[Federal Register Volume 73, Number 139 (Friday, July 18, 2008)]
[Proposed Rules]
[Pages 41416-42234]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-15539]



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Part II





Department of Health and Human Services





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Centers for Medicare & Medicaid Services



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42 CFR Parts 410 and 419



Medicare Program: Proposed Changes to the Hospital Outpatient 
Prospective Payment System and CY 2009 Payment Rates; Proposed Changes 
to the Ambulatory Surgical Center Payment System and CY 2009 Payment 
Rates; Proposed Rule

  Federal Register / Vol. 73, No. 139 / Friday, July 18, 2008 / 
Proposed Rules  

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 410 and 419

[CMS-1404-P]
RIN 0938-AP17


Medicare Program: Proposed Changes to the Hospital Outpatient 
Prospective Payment System and CY 2009 Payment Rates; Proposed Changes 
to the Ambulatory Surgical Center Payment System and CY 2009 Payment 
Rates

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

ACTION: Proposed rule.

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SUMMARY: This proposed rule would revise the Medicare hospital 
outpatient prospective payment system to implement applicable statutory 
requirements and changes arising from our continuing experience with 
this system. In this proposed rule, we describe the proposed 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 would be applicable to services furnished 
on or after January 1, 2009.
    In addition, this proposed rule would update the revised Medicare 
ambulatory surgical center (ASC) payment system to implement applicable 
statutory requirements and changes arising from our continuing 
experience with this system. In this proposed rule, we propose the 
applicable relative payment weights and amounts for services furnished 
in ASCs, specific HCPCS codes to which these proposed changes would 
apply, and other pertinent ratesetting information for the CY 2009 ASC 
payment system. These changes would be applicable to services furnished 
on or after January 1, 2009.

DATES: To be assured consideration, comments on all sections of the 
preamble of this proposed rule must be received at one of the addresses 
provided in the ADDRESSES section no later than 5 p.m. EST on September 
2, 2008.

ADDRESSES: In commenting, please refer to file code CMS-1404-P. 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 this 
regulation to http://www.regulations.gov. Follow the instructions for 
``Comment or Submission'' and enter the filecode to find the document 
accepting comments.
    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-1404-P, 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-1404-P, 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:
    a. Room 445-G, Hubert H. Humphrey Building, 200 Independence 
Avenue, SW., Washington, DC 20201.
    (Because access to the interior of the HHH Building is not readily 
available to persons without Federal Government identification, 
commenters are encouraged to leave their comments in the CMS drop slots 
located in the main lobby of the building. A stamp-in clock is 
available for persons wishing to retain a proof of filing by stamping 
in and retaining an extra copy of the comments being filed.)
    b. 7500 Security Boulevard, Baltimore, MD 21244-1850.
    If you intend to deliver your comments to the Baltimore address, 
please call the telephone number (410) 786-9994 in advance to schedule 
your arrival with one of our staff members.
    Comments mailed to the addresses indicated as appropriate for hand 
or courier delivery may be delayed and received after the comment 
period.
    Submission of comments on paperwork requirements. You may submit 
comments on this document's paperwork requirements by following the 
instructions at the end of the ``Collection of Information 
Requirements'' section in this document.
    For information on viewing public comments, see the beginning of 
the SUPPLEMENTARY INFORMATION section.

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.

SUPPLEMENTARY INFORMATION:
    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.regulations.gov. Follow the search instructions 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. EST. 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 Proposed Rule

    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

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    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 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
I/OCE Integrated Outpatient Code Editor
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
MMSEA Medicare, Medicaid, and SCHIP Extension Act of 2007, Pub. L. 
110-173
MPFS Medicare Physician Fee Schedule
MSA Metropolitan Statistical Area
NCCI National Correct Coding Initiative
NCD National Coverage Determination
NTIOL New technology intraocular lens
OMB Office of Management and Budget
OPD [Hospital] Outpatient department
OPPS [Hospital] Outpatient prospective payment system
PHP Partial hospitalization program
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 two payment systems under the Medicare 
program: The hospital outpatient prospective payment system (OPPS) and 
the revised ambulatory surgical center (ASC) payment system. The 
provisions relating to the OPPS are included in sections I. through 
XIV., and XVI. through XXI. of this proposed rule and in Addenda A, B, 
C (Addendum C is available on the Internet only; see section XVIII. of 
this proposed rule), D1, D2, E, L, and M to this proposed rule. The 
provisions related to the revised ASC payment system are included in 
sections XV. and XVII. through XXI. of this proposed rule and in 
Addenda AA, BB, DD1, DD2, and EE (Addendum EE is available on the 
Internet only; see section XVIII. of this proposed rule) to this 
proposed rule.

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, Medicaid, and SCHIP Extension Act of 
2007
F. Summary of the Major Contents of This Proposed Rule
1. Proposed Updates Affecting OPPS Payments
2. Proposed OPPS Ambulatory Payment Classification (APC) Group 
Policies
3. Proposed OPPS Payment for Devices
4. Proposed OPPS Payment for Drugs, Biologicals, and 
Radiopharmaceuticals
5. Proposed Estimate of OPPS Transitional Pass-Through Spending for 
Drugs, Biologicals, Radiopharmaceuticals, and Devices
6. Proposed OPPS Payment for Brachytherapy Sources
7. Proposed OPPS Payment for Drug Administration Services
8. Proposed OPPS Payment for Hospital Outpatient Visits
9. Proposed Payment for Partial Hospitalization Services
10. Proposed Procedures That Will Be Paid Only as Inpatient Services
11. OPPS Nonrecurring and Policy Clarifications
12. Proposed OPPS Payment Status and Comment Indicators
13. OPPS Policy and Payment Recommendations
14. Proposed Update of the Revised Ambulatory Surgical Center 
Payment System
15. Proposed Quality Data for Annual Payment Updates
16. Healthcare-Associated Conditions
17. Regulatory Impact Analysis
II. Proposed Updates Affecting OPPS Payments
A. Proposed Recalibration of APC Relative Weights
1. Database Construction
a. Database Source and Methodology
b. Proposed Use of Single and Multiple Procedure Claims
c. Proposed Calculation of CCRs
(1) Development of the CCRs
(2) Charge Compression
2. Proposed Calculation of Median Costs
a. Claims Preparations
b. Splitting Claims and Creation of ``Pseudo'' Single Claims
c. Completion of Claim Records and Median Cost Calculations
d. Proposed Calculation of Single Procedure APC Criteria-Based 
Median Costs
(1) Device-Dependent APCs
(2) Blood and Blood Products
(3) Single Allergy Tests
(4) Echocardiography Services
(5) Nuclear Medicine Services
(6) Hyperbaric Oxygen Therapy
(7) Payment for Ancillary Outpatient Services When Patient Expires 
(-CA Modifier)
e. Proposed Calculation of Composite APC Criteria-Based Median Costs
(1) Extended Assessment and Management Composite APCs (APCs 8002 and 
8003)
(2) Low Dose Rate (LDR) Prostate Brachytherapy Composite APC (APC 
8001)
(3) Cardiac Electrophysiologic Evaluation and Ablation Composite APC 
(APC 8000)
(4) Mental Health Services Composite APC (APC 0034)

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(5) Multiple Imaging Composite APCs (APCs 8004, 8005, 8006, 8007, 
and 8008)
3. Proposed Calculation of OPPS Scaled Payment Weights
4. Proposed Changes to Packaged Services
a. Background
b. Service-Specific Packaging Issues
(1) Package Services Addressed by APC Panel Recommendations
(2) IVIG Preadministration-Related Services
B. Proposed Conversion Factor Update
C. Proposed Wage Index Changes
D. Proposed Statewide Average Default CCRs
E. Proposed OPPS Payments to Certain Rural Hospitals
1. Hold Harmless Transitional Payment Changes Made by Pub. L. 109-
171 (DRA)
2. Proposed Adjustment for Rural SCHs Implemented in CY 2006 Related 
to Pub. L. 108-173 (MMA)
F. Proposed Hospital Outpatient Outlier Payments
1. Background
2. Proposed Outlier Calculation
3. Outlier Reconciliation
    G. Proposed Calculation of an Adjusted Medicare Payment from the 
National Unadjusted Medicare Payment
    H. Proposed Beneficiary Copayments
1. Background
2. Proposed Copayments
3. Calculation of a Proposed Adjusted Copayment Amount for an APC 
Group
III. Proposed OPPS Ambulatory Payment Classification (APC) Group 
Policies
A. Proposed OPPS Treatment of New HCPCS and CPT Codes
1. Proposed Treatment of New HCPCS Codes Included in the April and 
July Quarterly OPPS Updates for CY 2008
2. Proposed Treatment of New Category I and III CPT Codes and Level 
II HCPCS Codes
B. Proposed OPPS Changes--Variations within APCs
1. Background
2. Application of the 2 Times Rule
3. Proposed Exceptions to the 2 Times Rule
C. New Technology APCs
1. Background
2. Proposed Movement of Procedures from New Technology APCs to 
Clinical APCs
D. Proposed OPPS APC-Specific Policies
1. Trauma Response Associated with Hospital Critical Care Services 
(APC 0618)
2. Suprachoroidal Delivery of Pharmacologic Agent (APC 0236)
3. Closed Treatment Fracture of Finger/Toe/Trunk (APC 0043)
4. Individual Psychotherapy (APCs 0322 and 0323)
5. Implant Injection for Vesicoureteral Reflex (APC 0162)
IV. Proposed OPPS Payment for Devices
A. Pass-Through Payments for Devices
1. Expiration of Transitional Pass-Through Payments for Certain 
Devices
a. Background
b. Proposed Policy
2. Proposed Provisions for Reducing Transitional Pass-Through 
Payments to Offset Costs Packaged into APC Groups
a. Background
b. Proposed Policy
B. Proposed Adjustment to OPPS Payments for Partial or Full Credit 
Devices
1. Background
2. Proposed APCs and Devices Subject to the Adjustment Policy
V. Proposed OPPS Payment Changes for Drugs, Biologicals, and 
Radiopharmaceuticals
A. Proposed OPPS Transitional Pass-Through Payment for Additional 
Costs of Drugs, Biologicals, and Radiopharmaceuticals
1. Background
2. Proposed Drugs and Biologicals with Expiring Pass-Through Status 
in CY 2008
3. Proposed Drugs, Biologicals, and Radiopharmaceuticals with New or 
Continuing Pass-Through Status in CY 2009
4. Proposed Reduction of Transitional Pass-Through Payments for 
Diagnostic Radiopharmaceuticals to Offset Costs Packaged into APC 
Groups
B. Proposed OPPS Payment for Drugs, Biologicals, and 
Radiopharmaceuticals without Pass-Through Status
1. Background
2. Proposed Criteria for Packaging Payment for Drugs, Biologicals, 
and Radiopharmaceuticals
a. Drugs, Biologicals, and Therapeutic Radiopharmaceuticals
b. Proposed Payment for Diagnostic Radiopharmaceuticals and Contrast 
Agents
3. Proposed Payment for Drugs and Biologicals without Pass-Through 
Status That Are Not Packaged
a. Payment for Specified Covered Outpatient Drugs (SCODs)
b. Proposed Payment Policy
c. Proposed Payment for Blood Clotting Factors
4. Proposed Payment for Therapeutic Radiopharmaceuticals
a. Background
b. Proposed Payment Policy
5. Proposed Payment for Nonpass-Through Drugs, Biologicals, and 
Radiopharmaceuticals with HCPCS Codes, but without OPPS Hospital 
Claims Data
VI. Proposed Estimate of OPPS Transitional Pass-Through Spending for 
Drugs, Biologicals, Radiopharmaceuticals, and Devices
A. Background
B. Proposed Estimate of Pass-Through Spending
VII. Proposed OPPS Payment for Brachytherapy Sources
A. Background
B. Proposed OPPS Payment Policy
VIII. Proposed OPPS Payment for Drug Administration Services
A. Background
B. Proposed Coding and Payment for Drug Administration Services
IX. Proposed OPPS Payment for Hospital Outpatient Visits
A. Background
B. Proposed Policies for Hospital Outpatient Visits
1. Clinic Visits: New and Established Patient Visits
2. Emergency Department Visits
3. Visit Reporting Guidelines
X. Proposed Payment for Partial Hospitalization Services
A. Background
B. Proposed PHP APC Update
C. Proposed Policy Changes
1. Proposal to Deny Payments for Low Intensity Days
2. Proposal to Strengthen PHP Patient Eligibility Criteria
3. Proposed Partial Hospitalization Coding Update
C. Proposed Separate Threshold for Outlier Payments to CMHCs
XI. Proposed Procedures That Will Be Paid Only as Inpatient 
Procedures
A. Background
B. Proposed Changes to the Inpatient List
XII. OPPS Nonrecurring Technical and Policy Clarifications
A. Physician Supervision of HOPD Services
1. Background
2. Summary
B. Reporting of Pathology Services for Prostrate Saturation Biopsy
XIII. Proposed OPPS Payment Status and Comment Indicators
A. Proposed OPPS Payment Status Indicator Definitions
1. Proposed Payment Status Indicators to Designate Services That Are 
Paid under the OPPS
2. Proposed Payment Status Indicators to Designate Services That Are 
Paid under a Payment System Other Than the OPPS
3. Proposed Payment Status Indicators to Designate Services That Are 
Not Recognized under the OPPS But That May Be Recognized by Other 
Institutional Providers
4. Proposed Payment Status Indicators to Designate Services That Are 
Not Payable by Medicare
B. Proposed Comment Indicator Definitions
XIV. OPPS Policy and Payment Recommendations
A. Medicare Payment Advisory Commission (MedPAC) Recommendations
1. March 2008 Report
2. June 2007 Report
B. APC Panel Recommendations
C. OIG Recommendations
XV. Proposed Update of the Revised Ambulatory Surgical Center 
Payment System
A. Background
1. Legislative Authority for the ASC Payment System
2. Prior Rulemaking
3. Policies Governing Changes to the Lists of HCPCS Codes and 
Payment Rates for ASC Covered Surgical Procedures and Covered 
Ancillary Services
B. Proposed Treatment of New Codes
1. Proposed Treatment of New Category I and III CPT Codes and Level 
II HCPCS Codes
2. Proposed Treatment of New Level II HCPCS Codes Implemented in 
April and July 2008
C. Proposed Update to the Lists of ASC Covered Surgical Procedures 
and Covered Ancillary Services
1. Covered Surgical Procedures
a. Proposed Additions to the List of ASC Covered Surgical Procedures
b. Covered Surgical Procedures Designated as Office Based
(1) Background
(2) Proposed Changes to Covered Surgical Procedures Designated as 
Office-Based for CY 2009
c. Covered Surgical Procedures Designated as Device-Intensive

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(1) Background
(2) Proposed Changes to List of Covered Surgical Procedures 
Designated as Device-Intensive for CY 2009
2. Covered Ancillary Services
D. Proposed ASC Payment for Covered Surgical Procedures and Covered 
Ancillary Services
1. Proposed Payment for Covered Surgical Procedures
a. Background
b. Proposed Update to ASC Covered Surgical Procedure Payment Rates 
for CY 2009
c. Proposed Adjustment to ASC Payments for Partial or Full Device 
Credit
2. Proposed Payment for Covered Ancillary Services
a. Background
b. Proposed Payment for Covered Ancillary Services for CY 2009
E. New Technology Intraocular Lenses
1. Background
2. NTIOL Application Process for Payment Adjustment
3. Classes of NTIOLs Approved and New Request for Payment Adjustment
a. Background
b. Requests to Establish New NTIOL Class for CY 2009 and Deadline 
for Public Comment
4. Proposed Payment Adjustment
5. Proposed ASC Payment for Insertion of IOLs
F. Proposed ASC Payment and Comment Indicators
1. Background
2. Proposed ASC Payment and Comment Indicators
G. Calculation of the ASC Conversion Factor and ASC Payment Rates
1. Background
2. Proposed Policy Regarding Calculation of the ASC Payment Rates
a. Updating the ASC Relative Payment Weights for CY 2009 and Future 
Years
b. Updating the ASC Conversion Factor
3. Display of Proposed ASC Payment Rates
XVI. 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 Update
B. Existing Hospital Outpatient Measures for CY 2009
C. Proposed Quality Measures for CY 2010 and Subsequent Calendar 
Years and Proposed Process to Update Measures
1. Proposed Quality Measures for CY 2010 Payment Determinations
2. Proposed Process for Updating Measures
3. Possible New Quality Measures for CY 2011 and Subsequent Calendar 
Years
D. Proposed Payment Reduction for Hospitals That Fail to Meet the 
HOP QDRP Requirements for the CY 2009 Payment Update
1. Background
2. Proposed Reduction of OPPS Payments for Hospitals That Fail to 
Meet the HOP QDRP CY 2009 Payment Update Requirements
a. Calculation of Reduced National Unadjusted Payment Rates
b. Calculation of Reduced Minimum Unadjusted and National Unadjusted 
Beneficiary Copayments
c. Treatment of Other Payment Adjustments
E. Requirements for HOP Quality Data Reporting for CY 2010 and 
Subsequent Calendar Years
1. Administrative Requirements
2. Data Collection and Submission Requirements
3. HOP QDRP Validation Requirements
a. Proposed Data Validation Requirements for CY 2010
b. Alternative Data Validation Approaches for CY 2011
F. Publication of HOP QDRP Data
G. Proposed HOP QDRP Reconsideration and Appeals Procedures
H. Reporting of ASC Quality Data
XVII. Healthcare-Associated Conditions
A. Background
B. Broadening the Concept of the IPPS Hospital-Acquired Conditions 
Payment Provision to the OPPS
1. Criteria for Possible Candidate OPPS Conditions
2. Collaboration Process
3. Potential OPPS Healthcare-Associated Conditions
4. OPPS Infrastructure and Payment for Encounters Resulting in 
Healthcare-Associated Conditions
XVIII. Files Available to the Public Via the Internet
A. Information in Addenda Related to the Proposed CY 2009 Hospital 
OPPS
B. Information in Addenda Related to the Proposed CY 2009 ASC 
Payment System
XIX. Collection of Information Requirements
A. Legislative Requirement for Solicitation of Comments
B. Associated Information Collections Not Specified in Regulatory 
Text
C. Addresses for Submittal of Comments on ICRs
XX. Response to Comments
XXI. Regulatory Impact Analysis
A. Overall Impact
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 Proposed Rule
1. Alternatives Considered
2. Limitation of Our Analysis
3. Estimated Effects of This Proposed Rule on Hospitals
4. Estimated Effects of This Proposed Rule on CMHCs
5. Estimated Effects of This Proposed Rule on Beneficiaries
6. Conclusion
7. Accounting Statement
C. Effects of ASC Payment System Changes in This Proposed Rule
1. Alternatives Considered
2. Limitations on Our Analysis
3. Estimated Effects of This Proposed Rule on ASCs
4. Estimated Effects of This Proposed Rule on Beneficiaries
5. Conclusion
6. Accounting Statement
D. Effects of Proposed Requirements for Reporting of Quality Data 
for Annual Hospital Payment Update
E. Executive Order 12866

Regulation Text

Addenda

Addendum A--Proposed OPPS APCs for CY 2009
Addendum AA--Proposed ASC Covered Surgical Procedures for CY 2009 
(Including Surgical Procedures for Which Payment Is Packaged)
Addendum B--Proposed OPPS Payment by HCPCS Code for CY 2009
Addendum BB--Proposed ASC Covered Ancillary Services Integral to 
Covered Surgical Procedures for CY 2009 (Including Ancillary 
Services for Which Payment Is Packaged)
Addendum D1--Proposed OPPS Payment Status Indicators
Addendum DD1--Proposed ASC Payment Indicators
Addendum D2--Proposed OPPS Comment Indicators
Addendum DD2--Proposed ASC Comment Indicators
Addendum E--Proposed HCPCS Codes That Would Be Paid Only as 
Inpatient Procedures for CY 2009
Addendum L--Proposed Out-Migration Adjustment
Addendum M--Proposed HCPCS Codes for Assignment to Composite APCs 
for CY 2009

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

[[Page 41420]]

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. 
Further, the Medicare, Medicaid, and SCHIP Extension Act (MMSEA) of 
2007 (Pub. L. 110-173), enacted on December 29, 2007, made additional 
changes in the OPPS. A discussion of these changes is included in 
sections I.E., II.C., V., and VII. of this proposed rule.
    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 proposed rule. 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 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 27, 2007 
the CY 2008 OPPS/ASC final rule with comment period (72 FR 66580). 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 
2008 OPPS on the basis of claims data from January 1, 2006, through 
December 31, 2006, 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 26, 2006 final rule with 
comment period (71 FR 67960) pertaining to the APC assignment of HCPCS 
codes identified in Addendum B to that rule with the new interim (NI) 
comment indicator; and public comments received on the August 2,

[[Page 41421]]

2007 OPPS/ASC proposed rule for CY 2008 (72 FR 42628).
    Subsequent to publication of the CY 2008 OPPS/ASC final rule with 
comment period, we published in the Federal Register on February 22, 
2008, a correction notice (73 FR 9860) to correct certain technical 
errors in the CY 2008 OPPS/ASC 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 proposed rule, 
fulfills these requirements. The APC Panel is not restricted to using 
data compiled by CMS, and it 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 APC 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 continues to be 
technical in nature; is 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 13 subsequent 
meetings, with the last meeting taking place on March 5, and March 6, 
2008. 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. At its March 2008 meeting, the APC Panel 
recommended that the Observation and Visit Subcommittee's name be 
changed to the ``Visits and Observation Subcommittee.'' We are 
accepting this recommendation and will refer to the subcommittee by its 
new name, as appropriate, throughout this proposed rule. Thus, the 
three current subcommittees are the Data Subcommittee, the Visits and 
Observation 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 
Visits and Observation 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 March 2008 APC Panel meeting. 
All subcommittee recommendations are discussed and voted upon by the 
full APC Panel.
    Discussions of the recommendations resulting from the APC Panel's 
March 2008 meeting are included in the sections of this proposed rule 
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, Medicaid, and SCHIP Extension Act of 
2007

    The Medicare, Medicaid and SCHIP Extension Act (MMSEA) of 2007, 
(Pub. L. 110-173), enacted on December 29, 2007, included the following 
provisions that affect the OPPS and the revised APC payment system:
1. Increase in Physician Payment Update
    Section 101 of the MMSEA provides a 0.5 percent increase in the 
physician payment update from January 1, 2008 through June 30, 2008; 
revises the Physician Assistance and Quality Initiative Fund, and 
extends through 2009 the physician quality reporting system. We refer 
readers to section XV. of this proposed rule for discussion of the 
effect of this provision on services paid under the revised ASC payment 
system.
2. Extended Expiration Date for Cost-Based OPPS Payment for 
Brachytherapy Sources and Therapeutic Radiopharmaceuticals
    Section 106 of the MMSEA amended section 1833(t)(16)(C) of the Act, 
as amended by section 107 of the MIEA-TRCHA to extend for an additional 
6 months, through June 30, 2008, payment for brachytherapy devices at 
hospitals' charges adjusted to costs and to mandate that the same cost-
based payment methodology apply to therapeutic radiopharmaceuticals for 
the same extended payment period. We refer readers to sections V. and 
VII of this proposed rule for discussion of this provision.
3. Alternative Volume Weighting in Computation of Average Sales Price 
(ASP) for Medicare Part B Drugs
    Section 112 of the MMSEA amended section 1847A(b) to provide for 
application of alternative volume weighting in computing the average 
sales price (ASP) for payment of Part B multiple source and single 
source drugs furnished after April 1, 2008, and for a special rule, 
beginning April 1, 2008, for payment of single source drugs or 
biologicals treated as a multiple source drug. This provision is 
discussed in section V. of this proposed rule.

[[Page 41422]]

4. Extended Expiration Date for Certain IPPS Wage Index Geographic 
Reclassifications and Special Exceptions
    Section 117 of the MMSEA extended through September 30, 2008, both 
the reclassifications that were extended by section 106 of MIEA-TRCHA 
as well as certain special exception wage indices referenced in the FY 
2005 IPPS final rule (69 FR 49105 and 49107). This provision also 
amended section 508 of Pub. L. 108-173 to specify conditions specific 
to the reclassification of a group of hospitals in a geographic area 
for discharges occurring during FY 2008. In addition, for hospital 
reclassifications extended by section 106(a) of the MIEA-TRCHA, that 
resulted in a lower wage index for the second half of FY 2007 than 
applicable to such hospitals during the first half of FY 2007, section 
117 of the MMSEA directs the Secretary to apply a higher wage index to 
such hospitals for the entire FY 2007. We refer readers to section 
II.C. of this proposed rule for discussion of this provision.

F. Summary of the Major Contents of This Proposed Rule

    In this proposed rule, we are setting forth proposed changes to the 
Medicare hospital OPPS for CY 2009. These changes would be effective 
for services furnished on or after January 1, 2009. We are also setting 
forth proposed changes to the Medicare revised ASC payment system for 
CY 2009. These changes would be effective for services furnished on or 
after January 1, 2009. The following is a summary of the major changes 
that we are proposing to make:
1. Proposed Updates Affecting OPPS Payments
    In section II. of this proposed rule, we set forth--
     The methodology used to recalibrate the proposed APC 
relative payment weights.
     The proposed changes to packaged services.
     The proposed update to the conversion factor used to 
determine payment rates under the OPPS. In this section we set forth 
changes in the amounts and factors for calculating the full annual 
update increase to the conversion factor.
     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. Proposed OPPS Ambulatory Payment Classification (APC) Group Policies
    In section III. of this proposed rule, we discuss 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 discuss 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. Proposed OPPS Payment for Devices
    In section IV. of this proposed rule, we discuss proposed pass-
through payment for specific categories of devices and the proposed 
adjustment for devices furnished at no cost or with partial or full 
credit.
4. Proposed OPPS Payment Changes for Drugs, Biologicals, and 
Radiopharmaceuticals
    In section V. of this proposed rule, we discuss proposed CY 2009 
OPPS payment for drugs, biologicals, and radiopharmaceuticals, 
including the proposed payment for drugs, biologicals, and 
radiopharmaceuticals with and without pass-through status.
5. Proposed Estimate of OPPS Transitional Pass-Through Spending for 
Drugs, Biologicals, Radiopharmaceuticals, and Devices
    In section VI. of this proposed rule, we discuss the estimate of CY 
2009 OPPS transitional pass-through spending for drugs, biologicals, 
and devices.
6. Proposed OPPS Payment for Brachytherapy Sources
    In section VII. of this proposed rule, we discuss our proposal 
concerning coding and payment for brachytherapy sources.
7. Proposed OPPS Payment for Drug Administration Services
    In section VIII. of this proposed rule, we set forth our proposed 
policy concerning payment and coding for drug administration services.
8. Proposed OPPS Payment for Hospital Outpatient Visits
    In section IX. of this proposed rule, we set forth our proposed 
policies for the payment of clinic and emergency department visits and 
critical care services based on claims paid under the OPPS.
9. Proposed Payment for Partial Hospitalization Services
    In section X. of this proposed rule, we set forth our proposed 
payment for partial hospitalization services, including the proposed 
separate threshold for outlier payments for CMHCs.
10. Proposed Procedures That Will Be Paid Only as Inpatient Procedures
    In section XI. of this proposed rule, we discuss the procedures 
that we are proposing to remove from the inpatient list and assign to 
APCs.
11. OPPS Nonrecurring Technical and Policy Clarifications
    In section XII. of this proposed rule, we set forth our 
nonrecurring technical and policy clarifications.
12. Proposed OPPS Payment Status and Comment Indicators
    In section XIII. of this proposed rule, we discuss our proposed 
changes to the definitions of status indicators assigned to APCs and 
present our proposed comment indicators for the CY 2009 OPPS/ASC final 
rule with comment period.
13. OPPS Policy and Payment Recommendations
    In section XIV. of this proposed rule, we address recommendations 
made by the Medicare Payment Advisory Commission (MedPAC) in its June 
2007 and March 2008 reports to Congress, by the APC Panel regarding the 
OPPS for CY 2009, and by the Office of the Inspector General (OIG) in 
its June 2007 report.
14. Proposed Update of the Revised Ambulatory Surgical Center Payment 
System
    In section XV. of this proposed rule, we discuss the proposed 
update of the revised ASC payment system payment rates for CY 2009.
15. Proposed Reporting of Hospital Outpatient Quality Data for Annual 
Hospital Payment Rate Updates and CY 2009 Payment Reduction
    In section XVI. of this proposed rule, we discuss the proposed 
quality

[[Page 41423]]

measures for reporting hospital outpatient quality data for CY 2010 and 
subsequent calendar years, set forth the requirements for data 
collection and submission for the annual payment update, and propose a 
reduction in the OPPS payment for hospitals that fail to meet the HOP 
QDRP requirements for CY 2009.
16. Healthcare-Associated Conditions
    In section XVII. of this proposed rule, we discuss considerations 
related to potentially extending the principle of Medicare not paying 
more for the preventable healthcare-associated conditions acquired 
during inpatient stays paid under the IPPS to other Medicare payment 
systems for healthcare-associated conditions that occur or result from 
care in other settings.
17. Regulatory Impact Analysis
    In section XXI. of this proposed rule, we set forth an analysis of 
the impact the proposed changes would have on affected entities and 
beneficiaries.

II. Proposed Updates Affecting OPPS Payments

A. Proposed 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. As discussed in 
the November 13, 2000 interim final rule (65 FR 67824 through 67827), 
except for some reweighting due to a small number of APC changes, these 
relative payment weights continued to be in effect for CY 2001.
    We are proposing to use the same basic methodology that we 
described in the April 7, 2000 OPPS final rule with comment period to 
recalibrate the APC relative payment weights for services furnished on 
or after January 1, 2009, and before January 1, 2010 (CY 2009). That 
is, we are proposing to recalibrate the relative payment weights for 
each APC based on claims and cost report data for outpatient services. 
We are proposing 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 2009, we 
used approximately 130 million final action claims for hospital 
outpatient department (HOPD) services furnished on or after January 1, 
2007, and before January 1, 2008. (For exact counts of claims used, we 
refer readers to the claims accounting narrative under supporting 
documentation for this proposed rule on the CMS Web site at: http://www.cms.hhs.gov/HospitalOutpatientPPS/HORD/).
    Of the 130 million final action claims for services provided in 
hospital outpatient settings used to calculate the CY 2009 OPPS payment 
rates for this proposed rule, approximately 100 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 100 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 
52 million whole claims of the approximately 54 million claims that 
remained to set the OPPS APC relative weights that we are proposing for 
the CY 2009 OPPS. From the 52 million whole claims, we created 
approximately 90 million single records, of which approximately 60 
million were ``pseudo'' single claims (created from multiple procedure 
claims using the process we discuss in this section). Approximately 
627,000 claims trimmed out on cost or units in excess of +/-3 standard 
deviations from the geometric mean, yielding approximately 89 million 
single bills used for median setting. Ultimately, we were able to use 
for proposed CY 2009 ratesetting some portion of the data from 96 
percent of the CY 2007 claims containing services payable under the 
OPPS.
    The proposed APC relative weights and payments for CY 2009 in 
Addenda A and B to this proposed rule were calculated using claims from 
CY 2007 that were processed before January 1, 2008, 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 are proposing to convert to relative payment weights for 
purposes of calculating the CY 2009 payment rates.
b. Proposed Use of Single and Multiple Procedure Claims
    For CY 2009, in general, we are proposing 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. 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. 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 2008 OPPS/ASC final rule with comment period (72 FR 66590 
through 66597). In addition, for CY 2008, we increased packaging and 
created composite APCs, which also increased the number of bills we 
were able to use for median calculation by enabling us to use claims 
that contained multiple major procedures that previously would not have 
been usable. We refer readers to section II.A.2.e. of this proposed 
rule for discussion of the use of claims to establish median costs for 
composite APCs.
    We are proposing to continue to apply these processes to enable us 
to use as much claims data as possible for ratesetting for the CY 2009 
OPPS. Application of these processes in development of this proposed 
rule data resulted in our being able to use some or all of the data 
from 96 percent of the total claims that are eligible for use in

[[Page 41424]]

the OPPS ratesetting and modeling for this proposed rule. This process 
enabled us to create, for this proposed rule, approximately 60 million 
``pseudo'' single claims, including multiple imaging composite ``single 
session'' bills (we refer readers to section II.A.2.e.(5) of this 
proposed rule for further discussion), and approximately 30 million 
``natural'' single bills. For this proposed rule, ``pseudo'' single 
procedure bills represent 67 percent of all single bills used to 
calculate median costs. This compares favorably to the CY 2008 OPPS/ASC 
final rule with comment period data in which ``pseudo'' single bills 
represented 66 percent of all single bills used to calculate the median 
costs on which the CY 2008 OPPS payment rates were based.
    For CY 2009, we are proposing to bypass 452 HCPCS codes that are 
identified in Table 1 of this proposed rule. We are proposing to 
continue the use of the codes on the CY 2008 OPPS bypass list. Since 
the inception of the bypass list, we have calculated the percent of 
``natural'' single bills that contained packaging for each HCPCS code 
and the amount of packaging in each ``natural'' single bill for each 
code. We have generally retained the codes on the previous year's 
bypass list and used the update year's data (for CY 2009, data 
available for the first CY 2008 APC Panel meeting for services 
furnished on and after January 1, 2007 through and including September 
30, 2007) 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) 
is open to public comment. We removed two HCPCS codes from the CY 2008 
bypass list for this CY 2009 proposal because the codes were deleted on 
December 31, 2005, specifically C8951 (Intravenous infusion for 
therapy/diagnosis; each additional hour (List separately in addition to 
C8950)) and C8955 (Chemotherapy administration, intravenous; infusion 
technique, each additional hour (List separately in addition to 
C8954)). We updated HCPCS codes on the CY 2008 bypass list that were 
mapped to new HCPCS codes for CY 2009 ratesetting. We are proposing to 
add to the bypass list all HCPCS codes not on the CY 2008 bypass list 
that, using the APC Panel data, meet the same previously established 
empirical criteria for the bypass list that are summarized below. We 
assume that the representation of packaging in the single claims for 
any given code is comparable to packaging for that code in the multiple 
claims. The proposed criteria for the bypass list are:
     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 are proposing to add to the bypass list HCPCS codes 
that CMS medical advisors believe have minimal associated packaging 
based on their clinical assessment of the complete CY 2009 OPPS 
proposal. To ensure clinical consistency in our treatment of related 
services, we are also proposing to add the other CPT add-on codes for 
drug administration services to the CY 2009 bypass list, in addition to 
the CPT codes for additional hours of infusion that were previously 
included on the CY 2008 bypass list, because adding them enables us to 
use many correctly coded claims for initial drug administration 
services that would otherwise not be available for ratesetting. The 
result of this proposal is that the packaged costs associated with add-
on drug administration services are packaged into payment for the 
initial administration service, as has been our payment policy for the 
past 2 years for the CPT codes for additional hours of infusion. We are 
also proposing to add HCPCS code G0390 (Trauma response team activation 
associated with hospital critical care service) because we think it is 
appropriate to attribute all of the packaged costs that appear on a 
claim with HCPCS code G0390 and CPT code 99291 (Critical care, 
evaluation and management of the critically ill or critically injured 
patient; first 30-74 minutes) to CPT code 99291. If we did not add 
HCPCS code G0390 to the bypass list, we would have many fewer claims to 
use to set the median costs for APCs 0617 (Critical Care) and 0618 
(Trauma Response with Critical Care). By definition, we could not have 
any properly coded ``natural'' single bills for HCPCS code G0390. 
Including HCPCS code G0390 on the bypass list allows us to create more 
``pseudo'' single bills for CPT code 99291 and HCPCS code G0390, and, 
therefore, to improve the accuracy of the median costs of APCs 0617 and 
0618 to which the two codes are assigned, respectively. The Integrated 
Outpatient Code Editor (I/OCE) logic rejects a line for HCPCS code 
G0390 if CPT code 99291 is not also reported on the claim. Therefore, 
we cannot assess whether HCPCS code G0390 would meet the empirical 
criteria for inclusion on the bypass list because we have no 
``natural'' single claims for HCPCS code G0390.
    As a result of the multiple imaging composite APCs that we are 
proposing to establish for CY 2009 as discussed in section II.A.2.e.(5) 
of this proposed rule, the ``pseudo'' single converter logic for 
bypassed codes that are also members of multiple imaging composite APCs 
would change. When creating the set of ``pseudo'' single claims, claims 
that contain ``overlap bypass codes,'' that is, those HCPCS codes that 
are both on the bypass list and are members of the multiple imaging 
composite APCs, are identified first. These HCPCS codes are then 
processed to create multiple imaging composite ``single'' bills, that 
is, claims containing HCPCS codes from only one imaging family, thus 
suppressing the initial use of these codes as bypass codes. However, 
these ``overlap bypass codes'' are retained on the bypass list because 
single unit occurrences of these codes are identified as single bills 
at the end of the ``pseudo'' single processing logic. The net effect of 
using these HCPCS codes in building multiple imaging composite ``single 
session'' claims rather than for bypass purposes is a slight reduction 
in the number of ``pseudo'' single claims available for the ``overlap 
bypass codes'' and a handful of services that would be frequently 
billed with an ``overlap bypass code.'' This process also creates 
multiple imaging composite ``single session'' bills that can be used 
for calculating composite APC median costs. ``Overlap bypass codes'' 
that would be members of the proposed multiple imaging composite APCs 
are identified by asterisks (*) in Table 1.
    We note that this list contains bypass codes that were appropriate 
to claims for services in CY 2007 and, therefore, includes codes that 
were deleted for CY 2008. Moreover, there are codes on the proposed 
bypass list that are new for CY 2008 and which are appropriate 
additions to the bypass list in preparation for use of the CY 2008 
claims for creation of the CY 2010 OPPS. Table 1 below includes a list 
of the bypass codes that we are proposing

[[Page 41425]]

for CY 2009. We specifically request public comment on this proposed 
list of bypass codes for CY 2009.

 Table 1.--Proposed CY 2009 Bypass Codes for Creating ``Pseudo'' Single
                   Claims for Calculating Median Costs
------------------------------------------------------------------------
                                                       ``Overlap bypass
           HCPCS code              Short descriptor         codes''
------------------------------------------------------------------------
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.
17000...........................  Destruct premalg    ..................
                                   lesion.
17003...........................  Destruct premalg    ..................
                                   les, 2-14.
29220...........................  Strapping of low    ..................
                                   back.
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     ..................
                                   earwax.
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.
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.

[[Page 41426]]

 
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...........................  Contrst x-ray exam  ..................
                                   of throat.
74220...........................  Contrast x-ray,     ..................
                                   esophagus.
74230...........................  Cine/vid x-ray,     ..................
                                   throat/esoph.
74246...........................  Contrst x-ray uppr  ..................
                                   gi tract.
74247...........................  Contrst x-ray uppr  ..................
                                   gi tract.
74249...........................  Contrst x-ray uppr  ..................
                                   gi tract.
76100...........................  X-ray exam of body  ..................
                                   section.
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.
76776...........................  Us exam k transpl   *
                                   w/doppler.
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.
77072...........................  X-rays for bone     ..................
                                   age.
77073...........................  X-rays, bone        ..................
                                   length studies.
77074...........................  X-rays, bone        ..................
                                   survey, limited.
77075...........................  X-rays, bone        ..................
                                   survey complete.
77076...........................  X-rays, bone        ..................
                                   survey, infant.
77077...........................  Joint survey,       ..................
                                   single view.
77078...........................  Ct bone density,    ..................
                                   axial.
77079...........................  Ct bone density,    ..................
                                   peripheral.
77080...........................  Dxa bone density,   ..................
                                   axial.
77081...........................  Dxa bone density/   ..................
                                   peripheral.
77082...........................  Dxa bone density,   ..................
                                   vert fx.
77083...........................  Radiographic        ..................
                                   absorptiometry.
77084...........................  Magnetic image,     ..................
                                   bone marrow.
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.
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.

[[Page 41427]]

 
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..  ..................
86977...........................  RBC pretreatment,   ..................
                                   serum.
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...........................  Immunohistochemist  ..................
                                   ry.
88346...........................  Immunofluorescent   ..................
                                   study.
88347...........................  Immunofluorescent   ..................
                                   study.
88348...........................  Electron            ..................
                                   microscopy.
88358...........................  Analysis, tumor...  ..................
88360...........................  Tumor               ..................
                                   immunohistochem/
                                   manual.
88361...........................  Tumor               ..................
                                   immunohistochem/
                                   comput.
88365...........................  In situ             ..................
                                   hybridization
                                   (FISH).
88368...........................  Insitu              ..................
                                   hybridization,
                                   manual.
88399...........................  Surgical pathology  ..................
                                   procedure.
89049...........................  Chct for mal        ..................
                                   hyperthermia.
89230...........................  Collect sweat for   ..................
                                   test.
89240...........................  Pathology lab       ..................
                                   procedure.
90472...........................  Immunization        ..................
                                   admin, each add.
90474...........................  Immune admin oral/  ..................
                                   nasal addl.
90761...........................  Hydrate iv          ..................
                                   infusion, add-on.
90766...........................  Ther/proph/dg iv    ..................
                                   inf, add-on.
90767...........................  Tx/proph/dg addl    ..................
                                   seq iv inf.
90770...........................  Sc ther infusion,   ..................
                                   addl hr.
90771...........................  Sc ther infusion,   ..................
                                   reset pump.
90775...........................  Tx/pro/dx inj new   ..................
                                   drug 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.
90811...........................  Intac psytx, 20-    ..................
                                   30, w/e&m.
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.
90853...........................  Group               ..................
                                   psychotherapy.
90857...........................  Intac group psytx.  ..................
90862...........................  Medication          ..................
                                   management.
90899...........................  Psychiatric         ..................
                                   service/therapy.
92002...........................  Eye exam, new       ..................
                                   patient.
92004...........................  Eye exam, new       ..................
                                   patient.
92012...........................  Eye exam            ..................
                                   established pat.
92014...........................  Eye exam &          ..................
                                   treatment.
92020...........................  Special eye         ..................
                                   evaluation.
92025...........................  Corneal topography  ..................
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...........................  Electroretinograph  ..................
                                   y.
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.

[[Page 41428]]

 
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.
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.
96402...........................  Chemo hormon        ..................
                                   antineopl sq/im.
96411...........................  Chemo, iv push,     ..................
                                   addl drug.
96415...........................  Chemo, iv           ..................
                                   infusion, addl hr.
96417...........................  Chemo iv infus      ..................
                                   each addl seq.
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.

[[Page 41429]]

 
99241...........................  Office              ..................
                                   consultation.
99242...........................  Office              ..................
                                   consultation.
99243...........................  Office              ..................
                                   consultation.
99244...........................  Office              ..................
                                   consultation.
99245...........................  Office              ..................
                                   consultation.
0144T...........................  CT heart wo dye;    ..................
                                   qual calc.
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.
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.
G0389...........................  Ultrasound exam     ..................
                                   AAA screen.
G0390...........................  Trauma response w/  ..................
                                   hosp criti.
M0064...........................  Visit for drug      ..................
                                   monitoring.
Q0091...........................  Obtaining screen    ..................
                                   pap smear.
------------------------------------------------------------------------

 c. Proposed Calculation of CCRs
    (1) Development of the CCRs
    We calculated hospital-specific overall CCRs and hospital-specific 
departmental CCRs for each hospital for which we had CY 2007 claims 
data. For CY 2009 OPPS ratesetting, we used the set of claims processed 
during CY 2007. 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.
    We are proposing to make a change to the revenue code-to-cost 
center crosswalk for the CY 2009 OPPS. Specifically, for revenue code 
0904 (Activity Therapy), we are proposing to make cost center 3550 
(Psychiatric/Psychological Services) the primary cost center and to 
make cost center 6000 (Clinic services) the secondary cost center. For 
CY 2008, for revenue code 0904, the primary cost center is 3580 
(Recreational Therapy), cost center 3550 is secondary; and cost center 
6000 is tertiary. We are proposing this change to conform the OPPS 
methodology for hospital claims to the crosswalk that is being used to 
calculate partial hospitalization costs for CMHCs.
    We would like to affirm that the longstanding Medicare principles 
of cost apportionment at Sec.  413.53 convey that, under the 
departmental method of apportionment, the cost of each ancillary 
department is to be apportioned separately rather than being combined 
with another department. However, CMS does not specify a revenue code-
to-cost center crosswalk that hospitals must adopt to prepare the cost 
report, but instead, requires hospitals to submit their individual 
crosswalk to the Medicare contractor when the cost report is filed. The 
proposed CY 2009 OPPS revenue code-to-cost center crosswalk contains 
several potential cost center locations for a revenue code because it 
is an attempt to best represent the association of revenue codes with 
cost centers across all hospitals for modeling purposes. Assignment to 
cost centers is mutually exclusive and only defaults to the next level 
when the cost center with higher priority is unavailable. The changes 
to the crosswalk for revenue code 0904 mentioned above are used by CMS 
for modeling purposes only, and we fully expect hospitals to comply 
with the Medicare reimbursement policies when reporting their costs and 
charges on the cost report.
    At the March 2008 APC Panel meeting, we reviewed with the APC 
Panel's Data Subcommittee the current revenue code-to-cost center 
crosswalk, as well as other data in preparation for the CY 2009 
rulemaking cycle. At this meeting, the APC Panel recommended that the 
Data Subcommittee continue its work and we are accepting that 
recommendation. We will continue to work with the APC Panels' Data 
Subcommittee to prepare and review data and analyses relevant to the 
APC configurations and OPPS payment policies for hospital outpatient 
items and services.
(2) Charge Compression
    Since the implementation of the OPPS, some commenters have raised 
concerns about potential bias in the OPPS cost-based weights due to 
``charge compression,'' which is the practice of applying a lower 
charge markup to higher-cost services and a higher charge markup to 
lower-cost services. As a result, the cost-based weights suffer from 
aggregation bias, undervaluing high cost items and overvaluing low cost 
items if an estimate of average markup embodied in a single CCR is 
applied to items of widely varying costs in the same cost center. 
Commenters expressed increased concern about the impact of charge 
compression when, partially in response to recommendations of the 
Medicare Payment Advisory Commission (MedPAC), CMS proposed to set the 
relative weights for payment under the IPPS based on the costs of 
inpatient hospital services, rather than the charges for the services.
    To explore this issue, in August 2006 we awarded a contract to RTI 
International (RTI) to study the effects of charge compression in 
calculating the IPPS relative weights, particularly with regard to the 
impact on inpatient diagnosis-related group (DRG) payments, and to 
consider methods to reduce the variation in the CCRs used to calculate 
costs for the IPPS relative weights across services within cost 
centers. Of specific note was RTI's analysis of a regression-based 
methodology estimating an average adjustment for CCR by type of revenue 
code from an observed relationship between provider cost center CCRs 
and proportional billing of high and low cost services in the cost 
center. RTI issued a report in March 2007 with its findings on charge 
compression. The report is available on the CMS Web site at:  http://www.cms.hhs.gov/reports/downloads/Dalton.pdf. Although this report was 
focused largely on charge compression in the context of the IPPS cost-
based relative weights, several of the findings were relevant to the 
OPPS. Therefore, we discussed the findings and our responses to that 
interim draft report in the CY 2008 OPPS/ASC proposed rule (72 FR 42641 
through 42643) and reiterated them in the CY 2008 OPPS/ASC final rule 
with comment period (72 FR 66599 through 66602).
    As RTI noted in its 2007 report that its research was limited to 
IPPS DRG cost-based weights and that it did not examine potential areas 
of charge compression specific to hospital outpatient services, we were 
concerned

[[Page 41430]]

that the analysis was too limited in scope because typically hospital 
cost report CCRs encompass both inpatient and outpatient services for 
each cost center. Further, because both the IPPS and OPPS rely on cost-
based weights, we preferred to introduce any methodological adjustments 
to both payment systems at the same time. We believe that because 
charge compression affects the cost estimates for services paid under 
both IPPS and OPPS in the same way, it is appropriate that we would use 
the same approach to address the issue. Finally, we noted that we 
wished to assess the educational activities being undertaken by the 
hospital community to improve cost reporting accuracy in response to 
RTI's findings, either as an adjunct to or in lieu of regression-based 
adjustments to CCRs.
    We have since expanded RTI's analysis of charge compression to 
incorporate outpatient services. In August 2007, we again contracted 
with RTI. Under this contract, we asked RTI to evaluate the cost 
estimation process for the OPPS relative weights. This research 
included a reassessment of the regression-based CCR models using 
hospital outpatient and inpatient charge data, as well as a detailed 
review of the OPPS revenue code-to-cost center crosswalk and the OPPS' 
hospital-specific CCR methodology. In evaluating cost-based estimation, 
in general, the results of RTI's analyses impact both the OPPS APC 
relative weights and the IPPS MS-DRG (Medicare-Severity) relative 
weights. With the release of the IPPS FY 2009 proposed rule in April 
2008, CMS also posted an interim report discussing RTI's research 
findings for the IPPS MS-DRG relative weights to be available during 
the public comment period on the FY 2009 IPPS proposed rule. This 
report can be found on RTI's Web site at: http://www.rti.org/reports/cms/HHSM-500-2005-0029I/PDF/Refining_Cost_to_Charge_Ratios_200804.pdf. The IPPS-specific chapters, which were separately displayed 
in the April 2008 interim report, as well as the more recent OPPS 
chapters, are included in the July 2008 RTI final report entitled, 
``Refining Cost to Charge Ratios for Calculating APC and DRG Relative 
Payment Weights,'' that became available at the time of the development 
of this proposed rule. The RTI final report can be found on RTI's Web 
site at: http://www.rti.org.
    RTI's final report distinguished between two types of research 
findings and recommendations, those pertaining to the accounting or 
cost report data itself and those related to statistical regression 
analysis. Because the OPPS uses a hospital-specific CCR methodology, 
employs detailed cost report data, and estimates costs at the claim 
level, CMS asked RTI to closely evaluate the accounting component of 
the cost-based weight methodology, specifically the revenue code-to-
cost center crosswalk. In reviewing the cost report data for 
nonstandard cost centers used in the crosswalk, RTI discovered some 
problems concerning the classification of nonstandard cost centers, and 
reclassified nonstandard cost centers by reading providers' cost center 
labels. Standard cost centers are preprinted in the CMS-approved cost 
report software, while nonstandard cost centers are identified and 
updated periodically through analysis of frequently used labels. RTI 
also evaluated the revenue code-to-cost center crosswalk after 
examining hospitals' cost report and revenue code billing patterns in 
order to reduce aggregation bias inherent in defaulting to the overall 
ancillary CCR and generally to improve the empirical accuracy of the 
crosswalk.
    With regard to the statistical adjustments, RTI confirmed the 
findings of its March 2007 report that regression models are a valid 
approach for diagnosing potential aggregation bias within selected 
services for the IPPS and found that regression models are equally 
valid for setting payments under the OPPS. RTI also suggested that 
regression-based CCRs could provide a short-term correction until 
accounting data could be refined to support more accurate CCR estimates 
under both the IPPS and the OPPS. RTI again found aggregation bias in 
devices, drugs, and radiology and, using combined outpatient and 
inpatient claims, expanded the number of recommended regression-
adjusted CCRs.
    In almost all cases, RTI observed that potential distortions in the 
APC relative weights were proportionally much greater than for MS-DRGs 
for both accounting-based and statistical adjustments because APC 
groups are small and generally price a single service. However, just as 
the overall impacts on MS-DRGs were more moderate because MS-DRGs 
experienced offsetting effects of changes in cost estimation, a given 
hospital outpatient visit might include more than one service, leading 
to offsetting effects in cost estimation for services provided in the 
outpatient episode as a whole. In general, APC relative weights are 
more volatile than MS-DRG relative weights from year to year yet OPPS 
provider impacts are typically quite modest and, in light of this 
experience, we expect that overall provider impacts could be much more 
moderate than those suggested by individual APC impacts from the RTI 
analysis.
    Notwithstanding likely offsetting effects at the provider-level, 
RTI asserted that, while some averaging is appropriate for a 
prospective payment system, extreme distortions in APC payments for 
individual services bias perceptions of service profitability and may 
lead hospitals to inappropriately set their charge structure. RTI noted 
that this may not be true for ``core'' hospital services, such as 
oncology, but has a greater impact in evolving areas with greater 
potential for provider-induced demand, such as specialized imaging 
services. RTI also noted that cost-based weights are only one component 
of a final prospective payment rate. There are other rate adjustments 
(wage index, indirect medical education (IME), and disproportionate 
share hospital (DSH)) to payment derived from the revised cost-based 
weights and the cumulative effect of these components may not improve 
the ability of final payment to reflect resource cost. With regard to 
APCs and MS-DRGs that contain substantial device costs, RTI cautioned 
that other prospective payment system adjustments (wage index, IME, and 
DSH) largely offset the effects of charge compression among hospitals 
that receive these adjustments. RTI endorsed short-term regression-
based adjustments, but also concluded that more refined and accurate 
accounting data are the preferred long-term solution to mitigate charge 
compression and related bias in hospital cost-based weights.
    As a result of this research, RTI made 11 recommendations, 2 of 
which are specific to IPPS MS-DRGs and are not discussed in this 
proposed rule. The first set of non-IPPS-specific recommendations 
concentrates on short-term accounting changes to current cost report 
data; the second set addresses short-term regression-based and other 
statistical adjustments. RTI concluded its recommendations with longer-
term accounting changes to the cost report. (RTI report, ``Refining 
Cost to Charge Ratios for Calculating APC and MS-DRG Relative Payment 
Weights,'' July 2008). Given the magnitude and scope of impacts on APC 
relative weights that would result from adopting both accounting and 
statistical changes, as specifically observed in Chapter 6 of RTI's 
July 2008 final report and Attachments 4a, 4b, and 5 (RTI report, 
``Refining Cost to Charge Ratios for Calculating APC and MS-DRG 
Relative Payment Weights,'' July 2008), we are not proposing to adopt 
any short-term adjustments to OPPS payment rate

[[Page 41431]]

calculations for CY 2009. Furthermore, the numerous and substantial 
changes that RTI recommends have significantly complex interactions 
with one another and we believe that we should proceed cautiously. In a 
budget neutral payment system, increases in payment for some services 
must be countered by reductions to payment for other services.
    We are, however, specifically seeking public comments on several of 
RTI's recommended accounting-based changes pertaining to the cost 
report as discussed below because we plan to consider these public 
comments in our current revision to the Medicare hospital cost report 
and in our decisions pertaining to the CY 2010 OPPS. We believe that 
improved and more precise cost reporting is the best way to improve the 
accuracy of all cost-based payment weights, including relative weights 
for the IPPS MS-DRGs. Because both the IPPS and the OPPS rely on cost-
based weights derived, in part, from data on the Medicare hospital cost 
report form, public comments on recommended changes to the cost report 
should address any impact on both the inpatient and outpatient payment 
systems.
    We noted in the FY 2009 IPPS proposed rule that we are updating the 
cost report form to eliminate outdated requirements in conjunction with 
the Paperwork Reduction Act (PRA), and that we plan to propose actual 
changes to the cost reporting form, the attending cost reporting 
software, and the cost report instructions in Chapter 36 of the 
Medicare Provider Reimbursement Manual (PRM), Part II (73 FR 23546 
through 23547). We anticipate proposing these revisions shortly. We 
would consider any public comments on our proposals for cost report 
changes, as well as any public comments on RTI's cost estimation 
findings and recommendations for revising the cost report in general, 
in updating the cost report. We expect the revised cost report may be 
available for hospitals to use when submitting cost reports during FY 
2010, that is, for cost reporting periods beginning after October 1, 
2008, and we expect that we would be able to use some of these data for 
setting payment rates for future OPPS updates.
    RTI's first set of four recommendations for accounting changes 
addressed improved use of existing cost report and claims data. RTI 
recommended: (1) Immediately using text searches of providers' line 
descriptions to more appropriately classify nonstandard cost centers in 
current hospital cost report data; (2) changing cost report preparation 
software to impose fixed descriptions on nonstandard cost centers; (3) 
slightly revising CMS' cost center aggregation table to eliminate 
duplicative or misplaced nonstandard cost centers and to add 
nonstandard cost centers for common services without one; and (4) 
adopting RTI's recommended changes to the revenue code-to-cost center 
crosswalk.
    Given the magnitude and scope of impacts resulting from RTI's 
recommended revisions, we are not proposing to adopt any of the short-
term accounting changes, including text searches of providers' line 
descriptions to more appropriately classify nonstandard cost centers 
and recommended changes to the revenue code-to-cost center crosswalk. 
We will modify the cost report preparation software that will accompany 
the revised Medicare cost report form to print a brief fixed 
description with a nonstandard cost center number, while continuing to 
allow the hospital to enter a line description.
    With regard to revisions to the cost center aggregation table, we 
are specifically inviting public comment on whether several identified 
cost centers are duplicative (RTI report, ``Refining Cost to Charge 
Ratios for Calculating APC and MS-DRG Relative Payment Weights,'' July 
2008). We are also specifically requesting public comment on creation 
of new nonstandard cost centers for services that are well represented 
in line descriptions associated with ``other ancillary services'' cost 
centers, but for which no distinct nonstandard cost center currently 
exists and for which UB-04 revenue codes do exist, including cardiac 
rehabilitation, hyperbaric oxygen therapy, and patient education (RTI 
report, ``Refining Cost to Charge Ratios for Calculating APC and MS-DRG 
Relative Payment Weights,'' July 2008). We will consider these comments 
as we continue our work on revising the Medicare hospital cost report 
form.
    Furthermore, we are interested in public comment on RTI's 
recommended changes to the OPPS revenue code-to-cost center crosswalk, 
and we may propose to adopt crosswalk changes for CY 2010 based on 
RTI's analyses and related public comments received on this issue. 
Although available on the CMS Web site for continuous public comment, 
we have received relatively few public comments over the last several 
years on the OPPS revenue code-to-cost center crosswalk, which has 
undergone only minimal change since the inception of the OPPS. RTI's 
revised crosswalk in Attachment 2b of its final report reflected all 
accounting changes, including reclassification of nonstandard cost 
centers from text searches, removal of duplicative cost centers, and 
addition of new nonstandard cost centers for common services. 
Throughout the July 2008 final report, RTI used a subscripting 
nomenclature developed from CMS' aggregation table to identify cost 
centers. To disentangle the combined impact of these changes and 
clearly communicate RTI's recommended changes in current cost center 
numbers, we have made available on the CMS Web site a revised (RTI-
recommended) crosswalk using current standard and nonstandard cost 
centers in the same format as the crosswalk proposed for the CY 2009 
OPPS. This revised (RTI-recommended) crosswalk may be found on the CMS 
Web site under supporting documentation for this proposed rule at: 
http://www.cms.hhs.gov/HospitalOutpatientPPS/HORD/list.asp#TopOfPage. 
We did not include RTI's recommended new or collapsed nonstandard cost 
centers in this revised crosswalk.
    We are specifically inviting public comment on the numerous changes 
included in this crosswalk. Areas of specific interest include the 
addition of ``default'' CCRs for clinic, cardiology, and therapy 
services before defaulting to the overall ancillary CCR, as is our 
current policy. The overall ancillary CCR is charge-weighted and 
heavily influenced by the relationship between costs and charges for 
surgical and imaging services. RTI also introduced cost center 4300 
(Radioisotope) as a primary cost converter for the nuclear medicine 
revenue codes (034X). Further, RTI added secondary and tertiary 
crosswalk maps for services that frequently appear together, such as 
CCRs for Computed Tomography (CT) Scan as a secondary cost converter 
for the Magnetic Resonance Imaging (MRI) revenue codes (061X) (RTI 
report, ``Refining Cost to Charge Ratios for Calculating APC and MS-DRG 
Relative Payment Weights,'' July 2008).
    RTI's second set of recommendations concentrated on short-term 
statistical regression-based adjustments to address aggregation bias. 
RTI recommended: (1) Adopting regression-adjusted OPPS CCRs for 
Devices, Other Supplies Sold, Additional Detail Coded Drugs, and 
Intravenous (IV) Solutions and Other Drugs Sold; and (2) adopting a set 
of CCRs that blend corrected cost report and regression-adjusted CCRs 
for CT scanning, MRI, therapeutic radiology, nuclear medicine, and 
other diagnostic radiology services for hospitals that did not report 
these standard and nonstandard cost centers. We agree that

[[Page 41432]]

improved data for cost estimation in these areas is a desirable goal. 
However, we have chosen to concentrate our efforts on concrete steps to 
improve the quality of cost report accounting data that ultimately 
would be used to calculate both hospital inpatient and outpatient 
prospective payment system relative weights. In the proposed rule for 
the FY 2009 IPPS (73 FR 23544), for which the public comment period 
closed on June 13, 2008, we emphasize this fundamental goal of 
improving cost report accounting data rather than making short-term 
statistical adjustments.
    RTI's third and final set of recommendations focused on long-term 
accounting revisions to the cost report and educational efforts to 
improve the overall accuracy of accounting data. RTI recommended: (1) 
Clarifying cost report instructions and requiring hospitals to use all 
standard lines in the cost report if their facility offers the 
described services; (2) creating new standard lines on the cost report 
for CT Scanning, MRI, Cardiac Catheterization, Devices, and Drugs 
Requiring Additional Coding; and (3) educating hospitals through 
industry-led educational initiatives directed at methods for capital 
cost finding, specifically encouraging providers to use direct 
assignment of equipment depreciation and lease costs wherever possible, 
or at least to allocate moveable equipment depreciation based on dollar 
value of assigned depreciation costs.
    We will consider the best means to clarify the principle of 
departmental apportionment of costs at Sec.  413.53, which states that 
hospitals should apportion separately the costs and charges of each 
ancillary department for which charges are customarily made separately 
rather than combining those costs and charges with another ancillary 
department. RTI noted that many hospitals combine costs and charges for 
therapeutic radiology and nuclear medicine services under the 
diagnostic radiology cost center, when these are services with their 
own specific and distinct charges and cost centers (RTI report, 
``Refining Cost to Charge Ratios for Calculating APC and MS-DRG 
Relative Payment Weights,'' July 2008). We seek to better understand 
the reason for this aggregation and other relatively common scenarios, 
such as a failure to report the standard cost center 4700 (Blood 
Storing, Processing & Transp.) when the hospital bills Medicare for 
blood products that always have storage and processing costs and 
charges, as well as any concerns hospitals may have about reporting all 
appropriate standard cost centers.
    With regard to creating new standard lines on the cost report, we 
are proposing standard lines on the cost report for Devices and Drugs 
Requiring Additional Coding. In the FY 2009 IPPS proposed rule (73 FR 
23546), we proposed to create two new cost centers, Medical Supplies 
Charged to Patients and Implantable Devices Charged to Patients, to 
replace the current cost center called Supplies Charged to Patients as 
part of our initiative to revise and update the Medicare hospital cost 
report form. In our discussion of pharmacy overhead cost in section 
V.B.3. of this proposed rule, we are proposing to create two other new 
cost centers, Drugs with High Overhead Costs Charged to Patients and 
Drugs with Low Overhead Costs Charged to Patients, to replace the 
current cost center called Drugs Charged to Patient. Public comment on 
the proposal for these two other new cost centers included in this 
proposed rule should be made in reference to that detailed discussion.
    We believe that standard cost centers for CT Scanning, MRI, and 
Cardiac Catheterization also may be appropriate as we revise the 
Medicare hospital cost report form. CMS already has established 
nonstandard cost centers for these services and many, but not all, 
hospitals currently report costs and charges in these cost centers. As 
noted earlier in this section, cost center coding is a way to 
standardize cost reporting across hospitals. Standard cost centers are 
preprinted through CMS-approved cost report software, and nonstandard 
cost centers are identified and updated periodically through analysis 
of frequently used labels. While we currently use available nonstandard 
cost center CCRs for cost estimation under the OPPS, creating standard 
lines for CT Scanning, MRI, and Cardiac Catheterization would do more 
to require hospitals to break out their costs and charges for services 
in these clinical areas, especially as we pursue clarifying our 
departmental apportionment regulations requiring reporting of distinct 
charge types in separate ancillary cost centers. We are specifically 
inviting public comment on the appropriateness of creating standard 
cost centers for CT Scanning, MRI, and Cardiac Catheterization, rather 
than continuing the established nonstandard cost centers for these 
services.
    The accuracy of capital cost allocation under Medicare allocation 
methods remains an issue when discussing the accuracy of CCRs for 
radiology and other capital-intensive services. We are supportive of 
industry-led educational initiatives to improve the quality of 
reporting capital costs on the cost report and, as we explained in the 
FY 2008 IPPS final rule with comment period (72 FR 47196), we are 
willing to work with the hospital industry to further such initiatives.
    In summary, for CY 2009, we are proposing to adopt or support 
several of RTI's accounting recommendations that would improve the 
accuracy of cost report data, including educational initiatives on 
reporting capital costs, additional standard cost centers on the cost 
report for Drugs with High Overhead Costs and Drugs with Low Overhead 
Costs, adding fixed descriptions to the cost report software, and 
clarifying instructions requiring hospitals to report all standard cost 
centers if they offer services of the appropriate type. We are 
interested in significant public discussion of some of RTI's short-term 
and long-term recommendations, including RTI's suggested revisions to 
the revenue code-to-cost center crosswalk and recommended creation of 
standard cost centers for CT Scanning, MRI, and Cardiac 
Catheterization. We believe our CY 2009 proposals and certain short-
term and long-term recommendations included in RTI's July 2008 final 
report would further our pursuit of concrete steps for CY 2009 and 
future years to improve the overall accuracy of cost report accounting 
data and, therefore, hospital cost-based relative weights.
2. Proposed Calculation of Median Costs
    In this section of this proposed rule, we discuss the use of claims 
to calculate the proposed OPPS payment rates for CY 2009. The hospital 
OPPS page on the CMS Web site on which this proposed rule is posted 
provides an accounting of claims used in the development of the 
proposed rates at: http://www.cms.hhs.gov/HospitalOutpatientPPS. The 
accounting of claims used in the development of this proposed rule is 
included on the Web site under supplemental materials for the CY 2009 
proposed rule. 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 the claims that were used to calculate the proposed 
payment rates for the CY 2009 OPPS.

[[Page 41433]]

    We used the following methodology to establish the relative weights 
used in calculating the proposed OPPS payment rates for CY 2009 shown 
in Addenda A and B to this proposed rule.
a. Claims Preparation
    We used the CY 2007 hospital outpatient claims processed before 
January 1, 2008, to set the proposed relative weights for CY 2009. To 
begin the calculation of the relative weights for CY 2009, we pulled 
all claims for outpatient services furnished in CY 2007 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 100 million claims that contain hospital 
bill types paid under the OPPS.
    1. Claims that were not bill types 12X, 13X (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. In 
prior years, we also used claims of bill type 14X to set payment rates 
under the OPPS. However, bill type 14X ceased to be used to report any 
services for which payment is made under the OPPS effective April 1, 
2006. Therefore, we did not use these claims in development of the 
proposed CY 2009 OPPS rates.
    2. Claims that were bill types 12X or 13X (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 
2007 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 2006. For this proposed rule, we used 
the most recently submitted cost reports to calculate the CCRs to be 
used to calculate median costs for the proposed CY 2009 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 overall CCR calculation discussed 
in section II.A.1.c. of this proposed rule for all purposes that 
require 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 note that as discussed in 
section II.A.1.c.(1) of this proposed rule, we are proposing to remove 
cost center 3580 (Recreational Therapy) from the hierarchy of CCRs for 
revenue code 0904 (Activity Therapy).
    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 2 of this proposed rule contains a 
list of the revenue codes we are proposing to package. Revenue codes 
not included in Table 2 are those not allowed under the OPPS because 
their services could not be paid under the OPPS (for example, inpatient 
room and board charges), and thus charges with those revenue codes were 
not packaged for creation of the OPPS median costs. One exception to 
this general methodology for converting charges to costs on each claim 
is the calculation of median blood costs, as discussed in section 
II.A.2.d.(2) of this proposed rule.
    Thus, we applied CCRs as described above to claims with bill type 
12X or 13X, 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.
    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.

