Federal Register, Volume 72 Issue 227 (Tuesday, November 27, 2007)

[Federal Register Volume 72, Number 227 (Tuesday, November 27, 2007)]
[Rules and Regulations]
[Pages 66579-67225]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 07-5507]

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Part III

Book 2 of 2 Books

Pages 66579-67226

Department of Health and Human Services

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Centers for Medicare & Medicaid Services

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42 CFR Parts 410, 411, 412, et al.

Medicare and Medicaid Programs; Interim and Final Rule

Federal Register / Vol. 72, No. 227 / Tuesday, November 27, 2007 /
Rules and Regulations

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 410, 411, 412, 413, 414, 416, 419, 482, and 485

[CMS-1392-FC], [CMS-1533-F2], and [CMS-1531-IFC2]
RIN 0938-AO71, RIN 0938-AO70, and RIN 0938-AO35

Medicare Program: Changes to the Hospital Outpatient Prospective
Payment System and CY 2008 Payment Rates, the Ambulatory Surgical
Center Payment System and CY 2008 Payment Rates, the Hospital Inpatient
Prospective Payment System and FY 2008 Payment Rates; and Payments for
Graduate Medical Education for Affiliated Teaching Hospitals in Certain
Emergency Situations Medicare and Medicaid Programs: Hospital
Conditions of Participation; Necessary Provider Designations of
Critical Access Hospitals

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

ACTION: Interim and 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. We describe the changes to the amounts and
factors used to determine the payment rates for Medicare hospital
outpatient services paid under the prospective payment system. These
changes are applicable to services furnished on or after January 1,
2008. In addition, the rule sets forth the applicable relative payment
weights and amounts for services furnished in ASCs, specific HCPCS
codes to which the final policies of the ASC payment system apply, and
other pertinent rate setting information for the CY 2008 ASC payment
system. Furthermore, this final rule with comment period will make
changes to the policies relating to the necessary provider designations
of critical access hospitals and changes to several of the current
conditions of participation requirements.
The attached document also incorporates the changes to the FY 2008
hospital inpatient prospective payment system (IPPS) payment rates made
as a result of the enactment of the TMA, Abstinence Education, and QI
Programs Extension Act of 2007, Public Law 110-90. In addition, we are
changing the provisions in our previously issued FY 2008 IPPS final
rule and are establishing a new policy, retroactive to October 1, 2007,
of not applying the documentation and coding adjustment to the FY 2008
hospital-specific rates for Medicare-dependent, small rural hospitals
(MDHs) and sole community hospitals (SCHs). In the interim final rule
with comment period in this document, we are modifying our regulations
relating to graduate medical education (GME) payments made to teaching
hospitals that have Medicare affiliation agreements for certain
emergency situations.

DATES: Effective Date: The provisions of this rule are effective on
January 1, 2008.
IPPS Payment Rates: The FY 2008 IPPS payment rates, provided in
section XIX of the preamble of this document, became effective October
1, 2007.
Comment Period: We will consider comments on the payment
classifications assigned to HCPCS codes identified in Addenda B, AA,
and BB to this final rule with the ``NI'' comment indicator, and other
areas specified throughout this rule, at the appropriate address, as
provided below, no later than 5 p.m. EST on January 28, 2008. We will
also consider comments relating to the Medicare GME teaching hospital
affiliated agreement provisions, as provided below, no later than 5
p.m. EST on January 28, 2008.
Application Deadline--New Class of New Technology Intraocular Lens:
Requests for review of applications for a new class of new technology
intraocular lenses must be received by 5 p.m. EST on April 1, 2008.
Deadline for Submission of Written Medicare GME Affiliation
Agreements: Written Medicare GME affiliation agreements must be
received by 5 p.m. EST on January 1, 2008.

ADDRESSES: In commenting, please refer to file codes CMS-1392-FC (for
OPPS and ASC matters) or CMS-1531-IFC (for Medicare GME matters), as
appropriate. 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 regulation to http://www.cms.hhs.gov/eRulemaking. Click
on the link ``Submit electronic comments on CMS regulations with an
open comment period.'' (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-1392-FC (for OPPS and ASC matters), Attention: CMS-1531-IFC (for
Medicare GME matters), P.O. Box 8013, Baltimore, MD 21244-1850.
Please allow sufficient time for mailed comments to be received
before the close of the comment period.
3. By express or overnight mail. You may send written comments (one
original and two copies) to the following address ONLY: Centers for
Medicare & Medicaid Services, Department of Health and Human Services,
Attention: CMS-1392-FC (for OPPS and ASC matters), Attention: CMS-1531-
IFC (for Medicare GME matters), 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: Room
445-G, Hubert H. Humphrey Building, 200 Independence Avenue, SW.,
Washington, DC 20201; or 7500 Security Boulevard, Baltimore, MD 21244-
1850.
If you intend to deliver your comments to the Baltimore address,
please call telephone number (410) 786-9994 in advance to schedule your
arrival with one of our staff members.
(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 who wish to retain proof of filing by
stamping in and retain an extra copy of the comments being filed.)
Comments mailed to the addresses indicated as appropriate for hand
or courier delivery may be delayed and received after the comment
period.
For information on viewing public comments, see the beginning of
the SUPPLEMENTARY INFORMATION section.
Applications for a new class of new technology intraocular lenses:
Requests for review of applications for a new class of new technology
intraocular lenses must be sent by regular mail to:ASC/NTIOL, Division
of Outpatient Care, Mailstop C4-05-17, Centers for Medicare and
Medicaid Services,7500 Security Boulevard,Baltimore, MD 21244-1850.
Submissions of written Medicare GME affiliation agreements: Written

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Medicare GME affiliation agreements must be sent by regular mail
to:Centers for Medicare and Medicaid Services, Division of Acute Care,
Attention: Elizabeth Troung or Renate Rockwell,Mailstop C4-08-06,7500
Security Boulevard, Baltimore, MD 21244-1850.

FOR FURTHER INFORMATION CONTACT:
Alberta Dwivedi, (410) 786-0378, Hospital outpatient prospective
payment issues.
Dana Burley, (410) 786-0378, Ambulatory surgical center issues.
Suzanne Asplen, (410) 786-4558, Partial hospitalization and
community mental health center issues.
Sheila Blackstock, (410) 786-3502, Reporting of quality data
issues.
Mary Collins, (410) 786-3189, and Jeannie Miller, (410) 786-3164,
Necessary provider designations for CAHs issues.
Scott Cooper, (410) 786-9465, and Jeannie Miller, (410) 786-3164,
Hospital conditions of participation issues.
Miechal Lefkowitz, (410) 786-5316, Hospital inpatient prospective
payment system issues.
Tzvi Hefter, (410) 786-4487, Graduate medical education program
issues.

SUPPLEMENTARY INFORMATION:
Submitting Comments: We welcome comments from the public on the
OPPS APC assignments and/or status indicators assigned to HCPCS codes
identified in Addendum B to this final rule with comment period with
comment indicator ``NI'' and on the ASC payment indicators assigned to
HCPCS codes identified in Addenda AA and BB to this final rule with
comment period with comment indicator ``NI'' in order to assist us in
fully considering issues and developing OPPS and ASC payment policies
for those services. You can assist us by referencing file code CMS-
1392-FC.
We also welcome comments from the public on all issues set forth
regarding the revised regulations regarding the Medicare GME
affiliation agreements to assist us in fully considering issues and
developing policies. You can assist us by referencing the file code
CMS-1531-IFC2 and the specific ``issue identifier'' that precedes the
section on which you choose to comment.
Inspection of Public Comments: All comments received before the
close of the comment period are available for viewing by the public,
including any personally identifiable or confidential business
information that is included in a comment. We post all comments
received before the close of the comment period on the following Web
site as soon as possible after they have been received: http://www.cms.hhs.gov/eRulemaking. Click on the link ``Electronic Comments on
CMS Regulations'' on that Web site to view public comments.
Comments received timely will also 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, on 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.

Electronic Access

This Federal Register document is also available from the Federal
Register online database through GPO Access, a service of the U.S.
Government Printing Office. Free public access is available on a Wide
Area Information Server (WAIS) through the Internet and via
asynchronous dial-in. Internet users can access the database by using
the World Wide Web; the Superintendent of Documents' home page address
is http://www.gpoaccess.gov/index.html, by using local WAIS client
software, or by telnet to swais.access.gpo.gov, then login as guest (no
password required). Dial-in users should use communications software
and modem to call (202) 512-1661; type swais, then login as guest (no
password required).

Alphabetical List of Acronyms Appearing in This 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
ASC Ambulatory Surgical Center
ASP Average sales price
AWP Average wholesale price
BBA Balanced Budget Act of 1997, Pub. L. 105-33
BBRA Medicare, Medicaid, and SCHIP [State Children's Health
Insurance Program] Balanced Budget Refinement Act of 1999, Pub. L.
106-113
BCA Blue Cross Association
BCBSA Blue Cross and Blue Shield Association
BIPA Medicare, Medicaid, and SCHIP Benefits Improvement and
Protection Act of 2000, Pub. L. 106-554
CAH Critical access hospital
CAP Competitive Acquisition Program
CBSA Core-Based Statistical Area
CCR Cost-to-charge ratio
CERT Comprehensive Error Rate Testing
CMHC Community mental health center
CMS Centers for Medicare & Medicaid Services
CoP [Hospital] Condition of participation
CORF Comprehensive outpatient rehabilitation facility
CPT [Physicians'] Current Procedural Terminology, Fourth Edition,
2007, 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
DRA Deficit Reduction Act of 2005, Pub. L. 109-171
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
FAR Federal Acquisition Regulations
FDA Food and Drug Administration
FFS Fee-for-service
FSS Federal Supply Schedule
FTE Full-time equivalent
FY Federal fiscal year
GAO Government Accountability Office
GME Graduate medical education
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
HOPD Hospital outpatient department
HOP QDRP Hospital Outpatient Quality Data Reporting Program
ICD-9-CM International Classification of Diseases, Ninth Edition,
Clinical Modification
IDE Investigational device exemption
IME Indirect medical education
IOL Intraocular lens
IPPS [Hospital] Inpatient prospective payment system
IVIG Intravenous immune globulin
MAC Medicare Administrative Contractors
MedPAC Medicare Payment Advisory Commission
MDH Medicare-dependent, small rural hospital
MIEA-TRHCA Medicare Improvements and Extension Act under Division B,
Title I of the Tax Relief Health Care Act of 2006, Pub. L. 109-432
MMA Medicare Prescription Drug, Improvement, and Modernization Act
of 2003, Pub. L. 108-173
MPFS Medicare Physician Fee Schedule
MSA Metropolitan Statistical Area
NCCI National Correct Coding Initiative
NCD National Coverage Determination
NTIOL New technology intraocular lens
OCE Outpatient Code Editor
OMB Office of Management and Budget
OPD [Hospital] Outpatient department
OPPS [Hospital] Outpatient prospective payment system
PHP Partial hospitalization program

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PM Program memorandum
PPI Producer Price Index
PPS Prospective payment system
PPV Pneumococcal pneumonia vaccine
PRA Paperwork Reduction Act
QIO Quality Improvement Organization
RFA Regulatory Flexibility Act
RHQDAPU Reporting Hospital Quality Data for Annual Payment Update
[Program]
RHHI Regional home health intermediary
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
WAC Wholesale acquisition cost

In this document, we address several payment systems under the
Medicare program: The hospital outpatient prospective payment system
(OPPS); the revised ambulatory surgical center (ASC) payment system;
the hospital inpatient prospective payment system (IPPS); and payments
for direct and indirect graduate medical education (GME). The
provisions relating to the OPPS are included in sections I. through
XV., XVII., XXI. through XXIV. of this final rule with comment period
and in Addenda A, B, C (Addendum C is available on the Internet only;
see section XXI. of this final rule with comment period), D1, D2, E, L,
and M to this final rule with comment period. The provisions related to
the revised ASC payment system are included in sections XVI., XVII.,
and XXI. through XXIV. of this final rule with comment period and in
Addenda AA, BB, DD1, DD2, and EE (Addendum EE is available on the
Internet only; see section XXI. of this final rule with comment period)
to this final rule with comment period.
The provisions relating to the IPPS payment rates are included in
section XIX., XXIV., and XXV. of this document. The provisions relating
to policy changes to the Medicare GME affiliation provisions for
teaching hospitals in certain emergency situations are included in
sections XX., XXIV., and XXV. of this document.

Table of Contents

I. Background for the OPPS
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 of the APC Panel
2. Establishment of the APC Panel
3. APC Panel Meetings and Organizational Structure
E. Provisions of the Medicare Improvements and Extension Act
under Division B, Title I of the Tax Relief and Health Care Act of
2006
F. Summary of the Major Contents of the CY 2008 OPPS/ASC
Proposed Rule
1. Updates Affecting OPPS Payments
2. OPPS Ambulatory Payment Classification (APC) Group Policies
3. OPPS Payment for Devices
4. OPPS Payment for Drugs, Biologicals, and Radiopharmaceuticals
5. Estimate of OPPS Transitional Pass-Through Spending for
Drugs, Biologicals, and Devices
6. OPPS Payment for Brachytherapy Sources
7. OPPS Coding and Payment for Drug Administration Services
8. OPPS Hospital Coding and Payment for Visits
9. OPPS Payment for Blood and Blood Products
10. OPPS Payment for Observation Services
11. Procedures That Will Be Paid Only as Inpatient Services
12. Nonrecurring Technical and Policy Changes
13. OPPS Payment Status and Comment Indicators
14. OPPS Policy and Payment Recommendations
15. Update of the Revised ASC Payment System
16. Quality Data for Annual Payment Updates
17. Changes Affecting Necessary Provider Critical Access
Hospitals (CAHs) and Hospital Conditions of Participation (CoPs)
18. Regulatory Impact Analysis
G. Public Comments Received in Response to the CY 2008 OPPS/ASC
Proposed Rule
H. Public Comments Received on the November 24, 2006 OPPS/ASC
Final Rule with Comment Period
II. Updates Affecting OPPS Payments
A. Recalibration of APC Relative Weights
1. Database Construction
a. Database Source and Methodology
b. Use of Single and Multiple Procedure Claims
(1) Use of Date of Service Stratification and a Bypass List to
Increase the Amount of Data Used to Determine Medians
(2) Exploration of Allocation of Packaged Costs to Separately
Paid Procedure Codes
c. Calculation of CCRs
2. Calculation of Median Costs
3. Calculation of OPPS Scaled Payment Weights
4. Changes to Packaged Services
a. Background
b. Addressing Growth in OPPS Volume and Spending
c. Packaging Approach
(1) Guidance Services
(2) Image Processing Services
(3) Intraoperative Services
(4) Imaging Supervision and Interpretation Services
(5) Diagnostic Radiopharmaceuticals
(6) Contrast Agents
(7) Observation Services
d. Development of Composite APCs
(1) Background
(2) Low Dose Rate (LDR) Prostate Brachytherapy Composite APC
(a) Background
(b) Payment for LDR Prostate Brachytherapy
(3) Cardiac Electrophysiologic Evaluation and Ablation Composite
APC
(a) Background
(b) Payment for Cardiac Electrophysiologic Evaluation and
Ablation
e. Service-Specific Packaging Issues
B. Payment for Partial Hospitalization
1. Background
2. PHP APC Update
3. Separate Threshold for Outlier Payments to CMHCs
C. Conversion Factor Update
D. Wage Index Changes
E. Statewide Average Default CCRs
F. OPPS Payments to Certain Rural Hospitals
1. Hold Harmless Transitional Payment Changes Made by Pub. L.
109-171 (DRA)
2. Adjustment for Rural SCHs Implemented in CY 2006 Related to
Pub. L. 108-173 (MMA)
G. Hospital Outpatient Outlier Payments
H. Calculation of an Adjusted Medicare Payment from the National
Unadjusted Medicare Payment
I. Beneficiary Copayments
1. Background
2. Copayment
3. Calculation of an Adjusted Copayment Amount for an APC Group
III. OPPS Ambulatory Payment Classification (APC) Group Policies
A. Treatment of New HCPCS and CPT Codes
1. Treatment of New HCPCS Codes Included in the April and July
Quarterly OPPS Updates for CY 2007
a. Background
b. Implantation of Interstitial Devices (APC 0156)
c. Other New HCPCS Codes Implemented in April or July 2007
2. Treatment of New Category I and III CPT Codes and Level II
HCPCS Codes
a. Establishment and Assignment of New Codes
b. Electronic Brachytherapy (New Technology APC 1519)
c. Other Mid-Year CPT Codes
B. Variations within APCs
1. Background
2. Application of the 2 Times Rule
3. Exceptions to the 2 Times Rule
C. New Technology APCs
1. Introduction
2. Movement of Procedures from New Technology APCs to Clinical
APCs
a. Positron Emission Tomography (PET)/Computed Tomography (CT)
Scans (APC 0308)
b. IVIG Preadministration-Related Services (APC 0430)
c. Other Services in New Technology APCs
(1) Breast Brachytherapy Catheter Implantation (APC 0648)
(2) Preoperative Services for Lung Volume Reduction Surgery
(LVRS) (APCs 0209 and 0213)
D. APC Specific Policies
1. Cardiac Procedures

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a. Cardiac Computed Tomography and Computed Tomographic
Angiography (APCs 0282 and 0383)
b. Coronary and Non-Coronary Angioplasty (PTCA/PTA)(APCs 0082,
0083, and 0103)
c. Implantation of Cardioverter-Defibrillators (APCs 0107 and
0108)
d. Removal of Patient-Activated Cardiac Event Recorder (APC
0109)
e. Stress Echocardiography (APC 0697)
2. Gastrointestinal Procedures
a. Computed Tomographic Colonography (APC 0332)
b. Laparoscopic Neurostimulator Electrode Implantation (APC
0130)
c. Screening Colonoscopies and Screening Flexible
Sigmoidoscopies (APCs 0158 and 0159)
3. Genitourinary Procedures
a. Cystoscopy with Stent (APC 0163)
b. Percutaneous Renal Cryoablation (APC 0423)
c. Prostatic Thermotherapy (APC 0163)
d. Radiofrequency Ablation of Prostate (APC 0163)
e. Ultrasound Ablation of Uterine Fibroids with Magnetic
Resonance Guidance (MRgFUS) (APC 0067)
f. Uterine Fibroid Embolization (APC 0202)
4. Nervous System Procedures
a. Chemodenervation (APC 0206)
b. Implantation of Intrathecal or Epidural Catheter (APC 0224)
c. Implantation of Spinal Neurostimulators (APC 0222)
5. Nuclear Medicine and Radiation Oncology Procedures
a. Adrenal Imaging (APC 0391)
b. Injection for Sentinel Node Identification (APC 0389)
c. Myocardial Positron Emission Tomography (PET) Scans (APC
0307)
d. Nonmyocardial Positron Emission Tomography (PET) Scans (APC
0308)
e. Proton Beam Therapy (APCs 0664 and 0667)
6. Ocular and Ear, Nose and Throat Procedures
a. Amniotic Membrane for Ocular Surface Reconstruction (APC
0244)
b. Keratoprosthesis (APC 0293)
c. Palatal Implant (New Technology APC 1510)
7. Orthopedic Procedures
a. Arthroscopic Procedures (APCs 0041 and 0042)
b. Closed Fracture Treatment (APC 0043)
c. Insertion of Posterior Spinous Process Distraction Device
(APC 0050)
d. Intradiscal Annuloplasty (APC 0050)
e. Kyphoplasty Procedures (APC 0052)
8. Vascular Procedures
a. Blood Transfusion (APC 0110)
b. Endovenous Ablation (APC 0092)
c. Insertion of Central Venous Access Device (APC 0625)
d. Noninvasive Vascular Studies (APC 0267)
9. Other Procedures
a. Hyperbaric Oxygen Therapy (APC 0659)
b. Skin Repair Procedures (APCs 0133, 0134, 0135, 0136, and
0137)
c. Stereotactic Radiosurgery (SRS) Treatment Delivery Services
(APCs 0065, 0066, and 0067)
10. Medical Services
a. Single Allergy Tests (APC 0381)
b. Continuous Glucose Monitoring (APC 0097)
c. Home International Normalized Ratio (INR) Monitoring (APC
0097)
d. Mental Health Services (APC 0322, 0323, 0324, 0325)
IV. OPPS Payment for Devices
A. Treatment of Device Dependent APCs
1. Background
2. Payment under the OPPS
3. Payment When Devices Are Replaced with Partial Credit to the
Hospital
B. Pass-Through Payments for Devices
1. Expiration of Transitional Pass Through Payments for Certain
Devices
a. Background
b. Final Policy
2. Provisions for Reducing Transitional Pass Through Payments to
Offset Costs Packaged into APC Groups
a. Background
b. Final Policy
V. OPPS Payment Changes for Drugs, Biologicals, and
Radiopharmaceuticals
A. Transitional Pass-Through Payment for Additional Costs of
Drugs and Biologicals
1. Background
2. Drugs and Biologicals with Expiring Pass-Through Status in CY
2007
3. Drugs and Biologicals with Pass-Through Status in CY 2008
B. Payment for Drugs, Biologicals, and Radiopharmaceuticals
without Pass Through Status
1. Background
2. Criteria for Packaging Payment for Drugs and Biologicals
3. Payment for Drugs and Biologicals without Pass Through Status
That Are Not Packaged
a. Payment for Specified Covered Outpatient Drugs
(1) Background
(2) Payment Policy
(3) Payment for Blood Clotting Factors
(a) Background
(b) Payment for Diagnostic Radiopharmaceuticals
(c) Payment for Therapeutic Radiopharmaceuticals
b. Payment for Nonpass-Through Drugs, Biologicals, and
Radiopharmaceuticals with HCPCS Codes, But without OPPS Hospital
Claims Data
VI. Estimate of OPPS Transitional Pass Through Spending for Drugs,
Biologicals, Radiopharmaceuticals, and Devices
A. Total Allowed Pass Through Spending
B. Estimate of Pass Through Spending
VII. OPPS Payment for Brachytherapy Sources
A. Background
B. Payment for Brachytherapy Sources
VIII. OPPS Drug Administration Coding and Payment
A. Background
B. Coding and Payment for Drug Administration Services
IX. Hospital Coding and Payments for Visits
A. Background
B. Policies for Hospital Outpatient Visits
1. Clinic Visits: New and Established Patient Visits and
Consultations
2. Emergency Department Visits
C. Visit Reporting Guidelines
1. Background
2. CY 2007 Work on Visit Guidelines
3. Visit Guidelines
X. OPPS Payment for Blood and Blood Products
A. Background
B. Payment for Blood and Blood Products
XI. OPPS Payment for Observation Services
A. Observation Services (HCPCS Code G0378)
B. Direct Admission to Observation (HCPCS Code G0379)
XII. Procedures That Will Be Paid Only as Inpatient Procedures
A. Background
B. Changes to the Inpatient List
XIII. Nonrecurring Technical and Policy Changes
A. Outpatient Hospital Services and Supplies Incident to a
Physician Service
B. Interrupted Procedures
C. Transitional Adjustments--Hold Harmless Provisions
D. Reporting of Wound Care Services
E. Reporting of Cardiac Rehabilitation Services
F. Reporting of Bone Marrow and Stem Cell Processing Services
G. Reporting of Alcohol and/or Substance Abuse Assessment and
Intervention Services
XIV. OPPS Payment Status and Comment Indicators
A. Payment Status Indicator Definitions
1. Payment Status Indicators to Designate Services That Are Paid
under the OPPS
2. Payment Status Indicators to Designate Services That Are Paid
under a Payment System Other Than the OPPS
3. Payment Status Indicators to Designate Services That Are Not
Recognized under the OPPS But That May Be Recognized by Other
Institutional Providers
4. Payment Status Indicators to Designate Services That Are Not
Payable by Medicare
B. Comment Indicator Definitions
XV. OPPS Policy and Payment Recommendations
A. MedPAC Recommendations
B. APC Panel Recommendations
XVI. Update of the Revised Ambulatory Surgical Center Payment System
A. Legislative and Regulatory Authority for the ASC Payment
System
B. Rulemaking for the Revised ASC Payment System
C. Revisions to the ASC Payment System Effective January 1, 2008
1. Covered Surgical Procedures under the Revised ASC Payment
System
a. Definition of Surgical Procedure
b. Identification of Surgical Procedures Eligible for Payment
under the Revised ASC Payment System
c. Payment for Covered Surgical Procedures under the Revised ASC
Payment System
(1) General Policies
(2) Office-Based Procedures
(3) Device-Intensive Procedures
(4) Multiple and Interrupted Procedure Discounting
(5) Transition to Revised ASC Payment Rates

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2. Covered Ancillary Services under the Revised ASC Payment
System
a. General Policies
b. Payment Policies for Specific Items and Services
(1) Radiology Services
(2) Brachytherapy Sources
3. General Payment Policies
a. Adjustment for Geographic Wage Differences
b. Beneficiary Coinsurance
D. Treatment of New HCPCS Codes
1. Treatment of New CY 2008 Category I and III CPT Codes and
Level II HCPCS Codes
2. Treatment of New Mid-Year Category III CPT Codes
3. Treatment of Level II HCPCS Codes Released on a Quarterly
Basis
E. Updates to Covered Surgical Procedures and Covered Ancillary
Services
1. Identification of Covered Surgical Procedures
a. General Policies
b. Changes in Designation of Covered Surgical Procedures as
Office-Based
c. Changes in Designation of Covered Surgical Procedures as
Device Intensive
2. Changes in Identification of Covered Ancillary Services
F. Payment for Covered Surgical Procedures and Covered Ancillary
Services
1. Payment for Covered Surgical Procedures
a. Update to Payment Rates
b. Payment Policies When Devices Are Replaced at No Cost or with
Credit
(1) Policy When Devices Are Replaced at No Cost or with Full
Credit
(2) Policy When Implantable Devices Are Replaced with Partial
Credit
2. Payment for Covered Ancillary Services
G. Physician Payment for Procedures and Services Provided in ASC
H. Changes to Definitions of ``Radiology and Certain Other
Imaging Services'' and ``Outpatient Prescription Drugs''
I. New Technology Intraocular Lenses (NTIOLs)
1. Background
2. Changes to the NTIOL Determination Process Finalized for CY
2008
3. NTIOL Application Process for CY 2008 Payment Adjustment
4. Classes of NTIOLS Approved for Payment Adjustment
5. Payment Adjustment
6. CY 2008 ASC Payment for Insertion of IOLs
J. ASC Payment and Comment Indicators
K. ASC Policy and Payment Recommendations
L. Calculation of the ASC Conversion Factor and ASC Payment
Rates
XVII. Reporting Quality Data for Annual Payment Rate Updates
A. Background
1. Reporting Hospital Outpatient Quality Data for Annual Payment
Update
2. Reporting ASC Quality Data for Annual Payment Increase
3. Reporting Hospital Inpatient Quality Data for Annual Payment
Update
B. Hospital Outpatient Measures
C. Other Hospital Outpatient Measures
D. Implementation of the HOP QDRP and Request for Additional
Suggested Measures
E. Requirements for HOP Quality Data Reporting for CY 2009 and
Subsequent Calendar Years
1. Administrative Requirements
2. Data Collection and Submission Requirements
3. HOP QDRP Validation Requirements
F. Publication of HOP QDRP Data Collected
G. Attestation Requirement for Future Payment Years
H. HOP QDRP Reconsiderations
I. Reporting of ASC Quality Data
J. FY 2009 IPPS Quality Measures under the RHQDAPU Program
XVIII. Changes Affecting Critical Access Hospitals (CAHs) and
Hospital Conditions of Participation (CoPs)
A. Changes Affecting CAHs
1. Background
2. Co-Location of Necessary Provider CAHs
3. Provider-Based Facilities of CAHs
4. Termination of Provider Agreement
5. Regulation Changes
B. Revisions to Hospital CoPs
1. Background
2. Provisions of the Final Regulation
a. Timeframes for Completion of the Medical History and Physical
Examination
b. Requirements for Preanesthesia and Postanesthesia Evaluations
c. Technical Amendment to Nursing Services CoP
XIX. Changes to the FY 2008 Hospital Inpatient Prospective Payment
System (IPPS) Payment Rates
A. Background
B. Revised IPPS Payment Rates
1. MS-DRG Documentation and Coding Adjustment
2. Application of the Documentation and Coding Adjustment to the
Hospital Specific Rates
XX. Medicare Graduate Medical Education Affiliation Provisions for
Teaching Hospitals in Certain Emergency Situations
A. Background
1. Legislative Authority
2. Existing Medicare Direct GME and Indirect GME Policies
3. Regulatory Changes Issued in 2006 to Address Certain
Emergency Situations
B. Additional Changes in This Interim Final Rule with Comment
Period
1. Summary of Regulatory Changes
2. Discussion of Training in Nonhospital Settings
C. Responses to Comments on the April 12, 2006 Interim Final
Rule with Comment Period and This Interim Final Rule with Comment
Period
XXI. Files Available to the Public Via the Internet
A. Information in Addenda Related to the Revised CY 2008
Hospital OPPS
B. Information in Addenda Related to the Revised CY 2008 ASC
Payment System
XXII. Collection of Information Requirements
XXIII. Response to Comments
XXIV. Regulatory Impact Analysis
A. Overall Impact of Changes to the OPPS and ASC Payment Systems
1. Executive Order 12866
2. Regulatory Flexibility Act (RFA)
3. Small Rural Hospitals
4. Unfunded Mandates
5. Federalism
B. Effects of OPPS Changes in This Final Rule with Comment
Period
1. Alternatives Considered
2. Limitation of Our Analysis
3. Estimated Impact of This Final Rule with Comment Period on
Hospitals and CMHCs
4. Estimated Effect of This Final Rule with Comment Period on
Beneficiaries
5. Conclusion
6. Accounting Statement
C. Effects of ASC Payment System Changes in This Final Rule with
Comment Period
1. Alternatives Considered
2. Limitations on Our Analysis
3. Estimated Effects of This Final Rule with Comment Period on
ASCs
4. Estimated Effects of This Final Rule with Comment Period on
Beneficiaries
5. Conclusion
6. Accounting Statement
D. Effects of the Requirements for Reporting of Quality Data for
Hospital Outpatient Settings
E. Effects of the Policy on CAH Off-Campus and Co-Location
Requirements
F. Effects of the Policy Revisions to the Hospital CoPs
G. Effects of the Changes to the Hospital Inpatient Prospective
Payment System (IPPS) Payment Rates
1. Overall Impact
2. Objectives
3. Limitations of Our Analysis
4. Quantitative Effects of the IPPS Policy Changes on Operating
Costs
5. Analysis of Table I
a. Effects of All Changes with CMI Adjustment Prior to Estimated
Growth (Columns 2a and 2b)
b. Effects of All Changes with CMI Adjustment and Estimated
Growth (Column 3)
6. Overall Conclusion
7. Accounting Statement
8. Executive order 12866
H. Impact of the Policy Revisions to the Emergency Medicare GME
Affiliated Groups for Hospitals in Certain Declared Emergency Areas
1. Overall Impact
2. RFA
3. Small Rural Hospitals
4. Unfunded Mandates
5. Federalism
6. Anticipated Effects
7. Alternatives Considered
8. Conclusion
9. Executive Order 12866
XXV. Waiver of Proposed Rulemaking, Waiver of Delay in Effective
Date, and Retroactive Effective Date
A. Requirements for Waivers and Retroactive Rulemaking
B. IPPS Payment Rate Policies
C. Medicare GME Affiliation Agreement Provisions

Regulation Text

Addenda

Addendum A-OPPS APCs for CY 2008

[[Page 66585]]

Addendum AA-ASC Covered Surgical Procedures for CY 2008 (Including
Surgical Procedures for Which Payment is Packaged)
Addendum B-OPPS Payment By HCPCS Code for CY 2008
Addendum BB-ASC Covered Ancillary Services Integral to Covered
Surgical Procedures for CY 2008 (Including Ancillary Services for
Which Payment Is Packaged)
Addendum D1-OPPS Payment Status Indicators
Addendum DD1-ASC Payment Indicators
Addendum D2-OPPS Comment Indicators
Addendum DD2-ASC Comment Indicators
Addendum E-HCPCS Codes That Would Be Paid Only as Inpatient
Procedures for CY 2008
Addendum L-Out-Migration Adjustment
Addendum M-HCPCS Codes for Assignment to Composite APCs for CY 2008

I. Background for the OPPS

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 (BBA) of 1997 (Pub. L. 105-33) 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
(BBRA) of 1999 (Pub. L. 106-113) made major changes in the hospital
outpatient prospective payment system (OPPS). The Medicare, Medicaid,
and SCHIP Benefits Improvement and Protection Act (BIPA) of 2000 (Pub.
L. 106-554) made further changes in the OPPS. Section 1833(t) of the
Act was also amended by the Medicare Prescription Drug, Improvement,
and Modernization Act (MMA) of 2003 (Pub. L. 108 173). The Deficit
Reduction Act (DRA) of 2005 (Pub. L. 109-171), enacted on February 8,
2006, also made additional changes in the OPPS. In addition, the
Medicare Improvements and Extension Act under Division B of Title I of
the Tax Relief and Health Care Act (MIEA-TRHCA) of 2006 (Pub. L. 109-
432), enacted on December 20, 2006, made further changes in the OPPS. A
discussion of these changes is included in sections I.E., VII., and
XVII. 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 the
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 hospital outpatient services designated by the
Secretary (which includes partial hospitalization services furnished by
community mental health centers (CMHCs)) and hospital outpatient
services 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 added provisions 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.
The OPPS rate is an unadjusted national payment amount that
includes the Medicare payment and the beneficiary copayment. This rate
is divided into a labor-related amount and a nonlabor-related amount.
The labor-related amount is adjusted for area wage differences using
the hospital inpatient wage index value for the locality in which the
hospital or CMHC is located.
All services and items within an APC group are comparable
clinically and with respect to resource use (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 generally use the median cost of the item or service assigned to an
APC group.
For new technology items and services, special payments under the
OPPS may be made in one of two ways. Section 1833(t)(6) of the Act
provides for temporary additional payments, which we refer to as
``transitional pass through payments,'' for at least 2 but not more
than 3 years for certain drugs, biological agents, brachytherapy
devices used for the treatment of cancer, and categories of other
medical devices. For new technology services that are not eligible for
transitional pass through payments, and for which we lack sufficient
data to appropriately assign them to a clinical APC group, we have
established special APC groups based on costs, which we refer to as New
Technology APCs. These New Technology APCs are designated by cost bands
which allow us to provide appropriate and consistent payment for
designated new procedures that are not yet reflected in our claims
data. Similar to pass through payments, an assignment to a New
Technology APC is temporary; that is, we retain a service within a New
Technology APC until we acquire sufficient data to assign it to a
clinically appropriate APC group.

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 excludes payment for
ambulance, physical and occupational therapy, and speech-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 payment for screening and diagnostic mammography
services from the OPPS. The Secretary exercised the authority granted
under the statute to also 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 (CLFS); services for beneficiaries with end
stage renal disease (ESRD) that are paid under the ESRD composite rate;
and services and procedures that require an inpatient stay that are
paid under the hospital inpatient prospective payment system (IPPS). We
set forth the services that are excluded from payment under the OPPS in
Sec. 419.22 of the regulations.
Under Sec. 419.20(b) of the regulations, we specify the types of
hospitals and entities that are excluded from payment under the OPPS.
These excluded

[[Page 66586]]

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 that take into
account changes in medical practices, changes in technologies, and the
addition of new services, new cost data, and other relevant information
and factors.
Since initially implementing the OPPS, we have published final
rules in the Federal Register annually to implement statutory
requirements and changes arising from our continuing experience with
this system. We published in the Federal Register on November 24, 2006
the CY 2007 OPPS/ASC final rule with comment period (71 FR 67960). In
that final rule with comment period, we revised the OPPS to update the
payment weights and conversion factor for services payable under the CY
2007 OPPS on the basis of claims data from January 1, 2005, through
December 31, 2005, and to implement certain provisions of Pub. L. 108-
173 and Pub. L. 109-171. In addition, we responded to public comments
received on the provisions of the November 10, 2005 final rule with
comment period (70 FR 86516) pertaining to the APC assignment of HCPCS
codes identified in Addendum B of that rule with the new interim (NI)
comment indicator; and public comments received on the August 23, 2006
OPPS/ASC proposed rule for CY 2007 (71 FR 49506).
On August 2, 2007, we issued in the Federal Register (72 FR 42628)
a proposed rule for the CY 2008 OPPS/ASC to implement statutory
requirements and changes arising from our continuing experience with
both systems. We received approximately 2,180 pieces of timely
correspondence in response to the proposed rule. A summary of the
public comments we received and our responses to those comments are
included in the specific sections of this 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, and redesignated by section 202(a)(2) of the BBRA, requires
that we consult with an outside panel of experts to review the clinical
integrity of the payment groups and their weights under the OPPS. The
Act further specifies that the panel will act in an advisory capacity.
The Advisory Panel on Ambulatory Payment Classification (APC)
Groups (the APC Panel), discussed under section I.D.2. of this final
rule with comment period, fulfills these requirements. The APC Panel is
not restricted to using data compiled by CMS, 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 signed the initial charter
establishing the APC Panel. This expert panel, which may be composed of
up to 15 representatives of providers subject to the OPPS (currently
employed full-time, not as consultants, in their respective areas of
expertise), reviews clinical data and advises CMS about the clinical
integrity of the APC groups and their payment weights. For purposes of
this Panel, consultants or independent contractors are not considered
to be full-time employees. The APC Panel is technical in nature, and is
governed by the provisions of the Federal Advisory Committee Act
(FACA). Since its initial chartering, the Secretary has renewed the APC
Panel's charter three times: On November 1, 2002; on November 1, 2004;
and effective November 21, 2006. The current charter specifies, among
other requirements, that the APC Panel continue to be technical in
nature; be governed by the provisions of the FACA; may convene up to
three meetings per year; has a Designated Federal Officer (DFO); and is
chaired by a Federal official designated by the Secretary.
The current APC Panel membership and other information pertaining
to the APC Panel, including its charter, Federal Register notices,
membership, meeting dates, agenda topics, and meeting reports can be
viewed on the CMS Web site at: http://www.cms.hhs.gov/FACA/05--
AdvisoryPanelonAmbulatoryPaymentClassificationGroups.asp#TopOfPage.
3. APC Panel Meetings and Organizational Structure
The APC Panel first met on February 27, February 28, and March 1,
2001. Since the initial meeting, the APC Panel has held 12 subsequent
meetings, with the last meeting taking place on September 5 and 6,
2007. Prior to each meeting, we publish a notice in the Federal
Register to announce the meeting, and when necessary, to solicit
nominations for APC Panel membership, and to announce new members.
The APC Panel has established an operational structure that, in
part, includes the use of three subcommittees to facilitate its
required APC review process. The three current subcommittees are the
Data Subcommittee, the Observation and Visit Subcommittee, and the
Packaging Subcommittee. The Data Subcommittee is responsible for
studying the data issues confronting the APC Panel, and for
recommending options for resolving them. The Observation and Visit
Subcommittee reviews and makes recommendations to the APC Panel on all
technical issues pertaining to observation services and hospital
outpatient visits paid under the OPPS (for example, APC configurations
and APC payment weights). The Packaging Subcommittee studies and makes
recommendations on issues pertaining to services that are not
separately payable under the OPPS, but whose payments are bundled or
packaged into APC payments. Each of these subcommittees was established
by a majority vote from the full APC Panel during a scheduled APC Panel
meeting, and their continuation as subcommittees was last approved at
the September 2007 APC Panel meetings. All subcommittee recommendations
are discussed and voted upon by the full APC Panel.
Discussions of the recommendations resulting from the APC Panel's
March 2007 and September 2007 meetings are included in the sections of
this final rule with comment period that are specific to each
recommendation. For discussions of earlier APC Panel meetings and
recommendations, we refer readers to previously published hospital OPPS
final rules or the Web site mentioned earlier in this section.

E. Provisions of the Medicare Improvements and Extension Act under
Division B of Title I of the Tax Relief and Health Care Act of 2006

The Medicare Improvements and Extension Act under Division B of
Title I of the Tax Relief and Health Care Act

[[Page 66587]]

(MIEA-TRHCA) of 2006, Pub. L. 109-432, enacted on December 20, 2006,
included the following provisions affecting the OPPS:
1. Section 107(a) of the MIEA-TRHCA amended section 1833(t)(16)(C)
of the Act to extend the period for payment of brachytherapy devices
based on the hospital's charges adjusted to cost for 1 additional year,
through December 31, 2007.
2. Section 107(b)(1) of the MIEA-TRHCA amended section
1833(t)(2)(H) of the Act by adding stranded and non stranded devices
furnished on or after July 1, 2007, as additional classifications of
brachytherapy devices for which separate payment groups must be
established for payment under the OPPS. Section 107(b)(2) of the MIEA
TRCHA provides that the Secretary may implement the section 107(b)(1)
amendment to section 1833(t)(2)(H) of the Act ``by program instruction
or otherwise.''
3. Section 109(a) of the MIEA-TRHCA added new paragraph (17) to
section 1833(t) of the Act which authorizes the Secretary, beginning in
2009 and each subsequent year, to reduce the OPPS full annual update by
2.0 percentage points if a hospital paid under the OPPS fails to submit
data as required by the Secretary in the form and manner specified on
selected measures of quality of care, including medication errors. In
accordance with this provision, the selected measures are those that
are appropriate for the measurement of quality of care furnished by
hospitals in the outpatient setting, that reflect consensus among
affected parties and, to the extent feasible and practicable, that
include measures set forth by one or more of the national consensus
entities, and that may be the same as those required for reporting by
hospitals paid under the IPPS. This provision specifies that a
reduction for 1 year cannot be taken into account when computing the
OPPS update for a subsequent year. In addition, this provision requires
the Secretary to establish a process for making the submitted data
available for public review.

F. Summary of the Major Contents of the CY 2008 OPPS/ASC Proposed Rule

On August 2, 2007, we published a proposed rule in the Federal
Register (72 FR 42628) that set forth proposed changes to the Medicare
hospital OPPS for CY 2008 to implement statutory requirements and
changes arising from our continuing experience with the system and to
implement certain statutory provisions. In addition, we proposed
changes to the revised Medicare ASC payment system for CY 2008 such as
adding procedures to the list of covered surgical procedures and
adjusting the ASC rates so that the revised ASC payment system is
budget neutral. We also proposed to make changes to the policies
relating to the necessary provider designations of CAHs that are being
recertified when a CAH enters into a new co-location arrangement with
another hospital or CAH or when the CAH creates or acquires an off-
campus location. Further, we proposed changes to several of the current
conditions of participation that hospitals must meet to participate in
the Medicare and Medicaid programs to require the completion and
documentation in the medical record of medical histories and physical
examinations of patients conducted after admission and prior to surgery
or a procedure requiring anesthesia services and for postanesthesia
evaluations of patients before discharge or transfer from the
postanesthesia recovery area. Finally, we set forth proposed quality
measures for a Hospital Outpatient Quality Data Reporting (HOP QDRP)
program for reporting quality data for annual payment rate updates for
CY 2009 and subsequent calendar years. We also briefly discussed the
legislative provisions of the MIEA-TRHCA that give the Secretary
authority to develop quality measures for reporting data by ASCs. The
following is a summary of the major changes included in the CY 2008
OPPS/ASC proposed rule:
1. Updates Affecting OPPS Payments
In section II. of the proposed rule, we set forth--
The methodology used to recalibrate the proposed APC
relative payment weights.
The proposed payment for partial hospitalization services,
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.
The proposed retention of our current policy to use the
IPPS wage indices to adjust, for geographic wage differences, the
portion of the OPPS payment rate and the copayment standardized amount
attributable to labor related cost.
The proposed update of statewide average default CCRs.
The proposed application of hold harmless transitional
outpatient payments (TOPs) for certain small rural hospitals.
The proposed payment adjustment for rural SCHs.
The proposed calculation of the hospital outpatient
outlier payment.
The calculation of the proposed national unadjusted
Medicare OPPS payment.
The proposed beneficiary copayments for OPPS services.
2. OPPS Ambulatory Payment Classification (APC) Group Policies
In section III. of the proposed rule, we discussed the proposed
additions of new procedure codes to the APCs; our proposal to establish
a number of new APCs; and our analyses of Medicare claims data and
certain recommendations of the APC Panel. We also discussed the
application of the 2 times rule and proposed exceptions to it; proposed
changes to specific APCs; and the proposed movement of procedures from
New Technology APCs to clinical APCs.
3. OPPS Payment for Devices
In section IV. of the proposed rule, we discussed proposed payment
for device dependent APCs and pass-through payment for specific
categories of devices.
4. OPPS Payment for Drugs, Biologicals, and Radiopharmaceuticals
In section V. of the proposed rule, we discussed the proposed CY
2008 OPPS payment for drugs, biologicals, and radiopharmaceuticals,
including the proposed payment for drugs, biologicals, and
radiopharmaceuticals with and without pass-through status.
5. Estimate of OPPS Transitional Pass-Through Spending for Drugs,
Biologicals, and Devices
In section VI. of the proposed rule, we discussed the estimate of
CY 2008 OPPS transitional pass-through spending for drugs, biologicals,
and devices.
6. OPPS Payment for Brachytherapy Sources
In section VII. of the proposed rule, we discussed our proposal
concerning coding and payment for brachytherapy sources.
7. OPPS Coding and Payment for Drug Administration Services
In section VIII. of the proposed rule, we set forth our proposed
policy concerning coding and payment for drug administration services.
8. OPPS Hospital Coding and Payments for Visits
In section IX. of the proposed rule, we set forth our proposed
policies for the coding and reporting of clinic and emergency
department visits and

[[Page 66588]]

critical care services on claims paid under the OPPS.
9. OPPS Payment for Blood and Blood Products
In section X. of the proposed rule, we discussed our proposed
payment for blood and blood products.
10. Proposed OPPS Payment for Observation Services
In section XI. of the proposed rule, we discussed the proposed
payment policies for observation services furnished to patients on an
outpatient basis.
11. Procedures That Will Be Paid Only as Inpatient Services
In section XII. of the proposed rule, we discussed the procedures
that we proposed to remove from the inpatient list and assign to APCs.
12. Nonrecurring Technical and Policy Changes
In section XIII. of the proposed rule, we set forth our proposals
for nonrecurring technical and policy changes and clarifications
relating to outpatient services and supplies incident to physicians'
services; payment for interrupted procedures prior to and after the
administration of anesthesia; transitional adjustments to payments for
covered outpatient services furnished by small rural hospitals and SCHs
located in rural areas; and reporting requirements for wound care
services, cardiac rehabilitation services, and bone marrow and stem
cell processing services.
13. OPPS Payment Status and Comment Indicators
In section XIV. of the proposed rule, we discussed proposed changes
to the definitions of status indicators assigned to APCs and presented
our proposed comment indicators for the OPPS/ASC final rule with
comment period.
14. OPPS Policy and Payment Recommendations
In section XV. of the proposed rule, we addressed recommendations
made by the Medicare Payment Advisory Commission (MedPAC) in its March
and June 2007 Reports to Congress and by the APC Panel regarding the
OPPS for CY 2008.
15. Update of the Revised ASC Payment System
In section XVI. of the proposed rule, we discussed the proposed
update of the revised ASC payment system payment rates for CY 2008. We
also discussed our proposed changes to our regulations at Sec. Sec.
414.22(b)(5)(i)(A) and (B) regarding physician payment for performing
excluded surgical procedures in ASCs. In addition, we set forth our
proposal to revise the definitions of ``radiology and certain other
imaging services'' and ``outpatient prescription drugs'' when provided
integral to an ASC covered surgical procedure.
16. Reporting Quality Data for Annual Payment Rate Updates
In section XVII. of the proposed rule, we discussed the proposed
quality measures for reporting hospital outpatient quality data for CY
2009 and subsequent years and set forth the requirements for data
collection and submission for the annual payment update. We also
briefly discussed the legislative provisions of the MIEA-TRHCA that
give the Secretary authority to develop quality measures for reporting
by ASCs. (We note that, as discussed in section XVII.J. of this final
rule with comment period, we are also finalizing a proposal from the FY
2008 IPPS proposed rule relating to the FY 2009 RHQDAPU quality
measures. Specifically, we are finalizing the inclusion of SCIP
Infection 4: Cardiac Surgery Patients with Controlled 6AM Postoperative
Serum Glucose and SCIP Infection 6: Surgery Patients with Appropriate
Hair Removal in the FY 2009 RHQDAPU measure set, bringing the total
number of measures in that measure set to 30.)
17. Changes Affecting Necessary Provider Critical Access Hospitals
(CAHs) and Hospital Conditions of Participation (CoPs)
In section XVIII. of the proposed rule, we discussed our proposed
changes affecting CAHs both when the CAH enters into a new co-location
arrangement with another hospital or CAH and when the CAH creates or
acquires a provider-based off campus location. We also discussed our
proposed changes relating to several hospital CoPs to require the
completion of physical examinations and medical histories and
documentation in the medical records for patients after admission and
prior to surgery or a procedure requiring anesthesia services, and for
postanesthesia evaluations of patients after surgery or a procedure
requiring anesthesia services but before discharge or transfer from the
postanesthesia recovery area.
18. Regulatory Impact Analysis
In section XXII. of the proposed rule, we set forth an analysis of
the impact the proposed changes would have on affected entities and
beneficiaries. (We note that this regulatory impact analysis section is
redesignated as section XXIV. of this final rule with comment period.)

G. Public Comments Received in Response to the CY 2008 OPPS/ASC
Proposed Rule

We received approximately 2,180 timely pieces of correspondence
containing multiple comments on the CY 2008 OPPS/ASC proposed rule. We
note that we received some comments that were outside the scope of the
CY 2008 OPS/ASC proposed rule. These comments are not addressed in this
CY 2008 OPPS/ASC final rule with comment period. Summaries of the
public comments that are within the scope of the proposals and our
responses to those comments are set forth in the various sections of
this final rule with comment period under the appropriate headings.

H. Public Comments Received on the November 24, 2006 OPPS/ASC Final
Rule with Comment Period

We received approximately 21 timely items of correspondence on the
CY 2007 OPPS/ASC final rule with comment period, some of which
contained multiple comments on the interim final APC assignments and/or
status indicators of HCPCS codes identified with comment indicator
``NI'' in Addendum B to that final rule with comment period. Summaries
of those public comments and our responses to them are set forth in the
various sections of this final rule with comment period under the
appropriate headings.

II. Updates Affecting OPPS Payments

A. Recalibration of APC Relative Weights

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 with comment period (65 FR 18482), we
explained in detail how we calculated the relative payment weights that
were implemented on August 1, 2000 for each APC group. 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 2008 OPPS/ASC proposed rule, we proposed to use the same
basic methodology that we described in the

[[Page 66589]]

April 7, 2000 OPPS final rule with comment period to recalibrate the
APC relative payment weights for services furnished on or after January
1, 2008 and before January 1, 2009. That is, we proposed to 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 the proposed APC relative
payment weights for CY 2008, we used approximately 131 million final
action claims for hospital outpatient department (HOPD) services
furnished on or after January 1, 2006 and before January 1, 2007. (For
exact counts of claims used, we refer readers to the claims accounting
narrative under supporting documentation for the proposed rule on the
CMS Web site at: http://www.cms.hhs.gov/HospitalOutpatientPPS/HORD/).
Of the 141 million final action claims for services provided in
hospital outpatient settings used to calculate the CY 2008 OPPS payment
rates for this final rule with comment period, approximately 103
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 103 million claims,
approximately 45 million were not for services paid under the OPPS or
were excluded as not appropriate for use (for example, erroneous cost-
to-charge ratios (CCRs) or no HCPCS codes reported on the claim). We
were able to use approximately 54 million whole claims of the
approximately 58 million claims that remained to set the OPPS APC
relative weights for the CY 2008 OPPS. From the 54 million whole
claims, we created approximately 97 million single records, of which
approximately 65 million were ``pseudo'' single claims (created from
multiple procedure claims using the process we discuss in this
section). Approximately 926,000 claims trimmed out on cost or units in
excess of +/-3 standard deviations from the geometric mean, yielding
approximately 96 million single bills used for median setting.
Ultimately, we were able to use for CY 2008 ratesetting some portion of
93 ercent of the CY 2006 claims containing services payable under the
OPPS. This is approximately the same percentage of CY 2005 claims where
some portion could be used for CY 2007 ratesetting as described in the
CY 2007 OPPS/ASC final rule with comment period (71 FR 67970).
As proposed, the final APC relative weights and payments for CY
2008 in Addenda A and B to this final rule with comment period were
calculated using claims from this period that were processed before
June 30, 2007, 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
continue to believe that it is appropriate to use the most current full
calendar year claims data and the most recently submitted cost reports
to calculate the median costs which we proposed to convert to relative
payment weights for purposes of calculating the CY 2008 payment rates.
We did not receive any comments on our proposal to base the CY 2008
APC relative weights on the most currently available cost reports and
on claims for services furnished in CY 2006. Therefore, we are
finalizing our data source for the recalibration of the CY 2008 APC
relative payment weights as proposed, without modification, as
described in this section of this final rule with comment period.
b. Use of Single and Multiple Procedure Claims
For CY 2008, in general, we proposed to continue to use single
procedure claims to set the medians on which the APC relative payment
weights would be based, with some exceptions as discussed below. We
generally use single procedure claims to set the median costs for APCs
because we believe that it is important that the OPPS relative weights
on which payment rates are based be appropriate when one and only one
procedure is furnished and 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. 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 claims for multiple procedures. We engaged in several efforts
this year to improve our use of multiple procedure claims for
ratesetting. As we have for several years, we continued to use date of
service stratification and a list of codes to be bypassed to convert
multiple procedure claims to ``pseudo'' single procedure claims. We
also continued our internal efforts to better understand the patterns
of services and costs from multiple bills toward the goal of using more
multiple bill information by assessing the amount of packaging in the
multiple bills and, specifically, by exploring the amount of packaging
for drug administration services in the single and multiple bill
claims. Moreover, in many cases, the packaging approach that we
proposed for the CY 2008 OPPS also allows the use of more claims data
by enabling us to treat claims with multiple procedure codes as single
claims. We refer readers to section II.A.4. of the proposed rule for a
full discussion of the packaging approach for CY 2008.
We received several public comments on our proposed use of single
bills to calculate the APC median costs for ratesetting under the CY
2008 OPPS. A summary of the public comments and our responses follow.
Comment: Some commenters supported the ``natural'' and ``pseudo''
single methodology but asked that CMS continue to refine the approach
in order to improve the accuracy of the estimates because the medians
are used to develop payment rates for services on both single and
multiple procedure claims. Other commenters asserted that continued
reliance on single procedure bills to establish the medians from which
the rates were calculated failed to produce a statistically valid
sample of services for ratesetting, in particular for brachytherapy
services that are often provided in combination with one another in a
single encounter. Other commenters requested that CMS explore
additional revisions to the current methodology to ensure that OPPS
payment would be based on a substantial number of accurate hospital
claims.
Response: We generally base median costs for services on single
procedure claims to ensure that the median cost captures the full cost
of a service when it is the only service furnished. We recognize that
this approach has limitations and, in some cases, prevents us from
using many of the claims for services that are most commonly furnished
at the same time as other services. For this reason, we have developed
a number of different strategies, such as date of service
stratification and the use of the bypass list, that enable us to break
multiple procedure claims into ``pseudo'' single procedure claims where
we have confidence that the ``pseudo'' single claim contains the full
cost of the service, including related packaged costs. In recent years,
however, we have increasingly used multiple procedure claims to develop
median costs for individual services or groups of services. We have
developed these methodologies so that we can use more naturally
occurring claims data in cases in which care is most commonly reported
with multiple major procedure

[[Page 66590]]

codes on the same date, such as observation services, hyperbaric oxygen
therapy (HBOT), and single allergy tests.
Similarly, for CY 2008, we developed and proposed composite APCs
for low dose rate prostate brachytherapy (APC 8001 (LDR Prostate
Brachytherapy Composite)) and cardiac electrophysiology services (APC
8000 (Cardiac Electrophysiologic Evaluation and Ablation Composite)).
These APCs are designed to use multiple procedure claims to establish a
median cost and APC payment for multiple major procedures when they are
furnished together. As we discuss in section II.A.4.d. of this final
rule with comment period, we intend to explore the creation of
additional composite APCs for services that frequently are provided in
the same HOPD encounter. We also plan to continue to develop and refine
methods to increase the amount of claims data that we can use for
setting OPPS payment rates in a manner that gives us the most
confidence that the costs derived from these approaches are valid
reflections of the costs of the services described by HCPCS codes or,
in the case of composite APCs, described by the APCs. We anticipate
that the Data Subcommittee of the APC Panel will continue to provide us
with valuable advice regarding possible methodologies for increasing
the OPPS use of multiple procedure claims for ratesetting.
After consideration of the public comments received, we are
finalizing our proposal, without modification, to calculate median
costs for APCs using single and ``pseudo'' single procedure claims,
except where otherwise specified.
(1) Use of Date of Service Stratification and a Bypass List To Increase
the Amount of Data Used To Determine Medians
Through 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
numerous separately paid procedures reported on the same date on one
claim. We refer to these newly created single procedure claims as
``pseudo'' single claims because they were submitted by providers as
multiple procedure claims. The history of our use of a bypass list to
generate ``pseudo'' single claims is well documented, most recently in
the CY 2007 OPPS/ASC final rule with comment period (71 FR 67969
through 67970).
The date of service stratification (sorting the lines by date of
service and treating all lines with the same date of service as a
separate claim) and bypass list process we used for the CY 2007 OPPS
(combined with the packaging changes we proposed in section II.A.4. of
the proposed rule) resulted in our being able to use some part of
approximately 92 percent of the total claims that were eligible for use
in the OPPS ratesetting and modeling for the proposed rule. This
process enabled us to create, for the CY 2008 proposed rule,
approximately 58 million ``pseudo'' singles and approximately 30
million ``natural'' single bills. For the proposed rule, ``pseudo''
single procedure bills represented 66 percent of all single bills used
to calculate median costs. This compared favorably to the CY 2007 OPPS
final rule data in which ``pseudo'' single bills represented 68 percent
of all single bills used to calculate the median costs on which the CY
2007 OPPS payment rates were based. We believed that the reduction in
the percent of ``pseudo'' single bills and the corresponding increase
in the proportion of ``natural'' single bills observed for the CY 2008
proposed rule occurred largely because of our proposal to increase
packaging as discussed in section II.A.4. of the proposed rule. In many
cases, the packaging proposal for CY 2008 enabled us to use claims that
would otherwise have been considered to be multiple procedure claims
and, absent the proposal for additional packaging, could have been used
for ratesetting only if we had been able to create ``pseudo'' single
claims from them.
For CY 2008, we proposed to bypass 425 HCPCS codes that are
identified in Table 1 of the proposed rule. We proposed to continue the
use of the codes on the CY 2007 OPPS bypass list but to remove codes we
proposed to package for CY 2008. We also proposed to remove codes that
were on the CY 2007 bypass list that ceased to meet the empirical
criteria under the proposed packaging changes when clinical review
confirmed that their removal would be appropriate in the context of the
full proposal for the CY 2008 OPPS. Since the inception of the bypass
list, we have calculated the percent of ``natural'' single bills that
contained packaging for each code and the amount of packaging in each
``natural'' single bill for each code. We retained the codes on the
previous year's bypass list and used the update year's data to
determine whether it would be appropriate to add additional codes to
the previous year's bypass list. The entire list (including the codes
that remained on the bypass list from prior years) was open to public
comment. For the CY 2008 proposed rule, we explicitly reviewed all
``natural'' single bills against the empirical criteria for all codes
on the CY 2007 bypass list because of the proposal for greater
packaging discussed in section II.A.4. of the proposed rule, as this
effort increased the packaging associated with some codes. We removed
106 HCPCS codes from the CY 2007 bypass list for the CY 2008 proposal.
In addition, we note that many of the codes we proposed to newly
package for CY 2008 were on the bypass list used for setting the OPPS
payment rates for CY 2007 and were not proposed for bypass because we
also proposed to package them. We proposed to add to the bypass list
HCPCS codes that, using the proposed rule data, met the same previously
established empirical criteria for the bypass list that are reviewed
below or which our clinicians believed would have little associated
packaging if the services were coded correctly.
The CY 2008 packaging proposal minimally reduced the percentage of
total claims that we were able to use, in whole or in part, from 93
percent for CY 2007 to 92 percent for the proposed rule. The proposed
packaging approach increased the number of ``natural'' single bills, in
spite of reducing the universe of codes requiring single bills for
ratesetting, but reduced the number of ``pseudo'' single bills. More
``natural'' single procedure bills can be created by the packaging of
codes that always appear with another procedure because these dependent
services are supportive of and ancillary to the primary independent
procedures for which payment is being made. A claim containing two
independent procedure codes on the same date of service and not on the
bypass list previously could not be used for ratesetting, but packaging
the cost of one of the codes on the claim frees the claim to be used to
calculate the median cost of the procedure that is not packaged. On the
other hand, our proposed packaging approach reduced the number of codes
eligible for the bypass list because of the limitation on packaging set
by our previously established empirical criteria. A smaller bypass list
and the presence of greater packaging on claims reduced the final
number of ``pseudo'' single claims. In prior years, roughly 68 percent
of single bills were ``pseudo'' single bills, but based on the CY 2008
proposed rule data, 66 percent of single bills were ``pseudo'' singles.
Similarly, for this final rule with comment period,

[[Page 66591]]

66 percent of single bills were ``pseudo'' singles. Moreover, the
numbers of ``natural'' single bills and ``pseudo'' single bills were
reduced by the volume of services that we proposed to package. Hence,
our CY 2008 proposal to package payment for some HCPCS codes with
relatively high frequencies would eliminate for ratesetting the number
of available ``natural'' and ``pseudo'' single bills attributable to
the codes that we proposed to package.
As in prior years, we proposed to use the following empirical
criteria to determine the additional codes to add to the CY 2007 bypass
list to create the CY 2008 bypass list. We assumed that the
representation of packaging in the single claims for any given code was
comparable to packaging for that code in the multiple claims:
There are 100 or more single claims for the code. This
number of single claims ensures that observed outcomes are sufficiently
representative of packaging that might occur in the multiple claims.
Five percent or fewer of the single claims for the code
have packaged costs on that single claim for the code. This criterion
results in limiting the amount of packaging being redistributed to the
separately 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 claims
is 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.
In addition, we proposed to add to the bypass list codes that our
clinicians believe have minimal associated packaging based on their
clinical assessment of the complete CY 2008 OPPS proposal. As proposed,
this list contained bypass codes that were appropriate to claims for
services in CY 2006 and, therefore, included codes that were deleted
for CY 2007. Moreover, there were codes on the proposed bypass list
that were new for CY 2007 and which were appropriate additions to the
bypass list in preparation for use of the CY 2007 claims for creation
of the CY 2009 OPPS.
We received a number of public comments on the use of the bypass
list for creation of ``pseudo'' single procedure claims. A summary of
the comments and our responses follow.
Comment: Some commenters objected to the removal of HCPCS codes
from the bypass list because the codes ceased to meet the criteria for
the bypass list as a result of increased packaging in the ``natural''
single claims due to the proposed packaging approach. The commenters
objected to the removal of codes from the bypass list for this reason
because they asserted that it caused claims that would otherwise have
become ``pseudo'' single claims to not be used and, thereby, reduced
the number of single bills that were available for ratesetting for
certain services.
Response: We agree with the commenters, so we have reevaluated the
bypass list for this final rule with comment period and restored a
number of codes on the bypass list prior to the CY 2008 proposal to
maximize the creation of single and ``pseudo'' single procedure bills.
As we discuss later in this section and in section II.A.4. of this
final rule with comment period, we have made changes to the data
process to ensure that we capture as much data as possible for services
assigned status indicator ``Q.'' Although we revised the process to
apply the specific ``Q'' status indicator policies before assessment of
the bypass list so that additional HCPCS codes could be considered for
the bypass list without risk of losing their data regarding packaging,
we determined that no codes with status indicator ``Q'' were
appropriate for addition to the final CY 2008 bypass list because of
their significant associated packaging.
Comment: Several commenters asked that CMS add certain HCPCS codes
to the bypass list so that more single bills would be available for
median setting. Some commenters specifically objected to the removal of
the following radiation oncology services that they indicated should
seldom have any associated packaging: CPT codes 77280 (Therapeutic
radiology simulation-aided field setting; simple); 77285 (Therapeutic
radiology simulation-aided field setting; intermediate); 77290
(Therapeutic radiology simulation-aided field setting; complex); 77295
(Therapeutic radiology simulation-aided field setting; 3-dimensional);
77332 (Treatment devices, design and construction; simple (simple
block, simple bolus)); 77333 (Treatment devices, design and
construction; intermediate (multiple blocks, stents, bite blocks,
special bolus)); 77334 (Treatment devices, design and construction;
complex (irregular blocks, special shields, compensators, wedges, molds
or casts)); and 77417 (Therapeutic radiology port film(s)). One
commenter explained that there was an interaction with the packaging of
image guided radiation therapy codes that reduced the percentage of
single bills for high dose rate (HDR) brachytherapy from 62 percent to
48 percent of the total frequency. The commenter believed that the
payment for APC 0313 (Brachytherapy) dropped from $789.70 in CY 2007 to
$739.46 in the CY 2008 proposed rule because there were packaged costs
on claims that could no longer be used because the multiple procedure
claims included codes that were removed from the bypass list. The
commenter asked that these codes be restored to the bypass list so that
these claims could be used. Other commenters asked that CMS place CPT
code 93017 (Cardiovascular stress test using maximal or submaximal
treadmill or bicycle exercise, continuous electrocardiographic
monitoring, and/or pharmacological stress; tracing only, without
interpretation and report) on the bypass list because it is typically
performed with single photon emission computed tomography (SPECT)
procedures (CPT code 78465 (Myocardial perfusion imaging; tomographic
(SPECT), multiple studies (including attenuation correction when
performed), at rest and/or stress (exercise and/or pharmacologic) and
redistribution and/or rest injection, without or without
quantification)). These commenters believed that significant data from
multiple procedure claims were lost because CPT code 93017 was not
bypassed. Other commenters asked that CMS add the following drug
administration CPT codes to the bypass list because doing so would
enable use of more multiple procedure claims data to establish median
costs for drug administration services: CPT codes 90767 (Intravenous
infusion, for therapy, prophylaxis, or diagnosis (specify substance or
drug); additional sequential infusion, up to 1 hour (List separately in
addition to code for primary procedure)); 90768 (Intravenous infusion,
for therapy, prophylaxis, or diagnosis (specify substance or drug);
concurrent infusion (List separately in addition to code for primary
procedure); 90775 (Therapeutic, prophylactic or diagnostic injection
(specify substance or drug); each additional sequential intravenous
push of a new substance/drug (List separately in addition to code for
primary procedure)); 96411 (Chemotherapy administration; intravenous,
push technique, each additional substance/drug (List separately in
addition to code for primary procedure)); and 96417 (Chemotherapy
administration, intravenous infusion technique; each additional
sequential infusion (different substance/drug), up to 1 hour (List

[[Page 66592]]

separately in addition to code for primary procedure)). A commenter
asked that we add HCPCS code 88307 (Level V Surgical pathology, gross
and microscopic examination) because it is so similar to HCPCS codes
88305 (Level III Surgical pathology, gross and microscopic examination)
and 88306 (Level IV Surgical pathology, gross and microscopic
examination) that were already included on the bypass list.
Response: We have reviewed the requests to add these codes to the
bypass list and we have made the following decisions for CY 2008 for
the reasons stated below:
We have added the radiation oncology services listed above, with
the exception of CPT code 77417, to the bypass list because we agree
that they are of the type that should not have packaging associated
with them. We recognize that including them on the bypass list may
yield significantly more single procedure bills and may also increase
the number of claims that we can use for calculation of the low dose
rate prostate brachytherapy composite APC (APC8001). We have not added
CPT code 77417 to the CY 2008 bypass list because, based on its final
CY 2008 unconditionally packaged status, the code would not be a
candidate for the bypass list. Unconditionally packaged codes are not
included on the bypass list because their presence on a claim does not
make that claim a multiple procedure bill.
We have added CPT code 93017 to the bypass list because we agree
that it should not have significant associated packaging, and we
recognize that including it on the bypass list may yield significantly
more single procedure bills for median setting.
We have not added the drug administration services listed above to
the bypass list. Four of these five codes are for sequential drug
infusion services or injections of additional drugs and, therefore, by
definition, new drugs and medical supplies that are associated with
these codes should be reported in all cases in which the services are
furnished. We note that, beginning in CY 2007, we placed the CPT codes
for additional hours of infusion on the bypass list, recognizing that
all packaging related to these hours would be associated with the
initial services on the claim. We proposed and finalized this approach
for CY 2007, because we were unable to accurately assign representative
portions of packaged costs to multiple different drug administration
services. We expected that the packaging related to additional hours of
infusion of drugs that spanned several hours would be appropriately
assigned to the code for the first hour of infusion on the same claim.
If we had not placed the codes for additional hours of infusion on the
bypass list, we would have had a substantial set of drug administration
multiple procedure claims that were unusable for ratesetting purposes.
However, adding the sequential drug administration services to the
bypass list too would force all of the costs of the associated
additional drugs and supplies to be packaged into the payment for the
initial drug administration service for another drug, which we do not
believe is an appropriate allocation of packaging. While we understand
the concerns of the commenters regarding the challenges associated with
setting appropriate payment rates for these sequential services
reported on multiple procedure claims, we have very little CY 2006
claims data for the four codes because they were not recognized for
payment under the CY 2006 OPPS. We will reconsider the treatment of
these CPT codes for the CY 2009 OPPS update when CY 2007 data, where
these codes were separately paid under the OPPS, are available. We have
not added CPT code 90768 to the bypass list because our final CY 2008
policy unconditionally packages payment for this service and,
therefore, it is not a candidate for the bypass list.
We agree that HCPCS code 88307 (which was on the proposed bypass
list for the CY 2008 OPPS) is appropriate and we have added it to the
final CY 2008 bypass list.
In addition to these responses to comments, we have added six other
HCPCS codes to the final CY 2008 bypass list that met the empirical
criteria for inclusion using the final rule data, and we have also
added three HCPCS codes for clinical consistency with codes that are
already on the bypass list. New bypass codes for this final rule with
comment period are identified in Table 1 with an asterisk.
Comment: One commenter objected to the use of the bypass list to
create ``pseudo'' single claims for median setting on the basis that it
artificially lowers the median cost of the services on the bypass list
by sending all packaging on the claim to the other major separately
paid service on the claim. Specifically, the commenter believed that
inclusion of CPT code 93880 (Duplex scan of extracranial arteries;
complete bilateral study) on the bypass list resulted in the use of the
cost data for the lowest cost services and, thereby, lowered the cost
of this service. The commenter stated that CMS should work with
stakeholders on use of the bypass list, its impact on median costs, and
ways that CMS could use data that were more reflective of the real
costs for these procedures. The commenter believed that the median cost
of CPT code 93880 should be based on the cost of the typical patient
and not the least expensive patient because the OPPS payment caps
payment in the physician's office for the service. The commenter
explained that using the bypass list to generate more ``pseudo'' single
claims without any packaging resulted in stagnation in payment that
encouraged hospitals to pressure physicians to order more expensive
tests and threatened access to care for beneficiaries who would be
served well by simpler tests that were being underpaid as a result of
inclusion of CPT code 93880 on the bypass list.
One commenter asked that CMS provide a code-specific analysis of
the impact of bypassing each code on the bypass list because the
commenter believed that removing and using the line item costs for the
bypass codes to set the median costs for the APCs to which the bypass
codes are assigned results in understatement of the median costs for
those APCs.
Response: The bypass list has been very effective in enabling us to
use claims data that would not otherwise be available for median
calculation. Since its origin for the CY 2004 OPPS, we have been very
careful in determining the codes to be placed on the bypass list. As
described above, we use a standard set of criteria to select claims
that seldom have packaging (that is, fewer than 5 percent of
``natural'' single bills); that have little packaging (that is, less
than $50); for which we have at least 100 ``natural'' single bills; and
that are not unlisted codes (for which there is no specified service).
In addition to codes that pass these criteria, we also have added HCPCS
codes to the bypass list that have been recommended to us by members of
the public, including the specialty societies that are most familiar
with them, as services with which packaging should be seldom, if ever,
associated. Therefore, we believe that we have been very prudent with
regard to our selection of the codes to be added to the bypass list and
with our use of the list. Moreover, we open the criteria and the list
to public comment each year and we respond to comments in the final
rule for the update year.
We also make available the claims data used to calculate the median
costs on which the relative weights are based, and we provide an
extensive narrative description of our data process. Hence, we provide
commenters with the tools to conduct any further analyses they chose
with regard to the codes on the

[[Page 66593]]

bypass list or otherwise. In the case of CPT code 93880, the median
packaged cost on ``natural'' single procedure claims (of which there
were 403,106) was $0 and the percent of natural single procedure claims
on which there was any packaging was 0.47 percent (1,899 claims out of
403,106 ). Therefore, the code meets the criteria for inclusion on the
bypass list and will remain on it for CY 2008. We have no evidence that
physicians or hospitals are billing more expensive tests as a result of
the OPPS payment rate for CPT code 93880, and our data show there is
very little packaging associated with the service in the typical case.
In order to keep the established empirical criteria for the bypass
list constant, we specifically solicited public comment on whether we
should adjust the $50 packaging cost criterion for inflation each year
and, if so, recommendations for the source of the adjustment. We
believed that adding an inflation adjustment factor would ensure that
the same amount of packaging associated with candidate codes for the
bypass list was reviewed each year relative to nominal costs.
We received one public comment on the appropriateness of updating
the $50 packaging cost criteria for inclusion of a code on the bypass
list to account for annual inflation. A summary of the comment and our
response follow.
Comment: One commenter stated that CMS should update the $50
maximum ``natural'' single bill median packaging cost criterion for
including HCPCS codes on the bypass list on the basis of empirical
criteria. The commenter did not suggest a methodology we might use for
the update.
Response: We have not changed the $50 maximum ``natural'' bill
median packaging cost criterion for this final rule with comment
period. However, we will consider whether to update the criterion and,
if so, what methodology would be used, as part of the development of
the proposals for the CY 2009 OPPS.
After consideration of the public comments received, we are
adopting, as final, the proposed ``pseudo'' single claims process and
the CY 2008 bypass codes listed in Table 1 below. This list has been
modified from the CY 2008 proposed list, with the addition of HCPCS
codes that meet the empirical criteria based on updated claims data and
certain HCPCS codes recommended by commenters, as discussed above. As
stated earlier, the new bypass codes for this final rule with comment
period are identified in Table 1 with an asterisk.

Table 1.--CY 2008 Final Bypass Codes for Creating ``Pseudo'' Single
Claims for Calculating Median Costs
------------------------------------------------------------------------
Added for
HCPCS code Short description this final
rule
------------------------------------------------------------------------
11056...................... Trim skin lesions, 2 to 4....
11057...................... Trim skin lesions, over 4....
11300...................... Shave skin lesion............
11301...................... Shave skin lesion............
11719...................... Trim nail(s).................
11720...................... Debride nail, 1-5............
11721...................... Debride nail, 6 or more......
11954...................... Therapy for contour defects..
17003...................... Destruct premalg les, 2-14...
31231...................... Nasal endoscopy, dx..........
31579...................... Diagnostic laryngoscopy......
51798...................... Us urine capacity measure....
53661...................... Dilation of urethra.......... *
54240...................... Penis study..................
56820...................... Exam of vulva w/scope........
57150...................... Treat vagina infection....... *
67820...................... Revise eyelashes.............
69210...................... Remove impacted ear wax......
69220...................... Clean out mastoid cavity.....
70030...................... X-ray eye for foreign body...
70100...................... X-ray exam of jaw............
70110...................... X-ray exam of jaw............
70120...................... X-ray exam of mastoids.......
70130...................... X-ray exam of mastoids.......
70140...................... X-ray exam of facial bones...
70150...................... X-ray exam of facial bones...
70160...................... X-ray exam of nasal bones....
70200...................... X-ray exam of eye sockets....
70210...................... X-ray exam of sinuses........
70220...................... X-ray exam of sinuses........
70250...................... X-ray exam of skull..........
70260...................... X-ray exam of skull..........
70328...................... X-ray exam of jaw joint......
70330...................... X-ray exam of jaw joints.....
70336...................... Magnetic image, jaw joint....
70355...................... Panoramic x-ray of jaws......
70360...................... X-ray exam of neck...........
70370...................... Throat x-ray & fluoroscopy...
70371...................... Speech evaluation, complex...
70450...................... Ct head/brain w/o dye........
70480...................... Ct orbit/ear/fossa w/o dye...
70486...................... Ct maxillofacial w/o dye.....
70490...................... Ct soft tissue neck w/o dye..
70544...................... Mr angiography head w/o dye..
70551...................... Mri brain w/o dye............
71010...................... Chest x-ray..................
71015...................... Chest x-ray..................
71020...................... Chest x-ray..................
71021...................... Chest x-ray..................
71022...................... Chest x-ray..................
71023...................... Chest x-ray and fluoroscopy..
71030...................... Chest x-ray..................
71034...................... Chest x-ray and fluoroscopy..
71035...................... Chest x-ray..................
71100...................... X-ray exam of ribs...........
71101...................... X-ray exam of ribs/chest.....
71110...................... X-ray exam of ribs...........
71111...................... X-ray exam of ribs/chest.....
71120...................... X-ray exam of breastbone.....
71130...................... X-ray exam of breastbone.....
71250...................... Ct thorax w/o dye............
72010...................... X-ray exam of spine..........
72020...................... X-ray exam of spine..........
72040...................... X-ray exam of neck spine.....
72050...................... X-ray exam of neck spine.....
72052...................... X-ray exam of neck spine.....
72069...................... X-ray exam of trunk spine....
72070...................... X-ray exam of thoracic spine.
72072...................... X-ray exam of thoracic spine.
72074...................... X-ray exam of thoracic spine.
72080...................... X-ray exam of trunk spine....
72090...................... X-ray exam of trunk spine....
72100...................... X-ray exam of lower spine....
72110...................... X-ray exam of lower spine....
72114...................... X-ray exam of lower spine....
72120...................... X-ray exam of lower spine....

[[Page 66594]]

72125...................... Ct neck spine w/o dye........
72128...................... Ct chest spine w/o dye.......
72131...................... Ct lumbar spine w/o dye......
72141...................... Mri neck spine w/o dye.......
72146...................... Mri chest spine w/o dye......
72148...................... Mri lumbar spine w/o dye.....
72170...................... X-ray exam of pelvis.........
72190...................... X-ray exam of pelvis.........
72192...................... Ct pelvis w/o dye............
72202...................... X-ray exam sacroiliac joints.
72220...................... X-ray exam of tailbone.......
73000...................... X-ray exam of collar bone....
73010...................... X-ray exam of shoulder blade.
73020...................... X-ray exam of shoulder.......
73030...................... X-ray exam of shoulder.......
73050...................... X-ray exam of shoulders......
73060...................... X-ray exam of humerus........
73070...................... X-ray exam of elbow..........
73080...................... X-ray exam of elbow..........
73090...................... X-ray exam of forearm........
73100...................... X-ray exam of wrist..........
73110...................... X-ray exam of wrist..........
73120...................... X-ray exam of hand...........
73130...................... X-ray exam of hand...........
73140...................... X-ray exam of finger(s)......
73200...................... Ct upper extremity w/o dye...
73218...................... Mri upper extremity w/o dye..
73221...................... Mri joint upr extrem w/o dye.
73510...................... X-ray exam of hip............
73520...................... X-ray exam of hips...........
73540...................... X-ray exam of pelvis & hips..
73550...................... X-ray exam of thigh..........
73560...................... X-ray exam of knee, 1 or 2...
73562...................... X-ray exam of knee, 3........
73564...................... X-ray exam, knee, 4 or more..
73565...................... X-ray exam of knees..........
73590...................... X-ray exam of lower leg......
73600...................... X-ray exam of ankle..........
73610...................... X-ray exam of ankle..........
73620...................... X-ray exam of foot...........
73630...................... X-ray exam of foot...........
73650...................... X-ray exam of heel...........
73660...................... X-ray exam of toe(s).........
73700...................... Ct lower extremity w/o dye...
73718...................... Mri lower extremity w/o dye..
73721...................... Mri jnt of lwr extre w/o dye.
74000...................... X-ray exam of abdomen........
74010...................... X-ray exam of abdomen........
74020...................... X-ray exam of abdomen........
74022...................... X-ray exam series, abdomen...
74150...................... Ct abdomen w/o dye...........
74210...................... Contrast x-ray exam of throat
74220...................... Contrast x-ray, esophagus....
74230...................... Cine/vid x-ray, throat/esoph.
74246...................... Contrast x-ray uppr gi tract.
74247...................... Contrst x-ray uppr gi tract..
74249...................... Contrst x-ray uppr gi tract..
76020...................... X-rays for bone age..........
76040...................... X-rays, bone evaluation......
76061...................... X-rays, bone survey..........
76062...................... X-rays, bone survey..........
76065...................... X-rays, bone evaluation......
76066...................... Joint survey, single view....
76070...................... Ct bone density, axial.......
76071...................... Ct bone density, peripheral..
76075...................... Dxa bone density, axial......
76076...................... Dxa bone density/peripheral..
76077...................... Dxa bone density/v-fracture..
76078...................... Radiographic absorptiometry..
76100...................... X-ray exam of body section...
76400...................... Magnetic image, bone marrow..
76510...................... Ophth us, b & quant a........
76511...................... Ophth us, quant a only.......
76512...................... Ophth us, b w/non-quant a....
76513...................... Echo exam of eye, water bath.
76514...................... Echo exam of eye, thickness..
76516...................... Echo exam of eye.............
76519...................... Echo exam of eye.............
76536...................... Us exam of head and neck.....
76645...................... Us exam, breast(s)...........
76700...................... Us exam, abdom, complete.....
76705...................... Echo exam of abdomen.........
76770...................... Us exam abdo back wall, comp.
76775...................... Us exam abdo back wall, lim..
76778...................... Us exam kidney transplant....
76801...................... Ob us < 14 wks, single fetus.
76805...................... Ob us >/= 14 wks, sngl fetus.
76811...................... Ob us, detailed, sngl fetus..
76816...................... Ob us, follow-up, per fetus..
76817...................... Transvaginal us, obstetric...
76830...................... Transvaginal us, non-ob......
76856...................... Us exam, pelvic, complete....
76857...................... Us exam, pelvic, limited.....
76870...................... Us exam, scrotum.............
76880...................... Us exam, extremity...........
76970...................... Ultrasound exam follow-up....
76977...................... Us bone density measure......
76999...................... Echo examination procedure...
77280...................... Set radiation therapy field.. *
77285...................... Set radiation therapy field.. *
77290...................... Set radiation therapy field.. *
77295...................... Set radiation therapy field.. *
77300...................... Radiation therapy dose plan..

[[Page 66595]]

77301...................... Radiotherapy dose plan, imrt.
77315...................... Teletx isodose plan complex..
77326...................... Brachytx isodose calc simp...
77327...................... Brachytx isodose calc interm.
77328...................... Brachytx isodose plan compl..
77331...................... Special radiation dosimetry..
77332...................... Radiation treatment aid(s)... *
77333...................... Radiation treatment aid(s)... *
77334...................... Radiation treatment aid(s)... *
77336...................... Radiation physics consult....
77370...................... Radiation physics consult....
77401...................... Radiation treatment delivery.
77402...................... Radiation treatment delivery.
77403...................... Radiation treatment delivery.
77404...................... Radiation treatment delivery.
77407...................... Radiation treatment delivery.
77408...................... Radiation treatment delivery.
77409...................... Radiation treatment delivery.
77411...................... Radiation treatment delivery.
77412...................... Radiation treatment delivery.
77413...................... Radiation treatment delivery.
77414...................... Radiation treatment delivery.
77416...................... Radiation treatment delivery.
77418...................... Radiation tx delivery, imrt..
77470...................... Special radiation treatment..
77520...................... Proton trmt, simple w/o comp.
77523...................... Proton trmt, intermediate....
80500...................... Lab pathology consultation...
80502...................... Lab pathology consultation...
85097...................... Bone marrow interpretation...
86510...................... Histoplasmosis skin test.....
86850...................... RBC antibody screen..........
86870...................... RBC antibody identification..
86880...................... Coombs test, direct..........
86885...................... Coombs test, indirect, qual..
86886...................... Coombs test, indirect, titer.
86890...................... Autologous blood process.....
86900...................... Blood typing, ABO............
86901...................... Blood typing, Rh (D).........
86903...................... Blood typing, antigen screen.
86904...................... Blood typing, patient serum..
86905...................... Blood typing, RBC antigens...
86906...................... Blood typing, Rh phenotype...
86930...................... Frozen blood prep............
86970...................... RBC pretreatment.............
88104...................... Cytopath fl nongyn, smears...
88106...................... Cytopath fl nongyn, filter...
88107...................... Cytopath fl nongyn, sm/fltr..
88108...................... Cytopath, concentrate tech...
88112...................... Cytopath, cell enhance tech..
88160...................... Cytopath smear, other source.
88161...................... Cytopath smear, other source.
88162...................... Cytopath smear, other source.
88172...................... Cytopathology eval of fna....
88173...................... Cytopath eval, fna, report...
88182...................... Cell marker study............
88184...................... Flowcytometry/ tc, 1 marker..
88185...................... Flowcytometry/tc, add-on.....
88300...................... Surgical path, gross.........
88302...................... Tissue exam by pathologist...
88304...................... Tissue exam by pathologist...
88305...................... Tissue exam by pathologist...
88307...................... Tissue exam by pathologist...
88311...................... Decalcify tissue.............
88312...................... Special stains...............
88313...................... Special stains...............
88321...................... Microslide consultation......
88323...................... Microslide consultation......
88325...................... Comprehensive review of data.
88331...................... Path consult intraop, 1 bloc.
88342...................... Immunohistochemistry.........
88346...................... Immunofluorescent study......
88347...................... Immunofluorescent study......
88348...................... Electron microscopy..........
88358...................... Analysis, tumor..............
88360...................... Tumor immunohistochem/manual.
88361...................... Tumor immunohistochem/comput. *
88365...................... Insitu hybridization (fish)..
88368...................... Insitu hybridization, manual.
88399...................... Surgical pathology procedure.
89049...................... Chct for mal hyperthermia....
89230...................... Collect sweat for test.......
89240...................... Pathology lab procedure......
90761...................... Hydrate iv infusion, add-on..
90761...................... Hydrate iv infusion, add-on.. *
90766...................... Ther/proph/dg iv inf, add-on. *
90801...................... Psy dx interview.............
90802...................... Intac psy dx interview.......
90804...................... Psytx, office, 20-30 min.....
90805...................... Psytx, off, 20-30 min w/e&m..
90806...................... Psytx, off, 45-50 min........
90807...................... Psytx, off, 45-50 min w/e&m..
90808...................... Psytx, office, 75-80 min.....
90809...................... Psytx, off, 75-80, w/e&m.....
90810...................... Intac psytx, off, 20-30 min..
90812...................... Intac psytx, off, 45-50 min..
90816...................... Psytx, hosp, 20-30 min.......
90818...................... Psytx, hosp, 45-50 min.......
90826...................... Intac psytx, hosp, 45-50 min. *
90845...................... Psychoanalysis...............
90846...................... Family psytx w/o patient.....
90847...................... Family psytx w/patient.......

[[Page 66596]]

90853...................... Group psychotherapy..........
90857...................... Intac group psytx............
90862...................... Medication management........
92002...................... Eye exam, new patient........
92004...................... Eye exam, new patient........
92012...................... Eye exam established pat.....
92014...................... Eye exam & treatment.........
92020...................... Special eye evaluation.......
92081...................... Visual field examination(s)..
92082...................... Visual field examination(s)..
92083...................... Visual field examination(s)..
92135...................... Ophth dx imaging post seg....
92136...................... Ophthalmic biometry..........
92225...................... Special eye exam, initial....
92226...................... Special eye exam, subsequent.
92230...................... Eye exam with photos.........
92240...................... Icg angiography..............
92250...................... Eye exam with photos.........
92275...................... Electroretinography..........
92285...................... Eye photography..............
92286...................... Internal eye photography.....
92520...................... Laryngeal function studies...
92541...................... Spontaneous nystagmus test...
92546...................... Sinusoidal rotational test...
92548...................... Posturography................
92552...................... Pure tone audiometry, air....
92553...................... Audiometry, air & bone.......
92555...................... Speech threshold audiometry..
92556...................... Speech audiometry, complete..
92557...................... Comprehensive hearing test...
92567...................... Tympanometry.................
92582...................... Conditioning play audiometry.
92585...................... Auditor evoke potent, compre.
92603...................... Cochlear implt f/up exam 7 >.
92604...................... Reprogram cochlear implt 7 >.
92626...................... Eval aud rehab status........
93005...................... Electrocardiogram, tracing...
93017...................... Cardiovascular stress test... *
93225...................... ECG monitor/record, 24 hrs...
93226...................... ECG monitor/report, 24 hrs...
93231...................... Ecg monitor/record, 24 hrs...
93232...................... ECG monitor/report, 24 hrs...
93236...................... ECG monitor/report, 24 hrs...
93270...................... ECG recording................
93271...................... Ecg/monitoring and analysis..
93278...................... ECG/signal-averaged..........
93727...................... Analyze ilr system...........
93731...................... Analyze pacemaker system.....
93732...................... Analyze pacemaker system.....
93733...................... Telephone analy, pacemaker...
93734...................... Analyze pacemaker system.....
93735...................... Analyze pacemaker system.....
93736...................... Telephonic analy, pacemaker..
93741...................... Analyze ht pace device sngl..
93742...................... Analyze ht pace device sngl..
93743...................... Analyze ht pace device dual..
93744...................... Analyze ht pace device dual..
93786...................... Ambulatory BP recording......
93788...................... Ambulatory BP analysis.......
93797...................... Cardiac rehab................
93798...................... Cardiac rehab/monitor........
93875...................... Extracranial study...........
93880...................... Extracranial study...........
93882...................... Extracranial study...........
93886...................... Intracranial study...........
93888...................... Intracranial study...........
93922...................... Extremity study..............
93923...................... Extremity study..............
93924...................... Extremity study..............
93925...................... Lower extremity study........
93926...................... Lower extremity study........
93930...................... Upper extremity study........
93931...................... Upper extremity study........
93965...................... Extremity study..............
93970...................... Extremity study..............
93971...................... Extremity study..............
93975...................... Vascular study...............
93976...................... Vascular study...............
93978...................... Vascular study...............
93979...................... Vascular study...............
93990...................... Doppler flow testing.........
94015...................... Patient recorded spirometry..
94690...................... Exhaled air analysis.........
95115...................... Immunotherapy, one injection.
95117...................... Immunotherapy injections.....
95165...................... Antigen therapy services.....
95250...................... Glucose monitoring, cont..... *
95805...................... Multiple sleep latency test..
95806...................... Sleep study, unattended......
95807...................... Sleep study, attended........
95808...................... Polysomnography, 1-3.........
95812...................... Eeg, 41-60 minutes...........
95813...................... Eeg, over 1 hour.............
95816...................... Eeg, awake and drowsy........
95819...................... Eeg, awake and asleep........
95822...................... Eeg, coma or sleep only......
95869...................... Muscle test, thor paraspinal.
95872...................... Muscle test, one fiber....... *
95900...................... Motor nerve conduction test..
95921...................... Autonomic nerv function test.
95925...................... Somatosensory testing........
95926...................... Somatosensory testing........ *
95930...................... Visual evoked potential test.
95950...................... Ambulatory eeg monitoring....
95953...................... EEG monitoring/computer......
95970...................... Analyze neurostim, no prog...
95972...................... Analyze neurostim, complex...
95974...................... Cranial neurostim, complex...
95978...................... Analyze neurostim brain/1h...
96000...................... Motion analysis, video/3d....
96101...................... Psycho testing by psych/phys.

