes in clinical APCs with like services sharing similar resource
requirements. Therefore, for CY 2006, we are assigning CPT code 97602
to APC 0340 (Minor Ancillary Procedures) because we consider the
resource requirements of this service to be similar to the hospital
resources necessary for many of the other minor hospital procedures
assigned to this APC. While it may be that our CY 2004 hospital claims
data may not reflect all claims for services that could have been
described by CPT code 97602 because some hospitals may have been
billing for an evaluation and management service if nonselective wound
care was the only procedure provided on a day, we note that based on
almost 75,000 single claims the median cost of $42 for CPT code 97602
is very consistent with the CY 2006 median cost of $36 for APC 0340. In
addition, we are assigning CPT codes 97597 and 97605 to APC 0012 (Level
I Debridement and Destruction), and CPT codes 97598 and 97606 to APC
0013 (Level II Debridement and Destruction) because we consider these
services to closely resemble both the clinical characteristics and
resource requirements of the other debridement services assigned to
these APCs. We have listed these five codes in Addendum B with status
indicator ``X'' for CPT code 97602 and status indicator ``T'' for CPT
codes 97597, 97598, 97605, and 97606, along with their individual APC
assignments to indicate their payment rates in common hospital
outpatient circumstances where the services are provided as non-
therapy. If a claim indicates, as described above, that the services
are provided as therapy, the claim for such services will be paid under
the MPFS.
[[Page 68618]]
When hospitals provide wound care services, they should bill the
most appropriate CPT codes to describe those services. Hospitals should
not bill for an evaluation and management service along with the wound
care service unless a significant, separately identifiable evaluation
and management service, correctly identified with modifier -25 on the
claim, was also provided to the patient during the same encounter.
Lastly, under the OPPS we consider payment for nonselective wound care
to always be included in payment for selective wound care or negative
pressure wound therapy if both services are provided at the same
anatomic site in one encounter. Therefore, hospitals should not bill
for both services when nonselective wound care is provided with
selective wound care or negative pressure wound therapy at the same
anatomic site in a single encounter. Hospitals would appropriately use
the -59 modifier to indicate nonselective and selective wound care or
negative pressure wound therapy services provided in a single encounter
at different anatomic sites.
IV. Payment Changes for Devices
A. Device-Dependent APCs
Device-dependent APCs are populated by HCPCS codes that usually,
but not always, require that a device be implanted or used to perform
the procedure. For the CY 2002 OPPS, we used external data, in part, to
establish the device-dependent APC medians used for weight setting. At
that time, many devices were eligible for pass-through payment. For the
CY 2002 OPPS, we estimated that the total amount of pass-through
payments would far exceed the limit imposed by statute. To reduce the
amount of a pro rata adjustment to all pass-through items, we packaged
75 percent of the cost of the devices, using external data furnished by
commenters on the August 24, 2001 proposed rule and information
furnished on applications for pass-through payment, into the median
costs for the device-dependent APCs associated with these pass-through
devices. The remaining 25 percent of the cost was considered to be
pass-through payment.
In the CY 2003 OPPS, we determined APC medians for device-dependent
APCs using a three-pronged approach. First, we used only claims with
device codes on the claim to set the medians for these APCs. Second, we
used external data, in part, to set the medians for selected device-
dependent APCs by blending that external data with claims data to
establish the APC medians. Finally, we also adjusted the median for any
APC (whether device-dependent or not) that declined more than 15
percent. In addition, in the CY 2003 OPPS we deleted the device codes
(``C'' codes) from the HCPCS file in the belief that hospitals would
include the charges for the devices on their claims, notwithstanding
the absence of specific codes for devices used.
In the CY 2004 OPPS, we used only claims containing device codes to
set the medians for device-dependent APCs and again used external data
in a 50-50 blend with claims data to adjust medians for a few device-
dependent codes when it appeared that the adjustments were important to
ensure access to care. However, hospital device code reporting was
optional.
In the CY 2005 OPPS, which was based on CY 2003 claims data, there
were no device codes on the claims and, therefore, we could not use
device-coded claims in median calculations as a proxy for completeness
of the coding and charges on the claims. For the CY 2005 OPPS, we
adjusted device-dependent APC medians for those device-dependent APCs
for which the CY 2005 OPPS payment median was less than 95 percent of
the CY 2004 OPPS payment median. In these cases, the CY 2005 OPPS
payment median was adjusted to 95 percent of the CY 2004 OPPS payment
median. We also reinstated the device codes and made the use of the
device codes mandatory where an appropriate code exists to describe a
device utilized in a procedure and also implemented HCPCS code edits to
facilitate complete reporting of the charges for the devices used in
the procedures assigned to the device-dependent APCs.
1. Public Comments and Our Responses on the November 15, 2004 OPPS
Final Rule With Comment Period
We solicited public comments concerning the methodology set forth
in our CY 2005 OPPS final rule with comment period (November 15, 2004,
69 FR 65681). A summary of the comments we received and our responses
follow:
Comment: One commenter asked that CMS implement device edits other
than those included in Table 19 of the November 15, 2004 final rule
with comment period in April 2005. The commenter asked that CMS add the
following APCs to the list of device-dependent APCs and implement
device editing for them using the specific device codes provided by the
commenter: APC 0088 (Thrombectomy), APC 0141 (Level I Upper GI
Procedures), APC 0151 (Endoscopic Retrograde Cholangio-
Pancreatography), APC 0154 (Hernia/Hydrocele Procedures), APC 0187
(Miscellaneous Placement/Repositioning), APC 0315 (Level II
Implantation of Neurostimulator), APC 0415 (Level II Endoscopy Lower
Airway), APC 0416 (Level I Intravascular and Intracardiac Ultrasound
and Flow Reserve), and APC 0676 (Level II Thrombolysis and
Thrombectomy).
Response: We implemented the device edits for device-dependent APCs
in two phases for CY 2005. Those identified in Table 19 of the November
15, 2004 final rule with comment period (69 FR 65763) were implemented
effective for services furnished April 1, 2005, and later. The
remaining edits for device-dependent APCs were implemented effective
for services furnished October 1, 2005, and later. We implemented the
edits in two phases so that we could ensure that any systems issues
that might arise with implementation of the first set of edits would be
resolved before we implemented the remainder of the edits. We limited
the edits we implemented to those for services included in the list of
device-dependent APCs that we posted on the CMS Web site for public
review to minimize the possibility of unintended claims processing
problems. At this time, we have not expanded the scope of device-
dependent APCs or the scope of the edits because of concerns raised by
hospitals regarding the administrative burden that edits impose on
hospitals. We will evaluate the impact of the edits on hospitals and on
our claims data before we consider expanding the scope of the edits to
other services such as those suggested by the commenter.
Comment: One commenter recommended that device codes C1750 (Cath,
hemodialysis, long-term) and C1752 (Cath, hemodialysis, short-term) be
allowed when billing for services using CPT codes 36557 (Insert
tunneled cv cath), 36558 (Insert tunneled cv cath), and 36581 (Replace
tunneled cv cath). The commenter further recommended that CMS allow the
use of device code C1898 (Lead, pmkr, other than trans) when billing
for services using CPT codes 33211 (Insertion of heart electrode),
33216 (Insert lead pace-defib, one), and 33217 (Insert lead pace-defib,
dual).
Response: We agree with the commenter's recommendations and made
the changes when the edits were implemented in the two phases for CY
2005 discussed above in response to the preceding comment.
Comment: One commenter recommended that device codes for
[[Page 68619]]
brachytherapy needles, catheters, and sources be required when
providers bill for the following CPT codes for brachytherapy
application: 77761, 77762, 77763, 77776, 77777, 77778, 77781, 77782,
77783, and 77784. Numerous other commenters strongly opposed device
editing for brachytherapy procedures due to the burden that it would
impose on them.
Response: We did not require these edits for CY 2005. The needles
and catheters that are placed for the application of brachytherapy
sources are not placed when the procedures cited are performed but are
generally placed in procedures that are coded separately. In the case
of application of seeds for prostate brachytherapy (CPT code 77778),
the needles or catheters are placed when CPT code 55859 (Percut/needle
insert, pros) is performed and not as part of CPT code 77778. Moreover,
for CY 2005, sources of brachytherapy are billed and paid separately on
the basis of charges reduced to cost and, therefore, are irrelevant to
the calculation of a median cost for the application of the
brachytherapy sources because, unlike other devices, the cost of
brachytherapy sources is not packaged into the payment for the service
in which the sources are required.
2. CY 2006 Proposal, APC Panel Recommendations, and Responses to Public
Comments Received
In the CY 2006 OPPS proposed rule, we proposed to base the OPPS
device-dependent APC medians on CY 2004 claims, the most current data
available. In CY 2004, the use of device codes was optional. Thus, for
the CY 2006 OPPS proposed rule, we proposed to calculate median costs
for these APCs using all single bills without regard to whether there
was a device code reported on the claim. We calculated median costs for
this set of APCs using the standard median calculation methodology.
This methodology uses single procedure claims to set the median costs
for the APC. We then compared these unadjusted median costs to the
adjusted median costs that we used to set the payment rates for the CY
2005 OPPS. We found that 21 APCs experienced increases in median cost
compared to the CY 2005 OPPS adjusted median costs, 1 APC median was
unchanged, 16 APCs experienced decreases in median costs, and 8 APCs
were proposed to be reconfigured in such a way that no valid comparison
was possible. Table 15 published in the CY 2005 OPPS proposed rule
showed the comparison of these median costs (70 FR 42714).
As we stated previously, in CY 2004, CMS reissued HCPCS codes for
devices and asked hospitals to voluntarily code devices utilized to
provide services. As part of our development of the medians for this
final rule with comment period, we examined CY 2004 claims that
contained device codes that met our device edits, as posted on the OPPS
Web site at http://www.cms.hhs.gov/providers/hopps/default.asp. We
found that, in many cases, the number of claims that passed the device
edits was quite small. To use these claims to set medians for the CY
2006 OPPS would mean that the medians for some of these APCs would be
set based on very small numbers of claims, reflecting the fact that, in
CY 2004 when device coding was optional under the OPPS, relatively few
hospitals chose to code for devices. Therefore, we did not propose to
use only claims that passed the device edits to set the median costs
for device-dependent APCs for the CY 2006 OPPS.
When we considered whether to base the weights for these APCs on
the unadjusted median costs, we found that, for 10 of the 38 APCs for
which the APC composition is stable, basing the payment weight on the
unadjusted median cost would result in a reduction of more than 15
percent in the median cost for the CY 2006 OPPS compared to the CY 2005
OPPS.
In the CY 2006 proposed rule, we stated that we fully expect to use
the unadjusted median costs for device-dependent APCs as the basis of
their payment weights for the CY 2007 OPPS because device coding is
required for CY 2005 and device editing is being implemented in CY
2005, so that all CY 2005 claims should reflect the costs of devices
used to provide services. Nevertheless, we recognized that a payment
reduction of more than 15 percent from the CY 2005 OPPS to the CY 2006
OPPS may be problematic for hospitals that provide the services
contained in these APCs. Therefore, for the CY 2006 OPPS, we proposed
to adjust the median costs for the device-dependent APCs listed in
Table 15 of the CY 2006 proposed rule (70 FR 42714) for which
comparisons with prior years are valid to the higher of the CY 2006
unadjusted APC median or 85 percent of the adjusted median on which
payment was based for the CY 2005 OPPS. We stated that we viewed this
as a transitional step from the adjusted medians of past years to the
use of unadjusted medians based solely on hospital claims data with
device codes in future years.
As stated in the proposed rule (70 FR 42714), we expect that CY
2006 will be the last year in which we would make an across-the-board
adjustment to the median costs for these device-dependent APCs based on
comparisons to the prior year's payment medians. We believe that
mandatory reporting of device codes for services furnished in CY 2005,
combined with the editing of claims for the presence of device codes,
where such codes are appropriate, would result in claims data that more
fully reflect the relative costs of these services and that across-the-
board adjustments to median costs for these APCs would no longer be
appropriate.
a. APC Panel Recommendations
In the CY 2005 proposed rule, we proposed to treat APCs 0107 and
0108 in the same manner as we proposed to treat other device-dependent
APCs. We note that at its August 2005 meeting, the APC Panel
recommended that CMS set the payment rates for cardioverter
defibrillator APCs (APCs 0107 and 0108) at the CY 2005 payment rates
plus the full market basket increase for CY 2006. We did not accept
this recommendation because to do so would greatly contradict our
stated policy of applying a single standardized methodology wherever
possible to establish APC payment amounts that are appropriately
relative to one another.
The APC Panel also recommended that CMS add APC 0416 (Level I
Intravascular and Intracardiac Ultrasound and Flow Reserve) and, in
particular, CPT code 37250 (Iv us first vessel add-on) to the list of
device-dependent APCs and require device editing for CPT code 37250.
We did not accept this recommendation. Many services that require
devices are not included in the set of APCs to which we have given
special attention as they came off pass-through status. We package the
costs of relatively high cost devices into the median costs for the
device-dependent APCs, and the absence of charges for these devices on
claims is the reason for special treatment of the APCs in the past. The
absence of charges also gives rise to our application of device editing
to the services in the device-dependent APCs so that our hospital
claims data are more complete for these specific services. At this
time, we see no compelling reason to expand this list of device-
dependent APCs. This is particularly true given that we expect that,
for CY 2007, these APCs will not receive special attention as a class.
However, we note that we will make case-by-case decisions regarding the
adjustment of median costs where we believe that it is appropriate.
[[Page 68620]]
b. Public Comments Received and Our Responses
We received numerous public comments concerning our proposal.
Following is a summary of those comments and our responses:
(1) Adjustment of Median Costs
Comment: Some commenters supported the proposed median cost
adjustment for device-dependent APCs and supported the use of claims
data to set the relative weights for the CY 2006 OPPS. However, many
commenters stated that the proposed payments are inadequate to
compensate hospitals for the full costs of the devices and procedures
for many APCs, including, but not limited to, implantation of cochlear
implants, neurostimulators, urologic prosthetics, and cardioverter
defibrillators.
Commenters presented a variety of requests for revised median costs
or revised payment rates. Many commenters asked that CMS accept and use
external data in place of claims data and requested that CMS accept and
use confidential and proprietary information that cannot be made
public. Other commenters objected to the use of external data to set
median costs that are the basis of the rates and to the use of any
proprietary or confidential information that cannot be shared with the
public. Some commenters asked CMS to substitute specific amounts they
identified for the device portion of the median cost, for the full
median cost, or for the payment amount for the APCs of interest to
them. Commenters urged CMS to restrict the claims used to calculate the
median costs for device-dependent APCs to those with specified
diagnoses, or to those with specified HCPCS device codes, or with
specified revenue code charges only if the charges associated with
those codes exceeded amounts they recommended. Some commenters asked
that CMS set the CY 2006 median cost at the CY 2005 adjusted median
with an inflation adjustment for the full market basket increase for CY
2006. Other commenters asked CMS to adjust the medians to no less than
95 percent of the CY 2005 OPPS adjusted medians for all APCs, as well
as for device-dependent APCs. These commenters stated that a
transitional step to 85 percent was too great to prevent disruption to
care.
Some commenters asked CMS to disregard requests to set the payment
rates at 100 percent of the CY 2005 OPPS payment rates plus inflation
for neurostimulator and cardioverter defibrillator APCs, which they
stated have been given preferential treatment over other device-
dependent APCs in past years. These commenters requested that the same
adjustment policy apply to all device-dependent APCs. Some commenters
asked CMS to use only claims that contained appropriate device codes in
the calculations of the median costs because the presence of the device
code and a charge for the device are more likely to produce the best
possible estimate of relative cost for the service. All commenters who
addressed this general issue of device-dependent APCs supported an
adjustment of some type to median costs for these high cost APCs.
Response: After considering all of the comments received, we have
set the median costs for device-dependent APCs for CY 2006 at the
highest of: The median cost of all single bills; the median cost
calculated using only claims that contain pertinent device codes and
for which the device cost is greater than $1; or 90 percent of the
payment median that was used to set the CY 2005 payment rates. We set
90 percent of the CY 2005 payment median as a floor in consideration of
comments that stated that a 15-percent reduction from the CY 2005
payment median was too large of a transitional step. We also
incorporated, as part of our methodology, the recommendation to base
payment on medians that were calculated using only claims that passed
the device edits. We believe that this policy provides a reasonable
transition to full use of claims data in CY 2007, while better
moderating the amount of decline from the CY 2005 OPPS payment rates.
Table 16 of this final rule with comment period contains the CY 2005
payment median, the CY 2006 unadjusted single bill median, the amount
represented by 90 percent of the CY 2005 payment median, the CY 2006
median calculated using only claims containing appropriate devices, and
the CY 2006 adjusted median on which payment is based. As we discussed,
in the CY 2006 proposed rule, we did not adjust the medians for APC
0122 (Level II Tube Changes and Repositioning), APC 0427 (Level III
Tube Changes and Repositioning) APC 0166 (Level I Urethral Procedures),
APC 0168 (Level II Urethral Procedures), APC 0621 (Level I Vascular
Access Procedures), APC 0622 (Level II Vascular Access Procedures), and
APC 0623 (Level III Vascular Access Procedures) because of substantial
migration of HCPCS codes within these APCs.
We did not inflate the CY 2005 median cost or payment rate by the
market basket, or substitute specific amounts derived from external
studies or other external sources, as requested by commenters, because
doing so would contradict our stated policy of using claims data
developed from a single source, and applying a single standardized
methodology wherever possible to establish payment amounts that are
appropriately relative to one another. The Medicare claims database we
use contains all claims for all services paid under the OPPS for all
Medicare patients (other than those in Medicare managed care programs).
As such, we believe that it is the best and most reliable source for
standardized utilization and cost data in the Nation with regard to
Medicare outpatient hospital care. Because the OPPS is a relative
weight system, we believe it is important that, to the maximum extent
possible, the relative weights be calculated using standardized
processes and a standardized base of claims data.
(2) Effects of Inconsistent Markup of Charges
Comment: Some commenters objected to the use of claims data because
they believed the payments that result are less than the cost of the
procedures and the devices due to the high markup of low cost items and
services and the low markup of high cost items and services. They
indicated that the use of CCRs applied to hospital charges results in
median costs that are inadequate for high cost devices because the
markup on high cost devices is insufficient to result in the correct
costs for the devices after application of CCRs calculated from all
services in the applicable departments. Commenters offered a variety of
recommendations for dealing with this phenomenon that they identified
as ``charge compression.'' They suggested that CMS establish a sample
of hospitals from which data would be collected for use in place of
claims data or to validate the data derived from claims. They also
suggested that CMS establish a new cost center solely for high cost
devices and calculate an appropriate CCR for this new specialized cost
center. Some of the commenters recommended that CMS conduct a study of
the data of volunteer hospitals to determine an appropriate CCR for
high cost devices that would be applied to all hospitals. They noted
that CMS could adjust claims-based medians by substituting proprietary
confidential cost data for the device portion of the median costs. They
suggested that CMS could also calculate a charge decompression factor
that would estimate the markup function from charges on claims and
device acquisition cost data and incorporate these data into setting
two CCRs: one for high cost devices and one for low cost
[[Page 68621]]
devices, which would be used in place of actual hospital CCRs. Lastly,
the commenters also suggested that CMS could create a broad stakeholder
panel to address this issue.
Other commenters stated that the use of the hospital's average CCR
results in computed costs and relative weights that are more or less
than specific actual costs, but that this averaging is appropriate and
desirable in a PPS and should continue. They stated that the
alternative is a micromanaged payment system that resembles the system
that Congress discarded in favor of a bundled PPS. The commenters urged
CMS to remain committed to the principles of a PPS and the use of
averaging, rather than seeking to pay the actual cost for one element
of costs at the expense of all other items and services, which they
stated would occur as a result of the application of budget neutrality
adjustments required by law. They reiterated that many factors go into
the decision of what services to furnish in a hospital, and that the
payment for a specific service is only one of the applicable factors.
Response: We agree that the use of the hospital's average CCR
results in computed costs and relative weights that may be more or less
than specific actual costs and that this averaging is appropriate and
desirable in a PPS and should continue. One of the principal purposes
of determining median costs for weight setting in a budget neutral
payment system is to determine the appropriate relativity in resource
use among services, so that the fixed amount of money can be fairly and
equitably distributed among hospitals based on case-mix. We note that,
in general, the median costs derived from this process may not
represent the actual acquisition costs of the services being furnished,
nor will they ever represent acquisition costs. They are estimated
relative costs that are converted to relative weights, scaled for
budget neutrality, and then multiplied by a conversion factor to result
in payments that, as we have previously discussed, were designed in
such a manner that they are not expected to pay the full costs of the
services.
(3) Effects of Multiple Procedure Reduction
Comment: Some commenters stated that all device-dependent APCs
should be assigned a status indicator of ``S'' (significant service,
separately payable) because none of the procedures assigned to these
APCs should ever be reduced when performed with another procedure.
Commenters stated that much of the cost of these procedures is a
function of the cost of the device, and that the device cost remains
unchanged whether the procedure in which it is required is performed
with other surgical procedures or not. Commenters specifically objected
to the movement of CPT code 33225 (L ventric pacing lead add-on) from
New Technology APC 1525 in CY 2005 where it has a status indicator of
``S'' to APC 0418 ( Insertion of Left Ventricular Pacing Elect) for CY
2006, in which it was proposed to have status indicator ``T,'' because
the payment for the procedure, when performed in addition to another
procedure, would be reduced by 50 percent although most of the cost of
the procedure is in the device, the cost of which remains fixed.
Commenters also specifically objected to the assignment of status
indicator ``T'' to APCs 0223 and 0227 because it results in a reduction
in payment when services to place a catheter and implant an infusion
pump are provided in the same session.
Response: We decide on a service-by-service basis whether the
assignment of a status indicator ``S'' or ``T'' is appropriate. In the
case of most device-dependent APCs, the service in question is never
reduced because it is always the procedure with the highest payment
rate (for example, cochlear implants and insertion of a cardioverter
defibrillator (ICD)), and the assignment of a status indicator ``T'' is
necessary so that the lower cost services are reduced in payment to
reflect the efficiencies that occur when they are done at the same time
as the highest paid procedure.
In the case of CPT code 33225 for insertion of a left ventricular
pacing electrode at time of insertion of an ICD, we believe that
payment at 50 percent of the payment rate for APC 0418 is appropriate
for this add-on procedure based on the information furnished to us by
manufacturers, hospitals, and physicians who are familiar with the
service. This procedure is always done as an adjunct to insertion of a
cardioverter defibrillator and a significant portion of the cost of the
procedure is in the extension of operating room time and not in the
cost of the device, drugs, or supplies needed to furnish the service.
While CPT code 33225 is an add-on code, we discuss our ongoing
exploration of possible solutions to the data challenges in developing
appropriate payment rates for add-on codes in the data section (section
II.A.) of this final rule with comment period. Also assigned to APC
0418 is the stand-alone procedure for insertion of the left ventricular
lead, and we believe the add-on lead insertion is appropriately reduced
by 50 percent in comparison with the payment rate for the stand-alone
insertion procedure. Therefore, we believe that payment at 50 percent
of the amount for APC 0418 to which we proposed to assign CPT code
33225 is appropriate and, as proposed, we have moved CPT code 33225 to
APC 0418 with a status indicator of ``T.''
When a spinal infusion pump is implanted along with an intrathecal
or epidural catheter, CPT codes billed likely include those assigned to
APCs 0227 and 0223, respectively. The higher paying APC 0227 for
implantation of the infusion pump would receive full payment, while the
catheter insertion APC 0223 would receive 50 percent of the APC payment
because both APCs are assigned ``T'' status indicators. We believe this
reduction is appropriate, as there are some efficiencies when both
services are performed in a single session. In addition, we note that
the CPT code for the catheter implantation includes the possibility of
repositioning in its descriptor, so it is possible that this procedure
may not require a new device every time it is performed. Therefore, we
believe that the procedures assigned to APCs 0223 and 0227 are
appropriately assigned ``T'' status indicators.
(4) Impact of Proposed Rates on Access to Care
Comment: Some commenters stated that under the proposed payments,
Medicare beneficiaries may not get the device-related services they
need because Medicare payments would be inadequate to compensate
hospitals for their costs, and that hospitals would not furnish the
services to Medicare beneficiaries for the rates that Medicare proposed
to pay in CY 2006. They stated that hospitals will either cease
providing certain services, or they will decide not to furnish them due
to low Medicare payment rates.
Response: We share the commenters' concern that beneficiaries have
access to all of the care they need, regardless of the type of service.
As other commenters have stated, hospitals decide upon the range of
services to offer based on a variety of factors, of which Medicare
outpatient hospital payment is only one. We believe that the best way
to ensure access to care for Medicare beneficiaries is to establish the
OPPS using as many claims as possible from all hospitals so that the
relative weights on which the payments are based result in the most
fair and equitable distribution possible of Medicare's funding for
outpatient hospital services.
We note that our regulations at 42 CFR 489.53(a)(2) state that a
hospital
[[Page 68622]]
risks termination of its Medicare provider agreement if it treats
Medicare beneficiaries differently from other similar patients in the
hospital.
(5) Addition of Other APCs as Device-Dependent APCs
Comment: Some commenters asked that CMS expand the list of APCs for
which medians will be adjusted to include all APCs that require the use
of a device. Specifically, they requested that we apply any median
adjustment for device-dependent APCs also to APC 0112 (Apheresis,
Photopheresis, and Plasmapheresis), APC 0312 (Radioelement
Applications), APC 0313 (Brachytherapy), and APC 0651 (Complex
Interstitial Radiation Source Application). They asked that CMS set the
median for all such APCs that use a device at the CY 2005 OPPS adjusted
median after inflating by the full market basket increase for CY 2006.
Commenters asked that CMS add APC 0416 Level I Intravascular and
Intracardiac Ultrasound and Flow Reserve) and, in particular, CPT code
37250 (Iv us first vessel add-on) to the list of device-dependent APCs
and require device editing for CPT code 37250. They stated that this
service requires a device, that its APC should be treated like all
other device-dependent APCs, and that claims for the service should be
returned if they are submitted without the HCPCS code for the device so
that the full cost of the device will be included on every claim.
Response: As previously stated in response to the APC Panel's
recommendation on a similar issue, many services that require devices
are not included in the set of APCs to which we have given special
attention as they came off pass-through status. We package the costs of
relatively high cost devices into the median costs for the device-
dependent APCs, and the absence of charges for these devices on claims
is the reason for special treatment of the APCs in the past. The
absence of charges also leads to our application of device editing to
the services in the device-dependent APCs so that our hospital claims
data are more complete for these specific services. At this time, we
see no compelling reason to expand this list of device-dependent APCs.
This is particularly true given that we expect that, for CY 2007, these
APCs will not receive special attention as a class. However, we note
that we will make case-by-case decisions regarding the application of
edits where appropriate.
(6) Instructions on Reporting Device Charges
Comment: Some commenters asked that CMS educate providers on how to
report charges for devices and technologies that do not have HCPCS
codes, and that CMS issue explicit instructions regarding consistent
use of revenue codes for reporting charges for devices and technologies
to ensure that such charges are fully reported on claims.
Response: CMS' instructions regarding the need to report device
codes and charges are included in the Internet Only Manual, Claims
Processing Manual 100-4, Chapter 4 (CMS Web site: http://www.cms.hhs.gov/manuals/). Section 61.1 of that manual provides
instructions on the requirement to report the device code and directs
providers to the CMS Web site for the most current list of HCPCS codes
for devices and for the most recent set of procedure code to device
edits. In addition, section 20.5.1 specifies revenue centers that
should be used when devices are reported. As always, when devices do
not have appropriate HCPCS codes for reporting, hospitals should be
sure to include all charges associated with their use on claims for
services with which the devices were used.
(7) Application of Wage Index to Device-Dependent APCs Containing
Devices
Comment: Some commenters objected to the application of the wage
index to an APC into which devices were packaged. They indicated that
applying the wage index will continue to further undervalue new
technology services. They asked that CMS revise its policy and apply
the wage index only to the service portion of the procedure for APCs
for which the device cost is more than 80 percent of the total APC
payment.
Response: Whether the application of the wage index to 60 percent
of the APC payment will raise or reduce the payment for the service
depends on the wage index value of the area in which the hospital is
located. However, while we do not believe that the application of the
wage index underpays new technology items or services, we acknowledge
the commenter's request, and we will consider it as we develop our
policies for future updates of the OPPS.
(8) Recalls of High Cost Devices
Comment: Some commenters are concerned that claims for items
subject to a recall not be used for claims setting as there is no
charge for the device on the claim, and the use of the claim could skew
the median cost. These commenters also asked that CMS provide explicit
guidance on how to report devices for which the provider incurred no
cost due to replacement by the manufacturer under a recall of the
device.
Response: The recalls of a significant number of cardioverter
defibrillators and pacemakers to which the commenters referred occurred
very late in CY 2004 and in CY 2005. Therefore, we believe that they
have no effect on the CY 2004 claims used to set the rates for the CY
2006 OPPS. We are aware of the potential impact on data used for
ratesetting for the CY 2007 OPPS and are already considering a strategy
for ensuring that the CY 2005 claims data we will use for the CY 2007
OPPS will be appropriately reflective of the costs of the devices. We
note that one way of doing this is to not use claims that contain
device charges of $1.01 or less in the calculation of the median costs
for these APCs. In the July 2005 OPPS instruction, Change Request 3915,
dated June 30, 2005, we issued interim instructions regarding how
hospitals should report device codes and charges when the device was
furnished without cost by the manufacturer under a recall.
Specifically, we advised hospitals to report the HCPCS code for the
device and a token charge of $1.01 or less on the line with the device
code. Accordingly, we will use the device code and charge combination
to find these claims in the CY 2005 data.
For the future, beginning January 1, 2006, hospitals should report
modifier ``FB'' on the claim with the device code (where there is one
to report) or with the procedure code (where there is no appropriate
device code) to indicate that a device used in the procedure was
furnished without cost to the provider and, therefore, is not being
charged to Medicare or the beneficiary. The device edits will recognize
the modifier and will not return the claim to the provider as
incomplete because the device code is not on the claim. CMS will issue
instructions regarding use of the modifier in the January 2006 OPPS
change request issuance.
(9) Separate Payment for High Cost Devices
Comment: Some commenters asked that we pay separately for high cost
devices and recommended that CMS define ``high cost'' devices as those
with a cost greater than 50 percent of the APC payment rate. They
indicated that even with device editing, they do not believe
[[Page 68623]]
that hospitals will be diligent about reporting all of their services
or setting charges that reflect the costs of the devices. They believed
that separate payments for high cost devices is the only way to achieve
valid cost data for devices and related services.
Response: In general, we believe that packaging the costs of items
needed to furnish services into the payments for the services and the
assignment of multiple services to a single APC create incentives for
efficiency and for the selection of the least costly device that meets
the patient's needs. Therefore, for the CY 2006 OPPS, we will continue
to package payment for all devices without pass-through status, and
which are not brachytherapy sources, into the payments for the
procedures that utilize them. However, we recognize that there may be
valid reasons to consider whether it would be appropriate to pay
separately for some high cost devices, and we will consider whether
there are circumstances in which this may be appropriate in the future.
After carefully reviewing all comments received concerning our
proposed median cost adjustment for device-dependent APCs for CY 2006,
we have set the medians for device-dependent APCs at the highest of:
the median cost of all single bills; the median cost calculated using
only claims that contain pertinent device codes and for which the
device cost is greater than $1; or 90 percent of the payment median
that was used to set the CY 2005 payment rates. Table 16 below shows
the adjusted median costs for the listed device-dependent APCs for
which comparisons with prior years are valid to the highest of the CY
2006 unadjusted APC median, 90 percent of the adjusted median on which
payment was based for the CY 2005 OPPS, or the median calculated using
only claims that meet the device code edits implemented in CY 2005.
BILLING CODE 4120-01-P
[[Page 68624]]
[GRAPHIC] [TIFF OMITTED] TR10NO05.017
[[Page 68625]]
[GRAPHIC] [TIFF OMITTED] TR10NO05.018
[[Page 68626]]
BILLING CODE 4120-01-C
B. Pass-Through Payments for Devices
1. Expiration of Transitional Pass-Through Payments for Certain Devices
Section 1833(t)(6)(B)(iii) of the Act requires that, under the
OPPS, a category of devices be eligible for transitional pass-through
payments for at least 2, but not more than 3 years. This period begins
with the first date on which a transitional pass-through payment is
made for any medical device that is described by the category. In our
November 15, 2004 final rule with comment period (69 FR 65773), we
specified three device categories currently in effect that would cease
to be eligible for pass-through payment effective January 1, 2006.
The device category codes became effective April 1, 2001, under the
provisions of the BIPA. Prior to pass-through device categories, we
paid for pass-through devices under the OPPS on a brand-specific basis.
All of the initial 97 category codes that were established as of April
1, 2001, have expired; 95 categories expired after CY 2002 and 2
categories expired after CY 2003. All of the categories listed in Table
17, along with their expected expiration dates, were created since we
published the criteria and process for creating additional device
categories for pass-through payment on November 2, 2001 (66 FR 55850
through 55857). We based the expiration dates for the category codes
listed in Table 17 on the date on which a category was first eligible
for pass-through payment.
There are three categories for devices that would have been
eligible for pass-through payments for at least 2 years as of December
31, 2005. In the November 15, 2004 final rule with comment period, we
finalized the December 31, 2005 expiration dates for these three
categories--C1814 (Retinal tamponade device, silicone oil), C1818
(Integrated keratoprosthesis), and C1819 (Tissue localization excision
device). Each category includes devices for which pass-through payment
was first made under the OPPS in CY 2003 or CY 2004.
In the November 1, 2002 final rule, we established a policy for
payment of devices included in pass-through categories that are due to
expire (67 FR 66763). For CY 2003, we packaged the costs of the devices
no longer eligible for pass-through payments into the costs of the
procedures with which the devices were billed in CY 2001. Brachytherapy
sources for other than prostate brachytherapy, which are now separately
paid in accordance with section 621(b)(2) of Pub. L. 108-173, are an
exception to this established policy. For CY 2005, we continued to
apply this policy, the same as we did in CYs 2003 and 2004, to
categories of devices that expired on December 31, 2004.
2. Proposed and Final Policy for CY 2006
For CY 2006, we proposed to implement the final decision we made in
the November 15, 2004 final rule with comment period that finalizes the
expiration date for pass-through status for device categories C1814,
C1818, and C1819. Therefore, as of January 1, 2006, we will discontinue
pass-through payment for C1814, C1818, and C1819. In accordance with
our established policy, we proposed to package the costs of the devices
assigned to these three categories into the costs of the procedures
with which the devices were billed in CY 2004, the year of hospital
claims data used for the CY 2006 OPPS update.
We received two public comments concerning the expiration of pass-
through payment for these three device categories.
Comment: One commenter recommended that CMS extend the pass-through
payment for device category C1819 until December 31, 2006, rather than
ending pass-through payment on December 31, 2005. The commenter
expressed concern that our median cost data for the procedure codes
utilizing a tissue localization excision device do not include the
costs attributed to device category C1819, and that the volume of C1819
claims is not sufficient to affect the median costs for CPT codes 19125
(Excision, breast lesion) and 19160 (Removal of breast tissue).
Response: We finalized the pass-through payment for device category
code C1819 in the CY 2005 final rule with comment period and responded
to a similar comment in that same rule (69 FR 65773). In this CY 2006
final rule with comment period, we are merely implementing that
decision effective for services furnished on or after January 1, 2006.
Moreover, we believe that the device costs represented by device
category code C1819 are found in our median cost data, as we have CY
2004 hospital claims billed with C1819 that have been used to establish
CY 2006 payment rates. As the device median cost was only approximately
$67 and the median cost of APC 0028 (Level I Breast Surgery), where the
accompanying procedure CPT codes 19125 and 19160 mentioned in the
comment reside, is over $1,100, we anticipate that the packaging of
this device will not limit appropriate access. We note that as usage of
this device grows, the device costs may become more prominent
contributors to the median costs of procedures utilizing the device, as
long as hospitals report the device code and its associated charges on
their claims.
Comment: One commenter expressed concern regarding the appropriate
packaging of expiring device categories from pass-through payment for
ophthalmologic devices after December 31, 2005. The commenter
recommended that device category code C1814 be packaged with HCPCS
codes 67036 (Removal of inner eye fluid), 67040 (Laser treatment of
retina), 67108 (Repair detached retina), and 67112 (Rerepair detached
retina), all of which the commenter claimed are paid under APC 0672.
The commenter recommended that device category code C1818 be packaged
with HCPCS code 65770 (Revise cornea with implant), which is proposed
to be paid through APC 0244 (Cornea Transplant).
Response: Our policy is to package the expired device categories'
costs with the costs relating to the procedure codes with which they
were billed in our claims data. We will apply this policy to device
category codes C1814 and C1818 as well. To the extent that the HCPCS
codes reported in our claims data for the services associated with
device codes C1814 and C1818 are the same as those HCPCS service codes
noted in the comment, the median cost data for those HCPCS codes will
include the costs associated with codes C1814 and C1818.
As indicated in the November 15, 2004 final rule with comment
period, device categories C1814, C1818 and C1819 will expire from pass-
through payment on December 31, 2005. We remind the public that these
C-codes are still active for the billing and reporting of devices and
their charges along with the HCPCS codes for the procedures with which
they are used. When billing for procedures utilizing devices that have
active device codes, hospitals are required to report the codes for the
devices on their claims for the procedures.
[[Page 68627]]
Table 17.--List of Current Pass-Through Device Categories by Expiration Date
----------------------------------------------------------------------------------------------------------------
Date(s) Expiration
HCPCS codes Category long descriptor populated date
----------------------------------------------------------------------------------------------------------------
C1814...................................... Retinal tamponade device, silicone 4/1/03 12/31/05
oil.
C1818...................................... Integrated keratoprosthesis........ 7/1/03 12/31/05
C1819...................................... Tissue localization excision device 1/1/04 12/31/05
----------------------------------------------------------------------------------------------------------------
C. Other Policy Issues Relating to Pass-Through Device Categories
1. Provisions for Reducing Transitional Pass-Through Payments to Offset
Costs Packaged Into APC Groups
a. Background
In the November 30, 2001 final rule, we explained the methodology
we used to estimate the portion of each APC payment rate that could
reasonably be attributed to the cost of the associated devices that are
eligible for pass-through payments (66 FR 59904). Beginning with the
implementation of the CY 2002 OPPS quarterly update (April 1, 2002), we
deducted from the pass-through payments for the identified devices an
amount that reflected the portion of the APC payment amount that we
determined was associated with the cost of the device, as required by
section 1833(t)(6)(D)(ii) of the Act. In the November 1, 2002 interim
final rule with comment period, we published the applicable offset
amounts for CY 2003 (67 FR 66801).
For the CY 2002 and CY 2003 OPPS updates, to estimate the portion
of each APC payment rate that could reasonably be attributed to the
cost of an associated device eligible for pass-through payment, we used
claims data from the period used for recalibration of the APC rates.
That is, for CY 2002 OPPS updating, we used CY 2000 claims data and for
CY 2003 OPPS updating, we used CY 2001 claims data. For CY 2002, we
used median cost claims data based on specific revenue centers used for
device related costs because C-code cost data were not available until
CY 2003. For CY 2003, we calculated a median cost for every APC without
packaging the costs of associated C-codes for device categories that
were billed with the APC. We then calculated a median cost for every
APC with the costs of the associated device category C-codes that were
billed with the APC packaged into the median. Comparing the median APC
cost without device packaging to the median APC cost including device
packaging enabled us to determine the percentage of the median APC cost
that is attributable to the associated pass-through devices. By
applying those percentages to the APC payment rates, we determined the
applicable amount to be deducted from the pass-through payment, the
``offset'' amount. We created an offset list comprised of any APC for
which the device cost was at least 1 percent of the APC's cost.
The offset list that we have published each year is a list of
offset amounts associated with those APCs with identified offset
amounts developed using the methodology described above. As a rule, we
do not know in advance which procedures residing in certain APCs may be
billed with new device categories. Therefore, an offset amount is
applied only when a new device category is billed with a HCPCS
procedure code that is assigned to an APC appearing on the offset list.
The list of potential offsets for CY 2005 is currently published on the
CMS Web site: http://www.cms.hhs.gov, as ``Device-Related Portions of
Ambulatory Payment Classification Costs for 2005.''
For CY 2004, we modified our policy for applying offsets to device
pass-through payments. Specifically, we indicated that we would apply
an offset to a new device category only when we could determine that an
APC contains costs associated with the device. We continued our
existing methodology for determining the offset amount, described
earlier. We were able to use this methodology to establish the device
offset amounts for CY 2004 because providers reported device codes (C-
codes) on the CY 2002 claims used for the CY 2004 OPPS update. For the
CY 2005 update to the OPPS, our data consisted of CY 2003 claims that
did not contain device codes and, therefore, for CY 2005 we utilized
the device percentages as developed for CY 2004. In the CY 2004 OPPS
update, we reviewed the device categories eligible for continuing pass-
through payment in CY 2004 to determine whether the costs associated
with the device categories are packaged into the existing APCs. Based
on our review of the data for the device categories existing in CY
2004, we determined that there were no close or identifiable costs
associated with the devices relating to the respective APCs that are
normally billed with them. Therefore, for those device categories, we
set the offset to $0 for CY 2004. We continued this policy of setting
offsets to $0 for the device categories that continued to receive pass-
through payment in CY 2005.
For the CY 2006 OPPS update, CY 2004 hospital claims are available
for analysis. Hospitals billed device C-codes in CY 2004 on a voluntary
basis. We have reviewed our CY 2004 data, examining hospital claims for
services that included device C-codes and utilizing the methodology for
calculating device offsets noted above. The numbers of claims for
services in many of the APCs for which we calculated device percentages
using CY 2004 data were quite small. Many of these APCs already had
relatively few single claims available for median calculations compared
with the total bill frequencies because of our inability to use many
multiple bills in establishing median costs for all APCs, and
subsetting the single claims to only those including C-codes often
reduced those single bills by 80 percent or more. Our claims
demonstrate that relatively few hospitals specifically coded for
devices utilized in CY 2004. Thus, we are not confident that CY 2004
claims reporting C-codes represent the typical costs of all hospitals
providing the services. Therefore, we did not propose to use CY 2004
claims with device coding to propose CY 2006 device offset amounts. In
addition, we did not propose to use the CY 2005 methodology, for which
we utilized the device percentages as developed for CY 2004. Two years
have passed since we developed the device offsets for CY 2004, and the
device offsets originally calculated from CY 2002 hospitals' claims
data may not appropriately reflect the contributions of device costs to
procedural costs in the current outpatient hospital environment. In
addition, a number of the APCs on the CY 2004 and CY 2005 device offset
percentage lists are either no longer in existence or have been so
significantly reconfigured that the past device offsets likely do not
apply.
b. Proposed and Final Policy for CY 2006
For CY 2006, we proposed to continue to review each new device
category on a case-by-case basis as we have done in CY 2004 and CY
2005, to determine whether device costs associated with
[[Page 68628]]
the new category are packaged into the existing APC structure. If we do
not determine for any new device category the device costs associated
with the new category are packaged into existing APCs, we proposed to
continue our current policy of setting the offset for the new category
to $0 for CY 2006. There are currently no established categories that
would continue for pass-through payment in CY 2006. However, we may
establish new categories in any quarter. If we create a new device
category and determine that our data contain a sufficient number of
claims with identifiable costs associated with the devices in any APC,
we would adjust the APC payment if the offset is greater than $0. If we
determine that a device offset greater than $0 is appropriate for any
new category that we create, we proposed to announce the offset amounts
in the program transmittal that announces the new category.
For CY 2006, we proposed to use available partial year or full year
CY 2005 hospital claims data to calculate device percentages and
potential offsets for CY 2006 applications for new device categories.
Effective January 1, 2005, we require hospitals to report device C-
codes and their costs when hospitals bill for services which utilize
devices described by the existing C-codes. In addition, during CY 2005
we are implementing device edits for many services that require devices
and for which appropriate device C-codes exist. Therefore, we expect
that the number of claims, including device codes and their respective
costs, will be much more robust and representative for CY 2005 than for
CY 2004. We also note that offsets would not be used for any existing
categories at this time. If a new device category is created for
payment, for CY 2006 we proposed to examine the available CY 2005
claims data, including device costs, to determine whether device costs
associated with the new category are already packaged into the existing
APC structure, as indicated earlier. If we conclude that some related
device costs are packaged into existing APCs, we proposed to utilize
the methodology described earlier and first used for the CY 2003 OPPS
to determine an appropriate device offset percentage for those APCs
with which the new category would be reported.
We proposed not to publish a list of APCs with device percentages
as a transitional policy for CY 2006 because of the previously
discussed limitations of the CY 2004 OPPS data with respect to device
costs associated with procedures. We expect to reexamine our previous
methodology for calculating the device percentages and offset amounts
for the CY 2007 OPPS update, which will be based on CY 2005 hospital
claims data where device C-code reporting is required.
We did not receive any public comments in response to our
proposals.
Accordingly, we are finalizing our proposed policy for CY 2006 for
calculating device percentages and applying offsets.
2. Criteria for Establishing New Pass-Through Device Categories
a. Surgical Insertion and Implantation Criterion
One of our criteria, as set forth in Sec. 419.66(b)(3) of the
regulations, for establishing a new category of devices for pass-
through payment is that the item be surgically inserted or implanted.
The criterion that a device be surgically inserted or implanted is one
of our original criteria adopted when we implemented the BBRA
requirement that we establish pass-through payment for devices. This
criterion helps us define whether an item is a device, as distinguished
from other items, such as materials and supplies. We further clarified
our definition of the surgical insertion and implantation criterion in
the November 13, 2000 final rule (65 FR 67805). In that rule, we stated
that we consider a device to be surgically inserted or implanted if it
is introduced into the human body through a surgically created
incision. We also stated that we do not consider an item used to cut or
otherwise create a surgical opening to be a device that is surgically
inserted or implanted.
In our November 15, 2004 final rule with comment period, we
responded to comments received on our CY 2005 OPPS proposed rule, which
requested that we revisit our surgical insertion and implantation
criterion for establishing a new device category. The commenters
specifically requested that CMS eliminate the current requirement that
items that are included in new pass-through device categories must be
surgically inserted or implanted through a surgically created incision.
The commenters expressed concern that the current requirement may
prevent access to innovative and less invasive technologies,
particularly in the areas of gynecologic, urologic, colorectal, and
gastrointestinal procedures. These commenters asked that CMS change the
surgical insertion or implantation criterion to allow pass-through
payment for potential new device categories that include items
introduced into the human body through a natural orifice, as well as
through a surgically created incision. Several of the commenters
recommended that CMS allow the creation of a new pass-through category
for items implanted or inserted through a natural orifice, as long as
the other existing criteria are met.
In responding to the commenters, we stated in the November 15, 2004
final rule with comment period (69 FR 65774) that we were also
interested in hearing the views of other parties and receiving
additional information on these issues. While we appreciate and welcome
additional comments on these issues from the medical device makers, we
were also interested in hearing the views of Medicare beneficiaries, of
the hospitals that are paid under the OPPS, and of physicians and other
practitioners who attend to patients in the hospital outpatient
setting. For that reason, we solicited additional comments on this
topic within the 60-day comment period for the November 15, 2004 final
rule with comment period (69 FR 65774 through 65775). In framing their
comments, we asked that commenters consider the following questions
specific to devices introduced into the body through natural orifices:
1. Whether orifices include those that are either naturally or
surgically created, as in the case of ostomies. If you believe this
includes only natural orifices, why do you distinguish between natural
and surgically created orifices?
2. How would you define ``new,'' with respect to time and to
predecessor technology? What additional criteria or characteristics do
you believe distinguish ``new'' devices that are surgically introduced
through an existing orifice from older technology that also is inserted
through an orifice?
3. What characteristics do you consider to distinguish a device
that might be eligible for a pass-through category even if inserted
through an existing orifice from materials and supplies such as
sutures, clips or customized surgical kits that are used incident to a
service or procedure?
4. Are there differences with respect to instruments that are seen
as supplies or equipment for open procedures when those same
instruments are passed through an orifice using a scope?
(1) Public Comments Received on the November 15, 2004 Final Rule With
Comment Period and Our Responses
Below is a summary of the public comments we received on the four
stated surgical insertion and implantation device criterion questions
and our responses to them.
Comment: Most commenters generally framed their responses to the
four
[[Page 68629]]
questions listed above. Commenters were generally in favor of modifying
our surgical insertion and implantation criterion so that devices that
are placed into patients without the need for a surgical incision would
not be ineligible for pass-through payment, claiming that devices that
are inserted through a natural orifice offer important benefits to
Medicare beneficiaries, such as avoidance of more costly and more
invasive surgery. One commenter stated that procedures that could be
performed with minimal morbidity and on an outpatient basis are the
trend for surgery and should be encouraged. Another commenter believed
that our criterion of surgical insertion or implantation through a
surgically created incision was ineffective as a clear and
comprehensive description of surgical procedures, including endoscopic
and laparoscopic procedures.
Regarding the first specific question we posed, whether devices
introduced into the body through natural orifices includes orifices
that are either naturally or surgically created, commenters generally
stated CMS should include devices as potentially eligible for pass-
through categories whether they are introduced through orifices that
are either naturally or surgically created, as in the case of ostomies,
if the devices meet other cost and clinical criteria, in order to
encourage the development of new technologies.
Regarding the second question restated above, which asked how the
public would define ``new'' with respect to time and to predecessor
technology, some commenters stated that they believed the current
clinical and cost criteria are sufficient and that no additional
criteria or characteristics are needed. Several commenters indicated
that the timeframe for what CMS considers ``new'' could be clarified so
that if the device in question was not FDA approved or not used for the
services in the OPD during the year of the hospital claims that
provided the basis for the most recent OPPS update, it should be
considered ``new.'' Some commenters elaborated by example. They stated
that if CMS changes the surgical insertion or implantation requirement
to include devices inserted through natural orifices in CY 2005,
devices approved by the FDA and in use in the OPD in CY 2003 or
previously would not be eligible, while devices approved by FDA in CY
2004 or later and used in the OPD settings would be eligible for pass-
through consideration. Another commenter stated that the definition of
``new'' device should include those devices that require only an FDA
investigational device exemption (IDE) clearance. The commenter further
stated that these devices should be granted ``new'' status at the time
of FDA release as an IDE. The commenter stated that if FDA required a
premarket approval (PMA) for the device, a determination of newness
should be made on a case-by-case basis.
Regarding the question of what characteristics distinguish a device
that might be eligible for a pass-through category even if inserted
through an existing orifice from materials and supplies that are used
incident to a service or procedure, some commenters generally believed
that the current clinical and cost criteria are sufficient to
distinguish devices that might be eligible from materials and supplies.
Other commenters stated that the device must be an integral part of the
procedure or that it should include the characteristic of having a
diagnostic or therapeutic purpose, without which the procedure could
not be performed. Thus, according to these commenters, the device must
function for a specific procedure, while supplies may be used for many
procedures. One commenter pointed out that many devices are now
implanted through the use of naturally occurring orifices or without
significant incisions. This commenter indicated that the requirement of
a ``traditional incision'' no longer serves the purpose of
distinguishing between devices that are and are not implanted, or
between devices and supplies and instruments. The commenter stated that
retaining the requirement of a traditional incision could create
incentives to use more invasive technology, if that is the technology
that is eligible for pass-through payments and less invasive technology
is not. The commenter suggested excluding tools and disposable supplies
by excluding any item that is used primarily for the purpose of cutting
or delivering an implantable device. However, the commenter recommended
not reducing payment when delivery systems are packaged with the
device. The commenter further recommended that the term ``incision'' be
clearly defined to include all procedures involving the cutting,
breaking, or puncturing of tissue or skin, regardless of how small that
cut is, provided that the device is attached to or inserted into the
body via this cut, puncture, or break. Another commenter stated that
there are items included in a surgical kit that have significant cost
and are single use, for example, guidewires, implying that it is
sometimes difficult to determine what a supply is.
Regarding our question about whether there are differences with
respect to instruments that are seen as supplies or equipment for open
procedures when those same instruments are passed through an orifice
using a scope, commenters believed that the definitions of supplies and
eligible devices are independent of the use of a scope during a
procedure, and stated there were no distinguishing features of supplies
or equipment. One commenter reiterated that the current clinical and
cost criteria are sufficient to distinguish eligible devices (that is,
those with ``a specific therapeutic use'') from materials and supplies.
Commenters believed that the use of a scope should not be a factor in
the distinction between devices and supplies.
One commenter urged us to consider the points that the surgical
incision requirement is not mandated by statute and that CMS' criterion
to limit devices to only those that are surgically inserted or
implanted may have been based upon concern that less restrictive
criteria would cause spending on pass-though items to exceed the pool
of money set to fund the pass-though payments. The commenter indicated
that this concern would no longer be valid, given the relatively few
items currently paid on a pass-through basis.
Response: As we stated in the November 15, 2004 final rule, we
share the view that it is important to ensure access for Medicare
beneficiaries to new technologies that offer substantial clinical
improvement in the treatment of their medical conditions. We also
recognize that since the beginning of the OPPS, there have been
beneficial advances in technologies and services for many conditions,
which have both markedly altered the courses of medical care and
ultimately improved the health outcomes of many beneficiaries.
We carefully considered the comments and proposed to maintain our
current criterion that a device must be surgically inserted or
implanted, but also proposed to modify the way we currently interpret
this criterion under Sec. 419.66(b)(3) of the regulations. We proposed
to consider eligible those items that are surgically inserted or
implanted either through a natural orifice or a surgically created
orifice (such as through an ostomy), as well as those that are inserted
or implanted through a surgically created incision. We noted that we
would maintain all of our other criteria in Sec. 419.66 of the
regulations, as elaborated in our various rules, such as the November
1, 2002 final rule (67 FR 66781 through 66787).
[[Page 68630]]
Specifically, we noted that we would maintain the clarification made at
the time we clarified the surgically inserted or implanted criterion in
our August 3, 2000 interim final rule with comment period, namely, that
we do not consider an item used to cut or otherwise create a surgical
opening to be a device that is surgically implanted or inserted (65 FR
67805).
With this proposed revision of our definition of devices that are
surgically inserted or implanted, we reminded the public that device
category eligibility for transitional pass-through payment continues to
depend on meeting our substantial clinical improvement criterion, where
we compare the clinical outcomes of treatment options using the device
to currently available treatments, including treatments using devices
in existing or previously existing pass-through device categories. We
expect that requested new pass-through device categories that
successfully demonstrate substantial clinical improvement for Medicare
beneficiaries would describe new devices, where the additional device
costs would not be reflected in the hospital claims data providing the
costs of treatments available during the time period used for the most
recent OPPS update.
(2) Public Comments Received on the CY 2006 OPPS Proposed Rule and Our
Responses
We received many comments concerning our proposals to modify the
surgical insertion or implantation criterion for new pass-through
device categories.
Comment: Commenters supported our proposal to modify the way we
currently interpret our criterion that a device must be surgically
inserted or implanted under Sec. 419.66(b)(3) of the regulations, but
suggested that CMS consider eligible those items that are surgically
inserted or implanted either through a natural orifice or a surgically
created orifice (such as through an ostomy), as well as items that are
surgically inserted or implanted through a surgically created incision.
A few commenters suggested that CMS modify the regulatory language to
codify this change, by explicitly stating in Sec. 419.66(b)(3) that
the device is implanted or inserted through a natural or surgically
created orifice or through a surgically created incision. These
commenters made this request in the context of stating that the
proposed interpretation resolves the current need to make a traditional
surgical incision to insert or implant a device through an orifice for
that device to be considered eligible for a pass-through device
category.
Response: We appreciate the support for our proposal to modify our
interpretation of the surgical insertion or implantation criterion for
pass-through payment eligibility for devices. Our current criterion is
that a device must be surgically inserted or implanted, while our
interpretation of this criterion up to this point has been to consider
eligible only those devices that are inserted or implanted through a
surgically created incision, as clarified in our August 3, 2000 interim
final rule. As stated above, other clarifications in that interim final
rule remain. We do not believe that it is either essential or advisable
to revise the regulations. Therefore, we are not changing the current
language of Sec. 419.66(b)(3), as some commenters have suggested.
However, we are adopting as final our interpretation that surgical
insertion or implantation criteria include devices that are surgically
inserted or implanted via a natural or surgically created orifice, as
well as those devices that are inserted or implanted via a surgically
created incision. We will maintain all of the other criteria in Sec.
419.66 of the regulations, as elaborated in our various rules, such as
the November 1, 2002 final rule (67 FR 66781 through 66787) and our
August 3, 2000 interim final rule with comment period, namely, that we
do not consider an item used to cut or otherwise create a surgical
opening to be a device that is surgically implanted or inserted (65 FR
67805).
b. Existing Device Category Criterion
One of our criteria, as set forth in Sec. 419.66(c)(1) of the
regulations, to establish a new device category for pass-through
payment is that the devices that would populate the category not be
described by any existing or previously existing category. Commenters
to our various proposed rules, as well as applicants for new device
categories, have expressed concern that some of our existing and
previously existing device category descriptors are overly broad, and
that the category descriptors as they are currently written may
preclude some new technologies from qualifying for establishment of a
new device category for pass-through payment. These parties have
recommended that CMS consider modifying the descriptors for existing
device categories, especially when a device would otherwise meet all
the other criteria for establishing a new device category to qualify
for pass-through payment.
We agree that implementation of the requirement that a new device
category not be described by an existing or previously existing
category merits review. Beginning with CY 2006, 3 years will have
elapsed since the vast majority of the 97 initial device categories we
established on April 1, 2001, will have expired: 95 categories expired
after December 31, 2002, and 2 categories expired after December 31,
2003. Several additional years will have passed since those categories
were first populated in CY 2000 or CY 2001. Thus, while some of the
initial device category descriptors sufficed at the time they were
first created, further clarification as to the types of devices that
they are meant to describe is indicated. Therefore, we proposed to
create an additional category for devices that meet all of the criteria
required to establish a new category for pass-through payment in
instances where we believe that an existing or previously existing
category descriptor does not appropriately describe the new type of
device. This may entail the need to clarify or refine the short or long
descriptors of the previous category. We will evaluate each situation
on a case-by-case basis. We proposed that any such clarification will
be made prospectively from the date the new category would be made
effective.
We also proposed to revise Sec. 419.66(c)(1) of the regulations,
accordingly, to reflect, as one of the criteria for establishing a
device category, our determination that a device is not appropriately
described by any of the existing categories or by any category
previously in effect. In order to determine if a ``new'' device is
appropriately described by an existing or previously existing category
of devices, we proposed to apply two tests based upon our evaluation of
information provided to us in the device category application. First,
we will expect an applicant for a new device category to show that its
device is not similar to devices (including related predicate devices)
whose costs are reflected in the OPPS claims data in the most recent
OPPS update. Second, we will require an applicant for a new device
category to demonstrate that utilization of its device provides a
substantial clinical improvement for Medicare beneficiaries compared
with currently available treatments, including procedures utilizing
devices in existing or previously existing device categories. We will
consider a new device that meets both of these tests not to be
appropriately described by one of the existing or previously existing
pass-through device categories.
We received a large number of public comments concerning our
proposal to create an additional category for devices
[[Page 68631]]
that meet all of the criteria required to establish a new category for
pass-through payment in instances where we believe that an existing or
previously existing category descriptor does not appropriately describe
the new type of device.
Comment: Commenters generally supported our proposal to create an
additional category for devices that meet all of the criteria required
to establish a new category for pass-through payment in instances where
we believe that an existing or previously existing category descriptor
does not appropriately describe the new type of device, and which may
entail the need to clarify or refine the short or long descriptors of
the previous category. The commenters believed that CMS has sufficient
documentation on devices in expired categories to differentiate those
devices from new devices, as well as the authority to clarify the
definitions of previously existing categories. The commenters gave
examples of devices that they believe are not appropriately described
by existing categories and whose descriptors are overly broad.
Commenters also supported the application of the two tests that we
proposed to apply in order to determine if the devices in device
category applications are described by an existing or previously
existing category. One commenter expressed that it would be useful for
CMS to provide additional details on how we intend to evaluate whether
a new technology is similar to existing technologies. Another commenter
expressed concern that we have not developed standards of proof of
substantial clinical improvement, which is one of the proposed tests,
and encouraged CMS to develop further explanation of the substantial
clinical improvement test.
Response: We appreciate the commenters' support for our proposed
modification to our policy that a device may not be described by an
existing or previously existing device category. Regarding the
recommendations made for clarifying whether a nominated new device is
similar to an existing technology, as new device applications consist
of unique technologies, evaluation of what constitutes a similar
technology or substantial clinical improvement is done on an individual
application basis. We refer the commenters to our discussion of the
substantial clinical improvement criterion that is found in our
November 1, 2002 final rule (67 FR 66782-66783), which provides a list
of criteria and examples of clinical outcomes that are used to
determine if a request for a new category of devices meets our
substantial clinical improvement criterion.
Comment: A few commenters recommended that CMS consider pending
pass-through applications in light of this modification to the existing
category criterion, and that CMS make modifications to existing or
previously existing categories effective January 1, 2006, where all
device category criteria are met.
Response: It is our intention to evaluate pending pass-through
device category applications against any changes to criteria as a
result of this final rule with comment period. If any pending
applications are then eligible for establishment of a new device
category for pass-through payment, we will endeavor to add those for
payment effective January 1, 2006. Any payment instructions would be
announced in the program transmittal implementing our CY 2006 OPPS
update.
Comment: In commenting on our proposal to modify the existing
device category criterion for pass-through payment for devices, a
number of commenters noted that rechargeable implantable pulse
generator (IPG) neurostimulators should be provided with pass-through
payment status, and that a new category is needed specifically for
rechargeable neurostimulators. The commenters claimed that rechargeable
neurostimulators have allowed a significant advance to the field of
neuromodulation for the treatment of chronic intractable pain. The
commenters stated there is a high degree of patient compliance with
rechargeable neurostimulators, and these devices will reduce the cost
of spinal cord stimulation over time by reducing the number of surgical
battery replacements. A large number of commenters stated that the new
class of rechargeable IPG neurostimulators meets our proposed new tests
to determine if a device is described by an existing or previously
existing category. The commenters requested that CMS clarify the
previously existing category to state that it described nonrechargeable
neurostimulators. The commenters recommended that CMS apply any revised
criterion to pending applications.
Response: We note that two pass-through applications now under
consideration are for devices currently described by a previously
existing pass-through category. These applications are for implantable
rechargeable neurostimulators. Neurostimulators are covered by a
previously existing OPPS device category for pass-through payment,
C1767, Generator, neurostimulator (implantable). This same type of
rechargeable device was considered for the IPPS new technology add-on
payment, and passed all that payment system's criteria, including
demonstrating substantial clinical improvement. Therefore, with the
adoption of our proposal to clarify an existing or previously existing
device category if an existing or previously existing device category
does not appropriately describe a new device and the device would
otherwise be eligible for a new pass-through device category, we will
consider the rechargeable neurostimulator applications for pass-through
payment beginning January 2006, in which case we would also consider
the need to clarify or refine the description of category C1767. Any
coding and payment information will be announced in the program
transmittal implementing the OPPS for CY 2006. We also note that we
have included an estimate for a rechargeable neurostimulator category
in our pass-through spending estimate in section VI.B of this rule,
should there be creation of a new device category for pass-through
payment for such devices.