[[Page 41434]]

These line-items are used to calculate a per unit mean and median cost 
and a per day mean and median cost 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 remaining claims into five groups: single majors, 
multiple majors, single minors, multiple minors, and other claims. 
(Specific definitions of these groups follow below.) We are proposing 
to continue our current policy of defining major procedures as any 
procedure having a status indicator of ``S,'' ``T,'' ``V,'' or ``X;'' 
defining minor procedures as any code having a status indicator of 
``F,'' ``G,'' ``H,'' ``K,'' ``L,'' ``R,'' ``U,'' or ``N,'' and 
classifying ``other'' procedures as any code having a status indicator 
other than one that we have classified as major or minor. For CY 2009, 
we are proposing that status indicator ``R'' would be assigned to blood 
and blood products; status indicator ``U'' would be assigned to 
brachytherapy sources; status indicator ``Q1'' would be assigned to all 
``STVX-packaged codes;'' status indicator ``Q2'' would be assigned to 
all ``T-packaged codes;'' and status indicator ``Q3'' would be assigned 
to all codes that may be paid through a composite APC based on 
composite-specific criteria or paid separately through single code APCs 
when the criteria are not met. The codes with proposed status 
indicators ``Q1,'' ``Q2,'' and ``Q3'' were previously assigned status 
indicator ``Q'' for the CY 2008 OPPS. As we discuss in section 
XIII.A.1. of this proposed rule, we are proposing to assign these new 
status indicators to facilitate identification of the different 
categories of codes. We are proposing to treat these codes in the same 
manner for data purposes for CY 2009 as we treated them for CY 2008. 
Specifically, we are proposing to continue to evaluate whether the 
criteria for separate payment of codes with status indicator ``Q1'' or 
``Q2'' are met in determining whether they are treated as major or 
minor codes. Codes with status indicator ``Q1'' or ``Q2'' are carried 
through the data either with status indicator ``N'' as packaged or, if 
they meet the criteria for separate payment, they are given the status 
indicator of the APC to which they are assigned and are considered as 
``pseudo'' single major codes. Codes assigned status indicator ``Q3'' 
are paid under individual APCs unless they occur in the combinations 
that qualify for payment as composite APCs and, therefore, they carry 
the status indicator of the individual APC to which they are assigned 
through the data process and are treated as major codes during both the 
split and ``pseudo'' single creation process. The calculation of the 
median costs for composite APCs from multiple major claims is discussed 
in section II.A.2.e. of this proposed rule.
    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,'' 
which includes codes with status indicator ``Q3''); claims with one 
unit of a status indicator ``Q1'' code (``STVX-packaged'') where there 
was no code with status indicator ``S,'' ``T,'' ``V,'' or ``X'' on the 
same claim on the same date; or claims with one unit of a status 
indicator ``Q2'' code (``T-packaged'') where there was no code with a 
status indicator ``T'' on the same claim on the same date.
    2. Multiple Major Claims: Claims with more than one separately 
payable procedure (that is, status indicator ``S,'' ``T,'' ``V,'' or 
``X,'' which includes codes with status indicator ``Q3''), or multiple 
units of one payable procedure. These claims include those codes with a 
status indicator ``Q2'' code (``T-packaged'') where there was no 
procedure with a status indicator ``T'' on the same claim on the same 
date of service but where there was another separately paid procedure 
on the same claim with the same date of service (that is, another code 
with status indicator ``S,'' ``V,'' or ``X''). We also include 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,'' ``R,'' 
``U,'' or ``N'' and not status indicator ``Q1'' (``STVX-packaged'') or 
status indicator ``Q2'' (``T-packaged'') code.
    4. Multiple Minor Claims: Claims with multiple HCPCS codes that are 
assigned status indicator ``F,'' ``G,'' ``H,'' ``K,'' ``L,'' ``R,'' 
``U,'' or ``N;'' claims that contain more than one code with status 
indicator ``Q1'' (``STVX-packaged'') or more than one unit of a code 
with status indicator ``Q1'' but no codes with status indicator ``S,'' 
``T,'' ``V,'' or ``X'' on the same date of service; or claims that 
contain more than one code with status indicator ``Q2'' (T-packaged), 
or ``Q2'' and ``Q1,'' or more than one unit of a code with status 
indicator ``Q2'' but no code with status indicator ``T'' on the same 
date of service.
    5. Non-OPPS Claims: Claims that contain 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 OPPS service or a code for a packaged service. Non-OPPS claims 
include claims for ``sometimes'' therapy HCPCS codes for wound care 
paid sometimes under the OPPS but billed, in these non-OPPS cases, with 
revenue codes indicating that the therapy services would be paid under 
the Medicare Physician Fee Schedule (MPFS).
    The claims listed in numbers 1, 2, 3, and 4 above are included in 
the data files that can be purchased as described above. Claims that 
contain codes to which we are proposing to assign status indicators 
``Q1'' (``STVX-packaged'') and ``Q2'' (``T-packaged'') appear in the 
data for the single major file, the multiple major file, and the 
multiple minor file used in this proposed rule. Claims that contain 
codes to which we are proposing to assign status indicator ``Q3'' 
(composite APC members) appear in both the data of the single and 
multiple major files used in this proposed rule, depending on the 
specific composite calculation.
    To develop ``pseudo'' single claims for this proposed rule, we 
examined both the multiple major claims and the multiple minor claims. 
We first 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 for 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 used the bypass codes listed earlier in Table 1 and 
discussed in section II.A.1.b. of this proposed rule 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''

[[Page 41435]]

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 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.
    However, where only one unit of one of an ``overlap bypass code'' 
appeared on a claim with only one unit of another separately paid code, 
we used the line-item cost of the ``overlap bypass code'' to create a 
``pseudo'' single procedure claim for the ``overlap bypass code'' but 
did not use the remaining costs on the claim for the other separately 
paid procedure. We did not incorporate the changes to create ``pseudo'' 
single claims from the remaining information on these claims in the 
data development process for this proposed rule. We believe this 
simplifies our communication of the claims development process to the 
public by not adding unnecessary complexity. Furthermore, the limited 
increase of only 1 percent in the number of ``pseudo'' single claims 
that would be created from the remaining data made it impractical to 
include the changes to the data development process that would be 
required, taking into consideration the complexity of making such 
changes.
    We also examined the multiple minor claims to determine whether we 
could create ``pseudo'' single procedure claims. Specifically, where 
the claim contained multiple codes with status indicator ``Q1'' 
(``STVX-packaged'') on the same date of service or contained multiple 
units of a single code with status indicator ``Q1,'' we selected the 
status indicator ``Q1'' HCPCS code that had the highest CY 2008 
relative weight, moved the units to one on that HCPCS code, and 
packaged all costs for other codes with status indicator ``Q1,'' as 
well as all other packaged HCPCS code and packaged revenue code costs, 
into a total single cost for the claim to create a ``pseudo'' single 
claim for the selected code. We changed the status indicator for 
selected codes from the data status indicator of ``N'' to the status 
indicator of the APC to which the selected procedure was assigned for 
further data processing and considered this claim as a major procedure 
claim. We used this claim in the calculation of the APC median cost for 
the status indicator ``Q1'' HCPCS code.
    Similarly, where a multiple minor claim contained multiple codes 
with status indicator ``Q2'' (``T-packaged'') or multiple units of a 
single code with status indicator ``Q2,'' we selected the status 
indicator ``Q2'' HCPCS code that had the highest CY 2008 relative 
weight, moved the units to one on that HCPCS code, and packaged all 
costs for other codes with status indicator ``Q2,'' as well as all 
other packaged HCPCS code and packaged revenue code costs into a total 
single cost for the claim to create a ``pseudo'' single claim for the 
selected code. We changed the status indicator for the selected code 
from a data status indicator of ``N'' to the status indicator of the 
APC to which the selected code was assigned, and we considered this 
claim as a major procedure claim.
    Lastly, where a multiple minor claim contained multiple codes with 
status indicator ``Q2'' (``T-packaged'') and status indicator ``Q1'' 
(``STVX-packaged''), we selected the status indicator ``Q2'' HCPCS code 
(``T-packaged'') that had the highest relative weight for CY 2008, 
moved the units to one on that HCPCS code, and packaged all costs for 
other codes with status indicator ``Q2,'' costs of all codes with 
status indicator ``Q1'' (``STVX-packaged''), other packaged HCPCS code 
and packaged revenue code costs into a total single cost for the claim 
to create a ``pseudo'' single claim for the selected (``T-packaged'') 
code. We favor status indicator ``Q2'' over ``Q1'' HCPCS codes because 
``Q2'' HCPCS codes have higher CY 2008 relative weights. If a status 
indicator ``Q1'' HCPCS code had a higher CY 2008 relative weight, it 
would become the primary code for the simulated single bill process. We 
changed the status indicator for the selected status indicator ``Q2'' 
(``T-packaged'') code from a data status indicator of ``N'' to the 
status indicator of the APC to which the selected code was assigned and 
we considered this claim as a major procedure claim.
    After we assessed the conditional packaging of HCPCS codes with 
proposed status indicators ``Q1'' and ``Q2,'' we then assessed the 
claims to determine if the proposed criteria for the multiple imaging 
composite APCs, discussed in section II.A.2.e.(5) of this proposed 
rule, were met. Where the criteria for the proposed imaging composite 
APCs were met, we created a ``single session'' claim for the applicable 
imaging composite service and determined whether we could use the claim 
in ratesetting. For HCPCS codes that are both conditionally packaged 
and are proposed members of a multiple imaging composite APC, we first 
assessed whether the code would be packaged and if so, the code ceased 
to be available for further assessment as part of the composite APC. 
Because the code would not be a separately payable procedure, we 
considered it to be unavailable for use in setting the composite APC 
median cost.
    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 to multiple majors and to multiple minors. As has 
been our practice in recent years, we also excluded 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.
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 this proposed rule and 
the costs of those lines for codes with status indicator ``Q1'' or 
``Q2'' when they are not separately paid) and packaged revenue codes 
into the cost of the single major procedure remaining on the claim.
    The list of packaged revenue codes is shown in Table 2 below. As 
noted in the CY 2008 OPPS/ASC final rule with comment period (72 FR 
66606), for the CY 2008 OPPS, we adopted an APC Panel recommendation 
that requires CMS to review the final list of packaged revenue codes 
for consistency with OPPS policy and ensure that future versions of the 
I/OCE edit accordingly. We compared the packaged revenue codes in the 
I/OCE to the final list of packaged revenue codes for the CY 2008 OPPS 
(72 FR 66608 through 66609) that we used for packaging costs in median 
calculation. As a result of that analysis, we are proposing to use the 
packaged revenue codes for CY 2009 displayed in Table 2 below.
    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

[[Page 41436]]

services furnished on or after July 1, 2004, the I/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 do not believe that these 
charges, which were token charges as submitted by the hospital, are 
valid reflections of hospital resources. Therefore, we deleted these 
claims. 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 are 
proposing to use the pre-reclassified wage indices for standardization 
because we believe that they better reflect the true costs of items and 
services in the area in which the hospital is located than the post-
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 54 million 
claims were left for this proposed rule. Of these 54 million claims, we 
were able to use some portion of approximately 52 million whole claims 
(96 percent of approximately 54 million potentially usable claims) to 
create approximately 90 million single and ``pseudo'' single claims, of 
which we used 89 million single bills (after trimming out approximately 
627,000 claims as discussed below) in the CY 2009 median development 
and ratesetting.
    We used the remaining claims to calculate the proposed CY 2009 
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 proposed rule includes a discussion of certain proposed 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 some cases, APC median costs are calculated using variations of 
the process outlined above. Section II.A.2.d. of this proposed rule 
that follows addresses the calculation of single APC criteria-based 
median costs. Section II.A.2.e. of this proposed rule discusses the 
calculation of composite APC criteria-based median costs.
    Section X.B. of this proposed rule addresses the methodology for 
calculating the median cost for partial hospitalization services.

            Table 2.--Proposed CY 2009 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.
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.

[[Page 41437]]

 
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.
------------------------------------------------------------------------

d. Proposed Calculation of Single Procedure APC Criteria-Based Median 
Costs
(1) Device-Dependent APCs
    Device-dependent APCs are populated by HCPCS codes that usually, 
but not always, require that a device be implanted or used to perform 
the procedure. For a full history of how we have calculated payment 
rates for device-dependent APCs in previous years, and a detailed 
discussion of how we developed the standard device-dependent APC 
ratesetting methodology, we refer readers to the CY 2008 OPPS/ASC final 
rule with comment period (72 FR 66739 through 66742). Overviews of the 
procedure-to-device edits and device-to-procedure edits used in 
ratesetting for device-dependent APCs are available in the CY 2005 OPPS 
final rule with comment period (69 FR 65761 through 65763) and the CY 
2007 OPPS/ASC final rule with comment period (71 FR 68070 through 
68071).
    For CY 2009, we are proposing to continue using our standard 
methodology for calculating median costs for device-dependent APCs, 
which utilizes claims data that generally represent the full cost of 
the required device. Specifically, we are proposing to calculate the 
medians for device-dependent APCs for CY 2009 using only the subset of 
single bills from CY 2007 claims data that pass the procedure-to-device 
edits; do not contain token charges for devices; and do not contain the 
``FB'' modifier signifying that the device was furnished without cost 
to the provider, supplier, or practitioner, or where a full credit was 
received. We continue to believe that this methodology gives us the 
most appropriate median costs for device-dependent APCs in which the 
hospital incurs the full cost of the device.
    While the median costs for the majority of device-dependent APCs 
show increases from CY 2008 based on the CY 2009 proposed rule claims 
data, the median costs for three APCs involving electrode/lead 
implantation decreased significantly compared to the CY 2008 final rule 
with comment period median costs. Specifically, APCs 0106 (Insertion/
Replacement of Pacemaker Leads and/or Electrodes), 0225 (Implantation 
of Neurostimulator Electrodes, Cranial Nerve), and 0418 (Insertion of 
Left Ventricular Pacing Electrode), demonstrate median decreases of 26 
percent, 52 percent, and 47 percent, respectively. We believe these 
decreases reflect hospitals' correction of inaccurate and incomplete 
billing practices for these services due to the implementation of 
device-to-procedure edits beginning in CY 2007. As discussed in the CY 
2007 OPPS/ASC final rule with comment period (71 FR 68070 through 
68071), in the course of examining claims data for calculation of the 
CY 2007 payment rates, we identified circumstances in which hospitals 
billed a device code but failed to bill any procedure code with which 
the device could be used correctly. For APCs 0106, 0225, and 0418 in 
particular, we saw that hospitals frequently billed a procedure code 
for

[[Page 41438]]

lead/electrode implantation with device HCPCS codes for a lead/
electrode and the more expensive pulse generator, but failed to report 
a procedure code for generator implantation. These errors in billing 
led to the costs of the pulse generator being packaged incorrectly into 
the procedure codes for lead/electrode implantation. Hospitals that 
coded and billed in this manner received no payment for the procedure 
to implant the pulse generator, but these erroneous claims caused the 
payment rate for the lead/electrode implantation APCs to be 
inappropriately high. To address this problem, we implemented edits to 
correct the coding for CY 2007, and the decreases to the median costs 
of APCs 0106, 0225, and 0418 for CY 2009 are consistent with what we 
expect, based on what we understand to be the nature of the services 
and the costs of correctly coded devices. We also note an anticipated 
decrease in our frequency of single bills for the services assigned to 
APCs 0106, 0225, and 0418, most likely because the device-to-procedure 
edits led hospitals to include the pulse generator implantation HCPCS 
codes on the same claims, resulting in fewer single claims for the 
lead/electrode implantation procedures.
    APC 0625 (Level IV Vascular Access Procedures) as configured for CY 
2008 and calculated based on CY 2007 claims data also demonstrates a 
significant decrease in median cost (approximately 59 percent) relative 
to CY 2008 (based on CY 2006 claims data). We believe this decrease is 
attributable to the implementation of procedure-to-device edits on 
January 1, 2007, for the only CPT code assigned to this APC, 
specifically CPT code 36566 (Insertion of tunneled centrally inserted 
central venous access device, requiring two catheters via two separate 
venous access sites; with subcutaneous port(s)). Because the procedure 
described by CPT code 36566 involves the insertion of a dialysis access 
system, our edits require that the HCPCS code for that device be 
present on the claim any time a hospital bills CPT code 36566. Prior to 
January 1, 2007, we believe that hospitals often reported CPT code 
36566 without also reporting the device HCPCS code for the dialysis 
access system, or incorrectly billed CPT code 36566 for procedures that 
do not require the use of the device. Therefore, with the 
implementation of procedure-to-device edits, the volume of total CY 
2007 claims for CPT code 36566 decreased as hospitals corrected their 
claims to report this service only under the appropriate circumstances, 
while the correctly coded claims reporting the required device (and 
available for CY 2009 ratesetting) increased significantly from CY 2006 
to CY 2007. We believe that the CY 2009 proposed rule median cost of 
$2,092 calculated for CPT code 36566 from those claims is accurate and 
appropriately reflects correct hospital reporting of the procedure and 
the associated device. Furthermore, because of the decrease in the 
median cost for CPT code 36566, we are proposing for CY 2009 to 
reassign the code to APC 0623 (Level III Vascular Access Procedures), 
which has a median cost of approximately $1,939. We also are proposing 
to delete APC 0625 because no other procedures would map to this APC 
once CPT code 36566 is reassigned.
    In addition, we note a decrease of approximately 19 percent for APC 
0681 (Knee Arthroplasty) relative to CY 2008, which we believe is 
attributable to a low volume of services being performed by a small 
number of providers. As we have stated in the past, some fluctuation in 
relative costs from year to year is to be expected in a prospective 
payment system for low volume device-dependent APCs such as APC 0681, 
for which the median cost increased approximately 37 percent from CY 
2007 to CY 2008.
    Table 3 lists the APCs for which we are proposing to use our 
standard device-dependent APC ratesetting methodology for CY 2009. We 
refer readers to Addendum A to this proposed rule for the proposed 
payment rates for these APCs.

                                Table 3.--Proposed CY 2009 Device-Dependent APCs
----------------------------------------------------------------------------------------------------------------
                APC                       Status  indicator                          APC title
----------------------------------------------------------------------------------------------------------------
0039...............................  S                            Level I Implantation of Neurostimulator.
0040...............................  S                            Percutaneous Implantation of Neurostimulator
                                                                   Electrodes, Excluding Cranial Nerve.
0061...............................  S                            Laminectomy, Laparoscopy, or Incision for
                                                                   Implantation of Neurostimulator Electrodes,
                                                                   Excluding Cranial Nerve.
0082...............................  T                            Coronary or Non Coronary Atherectomy.
0083...............................  T                            Coronary or Non Coronary Angioplasty and
                                                                   Percutaneous Valvuloplasty.
0084...............................  S                            Level I Electrophysiologic Procedures.
0085...............................  T                            Level II Electrophysiologic Procedures.
0086...............................  T                            Level III Electrophysiologic Procedures.
0089...............................  T                            Insertion/Replacement of Permanent Pacemaker
                                                                   and Electrodes.
0090...............................  T                            Insertion/Replacement of Pacemaker Pulse
                                                                   Generator.
0104...............................  T                            Transcatheter Placement of Intracoronary
                                                                   Stents.
0106...............................  T                            Insertion/Replacement of Pacemaker Leads and/
                                                                   or Electrodes.
0107...............................  T                            Insertion of Cardioverter-Defibrillator.
0108...............................  T                            Insertion/Replacement/Repair of Cardioverter-
                                                                   Defibrillator Leads.
0115...............................  T                            Cannula/Access Device Procedures.
0202...............................  T                            Level VII Female Reproductive Procedures.
0222...............................  S                            Level II Implantation of Neurostimulator.
0225...............................  S                            Implantation of Neurostimulator Electrodes,
                                                                   Cranial Nerve.
0227...............................  T                            Implantation of Drug Infusion Device.
0229...............................  T                            Transcatheter Placement of Intravascular
                                                                   Shunts.
0259...............................  T                            Level VII ENT Procedures.
0293...............................  T                            Level V Anterior Segment Eye Procedures.
0315...............................  S                            Level III Implantation of Neurostimulator.
0384...............................  T                            GI Procedures with Stents.
0385...............................  S                            Level I Prosthetic Urological Procedures.
0386...............................  S                            Level II Prosthetic Urological Procedures.
0418...............................  T                            Insertion of Left Ventricular Pacing Elect.
0425...............................  T                            Level II Arthroplasty with Prosthesis.
0427...............................  T                            Level II Tube or Catheter Changes or
                                                                   Repositioning.

[[Page 41439]]

 
0622...............................  T                            Level II Vascular Access Procedures.
0623...............................  T                            Level III Vascular Access Procedures.
0648...............................  T                            Level IV Breast Surgery.
0652...............................  T                            Insertion of Intraperitoneal and Pleural
                                                                   Catheters.
0653...............................  T                            Vascular Reconstruction/Fistula Repair with
                                                                   Device.
0654...............................  T                            Insertion/Replacement of a permanent dual
                                                                   chamber pacemaker.
0655...............................  T                            Insertion/Replacement/Conversion of a
                                                                   permanent dual chamber pacemaker.
0656...............................  T                            Transcatheter Placement of Intracoronary Drug-
                                                                   Eluting Stents.
0674...............................  T                            Prostate Cryoablation.
0680...............................  S                            Insertion of Patient Activated Event
                                                                   Recorders.
0681...............................  T                            Knee Arthroplasty.
----------------------------------------------------------------------------------------------------------------

(2) Blood and Blood Products
    Since the implementation of the OPPS in August 2000, separate 
payments have been made for blood and blood products through APCs 
rather than packaging them into payments for the procedures with which 
they are administered. Hospital payments for the costs of blood and 
blood products, as well as the costs of collecting, processing, and 
storing blood and blood products, are made through the OPPS payments 
for specific blood product APCs.
    For the CY 2009 OPPS, we are proposing to continue to establish 
payment rates for blood and blood products using our blood-specific CCR 
methodology, which utilizes actual or simulated CCRs from the most 
recently available hospital cost reports to convert hospital charges 
for blood and blood products to costs. This methodology has been our 
standard ratesetting methodology for blood and blood products since CY 
2005. It was developed in response to data analysis indicating that 
there was a significant difference in CCRs for those hospitals with and 
without blood-specific cost centers, and past comments indicating that 
the former OPPS policy of defaulting to the overall hospital CCR for 
hospitals not reporting a blood-specific cost center often resulted in 
an underestimation of the true hospital costs for blood and blood 
products. Specifically, in order to address the difference in CCRs and 
to better reflect hospitals' costs, we are proposing to continue to 
simulate blood CCRs for each hospital that does not report a blood cost 
center by calculating the ratio of the blood-specific CCRs to 
hospitals' overall CCRs for those hospitals that do report costs and 
charges for blood cost centers. We would then apply this mean ratio to 
the overall CCRs of hospitals not reporting costs and charges for blood 
cost centers on their cost reports in order to simulate blood-specific 
CCRs for those hospitals. We calculated the proposed median costs upon 
which the proposed CY 2009 payment rates for blood and blood products 
are based using the actual blood-specific CCR for hospitals that 
reported costs and charges for a blood cost center and a hospital-
specific simulated blood-specific CCR for hospitals that did not report 
costs and charges for a blood cost center.
    We continue to believe that the blood-specific CCR methodology 
better responds to the absence of a blood-specific CCR for a hospital 
than alternative methodologies, such as defaulting to the overall 
hospital CCR or applying an average blood-specific CCR across 
hospitals. Because this methodology takes into account the unique 
charging and cost accounting structure of each provider, we believe 
that it yields more accurate estimated costs for these products. We 
believe that continuing with this methodology in CY 2009 would result 
in median costs for blood and blood products that accurately reflect 
the relative estimated costs of these products for hospitals without 
blood cost centers, and, therefore, for these products in general.
    As discussed in section XIII.A.1. of this proposed rule, we are 
also proposing to create status indicator ``R'' (Blood and Blood 
Products), to denote blood and blood products for publication and 
payment purposes in CY 2009. We believe that it is necessary to create 
a status indicator that is specific to blood and blood products to 
facilitate development of blood product median costs under the blood-
specific CCR methodology and to facilitate implementation of the 
reduced payments that would be made to hospitals that fail to report 
the hospital outpatient quality data, as discussed in section XVI.D.2. 
of this proposed rule.
    We refer readers to Addendum B to this proposed rule for the CY 
2009 proposed payment rates for blood and blood products, which are 
identified with proposed status indicator ``R.'' For more detailed 
discussion of the blood-specific CCR methodology, we refer readers to 
the CY 2005 OPPS proposed rule (69 FR 50524 through 50525). For a full 
history of OPPS payment for blood and blood products, we refer readers 
to the CY 2008 OPPS/ASC final rule with comment period (72 FR 66807 
through 66810).
(3) Single Allergy Tests
    We are proposing to continue with our methodology of 
differentiating single allergy tests (``per test'') from multiple 
allergy tests (``per visit'') by assigning these services to two 
different APCs to provide accurate payments for these tests in CY 2009. 
Multiple allergy tests are currently assigned to APC 0370 (Allergy 
Tests), with a median cost calculated based on the standard OPPS 
methodology. We provided billing guidance in CY 2006 in Program 
Transmittal 804 (issued on January 3, 2006) specifically clarifying 
that hospitals should report charges for the CPT codes that describe 
single allergy tests to reflect charges ``per test'' rather than ``per 
visit'' and should bill the appropriate number of units of these CPT 
codes to describe all of the tests provided. However, our CY 2007 
claims data available for this CY 2009 proposed rule for APC 0381 do 
not reflect improved and more consistent hospital billing practices of 
``per test'' for single allergy tests. The median cost of APC 0381, 
calculated for this proposed rule according to the standard single 
claims OPPS methodology, is approximately $51, significantly higher 
than the CY 2008 median cost of APC 0381 of approximately $17 
calculated according to the ``per unit'' methodology, and greater than 
we would expect for these procedures that are to be reported ``per 
test'' with the appropriate number of units. Some claims for single 
allergy tests still appear to provide charges that represent a ``per 
visit'' charge, rather than a ``per test'' charge.
    Therefore, consistent with our payment policy for CYs 2006, 2007, 
and

[[Page 41440]]

2008, we are proposing to calculate a ``per unit'' median cost for APC 
0381, based upon 520 claims containing multiple units or multiple 
occurrences of a single CPT code. The CY 2009 proposed median cost for 
APC 0381 using the ``per unit'' methodology is approximately $25. For a 
full discussion of this methodology, we refer readers to the CY 2008 
OPPS/ASC final rule with comment period (72 FR 66737).
(4) Echocardiography Services
    For the CY 2009 OPPS, we are proposing to continue the packaging of 
payment for all contrast agents into the payment for the associated 
imaging procedure, as we did in CY 2008. For echocardiography services, 
we are proposing to estimate median costs using the same methodology 
that we used to set medians for these services for CY 2008. In CY 2008, 
we finalized a policy to package payment for all contrast agents into 
the payment for the associated imaging procedure regardless of whether 
the contrast agent met the OPPS drug packaging threshold. Section 
1833(t)(2)(G) of the Act requires us to create additional APC groups of 
services for procedures that use contrast agents that classify them 
separately from those procedures that do not utilize contrast agents. 
To reconcile this statutory provision with our final policy of 
packaging all contrast agents, for CY 2008, we calculated HCPCS-
specific median costs for all separately payable echocardiography 
procedures that may be performed with contrast agents by isolating 
single and ``pseudo'' single claims with the following CPT codes where 
a contrast agent was also billed on the claim: 93303 (Transthoracic 
echocardiography for congenital cardiac anomalies; complete), 93304 
(Transthoracic echocardiography for congenital cardiac anomalies; 
follow-up or limited study), 93307 (Echocardiography, transthoracic, 
real-time with image documentation (2D) with or without M-mode 
recording; complete), 93308 (Echocardiography, transthoracic, real-time 
with image documentation (2D) with or without M-mode recording; follow-
up or limited study), 93312 ( Echocardiography, transesophageal, real 
time with image documentation (2D) (with or without M-mode recording); 
including probe placement, image acquisition, interpretation and 
report), 93315 (Transesophageal echocardiography for congenital cardiac 
anomalies; including probe placement, image acquisition, interpretation 
and report), 93318 (Echocardiography, transesophageal (TEE) for 
monitoring purposes, including probe placement, real time 2-dimensional 
image acquisition and interpretation leading to ongoing (continuous) 
assessment of (dynamically changing) cardiac pumping function and to 
therapeutic measures on an immediate time basis), and 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). As noted in the CY 
2008 OPPS/ASC final rule with comment period (72 FR 66644), our 
analysis indicated that all echocardiography procedures that may be 
performed with contrast agents are reasonably similar both clinically 
and in terms of resource use, as evidenced by similar HCPCS median 
costs.
    Pursuant to the statute, for CY 2008, we created APC 0128 
(Echocardiogram With Contrast) to provide payment for echocardiography 
procedures that are performed with a contrast agent. In addition, as 
discussed in the CY 2008 OPPS/ASC final rule with comment period (72 FR 
66644 through 66646), in order for hospitals to identify separately and 
receive appropriate payment for echocardiography procedures performed 
with contrast beginning in CY 2008, we created eight new HCPCS codes 
(C8921 through C8928) that corresponded to the related CPT 
echocardiography codes and assigned them to the newly created APC 0128. 
We instructed hospitals performing echocardiography procedures without 
contrast to continue to report the CPT codes and to report the new C-
codes when performing echocardiography procedures with contrast or 
without contrast followed by with contrast.
    Claims data from CY 2008 are not yet available for ratesetting, so 
we do not yet have claims data specific to HCPCS codes C8921 through 
C8928 in order to determine the CY 2009 payment rate for APC 0128. 
Therefore, for CY 2009, we are proposing to again use the methodology 
that we used to set the CY 2008 payment rate for APC 0128 (72 FR 
66645). That is, we isolate single and ``pseudo'' single claims in our 
database that include those CPT codes in the range of 93303 through 
93350 as described above that correspond to the contrast studies 
described by HCPCS codes C8921 through C8928. For claims where one of 
these echocardiography procedures was billed with a contrast agent, we 
packaged the cost of the contrast agent into the cost of the 
echocardiography procedure and then calculated a median cost for APC 
0128 using this subset of claims to determine the proposed median cost 
for APC 0128 of approximately $563. As in CY 2008, the HCPCS code-
specific median costs for echocardiography procedures performed with 
contrast are all similar, and we continue to believe these services 
share sufficient similarity to be assigned to the same APC.
    For CY 2009, we also recalculated the median cost 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 did in 
CY 2008 (72 FR 66645). We used claims for CPT codes 93303 through 93350 
after removing claims from the ratesetting process that included 
contrast agents because these claims were used to set the median cost 
for APC 0128.
    We continue to believe that these echocardiography APC medians 
accurately reflect hospital costs when performing echocardiography 
procedures, both with and without contrast. In addition, we believe 
that this 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 continue packaged payment 
for contrast agents.
(5) Nuclear Medicine Services
    In CY 2008, we began packaging payment for diagnostic 
radiopharmaceuticals into the payment for the associated nuclear 
medicine procedure. (For a discussion regarding the distinction between 
diagnostic and therapeutic radiopharmaceuticals, we refer readers to 
the CY 2008 OPPS/ASC final rule at 72 FR 66636). Prior to the 
implementation of this policy, diagnostic radiopharmaceuticals were 
subject to the standard OPPS drug packaging methodology whereby 
payments are packaged when the estimated mean per day product costs 
fall at or below the annual packaging threshold for drugs, biologicals, 
and radiopharmaceuticals.
    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. All nuclear 
medicine procedures require the use of at least

[[Page 41441]]

one radiopharmaceutical or other radiolabeled product, and there are 
only a small number of radiopharmaceuticals that may be appropriately 
billed with each diagnostic nuclear medicine procedure. For the OPPS, 
we distinguish diagnostic radiopharmaceuticals from therapeutic 
radiopharmaceuticals for payment purposes, and this distinction is 
recognized in the Level II HCPCS codes for diagnostic 
radiopharmaceuticals that include the term ``diagnostic'' along with a 
radiopharmaceutical in their HCPCS code descriptors. As we stated in 
the CY 2008 OPPS/ASC final rule with comment period (72 FR 66635), we 
believe that our policy to package payment for diagnostic 
radiopharmaceuticals (other than those already packaged when their per 
day costs are below the packaging threshold for OPPS drugs, 
biologicals, and radiopharmaceuticals) is consistent with OPPS 
packaging principles, provides greater administrative simplicity for 
hospitals, and encourages hospitals to use the most clinically 
appropriate and cost efficient diagnostic radiopharmaceutical for each 
study. For more background on this policy, we refer readers to 
discussions in the CY 2008 OPPS/ASC proposed rule (72 FR 42667 through 
42672) and the CY 2008 OPPS/ASC final rule with comment period (72 FR 
66635 through 66641).
    We continue to believe that it is most appropriate to package 
payment for some radiopharmaceuticals, specifically diagnostic 
radiopharmaceuticals, into the payment for diagnostic nuclear medicine 
procedures, and we are proposing to continue to package payment for 
diagnostic radiopharmaceuticals into the payment for the associated 
nuclear medicine procedure for CY 2009 as described in section V.B.2.b. 
of this proposed rule.
    During the March 2008 APC Panel meeting, the APC Panel recommended 
that CMS continue to package payment for diagnostic 
radiopharmaceuticals for CY 2009. In addition, the APC Panel 
recommended that CMS present data at the first CY 2009 APC Panel 
meeting on usage and frequency, geographic distribution, and size and 
type of hospitals performing nuclear medicine studies using 
radioisotopes in order to ensure that access to diagnostic 
radiopharmaceuticals is preserved for Medicare beneficiaries. We are 
accepting both of these recommendations.
    For CY 2008 ratesetting, we used only claims for nuclear medicine 
procedures that contained a diagnostic radiopharmaceutical in 
calculating the median costs for APCs including nuclear medicine 
procedures (72 FR 66639). This is similar to the established 
methodology used for device-dependent APCs before claims reflecting the 
procedure-to-device edits were included in our claims data. For CY 2008 
we also implemented claims processing edits (called procedure-to-
radiopharmaceutical edits) requiring the presence of a 
radiopharmaceutical (or other radiolabeled product) HCPCS code when a 
separately payable nuclear medicine procedure is present on a claim. 
Similar to our practice regarding the procedure-to-device edits that 
have been in place for some time, we continually review comments and 
requests for changes related to these edits and, based on our review, 
may update the edit list during our quarterly update process if 
necessary. The radiopharmaceutical (and other radiolabeled product) and 
procedure HCPCS codes that are included in these edits can be viewed on 
the OPPS Web site at: http://www.cms.hhs.gov/HospitalOutpatientPPS/01_overview.asp.
    The CY 2008 OPPS claims that are subject to the procedure-to-
radiopharmaceutical edits will not be available for setting payment 
rates until CY 2010 and, therefore, are not yet available to set 
payment rates for CY 2009. Therefore, we are proposing to continue our 
established CY 2008 methodology for setting the payment rates for APCs 
that include nuclear medicine procedures for CY 2009. We used an 
updated list of radiolabeled products from the procedure-to-
radiopharmaceutical edit file to identify single and ``pseudo'' single 
claims for nuclear medicine procedures that also included at least one 
eligible radiolabeled product. Using this subset of claims, we followed 
our standard OPPS ratesetting methodology, discussed in section II.A. 
of this proposed rule, to calculate median costs for nuclear medicine 
procedures and their associated APCs.
    We have identified those APCs containing nuclear medicine 
procedures that would be subject to this methodology under our CY 2009 
proposal in Table 4 below. As in CY 2008, when we set APC median costs 
based on single and ``pseudo'' single claims that also included at 
least one radiolabeled product on our edit file, we observed an 
equivalent or higher median cost than that calculated from all single 
and ``pseudo'' single bills. We believe that this methodology 
appropriately ensures that the costs of diagnostic radiopharmaceuticals 
are included in the ratesetting process for these APCs.

 Table 4.--Proposed APCs Where Nuclear Medicine Procedures Are Assigned
With Median Costs Calculated From Claims With an Associated Radiolabeled
                                 Product
------------------------------------------------------------------------
             APC                               APC title
------------------------------------------------------------------------
0307.........................  Myocardial Positron Emission Tomography
                                (PET) imaging.
0308.........................  Non-Myocardial Positron Emission
                                Tomography (PET) imaging.
0377.........................  Level II Cardiac Imaging.
0378.........................  Level II Pulmonary Imaging.
0389.........................  Level I Non-Imaging Nuclear Medicine.
0390.........................  Level I Endocrine Imaging.
0391.........................  Level II Endocrine Imaging.
0392.........................  Level II Non-imaging Nuclear Medicine.
0393.........................  Hematologic Processing & Studies.
0394.........................  Hepatobiliary Imaging.
0395.........................  GI Tract Imaging.
0396.........................  Bone Imaging.
0397.........................  Vascular Imaging.
0398.........................  Level I Cardiac Imaging.
0400.........................  Hematopoietic Imaging.
0401.........................  Level I Pulmonary Imaging.
0402.........................  Level II Nervous System Imaging.
0403.........................  Level I Nervous System Imaging.

[[Page 41442]]

 
0404.........................  Renal and Genitourinary Studies.
0406.........................  Level I Tumor/Infection Imaging.
0408.........................  Level III Tumor/Infection Imaging.
0414.........................  Level II Tumor/Infection Imaging.
------------------------------------------------------------------------

(6) Hyperbaric Oxygen Therapy
    Since the implementation of OPPS in August 2000, the OPPS has 
recognized HCPCS code C1300 (Hyperbaric oxygen under pressure, full 
body chamber, per 30 minute interval) for hyperbaric oxygen therapy 
(HBOT) provided in the hospital outpatient setting. In the CY 2005 
final rule with comment period (69 FR 65758 through 65759), we 
finalized a ``per unit'' median cost calculation for APC 0659 
(Hyperbaric Oxygen) using only claims with multiple units or multiple 
occurrences of HCPCS code C1300 because delivery of a typical HBOT 
service requires more than 30 minutes. We observed that claims with 
only a single occurrence of the code were anomalies, either because 
they reflected terminated sessions or because they were incorrectly 
coded with a single unit. In the same rule, we also established that 
HBOT would not generally be furnished with additional services that 
might be packaged under the standard OPPS APC median cost methodology. 
This enabled us to use claims with multiple units or multiple 
occurrences. Finally, we also used each hospital's overall CCR to 
estimate costs for HCPCS code C1300 from billed charges rather than the 
CCR for the respiratory therapy or other departmental cost centers. 
Comments on the CY 2005 proposed rule effectively demonstrated that 
hospitals report the costs and charges for HBOT in a wide variety of 
cost centers. Since CY 2005, we have used this methodology to estimate 
the median cost for HBOT. The median costs of HBOT using this 
methodology have been relatively stable for the last 5 years. For CY 
2009, we are proposing to continue using the same methodology to 
estimate a ``per unit'' median cost for HCPCS code C1300 of 
approximately $103 using 71,866 claims with multiple units or multiple 
occurrences for this proposed rule.
(7) Payment for Ancillary Outpatient Services When Patient Expires (-CA 
Modifier)
    In the November 1, 2002 final rule with comment period (67 FR 
66798), we discussed the creation of the new HCPCS-CA modifier to 
address situations where a procedure on the OPPS inpatient list must be 
performed to resuscitate or stabilize a patient (whose status is that 
of an outpatient) with an emergent, life-threatening condition, and the 
patient dies before being admitted as an inpatient. In Program 
Transmittal A-02-129, issued on January 3, 2003, we instructed 
hospitals on the use of this modifier. For a complete description of 
the history of the policy and development of the payment methodology 
for these services, we refer readers to the CY 2007 OPPS/ASC final rule 
with comment period (71 FR 68157 through 68158).
    For CY 2009, we are proposing to continue to use our established 
ratesetting methodology for calculating the median cost of APC 0375 
(Ancillary Outpatient Services When Patient Expires), and we are 
proposing to continue to make one payment under APC 0375 for the 
services that meet the specific conditions for using modifier -CA. We 
would calculate the relative payment weight for APC 0375 by using all 
claims reporting a status indicator ``C'' procedure appended with the -
CA modifier, using estimated costs from claims data for line-items with 
a HCPCS code assigned status indicator ``G,'' ``H,'' ``K,'' ``N,'' 
``Q1,'' ``Q2,'' ``Q3,'' ``R,'' ``S,'' ``T,'' ``U,'' ``V,'' and ``X'' 
and charges for packaged revenue codes without a HCPCS code. We 
continue to believe that this methodology results in the most 
appropriate aggregate median cost for the ancillary services provided 
in these unusual clinical situations.
    Also, we believe that hospitals are reporting the -CA modifier 
according to the policy initially established in CY 2003. The claims 
frequency for APC 0375 has been relatively stable over the past few 
years. Although the proposed median cost for APC 0375 is slightly lower 
for CY 2009 than for CY 2008, generally it has increased significantly 
in recent years. Variation in the median cost for APC 0375 is expected 
because of the small number of claims and because the specific cases 
are grouped by the presence of the -CA modifier appended to an 
inpatient procedure and not according to the standard APC criteria of 
clinical and resource homogeneity. Cost variation for APC 0375 from 
year to year is anticipated and acceptable so long as hospitals 
continue judicious reporting of the -CA modifier.
    Table 5 shows the number of claims and the median cost for APC 0375 
from CY 2006 to CY 2008. For CY 2009, we are proposing a median cost 
for APC 0375 of approximately $4,762.

 Table 5.--Claims for Ancillary Outpatient Services When Patient Expires
                (-CA Modifier) for CYs 2006 Through 2008
------------------------------------------------------------------------
                                                        Number    Median
               Prospective payment year                   of       cost
                                                        claims     ($)
------------------------------------------------------------------------
CY 2006..............................................      370     2,717
CY 2007..............................................      260     3,549
CY 2008..............................................      183     4,945
------------------------------------------------------------------------

e. Proposed Calculation of Composite APC Criteria-Based Median Costs
    As discussed in the CY 2008 OPPS/ASC final rule with comment period 
(72 FR 66613), we believe it is important that the OPPS enhance 
incentives for hospitals to provide only necessary, high quality care 
and to provide that care as efficiently as possible. For CY 2008, we 
developed composite APCs to provide a single payment for groups of 
services that are typically performed together during a single clinical 
encounter and that result in the provision of a complete service. 
Bundling payment for multiple independent services into a single OPPS 
payment in this way enables hospitals to manage their resources with 
maximum flexibility by monitoring and adjusting the volume and 
efficiency of services themselves. An additional advantage to the 
composite APC model is that we can use data from correctly coded 
multiple procedure claims to calculate payment rates for the specified 
combinations of services, rather than relying upon single procedure 
claims which typically are low in volume and/or incorrectly coded. We 
refer readers to section II.A.4. of the CY 2008 OPPS/ASC final rule 
with comment period for a full discussion of the development of the 
composite APC methodology (72 FR

[[Page 41443]]

66611 through 66614 and 66650 through 66652).
    We continue to consider the development and implementation of 
larger payment bundles, such as composite APCs, a long-term policy 
objective for the OPPS and continue to explore other areas where this 
payment model may be utilized. In developing this proposed rule, we 
followed the same methodology for identifying possible composite APCs 
as we did for CY 2008. Specifically, we examined the multiple procedure 
claims that we could not convert to single procedure claims to identify 
common combinations of services for which we have 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. In 
addition, consistent with our stated intention to involve the APC Panel 
in our future exploration of how we can develop encounter-based and 
episode-based payment groups (72 FR 66614), we also specifically 
explored a possible composite APC for radioimmunotherapy in response to 
a recommendation of the APC Panel from its September 2007 meeting.
    After performing claims analysis and clinical assessments as 
described above, and taking into consideration the recommendation of 
the APC Panel from its March 2008 meeting that we continue pursing a 
radioimmunotherapy composite APC, we are not proposing a composite APC 
payment for radioimmunotherapy for CY 2009, as discussed further in 
section V.B.4. of this proposed rule. However, we are proposing to 
expand the composite APC model to one new clinical area for CY 2009, 
multiple imaging services, as described in detail in section 
II.A.2.e.(5) of this proposed rule. We also are proposing to continue 
our established composite APC policies for extended assessment and 
management, low dose rate (LDR) prostate brachytherapy, cardiac 
electrophysiologic evaluation and ablation, and mental health services 
for CY 2009, as discussed in sections II.A.2.e.(1), II.A.2.e.(2), 
II.A.2.e.(3), and II.A.2.e.(4), respectively, of this proposed rule.
(1) Extended Assessment and Management Composite APCs (APCs 8002 and 
8003)
    For the CY 2009 OPPS we are proposing to continue to include 
composite APC 8002 (Level I Extended Assessment and Management 
Composite) and composite APC 8003 (Level II Extended Assessment and 
Management Composite) in the OPPS. In addition, we are proposing to 
include HCPCS code G0384 (Level 5 hospital emergency department visit 
provided in a type B emergency department) in the criteria that 
determine eligibility for payment for composite APC 8003. For CY 2008, 
we created these two new composite APCs to provide payment to hospitals 
in certain circumstances when extended assessment and management of a 
patient occur (an extended visit). In most circumstances, observation 
services are supportive and ancillary to the other services provided to 
a patient. In the circumstances when observation care is provided in 
conjunction with a high level visit or direct admission and is an 
integral part of a patient's extended encounter of care, payment is 
made for the entire care encounter through one of two composite APCs as 
appropriate.
    As defined for the CY 2008 OPPS, 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 (72 FR 
66648 through 66649). Composite 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. HCPCS code G0378 
(Observation services, per hour) is assigned status indicator ``N,'' 
signifying that its payment is always packaged. As noted in the CY 2008 
OPPS/ASC final rule with comment period (72 FR 66648 through 66649), 
the I/OCE evaluates every claim received to determine if payment 
through a composite APC is appropriate. If payment through a composite 
APC is inappropriate, the I/OCE, in conjunction with the PRICER, 
determines the appropriate status indicator, APC, and payment for every 
code on a claim. The specific criteria that must be met for the two 
extended assessment and management composite APCs to be paid are 
provided below in the description of the claims that were selected for 
the calculation of the proposed CY 2009 median costs for these 
composite APCs. The general composite APC logic and observation care 
reporting criteria have also been included in updates to the Claims 
Processing and Benefit Policy Manuals through Change Request 5916 
(Program Transmittals 82 and 1145), dated February 8, 2008, and we are 
not proposing to change these criteria for the CY 2009 OPPS.
    When we created composite APCs 8002 and 8003 for CY 2008, we 
retained 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 the CY 2008 final rule with comment period (72 FR 
66812). We are not proposing to change these reporting requirements for 
the CY 2009 OPPS. These 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.
    As noted in detail in sections IX.C and XI. of the CY 2008 OPPS/ASC 
final rule with comment period (72 FR 66802 through 66805 and 66814), 
we saw a normal and stable distribution of clinic and emergency 
department visit levels. We do not expect to see an increase in the 
proportion of visit claims for high level visits as a result of the new 
composite APCs adopted for CY 2008 and proposed for CY 2009. Similarly, 
we expect that hospitals will not purposely change their visit 
guidelines or otherwise upcode clinic and emergency department visits 
reported with observation care solely for the purpose of composite 
payment. As stated in the CY 2008 OPPS/ASC final rule with comment 
period (72 FR 66648), we expect to carefully monitor any changes in 
billing practices on a service-specific and hospital-specific level to 
determine whether there is reason to request that Quality Improvement 
Organizations (QIOs) review the quality of care furnished, or to 
request that Benefit Integrity contractors or other contractors review 
the claims against the medical record. However, we will not have claims 
available for analysis that reflect the new CY 2008 payment policy for 
the extended assessment and management composite APCs until the CY 2010 
annual OPPS rulemaking cycle.
    At the March 2008 meeting of the APC Panel, we discussed with the 
Visits and Observation Subcommittee, as well as with the full APC 
Panel, the extended assessment and management composite APCs and 
observation-related data previously requested by the APC Panel at its 
September 2007 meeting. At its March 2008 meeting, the APC Panel 
recommended that CMS provide them with additional data related to the 
frequency and median cost for the extended assessment and management 
composite APCs and length-of-stay

[[Page 41444]]

frequency distribution data for observation services, with additional 
detail at the 24-48 hour and greater than 48 hour levels. We are 
accepting those recommendations and will provide additional data as 
requested at the next APC Panel meeting in 2008. In addition, the APC 
Panel recommended continuation of the Visits and Observation 
Subcommittee's work. We also are accepting that recommendation.
    For CY 2009, we are proposing to continue the extended assessment 
and management composite APC payment methodology for APCs 8002 and 
8003. As stated above, we are also proposing to continue the general 
reporting requirements for observation services reported with HCPCS 
code G0378. We continue to believe that the composite APCs 8002 and 
8003 and the related policies provide the most appropriate means of 
paying for these services. We are proposing to calculate the median 
costs for APCs 8002 and 8003 using all single and ``pseudo single'' 
procedure claims for CY 2007 that meet the criteria for payment of each 
composite APC.
    Specifically, to calculate the proposed median costs for composite 
APCs 8002 and 8003, we selected single and ``pseudo'' single claims 
that met each of the following criteria:
    1. Did not contain a HCPCS code to which we have assigned status 
indicator ``T'' with a date of service 1 day earlier than the date of 
service associated with HCPCS code G0378. (By selecting these claims 
from single and ``pseudo'' single claims, we had already assured that 
they would not contain a code for a service with status indicator ``T'' 
on the same date of service.);
    2. Contained 8 or more units of HCPCS code G0378; and
    3. Contained one of the following codes:
     In the case of composite APC 8002, HCPCS code G0379 
(Direct admission of patient for hospital observation care) on the same 
date of service as G0378; or 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)) provided on the same 
date of service or one day before the date of service for HCPCS code 
G0378.
     In the case of composite APC 8003, CPT code 99284 
(Emergency department visit for the evaluation and management of a 
patient (Level 4)); CPT code 99285 (Emergency department visit for the 
evaluation and management of a patient (Level 5)); CPT code 99291 
(Critical care, evaluation and management of the critically ill or 
critically injured patient; first 30-74 minutes); or HCPCS code G0384 
provided on the same date of service or one day before the date of 
service for HCPCS code G0378. (As discussed in detail below, we are 
proposing to add HCPCS code G0384 to the eligibility criteria for 
composite APC 8003 for CY 2009.)
     We applied the standard packaging and trimming rules to the claims 
before calculating the proposed median costs. The proposed CY 2009 
median cost resulting from this process for composite APC 8002 is $364, 
which was calculated from 14,968 single and ``pseudo'' single bills 
that met the required criteria. The proposed median cost for composite 
APC 8003 is $670, which was calculated from 83,491 single and 
``pseudo'' single bills that met the required criteria. This is the 
same methodology we used to calculate the medians for composite APCs 
8002 and 8003 for the CY 2008 OPPS (72 FR 66649).
    As discussed in more detail in section IX.B. of this proposed rule, 
we are proposing to reassign HCPCS code G0384 from APC 0608 (Level 5 
Hospital Clinic Visits) to APC 0616 (Level 5 Emergency Visits). 
Consistent with this change for CY 2009, we are also proposing to add 
HCPCS code G0384 to the eligibility criteria for payment of composite 
APC 8003. Because these visits are rare, we would not expect that 
adding HCPCS code G0384 to the eligibility criteria for payment for 
extended assessment and management composite APC 8003 would 
significantly increase the relative frequency of the Type B emergency 
department Level 5 visits reported using HCPCS code G0384.
    As discussed further in sections III.D and IX. of this proposed 
rule and consistent with our CY 2008 final policy, when calculating the 
median costs for the clinic, Type A emergency department visit, Type B 
emergency department visit, and critical care APCs (0604 through 0617 
and 0626 through 0629), we would utilize our methodology that excludes 
those claims for visits that are eligible for payment through the two 
extended assessment and management composite APCs, that is APC 8002 or 
APC 8003. We believe that this approach would result in the most 
accurate cost estimates for APCs 0604 through 0617 and 0626 through 
0629 for CY 2009.
    Also as discussed in section XIII.A.1. of this proposed rule, for 
CY 2009, we are proposing to replace current status indicator ``Q'' 
with three new separate status indicators: ``Q1,'' ``Q2,'' and ``Q3.'' 
We believe that this proposed change would make our policy more 
transparent to hospitals and would facilitate the use of status 
indicator-driven logic in our ratesetting calculations, and in hospital 
billing and accounting systems. Under this proposal, status indicator 
``Q3'' would be assigned to all codes that may be paid through a 
composite APC based on composite-specific criteria or separately 
through single code APCs when the criteria are not met. Therefore, we 
are proposing that each of the direct admission, clinic, and emergency 
department visit codes that may be paid through composite APCs 8002 and 
8003 be assigned status indicator ``Q3'' for CY 2009. We are proposing 
that HCPCS code G0378 would continue to be always packaged by assigning 
the HCPCS code status indicator ``N,'' its current status indicator 
under the CY 2008 OPPS.
    We are also proposing that the payment policy for separate payment 
of HCPCS code G0379 that was finalized for the CY 2008 OPPS (72 FR 
66814 through 66815) would continue to apply for CY 2009 when the 
criteria for payment of this service through composite APC 8002 are not 
met. The criteria for payment of HCPCS code G0379 under either 
composite APC 8002, as part of the extended assessment and management 
composite service or APC 0604, as a separately payable individual 
service are: (1) both HCPCS codes G0378 and G0379 are reported with the 
same date of service; and (2) no service with a status indicator of 
``T'' or ``V'' or Critical Care (APC 0617) is provided on the same date 
of service as HCPCS code G0379. If either of the above criteria is not 
met, HCPCS code G0379 is assigned status indicator ``N'' and its 
payment is packaged into the payment for other separately payable 
services provided in the same encounter.
    In summary, for CY 2009, we are proposing to continue the extended 
assessment and management composite APC payment methodology and the 
general reporting requirements for observation services reported with 
HCPCS code G0378. We are proposing to base the CY 2009 OPPS payment for 
composite APC 8002 on a median cost of $364 and to base the payment for 
composite APC 8003 on a median cost of $670. For CY 2009, we are also 
proposing to add HCPCS code G0384 to the eligibility criteria for 
payment of composite APC 8003. Furthermore, we are proposing to assign 
status indicator ``Q3'' to each of the visit codes that may be paid 
through the Level I and Level II extended assessment and management 
composite APCs.

[[Page 41445]]

(2) Low Dose Rate (LDR) Prostate Brachytherapy Composite APC (APC 8001)
    LDR prostate brachytherapy is a treatment for prostate cancer in 
which needles or catheters are inserted into the prostate, followed by 
permanent implantation of radioactive sources into the prostate through 
the hollow needles or catheters. At least two CPT codes are used to 
report the composite treatment service because there are separate codes 
that describe placement of the needles/catheters and the application of 
the brachytherapy sources: CPT code 55875 (Transperineal placement of 
needles or catheters into prostate for interstitial radioelement 
application, with or without cystoscopy) and CPT code 77778 
(Interstitial radiation source application; complex). Generally, the 
component services represented by both codes are provided in the same 
operative session in the same hospital on the same date of service to 
the Medicare beneficiary treated with LDR brachytherapy for prostate 
cancer. As discussed in the CY 2008 OPPS/ASC final rule with comment 
period (72 FR 66653), OPPS payment rates for CPT code 77778, in 
particular, have fluctuated over the years. We were frequently informed 
by the public that reliance on single procedure claims to set the 
median costs for these services resulted in use of only incorrectly 
coded claims for LDR prostate brachytherapy because a correctly coded 
claim should include, for the same date of service, CPT codes for both 
needle/catheter placement and application of radiation sources, as well 
as separately coded imaging and radiation therapy planning services 
(that is, a multiple procedure claim).
    In order to base payment on claims for the most common clinical 
scenario, and to contribute to our goal of providing payment under the 
OPPS for a larger bundle of component services provided in a single 
hospital encounter, beginning in CY 2008 we provide a single payment 
for LDR prostate brachytherapy when the composite service, billed as 
CPT codes 55875 and 77778, is furnished in a single hospital encounter. 
We base the payment for composite APC 8001 (LDR Prostate Brachytherapy 
Composite) on the median cost derived from claims for the same date of 
service that contain both CPT codes 55875 and 77778 and that do not 
contain other separately paid codes that are not on the bypass list. In 
uncommon occurrences in which the services are billed individually, 
hospitals continue to receive separate payments for the individual 
services. We refer readers to the CY 2008 OPPS/ASC final rule with 
comment period (72 FR 66652 through 66655) for a full history of OPPS 
payment for LDR prostate brachytherapy and a detailed description of 
how we developed the LDR prostate brachytherapy composite APC.
    For CY 2009, we are proposing to continue paying for LDR prostate 
brachytherapy services using the composite APC methodology proposed and 
implemented for CY 2008. That is, we are proposing to use CY 2007 
claims on which both CPT codes 55875 and 77778 were billed on the same 
date of service with no other separately paid procedure codes (other 
than those on the bypass list) to calculate the payment rate for 
composite APC 8001. Consistent with our CY 2008 practice, we would not 
use the claims that meet these criteria in the calculation of the 
median costs for APCs 0163 (Level IV Cystourethroscopy and Other 
Genitourinary Procedures) and 0313 (Brachytherapy) to which HCPCS codes 
55875 and 77778 are assigned respectively; median costs for APCs 0163 
and 0313 would continue to be calculated using single procedure claims. 
As discussed in section XIII.A.1. of this proposed rule, we also are 
proposing to use new status indicator ``Q3'' (Codes that May be Paid 
Through a Composite APC), to denote HCPCS codes such as CPT codes 55875 
and 77778 that may be paid through a composite APC for publication and 
payment purposes for CY 2009, rather than status indicator ``Q'' that 
is being used in CY 2008. We are proposing the status indicator change 
to facilitate identification of HCPCS codes that may be paid through 
composite APCs and to facilitate development of the composite APC 
median costs.
    We continue to believe that this composite APC contributes to our 
goal of creating hospital incentives for efficiency and cost 
containment, while providing hospitals with the most flexibility to 
manage their resources. We also continue to believe that data from 
claims reporting both services required for LDR prostate brachytherapy 
provide the most accurate median cost upon which to base the composite 
APC payment rate.
    Using partial year CY 2007 claims data available for the CY 2009 
proposed rule, we were able to use 6,897 claims that contained both CPT 
code 77778 and 55875 to calculate the median cost upon which the CY 
2009 proposed payment for composite APC 8001 is based. The proposed 
median cost for composite APC 8001 for CY 2009 is approximately $3,509. 
This is an increase compared to the CY 2008 OPPS/ASC final rule with 
comment period in which we calculated a final median cost for this 
composite APC of approximately $3,391 based on a full year of CY 2006 
claims data. The CY 2009 proposed composite APC median is slightly less 
than $3,581, the sum of the proposed median costs for APCs 0163 (Level 
IV Cystourethroscopy and other Genitourinary Procedures) and 0651 
(Complex Interstitial Radiation Source Application) ($2,388 + $1,193), 
the APCs to which CPT codes 77778 and 55875 map if one service is 
billed on a claim without the other. We believe that the proposed 
median cost for composite APC 8001 of approximately $3,509, which is 
calculated from claims we believe to be correctly coded, would result 
in a reasonable and appropriate payment rate for this service in CY 
2009.
(3) Cardiac Electrophysiologic Evaluation and Ablation Composite APC 
(APC 8000)
    Cardiac electrophysiologic evaluation and ablation services 
frequently are performed in varying combinations with one another 
during a single episode of care in the HOPD. Therefore, correctly coded 
claims for these services often include multiple codes for component 
services that are reported with different CPT codes and that, prior to 
CY 2008, were always paid separately through different APCs 
(specifically, APC 0085 (Level II Electrophysiologic Evaluation), APC 
0086 (Ablate Heart Dysrhythm Focus), and APC 0087 (Cardiac 
Electrophysiologic Recording/Mapping)). As a result, there would never 
be many single bills for cardiac electrophysiologic evaluation and 
ablation services, and those that are reported as single bills would 
often represent atypical cases or incorrectly coded claims. As 
described in the CY 2008 OPPS/ASC final rule with comment period (72 FR 
66655 through 66659), the APC Panel and the public expressed persistent 
concerns regarding the limited and reportedly unrepresentative single 
bills available for use in calculating the median cost for these 
services according to our standard OPPS methodology.
    Effective January 1, 2008, we established APC 8000 (Cardiac 
Electrophysiologic Evaluation and Ablation Composite) to pay for a 
composite service made up of at least one specified electrophysiologic 
evaluation service and one electrophysiologic ablation service. 
Calculating a composite APC for these services allowed us to utilize 
many more claims than were available to establish the individual APC 
median

[[Page 41446]]

costs for these services, and we also saw this composite APC as an 
opportunity to advance our stated goal of promoting hospital efficiency 
through larger payment bundles. In order to calculate the median cost 
upon which the payment rate for composite APC 8000 is based, we used 
multiple procedure claims that contained at least one CPT code from 
group A for evaluation services and at least one CPT code from group B 
for ablation services reported on the same date of service on an 
individual claim. We refer readers to Table 6 for identification of the 
CPT codes that are assigned to groups A and B. For a full discussion of 
how we identified the group A and group B procedures and established 
the CY 2008 payment rate for the cardiac electrophysiologic evaluation 
and ablation composite APC, we refer readers to the CY 2008 OPPS/ASC 
final rule with comment period (72 FR 66655 through 66659). 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, payments are made under the appropriate single procedure 
APCs and the composite APC does not apply.
    For CY 2009, we are proposing to continue paying for cardiac 
electrophysiologic evaluation and ablation services using the composite 
APC methodology established for CY 2008. Consistent with our CY 2008 
practice, we would not use the claims that meet these criteria in the 
calculation of the median costs for APCs 0085 (Level II 
Electrophysiologic Procedures) and 0086 (Level III Electrophysiologic 
Procedures), to which the HCPCS codes in both groups A and B for 
composite APC 8000 are otherwise assigned. Median costs for APCs 0085 
and 0086 would continue to be calculated using single procedure claims. 
As discussed in section XIII.A.1. of this proposed rule, we also are 
proposing to use new status indicator ``Q3'' (Codes that May be Paid 
Through a Composite APC) to denote HCPCS codes such as the cardiac 
electrophysiologic evaluation and ablation CPT codes that may be paid 
through a composite APC for publication and payment purposes for CY 
2009, rather than the status indicator ``Q'' that is being used in CY 
2008. We continue to believe that the composite APC for cardiac 
electrophysiologic 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. Further, 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.
    Using partial year CY 2007 claims data available for this proposed 
rule, we were able to use 5,603 claims containing a combination of 
group A and group B codes and calculated a proposed median cost of 
approximately $9,174 for composite APC 8000. This is an increase 
compared to the CY 2008 OPPS/ASC final rule with comment period in 
which we calculated a final median cost for this composite APC of 
approximately $8,438 based on a full year of CY 2006 claims data. We 
believe that the proposed median cost of $9,174 calculated from a high 
volume of correctly coded multiple procedure claims results in an 
accurate and appropriate proposed payment for cardiac 
electrophysiologic evaluation and ablation services when at least one 
evaluation service is furnished during the same clinical encounter as 
at least one ablation service. Table 6 below lists the groups of 
procedures upon which we are proposing to base composite APC 8000 for 
CY 2009.

 Table 6.--Groups of Cardiac Electrophysiologic Evaluation and Ablation Procedures Upon Which We Base Composite
                                                    APC 8000
----------------------------------------------------------------------------------------------------------------
                                                                 Proposed
  Codes used in combinations: At least one in     HCPCS code    single code    Proposed CY 2009 SI  (composite)
           Group A and one in Group B                           CY 2009 APC
----------------------------------------------------------------------------------------------------------------
Group A
    Electrophysiology evaluation...............        93619          0085                                   Q3
    Electrophysiology evaluation...............        93620          0085                                   Q3
Group B
    Ablate heart dysrhythm focus...............        93650          0085                                   Q3
    Ablate heart dysrhythm focus...............        93651          0086                                   Q3
    Ablate heart dysrhythm focus...............        93652          0086                                   Q3
----------------------------------------------------------------------------------------------------------------

(4) Mental Health Services Composite APC (APC 0034)
    For the CY 2009 OPPS, we are proposing to continue our longstanding 
policy of limiting 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 consider to be the most 
resource intensive of all outpatient mental health treatment. We refer 
readers to the April 7, 2000 OPPS final rule with comment period (65 FR 
18455) for the initial discussion of this longstanding policy. We 
continue to believe that 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 than the partial hospitalization per diem payment.
    For CY 2009, as discussed further in section X.B. of this proposed 
rule, we are proposing to create two new APCs, 0172 (Level I Partial 
Hospitalization (3 services)) and 0173 (Level II Partial 
Hospitalization (4 or more services)), to replace APC 0033 (Partial 
Hospitalization), which we are proposing to delete for CY 2009. In 
summary, when a community mental health center (CMHC) or hospital 
provides three units of partial hospitalization services and meets all 
other partial hospitalization payment criteria, the CMHC or hospital 
would be paid through APC 0172. When the CMHC or hospital provides four 
or more units of partial hospitalization services and meets all other 
partial hospitalization payment criteria, the hospital would be paid 
through APC 0173. For CY 2009, we are proposing to set the payment rate 
for mental health composite APC 0034 at the same rate as APC 0173, 
which is the maximum partial hospitalization per diem payment. We 
believe this APC payment

[[Page 41447]]

rate would provide the most appropriate payment for composite APC 0034, 
taking into consideration the intensity of the mental health services 
and the differences in the HCPCS codes for mental health services that 
could be paid through this composite APC compared with the HCPCS codes 
that could be paid through partial hospitalization APC 0173. Through 
the I/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 maximum per diem partial hospitalization 
payment [listed as APC 0173 (Level II Partial Hospitalization (4 or 
more services))], those specified mental health services would be 
assigned to APC 0034 (Mental Health Services Composite), which has the 
same payment rate as APC 0173, and the hospital would be paid one unit 
of APC 0034. In the CY 2008 OPPS/ASC final rule with comment period (72 
FR 66651), we clarified that this longstanding policy regarding payment 
of APC 0034 for combinations of independent mental health services 
provided in a single hospital encounter resembles the payment policy 
for composite APCs that we finalized for LDR prostate brachytherapy and 
cardiac electrophysiologic evaluation and ablation services for CY 
2008. Similar to the logic for those two composite APCs, the I/OCE 
currently determines, and we are proposing for CY 2009 that it would 
continue to determine, whether to pay these specified mental health 
services individually or to make a single payment at the same rate as 
the APC 0173 per diem rate for partial hospitalization for all of the 
specified mental health services furnished on that date of service. 
However, we note that this established policy for payment of APC 0034 
differs from the payment policies for the LDR prostate brachytherapy 
and cardiac electrophysiologic evaluation and ablation 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.
    For CY 2008 (72 FR 66651), we changed the status indicator to ``Q'' 
for the HCPCS codes that describe 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. For CY 2009, we are proposing to change the status 
indicator from ``Q'' (Packaged Services Subject to Separate Payment 
under OPPS Payment Criteria) to ``Q3,'' (Codes that May be Paid Through 
a Composite APC), for those HCPCS codes that describe the specified 
mental health services to which APC 0034 applies. This is consistent 
with our proposal to change the status indicator from ``Q'' to ``Q3'' 
for all HCPCS codes that may be paid through composite APCs, in order 
to further refine our identification of the different types of 
conditionally packaged HCPCS codes that were previously all assigned 
the same status indicator ``Q'' under the OPPS. We are proposing to 
apply this status indicator policy to the HCPCS codes that are assigned 
to composite APC 0034 in Addendum M to this proposed rule. We are also 
proposing to change the status indicator from ``P'' (Partial 
Hospitalization) to ``S'' (Significant Procedure, Not Discounted when 
Multiple), for APC 0034. Although APC 0034 has been historically 
assigned status indicator ``P'' under the OPPS, this APC provides 
payment for mental health services that are furnished in an HOPD 
outside of a partial hospitalization program. This proposed status 
indicator change should have no practical implications for hospitals 
from a billing or payment perspective. Rather, we believe that it is 
more appropriate to assign status indicator ``S'' to an APC that 
describes mental health services that are provided outside of a partial 
hospitalization program. We refer readers to section XIII.A. of this 
proposed rule for a complete discussion of status indicators and our 
proposed status indicator changes for CY 2009.
    In summary, we are not proposing 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 0173. However, we are proposing to change the status 
indicator to ``Q3'' for the HCPCS codes for the mental health services 
to which this policy applies, consistent with our belief that payment 
for these services should be packaged into a single payment made at the 
same rate as a day of partial hospitalization unless the sum of the 
individual payments for these codes would be less than the payment for 
composite APC 0034.
(5) Multiple Imaging Composite APCs (APCs 8004, 8005, 8006, 8007, and 
8008)
    Under current OPPS policy, hospitals receive a full APC payment for 
each imaging service on a claim, regardless of how many procedures are 
performed during a single session using the same imaging modality or 
whether the procedures are performed on contiguous body areas. In 
response to a 2005 MedPAC recommendation to reduce the technical 
component payment for multiple imaging services performed on contiguous 
body areas, CMS proposed a payment reduction policy for multiple 
imaging procedures performed on contiguous body areas in both the CY 
2006 MPFS proposed rule (70 FR 45849 through 45851) and the CY 2006 
OPPS proposed rule (70 FR 42748 through 42751). In the March 2005 
MedPAC report entitled, ``Report to the Congress: Medicare Payment 
Policy,'' MedPAC concluded that Medicare's physician's office payment 
rates for imaging services were based on each service being provided 
independently and that the rates did not account for efficiencies that 
may be gained when multiple studies using the same imaging modality are 
performed in the same session. In both the CY 2006 MPFS proposed rule 
(70 FR 45849) and the CY 2006 OPPS proposed rule (70 FR 42751), we 
suggested that although each imaging procedure entails the use of 
hospital resources, including certain staff, equipment, and supplies, 
some of those resource costs are not incurred twice when the procedures 
are performed in the same session and thus, should not be paid as if 
they were incurred twice. Specifically, for CY 2006, for both the MPFS 
and the OPPS, we proposed to apply a 50-percent reduction in the 
payment for certain second and subsequent imaging procedures performed 
during the same session, similar to the longstanding OPPS policy of 
reducing payments for certain second and subsequent surgical procedures 
performed during the same operative session. We developed the 50-
percent reduction estimate using MPFS input data to estimate the 
practice expense resources associated with equipment time and indirect 
costs that would not occur for the second and subsequent procedures. We 
proposed that the reduction would apply only to individual services 
within 11 designated imaging families, which were comprised of 
procedures utilizing similar modalities across contiguous body areas 
and developed based on MPFS billing data. The imaging modalities 
included in the proposal

[[Page 41448]]

were ultrasound, computed tomography (CT), computed tomographic 
angiography (CTA), magnetic resonance imaging (MRI), and magnetic 
resonance angiography (MRA). Prior to making the proposal for the OPPS, 
we confirmed that the CY 2004 OPPS claims for the CY 2006 OPPS update 
demonstrated comparable clustering of imaging procedures by modality 
and within family. The OPPS and MPFS imaging services provided across 
families would not be subject to the reduction policy as proposed for 
CY 2006. The proposed 11 families of imaging services were as follows:
     Ultrasound (Chest/Abdomen/Pelvis-Non-Obstetrical)
     CT and CTA (Chest/Thorax/Abd/Pelvis)
     CT and CTA (Head/Brain/Orbit/Maxillofacial/Neck)
     MRI and MRA (Chest/Abd/Pelvis)
     MRI and MRA (Head/Brain/Neck)
     MRI and MRA (Spine)
     CT (Spine)
     MRI and MRA (Lower Extremities)
     CT and CTA (Lower Extremities)
     MR and MRI (Upper Extremities and Joints)
     CT and CTA (Upper Extremities)
    In response to the multiple imaging payment reduction policy 
proposed for the CY 2006 OPPS (70 FR 68707 through 68708), several 
commenters requested that we postpone implementation until we performed 
further analyses and were able to find more substantial, hospital-based 
data to support the 50-percent payment reduction rather than base the 
policy on MPFS data. Commenters argued that, unlike a relative value 
unit (RVU) estimate of the total resources associated with a single 
service for the MPFS, the OPPS cost-based methodology already 
incorporates the efficiencies of performing multiple procedures during 
the same session and that median cost estimates for single procedures 
reflect these savings. Specifically, an imaging CCR consists of the 
labor and allocated capital and overhead costs for all imaging provided 
in a department specified by each hospital on its cost report, divided 
by the total charges for all imaging services provided. In short, 
commenters stated that because the OPPS cost estimates used for setting 
the OPPS payment rates for imaging services already reflect costs for a 
department in general, the CCR used to adjust charges to costs 
currently incorporated savings from the imaging efficiencies associated 
with multiple procedures provided in a single session. By applying this 
CCR to every charge on a claim, commenters noted that CMS averages 
multiple imaging efficiencies for all imaging services across all 
service costs estimated with the departmental CCR. At its August 2005 
meeting, the APC Panel heard this and other arguments and recommended 
that CMS postpone implementation of the policy for a year in order to 
gather more data on the impact of the proposed changes.
    In the CY 2006 OPPS final rule with comment period (70 FR 68516), 
we acknowledged that, based on our analysis of how hospitals report 
charges and costs for diagnostic radiology services, it may be correct 
that the median costs from hospital claims data for the imaging 
services in the 11 families proposed for the reduction policy already 
reflect reduced median costs based, in part, on hospitals' provision of 
multiple imaging services in a single session. However, we expressed 
concern that the marginal effect of imaging efficiencies on a given CCR 
may be negligible, thereby underestimating the impact of multiple 
imaging efficiencies, especially where hospitals reported all 
diagnostic radiology services in one cost center and did not split the 
costs and charges for advanced imaging with CT, MRI, or ultrasound into 
separate cost centers. Because efficiencies are inherent in our cost 
methodology, our analysis did not provide a definitive answer regarding 
how much, on average, the OPPS median costs for single imaging services 
in the 11 families are reduced due to existing hospital efficiencies 
related to multiple services provided in a single session. Accordingly, 
we did not implement a multiple imaging payment reduction policy for 
the OPPS in CY 2006 (a modified MPFS multiple imaging payment reduction 
policy was implemented with a 25-percent reduction policy for certain 
second and subsequent imaging services for CY 2006, and that same 
reduction policy currently remains in effect under the MPFS). In the CY 
2006 OPPS final rule with comment period (70 FR 68707 through 68708), 
we stated that, depending upon the results of future analyses, we might 
revisit this issue and propose revisions to the structure of our 
payment rates for imaging procedures in order to ensure that those 
rates properly reflect the relative costs of initial and subsequent 
imaging procedures. Since publication of the CY 2006 OPPS final rule 
with comment period, MedPAC has encouraged us to continue our analyses 
in order to improve payment accuracy for imaging services under the 
OPPS, including considering adopting a multiple procedure payment 
reduction policy.
    In preparation for the CY 2009 OPPS proposed rule, we revisited the 
issue of how we could improve the accuracy of OPPS payment for multiple 
imaging services and incorporate the lower marginal cost for conducting 
second and subsequent imaging procedures in the same imaging session. 
As already noted, for CY 2008, we developed a composite APC methodology 
to provide a single payment for two or more major independent services 
that are typically performed together during a single operative session 
and that result in the provision of a complete service (72 FR 66650 
through 66652). The composite APCs for LDR prostate brachytherapy 
services and cardiac electrophysiologic evaluation and ablation 
services discussed in sections II.A.2.e.(2) and (3), respectively, of 
this proposed rule are classic examples. Providing one payment for an 
entire session encourages hospitals to closely evaluate the resources 
they use for all components of the composite service in order to 
improve their payment relative to the costs of performing the composite 
service. We decided to explore capturing efficiencies for multiple 
imaging procedures through a composite APC payment methodology when a 
hospital provides more than one imaging procedure using the same 
modality during a single session.
    We began by reexamining the 11 imaging families of HCPCS codes for 
contiguous body areas involving a single imaging modality that we had 
proposed for CY 2006 and that are currently in use under the MPFS for 
the multiple imaging procedure payment reduction policy. We based this 
code-specific analysis on the HCPCS codes recognized under the OPPS for 
the same services that are included in the 11 CY 2008 MPFS imaging 
families, and in addition, we incorporated the 10 HCPCS codes that are 
proposed for inclusion in these 11 families for the CY 2009 MPFS. We 
collapsed the 11 MPFS imaging families into 3 OPPS imaging families 
according to their modality--1 for ultrasound, 1 for CT and CTA, and 1 
for MRI and MRA services. These larger OPPS imaging families generally 
correspond to the larger APC groups of services paid under OPPS 
relative to the service-specific payment under the MPFS. We believe 
that these larger OPPS imaging families are appropriate because 
eliminating the contiguous body area concept that is central to the 
MPFS imaging families should not significantly limit potential 
efficiencies in an imaging session. For example, we would not expect 
second and subsequent imaging services of the same modality involving 
noncontiguous body areas to require duplicate facility

[[Page 41449]]

services such as greeting the patient, providing education and 
obtaining consent, retrieving prior exams, setting up an intravenous 
infusion, and preparing and cleaning the room, any more than second and 
subsequent imaging procedures of the same modality on contiguous body 
areas. The contiguous body area concept was a component of MedPAC's 
recommendation for reducing physician payment, but we believe it is 
less appropriate for a single, session-based OPPS composite imaging 
payment. In addition, using these collapsed OPPS families would add 
only 12 percent additional claims to those eligible for composite 
payment relative to using the 11 MPFS imaging families, suggesting that 
under the OPPS, multiple imaging claims are within the same imaging 
modality and involve contiguous body areas the vast majority of the 
time. Nevertheless, the three OPPS imaging families would allow us to 
capture additional claims for payment under an imaging composite 
payment methodology.
    Another unique aspect of imaging services for OPPS ratesetting, in 
general, is their inclusion on our bypass list and contribution to 
creating ``pseudo'' single claims, particularly those services that are 
specifically performed without the administration of contrast. Our 
creation of ``pseudo'' single claims from multiple procedure claims is 
discussed in section II.A.1.b. of this proposed rule. In beginning to 
model these potential multiple imaging composite APCs, we noted that 
there would be overlap between the bypass list and noncontrast imaging 
HCPCS codes that are included in the three OPPS imaging families. The 
bypass process removes any line-item for a bypass HCPCS code, 
irrespective of units, from multiple procedure claims. The line-item 
information is used to make at least one ``pseudo'' single bill and the 
line-items remaining on the claim are split by date and reassessed for 
single bill status. To model the median costs for the potential 
multiple imaging composite APCs, we removed any HCPCS codes in the OPPS 
imaging families that overlap with codes on our bypass list to avoid 
splitting claims with multiple units or multiple occurrences of codes 
in an OPPS imaging family into new ``pseudo'' single claims. The 
imaging HCPCS codes that we removed from the bypass list for purposes 
of calculating proposed multiple imaging composite APC median costs 
appear in Table 7 below. (We refer readers to section II.A.1.b. of this 
proposed rule for further discussion of how we treat claims with HCPCS 
codes in the OPPS imaging families that are also on the bypass list.) 
We integrated the identification of imaging composite ``single 
session'' claims, that is, claims with multiple imaging procedures 
within the same family on the same date of service, into the creation 
of ``pseudo'' single claims to ensure that claims were split in the 
``pseudo'' single process into accurate reflections of either a 
composite ``single session'' imaging service or a standard sole imaging 
service resource cost. Like all single bills, the new composite 
``single session'' claims were for the same date of service and 
contained no other separately paid services in order to isolate the 
session imaging costs. Our last step after processing all claims 
through the ``pseudo'' single process was to make line-items for HCPCS 
codes in the OPPS imaging families remaining on multiple procedure 
claims with one unit of the imaging HCPCS code and no other imaging 
services in the families into ``pseudo'' single bills for use in 
calculating the median costs for sole imaging services.