[[Page 66597]]

96111...................... Developmental test, extend...
96116...................... Neurobehavioral status exam..
96118...................... Neuropsych tst by psych/phys.
96119...................... Neuropsych testing by tec....
96150...................... Assess hlth/behave, init.....
96151...................... Assess hlth/behave, subseq...
96152...................... Intervene hlth/behave, indiv.
96153...................... Intervene hlth/behave, group.
96415...................... Chemo, iv infusion, addl hr..
96423...................... Chemo ia infuse each addl hr.
96900...................... Ultraviolet light therapy....
96910...................... Photochemotherapy with UV-B..
96912...................... Photochemotherapy with UV-A..
96913...................... Photochemotherapy, UV-A or B.
96920...................... Laser tx, skin < 250 sq cm...
98925...................... Osteopathic manipulation.....
98926...................... Osteopathic manipulation.....
98927...................... Osteopathic manipulation.....
98940...................... Chiropractic manipulation....
98941...................... Chiropractic manipulation....
98942...................... Chiropractic manipulation....
99204...................... Office/outpatient visit, new.
99212...................... Office/outpatient visit, est.
99213...................... Office/outpatient visit, est.
99214...................... Office/outpatient visit, est.
99241...................... Office consultation..........
99242...................... Office consultation..........
99243...................... Office consultation..........
99244...................... Office consultation..........
99245...................... Office consultation..........
0144T...................... CT heart wo dye; qual calc...
C8951...................... IV inf, tx/dx, each addl hr..
C8955...................... Chemotx adm, IV inf, addl hr.
G0008...................... Admin influenza virus vac....
G0101...................... CA screen; pelvic/breast exam
G0127...................... Trim nail(s).................
G0130...................... Single energy x-ray study....
G0166...................... Extrnl counterpulse, per tx..
G0175...................... OPPS Service,sched team conf.
G0332...................... Preadmin IV immunoglobulin...
G0340...................... Robt lin-radsurg fractx 2-5..
G0344...................... Initial preventive exam......
G0365...................... Vessel mapping hemo access...
G0367...................... EKG tracing for initial prev.
G0376...................... Smoke/tobacco counseling >10.
M0064...................... Visit for drug monitoring....
Q0091...................... Obtaining screen pap smear...
------------------------------------------------------------------------

(2) Exploration of Allocation of Packaged Costs to Separately Paid
Procedure Codes
During its August 23-24, 2006 meeting, the APC Panel recommended
that CMS provide claims analysis of the contributions of packaged costs
(including packaged revenue code charges and charges for packaged HCPCS
codes) to the median cost of each drug administration service. (We
refer readers to Recommendation 28 in the August 23-24, 2006
meeting recommendation summary on the CMS Web site at: http://www.cms.hhs.gov/FACA/05--
AdvisoryPanelonAmbulatoryPaymentClassificationGroups.asp#TopOfPage.) In
our continued effort to better understand the multiple claims in order
to extract single bill information from them, we examined the extent to
which the packaging in multiple procedure claims differs from the
packaging in the single procedure claims on which we base the median
costs both in general and more specifically for drug administration
services. We performed this analysis using the claims data on which we
based the CY 2007 OPPS/ASC final rule with comment period. We examined
the amount of packaging in multiple procedure versus single procedure
claims in general and in claims for drug administration services in
particular. We conducted this analysis without taking into account the
proposed packaging approach presented in the CY 2008 OPPS/ASC proposed
rule. However, we did not expect the services newly proposed for
packaged payment to commonly appear with a drug administration service.
Therefore, we believed that the analysis conducted on the CY 2007 final
rule with comment period data was sufficient to inform our development
of the CY 2008 OPPS/ASC proposed rule.
In general, we did not believe that the proportionate amount of
packaged costs in the multiple bills relative to the number of primary
services would be greater than that in the single bills. Our findings
supported our hypothesis. The costs in uncoded revenue codes and HCPCS
codes with a packaged status indicator accounted for 22 percent of
observed costs in the universe of all CY 2005 claims that we used to
model the CY 2007 OPPS (including both the single and multiple
procedure bills). Similarly, the costs in uncoded revenue codes and
HCPCS codes with a packaged status indicator accounted for 18 percent
of the total cost in the subset of CY 2005 single bills that we used to
calculate the median costs on which the relative weights were based.
However, the bypass methodology creates a ``pseudo'' single bill
for all claims for services or items on the bypass list, and these
``pseudo'' single bills have no associated packaging, by definition of
the application of the bypass list. Excluding the total cost associated
with bypass codes, 28 percent of observed costs in the single bills
were attributable to packaged services, and 29 percent of observed
costs across all claims were attributable to packaged services.
Therefore, we concluded that, in general, the extent of packaging in
all bills was similar to the amount of packaging in the single
procedure bills we used to set median costs for most APCs.
In the CY 2008 proposed rule (72 FR 42640), we recognized that
aggregate numbers do not address the packaging associated with single
and multiple procedure claims for specific services. In past years, we
received comments stating that the amount of packaging in the single
bills for drug administration services was not representative of the
typical packaged costs of these drug administration services, which
were usually performed in combination with one another, because the
single bills represented less complex and less resource-intensive
services than the usual cases.
We published a study in the CY 2007 OPPS/ASC final rule with
comment period (71 FR 68120 through 68121) that discussed the amount of
packaging on

[[Page 66598]]

the single bills for drug administration procedure codes, and we
promised to replicate that study for the APC Panel. We discussed the
results of this study with the APC Panel at its March 2007 meeting, in
accordance with the APC Panel's August 2006 recommendation and also
published the results in the CY 2008 OPPS/ASC proposed rule (72 FR
42640 through 42641).
As discussed in the proposed rule, we found that drug
administration services demonstrated reasonable single bill
representation in comparison with other OPPS services. Single bills for
drug administration constituted, roughly, 30 percent of all observed
occurrences of drug administration services, varying by code from 7 to
55 percent. The study also demonstrated that packaged costs
substantially contributed to median cost estimates for the majority of
drug administration HCPCS codes (72 FR 42640 through 42641).
For all single bills for CPT code 90780 (Intravenous infusion for
therapy/diagnosis, administered by physician or under direct
supervision of physician; up to one hour), on average, packaged costs
were 31 percent of total cost (median 27 percent). For the same code,
packaged drug and pharmacy costs comprised, on average, 23 percent of
total costs (median 15 percent). Single bills made up 34 percent of all
line-item occurrences of the service, suggesting that this single bill
median cost was fairly robust and probably captured packaging
adequately. On the other hand, CPT code 90784 (Therapeutic,
prophylactic or diagnostic injection (specify material injected);
subcutaneous or intramuscular) demonstrated limited packaging (median 0
percent and mean 17 percent), and the median cost for the code was
derived from only 7 percent of all occurrences of the code. Across all
drug administration codes, over half showed significant median packaged
costs largely attributable to packaged drug and pharmacy costs.
By definition, we were unable to precisely assess the amount of
packaging associated with drug administration codes in the multiple
bills. As a proxy, we estimated packaging as a percent of total cost on
each claim for two subsets of claims. Both analyses suggested the
presence of moderate packaged costs, especially drug and pharmacy
costs, associated with drug administration services in the multiple
bills. We calculated measures of central tendency for packaging
percentages in the multiple bills or portions of multiple bills
remaining after ``pseudo'' singles were created. We referred to this
group of the multiple bills as the ``hardcore'' multiple bills. For the
first subset of ``hardcore'' multiple bills with only drug
administration codes, that is, where multiple drug administration codes
were the only separately paid procedure codes on the claim, we
estimated that packaged costs were 22 percent of total costs (27
percent, on average), where total costs consisted of costs for all
payable codes. Costs for packaged drug HCPCS codes and pharmacy revenue
codes comprised 13 percent of total cost at the median (19 percent, on
average). For the second subset of ``hardcore'' multiple bills with any
drug administration code, that is, where a drug administration code
appeared with other payable codes (largely radiology services and
visits), we estimated packaged costs were 13 percent of total cost at
the median (19 percent, on average). Costs for packaged drugs and
pharmacy revenue codes comprised 6 percent of total cost at the median
(10 percent, on average). The amount of packaging in both proxy
measures, but especially the first subset, closely resembled the
packaged costs as a percentage of drug administration costs observed in
the single bills for drug administration services. While finding a way
to accurately use data from the ``hardcore'' multiple bills to estimate
drug administration median costs undoubtedly would impact medians,
these comparisons suggested that the multiple bill data probably would
support current median estimates.
In the CY 2008 OPPS/ASC proposed rule (72 FR 42641), we noted that
we had received several comments over the past few years offering
algorithms for packaging the costs associated with specific revenue
codes or packaging drugs with certain drug administration codes.
Because of the complexity of even routine OPPS claims, prior research
suggested that such algorithms have limited power to generate
additional single bill claims and do little to change median cost
estimates. In the proposed rule (72 FR 42641), we explained that we
continue to look for simple, but powerful, methodologies like the
bypass list and packaging of HCPCS codes for additional ancillary and
supportive services to assign packaged costs to all services within the
``hardcore'' multiple bills. Ideally, these methodologies should be
intuitive to the provider community, easily integrated into the
complexity of OPPS median cost estimation, and simple to maintain from
year to year. We specifically solicited methodologies for creation of
single bills that meet these criteria.
We received several public comments with regard to the use of data
from single and multiple procedure claims for ratesetting. A summary of
the public comments and our responses follow.
Comment: Several commenters expressed appreciation for CMS'
analysis of packaged costs included on single and multiple procedure
claims for drug administration services. One commenter encouraged CMS
to further analyze the total amount and percentage of packaged costs
associated with all packaged HCPCS codes, as well as other packaged
services reported by hospitals, and examine this information on single
versus multiple procedure claims in order to increase hospitals'
understanding of the actual packaged costs used in the ratesetting
process. Once again, several commenters encouraged CMS to consider
specific packaging algorithms to allocate packaged costs on multiple
procedures claims, in order to create additional ``pseudo'' single
claims for ratesetting.
Response: The packaging of associated costs into payment for major
procedures is a longstanding principle of the OPPS. The OPPS packages
payment for the operating and capital-related costs that are directly
related and integral to furnishing a service on an outpatient basis.
These packaged costs have historically included costs related to use of
an operating or treatment room, anesthesia, medical supplies,
implantable devices, inexpensive drugs, etc. Our findings related to
the packaged costs on single and multiple claims for drug
administration services confirm that the packaging on the single bills
used for ratesetting resembles the drug and pharmacy-related packaged
costs on multiple procedure claims. The packaging associated with drug
administration services on single and multiple claims has historically
been of particular concern to the public, so we are reassured by this
finding. We are not convinced that developing this information for all
other HCPCS codes would provide further useful information to
hospitals. Instead, we prefer to direct our analytic resources toward
exploring additional approaches to using more cost data from multiple
procedure claims for ratesetting. If we are eventually able to use all
OPPS claims in developing median costs, then all packaged costs on
claims would also be incorporated in ratesetting under the OPPS. We
remind hospitals that they should continue to take into consideration
all costs associated with providing HOPD services in establishing their
charges for the services. In addition, hospitals should report packaged
HCPCS codes and charges, consistent with all CPT, OPPS, and local

[[Page 66599]]

contractor instructions, whenever those services are provided to ensure
that the associated costs are included in ratesetting for the major
services.
As we have stated previously regarding our exploration of specific
packaging algorithms, we have found that these approaches, while
resource-intensive on our part, have limited power to generate
additional single bill claims and do little to change median cost
estimates. We received no other specific suggestions for other
approaches to allocating packaged costs on ``hardcore'' multiple bills
that would be intuitive to the provider community, easily integrated
into the complexity of OPPS median cost estimation, and simple to
maintain from year to year. We will continue to explore these data
challenges with the assistance of the Data Subcommittee of the APC
Panel. We believe that further progression toward encounter-based or
episode-based payment for commonly provided combinations of services
could reduce the number of these multiple claims and incorporate
additional claims data, as discussed in section II.A.4.d. of this final
rule with comment period regarding low dose rate prostate brachytherapy
and cardiac electrophysiologic evaluation and ablation procedures.
After consideration of the public comments received, we are
finalizing our CY 2008 proposal for the use of single and multiple
procedure claims for ratesetting. We will continue to pursue additional
methodologies that would allow use of cost data from ``hardcore''
multiple claims for ratesetting.
c. Calculation of CCRs
We calculated hospital-specific overall CCRs and hospital-specific
departmental CCRs for each hospital for which we had claims data in the
period of claims being used to calculate the median costs that we
converted to scaled relative weights for purposes of setting the OPPS
payment rates. We applied the hospital-specific CCR to the hospital's
charges at the most detailed level possible, based on a revenue code to
cost center crosswalk that contains a hierarchy of CCRs used to
estimate costs from charges for each revenue code. That crosswalk is
available for review and continuous comment on the CMS Web site at:
http://www.cms.hhs.gov/HospitalOutpatientPPS/03--
crosswalk.asp#TopOfPage. We calculated CCRs for the standard and
nonstandard cost centers accepted by the electronic cost report
database. In general, the most detailed level at which we calculated
CCRs was the hospital-specific departmental level.
Following the expiration of most medical devices from pass-through
status in CY 2003, prior to which devices were paid at charges reduced
to cost using the hospital's overall CCR, we received comments that our
OPPS cost estimates for device implantation procedures systematically
underestimate the cost of the devices included in the packaged payment
for the procedures because hospitals routinely mark up charges for low
cost items to a much greater extent than they mark up high cost items,
and that these items are often combined in a single cost center on
their Medicare cost report. This is commonly known as ``charge
compression.''
In CY 2006, the device industry commissioned a study to interpolate
a device specific CCR from the medical supply CCR, using publicly
available hospital claims and Medicare cost report data rather than
proprietary data on device costs. After reviewing the device industry's
data analysis and study model, CMS contracted with RTI International
(RTI) to study the impact of charge compression on the cost-based
weight methodology adopted in the FY 2007 IPPS final rule, to evaluate
this model, and to propose solutions. For more information, interested
individuals can view RTI's report on the CMS Web site at: http://www.cms.hhs.gov/reports/downloads/Dalton.pdf.
Any study of cost estimation in general, and charge compression
specifically, has obvious importance for both the OPPS and the IPPS.
RTI's research explicitly focused on the IPPS for several reasons,
which include greater Medicare expenditures under the IPPS, a desire to
evaluate the model quickly given IPPS regulation deadlines, and a focus
on other components of the new FY 2007 IPPS cost-based weight
methodology (CMS Contract No. 500-00-0024-T012, ``A Study of Charge
Compression in Calculating DRG Relative Weights,'' page 5). The study
first addressed the possibility of cross-aggregation bias in the CCRs
used to estimate costs under the IPPS created by the IPPS methodology
of aggregating cost centers into larger departments before calculating
CCRs. The report also addressed potential bias created by estimating
costs using a CCR that reflects the combined costs and charges of
services with wide variation in the amount of hospital markup. In its
assessment of the latter, RTI targeted its attempt to identify the
presence of charge compression to those cost centers presumably
associated with revenue codes demonstrating significant IPPS
expenditures and utilization. RTI assessed the correlation between cost
report CCRs and the percent of charges in a cost center attributable to
a set of similar services represented by a group of revenue codes. RTI
did not examine the correlation between CCRs and revenue codes without
significant IPPS expenditures or a demonstrated concentration in a
specific Diagnosis Related Group (DRG). For example, RTI did not
examine revenue code groups within the pharmacy cost center with low
proportionate inpatient charges that might be important to the OPPS,
such as ``Pharmacy Incident to Radiology.'' RTI states this limitation
in its study and specifically recommends that disaggregated CCRs be
reestimated for hospital outpatient charges.
Cost report CCRs combine both inpatient and outpatient services.
Ideally, RTI would be able to examine the correlation between CCRs for
Medicare inpatient services and inpatient claim charges and the
correlation between CCRs for Medicare outpatient services and
outpatient claim charges. However, the comprehensive nature of the cost
report CCR (which combines inpatient and outpatient services) argues
for an analysis of the correlation between CCRs and combined inpatient
and outpatient claim charges. As noted, the RTI study accepted some
measurement error in its analysis by matching an ``all charges'' CCR to
inpatient estimates of charges for groups of similar services
represented by revenue codes because of short timelines and because
inpatient costs dominate outpatient costs in many ancillary cost
centers. We believe that CCR adjustments used to calculate payment
should be based on the comparison of cost report CCRs to combined
inpatient and outpatient charges. An ``all charges'' model would reduce
measurement error and estimate adjustments to disaggregated CCRs that
could be used in both hospital inpatient and outpatient payment
systems.
RTI made several short-term recommendations for improving the
accuracy of DRG weight estimates from a cost-based methodology to
address bias in combining cost centers and charge compression that
could be considered in the context of OPPS policy. We discussed each
recommendation within the context of the OPPS and provided our
assessment of its application to the OPPS in the CY 2008 OPPS/ASC
proposed rule (72 FR 42642). Of the four short term recommendations, we
believe that only the recommendation to establish regression based
estimates as a

[[Page 66600]]

temporary or permanent method for disaggregating national average CCRs
for medical supplies, drugs, and radiology services under the IPPS has
specific application to the OPPS (RTI study, pages 11 and 86).
Moreover, with regard to radiology services, the OPPS already has
partially implemented RTI's recommendation to use lower CCRs to
estimate costs for those OPPS services allocated to MRI or CT Scan cost
centers through its use of hospital-specific CCRs for nonstandard cost
centers.
For reasons discussed below and in more detail in the proposed rule
(72 FR 42642 through 42643), we proposed to develop an all charges
model that would compare variation in CCRs with variation in combined
inpatient and outpatient charges for sets of similar services and
establish disaggregated regression-based CCRs that could be applied to
both inpatient and outpatient charges. We proposed to evaluate the
results of that methodology for purposes of determining whether the
resulting regression-based CCRs should be proposed for use in
developing the CY 2009 OPPS payment rates. As noted in the proposed
rule (72 FR 42642), the revised all charges model and resulting
regression-based CCRs were not available in time for use in developing
this final rule with comment period.
Since publication of the proposed rule, we have contracted with RTI
to determine whether the statistical model that RTI recommended in its
January 2007 report for adjusting CCRs in inpatient cost computations
can be expanded to include cost computations for significant categories
of outpatient services that are paid under the OPPS and to assess the
impact of any such changes on payment under the OPPS (HHSM 500-2005-
00029I Task Order 0008, ``Refining Cost-to-Charge Ratios for
Calculating APC and DRG Relative Payment Weights''). Under this task
order, RTI will assess the validity of the revenue code-to-cost center
crosswalk used under the OPPS by comparing revenue code and cost center
charges, make recommendations for changes to the crosswalk, and assess
the OPPS use of nonstandard cost centers. RTI will estimate regression-
based CCRs using charge data from both inpatient and outpatient claims
for hospital ancillary departments. RTI will extend its recommended
models to estimate regression-based CCRs for cost centers that are
particularly relevant to APCs, working with CMS staff to analyze the
sensitivity of APC weights to proposed adjustments. RTI also will
convene a technical expert panel to review analyses, as it did for its
first study.
There are several reasons why we did not propose to use the
intradepartmental regression-based CCRs that RTI estimated using IPPS
charges for the CY 2008 OPPS estimation of median costs. We agree with
RTI that the intradepartmental CCRs calculated for the IPPS would not
always be appropriate for application to the OPPS (RTI study, pages 34
and 35). While RTI recommends that the model be recalibrated for
outpatient charges before it is applied to the OPPS, we believed that
the combined nature of the CCRs available from the cost report prevents
an accurate outpatient recalibration that would be appropriate for the
OPPS alone. Therefore, we believed that an all charges model examining
an expanded subset of revenue codes would be the most appropriate, and
that this model should be developed before we could apply the resulting
regression based CCRs to the charges for supplies paid under the OPPS.
Moreover, we were concerned that implementing the regression-based
IPPS related CCRs in the OPPS that RTI estimated for CY 2008 could
result in greater instability in relative payment weights for CY 2008
than would otherwise occur, and that a subsequent change to application
of the regression-based CCRs resulting from development of an all
charges model might also result in significant fluctuations in median
costs and increased instability in payments from CY 2008 to CY 2009.
Therefore, these sequential changes could result in significant
increases in median costs in one year and significant declines in
median costs in the next year.
Therefore, we did not propose to adopt the RTI regression-based
CCRs under the CY 2008 OPPS. As indicated in the proposed rule (72 FR
42643), we stated that we would consider whether it would be
appropriate to adopt regression-based CCRs for the OPPS after we
received RTI's comprehensive review of the OPPS cost estimation
methodology and reviewed the results of the use of both inpatient and
outpatient charges across all payers to reestimate regression-based
CCRs.
We received many public comments on the issue of application of the
disaggregated CCRs that RTI estimated using regression analysis to
calculate payments for the CY 2008 OPPS. A summary of the public
comments and our responses follow.
Comment: The commenters made a number of requests for the CY 2008
OPPS. Some commenters asked specifically that CMS use the RTI
regression-based CCRs to calculate the costs of devices, implants, and
drugs under the CY 2008 OPPS. Other commenters urged CMS not to apply
this charge compression adjustment methodology to diagnostic radiology
services because the application of the methodology to these capital
intensive procedures has not been fully validated and would benefit
from additional analysis. The commenters who supported the application
of the adjustment methodology for CY 2008 asserted that CMS should
disregard the fact that the estimated regression-based CCRs were
calculated using only inpatient charge data because the commenters had
found that using inpatient or outpatient charges yielded similar CCR
estimates for implantable devices and all other supplies. These
commenters believed that CMS should accept the RTI findings that were
based on inpatient charges alone and apply them to the calculation of
median costs for all OPPS weights. They explained that CMS could
consider further refinements to the methodology in future years, such
as estimating the regression-based CCRs using either outpatient or
combined charges, but that CMS should not delay implementing this
important change as it evaluates an all charges model.
Some commenters who supported the application of the adjustment for
CY 2008 also stated that the most glaring cases of charge compression
occur with high cost implantable devices that are reported by hospitals
with low cost supplies in the same supply cost center. They asserted
that the need for analysis of the extent of a problem in other cost
centers should not stop CMS from applying the estimated regression-
based CCRs for CY 2008 to charges for medical supplies, drugs, and
radiology services. One commenter submitted a set of revised weights
for all APCs reflecting regression-based CCRs for implantable devices
and all other supplies, as well as its assumptions in developing the
weights, and asked that CMS review the results. Some commenters stated
that if CMS decides not to implement the RTI recommendations for
regression-based CCRs for CY 2008, it should ensure that an all charges
model is implemented in both the IPPS and the OPPS for CY 2009 through
a joint IPPS/OPPS task force. Some commenters believed that CMS should
either implement the regression-based adjustments in CY 2008 or begin a
transition to them over a period of 2 to 3 years.
The MedPAC recommended that CMS use the RTI's estimated
disaggregated, regression-based CCRs for medical supplies, drugs, and
radiology as part of the OPPS ratesetting process for CY

[[Page 66601]]

2008. It stated that, although the application of the regression based
CCR estimates is not a perfect solution to the problem of charge
compression, the possibility of payment inaccuracies is sufficiently
serious that CMS should implement this imperfect solution. The MedPAC
also recommended that if CMS prefers to await the results of the all
charges model and chooses not to correct for the effects of charge
compression under the CY 2008 OPPS, CMS must do so for the CY 2009
OPPS.
Response: While the RTI recommendations for regression-based CCRs
may have the potential to address issues of charge compression raised
in the public comments about OPPS cost-based weights, we are not
sufficiently convinced that we should adopt the regression-based CCR
estimates for the CY 2008 OPPS from the January 2007 RTI short-term
recommendations for several reasons. First, the focus of the RTI study
on inpatient charges did more than just restrict the regression model
dependent variables to inpatient percentages. The study also limited
the cost centers addressed to those where the inpatient charges
comprised a significant portion of the cost center charges and
substantially contributed to the DRGs. The RTI analysis did not examine
cost centers that have a much greater proportion of outpatient charges,
and as such, are particularly important to APC weights, while also
potentially having a residual import for DRG weight calculations as
well.
Second, adoption of regression-based CCRs in this final rule with
comment period would produce significant changes to the proposed APC
payment rates beyond those already introduced with our CY 2008
packaging approach. The lengthy discussion of public comments to our
proposed packaging approach in section II.A.4. of this final rule with
comment period reflects the public concern raised by a modest change in
the methodology for estimating APC relative weights. Disaggregating
drug and supply cost centers clearly would redistribute hospitals'
resource costs among relative weights for different APCs. Estimated APC
median costs calculated using regression-based CCRs for implantable
devices and all other supplies, which were furnished by one commenter,
showed increases for some services of as high as 28 percent, such as
APC 0418 (Insertion of Left Ventricular Lead). Others would decline by
as much as 11 percent, including APC 0674 (Prostate Cryoablation) and
APC 0086 (Level III Electrophysiologic Procedures). An adjusted ``all
other supply'' CCR would reduce the median cost of any service with
significant supply packaging. Adoption of regression-based CCRs could
interact with other potential changes to the APC payment groups under
the OPPS. Budget neutrality adjustments could further increase the
magnitude of these observed differences. We believe that these
significant redistributional effects would have to be confirmed through
CMS analysis, modeled, and made available for public comment should CMS
decide to adopt regression-based CCRs.
Third, we anticipate overall changes to our cost estimation
methodology in the future, including changes to the revenue code-to-
cost center crosswalk and use of nonstandard cost centers. We believe
that a comprehensive review of cost estimation is an appropriate time
to explore the potential use of disaggregated CCRs for the OPPS. For
example, if we implemented only select regression-based CCRs or
crosswalk refinements, we could inappropriately redistribute weight
within the system.
Finally, as noted in the FY 2008 IPPS final rule (72 FR 47192
through 47200), despite commenters' support for the disaggregated CCRs
developed from regression analysis, we remain concerned about the
accuracy of using regression-based estimates to determine relative
weights rather than the Medicare cost report. This is especially true
for the OPPS, given the potential redistribution of resource costs
among services. One commenter noted that poor capital allocation to MRI
and CT Scan revenue code charges could explain the observed differences
in CCRs for these services, and a regression-based adjustment based on
incorrect capital allocation would be equally inaccurate. As discussed
in the FY 2008 IPPS final rule (72 FR 47196), we fully support
voluntary educational initiatives to improve uniformity in reporting
costs and charges on the cost report. Participation in these
educational initiatives by hospitals is voluntary. Hospitals are not
required to change how they report costs and charges if their current
cost reporting practices are consistent with rules and regulations and
applicable instructions. However, both the IPPS and OPPS relative
weight estimates will benefit from any steps taken to improve cost
reporting. To the extent allowed under current regulations and cost
report instructions, we encourage hospitals to report costs and charges
consistently with how the data are used to determine relative weights.
We believe this goal is of mutual benefit to both Medicare and
hospitals.
In conclusion, we believe that it is important that the initial RTI
estimation of regression-based CCRs be replicated with the inclusion of
hospital outpatient charges, that the study examine the current OPPS
revenue code-to-cost center crosswalk and the use of nonstandard cost
centers, and that the analysis focus on the cost centers that have
significant hospital outpatient charges. Regression-based CCRs may have
potential to address issues of charge compression under the OPPS and
possible mismatches between how costs and charges are reported in the
cost reports and on OPPS claims. However, given the potential resulting
change in APC weights and redistributional impact, we believe we would
need to apply regression-based CCRs in all areas eligible for an
adjustment, as well as implement appropriate crosswalk refinements, in
order to not under-or overvalue relative weights within the system. We
continue to have concerns about premature adoption of regression-based
CCRs without the benefit of knowing how they would interact with other
APC changes. We further believe that such methodological changes would
need to be proposed, including presentation of our assessment of the
possible impact of the methodology and solicitation of public comment.
Once we have received the results of RTI's evaluation, we will analyze
the findings and then consider whether it could be appropriate to
propose to use regression-based CCRs under the OPPS. Once we have
completed our analysis, we will then examine whether the educational
activities being undertaken by the hospital community to improve cost
reporting accuracy under the IPPS would help to mitigate charge
compression under the OPPS, either as an adjunct to the application of
regression-based CCRs or in lieu of such an adjustment. After the
conclusion of our analysis of the RTI evaluation and our review of
hospital educational activities, we will then determine whether any
refinements should be proposed.
Comment: One commenter indicated that the standard hospital
accounting methodology for treatment of high capital costs, including
the costs of expensive nonmovable radiology equipment, results in CCRs
for radiology services that understate the true costs of radiology
services because the high capital costs are spread over all departments
of the hospital on a square footage basis. The commenter argued that
this understatement of the costs in the CCR for radiology-related

[[Page 66602]]

departments results in calculated costs for radiology services that are
too low because flawed CCRs are applied to the charges for the services
provided by the radiology department.
Response: We will consider the issue as part of our assessment of
CCRs over the upcoming year, in the context of the RTI study as
described earlier and the ongoing work that the hospital industry is
undertaking with respect to cost reporting.
2. Calculation of Median Costs
In this section of this final rule with comment period, we discuss
the use of claims to calculate the final OPPS payment rates for CY
2008. The hospital OPPS 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 on the CMS Web site at:
http://www.cms.hhs.gov/HospitalOutpatientPPS. 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 2008
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/
HospitalOutpatientPPS, includes information about purchasing the
following two OPPS data files: ``OPPS Limited Data Set'' and ``OPPS
Identifiable Data Set.'' These files are available for both the claims
that were used to calculate the proposed payment rates for the CY 2008
OPPS and also for the claims that were used to calculate the final
payment rates for the CY 2008 OPPS.
As proposed, we used the following methodology to establish the
relative weights used in calculating the OPPS payment rates for CY 2008
shown in Addenda A and B to this final rule with comment period. This
methodology is as follows:
a. Claims Preparation
We used hospital outpatient claims for the full CY 2006, processed
before June 30, 2007, to set the final relative weights for CY 2008. To
begin the calculation of the relative weights for CY 2008, we pulled
all claims for outpatient services furnished in CY 2006 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 would 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, the U.S. Virgin Islands, American
Samoa, and the Northern Mariana 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 108 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 CCR calculation process, we used the same general approach
as we used in developing the final APC rates for CY 2007, using the
revised CCR calculation which excluded the costs of paramedical
education programs and weighted the outpatient charges by the volume of
outpatient services furnished by the hospital. We refer readers to the
CY 2007 OPPS/ASC final rule with comment period for more information
(71 FR 67983 through 67985). We first limited the population of cost
reports to only those for hospitals that filed outpatient claims in CY
2006 before determining whether the CCRs for such hospitals were valid.
We then calculated the CCRs for each cost center and the overall
CCR 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 2005. As proposed, for this final rule
with comment period, we used the most recently submitted cost reports
to calculate the CCRs to be used to calculate median costs for the CY
2008 OPPS rates. 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 using the overall CCR, and we
then adjusted the most recent available submitted but not settled cost
report using that ratio. We calculated both an overall CCR and cost
center-specific CCRs for each hospital. We used the final overall CCR
calculation discussed in section II.A.1.c. of this final rule with
comment period for all purposes that required use of an overall CCR.
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
overall 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 cost center (that is, departmental) level by
removing the CCRs for each cost center as outliers if they exceeded +/-
3 standard deviations from the geometric mean. We used a four tiered
hierarchy of cost center CCRs to match a cost center to every possible
revenue code appearing in the outpatient claims, with the top tier
being the most common cost center and the last tier being the default
CCR. If a hospital's cost center CCR was deleted by trimming, we set
the CCR for that cost center to ``missing'' so that another cost center
CCR in the revenue center hierarchy could apply. If no other cost
center CCR could apply to the revenue code on the claim, we used the
hospital's overall CCR for the revenue code in question. For example,
if a visit was reported under the clinic revenue code, but the hospital
did not have a clinic cost center, we mapped the hospital-specific
overall CCR to the clinic revenue code. The hierarchy of CCRs is
available for inspection and comment on the CMS Web site: http://www.cms.hhs.gov/HospitalOutpatientPPS. We then converted the charges to
costs on each claim by applying the CCR that we believed was best
suited to the revenue code indicated on the line with the charge. Table
4 of the proposed rule contained a list of the revenue codes we
proposed to package. Revenue codes not included in Table 4 were those
not allowed under the OPPS because their services could not be paid
under the OPPS (for example, inpatient room and

[[Page 66603]]

board charges), and thus charges with those revenue codes were not
packaged for creation of the OPPS median costs. One exception is the
calculation of median blood costs, as discussed in section X. of this
final rule with comment period.
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, the U.S. Virgin Islands, American Samoa, and the
Northern Mariana 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 hospitals and moved them to 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 moved to another
file claims that contained nothing but influenza and pneumococcal
pneumonia (``PPV'') vaccines. Influenza and PPV vaccines are paid at
reasonable cost and, therefore, these claims are not used to set OPPS
rates. We note that the separate file containing partial
hospitalization claims is included in the files that are available for
purchase as discussed above. Unlike years past, we did not create a
separate file of claims containing observation services because we are
packaging all observation care for the CY 2008 OPPS.
We next copied line-item costs for drugs, blood, and brachytherapy
sources (the lines stay on the claim, but are copied 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 a per unit
mean and median and a per day mean and median for drugs,
radiopharmaceutical agents, blood and blood products, and brachytherapy
sources, as well as other information used to set payment rates, such
as a unit-to-day ratio for drugs.
b. Splitting Claims and Creation of ``Pseudo'' Single Claims.
We then split the claims into five groups: single majors, multiple
majors, single minors, multiple minors, and other claims. (Specific
definitions of these groups follow below.) In years prior to the CY
2007 OPPS, we made a determination about whether each HCPCS code was a
major code or a minor code or a code other than a major or minor code.
We used those code-specific determinations to sort claims into the five
groups identified above. For the CY 2007 OPPS, we used status
indicators to sort the claims into these groups. We defined major
procedures as any procedure having a status indicator of ``S,'' ``T,''
``V,'' or ``X;'' defined minor procedures as any code having a status
indicator of ``N;'' and classified ``other'' procedures as any code
having a status indicator other than ``S,'' ``T,'' ``V,'' ``X,'' or
``N.'' For the CY 2007 OPPS proposed rule limited data set and
identifiable data set, these definitions excluded claims on which
hospitals billed drugs and devices without also reporting separately
paid procedure codes and, therefore, those public use files did not
contain all claims used to calculate the drug and device frequencies
and medians. We corrected this for the CY 2007 OPPS/ASC final rule with
comment period limited data set and identifiable data set by extracting
claims containing drugs and devices from the set of ``other'' claims
and adding them to the public use files.
At its March 2007 meeting, the APC Panel recommended that CMS edit
and return for correction claims that contain a HCPCS code for a
separately paid drug or device but that also do not contain a HCPCS
code assigned to a procedural APC (that is, those not assigned status
indicator ``S,'' ``T,'' ``V,'' or ``X''). The APC Panel stated that
this edit should improve the claims data and may increase the number of
single bills available for ratesetting. We noted that such an edit
would be broader than the device-to-procedure code edits we implemented
for CY 2007 for selected devices, and we solicited comments on the
impact of establishing such edits on hospital billing processes and
related potential improvements to claims data. In the CY 2008 proposed
rule (72 FR 42645), we explained that in view of the prior public
comments and our desire to ensure that the public data files contained
all appropriate data, for the CY 2008 OPPS, we proposed to define
majors as HCPCS codes that have a status indicator of ``S,'' ``T,''
``V,'' or ``X.'' We proposed to define minors as HCPCS codes that have
a status indicator of ``F,'' ``G,'' ``H,'' ``K,'' ``L,'' or ``N'' but,
as discussed above, to make single bills out of any claims for single
procedures with a minor code that also has an APC assignment. This
ensured that the claims that contained only HCPCS codes for drugs and
biologicals or devices but that did not contain codes for procedures
were included in the limited data set and the identifiable data set. It
also ensured that conditionally packaged services proposed to receive
separate payment only when they were billed without any other
separately payable OPPS services would be treated appropriately for
purposes of median cost calculations. We proposed to define ``other''
services as HCPCS codes that had a status indicator other than those
defined as majors or minors.
We received several public comments regarding our proposal to
continue to process OPPS claims for a separately paid drug or device
that did not also report a procedural HCPCS code with a status
indicator of ``S,'' ``T,'' ``V,'' or ``X.'' A summary of the public
comments and our responses follow.
Comment: Several commenters requested that we adopt the
recommendation of the APC Panel that CMS edit and return for correction
claims that contained a HCPCS code for a separately paid drug or device
but that did not also report a HCPCS code with a status indicator of
``S,'' ``T,'' ``V,'' or ``X.'' These commenters believed that this
process would generally improve hospitals' coding and charging
practices. One commenter indicated that, under some circumstances, a
hospital may bill for a diagnostic radiopharmaceutical that is
administered on one day but may not report the associated nuclear
medicine procedure on the same claim because the procedure would be
provided several days later. In this case, the bill for the diagnostic
radiopharmaceutical would include no other services with a status
indicator of ``S,'' ``T,'' ``V,'' or ``X'' because the administration
of the radiopharmaceutical would be considered to be a part of the
nuclear medicine study.
Response: We have accepted this recommendation in selective
situations. We currently edit claims in the Outpatient Code Editor
(OCE) for selected devices for which our data show that hospitals have
a history of reporting the HCPCS device code but not reporting the
HCPCS procedure code that is necessary for the device to have
therapeutic benefit. See the device-to-procedure edits on the OPPS Web
page at http://www.cms.hhs.gov/HospitalOutpatientPPS/. Moreover, as
discussed in more detail in section II.A.4.c.(5) of this final rule
with comment period, effective for dates of service on or after January
1, 2008, we will implement OCE edits for diagnostic nuclear medicine
services that will require that a HCPCS code for a diagnostic
radiopharmaceutical must be on the claim for the claim to be processed
to payment. Claims will be returned to the provider for correction if
they contain a nuclear medicine service but the hospital does not also
report a radiopharmaceutical on the same claim. We will continue to
assess the need for OCE edits based upon the unique

[[Page 66604]]

circumstances of individual services or categories of services.
In the CY 2008 proposed rule (72 FR 42645), we explained our
continued belief that using status indicators, with the proposed
changes, was an appropriate way to sort the claims into these groups
and also to make our process more transparent to the public. We further
believed that this proposed method of sorting claims would enhance the
public's ability to derive useful information for analysis and public
comment on the proposed rule.
We used status indicator ``Q'' in Addendum B to the proposed rule
to identify services that would receive separate HCPCS code-specific
payment when specific criteria are met, and payment for the individual
service would be packaged in all other circumstances. We proposed
several different sets of criteria to determine whether separate
payment would be made for specific services. For example, we proposed
that HCPCS code G0379 (Direct admission of patient for hospital
observation care) be assigned status indicator ``Q'' in Addendum B to
the proposed rule because we proposed that it receive separate payment
only if it is billed on the same date of service as HCPCS code G0378
(Hospital observation service, per hour), without any services with
status indicator ``T'' or ``V'' or Critical Care (APC 0617). We also
proposed to assign the specific services in the proposed composite APCs
discussed in section II.A.4.d. of the proposed rule status indicator
``Q'' in Addendum B to the proposed rule because we proposed that their
payment would be bundled into a single composite payment for a
combination of major procedures under certain circumstances. As
proposed, these services would only receive separate code-specific
payment if certain criteria were met. The same is true for those less
intensive outpatient mental health treatment services for which payment
would be limited to the partial hospitalization per diem rate and which
also were assigned status indicator ``Q'' in Addendum B to the proposed
rule. According to longstanding OPPS payment policy (65 FR 18455),
payment for these individual mental health services is bundled into a
single payment, APC 0034 (Mental Health Services Composite), when the
sum of the individual mental health service payments for all of those
mental health services provided on the same day would exceed payment
for a day of partial hospitalization services. However, the largest
number of specific HCPCS codes identified by status indicator ``Q'' in
Addendum B to the proposed rule were those codes that we identified as
``special'' packaged codes, where we proposed that a hospital would
receive separate payment for providing one unit of a service when the
``special'' packaged code appears on the same day on a claim without
another service that was assigned status indicator ``S,'' ``T,'' ``V,''
or ``X.'' We proposed to package payment for these HCPCS codes when the
code appears on the same date of service on a claim with any other
service that was assigned status indicator ``S,'' ``T,'' ``V,'' or
``X.''
In response to public comments as discussed in detail in section
II.A.4. of this final rule with comment period, we refined the proposed
methodology for paying claims that contain ``special'' packaged codes
with status indicator ``Q'' when there is a major separately paid
procedure on the claim for the same date and when there are multiple
``special'' packaged codes with status indicator ``Q'' but no major
procedure on the claim. This last and largest subset of conditionally
packaged services, referred to as ``special'' packaged codes in the
proposed rule, had to be integrated into the identification of single
and multiple bills for ratesetting to ensure that the costs for these
services were appropriately packaged when they appeared with any other
separately paid service or paid separately when appearing by
themselves.
We handled these ``special'' packaged ``Q'' status codes in the
data for this final rule with comment period by assigning the HCPCS
code an APC and a data status indicator of ``N.'' This gives all
special packaged codes an initial status of ``minor'' that is changed,
when appropriate, through the split process. We identified two subsets
of the ``special'' packaged codes for the purpose of payment and
ratesetting. Imaging supervision and interpretation ``special''
packaged codes are now named ``T-packaged'' codes. All other
``special'' packaged codes are referred to as ``STVX-packaged'' codes.
When an ``STVX-packaged'' code appeared with a HCPCS code with a status
indicator of ``S,'' ``T,'' ``V,'' or ``X'' on the same date of service,
it retained its minor status and was treated as a packaged code and
received a status indicator of ``N.'' The costs that appeared on the
lines with these codes were packaged into the cost of the HCPCS code
with a status indicator of ``S,'' ``T,'' ``V,'' or ``X'' in the single
bills and contributed to the median cost for the primary service with
which they appeared. When the ``STVX packaged'' code appeared by
itself, without other special packaged codes on the same claim, and had
a unit of one, we changed the status indicator on the line to the
status indicator of the APC to which the code was assigned, converting
the service from a single minor to a single major. This created
``natural'' single bills for the ``STVX-packaged'' codes. In the case
of multiple ``STVX-packaged'' codes reported on a claim on the same
date of service but without a major separately paid procedure (that is,
``S,'' ``T,'' ``V,'' or ``X''), we first identified the ``STVX-
packaged'' code with the highest CY 2007 OPPS payment weight. We then
changed the status indicator on the line to the status indicator of the
APC to which this particular code was assigned, converting the service
from a single minor to a single major, and we forced the units to be
one to conform with our policy of paying only one unit of a ``Q''
status service. We extracted these claims from the multiple minors to
create ``pseudo'' single bills. We summed all costs on the claim and
associated the resulting cost with the payable ``STVX-packaged'' code
that had the highest CY 2007 OPPS payment weight. We used natural and
``pseudo'' single procedure claims for ``STVX-packaged'' codes to set
the median costs for the APCs to which the codes were assigned when
they would be separately paid.
We modified this methodology for the ``T-packaged'' codes (imaging
supervision and interpretation services in CY 2008) because our final
CY 2008 payment policy for these services differs from the policy for
``STVX-packaged'' codes. Although we treated all ``special'' packaged
codes as ``STVX-packaged'' codes in the proposed rule, in this final
rule with comment period, ``T-packaged'' services are packaged only
when they appear with a service with a status indicator of ``T'' on the
same date; otherwise, ``T packaged'' services are paid separately. We
assessed all claims for the presence of ``T packaged'' services and
determined their final payment disposition, packaged or separately
paid, prior to splitting the claims into single and multiple majors and
minors. When a ``T-packaged'' code appeared with a HCPCS code with a
status indicator of ``T'' on the same date of service, the ``T-
packaged'' code was treated as a packaged code and retained its minor
status and a status indicator of ``N.'' Otherwise, we designated a ``T-
packaged'' service that would be separately paid by identifying the
``T-packaged'' code on the date of service with the highest CY 2007
payment weight. We changed the status indicator on the line of the ``T-
packaged'' code with the highest CY 2007 payment weight to the status
indicator of the APC

[[Page 66605]]

to which the code was assigned, converting it from a single minor to a
single major. We forced the units to be one to conform with our policy
of paying only one unit of a service with a status indicator of ``Q.''
Any remaining ``T-packaged'' codes appearing on the same date of
service retained their minor status and a status indicator of ``N.'' In
the single and ``pseudo'' single bills, the costs that appeared on the
lines with these codes were packaged into the cost of the HCPCS code
with a status indicator of ``T.'' The remaining claims, ``T-packaged''
services on claims with another service with a status indicator of
``S,'' ``V,'' or ``X'' on the same date, became multiple majors. The
bypass process for breaking multiple major claims created additional
``pseudo'' single bills for the ``T-packaged'' codes that had been
converted to major status. When the ``T-packaged'' code appeared by
itself with packaged services and one unit, we changed the status
indicator on the line to the status indicator of the APC to which the
code was assigned, converting the service to a single major procedure.
In the case of multiple ``T-packaged'' codes reported on a claim on the
same date of service but without a major separately paid procedure
(``S,'' ``T,'' ``V,'' or ``X''), we summed all costs on the claim,
associated the resulting cost with the ``T-packaged'' or ``STVX-
packaged'' code that had the highest 2007 OPPS payment weight, and
forced the units to one. We extracted these claims from the multiple
minors to created new single bills. These processes created ``natural''
and ``pseudo'' single bills for the ``T-packaged'' codes that were then
used to set the median cost for each specific code and for the APCs to
which the codes would be assigned when they were separately paid.
We added the logic necessary to deal with these codes as part of
the split of the claims into the five groups defined below and in our
review of the multiple minor claims. We evaluated the ``T-packaged''
codes that had been on the bypass list to see if they might be eligible
for continuation on the list, as these codes would appear with their
final payment disposition in the multiple majors. However, we
determined that none of these codes should be returned to the bypass
list because their associated packaging under their CY 2008 ``Q''
payment status exceeded the empirical criteria designed to limit error
in the allocation of packaged costs through the bypass process.
Specifically, we divided the remaining claims into the following
five groups:
1. Single Major Claims: Claims with a single separately payable
procedure (that is, status indicator ``S,'' ``T,'' ``V,'' or ``X'').
Claims with one unit of a status indicator ``Q'' code that was an
``STVX-packaged'' code or ``T-packaged'' code where there was no code
on the claim with status indicator ``S,'' ``T,'' `` V,'' or ``X,'' or
``T,'' respectively.
2. Multiple Major Claims: Claims with more than one separately
payable procedure (that is, status indicator ``S,'' ``T,'' ``V,'' or
``X''), or multiple units of one payable procedure. As discussed below,
some of these were used in median setting. These claims included those
with a status indicator ``Q'' code that was a ``T-packaged'' code and
no procedure with a status indicator ``T'' on the same date of service.
We also included in this set claims that contained one unit of one code
when the bilateral modifier was appended to the code and the code was
conditionally or independently bilateral. In these cases, the claims
represented more than one unit of the service described by the code,
notwithstanding that only one unit was billed.
3. Single Minor Claims: Claims with a single HCPCS code that was
assigned status indicator ``F,'' ``G,'' ``H,'' ``K,'' ``L,'' or ``N''
and was not an ``STVX-packaged'' or ``T packaged code.''
4. Multiple Minor Claims: Claims with multiple HCPCS codes that
were assigned status indicator ``F,'' ``G,'' ``H,'' ``K,'' ``L,'' or
``N.'' This set included ``STVX packaged'' and ``T-packaged'' codes
with more than one unit of the code or more than one line of these
codes on the same date of service. As noted above, we created
``pseudo'' singles from some of these claims when we broke the claim by
date, packaged the costs into the code with the highest CY 2007 payment
weight, and forced the units to one to match our payment policy of
paying one unit.
5. Non-OPPS Claims: Claims that contained no services payable under
the OPPS (that is, all status indicators other than those listed for
major or minor status). These claims were 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 tests, and do not contain either a code for a separately
paid service or a code for a packaged service.
The claims listed in numbers 1, 2, 3, and 4 above were included in
the data files that can be purchased as described above. ``STVX-
packaged'' and ``T-packaged'' codes appear in the single major file,
the multiple major file, and the multiple minor file.
We set aside the single minor, multiple minor, and non-OPPS claims
(numbers 3, 4, and 5 above) because we did not use these claims in
calculating median costs of procedural APCs. We then used the bypass
codes listed earlier in Table 1 and discussed in section II.A.1.b. of
this final rule with comment period to remove separately payable
procedures that we determined contained limited or no packaged costs or
that were otherwise suitable for inclusion on the bypass list from a
multiple procedure bill. When one of the two separately payable
procedures on a multiple procedure claim was on the bypass list, we
split the claim into two ``pseudo'' single procedure claim 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 code
charges. We then examined the multiple major claims for dates of
service to determine if we could break them into ``pseudo'' single
procedure claims using the dates of service on all lines on the claim.
If we could create claims with single major procedures by using dates
of service, we created a single procedure claim record for each
separately paid procedure on a different date of service (that is, a
``pseudo'' single).
We also removed lines that contained multiple units of codes on the
bypass list and treated them as ``pseudo'' single claims by dividing
the cost for the multiple units by the number of units on the line.
Where one unit of a single, separately paid procedure code remained on
the claim after removal of the multiple units of the bypass code, we
created a ``pseudo'' single claim from that residual claim record,
which retained the costs of packaged revenue codes and packaged HCPCS
codes. This enabled us to use claims that would otherwise be multiple
procedure claims and could not be used. We excluded those claims that
we were not able to convert to single claims even after applying all of
the techniques for creation of ``pseudo'' singles. Among those excluded
were claims that contained codes that were viewed as independently or
conditionally bilateral and that contained the bilateral modifier
(Modifier 50 (Bilateral procedure)) because the line-item cost for the
code represented the cost of two units of the procedure,
notwithstanding that the code appeared with a unit of one. Therefore,
the charge on the line

[[Page 66606]]

represented the charge for two services rather than a single service
and using the line as reported would have overstated the cost of a
single procedure.
c. Completion of Claim Records and Median Cost Calculations
We then packaged the costs of packaged HCPCS codes (codes with
status indicator ``N'' listed in Addendum B to the proposed rule and
the costs of those lines for ``Q'' status services that retained status
indicator ``N'' through the split process as described above) and
packaged revenue codes into the cost of the single major procedure
remaining on the claim.
The final list of packaged revenue codes is shown in Table 2 below.
At its March 2007 meeting, the APC Panel recommended that CMS review
the final list of packaged revenue codes for consistency with OPPS
policy and ensure that future versions of the OCE edit accordingly. We
compared the packaged revenue codes in the OCE to the final list of
packaged revenue codes for the CY 2007 OPPS (71 FR 67989 through 67990)
that we used for packaging costs in median calculation. As a result of
that analysis, we stated in the CY 2008 OPPS/ASC proposed rule (72 RF
42646) that we accepted the APC Panel's recommendation and we proposed
to change the list of packaged revenue codes for the CY 2008 OPPS in
the following manner. First, we proposed to remove revenue codes 0274
(Prosthetic/Orthotic devices) and 0290 (Durable Medical Equipment) from
the list of packaged revenue codes because we do not permit hospitals
to report implantable devices in these revenue codes (Internet Only
Manual 100-4, Chapter 4, section 20.5.1.1). We also specifically
proposed to add revenue code 0273 (Take Home Supplies) to the list of
packaged revenue codes because we believed that the charges under this
revenue code were for the incidental supplies that hospitals sometimes
provided for patients who were discharged at a time when it was not
possible to secure the supplies needed for a brief time at home. We
proposed to conform the list of packaged revenue codes in the OCE to
the OPPS for CY 2008. We made these changes in the calculation of the
CY 2008 OPPS payment rates. The final CY 2008 packaged revenue codes
are displayed in Table 2 below.
We packaged the costs of the HCPCS codes that were shown with
status indicator ``N'' into the cost of the independent service to
which the packaged service was ancillary or supportive. We refer
readers to section II.A.4. of this final rule with comment period for a
more complete discussion of the final packaging changes for CY 2008.
We also excluded (1) claims that had zero costs after summing all
costs on the claim and (2) claims containing packaging flag number 3.
Effective for services furnished on or after July 1, 2004, the OCE
assigned packaging 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 the OPPS) for which the fiscal
intermediary was required to allocate the sum of charges for services
with a status indicator equaling ``S'' or ``T'' based on the weight of
the APC to which each code was assigned. We did not believe that these
charges, which were token charges as submitted by the hospital, were
valid reflections of hospital resources. Therefore, we deleted these
claims. We also deleted claims for which the charges equaled the
revenue center payment (that is, the Medicare payment) on the
assumption that where the charge equaled the payment, to apply a CCR to
the charge would not yield a valid estimate of relative provider cost.
For the remaining claims, we then standardized 60 percent of the
costs of the claim (which we have previously determined to be the
labor-related portion) for geographic differences in labor input 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 used
the pre reclassified wage indices for standardization because we
believed that they better reflected the true costs of items and
services in the area in which the hospital was located than the post
reclassification wage indices and, therefore, would result in the most
accurate unadjusted median costs.
We also excluded claims that were outside 3 standard deviations
from the geometric mean of units for each HCPCS code on the bypass list
(because, as discussed above, we used claims that contain multiple
units of the bypass codes).
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, approximately 58 million
claims were left for this final rule comment period. Of these 58
million claims, we were able to use some portion of approximately 54
million whole claims (93 percent of approximately 58 million
potentially usable claims) to create approximately 97 million single
and ``pseudo'' single claims, of which we used 96 million single bills
(after trimming out just over 900,000 claims as discussed below) in the
CY 2008 median development and ratesetting.
We used the remaining claims to calculate the CY 2008 median costs
for each separately payable HCPCS code and each APC. The comparison of
HCPCS and APC medians determines the applicability of the ``2 times''
rule. 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 where we believed that it was appropriate. Section III.
of this final rule with comment period includes a discussion of certain
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. Both the HCPCS medians and the
APC medians were weighted to account for the inclusion of multiple
units of the bypass codes in the creation of ``pseudo'' single bills.
In the CY 2008 proposed rule (72 FR 42646), we explained that in
our review of median costs for HCPCS codes and their assigned APCs, we
had frequently noticed that some services were consistently rarely
performed in the hospital outpatient setting for the Medicare
population. In particular, there were a number of services, such as
several procedures related to the care of pregnant women, that had
annual Medicare claims volume of 100 or fewer occurrences. By
definition, these services also had a small number of single bills from
which to estimate median costs. In addition, in some cases, these codes
had been historically assigned to clinical APCs where all the services
were low volume. Therefore, the median costs for these services and
APCs often fluctuated from year to year, in part due to the variability
created by such a small number of claims. One of the benefits of basing
payment on the median cost of many HCPCS codes with sufficient single
bill representation in an APC is that such fluctuation would be
moderated by the increased number of observations for similar services
on

[[Page 66607]]

which the APC median cost was also based. We considered proposing a
distinct methodology for calculation of the median cost of low total
volume APCs in order to provide more stability in payment from year to
year for these low total volume services. However, after examination of
the low total volume OPPS services and their assigned APCs, we
concluded that there were other clinical APCs with higher volumes of
total claims to which these low total volume services could be
reassigned, while ensuring the continued clinical and resource
homogeneity of the clinical APCs to which they would be newly
reassigned. Therefore, we believed that it would be more appropriate to
reconfigure clinical APCs to eliminate most of the low total volume
APCs. We observed that these low volume services differed from other
OPPS services only because they were not often furnished to the
Medicare population. Therefore, we proposed to reconfigure certain
clinical APCs for CY 2008 as a way to promote stability and appropriate
payment for the services assigned to them, including low total volume
services. We believed that these proposed reconfigurations maintained
APC clinical and resource homogeneity. We proposed these changes as an
alternative to developing specific quantitative approaches to treating
low total volume APCs differently for purposes of median calculation.
Specifically, we proposed that 3 APCs (all of which are New Technology
APCs) would have a total volume of services less than 100, and only 17
APCs would have a total volume of less than 1,000, in comparison with
CY 2007 where 9 APCs (including 3 New Technology APCs) had a total
volume of less than 100 and 36 APCs had a total volume of less than
1,000. In this final rule with comment period, 3 APCs (all New
Technology APCs) have a total volume of less than 100 and 15 APCs have
a total volume of less than 1,000.
We received a number of public comments on our proposed process for
calculating the median costs on which our payment rates are based. A
summary of the pubic comments and our responses follow.
Comment: Some commenters objected to the volatility of the OPPS
rates from year to year. The commenters asserted that the absence of
stability in the OPPS rates creates budgeting, planning, and operating
problems for hospitals, and that as more care is provided on an
outpatient, rather than inpatient basis, the need for stable payment
rates from one year to the next becomes more important to hospitals.
Some commenters asked that CMS permit no payment rate to change by more
than 5 percent from one year to the next.
Response: There are a number of factors pertinent to the OPPS that
cause median costs to change from one year to the next. Some of these
are a reflection of hospital behavior, and some of them are a
reflection of fundamental characteristics of the OPPS as defined in
statute. For example, the OPPS payment rates are based on hospital cost
report and claims data. However, hospital costs and charges change each
year and this results in both changes to the CCRs taken from the most
currently available cost reports and also differences in the charges on
the claims that are the basis of the calculation of the median costs on
which OPPS rates are based. Similarly, hospitals adjust their mix of
services from year to year by offering new services and ceasing to
furnish services or changing the proportion of the various services
they furnish, which has impact on the CCRs that we derive from their
cost reports. CMS cannot stabilize these hospital-driven fundamental
inputs to the calculation of OPPS payment rates. Moreover, there are
other essential elements of the OPPS which contribute to the changes in
relative weights each year. These include, but are not limited to,
reassignments of HCPCS codes to APCs to rectify 2 times violations as
required by the law, to address the costs of new services, and to
respond to public comments. Moreover, for some services, we cannot
avoid using small numbers of claims, either because the volume of
services is naturally low or because the claims data do not facilitate
the calculation of a median cost for a single service. Where there are
small numbers of claims to be used in median calculation, there is more
volatility in the median cost from one year to the next. Lastly,
changes to OPPS payment policy (for example, changes to packaging) also
contribute to some extent to the fluctuations in the OPPS payment rates
for the same service from year to year.
We cannot avoid the naturally occurring volatility in the cost
report and claims data that hospitals submit and on which the payment
rates are based. Moreover (with limited exceptions), we are required by
law to reassign HCPCS codes to APCs where it is necessary to avoid 2
times violations. However, we have made other changes to resolve some
of the other potential reasons for instability from year to year.
Specifically, we continue to seek ways to use more claims data so that
we have fewer APCs for which there are small numbers of single bills
used to set the APC median costs. Moreover, we have tried to eliminate
APCs with very small numbers of single bills where we could do so. We
received no public comments that objected to our proposal to eliminate
a number of very low volume APCs; therefore, we are adopting these
reconfigurations for CY 2008. We recognize that changes to payment
policies, such as the packaging of payment for ancillary and supportive
services and the implementation of composite APCs, may contribute to
volatility in payment rates in the short term, but we believe that
larger payment packages and bundles will help to stabilize payments in
future years by enabling us to use more claims data and by establishing
payments for larger groups of services.
Comment: A commenter stated that CMS should crosswalk revenue code
0278 (Other implants, under the Medical/Surgical Supplies category) to
cost center 3540 (Prosthetic Devices), which generally represents
higher cost technology, instead of crosswalking it to cost center 5500
(Medical Supplies Charge to Patient), which often represents lower cost
items. The commenter indicated that this change to the revenue code-to-
cost center crosswalk would result in improved estimates of the costs
of the devices billed under revenue code 0278 and, therefore, would
result in more accurate payments.
Response: We will carefully examine the implications of making this
change in the future. However, for CY 2008 this change would have a
negligible effect on the median costs for services with charges
reported under revenue code 0278. Only 20 providers out of 4,201 in the
file of the 2005-2006 cost reports used cost center 3540.
Comment: Some commenters asked that CMS provide an adjustment for
medical education costs under the OPPS because so much of the costs of
teaching services are being incurred in the HOPD as many of the
services previously furnished only in the inpatient setting are now
being furnished in the HOPD. The commenters stated that CMS indicated
that it would study the costs and payment differential among different
classes of providers in the April 7, 2000 OPPS final rule with comment
period but has not done so. The commenters also asserted that section
4523 of the BBA requires the Secretary to establish adjustments ``as
determined to be necessary to ensure equitable payments * * * for
certain classes of hospitals'' and, therefore, CMS should study whether
the hospital outpatient costs of teaching hospitals are higher than the
costs of other hospitals for purposes of determining whether there
should be a teaching

[[Page 66608]]

hospital adjustment. The commenters explained that their internal
analysis of 2004 Medicare cost reports showed that the average
outpatient margins were -20.2 percent for major teaching hospitals, -
10.1 percent for other teaching hospitals, and -11.8 percent for non-
teaching hospitals. They believed these findings demonstrated that the
hospital outpatient costs of major teaching hospitals are significantly
greater than the costs of other hospitals. The commenters requested
that CMS conduct its own analysis, and added that if that analysis
shows such a difference, CMS should add a teaching adjustment to the
OPPS.
Response: Unlike payment under the IPPS, the law does not provide
for payment for indirect medical education costs to be made through the
OPPS. Section 1833(t)(2)(E) of the Act, as added by section 4523 of the
BBA, states that the Secretary shall establish, in a budget neutral
manner `` * * * other adjustments as determined to be necessary to
ensure equitable payments, such as adjustments for certain classes of
hospitals.'' We have not found such an adjustment to be necessary to
ensure equitable payments to teaching hospitals and, therefore, have
not developed such an adjustment. We do not believe an indirect medical
education add-on payment is appropriate in a budget neutral payment
system where such changes would result in reduced payments to all other
hospitals. Furthermore, in this final rule with comment period, we have
developed payment weights that we believe provide appropriate and
adequate payment for the complex medical services, such as visits
requiring prolonged observation, new technology services and device-
dependent procedures, which we understand are furnished largely by
teaching hospitals. Teaching hospitals benefit from the recalibration
of the APCs and the changes to packaging that are implemented in this
final rule with comment period. The final CY 2008 impacts by class of
hospital are displayed in Table 61 in section XXIV.B. of this final
rule with comment period. Therefore, we do not believe that there is
sufficient reason to develop an adjustment to the OPPS payment to
teaching hospitals for the CY 2008 OPPS.
Comment: The MedPAC commented that while CMS proposed to apply a
multiple procedure reduction to imaging services for CY 2006, CMS did
not adopt this proposal as final but stated that it would continue to
study whether such a reduction was appropriate. The MedPAC asked that
CMS continue to examine ways to improve payment accuracy for imaging
services, including considering applying a multiple procedure reduction
to these services.
Response: The question of whether it would be appropriate to apply
a multiple procedure reduction pertains only to those imaging services
for which we make separate payment. It is not an issue for packaged
imaging services, including the numerous imaging services that we are
packaging for CY 2008 as part of our expanded payment bundles under the
OPPS. The concern, therefore, is partially mitigated by our final CY
2008 packaging policies. Commenters responding to the CY 2006 proposal
OPPS indicated that, in contrast to the MPFS payment rates, the
hospital cost data used by CMS to set payment rates for imaging
services already reflects savings due to the efficiencies of performing
multiple procedures during the same session and that the proposal to
discount second and subsequent procedures would be tantamount to
discounting those procedures twice (70 FR 68707). As we indicated in
our response to that comment, we were unable to disprove commenters'
contentions that there are already efficiencies included in hospitals'
costs and, therefore, in their CCRs and in the median costs on which
the OPPS payments are based (70 FR 68708). However, we believe it is
possible that there may be a relationship between the extent to which
efficiencies are incorporated into the median costs and the degree to
which charge compression affects the median costs for imaging services.
RTI's study of charge compression using inpatient charges found that
use of regression adjusted CCRs would reduce the costs of magnetic
resonance imaging and computed tomography services. This is one of the
categories of hospital services that has high outpatient utilization.
Over the coming year, as discussed earlier in this section of this
final rule with comment period, we will explore through the RTI
contract the results of including hospital outpatient charges to
determine regression-adjusted CCRs for calculation of the median costs
for imaging services. We believe that this information could be useful
in the reassessment of whether it would be appropriate to apply a
multiple procedure reduction to separately paid imaging services.
A detailed discussion of the development of median costs for blood
and blood products is included in section X. of this final rule with
comment period. A discussion of the calculation of medians for APCs
that require one or more implantable devices when the service is
performed is provided in section IV.A. of this final rule with comment
period. The methodology for developing the median costs for composite
APCs is included below in section II.A.4.d. of this final rule with
comment period. A description of the methodology for calculating the
median cost for partial hospitalization services is presented below in
section II.B. of this final rule with comment period.
After consideration of the public comments received, we are
finalizing our proposed CY 2008 methodology for calculating the median
costs upon which the CY 2008 OPPS payment rates are based, with the
modifications described earlier regarding the treatment of services
which are assigned status indicator ``Q.''

Table 2.--CY 2008 Packaged Revenue Codes
------------------------------------------------------------------------
Revenue code Description
------------------------------------------------------------------------
0250.............................. PHARMACY.
0251.............................. GENERIC.
0252.............................. NONGENERIC.
0254.............................. PHARMACY INCIDENT TO OTHER
DIAGNOSTIC.
0255.............................. PHARMACY INCIDENT TO RADIOLOGY.
0257.............................. NONPRESCRIPTION DRUGS.
0258.............................. IV SOLUTIONS.
0259.............................. OTHER PHARMACY.
0260.............................. IV THERAPY, GENERAL CLASS.
0262.............................. IV THERAPY/PHARMACY SERVICES.
0263.............................. SUPPLY/DELIVERY.

[[Page 66609]]

0264.............................. IV THERAPY/SUPPLIES.
0269.............................. OTHER IV THERAPY.
0270.............................. M&S SUPPLIES.
0271.............................. NONSTERILE SUPPLIES.
0272.............................. STERILE SUPPLIES.
0273.............................. TAKE HOME SUPPLIES.
0275.............................. PACEMAKER DRUG.
0276.............................. INTRAOCULAR LENS SOURCE DRUG.
0278.............................. OTHER IMPLANTS.
0279.............................. OTHER M&S SUPPLIES.
0280.............................. ONCOLOGY.
0289.............................. OTHER ONCOLOGY.
0343.............................. DIAGNOSTIC RADIOPHARMS.
0344.............................. THERAPEUTIC RADIOPHARMS.
0370.............................. ANESTHESIA.
0371.............................. ANESTHESIA INCIDENT TO RADIOLOGY.
0372.............................. ANESTHESIA INCIDENT TO OTHER
DIAGNOSTIC.
0379.............................. OTHER ANESTHESIA.
0390.............................. BLOOD STORAGE AND PROCESSING.
0399.............................. OTHER BLOOD STORAGE AND PROCESSING.
0560.............................. MEDICAL SOCIAL SERVICES.
0569.............................. OTHER MEDICAL SOCIAL SERVICES.
0621.............................. SUPPLIES INCIDENT TO RADIOLOGY.
0622.............................. SUPPLIES INCIDENT TO OTHER
DIAGNOSTIC.
0624.............................. INVESTIGATIONAL DEVICE (IDE).
0630.............................. DRUGS REQUIRING SPECIFIC
IDENTIFICATION, GENERAL CLASS.
0631.............................. SINGLE SOURCE.
0632.............................. MULTIPLE.
0633.............................. RESTRICTIVE PRESCRIPTION.
0681.............................. TRAUMA RESPONSE, LEVEL I.
0682.............................. TRAUMA RESPONSE, LEVEL II.
0683.............................. TRAUMA RESPONSE, LEVEL III.
0684.............................. TRAUMA RESPONSE, LEVEL IV.
0689.............................. TRAUMA RESPONSE, OTHER.
0700.............................. CAST ROOM.
0709.............................. OTHER CAST ROOM.
0710.............................. RECOVERY ROOM.
0719.............................. OTHER RECOVERY ROOM.
0720.............................. LABOR ROOM.
0721.............................. LABOR.
0732.............................. TELEMETRY.
0762.............................. OBSERVATION ROOM.
0801.............................. HEMODIALYSIS.
0802.............................. PERITONEAL DIALYSIS.
0803.............................. CAPD.
0804.............................. CCPD.
0809.............................. OTHER INPATIENT DIALYSIS.
0810.............................. ORGAN ACQUISITION.
0819.............................. OTHER ORGAN ACQUISITION.
0821.............................. HEMODIALYSIS COMP OR OTHER RATE.
0824.............................. MAINTENANCE 100%.
0825.............................. SUPPORT SERVICES.
0829.............................. OTHER HEMO OUTPATIENT.
0942.............................. EDUCATION/TRAINING.
------------------------------------------------------------------------

3. Calculation of OPPS Scaled Payment Weights
Using the median APC costs discussed previously, we calculated the
final relative payment weights for each APC for CY 2008 shown in
Addenda A and B to this final rule with comment period. In years prior
to CY 2007, we standardized all the relative payment weights to APC
0601 (Mid Level Clinic Visit) because it was 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.
Beginning with the CY 2007 OPPS, we standardized all of the
relative payment weights to APC 0606 (Level 3 Clinic Visits) because we
deleted APC 0601 as part of the reconfiguration of the visit APCs. We
chose APC 0606 as the base because APC 0606 was the middle level clinic
visit APC (that is, Level 3 of five levels). We had historically used
the median cost of the middle level clinic visit APC (that is APC 0601
through CY 2006) to calculate unscaled weights because mid-level clinic
visits were among the most frequently performed services in the
hospital outpatient setting. As proposed for CY 2008, to maintain
consistency in using a median for calculating unscaled weights
representing the median cost of some of the most frequently provided
services, we continued to use the

[[Page 66610]]

median cost of the mid-level clinic APC, proposed APC 0606, to
calculate unscaled weights. Following our standard methodology, but
using the CY 2008 median for APC 0606, for CY 2008 we assigned APC 0606
a relative payment weight of 1.00 and divided the median cost of each
APC by the median cost for APC 0606 to derive the unscaled relative
payment weight for each APC. The choice of the APC on which to base the
relative weights for all other APCs does not affect the payments made
under the OPPS because we scale the weights for budget neutrality.
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 2008 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 2007 relative weights to aggregate payments using
the CY 2008 final relative weights. This year, we included payments to
CMHCs in our comparison. Based on this comparison, we adjusted the
relative weights for purposes of budget neutrality. The final unscaled
relative payment weights were adjusted by a weight scaler of 1.3226 for
budget neutrality. In addition to adjusting for increases and decreases
in weight due to the recalibration of APC medians, the scaler also
accounts for any change in the base, other than changes in volume which
are not a factor in the weight scaler. The decline in the weight scaler
compared to the proposed weight scaler of 1.3665 results largely from
the refinement for this final rule with comment period of the proposed
packaging policy to package imaging supervision and interpretation
services only if they are reported on the same date of service as a
HCPCS code that has a status indicator of ``T.'' This change both
increased the median costs for these imaging supervision and
interpretation services and added a significant number of units for
these services that would be separately paid under the final CY 2008
policy. The other factors that contributed to the decline of the scaler
from the proposed rule to this final rule with comment period include
the creation of the observation composite APCs and the increase in the
final CY 2008 payment rate for partial hospitalization services
compared to the proposed payment rate.
The final relative payment weights listed in Addenda A and B to
this final rule with comment period incorporate the recalibration
adjustments discussed in sections II.A.1. and 2. of this final rule
with comment period.
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 final rule with comment period) is included in the budget
neutrality calculations for the CY 2008 OPPS. We did not receive any
public comments on the methodology for calculating scaled weights from
the median costs for the CY 2008 OPPS. Therefore, we are finalizing our
proposed methodology, without modification, including updating of the
budget neutrality scaler for the final rule as proposed.
4. Changes to Packaged Services
a. Background
When the Medicare program was first implemented, it paid for
hospital services (inpatient and outpatient) based on hospital-specific
reasonable costs attributable to furnishing services to Medicare
beneficiaries. Later, the law was amended to limit payment to the
lesser of the hospital's reasonable cost or customary charges for
services furnished to Medicare beneficiaries. Specific service-based
methodologies were then developed for certain types of services, such
as clinical laboratory tests and durable medical equipment, while
payments for outpatient surgical procedures and other diagnostic tests
were based on a blend of the hospital's aggregate Medicare costs for
these services and Medicare's payment for similar services in other
ambulatory settings. While this mix of different payment methodologies
was in use, hospital outpatient services were growing rapidly following
the implementation of the IPPS in 1983. The brisk increase in hospital
outpatient services led to an interest in creating payment incentives
to promote more efficient delivery of hospital outpatient services
through a Medicare prospective payment system for hospital outpatient
services, and the final statutory requirements for the OPPS were
established by the BBA and the BBRA. During the period of time when
different approaches to prospective payment for hospital outpatient
services were being considered, a variety of reports to Congress (June
1988, September 1990, and March 1995) discussed three major issues
related to defining the unit of payment for the payment system,
specifically the extent to which clinically similar procedures should
be grouped for payment purposes and the logic that should be used for
the groupings; the extent to which payment for minor, ancillary
services associated with a significant procedure should be packaged
into a single payment for the procedure (which we refer to as
``packaging''); and the extent to which payment for multiple
significant procedures or multiple units of the same procedure related
to an outpatient encounter or to an episode of care should be bundled
into a single unit of payment (which we refer to as ``bundling''). Both
packaging and bundling were presented as approaches to creating
incentives for efficiency, with their potential policy disadvantages
including inconsistency with other ambulatory fee schedules, reduced
transparency of service-specific payment, and the potential for
hospitals shifting the delivery of packaged or bundled services to
delivery settings other than the hospital outpatient department (HOPD).
The OPPS, like other prospective payment systems, relies on the
concept of averaging, where the payment may be more or less than the
estimated costs of providing a service or package of services for a
particular patient, but with the exception of outlier cases, it is
adequate to ensure access to appropriate care. Decisions about
packaging and bundling payment involve a balance between ensuring some
separate payment for individual services and establishing incentives
for efficiency through larger units of payment. In many situations, the
final payment rate for a package of services may do a better job of
balancing variability in the relative costs of component services
compared to individual rates covering a smaller unit of service without
packaging or bundling. Packaging payments into larger payment bundles
promotes the stability of payment for services over time, a
characteristic that reportedly is very important to hospitals. Unlike
packaged services, the costs of individual services typically show
greater variation because the higher variability for some component
items and services cannot be balanced with lower variability for others
and because relative weights are typically estimated using a smaller
set of claims.

[[Page 66611]]

When compared to service-specific payment, packaging or bundling
payment for component services may change payment at the hospital level
to the extent that there are systematic differences across hospitals in
their performance of the services included in that unit of payment.
Hospitals spending more per case than payment received would be
encouraged to review their service patterns to ensure that they furnish
services as efficiently as possible. Similarly, we believe that
unpackaging services heightens the hospital's focus on pricing
individual services, rather than the efficient delivery of those
services. Over the past several years of the OPPS, greater unpackaging
of payment has occurred simultaneously with continued tremendous growth
in OPPS expenditures as a result of increasing volumes of individual
services, as discussed in further detail below. Also discussed in
further detail below, most recently in its comments to the CY 2007
OPPS/ASC proposed rule and in the context of this rapid spending
growth, MedPAC encouraged CMS to broaden the payment bundles under the
OPPS to encourage providers to use resources efficiently.
As permitted under section 1833(t)(2)(B) of the Act, the OPPS
establishes groups of covered HOPD services, namely APC groups, and
uses them as the basic unit of payment. During the evolution of the
OPPS over the past 7 years, significant attention has been concentrated
on service-specific payment for services furnished to particular
patients, rather than on creating incentives for the efficient delivery
of services through encounter or episode-of-care-based payment. Overall
packaging included in the clinical APCs has decreased, and the
procedure groupings have become smaller as the focus has shifted to
refining service-level payment. Specifically, in the CY 2003 OPPS,
there were 569 APCs, but by CY 2007, the number of APCs had grown to
862, a 51 percent increase in 4 years. Similarly, the percentage of CPT
codes for procedural services that receive packaged payment declined by
over 10 percent between CY 2003 and CY 2007.
Currently, the APC groups reflect a modest degree of packaging,
including packaged payment for minor ancillary services, inexpensive
drugs, medical supplies, implantable devices, capital-related costs,
operating and recovery room use, and anesthesia services. Bundling
payment for multiple significant services provided in the same hospital
outpatient encounter or during an episode of care is not currently a
common OPPS payment practice, because the APC groups generally reflect
only the modest packaging associated with individual procedures or
services. Unconditionally packaged services with HCPCS codes are
identified by the status indicator ``N.'' Conditionally packaged
services, specifically those services whose payment is packaged unless
specific criteria for separate payment are met, are assigned status
indicator ``Q.'' To the extent possible, hospitals may use HCPCS codes
to report any packaged services that were performed, consistent with
CPT or CMS coding guidelines, but packaged costs also may be uncoded
and included in specific revenue code charges. Hospitals include
charges for packaged services on their claims, and the costs associated
with those packaged services are then added into the costs of
separately payable procedures on the same claims in establishing
payment rates for the separately payable services.
Packaging and bundling payment for multiple interrelated services
into a single payment create incentives for providers to furnish
services in the most efficient way by enabling hospitals to manage
their resources with maximum flexibility, thereby encouraging long-term
cost containment. For example, where there are a variety of supplies
that could be used to furnish a service, some of which are more
expensive than others, packaging encourages hospitals to use the least
expensive item that meets the patient's needs, rather than to routinely
use a more expensive item. Packaging also encourages hospitals to
negotiate carefully with manufacturers and suppliers to reduce the
costs of purchased items and services or to explore alternative group
purchasing arrangements, thereby encouraging the most economical health
care. Similarly, packaging encourages hospitals to establish protocols
that ensure that services are furnished only when they are important
and to carefully scrutinize the services ordered by practitioners to
maximize the efficient use of hospital resources. Finally, packaging
payments into larger payment bundles promotes the stability of payment
for services over time. Packaging and bundling also may reduce the
importance of refining service-specific payment because there is more
opportunity for hospitals to average payment across higher cost cases
requiring many ancillary services and lower cost cases requiring fewer
ancillary services.
b. Addressing Growth in OPPS Volume and Spending
Creating additional incentives for providing only necessary
services in the most efficient manner is of vital importance to
Medicare today, in view of the recent explosion of growth in program
expenditures for hospital outpatient services paid under the OPPS. As
illustrated in Table 3 below, total spending has been growing at a rate
of roughly 10 percent per year under the OPPS, and the Medicare
Trustees project that total spending under the OPPS will increase by
more than $3 billion from CY 2007 through CY 2008 to nearly $35
billion. Implementation of the OPPS has not slowed outpatient spending
growth over the past few years; in fact, double-digit spending growth
has generally been occurring. We are greatly concerned with this rate
of increase in program expenditures under the OPPS.

Table 3.-Growth in Expenditures Under Opps From CY 2001-CY 2008
[Projected expenditures for CY 2006-CY 2008 in billions]
--------------------------------------------------------------------------------------------------------------------------------------------------------
OPPS growth CY 2001 CY 2002 CY 2003 CY 2004 CY 2005 CY 2006 CY 2007 CY 2008
--------------------------------------------------------------------------------------------------------------------------------------------------------
Incurred Cost........................................... 17.702 19.561 21.156 23.866 26.572 29.741 32.714 36.072
Percent Increase........................................ .......... 10.5 8.2 12.8 11.3 11.9 10.1 10.26
--------------------------------------------------------------------------------------------------------------------------------------------------------
Based on the Midsession Review of the President's FY 2008 Budget.

As with the other Medicare fee-for-service payment systems that are
experiencing rapid spending growth, brisk growth in the intensity and
utilization of services is the major reason for the current rates of
growth in the OPPS, rather than general price or enrollment changes.
Table 4 below illustrates the increases in the volume and intensity of
hospital outpatient services over the past several years.

[[Page 66612]]

Table 4.-Percentage Increase in Volume and Intensity of Hospital Outpatient Services
--------------------------------------------------------------------------------------------------------------------------------------------------------
CY 2006 CY 2007 CY 2008
CY 2002 CY 2003 CY 2004 CY 2005 (Est.) (Est.) (Est.)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Percent Increase............................................. 3.5 2.5 7.6 7.4 10.1 9.4 5.8
--------------------------------------------------------------------------------------------------------------------------------------------------------
Based on the Midsession Review of the President's FY 2008 Budget.

For hospital outpatient services, the volume and intensity of
services are estimated to have continued to increase significantly in
recent years, at a rate of 10.1 percent between CY 2005 and CY 2006,
the last two completed calendar years. As we discussed in the CY 2007
OPPS/ASC final rule with comment period (71 FR 68189 through 68190),
the rapid growth in utilization of services under the OPPS shows that
Medicare is paying mainly for more services each year, regardless of
their quality or impact on beneficiary health. In its March 2007 Report
to Congress (pages 55 and 56), MedPAC confirmed that much of the growth
in service volume from 2003 to 2005 resulted from increases in the
number of services per beneficiary who received care, rather than from
increases in the number of beneficiaries served. MedPAC found that
while the rate of growth in service volume declined over that time
period, the complexity of services, defined as the sum of the relative
payment weights of all OPPS services divided by the volume of all
services, increased, and that most of the growth was attributable to
the insertion of devices and the provision of complex imaging services.
MedPAC further found that regression analysis suggested that relatively
complex hospital outpatient services may be more profitable for
hospitals than less complex services. In addition, its analysis
indicated that favorable payments for complex services give hospitals
an incentive to provide more of those complex services rather than
fewer basic services, which increases overall service complexity.
MedPAC expressed concern about this relationship and concluded that the
historically large increases in outpatient volume and service
complexity suggest a need to recalibrate the OPPS. In the future,
MedPAC plans to examine options for recalibrating the payment system to
accurately match payments to the costs of individual services (Medicare
Payment Advisory Commission Report to the Congress: Medicare Payment
Policy, March 2007, pages 55 and 56).
As proposed for the CY 2007 OPPS and finalized for the CY 2009
OPPS, we developed a plan to promote higher quality services under the
OPPS, so that Medicare spending would be directed toward those higher
quality services (71 FR 68189 through 68197). We believe that Medicare
payments should encourage physicians and other providers in their
efforts to achieve better health outcomes for Medicare beneficiaries at
a lower cost. In the CY 2007 OPPS/ASC final rule with comment period,
we discussed the concept of ``value-based purchasing'' in the OPPS as
well as in other Medicare payment systems. ``Value-based purchasing''
may use a range of budget-neutral incentives to achieve identified
quality and efficiency goals, as a means of promoting better quality of
care and more effective resource use in the Medicare payment systems.
In developing the concept of value-based purchasing for Medicare, we
have been working closely with stakeholder partners.
We continue to believe that the collection and submission of
performance data and the public reporting of comparative information
are strong incentives for hospital accountability in general and
quality improvement in particular, while encouraging the most efficient
and effective care. Measurement and reporting can focus the attention
of hospitals and consumers on specific goals and on hospitals'
performance relative to those goals. Development and implementation of
performance measurement and reporting by hospitals can thus produce
quality improvement in health care delivery. Hospital performance
measures may also provide a foundation for performance-based rather
than volume-based payments.
In the CY 2007 OPPS/ASC final rule with comment period, as a first
step in the OPPS toward value-based purchasing, we finalized a policy
that would employ our equitable adjustment authority under section
1833(t)(2)(E) of the Act to establish an OPPS Reporting Hospital
Quality Data for Annual Payment Update (RHQDAPU) program based on
measures specifically developed to characterize the quality of
outpatient care (71 FR 68197). We finalized implementation of the
program for CY 2009, when we would implement a 2.0 point reduction to
the OPPS conversion factor update for those hospitals that do not meet
the specific requirements of the CY 2009 program. We described the CY
2009 program, which would be based upon CY 2008 hospital reporting of
appropriate measures of the quality of hospital outpatient care that
have been carefully developed and evaluated, and endorsed as
appropriate, with significant input from stakeholders. We reiterated
our belief that ensuring that Medicare beneficiaries receive the care
they need and that such services are of high quality are the necessary
initial steps to incorporating value-based purchasing into the OPPS. We
explained that we are specifically seeking to encourage care that is
both efficient and of high quality in the HOPD.
Subsequent to the publication of the CY 2007 OPPS/ASC final rule
with comment period, section 109(a) of the MIEA-TRHCA, which added
section 1833(t)(19) to the Act, specifies that in the case of a
subsection (d) hospital (defined under section 1886(d)(1)(B) of the Act
as hospitals that are located in the 50 States or the District of
Columbia other than those categories of hospitals or hospital units
that are specifically excluded from the IPPS, including psychiatric,
rehabilitation, long-term care, children's, and cancer hospitals or
hospital units) that does not submit to the Secretary the quality
reporting data required for CY 2009 and each subsequent year, the OPPS
annual update factor shall be reduced by 2.0 percentage points. The
quality reporting program proposed for CY 2008 according to this
provision is referred to as the Hospital Outpatient Quality Data
Reporting Program (HOP QDRP) and is discussed in detail in section
XVII. of this final rule with comment period.
As the next step in our movement toward value-based purchasing
under the OPPS and to complement the HOP QDRP for CY 2009, with measure
reporting beginning in CY 2008, we believe it is important to initiate
specific payment approaches to explicitly encourage efficiency in the
hospital outpatient setting that we believe will control future growth
in the volume of OPPS services. While the HOP QDRP will encourage the
provision of higher quality hospital outpatient services that lead to
improved health outcomes for Medicare beneficiaries, we believe that
more targeted approaches are also necessary to encourage increased

[[Page 66613]]

hospital efficiency. Two alternatives we have considered that would be
feasible under current law include establishing a methodology to
measure the growth in volume and reduce OPPS payment rates to account
for unnecessary increases in volume or developing payment incentives
for hospitals to ensure that they provide necessary services as
efficiently as possible.
With respect to the first alternative, section 1833(t)(2)(F) of the
Act requires us to establish a methodology for controlling unnecessary
increases in the volume of covered OPPS services, and section
1833(t)(9)(C) of the Act authorizes us to adjust the update to the
conversion factor if, under section 1833(t)(2)(F) of the Act, we
determine that there is growth in volume that exceeds established
tolerances. As we indicated in the September 8, 1998 proposed rule
proposing the establishment of the OPPS (63 FR 47585), we considered
creating a system that mirrors the sustainable growth rate (SGR)
methodology applied to the MPFS update to control unnecessary growth in
service volume. However, implementing such a system could have the
potentially undesirable effect of escalating service volume as payment
rates stagnate and hospital costs rise, thus actually resulting in a
growth in volume rather than providing an incentive to control volume.
Therefore, this approach to addressing the volume growth under the OPPS
could inadvertently result in the exact opposite of our desired
outcome.
The second alternative we considered is to expand the packaging of
supportive ancillary services and ultimately bundle payment for
multiple independent services into a single OPPS payment. We believe
that this would create incentives for hospitals to monitor and adjust
the volume and efficiency of services themselves, by enabling them to
manage their resources with maximum flexibility. Instead of external
controls on volume, we believe that it is preferable for the OPPS to
create payment incentives for hospitals to carefully scrutinize their
service patterns to ensure that they furnish only those services that
are necessary for high quality care and to ensure that they provide
care as efficiently as possible. Specifically, we believe that
increased packaging and bundling are the most appropriate payment
strategies to establish such incentives in a prospective payment
system, and that this approach is clearly preferable to the
establishment of an SGR or other methodology that seeks to control
spending by addressing significant growth in volume and program
spending with lower payments.
In its October 6, 2006 letter of comment on the CY 2007 OPPS/ASC
proposed rule, MedPAC urged us to establish broader payment bundles in
both the revised ASC payment system and the OPPS to promote efficient
resource use and better align the two payment systems. In particular,
our proposal for the CY 2008 revised ASC payment system proposed to
package payment for all items and services directly related to the
provision of covered surgical procedures into the ASC facility payment
for the associated surgical procedure (71 FR 49468). These other items
and services included all drugs, biologicals, contrast agents,
implantable devices, and diagnostic services such as imaging. Because a
number of these items and services are separately paid under the OPPS
and the proposal included the establishment of most ASC payment weights
based on the procedures' corresponding OPPS payment weights, MedPAC
encouraged us to align the payment bundles in the two payment systems
by increasing the size of the payment bundles under the OPPS.
Moreover, MedPAC staff indicated in testimony at the January 9,
2007 MedPAC public meeting that the growth in OPPS spending and volume
raises questions about whether the OPPS should be changed to encourage
greater efficiency (page 390 of the January 9, 2007 MedPAC meeting
transcript available at the Web site at: http://www.medpac.gov). MedPAC
staff explained at that time that MedPAC intends to perform a long term
assessment of the design of the OPPS, including considering the
bundling of payments for procedures and visits furnished over a period
of time into a single payment, assessing whether there should be an
expenditure target for hospital outpatient services, evaluating whether
payments for multiple imaging services provided in the same session
should be discounted, and reviewing the methodology used by CMS to
determine relative payment weights for hospital outpatient services. We
welcome MedPAC's study of these areas, particularly with regard to how
we might develop appropriate payment rates for larger bundles of
services.
Because we believe it is important that the OPPS create enhanced
incentives for hospitals to provide only necessary, high quality care
and to provide that care as efficiently as possible, we have given
considerable thought to how we could increase packaging under the OPPS
in a manner that would not place hospitals at substantial financial
risk but which would create incentives for efficiency and volume
control, while providing hospitals with flexibility to provide care in
the most appropriate way for each Medicare beneficiary. We are
considering the possibility of greater bundling of payment for major
hospital outpatient services, which could result in establishing OPPS
payments for episodes of care, and for this reason we particularly
welcome MedPAC's exploration of how such an approach might be
incorporated into the OPPS payment methodology. We are particularly
concerned about the potential for shifting higher cost bundled services
to other ambulatory settings. We are currently considering the complex
policy issues related to the possible development and implementation of
a bundled payment policy for hospital outpatient services that involves
significant services provided over a period of time which could be paid
through an episode-based payment methodology, but we consider this
possible approach to be a long-term policy objective.
We also are examining how we might possibly establish payments for
same-day care encounters, building upon the current use of APCs for
payment through greater packaging of supportive ancillary services.
This could include conditional packaging of supportive ancillary
services into payment for the procedure that is the reason for the OPPS
encounter (for example, diagnostic tests performed on the day of a
scheduled procedure). Another approach could include creation of
composite APCs for frequently performed combinations of surgical
procedures (for example, one APC payment for multiple cardiac
electrophysiologic procedures performed on the same date). Not only
could these encounter-based payment groups create enhanced incentives
for efficiency, but they may also enable us to utilize for ratesetting
many of the multiple procedure claims that are not now used in our
establishment of OPPS rates for single procedures. (We refer readers to
section II.A.1.b. of this final rule with comment period for a more
detailed discussion of the treatment of multiple procedure claims in
the ratesetting process.) In the CY 2008 OPPS/ASC proposed rule, we
proposed two new composite APCs for CY 2008 payment of combinations of
services in two clinical care areas, as discussed in section II.A.4.d.
of this final rule with comment period. In that section, we summarize
and respond to the public comments we received on this proposal

[[Page 66614]]

as we explore the possibility of moving toward basing OPPS payment on
larger packages and bundles of services provided in a single hospital
outpatient encounter.
We intend to involve the APC Panel in our future exploration of how
we can develop encounter-based and episode-based payment groups, and we
look forward to the findings and recommendations of MedPAC in this
area. This is a significant change in direction for the OPPS, and we
specifically seek the recommendations of all stakeholders with regard
to which ancillary services could be packaged and those combinations of
services provided in a single encounter or over time that could be
bundled together for payment. We are hopeful that expanded packaging
and, ultimately, greater bundling under the OPPS may result in
sufficient moderation of growth in volume and spending that further
controls would not be needed. However, if spending were to continue to
escalate at the current rates, even after we have exhausted our options
for increased packaging and bundling, we are considering multiple
options under our authority to address these issues.
c. Packaging Approach
With the exception of the two composite APCs that we proposed for
CY 2008 and discuss in detail in section II.A.4.d. of this final rule
with comment period, we indicated in the CY 2008 OPPS/ASC proposed rule
that we were not prepared to propose an episode-based or fully
developed encounter-based payment methodology for CY 2008 as our next
step in value-based purchasing for the OPPS. However, in reviewing our
approach to revising payment packages and bundles for the proposed
rule, we examined services currently provided under the OPPS, looking
for categories of ancillary items and services for which we believed
payment could be appropriately packaged into larger payment packages
for the encounter. For this first step in creating larger payment
groups, we examined the HCPCS code definitions (including CPT code
descriptors) to see whether there were categories of codes for which
packaging would be a logical expansion of the longstanding packaging
policy that has been a part of the OPPS since its inception. In
general, we have often packaged the costs of selected HCPCS codes into
payment for services reported with other HCPCS codes where we believed
that one code reported an item or service that was integral to the
provision of care that was reported by another HCPCS code.
As an example of a previous change in the OPPS packaging status for
a HCPCS code that is ancillary and supportive, under the CY 2007 OPPS,
we note that CPT code 93641 (Electrophysiologic evaluation of single or
dual chamber pacing cardioverter defibrillator leads including
defibrillation threshold evaluation (induction of arrhythmia, evaluate
of sensing an pacing for arrhythmia termination) at the time of initial
implantation or replacement; with testing of single chamber or dual
chamber cardioverter defibrillator) went from separate to packaged
payment. This service is only performed during the course of a surgical
procedure for implantation or replacement of implantable cardioverter-
defibrillator (ICD) leads, and these surgical implantation procedures
are currently assigned to APC 0106 (Insertion/Replacement/Repair of
Pacemaker and/or Electrodes) and APC 0108 (Insertion/Replacement/Repair
of Cardioverter-Defibrillator Leads). We considered the
electrophysiologic evaluation service (CPT code 93641) to be an
ancillary supportive service that may be performed only in the same
operative session as a procedure that could otherwise be performed
independently of the electrophysiologic evaluation service. In this
particular case, the APC Panel recommended for CY 2007 that we package
payment for this diagnostic test, and we adopted that recommendation
for the CY 2007 OPPS. Making this payment change in this specific case
resulted in the availability of significantly more claims data and,
therefore, establishment of more valid and representative estimated
median costs for the lead insertion and electrophysiologic evaluation
services furnished in the single hospital encounter.
In the case of much of the care furnished in the HOPD, we believe
that it is appropriate to view a complete service as potentially being
reported by a combination of two or more HCPCS codes, rather than a
single code, and to establish payment policy that supports this view.
Ideally, we would consider a complete HOPD service to be the totality
of care furnished in a hospital outpatient encounter or in an episode
of care. In general, we believe that it is particularly appropriate to
package payment for those items and services that are typically
ancillary and supportive into the payment for the primary diagnostic or
therapeutic modalities in which they are used. As a significant first
step towards creating payment units that represent larger units of
service, in development of the proposed rule, we examined whether there
were categories of HCPCS codes that are typically ancillary and
supportive to diagnostic and therapeutic modalities.
Specifically, as our initial substantial step toward creating
larger payment groups for hospital outpatient care, in the CY 2008
OPPS/ASC proposed rule (72 FR 42652), we proposed to package payment
for items and services in the seven categories listed below into the
payment for the primary diagnostic or therapeutic modality to which we
believe these items and services are typically ancillary and
supportive. We specifically chose these categories of HCPCS codes for
packaging because we believe that the items and services described by
the codes in these categories are the HCPCS codes that are typically
ancillary and supportive to a primary diagnostic or therapeutic
modality and, in those cases, are an integral part of the primary
service they support. We proposed to assign status indicator ``N'' to
those HCPCS codes that we believe are always integral to the
performance of the primary modality and to package their costs into the
costs of the separately paid primary services with which they are
billed. We proposed to assign status indicator ``Q'' to those HCPCS
codes that we believe are typically integral to the performance of the
primary modality and to package payment for their costs into the costs
of the separately paid primary services with which they are usually
billed but to pay them separately in those uncommon cases in which no
other separately paid primary service is furnished in the hospital
outpatient encounter.
For ease of reference in our subsequent discussion in each of the
seven areas, we refer to the HCPCS codes for which we proposed to
package (or conditionally package) payment as dependent services. We
use the term ``independent service'' to refer to the HCPCS codes that
represent the primary therapeutic or diagnostic modality into which we
are proposing to package payment for the dependent service. We note
that, in future years as we consider the development of larger payment
groups that more broadly reflect services provided in an encounter or
episode of care, it is possible that we might propose to bundle payment
for a service that we now refer to as ``independent'' in this final
rule with comment period.
Specifically, we proposed to package the payment for HCPCS codes
describing the dependent items and services in the following seven
categories into the payment for the

[[Page 66615]]

independent services with which they are furnished:
Guidance services
Image processing services
Intraoperative services
Imaging supervision and interpretation services
Diagnostic radiopharmaceuticals
Contrast media
Observation services
In the proposed rule, we identified the HCPCS codes we proposed to
package for CY 2008, explained our rationale for proposing to package
the codes in these categories, provided examples of how HCPCS and APC
median costs and payments would change under these proposals, and
discussed the impact of these changes under each category, as follows:
The median costs of services at the HCPCS level for many separately
paid procedures changed as a result of our proposal because we proposed
to change the composition of the payment packages associated with the
HCPCS codes. Moreover, as a result of changes to the HCPCS median
costs, we proposed to reassign some HCPCS codes to different clinical
APCs for CY 2008 to avoid 2 times violations and to ensure continuing
clinical and resource homogeneity of the APCs. Therefore, the proposed
APC median costs changed not only as a result of the increased
packaging itself but also as a result of the migration of HCPCS codes
into and out of APCs through APC reconfiguration. The file of HCPCS
code and APC median costs resulting from our proposal is found under
supporting documentation for the proposed rule on the CMS Web site at
http://www.cms.hhs.gov/HospitalOutpatientPPS/HORD/list.asp#TopOfPage.
Review of the HCPCS median costs for the proposed rule indicated
that, while the proposed median costs rise for some HCPCS codes as a
result of increased packaging that expands the costs included in the
payment packages, there are also cases in which the proposed median
costs decline as a result of these proposed changes. While it seems
intuitive to believe that the proposed median costs of the remaining
separately paid services should rise when the costs of services
previously paid separately are packaged into larger payment groups, it
is more challenging to understand why the proposed median costs of
separately paid services would not change or would decline when the
costs of previously paid services are packaged.
Medians are generally more stable than means because they are less
sensitive to extreme observations, but medians typically do not reflect
subtle changes in cost distributions. The OPPS' use of medians rather
than means usually results in relative weight estimates being less
sensitive to packaging decisions. Specifically, the median cost for a
particular independent procedure generally will be higher as a result
of added packaging, but also could change little or be lower because
median costs typically do not reflect small distributional changes and
also because changes to the packaged HCPCS codes affect both the number
and composition of single bills and the mix of hospitals contributing
those single bills. Such a decline, no change, or an increase in the
median cost at the HCPCS code level could result from a change in the
number of single bills used to set the median cost. With greater
packaging, more ``natural'' single bills are created for some codes but
fewer ``pseudo'' single bills are created. Thus, some APCs gain single
bills and some lose single bills due to packaging changes, as well as
to the reassignment of some codes to different APCs. When more claims
from a different mix of providers are used to set the median cost for
the HCPCS code, the median cost could move higher or lower within the
array of per claim costs.
Similarly, revisions to APC assignments that are necessary to
resolve 2 times violations that could arise as a result of changes in
the HCPCS median cost for one or more codes due to additional packaging
may also result in increases or decreases to APC median costs and,
therefore, to increases or decreases in the payments for HCPCS codes
that would not be otherwise affected except for the CY 2008 proposed
packaging approach for the seven categories of items and services.
We examined the aggregate impact of making these proposed changes
on payment for CY 2008 in the proposed rule. Because the OPPS is a
budget neutral payment system in which the amount of payment weight in
the system is annually adjusted for changes in expenditures created by
changes in APC weights and codes (but is not currently adjusted based
on estimated growth in service volume), the effects of the packaging
changes we proposed resulted in changes to scaled weights and,
therefore, to the proposed payment rates for all separately paid
procedures. These changes resulted from both shifts in median costs as
a result of increased packaging, changes in multiple procedure
discounting patterns, and a higher weight scaler that was applied to
all unscaled APC weights. (We refer readers to section II.A.3. of this
final rule with comment period for an explanation of the weight
scaler.) In a budget neutral system, the monies previously paid for
services that were proposed to be packaged are not lost, but are
redistributed to all other services. A higher weight scaler would
increase payment rates relative to observed median costs for
independent services by redistributing the lost weight of packaged
items that historically have been paid separately and the lost weight
when the median costs of independent services did not completely
reflect the full incremental cost of the packaged services. The impact
of the cumulative changes for the CY 2008 OPPS payments is discussed in
section XXIV.B. of this final rule with comment period.
We estimated that our CY 2008 packaging proposal would redistribute
approximately 1.2 percent of the estimated CY 2007 base year
expenditures under the OPPS. The monies associated with this
redistribution were in addition to any increases that would otherwise
occur due to a higher median cost for the APC as a result of the
expanded payment package. If the relative weight for a particular APC
decreased as a result of the proposed packaging approach, the increased
weight scaler may or may not result in a relative weight that is equal
to or greater than the relative weight that would occur without the
proposed packaging approach. In general, the packaging that we proposed
would have more effect on payment for some services than on payment for
others because the dependent items and services that we proposed for
packaging are furnished more often with some independent services than
with others. However, because of the amount of payment weight that
would be redistributed by our proposal, there would be some impact on
payments for all OPPS services whose rates are set based on payment
weights, and the impact on any given hospital would vary based on the
mix of services furnished by the hospital.
We received many, often widely diverging, public comments on the CY
2008 proposed packaging approach. In many cases the comments were
generally applicable to the totality of the packaging proposal and, in
other cases, the same general comments were made but only with regard
to a specific category or set of services of interest to the commenter.
We have addressed all similar public comments in the discussion of
general comments, whether they were made in general or for specific
categories of services, because the same response applies