We are finalizing this proposal without change. We will create an
additional category for devices that meet all of the criteria required
to establish a new category for pass-through payment in instances where
we believe that an existing or previously existing category descriptor
does not appropriately describe the new type of device. This may entail
the need to clarify or refine the short or long descriptors of the
previous category. We will evaluate each situation on a case-by-case
basis and apply the two tests described above. Any such clarification
to a category descriptor will be made prospectively from the date the
new category would be made effective. We are also finalizing our
proposed revision of our regulations at Sec. 419.66(c)(1) to reflect
this change.
V. Payment Changes for Drugs, Biologicals, and Radiopharmaceuticals
A. Transitional Pass-Through Payment for Additional Costs of Drugs and
Biologicals
1. Background
Section 1833(t)(6) of the Act provides for temporary additional
payments or ``transitional pass-through payments'' for certain drugs
and biological agents. As originally enacted by the BBRA, this
provision required the Secretary to make additional payments to
hospitals for current orphan drugs, as designated under section 526 of
the Federal Food, Drug, and Cosmetic Act (Pub. L. 107-186); current
drugs and biological agents
[[Page 68632]]
and brachytherapy used for the treatment of cancer; and current
radiopharmaceutical drugs and biological products. For those drugs and
biological agents referred to as ``current,'' the transitional pass-
through payment began on the first date the hospital OPPS was
implemented (before enactment of BIPA (Pub. L. 106-554), on December
21, 2000).
Transitional pass-through payments are also required for certain
``new'' drugs, devices, and biological agents that were not being paid
for as a hospital OPD service as of December 31, 1996, and whose cost
is ``not insignificant'' in relation to the OPPS payment for the
procedures or services associated with the new drug, device, or
biological. Under the statute, transitional pass-through payments can
be made for at least 2 years but not more than 3 years. In Addenda A
and B to this final rule with comment period, pass-through drugs and
biological agents are identified by status indicator ``G.''
The process to apply for transitional pass-through payment for
eligible drugs and biological agents can be found on our CMS Web site:
www.cms.hhs.gov. If we revise the application instructions in any way,
we will post the revisions on our Web site and submit the changes to
the Office of Management and Budget (OMB) for approval, as required
under the Paperwork Reduction Act (PRA). Notification of new drugs and
biologicals application processes is generally posted on the OPPS Web
site at: http://www.cms.hhs.gov/providers/hopps.
2. Expiration in CY 2005 of Pass-Through Status for Drugs and
Biologicals
Section 1833(t)(6)(C)(i) of the Act specifies that the duration of
transitional pass-through payments for drugs and biologicals must be no
less than 2 years and no longer than 3 years. The drugs whose pass-
through status will expire on December 31, 2005, meet that criterion.
In the CY 2006 OPPS proposed rule, in Table 19 (70 FR 42722) we listed
the 10 drugs and biologicals for which we proposed that pass-through
status would expire on December 31, 2005.
We received one public comment concerning the proposed expiration
of pass-through status for those drugs and biologicals on December 31,
2005.
Comment: One commenter noted that the proposed rule did not make
clear whether drugs coming off pass-through status will be reassigned
to J-codes or will continue to be listed under their C-codes for
payment purposes and requested clarification in the final rule.
Response: In order to reduce redundancy and simplify coding for
drugs, biologicals, and radiopharmaceuticals under the OPPS, we are
deleting the temporary C-codes for items that also have permanent HCPCS
codes and are paying for those items under the permanent HCPCS codes if
it is appropriate to do so. Among the items whose pass-through status
will expire on December 31, 2005, are HCPCS codes C9123, C9203, C9205,
C9211, and C9212, which will be deleted effective December 31, 2005.
For services furnished on or after January 1, 2006, hospitals should
use HCPCS code J7344 to bill for Transcyte, HCPCS code Q9955 to bill
for Perflexane lipid micro, HCPCS code J9263 to bill for Oxaliplatin,
and HCPCS code J0215 to bill for Alefacept. Later in the preamble, we
list all of the C-codes in Table 25 that will be deleted on December
31, 2005 and replaced with other existing or new HCPCS codes in CY
2006.
For this final rule with comment period, in Table 18 below, we are
specifying the drugs and biologicals for which pass-through status will
expire on December 31, 2005. This listing is the same as that published
in the proposed rule.
Table 18.--List of Drugs and Biologicals for Which Pass-Through Status Expires December 31, 2005
----------------------------------------------------------------------------------------------------------------
HCPCS APC Short descriptor
----------------------------------------------------------------------------------------------------------------
C9123......................................... 9123 Transcyte, per 247 sq cm.
C9203......................................... 9203 Perflexane lipid micro.
C9205......................................... 9205 Oxaliplatin.
C9211......................................... 9211 Inj, alefacept, IV.
C9212......................................... 9212 Inj, alefacept, IM.
J0180......................................... 9208 Agalsidase beta injection.
J1931......................................... 9209 Laronidase injection.
J2469......................................... 9210 Palonosetron HCl.
J3486......................................... 9204 Ziprasidone mesylate.
J9041......................................... 9207 Bortezomib injection.
----------------------------------------------------------------------------------------------------------------
3. Drugs and Biologicals With Pass-Through Status in CY 2006
In the CY 2005 OPPS proposed rule (70 FR 42722 and 42723), we
proposed to continue pass-through status in CY 2006 for 14 drugs and
biologicals. These items, which were listed in Table 20 of the CY 2006
OPPS proposed rule (70 FR 42723), were given pass-through status as of
April 1, 2005. The APCs and HCPCS codes for drugs and biologicals that
we proposed to continue with pass-through status in CY 2006 are
assigned status indicator ``G'' in Addenda A and B of this final rule
with comment period.
Section 1833(t)(6)(D)(i) of the Act sets the payment rate for pass-
through eligible drugs (assuming that no pro rata reduction in pass-
through payment is necessary) as the amount determined under section
1842(o) of the Act. We note that this section of the Act also states
that if a drug or biological is covered under a competitive acquisition
contract under section 1847B of the Act, the payment rate is equal to
the average price for the drug or biological for all competitive
acquisition areas and the year established as calculated and adjusted
by the Secretary. The competitive acquisition program had not been
implemented at the time of issuance of the CY 2006 proposed rule.
Therefore, we did not have payment rates for certain drugs and
biologicals that would be covered under this program at that time.
Section 1847A of the Act, as added by section 303(c) of Pub. L. 108-
173, establishes the use of the average sales price (ASP) methodology
as the basis for payment of drugs and biologicals described in section
1842(o)(1)(C) of the Act and furnished on or after January 1, 2005.
This payment methodology is set forth in Sec. 419.64 of the
regulations. Similar to the payment policy established for pass-through
drugs and biologicals in CY 2005, we proposed to pay under the OPPS for
drugs and biologicals with pass-through status in CY 2006 consistent
with the provisions of section 1842(o) of the Act, as amended by
[[Page 68633]]
section 621 of Pub. L. 108-173, at a rate that is equivalent to the
payment these drugs and biologicals would receive in the physician
office setting.
Section 1833(t)(6)(D)(i) of the Act also sets the amount of
additional payment for pass-through eligible drugs and biologicals (the
pass-through payment amount). The pass-through payment amount is the
difference between the amount authorized under section 1842(o) of the
Act, and the portion of the otherwise applicable fee schedule amount
(that is, the APC payment rate) that the Secretary determines is
associated with the drug or biological.
In the CY 2006 OPPS proposed rule, (70 FR 42722 and 42731) we
proposed to continue to make separate payment in CY 2006 for new drugs
and biologicals with a HCPCS code consistent with the provisions of
section 1842(o) of the Act, as amended by section 621 of Pub. L. 108
173, at a rate that is equivalent to the payment they would receive in
a physician office setting, whether or not we have received a pass-
through application for the item. Accordingly, in CY 2006 the pass-
through payment amount would equal zero for those new drugs and
biologicals that we determine have pass-through status. That is, when
we subtract the amount to be paid for pass-through drugs and
biologicals under section 1842(o) of the Act, as amended by section 621
of Pub. L. 108-173, from the portion of the otherwise applicable fee
schedule amount or the APC payment rate associated with the drug or
biological that would be the amount paid for drugs and biologicals
under section 1842(o) of the Act as amended by section 621 of Pub. L.
108-173, the resulting difference is equal to zero.
We proposed to use payment rates based on the ASP data from the
fourth quarter of 2004 for budget neutrality estimates, impact
analyses, and to complete Addenda A and B of the proposed rule because
these were the most recent numbers available to us during the
development of the proposed rule. These payment rates were also the
basis for drug payments in the physician office setting effective April
1, 2005. To be consistent with the ASP-based payments that would be
made when these drugs and biologicals are furnished in physician
offices, we stated in our proposed rule (70 FR 42722 and 42723) that we
planned to make any appropriate adjustments to the amounts shown in
Addenda A and B of the proposed rule when we publish our final rule and
also on a quarterly basis on our Web site during CY 2006 if later
quarter ASP submissions indicate that adjustments to the payment rates
for these pass-through drugs and biologicals are necessary.
In Table 20 of the proposed rule, we listed the drugs and
biologicals for which we proposed that pass-through status continue in
CY 2006. We assigned pass-through status to these drugs and biologicals
as of April 1, 2005. Since publication of the CY 2006 OPPS proposed
rule, we have approved three additional drugs and biologicals for pass-
through payment beginning on or after July 1, 2005. These products are
Abraxane, which has been assigned HCPCS code C9127 (Injection,
Paclitaxel Protein Bound Particles, per 1 mg); Macugen, which has been
assigned HCPCS code C9128 (Injection, Pegaptanib Sodium, per 0.3 mg);
and Clolar, which has been assigned HCPCS code C9129 (Injection,
Clofarabine, per 1 mg). (See Change Request 3915, Transmittal 599
issued on June 30, 2005.) In addition, two more products have been
approved for pass-through status beginning on or after October 1, 2005.
They are Retisert, which has been assigned HCPCS code C9225 (Injection,
fluocinolone acetonide intravitreal implant, per 0.59 mg) and Prialt,
which has been assigned HCPCS code C9226 (Injection, ziconotide for
intrathecal infusion, per 5 mcg). (See Change Request 4035, Transmittal
691 issued on September 30, 2005). For CY 2006, the C-codes C9127,
C9128, C9129, and C9226 have been deleted and replaced with permanent
HCPCS codes J9264, J2503, J9027, and J2278, respectively. These new
eligible pass-through items are listed in Table 19 below. We also have
included in Addenda A and B to this final rule with comment period the
CY 2006 APC payment rates for all pass-through drugs and biologicals.
We received several public comments on the proposed listing and
payment rates for drugs and biologicals with pass-through status
continuing in CY 2006.
Comment: A few commenters indicated that our proposal to apply the
same payment methodology to pass-through drugs and to drugs that are
classified as a ``specified covered outpatient drug'' may not
appropriately recognize and pay hospitals for the additional costs that
are often associated with new technologies that are given pass-through
status. One commenter indicated that the proposal negated the intent of
the pass-through payment, which was meant to compensate hospitals for
costs not covered by existing APC payments. Commenters urged CMS to
consider maintaining a differential in payment systems between
innovative and older drugs in order to ensure adequate access to newer
therapies within the hospital outpatient setting. One commenter
suggested that CMS consider making the pass-through payment methodology
consistent with the methodology applied to new drugs in the physician
office setting (that is, wholesale acquisition cost or the applicable
payment methodology in effect on November 1, 2003) to distinguish and
provide sufficient payment for the class of pass-through drugs in
future years.
Response: Section 1833(t)(6)(D)(i) of the Act sets the additional
payment amount for pass-through eligible drugs or biologicals as the
difference between the amount determined under section 1842(o) of the
Act and the APC payment rate determined by the Secretary associated
with the drug or biological. As we explained earlier, section 1847A of
the Act, as added by section 303(c) of Pub. L. 108-173, establishes the
use of the ASP methodology as the basis for payment of drugs and
biologicals described in section 1842(o)(1)(C) of the Act and furnished
on or after January 1, 2005. Our proposal to pay for drugs and
biologicals with pass-through status in CY 2006 using the ASP
methodology at a rate that is equivalent to the payment these drugs and
biologicals would receive in the physician office setting is consistent
with the provisions of section 1842(o) of the Act, as amended by
section 621 of Pub. L. 108-173. Specifically, in CY 2006, we will be
paying for drugs and biologicals with pass-through status under the
OPPS based on the ASP methodology and using ASP data specific to the
drug or biological itself. We note that there may be certain drugs and
biologicals with pass-through status that are payable under different
HCPCS codes in the physician offices and outpatient departments, and
for such cases, payment for the drug or biological under the OPPS will
be based on the ASP data for the item described by the code that is
used under the OPPS. We agree that pass-through payments are designed
to recognize differences between the payment rates under the OPPS and
the payment rates for certain drugs and biologicals in the physician
office setting. Statutory changes in the payment methodology for pass-
through drugs and biologicals mean that such cost differentials no
longer exist.
We have used payment rates based on the ASP data from the second
quarter of CY 2005 for budget neutrality estimates, impact analyses,
and to complete Addenda A and B of this final rule with comment period
because these were the most recent numbers available to us during the
development of this rule. These payment rates are also the basis
[[Page 68634]]
for drug payments in the physician office setting effective October 1,
2005. However, the payment rates for pass-through drugs and biologicals
that will be effective in the OPPS on January 1, 2006 will be based on
ASP data from the third quarter of CY 2005, which will also be the
basis for drug payments in physician offices as of January 1, 2006. To
be consistent with the ASP-based payments that will be made when these
pass-through drugs and biologicals are furnished in physician offices,
we plan to make any appropriate adjustments in CY 2006 to the payment
rates for these items if later quarter ASP submissions indicate that
adjustments to the payment rates are necessary.
As noted earlier, section 1833(t)(6)(D)(i) of the Act also states
that if a drug or biological is covered under a competitive acquisition
contract under section 1847B of the Act, the payment rate is equal to
the average price for the drug or biological for all competitive
acquisition areas and year established as calculated and adjusted by
the Secretary. The competitive acquisition program still has not been
implemented with issuance of this final rule with comment period. We
expect implementation by July 1, 2006. For this final rule with comment
period, we do not have payment rates for certain drugs and biologicals
that would be covered under this program at that time. However, when
the competitive acquisition program is implemented in CY 2006, the OPPS
payment rates for pass-through drugs and biologicals that will also be
covered under the program will be based on the competitive acquisition
program methodology in CY 2006.
We refer readers to section V.B.3.a. of this preamble for a
discussion of payment policies for specified covered outpatient drugs.
Comment: The manufacturer of natalizumab (HCPCS code Q4079)
supported continued pass-through status for this product, but was
concerned that continuation of the 1-mg unit descriptor will create
confusion among providers and inject the potential of erroneously
denied or underpaid claims. The commenter indicated that a 300 mg dose
of the product is always uniformly infused and urged CMS to amend the
coding descriptor to reflect its clinical use.
Response: We recognize the commenter's concern. However, the
National HCPCS Panel coordinates decisions regarding the descriptors of
permanent HCPCS codes. Therefore, we will not respond to this comment
as it is outside the scope of this rule.
Table 19 below lists the drugs and biologicals that will have pass-
through status in CY 2006. Addenda A and B of this final rule with
comment period list the final CY 2006 rates for these pass-through
drugs and biologicals, which are based on ASP data reported by
manufacturers from the second quarter of CY 2005. These items are
assigned to status indicator ``G.''
Comment: A commenter recommended that CMS finalize the proposal to
continue payment for HCPCS codes C9221 and C9222 as pass-through
biologics in CY 2006 and requested that CMS confirm that the proposed
payment rate of $1,234.36 for HCPCS code C9221 reflected ASP+6 percent.
Response: We agree with the commenters that HCPCS codes C9221 and
C9222 should be paid as pass-through items in CY 2006; therefore, these
items are listed in Table 19 along with other drugs and biologicals
that will also have pass-through status under the OPPS in CY 2006 and
are also assigned to status indicator ``G'' in Addendum B of this final
rule with comment period.
Comment: A commenter indicated that the HCPCS code C9127
(paclitaxel protein-bound particles for injectable suspension, per 1
mg) was granted pass-through status effective July 1, 2005; however,
the CY 2006 proposed rule listed this code with a status indicator
``K'' rather than status indicator ``G.'' The commenter requested that
this code be assigned to status indicator ``G'' in the final rule
indicating its pass-through status.
Response: In the proposed rule, we listed only the drugs and
biologicals that received pass-through status as of April 1, 2005. As
indicated earlier, there are additional drugs and biologicals that have
been approved for pass-through status since the publication of the
proposed rule, and HCPCS code C9127 is one of the drugs that received
pass-through status effective July 1, 2005. We note that HCPCS code
C9127 has been deleted effective December 31, 2005 and replaced with
HCPCS code J9264 in CY 2006. Consequently, in this final rule we have
assigned HCPCS code J9264 to status indicator ``G'' in Addendum B in
this final rule with comment period.
Comment: Another commenter indicated that it was pleased with CMS'
proposal to continue pass-through status in CY 2006 for the drug
Orthovisc, which is reported under HCPCS code C9220; however, it was
also concerned that once the period of eligibility for pass-through
payments expired, there will not be a code corresponding to HCPCS code
C9220 that will be available for use. The commenter expressed concern
about the CMS HCPCS Workgroup's preliminary recommendation to deny a
unique code for Orthovisc and to include Orthovisc with other
viscosupplements described by HCPCS code J7317. The commenter stated
its belief that a new code is necessary and appropriate for Orthovisc
under the established HCPCS process, and such a decision would
recognize the unique characteristics of Orthovisc, distinguish it from
other viscosupplements, allow for appropriate payment, and facilitate
patient access. The commenter indicated that it resubmitted its J-code
application under the new HCPCS process on December 24, 2004 and
requested that CMS recognize Orthovisc as a unique product and grant it
a unique HCPCS code.
Response: Effective January 1, 2006, the National HCPCS Panel has
created HCPCS code J7318 (Hyaluron/derive intra-art inj) to describe
all of the sodium hyaluronate products, including Orthovisc. Decisions
regarding the creation of permanent HCPCS codes are coordinated by the
National HCPCS Panel. Comments related to the HCPCS code creation
process and decisions made by the National HCPCS Panel are outside the
scope of this rule. However, we note that in CY 2006 because HCPCS code
C9220 will continue to have pass-through status under the OPPS both
HCPCS code C9220 and HCPCS code J7318 will be payable under the OPPS,
and their payment rates will be established using the ASP data for all
of the products described by these codes. Therefore, we encourage
providers to continue billing for Orthovisc, which has pass-through
status, using HCPCS code C9920 in order to receive appropriate payment
for furnishing this drug in the hospital outpatient setting.
Comment: A few commenters requested the CMS clarify in the final
rule how payment for infusion drugs administered through an item of
DME, such as drugs administered through an implantable or external
infusion pump, will be paid under the OPPS in CY 2006. One commenter
was especially concerned about the payment rate for HCPCS code C9226
(Brand name: Prialt), which is administered through an intrathecal
pump. The commenters noted CMS' statement that CY 2006 payment for
drugs and biologicals under the OPPS will follow that of the physician
office setting; however, CMS did not specifically state that this
particular group of drugs, which are not paid under the ASP
methodology, will continue to be paid at 95 percent of AWP in CY 2006.
Commenters requested that CMS clarify that infusion
[[Page 68635]]
drugs administered through an item of DME and furnished in the hospital
outpatient setting, like Prialt, will be paid at 95 percent of AWP
pursuant to section 1842(o)(1)(D) of the Act. One commenter also
requested that CMS clarify that Prialt is not an orphan drug.
Response: HCPCS code C9226 was approved for pass-through status
effective October 1, 2005. As a pass-through drug under the OPPS,
payment for Prialt was established using the ASP methodology. (See
Change Request 4035, Transmittal 691 issued on September 30, 2005). As
with other new drugs without ASP data, payment for Prialt was set at
WAC+6% ($32.24 per 5 mcg) effective October 1, 2005. We note that
Prialt is not considered a single-indication orphan drug under OPPS. As
the commenters noted, section 1842(o)(1)(D) of the Act states that
drugs infused through DME are paid at 95 percent of AWP until such time
as they are incorporated into the DME competitive bidding program.
However, section 1842(o)(1) of the Act (which governs section
1842(o)(1)(D)) specifically states that this payment methodology only
applies when a ``drug or biological is not paid on a cost or
prospective payment basis.'' Payment for drugs under the OPPS is
established on the basis of prospective rates. The provision that
requires payment for DME infusion drugs at 95 percent of AWP is
therefore not applicable to Prialt or any other DME infusion drugs
furnished in the hospital outpatient setting. Therefore, in CY 2006 we
will continue to pay for Prialt and other non-pass-through DME infusion
drugs using the ASP methodology instead of paying at 95 percent of AWP.
We note that HCPCS code C9226 has been deleted effective December 31,
2005 and replaced with J2278 in CY 2006. Consequently, in this final
rule, we have assigned HCPCS code J2278 to status indicator ``G'' in
Addendum B in this final rule with comment period.
Table 19.--List of Drugs and Biologicals With Pass-Through Status in CY 2006
----------------------------------------------------------------------------------------------------------------
HCPCS Code APC Short descriptor
----------------------------------------------------------------------------------------------------------------
C9220......................................... 9220 Sodium hyaluronate.
C9221......................................... 9221 Graftjacket Reg Matrix.
C9222......................................... 9222 Graftjacket SftTis.
C9225......................................... 9225 Fluocinolone acetonide.
J0128......................................... 9216 Abarelix injection.
J0878......................................... 9124 Daptomycin injection.
J2278......................................... 1694 Ziconotide injection.
J2357......................................... 9300 Omalizumab injection.
J2503......................................... 1697 Pegaptanib sodium injection.
J2783......................................... 0738 Rasburicase.
J2794......................................... 9125 Risperidone, long acting.
J7518......................................... 9219 Mycophenolic acid.
J8501......................................... 0868 Oral aprepitant.
J9027......................................... 1710 Clofarabine injection.
J9035......................................... 9214 Bevacizumab injection.
J9055......................................... 9215 Cetuximab injection.
J9264......................................... 1712 Paclitaxel injection.
J9305......................................... 9213 Pemetrexed injection.
Q4079......................................... 9126 Injection, Natalizumab, 1 mg.
----------------------------------------------------------------------------------------------------------------
B. Payment for Drugs, Biologicals, and Radiopharmaceuticals Without
Pass-Through Status
1. Background
Under the CY 2005 OPPS, we currently pay for drugs, biologicals
including blood and blood products, and radiopharmaceuticals that do
not have pass-through status in one of two ways: packaged payment and
separate payment (individual APCs). We explained in the April 7, 2000
final rule (65 FR 18450) that we generally package the cost of drugs
and radiopharmaceuticals into the APC payment rate for the procedure or
treatment with which the products are usually furnished. Hospitals do
not receive separate payment from Medicare for packaged items and
supplies, and hospitals may not bill beneficiaries separately for any
packaged items and supplies whose costs are recognized and paid within
the national OPPS payment rate for the associated procedure or service.
(Program Memorandum Transmittal A-01-133, issued on November 20, 2001,
explains in greater detail the rules regarding separate payment for
packaged services.)
Packaging costs into a single aggregate payment for a service,
procedure, or episode of care is a fundamental principle that
distinguishes a prospective payment system from a fee schedule. In
general, packaging the costs of items and services into the payment for
the primary procedure or service with which they are associated
encourages hospital efficiencies and also enables hospitals to manage
their resources with maximum flexibility. Notwithstanding our
commitment to package as many costs as possible, we are aware that
packaging payments for certain drugs, biologicals, and
radiopharmaceuticals, especially those that are particularly expensive
or rarely used, might result in insufficient payments to hospitals,
which could adversely affect beneficiary access to medically necessary
services.
Section 1833(t)(16)(B) of the Act, as added by section 621(a)(1) of
Pub. L. 108-173, requires that the threshold for establishing separate
APCs for drugs and biologicals be set at $50 per administration for CYs
2005 and 2006. For CY 2005, we finalized our policy to continue paying
separately for drugs, biologicals, and radiopharmaceuticals whose
median cost per day exceeds $50 and packaging the costs of drugs,
biologicals, and radiopharmaceuticals whose median cost per day is less
than $50 into the procedures with which they are billed. For CY 2005,
we also adopted an exception policy to our packaging rule for one
particular class of drugs, the oral and injectable 5HT3 forms of anti-
emetic treatments (69 FR 65779 through 65780).
2. Criteria for Packaging Payment for Drugs, Biologicals, and
Radiopharmaceuticals
In accordance with section 1833(t)(16)(B) of the Act, for CY 2006,
the threshold for establishing separate
[[Page 68636]]
APCs for drugs and biologicals is required to be set at $50 per
administration. Therefore, in the CY 2006 proposed rule we proposed to
continue our existing policy of paying separately for drugs,
biologicals, and radiopharmaceuticals whose per day cost exceeds $50
and packaging the cost of drugs, biologicals, and radiopharmaceuticals
whose per day cost is less than $50 into the procedures with which they
are billed. We also proposed to continue our policy of exempting seven
oral and injectable 5HT3 anti-emetic products from our packaging rule
(Table 21 of the CY 2006 OPPS proposed rule, 70 FR 42723), thereby
making separate payment for all of the 5HT3 anti-emetic products. As
stated in our CY 2005 final rule with comment period (69 FR 65779
through 65780), chemotherapy is very difficult for many patients to
tolerate, as the side effects are often debilitating. In order for
beneficiaries to achieve the maximum therapeutic benefit from
chemotherapy and other therapies with side effects of nausea and
vomiting, anti-emetic use is often an integral part of the treatment
regimen. We want to continue to ensure that our payment rules do not
impede a beneficiary's access to the particular anti-emetic that is
most effective for him or her as determined by the beneficiary and his
or her physician.
Table 20.--Anti-Emetics To Exempt From $50 Packaging Requirement
------------------------------------------------------------------------
HCPCS Code Short description
------------------------------------------------------------------------
J1260.......................... Dolasetron mesylate.
J1626.......................... Granisetron HCl injection.
J2405.......................... Ondansetron HCl injection.
J2469.......................... Palonosetron HCl.
Q0166.......................... Granisetron HCl 1 mg oral.
Q0179.......................... Ondansetron HCl 8 mg oral.
Q0180.......................... Dolasetron mesylate oral.
------------------------------------------------------------------------
For the CY 2006 proposed payment rates, we calculated the per day
cost of all drugs, biologicals, and radiopharmaceuticals that had a
HCPCS code in CY 2004 and were paid (via packaged or separate payment)
under the OPPS using claims data from January 1, 2004 to December 31,
2004. In CY 2004, multisource drugs and radiopharmaceuticals had two
HCPCS codes that distinguished the innovator multisource (brand) drug
or radiopharmaceutical from the noninnovator multisource (generic) drug
or radiopharmaceutical. We aggregated claims for both the brand and
generic HCPCS codes in our packaging analysis of these multisource
products. Items such as single indication orphan drugs, certain
vaccines, and blood and blood products were excluded from these
calculations and our treatment of these items is discussed separately
in sections V.F., V.E., and X.B., respectively, of this preamble.
In order to calculate the per day cost for drugs, biologicals, and
radiopharmaceuticals to determine their packaging status in CY 2006, we
proposed several changes in the methodology that was described in
detail in the CY 2004 OPPS proposed rule (68 FR 47996 through 47997)
and finalized in the CY 2004 final rule with comment period (68 FR
63444 through 63447). For CY 2006, to calculate the per day cost of the
drugs, biologicals, and radiopharmaceuticals, our proposed methodology
was the following:
Step 1. After application of the CCRs, we aggregated all line-items
for a single date of service on a single claim for each product. This
resulted in creation of a single line-item with the total number of
units and the total cost of a drug or radiopharmaceutical given to a
patient in a single day.
Step 2. We then created a separate record for each drug or
radiopharmaceutical by date of service, regardless of the number of
lines on which the drug or radiopharmaceutical was billed on each
claim. For example, ``drug X'' is billed on a claim with two different
dates of service, and for each date of service, the drug is billed on
two line-items with a cost of $10 and 5 units for each line-item. In
this case, the computer program would create two records for this drug,
and each record would have a total cost of $20 and 10 units of the
product.
Step 3. We trimmed records with unit counts per day greater or less
than 3 standard deviations from the geometric mean. (This is a new step
in the methodology that we proposed for CY 2006.)
Step 4. For each remaining record for a drug or
radiopharmaceutical, we calculated the cost per unit of the drug. If
the HCPCS descriptor for ``drug X'' is ''per 1 mg'' and one record was
created for a total of 10 mg (as indicated by the total number of units
for the drug on the claim for each unique date of service), the
computer program divided the total cost for the record by 10 to give a
per unit cost. We then weighted this unit cost by the total number of
units in the record. We did this by generating a number of line-items
equivalent to the number of units in that particular claim. Thus, a
claim with 100 units of ``drug X'' and a total cost of $200 would be
given 100 line-items, each with a cost of $2, while a claim of 50 units
with a cost of $50 would be given 50 line items, each with a cost of
$1.
Step 5. We trimmed the unit records with cost per unit greater or
less than 3 standard deviations from the geometric mean.
Step 6. We aggregated the remaining unit records to determine the
mean cost per unit of the drug or radiopharmaceutical.
Step 7. Using only the records that remained after records with
unit counts per day greater or less than 3 standard deviations from the
geometric mean were trimmed (step 3), we determined the total number of
units billed for each item and the total number of unique per-day
records for each item. We divided the count of the total number of
units by the total number of unique per-day records for each item to
calculate an average number of units per day.
Step 8. Instead of using median cost as done in previous years, we
used the payment rate for each drug and biological effective April 1,
2005 for the physician office setting, which was calculated using the
ASP methodology, and multiplied the payment rate by the average number
of units per day for each drug or biological to arrive at its per day
cost. For items that did not have an ASP-based payment rate, we used
their mean unit cost derived from the CY 2004 hospital claims data to
determine their per day cost. Our reasoning for using these cost data
is discussed in section V.B.3.a. of this preamble.
Step 9. We packaged the items with per day cost based on the ASP
methodology or mean cost less than $50 and made items with per day cost
greater than $50 separately payable.
In the past, many commenters had alleged that hospitals do not
accurately bill the number of units for drugs and radiopharmaceuticals
consistent with expected appropriate clinical use. We have consistently
decided not to determine whether a hospital claim reports a clinically
appropriate unit dose of a drug for rate-setting purposes. Variations
among patients with respect to appropriate doses, the variety of
indications with different dosing regimens for some agents, and the
possibility of off-label uses make it difficult to know when units are
incorrectly reported. However, we believed that trimming the units
would improve the accuracy of estimates by removing those records with
the most extreme units, without requiring us to speculate about
clinically appropriate dosing. Therefore, we believed that trimming the
records with unit counts greater or less than 3 standard deviations
from the geometric mean would eliminate claims from our analysis that
might not appropriately
[[Page 68637]]
represent the actual number of units of a drug or radiopharmaceutical
furnished by a hospital to a patient during a specific clinical
encounter. Because it reduced extreme variation, trimming on greater or
less than 3 standard deviations from the geometric mean made this trim
more conservative and removed fewer records. This change in methodology
gave us even greater confidence in the cost estimates we use for our
packaging decisions.
We specifically requested comments on the changes that we proposed
in our methodology for packaging drugs and radiopharmaceuticals. In
response, we received numerous public comments on the proposed
methodology.
Comment: Many commenters supported CMS' continued use of the $50
per day cost threshold to determine whether a drug, biological, or
radiopharmaceutical will be packaged or paid separately. One commenter
indicated that this system allows hospital outpatient departments to
have an efficient option for packaging and for collecting payments for
less costly drugs. Numerous commenters also supported CMS' proposal to
exempt the 5HT3 anti-emetic products from the current $50 packaging
threshold and pay for all of them separately, noting that the policy
will help to ensure that Medicare beneficiaries have access to the
particular anti-emetic that is most effective for them as determined by
the beneficiary and his or her physician. One commenter, to the
contrary, indicated that the current threshold for separate payment of
radiopharmaceuticals is too high and distorts the resource homogeneity
of the nuclear medicine APCs and recommended that CMS make separate
payments for all radiopharmaceuticals.
Response: We appreciate the commenters' support of our proposals
for CY 2006 to establish a packaging threshold for drugs, biologicals,
and radiopharmaceuticals at $50 per day and to pay separately for the
seven 5HT3 anti-emetic products. Section 1833(t)(16)(B) of the Act
requires that the threshold for establishing separate APCs for drugs
and biologicals be set at $50 per administration for CY 2006.
Therefore, we cannot change the threshold amount for
radiopharmaceuticals, to which the policy also applies, as one of the
commenters has suggested.
In determining the packaging status of drugs, biologicals, and
radiopharmaceuticals for CY 2006, we calculated the per day costs of
these items using the general methodology described above. However, as
it is our policy to use updated data for the final rule, to determine
the final per day costs of these items we used the payment rate for
each drug and biological effective October 1, 2005 for the physician
office setting, which was calculated using the ASP methodology, along
with updated hospital claims data from CY 2004. The payment rate was
multiplied by the average number of units per day for each drug or
biological, which were recalculated using all of the CY 2004 hospital
claims data used for this final rule with comment period, to arrive at
each product's per day cost. For items that did not have an ASP-based
payment rate, we used their mean unit cost, which we also recalculated
using all of the CY 2004 hospital claims data used for this final rule
with comment period to determine their per day cost.
We note that there are two drugs for which we proposed to pay
separately in our proposed rule that now have per day costs less than
$50 based on the updated cost and claims data. In these cases, we are
applying our equitable adjustment authority to the packaging threshold
according to the policy that we finalized in the CY 2005 final rule for
drugs and biologicals with similar circumstances (69 FR 65780).
Therefore, for CY 2006, we are applying the following policy to these
drugs and biologicals:
Drugs and biologicals that were paid separately in CY
2005, were proposed for separate payment in CY 2006, and have per day
costs less than $50 based on updated ASPs and hospital claims data used
for this CY 2006 final rule with comment period will continue to
receive separate payment in CY 2006.
Those drugs and biologicals that were packaged in CY 2005,
were proposed for separate payment in CY 2006, and have per day costs
less than $50 based on updated ASPs and hospital claims data used for
this CY 2006 final rule with comment period will remain packaged in CY
2006.
Table 21 lists the two drugs and biologicals to which this policy
will apply, along with their CYs 2005 and 2006 payment status
indicators.
Table 21.--Drugs and Biologicals With Per Day Costs Less Than $50 Using Final Rule Data, But Were Proposed for
Separate Payment
----------------------------------------------------------------------------------------------------------------
CY 2005 status CY 2006 status
HCPCS Description indicator indicator
----------------------------------------------------------------------------------------------------------------
J0580........................................ Penicillin g benzathine inj.... N N
J3350........................................ Urea injection................. K K
----------------------------------------------------------------------------------------------------------------
We also note that there were several drugs, biologicals, and
radiopharmaceuticals that we proposed to package in the proposed rule
and that now have per day costs greater than $50 using updated ASPs and
all of the hospital claims data from CY 2004 used for this final rule
with comment period. In accordance with our established policy for such
cases, for CY 2006 we will pay for these drugs, biologicals, and
radiopharmaceuticals separately. Table 22 lists the drugs and
biologicals that were proposed as packaged items, but will be paid
separately in CY 2006.
Table 22.--Drugs and Biologicals With Per Day Costs Above $50 for Which
Separate Payment Will Be Made in CY 2006
------------------------------------------------------------------------
HCPCS \1\ Description
------------------------------------------------------------------------
90665........................ Lyme disease vaccine, im.
90717........................ Yellow fever vaccine, sc.
A9504........................ Technetium tc 99m apcitide.
J0350........................ Injection anistreplase 30 u.
J0470........................ Dimecaprol injection.
J2700........................ Oxacillin sodium injection.
J2910........................ Aurothioglucose injection.
J3470........................ Hyaluronidase injection.
J7197........................ Antithrombin iii injection.
------------------------------------------------------------------------
Comment: One commenter supported the addition of ``step 3'' to the
calculation of the per day cost methodology used to determine the
packaging status of drugs, biologicals, and radiopharmaceuticals and
stated that the addition of the new step will improve the accuracy of
the per day cost calculation by enabling CMS to trim out very high
units of service associated with very low costs that may
inappropriately lower the overall median cost.
Response: We appreciate the commenter's support of the change in
our methodology to determine the per
[[Page 68638]]
day costs of drugs, biologicals, and radiopharmaceuticals and are
finalizing this change for CY 2006, along with the other proposed
changes for determining per day costs of these items.
Comment: We received comments on the packaging status of one drug
and several radiopharmaceuticals where the commenters indicated that
the items were incorrectly packaged and should be paid separately in CY
2006. Specific items mentioned in the comments were HCPCS codes J1245,
A9513, C1079, C9013, and Q3012. One commenter asserted that confusing
HCPCS descriptors contributed to the submission of inaccurate claims
data to CMS. This commenter also noted that the inconsistent market
availability of some of these products resulted in small numbers of
claims and variable cost data, which CMS used to determine the per day
costs of these items. The commenters indicated that there are other
products that are used for the same indication as some of these
products, and also that there are clinical situations where physician
would prefer to utilize one particular product over another. Therefore,
commenters did not want payment rules to affect access to particular
products that may be most clinically effective for patients.
Response: We understand the commenters' concerns about the
packaging of these items. Based on the methodology we used to calculate
per day costs of these items, as described earlier in the preamble, we
determined that the per-day costs of these products were below $50.
Therefore, these items were packaged. When we recalculated the per day
costs of these items using updated CY 2004 claims data and ASP-based
payment rates based on data from the second quarter of CY 2005 for the
final rule, we observed that the per day costs of these items remained
below $50. For radiopharmaceuticals, we recalculate their mean per day
costs using updated CY 2004 claims data.
As described earlier, we applied an additional unit trimming step
in the methodology to determine per day costs of items in CY 2006. We
stated our belief that trimming the units would improve the accuracy of
the per day cost estimates by removing those records with the most
extreme units, without requiring us to speculate about clinically
appropriate dosing. Therefore, we believe that the new trimming step
eliminates claims from our analysis that might not appropriately
represent the actual number of units of a drug or radiopharmaceutical
furnished by a hospital to a patient during a specific clinical
encounter. We indicated that this change in methodology gave us even
greater confidence in the cost estimates we use for our packaging
decisions. Also, section 621(a)(2) of Pub. L. 108-173 requires that the
threshold for establishing separate APCs for drugs and biologicals be
set at $50 per administration for CY 2006. Therefore, we cannot change
the packaging threshold amount from $50, which would be required of us
if we were to pay for these items separately. For these reasons, we
believe that it is appropriate for us to package these items in CY 2006
under OPPS. We expect that the modest per day costs of these packaged
items will allow hospitals to make the most clinically appropriate
choices of products in their care of patients, as hospitals will also
bill a variety of separately payable services for the care provided.
Comment: One commenter indicated that it is operationally
impossible to establish a separate process for charging anti-emetic
drugs when they are used only in conjunction with chemotherapy since
the majority of their surgical outpatients receive these drugs. The
commenter inquired as to whether CMS could develop an edit to only pay
for the anti-emetic drug when it is connected to a cancer diagnosis.
Response: We note that separate payments for these 5HT3 injectable
and oral anti-emetic drugs will be made as long as these drugs are
covered by Medicare, regardless of the clinical indications for the
drugs' use. The policy described above for the 5HT3 anti-emetic drugs
applies only to the packaging status of these items, not to their
coverage status. Hospitals should continue billing for these injectable
and oral anti-emetic drugs in accordance with existing coverage rules.
Section 1833(t)(16)(B) of the Act that requires the threshold for
establishing separate APCs for drugs and biologicals to be set at $50
per administration will expire at the end of CY 2006. Therefore, we
will be evaluating other packaging thresholds for these products for
the CY 2007 OPPS update. We specifically requested comments on the use
of alternative thresholds for packaging drugs and radiopharmaceuticals
in CY 2007.
We received a number of public comments in response to this
request.
Comment: Commenters made various suggestions for establishing the
packaging threshold for CY 2007. Several commenters encouraged CMS to
set the packaging threshold no higher than $50 in CY 2007 and beyond.
Other commenters suggested that CMS provide separate payment for all
infused and injectable drugs, regardless of their per day costs, and
only continue to package oral drugs in CY 2007. Other commenters echoed
this general suggestion, but further suggested that the oral anti-
emetic drugs be paid separately along with the infused and injectable
drugs. One commenter stated that CMS should continue to pay separately
for all drugs and biologicals that were separately paid in the past,
including all therapies that had received pass-through status. Another
commenter suggested that, to the extent CMS may elect to raise the
packaging threshold in CY 2007 and beyond, the threshold be linked to
an appropriate price indexing mechanism. In establishing the
appropriate price indexing measure, the commenter urged CMS to give
substantial consideration to the impact resulting from capturing more
high-cost drugs in packaged payment groups, including the effect such a
policy may have on beneficiary access to needed treatments, with
particular focus on avoiding unintended disadvantages for newer
innovator products. Other commenters suggested that CMS determine
appropriate payment levels that will be sufficient to ensure patient
access in its consideration of the use of alternative thresholds for
packaging drugs in CY 2007, and that CMS utilize ASP data from CY 2005
to determine the appropriate parameters for a packaging threshold in CY
2007. On the other hand, MedPAC indicated that it has long been
concerned about the incentives created by the unpackaging of drugs that
exists in the OPPS. For example, MedPAC stated that, under the OPPS,
providers have an incentive to use a higher-cost drug that is paid
separately in place of a lower-cost drug that is packaged. If hospitals
act on this incentive, it could raise beneficiaries' overall cost
sharing, Part B premiums, and program spending. MedPAC added that
setting payment rates for small packages is likely to be less accurate
than setting rates for larger packages. It pointed out that, with
greater packaging, variations in charging practices are more likely to
balance out, leading to payment rates that, on average, are more
reflective of costs.
Response: We appreciate receiving these suggestions for
establishing an appropriate packaging threshold for CY 2007 and will
take the recommendations into consideration as we work on our packaging
proposal for the CY 2007 OPPS.
[[Page 68639]]
3. Payment for Drugs, Biologicals, and Radiopharmaceuticals Without
Pass-Through Status That Are Not Packaged
a. Payment for Specified Covered Outpatient Drugs
(1) Background
Section 1833(t)(14) of the Act, as added by section 621(a)(1) of
Pub. L. 108-173, requires special classification of certain separately
paid radiopharmaceuticals, drugs, and biologicals and mandates specific
payments for these items. Under section 1833(t)(14)(B)(i) of the Act, a
``specified covered outpatient drug'' is a covered outpatient drug, as
defined in section 1927(k)(2) of the Act, for which a separate APC
exists and that either is a radiopharmaceutical agent or is a drug or
biological for which payment was made on a pass-through basis on or
before December 31, 2002.
Under section 1833(t)(14)(B)(ii) of the Act, certain drugs and
biologicals are designated as exceptions and are not included in the
definition of ``specified covered outpatient drugs.'' These exceptions
are--
A drug or biological for which payment is first made on or
after January 1, 2003, under the transitional pass-through payment
provision in section 1833(t)(6) of the Act.
A drug or biological for which a temporary HCPCS code has
not been assigned.
During CYs 2004 and 2005, an orphan drug (as designated by
the Secretary).
Section 1833(t)(14)(F) of the Act defines the categories of drugs
based on section 1861(t)(1) and sections 1927(k)(7)(A)(ii),
(k)(7)(A)(iii), and (k)(7)(A)(iv) of the Act. The categories of drugs
are ``sole source drugs (includes a biological product or a single
source drug),'' ``innovator multiple source drugs,'' and ``noninnovator
multiple source drugs.'' The definitions of these specified categories
for drugs, biologicals, and radiopharmaceuticals were discussed in the
January 6, 2004 OPPS interim final rule with comment period (69 FR
822), along with our use of the Medicaid average manufacturer price
database to determine the appropriate classification of these products.
Because of the many comments received on the January 6, 2004 interim
final rule with comment period, the classification of many of the
drugs, biologicals, and radiopharmaceuticals changed from that
initially published. We announced these changes to the public on
February 27, 2004, through Transmittal 112, Change Request 3144. We
also implemented additional classification changes through Transmittal
132 (Change Request 3154, released March 30, 2004) and Transmittal 194
(Change Request 3322, released June 4, 2004).
Section 1833(t)(14)(A) of the Act, as added by section 621(a)(1) of
Pub. L. 108-173, also provides that payment for these specified covered
outpatient drugs for CYs 2004 and 2005 is to be based on its
``reference average wholesale price (AWP).'' Section 1833(t)(14)(A)(ii)
of the Act, as added by section 621(a) of Pub. L. 108-173 requires that
in CY 2005--
A sole source drug must be paid no less than 83 percent
and no more than 95 percent of the reference AWP.
An innovator multiple source drug must be paid no more
than 68 percent of the reference AWP.
A noninnovator multiple source drug must be paid no more
than 46 percent of the reference AWP.
Section 1833(t)(14)(G) of the Act defines ``reference AWP'' as the
AWP determined under section 1842(o) the Act as of May 1, 2003. We
interpreted this to mean the AWP set under the CMS single drug pricer
(SDP) based on prices published in the Red Book on May 1, 2003.
For CY 2005, we finalized our policy to determine the payment rates
for specified covered outpatient drugs under the provisions of Pub. L.
108-173 by comparing the payment amounts calculated under the median
cost methodology as done for procedural APCs to the AWP percentages
specified in section 1833(t)(14)(A)(ii) of the Act.
(2) Changes for CY 2006 Related to Pub. L. 108-173
Section 1833(t)(14)(A)(iii) of the Act, as added by section
621(a)(1) of Pub. L. 108 173, requires that payment for specified
covered outpatient drugs in CY 2006 be equal to the average acquisition
cost for the drug for that year as determined by the Secretary subject
to any adjustment for overhead costs and taking into account the
hospital acquisition cost survey data collected by the Government
Accountability Office (GAO) in CYs 2004 and 2005. If hospital
acquisition cost data are not available, the law requires that payment
be equal to payment rates established under the methodology described
in section 1842(o), section 1847A, or section 1847B of the Act as
calculated and adjusted by the Secretary as necessary.
(3) Data Sources Available for Setting CY 2006 Payment Rates
Section 1833(t)(14)(D) of the Act, as added by section 621(a)(1) of
Pub. L. 108-173, outlines the provisions of the hospital outpatient
drug acquisition cost survey mandated for the GAO. This provision
directs the GAO to collect data on hospital acquisition costs of
specified covered outpatient drugs and to provide information based on
these data that can be taken into consideration for setting CY 2006
payment rates for these products under the OPPS. Accordingly, the GAO
conducted a survey of 1,400 acute care, Medicare-certified hospitals
and requested hospitals to provide purchase prices for specified
covered outpatient drugs purchased between July 1, 2003 and June 30,
2004. The survey yielded a response rate of 83 percent; 1,157 hospitals
provided usable information. To ensure that its methodology for data
collection and analysis was sound, the GAO consulted an advisory panel
of experts in pharmaceutical economics, pharmacy, medicine, survey
sampling and Medicare payment.
The GAO reported the average and median purchase prices for 55
specified covered outpatient drug categories for the period July 1,
2003 to June 30, 2004. These items represented 86 percent of Medicare
spending for specified covered outpatient drugs during the first 9
months of CY 2004. The initial GAO data did not include any
radiopharmaceuticals. The report noted that the purchase price
information accounted for volume and other discounts provided at the
time of purchase, but excluded subsequent rebates from manufacturers
and payments from group purchasing organizations. The GAO survey data
were available in time for consideration in the CY 2006 OPPS proposed
rule.
At the time of issuance of the CY 2006 OPPS proposed rule, another
available source of drug pricing information was the ASP data from the
fourth quarter of CY 2004, which were used to set payment rates for
drugs and biologicals in the physician office setting effective April
1, 2005. We had ASP-based prices for approximately 475 drugs and
biologicals (including contrast agents) payable under the OPPS.
However, we did not then have (and we still do not have) any ASP data
on radiopharmaceuticals. Payments for most of the drugs and biologicals
paid in the physician office setting were based on ASP+6 percent.
Payments for items with no reported ASP were based on wholesale
acquisition cost (WAC).
Lastly, the third source of cost data that we had at the time of
issuance of the proposed rule for drugs, biologicals, and
radiopharmaceuticals was the mean and median costs derived from the CY
2004 hospital claims data. In our data analysis for the proposed rule,
we
[[Page 68640]]
compared the payment rates for drugs and biologicals using data from
all three sources described above. As section 1833(t)(14)(A)(iii) of
the Act clearly specifies that payment for specified covered outpatient
drugs in CY 2006 be equal to the ``average'' acquisition cost for the
drug, we limited our analysis to the mean costs of drugs determined
using the GAO acquisition cost survey and the hospital claims data,
instead of using median costs.
For the proposed rule, we estimated aggregate expenditures for all
drugs and biologicals (excluding radiopharmaceuticals) that would be
separately payable in CY 2006 and for the 55 drugs and biologicals
reported by the GAO using mean costs from the claims data, the GAO mean
purchase prices, and the ASP-based payment amounts (ASP+6 percent in
most cases), and calculated the equivalent average ASP-based payment
rate under each of the three payment methodologies. The results which
we presented in the proposed rule are shown in Table 23 below.
Table 23.--Comparison of Relative Pricing for OPPS Drugs and Biologicals Under Various Payment Methodologies
----------------------------------------------------------------------------------------------------------------
ASP equivalent (all
Type of pricing data Time period of pricing ASP equivalent (55 GAO separately billable
data drugs only) drugs)
----------------------------------------------------------------------------------------------------------------
GAO mean purchase price............. 12 months ending June ASP+3%.................. N/A
2004.
ASP+6%.............................. 4th quarter of 2004.... ASP+6%.................. ASP+6%
Mean cost from claims data.......... 1st 9 months of 2004... ASP+8%.................. ASP+8%
----------------------------------------------------------------------------------------------------------------
Prior to any adjustments for the differing time periods of the
pricing data, the results indicated that using the GAO mean purchase
prices as the basis for paying the 55 drugs and biologicals would be
equivalent to paying for those drugs and biologicals, on average, at
ASP+3 percent. In addition, using mean unit cost from hospital claims
data to set the payment rates for the drugs and biologicals that would
be separately payable in CY 2006 would be equivalent to basing their
payment rates, on average, at ASP+8 percent.
In determining the payment rates for drugs and biologicals in CY
2006, we did not propose to use the GAO mean purchase prices for the 55
drugs and biologicals because the GAO data reflect hospital acquisition
costs from a less recent period of time. The survey was conducted from
July 1, 2003 to June 30, 2004; thus, the purchase prices are generally
reflective of the time that is the midpoint of this period, which is
January 1, 2004. The hospital purchase price data also do not fully
account for rebates from manufacturers or payments from group
purchasing organizations made to hospitals. We also noted that it would
be difficult to update the GAO mean purchase prices during CY 2006 and
in future years.
We also did not propose, in general, to use mean costs from CY 2004
hospital claims data to set payment rates for drugs and biologicals in
CY 2006. In previous OPPS rules, we stated that pharmacy overhead costs
are captured in the pharmacy revenue cost centers and reflected in the
median costs of drug administration APCs, and the payment rate we
established for a drug, biological, or radiopharmaceutical APC was
intended to pay only for the cost of acquiring the item (66 FR 59896
and 67 FR 66769). However, findings from a MedPAC survey of hospital
charging practices indicated that hospitals set charges for drugs,
biologicals, and radiopharmaceuticals high enough to reflect their
handling costs as well as their acquisition costs. Therefore, the mean
costs calculated using charges from hospital claims data converted to
costs are representative of hospital acquisition costs for these
products, as well as their pharmacy overhead costs. For CY 2006, the
statute specifies that payments for specified covered outpatient drugs
are required to be equal to the ``average'' acquisition cost for the
drug. Payments based on mean costs would represent the products'
acquisition costs plus overhead costs, instead of acquisition costs
only. Therefore, at the time of issuance of the proposed rule, we
determined that it would be appropriate for us to use a source of cost
information other than the CY 2004 hospital claims data to set the
payment rates for most drugs and biologicals in CY 2006.
Based on these considerations, we proposed to pay ASP+6 percent as
the acquisition payment for separately payable drugs and biologicals in
CY 2006. Given the data as described above, we determined at the time
of issuance of the proposed rule that this was our best estimate of
average acquisition costs for CY 2006. We noted in the proposed rule
(70 FR 42726) that the comparison between the GAO purchase price data
and the ASP data indicated that the GAO data, on average, were
equivalent to ASP+3 percent. However, as noted earlier, we determined
that this comparison was problematic for two reasons. First, there were
differences in the time periods for the two sources of data. The GAO
data were from the 12 months ending June 2004, and the ASP data were
from the fourth quarter of CY 2004. It could be argued that prices
increased in the intervening time period. However, we determined that
there was no source of reliable information on specific price changes
for this time period for the drugs studied by the GAO. In the future,
we will have better information on price trends for Medicare Part B
drugs as more quarters of pricing information are reported under the
ASP system.
We also noted that the comparison between the GAO data and the ASP
data was problematic as the ASP data included rebates and other price
concessions and the GAO data did not. Inclusion of these rebates and
price concessions in the GAO data would decrease the GAO prices
relative to the ASP prices, suggesting that ASP+6 percent may be an
overestimate of hospitals' average acquisition costs. Unfortunately, we
did not have a source of information on the magnitude of the rebates
and price concessions for the specific drugs in the GAO data at that
time.
Therefore, we determined in the proposed rule that it was difficult
to adjust the GAO prices for inflation, rebates, and price concessions
to make the comparison with ASP more precise. We indicated that we
would continue to examine new data to improve our future estimates of
acquisition costs. In future years, our proposed pricing would be
modified as appropriate to reflect the most recent data and analyses
available. We also noted that, in addition to the importance of making
accurate
[[Page 68641]]
estimates of acquisition costs for drug pricing, there were important
implications for prices of other services due to the required budget
neutrality of the OPPS. For example, drugs and biological prices set at
ASP+3 percent instead of ASP+6 percent would have made available
approximately an additional $60 million for other items and services
under the OPPS.
In the proposed rule, we also noted that ASP data are unavailable
for some drugs and biologicals. For the few drugs and biologicals,
other than radiopharmaceuticals as discussed later, where ASP data were
unavailable, we proposed to use the mean costs from the CY 2004
hospital claims data to determine their packaging status for rate-
setting. Until we received ASP data for these items, we proposed that
payment would be based on their mean cost.
Our proposal used payment rates based on ASP data from the fourth
quarter of CY 2004 because these were the most recent numbers available
to us during the development of the proposed rule. To be consistent
with the ASP-based payments that would be made when these drugs and
biologicals are furnished in physician offices, we stated in our
proposed rule (70 FR 42726) that we planned to make any appropriate
adjustments to the amounts shown in Addenda A and B to the proposed
rule for these items based on more recent ASP data from the second
quarter of CY 2005, which is the basis for setting payment rates for
drugs and biologicals in the physician office setting effective October
1, 2005, prior to our publication of the CY 2006 OPPS final rule, and
also on a quarterly basis on our Web site during CY 2006. We noted that
we would determine the packaging status of each drug or biological only
once during the year during the update process. However, for the
separately payable drugs and biologicals, we would update their ASP-
based payment rates on a quarterly basis.
We also noted that we intend for the quarterly updates of the ASP-
based payment rates for separately payable drugs and biologicals to
function as future surveys of hospital acquisition cost data, as
section 1833(t)(14)(D)(ii) of the Act instructs us to conduct periodic
subsequent surveys to determine hospital acquisition cost for each
specified covered outpatient drug.
We specifically requested comments on our proposal to pay for drugs
and biologicals (including contrast agents) under the OPPS using the
ASP-based methodology that is also used to set the payment rates for
drugs and biologicals furnished in physician offices and the adequacy
of the payment rates to account for hospital acquisition costs of the
drugs and biologicals.
During the August 2005 meeting of the APC Panel, the Panel
recommended that CMS evaluate all the separately payable drug to be
paid at ASP+6 percent under the OPPS and pay particular attention to
those whose payments would drop or rise precipitously. We appreciate
the Panel's support of our payment proposal and discuss the final CY
2006 policies for drugs and biologicals below.
We received many public comments in response to our proposal to pay
for drugs and biologicals under the OPPS using the ASP methodology.
Comment: Many commenters, including national organizations
representing leading pharmaceutical and biotechnology companies,
hospital associations, and hospitals, supported CMS' proposal to pay
for most separately payable drugs and biologicals at ASP+6 percent.
These commenters stated that paying for drugs and biologicals at this
rate appeared to be both a reasonable and the best available estimate
of average hospital acquisition cost. One commenter stated that ASPs
reported by manufacturers are as close to real-time costs as any data
source CMS uses for rate-setting. Some of the commenters indicated that
this policy offered hospitals the assurance that the payment rates will
reflect market conditions as those rates will be updated on a quarterly
basis. Other supporters of this proposal noted that the policy had the
additional benefit of providing consistent payment rates under the OPPS
and under Part B in the physician office setting, thus helping to avoid
financial incentives for selection of sites of service. One commenter
indicated that the proposed policy also offered simplicity to the OPPS,
both for CMS and providers, by treating almost all separately paid
drugs uniformly and noted that paying for pass-through drugs the same
way as other separately payable drugs without pass-through status
created appropriate incentives to provide the most effective therapies,
regardless of their costs and payment amounts.
A comment from MedPAC acknowledged the problems presented by the
GAO purchase price information and recognized the use of ASP data as a
viable alternative. However, MedPAC indicated that a limitation of ASP
data is that CMS derives ASPs from manufacturers' sales to all
distribution channels, including wholesalers, group purchasing
organizations, hospitals, and other providers such as physicians.
Therefore, the ASPs do not specifically reflect hospital acquisition
costs. Furthermore, MedPAC indicated that reporting may not be
consistent across manufacturers, and CMS may need to verify the
accuracy of ASP data through confidential audits. Although MedPAC
stated that it supports CMS' proposed use of ASPs, it remained
concerned about the proposal to pay for most specified covered
outpatient drugs at a rate of ASP+8 percent, specifically ASP+6 percent
for the drug and an additional 2 percent for handling costs. MedPAC
noted that CMS' analysis of hospitals' mean purchase prices for drugs
studied in the GAO survey indicated that the hospitals' mean purchase
prices were equivalent to ASP+3 percent. Given that average ASP values
have declined in recent quarters and that the GAO's data did not fully
reflect rebates, MedPAC stated that the proposed payment rates for
drugs alone may be too high.
Several commenters, however, remained concerned that this proposal
will result in significant reductions in payments below acquisition
costs for certain types of drugs and biologicals, such as IVIG and
drugs and biologicals used to treat rare disorders, and was inadequate
to protect beneficiary access to these therapies. One commenter
indicated that payments increased to ASP+8 percent also resulted in
compensation below acquisition costs for certain products. Many of
these commenters urged CMS to monitor patient access problems and take
prompt steps to adjust payment rates where necessary to address such
problems. Several commenters requested that CMS implement the APC
Panel's recommendation to monitor for ``precipitous'' drops in payment
rates during the transition to ASP-based payments and apply a dampening
policy to the payment rates for certain drugs and biologicals. Several
dampening options were suggested, such as limiting payment decreases to
15 percent from CY 2005, paying at the higher of ASP+8 percent or 90
percent of drugs' CY 2005 payment rates, and freezing payment at the CY
2005 levels. One commenter recommended that no change be made to the
payment rates for drugs and biologicals from CY 2005 to CY 2006.
Another commenter urged CMS to gather data on the adequacy of ASP
payment over the next year and report to Congress if the agency finds
that ASP is not an appropriate payment formula.
A comment from a large cancer care provider raised several issues
concerning the use of ASPs. The commenter noted that the prices and
discounts included in the calculation of
[[Page 68642]]
ASP often are not passed along to providers. The commenter added that
small hospitals without purchasing power are likely to purchase drugs
above ASP rates. In addition, the commenter noted that because
manufacturers typically raise prices two to three times per year, the
two-quarter lag in the calculation of ASP may cause hospitals to suffer
losses each time they administer drugs. Another commenter questioned
whether ASP could be calculated regionally instead of nationally. One
commenter noted that CMS did not make clear in the proposed rule what
data will be used to establish payment rates for separately payable
drugs and biologicals as of January 1, 2006. The commenter indicated
that ASP data for the third quarter of CY 2005 will be available on
October 30, 2005 and requested that these data be used to set payment
rates for the first quarter of CY 2006.
Response: We appreciate the commenters' support of our proposal to
pay for separately payable drugs and biologicals at ASP+6 percent. For
this final rule with comment period, we again evaluated the three data
sources that we have available to us for setting the CY 2006 payment
rates for drugs and biologicals. As described in the proposed rule,
these data sources are the GAO reported average and median purchase
prices for 55 specified covered outpatient drug categories for the
period July 1, 2003 to June 30, 2004; ASP data; and mean and median
costs derived from hospital claims data used for this final rule with
comment period. For this final rule with comment period, we are able to
use updated ASP data from the second quarter of CY 2005, which are used
to set payment rates for drugs and biologicals in the physician office
setting effective October 1, 2005. We are also able to use updated
claims data, reflecting all of the hospital claims data from CY 2004
and updated CCRs.
In our data analysis for this final rule with comment period, we
again compared the payment rates for drugs and biologicals using data
from all three sources described above. As described in the proposed
rule, we limited our analysis to the mean costs of drugs and
biologicals determined using the GAO acquisition cost survey and the
hospital claims data, instead of using median costs. We estimated
aggregate expenditures for all drugs and biologicals (excluding
radiopharmaceuticals) that would be separately payable in CY 2006 and
for the 55 drugs and biologicals reported by the GAO using mean costs
from the claims data, the GAO mean purchase prices, and the ASP-based
payment amounts (ASP+6 percent in most cases), and then calculated the
equivalent average ASP-based payment rate under each of the three
payment methodologies. The results based on updated ASP and claims data
are presented in Table 24 below.
Table 24.--Comparison of Relative Pricing for OPPS Drugs and Biologicals Under Various Payment Methodologies
----------------------------------------------------------------------------------------------------------------
ASP equivalent (all
Type of pricing data Time period of pricing ASP equivalent (55 GAO separately billable
data drugs only) drugs)
----------------------------------------------------------------------------------------------------------------
GAO mean purchase price............. 12 months ending June ASP+4%.................. N/A
2004.
ASP+6%.............................. 2nd quarter of 2005.... ASP+6%.................. ASP+6%
Mean cost from claims data.......... 12 months of 2004...... ASP+6%.................. ASP+6%
----------------------------------------------------------------------------------------------------------------
Prior to any adjustments for the differing time periods of the
pricing data, the results indicated that using the GAO mean purchase
prices as the basis for paying the 55 drugs and biologicals would be
equivalent to paying for those drugs and biologicals, on average, at
ASP+4 percent. In addition, using mean unit cost from hospital claims
to set the payment rates for the drugs and biologicals that would be
separately payable in CY 2006 would be equivalent to basing their
payment rates, on average, at ASP+6 percent. We note that these levels
are slightly different from the estimates we determined for the
proposed rule, where the GAO data were equivalent to ASP+3 percent and
mean costs derived from the CY 2004 claims data were equivalent to
ASP+8 percent, on average. (See Table 22 of the CY 2006 OPPS proposed
rule, 70 FR 42725).