 Table 7.--Proposed OPPS Imaging Family Services Overlapping With HCPCS
                Codes on the Proposed CY 2009 Bypass List
------------------------------------------------------------------------
 
------------------------------------------------------------------------
                          Family 1--Ultrasound
------------------------------------------------------------------------
76700.....................................  Us exam, abdom, complete.
76705.....................................  Echo exam of abdomen.
76770.....................................  Us exam abdo back wall,
                                             comp.
76775.....................................  Us exam abdo back wall, lim.
------------------------------------------------------------------------
                          Family 1--Ultrasound
------------------------------------------------------------------------
76776.....................................  Us exam k transpl w/doppler.
76856.....................................  Us exam, pelvic, complete.
76870.....................................  Us exam, scrotum.
76857.....................................  Us exam, pelvic, limited.
------------------------------------------------------------------------
             Family 2--CT and CTA With and Without Contrast
------------------------------------------------------------------------
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.
71250.....................................  Ct thorax w/o dye.
72125.....................................  Ct neck spine w/o dye.
72128.....................................  Ct chest spine w/o dye.
72131.....................................  Ct lumbar spine w/o dye.
72192.....................................  Ct pelvis w/o dye.
73200.....................................  Ct upper extremity w/o dye.
73700.....................................  Ct lower extremity w/o dye.
74150.....................................  Ct abdomen w/o dye.
------------------------------------------------------------------------
             Family 3--MRI and MRA With and Without Contrast
------------------------------------------------------------------------
70336.....................................  Magnetic image, jaw joint.
70544.....................................  Mr angiography head w/o dye.
70551.....................................  Mri brain w/o dye.
72141.....................................  Mri neck spine w/o dye.
72146.....................................  Mri chest spine w/o dye.
72148.....................................  Mri lumbar spine w/o dye.
73218.....................................  Mri upper extremity w/o dye.
------------------------------------------------------------------------
             Family 3--MRI and MRA With and Without Contrast
------------------------------------------------------------------------
73221.....................................  Mri joint upr extrem w/o
                                             dye.
------------------------------------------------------------------------
             Family 3--MRI and MRA With and Without Contrast
------------------------------------------------------------------------
73718.....................................  Mri lower extremity w/o dye.
73721.....................................  Mri jnt of lwr extre w/o
                                             dye.
------------------------------------------------------------------------

    One final requirement of our assessment of multiple imaging 
composite APCs was our expansion of the OPPS families for the three 
modalities--ultrasound, CT and CTA, and MRI and MRA--into five 
composite APCs to accommodate the statutory requirement in section 
1833(t)(2)(G) of the Act, that the OPPS provide payment for imaging 
services provided with contrast and without contrast through separate 
payment groups. Ultrasound studies do not utilize contrast and thus 
this family constituted a single composite APC. However, we had to 
split the families for CT and CTA, and MRI and MRA, into two separate 
composite APCs each to reflect whether the procedures were performed 
with or without contrast. We examined the HCPCS codes on our ``single 
session'' claims, and if the claim had at least one HCPCS code that was 
performed with contrast, we classified the ``single session'' bill as 
``with contrast.'' We then recalculated the median costs for the 
standard (sole service) imaging APCs based on single and ``pseudo'' 
single bills and the imaging composite APC median costs based on 
appropriate ``single session'' bills with multiple imaging procedures.
    We were able to identify 1.7 million ``single session'' claims out 
of an estimated 4 million potential composite cases from our 
ratesetting claims database, or almost half of all eligible claims, to 
calculate median costs for the 5 OPPS multiple imaging composite APCs. 
We used 8 million single and ``pseudo'' single claims to set the 
medians for the standard (sole service) APCs for the same imaging 
procedures. We specifically note that the proposed CY 2009 payment 
rates for multiple imaging services provided during the same session 
and within the same OPPS

[[Page 41450]]

imaging family are based entirely on median costs derived empirically 
from OPPS claims and Medicare cost report data.
    In general, we found that the per service median cost for each of 
the multiple imaging procedures performed during a single session, and 
reflected in the composite APC median costs, was modestly less than the 
sole service median cost when only one imaging service was performed 
during a single session, as reflected in the median cost of the 
standard (sole service) imaging APCs (that is, those imaging services 
that would not have qualified for payment through a multiple imaging 
composite APC under the proposed composite methodology). However, we 
also noticed that the proposed CY 2009 median costs for the standard 
(sole service) imaging APCs increased slightly compared to the median 
costs that we would calculate using the current OPPS imaging service 
payment policy. These variations in median costs are consistent with 
our expectations. Because the OPPS cost-based payment weight 
methodology estimates a standard cost per imaging procedure for each 
hospital, these results suggest that the imaging composite ``single 
session'' claims disproportionately represent services furnished by 
more efficient providers that frequently perform more than one imaging 
procedure during a single session. The lower cost claims also may 
include more providers that appropriately report costs and charges for 
nonstandard cost centers for advanced imaging on their cost reports.
    In light of these findings, we determined that a proposal to revise 
our methodology for paying for multiple imaging procedures is warranted 
because the current OPPS policy of providing a full APC payment for 
each imaging service on a claim, regardless of how many procedures are 
performed during a single session using the same imaging modality, 
neither reflects nor promotes the efficiencies hospitals can achieve 
when they perform multiple imaging procedures during a single session, 
as seen in the claims data.
    Therefore, we are proposing to utilize the three OPPS imaging 
families discussed above, incorporating statutory requirements to 
differentiate OPPS payment for imaging services provided with contrast 
and without contrast as required by section 1833(t)(2)(G) of the Act, 
to create five multiple imaging composite APCs for payment in CY 2009. 
The proposed APCs are: APC 8004 (Ultrasound Composite); APC 8005 (CT 
and CTA without Contrast Composite); APC 8006 ( CT and CTA with 
Contrast Composite); APC 8007 (MRI and MRA without Contrast Composite); 
and APC 8008 (MRI and MRA with Contrast Composite). We calculated the 
proposed median costs for these APCs using CY 2007 claims data by 
isolating ``single session'' claims with more than one imaging service 
within a family as discussed above. Unlike our CY 2006 proposal where 
we would have applied a 50-percent payment reduction for second and 
subsequent imaging procedures comparable to the proposed MPFS policy, 
the CY 2009 OPPS proposal would calculate the composite APC payment 
amounts empirically from estimated costs on claims for multiple imaging 
services provided in a single session. This proposed composite 
methodology for multiple imaging services parallels the payment 
methodologies that we are proposing for other composite APCs under the 
CY 2009 OPPS.
    Table 8 below presents the HCPCS codes comprising the three OPPS 
imaging families and five composite APCs that would be created under 
this proposal for CY 2009, along with the proposed median costs upon 
which the payment rates for these composite APCs would be based. The 
HCPCS codes included in Table 8 are assigned status indicator ``Q3'' in 
Addendum B to this proposed rule to identify their status as 
potentially payable through a composite APC. Their composite APC 
assignments are identified in Addendum M to this proposed rule.
    To implement this proposed policy, we would provide one composite 
APC payment each time a hospital bills more than one procedure 
described by the HCPCS codes in one OPPS imaging family displayed in 
Table 8 below on a single date of service. If the hospital performs a 
procedure without contrast during the same session as at least one 
other procedure with contrast using the same imaging modality, then the 
hospital would receive payment for the ``with contrast'' composite APC. 
A single imaging procedure, or imaging procedures reported with HCPCS 
codes assigned to different OPPS imaging families, would be paid 
according to the standard OPPS methodology through the standard (sole 
service) imaging APCs to which they are proposed for assignment in CY 
2009. We are proposing that hospitals would continue to use the same 
HCPCS codes to report imaging services, and that the I/OCE would 
determine when combinations of imaging procedures would qualify for 
composite APC payment or would map to standard APCs for payment. We 
would make a single payment for those imaging services that qualify for 
composite APC payment, as well as the packaged services furnished on 
the same date of service. The proposed composite APCs would have status 
indicators of ``S,'' signifying that payment for the APC would not be 
reduced when appearing on the same claim with other significant 
procedures.

 Table 8.--Proposed OPPS Imaging Families and Multiple Imaging Procedure
                             Composite APCs
------------------------------------------------------------------------
 
------------------------------------------------------------------------
                          Family 1--Ultrasound
------------------------------------------------------------------------
APC 8004 (Ultrasound Composite)             Proposed CY 2009 Median Cost
                                             = $194.14
------------------------------------------------------------------------
76604.....................................  Us exam, chest.
76700.....................................  Us exam, abdom, complete.
76705.....................................  Echo exam of abdomen.
76770.....................................  Us exam abdo back wall,
                                             comp.
76775.....................................  Us exam abdo back wall, lim.
76776.....................................  Us exam k transpl w/Doppler.
76831.....................................  Echo exam, uterus.
76856.....................................  Us exam, pelvic, complete.
76870.....................................  Us exam, scrotum.
76857.....................................  Us exam, pelvic, limited.
------------------------------------------------------------------------
             Family 2--CT and CTA With and Without Contrast
------------------------------------------------------------------------
APC 8005 (CT and CTA without Contrast       Proposed CY 2009 Median Cost
 Composite) *                                = $422.98
------------------------------------------------------------------------
0067T.....................................  Ct colonography;dx.
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.
71250.....................................  Ct thorax w/o dye.
72125.....................................  Ct neck spine w/o dye.
------------------------------------------------------------------------
             Family 2--CT and CTA With and Without Contrast
------------------------------------------------------------------------
APC 8005 (CT and CTA without Contrast       Proposed CY 2009 Median Cost
 Composite) *                                = $422.98
------------------------------------------------------------------------
72128.....................................  Ct chest spine w/o dye.
72131.....................................  Ct lumbar spine w/o dye.
72192.....................................  Ct pelvis w/o dye.
73200.....................................  Ct upper extremity w/o dye.
73700.....................................  Ct lower extremity w/o dye.
74150.....................................  Ct abdomen w/o dye.
------------------------------------------------------------------------
APC 8006 (CT and CTA with Contrast          Proposed CY 2009 Median Cost
 Composite)                                  = $639.09
------------------------------------------------------------------------
70487.....................................  Ct maxillofacial w/dye.
70460.....................................  Ct head/brain w/dye.

[[Page 41451]]

 
70470.....................................  Ct head/brain w/o & w/dye.
70481.....................................  Ct orbit/ear/fossa w/dye.
70482.....................................  Ct orbit/ear/fossa w/o&w/
                                             dye.
70488.....................................  Ct maxillofacial w/o & w/
                                             dye.
70491.....................................  Ct soft tissue neck w/dye.
70492.....................................  Ct sft tsue nck w/o & w/dye.
70496.....................................  Ct angiography, head.
70498.....................................  Ct angiography, neck.
71260.....................................  Ct thorax w/dye.
71270.....................................  Ct thorax w/o & w/dye.
71275.....................................  Ct angiography, chest.
72126.....................................  Ct neck spine w/dye.
72127.....................................  Ct neck spine w/o & w/dye.
72129.....................................  Ct chest spine w/dye.
72130.....................................  Ct chest spine w/o & w/dye.
72132.....................................  Ct lumbar spine w/dye.
72133.....................................  Ct lumbar spine w/o & w/dye.
72191.....................................  Ct angiograph pelv w/o&w/
                                             dye.
72193.....................................  Ct pelvis w/dye.
72194.....................................  Ct pelvis w/o & w/dye.
73201.....................................  Ct upper extremity w/dye.
73202.....................................  Ct uppr extremity w/o&w/dye.
73206.....................................  Ct angio upr extrm w/o&w/
                                             dye.
------------------------------------------------------------------------
             Family 2--CT and CTA With and Without Contrast
------------------------------------------------------------------------
APC 8006 (CT and CTA with Contrast          Proposed CY 2009 Median Cost
 Composite)                                  = $639.09
------------------------------------------------------------------------
73701.....................................  Ct lower extremity w/dye.
73702.....................................  Ct lwr extremity w/o&w/dye.
73706.....................................  Ct angio lwr extr w/o&w/dye.
74160.....................................  Ct abdomen w/dye.
74170.....................................  Ct abdomen w/o & w/dye.
74175.....................................  Ct angio abdom w/o & w/dye.
75635.....................................  Ct angio abdominal arteries.
* If a ``without contrast'' CT or CTA procedure is performed during the
 same session as a ``with contrast'' CT or CTA procedure, the I/OCE will
 assign APC 8006 rather than APC 8005.
------------------------------------------------------------------------
             Family 3--MRI and MRA With and Without Contrast
------------------------------------------------------------------------
APC 8007 (MRI and MRA without Contrast      Proposed CY 2009 Median Cost
 Composite) *                                = $724.66
------------------------------------------------------------------------
70336.....................................  Magnetic image, jaw joint.
70540.....................................  Mri orbit/face/neck w/o dye.
70544.....................................  Mr angiography head w/o dye.
70547.....................................  Mr angiography neck w/o dye.
70551.....................................  Mri brain w/o dye.
70554.....................................  Fmri brain by tech.
71550.....................................  Mri chest w/o dye.
72141.....................................  Mri neck spine w/o dye.
72146.....................................  Mri chest spine w/o dye.
72148.....................................  Mri lumbar spine w/o dye.
72195.....................................  Mri pelvis w/o dye.
73218.....................................  Mri upper extremity w/o dye.
73221.....................................  Mri joint upr extrem w/o
                                             dye.
73718.....................................  Mri lower extremity w/o dye.
73721.....................................  Mri jnt of lwr extre w/o
                                             dye.
74181.....................................  Mri abdomen w/o dye.
75557.....................................  Cardiac mri for morph.
75559.....................................  Cardiac mri w/stress img.
C8901.....................................  MRA w/o cont, abd.
------------------------------------------------------------------------
             Family 3--MRI and MRA With and Without Contrast
------------------------------------------------------------------------
APC 8007 (MRI and MRA without Contrast      Proposed CY 2009 Median Cost
 Composite) *                                = $724.66
------------------------------------------------------------------------
C8904.....................................  MRI w/o cont, breast, uni.
C8907.....................................  MRI w/o cont, breast, bi.
C8910.....................................  MRA w/o cont, chest.
C8913.....................................  MRA w/o cont, lwr ext.
C8919.....................................  MRA w/o cont, pelvis.
------------------------------------------------------------------------
APC 8008 (MRI and MRA with Contrast         Proposed CY 2009 Median Cost
 Composite)                                  = $1,002.72
------------------------------------------------------------------------
70549.....................................  Mr angiograph neck w/o&w/
                                             dye.
70542.....................................  Mri orbit/face/neck w/dye.
70543.....................................  Mri orbt/fac/nck w/o & w/
                                             dye.
70545.....................................  Mr angiography head w/dye.
70546.....................................  Mr angiograph head w/o&w/
                                             dye.
------------------------------------------------------------------------
APC 8008 (MRI and MRA with Contrast         Proposed CY 2009 Median Cost
 Composite)                                  = $1,002.72
------------------------------------------------------------------------
70548.....................................  Mr angiography neck w/dye.
70552.....................................  Mri brain w/dye.
70553.....................................  Mri brain w/o & w/dye.
71551.....................................  Mri chest w/dye.
71552.....................................  Mri chest w/o & w/dye.
72142.....................................  Mri neck spine w/dye.
72147.....................................  Mri chest spine w/dye.
72149.....................................  Mri lumbar spine w/dye.
72156.....................................  Mri neck spine w/o & w/dye.
72157.....................................  Mri chest spine w/o & w/dye.
72158.....................................  Mri lumbar spine w/o & w/
                                             dye.
72196.....................................  Mri pelvis w/dye.
72197.....................................  Mri pelvis w/o & w/dye.
73219.....................................  Mri upper extremity w/dye.
73220.....................................  Mri uppr extremity w/o&w/
                                             dye.
73222.....................................  Mri joint upr extrem w/dye.
73223.....................................  Mri joint upr extr w/o&w/
                                             dye.
73719.....................................  Mri lower extremity w/dye.
73720.....................................  Mri lwr extremity w/o&w/dye.
73722.....................................  Mri joint of lwr extr w/dye.
------------------------------------------------------------------------
             Family 3--MRI and MRA With and Without Contrast
------------------------------------------------------------------------
APC 8008 (MRI and MRA with Contrast         Proposed CY 2009 Median Cost
 Composite)                                  = $1,002.72
------------------------------------------------------------------------
73723.....................................  Mri joint lwr extr w/o&w/
                                             dye.
74182.....................................  Mri abdomen w/dye.
74183.....................................  Mri abdomen w/o & w/dye.
75561.....................................  Cardiac mri for morph w/dye.
75563.....................................  Card mri w/stress img & dye.
C8900.....................................  MRA w/cont, abd.
C8902.....................................  MRA w/o fol w/cont, abd.
C8903.....................................  MRI w/cont, breast, uni.
C8905.....................................  MRI w/o fol w/cont, brst,
                                             un.
C8906.....................................  MRI w/cont, breast, bi.
C8908.....................................  MRI w/o fol w/cont, breast.
C8909.....................................  MRA w/cont, chest.
C8911.....................................  MRA w/o fol w/cont, chest.
C8912.....................................  MRA w/cont, lwr ext.
C8914.....................................  MRA w/o fol w/cont, lwr ext.
------------------------------------------------------------------------
APC 8008 (MRI and MRA with Contrast         Proposed CY 2009 Median Cost
 Composite)                                  = $1,002.72
------------------------------------------------------------------------
C8918.....................................  MRA w/cont, pelvis.
C8920.....................................  MRA w/o fol w/cont, pelvis.
------------------------------------------------------------------------
* If a ``without contrast'' MRI or MRA procedure is performed during the
 same session as a ``with contrast'' MRI or MRA procedure, the I/OCE
 will assign APC 8008 rather than 8007.
------------------------------------------------------------------------

3. Proposed Calculation of OPPS Scaled Payment Weights
    Using the APC median costs discussed in sections II.A.1. and 2. of 
this proposed rule, we calculated the proposed relative payment weights 
for each APC for CY 2009 shown in Addenda A and B to this proposed 
rule. In years prior to CY 2007, we standardized all the relative 
payment weights to APC 0601 (Mid Level Clinic Visit) because mid-level 
clinic visits were among 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 (71 FR 67990), 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 selected APC 0606 as the base because

[[Page 41452]]

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. 
Therefore, for CY 2009, to maintain consistency in using a median for 
calculating unscaled weights representing the median cost of some of 
the most frequently provided services, we are proposing to continue to 
use the median cost of the mid-level clinic visit APC, proposed APC 
0606, to calculate unscaled weights. Following our standard 
methodology, but using the proposed CY 2009 median cost for APC 0606, 
for CY 2009 we assigned APC 0606 a relative payment weight of 1.00 and 
divided the median cost of each APC by the proposed 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 2009 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 2008 relative weights to aggregate payments using 
the CY 2009 proposed relative weights. Again 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 
unscaled relative payment weights were adjusted by a weight scaler of 
1.3354 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 proposed 
relative payment weights listed in Addenda A and B to this proposed 
rule incorporate the recalibration adjustments discussed in sections 
II.A.1. and 2. of this proposed rule.
    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 proposed rule) is included in the budget neutrality calculations 
for the CY 2009 OPPS.
4. Proposed Changes to Packaged Services
a. Background
    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, is 
adequate to ensure access to appropriate care. 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 purchase price 
of 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 necessary services are furnished, while carefully 
scrutinizing 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.
    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. 
Over the past several years of the OPPS, greater unpackaging of payment 
has occurred simultaneously with continued growth in OPPS expenditures 
as a result of increasing volumes of individual services. In an attempt 
to address this increase in volume of services, in the CY 2008 OPPS/ASC 
final rule with comment period, we finalized additional packaging for 
the CY 2008 OPPS, which included the establishment of four new 
composite APCs for CY 2008, specifically APC 8000 (Cardiac 
Electrophysiologic Evaluation and Ablation Composite), APC 8001 (LDR 
Prostate Brachytherapy Composite), APC 8002 (Level I Extended 
Assessment & Management Composite), and APC 8003 (Level II Extended 
Assessment & Management Composite) (72 FR 66650 through 66659). HCPCS 
codes that may be paid through a composite APC if certain composite-
specific criteria are met or otherwise may be paid separately are 
assigned status indicator ``Q'' for CY 2008, and we consider them to be 
conditionally packaged. We discuss composite APCs in more detail in 
section II.A.2.e. of this proposed rule.
    In addition, in the CY 2008 OPPS/ASC final rule with comment 
period, (72 FR 66610 through 66659), we adopted the packaging of 
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. The seven categories are: Guidance services, image 
processing services, intraoperative services, imaging supervision and 
interpretation services, diagnostic radiopharmaceuticals, contrast 
media, and observation services. 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 finalized our assignment of status 
indicator ``N'' to those HCPCS codes that we believe are always 
integral to the performance of the primary modality, so we always 
package their costs into the costs of the separately paid primary 
services with which they are billed. Services assigned status indicator 
``N'' in CY 2008 are unconditionally packaged.
    We also finalized our assignment of status indicator ``Q'' to those 
HCPCS

[[Page 41453]]

codes that we believe are typically integral to the performance of the 
primary modality and, in such cases, we package payment for their costs 
into the costs of the separately paid primary services with which they 
are usually billed. An ``STVX-packaged code'' describes a HCPCS code 
whose payment is packaged when one or more separately paid primary 
services are furnished in the hospital outpatient encounter. A ``T-
packaged code'' describes a code whose payment is packaged when one or 
more separately paid surgical procedures are provided during the 
hospital encounter. ``STVX-packaged codes'' and ``T-packaged codes'' 
are paid separately in those uncommon cases when they do not meet their 
respective criteria for packaged payment. ``STVX-packaged codes'' and 
``T-packaged HCPCS codes'' assigned status indicator ``Q'' in CY 2008 
are conditionally packaged.
    We use the term ``dependent service'' to refer to the HCPCS codes 
that represent services that are typically ancillary and supportive to 
a primary diagnostic or therapeutic modality. We use the term 
``independent service'' to refer to the HCPCS codes that represent the 
primary therapeutic or diagnostic modality into which we 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.''
    An example of a CY 2008 change in the OPPS packaging status for a 
dependent HCPCS code that is ancillary and supportive is CPT code 61795 
(Stereotactic computer-assisted volumetric (navigational) procedure, 
intracranial, extracranial, or spinal (List separately in addition to 
code for primary procedure)). CPT code 61795 was assigned separate 
payment in CY 2007 but its payment is packaged during CY 2008. This 
service is only performed during the course of a surgical procedure. 
Several of the surgical procedures that we would expect to be reported 
in association with CPT code 61795 are assigned to APC 0075 (Level V 
Endoscopy Upper Airway) for CY 2008. We consider the stereotactic 
guidance service to be an ancillary and supportive service that may be 
performed only in the same operative session as a procedure that could 
otherwise be performed independently of the stereotactic guidance 
service.
    During its March 2008 meeting, the APC Panel recommended that CMS 
report to the APC Panel at its first CY 2009 meeting the impact of 
packaging on the net payments for patient care. We will take this 
recommendation into consideration and determine which data we can 
provide at the first CY 2009 APC Panel meeting that would best respond 
to this recommendation. The APC Panel also recommended that CMS present 
data at the first CY 2009 APC Panel meeting on usage and frequency, 
geographic distribution, and size and type of hospitals performing 
nuclear medicine examinations and using radioisotopes to ensure that 
access to these services is preserved for Medicare beneficiaries. This 
recommendation is discussed in more detail in section V.B.2.b. of this 
proposed rule.
    Hospitals include charges for packaged services on their claims, 
and the costs associated with those packaged services are then added to 
the costs of separately payable procedures on the same claims in 
establishing payment rates for the separately payable services. We 
encourage hospitals to report all HCPCS codes that describe packaged 
services that were provided, unless CPT or CMS provide other guidance. 
If a HCPCS code is not reported when a packaged service is provided, it 
can be challenging to track utilization patterns and resource costs.
    For CY 2009, we are proposing to further refine our identification 
of the different types of conditionally packaged HCPCS codes that were 
previously all assigned status indicator ``Q'' (Packaged Services 
Subject to Separate Payment under OPPS Payment Criteria) under the 
OPPS. We are proposing to create and assign status indicators ``Q1'' 
[bs] (``STVX-Packaged Codes''), ``Q2'' (``T-Packaged 
Codes''), or ``Q3'' (Codes that may be paid through a composite APC) to 
each conditionally packaged HCPCS code. We refer readers to section 
XIII.A.1. of this proposed rule for a complete discussion of status 
indicators and our proposed status indicator changes for CY 2009.
    While most conditionally packaged HCPCS codes are assigned to only 
one of the conditionally packaged categories described above, for CY 
2009, we are proposing to assign one particular HCPCS code to two 
conditionally packaged categories. Specifically, we are proposing to 
treat CPT code 75635 (Computed tomographic angiography, abdominal aorta 
and bilateral iliofemoral lower extremity runoff, with contrast 
material(s), including noncontrast images, if performed, and image 
postprocessing) as both a ``T-packaged code'' and a component of 
composite APC 8006 (CT and CTA with Contrast Composite). We are 
proposing to assign this code status indicator ``Q2'' in Addendum B and 
``Q3'' in Addendum M, to signify its dual treatment. For CY 2009, we 
are proposing to first assess whether CPT code 75635 would be packaged 
or separately payable, based on its status as a ``T-packaged code.'' If 
the service reported with CPT code 75635 would be separately payable 
due to the absence of another procedure on the claim with status 
indicator ``T'' for the same date of service, the code would then be 
assessed in the context of any other relevant imaging services reported 
on the claim for the same date of service to determine whether payment 
for CPT code 75635 under composite APC 8006 would be appropriate. If 
the criteria for payment of the code under composite APC 8006 are not 
met, then CPT code 75635 would be separately paid based on the proposed 
APC 0662 (CT Angiography) and its corresponding proposed payment rate 
displayed in Addendum B to this proposed rule.
b. Service-Specific Packaging Issues
    (1) Packaged Services Addressed by APC Panel Recommendations
    The Packaging Subcommittee of the APC Panel was established to 
review all packaged HCPCS codes. 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 in section 
II.A.4.a. of this proposed rule regarding our packaging approach for CY 
2008, we established packaging criteria that apply to seven categories 
of codes whose payments are packaged. Four of the APC Panel's packaging 
recommendations from its March 2008 meeting reference codes that are 
included in the seven categories of services that we packaged for CY 
2008. For these four recommendations, we specifically applied the 
packaging considerations that apply to those seven categories of codes 
in determining whether a code should be proposed as packaged or 
separately payable for CY 2009. Specifically, we determined whether a 
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 two APC Panel recommendations that do 
not fit into any of the seven categories of services that were part of 
the CY 2008

[[Page 41454]]

packaging approach, we applied the packaging criteria noted above that 
were historically used under the OPPS. Moreover, we took into 
consideration our interest in possibly expanding the size of payment 
groups for component services to provide encounter-based or episode-of-
care-based payment in the future in order to encourage hospital 
efficiency and provide hospitals with maximal flexibility to manage 
their resources.
    The Packaging Subcommittee reviewed the packaging status of 
numerous HCPCS codes and reported its findings to the APC Panel at its 
March 2008 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 provide additional data to support packaging radiation 
oncology guidance services for review by the Data Subcommittee at the 
next APC Panel meeting.
    2. CPT code 36592 (Collection of blood specimen using established 
central or peripheral catheter, venous, not otherwise specified) be 
treated as an ``STVX-packaged code'' for CY 2009 and assigned to the 
same APC as CPT code 36591 (Collection of blood specimen from a 
completely implantable venous access device) until adequate data are 
collected that would enable CMS to determine its own payment rate.
    3. HCPCS code A4306 (Disposable drug delivery system, flow rate of 
less than 50 mL per hour) remain packaged for CY 2009.
    4. CPT code 74305 (Cholangiography and/or pancreatography; through 
existing catheter, radiological supervision and interpretation) be 
treated as a ``T-packaged code'' for CY 2009 and that CMS consider 
assigning this code to APC 0263 (Level I Miscellaneous Radiology 
Procedures).
    5. CMS reinstate separate payment for the following intravascular 
ultrasound and intracardiac echocardiography codes: CPT codes 37250 
(Intravascular ultrasound (non-coronary vessel) during diagnostic 
evaluation and/or therapeutic intervention; initial vessel); 37251 
(Intravascular ultrasound (non-coronary vessel) during diagnostic 
evaluation and/or therapeutic intervention; each additional vessel); 
92978 (Intravascular ultrasound (coronary vessel or graft) during 
diagnostic evaluation and/or therapeutic intervention including imaging 
supervision, interpretation and report; initial vessel); 92979 
(Intravascular ultrasound (coronary vessel or graft) during diagnostic 
evaluation and/or therapeutic intervention including imaging 
supervision, interpretation and report; each additional vessel); and 
93662 (Intracardiac echocardiography during therapeutic/diagnostic 
intervention, including imaging supervision and interpretation).
    6. CMS continue to package diagnostic radiopharmaceuticals for CY 
2009.
    7. The Packaging Subcommittee continue its work.
    We address each of these recommendations in turn in the discussion 
that follows.

Recommendation 1

    In response to the APC Panel's recommendation, we are adopting the 
recommendation and will provide data related to radiation oncology 
guidance services to the Data Subcommittee at the next APC Panel 
meeting. For CY 2009, we are proposing to maintain the packaged status 
of radiation oncology guidance services. These services are ancillary 
and dependent in relation to the radiation therapy services with which 
they are most commonly furnished. Consistent with the principles of a 
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. While we are aware that some of the radiation 
oncology guidance codes describe relatively new technologies, we do not 
believe that beneficiary access to care would be harmed by packaging 
payment for radiation oncology guidance services. 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 
procedures they facilitate.

Recommendation 2

    For CY 2009, we are adopting the APC Panel recommendation and 
proposing to treat CPT code 36592 (Collection of blood specimen using 
established central or peripheral catheter, venous, not otherwise 
specified) as an ``STVX-packaged code'' and assigning it to APC 0624 
(Phlebotomy and Minor Vascular Access Device Procedures), the same APC 
to which we are proposing to assign CPT 36591 code (Collection of blood 
specimen from a completely implantable venous access device).
    CPT code 36592 became effective January 1, 2008, and was assigned 
interim status indicator ``N'' in the CY 2008 OPPS/ASC final rule with 
comment period. Several members of the public requested that we change 
the status of this code from unconditionally packaged to conditionally 
packaged, thereby paying it identically to CPT code 36591. CPT code 
36591 also became effective January 1, 2008, and was assigned interim 
status indicator ``Q'' with treatment as an ``STVX-packaged code'' and 
assignment to APC 0624. CPT code 36591 was a direct replacement for CPT 
code 36540, which was deleted effective January 1, 2008, but was an 
``STVX-packaged code'' with assignment to APC 0624 for CY 2007. These 
members of the public stated that the resource costs associated with 
drawing blood from an established central or peripheral catheter were 
almost identical to the resources associated with drawing blood from an 
implanted venous access device.
    We agree that the resource costs associated with CPT code 36592 are 
likely similar to the resource costs associated with CPT code 36591. 
When cost data for CPT code 36592 are available for the CY 2010 OPPS 
annual update, we will reevaluate whether assignment to APC 0624 
continues to be appropriate.
    In summary, for CY 2009, we are proposing to change the packaged 
status of CPT code 36592 from unconditionally packaged to conditionally 
packaged, as an ``STVX-packaged code,'' which is parallel to the 
proposed treatment of CPT code 36591. This service would be paid 
separately when it is provided in an encounter without a service 
assigned status indicator ``S,'' ``T,'' ``V,'' or ``X.'' In all other 
circumstances, its payment would be packaged.
    As noted above, for CY 2009, we are proposing to further refine our 
identification of the different types of conditionally packaged HCPCS 
codes that were previously all assigned status indicator ``Q'' 
(Packaged Services Subject to Separate Payment under OPPS Payment 
Criteria) under the OPPS. Therefore, we are proposing to assign status 
indicator''Q1'' to CPT code 36592 for CY 2009, which indicates that it 
is an ``STVX-packaged code.'' We refer readers to section XIII.A.1. for 
a complete discussion of status indicators and our proposed status 
indicator changes for CY 2009.
    We note that we expect hospitals to follow the CPT guidance related 
to CPT

[[Page 41455]]

codes 36591 and 36592 regarding when these services should be 
appropriately reported.

Recommendation 3

    For CY 2009, we are adopting the APC Panel's recommendation and 
proposing to maintain the packaged status of HCPCS code A4306 
(Disposable drug delivery system, flow rate of less than 50 mL per 
hour).
    HCPCS code A4306 describes a disposable drug delivery system with a 
flow rate of less than 50 mL per hour. Beginning in CY 2007, HCPCS code 
A4306 is payable under the OPPS with status indicator ``N,'' indicating 
that its payment is unconditionally packaged. We packaged this code 
because it is considered a supply, and under the OPPS it is standard to 
package payment for all supplies, including implantable and non-
implantable supplies, into payment for the procedures in which the 
supplies are used. In March 2007, we first discussed this code with the 
APC Panel. A manufacturer noted in a presentation during the March 2007 
APC Panel meeting that there is a particular disposable drug delivery 
system that is reported with HCPCS code A4306 that is specifically used 
to treat postoperative pain. The manufacturer requested that this code 
be moved to its own APC for CY 2008 so that the service could receive 
separate payment. During its September 2007 meeting, the APC Panel 
recommended that this code remain packaged for CY 2008 and asked CMS to 
present additional data to the APC Panel when available.
    During the APC Panel's March 2008 meeting, we provided to the 
Packaging Subcommittee additional cost data related to this code. Our 
CY 2007 proposed rule claims data indicate that HCPCS code A4306 was 
billed on OPPS claims approximately 2,400 times, yielding a line-item 
median cost of approximately $4. The individual costs for this supply 
range from $4 per unit to $2,056 per unit. The Packaging Subcommittee 
suggested that this code may not always be correctly reported by 
hospitals as the data also show that this code was frequently billed 
together with computed tomography (CT) scans of various regions of the 
body, without surgical procedures on the same date of service. 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. It was 
also noted that hospitals may actually be appropriately reporting HCPCS 
code A4306, which may be used to describe supplies used for purposes 
other than postoperative pain relief.
    In summary, because HCPCS code A4306 represents a supply and 
payment of supplies is packaged under the OPPS according to 
longstanding policy, we are proposing to maintain the unconditionally 
packaged status of HCPCS code A4306 for CY 2009.

Recommendation 4

    For CY 2009, we are adopting the APC Panel's recommendation and 
proposing to treat CPT code 74305 (Cholangiography and/or 
pancreatography; through existing catheter, radiological supervision 
and interpretation) as a ``T-packaged code'' and assign it to APC 0263 
(Level I Miscellaneous Radiology Procedures).
    Effective January 1, 2008, CPT code 74305 is unconditionally 
packaged and falls into the imaging supervision and interpretation 
category of codes that we created as part of the CY 2008 packaging 
approach. Several members of the public recently noted that CPT code 
74305 may sometimes be provided in a single hospital encounter with CPT 
code 47505 (Injection procedure for cholangiography through an existing 
catheter (eg, percutaneous transepatic or T-tube)), which is 
unconditionally packaged itself, when these are the only two services 
reported on a claim. In the case where only these two services were 
performed, the hospital would receive no separate payment. Our claims 
data indicate that CPT code 74305 is infrequently provided without any 
other separately payable services on the same date of service.
    Therefore, for CY 2009, we are proposing to change the packaged 
status of CPT code 74305 from unconditionally packaged to conditionally 
packaged, as a ``T-packaged code,'' which is parallel to the treatment 
of many other conditionally packaged imaging supervision and 
interpretation codes. Hospitals would receive separate payment for this 
service when it appears on a claim without a surgical procedure. The 
payment for this service would be packaged into payment for a status 
indicator ``T'' surgical procedure when it appears on the same date as 
a surgical procedure. Hospitals that furnish this imaging supervision 
and interpretation service on the same date as an independent surgical 
procedure assigned status indicator ``T'' must bill both services on 
the same claim.
    As noted above, for CY 2009, we are proposing to further refine our 
identification of the different types of conditionally packaged HCPCS 
codes that were previously all assigned status indicator ``Q'' 
(Packaged Services Subject to Separate Payment under OPPS Payment 
Criteria) under the OPPS. Therefore, we are proposing to assign status 
indicator ``Q2'' to CPT code 74305 for CY 2009, which indicates that it 
is a ``T-packaged code.'' We refer readers to section XIII.A.1. for a 
complete discussion of status indicators and our proposed status 
indicator changes for CY 2009.
    In summary, for CY 2009, we are proposing to change the status 
indicator for CPT code 74305 from ``N'' to ``Q2,'' with assignment to 
APC 0263 (Level I Miscellaneous Radiology Procedures) when it would be 
separately paid.

Recommendation 5

    For CY 2009, we are proposing to maintain the packaged status of 
CPT codes 37250 (Intravascular ultrasound (non-coronary vessel) during 
diagnostic evaluation and/or therapeutic intervention; initial vessel); 
37251 (Intravascular ultrasound (non-coronary vessel) during diagnostic 
evaluation and/or therapeutic intervention; each additional vessel); 
92978 (Intravascular ultrasound (coronary vessel or graft) during 
diagnostic evaluation and/or therapeutic intervention including imaging 
supervision, interpretation and report; initial vessel); 92979 
(Intravascular ultrasound (coronary vessel or graft) during diagnostic 
evaluation and/or therapeutic intervention including imaging 
supervision, interpretation and report; each additional vessel); and 
93662 (Intracardiac echocardiography during therapeutic/diagnostic 
intervention, including imaging supervision and interpretation). We are 
not adopting the APC Panel's recommendation to pay separately for these 
intraoperative intravascular ultrasound (IVUS) and intracardiac 
echocardiography (ICE) services for CY 2009.
    These services were newly packaged for CY 2008 because they were 
members of the intraoperative category of services that were included 
in the CY 2008 packaging approach. The intraoperative category includes 
those codes that are reported for supportive dependent diagnostic 
testing or other minor procedures performed during surgical or other 
independent procedures. Because these intraoperative IVUS and ICE 
services support the performance of an independent procedure and they 
are provided in the same operative session as the independent 
procedure, we packaged their payment into the OPPS payment for the 
independent procedure performed. We believe these IVUS and ICE services 
are always integral to and dependent upon the independent

[[Page 41456]]

services that they support and, therefore, we believe their payment 
would be appropriately packaged into the independent procedure.
    A presenter at the March 2008 APC Panel meeting requested separate 
payment for these services, noting that they are high cost and provided 
with relatively low frequency compared to the services they typically 
accompany. We continue to believe that these services are ancillary and 
dependent in relation to the independent cardiac and vascular 
procedures with which they are most commonly furnished. We note that 
resource cost was not a factor we considered when deciding to package 
intraoperative services. Packaging payment for items and services that 
are directly related to performing a procedure, even when those 
packaged items and services have variable resource costs or different 
frequencies of use in relationship to one another or to the independent 
services into which their payment is packaged, has been a principle of 
the OPPS since the inception of that payment system. For example, once 
an implantable device is no longer eligible for device pass-through 
payment, our standard policy is to package the payment for the device 
into the payment for the procedures with which the device was reported. 
These former pass-through devices may be high or low cost in 
relationship to the other costs of the associated surgical procedures, 
or the devices may be implanted in a large or small proportion of those 
surgical procedures, but the device payment is nevertheless packaged. 
We do not believe that the fact that a procedure may be performed with 
assorted technologies of varying resource costs is a sufficient reason 
to pay separately for a particular technology that is clearly ancillary 
and dependent in relationship to independent associated procedures. 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. Consistent with the principles of a 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. While we understand that these services represent 
technologies that are not commonly used in most institutions, we do not 
believe that beneficiary access to care would be harmed by packaging 
payment for IVUS and ICE services. We note that IVUS and ICE services 
are existing, established technologies and that hospitals have provided 
some of these services in the HOPD since the implementation of the OPPS 
in CY 2000. 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 IVUS 
and ICE services differently from other intraoperative services that 
are ancillary and dependent to the procedure they facilitate.
    In summary, we are proposing to maintain the unconditionally 
packaged status of CPT codes 37250, 37251, 92978, 92979, and 93662 for 
CY 2009.

Recommendation 6

    For CY 2009, we are adopting the APC Panel recommendation and 
proposing to maintain the packaged status of diagnostic 
radiopharmaceuticals. This recommendation is discussed in detail in 
section V.B.2.b. of this proposed rule.

Recommendation 7

    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 by e-mail to 
[email protected] with Packaging Subcommittee in the subject line.
(2) IVIG Preadministration-Related Services
    We are proposing to package payment for HCPCS code G0332 (Services 
for intravenous infusion of immunoglobulin prior to administration 
(this service is to be billed in conjunction with administration of 
immunoglobulin)) for CY 2009. Immune globulin is a complicated 
biological product that is developed from human plasma obtained from 
human plasma donors. Its purification is a complex process that occurs 
along a very long timeline and, therefore, only a small number of 
manufacturers provide commercially available products. In past years, 
there have been issues reported with the supply of intravenous immune 
globulin (IVIG) due to numerous factors, including decreased 
manufacturing capacity, increased usage, more sophisticated processing 
steps, and low demand for byproducts from IVIG fractionation.
    Under the OPPS, the current CY 2008 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). The CY 2009 
proposed OPPS payment rates for IVIG products are established based on 
the Part B ASP drug methodology, as discussed further in section V.B.3. 
of this proposed rule. Under the OPPS, payment is made separately for 
the administration of IVIG and those services are reported using the 
CPT code for the first hour and, as needed, additional hour CPT 
infusion codes. The CY 2009 proposed OPPS payments for drug 
administration services are discussed in section VIII.B. of this 
proposed rule. As explained in detail in the CY 2006 OPPS, CY 2007 
OPPS/ASC, and CY 2008 OPPS/ASC final rules with comment period (70 FR 
68648 to 68650, 71 FR 68092 to 68093, and 72 FR 66697 to 66698, 
respectively), we temporarily paid separately for the IVIG 
preadministration-related services in CY 2006 through CY 2008 because 
of reported instability in the IVIG marketplace due, in part, to the 
implementation of the new ASP payment methodology for IVIG drugs. Under 
the CY 2006 and CY 2007 OPPS, HCPCS code G0332 was assigned to New 
Technology APC 1502 (New Technology--Level II ($50-$100)), with a 
payment rate of $75. For CY 2008, HCPCS code G0332 was reassigned to 
APC 0430 (Drug Preadministration-Related Services), with a payment rate 
of approximately $38 set prospectively based on robust CY 2006 claims 
data for this code. In addition, a separate payment for HCPCS code 
G0332 has been made under the MPFS during the same time period, CY 2006 
to CY 2008.
    We specifically indicated in the CY 2008 OPPS/ASC final rule with 
comment period (72 FR 66697 through 66698) that we would consider 
packaging payment for HCPCS code G0332 in future years and that we 
intended to reevaluate the

[[Page 41457]]

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 under the OPPS. We note 
that the Office of the Inspector General's (OIG's) study on the 
availability and pricing of IVIG published in a report in April 2007 
entitled, ``Intravenous Immune Globulin: Medicare Payment and 
Availability (OEI-03-05-00404),'' found that for the third quarter of 
CY 2006, just over half of the IVIG sales to hospitals and physicians 
were at prices below Medicare payment amounts. Relative to the previous 
three quarters, this represented a substantial increase in the 
percentage of sales with prices below Medicare amounts. We have 
reviewed national claims data for IVIG drug utilization, as well as 
utilization of the preadministration-related services HCPCS code. These 
data show modest increases in the utilization of IVIG drugs and the 
preadministration-related services code, which suggest that IVIG 
pricing and access may be improving.
    IVIG preadministration-related services are dependent services that 
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 that they usually accompany. The recent findings of the OIG 
report suggest that stability in the IVIG market had improved in late 
CY 2006. No other comprehensive studies have been presented to indicate 
continued instability in market conditions or systematic problems with 
patient access. In addition, beginning July 1, 2007, six new HCPCS 
codes for specific IVIG products were adopted to implement separate 
payment for these products, contributing to generally increased 
payments for IVIG products and, we believe, improved market stability. 
Therefore, consistent with our OPPS payment policy for the facility 
resources expended to prepare for the administration of all other drugs 
and biologicals under the OPPS, we now believe that payment for the 
hospital resources required to locate and obtain the appropriate IVIG 
products and to schedule patients' infusions should be made through the 
OPPS payment for the associated drug administration services. 
Furthermore, the cost data that we have gathered for the services 
described by HCPCS code G0332 since CY 2006, including the line-item 
median cost for the code of approximately $38 from CY 2007 claims data, 
indicate that the cost of the services is relatively low. Therefore, 
because HCPCS code G0332 meets our historical criteria for packaged 
payment, because we paid separately for these services on a temporary 
basis only, and because we believe that the reported transient market 
conditions that led us to adopt the separate payment for IVIG 
preadministration-related services have improved, we now believe that 
packaged payment is more appropriate for the CY 2009 OPPS, consistent 
with our ongoing efforts to expand the size of the OPPS payment 
bundles. Therefore, we are proposing to assign status indicator ``N'' 
to HCPCS code G0332 for CY 2009. We will continue to work with 
stakeholders of the IVIG industry to understand their concerns 
regarding the pricing of IVIG and Medicare beneficiary access to this 
important therapy.
    The treatment of these services under the MPFS will be addressed 
separately in the CY 2009 MPFS proposed rule.

B. Proposed 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 2009, 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 proposed hospital market basket 
increase for FY 2009 published in the IPPS proposed rule on April 30, 
2008 is 3.0 percent (73 FR 23708). To set the proposed OPPS conversion 
factor for CY 2009, we increased the CY 2008 conversion factor of 
$63.694, as specified in the CY 2008 OPPS/ASC final rule with comment 
period (72 FR 66677), by 3.0 percent. Hospitals that fail to meet the 
reporting requirements of the Hospital Outpatient Quality Data 
Reporting (HOP QDRP) program are subject to a reduction of 2.0 
percentage points from the market basket update to the conversion 
factor. For a complete discussion of the HOP QDRP program, we refer 
readers to section XVI. of this proposed rule.
    In accordance with section 1833(t)(9)(B) of the Act, we further 
adjust the conversion factor annually to ensure that any revisions we 
are proposing 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 1.0010 for wage index changes by comparing 
total payments from our simulation model using the FY 2009 IPPS 
proposed wage index values to those payments using the current (FY 
2008) IPPS wage index values. For CY 2009, we are not proposing a 
change to our rural adjustment policy. Therefore, the budget neutrality 
factor for the rural adjustment is 1.000.
    For CY 2009, in this proposed rule, we estimate that allowed pass-
through spending for both drugs and biologicals and devices would equal 
approximately $19 million, which represents 0.07 percent of total 
projected OPPS spending for CY 2009. Therefore, the conversion factor 
was also adjusted by the difference between the 0.09 percent pass-
through dollars set aside for CY 2008 and the 0.07 percent estimate for 
CY 2009 pass-through spending. Finally, proposed payments for outliers 
remain at 1.0 percent of total OPPS payments for CY 2009.
    The proposed market basket increase update factor of 3.0 percent 
for CY 2009, the required wage index budget neutrality adjustment of 
approximately 1.0010, and the proposed adjustment of 0.02 percent of 
projected OPPS spending for the difference in the pass-through set 
aside result in a proposed full market basket conversion factor for CY 
2009 of $65.684. To calculate the CY 2009 reduced market basket 
conversion factor for those hospitals that fail to meet the 
requirements of the HOP QDRP for the full CY 2009 payment update, we 
made all other adjustments discussed above, but used a reduced market 
basket increase update factor of 1.0 percent. This results in a 
proposed reduced market basket conversion factor for CY 2009 of 
$64.409.

C. Proposed 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. This adjustment must be made in a budget neutral manner 
and budget neutrality is discussed in section II.B. of this proposed 
rule.
    The OPPS labor-related share is 60 percent of the national OPPS 
payment. This labor-related share is 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 are not proposing to revise this policy for the 
CY 2009 OPPS. We refer readers to section II.G. of this

[[Page 41458]]

proposed rule for a description and example of how the wage index for a 
particular hospital is used to determine the payment for the hospital.
    As discussed in section II.A.2.c. of this proposed rule, for 
estimating national median APC costs, we standardize 60 percent of 
estimated claims costs for geographic area wage variation using the 
same FY 2009 pre-reclassified wage indices that the IPPS uses to 
standardize costs. This standardization process removes the effects of 
differences in area wage levels from the determination of a 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 acute short-stay 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 HOPD within the hospital 
overall. In accordance with section 1886(d)(3)(E) of the Act, the IPPS 
wage index is updated annually. Therefore, in accordance with our 
established policy, we are proposing to use the final FY 2009 version 
of the IPPS wage indices used to pay IPPS hospitals to adjust the CY 
2009 OPPS payment rates and copayment amounts for geographic 
differences in labor cost for all providers that participate in the 
OPPS, including providers that are not paid under the IPPS (referred to 
in this section as ``non-IPPS'' providers).
    We note that the proposed FY 2009 IPPS wage indices continue to 
reflect a number of adjustments implemented over the past few years, 
including revised Office of Management and Budget (OMB) standards for 
defining geographic statistical areas (Core Based Statistical Areas or 
CBSAs), reclassification to different geographic areas, rural floor 
provisions and the accompanying budget neutrality adjustment, an 
adjustment for out-migration labor patterns, an adjustment for 
occupational mix, and a policy for allocating hourly wage data among 
campuses of multicampus hospital systems that cross CBSAs. In addition, 
our proposed changes to the FY 2009 IPPS wage index also included a 
revision of the reclassification average hourly wage comparison 
criteria and a state-level rural floor and imputed floor budget 
neutrality adjustment applied to the wage index. We refer readers to 
the FY 2009 IPPS proposed rule (73 FR 23617 through 23639) for a 
detailed discussion of these proposed changes to the wage index. In 
addition, we refer readers to the CY 2005 OPPS final rule with comment 
period (69 FR 65842 through 65844) and subsequent OPPS rules for a 
detailed discussion of the history of these wage index adjustments as 
applied under the OPPS.
    The IPPS wage index that we are proposing to adopt includes all 
reclassifications that are approved by the Medicare Geographic 
Classification Review Board (MGCRB) for FY 2009. We note that 
reclassifications under section 508 of Pub. L. 108-173 were extended by 
section 106(a) of the MIEA-TRHCA and were set to terminate September 
30, 2007. However, section 117(a)(1) of the Medicare, Medicaid, and 
SCHIP Extension Act (MMSEA) of 2007 (Pub. L. 110-173) further extended 
geographic reclassifications under section 508 until September 30, 
2008. In addition, section 117(a)(2) of the MMSEA extended certain 
special exception reclassifications as well. On February 22, 2008, we 
published a notice in the Federal Register (73 FR 9807) that indicated 
how we are implementing section 117(a) of the MMSEA under the IPPS. We 
also issued a joint signature memorandum on January 28, 2008, that 
explained how section 117 of the MMSEA would apply to the OPPS. As we 
stated in that memorandum, while most of the reclassifications extended 
by the MMSEA would expire September 30, 2008, for both the IPPS and the 
OPPS (with OPPS hospitals reverting to a previous reclassification or 
home area wage index from October 1, 2008, to December 31, 2008), 
special exception wage indices for certain hospitals would be extended 
through December 31, 2008, under the OPPS in order to give these 
hospitals the special exception wage index under the OPPS for the same 
time period as under the IPPS. Because the MMSEA provisions expire in 
2008, and are not applicable to FY 2009, we are not making any 
proposals related to those provisions for the OPPS wage index for CY 
2009.
    For purposes of the OPPS, we are proposing to continue our policy 
in CY 2009 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. We note that because non-IPPS hospitals cannot 
reclassify, they are eligible for the out-migration wage adjustment. 
Table 4J published in the Addendum to the FY 2009 IPPS proposed rule 
identifies counties eligible for the out-migration adjustment and 
providers receiving the adjustment. As we have done in prior years, we 
are reprinting the Table 4J, as Addendum L to this proposed rule, with 
the addition of non-IPPS hospitals that would receive the section 505 
out-migration adjustment under the CY 2009 OPPS.
    As stated earlier in this section, we 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 HOPD within the hospital overall. Therefore, we are 
proposing to use the final FY 2009 IPPS wage indices for calculating 
the OPPS payments in CY 2009. With the exception of the out-migration 
wage adjustment table (Addendum L to this proposed rule), which 
includes non-IPPS hospitals paid under the OPPS, we are not reprinting 
the proposed FY 2009 IPPS wage indices referenced in this discussion of 
the wage index. We 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 proposed FY 2009 IPPS wage indices tables.

D. Proposed 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 CCR because there is no 
cost report available. For these hospitals, CMS uses the statewide 
average default CCRs to determine the payments mentioned above until a 
hospital's Medicare contractor is able to calculate the hospital's 
actual CCR from its most recently submitted Medicare cost report. These 
hospitals include, but are not limited to, hospitals that are new, have 
not accepted assignment of an existing hospital's provider agreement, 
and have not yet submitted a cost report. CMS also uses the statewide 
average default CCRs to determine payments for hospitals that appear to 
have a biased CCR, that is, the CCR falls outside predetermined floor 
and ceiling thresholds for a valid CCR, or for hospitals whose most 
recent cost report reflects an all-inclusive rate status (Section 
10.11, Chapter 4, Medicare Claims Processing Manual Pub. 100-04). In 
this proposed rule, we are proposing to update the default ratios for 
CY 2009 using the most recent cost report data, and we are proposing to 
codify our

[[Page 41459]]

policies for using the default ratios for hospitals that do not have a 
CCR for outlier payments specifically. We refer readers to section 
II.F. of this proposed rule where we discuss this proposal for default 
CCRs as part of our broader proposal to implement an outlier 
reconciliation process similar to that implemented under the IPPS.
    For CY 2009, we used our standard methodology of calculating the 
statewide default CCRs using the same hospital overall CCRs that we use 
to adjust charges to costs on claims data. Table 9 lists the proposed 
CY 2009 default urban and rural CCRs by State and compares 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. We then weighted each 
hospital's CCR by claims volume corresponding to the year of the 
majority of cost reports used to calculate the overall CCR. We refer 
readers to section II.E. of the CY 2008 OPPS/ASC final rule with 
comment period (72 FR 66680 through 66682) and prior OPPS rules for a 
more detailed discussion of our established methodology for calculating 
the statewide average default CCRs, including the hospitals used in our 
calculations and trimming criteria.
    For this proposed rule, approximately 38 percent of the submitted 
cost reports represented data for cost reporting periods ending in CY 
2005 and 60 percent were for cost reporting periods ending in CY 2006. 
Table 9 lists the proposed CY 2009 default urban and rural CCRs by 
State and compares them to last year's default CCRs. 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. In general, observed 
changes between CY 2008 and CY 2009 are modest and the few significant 
changes are associated with a small number of hospitals. The national 
urban and rural CCRs observed for Maryland changed by less than 1 
percent.

            Table 9.--Proposed CY 2009 Statewide Average CCRs
------------------------------------------------------------------------
                                                               Previous
                                                Proposed CY  default CCR
            State                Urban/rural        2009       (CY 2008
                                                default CCR   OPPS final
                                                                rule)
------------------------------------------------------------------------
ALASKA.......................  RURAL..........        0.562        0.537
ALASKA.......................  URBAN..........        0.351        0.351
ALABAMA......................  RURAL..........        0.223        0.228
ALABAMA......................  URBAN..........        0.210        0.213
ARKANSAS.....................  RURAL..........        0.258        0.266
ARKANSAS.....................  URBAN..........        0.276        0.270
ARIZONA......................  RURAL..........        0.269        0.264
ARIZONA......................  URBAN..........        0.232        0.232
CALIFORNIA...................  RURAL..........        0.223        0.232
CALIFORNIA...................  URBAN..........        0.221        0.218
COLORADO.....................  RURAL..........        0.355        0.355
COLORADO.....................  URBAN..........        0.251        0.254
CONNECTICUT..................  RURAL..........        0.394        0.391
CONNECTICUT..................  URBAN..........        0.337        0.339
DISTRICT OF COLUMBIA.........  URBAN..........        0.329        0.346
DELAWARE.....................  RURAL..........        0.298        0.302
DELAWARE.....................  URBAN..........        0.368        0.400
FLORIDA......................  RURAL..........        0.212        0.219
FLORIDA......................  URBAN..........        0.194        0.198
GEORGIA......................  RURAL..........        0.273        0.279
GEORGIA......................  URBAN..........        0.262        0.269
HAWAII.......................  RURAL..........        0.371        0.373
HAWAII.......................  URBAN..........        0.345        0.317
IOWA.........................  RURAL..........        0.346        0.349
IOWA.........................  URBAN..........        0.317        0.325
IDAHO........................  RURAL..........        0.434        0.445
IDAHO........................  URBAN..........        0.419        0.414
ILLINOIS.....................  RURAL..........        0.286        0.286
ILLINOIS.....................  URBAN..........        0.272        0.271
INDIANA......................  RURAL..........        0.306        0.313
INDIANA......................  URBAN..........        0.299        0.301
KANSAS.......................  RURAL..........        0.317        0.318
KANSAS.......................  URBAN..........        0.241        0.240
KENTUCKY.....................  RURAL..........        0.240        0.244
KENTUCKY.....................  URBAN..........        0.264        0.262
LOUISIANA....................  RURAL..........        0.280        0.271
LOUISIANA....................  URBAN..........        0.268        0.277
MARYLAND.....................  RURAL..........        0.307        0.308
MARYLAND.....................  URBAN..........        0.283        0.284
MASSACHUSETTS................  URBAN..........        0.342        0.338
MAINE........................  RURAL..........        0.445        0.433
MAINE........................  URBAN..........        0.425        0.424
MICHIGAN.....................  RURAL..........        0.326        0.331

[[Page 41460]]

 
MICHIGAN.....................  URBAN..........        0.328        0.318
MINNESOTA....................  RURAL..........        0.497        0.499
MINNESOTA....................  URBAN..........        0.340        0.342
MISSOURI.....................  RURAL..........        0.277        0.289
MISSOURI.....................  URBAN..........        0.282        0.292
MISSISSIPPI..................  RURAL..........        0.265        0.267
MISSISSIPPI..................  URBAN..........        0.216        0.217
MONTANA......................  RURAL..........        0.444        0.453
MONTANA......................  URBAN..........        0.452        0.450
NORTH CAROLINA...............  RURAL..........        0.284        0.286
NORTH CAROLINA...............  URBAN..........        0.305        0.321
NORTH DAKOTA.................  RURAL..........        0.363        0.379
NORTH DAKOTA.................  URBAN..........        0.357        0.378
NEBRASKA.....................  RURAL..........        0.345        0.347
NEBRASKA.....................  URBAN..........        0.292        0.290
NEW HAMPSHIRE................  RURAL..........        0.374        0.375
NEW HAMPSHIRE................  URBAN..........        0.311        0.337
NEW JERSEY...................  URBAN..........        0.272        0.276
NEW MEXICO...................  RURAL..........        0.270        0.275
NEW MEXICO...................  URBAN..........        0.344        0.353
NEVADA.......................  RURAL..........        0.311        0.329
NEVADA.......................  URBAN..........        0.200        0.200
NEW YORK.....................  RURAL..........        0.414        0.417
NEW YORK.....................  URBAN..........        0.396        0.402
OHIO.........................  RURAL..........        0.359        0.354
OHIO.........................  URBAN..........        0.263        0.268
OKLAHOMA.....................  RURAL..........        0.279        0.288
OKLAHOMA.....................  URBAN..........        0.241        0.245
OREGON.......................  RURAL..........        0.320        0.321
OREGON.......................  URBAN..........        0.374        0.366
PENNSYLVANIA.................  RURAL..........        0.285        0.298
PENNSYLVANIA.................  URBAN..........        0.232        0.241
PUERTO RICO..................  URBAN..........        0.514        0.474
RHODE ISLAND.................  URBAN..........        0.295        0.308
SOUTH CAROLINA...............  RURAL..........        0.260        0.258
SOUTH CAROLINA...............  URBAN..........        0.245        0.244
SOUTH DAKOTA.................  RURAL..........        0.333        0.334
SOUTH DAKOTA.................  URBAN..........        0.269        0.289
TENNESSEE....................  RURAL..........        0.253        0.256
TENNESSEE....................  URBAN..........        0.229        0.241
TEXAS........................  RURAL..........        0.268        0.271
TEXAS........................  URBAN..........        0.246        0.242
UTAH.........................  RURAL..........        0.417        0.416
UTAH.........................  URBAN..........        0.433        0.406
VIRGINIA.....................  RURAL..........        0.268        0.268
VIRGINIA.....................  URBAN..........        0.275        0.275
VERMONT......................  RURAL..........        0.409        0.416
VERMONT......................  URBAN..........        0.408        0.340
WASHINGTON...................  RURAL..........        0.357        0.358
WASHINGTON...................  URBAN..........        0.360        0.368
WISCONSIN....................  RURAL..........        0.399        0.384
WISCONSIN....................  URBAN..........        0.357        0.362
WEST VIRGINIA................  RURAL..........        0.295        0.298
WEST VIRGINIA................  URBAN..........        0.361        0.360
WYOMING......................  RURAL..........        0.421        0.449
WYOMING......................  URBAN..........        0.333        0.351
------------------------------------------------------------------------

E. Proposed OPPS Payment 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

[[Page 41461]]

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 sole community hospitals (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 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 (71 FR 68010 and 
68228), we updated Sec.  419.70(d) to reflect the requirements of Pub. 
L. 109-171.
    Effective for services provided on or after January 1, 2009, rural 
hospitals having 100 or fewer beds that are not SCHs will no longer be 
eligible for hold harmless TOPs, in accordance with section 5105 of 
Pub. L. 109-171.
2. Proposed 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.
    In CY 2007, 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 (71 FR 68010 and 68227), 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. 
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 2009, we are proposing 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 past 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 2009, we also are proposing to continue to include brachytherapy 
sources in the group of services eligible for the 7.1 percent payment 
increase because we are proposing to pay them at prospective rates 
based on their median costs as calculated from historical claims data. 
We intend to reassess the 7.1 percent adjustment in the near future by 
examining differences between urban and rural hospitals' costs using 
updated claims, cost, and provider information. In that process, we 
will include brachytherapy sources in each hospital's mix of services.