[[Page 66616]]

whether the comment was on packaging in general or on a specific
service. We have limited the summary of public comments and our
responses in the individual category discussions to issues that pertain
only to the category or specific services within the category.
During the September 2007 APC Panel meeting, the APC Panel
supported packaging for contrast agents, image processing services,
guidance (except for radiation oncology guidance procedures),
diagnostic radiopharmaceuticals with a median per day cost of less than
$200, and intraoperative testing other than possibly for CPT code 96020
(Neurofunctional testing selection and administration during
noninvasive imaging functional brain mapping, with test administered
entirely by a physician or psychologist, with review of test results
and report). The Panel recommended a delay in packaging for imaging
supervision and interpretation services because of excessive payment
reductions that the Panel believed would occur under the CMS proposal,
particularly with regard to packaging payment for those supervision and
interpretation services that already include packaged injection
services. The Panel did not support packaging of observation services,
although it suggested that if CMS were to package observation, it
should instead create a composite APC (or a group of composite APCs)
for observation and the related visit services, without restriction to
specific clinical conditions. The APC Panel also recommended that CMS
provide additional information in the CY 2008 final rule with comment
period about packaging, including crosswalks and information clarifying
how newly packaged services map back to primary procedures.
Comment: MedPAC generally supported the proposed packaging because
the services proposed for packaging are typically furnished on the same
day as a separately paid service and there is little potential for them
to be furnished on another date to avoid the effects of packaging.
MedPAC explained that packaging of observation services is logical
because currently 70 percent of observation care is packaged. MedPAC's
principal concern about the proposed packaging of observation was that
this approach could result in hospitals' costs being higher than OPPS
payments in some cases, and thereby create an incentive for inpatient
admissions. It encouraged CMS to carefully monitoring whether hospitals
change their behavior with regard to inpatient admissions.
Some commenters supported encounter-based or episode-based payment,
but asked that this approach be based on single encounter only and not
span a period of time, because they believed that it would be very
difficult to set rates for periods of recurring services. The
commenters supported use of multiple procedure claims and payment for
combinations of services but encouraged CMS to carefully evaluate the
overall impact of packaging on all hospitals. Other commenters
suggested that CMS package only services that are low cost and
furnished at a high frequency with the independent service. Several
commenters stated that CMS should not finalize the proposed packaging
approach because it would lead to inappropriate payment, including both
overpayments and underpayments.
Several commenters asked that CMS delay the packaging approach for
at least a year because they believed the proposed rule did not furnish
sufficient data analysis in support of the proposal. They asserted that
the aggregate impact analysis provided no information that commenters
could use to evaluate the individual codes proposed to be packaged,
making it impossible for the public to determine how payment for
services would be affected. Some commenters requested that CMS furnish
the same level of impact discussion for each of the services in each of
the categories as it did for the composite APCs. Other commenters asked
CMS to identify the percent of charges for dependent services that were
packaged into each independent procedure, identify all independent
procedures into which cost was packaged from each packaged procedure,
and identify the cost of each procedure code with and without the
proposed packaging. They recommended that, before implementing the
proposed packaging, CMS publish all HCPCS and revenue codes and the
costs for each that enter into the consideration of packaging for every
code proposed to be packaged. The commenters believed that the lack of
transparency, together with late availability of a correct OPPS
proposed rule claims data set, made it difficult to determine whether
packaged costs were retained or lost in the median setting process.
Other commenters suggested that CMS explicitly crosswalk packaged
services to identified independent services, rather than packaging
payment into the independent service with which the packaged services
is billed on each claim. They asserted that no service should be
packaged unless it is furnished the majority of the time with the
specified independent service. The commenters stated that items and
services should be packaged only where there are substitutable services
that could be chosen by the hospital, and that no packaging should
occur where there is only one dependent service that would be provided
with the independent service.
Some commenters contended that CMS should not implement the
proposed packaging changes until after it implements an adjustment for
charge compression because errors in the proposed rates as a result of
charge compression would result in too little payment being packaged
into the independent service and would create disincentives for
hospital to furnish the packaged services, thus harming beneficiary
access to advanced technologies.
Some commenters requested that CMS develop and propose a set of
criteria for packaging services that would be open to public comment
and that would control whether and, if so, when CMS could package
payment for a service. The commenters stated that the criteria in the
proposed rule were too vague, undefined, and subjective to identify
which codes should be packaged. The commenters provided criteria that
they believe should govern whether a service should be packaged. The
suggested criteria included, but were not limited to, requiring that
packaging should only be adopted for high volume, low cost, minor and
ancillary services that are very frequently performed with the
specified independent service; no packaging of services that require
specialized equipment or devices; no packaging of services that are
only furnished in a small number of hospitals; no packaging of add-on
services unless the service is furnished with its base code at least 50
percent or 75 percent of the time; packaging only when a service is
being packaged into a specified service and, therefore, no general
packaging of services into the service with which it is performed; no
packaging unless CMS has provided the public with a full data
assessment of the effects of packaging each service; and no packaging
if the median cost for the code exceeds an established amount.
Other commenters suggested CMS not implement the proposed packaging
because the 60-day comment period provided insufficient time for
analysis and because the APC Panel recommendations and report were not
posted on the Web site immediately after the meeting.
Response: We have reviewed all of the public comments we received
on the

[[Page 66617]]

proposed packaging approach, and we have decided to finalize our
proposal with significant modifications and refinements to address some
of the concerns raised by commenters on our proposal to package payment
for diagnostic radiopharmaceuticals, imaging supervision and
interpretation services, contrast agents, and observation services. We
refer readers to sections II.A.4.c.(4), (5), (6), and (7) of this final
rule with comment period for detailed discussion of these modifications
and section II.A.2 of this final rule with comment period for
discussion of the changes we made to the data process in this regard.
We are finalizing our proposal for guidance, image processing, and
intraoperative services without substantial modification. Table 10,
which appears in section II.A.4., contains a comprehensive list of all
codes in the final seven categories for which we will package payment
either unconditionally (to which we assign status indicator ``N'') or
conditionally, providing separate payment if certain criteria are met
(to which we assign status indicator ``Q''). There is a category of
conditionally packaged codes assigned status indicator ``Q,'' which we
previously referred to as ``special'' packaged codes because their
payment was packaged when provided on the same date as a service that
was assigned status indicator ``S,'' ``T,'' ``V,'' or ``X.'' These
``special'' packaged codes will now be referred to as ``STVX-packaged
codes.'' We have identified a new category of conditionally packaged
codes that are called ``T-packaged codes,'' whose payment is packaged
when provided on the same date as another service that is assigned
status indicator ``T.'' The rationale for these changes are discussed
in detail below in section II.A.4.c.(4) of this final rule with comment
period.
We believe that it is appropriate and fully consistent with the
principles of a prospective payment system to package payment for
ancillary and supportive services into the payment for the independent
service with which they are furnished as a means of making payment for
a more comprehensive service package. Although separate payment will no
longer be made for the packaged services, the payments for the
independent services with which they are furnished will reflect the
costs of the packaged services to the extent that the packaged services
are provided with the independent service. We recognize that, in some
cases, certain supportive and ancillary dependent services are
furnished with only one independent service, and in other cases they
are furnished with many independent services. Similarly, in some cases
they are furnished frequently with independent services, and in some
cases they are uncommonly furnished with independent services.
We believe that packaging should reflect the reality of how the
services are furnished and reported on claims by hospitals. We believe
that nonspecific packaging (as opposed to selected code packaging)
based on combinations of services observed on hospital claims is fully
appropriate because of the myriad combinations of services that can be
appropriately provided together. This approach to packaging payment has
long existed in prospective payment systems, including the OPPS. For
example, in the IPPS, Medicare's oldest prospective payment system,
payment for all services furnished is packaged into a single payment
for an entire hospital inpatient stay that is based on the diagnosis-
related group (DRG) into which the stay is categorized. The DRG payment
packages together all payment for routine care, drugs, biologicals,
medical supplies, diagnostic tests, and all other covered services that
were provided to the patient, regardless of the extent to which
different patients in the same DRG received somewhat different services
during their stay. We believe that a similar approach to nonspecific
packaging under the OPPS is likewise fully appropriate. We have used
this packaging approach for ratesetting throughout the history of the
OPPS, and note that payment for APC groups currently reflects
significant nonspecific packaging in many cases. Similarly, we believe
that it is appropriate to establish under the OPPS a single payment for
multiple independent procedures that are frequently furnished together.
For that reason, we are adopting five composite APCs for CY 2008 and
intend to explore developing others.
We do not agree with the commenters that we should not package a
service unless it is a low cost ancillary and supportive service that
appears frequently with an independent service. To establish that
policy would negate the concept of averaging that is an underlying
premise of a prospective payment system by packaging only services that
will increase the payment for the independent service. To do that would
also create incentives for hospitals to provide ancillary and dependent
services that are higher cost or historically were infrequently
furnished with an independent service and would remain separately paid.
Similarly, we do not agree that we should not finalize the proposed
packaging approach because it will ``overpay'' some services and
``underpay'' others. Payment based on a measure of central tendency is
also a principle of any prospective payment system. In some cases,
payment in an individual case exceeds the average cost and in other
cases payment is less than the average cost, but on balance, payment
should approximate the relative cost of the average case, recognizing
that the OPPS, as created in the statute, was not intended to pay the
full cost of HOPD services.
We also do not agree that it would be beneficial to delay the
implementation of the proposed packaging approach for a year because
that would delay the implementation of incentives under the OPPS for
hospitals to look carefully at ways that they could provide care more
efficiently. We recognize that, as with any payment policy, there will
be affected parties that will ask for changes to the policy, and we are
always willing to hear their concerns and to make changes if the
changes are appropriate. Moreover, both APC and status indicator
assignments are open to public comment each year in the proposed rule,
and hence affected parties may provide their arguments for separate
payment as part of that process in the future.
We further disagree that we should delay or not finalize the
proposed packaging approach pending provision of the extensive data
that the commenters requested. We make available a considerable amount
of data for public analysis each year and while we are not developing
and providing the extensively detailed information that the commenters
request, we provide the public use files of claims and a detailed
narrative description of our data process that the public can use to
perform any desired analyses. While we acknowledge that we needed to
issue a second corrected file of claims data, the second file differed
from the first only in that it deleted a relatively small number of
duplicate claims for observation that would have been used to calculate
an APC rate for separately payable observation, had we proposed to pay
separately for observation, and hence we believe that the accidental
inclusion of these duplicate claims for observation care should have
had little or no effect on the majority of studies of the HCPCS codes
we proposed to package.
With regard to the request for extensive data on all HCPCS codes we
proposed to package, it would not be possible for us to anticipate the
specific combinations of services of interest to the public. In
addition, we believe that

[[Page 66618]]

the commenters must examine the data themselves to develop the specific
arguments to support their requests for changes to payments under the
OPPS. We note that we pay hospitals under the OPPS, and we showed the
impact of the CY 2008 packaging proposal on payment to different
classes of hospitals in Table 67 of the proposed rule (72 FR 42822
through 42824). We believe our estimate of the impact of these changes
provided valuable information to the hospitals that would receive
packaged payment for services that had been previously paid separately
under the OPPS.
With regard to the public comments that we should explicitly
crosswalk packaged codes to the independent codes into which the costs
would be packaged, we do not believe that this is feasible, given the
myriad combinations of services that are furnished in the HOPD, nor is
it consistent with the principles of a prospective payment system,
which bases payment on real occurrences of services that are furnished
by hospitals and reported on claims. Moreover, creation of such a
crosswalk would undoubtedly result in omissions of appropriate
packaging of services and would create a maintenance task that would
not be sustainable, given the number of changes to HCPCS codes each
year and the ever changing way in which services are furnished.
Similarly, it is not consistent with the concept of packaging within a
prospective payment system to package only those services for which
there are substitutes that could be furnished. In contrast, it is fully
consistent with the principles of a prospective payment system for
groups of services to package items and services that are always
furnished with an independent service and for which there are no
substitutes.
We also do not agree that we should delay creation of larger
payment bundles through packaging until after there is adjustment for
charge compression under the OPPS. As we discuss in section II.A.1.c.
of this final rule with comment period, we will consider whether to use
regression-adjusted CCRs to adjust for charge compression under the
OPPS after RTI reviews the OPPS cost estimation process, including an
assessment of the revenue code-to-cost center crosswalk and estimating
regression-adjusted CCRs from a model that includes outpatient charges.
There is no reason to delay the creation of incentives for encouraging
cost-effective utilization and efficiency in the provision of HOPD
services until a decision is made regarding the appropriateness of
using regression-adjusted CCRs to estimate OPPS costs.
We do not agree that we should develop and establish criteria with
stakeholder input before we finalize the packaging proposal. Nor do we
believe that the specific criteria the commenters recommended are
appropriate for determining when services should be packaged. The
criteria that the commenters provided are focused almost exclusively on
preventing packaging, rather than on determining when packaging would
be appropriate. We believe that packaging is appropriate when the
nature of a service is such that it is supportive and ancillary to
another service, whether the dependent service is frequently furnished
with the independent service or not and regardless of the cost of the
supportive ancillary service. This is largely a clinical decision based
on the nature of the service being considered for packaging.
Lastly, we do not agree that we should not implement the proposed
changes because the commenters believed that the 60 day comment period
was insufficient or because the APC Panel recommendations and report
were not posted to the Web site immediately after the public meeting.
The 60 day comment period is generally the standard comment period for
the proposed rule process. The availability of updated claims and cost
report data necessary to develop the proposed rule and issue the final
rule for the OPPS precludes a longer period for comment. Moreover, we
do not believe that the Web site posting of the APC Panel
recommendations and report is necessary for the public to provide
meaningful comments, in light of the fact that the APC Panel meeting is
open to the public.
We are not accepting the recommendation of the APC Panel to provide
information in this final rule with comment period clarifying how newly
packaged services map back to primary procedures because we would be
unable to display in a meaningful way all of the many combinations of
services that may be of interest to the public. Moreover, given the
numerous new, refined, and interrelated payment policies finalized for
CY 2008 involving APC reconfiguration, HCPCS migration, reduction in
the numbers of low volume APCs, and others, to adopt the APC Panel's
example of simulating median costs holding all other CY 2008 policies
constant for HCPCS codes with and without the additional packaging of
those services newly packaged for CY 2008 would not provide meaningful
comparative information. Almost certainly, if we were not to adopt
packaging of the additional services for CY 2008, the APC
configurations, bypass list, single claims available for ratesetting,
and other important features upon which the final median costs depend
would differ in significant ways from those aspects under our final CY
2008 policies.
Comment: A number of commenters disagreed with the CMS estimate of
the amount of payment that would be redistributed under the proposed
rule. The commenters indicated that the services proposed to be newly
packaged constitute 6 percent of the OPPS costs, although CMS estimated
that the packaging proposal would redistribute 1.2 percent of the CY
2008 expenditures under the OPPS. They attributed the difference in
cost estimates to the methodology for applying status indicator ``Q.''
The commenters believed that the resulting impact analysis would be
quite different from CMS' estimated impact displayed in the proposed
rule and, therefore, the implications of the policy are not fully
understood. They objected to packaging of observation services in
particular, but recommended that CMS reevaluate the entire packaging
proposal in light of methodological and data concerns.
Response: In the proposed rule, we estimated that the proposed
packaging approach would redistribute 1.2 percent of the CY 2007 base
expenditures under the OPPS to other OPPS services as part of our
budget neutrality adjustments for the proposed CY 2008 payment system.
This 1.2 percent is the aggregate payment weight reduction from the
packaging proposal, where the medians are marginally less than the
costs for the individual services prior to packaging. This is not
inconsistent with a finding that the total cost of services proposed to
be packaged constitutes 6 percent of HOPD costs. These percentages
measure different things. The first provides an estimate of money
redistributed to other services and the second an estimate of the
proportion of OPPS spending on services addressed by the policy. We
understand, and intended, that the packaging proposal affect services
responsible for significant OPPS spending, in order to provide
hospitals with meaningful incentives to examine their patterns of care
delivery and improve efficiency. The 1.2 percent reflects the
difference in total weight with and without the packaging proposal
relative to the CY 2007 total base weight. Whether or not the 1.2
percent of redistributed dollars was entirely attributable to the
proposed policy for estimating the median cost for ``Q'' status
indicator services cannot be

[[Page 66619]]

determined. For this final rule with comment period, we made
modifications to the policy governing the handling of many services
assigned status indicator ``Q,'' as discussed in section II.A.4.c.(4)
of this final rule with comment period, that resulted in use of more
claims data and significant changes to the median costs for some
services. We also accepted the public comments that recommended that we
create a composite APC for observation services, as discussed in
section II.A.4.c.(7) of this final rule with comment period.
Comment: Some commenters stated that CMS must undertake provider
education and claims monitoring because providers will cease to bill
HCPCS codes and charges for packaged services, which will result in
lower payment rates than would otherwise be made if they reported all
codes and charges and thus the costs of packaged services would be lost
to the payment system in future years. They indicated that this
presents huge operational challenges to hospitals to ensure that they
bill and charge for the packaged codes. Other commenters believed that
the implementation of increased packaging will be particularly
difficult in CY 2008 because CMS is simultaneously implementing
Medicare-Severity DRGs (MS-DRGs) for IPPS payment, which also poses
operational challenges for hospitals.
Response: We do not believe that there will be a significant change
in what hospitals charge and report for the services they furnish to
Medicare beneficiaries and to others as a result of the increased
packaging for the CY 2008 OPPS. Medicare cost reporting standards
specify that hospitals must impose the same charges for Medicare
patients as for other patients. We are often told by hospitals that
many private payers pay based on a percentage of charges and that
hospital chargemasters do not differentiate between the charges to
Medicare patients and others. Therefore, we have no reason to believe
that hospitals will cease to report charges and HCPCS codes for
packaged services they provide to Medicare beneficiaries. We expect
that hospitals, as other prudent businesses, will have a quality review
process that ensures that they accurately and completely report the
services they furnish, with the appropriate charges for those services
to Medicare and all other payers. Therefore, we do not see either the
need or the responsibility to undertake a special effort to educate
providers to report and charge Medicare for the services they furnish,
whether separately paid or packaged. According to our longstanding
policy, we will continue to encourage hospitals to report the HCPCS
codes and associated charges for all services they provide, taking into
consideration all CPT, OPPS, and local contracture instructions,
regardless of whether payment for those HCPCS codes is packaged or
separately provided. Similarly, we do not believe that the
implementation of MS-DRGs will create operational issues for hospitals
that would be complicated by increased packaging under the OPPS.
Comment: Some commenters asserted that increased packaging will
create disincentives to provide certain services and that providers may
stop furnishing these services to Medicare beneficiaries. The
commenters stated that increased packaging would reduce expenditures,
but the ultimate result would be reduced access to necessary care as
the payment incentives to provide care are reduced. Other commenters
believed that increased packaging will result in services being
furnished on multiple days in order to maximize payment, which will
increase, rather than decrease, volumes of services and provide a
significant inconvenience to beneficiaries.
Response: We also do not agree that beneficiary access to care will
be harmed by increased packaging. We believe that packaging will create
incentives for hospitals and their physician partners to work together
to establish appropriate protocols that will eliminate unnecessary
services where they exist and will institutionalize approaches to
providing necessary services more efficiently. Where this review
results in reductions in services that are only marginally beneficial,
we believe that this could improve rather than harm the quality of care
for beneficiaries because every service furnished in a hospital carries
some level of risk to the patient. Similarly, where this review results
in the concentration of some services in a reduced number of hospitals
in the community, we believe that the quality of care and hospital
efficiency may both be enhanced as a result. The medical literature
shows that concentration of services in certain hospitals often results
in both greater efficiency and higher quality of care for patients.
Moreover, we do not believe that packaging will result in Medicare
beneficiaries being treated differently from other patients with regard
to the care they receive in the hospital. A hospital may have its
provider agreement terminated by Medicare under 42 CFR 489.53(a)(2) if
it places restrictions on the persons it accepts for treatment and
either fails to exempt Medicare beneficiaries from those restrictions
or apply them to Medicare beneficiaries the same as to all other
persons seeking care. We do not believe that a hospital would risk
termination of its provider agreement by Medicare by refusing to
furnish a medically necessary service to a Medicare beneficiary,
although it provides the same service to other patients for the same
clinical indications.
As we indicated in the proposed rule, we will examine our claims
data for patterns of fragmented care and if we find a pattern in which
a hospital appears to be fragmenting care across multiple days, we will
refer it for investigation to the QIO or to the program safeguard
contractor, as appropriate to the circumstances we find. However, we do
not believe that, in general, hospitals would routinely, and for
purposes of financial gain, require patients to return on multiple days
to receive services that could have been furnished on the same day.
Comment: One commenter objected to the implication in the proposed
rule that hospitals provide whatever services they wish at whatever
cost, with their only concern being payment for the services, and that
payment rates could motivate hospitals to report services on separate
claims or split the service among different hospitals in order to be
paid more. The commenter stated that 42 CFR 411.15(m) requires that
hospitals must furnish and bill for services necessary to complete an
outpatient encounter and that, therefore, it would be a violation of
CMS regulations for a hospital to deliver part of the service at one
hospital and the rest at another hospital.
Response: We believe that hospitals strive to provide the best care
they can to the patients they serve. However, we are aware that there
are financial pressures on hospitals that might motivate some of them
to split services in such a way as to maximize payments. While we do
not expect that hospitals would routinely change the way they furnish
services or the way they bill in order to maximize payment, we do
believe that it would be possible, and hence we offered the cautionary
note in the proposed rule that we will consider that possibility as we
review our claims data. Other commenters, as described in the preceding
comment, stated that volumes of services and expenditures would
increase because hospitals would provide services on multiple days to
maximize payment.
We note that 42 CFR 411.15(m) specifies exclusions from Medicare
coverage in cases in which the hospital does not furnish a service
directly or

[[Page 66620]]

under arrangements as defined in 42 CFR 409.3 and, therefore, would not
prohibit a hospital from discharging a patient and sending that patient
to another hospital for a service that would otherwise be packaged if
furnished during the same encounter. However, as noted above, a
hospital that does not make available the same services to Medicare
beneficiaries as to its other hospital patients can be terminated from
Medicare under 42 CFR 489.53(a)(2). Additionally, we remind hospitals
that any business models or arrangements they make for the provision of
services intended to be billed by that hospital must comply with all
applicable laws and regulations, including, but not limited to, the
Stark law and other anti-kickback laws, the provider-based rules at 42
CFR 413.65, the ``incident-to'' rules at 42 CFR 410.27, and the
conditions for outpatient diagnostic services at 42 CFR 410.28. In
regard to hospital services provided under arrangements, as defined in
42 CFR 409.3, we have specified in the Eligibility and Entitlement
Manual that, ``In permitting providers to furnish services under
arrangements, it was not intended that the provider merely serve as a
billing mechanism for the other party. Accordingly, for services
provided under arrangements to be covered, the provider must exercise
professional responsibility over the arranged for services'' (Pub. 100-
1, Chapter 5, section 10.3). Therefore, we would not expect hospitals
to send patients to a separate entity merely to avoid packaged payment,
but, as stated above, we will consider that possibility as we review
our claims data.
Comment: Some commenters suggested that CMS work with and through
the AMA process in making any packaging decisions and not make any
arbitrary and single-sided bundling decisions that have not been fully
reviewed and analyzed for impact by the stakeholders. They suggested
that CMS discuss with the AMA CPT Editorial Panel the potential for
unintended consequences of proposed packaging or bundling on the
establishment of CPT codes. For example, one commenter believed that
packaging add-on codes, which the commenter viewed as integral to
maintaining flexibility of CPT coding, would likely discourage future
consideration of creating add-on codes as a means to describe code-
specific procedures and resources. Other commenters objected to what
they view as a ``codebook'' approach to determining what should be
packaged. The commenters stated that CMS not rely on CPT and HCPCS code
descriptors because the descriptors are complex and many do not
accurately describe the services furnished. Some commenters argued that
CMS should pay across settings in the same way and, therefore, should
not package under the OPPS services that are paid separately under the
MPFS.
Response: Our general process for developing the OPPS, including
making major payment policy decisions, is prescribed by the
Administrative Procedure Act (APA) and the Federal Advisory Committee
Act (FACA). As such, proposed payment rates and the attendant policies
are open to public comment both through the Federal Register notice and
comment rulemaking process and through the public meetings of the APC
Panel, which is a Federal Advisory Committee chartered by the Secretary
of Health and Human Services. Therefore, our proposed packaging for the
CY 2008 OPPS and the decisions we are announcing in this final rule
with comment period are neither arbitrary nor single-sided, as all
stakeholders have had the opportunity to comment. In this final rule
with comment period, we are responding to their comments. We note that
the AMA, as a member of the public, has the same opportunity to comment
on the packaging proposal in the proposed rule as any other member of
the public.
We believe that it is entirely appropriate to rely on the HCPCS
descriptors, including the AMA's CPT descriptors, for the definition of
the services furnished for purposes of the proposed packaging approach
and other payment policies. The OPPS is based on the definitions of
services reported with HCPCS codes, of which the CPT code set is a
fundamental part. The HCPCS codes are the only means by which hospitals
report the services they furnish and the charges for those services
and, therefore, they are basis of the OPPS. For that reason, we look to
the HCPCS definition of the service to determine whether a particular
service is ancillary and supportive of another service. To the extent
that there are changes to the HCPCS codes and, by extension, to the CPT
code descriptors, we will reevaluate the decisions we make with regard
to packaging payment. However, we do not believe that the AMA's CPT
Editorial Board is influenced by OPPS payment policy in its
deliberations, nor should it be influenced by OPPS payment policy in
its creation of CPT codes.
Moreover, we disagree that we should not package payment for
ancillary and supportive services because the MPFS pays separately for
them. The OPPS is not a fee schedule, but a prospective payment system
based on relative weights derived from costs and charges. Packaging of
payments into appropriate groups is a fundamental principle that
distinguishes a prospective payment system from a fee schedule and we
do not believe that we should refrain from packaging payment for
ancillary and supportive services into payment for the independent
services with which they are furnished because they may be treated
differently in the MPFS or because of the unlikely possibility that
this policy may have some influence on the AMA CPT Editorial Panel's
decisions regarding creation of codes.
Comment: One commenter stated that the concept of creating
incentives for hospitals to negotiate better prices on goods and
services through packaging is not applicable to small rural hospitals
and, therefore, it should not apply to them. The commenter argued that
smaller rural hospitals cannot negotiate for better prices on goods and
services because they buy smaller amounts of products and lack the
ability that large urban hospitals have to negotiate for better prices
on goods and services.
Response: We believe that the creation of incentives for hospitals
to seek more efficient ways of furnishing services is applicable to all
hospitals, including small rural hospitals. Small rural hospitals and
their physician partners have the same capacity and capability as other
hospitals to evaluate the appropriateness and efficiency of the
packaged services they furnish. Moreover, small rural hospitals can
join in cooperatives and group purchasing organizations that can
achieve purchasing efficiencies that they could not achieve by
themselves. We recognize that some costs are higher for certain
categories of rural hospitals, therefore we have provided the 7.1
percent rural adjustment for rural SCHs. Moreover, the law holds
harmless rural hospitals with 100 or fewer beds. However, we also
expect that small rural hospitals will be motivated by the packaging
approach to seek ways of furnishing services as efficiently as possible
and to eliminate services that are essential to the appropriate
treatment of the patient in any clinical case.
Comment: Some commenters contended that the proposed packaging
approach has the potential for systemwide net savings and
redistribution of payments away from hospitals that invested in high-
cost equipment and toward hospitals that do not have such costs. They
believed that charge compression contributes to this

[[Page 66621]]

problem because hospitals are limited in what they can charge, and the
allocation of radiology equipment capital costs exacerbates the
problem. The commenters suggested that CMS not finalize the packaging
proposal because packaging creates incentives for hospitals to divest
themselves of important but expensive technologies because those
technologies have ceased to be profitable.
Response: We agree that there is the potential for systemwide
redistribution of payments away from hospitals that invested in costly
equipment for services for which payment will be packaged and toward
hospitals that do not have such costs. However, to the extent that
packaging payment for ancillary and supportive services reduces the
amount of payment weight in the system for separately paid services,
that amount will be redistributed to all hospitals across all services
paid under the OPPS through the budget neutral weight scaler. Any
reduction in the growth of OPPS expenditures will result from slower
growth in hospital costs in future years as a result of hospitals
reducing the volume of certain services or finding more efficient ways
to provide care. That potential future savings is one of the purposes
of this packaging initiative and the exploration of episode-based or
encounter-based payments under the OPPS. Similarly, if increased
packaging causes hospitals to be more cautious in their decision making
regarding investing in new equipment or incurring other large capital
expenditures, we view that as a positive result of the policy.
Hospitals make decisions regarding the equipment they buy for general
business reasons, of which payment under the OPPS is only one factor
among many, including, but not limited to, utilization and payments
from other payers and payments from Medicare for IPPS services, which
is the dominant source of Medicare payment for hospital care.
Comment: One commenter asserted that linking growth in volume to
reduced payments is premature, inappropriate, and not supported by
statutory authority. The commenter was particularly concerned about any
methodology that would establish different update factors for different
OPPS service categories, where the update factor is determined in a
manner that takes into account utilization trends. Many commenters
stated that HOPD utilization of services is only marginally within the
control of hospitals. They explained that hospitals provide services
ordered by their medical staff and community physicians, and it would
be inappropriate to penalize hospitals for performing services whose
utilization is not within their control. The commenters believed that
innovation and best practices have increased utilization, not the
provision of excessive services.
Response: Section 1833(t)(2)(F) of the Act requires us to develop a
method of controlling unnecessary increases in the volume of covered
OPS services and section 1833(t)(9)(C) of the Act authorizes us to
adjust the update to the conversion factor if under section
1833(t)(2)(F) of the Act, we determine that there is growth in volume
that exceeds established tolerances. As we indicated in our proposed
rule, we prefer not to take the approach of creating an SGR-type
mechanism that could result in a reduced conversion factor under the
OPPS and that could inadvertently result in actually increasing the
volume of services. We prefer to establish larger packages of services
on which to base OPPS payment in order to create incentives for
hospitals and their physician partners to make thoughtful decisions
regarding what services are medically necessary for their patients and
to continuously reassess how they might be able to provide care more
efficiently. We recognize that decisions regarding the care provided in
HOPDs are not made unilaterally by the hospital, nor are they made
unilaterally by the physician who is ordering the care. While
physicians, rather than hospital staff, may order specific services for
patients, hospitals decide what HOPD services they will and will not
furnish, what drugs and supplies they will or will not buy and from
whom they will buy them, what investments in equipment they will or
will not make, and what programs they will open or close. Certainly,
they make these decisions with significant input from their medical
staff, but it is the hospital administration that makes the final
decisions in this regard. Moreover, hospitals control, to some extent,
the physicians on their medical staff and increasingly employ
physicians to provide services to patients and to supervise the
provision of hospital services. Hence, we do not agree with the
argument that hospitals have no control over the services they furnish
or that they have no influence over the physicians who order the
specific services furnished to their patients.
Comment: Some commenters asked CMS to impose a payment floor to
limit the amount of decline in any APC payment in at least the first
year of implementation as a means of mitigating the effects of no
longer paying separately for the packaged services.
Response: We do not agree that we should impose a payment floor to
limit the amount of decline in any APC payment as a means of mitigating
the effects of no longer paying separately for the packaged services.
The purpose of creating larger payment packages is to create incentives
for hospitals to assess the services they are furnishing to ensure that
they are furnishing only medically necessary services as efficiently as
possible. To establish a payment floor that would artificially inflate
payments for APCs that are declining would reduce what would otherwise
be appropriate increases in payments for other APCs. We believe that
this would be contrary to the stated goal of paying appropriately for
all services through larger payment bundles that are intended to create
incentives for efficiency.
Comment: Several commenters objected to the proposed packaging
approach because they believed that it would be more difficult for new
services to be approved for payment under New Technology APCs. One
commenter believed that it would be difficult for new guidance
services, in particular, to be approved for assignment to a New
Technology APC if CMS considers guidance to be a supportive and
ancillary service rather than a separately paid complete service.
Therefore, the commenter concluded that the proposed packaging not only
packages existing services but creates the potential for new
technologies to not be approved for New Technology APC payment.
Response: We assess applications for New Technology APC placement
on a case-by-case basis. The commenter is correct that, to qualify for
New Technology APC placement, the service must be a complete service,
by which we mean a comprehensive service that stands alone as a
meaningful diagnostic or therapeutic service. To the extent that a
service for which New Technology APC status is being requested is
ancillary and supportive of another service, for example, a new
intraoperative service or a new guidance service, we might not consider
it to be a complete service because its value is as part of an
independent service. However, if the entire, complete service,
including the guidance component of the service, for example, is
``truly new,'' as we explained that term at length in the November 30,
2001 final rule (66 FR 59898) which set forth the criteria for
eligibility for assignment of services to New Technology APCs, we would
consider the new complete procedure for New Technology APC assignment.

[[Page 66622]]

As stated in the November 30, 2001 final rule, by way of examples
provided, ``The use of a new expensive instrument for tissue
debridement or a new, expensive wound dressing does not in and of
itself warrant creation of a new HCPCS code to describe the instrument
or dressing; rather, the existing wound repair code appropriately
describes the service that is being furnished * * * '' (66 FR 59898).
This example may hold for some new guidance technologies as well.
The following discussions separately address each of the seven
categories of items and services for which we proposed to package
payment under the CY 2008 OPPS as part of our packaging proposal and
which we are adopting in this final rule with comment period, with the
modifications discussed under the applicable topic. Many codes that we
proposed to package for CY 2008 could fit into more than one of those
seven categories. For example, CPT code 93325 (Doppler echocardiography
color flow velocity mapping (List separately in addition to codes for
echocardiography)) could be included in both the intraoperative and
image processing categories. Therefore, for organizational purposes,
both to ensure that each code appears in only one category and to
facilitate discussion of our CY 2008 proposed and final policy, we have
created a hierarchy of categories that determines which category each
code appropriately falls into. This hierarchy is organized from the
most clinically specific to the most general type of category. The
hierarchy of categories is as follows: guidance services; image
processing services; intraoperative services; and imaging supervision
and interpretation services. Therefore, while CPT code 93325 may
logically be grouped with either image processing services or
intraoperative services, it is treated as an image processing service
because that group is more clinically specific and precedes
intraoperative services in the hierarchy. We did not believe it was
necessary to include diagnostic radiopharmaceuticals, contrast media,
or observation categories in this list because those services generally
map to only one of those categories. We note that there is no cost
estimation or payment implications related to the assignment of a HCPCS
code for purposes of discussion to any specific category.
Each HCPCS code we discuss in this section has a status indicator
of either ``N'' or ``Q.'' The payment for a HCPCS code with a status
indicator of ``N'' is unconditionally packaged so that its payment is
always incorporated into the payments for the separately paid services
with which it is reported. Payment for a HCPCS code with a status
indicator of ``Q'' is either packaged or separately paid, depending on
the services with which it is reported. Payment for a HCPCS code with a
status indicator of ``Q'' that is ``STVX-packaged'' is packaged unless
the HCPCS code is not reported on the same day with a service that has
a status indicator of ``S,'' ``T,'' ``V,'' or ``X,'' in which case it
would be paid separately. Payment for a HCPCS code with a status
indicator of ``Q'' that is ``T-packaged'' is packaged unless the HCPCS
code is not reported on the same day with a service that has a status
indicator of ``T,'' in which case it would be paid separately. Payment
for a HCPCS code with a status indicator of ``Q'' that is assigned to a
composite APC is packaged into the payment for the composite APC when
the criteria for payment of the composite APC are met.
(1) Guidance Services
We proposed to package payment for HCPCS guidance codes for CY
2008, specifically those codes that are reported for supportive
guidance services, such as ultrasound, fluoroscopic, and stereotactic
navigation services, that aid the performance of an independent
procedure. We performed a broad search for such services, relying upon
the AMA's CY 2007 book of CPT codes and the CY 2007 book of Level II
HCPCS codes, which identified specific HCPCS codes as guidance codes.
Moreover, we performed a clinical review of all HCPCS codes to capture
additional codes that are not necessarily identified as ``guidance''
services but describe services that provide directional information
during the course of performing an independent procedure. For example,
we proposed to package CPT code 61795 (Stereotactic computer-assisted
volumetric (navigational) procedure, intracranial, extracranial, or
spinal (List separately in addition to code for primary procedure))
because we consider it to be a guidance service that provides three-
dimensional information to direct the performance of intracranial or
other diagnostic or therapeutic procedures. We also included HCPCS
codes that existed in CY 2006 but were deleted and were replaced in CY
2007. We included the CY 2006 HCPCS codes because we proposed to use
the CY 2006 claims data to calculate the CY 2008 OPPS median costs on
which the CY 2008 payment rates would be based. Many, although not all,
of the CPT guidance codes we identified are designated in the CPT
coding scheme as add-on codes that are to be reported in addition to
the CPT code for the primary procedure. We also note that there are a
number of CPT codes describing independent surgical procedures that
have code descriptors that indicate that guidance is included in the
code reported for the surgical procedure if it is used and, therefore,
packaged payment is already made for the associated guidance service
under the OPPS. For example, the independent procedure described by CPT
code 55873 (Cryosurgical ablation of the prostate (includes ultrasonic
guidance for interstitial cryosurgical probe placement)) already
includes the ultrasound guidance that may be used. We believed
packaging payment for every guidance service under the OPPS would
provide consistently packaged payment for all these services that are
used to direct independent procedures, even if they are currently
separately reported.
Because these dependent guidance procedures support the performance
of an independent procedure and they are generally provided in the same
operative session as the independent procedure, we believed that it
would be appropriate to package their payment into the OPPS payment for
the independent procedure performed. However, guidance services differ
from some of the other categories of services that we proposed to
package for CY 2008. Hospitals sometimes may have the option of
choosing whether to perform a guidance service immediately preceding or
during the main independent procedure, or not at all, unlike many of
the imaging supervision and interpretation services, for example, which
are generally always reported when the independent procedure is
performed. Once a hospital decides that guidance is appropriate, the
hospital may have several options regarding the type of guidance
service that can be performed. For example, when inserting a central
venous access device, hospitals have the option of using no guidance,
ultrasound guidance, or fluoroscopic guidance, and the selection in any
specific case will depend upon the specific clinical circumstances of
the device insertion procedure. In fact, as we noted in the CY 2008
proposed rule, the historical hospital claims data demonstrated that
various guidance services for the insertion of these devices, which
have historically received packaged payment under the OPPS, are used
frequently for the insertion of vascular access devices.
Thus, we recognized that hospitals have several options regarding
the performance and types of guidance services they use. However, we
believed

[[Page 66623]]

that hospitals utilize the most appropriate form of guidance for the
specific procedure that is performed. We did not want to create payment
incentives to use guidance for all independent procedures or to provide
one form of guidance instead of another. Therefore, by proposing to
package payment for all forms of guidance, we specifically encouraged
hospitals to utilize the most cost effective and clinically
advantageous method of guidance that is appropriate in each situation
by providing them with the maximum flexibility associated with a single
payment for the independent procedure. Similarly, hospitals may
appropriately not utilize guidance services in certain situations based
on clinical indications.
Because guidance services can be appropriately reported in
association with many independent procedures, under our proposed
packaging of guidance services for CY 2008, the costs associated with
guidance services would be mapped to a larger number of independent
procedures than some other categories of codes that we proposed to
package. For example, CPT code 76001 (Fluoroscopy, physician time more
than one hour, assisting a non-radiologic physician (e.g.,
nephrostolithotomy, ERCP, bronchoscopy, transbronchial biopsy)) can be
reported with a wide range of services. According to the CPT code
descriptor, these procedures include nephrostolithotomy, which may be
reported with CPT code 50080 (Percutaneous nephrostolithotomy or
pyelostolithotomy, with or without dilation, endoscopy, lithotripsy,
stenting, or basket extraction; up to 2 cm), and endoscopic retrograde
cholangiopancreatography, which may be reported with CPT code 43260
(Endoscopic retrograde cholangiopancreatography (ERCP); diagnostic,
with or without collection of specimen(s) by brushing or washing
(separate procedure)). Therefore, the cost of the fluoroscopic guidance
would be reflected in the payment for each of these independent
services, in addition to numerous other procedures, rather than in the
payment for only one or two independent services, as is the case for
some of the other categories of codes that we proposed to package for
CY 2008.
In addition, because independent procedures such as CPT code 20610
(Arthrocentesis, aspiration and/or injection; major joint or bursa
(e.g., shoulder, hip, knee joint, subacromial bursa)) may be reported
with or without guidance, the cost for the guidance will be reflected
in the median cost for the independent procedure as a function of the
frequency that guidance is reported with that procedure. As we stated
previously, the median cost for a particular independent procedure
generally will be higher as a result of added packaging, but also could
change little or be lower because median costs typically do not reflect
small distributional changes and because changes to the packaged HCPCS
codes affect both the number and composition of single bills and the
mix of hospitals contributing those single bills. In fact, the CY 2007
CPT book indicates that if guidance is performed with CPT code 20610,
it may be appropriate to bill CPT code 76942 (Ultrasonic guidance for
needle placement (e.g., biopsy, aspiration, injection, localization
device), imaging supervision and interpretation); 77002 (Fluoroscopic
guidance for needle placement (e.g., biopsy, aspiration, injection,
localization device)); 77012 (Computed tomography guidance for needle
placement (e.g., biopsy, aspiration, injection, localization device),
radiological supervision and interpretation); or 77021 (Magnetic
resonance guidance for needle placement (e.g., for biopsy, needle
aspiration, injection, or placement of localization device)
radiological supervision and interpretation). The CY 2007 CPT book also
implies that it is not always clinically necessary to use guidance in
performing an arthrocentesis described by CPT code 20610.
The guidance procedures that we proposed to package for CY 2008
vary in their resource costs. Resource cost was not a factor we
considered when proposing to package guidance procedures. Notably, most
of the guidance procedures are relatively low cost in comparison to the
independent services they frequently accompany.
The codes we proposed to identify as guidance codes for CY 2008
that would receive packaged payment were listed in Table 8 of the CY
2008 proposed rule (72 FR 42657). (Table 10 in this final rule with
comment period contains a comprehensive list of all codes in the final
seven categories for services that are packaged for CY 2008.)
Several of these codes, including CPT code 76937 (Ultrasound
guidance for vascular access requiring ultrasound evaluation of
potential access sites, documentation of selected vessel patency,
concurrent real time ultrasound visualization of vascular needle entry,
with permanent recording and reporting (List separately in addition to
code for primary procedure)), were already unconditionally (that is,
always) packaged under the CY 2007 OPPS, where they have been assigned
status indicator ``N.'' Payment for these services is currently made as
part of the payment for the separately payable, independent services
with which they are billed. No separate payment is made for services
that we have assigned to status indicator ``N.'' We did not propose
status indicator changes for the five guidance procedures that were
unconditionally packaged for CY 2007.
We proposed to change the status indicators for 31 guidance
procedures from separately paid to unconditionally packaged (status
indicator ``N'') for the CY 2008 OPPS. We believed that these services
are always integral to and dependent upon the independent services that
they support and, therefore, their payment would be appropriately
packaged because they would generally be performed on the same date and
in the same hospital as the independent services.
We proposed to change the status indicator for one guidance
procedure from separately paid to conditionally packaged (status
indicator ``Q''), and to treat it as a ``special'' ``packaged code for
the CY 2008 OPPS, specifically, CPT code 76000 (Fluoroscopy (separate
procedure), up to 1 hour physician time, other than 71023 or 71034
(e.g., cardiac fluoroscopy)). This code was discussed in the past with
the Packaging Subcommittee of the APC Panel, which determined that,
consistent with its code descriptor as a separate procedure, this
procedure could sometimes be provided alone, without any other services
on the claim. We believe that this procedure will usually be provided
by a hospital as guidance in conjunction with another significant
independent procedure on the same date of service but may occasionally
be provided without another independent service. As a ``special''
packaged code, if the fluoroscopy service were billed without any other
service assigned status indicator ``S,'' ``T,'' ``V,'' or ``X''
reported on the same date of service, under our proposal we would not
treat the fluoroscopy procedure as a dependent service for purposes of
payment. If we were to unconditionally package payment for this
procedure, treating it as a dependent service, hospitals would receive
no payment at all when providing this service alone, although the
procedure would not be functioning as a guidance service in that case.
However, according to our proposal, its conditionally packaged status
with its designation as a ``special'' packaged code would allow payment
to be provided for this ``Q'' status fluoroscopy

[[Page 66624]]

procedure, in which case it would be treated as an independent service
under these limited circumstances. On the other hand, when the
fluoroscopy service is furnished as a guidance procedure on the same
day and in the same hospital as independent, separately paid services
that are assigned status indicator ``S,'' ``T,'' ``V,'' or ``X,'' we
proposed to package payment for it as a dependent service. In all
cases, we proposed that hospitals that furnish independent services on
the same date as dependent guidance services must bill them all on the
same claim. We believed that when dependent guidance services and
independent services are furnished on the same date and in the same
facility, they are part of a single complete hospital outpatient
service that is reported with more than one HCPCS code, and no separate
payment should be made for the guidance service that supports the
independent service.
The estimated overall impact of these changes presented in section
XXII.B. of the proposed rule (section XXIV.B. in this final rule with
comment period) was based on the assumption that hospital behavior
would not change with regard to when these dependent services are
performed on the same date and by the same hospital that performs the
independent services. To the extent that hospitals could change their
behavior and perform the guidance services more or less frequently, on
subsequent dates, or at settings outside of the hospital, the data
would show such a change in practice in future years and that change
would be reflected in future budget neutrality adjustments. However,
with respect to guidance services in particular, we believe that
hospitals are limited in the extent to which they could change their
behavior with regard to how they furnish these services. By their
definition, these guidance services generally must be furnished on the
same date and at the same operative location as the independent
procedure in order for the guidance service to meaningfully contribute
to the treatment of the patient in directing the performance of the
independent procedure. We do not believe the clinical characteristics
of the guidance services will change in the immediate future.
As we indicated earlier, in all cases, we proposed that hospitals
that furnish the guidance service on the same date as the independent
service must bill both services on the same claim. We indicated that we
expected to carefully monitor any changes in billing practices on a
service-specific and hospital-specific basis to determine whether there
is reason to request that QIOs review the quality of care furnished or
to request that Program Safeguard Contractors review the claims against
the medical record.
During the September 2007 APC Panel meeting, the Panel recommended
that CMS finalize the proposal to package guidance services, with the
exception of radiation oncology guidance procedures.
We received many public comments on our proposal to package
guidance services for CY 2008. A summary of the public comments and our
responses follow.
Comment: Many commenters requested that, if CMS elected to finalize
the packaging status of the guidance codes proposed for packaging, CMS
exclude radiation oncology guidance procedures, in accordance with the
APC Panel recommendation. Specifically, many commenters requested that
CMS pay separately for CPT codes 76950 (Ultrasonic guidance for
placement of radiation therapy fields); 76965 (Ultrasonic guidance for
interstitial radioelement application); 77014 (Computed tomography
guidance for placement of radiation therapy fields); 77417 (Therapeutic
radiology port film(s)); and 77421 (Stereoscopic X-ray guidance for
localization of target volume for the delivery of radiation therapy).
The commenters were concerned that packaging radiation oncology
guidance procedures would encourage hospitals to decrease utilization
of advanced technologies for localization used in radiation oncology
treatment delivery. The commenters noted that packaging payment for
radiation oncology guidance services offers a financial incentive to
those hospitals that use little or no daily localization when providing
radiation therapy. One commenter believed that packaging payment for
these guidance services encourages hospitals to use older, less
effective technologies, thereby discouraging development of new, more
effective technologies. Another commenter noted that if hospitals are
discouraged from using new technologies due to low payment rates, it
will take many years to gather robust cost data that reflect these new
technologies, likely even longer than New Technology APC and pass-
through payments are available for new technologies.
Response: After reviewing these public comments, considering the
recommendation of the APC Panel, and ensuring that CMS clinical staff
analyzed the content of these comments, we have decided to finalize our
proposal to package these guidance services, as proposed. These
services are ancillary and dependent in relation to the radiation
therapy services with which they are most commonly furnished. Moreover,
there are no unique clinical aspects to these radiation oncology
guidance services that would differentiate them from other guidance
services. Consistent with the principles of a prospective payment
system, in some cases, payment in an individual case exceeds the
average costs, and in other cases payment is less than the average
cost, but on balance, payment should approximate the relative cost of
the average case. We do not believe that beneficiary access to care
will be harmed by increased packaging. We believe that packaging will
create incentives for hospitals and their physician partners to work
together to establish appropriate protocols that will eliminate
unnecessary services where they exist and institutionalize approaches
to providing necessary services more efficiently. Therefore, we see no
basis for treating radiation oncology services differently from other
guidance services that are ancillary and dependent to the procedure
that they facilitate.
Comment: Many commenters were concerned with the proposal to
package payment for electrodiagnostic guidance for chemodenervation
procedures, specifically, CPT codes 95873 (Electrical stimulation for
guidance in conjunction with chemodenervation (List separately in
addition to code for primary procedure)), and 95874 (Needle
electromyography for guidance in conjunction with chemodenervation
(List separately in addition to code for primary procedure)). The
commenters indicated that chemodenervation involves the injection of
chemodenervation agents, such as botulinum toxin, to control the
symptoms associated with dystonia and other disorders. According to the
commenters, physicians often, but not always, use electromyography or
electrical stimulation guidance to guide the needle to the most
appropriate location. The commenters were concerned that the proposal
to package payment for these guidance services may discourage
utilization of this particular form of guidance, even when medically
appropriate. Several commenters noted that the CY 2008 proposed payment
rate for the injection and the associated guidance is a 15 percent
decrease from the CY 2007 payment rate. Most commenters requested that
CMS pay separately for electrodiagnostic guidance, several of whom
specified that CMS assign the

[[Page 66625]]

three chemodenervation procedures to their own APC. The commenters
noted that even if the median cost for the chemodenervation procedures
increased, the payment rate would not increase because chemodenervation
procedures are only a small proportion of all claims in their proposed
APC 0204 (Level I Nervous System Injections). Several other commenters
stated that the median costs for the chemodenervation procedures do not
reflect the full cost of the guidance because the guidance is performed
with the procedure infrequently.
Response: We note that the cost of the chemodenervation guidance
services will be reflected in the median cost for the independent HCPCS
code as a function of the frequency that chemodenervation services are
reported with that particular HCPCS code. As noted above, we recognize
that, in some cases, supportive and ancillary dependent services are
furnished at high frequency with independent services, and in other
cases, they are furnished with independent services at a low frequency.
We believe that packaging should reflect the reality of how services
are furnished. While the commenters are correct that the
chemodenervation procedures reflect only approximately 10 percent of
the services that comprise APC 0204, we note that they appropriately
map to this APC both clinically and in terms of resource use. If the
median costs for the individual chemodenervation procedures were to
change dramatically, based on resource cost data, we would review these
services as part of our annual review process to determine if a
different APC were more appropriate. We also note that if these three
chemodenervation procedures were mapped to their own APC, the estimated
median cost of the APC would be in the same general cost range as the
current median cost for APC 0204. Therefore, it is unnecessary to map
these three services to their own APC for CY 2008.
Comment: Several commenters requested that CMS clarify how the DRA
imaging cap for services paid under the MPFS would be applied to
services that are packaged under the OPPS.
Response: If an imaging service is packaged under the OPPS, the DRA
cap on the technical component payment for that service under the MPFS
is not applicable.
Comment: Many commenters supported the proposal to package each of
the guidance services that we identified in the proposed rule. The
commenters also gave specific comments related to almost every guidance
code that we proposed to package. In general, each commenter requested
that we pay separately for several of the guidance codes that we
proposed to package. The commenters expressed concern in several areas,
specifically, that insufficient payment rates would discourage new
technologies; that guidance services used infrequently with specific
services contribute very little to the payment rates for those
services; that the expected decrease in utilization for guidance
services could ultimately lead to increased costs, as a result of worse
patient outcomes; that packaged payment under the OPPS and separate
payment under the MPFS leads to payment disparity; and, in general,
that the lack of published crosswalks makes it difficult to analyze the
specific effects of this policy.
Response: We note that we did not receive any unique arguments
specific to any particular code. We received many similar public
comments regarding all the categories of codes that we proposed for
packaged payment. Therefore, we have responded to these general
comments above in section II.A.4.c. of this final rule with comment
period. In light of the public comments we received, our clinical
advisors reassessed every guidance code on the list to ensure that it
was still appropriate for packaged payment.
For CY 2008, we are finalizing the CY 2008 proposal, without
modification, to package payment for all guidance services for CY 2008.
We are partially accepting the APC Panel recommendation. Specifically,
we are packaging all guidance services for CY 2008, including radiation
oncology services. The guidance codes that are packaged for CY 2008 are
identified and displayed in Table 10 of this final rule with comment
period. These services are assigned status indicator ``N'' to indicate
their unconditional packaging, with the exception of CPT code 76000,
which is an ``STVX-packaged'' code assigned status indicator ``Q.''
(2) Image Processing Services
We proposed to package payment for ``image processing'' HCPCS codes
for CY 2008, specifically those codes that are reported as supportive
dependent services to process and integrate diagnostic test data in the
development of images, performed concurrently or after the independent
service is complete. We performed a broad search for such services,
relying upon the AMA's CY 2007 book of CPT codes and the CY 2007 book
of Level II HCPCS codes, which identified specific codes as
``processing'' codes. In addition, we performed a clinical review of
all HCPCS codes to capture additional codes that we consider to be
image processing. For example, we proposed to package payment for CPT
code 93325 (Doppler echocardiography color flow velocity mapping (List
separately in addition to codes for echocardiography)) because it is an
image processing procedure, even though the code descriptor does not
specifically indicate it as such.
An image processing service processes and integrates diagnostic
test data that were captured during another independent procedure,
usually one that is separately payable under the OPPS. The image
processing service is not necessarily provided on the same date of
service as the independent procedure. In fact, several of the image
processing services that we proposed to package for CY 2008 do not need
to be provided face-to-face with the patient in the same encounter as
the independent service. While this approach to service delivery may be
administratively advantageous from a hospital's perspective, providing
separate payment for each image processing service whenever it is
performed is not consistent with encouraging value-based purchasing
under the OPPS. We believed it was important to package payment for
supportive dependent services that accompany independent services but
that may not need to be provided face-to-face with the patient in the
same encounter because the supportive services utilize data that were
collected during the preceding independent services and packaging their
payment encourages the most efficient use of hospital resources. We are
particularly concerned with any continuance of current OPPS payment
policies that could encourage certain inefficient and more costly
service patterns. As stated above, packaging encourages hospitals to
establish protocols that ensure that services are furnished only when
they are medically necessary and to carefully scrutinize the services
ordered by practitioners to minimize unnecessary use of hospital
resources. Our standard methodology to calculate median costs packages
the costs of dependent services with the costs of independent services
on ``natural'' single claims across different dates of service, so we
are confident that we would capture the costs of the supportive image
processing services for ratesetting when they are packaged according to
our CY 2008 proposal, even if they were provided on a different date
than the independent procedure.
We listed the image processing services that we proposed to be
packaged for CY 2008 in Table 10 in the

[[Page 66626]]

CY 2008 proposed rule (72 FR 42659). As these services support the
performance of an independent service, we believe it would be
appropriate to package their payment into the OPPS payment for the
independent service provided.
As many independent services may be reported with or without image
processing services, the cost of the image processing services will be
reflected in the median cost for the independent HCPCS code as a
function of the frequency that image processing services are reported
with that particular HCPCS code. Again, while the median cost for a
particular independent procedure generally will be higher as a result
of added packaging, it could also change little or be lower because
median costs typically do not reflect small distributional changes and
because changes to the packaged HCPCS codes affect both the number and
composition of single bills and the mix of hospitals contributing those
single bills. For example, CPT code 70450 (Computed tomography, head or
brain; without contrast material) may be provided alone or in
conjunction with CPT code 76376 (3D rendering with interpretation and
reporting of computed tomography, magnetic resource imaging,
ultrasound, or other tomographic modality; not requiring image post-
processing on an independent workstation). In fact, CPT code 70450 was
provided approximately 1.5 million times based on CY 2008 proposed rule
claims data. CPT code 76376 was provided with CPT code 70450 less than
2 percent of the total instances that CPT code 70450 was billed.
Therefore, as the frequency of CPT code 76376 provided in conjunction
with CPT code 70450 increases, the median cost for CPT code 70450 would
be more likely to reflect that additional cost.
The image processing services that we proposed to package vary in
their hospital resource costs. Resource cost was not a factor we
considered when we proposed to package supportive image processing
services. Notably, the majority of image processing services that we
proposed to package have modest median costs in relationship to the
cost of the independent service that they typically accompany.
Several of these codes, including CPT code 76350 (Subtraction in
conjunction with contrast studies), are already unconditionally (that
is, always) packaged under the CY 2007 OPPS, where they have been
assigned status indicator ``N.'' Payment for these services is made as
part of the payment for the separately payable, independent services
with which they are billed. No separate payment is made for services
that we have assigned status indicator ``N.'' We did not propose status
indicator changes for the four image processing services that were
unconditionally packaged for CY 2007.
We proposed to change the status indicator for seven image
processing services from separately paid to unconditionally packaged
(status indicator ``N'') for the CY 2008 OPPS. We believe that these
services are always integral to and dependent upon the independent
service that they support and, therefore, their payment would be
appropriately packaged.
The estimated overall impact of these changes presented in section
XXII.B. of the proposed rule (section XXIV.B. of this final rule with
comment period) was based on the assumption that hospital behavior
would not change with regard to when these dependent image processing
services are performed on the same date and by the same hospital that
performs the independent services. To the extent that hospitals could
change their behavior and perform the image processing services more or
less frequently, the data would show such a change in practice in
future years and that change would be reflected in future budget
neutrality adjustments.
As we indicated earlier, in all cases, we provided that hospitals
that furnish the image processing procedure in association with the
independent service must bill both services on the same claim. We
indicated that we expected to carefully monitor any changes in billing
practices on a service-specific and hospital-specific basis to
determine whether there is reason to request that QIOs review the
quality of care furnished or to request that Program Safeguard
Contractors review the claims against the medical record.
The APC Panel recommended that all image processing services be
packaged as proposed in the proposed rule.
We received a number of public comments on our proposal to package
image processing service for CY 2008. A summary of the public comments
and our responses follow.
Comment: Many commenters were concerned with the proposal to
package payment for CPT code 93325 (Doppler echocardiography color flow
velocity mapping (List separately in addition to codes for
echocardiography)). The commenters noted that this service is often
critical to decisionmaking and consumes significantly greater resources
than the general echocardiography study process. Several commenters
noted that the AMA is planning to revise this CPT code for CY 2009, and
that changing the payment status of this code may confuse hospital
coding staff. Some commenters requested that CMS make no changes to the
payment status of this code until this code's descriptor has been
revised by the AMA, while others requested that CMS instruct hospitals
not to use the new CPT code that will be created by the AMA.
Response: We acknowledge that this service may be an important
clinical tool that is critical to decisionmaking. However, we continue
to believe that packaged payment is appropriate for this dependent
service that must, per the CY 2007 CPT book, be provided in conjunction
with echocardiography. In fact, packaging the status of this code may
make it easier to crosswalk the data from this code to the new CPT code
that the AMA may create for CY 2009. We see no compelling reason to
postpone packaging this service until CY 2009.
Comment: One commenter requested that CMS pay separately for HCPCS
code G0288 (Reconstruction, computed tomographic angiography of aorta
for surgical planning for vascular surgery) because it is different
than the other image processing codes proposed for packaged payment.
The commenter stated that the service is often an out-sourced service
purchased by the hospital. The commenter was particularly concerned
that hospitals would no longer continue to purchase this service if
insufficient payment was provided. Another commenter requested separate
payment for CPT code 95957 (Digital analysis of electroencephalogram
(EEG) (eg, for epileptic spike analysis)). The commenter stated that
this service is often performed on a different day than the EEG and by
a technologist other than the one who performed the EEG.
Response: As noted above, we believe it is important to package
payment for supportive dependent services that may not need to be
provided face-to-face with the patient in the same encounter as the
independent service. Packaging payment for supportive services that
utilize data that were collected during the preceding independent
services encourages the most efficient use of hospital resources. In
fact, as part of our proposed CY 2008 packaging approach, we also
proposed to unconditionally package payment in CY 2008 for several
other image processing services that are not always performed face-to-
face, including CPT codes 0174T (Computer aided detection (CAD)
(computer algorithm analysis of digital image data for lesion
detection) with further physician review for interpretation and report,
with or without digitization of

[[Page 66627]]

film radiographic images, chest radiograph(s), performed concurrent
with primary interpretation); 0175T ((Computer aided detection (CAD)
(computer algorithm analysis of digital image data for lesion
detection) with further physician review for interpretation and report,
with or without digitization of film radiographic images, chest
radiograph(s), performed remote from primary interpretation); and CPT
code 76377 (3D rendering with interpretation and reporting of computed
tomography, magnetic resource imaging, ultrasound, or other tomographic
modality; requiring image postprocessing on an independent
workstation).
We also believe it is likely that a hospital that performed the
computed tomographic angiography diagnostic procedure but does not have
the technology necessary to provide the preoperative image
reconstruction would send the results to another hospital for
performance of the reconstruction. In this situation, the second
hospital would be providing the reconstruction under arrangement and,
therefore, at least one service provided by the first hospital would be
separately paid. We believe that packaged payment for image
reconstruction under a prospective payment methodology for hospital
outpatient services is most appropriate. The same situation occurs when
hospitals provide the service described by CPT code 95957. We proposed
to unconditionally package payment for HCPCS code G0288 and CPT code
95957 for CY 2008, fully consistent with the packaging approach for the
CY 2008 OPPS. Because HCPCS code G0288 and CPT code 95957 are
supportive ancillary services that fit into the image processing
category, and we proposed to package payment for all image processing
services for CY 2008, we believe it is appropriate to unconditionally
package payment associated with these codes. Specifically, we
determined that these services are dependent services that are integral
to independent services, in this case, the computed tomographic
angiography and the EEG that we would expect to be provided. Even if
the imaging process services were provided on another day than the
independent services, our packaging methodology packages costs across
dates of service on ``natural'' single claims, so that the costs of
image process services would be captured.
For CY 2008, we are finalizing the packaged status of HCPCS code
G0288 and CPT code 95957, as listed in Table 10 of the proposed rule.
We note an inadvertent error in Addendum B to the proposed rule.
However, Table 10 of the proposed rule listed the accurate proposed
payment status of HCPCS code G0288.
Comment: Many commenters supported the proposal to package each of
the image processing services that was identified in the proposed rule.
Numerous other commenters requested that CMS postpone packaging all the
packaged codes included in all categories of the proposal until
additional data were provided to the public. These commenters also
submitted specific comments related to almost every image processing
code that CMS proposed to package. The commenters expressed concern in
several areas, specifically, that what they considered to be
insufficient payment rates would discourage new technologies; that
image processing services used infrequently with specific services
contribute very little to the payment rates for those services; that
the expected decrease in utilization for image processing services
could ultimately lead to increased costs, as a result of worse patient
outcomes; and in general, that the lack of published crosswalks makes
it difficult to analyze the specific effects of this policy.
Several commenters requested a crosswalk that specified how the
packaged costs were allocated from each dependent code to each
independent code. Other commenters requested that CMS create edits to
ensure that costs are appropriately mapped to independent codes.
Several commenters requested that CMS consider resource cost when
determining which codes to package. The commenters were concerned that
what they considered to be insufficient payment would create a
disincentive for hospitals to adopt new technology.
Response: We note that we did not receive any unique arguments
specific to any particular code. These comments are similar to those
received for all the categories of codes that we proposed for packaged
payment. Therefore, we have responded to these general comments above
in section II.A.4.c. of this final rule with comment period. In light
of the public comments we received, our clinical advisors reassessed
every image processing code on the list to ensure that it was still
appropriate for packaged payment.
We received one comment related to CPT codes 0174T and 0175T. The
comment summary and response related to those codes are located in
section II.A.4.e. of this final rule with comment period.
For CY 2008, we are finalizing our proposal, without modification,
to unconditionally package the payment for all imaging processing codes
listed in Table 10 of this final rule with comment period. We are
accepting the APC Panel recommendation to package all image processing
services. These services are assigned status indicator ``N'' to
indicate their unconditional packaging.
(3) Intraoperative Services
We proposed to package payment for ``intraoperative'' HCPCS codes
for CY 2008, specifically those codes that are reported for supportive
dependent diagnostic testing or other minor procedures performed during
independent procedures. We performed a broad search for possible
intraoperative HCPCS codes, relying upon the AMA's CY 2007 book of CPT
codes and the CY 2007 book of Level II HCPCS codes, to identify
specific codes as ``intraoperative'' codes. Furthermore, we performed a
clinical review of all HCPCS codes to capture additional supportive
diagnostic testing or other minor intraoperative or intraprocedural
codes that are not necessarily identified as ``intraoperative'' codes.
For example, we proposed to package payment for CPT code 95955
(Electroencephalogram (EEG) during nonintracranial surgery (e.g.,
carotid surgery)) because it is a minor intraoperative diagnostic
testing procedure even though the code descriptor does not indicate it
as such. Although we use the term ``intraoperative'' to categorize
these procedures, we also have included supportive dependent services
in this group that are provided during an independent procedure,
although that procedure may not necessarily be a surgical procedure.
These dependent services clearly fit into this category because they
are provided during, and are integral to, an independent procedure,
like all the other intraoperative codes, but the independent procedure
they accompany may not necessarily be a surgical procedure. For
example, we proposed to package HCPCS code G0268 (Removal of impacted
cerumen (one or both ears) by physician on same date of service as
audiologic function testing). While specific audiologic function
testing procedures are not surgical procedures performed in an
operating room, they are independent procedures that are separately
payable under the OPPS, and HCPCS code G0268 is a supportive dependent
service always provided in association with one of these independent
services. All references to ``intraoperative'' below refer to services
that are usually or always provided during a surgical procedure or
other independent procedure.

[[Page 66628]]

By definition, a service that is performed intraoperatively is
provided during and, therefore, on the same date of service as another
procedure that is separately payable under the OPPS. Because these
intraoperative services support the performance of an independent
procedure and they are provided in the same operative session as the
independent procedure, we believed it would be appropriate to package
their payment into the OPPS payment for the independent procedure
performed. Therefore, we did not propose to package payment for CY 2008
for those diagnostic services, such as CPT code 93005
(Electrocardiogram, routine ECG with at least 12 leads; tracing only,
without interpretation and report) that are sometimes or only rarely
performed and reported as supportive services in association with other
independent procedures. Instead, we proposed to include those HCPCS
codes that are usually or always performed intraoperatively, based upon
our review of the codes described above. The intraoperative services
that we proposed to package vary in hospital resource costs. Resource
cost was not a factor we considered when determining which supportive
intraoperative procedures to package.
The codes we proposed to identify as intraoperative services for CY
2008 that would receive packaged payment under the OPPS were listed in
Table 12 of the proposed rule (72 FR 42661 through 42662).
Several of these codes, including CPT code 93640
(Electrophysiologic evaluation of single or dual chamber pacing
cardioverter-defibrillator leads including defibrillation threshold
evaluation (induction of arrhythmia, evaluation of sensing and pacing
for arrhythmia termination) at the time of initial implantation or
replacement), are already unconditionally (that is, always) packaged
under the CY 2007 OPPS, where they have been assigned status indicator
``N.'' Payment for these services is made through the payment for the
separately payable, independent services with which they are billed. No
separate payment is made for services that we have assigned status
indicator ``N.'' We did not propose status indicator changes for the
five diagnostic intraoperative services that were unconditionally
packaged for CY 2007.
We proposed to change the status indicator for 34 intraoperative
services from separately paid to unconditionally packaged (status
indicator ``N'') for the CY 2008 OPPS. As stated in the CY 2008
proposed rule, we believe that these services are always integral to
and dependent upon the independent services that they support and,
therefore, their payment would be appropriately packaged because they
would generally be performed on the same date and in the same hospital
as the independent services.
We also proposed to change the status indicator for one
intraoperative procedure from unconditionally packaged to conditionally
packaged (status indicator ``Q'') as a ``special'' packaged code for
the CY 2008 OPPS, specifically, CPT code 0126T (Common carotid intima-
media thickness (IMT) study for evaluation of atherosclerotic burden or
coronary heart disease risk factor assessment). This code was discussed
in the past with the Packaging Subcommittee of the APC Panel, which
determined that, consistent with its code descriptor as a separate
procedure, this procedure could sometimes be provided alone, without
any other OPPS services on the claim. We believed that this procedure
would usually be provided by a hospital in conjunction with another
independent procedure on the same date of service but may occasionally
be provided without another independent service. As a ``special''
packaged code, if the study were billed without any other service
assigned status indicator ``S,'' ``T,'' ``V,'' or ``X'' reported on the
same date of service, under our proposal we proposed not to treat the
IMT study as a dependent service for purposes of payment. If we were to
continue to unconditionally package payment for this procedure,
treating it as a dependent service, hospitals would receive no payment
at all when providing this service alone, although the procedure would
not be functioning as an intraoperative service in that case. However,
according to our proposal, its conditionally packaged status as a
``special'' packaged code would allow payment to be provided for this
``Q'' status IMT study when provided alone, in which case it would be
treated as an independent service under these limited circumstances. On
the other hand, when this service is furnished as an intraoperative
procedure on the same day and in the same hospital as independent,
separately paid services that are assigned status indicator ``S,''
``T,'' ``V,'' or ``X,'' we proposed to package payment for it as a
dependent service. In all cases, we proposed that hospitals that
furnish independent services on the same date as this IMT procedure
must bill them all on the same claim. We believed that when dependent
and independent services are furnished on the same date and in the same
facility, they are part of a single complete hospital outpatient
service that is reported with more than one HCPCS code, and no separate
payment should be made for the intraoperative procedure that supports
the independent service.
The estimated overall impact of these changes presented in section
XXII.B. of the proposed rule (section XXIV.B. of this final rule with
comment period) was based on the assumption that hospital behavior
would not change with regard to when these intraoperative dependent
services are performed on the same date and by the same hospital that
performs the independent services. To the extent that hospitals could
change their behavior and perform the intraoperative services more or
less frequently, on subsequent dates, or at settings outside of the
hospital, the data would show such a change in practice in future years
and that change would be reflected in future budget neutrality
adjustments. However, with respect to intraoperative services in
particular, we believed that hospitals are limited in the extent to
which they could change their behavior with regard to how they furnish
these services. By their definition, these intraoperative services
generally must be furnished on the same date and at the same operative
location as the independent procedure in order to be considered
intraoperative. For these codes, we assume that both the dependent and
independent services would be furnished on the same date in the same
hospital, and hospitals should bill them on the same claim with the
same date of service.
As we indicated earlier, in all cases we provided that hospitals
that furnish the intraoperative procedure on the same date as the
independent service must bill both services on the same claim. We
expect to carefully monitor any changes in billing practices on a
service-specific and hospital-specific basis to determine whether there
is reason to request that QIOs review the quality of care furnished or
to request that Program Safeguard Contractors review the claims against
the medical record.
During the September 2007 APC Panel meeting, the Panel recommended
that CMS finalize the proposal to package intraoperative services and
that CMS consider assigning status indicator ``Q'' to CPT code 96020
(Neurofunctional testing selection and administration during
noninvasive imaging functional brain mapping, with test administered
entirely by a physician or psychologist, with review of test results
and report).
We received many public comments on our proposal to package

[[Page 66629]]

intraoperative services for CY 2008. A summary of the public comments
and our responses follow.
Comment: Several commenters requested that CMS change the status of
CPT code 96020 to conditionally packaged or separately payable instead
of finalizing the proposal to unconditionally package this code.
According to the commenters, functional brain mapping is often
performed prior to epilepsy surgery. The commenters noted that
functional brain mapping is performed by staff other than the
neurologist or neuropsychologist who performs the accompanying
functional MRI, reported with CPT code 70555 (Magnetic resonance
imaging, brain, functional MRI; requiring physician or psychologist
administration of entire neurofunctional testing). One commenter
clarified that functional MRI is more commonly performed without
functional brain mapping. If CPT code 96020 were conditionally
packaged, the commenter believed that separate payment should be made
for CPT code 96020 when it was provided with the functional MRI.
Another commenter stated that functional brain mapping is a separate
service from the functional MRI, and therefore should not be packaged.
Response: The AMA 2007 CPT book specifically states that CPT code
70555 can only be reported if CPT code 96020 is also performed. CPT
code 70555 is separately payable under the CY 2008 OPPS. Therefore,
whenever CPT code 70555, the independent procedure, is billed with CPT
code 96020, the dependent procedure, the payment associated with CPT
code 96020 is appropriately packaged into the payment for CPT code
70555. Even if CPT code 96020 were conditionally packaged, separate
payment would not be made when it was billed with CPT code 70555. In
addition, we believe that functional brain mapping is never provided to
a patient as a sole service. Instead, it is always provided in
conjunction with a functional MRI. Therefore, we continue to believe
that unconditional packaging is appropriate for CPT code 96020.
Comment: Many commenters requested that CMS continue to pay
separately for intravascular ultrasound (IVUS), fractional flow reserve
(FFR), and intracardiac echocardiography (ICE) reported with CPT codes
37250 (Intravascular ultrasound (non-coronary vessel) during diagnostic
evaluation and/or therapeutic intervention; initial vessel (List
separately in addition to code for primary procedure)); 37251
(Intravascular ultrasound (non-coronary vessel) during diagnostic
evaluation and/or therapeutic intervention; each additional vessel
(List separately in addition to code for primary procedure)); 75946
(Intravascular ultrasound (non coronary vessel), radiological
supervision and interpretation; each additional non-coronary vessel
(List separately in addition to code for primary procedure)); 92978
(Intravascular ultrasound (coronary vessel or graft) during diagnostic
evaluation and/or therapeutic intervention including imaging
supervision, interpretation and report; initial vessel (List separately
in addition to code for primary procedure)); 92979 (Intravascular
ultrasound (coronary vessel or graft) during diagnostic evaluation and/
or therapeutic intervention including imaging supervision,
interpretation and report; each additional vessel (List separately in
addition to code for primary procedure)); 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 (List separately in
addition to code for primary procedure)); 93572 (Intravascular Doppler
velocity and/or pressure derived coronary flow reserve measurement
(coronary vessel or graft) during coronary angiography including
pharmacologically induced stress; each additional vessel (List
separately in addition to code for primary procedure)); and 93662
(Intracardiac echocardiography during therapeutic/diagnostic
intervention, including imaging supervision and interpretation (List
separately in addition to code for primary procedure)).
The commenters noted that, while use of these procedures often
results in better patient outcomes and reduced need for subsequent
procedures, they are only provided to a small proportion of patients
who undergo stenting, angioplasty, and other related services. A number
of commenters specified that IVUS is performed on 1 to 20 percent of
patients who undergo a related diagnostic or therapeutic intervention,
using Medicare claims and internal hospital assessments. Therefore, the
commenters stated that the costs for IVUS, FFR, and ICE do not affect
the payment rates for the independent procedures in a significant way,
if at all. In addition, the commenters noted that IVUS, in particular,
involves high resource costs because of expensive capital equipment,
significant labor cost, and disposable supplies. Several commenters
noted that the CY 2005 OPPS data included a median cost of $2,000 for
IVUS, with approximately $800 of those costs related solely to the
device component. One commenter stated that IVUS may be performed in
conjunction with a diagnostic procedure that maps to an APC such as
0080 (Diagnostic Cardiac Catheterization); 0267 (Level III Diagnostic
and Screening Ultrasound); or 0280 (Level III Angiography and
Venography), rather than a major therapeutic procedure such as stenting
or angioplasty, resulting in a total payment of $150 to $2,500, which
would not cover the hospital's costs. Other commenters elaborated on
the costs associated with ICE, which is reported with the corresponding
independent services described by CPT codes 93621 (Comprehensive
electrophysiologic evaluation including insertion and repositioning of
multiple electrode catheters with induction or attempted induction of
arrhythmia; with left atrial pacing and recording from coronary sinus
or left atrium (List separately in addition to code for primary
procedure)); 93622 (Comprehensive electrophysiologic evaluation
including insertion and repositioning of multiple electrode catheters
with induction or attempted induction of arrhythmia; with left
ventricular pacing and recording (List separately in addition to code
for primary procedure)); 93651 (Intracardiac catheter ablation of
arrhythmogenic focus; for treatment of supraventricular tachycardia by
ablation of fast or slow atrioventricular pathways, accessory
atrioventricular connections or other atrial foci, singly or in
combination); and 93652 (Intracardiac catheter ablation of
arrhythmogenic focus; for treatment of ventricular tachycardia), in
only 5 percent of the claims involving the above procedures. The
commenters also noted that only 14 percent of hospitals billed ICE with
the CPT codes listed above, indicating that the impact of packaged
payment will affect a subset of hospitals who invested in this capital
equipment. One commenter noted that IVUS and ICE are clearly not
integral to any independent procedure because they are used
infrequently. Other commenters noted that costs will be improperly
allocated to hospitals that perform the independent procedure,
regardless of whether they purchased the equipment for the dependent
procedure. One commenter disputed describing FFR services as
``ancillary'' and stated that they are ``decisional'' and therefore
should not be packaged. The commenters expressed concern that packaged
payment will create a

[[Page 66630]]

significant financial disincentive to provide these services. The
commenters also noted that these procedures should not be described as
``intraoperative'' because they precede the independent procedure, and
may even result in canceling the independent procedure. One commenter
requested that CMS assign status indicator ``Q'' to CPT codes 93571 and
93572. On the other hand, several commenters specified that these
services are not stand alone procedures. One commenter stated that it
is illegal under section 1833(t)(2)(G) of the Act to package payment
for IVUS and FFR, which do not use contrast agents, into payment for
coronary or peripheral angiography, which require contrast agents.
Specifically, the commenter summarized the Act which states that CMS
must create payment groups under the OPPS that ``classify separately
those procedures that utilize contrast agents from those that do not.''
Response: We appreciate the many thoughtful comments related to the
packaged status of IVUS, FFR, and ICE services. We acknowledge that the
costs associated with packaged services may contribute more or less to
the median cost of the independent service, depending on how often the
dependent service is billed with the independent service. It is our
goal to adhere to the principles inherent in a prospective payment
system and to encourage hospitals to utilize resources in a cost-
effective manner. In this case, hospitals must choose whether to
utilize IVUS, FFR, and ICE, balancing the needs of the patient with the
costs associated with the services.
We continue to believe that IVUS, FFR, and ICE are dependent
services that are always provided in association with independent
services. This is different than stating that every angioplasty or
other related independent procedure utilizes IVUS, FFR, or ICE. In
fact, all of the codes about which we received comment are listed as
add-on codes in the CY 2007 CPT book. While we agree that some of these
services may contribute to decisionmaking, we still believe that these
services are never provided without another independent service on the
same day. Therefore, we do not believe it is appropriate to assign
status indicator ``Q'' to CPT codes 93571 and 93572, or any of the
other IVUS, FFR, or ICE services.
While the statute requires us to establish separate APCs for those
services that require contrast and those that do not require contrast,
the statute does not state a similar requirement for the packaged
services that are ancillary and supportive to the main independent
procedure. In this case, IVUS, FFR, and ICE are not the services
themselves that must be mapped to contrast or noncontrast APCs for
payment. Instead, independent services must map to contrast or
noncontrast APCs, as we have done. IVUS, FFR, and ICE are similar to
other supportive packaged services, including drugs and anesthesia.
Packaged codes never map to an APC, and, therefore, it is unnecessary
to distinguish whether they require contrast agents or not. Instead,
the independent procedure must map to a contrast or noncontrast APC.
For the reasons stated above, we are finalizing our proposal to
unconditionally package payment for IVUS, FFR, and ICE services for CY
2008.
Comment: One commenter requested that CMS conditionally package
payment for CPT code 75898 (Angiography through existing catheter for
follow-up study for transcatheter therapy, embolization or infusion),
instead of finalizing the proposal to unconditionally package payment
for this service. The commenter clarified that this is often the only
service performed when a patient has lengthy thrombolytic therapy.
Response: We agree with the commenter that this code should be
conditionally packaged rather than unconditionally packaged, so that
separate payment is made when this service is provided without any
other separately payable services on the same date of service. We are
changing the status indicator for CPT code 75898 to ``Q'' for CY 2008
and including it as an ``STVX-packaged'' code. When provided on the
same date of service as other separately payable services, payment for
CPT code 75898 will be packaged into payment for the other services.
Comment: One commenter requested that CMS continue to pay
separately for CPT codes 67299 (Unlisted procedure, posterior segment)
and 95999 (Unlisted neurological or neuromuscular diagnostic
procedure). These codes describe unlisted procedures, and the commenter
explained that it would be impossible to know whether the services they
describe should be appropriately packaged or separately paid.
Response: We agree with the commenter that CPT codes 67299 and
95999 should not be packaged under the OPPS for CY 2008 because they
are unlisted procedures. Therefore, we are finalizing a separately
payable status indicator and APC assignment for them in Addendum B to
this final rule with comment period.
Comment: Many commenters supported the proposal to package payment
for all intraoperative services and recommended that CMS finalize the
proposal without modification. Several commenters requested that CMS
pay separately for other intraoperative services that it proposed to
package for CY 2008, but did not present unique arguments specific to
any code.
Response: We agree with commenters that packaging payment for
intraoperative services is consistent with the principles of the OPPS
and will help contain costs while creating an incentive for hospitals
to utilize resources in a cost efficient manner. We understand that
hospitals would prefer if certain intraoperative services were paid
separately. In light of the public comments we received, our clinical
advisors reassessed each intraoperative code on the list to ensure that
it was still appropriate for packaged payment. However, we did not see
any compelling reason to pay separately for any of the intraoperative
services that were not already discussed and revised above.
For CY 2008, we are finalizing our CY 2008 proposal, with
modification, to package the payment for all intraoperative HCPCS codes
with three exceptions. Specifically, we are finalizing all of the
packaging changes we proposed, with the exception of conditionally
packaging CPT code 75898 as an ``STVX-packaged'' code and paying
separately for CPT codes 67299 and 95999. Except as otherwise specified
above, we are fully adopting the APC Panel recommendation to package
all intraoperative services and to review the status indicator of CPT
code 96020. Table 10 of this final rule with comment period includes
the final comprehensive list of all codes in the seven categories that
are packaged for CY 2008.
(4) Imaging Supervision and Interpretation Services
We proposed to change the packaging status of many imaging
supervision and interpretation codes for CY 2008. We define ``imaging
supervision and interpretation codes'' as HCPCS codes for services that
are defined as ``radiological supervision and interpretation'' in the
radiology series, 70000 through 79999, of the AMA CY 2007 book of CPT
codes, with the addition of some services in other code ranges of CPT,
Category III CPT tracking codes, or Level II HCPCS codes that are
clinically similar or directly crosswalk to codes defined as
radiological supervision and interpretation services in the CPT
radiology range. We also

[[Page 66631]]

included HCPCS codes that existed in CY 2006 but were deleted and were
replaced in CY 2007. We included the CY 2006 HCPCS codes because we
proposed to use the CY 2006 claims data to calculate the CY 2008 OPPS
median costs on which the CY 2008 payment rates would be based.
In its discussion of ``radiological supervision and
interpretation,'' CPT indicates that ``when a procedure is performed by
two physicians, the radiologic portion of the procedure is designated
as `radiological supervision and interpretation'.'' In addition, CPT
guidance notes that, ``When a physician performs both the procedure and
provides imaging supervision and interpretation, a combination of
procedure codes outside the 70000 series and imaging supervision and
interpretation codes are to be used.'' In the hospital outpatient
setting, the concept of one or more than one physician performing
related procedures does not apply to the reporting of these codes, but
the radiological supervision and interpretation codes clearly are
established for reporting in association with other procedural services
outside the CPT 70000 series. Because these imaging supervision and
interpretation codes are always reported for imaging services that
support the performance of an independent procedure and they are, by
definition, always provided in the same operative session as the
independent procedure, we believe that it is appropriate to package
their payment into the OPPS payment for the independent procedure
performed.
In addition to radiological supervision and interpretation codes in
the radiology range of CPT codes, there are CPT codes in other series
that describe similar procedures that we proposed to include in the
group of imaging supervision and interpretation codes proposed for
packaging under the CY 2008 OPPS. For example, CPT code 93555 (Imaging
supervision, interpretation and report for injection procedure(s)
during cardiac catheterization; ventricular and/or atrial angiography)
whose payment under the OPPS is currently packaged, is commonly
reported with an injection procedure code, such as CPT code 93543
(Injection procedure during cardiac catheterization; for selective left
ventricular or left atrial angiography), whose payment is also
currently packaged under the OPPS, and a cardiac catheterization
procedure code, such as CPT code 93526 (Combined right heart
catheterization and retrograde left heart catheterization), that is
separately paid. In the case of cardiac catheterization, CPT code 93555
describes an imaging supervision and interpretation service in support
of the cardiac catheterization procedure, and this dependent service is
clinically quite similar to radiological supervision and interpretation
codes in the radiology range of CPT. Payment for the cardiac
catheterization imaging supervision and interpretation services has
been packaged since the beginning of the OPPS. Therefore, in developing
the proposal for the CY 2008 proposed rule, we conducted a
comprehensive clinical review of all Category I and Category III CPT
codes and Level II HCPCS codes to identify all codes that describe
imaging supervision and interpretation services. The codes we proposed
to identify as imaging supervision and interpretation codes for CY 2008
that would receive packaged payment were listed in Table 14 of the
proposed rule (72 FR 42665-42667).
Several of these codes, including CPT code 93555 discussed above,
are already unconditionally (that is, always) packaged under the CY
2007 OPPS, where they have been assigned status indicator ``N.''
Payment for these services is made as part of the payment for the
separately payable, independent services with which they are billed. No
separate payment is made for services that we have assigned to status
indicator ``N.'' We did not propose status indicator changes for the
six imaging supervision and interpretation services that were
unconditionally packaged for CY 2007.
We proposed to change the status indicator for 33 imaging
supervision and interpretation services from separately paid to
unconditionally packaged (status indicator ``N'') for the CY 2008 OPPS.
We believed that these services are always integral to and dependent
upon the independent services that they support and, therefore, their
payment would be appropriately packaged because they would generally be
performed on the same date and in the same hospital as the independent
services.
We proposed to change the status indicator for 93 imaging
supervision and interpretation services from separately paid to
conditionally packaged (status indicator ``Q'') as ``special'' packaged
codes for the CY 2008 OPPS. These services may occasionally be provided
at the same time and at the same hospital with one or more other
procedures for which payment is currently packaged under the OPPS, most
commonly injection procedures, and in these cases we would not treat
the imaging supervision and interpretation services as dependent
services for purposes of payment. If we were to unconditionally package
payment for these imaging supervision and interpretation services as
dependent services, hospitals would receive no payment at all for
providing the imaging supervision and interpretation service and the
other minor procedure(s). However, according to our proposal, their
conditional packaging status as ``special'' packaged codes would allow
payment to be provided for these ``Q'' status imaging supervision and
interpretation services as independent services in these limited
circumstances, and for which payment for the accompanying minor
procedure would be packaged. However, when these imaging supervision
and interpretation dependent services are furnished on the same day and
in the same hospital as independent separately paid services,
specifically, any service assigned status indicator ``S,'' ``T,''
``V,'' or ``X,'' we proposed to package payment for them as dependent
services. In all cases, we proposed that hospitals that furnish the
independent services on the same date as the dependent services must
bill them all on the same claim. We believe that when the dependent and
independent services are furnished on the same date and in the same
hospital, they are part of a single complete hospital outpatient
service that is reported with more than one HCPCS code, and no separate
payment should be made for the imaging supervision and interpretation
service that supports the independent service.
In the case of services for which we proposed conditional
packaging, we indicated that we would expect that, although these
services would always be performed in the same session as another
procedure, in some cases that other procedure's payment would also be
packaged. For example, CPT code 73525 (Radiological examination, hip,
arthrography, radiological supervision and interpretation) and CPT code
27093 (Injection procedure for hip arthrography; without anesthesia)
could be provided in a single hospital outpatient encounter and
reported as the only two services on a claim. In the case where only
these two services were performed, the conditionally packaged status of
CPT code 73525 would appropriately allow for its separate payment as an
independent imaging supervision and interpretation arthrography
service, into which payment for the dependent injection procedure would
be packaged.
The estimated overall impact of these changes presented in section
XXII.B. of the proposed rule (section XXIV.B. of this final rule with
comment period) was based on the assumption that

[[Page 66632]]

hospital behavior would not change with regard to when these dependent
services are performed on the same date and by the same hospital that
performs the independent services. To the extent that hospitals could
change their behavior and perform the imaging supervision and
interpretation services more or less frequently, on subsequent dates,
or at settings outside of the hospital, the data would show such a
change in practice in future years and that change would be reflected
in future budget neutrality adjustments. However, with respect to the
imaging supervision and interpretation services in particular, we
believed that hospitals are limited in the extent to which they could
change their behavior with regard to how they furnish these services.
By their definition, these imaging and supervision services generally
must be furnished on the same date and at the same operative location
as the independent procedure in order for the imaging service to
meaningfully contribute to the diagnosis or treatment of the patient.
For those radiological supervision and interpretation codes in the
radiology range of CPT in particular, if the same physician is able to
perform both the procedure and the supervision and interpretation as
stated by CPT, we assume that both the dependent and independent
services would be furnished on the same date in the same hospital, and
hospitals should bill them on the same claim with the same date of
service.
As we indicated earlier in this section, in all cases, we are
providing that hospitals that furnish the imaging supervision and
interpretation service on the same date as the independent service must
bill both services on the same claim. We expect to carefully monitor
any changes in billing practices on a service-specific and hospital-
specific basis to determine whether there is reason to request that
QIOs review the quality of care furnished or to request that Program
Safeguard Contractors review the claims against the medical record.
During the September 2007 APC Panel meeting, the APC Panel
recommended that CMS delay packaging the imaging supervision and
interpretation services because of the reductions in payment that would
occur for services that would only be paid separately if they occurred
with other minor procedures that are already packaged. The Panel was
concerned about the proposed reductions in payment for typical
combinations of expensive imaging services. The Panel asked that CMS
develop an alternative model for these services and present it at the
next APC Panel meeting.
We received many public comments on our proposal to package imaging
supervision and interpretation services for CY 2008. A summary of the
public comments and our response follows.
Comment: Many commenters objected to the packaging of imaging
supervision and interpretation services. They asserted that the
proposal would, in many cases, excessively reduce payments because the
proposal packaged the cost of the service into one or more services
that are already packaged or would inappropriately package the cost of
expensive imaging supervision and interpretation services into more
minor services, like visits or minor diagnostic tests. The commenters
believed that this would result in little or no payment being made for
the more expensive services provided in an encounter. Other commenters
suggested that CMS package only the 33 codes for which the associated
surgical service is separately paid but not package the 93 codes
proposed to be conditionally packaged because payments would be
excessively reduced. As an alternative, one commenter suggested that
CMS review claims data for the 93 imaging supervision and
interpretation codes proposed to be assigned status indicator ``Q'' to
identify high volume combinations of services and evaluate the
combinations for creation of composite APCs. For example, the commenter
suggested that CMS could create a composite APC for CPT codes 72265
(Myelography, lumbosacral, radiological supervision and interpretation)
and 72132 (Computed tomography lumbar spine, with contrast material)
that would ensure that the full payment for CPT code 72265 would always
be made when furnished with CPT code 72132. The commenter was concerned
that CMS could ``overpay'' lumbar CT when no myelography was furnished
but could ``underpay'' when myelography is performed without lumbar
computed tomography (CT) but in addition to another minor services such
as an emergency department visit or other radiological service. Like
others, the commenter was concerned that, as proposed, if an expensive
imaging supervision and interpretation service is billed on the same
date as a visit, the visit would be paid and the expensive service
would not be paid.
Some commenters believed that the absence of consideration of how
payment would be made when unrelated services or packaged services were
the only other services on the claim demonstrated that the CMS proposal
was not carefully or sufficiently analyzed prior to being proposed and
should not be made final. The commenters cited several examples of
packaging with minor services or packaged services that they view as
common, which they believe illuminate the problems with packaging
imaging supervision and interpretation services. The commenters
asserted that CMS should ensure that no service is packaged into a
service that is already packaged. Some commenters believed that the
proposed policy would reduce payment for important interventional
imaging services by 25 percent in the aggregate, would cause CMS to use
fewer claims for ratesetting, and would result in access problems for
patients. Some commenters stated that the methodology reduces the
number of records that could be used to value these imaging codes for
separate payment, thereby resulting in costs that would be much lower
than would be the case if the medians were calculated with a higher
number of claims.
The commenters explained that some of the most common scenarios for
the services that are assigned to APC 0280 (Level III Angiography and
Venography) and are proposed for packaging are comparable to cardiac
catheterization (APC 0080 (Diagnostic Cardiac Catheterization)) in
time, equipment, supply, and labor but under the CMS proposal, the
payment made under APC 0280 would be significantly less than the
payment for APC 0080. Therefore, the commenters asked that the proposal
to package services in APCs 0279 (Level II Angiography and Venography),
280, and 668 (Level I Angiography and Venography) not be adopted in CY
2008 because the packaging would result in payments that are much less
than the cost of furnishing the services. One commenter added that it
is methodologically circular and unreasonable to package payment for
services that already include other packaged services.
Response: We have carefully considered the comments of the APC
Panel and the many thoughtful public comments we received on the
proposal to package imaging supervision and interpretation services for
the CY 2008 OPPS. We spent considerable time and effort in analysis of
the data as we developed our proposed rule, and we appreciate the
helpful comments we received on this issue. We have decided to finalize
our proposal to package these services after refining our methodology
for estimating the median cost of conditionally packaged codes assigned
status indicator ``Q'' to address concerns that packaging significant
services into services that either are already packaged

[[Page 66633]]

or are minor services leads to underpayment and concerns that the
proposal reduced the number of claims available for setting APC medians
for these services. We agree that we should not pay for a more minor
service, such as a visit or minor diagnostic procedure, when the
conditionally packaged imaging supervision and interpretation services
require more resources. We have modified the conditionally packaged
status of these services to be specific to surgical procedures and
called them ``T-packaged services.'' The payment for these imaging
supervision and interpretation codes will be packaged into the payment
for services with a status indicator ``T'' when they appear on the same
date as the surgical procedure. When these imaging supervision and
interpretation services appear with other codes that have any other
payable status indicator (``S,'' ''V,'' or ''X'') or with other
services that have a status indicator ``Q'' on the same date, we would
pay one unit of the ``T-packaged'' service with the highest relative
payment weight. We discuss how we split the claims to acquire ``T-
packaged'' single bills that represent all of the resource costs
associated with the conditionally packaged service in greater detail in
section II.A.2. of this final rule with comment period. The ratesetting
methodology specifically includes single bill claims for T-packed
services that represent the costs of multiple services with status
indicator ``Q'' and other packaged services. We believe that this
resolves many of the payment concerns with regard to our proposal to
treat the majority of supervision and interpretation codes as
conditionally packaged codes. These refinements to our methodology
significantly raised the median costs for a number of these services
compared to the proposed rule median costs. Furthermore, the
refinements, especially those creating single bills from multiple minor
claims, allowed us to use many more claims to estimate a median cost
for these conditionally packaged codes and, therefore, to develop an
APC median cost estimate that better reflects the resources consumed by
these services that are commonly performed in combination with one
another.
We believe that our changes have resulted in resolution of many of
the concerns raised by the commenters and the APC Panel. There were a
number of specific examples cited by the commenters to illustrate their
concerns on this issue. We include the commenters' examples below,
expanded to add the CY 2008 final rule payment. In the examples below,
``pkg'' means payment is packaged; ``na'' means not applicable.