We understand the concerns raised by commenters about the
reductions in payment rates for certain drugs and biologicals with the
transition from an AWP-based methodology to an ASP-based methodology.
However, our intent is to pay for drugs and biologicals based on their
hospital acquisition costs, and we believe that market-based ASP data,
which are reported by the manufacturers, better represent these costs
than dampened payment rates. We also note that commenters did not
present actual evidence demonstrating that access problems currently
exist for some of these products. They presented anecdotal reports and
results based on surveys that we can not validate. Therefore, we
believe that it is still appropriate for us to base payment for these
items on the ASP data.
As noted earlier and in the proposed rule, findings from a MedPAC
survey of hospital charging practices indicated that hospitals set
charges for drugs, biologicals, and radiopharmaceuticals high enough to
reflect their pharmacy handling costs as well as their acquisition
costs. Therefore, the mean costs calculated using charges from hospital
claims data converted to costs are representative of hospital
acquisition costs for these products, as well as their related pharmacy
overhead costs. Our calculations indicated that using mean unit costs
to set the payment rates for all separately payable drugs and
biologicals would be equivalent to basing their payment rates on the
ASP+6 percent, on average. This result also seems to confirm MedPAC's
comment that paying for the acquisition cost of drugs alone at ASP+6
percent may be too high. Because pharmacy overhead costs are already
built into the charges for drugs, biologicals, and
radiopharmaceuticals, our current data therefore indicate that payment
for drugs and biologicals and pharmacy overhead at a combined ASP+6
percent rate would serve as the best proxy for the combined acquisition
and overhead costs of each of these products.
Therefore, in this final rule with comment period for CY 2006, we
are adopting a policy of paying for the acquisition and overhead costs
of separately paid drugs and biologicals at a combined rate of ASP+6
percent. In other words, payment at ASP+6 percent will serve as a proxy
to make
[[Page 68643]]
appropriate payment for both the acquisition cost and overhead cost of
each of these products. We discuss in additional detail our responses
regarding payments for pharmacy overhead costs later in the preamble.
As noted in the proposed rule, ASP data are unavailable for some
drugs and biologicals. For these few drugs and biologicals, we used the
mean costs from the CY 2004 hospital claims data to determine their
packaging status for rate-setting. Until we receive ASP data for these
items, payment will be based on their mean cost calculated from CY 2004
hospital claims data. The payment rates for separately payable drugs
and biologicals shown in Addenda A and B to this final rule with
comment period represent payments for their acquisition costs in
addition to their overhead costs.
For this final rule with comment period, we are using payment rates
based on ASP data from the second quarter of CY 2005 because these are
the most recent numbers available for the development of this final
rule. To be consistent with the ASP-based payments that would be made
when these drugs and biologicals are furnished in physician offices, as
proposed, we plan to make any appropriate adjustments to the amounts
shown in Addenda A and B to this final rule with comment period for
these items on a quarterly basis as more recent ASP data become
available and post the payment rate changes on our Web site during each
quarter of CY 2006. Effective January 1, 2006, we will base payment
rates for separately payable drugs and biologicals on ASP data from the
third quarter of CY 2005, which will also be the basis for setting
payment rates for drugs and biologicals in the physician office setting
effective January 1, 2006. We discussed in the proposed rule that we
would determine the packaging status of each drug or biological only
once during the year during the update process; however, for the
separately payable drugs and biologicals, we would update their ASP-
based payment rates on a quarterly basis. Specifically, for CY 2006,
the packaging status of each drug or biological has been established
using the ASP data from the second quarter of CY 2005 and the
appropriate packaging status indicator can be found for these items in
Addendum B of this final rule with comment period. During CY 2006, we
will only update quarterly the payment rates for the separately payable
drugs and biologicals whose payments are based on the ASP methodology.
Comment: One commenter requested that CMS standardize the HCPCS
code descriptions in Addendum B, so that the drug names appear first
(and can be sorted alphabetically), rather than using ``injection'' as
the first word. The commenter also sought clarification on the dosage
sizes of several HCPCS codes and identified HCPCS codes for drugs that
the commenters believed are obsolete.
Response: We note that the HCPCS code descriptions in Addendum B of
our final rule with comment period are based on the short descriptors
assigned to the HCPCS codes by the National HCPCS Panel. The National
HCPCS Panel also determines the units associated with the HCPCS codes.
We suggest that the commenter pursue its concerns related to the HCPCS
codes through the process set up by the National HCPCS Panel.
Comment: One commenter indicated that there are currently five
sodium hyaluronate products approved for use in the United Stated that
differ in terms of molecular weights, proposed biological effects,
active ingredient doses per treatment, number of treatments per course,
and labeling for repeated treatment courses. Because of the existing
coding mechanism for these products, the commenter noted that the
proposed payment rates associated with the HCPCS codes may create
financial incentives for hospitals to stock and use certain products
instead of choosing products based on clinical judgment and appropriate
treatment for patients. The commenter expressed the belief that the
dosing differences among these agents warrant the creation of specific
codes for each single source product and has submitted recommendations
to CMS for specific coding and nomenclature for adoption in CY 2006.
Response: We recognize the commenter's concerns about payment for
these sodium hyaluronate products under the OPPS. As noted earlier, the
National HCPCS Panel has created HCPCS code J7318 (Hyaluron/derive
intra-art inj) to describe all of the sodium hyaluronate products
effective January 1, 2006. The payment rate for HCPCS code J7318 in CY
2006 will be established using the ASP data for all of the products
described by this code. HCPCS code J7318 will be used in the OPPS
during CY 2006 to report the administration of all products described
by that code that do no have another OPPS-specific code available due
to their pass-through status.
Comment: We received many comments on the significant proposed
reduction in payment rates from CY 2005 to CY 2006 for several wound
care products. The products of concern are Apligraf, Dermagraft, and
Orcel, which are reported by HCPCS codes C1305, C9201, and C9200
respectively under the OPPS in CY 2005. Commenters indicated that the
proposed CY 2006 payment rates for the acquisition and overhead costs
of all three of these products were incorrectly based on the CY 2004
claims data, instead of ASP+8 percent as proposed for other separately
payable drugs and biologicals, and they were very concerned that
decreased payments will significantly underpay hospitals and jeopardize
patient access to these therapies. One of the commenters stated that
CMS based payment for Apligraf on mean costs derived from the CY 2004
claims data because there had been no ASP payment rate specific to
HCPCS code C1305 and noted that the ASP rate for Apligraf is reported
by CMS in the physician office setting under HCPCS code J7340. Other
commenters raised similar concerns for Dermagraft whose ASP rate is
reported in the physician office setting under HCPCS code J7342,
instead of HCPCS code C9201. With respect to Orcel, one commenter
stated that this product was not commercially available during CY 2004
and, as a result, neither ASP data nor hospital outpatient claims data
should have existed for the product. The commenter recommended that, in
the absence of either claims or ASP data, CMS should follow its payment
policy for drugs and biologicals that do not have ASP data and
establish the payment rate for Orcel using WAC. If WAC was not
available, then CMS should set payment for Orcel at 95 percent of the
May 1, 2003 AWP.
Response: We recognize the commenters' concerns about the proposed
reduction in payment rates for these wound care products in CY 2006.
The commenters were correct in stating that we based the payment rates
for these items on their mean costs derived from the CY 2004 claims
data in the proposed rule because we believed that we did not have any
ASP data for these C-codes. We appreciate the commenters indicating to
us that HCPCS codes C1305 and C9201 are billed using HCPCS codes J7340
and J7342, respectively, in the physician office, and the ASP data
submitted for these products were associated with their permanent J-
codes.
For this final rule with comment period, we reviewed the NDCs for
which ASP data from the second quarter of CY 2005 were reported under
HCPCS codes J7340 and J7342, and verified that these NDCs included
Apligraf and Dermagraft products, respectively. Therefore, for CY 2006,
we will be deleting the HCPCS code C1305 for Apligraf and HCPCS code
C9201 for Dermagraft and paying for these
[[Page 68644]]
products using the ASPs calculated for HCPCS codes J7340 and J7342,
respectively. As one of the commenters noted, ASP data are not
available currently for HCPCS code C9200, which describes Orcel. Based
on our review of the descriptor for HCPCS code J7340, we determined
that this code appropriately describes Orcel; therefore, we will be
deleting HCPCS code C9200 and paying for this product using HCPCS code
J7340. Even though the calculation of the ASP-based payment rate for
HCPCS code J7340 does not currently account for the ASP of Orcel, we
believe that it is still appropriate for us to pay for Orcel using
HCPCS code J7340 since this code appropriately describes this product.
Also, once Orcel becomes available in the market and we receive ASP
data for this product, the ASP-based payment rate for HCPCS code J7340
will properly reflect the market price for Orcel. We believe that this
coding policy will lessen confusion for providers, enhance coding
consistency between the OPPS and physician offices, and result in
appropriate payment rates for these three wound care products in CY
2006.
In addition to reviewing whether permanent HCPCS codes duplicate
the three temporary C-codes describing wound care products in the CY
2005 OPPS, we also reviewed whether there are permanent HCPCS codes
that currently exist or will be created in CY 2006 that describe the
other C-codes for drugs, biologicals, and radiopharmaceuticals that are
payable under the OPPS in CY 2005 to determine if we could streamline
coding for other items as well. Based on our review, we found that
there are several C-codes for drugs, biologicals, and
radiopharmaceuticals that are payable under OPPS in CY 2005 that will
be replaced with new permanent HCPCS codes in CY 2006. We also found
that there are some C-codes that are also described by other permanent
HCPCS codes that existed in CY 2005. In cases where it is appropriate
to do so, we are deleting these C-codes and replacing them with new CY
2006 HCPCS codes or existing HCPCS codes that appropriately describe
products currently coded in the OPPS by the C-codes. As discussed later
in the preamble, we are also deleting the C-codes that were created to
represent the innovator multiple source (brand) drugs and instructing
hospitals to use the HCPCS codes for noninnovator multiple source
(generic) drugs to bill for both the brand and generic forms of a drug
in CY 2006. Table 25 lists the C-codes that we are deleting effective
December 31, 2005 and the permanent HCPCS codes that will be replacing
them in CY 2006. For services furnished on or after January 1, 2006,
hospitals should use replacements codes to bill for the products whose
C-codes will be deleted on December 31, 2005.
BILLING CODE 4210-01-P
[[Page 68645]]
[GRAPHIC] [TIFF OMITTED] TR10NO05.019
[[Page 68646]]
[GRAPHIC] [TIFF OMITTED] TR10NO05.020
[[Page 68647]]
[GRAPHIC] [TIFF OMITTED] TR10NO05.021
BILLING CODE 4210-01-C
Comment: One commenter noted that CMS should confirm that payment
for echocardiography contrast agents will be based on ASP+6 percent
plus an appropriate amount to reflect handling (no less than two
percent) so that payment for these items is consistent with all other
separately payable drugs under OPPS. A few commenters indicated that
CMS should implement the new HCPCS codes for echocardiography contrast
agents, which will be effective January 1, 2006, to facilitate uniform
billing for all echocardiography contrast agents across all sites of
service.
Response: In CY 2005, echocardiography contrast agents are
[[Page 68648]]
described by three C-codes, which are HCPCS code C9112 (Perflutren
lipid micro, 2ml), HCPCS code C9202 (Octafluoropropane), and HCPCS code
C9203 (Perflexane lipid micro). In the proposed rule, we proposed to
deleted these C-codes and pay for the products using Q-codes in CY
2006. As noted in the previous response to comments, these three C-
codes will be deleted as of December 31, 2005 and replaced with HCPCS
codes Q9957, Q9956, and Q9955, respectively. Hospitals should use the
new Q-codes in CY 2006 when billing for these echocardiography contrast
agents. We also note we will be paying for the acquisition and overhead
costs of these separately payable echocardiography contrast agents at a
combined rate of ASP+6 percent in CY 2006.
Comment: We received many comments that expressed concerns about
the proposed reductions in OPPS payment rates for intravenous
immunoglobulin (IVIG) products. Commenters requested that CMS make
special consideration in its payment for IVIG due to the current access
problems facing patients that rely on this lifesaving therapy.
Commenters indicated that payment at ASP+6 percent has not been
adequate to permit the continued purchase and administration of IVIG in
physician offices, infusion suites, and home care settings, resulting
in a shift of care to hospitals. Consequently, hospitals have been
overburdened by the increase in demand for IVIG, which has not been
easily accessible. The commenters indicated that CMS' goal in setting
payment rates for IVIG should be to ensure that patients have access to
all brands of IVIG in all sites of care. Commenters requested that CMS
use any and all authority and flexibility to address the existing
payment problems that will arise if the proposed OPPS payment rates for
IVIG are implemented and recommended several actions. In order of
priority, commenters' recommendations were to: (1) Provide a proxy add-
on payment rate for IVIG when determining the CY 2006 payment levels;
(2) in the absence of a proxy add-on, apply the 15-percent dampening
provision proposed for device-dependent APCs to determine the CY 2006
payment rates for IVIG; (3) establish unique HCPCS codes for each brand
of IVIG and set their payment rates on the ASP data specific to each
product; (4) classify IVIG as a biologic response modifier and pay its
administration through a high complexity intravenous infusion APC; and
(5) exclude prompt pay discounts when calculating the ASPs for the IVIG
HCPCS codes and equalize the lag time between the ASP reporting by
manufacturers and CMS' posting of the ASP-based payment rates for the
OPPS and Part B physician office payment rates. One commenter urged CMS
to revert to the original J-codes for IVIG (J1563 and J1564) and
maintain the CY 2005 payment rates. Other commenters suggested that, at
minimum, CMS should continue payment for IVIG at the CY 2005 payment
rates of 83 percent of AWP for 2 years, during which time CMS,
consulting with Congress, manufacturers, distributors, providers, and
patient groups, should conduct a study to determine the best payment
methodology for IVIG with the goal of ensuring access to IVIG and
continuity of care in all practice settings.
Response: As discussed earlier, we believe that ASP data are
reflective of present hospital acquisition costs for separately payable
drugs and biologicals under the OPPS. We believe this to be true for
IVIG as well. We therefore cannot agree that it is appropriate to make
adjustments to the payment rates for IVIG based on past prices, as we
have more current ASP data available that reflect current market
pricing for all of the brands of IVIG.
With respect to establishing brand-specific HCPCS codes for the
different IVIG products, we note that the procedures for HCPCS coding
specifically reject brand-specific coding, and we do not see a
compelling reason to override that standard. For further discussion of
HCPCS coding, see http://www.cms.hhs.gov/medicare/hcpcs/codpayproc.asp. Finally, we note that in CY 2006 the OPPS and physician
offices will both be paid based on the most recently available
quarter's ASP data, with implementation of payment rate changes in both
systems on the same date. As noted earlier, effective January 1, 2006
we will base payment rates for all separately payable drugs and
biologicals under the OPPS on ASP data from the third quarter of CY
2005, which will also be the basis for setting payment rates for drugs
and biologicals in the physician office setting effective January 1,
2006. After considering these factors, we are finalizing our proposal
to pay for IVIG under the OPPS at ASP+6 percent for CY 2006, the same
payment rate as in the physician office setting.
We will, however, continue to work with the IVIG community,
manufacturers, Congress, and other entities to seek better
understanding of the supply and market issues influencing the current
IVIG environment. We have discussed the accuracy of the ASP data with
the manufacturers and have been assured by these manufacturers that
their ASPs have been developed in accordance with applicable guidance
and that the resulting price reflects the current IVIG market. At the
same time, the IVIG manufacturers' association, the Plasma Protein
Therapeutics Association, reports that the overall supply of IVIG is
adequate and has improved in the past several months. However, based on
the comments received and our ongoing work with manufacturers, patient
groups, and other stakeholders, we continue to be concerned about CY
2005 reports of patients experiencing difficulties in accessing timely
IVIG treatments and reports of providers experiencing difficulties in
obtaining adequate amounts of IVIG products on a consistent basis to
meet their patients' needs in the current marketplace. Most brands of
IVIG have been put on allocation by manufacturers, and some
manufacturers have reported allocating products to a smaller number of
distributors and reducing the size of inventories. In addition, there
have been reports of diversion of products to the secondary market and
secondary distributors raising prices markedly. The Secretary's
Advisory Committee on Blood Safety and Availability has recommended
immediate steps be taken to ensure access to IVIG so that patients'
needs are being met. However, the complexity of the IVIG marketplace
makes it unclear what particular systematic approaches would be most
effective in addressing the many individual circumstances that have
been shared with us while not exacerbating what appears to be a
temporary disruption in the marketplace.
IVIG is a complicated biological product that is purified from
human plasma obtained from human plasma donors. Its purification is a
complex process that occurs along a very long timeline, and only a
small number of manufacturers provide commercially available products.
Historically, numerous factors, including decreased manufacturing
capacity, increased usage, more sophisticated processing steps, and low
demand for byproducts from IVIG fractionation have affected the supply
of IVIG. For CY 2006, there are two HCPCS codes that describe all IVIG
products, based on their lyophilized versus liquid preparation.
The recent patterns of utilization of IVIG also are unusual in
comparison with most other drugs and biologicals. Different IVIG
products are FDA-approved in a number of therapeutic areas for various
specific conditions, which include: Anti-infective therapy (bone marrow
transplant); immune
[[Page 68649]]
globulin replacement therapy (primary immune deficiencies and chronic
lymphocytic leukemia); anti-inflammatory therapy (Kawasaki disease);
and immunomodulation therapy (idiopathic thrombocytopenic purpura).
IVIG therapy, which has been available for about 25 years, was
initially reserved for the treatment of these FDA-approved indications.
More recently, IVIG has been increasingly used off-label so that off-
label uses now significantly exceed on-label uses. Many of these off-
label uses are for autoimmune, neurological, or systemic inflammatory
conditions. Some off-label uses of IVIG are supported by a robust
evidence base, while for other medical conditions the evidence has not
demonstrated that IVIG infusions are of significant therapeutic
benefit. In addition, despite the growing uses of IVIG there are
definite risks associated with IVIG treatment, including both early
inflammatory reactions and more rare but serious renal and
thromboembolic complications, as well as the inherent risk associated
with receipt of any biological product even with the ongoing
improvements in the safety of these types of products.
Medicare currently has one national coverage determination in place
since CY 2002 regarding IVIG infusions to treat autoimmune blistering
diseases, and there are numerous local coverage policies that describe
Medicare coverage for specific off-label indications. In the context of
these national and local coverage policies, IVIG use in hospital
outpatient departments has climbed steeply over the most recent years
for which data are available, from about 40,000 infusion days in CY
2002, to 60,000 days in CY 2003, and again to over 70,000 days in CY
2004. The infusion of IVIG in physician offices increased from about
2.3 million grams in CY 2003 to 4.0 million grams in CY 2004. In the
face of growing demand for IVIG in the absence of significant changes
in the prevalence of medical conditions for which there is high quality
evidence regarding the effectiveness of IVIG therapy, we are concerned
that all patients with medical need for IVIG continue to have access to
this expensive and valuable therapy. Over the upcoming year, we will be
using our historical claims databases to study the epidemiology of IVIG
treatment of Medicare beneficiaries in outpatient settings. We expect
that the health system as a whole should encourage an accountable and
scientifically grounded use of IVIG, and we welcome discussions with
industry, providers, and other interested entities around efforts to
ensure that IVIG is responsibly utilized for evidence-based clinical
indications so that optimal benefit is obtained.
Based on the potential access concerns, the growing demand for
IVIG, and the unique features of IVIG detailed above, as well as our
move to an ASP payment methodology for IVIG in the OPPS for CY 2006, as
we seek to gain improved understanding of the contemporary, volatile
IVIG marketplace we will employ a two-pronged approach during CY 2006
to help ensure the availability of IVIG to physicians and hospital
outpatient departments who care for Medicare beneficiaries and will be
paid ASP+6 percent for the IVIG products.
First, in addition to ongoing monitoring and outreach activities
within the Department of Health and Human Services, the Office of the
Inspector General (OIG) is studying the availability and pricing of
IVIG as part of its monitoring of market prices pursuant to section
1847A(d)(2)(A). We expect the OIG's work to provide a significant
contribution to the analysis of the current situation with respect to
the specific activities of manufacturers and distributors that may be
contributing to possible access problems for IVIG as we move to the ASP
payment methodology in both physician office and hospital outpatient
settings. We hope to understand those particular market behaviors that
may have led to such public alarm about the availability of IVIG and
the adequacy of our payment rate of ASP+6 percent, concerns that have
been particularly strong and persistent for IVIG in comparison with
other drugs paid under the same ASP methodology.
Second, we will provide additional payment in CY 2006. Presently
the IVIG marketplace is a dynamic one, where a significant portion of
IVIG products previously available in CY 2005 are being discontinued
and other products are expected to enter the market over the next year.
In light of this temporary market instability, we understand that
manufacturers have continued allocation procedures aimed at stabilizing
the supply of IVIG. Even so, we understand that providers may face
purchasing whichever brand of IVIG is available, even if it is not a
brand the patient is known to tolerate. Many patients treated with IVIG
receive regular infusions on a predictable schedule. To meet this need,
hospital staff must conduct significant preadministration services
prior to IVIG infusions to monitor and manage their inventory, locate
available IVIG products, reschedule infusions according to product
availability and patients' needs, and implement physicians'
determinations regarding whether the available formulations are
appropriate for patients and whether specific dosing adjustments are
required. Product-specific factors must be evaluated in light of
patients' clinical indications for the IVIG infusions, their underlying
medical conditions, and their past reactions to various IVIG products,
and hospital staff must locate appropriate doses of IVIG products in
light of these considerations. If the appropriate IVIG product
formulations were more widely and reliably available, we do not believe
that routine IVIG infusions would require these extensive
preadministration-related services prior to each infusion.
To continue to ensure appropriate patient access to IVIG in CY 2006
during this short-term period of market instability for IVIG, beginning
for dates of service on or after January 1, 2006 through December 31,
2006, we will temporarily allow a separate payment to hospitals to
reflect the additional resources that are associated with locating and
acquiring adequate IVIG products and preparing for an outpatient
hospital infusion of IVIG in the current environment. We expect that
making separate payment for these additional necessary services will
help insure that hospitals are able continue to provide IVIG infusions
to their patients who depend upon them. We will also provide an
additional payment to physician offices for these special services, to
ensure that patients continue to have access to IVIG infusions in the
most medically appropriate settings, without undesirable shifts in
sites of service for their care.
Because the extra hospital resources currently associated with the
preadministration-related services for intravenous infusion of
immunoglobulin are not accounted for in the CY 2004 hospital claims
data used to establish payments rates for the CY 2006 drug
administration HCPCS codes that will be billed for IVIG infusions, we
are creating a temporary G-code to describe these additional
preadministration services related to the intravenous infusion of
immunoglobulin. We have established the following G-code for hospital
outpatient billing for CY 2006:
G0332; Preadministration-related services for intravenous
infusion of immunoglobulin, per infusion encounter (This service is to
be billed in conjunction with administration of immunoglobulin.)
[[Page 68650]]
Hospitals may bill this service once per day in association with a
patient encounter for administration of IVIG, in addition to billing
for the appropriate drug administration service(s) and for appropriate
units of the HCPCS code that describes the IVIG product infused. In
addition, hospitals may also bill for any significant and separately
identifiable evaluation and management (E/M) service they perform at a
level 2 through 5 in association with the infusion encounter, appending
modifier -25 to the E/M service. We have established the payment level
for this service in outpatient hospital departments by crosswalking it
to the payment level established for the physician office for CY 2006.
We believe that the hospital resources required for HCPCS code G0332
should be very similar to the practice expense for this service in the
physician office, and, because no physician work is included in the
physician office payment for the new service, the HCPCS code G0332
payment rates in physician office and hospital outpatient settings
should be generally comparable. HCPCS code G0332 is a new service with
no claims history under the OPPS and we cannot identify an appropriate
clinical APC for its assignment based on considerations of clinical and
resource homogeneity. Therefore, we are assigning HCPCS code G0332 to
New Technology APC 1502 (status indicator ``S'') with a payment rate of
$75 for CY 2006, based on a direct crosswalk to the New Technology APC
that corresponds with the physician office CY 2006 payment of
approximately $69.
We believe that this temporary separate payment provided through
HCPCS code G0332 in CY 2006 for the physician office and hospital
outpatient resources associated with additional IVIG preadministration-
related services due to the present significant fluctuations in the
IVIG marketplace will ensure that Medicare beneficiaries depending on
IVIG experience no adverse health consequences from the market
instability for IVIG products. In the meantime, we will continue to
evaluate the market factors affecting the pricing and availability of
IVIG products in the context of our ASP+6 percent payment methodology
and our separate payment for HCPCS code G0332 in CY 2006. We expect
that in CY 2006 with continued collection of updated ASP data for IVIG;
improved understanding of the IVIG marketplace; more focused attention
on the medical necessity of the utilization of IVIG; ongoing
collaboration between CMS, the IVIG community, manufacturers,
providers, and other interested entities; and this temporary separate
payment for hospital and physician office resources required for the
intensive preadministration services related to IVIG infusion, the IVIG
marketplace will stabilize over the upcoming year. Substantial
preadministration-related services for IVIG infusions should no longer
be required of physician offices and hospital outpatient departments
that provide IVIG infusions to patients who need them. Therefore, this
additional payment for G0332 is effective for CY 2006 only. Thus, we
will be closely monitoring this issue once again in the context of our
rulemaking for CY 2007.
Comment: One commenter requested that CMS provide separate payment
for all magnetic resonance imaging contrast agents, including imaging
agents covered by HCPCS code Q9953.
Response: In CY 2006, the HCPCS codes that will be used to describe
magnetic resonance imaging contrast agents are HCPCS codes Q9952 (Inj
Gad-base MR contrast, ml), Q9953 (Inj Fe-based MR contrast, ml) and
Q9954 (Oral MR contrast, 100 ml). In the proposed rule, we proposed to
pay separately for HCPCS code Q9952 and HCPCS code Q9954; however, we
proposed to package HCPCS code Q9953 because we were not able to
estimate its per administration cost. For CY 2006, we will be paying
separately for HCPCS code Q9952 and HCPCS code Q9954, as proposed.
Additionally, we will provide separate payment for HCPCS code Q9953
since we have now determined its per day cost to be higher than $50 in
this final rule with comment period.
Comment: One commenter indicated that WinRho SDF Liquid is a new
intravenous gamma globulin product that recently received marketing
clearance from the FDA, and that this product was created to replace
the first generation therapy, WinRho SDF. The commenter noted that
WinRho SDF Liquid does not require reconstitution, whereas WinRho SDF
is a lyophilized product that requires reconstitution and is described
by HCPCS code J2792. According to the commenter, if WinRho SDF Liquid
is also assigned to HCPCS code J2792, then the OPPS payment in CY 2006
is likely to be below the acquisition cost of this new product.
Therefore, the commenter requested that CMS establish separate codes to
distinguish between the liquid and lyophilized forms of Rho D Immune
Globulin.
Response: We recognize the commenter's concern about payment for
this new intravenous gamma globulin product under the OPPS. The
National HCPCS Panel coordinates decisions regarding the creation of
permanent HCPCS codes; therefore, comments related to the HCPCS code
creation process are outside the scope of this rule.
Comment: One commenter was concerned that where the ASP information
does not exist, CMS will use the CY 2004 hospital claims data, and with
drug cost increases averaging 5 to 10 percent over the past two years,
the payments would not be enough to cover the costs of providing these
drugs.
Response: We understand the commenter's concern. However, as we
stated in the proposed rule, until ASP data are available for certain
drugs and biologicals, their payment rates will be based on their mean
costs derived from the CY 2004 claims data. We note that with respect
to items for which we currently do not have ASP data, once their ASP
data become available in later quarter submissions, their payment rates
under the OPPS will be adjusted so that the rates are based on the ASP
methodology and set to ASP+6 percent. Therefore, we encourage the
manufacturers of these drugs and biologicals to report their ASPs to
CMS.
We received several public comments on the November 15, 2004 final
rule with comment period concerning issues related to payment for drugs
and biologicals in CY 2005. For those issues that have not already been
addressed in other sections of this preamble, below is a summary of
those comments and our responses.
Comment: One commenter stated that CMS incorrectly calculated a
payment rate of $6.60 per cm2 for the product Integra described by
HCPCS code C9206 (Collagen-Glycosaminoglycan Bilayer Matrix, per cm2)
and that the payment rate was inappropriate in the OPPS setting. The
commenter noted that Integra is provided in four sizes that are
appropriate for different clinical needs and settings, and the payment
rate set by CMS represented a single payment rate based on the cost of
the largest package size used in the inpatient setting. The commenter
recommended that either three additional and separate payment HCPCS
codes be established for the different sizes, with payment rates
established according to their different WACs, or that the payment rate
for Integra be based on the costs of the smallest packaging sizes,
which are the ones used in the hospital outpatient department. In
addition, the commenter recommended that the unit descriptor for HCPCS
code C9206 be changed to 25 cm2 so that it is consistent with the
descriptors of the CPT codes used with this product and also so that it
is convenient and easy to apply for
[[Page 68651]]
hospital personnel inputting codes on claim forms.
Response: Effective January 1, 2005, HCPCS code C9206 (Collagen-
Glycosaminoglycan Bilayer Matrix, per cm2) was created to describe
Integra. To accommodate the different package sizes that currently
exist or may enter the market in the future, our policy is to create a
HCPCS code descriptor based on the lowest possible dosage or size of
the product; therefore, we assigned a unit of cm2 to HCPCS code C9206.
The payment rate of $6.60 per cm2 for this biological was calculated
using the standard methodology used to determine the payment rates for
drugs and biologicals in the physician office setting, where for drugs
and biologicals without an ASP, our methodology prescribes the use of
the lesser of the median WAC for all sources of the generic forms of
the product or the brand name product with the lowest WAC. Therefore,
because Integra is a brand name product with four different package
sizes and prices, we set the payment rate for HCPCS code C9206 at
$6.60, which was the lowest WAC per cm2. This payment rate was in
effect during the first quarter of CY 2005. We note that the payment
rates for C9206 for the second quarter of CY 2005 and following
quarters were based on 106 percent of its ASP, based on the ASP
methodology for drugs furnished in the physician office setting on or
after January 1, 2005. We note that for CY 2006, HCPCS code C9206 has
been deleted and replaced with the permanent HCPCS code J7343.
Comment: One commenter requested that CMS revise the first quarter
CY 2005 ASP rate for HCPCS code J0180 (Injection, agalsidase beta, 1
mg) from $121.12 to $121.14 because it believes that CMS made an error
in the weighting of the different ASP figures provided to CMS for the
two National Drug Codes for this product.
Response: The methodology used to establish the ASP-based payment
rates for drugs and biologicals is discussed in the CY 2006 Medicare
Physician Fee Schedule final rule. Therefore, we will not respond to
this comment since it is outside the scope of this rule.
Comment: One commenter expressed concern about the creation of the
new HCPCS code J3396 (Injection, verteporfin, 0.1 mg) in CY 2005 for
verteporfin and the deletion of HCPCS code J3395 (Injection,
verteporfin, 15 mg). The commenter stated that the new code will create
confusion among providers and urged CMS to reinstate HCPCS code J3395
for use with verteporfin injections and/or to clarify and implement
measures to ensure that the change to HCPCS code J3396 will not impact
providers' ability to accurately bill for their use of this medication.
Response: Decisions regarding the creation of permanent HCPCS codes
are coordinated by the National HCPCS Panel. Comments related to the
HCPCS code creation process and decisions made by the National HCPCS
Panel are outside the scope of this rule.
In CY 2005, we applied an equitable adjustment to determine the
payment rate for darbepoetin alfa (HCPCS code Q0137) pursuant to
section 1833(t)(2)(E) of the Act. However, for CY 2006, we proposed to
establish the payment rate for this biological using the ASP
methodology. The ASP data represent market prices for this biological;
therefore, we believe it is appropriate to use the ASP methodology to
establish payment rates for darbepoetin alfa because this method will
permit market forces to determine the appropriate payment for this
biological. We specifically requested comments on the proposed payment
policy for this biological.
We received several public comments on our proposal.
Comment: A number of commenters expressed concern about our
proposal to establish payment for both epoetin alfa (marketed under the
trade name of Procrit [supreg]) and darbepoetin alfa (marketed under
the trade name of Aranesp[supreg]) using the ASP methodology. Several
commenters urged CMS to implement this proposal so that a market-
oriented, ASP-based payment system can function as the Pub.L. 108-173
intended without any arbitrary government interference. In addition,
one of the commenters indicated that this policy would promote
appropriate patient and physician choice in making health care
decisions. One of the commenters supported the proposal to establish a
payment rate for darbepoetin alfa using the ASP methodology and to
discontinue application of an equitable adjustment to its payment rate.
This commenter also stated that CMS accurately noted in the CY 2006
proposed rule that ``the ASP data represent market prices for this
biological,'' and that using the ASP methodology to establish the CY
2006 OPPS payment rate for darbepoetin alfa ``will permit market forces
to determine the appropriate payment for this biological.'' Therefore,
the commenter reasoned that an equitable adjustment is not needed in CY
2006 since payments for all separately payable drugs and biologicals
will be based on market prices. The commenter also provided clinical
and economic data to further support CMS' proposal not to apply an
equitable adjustment to the payment rate for darbepoetin alfa in CY
2006. For example, the commenter noted that new clinical data
demonstrate that darbepoetin alfa and epoetin alfa achieve comparable
clinical outcomes at comparably priced doses. By applying the proposed
payment rates for doses of the two drugs based on current clinical
guidelines and validated randomized controlled trials, the commenter
concluded that overall Medicare and beneficiary spending would decrease
for similar clinical outcomes with the use of darbepoetin alfa rather
than epoetin alfa. In addition, the commenter highlighted that applying
an equitable adjustment to the payment rate for darbepoetin alfa in CY
2006 would, in fact, increase Medicare and beneficiary spending on
darbepoetin alfa. This commenter also recommended that if CMS plans to
utilize its equitable adjustment authority again, then the conversion
ratio should be increased to 400:1 to reflect the results of a new
clinical study that proves the clinical comparability of darbepoetin
alfa and epoetin alfa at such a dosing ratio.
One commenter on this topic also provided detailed results of
clinical studies that the commenter believes provide a strong rationale
for continuing the equitable payment adjustment for darbepoetin alfa
and demonstrate that the appropriate conversion ratio for making this
adjustment is less than or equal to 260:1. The commenter stated that
Medicare and beneficiary spending for these two drugs under the
proposed payment policy for CY 2006 will be higher in order to achieve
comparable therapeutic effects unless CMS maintains the equitable
adjustment policy and re-establishes a conversion ratio that is less
than or equal to 260:1.
Response: We appreciate the many thoughtful and detailed comments
on our proposed CY 2006 payment rates for darbepoetin alfa and epoetin
alfa. Based on our ASP market price data from the second quarter of CY
2005 for these two drugs, we observed that the payment rates for
epoetin alfa and darbepoetin alfa would decrease by similar levels in
CY 2006 from their current CY 2005 payment rates. Payment for epoetin
alfa would decrease by 17 percent and payment for darbepoetin alfa
would decrease by 18 percent. In CY 2006, if we continued the CY 2005
equitable adjustment policy of determining the payment rate for
darbepoetin alfa using a conversion ratio of 330 Units of epoetin alfa
to 1 microgram of darbepoetin alfa (330:1), then the payment rate for
darbepoetin alfa would decrease by 17 percent, the same rate of
[[Page 68652]]
change as that for epoetin alfa. Following the payment methodology
described earlier for separately payable drugs and biologicals where
payment for their acquisition and overhead costs would be equal to
ASP+6 percent in CY 2006, the payment rate for epoetin alfa would be
$9.22 per 1000 Units and the payment rate for darbepoetin alfa would be
$3.01 per microgram. However, if we applied the CY 2005 conversion
ratio of 330:1, the payment rate for darbepoetin alfa would be $3.04
per microgram.
In determining our payment policy for darbepoetin alfa in CY 2006,
we reviewed the results of the many recent clinical studies that were
provided in the comments. We independently assessed the methodological
rigor of the study designs and the generalizability of the results of
the various studies. This assessment included the appropriateness and
comparability of the sizes and characteristics of the subject groups,
the duration of the trials, the administered doses of the
investigational agents, the drop out rates in the treatment arms, and
the consideration of other possible causes of study bias. With the
limitations of the studies supporting either an increase or a decrease
in the conversion factor, the quality and quantity of the currently
available published evidence do not provide sufficient, clear evidence
to support a change in the appropriate conversion factor at this time.
Methodological shortcomings included insufficient sample sizes,
excessive dropout rates, inadequate study duration, and failure to
adequately account for confounding effects. Some studies have yet to be
published as full, peer-reviewed journal articles; abstracts do not
provide sufficient detail for our review. Overall, the results of these
clinical studies were not consistent or conclusive in defining a
single, different conversion ratio for dosing between these two
products, particularly with respect to the timing of specific doses of
the two drugs required to achieve several different meaningful clinical
outcomes. The results of contemporary clinical studies demonstrated
that a wide range of conversion ratios could be considered, and these
ratios varied by a factor of two or more depending on the specific
study design, the measured clinical outcomes, and the treated patient
populations. As we have noted above, the payment rate for darbepoetin
alfa at ASP+6 percent ($3.01 per microgram) is slightly lower than but
consistent with the payment rate for darbepoetin alfa using the 330:1
conversion ratio ($3.04 per microgram) that we established in CY 2005.
This conversion ratio is also well within the range of the conversion
ratios that may be supported by the available clinical data. We
therefore do not believe that there is sufficient clinical evidence to
indicate that we should specifically employ our equitable adjustment
authority to adjust the payment rate for darbepoetin alfa in CY 2006.
By finalizing this payment policy specifically for the CY 2006 OPPS,
based on our latest payment rate analysis and independent review of the
recent clinical literature, it is not our intention to preclude the use
of a conversion ratio to establish the OPPS payment rates for epoetin
alfa and darbepoetin alfa in the future. Rather, as long as the market
price for darbepoetin alfa is consistent with a payment rate derived
using a clinically appropriate conversion ratio, invoking our equitable
adjustment authority would not lead to a different result. However, we
retain our authority to apply an equitable adjustment in the future to
determine the payment rate for darbepoetin alfa pursuant to section
1833(t)(2)(E) of the Act. We will once again assess the need to
exercise this authority when we next update the payment rates under the
OPPS based on the latest available clinical evidence on the appropriate
conversion ratio and based on the actual pricing experience at that
time.
Effective April 1, 2005, several HCPCS codes were created to
describe various concentrations of low osmolar contrast material
(LOCM). These new codes are HCPCS codes Q9945 through Q9951. However,
in Transmittal 514 (April 2005 Update of the OPPS), we instructed
hospitals to continue reporting LOCM in CY 2005 using the existing
HCPCS codes A4644, A4645, and A4646 and made Q9945 through Q9951 not
payable under the OPPS. For CY 2006, we proposed to activate the new Q-
codes for hospitals and discontinue the use of HCPCS codes A4644
through A4646 for billing LOCM products. We have CY 2004 hospital
claims data for HCPCS codes A4644 through A4646, which show that the
mean costs per day for these products are greater than $50. Because we
did not have CY 2004 hospital claims data for HCPCS codes Q9945 through
Q9951, we crosswalked the cost data for the HCPCS A-codes to the new Q-
codes. There is no predecessor code that crosswalks to HCPCS code Q9951
for LOCM with a concentration of 400 or greater mg/ml of iodine.
Therefore, we proposed that our general payment policy of paying
separately for new codes while hospital data are being collected would
apply to HCPCS code Q9951. As our historical hospital mean per day
costs for the three A-codes exceeded the packaging threshold and our
payment policy for new codes without predecessors applied to one of the
new codes, we proposed to pay for the HCPCS codes Q9945 through Q9951
separately in CY 2006 at payment rates calculated using the ASP
methodology. We noted that because the new Q-codes describing LOCM were
more descriptively discriminating and had different units than the
previous A-codes for LOCM, as well as widely varying ASPs, we expected
that the packaging status of these Q-codes might change in future years
when we have specific OPPS claims data for these new codes. We
specifically invited comments on our proposed policy to pay separately
for LOCM described by HCPCS codes Q9945 through Q9951 in CY 2006.
We received several public comments in response to our request.
Comment: Several commenters supported CMS' proposal to pay
separately for LOCM using HCPCS codes Q9945 through Q9951, indicating
that this policy will help to protect beneficiary access to the most
appropriate therapies. The commenters believed that this change would
promote consistency across sites of services. A comment from a
manufacturer of contrast agents expressed concern about the use of the
new Q-codes for LOCM and the corresponding ASP payment methodology to
determine their payment rates. The commenter noted that the proposed
payment rates for the contrast media codes increase as the iodine or
active material concentration decreases and believed that the coding
tiers adopted by CMS do not appropriately categorize the various media
products. The commenter was also concerned that such a payment scheme
might be a perverse incentive for hospitals to use a lower
concentration LOCM in diagnostic imaging procedures in order to qualify
for higher payment rates or motivate clinically unnecessary and
potentially dangerous switches in contrast media selections. The
commenter recommended that CMS review whether an alternative payment
mechanism would be more appropriate for LOCM and proposed a revised
version of the Q-code classifications for LOCM.
Response: We appreciate the commenters' support of our proposal to
implement new HCPCS codes for LOCM in CY 2006 and pay for them
separately. In the final rule, the payment rates for these codes are
based on their market prices from the second quarter of CY 2005, and we
believe that the ASP-based
[[Page 68653]]
rates appropriately reflect the acquisition and pharmacy overhead costs
of these products under each of the HCPCS codes. Decisions regarding
the creation of permanent HCPCS codes are coordinated by the National
HCPCS Panel. We suggest that commenters who have concerns about the new
Q-codes for LOCM should pursue appropriate changes through the process
set up by the National HCPCS Panel to establish HCPCS codes.
(4) CY 2006 Proposed and Final Payment Policy for Radiopharmaceutical
Agents
We do not have ASP data for radiopharmaceuticals. Therefore, for CY
2006, we proposed to calculate per day costs of radiopharmaceuticals
using mean unit costs from the CY 2004 hospital claims data to
determine the items' packaging status similar to the drugs and
biologicals with no ASP data. In a separate report, the GAO provided
CMS with hospital purchase price information for nine
radiopharmaceuticals. As part of the GAO survey described earlier, the
GAO surveyed 1,400 acute-care, Medicare-certified hospitals and
requested hospitals to provide purchase prices for radiopharmaceuticals
from July 1, 2003 to June 30, 2004. The radiopharmaceutical part of the
survey yielded a response rate of 61 percent, where 808 hospitals
provided usable information. The GAO reported the average and median
purchase prices for nine radiopharmaceuticals for the period July 1,
2003, to June 30, 2004. These items represented 9 percent of the
Medicare spending for specified covered outpatient drugs during the
first 9 months of CY 2004. The report noted that the purchase price
information accounted for volume and other discounts provided at the
time of purchase, but excluded subsequent rebates from manufacturers
and payments from group purchasing organizations.
When we examined differences between the CY 2005 payment rates for
these nine radiopharmaceutical and their GAO mean purchase prices, we
found that the GAO purchase prices were substantially lower for several
of these agents. We also found similar patterns when we compared the CY
2005 payment rates for radiopharmaceuticals with their CY 2004 median
and mean costs from hospital claims data. In the proposed rule, we
indicated that our intent was to maintain consistency, whenever
possible, between the payment rates for these agents from CY 2005 to CY
2006, because such rapid reductions could adversely affect beneficiary
access to services utilizing radiopharmaceuticals.
As we did not have ASPs for radiopharmaceuticals that best
represent market prices, we proposed as a temporary 1-year policy for
CY 2006 to pay for radiopharmaceuticals that were separately payable in
CY 2006 based on the hospital's charge for each radiopharmaceutical
agent adjusted to cost. As we noted in the proposed rule, MedPAC has
indicated that hospitals currently include the charge for pharmacy
overhead costs in their charge for the radiopharmaceutical. Therefore,
we also noted in the proposed rule that paying for these items on the
basis of charges converted to cost would be the best available proxy
for the average acquisition cost of the radiopharmaceutical along with
its handling cost until we received ASP and overhead information on
these agents. We noted that we expected hospitals' different purchasing
and preparation and handling practices for radiopharmaceuticals to be
reflected in their charges, which would be converted to costs using
hospital-specific CCRs. To better identify the separately payable
radiopharmaceuticals to which this policy would apply, we proposed to
assign them to status indicator ``H.'' We specifically requested public
comment on the proposed payment policy for separately payable
radiopharmaceuticals in CY 2006.
We received many comments on this proposal.
Comment: Numerous commenters expressed concern about our proposal
to pay for separately payable radiopharmaceuticals at hospitals'
charges converted to cost in CY 2006. Most of the commenters generally
supported the proposed payment methodology for radiopharmaceuticals in
CY 2006. However, several of the commenters noted their belief that
this methodology may trigger drastic decreases in the payment rates for
certain items based on their review of hospital charge data for these
agents. Some of the commenters urged CMS to consider refining the
methodology for CY 2006 and offered several options. Several commenters
recommended that CMS utilize hospital-specific overall CCRs, rather
than departmental CCRs, indicating that overall CCRs were more
reflective of hospitals' overall charges and that department-specific
CCRs would fail to convert charges for radiopharmaceuticals to
``average'' acquisition costs, resulting in significantly lower
payments than the CY 2005 levels. Some of the commenters expressed
concern about the effect of cost compression using a CCR method,
stating that the proposed methodology will result in underpayment for
more expensive radiopharmaceuticals. The commenters noted that because
hospitals do not tend to maintain a constant CCR, as
radiopharmaceutical costs increase, the differences between actual
costs and the CMS derived costs increase exponentially. One commenter
suggested that CMS address this issue by establishing a national and
unique CCR for radiopharmaceuticals during CY 2006, which could more
accurately account for radiopharmaceutical handling and overhead costs,
while a few other commenters recommended that CMS facilitate hospital
reporting of accurate charges for radiopharmaceuticals by clarifying
exactly which cost-to-charge ratio would apply to each hospital to
calculate the hospital outpatient payment for radiopharmaceuticals in
CY 2006. Another commenter suggested that CMS provide a template that
hospitals may use to prepare their claims for radiopharmaceuticals,
including handling and other costs, and provide instructions to fiscal
intermediaries regarding the implementation of this policy. One of the
commenters suggested that CMS recognize the general reasonable concern
regarding using the hospital-specific overall cost-to-charge
methodology for highly expensive radiopharmaceuticals, and identified
19 radiopharmaceuticals with hospital acquisition costs per patient
study greater than $500, for which it recommended that CMS use external
data to verify and pay based on invoice acquisition costs plus handling
fees, or freeze the CY 2005 payment rates for these
radiopharmaceuticals, or both. Other commenters suggested limiting
decreases in payment rates for separately payable radiopharmaceuticals
from CY 2005 to CY 2006, including (1) establishing a payment floor
during CY 2006, based on an appropriate percentage of the CY 2005
payment rate for specific radiopharmaceuticals; (2) ensuring that the
resultant payment rate for each product in CY 2006 does not fall below
the level identified in the GAO data or, if GAO data were unavailable,
that the payment not be less than 95 percent of the CY 2005 payment
rate for the product; and (3) ensuring that payments for these products
do not fall below 95 percent of their CY 2005 rates. One commenter, to
the contrary, indicated that while the concerns of other commenters
advocating a payment floor
[[Page 68654]]
under the proposed methodology for CY 2006 are understandable, CMS
should not implement a floor in addition to implementing a CCR approach
for payment. This commenter noted that there were variations in the
cost data reported by hospitals in their charge reports, and it was
important that hospitals, as well as manufacturers, be encouraged to
report accurately to CMS and that setting an artificial payment floor
reduces hospitals' incentives to do so. The commenter further stated
that because the proposed policy already would provide hospitals with
an opportunity to report charges accurately for each claim, there was
no need for CMS to provide any additional safeguards to ensure
sufficient payment and that hospitals would already have the ability to
receive appropriate payment by reporting appropriate charges for these
agents in their claims.
Lastly, several of the commenters indicated that CMS incorrectly
stated that overhead costs for radiopharmaceuticals are included in the
hospital charges for the radiopharmaceuticals. One commenter stated
that some hospital costs associated with radiopharmaceutical purchase
and use are captured in hospital charges. However, the preparation,
distribution, administration, and safe disposal of
radiopharmaceuticals, along with labor costs and necessary patient and
hospital staff protection costs, are not uniformly and accurately
reflected in hospital charges. These commenters urged CMS to provide
hospital outpatient departments with clear guidance on the array of
costs associated with radiopharmaceutical acquisition and handling that
should be appropriately included in their charges for
radiopharmaceuticals, so that payments and data in CY 2006 accurately
reflect hospital acquisition and pharmacy overhead costs for each
radiopharmaceutical. One commenter also noted that an additional
payment for overhead and handling of radiopharmaceuticals should be
made because these costs are not captured in charges for the
radiopharmaceuticals.
Response: We appreciate the commenters' support of our proposed
payment policy for separately payable radiopharmaceuticals in CY 2006.
As recommended by several commenters, in this final rule with comment
period, we are using hospital-specific overall CCRs to derive the costs
of these items from the hospitals' reported charges. We acknowledge the
commenters' concerns about the use of the CCRs resulting in cost
compression. We believe that hospitals have the ability to set charges
for items properly so that charges converted to costs can appropriately
account fully for their acquisition and overhead costs. The specific
payment rates for separately payable radiopharmaceuticals are not being
determined on a prospective basis in CY 2006 because hospitals will
receive a newly calculated payment for each claim submitted for a
separately payable radiopharmaceutical, based on the specific
radiopharmaceutical charge on that claim and the applicable overall
hospital CCR. Therefore, if necessary we believe that hospitals can
appropriately adjust their charges for radiopharmaceuticals so that the
calculated costs properly reflect their actual costs. Specifically, it
is appropriate for hospitals to set charges for these agents in CY 2006
based on all costs associated with the acquisition, preparation, and
handling of these products so that their payments under the OPPS can
accurately reflect all of the actual costs associated with providing
these products to hospital outpatients. We believe that payment for
these items using charges converted to costs will be the best available
proxy for the average acquisition costs of the radiopharmaceuticals
along with their handling costs and that no additional dampening based
on historical payment rates is necessary to pay appropriately for
radiopharmaceuticals. Therefore, for CY 2006, we are finalizing the
proposed policy to pay for radiopharmaceuticals that are separately
payable based on the hospital's charge for each radiopharmaceutical
adjusted to cost. We note that we will not be indicating exactly which
cost-to-charge ratio will apply to each hospital, as the fiscal
intermediaries determine those values. We also note that we have never
provided such information in previous years for pass-through devices
and brachytherapy sources which are also paid under the same
methodology. As indicated in the proposed rule, we are assigning all
radiopharmaceuticals that will be separately payable in CY 2006, to
which this policy will apply, status indicator ``H'' in Addendum B of
this final rule with comment period.
Comment: A commenter indicated that the OPPS Final Rule should
reflect the use of HCPCS code A9523, rather than HCPCS code C1083, to
describe the imaging agent in the Zevalin therapeutic regimen in the
event that the HCPCS Committee modifies the HCPCS descriptor of HCPCS
code A9523 to reflect a per dose unit.
Response: We note that HCPCS codes C1083 and A9523 will be deleted
on December 31, 2005 and replaced with the new HCPCS code A9543
(Yttrium Y-90 ibritumomab tiuxetan, therapeutic, per treatment dose, up
to 40 millicuries) for services furnished on or after January 1, 2006.
Comment: One commenter recommended that HCPCS code G3001
(Administration and supply of tositumomab, 450 mg), currently
applicable to both doses of the non-radioactive component of therapy
and its administration, be amended to apply only to the non-radioactive
component of the regimen. The commenter also recommended that hospitals
should be allowed to use CPT code 90784 for the administration of the
non-radioactive component of BEXXAR and HCPCS code G3001 to reflect the
supply of tositumomab, thus allowing hospitals to identify the non-
radioactive product accurately in their claims with a familiar product
code and receive appropriate payment for the infusion of the product.
Consequently, the commenter strongly urged CMS to retain HCPCS code
G3001 as a product-only code, so that these facilities can continue to
provide treatment to Medicare beneficiaries.
Response: As we had stated in the November 7, 2003 final rule with
comment period for CY 2004 (68 FR 63443), unlabeled tositumomab is not
approved as either a drug or a radiopharmaceutical, but it is a supply
that is required as part of the Bexxar treatment regimen. We do not
make separate payment for supplies used in services provided under the
OPPS. Payments for necessary supplies are packaged into payments for
the separately payable services provided by the hospital.
Administration of unlabeled tositumomab is a complete service that
qualifies for separate payment under its own APC. This complete service
is currently described by HCPCS code G3001. Therefore, we do not agree
with the commenter's recommendation that we assign a separate code to
the supply of unlabeled tositumomab. Rather, we will continue to make
separate payment for the administration of tositumomab, and payment for
the supply of unlabeled tositumomab is packaged into the administration
payment.
Comment: One commenter suggested that CMS establish HCPCS
descriptors based on ``per dose'' units for radiopharmaceuticals,
indicating that such a policy would help facilitate a smoother
transition as CMS moves to establish payments for radiopharmaceuticals
based on average acquisition costs and pharmacy handling APCs.
Response: For CY 2006, the National HCPCS Panel has changed the
[[Page 68655]]
descriptors of many of the radiopharmaceutical product to indicate per
dose units. The new CY 2006 HCPCS codes and their descriptors can be
found on the HCPCS Web site at http://www.cms.hhs.gov/medicare/hcpcs/.
The payment status indicators associated with these codes can be found
in Addendum B of this final rule with comment period.
Comment: One commenter suggested that CMS require hospitals to
report HCPCS codes and charges for all radiopharmaceuticals to
facilitate accurate data collection and help ensure that the costs and
charges of radiopharmaceuticals (as well as the associated handling
costs) are considered in establishing payment rates under the OPPS.
Another commenter commended CMS for clarification and education
provided to hospitals regarding the importance of coding and reporting
charges for radiopharmaceuticals and encouraged CMS to continue to
remind hospitals to report charges regardless of N, K, or H status
indicators assigned to the radiopharmaceuticals, as these charges have
a key role in setting future APC rates and assignment of appropriate
status indicators.
Response: We will continue to strongly encourage hospitals to
report charges for all drugs, biologicals, and radiopharmaceuticals
using the correct HCPCS codes for the items used, including the items
that have packaged status in CY 2006. We agree with the commenters,
that a robust set of claims for each packaged or separately payable
item paid under the OPPS aids in obtaining the most accurate data for
future packaging decisions and rate-setting. In the CY 2005 final rule,
we noted that, with just a very few exceptions, hospitals appeared to
be reporting charges for drugs, biologicals and radiopharmaceuticals
using the existing HCPCS codes, even when such items had packaged
status (69 FR 65811). Therefore, we do not believe it is necessary to
institute a coding requirement for drugs, biologicals, and
radiopharmaceuticals in CY 2006 as we are currently doing for device
category codes required to be reported when used in procedures.
Section 303(h) of Pub. L. 108-173 exempted radiopharmaceuticals
from ASP pricing in the physician office setting where the fewer
numbers (relative to the hospital outpatient setting) of
radiopharmaceuticals are priced locally by Medicare contractors.
However, the statute does not exempt radiopharmaceutical manufacturers
from ASP reporting. We currently do not require reporting for
radiopharmaceuticals because we do not pay for any of the
radiopharmaceuticals using the ASP methodology. However, for CY 2006,
we proposed to begin collecting ASP data on all radiopharmaceuticals
for purposes of ASP-based payment of radiopharmaceuticals beginning in
CY 2007.
As we had stated in the November 7, 2003 final rule with comment
period for CY 2004 (68 FR 42728), in the CY 2006 proposed rule we
recognized that there are significant complex issues surrounding the
reporting of ASPs for radiopharmaceuticals. Most radiopharmaceuticals
must be compounded from a ``cold kit'' containing necessary
nonradioactive materials for the final product to which a radioisotope
is added. There are critical timing issues, given the short half-lives
of many radioisotopes used for diagnostic or therapeutic purposes.
Significant variations in practices exist with respect to what entity
purchases the constituents and who then compounds the
radiopharmaceutical to develop a final product for administration to a
patient. For example, manufacturers may sell the components of a
radiopharmaceutical to independent radiopharmacies. These
radiopharmacies may then sell unit or multi-doses to many hospitals.
However, some hospitals also may purchase the components of the
radiopharmaceutical and prepare the radiopharmaceutical themselves. In
some cases, hospitals may generate the radioisotope on-site, rather
than purchasing it. The costs associated with acquiring the
radiopharmaceutical in these instances may vary significantly. In
addition, there may only be manufacturer pricing for the components.
However, the price set by the manufacturer for one component of a
radiopharmaceutical may not directly translate into the acquisition
cost of the ``complete'' radiopharmaceutical, which may result from the
combination of several components. In general, for drugs other than
radiopharmaceuticals, the products sold by manufacturers with National
Drug Codes (NDCs) correspond directly with the HCPCS codes for the
products administered to patients so ASPs may be directly calculated
for the HCPCS codes. In the case of radiopharmaceuticals, this 1 to 1
relationship may not hold, potentially making the calculation of ASPs
for radiopharmaceuticals more complex.
In addition, some hospitals may generate their own radioisotopes,
which they then use for radiopharmaceutical compounding, and they may
sell these complete products to other sites. The costs associated with
this practice could be difficult to capture through ASP reporting. We
invited very specific comments on these and all other relevant issues
surrounding implementation of ASP reporting for radiopharmaceuticals.
We received numerous public comments on our proposal to begin
collecting ASP data on all radiopharmaceuticals for purposes of ASP-
based payment of radiopharmaceuticals beginning in CY 2007.
Comment: Many commenters provided detailed discussions of the
policy, including practical and legal challenges related to our
proposal to require ASP reporting for radiopharmaceuticals in CY 2006.
Some of these commenters indicated that radiopharmaceuticals are
formulated, distributed, compounded, and administered in unique
distribution channels that preclude the determination of ASP relevant
to a radiopharmaceutical HCPCS code by the manufacturer. Most
radiopharmaceuticals are typically formed from two or more components.
Thus, one manufacturer does not know if a hospital combining individual
components to generate the end product, a patient dose, uses
exclusively the manufacturer's raw materials, or instead combines raw
materials from more than one manufacturer. In this case, the
manufacturer has no way to calculate the ASP of the end product patient
dose, as the manufacturer only knows the sales prices of its own
components. Consequently, radiopharmaceutical manufacturers could not
in good faith sign CMS required ASP-reporting certifications as they
generally have no knowledge or access to end product unit prices. In
addition, the components may be combined to generate a vial of
radiopharmaceutical from which multiple patient doses can be drawn.
Pricing for a patient unit dose would thus vary, depending on how many
patient doses are drawn from a vial. Commenters also noted that a
significant proportion of radiopharmaceuticals are sold as components
to independent freestanding radiopharmacies or nuclear pharmacies.
These radiopharmacies prepare patient unit doses, which are then
purchased by hospitals. The manufacturer of the component may not know
what the radiopharmacies' prices are for a final unit dose product, and
may be precluded from accessing such information. Some of the
commenters indicated that if ASP reporting were imposed, it might
require reporting from
[[Page 68656]]
commercial radiopharmacies, entities that are currently not subject to
ASP reporting.
Many commenters also questioned whether CMS has the legal authority
to impose ASP reporting on radiopharmaceutical manufacturers and the
authority to implement payment for radiopharmaceuticals based on ASP.
They noted that Pub. L. 108-173 exempted radiopharmaceuticals from the
ASP-based payment methodology in physician offices. One of the
commenters stated that when Congress exempted radiopharmaceuticals from
the Pub. L. 108-173 provision modifying Part B payments for drugs and
biologicals furnished in the physician office setting, it did so
because of the unique nature and complexities associated with
radiopharmaceuticals rather than the unique nature of the physician
office setting. Therefore, it was unlikely that Congress intended for
CMS to collect ASP data for radiopharmaceuticals that would be
precluded from use in a Part B radiopharmaceutical payment methodology.
Most of the commenters agreed that the variability and complexities
associated with radiopharmaceuticals and their preparation make uniform
application of the ASP processes to products virtually impossible for
CMS. One commenter believed that it may be appropriate to pay hospitals
for therapeutic radioimmunotherapies based on the same calculation for
ASP as used for physician-administered pharmaceuticals. However, this
commenter did not provide an opinion on the applicability of the ASP
methodology for diagnostic radiopharmaceuticals. Another commenter
suggested that ASP data could be adapted to the unique features of
radiopharmaceuticals if CMS considered collecting ASP data from
independent radiopharmacies in addition to manufacturers. The commenter
noted that if CMS were to use some form of ASPs for outpatient hospital
radiopharmaceutical payments, it must--(1) qualify manufacturer
reporting; (2) use a weighted average that includes manufacturer and
radiopharmacy ASP data; (3) work with stakeholders to determine the
appropriate crosswalk between NDCs and HCPCS codes; (4) conduct surveys
of the relationships between end-user acquisition costs at the HCPCS
level from independent radiopharmacies and hospital radiopharmacies and
the manufacturer-reported ASPs; and (5) develop a specific proposal for
reporting radiopharmaceutical ASPs appropriately and allow stakeholders
to comment on the proposal before it is finalized.
Most commenters urged CMS to recognize the operational and
statutory impediments to ASP reporting for radiopharmaceuticals and the
inherent difficulties in establishing the OPPS payments for these
products based upon any ASP methodology. Rather than attempting to
determine ASP for radiopharmaceuticals based on some manipulation of a
hypothetical radiopharmaceutical ASP, many commenters urged CMS to
consider continuation of the CCR methodology to pay for separately
payable radiopharmaceuticals using the overall hospital-specific CCRs
with some refinements in CY 2007, as this policy may generate combined
hospital average acquisition and overhead costs, consistent with
statutory requirements. One commenter suggested that CMS consider all
issues surrounding radiopharmaceutical acquisition, dispensing, and
dosage before adopting any alternative payment mechanisms. Other
commenters urged CMS to continue working with hospitals and
manufacturers to ensure that both short-term and long-term payment
methodologies for radiopharmaceuticals would sufficiently pay providers
for medically necessary diagnostic tests and therapies and generate
valid and reliable data to support future payment rates.
Response: We appreciate all of the comments that we received on our
proposal to begin ASP reporting for radiopharmaceuticals in CY 2006. We
recognize that there are many complex issues surrounding our ability to
collect accurate ASP data for these agents in CY 2006. At this time, we
agree with the commenters about the difficulties in translating ASP
information gathered from manufacturers regarding radiopharmaceutical
raw materials into individual patient doses of specific
radiopharmaceuticals, as described by particular HCPCS codes. As this
transitional step would be essential to any future OPPS
radiopharmaceutical payment methodology based on ASP data, we are
hesitant at this time to establish required ASP reporting for
radiopharmaceuticals, with its accompanying administrative
complexities. Therefore, in this final rule with comment period, we are
not adopting our proposal to require reporting of ASP data by
radiopharmaceutical manufacturers in CY 2006. Instead, we will continue
to further explore the issues surrounding ASP reporting and
crosswalking ASPs to patient doses of radiopharmaceuticals. In
addition, we will take into consideration other radiopharmaceutical
payment alternatives to ASP reporting suggested by commenters as we
develop our policies for the CY 2007 OPPS. We will continue to seek
input and guidance from hospitals, radiopharmaceutical manufacturers,
and other interested organizations as we contemplate alternative
payment methodologies for radiopharmaceuticals.