F. Proposed Hospital Outpatient Outlier Payments

1. Background
    Currently, the OPPS pays outlier payments on a service-by-service 
basis. For CY 2008, 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 $1,575 
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 hospital 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. This 
outlier payment has historically been considered a final payment by 
longstanding OPPS policy.
    It has been our policy for the past several years to report the 
actual amount of outlier payments as a percent of total spending in the 
claims being used to model the proposed OPPS. An accounting error for 
CY 2005, CY 2006, and CY 2007 inflated CMS' estimates of OPPS 
expenditures, which led us to underestimate outlier payment as a 
percentage of total OPPS spending in prior rules. Total OPPS 
expenditures have been revised downward, and we have accordingly 
revised our outlier payment estimates. We further note that the CY 2005 
outlier payment estimate included in the CY 2007 OPPS/ASC

[[Page 41462]]

final rule with comment period (71 FR 68010) has not changed based on 
revised spending estimates. However, we previously stated that CY 2006 
outlier payment was equal to 1.1 percent of OPPS expenditures for CY 
2006 (72 FR 66685), but based on our revised numbers, actual outlier 
payments are equal to approximately 1.3 percent of CY 2006 OPPS 
expenditures. Our current estimate of total outlier payments as a 
percent of total CY 2007 OPPS payment, using available CY 2007 claims 
and the revised OPPS expenditure estimate, is approximately 0.9 
percent. For CY 2007, the estimated outlier payment was set at 1.0 
percent of the total aggregated OPPS payments. Therefore, for CY 2007 
we estimate that we paid approximately 0.1 percent less than the CY 
2007 outlier target of 1.0 percent of total aggregated OPPS payments. 
We will update our estimate of CY 2007 outlier spending in the CY 2009 
OPPS/ASC final rule with comment period.
    As explained in the CY 2008 OPPS/ASC final rule with comment period 
(72 FR 66685), we set our projected target for aggregate outlier 
payments at 1.0 percent of aggregate total payments under the OPPS for 
CY 2008. The outlier thresholds were set so that estimated CY 2008 
aggregate outlier payments would equal 1.0 percent of aggregate total 
payments under the OPPS. Using the same set of CY 2007 claims and CY 
2008 payment rates, we currently estimate that outlier payments for CY 
2008 would be approximately 0.8 percent of total CY 2008 OPPS payments. 
The difference between 1.0 percent and 0.8 percent is reflected in the 
regulatory impact analysis in section XXI.B. of this proposed rule. We 
note that we provide estimated CY 2009 outlier payments for hospitals 
and CMHCs 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 2009, we are proposing to continue our policy of setting 
aside 1.0 percent of aggregate total payments under the OPPS for 
outlier payments. We are proposing that a portion of that 1.0 percent, 
specifically 0.07 percent, would be allocated to CMHCs for partial 
hospitalization program outlier payments. This is the amount of 
estimated outlier payments that would result from the proposed CMHC 
outlier threshold of 3.40 times the CY 2009 PHP APC payment rates, as a 
proportion of all payments dedicated to outlier payments. For further 
discussion of CMHC outlier payments, we refer readers to section X.B.4. 
of this proposed rule.
    To ensure that estimated CY 2009 aggregate outlier payments would 
equal 1.0 percent of estimated aggregate total payments under the OPPS, 
we are proposing that the hospital 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 an $1,800 fixed-dollar 
threshold. This proposed threshold reflects the methodology discussed 
below, as well as proposed APC recalibration for CY 2009.
    We calculated the fixed-dollar threshold for this proposed rule 
using largely the same methodology as we did in CY 2008. For purposes 
of estimating outlier payments for this proposed rule, we used the CCRs 
available in the April 2008 update to the OPSF.
    The claims that we use to model each OPPS update lag by 2 years. 
For this proposed rule, we used CY 2007 claims to model the CY 2009 
OPPS. In order to estimate CY 2009 hospital outlier payments for this 
proposed rule, we inflated the charges on the CY 2007 claims using the 
same inflation factor of 1.1204 that we used to estimate the IPPS 
fixed-dollar outlier threshold for the FY 2009 IPPS proposed rule. For 
1 year, the inflation factor is 1.0585. The methodology for determining 
this charge inflation factor was discussed in the FY 2009 IPPS proposed 
rule (73 FR 23710 through 23711). As we stated in the CY 2005 OPPS 
final rule with comment period (69 FR 65845), 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.
    As noted in the CY 2007 OPPS/ASC final rule with comment period (71 
FR 68011), we are concerned that we may systematically overestimate the 
OPPS hospital outlier threshold if we did not apply a CCR inflation 
adjustment factor. Therefore, we are proposing to apply the same CCR 
inflation adjustment factor that we proposed to apply for the FY 2009 
IPPS outlier calculation to the CCRs used to simulate the CY 2009 OPPS 
outlier payments that determined the fixed-dollar threshold. 
Specifically, for CY 2009, we are proposing to apply an adjustment of 
0.9920 to the CCRs that are currently in the April 2008 OPSF to trend 
them forward from CY 2008 to CY 2009. The methodology for calculating 
this adjustment is discussed in the FY 2009 IPPS proposed rule (73 FR 
23710 through 23711).
    Therefore, to model hospital outliers for this proposed rule, we 
applied the overall CCRs from the April 2008 OPSF file after adjustment 
(using the proposed CCR inflation adjustment factor of 0.9920 to 
approximate CY 2009 CCRs) to charges on CY 2007 claims that were 
adjusted (using the proposed charge inflation factor of 1.1204 to 
approximate CY 2009 charges). We simulated aggregated CY 2009 hospital 
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 2009 OPPS payments. We 
estimate that a proposed fixed-dollar threshold of $1,800, 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 are proposing 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 $1,800 threshold 
are met. For CMHCs, if a CMHC's cost for partial hospitalization 
exceeds 3.40 times the payment rate for APC 0172 (Level I Partial 
Hospitalization (3 services)) or APC 0173 (Level II Partial 
Hospitalization (4 or more services)), the outlier payment is 
calculated as 50 percent of the amount by which the cost exceeds 3.40 
times the APC payment rate.
    New section 1833(t)(17)(A) of the Act, which applies to hospitals 
as defined under section 1886(d)(1)(B) of the Act, requires that 
hospitals that fail to report data required for the quality measures 
selected by the Secretary, in the form and manner required by the 
Secretary under 1833(t)(17)(B) of the Act, incur a 2.0 percentage point 
reduction to their OPD fee schedule increase factor, that is, the 
annual payment update factor. The application of a reduced OPD fee 
schedule increase factor results in reduced national unadjusted payment 
rates that will apply to certain outpatient items and services 
performed by hospitals that are required to report outpatient quality 
data and that fail to meet the HOP QDRP requirements. For hospitals 
that fail to meet the HOP

[[Page 41463]]

QDRP quality data reporting requirements, we are proposing that the 
hospitals' costs would be compared to the reduced payments for purposes 
of outlier eligibility and payment calculation. We believe no changes 
in the regulation text would be necessary to implement this policy 
because using the reduced payment for these outlier eligibility and 
payment calculations is contemplated in the current regulations at 
Sec.  419.43(d). This proposal conforms to current practice under the 
IPPS in this regard. Specifically, under the IPPS, for purposes of 
determining the hospital's eligibility for outlier payments, the 
hospital's estimated operating costs for a discharge are compared to 
the outlier cost threshold based on the hospital's actual DRG payment 
for the case. For more information on the HOP QDRP, we refer readers to 
section XVI. of this proposed rule.
3. Outlier Reconciliation
    As provided in section 1833(t)(5) of the Act, and described in the 
CY 2001 final rule with comment period (65 FR 18498), we initiated the 
use of a provider-specific overall CCR to estimate a hospital's or 
CMHC's costs from billed charges on a claim to determine whether a 
service's cost was significantly higher than the APC payment to qualify 
for outlier payment. Currently, these facility-specific overall CCRs 
are determined using the most recent settled or tentatively settled 
cost report for each facility. At the end of the cost reporting period, 
the hospital or CMHC submits a cost report to its Medicare contractor, 
who then calculates the overall CCR that is used to determine outlier 
payments for the facility. We believe the intent of the statute is that 
outlier payments would be made only in situations where the cost of a 
service provided is extraordinarily high. For example, under our 
existing outlier methodology, a hospital's billed current charges may 
be significantly higher than the charges included in the hospital's 
overall CCR that is used to calculate outlier payments, while the 
hospital's costs are more similar to the costs included in the overall 
CCR. In this case, the hospital's overall CCR used to calculate outlier 
payments is not representative of the hospital's current charge 
structure. The overall CCR applied to the hospital's billed charges 
would estimate an inappropriately high cost for the service, resulting 
in inappropriately high outlier payments. This is contrary to the goal 
of outlier payments, which are intended to reduce the hospital's 
financial risk associated with services that have especially high 
costs. The reverse could be true as well, if a hospital significantly 
lowered its current billed charges in relationship to its costs, which 
would result in inappropriately low outlier payments.
    For CY 2009, we are proposing to address vulnerabilities in the 
OPPS outlier payment system that lead to differences between billed 
charges and charges included in the overall CCR used to estimate cost. 
Our proposal would apply to all hospitals and CMHCs paid under the 
OPPS. The main vulnerability in the OPPS outlier payment system is the 
time lag between the CCRs from the latest settled cost report and 
current charges that create the potential for hospitals and CMHCs to 
set their own charges to exploit the delay in calculating new CCRs. A 
facility can increase its outlier payments during this time lag by 
increasing its charges significantly in relation to its cost increases. 
The time lag may lead to inappropriately high CCRs relative to billed 
charges that overestimate cost, and as a result, greater outlier 
payments. Therefore, we are taking steps to ensure that outlier 
payments appropriately account for financial risk when providing an 
extraordinarily costly and complex service, while only being made for 
services that legitimately qualify for the additional payment.
    We believe that some CMHCs may have historically increased and 
decreased their charges in response to Medicare outlier payment 
policies. The HHS Office of the Inspector General (OIG) has published 
several reports that found that CMHCs took advantage of vulnerabilities 
in the outpatient outlier payment methodology by increasing their 
billed charges after their CCRs were established to garner greater 
outlier payments (DHHS OIG June 2007, A-07-06-0459, page 2). We discuss 
the OIG's most recent report and accompanying recommendations in 
section XIV.C. of this proposed rule. We similarly noted in the CY 2004 
OPPS final rule with comment period (68 FR 63470) that some CMHCs 
manipulated their charges in order to inappropriately receive outlier 
payments.
    To address these vulnerabilities in the area of the OPPS outlier 
payment methodology, we are proposing to update our regulations to 
codify two existing longstanding OPPS policies, as discussed in further 
detail below. For the CY 2009 OPPS, we are also proposing to 
incorporate outlier policies comparable to those that have been 
included in several Medicare prospective payment systems, in particular 
the IPPS (68 FR 34494). Specifically, we are proposing to allow 
Medicare contractors to use a different CCR in certain circumstances to 
estimate costs, and we are proposing to require reconciliation of 
outlier payments in certain circumstances. We believe that all these 
proposed changes would address most of the current vulnerabilities 
present in the OPPS outlier payment system.
    First, we are proposing to update the regulations to codify two 
existing outlier policies. These policies are currently stated in Pub 
100-04, Chapter 4, section 10.11.1 of the Internet-Only Manual, as 
updated via Transmittal 1445, Change Request 5946, dated February 8, 
2008. To be consistent with our manual instructions, for CY 2009, we 
are proposing to revise 42 CFR 419.43 to add two new paragraphs 
(d)(5)(ii) and (d)(5)(iii). Specifically, we are proposing to add new 
paragraph (d)(5)(ii) to incorporate rules governing the overall 
ancillary CCR applied to processed claims and new paragraph (d)(5)(iii) 
to incorporate existing policy governing when a statewide average CCR 
may be used instead of an overall ancillary CCR. We note that use of a 
statewide average CCR in the specified cases is to ensure that the most 
appropriate CCR possible is used for outlier payment calculations. For 
purposes of this discussion and OPPS payment policy in general, we 
treat ``overall CCR'' and ``overall ancillary CCR'' as synonymous terms 
that refer to the overall CCR that is calculated based on cost report 
data, which for hospitals, pertains to a specific set of ancillary cost 
centers.
    We are proposing new Sec.  419.43(d)(5)(ii) to specify use of the 
hospital's or CMHC's most recently updated overall CCR for purposes of 
calculating outlier payments. Our ability to identify true outlier 
cases depends on the accuracy of the CCRs. To the extent some 
facilities may be motivated to maximize outlier payments by taking 
advantage of the time lag in updating the CCRs, the payment system 
remains vulnerable to overpayments to individual hospitals or CMHCs. 
This proposed provision specifies that the overall CCR applied at the 
time a claim is processed is based on either the most recently settled 
or tentatively settled cost report, whichever is from the latest cost 
reporting period. We are also proposing new Sec.  419.43(d)(5)(iii) to 
describe several circumstances in which a Medicare contractor may 
substitute a statewide average CCR for a hospital's or CMHC's CCR. In 
the CY 2007 OPPS/ASC final rule with comment period (71 FR 68006), we 
finalized this policy but inadvertently did not update our regulations. 
We refer readers to section II.D. of this proposed rule for a more

[[Page 41464]]

detailed discussion of statewide average CCRs. In summary, Medicare 
contractors can use a statewide CCR for new hospitals or CMHCs that 
have not accepted assignment of the existing provider agreement and who 
have not yet submitted a cost report; for hospitals or CMHCs whose 
Medicare contractor is unable to obtain accurate data with which to 
calculate the overall ancillary CCR; and for facilities whose actual 
CCR is more than 3 standard deviations above the geometric mean of 
other overall CCRs. For CY 2009, we estimate this upper threshold to be 
1.3. While this existing policy minimizes the use of CCRs that are 
significantly above the mean for cost estimation, facilities with CCRs 
that fall significantly below the mean would continue to have their 
actual CCRs utilized, instead of the statewide default CCR. We also are 
proposing to reevaluate the upper threshold and propose a new upper 
threshold, if appropriate, through rulemaking each year.
    These improvements somewhat mitigate, but do not fully eliminate, a 
hospital's or CMHC's ability to significantly increase its charges in 
relation to its cost increases each year, thereby receiving significant 
outlier payments because of the inflated CCR. Therefore, we also are 
proposing two new policies to more fully address the vulnerabilities 
described above. Specifically, we are proposing new Sec.  
419.43(d)(5)(i) that states that for hospital outpatient services 
performed on or after January 1, 2009, CMS may specify an alternative 
CCR or the facility may request an alternative CCR under certain 
circumstances. The alternative CCR in either case may be either higher 
or lower than the otherwise applicable CCR. In addition, we are 
proposing to allow a facility to request that its CCR be prospectively 
adjusted if the facility presents substantial evidence that the overall 
CCR that is currently used to calculate outlier payments is inaccurate. 
Such an alternative CCR may be appropriate if a facility's charges have 
increased at an excessive rate, relative to the rate of increase among 
other hospitals or CMHCs. CMS would have the authority to direct the 
Medicare contractor to calculate a CCR from the cost report that 
accounts for the increased charges. As explained in greater detail 
below, we are also proposing new Sec.  419.43(d)(5)(iv) to allow 
Medicare contractors the administrative discretion to reconcile 
hospital or CMHC cost reports under certain circumstances.
    We are proposing to implement a reconciliation process similar to 
that implemented by the IPPS in FY 2003 (68 FR 34494). This proposed 
policy would subject certain outlier payments to reconciliation when a 
hospital or CMHC cost report is settled. While the existing policies 
described above partially address the vulnerabilities in the OPPS 
outlier payment system, the proposed reconciliation process would more 
fully ensure accurate outlier payments for those facilities whose CCRs 
fluctuate significantly, relative to the CCRs of other facilities. We 
are proposing that this reconciliation process would only apply to 
those services provided on or after January 1, 2009. We considered 
proposing that this reconciliation process would become effective 
beginning with services provided during the hospital's first cost 
reporting period beginning in CY 2009 but believe effectuating this 
policy based upon date of service would be less burdensome for 
hospitals. We are specifically soliciting public comment related to the 
effective date for the reconciliation process that would be most 
administratively feasible for hospitals and CMHCs. We note this 
reconciliation process would be done on a limited basis in order to 
ease the administrative burden on Medicare contractors, as well as to 
focus on those facilities that appear to have improperly manipulated 
their charges to receive excessive outlier payments. We are proposing 
to set reconciliation thresholds in the manual, reevaluate them 
annually, and modify them as necessary. Following current IPPS outlier 
policy, these thresholds would include a measure of acceptable percent 
change in a hospital's or CMHC's CCR and an amount of outlier payment 
involved. We are further proposing that when the cost report is 
settled, reconciliation of outlier payments would be based on the 
overall CCR calculated based on the ratio of costs and charges computed 
from the cost report at the time the cost report coinciding with the 
service dates is settled. Reconciling these outlier payments would 
ensure that the outlier payments made are appropriate and that final 
outlier payments reflect the most accurate cost data. Because 
reconciliation entails evaluating claims for outlier payments using a 
revised CCR, this process would not apply to services and items not 
otherwise subject to outlier payments, including items and services 
paid at charges reduced to cost.
    This reconciliation process would require recalculating outlier 
payments for individual claims. We understand that the aggregate change 
in a facility's outlier payments cannot be determined because changes 
in the CCR would affect the eligibility and amount of outlier payment. 
For example, if a CCR declined, some services may no longer qualify for 
any outlier payments while other services may qualify for lower outlier 
payments. Therefore, the only way to accurately determine the net 
effect of a decrease in an overall CCR on a facility's total outlier 
payments is to assess the impact on a claim-by-claim basis. At this 
time, CMS is developing a method for reexamining claims to calculate 
outlier payments using a revised CCR.
    Similar to the IPPS, we also are proposing to adjust the amount of 
final outlier payments determined during reconciliation for the time 
value of money. A second vulnerability remaining after reconciliation 
is related to the same issue of the ability of hospitals and CMHCs to 
manipulate the system by significantly increasing charges in the year 
the service is performed, and obtaining excessive outlier payments as a 
result. Even though under the proposal the excess money would be 
refunded at the time of reconciliation, the facility would have access 
to excess payments from the Medicare Trust Fund on a short-term basis. 
In cases of underpayment, the facility would not have had access to 
appropriate outlier payment for that time period.
    Accordingly, we believe it is necessary to adjust the amount of the 
final outlier payment to reflect the time value of the funds for that 
time period. Therefore, we are proposing to add section Sec.  
419.43(d)(6) to provide that when the cost report is settled, outlier 
payments would be subject to an adjustment to account for the value of 
the money for the time period in which the money was inappropriately 
held by the hospital or CMHC. This would also apply where outlier 
payments were underpaid. In those cases, the adjustment would result in 
additional payments to hospitals or CMHCs. Any adjustment would be made 
based on a widely available index to be established in advance by the 
Secretary, and would be applied from the midpoint of the cost reporting 
period to the date of reconciliation (or when additional payments are 
issued, in the case of underpayments). This adjustment to reflect the 
time value of a facility's outlier payments would ensure that the 
outlier payment finalized at the time its cost report is settled 
appropriately reflects the hospital's or CMHC's approximate marginal 
costs in excess of the APC payments for services, taking into 
consideration the applicable outlier thresholds.

[[Page 41465]]

    Despite the fact that each individual facility's outlier payments 
may be subject to adjustment when the cost report is settled, we 
continue to believe that the hospital multiple and fixed-dollar outlier 
thresholds should be based on projected payments using the latest 
available historical data, without retroactive adjustments, to ensure 
that actual outlier payments are equal to the target spending 
percentage of total anticipated hospital outpatient spending. The 
proposed reconciliation process and ability to change overall CCRs are 
intended only to adjust actual outlier payments so that they most 
closely reflect true costs rather than artificially inflated costs. 
These adjustments would be made irrespective of whether total outlier 
spending targets are met or not.
    We are not proposing to make any changes to the method that we use 
to calculate outlier thresholds for CY 2009. The multiple and fixed-
dollar outlier thresholds are an important aspect of the prospective 
nature of the OPPS and key to their importance is their predictability 
and stability for the prospective payment year. The outlier payment 
policy is designed to alleviate any financial disincentive hospitals 
may have in providing any medically necessary care their patients may 
require, even to those patients who are very sick and would be likely 
more costly to treat. Preset and publicized OPPS outlier thresholds 
allow hospitals and CMHCs to approximate their Medicare payment for an 
individual patient while that patient is still in the hospital. Even 
though we are proposing to make outlier payments susceptible to a 
reconciliation based on the facility's actual CCRs during the 
contemporaneous cost reporting period, the facility should still be in 
a position to make this approximation. Hospitals and CMHCs have 
immediate access to the information needed to determine what their CCR 
will be for a specific time period when their cost report is settled. 
Even if the final CCR is likely to be different from the ratio used 
initially to process and pay the claim, hospitals and CMHCs not only 
have the information available to estimate their CCRs, but they also 
have the ability to control those CCRs, through the structure and 
levels of their charges. If we were to make retroactive adjustments to 
hospital outlier payments to ensure that we met total OPPS outlier 
spending targets, we would undermine the critical predictability aspect 
of the prospective nature of the OPPS. Making such an across-the-board 
adjustment would lead to either more or less outlier payments for all 
hospitals that would, therefore, be unable to immediately approximate 
the payment they would receive for especially costly services at the 
time those services were provided. We believe that it is neither 
necessary nor appropriate to make such an aggregate retroactive 
adjustment.
    For the corresponding proposed regulation text changes, we refer 
readers to Sec.  419.43(d)(5) and Sec.  419.43(d)(6) of this proposed 
rule.

G. Proposed Calculation of an Adjusted Medicare Payment From the 
Proposed 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, Sec.  419.32, Sec.  419.43 and Sec.  419.44. The payment 
rate for most services and procedures for which payment is made under 
the OPPS is the product of the conversion factor calculated in 
accordance with section II.B. of this proposed rule and the relative 
weight determined under section II.A. of this proposed rule. Therefore, 
the national unadjusted payment rate for most APCs contained in 
Addendum A to this proposed rule and for most HCPCS codes, to which 
separate payment under the OPPS has been assigned in Addendum B to this 
proposed rule, was calculated by multiplying the proposed CY 2009 
scaled weight for the APC by the proposed CY 2009 conversion factor. We 
note that section 1833(t)(17)(A) of the Act, which applies to hospitals 
as defined under section 1886(d)(1)(B) of the Act, requires that 
hospitals that fail to report data required for the quality measures 
selected by the Secretary, in the form and manner required by the 
Secretary under 1833(t)(17)(B) of the Act, incur a 2.0 percentage point 
reduction to their OPD fee schedule increase factor, that is, the 
annual payment update factor. The application of a reduced OPD fee 
schedule increase factor results in reduced national unadjusted payment 
rates that will apply to certain outpatient items and services provided 
by hospitals that are required to report outpatient quality data and 
that fail to meet the HOP QDRP requirements. For further discussion of 
the proposed payment reduction for hospitals that fail to meet the HOP 
QDRP data reporting requirements, we refer readers to section XVI.D. of 
this proposed rule.
    We demonstrate in the steps below how to determine the APC payment 
that would be made in a calendar year under the OPPS to a hospital that 
fulfills the HOP QDRP data reporting requirements and to a hospital 
that fails to meet the HOP QDRP data reporting requirements for a 
service that has any of the status indicator assignments: ``P,'' 
``Q1,'' ``Q2,'' ``Q3,'' ``R,'' ``S,'' ``T,'' ``U,'' ``V,'' or ``X'' (as 
defined in Addendum D1 to this proposed rule), in a circumstance in 
which the multiple procedure discount does not apply and the procedure 
is not bilateral.
    Individual providers interested in calculating the proposed payment 
amount that they specifically would receive for a specific service from 
the proposed national unadjusted payment rates presented in Addenda A 
and B to this proposed rule, should follow the formulas presented in 
the following steps. For purposes of the payment calculations below, we 
refer to the national unadjusted payment rate for hospitals that meet 
their HOP QDRP reporting requirements as the ``full'' national 
unadjusted payment rate. We refer to the national unadjusted payment 
rate for hospitals that fail to meet their HOP QDRP reporting 
requirements as the ``reduced'' national unadjusted payment rate. The 
``reduced'' national unadjusted payment rate is calculated by 
multiplying the proposed reporting ratio of 0.981 times the ``full'' 
national unadjusted payment rate. The national unadjusted payment rate 
used in the calculations below is either the ``full'' national 
unadjusted payment rate or the ``reduced'' national unadjusted payment 
rate, depending on whether the hospital met its HOP QDRP reporting 
requirements in order to receive the full CY 2009 OPPS increase factor.
    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).
    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.

[[Page 41466]]

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 2009 under the 
IPPS, reclassifications through the Medicare Geographic 
Reclassification Review Board (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 section 508 of Pub. L. 108-173 
are scheduled to expire on September 30, 2008 and will not be 
applicable to FY 2009. The wage index values include the occupational 
mix adjustment described in section II.C. of this proposed rule that 
was developed for the proposed FY 2009 IPPS payment rates published in 
the Federal Register on April 30, 2008 (73 FR 23624 through 23632).
    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 proposed rule contains the qualifying 
counties and the proposed wage index increase developed for the FY 2009 
IPPS and published in the FY 2009 IPPS proposed rule as Table 4J (73 FR 
23810 through 23819). This step is to be followed only if the hospital 
has chosen not to accept reclassification under Step 2 above.
    Step 4. Multiply the applicable wage index determined under Steps 2 
and 3 by the amount determined under Step 1 that represents the labor-
related portion of the national unadjusted payment rate.
    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 the regulations at 
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 
x 1.071
    We have provided examples below of the calculation of both the full 
and reduced national unadjusted payment rates that will apply to 
certain outpatient items and services performed by hospitals that meet 
and that fail to meet the HOP QDRP requirements, using the steps 
outlined above. For purposes of this example, we will use a provider 
that is located in Brooklyn, New York that is assigned to CBSA 35644. 
This provider bills one service that is assigned to APC 0019 (Level I 
Excision/Biopsy). The proposed CY 2009 full national unadjusted payment 
rate for APC 0019 is $288.20. The reduced national unadjusted payment 
rate for a hospital that fails to meet the HOP QDRP requirements would 
be $282.72. This reduced rate is calculated by multiplying the 
reporting ratio of 0.981 by the full unadjusted payment rate for APC 
0019.
    The FY 2009 wage index for a provider located in CBSA 35644 in New 
York is 1.3043. The labor portion of the proposed full national 
unadjusted payment is $225.54 (.60 x 288.20 x 1.3043). The labor 
portion of the reduced national unadjusted payment is $221.25 (.60 x 
282.72 x 1.3043). The nonlabor portion of the proposed full national 
unadjusted payment is $115.28 (.40 x $288.20). The nonlabor portion of 
the reduced national unadjusted payment is $113.08 (.40 x $282.72). The 
sum of the labor and nonlabor portions of the proposed full national 
adjusted payment is $340.82 ($225.54 + $115.28). The sum of the reduced 
national adjusted payment is $334.33 ($221.25 + $113.08).

H. Proposed 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. As specified in section 1833(t)(8)(C)(ii)(V) of 
the Act, for all services paid under the OPPS in CY 2009, and in 
calendar years thereafter, the percentage is 40 percent of the APC 
payment rate. Section 1833(t)(3)(B)(ii) of the Act provides that, for a 
covered OPD service (or group of such services) furnished in a year, 
the national unadjusted 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. Since the beginning of the OPPS, 
we have applied the 25-percent copayment to screening flexible 
sigmoidoscopies and screening colonoscopies.

[[Page 41467]]

2. Proposed Copayment
    For CY 2009, we are proposing 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). In addition, we are proposing to use the 
same rounding methodology implemented in CY 2008 in instances where the 
application of our standard copayment methodology would result in a 
copayment amount that is less than 20 percent and cannot be rounded, 
under standard rounding principles, to 20 percent. (We refer readers to 
the CY 2008 OPPS/ASC final rule with comment period (72 FR 66687).) The 
proposed national unadjusted copayment amounts for services payable 
under the OPPS that would be effective January 1, 2009 are shown in 
Addendum A and Addendum B to this proposed rule. As discussed in 
section XVI.D. of this proposed rule, we are proposing that the 
Medicare beneficiary's minimum unadjusted copayment and national 
unadjusted copayment for a service to which a reduced national 
unadjusted payment rate applies would equal the product of the 
reporting ratio and the national unadjusted copayment, or the product 
of the reporting ratio and the minimum unadjusted copayment, 
respectively, for the service.
3. Calculation of a Proposed Adjusted Copayment Amount for an APC Group
    Individuals interested in calculating their proposed national 
copayment liability for a given service provided by a hospital that met 
or failed to meet its HOP QDRP reporting requirements should follow the 
formulas presented in 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 0019, $71.87 is 24.938 percent of the proposed 
full national unadjusted payment rate of $288.20.
    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 appropriate wage-adjusted payment rate for 
the APC for the provider in question, as indicated in section II.G. of 
this proposed rule. Calculate the rural adjustment for eligible 
providers as indicated in section II.G. of this proposed rule.
    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.
    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.G. above, with and 
without the rural adjustment, to calculate the proposed 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
    Step 4. For a hospital that failed to meet its HOP QDRP reporting 
requirements, multiply the copayment calculated in Step 3 by the 
reporting ratio of 0.981.
    The proposed unadjusted copayments for services payable under the 
OPPS that would be effective January 1, 2009 are shown in Addenda A and 
B to this proposed rule. Please note that the proposed national 
unadjusted payment rates and copayment rates shown in Addenda A and B 
to this proposed rule reflect the full market basket conversion factor 
increase as discussed in section XVI.D. of this proposed rule.

III. Proposed OPPS Ambulatory Payment Classification (APC) Group 
Policies

A. Proposed OPPS Treatment of New HCPCS and CPT Codes

1. Proposed Treatment of New HCPCS Codes Included in the April and July 
Quarterly OPPS Updates for CY 2008
    During the April and July quarters of CY 2008, we created a total 
of 11 new Level II HCPCS codes that were not addressed in the CY 2008 
OPPS/ASC final rule with comment period that updated the CY 2008 OPPS. 
For the April quarter of CY 2008, we recognized for separate payment a 
total of four new Level II HCPCS codes, specifically C9241 (Injection, 
doripenem, 10 mg); Q4096 (Injection, von willebrand factor complex, 
human, ristocetin cofactor (not otherwise specified), per i.u. 
VWF:RCO); Q4097 (Injection, immune globulin (Privigen), intravenous, 
non-lyophilized (e.g., liquid), 500 mg); and Q4098 (Injection, iron 
dextran, 50 mg). For the July quarter of CY 2008, we recognized a total 
of seven new Level II HCPCS codes, specifically C9242 (Injection, 
fosaprepitant, 1 mg); C9356 (Tendon, porous matrix of cross-linked 
collagen and glycosaminoglycan matrix (TenoGlide Tendon Protector 
Sheet), per square centimeter); C9357 (Dermal substitute, granulated 
cross-linked collagen and glycosaminoglycan matrix (Flowable Wound 
Matrix), 1 cc); C9358 (Dermal substitute, native, non-denatured 
collagen (SurgiMend Collagen Matrix), per 0.5 square centimeters); 
G0398 (Home sleep study test (HST) w/type II portable monitor, 
unattended; minimum of 7 channels: EEG, EOG, EMG, ECG/heart rate, 
airflow, respiratory effort and oxygen saturation); G0399 (Home sleep 
test (HST) with type III portable monitor, unattended; minimum of 4 
channels: 2 respiratory movement/airflow, 1 ECG/heart rate and 1 oxygen 
saturation); and G0400 (Home sleep test (HST) with type IV portable 
monitor, unattended; minimum of 3 channels). We designated the payment 
status of these codes and added them either through the April update 
(Transmittal 1487, Change Request 5999, dated April 8, 2008) or the 
July update of the CY 2008 OPPS.
    In this proposed rule, we are soliciting public comment on the 
status indicators, APC assignments, and payment rates of these codes, 
which are listed in Table 10 and Table 11 of this proposed rule. 
Because of the timing of this proposed rule, the codes implemented 
through the July 2008 OPPS update are not included in Addendum B to 
this proposed rule. We

[[Page 41468]]

are proposing to assign these new HCPCS codes for CY 2009 to APCs with 
the proposed payment rates as displayed in Table 11 and incorporate 
them into Addendum B to our final rule with comment period for CY 2009, 
which is consistent with our annual APC updating policy. The HCPCS 
codes implemented through the April 2008 OPPS update and displayed in 
Table 10 are included in Addendum B to this proposed rule, where their 
proposed payment rates can also be found.

                              Table 10.--New HCPCS Codes Implemented in April 2008
----------------------------------------------------------------------------------------------------------------
                                                                            Proposed CY 2009 status  Proposed CY
               HCPCS code                         Long descriptor                  indicator           2009 APC
----------------------------------------------------------------------------------------------------------------
C9241...................................  Injection, doripenem, 10 mg....  G                                9241
Q4096...................................  Injection, von willebrand        K                                1213
                                           factor complex, human,
                                           ristocetin cofactor (not
                                           otherwise specified), per i.u.
                                           VWF:RCO.
Q4097...................................  Injection, immune globulin       K                                1214
                                           (Privigen), intravenous, non-
                                           lyophilized (e.g., liquid),
                                           500 mg.
Q4098...................................  Injection, iron dextran, 50 mg.  K                                1215
----------------------------------------------------------------------------------------------------------------


                               Table 11.--New HCPCS Codes Implemented in July 2008
----------------------------------------------------------------------------------------------------------------
                                                                                                     Proposed CY
                                                                    Proposed CY 2009    Proposed CY      2009
             HCPCS code                    Long descriptor          status indicator      2009 APC     payment
                                                                                                         rate
----------------------------------------------------------------------------------------------------------------
C9242 *............................  Injection, fosaprepitant, 1  G                            9242        $1.61
                                      mg.
C9356 *............................  Tendon, porous matrix of     G                            9356        16.92
                                      cross-linked collagen and
                                      glycosaminoglycan matrix
                                      (TenoGlide Tendon
                                      Protector Sheet), per
                                      square centimeter.
C9357 *............................  Dermal substitute,           G                            9357       883.33
                                      granulated cross-linked
                                      collagen and
                                      glycosaminoglycan matrix
                                      (Flowable Wound Matrix), 1
                                      cc.
C9358 *............................  Dermal substitute, native,   G                            9358        10.38
                                      non-denatured collagen
                                      (SurgiMend Collagen
                                      Matrix), per 0.5 square
                                      centimeters.
G0398..............................  Home sleep study test (HST)  S                            0213       152.52
                                      with type II portable
                                      monitor, unattended;
                                      minimum of 7 channels:
                                      EEG, EOG, EMG, ECG/heart
                                      rate, airflow, respiratory
                                      effort and oxygen
                                      saturation.
G0399..............................  Home sleep test (HST) with   S                            0213       152.52
                                      type III portable monitor,
                                      unattended; minimum of 4
                                      channels: 2 respiratory
                                      movement/airflow, 1 ECG/
                                      heart rate and 1 oxygen
                                      saturation.
G0400..............................  Home sleep test (HST) with   S                            0213       152.52
                                      type IV portable monitor,
                                      unattended; minimum of 3
                                      channels.
----------------------------------------------------------------------------------------------------------------
* The drug payment rates displayed in Table 11 reflect the July 2008 ASP data.

2. Proposed Treatment of New Category I and III CPT Codes and Level II 
HCPCS 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. 
Specifically, the status indicator, the APC assignment, or both, for 
all such codes flagged with comment indicator ``NI'' will be open to 
public comment in the CY 2009 OPPS/ASC final rule with comment period. 
We are proposing to continue this recognition and process for CY 2009. 
New Category I and III CPT codes, as well as new Level II HCPCS codes, 
effective January 1, 2009, will be listed in Addendum B to the CY 2009 
OPPS/ASC final rule with comment period and designated using comment 
indicator ``NI.'' We will respond to all comments received concerning 
these codes in a subsequent final rule for the next calendar year's 
OPPS/ASC update.
    In addition, we are proposing to continue our policy of the last 3 
years of recognizing new mid-year CPT codes, generally Category III CPT 
codes, that the American Medical Association (AMA) releases in January 
for implementation the following July through the OPPS quarterly update 
process. Therefore, for CY 2009, we are proposing to include in 
Addendum B to the CY 2009 OPPS/ASC final rule with comment period the 
new Category III CPT codes released in January 2008 for implementation 
on July 1, 2008 (through the OPPS quarterly update process), and the 
new Category III codes released in July 2008 for implementation on 
January 1, 2009. However, only those new Category III CPT codes 
implemented effective January 1, 2009, will be flagged with comment 
indicator ``NI'' in Addendum B to the CY 2009 OPPS/ASC 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 2008, which appear in Table 12 below, are 
subject to comment through this proposed rule, and we are proposing to 
finalize their status in the CY 2009 OPPS/ASC final rule with comment 
period.

[[Page 41469]]



                           TABLE 12.--Category III CPT Codes Implemented in July 2008
----------------------------------------------------------------------------------------------------------------
                                                                      Proposed CY 2009
              CPT code                       Long descriptor          status indicator     Proposed CY 2009 APC
----------------------------------------------------------------------------------------------------------------
0188T...............................  Remote real-time interactive  M                     Not applicable.
                                       videoconferenced critical
                                       care, evaluation and
                                       management of the
                                       critically ill or
                                       critically injured patient;
                                       first 30-74 minutes.
0189T...............................  Remote real-time interactive  M                     Not applicable.
                                       videoconferenced critical
                                       care, evaluation and
                                       management of the
                                       critically ill or
                                       critically injured patient;
                                       each additional 30 minutes.
0190T...............................  Placement of intraocular      T                     0237.
                                       radiation source applicator.
0191T...............................  Insertion of anterior         T                     0234.
                                       segment aqueous drainage
                                       device, without extraocular
                                       reservoir; internal
                                       approach.
0192T...............................  Insertion of anterior         T                     0234.
                                       segment aqueous drainage
                                       device, without extraocular
                                       reservoir; external
                                       approach.
----------------------------------------------------------------------------------------------------------------

B. Proposed OPPS Changes--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, therapeutic 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 independent 
procedures or furnishing the services. Therefore, we do not make 
separate payment for these 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) 
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 proposed 
rule); (7) incidental services such as venipuncture; and (8) guidance 
services, image processing services, intraoperative services, imaging 
supervision and interpretation services, diagnostic 
radiopharmaceuticals, and contrast media. Further discussion of 
packaged services is included in section II.A.4. of this proposed rule.
    In CY 2008, we implemented composite APCs to provide a single 
payment for groups of services that are typically performed together 
during a single clinical encounter and that result in the provision of 
a complete service. Under current CY 2008 OPPS policy, we provide 
composite APC payment for certain extended assessment and management 
services, low dose rate prostate brachytherapy, cardiac 
electrophysiologic evaluation and ablation, and mental health services. 
We also are proposing for CY 2009 a composite APC payment methodology 
for multiple imaging services. Further discussion of composite APCs is 
included in section II.A.2.e. of this proposed rule.
    Under the OPPS, we generally 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 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 (Level 3 Hospital Clinic Visits). 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 CPT 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, 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 2009 OPPS and our 
responses to them are discussed in the relevant specific sections 
throughout this proposed rule).
    Finally, 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 cost, or mean cost as elected by the Secretary, for an 
item or service in the group is more than 2 times greater than the 
lowest median cost for an item or service within the same group 
(referred to as the ``2 times rule''). We use the median cost of the 
item or service in implementing this provision. The statute authorizes 
the Secretary to make exceptions to the 2 times rule in unusual cases, 
such as low-volume items and services.
 2. Application of the 2 Times Rule
    In accordance with section 1833(t)(2) of the Act and Sec.  419.31 
of the regulations, we annually review the items and services within an 
APC group to determine, with respect to comparability of the use of 
resources, if the median cost 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 are proposing to make exceptions to this limit on the variation of 
costs within each APC group in unusual cases such as low-volume items 
and services.

[[Page 41470]]

    During the APC Panel's March 2008 meeting, we presented median cost 
and utilization data for services furnished during the period of 
January 1, 2007 through September 30, 2007, 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 2009 are contained 
principally in sections III.C. and III.D. of this proposed rule.
    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 are proposing changes to their HCPCS codes' APC 
assignments in Addendum B to this proposed rule. In these cases, to 
eliminate a 2 times violation or to improve clinical and resource 
homogeneity, we are proposing to reassign the codes to APCs that 
contain services that are similar with regard to both their clinical 
and resource characteristics. We also are proposing 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 2009 included in this proposed rule are related to changes in 
median costs of services that are observed in the CY 2007 claims data 
newly available for CY 2009 ratesetting. We also are proposing changes 
to the status indicators for some codes that are not specifically and 
separately discussed in this proposed rule. In these cases, we are 
proposing to change the status indicators for some codes because we 
believe that another status indicator would more accurately describe 
their payment status from an OPPS perspective based on the policies 
that we are proposing for CY 2009 or because we are proposing new 
status indicators to differentiate a related group of services from 
other services that previously shared the same status indicator.
    Addendum B to this proposed rule identifies with comment indicator 
``CH'' those HCPCS codes for which we are proposing a change to the APC 
assignment or status indicator as assigned in the April 2008 Addendum B 
update (via Transmittal 1487, Change Request 5999, dated April 8, 
2008). HCPCS codes with proposed CY 2009 changes in status indicator 
assignments from ``Q'' to ``Q1,'' from ``Q'' to ``Q2,'' or from ``Q'' 
to ``Q3'' are an exception to this identification practice because they 
are not flagged with comment indicator ``CH'' in Addendum B to this 
proposed rule. These proposed changes in status indicators are to 
facilitate policy transparency and operational logic rather than 
reflect changes in OPPS payment policy for these services, hence we 
believe that identifying these HCPCS codes with ``CH'' could be 
confusing to the public.
3. Proposed 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 are proposing for CY 2009 based on the APC Panel 
recommendations discussed mainly in sections III.C. and III.D. of this 
proposed rule, the other proposed changes to status indicators and APC 
assignments as identified in Addendum B to this proposed rule, and the 
use of CY 2007 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 outpatient setting
     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 13 below lists the APCs that we are proposing to exempt from 
the 2 times rule for CY 2009 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 CY 2007 claims data used to 
determine the APC payment rates that we are proposing for CY 2009. The 
median costs for hospital outpatient services for these and all other 
APCs that were used in the development of this proposed rule can be 
found on the CMS Web site at: http://www.cms.hhs.gov/HospitalOutpatientPPS/01_overview.asp.

   Table 13.--Proposed APC Exceptions to the 2 Times Rule for CY 2009
------------------------------------------------------------------------
                    APC                               APC title
------------------------------------------------------------------------
0060......................................  Manipulation Therapy.
0080......................................  Diagnostic Cardiac
                                             Catheterization.
0093......................................  Vascular Reconstruction/
                                             Fistula Repair without
                                             Device.
0105......................................  Repair/Revision/Removal of
                                             Pacemakers, AICDs, or
                                             Vascular Devices.
0141......................................  Level I Upper GI Procedures.
0245......................................  Level I Cataract Procedures
                                             without IOL Insert.
0303......................................  Treatment Device
                                             Construction.
0330......................................  Dental Procedures.
0409......................................  Red Blood Cell Tests.
0426......................................  Level II Strapping and Cast
                                             Application.
0432......................................  Health and Behavior
                                             Services.
0604......................................  Level 1 Hospital Clinic
                                             Visits.
------------------------------------------------------------------------

C. New Technology APCs

1. Background
    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 2 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. Proposed 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

[[Page 41471]]

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.
    Consistent with our current policy, for CY 2009 we are proposing 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. HCPCS codes C9725 (Placement of endorectal 
intracavitary applicator for high intensity brachytherapy), C9726 
(Placement and removal (if performed) of applicator into breast for 
radiation therapy), and C9727 (Insertion of implants into the soft 
palate; minimum of three implants), which are presented below in Table 
14 of this proposed rule, represent services assigned to New Technology 
APCs for CY 2008 for which we believe we have sufficient claims data to 
propose their reassignment to clinically appropriate APCs for CY 2009. 
These 3 procedures have been assigned to their New Technology APCs for 
at least 3 years, thereby providing us with sufficient data from at 
least 2 years of hospital claims upon which to base our proposed 
reassignments. In addition, these three procedures are clinically 
similar to other services currently paid through clinical APCs under 
the OPPS and for which we have substantial claims data regarding 
hospital costs. Therefore, for CY 2009, we are proposing to reassign 
these procedures to clinically appropriate APCs, applying their CY 2007 
claims data to develop their clinical APC median costs upon which 
payments would be based. These procedures and their proposed APC 
assignments are displayed in Table 14 below.
    HCPCS code C9723 (Dynamic infrared blood perfusion imaging (diri)) 
was assigned to New Technology APC 1502 (New Technology--Level II ($50-
$100)) when it was implemented in April 2005. However, based on our 
claims data for the past 3 years, which have shown no utilization for 
this code, we are proposing to delete HCPCS code C9723 on December 31, 
2008.

           Table 14.--Proposed CY 2009 APC Reassignments of New Technology Procedures to Clinical APCs
----------------------------------------------------------------------------------------------------------------
                                                                                    Proposed CY    Proposed CY
           HCPCS code             Short descriptor      CY 2008 SI     CY 2008 APC    2009 APC       2009 SI
----------------------------------------------------------------------------------------------------------------
C9725..........................  Placement of        S                        1507         0164  T
                                  endorectal
                                  intracavitary
                                  applicator for
                                  high intensity
                                  brachytherapy.
C9726..........................  Placement and       S                        1508         0028  T
                                  removal (if
                                  performed) of
                                  applicator into
                                  breast for
                                  radiation therapy.
C9727..........................  Insertion of        S                        1510         0252  T
                                  implants into the
                                  soft palate;
                                  minimum of three
                                  implants.
----------------------------------------------------------------------------------------------------------------

D. Proposed OPPS APC-Specific Policies

1. Trauma Response Associated With Hospital Critical Care Services (APC 
0618)
    In the CY 2007 OPPS/ASC final rule with comment period (71 FR 68133 
through 68134), we discussed the creation of HCPCS code G0390 (Trauma 
response team activation associated with hospital critical care 
service), which became effective January 1, 2007. HCPCS code G0390 is 
reported by hospitals when providing critical care services in 
association with trauma response team activation. HCPCS code G0390 has 
been assigned to APC 0618 (Trauma Response with Critical Care) since CY 
2007, with payment rates of approximately $495 and $330, for CYs 2007 
and 2008, respectively. The creation of HCPCS code G0390 enables us to 
pay differentially for critical care when trauma response team 
activation is associated with critical care services and when there is 
no trauma response team activation. We instructed hospitals to continue 
to report CPT codes 99291 (Critical care, evaluation and management of 
the critically ill or critically injured patient; first 30-74 minutes) 
and 99292 (Critical care, evaluation and management of the critically 
ill or critically injured patient; each additional 30 minutes (List 
separately in addition to code for primary service)) for critical care 
services when they also report HCPCS code G0390.
    For CY 2007 and CY 2008, we calculated the median cost for APC 0617 
(Critical Care) to which CPT code 99291 is assigned using the subset of 
single claims for CPT code 99291 that did not include charges under 
revenue code 068x, the trauma revenue code, reported on the same day. 
We established the median cost for APC 0618 (Trauma Response with 
Critical Care) by calculating the difference in median costs between 
the two subsets of single claims for CPT code 99291 representing the 
reporting of critical care services with and without revenue code 068x 
charges reported on the same day. For a complete description of the 
history of the policy and development of the payment methodology for 
these services, we refer readers to the CY 2007 OPPS/ASC final rule 
with comment period (71 FR 68133 through 68134). We provided billing 
guidance in CY 2006 in Transmittal 1139, Change Request 5438, issued on 
December 22, 2006, specifically clarifying when it would be appropriate 
to report HCPCS code G0390. The I/OCE logic only accepts HCPCS code 
G0390 when it is reported with revenue code 068x and CPT code 99291 on 
the same claim and on the same date of service.
    For CY 2009, we are proposing a median cost for APC 0617 of 
approximately $488 and a median cost for APC 0618 of approximately 
$989. For CY 2009 OPPS ratesetting, we are using claims data from CY 
2007 that also include claims for HCPCS code G0390, as CY 2007 is the 
initial year that we established OPPS payment for HCPCS code G0390. We 
are proposing to use the line-item median cost for HCPCS code G0390 in 
the CY 2007 claims to set the median cost for APC 0618, as HCPCS code 
G0390 is the only code assigned to that APC. As discussed in section 
II.A.1.b. of this proposed rule, we are proposing to add HCPCS code 
G0390 to the CY 2009 bypass list to isolate the line-item cost for 
HCPCS code G0390 and ensure that the critical

[[Page 41472]]

care claims for CPT code 99291 that are reported with HCPCS code G0390 
are available to set the medians for APC 0617 and composite APC 8003. 
The costs of packaged revenue code charges and HCPCS codes for services 
with status indicator ``N'' on a claim with HCPCS code G0390 would be 
associated with CPT code 99291 for ratesetting, if the claim for CPT 
code 99291 is a single or ``pseudo'' single bill.
    For APC 0617, we are proposing to calculate the median cost using 
our standard methodology that excludes those single claims for critical 
care services that are eligible for payment through the Level II 
extended assessment and management composite APC, that is APC 8003, as 
described in section II.A.2.e.(1) of this proposed rule. We believe 
that these proposed refinements in median cost calculations would 
result in more accurate cost estimates and payments for APCs 0617 and 
0618 for CY 2009.
2. Suprachoroidal Delivery of Pharmacologic Agent (APC 0236)
    CPT code 0186T (Suprachoroidal delivery of pharmacologic agent 
(does not include supply of medication)) is a new code for CY 2008. It 
was released on the AMA CPT Web site on July 1, 2007, and implemented 
on January 1, 2008. In the CY 2008 OPPS/ASC final rule with comment 
period (72 FR 66997), we assigned this code to APC 0236 (Level II 
Posterior Segment Eye Procedures) with a CY 2008 payment rate of 
approximately $1,161. We also assigned this code comment indicator 
``NI'' in Addendum B to the CY 2008 OPPS/ASC final rule with comment 
period to indicate that it is a new code for CY 2008 with an interim 
payment status subject to public comment following publication of that 
rule.
    As has been our practice in the past, we implement new HCPCS codes 
in the OPPS/ASC final rule with comment period, at which time we invite 
public comment on our interim treatment of the new codes. We 
subsequently respond to those comments in the final rule with comment 
period for the following year's OPPS update.
    In its March 2008 presentation to the APC Panel, a presenter 
requested the reassignment of CPT code 0186T from APC 0236 to APC 0237 
(Level III Posterior Segment Eye Procedures), which has a CY 2008 
payment rate of approximately $1,774. The presenter indicated that CPT 
code 0186T is analogous to CPT code 67027 (Implantation of intravitreal 
drug delivery system (e.g., ganciclovir implant), includes concomitant 
removal of vitreous), which is assigned to APC 0672 (Level IV Posterior 
Segment Eye Procedures) with a CY 2008 payment rate of about $2,370. 
Although the presenter stated that both procedures share similar 
clinical characteristics and resource costs, the presenter believed 
that CPT code 0186T would be most appropriately assigned to APC 0237 
based on the procedure's estimated hospital cost. The APC Panel noted 
that because the CPT code is new and there are no claims data for this 
procedure, the APC Panel would not make a specific CY 2009 APC 
assignment recommendation to CMS at this time. However, the APC Panel 
recommended that CMS share with the APC Panel the claims data for CPT 
code 0186T at the first CY 2009 APC Panel meeting, and that CMS 
reevaluate the assignment of CPT code 0186T to APC 0236 on the basis of 
those data. We are accepting the recommendation of the APC Panel and 
will provide the initial OPPS claims data available for this CPT code, 
based on CY 2008 claims data, for the first CY 2009 APC Panel meeting. 
These data will not be available until the CY 2010 OPPS update 
rulemaking cycle.
    Under the OPPS, we generally assign a new Category III CPT code to 
an APC if we believe that the procedure, if covered, would be 
appropriate for separate payment under the OPPS. A specific assignment 
to a clinical APC where HCPCS codes with comparable clinical and 
resource characteristics also reside is based on a variety of types of 
information including, but not limited to: Advice from our medical 
advisors, information from specialty societies, review of resource 
costs for related services from historical hospital claims data, 
consideration of the clinical similarity of the service to existing 
procedures, and review of any other information available to us.
    Based upon our further review and analysis of the clinical 
characteristics and resource costs associated with CPT code 0186T, we 
agree with the presenter that the most appropriate CY 2009 APC 
assignment for this procedure is APC 0237. We believe that the other 
procedures also assigned to APC 0237 are similar to the procedure 
described by CPT code 0186T. Therefore, for CY 2009, we are proposing 
to reassign CPT code 0186T from APC 0236 to APC 0237, which has a 
proposed median cost of approximately $1,447. We also note that because 
CPT code 0186T describes a specific drug administration service, the 
drug itself would be separately reported under the appropriate Level II 
HCPCS drug code.
3. Closed Treatment of Fracture of Finger/Toe/Trunk (APC 0043)
    We received a comment to the CY 2008 OPPS/ASC proposed rule on the 
variety of procedures assigned to APC 0043 (Closed Treatment Fracture 
Finger/Toe/Trunk). The commenter did not agree with the placement of 
various procedures in APC 0043 as many of the procedures vary in 
resource costs. In particular, the commenter asserted that the costs 
associated with finger treatments, hip dislocations, and spinal 
fractures vary significantly, and further stated that the costs of 
treating spinal fractures are significantly greater than the costs 
associated with finger or toe fractures. The commenter also expressed 
concern that grouping all of the approximately 150 procedures in one 
clinical APC violated the 2 times rule, and that continuing to exempt 
APC 0043 from the 2 times rule was not appropriate. The commenter 
recommended that CMS pay appropriately for these procedures, and stated 
that this could be achieved by dividing the procedures currently 
assigned to APC 0043 into several APCs. However, the commenter did not 
make any specific recommendations regarding alternative APC 
configurations. Because APC 0043 contains so many different fracture 
treatment procedures with low volume, we were concerned that any 
restructuring for CY 2008 without the benefit of public comment could 
result in the reconfiguration of APCs that did not reflect improved 
clinical and resource homogeneity over the proposed configuration. 
Therefore, we did not reconfigure APC 0043 for CY 2008, and we 
finalized a payment rate for APC 0043 of about $113.
    In the CY 2008 OPPS/ASC final rule with comment period (72 FR 
66723), we stated that we agreed with the commenter that grouping all 
of the closed fracture treatment procedures in one APC may not 
accurately distinguish the more expensive from the less resource-
intensive fracture treatment procedures. However, we also explained 
that we found that there were only 13 procedures that were significant 
procedures with the frequency necessary to assess the APC's alignment 
with the 2 times rule. The other procedures were all very low volume 
and, therefore, not significant procedures for purposes of evaluating 
the APC with respect to the 2 times rule. We noted that APC 0043 has 
been exempted from the 2 times rule for the past 7 years under the 
OPPS, and we had not previously received public comments regarding the 
structure of this APC. In that same rule (72 FR 66723) we

[[Page 41473]]

specifically invited public recommendations on potential alternative 
APC configurations for the services currently assigned to APC 0043 for 
the CY 2009 APC review process. We received no public comments on this 
APC issue.
    In the CY 2008 OPPS/ASC final rule with comment period (72 FR 
66723), we also stated that we would bring this APC issue to the 
attention of the APC Panel at its March 2008 meeting and requested 
input as to how to most appropriately categorize the procedures in APC 
0043. Based on the updated CY 2007 hospital outpatient claims data 
available for the March 2008 APC Panel meeting, we presented a possible 
reconfiguration of APC 0043 for the APC Panel's consideration. In 
particular, the potential reconfiguration reviewed and discussed by the 
APC Panel would delete APC 0043 and replace it with three new APCs, 
configured based on the hospital resource data from the CY 2007 claims 
data, as well as the clinical characteristics of the procedures 
currently assigned to APC 0043. The APC Panel recommended that CMS 
adopt the approach that CMS described to the APC Panel to reconfigure 
APC 0043 into three new APCs, and we are accepting the APC Panel's 
recommendation for CY 2009. Therefore, for CY 2009, we are proposing 
three new APCs to replace APC 0043, with proposed configurations as 
displayed in Table 15 below.
    Based on these configurations, proposed new APC 0129 (Level I 
Closed Treatment Fracture Finger/Toe/Trunk) has a proposed APC median 
cost of approximately $104, with the HCPCS code-specific median costs 
of the significant procedures ranging from approximately $74 to $124. 
Proposed new APC 0138 (Level II Closed Treatment Fracture Finger/Toe/
Trunk) has a proposed APC median cost of approximately $397, with only 
one significant procedure with a HCPCS code-specific median cost of 
approximately $399. Proposed new APC 0139 (Level III Closed Treatment 
Fracture Finger/Toe/Trunk) has a proposed APC median cost of 
approximately $1,340, with only one significant volume HCPCS code whose 
median cost is approximately $1,574.
    While all three proposed APCs contain many procedures that are very 
low in volume, this reconfiguration reflects an attempt to realign the 
procedures previously assigned to APC 0043 based on their clinical 
characteristics and resource costs into APC groups that are more 
homogeneous. Therefore, for CY 2009, we are proposing to reconfigure 
APC 0043 by deleting APC 0043 and reassigning the HCPCS codes 
previously assigned to APC 0043 to proposed new APCs 0129, 0138, and 
0139.

                 Table 15.--Proposed New APCs for Closed Treatment Fracture of Finger/Toe/Trunk
----------------------------------------------------------------------------------------------------------------
                                                                                                     Proposed CY
      Proposed CY 2009 new APC         HCPCS code          SI                Short descriptor          2009 APC
                                                                                                     median cost
----------------------------------------------------------------------------------------------------------------
0129................................        21800  T                   Treatment of rib fracture...      $103.52
                                            21820  T                   Treat sternum fracture......
                                            22305  T                   Treat spine process fracture
                                            23500  T                   Treat clavicle fracture.....
                                            23540  T                   Treat clavicle dislocation..
                                            23570  T                   Treat shoulder blade fx.....
                                            23600  T                   Treat humerus fracture......
                                            23620  T                   Treat humerus fracture......
                                            23650  T                   Treat shoulder dislocation..
                                            23675  T                   Treat dislocation/fracture..
                                            23929  T                   Shoulder surgery procedure..
                                            24500  T                   Treat humerus fracture......
                                            24505  T                   Treat humerus fracture......
                                            24530  T                   Treat humerus fracture......
                                            24560  T                   Treat humerus fracture......
                                            24565  T                   Treat humerus fracture......
                                            24576  T                   Treat humerus fracture......
                                            24600  T                   Treat elbow dislocation.....
                                            24640  T                   Treat elbow dislocation.....
                                            24650  T                   Treat radius fracture.......
                                            24670  T                   Treat ulnar fracture........
                                            24675  T                   Treat ulnar fracture........
                                            24999  T                   Upper arm/elbow surgery.....
                                            25500  T                   Treat fracture of radius....
                                            25530  T                   Treat fracture of ulna......
                                            25535  T                   Treat fracture of ulna......
                                            25560  T                   Treat fracture radius & ulna
                                            25600  T                   Treat fracture radius/ulna..
                                            25622  T                   Treat wrist bone fracture...
                                            25630  T                   Treat wrist bone fracture...
                                            25650  T                   Treat wrist bone fracture...
                                            25660  T                   Treat wrist dislocation.....
                                            25675  T                   Treat wrist dislocation.....
                                            25680  T                   Treat wrist fracture........
                                            25999  T                   Forearm or wrist surgery....
                                            26600  T                   Treat metacarpal fracture...
                                            26605  T                   Treat metacarpal fracture...
                                            26641  T                   Treat thumb dislocation.....
                                            26670  T                   Treat hand dislocation......
                                            26700  T                   Treat knuckle dislocation...
                                            26705  T                   Treat knuckle dislocation...

[[Page 41474]]

 
                                            26720  T                   Treat finger fracture, each.
                                            26725  T                   Treat finger fracture, each.
                                            26740  T                   Treat finger fracture, each.
                                            26742  T                   Treat finger fracture, each.
                                            26750  T                   Treat finger fracture, each.
                                            26755  T                   Treat finger fracture, each.
                                            26770  T                   Treat finger dislocation....
                                            26989  T                   Hand/finger surgery.........
                                            27193  T                   Treat pelvic ring fracture..
                                            27200  T                   Treat tail bone fracture....
                                            27220  T                   Treat hip socket fracture...
                                            27230  T                   Treat thigh fracture........
                                            27250  T                   Treat hip dislocation.......
                                            27256  T                   Treat hip dislocation.......
                                            27265  T                   Treat hip dislocation.......
                                            27267  T                   Cltx thigh fx...............
                                            27299  T                   Pelvis/hip joint surgery....
                                            27501  T                   Treatment of thigh fracture.
                                            27503  T                   Treatment of thigh fracture.
                                            27508  T                   Treatment of thigh fracture.
                                            27516  T                   Treat thigh fx growth plate.
                                            27517  T                   Treat thigh fx growth plate.
                                            27520  T                   Treat kneecap fracture......
                                            27530  T                   Treat knee fracture.........
                                            27538  T                   Treat knee fracture(s)......
                                            27550  T                   Treat knee dislocation......
                                            27560  T                   Treat kneecap dislocation...
                                            27599  T                   Leg surgery procedure.......
                                            27750  T                   Treatment of tibia fracture.
                                            27760  T                   Cltx medial ankle fx........
                                            27767  T                   Cltx post ankle fx..........
                                            27768  T                   Cltx post ankle fx w/mnpj...
                                            27780  T                   Treatment of fibula fracture
                                            27786  T                   Treatment of ankle fracture.
                                            27788  T                   Treatment of ankle fracture.
                                            27808  T                   Treatment of ankle fracture.
                                            27816  T                   Treatment of ankle fracture.
                                            27824  T                   Treat lower leg fracture....
                                            27830  T                   Treat lower leg dislocation.
                                            27899  T                   Leg/ankle surgery procedure.
                                            28400  T                   Treatment of heel fracture..
                                            28430  T                   Treatment of ankle fracture.
                                            28435  T                   Treatment of ankle fracture.
                                            28450  T                   Treat midfoot fracture, each
                                            28455  T                   Treat midfoot fracture, each
                                            28470  T                   Treat metatarsal fracture...
                                            28475  T                   Treat metatarsal fracture...
                                            28490  T                   Treat big toe fracture......
                                            28495  T                   Treat big toe fracture......
                                            28510  T                   Treatment of toe fracture...
                                            28515  T                   Treatment of toe fracture...
                                            28530  T                   Treat sesamoid bone fracture
                                            28540  T                   Treat foot dislocation......
                                            28600  T                   Treat foot dislocation......
                                            28605  T                   Treat foot dislocation......
                                            28630  T                   Treat toe dislocation.......
                                            28660  T                   Treat toe dislocation.......
                                            28899  T                   Foot/toes surgery procedure.
0138................................        20660  T                   Apply, rem fixation device..       397.39
                                            22310  T                   Treat spine fracture........
                                            23520  T                   Treat clavicle dislocation..
                                            23525  T                   Treat clavicle dislocation..
                                            23545  T                   Treat clavicle dislocation..
                                            23575  T                   Treat shoulder blade fx.....
                                            23665  T                   Treat dislocation/fracture..
                                            24535  T                   Treat humerus fracture......
                                            24577  T                   Treat humerus fracture......
                                            24655  T                   Treat radius fracture.......
                                            25505  T                   Treat fracture of radius....

[[Page 41475]]

 
                                            25520  T                   Treat fracture of radius....
                                            25565  T                   Treat fracture radius & ulna
                                            25605  T                   Treat fracture radius/ulna..
                                            25624  T                   Treat wrist bone fracture...
                                            25635  T                   Treat wrist bone fracture...
                                            26340  T                   Manipulate finger w/anesth..
                                            26645  T                   Treat thumb fracture........
                                            26675  T                   Treat hand dislocation......
                                            27238  T                   Treat thigh fracture........
                                            27246  T                   Treat thigh fracture........
                                            27500  T                   Treatment of thigh fracture.
                                            27510  T                   Treatment of thigh fracture.
                                            27810  T                   Treatment of ankle fracture.
                                            27818  T                   Treatment of ankle fracture.
                                            27840  T                   Treat ankle dislocation.....
                                            28570  T                   Treat foot dislocation......
0139................................        22315  T                   Treat spine fracture........     1,339.53
                                            23505  T                   Treat clavicle fracture.....
                                            23605  T                   Treat humerus fracture......
                                            23625  T                   Treat humerus fracture......
                                            24620  T                   Treat elbow fracture........
                                            25259  T                   Manipulate wrist w/anesthes.
                                            25690  T                   Treat wrist dislocation.....
                                            26607  T                   Treat metacarpal fracture...
                                            26706  T                   Pin knuckle dislocation.....
                                            27502  T                   Treatment of thigh fracture.
                                            27532  T                   Treat knee fracture.........
                                            27752  T                   Treatment of tibia fracture.
                                            27762  T                   Cltx med ankle fx w/mnpj....
                                            27781  T                   Treatment of fibula fracture
                                            27825  T                   Treat lower leg fracture....
                                            27831  T                   Treat lower leg dislocation.
                                            28405  T                   Treatment of heel fracture..
                                            28575  T                   Treat foot dislocation......
----------------------------------------------------------------------------------------------------------------

4. Individual Psychotherapy (APCs 0322 and 0323)
    APC 0323 (Extended Individual Psychotherapy) had a 2 times rule 
violation for CYs 2007 and 2008, and was exempted from the 2 times rule 
during those years. APC 0323 would continue to have a 2 times rule 
violation in CY 2009 if its configuration is not adjusted. In the CY 
2008 OPPS/ASC final rule with comment period (72 FR 66739), we agreed 
to review APC 0323 at the next APC Panel meeting and seek the APC 
Panel's guidance in reconfiguring this APC for CY 2009.
    It was brought to our attention that a handful of CPT codes 
describe psychotherapy services that could be appropriately provided 
and reported as part of a partial hospitalization program, but would 
not otherwise be appropriately reported by a HOPD for those 
psychotherapy services. Specifically, the category heading in the 2008 
CPT book specifies that the CPT codes listed in Table 16 below are to 
be reported for services provided in an ``inpatient hospital, partial 
hospital, or residential care facility.'' These CPT codes have been 
assigned to APCs 0322 (Brief Individual Psychotherapy) and 0323 since 
the implementation of the OPPS.

  Table 16.--Inpatient Hospital, Partial Hospital, or Residential Care
                      Facility Psychotherapy Codes
------------------------------------------------------------------------
           CPT code                         Long descriptor
------------------------------------------------------------------------
90816........................  Individual psychotherapy, insight
                                oriented, behavior modifying and/or
                                supportive, in an inpatient hospital,
                                partial hospital or residential care
                                setting, approximately 20 to 30 minutes
                                face-to-face with the patient;
90817........................  Individual psychotherapy, insight
                                oriented, behavior modifying and/or
                                supportive, in an inpatient hospital,
                                partial hospital or residential care
                                setting, approximately 20 to 30 minutes
                                face-to-face with the patient; with
                                medical evaluation and management
                                services.
90818........................  Individual psychotherapy, insight
                                oriented, behavior modifying and/or
                                supportive, in an inpatient hospital,
                                partial hospital or residential care
                                setting, approximately 45 to 50 minutes
                                face-to-face with the patient;
90819........................  Individual psychotherapy, insight
                                oriented, behavior modifying and/or
                                supportive, in an inpatient hospital,
                                partial hospital or residential care
                                setting, approximately 45 to 50 minutes
                                face-to-face with the patient; with
                                medical evaluation and management.
90821........................  Individual psychotherapy, insight
                                oriented, behavior modifying and/or
                                supportive, in an inpatient hospital,
                                partial hospital or residential care
                                setting, approximately 75 to 80 minutes
                                face-to-face with the patient;

[[Page 41476]]

 
90822........................  Individual psychotherapy, insight
                                oriented, behavior modifying and/or
                                supportive, in an inpatient hospital,
                                partial hospital or residential care
                                setting, approximately 75 to 80 minutes
                                face-to-face with the patient; with
                                medical evaluation and management
                                services.
90823........................  Individual psychotherapy, interactive,
                                using play equipment, physical devices,
                                language interpreter, or other
                                mechanisms of non-verbal communication,
                                in an inpatient hospital, partial
                                hospital or residential care setting,
                                approximately 20 to 30 minutes face-to-
                                face with the patient;
90824........................  Individual psychotherapy, interactive,
                                using play equipment, physical devices,
                                language interpreter, or other
                                mechanisms of non-verbal communication,
                                in an inpatient hospital, partial
                                hospital or residential care setting,
                                approximately 20 to 30 minutes face-to-
                                face with the patient; with medical
                                evaluation and management services.
90826........................  Individual psychotherapy, interactive,
                                using play equipment, physical devices,
                                language interpreter, or other
                                mechanisms of non-verbal communication,
                                in an inpatient hospital, partial
                                hospital or residential care setting,
                                approximately 45 to 50 minutes face-to-
                                face with the patient;
90827........................  Individual psychotherapy, interactive,
                                using play equipment, physical devices,
                                language interpreter, or other
                                mechanisms of non-verbal communication,
                                in an inpatient hospital, partial
                                hospital or residential care setting,
                                approximately 45 to 50 minutes face-to-
                                face with the patient; with medical
                                evaluation and management services.
90828........................  Individual psychotherapy, interactive,
                                using play equipment, physical devices,
                                language interpreter, or other
                                mechanisms of non-verbal communication,
                                in an inpatient hospital, partial
                                hospital or residential care setting,
                                approximately 75 to 80 minutes face-to-
                                face with the patient;
90829........................  Individual psychotherapy, interactive,
                                using play equipment, physical devices,
                                language interpreter, or other
                                mechanisms of non-verbal communication,
                                in an inpatient hospital, partial
                                hospital or residential care setting,
                                approximately 75 to 80 minutes face-to-
                                face with the patient; with medical
                                evaluation and management services.
------------------------------------------------------------------------

    The 2008 CPT book also includes a parallel set of CPT codes whose 
category heading in the CPT book specifies that these codes are to be 
reported for services provided in the office or other outpatient 
facilities. These CPT codes are listed in Table 17. These CPT codes 
have also been assigned to APCs 0322 and 0323 since the implementation 
of the OPPS.

   Table 17.--Office or Other Outpatient Facility Psychotherapy Codes
------------------------------------------------------------------------
           CPT code                         Long descriptor
------------------------------------------------------------------------
90804........................  Individual psychotherapy, insight
                                oriented, behavior modifying and/or
                                supportive, in an office or outpatient
                                facility, approximately 20 to 30 minutes
                                face-to-face with the patient;
90805........................  Individual psychotherapy, insight
                                oriented, behavior modifying and/or
                                supportive, in an office or outpatient
                                facility, approximately 20 to 30 minutes
                                face-to-face with the patient; with
                                medical evaluation and management
                                services.
90806........................  Individual psychotherapy, insight
                                oriented, behavior modifying and/or
                                supportive, in an office or outpatient
                                facility, approximately 45 to 50 minutes
                                face-to-face with the patient;
90807........................  Individual psychotherapy, insight
                                oriented, behavior modifying and/or
                                supportive, in an office or outpatient
                                facility, approximately 45 to 50 minutes
                                face-to-face with the patient; with
                                medical evaluation and management.
90808........................  Individual psychotherapy, insight
                                oriented, behavior modifying and/or
                                supportive, in an office or outpatient
                                facility, approximately 75 to 80 minutes
                                face-to-face with the patient;
90809........................  Individual psychotherapy, insight
                                oriented, behavior modifying and/or
                                supportive, in an office or outpatient
                                facility, approximately 75 to 80 minutes
                                face-to-face with the patient; with
                                medical evaluation and management
                                services.
90810........................  Individual psychotherapy, interactive,
                                using play equipment, physical devices,
                                language interpreter, or other
                                mechanisms of non-verbal communication,
                                in an office or outpatient facility,
                                approximately 20 to 30 minutes face-to-
                                face with the patient;
90811........................  Individual psychotherapy, interactive,
                                using play equipment, physical devices,
                                language interpreter, or other
                                mechanisms of non-verbal communication,
                                in an office or outpatient facility,
                                approximately 20 to 30 minutes face-to-
                                face with the patient; with medical
                                evaluation and management services.
90812........................  Individual psychotherapy, interactive,
                                using play equipment, physical devices,
                                language interpreter, or other
                                mechanisms of non-verbal communication,
                                in an office or outpatient facility,
                                approximately 45 to 50 minutes face-to-
                                face with the patient;
90813........................  Individual psychotherapy, interactive,
                                using play equipment, physical devices,
                                language interpreter, or other
                                mechanisms of non-verbal communication,
                                in an office or outpatient facility,
                                approximately 45 to 50 minutes face-to-
                                face with the patient; with medical
                                evaluation and management services.
90814........................  Individual psychotherapy, interactive,
                                using play equipment, physical devices,
                                language interpreter, or other
                                mechanisms of non-verbal communication,
                                in an office or outpatient facility,
                                approximately 75 to 80 minutes face-to-
                                face with the patient;
90815........................  Individual psychotherapy, interactive,
                                using play equipment, physical devices,
                                language interpreter, or other
                                mechanisms of non-verbal communication,
                                in an office or outpatient facility,
                                approximately 75 to 80 minutes face-to-
                                face with the patient; with medical
                                evaluation and management services.
------------------------------------------------------------------------

    Our CY 2007 claims data for this proposed rule (excluding all 
claims for partial hospitalization services) include approximately 
10,000 OPPS claims for CPT codes 90816 through 90829, compared with 
approximately 500,000 claims for CPT codes 90804 through 90815. We are 
unclear as to what HOPD services these claims for CPT codes 90816 
through 90829 represent and believe that these may be miscoded claims. 
We do not believe that CPT codes 90816 through 90829 could be 
appropriately reported for hospital outpatient services that are not 
part of a partial hospitalization program. Therefore, for CY 2009, we 
are proposing to assign status indicator ``P'' to CPT codes 90816 
through 90829, indicating that these services may be billed 
appropriately and paid under the

[[Page 41477]]

OPPS only when they are part of a partial hospitalization program. 
Partial hospitalization services are not included in our ratesetting 
process for nonpartial hospitalization OPPS services. Under this 
proposal, hospitals would continue to report CPT codes 90804 through 
90815 for individual psychotherapy services provided in the HOPD that 
are not part of partial hospitalization services, consistent with CPT 
instructions.
    We recalculated the median costs for APCs 0322 and 0323, after 
assigning status indicator ``P'' to CPT codes 90816 through 90829. As 
partial hospitalization services only, the claims data for these codes 
would only be considered for ratesetting with respect to partial 
hospitalization services paid through the two proposed CY 2009 partial 
hospitalization APCs, specifically APC 0172 (Level I Partial 
Hospitalization (3 services)) and APC 0173 (Level II Partial 
Hospitalization (4 or more services)), and no historical hospital 
claims data would continue to map to APCs 0322 and 0323. We refer 
readers to section X.B. of this proposed rule for a complete discussion 
of the proposed CY 2009 partial hospitalization payment policy. The CY 
2009 proposed median costs for APCs 0322 and 0323 are approximately $88 
and $108, respectively. This new configuration for APC 0323 eliminates 
the longstanding 2 times violation for this APC, although the median 
cost remains approximately the same as it was for CYs 2007 and 2008.
    During its March 2008 APC Panel meeting, the APC Panel recommended 
that CMS restructure APC 0323 as described above, and that a similar 
restructuring be considered for APC 0322. For CY 2009, we are adopting 
the APC Panel's recommendation and, therefore, we are proposing to 
assign status indicator ``P'' to CPT codes 90816 through 90829.
5. Implant Injection for Vesicoureteral Reflex (APC 0162)
    Following publication of the CY 2008 OPPS/ASC final rule with 
comment period, several members of the public contacted us to express 
their concerns regarding decreased access to and inadequate payment for 
CPT code 52327 (Cystourethroscopy, including ureteral catheterization, 
with subureteric injection of implant material). The CY 2008 OPPS 
payment for this procedure, which is assigned to APC 0162 (Level III 
Cystourethroscopy and other Genitourinary Procedures), is approximately 
$1,578. This procedure is primarily performed on pediatric patients to 
correct an anatomical defect that causes urine to reflux back to the 
kidneys (vesicoureteral reflux disease or VUR). From the perspective of 
these stakeholders, the assignment of this procedure to APC 0162 
provides inadequate payment to cover the hospital's cost for the 
procedure, which they asserted requires expensive implant material. 
Specifically, they stated that the currently available CPT and Level II 
HCPCS coding lacks the specificity needed to properly account for the 
cost of the ureteral implant, resulting in inadequate payment for this 
procedure. In addition to receiving several letters on this subject, we 
also met with several stakeholders about the concerns of pediatric 
urologists regarding decreased access to and inadequate payment for 
performance of this procedure.
    At the March 2008 APC Panel meeting, a presenter requested that the 
APC Panel recommend reassignment of CPT code 52327 from APC 0162 to APC 
0385 (Level I Prosthetic Urological Procedures), which has a CY 2008 
payment rate of approximately $5,327. The presenter indicated that 
while CPT code 52327 is clinically similar to other procedures assigned 
to APC 0162, it is not similar in terms of resource utilization. The 
presenter stated that CPT code 52327 is the only procedure assigned to 
APC 0162 that uses a high cost implant, yet it is paid the same as 
procedures that do not. The APC Panel recommended that CMS consider 
reassigning CPT code 52327 to a more appropriate APC.
    Based upon our further review and analysis of the clinical 
characteristics and resource costs associated with the procedure, we 
are accepting the APC Panel's recommendation and proposing to reassign 
CPT code 52327 to APC 0163 (Level IV Cystourethroscopy and other 
Genitourinary Procedures) for CY 2009. The median cost of CPT code 
52327 is approximately $2,030 based on 246 single claims available for 
this proposed rule. The proposed median cost of APC 0163 is 
approximately $2,388, and the median costs of significant procedures in 
this APC range from approximately $1,951 to $2,526. A number of the 
procedures assigned to APC 0163 are clinically similar to CPT code 
52327, involving the use of a cystoscope and the implantation of 
devices. Based on our review of its clinical and resource 
characteristics, we believe the most appropriate CY 2009 APC assignment 
for CPT code 52327 is APC 0163. Therefore, for CY 2009, we are 
proposing to reassign CPT code 52327 from APC 0162 to APC 0163, with a 
proposed median cost of approximately $2,388.

IV. Proposed OPPS Payment for Devices

A. Pass-Through Payments for Devices

1. Expiration of Transitional Pass-Through Payments for Certain Devices
a. Background
    Section 1833(t)(6)(B)(iii) of the Act requires that, under the 
OPPS, a category of devices be eligible for transitional pass-through 
payments for at least 2, but not more than 3, years. This period begins 
with the first date on which a transitional pass-through payment is 
made for any medical device that is described by the category. We may 
establish a new device category for pass-through payment in any 
quarter. Under our established policy, we base the expiration dates for 
the category codes on the date on which a category was first eligible 
for pass-through payment. We propose and finalize the dates for 
expiration of pass-through payments for device categories as part of 
the OPPS annual update.
    Two currently eligible categories, C1821 (Interspinous process 
distraction device (implantable)) and L8690 (Auditory osseointegrated 
device, includes all internal and external components), were 
established for pass-through payment as of January 1, 2007. These two 
device categories will be eligible for pass-through payment for 2 years 
through December 31, 2008. In the CY 2008 OPPS/ASC final rule with 
comment period (72 FR 66751), we finalized our policy to expire these 
two categories from pass-through device payment after December 31, 
2008.
    We also have an established policy to package the costs of the 
devices no longer eligible for pass-through payments into the costs of 
the procedures with which the devices are reported in the claims data 
used to set the payment rates (67 FR 66763). Brachytherapy sources, 
which are now separately paid in accordance with section 1833(t)(2)(H) 
of the Act, are an exception to this established policy.
b. Proposed Policy
    For CY 2009, we are implementing the final decisions that we 
discussed in the CY 2008 OPPS/ASC final rule with comment period that 
finalizes the expiration date of pass-through status for device 
categories C1821 and L8690. Therefore, as of January 1, 2009, we will 
discontinue pass-through payment for device category codes C1821 and 
L8690. In accordance with our established policy, we will package the 
costs of the devices assigned to these device categories into the costs 
of the procedures with which the devices were

[[Page 41478]]

billed in CY 2007, the year of hospital claims data used for this OPPS 
update.
    We currently have no established device categories eligible for 
pass-through payment that are continuing into CY 2009. We continue to 
evaluate applications for devices pass-through payment on an ongoing 
basis. We may establish a new device category in any quarter, and we 
will advise the public of our decision to establish a new device 
category in a subsequent quarter in CY 2008 through the transmittal 
that implements the OPPS update for the applicable quarter. We would 
then propose an expiration date for such new categories in future OPPS 
annual updates.
2. Proposed Provisions for Reducing Transitional Pass-Through Payments 
To Offset Costs Packaged Into APC Groups
a. Background
    We have an established policy to estimate the portion of each APC 
payment rate that could reasonably be attributed to the cost of the 
associated devices that are eligible for pass-through payments (66 FR 
59904). We deduct from the pass-through payments for identified device 
categories eligible for pass-through payments an amount that reflects 
the portion of the APC payment amount that we determine is associated 
with the cost of the device, defined as the APC offset amount, as 
required by section 1833(t)(6)(D)(ii) of the Act. We have consistently 
employed an established methodology to estimate the portion of each APC 
payment rate that could reasonably be attributed to the cost of an 
associated device eligible for pass-through payment, using claims data 
from the period used for the most recent recalibration of the APC rates 
(72 FR 66751 through 66752). We establish and update the applicable APC 
offset amounts for eligible pass-through device categories through the 
transmittals that implement the quarterly OPPS updates.
b. Proposed Policy
    We are proposing to continue our established policies for 
calculating and setting the APC offset amounts for each device category 
eligible for pass-through payment. We are also proposing to continue to 
review each new device category on a case-by-case basis, to determine 
whether device costs associated with the new category are packaged into 
the existing APC structure. If device costs packaged into the existing 
APC structure are associated with the new category, we would deduct the 
APC offset amount from the pass-through payment for the device 
category.