Example 1.--Myleography and Lumbosacral CT With Contrast
--------------------------------------------------------------------------------------------------------------------------------------------------------
CY 2007 CY 2008 Proposed CY 2008 CY 2008 Final
HCPCS Code Descriptor APC CY 2007 SI CY 2007 Payment payment APC CY 2008 SI payment
--------------------------------------------------------------------------------------------------------------------------------------------------------
72265................... Contrast X-ray 0274 S............. $157.01......... pkg............. 0274 Q............ $481.46
lower spine.
72132................... CT lumbar spine w/ 0283 S............. $250.94......... $751.09......... 0283 S............ $277.48
dye.
-------------------------------------------------------------------------------------------------------------------------------
Sum................. ................... ......... .............. $407.95......... $751.09......... ......... ............. $758.94
--------------------------------------------------------------------------------------------------------------------------------------------------------

Example 2.--Angiography, Carotid, Cervical, Vertebral and/or Intracranial
--------------------------------------------------------------------------------------------------------------------------------------------------------
CY 2007 CY 2008 Proposed CY 2008 CY 2008 Final
HCPCS Code Descriptor APC CY 2007 SI CY 2007 Payment payment APC CY 2008 SI payment
--------------------------------------------------------------------------------------------------------------------------------------------------------
36216................... Place catheter in ......... N............. pkg............. pkg............. na N............ pkg
artery.
36215................... Place catheter in ......... N............. pkg............. pkg............. na N............ pkg
artery.
36217................... Place catheter in ......... N............. pkg............. pkg............. na N............ pkg
artery.
36216-59................ Place catheter in ......... N............. pkg............. pkg............. na N............ pkg
artery.
75671................... Artery Xrays head 0280 S............. $1,279.92....... pkg............. 0280 Q............ $2,847.85
and neck.
75680................... Artery Xrays, neck. 0280 S............. $1,279.92....... pkg............. 0279 Q............ pkg
75685X2................. Artery Xrays, spine 0280 S............. $2,559.84....... $1,442.28....... 0279 Q............ pkg
-------------------------------------------------------------------------------------------------------------------------------
Sum................. ................... ......... .............. $5,119.68....... $1,442.28....... ......... ............. $2,847.85
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: Several commenters submitted this example or this example with minor variation. The final payment for this service in its entirety is similar to
the payment for cardiac catheterization (APC 0080), to which the commenters compared this service.

Example 3.--Evaluation and Percutaneous Revascularization of Graft
--------------------------------------------------------------------------------------------------------------------------------------------------------
CY 2007 CY 2008 Proposed CY 2008 CY 2008 Final
HCPCS Code Descriptor APC CY 2007 SI CY 2007 Payment payment APC CY 2008 SI payment
--------------------------------------------------------------------------------------------------------------------------------------------------------
36145X2................. Place catheter in na N............. pkg............. pkg............. na N............ pkg
artery.
75790................... Visualize A-V shunt 0279 S............. $584.32......... pkg............. 0668 Q............ pkg
G0393................... A-V fistula or 0081 T............. $2,639.19....... $2,934.24....... 0083 T............ $2,890.72
graft venous.
75978X2................. Repair venous 0668 S............. $767.90......... pkg............. 0083 Q............ pkg
blockage.
35476................... Repair venous 0081 T............. $1,319.60....... $1,467.37....... 0083 T............ $1,445.36
blockage.
-------------------------------------------------------------------------------------------------------------------------------
Sum................. ................... ......... .............. $5,311.01....... $4,401.61....... ......... ............. $4,336.08
--------------------------------------------------------------------------------------------------------------------------------------------------------

[[Page 66634]]

Example 4.--Diagnostic Angiography With Balloon Angioplasty of Superficial Femoral Artery
--------------------------------------------------------------------------------------------------------------------------------------------------------
CY 2007 CY 2008 Proposed CY 2008 CY 2008 Final
HCPCS Code Descriptor APC CY 2007 SI CY 2007 Payment payment APC CY 2008 SI payment
--------------------------------------------------------------------------------------------------------------------------------------------------------
75625................... Contrast Xray exam 0280 S............. $1,279.92....... pkg............. 0279 Q............ pkg
of aorta.
75716................... Artery Xrays, arms/ 0280 S............. $1,279.92....... pkg............. 0279 Q............ pkg
legs.
75774................... Artery Xray, each 0279 S............. $584.32......... pkg............. na N............ pkg
vessel.
75774................... Artery Xray, each 0279 S............. $584.32......... pkg............. na N............ pkg
vessel.
36247................... Place catheter in ......... N............. pkg............. pkg............. na N............ pkg
artery.
35474................... Repair arterial 0081 T............. $2,639.19....... $2,934.24....... 0083 T............ $2,890.72
blockage.
35474................... Repair arterial 0081 T............. $1,319.60....... $1,467.37....... 0083 T............ $1,445.36
blockage.
75962................... Repair atrial 0668 S............. $383.95......... pkg............. 0083 Q............ pkg
blockage.
75964................... Repair artery 0668 S............. $383.95......... pkg............. na N............ pkg
blockage, each.
-------------------------------------------------------------------------------------------------------------------------------
Sum................. ................... ......... .............. $8,455.17....... $4,401.61....... ......... ............. $4336.08
--------------------------------------------------------------------------------------------------------------------------------------------------------

Comment: Some commenters believed that CMS should not package
imaging supervision and interpretation services because CMS did not
conduct a sufficiently thorough analysis of the many ways that CPT
codes can be reported for services where there could be more than one
surgical CPT code associated with a single imaging supervision and
interpretation service. The commenters stated that these codes are
created on a ``component'' basis to deal effectively with the huge
variation in the combinations of services that could occur.
Response: We disagree with the commenters. We acknowledge that the
APC Panel and the commenters raised concerns about the packaging of
these services that we did not fully anticipate in development of the
proposed rule. However, the purpose of the APC Panel and the exposure
of the proposal to public comment are to raise issues for our
consideration as we develop final policies for the final rule. We
appreciate the assistance of the APC Panel and the many thoughtful
public comments we received on the proposal to package these codes. We
recognize that the codes are created as they exist, in order to
describe many different treatment scenarios through the use of multiple
and varied combinations of codes. As we discuss above, we have
developed a methodology that addresses the concerns raised by the
commenters and, as such, continue to believe that it is appropriate to
package these services for CY 2008.
Comment: Some commenters believed that the revenue code to CCR
mapping for these services is problematic because most are billed with
revenue code 0361 and revenue code 0361 is mapped to the surgery cost
center. However, as the commenters pointed out, most of these
procedures are performed in the imaging department or the heart
catheterization laboratory and, therefore, their median cost
calculation is highly suspect.
Response: We do not view the unknown amount of error that occurs as
a result of a theoretical conflict between the revenue code reported
for a service and the CCR used to reduce that charge to an estimated
cost as justification to not package these services. The costs we
calculate for purposes of establishing median costs for ratesetting are
estimated costs and as such, in general, there is error in them to the
extent that the charges are reported under a revenue code that maps to
a cost center in which the costs for the services are not found.
Hospitals select the revenue codes with which they report services to
Medicare and other payers for a wide range of reasons over which CMS
generally exercises no control. The CMS crosswalk of revenue codes to
cost centers is available for inspection and comment at the CMS Web
site at: http://www.cms.hhs.gov/HospitalOutpatientPPS/. Hospitals that
want to ensure that the correct CCR is applied to a service could, if
they chose, use this crosswalk to select either the revenue codes to
report or the cost center to use for costs reported with a particular
revenue code.
Comment: Some commenters believed that implementation of the
imaging and supervision packaging would present huge operational
challenges for hospitals to ensure that codes and charges continue to
be billed so that the data in future years will be acceptable as the
basis for setting relative weights for the OPPS. The commenters stated
that hospitals will cease to report the codes and charges for the
services that are no longer separately paid and that the costs of the
services will then be lost to the payment system and the median costs
for the services that should carry the packaging will be
inappropriately low.
Response: The commenters did not articulate how implementation of
the imaging supervision and interpretation packaging proposal would
present huge operational challenges for hospitals to ensure that the
codes and charges continue to be billed so that future claims will
contain the necessary costs for setting relative weights for the OPPS.
Hospitals need only continue to report the codes and charges for all of
the services they furnish. There are no new billing requirements
associated with this change in payment policy. Moreover, hospitals are
required to charge the same amount to all payers for the same services.
We understand that many private payers continue to pay a percent of
charges, creating incentives for hospitals to report and charge for all
services furnished to all patients.
Comment: Some commenters suggested that CMS update the OPPS
packaging policies to address newly added or deleted codes.
Response: We routinely review all new or revised HCPCS codes each
year to determine what status indicator to assign and whether other
changes to our files are needed. We also indicate new codes with a
change indicator in Addendum B to this final rule with comment period,
and we solicit public comments on the interim APC placement and status
indicator we assign to them for those HCPCS codes designated with
comment indicator ``NI'' in the final rule with comment period. We do
not review deleted codes because they naturally fall out of the system,
beginning in the claims for the period in which they are deleted,
although we continue to assign their claims data for ratesetting
purposes.
Comment: Some commenters expressed concerns with the treatment of
the claims data for imaging supervision and interpretation codes with
status indicator ``Q'' with regard to the impact on the number of
multiple procedure claims. Some commenters stated that reporting
packaged services

[[Page 66635]]

will create more multiple procedure bills that will not be used to set
rates.
Response: The reporting of packaged services will not result in
more multiple procedure claims because the packaged service, which has
a status indicator of ``N'' for data purposes, unless it is changed to
be separately paid, will not by itself cause a claim to be viewed as a
multiple major procedure claim. Moreover, if packaged services and
their charges are not reported, the payment for the services into which
their cost is packaged may be understated. Therefore, it is important
that hospitals report all services furnished and the associated
charges.
Comment: Some commenters indicated that where there are multiple
codes with status indicator ``Q'' on a claim and no separately paid
services, they are assigned status indicator ``N'' and sent to multiple
minors because the assignment of the status indicator ``N'' happens
before the split. They suggested that if the assignment happened after
the split and after the ``pseudo'' single creation, they could be used
in the median calculation for the APC.
Response: The commenter correctly describes how codes with status
indicator ``Q'' were treated in this circumstance for the proposed rule
data. We agree that claims with multiple occurrences of codes with
status indicator ``Q'' should be used to estimate the APC median cost
through which they will be separately paid. In response to the public
comments we received, we have revised the data process in several
places to address the estimation of costs for services with a status
indicator of ``Q.'' (See section II.A.2.b. of this final rule with
comment period for further discussion of the changes to the data
process.) With regard to this particular comment, we continue to assign
claims with multiple ``Q'' procedure or packaged services to the
multiple minor file. We then create additional single bills from the
multiple minor file by identifying which conditionally packaged code
will be the prime code that will carry the packaging by selecting the
conditionally packaged code with the highest payment for CY 2007 and
packaging all costs of the other codes into the cost for that code. We
also set the units to one for the prime code to reflect our policy of
only paying one unit of a service for codes with a status indicator of
``Q.'' That claim then becomes a single procedure claim assigned to the
APC to which the prime code is assigned. These modifications have
resulted in the use of many more claims than were used for the proposed
rule to set APC medians where conditionally packaged codes are
assigned.
Comment: One commenter believed that the data for many single bills
for the services with status indicator ``Q'' will be lost because CMS
assesses the status of the status indicator ``Q'' code before applying
the bypass list. The commenters stated that where there are three
services on the claim, two of which are on the bypass list, the status
indicator ``Q'' service will be changed to packaged before the bypass
list is applied and the two bypass codes will leave the claim without
packaging. The commenter added that there will then be no code to which
to package the cost of the status indicator ``Q'' code and the data
will neither be used nor packaged into anything (because nothing is
left for it to be packaged with). The commenter believed that if CMS
had made the assignment of the ``Q'' after the bypass codes were
removed, the data could be used to set the APC median for the ``Q''
service and more claims could have been used.
Response: The commenter accurately described the treatment of a
code with status indicator ``Q'' if it is on the same claim with two
codes that are on the bypass list. However, we disagree with the
commenter's recommendation. First, by definition, codes on the bypass
list do not have significant packaging. We specifically reassessed the
codes included on the bypass list in light of this packaging proposal
to ensure removal of any services with significant packaging. The
circumstances where ``Q'' service data would remain on a claim as
``packaging'' after removing the other two codes as bypass codes should
be very limited. Second, we would not want to use that data to set the
median cost for the ``Q'' status service because the final payment
disposition of the code with status indicator ``Q'' on the claim would
be packaged. Under this commenter's recommendation, we would be sending
the data for the status indicator ``Q'' codes to the APC to which it is
assigned even though, when the claim was processed, no separate payment
would be made for the status indicator ``Q'' code.
Comment: One commenter found that its calculation of median costs
using proposed rule data for the imaging supervision and interpretation
services to which CMS proposed to assign status indicator ``Q''
resulted in median costs for these codes and the APCs to which they
were assigned that were significantly higher than the median costs
calculated by CMS for these codes and their APCs. The commenter was
concerned that CMS may have inadvertently failed to include the
packaged costs in the calculation of the medians for these costs codes.
Response: The commenter is correct in that we inadvertently erred
and did not include the packaged costs of ``Q'' status procedures in
the calculation of the medians for these codes and their related APCs
in the proposed rule. We have packaged these costs with the ``Q''
procedures for this final rule with comment period, in addition to
making the other modifications to the calculation of the median costs
for these codes as discussed in detail above and in section II.A.2. of
this final rule with comment period.
For CY 2008, we are finalizing our proposal, with modification as
discussed above, to unconditionally or conditionally packaged imaging
supervision and interpretation services. These codes, with their
assigned status indicator ``N'' as unconditionally packaged or ``Q'' as
``T-packaged'' codes, are listed in Table 10 of this final rule with
comment period. We are not accepting the APC Panel recommendation to
delay packaging of these services and provide an alternative model at
the next Panel meeting, because we are finalizing a modified model. We
will review the final CY 2008 policy, including the ratesetting
methodology, with the APC Panel at its 2008 winter meeting.
(5) Diagnostic Radiopharmaceuticals
For CY 2008, we proposed to change the packaging status of
diagnostic radiopharmaceuticals as part of our overall enhanced
packaging approach for the CY 2008 OPPS. Packaging costs into a single
aggregate payment for a service, encounter, or episode of care is a
fundamental principle that distinguishes a prospective payment system
from a fee schedule. In general, packaging the costs of supportive
items and services into the payment for the independent procedure or
service with which they are associated encourages hospital efficiencies
and also enables hospitals to manage their resources with maximum
flexibility. As we stated in the CY 2007 OPPS/ASC final rule with
comment period, we believe that a policy to package payment for
additional radiopharmaceuticals (other than those already packaged when
their per day costs are below the packaging threshold for OPPS drugs,
biologicals, and radiopharmaceuticals based on data for the update
year) is consistent with OPPS packaging principles and would provide
greater administrative simplicity for hospitals (71 FR 68094).
All nuclear medicine procedures require the use of at least one
radiopharmaceutical, and there are only

[[Page 66636]]

a small number of radiopharmaceuticals that may be appropriately billed
with each diagnostic nuclear medicine procedure. While examining the CY
2005 hospital claims data in preparation for the CY 2007 OPPS/ASC
proposed rule, we identified a significant number of diagnostic nuclear
medicine procedure claims that were missing HCPCS codes for the
associated radiopharmaceutical. At that time, we believed that there
could be two reasons for the presence of these claims in the data. One
reason could be that the radiopharmaceutical used for the procedure was
packaged under the OPPS and, therefore, some hospitals may have decided
not to include the specific radiopharmaceutical HCPCS code and an
associated charge on the claim. A second reason could be that the
hospitals may have incorporated the cost of the radiopharmaceutical
into the charges for the associated nuclear medicine procedures. A
third possibility not offered in the CY 2007 OPPS/ASC proposed rule is
that hospitals may have included the charges for radiopharmaceuticals
on an uncoded revenue code line.
In the CY 2007 OPPS/ASC proposed rule, we did not propose packaging
payment for radiopharmaceuticals with per day costs above the $55 CY
2007 packaging threshold because we indicated that we were concerned
that payments for certain nuclear medicine procedures could potentially
be less than the costs of some of the packaged radiopharmaceuticals,
especially those that are relatively expensive. At the same time, we
also noted the GAO's comment in reference to the CY 2006 OPPS proposed
rule that stated a methodology that includes packaging all
radiopharmaceutical costs into the payments for the nuclear medicine
procedures may result in payments that exceed hospitals' acquisition
costs for certain radiopharmaceuticals because there may be more than
one radiopharmaceutical that may be used for a particular procedure. We
also expressed concern that packaging payment for additional
radiopharmaceuticals could provoke treatment decisions that may not
reflect use of the most clinically appropriate radiopharmaceutical for
a particular nuclear medicine procedure in any specific case (71 FR
68094).
After considering this issue further and examining our CY 2006
claims data for the CY 2008 OPPS update, as we indicated in the CY 2008
OPPS/ASC proposed rule, we believe that it is most appropriate to
package payment for some radiopharmaceuticals, specifically diagnostic
radiopharmaceuticals, into the payment for diagnostic nuclear medicine
procedures for CY 2008. We expect that packaging would encourage
hospitals to use the most cost efficient diagnostic radiopharmaceutical
products that are clinically appropriate. We anticipate that hospitals
would continue to provide care that is aligned with the best interests
of the patient. Furthermore, we believe that it would be the intent of
most hospitals to provide both the diagnostic radiopharmaceutical and
the associated diagnostic nuclear medicine procedure at the time the
diagnostic radiopharmaceutical is administered and not to send patients
to a different provider for administration of the radiopharmaceutical.
As we indicated in the proposed rule, we do not believe that our
packaging proposal would limit beneficiaries' ability to receive
clinically appropriate diagnostic procedures. Again, the OPPS is a
system of averages, and payment in the aggregate is intended to be
adequate, although payment for any one service may be higher or lower
than a hospital's actual costs in that case.
For CY 2008, we have separated radiopharmaceuticals into two
groupings. The first group includes diagnostic radiopharmaceuticals,
while the second group includes therapeutic radiopharmaceuticals. We
identified all diagnostic radiopharmaceuticals as those Level II HCPCS
codes that include the term ``diagnostic'' along with a
radiopharmaceutical in their long code descriptors. Therefore, we were
able to distinguish therapeutic radiopharmaceuticals from diagnostic
radiopharmaceuticals as those Level II HCPCS codes that have the term
``therapeutic'' along with a radiopharmaceutical in their long code
descriptors. There currently are no HCPCS C-codes used to report
radiopharmaceuticals under the OPPS. For CY 2008, we proposed to
package payment for all diagnostic radiopharmaceuticals that are not
otherwise packaged according to the CY 2008 packaging threshold for
drugs, biologicals, and radiopharmaceuticals that we proposed. We
proposed this packaging approach for diagnostic radiopharmaceuticals,
while we proposed to continue to pay separately for therapeutic
radiopharmaceuticals with an average per day cost of more than $60 as
discussed in section V.B.3.a.(c) of this final rule with comment
period. In that section, we review our reasons for treating diagnostic
radiopharmaceuticals (as well as contrast media) differently from other
types of specified covered outpatient drugs identified in section
1833(t)(B) of the Act.
Diagnostic radiopharmaceuticals are always intended to be used with
a diagnostic nuclear medicine procedure. In examining our CY 2006
claims data, we were able to match most diagnostic radiopharmaceuticals
to their associated diagnostic procedures and most diagnostic nuclear
medicine procedures to their associated diagnostic radiopharmaceuticals
in the vast majority of single bills used for ratesetting. We estimate
that less than 5 percent of all claims with a diagnostic
radiopharmaceutical had no corresponding diagnostic nuclear medicine
procedure. In addition, we found that only about 13 percent of all
single bills with a diagnostic nuclear medicine procedure code had no
corresponding diagnostic radiopharmaceutical billed. These statistics
indicate that, in a majority of our single bills for diagnostic nuclear
medicine procedures, a diagnostic radiopharmaceutical HCPCS code is
included on the single bill. Table 15 in the proposed rule (72 FR
42668) presented the top 20 diagnostic nuclear medicine procedures in
terms of the overall frequency with which they are reported in the OPPS
claims data. Among these high volume diagnostic nuclear medicine
procedures, their single bills included a HCPCS code for a diagnostic
radiopharmaceutical at least 84 percent of the time for 19 of the top
20 procedures. More specifically, 84 to 86 percent of the single bills
for 4 diagnostic nuclear medicine procedures included a diagnostic
radiopharmaceutical, 87 to 89 percent of the single bills for 8
diagnostic nuclear medicine procedures included a diagnostic
radiopharmaceutical, and 90 percent or more of the single bills for 7
diagnostic nuclear medicine procedures included a diagnostic
radiopharmaceutical.
Among the lower volume diagnostic nuclear medicine procedures
(which were outside the top 20 in terms of volume), there was still
good representation of diagnostic radiopharmaceutical HCPCS codes on
the single bills for most procedures. About 40 percent of the low
volume diagnostic nuclear medicine procedures had at least 80 percent
of the single bills for that diagnostic procedure that included a
diagnostic radiopharmaceutical HCPCS code; about 37 percent of the low
volume diagnostic procedures had between 50 to 79 percent of the single
bills that included a diagnostic radiopharmaceutical HCPCS code; and
about 23 percent of the low volume diagnostic procedures

[[Page 66637]]

had less than 50 percent of the single bills that include a diagnostic
radiopharmaceutical HCPCS code. For the few diagnostic nuclear medicine
procedures where less than 50 percent of the single bills included a
diagnostic radiopharmaceutical HCPCS code, we believed there could be
several reasons why the percentage of single bills for the diagnostic
nuclear medicine procedure with a diagnostic radiopharmaceutical HCPCS
code was low.
As noted earlier, it is possible that hospitals may have included
the charge for the radiopharmaceutical in the charge for the diagnostic
nuclear medicine procedure itself or on an uncoded revenue code line
instead of reporting charges for a specific diagnostic
radiopharmaceutical HCPCS code. We found that 24 percent of all single
bills for a diagnostic nuclear medicine procedure but without a coded
diagnostic radiopharmaceutical had uncoded costs in a revenue code that
might contain diagnostic radiopharmaceutical costs, specifically,
revenue codes 0254 (Drugs Incident to Other Diagnostic Services), 0255
(Drugs Incident to Radiology), 0343 (Diagnostic Radiopharmaceuticals),
0621 (Supplies Incident to Radiology), and 0622 (Supplies Incident to
Other Diagnostic Services). In comparison, we found that only 2 percent
of diagnostic nuclear medicine single bills with a nuclear medicine
procedure and a coded diagnostic radiopharmaceutical had uncoded costs
in these revenue codes. It is also possible that some of these
procedures typically used a diagnostic radiopharmaceutical subject to
packaged payment under the CY 2006 OPPS, and hospitals may have chosen
not to report a separate charge for the diagnostic radiopharmaceutical.
Payment for diagnostic radiopharmaceuticals commonly used with some
diagnostic nuclear medicine procedures would already be packaged
because these diagnostic radiopharmaceuticals' average per day costs
were less than $50 in CY 2006. We stated in the proposed rule that the
CY 2008 proposal to package additional diagnostic radiopharmaceuticals
would have little impact on the payment for those diagnostic procedures
that typically use inexpensive diagnostic radiopharmaceuticals that
would be packaged under our proposed CY 2008 packaging threshold of
$60, except to the extent that the budget neutrality adjustment due to
the broader packaging proposal leads to an increase in the scaler and
an increase in the payment for procedures in general.
At its March 2007 meeting, the APC Panel recommended that CMS work
with stakeholders on issues related to payment for
radiopharmaceuticals, including evaluating claims data for different
classes of radiopharmaceuticals and ensuring that a nuclear medicine
procedure claim always includes at least one reported
radiopharmaceutical agent. In the proposed rule, we noted that we
planned to accept the APC Panel's recommendation, and we specifically
welcomed public comment on the hospitals' burden involved should we
require such precise reporting. We also sought public comment on the
importance of such a requirement in light of our above discussion on
the representation of diagnostic radiopharmaceuticals in the single
bills for diagnostic nuclear medicine procedures, the presence of
uncoded revenue code charges specific to diagnostic
radiopharmaceuticals on claims without a coded diagnostic
radiopharmaceutical, and our proposal to package payment for all
diagnostic radiopharmaceuticals.
As we indicated in the proposed rule, we are aware that several
diagnostic radiopharmaceuticals may be used for multiple day studies;
that is, a particular diagnostic radiopharmaceutical may be
administered on one day and a related diagnostic nuclear medicine
procedure may be performed on a subsequent day. While we understand
that multiple day episodes for diagnostic radiopharmaceuticals and the
related diagnostic nuclear medicine procedures occur, we expect that
this would be a small proportion of all diagnostic nuclear medicine
imaging procedures. We estimate that, roughly, 15 diagnostic
radiopharmaceuticals have a half-life longer than one day such that
they could support diagnostic nuclear medicine scans on different days.
We believe these diagnostic radiopharmaceuticals would be concentrated
in a specific set of diagnostic procedures. Excluding the 5 percent of
diagnostic radiopharmaceutical claims with no matching diagnostic
nuclear medicine scan for the same beneficiary, we found that a
diagnostic nuclear medicine scan was reported on the same day as a
coded diagnostic radiopharmaceutical 90 percent or more of the time for
10 of these 15 diagnostic radiopharmaceuticals. Further, between 80 and
90 percent single bills for each of the remaining 5 diagnostic
radiopharmaceuticals had a diagnostic nuclear medicine scan on the same
day. In the ``natural'' single bills we use for ratesetting, we package
payment across dates of service. In light of such high percentages of
extended half-life diagnostic radiopharmaceuticals with same day
diagnostic nuclear medicine scans and the ability of ``natural''
singles to package costs across days, we indicated in the proposed rule
that we believe that our standard OPPS ratesetting methodology of using
median costs calculated from claims data would adequately capture the
costs of diagnostic radiopharmaceuticals associated with diagnostic
nuclear medicine procedures that are not provided on the same date of
service.
The packaging proposal we presented would have reduced the overall
frequency of single bills for diagnostic nuclear medicine procedures,
but the percent of single bills out of total claims remained robust for
the majority of diagnostic nuclear medicine procedures. Typically,
packaging more procedures should improve the number of single bill
claims from which to derive median cost estimates because packaging
reduces the number of separately paid procedures on a claim, thereby
creating more single procedure bills. In the case of diagnostic nuclear
medicine procedures, packaging diagnostic radiopharmaceuticals reduced
the overall number of single bills available to calculate median costs
by increasing packaged costs that previously were ignored in the bypass
process. In prior years, we did not consider the costs of
radiopharmaceuticals when we used our bypass methodology to extract
``pseudo'' single claims because we assumed that the cost of
radiopharmaceutical overhead and handling would be included in the
line-item charge for the radiopharmaceutical, and the diagnostic
radiopharmaceuticals were subject to potential separate payment if
their mean per day cost fell above the packaging threshold. The bypass
process sets empirical and clinical criteria for minimal packaging for
a specific list of procedures and services in order to assign packaged
costs to other procedures on a claim and is discussed at length in
section II.A.1. of the proposed rule, and this final rule with comment
period. Generally, we found that changing the status of diagnostic
radiopharmaceuticals to packaged increased the packaging on each claim.
This would make it both harder for nuclear medicine procedures to
qualify for the bypass list and more difficult to assign packaging to
individual diagnostic nuclear medicine procedures, resulting in a
possible reduction of the number of ``pseudo'' singles that are
produced by the bypass process. Notwithstanding this potentiality,
diagnostic nuclear medicine procedures

[[Page 66638]]

continued to have good representation in the single bills. On average,
single bills as a percent of total occurrences remained substantial at
55 percent for individual procedures. We discuss our process for
ratesetting, including the construction and use of single and multiple
bills, in greater detail in section II.A.1. of this final rule with
comment period.
We indicated in the proposed rule that we believe our CY 2006
claims data supported our CY 2008 proposal to package payment for all
diagnostic radiopharmaceuticals and would lead to payment rates for
diagnostic nuclear medicine procedures that appropriately reflect
payment for the costs of the diagnostic radiopharmaceuticals that are
administered to carry out those diagnostic nuclear medicine procedures.
Among the top 20 high volume diagnostic nuclear medicine procedures, at
least 84 percent of the single bills for almost every diagnostic
nuclear medicine procedure included a diagnostic radiopharmaceutical
HCPCS code. While a diagnostic radiopharmaceutical, by definition,
would be anticipated to accompany 100 percent of the diagnostic nuclear
medicine procedures, it is not unexpected that, while percentages in
our claims data are high, they are less than 100 percent. As noted
previously, we have heard anecdotal reports that some hospitals may
include the charges for diagnostic radiopharmaceuticals in their charge
for the diagnostic nuclear medicine procedure or on an uncoded revenue
code line, rather than reporting a HCPCS code for the diagnostic
radiopharmaceutical. Thus, it is likely that the frequency of
diagnostic radiopharmaceutical costs reflected in our claims data were
even higher than the percentages indicated. Furthermore, we note that
the OPPS ratesetting methodology is based on medians, which are less
sensitive to extremes than means and typically do not reflect subtle
changes in cost distributions. Therefore, to the extent that the vast
majority of single bills for a particular diagnostic nuclear medicine
procedure included a diagnostic radiopharmaceutical HCPCS code, the
fact that the percentage was somewhat less than 100 percent was likely
to have minimal impact on the median cost of the procedure in most
cases. Even in those few instances where we had a low total number of
single bills, largely because of low overall volume, we had ample
representation of diagnostic radiopharmaceutical HCPCS codes on the
single bills for the majority of lower volume nuclear medicine
procedures. We also continued to have reasonable representation of
single bills out of total claims in general. Finally, as noted
previously, to the extent that the diagnostic radiopharmaceuticals
commonly used with a particular diagnostic nuclear medicine procedure
were already packaged, the proposal to package additional diagnostic
radiopharmaceuticals would have had little impact on the payment for
these procedures.
The estimated overall impact of these changes presented in section
XXII.B. of the proposed rule (section XXIV.B. of this final rule with
comment period) was based on the assumption that hospital behavior
would not change with regard to whether the dependent diagnostic
radiopharmaceuticals services are provided by the same hospital that
performs the independent services. In order to provide diagnostic
nuclear medicine procedures under this policy, hospitals would either
need to administer the necessary diagnostic radiopharmaceuticals
themselves or refer patients elsewhere for the administration of the
diagnostic radiopharmaceuticals. In the latter case, claims data would
show such a change in practice in future years and that change would be
reflected in future ratesetting. However, with respect to diagnostic
radiopharmaceuticals, we believe that hospitals are limited in the
extent to which they could change their behavior with regard to how
they furnish these items because diagnostic radiopharmaceuticals are
typically provided on the same day as a diagnostic nuclear medicine
procedure. It would be difficult for Hospital A to send patients to
receive diagnostic radiopharmaceuticals from Hospital B and then have
the patients return to Hospital A for the diagnostic nuclear medicine
procedure in the appropriate timeframe (given the radiopharmaceutical's
half-life) to perform a high quality study. We expect that hospitals
would always bill the diagnostic radiopharmaceutical on the same claim
as the other independent services for which the radiopharmaceutical was
administered.
The APC Panel recommended that CMS package radiopharmaceuticals
with a median per day cost of less than $200 but pay separately for
radiopharmaceuticals with a per day cost of $200 or more. The APC Panel
also recommended that CMS should identify nuclear medicine procedure
claims with and without radiopharmaceuticals and should present its
findings to the Panel at the next meeting for consideration of whether
an edit is needed to ensure that the cost of the radiopharmaceutical is
packaged into the payment for the nuclear medicine service.
We received many public comments on our proposal to package payment
for diagnostic radiopharmaceuticals for CY 2008. A summary of the
public comments and our responses follow.
Comment: Some commenters recommended that CMS package
radiopharmaceuticals with a per day cost less than $200 but pay
separately for radiopharmaceuticals with a per day cost of $200 or
more. Other commenters objected to packaging diagnostic
radiopharmaceuticals and asked that CMS continue to pay separately for
radiopharmaceuticals with per day costs that exceed the packaging
threshold for drugs. These commenters explained that FDA views
radiopharmaceuticals to be drugs, they are defined as drugs for
purposes of pass-through payment under OPPS in sections
1833(t)(6)(A)(iii) of the Act, and for purposes of payment as specified
covered outpatient drugs (SCODs) and biologicals in section
1833(t)(14)(B)(i)(l) of the Act. The commenters argued that CMS should,
therefore, pay separately for radiopharmaceuticals with a per day cost
in excess of $60, as it does for other drugs.
The commenters believed that section 1833(t)(14)(B)(i)(l) of the
Act requires CMS to treat radiopharmaceuticals no differently from
other SCODs and, therefore, CMS must pay radiopharmaceuticals actual
acquisition costs or, failing that, charges adjusted to costs. Some
commenters believed that there is no authority for CMS to package drugs
that are incidental or ancillary to a procedure and that by doing so,
CMS is relying on a form of ``functional equivalence'' which is
expressly limited by statute under section 1833(t)(6)(F) of the Act.
The commenters argued that the proposal will create an incentive for
hospitals to not use advanced technologies and will harm patient care.
Some commenters believed that packaging diagnostic radiopharmaceuticals
could discourage hospitals from using the most appropriate drug for
each patient and encourage them to use less clinically effective
radiopharmaceuticals when there is a choice of radiopharmaceutical.
Some commenters added that the proposal ignores medical indications and
focuses solely on cost reduction, which could result in constraints on
medical decisionmaking and would compromise medical care.
Response: After review of the public comments we received on this
issue, we have decided to finalize our proposal to package payment for
diagnostic

[[Page 66639]]

radiopharmaceuticals into the payment for the nuclear medicine services
which cannot be performed without the administration of a
radiopharmaceutical. We refer readers to section V.B.4.b. of this final
rule with comment period for a discussion of the rationale to package
payment for diagnostic radiopharmaceuticals as SCODs and our belief
that the packaged payment provides payment at average acquisition cost
for the products.
We find the argument that we are creating functional equivalence by
packaging the payment for diagnostic radiopharmaceuticals into the
payment for the nuclear medicine services without which they cannot be
performed to be unconvincing. We are not establishing an equivalent
payment for different products based on their function. We are instead
packaging the cost of radiopharmaceuticals, however differential those
costs may be, into the payment for nuclear medicine services to create
an appropriate payment for the nuclear medicine services that use these
products, whether there is one product or multiple products that could
be used to furnish the service. This is analogous to our longstanding
practice of packaging of medical devices into the payment for the
procedure in which they are used, notwithstanding that there may be
different devices that could be used to furnish the service.
Moreover, we do not agree with the argument that paying for
radiopharmaceuticals as part of the payment for the nuclear medicine
service to which they are essential will harm patient care. We believe
that providing packaged payment for radiopharmaceuticals as part of the
nuclear medicine service will cause hospitals and their physician
partners to give even more careful consideration to the selection of
the radiopharmaceutical that is the most appropriate for the patient
whom they are treating.
We are not accepting the APC Panel recommendation to pay separately
for radiopharmaceuticals with a per day cost in excess of $200 because
we could not determine an empirical basis for paying separately for
radiopharmaceuticals with a per day cost in excess of $200.
Comment: Many commenters stated that a diagnostic
radiopharmaceutical is always needed to provide a nuclear medicine
service and, therefore, CMS should use only claims in which both
services were present to compute the median cost for the nuclear
medicine procedure if CMS decides to package diagnostic
radiopharmaceuticals. Some commenters suggested that CMS establish OCE
edits that would require a charge be reported under the diagnostic
radiopharmaceutical revenue code 0343 when there was a charge in
revenue codes 0340 or 0341 for a nuclear medicine procedure. Other
commenters recommended that CMS establish OCE edits that would require
a HCPCS code for a diagnostic radiopharmaceutical be reported on a
claim for a diagnostic nuclear medicine procedure. Some commenters were
concerned that the actual cost of radiopharmaceuticals would be lost
because hospitals would not report the charges on the claim unless CMS
mandates and enforces their reporting.
Response: We agree that it is important that the costs of
radiopharmaceuticals be reported on the same claim with the nuclear
medicine service so that we can have confidence that the payment for
the nuclear medicine procedure reflects the cost of the
radiopharmaceutical as well as the nuclear medicine service. Therefore,
we have used only claims that contain a HCPCS code and charge for a
diagnostic radiopharmaceutical to calculate the median costs of the
nuclear medicine procedures for CY 2008. Moreover, effective for
services furnished on and after January 1, 2008, the OCE will return
for correction any claim for a nuclear medicine procedure that does not
contain a HCPCS code and charge for a diagnostic radiopharmaceutical.
These edits are similar to the edits we have had in place in the OCE
since CY 2005 for medical devices. The significant difference, however,
is that we recognize that, for some nuclear medicine procedures, there
is a choice of radiopharmaceuticals that could be used and, therefore,
the edits will not specify which radiopharmaceutical must be billed
with any given nuclear medicine procedure. We also recognize that, in
some cases, the radiopharmaceutical is administered several days before
the nuclear medicine service is furnished. In these cases, the hospital
will need to hold the claim until after the service is furnished so
that the radiopharmaceutical can appear on the bill with the nuclear
medicine procedure or the bill for the procedure will be returned for
correction. We did not accept the comment that we should establish the
edits using combinations of revenue codes because to do so would not
provide specific information on the particular radiopharmaceutical
being furnished and we could not be certain that the charges were for
radiopharmaceuticals.
Comment: Some commenters asserted that, based on survey data they
gathered, claims data fail to capture hospital average acquisition
costs for radiopharmaceuticals. The commenters, therefore, concluded
that the costs of low volume, high cost radiopharmaceuticals are not
captured in the claims data that is used to set the median costs on
which the nuclear medicine services payment rates are based and the
packaged payment for radiopharmaceuticals will be inadequate to pay for
the cost of the drug. The commenters believed that these incorrectly
priced products are unlikely to continue to be manufactured and thus
will cease to be available. The commenters also stated that it is
unlikely that the industry will develop new products for the market if
they find that hospitals will not use them because of inadequate
payment. The commenters believed that beneficiary care would suffer as
hospitals ceased to furnish the service because payment would be
inadequate to cover the cost. Some commenters explained that, while CMS
implemented revenue codes for diagnostic and therapeutic
radiopharmaceuticals in CY 2004, hospitals have not yet fully reflected
these revenue codes in their billing practices and, therefore, the
claims data are not correct or reliable and CMS should continue to pay
separately for radiopharmaceuticals at charges adjusted to cost. Other
commenters believed that the proposed changes would overestimate
payments for some diagnostic radiopharmaceuticals, underestimate
others, and create improper financial incentives for hospitals and
physicians to select certain radiopharmaceuticals rather than others,
potentially reducing the quality of care.
Response: We believe that we have appropriately calculated the
radiopharmaceutical costs that we are packaging into the nuclear
medicine services by using only claims for nuclear medicine services
that contain a radiopharmaceutical, as noted above. This is analogous
to our process for ensuring that the costs of devices are packaged into
the payment for the APC in which they are used, and we believe that
using only these claims will negate any existing problems with the use
or lack of use of the radiopharmaceutical revenue codes.
With regard to the concern that packaging radiopharmaceuticals will
result in overpayment in some cases and underpayment in others, we note
that the most fundamental characteristic of a prospective payment
system is that payment is to be set at an average for the service,
which, by definition, means that some services are paid more or less
than the average. However, the average

[[Page 66640]]

should provide adequate payment for the service, while creating
incentives for hospitals to control costs and utilization of high cost
services where it is appropriate to do so. We do not believe that
either beneficiary access to care or the quality of care will be
adversely affected because we pay for diagnostic radiopharmaceuticals
as part of the payment for the procedure to which they are an integral
part. With regard to the influence this may have on the development and
production of radiopharmaceuticals, there are many aspects of the
health care economy that influence what is developed and produced, of
which Medicare payment under the OPPS is merely one.
Comment: Some commenters stated that CMS has not provided adequate
information for specialty societies and others to adequately review the
matching of the drugs with the services to determine whether an
appropriate radiopharmaceutical is packaged into the nuclear medicine
services. The commenters indicated that CMS should provide data on the
percent of nuclear medicine claims that were reported with and without
a corresponding radiopharmaceutical so that the public can determine
whether an edit is indicated for reporting these services either
through OCE or backend rate setting and, if so, what edit would be
appropriate.
Response: We provided considerable information and data in support
of our proposal. Moreover, we make available our claims data both for
the proposed rule and the final rule so that the public can perform any
analysis they choose. There are limits to our ability to provide
specialized studies of interest. Therefore, we provide a narrative
claims accounting that is intended to illuminate our data process for
those who would like to use the claims data to explore alternatives.
Comment: Some commenters believed that packaging diagnostic
radiopharmaceuticals would undermine the clinical and resource
homogeneity of the nuclear medicine APCs, especially the cardiac
imaging APCs, resulting in 2 times violations. The commenters stated
that the APC revision that is proposed as a result of the proposed
packaging results in a lack of resource and clinical homogeneity within
the APCs. Specifically, the commenters believed that, by packaging
diagnostic radiopharmaceuticals, CMS created a 2 times violation in APC
0408 because the median costs for the services assigned to the APC vary
widely for the procedure code based on the radiopharmaceutical used.
Response: We agree that packaging costs into the median for a
service to which they are an integral part can change the median cost
for that service and result in 2 times violations. As we noted in the
proposed rule, there were a significant number of APC reassignments to
eliminate 2 times violations that would otherwise have resulted from
the proposed packaging approach. However, we disagree that we should
refrain from packaging payment for necessary items into the payment for
the service in which they are required in order to prevent 2 times
violations from occurring. Instead, we believe that we should make the
necessary reassignments to different APCs where necessary to resolve 2
times violations where they occur. For example, to resolve 2 times
violations that would otherwise have occurred when we used only those
claims for nuclear medicine procedures reporting HCPCS code for
diagnostic radiopharmaceuticals, we made the following APC
reassignments for this final rule with comment period. We reassigned
CPT code 78730 (Urinary bladder residual study (List separately in
addition to code for primary procedure)) from APC 0340 (Minor Ancillary
Procedures) to APC 0389 (Level I Non-Imaging Nuclear Medicine). We
reassigned CPT code 78725 (Kidney function study, non-imaging
radioisotopic study) from APC 0389 to APC 0392 (Level II Non-Imaging
Nuclear Medicine). We reassigned CPT code 78006 (Thyroid imaging, with
uptake; single determination) from APC 0390 (Level I Endocrine Imaging)
to APC 0391 (Level II Endocrine Imaging). With regard to APC 0408
(Level III Tumor/Infection Imaging), that APC contained only one code
for the proposed rule, CPT code 78804 (Radiopharmaceutical localization
of tumor or distribution of radiopharmaceutical agent(s); whole body,
requiring two or more days imaging), and it had a proposed median of
approximately $1,010. For this final rule with comment period, APC 0408
contains 3 CPT codes: 78804 (Radiopharmaceutical localization of tumor
or distribution of radiopharmaceutical agent(s); whole body, requiring
two or more days imaging); 78075 (Adrenal Imaging, cortex and/or
medulla); and 78803 (Radiopharmaceutical localization of tumor or
distribution of radiopharmaceutical agent(t); tomographic (SPECT)). For
this final rule with comment period, APC 408 has a median cost of
approximately $969.
Because we have traditionally paid for a service package under the
OPPS as represented by a HCPCS code for the major procedure that is
assigned to an APC group for payment, we assess the applicability of
the 2 times rule to services at the HCPCS code level, not at a more
specific level based on the individual diagnostic radiopharmaceuticals
that may be utilized in a service reported with a single HCPCS code. If
the use of a very expensive diagnostic radiopharmaceutical in a
clinical scenario causes a specific procedure to be much more expensive
for the hospital than the APC payment, we consider such a case to be
the natural consequence of a prospective payment system that
anticipates that some cases will be more costly and other less costly
than the procedure payment. In addition, very high cost cases could be
eligible for outlier payment. As we note elsewhere in this final rule
with comment period, decisions about packaging and bundling payment
involve a balance between ensuring some separate payment for individual
services and establishing incentives for efficiency through larger
units of payment. In the case of diagnostic radiopharmaceuticals, these
products will be part of the OPPS payment package for the procedures in
which they are used beginning in CY 2008.
Comment: One commenter objected to packaging of diagnostic
radiopharmaceuticals because the commenter believed that including the
payment for the item in the payment for the procedure would improperly
subject the portion of the payment that is attributable to the
diagnostic radiopharmaceutical to wage adjustment. The commenter
indicated that there should be no wage adjustment applied to the cost
of a diagnostic radiopharmaceutical.
Response: We disagree that we should not package the payment for a
radiopharmaceutical into the payment for the procedure in which it is
an integral part because part of the procedure payment will be wage
adjusted. Since the inception of the OPPS, we have determined that,
approximately 60 percent of the cost of an OPPS service is attributable
to wage costs. That figure is an overall average percent that takes
into account the extent to which there are costs in the OPPS payments
that are not attributable to wages. We have a longstanding policy of
wage adjusting 60 percent of the cost of the APC, regardless of whether
it is an office visit (which is mostly wage costs) or an ICD
replacement (in which most of the cost is a device), because our
analysis shows that, overall, OPPS

[[Page 66641]]

services approximately 60 percent of the cost is attributable to wages.
Comment: Some commenters stated that diagnostic
radiopharmaceuticals are not interchangeable and carry high costs
because, if the patient for whom the hospital secures a
radiopharmaceutical cannot use the product, the hospital cannot bill
for it and must absorb the loss. The commenters stated that hospitals
have little or no flexibility in determining the diagnostic
radiopharmaceutical that they purchase and have little ability to
achieve efficiency.
Response: We recognize that radiopharmaceuticals are specialized
products that have unique costs associated with them. However, we
believe that the costs should be reflected in the charges that
hospitals set for them and in the cost report where the full costs of
the services are carried. Therefore, the costs will be calculated like
any other OPPS cost and packaged into the total cost of the nuclear
medicine service to which they are an integral part and will be the
basis for the payment rate for the nuclear medicine service in the same
way that other packaged costs contribute to the payment rate for the
services to which they are an integral part.
Comment: Several commenters stated that HCPCS codes A9542 (Indium
IN-111 ibritumomab tiuxetan, diagnostic, per study dose, up to 5
millicuires) and A9544 (Iodine I-131 tositumomab, diagnostic, per study
dose) are not diagnostic radiopharmaceuticals and should not be
packaged. The commenters reported that they are not used to diagnose
the patient's disease but instead are used to assess the
biodistribution of radioimmunotherapy agents or to calculate the
therapeutic dose of those agents. The commenters contended that,
although packaging is intended to create incentives for using the most
cost-effective product, in these cases there are no other products that
are available, and hence these products should always be paid
separately. The commenters concluded that the proposed payments for
these services are so low that hospitals will not offer the treatments
to Medicare beneficiaries.
Response: We continue to believe that HCPCS codes A9542 and A9544
are diagnostic radiopharmaceuticals. While they are not used to
diagnose disease, they are used to determine whether future therapeutic
services would be beneficial to the patient and to determine how to
proceed with therapy. This is analogous to the use of positron emission
tomography (PET) scanning for staging purposes when there has already
been a diagnosis of disease but the physician is seeking information to
use in planning a course of therapy. The scan is a diagnostic service,
notwithstanding that the disease has previously been diagnosed and the
diagnostic service is essential to planning therapy. While we recognize
that these radiopharmaceuticals are sole source products, we do not
believe that is sufficient to justify treating them differently from
other diagnostic radiopharmaceuticals. Moreover, given that the
Medicare population is such a dominant portion of the population to
which these services are targeted, we do not believe that hospitals
will cease to provide the service because the payment is packaged into
the payment for the service to which the radiopharmaceutical is an
integral part. We also note that, under 42 CFR 489.53(a)(2), CMS may
terminate the provider agreement of any hospital that furnishes this or
any other service to its patients but fails to also furnish it to
Medicare patients who need it.
Comment: Some commenters asked that CMS pay hospitals separately
for diagnostic radiopharmaceuticals based on acquisition costs. The
commenters had a variety of recommendations regarding how CMS should
acquire acquisition cost data on which CMS could base separate payment
for radiopharmaceuticals. Some commenters recommended that CMS conduct
surveys of radiopharmaceutical costs or rely on the external data from
surveys conducted by outside entities to obtain cost data. Some
commenters recommended that CMS work with stakeholders to develop a
standardized radiopharmaceutical reporting format and base separate
payment for radiopharmaceuticals on a radiopharmaceutical average
selling nuclear pharmacy price (ASNPP), average acquisition cost (ACC),
or another voluntarily reported amount if furnished by manufacturers
and nuclear pharmacies, instead of claims data charges adjusted to cost
by departmental CCRs. Other commenters suggested that CMS require
hospitals to report acquisition costs for radiopharmaceuticals,
instruct contractors to collect periodic reports from hospitals of
diagnostic radiopharmaceutical costs, and gather and summarize nuclear
pharmacy invoice data through CY 2008 that would be used to set CY 2009
rates. The commenters stated that separate payment of diagnostic
radiopharmaceuticals for CY 2008 is critical to enable hospitals to
account for the complex combinations of radiopharmaceuticals used to
provide nuclear medicine procedures. Some commenters indicated that
continuation of the current payment at charges reduced to cost by the
overall CCR, while not ideal, is a reasonable temporary solution until
CMS can implement a long term solution to pay acquisition costs for
radiopharmaceuticals as required by law. Some commenters supported CMS'
use of its claims data alone to set the CY 2008 payment rates, but only
if no external data source is available to pay actual acquisition costs
for radiopharmaceuticals.
Response: As we previously stated, we have decided to package
payment for diagnostic radiopharmaceuticals into the payment for
nuclear medicine services. Therefore, proposals for gathering data on
which separate payment could be based are not relevant. However, we
note that when we proposed to acquire ASP data for radiopharmaceuticals
for purposes of paying separately for them under the CY 2006 OPPS,
commenters were virtually unanimous that the industry could not report
valid sales price data on radiopharmaceuticals.
After consideration of the public comments received, we are
finalizing our CY 2008 proposal to provide packaged payment for
diagnostic radiopharmaceuticals, with modification to calculate the
median costs for the APCs for nuclear medicine studies that require a
diagnostic radiopharmaceutical using only claims on which at least one
diagnostic radiopharmaceutical is present. We will implement edits in
the OCE for services furnished on and after January 1, 2008, that will
return to providers any claim for a nuclear medicine study that does
not also report a HCPCS code and charge for a diagnostic
radiopharmaceutical. We are not accepting the APC Panel's
recommendation to set a packaging threshold for diagnostic
radiopharmaceuticals at a median cost of $200 per day. We are accepting
the APC Panel's recommendation to provide information regarding claims
for diagnostic radiopharmaceuticals reported with nuclear medicine
procedures, and we will discuss that information with the Panel at the
2008 winter meeting. Diagnostic radiopharmaceuticals assigned status
indicator ``N'' that will be unconditionally packaged are listed in
Table 10 of this final rule with comment period.
(6) Contrast Agents
For CY 2008, we proposed to package payment for all contrast media
into their

[[Page 66642]]

associated independent diagnostic and therapeutic procedures as part of
our proposed packaging approach for the CY 2008 OPPS (72 FR 42672
through 42674). As noted in section II.A.4.c. of the proposed rule and
this final rule with comment period, packaging the costs of supportive
items and services into the payment for the independent procedure or
service with which they are associated encourages hospital efficiencies
and also enables hospitals to manage their resources with maximum
flexibility. As stated in the proposed rule (72 FR 42672), we believe
that contrast agents are particularly well suited for packaging because
they are always provided in support of an independent diagnostic or
therapeutic procedure that involves imaging, and thus payment for
contrast agents can be packaged into the payment for the associated
separately payable procedures.
Contrast agents are generally considered to be those substances
introduced into or around a structure that, because of the differential
absorption of x-rays, alteration of magnetic fields, or other effects
of the contrast medium in comparison with surrounding tissues, permit
visualization of the structure through an imaging modality. The use of
certain contrast agents is generally associated with specific imaging
modalities, including x-ray, computed tomography (CT), ultrasound, and
magnetic resonance imaging (MRI), for purposes of diagnostic testing or
treatment. They are most commonly administered through an oral or
intravascular route in association with the performance of the
independent procedures involving imaging that are the basis for their
administration. Even in the absence of this proposal to package payment
for all contrast agents, we indicated that we would propose to package
the majority of HCPCS codes for contrast agents recognized under the
OPPS in CY 2008. We consider contrast agents to be drugs under the
OPPS, and as a result they are packaged if their estimated mean per day
cost is equal to or less than $60 for CY 2008. (For more discussion of
our drug packaging criteria, we refer readers to section V.B.2 of this
final rule with comment period.) Seventy-five percent of contrast
agents HCPCS codes have an estimated mean per day cost equal to or less
than $60 based on our CY 2006 proposed rule claims data.
At the time of the proposed rule, contrast agents were described by
those Level II HCPCS codes in the range from Q9945 through Q9964. There
were currently no HCPCS C-codes or other Level II HCPCS codes outside
the range specified above used to report contrast agents under the
OPPS. As shown in Table 19 of the proposed rule, in CY 2007 we packaged
7 out of 20 of these contrast agent HCPCS codes based on the $55
packaging threshold. For CY 2008, we proposed to package all drugs with
a per day mean cost of $60 or less. For CY 2008, the vast majority of
contrast agents would be packaged under the traditional OPPS packaging
methodology using the $60 packaging threshold, based on the CY 2006
claims data available for the proposed rule. In fact, of the 20
contrast agent HCPCS codes we included in our proposed packaging
approach, 15 would have been proposed to be packaged for CY 2008 under
our drug packaging methodology. These 15 codes represent 94 percent of
all occurrences of contrast agents billed under the OPPS, using
proposed rule data. As stated in the proposed rule (72 FR 42672), we
believe that this shift in the packaging status for several of these
agents between CYs 2007 and 2008 may be because, in CY 2007, a number
of the contrast agents exceeded the $55 threshold by only a small
amount and, based on our latest claims data for CY 2008, a number of
these products have now fallen below the proposed $60 threshold. Given
that the vast majority of contrast agents billed would already be
packaged under the OPPS in CY 2008, we stated in the proposed rule (72
FR 42672) that we believe it would be desirable to package payment for
the remaining contrast agents as it promotes efficiency and results in
a consistent payment policy across products that may be used in many of
the same independent procedures. We also noted in the proposed rule (72
FR 42672) that the significant costs associated with these 15 contrast
agents would already be reflected in the median costs for those
independent procedures and, if we were to pay for the 5 remaining
agents separately, we would be treating these 5 agents differently than
the others. If the 5 agents remained separately payable, there would
effectively be two payments for contrast agents when these 5 agents
were billed--a separate payment and a payment for packaged contrast
agents that was part of the procedure payment. This could potentially
provide a payment incentive to administer certain contrast agents that
might not be the most clinically appropriate or cost effective.
Moreover, as noted previously, contrast agents are always provided with
independent procedures and, under a consistent approach to packaging in
keeping with our enhanced efforts to encourage hospital efficiency and
promote value-based purchasing under the OPPS, their payment would be
appropriately packaged for CY 2008.
The estimated overall impact of these changes presented in section
XXII.B. of the proposed rule (and section XXIV.B. of this final rule
with comment period) was based on the assumption that hospital behavior
would not change with regard to when these contrast agents are provided
by the same hospital that performs the imaging procedure. Under this
policy, in order to provide imaging procedures requiring contrast
agents, hospitals will either need to administer the necessary contrast
agent themselves or refer patients elsewhere for the administration of
the contrast agent. In the latter case, claims data would show such a
change in practice in future years and that change would be reflected
in future ratesetting. However, with respect to contrast agents, we
believe that hospitals are limited in the extent to which they could
change their behavior with regard to how they furnish these services
because contrast agents are typically provided on the same day
immediately prior to an imaging procedure being performed. We expected
that hospitals would always bill the contrast agent on the same claim
as the other independent services for which the contrast agent was
administered.
As we indicated earlier, in all cases we are providing that
hospitals that furnish the supportive contrast agent in association
with independent procedures involving imaging must bill both services
on the same claim so that the cost of the contrast agent can be
appropriately packaged into payment for the significant independent
procedure. As noted in the proposed rule (72 FR 42673), we expect to
carefully monitor any changes in billing practices on a service-
specific and hospital-specific basis to determine whether there is
reason to request that QIOs review the quality of care furnished or to
request that Program Safeguard Contractors review the claims against
the medical record.
During its September 2007 APC Panel meeting, the Panel recommended
that contrast agents be packaged as proposed.
We received many public comments on the proposal to package payment
for all contrast agents. A summary of the public comments and our
responses follow.
Comment: Many commenters supported our proposal to package all
contrast agents, while others requested that we pay separately for all
contrast agents in accordance with the Average

[[Page 66643]]

Sales Price (ASP) payment methodology. Many commenters requested that
we treat contrast agents in the same manner as we treat other drugs
under the OPPS, thereby continuing to apply the proposed $60 threshold
to determine packaging status. One commenter expressed concern with the
accuracy of CMS' cost data, and estimated that if contrast agents were
packaged, hospitals would not receive any payment in addition to the
payment for the procedure without contrast. Several commenters
requested that CMS create edits to ensure that the costs for contrast
agents are only packaged with appropriate procedures, rather than with
any code that may appear on the claim. Other commenters requested that
CMS implement edits to ensure that contrast agents are always billed
with procedures that require contrast agents. Some commenters were
concerned that CMS may not be accounting for the full cost of the
contrast agent, because of the methodology used to determine the
acquisition costs of the agents. One commenter noted that it is
difficult for hospitals operationally to treat contrast agents as
packaged, then separately payable the following year, and then packaged
again. In addition, commenters were concerned that packaged status
would encourage less coding accuracy, which would hinder the
development of accurate future payment rates. One commenter expressed
concern that patient access to more expensive contrast agents, such as
gadolinium-based contrast agents, may be limited, if the proposal to
package all contrast agents were finalized.
Response: We have considered all of the comments on this issue and
have concluded that it is appropriate to package all contrast agents
into payment for the procedure in which they are used. Many contrast
agents are packaged currently under the OPPS and have been packaged
since the inception of the OPPS. We have no reason to believe that the
cost data that we developed for contrast agents are insufficient to
result in an appropriate median cost for the services in which the
contrast agent is used. Moreover, we are not convinced that there are
benefits to making separate payment that would outweigh the incentives
for appropriate utilization and efficiency that are created by
packaging the payment for the contrast agent into the payment for the
service in which it is used.
In addition, we do not believe it is necessary to create edits to
ensure that contrast agents are billed in conjunction with services
that require contrast agents. For example, we believe that the payment
rates for CT with and without contrast are accurate, further bolstering
our perspective that hospitals are correctly billing the charges for
contrast agents for those services that require them. There is
currently a significant cost differential that appears to be
appropriate between CT scans with and without contrast, and we have no
reason to believe that this cost differential is inaccurate. For
example, the CY 2008 median cost for CPT code 72192 (Computer
tomographic angiography, pelvis, without contrast material) is
approximately $190. The CY 2008 median cost for CPT code 72193
(Computer tomographic angiography, pelvis, with contrast material) the
same procedure, with contrast, is approximately $249. The CY 2008
median costs for the services in APC 0332 (Computed Tomography Without
Contrast) range from approximately $164 to $227. The CY 2008 proposed
median costs for the services in APC 0283 (Computed Tomography with
Contrast) range from approximately $247 to $333, significantly higher
than the median costs for the procedures that do not involve contrast
media.
Providers have several ways to report contrast agents, including
uncoded charges on revenue code lines, including the charge for the
contrast agent in the charge for the procedure, or reporting the
appropriate HCPCS code for the contrast agent that was used. Prior to
proposing to package payment for all contrast agents, we note that
there were no concerns or complaints about the payment rates for
imaging studies with and without contrast, when a number of the
commonly used contrast agents were packaged. In addition, if we were to
subset claims for procedures that require a contrast agent to use only
those claims that included a coded contrast agent, we would be able to
use many fewer claims, which would cause our median costs to be less
accurate and representative.
Most of the contrast media would have been packaged in the absence
of this packaging proposal, because 75 percent of all contrast agents
fall below the $60 threshold for CY 2008. However, we are interested to
know whether the public thinks it would be beneficial from a
ratesetting perspective to require hospitals to report contrast media
by including HCPCS codes for contrast on all claims for procedures that
use contrast. We are particularly concerned with unnecessarily
burdening hospitals, and are seeking comments in this final rule with
comment period related to how administratively burdensome this
requirement would be for hospitals.
In response to the commenter who found it difficult operationally
to manage changes in the packaged status of contrast media, we note
that we do not anticipate regular changes to the packaged status of
contrast media, now that we are finalizing our proposal to package
payment for all contrast media.
In response to the commenter's concern about payment for expensive
contrast agents like gadolinium-based contrast media, we note that the
gadolinium-based contrast agents would be packaged under the $60
packaging threshold, regardless of whether this proposal to package
payment for all contrast media was finalized. Packaging payment for
these products provides hospitals with an incentive to choose the most
cost-effective contrast agent that meets the needs of the patient.
Comment: Several commenters questioned whether we have the
authority under the Social Security Act to package all contrast agents.
Response: See section V.B.4.b. of this final rule with comment
period for a discussion of the rationale to package payment for
contrast agents as SCODs and our belief that the packaged payment
provides payment at average acquisition cost for the products.
Comment: Several commenters requested that contrast agents used for
echocardiography imaging procedures remain separately paid in CY 2008.
These commenters were concerned that echocardiography procedure codes
do not distinguish between services provided with contrast and those
provided without contrast, although section 1833(t)(2)(G) of the Act
requires that contrast and noncontrast procedures be paid through
separate APC groups. As echocardiography procedures are not usually
performed with contrast, the commenters asserted that the packaged
payment for contrast and echocardiography would be insufficient to
cover both costs, and that physicians would therefore be limited in
their ability to use contrast when necessary.
Response: The commenters are correct; section 1833(t)(2)(G) of the
Act requires us to create additional groups of services for procedures
that use contrast agents. As contrast agents were eligible for separate
payment in CY 2007 but subject to the OPPS drug packaging threshold, a
distinction was made in payment between those procedures performed with
contrast from those without contrast. However, as noted above, we are
finalizing our proposal to package all contrast agents in CY 2008
regardless of if they meet the OPPS drug packaging threshold.

[[Page 66644]]

Because current CPT codes do not distinguish between
echocardiography procedures performed without contrast from those
performed with contrast, we calculated HCPCS-specific median costs for
echocardiography procedures that were performed with contrast by
isolating single and ``pseudo'' single claims with CPT codes 93303
through 93350 where there was also a contrast agent on the claim. Our
analysis indicated that median costs for echocardiography procedures
performed with contrast are similar both clinically and in terms of
resource use, as evidenced by similar HCPCS median costs. Therefore,
pursuant to the statute, we have created APC 0128 (Echocardiogram With
Contrast) to provide payment for echocardiography procedures that are
performed with a contrast agent in CY 2008.
In order for hospitals to report echocardiography procedures
performed with contrast, as all contrast will be packaged in CY 2008,
we have also created the eight new HCPCS codes shown in Table 3 below.
We have assigned HCPCS codes C8921 through C8928 to the newly created
APC 0128. Hospitals performing echocardiography procedures without
contrast will continue to use the CPT codes indicated in Table 5, while
echocardiography procedures performed with contrast will be reported
with the newly developed C-codes also identified in Table 5. We will
provide further instruction about reporting echocardiography procedures
with and without contrast in the January 2007 OPPS update.

Table 5.--CY 2008 Echocardiography HCPCS Codes for Procedures With and Without Contrast
--------------------------------------------------------------------------------------------------------------------------------------------------------
Echocardiography without contrast Echocardiography with contrast
--------------------------------------------------------------------------------------------------------------------------------------------------------
HCPCS Descriptor SI APC HCPCS Descriptor SI APC
--------------------------------------------------------------------------------------------------------------------------------------------------------
93303............................... Transthoracic S 0269 C8921.................. Transthoracic S 0128
echocardiography for echocardiography with
congenital cardiac contrast for congenital
anomalies; complete. cardiac anomalies; complete.
93304............................... Transthoracic S 0697 C8922.................. Transthoracic S 0128
echocardiography for echocardiography with
congenital cardiac contrast for congenital
anomalies; follow-up or cardiac anomalies; follow-
limited study. up or limited study.
93307............................... Echocardiography, S 0269 C8923.................. Transthoracic S 0128
transthoracic, real-time echocardiography with
with image documentation contrast, real-time with
(2D) with or without M-mode image documentation (2D)
recording; complete. with or without M-mode
recording; complete.
93308............................... Echocardiography, S 0697 C8924.................. Transthoracic S 0128
transthoracic, real-time echocardiography with
with image documentation contrast, real-time with
(2D) with or without M-mode image documentation (2D)
recording; follow-up or with or without M-mode
limited study. recording; follow-up or
limited study.
93312............................... Echocardiography, S 0270 C8925.................. Transesophageal S 0128
transesophageal, real time echocardiography (TEE) with
with image documentation contrast, real time with
(2D) (with or without M- image documentation (2D)
mode recording); including (with or without M-mode
probe placement, image recording); including probe
acquisition, interpretation placement, image
and report. acquisition, interpretation
and report.
93313............................... Echocardiography, S 0270 ...... .....
transesophageal, real time
with image documentation
(2D) (with or without M-
mode recording); placement
of transesophageal probe
only.
93314............................... Echocardiography, N ...... ...... .....
transesophageal, real time
with image documentation
(2D) (with or without M-
mode recording); image
acquisition, interpretation
and report only.
93315............................... Transesophageal S 0270 C8926.................. Transesophageal S 0128
echocardiography for echocardiography (TEE) with
congenital cardiac contrast for congenital
anomalies; including probe cardiac anomalies;
placement, image including probe placement,
acquisition, interpretation image acquisition,
and report. interpretation and report.
93316............................... Transesophageal S 0270 ...... .....
echocardiography for
congenital cardiac
anomalies; placement of
transesophageal probe only.
93317............................... Transesophageal N ...... ...... .....
echocardiography for
congenital cardiac
anomalies; image
acquisition, interpretation
and report only.
93318............................... Echocardiography, S 0270 C8927.................. Transesophageal S 0128
transesophageal (TEE) for echocardiography (TEE) with
monitoring purposes, contrast for monitoring
including probe placement, purposes, including probe
real time 2-dimensional placement, real time 2-
image acquisition and dimensional image
interpretation leading to acquisition and
ongoing (continuous) interpretation leading to
assessment of (dynamically ongoing (continuous)
changing) cardiac pumping assessment of (dynamically
function and to therapeutic changing) cardiac pumping
measures on an immediate function and to therapeutic
time basis. measures on an immediate
time basis.

[[Page 66645]]

93320............................... Doppler echocardiography, N ...... ...... .....
pulsed wave and/or
continuous wave with
spectral display (List
separately in addition to
codes for echocardiographic
imaging); complete.
93321............................... Doppler echocardiography, N ...... ...... .....
pulsed wave and/or
continuous wave with
spectral display (List
separately in addition to
codes for echocardiographic
imaging); follow-up or
limited study (List
separately in addition to
codes for echocardiographic
imaging).
93325............................... Doppler echocardiography N ...... ...... .....
color flow velocity mapping
(List separately in
addition to codes for
echocardiography).
93350............................... Echocardiography, S 0697 C8928.................. Transthoracic S 0128
transthoracic, real-time echocardiography with
with image documentation contrast, real-time with
(2D), with or without M- image documentation (2D),
mode recording, during rest with or without M-mode
and cardiovascular stress recording, during rest and
test using treadmill, cardiovascular stress test
bicycle exercise and/or using treadmill, bicycle
pharmacologically induced exercise and/or
stress, with interpretation pharmacologically induced
and report. stress, with interpretation
and report.
--------------------------------------------------------------------------------------------------------------------------------------------------------

In order to determine a payment rate for APC 0128 for CY 2008, we
isolated single and ``pseudo'' single claims in our database that
included those CPT codes in the range of 93303 through 93350 that
correspond to the contrast studies described by the new C-codes. We
created new C-codes for contrast studies only to parallel those CPT
codes for procedures where we expected that the procedures could be
provided with or without contrast. For claims where an echocardiography
procedure was billed with a contrast agent, we packaged the payment for
the contrast agent into the echocardiography procedure and then
calculated the median cost for this subset of claims. This became the
median for APC 0128. In addition, we recalculated the medians for APCs
0269 (Level II Echocardiogram Without Contrast Except Transesophageal);
0270 (Transesophageal Echocardiogram Without Contrast); and 0697 (Level
I Echocardiogram Without Contrast Except Transesophageal), as we needed
to remove the claims from the ratesetting process that included
contrast because they were used to set the median cost for APC 0128.
The resulting CY 2008 APC medians are shown in Table 6.

Table 6.-CY 2008 Final Rule Echocardiogram APC Medians
------------------------------------------------------------------------
HCPCS
APC Title Codes Median
------------------------------------------------------------------------
0269......................... Level II 93303 $401
Echocardiogram 93307
Without Contrast
Except
Transesophageal.
0270......................... Transesophageal 93312 $517
Without Contrast 93313
Echocardiogram. 93315
93316
93318
0697......................... Level I 93304 $210
Echocardiogram 93308
Without Contrast 93350
Except
Transesophageal.
0128......................... Echocardiogram With C8921 $534
Contrast. C8922
C8923
C8924
C8925
C8926
C8927
C8928
------------------------------------------------------------------------

We believe that these medians accurately reflect hospital costs
when performing echocardiography procedures, both with and without
contrast. This final coding and payment methodology allows us to both
adhere to the statutory requirement to create additional groups of
services for procedures that use contrast agents and to package payment
contrast agents in CY 2008. Therefore, we are finalizing our policy to
assign HCPCS codes C8921

[[Page 66646]]

through C8928 to APC 0128 and will instruct hospitals to use these
contrast-specific HCPCS codes when submitting an OPPS claim for
echocardiography procedures performed with contrast.
For CY 2008, we are finalizing our proposal to unconditionally
packaged payment for all contrast agents, with modification as
discussed above. We are fully adopting the APC Panel recommendation to
package all contrast media for CY 2008. Consistent with the statute, we
are also finalizing the creation of APC 0128, as well as eight Level II
HCPCS codes that describe echocardiography procedures performed with
contrast. Contrast agents that are packaged are assigned status
indicator ``N'' and are listed in Table 10 of this final rule with
comment period.
(7) Observation Services
We proposed to package payment for all observation care, reported
under HCPCS code G0378 (Hospital observation services, per hour) for CY
2008. We proposed that payment for observation care would be packaged
as part of the payment for the separately payable services with which
it is billed. We have defined observation care as a well defined set of
specific, clinically appropriate services that 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 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 or to patients with unexpectedly prolonged
recovery after surgery. Throughout the proposed rule and in this final
rule with comment period, as well as in our manuals and guidance
documents, we use both of the terms ``observation services'' and
``observation care'' in reference to the services defined above.
Payment for all observation care under the OPPS was packaged prior
to CY 2002. Since CY 2002, separate payment of a single unit of an
observation APC for an episode of observation care has been provided in
limited circumstances. Effective for services furnished on or after
April 1, 2002, separate payment for observation was made if the
beneficiary had chest pain, asthma, or congestive heart failure and met
additional criteria for diagnostic testing, minimum and maximum limits
to observation care time, physician care, and documentation in the
medical record (66 FR 59856, 59879). Payment for observation care that
did not meet these specified criteria was packaged. Between CY 2003 and
CY 2006, several more changes were made to the OPPS policy regarding
separate payment for observation services, such as: clarification that
observation is not separately payable when billed with ``T'' status
procedures on the day of or day before observation care; development of
specific Level II HCPCS codes for hospital observation services and
direct admission to observation care; and removal of the initially
established diagnostic testing requirements for separately payable
observation (67 FR 66794, 69 FR 65828, and 70 FR 68688). Throughout
this time period, we maintained separate payment for observation care
only for the three specified medical conditions, and OPPS payment for
observation for all other clinical conditions remained packaged.
Since January 1, 2006, hospitals have reported observation services
based on an hourly unit of care using HCPCS code G0378. This code has a
status indicator of ``Q'' under the CY 2007 OPPS, meaning that the OPPS
claims processing logic determines whether the observation is packaged
or separately payable. The OCE's current logic determines whether
observation services billed under HCPCS code G0378 are separately
payable through APC 0339 (Observation) or whether payment for
observation services will be packaged into the payment for other
separately payable services provided by the hospital in the same
encounter based on criteria discussed subsequently. (We note that if an
HOPD directly admits a patient to observation, Medicare currently pays
separately for that direct admission reported under HCPCS code G0379
(Direct admission of patient for hospital observation care) in
situations where payment for the actual observation care reported under
HCPCS code G0378 is packaged.) For CY 2008, as discussed in more detail
later in this final rule with comment period (section XI.), we proposed
to continue the coding and payment methodology for direct admission to
observation status, with the exception of the requirement that HCPCS
code G0379 is only eligible for separate payment if observation care
reported under HCPCS code G0378 does not qualify for separate payment.
As noted in the proposed rule (72 FR 42674), this requirement would no
longer be applicable under our proposal to package all observation
services reported under HCPCS code G0378.
For CY 2007, separate OPPS payment may be made for observation
services reported under HCPCS code G0378 provided to a patient when all
of the following requirements are met. The hospital would receive a
single separate payment for an episode of observation care (APC 0339)
when:
1. Diagnosis Requirements
a. The beneficiary must have one of three medical conditions:
congestive heart failure, chest pain, or asthma.
b. Qualifying ICD-9-CM diagnosis codes 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 is not allowed.
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 follow-up 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 claim for observation services must include one of the
following services in addition to the reported observation services.
The additional services listed below must have a line-item date of
service on the same day or the day before the date reported for
observation:
An emergency department visit (APC 0609, 0613, 0614, 0615,
or 0616); or
A clinic visit (APC 0604, 0605, 0606, 0607, or 0608); or
Critical care (APC 0617); or
Direct admission to observation reported with HCPCS code
G0379 (APC 0604).
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

[[Page 66647]]

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.
In the context of our proposed CY 2008 packaging approach, we
indicated that we believed that it was appropriate to package payment
for all observation services reported with HCPCS code G0378 under the
CY 2008 OPPS. Primarily, observation services are ideal for packaging
because they are always provided as a supportive service in conjunction
with other independent separately payable hospital outpatient services
such as an emergency department (ED) visit, surgical procedure, or
another separately payable service, and thus observation costs can
logically be packaged into OPPS payment for independent services. As
discussed extensively in this section, packaging payment into larger
payment bundles creates incentives for providers to furnish services in
the most efficient way that meets the needs of the patient, encouraging
long-term cost containment.
As we discussed in the general overview of the CY 2008 packaging
approach (section II.A.4.b. of this final rule with comment period),
there has been substantial growth in program expenditures for hospital
outpatient services under the OPPS in recent years. The primary reason
for this upsurge is growth in the intensity and utilization of services
rather than the general price of services or enrollment changes. This
observed trend is notably reflected in the frequency and costs of
separately payable observation care for the last few years. While
median costs for an episode of observation care that would meet the
criteria for separate payment have remained relatively stable between
CYs 2003 and 2006, the frequency of claims for separately payable
observation services has rapidly increased. Comparing claims data for
separately payable observation care available for proposed rules
spanning from CYs 2005 to 2008 (that is, claims data reflecting
services furnished from CYs 2003 to 2006), we saw substantial growth in
separately payable observation care billed under the OPPS over that
time. In CY 2003, the first full year that observation care was
separately payable, there were approximately 56,000 claims for
separately payable observation care. In CY 2004, there were
approximately 77,000 claims for separately payable observation care. By
CY 2005, that number had increased to approximately 124,300 claims,
representing an increase of approximately 61 percent over the previous
calendar year. Based on the CY 2006 data available for issuance of the
proposed rule, the frequency of claims for separately payable
observation services increased to more than 271,200 claims which
represents an increase of approximately 118 percent over CY 2005 and
more than triple the number of claims for CY 2004. While it is not
possible to discern the specific factors responsible for the growth in
claims for separately payable observation services, as there have been
minor changes in both the process and criteria for separate payment for
these services over this time period, the substantial growth by itself
is noteworthy.
In the proposed rule (72 FR 42675), we indicated that we were also
concerned that the current criteria for separate payment for
observation services may provide disincentives for efficiency. For CY
2007, in order for observation services to be separately payable, they
must last at least 8 hours. While this criterion was put in place to
ensure that separate payment is made only for observation services of a
substantial duration, it may create a financial disincentive for an
HOPD to make a timely determination regarding a patient's safe
disposition after observation care ends. By packaging payment for all
observation services, regardless of their duration, we would provide
incentives for more efficient delivery of services and timely decision-
making. The current criterion also prohibits separate payment for
observation services when a ``T'' status procedure (generally a
surgical procedure) is provided on the same day or the previous day by
the HOPD to the same Medicare beneficiary. Again, this may create a
financial disincentive for hospitals to provide minor surgical
procedures during a patient's observation stay, unless those procedures
are essential to the patient's care during that time period, even if
the most efficient and effective performance of those procedures could
be during the single HOPD encounter.
Currently, the OPPS pays separately for observation care for only
the three original medical conditions designated in CY 2002,
specifically chest pain, asthma, and congestive heart failure. As
discussed in more detail in the observation section (section XI.) of
this final rule with comment period, the APC Panel recommended at its
March 2007 meeting that we consider expanding separate payment for
observation services to include two additional diagnoses, syncope and
dehydration. As mentioned previously, we have defined observation care
as a well-defined set of specific, clinically appropriate services,
which include ongoing, short term treatment, assessment, and
reassessment, that are furnished while a decision is being made
regarding whether a patient will require further treatment as a
hospital inpatient or if the individual is able to be discharged from
the hospital. Given the definition of observation services, it is clear
that, in certain circumstances, observation care could be appropriate
for patients with a range of diagnoses. Both the APC Panel and numerous
commenters to prior OPPS proposed rules have confirmed their agreement
with this perspective. In addition, the June 2006 Institute of Medicine
(IOM) Report entitled, ``Hospital-Based Emergency Care: At the Breaking
Point,'' encourages hospitals to apply tools to improve the flow of
patients through emergency departments, including developing clinical
decisions units where observation care is provided. The IOM's Committee
on the Future of Emergency Care in the United States Health System
recommended that CMS remove the current limitations on the medical
conditions that are eligible for separate observation care payment in
order to encourage the development of such observation units.
We indicated in the proposed rule (72 FR 42676) that, as packaging
payment provides desirable incentives for greater efficiency in the
delivery of health care and provides hospitals with significant
flexibility to manage their resources, we believed it was most
appropriate to treat observation care for all diagnoses similarly by
packaging its costs into payment for the separately payable independent
services with which the observation is associated. We noted in the
proposed rule (72 FR 42676) that this consistent payment methodology
would provide hospitals with the flexibility to assess their approaches
to patient care and patient flow and provide observation care for
patients with a variety of clinical conditions when hospitals conclude
that observation services would improve their treatment of those
patients. Approximately 70 percent of the occurrences of observation
care billed under the OPPS are currently packaged, and this expansion
would extend the incentives for efficiency already present for the vast
majority of observation services that are already packaged under the
OPPS to the remaining 30 percent of

[[Page 66648]]

observation services for which we currently make separate payment.
The estimated overall impact of these changes, presented in section
XXII.B. of the proposed rule (and in section XXIV.B. of this final rule
with comment period), was based on the assumption that hospital
behavior would not change with regard to when the dependent observation
care is provided in the same encounter and by the same hospital that
performs the independent services. To the extent that hospitals could
change their behavior and cease providing observation services, refer
patients elsewhere for that care, or increase the frequency of
observation services, the data would show such a change in practice in
future years and that change would be reflected in future budget
neutrality adjustments. However, with respect to observation care, we
indicated that we believe that hospitals are limited in the extent to
which they could change their behavior with regard to how they furnish
these services because observation care, by definition, is 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 after
receiving the independent services. We indicated that we believe it is
unlikely that hospitals will cease providing medically necessary
observation care or refer patients elsewhere for that care if they were
unable to reach a decision that the patient could be safely discharged
from the outpatient department. We stated in the proposed rule (72 FR
42677) that we expect that hospitals would always bill the supportive
observation services on the same claim as the other independent
services provided in the single hospital encounter.
As we indicated earlier, in all cases we proposed that hospitals
that furnish the observation care in association with independent
services must bill those services on the same claim so that the costs
of the observation services can be appropriately packaged into payment
for the independent services. We stated in the proposed rule (72 FR
42677) that we expected to carefully monitor any changes in billing
practices on a service-specific and hospital-specific basis to
determine whether there is reason to request that QIOs review the
quality of care furnished or to request that Program Safeguard
Contractors review the claims against the medical record.
During its September 2007 APC Panel meeting, the APC Panel
recommended that CMS not package observation services as proposed,
thereby maintaining the CY 2007 payment policy. However, the APC Panel
indicated that if CMS were to package observation, CMS should create a
composite emergency department/clinic and observation APC (or group of
composite APCs) that would be paid only when both services were
furnished; if the composite APC were paid, neither the emergency
department nor the clinic visit would be paid separately. The APC Panel
recommended that coding and service requirements currently applicable
to separately paid observation would remain the same, with the
exception that there would be no clinical condition (that is,
diagnosis) restrictions on payment for the composte APC. The APC Panel
noted that payment rates for this (these) composite APC(s) would need
to be adjusted based on readily available historical visit and
observation data.
We received many public comments on our proposal to package payment
for observation services into the payment for the services with which
it is furnished. A summary of public comments and our responses follow.
Comment: Several commenters, including MedPAC, requested that CMS
finalize its policy to package payment for all observation care. MedPAC
specifically stated that packaging of observation care is logical
because currently 70 percent of observation care is packaged. However,
most commenters addressing observation packaging requested that CMS
finalize its proposal to package all of the categories of codes that it
identified in the proposed rule, with the exception of observation
care. Many of these commenters stated that observation care is often a
significant service and is not supportive and integral to an
independent service. These commenters recommended that CMS implement
various policies, such as paying separately for all observation care
regardless of diagnosis, expanding the diagnoses that would enable
separate payment, postponing packaging observation services, or
creating a composite APC to allow separate payment for observation care
in certain circumstances.
Response: Based on our review of the comments received, we continue
to believe that observation services are usually ancillary and
supportive to the other independent services that are provided to the
patient on the same day. However, we accept the commenters' and the APC
Panel's statements that observation care may sometimes rise to the
level of a major component service, specifically, when it is provided
for 8 hours or more in association with a high level clinic or ED
visit, direct admission to observation, or critical care services and
it is not provided in conjunction with a surgical procedure. In
addition, based on our review of the clinical circumstances provided by
many commenters, we recognize that observation care can be a major
component service when provided to patients with clinical conditions
other than congestive heart pain, chest pain, and asthma for which
separate observation payment may currently by provided under the OPPS.
Consistent with our statutory flexibility to define what
constitutes a service under the OPPS, we proposed to view a service, in
some cases, as the totality of care provided in a hospital outpatient
encounter that would be reported with two or more HCPCS codes for
component services with the proposal of composite APCs for low dose
rate prostate brachytherapy and cardiac electrophysiological evaluation
and ablation services. In general, we intend to request public comment
on possible composite APCs in the annual OPPS proposed rulemaking
cycle. This also includes creating composite APCs, as appropriate, in
response to those public comments received during rulemaking.
Therefore, we have decided to create two composite APCs that will
provide payment to hospitals in certain circumstances when extended
assessment and management of a patient occur. These composite APCs
describe an extended encounter for care provided to a patient.
Specifically, we are creating two new composite APCs for CY 2008, APCs
8002 (Level I Extended Assessment and Management Composite) and 8003
(Level II Extended Assessment and Management Composite). APC 8002
describes an encounter for care provided to a patient that includes a
high level (Level 5) clinic visit or direct admission to observation in
conjunction with observation services of substantial duration. APC 8003
describes an encounter for care provided to a patient that includes a
high level (Level 4 or 5) emergency department visit or critical care
services in conjunction with observation services of substantial
duration. As with the other composite APCs that we proposed, we
anticipate that assignment to and payment through one of these two new
composite APCs will be transparent from a billing perspective. The OCE
will evaluate every claim received to determine if payment through a
composite APC is appropriate. If payment through a composite APC is
inappropriate, the OCE in conjunction with the PRICER, will determine
the appropriate status

[[Page 66649]]

indicator, APC, and payment for every code on a claim. The specific
logic associated with the two Extended Assessment and Management
Composite APCs is detailed below.
APC 8002 will be assigned when 8 or more units of HCPCS code G0378
(Hospital observation service, per hour) are billed--
On the same day as HCPCS code G0379 (Direct admission of
patient for hospital observation care); or
On the same day or the day after--
++ CPT code 99205 (Office or other outpatient visit for the
evaluation and management of a new patient (Level 5)); or
++ CPT code 99215 (Office or other outpatient visit for the
evaluation and management of an established patient (Level 5)).
If a hospital provides a service with status indicator ``T'' on the
same date of service, or 1 day earlier than the date of service
associated with HCPCS code G0378, the hospital will not be eligible for
payment under APC 8002. There is no diagnosis requirement for purposes
of this composite APC. Rather, patients with any diagnosis may trigger
payment of APC 8002. If any of the criteria listed above are not met,
payment would not be made through APC 8002. Instead, payment for any
separately payable services, including the clinic visit, would be made
through the usual associated APCs. Payment for a direct admission to
observation would be made according to the usual HCPCS code G0379
payment criteria and payment for HCPCS code G0378 would remain packaged
because we consider the observation care to be supportive and ancillary
to whichever service(s) it accompanies.
APC 8003 will be assigned when eight or more units of HCPCS code
G0378 (Hospital observation service, per hour) are billed on the same
day or the day after CPT code 99284 (Emergency department visit for the
evaluation and management of a patient (Level 4)), 99285 (Emergency
department visit for the evaluation and management of a patient (Level
5)); or 99291 (Critical care, evaluation and management of the
critically ill or critically injured patient; first 30-74 minutes). The
remaining criteria are identical to the criteria associated with
composite APC 8002. If a hospital provides a service with status
indicator ``T'' on the same date of service, or one day earlier than
the date of service associated with HCPCS code G0378, the composite APC
8003 would not apply. Instead, payment for the ED visit or critical
care and any other separately payable services will be made through the
usual associated APCs, and payment for HCPCS code G0378 for observation
services will remain packaged because we consider the observation care
to be supportive and ancillary to whichever service(s) it accompanies.
There is no diagnosis requirement for purposes of this composite APC
either. Instead, patients with any diagnosis may trigger payment of APC
8003.
We note that HCPCS code G0378 will continue to be assigned status
indicator ``N,'' signifying that its payment is always packaged. As
stated above, in most circumstances, observation services are
supportive and ancillary to the other services provided to a patient.
In the circumstances when observation care is elevated to a major
component service in conjunction with a high level visit or direct
admission that is an integral part of a patient's extended encounter
for care, payment is made for the entire care encounter through APC
8002 or 8003, as appropriate.
We are retaining as general reporting requirements for all
observation services those criteria related to physician order and
evaluation, documentation, and observation beginning and ending time as
listed in section XI. of this final rule with comment period. Those are
more general requirements that encourage hospitals to provide medically
reasonable and necessary care and help to ensure the proper reporting
of observation services on correctly coded hospital claims that reflect
the full charges associated with all hospital resources utilized to
provide the reported services.
The CY 2008 median cost for APC 8002 (Level I Extended Assessment
and Management Composite) is approximately $347. The payment associated
with APC 8002 is intended to pay the hospital for the costs associated
with a single episode of extended assessment and management that
includes a high level clinic visit or direct admission to the hospital
for observation care, 8 hours or more of observation services, and any
associated packaged services. We calculated this median cost using all
CY 2006 single bill claims that met the criteria for APC 8002, as
specified above. The CY 2008 median cost for APC 8003 (Level II
Extended Assessment and Management Composite) is approximately $631.
The payment associated with APC 8003 is intended to pay the hospital
for the costs associated with a single episode of more intense extended
assessment and management that includes a high level emergency
department visit or critical care services, 8 hours or more of
observation services, and any associated packaged services. We
calculated this median cost using all CY 2006 single bill claims that
met the criteria for APC 8003, as specified above.
While analyzing CY 2006 claims data, the most current full year
claims data available, we observed that applying CY 2008 criteria for
composite APCs resulted in payment for 55 percent more instances of
observation care through a composite APC than if we had applied the CY
2007 criteria to those same claims. In addition, our CY 2006 claims
data indicate that close to 30 percent of all observation care was paid
separately. We estimate that roughly 90 percent of those instances of
separately payable observation care reported in CY 2006 would be
eligible for payment through composite APCs 8002 and 8003, using CY
2008 criteria. Those separately payable observation services that would
not be eligible for payment through a composite APC involve observation
services that were associated with low level clinic or emergency
department visits. In addition, some of the packaged observation care
that was provided in CY 2006 would be eligible for payment through
composite APCs 8002 and 8003 because we are eliminating the diagnosis
requirement for CY 2008.
As noted in detail in section IX.C of this final rule with comment
period, we see a normal and stable distribution of clinic and ED visit
levels. We do not expect this distribution to change due to the
increase in claims for high level visits that may result from the new
composite APCs. Depending on our CY 2008 claims data (which would be
used for the CY 2010 OPPS), we may choose to modify the composite APCs
that we are creating for CY 2008 or move to packaging observation care
as we originally proposed to create further incentives for hospitals to
operate in an efficient way.
In summary, for CY 2008, payment for observation services will
remain packaged with status indicator ``N.'' We are creating two
composite APCs for extended assessment and management, of which
observation care is a component major service. When criteria for
payment of the composite APCs are met, separate payment will be made to
the hospital through the composite APC. This composite APC payment
methodology will contribute to our goal of providing payment under the
OPPS for a larger bundle of component services provided in a single
hospital outpatient encounter, creating additional hospital incentives
for efficiency and cost containment, while providing hospitals with the
most flexibility to manage their resources.