Comment: Several commenters requested that for CY 2007 and future
years CMS carefully review and analyze radiopharmaceutical costs
acquired in CY 2006 and consider continuing the use of the CCR
methodology for payment, along with other possible options. Some
commenters suggested that CMS consider the impact to the payment system
and the burden to hospitals to significantly change payment methods for
radiopharmaceuticals from year to year. Other commenters encouraged CMS
to work in close consultation in the future with hospitals and
manufacturers to help ensure that the costs of radiopharmaceuticals are
properly captured in the OPPS rates beyond CY 2006. One commenter
stated that data from the GAO survey of hospital acquisition costs
could be one basis for acquiring information on which national payment
rates could be established. Another commenter recommended that CMS
explore the possibility of treating radiotherapies such as Bexxar and
Zevalin differently from traditional radiopharmaceuticals in order to
preserve patient access to them.
Response: We appreciate receiving these suggestions for
establishing an appropriate payment methodology for
radiopharmaceuticals beyond CY 2006 and will take all of the
recommendations into consideration when we start developing our payment
proposal for radiopharmaceuticals for the CY 2007 OPPS. Other payment
options for radiopharmaceuticals that we will also consider include
basing payments on mean costs derived from hospital claims data or
creating charge-based payment rates for these items. Another option
would be to develop a hospital payment methodology using the invoice
data submitted to carriers when radiopharmaceuticals are administered
in physician offices. It is not our intention to maintain the CY 2006
methodology of paying for radiopharmaceuticals on the basis of charges
converted to costs permanently. Rather, we will actively seek other
sources of information on radiopharmaceutical costs that might provide
a basis for payment. We
[[Page 68657]]
welcome suggestions about such sources of data and alternative
methodologies.
We discuss in section V.B.3.a.(5) of this preamble our CY 2006
proposed payment policies for overhead costs of drugs, biologicals, and
radiopharmaceuticals. In section V.D. of this preamble, we discuss the
methodology that we proposed to use to determine the CY 2006 payment
rates for new drugs, biologicals, and radiopharmaceuticals.
While payments for drugs, biologicals and radiopharmaceuticals are
taken into account when calculating budget neutrality, we note that we
proposed to pay for the acquisition costs of drugs, biologicals, and
radiopharmaceuticals without scaling these payment amounts. We proposed
not to scale these payments because we believed that Congress, in
section 621 of Pub.L. 103-178, intended for payments for these drugs to
be based on average acquisition costs. Scaling these payments would
mean that they are no longer based solely on acquisition costs.
Therefore, at the time of the proposed rule we believed that it was
most consistent with the statute not to scale these payment rates. In
section V.B.3.a.(5) of this preamble, we also discuss that we proposed
to add 2 percent of the ASP to the payment rates for drugs and
biologicals with rates based on the ASP methodology to provide payment
to hospitals for pharmacy overhead costs associated with furnishing
these products. We proposed to scale these additional payment amounts
for pharmacy overhead costs. In the CY 2006 proposed rule, we
specifically invited public comments on whether it was appropriate to
exempt payment rates for drugs, biologicals, and radiopharmaceuticals
from scaling and scale the additional payment amount for pharmacy
overhead costs.
We note that further discussion of the budget neutrality
implications of the various drug payment proposals that we considered
is included in section XIX.C. of this preamble.
We received a few public comments on these scaling issues
associated with drugs, biologicals, and radiopharmaceuticals.
Comment: MedPAC expressed concern that CMS proposed to apply budget
neutrality adjustments to all APCs, while exempting payment for the
acquisition costs of specified covered outpatient drugs from these
adjustments. MedPAC's concern was that this policy, by reducing the
payment rates for clinical APCs but not drugs, may exacerbate any
existing incentives for hospitals to use separately payable products.
For example, the financial incentive to use a SCOD instead of a
packaged drug would be increased by the proposed method of budget
neutrality adjustment, creating higher payments for hospitals that are
relatively high users of SCODs and reducing payments for low users.
Another commenter supported the use of these rates for budget
neutrality estimates and impact analysis.
Response: We understand MedPAC's concern about our proposal to not
scale the payment rates for separately payable drugs and biologicals.
The statute contains a general requirement (section 1833(t)(9)(B)) that
changes to the APC relative weights, APC groups, and other adjustments
``for a year may not cause the estimated amount of expenditures under
this part for the year to increase or decrease.'' We therefore apply a
budget neutrality adjustment, or scalar, to the APC relative weights to
satisfy this requirement. Section 1833(t)(14)(A)(iii)(I) requires that,
beginning in CY 2006, we pay for a separately payable drug on the basis
of ``the average acquisition cost of the drug.'' We believe that the
best interpretation of the specific requirement that we pay for such
drugs on the basis of average acquisition cost, is that these payments
themselves should not be adjusted as part of meeting the statutory
budget neutrality requirement. If we were to apply the budget
neutrality scalar to these payments, we would no longer be paying the
average acquisition cost, but rather an adjusted average acquisition
cost, for separately payable drugs. For CY 2006, as described earlier,
we will be paying for the acquisition and overhead costs of drugs and
biologicals at ASP+6 percent, without scaling for budget neutrality. We
believe that these amounts are the best proxies we have for the
aggregate average acquisition and pharmacy overhead costs of drugs and
biologicals. We continue to believe that not scaling these payments is
most consistent with the statutory requirement of paying for the
acquisition costs of drugs on the basis of average costs. Because we
are no longer identifying a separate payment amount for overhead costs,
we will not scale any part of the ASP+6 percent payment for drugs in
order to maintain consistency with the statutory requirement to pay on
the basis of average acquisition costs. It is also worth noting that
the budget neutrality adjustment is not always negative. For CY 2006,
for example, the budget neutrality adjustment is 1.012508103. Therefore
applying the adjustment to clinical APCs but not to drug payments does
not always increase any incentive that otherwise may exist for a
hospital to use a SCOD instead of a packaged drug.
(5) MedPAC Report on APC Payment Rate Adjustment for Specified Covered
Outpatient Drugs
Section 1833(t)(14)(E) of the Act, as added by section 621(a)(1) of
Pub. L. 108-173, required MedPAC to submit a report to the Secretary,
not later than July 1, 2005, on adjusting the APC rates for specified
covered outpatient drugs to take into account overhead and related
expenses, such as pharmacy services and handling costs. This provision
also required that the MedPAC report include the following: a
description and analysis of the data available for adjusting such
overhead expenses; recommendation as to whether a payment adjustment
should be made; and the methodology for adjusting payment, if an
adjustment is recommended. Section 1833(t)(14)(E)(ii) of the Act, as
added by section 621(a)(1) of Pub. L. 108-173, authorized the Secretary
to adjust the APC weights for specified covered outpatient drugs to
reflect the MedPAC recommendation.
The statute mandates MedPAC to report on whether drug APC payments
under the OPPS should be adjusted to account for pharmacy overhead and
nuclear medicine handling costs associated with providing specified
covered outpatient drugs. In creating its framework for analysis,
MedPAC interviewed stakeholders, analyzed cost report data, conducted
four individual hospital case studies, and received technical advice on
grouping items with similar handling costs from a team of experts in
hospital pharmacy, hospital finance, cost accounting, and nuclear
medicine.
As we discussed in the CY 2006 OPPS proposed rule (70 FR 42728),
MedPAC concluded that the handling costs for drugs, biologicals, and
radiopharmaceuticals delivered in the hospital outpatient department
are not insignificant, as medications typically administered in
outpatient departments generally require greater pharmacy preparation
time than do those provided to inpatients. MedPAC found that little
information is currently available about the magnitude of these costs.
According to the MedPAC analysis, hospitals historically set charges
for drugs, biologicals, and radiopharmaceuticals at levels that
reflected their respective handling costs, and payments covered both
drug acquisition and handling. Moreover, hospitals vary considerably in
their likelihood of providing specific services which utilize drugs,
biologicals,
[[Page 68658]]
or radiopharmaceuticals with different handling costs.
As we also reported in the CY 2006 OPPS proposed rule, MedPAC
developed seven drug categories for pharmacy and nuclear medicine
handling costs, according to the level of resources used to prepare the
products (Table 23 of the proposed rule, 70 FR 42729) Characteristics
associated with the level of handling resources required included
radioactivity, toxicity, mode of administration, and the need for
special handling. Groupings ranged from dispensing an oral medication
on the low end of relative cost to providing radiopharmaceuticals on
the high end. MedPAC collected cost data from four hospitals that were
then used to develop relative median costs for all categories but
radiopharmaceuticals (Category 7+). The case study facilities were not
able to provide sufficient cost information regarding the handling of
outpatient radiopharmaceuticals to develop a cost relative for Category
7+. The MedPAC study classified about 230 different drugs, biologicals,
and radiopharmaceuticals into the seven categories based on input from
their expert panel and each case study facility.
In its report, MedPAC recommended the following:
Establish separate, budget neutral payments to cover the
costs hospitals incur for handling separately payable drugs,
biologicals, and radiopharmaceuticals; and
Define a set of handling fee APCs that group drugs,
biologicals, and radiopharmaceuticals based on attributes of the
products that affect handling costs; instruct hospitals to submit
charges for these APCs; and base payment rates for the handling fee
APCs on submitted charges reduced to costs.
MedPAC found some differences in the categorizations of drug and
radiopharmaceutical products by different experts and across the case
study sites. In the majority of cases where groupings disagreed,
hospitals used different forms of the products, which were coded with
the same HCPCS code. For example, a drug may be purchased as a
prepackaged liquid or as a powder requiring reconstitution. Such a drug
would vary in the handling resources required for its preparation and
would fall into a different drug category depending on its form. In
addition, the handling cost groupings may vary depending on the
intended method of drug delivery, such as via intravenous push or
intravenous infusion. For a number of commonly used drugs, MedPAC
provided two categories in their final consensus categorizations, with
the categories 2 and 3 reported as the most frequent combination. For
example, MedPAC placed HCPCS codes J1260 (Injection, dolasetron
mesylate, 10 mg) and J2020 (Injection, linezolid, 200 mg) in consensus
categories 2 and 3, acknowledging that the appropriate categorization
could vary depending on the clinical preparation and use of the drug.
We noted in the proposed rule (70 FR 42729) that we have no information
regarding hospitals' frequencies of use of various forms of drugs
provided in the outpatient department under the OPPS, as the case
studies only included four facilities and the technical advisory
committee was similarly small. Thus, in many cases it is impossible to
assign a drug exclusively and appropriately to a certain overhead
category that would apply to all hospital outpatient uses of the drug
because of the different handling resources required to prepare
different forms of the drugs.
There are over 100 separately payable drugs, biologicals, and
radiopharmaceuticals that are separately payable under the OPPS but for
which MedPAC provided no consensus categorizations in its 7 drug
groups. In preparation for the CY 2006 proposed rule, we independently
examined these products and considered the handling cost categories
that could be appropriately assigned to each product as described by an
individual HCPCS code. As discussed above, many of the drugs had
several forms, which would place them in different handling cost
groupings depending on the specific form of the drug prepared by the
hospital pharmacy for a patient's treatment. In addition, as we stated
in the proposed rule, we believe that hospitals may have difficulty
discriminating among the seven categories for some drugs, because the
applicability of a given category description to a specific clinical
situation could be ambiguous. Indeed, in the MedPAC study, initially
only about 80 percent of the case study pharmacists agreed with the
expert panel category assignments. However, concurrence increased that
percentage to almost 90 percent after discussion and review.
Nevertheless, there remained a number of drugs for which differences in
categorization by the case study facilities and the expert panel
persisted.
In light of our concerns over our ability to appropriately assign
drugs to the seven MedPAC drug categories so that the categories
accurately described the drugs' attributes in all of the OPPS hospitals
and the MedPAC recommendations, for CY 2006 we proposed to establish
three distinct HCPCS C-codes and three corresponding APCs for drug
handling categories to differentiate overhead costs for drugs and
biologicals, by combining several of the categories identified in the
MedPAC report. We proposed to collapse the MedPAC categories 2, 3, and
4 into a single category described by HCPCS code CXXXX, and MedPAC
categories 5 and 6 into another category described by HCPCS code CYYYY,
while maintaining MedPAC category 1 as described by HCPCS code CWWWW.
(Our rationale for not proposing to create an overhead payment category
for radiopharmaceuticals is discussed below.) We proposed merging
categories in this way generally because we believed that doing so
would resolve the categorization dilemmas resulting from the most
common scenarios where drugs might fall into more than one grouping and
minimized the administrative burden on hospitals to determine which
category applied to the handling of a drug in a specific clinical
situation. In addition, these broader handling cost groupings would
minimize any undesirable payment policy incentives to utilize
particular forms of drugs or specific preparation methods. We proposed
only to collapse those categories whose MedPAC relative weights
differed by less than a factor of two, consistent with the principle
outlined in section 1833(t)(2) of the Act that provides that items and
services within an APC group cannot be considered comparable with
respect to the use of resources if the median cost of the highest cost
item or service within an APC group is more than 2 times greater than
the median cost of the lowest cost item or service within that same
group.
As discussed in previous final rules and in the CY 2006 OPPS
proposed rule, we believed that pharmacy overhead costs are captured in
the pharmacy revenue cost centers and reflected in the median cost of
drug administration APCs, and the payment rate we established for a
drug, biological, or radiopharmaceutical APC was intended to pay only
for the cost of acquiring the item (66 FR 59896, 67 FR 66769, and 70 FR
42729 through 42730). As a MedPAC survey of hospital charging practices
indicated that hospitals' charges for drugs, biologicals, and
radiopharmaceuticals reflect their handling costs as well as their
acquisition costs, we believed pharmacy overhead costs would be
incorporated into the OPPS payment rates for drugs, biologicals, and
radiopharmaceuticals if the rates were based on hospital claims
[[Page 68659]]
data. However, in light of our proposal to establish three distinct C-
codes for drug handling categories, we also proposed to instruct
hospitals to charge the appropriate pharmacy overhead C-code for
overhead costs associated with each administration of each separately
payable drug and biological based on the code description that best
reflected the service the hospital provided to prepare the product for
administration to a patient. We would collect hospital charges for
these C-codes for 2 years, and consider basing payment for the
corresponding drug handling APCs on the charges reduced to costs in CY
2008, similar to the payment methodology for other procedural APCs.
Median hospital costs for the drug handling APCs should reflect the CY
2006 practice patterns across all OPPS hospitals of handling drugs
whose preparation was described by each of the C-codes, reflecting the
differential utilization of various forms of drugs and alternative
methods of preparation and delivery through hospitals' billing and
charges for the C-codes. Table 24 of the proposed rule (70 FR 42730)
listed the drug handling categories, C-codes, and APCs we proposed for
CY 2006.
We proposed these three categories because we believed that they
were sufficiently distinct and reflective of the resources necessary
for drug handling to permit appropriate hospital billing and to capture
the varying overhead costs of the drugs and biologicals separately
payable under the OPPS. We did not propose to adopt the median cost
relatives reported for MedPAC's six categories (excluding
radiopharmaceuticals). This was because it was very difficult to
accurately crosswalk the cost relatives for the six categories to the
three categories we proposed. In addition, we were not confident that
the cost relatives that were based on cost data from four hospitals
appropriately reflected the median relative resource costs of all
hospitals that would bill these drug handling services under the OPPS.
Instead, we believed it was most appropriate to collect hospital
charges for the drug handling services based on attributes of the
products that affected the hospital resources required for their
handling, and to consider making future payments under the OPPS using
the proposed C-codes based on the medians of charges converted to costs
for the drug handling APC associated with each administration of a
separately payable drug or biological.
For CY 2006, pursuant to section 1833(t)(14)(E)(ii) of the Act, we
proposed an adjustment to cover the costs hospitals incur for handling
separately payable drugs and biologicals. As we did not have separate
hospital charge data on pharmacy overhead, we proposed for CY 2006 to
pay for drug and biological overhead costs based on 2 percent of the
ASP. As described earlier, we estimated aggregate expenditure for all
separately payable OPPS drugs and biologicals (excluding
radiopharmaceuticals) using mean costs from the claims data and then
determined the equivalent average ASP-based rates. Our calculations at
the time of the proposed rule indicated that using mean unit costs to
set the payment rates for all separately payable drugs and biologicals
would be equivalent to basing their payment rates on ASP+8 percent. As
noted previously, because pharmacy overhead costs are already built
into the charges for drugs, biologicals, and radiopharmaceuticals as
indicated by the MedPAC study described above, we believed on the basis
of the data available at the time of our development of the proposed
rule that payments for drugs and biologicals and overhead at a combined
ASP+8 percent would serve as a proxy for representing both the
acquisition and overhead cost of each of these products. Moreover, as
we proposed to pay for all separately payable drugs and biologicals
using the ASP methodology, where payment rates for most of these items
were set at ASP+6 percent, we believed that an additional 2 percent of
the ASP would provide adequate additional payment for the overhead
costs of these products and be consistent with historical hospital
costs for drug acquisition and handling. Even though we did not propose
to scale the payment rates for drugs and biologicals based on the ASP
methodology, we proposed to scale the additional payment amount of 2
percent of the ASP for pharmacy overhead costs. Therefore, for CY 2006,
we proposed to pay an additional 2 percent of the ASP scaled for budget
neutrality for overhead costs associated with separately payable drugs
and biologicals, along with paying ASP+6 percent for the acquisition
costs of the drugs and biologicals. We specifically requested public
comments on this proposed policy for paying for pharmacy overhead costs
in CY 2006 and on the proposed policy regarding hospital billing of
drug handling charges associated with each administration of each
separately payable drug or biological using the proposed C-codes.
During the August 2005 meeting of the APC Panel, the Panel made
three recommendations regarding our proposals for determining and
paying for overhead costs associated with providing drugs and
biologicals. The Panel recommended that CMS: (1) Reconsider carefully
the proposal to pay 2 percent of ASP for hospital pharmacy overhead
costs to ensure that it is in line with hospital costs and that CMS
take into account external data gathered during the comment period; (2)
pay for the pharmacy overhead costs of both packaged and separately
paid drugs, employing a mechanism that adds only minimal additional
administrative burden for hospitals; and (3) delay the implementation
of the proposed codes for drug handling cost categories until January
2007 so that further data and alternative solutions for making payments
to hospitals for pharmacy overhead costs can be collected, analyzed by
CMS, and presented to the Panel at its winter 2006 meeting. The final
CY 2006 policies on pharmacy overhead costs are discussed below.
We received many public comments concerning our proposals.
Comment: Commenters were pleased that CMS recognized that
additional payments should be provided to hospitals to cover handling
costs associated with administering drugs and biologicals in the
hospital outpatient setting. However, many commenters were concerned
that the proposed payment of 2 percent of the ASP for these costs was
not adequate to ensure that hospitals would be able to continue to
provide these services. Commenters indicated that these handling costs
could be substantial and cited comments in the MedPAC study on pharmacy
handling costs attributing 26 to 28 percent of pharmacy department
costs to overhead costs. Several commenters noted that MedPAC stated in
its report that pharmacy overhead costs are inconsistently reported in
hospital charge data. Therefore, these commenters concluded that our
analysis of the HCPCS drug charge data derived from CY 2004 provider
claims is not likely to reflect pharmacy handling charges accurately
and consistently. One commenter stated that an additional payment of 2
percent of ASP for drug handling is not adequate for certain drugs that
have very high handling costs due to special equipment or procedures
related to the drug's toxicity, or special compounding or preparation
requirements. Several other commenters stated that hospitals are facing
increased pharmacy handling costs and overhead expenses as a result of
at least one, and possibly two, new government requirements that
reflect new criteria for compounding sterile products and new
procedures to ensure staff and patient safety. According to the
commenters, these additional costs were
[[Page 68660]]
not reflected in the CY 2004 hospital claims data, and therefore were
not accounted for in CMS' estimate of 2 percent of ASP for the pharmacy
overhead costs of drugs and biologicals.
Commenters provided various recommendations for CMS to consider in
determining appropriate payment levels for drug handling costs in CY
2006. One commenter encouraged CMS to use industry data to set an
equitable payment rate for these pharmacy overhead costs instead of the
percentage of ASP proposed. Another commenter recommended that CMS
increase the payment for pharmacy overhead costs to more closely
approximate the findings reported by MedPAC. Several commenters
recommended implementing a dampening policy in CY 2006, so that drug
payments are no lower than 95 percent of the CY 2005 payment levels.
Another dampening policy suggested was that CMS pay for separately
payable drugs and biologicals at the higher of ASP+8 percent or 90
percent of the CY 2005 payment rate. One commenter recommended that CMS
consider freezing payments in CY 2006 for those drugs whose payments
would decline significantly from the CY 2005 rates, particularly those
drugs that may have especially complex and costly handling
requirements. Some of these commenters indicated that a dampening
policy would allow CMS to provide hospitals with a transition mechanism
as it moved toward an ASP-based payment methodology, and at the same
time provide adequate payment for these items until CMS collected
sufficient pharmacy overhead charge data to establish accurate cost-
based payment rates for drug handling expenses.
MedPAC expressed concern about the methodology to pay hospitals 2
percent of ASP for each separately payable drug administered because of
the proportional nature of this proposal. MedPAC suggested that CMS
consider another alternative because the proposed method ties payment
for handling costs directly to the acquisition cost of a drug. MedPAC
noted that payment for the handling cost of a particular drug could
differ sharply from the handling cost hospitals actually incur; for
example, a drug with a high acquisition cost does not necessarily also
have high handling costs. MedPAC also expressed concern that this
method of paying for pharmacy overhead could result in higher drug
acquisition costs for hospitals because it gives manufacturers an
incentive to increase prices. MedPAC proposed an alternative
methodology under which CMS would estimate the total dollars that
should be dedicated to paying pharmacy handling costs and determine how
much of the total should be allocated to groups of drugs that are
similar with respect to their handling costs. MedPAC noted that 2
percent of ASP, as suggested by our analysis of the data on hospitals'
acquisition and overhead costs, would be a viable basis for creating
such a pool. Under the MedPAC methodology, hospitals would receive the
same payment for the handling cost of each specified covered outpatient
drug within the same category of handling costs, regardless of the
acquisition costs of the specific drugs assigned to the category.
One commenter urged CMS to implement a pharmacy service and
handling add-on of at least 8 percent of ASP, in addition to the
acquisition cost payment of ASP+6 percent. The commenter used the
hospital outpatient claims data to examine the percentage add-on to ASP
that would be necessary to maintain aggregate payments in CY 2006 at 95
or 100 percent of the CY 2005 level. The commenter found that, to
maintain payments at 95 or 100 percent of the CY 2005 levels for
chemotherapy or supportive care drugs, except radiopharmaceuticals,
add-on amounts of 7.6 percent of ASP or 13.3 percent of ASP,
respectively, would be necessary. The commenter stated that payment at
this level would be an appropriate interim measure to limit the
potential decreases in drug payments until data are collected to
implement a better long-term solution. Many other commenters supported
this proposal to pay 8 percent of ASP for overhead costs in addition to
paying ASP+6 percent for acquisition costs (for a total payment of ASP
plus 14 percent for drug acquisition and overhead costs).
Another commenter recommended that CMS adopt a process similar to
what it proposed to support the 2 percent payment for CY 2006 and
suggested a variation to the proposed methodology. The commenter
indicated that CMS could compute a reasonable estimate of handling
costs by use of current claims data by first computing the mean cost of
each drug and then deducting the ASP+6 percent amount. The commenter
added that, after statistical outliers are excluded, CMS would have a
reasonable estimate of the handling costs either by drug HCPCS code or
by three categories without hospitals incurring the additional burden
of billing a new handling charge. The commenter stated that CMS could
then add the estimated handling costs to the drug ASP+6 percent payment
to create a single payment for both the acquisition and handling costs.
The commenter indicated that this method should also be more accurate
than the current proposal of 2 percent of ASP for handling costs that
applies equally to all three categories. The commenter expressed
concern that the proposed 2 percent of ASP for handling costs is
significantly lower than the percentage indicated by both MedPAC and
CMS studies. Because the drug handling cost must be paid in a budget
neutral manner, the commenter questioned the adoption of an
administratively burdensome process which attempted to redistribute
OPPS payments for only 2 percent of drug payments. The commenter
recommended that CMS withdraw its proposed billing requirement for
handling charges and simply adopt the 2 percent of ASP payment method
proposed for CY 2006 and future years if CMS believes that its data
indicate that drug handling costs are only 2 percent of drug payments.
The commenter added that submitting handling charges for the proposed
C-codes would be burdensome for such a relatively small payment
refinement benefit. Several other commenters believed that, while an
imperfect measure, increasing payment for drug handling costs by 2
percent of ASP would be appropriate as a temporary measure.
Some commenters also indicated that CMS should work with hospital
and pharmacy stakeholders to develop an approach to establish
differential add-on payments for drug handling costs to account for a
wide variety of drug handling categories. Lastly, one commenter noted
that if CMS implements this policy, it should continue to analyze and
refine payment for pharmacy overhead costs in the future to ensure that
2 percent of the ASP adjustment provides adequate payment for these
services.
Response: We understand the commenters' concerns about basing the
additional payment amount for overhead costs of drugs and biologicals
on 2 percent of an item's ASP. We agree with MedPAC and other
commenters on the proposed rule that hospital charges for drugs and
biologicals are generally reflective of both their acquisition and
overhead costs. MedPAC did indicate in its comments that 2 percent
would be a viable basis for creating the drug overhead pool. Therefore,
we are not convinced by those commenters who contended that drug
overhead costs are much higher than 2 percent of ASP (for example, 25
to 30 percent of total drug costs). As described earlier, using updated
CY 2004 claims data and ASP information from the second quarter of CY
2005, we determined that using
[[Page 68661]]
mean unit costs to set the payment rates for the drugs and biologicals
that would be separately payable in CY 2006 would be equivalent to
basing their payment rates, on average, at ASP+6 percent. Consequently,
we believe that it is appropriate for us to base payment for average
acquisition and overhead costs for separately payable drugs and
biologicals on ASP+6 percent for CY 2006 because both acquisition and
overhead costs are reflected in the charges submitted by hospitals for
these items. We have no reason to believe that, in the aggregate, a
payment rate of ASP+6 percent would be insufficient to provide combined
appropriate payment for both the hospital acquisition and overhead
costs related to providing drugs and biologicals to hospital
outpatients.
In the light of this decision to proceed with an integrated payment
of ASP+6 percent for the acquisition and overhead costs of drugs, we
also are not adopting MedPAC's recommendation to create and
appropriately distribute a drug overhead payment pool in this final
rule with comment period. We understand MedPAC's concern that a flat
percentage add-on payment for overhead costs might underpay these costs
for some drugs and overpay for others. However, on the basis of our
claims data, we believe that the payment rate that we are adopting will
provide adequate payment for both acquisition and overhead costs in the
aggregate. We also note the difficulties in determining the relative
values of the separate drug handling cost categories in order to
allocate spending from MedPAC's overhead drug pool. However, we will
continue to study and consider this alternative as we develop our
future policies on payment for drug costs in general and overhead costs
in particular. As we evaluate other options for paying for drug
handling costs in the future, we will also consider different
methodologies that could be used to develop clinically meaningful and
distinct payment levels for the diverse pharmacy overhead resources
associated with administration of drugs and biologicals. We welcome
comments and information about sources of data that could be useful in
further developing a methodology for payment of drug overhead costs for
the CY 2007 proposed rule.
Comment: Two commenters were concerned that the proposed additional
payment of 2 percent of ASP did not fully cover hospital costs of
procuring, storing, and furnishing clotting factors to patients with
hemophilia. The commenters noted that the CY 2005 payment for a
clotting factor in the physician office setting is based on ASP+6
percent plus an additional furnishing fee to cover the costs of
providing the product to Medicare beneficiaries. According to the
commenters, this fee was set at $0.14 per unit of clotting factor for
CY 2005 and is required to be updated annually. The commenters also
noted that an add-on payment is made to hospitals for clotting factors
provided to patients in the hospital inpatient setting. They indicated
that for hospital inpatient services the current additional payment for
a clotting factor equals 95 percent of its AWP; however, for CY 2006,
CMS proposed to set the payment rate and the furnishing fee for
clotting factors used in the hospital inpatient setting at the same
rate as for clotting factors provided in physician offices under Part
B. The commenters argued that the hospital outpatient handling costs
should not be treated differently than in the physician office because
the costs of inventory, specialized refrigeration, assay management,
and formulation of clotting factors are similar for all providers of
these drugs and do not very between the hospital inpatient and
outpatient setting. The commenters were concerned that the proposed 2
percent of ASP did not fully cover the additional costs of furnishing
clotting factors to Medicare beneficiaries in the hospital outpatient
setting and urged CMS to apply the Part B furnishing fee to the
hospital outpatient setting as well. One of the commenters additionally
requested that CMS not include clotting factors in the collection of
overhead cost data using the proposed C-codes, as CMS has already
established a mechanism for calculating and updating the costs
associated with providing these drugs under the Medicare Physician Fee
Schedule and Inpatient Prospective Payment System, and it sought
clarification in the preamble and regulatory text of the final rule on
all payment provisions related to clotting factors.
Response: Section 303 of Pub. L. 108-173 established section 1847A
of the Act which requires that almost all Medicare Part B drugs not
paid on a cost or prospective basis be paid at 106 percent of average
sales price (ASP) and provided for payment of a furnishing fee for
blood clotting factors, effective January 1, 2005. In CY 2006, payment
for clotting factors furnished in both the physician office setting and
inpatient hospital setting will be made at ASP+6 percent plus an
additional amount for the furnishing fee. We agree with the commenters'
statements about the use of similar resources to furnish clotting
factors across all types of service settings and believe that it is
appropriate to adopt a methodology for paying for clotting factors
under the OPPS that is consistent with the methodology applied in the
physician office setting and the inpatient hospital setting. Therefore,
in CY 2006, we will be paying for clotting factors at ASP+6 percent in
the OPPS and providing payment for the furnishing fee that will also be
a part of the payment for clotting factors furnished in physician
offices under Medicare Part B. This furnishing fee will be updated each
calendar year based on the consumer price index, and we will update the
amount appropriately each year under the OPPS. In CY 2005, the
furnishing fee is $0.14 per unit, and for CY 2006, it will be updated
to $0.146 per unit. Effective January 1, 2006, we will make payment for
clotting factors at ASP+6 percent using ASP data from the third quarter
of 2005 along with paying for the furnishing fee using the updated
amount for CY 2006. The final CY 2006 regulations establishing the ASP
methodology and the furnishing fee for blood clotting factors under
Medicare Part B can be found in the CY 2006 Medicare Physician Fee
Schedule final rule. We believe that this methodology will allow us to
provide adequate payment for both the acquisition and overhead costs of
clotting factors under the OPPS in CY 2006.
Comment: One commenter requested that CMS clarify how it will pay
hospitals for the costs incurred with handling intrathecal drugs,
noting that MedPAC did not discuss the handling costs of intrathecal
drugs in its report on pharmacy overhead costs. The commenter noted
that intrathecal drugs involve significant handling costs; therefore,
CMS should ensure that intrathecal drugs are paid a sum sufficient to
cover their handling costs.
Response: In CY 2006, payment for intrathecal drugs will be
determined using the same ASP methodology as will be used for other
separately payable drugs and biologicals, where payment for acquisition
and overhead costs will be set at ASP+6 percent.
Comment: We received many comments on our proposal to implement C-
codes for drug handling categories in CY 2006. Many of the commenters
opposed the proposal, while other commenters supported it.
A national association of hospitals expressed strong opposition to
the proposal to require hospitals to report their drug handling charges
using C-codes in order for CMS to pay pharmacy overhead costs and
recommended that CMS find an alternative method to
[[Page 68662]]
identify drug handling costs. The commenter raised several concerns
regarding this proposal. For example, the commenter indicated that by
proposing to require hospitals to bill a handling charge when the
industry practice has been to bill a combined charge to reflect both
the drug acquisition cost and handling cost is contrary to a basic,
long standing tenet of the Medicare Act in 42 U.S.C. 1395 that CMS
interpreted as prohibiting any interference with hospital charge
structures. Also, the commenter noted that Medicare providers must have
a consistent charge structure in order to prepare the Medicare cost
report and to apportion costs within the Medicare cost report. The
proposal to require hospitals to begin billing the drug handling charge
as a separate line-item charge will present billing and payment
concerns for all other payers because drug handling charges would also
have to be billed also to private payers and the Medicaid program, or
the provider would have to be able to generate consistent charges for
proper Medicare apportionment costs. However, since most other payers
do not recognize C-codes and may refuse to accept and/or pay for such
handling charges, it would raise concern for a provider as to whether
it must pursue collection in order to have a consistent charge
structure for payment and apportionment. The commenter noted that drug
handling costs are not presently billed separately by the vast majority
of hospitals, and most of these hospitals do not have sophisticated
cost accounting systems that would permit the determination of handling
costs for each billable drug. Reporting pharmacy overhead charges with
C-codes would result in a tremendous burden to hospitals, requiring the
modification of their pharmacy charge masters to reduce each current
drug charge to reflect only the drug acquisition cost and to remove the
drug handling costs currently included in each drug line item's charge.
Hospitals that do not have sophisticated cost accounting systems would
have difficulty in determining the applicable amount attributable to
the handling costs. The commenter indicated that even if this
administratively burdensome process of billing for handling charges is
adopted, CMS would still be unable to determine the drug handling costs
at the individual drug level because an average pharmacy department CCR
would be applied to billed charges to determine drug handling costs,
and these CCRs were never intended to determine cost at the specific
procedure level, such as drug handling costs for individual drugs. The
commenter also expressed concern that CMS' proposal to pay the drug
handling costs only for separately payable drugs would create an
additional burden for hospitals as they must identify and modify only
those drug charge items that qualify for separate payment under the
OPPS. Charges for packaged drugs must continue to include the overhead
costs as part of the drug's line item charge or the appropriate revenue
code charge. Because Medicare beneficiaries frequently require more
than one drug in an outpatient encounter, it may be impossible to
identity any correlation between the drug HCPCS code reported and the
drug handling category HCPCS code reported. Additionally, there would
be no incentives for hospitals to perform the charge master maintenance
and educate pharmacy staff as neither the presence nor accuracy of the
drug handling HCPCS codes will impact the proposed CY 2006 payment of
drug handling costs. Another concern raised was that CMS would be able
to determine appropriate payment rates for these C-codes in future
years using the claims data only if hospitals can reasonably estimate
their drug handling costs and if hospitals mark up their drug handling
costs in line with their overall pharmacy mark-up. The last concern
cited by the commenter was that there may be an issue if hospitals
report the new drug handling costs separately without restructuring
their existing drug charges to remove the drug handling costs already
included in the drug charges.
Other commenters echoed these concerns. One commenter indicated
that even though collecting charge data for handling costs may be
useful for CMS, the reporting requirement would overwhelm coding and
nursing staffs already challenged with the complex task of ensuring
that the correct dosage of the drug is billed. Another commenter
strongly opposed the use of C-codes to bill for drug handling costs
because it would present an operational nightmare because every drug
required ``handling.'' The commenter, therefore, requested that CMS not
implement this proposal until further assessments of the system
implications associated with such a change are completed.
Several commenters raised other coding, billing, and charging
issues related to this proposal. For example, commenters questioned
whether CMS would expect multiple line-items to be reported per date of
service if multiple drugs from the same drug handling family are
provided. They also asked whether CMS would require providers to report
a single revenue code with the pharmacy handling C-codes, or would the
revenue codes need to match the actual drug revenue code. The
commenters urged CMS to review the coding and billing requirements
necessary to implement such a mechanism correctly.
One commenter strongly opposed the proposal requiring hospitals to
establish separate pharmacy overhead charges for separately payable
drugs and biologicals and use the three proposed C-codes for charging
these overhead costs in CY 2006. This commenter indicated that it would
be extremely burdensome and difficult for hospitals to implement the
proposal. The commenter also indicated that there are many complex
issues and administratively burdensome aspects to adopting this
proposal for charging for drug handling using these new C-codes. The
commenter pointed out that even assuming that hospitals could provide
differential charges, other concerns remain. For example, the commenter
indicated that hospitals would have to evaluate the normal mark-up
formula for all pharmacy items and deduct the handling costs for only
the separately payable drugs under Medicare, while the drug handling
charges for packaged drugs would remain incorporated within overall
charges for those drugs. The commenter stated that because the C-codes
would only be recognized by and acceptable to Medicare, but not to
other payers, hospitals would have to modify their billing systems to
separate out the drug handling charge from the drug charge for Medicare
claims, but bill them as a single line-item for other payers. The
commenter believed that there would also be confusion about how the
drug handling C-codes would apply when a hospital pharmacy mixes
multiple doses of a drug for a patient, and in particular the question
of whether the hospital would report a single C-code for handling costs
or multiple C-codes in this situation. The commenter also expressed
concern that some hospitals may not be able to accommodate the proposed
C-codes because drug pricing is generated through a pharmacy charging
system often located outside the hospital's normal charging system. For
these reasons, the commenter indicated that it is unclear how CMS would
expect providers to report drug charges in the inpatient setting versus
the outpatient setting because many hospitals use the same charge
master for inpatient and outpatient services.
One of the commenters noted that when hospital clinic nurses and
pharmacies bill for drugs, they do not view the patient-specific data
to
[[Page 68663]]
determine if the patient has Medicare coverage and whether the drug is
separately payable to make decisions about whether to report additional
services. The commenter pointed out that dispensing fees vary
significantly in each hospital due to variances in overhead and
handling fees incurred. The commenter believed that the proposal
requires more research and consideration in order to reduce the
administrative burden that would be required of hospital staff and
adequately capture all pharmacy overhead and handling costs incurred.
This commenter supported establishing payment for pharmacy overhead
costs based on the additional 2 percent of ASP added to each APC drug
payment, as this method simplifies the payment mechanism.
Many commenters stated that CMS should not implement the proposed
drug handling C-codes in CY 2006 and should instead study alternate
mechanisms for obtaining drug handling cost data, including using the
cost report to compute an average pharmacy handling percentage that may
be used in the future along with the ASP+6 percent model for drug
acquisition costs. Other commenters recommended that CMS work with
stakeholder groups to collect additional data and develop simpler,
alternative solutions for ensuring that hospitals are appropriately
paid for their pharmacy overhead and drug handling costs. Some
commenters stated that such approaches should incorporate the payment
for drug handling directly into the payment rate for the drug itself,
rather than requiring separate coding systems. One commenter suggested
that CMS obtain more accurate information by surveying hospital
pharmacy departments and studying data on the departmental costs of
hospital pharmacies. Another commenter stated that CMS should collect
data and make payments in a manner similar to the way in which data are
collected and payments provided through the Quality Measurement
Demonstration Project that was implemented in physicians' offices in CY
2005.
Several commenters supported our proposal to implement the C-codes
for drug handling categories. They supported the development of the
three proposed distinct C-codes for drug handling categories and the
collection of hospital claims data over the next 2 years for use in
establishing payment rates based on actual costs in CY 2008 and beyond.
One of the commenters supported basing payment for these new categories
in CY 2008 on a weighted average of the overhead costs for all drugs to
which the categories will apply, thus ensuring the most accurate
payment level possible while meeting the objective of the proposal to
streamline the overhead payment system.
A few commenters did not believe the three drug handling categories
proposed were sufficient to cover the wide range of drug handling costs
for all of the separately payable drugs used by hospital outpatient
departments and stated that the categories proposed by MedPAC would
allow greater differentiation of drug handling costs. One commenter
explained that more refined categories can and should be developed and
urged CMS to reevaluate the use of the MedPAC categories and to release
a listing of the drugs assigned to each drug handling category for
hospital review. These commenters indicated that limiting the number of
categories for which hospitals report their drug handling costs would
not provide accurate cost data and were concerned that CMS'
descriptions of these categories did not provide sufficient clarity for
hospitals to appropriately classify all of their drugs. One commenter
noted that intrathecal drugs should be assigned to category three or a
new overhead cost category for intrathecal drugs should be created.
MedPAC was pleased that CMS' proposed methodology to pay for
overhead and handling costs beginning in CY 2008 reflected its
recommendations and noted that the methodology would be similar to that
used to set payment rates for procedural APCs. However, MedPAC
encouraged CMS to explore whether it would be reasonable to expand the
number of handling cost APCs beyond the proposed three categories after
the charge data necessary to set rates for the three handling cost APCs
are collected.
Several commenters supported the creation of a mechanism for
hospitals to begin capturing and reporting pharmacy costs. However,
they indicated that it will take hospitals considerable time and effort
to develop this approach as most hospitals do not currently report
pharmacy costs directly or capture these costs fully. One commenter
recommended that CMS tie reporting of the new C-codes for handling fees
to actual payment amounts for the services so that hospitals would have
an incentive to quickly develop a mechanism to report these codes.
Other commenters supported the general C-code methodology, but were
concerned that there was insufficient time to properly instruct and
educate hospitals on how and when to use these codes. Therefore, to
ensure that the new C-codes can be used effectively, these commenters
recommended that CMS consult with hospital organizations on this issue,
and after reviewing their feedback, consider delaying C-code
implementation until January 1, 2007 while continuing to refine the
codes and develop instructions for their use. The APC Panel also
recommended that CMS delay implementation of this proposal in order to
collect more data and study alternatives.
If this policy is implemented for CY 2006, some commenters
suggested that CMS provide a grace period of no less than 90 days after
the implementation of the CY 2006 OPPS to allow hospitals time to make
necessary system changes and to educate pharmacy staff, finance staff,
and coders on the required use of the drug handling C-codes. Other
commenters noted that a grace period of no less than 6 months would be
required after the implementation of the CY 2006 OPPS. One commenter
insisted that CMS collect hospital charge data for overhead costs for 2
years to determine if the proposed 2 percent of the ASP add-on rate is
adequate and consider new payment rates for these pharmacy overhead
services in CY 2008.
Response: We have carefully considered all the comments and the
concerns raised by the commenters. In light of the extensive
operational issues related to coding, billing, and charging for C-codes
for drug handling categories identified by commenters, we believe there
is good reason at this time not to proceed with our proposal for CY
2006. Therefore, we are not finalizing our proposal to collect data on
pharmacy overhead costs in CY 2006. Rather, we will continue to solicit
input from the industry, APC Panel, and hospitals to explore
alternative methodologies for capturing meaningful and complete
pharmacy overhead costs, for potential use in providing appropriate
payments to hospitals for such services in future updates of the OPPS.
We note that for CY 2006 we are requiring specific coding for certain
devices, as we require the billing of all separately payable drugs and
request that hospitals report packaged drugs. We believe that hospitals
can easily ascertain the acquisition costs of devices and decide on an
appropriate markup that includes device handling, and these device
costs (except for devices with pass-through status) are then
appropriately packaged into payments for the separately payable
procedures that utilize the devices. Similarly, we believe that
hospitals are aware of the acquisition costs of drugs and provide an
appropriate markup that includes pharmacy overhead. These billed drugs
are then either separately paid at ASP+6% for CY 2006 or their
[[Page 68664]]
payment is packaged into payments for the separately payable procedures
where the drugs are administered. However, as discussed above,
hospitals do not keep track of their pharmacy overhead costs nor their
device handling costs separately. Rather, these broad overhead and
handling costs are typically built into the charges for the drugs or
devices themselves, In many ways, the device charge reported on a claim
is like the drug charge, in that both currently reflect the acquisition
cost of the device or drug and the handling cost of the device or drug
(special handling, storage, etc.). Just as we do not require hospitals
at this time to further differentiate their device charges into
acquisition and handling components, based on our review of comments to
the CY 2006 proposed rule we are also not going to require hospitals
for CY 2006 to separate the traditionally highly linked drug
acquisition and pharmacy overhead charges.
Comment: Several commenters urged CMS to recognize that low-cost
drugs and biologicals may have substantial handling costs depending on
the type and volume of the drugs administered, and therefore,
recommended that CMS apply additional payments to packaged drugs and
biologicals, as well as to separately payable therapies. The APC Panel
also recommended that CMS pay for the overhead costs of both packaged
and separately paid drugs. One of the commenters suggested that the use
of the proposed C-codes for drug handling categories also be extended
to include packaged drugs. One commenter recommended that CMS make an
add-on payment of at least $14.80 per dose of packaged drug
administered, and that CMS consider establishing a new G-code for
pharmacy handling services associated with packaged drugs for this
purpose. The commenter based its recommendation on an analysis of the
amount of required pharmacist and pharmacy technician time, plus
indirect overhead costs, associated with preparing each dose of a
packaged drug. Another commenter indicated that CMS may believe that
overhead costs for packaged drugs are reflected in the payments for
drug administration APCs; however, the commenter did not believe that
the drug administration APC payment rates are sufficient to pay
providers for administration services, or the acquisition and handling
costs associated with packaged drugs. In addition, one commenter
indicated that CMS should ensure that the add-on payment is applied
equally to all drugs, including those on pass-through and new to the
market.
One commenter strongly opposed the expansion of the drug handling
C-code reporting proposal to packaged drugs, citing that this policy
would exponentially increase the coding and administrative burden on
hospitals due to the large number of drugs that would require special
charging practices for Medicare purposes. For example, the commenter
noted that hospitals generally do not provide detailed billing for
drugs that are not separately paid. The commenter believed that because
all drugs do not have their own unique HCPCS codes, creating new codes
for all drugs would be a significant burden. The commenter added that,
given the large volume of drugs used in hospital outpatient
departments, expanding drug handling coding requirements to all of
these drugs, regardless of their packaging status, would dramatically
increase hospital administrative costs associated with this proposal.
Other commenters expressed similar views.
Response: We agree with the commenters who stated that extending
specific payment for handling costs to packaged drugs would impose an
excessive burden on hospitals. As the commenters noted, this policy
would exponentially increase the coding and administrative burden that
our proposed use of C-codes would have imposed. In addition, as we have
stated previously, overhead costs are built into the charges for drugs,
and these charges are already accounted for in setting the weights for
the procedural APCs into which some drugs are packaged. Accordingly, we
believe that additional payment for overhead costs of packaged drugs
would be duplicative and have not made a separate provision for
additional payment.
As discussed earlier, we proposed to pay for separately payable
radiopharmaceuticals based on their charges on the claims submitted by
hospitals converted to costs. MedPAC found that the handling resource
costs associated with radiopharmaceuticals were especially difficult to
study and estimate because of the varying resource requirements for
handling radiopharmaceuticals in a variety of hospital outpatient
settings for different clinical uses. These various methods of
preparation of radiopharmaceuticals, and the individual
radiopharmaceuticals themselves, differ significantly in the costs of
their handling, with substantial variation in such factors as site of
preparation, personnel time, shielding, transportation, equipment,
waste disposal, and regulatory compliance requirements. However, as
MedPAC also found that handling costs for drugs, biologicals, and
radiopharmaceuticals were built into hospitals' charges for the
products themselves, we stated in the proposed rule that we believed
that the charges from hospital claims converted to costs were
representative of hospital acquisition costs for these agents, as well
as their overhead costs. These costs would appropriately reflect each
hospital's potentially diverse patterns of acquisition or production of
radiopharmaceuticals for use in the outpatient hospital setting and
their related handling costs that vary across radiopharmaceutical
products and the circumstances of their production and use. Therefore,
we did not propose to create separate handling categories for
radiopharmaceuticals for CY 2006.
We received many public comments on this radiopharmaceutical
proposal.
Comment: Several commenters stated that CMS should not assume that
the hospitals have incorporated handling costs in their hospital
charges for radiopharmaceuticals. They indicated that there has been
some ambiguity about what costs should be included in
radiopharmaceutical charges, as opposed to procedure charges, and this
matter is complicated by the difference in payment policies for
physician offices as compared to the hospital outpatient setting. They
also stated that differing payment policies and lack of clear billing
instructions in the different settings contribute to uncertainty about
where radiopharmaceutical costs are reported by hospitals. Commenters
suggested that CMS specifically declare where the costs for
radiopharmaceutical handling should reside for all delivery settings
and give clear direction to providers. One commenter stated that, due
to the variety of radiopharmaceuticals that can be used with the same
procedure, it is most accurate to incorporate radiopharmaceutical
handling costs in the charge for the radiopharmaceutical rather than in
the charge for the nuclear medicine procedure.
Response: We understand the commenters' concerns. We would
emphasize that, in light of the policy that we are adopting in this
final rule with comment period of paying for radiopharmaceuticals based
on hospitals' charges converted to costs, it is appropriate for
hospitals to include all the costs associated with acquiring and
handling radiopharmaceuticals in their charges for the
radiopharmaceuticals.
However, because we proposed to collect ASP information for
radiopharmaceuticals in CY 2006, we
[[Page 68665]]
requested specific comments on appropriate categories for potentially
capturing radiopharmaceutical handling costs. We stated in the proposed
rule that we believed that these handling costs may vary depending on
many factors. We also indicated that the handling cost categories
should exclude any resources associated with specific diagnostic
procedures or administration codes for patient services that utilize
the radiopharmaceuticals. However, the handling cost categories should
include all aspects of radiopharmaceutical handling and preparation,
including transportation, storage, compounding, required shielding,
inventory management, revision of dosages based on patient conditions,
documentation, disposal, and regulatory compliance. The MedPAC study
contractor suggested a variety of discriminating factors that may be
related to the magnitude of radiopharmaceutical handling costs,
including the complexity of the calculations and manipulations involved
with compounding, the intended use of the product for diagnostic or
therapeutic purposes, the item's status as a radioimmunoconjugate or
nonradioimmunoconjugate, short-lived agents produced in-house, and
preparation of the radiopharmaceutical in-house versus production in a
commercial radiopharmacy. We sought comments on the construction of
radiopharmaceutical handling cost categories that would meaningfully
reflect differences in the levels of necessary hospital resources and
that could easily be understood and applied by hospitals characterizing
their preparation of radiopharmaceuticals.
We received numerous public comments concerning radiopharmaceutical
handling cost categories.
Comment: We received comments describing various proposals for
creating radiopharmaceutical handling cost categories. One commenter
recommended the creation of five handling categories for
radiopharmaceuticals and assigning them G-codes, instead of C-codes as
proposed, for drug handling categories. The commenter recommended this
approach because G-codes are available to all insurers and would assist
hospitals in more accurate, consistent, and efficient billing for
radiopharmaceuticals. Another commenter suggested seven potential
radiopharmaceutical handling categories for our consideration. Still
another commenter proposed four categories for capturing the costs of
radiopharmaceuticals. MedPAC also encouraged CMS to further study how
to best construct categories of handling cost APCs for
radiopharmaceuticals, which are generally likely to require greater
resources for their preparation than drugs and biologicals. One
commenter recommended that all radiopharmaceuticals be paid separately.
The commenter believed that because of the potential for hospitals to
bill one of the radiopharmaceutical handling category codes, this
policy would facilitate appropriate data gathering, recognition, and
payment of handling costs for all radiopharmaceuticals.
One commenter was pleased that CMS did not intend to create C-codes
for radiopharmaceutical handling costs for CY 2006. Other commenters
stated that, if CMS implements its proposal to create handling cost
categories for drugs and biologicals in CY 2006, it should also create
handling cost categories for radiopharmaceuticals in CY 2006. These
commenters added, however, if CMS delays implementation of these drug
handling categories, it would be appropriate to delay the adoption of
handling cost category codes for radiopharmaceuticals.
Several commenters noted that if CMS implemented specific coding
for handling and overhead costs of radiopharmaceuticals in CY 2006, it
would have to initiate well in advance of January 2006 an educational
effort to communicate to providers the need to use the new codes and to
adjust radiopharmaceutical charges during CY 2006 to accurately reflect
any changes in HCPCS code descriptors, along with identification of the
relevant hospital CCR appropriate for calculating radiopharmaceutical
payments. Another commenter suggested that CMS advise hospitals to make
timely updates in charges to ensure that they fully, accurately, and
uniformly report all relevant costs for radiopharmaceuticals.
A few commenters were concerned about the usefulness of creating
additional C-codes for hospitals to report radiopharmaceutical handling
costs in CY 2006 for use in CY 2007 without providing any payment to
hospitals for this additional work, citing that the process will place
an undue administrative burden on hospitals. They recommended that CMS
work with medical specialty societies and industry to develop
appropriate handling cost categories for radiopharmaceuticals and
establish a specific payment rate for each category to help deflect the
additional costs to hospitals for this added burden and to ensure
adequate data collection. In addition, the commenters asked for
concurrent direction to hospitals about including the costs of handling
in their charges for radiopharmaceuticals. Another commenter
recommended that CMS incorporate these added handling costs directly
into the final payment rates for radiopharmaceuticals by individual
HCPCS codes.
Response: As discussed earlier, we will not be implementing the C-
code handling categories for drugs and biologicals in CY 2006 due to
the complex operational and policy issues surrounding this proposal. We
will continue to study the possibility of creating handling cost
categories for radiopharmaceuticals, as well as drugs, in order to
develop viable options for making accurate payments for drug and
radiopharmaceutical handling costs for consideration in future updates
of the OPPS. In the meantime, as discussed earlier, payment for both
acquisition and handling costs of radiopharmaceuticals in CY 2006 will
be made based on hospital charges for these items converted to costs
using each hospital's overall CCR. This methodology will allow us to
pay simultaneously for radiopharmaceutical acquisition and handling
costs, without creating additional administrative burden for hospitals.
Comment: One commenter noted that CMS should include the costs
associated with specially trained personnel to handle and compound
radiopharmaceuticals, waste, and spoilage in its list of elements to
consider including as part of radiopharmaceutical handling costs. The
commenter also suggested that CMS make clear whether the
radiopharmaceutical ``transportation'' costs should reside with the
acquisition costs or with the handling costs. At present, many
radiopharmaceutical invoice acquisition costs could include the
``transportation'' costs, therefore, the commenter cautioned CMS
regarding the potential for double counting.
Response: Since in CY 2006 payment for both acquisition and
handling costs of radiopharmaceuticals will be made based on hospital
charges for these items converted to costs, we encourage hospitals to
include in their charges the costs associated with specially trained
personnel to handle and compound radiopharmaceuticals, waste, spoilage,
and transportation costs as noted by the commenter. Whether hospitals
associate these costs with radiopharmaceutical acquisition or handling
is not significant, as both types of costs should be fully reflected in
the hospitals' charges for radiopharmaceuticals.
[[Page 68666]]
b. Final CY 2006 Payment for Nonpass-Through Drugs, Biologicals, and
Radiopharmaceuticals With HCPCS Codes, But Without OPPS Hospital Claims
Data
Pub. L. 108-173 does not address the OPPS payment in CY 2005 and
after for new drugs, biologicals, and radiopharmaceuticals that have
assigned HCPCS codes, but that do not have a reference AWP or approval
for payment as pass-through drugs or biologicals. Because there is no
statutory provision that dictated payment for such drugs and
biologicals in CY 2005, and because we had no hospital claims data to
use in establishing a payment rate for them, we investigated several
payment options for CY 2005 and discussed them in detail in the CY 2005
OPPS final rule with comment period (69 FR 65797 through 65799).
In the CY 2006 OPPS proposed rule, we proposed to use the same
methodology that we used in CY 2005. That is, we proposed to pay for
these new drugs and biologicals with HCPCS codes but which do not have
pass-through status at a rate that is equivalent to the payment they
would receive in the physician office setting, which would be
established in accordance with the ASP methodology described in the CY
2006 Medicare Physician Fee Schedule final rule. As discussed in the CY
2005 final rule with comment period (69 FR 65797), new drugs,
biologicals, and radiopharmaceuticals may be expensive, and we were
concerned that packaging these new items might jeopardize beneficiary
access to them. In addition, we did not want to delay separate payment
for these items solely because a pass-through application was not
submitted. We noted in the proposed rule that this payment methodology
is the same as the methodology that would be used to calculate the OPPS
payment amount that pass-through drugs and biologicals would be paid in
CY 2006 in accordance with section 1842(o) of the Act, as amended by
section 303(b) of Pub. L. 108-173, and section 1847A of the Act. Thus,
we proposed to continue to treat new drugs, biologicals, and
radiopharmaceuticals with established HCPCS codes the same,
irrespective of whether pass-through status has been determined. We
also proposed to assign status indicator ``K'' to HCPCS codes for new
drugs and biologicals for which we have not received a pass-through
application.
In the proposed rule, we stated that there were several drugs,
biologicals, and radiopharmaceuticals that were payable during CY 2004
or where HCPCS codes for products were created effective January 1,
2005, for which we did not have any CY 2004 hospital claims data. In
order to determine the packaging status of these items for CY 2006, in
the proposed rule we calculated an estimate of the per day cost of each
of these items by multiplying the payment rate for each product, as
determined using the ASP methodology, by an estimated average number of
units of each product that would be furnished to a patient during one
administration. We proposed to package items for which we estimated the
per administration cost to be less than $50 and pay separately for
items with an estimated per administration cost greater than $50. We
indicated that payment for the separately payable items would be based
on rates determined using the ASP methodology established in the
physician office setting. There were two codes HCPCS codes 90393
(Vaccina ig, im) and Q9953 (Inj Fe-based MR contrast, ml), for which we
were not able to determine payment rates based on the ASP methodology.
Because we were unable to estimate the per administration cost of these
items, we proposed to package them in CY 2006. We specifically
requested public comments on our proposed policy for determining the
per administration cost of these drugs, biologicals, and
radiopharmaceuticals that were payable under the OPPS, but did not have
any CY 2004 claims data.
We received several public comments in response to our request.
Comment: One commenter supported the proposal to price drugs that
have a HCPCS code but do not have pass-through status at the same rate
they would be paid in the physician office setting based on the ASP
methodology.
Response: We appreciate the commenter's support. We are finalizing
our proposed policy to pay for new drugs, biologicals, and
radiopharmaceuticals with HCPCS codes but which do not have pass-
through status at a rate that is equivalent to the payment they would
receive in the physician office setting, which will be established in
accordance with the ASP methodology. We are also paying separately for
drugs, biologicals, and radiopharmaceuticals whose HCPCS codes will be
payable for the first time under the OPPS in CY 2006 but whose codes do
not crosswalk to other HCPCS codes previously recognized under the
OPPS.
In CY 2006, payment for these new drugs, biologicals, and
radiopharmaceuticals will be based on ASP+6 percent. In accordance with
the ASP methodology used in the physician office setting, in the
absence of ASP data, we will use wholesale acquisition cost (WAC) for
the product to establish the initial payment rate. We note, however,
that if WAC is also unavailable, then we will calculate payment at 95
percent of the most recent AWP that we have available at the time of
the development of this final rule and for the quarterly updates. We
note that with respect to items for which we currently do not have ASP
data, once their ASP data become available in later quarter
submissions, their payment rates under the OPPS will be adjusted so
that the rates are based on the ASP methodology and set to ASP+6
percent.
For this final rule with comment period, we are basing the payment
rates for these items on ASP data from the second quarter of CY 2005,
which are effective in the physician office setting on October 1, 2005,
because these are the most recent values available for the development
of this rule. To be consistent with the ASP-based payments that would
be made when these drugs and biologicals are furnished in physician
offices as proposed, we plan to make any appropriate adjustments to the
amounts shown in Addenda A and B to this final rule with comment period
for these items on a quarterly basis as more recent ASP data become
available. Changes in the payment rates will be posted on our Web site
during each quarter of CY 2006. Accordingly, effective January 1, 2006,
we will base payment rates for all separately payable drugs and
biologicals on ASP data from the third quarter of CY 2005, which will
also be the basis for setting payment rates for drugs and biologicals
in the physician office setting effective January 1, 2006.
For CY 2006, we will apply this policy to several drugs,
biologicals, and radiopharmaceuticals that are new effective January 1,
2006 and do not have pass-through status or hospital claims data. These
items are listed in Table 26 below and will be separately payable under
OPPS in CY 2006, and thus, we have assigned them to status indicator
``K''.
[[Page 68667]]
Table 26.--CY 2006 Payment Methodology for New Drugs, Biologicals, and
Radiopharmaceuticals Without Pass-Through Status and CY 2004 Claims Data
------------------------------------------------------------------------
HCPCS code Description APC CY 2006 SI
------------------------------------------------------------------------
90714..................... Td vaccine no 1634 K
prsrv >/= 7 im.
A9567..................... Technetium TC- 1679 H
99m aerosol.
A9535..................... Injection, 1640 K
methylene blue.
J0132..................... Acetylcysteine 1680 K
injection.
J0278..................... Amikacin sulfate 1681 K
injection.
J2425..................... Palifermin 1696 K
injection.
J2805..................... Sincalide 1699 K
injection.
J2850..................... Inj secretin 1700 K
synthetic human.
J3471..................... Ovine, up to 999 1702 K
USP units.
J3472..................... Ovine, 1000 USP 1703 K
units.
J7341..................... Non-human, 1707 K
metabolic
tissue.
J8540..................... Oral 1708 K
dexamethasone.
J9225..................... Histrelin 1711 K
implant.
Q9958..................... HOCM <=149 mg/ml 1714 K
iodine, 1ml.
Q9960..................... HOCM 200-249mg/ 1715 K
ml iodine, 1ml.
Q9961..................... HOCM 250-299mg/ 1734 K
ml iodine, 1ml.
Q9962..................... HOCM 300-349mg/ 1735 K
ml iodine, 1ml.
Q9963..................... HOCM 350-399mg/ 1736 K
ml iodine, 1ml.
Q9964..................... HOCM >= 400 mg/ 1737 K
ml iodine, 1ml.
------------------------------------------------------------------------
Comment: One commenter agreed in principle with CMS' proposed
methodology for determining the packaging status for drugs for which
CMS did not have CY 2004 claims data. However, the commenter expressed
concern about the proposal to package HCPCS code Q9953 (Inj Fe-based MR
contrast, ml). The commenter noted that ASP data are available for
Q9953, and the data demonstrated that the average per administration
cost of Q9953 exceeded the $50 packaging threshold. Thus, the commenter
believed that HCPCS code Q9953 should be paid separately in CY 2006.
The commenter indicated that the most current ASP data submission,
which was submitted to CMS on July 29, 2005, showed an ASP for Feridex
I.V., the product described by HCPCS code Q9953, of $28.68 per ml. The
commenter pointed out that using an average dosing of 3.5 ml per the
Feridex I.V. package insert, the average cost per administration would
be $100.39 for HCPCS code Q9953, which far exceeds the CY 2006 OPPS $50
packaging threshold. Therefore, the commenter requested that CMS use
the ASP data as reported to establish a CY 2006 OPPS payment amount for
HCPCS code Q9953.
Response: Consistent with the commenter's statement, we received
ASP data from the second quarter of CY 2005 for HCPCS code Q9953 after
the proposed rule was issued. For this final rule with comment period,
we are using updated ASP data under the methodology we proposed to
determine the packaging status for items that did not have any CY 2004
hospital claims data, and our calculation of the per day cost of HCPCS
code Q9953 indicated that it is higher than $50 per day. Therefore, we
will make separate payment for HCPCS code Q9953 in CY 2006 and set
payment at the rate determined using the ASP methodology.
In this final rule with comment period, we are finalizing the
proposed policy for determining the per administration cost of drugs,
biologicals, and radiopharmaceuticals that are payable under the OPPS,
but which do not have any CY 2004 claims data to determine their
packaging status in CY 2006. Table 27 below lists all of the drugs and
biologicals to which this policy will apply in CY 2006.
