[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]



[[Page 66579]]

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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

[[Page 66584]]

    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