B. Proposed Adjustment to OPPS Payment for Partial or Full Credit 
Devices

1. Background
    In recent years there have been several field actions and recalls 
as a result of implantable device failures. In many of these cases, the 
manufacturers have offered devices without cost to the hospital or with 
credit for the device being replaced if the patient required a more 
expensive device. In order to ensure that payment rates for procedures 
involving devices reflect only the full costs of those devices, our 
standard rate-setting methodology for device-dependent APCs uses only 
claims that contain the correct device code for the procedure, do not 
contain token charges, and do contain the ``FB'' modifier signifying 
that the device was furnished without cost or with a full credit.
    To ensure equitable payment when the hospital receives a device 
without cost or with full credit, in CY 2007 we implemented a policy to 
reduce the payment for specified device-dependent APCs by the estimated 
portion of the APC payment attributable to device costs (that is, the 
device offset) when the hospital receives a specified device at no cost 
or with full credit. Hospitals are instructed to report such full 
credit/no cost cases using the ``FB'' modifier on the line with the 
procedure code in which the free device is used. In cases in which the 
device is furnished without cost, the hospital is to report a token 
device charge of less than $1.01. In cases in which the device being 
inserted is an upgrade (either of the same type of device or to a 
different type of device) with a full credit for the device being 
replaced, the hospital is to report as the device charge the difference 
between its usual charge for the replacement device being implanted and 
its usual charge for the replaced device for which it received full 
credit. In CY 2008, we expanded this payment adjustment policy to 
include cases in which hospitals receive partial credits of 50 percent 
or more of the cost of a specified device. Hospitals are instructed to 
append the ``FC'' modifier to the procedure code that reports the 
service provided to furnish the device when they receive a partial 
credit of 50 percent or more of the cost of the new device. In CY 2008, 
OPPS payment for the implantation procedure is reduced by 100 percent 
of the device offset for full credit/no cost cases when both a 
specified device code is present on the claim and the procedure code 
maps to a specified APC. Payment for the implantation procedure is 
reduced by 50 percent of the device offset for partial credit cases 
when both a specified device code is present on the claim and the 
procedure code maps to a specified APC. Beneficiary copayment is based 
on the reduced payment amount when either the ``FB'' or ``FC'' modifier 
is billed and the procedure and device codes appear on the lists of 
procedures and devices to which this policy applies. We refer readers 
to the CY 2008 OPPS/ASC final rule with comment period for more 
background information on the ``FB'' and ``FC'' payment adjustment 
policy (72 FR 66743 through 66749).
2. Proposed APCs and Devices Subject to the Adjustment Policy
    For CY 2009, we are proposing to continue the policy of reducing 
OPPS payment by 100 percent of the device offset amount when a hospital 
furnishes a specified device without cost or with a full credit and by 
50 percent of the device offset amount when the hospital receives 
partial credit in the amount of 50 percent or more of the cost for the 
device. Because the APC payments for the related services are 
specifically constructed to ensure that the full cost of the device is 
included in the payment, we continue to believe that it is appropriate 
to reduce the APC payment in cases in which the hospital receives a 
device without cost, with full credit, or with partial credit, in order 
to provide equitable payment in these cases (we refer readers to 
section II.A.2.d.(1) of this proposed rule for a description of our 
standard ratesetting methodology for device-dependent APCs). Moreover, 
the payment for these devices comprises a large part of the APC payment 
on which the beneficiary copayment is based, and we continue to believe 
it is equitable that the beneficiary cost sharing reflect the reduced 
costs in these cases.
    We also are proposing to continue using the three criteria 
established in the CY 2007 OPPS/ASC final rule with comment period for 
determining the APCs to which this policy applies (71 FR 68072 through 
68077). Specifically, (1) all procedures assigned to the selected APCs 
must require implantable devices that would be reported if device 
insertion procedures were performed, (2) the required devices must be 
surgically inserted or implanted devices that remain in the patient's 
body after the conclusion of the procedures (at least temporarily), and 
(3) the device offset amount must be significant, which for purposes of 
this policy is defined as exceeding 40 percent of the APC cost. We also 
are proposing to continue to restrict the devices to which

[[Page 41479]]

the APC payment adjustment would apply to a specific set of costly 
devices to ensure that the adjustment would not be triggered by the 
implantation of an inexpensive device whose cost would not constitute a 
significant proportion of the total payment rate for an APC. We 
continue to believe that these criteria are appropriate because free 
devices and credits are likely to be associated with particular cases 
only when the device must be reported on the claim and is of a type 
that is implanted and remains in the body when the beneficiary leaves 
the hospital. We believe that the reduction in payment is appropriate 
only when the cost of the device is a significant part of the total 
cost of the APC into which the device cost is packaged, and that the 40 
percent threshold is a reasonable definition of a significant cost.
    We examined the offset amounts calculated from the CY 2009 proposed 
rule data and the clinical characteristics of APCs to determine whether 
the APCs to which the full credit/no cost and partial credit device 
adjustment policy applies in CY 2008 continue to meet the criteria for 
CY 2009, and to determine whether other APCs to which the policy does 
not apply in CY 2008 would meet the criteria for CY 2009. Table 18 
below lists the proposed APCs to which the payment reduction policy for 
full credit/no cost and partial credit devices would apply in CY 2009 
and displays the proposed payment reduction percentages for both full 
credit/no cost and partial credit circumstances. Table 19 lists the 
proposed devices to which this policy would apply in CY 2009. As 
reflected in the tables, we are proposing to add APC 0425 (Level II 
Arthroplasty or Implantation with Prosthesis) and APC 0648 (Level IV 
Breast Surgery) and their associated devices that would not otherwise 
be on the device list for CY 2009 because the device offset percentages 
for these two APCs are above the 40 percent threshold based on the CY 
2007 claims data available for the proposed rule. We also are proposing 
to remove APC 0106 (Insertion/Replacement of Pacemaker Leads and/or 
Electrodes) and device HCPCS codes associated only with procedures 
assigned to this APC because the proposed device offset percentage for 
that APC is less than 40 percent. We will update the lists of APCs and 
devices to which the full credit/no cost and partial credit device 
adjustment policy would apply in CY 2009 based on the final CY 2007 
claims data available for the CY 2009 OPPS/ASC final rule with comment 
period.

   Table 18.--Proposed APC Adjustments in Cases of Devices Furnished at No Cost or With Full or Partial Credit
----------------------------------------------------------------------------------------------------------------
                                                                                        Proposed CY  Proposed CY
                                                                                            2009         2009
                                                                                         reduction    reduction
                APC                           SI                    APC title             for full   for partial
                                                                                        credit case  credit case
                                                                                         (percent)    (percent)
----------------------------------------------------------------------------------------------------------------
0039...............................  S                     Level I Implantation of               83           42
                                                            Neurostimulator.
0040...............................  S                     Percutaneous Implantation             56           28
                                                            of Neurostimulator
                                                            Electrodes, Excluding
                                                            Cranial Nerve.
0061...............................  S                     Laminectomy, Laparoscopy,             61           30
                                                            or Incision for
                                                            Implantation of
                                                            Neurostimulator
                                                            Electrodes, Excluding
                                                            Cranial Nerve.
0089...............................  T                     Insertion/Replacement of              72           36
                                                            Permanent Pacemaker and
                                                            Electrodes.
0090...............................  T                     Insertion/Replacement of              73           36
                                                            Pacemaker Pulse Generator.
0107...............................  T                     Insertion of Cardioverter-            89           44
                                                            Defibrillator.
0108...............................  T                     Insertion/Replacement/                88           44
                                                            Repair of Cardioverter-
                                                            Defibrillator Leads.
0222...............................  S                     Level II Implantation of              84           42
                                                            Neurostimulator.
0225...............................  S                     Implantation of                       61           30
                                                            Neurostimulator
                                                            Electrodes, Cranial Nerve.
0227...............................  T                     Implantation of Drug                  81           40
                                                            Infusion Device.
0259...............................  T                     Level VII ENT Procedures...           83           42
0315...............................  S                     Level III Implantation of             88           44
                                                            Neurostimulator.
0385...............................  S                     Level I Prosthetic                    57           29
                                                            Urological Procedures.
0386...............................  S                     Level II Prosthetic                   64           32
                                                            Urological Procedures.
0418...............................  T                     Insertion of Left                     70           35
                                                            Ventricular Pacing Elect.
0425...............................  T                     Level II Arthroplasty or              46           23
                                                            Implantation with
                                                            Prosthesis.
0648...............................  T                     Level IV Breast Surgery....           41           21
0654...............................  T                     Insertion/Replacement of a            77           38
                                                            permanent dual chamber
                                                            pacemaker.
0655...............................  T                     Insertion/Replacement/                75           37
                                                            Conversion of a permanent
                                                            dual chamber pacemaker.
0680...............................  S                     Insertion of Patient                  71           35
                                                            Activated Event Recorders.
0681...............................  T                     Knee Arthroplasty..........           74           37
----------------------------------------------------------------------------------------------------------------


Table 19.--Proposed Devices for Which the ``FB'' or ``FC'' Modifier Must
  Be Reported With the Procedure Code When Furnished at No Cost or With
                         Full or Partial Credit
------------------------------------------------------------------------
         Device HCPCS code                    Short descriptor
------------------------------------------------------------------------
C1721.............................  AICD, dual chamber.
C1722.............................  AICD, single chamber.
C1728.............................  Cath, brachytx seed adm.
C1764.............................  Event recorder, cardiac.
C1767.............................  Generator, neurostim, imp.
C1771.............................  Rep dev, urinary, w/sling.
C1772.............................  Infusion pump, programmable.
C1776.............................  Joint device (implantable).
C1778.............................  Lead, neurostimulator.

[[Page 41480]]

 
C1779.............................  Lead, pmkr, transvenous VDD.
C1785.............................  Pmkr, dual, rate-resp.
C1786.............................  Pmkr, single, rate-resp.
C1789.............................  Prosthesis, breast, imp.
C1813.............................  Prosthesis, penile, inflatab.
C1815.............................  Pros, urinary sph, imp.
C1820.............................  Generator, neuro rechg bat sys.
C1881.............................  Dialysis access system.
C1882.............................  AICD, other than sing/dual.
C1891.............................  Infusion pump, non-prog, perm.
C1897.............................  Lead, neurostim, test kit.
C1898.............................  Lead, pmkr, other than trans.
C1900.............................  Lead coronary venous.
C2619.............................  Pmkr, dual, non rate-resp.
C2620.............................  Pmkr, single, non rate-resp.
C2621.............................  Pmkr, other than sing/dual.
C2622.............................  Prosthesis, penile, non-inf.
C2626.............................  Infusion pump, non-prog, temp.
C2631.............................  Rep dev, urinary, w/o sling.
L8600.............................  Implant breast silicone/eq.
L8614.............................  Cochlear device/system.
L8690.............................  Aud osseo dev, int/ext comp.
------------------------------------------------------------------------

V. Proposed OPPS Payment Changes for Drugs, Biologicals, and 
Radiopharmaceuticals

A. Proposed OPPS Transitional Pass-Through Payment for Additional Costs 
of Drugs, Biologicals, and Radiopharmaceuticals

1. Background
    Section 1833(t)(6) of the Act provides for temporary additional 
payments or ``transitional pass-through payments'' for certain drugs 
and biological agents. As originally enacted by the Medicare, Medicaid, 
and SCHIP Balanced Budget Refinement Act (BBRA) of 1999 (Pub. L. 106-
113), this provision requires the Secretary to make additional payments 
to hospitals for current orphan drugs, as designated under section 526 
of the Federal Food, Drug, and Cosmetic Act (Pub. L. 107-186); current 
drugs and biological agents and brachytherapy sources used for the 
treatment of cancer; and current radiopharmaceutical drugs and 
biological products. For those drugs and biological agents referred to 
as ``current,'' the transitional pass-through payment began on the 
first date the hospital OPPS was implemented (before enactment of the 
Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act 
(BIPA) of 2000 (Pub. L. 106-554), on December 21, 2000).
    Transitional pass-through payments are also provided for certain 
``new'' drugs and biological agents that were not being paid for as an 
HOPD service as of December 31, 1996, and whose cost is ``not 
insignificant'' in relation to the OPPS payments for the procedures or 
services associated with the new drug or biological. For pass-through 
payment purposes, radiopharmaceuticals are included as ``drugs.'' Under 
the statute, transitional pass-through payments can be made for at 
least 2 years but not more than 3 years. Proposed CY 2009 pass-through 
drugs and biologicals and their APCs are assigned status indicator 
``G'' as indicated in Addenda A and B to this proposed rule.
    Section 1833(t)(6)(D)(i) of the Act specifies that the pass-through 
payment amount, in the case of a drug or biological, is the amount by 
which the amount determined under section 1842(o) of the Act (or, if 
the drug or biological is covered under a competitive acquisition 
contract under section 1847B of the Act, an amount determined by the 
Secretary equal to the average price for the drug or biological for all 
competitive acquisition areas and year established under such section 
as calculated and adjusted by the Secretary) for the drug or biological 
exceeds the portion of the otherwise applicable Medicare OPD fee 
schedule that the Secretary determines is associated with the drug or 
biological. This methodology for determining the pass-through payment 
amount is set forth in Sec.  419.64 of the regulations, which specifies 
that the pass-through payment equals the amount determined under 
section 1842(o) of the Act minus the portion of the APC payment that 
CMS determines is associated with the drug or biological. Section 1847A 
of the Act, as added by section 303(c) of Pub. L. 108-173, establishes 
the use of the average sales price (ASP) methodology as the basis for 
payment for drugs and biologicals described in section 1842(o)(1)(C) of 
the Act that are furnished on or after January 1, 2005. The ASP 
methodology, as applied under the OPPS, uses several sources of data as 
a basis for payment, including the ASP, wholesale acquisition cost 
(WAC), and average wholesale price (AWP). In this proposed rule, the 
term ``ASP methodology'' and ``ASP-based'' are inclusive of all data 
sources and methodologies described therein. Additional information on 
the ASP methodology can be found on the CMS Web site at: http://www.cms.hhs.gov/McrPartBDrugAvgSalesPrice/01_overview.asp#TopOfPage.
    As noted above, section 1833(t)(6)(D)(i) of the Act also states 
that if a drug or biological is covered under a competitive acquisition 
contract under section 1847B of the Act, the payment rate is equal to 
the average price for the drug or biological for all competitive 
acquisition areas and the year established as calculated and adjusted 
by the Secretary. Section 1847B of the Act, as added by section 303(d) 
of Pub. L. 108-173, establishes the payment methodology for Medicare 
Part B drugs and biologicals under the competitive acquisition program 
(CAP). The Part B drug CAP was implemented July 1, 2006, and includes 
approximately 190 of the most common Part B drugs provided in the 
physician's office setting. The list of drugs and biologicals covered 
under the Part B drug CAP, their associated payment rates, and the Part 
B drug CAP pricing methodology can be found on the CMS Web site at: 
http://www.cms.hhs.gov/CompetitiveAcquisforBios.
    For CYs 2005, 2006, and 2007, we estimated the OPPS pass-through 
payment amount for drugs and biologicals to be zero based on our 
interpretation that the ``otherwise applicable Medicare OPD fee 
schedule'' amount was equivalent to the amount to be paid for pass-
through drugs and biologicals under section 1842(o) of the Act (or 
section 1847B of the Act, if the drug or biological is covered under a 
competitive acquisition contract). We concluded for those years that 
the resulting difference between these two rates would be zero. For CY 
2008, we estimated the OPPS pass-through payment amount for drugs and 
biologicals to be $6.6 million. Our proposed OPPS pass-through payment 
estimate for drugs and biologicals in CY 2009 is $8.9 million, which is 
discussed in section VI.B. of this proposed rule.
    The pass-through application and review process for drugs and 
biologicals is explained on the CMS Web site at: http://www.cms.hhs.gov/HospitalOutpatientPPS/04_passthrough_payment.asp.
2. Proposed Drugs and Biologicals With Expiring Pass-Through Status in 
CY 2008
    Section 1833(t)(6)(C)(i) of the Act specifies that the duration of 
transitional pass-through payments for drugs and biologicals must be no 
less than 2 years and no longer than 3 years. We are proposing that the 
pass-through status of 15 drugs and biologicals expire on December 31, 
2008, as listed in Table 20 below. Our standard methodology for 
providing payment for drugs and biologicals with expiring pass-through 
status in an upcoming calendar year is to determine the product's 
estimated per day cost and compare it with the OPPS drug packaging 
threshold for that

[[Page 41481]]

calendar year (proposed at $60 for CY 2009). If the estimated per day 
cost is less than or equal to the applicable OPPS drug packaging 
threshold, we would package payment for the drug or biological into the 
payment for the associated procedure in the upcoming calendar year. If 
the estimated per day cost is greater than the OPPS drug packaging 
threshold, we would provide separate payment at the applicable relative 
ASP-based payment amount (proposed at ASP + 4 percent for CY 2009). For 
drugs and biologicals that are currently covered under the CAP, we are 
proposing to use the payment rates calculated under that program that 
are in effect as of April 1, 2008, for purposes of packaging decisions 
and for Addenda A and B to this proposed rule. We are proposing to 
update these payment rates for purposes of the CY 2009 OPPS/ASC final 
rule with comment period.
    Three of the products with expiring pass-through status for CY 2009 
are biologicals that are solely surgically implanted according to their 
Food and Drug Administration-approved indications. These products are 
described by HCPCS codes C9352 (Microporous collagen implantable tube 
(Neuragen Nerve Guide), per centimeter length); C9353 (Microporous 
collagen implantable slit tube (NeuraWrap Nerve Protector), per 
centimeter length); and J7348 (Dermal (substitute) tissue of nonhuman 
origin, with or without other bioengineered or processed elements, 
without metabolically active elements (Tissuemend), per square 
centimeter).
    The methodology of calculating a product's estimated per day cost 
and comparing it to the annual OPPS drug packaging threshold has been 
used to determine the packaging status of all drugs and biologicals 
under the OPPS (except for our exemption for 5HT3 anti-emetics), 
including injectable products paid for under the OPPS as biologicals 
(such as intraarticular sodium hyaluronate products). However, we 
believe that the three products described above with expiring pass-
through status for CY 2009 differ from other biologicals paid under the 
OPPS in that they specifically function as surgically implanted 
devices. Both implantable devices under the OPPS and these three 
biologicals with expiring pass-through status are always surgically 
inserted or implanted (including through a surgical incision or a 
natural orifice). Furthermore, in some cases these implantable 
biologicals can substitute for implantable nonbiologic devices (such as 
for synthetic nerve conduits or synthetic mesh used in tendon repair). 
To date, for other nonpass-through biologicals paid under the OPPS 
which may sometimes be used as implantable devices, we have instructed 
hospitals, via Transmittal 1336, Change Request 5718, dated September 
14, 2007, to not separately bill for the HCPCS codes for the products 
when using these items as implantable devices (including as a scaffold 
or an alternative to human or nonhuman connective tissue or mesh used 
in a graft) during surgical procedures. In such cases, we consider 
payment for the biological used as an implantable device in a specific 
clinical case to be included in payment for the surgical procedure.
    As we established in the CY 2003 OPPS final rule with comment 
period (67 FR 66763), when the pass-through payment period for an 
implantable device ends, it is standard OPPS policy to package payment 
for the implantable device into payment for its associated surgical 
procedure. We consider nonpass-through implantable devices to be 
integral and supportive items and services for which packaged payment 
is most appropriate. According to our regulations at Sec.  419.2(b), as 
a prospective payment system, the OPPS establishes a national payment 
rate that includes operating and capital-related costs that are 
directly related and integral to performing a procedure or furnishing a 
service on an outpatient basis including, but not limited to, 
implantable prosthetics, implantable durable medical equipment, and 
medical and surgical supplies. Therefore, when the period of device 
pass-through payment ends, we package the costs of the devices no 
longer eligible for pass-through payment into the costs of the 
procedures with which the devices were reported in the claims data used 
to set the payment rates for the upcoming calendar year. We believe 
this policy to package payment for implantable devices that are 
integral to the performance of separately paid procedures should also 
apply to payment for implantable biologicals without pass-through 
status, when those biologicals function as implantable devices. As 
stated above, implantable biologicals may be used in place of other 
implantable nonbiologic devices whose costs are already accounted for 
in the associated procedural APC payments for surgical procedures. If 
we were to provide separate payment for these implantable biologicals 
without pass-through status, we would potentially be providing 
duplicate device payment, both through the packaged nonbiologic device 
cost included in the surgical procedure's payment and separate 
biological payment. We see no basis for treating implantable biological 
and nonbiologic devices without pass-through status differently for 
OPPS payment purposes, because both are integral to and supportive of 
the separately paid surgical procedures in which either may be used. 
Therefore, for CY 2009, we are proposing to package payment for any 
biological without pass-through status that is surgically inserted or 
implanted (through a surgical incision or a natural orifice) into the 
payment for the associated surgical procedure. As a result of this 
proposed methodology, HCPCS codes C9352, C9353 and J7348 would be 
packaged and assigned status indicator ``N'' for CY 2009. In addition, 
any new biologicals without pass-through status that are surgically 
inserted or implanted (through a surgical incision or a natural 
orifice) would be packaged beginning in CY 2009. Moreover, for nonpass-
through biologicals which may sometimes be used as implantable devices, 
we would continue to instruct hospitals to not bill separately for the 
HCPCS codes for the products when used as implantable devices. This 
reporting would ensure that the costs of these products that may be, 
but are not always, used as implanted biologicals are appropriately 
packaged into payment for the associated implantation procedures.

     Table 20.--Proposed Drugs and Biologicals for Which Pass-Through Status Would Expire December 31, 2008
----------------------------------------------------------------------------------------------------------------
                                                                                   Proposed CY 2009  Proposed CY
        CY 2009 HCPCS code          CY 2008 HCPCS code     CY 2008 descriptor             SI           2009 APC
----------------------------------------------------------------------------------------------------------------
C9352............................  C9352..............  Neuragen nerve guide,     N                  ...........
                                                         per cm.
C9353............................  C9353..............  Neurawrap nerve           N                  ...........
                                                         protector, cm.
J0129............................  J0129*.............  Abatacept injection.....  K                         9230

[[Page 41482]]

 
J0348............................  J0348..............  Anadulafungin injection.  K                         0760
J0894............................  J0894*.............  Decitabine injection....  K                         9231
J1740............................  J1740*.............  Ibandronate sodium        K                         9229
                                                         injection.
J1743............................  J1743..............  Idursulfase injection...  K                         9232
J2248............................  J2248..............  Micafungin sodium         K                         9227
                                                         injection.
J2323............................  J2323*.............  Natalizumab injection...  K                         9126
J2778............................  J2778*.............  Ranibizumab injection...  K                         9233
J3243............................  J3243..............  Tigecycline injection...  K                         9228
J3473............................  J3473..............  Hyaluronidase             N                  ...........
                                                         recombinant.
J7348............................  J7348..............  Tissuemend tissue.......  N                  ...........
J7349............................  J7349..............  Primatrix tissue........  K                         1141
J9303............................  J9303..............  Panitumumab injection...  K                         9235
----------------------------------------------------------------------------------------------------------------
* Indicates that the drug was paid at a rate determined by the Part B drug CAP methodology while identified as
  pass-through under the OPPS.

3. Proposed Drugs, Biologicals, and Radiopharmaceuticals With New or 
Continuing Pass-Through Status in CY 2009
    We are proposing to continue pass-through status in CY 2009 for 16 
drugs and biologicals. These items, which were approved for pass-
through status between April 1, 2007 and July 1, 2008, are listed in 
Table 21. The APCs and HCPCS codes for these proposed drugs and 
biologicals listed in Table 21 are assigned status indicator ``G'' in 
Addenda A and B to this proposed rule.
    Section 1833(t)(6)(D)(i) of the Act sets the amount of pass-through 
payment for pass-through drugs and biologicals (the pass-through 
payment amount) as the difference between the amount authorized under 
section 1842(o) of the Act (or, if the drug or biological is covered 
under a CAP under section 1847B of the Act, an amount determined by the 
Secretary equal to the average price for the drug or biological for all 
competitive acquisition areas and year established under such section 
as calculated and adjusted by the Secretary) and the portion of the 
otherwise applicable fee schedule amount that the Secretary determines 
is associated with the drug or biological. Given our CY 2009, proposal 
to provide payment for nonpass-through separately payable drugs and 
biologicals at ASP+4 percent as described further in section V.B.3. of 
this proposed rule, we believe it would be consistent with the statute 
to provide payment for drugs and biologicals with pass-through status 
that are not part of the Part B drug CAP at a rate of ASP+6 percent, 
the amount authorized under section 1842(o) of the Act, rather than 
ASP+4 percent that would be the otherwise applicable fee schedule 
portion associated with the drug or biological. The difference between 
ASP+4 percent and ASP+6 percent, therefore, would be the CY 2009 pass-
through payment amount for these drugs and biologicals. Thus, for CY 
2009, we are proposing to pay for pass-through drugs and biologicals 
that are not part of the Part B drug CAP at ASP+6 percent, equivalent 
to the rate these drugs and biologicals would receive in the 
physician's office setting in CY 2009.
    Section 1842(o) of the Act also states that if a drug or biological 
is covered under the CAP under section 1847B of the Act, the payment 
rate is equal to the average price for the drug or biological for all 
competitive acquisition areas and year established as calculated and 
adjusted by the Secretary. For CY 2009, we are proposing to provide 
payment for drugs and biologicals with pass-through status that are 
offered under the Part B drug CAP at a rate equal to the Part B drug 
CAP rate. Therefore, considering ASP+4 percent to be the otherwise 
applicable fee schedule portion associated with these drugs or 
biologicals, the difference between the Part B drug CAP rate and ASP+4 
percent would be the pass-through payment amount for these drugs and 
biologicals. HCPCS codes that are offered under the CAP program as of 
April 1, 2008 are identified in Table 21 below with an asterisk.
    In section V.B.5. of this proposed rule, we discuss our proposal to 
make separate payment in CY 2009 for new drugs and biologicals with a 
HCPCS code but without hospital claims data, consistent with the 
provisions of section 1842(o) of the Act, at a rate that is equivalent 
to the payment they would receive in a physician's office setting (or 
under section 1847B of the Act, if the drug or biological is covered 
under a competitive acquisition contract) only if we have received a 
pass-through application for the item and pass-through status has been 
subsequently granted. Otherwise, we are proposing to pay ASP+4 percent 
for these products in CY 2009.
    In addition, we are proposing to update pass-through payment rates 
on a quarterly basis on our Web site during CY 2009 if later quarter 
ASP submissions (or more recent WAC or AWP information, as applicable) 
indicate that adjustments to the payment rates for these pass-through 
drugs and biologicals are necessary. If a drug or biological that has 
been granted pass-through status for CY 2009 becomes covered under the 
Part B drug CAP, we are proposing to make the appropriate adjustments 
to the payment rates for these drugs and biologicals on a quarterly 
basis.
    In CY 2009, we are proposing to provide payment for diagnostic and 
therapeutic radiopharmaceuticals that are granted pass-through status 
based on the ASP methodology. As stated above, for purposes of pass-
through payment, we consider radiopharmaceuticals to be drugs under the 
OPPS and, therefore, if a diagnostic or therapeutic radiopharmaceutical 
receives pass-through status during CY 2009, we are proposing to follow 
the standard ASP methodology to determine its pass-through payment rate 
under the OPPS. If ASP information is available, the payment rate would 
be equivalent to the payment rate that drugs receive under section 
1842(o) of the Act, that is, ASP+6 percent. If ASP data are not 
available for a radiopharmaceutical, we are proposing to base the pass-
through payment on the product's WAC. If WAC information is also not 
available, we are proposing to provide payment for the pass-through 
radiopharmaceutical at 95 percent of its most recent AWP.

[[Page 41483]]



            Table 21.--Proposed Drugs and Biologicals With Continuing Pass-Through Status in CY 2009
----------------------------------------------------------------------------------------------------------------
                                                                                   Proposed CY 2009  Proposed CY
        CY 2008 HCPCS code          CY 2009 HCPCS code      Short descriptor              SI           2009 APC
----------------------------------------------------------------------------------------------------------------
C9238............................  C9238..............  Inj, levetiracetam......  G                         9238
C9239............................  C9239..............  Inj, temsirolimus.......  G                         1168
C9240*...........................  C9240..............  Injection, ixabepilone..  G                         9240
C9241............................  C9241..............  Injection, doripenem....  G                         9241
C9242............................  C9242..............  Injection, fosaprepitant  G                         9242
C9354............................  C9354..............  Veritas collagen matrix,  G                         9354
                                                         cm2.
C9355............................  C9355..............  Neuromatrix nerve cuff,   G                         9355
                                                         cm.
C9356............................  C9356..............  TenoGlide Tendon Prot,    G                         9356
                                                         cm2.
C9357............................  C9357..............  Flowable Wound Matrix, 1  G                         9357
                                                         cc.
C9358............................  C9358..............  SurgiMend, 0.5 cm2......  G                         9358
J1300............................  J1300..............  Eculizumab injection....  G                         9236
J1571............................  J1571..............  HepaGam B IM Injection..  G                         0946
J1573............................  J1573..............  Hepagam B intravenous,    G                         9356
                                                         inj.
J3488*...........................  J3488..............  Reclast injection.......  G                         0951
J9226............................  J9226..............  Supprelin LA implant....  G                         1142
J9261............................  J9261..............  Nelarabine injection....  G                         0825
----------------------------------------------------------------------------------------------------------------
* Indicates that the drug was paid at a rate determined by the Part B drug CAP methodology while identified as
  pass-through under the OPPS.

4. Proposed Reduction of Transitional Pass-Through Payments for 
Diagnostic Radiopharmaceuticals To Offset Costs Packaged Into APC 
Groups
    Prior to CY 2008, certain diagnostic radiopharmaceuticals were paid 
separately under the OPPS if their mean per day costs were greater than 
the applicable year's drug packaging threshold. In CY 2008 (72 FR 
66768), we packaged payment for all nonpass-through diagnostic 
radiopharmaceuticals as ancillary and supportive items and services. 
Specifically, we packaged payment for all nonpass-through diagnostic 
radiopharmaceuticals, including those products that would not otherwise 
have been packaged based solely on the CY 2008 drug packaging 
threshold, into payment for their associated nuclear medicine 
procedures. We are proposing to continue to package payment in CY 2009 
for all nonpass-through diagnostic radiopharmaceuticals as discussed in 
section V.B.2.b. of this proposed rule.
    As previously noted, for OPPS pass-through payment purposes, 
radiopharmaceuticals are considered to be ``drugs.'' As described 
above, section 1833(t)(6)(D)(i) of the Act specifies that the 
transitional pass-through payment amount for pass-through drugs and 
biologicals is the difference between the amount paid under section 
1842(o) or the Part B drug CAP rate and the otherwise applicable OPPS 
payment amount. Furthermore, transitional pass-through payments for 
drugs, biologicals, and radiopharmaceuticals under the OPPS are made 
for a period of at least 2 but not more than 3 years. There are 
currently no radiopharmaceuticals with pass-through status under the 
OPPS. For new pass-through radiopharmaceuticals with no ASP information 
or CAP rate, our proposed CY 2009 payment methodology is discussed in 
section V.A.3. of this proposed rule. According to this proposal and 
consistent with our CY 2008 final policy (72 FR 66755), new pass-
through diagnostic radiopharmaceuticals without ASP information would 
be paid based on WAC or, if WAC is not available, based on 95 percent 
of the product's most recently published AWP.
    As described in section IV.A.2.a. of this proposed rule regarding 
pass-through device payment, we have consistently employed an 
established methodology to estimate the portion of each APC payment 
rate that could reasonably be attributed to the cost of an associated 
device eligible for pass-through payment (the APC device offset amount) 
to avoid duplicate payment for the device portion of a procedure. This 
calculation uses calendar year claims data from the period used for the 
most recent recalibration of the APC payment rates (72 FR 66751 through 
66752). We evaluate new pass-through device categories individually to 
determine if there are device costs packaged into the associated 
procedural APC payment rate from predecessor devices that resemble the 
new pass-through device category, suggesting that a device offset 
amount would be appropriate. On an ongoing basis, through the quarterly 
transmittals that implement the quarterly OPPS updates, we establish 
the applicable APC device offset amount, if any, in the same quarter as 
the eligible pass-through device category is first established. We 
update device offset amounts annually for eligible pass-through device 
categories when we recalibrate APC payment rates. We note that we 
initially implemented the device offset policy in CY 2001 only for 
pacemakers and neurostimulators but subsequently expanded the offset to 
other pass-through devices with costs from predecessor devices packaged 
into the existing APC structure beginning in CY 2002. Since April 2002, 
we have applied a uniform reduction, the APC device offset amount for 
the associated procedure, to payment for each of the devices receiving 
transitional pass-through payments furnished on or after April 1, 2002, 
and for which we have determined that the pass-through device resembles 
packaged predecessor devices.
    Because of our proposed CY 2009 packaging policy for diagnostic 
radiopharmaceuticals, we believe that a payment offset policy, as 
discussed previously for implantable devices, is now appropriate for 
diagnostic radiopharmaceuticals approved for pass-through payment 
status. An APC radiopharmaceutical offset amount would allow us to 
avoid duplicate payment for the diagnostic radiopharmaceutical portion 
of a nuclear medicine procedure by providing a diagnostic 
radiopharmaceutical pass-through payment that represents the difference 
between the payment rate for the diagnostic radiopharmaceutical and the 
packaged radiopharmaceutical cost included in the procedural APC 
payment for the nuclear medicine procedure. The otherwise applicable 
OPPS payment amount for the diagnostic radiopharmaceutical would 
roughly be the median cost of the predecessor diagnostic 
radiopharmaceuticals that is packaged into the payment for the nuclear

[[Page 41484]]

medicine procedure. This APC radiopharmaceutical offset amount, similar 
to the longstanding device offset policy for payment of implantable 
devices with pass-through status, would be calculated based on a 
percentage of the APC payment for a nuclear medicine procedure 
attributable to the costs of packaged diagnostic radiopharmaceuticals, 
as reflected in the most recent complete year of hospital outpatient 
claims data.
    Beginning in CY 2009, we are proposing to review each new pass-
through diagnostic radiopharmaceutical on a case-by-case basis, to 
determine whether radiopharmaceutical costs associated with 
predecessors of the new product are packaged into the existing APC 
structure for those nuclear medicine procedures with which the new 
radiopharmaceutical would be used. This proposed methodology is 
consistent with our current policy for new device categories. Because 
of the nature of diagnostic radiopharmaceuticals and the small number 
of nuclear medicine procedures to which they are typically closely 
linked, we believe that we would usually find costs for predecessor 
diagnostic radiopharmaceuticals packaged into the existing APC payment 
for the nuclear medicine procedures associated with the new product. In 
these cases, we would deduct the uniform, applicable APC 
radiopharmaceutical offset amount for the associated nuclear medicine 
procedure, calculated as described below, from the pass-through payment 
for the diagnostic radiopharmaceutical. We are proposing to establish 
the pertinent APC radiopharmaceutical offset amounts for newly eligible 
pass-through diagnostic radiopharmaceuticals quarterly through the 
transmittals that implement the quarterly OPPS updates and update these 
offset amounts annually, as needed.
    Not all CY 2007 OPPS claims for nuclear medicine procedures include 
radiolabeled products because radiopharmaceutical claims processing 
edits were implemented beginning in CY 2008. These claims processing 
edits require that a radiolabeled product be included on all claims for 
nuclear medicine procedures to ensure that we capture the full costs of 
the packaged diagnostic radiopharmaceuticals used for the procedures in 
future ratesetting. Because our most recent claims data do not yet 
reflect the results of these edits, we are proposing to use only those 
claims that pass the radiopharmaceutical edits to set rates for nuclear 
medicine procedures in CY 2009 as discussed in section II.A.2.d.(5) of 
this proposed rule. We are proposing to use the same claims to 
calculate the APC radiopharmaceutical offset amounts. Specifically, we 
would calculate the APC radiopharmaceutical offset fraction as: 1 minus 
(the cost from single procedure claims in the APC that pass the 
radiopharmaceutical edits after removing the costs for packaged 
diagnostic radiopharmaceuticals divided by the cost from single 
procedure claims in the APC that pass the radiopharmaceutical edits). 
To determine the actual APC offset amount, we would then multiply the 
resulting fraction by the CY 2009 APC payment amount for the procedure 
with which the new diagnostic radiopharmaceutical is used and, 
accordingly, reduce the transitional pass-through payment for the 
diagnostic radiopharmaceutical with pass-through status by this amount.
    Table 22 displays the APCs to which nuclear medicine procedures are 
proposed for assignment in CY 2009 and for which we would expect that 
an APC radiopharmaceutical offset could be applicable in the case of 
new diagnostic radiopharmaceuticals with pass-through status.

Table 22.--APCs to Which Nuclear Medicine Procedures Are Proposed for CY
                             2009 Assignment
------------------------------------------------------------------------
                APC                               APC title
------------------------------------------------------------------------
0307..............................  Myocardial Positron Emission
                                     Tomography (PET) imaging.
0308..............................  Non-Myocardial Positron Emission
                                     Tomography (PET) imaging.
0377..............................  Level II Cardiac Imaging.
0378..............................  Level II Pulmonary Imaging.
0389..............................  Level I Non-imaging Nuclear
                                     Medicine.
0390..............................  Level I Endocrine Imaging.
0391..............................  Level II Endocrine Imaging.
0392..............................  Level II Non-imaging Nuclear
                                     Medicine.
0393..............................  Hematologic Processing & Studies.
0394..............................  Hepatobiliary Imaging.
0395..............................  GI Tract Imaging.
0396..............................  Bone Imaging.
0397..............................  Vascular Imaging.
0398..............................  Level I Cardiac Imaging.
0400..............................  Hematopoietic Imaging.
0401..............................  Level I Pulmonary Imaging.
0402..............................  Level II Nervous System Imaging.
0403..............................  Level I Nervous System Imaging.
0404..............................  Renal and Genitourinary Studies.
0406..............................  Level I Tumor/Infection Imaging.
0408..............................  Level III Tumor/Infection Imaging.
0414..............................  Level II Tumor/Infection Imaging.
------------------------------------------------------------------------

B. Proposed OPPS Payment for Drugs, Biologicals, and 
Radiopharmaceuticals Without Pass-Through Status

1. Background
    Under the CY 2008 OPPS, we currently pay for drugs, biologicals, 
and radiopharmaceuticals that do not have pass-through status in one of 
two ways: Packaged payment into the payment for the associated service 
or separate payment (individual APCs). We explained in the April 7, 
2000, OPPS final rule with comment period (65 FR 18450) that we 
generally package the cost of drugs and radiopharmaceuticals into the 
APC payment rate for the procedure or treatment with which the products 
are usually furnished. Hospitals do not receive separate payment from 
Medicare for packaged items and supplies, and hospitals may not bill 
beneficiaries separately for any packaged items and supplies whose 
costs are recognized and paid within the national OPPS payment rate for 
the associated procedure or service. (Program Memorandum Transmittal A-
01-133, issued on November 20, 2001, explains in greater detail the 
rules regarding separate payment for packaged services.)
    Packaging costs into a single aggregate payment for a service, 
procedure, or episode of care is a fundamental principle that 
distinguishes a prospective payment system from a fee schedule. In 
general, packaging the costs of items and services into the payment for 
the primary procedure or service with which they are associated 
encourages hospital efficiencies and also enables hospitals to manage 
their resources with maximum flexibility.
    Section 1833(t)(16)(B) of the Act, as added by section 621(a)(2) of 
Pub. L. 108-173, sets the threshold for establishing separate APCs for 
drugs and biologicals at $50 per administration for CYs 2005 and 2006. 
Therefore, for CYs 2005 and 2006, we paid separately for drugs, 
biologicals, and radiopharmaceuticals whose per day cost exceeded $50 
and packaged the costs of drugs, biologicals, and radiopharmaceuticals 
whose per day cost was equal to or less than $50 into the procedures 
with which they were billed. For CY 2007, the packaging threshold for 
drugs, biologicals, and radiopharmaceuticals that were not new and did 
not have pass-through status was established at $55. For CY 2008, the 
packaging threshold for drugs, biologicals, and radiopharmaceuticals 
that are not new and do not have pass-through status was established at 
$60. The methodology used to establish the $55 threshold for CY 2007, 
the $60

[[Page 41485]]

threshold for CY 2008, and our proposed approach for CY 2009 are 
discussed in more detail in section V.B.2. of this proposed rule.
    In addition, since CY 2005, we have provided an exemption to this 
packaging determination for oral and injectable 5HT3 anti-emetic 
products. We discuss in section V.B.2. of this proposed rule our 
proposed CY 2009 payment policy for these anti-emetic products.
2. Proposed Criteria for Packaging Payment for Drugs, Biologicals and 
Radiopharmaceuticals
a. Drugs, Biologicals, and Therapeutic Radiopharmaceuticals
    As indicated above, in accordance with section 1833(t)(16)(B) of 
the Act, the threshold for establishing separate APCs for payment of 
drugs and biologicals was set to $50 per administration during CYs 2005 
and 2006. In CY 2007, we used the fourth quarter moving average 
Producer Price Index (PPI) levels for prescription preparations to 
trend the $50 threshold forward from the third quarter of CY 2005 (when 
the Pub. L. 108-173 mandated threshold became effective) to the third 
quarter of CY 2007. We then rounded the resulting dollar amount to the 
nearest $5 increment in order to determine the CY 2007 threshold amount 
of $55. Using the same methodology as that used in CY 2007 (which is 
discussed in more detail in the CY 2007 OPPS/ASC final rule with 
comment period (71 FR 68085 through 68086)), for CY 2008 we set the 
packaging threshold for establishing separate APCs for drugs and 
biologicals at $60.
    Following the CY 2007 methodology for CY 2009, we used updated 
fourth quarter moving average PPI levels to trend the $50 threshold 
forward from the third quarter of CY 2005 to the third quarter of CY 
2009 and again rounded the resulting dollar amount ($61.25) to the 
nearest $5 increment, which yielded a figure of $60. In performing this 
calculation, we used the most up-to-date forecasted, quarterly PPI 
estimates from CMS' Office of the Actuary (OACT). As actual inflation 
for past quarters replaced forecasted amounts, the PPI estimates for 
prior quarters have been revised (compared with those used in the CY 
2007 OPPS/ASC final rule with comment period) and have been 
incorporated into our calculation. Based on the calculations described 
above, we are proposing a packaging threshold for CY 2009 of $60. As 
stated in the CY 2007 OPPS/ASC final rule with comment period (71 FR 
68086), we believe that packaging certain items is a fundamental 
component of a prospective payment system, that packaging these items 
does not lead to beneficiary access issues and does not create a 
problematic site of service differential, that the packaging threshold 
is reasonable based on the initial establishment in law of a $50 
threshold for the CY 2005 OPPS, that updating the $50 threshold is 
consistent with industry and government practices, and that the PPI for 
prescription preparations is an appropriate mechanism to gauge Part B 
drug inflation. During the March 2008 APC Panel meeting, the APC Panel 
made a recommendation supporting CMS' current methodology of adjusting 
the threshold dollar amount for packaging drugs and biologicals on the 
basis of the PPI for prescription drugs. We are adopting the APC 
Panel's recommendation, and we are proposing to continue this 
methodology for updating the drug packaging threshold for CY 2009.
    To determine their CY 2009 proposed packaging status, we calculated 
the per day cost of all drugs, biologicals, and therapeutic 
radiopharmaceuticals that had a HCPCS code in CY 2007 and were paid 
(via packaged or separate payment) under the OPPS using claims data 
from January 1, 2007, to December 31, 2007. In order to calculate the 
per day costs for drugs, biologicals, and therapeutic 
radiopharmaceuticals to determine their packaging status in CY 2009, we 
are proposing to use the methodology that was described in detail in 
the CY 2006 OPPS proposed rule (70 FR 42723 through 42724) and 
finalized in the CY 2006 OPPS final rule with comment period (70 FR 
68636 through 70 FR 68638). To calculate the proposed CY 2009 per day 
costs, we used an estimated payment rate for each drug and biological 
of ASP+4 percent (which is the payment rate we are proposing for 
separately payable drugs and biologicals in CY 2009, as discussed in 
more detail in section V.B.3.b. of this proposed rule). We used the 
manufacturer submitted ASP data from the fourth quarter of CY 2007 
(data that were used for payment purposes in the physician's office 
setting, effective April 1, 2008) to determine the proposed per day 
cost.
    As is our standard methodology, we are proposing to use payment 
rates based on the ASP data from the fourth quarter of CY 2007 for 
budget neutrality estimates, packaging determinations, impact analyses, 
and completion of Addenda A and B to this proposed rule because these 
are the most recent data available for use at the time of development 
of this proposed rule. These data are also the basis for drug payments 
in the physician's office setting, effective April 1, 2008. For items 
that did not have an ASP-based payment rate, we used their mean unit 
cost derived from the CY 2007 hospital claims data to determine their 
per day cost. We packaged items with a per day cost less than or equal 
to $60 and identified items with a per day cost greater than $60 as 
separately payable. Consistent with our past practice, we crosswalked 
historical OPPS claims data from the CY 2007 HCPCS codes that were 
reported to the CY 2008 HCPCS codes that we display in Addendum B to 
this proposed rule for payment in CY 2009.
    Our policy during previous cycles of the OPPS has been to use 
updated ASP and claims data to make final determinations of the 
packaging status of drugs, biologicals, and radiopharmaceuticals for 
the final rule with comment period. We note that it is also our policy 
to make an annual packaging determination only when we develop the 
OPPS/ASC final rule for the update year. Only items that are identified 
as separately payable in the final rule would be subject to quarterly 
updates. For our calculation of per day costs of drugs, biologicals, 
and therapeutic radiopharmaceuticals in the CY 2009 OPPS/ASC final rule 
with comment period, we are proposing to use ASP data from the first 
quarter of CY 2008, which is the basis for calculating payment rates 
for drugs and biologicals in the physician's office setting using the 
ASP methodology, effective July 1, 2008, along with updated hospital 
claims data from CY 2007. We note that we would also use these data for 
budget neutrality estimates and impact analyses for the CY 2009 OPPS/
ASC final rule with comment period. Payment rates for separately 
payable drugs and biologicals included in Addenda A and B to that final 
rule with comment period would be based on ASP data from the second 
quarter of CY 2008, which are the basis for calculating payment rates 
for drugs and biologicals in the physician's office setting using the 
ASP methodology, effective October 1, 2008. These rates would then be 
updated in the January 2009 OPPS update, based on the most recent ASP 
data to be used for physician's office and OPPS payment as of January 
1, 2009.
    Consequently, the packaging status for drugs, biologicals, and 
therapeutic radiopharmaceuticals in the CY 2009 OPPS/ASC final rule 
with comment period using the updated data may be different from their 
packaging status determined based on the data used for

[[Page 41486]]

this proposed rule. Under such circumstances, we are proposing to apply 
the following policies to these drugs, biologicals, and therapeutic 
radiopharmaceuticals whose relationship to the proposed $60 threshold 
changes based on the final updated data:
     Drugs, biologicals, and therapeutic radiopharmaceuticals 
that were paid separately in CY 2008, proposed for separate payment in 
CY 2009, and have per day costs equal to or less than $60 based on the 
updated ASPs and hospital claims data used for the CY 2009 final rule 
with comment period, would continue to receive separate payment in CY 
2009.
     Drugs, biologicals, and therapeutic radiopharmaceuticals 
that were packaged in CY 2008 and that were proposed for separate 
payment in CY 2009, and have per day costs equal to or less than $60 
based on the updated ASPs and hospital claims data used for the CY 2009 
final rule with comment period, would remain packaged in CY 2009.
     Drugs, biologicals, and therapeutic radiopharmaceuticals 
for which we proposed packaged payment in CY 2009, but have per day 
costs greater than $60 based on the updated ASPs and hospital claims 
data used for the CY 2009 final rule with comment period, would receive 
separate payment in CY 2009.
    For CY 2009, we are also proposing to continue exempting the oral 
and injectable forms of 5HT3 anti-emetic products from packaging, 
thereby making separate payment for all of the 5HT3 anti-emetic 
products. As we stated in the CY 2005 OPPS final rule with comment 
period (69 FR 65779 through 65780), it is our understanding that 
chemotherapy is very difficult for many patients to tolerate, as the 
side effects are often debilitating. In order for Medicare 
beneficiaries to achieve the maximum therapeutic benefit from 
chemotherapy and other therapies with side effects of nausea and 
vomiting, anti-emetic use is often an integral part of the treatment 
regimen. We believe that we should continue to ensure that Medicare 
payment rules do not impede a beneficiary's access to the particular 
anti-emetic that is most effective for him or her as determined by the 
beneficiary and his or her physician.

    Table 23.--Proposed Anti-Emetics to Exempt From CY 2009 OPPS Drug
                           Packaging Threshold
------------------------------------------------------------------------
            HCPCS code                        Short descriptor
------------------------------------------------------------------------
J1260.............................  Dolasetron mesylate.
J1626.............................  Granisetron HCl injection.
J2405.............................  Ondansetron hcl injection.
J2469.............................  Palonosetron HCl.
Q0166.............................  Granisetron HCl 1 mg oral.
Q0179.............................  Ondansetron HCl 8 mg oral.
Q0180.............................  Dolasetron mesylate oral.
------------------------------------------------------------------------

b. Proposed Payment for Diagnostic Radiopharmaceuticals and Contrast 
Agents
    As established in the CY 2008 final rule with comment period (72 FR 
66766 through 66768), we began packaging payment for all diagnostic 
radiopharmaceuticals and contrast agents into the payment for the 
associated procedure, regardless of their per day costs. 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 items and services into the payment for the primary 
procedure or service with which they are associated encourages hospital 
efficiencies and also enables hospitals to manage their resources with 
maximum flexibility. Prior to CY 2008, we noted that the proportion of 
drugs, biologicals, and radiopharmaceuticals that were separately paid 
under the OPPS had increased in recent years, a pattern that we also 
observed for procedural services under the OPPS. Our final CY 2008 
policy that packaged payment for all nonpass-through diagnostic 
radiopharmaceuticals and contrast agents regardless of their per day 
costs contributed significantly to expanding the size of the OPPS 
payment bundles and is consistent with the principles of a prospective 
payment system.
    During the March 2008 meeting of the APC Panel, the APC Panel 
recommended that CMS continue to package payment for diagnostic 
radiopharmaceuticals for CY 2009. We are accepting this recommendation 
and, therefore, for CY 2009, we are proposing to continue packaging 
payment for all nonpass-through diagnostic radiopharmaceuticals and 
contrast agents regardless of their per day costs for the reasons 
discussed below. As we established in the CY 2008 OPPS/ASC final rule 
with comment period (72 FR 66768), we identify diagnostic 
radiopharmaceuticals specifically as those Level II HCPCS codes that 
include the term ``diagnostic'' along with a radiopharmaceutical in 
their long code descriptors.
    We continue to believe that our proposal to continue to treat 
diagnostic radiopharmaceuticals and contrast agents differently from 
other specified covered outpatient drugs (SCODs) is appropriate for 
several reasons. First, the statutory requirement that we must pay 
separately for drugs and biologicals for which the per day cost exceeds 
$50 under section 1833(t)(16)(B) of the Act has expired. Therefore, we 
are not restricted in the extent to which we can package payment for 
SCODs and other drugs, nor are we required to treat all classes of 
drugs in the same manner with regard to whether they are packaged or 
separately paid. We have used this flexibility to make different 
packaging determinations with regard to specific anti-emetic drugs.
    Second, diagnostic radiopharmaceuticals and contrast agents 
function effectively as supplies that enable the provision of an 
independent service. More specifically, contrast agents are always 
provided in support of a diagnostic or therapeutic procedure that 
involves imaging, and diagnostic radiopharmaceuticals are always 
provided in support of a diagnostic nuclear medicine procedure. This is 
different from many other SCODs, such as therapeutic 
radiopharmaceuticals, where the therapeutic radiopharmaceutical itself 
is the primary therapeutic modality. Given the inherent function of 
contrast agents and diagnostic radiopharmaceuticals as supportive to 
the performance of an independent procedure, we continue to view the 
packaging of payment for contrast agents and diagnostic 
radiopharmaceuticals as a logical expansion of packaging for SCODs. As 
we consider the possibility of moving to additional encounter-based and 
episode-based payment in future years, we may consider additional 
options for packaging more SCODs in the future.
    Third, section 1833(t)(14)(A)(iii) of the Act requires that payment 
for SCODs be set prospectively based on a measure of average hospital 
acquisition cost. We believe our claims data offer an acceptable proxy 
for average hospital acquisition cost and associated handling and 
preparation costs for radiopharmaceuticals. We believe that hospitals 
have adapted to the CY 2006 coding changes for radiopharmaceuticals and 
responded to our instructions to include charges for 
radiopharmaceutical handling in their charges for the 
radiopharmaceutical products. We have relied on mean unit

[[Page 41487]]

costs derived from our claims data as one proxy for average acquisition 
cost and pharmacy overhead, and we use these data to determine the 
packaging status for SCODs.
    In the case of contrast agents, while we have ASP data that could 
be a proxy for average hospital acquisition cost and associated 
handling and preparation costs, payment for almost all contrast agents 
would be packaged under the OPPS for CY 2009 based on the proposed CY 
2009 OPPS $60 per day packaging threshold. Therefore, we believe it 
would be appropriate to continue to package payment for all contrast 
agents for CY 2009, to provide accurate payment for the associated 
tests and procedures using an approach that promotes hospital 
efficiency.
    In summary, we view diagnostic radiopharmaceuticals and contrast 
agents as ancillary and supportive of the diagnostic tests and 
therapeutic procedures in which they are used. In light of our 
authority to make different packaging determinations and the improved 
reporting of hospital charges for radiopharmaceutical handling in the 
CY 2007 claims data, we are proposing to continue packaging payment for 
all contrast agents and diagnostic radiopharmaceuticals regardless of 
their per day costs for CY 2009.
    For more information on how we are proposing to set CY 2009 payment 
rates for nuclear medicine procedures in which diagnostic 
radiopharmaceuticals are used and echocardiography services provided 
with and without contrast agents, we refer readers to sections 
II.A.2.d.(5) and (4), respectively, of this proposed rule.
    During the March 2008 APC Panel meeting, the APC Panel also 
recommended that CMS present data at the first CY 2009 APC Panel 
meeting on usage and frequency, geographic distribution, and size and 
type of hospitals performing nuclear medicine studies using 
radioisotopes in order to ensure that access is preserved for Medicare 
beneficiaries. We are accepting this recommendation and will present 
information to the APC Panel at its first CY 2009 meeting when initial 
claims data from CY 2008 will be available.
3. Proposed Payment for Drugs and Biologicals Without Pass-Through 
Status That Are Not Packaged
a. Payment for Specified Covered Outpatient Drugs (SCODs)
    Section 1833(t)(14) of the Act, as added by section 621(a)(1) of 
Pub. L. 108-173, requires special classification of certain separately 
paid radiopharmaceuticals, drugs, and biologicals and mandates specific 
payments for these items. Under section 1833(t)(14)(B)(i) of the Act, a 
``specified covered outpatient drug'' is a covered outpatient drug, as 
defined in section 1927(k)(2) of the Act, for which a separate APC has 
been established and that either is a radiopharmaceutical agent or is a 
drug or biological for which payment was made on a pass-through basis 
on or before December 31, 2002.
    Under section 1833(t)(14)(B)(ii) of the Act, certain drugs and 
biologicals are designated as exceptions and are not included in the 
definition of ``specified covered outpatient drugs,'' known as SCODs. 
These exceptions are--
     A drug or biological for which payment is first made on or 
after January 1, 2003, under the transitional pass-through payment 
provision in section 1833(t)(6) of the Act.
     A drug or biological for which a temporary HCPCS code has 
not been assigned.
     During CYs 2004 and 2005, an orphan drug (as designated by 
the Secretary).
    Section 1833(t)(14)(A)(iii) of the Act, as added by section 
621(a)(1) of Pub. L. 108-173, requires that payment for SCODs in CY 
2006 and subsequent years be equal to the average acquisition cost for 
the drug for that year as determined by the Secretary, subject to any 
adjustment for overhead costs and taking into account the hospital 
acquisition cost survey data collected by the Government Accountability 
Office (GAO) in CYs 2004 and 2005. If hospital acquisition cost data 
are not available, the law requires that payment be equal to payment 
rates established under the methodology described in section 1842(o), 
section 1847A, or section 1847B of the Act, as calculated and adjusted 
by the Secretary as necessary.
    In the CY 2006 OPPS proposed rule (70 FR 42728), we discussed the 
CY 2005 report by MedPAC regarding pharmacy overhead costs in HOPDs and 
summarized the findings of that study:
     Handling costs for drugs, biologicals, and 
radiopharmaceuticals administered in the HOPD are not insignificant;
     Little information is available about the magnitude of 
pharmacy overhead costs;
     Hospitals set charges for drugs, biologicals, and 
radiopharmaceuticals at levels that reflected their respective handling 
costs; and
     Hospitals vary considerably in their likelihood of 
providing services which utilize drugs, biologicals, or 
radiopharmaceuticals with different handling costs.
    As a result of these findings, MedPAC developed seven drug 
categories for pharmacy and nuclear medicine handling costs based on 
the estimated level of hospital resources used to prepare the products. 
Associated with these categories were two recommendations for accurate 
payment of pharmacy overhead under the OPPS.
    1. CMS should establish separate, budget neutral payments to cover 
the costs hospitals incur for handling separately payable drugs, 
biologicals and radiopharmaceuticals.
    2. CMS should define a set of handling fee APCs that group drugs, 
biologicals, and radiopharmaceuticals based on attributes of the 
products that affect handling costs; CMS should instruct hospitals to 
submit charges for these APCs and base payment rates for the handling 
fee APCs on submitted charges reduced to costs.
    In assigning drugs to the seven categories, MedPAC considered 
additional characteristics that contribute to differential pharmacy 
handling costs, such as radioactivity, toxicity, mode of 
administration, and the need for special handling. While MedPAC was 
able to include information on a variety of drugs with many of these 
characteristics, hospitals participating in MedPAC's research were not 
able to provide sufficient cost information regarding the handling of 
outpatient radiopharmaceuticals for MedPAC to make a recommendation 
about overhead categories for these products.
    In response to the MedPAC findings, in the CY 2006 OPPS proposed 
rule (70 FR 42729), we discussed our belief that because of the varied 
handling resources required to prepare different forms of drugs, it 
would be impossible to exclusively and appropriately assign a drug to a 
certain overhead category that would apply to all hospital outpatient 
uses of the drug. Therefore, our CY 2006 OPPS proposal included a 
proposal to establish three distinct Level II HCPCS C-codes and three 
corresponding APCs for drug handling categories to differentiate 
overhead costs for drugs and biologicals. We also proposed: (1) To 
combine several overhead categories recommended by MedPAC according to 
Table 24, as shown below; (2) to establish three drug handling 
categories, as we believed that larger groups would minimize the number 
of drugs that may fit into more than one category and would lessen any 
undesirable payment policy incentives to utilize particular forms of 
drugs or specific preparation methods; (3) to collect hospital charges 
for these C-codes for 2 years; and (4) to ultimately base payment for 
the corresponding drug handling APCs on

[[Page 41488]]

CY 2006 claims data available for the CY 2008 OPPS. Both the MedPAC 
categories and the CY 2006 proposed categories are identified in Table 
24 below.

             Table 24.--Drug Overhead Category Groupings Discussed in the CY 2006 OPPS Proposed Rule
----------------------------------------------------------------------------------------------------------------
                                                                               Proposed CY 2006 drug overhead
      MedPAC drug overhead category                  Description                          category
----------------------------------------------------------------------------------------------------------------
Category 1..............................  Orals (oral tablets, capsules,    Category 1.
                                           solutions).
Category 2..............................  Injection/Sterile Preparation     Category 2.
                                           (draw up a drug for
                                           administration).
Category 3..............................  Single IV Solution/Sterile        Category 2.
                                           Preparation (adding a drug or
                                           drugs to a sterile IV solution)
                                           or Controlled Substances.
Category 4..............................  Compounded/Reconstituted IV       Category 2.
                                           Preparations (requiring
                                           calculations performed
                                           correctly and then compounded
                                           correctly).
Category 5..............................  Specialty IV or Agents requiring  Category 3.
                                           special handling in order to
                                           preserve their therapeutic
                                           value or Cytotoxic Agents, oral
                                           (chemotherapeutic, teratogenic,
                                           or toxic) requiring personal
                                           protective equipment (PPE).
Category 6..............................  Cytotoxic Agents                  Category 3.
                                           (chemotherapeutic, teratogenic,
                                           or toxic) in all formulations
                                           except oral requiring PPE.
Category 7..............................  Radiopharmaceutical: Basic and
                                           Complex Diagnostic Agents, PET
                                           Agents, Therapeutic Agents, and
                                           Radioimmunoconjugates.
----------------------------------------------------------------------------------------------------------------

    In the CY 2006 OPPS final rule with comment period (70 FR 68659 
through 68665), we discussed the public comments we received on our 
proposal regarding pharmacy overhead. The overwhelming majority of 
commenters did not support our proposal and urged us not to finalize 
this policy, as it would be administratively burdensome for hospitals. 
Therefore, we did not finalize this proposal for CY 2006.
    As we noted in the CY 2006 OPPS final rule with comment period (70 
FR 68640), findings from a MedPAC survey of hospital charging practices 
indicated that hospitals set charges for drugs, biologicals, and 
radiopharmaceuticals high enough to reflect their pharmacy handling 
costs as well as their acquisition costs. After considering all public 
comments received, in the CY 2006 OPPS final rule with comment period 
(70 FR 68642), we established a policy to provide a combined payment 
rate of ASP+6 percent for both the hospital's drug and biological 
acquisition costs and associated pharmacy overhead costs, as this was 
the equivalent average ASP-based amount to the aggregate cost from CY 
2004 hospital claims data for separately payable drugs under the OPPS. 
We acknowledged the limitations of this methodology, namely that 
pharmacy overhead costs of specific drugs and biologicals are not 
directly related to their specific acquisition costs. We also solicited 
additional comments on future options for ways to identify and provide 
an alternative payment methodology for pharmacy overhead costs under 
the OPPS.
    In the CY 2007 OPPS/ASC final rule with comment period (71 FR 
68091), we proposed and finalized a policy that provided a single 
payment of ASP+6 percent for the hospital's acquisition cost for the 
drug or biological and all associated pharmacy overhead and handling 
costs. The ASP+6 percent rate was higher than the equivalent average 
ASP-based amount calculated from claims of ASP+4 percent, but we 
adopted this methodology for stability while we continued to examine 
the issue of the costs of pharmacy overhead in the HOPD.
    We continued to meet with interested pharmacy stakeholders 
regarding the various issues related to hospital charging practices and 
how these practices would affect our potential proposals for payment of 
drugs and pharmacy overhead under the OPPS. Many comments from the 
hospital industry reiterated that hospitals do not attach a specific 
pharmacy overhead charge to a particular drug. In particular, a more 
expensive drug with high pharmacy overhead costs does not commonly 
result in a sufficiently high hospital charge for the drug to account 
for all of the associated drug acquisition and pharmacy overhead costs. 
We have been told that hospitals frequently allocate a relatively 
greater pharmacy overhead charge to the single hospital charge for less 
expensive drugs to counterbalance the lesser charge for pharmacy 
overhead for more expensive drugs with high pharmacy overhead costs.
    Therefore, the pharmacy overhead costs of one drug may be 
distributed among charges for many drugs. This practice of unequally 
distributing pharmacy overhead charges among all drugs provided by the 
hospital pharmacy makes the single CCR for cost center 5600 (Drugs 
Charged to Patients) applied for OPPS cost estimation of drugs through 
the revenue code-to-cost center crosswalk result in less accurate costs 
for individual drugs. The result is that the charges and estimated 
costs for less expensive drugs shoulder a higher burden of pharmacy 
overhead costs as compared to the charges and estimated costs for more 
expensive drugs. Commenters have suggested that our OPPS methodology of 
applying a single CCR for the cost estimation of all drugs unfairly 
reduces payment amounts for separately payable expensive drugs, as the 
actual CCR varies widely across drugs. The concerns surrounding the 
impact on payment accuracy of differential hospital charging practices 
for pharmacy overhead costs resemble the concerns regarding charge 
compression that have been raised for expensive implantable devices 
over the past several years of the OPPS (72 FR 66599 through 66602). In 
general, differential hospital markup policies related to the cost of 
an item lead to overestimating the cost of inexpensive items and 
underestimating the cost of expensive items when a single CCR is 
applied to charges on claims.
    In the CY 2008 OPPS/ASC proposed rule (72 FR 42735), in response to 
ongoing discussions with interested parties, we proposed to continue 
our methodology of providing a combined payment rate for drug and 
biological acquisition and pharmacy overhead costs. We also proposed to 
instruct hospitals to remove the pharmacy overhead charge for both 
packaged and separately paid drugs and biologicals from the charge for 
the drug or biological and report the pharmacy overhead charge on an 
uncoded revenue code line on the claim. We believed that

[[Page 41489]]

this would provide us with an avenue for collecting pharmacy handling 
cost data specific to drugs in order to package the overhead costs of 
these items into the associated procedures, most likely drug 
administration services. We believed that this methodology of reporting 
pharmacy overhead costs on an uncoded revenue center line would 
increase the accuracy of pharmacy overhead payments for drugs and 
biologicals as it would package the overhead cost for similar drugs 
into the commonly associated separately payable services, for example, 
by packaging the pharmacy overhead cost for a chemotherapy drug with 
the cost of the chemotherapy drug administration service also included 
on the claim.
    Similar to the public response to our CY 2006 pharmacy overhead 
proposal, the overwhelming majority of commenters did not support our 
CY 2008 proposal and urged us to not finalize this policy (72 FR 
66761). While MedPAC supported the proposal for improving the accuracy 
of drug payment by incorporating variability in pharmacy overhead 
costs, most other commenters cited the increased hospital burden that 
would be associated with manipulating accounting systems and making 
manual calculations, along with concerns about making these changes to 
their billing operations while continuing to set charges for particular 
services that were the same for all payers. After hearing concerns 
about the burden of establishing a unique pharmacy overhead charge for 
every drug, at its September 2007 meeting, the APC Panel recommended 
that hospitals not be required to separately report charges for 
pharmacy overhead and handling and that payment for overhead be 
included as part of drug payment. The APC Panel also recommended that 
CMS continue to evaluate alternative methods to standardize the capture 
of pharmacy overhead costs in a manner that is simple to implement at 
the organizational level (72 FR 66761). Because of these concerns, we 
did not finalize the proposal to instruct hospitals to separately 
report pharmacy overhead charges for CY 2008. Instead, in the CY 2008 
OPPS/ASC final rule with comment period (72 FR 66763), we finalized a 
policy of providing payment for separately payable drugs and 
biologicals and their pharmacy overhead at ASP+5 percent as a 
transition from their CY 2007 payment of ASP+6 percent to payment based 
on the equivalent average ASP-based payment rate calculated from 
hospital claims, which was ASP+3 percent for the CY 2008 OPPS/ASC final 
rule with comment period. Hospitals continued to include charges for 
pharmacy overhead costs in the line-item charges for the associated 
drugs reported on claims.
b. Proposed Payment Policy
    The provision in section 1833(t)(14)(A)(iii) of the Act, as 
described above, continues to be applicable to determining payments for 
SCODs for CY 2009. This provision requires that, in CY 2009, payment 
for SCODs be equal to the average acquisition cost for the drug for 
that year as determined by the Secretary, subject to any adjustment for 
overhead costs and taking into account the hospital acquisition cost 
survey data collected by the GAO in CYs 2004 and 2005. If hospital 
acquisition cost data are not available, the law requires that payment 
be equal to payment rates established under the methodology described 
in section 1842(o), section 1847A, or section 1847B of the Act, as 
calculated and adjusted by the Secretary as necessary. In addition, 
section 1833(t)(14)(E)(ii) authorizes the Secretary to adjust APC 
weights for SCODs to take into account the MedPAC report relating to 
overhead and related expenses, such as pharmacy services and handling 
costs.
    During this past year, we have met with a variety of stakeholders 
regarding different proposals for collecting pharmacy overhead cost 
information for setting OPPS payment rates. One such proposal was 
endorsed by several stakeholders during the March 2008 APC Panel 
meeting. Presenters to the APC Panel explained that CMS' methodology of 
using a single CCR to determine the acquisition and pharmacy overhead 
cost for all drugs attributes a greater relative share of pharmacy 
overhead cost to the lower-priced packaged drugs and a lower relative 
share of pharmacy overhead cost to the more expensive, separately 
payable drugs. Because the OPPS packages payment for drugs and 
biologicals with an estimated per day cost of $60 or less and estimates 
the equivalent average ASP-based amount based only on the costs of 
separately payable drugs, some pharmacy overhead cost that should be 
associated with separately payable drugs is being packaged into payment 
for the procedures that are performed with lower cost packaged drugs.
    This stakeholder proposal suggested that CMS recalculate the 
equivalent average ASP-based amount based on the costs of packaged and 
separately payable drugs with HCPCS codes, rather than on our current 
methodology of calculating an ASP-based amount solely from claims data 
for separately payable drugs. CMS would then use this equivalent 
average ASP-based amount (or the physician's office payment rate of 
ASP+6 percent) to represent the acquisition and pharmacy overhead cost 
of all packaged drugs and would substitute this figure for the costs of 
packaged drugs in ratesetting for their associated procedures. The pool 
of money under the budget neutral OPPS that would result from this 
methodology that would package lower drug costs with associated 
procedures than our current methodology could then be distributed to 
OPPS payment in a number of ways, such as increasing the combined 
acquisition and overhead cost payment for separately payable drugs to a 
higher average ASP-based amount and/or providing separate payment for 
pharmacy overhead costs for either all drugs or only separately payable 
drugs based on a flat add-on rate or on tiers of pharmacy service 
complexity. The stakeholders presented APC median cost estimates 
demonstrating that their recommendation would significantly impact drug 
payment rates but would only change the majority of APC median costs by 
less than 2 percent.
    At its March 2008 meeting, the APC Panel recommended that CMS work 
with stakeholders to further develop recommendations on the validity of 
this methodology and conduct an impact analysis, with consideration for 
CY 2009 rulemaking. Because CMS would redistribute pharmacy overhead 
cost when modeling payment rates for ratesetting, the suggested 
methodology would be administratively simple for hospitals. This 
approach also would refine the existing OPPS methodology for estimating 
pharmacy overhead cost in a budget neutral manner, without 
redistributing money from the payment for nondrug components of other 
services to payment for drugs. However, we also believe that 
substituting an average ASP-based amount (or the physician's office 
payment rate of ASP+6 percent) on claims for purposes of packaging drug 
costs into associated procedures would be a highly significant change 
to our established methodology. It is our longstanding policy to accept 
hospital charge data as it is reported on claims, in order to capture 
variability in hospitals' unique charges that is specific to each 
hospital's charging structure, as well as other potential efficiencies. 
The stakeholder recommendation would eliminate the expected variability 
in hospitals' costs of drugs that are packaged into their associated 
procedures.
    While we appreciate the thoughtful approach to OPPS payment for