We note that in the proposed rule, we indicated that we are
packaging HCPCS code 90393 (Vaccina ig, im) as we were unable to
determine a payment rate for this item based on the ASP methodology;
thus, we were also unable to estimate the per administration cost of
this item, For this final rule with comment period, we were still not
able to determine an ASP-based payment for this item to estimate its
per administration cost. Therefore, we will continue to package this
code in this final rule with comment period.
Table 27.--Drugs, Biologicals, and Radiopharmaceuticals Without CY 2004 Claims Data
----------------------------------------------------------------------------------------------------------------
Est. average
ASP-based number of CY 2006
HCPCS code Description payment rate units per SI
administration
----------------------------------------------------------------------------------------------------------------
90581................................. Anthrax vaccine, sc......... $126.46 1 K
C1093*................................ TC99M fanolesomab........... 1,197.00 1 H
C9206*................................ Integra, per cm2............ 10.69 19 K
C9224................................. Injection, galsulfase....... 1,522.15 14 K
J0135................................. Adalimumab injection........ 293.98 2 K
J0190................................. Inj biperiden lactate/5 mg.. 3.14 1 N
J0200................................. Alatrofloxacin mesylate..... 16.03 2.5 N
J0288................................. Ampho b cholesteryl sulfate. 12.00 35 K
J0395................................. Arbutamine HCl injection.... 160.00 1 K
J1180................................. Dyphylline injection........ 8.05 8.4 K
J1457................................. Gallium nitrate injection... 1.25 340 K
J3315................................. Triptorelin pamoate......... 372.86 1 K
[[Page 68668]]
J3530................................. Nasal vaccine inhalation.... 15.00 1 N
J7350................................. Injectable human tissue..... 5.35 33 K
J7674................................. Methacholine chloride, neb.. 0.40 8.875 N
J9357................................. Valrubicin, 200 mg.......... 369.60 4 K
Q2012*................................ Pegademase bovine, 25 iu.... 166.07 56 K
Q2018*................................ Urofollitropin, 75 iu....... 48.45 2 K
----------------------------------------------------------------------------------------------------------------
* For CY 2006, C1093, C9206, Q2012, and Q2018 are deleted and replaced with A9566, J7343, J2504, and J3355
respectively.
Comment: One commenter requested that CMS clarify the coding and
payment policies for high osmolar contrast medium (HOCM) that will be
applicable during CY 2006. The commenter supported the proposal that
would allow hospitals to bill and be paid for these agents using the
recently assigned HCPCS codes Q9958--Q9964 and revenue code 636. In
addition, the commenter requested that HOCM agents be paid using the
ASP methodology in CY 2006. The commenter noted that section 3631 of
CMS' Intermediary Manual currently states that ``if billing separately,
hospitals use revenue code 255 for contrast material other than LOCM.
To prevent confusion and the inappropriate denial of claims, the
commenter further requested that CMS specify that hospitals should
disregard the program manual instruction and use revenue code 636 and
the Q-codes when billing for HOCM.
Response: The HCPCS codes Q9958--Q9964 for HOCM were created
effective July 1, 2005. We believe that these codes should be paid
separately according to the ASP methodology in CY 2006, similar to our
policy of paying separately for new items in CY 2006 because these
codes had no predecessor codes in the OPPS and the codes themselves
will first be recognized under the OPPS in CY 2006. In this final rule
with comment period, we were able to determine ASP-based payment rates
for all of the HOCM codes, except HCPCS code Q9959. We were unable to
identify a product that crosswalked to this code; therefore, we could
not calculate an appropriate payment for this code. Therefore, we are
packaging HCPCS code Q9959 in this final rule with comment period. We
note that if ASP data become available in later quarter submissions for
this code, then we will pay for this code separately based on an
appropriate payment rate. The ASP-based payment rates for the
separately payable HOCM codes that are listed in Addenda A and B of
this final rule with comment period are estimates and have not been
published before as these codes are not currently separately paid in
the physician office setting. In response to one of the commenter's
concerns about appropriate billing for HOCM, the hospitals may wish to
post their charges for HOCM on the claim with the revenue code that
crosswalks to the cost center on the hospital Medicare cost report
where the costs for HOCM are reported. We note that we will be closely
examining hospital claims data for HOCM codes, as for all drugs,
biologicals, and radiopharmaceuticals, to assess whether packaging or
separate payment is appropriate for future OPPS updates.
C. Coding and Billing Changes for Specified Covered Outpatient Drugs
1. Background
As discussed in the January 6, 2004 interim final rule with comment
period (69 FR 826), we instructed hospitals to bill for sole source
drugs using the existing HCPCS codes, which were priced in accordance
with the provisions of section 1833(t)(14)(A)(i) of the Act, as added
by Pub. L. 108-173. However, at that time, the existing HCPCS codes did
not allow us to differentiate payment amounts for innovator multiple
source and noninnovator multiple source forms of the drug. Therefore,
effective April 1, 2004, we implemented new HCPCS codes via Program
Transmittal 112 (Change Request 3144, February 27, 2004) and Program
Transmittal 132 (Change Request 3154, March 30, 2004) that providers
were instructed to use to bill for innovator multiple source drugs in
order to receive appropriate payment in accordance with section
1833(t)(14)(A)(i)(II) of the Act. We also instructed providers to
continue to use the existing HCPCS codes to bill for noninnovator
multiple source drugs to receive payment in accordance with section
1833(t)(14)(A)(i)(III) of the Act. These coding policies allowed
hospitals to appropriately code for drugs, biologicals, and
radiopharmaceuticals based on their classification and to be paid
accordingly. We continued this coding practice in CY 2005 with payment
made in accordance with section 1833(t)(14)(A)(ii) of the Act.
2. CY 2006 Payment Policy
In the CY 2006 OPPS proposed rule, we proposed to base the payment
rates for drugs and biologicals and their pharmacy overhead costs on
the ASP methodology that is used to set payment rates for these items
in the physician office setting. Under this methodology, a single
payment rate for the drug is calculated by considering the prices for
both the innovator multiple source (brand) and noninnovator multiple
source (generic) forms of the drug. Therefore, under the OPPS, we noted
in the proposed rule that we believed that there was no longer a need
to differentiate between the brand and generic forms of a drug. Thus,
we proposed to discontinue use of the C-codes that were created to
represent the innovator multiple source drugs. In CY 2006, hospitals
would use the HCPCS codes for noninnovator multiple source (generic)
drugs to bill for both the brand and generic forms of a drug as they
did prior to implementation of section 1833(t)(14)(A) in Pub. L. 108-
173. We specifically requested comments on this proposed policy.
We received a few public comments concerning this proposal.
Comment: Several commenters supported the proposal to eliminate the
use of the brand name drug C-codes in CY 2006 as there was no longer a
need to distinguish between innovator (brand name) and noninnovator
(generic) multiple source drugs. The commenters indicated that this
policy will reduce the administrative burden of maintaining and
reporting separate HCPCS codes for both generic and brand name drugs.
However, some commenters pointed out that the availability of these
drugs varies in the marketplace, and they asked CMS to clarify how it
determines a single ASP payment for both brand and generic
[[Page 68669]]
drugs to ensure that the calculated APC payment accurately reflects the
combined cost of both brand and generic forms of the drug. One
commenter also requested that CMS clarify whether the ASP is based on
the volume of brand versus generic drugs purchased by providers during
a given quarter.
Response: Section 1847A(b)(3) of the Act specifies that the payment
amount for multiple source drugs is the volume-weighted average of the
ASPs reported by the manufacturers of the NDCs assigned to the billing
HCPCS code. The computation is weighted by the number of units sold
during the reporting period. As availability of products changes in the
marketplace, changes in purchasing patterns will be reported in the ASP
data. For further discussion of the methodology used to determine the
ASP-based payment amounts, see the related ``Frequently Asked
Question'' at http://questions.cms.hhs.gov. This issue is also
addressed in the CY 2006 Medicare Physician Fee Schedule final rule.
For CY 2006, we are finalizing our proposal to discontinue use of
the C-codes that were created to represent the innovator multiple
source drugs, and note that hospitals are to use the HCPCS codes for
noninnovator multiple source (generic) drugs to bill for both the brand
and generic forms of a drug.
D. Payment for New Drugs, Biologicals, and Radiopharmaceuticals Before
HCPCS Codes Are Assigned
1. Background
Historically, hospitals have used a HCPCS code for an unlisted or
unclassified drug, biological, or radiopharmaceutical or used an
appropriate revenue code to bill for drugs, biologicals, and
radiopharmaceuticals furnished in the outpatient department that do not
have an assigned HCPCS code. The codes for not otherwise classified
drugs, biologicals, and radiopharmaceuticals are assigned packaged
status under the OPPS. That is, separate payment is not made for the
code, but charges for the code would be eligible for an outlier payment
and, in future OPPS updates, the charges for the code are packaged with
the separately payable service with which the code is reported for the
same date of service.
Drugs and biologicals that are newly approved by the FDA and for
which a HCPCS code has not yet been assigned by the National HCPCS
Alpha-Numeric Workgroup could qualify for pass-through payment under
the OPPS. An application must be submitted to CMS in order for a drug
or biological to be assigned pass-through status, a temporary C-code
assigned for billing purposes, and an APC payment amount determined.
Pass-through applications are reviewed on a flow basis, and payment for
drugs and biologicals approved for pass-through status is implemented
throughout the year as part of the quarterly updates of the OPPS.
2. CY 2006 Payment Policy
Section 1833(t)(15) of the Act, as added by section 621(a)(1) of
Pub. L. 108-173, provides for payment for new drugs and biologicals
until HCPCS codes are assigned under the OPPS. Under this provision, we
are required to make payment for an outpatient drug or biological that
is furnished as part of covered outpatient hospital services but for
which a HCPCS code has not yet been assigned in an amount equal to 95
percent of AWP. This provision applies only to payments made under the
OPPS on or after January 1, 2004.
As noted in the proposed rule (70 FR 42733), we initially adopted
the methodology for determining payment under section 1833(t)(15) of
the Act on an interim basis on May 28, 2004, via Transmittal 188,
Change Request 3287, and finalized the methodology for CY 2005 in our
CY 2005 OPPS final rule with comment period. In that final rule with
comment period, we also expanded the methodology to include payment for
new radiopharmaceuticals to which a HCPCS code is not assigned (69 FR
65804 through 65807). We instructed hospitals to bill for a drug or
biological that is newly approved by the FDA by reporting the NDC for
the product along with new HCPCS code C9399 (Unclassified drug or
biological). When HCPCS code C9399 appears on a claim, the OCE suspends
the claim for manual pricing by the fiscal intermediary. The fiscal
intermediary prices the claim at 95 percent of its AWP using the Red
Book or an equivalent recognized compendium, and processes the claim
for payment. This approach enables hospitals to bill and receive
payment for a new drug, biological, or radiopharmaceutical concurrent
with its approval by the FDA. The hospital does not have to wait for
the next OPPS quarterly release or for approval of a product-specific
HCPCS code to receive payment for a newly approved drug, biological, or
radiopharmaceutical. In addition, the hospital does not have to
resubmit claims for adjustment. Hospitals discontinue billing HCPCS
code C9399 and the NDC upon implementation of a HCPCS code, status
indicator, and appropriate payment amount with the next OPPS quarterly
update.
For CY 2006, we proposed to continue the same methodology for
paying for new drugs, biologicals, and radiopharmaceuticals without
HCPCS codes. We received a few public comments in response to our
proposal.
Comment: Several commenters supported CMS' proposal to pay for new
drugs prior to the assignment of a HCPCS code at an amount equal to 95
percent of the drug's AWP and reiterated that the AWP should correspond
to the payment rate established by the fiscal intermediaries using the
Red Book or an equivalent recognized compendium. One commenter noted
that this policy allows providers to receive payment for newer drugs in
a timely fashion.
Response: We appreciate the commenters' support for the
continuation of our policy to pay for new drugs, biologicals, and
radiopharmaceuticals without HCPCS codes at 95 percent of AWP. For CY
2006, we are finalizing our proposed methodology, without modification.
E. Payment for Vaccines
Outpatient hospital departments administer large numbers of
immunizations for influenza (flu) and pneumococcal pneumonia (PPV),
typically by participating in immunization programs. In recent years,
the availability and cost of some vaccines (particularly the flu
vaccine) have fluctuated considerably. As discussed in the November 1,
2002 final rule (67 FR 66718), we were advised by providers that the
OPPS payment was insufficient to cover the costs of the flu vaccine and
that access of Medicare beneficiaries to flu vaccines might be limited.
They cited the timing of updates to the OPPS rates as a major concern.
They indicated that our update methodology, which uses 2-year-old
claims data to recalibrate payment rates, would never be able to take
into account yearly fluctuations in the costs of the flu vaccine. We
agreed with this concern and decided to pay hospitals for influenza and
pneumococcal pneumonia vaccines based on a reasonable cost methodology.
As a result of this change, hospitals, home health agencies (HHAs), and
hospices, which were paid for these vaccines under the OPPS in CY 2002,
have been receiving payment at reasonable cost for these vaccines since
CY 2003.
Influenza, pneumococcal, and hepatitis B vaccines and their
administration are specifically covered by Medicare under section
1861(s)(10) of the Act. For CY 2006, we proposed
[[Page 68670]]
to continue to pay influenza and pneumococcal vaccines at reasonable
cost. However, hepatitis B vaccines have been paid under clinical APCs
that also included other vaccines. For CY 2006, we proposed to pay for
all hepatitis B vaccines at reasonable cost, consistent with the
payment methodology for influenza and pneumococcal vaccines. Influenza
and pneumococcal vaccines are exempt from coinsurance and deductible
payments under sections 1833(a)(3) and 1833(b) of the Act and have been
assigned status indicator ``L''. However, hepatitis B vaccines have no
similar coinsurance or deductible exemption. Therefore, we proposed to
assign these items status indicator ``F''.
Previously under the OPPS, separately payable vaccines other than
influenza and pneumococcal were grouped into clinical APCs 0355 (Level
I Immunizations) and 0356 (Level II Immunizations) for payment
purposes. Payment rates for these APCs were based on the APCs' median
costs, calculated from the costs of all of the vaccines grouped within
the APCs. For CY 2006, we proposed to pay for each separately payable
vaccine under its own APC, consistent with our policy for separately
payable drugs other than vaccines, instead of aggregating them into
clinical APCs with other vaccines. We believed this policy would allow
us to more appropriately establish a payment rate for each separately
payable vaccine based on the ASP methodology. Proposed and final policy
changes to coding and payments for the administration of these vaccines
are discussed in section VIII.C. of this preamble.
During the August 2005 meeting of the APC Panel, the Panel
recommended that CMS change the status indicator for CPT code 90660,
intranasal influenza vaccine, to ``L,'' and that the code be reimbursed
on a reasonable-cost basis. As discussed below, we accepted this
recommendation.
We specifically requested comments on our proposed vaccine policies
for CY 2006. We received several public comments concerning our
proposal.
Comment: All commenters supported CMS' proposal to continue to pay
for influenza and pneumococcal pneumonia vaccines based on reasonable
cost. One commenter believed that payment based on reasonable cost
helps to ensure that hospitals are adequately paid for providing these
vaccines.
Response: We appreciate the commenters' continued support of our
policy. We are finalizing our proposal to pay for influenza and
pneumococcal pneumonia vaccines at reasonable cost for CY 2006 in this
final rule with comment period. We did not receive any comments on our
proposals to also pay for Hepatitis B vaccines at reasonable cost and
pay for each separately payable vaccine under its own APC. For CY 2006,
we are also finalizing these two proposals.
Comment: Several commenters noted that CMS assigned CPT code 90660
(Intranasal influenza vaccine) status indicator ``E,'' indicating that
Medicare does not cover the item, does not recognize it, or does not
provide separate payment for it. The commenters urged CMS to implement
the APC Panel's recommendation to pay for CPT code 90660 on a
reasonable cost basis and exempt this code from coinsurance and
deductible, similar to all other influenza vaccines.
Response: We agree with the commenters that our proposal to pay
influenza vaccines at reasonable cost should also apply to CPT code
90660. Therefore, CPT code 90660 will be paid at reasonable cost and
assigned to status indicator ``L'' in CY 2006, similar to all other
influenza vaccines.
F. Changes in Payment for Single Indication Orphan Drugs
Section 1833 (t)(1)(B)(i) of the Act gives the Secretary the
authority to designate the hospital outpatient services to be covered.
The Secretary has specified coverage for certain drugs as orphan drugs
(section 1833(t)(14)(B)(ii)(III) of the Act, as added by section
621(a)(1) of Pub. L. 108-173). Section 1833 (t)(14)(C) of the Act, as
added by section 621(a)(1) of Pub. L. 108-173, gives the Secretary the
authority in CYs 2004 and 2005 to specify the amount of payment for an
orphan drug that has been designated as such by the Secretary.
In the CY 2006 OPPS proposed rule (70 FR 42733), we indicated that
we recognized that orphan drugs that are used solely for an orphan
condition or conditions are generally expensive and, by definition, are
rarely used. We believed that if the costs of these drugs were packaged
into the payment for an associated procedure or visit, the payment for
the procedure might be insufficient to compensate a hospital for the
typically high costs of this special type of drug. Therefore, we
proposed to continue paying for them separately.
In the November 1, 2002 final rule (67 FR 66772), we identified 11
single indication orphan drugs that are used solely for orphan
conditions by applying the following criteria:
The drug is designated as an orphan drug by the FDA and
approved by the FDA for treatment of only one or more orphan
condition(s).
The current United States Pharmacopoeia Drug Information
(USPDI) shows that the drug has neither an approved use nor an off-
label use for other than the orphan condition(s).
Eleven single indication orphan drugs were identified as having met
these criteria and payments for these drugs were made outside of the
OPPS on a reasonable cost basis.
In the November 7, 2003 final rule with comment period (68 FR
63452), we discontinued payment for orphan drugs on a reasonable cost
basis and made separate payments for each single indication orphan drug
under its own APC. Payments for the orphan drugs were made at 88
percent of the AWP listed for these drugs in the April 1, 2003 single
drug pricer, unless we were presented with verifiable information that
showed that our payment rate did not reflect the price that was widely
available to the hospital market. For CY 2004, Ceredase (alglucerase)
and Cerezyme (imiglucerase) were paid at 94 percent of the AWP because
external data submitted by commenters on the August 12, 2003 proposed
rule caused us to believe that payment at 88 percent of the AWP would
be insufficient to ensure beneficiaries' access to these drugs.
In the December 31, 2003 correction of the November 7, 2003 final
rule with comment period (68 FR 75442), we added HCPCS code J9017
(Arsenic trioxide, 1 mg) to our list of single indication orphan drugs.
In the November 15, 2004 final rule with comment period (69 FR 65807),
we retained the same criteria for identifying single indication orphan
drugs and added two HCPCS codes to our list, HCPCS code C9218
(Injection, Azactidine, per 1 mg) and HCPCS code J9010 (Alemtuzumab, 10
mg) (69 FR 65808). As of CY 2005, the following are the 14 orphan drugs
that we have identified as meeting our criteria: HCPCS code C9218
(Injection, Azactidine, per 1 mg); HCPCS code J0205 (Injection,
Alglucerase, per 10 units); HCPCS code J0256 (Injection, Alpha 1-
proteinase inhibitor, 10 mg); HCPCS code J9300 (Gemtuzumab ozogamicin,
5mg); HCPCS code J1785 (Injection, Imiglucerase, per unit); HCPCS code
J2355 (Injection, Oprelvekin, 5 mg); HCPCS code J3240 (Injection,
Thyrotropin alpha, 0.9 mg); HCPCS code J7513 (Daclizumab, parenteral,
25 mg); HCPCS code J9010 (Alemtuzumab, 10 mg); HCPCS code J9015
(Aldesleukin, per single use vial); HCPCS code J9017 (Arsenic trioxide,
1 mg); HCPCS code J9160 (Denileukin
[[Page 68671]]
diftitox, 300 mcg); HCPCS code J9216 (Interferon, gamma 1-b, 3 million
units); and HCPCS code Q2019 (Injection, Basiliximab, 20 mg).
In the November 15, 2004 final rule with comment period (69 FR
65808), we stated that had we not classified these drugs as single
indication orphan drugs for payment under the OPPS, they would have met
the definition of single source specified covered outpatient drugs and
received lower payments, which could have impeded beneficiary access to
these unique drugs dedicated to the treatment of rare diseases.
Instead, for CY 2005, under our authority at section 1833(t)(14)(C) of
the Act, we set payment for all 14 single indication orphan drugs at
the higher of 88 percent of the AWP or the ASP+6 percent. For CY 2005,
we also updated on a quarterly basis the payment rates through
comparison of the most current ASP and AWP information available to us.
Given that CY 2005 was the first year of mandatory ASP reporting by
manufacturers, we did not want potential significant fluctuations in
the ASPs to affect payments to hospitals furnishing these drugs, which
in turn might cause access problems for beneficiaries. Therefore, in
the November 15, 2004 final rule, we did not implement the proposed 95
percent AWP cap on payments for single indication orphan drugs, which
was described in the August 16, 2004 proposed rule (69 FR 50518), as we
intended to monitor the impact of our payment policy and consider the
need for a cap in future OPPS updates if appropriate (69 FR 65809).
As indicated in the proposed rule (70 FR 42734), as a part of the
GAO study on hospital acquisition costs of specified covered outpatient
drugs, the GAO provided the average hospital purchase prices for four
orphan drugs: HCPCS code J0256 (Injection, Alpha 1-proteinase
inhibitor, 10 mg), HCPCS code J1785 (Injection, Imiglucerase, per
unit), HCPCS code J9160 (Denileukin difitox, 300 mcg), and HCPCS code
J9010 (Alemtuzumab, 10 mg).
For alpha 1-proteinase inhibitor (HCPCS code J0256), the hospitals
in the study sample represented only about 14 percent of the estimated
total number of hospitals purchasing the drug. The mean hospital
purchase price was about 73 percent of the payment rate based on ASP+6
percent rate and about 63 percent of the CY 2005 payment rate updated
in April 2005. We noted in the proposed rule (70 FR 42734) that we
believed the GAO acquisition data for alpha 1-proteinase inhibitor were
likely not representative of hospital acquisition costs for the drug
because the number of hospitals providing data was so small compared to
the total number of hospitals expected to utilize the drug.
Furthermore, we recognized that the GAO data on hospital drug
acquisition costs did not reflect the current acquisition costs
experienced by hospitals but instead, relied on past cost data from
late CY 2003 through early CY 2004. On the other hand, we stated that
the ASP data were more current and thus were likely more reflective of
hospital acquisition costs for alpha 1-proteinase inhibitor at the time
of issuance of the CY 2006 proposed rule.
In contrast to the GAO data for alpha 1-proteinase inhibitor, the
GAO data for imiglucerase (HCPCS code J1785) reflected hospital
purchase prices from about 69 percent of the hospitals expected to
utilize the drug. For this drug, the mean hospital purchase price was
about 93 percent of the CY 2005 payment rate for imiglucerase updated
in April 2005, which was based on ASP+6 percent rate. Thus, the ASP-
based payment rate also appeared to be appropriately reflective of
hospital acquisition costs for imiglucerase, and to be consistent with
the GAO mean purchase price.
For denileukin difitox (HCPCS code J9160) and alemtuzumab (HCPCS
code J9010), the GAO data for these drugs reflected hospital purchase
prices from about 77 percent and 66 percent of the hospitals expected
to acquire these drugs, respectively. The mean hospital purchase price
for denileukin difitox was about 94 percent of the payment rate based
on the ASP+6 percent rate and about 79 percent of the CY 2005 payment
rate. As for alemtuzumab, the mean hospital purchase price was about 95
percent of the payment rate based on the ASP+6 percent rate and about
89 percent of the CY 2005 payment rate. For both of these drugs, the
ASP-based payment rates also appeared to be appropriately reflective of
their hospital acquisition costs, based on confirmation by the GAO
average purchase price data from over two-thirds of the hospitals
expected to acquire the drugs.
During the quarterly updates to payment rates for single indication
orphan drugs for CY 2005, we observed significant improvement in the
accuracy and consistency of manufacturers' reporting of the ASPs for
these orphan drugs. Overall, we found that the ASPs as compared to the
AWPs were less likely to experience dramatic fluctuations in prices
from quarter to quarter. We indicated in the proposed rule that we
expected that as the ASP system continues to mature, manufacturers will
further refine their quarterly reporting, leading to even greater
stability and accuracy in their reporting of sales prices. As the ASPs
reflect the average sales prices to all purchasers, the ASP data also
include drug sales to hospitals. Past commenters have indicated to us
that some orphan drugs are administered principally in hospitals, and
to the extent that this is true their ASPs should predominantly be
based upon the sales of drugs used by hospitals. For three of the
orphan drugs for which the GAO provided average purchase prices from a
large percentage of hospitals expected to acquire the drugs, the GAO
data were very consistent with the ASP+6 percent. For the fourth drug,
the GAO mean was significantly lower than the ASP+6 percent and the
confidence interval around that mean was quite tight, although only a
small proportion of hospitals expected to acquire the drug reported
their purchase prices. Thus, in the proposed rule, we stated that we
believed that proposing to pay for orphan drugs based on an ASP
methodology was appropriate for the CY 2006 OPPS and should assure
patients' continued access to these orphan drugs in the hospital
outpatient department. Therefore, for CY 2006, we proposed to pay for
single indication orphan drugs at the ASP+6 percent.
We believed that paying for orphan drugs using the ASP methodology
was consistent with our proposed general drug payment policy for other
separately payable drugs and biologicals in the CY 2006 and reflected
our general view that ASP-based payment rates serve as the best proxy
for the average acquisition cost for these items as described in this
section V. of the preamble. In addition, we proposed to pay an
additional 2 percent of the ASP scaled for budget neutrality to cover
the handling costs of these drugs, also consistent with our proposed
general pharmacy overhead payment policy for handling costs associated
with separately payable drugs and biologicals. We believed that the
ASP+6 percent for orphan drugs would provide appropriate payment for
hospital acquisition costs for these drugs that are administered by a
relatively small number of providers, so that patients would continue
to have access to orphan drugs in the hospital outpatient setting.
Hospitals would also receive additional payments for costs associated
with their storage, handling, and preparation of orphan drugs. We
proposed to update the payment rates on a quarterly basis to reflect
the most current ASPs available to us, and we also noted that
appropriate adjustments to the payment amounts shown in
[[Page 68672]]
Addendum A and B of this final rule with comment period would be made
if the ASP submissions in a later quarter indicated that adjustments to
the payment rates were necessary. (70 FR 42735) These changes to the
Addenda would be announced in our program instructions released on a
quarterly basis and posted on our Web site at http://www.cms.hhs.gov.
We specifically requested comments on our proposed payment policy
for single indication orphan drugs in CY 2006. We received several
public comments regarding our proposal.
Comment: One commenter indicated that, under the proposed payment
policy for orphan drugs, it did not anticipate access problems
generally for orphan drugs that will be used in the hospital outpatient
setting in CY 2006. However, the commenter also stated that orphan
drugs should be given special consideration as a class and recommended
that CMS adopt the definition of ``orphan drugs'' used in the Food,
Drug, and Cosmetics Act for purposes of identifying drugs and
biologicals that are treatments for rare diseases. The commenter
further recommended that CMS establish an evaluation process to
determine which orphan products may need special status or assistance
to assure access. For example, the commenter suggested that CMS accept
orphan products designated by the FDA as a valid class for initial
consideration; develop prospective criteria to determine which orphan
drugs should not be part of this class; work with stakeholders to
identify any access problems that may occur or are likely to occur in
the near future; and provide patients and pharmaceutical companies an
opportunity to present data and receive a written explanation with
examples before making a final decision that an orphan drug access
problem exists.
Response: As we stated in the CY 2005 final rule with comment
period (69 FR 65808), using the statutory authority in section
1833(t)(1)(B)(i) of the Act, which gives the Secretary broad authority
to designate covered OPD services under the OPPS, we have established
criteria which distinguish single indication orphan drugs from other
drugs designated as orphan drugs by the FDA under the Orphan Drug Act.
Our determination to provide special payment for these drugs in
previous years neither affected nor deviated from FDA's classification
of any drugs as orphan drugs. The special treatment given to this
subset of FDA-designated orphan drugs was intended to ensure that
beneficiaries had continued access to these life-saving therapies given
that these drugs have a relatively low volume of patient use, lack any
other nonorphan indication, and are typically very costly. We will
consider the recommendation to establish an evaluation process to
determine future changes to the OPPS orphan drug list and the payment
rates for these drugs.
Based on our analysis of the ASP rates using data from the fourth
quarter of CY 2004 and the GAO reported mean purchase prices for four
orphan drugs, we stated in the proposed rule (70 FR 42735) that we
believed proposing to pay for orphan drugs using the ASP methodology at
a payment rate of ASP+6 percent is appropriate for the CY 2006 OPPS and
should ensure patients' continued access to these orphan drugs in the
hospital outpatient department. Using updated ASP data reported from
the second quarter of CY 2005, we found that our current analysis is
consistent with the results we found for the proposed rule. As
indicated in the proposed rule, we believe that paying for orphan drugs
using the ASP methodology is consistent with our CY 2006 final drug
payment policy for other separately payable drugs and biologicals and
reflects our general view that ASP-based payment rates serve as the
best proxy for the average acquisition costs for these items as
described earlier in this preamble.
Earlier in the preamble, we indicated that in CY 2006, we are
basing payment for the average acquisition and overhead costs for other
separately payable drugs and biologicals on ASP+6 percent because, in
part, both the acquisition and pharmacy overhead costs are reflected in
the charges submitted by hospitals for these items. In this final rule
with comment period, we made this determination using updated ASP data,
hospital claims data, and CCRs. We believe that the same observation is
true for single indication orphan drugs, as we do not have any reason
to believe that hospitals would include their acquisition and overhead
costs in the charges for other separately payable drugs and
biologicals, but would not follow the same charging practice when
billing for single-indication orphan drugs. Therefore, we believe that
in CY 2006, a combined payment rate of ASP+6 percent will be sufficient
and appropriate for both the acquisition and overhead costs related to
providing single-indication drugs to hospital outpatients. Accordingly,
in this final rule with comment period, we are adopting the policy of
paying for orphan drugs separately at ASP+6 percent, which represents a
combined payment for the acquisition and overhead costs associated with
furnishing these products. We note that this policy will no longer
differentiate how we pay for orphan drugs based on the use of the drugs
because all orphan drugs, both single-indication and multi-indication,
will be paid under the same methodology.
For this CY 2006 OPPS final rule with comment period, we are using
payment rates for single-indication orphan drugs based on ASP data from
the second quarter of CY 2005, which are effective in the physician
office setting on October 1, 2005, because these are the most recent
numbers available for the development of this rule. To be consistent
with the ASP-based payments that would be made when these drugs and
biologicals are furnished in physician offices, as proposed, we plan to
make any appropriate adjustments to the amounts shown in Addenda A and
B to this final rule with comment period for these items on a quarterly
basis as more recent ASP data become available. Changes in the APC
payment rates for these items will be posted on our Web site during
each quarter of CY 2006. Therefore, effective January 1, 2006, we will
base payment rates for single-indication orphan drugs on ASP data from
the third quarter of CY 2005, which will also be the basis for setting
payment rates for drugs and biologicals in the physician office setting
effective January 1, 2006.
Comment: One commenter indicated that payment at ASP+6 percent is
inadequate for HCPCS code J9160 (Denileukin diftitox, 300 mcg) because
the methodology has resulted in access issues for patients in the
physician office setting, which influenced the shift of patients from
physician offices to hospital outpatient sites. As CMS proposed to use
the same methodology to establish payment rates in the hospital
outpatient setting, the commenter is concerned that the consequence
will be that patients will be left with no access to this biological.
The commenter noted that the GAO data that supported the belief that
the median purchase price for hospitals was almost exactly the same as
the WAC price for this item for CY 2003. Therefore, the commenter
recommended that CMS consider a temporary payment rate for one year
that is closer to the actual hospital acquisition cost such as WAC or
implement some other special methodology to ensure appropriate payment
for this product in CY 2006. The commenter also indicated that an
additional payment amount of 2 percent of the ASP for handling costs
associated with this biological is inadequate and
[[Page 68673]]
requested a higher handling rate for a special class of products, like
denileukin diftitox, that require special handling.
Response: As we stated in the proposed rule, the GAO data for
denileukin difitox reflected hospital purchase prices from about 77
percent of the hospitals expected to acquire these drugs. The mean
hospital purchase price from the GAO study for denileukin difitox was
about 91 percent of the ASP+6 percent payment rate based on data from
the second quarter of CY 2005 and about 79 percent of the CY 2005
payment rate. We continue to believe in this final rule with comment
period that the ASP-based payment rate for this drug appears to be
appropriately reflective of its hospital acquisition costs, based on
confirmation by the GAO average purchase price data from over three-
fourths of the hospitals expected to acquire the drug. Moreover, as
stated previously, we believe that like for other single-indication
orphan drugs and other separately payable drugs and biologicals, a
combined payment of ASP+6 percent in CY 2006 for this drug is adequate
to cover both its acquisition and pharmacy overhead costs.
We received two public comments on the proposed payment rate for
HCPCS code J0256.
Comment: One commenter indicated that HCPCS code J0256 described
three alpha 1-augmentation therapies currently available and urged CMS
to recognize the critical importance of the access issues surrounding
these therapies. Therefore, the commenter recommended that in CY 2006
CMS set the payment rate for HCPCS code J0256 at the higher of the CY
2005 fourth quarter payment rate or the proposed ASP+8 percent rate.
The commenter added that setting a floor should provide access to all
three therapies, which is critical because there is not a sufficient
supply of any of the alpha 1-proteinase inhibitors to supply all
patients for whom the therapy has been prescribed. Another commenter
recommended that CMS establish brand-specific codes and payment rates
for the different products described by HCPCS code J0256; synchronize
operationally the lag time between the manufacturers' ASP reporting and
CMS' posting of the updated ASP payment rates on its Web site so that
such changes are implemented at the same time for drugs paid under the
OPPS and those paid under the physician fee schedule; and consider a
proxy add-on payment to cover the overhead costs associated with these
drugs.
Response: As discussed earlier in this preamble and noted in the
proposed rule, we believe the GAO acquisition data for alpha 1-
proteinase inhibitor are likely not representative of hospital
acquisition costs for the drug because the number of hospitals
providing data is so small compared to the total number of hospitals
expected to use the drug. Moreover, the GAO data relied on past
hospital cost information from late CY 2003 through early CY 2004. As
previously stated, the ASP data are more current, and thus are likely
more reflective of present hospital acquisition costs for alpha 1-
proteinase inhibitor. We continue to believe this to be true, and
therefore, based on rationale cited above, in CY 2006, we will pay for
all single-indication orphan drugs, including alpha 1-proteinase
inhibitor, at a rate of ASP+6 percent for both the acquisition and
overhead costs associated with these items. We find no reason to
establish a payment floor for alpha 1-proteinase inhibitor that is
related to the CY 2005 payment rates, when we have more current ASP
data available that reflect current market prices.
With respect to establishing brand-specific HCPCS codes for the
different products described by HCPCS code J0256, we suggest that the
commenter pursue these changes through the process set up by the
National HCPCS Panel to establish HCPCS codes. Lastly, we note that in
CY 2006 there will not be a lag in the implementation of the ASP-based
payment rates for the OPPS and the physician fee schedule. As noted
earlier, effective January 1, 2006, we will base payment rates for
single-indication orphan drugs on ASP data from the third quarter of CY
2005, which will also be the basis for setting payment rates for drugs
and biologicals in the physician office setting effective January 1,
2006. We note that HCPCS codes C9128 and Q201 have been deleted
effective December 31, 2005 and replaced with HCPCS codes J9025 and
J0480, respectively, in CY 2006.
VI. Estimate of Transitional Pass-Through Spending in CY 2006 for
Drugs, Biologicals, and Devices
A. Total Allowed Pass-Through Spending
Section 1833(t)(6)(E) of the Act limits the total projected amount
of transitional pass-through payments for drugs, biologicals,
radiopharmaceuticals, and categories of devices for a given year to an
``applicable percentage'' of projected total Medicare and beneficiary
payments under the hospital OPPS. For a year before CY 2004, the
applicable percentage was 2.5 percent; for CY 2005 and subsequent
years, we specify the applicable percentage up to 2.0 percent.
If we estimate before the beginning of the calendar year that the
total amount of pass-through payments in that year would exceed the
applicable percentage, section 1833(t)(6)(E)(iii) of the Act requires a
uniform reduction in the amount of each of the transitional pass-
through payments made in that year to ensure that the limit is not
exceeded. We make an estimate of pass-through spending to determine not
only whether payments exceed the applicable percentage, but also to
determine the appropriate reduction to the conversion factor for the
projected level of pass-through spending in the following year.
As stated in the proposed rule, making an estimate of pass-through
spending for devices in CY 2006 entails estimating spending for two
groups of items (70 FR 42735). The first group consists of those items
for which we have claims data for procedures that we believe used
devices that were eligible for pass-through status in CY 2004 and CY
2005 and that would continue to be eligible for pass-through payment in
CY 2006. The second group consists of those items for which we have no
direct claims data, that is, items that became, or would become,
eligible in CY 2005 and would retain pass-through status in CY 2006, as
well as items that would be newly eligible for pass-through payment
beginning in CY 2006.
B. Estimate of Pass-Through Spending for CY 2006
As we proposed, in this final rule with comment period, we are
setting the applicable percentage cap at 2.0 percent of the total OPPS
projected payments for CY 2006. As we discuss in section IV.C. of this
preamble, the three remaining device categories receiving pass-through
payment in CY 2005 will expire on December 31, 2005. Therefore, we
estimate pass-through spending attributable to the first group of items
described above to equal zero.
To estimate CY 2006 pass-through spending for device categories in
the second group, that is, items for which we have no direct claims
data, as we proposed, in this final rule with comment period, we used
the following approach: For additional device categories that are
approved for pass-through status after July 1, 2005, but before January
1, 2006, we used price information from manufacturers and volume
estimates based on claims for procedures that would most likely use the
devices in question because we did not have any CY 2004 claims data
upon which to base a spending estimate. We projected these data forward
to CY 2006
[[Page 68674]]
using inflation and utilization factors based on total growth in OPPS
services as projected by CMS' Office of the Actuary (OACT) to estimate
CY 2006 pass-through spending for this group of device categories. For
device categories that become eligible for pass-through status in CY
2006, we used the same methodology. We anticipated that any new
categories for January 1, 2006, would be announced after the
publication of the proposed rule, but before publication of this final
rule with comment period. Therefore, as indicated in the proposed rule
(70 FR 42735), the estimate of pass-through spending in this final rule
with comment period incorporates any pass-through spending for device
categories made effective January 1, 2006, and during subsequent
quarters of CY 2006.
We did not announce pass-through status for any new device
categories after July 1, 2005. There is one new device category that we
may add for pass-through payment as of January 1, 2006. To estimate CY
2006 pass-through spending for items for which we have no direct claims
data, we are adhering to the methodology, as specified above, for
estimating pass-through spending for the second group of items, with a
refinement to the growth factor. That is, we are projecting forward to
CY 2006 the OPPS volume of the procedure utilizing devices that could
fall into the potential new device category at a higher rate of
increase than the total rate of growth in OPPS services as projected by
the OACT. The rate of growth of this relatively new procedure in the
OPPS claims data from recent years is several times the overall growth
rate of all OPPS services.
With respect to CY 2006 pass-through spending for drugs and
biologicals, as we noted in the proposed rule (70 FR 42735) and as
explained in section V.A.3. of this final rule with comment period, the
pass-through payment amount for new drugs and biologicals that we
determine have pass-through status will equal zero. Therefore, our
estimate of pass-through spending for drugs and biologicals with pass-
through status in CY 2006 equals zero.
In the CY 2005 final rule with comment period (69 FR 65810), we
indicated that we are accepting pass-through applications for new
radiopharmaceuticals that are assigned a HCPCS code on or after January
1, 2005. The pass-through amount for new radiopharmaceuticals approved
for pass-through status in CY 2005 is the difference between the OPPS
payment for the radiopharmaceutical, that is, the payment amount
determined for the radiopharmaceutical as a sole source specified
covered drug, and the payment amount for the radiopharmaceutical under
section 1842(o) of the Act. However, we have no new
radiopharmaceuticals that were added for pass-through payment in CY
2005, and we have no information identifying new radiopharmaceuticals
to which a HCPCS code might be assigned on or after January 1, 2006,
for which pass-through status would be sought. We also have no data
regarding payment for new radiopharmaceuticals with pass-through status
under the methodology that we specified in the CY 2005 final rule with
comment period. However, we do not believe that pass-through spending
for new radiopharmaceuticals in CY 2006 will be significant enough to
materially affect our estimate of total pass-through spending in CY
2006. Therefore, we are not including radiopharmaceuticals in our
estimate of pass-through spending for CY 2006.
In accordance with the methodology described above and the
methodology for estimating pass-through spending discussed in our
proposed rule for CY 2006, we estimate that total pass-through spending
for device categories that first become eligible for pass-through
status during CY 2006 will equal approximately $45.5 million, which
represents 0.17 percent of total OPPS projected payments for CY 2006.
This figure includes estimates for the current device categories
continuing into CY 2006, which equal zero, in addition to projections
for categories that first become eligible during CY 2006.
This estimate of total pass-through spending for CY 2006 is
significantly lower than many previous years' estimates (except for the
CY 2005 estimate, which was approximately $23.4 million) both because
of the method we used, as discussed in section V.A.3. of this preamble,
for determining the amount of pass-through payment for drugs and
biologicals with pass-through status, and the fact that there are no CY
2005 pass-through device categories that are being carried over to CY
2006.
Because we estimate pass-through spending in CY 2006 will not
amount to 2.0 percent of total projected OPPS CY 2006 spending, we will
return 1.83 percent of the pass-through pool to adjust the conversion
factor, as we discuss in section II.C. of this preamble.
We received one public comment on our estimated pass-through
spending for CY 2006.
Comment: One commenter commended us for returning, via an
adjustment to the conversion factor, the portion of the pass-through
spending pool that exceeds the estimated amount for pass-through
payments in CY 2006. The commenter indicated that this will ensure
beneficiary access to basic services.
Response: We appreciate the commenter's support.
Accordingly, we are finalizing our proposed methodology for
estimating CY 2006 OPPS pass-through spending for drugs, biologicals,
and categories of devices with the modification as discussed above. Our
adoption of this proposal as modified will return 1.83 percent of the
pass-through pool to adjust the conversion factor.
VII. Brachytherapy Source Payment Changes
A. Background
Section 1833(t)(16)(C) and section 1833(t)(2)(H) of the Act, as
added by sections 621(b)(1) and (b)(2) of Pub. L. 108-173,
respectively, establish separate payment for devices of brachytherapy
consisting of a seed or seeds (or radioactive source) based on a
hospital's charges for the service, adjusted to cost. Charges for the
brachytherapy devices may not be used in determining any outlier
payments under the OPPS. In addition, consistent with our practice
under the OPPS to exclude items paid at cost from budget neutrality
consideration, these items must be excluded from budget neutrality as
well. The period of payment under this provision is for brachytherapy
sources furnished from January 1, 2004, through December 31, 2006.
Section 621(b)(3) of Pub. L. 108-173 requires the Government
Accountability Office (GAO) to conduct a study to determine appropriate
payment amounts for devices of brachytherapy, and to submit a report on
its study to the Congress and the Secretary, including recommendations.
As indicated in the CY 2006 proposed rule, we are awaiting the report
and any recommendations on the payment of devices of brachytherapy,
which would pertain to brachytherapy payments after December 31, 2006.
In the OPPS interim final rule with comment period published on
January 6, 2004 (69 FR 827), we implemented sections 621(b)(1) and
(b)(2)(C) of Pub. L. 108-173. In that rule, we stated that we will pay
for the brachytherapy sources listed in Table 4 of the interim final
rule with comment period (69 FR 828) on a cost basis, as required by
the statute. Since January 1, 2004, we have used status indicator ``H''
to denote nonpass-through brachytherapy sources paid on a cost basis, a
policy that we
[[Page 68675]]
finalized in the CY 2005 final rule with comment period (69 FR 65838).
As we indicated in the January 6, 2004 interim final rule with
comment period, we began payment for the brachytherapy source in HCPCS
code C1717 (High Dose Rate Iridium 192) based on the hospital's charge
adjusted to cost beginning January 1, 2004. Prior to enactment of Pub.
L. 108-173, these sources were paid as packaged services in APC 0313.
As a result of the requirement under Pub. L. 108-173 to pay for HCPCS
code C1717 separately, we adjusted the payment rate for APC 0313,
Brachytherapy, to reflect the unpackaging of the brachytherapy source.
We finalized this payment methodology in our November 15, 2004 final
rule with comment period (69 FR 65839).
Section 1833(t)(2)(H) of the Act, as added by section 621(b)(2)(C)
of Pub. L. 108-173, mandated the creation of separate groups of covered
OPD services that classify brachytherapy devices separately from other
services or groups of services. The additional groups must be created
in a manner that reflects the number, isotope, and radioactive
intensity of the devices of brachytherapy furnished, including separate
groups for Palladium-103 and Iodine-125 devices. In accordance with
this provision and based on recommendations of the APC Panel in the
February 2004 meeting, we established the following two new
brachytherapy source codes for CY 2005 (69 FR 65839):
C2634 Brachytherapy source, High Activity Iodine-125,
greater than 1.01 mCi (NIST), per source
C2635 Brachytherapy source, High Activity Palladium-103,
greater than 2.2 mCi (NIST), per source
In addition to adopting the APC Panel's recommendation to establish
new HCPCS codes that would distinguish high activity Iodine-125 from
high activity Palladium-103 on a per source basis, we adopted this
policy for other brachytherapy code descriptors, as well. Therefore,
beginning January 1, 2005, we included ``per source'' in the HCPCS code
descriptors for all those brachytherapy source descriptors for which
units of payment were not already delineated. Table 40 published in the
November 15, 2004 final rule with comment period (69 FR 65840) included
a complete listing of the HCPCS codes, long descriptors, APC
assignments, and status indicators that we used for brachytherapy
sources paid under the OPPS in CY 2005 (69 FR 65840 and 65841).
Further, for CY 2005, we added the following code of linear source
Palladium-103 to be paid at cost: C2636 Brachytherapy linear source,
Palladium-103, per 1 mm. We had indicated in our August 16, 2004
proposed rule that we were aware of a new linear source Palladium-103,
which came to our attention in CY 2003 through an application for a new
device category for pass-through payment. We stated that, while we
decided not to create a new category for pass-through payment, we
believed that the new linear source fell under the provisions of Pub.
L. 108-173. Therefore, we made final our proposal to add HCPCS code
C2636 as a new brachytherapy source to be paid at cost in CY 2005.
B. Changes Related to Pub. L. 108-173
As stated in the CY 2006 OPPS proposed rule (70 FR 42736), we
consistently invite the public to submit recommendations for new codes
to describe brachytherapy sources in a manner reflecting the number,
radioisotope, and radioactivity intensity of the sources. We request
that commenters provide a detailed rationale to support recommended new
codes and to send recommendations to us. We endeavor to add new
brachytherapy source codes and descriptors to our systems for payment
on a quarterly basis. Such recommendations should be directed to the
Division of Outpatient Care, Mail Stop C4-05-17, Centers for Medicare &
Medicaid Services, 7500 Security Boulevard, Baltimore, MD 21244.
Prior to the publication of the CY 2006 OPPS proposed rule, we had
then recently received only one such request for coding and payment of
a new brachytherapy source since we added separate APC payment
beginning in CY 2005 for the three brachytherapy sources discussed
above. Therefore, we did not propose any coding changes to the sources
of brachytherapy for CY 2006 but listed in Table 26 of the CY 2006
proposed rule (70 FR 42737) the separately payable brachytherapy
sources that we proposed to continue for CY 2006. In addition, in that
same proposed rule, we stated that we would evaluate the one request
that we had received for establishment of a new brachytherapy source
code prior to publishing this final rule with comment period (70 FR
42736). Our decision regarding that coding request is discussed below.
At the end of May 2005, we received a recommendation for the
creation of a new code and descriptor that would be used to pay
separately for Ytterbium-169, a new high activity brachytherapy source
for use in High Dose Rate (HDR) brachytherapy, in accordance with
sections 1833(t)(16)(C) and 1833(t)(2)(H) of the Act, as added by
sections 621(b)(1) and (b)(2), respectively, of Pub. L. 108-173. We
evaluated this new source and agree with the recommendation to
establish a new code and descriptor for Ytterbium-169, effective
October 1, 2005. The new coding information was first announced in
Program Transmittal 662, dated August 26, 2005, for OPPS implementation
effective October 1, 2005. The new code and long descriptor are as
follow:
C2637 Brachytherapy source, Ytterbium-169, per source
This code and descriptor are also listed in Table 29 below.
We received one public comment concerning payment for brachytherapy
sources.
Comment: One commenter requested CMS to identify a form of
radiation therapy as utilizing a source of brachytherapy and provide a
separate payment for the source.
Response: We will evaluate this request and, if warranted,
establish a code, descriptor, and separate payment for a source of
brachytherapy. Evaluation of potential brachytherapy sources is often
complex and requires a significant evaluation period. Because this
request was received as one of our comments to the proposed rule for CY
2006, we will continue to evaluate it and provide a code and
descriptor, if appropriate, through one of our quarterly OPPS updates.
C. Final Policy for CY 2006
Table 28 provides a complete listing of the HCPCS codes, long
descriptors, APC assignments, and status indicators that we will use
for brachytherapy sources paid separately on a cost basis under the
OPPS in CY 2006.
[[Page 68676]]
Table 28.-- Separately Payable Brachytherapy Sources for CY 2006
----------------------------------------------------------------------------------------------------------------
New
HCPCS Long descriptor APC APC title status
indicator
----------------------------------------------------------------------------------------------------------------
C1716.............................. Brachytherapy source, 1716 Brachytx source, Gold 198 H
Gold 198, per source.
C1717.............................. Brachytherapy source, 1717 Brachytx source, HDR Ir- H
High Dose Rate Iridium 192.
192, per source.
C1718.............................. Brachytherapy source, 1718 Brachytx source, Iodine H
Iodine 125, per source. 125.
C1719.............................. Brachytherapy source, Non- 1719 Brachytx source, Non-HDR H
High Dose Rate Iridium Ir-192.
192, per source.
C1720.............................. Brachytherapy source, 1720 Brachytx source, H
Palladium 103, per Palladium 103.
source.
C2616.............................. Brachytherapy source, 2616 Brachytx source, Yttrium- H
Yttrium-90, per source. 90.
C2632.............................. Brachytherapy solution, 2632 Brachytx sol, I-125, per H
Iodine125, per mCi. mCi.
C2633.............................. Brachytherapy source, 2633 Brachytx source, Cesium- H
Cesium-131, per source. 131.
C2634.............................. Brachytherapy source, 2634 Brachytx source, HA, I- H
High Activity, Iodine- 125.
125, greater than 1.01
mCi (NIST), per source.
C2635.............................. Brachytherapy source, 2635 Brachytx source, HA, P- H
High Activity, Palladium- 103.
103, greater than 2.2
mCi (NIST), per source.
C2636.............................. Brachytherapy linear 2636 Brachytx linear source, P- H
source, Palladium-103, 103.
per 1MM.
C2637.............................. Brachytherapy source, 2637 Brachytx, Ytterbium-169.. H
Ytterbium-169, per
source.
----------------------------------------------------------------------------------------------------------------
VIII. Coding and Payment for Drug Administration
A. Background
From the start of the OPPS until the end of CY 2004, three HCPCS
codes were used to bill drug administration services provided in the
hospital outpatient department:
Q0081 (Infusion therapy, using other than chemotherapeutic
drugs, per visit)
Q0083 (Chemotherapy administration by other than infusion
technique only, per visit)
Q0084 (Chemotherapy administration by infusion technique
only, per visit).
A fourth OPPS drug administration HCPCS code, Q0085 (Administration
of chemotherapy by both infusion and another route, per visit) was
active from the beginning of the OPPS through the end of CY 2003.
Each of these four HCPCS codes mapped to an APC (that is, Q0081
mapped to APC 0120, Q0083 mapped to APC 0116, Q0084 mapped to APC 0117,
and Q0085 mapped to APC 0118), and the APC payment rates for these
codes were made on a per-visit basis. The per-visit payment included
payment for all hospital resources (except separately payable drugs)
associated with the drug administration procedures. For CY 2004, we
discontinued using HCPCS code Q0085 to identify drug administration
services and moved to a combination of HCPCS codes Q0083 and Q0084 that
allowed more accurate calculations when determining OPPS payment rates.
In response to comments we received concerning the available
opportunities to gather additional drug administration data (and
subsequently facilitate development of more accurate payment rates for
drug administration services in future years) and to reduce hospital
administrative burden, we proposed for the CY 2005 OPPS to change our
coding and payment methodologies related to drug administration
services.
After examining comments and suggestions, including recommendations
of the APC Panel, we adopted a crosswalk for the CY 2005 OPPS that
identified all active CY 2005 CPT drug administration codes and the
corresponding OPPS Q-codes, which hospitals had previously used to
report their charges for drug administration services. Hospitals were
instructed to begin billing CPT codes for drug administration services
in the hospital outpatient department effective January 1, 2005.
Payment rates for CY 2005 drug administration services were set
using CY 2003 claims data. These data reflected per-visit costs
associated with the four Q-codes listed above. To allow for the time
necessary to collect data at the more specific CPT code level and to
continue accurate payments based on available claims data, we used the
Q-code crosswalk to map CPT drug administration codes to existing drug
administration APCs. While hospitals were instructed to bill all
relevant CPT codes that describe the services provided, the OCE
collapsed payments for drug administration services attributed to the
same APC and paid a single APC amount for those services for each
visit, unless a modifier was used to identify drug administration
services provided more than once in a separate encounter on the same
day.
In 2004, the CPT Editorial Panel approved several new drug
administration codes and revised several existing codes for use
beginning in CY 2006. Those physicians paid under the Medicare
Physician Fee Schedule were given HCPCS G-codes corresponding to these
expected CY 2006 CPT codes to bill for drug administration services
provided in CY 2005 in the physician office setting.
B. CY 2006 Drug Administration Policy Changes
For CY 2006 OPPS billing purposes, we proposed to continue our
policy of using CPT codes to bill for drug administration services
provided in the hospital outpatient department, understanding that the
CY 2005 CPT codes were likely going to change significantly for CY
2006. We anticipated that the CY 2005 CPT codes would no longer be
active in CY 2006. Therefore, we proposed a CY 2006 crosswalk that
mapped CY 2005 CPT codes to the CPT drug administration codes approved
by the CPT Editorial Panel in CY 2004. Our closest proxy to the
expected CY 2006 CPT codes was the set of HCPCS G-codes used in the
physician office setting for CY 2005 and we used these G-codes in an
extensive crosswalk (Table 27 in the proposed rule) that provided an
overview of our proposed billing and payment policies for CY 2006.
The OPPS drug administration payment rates that we proposed for CY
[[Page 68677]]
2006 were dependent on CY 2004 data containing per-visit charges for
HCPCS codes Q0081, Q0083, and Q0084. While HCPCS code Q0085 was used to
inform payment rates for drug administration APCs for CY 2005, there
are no data from this code to develop payment rates for drug
administration APCs for CY 2006 because this code was not used in CY
2004. We proposed to map the new CY 2006 CPT codes to existing drug
administration APC groups (APC 0116, APC 0117, and APC 0120) as we did
in CY 2005. Again, we indicated in our proposal that hospitals would be
expected to bill all relevant CPT codes for services provided, despite
the per-encounter payment hospitals would receive for services billed
within the same APC group without the use of a proper modifier to
signify services that were provided in a separate visit on the same
day.
The APC Panel approved the crosswalk presented in Table 27 of the
CY 2006 OPPS proposed rule at both the February 2005 and August 2005
meetings, and further recommended that CMS evaluate hospital claims
data to ensure appropriate payments for subsequent hours of infusion.
We received a number of public comments on several aspects of our
proposed drug administration policy for CY 2006.
Comment: Numerous commenters generally supported our proposed
policy to use CPT codes to report drug administration services in the
hospital outpatient setting in CY 2006. They stated that consistent
coding across sites of service reduces hospital burden by simplifying
the coding process. The majority of these commenters offered support in
the context of the overall principle of utilizing CPT codes when
applicable in the hospital outpatient setting to bill for services
under the OPPS.
Response: We agree with the commenters that consistent coding
across sites of service is preferable when codes are applicable across
settings. Our transition to CPT codes in CY 2005 was in response to
numerous comments requesting that the OPPS recognize CPT drug
administration codes to reduce the overall hospital administrative
burden of billing one set of codes for Medicare and another set of
codes for non-Medicare payers.
Comment: Commenters expressed concern over the complexity and
specificity of the CPT codes and the billing guidelines provided by the
AMA for the new CY 2006 CPT codes for drug administration.
Specifically, the commenters stated that CPT code descriptions that
contain ``initial,'' ``sequential,'' or ``concurrent'' either did not
apply or would be very difficult to correctly apply in the hospital
setting due to the patient's likelihood of receiving numerous drug
administration services from multiple hospital departments during the
course of a patient's hospital outpatient encounter. The commenters
recommended that CMS instruct hospitals to disregard these terms,
particularly the word ``initial'' and the related CPT instruction to
bill only one initial service when multiple intravenous injections and
infusion are provided, when billing for outpatient services as these
codes do not sufficiently describe the way hospital services are often
provided. The commenters pointed out that because hospital outpatient
charging for drug administration services currently occurs at the
departmental level on a flow basis as services are provided, if
hospitals were required to use the CPT codes in full accordance with
the CPT instructions, extensive, disruptive, and burdensome involvement
of medical records staff and coders would be required to bill for these
very common hospital outpatient services.
Response: While we understand the commenters' concerns regarding
the granularity of the CY 2006 CPT codes, we do not agree that the
concepts embedded in CPT codes described with the terms ``initial,''
``sequential,'' or ``concurrent,'' and the accompanying expectations of
differential resources required to perform those services, are
inapplicable in the hospital setting. Similar to a physician office
setting, we believe it is reasonable to expect that different hospital
resources would be used for the first (initial) drug administration
service provided to a patient in a hospital outpatient setting on a
single day. For example, the first intravenous infusion provided to a
hospital outpatient would generally require either the start of an
intravenous line or the accessing of an indwelling catheter or port.
All subsequent intravenous infusions in the hospital on the same day
would likely not involve those additional resources associated with the
initial infusion. We understand that the concepts associated with drug
administration coding using CY 2006 CPT codes are substantially
different from the principles of drug administration coding used by the
OPPS in the past. However, this conceptual difference alone does not
lead us to conclude that the full adoption of the CY 2006 CPT codes and
their descriptors in the hospital setting is inappropriate.
While we acknowledge that hospital charging practices might need to
change with implementation of the new CY 2006 CPT codes and their
descriptors, in the OPPS we originally moved to the use of CPT codes
for the billing of drug administration services at the request of
hospitals so they could use one standard code set for billing all
payers. We would expect that hospitals would nonetheless need to
implement some administrative changes for other payers who will be
making payments for hospital outpatient drug administration services
based on the CY 2006 CPT codes. While we do not doubt the
administrative burden on hospitals associated with billing changes, we
cannot and do not understand how our instructing hospitals to ignore
certain concepts in the code descriptors for the new CY 2006 CPT codes
would substantially reduce the administrative changes necessary for
hospitals to bill the codes appropriately to other payers, in addition
to Medicare.
Comment: Several commenters pointed out that if the proposed
crosswalk were implemented as displayed in Table 27 of the proposed
rule and no exceptions to CPT billing guidance were provided, our CY
2005 payment policy of providing separate APC payments for chemotherapy
services and nonchemotherapy infusions during the same episode of care
would no longer apply. The commenters believed that if our proposal is
to package all subsequent hours of infusion therapy (chemotherapy and
nonchemotherapy), hospitals following CPT billing guidelines would have
coded only one initial code, and therefore only received one APC
payment. The commenters expressed concern about this situation and
stated that they did not believe it was CMS' intent to reduce payment
in this scenario.
Response: The commenters are correct in that it was not our intent
to change the drug administration payment policies in place in CY 2005.
We appreciate the analysis submitted by the commenters who provided us
with detailed recommendations to remedy this situation.
Under CY 2006 CPT guidelines, hospitals would be required to bill
one, and only one, initial service code for intravenous drug
administration services (unless a modifier is used to indicate an
additional episode of care on the same date of service). As many
commenters noted, hospital billing personnel recently transitioned from
a per-visit concept under the CY 2004 Q-codes to a per-treatment
concept under CY 2005 CPT codes, and an additional transition in CY
2006 to even more complex concepts does not allow
[[Page 68678]]
sufficient time to properly train and educate hospital personnel
regarding correct coding for drug administration.
As we considered the above comments, we developed preliminary OCE
logic that would have potentially permitted some of the CY 2006 CPT
codes for sequential and additional infusion services to be assigned
status indicator ``Q,'' consistent with a variable payment status. That
is, under some circumstances where the sequential infusion was the same
type of infusion (that is, chemotherapy or nonchemotherapy) as the
initial infusion, payment for the sequential infusion would be packaged
into payment for the initial drug administration service. In contrast,
for situations where the sequential infusion was of a different type
than the initial infusion, separate OPPS payment for the sequential
infusion would be made. Thus, in order to determine the payment status
of some drug administration CPT codes (packaged or separately payable),
hospitals would have to be meticulous in correctly coding their claims.
Therefore, only expected code pairs that had been built into OCE logic
were present on claims. Otherwise, claims would have to be returned to
hospitals for correction. We grew concerned that hospitals would have
an overwhelming burden not only implementing these new CPT codes in
hospital software but also providing the necessary training to a
variety of staff who provide and bill these high-volume drug
administration services. It is our understanding that a system change
this complex may have unintended consequences if implemented for
January 1, 2006. One of our main concerns is that without sufficient
time to train and educate staff, hospitals may experience a great
number of returned claims and, therefore, experience a delay in payment
for these high-volume services. We believe that the level of
understanding required to properly bill for services under the CY 2006
CPT codes will require substantial hospital efforts to minimize
unintentional coding errors that could lead to returned claims.
We have developed the advanced OCE logic that identifies separately
payable instances of multiple drug administration services provided in
the same episode of care but with only one initial CPT code. Claims not
passing this extensive logic would not provide sufficient information
in order to assign APC payment to the services billed, and would
subsequently result in a return of such claims to providers. We are
still reviewing the future use of such logic for drug administration
services under the OPPS.
Comment: Commenters provided a variety of other solutions that
could permit continuation of CY 2005 OPPS drug administration payment
policies while using CY 2006 CPT codes. The commenters' suggestions
included reverting back to the three Q-codes (used prior to CY 2005),
creating HCPCS codes to mimic the CY 2005 CPT codes, or creating a
hybrid of CY 2005 and CY 2006 drug administration codes.
Response: We appreciate the many ideas discussed in the comments we
received on the proposed rule, and we considered the above mentioned
options in addition to many others before making our decision. However,
we believe we have discussed the inherent advantages of using CPT
codes, and in order to continue in our efforts to use CPT codes
whenever possible, we will be adopting 20 of the 33 CY 2006 drug
administration CPT codes for billing and payment purposes under the
OPPS for CY 2006 (Table 29).