[[Page 66650]]

d. Development of Composite APCs
(1) Background
As we discuss above in regard to our reasons for our packaging
approach for the CY 2008 OPPS, we believe that it is crucial that the
payment approach of the OPPS create incentives for hospitals to seek
ways to provide services more efficiently than exist under the current
OPPS structure and allow hospitals maximum flexibility to manage their
resources. The current OPPS structure usually provides payment for
individual services which are generally defined by individual HCPCS
codes. We currently package the costs of some items and services (such
as drugs and biologicals with an average per day cost of less than $55)
into the payment for separately payable individual services. However,
because the extent of packaging in the OPPS is currently modest,
furnishing many individual separately payable services increases total
payment to the hospital. We believe that this aspect of the current
OPPS structure is a significant factor in the growth in volume and
spending that we discuss in our general overview and provides a primary
rationale for the packaging approach for services that we proposed for
the CY 2008 OPPS. While packaging payment for supportive dependent
services into the payment for the independent services which they
accompany promotes greater efficiency and gives hospitals some
flexibility to manage their resources, we believe that payment for
larger bundles of major separately paid services that are commonly
performed in the same hospital outpatient encounter or as part of a
multi-day episode of care would create even more incentives for
efficiency, as discussed earlier. Moreover, defining the ``service''
paid under the OPPS by combinations of HCPCS codes for component
services that are commonly performed in the same encounter and that
result in the provision of a complete service would enable us to use
more claims data and to establish payment rates that we believe more
appropriately capture the costs of services paid under the OPPS.
Section 1833(t)(1)(B) of the Act permits us to define what
constitutes a ``service'' for purposes of payment under the OPPS and is
not restricted to defining a ``service'' as a single HCPCS code. For
example, the OPPS currently packages payment for certain items and
services reported with HCPCS codes into the payment for other
separately payable services on the claim. Consistent with our statutory
flexibility to define what constitutes a service under the OPPS, we
proposed to view a service, in some cases, as not just the diagnostic
or treatment modality identified by one individual HCPCS code but as
the totality of care provided in a hospital outpatient encounter that
would be reported with two or more HCPCS codes for component services.
In view of this statutory flexibility to define what constitutes a
``service'' for purposes of OPPS payment, our desire to encourage
efficiency in HOPD care, our focus on value-based purchasing, and our
desire to use as much claims data as possible to set payment rates
under the OPPS, we examined our claims data to determine how we could
best use the multiple procedure claims (``hardcore'' multiples) that
are otherwise not available for ratesetting because they include
multiple separately payable procedures furnished on the same date of
service. As discussed in more detail in our discussion of single and
multiple procedure claims in section II.A.1.b. of this final rule with
comment period, we have focused in recent years on ways to convert
multiple procedure claims to single procedure claims to maximize our
use of the claims data in setting median costs for separately payable
procedures. We have been successful in using the bypass list to
generate ``pseudo'' single procedure claims for use in median setting,
but this approach generally does not enable us to use the hardcore
multiple claims that contain multiple separately payable procedures,
all with associated packaging that cannot be split among them. We
believe that we could use the data from many more multiple procedure
claims by creating APCs for payment of those services defined as
frequently occurring common combinations of HCPCS codes for component
services that we see in correctly coded multiple procedure claims.
Our examination of data for multiple procedure claims identified
two specific sets of services that we believe are good candidates for
payment based on the naturally occurring common combinations of
component codes that we see on the multiple procedure claims. These are
low dose rate (LDR) prostate brachytherapy and cardiac
electrophysiologic evaluation and ablation services.
Specifically, we have been told (and our data support) that claims
for LDR prostate brachytherapy, when correctly coded, report at least
two major separately payable procedure codes the majority of the time.
For reasons discussed below, in the CY2008 OPPS/ASC proposed rule (72
FR 42678 through 42679), we proposed to use these correctly coded
claims that would otherwise be unusable hardcore multiples as the basis
for an encounter-based composite APC that would make a single payment
when both codes are reported with the same date of service. We also
proposed to pay separately for these procedure codes in cases where
only one of the two procedures is provided in a hospital encounter,
through the APC associated with that component procedure code that is
furnished.
Similarly, we have been told (and our data support) that multiple
cardiac electrophysiologic evaluation, mapping, and ablation services
are typically furnished on the same date of service and that the
correctly coded claims are typically the multiple procedure claims that
include several component services and that we are unable to use in our
current claims process. The CY 2007 CPT book introductory discussion in
the section entitled ``Intracardiac Electrophysiological Procedures/
Studies'' notes that, in many circumstances, patients with arrhythmias
are evaluated and treated at the same encounter. Therefore, as
discussed in detail below, we also proposed to establish an encounter
based composite APC for these services that would provide a single
payment for certain common combinations of component cardiac
electrophysiologic services that are reported on the same date of
service.
These composite APCs reflect an evolution in our approach to
payment under the OPPS. Where the claims data show that combinations of
services are commonly furnished together, in the future we will
actively examine whether it would be more appropriate to establish a
composite APC under which we would pay a single rate for the service
reported with a combination of HCPCS codes on the same date of service
(or different dates of service) than to continue to pay for these
individual services under service-specific APCs. We proposed these
specific encounter-based composite APCs for CY 2008 because we believe
that this approach could move the OPPS toward possible payment based on
an encounter or episode-of-care basis, enable us to use more valid and
complete claims data, create hospital incentives for efficiency, and
provide hospitals with significant flexibility to manage their
resources that do not exist when we pay for services on a per service
basis. As such, we indicated that these proposed composite APCs may
serve as a prototype for future creation of more composite APCs,
through which we could provide OPPS payment for other types of services
in the future. We

[[Page 66651]]

noted that while these proposed composite APCs for CY 2008 are based on
observed combinations of component HCPCS codes reported on the same
date of service for a single encounter, we also would be exploring in
the future how we could potentially set payments based on episodes of
care involving services that extend beyond the same date but which are
all supportive of a single, related course of treatment. While we did
not propose to implement multiday episode-of-care APCs in CY 2008, we
welcomed comments on the concept of developing these APCs to provide
payment for such episodes in order to inform our future analyses in
this area.
While we have never previously used the term ``composite'' APC
under the OPPS, we have one historical payment policy that resembles
the CY 2008 proposed composite APC policy. Since the inception of the
OPPS, CMS has limited the aggregate payment for specified less
intensive mental health services furnished on the same date to the
payment for a day of partial hospitalization, which we considered to be
the most resource intensive of all outpatient mental health treatment
(65 FR 18455). The costs associated with administering a partial
hospitalization program represent the most resource intensive of all
outpatient mental health treatment, and we do not believe that we
should pay more for a day of individual mental health services under
the OPPS. Through the OCE, when the payment for specified mental health
services provided by one hospital to a single beneficiary on one date
of service based on the payment rates associated with the APCs for the
individual services would exceed the per diem partial hospitalization
payment (listed as APC 0033 (Partial Hospitalization)), those specified
mental health services are assigned to APC 0034, which has the same
payment rate as APC 0033, and the hospital is paid one unit of APC
0034. This longstanding policy regarding payment of APC 0034 for
combinations of independent services provided in a single hospital
encounter resembles the payment policy for composite APCs that we
proposed for LDR prostate brachytherapy and cardiac electrophysiologic
evaluation and ablation services for CY 2008. Similar to the logic for
the proposed composite APCs, the OCE determines whether to pay these
specified mental health services individually or to make a single
payment at the same rate as the per diem rate for partial
hospitalization for all of the specified mental health services
furnished on that date of service. However, we note this established
policy for payment of APC 0034 differs from the proposed policies for
the new CY 2008 composite APCs because APC 0034 is only paid if the sum
of the individual payment rates for the specified mental health
services provided on one date of service exceeds the APC 0034 payment
rate, which equals the per diem rate of APC 0033 for partial
hospitalization.
We did not propose to change this mental health services payment
policy for CY 2008. However, we proposed to change the status indicator
from ``S'' to ``Q'' for the HCPCS codes for the specified mental health
services to which APC 0034 applies because those codes are
conditionally packaged when the sum of the payment rates for the single
code APCs to which they are assigned exceeds the per diem payment rate
for partial hospitalization. While we have not published APC 0034 in
Addendum A in the past, we are including it in Addendum A to this final
rule with comment period entitled ``Mental Health Composite,''
consistent with our naming taxonomy and publication of the two other
composite APCs. We are also including the mental health composite APC
0034 and its member HCPCS codes in Addendum M to this final rule with
comment period in the same way that we show the HCPCS codes to which
the LDR Prostate Brachytherapy Composite APC and Cardiac
Electrophysiologic Evaluation and Ablation Composite APC apply.
We solicited public comments on the concept of composite APCs in
general and, specifically, the two new proposed encounter-based
composite APCs for CY 2008, and we expressed our hope of involving the
public and the APC Panel in the creation of additional composite APCs.
As stated in the proposed rule (72 FR 42679), our goal is to use the
many naturally occurring multiple procedure claims that cannot
currently be incorporated under the existing APC structure, regardless
of whether the naturally occurring pattern of multiple procedure claims
prevents the development of single bills for individual services.
We received many comments on the concept of composite APCs in
general and on the proposal to create the LDR Prostate Brachytherapy
Composite and the Electrophysiologic Evaluation and Ablation Composite
APC in particular. A summary of the comments and our responses follow.
Comment: In general, most commenters supported the creation of the
two composite APCs that were proposed for CY 2008: Cardiac
Electrophysiologic Evaluation and Ablation Composite (APC 8000) and Low
Dose Rate Prostate Brachytherapy Composite (APC 8001). Commenters,
including MedPAC and the APC Panel, supported the implementation of the
proposed composite APCs. Commenters stated that creation of these
composites will enable use of more multiple claims data and enable the
payment system to better reflect the reality of how services are
commonly furnished. In particular, MedPAC indicated that it supports
the proposed composite APCs because they will increase incentives for
efficiency and can serve as a starting point for payment bundles that
reflect encounters or episodes of care. MedPAC indicated that it will
be exploring both packaging and bundling under the OPPS in its future
work. Other commenters objected to the creation of composite APCs
because they believed that they are dependent on proposed packaging
changes that the commenters do not support. Other commenters supported
the concept of composite APCS as long as a composite is limited to
related services furnished on the same date of service. These
commenters believed that the creation of composite APCs for
discontinuous services that span multiple dates of service would
present too many problems to be viable.
Response: We appreciate the commenters' support for the creation of
the two proposed composite APCs and we will implement the proposed new
composite APCs 8000 and 8001 for services furnished on and after
January 1, 2008. We also acknowledge that the viability of the
composite APCs is dependent on packaging of the supportive and
ancillary services. However, as discussed above, we are finalizing the
proposed packaging approach, with modifications, and therefore, we
believe that it is appropriate to finalize the creation of these two
composite APCs for the CY 2008 OPPS. We will take the commenters'
concerns with regard to the possible creation of composite APCs for
discontinuous services that span multiple dates of service into account
in development of future proposals for composite APCs.
Comment: Some commenters asked that CMS provide a clear and
transparent process for identifying and calculating payments for future
composite APCs and asked that CMS evaluate closely the impact of the
proposed composites on payment adequacy and access to care before
expanding to other services. They asserted that any development of
further composite APCs should include the views of all stakeholders.
Response: We expect that in the future, we would identify possible

[[Page 66652]]

composite APCs using the same process that we used to identify the
codes in composite APCs 8000 and 8001. As we described in the proposed
rule, we examined the multiple procedure claims that we could not
convert to single procedure claims to identify common combinations of
services for which we had relatively few single procedure claims. We
then performed a clinical assessment of the combinations that we
identified to determine whether our findings were consistent with our
understanding of the services furnished. After we defined the minimal
combination of services for which we would pay under the composite APC,
we then identified claims for which the only separately paid codes were
members of the composite, and we calculated the median cost for the
package of services, including the costs of the packaged services. We
intend to proceed carefully in examining the potential for creation of
more composite APCs. In general, we intend to follow this process for
creation of composite APCs and to request public comment in the
rulemaking cycle, which is our standard process for securing the views
of stakeholders. See section II.A.4.c.(7). for our discussion of the
composite APCs we created for this final rule with comment period,
specifically APC 8002 (Level I Extended Assessment and Management
Composite) and APC 8003 (Level II Extended Assessment and Management
Composite).
Comment: Some commenters asked that CMS ensure that all packaged
costs are captured in the payment rate for the composite APC. Other
commenters stated that there are many intraoperative services that we
proposed to package that may or may not be done at the same time and
whose costs, when packaged may not be fully accommodated in the
composite payment and should therefore be paid separately in addition
to the payment for the composite APCs. Some commenters identified
services that CMS proposed to package for which they believed separate
payment should be made outside of the composite APC payment. For
example, one commenter asked that CPT code 93662 (Intracardiac
echocardiography during therapeutic/diagnostic intervention, including
imaging supervision and interpretation (List separately in addition to
code for primary procedure)) continue to be paid separately and not as
part of composite APC 8000 because its cost is high but the frequency
of its use with the main procedures in APC 8000 is low.
Response: We capture the packaged costs in the creation of the
composite APC medians to the extent that the packaged services are
reported on the claims that meet the criteria for composite payment.
The effectiveness of the composite APCs is highly dependent upon the
packaging of the ancillary and supportive services that are furnished
at the same encounter with the services in the composite APC. By
packaging guidance, imaging post processing, intraoperative, and
imaging supervision and interpretation services we are able to identify
many more services that contain only the separately paid procedures
that are assigned to the composite APC that we can then use to
calculate a median cost for the composite APC. Separate payment for
guidance, imaging post processing, intraoperative, and imaging
supervision and interpretation services would greatly reduce the number
of claims that would be available for use in composite APCs because the
HCPCS codes assigned to the composite APC would no longer be the only
separately paid procedure codes on the claims and one of the benefits
of using a composite APC (enabling use of more claims) would be lost.
As with packaging of the costs of OPPS services in general, we package
costs into the cost of the major separately paid service being
furnished. In the case of the composite APCs, the costs of ancillary
and dependent services are packaged into the payment for the composite
APC to the extent that they are furnished with the services that are
assigned to the composite APC. In general, the premise of the OPPS,
like that of other claims-based prospective payment systems, is that
hospitals report HCPCS codes and charges to reflect the reality of how
they furnish services. In general, we believe we can rely on the claims
data to be an accurate reflection of the services that were furnished
to Medicare beneficiaries.
Comment: A commenter stated that the composite APCs differ
significantly in concept from the conditionally packaged services to
which CMS also proposed to assign status indicator ``Q'' and urged CMS
to assign a status indicator other than ``Q'' to composites so that
they would be more easily distinguishable from a conditionally packaged
service. Other commenters stated that the definition of the status
indicator Q was ill defined and confusing.
Response: For CY 2008, we will assign the status indicator ``Q'' to
composite APCs, to codes that are packaged when billed on the same
claim with a procedure that has status indicator ``S,'' ``T,'' ``V,''
or ``X,'' and to codes that are packaged only when billed on the same
claim with a procedure that has a status indicator ``T.'' We will
consider for CY 2009 whether it would be more appropriate to assign
status indicators based on the particular packaging policy that applies
to the code.
We appreciate the comments on composite APCs. With respect to our
treatment of mental health services, we are not making a change to the
longstanding payment policy under which the OPPS pays one unit of APC
0034 in cases in which the total payments for specified mental health
services provided on the same date of service would otherwise exceed
the payment rate for APC 0033. However, we are changing the status
indicator to ``Q'' for the HCPCS codes for mental health services to
which this policy applies and which comprise this existing composite
APC, because payment for these services would be packaged unless the
sum of the individual payments assigned to the codes would be less than
the payment for APC 0034.
(2) Low Dose Rate (LDR) Prostate Brachytherapy Composite APC
(a) Background
LDR prostate brachytherapy is a treatment for prostate cancer in
which needles or catheters are inserted into the prostate, and then
radioactive sources are permanently implanted into the prostate through
the hollow needles or catheters. The needles or catheters are then
removed from the body, leaving the radioactive sources in the prostate
forever, where they slowly give off radiation to destroy the cancer
cells until the sources are no longer radioactive. At least two CPT
codes are used to report the composite treatment service because there
are separate codes that describe placement of the needles or catheters
and application of the brachytherapy sources. LDR prostate
brachytherapy cannot be furnished without the services described by
both of these codes. Generally, the component services represented by
both codes occur in the same operative session in the same hospital on
the same date of service. However, we have been told of uncommon cases
in which they are furnished in different locations, with the patient
being transported from one location to another for application of the
sources. In addition, other services, commonly CPT code 76965
(Ultrasonic guidance for interstitial radioelement application) and CPT
code 77290 (Therapeutic radiology simulation-aided field setting;
complex) are often provided in the same hospital encounter.
CPT code 55875 (Transperineal placement of needles or catheters
into

[[Page 66653]]

prostate for interstitial radioelement application, with or without
cystoscopy) is used to report the placement of the needles or catheters
for services furnished on or after January 1, 2007. Before this date,
including in the claims for services furnished in CY 2006 that were
used to develop the CY 2008 proposed rule, CPT code 55859
(Transperineal placement of needles or catheters into prostate for
interstitial radioelement application, with or without cystoscopy)
reported this service. All of the claims for CPT code 55859 (as
reported in the CY 2006 claims data) are for the placement of needles
or catheters for prostate brachytherapy, although not all are related
to permanent brachytherapy source application.
CPT code 77778 (Interstitial radiation source application; complex)
is used to report the application of brachytherapy sources and, when
billed with CPT code 55859 (or CPT code 55875 after January 1, 2007)
for the same encounter, reports placement of the sources in the
prostate. We have been told that application of brachytherapy sources
to the prostate is estimated to be about 85 percent of all occurrences
of CPT code 77778 under the OPPS, consistent with our CY 2006 claims
data used for CY 2008 ratesetting. CPT code 77778 is also used to
report the application of sources of brachytherapy to body sites other
than the prostate.
Historical coding, APC assignments, and payment rates for CPT codes
55859 (CPT code 55875 beginning in CY 2007) and 77778 are shown below
in Table 7.

Table 7.--Historical Payment Rates for Complex Interstitial Application of Brachytherapy Sources
--------------------------------------------------------------------------------------------------------------------------------------------------------
Payment Payment
rate for APC for rate for APC for
OPPS CY Combination APC CPT code HCPCS code CPT codes HCPCS code Brachytherapy source
77778 77778 55859/55875 55859
--------------------------------------------------------------------------------------------------------------------------------------------------------
2000..................................... n/a......................... $198.31 APC 0312 $848.04 APC 0162 Pass-through
2001..................................... n/a......................... $205.49 APC 0312 $878.72 APC 0162 Pass-through
2002..................................... n/a......................... $6,344.67 APC 0312 $2,068.23 APC 0163 Pass-through with pro rata
reduction
2003 (prostate brachytherapy with iodine G0261, APC 648, $5,154.34... n/a n/a n/a n/a Packaged
sources).
2003 (prostate brachytherapy with G0256, APC 649, $5,998.24... n/a n/a n/a n/a Packaged
palladium sources).
2003 (not prostate brachytherapy, not N/A......................... $2,853.58 APC 0651 $1,479.60 APC 0163 Separate payment based on
including sources). scaled median cost per
source
2004..................................... N/A......................... $558.24 APC 0651 $1,848.55 APC 0163 Cost
2005..................................... N/A......................... $1,248.93 APC 0651 $2,055.63 APC 0163 Cost
2006..................................... N/A......................... $666.21 APC 0651 $1,993.35 APC 0163 Cost
2007..................................... N/A......................... $1,035.50 APC 0651 $2,146.84 APC 0163 Cost
--------------------------------------------------------------------------------------------------------------------------------------------------------

Payment rates for CPT code 77778, in particular, have fluctuated
over the years. We have frequently been informed by the public that
reliance on single procedure claims to set the median costs for these
services results in use of only incorrectly coded claims for LDR
prostate brachytherapy because, for application of brachytherapy
sources to the prostate, a correctly coded claim is a multiple
procedure claim. Specifically, we have been informed that a correctly
coded claim for LDR prostate brachytherapy should include, for the same
date of service, both CPT codes 55859 and 77778, brachytherapy sources
reported with Level II HCPCS codes, and typically separately coded
imaging and radiation therapy planning services, and that we should use
correctly coded claims to set the median for APC 0651 (Complex
Interstitial Radiation Source Application) in particular (where CPT
code 77778 is assigned). In presentations to the APC Panel at its March
2006 meeting, and in response to the CY 2006 OPPS proposed rule and CY
2007 OPPS/ASC proposed rule, commenters urged us to set the payment
rate for LDR prostate brachytherapy services using only multiple
procedure claims. Specifically for CY 2007, they urged us to sum the
costs on multiple procedure claims containing CPT codes 77778 and 55859
(and no other separately payable services not on the bypass list) and,
excluding the costs of sources, split the resulting aggregate median
cost on the multiple procedure claim according to a preestablished
attribution ratio between CPT codes 77778 and 55859. They indicated
that any claim for a brachytherapy service that did not also report a
brachytherapy source should be considered to be incorrectly coded and
thus not reflective of the hospital's resources required for the
interstitial source application procedure. The presenters to the APC
Panel believed that claims that did not contain both brachytherapy
source and source application codes should be excluded from use in
establishing the median cost for APC 0651. They believed that hospitals
that reported the brachytherapy sources on their claims were more
likely to report complete charges for the associated brachytherapy
source application procedure than hospitals that did not report the
separately payable brachytherapy sources.
As a result of those comments, for both CYs 2006 and 2007, we used
multiple procedure claims containing both CPT codes 55859 and 77778 to
determine a median cost for the totality of both services (with both
packaging and bypassing of the other commonly furnished services). We
compared the median calculated from this subset of claims reflecting
the most common clinical scenario to the single bill median costs for
CPT codes 55859 and 77778 as a method of determining whether the total
payment to the hospital for both services furnished to provide LDR
prostate brachytherapy would be reasonable. In both years, we found
that the sum of the single bill medians was reasonably close to the
median cost of both services from multiple claims when they were
treated as a single procedure and the supporting services were either
packaged or bypassed for purposes of calculating the

[[Page 66654]]

median for the combined pair of codes. (We refer readers to the CY 2006
final rule with comment period (70 FR 68596) and the CY 2007 final rule
with comment period (71 FR 68043) for specific discussion of these
findings.) Hence, we concluded that the single bill median costs were
reasonable and, for both the CYs 2006 and CY 2007 OPPS, we based
payment for CPT codes 55859 and 77778 on single procedure claims.
(b) Payment for LDR Prostate Brachytherapy
For the CY 2008 OPPS, we proposed to create a composite APC 8001,
titled ``LDR Prostate Brachytherapy Composite,'' that would provide one
bundled payment for LDR prostate brachytherapy when the hospital bills
both CPT codes 55875 and 77778 as component services provided during
the same hospital encounter. It is shown in Addendum A to this final
rule with comment period as APC 8001 (LDR Prostate Brachytherapy
Composite). As discussed in detail in section VII. of this final rule
with comment period, as we proposed, we are continuing to pay sources
of brachytherapy separately in accordance with the statute.
In the CY 2006 claims used to calculate the proposed CY 2008 median
costs, CPT code 55859 was reported 14,083 times. The proposed rule
median cost for CPT code 55859, calculated from 2,232 single and
``pseudo'' single bills, was approximately $2,329. The CY 2008 proposed
rule median cost for APC 0163 (Level IV Cystourethroscopy and other
Genitourinary Procedures) to which CPT code 55859 was assigned for CY
2006 and to which CPT code 55875 is assigned for CY 2007 was
approximately $2,322. In the set of claims used to calculate the median
cost for APC 0651, to which CPT code 77778 is the only assigned
service, CPT code 77778 was reported 11,850 times. The CY 2008 proposed
rule median cost for APC 0651 (and, therefore, for CPT code 77778)
based on 339 single and ``pseudo'' single procedure bills was
approximately $970.
In examining the claims data used to calculate the median costs for
the proposed rule, we found 9,807 claims on which both CPT code 55859
and CPT code 77778 were billed on the same date of service. These data
suggest that LDR prostate brachytherapy constituted at least 70 percent
of CY 2006 claims for CPT code 55859, with the remainder of claims
representing the insertion of needles or catheters for high dose rate
prostate brachytherapy or unusual clinical situations where the LDR
sources were not applied in the same operative session as the insertion
of the needles or catheters. These data are consistent with our
understanding of current clinical practice for prostate brachytherapy,
and we believe that those multiple claims are correctly coded claims
for this common clinical scenario. Similarly, 83 percent of the claims
for complex interstitial brachytherapy source application CPT code
77778 also included the CPT code for inserting needles or catheters
into the prostate, consistent with our understanding that the vast
majority of cases of complex interstitial brachytherapy source
application procedures are specifically for the treatment of prostate
cancer, rather than other types of cancer.
Using the proposed packaging approach for imaging supervision and
interpretation services and guidance services for CY 2008, we were able
to identify 1,343 claims, 14 percent of all OPPS claims that reported
these two procedures on the same date, that contain both CPT codes
55859 and 77778 on the same date of service and no other separately
paid procedure code. We were not able to use more claims to develop
this composite APC median cost because there are several radiation
therapy planning codes that are commonly reported with CPT codes 55859
and 77778 and that are both separately paid and not on the bypass list
because the amount of their associated packaging exceeds the threshold
for inclusion on the bypass list. A complete discussion of the bypass
list under our CY 2008 packaging policy is provided in section II.A. of
this final rule with comment period.
We packaged the costs of packaged revenue codes and packaged HCPCS
codes into the sum of the costs for CPT codes 55859 and 77778 to derive
a total proposed median cost of approximately $3,127 for the composite
LDR prostate brachytherapy service based upon the 1,343 claims that
contained both CPT codes and no other separately paid procedure codes.
This is reasonably comparable to $3,298, the sum of the CPT median
costs we calculated using the single procedure bills for CPT codes
55859 and 77778 (($2,329 plus $969). As stated in the proposed rule (72
FR 42680), we believe that the difference between the composite APC
median cost based upon those claims that contain both codes and the sum
of the median costs for the APCs to which the two individual CPT codes
map is minimal and may be attributable to efficiencies in furnishing
the services together during a single encounter.
In the proposed rule (72 FR 42681), we indicated our belief that
creation of the composite APC for the payment of LDR prostate
brachytherapy is consistent with the statute and with our desire to use
more claims data for ratesetting, particularly data from correctly
coded claims that reflect typical clinical practice, and to make
payment for larger packages and bundles of services to provide enhanced
incentives for efficiency and cost containment under the OPPS and to
maximize hospital flexibility in managing resources.
Under our proposal, hospitals that furnish LDR prostate
brachytherapy would report CPT codes 55875 and 77778 and the codes for
the applicable brachytherapy sources in the same manner that they
currently report these items and services (in addition to reporting any
other services provided), using the same HCPCS codes and reporting the
same charges. We would require that hospitals report both CPT codes
resulting in the composite APC payment on the same claim when they are
furnished to a single Medicare beneficiary in the same facility on the
same date of service, and we would make any necessary conforming
changes to the billing instructions to ensure that they do not present
an obstacle to correct reporting. We may implement edits to ensure that
hospitals do not submit two separate claims for these two procedures
when furnished on the same date in the same facility. When this
combination of codes is reported, the OCE would assign the composite
APC 8001 and the PRICER would pay based on the payment rate for the
composite APC. The OCE would assign APC 0163 or APC 0651 only when both
codes are not reported on the same claim with the same date of service,
and we would expect this to be the atypical case. The composite APC
would have a status indicator of ``T'' so that payment for other
procedures also assigned to status indicator ``T'' with lower payment
rates would be reduced by 50 percent when furnished on the same date of
service as the composite service, in order to reflect the efficiency
that occurs when multiple procedures are furnished to a Medicare
beneficiary in a single operative session. We would not expect that the
composite APC payment would be frequently reduced under the multiple
procedure reduction policy because we believe that it is unlikely that
a higher paid procedure would be performed on the same date.
We proposed to continue to establish separate payment rates for APC
0651 (to which only CPT code 77778 is assigned) and for APC 0163 (to
which we proposed to continue to assign CPT code 55875). In some cases,
CPT 55875

[[Page 66655]]

may be reported for the insertion of needles or catheters for high dose
rate prostate brachytherapy, and the low dose rate brachytherapy source
application procedure (CPT code 77778) would not be reported. In high
dose rate prostate brachytherapy, the sources are applied temporarily
several times over a few days while the needles or catheters remain in
the prostate, and the needles or catheters are removed only after all
the treatment fractions have been completed. We have also been told by
hospitals that, even when LDR prostate brachytherapy is planned, there
are occasions in which the needles or catheters are inserted in one
facility and the patient is moved to another facility for the
application of the sources. In those cases, we would need to be able to
appropriately pay the hospital that inserted the needles or catheters
before the patient was discharged prior to source application.
Moreover, there are cases in which the needles or catheters are
inserted but it is not possible to proceed to the application of the
sources and, therefore, the hospital would correctly report only CPT
code 55875. Similarly, more than 10 brachytherapy sources can be
applied interstitially (as described by CPT code 77778) to sites other
than the prostate and it is, therefore, necessary to have a separate
payment rate for CPT code 77778. Hence, for CY 2008 we proposed to
continue to pay for CPT code 55875 (the successor to CPT code 55859)
through APC 0163 and to pay for CPT code 77778 through APC 0651 when
the services are individually furnished other than on the same date of
service in the same facility.
Comment: One commenter supported the creation of the composite APC
for LDR Prostate Brachytherapy (APC 8001) but was concerned about the
assignment of status indicator ``T'' to APC 8001. The commenter asked
which codes would be reduced when furnished with the composite as a
result of the assignment of the status indicator ``T.''
Response: We assigned status indicator ``T'' to APC 8001 because
CPT code 55875 is a surgical service that has a status indicator ``T''
in APC 163. The multiple surgical reduction will apply only when other
surgical procedures that have the status indicator of ``T'' are
performed on the same date of service. Payment for the APC with the
highest payment rate with status indicator ``T'' will not be reduced
but payments for other codes on the same claim that also have a status
indicator of ``T'' will be reduced by 50 percent under our standard
multiple procedure reduction policy. Currently, when CPT code 55875 is
reported with another procedure that has a status indicator of ``T,''
payment for the service with the lower payment rate would be reduced by
50 percent. Similarly, when CPT code 55875 is paid as part of composite
APC 8001 and another procedure that has a status indicator of ``T'' is
also reported on the claim, payment for the composite APC or the other
procedure would be reduced by 50 percent, depending on which payment
rate was lower. This is the standard OPPS multiple surgical procedure
payment reduction policy.
As proposed, we are establishing a composite APC, shown in Addendum
A as APC 8001, to provide payment for LDR prostate brachytherapy when
the composite service, billed as CPT codes 55875 and 77778, is
furnished in a single hospital encounter and to base the payment for
the composite APC on the median cost derived from claims that contain
both codes. These two CPT codes are assigned status indicator ``Q'' in
Addendum B to this final rule with comment period to signify their
conditionally packaged status, and their composite APC assignments are
noted in Addendum M. This policy will permit us to base payment on
claims for the most common clinical scenario for interstitial radiation
source application to the prostate. We note that this payment bundle
will also include payment for the commonly associated imaging guidance
services, which will be newly packaged under our CY 2008 packaging
approach. Most importantly, this composite APC payment methodology will
contribute to our goal of providing payment under the OPPS for a larger
bundle of component services provided in a single hospital outpatient
encounter, creating additional hospital incentives for efficiency and
cost containment, while providing hospitals with the most flexibility
to manage their resources. In our final calculation of the median cost
for this composite APC for CY 2008, we were able to use 7,870 claims
that contained both CPT code 77778 and 55859 (the code in effect in
2006) and the median cost on which payment is based is approximately
$3,391. This compares favorably to the proposed rule in which we were
able to us only 1,343 claims containing both codes and calculated a
proposed median cost of approximately $3,127. We believe that the
number of usable claims increased so greatly as the result of the
addition of related procedure codes to the bypass list as a result of
public comments. The CY 2008 composite median is slightly less than
$3,410, the sum of the medians for APCs 163 and 651 ($2,270 + $1,140),
which commenters have told us are unreliable because they are
calculated from single bills although there should never be single
bills for this procedure. Hence, we believe that the median cost for
the composite APC of approximately $3,391, which is calculated from
bills we believe to be correctly coded will result in a reasonable and
appropriate payment rate for this service.
(3) Cardiac Electrophysiologic Evaluation and Ablation Composite APC
(a) Background
During its March 2007 meeting, members of the APC Panel indicated
that the reason we found so few single bills for procedures assigned to
APC 0087 (Cardiac Electrophysiologic Recording/Mapping), specifically
72 of 11,834 or 0.61 percent of all proposed rule CY 2006 claims, is
that most of the services assigned to APCs 0085 (Level II
Electrophysiologic Evaluation), 0086 (Ablate Heart Dysrhythm Focus),
and 0087 are performed in varying combinations with one another.
Therefore, correctly coded claims would most often include multiple
codes for component services that are reported with different CPT codes
and that are now paid separately through different APCs. There would
never be many single bills and those that are reported as single bills
would likely represent atypical cases or incorrectly coded claims.
We examined the combinations of services observed in our claims
data across these three APCs to see whether there was the potential for
handling the data differently so that we could use more claims data to
set the payment rates for these procedures, particularly those services
assigned to APC 0087 where we have had a persistent concern regarding
the limited and reportedly unrepresentative single bills available for
use in calculating the median cost according to our standard OPPS
methodology. We initially developed and examined frequency
distributions of unique combinations of codes on claims which contained
at least one unit of any code assigned to APC 0085, 0086, or 0087 and
then broadened these analysis to any combination of an
electrophysiologic evaluation and ablation code.
Our initial frequency distributions supported the APC Panel
members' description of their experiences. We identified and enumerated
the most commonly appearing unique occurrences (either single
procedures or combinations) of codes for services assigned to status
indicator ``S,'' ``T,'' ``V,'' or ``X'' that contained at least one

[[Page 66656]]

code assigned to APC 0085, 0086, or 0087. There were 7,379 claims in
the top 100 occurrence types. Table 8 shows the 10 most common unique
occurrences from CY 2006 proposed rule claims data available at that
time.

Table 8.--Ten Most Frequently Occurring Unique Occurrences of Cardiac Electrophysiologic Evaluations, Mapping,
and Ablation Procedures and other Separately Payable Services
----------------------------------------------------------------------------------------------------------------
CY 2007 CY 2007
Combination No. Frequency HCPCS code Short descriptor APC SI
----------------------------------------------------------------------------------------------------------------
1................................... 763 93620 Electrophysiology 0085 T
evaluation.
2................................... 509 93609 Map tachycardia, add-on.... 0087 T
93620 Electrophysiology 0085 T
evaluation.
93621 Electrophysiology 0085 T
evaluation.
93623 Stimulation, pacing heart.. 0087 T
93651 Ablate heart dysrhythm 0086 T
focus.
3................................... 398 93609 Map tachycardia, add-on.... 0087 T
93620 Electrophysiology 0085 T
evaluation.
93621 Electrophysiology 0085 T
evaluation.
93651 Ablate heart dysrhythm 0086 T
focus.
4................................... 381 93650 Ablate heart dysrhythm 0086 T
focus.
5................................... 376 93620 Electrophysiology 0085 T
evaluation.
93623 Stimulation, pacing heart.. 0087 T
6................................... 248 93005 Electrocardiogram, tracing. 0099 S
93609 Map tachycardia, add-on.... 0087 T
93620 Electrophysiology 0085 T
evaluation.
93621 Electrophysiology 0085 T
evaluation.
93623 Stimulation, pacing heart.. 0087 T
93651 Ablate heart dysrhythm 0086 T
focus.
7................................... 225 93005 Electrocardiogram, tracing. 0099 S
93609 Map tachycardia, add-on.... 0087 T
93620 Electrophysiology 0085 T
evaluation.
93621 Electrophysiology 0085 T
evaluation.
93651 Ablate heart dysrhythm 0086 T
focus.
8................................... 225 93613 Electrophys map 3d, add-on. 0087 T
93620 Electrophysiology 0085 T
evaluation.
93621 Electrophysiology 0085 T
evaluation.
93651 Ablate heart dysrhythm 0086 T
focus.
9................................... 217 93005 Electrocardiogram, tracing. 0099 S
93620 Electrophysiology 0085 T
evaluation.
10.................................. 185 93613 Electrophys map 3d, add-on. 0087 T
93620 Electrophysiology 0085 T
evaluation.
93621 Electrophysiology 0085 T
evaluation.
93623 Stimulation, pacing heart.. 0087 T
93651 Ablate heart dysrhythm 0086 T
focus.
----------------------------------------------------------------------------------------------------------------

Although the number of claims for each unique occurrence was
modest, we were able to determine that there were certain combinations
of codes that occurred most often together. Based on our review of the
most frequently occurring combinations of codes on claims that also
contained at least one code assigned to APC 0085, 0086 or 0087 and our
clinical review of the codes, we proceeded to study combination claims
that contained at least one code from group A for evaluation services
and at least one code from group B for ablation services reported on
the same date of service on an individual claim, as specified in Table
9 below.

Table 9.--Groups of Cardiac Electrophysiologic Evaluation and Ablation
Procedures on Which We Base the Composite APC
------------------------------------------------------------------------
CY
Codes Used in Combinations: At Least One in HCPCS 2007 CY 2007
Group A and One in Group B code APC SI
------------------------------------------------------------------------
Group A
Electrophysiology evaluation................ 93619 0085 T
Electrophysiology evaluation................ 93620 0085 T
Group B
Ablate heart dysrhythm focus................ 93650 0086 T
Ablate heart dysrhythm focus................ 93651 0086 T
Ablate heart dysrhythm focus................ 93652 0086 T
------------------------------------------------------------------------

When we studied proposed rule claims that contained a code in group
A and also a code in group B, we found that there were 5,118 claims
that met these criteria, and that of these 5,118 claims, 4,552 (89
percent) contained both CPT code 93620 (Comprehensive
electrophysiologic evaluation including insertion and repositioning of
multiple electrode catheters with induction or attempted induction of
arrhythmia; with right atrial pacing and recording, right ventricular
pacing and recording, His bundle recording) from APC 0085 and CPT code
93651 (Intracardiac catheter ablation of arrhythmogenic focus; for
treatment of supraventricular tachycardia by ablation of fast or slow
atrioventricular pathways, accessory atrioventricular connections or
other atrial foci, singly or in combination) from APC 0086 with the
same date of service. Given that CPT code 93651 had a total frequency
of 8,091, this means that more than 55 percent of the claims for CPT
code 93651 also contained CPT

[[Page 66657]]

code 93620. CPT code 93620 had a total frequency of 12,624,
approximately 50 percent higher than the total frequency for CPT code
93651, which is consistent with our expectations because CPT code 93620
describes a diagnostic service and CPT code 93651 is a treatment
service that may be provided based upon the findings of the evaluation
described by CPT code 93620. In addition to the codes for group A and
group B services, the combination claims also contained costs for
packaged services that were reported under revenue codes without HCPCS
codes and under packaged HCPCS codes. As we discuss in considerable
detail above, we lack a methodology that could be used to allocate
these packaged costs to major separately paid procedures in a manner
which gives us confidence that the costs would be attributed correctly.
We have explored and will continue to explore an alternative strategy
that would enable us to use these correctly coded multiple procedure
claims for ratesetting.
In our review of these proposed rule claims, not only did we find a
high number of claims on which there was one code from group A and one
code from group B, but we also found that claims for procedures
assigned to APC 0087 for CY 2007 usually appeared on claims that
contained a code from APC 0085 or APC 0086, or both. The most
frequently appearing CPT codes that were assigned to APC 0087 for CY
2007 were, as shown above, 93609 (Intraventricular and/or intra-atrial
mapping of tachycardia site(s), with catheter manipulation to record
from multiple sites to identify origin of tachycardia (List separately
in addition to code for primary procedure)), 93613 (Intracardiac
electrophysiologic 3-dimensional mapping (List separately in addition
to code for primary procedure)), 93621 (Comprehensive
electrophysiologic evaluation including insertion and repositioning of
multiple electrode catheters with induction or attempted induction of
arrhythmia; with left atrial pacing and recording from coronary sinus
or left atrium (List separately in addition to code for primary
procedure)), 93622 (Comprehensive electrophysiologic evaluation
including insertion and repositioning of multiple electrode catheters
with induction or attempted induction of arrhythmia; with left
ventricular pacing and recording (List separately in addition to code
for primary procedure)), and 93623 (Programmed simulation and pacing
after intravenous drug infusion (List separately in addition to code
for primary procedure)). These codes are all CPT add-on codes that CPT
indicates are to be reported in addition to the code for the primary
procedure. Our clinical review of the services described by these five
CPT codes determined that they are supportive dependent services that
are provided most often as supplemental to procedures assigned to APCs
0085 and 0086. The procedures in APCs 0085 and 0086 can be performed
without these supportive add-on procedures, but these dependent
services cannot be done except as a supplement to another
electrophysiologic procedure. Therefore, we proposed to unconditionally
package all of these five CPT codes under the grouping of
intraoperative services for the CY 2008 OPPS. We discuss the packaging
of intraoperative services in general, including these services, in
section II.A.4.c.(3) above.
However, packaging these supportive ancillary services that are so
often reported with the cardiac electrophysiologic evaluation and
ablation services did not, by itself, enable us to use many more claims
because, as we noted previously, the claims on which these codes most
commonly appeared typically also contained at least one separately paid
code from APC 0085 and one code from APC 0086. Although the most common
combination of codes from APCs 0085 and 0086 was the pair of CPT codes
93620 and 93651, there are numerous other combinations of services from
APCs 0085 and 0086 that were performed and, while not as frequent,
these combinations were also reflected in the multiple claims.
In order to use more claims and adequately reflect the varied,
common combinations of electrophysiologic evaluation and ablation CPT
codes, we calculated a composite median cost from all claims containing
at least one code from group A and at least one code from group B as if
they were a single service. We selected multiple procedure claims that
contained at least one code in group A and one code in group B on the
same date of service and calculated a median cost from the total costs
on these claims. Some claims had more than one code from each group.
Although the claim was required to contain at least one code from each
group to be included, the claim could also contain any number of codes
from either group and any number of units of those codes. In addition,
the costs of the five supportive intraoperative services previously
assigned to APC 0087 that we identify above were packaged, as well as
the costs of the other items and services proposed to be packaged for
the CY 2008 OPPS. This selection process yielded 5,118 claims to use
for the calculation. The proposed composite median cost for these
claims using the CY 2008 proposed rule data was approximately $8,529.
We believe that this cost is attributable largely to the 4,552 claims
that contain one unit each of CPT code 93620 and CPT code 93651 (and
some unknown numbers and combinations of packaged services). In
comparison, the sum of the CY 2008 proposed rule CPT code median costs
for CPT code 93620 (which is $3,111) and CPT code 93651 (which is
$5,644) is approximately $8,756. If the 50 percent multiple procedure
discount is applied to the CPT code median cost for the lower cost
procedure based on its assignment to an APC with a ``T'' status, the
adjusted sum of the median costs is $7,200 ($5,644 + $1,556). These
medians were calculated using only claims that contain correct devices
and do not contain token charges or the ``FB'' modifier. We believe the
significant positive difference between the composite and discounted
costs still reflects efficiencies, as the sum of the discounted median
costs does not take into account the cost of other procedures also
provided that are assigned to APCs 0085 and 0086, while the composite
median cost of $8,528.83 does, to some extent, reflect the cost of
other multiple procedures in APCs 0085 and 0086 that were also reported
on the claims used to develop the composite median cost. In addition,
these two calculations are based upon two different sets of claims,
single procedure claims in one case (which do not represent the way the
service is typically furnished) and the specified subset of clinically
common combination claims in the second case. Moreover, while the 50
percent multiple procedure reduction is our best aggregate estimate of
the overall degree of efficiency applicable to multiple surgeries, it
may or may not be specifically appropriate to this particular
combination of procedures.
By selecting the multiple procedure claims that contained at least
one code in each group, we were able to use many more claims than were
available to establish the individual APC medians. The percents by CPT
code for the composite configuration in Table 24 of the proposed rule
(72 FR 42684) represented the sum of the frequency of single bills used
to set the medians for APCs 0085 and 0086 with packaging of the five
intraoperative services and the frequency of multiple bills used to set
the medians for the composite claims containing at least one code from
each group and with packaging of the costs

[[Page 66658]]

of the five intraoperative services, divided by the total frequency of
each CPT code.
Moreover, by packaging CPT codes 93609, 93613, 93621, 93622, and
93623, we were able to use many more of the claims for these codes from
the most common clinical scenarios than would otherwise be possible if
the supportive intraoperative services were separately paid. Wherever
any of these codes appears on a claim that could be used for median
setting, the cost data for these codes are packaged in the calculation
of the median cost for the separately paid services on the claim.
(b) Payment for Cardiac Electrophysiologic Evaluation and Ablation
In view of our findings with regard to how often the codes in
groups A and B appear together on the same claim, we proposed to
establish one composite APC, shown in Addendum A of the proposed rule
as APC 8000 (Cardiac Electrophysiologic Evaluation and Ablation
Composite), for CY 2008 that would pay for a composite service made up
of any number of services in groups A and B when at least one code from
group A and at least one code from group B appear on the same claim
with the same date of service. The five CPT codes involved in this
composite APC are assigned to status indicator ``Q'' in Addendum B to
the proposed rule to identify their conditionally packaged status, and
their composite APC assignments were identified in Addendum M of the
proposed rule. We proposed to use the composite median cost of
approximately $8,529 as the basis for establishing the relative weight
for this newly created APC for the composite electrophysiology
evaluation and ablation service. Under this composite APC, unlike most
other APCs, we proposed to make a single payment for all services
reported in groups A and B. We proposed that hospitals would continue
to code using CPT codes to report these services and that the OCE would
recognize when the criteria for payment of the composite APC are met
and would assign the composite APC instead of the single procedure APCs
as currently occurs. The PRICER would make a single payment for the
composite APC that would encompass the program payment for the code in
group A, the code in group B, and any other codes reported in groups A
or B, as well as the packaged services furnished on the same date of
service. The proposed composite APC would have a status indicator of
``T'' so that payment for other procedures also assigned to status
indicator ``T'' with lower payment rates would be reduced by 50 percent
when furnished on the same date of service as the composite service, in
order to reflect the efficiency that occurs when multiple procedures
are furnished to a Medicare beneficiary in a single operative session.
We would not expect that the proposed composite APC payment would be
commonly reduced because we believe that it is unlikely that a higher
paid procedure would be performed on the same date. We proposed to
continue to pay separately for other separately paid services that are
not reported under the codes in groups A and B (such as chest x-rays
and electrocardiograms).
Moreover, where a service in group A is furnished on a date of
service that is different from the date of service for a code in group
B for the same beneficiary, we proposed that payments would be made
under the single procedure APCs and the composite APC would not apply.
Given our CY 2008 proposal to unconditionally package payment for five
cardiac electrophysiologic CPT codes as members of the category of
intraoperative services that were previously assigned to APCs 0085 and
0087, we also proposed to reconfigure APCs 0084 through 0087, where
many of the cardiac electrophysiologic procedures that will be
separately paid when they are not paid according to the composite APC
are assigned. Specifically, we proposed to discontinue APC 0087, and
reconfigure APCs 0084, 0085, and 0086, with proposed titles and median
costs of Level I Electrophysiologic Procedures (APC 0084) at
approximately $603; Level II Electrophysiologic Procedures (APC 0085)
at approximately $2,976; and Level III Electrophysiologic Procedures
(APC 0086) at approximately $5,842, respectively. We refer readers to
section IV.A.2. of this his final rule with comment period rule for a
discussion of calculation of median costs for device-dependent APCs. We
believe this reconfiguration improved the clinical and resource
homogeneity of these APCs which would provide payment for cardiac
electrophysiologic procedures that would be individually paid when they
do not meet the criteria for payment of the composite APC.
We believe that creation of the proposed composite APC for cardiac
electrophysiology evaluation and ablation services is the most
efficient and effective way to use the claims data for the majority of
these services and best represents the hospital resources associated
with performing the common combinations of these services that are
clinically typical. We believe that the proposed ratesetting
methodology results in an appropriate median cost for the composite
service when at least one evaluation service in group A is furnished on
the same date as at least one ablation service in group B. This
approach creates incentives for efficiency by providing a single
payment for a larger bundle of major procedures when they are performed
together, in contrast to continued separate payment for each of the
individual procedures. We expect to develop additional composite APCs
in the future as we learn more about major currently separately paid
services that are commonly furnished together during the same hospital
outpatient encounter.
We did not receive any public comments specific to the creation of
the composite APC for cardiac electrophysiology evaluation and ablation
other than those included in the general discussion of composite APCs
above. Therefore, we are finalizing the creation of this APC as
proposed. For this final rule with comment period, we recalculated the
median cost of the APC as proposed. We were able to use 5,596 claims
that met the criteria of having at least one code in group A and one
code in group B, which had correct device codes, no token charges for
devices and no FB modifiers on the claims. Using these 5,596 correctly
coded claims from the final rule data, we calculated a median cost from
the final rule data of approximately $8,438. We note that while the
number of usable claims for the final rule date increased to 5,596 from
the 5,118 claims used in the proposed rule, the median cost declined
slightly (approximately 1 percent) to approximately $8,438 from the
$8,529 median cost calculated from proposed rule data. However, we
believe that the median cost for this composite APC is a valid
reflection of the estimated relative cost of these services when
furnished in combination with one another.
After consideration of the public comments we received on the
proposed composite APCs for LDR Prostate Brachytherapy and Cardiac
Electrophysiology Evaluation and Ablation, we are finalizing our
proposed policy regarding these composite APCs without modification.
In conclusion, we are finalizing our proposed packaging approach
with the modifications discussed above for the CY 2008 OPPS. Table 10
in this final rule with comment period displays the list of packaged
services in the categories of guidance, image processing,
intraoperative services, radiopharmaceuticals, contrast media, imaging
supervision and interpretation,

[[Page 66659]]

and observation services. Codes in composite APCs, including the two
extended assessment and management APCs, are displayed in Addendum M.
In Table 10, HCPCS codes with status indicator ``N'' are always
packaged. HCPCS codes with status indicator ``Q'' are conditionally
packaged. Codes with status indicator ``Q'' that are for imaging
supervision and interpretation are packaged only when reported on the
same claim on the same day as a procedure with status indicator ``T''
and are identified as ``T-packaged'' in the sixth column. Codes that
are packaged when they are reported on the same claim with a code with
status indicator ``S,'' ``T,'' ``V,'' or ``X'' on the same day are
identified as ``STVX-packaged'' in the sixth column.

Table 10.--CY 2008 Packaged HCPCS Codes Included in Seven Packaging Categories
--------------------------------------------------------------------------------------------------------------------------------------------------------
Final ``STVX-
CY CY CY packaged'' Final CY
2008 HCPCS code Short descriptor 2007 2007 2008 or ``T- 2008 APC Category
SI APC SI packaged''
(1) (2).............................. (3) (4) (5) (6) (7) (8)
--------------------------------------------------------------------------------------------------------------------------------------------------------
19295..................... Place breast clip, percut........ S 0657 N n/a n/a Guidance
20975..................... Electrical bone stimulation...... X 0340 N n/a n/a Intraoperative.
20985..................... Cptr-asst dir ms px.............. n/a n/a N n/a n/a Guidance.
20986..................... Cptr-asst dir ms px io img....... n/a n/a N n/a n/a Guidance.
20987..................... Cptr-asst dir ms px pre img...... n/a n/a N n/a n/a Guidance.
31620..................... Endobronchial us add-on.......... S 0670 N n/a n/a Intraoperative.
37250..................... Iv us first vessel add-on........ S 0416 N n/a n/a Intraoperative.
37251..................... Iv us each add vessel add-on..... S 0416 N n/a n/a Intraoperative.
58110..................... Bx done w/colposcopy add-on...... T 0188 N n/a n/a Intraoperative.
61795..................... Brain surgery using computer..... S 0302 N n/a n/a Guidance.
62160..................... Neuroendoscopy add-on............ T 0122 N n/a n/a Guidance.
70010..................... Contrast x-ray of brain.......... S 0274 Q T 0274 Imaging S&I.
70015..................... Contrast x-ray of brain.......... S 0274 Q T 0274 Imaging S&I.
70170..................... X-ray exam of tear duct.......... X 0264 Q T 0317 Imaging S&I.
70332..................... X-ray exam of jaw joint.......... S 0275 Q T 0275 Imaging S&I.
70373..................... Contrast x-ray of larynx......... X 0263 Q T 0263 Imaging S&I.
70390..................... X-ray exam of salivary duct...... X 0263 Q T 0263 Imaging S&I.
71040..................... Contrast x-ray of bronchi........ X 0263 Q T 0263 Imaging S&I.
71060..................... Contrast x-ray of bronchi........ X 0263 Q T 0317 Imaging S&I.
71090..................... X-ray & pacemaker insertion...... X 0272 N n/a n/a Imaging S&I.
72240..................... Contrast x-ray of neck spine..... S 0274 Q T 0274 Imaging S&I.
72255..................... Contrast x-ray, thorax spine..... S 0274 Q T 0274 Imaging S&I.
72265..................... Contrast x-ray, lower spine...... S 0274 Q T 0274 Imaging S&I.
72270..................... Contrast x-ray, spine............ S 0274 Q T 0274 Imaging S&I.
72275..................... Epidurography.................... S 0274 N n/a n/a Imaging S&I.
72285..................... X-ray c/t spine disk............. S 0388 Q T 0388 Imaging S&I.
72291..................... Perq vertebroplasty, fluor....... S 0274 N n/a n/a Imaging S&I.
72292..................... Perq vertebroplasty, ct.......... S 0274 N n/a n/a Imaging S&I.
72295..................... X-ray of lower spine disk........ S 0388 Q T 0388 Imaging S&I.
73040..................... Contrast x-ray of shoulder....... S 0275 Q T 0275 Imaging S&I.
73085..................... Contrast x-ray of elbow.......... S 0275 Q T 0275 Imaging S&I.
73115..................... Contrast x-ray of wrist.......... S 0275 Q T 0275 Imaging S&I.
73525..................... Contrast x-ray of hip............ S 0275 Q T 0275 Imaging S&I.
73530..................... X-ray exam of hip................ X 0261 N n/a n/a Intraoperative.
73542..................... X-ray exam, sacroiliac joint..... S 0275 Q T 0275 Imaging S&I.
73580..................... Contrast x-ray of knee joint..... S 0275 Q T 0275 Imaging S&I.
73615..................... Contrast x-ray of ankle.......... S 0275 Q T 0275 Imaging S&I.
74190..................... X-ray exam of peritoneum......... S 0264 Q T 0317 Imaging S&I.
74235..................... Remove esophagus obstruction..... S 0257 N n/a n/a Imaging S&I.
74300..................... X-ray bile ducts/pancreas........ X 0263 N n/a n/a Intraoperative.
74301..................... X-rays at surgery add-on......... X 0263 N n/a n/a Intraoperative.
74305..................... X-ray bile ducts/pancreas........ X 0263 N n/a n/a Imaging S&I.
74320..................... Contrast x-ray of bile ducts..... X 0264 Q T 0317 Imaging S&I.
74327..................... X-ray bile stone removal......... S 0296 N n/a n/a Imaging S&I.
74328..................... X-ray bile duct endoscopy........ N n/a N n/a n/a Imaging S&I.
74329..................... X-ray for pancreas endoscopy..... N n/a N n/a n/a Imaging S&I.
74330..................... X-ray bile/panc endoscopy........ N n/a N n/a n/a Imaging S&I.
74340..................... X-ray guide for GI tube.......... X 0272 N n/a n/a Imaging S&I.
74355..................... X-ray guide, intestinal tube..... X 0263 N n/a n/a Imaging S&I.
74360..................... X-ray guide, GI dilation......... S 0257 N n/a n/a Imaging S&I.
74363..................... X-ray, bile duct dilation........ S 0297 N n/a n/a Imaging S&I.
74425..................... Contrst x-ray, urinary tract..... S 0278 Q T 0278 Imaging S&I.
74430..................... Contrast x-ray, bladder.......... S 0278 Q T 0278 Imaging S&I.
74440..................... X-ray, male genital tract........ S 0278 Q T 0278 Imaging S&I.
74445..................... X-ray exam of penis.............. S 0278 Q T 0278 Imaging S&I.
74450..................... X-ray, urethra/bladder........... S 0278 Q T 0278 Imaging S&I.
74455..................... X-ray, urethra/bladder........... S 0278 Q T 0278 Imaging S&I.
74470..................... X-ray exam of kidney lesion...... X 0263 Q T 0263 Imaging S&I.
74475..................... X-ray control, cath insert....... S 0297 Q T 0317 Imaging S&I.

[[Page 66660]]

74480..................... X-ray control, cath insert....... S 0296 Q T 0317 Imaging S&I.
74485..................... X-ray guide, GU dilation......... S 0296 Q T 0317 Imaging S&I.
74740..................... X-ray, female genital tract...... X 0264 Q T 0263 Imaging S&I.
74742..................... X-ray, fallopian tube............ X 0264 N n/a n/a Imaging S&I.
75600..................... Contrast x-ray exam of aorta..... S 0280 Q T 0279 Imaging S&I.
75605..................... Contrast x-ray exam of aorta..... S 0280 Q T 0279 Imaging S&I.
75625..................... Contrast x-ray exam of aorta..... S 0280 Q T 0279 Imaging S&I.
75630..................... X-ray aorta, leg arteries........ S 0280 Q T 0279 Imaging S&I.
75635..................... Ct angio abdominal arteries...... S 0662 Q T 0662 Imaging S&I.
75650..................... Artery x-rays, head & neck....... S 0280 Q T 0280 Imaging S&I.
75658..................... Artery x-rays, arm............... S 0279 Q T 0279 Imaging S&I.
75660..................... Artery x-rays, head & neck....... S 0668 Q T 0280 Imaging S&I.
75662..................... Artery x-rays, head & neck....... S 0280 Q T 0280 Imaging S&I.
75665..................... Artery x-rays, head & neck....... S 0280 Q T 0279 Imaging S&I.
75671..................... Artery x-rays, head & neck....... S 0280 Q T 0280 Imaging S&I.
75676..................... Artery x-rays, neck.............. S 0280 Q T 0279 Imaging S&I.
75680..................... Artery x-rays, neck.............. S 0280 Q T 0279 Imaging S&I.
75685..................... Artery x-rays, spine............. S 0280 Q T 0279 Imaging S&I.
75705..................... Artery x-rays, spine............. S 0668 Q T 0279 Imaging S&I.
75710..................... Artery x-rays, arm/leg........... S 0280 Q T 0279 Imaging S&I.
75716..................... Artery x-rays, arms/legs......... S 0280 Q T 0279 Imaging S&I.
75722..................... Artery x-rays, kidney............ S 0280 Q T 0279 Imaging S&I.
75724..................... Artery x-rays, kidneys........... S 0280 Q T 0279 Imaging S&I.
75726..................... Artery x-rays, abdomen........... S 0280 Q T 0279 Imaging S&I.
75731..................... Artery x-rays, adrenal gland..... S 0280 Q T 0279 Imaging S&I.
75733..................... Artery x-rays, adrenals.......... S 0668 Q T 0279 Imaging S&I.
75736..................... Artery x-rays, pelvis............ S 0280 Q T 0279 Imaging S&I.
75741..................... Artery x-rays, lung.............. S 0279 Q T 0279 Imaging S&I.
75743..................... Artery x-rays, lungs............. S 0280 Q T 0279 Imaging S&I.
75746..................... Artery x-rays, lung.............. S 0279 Q T 0668 Imaging S&I.
75756..................... Artery x-rays, chest............. S 0279 Q T 0668 Imaging S&I.
75774..................... Artery x-ray, each vessel........ S 0279 N n/a n/a Imaging S&I.
75790..................... Visualize A-V shunt.............. S 0279 Q T 0668 Imaging S&I.
75801..................... Lymph vessel x-ray, arm/leg...... X 0264 Q T 0317 Imaging S&I.
75803..................... Lymph vessel x-ray, arms/legs.... X 0264 Q T 0317 Imaging S&I.
75805..................... Lymph vessel x-ray, trunk........ X 0264 Q T 0317 Imaging S&I.
75807..................... Lymph vessel x-ray, trunk........ X 0264 Q T 0317 Imaging S&I.
75809..................... Nonvascular shunt, x-ray......... X 0263 Q T 0263 Imaging S&I.
75810..................... Vein x-ray, spleen/liver......... S 0279 Q T 0279 Imaging S&I.
75820..................... Vein x-ray, arm/leg.............. S 0668 Q T 0668 Imaging S&I.
75822..................... Vein x-ray, arms/legs............ S 0668 Q T 0668 Imaging S&I.
75825..................... Vein x-ray, trunk................ S 0279 Q T 0279 Imaging S&I.
75827..................... Vein x-ray, chest................ S 0279 Q T 0668 Imaging S&I.
75831..................... Vein x-ray, kidney............... S 0279 Q T 0279 Imaging S&I.
75833..................... Vein x-ray, kidneys.............. S 0279 Q T 0279 Imaging S&I.
75840..................... Vein x-ray, adrenal gland........ S 0280 Q T 0279 Imaging S&I.
75842..................... Vein x-ray, adrenal glands....... S 0280 Q T 0279 Imaging S&I.
75860..................... Vein x-ray, neck................. S 0668 Q T 0668 Imaging S&I.
75870..................... Vein x-ray, skull................ S 0668 Q T 0668 Imaging S&I.
75872..................... Vein x-ray, skull................ S 0279 Q T 0668 Imaging S&I.
75880..................... Vein x-ray, eye socket........... S 0668 Q T 0668 Imaging S&I.
75885..................... Vein x-ray, liver................ S 0280 Q T 0279 Imaging S&I.
75887..................... Vein x-ray, liver................ S 0279 Q T 0668 Imaging S&I.
75889..................... Vein x-ray, liver................ S 0280 Q T 0279 Imaging S&I.
75891..................... Vein x-ray, liver................ S 0279 Q T 0279 Imaging S&I.
75893..................... Venous sampling by catheter...... Q 0668 Q T 0279 Imaging S&I.
75894..................... X-rays, transcath therapy........ S 0298 N n/a n/a Imaging S&I.
75896..................... X-rays, transcath therapy........ S 0263 N n/a n/a Imaging S&I.
75898..................... Follow-up angiography............ X 0263 Q STVX 0263 Intraoperative.
75901..................... Remove cva device obstruct....... X 0263 N n/a n/a Imaging S&I.
75902..................... Remove cva lumen obstruct........ X 0263 N n/a n/a Imaging S&I.
75940..................... X-ray placement, vein filter..... S 0298 N n/a n/a Imaging S&I.
75945..................... Intravascular us................. S 0267 Q T 0267 Imaging S&I.
75946..................... Intravascular us add-on.......... S 0266 N n/a n/a Imaging S&I.
75960..................... Transcath iv stent rs&i.......... S 0668 N n/a n/a Imaging S&I.
75961..................... Retrieval, broken catheter....... S 0668 N n/a n/a Imaging S&I.
75962..................... Repair arterial blockage......... S 0668 Q T 0083 Imaging S&I.

[[Page 66661]]

75964..................... Repair artery blockage, each..... S 0668 N n/a n/a Imaging S&I.
75966..................... Repair arterial blockage......... S 0668 Q T 0083 Imaging S&I.
75968..................... Repair artery blockage, each..... S 0668 N n/a n/a Imaging S&I.
75970..................... Vascular biopsy.................. S 0668 N n/a n/a Imaging S&I.
75978..................... Repair venous blockage........... S 0668 Q T 0083 Imaging S&I.
75980..................... Contrast xray exam bile duct..... S 0297 N n/a n/a Imaging S&I.
75982..................... Contrast xray exam bile duct..... S 0297 N n/a n/a Imaging S&I.
75984..................... Xray control catheter change..... X 0263 N n/a n/a Imaging S&I.
75989..................... Abscess drainage under x-ray..... N ...... N n/a n/a Imaging S&I.
75992..................... Atherectomy, x-ray exam.......... S 0668 N n/a n/a Imaging S&I.
75993..................... Atherectomy, x-ray exam.......... S 0668 N n/a n/a Imaging S&I.
75994..................... Atherectomy, x-ray exam.......... S 0668 N n/a n/a Imaging S&I.
75995..................... Atherectomy, x-ray exam.......... S 0668 N n/a n/a Imaging S&I.
75996..................... Atherectomy, x-ray exam.......... S 0668 N n/a n/a Imaging S&I.
76000..................... Fluoroscope examination.......... X 0272 Q STVX 0272 Guidance.
76001..................... Fluoroscope exam, extensive...... N n/a N n/a n/a Guidance.
76080..................... X-ray exam of fistula............ X 0263 Q T 0263 Imaging S&I.
76125..................... Cine/video x-rays add-on......... X 0260 N n/a n/a Image Processing.
76350..................... Special x-ray contrast study..... N n/a N n/a n/a Image Processing.
76376..................... 3d render w/o postprocess........ X 0340 N n/a n/a Image Processing.
76377..................... 3d rendering w/postprocess....... S 0282 N n/a n/a Image Processing.
76930..................... Echo guide, cardiocentesis....... S 0268 N n/a n/a Guidance.
76932..................... Echo guide for heart biopsy...... S 0309 N n/a n/a Guidance.
76936..................... Echo guide for artery repair..... S 0309 N n/a n/a Guidance.
76937..................... Us guide, vascular access........ N n/a N n/a n/a Guidance.
76940..................... Us guide, tissue ablation........ S 0268 N n/a n/a Guidance.
76941..................... Echo guide for transfusion....... S 0268 N n/a n/a Guidance.
76942..................... Echo guide for biopsy............ S 0268 N n/a n/a Guidance.
76945..................... Echo guide, villus sampling...... S 0268 N n/a n/a Guidance.
76946..................... Echo guide for amniocentesis..... S 0268 N n/a n/a Guidance.
76948..................... Echo guide, ova aspiration....... S 0309 N n/a n/a Guidance.
76950..................... Echo guidance radiotherapy....... S 0268 N n/a n/a Guidance.
76965..................... Echo guidance radiotherapy....... S 0308 N n/a n/a Guidance.
76975..................... GI endoscopic ultrasound......... S 0266 Q T 0267 Imaging S&I.
76998..................... Us guide, intraop................ S 0266 N n/a n/a Guidance.
77001..................... Fluoro guide for vein device..... N n/a N n/a n/a Guidance.
77002..................... Needle localization by xray...... N n/a N n/a n/a Guidance.
77003..................... Fluoroguide for spine inject..... N n/a N n/a n/a Guidance.
77011..................... Ct scan for localization......... S 0283 N n/a n/a Guidance.
77012..................... Ct scan for needle biopsy........ S 0283 N n/a n/a Guidance.
77013..................... Ct guide for tissue ablation..... S 0333 N n/a n/a Guidance.
77014..................... Ct scan for therapy guide........ S 0282 N n/a n/a Guidance.
77021..................... Mr guidance for needle place..... S 0335 N n/a n/a Guidance.
77022..................... Mri for tissue ablation.......... S 0335 N n/a n/a Guidance.
77031..................... Stereotact guide for brst bx..... X 0264 N n/a n/a Guidance.
77032..................... Guidance for needle, breast...... X 0283 N n/a n/a Guidance.
77053..................... X-ray of mammary duct............ X 0263 Q T 0263 Imaging S&I.
77054..................... X-ray of mammary ducts........... X 0263 Q T 0263 Imaging S&I.
77417..................... Radiology port film(s)........... X 0260 N n/a n/a Guidance.
77421..................... Stereoscopic x-ray guidance...... S 0257 N n/a n/a Guidance.
78020..................... Thyroid met uptake............... S 0399 N n/a n/a Intraoperative.
78478..................... Heart wall motion add-on......... S 0399 N n/a n/a Intraoperative.
78480..................... Heart function add-on............ S 0399 N n/a n/a Intraoperative.
78496..................... Heart first pass add-on1......... S 0399 N n/a n/a Intraoperative.
92547..................... Supplemental electrical test..... X 0363 N n/a n/a Intraoperative.
92978..................... Intravasc us, heart add-on....... S 0670 N n/a n/a Intraoperative.
92979..................... Intravasc us, heart add-on....... S 0416 N n/a n/a Intraoperative.
93320..................... Doppler echo exam, heart......... S 0697 N n/a n/a Intraoperative.
93321..................... Doppler echo exam, heart......... S 0697 N n/a n/a Intraoperative.
93325..................... Doppler color flow add-on........ S 0697 N ........... n/a Image Processing.
93555..................... Imaging, cardiac cath............ N n/a N n/a n/a Imaging S&I.
93556..................... Imaging, cardiac cath............ N n/a N n/a n/a Imaging S&I.
93571..................... Heart flow reserve measure....... S 0670 N n/a n/a Intraoperative.
93572..................... Heart flow reserve measure....... S 0416 N n/a n/a Intraoperative.
93609..................... Map tachycardia, add-on.......... T 0087 N n/a n/a Intraoperative.
93613..................... Electrophys map 3d, add-on....... T 0087 N n/a n/a Image Processing.
93621..................... Electrophysiology evaluation..... T 0085 N n/a n/a Intraoperative.

[[Page 66662]]

93622..................... Electrophysiology evaluation..... T 0085 N n/a n/a Intraoperative.
93623..................... Stimulation, pacing heart........ T 0087 N n/a n/a Intraoperative.
93631..................... Heart pacing, mapping............ T 0087 N n/a n/a Intraoperative.
93640..................... Evaluation heart device.......... N n/a N n/a n/a Intraoperative.
93641..................... Electrophysiology evaluation..... N n/a N n/a n/a Intraoperative.
93662..................... Intracardiac ecg (ice)........... S 0670 N n/a n/a Intraoperative.
95829..................... Surgery electrocorticogram....... S 0214 N n/a n/a Intraoperative.
95873..................... Guide nerv destr, elec stim...... S 0215 N n/a n/a Guidance.
95874..................... Guide nerv destr, needle emg..... S 0215 N n/a n/a Guidance.
95920..................... Intraop nerve test add-on........ S 0216 N n/a n/a Intraoperative.
95955..................... EEG during surgery............... S 0213 N n/a n/a Intraoperative.
95957..................... EEG digital analysis............. S 0214 N n/a n/a Image Processing.
95980..................... Io anal gast n-stim init......... n/a n/a N n/a n/a Intraoperative.
96020..................... Functional brain mapping......... X 0373 N n/a n/a Intraoperative.
0126T..................... Chd risk imt study............... N n/a Q STVX 0340 Intraoperative.
0159T..................... Cad breast MRI................... N n/a N n/a n/a Image Processing.
0173T..................... Iop monit io pressure............ N n/a N n/a n/a Intraoperative.
0174T..................... Cad cxr remote................... N n/a N n/a n/a Image Processing.
0175T..................... Cad cxr with interp.............. N n/a N n/a n/a Image Processing.
A4641..................... Radiopharm dx agent noc.......... N n/a N n/a n/a Diagnostic Radiopharmaceutical.
A4642..................... In111 satumomab.................. H 0704 N n/a n/a Diagnostic Radiopharmaceutical.
A9500..................... Tc99m sestamibi.................. H 1600 N n/a n/a Diagnostic Radiopharmaceutical.
A9501..................... Technetium TC-99m teboroxime..... n/a n/a N n/a n/a Diagnostic Radiopharmaceutical.
A9502..................... Tc99m tetrofosmin................ H 0705 N n/a n/a Diagnostic Radiopharmaceutical.
A9503..................... Tc99m medronate.................. N n/a N n/a n/a Diagnostic Radiopharmaceutical.
A9504..................... Tc99m apcitide................... N n/a N n/a n/a Diagnostic Radiopharmaceutical.
A9505..................... TL201 thallium................... H 1603 N n/a n/a Diagnostic Radiopharmaceutical.
A9507..................... In111 capromab................... H 1604 N n/a n/a Diagnostic Radiopharmaceutical.
A9508..................... I131 iodobenguate, dx............ H 1045 N n/a n/a Diagnostic Radiopharmaceutical.
A9509..................... Iodine I-123 sod iodide mil...... n/a n/a N n/a n/a Diagnostic Radiopharmaceutical.
A9510..................... Tc99m disofenin.................. N n/a N n/a n/a Diagnostic Radiopharmaceutical.
A9512..................... Tc99m pertechnetate.............. N n/a N n/a n/a Diagnostic Radiopharmaceutical.
A9516..................... I123 iodide cap, dx.............. H 9148 N n/a n/a Diagnostic Radiopharmaceutical.
A9521..................... Tc99m exametazime................ H 1096 N n/a n/a Diagnostic Radiopharmaceutical.
A9524..................... I131 serum albumin, dx........... H 9100 N n/a n/a Diagnostic Radiopharmaceutical.
A9526..................... Nitrogen N-13 ammonia............ H 0737 N n/a n/a Diagnostic Radiopharmaceutical.
A9528..................... Iodine I-131 iodide cap, dx...... H 1088 N n/a n/a Diagnostic Radiopharmaceutical.
A9529..................... I131 iodide sol, dx.............. N n/a N n/a n/a Diagnostic Radiopharmaceutical.
A9531..................... I131 max 100uCi.................. N n/a N n/a n/a Diagnostic Radiopharmaceutical.
A9532..................... I125 serum albumin, dx........... N n/a N n/a n/a Diagnostic Radiopharmaceutical.
A9536..................... Tc99m depreotide................. H 0739 N n/a n/a Diagnostic Radiopharmaceutical.
A9537..................... Tc99m mebrofenin................. N n/a N n/a n/a Diagnostic Radiopharmaceutical.
A9538..................... Tc99m pyrophosphate.............. N n/a N n/a n/a Diagnostic Radiopharmaceutical.

[[Page 66663]]

A9539..................... Tc99m pentetate.................. H 0722 N n/a n/a Diagnostic Radiopharmaceutical.
A9540..................... Tc99m MAA........................ N n/a N n/a n/a Diagnostic Radiopharmaceutical.
A9541..................... Tc99m sulfur colloid............. N n/a N n/a n/a Diagnostic Radiopharmaceutical.
A9542..................... In111 ibritumomab, dx............ H 1642 N n/a n/a Diagnostic Radiopharmaceutical.
A9544..................... I131 tositumomab, dx............. H 1644 N n/a n/a Diagnostic Radiopharmaceutical.
A9546..................... Co57/58.......................... H 0723 N n/a n/a Diagnostic Radiopharmaceutical.
A9547..................... In111 oxyquinoline............... H 1646 N n/a n/a Diagnostic Radiopharmaceutical.
A9548..................... In111 pentetate.................. H 1647 N n/a n/a Diagnostic Radiopharmaceutical.
A9550..................... Tc99m gluceptate................. H 0740 N n/a n/a Diagnostic Radiopharmaceutical.
A9551..................... Tc99m succimer................... H 1650 N n/a n/a Diagnostic Radiopharmaceutical.
A9552..................... F18 fdg.......................... H 1651 N n/a n/a Diagnostic Radiopharmaceutical.
A9553..................... Cr51 chromate.................... H 0741 N n/a n/a Diagnostic Radiopharmaceutical.
A9554..................... I125 iothalamate, dx............. N n/a N n/a n/a Diagnostic Radiopharmaceutical.
A9555..................... Rb82 rubidium.................... H 1654 N n/a n/a Diagnostic Radiopharmaceutical.
A9556..................... Ga67 gallium..................... H 1671 N n/a n/a Diagnostic Radiopharmaceutical.
A9557..................... Tc99m bicisate................... H 1672 N n/a n/a Diagnostic Radiopharmaceutical.
A9558..................... Xe133 xenon 10mci................ N n/a N n/a n/a Diagnostic Radiopharmaceutical.
A9559..................... Co57 cyano....................... H 0724 N n/a n/a Diagnostic Radiopharmaceutical.
A9560..................... Tc99m labeled rbc................ H 0742 N n/a n/a Diagnostic Radiopharmaceutical.
A9561..................... Tc99m oxidronate................. N n/a N n/a n/a Diagnostic Radiopharmaceutical.
A9562..................... Tc99m mertiatide................. H 0743 N n/a n/a Diagnostic Radiopharmaceutical.
A9566..................... Tc99m fanolesomab................ H 1678 N n/a n/a Diagnostic Radiopharmaceutical.
A9567..................... Technetium TC-99m aerosol........ H 0829 N n/a n/a Diagnostic Radiopharmaceutical.
A9568..................... Tc99m arcitumomab................ H 1648 N n/a n/a Diagnostic Radiopharmaceutical.
A9569..................... Technetium TC-99m auto WBC....... n/a n/a N n/a n/a Diagnostic Radiopharmaceutical.
A9570..................... Indium In-111 auto WBC........... n/a n/a N n/a n/a Diagnostic Radiopharmaceutical.
A9571..................... Indium In-111 auto platelet...... n/a n/a N n/a n/a Diagnostic Radiopharmaceutical.
A9572..................... Indium In-111 pentetreotide...... n/a n/a N n/a n/a Diagnostic Radiopharmaceutical.
A9576..................... Inj prohance multipack........... n/a n/a N n/a n/a Contrast Agent.
A9577..................... Inj multihance................... n/a n/a N n/a n/a Contrast Agent.
A9578..................... Inj multihance multipack......... n/a n/a N n/a n/a Contrast Agent.
A9579..................... Gad-base MR contrast NOS, 1ml.... n/a n/a N n/a n/a Contrast Agent.
G0268..................... Removal of impacted wax md....... X 0340 N n/a n/a Intraoperative.
G0275..................... Renal angio, cardiac cath........ N n/a N n/a n/a Intraoperative.
G0278..................... Iliac art angio,cardiac cath..... N n/a N n/a n/a Intraoperative.
G0288..................... Recon, CTA for surg plan......... S 0417 N n/a n/a Image Processing.
G0378..................... Hospital observation per hr...... Q 339 N n/a n/a Observation.
Q9951..................... LOCM >= 400 mg/ml iodine, 1ml.... K 9163 N n/a n/a Contrast Agent.
Q9953..................... Inj Fe-based MR contrast, 1ml.... K 1713 N n/a n/a Contrast Agent.

[[Page 66664]]

Q9954..................... Oral MR contrast, 100 ml......... K 9165 N n/a n/a Contrast Agent.
Q9955..................... Inj perflexane lip micros, ml.... K 9203 N n/a n/a Contrast Agent.
Q9956..................... Inj octafluoropropane mic, ml.... K 9202 N n/a n/a Contrast Agent.
Q9957..................... Inj perflutren lip micros, ml.... K 9112 N n/a n/a Contrast Agent.
Q9958..................... HOCM <= 149 mg/ml iodine, 1ml.... N n/a N n/a n/a Contrast Agent.
Q9959..................... HOCM 150-199mg/ml iodine, 1ml.... N n/a N n/a n/a Contrast Agent.
Q9960..................... HOCM 200-249mg/ml iodine, 1ml.... N n/a N n/a n/a Contrast Agent.
Q9961..................... HOCM 250-299mg/ml iodine, 1ml.... N n/a N n/a n/a Contrast Agent.
Q9962..................... HOCM 300-349mg/ml iodine, 1ml.... N n/a N n/a n/a Contrast Agent.
Q9963..................... HOCM 350-399mg/ml iodine, 1ml.... N n/a N n/a n/a Contrast Agent.
Q9964..................... HOCM >= 400mg/ml iodine, 1ml..... N n/a N n/a n/a Contrast Agent.
Q9965..................... LOCM 100-199mg/ml iodine, 1ml.... n/a n/a N n/a n/a Contrast Agent.
Q9966..................... LOCM 200-299mg/ml iodine, 1ml.... n/a n/a N n/a n/a Contrast Agent.
Q9967..................... LOCM 300-399mg/ml iodine, 1ml.... n/a n/a N n/a n/a Contrast Agent.
--------------------------------------------------------------------------------------------------------------------------------------------------------

e. Service-Specific Packaging Issues
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.'' Commenters to past rules have
suggested that certain 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.'' In
deciding whether to package a service or pay for a code separately, we
have historically considered a variety of factors, including whether
the service is normally provided separately or in conjunction with
other services; how likely it is for the costs of the packaged code to
be appropriately mapped to the separately payable codes with which it
was performed; and whether the expected cost of the service is
relatively low. As discussed above regarding our packaging approach for
CY 2008, we have modified the historical considerations outlined above
in developing our policy for the CY 2008 OPPS. The Packaging
Subcommittee discussed many HCPCS codes during the March 2007 APC Panel
meeting, prior to development of the packaging approach discussed
above, and we have summarized and responded to the APC Panel's
packaging-related recommendations below. Three of the codes reviewed by
the Packaging Subcommittee at the March 2007 APC Panel meeting are
included in the seven categories of services identified for packaging
under the CY 2008 OPPS. For those three codes, we specifically applied
the proposed CY 2008 criteria for determining whether a code should be
proposed as packaged or separately payable for CY 2008. Specifically,
we determined whether the service is a dependent service falling into
one of the seven specified categories that is always or almost always
provided integral to an independent service. For those four codes that
were reviewed during the March 2007 APC Panel meeting but that do not
fit into any of the seven categories of codes that are part of our CY
2008 proposed packaging approach, we applied the packaging criteria
described above that were historically used under the OPPS. Moreover,
we took into consideration our interest in exploring the possibility of
expanding the size of payment groups for component services to provide
encounter-based and episode-of-care-based payment in the future in
order to encourage hospital efficiency and provide hospitals with
maximal flexibility to manage their resources.
In accordance with a recommendation of the APC Panel, for the CY
2007 OPPS, we implemented a new policy that designates certain codes as
``special'' packaged codes, assigned to status indicator ``Q'' under
the OPPS, where separate payment is provided if the code is reported
without any other services that are separately payable under the OPPS
on the same date of service. Otherwise, payment for the ``special''
packaged code is packaged into payment for the separately payable
services provided by the hospital on the same date. We note that these
``special'' packaged codes are a subset of those HCPCS codes that are
assigned to status indicator ``Q,'' which means that their payment is
conditionally packaged under the OPPS. We proposed to update our
criteria to determine packaged versus separate payment for ``special''
packaged HCPCS codes assigned to status indicator ``Q'' for CY 2008.
For CY 2008, payment for ``special'' packaged codes would be packaged
when these HCPCS codes are billed on the same date of service as a code
assigned to status indicator ``S,'' ``T,'' ``V,'' or ``X.'' When one of
the ``special'' packaged codes assigned to status indicator ``Q'' is
billed on a date of service without a code that is assigned to any of
the four status indicators noted above, the ``special'' packaged code
assigned to status indicator ``Q'' would be separately payable.
The Packaging Subcommittee identified areas for change for some
currently packaged CPT codes that it 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. Based on the comments received, additional issues, and new
data that we shared with the Packaging Subcommittee concerning the
packaging status of codes for CY 2008, the Packaging Subcommittee
reviewed the packaging status of numerous HCPCS codes and reported its
findings to the APC Panel at its March 2007 meeting. The APC Panel
accepted the report of the Packaging Subcommittee, heard several
presentations on certain packaged services, discussed the deliberations
of the Packaging Subcommittee, and recommended that--
1. CMS place CPT code 76937 (Ultrasound guidance for vascular
access requiring ultrasound evaluation of potential access sites,
documentation of selected vessel patency, concurrent real-time
ultrasound visualization of vascular needle entry, with permanent

[[Page 66665]]

recording and reporting (list separately in addition to code for
primary procedure)) on the list of ``special'' packaged codes (status
indicator ``Q''). (Recommendation 1)
2. CMS evaluate providing separate payment for trauma activation
when it is reported on a claim for an ED visit, regardless of the level
of the emergency department visit. (Recommendation 2)
3. CMS place CPT code 0175T (Computer aided detection (CAD)
(computer algorithm analysis of digital image data for lesion
detection) with further physician review for interpretation and report,
with or without digitization of film radiographic images, chest
radiograph(s), performed remote from primary interpretation) on the
list of ``special'' packaged codes (status indicator ``Q'').
(Recommendation 3)
4. CMS place CPT code 0126T (Common carotid intima-media thickness
(IMT) study for evaluation of atherosclerotic burden or coronary heart
disease risk factor assessment) on the list of ``special'' packaged
codes (status indicator ``Q'') and that CMS consider mapping the code
to APC 340 (Minor Ancillary Procedures). (Recommendation 4)
5. CMS place CPT code 0069T (Acoustic heart sound recording and
computer analysis only) on the list of ``special'' packaged codes
(status indicator ``Q'') and that CMS exclude APC 0096 (Non-Invasive
Vascular Studies) as a potential placement for this CPT code.
(Recommendation 5)
6. CMS maintain the packaged status of HCPCS code A4306 (Disposable
drug delivery system, flow rate of less than 50 ml per hour) and that
CMS present additional data on this system to the APC Panel when
available. (Recommendation 6)
7. CMS reevaluate the packaged OPPS payment for CPT code 99186
(Hypothermia; total body) based on current research and availability of
new therapeutic modalities. (Recommendation 7)
8. The Packaging Subcommittee remains active until the next APC
Panel meeting. (Recommendation 8)
In addition, the Packaging Subcommittee reported its findings to
the APC Panel at its September 2007 meeting. The APC Panel accepted the
report of the Packaging Subcommittee, heard presentations on certain
packaged services, discussed the deliberations of the Packaging
Subcommittee, and recommended that--
9. CMS provide more data at the next APC Panel meeting on HCPCS
code A4306 (Disposable drug delivery system, flow rate of less than 50
mL per hour). (Recommendation 9)
10. The Packaging Subcommittee remains active until the next APC
Panel meeting. (Recommendation 10)
We address each of these recommendations in turn in the discussion
that follows.
Recommendation 1
For CY 2008, we proposed to maintain CPT code 76937 as a packaged
service. We are not adopting the APC Panel's recommendation to pay
separately for this code in some circumstances as a ``special''
packaged code. In the CY 2006 OPPS final rule with comment period (70
FR 68544 through 68545), in response to several public comments, we
reviewed in detail the claims data related to CPT code 76937. During
its March 2006 APC Panel meeting, after reviewing data pertinent to CPT
code 76937, the APC Panel recommended that CMS maintain the packaged
status of this code for CY 2007, and we accepted that recommendation.
During the March 2007 APC Panel meeting, after reviewing current data
and listening to a public presentation, the Panel recommended that we
treat this code as a ``special'' packaged code for CY 2008, noting that
certain uncommon clinical scenarios could occur where it would be
possible to bill this service alone on a claim, without any other
separately payable OPPS services.
We proposed to maintain CPT code 76937 as an unconditionally
packaged service for CY 2008, fully consistent with the proposed
packaging approach for the CY 2008 OPPS, as discussed above. Because
CPT code 76937 is a guidance procedure and we proposed to package
payment for all guidance procedures for CY 2008, we believe it is still
appropriate to maintain the unconditionally packaged status of this
code, which is a CPT designated add-on procedure that we expected to be
generally provided only in association with other independent services.
We applied the updated criteria for determining whether this service
should receive packaged or separately payment under the CY 2008 OPPS.
Specifically, we determined that this service was a supportive
ancillary service that was integral to an independent service,
resulting in our CY 2008 proposal to packaged payment for the service.
We discussed this code extensively in both the CY 2006 and CY 2007
final rules with comment period (70 FR 68544 through 68545; 71 FR 67996
through 67997). Our hospital claims data demonstrated that guidance
services were used frequently for the insertion of vascular access
devices, and we had no evidence that patients lacked appropriate access
to guidance services necessary for the safe insertion of vascular
access devices in the hospital outpatient setting. Because we believe
that ultrasound guidance would almost always be provided with one or
more separately payable independent procedures, its costs would be
appropriately bundled with the handful of vascular access device
insertion procedures with which it was most commonly performed. We
further believe that hospital staff chose whether to use no guidance or
fluoroscopic guidance or ultrasound guidance on an individual basis,
depending on the clinical circumstances of the vascular access device
insertion procedure.
Therefore, we do not believe that CPT code 76937 is an appropriate
candidate for designation as a ``special'' packaged code. The CY 2007
CPT book indicates that this code is an add-on code and should be
reported in addition to the code reported for the primary procedure.
According to our CY 2006 claims data available for the proposed rule,
this code was billed over 60,000 times, yet less than one-tenth of 1
percent of all claims for the procedure were billed without any
separately payable OPPS service on the claim. Because this code is
provided alone only extremely rarely, we believe this code would not be
appropriately treated as a ``special'' packaged code. Therefore, we
proposed to continue to unconditionally package CPT code 76937 for CY
2008.
We received several comments that referenced CPT code 76937 in
discussions related to the packaged status of guidance services in
general. Those comments are summarized and responded to in section
II.4.c.1 of this final rule with comment period. As noted in that
section, we are finalizing our proposal, without modification, to
unconditionally package CPT code 76937 for CY 2008.
Recommendation 2
For CY 2008, we proposed to maintain the packaged status of revenue
code 068x, trauma response, when the trauma response is provided
without critical care services. During the August 2006 APC Panel
meeting, the APC Panel encouraged CMS to pay differentially for
critical care services provided with and without trauma activation. For
CY 2007, as a result of the APC Panel's August 2006 discussion and our
own data analysis, we finalized a policy to pay differentially for
critical care provided with and without trauma activation. The CY 2007
payment rate

[[Page 66666]]

for critical care unassociated with trauma activation is $405.04 (APC
0617, Critical Care), while the payment rate for critical care
associated with trauma activation is $899.58 (APC 0617 and APC 0618
(Trauma Response with Critical Care)). During the March 2007 APC Panel
meeting, a presenter requested that CMS also pay differentially for
emergency department visits provided with and without trauma
activation. Two organizations that submitted comment letters for the
APC Panel's review specifically requested separate payment for revenue
code 068x every time it appears on a claim, regardless of the other
services that were billed on that claim. The APC Panel recommended that
CMS evaluate providing separate payment for trauma activation when it
is reported on a claim for an emergency department visit, regardless of
the level of the emergency department visit.
After accepting the APC Panel's recommendation and evaluating this
issue, we continue to believe that, while it is currently appropriate
to pay separately for trauma activation when billed in association with
critical care services, it is also currently appropriate to maintain
the packaged payment status of revenue code 068x when trauma response
services are provided in association with both clinic and emergency
department visits under the CY 2008 OPPS. As mentioned above, we are
exploring the possibility of expanding the size of the payment groups
under the OPPS to move toward encounter-based and episode-of-care-based
payments in order to encourage maximum hospital efficiency with a focus
on budget-neutral value-based purchasing. Because trauma activation in
association with emergency department or clinic visits would always be
provided in the same hospital outpatient encounter as the visit for
care of the injured Medicare beneficiary, packaging payment for trauma
activation when billed in association with both clinic and emergency
department visits is most consistent with our proposed packaging
approach. We are also concerned that unpackaging payment for trauma
activation in those circumstances where the trauma response would be
less likely to be essential to appropriately treating a Medicare
beneficiary would reduce the incentive for hospitals to provide the
most efficient and cost-effective care. We note that, while we proposed
for CY 2008 to continue to provide separate payment for trauma
activation in association with critical care services, we may
reconsider this payment policy for future OPPS updates as we explore
the possibility of developing encounter based and episode-of-care-based
payment approaches.
Furthermore, continued packaged payment for trauma activation when
unassociated with critical care is consistent with the principles of
the OPPS, where hospitals receive payment based on the median cost
related to all of the hospital resources associated with the main
service provided. In various situations, each hospital's costs may be
higher or lower than the median cost used to set payment rates. In
light of our packaging approach for the CY 2008 OPPS, we believe it is
particularly important not to make any changes in our payment policies
for other services that are not fully aligned with promoting efficient,
judicious, and deliberate care decisions by hospitals that allow them
maximum flexibility to manage their resources through encouraging the
most cost-effective use of hospital resources in providing the care
necessary for the treatment of Medicare beneficiaries. Packaging
payment encourages hospitals to establish protocols that ensure that
services are furnished only when they are medically necessary and to
carefully scrutinize the services ordered by practitioners to minimize
unnecessary use of hospital resources.
Therefore, we are adopting the APC Panel's recommendation that we
evaluate providing separate payment for revenue code 068x when provided
in association with emergency department visits. For CY 2008, after our
thorough assessment, we proposed to maintain the packaged status of
revenue code 068x, except when revenue code 068x is billed in
association with critical care services.
We did not receive any comments on this proposal. Therefore, we are
finalizing our proposal, without modification, to maintain the packaged
status of revenue code 068x, trauma response, when the trauma response
is provided without critical care services.
We note that we do not anticipate that the new composite Extended
Assessment and Management APCs, 8002 and 8003, will affect this policy
in any way.
Recommendation 3
For CY 2008, we proposed to maintain the unconditionally packaged
status of CPT codes 0174T (Computer aided detection (CAD) (computer
algorithm analysis of digital image data for lesion detection) with
further physician review for interpretation and report, with or without
digitization of film radiographic images, chest radiograph(s),
performed concurrent with primary interpretation) and 0175T. These
services involve the application of computer algorithms and
classification technologies to chest x-ray images to acquire and
display information regarding chest x-ray regions that may contain
indications of cancer. CPT code 0152T (Computer aided detection
(computer algorithm analysis of digital image data for lesion
detection) with further physician review for interpretation, with or
without digitization of film radiographic images; chest radiograph(s)
(List separately in addition to code for primary procedure)), the
predecessor code to CPT codes 0174T and 0175T, was indicated as an add-
on code to chest x-ray CPT codes for CY 2006, according to the AMA's CY
2006 CPT book. However, on July 1, 2006, the AMA released to the public
an update that deleted CPT codes 0152T and replaced it with the two new
Category III CPT codes 0174T and 0175T.
In its March 2006 presentation to the APC Panel, before the AMA had
released the CY 2007 changes to CPT code 0152T, a presenter requested
that we pay separately for this service and assign it to a New
Technology APC with a payment rate of $15, based on its estimated cost,
clinical considerations, and similarity to other image post-processing
services that are paid separately. We proposed to accept the APC
Panel's recommendation to package CPT code 0152T for CY 2007.
In its August 2006 presentation to the APC Panel, after the AMA had
released the CY 2007 code changes, the same presenter requested that we
assign both of the two new codes to a New Technology APC with a payment
rate of $15. The APC Panel members discussed these codes extensively.
They considered the possibility of treating CPT code 0175T as a
``special'' packaged code, thereby assigning payment to the code only
when it was performed by a hospital without any other separately
payable OPPS service also provided on the same day. They questioned the
meaning of the word ``remote'' in the code descriptor for CPT code
0175T, noting that was unclear as to whether remote referred to time,
geography, or a specific provider. They believed it was likely that a
hospital without a CAD system that performed a chest x-ray and sent the
x-ray to another hospital for performance of the CAD would be providing
the CAD service under arrangement and, therefore, would be providing at
least one other service (chest x-ray) that would be separately paid.
Thus, even in these cases, payment for the CAD service

[[Page 66667]]

could be appropriately packaged. After significant and lengthy
deliberation, the APC Panel recommended that we package payment for
both of the new CPT codes, 0174T and 0175T, for CY 2007.
In its March 2007 presentation to the APC Panel, the same presenter
requested that we pay separately for CPT codes 0174T and 0175T, mapping
them to New Technology APC 1492, with a payment rate of $15. The
presenter indicated that chest x-ray CAD is not a screening tool and
should only be billed to Medicare when applied to chest x-rays
suspicious for lung cancer. The presenter also explained that
additional and distinct hospital resources are required for chest x-ray
CAD that are not required for a standard chest x-ray. In addition,
remote chest x-ray CAD described by CPT code 0175T can be performed at
a different time or location or by a different provider than the chest
x-ray service. The presenter expressed concern that if hospitals were
not paid separately for this technology, hospitals would not be able to
provide it, thereby limiting beneficiary access to chest x-ray CAD. The
APC Panel recommended conditional packaging as a ``special'' packaged
code for CPT code 0175T, but did not recommend a change to the
unconditionally packaged status of CPT code 0174T. We are not adopting
the APC Panel's recommendation for designation of CPT code 0175T as a
``special'' packaged code under the CY 2008 OPPS.
We believed and continue to believe that packaged payment for
diagnostic chest x-ray CAD under a prospective payment methodology for
outpatient hospital services is most appropriate. We proposed to
maintain CPT codes 0174T and 0175T as unconditionally packaged services
for CY 2008, fully consistent with the packaging approach for the CY
2008 OPPS, as discussed above. Because CPT codes 0174T and 0175T are
supportive ancillary services that fit into the ``image processing''
category, and we proposed to package payment for all image processing
services for CY 2008, we believe it is appropriate to maintain the
packaged status of these code. We applied the updated criteria for
determining whether these two CAD services should receive packaged or
separate payment. Specifically, we determined that this service is a
dependent service that is integral to an independent service, in this
case, the chest x-ray or other OPPS service that we would expect to be
provided in addition to the CAD service.
After hearing many public presentations and discussions regarding
the use of chest x-ray CAD, we continue to believe that even the remote
service would almost always be provided by a hospital either in
conjunction with other separately payable services or under
arrangement. For example, if a physician orders a chest x-ray and CAD
service to be performed at hospital A and hospital A, which does not
have the CAD technology, sends the chest x-ray to hospital B for the
performance of chest x-ray CAD, hospital B could only provide the CAD
service if it were provided under arrangement, to avoid the OPPS
unbundling prohibition. Assuming that the CAD service was provided
under arrangement, hospital A would bill for the chest x-ray CAD that
was performed by hospital B and would pay hospital B for the service
provided. In that case, hospital A would also bill the chest x-ray
service that it provided. In another scenario that has been described
to us, if a physician were to send a patient to a hospital clinic with
the patient's chest x-ray for consultation, we believe that the patient
would likely receive a visit service, in addition to the chest x-ray
CAD. Therefore, in both of these circumstances, payment for the chest
x-ray CAD would be appropriately packaged into payment for the
separately payable services with which it was provided.
We also do not believe that CPT code 0175T should be treated as a
``special'' packaged code. As discussed earlier in this section with
regard to our packaging approach for image processing services for CY
2008, we are concerned with establishing payment policies that could
encourage certain inefficient and more costly service patterns,
particularly for those services that do not need to be provided as a
face-to-face encounter with the patient. If we were to assign CPT code
0175T to ``special'' packaged status, we would likely create an
incentive for hospitals to perform chest x-ray CAD remotely, for
example, several days after performance of the initial chest x-ray,
rather than immediately following the chest x-ray on the same day, to
enable the hospital to receive separate payment for the service. In CY
2005, there were approximately 7.3 million claims for all chest x-ray
services in the HOPD, so a payment policy that could induce such
changes in service delivery would be problematic in light of our
commitment to encouraging the most efficient and cost-effective care
for Medicare beneficiaries. Creating such perverse payment incentives
through conditional packaging is a particular problem for those
services that do not need a face-to-face encounter with the patient. In
fact, as part of our proposed CY 2008 packaging approach, we also
proposed to unconditionally package payment in CY 2008 for several
other image processing services that are not always performed face-to-
face, including HCPCS code G0288 (Reconstruction, computer tomographic
angiography of aorta for surgical planning for vascular surgery) and
CPT code 76377 (3D rendering with interpretation and reporting of
computed tomography, magnetic resource imaging, ultrasound, or other
tomographic modality; requiring image postprocessing on an independent
workstation). As noted in section II.A.4.c.(2) of this final rule with
comment period, we are finalizing our proposal for those codes and they
will be unconditionally packaged for CY 2008.
The proposed unconditionally packaged treatment of the two CPT
codes for chest x-ray CAD is fully consistent with the packaging
approach for the CY 2008 OPPS, as discussed above, and the principles
and incentives for efficiency inherent in a prospective payment system
based on groups of services. Packaging these services creates
incentives for providers to furnish services in the most cost-effective
way and provides them with the most flexibility to manage their
resources. As stated above, packaging encourages hospitals to establish
protocols that ensure that services are furnished only when they are
medically necessary and to carefully scrutinize the services ordered by
practitioners to minimize unnecessary use of hospital resources.
Therefore, we proposed to continue to unconditionally package payment
for CPT codes 0174T and 0175T for CY 2008.
Comment: One commenter requested that CPT codes 0174T and 0175T,
which were provided interim assignments in CY 2007 be assigned to
status indicator ``S'' and be paid separately with a payment rate of
$15. That commenter then requested conditional payment for both of
these CPT codes, status indicator ``Q'' assignment, and a payment rate
of $15. The commenter indicated that this technology is an important
diagnostic test for lung cancer patients, and that insufficient payment
will limit access to this cost-effective diagnostic tool.
Response: As discussed extensively above, after thorough discussion
with the APC Panel and repeated review by our clinical advisors, we
continue to believe that these codes are appropriately unconditionally
packaged.
For CY 2008, we are finalizing our proposal without modification to
unconditionally package CPT codes