[[Page 41490]]

pharmacy overhead costs as described above, we believe there are 
several issues to be seriously considered before we could potentially 
propose the adoption of such a methodology including, but not limited 
to, its implications for how we would more generally estimate the costs 
of items packaged into a primary service. We package payment under the 
OPPS for the costs of many items and services other than relatively 
inexpensive drugs that are integral to separately payable primary 
services. In addition, it is not clear to us what approach for 
redistributing pharmacy overhead dollars would be most accurate and 
operationally feasible for CMS. We specifically invite public comment 
on this potential approach for estimating pharmacy overhead costs and 
redistributing pharmacy overhead payment under the OPPS.
    Recently, RTI completed its evaluation of the OPPS cost-based 
weight methodology in general, and charge compression in particular. 
Pharmacy stakeholders have already noted that accurately estimating 
pharmacy overhead cost is intimately related to the CCR used to 
estimate costs from claims' charges. As discussed above, hospitals have 
informed us that they redistribute the cost of pharmacy overhead from 
expensive to inexpensive drugs when setting charges for drugs.
    RTI determined that hospitals billing a greater percent of drug 
charges under revenue code 0636 (Drugs requiring detail coding) out of 
all revenue codes related to drugs had a significantly higher CCR for 
cost center 5600 (Drugs Charged to Patients). ``These findings are 
consistent with the a priori expectation that providers tend to use 
lower markup rates on these relatively expensive items, as compared 
with other items in their CCR group.'' (RTI report, ``Refining Cost to 
Charge Ratios for Calculating APC and MS-DRG Relative Payment 
Weights,'' July 2008). RTI, in its March 2007 report, noted that 
hospitals billing a greater percent of drug charges under revenue code 
0258 (IV solutions) out of all revenue codes related to drugs had a 
significantly lower CCR for cost center 5600. In the short term, RTI 
recommends that CMS adopt regression-adjusted CCRs under the OPPS for 
drugs requiring detail coding (reported under revenue code 0636) and 
for IV solutions (reported under revenue code 0258) for purposes of 
estimating median costs. To eliminate the need for simulated CCRs in 
the longer term, RTI recommends that CMS create a new standard cost 
center on the cost report for drugs requiring detail coding (reported 
under revenue code 0636) to mitigate charge compression by acquiring 
more specific CCRs (RTI report, ``Refining Cost to Charge Ratios for 
Calculating APC and MS-DRG Relative Payment Weights,'' July 2008.). 
RTI's recommendations provide other alternatives to the recent pharmacy 
stakeholder recommended approach described above for improving the cost 
estimation of the acquisition and pharmacy overhead costs of drugs 
under the OPPS.
    As discussed further in section II.A.1.c. of this proposed rule and 
consistent with our proposal for the FY 2009 IPPS, we are not proposing 
to adopt regression-based CCRs for cost estimation in any area of the 
CY 2009 OPPS, including drugs requiring detail coding and IV solutions. 
Instead, we believe that RTI's empirical findings would appropriately 
be addressed through concrete steps to improve the quality of 
accounting information used to estimate future costs from drug charges. 
Cognizant of public comments on past proposals, we also believe that 
this should be done in a manner that is fairly simple for hospitals to 
implement.
    For CY 2009, we are proposing to continue our policy of making a 
combined payment for the acquisition and pharmacy overhead costs of 
separately payable drugs and biologicals at an equivalent average ASP-
based amount calculated based on our standard methodology of estimating 
drug costs from claims. Using updated data for this proposed rule, 
after determining the proposed CY 2009 packaging status of drugs and 
biologicals, we estimated the aggregate cost of all drugs and 
biologicals (excluding therapeutic radiopharmaceuticals for which no 
ASP data are currently available) that would be separately payable in 
CY 2009 based on mean costs from hospital claims data and calculated 
the equivalent average ASP-based payment rate that would equate to the 
aggregate reported hospital cost. The results of our analysis indicate 
that setting the payment rates for drugs and biologicals that would be 
separately payable in CY 2009 based on hospital costs would be 
equivalent to providing payment, on average, at ASP+4 percent. 
Therefore, we are proposing to pay for separately payable drugs and 
biologicals under the CY 2009 OPPS at ASP+4 percent because we believe 
that this is the best currently available proxy for average hospital 
acquisition cost and associated pharmacy overhead costs.
    In addition, we are also proposing to break the single standard 
cost center 5600 into two standard cost centers, Drugs with High 
Overhead Cost Charged to Patients and Drugs with Low Overhead Cost 
Charged to Patients, to reduce the reallocation of pharmacy overhead 
cost from expensive to inexpensive drugs and biologicals when setting 
an equivalent average ASP-based payment amount in the future. This 
proposal is consistent with RTI's recommendation for creating a new 
cost center whose CCR would be used to adjust charges to costs for 
drugs requiring detail coding. We note, however, that while improved 
CCRs would more accurately estimate the ASP-based amount for combined 
drug and pharmacy overhead payment, they would not capture within HCPCS 
code variability in pharmacy handling costs resulting from different 
methods of drug preparation used by hospitals. As discussed above, we 
believe that improved and more precise cost reporting is the best way 
to improve the accuracy of all cost-based payment weights, including 
relative weights for the IPPS MS-DRGs. Because both the IPPS and the 
OPPS rely on cost-based weights derived, in part, from data on the 
Medicare hospital cost report form, public comment on this proposed 
change to the cost report to break the single standard cost center 5600 
into two standard cost centers should address any impact on both the 
inpatient and outpatient payment systems.
    This proposal would not affect OPPS cost estimation for 
radiopharmaceuticals for several reasons. First, we would not expect 
the costs and charges for radiopharmaceuticals to be assigned to cost 
center 5600. Rather cost center 4300 (Radioisotope) is more appropriate 
for these items. Second, our claims data demonstrate that some 
hospitals continue to bill radiopharmaceuticals under revenue code 
0636, contrary to UB-04 instructions (Official UB04 Data Specifications 
Manual, AHA 2007, p. 127) specifically noting that radiopharmaceuticals 
should be billed under revenue codes 0343 (Diagnostic 
Radiopharmaceuticals) and 0344 (Therapeutic Radiopharmaceuticals). We 
believe that billing radiopharmaceuticals under revenue code 0636 could 
be a result of dated CMS' guidance regarding billing 
radiopharmaceuticals under revenue code 0636. On April 8, 2008, we 
deleted this guidance from our Claims Processing Manual through 
administrative issuance (Transmittal 1487, Change Request 5999). 
Finally, RTI did not observe evidence of differential mark-up in cost 
center 4300 (for hospitals reporting the cost center) for products 
reported under revenue

[[Page 41491]]

codes 0343 and 0344 (RTI report, ``Refining Cost to Charge Ratios for 
Calculating APC and MS-DRG Relative Payment Weights,'' July 2008).
    In the FY 2009 IPPS proposed rule (73 FR 23544 through 23546), we 
proposed creating two cost centers, specifically (1) Medical Supplies 
Charged to Patients and (2) Implantable Devices Charged to Patients, to 
replace the current cost center Supplies Charged to Patients as part of 
our initiative to revise and update the Medicare hospital cost report 
form. We noted that we were only proposing one additional cost center 
in order to proceed cautiously with changes to the Medicare cost report 
in order to avoid unintended consequences for hospitals paid on a cost 
basis and to limit hospitals' administrative burden associated with 
adapting to new cost reporting forms and instructions. We remain 
committed to moving cautiously but recognize the need for a judicious 
number of additional cost centers in specific areas, including drugs 
and biologicals. As with the items reported in the cost center Supplies 
Charged to Patients, items reported in Drugs Charged to Patients 
demonstrate significant variability in the costs of included items.
    We noted in the FY 2009 IPPS proposed rule (73 FR 23546 through 
23547) that we are updating the cost report form to eliminate outdated 
requirements in conjunction with the PRA, and that we plan to propose 
actual changes to the cost reporting form, the attending cost reporting 
software, and the cost report instructions in Chapter 36 of the 
Medicare Provider Reimbursement Manual (PRM), Part II. We anticipate 
proposing these revisions shortly. If we were to adopt as final our 
proposal to create one cost center for Drugs with High Overhead Cost 
Charged to Patients and one cost center for Drugs with Low Overhead 
Cost Charged to Patients in the CY 2009 OPPS/ASC final rule with 
comment period, the cost report forms and instructions would reflect 
those changes. We expect the revised cost report may be available for 
hospitals to use when submitting cost reports during FY 2009, that is, 
for cost reporting periods beginning after October 1, 2008, and we 
expect that we would be able to use some of these data for setting drug 
payment rates for a future OPPS update, generally 2 to 3 years from 
implementation of the new cost report form.
    Currently, to estimate the cost of separately payable drugs and 
biologicals for purposes of establishing the equivalent average ASP-
based amount, we estimate costs from charges billed with UB-04 drug 
revenue codes 025X (Pharmacy) and 063X (Drugs Require Specific ID) 
using the CCR for cost center 5600. Our current revenue code-to-cost 
center crosswalk is available on the CMS Web site: (http://www.cms.hhs.gov/HospitalOutpatientPPS/03_crosswalk.asp#TopOfPage). As 
part of our effort to isolate the costs and charges for drugs with high 
and low pharmacy overhead costs respectively, as proposed, we would 
instruct hospitals to report the charges for drugs and biologicals 
qualifying for the Drugs with High Overhead Cost Charged to Patients 
cost center under revenue code 0636 and all other drugs and biologicals 
under other appropriate drug revenue codes.
    It is current practice for hospitals to bill only outpatient drug 
and biological charges with revenue code 0636. Payment for inpatient 
hospital services through DRGs does not require detailed HCPCS coding 
for drugs and biologicals. More importantly, CMS claims processing 
systems currently allow only HCPCS codes for blood clotting factors to 
be reported with revenue code 0636 on inpatient claims. Under our CY 
2009 proposal, we would instruct hospitals to report charges for drugs 
and biologicals meeting the criteria for the proposed Drugs with High 
Overhead Costs Charged to Patients cost center under revenue code 0636 
for both inpatient and outpatient claims. CMS would need to change its 
claims processing systems and, because revenue code 0636 requires all 
charges to be reported in association with HCPCS codes, this approach 
would require hospitals to report HCPCS codes for drug charges under 
revenue code 0636 on inpatient claims. We believe that consistent 
billing of drugs and biologicals across inpatient and outpatient 
settings in the same hospital would be more appropriate than current 
practice, in order to refine our cost estimation for drugs with high 
and low pharmacy overhead costs. Continuing to exclude inpatient 
hospital charges for drugs and biologicals with high overhead costs 
from being reported under revenue code 0636 would leave some averaging 
of high and low pharmacy overhead costs under other pharmacy revenue 
codes, especially revenue code series 025X that we would map to the 
proposed new cost center Drugs with Low Overhead Costs Charged to 
Patients. As a result, there would be no improvement in the accuracy of 
MS-DRG weights based on the two new cost centers that we are proposing 
to create. However, we specifically invite public comment on how a CMS 
requirement to report certain drug and biological charges under revenue 
code 0636 on hospital inpatient claims would impact hospitals.
    There are several ways we could define these new cost centers for 
purposes of hospital reporting. First, we could adopt the assumptions 
behind RTI's empirical findings and require that hospitals simply 
report the costs and charges associated with revenue code 0636 in the 
proposed new cost center Drugs with High Overhead Costs Charged to 
Patients. This approach would require hospitals to report charges and 
costs for all other drugs in the proposed new cost center Drugs with 
Low Overhead Costs Charged to Patients. We believe this approach would 
be administratively simple for hospitals to implement because it would 
easily align revenue code and cost center relationships and would not 
require hospitals to otherwise categorize drugs or estimate a unique 
pharmacy overhead cost for each drug. Notwithstanding our requirement 
for hospitals to report, consistent with CPT and CMS instructions, all 
services described by HCPCS codes provided in an encounter, to the 
extent that hospitals report HCPCS codes for drugs that are not 
packaged, this approach might isolate costs and charges for drugs that 
are separately paid under the OPPS for purposes of more accurately 
estimating their costs. While we believe that RTI's findings suggest an 
increase in the CCR for adjustment of drug charges to costs would 
result from isolating the costs and charges for drugs billed under 
revenue code 0636, one limitation of this approach is that it would not 
fully mitigate the disproportionate allocation of pharmacy overhead 
cost reflected in differential markup. Although clearly an improvement 
in accuracy over current cost estimation, it is likely that significant 
variability in markup and overhead cost for drugs currently billed 
under revenue code 0636 would remain in the proposed new cost center 
CCR for Drugs with High Overhead Costs Charged to Patients.
    Second, we could set a cost threshold for drug acquisition and 
pharmacy overhead cost for purposes of including costs and charges for 
the drug in one of the two proposed new cost centers. If we were to 
implement this methodology, we potentially could set the threshold at 
the OPPS drug packaging threshold, which is proposed to be $60 for CY 
2009. This would clearly identify those drugs that would be billed in 
each cost center because all drug and biological HCPCS codes would be 
assigned either separately payable or

[[Page 41492]]

packaged status under the CY 2009 OPPS. However, we believe that using 
the OPPS drug packaging threshold may be too low, and probably does not 
identify a cost point that would maximize cost differences between 
drugs with relatively high pharmacy overhead costs and drugs with 
relatively low pharmacy overhead costs. This approach has the benefit 
of considering cost, which appears largely to determine the amount of 
markup for pharmacy overhead costs a hospital incorporates into drug 
charges. Although some high cost drugs may have low pharmacy overhead 
costs, in general this alternative may do a better job of improving 
cost estimates for drugs with high pharmacy overhead costs through the 
use of more specific CCRs than the first alternative discussed, a cost 
center that would include all drugs currently billed under revenue code 
0636. On the other hand, we are uncertain as to how we would identify 
the most appropriate cost threshold amount, or the manner and frequency 
with which we would update the threshold. More importantly, we are 
concerned that identifying the unique acquisition and overhead cost for 
each drug could impose a comparable administrative burden as other 
prior proposals.
    Third, we could also set a cost threshold for pharmacy overhead 
specifically to define high versus low overhead cost for purposes of 
reporting costs and charges for drugs in the two new cost centers. This 
alternative would require hospitals to identify the cost of pharmacy 
overhead for every drug in order to assign it to a cost center. This 
approach would most accurately isolate drugs with high and low overhead 
costs, respectively. The resulting CCRs, therefore, would better 
estimate the average acquisition and overhead cost for these drugs. On 
the other hand, as with the second alternative, we are uncertain as to 
how we would identify the most appropriate pharmacy cost threshold 
amount, or the manner and frequency with which we would update the 
threshold. Further, this approach could also impose a significant 
hospital administrative burden, comparable to the burden identified by 
commenters regarding other prior proposals.
    A fourth approach would be to instruct hospitals to assign those 
drugs they administer in the OPPS to the two proposed new cost centers 
according to the categories discussed in the CY 2006 final rule with 
comment period and presented in Table 24 above. Under this methodology, 
drugs falling in CMS categories 1 and 2 would be billed under revenue 
codes 025X or 063X (other than 0636) and captured on the cost report in 
the proposed new cost center Drugs with Low Overhead Cost Charged to 
Patients, while drugs falling in CMS category 3 would be billed under 
revenue code 0636 and reported in the proposed new cost center Drugs 
with High Overhead Cost Charged to Patients. CMS would provide some 
examples in the cost report instructions of appropriate drugs for each 
category. We are aware that some pharmacy stakeholders have already 
categorized drug and biological HCPCS codes into the three CMS pharmacy 
overhead categories that were proposed for CY 2006. Because pharmacy 
overhead costs may vary depending on the preparation of a specific 
product at an individual hospital and hospital accounting also varies, 
the same drug could appear in a different cost center across hospitals. 
However, we do not believe it would be necessary for hospitals to 
assign exactly the same drugs to each of the two proposed new cost 
centers, as long as hospitals' assessment of the pharmacy overhead cost 
category is consistent with their billing of these drugs under revenue 
codes 063X (other than 0636) and 025X or 0636 and the inclusion of 
these drugs in the associated cost centers. Prospectively, the OPPS 
cost estimation methodology would use the CCR calculated for the 
proposed new cost center Drugs with High Overhead Cost Charged to 
Patients to adjust drug charges billed under revenue code 0636 to cost 
and the CCR calculated for the proposed new cost center Drugs with Low 
Overhead Cost Charged to Patients to adjust drug charges billed under 
revenue codes 025X and 063X (other than 0636) to cost for determining 
drug acquisition and pharmacy overhead costs. We believe that this 
fourth approach would best estimate a CCR for drugs with high pharmacy 
overhead cost and relatively low markup as reflected in hospitals' 
charges. Because the number of drugs in pharmacy overhead category 
three would be limited based on the specific category description, this 
approach should more accurately address the limited markup for very 
expensive drugs with high pharmacy overhead costs, where charges do not 
reflect the hospitals' pharmacy overhead costs for those drugs. We also 
believe that hospitals would find this alternative easier to implement 
than any policy requiring hospitals to identify a unique total 
acquisition and overhead cost or a specific pharmacy overhead cost for 
each drug for purposes of assigning the drug's costs and charges to one 
of the two proposed new cost centers. However, we realize that there 
would still be some additional administrative burden for hospitals that 
have not yet determined the appropriate pharmacy overhead category for 
each of their drugs, and that they would need to educate their billing 
staff, to modify their chargemasters, and to adapt other billing 
software.
    In summary, we are proposing to pay for the combined average 
acquisition and pharmacy overhead cost of separately payable drugs and 
biologicals at ASP+4 percent under the CY 2009 OPPS. In addition, we 
are proposing to create two new cost centers when we revise the 
Medicare hospital cost report form, specifically Drugs with High 
Overhead Cost Charged to Patients and Drugs with Low Overhead Cost 
Charged to Patients. We expect that CCRs from these proposed new cost 
centers would be available in 2 to 3 years to refine OPPS drug cost 
estimates by accounting for differential hospital markup practices for 
drugs with high and low pharmacy overhead costs. We specifically invite 
public comment on the policy and operational benefits, challenges, and 
concerns that may be associated with these proposals, specifically as 
they relate to our proposed approach to distinguishing between drugs 
and biologicals for purposes of inclusion in the two proposed new cost 
centers and the other alternatives discussed above.
c. Proposed Payment for Blood Clotting Factors
    For CY 2008, we are providing payment for blood clotting factors 
under the OPPS at ASP+5 percent, plus an additional payment for the 
furnishing fee that is also a part of the payment for blood clotting 
factors furnished in physicians' offices under Medicare Part B. The CY 
2008 updated furnishing fee increased by 4.0 percent to $0.158 per 
unit.
    For CY 2009, we are proposing to pay for blood clotting factors at 
ASP+4 percent, consistent with our proposed payment policy for other 
nonpass-through separately payable drugs and biologicals, and to 
continue our policy for payment of the furnishing fee using an updated 
amount for CY 2009. Because the furnishing fee update is based on the 
percentage increase in the Consumer Price Index (CPI) for medical care 
for the 12-month period ending with June of the previous year and the 
Bureau of Labor Statistics releases the applicable CPI data after the 
MPFS and OPPS/ASC proposed rules are published, we are not able to 
include the actual updated furnishing fee in this proposed rule. 
Therefore, in accordance with our policy as finalized in the CY

[[Page 41493]]

2008 OPPS/ASC final rule with comment period (72 FR 66765), we will 
announce the actual figure for the percent change in the applicable CPI 
and the updated furnishing fee calculated based on that figure through 
applicable program instructions and posting on the CMS Web site at: 
http://www.cms.hhs.gov/McrPartBDrugAvgSalesPrice/.
4. Proposed Payment for Therapeutic Radiopharmaceuticals
a. Background
    Section 303(h) of Pub. L. 108-173 exempted radiopharmaceuticals 
from ASP pricing in the physician's office setting. Beginning in the CY 
2005 OPPS final rule with comment period, we have exempted 
radiopharmaceutical manufacturers from reporting ASP data for payment 
purposes under the OPPS. (For more information, we refer readers to the 
CY 2005 OPPS final rule with comment period (69 FR 65811) and the CY 
2006 OPPS final rule with comment period (70 FR 68655).) Consequently, 
we did not have ASP data for radiopharmaceuticals for consideration for 
previous years' OPPS ratesetting. In accordance with section 
1833(t)(14)(B)(i)(I) of the Act, we have classified 
radiopharmaceuticals under the OPPS as SCODs. As such, we have paid for 
radiopharmaceuticals at average acquisition cost as determined by the 
Secretary and subject to any adjustment for overhead costs. 
Radiopharmaceuticals are also subject to the policies affecting all 
similarly classified OPPS drugs and biologicals, such as pass-through 
payment for diagnostic and therapeutic radiopharmaceuticals and 
individual packaging determinations for therapeutic 
radiopharmaceuticals, discussed earlier in this proposed rule.
    For CYs 2006 and 2007, we used mean unit cost data from hospital 
claims to determine each radiopharmaceutical's packaging status and 
implemented a temporary policy to pay for separately payable 
radiopharmaceuticals based on the hospital's charge for each 
radiopharmaceutical adjusted to cost using the hospital's overall CCR. 
In addition, in the CY 2006 final rule with comment period (70 FR 
68654), we instructed hospitals to include charges for 
radiopharmaceutical handling in their charges for the 
radiopharmaceutical products so these costs would be reflected in the 
CY 2008 ratesetting process. We note that this continues to be our 
expectation, and we believe that the charges for radiopharmaceuticals 
in the CY 2007 claims data that we are using for this proposed rule 
reflect both the acquisition cost of the radiopharmaceutical and its 
associated overhead. The methodology of providing separate payment 
based on the individual hospital's overall CCR for CYs 2006 and 2007 
was finalized as an interim proxy for average acquisition cost because 
of the unique circumstances associated with providing 
radiopharmaceutical products to Medicare beneficiaries. The single OPPS 
payment represented Medicare payment for both the acquisition cost of 
the radiopharmaceutical and its associated handling costs.
    During the CY 2006 and CY 2007 rulemaking processes, we encouraged 
hospitals and radiopharmaceutical stakeholders to assist us in 
developing a viable long-term prospective payment methodology for these 
products under the OPPS. As reiterated in the CY 2008 OPPS/ASC final 
rule with comment period (72 FR 66766), we were pleased to note that we 
had many discussions with interested parties regarding the availability 
and limitations of radiopharmaceutical cost data.
    In considering payment options for therapeutic radiopharmaceuticals 
for CY 2008, we examined several alternatives which we discussed in our 
CY 2008 OPPS/ASC proposed rule (72 FR 42738 through 42739) and CY 2008 
OPPS/ASC final rule with comment period (72 FR 66769 through 66770). 
(We refer readers to these rules for a full discussion of all of the 
options that we considered.) After considering the options and all 
public comments, we finalized a CY 2008 methodology to provide a 
prospective payment for therapeutic radiopharmaceuticals (defined as 
those Level II HCPCS codes that include the term ``therapeutic'' along 
with a radiopharmaceutical in their long code descriptors) using mean 
costs derived from the CY 2006 claims data, where the costs are 
determined using our standard methodology of applying hospital-specific 
departmental CCRs to radiopharmaceutical charges, defaulting to 
hospital-specific overall CCRs only if appropriate departmental CCRs 
are unavailable (72 FR 66772). We additionally finalized a policy to 
package payment for all diagnostic radiopharmaceuticals (defined as 
Level II HCPCS codes that include the term ``diagnostic'' along with a 
radiopharmaceutical in their long code descriptors) for CY 2008. As 
discussed in the CY 2008 OPPS/ASC proposed rule (72 FR 42739), we 
believed that adopting prospective payment based on historical hospital 
claims data was appropriate because it served as our most accurate 
available proxy for the average hospital acquisition cost of separately 
payable therapeutic radiopharmaceuticals. In addition, we noted that we 
have found that our general prospective payment methodology based on 
historical hospital claims data results in more consistent, 
predictable, and equitable payment amounts across hospitals and likely 
provides incentives to hospitals for efficiently and economically 
providing these outpatient services.
    Prior to implementation of our finalized CY 2008 methodology of 
providing a prospective payment for therapeutic radiopharmaceuticals, 
section 106(b) of the MMSEA was enacted on December 29, 2007, that 
provided payment for therapeutic radiopharmaceuticals based on 
individual hospital charges adjusted to cost. Therefore, hospitals 
continue to receive payment for therapeutic radiopharmaceuticals by 
applying the hospital-specific overall CCR to each hospital's charge 
for a therapeutic radiopharmaceutical from January 1, 2008 through June 
30, 2008. Thereafter, the OPPS provides payment for separately payable 
therapeutic radiopharmaceuticals on a prospective basis, with payment 
rates based upon mean costs from hospital claims data as set forth in 
the CY 2008 OPPS/ASC final rule with comment period, unless otherwise 
required by law.
b. Proposed Payment Policy
    Since the start of the temporary cost-based payment methodology for 
radiopharmaceuticals in CY 2006, we have met with several interested 
parties on a number of occasions regarding payment under the OPPS for 
radiopharmaceuticals and have received numerous different suggestions 
from these stakeholders regarding payment methodologies that we could 
employ for future use under the OPPS.
    In the CY 2008 OPPS/ASC final rule with comment period (72 FR 
66771), we solicited comments requesting interested parties to provide 
information related to if and how the existing ASP methodology could be 
used to establish payment for specific therapeutic radiopharmaceuticals 
under the OPPS. We received several responses to our request for 
comments.
    Similar to the recommendations we received during the CY 2008 OPPS/
ASC proposed rule comment period (72 FR 66770), we received several 
suggestions regarding the establishment of an OPPS-specific methodology 
for radiopharmaceutical payment that would be similar to the ASP 
methodology, without following the

[[Page 41494]]

established ASP procedures referenced at 1847A of the Act and 
implemented through rulemaking. Some commenters recommended using 
external data submitted by a variety of sources other than 
manufacturers. Along this line, commenters suggested gathering 
information from nuclear pharmacies using methodologies with a variety 
of names such as Nuclear Pharmacy Calculated Invoiced Price (Averaged) 
(CIP) and Calculated Pharmacy Sales Price (CPSP). Other commenters 
recommended that CMS base payment for certain radiopharmaceuticals on 
manufacturer-reported ASP.
    As noted in the CY 2008 OPPS/ASC final rule with comment period (72 
FR 66771), a ratesetting approach based on external data would be 
administratively burdensome for us because we would be required to 
collect, process, and review external information to ensure that it was 
valid, reliable, and representative of a diverse group of hospitals so 
that it could be used to establish rates for all hospitals. However, we 
specifically requested additional comments regarding the use of the 
existing ASP reporting structure for therapeutic radiopharmaceuticals 
as this established methodology is already used for payment of other 
drugs provided in the hospital outpatient setting (72 FR 66771). While 
we received several recommendations from commenters on the CY 2008 
OPPS/ASC final rule with comment period regarding payment of 
therapeutic radiopharmaceuticals based on estimated costs provided by 
manufacturers or other parties, we believe that the use of external 
data for payment of therapeutic radiopharmaceuticals should only be 
adopted if those external data are subject to the same well-established 
regulatory framework as the ASP data currently used for payment of 
separately payable drugs and biologicals under the OPPS. We have 
previously indicated that nondevice external data used for setting 
payment rates should be publicly available and representative of a 
diverse group of hospitals both by location and type, while it should 
also identify its data sources. We do not believe that external 
therapeutic radiopharmaceutical cost data voluntarily provided outside 
of the established ASP methodology, either by manufacturers or nuclear 
pharmacies, would generally satisfy these criteria that are minimum 
standards for setting OPPS payment rates.
    Another commenter on the CY 2008 OPPS/ASC final rule with comment 
period recommended that CMS identify the therapeutic 
radiopharmaceutical used for Zevalin therapy (A9543 (Yttrium Y-90 
ibritumomab tiuxetan, therapeutic, per treatment dose, up to 40 
millicuries)) as a biological for payment purposes, instead of treating 
it as a radiopharmaceutical. As discussed in the CY 2003 OPPS final 
rule with comment period (67 FR 66757), Zevalin treatment consists of a 
radioactive isotope that is delivered to its target tissue by a 
monoclonal antibody. At that time, we explained that because of the 
specific requirements associated with delivery of radioactive isotope 
therapy, any product containing a therapeutic radioisotope, including 
Y-90 Zevalin, would be considered to be covered and paid under the 
category of benefits described under section 1861(s)(4) of the Act for 
radioactive isotope therapy. We stated that we would not consider 
therapeutic radiopharmaceuticals to be drugs as described in section 
1861(t) and, therefore, the OPPS payment methodology for separately 
payable drugs and biologicals would not be applicable to payment for Y-
90 Zevalin. We continue to believe that the most appropriate Medicare 
benefit category for Y-90 Zevalin is provided in section 1861(s)(4) of 
the Act because this product is a specific radioactive isotope therapy. 
Therefore, the CY 2009 OPPS proposal for nonpass-through payment of 
separately payable biologicals that is described in section V.B.3.b. of 
this proposed rule would not apply to payment for Y-90 Zevalin.
    As noted in the CY 2008 OPPS/ASC final rule with comment period (72 
FR 66770), at its September 2007 meeting, the APC Panel recommended 
that CMS create a composite APC for Bexxar or related therapies and 
present it for the APC Panel's consideration at the next APC Panel 
meeting. We accepted this recommendation and modeled a 
radioimmunotherapy (RIT) composite APC for both Bexxar and Zevalin 
therapies using our final rule CY 2008 claims database. We discussed 
this analysis with the APC Panel at its March 2008 meeting.
    To perform this analysis for the APC Panel, we first identified all 
claims that had an occurrence of a case-defining therapeutic 
radiopharmaceutical HCPCS code used for a RIT treatment: A9545 (Iodine 
I-131 tositumomab, therapeutic, per treatment dose) and A9543 (Yttrium 
Y-90 ibritumomab tiuxetan, therapeutic, per treatment dose, up to 40 
millicuries). We then identified what we considered to be the HCPCS 
codes for services and products associated with RIT, based on 
information from the manufacturers and suggestions from CMS medical 
advisors and identified associated claims (using beneficiary health 
insurance claim (HIC) numbers) to develop the total median cost for a 
RIT composite APC.
    We note that very few hospitals billed all of the HCPCS codes for 
an individual beneficiary that we expected to be reported for a case of 
RIT treatment. We used this ``HIC-linked'' file consisting of all 
associated claims for each beneficiary from one hospital that we 
considered to be part of a single case of RIT treatment to develop a 
composite APC cost estimate for a course of RIT treatment, where a case 
required: (1) HCPCS code A9545 or A9543; (2) an HCPCS code for either 
nonradiolabeled tositumomab (G3001 (Administration or supply of 
tositumomab, 450 mg)) or rituximab (J9310 (Rituximab, 100 mg)) (which 
would also indicate the start of a RIT case); (3) a HCPCS code for the 
corresponding diagnostic radiopharmaceutical (A9544 (Iodine I-131 
tositumomab, diagnostic, per study dose) or A9542 (Indium In-111, 
ibritumomab tiuxetan, diagnostic, per study dose, up to 5 
millicuries)); and (4) at least one instance of a diagnostic imaging 
service (CPT code 78804 (Radiopharmaceutical localization of tumor or 
distribution of radiopharmaceutical agent(s); whole body, requiring two 
or more days imaging)) prior to the administration of the therapeutic 
radiopharmaceutical. In addition, in order to further define the case 
for an estimate of a composite APC cost, we did not include the costs 
of services occurring on dates before the provision of the 
nonradiolabeled tositumomab or rituximab or after the administration of 
the therapeutic radiopharmaceutical.
    Other services we expected to be reported for a case, such as CPT 
code 79403 (Radiopharmaceutical therapy, radiolabeled monoclonal 
antibody by intravenous infusion) and CPT code 77300 (Basic radiation 
dosimetry calculation, central axis depth dose calculation, TDF, NSD, 
gap calculation, off axis factor, tissue inhomogeneity factors, 
calculation of non-ionizing radiation surface and depth dose, as 
required during course of treatment, only when prescribed by the 
treating physician), were considered optional and, although they were 
not required in order to determine the RIT case, the costs of these 
associated services were included when we established the median cost 
of the RIT composite APC.
    We determined that the median cost for the RIT composite APC, 
including required and optional additional services directly related to 
the RIT treatment, would be approximately $19,000. This figure 
represents, at a minimum, the estimated cost of the nonradiolabeled 
tositumomab (or

[[Page 41495]]

rituximab), the diagnostic radiopharmaceutical, the therapeutic 
radiopharmaceutical, and the imaging, based on costs from hospital 
claims data.
    Upon review of this study, the APC Panel, at its March 2008 
meeting, recommended that CMS pursue a RIT composite APC that uses 
existing claims and stakeholder data to establish appropriate payment 
rates for RIT protocols. In addition, the APC Panel recommended that 
CMS provide specific guidance to hospitals on appropriate billing for 
RIT under a composite APC methodology. We are not accepting these 
recommendations of the APC Panel. First, we do not believe it would be 
appropriate to incorporate external data into a composite APC 
methodology, when composite APC median costs for a comprehensive 
service that the composite APC describes are based upon reported 
hospital costs on claims as described in section II.A.2.e. of this 
proposed rule. As we have hospital costs from CY 2007 claims for the 
services that would be paid through a RIT composite APC, we would have 
no reason to use external stakeholder data instead of reported hospital 
costs for ratesetting for such an APC. In addition, as the APC Panel 
alluded to in its second recommendation regarding billing guidance to 
hospitals, our claims analysis demonstrated that, according to hospital 
claims data, apparently few patients actually received all the 
component services associated with RIT treatment from a single 
hospital, or many RIT treatments were incorrectly reported by 
hospitals. A composite APC payment provides more accurate payment for a 
set of major services with only limited variation from hospital to 
hospital or from case to case and relies on correctly coded claims for 
the comprehensive service to develop the composite cost, whereas RIT 
treatment does not appear to have these characteristics. Stakeholders 
have confirmed that a proportion of patients receiving a diagnostic 
radiopharmaceutical and imaging in preparation for RIT treatment do not 
go on to receive the therapeutic radiopharmaceutical for a variety of 
specific clinical reasons. Furthermore, the whole course of RIT 
treatment may occur over a several week period, and the challenges 
associated with instructing hospitals to report component services in a 
timely fashion that would allow the I/OCE to determine whether a 
composite payment would be appropriate are significant. Therefore, we 
believe it would be premature to propose payment of a composite APC for 
RIT treatment for CY 2009.
    We received comments on the CY 2008 OPPS/ASC final rule with 
comment period from certain radiopharmaceutical manufacturers who 
indicated that the standard ASP methodology could be used for payment 
of certain therapeutic radiopharmaceutical products. Specifically, 
these manufacturers expressed interest in providing ASP for their 
therapeutic radiopharmaceutical products as a basis for payment under 
the OPPS. We appreciate the willingness of these manufacturers to 
provide ASP data, but we recognize that payment based on the ASP 
methodology may not be possible for all therapeutic 
radiopharmaceuticals if manufacturers are unable or unwilling to 
voluntarily submit ASP data. Therefore, we are proposing the following 
payment methodology for therapeutic radiopharmaceuticals under the CY 
2009 OPPS. For therapeutic radiopharmaceuticals where ASP information 
is submitted through the established ASP process by all manufacturers 
of the specific therapeutic radiopharmaceutical, we would provide 
payment for the average acquisition and associated handling costs of 
the therapeutic radiopharmaceutical at the same relative ASP-based 
amount (proposed at ASP+4 percent for CY 2009) that we would pay for 
separately payable drugs and biologicals in CY 2009 under the OPPS. If 
sufficient ASP information is not submitted or appropriately certified 
by the manufacturer for a given calendar year quarter, then for that 
quarter we are proposing that the OPPS would provide a prospective 
payment based on the mean cost from hospital claims data as displayed 
in Table 25 below, as this was the methodology finalized in the CY 2008 
OPPS/ASC final rule with comment period. Further, we are proposing to 
continue the methodology, as discussed in the CY 2008 OPPS/ASC final 
rule with comment period (72 FR 66772), of eliminating claims from 
providers who consistently (more than 2 times) reported charges in the 
CY 2007 claims data that were less than $100 when converted to costs 
for HCPCS codes A9543 and A9545 as part of the usual ratesetting 
process. We believe that this would mitigate the effects of using 
incorrectly coded claims from several providers in our standard 
ratesetting methodology which calculates the mean costs for these two 
products from the claims available for the update year.
    Because we do not have ASP data for therapeutic 
radiopharmaceuticals that were used for payment in April 2008, the 
proposed payment rates included in Addenda A and B to this proposed 
rule are based on mean costs from historical hospital claims data 
available for this proposed rule. Under our proposal that initially 
looks to ASP data to establish the payment rates for separately payable 
therapeutic radiopharmaceuticals, beginning in CY 2009, we would update 
the payment rates for therapeutic radiopharmaceuticals quarterly as new 
ASP data become available, just as we would update the payment rates 
for separately payable drugs and biologicals under the OPPS.
    We are proposing to allow manufacturers to submit ASP information 
for any separately payable therapeutic radiopharmaceutical for payment 
purposes under the OPPS. However, we are not proposing to compel 
manufacturers to submit ASP information. The ASP data submitted would 
need to be provided for a patient-specific dose, or patient-ready form, 
of the therapeutic radiopharmaceutical in order to properly calculate 
the ASP amount for a given HCPCS code. In addition, in those instances 
where there is more than one manufacturer of a particular therapeutic 
radiopharmaceutical, we note that all manufacturers would need to 
submit ASP information in order for payment to be made on an ASP basis. 
We are specifically requesting public comment on the development of a 
crosswalk, similar to the NDC/HCPCS crosswalk for separately payable 
drugs and biologicals posted on the CMS Web site at: http://www.cms.hhs.gov/McrPartBDrugAvgSalesPrice/01a_2008aspfiles.asp, for 
use for therapeutic radiopharmaceuticals. We believe that the use of 
ASP information for OPPS payment would provide an opportunity to 
improve payment accuracy for these products by applying an established 
methodology that has already been successfully implemented under the 
OPPS for other separately payable drugs and biologicals. As is the case 
with other drugs and biologicals subject to ASP reporting, in order for 
a therapeutic radiopharmaceutical to receive payment based on ASP 
beginning January 1, 2009, we would need to receive ASP information 
from the manufacturer in October 2008 that would reflect therapeutic 
radiopharmaceutical sales in the third quarter of CY 2008 (July 1, 2008 
through September 30, 2008). These data would not be available for 
publication in the CY 2009 OPPS/ASC final rule with

[[Page 41496]]

comment period but would be included in the January 2009 OPPS quarterly 
release that would update the payment rates for separately payable 
drugs, biologicals, and therapeutic radiopharmaceuticals based on the 
most recent ASP data, consistent with our customary practice over the 
past 3 years when we have used the ASP methodology for payment of 
separately payable drugs and biologicals under the OPPS. In addition, 
we would need to receive information from radiopharmaceutical 
manufacturers that would allow us to calculate a unit dose cost 
estimate based on the applicable HCPCS code for the therapeutic 
radiopharmaceutical.
    We realize that not all therapeutic radiopharmaceutical 
manufacturers may be willing or able to submit ASP information for a 
variety of reasons. We are proposing to provide payment at the ASP rate 
if ASP information is available for a given calendar year quarter or, 
if ASP information is not available, we are proposing to provide 
payment based on the most recent hospital mean unit cost data that we 
have available. We believe that both methodologies represent an 
appropriate and adequate proxy for average hospital acquisition cost 
and associated handling costs for these products. Therefore, if ASP 
information for the appropriate period of sales related to payment in 
any CY 2009 quarter is not available, we would rely on the CY 2007 mean 
unit cost data derived from hospital claims to set the payment rates 
for therapeutic radiopharmaceuticals. We note that this is not the 
usual OPPS process that relies on alternative data sources, such as WAC 
or AWP, when ASP information is temporarily unavailable, prior to 
defaulting to the mean unit cost from hospital claims data. We are 
proposing this methodology specifically for therapeutic 
radiopharmaceuticals whereby we would immediately default to the mean 
unit cost from hospital claims if sufficient ASP data were not 
available because we are not proposing to require therapeutic 
radiopharmaceutical manufacturers to report ASP data at this time. We 
do not believe that WAC or AWP is an appropriate proxy for OPPS payment 
for average therapeutic radiopharmaceutical acquisition cost and 
associated handling costs when manufacturers are not required to submit 
ASP data and, therefore, payment based on WAC or AWP could continue for 
the full calendar year.
    Similar to the ASP process already in place for drugs and 
biologicals, we are proposing to update ASP data for therapeutic 
radiopharmaceuticals through our quarterly process as updates become 
available. In addition, we are proposing to assess the availability of 
ASP data for therapeutic radiopharmaceuticals quarterly, and if ASP 
data become available midyear, we would transition at the next 
available quarter to ASP-based payment. For example, if ASP data are 
not available for the quarter beginning January 2009 (that is, ASP 
information reflective of third quarter CY 2008 sales are not submitted 
in October 2008), then the next opportunity to begin payment based on 
ASP data for a therapeutic radiopharmaceutical would be April 2009 if 
ASP data reflective of fourth quarter CY 2008 sales were submitted in 
January 2009.

                 Table 25.--Proposed CY 2009 Separately Payable Therapeutic Radiopharmaceuticals
----------------------------------------------------------------------------------------------------------------
                                                                                                     Proposed CY
                                                                                                         2009
                                                                                                       payment
               HCPCS code                        Short descriptor         Proposed CY   Proposed CY   rate based
                                                                            2009 APC      2009 SI      on mean
                                                                                                      cost from
                                                                                                        claims
----------------------------------------------------------------------------------------------------------------
A9517..................................  I131 iodide cap, rx............         1064            K       $514.52
A9530..................................  I131 iodide sol, rx............         1150            K        424.97
A9543..................................  Y90 ibritumomab, rx............         1643            K     15,159.66
A9545..................................  I131 tositumomab, rx...........         1645            K     10,554.47
A9563..................................  P32 Na phosphate...............         1675            K        164.98
A9564..................................  P32 chromic phosphate..........         1676            K        560.36
A9600..................................  Sr89 strontium.................         0701            K      1,308.96
A9605..................................  Sm 153 lexidronm...............         0702            K      2,655.52
----------------------------------------------------------------------------------------------------------------

5. Proposed Payment for Nonpass-Through Drugs, Biologicals, and 
Radiopharmaceuticals With HCPCS Codes, but Without OPPS Hospital Claims 
Data
    Pub. L. 108-173 does not address the OPPS payment in CY 2005 and 
after for drugs, biologicals, and radiopharmaceuticals that have 
assigned HCPCS codes, but that do not have a reference AWP or approval 
for payment as pass-through drugs or biologicals. Because there is no 
statutory provision that dictated payment for such drugs and 
biologicals in CY 2005, and because we had no hospital claims data to 
use in establishing a payment rate for them, we investigated several 
payment options for CY 2005 and discussed them in detail in the CY 2005 
OPPS final rule with comment period (69 FR 65797 through 65799).
    For CYs 2005 to 2007, we implemented a policy to provide separate 
payment for new drugs, biologicals, and radiopharmaceuticals with HCPCS 
codes, but which did not have pass-through status, at a rate that was 
equivalent to the payment they received in the physician's office 
setting, established in accordance with the ASP methodology. For CY 
2008, we finalized a policy to provide payment for new drugs and 
biologicals with HCPCS codes but which do not have pass-through status 
and are without OPPS hospital claims data, at ASP+5 percent, consistent 
with the final OPPS payment methodology for other separately payable 
drugs and biologicals. We are proposing to continue this methodology 
for CY 2009. Therefore, for CY 2009, we are proposing to provide 
payment for new drugs and biologicals with HCPCS codes, but which do 
not have pass-through status and are without OPPS hospital claims data, 
at ASP+4 percent, consistent with the CY 2009 proposed payment 
methodology for other separately payable nonpass-through drugs and 
biologicals. It is our belief that this policy ensures that new 
nonpass-through drugs and biologicals are treated like other drugs and 
biologicals under the OPPS, unless they are granted pass-through 
status. Only if

[[Page 41497]]

they are pass-through drugs and biologicals would they receive a 
different payment for CY 2009, generally equivalent to the payment 
these drugs and biologicals would receive in the physician's office 
setting, consistent with the requirements of the statute. We are 
proposing to continue packaging payment for all new nonpass-through 
diagnostic radiopharmaceuticals in CY 2009.
    In accordance with the ASP methodology, in the absence of ASP data, 
we are proposing, for CY 2009, to continue the policy we implemented 
beginning in CY 2005 of using the WAC for the product to establish the 
initial payment rate for new nonpass-through drugs and biologicals with 
HCPCS codes, but which are without OPPS claims data. However, we note 
that if the WAC is also unavailable, we would make payment at 95 
percent of the product's most recent AWP. We are also proposing to 
assign status indicator ``K'' to HCPCS codes for new drugs and 
biologicals for which we have not received a pass-through application. 
We further note that with respect to new items for which we do not have 
ASP data, once their ASP data become available in later quarter 
submissions, their payment rates under the OPPS would be adjusted so 
that the rates are based on the ASP methodology and set to the 
finalized ASP-based amount (proposed for CY 2009 at ASP+4 percent) for 
items that have not been granted pass-through status.
    For CY 2009, we also are proposing to base payment for new 
therapeutic radiopharmaceuticals with HCPCS codes as of January 1, 
2009, but which do not have pass-through status, on the WACs for these 
products if ASP data for these therapeutic radiopharmaceuticals are not 
available. If the WACs are also unavailable, we would make payment for 
new therapeutic radiopharmaceuticals at 95 percent of their most recent 
AWPs because we would not have mean costs from hospital claims data 
upon which to base payment. Analogous to new drugs and biologicals, we 
are proposing to assign status indicator ``K'' to HCPCS codes for new 
therapeutic radiopharmaceuticals for which we have not received a pass-
through application.
    Consistent with other ASP-based payments, for CY 2009, we are 
proposing to make any appropriate adjustments to the payment amounts 
for new drugs and biologicals in the CY 2009 OPPS/ASC final rule with 
comment period and also on a quarterly basis on our Web site during CY 
2009 if later quarter ASP submissions (or more recent WACs or AWPs) 
indicate that adjustments to the payment rates for these drugs and 
biologicals are necessary. The payment rates for new therapeutic 
radiopharmaceuticals would also be adjusted accordingly. We note, the 
new CY 2009 HCPCS codes for drugs, biologicals, and therapeutic 
radiopharmaceuticals are not available at the time of development of 
this proposed rule; however, they will be included in the CY 2009 OPPS/
ASC final rule with comment period where they will be assigned comment 
indicator ``NI'' to reflect that their interim final OPPS treatment is 
open to comment in the CY 2009 OPPS/ASC final rule with comment period.
    There are several nonpass-through drugs and biologicals that were 
payable in CY 2007 and/or CY 2008 for which we do not have any CY 2007 
hospital claims data. In order to determine the packaging status of 
these items for CY 2009, we calculated an estimate of the per day cost 
of each of these items by multiplying the payment rate for each product 
based on ASP+4 percent, similar to other nonpass-through drugs and 
biologicals paid separately under the OPPS, by an estimated average 
number of units of each product that would typically be furnished to a 
patient during one administration in the hospital outpatient setting. 
We are proposing to package items for which we estimate the per 
administration cost to be less than or equal to $60, which is the 
general packaging threshold that we are proposing for drugs, 
biologicals, and therapeutic radiopharmaceuticals in CY 2009. We are 
proposing to pay separately for items with an estimated per 
administration cost greater than $60 (with the exception of diagnostic 
radiopharmaceuticals and contrast agents which we are proposing to 
continue to package regardless of cost, as discussed in more detail in 
section V.B.2.b. of this proposed rule) in CY 2009. We are proposing 
that the CY 2009 payment for separately payable items without CY 2007 
claims data would be based on ASP+4 percent, similar to other 
separately payable nonpass-through drugs and biologicals under the 
OPPS. In accordance with the ASP methodology used in the physician's 
office setting, in the absence of ASP data, we would use the WAC for 
the product to establish the initial payment rate. However, we note 
that if the WAC is also unavailable, we would make payment at 95 
percent of the most recent AWP available.
    Table 26 lists all of the nonpass-through drugs and biologicals 
without available CY 2007 claims data to which these policies would 
apply in CY 2009.

                          Table 26.--Drugs and Biologicals Without CY 2007 Claims Data
----------------------------------------------------------------------------------------------------------------
                                                          Proposed      Estimated
                                                         ASP-based   average number    Proposed CY   Proposed CY
          HCPCS code               Short descriptor       payment     of units per       2009 SI       2009 APC
                                                            rate     administration
----------------------------------------------------------------------------------------------------------------
C9237.........................  Inj, lanreotide              $23.90             90   K                      9237
                                 acetate.
J0400.........................  Aripiprazole injection  ...........             39   N               ...........
J1573.........................  Hepagam B intravenous,        47.43              8   K                      1138
                                 inj.
J2724.........................  Protein C concentrate.        11.96            630   K                      1139
J3355.........................  Urofollitropin, 75 iu.        48.25              2   K                      1741
Q4096.........................  VWF complex, not               0.64           6825   K                      1213
                                 Humate-P.
Q4097.........................  Inj IVIG Privigen 500         33.54             84   K                      1214
                                 mg.
----------------------------------------------------------------------------------------------------------------

    In the CY 2008 OPPS/ASC final rule with comment period (72 FR 
66776), we began recognizing, for OPPS payment purposes, multiple HCPCS 
codes indicating different dosages for covered Part B drugs. In 
general, prior to CY 2008, the OPPS recognized the lowest available 
administrative dose of a drug if multiple HCPCS codes existed for the 
drug; for the remainder of the doses, the HCPCS codes were assigned 
status indicator ``B'' indicating that another code existed for OPPS 
purposes. For example, if drug X has 2 HCPCS codes, 1 for a 1 ml dose 
and a second for a 5

[[Page 41498]]

ml dose, prior to CY 2008, the OPPS would have assigned a payable 
status indicator to the 1 ml dose and status indicator ``B'' to the 5 
ml dose. Hospitals were then responsible for billing the appropriate 
number of units for the 1 ml dose in order to receive payment for the 
drug under the OPPS.
    As these HCPCS codes were previously unrecognized under the OPPS 
prior to CY 2008, we do not have claims data to determine their 
appropriate packaging status for CY 2009. For the CY 2008 OPPS/ASC 
final rule with comment period (72 FR 66775), we implemented a policy 
that assigned the status indicator of the previously recognized HCPCS 
code to the associated newly recognized code(s). For CY 2009, we are 
again proposing to continue to use this methodology. Table 27 below 
shows the CY 2007 unrecognized HCPCS code, the CY 2007 status indicator 
for the unrecognized HCPCS code, the CY 2008 short descriptor for the 
unrecognized HCPCS code, the associated recognized CY 2007 HCPCS code, 
and the proposed status indicator for the newly recognized code. As 
noted in the CY 2008 OPPS/ASC final rule with comment period (72 FR 
66775), we believe that this approach is the most appropriate and 
reasonable way to implement this change in HCPCS code recognition under 
the OPPS without impacting payment. However, once claims data are 
available for these previously unrecognized HCPCS codes, we would 
determine the packaging status and resulting status indicator for each 
HCPCS code according to the general code-specific methodology for 
determining a code's packaging status for a given update year. As we 
stated in the CY 2008 OPPS/ASC final rule with comment period (72 FR 
66775), we plan to closely follow our claims data to ensure that our 
annual packaging determinations for the different HCPCS codes 
describing the same drug do not create inappropriate payment incentives 
for hospitals to report certain HCPCS codes instead of others.

     Table 27.--HCPCS Codes Unrecognized in CY 2007, Associated Recognized HCPCS Codes, and Proposed Status
                                             Indicators for CY 2009
----------------------------------------------------------------------------------------------------------------
                                                                                                Proposed CY 2009
                                                                              Associated HCPCS    SI for HCPCS
HCPCS codes not recognized in CY      CY 2007 SI          CY 2008 short       recognized in CY     code newly
              2007                                          descriptor              2007        recognized in CY
                                                                                                      2008
----------------------------------------------------------------------------------------------------------------
J1470...........................  B                  Gamma globulin 2 CC inj  J1460...........  K
J1480...........................  B                  Gamma globulin 3 CC inj  J1460...........  K
J1490...........................  B                  Gamma globulin 4 CC inj  J1460...........  K
J1500...........................  B                  Gamma globulin 5 CC inj  J1460...........  K
J1510...........................  B                  Gamma globulin 6 CC inj  J1460...........  K
J1520...........................  B                  Gamma globulin 7 CC inj  J1460...........  K
J1530...........................  B                  Gamma globulin 8 CC inj  J1460...........  K
J1540...........................  B                  Gamma globulin 9 CC inj  J1460...........  K
J1550...........................  B                  Gamma globulin 10 CC     J1460...........  K
                                                      inj.
J1560...........................  B                  Gamma globulin > 10 CC   J1460...........  K
                                                      inj.
J8521...........................  B                  Capecitabine, oral, 500  J8520...........  K
                                                      MG.
J9062...........................  B                  Cisplatin 50 MG          J9060...........  N
                                                      injection.
J9080...........................  B                  Cyclophosphamide 200 MG  J9070...........  N
                                                      inj.
J9090...........................  B                  Cyclophosphamide 500 MG  J9070...........  N
                                                      inj.
J9091...........................  B                  Cyclophosphamide 1.0     J9070...........  N
                                                      Grm inj.
J9092...........................  B                  Cyclophosphamide 2.0     J9070...........  N
                                                      Grm inj.
J9094...........................  B                  Cyclophosphamide         J9093...........  N
                                                      lyophilized.
J9095...........................  B                  Cyclophosphamide         J9093...........  N
                                                      lyophilized.
J9096...........................  B                  Cyclophosphamide         J9093...........  N
                                                      lyophilized.
J9097...........................  B                  Cyclophosphamide         J9093...........  N
                                                      lyophilized.
J9110...........................  B                  Cytarabine hcl 500 MG    J9100...........  N
                                                      inj.
J9140...........................  B                  Dacarbazine 200 MG inj.  J9130...........  N
J9182...........................  B                  Etoposide 100 MG inj...  J9181...........  N
J9260...........................  B                  Methotrexate sodium inj  J9250...........  N
J9290...........................  B                  Mitomycin 20 MG inj....  J9280...........  N
J9291...........................  B                  Mitomycin 40 MG inj....  J9280...........  N
J9375...........................  B                  Vincristine sulfate 2    J9370...........  N
                                                      MG inj.
J9380...........................  B                  Vincristine sulfate 5    J9370...........  N
                                                      MG inj.
----------------------------------------------------------------------------------------------------------------

    Finally, there are 8 drugs and biologicals, shown in Table 28 
below, that were payable in CY 2007 for which we lack CY 2007 claims 
data and for which we are unable to determine the per day cost based on 
the ASP methodology. As we are unable to determine the packaging status 
and subsequent payment rates, if applicable, for these drugs and 
biologicals for CY 2009 based on the ASP methodology or claims data, we 
are proposing to package payment for these drugs and biologicals in CY 
2009.

  Table 28.--Drugs and Biologicals Without Information on per Day Cost
               That Are Proposed for Packaging in CY 2009
------------------------------------------------------------------------
                                                           Proposed CY
           HCPCS code               Short descriptor         2009 SI
------------------------------------------------------------------------
90393..........................  Vaccina ig, im........               N

[[Page 41499]]

 
90581..........................  Anthrax vaccine, sc...               N
J0350..........................  Injection anistreplase               N
                                  30 u.
J0395..........................  Arbutamine HCl                       N
                                  injection.
J1452..........................  Intraocular Fomivirsen               N
                                  na.
J2670..........................  Totazoline hcl                       N
                                  injection.
J3530..........................  Nasal vaccine                        N
                                  inhalation.
Q0174..........................  Thiethylperazine                     N
                                  maleate 10 mg.
------------------------------------------------------------------------

VI. Proposed Estimate of OPPS Transitional Pass-Through Spending for 
Drugs, Biologicals, Radiopharmaceuticals, and Devices

A. Background

    Section 1833(t)(6)(E) of the Act limits the total projected amount 
of transitional pass-through payments for drugs, biologicals, 
radiopharmaceuticals, and categories of devices for a given year to an 
``applicable percentage'' of projected total Medicare and beneficiary 
payments under the hospital OPPS. For a year before CY 2004, the 
applicable percentage was 2.5 percent; for CY 2004 and subsequent 
years, we specify the applicable percentage up to 2.0 percent.
    If we estimate before the beginning of the calendar year that the 
total amount of pass-through payments in that year would exceed the 
applicable percentage, section 1833(t)(6)(E)(iii) of the Act requires a 
uniform reduction in the amount of each of the transitional pass-
through payments made in that year to ensure that the limit is not 
exceeded. We make an estimate of pass-through spending to determine not 
only whether payments exceed the applicable percentage, but also to 
determine the appropriate reduction to the conversion factor for the 
projected level of pass-through spending in the following year.
    For devices, developing an estimate of pass-through spending in CY 
2009 entails estimating spending for two groups of items. The first 
group of items consists of device categories that were recently made 
eligible for pass-through payment and that would continue to be 
eligible for pass-through payment in CY 2009. The CY 2008 OPPS/ASC 
final rule with comment period (72 FR 66778) describes the methodology 
we have used in previous years to develop the pass-through spending 
estimate for known device categories continuing into the applicable 
update year. The second group contains items that we know are newly 
eligible, or project would be newly eligible, for device pass-through 
payment in the remainder of CY 2008 or beginning in CY 2009. The sum of 
the CY 2009 pass-through estimates for these two groups of device 
categories would equal the total CY 2009 pass-through spending estimate 
for device categories with pass-through status.
    For drugs and biologicals, section 1833(t)(6)(D)(i) of the Act 
establishes the pass-through payment amount for drugs and biologicals 
eligible for pass-through payment as the amount by which the amount 
authorized under section 1842(o) of the Act (or, if the drug or 
biological is covered under a competitive acquisition contract under 
section 1847B of the Act, an amount determined by the Secretary equal 
to the average price for the drug or biological for all competitive 
acquisition areas and year established under such section as calculated 
and adjusted by the Secretary) exceeds the portion of the otherwise 
applicable fee schedule amount that the Secretary determines is 
associated with the drug or biological. Because we are proposing to pay 
for nonpass-through separately payable drugs and biologicals under the 
CY 2009 OPPS at ASP+4 percent, which represents the otherwise 
applicable fee schedule amount associated with a pass-through drug or 
biological, and we would pay for pass-through drugs and biologicals at 
ASP+6 percent or the Part B drug CAP rate, if applicable, our estimate 
of drug and biological pass-through payment for CY 2009 is not zero. 
Similar to estimates for devices, the first group of drugs and 
biologicals requiring a pass-through payment estimate consists of those 
products that were recently made eligible for pass-through payment and 
that would continue to be eligible for pass-through payment in CY 2009. 
The second group contains drugs and biologicals that we know are newly 
eligible, or project would be newly eligible, beginning in CY 2009. The 
sum of the CY 2009 pass-through estimates for these two groups of drugs 
and biologicals would equal the total CY 2009 pass-through spending 
estimate for drugs and biologicals with pass-through status.

B. Proposed Estimate of Pass-Through Spending

    We are proposing to set the applicable percentage limit at 2.0 
percent of the total OPPS projected payments for CY 2009, consistent 
with our OPPS policy from CY 2004 through CY 2008.
    As discussed in section IV.A. of this proposed rule, there are 
currently no known device categories receiving pass-through payment in 
CY 2008 that would continue for payment during CY 2009. Therefore, 
there are no device categories in the first group, that is, device 
categories recently made eligible for pass-through payment and 
continuing into CY 2009, and the estimate for this group is $0.
    In estimating CY 2009 pass-through spending for device categories 
in the second group (that is, device categories that we know at the 
time of the development of this proposed rule would be newly eligible 
for pass-through payment in CY 2009 (of which there are none), 
additional device categories that we estimate could be approved for 
pass-through status subsequent to the development of this proposed rule 
and before January 1, 2009, and contingent projections for new 
categories in the second through fourth quarters of CY 2009), we are 
proposing to use the general methodology described in the CY 2008 OPPS/
ASC final rule with comment period (72 FR 66778), while also taking 
into account recent OPPS experience in approving new pass-through 
device categories. The estimate of CY 2009 pass-through spending for 
this second group is $10.0 million. Employing our established 
methodology that the estimate of pass-through device spending in CY 
2009 incorporates CY 2009 estimates of pass-through spending for known 
device categories continuing in CY 2009, those first effective January 
1, 2009, and those device categories projected to be approved during 
subsequent quarters of CY 2008 and CY 2009, our proposed total pass-
through estimate for device categories for CY 2009 is $10.0 million.

[[Page 41500]]

    To estimate CY 2009 pass-through spending for drugs and biologicals 
in the first group, specifically those drugs and biologicals recently 
made eligible for pass-through payment and continuing into CY 2009, we 
are proposing to utilize the most recent Medicare physician's office 
data regarding their utilization, information provided in the 
respective pass-through applications, historical hospital claims data, 
pharmaceutical industry information, and clinical information regarding 
the drugs or biologicals, in order to project the CY 2009 OPPS 
utilization of the products. For the known drugs and biologicals that 
would continue on pass-through status in CY 2009, we then estimate the 
total pass-through payment amount as the difference between ASP+6 
percent or the Part B drug CAP rate, as applicable, and ASP+4 percent, 
aggregated across the projected CY 2009 OPPS utilization of these 
products. If payment for the drug or biological would be packaged if 
the product were not paid separately because of its pass-through 
status, we include in the pass-through estimate the full payment for 
the drug or biological at ASP+6 percent. Based on these analyses, we 
are proposing the estimated pass-through spending attributable to the 
first group (that is, the known drugs and biologicals continuing with 
pass-through eligibility in CY 2009) described above to be about $3.4 
million for CY 2009. This $3.4 million estimate of CY 2009 pass-through 
spending for the first group of pass-through drugs and biologicals 
reflects the current pass-through drugs and biologicals that are 
continuing on pass-through status into CY 2009, which are displayed in 
Table 21 in section V.A.3. of this proposed rule.
    To estimate CY 2009 pass-through spending for drugs and biologicals 
in the second group (that is, drugs and biologicals that we know at the 
time of development of this proposed rule would be newly eligible for 
pass-through payment in CY 2009 (of which there are none), additional 
drugs and biologicals that we estimate could be approved for pass-
through status subsequent to the development of this proposed rule and 
before January 1, 2009, and projections for new drugs and biologicals 
that could be initially eligible for pass-through payment in the second 
through fourth quarters of CY 2009), we are proposing to use 
utilization estimates from applicants, pharmaceutical industry data, 
and clinical information as the basis for pass-through spending 
estimates for these drugs and biologicals for CY 2009, while also 
considering the most recent OPPS experience in approving new pass-
through drugs and biologicals. Based on these analyses, we are 
proposing the estimated pass-through spending attributable to this 
second group of drugs and biologicals to be about $5.5 million for CY 
2009.
    In the CY 2005 OPPS final rule with comment period (69 FR 65810), 
we indicated that we are accepting pass-through applications for new 
radiopharmaceuticals that are assigned a HCPCS code on or after January 
1, 2005. (Prior to this date, radiopharmaceuticals were not included in 
the category of drugs paid under the OPPS, and, therefore, were not 
eligible for pass-through status.) There are no radiopharmaceuticals 
that are eligible for pass-through payment at the time of publication 
of this proposed rule. In addition, we have no information identifying 
new radiopharmaceuticals to which a HCPCS code might be assigned on or 
after January 1, 2009, for which pass-through payment status would be 
sought. We also have no historical data regarding payment for new 
radiopharmaceuticals with pass-through status under the methodology 
that we specified for the CY 2005 OPPS or the CY 2009 methodology that 
we are proposing as discussed in section V.A.3. of this proposed rule. 
However, we do not believe that pass-through spending for new 
radiopharmaceuticals in CY 2009 would be significant enough to 
materially affect our estimate of total pass-through spending in CY 
2009. Therefore, we are not including radiopharmaceuticals in our 
proposed estimate of pass-through spending for CY 2009. We discuss the 
proposed methodology for determining the CY 2009 payment amount for new 
therapeutic radiopharmaceuticals without pass-through status in section 
V.B.5. of this proposed rule. We discuss our proposal to package 
payment for all new diagnostic radiopharmaceuticals without pass-
through status in CY 2009 in section V.B.2.b. of this proposed rule.
    In accordance with the comprehensive methodology described above, 
we estimate that total pass-through spending for the device categories 
and the drugs and biologicals that are continuing for pass-through 
payment into CY 2009 and those devices, drugs, biologicals, and 
radiopharmaceuticals that first become eligible for pass-through status 
subsequent to this proposed rule in CY 2008 or during CY 2009 would 
approximate $18.9 million, which represents 0.07 percent of total OPPS 
projected payments for CY 2009.
    Because we estimate that pass-through spending in CY 2009 would not 
amount to 2.0 percent of total projected OPPS CY 2009 spending, we are 
proposing to return 1.93 percent of the pass-through pool to adjust the 
conversion factor, as we discuss in section II.B. of this proposed 
rule.

VII. Proposed OPPS Payment for Brachytherapy Sources

A. Background

    Section 1833(t)(2)(H) of the Act, as added by section 621(b)(2)(C) 
of Public Law 108-173, mandated the creation of separate groups of 
covered OPD services that classify brachytherapy devices separately 
from other services or groups of services. The additional groups must 
reflect the number, isotope, and radioactive intensity of the devices 
of brachytherapy furnished, including separate groups for palladium-103 
and iodine-125 devices.
    Section 1833(t)(16)(C) of the Act, as added by section 621(b)(1) of 
Public Law 108-173, established payment for devices of brachytherapy 
consisting of a seed or seeds (or radioactive source) based on a 
hospital's charges for the service, adjusted to cost. The period of 
payment under this provision is for brachytherapy sources furnished 
from January 1, 2004, through December 31, 2006. Under section 
1833(t)(16)(C) of the Act, charges for the brachytherapy devices may 
not be used in determining any outlier payments under the OPPS for that 
period of payment. Consistent with our practice under the OPPS to 
exclude items paid at cost from budget neutrality consideration, these 
items were excluded from budget neutrality for that time period as 
well.
    Section 621(b)(3) of Pub. L. 108-173 required the GAO to conduct a 
study to determine appropriate payment amounts for devices of 
brachytherapy, and to submit a report on its study to the Congress and 
the Secretary, including recommendations on the appropriate payments 
for such devices. This report was due to Congress and to the Secretary 
no later than January 1, 2005. The GAO's final report, ``Medicare 
Outpatient Payments: Rates for Certain Radioactive Sources Used in 
Brachytherapy Could Be Set Prospectively'' (GAO-06-635), was published 
on July 24, 2006. We summarized and discussed the report's findings and 
recommendations in the CY 2007 OPPS/ASC final rule with comment period 
(71 FR 68103 through 68105). The GAO report principally recommended 
that we use OPPS historical claims data to determine prospective 
payment rates for two of the

[[Page 41501]]

most frequently used brachytherapy sources, iodine-125 and palladium-
103, and also recommended that we consider using claims data for the 
third source studied, high dose rate (HDR) iridium-192.
    In our CY 2007 annual OPPS rulemaking, we proposed and finalized a 
policy of prospective payment based on median costs for the 11 
brachytherapy sources for which we had claims data. We based the 
prospective payment rates on median costs for each source from our CY 
2005 claims data (71 FR 68102 through 71 FR 68114).
    Subsequent to publication of the CY 2007 OPPS/ASC final rule with 
comment period, section 107(a) of the MIEA-TRHCA amended section 
1833(t)(16)(C) of the Act by extending the payment period for 
brachytherapy sources based on a hospital's charges adjusted to cost 
for 1 additional year, through December 31, 2007. Therefore, we 
continued to pay for brachytherapy sources on charges adjusted to cost 
for CY 2007.
    Section 107(b)(1) of the MIEA-TRHCA amended section 1833(t)(2)(H) 
of the Act by adding a requirement for the establishment of separate 
payment groups for ``stranded and non-stranded'' brachytherapy devices 
beginning July 1, 2007. Section 107(b)(2) of the MIEA-TRHCA authorized 
the Secretary to implement this new requirement by ``program 
instruction or otherwise.'' This new requirement is in addition to the 
requirement for separate payment groups based on the number, isotope, 
and radioactive intensity of brachytherapy devices that was previously 
established by section 1833(t)(2)(H) of the Act. We note that 
commenters who responded to the CY 2007 proposed rule asserted that 
stranded sources, which they described as embedded into the stranded 
suture material and separated within the strand by material of an 
absorbable nature at specified intervals, had greater production costs 
than non-stranded sources (71 FR 68113 through 68114).
    As a result of the statutory requirement to create separate groups 
for stranded and non-stranded sources as of July 1, 2007, we 
established several coding changes via program transmittal, effective 
July 1, 2007 (Transmittal 1259, dated June 1, 2007). Based upon 
comments on our CY 2007 proposed rule and industry input, we were aware 
of three sources available in stranded and non-stranded forms at that 
time: iodine-125; palladium-103; and cesium-131 (72 FR 42746). We 
created six new HCPCS codes to differentiate the stranded and non-
stranded versions of iodine, palladium and cesium sources.
    The first partial year claims data for separately coded stranded 
and non-stranded iodine, palladium, and cesium sources are now 
available in the CY 2007 claims data that we are using for CY 2009 
ratesetting for brachytherapy sources included in this proposed rule.
    In Transmittal 1259, we indicated that if we receive information 
that any of the other sources now designated as non-stranded are 
marketed as a stranded source, we would create a code for the stranded 
source. We also established two ``Not Otherwise Specified'' (NOS) codes 
for billing stranded and non-stranded sources that are not yet known to 
us and for which we do not have source-specific codes, that is, C2698 
(Brachytherapy source, stranded, not otherwise specified, per source) 
for stranded NOS sources, or C2699 (Brachytherapy source, non-stranded, 
not otherwise specified, per source) for non-stranded NOS sources.
    In the CY 2008 OPPS/ASC final rule with comment period (72 FR 66783 
through 66784), we again finalized prospective payment for 
brachytherapy sources, beginning in CY 2008, with payment rates 
determined using the CY 2006 claims-based costs per source for each 
brachytherapy source. Consistent with our policy regarding APC payments 
made on a prospective basis, we finalized our policy in the CY 2008 
OPPS/ASC final rule with comment period (72 FR 66686) to subject the 
cost of brachytherapy sources to the outlier provision of section 
1833(t)(5) of the Act, and to also subject brachytherapy source payment 
weights to scaling for purposes of budget neutrality. Therefore, 
brachytherapy sources could receive outlier payments if the costs of 
furnishing brachytherapy sources met the criteria for outlier payment. 
In addition, as noted in the CY 2008 OPPS/ASC final rule with comment 
period (72 FR 66683), implementation of prospective payment for 
brachytherapy sources provides opportunities for hospitals to receive 
additional payments under certain circumstances through the 7.1 percent 
rural SCH adjustment.
    We proposed and finalized a policy for CY 2008 to pay the two NOS 
codes, C2698 and C2699, based on a rate equal to the lowest stranded or 
non-stranded prospective payment rate for such sources, respectively, 
on a per source basis (as opposed, for example, to per mci). We 
reasoned that this payment methodology for NOS sources would provide 
payment to a hospital for new sources, while encouraging interested 
parties to quickly bring new sources to our attention so specific 
coding and payment could be established (72 FR 66785).
    After we finalized our proposal to pay for brachytherapy sources in 
CY 2008 based on median costs, section 106(a) of the MMSEA extended the 
charges adjusted to cost payment methodology for an additional 6 
months, through June 30, 2008. On January 18, 2008, we issued 
Transmittal R1417CP to indicate how we are implementing this provision. 
At this time, the prospective payment rates for brachytherapy sources 
finalized in the CY 2008 OPPS/ASC final rule with comment period will 
become effective July 1, 2008.
    Status indicator ``H'' (defined in the CY 2008 OPPS/final rule with 
comment period as ``Pass-Through Device Categories. Separate cost-based 
pass-through payment; not subject to copayment.'') is currently 
assigned to brachytherapy sources through June 30, 2008, for claims 
processing purposes, although a beneficiary copayment is being applied 
to payment for these sources. We finalized a policy in the CY 2008 
OPPS/ASC final rule with comment period to assign status indicator 
``K'' (defined as ``Nonpass-Through Drugs and Biologicals; Therapeutic 
Radiopharmaceuticals; Brachytherapy Sources; Blood and Blood Products. 
Paid under OPPS; separate APC payment.'') to all brachytherapy source 
APCs because the sources would be paid based on prospective payment. 
The definition of status indicator ``K'' was initially changed for CY 
2007 to accommodate prospective payment for brachytherapy sources and 
this change was continued for CY 2008 (72 FR 66785). Brachytherapy 
source APCs will be assigned status indicator ``K'' beginning July 1 
through December 31, 2008.
    For CY 2008, we also adopted the policy we established in the CY 
2007 OPPS/ASC final rule with comment period (which was superseded by 
section 107 of the MIEA-TRHCA) regarding payment for new brachytherapy 
sources for which we have no claims data. We assign future new HCPCS 
codes for new brachytherapy sources to their own APCs, with prospective 
payment rates set based on our consideration of external data and other 
relevant information regarding the expected costs of the sources to 
hospitals (72 FR 66785). When section 106(a) of the MMSEA extended the 
charges adjusted to cost payment methodology for brachytherapy sources 
through June 30, 2008, this policy was not implemented as of January 1, 
2008. We anticipate implementing this policy as of July 1, 2008.
    At its March 2008 meeting, the APC Panel recommended that CMS use

[[Page 41502]]

median cost data to pay for brachytherapy sources in CY 2009, as 
presented by the CMS staff and reviewed by the APC Panel Data 
Subcommittee.