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In addition, we will not recognize under the OPPS 13 of the 33 CY
2006 CPT codes, but instead will instruct hospitals to use 6 new HCPCS
C-codes for billing and payment purposes under OPPS for CY 2006 (Table
31). The C-codes generally parallel the less complex CY 2005 CPT codes
for infusions and intravenous pushes, as those codes will be deleted
for the CY 2006 OPPS. We are adopting these 6 newly created C-codes in
an effort to minimize the administrative burden hospitals have
indicated they will face if the OPPS were to adopt all 33 of the CY
2006 drug administration CPT codes. The CY 2006 CPT drug administration
codes that we will not be using in the OPPS for CY 2006 are codes that
require determinations of initial, sequential, and concurrent infusions
or intravenous pushes. The C-codes will permit straightforward billing
of types of infusions and intravenous pushes, for the first hour and
then each additional hour of infusion or for each intravenous
[[Page 68680]]
push, an approach to coding that commenters indicated was consistent
with current patterns of delivery and billing of drug administration
services in the hospital outpatient setting. The OCE logic to determine
the appropriate CY 2006 APC payments to make for a single drug
administration encounter in one day or multiple separate encounters in
the same day will operate as it did for CY 2005. As the C-codes are
similar to the CY 2005 CPT codes, we expect that their implementation
for CY 2006 billing should be clear, as hospitals have 1 year of
experience already with the use of very similar codes during CY 2005.
We believe that providing hospitals with additional time to train
staff on the correct billing of the CY 2006 drug administration CPT
codes, combined with the opportunity for hospital staff to use these
codes for non-Medicare payers during CY 2006, should allow a less
burdensome transition to the remaining CPT drug administration codes in
the future. In addition, because we will have more specific drug
administration median cost data for use in the CY 2007 OPPS and beyond
with the first availability of CY 2005 cost data for the CPT codes for
drug administration services, we anticipate that ensuring more accurate
payment with respect to these remaining CPT drug administration codes
may be more feasible for future OPPS updates.
Table 30.--CY 2006 OPPS Drug Administration C-Codes
----------------------------------------------------------------------------------------------------------------
Code Description Add-On SI APC
----------------------------------------------------------------------------------------------------------------
C8950.................................... Intravenous infusion for therapy/ .......... S 0120
diagnosis; up to 1 hour.
C8951.................................... Intravenous infusion for therapy/ Y N
diagnosis; each additional hour
(List separately in addition to
C8950).
C8952.................................... Therapeutic, prophylactic or .......... X 0359
diagnostic injection;
intravenous push.
C8953.................................... Chemotherapy administration, .......... S 0116
intravenous; push technique.
C8954.................................... Chemotherapy administration, .......... S 0117
intravenous; infusion
technique, up to one hour.
C8955.................................... Chemotherapy administration, Y N
intravenous; infusion
technique, each additional hour
(List separately in addition to
C8954).
----------------------------------------------------------------------------------------------------------------
Comment: Commenters requested that CMS provide various billing and
coding instructions relating to the CY 2006 CPT drug administration
codes, and that CMS include more specific definitions of CPT drug
administration terminology in the final rule.
Response: We appreciate the commenters' request for clarity on
aspects of the proposed CY 2006 drug administration CPT codes. As we
have done in the past, we will release instructions separately from
this final rule with comment period that include drug administration
billing and coding guidance for hospitals for CY 2006. In addition, as
is our longstanding practice, we defer questions about CPT code
definitions to the AMA CPT Editorial Panel members who are the creators
and maintainers of CPT codes.
Comment: Several commenters requested that CMS provide explicit
billing and coding instructions regarding the administration of
specific drugs and agents.
Response: As stated above, we do not provide billing guidance to
hospitals in the final rule. Information for hospitals that discusses
billing and coding specifics will be distributed separately via CMS
transmittal following the publication of this final rule with comment
period. In addition, we expect that all drug administration codes used
in the CY 2006 OPPS, including the new C-codes, will conform to CPT
guidance regarding under what clinical circumstances they may be
appropriately billed, including instructions related to appropriate
coding for the administration of certain complex biologics.
Comment: Commenters requested that a section within the AMA CPT
Manual be created to identify and provide hospital-specific definitions
for CPT codes that are used by the OPPS.
Response: The OPPS does not issue or maintain CPT codes. Comments
regarding the AMA CPT Manual or CPT codes should be directed to the
AMA.
Comment: Commenters requested that CMS create non-chemotherapy
HCPCS codes similar to the CPT codes for initiation of a prolonged
chemotherapy infusion requiring a pump and pump maintenance and
refilling codes so hospitals can bill for these services when provided
to patients who require extended infusions of non-chemotherapy
medications, including drugs for pain. They argued that the CY 2006 CPT
codes for drug administration do not include appropriate codes to bill
for these services, which require specific and significant hospital
resources.
Response: We agree that codes for these services were needed, and
we have created HCPCS codes C8956 (Refilling and maintenance of
portable or implantable pump or reservoir for drug delivery for
therapy/diagnosis, systemic (eg. intravenous, intra-arterial)) and
C8957 (Intravenous infusion for therapy/diagnosis; initiation of
prolonged infusion (more than 8 hours), requiring use of portable or
implantable pump) for this purpose (Table 31).
Table 31.--Nonchemotherapy Prolonged Infusion Codes That Require a Pump
----------------------------------------------------------------------------------------------------------------
Code Description Add-On SI APC
----------------------------------------------------------------------------------------------------------------
C8956..................................... Refilling and maintenance of ......... T 0125
portable or implantable pump or
reservoir for drug delivery for
therapy/diagnosis, systemic
(eg. intravenous, intra-
arterial).
C8957..................................... Intravenous infusion for therapy/ ......... S 0120
diagnosis; initiation of
prolonged infusion (more than 8
hours), requiring use of
portable or implantable pump.
----------------------------------------------------------------------------------------------------------------
Comment: One commenter requested that the OPPS use the information
present on the claim, specifically the pharmacy revenue code (636), to
identify which payment would be best suited for administration of that
type of drug.
[[Page 68681]]
Response: We support minimizing the administrative burden that
hospitals incur when billing for drug administration services in the
outpatient department. However, we do not believe that this suggestion
would yield more accurate claims data or reduce the administrative
burden on hospitals to code for drug administration services. Hospitals
are responsible for identifying which drug administration services are
provided and establishing appropriate charges for those services, and
implementing a system such as that conceived by the commenter that
removes the determination from hospitals would be unproductive.
Comment: Commenters noted that CY 2006 drug administration APC
payment rates are derived from CY 2004 claims data and expressed
concern that these data are outdated and inaccurate.
Response: While we acknowledge the concern presented by commenters,
we do not believe that our reliance on the most recent claims data
available provides inaccurate payments for drug administration services
provided in hospital outpatient departments. It has been the OPPS
policy to set payments for drug administration services, as well as
almost all other OPPS services, based on the most recent claims year
data available, and we are continuing that methodology in CY 2006.
Comment: Several commenters requested that CMS implement a
chemotherapy demonstration program similar to the Quality of Care
Demonstration program that was instituted in the physician office
setting throughout CY 2005.
Response: While we recognize the desire of the commenters to ensure
beneficiary access to drug administration services by providing
additional payments to hospitals for drug administration-related
services, we believe that the drug administration payment methodology
we are finalizing in this final rule with comment period provides
accurate payments for hospital drug administration services. Further,
we do not believe that there is a beneficiary access issue directly
attributable to the OPPS payment policies for drug administration
services.
Comment: Many commenters requested that the OPPS provide payment
for additional hours of infusion, instead of packaging subsequent hours
of infusion into the payment for the initial hour of infusion therapy.
Response: As discussed in the proposed rule, CY 2006 OPPS payment
rates rely upon CY 2004 claims data that only has information on the
three Q-codes mapped to APCs 0116, 0117 and 0120. For CY 2006, while
the codes for initial hour of infusion and subsequent hour(s) of
infusion were available for hospitals to report in CY 2005, appropriate
CY 2005 claims data are not available to use for ratesetting purposes
for the CY 2006 OPPS. As the most recent and complete year of data
available from CY 2004 reflects per-visit payment rates for drug
administration services, we must continue to use both our crosswalk
methodology and the OCE claims logic during CY 2006 which allows us to
collect more specific drug administration cost data while continuing to
make appropriate drug administration payments. Because of the
descriptors of the previous drug administration Q-codes upon which CY
2006 drug administration payment rates are based, each payment for a
drug administration APC in CY 2006 is necessarily a payment that
reflects an ``average'' infusion service in CY 2004, constituting one
or more hours. We appreciate hospitals' continued diligence in
accurately billing for the additional hours of infusion for
chemotherapy and nonchemotherapy treatments that will once again be
packaged for CY 2006, as we gather additional hospital claims data to
support our move to more specific payments for individual drug
administration services in the future.
Comment: One commenter noted that in Addendum B, Payment Status by
HCPCS Code and Related Information Calendar Year 2006, HCPCS code G0258
(IV infusion during obs stay) was incorrectly listed as payable with a
status indicator of ``X.''
Response: We agree that HCPCS code G0258 was incorrectly listed in
Addendum B of the proposed rule as having status indicator ``X'' rather
than ``B.'' However, HCPCS code G0258 is deleted for CY 2006;
therefore, it will have no payment status in the CY 2006 OPPS.
Comment: One commenter requested that CMS not reassign CPT codes
95144 through 95165 (Antigen therapy services) to the injection APCs as
listed in Addendum B of the proposed rule. Instead, the commenter
suggested keeping these services within APC 0371 because of their
similarity in resource use and for reasons of clinical coherence.
Response: We agree with the commenter that the median cost data
available for these codes do not correspond to the expected levels of
service based on the CPT code descriptors. For example, in the proposed
rule, HCPCS code 95149 (Professional services for the supervision of
preparation and provision of antigens for allergen immunotherapy; five
single stinging insect venoms) was mapped to APC 0352 (Level I
Injections) based on a median cost of $11.43 from 9 single claims,
while HCPCS code 95146 (Professional services for the supervision of
preparation and provision of antigens for allergen immunotherapy; two
single stinging venoms) was mapped to APC 0359 (Level III Injections)
based on a median cost of $70.64 from 43 single claims. These
unexpected median cost results may have arisen from miscoding or from
the inherently high volatility in costs that may occur due to small
numbers of claims. While we are unable to retain these codes in APC
0371 as recommended by the commenter due to the restructuring of the
injection codes into three levels of injection APCs, we have decided to
place CPT codes 95144 through 95165 in APC 0353 (Level II Injections)
because we believe that the services provided by these HCPCS codes are
similar to other HCPCS codes within this APC and the CY 2006 median
cost for APC 0353 most closely matches the CY 2005 median cost these
codes experienced in APC 0371.
C. 2006 Vaccine Administration Policy Changes
Hospitals currently use three HCPCS G-codes to indicate the
administration of the following vaccines that have specific statutory
coverage:
G0008--Administration of Influenza Virus Vaccine.
G0009--Administration of Pneumococcal Vaccine.
G0010--Administration of Hepatitis B Vaccine.
HCPCS codes G0008 and G0009 are exempt from beneficiary coinsurance
and deductible applications and, as such, payment has been made outside
of the OPPS since CY 2003 based on reasonable cost. We have made
payment for HCPCS code G0010 through a clinical APC (that is, APC 0355)
that included vaccines along with this vaccine administration code.
Additional vaccine administration codes have been packaged or not paid
under the OPPS.
As stated in the CY 2006 OPPS proposed rule, we believe that HCPCS
codes G0008, G0009 and G0010 are clinically similar and comparable in
resource use to one another and to the administration of other
immunizations and other therapeutic, prophylactic, or diagnostic
injections. To that end, we concluded that the appropriate APC
assignment for these vaccine administration services was newly
reconfigured APC 0353 (Injection, Level
[[Page 68682]]
II). However, because of their statutory exemption regarding
beneficiary deductible and coinsurance, for operational reasons we were
unable to include HCPCS codes G0008 and G0009 in an APC with codes that
did not share this exemption.
Instead of including these codes within the same APC, we proposed
to map HCPCS codes G0008 and G0009 to APC 0350 (Administration of flu
and PPV vaccines). As dictated by statute, HCPCS codes G0008 and G0009
would continue to be exempt from beneficiary coinsurance and
deductible.
We also proposed to change the status indicator for HCPCS code
G0010 from ``K'' (Separate APC Payment) to ``B'' (Not paid under OPPS;
Alternate code may be available), and to change the status indicators
for vaccine administration codes 90471 and 90472 from ``N'' (Packaged)
to ``X'' (Separate APC Payment), in agreement with the recommendation
of the APC Panel to unpackage these services. Hospitals would code for
hepatitis B vaccine administration using codes 90471 or 90472 (as
appropriate), and payment would be mapped to reconfigured APC 0353
(Injection, Level II) that would include other injection services that
were clinically similar and comparable in resource use.
In order to pay appropriately for services that we believed were
clinically similar and comparable in resource use and, barring
technical restrictions, would otherwise be assigned to the same APC, we
proposed to calculate a combined median cost for all services assigned
to APC 0350 and APC 0353 that would then serve as the median cost for
both APCs. This combined median would be calculated using charges
converted to costs from claims for services in both APCs and would have
the effect of making the OPPS payment rates for APC 0350 and APC 0353
identical, although beneficiary copayment and deductible would not be
applied to services in APC 0350.
Our vaccine administration proposed policy also included proposed
changes to the status indicators for vaccine administration codes 90473
and 90474 from ``E'' (Not paid under OPPS) to ``S'' (Paid under OPPS)
and proposed to make payments for these services when they were covered
through proposed APC 1491 (New Technology--Level IA ($0-$10)).
Finally, we proposed to change the status indicators for the four
remaining vaccine administration codes involving physician counseling
(90465, 90466, 90467 and 90468) from ``N'' (Packaged) to ``B'' (Not
paid under OPPS; Alternate code may be available). We proposed that
hospitals providing immunization services with physician counseling
would use the vaccine administration codes 90471, 90472, 90473, and
90474 to report such services, as we did not believe the provision of
physician counseling would significantly affect the hospital resources
required for administration of immunizations.
During its August 2005 meeting, the APC Panel made a recommendation
to CMS to pay for the administration of flu vaccines similarly under
the OPPS regardless of their method of administration. We agree that
hospitals should always use the most specific HCPCS codes available,
whose descriptors are consistent with the method of administration and
type of vaccine, to bill for all vaccine administration services but,
in particular, to bill for vaccine services that are congressionally
exempt from deductible and coinsurance. However, we note that vaccine
administration codes other than G0008 for administration of influenza
virus vaccine and G0009 for administration of pneumococcal vaccine are
not exempted in the OCE from charging beneficiary deductible and
coinsurance and should not be used to report these services which are
exempt from copayment.
Comment: Similar to the APC Panel recommendation discussed above,
commenters requested that CMS provide payment for the administration of
intranasal influenza vaccine similar to payments for other methods of
administration of the influenza vaccine.
Response: As stated above, vaccine administration codes other than
G0008 for administration of influenza virus vaccine are not exempted in
the OCE from charging beneficiary deductible and coinsurance and they
should not be used to report these services which are exempt from
copayment.
Comment: Numerous commenters supported our proposal to pay
separately for vaccine administration services.
Response: We appreciate the commenters' support of our proposed
policy and are adopting it as final in this rule.
Comment: Several commenters noted a typographical error in the CY
2006 OPPS proposed rule preamble that incorrectly listed two codes to
be used for the administration of hepatitis B vaccine as codes 96471
and 96472 instead of codes 90741 and 90742.
Response: We appreciate the commenters' note, and we have corrected
the error in this final rule with comment period.
After consideration of the public comments received, in this final
rule with comment period, we are finalizing our proposed CY 2006
methodology to pay separately for vaccine administration services as
discussed above. Table 32 below specifies the CY 2006 vaccine
administration codes, their APC median costs, the status indicator
assigned to each code, and the APC payment amount.
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IX. Hospital Coding for Evaluation and Management (E/M) Services
In the CY 2006 proposed rule (70 FR 42740), we again stated our
concerns and directions for developing a set of national facility
coding guidelines for emergency department and clinic visits. We noted
that we intend to make available for public comment the proposed coding
guidelines that we are considering through the CMS OPPS Web site as
soon as we have completed them. We also stated that we will notify the
public through our listserve when these proposed guidelines become
available, and instructed interested parties to subscribe to this
listserve by going to the following CMS Web site: http://www.cms.hhs.gov/medlearn/listserv.asp and following the directions to
the OPPS listserve.
We received a number of public comments on our proposal.
Comment: Several commenters expressed disappointment that CMS has
not yet proposed national E/M guidelines for facilities. While the
majority of commenters were pleased that CMS is continuing to develop
and test draft codes and guidelines, they were concerned that the
ongoing lack of uniformity places hospitals at risk for
[[Page 68684]]
multiple interpretations of the level of service that should be coded,
and hampers CMS' ability to gather consistent, meaningful data on
services provided in the emergency department and hospital clinics. One
commenter emphasized that the implementation of a uniform set of
national guidelines for E/M services is especially important because
CMS uses the mid-level clinic visit (APC 0601) to scale the relative
payment weights for all other services paid under the OPPS. A few
commenters recommended that CMS implement the E/M guidelines drafted by
the independent panel of experts from the AHA and the AHIMA. Two other
commenters provided their own model guidelines for CMS to consider.
Several commenters reminded CMS that adoption of a new set of
guidelines for E/M services will involve an enormous undertaking by
large medical centers and that CMS had committed to providing a minimum
of between 6 and 12 months' notice prior to implementation to allow
providers adequate time to make necessary systems changes and educate
their staff. The commenters also urged CMS to ensure adequate
opportunity for the public to review and comment on the proposed
guidelines before they are finalized.
Response: Over the past year, we have engaged a contractor to
assist us with testing the validity and reliability of a slightly
modified draft of the guidelines recommended by the independent
Hospital Evaluation and Management Coding Panel of the AHA and AHIMA.
We have contracted a study of these guidelines using a sample of
hospital outpatient claims to analyze the potential financial impact of
the proposed guidelines on classes of hospitals and on the OPPS, as
well as the potential burden that adoption of such guidelines might
impose on hospitals. Although we have made much progress in our efforts
to develop a set of national facility guidelines for emergency
department and clinic visits, we believe additional testing is
necessary and essential to providing hospitals with the least
burdensome standard for achieving uniformity and to yielding more
accurate, meaningful information related to hospital resources upon
which to set the OPPS payments for emergency department and clinic
services. We are committed to the goal of paying appropriately under
the OPPS for the costs of hospital E/M services across the levels of
care. Therefore, we will continue to develop and test the draft codes
and guidelines. However, we have not yet set a date for their
implementation.
As stated in the CY 2006 OPPS proposed rule, we intend to make
available for public comment the proposed coding guidelines that we are
considering through the CMS OPPS Web site once we are satisfied with
the results of the testing and have made appropriate modifications in
light of these testing results. Furthermore, we will provide ample
opportunity for the public to comment on such a major proposal. We will
continue to be considerate of the time necessary to educate clinicians
and coders on the use of the new codes and guidelines and for hospitals
to modify their systems. We still anticipate providing a minimum notice
of between 6 and 12 months prior to implementation of the new
evaluation and management codes and guidelines.
Comment: One commenter expressed a number of concerns that the
commenter believed were related to proposals on the manner in which the
Medicare program uses CPT code definitions that have been adopted by
the AMA as a basis to classify patients who receive emergency
department services for payment purposes under the Medicare OPPS.
Response: In the CY 2006 OPPS proposed rule, we did not propose to
make any changes related to the manner in which we use CPT code
definitions as a basis to classify patients. We are not making any
changes to our use of the CPT code definitions in this final rule with
comment period. However, we remind the public that regulations
implementing the HIPAA (42 CFR Parts 160 and 162) require that the
HCPCS be used to report health care services, including outpatient
services paid under the OPPS. The OPPS regulations at 42 CFR 419.2(a)
establish HCPCS codes as the means for identifying services paid under
the OPPS. The HIPAA regulations require that these codes be used in the
manner described by the maintainer's guidelines. In accordance with our
policy that was established in the April 7, 2000 final rule with
comment period that implemented the OPPS, hospitals use internal
guidelines only to distinguish among varying levels of resource
intensity when determining an appropriate CPT code to bill for
outpatient E/M services.
X. Payment for Blood and Blood Products
A. Background
Since the implementation of the OPPS in August 2000, separate
payments have been made for blood and blood products through APCs
rather than packaging them into payments for the procedures with which
they were administered. Hospital payments for the costs of blood and
blood products, as well as the costs of collecting, processing, and
storing blood and blood products, are made through the OPPS payments
for specific blood product APCs. On April 12, 2001, CMS issued the
original billing guidance for blood products to hospitals (Program
Transmittal A-01-50). In response to requests for clarification of
these instructions, CMS issued Transmittal 496 on March 4, 2005. The
comprehensive billing guidelines in the Transmittal also addressed
specific concerns and issues related to billing for blood-related
services, which the public had brought to our attention.
In CY 2000, payments for blood and blood products were established
based on external data provided by commenters due to limited Medicare
claims data. From CY 2000 to CY 2002, payment rates for blood and blood
products were updated for inflation. For CY 2003, as described in the
November 1, 2002 final rule with comment period (67 FR 66773), we
applied a special dampening methodology to blood and blood products
that had significant reductions in payment rates from CY 2002 to CY
2003, when median costs were first calculated from hospital claims.
Using the dampening methodology, we limited the decrease in payment
rates for blood and blood products to approximately 15 percent. For CY
2004, as recommended by the APC Panel, we froze payment rates for blood
and blood products at CY 2003 levels as we studied concerns raised by
commenters and presenters at the August 2003 and February 2004 APC
Panel meetings.
For CY 2005, we established new APCs that allowed each blood
product to be assigned to its own separate APC, as several of the
previous blood product APCs contained multiple blood products with no
clinical homogeneity or whose product-specific median costs may not
have been similar. Some of the blood product HCPCS codes were
reassigned to the new APCs (Table 34 of the November 15, 2004 final
rule with comment period (69 FR 65819)).
We also noted in the November 15, 2004 final rule with comment
period that public comments on previous OPPS rules had stated that the
CCRs that were used to adjust charges to costs for blood products in
past years were too low. Past commenters indicated that this approach
resulted in an underestimation of the true hospital costs for blood and
blood products. In response to these comments and APC Panel
recommendations from its
[[Page 68685]]
February 2004 and September 2004 meetings, we conducted a thorough
analysis of the OPPS CY 2003 claims (used to calculate the CY 2005 APC
payment rates) to compare CCRs between those hospitals reporting a
blood-specific cost center and those hospitals defaulting to the
overall hospital CCR in the conversion of their blood product charges
to costs. As a result of this analysis, we observed a significant
difference in CCRs utilized for conversion of blood product charges to
costs for those hospitals with and without blood-specific cost centers.
The median hospital blood-specific CCRs were almost two times the
median overall hospital CCR. As discussed in the November 15, 2004
final rule with comment period, we applied a methodology for hospitals
not reporting a blood-specific cost center, which simulated a blood-
specific CCR for each hospital that we then used to convert charges to
costs for blood products. Thus, we developed simulated medians for all
blood and blood products based on CY 2003 hospital claims data (69 FR
65816).
For CY 2005, we also identified a subset of blood products that had
less than 1,000 units billed in CY 2003. For these low-volume blood
products, we based the CY 2005 payment rate on a 50/50 blend of CY 2004
product-specific OPPS median costs and the CY 2005 simulated medians
based on the application of blood-specific CCRs to all claims. We were
concerned that, given the low frequency in which these products were
billed, a few occurrences of coding or billing errors may have led to
significant variability in the median calculation. The claims data may
not have captured the complete costs of these products to hospitals as
fully as possible. This low-volume adjustment methodology also allowed
us to further study the issues raised by commenters and by presenters
at the September 2004 APC Panel meeting, without putting beneficiary
access to these low-volume blood products at risk.
B. Proposed and Final Policy Changes for CY 2006
For CY 2006, we proposed to continue to make separate payments for
blood and blood products under the OPPS through individual APCs for
each product. We also proposed to establish payment rates for these
blood and blood products by using the same simulation methodology
described in the November 15, 2004 final rule with comment period (69
FR 65816), which utilized hospital-specific actual or simulated CCRs
for blood cost centers to convert hospital charges to costs, with an
adjustment applied to some products. We continue to believe that using
blood-specific CCRs applied to hospital claims data will result in
reasonably accurate payments that more fully reflect hospitals' true
costs of providing blood and blood products than our general
methodology of defaulting to the overall hospital CCR when more
specific CCRs are unavailable.
For blood and blood products whose CY 2006 simulated medians
experienced a decrease of more than 10 percent in comparison to their
CY 2005 payment medians, we proposed to limit the decrease in medians
to 10 percent. Therefore, overall we proposed to base median costs for
blood and blood products in CY 2006 on the greater of: (1) Simulated
medians calculated using CY 2004 claims data; or (2) 90 percent of the
APC payment median for CY 2005 for such products. We recognize that
possible errors in hospital billing or coding for blood products in CY
2004 may have contributed to these decreases in medians. In particular,
hospitals may have been uncertain about which of their many different
costs for providing blood and blood products should be captured in
their charges for the products, based on variations in the specific
circumstances of the services they provided. In addition, the six
products affected by the proposed CY 2006 adjustment policy all were
relatively low volume with fewer than 7,000 units billed in CY 2004.
Three of these products were affected by the low-volume payment
adjustment for CY 2005 because there were less than 1,000 units billed,
and their CY 2005 payment medians would have decreased without the
adjustment. In the interim, as hospitals become more familiar with the
comprehensive billing guidelines for blood and blood products that are
described in Program Transmittal 496 (Change Request 3681 dated March
4, 2005), we acknowledge the need to protect beneficiaries' access to a
safe blood supply and proposed to do so by limiting significant
decreases in payment rates for blood and blood products from CY 2005 to
CY 2006. We expect that our billing guidance will assist hospitals in
more fully including all appropriate costs for providing blood and
blood products in their charges for those products, so that our data
for CY 2005, which will be used to set median costs for blood and blood
products in the CY 2007 OPPS update, should more accurately capture the
hospital costs associated with each different blood product.
Therefore, for CY 2006, we proposed to establish payment rates for
blood and blood products under the OPPS using the same simulation
methodology described in the November 15, 2004 final rule with comment
period (69 FR 65816). For blood and blood products whose CY 2006
medians would have otherwise experienced a decrease of more than 10
percent in comparison with their CY 2005 payment rates, we proposed to
adjust the simulated medians by limiting their decrease to 10 percent.
At the August 2005 APC Panel meeting, the Panel recommended that
CMS use its CY 2005 payment rates as the floor for its CY 2006 payment
rates for all blood and blood products. Specifically, the Panel
recommended that CMS should pay the greater of: (1) The simulated
median costs calculated from the CY 2004 hospitals claims data; or (2)
the CY 2005 APC payment medians for these products. For reasons
discussed in detail below, we are not adopting the Panel's
recommendation for setting the CY 2006 payment rates for blood and
blood products. Instead, for CY 2006, we are setting the final median
costs for blood and blood products at the greater of: (1) The simulated
median costs calculated from the CY 2004 hospital claims data; or (2)
95 percent of the CY 2005 adjusted median costs for these products.
We received numerous public comments concerning our proposed
payment for blood and blood products.
Comment: Numerous commenters applauded our March 2005 issuance of
comprehensive billing guidelines (Program Transmittal 496) for blood
and blood products, stating that the guidelines clarified many areas of
confusion for providers and should result in improved hospital coding
of blood and blood products. Other commenters recommended that CMS
release guidance on blood and blood products on an annual basis.
Response: We appreciate the comment and expect that the billing
guidance that we issued in March 2005 will result in improved hospital
coding of blood and blood products. We will continue to support
educational efforts by interested organizations to clarify areas of
confusion and improve accuracy of billing for hospitals related to the
billing of blood and blood products. In addition, we will continue to
issue guidance on billing for blood and blood products to provide
clarification or additional explanation as needed, based on additional
questions and issues that are brought to our attention.
Comment: Numerous commenters expressed concern that the proposed
payment rates for several blood products had decreased from their CY
[[Page 68686]]
2005 payment rates. Commenters stated that such payment declines would
likely jeopardize beneficiary access to these products. Most notably,
according to several organizations providing blood and blood products
to hospitals, the proposed CY 2006 payment rate for leukocyte-reduced
red blood cells (HCPCS code P9016), the most commonly billed blood
product in the hospital outpatient setting, is significantly below
hospitals' actual acquisition costs. Commenters urged CMS to set the CY
2006 payment rates for blood and blood products at the greater of: (1)
The simulated medians calculated using the CY 2004 claims data; or (2)
the CY 2005 APC payment medians for these products.
Response: We are displaying in Table 33 of this final rule with
comment period the list of blood product HCPCS codes with their final
CY 2006 adjusted median costs. Overall, median costs from CY 2005 and
CY 2006 were relatively stable, with significant increases and adjusted
decreases for some specific blood products. In addition, we expect that
as hospitals improve their billing and coding practices, medians based
on historical hospital claims data should continue to become more
consistent and reflective of all hospital costs associated with
providing blood products to hospital outpatients. We agree with
commenters that beneficiary access to the safest and most immediately
available blood supply is critical to saving lives. In addition, we
understand that, in most cases, the hospital costs related to providing
blood and blood products stem mainly from the costs of processing and
storing the blood. We also acknowledge that new blood testing due to
technological advances and challenges associated with donor recruitment
and retention may contribute to rising costs of blood and blood
products. However, there may be other environmental forces, including
improved efficiencies through new technologies and changes in the
clinical circumstances surrounding outpatient hospital transfusions,
that may reduce the costs of providing blood products. While the above-
mentioned issues must all be carefully considered, we also remind
commenters that the payment rates for services paid under the OPPS will
naturally experience fluctuations from year to year. Such variation is
inherent in any budget-neutral prospective payment system such as the
OPPS, where payment rates are developed based on historical hospital
claims data. However, when such fluctuations become large enough to
potentially jeopardize access to services paid under the OPPS, we may
acknowledge the need to balance these payment fluctuations with
protecting beneficiary access to such services by moderating abrupt
payment declines that occur over a 1-year period. We were concerned
that our proposed allowance of a 10 percent decrease in median costs
from the CY 2005 adjusted final medial costs might affect beneficiary
access to these services. Therefore, for CY 2006, for blood and blood
products whose CY 2006 simulated median costs would have otherwise
experienced a decrease of more than 5 percent in comparison with their
CY 2005 adjusted final median costs, we are adjusting the simulated
medians by limiting their decrease to 5 percent. We applied this
adjustment to 11 blood and blood product APCs for CY 2006. Table 33 of
this final rule with comment period contains the adjusted payment
medians for CY 2006. Those CY 2006 final median costs that we adjusted
by moderating their decrease to 5 percent are indicated by an asterisk
in the table. In summary, for the CY 2006 OPPS, the final median costs
for blood and blood products are set at the greater of: (1) the
simulated median costs calculated from the CY 2004 claims data; or (2)
95 percent of the CY 2005 adjusted median costs for these products.
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Comment: While one commenter thanked CMS for providing hospitals
with detailed billing guidance for blood and blood products when
furnished under the hospital outpatient setting, the commenter
requested additional clarification on whether hospitals should charge
inpatients, as they do outpatients, for blood administration services.
The commenter explained that some hospitals do not charge inpatients
separately for blood administration services; rather they consider such
services to be included in the room and board rate. The commenter urged
CMS to instruct hospitals to establish a charge structure for blood
transfusion and administration services that applies uniformly to both
inpatients and outpatients.
Response: We appreciate the comment's recommendation. However, we
do not consider the OPPS final rule, which addresses hospital
outpatient payment policies, to be an appropriate forum for addressing
detailed billing guidance for inpatient services. Rather, we encourage
hospitals to consult their fiscal intermediaries with any concerns
related to the billing of blood transfusion and administration services
to inpatients.
Comment: One commenter supported our proposal to set CY 2006 OPPS
payments for blood and blood products based on hospital claims data
rather than blood industry data. This commenter recommended that if CMS
does consider using external data in some fashion for setting the
payment rates for blood and blood products, that
[[Page 68688]]
CMS proceed very cautiously in considering whether to utilize blood
industry data. The commenter stated that it is crucial that the
external data be valid, reliable, publicly available, reflective of
geographic variations in costs, and subject to audit.
Response: Although we are not using external data for setting the
CY 2006 payment rates for blood and blood products, we thank the
commenter for the recommended and considered caution toward using such
external data in this case.
After carefully considering all comments received on our proposed
CY 2006 OPPS methodology for establishing APC payment for blood and
blood products, we are adopting as final our proposal with
modification. To ensure beneficiaries' access to a safe blood supply,
we are adopting a payment adjustment policy that will limit significant
decreases in APC payment rates for blood and blood products from CY
2005 to CY 2006 by not more than 5 percent rather than 10 percent as
proposed. Therefore, for the CY 2006 OPPS, the final median costs for
blood and blood products are set at the greater of: (1) The simulated
median costs calculated from the CY 2004 claims data; or (2) 95 percent
of the CY 2005 adjusted median costs for these products, as reflected
in Table 34 above.
For CY 2006, we also proposed to change the status indicator for
CPT code 85060 (Blood smear, peripheral, interpretation by physician
with written report) from ``X'' (separately paid under the OPPS) to
``B'' (not paid under the OPPS). When a hospital provides a physician
interpretation of an abnormal peripheral blood smear interpretation for
a hospital outpatient, the charge for the facility resources associated
with the interpretation should be bundled into the charge reported for
the ordered hematology lab service, such as CPT code 85007 (Blood
count; blood smear, microscopic examination with manual differential
WBC count) or CPT code 85008 (Blood count; blood smear, microscopic
examination without manual differential WBC count), that are paid under
the Clinical Laboratory Fee Schedule (CLFS). A physician interpretation
of an abnormal peripheral blood smear is considered a routine part of
the ordered hematology lab service, such as CPT codes 85007 and 85008
paid under the CLFS, so hospitals will receive duplicate payment for
the facility resources associated with a physician's blood smear
interpretation if we were to continue to pay separately for CPT code
85060 under the OPPS for hospital outpatients. Therefore, for CY 2006,
we proposed to discontinue payment under the OPPS for CPT code 85060 by
changing its status indicator from ``X'' to ``B.''
We did not receive any public comments on this proposal.
Accordingly, we are finalizing our proposal to discontinue payment
under the OPPS effective for services furnished on or after January 1,
2006, for CPT code 85060 by changing its status indicator from ``X'' to
``B.''
XI. Payment for Observation Services
A. Background
Observation care is a well-defined set of specific, clinically
appropriate services, which include ongoing short-term treatment,
assessment, and reassessment, before a decision can be made regarding
whether patients will require further treatment as hospital inpatients
or if they are able to be discharged from the hospital. Observation
status is commonly assigned to patients with unexpectedly prolonged
recovery after surgery and to patients who present to the emergency
department and who then require a significant period of treatment or
monitoring before a decision is made concerning their next placement.
For a detailed discussion of the clinical and payment history of
observation services under the OPPS, we refer readers to the November
1, 2002 final rule with comment period (67 FR 66794).
For a detailed discussion of our proposed changes to payments for
observation services for CY 2006, we refer readers to the CY 2006 OPPS
proposed rule at 70 FR 42742 through 42745. A summary of the proposed
changes is included below, followed by our responses to the public
comments, and our final policies for CY 2006.
B. Proposed and Final CY 2006 Coding Changes for Observation Services
and Direct Admission to Observation
In response to comments received regarding the continuing
administrative burden on hospitals when attempting to differentiate
between packaged and separately payable observation services for
purposes of billing correctly, and recommendations made by the APC
Panel and participants at the February 2005 APC Panel meeting, in the
CY 2006 OPPS proposed rule, we proposed two changes in observation
coding and implementation of the OPPS payment policies for observation
services in CY 2006. As we stated in the CY 2006 proposed rule (70 FR
42743), these administrative changes were prompted by the fact that CY
2004 hospital data do not reflect the CY 2005 policy changes
implemented for separately payable observation services. We continued
to receive incomplete and unreliable data as a result of inconsistent
hospital reporting, with some hospitals reporting observation services
per day, and others reporting each hour of observation as one unit. The
CY 2006 proposed changes were an effort to ensure more consistent
hospital billing for both separately payable and packaged observation
services in order to guide our future analyses of observation care and
to shift the administrative burden for determining separately payable
observation services from hospitals to the OCE. We do not expect to see
an increase in the number of separately payable observations services
as a result of these changes.
First, we proposed to discontinue HCPCS codes G0244 (Observation
care by facility to patient), G0263 (Direct admission with CHF, CP,
asthma), and G0264 (Assessment other than CHF, CP, asthma) and to
create two new HCPCS codes to be used by hospitals to report all
observation services, whether separately payable or packaged, and
direct admission for observation care, whether separately payable or
packaged:
G0378--Hospital observation services, per hour (cited in
the proposed rule as ``GXXXX'').
G0379--Direct admission of patient for hospital
observation care (cited in the proposed rule as ``GYYYY'').
Second, we proposed to shift determination of whether or not
observation services are separately payable under APC 0339
(Observation) from the hospital billing department to the OPPS claims
processing logic. That is, hospitals would bill HCPCS code G0378 when
observation services are provided to any patient admitted to
``observation status,'' regardless of the patient's condition. In
addition to the HCPCS code G0378, hospitals would bill HCPCS code G0379
when observation services are the result of a direct admission to
``observation status'' without an associated emergency room visit,
hospital outpatient clinic visit, or critical care service on the day
of or day before the observation services.
We proposed to assign both of these proposed new HCPCS codes a new
status indicator ``Q'' (packaged service subject to separate payment
based on criteria) that would trigger the OCE logic during the
processing of the claim to determine if the observation service or
direct admission service is packaged with the other separately payable
hospital services provided, or if a separate APC payment for
observation services or direct admission to observation is appropriate
in accordance with the criteria discussed in section
[[Page 68689]]
XI.C. or XI.D. of this preamble. In addition, we proposed to change the
status indicator for CPT codes 99217 through 99220 and 99234 through
99236 from ``N'' (packaged) to ``B'' (code not recognized by the OPPS).
We noted we would expect hospitals to use HCPCS code G0378 to
accurately report all observation services provided to beneficiaries,
whether the observation would be packaged or separately payable, to
assist us in developing consistent and complete hospital claims data
regarding the utilization and costs of observation services. The units
of service reported with HCPCS code G0378 would equal the number of
hours the patient is in observation status.
Comment: Several commenters expressed support for the proposed
changes and CMS' and the APC Panel's efforts to streamline the billing
process for observation services in hospitals. Nine commenters stated
that they appreciated our proposal to shift the burden of determining
if observation is separately payable from the hospitals to the OCE
logic.
While most of these commenters approved the proposal to use the new
HCPCS code G0378 to bill for hospital observation services, two
commenters believed that HCPCS code G0378 is unnecessary. They
recommended that providers should use CPT evaluation and management
codes for observation care, specifically CPT codes 99218, 99219, and
99220. The commenters also suggested that CMS should require hospitals
to provide the hour information in the unit field and develop edits for
these codes to edit for the qualifying conditions. A third commenter
requested clarification on why G-codes are needed at all.
Response: We disagree with the commenters that HCPCS code G0378 is
unnecessary and disagree that the requirement of reporting the code per
hour could be handled in the unit field for CPT observation codes. The
CPT observation codes are per day codes by CPT definition. We believe
that to instruct hospitals to bill multiple units of a per day code to
report the hours of observation care provided would create confusion
and many variances in claims reporting resulting in poor hospital
claims data. Generally, we follow CPT instructions for coding, and in
this case we believe that it would be most prudent to establish a per
hour G-code for observation services to facilitate ease of coding
observation services and to ensure that we will be able to obtain
useful and consistent data from future claims.
Comment: Five commenters sought clarification of the language in
section XI.B. of the CY 2006 proposed rule on page 70 FR 42743 where we
stated that hospitals would bill HCPCS code G0378 when observation
services are provided to any patient admitted to ``observation
status,'' regardless of the patient's status as inpatient or
outpatient.
Response: We mistakenly included the word ``inpatient'' in this
statement. The statement should instead read, ``Hospitals would bill
HCPCS code G0378 when observation services are provided to any patient
admitted to `observation status' regardless of the patient's
condition.''
Comment: One commenter notified CMS of an omission on page 70 FR
42745, under section XI.C.3.a of the CY 2006 proposed rule. The
commenter pointed out that we had omitted direct admission from the
bulleted list of additional hospital services.
Response: We appreciate the commenter bringing this error to our
attention. The omission was inadvertent. In this final rule with
comment period, we have made the appropriate change to make the policy
consistent with the CY 2005 OPPS payment policy. The corrected policy
reads as follows for the billing of hospital observation services:
``Additional Hospital Services:
a. The hospital must provide on the same day or the day before and
report on the same claim:
An emergency department visit (APC 0610 or 0612); or
A clinic visit (APC 0600, 0601, or 0602); or
Critical care (APC 0620); or
Direct admission to observation using HCPCS code G0379.''
Comment: Many commenters expressed overall approval for our
proposed policy changes concerning the new G-codes for observation
services and, specifically, approval of the new HCPCS code G0379 to
report direct admission to observation when a Medicare beneficiary is
directly admitted into a hospital outpatient department for observation
care after being seen by a physician in the community.
However, seven commenters believed that HCPCS code G0379 would be
unnecessary if CMS would alter the OCE logic to look for revenue codes
45X (Emergency Department) and 516 (urgent care) on claims for
observation services coded with HCPCS code G0378. They reasoned that if
one of these revenue codes is not on the claim, the OCE logic should
determine that the observation services billed were as a result of a
direct admission to observation care.
Response: While we appreciate this suggestion and we agree that the
OCE logic could recognize these revenue codes, we will implement HCPCS
code G0379 as proposed. The OCE logic has no method of identifying if
the direct admission to observation care service was actually provided.
For example, the observation care billed with HCPCS code G0378 may have
been an error in coding by a hospital, or the hospital may have failed
to bill for an emergency room or clinic visit on the same day on the
same claim as the observation services. Because we plan to pay
separately for HCPCS code G0379 in some circumstances and the OPPS pays
for services that were provided and billed with HCPCS codes on claims,
the HCPCS code G0379 is necessary for billing and possible separate
payment. In addition, if hospitals did not appropriately bill HCPCS
code G0379 with its associated charges in cases of direct admission to
observation, we would have no direct way of calculating the median cost
of the direct admission to observation to facilitate analysis of its
median cost in comparison with the OPPS payment rate for that service.
If the observation care itself was not separately payable, and there
were no other separately payable services on the claim, there would be
no billed direct admission service with which to package the
observation care and other packaged costs on the claim. Thus, in the
absence of a code on a claim reporting a direct admission to
observation services billed as HCPCS code G0379, Medicare will not use
the OCE logic to infer that the patient was previously seen by a
physician outside of the hospital who ordered the direct admission of
the patient for observation services.
In summary, while a few commenters questioned the necessity of
creating new G-codes for reporting observation services and direct
admission to observation, we agree with the many commenters who
encouraged us to implement the new codes and to use the OCE logic to
determine when observation services are separately payable for the CY
2006 OPPS. Like those commenters, we believe that this change will both
reduce the administrative burden on hospitals and will improve CMS
claims data which will allow us to continue to evaluate our payment
policies for observation services under the OPPS.
C. Proposed and Final Criteria for Separate Payment for Direct
Admission to Observation
Through claims processing logic, we proposed to continue paying for
direct
[[Page 68690]]
admission to observation at a rate equal to that of a Low Level Clinic
Visit (APC 0600) when a Medicare beneficiary seen by a physician in the
community and then is directly admitted into a hospital outpatient
department for observation care that does not qualify for separate
payment under APC 0339. In order to receive separate payment for a
direct admission into observation (APC 0600), the claim must show:
1. Both HCPCS codes G0378 (Hourly Observation) and G0379 (Direct
Admit to Observation) with the same date of service.
2. That no services with a status indicator ``T'' or ``V'' or
Critical care (APC 0620) were provided on the same day of service as
HCPCS code G0379.
3. The observation care does not qualify for separate payment under
APC 0339.
Comment: One commenter disagreed with our proposal that no service
with a status indicator of ``V'' (clinic or emergency department visit)
can be on the claim when provided on the same day of service as HCPCS
code G0379. The commenter stated that because OPPS services performed
on the same date of service must be reported on the same claim, the
hospital would not receive any payment for observation services for
patients who receive a service in a provider-based clinic in the
morning and later in the day are directly admitted to observation by
their primary care practitioner for an unrelated reason. The commenter
recommended that CMS eliminate the requirement that a hospital must
combine separate outpatient encounters on a single claim.
Response: We appreciate the commenter's suggestion, but at this
time we are not removing the requirement that services with status
indicator ``V'' cannot be billed on the same claim with the same date
of service as HCPCS code G0379 for direct admission to observation care
for separate payment for HCPCS code G0379 to be made. We believe that
the circumstances under which a patient would have a hospital visit
(clinic or emergency room), sees a physician outside the hospital for
an unrelated reason later in the same day, and then be directed on that
same day to the same hospital where he or she had the first hospital
visit for direct admission to observation for observation services that
would be packaged (that is, not for chest pain, congestive heart
failure, or asthma) but for which we would make separate payment for
the direct admission to observation would be very rare. The OCE editing
cannot deal with the complexity of this unusual sequence of events.
Thus, if the observation services were not separately payable in such a
scenario, payment for the direct admission to observation and the
accompanying observation services would be packaged with payments for
the other separately payable services on the claim, including the day's
earlier hospital visit if all of these services were billed on the
claim.
As discussed in the data section (section II.A.) of this final rule
with comment period and in Change Request 4047, issued on October 14,
2005, some nonrepetitive OPPS services provided on the same day by a
hospital may be billed on different claims, provided that all charges
associated with each procedure or service being reported are billed on
the same claim with the HCPCS code which describes that service. We
reiterate that it is vitally important that all of the charges that
pertain to a nonrepetitive, separately paid procedure or service be
reported on the same claim with that procedure or service. Only thus
can we develop complete and accurate median costs for ratesetting
purposes. We also emphasize that this relaxation of same day billing
requirements for some nonrepetitive services does not apply to
nonrepetitive services provided on the same day as either direct
admission to observation care or observation services because the OCE
claim-by-claim logic cannot function properly unless all services
related to the episode of observation care, including hospital clinic
visits, emergency department visits, critical care services, and ``T''
status procedures, are reported on the same claim. Further instruction
on billing repetitive and nonrepetitive hospital services can be found
in Change Request 4047 cited above.
Specifically with respect to the billing of HCPCS code G0379 for
direct admission to observation care, we expect that hospitals will
only bill this service if a patient is admitted directly to observation
care after being seen by a physician in the community. Although our OCE
logic is performed on a claim-by-claim basis, hospitals should not bill
HCPCS code G0379 for direct admission to observation care on the same
day as hospital clinic visits, emergency room visits, critical care
services, and ``T'' status procedures that are related to the
subsequent admission to observation care. Instead, hospitals should
bill all of the services associated with the observation care,
including hospital clinic visits, emergency room visits, critical care
services, and ``T'' status procedures, on the same claim so that the
OCE logic may appropriately determine the separately payable or
packaged payment status of HCPCS codes G0378 and G0379.
In summary, we are implementing as final our proposed CY 2006
payment policies for observation services under the OPPS. We are also
implementing the policy related to the new HCPCS code G0379 as proposed
in order to continue paying for direct admission to observation at a
rate equal to that of a Low Level Clinic Visit when a Medicare
beneficiary is directly admitted into a hospital outpatient department
for observation care that does not qualify for separate payment under
APC 0339.
D. Proposed and Final Criteria for Separately Payable Observation
Services (APC 0339)
For CY 2006, we proposed to continue applying the existing CY 2005
criteria (69 FR 65830), which determine if hospitals may receive
separate payment for medically necessary observation care provided to a
patient with congestive heart failure, chest pain, or asthma. In
addition, we proposed to continue our policy of packaging payment for
all other observation services into the payments for the separately
payable services with which the observation service is reported. As
explained previously in section XI.B. of this preamble, the only
changes we proposed are related to the code hospitals will use to
report observation services, and the point at which a payment
determination is made. Rather than requiring the hospital to determine
prior to claims submission whether patient condition and the services
furnished meet the criteria for payment of APC 0339, that determination
would shift to the claims processing modules installed by the fiscal
intermediaries to process all OPPS bills, thereby reducing the
administrative burden on hospitals.
Criteria for separate observation service payments include
documentation of specific ICD-9-CM diagnostic codes; the length of time
a patient is in observation status; hospital services provided before,
during, and after the patient receives observation care; and ongoing
physician evaluation of the patient's status.
As we stated in Program Transmittal A-02-129 released in January
2003, we will continue to update any changes in the list of ICD-9-CM
codes required for payment of HCPCS code G0378 resulting from the
October 1 annual update of ICD-9-CM in the October quarterly update of
the OPPS. The ICD-9-CM codes for CY 2006 through October 2006 are
listed in Table 35. As we proposed, below are the criteria that we will
continue using in CY 2006 to determine if hospitals may receive
separate OPPS payment for medically necessary observation care provided
to
[[Page 68691]]
a patient with congestive heart failure, chest pain, or asthma.
1. Diagnosis Requirements
a. The beneficiary must have one of three medical conditions:
congestive heart failure, chest pain, or asthma.
b. The hospital bill must report as the reason for visit or
principal diagnosis an appropriate ICD-9-CM code (as shown in Table 30
below) to reflect the condition.
c. The qualifying ICD-9-CM diagnosis code must be reported in Form
Locator (FL) 76, Patient Reason for Visit, or FL 67, principal
diagnosis, or both, in order for the hospital to receive separate
payment for APC 0339. If a qualifying ICD-9-CM diagnosis code(s) is
reported in the secondary diagnosis field but is not reported in either
the Patient Reason for Visit field (FL 76) or in the principal
diagnosis field (FL 67), separate payment for APC 0339 will not be
allowed.
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BILLING CODE 4120-01-C
2. Observation Time
a. Observation time must be documented in the medical record.
b. A beneficiary's time in observation (and hospital billing)
begins with the beneficiary's admission to an observation bed.
c. A beneficiary's time in observation (and hospital billing) ends
when all clinical or medical interventions have been completed,
including followup care furnished by hospital staff and physicians that
may take place after a physician has ordered the patient be released or
admitted as an inpatient.
d. The number of units reported with HCPCS code G0378 must equal or
exceed 8 hours.
3. Additional Hospital Services
a. The hospital must provide on the same day or the day before and
report on the same claim:
An emergency department visit (APC 0610, 0611, or 0612) or
A clinic visit (APC 0600, 0601, or 0602); or
Critical care (APC 0620); or
Direct admission to observation services using HCPCS code
G0379 (APC 0600).
b. No procedure with a ``T'' status indicator can be reported on
the same day or day before observation care is provided.
4. Physician Evaluation
a. The beneficiary must be in the care of a physician during the
period of observation, as documented in the medical record by
admission, discharge, and other appropriate progress notes that are
timed, written, and signed by the physician.
b. The medical record must include documentation that the physician
explicitly assessed patient risk to determine that the beneficiary
would benefit from observation care.
The APC Panel met in August 2005 and made several recommendations
for clarification of the observation policy, including that CMS offer
further guidance regarding the definition of end-time of observation
services, billing the new HCPCS G-codes in relation to the currently
required evaluation and management visit codes, the typical length of
observation time, and if the hospital has the ability to issue an
Advance Beneficiary Notice (ABN) and under what circumstances.
We appreciate the consideration of the issues by the APC Panel and
will continue to evaluate its recommendations as we gather claims data
based on the new G-codes. We also appreciate the APC Panel's concern
for clear coding and billing guidance. We will provide detailed
guidance regarding billing for observation services in an upcoming
Internet-only manual update and ``Medlearn Matters'' article. For
further clarification, this guidance will also include a restatement of
when observation hours begin and end, and a discussion of appropriate
billing of the G-codes for observation services in relationship to
other services also billed by hospitals. As we have stated before in
reference to the appropriate duration of observation services, we
believe that in the overwhelming majority of cases, decisions can be
and are routinely made in less than 48 hours, and generally in less
than 24 hours, regarding whether to release a beneficiary from the
hospital following resolution of the reason for the outpatient visit or
whether to admit the beneficiary as an inpatient (69 FR 65830, November
15, 2004).
In response to the APC Panel's recommendation for clarification
concerning if and when a hospital may issue an ABN, all hospital
observation services, regardless of the duration of the observation
care, that are medically reasonable and necessary are covered by
Medicare, and hospitals receive OPPS payments for such observation
services. We make separate payment for observation care only for the
three conditions previously defined that also meet our specific
criteria, and payments for all other reasonable and necessary
observation services are packaged into the payments for other
separately payable services provided to the patient on the same day. An
ABN should not be issued in the context of reasonable and necessary
observation services, whether packaged or not.
The APC Panel also recommended that CMS reevaluate expanding the
list of diagnoses eligible for separate payment for observation.
We appreciate this recommendation by the APC Panel. While we
believe that it is premature to expand the conditions for which we
would separately pay for observation services, we believe that the
coding changes we are finalizing for CY 2006 will result in more
consistent and accurate hospital claims. The data gathered from these
claims will allow further analysis of the appropriateness of expanding
the number of separately payable conditions.
In addition, the APC Panel recommended that CMS establish a
mechanism to reimburse separately for observation services when
specific HCPCS codes with status indicator ``T'' are also on the claim
with observation services on the day of or the day preceding
observation care. The APC Panel believed that sometimes observation
services could be provided on the same day as ``T'' status procedures,
but be unassociated with those procedures, as the observation care
could be related to treatment of chest pain, asthma, or congestive
heart failure for which we might otherwise make separate payment.
Although we appreciate the discussion of the APC Panel and this
recommendation, we believe that in most cases, where observation care
is billed on a claim on the same date as a ``T'' status procedure, the
observation services are most likely related to post-procedural
observation for which we do not make separate payment. As we take on
the administrative responsibility for determining which observation
services we will pay separately for, we have limited ability to
determine the temporal order of ``T'' status procedures in relationship
to the observation services. In addition, considering that there are
over 13,000 ``T'' status codes paid under the OPPS, it would be an
extremely large administrative burden for us to individually evaluate
each ``T'' status code to determine if there may be an exception to the
rule in some clinical circumstances, where observation care would
precede or be unassociated with the ``T'' status procedure. We will
discuss this issue again with the APC Panel in future APC Panel
meetings and will examine the utilization patterns and costs of
procedure-related observation services in our claims data based on the
new G-code reporting of observation care.
We note, as described earlier in the context of billing HCPCS code
G0379 for direct admission to observation, that through Change Request
4047 issued on October 14, 2005, we have recently relaxed our previous
requirement to bill all OPPS services provided on the same day on the
same claim. In the case of observation care, because of the OCE claim-
by-claim logic, in order for us to make proper determinations regarding
packaging or separate payment for observation services consistent with
our payment policy to make separate observation payment only for the
three specified medical conditions, all services associated with the
observation care, including hospital clinic visits, emergency room
visits, critical care services, and ``T'' status procedures that may
have resulted in the need for observation care, must be reported on the
same claim.
Comment: Several commenters requested clarification of the billing
process, such as how to bill observation services when the patient is
seen over
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the midnight hour. Three commenters requested that CMS issue further
billing guidance in the form of prompt issuance of program transmittals
and manual changes, as well as a possible training package for
hospitals to use when training physicians so that physicians can
receive the same instructions from all facilities to which they admit
patients.
Response: We appreciate these suggestions and, as stated earlier,
we will provide detailed guidance regarding billing for observation
services in an upcoming Internet-only manual update and ``Medlearn
Matters'' article.
Comment: Several commenters recommended that CMS reevaluate
expanding the list of diagnoses eligible for separate payment for
observation. One commenter requested that CMS consider adding the
following diagnoses: 466.0--Acute bronchitis; 466.11 (Acute bronchitis
due to RSV); 466.19 (Acute bronchitis due to oth infects organism);
491.21 (Chr obstructive bronchitis, w acute exacerbation); 491.22 (Chr
obstructive bronchitis, w acute bronchitis); and 496 (Chr obstructive
pulmonary disease). The commenter stated that the current asthma
diagnoses that receive separate payment include some patients with
chronic obstructive pulmonary disease (COPD), but not all patients with
COPD, and that physicians are frequently nonspecific when stating a
diagnosis, which then leads to a wide variety of assignments of asthma
and COPD codes. In addition, the commenter reasoned that the care of a
patient with asthma, bronchitis, or COPD is very similar as far as the
diagnostic tests performed, medications ordered, and clinical care
provided.
Response: Our separately payable observation policy includes only
diagnoses directly related to asthma. While we acknowledge that some of
these conditions may have similar symptoms or a similar clinical course
to asthma, we do not consider these diagnoses codes to represent
asthma. In addition, there may be significant differences in responses
to treatment for patients with these other diagnoses. Therefore, we are
not adding the suggested diagnoses at this time.
Comment: One commenter requested that CMS and the APC Panel study
the possible expansion of the conditions for which separate payment
would be provided to include the diagnoses of febrile neutropenia,
chemotherapy hypersensitivity reaction, and hypovolemia, electrolyte
imbalance. Another commenter requested that CMS consider adding the
diagnosis codes for coronary artery disease as valid conditions for
separate payment of observation.
Response: We appreciate the comments that we received from these
commenters regarding possible additions to the list of diagnoses
eligible for separate payment for observation services. Although we are
not implementing in the CY 2006 OPPS the recommendations made by
commenters and the APC Panel to expand separate payment for observation
to include conditions in addition to congestive heart failure, asthma,
and chest pain, we will continue to analyze our data based on the new
G-codes and will study the feasibility and impact of such changes in
eligible diagnoses as we consider future updates of the OPPS. We
believe that the use of the new G-code for reporting hourly observation
services should yield much more robust and reliable claims data upon
which to base such further analyses.
Comment: One commenter recommended that CMS establish a mechanism
to reimburse separately for observation services when specific HCPCS
codes with status indicator ``T'' are also on the claim with
observation services on the day of or the day preceding observation
care. The commenter stated that the intensity and types of service for
these types of procedures can be similar and that procedural
complications or physician planned overnight observation can apply to
status ``T'' procedures such as breast procedures and interventional
radiology procedures. The commenter also expressed concern that
patients initially in observation for chest pain may proceed to cardiac
catheterization evaluations, and the current rule would seem to limit
separate payment for observation services in this situation, even
though the observation was for chest pain and it preceded the cardiac
catheterization. The commenter requested that CMS either allow both
``S'' and ``T'' status services to be on the claim or discontinue this
edit.
Response: Our changes in coding and OCE logic for CY 2006 do not
affect the criteria for separately payable observation services. We do
not intend to make separate payment for observation services following
surgical or interventional procedures, and, in general, these services
may be most readily identified by their ``T'' status under the OPPS. As
we stated previously in response to a similar recommendation by the APC
Panel, we believe that in most cases, where observation care is billed
on a claim on the same date as a ``T'' status procedure, the
observation services are most likely related to post-procedural
observation for which we do not make separate payment. We refer the
readers to the previous response for further explanation.
Comment: One commenter recommended that CMS reconsider requiring
hospitals to report one of the ICD-9-CM diagnosis codes designated for
payment of APC 0339 as the admitting or primary diagnosis on the
hospital claim. The commenter was concerned that if we restrict the
position of the diagnosis code to the admitting or principal field,
many claims that otherwise meet the criteria for separate payment of
observation services will not be payable because coding rules and the
frequency by which Medicare beneficiaries with asthma, congestive heart
failure, or chest pains have other presenting signs, symptoms, and
clinical conditions will result in inappropriate placement of the
requisite diagnosis code. The commenter recommended that CMS accept the
required diagnosis in any diagnosis field.
Response: As we stated in the CY 2005 OPPS final rule with comment
period, we do not agree that this requirement will result in many
claims for APC 0339 not being paid. Rather, we believe that requiring
hospitals to report the signs, symptoms, and conditions that are the
reason for the patient's visit will enhance coding accuracy and ensure
that Medicare is paying appropriately for APC 0339 by limiting separate
payment to those observation services furnished to monitor asthma,
chest pain, and congestive heart failure. If we were to accept the
required ICD-9-CM diagnosis code as a secondary diagnosis, we would
remain concerned that we may be making separate payment for observation
for conditions other than asthma, congestive heart failure, or chest
pain because these conditions are reported in the secondary diagnosis
field even though they are not the clinical reason that the patient is
receiving observation services.
In summary, after careful consideration of the comments we received
related to the criteria required for separate payment of observation
services (APC 0339), we have decided to continue using the criteria as
proposed for CY 2006. We will analyze the data that will be gathered
through the reporting of the new HCPCS codes G0378 and G0379 to further
study the implications of expanding the list of conditions eligible for
separate payment for observation services. In addition, we will be
issuing additional guidance for reporting and billing observation
services in the form of a change request
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updating the Internet-only manual and a ``Medlearn Matters'' article.
XII. Procedures That Will Be Paid Only as Inpatient Procedures
A. Background
Section 1833(t)(B)(i) of the Act gives the Secretary broad
authority to determine the services to be covered and paid for under
the OPPS. Before implementation of the OPPS in August 2000, Medicare
paid reasonable costs for services provided in the outpatient
department. The claims submitted were subject to medical review by the
fiscal intermediaries to determine the appropriateness of providing
certain services in the outpatient setting. We did not specify in
regulations those services that were appropriate to provide only in the
inpatient setting and that, therefore, should be payable only when
provided in that setting.
In the April 7, 2000 final rule with comment period, we identified
procedures that are typically provided only in an inpatient setting
and, therefore, would not be paid by Medicare under the OPPS (65 FR
18455). These procedures comprise what is referred to as the
``inpatient list.'' The inpatient list specifies those services that
are only paid when provided in an inpatient setting because of the
nature of the procedure, the need for at least 24 hours of
postoperative recovery time or monitoring before the patient can be
safely discharged, or the underlying physical condition of the patient.
As we discussed in the April 7, 2000 final rule with comment period (65
FR 18455) and the November 30, 2001 final rule (66 FR 59856), we use
the following criteria when reviewing procedures to determine whether
or not they should be moved from the inpatient list and assigned to an
APC group for payment under the OPPS:
Most outpatient departments are equipped to provide the
services to the Medicare population.
The simplest procedure described by the code may be
performed in most outpatient departments.
The procedure is related to codes that we have already
removed from the inpatient list.
In the November 1, 2002 final rule with comment period (67 FR
66792), we removed 43 procedures from the inpatient list for payment
under OPPS. We also added the following criteria for use in reviewing
procedures to determine whether they should be removed from the
inpatient list and assigned to an APC group for payment under the OPPS:
We have determined that the procedure is being performed
in multiple hospitals on an outpatient basis; or
We have determined that the procedure can be appropriately
and safely performed in an ambulatory surgical center (ASC) and is on
the list of approved ASC procedures or proposed by us for addition to
the ASC list.
We believe that these additional criteria help us to identify
procedures that are appropriate for removal from the inpatient list.
In the November 7, 2003 final rule with comment period (68 FR
63465), no significant changes were made to the inpatient list. In the
November 15, 2004 final rule with comment period (69 FR 65834), we
removed 22 procedures from the inpatient list, effective for services
furnished on or after January 1, 2005.