[[Page 66668]]

0174T and 0175T for CY 2008. We note that these codes fall into the
category of the image processing codes that are packaged for the CY
2008 OPPS.
Recommendation 4
For CY 2008, we adopted the APC Panel's recommendation and proposed
to add CPT code 0126T to the list of ``special'' packaged codes and
assign this code to APC 0340 (Minor Ancillary Procedures).
This service describes an ultrasound procedure that measures common
carotid intima-media thickness to evaluate a patient's degree of
atherosclerosis. This code became effective January 1, 2006. We
received a comment to the CY 2007 proposed rule requesting that this
code become separately payable for CY 2007. At that point, we had no
cost data for the service and, as discussed in the CY 2007 OPPS/ASC
final rule with comment period (71 FR 67998), we reviewed this code
with the Packaging Subcommittee, as is our standard procedure for codes
that we are asked to review during the comment period. The APC Panel
noted that this service could sometimes be provided to a patient
without any other separately payable services. Therefore, the APC Panel
recommended that we add this code to the list of ``special'' packaged
codes and pay for it separately when it is provided without any other
separately payable services on the same day. For circumstances when
this code is paid separately, the APC Panel recommended that we
consider assigning this code to APC 0340.
While we continue to believe that this procedure would not commonly
be provided alone, we adopted the APC Panel recommendation and proposed
to treat this code as a ``special'' packaged code subject to
conditional packaging, mapping to APC 0340 for CY 2008 when it would be
separately paid. This is fully consistent with the packaging approach
for the CY 2008 OPPS, as discussed above. Because CPT code 0126T is
almost always performed during another procedure, and we proposed to
package payment for all intraoperative procedures for CY 2008, we
believe it is appropriate to designate this CPT code as a ``special''
packaged code. We applied the updated criteria for determining whether
this service should receive packaged or separate payment. Specifically,
we determined that this service is usually a dependent service that is
integral to an independent service, but that it could sometimes be
provided without an independent service.
As with all ``special'' packaged codes, we will closely monitor
cost data and frequency of separate payment for this procedure as soon
as we have more claims data available.
We did not receive any comments related to this proposal.
Therefore, we are finalizing our proposal without modification to
designate CPT code 0126T as a ``special'' packaged code for CY 2008.
This code is an ``STVX-packaged'' code.
Recommendation 5
For CY 2008, we proposed to maintain the packaged status of CPT
code 0069T, and we are not adopting the APC Panel's recommendation to
designate this service as a ``special'' packaged code. This service
uses signal processing technology to detect, interpret, and document
acoustical activities of the heart through special sensors applied to a
patient's chest. This code was a new Category III CPT code implemented
in the CY 2005 OPPS. CPT code 0069T was an add-on code to an
electrocardiography (EKG) service for CYs 2005 and 2006. However,
effective January 1, 2007, the AMA changed the code descriptor to
remove the add-on code designation for CPT code 0069T. This code has
been packaged under the OPPS since CY 2005.
During the August 2005 APC Panel meeting, the APC Panel recommended
packaging CPT code 0069T for CY 2005. In its March 2006 presentation to
the APC Panel, a presenter requested that we pay separately for CPT
code 0069T and assign it to APC 0099 (Electrocardiograms) based on its
estimated cost and clinical characteristics. The presenter stated that
the acoustic heart sound recording and analysis service may be provided
with or without a separately reportable electrocardiogram. Members of
the APC Panel engaged in extensive discussion of clinical scenarios as
they considered whether CPT code 0069T could or could not be
appropriately reported alone or in conjunction with several different
procedure codes. Ultimately, the APC Panel recommended assigning this
service to a separately payable status indicator. However, during the
August 2006 meeting, the APC Panel further discussed CMS' proposal to
package payment for CPT code 0069T for CY 2007 and considered the CY
2007 code descriptor change, finally recommending that CMS continue to
package this code for CY 2007.
During the March 2007 APC Panel meeting, the same presenter
requested that we pay separately for this service and assign it to APC
0096 (Non-Invasive Vascular Studies) or to APC 0097 (Cardiac and
Ambulatory Blood Pressure Monitoring), with CY 2007 payment rates of
$94.06 and $62.85, respectively. The presenter stated that the
estimated true cost of this service lies between $62 and $94. The
presenter clarified that this service is usually provided with an EKG,
but noted that the test is sometimes provided without an EKG, according
to its revised code descriptor for CY 2007. The presenter agreed that
it would be rare for the acoustic heart sound procedure to be performed
alone without any other separately payable OPPS services. The APC Panel
recommended that we place CPT code on the list of ``special'' packaged
codes and that we exclude APC 0096 as a potential placement for this
CPT code.
Because this service does not fit into one of the seven identified
categories of packaged codes proposed for the CY 2008 OPPS, we followed
our historical packaging guidelines to determine whether to maintain
the packaged status of this code or to pay for it separately. Based on
the clinical uses that were described during the March 2007 and earlier
APC Panel meetings, APC Panel discussions, and our claims data review,
we continue to believe that it is highly unlikely that CPT code 0069T
would be performed in the HOPD as a sole service without other
separately payable OPPS services. In addition, our data indicate that
this service is estimated to require only minimal hospital resources.
Based on CY 2006 claims, we had only 8 single claims for CPT code
0069T, with a median line-item cost of approximately $5, consistent
with its low expected cost. Therefore, we believe that payment for CPT
code 0069T is appropriately packaged because it would usually be
closely linked to the performance of an EKG or other separately payable
cardiac service, would rarely, if ever, be the only OPPS service
provided to a patient in an encounter, and has a low estimated resource
cost. The proposed packaged treatment of this code is consistent with
the principles and incentives for efficiency inherent in a prospective
payment system based on groups of services. Therefore, we proposed to
continue to package payment for CPT code 0069T for CY 2008.
We did not receive any comments related to this proposal.
Therefore, we are finalizing our proposal, without modification, to
continue to package payment for CPT code 0069T for CY 2008.
Recommendation 6
For CY 2008, we proposed to adopt the APC Panel's recommendation
and maintain the packaged status of HCPCS code A4306. We note that at
its

[[Page 66669]]

September 2007 APC Panel meeting, the Panel recommended specifically
that CMS provide more data at the next meeting on this code.
HCPCS code A4306 describes a disposable drug delivery system with a
flow rate of less than 50 ml per hour. As discussed during the March
2007 APC Panel meeting, there is a particular disposable drug delivery
system that is specifically used to treat postoperative pain. Since the
implementation of the OPPS, this code was assigned to status indicator
``A,'' indicating that it was payable according to another fee
schedule, in this case, the Durable Medical Equipment (DME) fee
schedule. There were discussions during CYs 2005 and 2006 between CMS
and a manufacturer, and it was determined that this code should be
removed from the DME fee schedule as this code does not describe DME.
For CY 2007, HCPCS code A4306 is payable under the OPPS, with status
indicator ``N'' indicating that its payment is unconditionally
packaged.
One presenter to the APC Panel requested that we pay separately for
this supply under the OPPS. For CY 2007, we packaged payment for this
code because it is considered to be a supply, and since the inception
of the OPPS the established payment policy packages payment for
supplies because they are directly related and integral to an
independent service furnished under the OPPS.
Our CY 2006 claims data indicate that HCPCS code A4306 was billed
on OPPS claims 1,773 times, yielding a line-item median cost of
approximately $3. The APC Panel and a presenter believe that this code
may not always be appropriately billed by hospitals as the data also
show that this code was billed together with computed tomography (CT)
scans of the thorax, abdomen, and pelvis approximately 40 percent of
the time that this supply was reported. The APC Panel speculated that
this code may be currently reported when other types of drug delivery
devices are utilized for nonsurgical procedures or for purposes other
than the treatment of postoperative pain. Therefore, the APC Panel
requested that we share additional data when available.
In summary, because HCPCS code A4306 represents a supply and
payment of supplies is packaged under the OPPS according to
longstanding policy, we proposed to maintain the packaged status of
HCPCS code A4306 for CY 2008.
Comment: A commenter supported CMS' proposal to maintain the
packaged status of HCPCS code A4306 for CY 2008. The commenter
suspected that this code is misreported by hospitals and estimated that
the true cost of the supply is between $20 and $60. The commenter
requested that CMS provide instructions to hospitals on the appropriate
revenue center for this supply and contact the AHA coding clinic
regarding the need for better HCPCS code instructions for this supply.
Response: In general, we give hospitals the flexibility to report
charges under whichever revenue code the hospital believes is most
appropriate. In addition, it is not our usual practice to refer codes
to the AHA coding clinic for review. Instead, we encourage the
commenter to submit any questions or requests for clarification to the
AHA coding clinic, if appropriate.
We are finalizing without modification our proposal to continue to
package payment for HCPCS code A4306 for CY 2008. In addition, with
respect to APC Panel Recommendation 9, we will provide the APC Panel
with more cost data related to this code at its next meeting.
Recommendation 7
For CY 2008, we proposed to maintain the packaged status of CPT
code 99186, consistent with the APC Panel's recommendation that we
reevaluate the packaged OPPS payment for CPT code 99186 based on
current research and the availability of new therapeutic modalities.
This service describes induced total body hypothermia that is performed
on some post-cardiac arrest patients to avoid or lessen brain damage.
The service has been packaged since the implementation of the OPPS. One
presenter to the APC Panel at the March 2007 meeting requested that
this code be assigned a separately payable status indicator under the
OPPS. The presenter expressed concern that hospitals that provide this
service and subsequently transfer the patient to another hospital prior
to admission are not adequately paid for their services.
Because this service does not fit into one of the seven identified
categories of packaged codes proposed for the CY 2008 OPPS, we followed
our historical packaging guidelines to determine whether to maintain
the packaged status of this code or to pay for it separately. Claims
data indicate that this code was billed 39 times under the OPPS in CY
2006 and was never billed without another separately payable service on
the same date. The proposed CY 2008 median cost for this code was
approximately $35, with individual costs ranging from approximately $17
to $69, likely reflecting the costs associated with traditional methods
of inducing total body hypothermia, such as ice packs applied to the
body. In fact, the presenter noted that a technologically advanced
total body hypothermia system costs $30,000, with an additional cost of
$1,600 per disposable body suit. As expected, our claims data showed
that this service was provided most frequently with high level
emergency department visits and critical care services.
As we noted in the CY 2008 proposed rule, we believed that the
circumstances in which total body hypothermia would be provided to a
Medicare beneficiary and billed under the OPPS were extremely rare, as
patients requiring this therapy would almost always be admitted as
inpatients if they survive. Moreover, in the uncommon situation where a
patient presents to one hospital and then is cooled and transported to
another hospital without admission to the first hospital, payment for
the hypothermia service would be most appropriately packaged into
payment for the many other separately payable services that it most
likely accompanied and that would be paid to the first hospital under
the OPPS.
In addition, consistent with the principles and incentives for
efficiency inherent in a prospective payment system based on groups of
services, packaging payment for this procedure that is highly
integrated with other services provided in the hospital outpatient
encounter creates incentives for providers to furnish services in the
most cost-effective way. In situations where there are a variety of
supplies that could be used to furnish a service, some of which are
more expensive than others, packaging encourages hospitals to use the
most cost-effective item that meets the patient's needs.
This code was discussed by the APC Panel members during the
September 2007 APC Panel meeting, but they made no official
recommendation.
We did not receive any comments related to our proposal. Therefore,
we are finalizing our proposal to maintain the packaged status of CPT
code 99186 for CY 2008.
Recommendation 8
We note that the Packaging Subcommittee remains active. See
Recommendation 10 below.
Recommendation 9
As noted in Recommendation 6, in accordance with the APC Panel's
recommendation, we will provide more cost data related to HCPCS code
A4306 (Disposable drug delivery system, flow

[[Page 66670]]

rate of less than 50 mL per hour) for the APC Panel's review at its
next meeting.
Recommendation 10
In response to the APC Panel's recommendation for the Packaging
Subcommittee to remain active until the next APC Panel meeting, we note
that the APC Panel Packaging Subcommittee remains active, and
additional issues and new data concerning the packaging status of codes
will be shared 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, and we also encourage recommendations of
specific services or procedures whose payment would be most
appropriately packaged under the OPPS. 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 community mental
health center (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. The Medicare regulations at
Sec. 419.21 that implement this provision specify that payments under
the OPPS will be made for partial hospitalization services furnished by
CMHCs as well as those furnished to hospital outpatients. Section
1833(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, which
includes a discussion of the decision to base relative payment rates on
median cost, we refer readers to the April 7, 2000 OPPS final rule with
comment period (65 FR 18482).
Historically, the median per diem cost for CMHCs greatly exceeded
the median per diem cost for hospital-based PHPs and fluctuated
significantly from year to year, while the median per diem cost for
hospital-based PHPs 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
section II.B.2. of this final rule with comment period and in the CY
2004 OPPS final rule with comment period (68 FR 63470), we also believe
that some CMHCs manipulated their charges in order to inappropriately
receive outlier payments.
For CY 2005, the PHP 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 the CY 2005 OPPS update, the CMHC median per diem cost was $310,
the hospital-based PHP median per diem cost was $215, and the combined
CMHC and hospital-based median per diem cost was $289. We believed that
the reduction in the CY 2005 CMHC median per diem cost compared to
prior years 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.
For the CY 2006 OPPS final rule with comment period, we analyzed 12
months of the most current claims data available for hospital and CMHC
PHP services furnished between January 1, 2004, and December 31, 2004.
We also used the most currently available CCRs to estimate costs. The
median per diem cost for CMHCs dropped to $154, while the median per
diem cost for hospital-based PHPs was $201. Based on the CY 2004 claims
data, the average charge per day for CMHCs was $760, considerably
greater than hospital-based per day costs but significantly lower than
what it was in CY 2003 ($1,184). We believed 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 CY
2006 OPPS updated combined hospital-based and CMHC median per diem cost
was $161, a decrease of 44 percent compared to the CY 2005 combined
median per diem amount.
Due to concern that this amount may not cover the cost for PHPs, as
stated in the CY 2006 OPPS final rule with comment period (70 FR 68548
and 68549), we applied a 15-percent reduction to the combined hospital-
based and CMHC median per diem cost to establish the CY 2006 PHP APC.
(We refer readers to the CY 2006 OPPS final rule with comment period
for a full discussion of how we established the CY 2006 PHP rate (70 FR
68548).) We stated our belief that 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 stated that 15 percent was an
appropriate reduction because it recognized decreases in median per
diem costs in both the hospital data and the CMHC data, and also
reduced the risk of any adverse impact on access to these services that
might result from a large single-year rate reduction. However, we
adopted this policy as a transitional measure, and stated in the CY
2006 OPPS final rule with comment period that we would continue to
monitor CMHC costs and charges for these services and work with CMHCs
to improve their reporting so that payments could be calculated based
on better empirical data (70 FR 68548). To apply this methodology for
CY 2006, we reduced the CY 2005 combined unscaled hospital-based and
CMHC median per diem cost of $289 by 15 percent, resulting in a
combined median per diem cost of $245.65 for CY 2006.
For the CY 2007 final rule with comment period, we analyzed 12
months of more current data for hospital and CMHC PHP claims for
services furnished between January 1, 2005, and December 31, 2005, and
used the most currently available CCRs to estimate costs. Using these
updated data, we recreated the analysis performed for the CY 2007
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 $8 to $173, while the

[[Page 66671]]

median per diem cost for hospital-based PHPs decreased $19 to $190. The
CY 2005 average charge per day for CMHCs was $675, similar to the
figure noted in the CY 2007 proposed rule ($673) but still
significantly lower than what was noted as the average charge for CY
2003 ($1,184).
The combined hospital-based and CMHC median per diem cost would
have been $175 for CY 2007. Rather than allowing the PHP median per
diem cost to drop to this level, we proposed to reduce the PHP median
cost by 15 percent, similar to the methodology used for the CY 2006
update. However, after considering all public comments received
concerning the proposed CY 2007 PHP per diem rate and results obtained
using the more current data, we modified our proposal. We made a 5-
percent reduction to the CY 2006 median per diem rate to provide a
transitional path to the per diem cost indicated by the data. This
approach accounted for the downward direction of the data and addressed
concerns raised by commenters about the magnitude of another 15-percent
reduction in 1 year. Thus, to calculate the CY 2007 APC PHP per diem
cost, we reduced $245.65 (the CY 2005 combined hospital-based and CMHC
median per diem cost of $289 reduced by 15 percent) by 5 percent, which
resulted in a combined per diem cost of $233.37.
2. PHP APC Update for CY 2008
As noted in the CY 2008 OPPS/ASC proposed rule (72 FR 42691), for
the past 2 years, we were concerned that we did not have sufficient
evidence to support using the median per diem cost produced by the most
current year's PHP data. After extensive analysis, we now believe the
data reflects the level of cost for the type of services that are being
provided. This analysis included an examination of revenue-to-cost
center mapping, refinements to the per diem methodology, and an in-
depth analysis of the number of units of service per day.
As stated in the CY 2008 proposed rule (72 FR 42691), the CY 2006
and CY 2007 OPPS updates data have produced median costs that we
believed were too low to cover the cost of a program that typically
spans 5 to 6 hours per day. However, we continued to observe a clear
downward trend in the data. We stated that if the data continued to
reflect a low PHP per diem cost in CY 2008, we expected to continue the
transition of decreasing the PHP median per diem cost to an amount that
is more reflective of the data.
We received a comment on the CY 2007 proposed rates that CMS
understated the PHP median cost by not using a hospital-specific CCR
for partial hospitalization. In our response to this comment in the CY
2007 OPPS/ASC final rule with comment period (71 FR 68000), we noted
that, although most hospitals do not have a cost center for partial
hospitalization, we used the CCR as specific to PHP as possible. The
following CMS Web site contains the revenue-code-to-cost-center
crosswalk: http://www.cms.hhs.gov/HospitalOutpatientPPS/03--
crosswalk.asp#TopOfPage.
As noted in the proposed rule (72 FR 42691), this crosswalk
indicates how charges on a claim are mapped to a cost center for the
purpose of converting charges to cost. One or more cost centers are
listed for most revenue codes that are used in the OPPS median
calculations, starting with the most specific, and ending with the most
general. Typically, we map the revenue code to the most specific cost
center with a provider-specific CCR. However, if the hospital does not
have a CCR for any of the listed cost centers, we consider the overall
hospital CCR as the default. For partial hospitalization, the revenue
center codes billed by PHPs are mapped to Primary Cost Center 3550
``Psychiatric/Psychological Services''. If that cost center is not
available, they are mapped to the Secondary Cost Center 6000
``Clinic.'' We use the overall facility CCR for CMHCs because PHPs are
CMHCs' only Medicare cost, and CMHCs do not have the same cost
structure as hospitals. Therefore, for CMHCs, we use the CCR from the
outpatient provider-specific file.
As indicated in the proposed rule (72 FR 42691), closer examination
of the revenue-code-to-cost-center crosswalk revealed that 10 of the
revenue center codes (shown in the table below) that are common among
hospital-based PHP claims did not map to a Primary Cost Center 3550
``Psychiatric/Psychological Services'' or a Secondary Cost Center of
6000 ``Clinic.''

------------------------------------------------------------------------
Revenue center code Revenue center description
------------------------------------------------------------------------
0430............................. Occupational Therapy.
0431............................. Occupational Therapy: Visit charge.
0432............................. Occupational Therapy: Hourly charge.
0433............................. Occupational Therapy: Group rate.
0434............................. Occupational Therapy: Evaluation/re-
evaluation.
0439............................. Occupational Therapy: Other
occupational therapy.
0904............................. Psychiatric/Psychological Treatment:
Activity therapy.
0940............................. Other Therapeutic Services.
0941............................. Other Therapeutic Services:
Recreation Rx.
0942............................. Other Therapeutic Services: Education/
training.
------------------------------------------------------------------------

We believed these 10 revenue center codes did not map to either a
Primary Cost Center 3550 ``Psychiatric/Psychological Services'' or a
Secondary Cost Center 6000 ``Clinic'' because these codes may be used
for services that are not PHP or psychiatric related. For example, the
majority of Occupational Therapy services are not furnished to PHP
patients and, therefore, these services should be appropriately mapped
to a Primary Cost Center 5100 ``Occupation Therapy'' (the general
Occupational Therapy Cost Center). Another example would be claims for
Diabetes Education, which is also not furnished to PHP patients.
For this final rule with comment period, we have updated this
analysis using updated claims and CCR data for PHP claims. Again, we
remapped the 10 revenue center codes described earlier in this section
to a Primary Cost Center 3550 ``Psychiatric/Psychological Services'' or
a Secondary Cost Center 6000 ``Clinic''. Once we remapped the codes, we
computed an alternate cost for each line item of the CY 2006 hospital-
based PHP claims. There are a total of 723,749 line items in the CY
2006 hospital-based PHP claims. Prior to remapping, there were 320,504
line items where a default CCR was used to estimate costs. After the
remapping, there were 160,351 line items left defaulting to the
hospitals' overall CCR. While this remapping creates a more accurate
estimate of PHP per diem costs for a significant number of claims,
again there was not a large change in the resulting median per diem
cost. The median per diem costs for hospital-based PHPs increased by $5
(from $172 to $177). We note that, unlike the proposed rule, this final
rule analysis was done using the revised methodology for computing per
diem costs described below. We received no public comments in
opposition to the proposed change in remapping revenue codes to
alternate cost centers. Therefore, we are adopting this proposed change
beginning in CY 2008.
As part of our effort to produce the most accurate per diem cost
estimate, we have reexamined our methodology for computing the PHP per
diem cost. Section 1833(t)(2)(C) of the Act requires that we establish
relative payment weights based on median (or mean, at

[[Page 66672]]

the election of the Secretary) hospital costs determined by 1996 claims
data and data from the most recent available cost reports. As explained
in section II.B.1. of this final rule with comment period, payment to
providers under OPPS for PHP services 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. Other than being a per diem payment, we use the
general OPPS ratesetting methodology for determining median cost.
As we have described in prior Federal Register notices, our current
method for computing per diem costs is as follows: We use data from all
hospital bills reporting condition code 41, which identifies the claim
as partial hospitalization, and all bills from CMHCs. We use 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 are then
computed by summing the line-item costs on each bill and dividing by
the number of days of PHP care provided on the bill. These computed per
diem costs are arrayed from lowest to highest and the middle value of
the array is the median per diem cost.
As indicated in the proposed rule (72 FR 42692), we have developed
an alternate way to determine median cost by computing a separate per
diem cost for each day rather than for each bill. Under this method, a
cost is computed separately for each day of PHP care. When there are
multiple days of care entered on a claim, a unique cost is computed for
each day of care. All of these costs are then arrayed from lowest to
highest and the middle value of the array would be the median per diem
cost.
We proposed to adopt this alternative method of computing PHP per
diem median cost because we believe it produces a more accurate
estimate because each day gets an equal weight towards computing the
median. In light of the stabilizing trend in the data, and the
robustness of recent data analysis, we believe it is now appropriate to
adopt this method. We believe this method for computing a PHP per diem
median cost more accurately reflects the costs of a PHP and uses all
available PHP data. We received no public comments in opposition to the
revised method for computing per diem cost, although we did receive a
few public comments critical of our current method of computing per
diem costs. (These public comments and our response are addressed
below.) Therefore, we are adopting this proposed change beginning in CY
2008.
As noted previously, for the past 2 years, the data have produced
median costs that we believed were too low to cover the cost of a
program that typically spans 5 to 6 hours per day. This length of day
would include five or six services with a break for lunch. We looked at
the number of units of service being provided in a day of care, as a
possible explanation for the low per diem cost for PHP. Our analysis
revealed that both hospital based and CMHC PHPs have a significant
number of days where fewer than 4 units of service were provided.
Using updated data from the CY 2008 proposed rule, specifically, 64
percent of the days that CMHCs were paid were for days where 3 or less
units of services were provided, and 31 percent of the days that
hospital-based PHPs were paid were for days where 3 or less units of
service were provided. We continue to believe these findings are
significant because they may explain a lower per diem cost. Based on
these updated findings, we computed median per diem costs in two
categories:
(a) All days.
(b) Days with 4 units of service or more (removing days with 3
services or less).
These updated median per diem costs were computed separately for
CMHCs and hospital based PHPs and are shown in the table below:

------------------------------------------------------------------------
Hospital-
CMHCs based PHPs Combined
------------------------------------------------------------------------
All Days......................... $172 $177 $172
Days with 4 units or more........ 192 189 192
------------------------------------------------------------------------

As expected, excluding the low unit days resulted in a higher
median per diem cost estimate. However, if the programs have many ``low
unit days,'' their cost and Medicare payment should reflect this level
of service. It would not be appropriate to set the PHP rate to exclude
the ``low unit days'' because these days are covered PHP days. We
believe the analysis of the number of units of service per day supports
a lower per diem cost. Therefore, including all days supports the data
trend towards a lower per diem cost and we believe more accurately
reflects the costs of providing PHP services.
Although the minimum number of PHP services required in a PHP day
is three, it was never our intention that this represented the number
of services to be provided in a typical PHP day. Our intention was to
cover days that consisted of only three services, generally because a
patient was transitioning towards discharge (or a patient who is
transitioning at the beginning of their PHP stay). Rather than set
separate rates for half-days and full-days, we believed it was
appropriate to set one rate that would be paid for all PHP days,
including those for patients transitioning towards discharge (or
admission). We intended that the PHP benefit is for a full day, with
shorter days only occurring while a patient transitions into or out of
the PHP.
However, as indicated in the data, many programs have these ``low
unit days,'' and we believe their cost and Medicare payment should
reflect this level of service. It would not be appropriate to set the
PHP rate excluding the low unit days because these days are covered.
Again, we believe the data support the estimated per diem cost under
$200 that we have observed.
We believed the most appropriate payment rate for PHPs is computed
using both hospital-based and CMHC PHP data, including the remapped
data for all days, resulting in a median per diem cost of $178.
Therefore, we proposed a CY 2008 APC PHP per diem cost of $178.
We received a large number of public comments on our proposal. A
summary of the public comments received and our responses follow.
Comment: A number of commenters expressed concern about the
magnitude of the PHP per diem rate reduction, particularly in light of
the reductions over the past few years. Many commenters believe that
such a reduction would reduce the financial viability and possibly lead
to the closure of many PHPs, thus affecting access to this crucial
service that serves vulnerable populations. Many commenters stated that
PHPs are an

[[Page 66673]]

integral part of the continuum of care, and if programs were forced to
close, there would be an increase in the length and number of more
costly inpatient hospital stays. In addition, because hospital
outpatient mental health services paid under the OPPS are capped at the
PHP per diem rate, many commenters were concerned about overall access
to outpatient mental health treatment. The majority of commenters
requested that CMS freeze the PHP per diem rate at the CY 2007 level,
and some suggested inflating this rate each year by the consumer price
index or market basket update. In addition, several patients were
concerned that the proposed 24-percent reduction in payment would
negatively impact their ability to continue therapy. One commenter
requested that CMS limit the annual reduction to 5 percent, phasing in
the reduction over several years if necessary.
Response: For this CY 2008 final rule with comment period, we
analyzed 12 months of more current data for hospital and CMHC PHP
claims for PHP services furnished between January 1, 2006 and December
31, 2006. These claims data are more current than the CY 2008 proposed
rule claims data because the data include claims paid through June 30,
2007. We also used the most currently available CCRs to estimate costs.
Using these updated data, we recreated the analysis performed for the
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 decreased $6 to $172, while the median per diem cost for
hospital based PHPs decreased $9 to $177. The combined median per diem
cost, which is computed from both hospital-based and CMHC PHP data,
decreased $6 to $172. The CY 2006 average charge per day for CMHCs was
$615, similar to the figure noted in the CY 2007 proposed rule ($613)
and slightly lower than the average charge per day for hospital-based
PHPs ($631).
The data in this area have been volatile in the past and CMS must
establish a payment amount that reflects the intensity of the PHP, and
that also considers that costs for providing PHP services are
declining. We proposed two refinements to the methodology for computing
the PHP median, however, these refinements did not appreciably impact
the median per diem cost. We received no public comments in opposition
to these refinements and, therefore, we are adopting them in this final
rule with comment period. Thus, for CY 2008, we remapped the revenue
codes to the most appropriate cost centers and computed the median
using a per day methodology (as described earlier in this section).
In addition, based on our data analysis, we have determined that
CMHCs (and hospital-based PHPs to a lesser extent) are furnishing a
substantial number of low unit days. Although these are all covered
days in the context of existing Medicare guidelines, PHPs are furnished
in lieu of psychiatric hospitalization and are intended to be more
intensive than a half-day program. While the guidelines have allowed a
minimum of three services per day, this was intended to be a floor, not
the norm.
We conducted extensive data analysis, which included unit analysis,
revenue code and HCPCS/CPT frequency analysis, and we have learned that
PHPs often use the least costly staff and may not offer the full range
of PHP services contemplated in section 1861(ff) of the Act. However,
we believe the data accurately represent the level of service provided.
Because partial hospitalization is provided in lieu of inpatient
care, it should be a highly structured and clinically-intensive
program, usually lasting most of the day. Our goal is to improve the
level of service furnished in a PHP day. We are concerned that the
proposed decrease in PHP payment may not reflect the mix and quantity
of services that should be provided under such an intensive program. In
an effort to ensure access to this needed service to vulnerable
populations, we are mitigating the reduction to 50 percent of the
difference between the current APC amount ($233) and the computed
amount based on the PHP data ($172), resulting in an APC median cost of
$203. We believe this payment amount will give the providers an
opportunity to increase the intensity of their programs and maintain
partial hospitalization as part of the continuum of mental health care.
We reiterate our expectation that hospitals and CMHCs will provide
a comprehensive program consistent with the statutory intent. We intend
to explore the changes to our regulations and claims processing systems
in order to deny payment for low intensity days and we specifically
invite public comment on the most appropriate threshold.
Comment: A few commenters disagreed with the CMS approach to
establishing the median per diem cost by summarizing the line-item
costs on each bill and dividing by the number of days on the bills. The
commenters indicated that this calculation can severely dilute the rate
and penalize providers. The commenters stated that all programs are
strongly encouraged by the fiscal intermediaries to submit all PHP
service days on claims, even when the patient receives less than three
services. They further stated that programs must report these days to
be able to meet the 57 percent attendance threshold and avoid potential
delays in the claim payment. The commenters were concerned that
programs are only paid their per diem when three or more qualified
services are presented for a day of service. The commenters stated that
if only one or two services are assigned a cost and the day is divided
into the aggregate data, the cost per day is significantly compromised
and diluted. They claimed that even days that are paid but only have
three services dilute the cost factors on the calculations.
Response: As discussed earlier in this section, we have refined our
methodology for computing per diem costs. We have developed an
alternate way to determine median cost by computing a separate per diem
cost for each day rather than for each bill. Under this method, a cost
is computed separately for each day of PHP care. When there are
multiple days of care entered on a claim, a unique cost is computed for
each day of care. We only assign costs for line items on days when a
payment is made. All of these costs are then arrayed from lowest to
highest and the middle value of the array would be the median per diem
cost.
We adopted this alternative method of computing PHP per diem median
cost because we believe it produces a more accurate estimate because
each day gets an equal weight towards computing the median. This method
for computing a PHP per diem median cost more accurately reflects the
costs of a PHP and uses all available PHP data. Additionally, if a
provider has charges on a bill for which the provider does not receive
payment, this will be reflected in that provider's CCRs. This lower CCR
will be applied to the larger charges and will result in the
appropriate cost per diem.
To gauge the effect that days with one or two services had on the
per diem cost, we trimmed all days with less than three services, and
the recalculated median per diem cost only changed by $2.00. As such,
we do not believe the calculations are adversely affected by the
inclusion of these days.
Comment: One commenter suggested that CMS set the PHP median per
diem cost based on days when four or more services are provided and
then pay a low-utilization payment adjustment amount for days when
three or fewer

[[Page 66674]]

services are provided. The commenter also suggested that CMS establish
frequency constraints for billing three or fewer services to prevent
the bulk of days furnished by a provider from becoming low utilization
days. The commenter urged CMS to further research this suggestion as a
possible payment restructuring for CY 2009. Several commenters urged
CMS to reevaluate the PHP payment methodology and to either refine the
APC structure for PHP to reflect different service levels or to exclude
the low-volume days from the calculation of the PHP rate and develop an
alternate payment policy for low-volume days.
Response: The structure of partial hospitalization is a full day of
treatment. We are concerned about providing an incentive for providers
to structure their PHPs on a half-day basis. As discussed earlier in
this section, in an effort to ensure access to this needed service to
vulnerable populations, we are mitigating the reduction to the PHP rate
for CY 2008. We think establishing a half-day rate is inconsistent with
this policy. Therefore, we are not prepared to establish a half day
rate at this time. However, we are willing to explore how we could
utilize frequency controls to maintain the overall intensity of the
partial hospitalization benefit.
Comment: One commenter noted that CMS did not respond to previous
statements from commenters that the industry would welcome
accreditation rules and/or stricter policies for PHPs.
Response: For the CY 2009 OPPS update, we are exploring proposing
conditions of participation for CMHCs to establish minimum standards
for patient rights, physical environment, staffing, and documentation
requirements. In addition, we are considering changes that are
necessary to our regulations and claims processing systems to deny
payment for low intensity days. We specifically invite public comment
on the most appropriate threshold.
Comment: Many commenters requested that the CMHC cost report data
be included in the HCRIS so that the industry can review and analyze
CMHC cost data.
Response: We understand the commenters' need to have CMHC data
available through the HCRIS system and are working to accomplish this
task.
Comment: With respect to the methodology used to establish the PHP
APC amount, commenters were concerned that data from settled cost
reports do not include costs reversed on appeal. The commenters stated
that there are inherent problems in using claims data from a time
period that is different from that for the CCRs from settled cost
reports. The commenters indicated this methodology would artificially
lower the computed median costs, and that the data used to calculate
the PHP rate should be revised to include costs that were subsequently
allowed. The commenters also stated that CMS uses costs that are at
least 1 to 3 years old to project rates 2 years forward and that this
approach does not accurately reflect the true costs of the providers.
Response: We use the best available data in computing the APCs. On
January 17, 2003, we issued Program Memorandum No. A-03-004 that
directed fiscal intermediaries to update the CCRs on an on going basis
whenever a more recent full year settled or tentatively settled cost
report is available. In this way, we minimize the time lag between the
CCRs and claims data and continue to use the best available data for
ratesetting purposes.
Comment: Several commenters summed the payment rate for four Group
Therapy sessions (APC 0325) and requested that amount as the minimum
for a day of PHP (that is, 4 x $64.45=$257.80). Another commenter
presented two different typical days using proposed CY 2008 rates.
Typical Day 1 included three Group Therapy sessions (CPT code 90853,
APC 0325, 3 x $64.45) and one Individual Psychotherapy session (CPT
code 90818, APC 0323, $106.49). The commenter priced Typical Day 1 at
$299.84. Typical Day 2 included one Group Therapy session (CPT code
90853, APC 0325, $64.45), one Individual Psychotherapy session (CPT
code 90818, APC 0323, $106.49), and one Family Therapy session (CPT
code 90847, APC 0324, $141.61). The commenter priced Typical Day 2 at
$312.55. Based on the commenter's presented material, the commenter
stated that the typical days yield an average componentized rate of
$306. The commenter questioned how CMS can set rates for APCs 0322
through 0325, but is unable to determine a payment rate for a day that
is comprised of a minimum of three to four of those services. Other
commenters stated that while CMS requires a minimum of four treatments
per day to qualify for a day of PHP, the proposed per diem rate of
$179.88 for PHP is less than what CMS would pay for four Group Therapy
sessions.
Response: We do not believe this is an appropriate comparison. The
commenter does not use the payment rate for the PHP APC, that is, APC
0033, in the calculations. The payment rates for APC services cited by
the commenter (APC 0323, APC 0324 and APC 0325) are not computed from
PHP bills. 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 program of services where savings can be realized by hospitals and
CMHCs over delivering individual psychotherapy services.
We structured the PHP APC (APC 0033) as a per diem methodology in
which the day of care is the unit that reflects the structure and
scheduling of PHPs and the composition of the PHP APC consists of the
cost of all services provided each day. Although we require that each
PHP day include a psychotherapy service, we do not specify the specific
mix of other services provided and our payment methodology reflects the
cost per day rather than the cost of each service furnished within the
day.
CMS examined both CMHC and hospital-based PHP program data to
determine what services these programs are providing to their patients.
An important finding was that the days cited by the commenter are not
typical days for most CMHCs. For CMHCs, 60 percent of services are
Group Psychotherapy (CPTs 90853 and 90857), 26 percent of services are
Training and Education (HCPCS G0177), 12 percent are Activity Therapy
(HCPCS G0176), and only 1 percent of PHP days included Individual
Therapy (Brief or Extended, CPTs 90816 or 90818)).
The days cited by the commenter are not typical days for hospital-
based PHPs either. For hospital-based PHPs, 47 percent of services are
Group Psychotherapy (CPT codes 90853 and 90857), 27 percent of services
are Training and Education (HCPCS code G0177), 16 percent are Activity
Therapy (HCPCS code G0176), 3 percent are Occupational Therapy (HCPCS
code G0129), 2 percent of PHP days include Brief Individual
Psychotherapy (CPT code 90816), and only 1 percent of PHP days include
Extended Individual Therapy (CPT code 90818).
We note that the APCs for Training and Education (HCPCS code
G0177), Activity Therapy (HCPCS code G0176), and Occupational Therapy
(HCPCS code G0129) are not separately payable under the OPPS. They are
packaged services and only payable as part of a PHP day of care. In
CMHCs, Training and Education (HCPCS code G0177) and Activity Therapy
(HCPCS code G0176), account for 38 percent of PHP services. In
hospital-based PHPs, Training and Education and Activity Therapy
account for 43 percent of PHP services. In addition to not being
separately payable, these services may be provided to

[[Page 66675]]

patients by less costly staff than staff that provide Psychotherapy and
Occupational Therapy. Based on the mix of services provided on the
majority of PHP days, we believe the data used for setting the PHP
payment appropriately reflect the typical PHP day.
Comment: One commenter asked CMS to consider implementing a
reimbursement level for intensive outpatient program (IOP) services
because the commenter's State requires 3 hours of service for such
programs.
Response: While some private insurers and some State Medicaid
programs recognize IOP as a distinct benefit (like PHP), Medicare does
not. However, hospitals that provide IOP services may bill Medicare
under the OPPS for individual mental health services that are otherwise
covered and billable under the OPPS.
Comment: Several commenters claimed that the costs of CMHCs are
higher because ``hospitals can share and spread their costs to other
departments.'' The commenters believed that the CMHC patient acuity
level is more intense than that for hospital patients because hospital
outpatient departments need only provide one or two therapies, yet
still receive the full PHP per diem.
Response: CMHCs are required to furnish an array of outpatient
services including specialized outpatient services for children, the
elderly, individuals with a serious mental illness, and residents of
its service area who have been discharged from inpatient treatment.
Accordingly, CMHCs have the same ability as hospitals to share costs
among its programs as needed. Further, we believe hospital costs in
some areas, for example, capital and 24-hour maintenance costs, greatly
exceed comparable CMHC costs. Notably, we believe patient acuity across
hospital-based and CMHC PHPs should be the same, that is, the patients
would otherwise require inpatient psychiatric care regardless of
setting (see sections 1861(ff) and 1835(a)(2)(F) of the Act).
Comment: A few commenters expressed concern that the current
methodology used to calculate the daily rate does not capture all
relevant data nor does it reflect the actual cost to providers to
deliver these services. The commenters asked that CMS analyze the
mapping of revenue-codes-to-cost centers for CMHCs similar to the
analysis CMS completed for hospital-based programs and discussed in the
CY 2007 OPPS/ASC final rule with comment period (71 FR 68000). The
commenters indicated that CMHC PHP services have higher cost-to-charge
ratios than the overall CMHC cost-to-charge ratios.
Response: We are unable to conduct a revenue code mapping analysis
for CMHCs because PHP is the CMHCs' only Medicare cost and CMHCs do not
have the same cost centers as hospitals. Therefore, for CMHCs, we use
the overall facility CCR from the outpatient provider-specific file.
Comment: Several commenters expressed concern that cost report data
frequently do not reflect bad debt expense for the entire year. The
commenters are concerned that these costs are not being considered in
the CMS data and severely short change the rate calculations.
Response: While, the bad debt policy is outside the scope of this
rule, we refer the commenter to Sec. 413.89 and the Provider
Reimbursement Manual Part I (PRM), Chapter 3, concerning our bad debt
requirements.
Comment: One commenter stated that administrative costs for CMHCs
continue to be a major impediment to operating PHPs for Medicare
beneficiaries. The commenter was concerned that Medicare does not cover
the cost of meals and transportation to and from programs. The
commenter stated that 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: One commenter requested that the same provisions given to
rural HOPDs also be given to rural CMHCs. Several commenters urged CMS
to reconsider the changes in funding for these programs, especially the
programs in rural areas.
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 SCHs in rural areas. Section
1866(t)(7)(D) of the Act does not authorize hold harmless payments to
CMHCs. In addition, although section 411 of Pub. L. 108-173 required
CMS to determine the appropriateness of additional payments for certain
rural hospitals, that authority also does not extend to CMHCs.
Comment: A few commenters stated that hospitals that offer partial
hospitalization services should not be penalized for the instability in
data reporting of CMHCs. Many commenters requested that CMS require
that CMHCs improve their reporting or have that provider group face
economic consequences.
Response: As described earlier in this section, after extensive
analysis, we now believe we have determined the appropriate level of
cost for the type of services that are being provided by PHPs. This
analysis included an examination of revenue-to-cost center mapping,
refinements to the per diem methodology, and an in-depth analysis of
the number of units of service per day. We note that for CY 2006, the
hospital-based PHPs per diem median cost is $177 and for CMHCs, the per
diem median cost is $172. We have observed a stabilizing trend in CMHC
data and similar per diem costs between hospital-based and CMHC PHPs.
Comment: Two national behavioral health care organizations
expressed concern that contrary to congressional intent, the most
intensive provider settings are being penalized. The commenters pointed
out that CMS data show that PHP programs providing four or more units
of service per day (programs that are highly intensive) have a
substantially higher median cost for those days than the overall median
cost per day. The commenters pointed out that hospital-based programs
(66 percent of their days have 4 or more units of service) have a
median cost of $218 versus a median cost of $186 for all days
regardless of the number of units of service. They noted that CMS' use
of the overall median cost per day understates the degree to which
hospital-based programs are structured around four or more units of
services, but acknowledge that on some days a patient may only get
three services (due to leaving early for illness, transitioning out of
the program, or other reasons). Similarly, according to one commenter,
CMHCs have a median cost of $191 for those days with 4 or more units of
service provided versus a median cost of $178 for all days. The
commenter stated that CMHCs have 36 percent of their days with 4 or
more units of service provided. The commenter indicated that its
State's Medicaid program requires a minimum of four hours to qualify
for a day of PHP and believed the CMS payment methodology is in
conflict with its State's laws.
Several commenters stated that the CMS data, when it combines those
programs that offer 3 units with those that offer 4 or more units,
clearly

[[Page 66676]]

penalizes the programs that routinely offer 4 or more units.
Response: We refer the commenter to the table presented earlier in
this section that provides updated figures to the ones cited by the
commenter. We recognize that by definition, 50 percent of PHP days will
have per diem costs higher than the median per diem cost, while 50
percent will have costs lower than the median per diem cost. It is
likely that the programs providing 4 units of service are on the high
side of the median per diem cost. In addition, we note that the final
rate of $203 is well above the combined median per diem cost for days
with 4 units of service of more ($192). Days where four services are
provided are certainly within this amount.
Comment: One commenter asked that CMS change the Medicare lifetime
maximum of 190 mental health days of stay in a psychiatric hospital, to
unlimited. The commenter asserted that if a person is diagnosed with a
mental health illness of various kinds the individual will need
``maintenance'' throughout his or her entire life.
Response: The 190-day lifetime limit on inpatient psychiatric care
is statutory, and established in section 1812(b)(3) of the Act.
Comment: Many commenters, including a national behavioral health
association, recommended that PHP be removed from the APC codes and
created under an independent status using home health and hospice as
examples. The commenters are concerned that the current methodology is
not conducive to this APC code and asserted that there is precedent in
other CMS OPPS service industries to exclude the service from the APC
code listing and treat it independently.
Response: 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. The Medicare regulations at 42
CFR 419.21 that implement this provision specify that payments under
the OPPS will be made for partial hospitalization services furnished by
CMHCs as well as those furnished to hospital outpatients and thus, PHP
is paid under the OPPS. However, it would require a statutory change to
establish an independent payment system for partial hospitalization
programs outside the OPPS. The statute provides specific separate and
distinct payment systems for both home health and hospice services,
which are also separate and distinct benefit categories.
Comment: One commenter asked why there are no CMHCs shown in the
impact statements in the annual OPPS updating documents published in
the Federal Register. The commenter asked if this is required by
regulation.
Response: CMHCs do not share the same characteristics as hospitals
and do not fit into the traditional impact categories (like bed size).
Therefore, we have not included them in the impact chart. As PHP is the
only Medicare service CMHCs provide, the impact is the percentage
change in the APC amount from year to year. Assuming that the number of
PHP days provided by CMHCs stays the same as it was in CY 2006, the
estimated impact on CMHCs as a result of the CY 2008 PHP payment rate
compared to the CY 2007 PHP payment rate is a 13-percent decrease. In
this year's impact table we have included CMHCs in the total count of
providers, but they are not shown separately. (For additional
information, see section XXIV, ``Regulatory Impact Analysis'' of this
final rule with comment period.)
Comment: Several commenters suggested establishing a PHP rate
calculation task force to develop a new rate methodology that captures
all relevant data and reflects the actual costs to providers to deliver
PHP services. The commenter recommended that the ratesetting task force
be composed of CMS staff and a diverse group of stakeholder that
include front-line providers of PHP services and representatives from
national industry organizations. Other commenters requested that CMS
further study the possibility of differentiating payment based on the
intensity of services provided during a day of PHP services for CY
2009. These commenters also recommended that CMS establish quality
criteria to judge performance and that would influence future rate
reimbursement.
Response: We agree that the payment rate for PHP needs to be
accurate and appropriate to sustain access to care. While we believe we
provide an accurate and appropriate approach to payment for PHP, as
changes to the current methodology are considered, input from the
industry is an important part of that process. Therefore, we welcome
any input and information that the industry can provide about the costs
of their programs and encourage providers to submit information on
their costs. We would also find information about the status of quality
criteria useful and would encourage providers to submit that
information as well.
Comment: A few commenters stated that the wage index adjustment
does not accurately reflect the cost of labor in areas affected by
Hurricanes Katrina and Rita. The commenters also pointed out that the
proposed wage index in Louisiana has decreased post-hurricane instead
of increasing, which has resulted in a much lower payment rate in
Louisiana. The commenters further stated that the time lag for wage
indexing is a huge factor for Hurricane Zone providers and that the
wage index decrease makes the assumption that the cost of labor has
actually decreased since the hurricanes. Some commenters noted that the
lack of facilities, trained professionals and inadequate reimbursement
will make Louisiana worse off now than prior to Hurricanes Katrina and
Rita. A few commenters asked that CMS freeze the 2005 level rates to
maintain the Hurricane Zones at status quo until a realistic impact
study can be commissioned.
Response: The hospital wage data used to compute the IPPS FY 2008
hospital wage index is from the FY 2004 hospital cost reports for all
hospitals. This is the standard lag timeframe in determining the
hospital wage index. It will be another year before FY 2005 data will
be reflected in the IPPS FY 2009 hospital wage index. However, we note
that the wage index is a relative measure of differences in area hourly
wage levels. It compares a labor market's average hourly wage to the
national average hourly wage. To the extent that post-hurricane
hospital labor costs are higher relative to the national average, the
wage index will reflect the higher relative labor cost beginning when
the FY 2005 data will be used in the FY 2009 IPPS hospital wage index
(which will be applied to the CY 2009 OPPS rate year). In addition, the
statutory authority for the OPPS wage index policy in section
1833(t)(2)(D) of the Act requires that the wage adjustments be made in
a budget neutral manner. Therefore, we cannot raise one wage area and
still maintain budget neutrality. Finally, it should be noted that
CMHCs located in Federal Emergency Management Agency (FEMA) designated
disaster areas were provided with relief funds by the Department of
Health and Human Services in 2007.
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

[[Page 66677]]

for PHP. In addition, further analysis indicated that using the same
OPPS outlier threshold for both hospitals and CMHCs did not limit
outlier payments to high cost cases and resulted in excessive outlier
payments to CMHCs. Therefore, beginning in CY 2004, we established a
separate outlier threshold for CMHCs. For CYs 2004 and 2005, 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. For CY 2006, we set the estimated outlier target at
1.0 percent and allocated a portion of that 1.0 percent, 0.6 percent
(or 0.006 percent of total OPPS payments), to CMHCs for PHP services.
For CY 2007, we set the estimated outlier target at 1.0 percent and
allocated a portion of that 1.0 percent, an amount equal to 0.15
percent of outlier payments and 0.0015 percent of total OPPS payments
to CMHCS for PHP service outliers. The CY 2007 CMHC outlier threshold
is met when the cost of furnishing services by a CMHC exceeds 3.40
times the PHP APC payment amount. The CY 2007 OPPS outlier payment
percentage is 50 percent of the amount of costs in excess of the
threshold.
The separate outlier threshold for CMHCs became effective January
1, 2004, and has resulted in more commensurate outlier payments. In CY
2004, the separate outlier threshold for CMHCs resulted in $1.8 million
in outlier payments to CMHCs. In CY 2005, the separate outlier
threshold for CMHCs resulted in $0.5 million in outlier payments to
CMHCs. In contrast, in 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.
As noted in section II.G. of this final rule with comment period,
for CY 2008, we proposed to continue our policy of setting aside 1.0
percent of the aggregate total payments under the OPPS for outlier
payments. We proposed that a portion of that 1.0 percent, an amount
equal to 0.03 percent of outlier payments and 0.0003 percent of total
OPPS payments, would be allocated to CMHCs for PHP service outliers. As
discussed in section II.G. of this final rule with comment period, we
again proposed to set a dollar threshold in addition to an APC
multiplier threshold for OPPS outlier payments. However, because the
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 propose to set a dollar threshold for
CMHC outliers. As noted above, we proposed to set the outlier threshold
for CMHCs for CY 2008 at 3.40 times the APC payment amount and the CY
2008 outlier payment percentage applicable to costs in excess of the
threshold at 50 percent.
We received no public comments on our proposal. As discussed in
section II.G. of this final rule with comment period, using more recent
data for this final rule with comment period, we set the target for
hospital outpatient outlier payments at 1.0 percent of total OPPS
payments. We allocate a portion of that 1.0 percent, an amount equal to
0.02 percent of outlier payments and 0.0002 percent of total OPPS
payments to CMHCs for PHP service outliers. For CY 2008, we set the
outlier threshold for CMHCs for CY 2008 at 3.40 times the APC payment
amount and the CY 2008 outlier percentage applicable to costs in excess
of the threshold at 50 percent.

C. Conversion Factor Update

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 2008, 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 final hospital market basket increase for FY 2008 published in
the IPPS final rule with comment period on August 22, 2007 is 3.3
percent (72 FR 48173), the same as the forecast published in the FY
2008 IPPS proposed rule on May 3, 2007 (72 FR 24787). To set the OPPS
conversion factor for CY 2008, we increased the CY 2007 conversion
factor of $61.468, as specified in the CY 2007 OPPS/ASC final rule with
comment period (71 FR 68003), by 3.3 percent.
In accordance with section 1833(t)(9)(B) of the Act, we further
adjusted the conversion factor for CY 2007 to ensure that the revisions
we are making to our updates for a revised wage index and rural
adjustment are made on a budget neutral basis. We calculated an overall
budget neutrality factor of 1.0019 for wage index changes by comparing
total payments from our simulation model using the FY 2008 IPPS final
wage index values as finalized to those payments using the current (FY
2007) IPPS wage index values. This adjustment reflected an adjustment
of 1.0001 for changes to the wage index and an additional 1.0018 to
accommodate the IPPS budget neutrality adjustment for inclusion of the
rural floor. As discussed further in section II.D. of this final rule
with comment period, for the first time, the final FY 2008 IPPS wage
indices included a blanket budget neutrality adjustment for including
the rural floor provision, which previously had been applied to the
IPPS standardized amount. For further discussion of this policy in its
entirety, we refer readers to the FY 2008 IPPS proposed rule (72 FR
24787 through 24792) and the FY 2008 IPPS final rule with comment
period (72 FR 47325 through 47330). This adjustment is specific to the
IPPS. For the OPPS, we are increasing the conversion factor by the
proportional amount of the rural floor budget neutrality adjustment to
accommodate this change.
For this final rule with comment period, we estimated the rural
adjustment for CY 2008 to reflect the extension of the adjustment to
payment for brachytherapy sources as discussed in section II.F.2. of
this final rule with comment period, but as the impact of the extension
was negligible, we did not change the rural adjustment. Therefore, we
calculated a budget neutrality factor of 1.000 for the rural
adjustment. For CY 2008, in this final rule with comment period, we
estimated that allowed pass through spending for both drugs and devices
would equal approximately $32 million, which represents 0.09 percent of
total OPPS projected spending for CY 2008. The conversion factor was
also adjusted by the difference between the 0.21 percent pass through
dollars set aside in CY 2007 and the 0.09 percent estimate for CY 2008
pass through spending. Finally, estimated payments for outliers remain
at 1.0 percent of total payments for CY 2008.
The market basket increase update factor of 3.3 percent for CY
2008, the required wage index and rural budget neutrality adjustment of
approximately 1.0019, and the adjustment of 0.12 percent for the
difference in the pass-through set aside resulted in a final standard
OPPS conversion factor for CY 2008 of $63.694.
We received one public comment on our proposed conversion factor
update for CY 2008. A summary of the public comment and our response
follow.
Comment: A commenter objected to the proposed market basket
increase of 3.3 percent. The commenter stated that the average
outpatient cost of service is projected to increase by at least 5
percent for CY 2008 due to increases in salaries and medical supply
costs for services to Medicare beneficiaries. The

[[Page 66678]]

commenter recommended that the average payment to hospitals for
outpatient services be increased by 5 percent, the actual amount by
which the commenter believed costs would increase for CY 2008.
Response: Section 1833(t)(3)(C)(iv) of the Act requires that CMS
update the conversion factor annually using an OPD fee schedule
increase factor specific to the PPS year. However, the statute gives
CMS the discretion to use the hospital inpatient update factor, the
hospital inpatient operating market basket, as an appropriate
substitute for the OPD fee schedule increase for purposes of the annual
percentage increase specific to covered OPD services. The statute
permits, and we continue to believe, that the hospital inpatient
operating market basket is an appropriate measure of change in hospital
input prices for goods and services required to provide hospital care,
including that in the outpatient setting. Hospitals use similar
resources in their hospital inpatient and outpatient departments. The
hospital market basket is carefully estimated for each PPS year, and
periodically rebased and revised. For these reasons, we have specified
in the regulations governing the annual OPPS update at Sec. 419.32
(b)(iv) that, for years beginning after CY 2003, the update factor for
the OPPS equals the update factor for the IPPS. We disagree that the
update factor for the CY 2008 OPPS should be 5 percent. For FY 2008,
the IPPS update factor is the hospital market basket of 3.3 percent
and, therefore, we have used this update factor in the establishment of
the conversion factor for the CY 2008 OPPS.
After consideration of the public comment received, we are
finalizing our CY 2008 proposal, without modification, to update the
conversion factor by the FY 2008 IPPS market basket increase update
factor of 3.3 percent, resulting in a final conversion factor of
$63.694.

D. Wage Index Changes

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, which includes the
copayment standardized amount, that is attributable to labor and labor
related cost. Since the inception of the OPPS, CMS policy has been to
wage adjust 60 percent of the OPPS payment, based on a regression
analysis that determined that approximately 60 percent of the costs of
services paid under the OPPS were attributable to wage costs. We
confirmed that this labor-related share for outpatient services is
still appropriate during our regression analysis for the payment
adjustment for rural hospitals in the CY 2006 OPPS final rule with
comment period (70 FR 68553). Therefore, we did not propose to revise
this policy for the CY 2008 OPPS. We refer readers to section II.H. of
this final rule with comment period for a description and example of
how the wage index for a particular hospital is used to determine the
payment for the hospital. This adjustment must be made in a budget
neutral manner. As we have done in prior years, we proposed to adopt
the final IPPS wage indices for the OPPS and to extend these wage
indices to hospitals that participate in the OPPS but not the IPPS
(referred to in this section as ``non-IPPS'' hospitals).
As discussed in section II.A. of this final rule with comment
period, we standardize 60 percent of estimated costs as labor-related
costs for geographic area wage variation using the IPPS pre-
reclassified wage indices in order to remove the effects of differences
in area wage levels in determining the national unadjusted OPPS payment
rate and the copayment amount.
As published in the original OPPS April 7, 2000 final rule with
comment period (65 FR 18545), the OPPS has consistently adopted the
final IPPS wage indices as the wage indices for adjusting the OPPS
standard payment amounts for labor market differences. Thus, the wage
index that applies to a particular hospital under the IPPS will also
apply to that hospital under the OPPS. 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 the OPPS is reasonable and logical, given the inseparable,
subordinate status of the hospital outpatient department within the
hospital overall. In accordance with section 1886(d)(3)(E) of the Act,
the IPPS wage index is updated annually. In accordance with our
established policy, we proposed to use the final FY 2008 final version
of these wage indices to determine the wage adjustments for the OPPS
payment rate and copayment standardized amount that would be published
in our final rule with comment period for CY 2008.
We note that the FY 2008 IPPS wage indices continue to reflect a
number of changes implemented over the past few years as a result of
the revised Office of Management and Budget (OMB) standards for
defining geographic statistical areas, the implementation of an
occupational mix adjustment as part of the wage index, wage adjustments
provided for under Pub. L. 105-33 and Pub. L. 108-173, and
clarification of our policy for multicampus hospitals. The following is
a brief summary of the components of the FY 2008 IPPS wage indices and
any adjustments that we are applying to the OPPS for CY 2008. We refer
the reader to the FY 2008 IPPS final rule with comment period (72 FR
47308 through 47345) for a detailed discussion of the changes to the
wage indices. In this final rule with comment period, we are not
reprinting the final FY 2008 IPPS wage indices referenced in the
discussion below, with the exception of the out migration wage
adjustment table (Addendum L to this final rule with comment period),
which includes non-IPPS providers paid under the OPPS. We also refer
readers to the CMS Web site for the OPPS at: http://www.cms.hhs.gov/
providers/hopps. At this link, the reader will find a link to the final
FY 2008 IPPS wage indices tables.
1. The continued use of the Core Based Statistical Areas (CBSAs)
issued by the 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 IPPS final rule, CMS
adopted the new OMB definitions for wage index purposes. In the FY 2008
IPPS final rule with comment period, we again stated that hospitals
located in Metropolitan Statistical Areas (MSAs) will be urban and
hospitals that are located in Micropolitan Areas or outside CBSAs will
be rural. We also reiterated our policy that when an MSA is divided
into one or more Metropolitan Divisions, we use the Metropolitan
Division for purposes of defining the boundaries of a particular labor
market area. To help alleviate the decreased payments for previously
urban hospitals that became rural under the new geographical
definitions, we allowed these hospitals to maintain for the 3-year
period from FY 2005 through FY 2007, the wage index of the MSA where
they previously had been located. This hold harmless provision expired
after FY 2007. We adopted the same policy for the OPPS, but because the
OPPS operates on a calendar year, wage index policies are in effect
through December 31, 2007. To be consistent with the IPPS, as finalized
in the FY 2008 IPPS final rule with comment period, beginning in CY
2008 (January 1, 2008)

[[Page 66679]]

under the OPPS, these hospitals will receive their statewide rural wage
index. Hospitals paid under the IPPS are eligible to apply for
reclassification in FY 2008.
As noted above, for purposes of estimating an adjustment for the
OPPS payment rates to accommodate geographic differences in labor costs
in this final rule with comment period, we have used the wage indices
identified in the FY 2008 IPPS final rule with comment period (and as
corrected in the September 28, 2007 second FY 2008 IPPS correction
notice that was printed in the October 10, 2007 Federal Register (72 FR
57634) that are fully adjusted for differences in occupational mix
using the entire 6-month survey data collected in 2006.
2. The reclassifications of hospitals to geographic areas for
purposes of the wage index. For purposes of the OPPS wage index, we
proposed to adopt all of the IPPS reclassifications for FY 2008,
including reclassifications that the Medicare Geographic Classification
Review Board (MGCRB) approved. We note that reclassifications under
section 508 of Pub. L. 108-173 were set to terminate March 31, 2007.
However, section 106(a) of the MIEA-TRHCA extended any geographic
reclassifications of hospitals that were made under section 508 and
that would expire on March 31, 2007 until September 30, 2007. On March
23, 2007, we published a notice in the Federal Register (72 FR 13799)
that indicated how we are implementing section 106 of the MIEA-TRHCA
through September 30, 2007. Because the section 508 provision expired
on September 30, 2007, the OPPS wage index will not include any
reclassifications under section 508 for CY 2008.
3. The out-migration wage adjustment to the wage index. In the FY
2008 IPPS final rule with comment period (72 FR 473398 through 47341),
we discussed the out migration adjustment under section 505 of Pub. L.
108-173 for counties under this adjustment. Hospitals paid under the
IPPS located in the qualifying section 505 ``out migration'' counties
receive a wage index increase unless they have already been otherwise
reclassified. We note that in the FY 2008 IPPS final rule with comment
period, we finalized our proposal to use the post-reclassified, rather
than the pre-reclassified, wage indices in calculating the out-
migration adjustment. (See the FY 2008 IPPS final rule with comment
period and the second FY 2008 IPPS correction notice for further
information on the out migration adjustment.) For OPPS purposes, we
proposed to continue our policy in CY 2008 to allow-non IPPS hospitals
paid under the OPPS to qualify for the out-migration adjustment if they
are located in a section 505 out migration county. Because non-IPPS
hospitals cannot reclassify, they are eligible for the out-migration
wage adjustment. Table 4J published in the Addendum to the FY 2008 IPPS
final rule with comment period (and corrected in the second FY 2008
IPPS correction notice) identifies counties eligible for the out-
migration adjustment and providers receiving the adjustment. As stated
earlier, we are reprinting the final version of Table 4J, as corrected,
in this final rule with comment period as Addendum L.
4. Wage Index for Multicampus Hospitals. As indicated in the CY
2008 OPPS/ASC proposed rule (72 FR 42695), we also wish to clarify that
the IPPS policy for multicampus wage index payments also applies to the
OPPS. As a result of the new labor market areas introduced in FY 2005,
there are hospitals with multiple campuses previously located in a
single MSA that are now in more than one CBSA. A multicampus hospital
is an integrated institution. For this reason, the multicampus hospital
has one CMS certification number (CCN) and submits a single cost report
that combines the total wages and hours of each of its campuses in the
manner described in the FY 2008 IPPS final rule with comment period (72
FR 47317).
In the FY 2008 IPPS final rule with comment period, we finalized
our proposal to apportion wages and hours across multiple campuses
using full-time equivalent (FTE) staff data or Medicare discharge data
in order to include wage data for the individual campuses of a
multicampus hospital in its local wage index calculation. We indicated
our intent to collect campus locations and numbers of FTE staff by
location by adding lines to Worksheet S-2 of the Medicare cost report
submitted by hospitals. We stated that we would continue to use either
Medicare discharge data or self-reported FTE data to apportion wage
data by campus until revisions are made to Worksheet S-2 of the
Medicare cost report to require reporting of FTE data by campus and
until such data in the cost report can be used to calculate the wage
index, at which time the wage data of a multicampus hospital will be
allocated among its campuses based only on FTE counts by campus
reported in the Medicare cost report. We stated that the effective date
of the revised cost report is not expected until FY 2009. Therefore the
FTE data reported by multicampus hospitals in the revised Medicare cost
report could not be used to allocate wages and hours to each labor
market by FTEs until at least the FY 2013 wage index. As part of this
policy, we would fully expect that an HOPD that is part of a
multicampus hospital system would receive a wage index based on the
geographic location of the inpatient campus with which it is
associated. This would include cases where one inpatient campus
reclassified. Affiliated outpatient facilities would receive the
reclassified wage index of the inpatient campus. For further discussion
of the FY 2008 IPPS final multicampus hospital policy in its entirety,
we refer readers to the FY 2008 IPPS final rule with comment period (72
FR 47317 through 47319).
5. Rural Floor Provision. Section 4410 of Pub. L. 105-33 provides
that the area wage index applicable to any hospital that is located in
an urban area of a State may not be less than the area wage index
applicable to hospitals located in rural areas of the State (``the
rural floor''). Table 4A in the FY 2008 IPPS final rule with comment
period (72 FR 47503) (and as corrected in the September 28, 2007 second
correction notice for the FY 2008 IPPS final rule, which appeared in
the October 10, 2007 issue of the Federal Register) identifies urban
areas where hospitals located in those areas are assigned the rural
floor (noted by a superscript ``2''). For CY 2008 under the OPPS, we
proposed to continue our policy to allow non-IPPS hospitals paid under
the OPPS to receive the rural floor wage index, when applicable under
the IPPS for FY 2008. For the first time, the final FY 2008 IPPS wage
indices include a blanket budget neutrality adjustment for including
the rural floor provision, which previously had been applied to the
IPPS standardized amount. For further discussion of this final policy
in its entirety, we refer readers to the FY 2008 IPPS final rule with
comment period (72 FR 47325 through 47330) and the second FY 2008 IPPS
correction notice (72 FR 57634).
We note that 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 2008 in this
final rule with comment period, we have included the wage index changes
that would result from the MGCRB reclassifications, implementation of
sections 4410 of Pub. L. 105-33 and 505 of Pub. L. 108-173, and other
refinements adopted in the FY 2008 IPPS final rule with comment period.
For the CY 2008 OPPS, we proposed to use the final FY 2008 IPPS

[[Page 66680]]

wage indices, including the budget neutrality adjustment for the rural
floor, for calculating OPPS payment in CY 2008. We discuss how the OPPS
conversion factor would compensate for the inclusion of this budget
neutrality adjustment in the wage indices in section II.C. of this
final rule with comment period relating to the conversion factor
update.
Comment: Commenters supported the CMS proposal for CY 2008 to
extend the IPPS wage indices to the OPPS as we had done in previous
years. One commenter agreed with the proposal to adopt the IPPS wage
index but suggested that it would be logical to adopt the same labor
component percentage as applied under the IPPS. The commenter argued
that the labor component is derived from hospital cost report
information that does not separate inpatient from outpatient services
for labor-related and nonlabor-related costs, and thus the labor
component utilized in the IPPS is based on a combination of inpatient
and outpatient costs. The commenter also suggested that the 60 percent
labor-related share used in the OPPS was derived nearly 10 years ago
and has never been supported by analysis. The commenter recommended
that CMS revise the labor-related share from 60 percent to 69.731
percent to be consistent with the IPPS.
Response: We appreciate the support expressed by commenters
concerning our proposed wage index policies for CY 2008. In response to
the comment concerning the OPPS labor-related share, we do not believe
that such a change to adopt the IPPS labor related share is
appropriate. The current IPPS labor-related share of 69.731 percent was
calculated by summing the relative weights for labor components in the
IPPS operating market basket (70 FR 2339). The IPPS estimates a labor-
related share that is specific to inpatient services; the OPPS
estimates a labor-related share that is specific to outpatient
services. The OPPS labor-related share was determined through
regression analyses conducted for the initial OPPS proposed rule (63 FR
47581). Those analyses examined the extent of variability in hospital
outpatient cost per unit explained by variability in the wage index,
holding outpatient service mix under the proposed system, geographic
location, volume, and other variables constant. The unit cost dependent
variable in these analyses was derived by applying the CCRs for
ancillary cost centers to charges, and those ancillary CCRs should
reflect the proportional labor costs for ancillary services. The wage
index provides a measure of the wage level faced by a hospital relative
to the national average, which should be roughly the same for the
institution across inpatient and outpatient settings. Those initial
analyses identified 60 percent as the appropriate labor-related 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, as discussed in the CY 2006 OPPS final
rule with comment period (70 FR 68556). Further, we would expect
services delivered in the HOPD to require proportionately less labor
than more acute inpatient services that require greater nursing care
and an extended stay. We believe that the 60 percent labor-related
share for the OPPS compares favorably to the hospital inpatient labor-
related share of 69.731 percent.
We are finalizing our proposal, without modification, to use the
final IPPS FY 2008 wage indices to adjust the OPPS standard payment
amounts for labor market differences under the CY 2008 OPPS.

E. Statewide Average Default 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 2007 in
our final rule with comment period (71 FR 68006 through 68009). As we
proposed, in this final rule with comment period we have updated the
default ratios for CY 2008 using the most recent cost report data.
We calculated the statewide default CCRs using the same overall
CCRs that we use to adjust charges to costs on claims data. Table 25
published in the CY 2008 OPPS/ASC proposed rule listed the proposed CY
2008 default urban and rural CCRs by State and compared them to last
year's default CCRs. 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 weighted by Medicare
Part B charges. We also adjusted ratios from submitted cost reports to
reflect final settled status by applying the differential between
settled to submitted costs and charges from the most recent pair of
final settled and submitted cost reports.
For the proposed rule, approximately 78 percent of the submitted
cost reports represented data for CY 2005. We have since updated the
cost report data we use to calculate CCRs with additional submitted
cost reports for CY 2006. For this final rule with comment period, 47
percent of the submitted cost reports utilized in the default ratio
calculation were for CY 2005 and 49 percent were for CY 2006. 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, American Samoa, and the Northern Mariana
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 2006.
Finally, we calculated an overall average CCR, weighted by a
measure of volume for CY 2006, 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. 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 observed differences between last
year's and this year's default statewide CCRs largely reflect a general
decline in the ratio between costs and charges widely observed in the
cost report data. However, observed increases in some areas suggest
that the decline in CCRs is moderating. Further, the addition of
weighting by Medicare Part B charges to the overall CCR in CY 2007
slightly increases the variability of the overall CCR calculation.
As stated above, CMS uses default statewide CCRs for several groups
of hospitals, including, but 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, and hospitals that have recently given up their all-inclusive rate
status.
Prior to CY 2007, OPPS policy required hospitals that experienced a
change of ownership, but that did not accept assignment of the previous
hospital's provider agreement, to use the

[[Page 66681]]

previous provider's CCR. However, in CY 2007 we revised this policy and
finalized our proposal to use default statewide CCRs for entities that
had not accepted assignment of an existing hospital's provider
agreement in accordance with Sec. 489.18 and that had not yet
submitted its first Medicare cost report. For CY 2008, we proposed to
continue to apply this treatment of using the default statewide CCR, to
include an entity that has not accepted assignment of an existing
hospital's provider agreement in accordance with Sec. 489.18 and that
has not yet submitted its first Medicare cost report. This policy is
effective for hospitals experiencing a change of ownership on or after
January 1, 2007. As stated in the CY 2007 OPPS/ASC final rule with
comment period (71 FR 68006), we believed that a hospital that has not
accepted assignment of an existing hospital's provider agreement is
similar to a new hospital that will establish its own costs and
charges. We also believed that the hospital that has chosen not to
accept assignment may have different costs and charges than the
existing hospital. Furthermore, we believed that the hospital should be
provided time to establish its own costs and charges. Therefore, we
proposed to use the default statewide CCR to determine cost-based
payments until the hospital has submitted its first Medicare cost
report.
We did not receive any public comments concerning this issue.
Therefore, we are finalizing the statewide average default CCRs as
shown in Table 11 below for OPPS services furnished on or after January
1, 2008, without modification.

Table 11.--CY 2008 Statewide Average CCRs
----------------------------------------------------------------------------------------------------------------
Previous
CY 2008 default CCR
State Rural/urban default CCR (CY 2007 OPPS
final rule)
----------------------------------------------------------------------------------------------------------------
ALASKA..................................... RURAL.............................. 0.537 0.534
ALASKA..................................... URBAN.............................. 0.351 0.383
ALABAMA.................................... RURAL.............................. 0.228 0.232
ALABAMA.................................... URBAN.............................. 0.213 0.223
ARKANSAS................................... RURAL.............................. 0.266 0.264
ARKANSAS................................... URBAN.............................. 0.270 0.275
ARIZONA.................................... RURAL.............................. 0.264 0.282
ARIZONA.................................... URBAN.............................. 0.232 0.232
CALIFORNIA................................. RURAL.............................. 0.232 0.246
CALIFORNIA................................. URBAN.............................. 0.218 0.232
COLORADO................................... RURAL.............................. 0.355 0.370
COLORADO................................... URBAN.............................. 0.254 0.267
CONNECTICUT................................ RURAL.............................. 0.391 0.389
CONNECTICUT................................ URBAN.............................. 0.339 0.349
DISTRICT OF COLUMBIA....................... URBAN.............................. 0.346 0.339
DELAWARE................................... RURAL.............................. 0.302 0.323
DELAWARE................................... URBAN.............................. 0.400 0.395
FLORIDA.................................... RURAL.............................. 0.219 0.219
FLORIDA.................................... URBAN.............................. 0.198 0.199
GEORGIA.................................... RURAL.............................. 0.279 0.285
GEORGIA.................................... URBAN.............................. 0.269 0.289
HAWAII..................................... RURAL.............................. 0.373 0.357
HAWAII..................................... URBAN.............................. 0.317 0.320
IOWA....................................... RURAL.............................. 0.349 0.349
IOWA....................................... URBAN.............................. 0.325 0.343
IDAHO...................................... RURAL.............................. 0.445 0.436
IDAHO...................................... URBAN.............................. 0.414 0.416
ILLINOIS................................... RURAL.............................. 0.286 0.308
ILLINOIS................................... URBAN.............................. 0.271 0.288
INDIANA.................................... RURAL.............................. 0.313 0.316
INDIANA.................................... URBAN.............................. 0.301 0.320
KANSAS..................................... RURAL.............................. 0.318 0.320
KANSAS..................................... URBAN.............................. 0.240 0.252
KENTUCKY................................... RURAL.............................. 0.244 0.251
KENTUCKY................................... URBAN.............................. 0.262 0.270
LOUISIANA.................................. RURAL.............................. 0.271 0.281
LOUISIANA.................................. URBAN.............................. 0.277 0.273
MARYLAND................................... RURAL.............................. 0.308 0.318
MARYLAND................................... URBAN.............................. 0.284 0.298
MASSACHUSETTS.............................. URBAN.............................. 0.338 0.349
MAINE...................................... RURAL.............................. 0.433 0.457
MAINE...................................... URBAN.............................. 0.424 0.429
MICHIGAN................................... RURAL.............................. 0.331 0.346
MICHIGAN................................... URBAN.............................. 0.318 0.329
MINNESOTA.................................. RURAL.............................. 0.499 0.508
MINNESOTA.................................. URBAN.............................. 0.342 0.338
MISSOURI................................... RURAL.............................. 0.289 0.294
MISSOURI................................... URBAN.............................. 0.292 0.303
MISSISSIPPI................................ RURAL.............................. 0.267 0.284
MISSISSIPPI................................ URBAN.............................. 0.217 0.231
MONTANA.................................... RURAL.............................. 0.453 0.439

[[Page 66682]]

MONTANA.................................... URBAN.............................. 0.450 0.463
NORTH CAROLINA............................. RURAL.............................. 0.286 0.305
NORTH CAROLINA............................. URBAN.............................. 0.321 0.370
NORTH DAKOTA............................... RURAL.............................. 0.379 0.367
NORTH DAKOTA............................... URBAN.............................. 0.378 0.395
NEBRASKA................................... RURAL.............................. 0.347 0.376
NEBRASKA................................... URBAN.............................. 0.290 0.290
NEW HAMPSHIRE.............................. RURAL.............................. 0.375 0.370
NEW HAMPSHIRE.............................. URBAN.............................. 0.337 0.325
NEW JERSEY................................. URBAN.............................. 0.276 0.297
NEW MEXICO................................. RURAL.............................. 0.275 0.274
NEW MEXICO................................. URBAN.............................. 0.353 0.398
NEVADA..................................... RURAL.............................. 0.329 0.335
NEVADA..................................... URBAN.............................. 0.200 0.214
NEW YORK................................... RURAL.............................. 0.417 0.445
NEW YORK................................... URBAN.............................. 0.402 0.427
OHIO....................................... RURAL.............................. 0.354 0.369
OHIO....................................... URBAN.............................. 0.268 0.283
OKLAHOMA................................... RURAL.............................. 0.288 0.295
OKLAHOMA................................... URBAN.............................. 0.245 0.261
OREGON..................................... RURAL.............................. 0.321 0.344
OREGON..................................... URBAN.............................. 0.366 0.405
PENNSYLVANIA............................... RURAL.............................. 0.298 0.305
PENNSYLVANIA............................... URBAN.............................. 0.241 0.252
PUERTO RICO................................ URBAN.............................. 0.474 0.469
RHODE ISLAND............................... URBAN.............................. 0.308 0.309
SOUTH CAROLINA............................. RURAL.............................. 0.258 0.255
SOUTH CAROLINA............................. URBAN.............................. 0.244 0.248
SOUTH DAKOTA............................... RURAL.............................. 0.334 0.348
SOUTH DAKOTA............................... URBAN.............................. 0.289 0.304
TENNESSEE.................................. RURAL.............................. 0.256 0.265
TENNESSEE.................................. URBAN.............................. 0.241 0.249
TEXAS...................................... RURAL.............................. 0.271 0.289
TEXAS...................................... URBAN.............................. 0.242 0.258
UTAH....................................... RURAL.............................. 0.416 0.441
UTAH....................................... URBAN.............................. 0.406 0.416
VIRGINIA................................... RURAL.............................. 0.268 0.282
VIRGINIA................................... URBAN.............................. 0.275 0.280
VERMONT.................................... RURAL.............................. 0.416 0.432
VERMONT.................................... URBAN.............................. 0.340 0.338
WASHINGTON................................. RURAL.............................. 0.358 0.374
WASHINGTON................................. URBAN.............................. 0.368 0.372
WISCONSIN.................................. RURAL.............................. 0.384 0.367
WISCONSIN.................................. URBAN.............................. 0.362 0.364
WEST VIRGINIA.............................. RURAL.............................. 0.298 0.316
WEST VIRGINIA.............................. URBAN.............................. 0.360 0.369
WYOMING.................................... RURAL.............................. 0.449 0.471
WYOMING.................................... URBAN.............................. 0.351 0.352
----------------------------------------------------------------------------------------------------------------

F. OPPS Payments to Certain Rural Hospitals

1. Hold Harmless Transitional Payment Changes Made by Pub. L. 109-171
(DRA)
When the OPPS was implemented, every provider was eligible to
receive an additional payment adjustment (called either transitional
corridor payment or transitional outpatient payment) if the payments it
received for covered outpatient department (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 provides that the transitional corridor payments
are temporary payments for most providers to ease their transition from
the prior reasonable cost-based payment system to the OPPS system.
There are two exceptions, cancer hospitals and children's hospitals, to
this provision and those 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 furnished during the period that begins with
the provider's first cost reporting period beginning on or after
January 1, 2004, and ended on December 31, 2005. Accordingly, the
authority for making transitional corridor payments under

[[Page 66683]]

section 1833(t)(7)(D)(i) of the Act, as amended by section 411 of Pub.
L. 108-173, for rural hospitals having 100 or fewer beds and SCHs
located in rural areas expired on December 31, 2005.
Section 5105 of Pub. L. 109-171 reinstituted the hold harmless
transitional outpatient payments (TOPs) for covered OPD services
furnished on or after January 1, 2006, and before January 1, 2009, for
rural hospitals having 100 or fewer beds that are not SCHs. When the
OPPS payment is less than the payment the provider would have received
under the previous reasonable cost-based system, the amount of payment
is increased by 95 percent of the amount of the difference between the
two payment systems for CY 2006, by 90 percent of the amount of that
difference for CY 2007, and by 85 percent of the amount of that
difference for CY 2008.
For CY 2006, we implemented section 5105 of Pub. L. 109-171 through
Transmittal 877, issued on February 24, 2006. We did not specifically
address whether TOPs apply to essential access community hospitals
(EACHs), which are considered to be SCHs under section
1886(d)(5)(D)(iii)(III) of the Act. Accordingly, under the statute,
EACHs are treated as SCHs. Therefore, we believed and continue to
believe that EACHs are not currently eligible for TOPs under Pub. L.
109-171. However, they are eligible for the adjustment for rural SCHs.
In the CY 2007 OPPS/ASC final rule with comment period, we updated
Sec. 419.70(d) to reflect the requirements of Pub. L. 109-171 (71 FR
68010 and 68228).
2. Adjustment for Rural SCHs Implemented in CY 2006 Related to Pub. L.
108-173 (MMA)
In the CY 2006 OPPS final rule with comment period (70 FR 68556),
we finalized a payment increase for rural SCHs of 7.1 percent for all
services and procedures paid under the OPPS, excluding drugs,
biologicals, brachytherapy seeds, and services paid under pass-through
payment policy in accordance with section 1833(t)(13)(B) of the Act, as
added by section 411 of Pub. L. 108-173. Section 411 gave the Secretary
the authority to make an adjustment to OPPS payments for rural
hospitals, effective January 1, 2006, if justified by a study of the
difference in costs by APC between hospitals in rural and urban areas.
Our analysis showed a difference in costs for rural SCHs. Therefore, we
implemented a payment adjustment for only those hospitals beginning
January 1, 2006.
Last year, we became aware that we did not specifically address
whether the adjustment applies to EACHs, which are considered to be
SCHs under section 1886(d)(5)(D)(iii)(III) of the Act. Thus, under the
statute, EACHs are treated as SCHs. Therefore, in the CY 2007 OPPS/ASC
final rule with comment period, for purposes of receiving this rural
adjustment, we revised Sec. 419.43(g) to clarify that EACHs are also
eligible to receive the rural SCH adjustment, assuming these entities
otherwise meet the rural adjustment criteria (71 FR 68010 and 68227).
Currently, fewer than 10 hospitals are classified as EACHs and as of CY
1998, under section 4201(c) of Pub. L. 105-33, a hospital can no longer
become newly classified as an EACH.
This adjustment for rural SCHs is budget neutral and applied before
calculating outliers and copayment. As stated in the CY 2006 OPPS final
rule with comment period (70 FR 68560), we would not reestablish the
adjustment amount on an annual basis, but we note that we may review
the adjustment in the future and, if appropriate, would revise the
adjustment.
For CY 2008, we proposed to continue our current policy of a budget
neutral 7.1 percent payment increase for rural SCHs, including EACHs,
for all services and procedures paid under the OPPS, excluding drugs,
biologicals, and services paid under the pass-through payment policy in
accordance with section 1833(t)(13)(B) of the Act. This adjustment is
in accordance with section 411 of the MMA, which gave the Secretary the
authority to make an adjustment to OPPS payments for rural hospitals,
if justified by a study of the difference in costs by APC between
hospitals in rural and urban areas. Our analysis showed a difference in
costs only for rural SCHs, and we implemented a payment adjustment for
those hospitals beginning January 1, 2006. For CY 2008, we also
proposed to include brachytherapy sources in the group of services
eligible for the 7.1 percent payment increase because we proposed to
pay them at prospective rates based on their median costs as calculated
from historical claims data. Consequently, we proposed to revise Sec.
419.43 to reflect our proposal to make brachytherapy sources eligible
for the 7.1 percent payment increase for rural SCHs. As indicated in
our proposed rule (72 FR 42698), we intend to reassess the 7.1 percent
adjustment in the near future by examining differences between urban
and rural costs using updated claims, cost, and provider information.
In that process, we will include brachytherapy sources in each
hospital's mix of services.
Comment: Several commenters supported our proposals to continue our
current policy of a budget neutral 7.1 percent payment increase for
rural SCHs, including EACHs, for all services and procedures paid under
the OPPS, excluding drugs, biologicals, and services paid under the
pass-through payment policy, and to make brachytherapy sources eligible
for the 7.1 percent payment increase for rural SCHs.
Response: We appreciate the commenters' support of the policy.
After consideration of the public comments received, we are
finalizing, without modification, our policy to continue a payment
adjustment for rural SCHs, including EACHs, of 7.1 percent for CY 2008.
We also are finalizing our proposed revision of Sec. 419.43 to make
brachytherapy sources eligible for the 7.1 percent payment increase for
rural SCHs, including EACHs, without modification.

G. Hospital Outpatient Outlier Payments

1. Background
Currently, the OPPS pays outlier payments on a service-by-service
basis. For CY 2007, 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 $1,825
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.
As explained in the CY 2007 OPPS/ASC final rule with comment period
(71 FR 68011 through 68012), we set our projected target for aggregate
outlier payments at 1.0 percent of aggregate total payments under the
OPPS for CY 2007. The outlier thresholds were set so that estimated CY
2007 aggregate outlier payments would equal 1.0 percent of aggregate
total payments under the OPPS. In that final rule with comment period
(71 FR 68010) we also published total outlier payments as a percent of
total expenditures for CY 2005. In the past, we have received comments
asking us to publish estimated outlier payments to provide a context
for the proposed outlier thresholds for the update year. In the CY 2008
OPPS/ASC

[[Page 66684]]

proposed rule (72 FR 42698), we estimated, using available CY 2006
claims, that the outlier payments for CY 2006 would be approximately
1.1 percent of total CY 2006 OPPS payment. In the final CY 2006 claims,
aggregated outlier payments were 1.1 percent of aggregated total OPPS
payments. For CY 2006, the estimated outlier payments were set at 1.0
percent of the total aggregated OPPS payments. Therefore, for CY 2006
we paid 0.1 percent in excess of the CY 2006 outlier target of 1.0
percent of total aggregated OPPS payments. Using the final CY 2006
claims and CY 2007 payment rates, we currently estimate that outlier
payments for CY 2007 would be approximately 0.7 percent of total CY
2007 OPPS payments and the difference between 1.0 percent and 0.7
percent is reflected in the regulatory impact analysis in section
XXIV.B. of this final rule with comment period. We will not know the
final amount of outlier payments as a percent of total payments until
we have final CY 2007 claims. We note that we provide estimated CY 2008
outlier payments by hospital for hospitals with claims included in the
claims data that we used to model impacts on the CMS Web site in the
Hospital--Specific Impacts--Provider-Specific Data file on the CMS Web
site at: http://www.cms.hhs.gov/HospitalOutpatientPPS/.
2. Proposed Outlier Calculation
For CY 2008, we proposed to continue our policy of setting aside
1.0 percent of aggregate total payments under the OPPS for outlier
payments. We proposed that a portion of that 1.0 percent, 0.03 percent,
would be allocated to CMHCs for partial hospitalization program service
outliers. This amount is the amount of estimated outlier payments
resulting from the proposed CMHC outlier threshold of 3.4 times the APC
payment rate, as a proportion of all payments dedicated to outlier
payments. For this final rule, we estimate that 0.02 percent of total
outlier payments would be allocated to CMHC's for partial
hospitalization program service outliers. For further discussion of
CMHC outliers, we refer readers to section II.B.3. of this final rule
with comment period.
In order to ensure that estimated CY 2008 aggregate outlier
payments would equal 1.0 percent of estimated aggregate total payments
under the OPPS, we proposed that the outlier threshold be set so that
outlier payments would be 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 $2,000 fixed-dollar
threshold. This proposed threshold reflected minor changes to the
methodology discussed below as well as APC recalibration, including
changes due in part to the CY 2008 packaging approach discussed in
section II.A.4.c. of this final rule with comment period.
We calculated the fixed-dollar threshold for the CY 2008 proposed
rule using largely the same methodology as we did in CY 2007, except
that we proposed to adjust the overall CCRs to reflect the anticipated
annual decline in overall CCRs, discussed below, and to use CCRs from
the most recent update to the Outpatient Provider-Specific File (OPSF),
rather than CCRs we calculate internally for ratesetting. As noted in
the CY 2008 OPPS/ASC proposed rule (72 FR 42699), in November 2006 we
issued Transmittal 1030, ``Policy Changes to the Fiscal Intermediary
(FI) Calculation of Hospital Outpatient Payment System (OPPS) and
Community Mental Health Center (CMHC) Cost to Charge Ratios (CCRs),''
instructing fiscal intermediaries (or, if applicable, MACs) to update
the overall CCR calculation for outlier and other cost-based payments
using the CCR calculation methodology that we finalized for CY 2007. As
discussed in the CY 2007 OPPS/ASC proposed rule and final rule with
comment period, this methodology aligned the fiscal intermediary's CCR
calculation and the CCR calculation we previously used to model outlier
thresholds by removing allied and nursing health costs for those
hospitals with paramedical education programs from the fiscal
intermediary's CCR calculation and weighting our ``traditional'' CCR
calculation by total Medicare Part B charges. We believe that the OPSF
best estimates the CCRs that fiscal intermediaries (or, if applicable,
MACs) would use to determine outlier payments in CY 2008. For the
proposed rule, we used the April update to the OPSF. We supplemented a
CCR calculated internally for the handful of providers with claims in
our claims dataset that were not listed in the April update to the
OPSF.
The claims that we use to model each OPPS update lag by 2 years.
For the proposed rule, we used CY 2006 claims to model the CY 2008
OPPS. In order to estimate CY 2008 outlier payments for the proposed
rule, we inflated the charges on the CY 2006 claims using the same
inflation factor of 1.1504 that we used to estimate the IPPS fixed-
dollar outlier threshold for the FY 2008 IPPS proposed rule. For 1
year, the inflation factor is 1.0726. The methodology for determining
this charge inflation factor was discussed in the FY 2008 IPPS proposed
rule (72 FR 24837) and in the FY 2008 IPPS final rule with comment
period (72 FR 47417). As we stated in the CY 2005 OPPS final rule with
comment period, we believe that the use of this charge inflation factor
is appropriate for the 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).
In comments on the CY 2007 OPPS/ASC proposed rule, a commenter
asked that CMS modify the charge methodology used to set the OPPS
outlier threshold to account for the change in CCRs over time in a
manner similar to that used for the FY 2007 IPPS. The commenter
indicated that it would be appropriate to apply an inflation adjustment
factor so that the CCRs that CMS uses to simulate OPPS outlier payments
would more closely reflect the CCRs that would be used in CY 2007 to
determine actual outlier payment. In the CY 2007 OPPS/ASC final rule
with comment period, we expressed concern that cost increases between
inpatient and outpatient departments could be different and indicated
that we would study the issue and address any changes to the outlier
methodology through future rulemaking (71 FR 68012).
In assessing the possibility of utilizing a cost inflation
adjustment for the OPPS, we determined that we could not calculate an
OPPS-specific reliable cost per unit, comparable to the cost per
discharge component of the IPPS calculation, because of variability in
definition of an OPPS unit of service across calendar years. However,
we also believed that the costs and charges reported under the
applicable cost centers largely are commingled inpatient and outpatient
costs and charges. We did not want to systematically overestimate the
OPPS outlier threshold as could occur if we did not apply a CCR
inflation adjustment factor. Therefore, we proposed to apply the CCR
adjustment factor that was proposed to be applied for IPPS outlier
calculation to the CCRs used to simulate the CY 2008 OPPS outlier
payments that determined the fixed-dollar threshold. Specifically, for
CY 2008, we proposed to apply an adjustment of 0.9912 to the CCRs that
are currently on the OPSF to trend them forward from CY 2007 to CY
2008. The methodology for calculating this adjustment is discussed in
the FY 2008 IPPS proposed rule (72 FR 24837) and the FY 2008 IPPS final
rule with comment period (72 FR 47417).