B. Proposed OPPS Payment Policy

    As we have stated in the CY 2008 OPPS/ASC final rule with comment 
period (72 FR 66780), we believe that adopting prospective payment for 
brachytherapy sources would be appropriate for a number of reasons. The 
general OPPS payment methodology is a prospective payment system using 
median costs based on claims data to set the relative payment weights 
for hospital outpatient services. This prospective payment methodology 
would result in more consistent, predictable, and equitable payment 
amounts per source across hospitals by eliminating some of the 
extremely high and low payment amounts resulting from payment based on 
hospitals' charges adjusted to cost. Prospective payment would also 
provide hospitals with incentives for efficiency in the provision of 
brachytherapy services to Medicare beneficiaries. Moreover, this 
approach is consistent with our payment methodology for the vast 
majority of items and services paid under the OPPS. Indeed, section 
1833(t)(2)(C) of the Act requires us to establish prospective payment 
rates for the OPPS system based on median costs (or mean costs if 
elected by the Secretary). Only pass-through devices continue to be 
paid at charges adjusted to cost for all of CY 2008, while 
brachytherapy sources and therapeutic radiopharmaceuticals are paid at 
charges adjusted to cost for the first 6 months of CY 2008.
    We are proposing to use CY 2007 claims data for setting the CY 2009 
rates for brachytherapy sources, as we are proposing for most other 
items and services that will be paid under the CY 2009 OPPS, using our 
standard OPPS ratesetting methodology. We believe that we have 
sufficiently robust CY 2007 claims data for all payable brachytherapy 
sources, including stranded and non-stranded iodine, palladium, and 
cesium sources. As indicated earlier, at the March 2008 APC Panel 
meeting, the APC Panel Data Subcommittee reviewed the CY 2007 claims 
data for brachytherapy sources and the APC Panel recommended using the 
median cost data for CY 2009 rates. We are accepting the APC Panel's 
recommendation, which is consistent with our proposal.
    We are proposing to pay for the stranded and non-stranded NOS 
codes, C2698 and C2699, based on a rate equal to the lowest stranded or 
non-stranded prospective payment rate for such sources, respectively, 
on a per source basis (as opposed, for example, to per mci). This 
proposed payment methodology for NOS sources would provide payment to a 
hospital for new sources, while encouraging interested parties to 
quickly bring new sources to our attention so specific coding and 
payment could be established.
    We are proposing to establish new status indicator ``U'' 
(Brachytherapy Sources. Paid under OPPS; separate APC payment) for 
brachytherapy sources as of January 1, 2009. Status indicator ``H'' is 
currently used for the periods when brachytherapy sources are paid 
based on the charges adjusted to cost payment methodology, while status 
indicator ``K'' is used for brachytherapy source payment as of July 1, 
2008 through December 31, 2008, in accordance with the policy we 
finalized in the CY 2008 OPPS/ASC final rule with comment period. 
Status indicator ``K'' currently encompasses nonpass-through drugs and 
biologicals, therapeutic radiopharmaceuticals, brachytherapy sources, 
and blood and blood products. Assigning status indicator ``K'' to 
several types of items and services with potentially differing payment 
policies has added unnecessary complexity to our operations. In 
addition, in CY 2009 we are implementing section 1833(t)(17)(A) of the 
Act that specifies payment to hospitals based on a reduced conversion 
factor when those hospitals fail to submit timely hospital outpatient 
quality data as required. Therefore, to facilitate implementation of 
this payment change and streamline operations, we are proposing to 
assign new status indicator ``U'' to brachytherapy source HCPCS codes 
beginning in CY 2009.
    We are, therefore, proposing to pay for brachytherapy sources at 
prospective rates based on their source-specific median costs for CY 
2009. The separately payable brachytherapy source codes, descriptors, 
APCs, approximate median costs, and status indicators are presented in 
Table 29.

                    TABLE 29.--Proposed Separately Payable Brachytherapy Sources for CY 2009
----------------------------------------------------------------------------------------------------------------
                                                                                       Proposed CY   Proposed CY
               HCPCS code                        Long descriptor          Proposed CY  2009 median   2009 status
                                                                            2009 APC       cost       indicator
----------------------------------------------------------------------------------------------------------------
A9527..................................  Iodine I-125, sodium iodide             2632          $36            U
                                          solution, therapeutic, per
                                          millicurie.
C1716..................................  Brachytherapy source, non-              1716           34            U
                                          stranded, Gold-198, per source.
C1717..................................  Brachytherapy source, non-              1717          212            U
                                          stranded, High Dose Rate
                                          Iridium-192, per source.
C1719..................................  Brachytherapy source, non-              1719           65            U
                                          stranded, Non-High Dose Rate
                                          Iridium-192, per source.
C2616..................................  Brachytherapy source, non-              2616       13,426            U
                                          stranded, Yttrium-90, per
                                          source.
C2634..................................  Brachytherapy source, non-              2634           43            U
                                          stranded, High Activity,
                                          Iodine-125, greater than 1.01
                                          mCi (NIST), per source.
C2635..................................  Brachytherapy source, non-              2635           27            U
                                          stranded, High Activity,
                                          Palladium-103, greater than
                                          2.2 mCi (NIST), per source.
C2636..................................  Brachytherapy linear source,            2636           60            U
                                          non-stranded, Palladium-103,
                                          per 1MM.
C2638..................................  Brachytherapy source, stranded,         2638           40            U
                                          Iodine-125, per source.
C2639..................................  Brachytherapy source, non-              2639           36            U
                                          stranded, Iodine-125, per
                                          source.
C2640..................................  Brachytherapy source, stranded,         2640           66            U
                                          Palladium-103, per source.
C2641..................................  Brachytherapy source, non-              2641           63            U
                                          stranded, Palladium-103, per
                                          source.
C2642..................................  Brachytherapy source, stranded,         2642          100            U
                                          Cesium-131, per source.
C2643..................................  Brachytherapy source, non-              2643           59            U
                                          stranded, Cesium-131, per
                                          source.
C2698..................................  Brachytherapy source, stranded,         2698           40            U
                                          not otherwise specified, per
                                          source.
C2699..................................  Brachytherapy source, non-              2699           27            U
                                          stranded, not otherwise
                                          specified, per source.
----------------------------------------------------------------------------------------------------------------


[[Page 41503]]

    In addition, in CY 2009, we are proposing to continue the policy we 
established in the CY 2007 OPPS/ASC final rule with comment period 
(which was superseded by section 107 of the MIEA-TRHCA) regarding 
payment for new brachytherapy sources for which we have no claims data. 
In accordance with that policy, we would assign future new HCPCS codes 
for new brachytherapy sources to their own APCs, with prospective 
payment rates set based on our consideration of external data and other 
relevant information regarding the expected costs of the sources to 
hospitals.
    We continue to invite hospitals and other parties to submit 
recommendations to us for new HCPCS codes to describe new sources 
consisting of a radioactive isotope, including a detailed rationale to 
support recommended new sources. Such recommendations should be 
directed to the Division of Outpatient Care, Mail Stop C4-05-17, 
Centers for Medicare and Medicaid Services, 7500 Security Boulevard, 
Baltimore, MD 21244. We will continue to add new brachytherapy source 
codes and descriptors to our systems for payment on a quarterly basis.

VIII. Proposed OPPS Payment for Drug Administration Services

A. Background

    In CY 2005, in response to the recommendations made by commenters 
and the hospital industry, OPPS transitioned to the use of CPT codes 
for drug administration services. These CPT codes allowed specific 
reporting of services regarding the number of hours for an infusion and 
provided consistency in coding between Medicare and other payers. (For 
a discussion regarding coding and payment for drug administration 
services prior to CY 2005, we refer readers to the CY 2008 OPPS/ASC 
final rule with comment period (72 FR 66787).)
    While hospitals began adopting CPT codes for outpatient drug 
administration services in CY 2005, physicians paid under the MPFS were 
using HCPCS G-codes in CY 2005 to report office-based drug 
administration services. These G-codes were developed in anticipation 
of substantial revisions to the drug administration CPT codes by the 
CPT Editorial Panel that were expected for CY 2006.
    In CY 2006, as anticipated, the CPT Editorial Panel revised its 
coding structure for drug administration services, incorporating new 
concepts such as initial, sequential, and concurrent services into a 
structure that previously distinguished services based on type of 
administration (chemotherapy/nonchemotherapy), method of administration 
(injection/infusion/push), and for infusion services, first hour and 
additional hours. For CY 2006, we implemented the CY 2006 drug 
administration CPT codes that did not reflect the concepts of initial, 
sequential, and concurrent services under the OPPS, and we created 
HCPCS C-codes that generally paralleled the CY 2005 CPT codes for 
reporting these other services.
    For CY 2007, as a result of comments on our proposed rule and 
feedback from the hospital community and the APC Panel, we implemented 
the full set of CPT codes, including codes incorporating the concepts 
of initial, sequential, and concurrent. In addition, the CY 2007 update 
process offered us the first opportunity to consider data gathered from 
the use of CY 2005 CPT codes for purposes of ratesetting. For CY 2007, 
we used CY 2005 claims data to implement a six-level APC structure for 
drug administration services. This six-level APC structure for drug 
administration services was continued in CY 2008.

B. Proposed Coding and Payment for Drug Administration Services

    The CY 2009 ratesetting process affords us the first opportunity to 
examine hospital claims data for the full set of CPT codes that reflect 
the concepts of initial, concurrent, and sequential services. We 
performed our standard annual OPPS review of the clinical and resource 
characteristics of the drug administration HCPCS codes assigned to APCs 
0436 (Level I Drug Administration), 0437 (Level II Drug 
Administration), 0438 (Level III Drug Administration), 0439 (Level IV 
Drug Administration), 0440 (Level V Drug Administration), and 0441 
(Level VI Drug Administration) for CY 2008 based on the CY 2007 claims 
data available for this proposed rule. Under the CY 2008 APC 
configurations for drug administration services, we observed several 2 
times violations among the 6 APCs. Therefore, we are proposing to 
reconfigure the drug administration APCs for CY 2009 to improve the 
clinical and resource homogeneity of the APCs. (We refer readers to 
section III.B. of this proposed rule for further discussion of the 2 
times rule.)
    As a result of our hospital cost analysis and detailed clinical 
review, we are proposing a five-level APC structure for CY 2009 drug 
administration services to more appropriately reflect their resource 
utilization in APCs that also group clinically similar services. These 
APCs generally demonstrate the clinically expected and actually 
observed comparative relationships between the median costs of 
different types of drug administration services, including initial and 
additional services, chemotherapy and other diagnostic, prophylactic, 
or therapeutic services, injections and infusions, and simple and 
complex methods of drug administration. We do not believe that six drug 
administration APCs continue to be necessary to pay appropriately for 
drug administration services based on the significant clinical and 
resource differences among services. Instead, we believe that the 
proposed five-level APC structure for CY 2009, displayed in Table 30 
below, is the more appropriate structure based on hospital claims data 
for the full range of CPT drug administration codes.
    We presented a potential four-level drug administration APC 
structure to the APC Panel during the March 2008 APC Panel meeting. 
After reviewing the data, the APC Panel recommended that CMS not 
implement this configuration until more data are available and that CMS 
provide the APC Panel with a crosswalk analysis of the data. We 
appreciate the recommendation of the APC Panel. We are accepting this 
recommendation, and we are not proposing to implement a four-level APC 
structure for drug administration services in CY 2009.
    We last reconfigured the drug administration APCs for CY 2007 when 
we first had 1 year of claims data reflecting the costs of predecessor 
drug administration CPT codes. Therefore, in parallel fashion we 
believe it is appropriate to propose to reconfigure the drug 
administration APCs for CY 2009 when we first have a year of hospital 
claims data for the full range of CPT codes. Our prior assignments of 
CPT codes without data were based only on estimates of hospital 
resource costs, and our usual practice is to closely examine the APC 
assignments of all HCPCS codes once we have actual claims data. We note 
that, for most of the drug administration services, we have thousands 
of single bills available for ratesetting from the claims submitted by 
thousands of hospitals, increasing our confidence in the accuracy and 
stability of the claims data. In addition, our bypass code methodology 
as described in section II.A.1.b. of this proposed rule, which 
specifically incorporates packaged costs into the costs of the initial 
drug administration service and not into the additional drug 
administration services provided in the same hospital encounter, 
ensures that

[[Page 41504]]

the single claims used for ratesetting represent a large proportion of 
total hospital claims for most drug administration services. Therefore, 
we believe that this proposed five-level drug administration APC 
structure would be most appropriate after examination of the robust set 
of drug administration claims available for CY 2009 ratesetting because 
the proposed structure would result in payment groups with greater 
clinical and resource homogeneity. In addition, we do not believe that 
a crosswalk analysis of the cost data would be pertinent because, for a 
number of the CPT codes, our APC assignments prior to CY 2009 were 
based only on our estimates of their expected costs, and not based on 
hospitals' actual costs for services reported according to the current 
CPT code descriptors and guidelines.
    We believe that the proposed five-level drug administration APC 
structure presented below in Table 30 accurately refines the drug 
administration APCs based on updated and comprehensive hospital claims 
data. Therefore, we are proposing to implement the APC structure 
displayed in Table 30 below for CY 2009. In addition to adopting this 
drug administration APC structure for payment of services, we are 
proposing to continue the use of drug administration CPT codes for OPPS 
reporting in CY 2009. As described earlier, APC reconfiguration is a 
regular part of the annual OPPS update in response to our assessment of 
the most recent hospital claims data. Although changes to the APC 
assignments of HCPCS codes, including the drug administration CPT 
codes, affect hospital payment for services, they do not require any 
coding changes by hospitals.

          Table 30.--Proposed CY 2009 Drug Administration APCs
------------------------------------------------------------------------
                     Proposed CY
  Proposed CY 2009     2009 APC    HCPCS code       Long descriptor
        APC          median cost
------------------------------------------------------------------------
0436...............       $24.98        90471  Immunization
                                                administration (includes
                                                percutaneous,
                                                intradermal,
                                                subcutaneous, or
                                                intramuscular
                                                injections); one vaccine
                                                (single or combination
                                                vaccine/toxoid).
                                        90472  Immunization
                                                administration (includes
                                                percutaneous,
                                                intradermal,
                                                subcutaneous, or
                                                intramuscular
                                                injections); each
                                                additional vaccine
                                                (single or combination
                                                vaccine/toxoid)(List
                                                separately in addition
                                                to code for primary
                                                procedure).
                                        90473  Immunization
                                                administration by
                                                intranasal or oral
                                                route; one vaccine
                                                (single or combination
                                                vaccine/toxoid).
                                        90474  Immunization
                                                administration by
                                                intranasal or oral
                                                route; each additional
                                                vaccine (single or
                                                combination vaccine/
                                                toxoid) (List separately
                                                in addition to code for
                                                primary procedure).
                                        90761  Intravenous infusion,
                                                hydration; each
                                                additional hour (List
                                                separately in addition
                                                to code for primary
                                                procedure).
                                        90766  Intravenous infusion, for
                                                therapy, prophylaxis, or
                                                diagnosis (specify
                                                substance or drug); each
                                                additional hour (List
                                                separately in addition
                                                to code for primary
                                                procedure).
                                        90771  Subcutaneous infusion for
                                                therapy or prophylaxis
                                                (specify substance or
                                                drug); additional pump
                                                set-up with
                                                establishment of new
                                                subcutaneous infusion
                                                site(s) (List separately
                                                in addition to code for
                                                primary procedure).
                                        90772  Therapeutic, prophylactic
                                                or diagnostic injection
                                                (specify substance or
                                                drug); subcutaneous or
                                                intramuscular.
                                        90779  Unlisted therapeutic,
                                                prophylactic or
                                                diagnostic intravenous
                                                or intra-arterial
                                                injection or infusion.
                                        95115  Professional services for
                                                allergen immunotherapy
                                                not including provision
                                                of allergenic extracts;
                                                single injection.
                                        95117  Professional services for
                                                allergen immunotherapy
                                                not including provision
                                                of allergenic extracts;
                                                two or more injections.
                                        95145  Professional services for
                                                the supervision of
                                                preparation and
                                                provision of antigens
                                                for allergen
                                                immunotherapy (specify
                                                number of doses); single
                                                stinging insect venom.
                                        95165  Professional services for
                                                the supervision of
                                                preparation and
                                                provision of antigens
                                                for allergen
                                                immunotherapy; single or
                                                multiple antigens
                                                (specify number of
                                                doses).
                                        95170  Professional services for
                                                the supervision of
                                                preparation and
                                                provision of antigens
                                                for allergen
                                                immunotherapy; whole
                                                body extract of biting
                                                insect or other
                                                arthropod (specify
                                                number of doses).
                                        96549  Unlisted chemotherapy
                                                procedure.
                                        G0008  Administration of
                                                influenza virus vaccine.
                                        G0009  Administration of
                                                pneumococcal vaccine.
                                        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).
                                        90770  Subcutaneous infusion for
                                                therapy or prophylaxis
                                                (specify substance or
                                                drug); each additional
                                                hour (List separately in
                                                addition to code for
                                                primary procedure)
                                        90773  Therapeutic, prophylactic
                                                or diagnostic injection
                                                (specify substance or
                                                drug); intra-arterial.
                                        90774  Therapeutic, prophylactic
                                                or diagnostic injection
                                                (specify substance or
                                                drug); intravenous push,
                                                single or initial
                                                substance/drug.
0437...............       $36.59        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).
                                        95144  Professional services for
                                                the supervision of
                                                preparation and
                                                provision of antigens
                                                for allergen
                                                immunotherapy, single
                                                dose vial(s) (specify
                                                number of vials).
                                        95148  Professional services for
                                                the supervision of
                                                preparation and
                                                provision of antigens
                                                for allergen
                                                immunotherapy (specify
                                                number of doses); four
                                                single stinging insect
                                                venoms.
                                        96401  Chemotherapy
                                                administration,
                                                subcutaneous or
                                                intramuscular; non-
                                                hormonal anti-
                                                neoplastic.
                                        96402  Chemotherapy
                                                administration,
                                                subcutaneous or
                                                intramuscular; hormonal
                                                anti-neoplastic.
                                        96405  Chemotherapy
                                                administration;
                                                intralesional, up to and
                                                including 7 lesions.
                                        96415  Chemotherapy
                                                administration,
                                                intravenous infusion
                                                technique; each
                                                additional hour (List
                                                separately in addition
                                                to code for primary
                                                procedure).

[[Page 41505]]

 
0438...............       $74.19        90760  Intravenous infusion,
                                                hydration; initial, 31
                                                minutes to 1 hour.
                                        90769  Subcutaneous infusion for
                                                therapy or prophylaxis
                                                (specify substance or
                                                drug); initial, up to
                                                one hour, including pump
                                                set-up and establishment
                                                of subcutaneous infusion
                                                site(s).
                                        95146  Professional services for
                                                the supervision of
                                                preparation and
                                                provision of antigens
                                                for allergen
                                                immunotherapy (specify
                                                number of doses); two
                                                single stinging insect
                                                venoms.
                                        95147  Professional services for
                                                the supervision of
                                                preparation and
                                                provision of antigens
                                                for allergen
                                                immunotherapy (specify
                                                number of doses); three
                                                single stinging insect
                                                venoms.
                                        96406  Chemotherapy
                                                administration;
                                                intralesional, more than
                                                7 lesions.
                                        96411  Chemotherapy
                                                administration;
                                                intravenous, push
                                                technique, each
                                                additional substance/
                                                drug (List separately in
                                                addition to code for
                                                primary procedure).
                                        96417  Chemotherapy
                                                administration,
                                                intravenous infusion
                                                technique; each
                                                additional sequential
                                                infusion (different
                                                substance/drug), up to 1
                                                hour (List separately in
                                                addition to code for
                                                primary procedure).
                                        96423  Chemotherapy
                                                administration, intra-
                                                arterial; infusion
                                                technique, each
                                                additional hour (List
                                                separately in addition
                                                to code for primary
                                                procedure).
                                        90765  Intravenous infusion, for
                                                therapy, prophylaxis, or
                                                diagnosis (specify
                                                substance or drug);
                                                initial, up to 1 hour.
                                        95149  Professional services for
                                                the supervision of
                                                preparation and
                                                provision of antigens
                                                for allergen
                                                immunotherapy (specify
                                                number of doses); five
                                                single stinging insect
                                                venoms.
0439...............      $126.58        96409  Chemotherapy
                                                administration;
                                                intravenous, push
                                                technique, single or
                                                initial substance/drug.
                                        96420  Chemotherapy
                                                administration, intra-
                                                arterial; push
                                                technique.
                                        96522  Refilling and maintenance
                                                of implantable pump or
                                                reservoir for drug
                                                delivery, systemic
                                                (e.g., intravenous,
                                                intra-arterial).
                                        96542  Chemotherapy injection,
                                                subarachnoid or
                                                intraventricular via
                                                subcutaneous reservoir,
                                                single or multiple
                                                agents.
0440...............      $190.72        95990  Refilling and maintenance
                                                of implantable pump or
                                                reservoir for drug
                                                delivery, spinal
                                                (intrathecal, epidural)
                                                or brain
                                                (intraventricular).
                                        95991  Refilling and maintenance
                                                of implantable pump or
                                                reservoir for drug
                                                delivery, spinal
                                                (intrathecal, epidural)
                                                or brain
                                                (intraventricular);
                                                administered by a
                                                physician.
                                        96413  Chemotherapy
                                                administration,
                                                intravenous infusion
                                                technique; up to 1 hour,
                                                single or initial
                                                substance/drug.
                                        96416  Chemotherapy
                                                administration,
                                                intravenous infusion
                                                technique; initiation of
                                                prolonged chemotherapy
                                                infusion (more than 8
                                                hours), requiring use of
                                                a portable or
                                                implantable pump.
                                        96422  Chemotherapy
                                                administration, intra-
                                                arterial; infusion
                                                technique, up to one
                                                hour.
                                        96425  Chemotherapy
                                                administration, intra-
                                                arterial; infusion
                                                technique, initiation of
                                                prolonged infusion (more
                                                than 8 hours), requiring
                                                the sue of a portable or
                                                implantable pump.
                                        96440  Chemotherapy
                                                administration into
                                                pleural cavity,
                                                requiring and including
                                                thoracentesis.
                                        96445  Chemotherapy
                                                administration into
                                                peritoneal cavity,
                                                requiring and including
                                                peritoneocentesis.
                                        96450  Chemotherapy
                                                administration, into CNS
                                                (eg, intrathecal),
                                                requiring and including
                                                spinal puncture.
                                        96521  Refilling and maintenance
                                                of portable pump.
                                        C8957  Intravenous infusion for
                                                therapy/diagnosis;
                                                initiation of prolonged
                                                infusion (more than
                                                eight hours), requiring
                                                use of portable or
                                                implantable pump.
------------------------------------------------------------------------

IX. Proposed OPPS Payment for Hospital Outpatient Visits

A. Background

    Currently, hospitals report visit HCPCS codes to describe three 
types of OPPS services: clinic visits, emergency department visits, and 
critical care services. CPT indicates that office or other outpatient 
visit codes are used to report evaluation and management (E/M) services 
provided in the physician's office or in an outpatient or other 
ambulatory facility. For OPPS purposes, we refer to these as clinic 
visit codes. CPT also indicates that emergency department visit codes 
are used to report E/M services provided in the emergency department, 
which is defined as an ``organized hospital-based facility for the 
provision of unscheduled episodic services to patients who present for 
immediate medical attention. The facility must be available 24 hours a 
day.'' For OPPS purposes, we refer to these as emergency department 
visit codes that specifically apply to the reporting of visits to Type 
A emergency departments. Furthermore, for CY 2007 we established five 
new Level II HCPCS codes to report visits to Type B emergency 
departments (defined as dedicated emergency departments that incur 
Emergency Medical Treatment and Labor Act (EMTALA) of 1986 (Pub. L. 99-
272) obligations but that do not meet the Type A emergency department 
definition, as described in more detail below). These new Level II 
HCPCS codes were developed because there were no CPT codes at that time 
that fully described services provided in this type of facility. CPT 
defines critical care services to be reported with critical care CPT 
codes as the ``direct delivery by a physician(s) of medical care for a 
critically ill or critically injured patient.'' Under the OPPS, in 
Transmittal 1139, Change Request 5438, dated December 22, 2006, we have 
stated that the time that can be reported as critical care is the time 
spent by a physician and/or hospital staff engaged in active face-to-
face critical care of a critically ill or critically injured patient. 
We also established HCPCS code G0390 (Trauma response team associated 
with hospital critical care service) in CY 2007 for the reporting of a 
trauma response in association with critical care services. We refer 
readers to section III.D.1. of this proposed rule for further 
discussion of payment for a trauma response associated with hospital 
critical care services.
    Currently, CMS instructs hospitals to report the CY 2008 CPT codes 
that describe new and established clinic visits, Type A emergency 
department

[[Page 41506]]

visits, and critical care services, and the six Level II HCPCS codes to 
report Type B emergency department visits and trauma activation 
provided in association with critical care services. These codes are 
listed below in Table 31. We are not proposing to change the visit 
HCPCS codes that hospitals report for CY 2009.

   Table 31.--CY 2008 CPT E/M and Level II HCPCS Codes Used To Report
    Clinic and Emergency Department Visits and Critical Care Services
------------------------------------------------------------------------
          HCPCS Code                           Descriptor
------------------------------------------------------------------------
                        Clinic Visit HCPCS Codes
------------------------------------------------------------------------
99201........................  Office or other outpatient visit for the
                                evaluation and management of a new
                                patient (Level 1).
99202........................  Office or other outpatient visit for the
                                evaluation and management of a new
                                patient (Level 2).
99203........................  Office or other outpatient visit for the
                                evaluation and management of a new
                                patient (Level 3).
99204........................  Office or other outpatient visit for the
                                evaluation and management of a new
                                patient (Level 4).
99205........................  Office or other outpatient visit for the
                                evaluation and management of a new
                                patient (Level 5).
99211........................  Office or other outpatient visit for the
                                evaluation and management of an
                                established patient (Level 1).
99212........................  Office or other outpatient visit for the
                                evaluation and management of an
                                established patient (Level 2).
99213........................  Office or other outpatient visit for the
                                evaluation and management of an
                                established patient (Level 3).
99214........................  Office or other outpatient visit for the
                                evaluation and management of an
                                established patient (Level 4).
99215........................  Office or other outpatient visit for the
                                evaluation and management of an
                                established patient (Level 5).
------------------------------------------------------------------------
                 Emergency Department Visit HCPCS Codes
------------------------------------------------------------------------
99281........................  Emergency department visit for the
                                evaluation and management of a patient
                                (Level 1).
99282........................  Emergency department visit for the
                                evaluation and management of a patient
                                (Level 2).
99283........................  Emergency department visit for the
                                evaluation and management of a patient
                                (Level 3).
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).
G0380........................  Type B emergency department visit (Level
                                1).
G0381........................  Type B emergency department visit (Level
                                2).
G0382........................  Type B emergency department visit (Level
                                3).
G0383........................  Type B emergency department visit (Level
                                4).
G0384........................  Type B emergency department visit (Level
                                5).
------------------------------------------------------------------------
                   Critical Care Services HCPCS Codes
------------------------------------------------------------------------
99291........................  Critical care, evaluation and management
                                of the critically ill or critically
                                injured patient; first 30-74 minutes.
99292........................  Critical care, evaluation and management
                                of the critically ill or critically
                                injured patient; each additional 30
                                minutes.
G0390........................  Trauma response associated with hospital
                                critical care service.
------------------------------------------------------------------------

    The majority of CPT code descriptors are applicable to both 
physician and facility resources associated with specific services. 
However, we have acknowledged from the beginning of the OPPS that we 
believe that CPT E/M codes were defined to reflect the activities of 
physicians and do not necessarily fully describe the range and mix of 
services provided by hospitals during visits of clinic or emergency 
department patients or critical care encounters. While awaiting the 
development of a national set of facility-specific codes and 
guidelines, we have advised hospitals that each hospital's internal 
guidelines that determine the levels of clinic and emergency department 
visits to be reported should follow the intent of the CPT code 
descriptors, in that the guidelines should be designed to reasonably 
relate the intensity of hospital resources to the different levels of 
effort represented by the codes.
    During its March 2008 APC Panel meeting, the APC Panel recommended 
that CMS provide, for review by the Visits and Observation Subcommittee 
at the next CY 2008 APC Panel meeting: (1) Frequency and median cost 
data on new and established patient clinic visits and Type A and Type B 
emergency department visits; (2) data on CPT code 99291 (Critical care, 
evaluation and management of the critically ill or critically injured 
patient; first 30-74 minutes) and APC 617 (Critical Care); and (3) 
frequency and median cost data on the extended assessment and 
management composite APCs (that is, APCs 8002 and 8003). We are 
adopting all three of these recommendations and will provide frequency 
and cost data related to these services at the next CY 2008 APC Panel 
meeting. The complete discussion related to visits is provided below. A 
complete discussion related to the extended assessment and management 
composite APCs can be found in section II.A.2.e.(1) of this proposed 
rule.

B. Proposed Policies for Hospital Outpatient Visits

1. Clinic Visits: New and Established Patient Visits
    CPT defines an established patient as ``one who has received 
professional services from the physician or another physician of the 
same specialty who belongs to the same group practice, within the past 
3 years.'' To apply this definition to hospital clinic visits, we 
stated in the April 7, 2000 OPPS final rule with comment period (65 FR 
18451), that the meanings of ``new'' and ``established'' pertain to 
whether or not the patient already has a hospital medical record 
number. If the patient has a hospital medical record that was created 
within the past 3 years, that patient is considered an established 
patient to the hospital. The same patient could be ``new'' to the 
physician but an ``established'' patient to the hospital. The opposite 
could be true if the physician has a longstanding relationship with the 
patient, in which case the patient would be an ``established'' patient 
with respect to the physician and a ``new'' patient with respect to the 
hospital. Our resource cost data continue to show that new patient 
visits are consistently more costly than established patient visits of 
the same level.
    Since the implementation of the OPPS, we have received very few

[[Page 41507]]

comments related to the definitions of new and established patient 
visits. However, during the past year, we have heard from several 
provider groups that hospitals cannot easily distinguish between new 
and established patients for purposes of correctly reporting clinic 
visits under the OPPS, based on the definition above. We considered 
several options for refining the definitions of new and established 
patients as they would apply under the CY 2009 OPPS in order to reduce 
hospitals' administrative burden associated with reporting appropriate 
clinic visit CPT codes.
    We considered proposing to eliminate the distinction between new 
and established patient visits under the OPPS, as had previously been 
recommended by the APC Panel for CY 2008. We considered instructing 
hospitals to bill all visits as established patient visits and the 
hospital would determine the appropriate code level based on the 
resources expended during the visit. However, because hospital claims 
data continue to show significant cost differences between new and 
established patient visits, we believe it is most appropriate to 
continue to recognize the CPT codes for both new and established 
patient visits and, in some cases, provide differential payment for new 
and established patient visits of the same level. In addition, we 
continue to believe it is important that CPT codes be reported 
consistent with their code descriptors, and some patients will always 
be new to the hospital, regardless of any potential refinement in the 
definition of ``new'' for reporting clinical visits under the OPPS. 
Therefore, we are not proposing this approach for CY 2009.
    Another alternative we considered was proposing to define an 
established patient as a patient who already had a hospital medical 
record number at the hospital where he or she is currently receiving 
services, regardless of when this medical record was created. Several 
commenters to the CY 2008 OPPS/ASC proposed rule preferred this 
distinction rather than the current policy, which requires hospitals to 
determine if the patient's hospital medical record was created within 
the past 3 years (72 FR 66793). However, one commenter noted an extreme 
example in which a patient who was born at a hospital and assigned a 
medical record number would always be considered an established patient 
to that hospital, even if the patient was not treated again at that 
hospital until decades later. We continue to believe it is appropriate 
to include a time limit when determining whether a patient is new or 
established from the hospital's perspective because we would expect 
that care of a patient who was not treated at the hospital for several 
years prior to a visit could require significantly greater hospital 
resources than care for a patient who was recently treated at the 
hospital. Therefore, we are not proposing this alternative for CY 2009.
    We considered proposing to modify the new and established patient 
definitions for reporting clinic visits under the OPPS so they would 
pertain to whether or not the patient was registered in a specific 
hospital clinic within the past 3 years. However, we believe this 
approach could be problematic because we do not believe that every 
clinic has clear administrative boundaries that define whether the 
patient was previously seen in that particular clinic. For example, a 
hospital-based clinic may have several locations, including on-campus 
and off-campus sites, or a specific area of the hospital may house two 
or more specialty clinics that treat disparate types of clinical 
conditions.
    We considered and are not proposing to adopt the three alternatives 
described above, for CY 2009, but are instead proposing to modify the 
definitions of ``new'' and ``established'' patients as they apply to 
hospital outpatient visits. Specifically, the meanings of ``new'' and 
``established'' would pertain to whether or not the patient was 
registered as an inpatient or outpatient of the hospital within the 
past 3 years. Under this proposal, hospitals would not need to 
determine the specific clinic where the patient was previously treated 
because the proposed approach would not rely upon when the medical 
record was initially created but rather, would depend upon whether the 
individual had been registered as a hospital inpatient or outpatient 
within the previous 3 years.
    Hospitals would also not need to determine when the medical record 
was initially created. If the patient were registered as an inpatient 
or outpatient of the hospital within the past 3 years, that patient 
would be considered an ``established'' patient to the hospital. If a 
patient were registered as an outpatient in a hospital's off-campus 
provider-based clinic or emergency department within the past 3 years, 
that patient would still be an ``established'' patient to the hospital 
for an on-campus or off-campus clinic visit even if the medical record 
was initially created by the hospital prior to the past 3 years. 
Consistent with past policy, the same patient could be ``new'' to the 
physician but an ``established'' patient to the hospital. The opposite 
could be true if the physician has a longstanding relationship with the 
patient, in which case the patient would be an ``established'' patient 
with respect to the physician and a ``new'' patient with respect to the 
hospital. We believe that our proposed refinement of the new and 
established patient definitions for reporting visits under the OPPS 
would be administratively straightforward for hospitals to apply, while 
continuing to capture differences in hospital resources required to 
provide new and established patient clinic visits. Furthermore, we 
believe that costs from historical hospital claims data for services 
reported under the past OPPS interpretation of new and established 
patient visits could simply be crosswalked to the expected costs of the 
corresponding visit level reported under our proposed framework, 
thereby providing appropriate payment for new and established clinic 
visits of all five levels until CY 2009 claims data reflecting the 
refined definitions would be available for CY 2011 ratesetting. We 
would expect only minimal cost differences for clinic visits if these 
new definitions were finalized for CY 2009.
    In summary, for CY 2009, we are proposing to modify the definitions 
of new and established patient visits as they relate to reporting 
hospital outpatient visits under the OPPS. We welcome public comment 
related to the proposed definitions of new and established patient 
visits under the OPPS. For CY 2009, we are proposing to continue our 
usual policy of calculating median costs for clinic visits under the 
OPPS using historical hospital claims data.
    As discussed further in section II.A.2.e.(1) of this proposed rule 
and consistent with our CY 2008 policy, when calculating the median 
costs for the clinic visit APCs (0604 through 0608), we would utilize 
our methodology that excludes those claims for visits that are eligible 
for payment through the extended assessment and management composite 
APC 8002 (Level I Extended Assessment and Management Composite). We 
believe that this approach would result in the most accurate cost 
estimates for APCs 0604 through 0608 for CY 2009.
2. Emergency Department Visits
    As described in section IX.A. of this proposed rule, CPT defines an 
emergency department as ``an organized hospital-based facility for the 
provision of unscheduled episodic services to patients who present for 
immediate medical attention. The facility must be available 24 hours a 
day.'' Prior to CY 2007, under the OPPS we restricted the

[[Page 41508]]

billing of emergency department CPT codes to services furnished at 
facilities that met this CPT definition. Facilities open less than 24 
hours a day should not have reported the emergency department CPT codes 
for visits.
    Sections 1866(a)(1)(I), 1866(a)(1)(N), and 1867 of the Act impose 
specific obligations on Medicare-participating hospitals and CAHs that 
offer emergency services. These obligations concern individuals who 
come to a hospital's dedicated emergency department and request 
examination or treatment for medical conditions, and apply to all of 
these individuals, regardless of whether or not they are beneficiaries 
of any program under the Act. Section 1867(h) of the Act specifically 
prohibits a delay in providing required screening or stabilization 
services in order to inquire about the individual's payment method or 
insurance status. Section 1867(d) of the Act provides for the 
imposition of civil monetary penalties on hospitals and physicians 
responsible for failing to meet the provisions listed above. These 
provisions, taken together, are frequently referred to as the EMTALA 
provisions.
    Section 489.24 of the EMTALA regulations defines ``dedicated 
emergency department'' as any department or facility of the hospital, 
regardless of whether it is located on or off the main hospital campus, 
that meets at least one of the following requirements: (1) It is 
licensed by the State in which it is located under applicable State law 
as an emergency room or emergency department; (2) It is held out to the 
public (by name, posted signs, advertising, or other means) as a place 
that provides care for emergency medical conditions on an urgent basis 
without requiring a previously scheduled appointment; or (3) During the 
calendar year immediately preceding the calendar year in which a 
determination under the regulations is being made, based on a 
representative sample of patient visits that occurred during that 
calendar year, it provides at least one-third of all of its outpatient 
visits for the treatment of emergency medical conditions on an urgent 
basis without requiring a previously scheduled appointment.
    In the CY 2008 OPPS/ASC proposed rule (72 FR 42756), we reiterated 
our belief that every emergency department that meets the CPT 
definition of emergency department also qualifies as a dedicated 
emergency department under EMTALA. However, we indicated that we were 
aware that there are some departments or facilities of hospitals that 
meet the definition of a dedicated emergency department under the 
EMTALA regulations, but that do not meet the more restrictive CPT 
definition of an emergency department. For example, a hospital 
department or facility that meets the definition of a dedicated 
emergency department may not be available 24 hours a day, 7 days a 
week. Nevertheless, hospitals with such departments or facilities incur 
EMTALA obligations with respect to an individual who presents to the 
department and requests, or has requested on his or her behalf, 
examination or treatment for an emergency medical condition. However, 
because they did not meet the CPT requirements for reporting emergency 
visit E/M codes, prior to CY 2007, these facilities were required to 
bill clinic visit codes for the services they furnished under the OPPS. 
We had no way to distinguish in our hospital claims data the costs of 
visits provided in dedicated emergency departments that did not meet 
the CPT definition of emergency department from the costs of clinic 
visits.
    Prior to CY 2007, some hospitals requested that they be permitted 
to bill emergency department visit codes under the OPPS for services 
furnished in a facility that met the CPT definition for reporting 
emergency department visit E/M codes, except that the facility was not 
available 24 hours a day. These hospitals believed that their resource 
costs for visits were more similar to those of emergency departments 
that met the CPT definition than they were to the resource costs of 
clinics. Representatives of such facilities argued that emergency 
department visit payments would be more appropriate, on the grounds 
that their facilities treated patients with emergency conditions whose 
costs exceeded the resources reflected in the clinic visit APC 
payments, even though these emergency departments were not available 24 
hours per day. In addition, these hospital representatives indicated 
that their facilities had EMTALA obligations and should, therefore, be 
able to receive emergency department visit payments. While these 
emergency departments may have provided a broader range and intensity 
of hospital services, and required significant resources to assure 
their availability and capabilities in comparison with typical hospital 
outpatient clinics, the fact that they did not operate with all 
capabilities full-time suggested that hospital resources associated 
with visits to emergency departments or facilities available less than 
24 hours a day might not be as great as the resources associated with 
emergency departments or facilities that were available 24 hours a day, 
and that fully met the CPT definition.
    In the CY 2007 OPPS/ASC final rule with comment period (71 FR 
68132), we finalized the definition of Type A emergency departments to 
distinguish them from Type B emergency departments. A Type A emergency 
department must be available to provide services 24 hours a day, 7 days 
a week, and meet one or both of the following requirements related to 
the EMTALA definition of a dedicated emergency department, 
specifically: (1) It is licensed by the State in which it is located 
under the applicable State law as an emergency room or emergency 
department; or (2) It is held out to the public (by name, posted signs, 
advertising, or other means) as a place that provides care for 
emergency medical conditions on an urgent basis without requiring a 
previously scheduled appointment. For CY 2007 (71 FR 68140), we 
assigned the five CPT E/M emergency department visit codes for services 
provided in Type A emergency departments to the five newly created 
Emergency Visit APCs, specifically 0609 (Level 1 Emergency Visits), 
0613 (Level 2 Emergency Visits), 0614 (Level 3 Emergency Visits), 0615 
(Level 4 Emergency Visits), and 0616 (Level 5 Emergency Visits).
    We defined a Type B emergency department as any dedicated emergency 
department that incurred EMTALA obligations under Sec.  489.24 of the 
EMTALA regulations but that did not meet the Type A emergency 
department definition. To determine whether visits to Type B emergency 
departments have different resource costs than visits to either clinics 
or Type A emergency departments, in the CY 2007 OPPS/ASC final rule 
with comment period (71 FR 68132), we finalized a set of five G-codes 
for use by hospitals to report visits to all entities that meet the 
definition of a dedicated emergency department under the EMTALA 
regulations in Sec.  489.24, but that are not Type A emergency 
departments. These codes are called ``Type B emergency department visit 
codes.'' In the CY 2007 OPPS/ASC final rule with comment period (71 FR 
68132), we explained that these new G-codes would serve as a vehicle to 
capture median cost and resource differences among visits provided by 
Type A emergency departments, Type B emergency departments, and 
clinics. For CYs 2007 and 2008, we assigned the five new Type B 
emergency department visit codes for services provided in a Type B 
emergency department to the five Clinic

[[Page 41509]]

Visit APCs, specifically 0604 (Level 1 Hospital Clinic Visits), 0605 
(Level 2 Hospital Clinic Visits), 0606 (Level 3 Hospital Clinic 
Visits), 0607 (Level 4 Hospital Clinic Visits), and 0608 (Level 5 
Hospital Clinic Visits). This payment policy for Type B emergency 
department visits was similar to our previous policy, which required 
that services furnished in emergency departments that had an EMTALA 
obligation but did not meet the CPT definition of emergency department 
be reported using CPT clinic visit E/M codes, resulting in payments 
based upon clinic visit APCs. While maintaining the same payment policy 
for Type B emergency department visits in CYs 2007 and 2008, we believe 
the reporting of specific G-codes for emergency department visits 
provided in Type B emergency departments would permit us to 
specifically collect and analyze the hospital resource costs of visits 
to these facilities in order to determine if in the future a proposal 
for an alternative payment policy might be warranted. We expected 
hospitals to adjust their charges appropriately to reflect differences 
in Type A and Type B emergency department visit costs. We noted that 
the OPPS rulemaking cycle for CY 2009 would be the first year that we 
would have cost data for these new Type B emergency department HCPCS 
codes available for analysis.
    We now have CY 2007 cost data for CY 2009 ratesetting for the Type 
B emergency department HCPCS codes G0380 through G0384. Based on these 
data, 342 hospitals billed at least one Type B emergency department 
visit code in CY 2007, with a total frequency of visits provided in 
Type B emergency departments of approximately 200,000. All except 2 of 
the 342 hospitals reporting Type B emergency department visits in CY 
2007 also reported Type A emergency department visits. Overall, many 
more hospitals (approximately 2,911 total hospitals) reported Type A 
emergency department visits than Type B emergency department visits. 
For comparison purposes, the total frequency of visits provided in 
hospital outpatient clinics and Type A emergency departments is 
approximately 14.5 million and 10.3 million, respectively. The median 
costs for the Type B emergency department visit HCPCS codes, as 
compared to the clinic visit and Type A emergency visit APC median 
costs, are shown in Table 32 below.

 Table 32.--Comparison of Median Costs for Clinic Visit APCs, Type B Emergency Department Visit HCPCS Codes, and
                                           Type A Emergency Visit APCs
----------------------------------------------------------------------------------------------------------------
                                                                                      Type B
                                                                                     emergency        Type A
                           Visit level                             Clinic visit     department       emergency
                                                                       APCs         visit HCPCS     visit APCs
                                                                                       code
----------------------------------------------------------------------------------------------------------------
Level 1.........................................................             $55             $48             $54
Level 2.........................................................              68              65              87
Level 3.........................................................              88              92             136
Level 4.........................................................             117             156             219
Level 5.........................................................             155             326             325
----------------------------------------------------------------------------------------------------------------

    The median costs of the lowest level visit are similar across all 
settings, including clinic and Type A and B emergency departments. 
Visit levels 2 and 3 share similar resource costs in the clinic and 
Type B emergency department settings, while visits provided in Type A 
emergency departments have higher estimated resource costs at these 
levels. The level 4 clinic visit APC is less resource intensive than 
the level 4 Type B emergency department visit, which is similarly less 
resource intensive than the level 4 Type A emergency department visit. 
The Type A and B emergency department level 5 visit median costs are 
similar to each other and significantly exceed the level 5 clinic visit 
cost.
    We performed additional data analyses in preparation for this 
proposed rule to gather more information for our proposal for payment 
of Type B emergency department visits. This included studying the 
emergency department visit charges and costs of hospitals that billed 
Type B emergency department visits, analyzing the cost data for various 
subsets of hospitals that billed the Type B emergency department visit 
codes, and comparing visit cost data for hospitals that did and did not 
bill Type B emergency department visit codes. Hospitals that reported 
both Type A and Type B emergency department visits billed lower charges 
for Type B emergency department visits than Type A emergency department 
visits, presumably reflecting the lower costs for Type B emergency 
department visits. Moreover, hospitals that billed both Type A and Type 
B emergency department visits also had lower costs for Type B emergency 
department visits than Type A emergency department visits at all levels 
except for the level 5 Type B emergency department visit. The Type A 
emergency department visit costs for hospitals that billed both Type A 
and Type B emergency department visits resemble the Type A emergency 
department visit costs of hospitals that billed only Type A emergency 
department visits and did not bill any Type B emergency department 
visits. We also determined that the majority of Type B emergency 
department visits were reported under an emergency department revenue 
code. In summary, our further analyses confirmed that the median costs 
of Type B emergency department visits are less than the median costs of 
Type A emergency department visits for all but the level 5 visit, and 
that the observed differences are not attributable to provider-level 
differences in the visit costs of the different groups of hospitals 
reporting Type A and Type B emergency department visits. In other 
words, the median costs from CY 2007 hospital claims represent real 
differences in the hospital resource costs for the same level of visit 
in a Type A or Type B emergency department. As noted earlier, the CY 
2007 claims data are the first year of claims data that include 
providers' cost data for the Type B emergency department visits. We 
will perform additional analyses to monitor patterns of billing and 
costs of these services throughout the CY 2009 rulemaking cycle, and in 
preparation for the CY 2010 rulemaking cycle, as additional cost data 
become available.
    We shared preliminary cost and frequency data with the Visits and 
Observation Subcommittee of the APC Panel and the full APC Panel during 
its March 2008 meeting. The APC Panel recommended that CMS continue to 
pay

[[Page 41510]]

levels 1, 2, and 3 Type B emergency department visits at the 
corresponding clinic visit levels. The APC Panel also recommended that 
CMS consider using the clinic visit level 5 APC as the basis of payment 
for the level 4 Type B emergency department visit and the level 5 Type 
A emergency department visit APC as the basis of payment for the level 
5 Type B emergency department visit. Given the limited data presently 
available for Type B emergency department visits, the APC Panel also 
recommended that CMS reconsider payment adjustments as more claims data 
become available. In general, the APC Panel's recommended configuration 
would pay appropriately for each level of Type B emergency department 
visit, based on the resource costs of Type B emergency department 
visits that are reflected in claims data.
    In accordance with the APC Panel's assessment, we are proposing to 
pay for Type B emergency department visits in CY 2009 consistent with 
their median costs, although we are not fully adopting the APC Panel's 
recommended payment configuration. Specifically, we are proposing to 
pay levels 1, 2, 3, and 4 Type B emergency department visits through 
four levels of newly created APCs, 0626 (Level 1 Type B Emergency 
Visits), 0627 (Level 2 Type B Emergency Visits), 0628 (Level 3 Type B 
Emergency Visits), and 0629 (Level 4 Type B Emergency Visits). We are 
proposing to assign HCPCS codes G0380, G0381, G0382, and G0383, the 
levels 1, 2, 3, and 4 Type B emergency department visit Level II HCPCS 
codes, to APCs 0626, 0627, 0628, and 0629, respectively, for CY 2009. 
These HCPCS codes would be the only HCPCS codes assigned to these newly 
created APCs. Furthermore, to distinguish these new APCs from the APCs 
for levels 1, 2, 3, and 4 Type A emergency visits, we are proposing to 
modify the titles of the current APCs for these visits to incorporate 
Type A in their names. Therefore, their proposed revised titles would 
be: APC 0609, Level 1 Type A Emergency Visits; APC 0613, Level 2 Type A 
Emergency Visits; APC 0614, Level 3 Type A Emergency Visits; and APC 
0615, Level 4 Type A Emergency Visits. Finally, we are proposing to map 
the level 5 Type B emergency department visit code, HCPCS code G0384, 
to APC 0616 (Level 5 Emergency Visits), which is the same APC that 
contains CPT code 99285, the level 5 Type A emergency department visit 
code. Consistent with the APC Panel recommendation, the level 5 Type B 
emergency department visit payment rate would be the same as the level 
5 Type A emergency department visit payment rate, based upon the 
similar median costs for these visits. For this highest level of 
emergency department visits, the costs of these relatively uncommon 
visits to Type A and Type B emergency departments are comparable, 
reflecting the considerable hospital resources required to care for 
these sick patients in both settings.
    Table 33 below displays the proposed APC median costs for each 
level of Type B emergency department visit, under our proposed CY 2009 
configuration. We believe the CY 2009 proposed assignments of the 
levels 1 through 4 Type B emergency department visits to their own new 
clinical APCs, and the proposed assignment of the level 5 Type B 
emergency department visit to APC 0616, would pay appropriately for all 
levels of Type B emergency department visits, taking into consideration 
the hospital costs for these visits.
    As more cost data become available and hospitals gain additional 
experience with reporting visits to Type B emergency departments, we 
would continue to regularly reevaluate patterns of Type A and Type B 
emergency visit reporting at varying levels of disaggregation below the 
national level to ensure that hospitals continue to bill appropriately 
and differentially for these services. In addition, according to our 
usual practice, we would examine trends in cost data over time and 
consider alternative emergency department visit APC configurations in 
the future if updated data indicate that changes to the proposed 
payment structure for CY 2009 should be considered.

    Table 33.--Proposed CY 2009 Type B Emergency Department Visit APC
                      Assignments and Median Costs
------------------------------------------------------------------------
                                            Proposed CY     Proposed CY
 Type B emergency department visit level     2009 APC        2009 APC
                                            assignment      median cost
------------------------------------------------------------------------
Level 1.................................            0626             $48
Level 2.................................            0627              65
Level 3.................................            0628              92
Level 4.................................            0629             156
Level 5.................................            0616             325
------------------------------------------------------------------------

    For the CY 2009 OPPS, we are also proposing to include HCPCS code 
G0384 in the criteria that determine eligibility for payment of 
composite APC 8003 (Level II Extended Assessment and Management 
Composite). We refer the readers to section II.A.2.e.(1) of this 
proposed rule for further discussion related to the extended assessment 
and management composite APCs. As discussed in detail in sections 
II.A.2.e.(1) and III.D.1. of this proposed rule and consistent with our 
CY 2008 practice, when calculating the median costs for the Type A and 
Type B emergency visit APCs (0609 through 0616 and 0626 through 0629), 
we would utilize our methodology that excludes those claims for visits 
that are eligible for payment through the extended assessment and 
management composite APC 8003. We believe that this approach would 
result in the most accurate cost estimates for APCs 0609 through 0616 
and 0626 through 0629 for CY 2009.
3. Visit Reporting Guidelines
    As described in section IX.A. of this proposed rule, since April 7, 
2000, we have instructed hospitals to report facility resources for 
clinic and emergency department hospital outpatient visits using the 
CPT E/M codes and to develop internal hospital guidelines for reporting 
the appropriate visit level.
    As noted in detail in sections IX.C. of the CY 2008 OPPS/ASC final 
rule with comment period (72 FR 66802 through 66805), we observed a 
normal and stable distribution of clinic and emergency department visit 
levels in hospital claims over the past several years. The data 
indicated that hospitals, on average, were billing all five levels of 
visit codes with varying frequency, in a consistent pattern over time. 
Overall, both the clinic and emergency department visit distributions 
indicated that hospitals were billing consistently over time and in a 
manner that distinguished between visit levels,

[[Page 41511]]

resulting in relatively normal distributions nationally for the OPPS, 
as well as for specific classes of hospitals. The results of these 
analyses were generally consistent with our understanding of the 
clinical and resource characteristics of different levels of hospital 
outpatient clinic and emergency department visits. In the CY 2008 OPPS/
ASC proposed rule (72 FR 42764 through 42765), we specifically invited 
public comment as to whether a pressing need for national guidelines 
continued at this point in the maturation of the OPPS, or if the 
current system where hospitals create and apply their own internal 
guidelines to report visits was currently more practical and 
appropriately flexible for hospitals. We explained that although we 
have reiterated our goal since CY 2000 of creating national guidelines, 
this complex undertaking for these important and common hospital 
services was proving more challenging than we initially thought as we 
received new and expanded information from the public on current 
hospital reporting practices that led to appropriate payment for the 
hospital resources associated with clinic and emergency department 
visits. We believed that many hospitals had worked diligently and 
carefully to develop and implement their own internal guidelines that 
reflected the scope and types of services they provided throughout the 
hospital outpatient system. Based on public comments, as well as our 
own knowledge of how clinics operate, it seemed unlikely that one set 
of straightforward national guidelines could apply to the reporting of 
visits in all hospitals and specialty clinics. In addition, the stable 
distribution of clinic and emergency department visits reported under 
the OPPS over the past several years indicated that hospitals, both 
nationally in the aggregate and grouped by specific hospital classes, 
were generally billing in an appropriate and consistent manner as we 
would expect in a system that accurately distinguished among different 
levels of service based on the associated hospital resources.
    Therefore, we did not propose to implement national visit 
guidelines for clinic or emergency department visits for CY 2008. Since 
publication of the CY 2008 OPPS/ASC final rule with comment period, we 
have once again examined the distribution of clinic and Type A 
emergency department visit levels based upon updated CY 2007 claims 
data available for this proposed rule and confirmed that we continue to 
observe a normal and stable distribution of clinic and emergency 
department visit levels in hospital claims. We continue to believe 
that, based on the use of their own internal guidelines, hospitals are 
generally billing in an appropriate and consistent manner that 
distinguishes among different levels of visits based on their required 
hospital resources. As a result of our updated analyses, we are 
proposing that hospitals should continue to report visits during CY 
2009 according to their own internal hospital guidelines.
    In the absence of national guidelines, we would continue to 
regularly reevaluate patterns of hospital outpatient visit reporting at 
varying levels of disaggregation below the national level to ensure 
that hospitals continue to bill appropriately and differentially for 
these services. We do not expect to see an increase in the proportion 
of visit claims for high level visits as a result of the new extended 
assessment and management composite APCs 8002 and 8003 adopted for CY 
2008 and proposed for CY 2009. Similarly, we expect that hospitals will 
not purposely change their visit guidelines or otherwise upcode clinic 
and emergency department visits reported with observation care solely 
for the purpose of composite APC payment. As stated in the CY 2008 
OPPS/ASC final rule with comment period (72 FR 66648), we expect to 
carefully monitor any changes in billing practices on a service-
specific and hospital-specific level to determine whether there is 
reason to request that QIOs review the quality of care furnished, or to 
request that Benefit Integrity contractors or other contractors review 
the claims against the medical record.
    In addition, we note our continued expectation that hospitals' 
internal guidelines would comport with the principles listed in the CY 
2008 OPPS/ASC final rule with comment period (72 FR 66805). We 
encourage hospitals with more specific questions related to the 
creation of internal guidelines to contact their local fiscal 
intermediary or Medicare Administrative Contractor (MAC).
    We appreciate all of the comments we have received in the past from 
the public on visit guidelines, and we encourage continued submission 
of comments throughout the year that would assist us and other 
stakeholders interested in the development of national guidelines. 
Until national guidelines are established, hospitals should continue 
using their own internal guidelines to determine the appropriate 
reporting of different levels of clinic and emergency department 
visits. While we understand the interest of some hospitals in our 
moving quickly to promulgate national guidelines that would ensure 
standardized reporting of hospital outpatient visit levels, we believe 
that the issues and concerns identified both by us and others that may 
arise are important and require serious consideration prior to the 
implementation of national guidelines. Because of our commitment to 
provide hospitals with 6 to 12 months' notice prior to implementation 
of national guidelines, we would not implement national guidelines 
prior to CY 2010. Our goal is to ensure that OPPS national or hospital-
specific visit guidelines continue to facilitate consistent and 
accurate reporting of hospital outpatient visits in a manner that is 
resource-based and supportive of appropriate OPPS payments for the 
efficient and effective provision of visits in hospital outpatient 
settings.

X. Proposed Payment for Partial Hospitalization Services

A. 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. Section 1833(t)(1)(B)(i) of the Act provides the Secretary 
with the authority to designate the hospital outpatient department 
services to be covered under the OPPS. The Medicare regulations at 
Sec.  419.21(c) 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. 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 (65 FR 18452).
    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 X.B. of this proposed rule and in the CY 2004

[[Page 41512]]

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.
    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, a reduction in 
median cost from previous years. We believed the reduction 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, the median per 
diem cost for CMHCs dropped to $154, while the median per diem cost for 
hospital-based PHPs was $201. 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.
    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).) In that rule, 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 OPPS/ASC final rule with comment period, we 
analyzed 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. The median per diem cost for CMHCs 
was $173, while the median per diem cost for hospital-based PHPs was 
$190.
    The combined hospital-based and CMHC median per diem cost would 
have been $175 for CY 2007. Rather than allowing the PHP per diem rate 
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 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.
    For the CY 2008 OPPS/ASC final rule with comment period, we 
analyzed 12 months of current data for hospital-based PHP claims 
(condition code 41) and CMHC PHP claims for PHP services furnished 
between January 1, 2006, and December 31, 2006. We also used the most 
currently available CCRs to estimate costs for a day of PHP services. 
The median per diem cost for CMHCs was $172, while the median per diem 
cost for hospital-based PHPs was $177. The combined median per diem 
cost, which is computed from both hospital-based and CMHC PHP data was 
$172.
    For the past 3 years, we have been 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. As discussed in the CY 2008 OPPS/
ASC final rule with comment period (72 FR 66671), after extensive data 
analysis we now believe the data reflect 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 
services per day. (We refer readers to the CY 2008 OPPS/ASC final rule 
with comment period (72 FR 66671 through 66675) for a detailed 
discussion of the data analysis.)
    Thus, for CY 2008, we proposed and finalized two refinements to the 
methodology for computing the PHP median; however, these refinements 
did not appreciably impact the median per diem cost. We remapped the 10 
revenue codes to the most appropriate cost centers and computed the 
median using a per day methodology (as described below). As noted in 
the CY 2008 OPPS/ASC final rule with comment period (72 FR 66671), 
after extensive analysis, we now believe the data reflected the level 
of cost for the type of services that are being provided. We continued 
to observe a clear downward trend in the CY 2006 data used to develop 
the CY 2008 OPPS/ASC final rule with comment period.
    Thus, for CY 2008, we refined our methodology for computing PHP per 
diem costs. We developed an alternate method to determine median cost 
by computing a separate per diem cost for each day rather than for each 
bill. Under this method, we computed a cost 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 assigned costs 
for line items on days when a payment is made. All of these costs were 
then arrayed from lowest to highest and the middle value of the array 
would be the median per diem cost. A complete discussion of the refined 
method of computing the PHP median cost can be found in the CY 2008 
OPPS/ASC final rule with comment period (72 FR 66672).
    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. For CY 2008, we were 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 mitigated the proposed reduction to 50 
percent of the difference between the CY 2007 APC amount ($233) and the 
computed amount based on the PHP data ($172), resulting in an APC 
median cost of $203 for CY 2008. As stated in the CY 2008 OPPS/ASC

[[Page 41513]]

final rule with comment period (72 FR 66673), we believe this payment 
amount would 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.
    In the CY 2008 OPPS/ASC final rule with comment period (72 FR 
66673), we reiterated our expectation that hospitals and CMHCs will 
provide a comprehensive program consistent with the statutory intent. 
We also indicated that we intend to explore changes to our regulations 
and claims processing systems in order to deny payment for low 
intensity days and we specifically invited public comment on the most 
appropriate threshold. We received no public comments on this issue.

B. Proposed PHP APC Update

    In the CY 2008 OPPS/ASC final rule with comment period (72 FR 66672 
through 66674), we presented our analysis of the number of units of 
service provided in a day of care, as a possible explanation for the 
low per diem cost for PHP. Both hospital-based and CMHC PHPs had a 
significant number of days where fewer than 4 units of service were 
provided. As noted in the CY 2008 OPPS/ASC final rule with comment 
period, review of CY 2006 data showed that 64 percent of the CMHC days 
were days where fewer than 4 units of service were provided, and 31 
percent of the hospital-based PHP days were days where fewer than 4 
units of service were provided (72 FR 66672).
    We have updated this analysis using CY 2007 claims and found that 
the results and trends have continued. In fact, there are even more 
days with less than four services provided in CMHCs, but there were 
fewer days with less than 4 units of service provided in hospital-based 
PHPs compared to the CY 2006 data. Using CY 2007 claims, 73 percent of 
CMHC days have fewer than 4 units of service, and 28 percent of 
hospital-based PHP days have fewer than 4 units of service. Based on 
these updated findings, we computed median per diem costs in the 
following three categories: (1) All days; (2) Days with 3 units of 
service; and (3) Days with 4 units or more. These updated median per 
diem costs were computed separately for CMHCs and hospital-based PHPs 
and are shown in the table below:

----------------------------------------------------------------------------------------------------------------
                                                                                  Hospital-based
                                                                       CMHCs           PHPs          Combined
----------------------------------------------------------------------------------------------------------------
All Days........................................................            $145            $177            $146
Days with 3 units...............................................             139             151             140
Days with 4 units or more.......................................             171             205             174
----------------------------------------------------------------------------------------------------------------

    Using CY 2007 data and our refined methodology for computing PHP 
per diem costs adopted in our CY 2008 OPPS/ASC final rule with comment 
period (72 FR 66672), the median per diem cost calculated from all 
claims is $146. The data indicate that CMHCs provide far fewer days 
with 4 or more units of service and that CMHC median per diem cost 
($145) is substantially lower than the comparable data from hospital-
based PHPs ($177). Medians for claims containing 4 or more units of 
service are $205 for hospital-based PHPs and $174 for all PHP claims 
regardless of site of service. Medians for claims containing 3 units of 
service are $139 for CMHCs, $151 for hospital-based PHPs, and $140 for 
all PHP claims regardless of site of service.
    As we stated in our CY 2008 OPPS/ASC final rule with comment period 
(72 FR 66672), it was never our intention that days with three services 
represented the number of services provided in a typical day. Our 
intention was to cover days that consisted of only three services in 
certain limited circumstances. For example, we note there are days when 
a patient is transitioning towards discharge (or days when a patient 
who is transitioning at the beginning of his or her PHP stay). Another 
example of when it may be appropriate for a program to provide only 
three services in a day is when a patient is required to leave the PHP 
early for the day due to an unexpected medical appointment. Therefore, 
we recognize there may be limited circumstances when it is appropriate 
for PHPs to receive payment for days when only three services are 
provided. However, we believe that programs that provide four or more 
services should be paid an amount that recognizes that they have 
provided a more intensive day of care. A higher rate for more intensive 
days is consistent with our goal that hospitals and CMHCs provide a 
comprehensive program in keeping with the statutory intent.
    Accordingly, as there are circumstances when three services 
provided may be appropriate, but to reflect our general belief that the 
data trend that four or more services more appropriately indicated the 
comprehensive nature of PHP services, for CY 2009, we are proposing to 
create two separate APC payment rates for PHP: one for days with three 
services and one for days with four or more services. We are proposing 
to create two new APCs for PHP as follows:

------------------------------------------------------------------------
                                                                Proposed
           Proposed APC                    Group title          per diem
                                                                  rate
------------------------------------------------------------------------
0172..............................  Level I Partial                 $140
                                     Hospitalization (3
                                     services).
0173..............................  Level II Partial                 174
                                     Hospitalization (4 or
                                     more services).
------------------------------------------------------------------------

    For APC 0172, we are proposing to use the median per diem cost for 
CMHC and hospital-based PHP days with 3 units of services ($140). For 
APC 00173, we are proposing to use the median per diem cost for CMHC 
and hospital-based PHP days with 4 or more units of service ($174). As 
noted previously, these proposed payment rates are derived from both 
PHP-based and CMHC-based claims, and represent the median cost of 
providing PHP services for the unit of services described. We believe 
that $140 is an appropriate payment rate for less intensive days 
because it is derived from both hospital-based PHP and CMHC claims data 
using all days with three services. We believe that $174 is an 
appropriate payment rate for more intensive days because it is derived 
from both hospital-based PHP and CMHC claims data, using all days with 
four or more services. We believe that creating a rate specific to days 
with

[[Page 41514]]

three services is consistent with our proposal to require CMHCs and 
hospital-based PHPs to provide a minimum of 3 units of service per day 
in order to receive payment as discussed below in section X.C.1. of 
this proposed rule. Our proposal to use two separate PHP rates provides 
a lower payment for days with only three services, while not penalizing 
programs that provide four or more services by excluding days with 
three services in the computation of APC 0173. We believe our proposal 
appropriately balances our concern that a PHP program is an intensive 
program and should generally consist of five to six services provided, 
with the realization that there may nonetheless be appropriate 
circumstances where three services may be provided.

C. Proposed Policy Changes

1. Proposal to Deny Payment for Low Intensity Days
    In the CY 2008 OPPS/ASC final rule with comment period (72 FR 
66673), we reiterated our expectation that hospitals and CMHCs will 
provide a comprehensive program consistent with the statutory intent. 
We also indicated that we intend to explore changes to our regulations 
and claims processing systems in order to deny payment for low 
intensity days and we specifically invited public comment on the most 
appropriate threshold. We received no public comments on this subject. 
Our analysis of claims data indicates that CMHCs (and to a lesser 
extent hospital-based PHPs) are furnishing a substantial number of low 
unit days. We consider providing only one or two services to be a low 
unit day. Although we currently consider the acceptable minimum number 
of PHP services required in a PHP day to be three, it was never our 
intention that three or fewer services should represent the number of 
services to be provided in a typical PHP day. PHP is furnished in lieu 
of an inpatient psychiatric hospitalization and is intended to be more 
intensive than a half-day program. We believe the typical PHP day 
should include five to six services with a break for lunch. As 
indicated in section X.B. above, we are proposing two PHP per diem 
rates that reflect the level of care provided.
    In conjunction with and to conform to our proposed CY 2009 PHP per 
diem rates that account for a minimum of 3 units of service provided, 
we also are proposing changes to the existing PHP logic portion of the 
I/OCE to require that CMHCs and hospital-based PHPs provide a minimum 
of three services per day in order to receive PHP payment. Currently, 
the PHP logic portion of the I/OCE results in a ``suspension of claim 
for medical review'' for claims with fewer than three services provided 
in a day. For CY 2009, we are proposing to deny payment for any PHP 
claims for days when fewer than three therapeutic services are 
provided. We believe that three services should be the minimum number 
of services allowed in a PHP day because a day with one or two services 
does not meet the statutory intent of a PHP program. Three services are 
a minimum threshold that permits unforeseen circumstances, such as 
medical appointments, while allowing payment, but still maintains the 
integrity of a comprehensive program. As noted previously, we also 
believe that a day where a patient receives only three services should 
only occur under certain circumstances. As we explained in section X.B. 
of this proposed rule, an example of when it may be appropriate to bill 
only three services a day would be when a patient might need to leave 
early for a medical appointment and, therefore, would be unable to 
complete a full day of PHP treatment. However, PHP programs that 
provide three services in a day should be the exception, as we expect 
PHP programs to generally provide a more intensive day of services as 
PHP is a more comprehensive program than three services. CMS will be 
observing trends and assessing this proposed two payment rate approach 
in its continued review to protect the integrity of the PHP program.

2. Proposal to Strengthen PHP Patient Eligibility Criteria

    As discussed in the CY 2008 OPPS/ASC final rule with comment period 
(72 FR 66671), we established the current PHP payment rate of $203. As 
part of our ongoing review of ensuring the most appropriate payment is 
made for these intensive, service-oriented programs, we also explored 
changes that could enhance and strengthen the integrity of the PHP 
benefit overall. As part of this review, we looked at existing 
instructions to providers, including current regulations, manuals, and 
other guidance. We are proposing to codify existing policy regarding 
PHP patient eligibility as we believe it will help strengthen the 
integrity of the PHP benefit by conforming our regulations to our 
longstanding policy and making available the general program 
requirements in one regulatory section. These requirements are 
currently stated in the Medicare Benefit Policy Manual, Pub. 100-02, 
Chapter 6, section 70.3, available on the CMS Web site at: http://www.cms.hhs.gov/manuals/Downloads/bp102c06.pdf) and in Transmittal 10, 
Change Request 3298, dated May 7, 2004, but not codified. The 
regulatory text changes that we are proposing are intended to 
strengthen PHP requirements by adding the existing patient eligibility 
conditions to the existing PHP regulations, and do not reflect a change 
in policy. Specifically, we are proposing to revise 42 CFR 410.43 to 
add a reference to current regulations at Sec.  424.24(e) that requires 
that PHP services are furnished pursuant to a physician certification 
and plan of care. While the requirements at Sec.  424.24(e) are not 
new, we believe the addition of this reference to Sec.  410.43 will 
provide a more complete description of our expectations for PHP 
programs in Sec.  410.43.
    We also are proposing to revise 42 CFR 410.43 to add the following 
patient eligibility criteria. We are proposing to state that partial 
hospitalization programs are intended for patients who--
    (1) Require 20 hours per week of therapeutic services;
    (2) Are likely to benefit from a coordinated program of services 
and require more than isolated sessions of outpatient treatment;
    (3) Do not require 24-hour care;
    (4) Have an adequate support system while not actively engaged in 
the program;
    (5) Have a mental health diagnosis;
    (6) Are not judged to be dangerous to self or others; and
    (7) Have the cognitive and emotional ability to participate in the 
active treatment process and can tolerate the intensity of the partial 
hospitalization program.
    We would like to generally note that partial hospitalization is the 
level of intervention that falls between inpatient hospitalization and 
episodic treatment in the continuum of care for the mentally ill. While 
we require a patient to have a mental health diagnosis, we caution that 
the diagnosis in itself is not the sole determining factor for 
coverage.
    Because partial hospitalization is provided in lieu of inpatient 
care, it should be a highly structured and clinically-intensive 
program. Our goal is to improve the level of service furnished in a PHP 
day, while also ensuring that the partial hospitalization benefit is 
being utilized by the appropriate population. For example, a PHP 
candidate should be able to tolerate a day of PHP and benefit from the 
intense treatment provided in the program. In addition, for the program 
to be fully beneficial, a PHP participant should have a strong support 
system outside of the PHP program helping to ensure success. Moreover, 
the safety of all PHP

[[Page 41515]]

patients is extremely important and, therefore, all PHP participants 
should be able to live safely in the community, and not be a danger to 
self or others. For these reasons, it has been our longstanding policy 
that these criteria are vital in determining the patient's eligibility 
to participate in a PHP and believe it necessary to propose to codify 
the above list of basic patient eligibility requirements in Sec.  
410.43.
    In the CY 2008 OPPS/ASC final rule with comment period (72 FR 
66673), we reiterated our expectation that hospitals and CMHCs will 
provide a comprehensive program consistent with the statutory intent. 
We believe the addition of these requirements to the regulations helps 
provide a clear and consistent description of our expectations for PHP 
programs and would strengthen the integrity of the PHP benefit by 
noting such in the PHP regulations.
3. Proposed Partial Hospitalization Coding Update
    As part of our ongoing evaluation of partial hospitalization codes, 
we are proposing several coding changes. We identified several CPT 
codes that we believe are inappropriate for billing PHP claims. Upon 
further study and after consultation with CMS medical advisors, we are 
proposing to eliminate use of the following three CPT codes for billing 
PHP claims: 90846 (Family psychotherapy (without the patient present)), 
90849 (Multi-family group psychotherapy), and 90899 (Unlisted 
psychiatric service or procedure). While these three CPT codes 
constitute 0.157 percent of the total PHP claims for CY 2006, we 
believe there are similar and more appropriate HCPCS codes to use to 
bill for these services. We specifically request public comment on our 
proposed elimination of these three CPT codes from use in the PHP 
benefit.
    Our review of the claims data associated with CPT code 90846 found 
that this code accounts for approximately 0.004 percent of the total 
services billed on PHP claims in CY 2006. We also believe that CPT code 
90846 is not an appropriate code for the PHP benefit, because it 
excludes the beneficiary. Rather, we believe that another available PHP 
code CPT code 90847 (Family psychotherapy (conjoint psychotherapy with 
patient present)), which is currently a billable PHP code, is the more 
appropriate CPT code to use to bill for family psychotherapy services 
because it requires the presence of the patient as part of the family 
psychotherapy session.
    In addition, our review of the CY 2006 claims data associated with 
CPT code 90849 found that this code accounts for approximately 0.058 
percent of the total services billed on PHP claims in CY 2006. We also 
believe that the intended use of this code, which is for the reporting 
of multiple family group therapy sessions, is not appropriate for our 
use under PHP because PHP care is centered on the beneficiary. As 
stated earlier, we believe that CPT code 90847 is the more appropriate 
code to use for PHP payment of family psychotherapy services, because 
it provides for the conduct of individualized family psychotherapy with 
the patient present. Therefore, for CY 2009, we are proposing to 
eliminate CPT code 90849 for use as a PHP code.
    In addition, evaluation of the CY 2006 claims data found that CPT 
code 90899 accounted for approximately 0.095 percent of total services 
billed on PHP claims. Upon closer examination, we found that CPT code 
90899 is predominantly used to bill for patient education services. 
This is an unlisted CPT procedure code and such CPT unlisted procedure 
codes are used to report unlisted psychiatric procedures that are not 
accurately described by any other, more specific CPT codes. Because of 
our concerns about the type of services that may be billed using an 
unlisted CPT code and because a more appropriate code is currently 
available that better describes the patient education services for 
which PHP payment may be made, we are proposing to eliminate PHP 
payment for CPT code 90899 in CY 2009, and are proposing to replace CPT 
code 90899 with HCPCS code G0177 (Patient Education and Training). We 
further note that eliminating unlisted CPT procedure codes is 
consistent with how other payment systems currently treat such codes, 
in that more specific coding is preferred over general coding.
    In addition, we are proposing to eliminate two group therapy CPT 
codes currently used in a PHP setting, 90853 (Group psychotherapy other 
than of a multiple-family group) and 90857 (Interactive group 
psychotherapy), and replace them with two new parallel timed HCPCS G-
codes: GXXX1 (Group psychotherapy other than of a multiple-family 
group, in a partial hospitalization setting, approximately 45 to 50 
minutes) and GXXX2 (Interactive group psychotherapy, in a partial 
hospitalization setting, approximately 45 to 50 minutes). As most of 
the current PHP codes already include time estimates, we believe in 
order to maintain consistency with the existing HCPCS codes used in 
PHP, the group therapy codes should likewise include a time descriptor. 
We believe the time of 45 to 50 minutes for a group therapy session is 
reasonable as it approximately reflects the timing of group sessions in 
current clinical practices. Therefore, we are proposing the two new 
timed HCPCS G-codes for PHP group therapies: GXXX1 and GXXX2. We note 
that both CPT code 90853 and 90857 may still be used in a non-PHP 
setting.
    The table of billable PHP revenue and HCPCS codes originally 
published in the April 7, 2000 OPPS final rule with comment period (65 
FR 18454) was updated and published in Transmittal 1487, Change Request 
5999, dated April 8, 2008, and is currently located in, the Medicare 
Claims Processing Manual, Pub. 100-04, Chapter 4, section 260.1, which 
is available on the CMS Web site at: http://www.cms.hhs.gov/manuals/downloads/clm104c04.pdf. Table 34 below displays the revised list of 
billable PHP revenue codes and HCPCS codes shown in Transmittal 1487. 
This table also includes the five CPT codes that we are proposing to 
eliminate for CY 2009 and the two new HCPCS G-codes we are proposing to 
add for CY 2009. The five CPT codes that we are proposing to eliminate 
are shown in the HCPCS code column with a line struck through each 
code. The two new HCPCS G-codes that we are proposing are shown in the 
HCPCS code column, in the row with revenue code 0915 (Group Therapy).