B. Proposed and Final Changes to the Inpatient List
For CY 2006 OPPS, we used the same methodology as described in the
November 15, 2004 final rule with comment period (69 FR 65837) to
identify a subset of procedures currently on the inpatient list that
were being widely performed on an outpatient basis. These procedures
were then clinically reviewed for possible removal from the inpatient
list. We solicited input from the APC Panel on the appropriateness of
the removal of 26 procedures from the inpatient list at the February
2005 APC Panel meeting. The APC Panel recommended that these 26
procedures be removed from the list and further recommended that CMS
consider CPT code 37183 (Remove hepatic shunt (TIPS)) for removal. We
agreed with the APC Panel's recommendation that CPT code 37183 be
removed from the inpatient list for CY 2006 and we proposed to remove
it from the inpatient list. In addition, the APC Panel recommended that
CMS review site of service data on laminectomy services, which
currently have status indicator C and are on the inpatient list, to
determine whether the procedures are being performed in the hospital
outpatient setting with enough frequency to be assigned to APCs for
payment under the OPPS.
However, subsequent to the APC Panel's February 2005 meeting, we
conducted further clinical evaluations of three procedures (CPT codes
33420, 65273, and 59856) included among the 26 procedures that the APC
Panel recommended for removal from the inpatient list. Upon further
clinical evaluation of CPT code 33420 (Valvotomy, mitral valve; closed
heart), we found that the utilization data suggesting that this
procedure is an office-based procedure were errant. Additional sources
of utilization data suggested that this procedure is predominately
performed on an inpatient basis. Concomitant with not meeting our
criteria of being performed on an outpatient basis in multiple
hospitals and not appearing on the ASC list of approved procedures, we
were not compelled to support the removal of this procedure from the
inpatient list. For this reason, we proposed to retain CPT code 33420
on the inpatient list for CY 2006.
CPT codes 65273 and 59856 were similarly reevaluated because of our
concern with the HCPCS long descriptors for these two codes. The long
descriptors for these codes are as follows: CPT code 65273 (Repair of
laceration; conjunctiva, by mobilization and rearrangement, with
hospitalization) and CPT code 59856 (Induced abortion, by one or more
vaginal suppositories (eg, prostaglandin) with or without cervical
dilation (eg, laminaria), including hospital admission and visits,
delivery of fetus and secundines; with dilation and curettage and/or
evacuation). The long descriptors indicate that hospital admission or
hospitalization is included in the codes for these two procedures,
which leads us to believe that these two procedures do not meet the
established criteria for removal from the inpatient list. The same code
descriptor for CPT code 65273, but without hospitalization, is assigned
to CPT code 65272, which is already separately payable under the OPPS.
Therefore, we proposed to retain CPT codes 65273 and 59856 on the
inpatient list for CY 2006.
In addition, we proposed to remove CPT code 62160 (Neuroendoscopy)
from the inpatient list. Questions about this service have been raised
to us by the hospital community because CPT code 62160 is an add-on CPT
code (that is, a code that is commonly performed as an ``additional or
supplemental'' procedure to the primary procedure). Two of the
separately coded services that CPT indicates are to be used with the
add-on code are currently payable under the OPPS. Further clinical
evaluation of this add-on procedure and its use in various sites of
service leads us to believe it is appropriate for removal from the
inpatient list.
Therefore, for CY 2006, we proposed to remove 25 procedures from
the inpatient list and to assign 23 of these procedures to clinically
appropriate APCs. We did not propose to assign two of these procedures
to APC groups, that is, CPT codes 00634 (Anesthesia for
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procedures in lumbar region; chemonucleoysis) and 01190 (Anesthesia for
obturator neurectomy; intrapelvic) because they are anesthesia
procedures for which no separate payment is made under the OPPS.
Payment for these two procedures will be packaged into the procedures
with which they are billed. We proposed that the changes to the
inpatient list would be effective for services furnished on or after
January 1, 2006.
We received numerous public comments on our proposed assignment of
procedures to the inpatient list for the CY 2006 OPPS.
Comment: No commenter objected to the removal of the 25 procedures
from the inpatient list. However, commenters requested that CMS
eliminate the inpatient list. Among the reasons cited in the comments
is that physicians are not bound by the list for payment for their
professional services but are the decisionmakers regarding where a
procedure is performed. The commenters stated that physicians often are
unaware of the payment restrictions placed on the hospital by the
inpatient list or, because their payment is unaffected by the list's
constraints, may not be concerned with the hospital's payment. They
pointed out that these factors make implementation and administration
of the inpatient list very difficult for hospitals.
The commenters requested that if CMS does retain the list, that CMS
make a strong effort to educate physicians about the hospital issues
related to the inpatient list by, at a minimum, posting the inpatient
list and an explanation of it on CMS' physician Web sites and on
carrier Web sites.
Commenters also stated that teaching hospitals, where many of the
procedures that are on the inpatient list are performed on an
outpatient basis for the first time, are affected by the policy more
than are nonteaching hospitals, because there is usually a significant
time gap between when the services are performed safely in teaching
hospital outpatient departments and ``most'' hospital outpatient
departments. They asserted that criteria should be revised to allow a
procedure to be removed from the list when it can be performed safely
in a hospital outpatient department rather than based on the number of
outpatient departments in which it may be safely performed.
The commenters also urged CMS to establish an appeal process in the
event that the list is not eliminated. They believe that a process that
would allow for case-by-case review of the documentation for inpatient
procedures that were performed in the outpatient department may serve
to alleviate some hospital losses and provide information to CMS
regarding procedures that may be good candidates for removal from the
list.
Finally, the commenters once again stated that they strongly
supported the February, 2004 APC Panel's recommendation that CMS
eliminate the inpatient list.
Response: We are not eliminating the inpatient list at this time.
We continue to believe that there are services that cannot be safely
and effectively delivered to Medicare beneficiaries in the hospital
outpatient setting. We are concerned that elimination of the inpatient
list could result in unsafe or uncomfortable care for Medicare
beneficiaries. Among the potential results of eliminating the list are
long observation stays after some procedures and imposition of OPPS
copayments, which could differ significantly from a beneficiary's
inpatient cost-sharing responsibilities.
We believe that it is important for hospitals to educate physicians
on Medicare services provided under the OPPS to avoid inadvertently
providing services in a hospital outpatient setting that are more
appropriately performed in an inpatient setting. However, we will
follow up on the commenters' recommendations regarding what CMS may be
able to do to supplement hospitals' physician education efforts.
Comment: Several commenters requested that CMS issue billing
instructions for instances where hospitals have charges for an
inpatient procedure performed in the outpatient department in addition
to other services on the bill. Commenters were concerned that some
fiscal intermediaries allow payment for the services other than the
inpatient procedure, while other fiscal intermediaries do not. They
also requested that CMS include in the proposed rule explanations for
any new Category III CPT codes that CMS assigns to the inpatient list.
Response: Billing instructions are outside of the scope of the
final rule, but we will look into the billing issues as suggested by
the commenters. With regard to new Category III CPT codes released by
the AMA on January 1 for implementation on July 1 of a given year, we
refer the readers to section III.E. of this final rule for a
description of our process for recognizing these codes and receiving
public comments on their status under the OPPS. We will respond to
those comments in the final rule, here for CY 2007. With regard to new
Category III CPT codes released by the AMA on July 1 for implementation
in January and new Category I CPT codes released in the fall for
implementation in January, because of the timing of the release of
these codes we are unable to provide discussions of those assignments
in any proposed rule. Instead, consistent with current practice, we
will continue to designate these codes with comment indicator ``NI'' in
the final rule to indicate that we are assigning them an interim
payment status which is subject to public comment following publication
of the final rule that implements the annual OPPS update. We believe
that these processes provide ample opportunity for the public to
comment regarding the assignments of new CPT codes to the inpatient
list prior to our finalizing such assignments.
Comment: One commenter requested that CMS clarify that just because
services are not on the inpatient list that does not mean they can only
be provided in the outpatient setting.
Response: Many services payable under the OPPS may also be payable
by Medicare when they are provided in other outpatient settings,
including ASCs and physician offices, and in inpatient settings,
depending on the clinical circumstances and health care delivery
practices surrounding the care of specific Medicare beneficiaries. As
we have stated previously, the OPPS inpatient list is a list of
procedures that are only paid by Medicare when they are provided in an
inpatient setting, and the absence of procedures from the inpatient
list should not be interpreted as identifying those procedures as
appropriately performed only in the outpatient setting.
Comment: Several commenters requested that CMS remove additional
procedures from the inpatient list. In addition, the APC Panel
recommended that CMS review site of service data on certain laminectomy
services, which currently have status indicator C and are on the
inpatient list, to determine whether the procedures are being performed
in the hospital outpatient setting with enough frequency to be assigned
to APCs for payment under the OPPS. None of the commenters provided us
with specific evidence to support statements that the procedures were
being performed on an outpatient basis in a safe and effective manner,
nor did they suggest appropriate APC assignments for the procedures.
The commenters requested that the CPT codes for procedures shown in
Table 35 below be removed from the inpatient list.
BILLING CODE 4210-01-P
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BILLING CODE 4210-01-C
Response: We carefully evaluated each of the 17 procedures the
commenters requested for deletion from the inpatient list. With the
exception of one of the procedures, we found that 16 of the procedures
are performed on Medicare beneficiaries more than 90 percent of the
time in the inpatient setting and are associated with more than 23 hour
recovery times. Some of the procedures are associated with an
expectation of 4 to 5 day hospital stays. Two of the codes (63043 and
63044) are for ``add-ons'' to procedures that are not included on the
inpatient list (63040, Laminotomy (hemilaminectomy), with decompression
of nerve root(s), including parital facetectomy, foraminotomy and/or
excision of herniated intervertebral disk, reexploration, single
interspace; cervical and 63042, Laminotomy (hemilaminectomy), with
decompression of nerve root(s), including parital facetectomy,
foraminotomy and/or excision of herniated intervertebral disk,
reexploration, single interspace; lumbar). We are retaining codes 63043
and 63044 on the inpatient list because when these ``add-on'' services
are performed in addition to the base procedures, the resulting
complete surgical sessions involve more extensive surgery, longer
intraoperative times, longer recovery periods, and a higher frequency
of performance in the inpatient setting, than do the base procedures
alone that are not included on the inpatient list.
We will take this opportunity to remind the public that the
determinations for inclusion on the inpatient list are made for the
Medicare population. Thus, although some procedures may be routinely
performed on an outpatient basis for younger
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patients, their safe performance in the outpatient hospital setting may
be much rarer for older individuals who are likely to have a number of
comorbidities and slower recovery times. For procedures that are not
included on the inpatient list, we rely on the practitioners' judgment
to determine on a patient-by-patient basis whether or not a particular
procedure would be most appropriately performed in the inpatient
setting. We believe that these 16 procedures should remain on the
inpatient list for the CY 2006 OPPS.
The one procedure that we believe is appropriate for deletion from
the inpatient list is code 63075. We found evidence that this procedure
is being performed safely in some outpatient settings with increasing
frequency. We are deleting the procedure from the inpatient list and
assigning it to APC 0208 (Laminotomies and Laminectomies) for CY 2006.
BILLING CODE 4210-01-P
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BILLING CODE 4210-01-C
C. Ancillary Outpatient Services When Patient Expires (-CA Modifier)
In the November 1, 2002 final rule with comment period (67 FR
66798), we discussed the creation of a new HCPCS modifier -CA to
address situations where a procedure on the OPPS inpatient list must be
performed to resuscitate or stabilize a patient (whose status is that
of an outpatient) with an emergent, life-threatening condition, and the
patient dies before being admitted as an inpatient. In Transmittal A-
02-129, issued on January 3, 2003, we instructed hospitals on the use
of this modifier when submitting a claim on bill type 13x for a
procedure that is on the inpatient list and assigned the payment status
indicator (SI) ``C.'' Conditions to be met for hospital payment for a
claim reporting a service billed with modifier -CA include a patient
with an emergent, life-threatening condition on whom a procedure on the
inpatient list is performed on an emergency basis to resuscitate or
stabilize the patient. For CY 2003, a single payment for otherwise
payable outpatient services billed on a claim with a procedure appended
with this new -CA modifier was made under APC 0977 (New Technology
Level VIII, $1,000-$1,250), due to the lack of available claims data to
establish a payment rate based on historical hospital costs.
As discussed in the November 7, 2003 final rule with comment
period, we created APC 0375 to pay for services furnished on the same
date as a procedure with SI ``C'' and billed with the modifier -CA (68
FR 63467) because we were concerned that payment under a New Technology
APC would not result in an appropriate payment. Payment under a New
Technology APC is a fixed amount that does not have a relative payment
weight and, therefore, is not subject to recalibration based on
hospital costs. In the absence of hospital claims data to determine
costs, the clinical APC 0375 payment rate for CY 2004 was set at of
$1,150, which was the payment amount for the newly structured New
Technology APC that replaced APC 0977.
For CY 2005, payment for otherwise payable outpatient services
furnished on the same date of service that a procedure with SI ``C''
was performed on an emergent basis on an outpatient who died before
inpatient admission and where modifier -CA was appended to the
inpatient procedure continued to be made under APC 0375 (Ancillary
Outpatient Services When Patient Expires) at a payment rate of
$3,217.47. As discussed in the November 15, 2004 final rule with
comment period (69 FR 65841), the payment median was set in accordance
with the same methodology we followed to set payment rates for the
other procedural APCs in CY 2005, based on the relative payment weight
calculated for APC 0375. A review of the 18 hospital claims utilized
for ratesetting revealed a reasonable mix of outpatient services that a
hospital could be expected to furnish during an encounter with a
patient with an emergency condition requiring immediate medical
intervention, as well as a wide range of costs.
For CY 2006, we did not propose any changes to our payment policy
for services billed on the same date as a ``C'' status procedure
appended with modifier -CA. We proposed to continue to make one payment
under APC 0375 for the services that meet the specific conditions
discussed in previous rules for using modifier -CA, based on
calculation of the relative payment weight for APC 0375, using charge
data from CY 2004 claims for line items with a HCPCS code and status
indicator ``V,'' ``S,'' ``T,'' ``X,'' ``N,'' ``K,'' ``G,'' and ``H,''
in addition to charges for revenue codes without a HCPCS code.
In accordance with this methodology, for the CY 2006 proposed rule,
we calculated a median cost of $2,528.61 for APC 0375 for the
aggregated otherwise payable outpatient hospital services based on 300
CY 2004 hospital claims reporting modifier -CA with an inpatient
procedure. These 300 claims were billed by 218 different hospital
providers, each submitting between 1 and 10 claims with modifier -CA
appended to a ``C'' status procedure. This median cost for APC 0375 is
relatively consistent with the median calculated for the CY 2005 OPPS
update, and, as expected, the hospital claims once again show a wide
range of costs. Nevertheless, we are concerned with the very large
increase in the volume of hospital claims billed with the -CA modifier
from CY 2003 to CY 2004, growing from 18 to 300 claims over that 1-year
time period. We acknowledge that modifier -CA was first introduced in
CY 2003, and in CY 2003 and CY 2004 hospitals may have been
experiencing a learning curve with respect to its appropriate use on
claims for services payable under the OPPS.
However, our clinical review for the proposed rule of the 300
claims reporting modifier -CA lends some support to our early concerns
regarding the increased CY 2004 modifier volume and hospitals' possible
incorrect use of the modifier for services that do not meet the payment
conditions we established. Hospitals should be using this modifier only
under circumstances described in section VI of Transmittal A-02-129,
which provided specific billing guidance for the use of modifier -CA.
In addition to expected use of the -CA modifier for exploratory
laparotomies and insertions of intra-aortic balloon assist devices,
other unanticipated examples of ``C'' status procedures reported with
the -CA modifier by hospitals in CY 2004 include knee arthroplasty,
thyroidectomy, repair of nonunion or malunion of the femur, and
thromboendarterectomy of the carotid, vertebral, or subclavian
arteries. Moreover, few of the claims also include a clinic or
emergency room visit on the same date of service as the procedure
appended with modifier -CA, as might be expected for some patients
presenting to a hospital with serious medical conditions which require
urgent interventions with inpatient procedures. We are concerned that
some procedures reported by hospitals with the -CA modifier in CY 2004
may not have been provided to patients with emergent, life-threatening
conditions, where the inpatient procedure was performed on an emergency
basis to resuscitate or stabilize the patient. Instead, those
procedures may have been provided to hospital outpatients as scheduled
inpatient procedures that were not emergency interventions for patients
in critical or unstable condition and such circumstances would have
been inconsistent with our billing and payment rules regarding correct
use of the -CA modifier to receive payment for APC 0375. In light of
these claims findings and our current analysis, we will continue to
closely monitor hospital use of modifier -CA, following changes in the
claims volume, noting inpatient procedures to which the -CA modifier is
appended, examining other services billed on the same date as the
inpatient procedure, and analyzing specific hospital patterns of
billing for services with modifier -CA appended, to assess whether a
proposal to change our policies regarding payment for APC 0375 would be
warranted in the future or whether hospitals require further education
regarding correct use of the modifier -CA.
We received several public comments concerning our proposed payment
for APC 0375.
Comment: A few commenters indicated that the -CA modifier policy
supports an important function for hospitals and should be retained.
Commenters suggested that the increased use of the modifier noted by
CMS may be due to hospitals only
[[Page 68701]]
recently becoming aware of the relatively new modifier.
In response to CMS' question about why few of the claims with a -CA
modifier included a clinic or emergency department visit on the same
date of service, the commenters speculated that perhaps the beneficiary
came in for a scheduled procedure but due to complications, the
physician finds it necessary to provide a service that they had not
otherwise intended to perform in an outpatient setting and the patient
then died prior to inpatient admission.
Response: Despite the comments we received, we remain concerned
that, while our billing and payment rules indicate that the inpatient
procedure on the claim should be performed on an emergency basis to
stabilize the patient if the modifier -CA is to be reported, on many of
our claims, the -CA modifier was appended to inpatient list procedures
that would likely not have been emergency resuscitative procedures. We
remind hospitals to review our billing and payment rules for using the
-CA modifier described in section VI. Of Transmittal A-02-129.
Hospitals should limit their use of the -CA modifier to only those
claims where all of the conditions outlined are met.
After careful consideration of the public comments received, we
have decided that we will make no change to our -CA modifier policy at
this time. We will continue to monitor the use of the modifier and will
continue to encourage educational efforts by interested parties
regarding appropriate use of the -CA modifier on OPPS claims.
XIII. Indicator Assignments
A. Status Indicator Assignments
The payment status indicators (SIs) that we assign to HCPCS codes
and APCs under the OPPS play an important role in determining payment
for services under the OPPS because they indicate whether a service
represented by a HCPCS code is payable under the OPPS or another
payment system and also whether particular OPPS policies apply to the
code. In the CY 2006 OPPS proposed rule, we provided for CY 2006 our
proposed status indicator assignments for APCs in Addendum A, for the
HCPCS codes in Addendum B, and the definitions of the status indicators
in Addendum D1.
Specifically, for CY 2006, we proposed to use the following status
indicators in the specified manner:
``A'' to indicate services that are billable to fiscal
intermediaries but are paid under some payment method other than OPPS,
such as under the durable medical equipment, prosthetics, orthotics,
and supplies (DMEPOS) fee schedule or the Medicare Physician Fee
Schedule. Some, but not all, of these other payment systems are
identified in Addendum D1.
``B'' to indicate the services that are billable to fiscal
intermediaries but are not payable under the OPPS when submitted on an
outpatient hospital Part B bill type, but that may be payable by fiscal
intermediaries to other provider types when submitted on an appropriate
bill type.
``C'' to indicate inpatient services that are not payable
under the OPPS.
``D'' to indicate a code that is discontinued, effective
January 1, 2006.
``E'' to indicate items or services that are not covered
by Medicare or codes that are not recognized by Medicare.
``F'' to indicate acquisition of corneal tissue which is
paid on a reasonable cost basis, certain CRNA services, and hepatitis B
vaccines that are paid on a reasonable cost basis.
``G'' to indicate drugs and biologicals that are paid
under the OPPS transitional pass-through rules.
``H'' to indicate pass-through devices, brachytherapy
sources, and separately payable radiopharmaceuticals that are paid on a
cost basis.
``K'' to indicate drugs and biologicals (including blood
and blood products) that are paid in separate APCs under the OPPS, but
that are not paid under the OPPS transitional pass-through rules.
``L'' to indicate flu and pneumococcal immunizations that
are paid at reasonable cost but to which no coinsurance or copayment
apply.
``M'' to indicate services that are only billable to
carriers and not to fiscal intermediaries and that are not payable
under the OPPS.
``N'' to indicate services that are paid under the OPPS,
but for which payment is packaged into another service or APC group.
``P'' to indicate services that are paid under the OPPS,
but only in partial hospitalization programs.
``Q'' to indicate packaged services subject to separate
payment under OPPS payment criteria.
``S'' to indicate significant procedures that are not
discounted when multiple and that are subject to separate APC payment
under the OPPS.
``T'' to indicate significant services that are paid under
the OPPS and to which the multiple procedure payment discount under the
OPPS applies.
``V'' to indicate medical visits (including emergency
department or clinic visits) that are paid under the OPPS.
``X'' to indicate ancillary services that are paid under
the OPPS.
``Y'' to indicate nonimplantable durable medical equipment
that must be billed directly to the durable medical equipment regional
carrier rather than to the fiscal intermediary.
We proposed the payment status indicators identified above, of
which indicators ``M'' and ``Q'' are new for CY 2006, for each HCPCS
code and each APC listed in Addenda A and B and we requested comments
on the appropriateness of the indicators that we proposed to assign.
We received numerous comments regarding the appropriateness of the
status indicator assignment for specific HCPCS codes which we discuss
in other related sections of this final rule with comment period. In
addition, we received several general comments regarding the payment
status indicators and their proposed uses, which are discussed below.
Comment: Several commenters recommended that CMS revise the
definition of status indicator ``H'' which had been initially used only
for pass-through device categories paid on a cost basis that were not
subject to coinsurance. The commenters argued that the proposed
expansion of ``H'' to include brachytherapy sources that are paid on a
cost basis and radiopharmaceuticals that we proposed to pay on a cost
basis for CY 2006 is inconsistent in classification because coinsurance
applies to these items.
One commenter made recommendations regarding other status
indicators. For indicator ``A,'' the commenter requested that CMS
identify what fee schedule each HCPCS code is paid under. For indicator
``B,'' the commenter recommended that if the HCPCS code was paid to
physicians, the same code should be paid to hospitals. The commenter
also requested that CMS revise the definition of status indicator ``E''
to separately identify services that were not covered by Medicare
according to statute from those not covered for other reasons. Lastly,
the commenter asked whether hospitals could automatically follow the
language in the ``C'' status indicator descriptor, which states, ``Not
paid under the OPPS. Admit patient. Bill as inpatient.''
Response: We have established specific status indicators in the
OPPS for the principal purpose of making appropriate payment for
services under the OPPS because we must signal the claims processing
system through the OCE software as to HCPCS codes that are paid under
the OPPS and those codes to which particular OPPS payment policies
apply.
[[Page 68702]]
With respect to those HCPCS codes proposed for CY 2006 with the
status indicator ``H,'' all of those codes have individual APC
assignments that are unique. Because the APCs for these items each
contain only one HCPCS code, we have chosen to associate the
application of coinsurance or the lack thereof within each of these
APCs in our claims processing system. Therefore, in CY 2005, the APCs
for pass-through device categories do not have associated coinsurance,
whereas the APCs for brachytherapy sources are subject to a 20-percent
coinsurance. Similarly, for separately payable radiopharmaceuticals in
CY 2006, their APCs will be subject to a 20-percent coinsurance.
Therefore, we have no operational need to establish a new status
indicator to separately identify the coinsurance status of HCPCS codes
paid on a cost basis under the OPPS. However, we will indicate that
pass-through device categories receive separate cost-based pass-through
payments that are not subject to coinsurance in the OPPS payment status
description of status indicator ``H'' in Addendum D. We are finalizing
for CY 2006 our proposed expansion of the definition of status
indicator ``H'' to include radiopharmaceutical agents.
With respect to the comments concerning status indicators ``A'' and
``E,'' the OPPS has no administrative need to make the distinctions
suggested by the commenter. Regarding HCPCS codes assigned status
indicator ``B,'' in some cases such services may be paid to physicians
and not to hospitals because the services are professional services
only, not requiring hospital resources. In other cases, there may be
alternate HCPCS codes that are recognized for the services under the
OPPS. Therefore, we do not believe that status indicator ``B'' needs to
be modified.
Lastly, status indicator ``C'' identifies services that are only
paid in an inpatient setting because of the nature of the procedures,
their associated recovery times, or the physical conditions of the
patients. Therefore, these services are not paid by Medicare under the
OPPS. While the OPPS payment status explanation suggests what a
hospital might do regarding admission and billing for such services,
hospitals must follow all of their own and Medicare's policies and
procedures regarding inpatient hospital admissions and inpatient
billing.
We are finalizing the definitions of status indicators ``H'' and
``K'' as noted in Table 37 below. Consequently, all pass-through device
categories active in CY 2006 are assigned status indicator ``H'' and
are not subject to coinsurance, while brachytherapy sources and
radiopharmaceuticals assigned status indicator ``H'' will be subject to
coinsurance.
Table 37.--CY 2006 Definitions of Status Indicators ``H'' and ``K''
------------------------------------------------------------------------
Status indicator Item/code/service OPPS payment status
------------------------------------------------------------------------
H......................... (1) Pass-Through (1) Separate cost-
Device Categories. based pass-through
payment; Not subject
to coinsurance.
(2) Brachytherapy (2) Separate cost-
Sources. based nonpass-
through payment.
(3) (3) Separate cost-
Radiopharmaceutical based nonpass-
Agents. through payment.
K......................... Non-Pass-Through Paid under OPPS;
Drugs and Separate APC
Biologicals. payment.
------------------------------------------------------------------------
We are also finalizing our policy regarding status indicator ``Q.''
HCPCS codes with status indicator ``Q'' are either separately payable
or packaged, depending on the specific circumstances of their billing.
Addendum B displays the APC assignments of those codes with ``Q''
status when they are separately payable. OCE claims processing logic
will be applied to codes assigned status indicator ``Q'' in order to
determine if the service will be packaged or separately payable. In the
event that a code is separately payable, the HCPCS code will receive an
APC payment that corresponds to the APC listed in Addendum B, and would
be subject to any discounting policies applied to that APC (identified
by the APC status indicator). For CY 2006, hospital observation G-codes
are assigned ``Q'' status; specific discussion of the payment policy
applying to these services can be found in section IX. of this final
rule with comment period.
B. Comment Indicators for the CY 2006 OPPS Final Rule
In the CY 2006 proposed rule, we proposed to continue to use the
two comment indicators finalized in the November 15, 2004 final rule
with comment period (69 FR 65827 and 65828) to identify in this CY 2006
final rule the assignment status of a specific HCPCS code to an APC and
the timeframe when comments on the HCPCS APC assignment will be
accepted. The two comment indicators are listed below and in Addendum
D2.
''NF''--New code, final APC assignment; Comments were
accepted on a proposed APC assignment in the Proposed Rule; APC
assignment is no longer open to comment.
''NI''--New code, interim APC assignment; Comments will be
accepted on the interim APC assignment for the new code.
Comment: Several commenters expressed concern regarding changes in
the proposed APC assignments for several codes (for example, CPT codes
63655 and 78700) that were not specifically addressed in the proposed
rule. The commenters believed that the proposed new APC assignments for
these codes were made in error.
Response: In general, changes in proposed APC assignments that were
not discussed in detail in the proposed rule were made to improve
clinical and resource homogeneity of the APC groups. We noted in the
proposed rule that the payment status indicators for each APC and HCPCS
code in Addenda A and B are subject to comment (70 FR 42748), and
included the APC assignment of all individual HCPCS codes.
Specific changes based on APC Panel recommendations are noted in
the related topic sections of this final rule with comment period under
section I.D. We discuss other changes throughout the final rule to
address particular interests or concerns of the public. Addendum B of
this final rule with comment period provides the status indicator and,
where applicable, the APC assignment for those HCPCS codes that are
payable under the OPPS, as well as those HCPCS codes that are being
discontinued in CY 2006. To facilitate review of these changes, we are
establishing new comment indicator ``CH'' in this final rule with
comment period to designate HCPCS codes in Addendum B whose status
indicator or APC assignment, or both, for the upcoming year will change
from what they are in the current year:
``CH''--Active HCPCS codes in current year and next
calendar year;
[[Page 68703]]
status indicator and/or APC assignment have changed.
For example, in Addendum B of this final rule with comment period,
the APC assignment and/or status indicator assignment for HCPCS codes
flagged with comment indicator ``CH'' will be different for services
furnished on or after January 1, 2006, than they were for services
furnished on December 31, 2005. A HCPCS code showing comment indicator
``CH'' in Addendum B is not open to comment as they are so indicated
only for the ease of the public to review the changes made from FY 2005
to CY 2006. Rather, in Addendum B of this final rule with comment
period, only HCPCS codes flagged with comment indicator ``NI'' are
subject to public comment.
XIV. Nonrecurring Policy Changes
A. Payments for Multiple Diagnostic Imaging Procedures
Currently, under the OPPS, hospitals billing for diagnostic imaging
procedures receive full APC payments for each service on a claim,
regardless of how many procedures are performed using a single imaging
modality and whether or not contiguous areas of the body are studied in
the same session. In its March 2005 Report to Congress, MedPAC
recommended that the Secretary should improve Medicare coding edits
that detect unbundled diagnostic imaging services and reduce the
technical component payment for multiple imaging services when they are
performed on contiguous areas of the body (Recommendation 3-B). MedPAC
pointed out that Medicare's payment rates are based on each service
being provided independently and that the rates do not account for
efficiencies that may be gained when multiple studies using the same
imaging modality are performed in the same session. Further, MedPAC
stated that those efficiencies are especially likely when contiguous
body areas are the focus of the imaging because the patient and
equipment have already been prepared for the second and subsequent
procedures, potentially yielding resource savings in areas such as
clerical time, technical preparation, and supplies, elements of
hospital costs for imaging procedures that are reflected in APC payment
rates under the OPPS.
Under the OPPS, we have a longstanding policy of reducing payment
for multiple surgical procedures performed on the same patient in the
same operative session (Sec. 419.44(a) of the regulations). In such
cases, full payment is made for the procedure with the highest APC
payment rate, and each subsequent procedure is paid at 50 percent of
its respective APC payment rate. In the proposed rule, we indicated
that we believed that a similar policy for payment of diagnostic
imaging services would be more appropriate than our current policy
because it would lead to more appropriate payment for multiple imaging
procedures of contiguous body areas that are performed during the same
session.
In our efforts to determine whether or not such a policy would
improve the accuracy of OPPS payments, in the CY 2006 OPPS proposed
rule, we identified 11 ``families'' of imaging procedures by imaging
modality (ultrasound, computerized tomography (CT) and computerized
tomography angiography (CTA), magnetic resonance imaging (MRI) and
magnetic resonance angiography (MRA)) and contiguous body area (for
example, CT and CTA of Chest/Thorax/Abdomen/Pelvis), as displayed in
Table 38. Using those families of procedures, we examined OPPS bills
for CY 2004 and found that there were numerous claims reporting more
than one imaging procedure within the same family provided to a
beneficiary by a hospital on the same day.
BILLING CODE 4210-01-P
[[Page 68704]]
[GRAPHIC] [TIFF OMITTED] TR10NO05.028
[[Page 68705]]
[GRAPHIC] [TIFF OMITTED] TR10NO05.029
[[Page 68706]]
[GRAPHIC] [TIFF OMITTED] TR10NO05.030
BILLING CODE 4210-01-C
For example, the imaging procedures described by CPT codes 72192
(Computed tomography, pelvis; without contrast material) and 74150
(Computed
[[Page 68707]]
tomography, abdomen; without contrast material) are for studies of two
adjacent body regions. Appropriate diagnostic evaluation of many
constellations of patients' signs and symptoms and potentially affected
organ systems may involve assessment of pathology in both the abdomen
and pelvis, body areas that are anatomically and functionally closely
related. Therefore, both studies are frequently performed in the same
session to provide the necessary clinical information to diagnose and
treat a patient. Although each procedure, by itself, entails the use of
hospital resources, including certain staff, equipment, and supplies,
some of those resource costs are not incurred twice when the procedures
are performed in the same session and, thus we believed, should not be
paid as if they were. Beginning with the beneficiary's arrival in the
outpatient department, costs are incurred only once for registering the
patient, taking the patient to the procedure room, positioning the
patient on the table for the CT scan, among others. We proposed a
reduction because we believed that reducing the payment for the second
and subsequent procedures within the identified families might result
in more accurate payments with respect to the hospital resources
utilized for multiple imaging procedures performed in the same session.
OPPS bills do not contain detailed information on the hospitals'
costs that are incurred in furnishing imaging procedures. Much of the
cost is packaged and included in the overall charges for the
procedures. Even if bundled costs are reported with charges on separate
lines either with HCPCS codes or with revenue codes, when there are
multiple procedures on the claims, it is impossible for us to
accurately attribute bundled costs to each procedure. However, at the
time of issuance of the proposed rule, our analysis of CY 2004 hospital
claims convinced us that some discounting of multiple imaging
procedures is warranted. In order to determine the level of adjustment
that would be appropriate for the second and subsequent procedures
performed within a family in the same session, we used the MPFS
methodology and data.
Under the resource-based practice expense methodology used for
Medicare payments to physicians, specific practice expense inputs of
clinical labor, supplies and equipment are used to calculate ``relative
value units'' on which physician payments are based. When multiple
images are acquired in a single session, most of the clinical labor
activities are not performed twice and many of the supplies are not
furnished twice. Specifically, we consider that the following clinical
labor activities included in the ``technical component'' (TC) of the
MPFS are not duplicated for subsequent procedures: Greeting,
positioning and escorting the patient; providing education and
obtaining consent; retrieving prior exams; setting up the IV; and
preparing and cleaning the room. In addition, we consider that
supplies, with the exception of film, are not duplicated for subsequent
procedures. Equipment time and indirect costs are allocated based on
clinical labor time in the physician payment methodology and therefore,
we believe, these inputs should be reduced accordingly.
We performed analyses and found that excluding those practice
expense inputs, along with the corresponding portion of equipment time
and indirect costs, supported a 50-percent reduction in the payment for
the TC portion of subsequent procedures. The items and services that
make up hospitals' facility costs are generally very similar to those
that are counted in the TC portion of the MPFS for diagnostic imaging
procedures. We believed that the analytic justification for a 50-
percent reduction of the TC for the second and subsequent imaging
procedures using the MPFS input data also provided a basis for a
similar relative reduction to payments for multiple imaging procedures
performed in the hospital outpatient department. Therefore, we proposed
to make a 50-percent reduction in the OPPS payments for some second and
subsequent imaging procedures performed in the same session, similar to
our policy of reducing payments for some second and subsequent surgical
procedures.
We proposed to apply the multiple imaging procedure reduction only
to individual services described by codes within one family, not across
families. Reductions would apply when more than one procedure within
the family is performed in the same session. For example, no reduction
would apply to an MRI of the brain (CPT code 70552) in code Family 5,
when performed in the same session as an MRI of the spinal canal and
contents (CPT code 72142) in code Family 6. We proposed to make full
payment for the procedure with the highest APC payment rate, and
payment at 50 percent of the applicable APC payment rate for every
additional procedure in the same family, when performed in the same
session.
At its August 2005 meeting, the APC Panel heard testimony that
provided evidence against proceeding with the proposal to discount for
multiple diagnostic imaging procedures at this time based on logic that
efficiencies related to multiple imaging procedures were already
captured in the OPPS claims data. The Panel made its recommendation
that CMS should postpone implementation of the policy for a year so
that we may gather more data on the implications of those changes. The
Panel also recommended that CMS work with the American College of
Radiology and other stakeholders in that process.
Comment: Many commenters on the proposed rule requested that we
postpone implementation of the proposed discounting policy until we
perform further analyses and are able to find more substantial,
supporting hospital-based data. The commenters stated that our use of
the MPFS data was an inappropriate basis for estimating costs and cost
efficiencies in the hospital outpatient department and that a 50-
percent reduction for second and subsequent services provided in the
same imaging session was unwarranted. Commenters stated that the
hospital cost data used by CMS to set payment rates already reflect
savings due to the efficiencies of performing multiple procedures
during the same session, and that the proposed policy to discount
second and subsequent procedures is actually tantamount to discounting
those procedures twice.
In addition, other commenters suggested that a lower percentage
reduction may be more accurate. Some commenters also provided specific
recommendations for modifications to the procedures included in the
families eligible for discounting. One commenter indicated that CMS had
failed to consider differences in patient preparation requirements for
some imaging procedures that would necessitate significant additional
time between the two tests, even though they are being performed during
the same session. The commenters asserted that any discounting payment
policy would systematically disadvantage hospitals relative to other
settings for imaging services and that the negative effect on rural
hospitals, who commonly lease expensive capital equipment such as MRI
machines, would result in discontinuation of essential diagnostic
radiology services in many areas. Finally, the commenters identified
implementation issues that we had not addressed in the proposed rule,
such as defining what we meant as ``the same session.''
Response: After careful consideration of the public comments
received, the results of additional analyses of CY 2004 OPPS claims
data, and the APC
[[Page 68708]]
Panel recommendation, we have decided not to finalize our proposal to
discount for multiple diagnostic imaging procedures at this time. In
calculating median costs for outpatient imaging procedures in the
radiology families we proposed for discounting, for most hospitals'
claims, we used a hospital-specific diagnostic radiology CCR for the
conversion of charges to costs. Some hospitals reported costs and
charges in nonstandard cost centers for ultrasound, CT, or MRI
services, and, in general, those modality-specific CCRs were lower than
their CCRs for diagnostic radiology. Those lower CCRs were not
inconsistent with hospitals' experiences of particular efficiencies in
providing multiple ultrasound, CT, or MRI services in a single setting,
without reductions in charges for those multiple procedure sessions.
For the majority of hospitals for which we used diagnostic
radiology CCRs to convert charges to costs for ultrasound, CT, and MRI
procedures, we were concerned about whether these CCRs were too general
and broad to reflect the efficiencies of providing multiple imaging
procedures on contiguous body parts. We found that the imaging
procedures we identified as eligible for the proposed payment
reductions accounted for approximately half of the total OPPS charges
attributed by the OPPS to hospitals' diagnostic radiology cost centers.
This result suggests that costs and charges related to ultrasound, CT,
and MRI services in the 11 proposed families are significant
contributors from the OPPS to hospitals' diagnostic radiology cost
centers; we also recognize that costs and charges are incurred in
diagnostic radiology cost centers for inpatients and patients not
insured by Medicare. We have no way of knowing how patterns of costs
and charges for those patients contribute to hospitals' diagnostic
radiology CCRs, but we have no specific reason to believe that their
patterns of services would be very different than those for Medicare
beneficiaries in the hospital outpatient setting. Thus, it may be
correct that our median costs for imaging services in the 11 families
proposed for the reduction policy reflect a reduced median based, in
part, on hospitals' provision of multiple scans in one session.
Although our analyses provided no definite answer regarding
whether, and by how much, the OPPS median costs for single imaging
services in the 11 proposed families are reduced due to existing
hospital efficiencies related to multiple services as compared with the
hypothetical median costs for actual single services, our analyses do
not disprove the commenters' contentions that there are efficiencies
already reflected in their hospital costs, and therefore, their CCRs
and the median costs for the procedures. Further, the results of our
initial analyses do support the recommendation that we should defer
implementation of the proposed multiple imaging procedure reduction
policy to perform additional analyses. Depending upon the results of
our analyses, in a future rule we may propose revisions to the
structure of our rates in order to ensure that these rates properly
reflect the relative costs of initial and subsequent imaging
procedures.
Comment: MedPAC expressed support of our multiple imaging
discounting proposal and suggested that it would be preferable for CMS
to be able to make the proposed reductions without the requirement for
budget neutrality so that budget savings and lower cost sharing for
beneficiaries would result. MedPAC realized that CMS is statutorily
required to maintain budget neutrality in all changes made to the OPPS
and, therefore, suggested that the Secretary offer a legislative
proposal to Congress to allow us to capture potential savings.
Response: We appreciate MedPAC's support for our proposed policy.
We are also appreciative of the preliminary work that MedPAC has
provided in this area. We have carefully considered its suggestions, as
well as those of other commenters, in determining whether to finalize
our proposed multiple diagnostic imaging policy and will consider their
suggestions regarding budget neutrality issues in our ongoing work on
this issue.
Given the evidence presented by the commenters, the recommendation
of the APC Panel, and our further analysis of this issue, we are
convinced that additional analyses are in order. Therefore, during the
coming year, we will perform analyses of relevant data to determine
what, if any, changes in our median cost calculations for imaging
services or discounting policies, or both, could be appropriate to
enable us to make more accurate payments for diagnostic imaging
services. To the extent feasible, as recommended by the APC Panel, we
will look to the stakeholders in this policy for additional information
and input concerning further development. As we have stated, in a
future rule we may propose revisions to the structure of our rates in
order to ensure that these rates properly reflect the relative costs of
initial and subsequent imaging procedures.
B. Interrupted Procedure Payment Policies (Modifiers -52, -73, and -74)
1. Modifier -52
Since implementation of the OPPS in 2000, we have required
hospitals to report modifiers -52, -73, and -74 to indicate procedures
that were terminated before their completion. Modifier -52 indicates
partial reduction or discontinuation of services that do not require
anesthesia, while modifiers -73 and -74 are used for procedures
requiring anesthesia, where the patient was taken to the treatment room
and the procedure was discontinued before anesthesia administration or
after anesthesia administration/procedure initiation, respectively. The
elective cancellation of procedures is not reported. Hospitals are paid
50 percent of the APC payment for services with modifier -73 appended
and 100 percent for procedures with modifier -52 or -74 reported, in
accordance with Sec. 419.44(b) of the regulations. In January 2005, we
clarified, in Program Transmittal 442, the definition of anesthesia for
purposes of billing for services furnished in the hospital outpatient
department in the context of reporting modifiers -73 and -74. The APC
Panel considered the current OPPS payment policies for interrupted
procedures at its February 2005 meeting and made a number of
recommendations that are addressed in the following discussion.
Current OPPS policy requires providers to use modifier -52 to
indicate that a service that did not require anesthesia was partially
reduced or discontinued at the physician's discretion. The physician
may discontinue or cancel a procedure that is not completed in its
entirety due to a number of circumstances, such as adverse patient
reaction or medical judgment that completion of the full study is
unnecessary. The modifier is reported most often to identify
interrupted or reduced radiological and imaging procedures, and our
current policy is to make full payment for procedures with a -52
modifier.
We have reconsidered our payment policy for interrupted or reduced
services not requiring anesthesia and reported with a -52 modifier. At
its February 2005 meeting, the APC Panel recommended continuing current
OPPS payment policy at 100 percent of the APC payment for reduced
services reported with modifier -52, although the APC Panel members
acknowledged their limited familiarity with the specific outpatient
hospital services and their clinical circumstances that would warrant
the reporting of modifier -52. We examined our data to determine the
[[Page 68709]]
appropriateness of our current policy regarding payment for services
that are reduced, and although some hospital resources are used to
provide even an incomplete service, such as a radiology service, we are
skeptical that it is accurate to pay the full rate for a discontinued
or reduced radiological service. Compared to surgical procedures that
require anesthesia, a number of general and procedure-specific
supplies, and reserved procedure rooms that must be cleaned and
prepared prior to performance of each specific procedure, the costs to
the hospital outpatient department for the rooms and supplies typically
associated with procedures not requiring anesthesia are much more
limited. For example, the scheduling maintained for radiological
services not requiring anesthesia generally exhibits greater
flexibility than that for surgical procedures, and the procedure rooms
are used for many unscheduled services that are fit in, when possible,
between those that are scheduled. Consequently, we believe that the
loss of revenue that may result from a surgical procedure being
discontinued prior to its initiation in the procedure room is usually
more substantial than that lost as the result of a discontinued service
not requiring anesthesia, such as a radiology procedure. Nonetheless,
under our current policy, Medicare makes the full APC payment for
discontinued or reduced radiological procedures and only 50 percent of
the APC payment for surgical procedures that are discontinued prior to
initiation of the procedure or the administration of anesthesia.
Therefore, we proposed to pay 50 percent of the APC payment amount
for a discontinued procedure that does not require anesthesia where
modifier -52 is reported. We believed that this proposed payment would
appropriately recognize the hospital's costs involved with the delivery
of a typical reduced service, similar to our payment policies for
interrupted procedures that require anesthesia.
We received many comments on our proposal to reduce by 50 percent
the OPPS payment for claims for discontinued procedures reported with
modifier -52.
Comment: All of the commenters requested that CMS continue to make
full payment for those procedures. One argument presented by commenters
was that the modifier cannot be used for elective cancellations, and
that discontinuations are often associated with some unanticipated
incident related to the beneficiary's clinical condition. They asserted
that, in those cases, the provider must address the beneficiary's
clinical needs and because of the costs incurred as a result of those
interventions, no fewer resources are used during the attempt to
complete the procedure than there would have been if it had been
completed without complications.
In fact, many commenters asserted that failed attempts to complete
procedures often result in much higher resource use than completed,
uncomplicated procedures because the procedure's discontinuation may
come after many supplies and much time were expended. Further, they
stated that a reduction in the OPPS payment is unfair because there are
many times that no other procedures can be performed during the period
that was scheduled for the incomplete procedure.
Commenters also stated that CMS does not fully understand hospital
operations and urged CMS to learn more before we implement such a
payment reduction policy. They stated that there was no indication in
the proposed rule that CMS conducted any analysis to support the
proposed reduction. They believed that CMS must perform cost analyses
regarding the procedures to which the modifier is applied in order to
evaluate the types of other services delivered when procedures are
interrupted and the resources expended in their delivery.
Further, the commenters believed there is still confusion among
providers regarding how to use the -52 modifier, and suggested that CMS
review the data to evaluate the potential financial impact of the
proposed policy because it may be applied disproportionately to those
providers who use the modifier appropriately.
Response: We have conducted analyses of our hospital claims data to
examine the usage of the -52 modifier in CY 2004. Those analyses are
the basis for our determination that a reduction in the OPPS payments
for interrupted procedures reported with a -52 modifier is warranted.
We discovered 120,000 procedures in the CY 2004 hospital claims data
with a -52 modifier appended. That level of use seemed high, and more
in-depth analysis revealed that, although most of the usage was for
imaging procedures, some of the services reported with the -52 modifier
were unexpected and inappropriate (that is, office visit and diagnostic
colonoscopy).
The results of our data analysis appear, to some degree, to
conflict with much of the anecdotal information presented by the
commenters. Although the commenters asserted that many times,
discontinuation of procedures is associated with emergency
interventions and use of additional resources, the data did not
indicate that this was likely to have been the primary reason for the
procedures to which the -52 modifier was appended in CY 2004. The
highest frequency use of the -52 modifier was among diagnostic imaging
procedures that are typically not associated with adverse reactions
(the top three procedures are imaging services without contrast), and
we believe that there are some cost savings that result from not
performing the entire procedure (for example, less film, less computer
time, and less room time). As the claims for many of these procedures
included little packaging and we found the line item charges for the
services were not reduced when the -52 modifier was reported, we could
generally not detect significant differences in costs for the same
procedure, with and without the -52 modifier reported. However, because
the line item charges for the services were typically similar for
completed and interrupted procedures, we do not believe that our claims
analysis had the potential to reflect any true hospital cost savings
when procedures were discontinued. In general, we did not observe
increased costs for claims for services reported with the -52 modifier.
Further, some of the services that had the -52 modifier appended do not
require significant supplies or procedure rooms, but, rather, are
provided in examination rooms or other nonspecific areas of the
outpatient department. Therefore, only minimal costs would be incurred
by the hospital for an incomplete procedure.
Our data also indicated that the -52 modifier was often used
inappropriately. For example, diagnostic colonoscopies ordinarily
require anesthesia and, therefore, when discontinued, are to be
reported using the -73 or -74 modifiers, rather than modifier -52.
However, what we found in the hospital claims data was that diagnostic
colonoscopy was the fifth most frequently reported procedure with the -
52 modifier. We expect that the frequency of -52 modifier use with
procedures in which anesthesia was administered will have decreased for
CY 2005 as a result of our clarification regarding the use of modifiers
-52, -73 and -74 published in Transmittal 442 issued in January 2005.
We have examined our data and given careful consideration to the
public comments and the APC Panel's discussion and recommendations
regarding OPPS payment policies for interrupted procedures. Given the
nature of the procedures that were likely
[[Page 68710]]
reported appropriately with the -52 modifier in CY 2004, we continue to
believe that there are considerable savings associated with their
incomplete performance. We think that in the hospital outpatient
setting, there are generally many opportunities to utilize the rooms
and equipment that would otherwise be left unused as a result of
discontinued procedures. We also believe that, although there may be
occasional instances in which a discontinued procedure appropriately
reported with the -52 modifier consumes more resources than one that is
completed without interruption, those are unusual events and the vast
majority of discontinued cases are significantly less costly than
completed procedures. Therefore, we are finalizing our proposed policy
to apply a 50 percent reduction to the APC payments for interrupted
procedures reported with the -52 modifier in CY 2006.
Comment: One commenter requested that CMS give special
consideration to capsule endoscopy of the esophagus if CMS makes final
its proposal to reduce payment for procedures with the -52 modifier.
The commenter indicated that the procedure is correctly coded using CPT
91110 (Gastrointestinal tract imaging, intraluminal (e.g., capsule
endoscopy), esophagus through ileum, with physician interpretation and
report), with -52 appended to indicate that the ileum was not
visualized, even in cases where visualization of the ileum was not
intended. The commenter stated that, although the professional
component costs are reduced if the ileum is not included in the test,
the technical costs of the procedure are the same whether or not the
ileum is visualized.
The commenter suggested several options for accommodating the
capsule endoscopy of the esophagus procedure in case CMS goes forward
with the proposed -52 modifier policy. These included exempting
hospitals from reporting the modifier with CPT 91110, establishing an
administrative exception so that intermediaries would not reduce
payment under the OPPS for the procedure, and establishing a different
code for the procedure that would obviate the need for the -52
modifier.
Response: We are finalizing our proposal to reduce payments for
procedures to which the -52 modifier is appended. We do not believe
that exempting the capsule endoscopy procedure from the reduction
policy is practical or warranted, given our consideration of specific
information available to use concerning the capsule endoscopy of the
esophagus procedure and hospital cost and clinical information
regarding other separately payable services under the OPPS. Moreover,
even if we believed that it was appropriate, it is not feasible for us
to selectively exempt individual procedures from the requirements of
our OPPS payment policy for the -52 modifier, nor should providers
knowingly misuse a CPT code in contradiction to CPT instructions.
While we do not establish HCPCS codes for new technology procedures
that are described by existing HCPCS codes or combinations of HCPCS
codes, we acknowledge that the commenter is concerned about the current
CPT coding structure and its applicability to capsule endoscopy of the
esophagus, along with the implications of the CY 2006 OPPS payment
policy for services reported with the -52 modifier. As the AMA, through
the CPT Editorial Panel, develops new CPT codes, provides coding
instructions, and makes editorial changes to existing CPT codes, we
encourage the commenter to bring its concerns about appropriate CPT
coding for capsule endoscopy of the esophagus to the attention of the
CPT Editorial Panel.
2. Modifiers -73 and -74
When a procedure requiring anesthesia is discontinued after the
beneficiary was prepared for the procedure and taken to the room where
it was to be performed but before the administration of anesthesia,
hospitals currently report modifier -73 and receive 50 percent of the
APC payment for the planned service. The APC Panel recommended that we
make full APC payment for services with modifier -73 reported, because
significant hospital resources were expended to prepare the patient and
the treatment room or operating room for the procedure. Although the
circumstances that require use of modifier -73 occur infrequently, we
continue to believe that hospitals realize significant savings when
procedures are discontinued prior to initiation but after the
beneficiary is taken to the procedure room. We believe savings are
recognized for treatment/operating room time, single use devices,
drugs, equipment, supplies, and recovery room time. Thus, we believe
our policy of paying 50 percent of the procedure's APC payment when
modifier -73 is reported remains appropriate.
Further, in the CY 2006 proposed rule, we explored the possibility
of applying a payment reduction for interrupted procedures in which
anesthesia was to be used (and may have been administered) and the
procedure was initiated. Currently, those cases are reported using
modifier -74, and we make the full APC payment for the planned service.
The payment policy for interrupted procedures reported with
modifier -74 was originally adopted because we believed that the
facility costs incurred for discontinued procedures that were initiated
to some degree were as significant to the hospital provider as for a
completed procedure, including resources for patient preparation,
operating room use, and recovery room care. However, we had come to
question that underlying assumption, especially as many surgical
procedures have come to require specialized and costly devices and
equipment, and our APC payments include the costs for those devices and
equipment. At the time of the CY 2006 proposed rule, we expressed our
belief that there may be costs that are not incurred in the event of a
procedure's discontinuation, if a hospital is managing its use of
devices, supplies, and equipment efficiently and conservatively. For
example, the patient's recovery time may be less than the recovery time
would have been for the planned procedure, because less extensive
surgery was performed or costly devices planned for the procedure may
not be used.
The APC Panel recommended that we continue to pay 100 percent of
the procedural APC payment when modifier -74 is appended to the
surgical service because, in its opinion, procedures may frequently be
terminated prior to completion because the patient is experiencing
adverse effects from the surgical service or the anesthesia. The APC
Panel speculated that, in fact, significant additional resources could
be expended in such a situation to stabilize and treat the patient if a
procedure were discontinued because of patient complications. However,
we believed that many of such additional services, including critical
care, drugs, blood and blood products, and x-rays that may be necessary
to manage and treat such patients, are separately payable under the
OPPS and thus the hospital's costs need not be paid through the APC
payment for the planned procedure. Because the OPPS is paying for the
time in the operating room, recovery room, outpatient department staff,
and supplies related to the typical procedure, it seemed that those
costs might be lower in those infrequent cases when the procedure is
initiated but not completed. We acknowledged that the costs on claims
reporting a service with modifier -74 might be particularly diverse,
depending upon the point in the procedure when the service was
interrupted. Thus, in the proposed rule,
[[Page 68711]]
we specifically invited comment on the clinical circumstances in which
modifier -74 is used in the hospital outpatient department, and the
degree to which hospitals may experience cost savings in such
situations where procedures are not completed. We were specifically
interested in comments regarding the disposition of devices and
specialized equipment that are not used because a procedure is
discontinued after its initiation. In particular, we were interested in
obtaining information about when during the procedure the decision to
discontinue is typically made.
We received numerous public comments on the use of modifiers-73 and
-74 and the associated costs of procedures billed with one of those
modifiers.
Comment: A number of commenters encouraged CMS to continue to make
full OPPS payments for interrupted services requiring anesthesia that
were coded with the -74 modifier to indicate that the procedures were
interrupted after their initiation or after the administration of
anesthesia. In response to the proposed rule in which we discussed our
concerns about the appropriateness of our current policy of making full
payment for those discontinued procedures, the commenters provided
extensive detail about the variable clinical circumstances where the -
74 modifier is correctly reported and provided examples of the hospital
resources required in such circumstances. They believed that the
resources were definitely not reduced because, in most cases, all
supplies would have been opened, the patient would continue to require
recovery time, and the operative session might actually be longer than
usual because of patient complications or multiple unsuccessful
attempts to complete a complicated procedure.
In addition, numerous commenters recommended that CMS make full APC
payments for services reported with a -73 modifier because of
significant hospital resources required to prepare patients for those
procedures. The commenters pointed out that the current OPPS payment
policy indicates that CMS makes 50 percent of the APC payment when a -
73 modifier is appended to a procedure that requires anesthesia and was
interrupted after the patient was taken into the treatment room but
prior to the administration of anesthesia. The commenters provided
multiple examples of the types of costs incurred by hospitals in such
circumstances, noting that the procedure might have been interrupted
because a patient required treatment for an evolving medical condition,
requiring significant hospital resources. They added that sterile
supplies may have been opened and other resources, including staff time
and allocated procedure room time, used. The commenters recommended
that CMS make 100 percent of the APC payment when a -73 modifier is
reported with a procedure. In addition, several commenters requested
that CMS modify the definition of when the -73 modifier is to be used.
They indicated a preference that the modifier be used earlier, when a
procedure is cancelled while a patient is still in a holding room or
preoperative suite where the patient has been prepared for surgery,
rather than being applicable only after the patient has been taken into
the treatment room.
Response: We made no proposals to change our payment policies for
procedures reported with modifiers -73 and -74 for CY 2006. We
appreciate the detailed comments we received on hospitals' experiences
with their use. We continue to believe that payment at 50 percent of
the APC rate is appropriate for procedures reported with modifier -73,
as we believe, in particular, that there are significant savings
associated with decreased procedure or operating room times and
markedly reduced recovery times. We do not believe it is appropriate to
make procedural APC payments for services cancelled prior to a
patient's entering the treatment or operating room. While specific
hospital resources used in individual circumstances to prepare patients
for surgery differ, in general, costs incurred in preoperative
preparation are similar across surgical procedures (for example,
establishment of intravenous access, pre-operative medication) and are
unlikely to be closely related to the APC payments for the planned
procedures. We expect that hospitals will continue to be cautious in
expending resources preoperatively for procedures that may be cancelled
prior to the patient entering the treatment room. Therefore, we will
continue our current policy of a 50-percent reduction in the APC
payment for services reported with the -73 modifier for the CY 2006
OPPS.
We also will maintain our current policy of paying 100 percent of
the APC payment for procedures reported with the -74 modifier for CY
2006. We agree with the commenters that, in general, the clinical
circumstances where the -74 modifier is reported may be particularly
diverse and unpredictable. While we understand that any reductions in
APC payments under such circumstances could pose some risk of the OPPS
making inappropriate payments for hospital resources utilized for such
discontinued procedures, we remain concerned that making the full APC
payment could also be inappropriate if a discontinued procedure with
the -74 modifier appended was a high cost service requiring an
expensive device that was not actually utilized. In the future, we may
further examine our hospital claims data to analyze cost information
for procedures reported with and without the -74 modifier.
We will provide billing guidance for CY 2006 regarding modifiers -
52, -73, and -74 to offer hospitals additional instructions regarding
the appropriate use of the three modifiers in the OPPS. Our goal is to
assure that hospitals understand and report these modifiers correctly
so that they receive appropriate payments for the services they
provide.
XV. OPPS Policy and Payment Recommendations
A. MedPAC Recommendations
1. Report to the Congress: Medicare Payment Policy (March 2005)
The Medicare Payment Advisory Commission (MedPAC) submits reports
to Congress in March and June that summarize payment policy
recommendations. The March 2005 MedPAC report included the following
two recommendations relating specifically to the hospital OPPS:
a. Recommendation 1: The Congress should increase payment rates for
the outpatient prospective payment system by the projected increase in
the hospital market basket index less 0.4 percent for calendar year
2006. A discussion regarding hospital update payments, and the effect
of the market basket update in relation to other factors influencing
OPPS payment rates, is included in section II.C. (``Conversion Factor
Update for CY 2006'') of this preamble.
b. Recommendation 2: The Congress should extend hold-harmless
payments under the outpatient prospective payment system for rural sole
community hospitals and other rural hospitals with 100 or fewer beds
through calendar year 2006. A discussion of the expiration of the hold-
harmless provision is included in section II.F. of this preamble. See
also section II.G. (``Adjustment for Rural Hospitals'') of this
preamble for a discussion of section 411 of Pub. L. 108-173.
[[Page 68712]]
2. Report to the Congress: Issues in a modernized Medicare Program--
Payment for Pharmacy Handling Costs in Hospital Outpatient Departments
(June 2005)
A discussion of the MedPAC recommendations relating to pharmacy
overhead payments in the hospital outpatient department can be found in
section V. of the preamble of this final rule with comment period.
B. APC Panel Recommendations
Recommendations made by the APC Panel are discussed in sections of
this preamble that correspond to topics addressed by the APC Panel.
Minutes of the APC Panel's February 2005 and August 2005 meeting are
available online at http://www.cms.hhs.gov/faca/apc/default.asp.
C. GAO Hospital Outpatient Drug Acquisition Cost Survey
A discussion of the June 30, 2005 GAO report entitled ``Medicare:
Drug Purchase Prices for CMS Consideration in Hospital Outpatient Rate-
Setting'' and section 621(a)(1) of the MMA is included in section V. of
the preamble of this final rule with comment period.
XVI. Physician Oversight of Nonphysician Practitioners in Critical
Access Hospitals
A. Background
Section 1820 of the Act, as amended by section 4201 of the Balanced
Budget Act of 1997, Pub. L. 105-33, provides for the establishment of
Medicare Rural Hospital Flexibility Programs (MRHFPs), under which
individual States may designate certain facilities as critical access
hospitals (CAHs). Facilities that are so designated and meet the CAH
conditions of participations (COPs) under 42 CFR part 485, subpart F,
will be certified as CAHs by CMS. The MRHFP replaced the Essential
Access Community Hospital (EACH)/ Rural Primary Care Hospital (RPCH)
program.
B. Proposed Policy Change in the Proposed Rule
Under the former EACH/RPCH program, physician oversight was
required for services provided by nonphysician practitioners such as
physician assistants (PAs), nurse practitioners (NPs), and clinical
nurse specialists (CNSs) in a CAH. Under the MRHFP, the statute
likewise requires physician oversight for nonphysician practitioners.
We note that under the EACH/RPCH program, we allowed for situations
when the RPCH had an unusually high volume of outpatients (100 or more
during a 2-week period) that were treated by nonphysician
practitioners. We stated that it would be sufficient for a physician to
review and sign a 25-percent sample of medical records for patients
cared for by a nonphysician practitioner unless State practice and laws
require higher standards for physician oversight for nonphysician
practitioners.
However, the current regulation does not distinguish between
inpatient and outpatient physician oversight. Although the CAH CoPs at
Sec. 485.631(b)(iv) provide that a doctor of medicine or osteopathy
periodically reviews and signs the records of patients cared for by
NPs, CNSs, or PAs, section 1820(c)(2)(B)(iv)(III) of the Act states
that CAH inpatient care provided by a PA or NP is subject to the
oversight of a physician. The review of outpatient records is not
addressed in the statute. Presently, for patients cared for by
nonphysician practitioners, the interpretative guidelines set forth in
Appendix W of the State Operations Manual (CMS Publication 7) set
parameters for inpatient and outpatient physician reviews. To maintain
consistency from the EACH/RPCH program to the CAH program, we indicated
in the Interpretative Guidelines that CAHs with a high volume of
outpatients need to have a physician review and sign a random sample of
25 percent of outpatient medical records. Therefore, the interpretative
guidelines allow a physician to review and sign a 25-percent sample of
outpatient records for patients under the care of a nonphysician
practitioner.
Nonphysician practitioners recently brought to our attention their
concerns regarding their ability to practice under their State laws
governing scope of practice. Particularly, the nonphysician
practitioners believe the current regulations and guidelines impede
their ability to practice in CAHs. Certified nurse midwives, NPs, and
CNSs disagree with the need for a physician to review records of
patients that have been in their care when State law permits them to
practice independently.