[[Page 66685]]

Therefore, for the CY 2008 proposed rule, we applied the overall
CCRs from the April 2007 OPSF file after adjustment to approximate CY
2008 CCRs (using the proposed CCR inflation adjustment factor of
0.9912) to charges on CY 2006 claims that were adjusted to approximate
CY 2008 charges (using the proposed charge inflation factor of 1.1504).
We simulated aggregated CY 2008 outlier payments using these costs for
several different fixed-dollar thresholds, holding the 1.75 multiple
constant and assuming that outlier payment would continue to be made at
50 percent of the amount by which the cost of furnishing the service
would exceed 1.75 times the APC payment amount, until the total outlier
payments equaled 1.0 percent of aggregated estimated total CY 2008 OPPS
payments. We estimated that a proposed fixed-dollar threshold of
$2,000, combined with the proposed multiple threshold of 1.75 times the
APC payment rate, would allocate 1.0 percent of aggregated total OPPS
payments to outlier payments. We proposed to continue to make an
outlier payment that equals 50 percent of the amount by which the cost
of furnishing the service exceeds 1.75 times the APC payment amount
when both the 1.75 multiple threshold and the fixed-dollar $2,000
threshold are met. For CMHCs, if a CMHC provider's cost for partial
hospitalization exceeds 3.4 times the payment rate for APC 0033, 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 several public comments related to this proposal. A
summary of the public comments and our responses follow.
Comment: Several commenters requested that CMS publish annual
outlier payments as a percentage of total OPPS payment.
Response: We currently publish the total outlier payments as a
percent of total payment for past years in the annual OPPS/ASC proposed
and final rules. We have projected outlier payments to be 1.1 percent
of total OPPS payments for CY 2006, the most complete set of full year
claims data that currently exists. We plan to continue to publish these
numbers for future years, after we have full year cost data. For CY
2008, we estimate that outlier payments will be 1.0 percent of total
payment.
Comment: One commenter agreed with our proposal to raise the fixed
dollar outlier threshold accordingly so that the 1.0 percent target for
outlier payments is met. Other commenters requested that CMS lower the
fixed dollar threshold so that a greater number of services would be
eligible for outlier payments. One commenter noted that the proposed
increased fixed dollar threshold significantly reduced the number of
services that would be eligible for outlier payments. Another commenter
expressed concern that increased OPPS packaging would cause CMS to pay
less in outlier payments than in the past. Other commenters were
concerned that the fixed dollar outlier threshold that CMS proposed was
set too high and would result in CMS spending less money than allocated
for the projected 1.0 percent outlier target. These commenters argued
that the estimated outlier target amount has historically been greater
than the actual need, and they asked that CMS either reduce the set-
aside amount and retain that money in the base OPPS rates or reduce the
threshold for qualification so that the outlier expenditures would be
at a zero balance at the end of each year. Several commenters asked
that CMS limit the increase in the outlier threshold to the amount of
the market basket update each year, which would mean, for CY 2008, that
the CY 2008 threshold would be increased by only 3.3 percent. Other
commenters suggested that the outlier payment be increased from 50
percent to 80 percent of the difference between the APC payment and the
cost of the service. They believed that this would more appropriately
account for the additional cost of the service and make the outlier
payment policy consistent with IPPS policy.
Response: Consistent with the views of most commenters, we are
reducing the proposed fixed dollar outlier threshold based on our
updated analysis for this final rule with comment period, where we use
the most current claims and cost report data and final payment policies
to estimate the threshold that would allow us to pay CY 2008 outlier
payments of 1.0 percent of total CY 2008 OPPS payment.
In CY 2008, the OPPS outlier outlay is projected to be 1.0 percent
of total payments. We note that our projections for CY 2008 outlier
payments take into account the final packaging policies, as well as all
other final payment policies, of the OPPS. We acknowledge that outlier
payments are an integral component of the OPPS and could be
particularly important as the APC payment bundles grow larger and
hospitals potentially experience financially greater risk associated
with individual patient encounters. In a movement toward encounter-
based or episode-based payment, multiple service payments for a claim
could become less common, and OPPS outlier payments could come to be
increasingly targeted toward clinical cases rather than individual
services, consistent with the customary role of outlier payment in a
prospective payment system. We prospectively set the outlier thresholds
so that we will pay 1.0 percent of projected payment based on our best
inflation assumptions and model of final payment policies. The final
policy to increase packaging for the CY 2008 OPPS should not result in
less aggregate outlier payment in CY 2008 than other years, although
the distribution of payment across APCs will change.
We believe that the estimated total CY 2008 outlier payments will
meet the target of 1.0 percent of total OPPS payments. In CY 2006,
aggregated outlier payments were 1.1 percent of aggregated total
spending, while the target was set at 1.0. As we indicated in the CY
2007 OPPS/ASC final rule with comment period (71 FR 68010), in the
final set of CY 2005 OPPS claims, aggregated outlier payments were 2.39
percent of aggregated total OPPS payments, while the target was set at
2.0 percent. Similarly, using the final set of CY 2004 OPPS claims,
aggregated outlier payments were 2.5 percent of total OPPS payments,
while the target was set at 2 percent. Hence, our historic estimation
of outlier payments has resulted in outlier payments that exceeded our
target. As noted above, we currently estimate that we will pay 0.7
percent of total payments in outlier payments in CY 2007. We believe
that our proposed methodology that applies charge and CCR inflation
factors to updated CY 2006 claims and overall CCRs from the most recent
OPSF file to approximate CY 2008 values yields an outlier threshold
that will result in more accurate aggregate program outlier payments.
We did not increase the CY 2008 outlier threshold by the market
basket update of 3.3 percent because our calculations are intended to
best approximate the outlier target of 1.0 percent of CY 2008 OPPS
expenditures. We continue to believe that an outlier target of 1.0
percent of total OPPS payment is appropriate for the OPPS. However, we
will monitor outlier payments distributed during CY 2008 to determine
whether a different outlier target would be more appropriate.
Similarly, we do not believe it is appropriate to increase the
payment percentage to 80 percent of the difference between the APC
payment and the cost of the service in order to align it with the IPPS
outlier policy. In a budget neutral system with a specified payment
target, the payment percentage

[[Page 66686]]

and fixed-dollar threshold have an inverse relationship. Raising the
payment percentage would require us to significantly increase the fixed
dollar threshold to ensure that the outlier target is not exceeded. We
agree with most commenters that a relatively lower fixed-dollar
threshold is more desirable for the OPPS than a higher fixed-dollar
threshold, given the current size of the OPPS payment bundles.
After consideration of the public comments received, we are
finalizing our CY 2008 proposal, without modification, for the outlier
calculation as outlined below.
3. Final Outlier Calculation
For CY 2008, we are applying the overall CCRs from the July 2007
OPSF file with a CCR adjustment factor of 1.0027 to approximate CY 2008
CCRs to charges on the final CY 2006 claims that were adjusted to
approximate CY 2008 charges (using the final charge inflation factor of
1.1278). These are the same CCR adjustment and charge inflation factors
that we used to set the IPPS fixed-dollar threshold for FY 2008 (72 FR
47418). We simulated aggregated CY 2008 outlier payments using these
costs for several different fixed-dollar thresholds, holding the 1.75
multiple constant and assuming that outlier payment would continue to
be made at 50 percent of the amount by which the cost of furnishing the
service would exceed 1.75 times the APC payment amount, until the total
outlier payments equaled 1.0 percent of aggregated estimated total CY
2008 OPPS payments. We estimate that a fixed-dollar threshold of
$1,575, 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.
In summary, for CY 2008 we will continue to make an outlier payment
that equals 50 percent of the amount by which the cost of furnishing
the service exceeds 1.75 times the APC payment amount when both the
1.75 multiple threshold and the fixed-dollar $1,575 threshold are met.
As discussed in section VII.B. of this final rule with comment period,
brachytherapy sources will be eligible for outlier payment beginning in
CY 2008. In addition, the costs of diagnostic radiopharmaceuticals and
contrast media for which CY 2008 payment is packaged into the APC
payments for nuclear medicine and other imaging procedures under the
final packaging approach will contribute to a claim's eligibility for
outlier payment in CY 2008. For CMHCs, if a CMHC provider's cost for
partial hospitalization exceeds 3.4 times the payment rate for APC
0033, the outlier payment is calculated as 50 percent of the amount by
which the cost exceeds 3.4 times the APC payment rate.

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

(We note that the title of this section has been changed from that
used in the CY 2008 OPPS/ASC proposed rule. In that rule this section
was entitled, ``Proposed Calculation of the National Unadjusted
Medicare Payment.'')
The basic methodology for determining prospective payment rates for
HOPD services under the OPPS is set forth in existing regulations at
Sec. 419.31 and Sec. 419.32, and Sec. 419.43 and Sec. 419.44. 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 each APC contained in Addendum A to this final rule with
comment period and for HCPCS codes to which separate 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 2008 scaled weight for the APC
by the final CY 2008 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
that has any of the status indicator assignments ``S,'' ``T,'' ``V,''
or ``X,'' as defined in Addendum D1 of this final rule with comment
period, in a circumstance in which the multiple procedure discount does
not apply and the procedure is not bilateral or discontinued, we take
the following steps:
Step 1. Calculate 60 percent (the labor-related portion) of the
national unadjusted payment rate. Since the initial implementation of
the OPPS, we have used 60 percent to represent our estimate of that
portion of costs attributable, on average, to labor. (We refer readers
to the April 7, 2000 final rule with comment period (65 FR 18496
through 18497) for a detailed discussion of how we derived this
percentage.) We confirmed that this labor-related share for hospital
outpatient services is still appropriate during our regression analysis
for the payment adjustment for rural hospitals in the CY 2006 OPPS
final rule with comment period (70 FR 68553).
Individual providers interested in calculating the final payment
amount that they will receive for a specific service from the national
payment rates presented in Addenda A and B to this final rule with
comment period should follow the formulas presented in the following
steps. The formula below is a mathematical representation of step 1
discussed above and identifies the labor-related portion of a specific
payment rate for the specific service.

x--Labor-related portion of the national unadjusted payment rate

x = .60 * (national unadjusted payment rate)

Step 2. Determine the wage index area in which the hospital is
located and identify the wage index level that applies to the specific
hospital. 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 2008 under the
IPPS, reclassifications through the MCGRB, section 1886(d)(8)(B)
``Lugar'' hospitals, and section 401 of Pub. L. 108-173. We note that
the reclassifications of hospitals under the one-time appeals process
under section 508 of Pub. L. 108-173 expired on September 30, 2007, and
is no longer applicable in this determination of appropriate wage
values for the CY 2008 OPPS. 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 final FY 2008 IPPS
payment rates published in the Federal Register on August 22, 2007 (72
FR 47309 through 47315) and corrected in the correction notice to the
FY 2008 IPPS final rule with comment period published in the Federal
Register on October 10, 2007 (72 FR 57634 through 57738).
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 to this final rule with comment period contains the
qualifying counties and the final wage index increase developed for the
FY 2008 IPPS published in the FY 2008 IPPS final rule with comment
period (72 FR 47339) and corrected in the correction notice to the FY
2008 IPPS final rule with comment period published in the Federal
Register on October 10, 2007 (72 FR 57634 through 57738). This step is
to be followed only

[[Page 66687]]

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.
The formula below is a mathematical representation of step 4
discussed above and adjusts the labor-related portion of the national
payment rate for the specific service by the wage index.

xa--Labor-related portion of the national unadjusted
payment rate (wage adjusted
xa = 60 * (national unadjusted payment rate) * applicable
wage index.

Step 5. Calculate 40 percent (the nonlabor-related portion) of the
national unadjusted payment rate and add that amount to the resulting
product of Step 4. The result is the wage index adjusted payment rate
for the relevant wage index area.The formula below is a mathematical
representation of step 5 discussed above and calculates the remaining
portion of the national payment rate, the amount not attributable to
labor, and the adjusted payment for the specific service.

y--Nonlabor-related portion of the national unadjusted payment rate
y = .40 * (national unadjusted payment rate)
Adjusted Medicare Payment = y + xa

Step 6. If a provider is a SCH, as defined in Sec. 412.92, or an
EACH, which is considered to be a SCH under section
1886(d)(5)(D)(iii)(III) of the Act, and located in a rural area, as
defined in Sec. 412.64(b), or is treated as being located in a rural
area under Sec. 412.103, multiply the wage index adjusted payment rate
by 1.071 to calculate the total payment.
The formula below is a mathematical representation of step 6
discussed above and applies the rural adjustment for rural SCHs.

Adjusted Medicare Payment (SCH or EACH) = Adjusted Medicare Payment
* 1.071

We did not receive any public comments on our proposed methodology
for calculating an adjusted payment from the national unadjusted
Medicare payment amount for CY 2008. Therefore, we are finalizing our
methodology as proposed for CY 2008, without modification.

I. Beneficiary Copayments

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
a specified percentage. For all services paid under the OPPS in CY
2008, and in calendar years thereafter, the specified percentage is 40
percent of the APC payment rate (section 1833(t)(8)(C)(ii)(V) of the
Act). Section 1833(t)(3)(B)(ii) of the Act provides that, for a covered
OPD service (or group of such services) furnished in a year, the
national unadjusted copayment amount cannot be less than 20 percent of
the OPD fee schedule amount. Sections 1834(d)(2)(C)(ii) and
(d)(3)(C)(ii) of the Act further require that the copayment for
screening flexible sigmoidoscopies and screening colonoscopies be equal
to 25 percent of the payment amount. We have applied the 25-percent
copayment to screening flexible sigmoidoscopies and screening
colonoscopies since the beginning of the OPPS.
2. Copayment
For CY 2008, we proposed to determine copayment amounts for new and
revised APCs using the same methodology that we implemented for CY
2004. (We refer readers to the November 7, 2003 OPPS final rule with
comment period (68 FR 63458).) The unadjusted copayment amounts for
services payable under the OPPS that will be effective January 1, 2008,
are shown in Addendum A and Addendum B to this final rule with comment
period.
We have historically used standard rounding principles to establish
a 20 percent copayment for those few circumstances where the copayment
rate was between 19.5 and 20 percent using our established copayment
rules. For example, the CY 2008 proposed payment and copayment amounts
for APC 9228 (Tigecycline injection) were $0.91 and $0.18,
respectively. Twenty percent of $0.91 is $0.182. Because it would be
impossible to set a copayment rate at exactly 20 percent in this case,
that is, $0.182, we proposed to round the amount, using standard
rounding principles, to $0.18. Also using standard rounding principles,
19.78 percent ($0.18 as a percentage of $0.91) rounds to 20 percent and
meets the statutory requirement of a copayment amount of at least 20
percent. For CY 2008, APC 9046 (Iron Sucrose Injection) had a proposed
payment amount and copayment amount of $0.37 and $0.08, respectively.
Using our established copayment rules, 20 percent of $0.37 is $0.074.
Normally, we would apply standard rounding principles to achieve an
amount that is payable, here $0.07 rather than $0.074. However, if we
were to set a copayment amount of $0.07, which is 18.9 percent of
$0.37, we would not be setting a copayment rate that is at least 20
percent of the OPPS payment rate. As proposed, we continue to believe
that section 1833(t)(3)(B) of the Act requires us to set a copayment
amount that is at least 20 percent of the OPPS payment amount, not less
than 20 percent. Therefore, we proposed to set the copayment rate for
APC 9046 at $0.08. Eight cents represents the lowest amount that we
could set that would bring the copayment rate to 20 percent or, in this
case, just above 20 percent. We proposed to apply this same methodology
in the future to instances where the application of our standard
copayment methodology would result in a copayment amount that is under
20 percent and cannot be rounded, under standard rounding principles,
to 20 percent.
We did not receive any public comments on this proposal, and,
therefore, we are adopting it as final, without modification.
3. Calculation of an Adjusted Copayment Amount for an APC Group
To calculate the OPPS adjusted 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 23 percent of $30.61.
Individuals interested in calculating the their final copayment
liability for a given service from the national copayment rates
presented in Addenda A and B should follow the formulas presented in
the following steps. The formula below is a mathematical representation
of step 1 discussed above and calculates national copayment as a
percentage of national payment for a given service.

b--Beneficiary payment percentage
b = national unadjusted copayment for APC / national unadjusted
payment rate for APC

Step 2. Calculate the wage adjusted payment rate for the APC, for
the provider in question, as indicated in section II.H. of this final
rule with comment period. Calculate the rural adjustment for eligible
providers as indicated in section II.H. of this final rule with comment
period.
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.

[[Page 66688]]

The formula below is a mathematical representation of step 3
discussed above and applies the beneficiary percentage to the adjusted
payment rate for a service calculated under II.H. above, with and
without the rural adjustment, to calculate the final adjusted
beneficiary copayment for a given service.

Wage-adjusted copayment amount for the APC = Adjusted Medicare
Payment * b
Wage-adjusted copayment amount for the APC (SCH or EACH) = (Adjusted
Medicare Payment * 1.071)* b

The unadjusted copayments for services payable under the OPPS that
will be effective January 1, 2008, are shown in Addenda A and B to this
final rule with comment period.
We did not receive any public comments concerning the proposed
methodology for calculating the unadjusted copayment amount for CY
2008. Therefore, we are finalizing our proposal without modification.

III. OPPS Ambulatory Payment Classification (APC) Group Policies

A. Treatment of New HCPCS and CPT Codes

1. Treatment of New HCPCS Codes Included in the April and July
Quarterly OPPS Updates for CY 2007
a. Background
For the July quarter of CY 2007, we created a total of 16 new Level
II HCPCS codes, specifically C2638, C2639, C2640, C2641, C2642, C2643,
C2698, C2699, C9728, Q4087, Q4088, Q4089, Q4090, Q4091, Q4092, and
Q4095 that were not addressed in the CY 2007 OPPS/ASC final rule with
comment period that updated the CY 2007 OPPS. We designated the payment
status of these codes and added them through the July 2007 update
(Change Request 5623, Transmittal 1259, dated June 1, 2007). There were
no new Level II HCPCS codes for the April 2007 update. In the CY 2008
OPPS/ASC proposed rule, we also solicited public comment on the status
indicators, APC assignments, and payment rates of these codes, which
were listed in Table 26A and Table 26B of that proposed rule, and now
appear in Tables 10 and 11, respectively, of this final rule with
comment period. Because of the timing of the proposed rule, the codes
implemented through the July 2007 OPPS update were not included in
Addendum B to that rule. In the CY 2008 OPPS/ASC proposed rule, we
proposed to assign the new HCPCS codes for CY 2008 to APCs with the
proposed rates as displayed in Tables 26A and 26B and incorporate them
into Addendum B of this final rule with comment period for CY 2008,
which is consistent with our annual APC updating policy. As noted in
Table 13 of this final rule with comment period, HCPCS codes Q4087,
Q4088, Q4089, Q4090, Q4091, Q4092, and Q4095 will be deleted on
December 31, 2007 and replaced with HCPCS J-codes effective January 1,
2008. Readers should refer to Table 13 for their replacement codes.
b. Implantation of Interstitial Devices (APC 0156)
Effective January 1, 2007, CPT code 55876 (Placement of
interstitial device(s) for radiation therapy guidance (e.g., fiducial
markers, dosimeter), prostate (via needle, any approach), single or
multiple) was implemented. We assigned this code to APC 0156 (Level III
Urinary and Anal Procedures) for CY 2007 on an interim final basis. We
then created a new Level II HCPCS code for a similar interstitial
device implantation service for non-prostate sites, C9728 (Placement of
interstitial device(s) for radiation therapy/surgery guidance (e.g.,
fiducial markers, dosimeter), other than prostate (any approach),
single or multiple). We implemented HCPCS code C9728 effective July 1,
2007 via Program Transmittal 1259 dated June 1, 2007, as a result of
information we received during our evaluation of an application for
assignment of the implantation of a radiation dose verification system
to a New Technology APC. We assigned HCPCS code C9728 to APC 0156
because we believed it was similar to CPT code 55876 from both clinical
and resource perspectives. We proposed to maintain both CPT code 55876
and HCPCS code C9728 in APC 0156 for CY 2008, with a proposed payment
rate of approximately $195.
We received a number of comments on the APC assignments of these
codes, both on the CY 2007 OPPS/ASC final rule with comment period and
on the CY 2008 proposed rule. A summary of the comments and our
response follow.
Comment: A few commenters expressed concern about CMS' interim
final placement of CPT code 55876 in APC 0156 for CY 2007 as shown in
Addendum B to the CY 2007 final rule with comment period. Several
commenters expressed similar concern regarding the proposed CY 2008 APC
assignment for this code. The commenters recommended that the payment
rate for implanting the interstitial devices not incorporate the cost
of the devices, because such items have a range of costs. Several
commenters claimed that the costs of these devices range widely, from
approximately $200 for gold markers, to $900 for implantable
dosimeters, to $1200 for electromagnetic transponders, which they
believed justified separate payment for the various types of
interstitial devices.
Some commenters also expressed concern about the proposed CY 2008
APC placement of a new code that CMS created for non-prostate
applications, specifically HCPCS code C9728 which was assigned to APC
0156, effective July 1, 2007, because it is similar to CPT code 55876.
Several commenters asserted that the payment for HCPCS code C9728
should include the costs of dosimeter sensors, which they believed are
currently excluded. These commenters also noted that payment for CPT
code 55876 excludes the cost of dosimeter sensors. They recommended
that CMS develop Level II HCPCS codes that permit hospitals to report
the specific technologies associated with HCPCS code C9728 and CPT code
55876 in each clinical case and receive appropriate payment for the
specific interstitial device implanted.
Several commenters pointed out that the CPT coding instructions for
CPT code 55876 instruct coders to report the supply of devices for the
implantation procedure separately from CPT code 55876. These commenters
claimed that when the CPT Editorial Panel established the code, it did
not include the implantable interstitial device and the imaging
guidance for the implantation procedure in the code, and, therefore,
both device costs and imaging guidance costs were excluded from the
proposed CY 2008 APC payment for CPT code 55876. Because a dosimeter
sensor could be implanted with CPT code 55876 for prostate
applications, the commenters asserted that its costs are not reflected
in that service. The commenters claimed that, unlike the instructions
for CPT code 55876, the descriptor for HCPCS code C9728 does not direct
coders to report the device separately. These commenters recommended
that CMS assign the DVS[reg] Dosimeter device for any body site to New
Technology APC 1514 (New Technology--Level XIV ($1200-$1300)), with a
payment rate of $1250 for the device for CY 2008. Alternatively, they
suggested that CMS package payment for all of the items and services
needed to implant the dosimeter into payment for a single code which
they recommended be assigned to New Technology APC 1522 (New
Technology--Level XXII ($2000-$2500)). One commenter further claimed
that CMS was required to set the APC assignment for the DVS[reg] device
based on the cost estimate

[[Page 66689]]

included in its New Technology APC application.
Response: Many procedures paid under the OPPS include payment for
various implantable devices, where the procedure cost in an individual
case would vary by the type of device. Our long-standing policy is to
package the costs of implantable devices into payment for the
procedures in which they are used, unless those devices are paid
separately for a limited period of 2 to 3 years based on their
transitional pass-through status. Payment for OPPS services includes
payment for all costs that are directly related and integral to
performing a procedure or furnishing a service on an outpatient basis,
as set forth in Sec. 419.2.
According to our usual practice, when we originally evaluated CPT
code 55876 for APC assignment for CY 2007, we took into consideration
all information available to us about the particular service, as well
as other OPPS services for which we have claims-based cost data. In
particular, we considered the probable utilization of the various
devices, including fiducial markers and dosimeters, whose implantation
could be reported with the CPT code, as well as possible implantation
approaches, recognizing that a prospective payment system is based on
principles of averaging. For established services paid under the OPPS,
payment is generally based on the median cost of the service from
claims data. Although CPT instructions state that the supply of the
implantable device is to be reported separately, we considered the
device costs associated with CPT code 55876, which would be packaged
into payment for the implantation procedure under the OPPS even if the
device were separately reported, when we assigned the CPT code to APC
0156. A previous pass-through device category, C1879 (Tissue marker
(implantable)) for a device that we believe could be reported with CPT
code 55876, was active from August 2000 through December 2002. After
its expiration, the cost of tissue markers has been packaged into the
OPPS payment for the procedures in which they are used. We note that
the line-item CY 2006 median cost for HCPCS code C1879 for an
implantable tissue marker was $88 based on approximately 18,600 units
of this device. Although there was no specific HCPCS device code for a
dosimeter in CY 2007, we would consider payment for the dosimeter
packaged under the OPPS into the implantation procedure and would have
no need to establish a specific HCPCS code for the dosimeter for OPPS
payment purposes. There may be other devices whose implantation would
also be reported with CPT code 55876 and, similarly, we would package
their payment under the OPPS. We note that the CMS HCPCS Workgroup has
created two related supply codes for CY 2008, specifically A4648
(Tissue marker, implantable, any type, each) and A4650 (Implantable
radiation dosimeter, each), which will be packaged under the OPPS for
CY 2008 and which could also be reported in association with CPT code
55876. Therefore, any of these HCPCS codes for devices or supplies,
A4648, A4650 or C1879, are reportable with service codes 55876 or
C9728.
In response to public comments on the CY 2007 OPPS/ASC final rule
with comment period and on the CY 2008 proposed rule on the proposed
assignment of CPT code 55876 for CY 2008, we once again examined
information available to us regarding procedures that could be reported
with the CPT code, along with updated claims data for other OPPS
services. We continue to believe that APC 0156 is the most appropriate
APC assignment for CPT code 55876, based on the expected median cost
and utilization of all of the services that would be reported with the
code under the OPPS. We will first have claims data for CPT code 55876
for the CY 2009 OPPS update, which we will review in the context of our
CY 2009 update proposals.
We note that during CY 2007, we evaluated a New Technology APC
application submitted by the manufacturer of the DVS[reg] System for a
service the applicant entitled ``Implantation of the DVS[reg]
Dosimeter.'' We did not approve an item or service for payment
specifically for the DVS[reg] Dosimeter. However, we approved creation
of a new code for a service for non-prostate placement of interstitial
device(s) for radiation therapy or surgical guidance, using such
devices as fiducial markers or dosimeters. As explained by the
commenters, and similar to CPT code 55876, this procedure could implant
devices with a wide range of costs, including dosimeters that
commenters claimed ranged from $900 to $1200. Our general policy in
creating a new service code under the OPPS, whether we assign it to a
clinical or New Technology APC, is to develop a general service code so
that it may be reported for a range of technologies, rather than only
for a single proprietary service. This reduces potential barriers to
payment under the OPPS for related new services and is consistent with
the general coding practices of the CPT Editorial Panel and the CMS
HCPCS Workgroup. When we approve a new service for assignment to a New
Technology APC, we are not required to set the payment rate based on
the cost data presented in the New Technology APC application alone, as
we have stated in our final rule published in the Federal Register on
November 30, 2001. In that rule, we specifically explained that we do
not limit our determination of the cost of a service 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 (66 FR 59900). In addition, we note that only
complete services are currently assigned to New Technology APCs, not
items, such as drugs or devices.
In response to comments to the CY 2008 proposed rule on the
proposed assignment of HCPCS code C9728, we examined all information
available to us on procedures that could be reported with the code, as
well as updated cost data from claims regarding other OPPS services. We
continue to believe that the resources and utilization associated with
HCPCS code C9728, including the cost of the various possible
implantable devices that may be implanted in the service and the
different approaches to the implantation, resemble those associated
with CPT code 55876. Therefore, we will maintain HCPCS code C9728 in
APC 0156 for CY 2008. We will first have data for HCPCS code C9728 for
the CY 2009 OPPS update, which we will review in the context of our CY
2009 update proposals. We expect that these data will reflect the costs
of the implantable devices utilized and, the extent that more costly
devices, such as implantable dosimeters and electromagnetic
transponders, are increasingly reported with this procedure, the cost
of these devices will gradually be reflected in the median cost of
HCPCS code C9728.
c. Other New HCPCS Codes Implemented in April or July 2007
While we received public comments on the proposed CY 2008 OPPS
treatment of HCPCS code C9728 as discussed above and HCPCS codes C2638,
C2639, C2640, C2641, C2642, C2643, C2698, and C2699 as discussed in
section VII. of this final rule with comment period, we did not receive
any public comments on the proposed APC assignments and status
indicators for HCPCS codes Q4087, Q4088, Q4089, Q4090, Q4091, Q4092,
and Q4095 that were implemented in July 2007. However, for CY 2008, the
CMS HCPCS Workgroup decided to delete the drug codes described by Q-
codes on December 31, 2007 and replace them with permanent J-codes
effective

[[Page 66690]]

January 1, 2008. Consistent with our general policy of using permanent
HCPCS codes for the reporting of drugs under the OPPS in order to
streamline coding, we are displaying the J-codes in Table 13 that will
replace the seven Q-codes, effective January 1, 2008. We note that Q
codes are temporary national HCPCS codes. To avoid duplication,
temporary national HCPCS codes, such as ``C-,'' ``G-,'' ``K-,'' and
``Q-codes,'' are generally deleted once permanent national HCPCS codes
are created that describe the same item, service, or procedure. The J-
codes describe the same drugs and the same dosages as the Q-codes that
will be deleted December 31, 2007. Because we did not receive any
public comments on the proposed CY 2008 APC and status indicator
assignments for the new HCPCS codes, with the exception of HCPCS code
C9728, that were implemented in July 2007, we are adopting our proposal
as final, without modification, and are assigning the replacement HCPCS
J codes to the same status indicators and APCs that were proposed for
the predecessor Q-codes, as shown in Addendum B to this final rule with
comment period.

Table 12.--New Non-Drug Hcpcs Codes Implemented in July 2007
----------------------------------------------------------------------------------------------------------------
Final CY
HCPCS code Long descriptor Final CY 2008 status Final CY 2008 median
indicator 2008 APC cost
----------------------------------------------------------------------------------------------------------------
C2638.................... Brachytherapy source, stranded, K........................ 2638 $45
iodine-125, per source.
C2639.................... Brachytherapy source, non- K........................ 2639 32
stranded, iodine-125, per
source.
C2640.................... Brachytherapy source, stranded, K........................ 2640 65
palladium-103, per source.
C2641.................... Brachytherapy source, non- K........................ 2641 51
stranded, palladium-103, per
source.
C2642.................... Brachytherapy source, stranded, K........................ 2642 97
cesium-131, per source.
C2643.................... Brachytherapy source, non K........................ 2643 63
stranded, cesium-131, per
source.
C2698.................... Brachytherapy source, stranded, K........................ 2698 45
not otherwise specified, per
source.
C2699.................... Brachytherapy source, non- K........................ 2699 31
stranded, not otherwise
specified, per source.
C9728.................... Placement of interstitial T........................ 0156 192
device(s) for radiation therapy/
surgery guidance (eg, fiducial
markers, dosimeter), other than
prostate (any approach) single
or multiple.
----------------------------------------------------------------------------------------------------------------

Table 13.--New Drug Hcpcs Codes Implemented in July 2007
----------------------------------------------------------------------------------------------------------------
Final CY
New HCPCS J-code effective HCPCS Q- Long descriptor 2008 status Final CY
January 1, 2008 code indicator 2008 APC
---------------------------------------------------------------------------------------------------------------
J1568.......................... Q4087 Injection, immune globulin, (Octogam), K 0943
intravenous, non-lyophilized, (e.g.
liquid), 500 mg.
J1569.......................... Q4088 Injection, immune globulin, K 0944
(Gammagard), intravenous, non-
lyophilized, (e.g. liquid), 500 mg.
J2791.......................... Q4089 Injection, rho(d) immune globulin K 0945
(human), (Rhophylac), intravenous,
100 iu.
J1571.......................... Q4090 Injection, hepatitis b immune globulin K 0946
(Hepagam B), intramuscular, 0.5 ml.
J1572.......................... Q4091 Injection, immune globulin, K 0947
(Flebogamma), intravenous, non-
lyophilized, (e.g. liquid), 500 mg.
J1561.......................... Q4092 Injection, immune globulin, (Gamunex), K 0948
intravenous, non-lyophilized, (e.g.
liquid), 500 mg.
J3488.......................... Q4095 Injection, zoledronic acid (Reclast), K 0951
1 mg.
----------------------------------------------------------------------------------------------------------------

2. Treatment of New Category I and III CPT Codes and Level II HCPCS
Codes

a. Establishment and Assignment of New Codes
As has been our practice in the past, we implement new Category I
and III CPT codes and new Level II HCPCS codes through program
transmittals, which are released in the summer through the fall of each
year for annual updating, effective January 1, in the final rule
updating the OPPS for the following calendar year. These codes are
flagged with comment indicator ``NI'' in Addendum B to the OPPS/ASC
final rule with comment period 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 refer readers to the discussion immediately below concerning our
policy for implementing new Category I and III mid-year CPT codes.) In
the CY 2008 OPPS/ASC proposed rule, we proposed to continue this
recognition and process for CY 2008. Therefore, new Category I and III
CPT codes and new Level II HCPCS codes, effective January 1, 2008, are
listed in Addendum B to this final rule with comment period and
designated using comment indicator ``NI.'' The status indicator, the
APC assignment, or both, for all such codes flagged with comment
indicator ``NI'' is open to public comment in this final rule with
comment period. As indicated in the CY 2008 OPPS/ASC proposed rule, we
will respond to all comments received concerning these codes in a
subsequent final rule for the next calendar year's OPPS/ASC update.
We did not receive any public comments on our proposal to assign a
comment indicator of ``NI'' in Addendum B of the OPPS final rule with
comment period to the new codes that are open to public comment.
Therefore, we are finalizing our proposed treatment of new CY 2008
Category I and III CPT codes, as well as the Level II HCPCS codes,
without modification.
We received some comments to the CY 2008 proposed rule regarding
individual new HCPCS codes that commenters expected to be implemented
for the first time in the CY 2008 OPPS. We could not discuss the CY
2008 codes, including their APC

[[Page 66691]]

and/or status indicator assignments, because the codes were not
available when we developed and issued the proposed rule. For those new
Category I CPT codes whose descriptors were not officially available
during the comment period and development of the CY 2008 final rule
with comment period, we do not specifically respond to those comments
in this final rule with comment period. For those new Category III CPT
codes that were released on July 1, 2007, for implementation January 1,
2008, we respond to those comments in this final rule with comment
period because those codes were publicly available during the comment
period to the proposed rule and the development of this final rule with
comment period. Both of these groups of codes are flagged with comment
indicator ``NI'' in this final rule with comment period, as discussed
above, to signal that they are open to public comment.
Effective for January 1, 2008, we have created eight HCPCS C-codes
that describe transthoracic echocardiography with contrast and
transesophageal echocardiography with contrast to enable facilities to
appropriately report contrast-enhanced echocardiography services. (See
section II.A.4.c(6) of this final rule with comment period for further
discussion of these codes). Effective January 1, 2008, these C-codes
will be used by HOPDs to report contrast echocardiography services.
These codes are assigned comment indicator ``NI'' in Addendum B to this
final rule with comment period.
In the CY 2008 OPPS/ASC proposed rule, we also proposed to continue
our policy of the last 2 years of recognizing new mid-year CPT codes,
generally Category III CPT codes, that the AMA releases in January for
implementation the following July through the OPPS quarterly update
process. Therefore, for CY 2008, we proposed to include in Addendum B
to the CY 2008 OPPS/ASC final rule with comment period the new Category
III CPT codes released in January 2007 for implementation on July 1,
2007 (through the OPPS quarterly update process), and the new Category
III codes released in July 2007 for implementation on January 1, 2008.
However, as proposed, only those new Category III CPT codes implemented
effective January 1, 2008, are flagged with comment indicator ``NI'' in
Addendum B to this final rule with comment period, to indicate that we
have assigned them an interim payment status which is subject to public
comment. Category III CPT codes implemented in July 2007, which
appeared in Table 27 of the proposed rule and are displayed in Table 14
of this final rule with comment period, were subject to comment in the
proposed rule, and we proposed to finalize their status in this final
rule with comment period.
b. Electronic Brachytherapy Services (New Technology APC 1519)
The AMA's CPT Editorial Panel created a new Category III code,
0182T (High dose rate (HDR) electronic brachytherapy, per fraction), as
of July 1, 2007. We assigned CPT code 0182T to New Technology APC 1519
(New Technology--Level IXX ($1700-$1800)), with a payment rate of
$1750, as of July 1, 2007 (via Program Transmittal 1259, Change Request
5623).
We received a wide variety of comments regarding the proposed
assignment of CPT code 0182T to New Technology APC 1519. A summary of
the comments and our response follows.
Comment: Some commenters thought the proposed assignment provided a
payment that was too high, some believed the proposed payment was too
low, while others agreed with the proposed APC assignment. A number of
commenters believed that placement of CPT code 0182T into APC 1519
resulted in a payment amount much higher relative to existing APCs for
application of brachytherapy sources, specifically, APCs 0312
(Radioelement Applications), 0313 (Brachytherapy), and 0651 (Complex
Interstitial Radiation Source Application), with proposed CY 2008
payment rates of $534.48, $739.46, and $981.88, respectively. One
commenter indicated that only a very small number of patients would be
treated using electronic brachytherapy. Another commenter expressed
appreciation of CMS's prompt assignment of new technologies to APCs,
while some commenters were concerned that the proposed payment for CPT
code 0182T as a new technology service was between two and three times
the payment rate for the other conventional brachytherapy service APCs
cited above. These commenters believed that the proposed payment for
electronic brachytherapy was excessive and, given that the risks of the
treatment have yet to be clearly established, such conditions would
encourage the early and possibly inappropriate adoption of this
service. Some commenters recommended that CMS consult with specialty
organizations regarding the pricing of new technology services prior to
assigning them to APCs. Other commenters supported the proposed
assignment of CPT code 0182T and recommended that the service reside in
that New Technology APC for at least 2 years.
Another commenter expressed concern that the payment level was too
low for a single fraction treatment of electronic brachytherapy. The
commenter pointed out that two applications for New Technology APCs
were submitted to CMS for electronic brachytherapy with the following
descriptions: (a) HDR electronic brachytherapy, complete course as a
single fraction, and (b) HDR electronic brachytherapy, per fraction.
The commenter claimed that the two forms of HDR electronic
brachytherapy are each unique and should not be classified into the
same APC. The commenter requested that a new HCPCS code for HDR
electronic brachytherapy, complete course as a single fraction, be
developed and assigned to APC 1529 (New Technology--Level XXIX ($5,500-
$6,000)) for CY 2008.
Response: The CY 2008 proposed APC assignment of CPT code 0182T
maintained our initial placement of HDR electronic brachytherapy.
Consistent with our recent OPPS practice for Category III CPT codes
that are implemented mid-year by the AMA, we recognized CPT code 0182T
under the OPPS in July 2007. This recognition ensures timely collection
of data pertinent to the service described by the code, ensures patient
access to the service, and eliminates potential redundancy between
Category III CPT codes and Level II HCPCS codes that are created by us
in response to applications for new technology services.
Commenters did not provide analyses regarding the costs of the
service; however, we received cost estimates from two manufacturers in
their respective New Technology APC applications over the course of an
extensive evaluation period. As is our customary practice, we also used
claims data for related services and other sources of information to
supplement information included in the New Technology APC applications
in order to provide an APC assignment we believed to be appropriate at
this time. Regarding the comments on potential complications or risks
of the new service that has a higher payment rate than conventional
brachytherapy procedures, we note that the APC assignment of a service
based on its estimated cost is our usual practice for new services
under the OPPS, which generally pays for services based on estimated
hospital resources. In the absence of cost data from hospital claims,
we believe that comparisons of OPPS payment for electronic

[[Page 66692]]

brachytherapy to payment for conventional brachytherapy services that
are assigned to APCs 0312, 0313, and 0651 and that implant radioactive
sources are not appropriate. The law specifically requires separate
payment for the brachytherapy sources, and, therefore, these costs are
not included in the procedure payment for conventional brachytherapy
services that are reported for implanting the sources. We define
brachytherapy sources as containing a radioactive isotope so, by
definition, in the case of electronic brachytherapy treatment the New
Technology APC payment for the procedure would include payment for the
costs of the radiation actually delivered to the patient. Thus, it is
not appropriate to compare the costs of conventional and electronic
brachytherapy treatments based on a comparison of the treatment
procedure costs alone.
In light of the commenters' concerns regarding safety of the new
procedures, we reiterate that even though a service is assigned a HCPCS
code and a payment rate under the OPPS, it does not imply coverage by
the Medicare program but indicates only how the service may be paid if
covered by the program. Unless CMS has issued a national coverage
determination (NCD), local contractors determine whether a service
meets all program requirements for coverage. While we do not
specifically consult with specialty organizations during the New
Technology APC application evaluation process that may result in an
initial APC assignment for a service, the APC assignments of new
technology services, like all other OPPS services, are open to comment
in the annual OPPS update, and we welcome public comments.
We will not create a new Level II HCPCS code for HDR electronic
brachytherapy, complete course as a single fraction, and assign it to a
different New Technology APC. We evaluated both New Technology APC
applications at length and received input from both applicants. We
believe that the two forms of HDR electronic brachytherapy, whether
provided in a single fraction or multiple fractions depending on the
technology, are both described by CPT code 0182T that is appropriately
assigned to a single APC. We note that the payment is per fraction, and
that would include a single fraction treatment as well.
After reviewing the public comments received and all current
information available to us regarding HDR electronic brachytherapy and
other hospital outpatient services, we continue to believe that New
Technology APC 1519, with a payment rate of $1750, is the most
appropriate assignment for CPT code 0182T. Therefore, we are finalizing
our proposal, without modification, to maintain the assignment of CPT
code 0182T to New Technology APC 1519, with a payment rate of $1750 for
CY 2008.
c. Other Mid-Year CPT Codes
We did not receive any comments on the proposed CY 2008 APC and
status indicator assignments of Category III CPT codes first
implemented in July 2007 for services other than CPT code 0182T. After
considering the public comments received on CPT code 0182T, we are
finalizing our general proposal for the treatment of new mid-year CPT
codes, including our proposed APC assignments for CPT code 0182T and
other Category III CPT codes as displayed Table 14.

Table 14.--Category III CPT Codes Implemented in July 2007
----------------------------------------------------------------------------------------------------------------
Final CY 2008 status
CPT code Long descriptor indicator Final CY 2008 APC
----------------------------------------------------------------------------------------------------------------
0178T.................. Electrocardiogram, 64 leads or B...................... Not applicable.
greater, with graphic
presentation and analysis;
with interpretation and
report.
0179T.................. Electrocardiogram, 64 leads or X...................... 0100
greater, with graphic
presentation and analysis;
tracing and graphics only,
without interpretation and
report.
0180T.................. Electrocardiogram, 64 leads or B...................... Not applicable.
greater, with graphic
presentation and analysis;
interpretation and report
only.
0181T.................. Corneal hysteresis S...................... 0230
determination, by air impulse
stimulation, bilateral, with
interpretation and report.
0182T.................. High dose rate electronic S...................... 1519
brachytherapy, per fraction.
----------------------------------------------------------------------------------------------------------------

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) of the Act 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 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 similar services, as well as medical
visits. We also have developed separate APC groups for certain medical
devices, drugs, biologicals, radiopharmaceuticals, and brachytherapy
devices.
We have packaged into payment for each procedure or service within
an APC group the costs associated with those items or services that are
directly related to and supportive of performing the main procedures or
furnishing services. Therefore, we do not make separate payment for
packaged items or services. For example, packaged items and services
include: (1) Use of an operating, treatment, or procedure room; (2) use
of a recovery room; (3) most observation services; (4) anesthesia; (5)
medical/surgical supplies; (6) pharmaceuticals (other than those for
which separate payment may be allowed under the provisions discussed in
section V. of this final rule with comment period); and (7) incidental
services such as venipuncture. Our final packaging methodology for
ancillary and supportive services is discussed in section II.A.4.c. of
this final rule with comment period.
Under the OPPS, we pay for hospital outpatient services on a rate-
per-service basis, where the service may be reported with one or more
HCPCS codes. Payment varies according to the APC group to which the
independent service

[[Page 66693]]

or combination of services 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 0606. The APC
weights are scaled to APC 0606 because it is the middle level clinic
visit APC (that is, where the Level 3 Clinic Visit HCPCS code of five
levels of clinic visits is assigned), and because middle level clinic
visits are among the most frequently furnished services in the hospital
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 specific services for the CY 2008 OPPS and our
responses to them are discussed in the relevant specific sections
throughout this final rule with comment period).
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 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.
During the APC Panel's March 2007 meeting, we presented median cost
and utilization data for services furnished during the period of
January 1, 2006, through September 30, 2006, about which we had
concerns or about which the public had raised concerns regarding their
APC assignments, status indicator assignments, or payment rates. The
discussions of most service-specific issues, the APC Panel
recommendations if any, and our proposals for CY 2008 are contained
principally in sections III.C. and III.D. of this final rule with
comment period.
In addition to the assignment of specific services to APCs that we
discussed with the APC Panel, we also identified APCs with 2 times
violations that were not specifically discussed with the APC Panel but
for which we proposed changes to their HCPCS codes' APC assignments in
Addendum B to the proposed rule. In these cases, to eliminate a 2 times
violation or to improve clinical and resource homogeneity, we proposed
to reassign the codes to APCs that contained services that were similar
with regard to both their clinical and resource characteristics. We
also proposed to rename existing APCs, discontinue existing APCs, or
create new clinical APCs to complement proposed HCPCS code
reassignments. In many cases, the proposed HCPCS code reassignments and
associated APC reconfigurations for CY 2008 included in the proposed
rule were related to changes in median costs of services and APCs
resulting from our proposed bundling approach for CY 2008, as discussed
in section II.A.4.c. of the proposed rule. We also proposed changes to
the status indicators for some codes that were not specifically and
separately discussed in the proposed rule. In these cases, we proposed
to change the status indicators for some codes because we believed that
another status indicator more accurately described their payment status
from an OPPS perspective based on the policies that we proposed for CY
2008.
Addendum B to the proposed rule identified with a comment indicator
``CH'' those HCPCS codes for which we proposed a change to the APC
assignment or status indicator as assigned in the April 2007 Addendum B
update (via Change Request 5544, Transmittal 1209, dated March 21,
2007). Addendum B to this final rule with comment period identifies
with the ``CH'' comment indicator the final CY 2008 changes compared to
the codes' status as reflected in the October 2007 Addendum B update
(via Change Request 5718, Transmittal 1336, dated September 14, 2007).
We received many public comments regarding the proposed APC and
status indicator assignments for CY 2008 for specific HCPCS codes.
These are discussed mainly in sections III.C. and III.D. of this final
rule with comment period, and the final action for CY 2008 related to
each HCPCS code is noted in those sections. We also received a number
of specific comments about some of the procedures assigned to APCs that
may have violated the 2 times rule. These comments are addressed
elsewhere in the final rule with comment period, primarily in sections
related to the types of procedures that were the subject of the
comments.
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. Taking into account the APC changes
that we proposed for CY 2008 based on the APC Panel recommendations
discussed mainly in sections III.C. and III.D. of this final rule with
comment period, the proposed changes to status indicators and APC
assignments as identified in Addendum B to the proposed rule, and the
use of CY 2006 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. 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, we refer readers to
the April 7, 2000 OPPS final rule with comment period (65 FR 18457).
Table 28 of the proposed rule listed the APCs that we proposed to
exempt from the 2 times rule for CY 2008 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 2008. The
median costs for hospital outpatient services for these and all other
APCs that were used in the development of the proposed rule can

[[Page 66694]]

be found on the CMS Web site at: http://www.cms.hhs.gov.
We did not receive any general public comments related to the list
of proposed exceptions to the 2 times rule, specifically those listed
in Table 28 of the proposed rule. For the proposed rule, the list of
APCs excepted from the 2 times rule were based on data from January 1,
2006, through September 30, 2006. For this final rule with comment
period, we used data from January 1, 2006 through December 1, 2006.
Thus, after responding to all of the comments on the proposed rule and
making changes to APC assignments based on the comments received, we
analyzed the full CY 2006 data to identify APCs with 2 times rule
violations. In contrast to previous years, for CY 2008 we have
calculated a significant number of APC medians through customized
methodologies, such as device-dependent APC, APCs to which nuclear
medicine procedures are assigned, and Visit APCs, that are impacted by
the Extended Assessment and Management Composite APCs. Therefore, for
this final rule with comment period we assessed the HCPCS code-specific
median costs for HCPCS codes that are part of these customized APC
median cost calculations to accurately identify 2 times violations. We
also have some APCs where the concept of a 2 times violation is not
relevant, typically those set based on multiple claims, such as APC
0381 for single allergy tests and APC 0375 for ancillary services when
a hospital outpatient dies. Table 15 below has been revised relative to
prior years to remove APCs where a 2 times violation is not a relevant
concept and to identify final APCs, including those with customized
median cost methodologies, with 2 times violations.
Based on our final data, we found that there were 21 APCs with 2
times rule violations. We applied the criteria as described earlier to
finalize the APCs that are exceptions to the 2 times rule for CY 2008.
After consideration of all public comments received on the proposed
rule and the careful review of the CY 2006 claims data for the full
year, we are finalizing the list of APCs exempted from the 2 times
rule. The final list of APCs that are exceptions to the 2 times rule
for CY 2008 is displayed in Table 15 below.

Table 15.--Final APC Exceptions to the 2 Times Rule for CY 2008
------------------------------------------------------------------------
APC APC title
------------------------------------------------------------------------
0043............................ Closed Treatment Fracture Finger/Toe/
Trunk.
0058............................ Level I Strapping and Cast
Application.
0060............................ Manipulation Therapy.
0080............................ Diagnostic Cardiac Catheterization.
0093............................ Vascular Reconstruction/Fistula Repair
Without Device.
0105............................ Repair/Revision/Removal of Pacemakers,
AICDs, or Vascular Devices.
0106............................ Insertion/Replacement of Pacemaker
Leads and/or Electrodes.
0141............................ Level I Upper GI Procedures.
0235............................ Level I Posterior Segment Eye
Procedures.
0251............................ Level I ENT Procedures.
0256............................ Level V ENT Procedures.
0260............................ Level I Plain Film Except Teeth.
0303............................ Treatment Device Construction.
0323............................ Extended Individual Psychotherapy.
0330............................ Dental Procedures.
0409............................ Red Blood Cell Tests.
0432............................ Health and Behavior Services.
0437............................ Level II Drug Administration.
0438............................ Level III Drug Administration.
0604............................ Level 1 Hospital Clinic Visits.
0688............................ Revision/Removal of Neurostimulator
Pulse Generator Receiver.
------------------------------------------------------------------------

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.
We note that the cost bands for New Technology APCs range from $0
to $50 in increments of $10, from $50 to $100 in increments of $50,
from $100 through $2,000 in increments of $100, and from $2,000 through
$10,000 in increments of $500. These increments, which are in two
parallel sets of New Technology APCs, one with status indicator ``S''
and the other with status indicator ``T,'' allow us to price new
technology services more appropriately and consistently.
2. Movement of Procedures From New Technology APCs to Clinical APCs
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 cost bands, reassign the procedure or
service to a different New Technology APC that most appropriately
reflects its cost.
At its March 2007 meeting, the APC Panel recommended that CMS keep
services in New Technology APCs until sufficient data are available to
assign them to clinical APCs, but for no longer than 2 years. We note
that because of the potential for quarterly assignment of new services
to New Technology APCs and the 2-year time lag in claims data for an
OPPS update (that is, CY 2006 data are utilized for this CY 2008 OPPS
rulemaking cycle), if we were to accept the APC Panel's recommendation,
we would always reassign services from New Technology to clinical APCs
based on 1 year or less of claims data. For example, if a new service
was first assigned to a New Technology APC in July 2006, we would have
6 months of data for purposes of CY 2008 rulemaking but, in order to
ensure that the service was in a New Technology APC for no longer than
2 years, we would need to move the service to a clinical APC for CY
2008. While we might have sufficient claims data from 6 months of CY
2006 to support a proposal for such a reassignment for CY 2008, we are
not confident that this would always be the case for all new services,
given our understanding of the dissemination of new technology
procedures into medical practice and the diverse characteristics of new
technology services that treat different clinical conditions.
Therefore, we did not accept the APC Panel's recommendation for CY 2008
because we believed that accepting the recommendation would limit our
ability to individually assess the OPPS treatment of each new
technology service in the context of available hospital claims data. We
are particularly concerned about continuing to provide appropriate
payment for low volume new technology services that may be

[[Page 66695]]

expected to continue to be low volume under the OPPS due to the
prevalence of the target conditions in the Medicare population. We
appreciate the APC Panel's thoughtful discussion of new technology
services, and we agree with the APC Panel that it should be our
priority to regularly reassign services from New Technology APCs to
clinical APCs under the OPPS, so that they are treated like most other
OPPS services for purposes of ratesetting once hospitals have had
sufficient experience with providing and reporting the new services.
Rather, consistent with our current policy, for CY 2008 we proposed to
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. The flexibility associated with this policy
allows us to move a service from a New Technology APC in less than 2
years if sufficient data are available. It also allows us to retain a
service in a New Technology APC for more than 2 years if sufficient
hospital claims data upon which to base a decision for reassignment
have not been collected.
We received a number of public comments on our OPPS treatment of
New Technology services. A summary of the public comments and our
responses follow.
Comment: Several commenters requested that CMS reconsider
maintaining a new service in a New Technology APC for a minimum of at
least 2 years, to ensure sufficient claims data, before assigning it to
a clinical APC. These commenters were concerned that reassigning a new
service from a New Technology APC to a clinical APC in less than 2
years may result in the collection of inaccurate claims data because
integration of new technologies can be slow and hospitals need time to
update their chargemasters to appropriately include charges that are
related to the actual costs of the new service. Other commenters
reported that while a new technology service may increase hospital
outpatient costs, it could ultimately replace more invasive inpatient
procedures that are more costly for the Medicare program.
In addition, several commenters recommended that CMS place all new
HCPCS codes for new services in New Technology APCs, rather than
assigning them directly to clinical APCs, until claims data are
available in order to ensure access to these services. Some commenters
also recommended that CMS consider alternatives to moving procedures
from New Technology APCs to clinical APCs that would prevent excessive
reductions in payment, including moving procedures to different APCs,
utilizing external data for ratesetting, or maintaining procedures in
their current New Technology APCs.
Response: As we have stated previously, we generally keep a
procedure in the New Technology APC to which it is initially assigned
until we have collected sufficient claims data 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. This
policy would allow 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, and also allows us to move a
service from a New Technology APC in less than 2 years if sufficient
claims data are available. To retain a new service under a New
Technology APC for a minimum of at least two years, especially for a
service for which we have significant claims data, may result in
inappropriate payment of the service. We want to ensure appropriate
allocation of Medicare expenditures, and for a service that has been
placed in a New Technology APC with significant claims data, we believe
it is in the best interest of both the Medicare program and the
beneficiary to reassign the service to an appropriate clinical APC
based on clinical coherence and resource similarity.
In response to the different suggestions for transitioning new
technology services from New Technology APCs to clinical APCs to
prevent excessive reductions in payment, because we generally move new
services from New Technology APCs to clinical APCs only when we have
adequate data upon which to base a decision, we do not believe a
transition would commonly be necessary in order to provide appropriate
payment for the services based on their hospital costs. We have no need
to utilize external data in these cases where we believe our claims
data, developed according to the standard OPPS ratesetting methodology,
are adequate to reassign the new services to clinical APCs. In a few
past situations, we have moved services from one New Technology APC to
another New Technology APC with a lower payment rate if we believed
that our data were not fully developed to support a final clinical APC
assignment, but we expect these cases to continue to be rare. In
addition, all reassignments of services out of New Technology APCs are
proposed during the annual rulemaking cycle, allowing the opportunity
for public comment prior to their movement.
When evaluating new services for payment under the OPPS, we use all
information available to us regarding the clinical characteristics of
the procedures and the expected hospital resource costs. We reserve New
Technology APC assignments for those services where we do not believe
there is an appropriate clinical APC for the new service. In many
cases, new HCPCS codes describe services that are similar to existing
services that are paid under the OPPS and for which we have robust cost
data from hospital claims. We continue to believe that it is
appropriate to assign similar new and existing services to the same
clinical APC in such cases. We follow the claims data closely and
carefully review the New Technology and clinical APC assignments of
relatively new OPPS services for each update year when new claims data
become available. In addition, the OPPS treatment of all new services
is open to public comment in the annual OPPS/ASC rule (either proposed
or final with comment period) that follows the service's implementation
under the OPPS.
After consideration of all public comments received, we are
finalizing our CY 2008 proposal, without modification, to maintain a
new service in a New Technology APC until we gather sufficient claims
data to assign the service to a clinically appropriate APC. Thus, a
service can be assigned to a New Technology APC for more than 3 years
if we have insufficient claims data to reassign the service to a
clinical APC, or it could be reassigned to a clinical APC in less than
2 years if we have adequate claims data. We will continue to assess new
services for potential assignment to clinical APCs before assigning
them to New Technology APCs.
The procedures presented below in sections III.C.2.a., III.C.2.b.,
and III.C.2.c. represent services assigned to New Technology APCs for
CY 2007 for which we stated in the CY 2008 proposed rule that we
believed we had sufficient data to propose their reassignment to
clinically appropriate APCs for CY 2008.

[[Page 66696]]

a. Positron Emission Tomography (PET)/Computed Tomography (CT) Scans
(APC 0308)
From August 2000 through April 2005, we paid separately for PET and
CT scans. In CY 2004, the payment rate for nonmyocardial PET scans was
$1,450, while it was $193 for typical diagnostic CT scans. Prior to CY
2005, nonmyocardial PET and the PET portion of PET/CT scans were
described by G-codes for billing to Medicare. Several commenters to the
November 15, 2004 final rule with comment period (69 FR 65682) urged
that we replace the G-codes for nonmyocardial PET and PET/CT scan
procedures with the established CPT codes. These commenters stated that
movement to the established CPT codes would greatly reduce the burden
on hospitals of tracking and billing the G-codes which were not
recognized by other payers and would allow for more uniform hospital
billing of these scans. We agreed with the commenters that movement
from the G-codes to the established CPT codes for nonmyocardial PET and
PET/CT scans would allow for more uniform billing of these scans. As a
result of a Medicare national coverage determination (Publication 100-
3, Medicare Claims Processing Manual section 220.6) that was made
effective January 28, 2005, we discontinued numerous G-codes that
described myocardial PET and nonmyocardial PET procedures and replaced
them with the established CPT codes. The CY 2005 payment rate for
concurrent PET/CT scans using the CPT codes 78814 (Tumor imaging,
positron emission tomography (PET) with concurrently acquired computed
tomography (CT) for attenuation correction and anatomical localization;
limited area (eg, 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); and 78816 (Tumor imaging, positron emission
tomography (PET) with concurrently acquired computed tomography (CT)
for attenuation correction and anatomical localization; whole body) was
$1,250, which was $100 higher than the payment rate for PET scans
alone. These PET/CT CPT codes were placed in New Technology APC 1514
(New Technology--Level XIV ($1,200-$1,300)) for CY 2005.
We continued with these coding and payment methodologies in CY
2006. For CY 2007, while we proposed to reassign both PET and PET/CT
scans to the same new clinical APC, we finalized a policy that
reassigned conventional PET procedures to APC 0308 (Non-Myocardial
Positron Emission Tomography (PET) Imaging) with a final median cost of
approximately $850. We also reassigned PET/CT services to a different
New Technology APC for CY 2007, specifically New Technology APC 1511
(New Technology--Level XI ($900-$1000)), thereby maintaining the
historical payment differential of about $100 between PET and PET/CT
procedures. Furthermore, we stated in the CY 2007 OPPS/ASC final rule
with comment period (71 FR 68022) that we would wait for a full year of
CPT-coded claims data prior to assigning the PET/CT services to a
clinical APC and that maintaining a modest payment differential between
PET and PET/CT procedures was warranted for CY 2007.
For CY 2008, we proposed the reassignment of concurrent PET/CT
scans, specifically CPT codes 78814, 78815, and 78816, to a clinical
APC because we believed we had adequate claims data from CY 2006 upon
which to determine the median cost of performing these procedures.
Based on our proposed rule analysis of approximately 117,000 CY 2006
single claims, the median cost of PET/CT scans was approximately
$1,094. We then examined approximately 34,000 single claims from CY
2006 for nonmyocardial PET scans, as described by CPT codes 78608,
78811, 78812, and 78813, and found that the median cost was also
approximately $1,094. In the proposed rule, we noted that a comparison
of the median cost of PET/CT scans with the median cost of
nonmyocardial PET scans, as derived from CY 2006 claims data,
demonstrated that these costs were almost the same, thereby reflecting
significant hospital resource equivalency between the two types of
services. This result was not unexpected because many newer PET
scanners also have the capability of rapidly acquiring CT images for
attenuation correction and anatomical localization, sometimes with
simultaneous image acquisition. The median costs for both PET and PET/
CT scans were significantly higher for CY 2008 than for CY 2007 due to
our CY 2008 proposal to package payment for all diagnostic
radiopharmaceuticals as described in section II.A.4.c.(5) of this final
rule with comment period that would package payment for the costs of
the radiopharmaceuticals utilized similarly into the payment for both
PET and PET/CT scans. As stated in the proposed rule (72 FR 42705), we
believe that our claims data accurately reflected the comparable
hospital resources required to provide nonmyocardial PET and PET/CT
procedures, and that the scans had obvious clinical similarity as well.
Therefore, for CY 2008 we proposed to reassign the CPT codes for PET/CT
scans to the clinical APC where nonmyocardial PET scans were also
assigned, specifically APC 0308, with a proposed median cost of
approximately $1,094.
We noted in the proposed rule (72 FR 42705) that we had been paying
separately for fluorodeoxyglucose (FDG), the radiopharmaceutical
described by HCPCS code A9552 (F18 fdg), that is commonly administered
during nonmyocardial PET and PET/CT procedures. For CY 2008, consistent
with the proposed packaging approach as discussed in section
II.A.4.c.(5) of the proposed rule, we proposed to package payment for
the diagnostic radiopharmaceutical FDG into payment for the associated
PET and PET/CT procedures. Because FDG was the most commonly used
radiopharmaceutical for both PET and PET/CT scans and our single claims
for these procedures included FDG more than 80 percent of the time, the
packaging of this radiopharmaceutical fully maintained the clinical and
resource homogeneity of the reconfigured APC 0308 that we proposed.
We received a number of public comments concerning our proposed
reassignment of concurrent PET/CT scans for CY 2008. A summary of the
public comments and our response follow.
Comment: Several commenters thanked CMS for proposing to increase
the payment rate for concurrent PET/CT scans from the CY 2007 payment
of approximately $950 to approximately $1,107 for CY 2008 and ensuring
that these scans are assigned to a clinical APC with other services
with similar median costs. However, these commenters were concerned
that the proposed payment rate for the PET/CT scans for CY 2008 would
be inadequate if the payment for the diagnostic radiopharmaceutical
used in these procedures, specifically FDG, was packaged into the
payment for the scans. Other commenters questioned the validity of the
claims used to set the proposed payment rate for the concurrent PET/CT
scan procedures. They indicated that the proposal to assign concurrent
PET/CT scans from a New Technology APC to clinical APC 0308 was
inappropriate and unsupported by reliable data. They believed that CMS
did not have sufficient or accurate claims data to justify movement of
the concurrent PET/CT services from New Technology APC 1514 to clinical
APC 0308. Several

[[Page 66697]]

commenters suspected that the claims used to set the proposed payment
rate were flawed because they believed that many hospitals had not yet
updated their chargemasters to distinguish charges for the conventional
nonmyocardial PET scans from charges for concurrent PET/CT scans. One
commenter indicated that if CMS were to blend its own external data
from the refined direct cost inputs used to establish the practice
expense relative value units under the MPFS with OPPS claims data to
establish a payment rate for PET/CT, the payment rate would be
significantly higher than the proposed payment. Several commenters
claimed that that proposed payment rate for the concurrent PET/CT
procedures failed to recognize the differences in technology between
the conventional nonmyocardial PET procedures and the concurrent PET/CT
scans. They indicated that concurrent PET/CT scans used more advanced
technology, resulting in greater capital equipment costs. Many
commenters recommended that CMS continue to assign these PET/CT scans
to a New Technology APC for one more year while CMS collects additional
data on the cost of these procedures. Conversely, several commenters
strongly urged CMS to assign the concurrent PET/CT scans to a separate
clinical APC, distinct from the APC for conventional PET scans, to
better reflect the incremental cost differences associated with this
technology.
Response: As stated above, CPT codes 78814, 78815, and 78816 were
new codes in CY 2005 and were assigned to New Technology APC 1514 with
a payment rate of $1,250. We continued with this same APC assignment in
CY 2006. In CY 2007, we assigned these services to a different New
Technology APC, specifically New Technology APC 1511, with a payment
rate of $950 in order to maintain the historical payment differential
of about $100 between the conventional PET and concurrent PET/CT
procedures. For CY 2007 ratesetting, we had only 9 months of claims
data and public commenters were concerned that these data did not yet
reflect updated and appropriate hospital charges specifically for PET/
CT scans. Therefore, concurrent PET/CT scan procedures have been
assigned to a New Technology APC under the OPPS since CY 2005, a period
of almost 3 years.
As we have stated in other sections of this final rule with comment
period, such as in section III.D., comparisons between the MPFS and
OPPS payments for services are not appropriate because the MPFS applies
a very different methodology for establishing the payment for the
physician's office practice expenses associated with a procedure, based
on direct cost inputs. Consequently, the application of the different
methodologies results in different payment amounts in the two settings.
As noted previously, under the OPPS, we retain services within New
Technology APC groups where they are assigned according to our
estimates of their costs until we gather sufficient claims data to
enable us to assign the services to clinically appropriate APCs based
on hospital resource costs as calculated from claims. We disagree with
the commenters' argument that we have insufficient claims data to
justify movement of concurrent PET/CT scans from New Technology APC
1511 to clinical APC 0308. For this final rule with comment period, our
updated claims data for concurrent PET/CT scans showed a total of over
149,000 services performed, with about 126,000 single claims available
for ratesetting. The median cost for PET/CT scans alone was
approximately $1,076. Similarly, we had over 40,000 total claims for
conventional PET scans, with approximately 35,000 single claims
available for ratesetting. The median cost for conventional PET scans
alone was approximately $1,029, very close to the median cost of PET/CT
scans. Based on their common clinical characteristics and the hospital
resource similarity observed in our claims data for conventional PET
and concurrent PET/CT scans, we believe that our claims data are
sufficiently robust to support reassignment of PET/CT scans to the same
clinical APC as conventional PET scans. The final median cost of APC
0308 of approximately $1,044 appropriately reflects the similar costs
of both conventional PET and concurrent PET/CT scans.
After consideration of the public comments received, we are
finalizing our CY 2008 proposal, without modification, to assign
concurrent PET/CT scan procedures described by CPT codes 78814, 78815,
and 78816 to clinical APC 0308, with a CY 2008 median cost of
approximately $1,044, which includes packaged costs for diagnostic
radiopharmaceuticals used in the scans. For further discussion of our
final CY 2008 payment policy for diagnostic radiopharmaceuticals, refer
to section II.A.4.c.(5) of this final rule with comment period.
b. IVIG Preadministration-Related Services (APC 0430)
In CY 2006, we created the temporary HCPCS code G0332 (Services for
intravenous infusion of immunoglobulin prior to administration (this
service is to be billed in conjunction with administration of
immunoglobulin)). Based on our estimate of the costs of this service in
comparison with other services, HCPCS code G0332 was assigned to New
Technology APC 1502 (New Technology--Level II, $50-$100), with a
payment rate of $75 effective January 1, 2006. In the CY 2007 OPPS/ASC
final rule with comment period, we indicated our belief that it was
appropriate to continue the temporary IVIG preadministration-related
services payment through HCPCS code G0332 and its continued assignment
to New Technology APC 1502 for CY 2007, in order to help ensure
continued patient access to IVIG (71 FR 68092).
For CY 2008, we proposed to continue to provide separate payment
for IVIG preadministration-related services through the assignment of
HCPCS code G0332 to a clinical APC. This service has been assigned to a
New Technology APC under the OPPS for 2-full years. As noted
previously, under the OPPS, we retain services within New Technology
APC groups where they are assigned according to our estimates of their
costs until we gather sufficient claims data to enable us to assign the
services to clinically appropriate APCs based on hospital resource
costs as calculated from claims. According to our analysis of the
hospital outpatient claims data, we noted we had adequate claims data
from CY 2006 upon which to determine the median cost of performing IVIG
preadministration related services and to reassign HCPCS code G0332 to
an appropriate clinical APC for CY 2008. For the CY 2008 OPPS/ASC
proposed rule, our claims data for this high volume service showed a
total of over 49,000 services performed, with about 48,000 single
claims available for ratesetting. Therefore, we proposed to reassign
HCPCS code G0332 to new clinical APC 0430 (Drug Preadministration--
Related Services) for CY 2008, with a proposed median cost of
approximately $39, where it would be the only service assigned to the
APC at this time.
As noted in the proposed rule (72 FR 42705), IVIG
preadministration-related services are always provided in conjunction
with other separately payable services such as drug administration
services, and thus are well suited for packaging into the payment for
the separately payable services. While we did not make a determination
about the appropriateness of continuing separate OPPS payment for HCPCS
code G0332 after CY 2008, we stated in the proposed rule (72 FR

[[Page 66698]]

42705) that we would consider packaging payment for HCPCS code G0332 in
future years if we determined that separate payment was no longer
warranted. We intend to reevaluate the appropriateness of separate
payment for IVIG preadministration-related services for the CY 2009
OPPS rulemaking cycle, especially as we explore the potential for
greater packaging and possible encounter-based or episode-based OPPS
payment approaches.
We received a number of public comments on our CY 2008 proposed
payment for IVIG preadministration-related services. A summary of the
public comments and our response follow.
Comment: Many commenters questioned the accuracy and reliability of
the CY 2006 hospital outpatient claims data that were used to set the
proposed payment rate for HCPCS code G0332. Some commenters indicated
that because HCPCS code G0332 was a new code for CY 2006, it was
clearly not well understood by many hospitals, and as a result, it took
some time for hospitals to appropriately determine the cost and the
reported charge for the service. Many commenters stated that the
proposed payment rate of $39 was likely based on flawed data, and as
such, the data should not be used as a basis for reassigning HCPCS code
G0332 from New Technology APC 1502 to APC 0430. These commenters
believed that the low payment rate was due to underreporting of this
service because their findings revealed that hospitals reported HCPCS
code G0332 on only 49 percent of the claims for IVIG administration.
One commenter believed that, based on an analysis of its hospital
system's claims data for HCPCS code G0332, that claims data were
distorted due to a number of factors, including revenue code selections
by hospitals, differences in the CCRs mapped to those revenue codes,
and the actual dollar charges reported by hospitals for this service.
Several commenters explained that hospitals set widely varying charges
for HCPCS code G0332, and some of these commenters believed that it
would be appropriate to exclude from the ratesetting process claims
where the reported charge is equal to or less than the $75 payment
rate.
Many commenters believed that reducing this add-on payment would
have a negative impact on patient access to care, considering the short
supply and high costs of acquiring IVIG. Several commenters suggested
that CMS should maintain the $75 add-on payment for HCPCS code G0332 to
maintain parity with the proposed $71 MPFS payment rate for this
service. These commenters asserted that establishing a difference in
payment for HCPCS code G0332 across systems could drive patients from
one site of service to another. They further believed that maintaining
payment parity for the service at comparable levels across these sites
of service would mitigate potential disruptions to the sites of service
where patients are now receiving care and would also allow the choice
of site of care to be dictated by particular patient circumstances.
Several commenters commended CMS for continued support in extending the
add-on payment for HCPCS code G0332; however, they recommended that the
$75 separate payment under New Technology APC 1502 be continued for
another year. Alternatively, several commenters requested that CMS
reassign HCPCS code G0332 to a clinical APC whose payment rate is
equivalent to $75 to ensure that hospitals would continue to be paid
appropriately for the full range of costs incurred in furnishing IVIG
to their patients and to help mitigate the possible adverse financial
impact on hospitals acquiring IVIG that could result from a lower
payment for preadministration-related services.
Response: Just as our payment rates are updated annually, so too
are billing codes (that is, ICD-9-CM, Level II HCPCS, and CPT). Annual
updates to the HCPCS coding system (whether through addition of a new
code, revision of a code descriptor, or deletion of a code), are a
well-established and predictable process that has been in place for
some time. Hospitals are well aware of this practice because they have
successfully implemented these changes each year.
The MPFS applies a distinct methodology for establishing the
payment for the physician's office practice expenses associated with a
procedure that differs significantly from the OPPS methodology which
generally pays based on relative payment weights calculated from
hospitals' costs as determined from claims data. The application of the
different methodologies results in different payment amounts in the two
settings. Therefore, comparisons between OPPS and MPFS payments are not
appropriate.
In determining the CY 2008 final rule median cost of approximately
$37 for HCPCS code G0332, we used the most recent claims data available
under the OPPS, specifically CY 2006 claims. According to our standard
OPPS methodology as described in section II.A.2. of this final rule
with comment period, we excluded claims for HCPCS code G0332 where the
line-item charge was exactly equal to the CY 2006 payment rate, a
process we followed for all OPPS services. We did not remove claims
whose charges were less than $75 because hospitals are free to set
their own charges for individual services based on their own judgment.
Under the OPPS, the current payment methodology for IVIG treatments
consists of three components, which include payment for the drug itself
(described by a HCPCS J code), administration of the IVIG product
(described by one or more CPT codes), and the preadministration-related
services (HCPCS code G0332). As stated previously, this service has
been assigned to New Technology APC 1502 under the OPPS for 2 full
years. Under the OPPS, we retain services within New Technology APC
groups where they are assigned according to our estimates of their
costs until we gather sufficient claims data to enable us to assign the
services to clinically appropriate APCs based on hospital resource
costs as calculated from claims. We do not agree with the commenters'
argument that underreporting of this service in CY 2006 is a compelling
rationale for delaying reassignment to a clinical APC. Our CY 2006
claims data include approximately 59,000 total claims for HCPCPS code
G0332, and we have no reason to believe those claims do not accurately
represent the costs to hospitals of providing the service in CY 2006.
We believe that the approximately 57,000 single claims used to set the
CY 2008 median cost of IVIG preadministration-related services at
approximately $37 accurately reflect hospitals' costs for the service
and that the final CY 2008 payment rate for HCPCS code G0332 is
adequate to ensure access to IVIG therapy.
After consideration of the public comments received, we are
finalizing our CY 2008 proposal, without modification, to assign HCPCS
code G0332 to APC 0430, with a median cost of approximately $37. As we
stated previously, we will consider packaging payment for HCPCS code
G0332 in future years if we determine separate payment is no longer
warranted. We intend to reevaluate the appropriateness of separate
payment for IVIG preadministration-related services for the CY 2009
OPPS rulemaking cycle, especially as we explore the potential for
greater packaging and possible encounter-based or episode-based OPPS
payment approaches.

[[Page 66699]]

c. Other Services in New Technology APCs
Other than the concurrent PET/CT and IVIG preadministration-related
new technology services discussed in sections III.C.2.a. and III.C.2.b.
of this final rule with comment period, there are five procedures
currently assigned to New Technology APCs for CY 2007 for which we
believed we also had data that were adequate to support their
reassignment to clinical APCs. For CY 2008, we proposed to reassign
these procedures to clinically appropriate APCs, applying their CY 2006
claims data to develop their clinical APC median costs upon which
payments would be based. These procedures and their proposed APC
assignments were displayed in Table 29 of the proposed rule. This table
has been reproduced as Table 16 at the end of this section and updated
with the final status indicators, APC assignments, and median costs of
these services.
(1) Breast Brachytherapy Catheter Implantation (APC 0648)
For CY 2008, we proposed to reassign CPT code 19298 (Placement of
radiotherapy afterloading brachytherapy catheters (multiple tube and
button type) into the breast for interstitial radioelement application
following (at the time of or subsequent to) partial mastectomy,
includes imaging guidance) from New Technology APC 1524 (New
Technology--Level XXIV ($3,000-$3,500)) to APC 0648 (Level IV Breast
Surgery), with a proposed median cost of approximately $3,417.
We received several public comments concerning the proposed
reassignment of CPT code 19298. A summary of the public comments and
our response follow.
Comment: Several commenters agreed with CMS's proposal to reassign
CPT code 19298 to APC 0648. They acknowledged that this proposed
reassignment of CPT code 19298 would place the three surgical codes for
the placement of catheters for breast brachytherapy in the same APC,
that is, CPT codes 19296 (Placement of radiotherapy afterloading
balloon catheter into the breast for interstitial radioelement
application following partial mastectomy, includes imaging guidance; on
date separate from partial mastectomy); 19297 (Placement of
radiotherapy afterloading balloon catheter into the breast for
interstitial radioelement application following partial mastectomy,
includes imaging guidance; concurrent with partial mastectomy (List
separately in addition to code for primary procedure)); and 19298.
Response: We thank the commenters for their input and support.
Because of its clinical and resource characteristics similar to those
other procedures also assigned to APC 0648, we are finalizing our CY
2008 proposal, without modification, to reassign CPT code 19298 to APC
0648, with a median cost of approximately $3,560.
(2) Preoperative Services for Lung Volume Reduction Surgery (LVRS)
(APCs 0209 and 0213)
As illustrated in Table 16 below, CY 2008, we proposed to reassign
HCPCS codes G0302 (Pre operative pulmonary surgery services for
preparation for LVRS, complete course of services, to include a minimum
of 16 days of services) and G0303 (Pre-operative pulmonary surgery
services for preparation for LVRS, 10 to 15 days of services) to APC
0209 (Level II Extended EEG and Sleep Studies). For CY 2008, we also
proposed to reassign HCPCS codes G0304 (Pre-operative pulmonary surgery
services for preparation for LVRS, 1 to 9 days of services) and G0305
(Post-discharge pulmonary surgery services after LVRS, minimum of 6
days of services) to APC 0213 (Level I Extended EEG and Sleep Studies).
We did not receive any public comments on these two proposals and,
therefore, we are finalizing our CY 2008 proposals for HCPCS codes
G0302, G0303, G0304, and G0305 without modification. Specifically,
HCPCS codes G0302 and G0303 are assigned to APC 0209, with a CY 2008
median cost of approximately $710. HCPCS codes G0304 and G0305 are
assigned to APC 0213, with a CY 2008 median cost of approximately $145.

Table 16.--Final CY 2008 APC Reassignments of Other New Technology Procedures to Clinical APCs
----------------------------------------------------------------------------------------------------------------
CY 2007 APC Final CY
HCPCS code Short descriptor CY 2007 SI CY 2007 APC payment Final CY Final CY 2008 APC
rate 2008 SI 2008 APC median cost
----------------------------------------------------------------------------------------------------------------
19298.......... Place breast rad S......... 1524 $3,250 T........... 0648 $3,560
tube/caths.
G0302.......... Pre-op service S......... 1509 750 S........... 0209 710
LVRS complete.
G0303.......... Pre-op service S......... 1507 550 S........... 0209 710
LVRS 10-15 dos.
G0304.......... Pre-op service S......... 1504 250 S........... 0213 145
LVRS 1-9 dos.
G0305.......... Post op service S......... 1504 250 S........... 0213 145
LVRS min 6.
----------------------------------------------------------------------------------------------------------------

D. APC-Specific Policies

1. Cardiac Procedures
a. Cardiac Computed Tomography and Computed Tomographic
Angiography(APCs 0282 and 0383)
Cardiac computed tomography (CCT) and cardiac computed tomography
angiography (CCTA) are noninvasive diagnostic procedures that assist
physicians in obtaining detailed images of coronary blood vessels. The
data obtained from these procedures can be used for further diagnostic
evaluations and/or appropriate therapy for coronary patients.
Currently, there are eight Category III CPT codes that describe CCT
and CCTA procedures. The CPT codes, which were shown in Table 31 of the
proposed rule, are 0144T through 0151T. These codes were new for CY
2006. In the CY 2006 OPPS final rule with comment period, we assigned
the CCT and CCTA procedure codes to interim APCs, which were subject to
public comment. In CY 2006, the CCT and CCTA procedure codes were
assigned to four APCs, specifically, APC 0282 (Miscellaneous
Computerized Axial Tomography), APC 0376 (Level II Cardiac Imaging),
APC 0377 (Level III Cardiac Imaging), and APC 0398 (Level I Cardiac
Imaging). We did not receive any public comments on the interim APC
assignments.
In the CY 2007 OPPS/ASC proposed rule, we proposed to retain the
existing APC assignments for the CCT and CCTA procedure codes. We
received several public comments on the proposed APCs assignments,
which we addressed in the CY 2007 OPPS/ASC final rule with comment
period (71 FR 68038 and 68039). Several of the commenters requested
that we either not assign the CCT and CCTA procedures to any APCs or
assign them to appropriate New Technology APCs. In addition, some
commenters were also concerned that CCT and CCTA procedures were not

[[Page 66700]]

clinically homogeneous with other procedures assigned to APCs 0282,
0376, 0377, and 0398, noting that the last three APCs previously
contained only nuclear medicine cardiac imaging procedures.
In the CY 2007 OPPS/ASC final rule with comment period (71 FR
68038), we indicated our belief that the clinical characteristics and
expected resource use associated with the CCT and CCTA procedures were
sufficiently similar to the other procedures assigned to APCs 0282,
0376, 0377, and 0398 that we believed those APC assignments were
appropriate. While several of those APCs also contained nuclear
medicine imaging procedures, we had never designated those APCs as
specific to nuclear medicine procedures. Therefore, for CY 2007, we
continued with the CY 2006 APC assignments for CPT codes 0144T through
0151T. We did not agree with the commenters that use of CT and CTA for
cardiac studies was a new technology for which we had no relevant OPPS
cost information that could be used to estimate hospital resources for
these procedures. We also believed these services could be potentially
covered hospital outpatient services, so that it would not be
appropriate for us to depart from our standard OPPS policy and not
assign them to APCs. As we indicated in our CY 2007 OPPS/ASC proposed
rule (71 FR 49549), some Category III CPT codes describe services that
we have determined to be similar in clinical characteristics and
resource use to HCPCS codes assigned to existing clinical APCs. In
these instances, we may assign the Category III CPT code to the
appropriate clinical APC. Other Category III CPT codes describe
services that we have determined 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 to one of several
nonseparately payable status indicators, including ``N,'' ``C,'' ``B,''
or ``E,'' which we believe is appropriate for the specific code. As we
noted in the CY 2007 OPPS/ASC final rule with comment period, we
believed that CCT and CCTA procedures were appropriate for separate
payment under the OPPS should local contractors provide coverage for
these procedures and, therefore, they warranted status indicator and
APC assignments that would provide separate payment under the OPPS (71
FR 68038).
At its March 2007 meeting, the APC Panel recommended that CMS work
with stakeholders to determine more appropriate APC placements for CCT
and CCTA procedures. The APC Panel made no specific recommendations
regarding the appropriate APC assignments for these services, although
several different clinical APC configurations were discussed, along
with the alternative of assigning these procedures to New Technology
APCs.
We note that we generally meet with interested organizations
concerning their views about OPPS payment policy issues with respect to
specific technologies or services. Following the publication of the CY
2007 OPPS/ASC final rule with comment period, we received such
information from interested individuals and organizations regarding the
clinical and facility resource characteristics of CCT and CCTA
procedures. In the CY 2008 OPPS/ASC proposed rule (72 FR 42711), we
reiterated that we would consider the input of any individual or
organization to the extent allowed by Federal law, including the
Administrative Procedure Act (APA) and the FACA. We explained that we
establish the OPPS payment rates for services through regulations,
during our annual rulemaking cycle. We are required to consider the
timely comments of interested organizations, establish the payment
policies for the forthcoming year, and respond to the timely comments
of all public commenters in the final rule in which we establish the
payments for the forthcoming year.
During the development of the CY 2008 proposed rule, we noted that
analysis of our hospital data for claims submitted for CY 2006
indicated that CCT and CCTA procedures were performed relatively
frequently on Medicare patients. Our claims data showed a total of over
16,000 procedures performed, with about 11,000 single claims available
for ratesetting. Based on our analysis of the robust hospital
outpatient claims data at that time, we believed we had adequate claims
data from CY 2006 upon which to determine the median costs of
performing these procedures and to assign them to appropriate clinical
APCs. We saw no rationale for reassigning these procedures to New
Technology APCs in CY 2008, when we had claims-based cost information
regarding these procedures, and they were clinically similar to other
procedures paid under the OPPS.
We acknowledged the concerns that had been expressed to us
regarding the clinical homogeneity of APCs 0376, 0377, and 0398, where
some of the CCT and CCTA were assigned for CY 2007 along with nuclear
medicine cardiac imaging procedures. Because we proposed to package
payment for diagnostic radiopharmaceuticals into payment for diagnostic
nuclear medicine procedures in CY 2008 as discussed in detail in
section II.A.4.c.(5) of this final rule with comment period, we
believed that to ensure the clinical and resource homogeneity of APCs
0376, 0377, and 0398 in CY 2008, it would be most appropriate to
reassign the CCT and CCTA services currently residing in those APCs to
other clinical APCs for CY 2008.
Therefore, for CY 2008, we proposed to assign the CCT and CCTA
procedures to two clinical APCs, specifically new clinical APC 0383
(Cardiac Computed Tomographic Imaging) and APC 0282, as shown in Table
17 below. The proposed median cost of approximately $314 for APC 0383
was based entirely on claims data for CPT codes 0145T, 0146T, 0147T,
0148T, 0149T, and 0150T that described CCT and CCTA services, a
clinically homogeneous grouping of services. In addition, the
individual median costs of these services ranged from a low of
approximately $277 to a high of $437, reflecting their hospital
resource similarity as well. We proposed to reassign the two other CCT
CPT codes, specifically CPT codes 0144T and 0151T, to APC 0282. The
inclusion of these two codes in APC 0282 resulted in a CY 2008 proposed
APC median cost of about $105.
We received a number of public comments concerning our CY 2008
proposals for CCT and CCTA procedures. A summary of the public comments
and our responses follow.
Comment: While several commenters expressed appreciation for the
proposed reassignment of CCT and CCTA procedures into their own
clinically homogenous APC groups, many commenters disagreed with the
proposal to reassign these services from APCs 0282, 0376, 0377, and
0398 to APCs 0282 and 0383 for CY 2008. These commenters were
especially concerned with the proposed payment rates for these
procedures and asserted that the proposed median costs of $105 for APC
0282 and $314 for APC 0383 were inadequate because they were based on
limited data, thereby undervaluing these new technology services. The
commenters further believed that the CY 2008 proposed payment rates of
$107 for APC 0282 and $318 for APC 0383 were unreasonably low based on
only 16,000 total procedures, with about 11,000 single claims used for
ratesetting. Some commenters pointed out that the

[[Page 66701]]

first year in which the new procedures were specifically reported by
hospitals was CY 2006. They argued that because it takes time for
hospitals to completely capture and report the full costs associated
with new procedures in their charges, hospitals could not have reported
these services accurately in CY 2006. One commenter believed that
because most hospitals do not specifically allocate capital costs to
the cost centers involved, the CCRs used to convert charges to costs
for CCT and CCTA procedures were likely understated.
Many commenters expressed concern that there had not been
sufficient time to develop accurate and reliable claims data for these
new procedures and that additional measures were necessary to ensure
appropriate payments. Some commenters recommended that CMS delay the
implementation of the CY 2008 median costs until a full year of claims
data were available from both multiple and single claims and suggested
that CMS continue with the CY 2007 APC assignments for CCT and CCTA
procedures. They argued that inadequate payment rates would
unintentionally encourage the use of more expensive and invasive
diagnostic procedures for Medicare beneficiaries. Some commenters
further requested that CMS consult with stakeholders and utilize
external data to determine the degree to which OPPS claims data
accurately reflected the relative resource costs of these procedures
and to make appropriate adjustments to the payment rates, especially
for APC 0383. Other commenters requested that CMS reassign the CCT and
CCTA procedures to appropriate New Technology APCs for CY 2008.
Some commenters requested that CMS reconsider the reassignment of
CPT codes 0144T and 0151T whose median costs varied significantly, from
$86 and $144, respectively, because these services did not appear to be
clinically appropriate when compared to the other procedures assigned
to APC 0282.
Response: While we acknowledge that the CPT codes for CCT and CCTA
procedures were new for January 2006, we disagree with the commenters'
argument that our claims data are inadequate to support the
reassignment of CCT and CCTA procedures to clinical APCs for CY 2008
based on hospital costs derived from claims. We used the approximately
12,000 single bills available for this final rule with comment period
in determining the median costs for the CCT and CCTA procedures because
the single bills provide us with the most accurate costs that are the
foundation of our standard OPPS ratesetting methodology. As we discuss
in section II.A.1.b. of this final rule with comment period, we are
unable to appropriately allocate packaged costs on multiple procedure
claims so we generally are not able to use them in setting payment
rates. As we also discuss in that section, we are continuing to work on
additional methodologies that would allow us to use claims data from
more OPPS claims. While we recognize that reliance on single procedure
claims may result in the use of fewer claims for some services than for
others, in the case of CCT and CCTA procedures, in particular, we were
able to use about two-thirds of all approximately 18,000 claims for
ratesetting. These services were reported by many hospitals in CY 2006,
and we have no reason to believe that costs based upon this large
percentage of all claims do not accurately reflect the resource costs
of these services to hospitals. Our standard OPPS methodology
determines the relative costs of services from claims, with a specific
focus on relative costs and not absolute costs, and we do not believe
there is any need for us to utilize external data to determine the
costs of these services. Additionally, we do not agree with the
commenters' suggestion to place the CCT and CCTA procedures in New
Technology APCs. We believe that, based on the clinical characteristics
and resource use calculated from CY 2006 claims for CCT and CCTA
procedures, our proposal would assign them to appropriate clinical APCs
for CY 2008. In fact, several commenters acknowledged that the proposed
APC assignments of these procedures were appropriate based on explicit
consideration of clinical homogeneity.
Further, in the case of CPT codes 0144T and 0151T, the commenters
mistakenly believed that the CY 2008 OPPS median costs for these
procedures were $86 and $144, respectively. The CY 2008 proposed rule
median cost for CPT code 0144T was approximately $68 and approximately
$43 for CPT code 0151T, and their final rule median costs are
approximately $68 and $54, respectively. The $86 and $144 figures
reported by some commenters were based on the procedures' mean costs,
not the median costs which are used for ratesetting under the OPPS. We
believe that CPT codes 0144T and 0151T are appropriately assigned to
APC 0282 as their median costs fall within the range of costs of other
procedures also assigned to the APC, which has a final median cost of
approximately $100.
Comment: Some commenters were uncertain as to whether the costs of
the contrast agents used in conjunction with CCT and CCTA procedures
were included in the proposed payment rate calculations for APCs 0282
and 0383. They requested that CMS address this issue in this final rule
with comment period. The commenters requested that CMS increase the
payment rates for APCs 0282 and 0383 if the costs of the contrast
agents were not included in the proposed payment rates.
Response: The proposed payment rates for APCs 0282 and 0383
included the costs of the contrast agents, because, as discussed
further in section II.A.4.c.(6) of this final rule with comment period,
we proposed to package payment for all contrast agents for CY 2008. Our
final CY 2008 policy packages payment for all contrast agents and,
therefore, the final payment rates for CCT and CCTA procedures include
these costs.
After consideration of the public comments received, we are
finalizing our CY 2008 proposal, without modification, to assign CCT
and CCTA procedures to APCs 0282 and 0383, with CY 2008 median costs of
approximately $100 and approximately $296, respectively. The final CY
2008 APC assignments and APC median costs for the specific CCT and CCTA
procedures are displayed in Table 17.

Table 17.--Final CY 2008 APC Assignments of CCT and CCTA Procedures
----------------------------------------------------------------------------------------------------------------
Final CY
HCPCS code Short descriptor CY 2007 SI CY 2007 CY 2007 APC Final CY 2008 Final CY 2008 APC
APC median cost SI 2008 APC median cost
----------------------------------------------------------------------------------------------------------------
0144T.......... CT heart wo dye; S.......... 0398 $252 S............. 0282 $100
qual calc.
0145T.......... CT heart w/wo S.......... 0376 305 S............. 0383 296
dye funct.
0146T.......... CCTA w/wo dye... S.......... 0376 305 S............. 0383 296
0147T.......... CCTA w/wo, quan S.......... 0376 305 S............. 0383 296
calcium.
0148T.......... CCTA w/wo, strxr S.......... 0377 397 S............. 0383 296

[[Page 66702]]

0149T.......... CCTA w/wo, strxr S.......... 0377 397 S............. 0383 296
quan calc.
0150T.......... CCTA w/wo, S.......... 0398 252 S............. 0383 296
disease strxr.
0151T.......... CT heart funct S.......... 0282 94 S............. 0282 100
add-on.
----------------------------------------------------------------------------------------------------------------

b. Coronary and Non-Coronary Angioplasty (PTCA/PTA) (APCs 0082, 0083,
and 0103)
For CY 2008, we proposed to delete APC 0081 (Noncoronary
Angioplasty or Atherectomy) as a result of the effects of the proposed
CY 2008 packaging approach on median costs (see section II.A.4.c. of
this final rule with comment period for more discussion of our
packaging approach). We proposed to reassign the procedures that mapped
to this APC in CY 2007 to APCs that would be homogeneous with respect
to clinical characteristics and resource use in CY 2008, specifically
APCs 0082 (Coronary or Non-Coronary Atherectomy), 0083 (Coronary or
Non-Coronary Angioplasty and Percutaneous Valvuloplasty), and 0103
(Miscellaneous Vascular Procedures). The CY 2008 proposed payment rates
for these APCs were approximately $5,654, $2,934, and $972,
respectively. The CY 2007 payment rate for APC 0081 was approximately
$2,639.
We received one public comment on our CY 2008 proposal to delete
APC 0081 and reassign the procedures that mapped to this APC to APCs
0082 and 0083. A summary of the public comment and our response follow.
Comment: One commenter stated that the proposed reassignment of
some of the angioplasty procedures assigned to APC 0081 in CY 2007 to
APC 0083 in CY 2008 fails to recognize the differences in median costs
associated with the use of specialty balloons in certain coronary and
non-coronary angioplasty (PTCA/PTA) procedures. According to the
commenter, specialty balloons are defined as balloons that can be used
for purposes other than inflation and deflation (eg, cutting balloons
and cold therapy balloons). The commenter estimated from an analysis of
the CY 2006 Medicare claims data that the median costs for PTCA/PTA
procedures involving specialty balloons are approximately 55 percent
higher than the median costs of all PTCA/PTA procedures in APC 0083,
and represent approximately 4 percent of the cases. The commenter
expressed concern that inadequate payment for PTCA/PTA procedures
involving specialty balloons could reduce beneficiary access to this
technology.
The commenter urged CMS to reconsider its proposal to reassign all
PTCA/PTA procedures to APC 0083. Specifically, the commenter requested
that CMS establish a HCPCS Level II G-code to differentiate coronary
and noncoronary PTCA/PTA procedures using specialty balloons from those
PTCA/PTA procedures using standard, nonspecialty balloons, defining
specialty balloons as those which have a median reported cost of more
than $800 based on CY 2006 hospital claims containing the Level II
HCPCS C-code for PTCA/PTA balloons, C1725 (Catheter, transluminal
angioplasty, non-laser). The commenter stated that nonspecialty
balloons cost approximately $200 to $400. According to the commenter's
suggestion, the new G-code would map to a new APC for coronary and
noncoronary angioplasty procedures using specialty balloons, the
payment for which would be based upon the median cost of procedures
performed using specialty balloons, as indicated on CY 2006 claims by
the reporting of C1725 where the reported catheter cost is more than
$800.
Response: We believe that the proposed reassignment of the
procedures assigned to APC 0081 in CY 2007 to APC 0083 in CY 2008 is
appropriate, both in terms of the clinical similarities and resource
costs of the procedures involved. The HCPCS-specific median costs of
significant procedures assigned to APC 0083 range from approximately
$2,621 to $4,339. Even considering the information provided by the
commenter about the expected differential cost between specialty and
non-specialty balloons of $400 to $600, we would not expect Medicare
beneficiaries to have problems with access to procedures with specialty
balloons, when the APC 0083 CY 2008 median cost is approximately
$2,855. Packaging payment for the variety of implantable devices that
are used in specific procedures is a well-established principle of the
OPPS, and we expect that hospitals will carefully consider the clinical
benefits and costs of all technologies when performing procedures on
patients. Therefore, we also believe that a policy to provide different
payments for PTCA/PTA procedures involving specialty balloons would not
be consistent with our overall strategy to encourage hospitals to use
resources more efficiently by increasing the size of the payment
bundles. If the use of a very expensive device in a clinical scenario,
such as a specialty balloon, caused a specific procedure to be much
more expensive for the hospital than the APC payment, we consider such
a case to be the natural consequence of a prospective payment system
that anticipates that some cases will be more costly and others less
costly than the procedure payment. We will continue to monitor the
costs of PTCA/PTA procedures over time based on the evolution of
clinical practice and will consider proposing future modifications to
the configuration of APC 0083 as necessary.
After consideration of the public comment received, we are
finalizing our CY 2008 proposal, without modification, to reassign
angioplasty procedures assigned to APC 0081 in CY 2007 to APC 0083 in
CY 2008. The median cost of APC 0083 is approximately $2,855.
c. Implantation of Cardioverter-Defibrillators (APCs 0107 and 0108)
In CY 2003, we created four Level II HCPCS codes for implantation
of single and dual chamber cardioverter-defibrillators (ICDs) with and
without leads because, for the CY 2004 OPPS, we deleted the device
HCPCS codes and there was no other way of determining whether the
device being implanted was a single chamber or dual chamber device. We
were concerned that the costs of inserting single versus dual chamber
ICDs could be sufficiently different due to the two types of devices
implanted such that separate APC assignments for the insertion
procedures could be appropriate in the future. The HCPCS codes are
G0297 (Insertion of single chamber pacing cardioverter defibrillator
pulse generator); G0298 (Insertion of dual chamber pacing cardioverter
defibrillator pulse generator); G0299 (Insertion or repositioning of
electrode lead for single chamber pacing cardioverter

[[Page 66703]]

defibrillator and insertion of pulse generator); and G0300 (Insertion
or repositioning of electrode lead for dual chamber pacing cardioverter
defibrillator and insertion of pulse generator). The pairs of codes
were assigned to two different clinical APCs, depending on whether or
not they included the possibility of electrode insertion, specifically
APC 0107 (Insertion of Cardioverter-Defibrillator) and APC 0108
(Insertion/Replacement/Repair of Cardioverter-Defibrillator Leads).
In the same year, the OPPS ceased to recognize for payment the two
CPT codes for insertion of ICDs with or without ICD leads. These CPT
codes are 33240 (Insertion of single or dual chamber pacing
cardioverter-defibrillator pulse generator) and 33249 (Insertion or
repositioning of electrode lead(s) for single or dual chamber pacing
cardioverter-defibrillator and insertion of pulse generator).
We reinstated the device category HCPCS codes on January 1, 2005.
Moreover, since January 1, 2005, hospitals have been required to report
devices they use or implant when there is a device code that describes
the device. We began to edit to ensure that hospitals are correctly
billing devices required for certain procedures in April 2005 and
implemented the second phase of device edits on October 1, 2005.
Therefore, we no longer need different procedural Level II HCPCS codes
to identify whether hospitals inserted a single or dual chamber ICD
device.
At its March 2007 meeting, the APC Panel recommended that CMS
delete the Level II HCPCS codes for implantation of cardioverter-
defibrillator pulse generators with or without repositioning or
implantation of electrode lead(s) for CY 2008 and authorize hospitals
to report the CPT codes. The APC Panel indicated that the requirement
for reporting device codes would enable CMS to continue to identify
costs when different types of devices are implanted if that were to be
necessary.
We analyzed the median cost data associated with APCs 0107 and 0108
as part of our preparation for the APC Panel discussion. While there
was a difference in the median cost when a single chamber versus a dual
chamber device is implanted, the difference has never been great enough
to justify differential APC assignments for the procedures. Table 34
included in the CY 2008 OPPS/ASC proposed rule presented a historical
summary of all single claim median costs. (For purposes of this
analysis, we displayed the median costs for all single claims without
regard to adjustment or to whether the claims met various selection
criteria; these were not the median costs on which proposed payments
were based.)
Hospitals have consistently indicated that they would prefer to
report services furnished using the CPT codes that describe them,
rather than the Level II HCPCS G-codes, because many private payers
require that they bill the CPT codes. We also prefer to recognize CPT
codes for procedures under the OPPS, when possible, to minimize the
administrative coding burden on hospitals.
In the CY 2008 OPPS/ASC proposed rule (72 FR 42715), we stated our
belief that the differences between the median costs for the two Level
II HCPCS codes assigned to each APC (that is, G0297 and G0298 for APC
0107 and G0299 and G0300 for APC 0108) do not currently support
differential APC assignments for single and dual chamber ICD insertion
procedures. The required device coding would allow us to continue to
follow the different costs over time by examining subsets of ICD
implantation procedure claims based on the type of device reported on
the claims. Moreover, we are sensitive to the benefits of minimizing
the reporting burden on hospitals. Therefore, for CY 2008, we proposed
to delete the Level II HCPCS codes for ICD insertion procedures and
require hospitals to bill the appropriate CPT codes, along with the
applicable device C-codes, for payment under the OPPS.
We received a number of public comments on our CY 2008 proposal for
reporting ICD implantation procedures under the OPPS. A summary of the
public comments and our responses follow.
Comment: Several commenters supported implementing the policy as
proposed. One commenter favored the elimination of the Level II HCPCS
codes for ICD implantation, citing the administrative burden these pose
for hospitals, but remained concerned about the potential negative
impact to hospitals when the more expensive dual chamber device is used
for Medicare beneficiaries. The commenter suggested that CMS should
consider creation of composite APCs for device-dependent procedures,
such as ICD implantation, where the device costs can vary significantly
based on the type of device used. The commenter suggested that payment
for these composite APCs would be based on the combination of the
device implantation CPT code and the existing Level II HCPCS code for
the particular device. According to the commenter, this would minimize
the administrative burden for providers, allow coding to remain
consistent across payers, and enable more appropriate payment for
procedures with varying device costs.
Response: Composite APCs provide a single payment for two or more
major procedures that are commonly performed together, in order to
promote efficiency by increasing the size of the payment bundle. We do
not agree that the payment methodology outlined by one commenter, to
base payment for ICDs on the combination of the ICD implantation CPT
code and the existing device code, is consistent with the concept of
composite APCs as described in the proposed rule and as finalized in
section II.A.4.d. of this final rule with comment period. The scenario
described by the commenter largely describes the current packaging of
device payment into the payment for the procedure, except that we
generally base payment on all of the devices associated with a
procedure as a mechanism to promote the efficient utilization of
resources. The recommended approach could actually reduce packaging
under the OPPS by creating small and more specific payment bundles,
rather than increasing the size of the payment bundles to provide
hospitals with the flexibility to manage their resources as they
control costs. To establish a separate APC for each combination of a
procedure and a particular device used, as described by the commenter,
would create incentives for the use of the most expensive device rather
than creating incentives for efficiency and therefore is contrary to
the principles of a prospective payment system. As described above, we
believe that the payment for the procedures and associated devices
included in APCs 0107 and 0108 is appropriate, as the differences
between the median costs for the two Level II HCPCS codes currently
assigned to each APC do not currently support differential APC
assignments for single and dual chamber ICD insertion procedures.
After consideration of the public comments received, we are
adopting the March 2007 APC Panel recommendation and finalizing our CY
2008 proposal, without modification, to delete the Level II HCPCS codes
(G0297, G0298, G0299, and G0300) for ICD insertion procedures and
require hospitals to bill the appropriate CPT codes for ICD insertion,
specifically CPT code 33240 or CPT code 33249, as appropriate, along
with the applicable device C-codes, for payment under the OPPS in CY
2008.

[[Page 66704]]

d. Removal of Patient-Activated Cardiac Event Recorder (APC 0109)
In the CY 2008 OPPS/ASC proposed rule, we proposed to continue our
CY 2007 assignment of CPT code 33284 (Removal of an implantable,
patient-activated cardiac event recorder) to APC 0109 (Removal/Repair
of Implanted Devices), with a proposed CY 2008 payment rate of
approximately $389. The CY 2007 payment rate for this service is
approximately $676.
We received one public comment on the CY 2008 proposed
reconfiguration of APC 0109. A summary of the public comment and our
response follow.
Comment: One commenter requested that CMS reexamine its proposed
assignment of CPT code 33284 to APC 0109 in light of the proposed
reassignment of CPT codes 36575 (Repair of tunneled or non-tunneled
central venous access catheter, without subcutaneous port or pump,
central or peripheral insertion site) and 36589 (Removal of tunneled
central venous catheter, without subcutaneous port or pump) from APC
0621 (Level I Vascular Access Procedures) to APC 0109 for CY 2008. The
commenter asserted that the proposed inclusion of CPT codes 36575 and
36589 in APC 0109 significantly altered the proposed median cost of APC
0109, to the extent that it was no longer representative of the
resource requirements of CPT code 33284. The commenter requested that
CMS create a separate APC for CPT code 33284 if CMS finalizes its
proposal to reassign CPT codes 36575 and 36589 to APC 0109.
Response: We agree with the commenter that the change in
composition of APC 0109 may no longer most accurately reflect the
resource characteristics of CPT code 33284. CPT codes 36575 and 36589
have median costs of approximately $319 and $357, respectively, while
CPT code 33284 has a median cost of approximately $682. While we
appreciate the commenter's suggestion for a new APC for CPT code 33284,
we believe that an existing clinical APC may sufficiently account for
the clinical and resource characteristics of the procedure described by
CPT code 33284. The clinical characteristics of CPT code 33284 are
similar to those procedures in APC 0020 (Level II Excision/Biopsy). CPT
code 33284 and the other procedures assigned to APC 0020 generally
require surgical incisions, local anesthesia, and suturing. In
addition, we believe that APC 0020, with an APC median cost of
approximately $546, more closely aligns with the resources of CPT code
33284, rather than its proposed assignment to APC 0109, with an APC
median cost of approximately $356.
After consideration of the public comment received, we are not
finalizing our CY 2008 proposal to assign CPT code 33284 to APC 0109.
Instead, we are reassigning CPT code 33284 to APC 0020 for CY 2008,
with a median cost of approximately $546.
e. Stress Echocardiography (APC 0697)
In the CY 2008 OPPS/ASC proposed rule, we proposed to assign CPT
code 93350 (Echocardiography, transthoracic, real-time with image
documentation (2D), with or without M-mode recording, during rest and
cardiovascular stress test using treadmill, bicycle exercise and/or
pharmacologically induced stress, with interpretation and report) to
APC 0697 (Level I Echocardiogram, Except Transesophageal), with a
proposed payment rate of approximately $306. Currently, this service is
assigned to APC 0269 (Level II Echocardiogram Except Transesophageal),
with a payment rate of approximately $198 for CY 2007. The proposed
packaging approach for CY 2008, as described further in section
II.A.4.c. of this final rule with comment period, proposed to package
significant additional costs for ancillary and supportive services into
the CY 2008 payment for CPT code 93350.
We received a few public comments concerning our CY 2008 proposed
reassignment of CPT code 93350 to APC 0697. A summary of the public
comments and our response follow.
Comment: A few commenters requested that we continue to assign CPT
code 93350 to APC 0269, instead of reassigning this procedure to APC
0697 as proposed. The commenters stated that the Level II APC is a more
appropriate placement, as the procedure is comparable in clinical and
resource characteristics to CPT code 93307 (Echocardiography,
transthoracic, real-time with image documentation (2D) with or without
M-mode recoding; complete) that CMS proposed to retain in APC 0269.
Response: We have a significantly greater number of single and
``pseudo'' single claims available for CPT code 93350 for this final
rule with comment period than we had for the proposed rule because, in
response to the request of commenters, we added CPT code 93017
(Cardiovascular stress test using maximal or submaximal treadmill or
bicycle exercise, continuous electrocardiographic monitoring, and/or
pharmacological stress; tracing only, without interpretation or report)
to the final CY 2008 bypass list, as described in section II.A.1.b. of
this final rule with comment period. By adding CPT code 93017 to the CY
2008 bypass list, we did not attribute any packaged services that may
be on the claim to this procedure, and we were therefore able to create
single and ``pseudo'' single claims from claims that would have
otherwise been considered multiple procedure claims. The availability
of additional claims for ratesetting and our final policy for paying
for contrast and nonconstrast echocardiography through different APCs
also contribute to the differences between the final rule median costs
and the proposed rule median costs for echocardiography CPT codes.
For CY 2008, we are establishing a new APC for echocardiograms with
contrast as described in section II.A.4.c.(6) of this final rule with
comment period, specifically APC 0128 (Echocardiogram with Contrast).
The median cost of CPT code 93350 for contrast studies is approximately
$527, while the median cost of CPT code 93307 for contrast studies is
approximately $545. When these studies are performed with contrast in
CY 2008, they will be reported with HCPCS codes C8928 (Transthoracic
echocardiography with contrast, real-time with image documentation
(2D), with or without M-mode recording, during rest and cardiovascular
stress test using treadmill, bicycle exercise and/or pharmacologically
induced stress, with interpretation and report); and C8923
(Transthoracic echocardiography with contrast, real-time with image
documentation (2D) with or without M-mode recording; complete),
respectively. Both of these C-codes are assigned to new APC 0128 based
on their clinical and resource comparability, with a CY 2008 median
cost of approximately $534.
For this final rule with comment period, we have over 88,000 single
bills for noncontrast studies reported with CPT code 93350 that have an
updated median cost of approximately $374. This median cost is quite
close to the final rule median cost of CPT code 93307 for noncontrast
studies of approximately $404. We agree with the commenters that CPT
code 93350 for noncontrast studies is more appropriately placed in the
Level II noncontrast APC that has a median cost of approximately $401,
and where CPT code 93307 is also assigned. The two procedures are
clinically similar, both representing comprehensive transthoracic
echocardiography services.
Therefore, after consideration of the public comments received, we
are not

[[Page 66705]]

finalizing our proposal to assign noncontrast studies reported with CPT
code 93350 to APC 0697, which has the new APC title of ``Level I
Echocardiogram Without Contrast Except Esophageal''. Instead, we are
retaining the assignment of CPT code 93350 for noncontrast studies to
APC 0269, which has the new APC title of ``Level II Echocardiogram
Without Contrast Except Transesophageal,'' because we believe this
procedure is clinically similar to other procedures in the Level II APC
and the median costs indicate that the noncontrast studies in this APC
require similar hospital resources as well. Contrast studies reported
with the corresponding C-code to CPT code 93350, specifically C8928,
are assigned to APC 0128, with a CY 2008 median cost of approximately
$534.
f. Coronary or Non-Coronary Atherectomy (APC 0082)
Currently, APC 0082 is titled ``Coronary Atherectomy'' and contains
only two CPT codes: 92995 (Percutaneous transluminal coronary
atherectomy, by mechanical or other method, with or without balloon
angioplasty; single vessel) and 92996 (Percutaneous transluminal
coronary atherectomy, by mechanical or other method, with or without
balloon angioplasty; each additional vessel (List separately in
addition to code for primary procedure)). We proposed to reconfigure
APC 0082 for the CY 2008 OPPS by adding 11 CPT codes, most of which
were for percutaneous atherectomy procedures, and to change its title
to ``Coronary or Non-Coronary Atherectomy'', as shown in Addendum A to
the proposed rule (72 FR 42838), to better reflect the composition of
procedures that we proposed to assign to this APC. The CY 2008 proposed
payment rate for APC 0082 was approximately $5,654, while its CY 2007
payment rate is approximately $4,438.
We received one public comment on the CY 2008 proposed
reconfiguration of APC 0082. A summary of the public comment and our
response follow.
Comment: A commenter objected to the proposed composition of APC
0082 on the basis that it includes both coronary and noncoronary
atherectomy procedures, as a result of the proposed packaging of
imaging supervision and interpretation CPT codes. The commenter stated
that, as proposed, APC 0082 no longer contains services that are
comparable clinically and with respect to resource use and, therefore,
believed that the coronary and noncoronary services should not be
assigned to the same APC. The commenter indicated that treatment of
peripheral vascular disease is more diffuse, requires a different
approach, and utilizes different resources than treatment of coronary
disease. The commenter noted that it could not determine if the
proposed payment rate for APC 0082 is appropriate, due to the proposed
packaging of imaging supervision and interpretation codes for the
noncoronary atherectomy procedures, and questioned whether the claims
data could accurately reflect the costs associated with these different
procedures.
Response: We believe that there is sufficient clinical homogeneity
among all the services that we proposed to assign to APC 0082 for the
CY 2008 OPPS and that the resources that those services require are
sufficiently similar to justify assigning coronary and noncoronary
atherectomy procedures to the same clinical APC. The CY 2006 claims
data show that CPT codes 92995 and 92996 are very uncommon services in
the HOPD, as they have a total combined frequency of 159 services for
CY 2006. Moreover, the median costs for these codes (approximately
$5,696 for CPT code 92995 and $3,924 for CPT code 92996) are very
comparable to the median costs for the two highest volume noncoronary
atherectomy codes in APC 0082: CPT code 35493 (Transluminal peripheral
atherectomy, percutaneous; femoral-popliteal), which has a total
frequency of 8,473 and a median cost of approximately $5,956; and CPT
code 37204 (Transcatheter occlusion or embolization (e.g., for tumor
destruction, to achieve hemostasis, to occlude a vascular
malformation), percutaneous, any method, non-central nervous system,
non-head or neck), which has a total frequency of 5,789 and a median
cost of approximately $4,867. The CY 2008 OPPS median cost for APC 0082
(with correct devices, no token claims, and no claims with the ``FB''
modifier) is approximately $5,506 and the total frequency of services
in the APC is 18,357.
There are no HCPCS codes in APC 0082, as proposed, that would cause
the APC to violate the 2 times rule. We believe that it is appropriate
to reassign the noncoronary atherectomy procedures to APC 0082 because
we believe that the clinical characteristics and resource costs are
sufficiently similar to warrant their placement in the same APC with
coronary atherectomy procedures. We recognize that the similar resource
costs may result, to some extent, from the packaging of guidance and
imaging supervision and interpretation services under the CY 2008 OPPS.
However, even absent our proposal to increase packaging for the CY 2008
OPPS, the median cost of virtually all codes for procedural services
contains some costs for packaged services. Moreover, the movement of
codes from one APC to another occurs for a variety of reasons,
including changes in packaging from one year to another. In addition,
as discussed further in section II.A.2. of this final rule with comment
period, we proposed to reconfigure certain clinical APCs for CY 2008 as
a way to promote stability and appropriate payment for the services
assigned to them, including low total volume APCs, with a particular
focus on APCs with total frequencies of less than 1,000. APC 0082, as
configured for CY 2007, includes only 232 services. Therefore, the
reconfiguration of APC 0082 for CY 2008, as a result of increased costs
that occur with more packaging and our effort to minimize the number of
low volume APCs, among other reasons, is a normal occurrence in the
course of updating the OPPS from one year to another.
After consideration of the public comment received, we are
finalizing our CY 2008 proposal, without modification, to reconfigure
APC 0082 as proposed, with a median cost of approximately $5,506.
2. Gastrointestinal Procedures
a. Computed Tomographic Colonography (APC 0332)
For CY 2008, we proposed to reassign diagnostic computed
tomographic colonography, specifically described by CPT code 0067T
(Computed tomographic (CT) colonography (i.e., virtual colonoscopy);
diagnostic), from APC 0333 (Computed Tomography without Contrast
followed by Contrast) to APC 0332 (Computed Tomography without
Contrast), with a proposed payment rate of approximately $201.
We received several public comments concerning this proposal. A
summary of the public comments and our response follow.
Comment: Several commenters requested that CMS continue the CY 2007
APC assignment for CPT code 0067T, specifically APC 0333, rather than
reassign it to APC 0332 for CY 2008 as proposed.
Response: CPT code 0067T was implemented on January 1, 2005, and
initially assigned to APC 0332. As part of our annual APC review
process, we subsequently reassigned CPT code 0067T to APC 0333 in CY
2006 and continued this APC assignment in CY 2007. Based on analysis of
the CY 2006

[[Page 66706]]

hospital outpatient claims data, we proposed to reassign CPT code 0067T
to APC 0332 for CY 2008 based on clinical homogeneity and resource
considerations. Specifically, our hospital outpatient claims data from
CY 2006 showed a median cost of approximately $164 for CPT code 0067T
based on 1,421 single claims (of 1,904 total claims). Based on the
median costs of the significant procedures assigned to APC 0332 for CY
2008, which range from $164 to $227, we believe that CPT code 0067T
most closely resembles other noncontrast CT procedures also assigned to
APC 0332. We do not agree with the commenters' recommendation that APC
0333 is the most appropriate APC assignment for CPT code 0067T because
the median cost of approximately $322 for APC 0333, which contains
significant procedures with HCPCS-specific median costs ranging from
about $272 to $359, is much higher than the median cost of CPT code
0067T. In addition, as discussed in section II.A.4.c. of this final
rule with comment period, we are finalizing our proposal to package
payment for all contrasts agents in CY 2008. Because the CT scans
assigned to APC 0333 for CY 2008 all include the administration of
contrast and CT colonography is a noncontrast study, we believe 0067T
is most appropriately assigned to APC 0332, where other noncontrast CT
scans reside.
After consideration of the public comments received, we are
finalizing, without modification, the proposed assignment of CPT code
0067T to APC 0332, with a median cost of about $189 for CY 2008.
b. Laparoscopic Neurostimulator Electrode Implantation (APC 0130)
In the CY 2008 OPPS/ASC proposed rule, we proposed to continue our
CY 2007 assignment of CPT code 43647 (Laparoscopy, surgical;
implantation or replacement of gastric neurostimulators electrodes,
antrum) to APC 0130 (Level I Laparoscopy), with a proposed payment rate
of approximately $2,217. CPT code 43647 was a new code for CY 2007, so
it received an interim final CY 2007 assignment to APC 0130, with a
payment rate of approximately $1,975. In addition, during the September
2007 meeting of the APC Panel, the Panel recommended that CMS
reevaluate its decision to assign the device-dependent procedure
described by CPT code 43647 to APC 0130 because the procedure requires
a device and APC 0130 is not a device-dependent APC. We accepted the
APC Panel recommendation and reassessed the proposed CY 2008 APC
assignment of CPT code 43647 for this final rule with comment period.
We respond to this recommendation below.
We received a number of public comments on our interim final CY
2007 and proposed CY 2008 assignments of CPT code 43647 to APC 0130,
both on the CY 2007 OPPS/ASC final rule with comment period and on the
CY 2008 OPPS/ASC proposed rule. A summary of the public comments and
our response follow.
Comment: A few commenters objected to our assignment of CPT code
43647 to APC 0130, stating that APC 0130 does not accurately reflect
the clinical and cost characteristics of CPT code 43647. The commenters
noted that APC 0130 includes procedures for implanting minor devices
that have modest costs, while the laparoscopic implantation of gastric
neurostimulator electrodes is an invasive procedure that is comparable
to the surgical implantation of neurostimulator electrodes via incision
or laminectomy procedures that are assigned to APC 0061 (Laminectomy or
Incision for Implantation of Neurostimulator Electrodes, Excluding
Cranial Nerve). The commenters requested that we assign CPT code 43647
to APC 0061, which they believed more accurately reflects the clinical
and resource aspects of this procedure. In addition, the commenters
noted that if CPT code 43647 is reassigned to APC 0061, then all
peripheral neurostimulator lead implantations would be assigned to the
same APC.
Response: We have no hospital claims data for CPT code 43647
because the code was new for CY 2007. However, we agree with the
commenters that CPT code 43647 would be expected to have device costs
that are similar to other procedures assigned to APC 0061 for CY 2007
because all of these procedures implant neurostimulator electrodes. In
particular, the device percentage of device-dependent APC 0061 is about
60 percent, so that assignment of CPT code 43647 to an APC in the
laparoscopic APC series as proposed may not provide the most
appropriate payment for the procedure. While CPT code 43647 involves a
different surgical approach to neurostimulator electrode implantation,
in comparison with the potentially more invasive procedures currently
assigned to APC 0061, we still believe the procedure's clinical
characteristics more closely resemble the other procedures assigned to
APC 0061 than the minimally invasive percutaneous neurostimulator
electrode implantation procedures assigned to APC 0040 (Percutaneous
Implantation of Neurostimulator Electrodes, Excluding Cranial Nerve).
Therefore, we agree with commenters that APC 0061 would be an
appropriate APC assignment for CPT code 43647 for CY 2008, taking into
account the procedure's clinical characteristics and expected hospital
resource costs. We will reassign CPT code 43647 to APC 0061 for CY
2008, while we await the opportunity to review its CY 2007 claims data
in preparation for the CY 2009 rulemaking cycle.
After consideration of the public comments received, we are not
finalizing our CY 2008 proposal to assign CPT code 43647 to APC 0130.
Instead, we will reassign CPT code 43647 to APC 0061, with a median
cost of approximately $5,213. In addition, we are changing the title of
APC 0061 to ``Laminectomy, Laparoscopy, or Incision for Implantation of
Neurostimulator Electrodes, Excluding Cranial Nerve'' to better reflect
all of the procedures assigned to the APC for CY 2008.
c. Screening Colonoscopies and Screening Flexible Sigmoidoscopies (APCs
0158 and 0159)
Since the implementation of the OPPS in August 2000, screening
colonoscopies and screening flexible sigmoidoscopies have been paid
separately. In the CY 2007 OPPS/ASC final rule with comment period (71
FR 68013), we implemented certain changes associated with colorectal
cancer screening services provided in HOPDs. First, section 5113 of
Pub. L. 109-171 amended section 1833(b) of the Act to add colorectal
cancer screening to the list of services for which the beneficiary
deductible no longer applies. This provision applies to services
furnished on or after January 1, 2007. Second, sections 1834(d)(2) and
(d)(3) of the Act require Medicare to pay the lesser of the ASC or OPPS
payment amount for screening flexible sigmoidoscopies and screening
colonoscopies. For CY 2007, the OPPS payment for screening
colonoscopies, HCPCS codes G0105 (Colorectal cancer screening;
colonoscopy on individual at risk) and G0121 (Colorectal cancer
screening; colonoscopy on individual not meeting criteria for high
risk), developed in accordance with our standard OPPS ratesetting
methodology, would have slightly exceeded the CY 2007 ASC payment of
$446 for these procedures. Consistent with the requirements set forth
in sections 1834(d)(2) and (d)(3) of the Act, the OPPS payment rates
for HCPCS codes G0105 and G0121 were set equal to the CY 2007 ASC rate
of $446 effective January 1, 2007. This requirement did not impact the
OPPS payment rate for

[[Page 66707]]

screening flexible sigmoidoscopies (G0104, Colorectal cancer screening;
flexible sigmoidoscopy) because Medicare did not make payment to ASCs
for screening flexible sigmoidoscopies in CY 2007, so there was no
payment comparison to be made for those services.
According to the policy for the revised ASC payment system as
described in the August 2007 final rule for the revised ASC payment
system (72 FR 42493), ASCs will be paid for screening colonoscopies
based on their ASC payment weights derived from the related OPPS APC
payment weights and multiplied by the final ASC conversion factor (the
product of the OPPS conversion factor and the ASC budget neutrality
adjustment). As an office-based procedure added to the ASC list of
covered surgical procedures for CY 2008, ASC payment for screening
flexible sigmoidoscopies will be capped at the CY 2008 MPFS nonfacility
practice expense amount (72 FR 42511). Sections 1834(d)(2) and (d)(3)
of the Act would then require that the CY 2008 OPPS payment rates for
these procedures be set equal to their significantly lower ASC payment
rates.
However, for CY 2008, we proposed to use the equitable adjustment
authority of section 1833(t)(2)(E) of the Act to adjust the OPPS
payment rates for screening colonoscopies and screening flexible
sigmoidoscopies. Section 1833(t)(2)E) of the Act provides that the
Secretary shall establish adjustments, in a budget neutral manner, as
determined to be necessary to ensure equitable payments under the OPPS.
Sections 1834(d)(2) and (d)(3) of the Act regarding payment for
screening flexible sigmoidoscopies and screening colonoscopies under
the OPPS and ASC payment systems were established by Congress in 1997,
many years prior to the CY 2008 initial implementation of the revised
ASC payment system. The payment policies of the revised ASC payment
system, as summarized in section XVI.C. of this final rule with comment
period, make fundamental changes to the methodology for developing ASC
payment rates based on certain principles, specifically that the OPPS
payment weight relativity is applicable to ASC procedures and that ASC
costs are lower than HOPD costs for providing the same procedures, that
contradict the original assumptions underlying these provisions.
According to the findings of the GAO in its report, released on
November 30, 2006 and entitled ``Medicare: Payment for Ambulatory
Surgical Centers Should Be Based on the Hospital Outpatient Payment
System'' (GAO-07-86), the payment groups of the OPPS accurately reflect
the relative costs of procedures performed in ASCs just as well as they
reflect the relative costs of the same procedures provided in HOPDs.
Screening colonoscopies were among the top 20 ASC procedures in terms
of volume whose costs were specifically studied by the GAO in its work
that led to this conclusion. We see no clinical or hospital resource
explanation why the OPPS relative costs from CY 2006 OPPS claims data
for screening flexible sigmoidoscopies and screening colonoscopies
would not provide an appropriate basis for establishing their payment
rates under both the OPPS and the revised ASC payment system, according
to the standard ratesetting methodologies of each payment system for CY
2008. If we were to pay for these screening procedures under the OPPS
according to their ASC rates in CY 2008, we would significantly distort
their payment relativity in comparison with other OPPS services. We
believed and continue to believe it would be inequitable to pay these
screening services in HOPDs at their ASC rates for CY 2008, thereby
ignoring the relativity of their costs in comparison with other OPPS
services which have similar or different clinical and resource
characteristics. Therefore, for CY 2008 when we will be paying for
screening colonoscopies and screening flexible sigmoidoscopies
performed in ASCs based upon their standard revised ASC payment rates,
we proposed to adjust the payment rates under the OPPS to pay for the
procedures according to the standard OPPS payment rates. We believed
that the application of sections 1834(d)(2) and (d)(3) of the Act
produces inequitable results because of the revised ASC payment system
to be implemented in CY 2008. We believed this proposal would provide
the most appropriate payment for these procedures in the context of the
contemporary payment policies of the OPPS and the revised ASC payment
system.
We received several public commenters concerning this proposal. A
summary of the public comments and our response follow.
Comment: Several commenters agreed that it would be inequitable to
pay for screening colonoscopies and screening flexible sigmoidoscopies
services in the HOPD at their lower ASC payment rate. They supported
CMS's use of the equitable adjustment authority to adjust the OPPS
payment rates for these services.
Response: We appreciate commenters' support of our proposal. We
acknowledge that sections 1834(d)(2) and (d)(3) of the Act would
otherwise require that the CY 2008 OPPS payment rates for screening
colonoscopies and screening flexible sigmoidoscopies be set equal to
their significantly lower ASC payment rates. However, we continue to
believe it is necessary to invoke the equitable adjustment authority
provided by section 1833(t)(2)(E) of the Act to adjust the OPPS payment
rates for these procedures in order to establish the most appropriate
payment for these procedures in the context of the contemporary payment
policies of the OPPS and the revised ASC payment system.
After consideration of the public comments received, we are
finalizing our CY 2008 proposal, without modification, to pay for
screening colonoscopies and screening flexible sigmoidoscopies under
the OPPS at payment rates developed according to the standard OPPS
ratesetting methodology.
3. Genitourinary Procedures
a. Cystoscopy With Stent (APC 0163)
For CY 2008, we proposed to continue assignment of CPT code 52282
(Cystourethroscopy, with insertion of urethral stent) to APC 0163
(Level IV Cystourethroscopy and other Genitourinary Procedures), with a
proposed payment rate of approximately $2,351. Payment for APC 0163 in
CY 2007 is approximately $2,147.
We received one public comment on our CY 2008 proposed assignment
of CPT code 52282 to APC 0163. A summary of the public comment and our
response follow.
Comment: One commenter indicated that the procedure described by
CPT code 52282 is inappropriately assigned to APC 0163, and that it
should be reassigned to a new device-dependent APC for CY 2008.
According to the commenter, the procedure described by CPT code 52282
is dissimilar to the other procedures that map to APC 0163, both
clinically and in terms of cost. The commenter stated that this
procedure is the only procedure in APC 0163 that involves an implant.
In addition, the commenter asserted that the APC's CY 2008 proposed
payment of approximately $2,351 is inadequate to cover hospitals' costs
for performing this procedure, and that as a result, hospitals may
limit beneficiary access to this treatment. According to the commenter,
the urethral stent that is placed during these procedures is
approximately $4,200. The commenter also noted that other stent
placement procedures have device-dependent

[[Page 66708]]

status so that adequate costs can be tracked. The commenter recommended
that CMS create a new device-dependent APC for CPT code 52282 with a
payment rate of at least $4,000.
Response: In response to the concerns raised by the commenter, we
reviewed the clinical characteristics and hospital costs from CY 2006
claims data for all procedures proposed for CY 2008 assignment to APC
0163. The APC median cost is approximately $2,270, while CPT code 52282
has a median cost of approximately $2,016, based on 291 single claims
out of a total of 900 claims for the procedure. Because of the
commenter's concern about whether the stent costs were appropriately
reflected in the procedure's median cost, we compared the median costs
of CY 2006 claims that include both CPT code 52282 for cystoscopy with
implant of a stent and a Level II HCPCS C code for a stent, to CY 2006
claims that include CPT code 52282 but do not include a device C-code
for a stent. While a stent is always necessary for the procedure and we
require that hospitals report device HCPCS codes whenever they implant
a device that is described by an available device code, we found that
hospitals did not always report a stent HCPCS code with CPT code 52282.
This is similar to our findings in other cases of device-related
procedures. We believe, however, that hospitals are usually otherwise
accounting for the device cost in their charges on claims for CPT code
52282, either by incorporating the charge into the charge for the
procedure or reporting a charge on an uncoded revenue code line. We
found only a small difference in median costs of approximately $500 for
procedures reported with and without a device C-code. This difference
in costs is well within an appropriate range for the APC group.
Furthermore, the median cost for the claims billed with CPT code 52282
and a stent C-code was approximately $2,369, very close to the CY 2008
median cost of APC 0163 of approximately $2,270. We also believe that
CPT code 52282 clinically resembles the other cystourethroscopic
procedures also assigned to APC 0163. Therefore, we do not believe that
there are sufficient differences in clinical characteristics or
resources required to perform the procedure described by CPT code 52282
relative to the other procedures assigned to APC 0163 to warrant
reassignment of CPT code 52282 to a new, device-dependent APC as the
commenter suggested.
After consideration of the public comment received, we are
finalizing our proposal, without modification, to assign CPT code 52282
to APC 0163, with a CY 2008 median cost of approximately $2,270.
b. Percutaneous Renal Cryoablation (APC 0423)
For CY 2008, we proposed to assign CPT code 0135T (Ablation renal
tumor(s), unilateral, percutaneous, cryotherapy) to APC 0423 (Level II
Percutaneous Abdominal and Biliary Procedures), with a proposed payment
rate of approximately $2,810. This code was new in CY 2006, when it was
assigned to APC 0163 (Level IV Cystourethroscopy and other
Genitourinary Procedures) on an interim final basis, with a payment
rate of $1,999. In CY 2007, based on the APC Panel's recommendation
made at the March 2006 APC Panel meeting, we reassigned CPT code 0135T
from APC 0163 to APC 0423 with a payment rate of approximately $2,297.
We expected hospitals, when billing CPT code 0135T, to also report the
device HCPCS code, C2618 (Probe, cryoablation), associated with the
procedure.
We received several public comments concerning this proposal. A
summary of the public comments and our responses follow.
Comment: Several commenters disagreed with our proposed APC
assignment for CPT code 0135T. They indicated that the proposed payment
rate for APC 0423 does not cover the cost hospitals incur for the
cryoprobes used in the procedure. One commenter reported that the
average cost of one probe is about $1,000, while several commenters
indicated that a single procedure, on the average, uses about 2.5
probes but may involve up to 4 probes depending on the size of the
tumor and the probe needle selected. Other commenters argued that CPT
code 0135T requires more resources than the other procedures currently
assigned to APC 0423, specifically CPT codes 47382 (Ablation, one or
more liver tumor(s), percutaneous, radiofrequency) and 50592 (Ablation,
one or more renal tumor(s), percutaneous, unilateral, radiofrequency).
Several commenters highlighted the variance in the use of probes used
for the procedures assigned to APC 0423. Specifically, these commenters
asserted that CPT code 0135T requires the use of multiple probes while
the radiofrequency ablation procedures require only a single probe in a
procedure. Further, the commenters highlighted the various median costs
associated with the procedures assigned to APC 0423. That is, they
pointed out that the proposed median cost of about $3,520 for CPT code
0135T was 30 to 32 percent more than the median cost for CPT code
47382, which had a proposed median cost of about $2,706, or CPT code
50592, which had a proposed median cost of about $2,658. The commenters
urged CMS to reevaluate the proposed payment rate for APC 0423 and use
acquisition cost data provided by manufacturers, as many of the claims
used to set the payment rate do not contain the required device.
Alternatively, some commenters requested that CMS consider creating a
unique clinical APC for renal cryoablation that would be designated as
device-dependent to appropriately distinguish the resource costs
associated with renal cryoablation from radiofrequency ablation
procedures.
Response: Based on our comprehensive review of the procedures
assigned to APC 0423, public comments, and the CY 2006 recommendation
of the APC Panel regarding renal cryoablation, we believe that we have
appropriately assigned CPT code 0135T to APC 0423 for CY 2008 based on
clinical and resource considerations. We disagree with the commenters'
argument regarding the clinical dissimilarity of the renal cryoablation
procedure from the radiofrequency ablation procedures in APC 0423. The
commenters to the CY 2007 OPPS proposed rule (71 FR 68049) acknowledged
that cryoablation and radiofrequency percutaneous ablation procedures
for renal tumors are clinically similar. We continue to believe that
CPT code 0135T is appropriately assigned to APC 0423 because it is
placed with other procedures that share its clinical and resource
characteristics. If hospitals use more than one probe in performing the
renal cryoablation procedure, we expect hospitals to report this
information on the claim and adjust their charges accordingly.
Hospitals should report the number of cryoablation probes used to
perform CPT code 0135T as the units of HCPCS code C2618 which describes
these devices, with their charges for the probes. Since CY 2005, we
have required hospitals to report device HCPCS codes for all devices
used in procedures if there are appropriate HCPCS codes available. In
this way, we can be confident that hospitals have included charges on
their claims for costly devices used in procedures when they submit
claims for those procedures.
Comment: Several commenters informed us that the hospital claims
data that we used to set the proposed payment rate for CPT code 0135T
do not accurately capture the full costs related to this procedure.
They believed that the omission on the claims for the device C-code,
specifically HCPCS code C2618,

[[Page 66709]]

for the cryoprobes leads to omission of cryoprobe cost information and
undervaluation of the cost of the procedure. Some commenters reported
the results of their study of our hospital outpatient claims data which
revealed that of the 110 Medicare claims submitted for CPT code 0135T,
only 44 single claims included the device HCPCS C-code (C2618) on the
claims. Because the procedure cannot be performed without the cryoprobe
device, these commenters strongly urged CMS to designate the renal
cryoablation procedure as a ``device-dependent'' procedure and require
hospitals to submit claims with the appropriate HCPCS C-code. One
commenter who acknowledged its experience with hospital billing
reported that hospitals are not motivated to report the cost of the
devices on the claim form unless a HCPCS C-code is required by a code
edit for claim submission. Several commenters requested that CMS
designate CPT code 0135T as a ``device-dependent'' procedure to ensure
that future claims data more accurately reflect the total cost of the
procedure.
Response: We acknowledge the concerns raised by the commenters
regarding the hospitals' failure to report the device HCPCS code C2618
with the procedure. We further examined our CY 2006 hospital outpatient
claims data to determine the frequency of billing CPT code 0135T with
and without HCPCS code C2618. Our analysis revealed that the final rule
median cost of approximately $3,446 based on 48 single bills used for
ratesetting falls within the range for those procedures billed with and
without the device HCPCS code C2618. Specifically, our data showed a
median cost of about $4,402 based on 17 single bills for procedures
billed with the device HCPCS code C2618 and a median cost of about
$2,834 based on 31 single bills for those procedures billed without the
device C-code. Even considering only those claims for CPT code 0135T
with the device HCPCS code and higher median cost, CPT code 0135T would
be appropriately assigned to APC 0423 based on that cost.
Further, we do not believe that we should create a claims
processing edit in this instance. We create device edits, when
appropriate, for procedures assigned to device-dependent APCs, where
those APCs have been historically identified under the OPPS as having
very high device costs. Because APC 0423 is not a device-dependent APC
and the costs of the procedure with and without HCPCS code C2618 are
reasonably similar, we will not create edits. We remind hospitals that
they must report all of the HCPCS codes that appropriately describe the
items used to provide services, regardless of whether the HCPCS codes
are packaged or paid separately.
After further analysis of our CY 2006 hospital outpatient claims
data, the APC Panel recommendation from the March 2006 meeting, and
consideration of the public comments received, we are finalizing our
proposal, without modification, to assign CPT code 0135T to APC 0423
for CY 2008 with a median cost of approximately $2,705.
For CY 2008, the CPT Editorial Panel decided to delete CPT code
0135T on December 31, 2007, and replace it with CPT code 50593
(Ablation, renal tumor(s), unilateral, percutaneous, cryotherapy). The
replacement CPT code 50593 will be assigned to APC 0423 effective
January 1, 2008. Similar to its predecessor code, we expect hospitals
to report both the device HCPCS code C2618 and CPT code 50593 to
appropriately report the renal cryoablation procedure.
c. Prostatic Thermotherapy (APC 0163)
For CY 2008, we proposed to reconfigure certain clinical APCs to
eliminate most of the low total volume APCs as an alternative to
developing specific quantitative approaches to treating low total
volume APCs differently for purposes of median calculation. We further
concluded that there were other clinical APCs with higher volumes of
total claims to which these low total volume services could be
reassigned, while maintaining the continued clinical and resource
homogeneity of the clinical APCs to which they would be newly
reassigned. As a result, we eliminated certain APCs and reassigned the
procedures associated with these APCs to other clinical APCs with
higher volumes of claims. Prostatic thermotherapy procedures were
assigned to APC 0675 (Prostatic Thermotherapy) for CY 2007, with a
payment rate of approximately $2,529. For CY 2008, we proposed to
reassign CPT codes 53850 (Transurethral destruction of prostate tissue;
by microwave thermotherapy) and 53852 (Transurethral destruction of
prostate tissue; by radiofrequency thermotherapy) from APC 0675 to APC
0163 (Level IV Cystourethroscopy and other Genitourinary Procedures),
with a proposed payment rate of approximately $2,351. We proposed to
eliminate APC 0675, which would otherwise have included only
approximately 550 total services based on CY 2006 claims.
We received some public comments on the proposed deletion of APC
0675 and the reassignment of the prostatic thermotherapy procedures in
APC 0675 to APC 0163. A summary of the public comments and our response
follow.
Comment: Specifically, some commenters requested clarification from
CMS on the reassignment of CPT codes 53850 and 53852 from APC 0675 to
APC 0163, as reflected in Addendum B of the CY 2008 OPPS proposed rule.
One commenter urged CMS to investigate whether these procedures were
correctly assigned to APC 0163 as the procedures described by CPT codes
53850 and 53852 seemed more appropriate, in terms of clinical
characteristics and resource costs, for assignment to APC 0429 (Level V
Cystourethroscopy and other Genitourinary Procedures). The commenter
recommended that the APC Panel discuss this issue at its next meeting
to further review the data before the proposed change is finalized.
Response: As part of our annual review, we examine the APC
assignments for all items and services under the OPPS for appropriate
placements in the context of our proposed policies for the update year.
This review involves careful and extensive analysis of our hospital
outpatient claims data, as well as input from our medical advisors and
the APC Panel and recommendations from the public. Based on our
analysis of the hospital outpatient claims from CY 2006, the final
median cost for CPT code 53850 is approximately $2,482 based on 199
single claims (223 total), and the final median cost for CPT code 53852
is approximately $2,894 based on 195 single claims (315 total). We
agree with the commenter who recommended reassignment of these CPT
codes to APC 0429, which has a median cost of approximately $2,844 for
CY 2008 and includes several other procedures to destroy prostate
tissue. We believe that APC 0429 is the most appropriate assignment for
both CPT codes based on clinical and resource considerations.
After consideration of the public comments received, we are
modifying our proposal and finalizing the CY 2008 assignments of CPT
codes 53850 and 53852 to APC 0429, with a median cost of approximately
$2,844.
d. Radiofrequency Ablation of Prostate (APC 0163)
For CY 2008, we proposed to delete APC 0675 (Prostatic
Thermotherapy) and reassign the two CPT codes that mapped to this APC
in CY 2007, CPT code 53850 (Transurethral destruction of prostate
tissue; by microwave thermotherapy) and CPT code 53852

[[Page 66710]]

(Transurethral destruction of prostate tissue; by radiofrequency
thermotherapy) to APC 0163 (Level IV Cystourethroscopy and other
Genitourinary Procedures). The CY 2007 payment rate for APC 0675 is
approximately $2,529, and the CY 2008 proposed payment rate for APC
0163 was approximately $2,351.
Comment: One commenter asserted that the proposed reassignment of
CPT code 53852 to APC 0163 is not clinically appropriate or consistent
with the resource costs of other procedures assigned to APC 0163. The
commenter suggested that CMS reassign CPT code 53852 to APC 0429 (Level
V Cystourethroscopy and other Genitourinary Procedures), with a CY 2008
proposed payment rate of approximately $2,924. According to the
commenter, CMS cost data showed that the median cost of CPT code 53852
is 26 percent higher than the median cost of the APC 0163 to which CMS
proposed to reassign the procedure. The commenter stated that the
clinical characteristics of the procedure described by CPT code 53852
are more similar to the procedure described by CPT code 52647 (Laser
coagulation of the prostate, including control of postoperative
bleeding, complete (vasectomy, meatotomy, cystourethroscopy, urethral
calibration and/or dilation, and internal urethrotomy are included if
performed)), which maps to APC 0429, than the procedures that are
included in APC 0163. Specifically, the commenter stated that both
procedures can be done under direct visualization, placement of the
energies are customized, and there is no incision or cutting of the
tissues involved. The commenter also argued that CMS data on
intraservice procedure times and the direct costs of clinical labor,
supplies, and equipment indicate that CPT code 53852 should be
reassigned to APC 0429 rather than to APC 0163.
Response: We examined the clinical characteristics and claims-based
resource costs of all procedures proposed for assignment to APC 0163
and APC 0429 for CY 2008. We agree with the commenter that APC 0429
would be an appropriate assignment for CPT code 53852 for CY 2008. CPT
code 53852 appears to be more closely related, both in terms of
clinical characteristics and resource costs, to the laser surgery
procedures assigned to APC 0429 than to many of the cystourethroscopy
and transurethral resection procedures assigned to APC 0163. CPT code
53852, like some other procedures assigned to APC 0429, is a minimally
invasive procedure for the destruction of prostate tissue, and we
believe the procedure room time and recovery period for the services
would be relatively comparable.
After consideration of the public comments received, we are
modifying our CY 2008 proposal and will reassign CPT code 53852 to APC
0429, with a median cost of approximately $2,844.
e. Ultrasound Ablation of Uterine Fibroids With Magnetic Resonance
Guidance (MRgFUS) (APC 0067)
Magnetic resonance guided focused ultrasound (MRgFUS) is a
noninvasive surgical procedure that uses high intensity focused
ultrasound waves to destroy tissue in combination with magnetic
resonance imaging (MRI) guidance. Currently, the two Category III CPT
codes for this procedure are 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), which were implemented on
January 1, 2005.
In the CY 2006 OPPS proposed rule, we proposed to continue to
assign both codes to APC 0193 (Level V Female Reproductive Proc).
However, at the August 2005 APC Panel meeting, the APC Panel
recommended that CMS work with stakeholders to assign CPT codes 0071T
and 0072T to appropriate New Technology APCs. Based on our review of
several factors, which included information presented at the August
2005 APC Panel meeting, the public comments received on the CY 2006
OPPS proposed rule, and our analysis of OPPS claims data for different
procedures, we reassigned CPT code 0071T from APC 0193 to APC 0195
(Level IX Female Reproductive Proc) and CPT code 0072T from APC 0193 to
APC 0202 (Level X Female Reproductive Proc) effective January 1, 2006,
to reflect the higher level of resources we estimated were required
when performing the MRgFUS procedures.
In the CY 2007 OPPS/ASC proposed rule, we proposed to continue to
assign CPT code 0071T to APC 0195 and CPT code 0072T to APC 0202. We
received comments on the CY 2007 proposed APC assignments recommending
that we revise the APC assignments for CPT codes 0071T and 0072T. The
commenters indicated that, while MRgFUS treats anatomical sites that
are similar to other procedures assigned to APCs 0195 and 0202, the
resources utilized differed dramatically. Several commenters
recommended that the most appropriate APC assignment for the MRgFUS
procedures would be APC 0127 (Level IV Stereotactic Radiosurgery),
based on their analyses of the procedures' resource use and clinical
characteristics.
As we stated in both the CY 2006 OPPS final rule with comment
period and the CY 2007 OPPS/ASC final rule with comment period, we
believe that MRgFUS treatment bears a significant relationship to
technologies already in use in HOPDs (70 FR 68600 and 71 FR 68050,
respectively). 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
continue to believe that, although MRgFUS therapy is relatively new, it
is an integrated application of existing technologies (MRI and
ultrasound), and its technology resembles other OPPS services that are
assigned to clinical APCs for which we have significant OPPS claims
data. In the CY 2007 OPPS/ASC final rule with comment period (71 FR
68050), we explained our belief that retaining MRgFUS procedures in
clinical APCs with other female reproductive procedures would enable us
both to set accurate payment rates and to maintain appropriate clinical
homogeneity of the APCs. Furthermore, we did not agree with commenters
that MRgFUS procedures shared sufficient clinical and resource
characteristics with cobalt-based stereotactic radiosurgery (SRS) to
reassign them to that particular clinical APC 0127, where only the
single specific SRS procedure was assigned for CY 2007 and which had a
CY 2007 APC median cost of approximately $8,461. Consequently, in the
CY 2007 OPPS/ASC final rule with comment period (71 FR 68051), we
finalized payment for these procedures in APCs 0195 and 0202 as
proposed.
Analysis of our hospital outpatient data for claims submitted for
CY 2006 during the development of the proposed rule indicated that
MRgFUS procedures were rarely performed on Medicare patients. As we
stated in the CY 2006 OPPS final rule with comment period and the CY
2007 OPPS/ASC final rule with comment period, because treatment of
uterine fibroids is most common among women younger than 65 years of
age, we did not expect that there ever would be many Medicare claims
for the MRgFUS procedures (70 FR 68600 and 71 FR 68050, respectively).
For OPPS claims submitted from CY 2005 through CY 2006, our claims data
showed that there

[[Page 66711]]

were only two claims submitted for CPT code 0071T in CY 2005 and one in
CY 2006. We had no hospital claims for CPT code 0072T from either of
those years.
At its March 2007 meeting, the APC Panel recommended that, for CY
2008, CMS reassign CPT codes 0071T and 0072T from APCs 0195 and 0202 to
APC 0067 (Level III Stereotactic Radiosurgery, MRgFUS, and MEG), which
had a proposed APC median cost of approximately $3,870 for CY 2008. The
APC Panel discussed its general belief that while the MRgFUS procedures
might not be performed frequently on Medicare patients, CMS should pay
appropriately for the procedures to ensure access for Medicare
beneficiaries. In addition, following discussion of the potential for
reassignment of the CPT codes to New Technology APCs, the APC Panel
specifically recommended that the procedures be assigned to a clinical
APC at this point in their adoption into clinical practice, instead of
a New Technology APC. Furthermore, following publication of the CY 2007
OPPS/ASC final rule with comment period, we received input from
interested individuals and organizations regarding the clinical and
resource characteristics of MRgFUS procedures. Based on our
consideration of all information available to us regarding the
necessary hospital resources for the MRgFUS procedures in comparison
with other procedures for which we have historical hospital claims
data, for CY 2008 we proposed to accept the APC Panel's recommendation
to reassign these services to clinical APC 0067, an APC that currently
contains two linear accelerator-based stereotactic radiosurgery (SRS)
procedures. We agreed with the APC Panel that these SRS procedures
share sufficient clinical and resource similarity with the MRgFUS
services, including reliance on image guidance in a single treatment
session to ablate abnormal tissue, to justify their assignment to the
same clinical APC. Unlike the cobalt-based SRS service that we
concluded in the CY 2007 OPPS/ASC final rule with comment period was
not similar to MRgFUS procedures based on clinical and resource
considerations, these linear accelerator-based SRS procedures are not
performed solely on intracranial lesions and generally do not require
immobilization of the patient's head in a frame that is screwed into
the skull, thereby exhibiting characteristics more consistent with
MRgFUS treatments. In addition, based on our understanding of the
MRgFUS procedures described by the two CPT codes which differ only in
the volume of uterine leiomyomata treated, we believed it would be most
appropriate to assign both of these procedures to the same clinical
APC, as recommended by the APC Panel. Therefore, for CY 2008 we
proposed to reassign CPT codes 0071T and 0072T to APC 0067, with a
proposed APC median cost of approximately $3,870, which was reflected
in Table 32 of the proposed rule (72 FR 42713).
We received several public comments on our CY 2008 proposal
concerning MRgFUS procedures. A summary of the public comments and our
responses follow.
Comment: Several commenters agreed with CMS's proposal to assign
the MRgFUS procedures, specifically CPT codes 0071T and 0072T, to APC
0067 because the services share similarities, both clinically and with
regard to resource costs, with other procedures also assigned to APC
0067. However, many commenters disagreed with the proposed payment rate
of approximately $3,918 for APC 0067. They recommended that MRgFUS be
placed in APC 0127 (Level IV Stereotactic Radiosurgery, MRgFUS, and
MEG), which had a proposed payment rate of approximately $7,864, as
they believed that this APC accurately reflected the hospital charges
and costs for this procedure. The commenters believed that the proposed
payment rate for APC 0067 was far below the costs incurred to provide
MRgFUS procedures and did not accurately reflect the treatment planning
component that is part of the MRgFUS procedure. Other commenters
disagreed with the placement of MRgFUS services in an APC that
historically had contained only SRS procedures. These same commenters
argued that the MRgFUS procedure is not similar to SRS treatment
delivery services based on clinical coherence and resource utilization.
Some commenters suggested that CMS reassign these procedures, as
previously done in CY 2007, to a female reproductive procedure APC.
Response: As we stated in the CY 2006 OPPS final rule with comment
period and the CY 2007 OPPS/ASC final rule with comment period, because
treatment of uterine fibroids is most common among women younger than
65 years of age, we did not expect that there ever would be many
Medicare claims for the MRgFUS procedures (70 FR 68600 and 71 FR 68050,
respectively). Analysis of hospital outpatient data for claims
submitted for CY 2006 indicates that MRgFUS procedures were rarely
performed on Medicare patients. For OPPS claims submitted from CY 2005
through CY 2006, our claims data showed that there were only two claims
submitted for CPT code 0071T in CY 2005 and one in CY 2006. We had no
hospital claims for CPT code 0072T from either of those years. While we
have no information from hospital claims regarding the costs of MRgFUS
procedures, we continue to believe that the clinical and expected
resource characteristics of MRgFUS procedures resemble the first or
complete session LINAC-based SRS treatment delivery services that are
also assigned to APC 0067. The APC Panel also recommended that MRgFUS
procedures be assigned to that clinical APC, instead of a New
Technology APC. While commenters pointed to specific differences in the
technologies utilized for MRgFUS and SRS procedures, both services are
noninvasive and utilize specialized equipment and image guidance in the
targeted ablation of abnormal tissue during a lengthy treatment
session. Therefore, we believe that the services are sufficiently
similar to reside in the same clinical APC.
After consideration of the public comments received and the APC
Panel recommendation at its March 2007 meeting, we are finalizing our
proposal, without modification, to assign CPT codes 0071T and 0072T to
APC 0067, with a CY 2008 median cost of approximately $3,882. Table 18
lists the final APC median costs for the MRgFUS CPT codes.

Table 18.--Final CY 2008 APC Assignments of MRgFUS Procedures
----------------------------------------------------------------------------------------------------------------
Final CY
HCPCS code Short descriptor CY 2007 SI CY 2007 CY 2007 APC Final CY 2008 Final CY 2008 APC
APC median cost SI 2008 APC median cost
----------------------------------------------------------------------------------------------------------------
0071T.......... U/s leiomyomata T......... 0195 $1,742 S............. 0067 $3,882
ablate <200.
0072T.......... U/s leiomyomata T......... 0202 $2,534 S............. 0067 $3,882
ablate >200.
----------------------------------------------------------------------------------------------------------------

[[Page 66712]]

f. Uterine Fibroid Embolization (APC 0202)
Prior to January 1, 2007, a specific CPT code did not exist to
describe uterine fibroid embolization. CPT guidance suggests that
hospitals previously reported this procedure using CPT codes 37204
(Transcatheter occlusion or embolization (eg, for tumor destruction, to
achieve hemostasis, to occlude a vascular malformation), percutaneous,
any method, non-central nervous system, non-head or neck) and 75894
(Transcatheter therapy, embolization, any method, radiological
supervision and interpretation). In CY 2006, the combined APC payment
for these two procedures was approximately $2,504. Effective January 1,
2007, the CPT Editorial Panel created CPT code 37210 (Uterine fibroid
embolization (UFE, embolization of the uterine arteries to treat
uterine fibroids, leiomyomata), percutaneous approach inclusive of
vascular access, vessel selection, embolization, and all radiological
supervision and interpretation, intraprocedural roadmapping, and image
guidance necessary to complete the procedure) to describe this
procedure. In the CY 2007 OPPS/ASC final rule with comment period (71
FR 68317), we provided an interim final assignment of CPT code 37210 to
APC 0202 (Level VII Female Reproductive Procedures), with a CY 2007
payment rate of approximately $2,642. For CY 2008, we proposed
continued assignment of CPT code 37210 to APC 202 (72 FR 42936), with a
proposed payment rate of approximately $2,753. Because this is a new
code for CY 2007, the CY 2006 claims data, upon which we set CY 2008
payment rates, do not reflect use of this code.
At the September 2007 meeting of the APC Panel, the Panel
recommended that CMS consider moving CPT code 37210 to another APC,
such as APC 0067 (Level III Stereotactic Radiosurgery), with a CY 2008
proposed payment rate of approximately $3,918, or APC 0229
(Transcatheter Placement of Intravascular Shunts), with a CY 2008
proposed payment rate of approximately $5,713, to improve the clinical
and resource homogeneity of the procedure within its assigned APC.
We received several public comments on the CY 2007 OPPS/ASC final
rule with comment period and the CY 2008 OPPS/ASC proposed rule
regarding the placement of CPT code 37210 in APC 0202. A summary of the
public comments and our response follow.
Comment: Several commenters requested that CMS consider the APC
Panel's recommendation to reassign CPT code 37210 to a different APC.
The commenters argued that the uterine fibroid embolization procedure
is clinically dissimilar to the other procedures assigned to APC 0202,
which do not require the implantation of a device and do not utilize
imaging resources. The commenters suggested that CMS create a new APC
for CPT code 37210 or reassign it to APC 0229. The commenters stated
that the uterine fibroid embolization procedure is similar to the other
vascular procedures included in APC 0229, both clinically and in terms
of resource utilization. Specifically, the commenters noted that the
uterine fibroid embolization procedure is similar to the revision of
transvenous intrahepatic portosystemic shunts, described by CPT code
37183 (Revision of transvenous intrahepatic portosystemic shunt(s)
(TIPS) (includes venous access, hepatic and portal vein
catheterization, portography with hemodynamic evaluation, intrahepatic
tract recanulization/dilatation, stent placement and all associated
imaging guidance and documentation)), which maps to APC 0229. According
to the commenters, both uterine fibroid embolization and the revision
of transvenous intrahepatic portosystemic shunts involve device
implantation, selective catheterization, and radiological supervision
and interpretation. The commenters stated that the hospital resource
consumption related to the devices used in uterine fibroid embolization
are also similar to other procedures in APC 0229, including those
described by CPT code 37205 (Transcatheter placement of an
intravascular stent(s) (except coronary, carotid, and vertebral
vessel), percutaneous; initial vessel) and CPT code 37206
(Transcatheter placement of an intravascular stent(s) (except coronary,
carotid, and vertebral vessel), percutaneous; each additional vessel).
Response: We reviewed the clinical characteristics and claims-based
costs of all procedures also proposed for assignment to APC 0202 for CY
2008, as well as the recommendation of the APC Panel from its September
2007 meeting. We do not believe that the procedure described by CPT
code 37210 sufficiently resembles the services assigned to APC 0067,
one of the possibilities recommended by the APC Panel, for that
clinical APC to be an appropriate assignment. The stereotactic
radiosurgery, magnetic resonance-guided focused ultrasound ablation,
and magnetoencephalography services assigned to APC 0067 all are
noninvasive procedures that do not require vascular catheterization or
the use of implantable devices. We examined the clinical
characteristics and resource costs of procedures assigned to APC 0229
and agree with some of the commenters that this APC would be an
appropriate assignment for CPT code 37210 for CY 2008 while we await
claims data that will be available for the CY 2009 OPPS update. CPT
code 37210, like other procedures assigned to APC 0229, requires the
targeted use of intravascular catheters, imaging guidance, and
implantable devices, and we believe the procedure room time and
recovery period for the services would be relatively comparable. CPT
code 37210 appears to be more closely related, both in terms of
clinical characteristics and resource costs, to the minimally invasive
interventional procedures assigned to APC 0229 than to many of the open
surgical repair procedures of the female reproductive system assigned
to APC 0202. We are unable to assign CPT code 37210 to a new clinical
APC for CY 2008 because we would have no claims data for the procedure
upon which to base the payment rate for that APC. Therefore, we have
adopted the recommendation of the APC Panel to consider moving CPT code
37210 to APC 0229 and will reassign the procedure to that APC for CY
2008.
After consideration of the public comments received, we are
modifying our CY 2008 proposal and will reassign CPT code 37210 for
uterine fibroid embolization to APC 0229, with a median cost of
approximately $5,570.
4. Nervous System Procedures
a. Chemodenervation (APC 0206)
For CY 2008, we proposed to reassign two chemodenervation
procedures, specifically those described by CPT codes 64650
(Chemodenervation of eccrine glands; both axillae) and 64653
(Chemodenervation of eccrine glands; other area(s) (eg, scalp, face,
neck), per day) to APC 0206 (Level II Nerve Injections), with a
proposed payment rate of approximately $265. These services are
currently assigned to APC 0204 (Level I Nerve Injections) for CY 2007,
with a payment rate of approximately $139.
We received one public comment on our CY 2008 proposed assignment
of chemodenervation procedures to APC 0206. A summary of the public
comment and our response follow.
Comment: One commenter was concerned that CMS proposed to reassign
CPT codes 64650 and 64653 to APC 0206 for CY 2008, but retained other
chemodenervation procedures in

[[Page 66713]]

APC 0204, specifically CPT codes 64612 (Chemodenervation of muscle(s);
muscle(s) innervated by facial nerve (eg, for blepharospasm, hemifacial
spasm); 64613 (Chemodenervation of muscle(s); cervical spinal muscle(s)
(eg, for spasmodic torticollis); and 64614 (Chemodenervation of
muscle(s); extremity(s) and/or trunk muscle(s) (eg, for dystonia,
cerebral palsy, multiple sclerosis). The commenter believed that CPT
codes 64650 and 64653 for chemodenervation of eccrine glands should be
grouped with the other three cited chemodenervation codes based on
clinical and resource considerations. Of note, many commenters stated
that if CMS proceeded with the packaging of electrodiagnostic guidance
for chemodenervation procedures, a new distinct APC should be
established for CPT codes 64612, 64613, and 64614, but CPT codes 64650
and 64653 were not included in that request.
Response: CPT codes 64650 and 64653 were new codes in CY 2006,
which were initially assigned to APC 0204 on an interim final basis,
and subsequently retained in that APC for CY 2007. For CY 2008, we
proposed to reassign them to APC 0206 based on analysis of our first
limited claims data from CY 2006. The final rule median cost for APC
0204 is approximately $146 and for APC 0206 is approximately $258. Our
claims data showed a median cost of approximately $221 for CPT code
64650 and a median cost of approximately $235 for CPT code 64653 based
on only 7 claims (of 11 total claims) and 15 claims (of 22 total
claims), respectively. We agree with the commenter that these two
chemodenervation procedures are clinically similar to the three
procedures reported for chemodenervation of the muscles. Given the
final CY 2008 packaging policy as discussed section II.A.4.c.(1) of
this final rule with comment period that will package payment for the
electrodiagnostic guidance for chemodenervation services, we would
expect that the hospital resources required for CPT codes 64612 through
64614, where this guidance is sometimes used, would be at least as
great as those required for chemodenervation of eccrine glands. In view
of the limited claims for CY 2006 for CPT codes 64650 and 64653, we
agree with the commenters that these two CPT codes should be assigned
to the same APC as the other three chemodenervation procedures,
specifically CPT codes 64612 through 64614, whose median costs of
approximately $125 through $187 are within the range of costs for other
significant services also assigned to APC 0204, where these muscle
chemodenervation procedures were proposed for assignment in CY 2008. We
do not see any need to establish a new APC for CPT codes 64612 through
64614 for CY 2008 based on clinical and resource considerations.
Therefore, we believe that CPT codes 64650 and 65653 should remain in
APC 0204 for CY 2008. As we accumulate additional claims data for these
procedures we will reassess their resource utilization and APC
placement.
After consideration of the public comment received, we are
modifying the CY 2008 proposed assignments of CPT codes 64650 and 64653
and retaining these two CPT codes in APC 0204, with a median cost of
approximately $146, rather than reassigning them to APC 0206 as
proposed.
b. Implantation of Intrathecal or Epidural Catheter (APC 0224)
For CY 2008, we proposed to delete APC 0223 (Implantation or
Revision of Pain Management Catheter) and reassign CPT code 62350
(Implantation, revision, or repositioning of tunneled intrathecal or
epidural catheter, for long-term medication administration via an
external pump or implantable reservoir/infusion pump; without
laminectomy) to APC 0224 (Implantation of catheter/reservoir/shunt).
The procedure described by CPT code 62350 is the only procedure
assigned to APC 0223 in CY 2007, with a payment rate of approximately
$1,896. The CY 2008 proposed payment for APC 0224 was approximately
$2,364.
We received one public comment on our CY 2008 proposal to reassign
CPT code 62350 to APC 0224. A summary of the public comment and our
response follow.
Comment: One commenter supported the proposal to delete APC 0223
and reassign CPT code 62350 to APC 0224. According to the commenter,
this policy would increase resource homogeneity and clinical coherence.
Response: We appreciate the commenter's support and agree that the
deletion of APC 0223 and the reassignment of CPT code 62350 to APC 0224
would increase resource homogeneity and clinical coherence of the
resulting APC configuration by assigning multiple similar procedures
for the implantation of nervous system shunts and catheters to the same
clinical APC. We also believe this proposal is consistent with our
overall strategy to encourage hospitals to use resources more
efficiently by increasing the size of the payment bundles, and by
eliminating, whenever possible, APCs comprised of few procedures.
Therefore, we are finalizing our proposal, without modification, to
delete APC 0223 and reassign CPT code 62350 to APC 0224, with a median
cost of approximately $2,282.
c. Implantation of Spinal Neurostimulators (APC 0222)
The CPT code for insertion of a spinal neurostimulator (63685,
Insertion or replacement of spinal neurostimulator pulse generator or
receiver, direct or inductive coupling), which is currently assigned to
APC 0222 (Implantation of Neurological Device), is reported for both
the insertion of a nonrechargeable neurostimulator and a rechargeable
neurostimulator. The costs of a nonrechargeable neurostimulator from
the CY 2005 claims are packaged into the payment for APC 0222 in CY
2007. We believe rechargeable neurostimulators are currently most
commonly implanted for spinal neurostimulation, consistent with the
information provided during our consideration of the device for pass-
through designation. However, in response to hospital requests, in CY
2007 we expanded our procedure-to-device edits to allow device category
code C1820 (Generator, neurostimulator (implantable), with rechargeable
battery and charging system) to be reported with two other procedures.
These procedures are CPT code 64590 (Insertion or replacement of
peripheral or gastric neurostimulator pulse generator or receiver,
direct or inductive coupling), assigned to APC 0222, and CPT code 61885
(Insertion or replacement of cranial neurostimulator pulse generator or
receiver, direct or inductive coupling; with connection to a single
electrode array), assigned to APC 0039 (Level I Implantation of
Neurostimulator).
The rechargeable neurostimulator reported as device category code
C1820 has received pass-through payment since January 1, 2006, and its
pass-through status will expire on January 1, 2008, as discussed
further in section IV.B. of this final rule with comment period. During
the 2 years of pass-through payment when device category code C1820 has
been paid at a hospital's charges reduced to cost using the overall
hospital CCR, we have applied a device offset when device category code
C1820 is reported with a CPT code assigned to APCs 0039 or 0222 in
order to remove the costs of the predecessor nonrechargeable device
from the payment for APCs 0039 and 0222. This device offset ensures
that no duplicate

[[Page 66714]]

device payment is made. As a general policy, under the OPPS we package
payment for the costs of devices into the payment for the procedure in
which they are used.
Because we traditionally have paid for a service package under the
OPPS as represented by a HCPCS code for the major procedure that is
assigned to an APC group for payment, we assess the applicability of
the 2 times rule to services at the HCPCS code level, not at a more
specific level based on the individual devices that may be utilized in
a service reported with a single HCPCS code. If the use of a very
expensive device in a clinical scenario causes a specific procedure to
be much more expensive for the hospital than the APC payment, we
consider such a case to be the natural consequence of a prospective
payment system that anticipates that some cases will be more costly and
others less costly than the procedure payment. In addition, very high
cost cases could be eligible for outlier payment. As we note in section
II.A.4. of this final rule with comment period, decisions about
packaging and bundling payment involve a balance between ensuring some
separate payment for individual services and establishing incentives
for efficiency through larger units of payment. In the case of
implantable nonpass-through devices, these devices are part of the OPPS
payment package for the procedures in which they are used.
Stakeholders encouraged us to deem as two distinct procedures
neurostimulator implantation involving rechargeable and nonrechargeable
devices, so in the CY 2008 proposed rule we conducted a review of our
CY 2006 claims data for APC 0222. This examination showed that the
median costs of the associated neurostimulator implantation procedures
are higher for rechargeable neurostimulator implantation than for
nonrechargeable neurostimulator implantation, as shown in Table 35 of
the proposed rule (72 FR 42716). However, the difference in costs
(approximately $6,500 based on proposed rule data) was not so great
that retaining the procedures for the implantation of both types of
devices for spinal or peripheral neurostimulation in APC 0222 would
cause a 2 times violation, even if we were to consider them to be
distinct procedures. The data did not justify creating a new clinical
APC. In addition, to pay differentially would require us to establish
one or more Level II HCPCS codes for reporting under the OPPS, because
the three CPT codes for which device category code C1820 is currently
an allowed device do not differentiate among the device implantation
procedures based on the specific device used. The creation of special
Level II HCPCS codes for OPPS reporting is generally undesirable,
unless absolutely essential, because it increases hospital
administrative burden as the codes may not be accepted by other payers.
Establishing separate coding and payment would reduce the size of the
APC payment groups in a year in which we proposed to increase packaging
under the OPPS through expanded payment groups.
Therefore, for CY 2008 we proposed to package the costs of
rechargeable neurostimulators into the payment for the CPT codes that
describe the services furnished. Our proposed median cost for APC 0222
was approximately $12,162. We thought this approach to be the most
administratively simple, consistent with the OPPS packaging principles,
and supportive of encouraging hospital efficiency, while also providing
appropriate packaged payment for implantable neurostimulators. In the
proposed rule (72 FR 42716), we specifically requested that commenters
submit comments that address how this specific device implantation
situation differed from many other scenarios under the OPPS, where
relatively general HCPCS codes describe procedures that may utilize a
variety of devices with different costs, and payment for those devices
is packaged into the payment for the associated procedures.
We received many public comments in response to this proposal. A
summary of the public comments and our response follow.
Comment: The commenters urged CMS to pay differentially for
rechargeable and nonrechargeable neurostimulators by creating separate
APCs for the implantation procedures. They argued that the 2 times rule
is a sufficient but not necessary condition for splitting APCs, and
they identified other factors apart from the 2 times rule that should
be taken into consideration in determining APC assignments. The
commenters argued that the resources required to implant rechargeable
versus nonrechargeable neurostimulators vary substantially, and that a
combined APC for these procedures would result in a payment that is
inequitable for both technologies and may lead to incentives for
facilities to furnish only the less costly technology, even when the
more expensive technology is clinically indicated for a particular
patient. The commenters stated that the prospect of hospitals limiting
patient access to rechargeable neurostimulators is particularly
troubling because this technology represents a substantial clinical
improvement for select patients and is more cost-effective compared to
nonrechargeable neurostimulators. The commenters argued that paying
more initially for rechargeable neurostimulators would save the
Medicare program and beneficiaries money in the long term, and improve
overall patient care and satisfaction. The commenters also pointed to
provider concentration as an additional factor that should be
considered in APC assignments. In the case of neurostimulators,
commenters provided data that showed only 27 percent of the total
number of hospitals that implant nonrechargeable neurostimulators also
implant rechargeable neurostimulators, and stated that an APC payment
that combines payment for rechargeable and nonrechargeable
neurostimulator implantation procedures may bias the payment system
against those hospitals.
The commenters disagreed with the assertion in the proposed rule
that creating a new APC dedicated solely to rechargeable
neurostimulator implantation procedures would be inconsistent with OPPS
packaging principles. According to the commenters, distinct treatment
of rechargeable and nonrechargeable neurostimulators is not an issue of
packaging, because the technologies are not ancillary services or
products. Instead, the commenters characterized them as alternative
treatments depending on patient needs, and indicated that neither
rechargeable nor nonrechargeable neurostimulators represent
subordinate, supportive, or optional services relative to the other.
The commenters also disagreed that as rechargeable neurostimulators
become the dominant device implanted for neurostimulation, the median
costs of APC 0222 would increase to reflect the costs of the
technology. According to their analysis of claims data, approximately
60 percent of the CY 2006 single procedure claims for APC 0222 were for
implantation of gastric, sacral, or other types of peripheral nerve
neurostimulator devices, all of which utilize and are indicated for
nonrechargeable technologies only. Therefore, the commenters claimed
that the median costs for APC 0222 would continue to be dominated by
nonrechargeable neurostimulator implantation procedures, even as the
utilization of rechargeable neurostimulators grows.
The commenters responded to the proposed rule request to describe
how this specific device implantation situation differed from many
other scenarios under the OPPS, where relatively general HCPCS codes
describe

[[Page 66715]]

procedures that may utilize a variety of devices with different costs,
and payment for those devices is packaged into the payment for the
associated procedures. The commenters stated that they were unaware of
other APCs that include devices where the magnitude of the cost
difference among packaged services is as substantial as proposed for
neurostimulators. They also asserted that, unlike other OPPS services,
rechargeable neurostimulators can reduce long-term costs. Rather than
promoting efficiency, they argued, the CMS proposal to group payment
for rechargeable neurostimulator implantation procedures with
procedures involving nonrechargeable neurostimulators would discourage
efficient resource utilization. They submitted economic models
presented at special society meetings that concluded rechargeable
spinal neurostimulators should reduce the number of reimplantation
procedures due to battery depletion as well as reduce the number of
complications associated with reimplantation procedures, and ultimately
result in cost savings to payers and the health system.
The commenters offered various coding mechanisms that would enable
the creation of unique APCs for rechargeable and nonrechargeable
neurostimulator implantation procedures. Some commenters urged CMS to
create new Level II HCPCS codes to differentiate between
neurostimulator implantation procedures involving nonrechargeable and
rechargeable devices, assign those HCPCS codes to separate APCs, and
discontinue the use of CPT codes describing these procedures for OPPS
payment purposes. These commenters stated that any administrative
burden posed by new Level II HCPCS codes would be outweighed by the
higher payment the hospital would receive for rechargeable
neurostimulators, and that this methodology is consistent with previous
CMS actions to identify and allow specific payment for services of
importance to Medicare. Other commenters, however, supported the CMS
proposal not to implement new Level II HCPCS codes, arguing that it is
too much of an administrative burden for hospitals to follow coding
rules for Medicare patients that are inconsistent with CPT coding
guidelines. They suggested that neurostimulator implantation procedures
that contain the existing C-code for the rechargeable device (C1820)
map to a new APC with a higher payment rate, while claims for
neurostimulator implantation procedures with the existing C-code for
the nonrechargeable device (C1767) continue to map to APC 0222. Other
commenters requested that CMS pursue new CPT codes through the AMA
rather than create new Level II HCPCS codes.
Response: After consideration of the comments received on this
issue, we have decided to reconfigure the APC assignments of procedures
involving implantation of neurostimulators in order to improve the
resource homogeneity of these APCs and ensure appropriate payment for
both rechargeable and nonrechargeable neurostimulators. Effective
January 1, 2008, CMS will implement a revised APC configuration for
neurostimulator implantation procedures that groups payment for certain
procedures mainly involving nonrechargeable neurostimulator technology
(that is, cranial, sacral, gastric, or other peripheral
neurostimulators) into two clinical APCs (APCs 0039 and 0315), while
establishing a single APC for spinal neurostimulator implantation,
which may commonly utilize either rechargeable or nonrechargeable
technologies (APC 0222). Specifically, CMS will reassign CPT code 64590
for implantation of peripheral neurostimulators from APC 0222 to APC
0039, which already includes CPT code 61885 for implantation of single
array cranial neurostimulators. CPT code 63685 for the implantation of
spinal neurostimulators will be the only code remaining in APC 0222. By
moving CPT code 64590 to APC 0039, all procedures that generally use
nonrechargeable technologies only will be removed from ratesetting for
spinal neurostimulator implantation, for which both rechargeable and
nonrechargeable neurostimulators are indicated and commonly utilized.
This APC reconfiguration will not affect CPT code assignment to APC
0315 (Level II Implantation of Neurostimulators), which will continue
to include only CPT code 61886 (Insertion or replacement of cranial
neurostimulator pulse generator or receiver, direct or inductive
coupling; with connection to two or more electrode arrays), although we
will rename all three APCs to accommodate this new configuration. The
revised APC configuration and naming convention for neurostimulator
implantation APCs are summarized in Table 19 below. We note that this
approach does not require hospitals to alter their coding practices in
any way to conform to the new payment policy.
We agree with commenters that there are other important factors we
consider when deciding on APC assignments besides the 2 times rule. In
our CY 2001 final rule, we recognized that resource homogeneity is a
fundamental criterion for evaluating changes to APC assignments. We
wrote in the CY 2001 final rule that ``if the procedures within an APC
require widely varying resources, it would be difficult to develop
equitable payment rates. Aggregated payments to a facility that
performed a disproportionate share of either the expensive or
inexpensive procedures within an APC would be distorted. Further, the
facility might be encouraged to furnish only the less costly procedures
within the APC, resulting in a potential access problem for the more
costly services'' (65 FR 18457). In the case of the neurostimulator
implantation APC configuration that we are adopting for CY 2008, two of
the APCs contain only one procedure and one APC contains only two CPT
codes, with very close CPT code-specific median costs, so these three
APCs reflect great resource homogeneity. We do not consider the
implantation of rechargeable and nonrechargeable neurostimulators to be
different procedures, so we see no need to adopt differential coding
and/or payment for procedures that depend on the device implanted. We
believe our final APC configuration will provide appropriate payment
for neurostimulator implantation procedures that ensures access to the
appropriate neurostimulator technologies under the OPPS for Medicare
beneficiaries.
Just as we do not want to provide incentives for the
underutilization of rechargeable neurostimulators, we also do not want
to provide incentives for the overutilization of this expensive
technology. According to information provided by the manufacturers of
rechargeable neurostimulators, these devices are clinically indicated
in only a subset of patients for whom spinal neurostimulation is a
treatment option. They estimate that approximately 35 percent of these
patients are candidates for rechargeable spinal neurostimulators,
although this proportion may be higher. Our claims data from CY 2006,
the first year of device pass-through for the rechargeable devices,
already indicate that rechargeable neurostimulators are being implanted
in about one-third of the spinal neurostimulator implantation cases. We
received comments from many providers, however, who stated that they
use or wish to use the rechargeable technology in all of their
patients. We believe that creating a separate APC for rechargeable
neurostimulator implantation, as was recommended by commenters, could

[[Page 66716]]

create incentives for hospitals to use the more expensive rechargeable
technology, even when the more expensive technology is not clinically
indicated. In contrast to the commenters' perspective, we believe that
packaging payment for implantable devices into the related procedures
is an important packaging principle that contributes to the size of the
OPPS payment bundles. Although our CY 2008 proposal was to newly
package payment for certain ancillary and supportive services, many
other items and types of services that are fundamental to a procedure's
therapeutic effect have been historically packaged under the payment
system and will remain packaged for CY 2008. A policy to provide
different payments for procedures according to the devices implanted
would not be consistent with our overall strategy to encourage
hospitals to use resources more efficiently by increasing the size of
the payment bundles. However, we believe that the revised
neurostimulator APC configuration that we are adopting for CY 2008 will
allow us to calculate payment rates for procedures involving spinal
neurostimulators that reflect changes in surgical practice based on
clinical, rather than financial, considerations. To the extent that
rechargeable neurostimulators may become the dominant device implanted
for spinal neurostimulation over time based on the evolution of
clinical practice, the median costs for the spinal neurostimulator
implantation APC may increase to reflect contemporary utilization
patterns.
In summary, for CY 2008, we are finalizing our proposal, with
modification, for payment of neurostimulator implantation procedures.
We will implement a revised APC configuration for neurostimulator
implantation procedures that packages payment for procedures involving
mainly nonrechargeable neurostimulator technology (i.e., cranial,
sacral, gastric, or other peripheral neurostimulators) into two APCs
(APCs 0039 and 0315), while establishing a single APC for spinal
neurostimulator implantation, which commonly utilizes either
rechargeable or nonrechargeable technologies (APC 0222). We believe
that this revised APC configuration best serves the principles of a
prospective payment system by following our standard practice of
retaining a single CPT code for neurostimulator implantation procedures
that does not distinguish between the implantation of rechargeable and
nonrechargeable neurostimulators, into which the costs of both types of
devices are packaged in relationship to their OPPS utilization. We also
believe the revised APC configuration is both consistent with our
standard ratesetting practice for technologies coming off pass-through
status, and reflective of the clinical and resource considerations
presented by commenters. Because no new codes or coding practices will
be required, hospitals will not experience any change in the
administrative burden associated with reporting neurostimulator
implantation procedures.

Table 19.--CY 2008 APC Configuration for Payment of Rechargeable and Nonrechargeable Neurostimulator Implantation Procedures
--------------------------------------------------------------------------------------------------------------------------------------------------------
HCPCS codes CY 2008 CY 2008
included in CPT code APC
APC Revised title for CY 2008 Previous title CY 2008 HCPCS descriptor median median
median cost cost cost
--------------------------------------------------------------------------------------------------------------------------------------------------------
0039.............................. Level I Implantation of Level I Implantation of 61885 Insertion or replacement $12,799 $11,732
Neurostimulator. Neurostimulator. of cranial
neurostimulator pulse
generator or receiver,
direct or inductive
coupling; with
connection to a single
electrode array.
64590 Insertion or replacement $10,954 $11,732
of peripheral
neurostimulator pulse
generator or receiver,
direct or inductive
coupling.
0222.............................. Level II Implantation of Implantation of 63685 Insertion or replacement $15,150 $15,150
Neurostimulator. Neurological Device. of spinal
neurostimulator pulse
generation or receiver,
direct or inductive
coupling.
0315.............................. Level III Implantation of Level II Implantation of 61886 Insertion or replacement $16,988 $16,988
Neurostimulator. Neurostimulator. of cranial
neurostimulator pulse
generator or receiver,
direct or inductive
coupling; with
connection to two or
more electrode arrays.
--------------------------------------------------------------------------------------------------------------------------------------------------------

5. Nuclear Medicine and Radiation Oncology Procedures
a. Adrenal Imaging (APC 0391)
For CY 2008, we proposed to assign CPT code 78075 (Adrenal imaging,
cortex and/or medulla) to APC 0391 (Level II Endocrine Imaging), with a
proposed payment rate of about $233. Currently, this procedure is
assigned to the same clinical APC for CY 2007.
We received several public comments concerning this proposal. A
summary of the public comments and our response follow.
Comment: Some commenters requested that CMS recognize this code as
a high intensity multiday imaging procedure and reassign CPT code 78075
to APC 0408 (Level III Tumor/Infection Imaging), along with another
multiday tumor imaging procedure code CPT code 78804
(Radiopharmaceutical localization of tumor or distribution of
radiopharmaceutical agent(s); whole body, requiring two or more days
imaging).
Response: Based on our review of the costs and clinical
characteristics of CPT code 78075, we agree with the commenters that
this procedure is similar to CPT code 78804, in terms of clinical
homogeneity and resource costs. Both procedures require nuclear
medicine imaging several days following the injection of a diagnostic
radiopharmaceutical. We note that these services are nuclear medicine
procedures and, therefore, their final rule median costs are calculated
according to the temporary special methodology that relies on the
subset of claims reporting coded diagnostic radiopharmaceuticals, as
described in section II.A.4.c. of this final rule with comment period.
Our claims data from CY 2006 showed that the median cost for CPT code
78075 is approximately $954 based on 124 single claims for

[[Page 66717]]

ratesetting, which is relatively similar to the median cost of
approximately $1,194 for the sole procedure code 78804 proposed for
assignment to APC 0408. In contrast, the HCPCS-specific median costs
for the individual significant procedures in APC 0391 range from
approximately $201 to $243, resulting in an APC median cost of
approximately $217. The median cost of APC 0391 is significantly lower
than the APC 0408 median cost of approximately $969 and the CPT code
78075 median cost of approximately $954.
After considering the public comments received, we are modifying
our proposal and are reassigning CPT code 78075 to APC 0408, with a CY
2008 median cost of approximately $969, rather than to APC 0391 as
proposed.
b. Injection for Sentinel Node Identification (APC 0389)
For CY 2008, we proposed to assign the sentinel node identification
procedure, specifically described by CPT code 38792 (Injection
procedure; for identification of sentinel node), to APC 0389 (Level I
Non-imaging Nuclear Medicine), with a proposed payment rate of
approximately $101. Currently, this procedure is assigned to the same
clinical APC for CY 2007.
We received several public comments on our CY 2008 proposed
assignment of CPT code 38792 to APC 0389. A summary of the public
comments and our responses follow.
Comment: Some commenters recommended that CPT code 38792 be
reassigned from APC 0389 to APC 0392 (Level II Non-imaging Nuclear
Medicine), which had a proposed payment rate of approximately $209. The
commenters indicated that an injection for sentinel node identification
is more resource intensive, as corroborated by the CMS hospital
outpatient claims data, than other procedures also assigned to APC
0389. These commenters requested that CMS reassign CPT code 38792 to
APC 0392 for CY 2008.
Response: Based on our review of the costs and clinical
characteristics of CPT code 38792, we agree with the commenters that
this procedure is most similar to those procedures assigned to APC 0392
for CY 2008. Our claims data from CY 2006 showed that the median cost
for CPT code 38792 is approximately $174 based on 390 single claims
available for ratesetting, which is significantly higher than the
median cost of approximately $114 for APC 0389. The median cost of APC
0392 of $183, which contains nuclear medicine procedures and,
therefore, is calculated according to the special methodology described
in section II.A.4.c. of this final rule with comment period, is more
consistent with the hospital resources required to perform CPT code
38792.
After consideration of the public comments received, we are
modifying our proposal and reassigning CPT code 38792 to APC 0392, with
a CY 2008 median cost of approximately $183, rather than to APC 0389 as
proposed.
c. Myocardial Positron Emission Tomography (PET) Scans (APC 0307)
From August 2000 to December 31, 2005, under the OPPS, we assigned
one clinical APC to all myocardial positron emission tomography (PET)
scan procedures, which were reported with multiple G-codes through
March 31, 2005. Under the OPPS, effective April 1, 2005, myocardial PET
scans were reported with three CPT codes, specifically CPT codes 78459
(Myocardial imaging, positron emission tomography (PET), metabolic
evaluation), 78491 (Myocardial imaging, positron emission tomography
(PET), perfusion; single study at rest or stress), and 78492
(Myocardial imaging, positron emission tomography (PET), perfusion;
multiple studies at rest and/or stress). From April 1, 2005 through
December 31, 2005, these three CPT codes were assigned to one APC,
specifically APC 0285 (Myocardial Positron Emission Tomography (PET),
with a payment rate of approximately $736. In CY 2006, in response to
the public comments received on the CY 2006 OPPS proposed rule, and
based on our claims information, myocardial PET services were assigned
to two clinical APCs for the CY 2006 OPPS. The CPT codes for the single
scans, specifically 78459 and 78491, were assigned to APC 0306
(Myocardial Positron Emission Tomography (PET) Imaging, Single Study,
Metabolic Evaluation) with a payment rate of approximately $801, and
the multiple scan CPT code 78492 was assigned to APC 0307 (Myocardial
Positron Emission Tomography (PET) Imaging, Multiple Studies) with a
payment rate of approximately $2,485, effective January 1, 2006.
However, analysis of the CY 2005 claims data that were used to set the
payment rates for CY 2007 revealed that when all the myocardial PET
scan procedure codes were combined into a single clinical APC, as they
were prior to CY 2006, the APC median cost for myocardial PET services
was very similar to the median cost of their single CY 2005 clinical
APC. Further, our analysis revealed that the updated differential
median costs of the single and multiple study procedures no longer
supported the two-level APC payment structure. Therefore, for CY 2007,
CPT codes 78459, 78491, and 78492, were assigned to a single clinical
APC, specifically APC 0307, which was renamed ``Myocardial Positron
Emission Tomography (PET) Imaging,'' with a median cost of
approximately $727.
At its March 2007 meeting, the APC Panel recommended that CMS
reassign CPT code 78492 to its own clinical APC, to distinguish this
multiple study procedure that the APC Panel believed would require
greater hospital resources from less resource intensive single study
procedures. However, as indicated in the CY 2008 proposed rule (72 FR
42713), we did not accept the APC Panel's recommendation because,
consistent with our observations from the CY 2005 claims data, our CY
2006 claims data available for the proposed rule did not support the
creation of a clinical APC for CPT code 78492 alone. Analysis of the
latest CY 2006 claims data continued to support a single level APC
payment structure for the myocardial PET scan procedures because very
few single scan studies were performed and we believed single and
multiple scan procedures were clinically similar. Our claims data
available for the proposed rule showed a total of 2,547 procedures
reported with the multiple scan CPT code 78492. Alternatively, our
claims data showed only a combined total of 249 procedures reported
with the single scan CPT codes 78459 and 78491, less than 10 percent of
all studies reported. A similar distribution was observed in the single
bills available for ratesetting.
Similar to findings from the CY 2005 data, as we discussed in the
proposed rule, our CY 2006 claims data revealed that more hospitals
were not only providing multiple myocardial PET scan services, but most
myocardial PET scans were multiple studies. Further, our most recent
data analysis for this final rule with comment period revealed that
multiple myocardial PET scan services were commonly performed in the
same hospital encounter with a cardiovascular stress test, specifically
CPT code 93017 (Cardiovascular stress test using maximal or submaximal
treadmill or bicycle exercise, continuous electrocardiographic
monitoring, and/or pharmacological stress; tracing only, without
interpretation and report).
In the CY 2008 OPPS/ASC proposed rule, we indicated our belief that
the assignment of CPT codes 78459, 78491, and 78492 to a single
clinical APC for CY 2008 was still appropriate because the CY 2006
claims data did not support a resource differential among significant

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myocardial PET services that would necessitate the placement of single
and multiple PET scan procedures into two separate clinical APCs.
Therefore, we proposed to continue to assign both the single and
multiple myocardial PET scan procedure codes to APC 0307, with a
proposed APC median cost of approximately $2,678 for CY 2008. We noted
that the proposed CY 2008 median cost of APC 0307 was significantly
higher than its CY 2007 median cost, in part because of our proposed CY
2008 packaging approach discussed in detail in section II.A.4.c.(5) of
this final rule with comment period that would package payment for
diagnostic radiopharmaceuticals into the payment for their related
diagnostic nuclear medicine studies, such as myocardial PET scans. The
myocardial PET scan CPT codes and their proposed CY 2008 APC
assignments were displayed in Table 33 of the proposed rule, which has
been reproduced as Table 20 below, and updated to show the final status
indicators, APC assignments, and median costs for these services.
We received a number of public comments concerning our proposed
payment for myocardial PET scans. A summary of the public comments and
our response follow.
Comments: Some commenters disagreed with our proposal to assign CPT
codes 78459, 78491, and 78492 to a single clinical APC even though the
CY 2006 claims data did not support a resource differential. They
requested that CMS separate single (rest or stress) from multiple (rest
and stress) PET myocardial perfusion imaging studies. Specifically,
these commenters requested that CMS assign the single myocardial PET
codes, CPT codes 78459 and 78491, to APC 0307, and create a new
clinical APC for CPT code 78492, which describes the multiple
myocardial PET scan procedure. The commenters believed that maintaining
the multiple myocardial PET scan in the same APC as the single
myocardial PET scans significantly underpaid hospitals for providing
multiple myocardial PET scan procedures. They reported that multiple
myocardial PET procedures require greater hospital resources than
single myocardial PET scans.
Response: Based on our review of the hospital outpatient claims
data from CY 2005 and CY 2006, as well as the clinical characteristics
of CPT code 78492, we do not agree that we should establish a new
clinical APC solely for the multiple myocardial PET scans. Our claims
data for this final rule with comment period showed a total of 2,808
procedures reported with the multiple scan CPT code 78492. Conversely,
our claims data showed only a combined total of 286 procedures reported
with the single scan CPT codes 78459 and 78491.
We note that our final median cost for this APC is approximately
$1,384, which is significantly lower than the proposed rule median cost
for the APC. According to our final ratesetting policies in which we
included CPT code 93017 on the bypass list as discussed in section
II.1.b of this final rule with comment period, we based APC 0307's
final median cost on 1,832 single claims out of 3,094 CY 2006 claims
for myocardial PET procedures. Due to our bypassing of CPT code 93017
for the cardiovascular stress test commonly reported with myocardial
PET scans, we were able to use almost twice the number of claims to
develop the final median cost based on claims from a large number of
hospitals in comparison with the proposed rule, and almost all of those
additional single claims were for multiple myocardial PET scan
services. As discussed in section II.A.4.c.(5) of this final rule
comment period, the final median cost for APC 0307 was also calculated
only from those claims for myocardial PET scan procedures that also
contained a HCPCS code for a diagnostic radiopharmaceutical. The median
cost of approximately $1,384 compares favorably to our CY 2007
estimated average total payment of $1191 for these services, consisting
of approximately $731 for the scan (APC 0307) and approximately $460
(average estimate of charges reduced to cost) for the commonly used
diagnostic radiopharmaceutical A9555 (Rubidium Rb-82-diagnostic, per
study dose, up to 60 millicuries). Therefore, we believe that the final
median cost of APC 0307 for the scans and associated diagnostic
radiopharmaceuticals appropriately reflects the hospital resources
associated with providing myocardial PET scans to Medicare
beneficiaries in cost-efficient settings and is adequate to ensure
appropriate access to these services for Medicare beneficiaries.
The CY 2008 median cost for APC 0307 of approximately $1,384 is
very similar to the median cost of CPT code 78492 of $1,467, so we do
not believe that the assignment of the relatively small number of
generally lesser cost single scan claims to APC 0307 significantly
reduces the payment rate for multiple scan studies. In addition, as
discussed in section II.A.2. of this final rule with comment period, we
are attempting to reduce the number of low volume APCs under the OPPS
to promote the stability of payment rates. If we were to create a new
clinical APC for multiple myocardial PET scans, APC 0307 for single
scan studies would become a very low volume APC. We continue to believe
that the assignment of CPT codes 78459, 78491, and 78492 to a single
clinical APC for CY 2008 remains appropriate because the CY 2006 claims
data do not support a resource differential among significant
myocardial PET services that would necessitate the placement of single
and multiple PET scan procedures into two separate clinical APCs.
After consideration of the public comments received, we are
finalizing our CY 2008 proposal, without modification, to provide
payment for all myocardial PET scans through APC 0307, with a CY 2008
median cost of approximately $1,384, as shown in Table 20.

Table 20.--Final CY 2008 APC Assignments for Myocardial Pet Scans
----------------------------------------------------------------------------------------------------------------
Final CY
HCPCS code Short descriptor CY 2007 SI CY 2007 CY 2007 APC Final CY 2008 Final CY 2008 APC
APC median cost SI 2008 APC median cost
----------------------------------------------------------------------------------------------------------------
78459.......... Heart muscle S......... 0307 $727 S............. 0307 $ 1,384
imaging (PET).
78491.......... Heart image S......... 0307 $727 S............. 0307 $ 1,384
(pet), single.
78492.......... Heart image S