MedPAC, in its June 2002 Report to Congress, stated that certified
nurse midwives, NPs, CNSs, and PAs are health care practitioners who
furnish many of the same health care services traditionally provided by
physicians, such as diagnosing illnesses, performing physical
examinations, ordering and interpreting laboratory tests, and providing
preventive health services. In many States, advance practice nurses are
permitted to practice independently or in collaboration with a
physician. MedPAC reported that NPs have independent practice authority
in 21 States, and CNSs have independent practice authority in 20
States. PAs, by law, must work under the supervision of a physician.
Based on the American Medical Association's guidelines for PAs, the
definition of supervision varies by State. Generally, the physician
assistant is a representative of the physician, treating the patient in
the style and manner developed and directed by the supervising
physician.
MedPAC further reported that several studies have shown comparable
patient outcomes for the services provided by physician and
nonphysician practitioners. MedPAC reported that research conducted by
Mundinger et al.\2\ in 2000, Brown and Grimes \3\ in 1993, Ryan in
1993,\4\ and the Office of Technology Assessment \5\ in 1986 has shown
that nonphysician practitioners can perform about 80 percent of the
services provided by primary care physicians with comparable quality. A
randomized trial of physicians and NPs providing care in ambulatory
care settings who had the same authority, responsibilities,
productivity, and administrative requirements were shown to have
comparable patient outcomes (see pages 5 and 11 of the June 2002 MedPAC
report). Nonphysician practitioners are trained with the expectation
that they will exercise a certain degree of autonomy when providing
patient care. About 90 percent of NPs and 50 percent of PAs provide
primary care.
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\2\ Mundinger, M.O., Kane, R.I., Lenez, E.R., et al., Primary
Care Outcomes in Patients Treated by Nurse Practitioners or
Physicians, A Randomized Trial, The Journal of the American Medical
Association, January 5, 2000, Vol. 283, No. 1, pages 59-68.
\3\ Brown, S.A. and Grimes, D.E., Nurse Practitioners and
Certified Nurse Midwives: A Meta Analysis of Studies on Nurses in
Primary Care Roles, American Nurses Association, Washington, DC,
March 1993.
\4\ Ryan, S.A., Nurse Practitioners: Educational Issues,
Practice Styles, and Service Barriers. In Clawson, D.K., Osterweis,
M., eds: The Role of Physician Assistants and Nurse Practitioners in
Primary Health Care Association of Academic Health Centers,
Washington, DC, 1993.
\5\ Office of Technology Assessment, U.S. Congress: Nurse
Practitioners, Physician Assistants, and Certified Nurse Midwives: A
Policy Analysis, Health Technology Case Study 37, Washington, DC,
U.S. Government Printing Office, 1986.
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We believe sufficient control and oversight of these nonphysician
practitioners is generated by State laws which allow independent
practice authority. However, we remain concerned that, in those States
without independent practice laws, we have a responsibility to continue
to ensure the
[[Page 68713]]
safety and quality of services provided to Medicare beneficiaries.
Therefore, in the CY 2006 OPPS proposed rule (70 FR 42753), we
proposed to revise the regulation at Sec. 485.631(b)(1)(iv) and to add
new paragraphs (b)(1)(v) and (b)(1)(vi) to Sec. 485.631 to defer to
State law regarding the review of records for outpatients cared for by
nonphysician practitioners. We proposed that if State law allows these
practitioners to practice independently, we would not require
physicians to review and sign medical records of outpatients cared for
by these nonphysician practitioners in CAHs. However, for those States
that do not allow independent practice of nonphysician practitioners,
we proposed to continue to maintain the requirement that periodic
review is performed by the physician on outpatient records under the
care of a nonphysician practitioner in a CAH. We believe a review at
least every 2 weeks provides a sufficient time period without unduly
imposing an administrative burden on the physician or the CAH. In
addition, we proposed to allow the CAH to determine the sample size of
the reviewed records in accordance with current standards of practice
to allow the CAH flexibility in adapting the review to its particular
circumstances. Specifically, we proposed that the physician
periodically (that is, at least once every 2 weeks) reviews and signs a
sample of the outpatient records of nonphysician practitioners
according to the facility policy and current standards of practice. We
proposed to still require periodic review and oversight of all
inpatient records by physicians.
C. Public Comments Received on the Proposed Rule and Our Responses
We received 11 public comments concerning our proposed revision of
Sec. 485.631(b)(1)(iv) and the addition of Sec. Sec. 485.631(b)(1)(v)
and (b)(1)(vi).
Comment: The majority of commenters supported our proposal to defer
to State law regarding the need for physicians to review and sign the
medical records for outpatients cared for by nonphysician practitioners
in CAHs. The commenters also stated that CMS should extend the
application of this policy to physician review of inpatient records for
patients cared for by nonphysician practitioners.
Response: We appreciate the commenters' support of our proposed
policy change to defer to State law for physician oversight of
outpatients cared for by nonphysician practitioners in CAHs. However,
we believe the statute is very specific as to the oversight requirement
for inpatients treated by a nonphysician practitioner in a CAH. As we
stated in the proposed rule, section 1820(c)(2)(B)(iv)(III) of the Act
provides that CAH inpatient care provided by a PA, NP, or CNS is
subject to the oversight of a physician. Therefore, we will still
require physicians to periodically review and sign medical records of
all inpatients cared for by a nonphysician practitioner.
Comment: Two commenters stated that, given the growing clinical
independence of NPs, they have concern with CMS adding additional
Federal requirements for patient record reviews that go beyond existing
State licensure laws. Some commenters stated that most States do not
use the term ``independent practice,'' but instead define independent
practice as the practitioner functioning autonomously. Another
commenter stated that some States do not address independent practice
and, instead, describe their oversight agreement as a ``collaborative''
agreement between the physician and the nonphysician practitioner.
Response: We share the commenters' concern with imposing
requirements that do not increase the safety and health outcomes of
patients. We proposed the new policy to eliminate the requirement for a
physician to review and sign all medical records of outpatients (or a
random sample of 25 percent for CAHs with a high volume of outpatients)
cared for by a nonphysician practitioner to provide CAHs with the
flexibility to comply with State laws for outpatient oversight. We
believe that sufficient control and oversight of nonphysician
practitioners are generated by State laws.
We also believe that the proposed policy on physician oversight of
outpatient care provided by nonphysician practitioners allows for
collaborative arrangements. Nonphysician practitioners who are required
by State law to have a collaborative agreement with a physician would
be expected to follow any State law, current standards of practice, and
the CAH's policies concerning physicians collaborating with
nonphysician practitioners who provide care for outpatients. We further
understand that, in many instances, the terms ``autonomous'' and
``independent'' are synonymous. Although PAs are not considered
independent practitioners because they always work under physician
supervision, PAs perform their duties with a high degree of autonomy in
providing patient care and making medical decisions. Based on these
comments, and to provide clarity, we are removing the word
``independently'' from the final regulation at Sec. 485.63(b)(1)(v)
and (vi) and further revising the regulation to state that, where State
law requires record reviews or co-signatures, or both, by a
collaborating physician, physicians must periodically, but not less
than every 2 weeks, review and sign a sample of outpatient records of
patients who were cared for by nonphysician practitioners in accordance
with the policies of the CAH and current standards of practice. In
addition, where State law does not require record reviews or co-
signatures, or both, by a collaborating physician, physician are not
required to review and sign outpatient records of patients who were
cared for by nonphysician practitioners.
D. Final Policy
After carefully considering the public comments received, we are
adopting the proposed policy changes as final with the following
modifications: We are revising the regulation at Sec. 485.63(b)(1)(v)
and (vi) by removing references to independent practice. We are further
providing that physicians must review and sign a sample of outpatient
records periodically, but not less than every 2 weeks, only if State
law requires such record reviews or co-signatures, or both, by a
collaborating physician.
XVII. Files Available to the Public Via the Internet
Addenda A and B to this final rule with comment period provide
various data pertaining to CY 2006 payment for services under the OPPS.
In previous years, we have listed in Addendum B hundreds of HCPCS codes
describing services that are not paid under the hospital OPPS. To
conserve resources and to make Addendum B more relevant to the OPPS, in
this final rule with comment period that updates the OPPS for CY 2006,
we are including in Addendum B only the HCPCS codes for services that
are paid under the OPPS, as well as HCPCS codes that will be
discontinued in CY 2006. The HCPCS codes published in Addendum B to
this final rule with comment period, as well as HCPCS codes for items
or services furnished in a hospital outpatient setting that are paid
under a fee schedule or payment methodology other than the OPPS, and
HCPCS codes for items or services not recognized or covered by
Medicare, are available to the public on the CMS Web site at: http://www.cms.hhs.gov/providers/hopps.
For the convenience of the public, we are also including on this
same CMS
[[Page 68714]]
Web site, in a format that can be readily downloaded and manipulated, a
table that displays the HCPCS data in Addendum B sorted by APC
assignment, which is identified on the Web site as Addendum C. In
addition, we are including on the CMS Web site, in a format that can be
easily downloaded and manipulated, Addendum A.
We note that in the CY 2006 OPPS proposed rule, we included, as
Addenda H, I, J, K, L, M, N, and O, reprints of wage index related
tables from the IPPS that would be used for the OPPS for CY 2006. In
this final rule with comment period, we are not reprinting these tables
as they were issued in the final FY 2006 IPPS rule, and corrected.
Rather, we are providing a link on the CMS Web site at: http://www.cms.hhs.gov/providers/hopps to all of the FY 2006 IPPS wage index
related tables, except for the table containing the out-migration wage
adjustment data referenced in section II.D. of this preamble. The out-
migration table is presented as Addendum L in this final rule with
comment period. For additional assistance, contact Rebecca Kane, (410)
786-0378.
XVIII. Collection of Information Requirements
In the CY 2006 OPPS proposed rule, we solicited public comments on
the following information collection requirement and the associated
burden that is subject to the Paperwork Reduction Act of 1995 (PRA):
Section 485.631(b)(1)(iv), (b)(1)(v), and (b)(1)(vi)--Condition of
Participation: Staffing and Staff Responsibilities
In the proposed rule, we proposed to revise Sec. 485.631(b)(1)(iv)
and add new Sec. Sec. 485.631(b)(v) and (vi) of the regulations to
require, as a condition of participation for a CAH, that a doctor of
medicine or osteopathy (1) periodically review and sign the records of
all inpatients cared for by nurse practitioners, clinical nurse
specialists, certified nurse midwives, or physician assistants; and (2)
periodically, but not less than every 2 weeks, review and sign a sample
of outpatient records of patients cared for by nurse practitioners,
clinical nurse specialists, certified nurse midwives, or physician
assistants according to the policy and standard practice of the CAH
when State law does not allow these nonphysician practitioners to
practice independently. In addition, we proposed to provide that a
doctor of medicine or osteopathy is not required to review and sign
outpatient records of patients cared for by nurse practitioners,
clinical nurse specialists, certified nurse midwives, or physician
assistants when State law allows these nonphysician practitioners to
practice independently.
Based on public comments received on the proposed policy changes in
Sec. 485.631(b)(1), in this final rule with comment period, we have
revised the proposed section to remove the term ``independently'' and
to specify that where State law requires record review or co-
signatures, or both, by a collaborating physician, physicians must
review and sign a sample of outpatient records of patients who were
cared for by nonphysician practitioners in accordance with the policies
of the CAH and current standards of practice. We refer the readers to
section XVI.C. of this preamble for a fuller discussion of these final
changes.
The information collection requirements associated with these
provisions are subject to the PRA. However, the collection requirement
is currently approved under OMB control number 0938-0328 with an
expiration date of January 31, 2008.
XIX. Regulatory Impact Analysis
A. OPPS: General
We have examined the impacts of this final rule with comment period
as required by Executive Order 12866 (September 1993, Regulatory
Planning and Review), the Regulatory Flexibility Act (RFA) (September
19, 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.
1. Executive Order 12866
Executive Order 12866 (as amended by Executive Order 13258, which
merely reassigns responsibility of duties) 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).
We estimate that the effects of the provisions that will be
implemented by this final rule with comment period will result in
expenditures exceeding $100 million in any 1 year. We estimate the
total increase (from changes in this final rule with comment period as
well as enrollment, utilization, and case-mix changes) in expenditures
under the OPPS for CY 2006 compared to CY 2005 to be approximately $1.4
billion. Therefore, this final rule with comment period is an
economically significant rule under Executive Order 12866, and a major
rule under 5 U.S.C. 804(2).
2. Regulatory Flexibility Act (RFA)
The RFA requires agencies to determine whether a rule would have a
significant economic impact on a substantial number of small entities.
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 by
nonprofit status or by having revenues of $6 million to $29 million in
any 1 year (65 FR 69432).
For purposes of the RFA, we have determined that approximately 37
percent of hospitals would be considered small entities according to
the Small Business Administration (SBA) size standards. We do not have
data available to calculate the percentages of entities in the
pharmaceutical preparation manufacturing, biological products, or
medical instrument industries that would be considered to be small
entities according to the SBA size standards. For the pharmaceutical
preparation manufacturing industry (NAICS 325412), the size standard is
750 or fewer employees and $67.6 billion in annual sales (1997 business
census). For biological products (except diagnostic) (NAICS 325414),
with $5.7 billion in annual sales, and medical instruments (NAICS
339112), with $18.5 billion in annual sales, the standard is 50 or
fewer employees (see the standards Web site at http://www.sba.gov/regulations/siccodes/). Individuals and States are not included in the
definition of a small entity.
3. Small Rural Hospitals
In addition, section 1102(b) of the Act requires us to prepare a
regulatory impact analysis if a 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. With
the exception of hospitals located in certain New England counties, for
purposes of section 1102(b) of the Act, we previously defined a small
rural hospital as a hospital with fewer than 100 beds that is located
outside of a Metropolitan Statistical Area (MSA) (or New England County
Metropolitan Area (NECMA)). However, under the new labor market
definitions that we adopted in the November 15, 2004 final rule with
comment period, for CY 2005 (consistent with the FY
[[Page 68715]]
2005 IPPS final rule), we no longer employ NECMAs to define urban areas
in New England. Therefore, we now define a small rural hospital as a
hospital with fewer than 100 beds that is located outside of an MSA.
Section 601(g) of the Social Security Amendments of 1983 (Pub. L. 98-
21) designated hospitals in certain New England counties as belonging
to the adjacent NECMA. Thus, for purposes of the OPPS, we classify
these hospitals as urban hospitals. We believe that the changes in this
final rule with comment period will affect both a substantial number of
rural hospitals as well as other classes of hospitals and that the
effects on some may be significant. Therefore, we conclude that this
final rule with comment period will have a significant impact on a
substantial number of small entities.
4. Unfunded Mandates
Section 202 of the Unfunded Mandates Reform Act of 1995 (Pub. L.
104-4) also requires that agencies assess anticipated costs and
benefits before issuing any rule that may result in a single
expenditure in any 1 year by State, local, or tribal governments, in
the aggregate, or by the private sector, of $120 million. This final
rule with comment period does not mandate any requirements for State,
local, or tribal governments. This final rule with comment period also
does not impose unfunded mandates on the private sector of more than
$120 million dollars.
5. Federalism
Executive Order 13132 establishes certain requirements that an
agency must meet when it publishes any rule (proposed or final rule)
that imposes substantial direct costs on State and local governments,
preempts State law, or otherwise has Federalism implications.
We have examined this final rule with comment period in accordance
with Executive Order 13132, Federalism, and have determined that it
will not have an impact on the rights, roles, and responsibilities of
State, local or tribal governments. As reflected in Table 39, the
impact analysis shows that payments to governmental hospitals
(including State, local, and tribal governmental hospitals) will
increase by 1.9 percent under this final rule with comment period.
Comment: Several commenters noted that OPPS is the only major
Medicare payment system that does not include a teaching adjustment and
urged CMS to compare the unit costs of teaching hospitals with other
types of hospitals in order to support a teaching adjustment to the
OPPS. One commenter suggested that such a study was necessary in light
of the lower average payment increase estimated for major teaching
hospitals in the proposed rule, 0.6 percent. The commenter hypothesized
that teaching hospitals are more dependent on pass-through, outlier,
and device-dependent APC payments, for which payments are less stable
than for other hospitals, and that this is one reason for an
adjustment. Finally, the commenter cited the statement in the April 7,
2000 final rule, where CMS indicated that it would study cost and
payment differentials among hospitals, including teaching facilities,
once there was reliable claims data under the OPPS.
Response: We do not believe that a study of the unit costs of
teaching hospitals relative to other classes of hospitals is necessary
at this time. As we stated in our April 7, 2000 final rule, we believe
it is important to monitor ongoing trends for specific classes of
hospitals. However, we also believe that such studies are especially
warranted when hospitals experience a negative increase in payments. In
this specific instance, major teaching hospitals are projected to
experience an overall increase in payments of 1.0 percent. This
increase is lower than the market basket update to the conversion
factor because it reflects extra payments for drugs authorized by Pub.
L. 108-173 for 2 years that expire in CY 2006. For the past 2 years,
teaching hospitals have been receiving more payment for drugs than
budget neutrality would allow. The increase in total payments for
teaching hospitals is less this year because the provision allowing
extra drug payments expires. Without considering these expiring
payments for drugs, major teaching hospitals are projected to receive a
3.5 percent increase in total payments and minor teaching hospitals are
projected to experience an increase of 4.1 percent. In light of such
large increases, we do not believe that a study of unit costs for
teaching hospitals is necessary. In addition, we are not convinced that
a reliance on pass-through, outlier, or device-dependent APCs is a
reason to propose an adjustment. We believe that the source of payments
is less important than total payments for each hospital.
B. Impact of Changes in This Final Rule With Comment Period
We are adopting as final several proposed changes to the OPPS that
are required by the statute. We are required under section
1833(t)(3)(C)(ii) of the Act to update annually the conversion factor
used to determine the APC payment rates. We are also required under
section 1833(t)(9)(A) of the Act to revise, not less often than
annually, the wage index and other adjustments. In addition, we must
review the clinical integrity of payment groups and weights at least
annually. Accordingly, in this final rule with comment period, we are
updating the conversion factor and the wage index adjustment for
hospital outpatient services furnished beginning January 1, 2006, as we
discuss in sections II.C. and II.D., respectively, of this preamble. We
also are revising the relative APC payment weights using claims data
from January 1, 2004, through December 31, 2004 and updated cost report
information. In response to a provision in Pub. L. 108-173 that we
analyze the cost of outpatient services in rural hospitals relative to
urban hospitals, we are increasing payments to rural SCHs. Section
II.G. of this preamble provides greater detail on this rural
adjustment. Finally, we are removing three device categories from pass-
through payment status. In particular, section IV.C.1. of this preamble
discusses the expiration of pass-through status for devices.
Under this final rule with comment period, the update change to the
conversion factor as provided by statute will increase total OPPS
payments by 3.7 percent in CY 2006. The inclusion in CY 2006 of payment
for specific covered outpatient drugs within budget neutrality, and the
expiration of additional drug payment outside budget neutrality, result
in a net increase of 2.2 percent. The changes to the APC weights,
changes to the wage indices, and the introduction of a payment
adjustment for rural SCHs will not increase OPPS payments because these
changes to the OPPS are budget neutral. However, these updates do
change the distribution of payments within the budget neutral system as
shown in Table 39 and described in more detail in this section.
C. Alternatives Considered
Alternatives to the changes we are making and the reasons that we
have chosen the options that we have are discussed throughout this
final rule with comment period. Some of the major issues discussed in
this final rule with comment period and the options considered are
discussed below.
1. Option Considered for Payment Policy for Separately Payable Drugs
and Biologicals
As discussed in detail in section V.B.3 of this preamble, section
1833(t)(14)(A)(iii) of the Act requires
[[Page 68716]]
that payment for specified covered outpatient drugs in CY 2006, as
adjusted for pharmacy overhead costs, be equal to the average
acquisition cost for the drug for that year as determined by the
Secretary and taking into account the hospital acquisition cost survey
data collected by the GAO in CY 2004 and CY 2005. If hospital
acquisition cost data are not available, the law requires that payment
be equal to payment rates established under the methodology described
in section 1842(o), section 1847A, or section 1847B of the Act, as
calculated and adjusted by the Secretary as necessary.
The payment policy that we are adopting for CY 2006 is to pay for
the acquisition and pharmacy overhead costs of all separately payable
drugs and biologicals at the payment rates effective in the physician
office setting as determined using the manufacturer's average sales
price (ASP) methodology. (The payment rate in the physician office
setting is ASP+6 percent.) These payment rates listed in this final
rule with comment period are based on ASP data from the second quarter
of 2005, which were used to set payment rates for drugs and biologicals
in the physician office setting effective October 1, 2005, as these are
the most recent numbers available to us during the development of this
final rule with comment period. For the few drugs and biologicals,
other than radiopharmaceuticals as discussed earlier, where ASP data
are unavailable, we used the mean costs from the CY 2004 hospital
claims data to determine their packaging status and for ratesetting. We
believe that the ASP-based payment rates serve as the best proxy for
the average acquisition and pharmacy overhead costs for the drug or
biological because the rates calculated using the ASP methodology are
based on the manufacturers' sales prices from the second quarter of CY
2005 and take into consideration information on sales prices to
hospitals. Furthermore, payments for drugs and biologicals using the
ASP methodology will allow for consistency of drug pricing between the
physician offices and hospital outpatient departments.
In the CY 2006 proposed rule, we proposed paying for acquisition
costs of drugs alone at the rate of ASP+6 percent, with an additional 2
percent of ASP for the pharmacy overhead costs of drugs. At that time,
we also considered paying for separately payable drugs and biologicals
(before payment for pharmacy overhead) at ASP+3 percent, based on the
average relationship between the GAO mean purchase prices and ASP. We
also considered ASP+8 percent (again before payment for pharmacy
overhead) based on the average relationship between the mean costs from
hospital claims data and ASP.
In the proposed rule, we did not set payment rates for separately
payable drugs and biologicals at ASP+3 percent because the GAO data
reflect hospital acquisition costs from a less recent period of time,
as the midpoint of the time period when the survey was conducted is
January 1, 2004, and it will be difficult to update the GAO mean
purchase prices during CY 2006 and in future years. Because the changes
in drug payments are required to be budget neutral by law, we note that
paying for separately payable drugs and biologicals at ASP+3 percent
relative to ASP+6 percent would have made available approximately an
additional $60 million for other items and services paid under the
OPPS.
In the proposed rule, we also did not use ASP+8 percent to set
payment rates for drugs and biologicals in CY 2006. The statute
specifies that CY 2006 payments for specified covered outpatient drugs
are required to be equal to the ``average'' acquisition cost for the
drug. Payment at ASP+8 percent for drugs or biologicals, which
represented the average relationship between the mean cost from
hospital claims data and ASP at the time of the proposed rule, would
reflect the product's acquisition cost plus pharmacy overhead cost,
instead of acquisition cost only. Therefore, we believed at that time
that it would not be appropriate for us to use ASP+8 percent to set the
payment rates for drugs and biologicals in CY 2006.
In this final rule with comment period, we have updated data on
drug costs, and we have reviewed the available alternatives in the
light of those data. Based on our updated data, the average
relationship between the mean costs from hospital claims data and ASP
is now ASP+6 percent, rather than ASP+8 percent as in the proposed
rule. Therefore, in this final rule with comment period, we are
adopting the policy of paying both for the acquisition and pharmacy
overhead costs of separately payable drugs at a combined rate of ASP+6
percent. As in the proposed rule, we considered several alternatives.
We again considered paying for separately payable drugs and biologicals
at ASP+3 percent, reflecting the GAO survey data on drug costs.
However, payment at this level would reflect only the acquisition costs
of drugs and, therefore, would not be sufficient to pay for acquisition
and overhead costs. We also considered paying for the acquisition costs
of drugs alone at the proposed rate of ASP+6 percent. A commenter from
MedPAC noted that, given that ASP values have declined in recent
quarters and that the GAO's data did not fully reflect rebates, the
proposed drug payment rates of ASP+6 percent could be too high. In
addition, our more recent claims data indicate that this rate would
represent excessive payment for acquisition costs of drugs alone.
Instead, the hospital claims data suggest that ASP+6 percent is an
appropriate rate for the acquisition and pharmacy overhead costs of
drugs because pharmacy overhead costs are already built into hospital
charges for drugs. Therefore, we are adopting that policy in this final
rule with comment period.
Payment for drugs and biologicals under this methodology adds
approximately $500 million to the amount of drug costs that was
included in our budget neutrality calculation for the CY 2005 OPPS. The
effect of the addition of this amount is offset by reductions in
weights for other services that are largely a function of updated,
reduced CCRs.
2. Payment Adjustment for Rural SCHs
In section II.G. of this preamble, we are finalizing a 7.1 percent
payment adjustment increase for rural SCHs. Section 1833(t)(13)(A) of
the Act instructs the Secretary to conduct a study to determine if
rural hospital outpatient costs exceed urban hospital outpatient costs.
In addition, under section 1833(t)(13)(B) of the Act, the Secretary is
given authorization to provide an appropriate adjustment to rural
hospitals, by January 1, 2006, if rural hospital costs are determined
to be greater than urban hospital costs.
For this final rule with comment period, we conducted the same
analyses that we conducted for the proposed rule with updated data, and
in addition, we examined the relative costliness of several classes of
hospitals identified in public comments. We used regression analysis to
analyze the differences in the outpatient cost per unit between rural
and urban hospitals in order to compare costs after accounting for
other factors that influence unit cost, including local labor supply,
and complexity and volume of services.
As in the proposed rule, our initial regression analysis found that
all rural hospitals give some indication of having higher cost per
unit, after controlling for labor input prices, service-mix complexity,
volume, facility size, and type of hospital. In order to assess whether
the small difference in costs was uniform across rural hospitals or
whether all of the variation was
[[Page 68717]]
attributable to a specific class of rural hospitals, we included more
specific categories of rural hospitals in our explanatory regression
analysis. We divided rural hospitals into categories indicated by their
eligibility for the expiring hold harmless provision: rural SCHs, small
rural hospitals with 100 or fewer beds, and all other rural hospitals.
Further analysis revealed that only rural SCHs are more costly than
urban hospitals holding all other variables constant. We also examined
the relative costliness of other types of hospitals suggested by public
comments, including urban SCHs and MDHs. We observed no significant
difference in the unit costs of small rural hospitals with 100 or fewer
beds, all other rural hospitals, MDHs, urban SCHs, and all other urban
hospitals. Therefore, we are adopting a 7.1 percent payment increase
for rural SCHs on all services except drugs, biologicals, and those
paid under pass-through for CY 2006.
3. Change in the Percentage of Total OPPS Payments Dedicated to Outlier
Payments
In section II.H. of this preamble, we are changing the percentage
of total OPPS payments dedicated to outlier payments to 1.0 percent in
CY 2006 from the current policy of 2.0 percent. We also will continue
using a fixed-dollar threshold in addition to the threshold based on a
multiple of the APC amount, which we have applied since the beginning
of the OPPS. In response to findings reported by the MedPAC in its
March 2004 Report to Congress that the OPPS outlier policy based on a
multiple threshold only targeted outlier payments to simple and low
cost procedures. In the same report, MedPAC recommended eliminating the
entire outlier policy from the OPPS because the OPPS pays by service
rather than by case and, therefore, hospitals are already paid for
every increased service associated with a costly case. In addition,
cost variability is lower for expensive, complex procedures than less
expensive and simpler procedures. We implemented the fixed-dollar
threshold in the CY 2005 OPPS that targets outlier payments to complex
and expensive procedures that ultimately could impact beneficiary
access to services. Our decision to reduce the percentage of total
payments dedicated to outlier payments continues to refine our outlier
policy to improve its appropriateness for the OPPS. A reduction in the
percentage of total payment set aside for outlier payments with the
fixed-dollar threshold continues to target outlier payments to those
services where one costly occurrence could pose a financial risk for
hospitals, but limits these payments to the most complex and costly
services. At 1.0 percent, the OPPS outlier policy becomes catastrophic
insurance against an occurrence of a very costly service. At the same
time, reducing the percentage of total payments dedicated to outlier
payments increases the conversion factor, redistributing 1.0 percent of
total payments to almost all services.
Alternatives to this policy are either to remain at 2.0 percent or
to increase the percentage of payments dedicated to outliers to the
statutory limit of 3.0 percent. Increasing the percentage of payments
dedicated to outliers could target more payment to outliers, but is at
odds with OPPS payment by service rather than case. It is not possible
to eliminate outlier payments entirely without a statutory change.
D. Limitations of Our Analysis
The distributional impacts presented here are the projected effects
of the final policy changes, as well as the statutory changes that will
be effective for CY 2006, on various hospital groups. We estimate the
effects of individual policy changes by estimating payments per service
while holding all other payment policies constant. We use the best data
available but do not attempt to predict behavioral responses to our
policy changes. In addition, we do not make adjustments for future
changes in variables such as service volume, service-mix, or number of
encounters.
E. Estimated Impacts of This Final Rule With Comment Period on
Hospitals
The estimated increase in the total payments made under OPPS is
limited by the increase to the conversion factor set under the
methodology in the statute. The distributional impacts presented do not
include assumptions about changes in volume and service-mix. The
enactment of Pub. L. 108-173 on December 8, 2003, provided for the
payment of additional dollars in CY 2004 and CY 2005 to providers of
OPPS services outside of the budget neutrality requirement for
specified covered outpatient drugs. These provisions expire in CY 2006.
Pub. L. 108-173 also provided for additional payment outside of the
budget neutrality requirement for wage indices for specific hospitals
reclassified under section 508 through CY 2007. Table 39 shows the
estimated redistribution of hospital payments among providers as a
result of a new APC structure, wage indices, and adjustment for rural
SCHs, which are budget neutral; the estimated distribution of increased
payments in CY 2006 resulting from the combined impact of APC
recalibration, wage effects, the rural SCH adjustment, and the market
basket update to the conversion factor; and, finally, estimated
payments considering all payments for CY 2006 relative to all payments
for CY 2005, including the expiration of extra payment for specified
covered outpatient drugs outside budget neutrality and the change in
the percentage of total payments dedicated to outlier payments. Because
the expiring payments for drugs were not budget neutral, most classes
of hospitals will experience a positive update for CY 2006 that is
lower than the market basket update. In essence, the presence of extra
payment in previous years makes the increase for CY 2006 look
artificially low. We also estimate that a few classes of hospitals may
receive less payment in CY 2006. Because updates to the conversion
factor, including the update of the market basket, the removal of
additional money for pass-through payments, and a change in the
percentage of total payments dedicated to outlier payments are applied
uniformly, observed redistributions of payments in the impact table
largely depends on the mix of services furnished by a hospital (for
example, how the APCs for the hospital's most frequently furnished
services would change), the impact of the wage index changes on the
hospital, and the impact of the payment adjustment for rural SCHs.
However, total payments made under this system and the extent to which
this final rule with comment period redistributes money during
implementation would also depend on changes in volume, practice
patterns, and the mix of services billed between CY 2005 and CY 2006,
which CMS cannot forecast. Overall, the final OPPS rates for CY 2006
will have a positive effect for all hospitals paid under the OPPS.
Adopted changes will result in a 2.2 percent increase in Medicare
payments to all hospitals, exclusive of transitional pass-through
payments. Removing cancer and children's hospitals because their
payments are held harmless to the pre-BBA ratio between payment and
cost, suggests that adopted changes will result in a 2.3 percent
increase in Medicare payments to all other hospitals.
To illustrate the impact of the CY 2006 changes adopted in this
final rule with comment period, our analysis begins with a baseline
simulation model that uses the final CY 2005 weights, the FY 2005 final
post-reclassification IPPS wage indices, as subsequently corrected
[[Page 68718]]
and without additional increases resulting from section 508
reclassifications, and the final CY 2005 conversion factor. Columns 2,
3, and 4 in Table 39 reflect the independent effects of the APC
reclassification and recalibration changes, updated wage indices, and
the new adjustment for rural SCHs, respectively. These effects are
budget neutral, which is apparent in the overall zero impact in payment
for all hospitals in the top row. Column 2 shows the independent effect
of changes resulting from the reclassification of services codes among
APC groups and the recalibration of APC weights based on a complete
year of CY 2004 hospital OPPS claims data and more recent cost report
data. This column also shows the impact of incorporating drug payment
at 106 percent of ASP and, for radiopharmaceuticals, payment at cost,
within budget neutrality. We modeled the independent effect of APC
recalibration by varying only the weights, the final CY 2005 weights
versus the final CY 2006 weights, in our baseline model, and
calculating the percent difference in payments. Column 3 shows the
impact of updating the wage index used to calculate payment by applying
the final FY 2006 IPPS wage index, as subsequently corrected. The OPPS
wage index used in Column 3 does not include changes to the wage index
for hospitals reclassified under section 508 of Pub. L. 108-173. We
modeled the independent effect of updating the wage index by varying
only the wage index, using the final CY 2006 scaled weights, and a CY
2005 conversion factor that included a budget neutrality adjustment for
changes in wage effects between CY 2005 and CY 2006. Column 4 shows the
budget neutral impact of adding a 7.1 percent adjustment to payment for
services other than drugs, biologicals, and those receiving pass-
through payments to rural SCHs. We modeled the independent effect of
the payment adjustment for rural SCHs by varying only the presence of
the rural adjustment, using CY 2006 scaled weights, the FY 2006 wage
indices, and a CY 2005 conversion factor with budget neutrality
adjustments for the new wage index and the adjustment for rural SCHs.
Column 5 demonstrates the combined ``budget neutral'' impact of APC
recalibration, the wage index update, and the new adjustment for rural
SCHs on various classes of hospitals, as well as the impact of updating
the conversion factor with the market basket update. We modeled the
independent effect of budget neutrality adjustments and the market
basket update by using the weights and wage indices for each year to
model CY 2006 requirements, and using a CY 2005 conversion factor that
included the market basket update and budget neutrality adjustments for
differences in wages and the adjustment for rural SCHs.
Finally, Column 6 depicts the full impact of the CY 2006 policy on
each hospital group by including the effect of all the changes for CY
2006 and comparing them to all payments in CY 2005, including those
required by Pub. L. 108-173. Column 6 shows the combined budget neutral
effects of Columns 2 through 5, plus the impact of changing the
percentage of total payments dedicated to outlier payments to 1.0
percent, the impact of changing the percentage of total payments
dedicated to transitional pass-through payments to 0.17 percent, the
impact of expiring payments for drugs added on top of OPPS payments in
CY 2005 as a result of Pub. L. 108-173, and the continued presence of
payment for wage index increases for hospitals reclassified under
section 508 of Pub. L. 108-173.
We modeled the independent effect of all changes in Column 6 using
the final weights for CY 2005 with additional money for drugs
authorized by Pub. L. 108-173 and the final weights for CY 2006. The
wage indices in each year include wage index increases for hospitals
eligible for reclassification under section 508 of Pub. L. 108-173. We
used the final conversion factor for CY 2005 of $56.983 and the final
CY 2006 conversion factor of $59.511. Column 6 also contains simulated
outlier payments for each year. We used the charge inflation factor
used in the final FY 2006 IPPS rule of 7.21 percent to increase
individual costs on the CY 2004 claims to reflect CY 2005 dollars, and
we used the most recent overall CCR for each hospital as calculated for
the APC median setting process. Using the CY 2004 claims and a 7.21
percent charge inflation factor, we currently estimate that actual
outlier payments for CY 2005, using a multiple threshold of 1.75 and a
fixed-dollar threshold of $1,175 will be 1.15 percent of total
payments, which is .85 percent lower than the 2.0 percent that we
projected in setting outlier policies for CY 2005. Outlier payments of
only 1.15 percent appear in the CY 2005 comparison in Column 6. We used
the same set of claims and a charge inflation factor of 14.94 percent
to model the CY 2006 outliers at 1.0 percent of total payments using a
multiple threshold of 1.75 and a fixed-dollar threshold of $1,250.
Column 1: Total Number of Hospitals
Column 1 in Table 39 shows the total number of hospital providers
(4,222) for which we were able to use CY 2004 hospital outpatient
claims to model CY 2005 and CY 2006 payments by classes of hospitals.
We excluded all hospitals for which we could not accurately estimate CY
2005 or CY 2006 payment and entities that are not paid under the OPPS.
The latter entities include CAHs, all-inclusive hospitals, and
hospitals located in Guam, the U.S. Virgin Islands, and the State of
Maryland. This process is discussed in greater detail in section II.A.
of this preamble. At this time, we are unable to calculate a
disproportionate share (DSH) variable for hospitals not participating
in the IPPS. Hospitals for which we do not have a DSH variable are
grouped separately and generally include psychiatric hospitals,
rehabilitation hospitals, and long-term care hospitals. Finally,
section 1833(t)(7)(D) of the Act permanently holds harmless cancer
hospitals and children's hospitals to the proportion of their pre-BBA
payment relative to their costs. Because this final rule with comment
period will not impact these hospitals negatively, we removed them from
our impact analyses. We show the total number (4,162) of OPPS
hospitals, excluding the hold-harmless cancer hospitals and children's
hospitals, on the second line of the table.
Column 2: APC Recalibration
The combined effect of APC reclassification and recalibration,
including the payment for drugs and biologicals at 106 percent of ASP
for acquisition and pharmacy overhead costs, resulted in larger changes
in Column 2 than are typically observed for APC recalibration. Overall,
these changes have no impact on all urban hospitals, which show no
projected change in payments, although some classes of urban hospitals
experience decreases in payments. However, changes to the APC structure
for CY 2006 tend to favor, slightly, urban hospitals that are not
located in large urban areas. We estimate that large urban hospitals
will experience a decline of 0.7 percent, while ``other'' urban
hospitals experience an increase of 0.9 percent. Urban hospitals with
between 0 and 99 beds and between 100 and 199 beds experience
decreases, while the largest urban hospitals, those with beds greater
than 500 experience increases of 0.7 percent. With regard to volume,
all urban hospitals except those with the highest volume, experience
decreases in payments. The lowest
[[Page 68719]]
volume hospitals experience the largest decrease of 5.4 percent. Urban
hospitals providing the highest volume of services demonstrate a
projected increase of 0.2 percent as a result of APC recalibration.
Estimated decreases in payment for urban hospitals are also
concentrated in some regions, specifically, New England, Pacific, South
Atlantic, and Mountain, with the first two experiencing the largest
decreases of 1.0 each. On the other hand, a few regions experience
moderate increases. Urban hospitals in the East South Central and West
North Central regions experience increases of 1.6 and 2.3 percent,
respectively.
Overall, rural hospitals show a modest 0.2 percent decrease as a
result of changes to the APC structure, and this 0.2 percent decrease
appears to be concentrated in rural hospitals that are not rural SCHs,
which experience a 0.6 percent increase. Notwithstanding a modest
overall decline in payments, there is substantial variation among
classes of rural hospitals. Specifically, rural hospitals with less
than 100 beds and between 150 and 199 beds experience decreases, with
hospitals having less than 50 beds experiencing the largest decrease of
1.6 percent. Rural hospitals with greater than 200 beds experience the
largest increase of 1.6 percent. With regard to volume, all rural
hospitals, except those with the highest volume, experience decreases
in payments. The lowest volume hospitals experience the largest
decrease of 5.7 percent. Rural hospitals providing the highest volume
of services demonstrate a projected increase of 0.8 percent as a result
of APC recalibration. Decreases for rural hospitals occur in every
region except West North Central and the Middle Atlantic. The largest
decreases are observed in the Pacific (-1.8 percent), New England (-1.4
percent), and West South Central (-1.4 percent) regions. On the other
hand, rural hospitals in the Middle Atlantic and West North Central
regions experience increases of 1.8 and 3.5 percent, respectively.
Among other classes of hospitals, the largest observed impacts
resulting from APC recalibration include declines of 0.6 percent for
nonteaching hospitals and increases of 0.4 percent for major teaching
hospitals. Hospitals treating the most low-income patients (high DSH
percentage) and the least low-income patients demonstrate declines of
0.2 percent. Urban hospitals that are treating DSH patients and are
also teaching hospitals experience increases of 0.5 percent. We project
that hospitals for which a DSH percentage is not available, including
psychiatric hospitals, rehabilitation hospitals, and long-term care
hospitals will experience decreases in payments of 4.5 percent, and for
the urban subset, 5.9 percent. Classifying hospitals by type of
ownership suggests that proprietary and government hospitals will lose
1.1 and 0.1 percent, respectively, while voluntary hospitals will gain
0.2 percent.
Column 3: New Wage Indices
Changes introduced by the final FY 2006 IPPS wage indices will have
a modest impact in CY 2006, increasing payments to rural hospitals
slightly and having no effect overall on urban hospitals. We estimate
that rural SCHs will experience an increase in payments of 0.1 percent,
while all other rural hospitals experience an increase of 0.2 percent.
With respect to volume, rural hospitals with the least volume and rural
hospitals with moderate volume experience decreases of 0.1 and 0.2
percent, respectively. For both facility size and volume, no category
of rural hospitals experiences an increase greater than 0.3 percent.
Examining hospitals by region reveals slightly greater variability. We
estimate that rural hospitals in several regions will experience
decreases in payment up to 0.3 percent due to wage changes, including
the Middle Atlantic, South Atlantic, West North Central, and West South
Central regions. However, rural hospitals in the remaining regions
experience increases. We estimate that the New England region will see
the largest increase of 2.2 percent.
Overall, urban hospitals experience no change in payments as a
result of the new wage indices. With respect to facility size, we
estimate that urban hospitals with between 300 and 499 beds will
experience a decrease in payments of 0.2 percent. Urban hospitals with
less than 99 beds experience the largest increase of 0.2 percent. When
categorized by volume, urban hospitals with the largest volumes
experience no change in payment as a result of changes to the wage
index, and urban hospitals with the lowest volume experience a 0.4
percent increase in payment. We estimate that urban hospitals in all
but the Pacific, New England and the Middle Atlantic regions will
experience modest decreases due to wage changes of no more than 0.5
percent (except for urban hospitals in Puerto Rico, with a decrease of
1 percent). Urban hospitals in the Pacific and New England regions will
experience an increase of 1.2, and 0.2 percent, respectively. Urban
hospitals in the Middle Atlantic region will experience no change in
payments.
Looking across other categories of hospitals, we estimate that
updating the wage index will lead major teaching hospitals to lose 0.2
percent and hospitals without graduate medical education programs are
estimated to gain 0.1 percent. Hospitals serving between 0.0 and 0.10
percent of low-income patients lose up to 0.1 percent, whereas
hospitals serving other percentages of low-income patients experience
no change. Government, voluntary, and proprietary hospitals as classes
will experience no change in payment due to wage changes.
Column 4: New Adjustment for Rural SCHs
As discussed in section II.G. of this preamble, we have increased
payments for all services except drugs and biologicals to rural SCHs by
7.1 percent. This resulted in an adjustment to the conversion factor of
0.996. Targeting payments to these rural hospitals uniformly reduces
payments to all other hospitals by 0.4 percent. The uniform reduction
for all urban and other rural hospitals is evident in Column 4. The
periodic appearance of a - 0.3 among urban classes of hospitals is due
to the difference between the definition of rural used for this impact
table and the broader definition of rural employed for the adjustment
for rural SCHs. SCHs located in urban areas that are reclassified as
rural for wage index purposes are eligible for the adjustment. The
observed increase of 5.6 percent for rural SCHs is lower than 7.1
percent because drugs and biologicals do not receive the payment
adjustment. The remaining classes of rural hospitals show variable
increases that reflect the distribution of rural SCHs. The largest
increases are observed among rural hospitals with small numbers of
beds, with moderate volume, and regions in the western half of the
country.
Column 5: All Budget Neutrality Changes and Market Basket Update
The addition of the market basket update alleviates any negative
impacts on payments for CY 2006 created by the budget neutrality
adjustments made in Columns 2, 3, and 4, with the exception of
hospitals with the lowest volume of services and hospitals not paid
under IPPS, including psychiatric hospitals, rehabilitation hospitals,
and long-term care hospitals. In many instances, the redistribution of
payments created by APC recalibration offset those introduced by
updating the wage indices. However, in a few instances, negative APC
recalibration changes compound a reduction in payment from updating the
wage index. In addition,
[[Page 68720]]
all urban and rural hospitals that are not SCHs experience a decrease
in payment of 0.4 percent as a result of the payment adjustment for
rural SCHs.
We estimate that the cumulative impact of the budget neutrality
adjustments and the addition of the market basket update will result in
an increase in payments for urban hospitals of 3.3 percent, which is
less than the market basket update of 3.7 percent. Large urban
hospitals will experience an increase of 2.5 percent and other urban
hospitals will experience an increase of 4.2 percent. Most other
classes of urban hospitals experience updates lower than the market
basket update. Urban hospitals with the lowest volume experience a
negative market basket update, which is largely a function of the 5.4
percent decrease in payments attributable to changes to the APC
structure. Urban hospitals with moderate volume will also lose the bulk
of the market basket update as a result of a 2.9 percent decrease
resulting from the APC recalibration and the addition of the payment
adjustment for rural SCHs. The same compounding effect holds true for
urban hospitals in the New England and South Atlantic regions and
Puerto Rico, which experience the lowest overall increases of 2.5, 2.3,
and 1.4 percent, respectively. Urban hospitals in the East South
Central and West North Central regions experience increases in payment
for CY 2006 above the market basket update.
We estimate that the cumulative impact of budget neutrality
adjustments and the market basket update will result in an overall
increase for rural hospitals of 5.7 percent, with rural SCHs
experiencing an update of 10.2 percent and other rural hospitals
experiencing an update of 2.9 percent. In general, rural hospitals with
more than 50 beds and the highest volume rural hospitals experience
increases of more than 5.3 percent, which generally results from the
combined impact of increases in payment from APC recalibration, wage
changes, and the new adjustment for rural SCHs. We estimate that low-
volume rural hospitals will experience a decrease in payments of 1.1
percent, which results from the combined impact of decreased payments
attributable to APC recalibration and wage index update that are larger
than the estimated 1.2 percent increase from the adjustment for rural
SCHs. Rural hospitals also demonstrate large increases by region. We
estimate that all regions except East South Central will experience
increases larger than the market basket update. For these regions, in
aggregate, the payment adjustment for rural SCHs compensates for
observed decreases in payment due to APC recalibration or the update
for the wage indices.
The changes across columns for other classes of hospitals are
fairly moderate and most show updates relatively close to the market
basket update with the exception of hospitals not paid under the IPPS.
These hospitals show negative payment updates as a result of negative
payment changes for APC recalibration and the adjustment for rural
SCHs. Proprietary hospitals also show an increase much less than the
market basket as a result of negative payments under APC recalibration.
Column 6: All Changes for CY 2006
Column 6 compares all changes for CY 2006 to final payment for CY
2005 and includes any additional dollars resulting from provisions in
Pub. L. 108-173 in both years, changes in outlier payment percentages
and thresholds, and the difference in pass-through estimates. Overall,
we estimate that hospitals will gain 2.2 percent under this final rule
with comment period in CY 2006 relative to total spending in CY 2005,
which included Pub. L. 108-173 dollars for drugs and wage indices. When
we excluded cancer and children's hospitals, which are held harmless,
the gain is 2.3 percent. While hospitals receive the 3.7 percent
increase due to the market basket update appearing in Column 5 and the
additional 0.85 percent in outlier payments that we estimate as not
being paid in CY 2005, we estimate that hospitals also experience an
overall 2.25 percent loss due to the expiration of additional payment
for drugs in CY 2005, as well as a 0.07 percent reduction due to the
change in estimated pass-through payments for CY 2006. That is, without
the net additional 0.78 (0.85-0.07) percent increase in outlier
payments due to lower than expected payment for outliers in CY 2005,
hospitals will receive a positive increase in payments of 1.5 percent.
Paying the net additional 0.78 percent in CY 2006 increases overall
gains to 2.2 (rounded 2.23) percent, which is lower than the market
basket update. The change in the outlier thresholds has a small
redistributive impact by class of hospital and the vast majority of
redistributive impacts observed between Columns 5 and 6 can be
attributed to the loss of additional payment for drugs outside budget
neutrality required by Pub. L. 108-173. The redistributive impact of
the change in the outlier target from 2 to 1 percent is discussed in
greater detail under section XIX.F. of this preamble.
In general, urban hospitals appear to experience the largest
negative impacts from the combined effects of losing additional
payments for drugs, the decreases in payment from the payment
adjustment for rural SCHs, and, frequently, negative changes in
payments due to APC recalibration. We estimate that hospitals in large
urban areas will gain 1.2 percent in CY 2006 and hospitals in other
urban areas will gain 2.8 percent. We estimate that low-volume urban
hospitals will experience a decrease in total payments of 1.0 percent
between CY 2005 and CY 2006. This negative update includes the
cumulative effect of negative payments from APC recalibration, a
negative impact of the payment adjustment for rural SCHs, a loss of
payments outside budget neutrality for drugs and a loss of some outlier
payments. All other classes of urban hospitals show increases between
0.4 and 3.8 percent. We note that urban hospitals in the East South
Central and West North Central regions are estimated to receive
slightly more than the market basket in spite of expiring drug
payments, the largest increases for urban hospitals.
Overall, rural hospitals experience larger increases than those
observed for urban hospitals because the payment adjustment for rural
SCHs tends to buffer the loss of payments for drugs from Pub. L. 108-
173. However, this adjustment is only for rural SCHs. Overall, we
estimate that rural hospitals will experience an increase in payments
of 3.9 percent. However, we also estimate that rural SCHs will
experience an increase of 7.6 percent, and that the other rural
hospitals will only experience an increase of 1.5 percent. With the
exception of low-volume rural hospitals, no category of rural hospitals
experiences a decrease in payments between CY 2005 and CY 2006, and a
few groups of rural hospitals show increases comparable to, or better
than, the market basket. For example, rural hospitals with more than
100 beds experience increases of at least 4.1 percent. Rural hospitals
with moderate to high volume experience increases of no less than 2.8
percent. Across the regions, all rural hospitals except those in the
New England and East North Central regions experience increases in
payments greater than 3.2 percent. Rural hospitals in the West North
Central region experience an increase of 6.1 percent. We project that
low-volume rural hospitals, like low-volume urban hospitals, will
experience a decrease in payments of 2.2 percent (due to decreases in
payments for mid-level and high-level emergency visits).
[[Page 68721]]
Among other classes of hospitals, we estimate that hospitals not
paid under the IPPS (DSH Not Available) will experience decreases in
payments between CY 2005 and CY 2006 of 1.5 percent. Factoring in
expiring payments for drugs through Pub. L. 108-173, we estimate that
major teaching hospitals will experience an increase of 1.0 percent.
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F. Estimated Impact of the Change in Outlier Policy
As stated in section II.H. of this preamble, we are changing the
percentage of payments that we have set aside for outlier payments from
2.0 percent to 1.0 percent. In order to accommodate this reduction in
outlier payments, we increased the fixed-dollar threshold to $1,250.
This threshold changed from the $1,575 in the proposed rule because we
used updated claims, final rule APC payment rates, an updated charge
inflation factor of 14.94 percent, and each hospital's overall CCR that
we calculate as part of our APC median estimation process.
Table 40 shows the impact of reducing the amount of total aggregate
OPPS payments set aside for outlier payments to 1.0 percent of CY 2006
payments. Column 2 compares estimated CY 2006 total payments with a 1.0
percent outlier policy and an additional 1.0 percent of total payments
in the conversion factor with estimated CY 2006 total payment under a
2.0 percent policy. Using updated claims data, a new charge inflation
factor, new APC payment rates, and CCRs, we estimate that the fixed-
dollar threshold associated with a 2.0 percent outlier policy would
have been $550. We used this fixed-dollar threshold to model the 2.0
percent outlier policy. All other components of the payment system are
held constant, including the multiple threshold of 1.75 times the APC
payment rate. This impact differs from any impact attributable to
outlier payments in Table 40 because the comparison here is within
estimates of CY 2006 and not across CY 2005 and CY 2006. We expect that
this policy change would slightly redistribute payments away from
hospitals receiving a lot of outlier payments to hospitals generally
not receiving outlier payments. We also would expect the losses to be
concentrated in a few classes of hospitals and the benefits to be
diffused across all other classes of hospitals.
Table 40 depicts small changes in total payments across all classes
of hospitals from reducing the amount of total payments set aside for
outlier payments from 2.0 percent to 1.0 percent. As expected, modest
reductions in total payments are observed for hospitals that probably
receive a larger percentage of their total payments as outlier
payments, including major teaching hospitals and large urban hospitals.
We estimate that major teaching hospitals will experience a decrease of
0.7 percent in total payments and that large urban hospitals will
experience a decrease of 0.1 percent in total payments. These same
hospitals are also responsible for the 0.4 percent decrease in total
payments for urban hospitals with more than 500 beds, the 0.1 percent
decrease for teaching hospitals with a disproportionate share of low-
income patients, and the 0.5 percent decrease for hospitals serving a
large percentage of low-income patients. Also evident are slight
increases in total payments for most other hospitals arising from the
increase in the conversion factor. For example, rural hospitals gain
0.2 percent overall. The
[[Page 68724]]
decreases in total payments for low-volume rural and low-volume urban
hospitals appear to be attributable to a concentrated loss of outlier
payments for moderate cost and moderate complexity services that fail
to meet the higher fixed-dollar threshold.
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G. Accounting Statement
As required by OMB Circular A-4 (available at http://www.whitehousegov/omb/circulars/a004/a-4.pdf, in Table 41 below, we
have prepared an accounting statement showing the classification of the
expenditures associated with the provisions of this final rule with
comment period. This table provides our best estimate of the increase
in Medicare payments under the OPPS as a result of the changes
presented in this final rule with comment period based on the data for
4,222 hospitals. All expenditures are classified as transfers to
Medicare providers (that is, OPPS).
Table 41.--Accounting Statement: Classification of Estimated
Expenditures From CY 2005 to CY 2006
------------------------------------------------------------------------
Category Transfers
------------------------------------------------------------------------
Annualized Monetized Transfers......... $660 Billion.
From Whom to Whom...................... Federal Government to OPPS
Medicare Providers.
Category............................... Reduction in Costs.
Annualized Monetized Reduction......... $436 Million.
From Whom to Whom...................... Reduction in Payments from
Beneficiaries to Federal
Government.
Total.............................. $1.1 Billion.
------------------------------------------------------------------------
H. Estimated Impacts of This Final Rule With Comment Period on
Beneficiaries
For services for which the beneficiary pays a copayment of 20
percent of the payment rate, the beneficiary share of payment will
increase for services for which OPPS payments will rise and will
decrease for services for which OPPS payments will fall. For example,
for a mid-level office visit (APC 0601), the minimum unadjusted
copayment in CY 2005 was $11.22. In this final rule with comment
period, the minimum unadjusted copayment for APC 601 is $12.05 because
the OPPS payment for the service will increase under this final rule
with comment period, and there is no national unadjusted copayment. In
[[Page 68727]]
another example, for a Level IV Needle Biopsy (APC 0037), in the CY
2005 OPPS, the national unadjusted copayment in CY 2005 was $234.20,
and the minimum unadjusted copayment was $106.47. In this final rule
with comment period, the national unadjusted copayment for APC 0037 is
$228.76 because the national unadjusted copayment is limited to 40
percent of the APC payment rate for CY 2006, as discussed in section
II. of the preamble to this final rule with comment period. The minimum
unadjusted copayment for APC 0037 is $114.38. However, in all cases,
the statute limits beneficiary liability for copayment for a service to
the inpatient hospital deductible for the applicable year. For 2006,
the inpatient deductible is $952.
In order to better understand the impact of changes in copayment on
beneficiaries we modeled the percent change in total copayment
liability using CY 2004 claims. We estimate that total beneficiary
liability for copayments will decline as an overall percentage of total
payments from 33 percent in CY 2005 to 29 percent in CY 2006. This
represents a decline in beneficiary liability of more than $400 million
from the CY 2005 OPPS to the CY 2006 OPPS.
Conclusion
The changes in this final rule with comment period will affect all
classes of hospitals. Some hospitals experience significant gains and
others less significant gains, but almost all hospitals will experience
positive updates in OPPS payments in CY 2006. Table 39 demonstrates the
estimated distributional impact of the OPPS budget neutrality
requirements and an additional 2.2 percent increase in payments for CY
2006, after considering the expiring provision for additional drug
payment under Pub. L. 108-173 and a change in the percentage of total
payments dedicated to outliers and transitional pass-through payments,
exclusive of transitional pass-through payments, across various classes
of hospitals. The accompanying discussion, in combination with the rest
of this final rule with comment period constitutes a regulatory impact
analysis.
In accordance with the provisions of Executive Order 12866, this
final rule with comment period was reviewed by the Office of Management
and Budget.
XX. Waiver of Proposed Rulemaking
We ordinarily publish a notice of proposed rulemaking in the
Federal Register and invite public comment on the proposed rule. The
notice of proposed rulemaking includes a reference to the legal
authority under which the rule is proposed, and the terms and
substances of the proposed rule or a description of the subjects and
issues involved. This procedure can be waived, however, if an agency
finds good cause that a notice-and-comment procedure is impracticable,
unnecessary, or contrary to the public interest and incorporates a
statement of the finding and its reasons in the rule issued.
As established in regulations, HCPCS codes are used to identify
services for which predetermined amounts are paid under the OPPS (42
CFR 419.2(a)). The HCPCS is a national coding system comprised of Level
I (CPT) codes and Level II (HCPCS National Codes) that are intended to
provide uniformity to coding procedures, services, and supplies across
all types of medial providers and suppliers. Level I (CPT) codes are
copyrighted by the AMA and consist of several categories, including
Category I codes which are five-digit numeric codes, and Category II
codes which are temporary codes to track emerging technology, services,
and procedures, as we discuss elsewhere in this preamble.
AMA issues an annual update of the CPT code set each fall, with
January 1 as the effective date for implementing the updated CPT codes.
The HCPCS, including both Level I and Level II codes, is similarly
updated annually on a calendar year basis. Annual coding changes are
not available to the public until the fall immediately preceding the
annual January update of the OPPS. Because of the timing of the release
of these codes, it is impracticable for us to provide prior notice and
solicit comment on these codes in advance of the publication of the
annual final rule that implements the OPPS update. Yet it is imperative
that these codes be accounted for and recognized timely under the OPPS
for payment because services represented by these codes will be
provided to Medicare beneficiaries by outpatient hospital departments
once issued by the applicable group. Moreover, as we explain above,
regulations implementing HIPAA (42 CFR parts 160 and 162) require that
the HCPCS be used to report health care services, including outpatient
services paid under the OPPS. Therefore, we believe it would be
contrary to the public interest to delay recognition of these codes as
payment could not then be made for those services provided under these
codes and public access to these services would be impeded.
Therefore, for good cause, we waive notice and comment rulemaking
procedures with respect to these codes noted in Addendum B with the
status indicator ``NI.'' However, we are providing a 60-day public
comment period on these codes.
List of Subjects
42 CFR Part 419
Hospitals, Medicare, Reporting and recordkeeping requirements.
42 CFR Part 485
Grant program-health, Health facilities, Medicaid, Medicare,
Reporting and recordkeeping requirements.
0
For the reasons stated in the preamble of this final rule with comment
period, the Centers for Medicare & Medicaid Services is amending 42 CFR
Chapter IV as set forth below:
PART 419--PROSPECTIVE PAYMENT SYSTEM FOR HOSPITAL OUTPATIENT
DEPARTMENT SERVICES
0
A. Part 419 is amended as follows:
0
1. The authority citation for Part 419 continues to read as follows:
Authority: Secs. 1102, 1833(t), and 1871 of the Social Security
Act (42 U.S.C. 1302, 1395l(t), and 1395hh).
0
2. Section 419.43 is amended by adding a new paragraph (g) to read as
follows:
Sec. 419.43 Adjustments to national program payment and beneficiary
copayment amounts.
* * * * *
(g) Payment adjustment for certain rural hospitals. (1) General
rule. CMS provides for additional payment for covered hospital
outpatient services not excluded under paragraph (g)(4) of this
section, furnished on or after January 1, 2006, if the hospital--
(i) Is a sole community hospital under Sec. 412.92 of this
chapter; and
(ii) Is located in a rural area as defined in Sec. 412.64(b) of
this chapter or is treated as being located in a rural area under Sec.
412.103 of this chapter.
(2) Amount of adjustment. The amount of the additional payment
under paragraph (g)(1) of this section is determined by CMS and is
based on the difference between costs incurred by hospitals that meet
the criteria in paragraphs (g)(1)(i) and (g)(1)(ii) of this section and
costs incurred by hospitals located in urban areas.
(3) Budget neutrality. CMS establishes the payment adjustment under
paragraph (g)(2) of this section in a budget neutral manner, excluding
services and groups specified in paragraph (g)(4) of this section.
(4) Excluded services and groups. Drugs and biologicals that are
paid
[[Page 68728]]
under a separate APC and devices of brachytheraphy consisting of a seed
or seeds (including a radioactive source) are excluded from
qualification for the payment adjustment in paragraph (g)(2) of this
section.
(5) Copayment. The payment adjustment in paragraph (g)(2) of this
section is applied before calculating copayment amounts.
(6) Outliers. The payment adjustment in paragraph (g)(2) of this
section is applied before calculating outlier payments.
0
3. Section 419.66 is amended by revising paragraph (c)(1) to read as
follows:
Sec. 419.66 Transitional pass-through payments: Medical devices.
* * * * *
(c) Criteria for establishing device categories. * * *
(1) CMS determines that a device to be included in the category is
not appropriately described by any of the existing categories or by any
category previously in effect, and was not being paid for as an
outpatient service as of December 31, 1996.
* * * * *
PART 485--CONDITIONS OF PARTICIPATION: SPECIALIZED PROVIDERS
0
B. Part 485 is amended as follows:
0
1. The authority citation for Part 485 continues to read as follows:
Authority: Secs. 1102 and 1871 of the Social Security Act (42
U.S.C. 1302 and 1395hh).
0
2. Section 485.631 is amended by--
0
a. Republishing paragraph (b)(1) introductory text.
0
b. Revising paragraph (b)(1)(iv).
0
c. Adding new paragraphs (b)(1)(v) and (b)(1)(vi).
The revision and additions read as follows:
Sec. 485.631 Condition of participation: Staffing and staff
responsibilities.
* * * * *
(b) Standard: Responsibilities of the doctor of medicine or
osteopathy. (1) The doctor of medicine or osteopathy--
* * * * *
(iv) Periodically reviews and signs the records of all inpatients
cared for by nurse practitioners, clinical nurse specialists, certified
nurse midwives, or physician assistants.
(v) Periodically, but not less than every 2 weeks, reviews and
signs a sample of outpatient records of patients cared for by nurse
practitioners, clinical nurse specialists, certified nurse midwives, or
physician assistants according to the policies of the CAH and according
to current standards of practice where State law requires record
reviews or co-signatures, or both, by a collaborating physician.
(vi) Is not required to review and sign outpatient records of
patients cared for by nurse practitioners, clinical nurse specialists,
certified nurse midwives, or physician assistants where State law does
not require record reviews or co-signatures, or both, by a
collaborating physician.
* * * * *
(Catalog of Federal Domestic Assistance Program No. 93.773,
Medicare--Hospital Insurance; and Program No. 93.774, Medicare--
Supplementary Medical Insurance Program)
Dated: October 26, 2005.
Mark B. McClellan,
Administrator, Centers for Medicare & Medicaid Services.
Dated: November 1, 2005.
Michael O. Leavitt,
Secretary.
Editorial Note: The following Addenda will not be published in
the Code of Federal Regulations.
BILLING CODE 4120-01-P
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[FR Doc. 05-22136 Filed 11-2-05; 4:13 pm]
BILLING CODE 4120-01-C