[[Page 41516]]

[GRAPHIC] [TIFF OMITTED] TP18JY08.672

D. Proposed Separate Threshold for Outlier Payments to CMHCs

    In the November 7, 2003 final rule with comment period (68 FR 
63469), we indicated that, given the difference in PHP charges between 
hospitals and CMHCs, we did not believe it was appropriate to make 
outlier payments to CMHCs using the outlier percentage target amount 
and threshold established for hospitals. There was a significant 
difference in the amount of outlier payments made to hospitals and 
CMHCs for PHP. 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, an amount 
equal to 0.6 percent (or 0.006 percent of total OPPS payments), to 
CMHCs for PHP outliers. 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 (or 0.0015 percent of 
total OPPS payments), to CMHCs for PHP outliers. For CY 2008, we set 
the estimated outlier target at 1.0 percent and allocated a portion of 
that 1.0 percent, an amount equal to 0.02 percent of outlier payments 
(or 0.0002 percent of total OPPS payments), to CMHCs for PHP outliers. 
The CY 2008 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 2008 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.F. of this proposed rule, for CY 2009, we 
are proposing to continue our policy of setting aside 1.0 percent of 
the aggregate total payments under the OPPS for outlier payments. We 
are proposing that a portion of that 1.0 percent, an amount equal to 
0.07 percent of outlier payments (or 0.0007 percent of total OPPS 
payments), would be allocated to CMHCs for PHP outliers. As discussed 
in section II.F. of this proposed rule, we again are proposing to set a 
dollar threshold in addition to an APC multiplier threshold for OPPS 
outlier payments. However, because the PHP APC 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 
are not proposing to set a dollar threshold for CMHC outliers. As noted 
above, we are proposing to set the outlier threshold for CMHCs for CY 
2009 at 3.40 times the APC payment amount and the CY 2009 outlier 
payment percentage applicable to costs in excess of the threshold at 50 
percent.

XI. Proposed Procedures That Will Be Paid Only as Inpatient Procedures

A. Background

    Section 1833(t)(1)(B)(i) of the Act gives the Secretary broad 
authority to determine the services to be covered and paid for under 
the OPPS. Before implementation of the OPPS in August 2000, Medicare 
paid reasonable costs for services provided in the outpatient 
department. The claims submitted were subject to medical review by the 
fiscal intermediaries to determine the appropriateness of providing 
certain services in the outpatient setting. We did not specify in 
regulations those services that were appropriate to provide only in the 
inpatient setting and that, therefore, should be payable only when 
provided in that setting.
    In the April 7, 2000 final rule with comment period (65 FR 18455), 
we identified procedures that are typically provided only in an 
inpatient setting and, therefore, would not be paid by Medicare under 
the OPPS. These procedures comprise what is referred to as the 
``inpatient list.'' The inpatient list specifies those services that 
are only paid when provided in an inpatient setting because of the 
nature of the procedure, the need for at least 24 hours of 
postoperative recovery time or monitoring before the patient can be 
safely discharged, or the underlying physical condition of the patient. 
As we discussed in that rule and in the November 30, 2001 final rule 
(66 FR 59856), we may use any of the following criteria when reviewing 
procedures to

[[Page 41517]]

determine whether or not they should be moved from the inpatient list 
and assigned to an APC group for payment under the OPPS:
     Most outpatient departments are equipped to provide the 
services to the Medicare population.
     The simplest procedure described by the code may be 
performed in most outpatient departments.
     The procedure is related to codes that we have already 
removed from the inpatient list.
    In the November 1, 2002 final rule with comment period (67 FR 
66741), we added the following criteria for use in reviewing procedures 
to determine whether they should be removed from the inpatient list and 
assigned to an APC group for payment under the OPPS:
     We have determined that the procedure is being performed 
in numerous hospitals on an outpatient basis; or
     We have determined that the procedure can be appropriately 
and safely performed in an ASC, and is on the list of approved ASC 
procedures or has been proposed by us for addition to the ASC list.
    We believe that these additional criteria help us to identify 
procedures that are appropriate for removal from the inpatient list.
    The list of codes that we are proposing to be paid by Medicare in 
CY 2009 only as inpatient procedures is included as Addendum E to this 
proposed rule.

B. Proposed Changes to the Inpatient List

    For the CY 2009 OPPS, we used the same methodology as described in 
the November 15, 2004 final rule with comment period (69 FR 65835) to 
identify a subset of procedures currently on the inpatient list that 
are being performed a significant amount of the time on an outpatient 
basis. These procedures were then clinically reviewed for possible 
removal from the inpatient list. We solicited the APC Panel's input at 
its March 2008 meeting on the appropriateness of removing the following 
six CPT codes from the CY 2009 OPPS inpatient list: 21172 
(Reconstruction superior-lateral orbital rim and lower forehead, 
advancement or alteration, with or without grafts (includes obtaining 
autografts)); 21386 (Open treatment of orbital floor blowout fracture; 
periorbital approach); 21387 (Open treatment of orbital floor blowout 
fracture; combined approach); 27479 (Arrest, epiphyseal, any method 
(e.g., epiphysiodesis); combined distal femur, proximal tibia and 
fibula); 54535 (Orchiectomy, radical, for tumor; with abdominal 
exploration); and 61850 (Twist drill or burr hole(s) for implantation 
of neurostimulator electrodes, cortical).
    In addition to presenting to the APC Panel the six candidate 
procedures that we believed could be appropriate for removal from the 
inpatient list for CY 2009, we also presented utilization data for two 
procedures, specifically CPT code 64818 (Sympathectomy, lumbar) and CPT 
code 20660 (Application of cranial tongs caliper, or stereotactic 
frame, including removal (separate procedure)) that were discussed as 
possible procedures for removal from the inpatient list during the 
March 2007 APC Panel meeting. At that meeting, the APC Panel 
recommended that we obtain additional utilization data for these two 
procedures for its consideration at a subsequent meeting.
    Following discussion, the APC Panel recommended that CMS remove 
from the inpatient list four of the six procedures (presented as 
candidates for removal from the list), specifically CPT codes 21172, 
21386, 21387, and 27479, and one of the two codes for which additional 
utilization data were presented, specifically CPT code 20660. The APC 
Panel also recommended that CMS seek input from relevant physician 
specialty groups on the removal of two of the six procedures (presented 
to them as possible candidates for removal from the inpatient list), 
CPT codes 54535 and 61850. The APC Panel made no recommendation 
regarding removal of CPT code 64818 from the inpatient list after 
review of the additional data presented. For CY 2009, we are proposing 
to remove all of the codes except for CPT code 64818 from the inpatient 
list that were presented to the APC Panel as candidates for removal 
during its March 2008 meeting and, as recommended by the APC Panel, are 
specifically soliciting public comment on the proposed removal of CPT 
codes 54535 and 61850 from the inpatient list.
    In addition to the procedures discussed at the APC Panel's March 
2008 meeting, we also reviewed and are proposing to remove three 
procedures from the inpatient list that were requested for removal 
during the comment period on the CY 2008 OPPS/ASC proposed rule. We 
believe that these procedures are appropriate for removal from the 
inpatient list and are soliciting public comment on our proposal to 
remove these three procedures: CPT codes 27886 (Amputation, leg, 
through tibia and fibula; reamputation); 43420 (Closure of 
esophagostomy or fistula; cervical approach); and 50727 (Revision of 
urinary-cutaneous anastomosis (any type urostomy)).
    Furthermore, during the March 2008 meeting of the APC Panel, a 
meeting attendee requested removal of several CPT codes from the 
inpatient list. That verbal request was followed by a letter in which 
the stakeholder requested that we remove five other procedures from the 
inpatient list for CY 2009. These procedures are: CPT code 50580 (Renal 
endoscopy through nephrotomy or pyelotomy, with or without irrigation, 
instillation, or ureteropyelography, exclusive of radiologic service; 
with removal of foreign body or calculus); CPT code 51845 (Abdomino-
vaginal vesical neck suspension, with or without endoscopic control 
(e.g., Stamey, Raz, modified Pereyra); CPT code 51860 (Cystorrhaphy, 
suture of bladder wound, injury or rupture; simple); CPT code 54332 
(One stage proximal penile or penoscrotal hypospadias repair requiring 
extensive dissection to correct chordee and urethroplasty by use of 
skin graft tube and/or island flap); and CPT code 54336 (One stage 
perineal hypospadias repair requiring extensive dissection to correct 
chordee and urethroplasty by use of skin graft tube and/or island 
flap). Based on our utilization data and clinical review, we are 
proposing to remove one of these procedures from the inpatient list, 
specifically CPT code 54332, and note that effective January 1, 2008, 
CPT code 50580 was removed from the inpatient list and assigned to APC 
0161.
    Consistent with our established policy for removing procedures from 
the inpatient list, we rely on recommendations from the public and the 
APC Panel, combined with our utilization data and review by CMS medical 
advisors, to determine which procedures are candidates for removal. We 
believe that our policy of proposing the procedures for removal and 
soliciting comments from the public, which includes physician specialty 
societies, is the most appropriate process to receive input from the 
public on this issue. Rather than solicit approval from a select group 
(for example, specific physician specialty societies), we believe that 
solicitation of comments from all interested parties is more consistent 
with meeting our obligation to the public regarding outpatient services 
provided by hospitals. Therefore, we are accepting both recommendations 
of the APC Panel from its March 2008 meeting regarding the inpatient 
list, including (1) proposing to remove the five specific procedures 
the APC Panel recommended for removal (CPT codes 21172, 21386, 21387, 
27479, and 20660)

[[Page 41518]]

and (2) seeking input from relevant professional societies regarding 
our CY 2009 proposal to remove from the inpatient list CPT codes 54535 
and 61850.
    The utilization data and clinical review findings for the 11 
procedures we are proposing to remove from the inpatient list for CY 
2009 support our proposal. Therefore, we are proposing that 11 
procedures be removed from the OPPS inpatient list for CY 2009 and be 
assigned to clinically appropriate APCs, as shown in Table 35 below.

 Table 35.--Proposed HCPCS Codes for Removal From Inpatient List and Their Proposed APC Assignments for CY 2009
----------------------------------------------------------------------------------------------------------------
                                                                                Proposed CY    Proposed CY 2009
           HCPCS code                          Long descriptor                   2009 APC      status  indicator
----------------------------------------------------------------------------------------------------------------
20660..........................  Application of cranial tongs caliper, or               0138  T
                                  stereotactic frame, including removal
                                  (separate procedure).
21172..........................  Reconstruction superior-lateral orbital rim            0256  T
                                  and lower forehead, advancement or
                                  alteration, with or without grafts
                                  (includes obtaining autografts).
21386..........................  Open treatment of orbital floor blowout                0256  T
                                  fracture; periorbital approach.
21387..........................  Open treatment of orbital floor blowout                0256  T
                                  fracture; combined approach.
27479..........................  Arrest, epiphyseal, any method (e.g.,                  0050  T
                                  epiphysiodesis); combined distal femur
                                  proximal tibia and fibula.
27886..........................  Amputation, leg, through tibia and fibula;             0049  T
                                  reamputation.
43420..........................  Closure of esophagostomy or fistula;                   0254  T
                                  cervical approach.
50727..........................  Revision of urinary-cutaneous anastomosis              0165  T
                                  (any type urostomy).
54332..........................  One stage proximal penile or penoscrotal               0181  T
                                  hypospadias repair requiring extensive
                                  dissection to correct chordee and
                                  urethroplasty by use of skin graft tube
                                  and/or island flap.
54535..........................  Orchiectomy, radical, for tumor; with                  0181  T
                                  abdominal exploration.
61850..........................  Twist drill or burr hole(s) for                        0061  S
                                  implantation of neurostimulator
                                  electrodes, cortical.
----------------------------------------------------------------------------------------------------------------

XII. OPPS Nonrecurring Technical and Policy Clarifications

A. Physician Supervision of HOPD Services

1. Background
    The following discussion is a restatement and clarification of the 
requirements for physician supervision of therapeutic hospital 
outpatient services. We have received many questions related to 
physician supervision in hospitals and provider-based departments of 
hospitals in response to recent changes to the Medicare Benefit Policy 
Manual, Pub.100-2, issued via Transmittal 82, Change Request 5496, 
dated February 8, 2008. That change request updated the Medicare 
Benefit Policy Manual, Chapter 6, sections 20 through 20.6 and 70.5 to 
clarify existing OPPS policy. The change request incorporated a 
citation and reference language from 42 CFR 410.27(f) into the text of 
the manual for the first time since the regulatory language was 
finalized in the April 7, 2000 OPPS final rule with comment period (65 
FR 18524 through 18526). We believe that the updated manual language 
drew renewed attention to the longstanding OPPS policy on physician 
supervision. Based on the number and scope of the questions raised to 
us, and varying interpretations of the existing policy that 
stakeholders have described, we are including this discussion in this 
proposed rule to provide up-to-date clarification of the existing 
policy that may resolve some of the questions brought to our attention.
    Section 1861(s)(2)(C) of the Act authorizes payment for diagnostic 
services, which are furnished to a hospital outpatient for the purpose 
of diagnostic study. We have further defined the requirements for 
diagnostic services furnished to hospital outpatients, including 
requirements for physician supervision of diagnostic services, in 
Sec. Sec.  410.28 and 410.32. Section 410.28(e) states that Medicare 
Part B will make payment for diagnostic services furnished at provider-
based departments of hospitals ``only when the diagnostic services are 
furnished under the appropriate level of physician supervision 
specified by CMS in accordance with the definitions in Sec. Sec.  
410.32(b)(3)(i), (b)(3)(ii), and (b)(3)(iii).'' In addition, in the 
April 7, 2000 OPPS final rule with comment period (65 FR 18526), we 
stated that our model for the requirement was the requirement for 
physician supervision of diagnostic tests payable under the MPFS that 
was set forth in the CY 1998 MPFS final rule (62 FR 59048) that was 
published in the Federal Register on October 31, 1998. We also 
explained with respect to the supervision requirements for individual 
diagnostic tests that we intended to instruct hospitals and fiscal 
intermediaries to use the MPFS as a guide pending issuance of updated 
requirements. For diagnostic services not listed in the MPFS, we stated 
that fiscal intermediaries, in consultation with their medical 
directors, would define appropriate supervision levels in order to 
determine whether claims for these services are reasonable and 
necessary. We have not subsequently issued new requirements for the 
physician supervision of diagnostic tests in provider-based departments 
of hospitals. Instead, we have continued to follow the supervision 
requirements for individual diagnostic tests as listed each year in the 
updates to the MPFS.
    Section 1861(s)(2)(B) of the Act authorizes payment for hospital 
services ``incident to physicians' services rendered to outpatients.'' 
We have further defined the requirements for outpatient hospital 
therapeutic services and supplies ``incident to'' a physician's service 
in Sec.  410.27. More specifically, Sec.  410.27(f) states, ``Services 
furnished at a department of a provider, as defined in Sec.  
413.65(a)(2) of this subchapter, that has provider-based status in 
relation to a hospital under Sec.  413.65 of this subchapter, must be 
under the direct supervision of a physician. `Direct supervision' means 
the physician must be present and on the premises of the location and 
immediately available to furnish assistance and direction throughout 
the performance of the procedure. It does not mean that the physician 
must be present in the room when the procedure is performed.'' This

[[Page 41519]]

language makes no distinction between on-campus and off-campus 
provider-based departments.
    However, in the preamble of the April 7, 2000 OPPS final rule with 
comment period (68 FR 18525), we further discussed the requirement for 
physician supervision and the finalization of the proposed regulation 
text. In that discussion, we stated that the language of Sec.  
410.27(f) ``applies to services furnished at an entity that is located 
off the campus of a hospital that we designate as having provider-based 
status as a department of a hospital in accordance with Sec.  413.65.'' 
We also stated that for services furnished in a department of a 
hospital that is located on the campus of a hospital, ``we assume the 
direct supervision requirement to be met as we explain in section 
3112.4(a) of the Intermediary Manual.'' We went on to add that ``we 
assume the physician supervision requirement is met on hospital 
premises because staff physicians would always be nearby within the 
hospital.''
    Based on questions received recently, we are concerned that some 
stakeholders may have misunderstood our use of the term ``assume'' in 
the April 7, 2000 OPPS final rule with comment period, believing that 
our statement meant that we do not require any supervision in the 
hospital or in an on-campus provider-based department for therapeutic 
OPPS services, or that we only require general supervision for those 
services. This is not the case. It is our expectation that hospital 
outpatient therapeutic services are provided under the direct 
supervision of physicians in the hospital and in all provider-based 
departments of the hospital, specifically both on-campus and off-campus 
departments of the hospital. The expectation that a physician would 
always be nearby predates the OPPS and is related to the statutory 
authority for payment of hospital outpatient services--that Medicare 
makes payment for hospital outpatient services ``incident to'' the 
services of physicians in the treatment of patients as described in 
section 1861(s)(2)(B) of the Act. Longstanding hospital outpatient 
policy language states that, ``the services and supplies must be 
furnished as an integral though incidental part of the physicians' 
professional services in the course of treatment of an illness or 
injury.'' We refer readers to Sec.  410.27(a) and to the Medicare 
Benefit Policy Manual, Pub. 100-2, Chapter 6, section 20.5.1, for 
further description of hospital outpatient services incident to a 
physician's service. The Medicare Benefit Policy Manual also states in 
Chapter 6, section 20.5.1, that services and supplies must be furnished 
on a physician's order and delivered under physician supervision. 
However, the manual indicates further that each occasion of a service 
by a nonphysician does not need also be the occasion of the actual 
rendition of a personal professional service by the physician 
responsible for the care of the patient. Nevertheless, as stipulated in 
that same section of the manual ``during any course of treatment 
rendered by auxiliary personnel, the physician must personally see the 
patient periodically and sufficiently often enough to assess the course 
of treatment and the patient's progress and, where necessary, to change 
the treatment regimen.''
    The expectation that a physician would always be nearby also dates 
back to a time when inpatient hospital services provided in a single 
hospital building represented the majority of hospital payments by 
Medicare. Since that time, advances in medical technology, changes in 
the patterns of healthcare delivery, and changes in the organizational 
structure of hospitals have led to the development of extensive 
hospital campuses, sometimes spanning several city blocks, as well as 
off-campus and satellite provider-based campuses at different 
locations. In the April 7, 2000 OPPS final rule with comment period (65 
FR 18525), we described the focus of the direct physician supervision 
requirement on off-campus provider-based departments. We will continue 
to emphasize the physician supervision requirement for off-campus 
provider-based departments. However, we note that if there were 
problems with outpatient care in a hospital or in an on-campus 
provider-based department where direct supervision was not in place 
(that is, the expectation of direct physician supervision was not met), 
we would consider that to be a concern. We want to ensure that OPPS 
payment is made for high quality hospital outpatient services provided 
to beneficiaries in a safe and effective manner and consistent with 
Medicare requirements.
    The definition of direct supervision in Sec.  410.27(f) requires 
that the physician must be present and on the premises of the location 
and immediately available to furnish assistance and direction 
throughout the performance of the procedure. In the April 7, 2000 OPPS 
final rule with comment period (65 FR 18525), we define ``on the 
premises of the location'' by stating `` * * * a physician must be 
present on the premises of the entity accorded status as a department 
of the hospital and therefore, immediately available to furnish 
assistance and direction for as long as patients are being treated at 
the site.'' We also stated that this does not mean that the physician 
must be physically in the room where a procedure or service is 
furnished. Although we have not further defined the term ``immediately 
available'' for this specific context, the lack of timely physician 
response to a problem in the HOPD would represent a quality concern 
from our perspective that hospitals should consider in structuring 
their provision of services in ways that meet the direct physician 
supervision requirement for HOPD services.
2. Summary
    In summary, direct physician supervision is the standard set forth 
in the April 7, 2000 OPPS final rule with comment period for 
supervision of hospital outpatient therapeutic services covered and 
paid by Medicare in hospitals and provider-based departments of 
hospitals. While we have emphasized and will continue to emphasize the 
direct supervision requirement for off-campus provider-based 
departments, we are reiterating our expectation of direct physician 
supervision of all hospital outpatient therapeutic services, regardless 
of their on-campus or off-campus location. Appropriate supervision is a 
key aspect of the delivery of safe and high quality hospital outpatient 
services that are paid based on the statutory authority of the OPPS.

B. Reporting of Pathology Services for Prostate Saturation Biopsy

    Prostate saturation biopsy is a technique currently described by 
Category III CPT code 0137T (Biopsy, prostate, needle, saturation 
sampling for prostate mapping). Typically this service entails 
obtaining 40 to 80 core samples from the prostate under general 
anesthesia. Currently the samples are reviewed by a pathologist, and 
the pathology service is reported with CPT code 88305 (Level IV--
Surgical pathology, gross and microscopic examination). Since the 
beginning of the OPPS, Medicare has paid for the gross and microscopic 
pathology examination of prostate biopsy specimens using CPT code 
88305. This CPT code has been paid separately under the OPPS and 
assigned to APC 0343 (Level III Pathology) with status indicator ``X'' 
since August 2000. For CY 2008, CPT code 88305 is assigned to APC 0343 
with a payment rate of approximately $33.
    In view of the large number of samples that are taken from a single 
body organ during prostate saturation biopsy and that must undergo 
gross and

[[Page 41520]]

microscopic examination by a pathologist, for CY 2009, we are proposing 
to recognize four new more specific Level II HCPCS G-codes under the 
OPPS for these pathology services, consistent with the CY 2009 proposal 
for the MPFS. The proposed HCPCS codes are: GXXX1 (Surgical pathology, 
gross and microscopic examination for prostate needle saturation biopsy 
sampling, 1-20 specimens); GXXX2 (Surgical pathology, gross and 
microscopic examination for prostate needle saturation biopsy sampling 
21-40 specimens); GXXX3 (Surgical pathology, gross and microscopic 
examination for prostate needle saturation biopsy sampling, 41-60 
specimens); and GXXX4 (Surgical pathology, gross and microscopic 
examination for prostate needle saturation biopsy sampling, greater 
than 60 specimens). We believe the descriptors of these proposed HCPCS 
G-codes more specifically reflect the characteristics of prostate 
saturation biopsy pathology services so that reporting would result in 
more accurate cost data for OPPS ratesetting and, ultimately, more 
appropriate payment. CPT code 88305 would continue to be recognized 
under the OPPS for those surgical pathology services unrelated to 
prostate needle saturation biopsy sampling. Consistent with the 
proposed CY 2009 APC assignment for CPT code 88305, we are proposing to 
assign these four new HCPCS G-codes to APC 0343, with a proposed APC 
median cost of approximately $35. We are specifically interested in 
public comment on the appropriateness of recognizing these proposed new 
HCPCS G-codes under the OPPS and their proposed APC assignments, 
specifically with regard to the expected hospital resources required 
for the preparation of the biopsy specimens that would be reported with 
the proposed new HCPCS G-codes and the extent to which those resources 
necessary to provide a single unit of each proposed new HCPCS G-code 
would differ from the resources required to provide a single unit of 
CPT code 88305 for a conventional prostate needle biopsy specimen.

XIII. Proposed OPPS Payment Status and Comment Indicators

A. Proposed OPPS Payment Status Indicator Definitions

    The OPPS payment status indicators (SIs) that we assign to HCPCS 
codes and APCs play an important role in determining payment for 
services under the OPPS. They indicate whether a service represented by 
a HCPCS code is payable under the OPPS or another payment system and 
also whether particular OPPS policies apply to the code. Our proposed 
CY 2009 status indicator assignments for APCs and HCPCS codes are shown 
in Addendum A and Addendum B, respectively, to this proposed rule. We 
are proposing to use the status indicators and definitions that are 
listed in Addendum D1 to this proposed rule, which we discuss below in 
greater detail.
1. Proposed Payment Status Indicators To Designate Services That Are 
Paid Under the OPPS

----------------------------------------------------------------------------------------------------------------
        Indicator                  Item/code/service                         OPPS payment status
----------------------------------------------------------------------------------------------------------------
G........................  Pass-Through Drugs and            (1) Paid under OPPS; separate APC payment.
                            Biologicals.
H........................  Pass-Through Device Categories..  Separate cost-based pass-through payment; not
                                                              subject to copayment.
K........................  (1) Non-Pass-Through Drugs and    (1) Paid under OPPS; separate APC payment.
                            Biologicals.
                           (2) Therapeutic                   (2) Paid under OPPS; separate APC payment.
                            Radiopharmaceuticals.
N........................  Items and Services Packaged into  Paid under OPPS; payment is packaged into payment
                            APC Rates.                        for other services. Therefore, there is no
                                                              separate APC payment.
P........................  Partial Hospitalization.........  Paid under OPPS; per diem APC payment.
Q1.......................  STVX-Packaged Codes.............  Paid under OPPS; Addendum B displays APC
                                                              assignments when services are separately payable.
                                                               (1) Packaged APC payment if billed on the same
                                                             date of service as a HCPCS code assigned status
                                                             indicator ``S,'' ``T,'' ``V,'' or ``X.''
                                                               (2) In all other circumstances, payment is made
                                                             through a separate APC payment.
Q2.......................  T-Packaged Codes................  Paid under OPPS; Addendum B displays APC
                                                              assignments when services are separately payable.
                                                               (1) Packaged APC payment if billed on the same
                                                             date of service as a HCPCS code assigned status
                                                             indicator ``T.''
                                                               (2) In all other circumstances, payment is made
                                                             through a separate APC payment.
Q3.......................  Codes that may be paid through a  Paid under OPPS; Addendum B displays APC
                            composite APC.                    assignments when services are separately payable.
                                                              Addendum M displays composite APC assignments when
                                                              codes are paid through a composite APC.
                                                               (1) Composite APC payment based on OPPS composite-
                                                             specific payment criteria. Payment is packaged into
                                                             a single payment for specific combinations of
                                                             service.
                                                               (2) In all other circumstances, payment is made
                                                             through a separate APC payment or packaged into
                                                             payment for other services.
R........................  Blood and Blood Products........  Paid under OPPS; separate APC payment.
S........................  Significant Procedure, Not        Paid under OPPS; separate APC payment.
                            Discounted when Multiple.
T........................  Significant Procedure, Multiple   Paid under OPPS; separate APC payment.
                            Reduction Applies.
U........................  Brachytherapy Sources...........  Paid under OPPS; separate APC payment.
V........................  Clinic or Emergency Department    Paid under OPPS; separate APC payment.
                            Visit.
X........................  Ancillary Services..............  Paid under OPPS; separate APC payment.
----------------------------------------------------------------------------------------------------------------

    For CY 2009, we are proposing to replace current status indicator 
``Q'' with three new separate status indicators: ``Q1,'' ``Q2,'' and 
``Q3.'' We are proposing that status indicator ``Q1'' would be assigned 
to all ``STVX-packaged codes;'' status indicator ``Q2'' would be 
assigned to all ``T-packaged codes;'' and status indicator ``Q3'' would 
be assigned to all codes that may be paid through a composite APC based 
on composite-specific criteria or separately through single code APCs 
when the criteria are not met. We note that a commenter to the CY 2008 
OPPS/

[[Page 41521]]

ASC proposed rule requested that we assign a distinct status indicator 
to services that may be subject to a composite APC methodology because 
the commenter believed that the composite payment policy differed 
significantly from the policies for payment of ``T-packaged'' and 
``STVX-packaged codes'' (72 FR 66824). Therefore, we believe that this 
proposed change to establish new status indicators ``Q1,'' ``Q2,'' and 
``Q3'' would make our policies more transparent to hospitals and would 
facilitate the use of status indicator-driven logic in our ratesetting 
calculations, and in hospital billing and accounting systems.
    For CY 2009, we are proposing to use new payment status indicator 
``R'' for all blood and blood product APCs and to use new payment 
status indicator ``U'' for all brachytherapy source APCs. Nonpass-
through drugs and biologicals which do not require a conversion factor 
to calculate their payment rates would continue to be assigned status 
indicator ``K.'' We are proposing to create these new status indicators 
for blood and blood products and for brachytherapy sources to 
facilitate implementation of the reduced market basket conversion 
factor that would apply to payments to hospitals that are required to 
report quality data but that fail to meet the established quality 
reporting standards.
    This is necessary because we are proposing to continue our final CY 
2008 policies of setting prospective payment rates for brachytherapy 
sources and blood and blood products calculated as the product of 
scaled relative weights and the conversion factor and, therefore, blood 
and blood products and brachytherapy sources, but no other services 
that are currently assigned status indicator ``K'' would be subject to 
the reduced conversion factor. We refer readers to section XVI. of this 
proposed rule for discussion of the requirements of the hospital 
outpatient quality data reporting program and the reduced market basket 
conversion factor that would apply to payment for specific services 
when hospitals for which reporting is required fail to meet the 
reporting standards.
2. Proposed Payment Status Indicators To Designate Services That Are 
Paid Under a Payment System Other Than the OPPS
    We are proposing no changes to the status indicators as listed 
below for the CY 2009 OPPS.

------------------------------------------------------------------------
          Indicator             Item/code/service    OPPS payment status
------------------------------------------------------------------------
A...........................  Services furnished    Not paid under OPPS.
                               to a hospital         Paid by fiscal
                               outpatient that are   intermediaries/MACs
                               paid under a fee      under a fee
                               schedule or payment   schedule or payment
                               system other than     system other than
                               OPPS, for example:    OPPS.
                               Ambulance
                               Services.
                               Clinical     Not subject to
                               Diagnostic            deductible or
                               Laboratory Services   coinsurance.
                               Non-
                               Implantable
                               Prosthetic and
                               Orthotic Devices
                               EPO for
                               ESRD Patients
                               Physical,
                               Occupational, and
                               Speech Therapy
                               Routine
                               Dialysis Services
                               for ESRD Patients
                               Provided in a
                               Certified Dialysis
                               Unit of a Hospital
                               Diagnostic
                               Mammography
                               Screening    Not subject to
                               Mammography.          deductible.
C...........................  Inpatient Procedures  Not paid under OPPS.
                                                     Admit patient. Bill
                                                     as inpatient.
F...........................  Corneal Tissue        Not paid under OPPS.
                               Acquisition;          Paid at reasonable
                               Certain CRNA          cost.
                               Services; and
                               Hepatitis B
                               Vaccines.
L...........................  Influenza Vaccine;    Not paid under OPPS.
                               Pneumococcal          Paid at reasonable
                               Pneumonia Vaccine.    cost; not subject
                                                     to deductible or
                                                     coinsurance.
M...........................  Items and Services    Not paid under OPPS.
                               Not Billable to the
                               Fiscal Intermediary/
                               MAC.
Y...........................  Non-Implantable       Not paid under OPPS.
                               Durable Medical       All institutional
                               Equipment.            providers other
                                                     than home health
                                                     agencies bill to
                                                     DMERC.
------------------------------------------------------------------------

3. Proposed Payment Status Indicators To Designate Services That Are 
Not Recognized Under the OPPS But That May Be Recognized by Other 
Institutional Providers
    We are proposing no changes to the status indicators as listed 
below for the CY 2009 OPPS.

------------------------------------------------------------------------
          Indicator             Item/code/service    OPPS payment status
------------------------------------------------------------------------
B...........................  Codes that are not    Not paid under OPPS.
                               recognized by OPPS    May be paid
                               when submitted on     by fiscal
                               an outpatient         intermediaries/MACs
                               hospital Part B       when submitted on a
                               bill type (12x        different bill
                               and13x).              type, for example,
                                                     75x (CORF), but not
                                                     paid under OPPS.
                                                     An
                                                     alternate code that
                                                     is recognized by
                                                     OPPS when submitted
                                                     on an outpatient
                                                     hospital Part B
                                                     bill type (12x and
                                                     13x) may be
                                                     available.
------------------------------------------------------------------------


[[Page 41522]]

4. Proposed Payment Status Indicators To Designate Services That Are 
Not Payable by Medicare
    We are proposing no changes to the status indicators as listed 
below for the CY 2009 OPPS.

------------------------------------------------------------------------
          Indicator             Item/code/service    OPPS payment status
------------------------------------------------------------------------
D...........................  Discontinued Codes..  Not paid under OPPS
                                                     or any other
                                                     Medicare payment
                                                     system.
E...........................  Items, Codes, and     Not paid under OPPS
                               Services:             or any other
                               That are      Medicare payment
                               not covered by        system.
                               Medicare based on
                               statutory exclusion.
                               That are
                               not covered by
                               Medicare for
                               reasons other than
                               statutory exclusion
                               That are
                               not recognized by
                               Medicare but for
                               which an alternate
                               code for the same
                               item or service may
                               be available
                               For which
                               separate payment is
                               not provided by
                               Medicare.
------------------------------------------------------------------------

    To address providers' broader interests and to make the published 
Addendum B more convenient for public use, we are displaying in 
Addendum B to this proposed rule all active HCPCS codes for CY 2009 
that describe items and services that are: (1) Payable under the OPPS; 
(2) paid under a payment system other than the OPPS; (3) not recognized 
under the OPPS but that may be recognized by other institutional 
providers; and (4) not payable by Medicare. The universe of CY 2009 
status indicators that we are proposing for these items and services 
are listed in the tables above.
    Addendum B, with a complete listing of HCPCS codes that includes 
their proposed payment status indicators and proposed APC assignments 
for CY 2009, is available electronically on the CMS Web site under 
supporting documentation for this proposed rule at: http://www.cms.hhs.gov/HospitalOutpatientPPS/HORD/list.asp#TopOfPage.

B. Proposed Comment Indicator Definitions

    For the CY 2009 OPPS, we are proposing to continue use of the two 
comment indicators that are in effect for the CY 2008 OPPS. These two 
comment indicators are listed below.
     ``CH''--Active HCPCS codes in current and next calendar 
year; status indicator and/or APC assignment have changed or active 
HCPCS code that will be discontinued at the end of the current calendar 
year.
     ``NI''--New code, interim APC assignment; Comments will be 
accepted on the interim APC assignment for the new code.
    We are proposing to use the ``CH'' indicator in the CY 2009 OPPS/
ASC final rule with comment period to indicate HCPCS codes for which 
the status indicator or APC assignments, or both, would change in CY 
2009 compared to their assignment as of December 31, 2008.
    We are using the ``CH'' indicator in this proposed rule to call 
attention to proposed changes in the payment status indicator and/or 
APC assignment for HCPCS codes for CY 2009. In this proposed rule, the 
``CH'' indicator is appended to HCPCS codes for which we are proposing 
changes in the payment status indicator and/or APC assignment for CY 
2009 compared to their assignment as of June 30, 2008. We believe that 
using the ``CH'' indicator in this proposed rule would facilitate the 
public's review of the changes that we are proposing to make final in 
CY 2009. The use of the comment indicator ``CH'' in association with a 
composite APC indicates that the configuration of the composite APC is 
proposed for change in this proposed rule.
    ``STVX-packaged codes,'' ``T-packaged codes,'' and other HCPCS 
codes that could be paid through a composite APC with proposed CY 2009 
changes in status indicator assignments from ``Q'' to ``Q1,'' from 
``Q'' to ``Q2,'' and from ``Q'' to Q3,'' as well as HCPCS codes for 
blood and blood products and for brachytherapy sources with proposed CY 
2009 changes in status indicator assignments from ``K'' to ``R'' and 
from ``K'' to ``U,'' respectively, are not flagged with comment 
indicator ``CH'' in Addendum B to this proposed rule. These proposed 
changes in status indicators are to facilitate policy transparency and 
operational logic rather than to reflect changes in OPPS payment policy 
for these services, so we believe that identifying these HCPCS codes 
with ``CH'' could be confusing to the public.
    We are proposing to continue our policy of using comment indicator 
``NI'' in the OPPS/ASC final rule with comment period. We are proposing 
that only HCPCS codes with comment indicator ``NI'' in the CY 2009 
OPPS/ASC final rule with comment period would be subject to comment at 
that time. We are proposing that HCPCS codes that do not appear with 
comment indicator ``NI'' in the CY 2009 OPPS/ASC final rule with 
comment period would not be open to public comment, unless we 
specifically request additional comments at that time. The disposition 
of HCPCS codes that appear in the CY 2009 OPPS/ASC final rule with 
comment period to which comment indicator ``NI'' is not appended will 
have been open to public comment as a result of this proposed rule.
    The two comment indicators that we are proposing to continue using 
in CY 2009 and their definitions are listed in Addendum D2 to this 
proposed rule.

XIV. OPPS Policy and Payment Recommendations

A. Medicare Payment Advisory Commission (MedPAC) Recommendations

    MedPAC was established under section 1805 of the Act to advise the 
U.S. Congress on issues affecting the Medicare program. As required 
under the statute, MedPAC submits reports to Congress not later than 
March and June of each year that present its Medicare payment policy 
recommendations. The following section describes recent recommendations 
relevant to the OPPS that have been made by MedPAC.

[[Page 41523]]

1. March 2008 Report
    The March 2008 MedPAC ``Report to Congress: Medicare Payment 
Policy'' included the following recommendation relating specifically to 
the Medicare hospital OPPS:
    Recommendation 2A-1: The Congress should increase payment rates for 
the acute inpatient and outpatient prospective payment systems in 2009 
by the projected rate of increase in the hospital market basket index, 
concurrent with implementation of a quality incentive payment program.
    CMS Response: We are proposing to increase payment rates for the CY 
2009 OPPS by the projected rate of increase in the hospital market 
basket through adjustment of the full CY 2009 conversion factor. 
Simultaneously, we are proposing to implement, effective for CY 2009, 
the reduction in the annual update factor by 2.0 percentage points for 
hospitals that are defined under section 1886(d)(1)(B) of the Act and 
that do not meet the hospital outpatient quality data reporting 
required by section 1833(t)(17) of the Act, as added by section 109(a) 
of the MIEA-TRHCA. Specifically, we are proposing to calculate two 
conversion factors, a full conversion factor based on the full hospital 
market basket increase and a reduced conversion factor that reflects 
the 2.0 percentage point reduction to the market basket. Our proposed 
update of the conversion factor and our proposed adoption and 
implementation of the reduced conversion factor that would apply to 
hospitals that fail their quality reporting requirements for the CY 
2009 OPPS are discussed in detail in section XVI.D.2. of this proposed 
rule.
    This full MedPAC report can be downloaded from MedPAC's Web site 
at: http://www.medpac.gov/documents/Mar08_EntireReport.pdf.
2. June 2007 Report
    In its June 2007 ``Report to the Congress: Promoting Greater 
Efficiency in Medicare,'' MedPAC included analysis and recommendations 
on alternatives to the current method for computing the IPPS wage index 
for FY 2009. (We refer readers to Chapter 6 of the June 2007 MedPAC 
report to Congress.) In accordance with our established policy, under 
the OPPS we adopt the IPPS wage indices to adjust the OPPS standard 
payment amounts for labor market differences. Therefore, MedPAC's 
analysis and recommendations have implications for the CY 2009 OPPS. We 
have considered MedPAC's recommendations and analysis in making a 
proposal to revise the IPPS wage indices in the FY 2009 IPPS proposed 
rule (73 FR 23617 through 23623), as required by section 106(b)(2) of 
the MIEA-TRHCA. We discuss our proposed application of changes to the 
IPPS wage index for the CY 2009 OPPS in section II.C. of this proposed 
rule.
    This full MedPAC report can be downloaded from MedPAC's Web site at 
http://www.medpac.gov/document/Jun07_EntireReport.pdf.

B. APC Panel Recommendations

    Recommendations made by the APC Panel at its March 2008 meeting are 
discussed in sections of this proposed rule that correspond to topics 
addressed by the APC Panel. The report and recommendations from the APC 
Panel's March 5-6, 2008 meeting are available on the CMS Web site at: 
http://www.cms.hhs.gov/FACA/05_AdvisoryPanelonAmbulatoryPaymentClassificationGroups.asp.

C. OIG Recommendations

    The mission of the OIG, as mandated by Public Law 95-452, as 
amended, is to protect the integrity of the U.S. Department of Health 
and Human Services (HHS) programs, as well as the health and welfare of 
beneficiaries served by those programs. This statutory mission is 
carried out through a nationwide network of audits, investigations, and 
inspections. In June 2007 the OIG released a report, entitled ``Impact 
of Not Retroactively Adjusting Outpatient Outlier Payments,'' that 
described the OIG's research into sources of error in CMHC outlier 
payments. The OIG report included the following two recommendations 
relating specifically to the hospital OPPS under which payment is made 
for outpatient services provided by CMHCs.
    Recommendation 1: The OIG recommended that CMS require adjustments 
of outpatient outlier payments at final cost report settlement, 
retroactive to the beginning of the cost report period.
    CMS Response: We have been proactive in addressing this issue for 
partial hospitalization prospective payment by designating a unique 
outlier threshold for CMHCs beginning in CY 2004. As discussed in the 
CY 2007 OPPS/ASC final rule with comment period (71 FR 68002 through 
68003), differences in total CMHC outlier payments between CY 2004 and 
CY 2005 demonstrate that designating a separate threshold has 
successfully restrained CMHC outlier payments. Moreover, until the CY 
2005 implementation of a fixed dollar outlier threshold for most other 
hospital outpatient services that concentrates outlier payments on 
costly and complex services, we did not believe it would be cost-
effective to pursue adjustments of outlier payments for all of the 
OPPS. However, in addition to the unique outlier threshold for CMHCs 
that we have recently adopted to address excessive CMHC outlier 
payments, we are proposing to provide for reconciliation of outlier 
payments under the OPPS at final cost report settlement as recommended 
by the OIG, beginning in CY 2009. We discuss our rationale for 
proposing to reconcile outlier payments in more detail in section II.F. 
of this proposed rule.
    Recommendation 2: The OIG recommended that CMS require retroactive 
adjustments of outpatient outlier payments when an error caused by the 
fiscal intermediary or provider is identified after the cost report is 
settled.
    CMS Response: We note that the OIG's findings were based largely on 
information from the OPPS' early implementation period, between CY 2000 
and CY 2003. We believe we have taken several steps since that time in 
order to improve the accuracy and frequency of the Medicare 
contractors' CCR calculations, including updating our instructions, 
increasing the frequency of calculation, and conducting an annual 
review of CMHC CCRs. However, in light of this OIG recommendation, for 
the CY 2009 OPPS we are also proposing to provide for reconciliation of 
outlier payments under the OPPS. We discuss our rationale for proposing 
to reconcile outlier payments in more detail in section II.F. of this 
proposed rule.

XV. Proposed Update of the Revised Ambulatory Surgical Center Payment 
System

A. Background

1. Legislative Authority for the ASC Payment System
    Section 1832(a)(2)(F)(i) of the Act provides that benefits under 
Medicare Part B include payment for facility services furnished in 
connection with surgical procedures specified by the Secretary that are 
performed in an ASC. To participate in the Medicare program as an ASC, 
a facility must meet the standards specified in section 
1832(a)(2)(F)(i) of the Act, which are set forth in 42 CFR part 416, 
subpart B and subpart C of our regulations. The regulations at 42 CFR 
part 416, subpart B describe the general conditions and requirements 
for ASCs, and the regulations at subpart C explain the specific 
conditions for coverage for ASCs.

[[Page 41524]]

    Section 141(b) of the Social Security Act Amendments of 1994, 
Public Law 103-432, requires us to establish a process for reviewing 
the appropriateness of the payment amount provided under section 
1833(i)(2)(A)(iii) of the Act for intraocular lenses (IOLs) that belong 
to a class of new technology intraocular lenses (NTIOLs). That process 
was the subject of a separate final rule entitled ``Adjustment in 
Payment Amounts for New Technology Intraocular Lenses Furnished by 
Ambulatory Surgical Centers,'' published on June 16, 1999, in the 
Federal Register (64 FR 32198).
    Section 626(b) of the Medicare Prescription Drug, Improvement, and 
Modernization Act of 2003 (MMA), Public Law 108-173, added section 
1833(i)(2)(D) to the Act, which required the Secretary to implement a 
revised ASC payment system to be effective not later than January 1, 
2008. Section 626(c) of the MMA amended section 1833(a)(1) of the Act 
to require that, beginning with implementation of the revised ASC 
payment system, payment for surgical procedures furnished in ASCs shall 
be 80 percent of the lesser of the actual charge for the services or 
the amount determined by the Secretary under the revised payment 
system.
    Section 5103 of the Deficit Reduction Act of 2005 (DRA), Public Law 
109-171, amended section 1833(i)(2) of the Act by adding a new 
subparagraph (E) to place a limitation on payment amounts for surgical 
procedures in ASCs. Section 1833(i)(2)(E) of the Act provides that if 
the standard overhead amount under section 1833(i)(2)(A) of the Act for 
an ASC facility service for such surgical procedures, without 
application of any geographic adjustment, exceeds the Medicare payment 
amount under the hospital OPPS for the service for that year, without 
application of any geographic adjustment, the Secretary shall 
substitute the OPPS payment amount for the ASC standard overhead 
amount. This provision applied to surgical procedures furnished in ASCs 
on or after January 1, 2007, but before the effective date of the 
revised ASC payment system (that is, January 1, 2008). Section 109(b) 
of the Medicare Improvements and Extension Act of 2006 of the Tax 
Relief and Health Care Act of 2006 (MIEA-TRHCA), Public Law 109-432, 
amended section 1833(i) of the Act, in part, by adding a new clause 
(iv) to paragraph (2)(D) and by also adding paragraph (7)(A), which 
authorize the Secretary to require ASCs to submit data on quality 
measures and to reduce the annual update by 2 percentage points for an 
ASC that fails to submit data as required by the Secretary on selected 
quality measures. Section 109(b) of the MIEA-TRHCA also amended section 
1833(i) of the Act by adding new paragraph (7)(B), which requires that 
certain quality of care reporting requirements mandated for hospitals 
paid under the OPPS, according to section 109(a) of the MIEA-TRHCA, be 
applied in a similar manner to ASCs unless otherwise specified by the 
Secretary.
    For a detailed discussion of the legislative history related to 
ASCs, we refer readers to the June 12, 1998 proposed rule (63 FR 32291 
through 32292).
2. Prior Rulemaking
    On August 2, 2007, we published in the Federal Register (72 FR 
42470) the final rule for the revised ASC payment system, effective 
January 1, 2008. We revised our criteria for identifying surgical 
procedures that are eligible for Medicare payment when furnished in 
ASCs and adopted the method we would use to set payment rates for ASC 
covered surgical procedures and covered ancillary services furnished in 
association with those covered surgical procedures beginning in CY 
2008. In that final rule, we also established a policy for updating on 
an annual calendar year basis the ASC conversion factor, the relative 
payment weights and APC assignments, the ASC payment rates, and the 
list of procedures for which Medicare would not make an ASC payment. We 
also established a policy for treating new and revised HCPCS and CPT 
codes under the ASC payment system. This policy is consistent with the 
OPPS to the extent possible (72 FR 42533).
    In the CY 2008 OPPS/ASC final rule with comment period (72 FR 
66827), we updated and finalized the CY 2008 ASC rates and lists of 
covered surgical procedures and covered ancillary services. We also 
made regulatory changes to 42 CFR parts 411, 414, and 416 related to 
our final policies to provide payments to physicians who perform 
noncovered ASC procedures in ASCs based on the facility practice 
expense (PE) relative value units (RVUs), to exclude covered ancillary 
radiology services and covered ancillary drugs and biologicals from the 
categories of designated health services (DHS) that are subject to the 
physician self-referral prohibition, and to reduce ASC payments for 
surgical procedures when the ASC receives full or partial credit toward 
the cost of the implantable device.
3. Policies Governing Changes to the Lists of Codes and Payment Rates 
for ASC Covered Surgical Procedures and Covered Ancillary Services
    The August 2, 2007, final rule established our policies for 
determining which procedures are ASC covered surgical procedures and 
covered ancillary services. Under Sec. Sec.  416.2 and 416.166, subject 
to certain exclusions, covered surgical procedures are surgical 
procedures that are separately paid under the OPPS, that would not be 
expected to pose a significant risk to beneficiary safety when 
performed in an ASC, and that would not be expected to require an 
overnight stay. We defined surgical procedures as those described by 
Category I CPT codes in the surgical range from 10000 through 69999, as 
well as those Category III CPT codes and Level II HCPCS codes that 
crosswalk or are clinically similar to ASC covered surgical procedures 
(72 FR 42478).
    In the August 2, 2007, final rule, we also established our policy 
to make separate ASC payments for the following ancillary services, for 
which separate payment is made under the OPPS, when they are provided 
integral to ASC covered surgical procedures: Brachytherapy sources; 
certain implantable items that have pass-through status under the OPPS; 
certain items and services that we designate as contractor-priced, 
including, but not limited to, procurement of corneal tissue; certain 
drugs and biologicals; and certain radiology services. These covered 
ancillary services are specified in Sec.  416.164(b) and are eligible 
for separate ASC payment (72 FR 42495). Payment for ancillary services 
that are not paid separately under the ASC payment system is packaged 
into the ASC payment for the covered surgical procedure.
    The full CY 2008 lists of ASC covered surgical procedures and 
covered ancillary services are included in Addendum AA and BB, 
respectively, to the CY 2008 OPPS/ASC final rule with comment period 
(72 FR 66945 through 66993 and 67165 through 67188).
    We update the lists of, and payment rates for, covered surgical 
procedures and covered ancillary services, in conjunction with the 
annual proposed and final rulemaking process to update the OPPS and ASC 
payment system (Sec.  416.173; 72 FR 42535). In addition, because we 
base ASC payment policies for covered surgical procedures, drugs, 
biologicals, and certain other covered ancillary services on the OPPS 
payment policies, we also provide quarterly updates for ASC services 
throughout the year (January, April, July, and October),

[[Page 41525]]

just as we do for the OPPS. The updates are to implement newly created 
Level II HCPCS codes and Category III CPT codes for ASC payment and to 
update the payment rates for separately paid drugs and biologicals 
based on the most recently submitted ASP data.
    In our annual updates to the ASC list of, and payment rates for, 
covered surgical procedures and covered ancillary services we undertake 
a review of excluded surgical procedures, new procedures, and 
procedures for which there is revised coding, to identify any that we 
believe meet the criteria for designation as ASC covered surgical 
procedures or covered ancillary services. Updating the lists of covered 
surgical procedures and covered ancillary services, as well as their 
payment rates, in association with the annual OPPS rulemaking cycle is 
particularly important because the OPPS relative payment weights and, 
in some cases, payment rates, are used as the basis for the payment of 
covered surgical procedures and covered ancillary services under the 
revised ASC payment system. This joint update process ensures that the 
ASC updates occur in a regular, predictable, and timely manner.

B. Proposed Treatment of New Codes

1. Proposed Treatment of New Category I and III CPT Codes and Level II 
HCPCS Codes
    We finalized a policy in the August 2, 2007, final rule to evaluate 
each year all new Category I and Category III CPT codes and Level II 
HCPCS codes that describe surgical procedures to make preliminary 
determinations in the annual OPPS/ASC final rule with comment period 
regarding whether or not they meet the criteria for payment in the ASC 
setting and, if so, whether they are office-based procedures (72 FR 
42533). In addition, we identify new codes as ASC covered ancillary 
services based upon the final payment policies of the revised ASC 
payment system. New HCPCS codes that are released in the summer through 
the fall of each year, to be effective January 1, are included in the 
final rule updating the ASC payment system for the following calendar 
year. These new codes are flagged with comment indicator ``NI'' in 
Addenda AA and BB to the OPPS/ASC final rule with comment period to 
indicate that we are assigning them an interim status which is subject 
to public comment on that final rule. These interim determinations must 
be made in the OPPS/ASC final rule with comment period because, in 
general, the new HCPCS codes and their descriptors for the upcoming 
calendar year are not available at the time of development of the OPPS/
ASC proposed rule. The interim payment indicators assigned to the new 
codes under the revised ASC payment system are subject to comment in 
that final rule. We will respond to those comments in the OPPS/ASC 
update final rule with comment period for the following calendar year. 
We are proposing to continue this recognition process for CY 2009.
    In addition, we are proposing to continue our policy of 
implementing through the ASC quarterly update process new mid-year CPT 
codes, generally Category III CPT codes, that the AMA releases in 
January to become effective the following July. Therefore, we are 
proposing to include in Addenda AA or BB, as appropriate, to the CY 
2009 OPPS/ASC final rule with comment period the new Category III CPT 
codes released in January 2008 for implementation on July 1, 2008 
(through the ASC quarterly update process), that we identify as ASC 
covered services. Similarly, we are proposing to include in Addenda AA 
and BB to that final rule any new Category III CPT codes that the AMA 
releases in July 2008 to be effective on January 1, 2009, that we 
identify as ASC covered services. However, only those new Category III 
CPT codes implemented effective January 1, 2009, will be designated by 
comment indicator ``NI'' in the Addenda to the CY 2009 OPPS/ASC final 
rule with comment period, to indicate that we have assigned them an 
interim payment status which is subject to public comment. The Category 
III CPT codes implemented in July 2008 for ASC payment, which appear in 
Table 36 below, are subject to comment through this proposed rule, and 
we are proposing to finalize their payment indicators in the CY 2009 
OPPS/ASC final rule with comment period. We are proposing to assign 
payment indicator ``G2'' (Non office-based surgical procedure added in 
CY 2008 or later; payment based on OPPS relative payment weight) to 
each of these three new codes. Because of the timing of this proposed 
rule, these codes are not listed in Addendum AA to this proposed rule 
although they will be included in Addendum AA to the CY 2009 OPPS/ASC 
final rule with comment period.

                 Table 36.--New Category III CPT Codes Implemented in July 2008 for ASC Payment
----------------------------------------------------------------------------------------------------------------
                                                                   Proposed CY 2009 ASC    Proposed CY 2009 ASC
             HCPCS code                    Long descriptor          payment  indicator            payment
----------------------------------------------------------------------------------------------------------------
0190T..............................  Placement of intraocular     G2....................  $890.60
                                      radiation source
                                      applicator.
0191T..............................  Insertion of anterior        G2....................  968.22
                                      segment aqueous drainage
                                      device, without
                                      extraocular reservoir;
                                      internal approach.
0192T..............................  Insertion of anterior        G2....................  968.22
                                      segment aqueous drainage
                                      device, without
                                      extraocular reservoir;
                                      external approach.
----------------------------------------------------------------------------------------------------------------

2. Proposed Treatment of New Level II HCPCS Codes Implemented in April 
and July 2008
    New Level II HCPCS codes may describe covered surgical procedures 
or covered ancillary services. All new Level II HCPCS codes implemented 
in April and July 2008 for ASCs describe covered ancillary services. 
During the second quarter of CY 2008, we added to the list of covered 
ancillary services a total of four new Level II HCPCS codes for drugs 
and biologicals because they are eligible for separate payment under 
the OPPS. Those HCPCS codes are: C9241 (Injection, doripenem, 10 mg); 
Q4096 (Injection, von willebrand factor complex, human, ristocetin 
cofactor (not otherwise specified), per i.u. VWF.RCO); Q4097 
(Injection, immune globulin (Privigen), intravenous, non-lyophilized 
((e.g., liquid), 500 mg); and Q4098 (Injection, iron dextran, 50 mg). 
Similarly, for the third quarter of CY 2008, we added a total of four 
new Level II HCPCS codes to the list of ASC covered ancillary services 
for drugs and biologicals because they are eligible for separate 
payment under the OPPS. Those HCPCS codes are: C9242 (Injection, 
fosaprepitant, 1 mg); C9356 (Tendon, porous matrix of cross-linked 
collagen and glycosaminoglycan matrix ((TenoGlide Tendon Protector 
Sheet), per square centimeter); C9357 (Dermal

[[Page 41526]]

substitute, granulated cross-linked collagen and glycosaminoglycan 
matrix ((Flowable Wound Matrix), 1 cc); and C9358 (Dermal substitute, 
native, non-denatured collagen ((SurgiMend Collagen Matrix), per 0.5 
square centimeters). We assigned the payment indicator ``K2'' (Drugs 
and biologicals paid separately when provided integral to a surgical 
procedure on ASC list; payment based on OPPS rate) for all of these new 
Level II HCPCS codes and added them to the list of covered ancillary 
services either through the April update (Transmittal 1488, Change 
Request 5994, dated April 9, 2008) or the July update of the CY 2008 
ASC payment system. In this CY 2009 OPPS/ASC proposed rule, we are 
soliciting public comment on the proposed ASC payment indicators and 
payment rates for these codes, as listed in Tables 37 and 38. The codes 
listed in Table 37 also are included in Addendum BB of this proposed 
rule. These HCPCS codes are paid in ASCs beginning in April and July 
2008, respectively, based on the ASC rates posted for the appropriate 
calendar quarter on the CMS Web site at: http://www.cms.hhs.gov/ASCPayment/. However, because of the timing of this proposed rule, the 
codes implemented by the July 2008 ASC update and their proposed CY 
2009 payment rates (based on July 2008 ASP data) that are displayed in 
Table 38 are not included in Addendum BB to this proposed rule. We are 
proposing to include the new HCPCS codes displayed in Tables 37 and 38 
and, for the codes in Table 37, in Addendum BB to the list of covered 
ancillary services and to incorporate all of them into Addendum BB to 
our final rule with comment period for CY 2009, consistent with our 
annual update policy.

      Table 37.--New Level II HCPCS Codes Implemented in April 2008
------------------------------------------------------------------------
                                                        Proposed CY 2009
          HCPCS code               Long descriptor        ASC payment
                                                           indicator
------------------------------------------------------------------------
C9241.........................  Injection, doripenem,  K2
                                 10 mg.
Q4096.........................  Injection, von         K2
                                 willebrand factor
                                 complex, human,
                                 ristocetin cofactor
                                 (not otherwise
                                 specified), per i.u.
                                 VWF:RCO.
Q4097.........................  Injection, immune      K2
                                 globulin (Privigen),
                                 intravenous, non-
                                 lyophilized (e.g.,
                                 liquid), 500 mg.
Q4098.........................  Injection, iron        K2
                                 dextran, 50 mg.
------------------------------------------------------------------------


                          Table 38.--New Level II HCPCS Codes Implemented in July 2008
----------------------------------------------------------------------------------------------------------------
                                                                             Proposed CY 2009
          HCPCS code                          Long descriptor                  ASC payment      Proposed CY 2009
                                                                                indicator         ASC payment
----------------------------------------------------------------------------------------------------------------
C9242*........................  Injection, fosaprepitant, 1 mg............  K2...............  $1.61
C9356*........................  Tendon, porous matrix of cross-linked       K2...............  16.92
                                 collagen and glycosaminoglycan matrix
                                 (TenoGlide Tendon Protector Sheet), per
                                 square centimeter.
C9357*........................  Dermal substitute, granulated cross-linked  K2...............  883.33
                                 collagen and glycosaminoglycan matrix
                                 (Flowable Wound Matrix), 1 cc.
C9358*........................  Dermal substitute, native, non-denatured    K2...............  10.38
                                 collagen (SurgiMend Collagen Matrix), per
                                 0.5 square centimeters.
----------------------------------------------------------------------------------------------------------------
* The payment rates displayed in Table 38 reflect the July 2008 ASP data.

C. Proposed Update to the Lists of ASC Covered Surgical Procedures and 
Covered Ancillary Services

1. Covered Surgical Procedures
a. Proposed Additions to the List of ASC Covered Surgical Procedures
    We are proposing to update the ASC list of covered surgical 
procedures by adding nine procedures to the list. Three of the nine 
procedures, specifically CPT code 0190T (Placement of intraocular 
radiation source applicator), CPT code 0191T (Insertion of anterior 
segment aqueous drainage device, without extraocular reservoir; 
internal approach), and CPT code 0192T (Insertion of anterior segment 
aqueous drainage device, without extraocular reservoir; external 
approach) are new Category III CPT codes that became effective July 1, 
2008, and were implemented in the July 2008 ASC update. The other six 
procedures were excluded from the ASC list for CY 2008 because we 
believed they did not meet the definition of a covered surgical 
procedure based on our expectation that they would pose a significant 
safety risk to Medicare beneficiaries or would require an overnight 
stay if performed in ASCs. During our annual review of excluded codes 
in which we used most recent utilization data, we identified the 
following six procedures that we believe should no longer be excluded 
from the ASC list: CPT code 31293 (Nasal/sinus endoscopy, surgical; 
with medial orbital wall and inferior orbital wall decompression); CPT 
code 34490 (Thrombectomy, direct or with catheter; axillary and 
subclavian vein, by arm incision); CPT code 36455 (Exchange 
transfusion, blood; other than newborn); CPT code 49324 (Laparoscopy, 
surgical; with drainage of lymphocele to peritoneal cavity); CPT code 
49325 (Laparoscopy, surgical; with revision of previously placed 
intraperitoneal cannula or catheter, with removal of intraluminal 
obstructive material if performed); and CPT code 49326 (Laparoscopy, 
surgical; with omentopexy (omental tacking procedure)). The nine codes 
that we are proposing to add to the ASC list of covered surgical 
procedures and their proposed CY 2009 payment indicator ``G2'' (Non 
office-based surgical procedure added in CY 2008 or later; payment 
based on OPPS relative payment weight) are displayed in Table 39, 
below.

[[Page 41527]]



   Table 39.--Proposed New ASC Covered Surgical Procedures for CY 2009
------------------------------------------------------------------------
                                                            Proposed CY
                                                             2009 ASC
        HCPCS code                Short descriptor            payment
                                                             indicator
------------------------------------------------------------------------
31293....................  Nasal/sinus endoscopy, surg..              G2
34490....................  Removal of vein clot.........              G2
36455....................  Bl exchange/transfuse non-nb.              G2
49324....................  Lap insertion perm ip cath...              G2
49325....................  Lap insertion perm ip cath...              G2
49326....................  Lap w/omentopexy add-on......              G2
0190T....................  Place intraoc radiation src..              G2
0191T....................  Insert ant segment drain int.              G2
0192T....................  Insert ant segment drain ext.              G2
------------------------------------------------------------------------

b. Covered Surgical Procedures Designated as Office-Based
(1) Background
    In the August 2, 2007 final rule, we finalized our policy to 
designate as ``office-based'' those procedures that are added to the 
ASC list of covered surgical procedures in CY 2008 or later years that 
we determine are usually performed in physicians' offices based on 
consideration of the most recent available volume and utilization data 
for each individual procedure code (that is, performed more than 50 
percent of the time in physicians' offices) and/or, if appropriate, the 
clinical characteristics, utilization, and volume of related codes. In 
that rule, we also finalized our policy to exempt all procedures on the 
CY 2007 ASC list from application of the office-based classification 
(72 FR 42512).
    In the August 2, 2007 final rule, we identified a list of 
procedures as office-based after taking into account the most recently 
available CY 2005 volume and utilization data for each individual 
procedure or group of related procedures. We believed that the 
resulting list accurately reflected Medicare practice patterns and that 
the procedures were of similar complexity. In Addendum AA to that final 
rule, each of the office-based procedures was identified by payment 
indicator ``P2'' (Office-based surgical procedure added to ASC list in 
CY 2008 or later with MPFS nonfacility PE RVUs; payment based on OPPS 
relative payment weight); ``P3'' (Office-based surgical procedure added 
to ASC list in CY 2008 or later with MPFS nonfacility PE RVUs; payment 
based on MPFS nonfacility PE RVUs); or ``R2'' (Office-based surgical 
procedure added to ASC list in CY 2008 or later without MPFS 
nonfacility PE RVUs; payment based on OPPS relative payment weight), 
depending on whether we estimated it would be paid according to the 
standard ASC payment methodology based on its OPPS relative payment 
weight or at the MPFS nonfacility PE RVU amount.
    In the CY 2008 OPPS/ASC final rule with comment period (72 FR 66840 
through 66841), we finalized the temporary office-based designations of 
4 procedures, while newly designating 19 procedures as permanently 
office-based. In addition, we designated 3 procedures coded by CPT 
codes that were new for CY 2008 as temporarily office-based on an 
interim final basis. Those 3 temporary designations for the new CY 2008 
CPT codes were open to comment during the 60-day comment period for the 
CY 2008 OPPS/ASC final rule with comment period. We indicated that we 
would respond to public comments on those designations in the OPPS/ASC 
final rule with comment period for CY 2009.
(2) Proposed Changes to Covered Surgical Procedures Designated as 
Office-Based for CY 2009
    In developing this proposed rule, we followed our final policy to 
annually review and update the surgical procedures for which ASC 
payment is made and to identify new procedures that may be appropriate 
for ASC payment, including their potential designation as office-based. 
We reviewed the CY 2007 utilization data and clinical characteristics 
for all those surgical procedures newly added for ASC payment in CY 
2008 that were assigned payment indicator ``G2'' in the CY 2008 OPPS/
ASC final rule with comment period.
    As a result of that review, we identified the following 5 
procedures that we are proposing to newly designate as office-based 
procedures for CY 2009: CPT code 0084T (Insertion of a temporary 
prostatic urethral stent); CPT code 36515 (Therapeutic apheresis; with 
extracorporeal immunoadsorption and plasma reinfusion); CPT code 36516 
(Therapeutic apheresis; with extracorporeal selective adsorption or 
selective filtration and plasma reinfusion); CPT code 65436 (Removal of 
corneal epithelium; with application of chelating agent (e.g., EDTA)); 
and CPT code 67505 (Retrobulbar injection; alcohol). Of those, we are 
proposing to make the office-based designation of CPT code 0084T 
temporary because we do not have adequate data upon which to base a 
permanent designation. We are proposing to make permanent office-based 
designations for the remaining four procedures. The codes that we are 
newly proposing as office-based are displayed in Table 40.

  Table 40.--CY 2009 Proposed New Designations of ASC Covered Surgical
                       Procedures as Office-Based
------------------------------------------------------------------------
                                                            Proposed CY
                                            CY 2008 ASC      2009 ASC
    HCPCS code        Short descriptor        payment         payment
                                             indicator       indicator
------------------------------------------------------------------------
0084T............  Temp prostate                      G2             R2*
                    urethral stent.
36515............  Apheresis, adsorp/                 G2              P2
                    reinfuse.
36516............  Apheresis, selective.              G2              P2
65436............  Curette/treat cornea.              G2              P3

[[Page 41528]]

 
67505............  Inject/treat eye                   G2              P3
                    socket.
------------------------------------------------------------------------
* Denotes temporary payment indicator.

    Furthermore, we reviewed CY 2007 utilization information for the 
seven procedures with temporary office-based designations for CY 2008. 
Of those procedures, we are proposing to make permanent the office-
based designation for CPT code 28890 (Extracorporeal shock wave, high 
energy, performed by a physician, requiring anesthesia other than 
local, including ultrasound guidance, involving the plantar fascia). In 
response to comments on the CY 2008 OPPS/ASC proposed rule, in the CY 
2008 OPPS/ASC final rule with comment period, we made the office-based 
designation for CPT code 28890 temporary rather than permanent as was 
proposed (72 FR 66839 through 66840). Although the CY 2006 utilization 
data available for development of the CY 2008 OPPS/ASC final rule with 
comment period showed that the service was provided more than 70 
percent of the time in the physician's office setting, we were 
persuaded by commenters that providers may have been using CPT code 
28890, which was new for CY 2006, erroneously to report less intensive 
extracorporeal shock wave procedures that would be more frequently 
performed in the physician's office. Our review of the CY 2007 data 
continues to support our designation of this procedure as office-based 
and thus, we believe it is appropriate at this time to propose to make 
that designation permanent for CY 2009.
    We are not proposing to make permanent the office-based 
designations for the 6 other procedures for which the CY 2008 
designations are temporary. For those procedures, we do not believe 
that the currently available utilization data provide an adequate basis 
for proposing permanent office-based designations. The procedures with 
temporary office-based status for the CY 2008 ASC payment system that 
we are proposing to continue to temporarily designate as office-based 
procedures for CY 2009 are displayed in Table 40A, below. In our review 
of these codes, we also determined that it would be consistent for the 
office-based assignment of HCPCS code C9728 (Placement of interstitial 
device(s) for radiation therapy/surgery guidance (e.g., fiducial 
markers, dosimeter), other than prostate (any approach), single or 
multiple) to be temporary. This procedure is paid under the CY 2008 ASC 
payment system as an office-based procedure but is analogous to 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), for which we are proposing to maintain 
the temporary office-based payment indicator for CY 2009. Therefore, we 
also are proposing to assign a temporary office-based payment indicator 
to HCPCS code C9728 for CY 2009. All procedures for which the proposed 
office-based designation for CY 2009 is temporary are indicated by an 
asterisk in Addendum AA to this proposed rule.

 Table 40A.--CY 2008 Office-Based Procedures for Which Their Proposed CY
              2009 Designation Is Temporarily Office-Based
------------------------------------------------------------------------
                                                            Proposed CY
                                                             2009 ASC
        HCPCS code                Short descriptor            payment
                                                             indicator
------------------------------------------------------------------------
0099T....................  Implant corneal ring.........             R2*
0124T....................  Conjunctival drug placement..             R2*
21073....................  Mnpj of tmj w/anesth.........             P3*
55876....................  Place rt device/marker, pros.             P3*
67229....................  Tr retinal les preterm inf...             R2*
68816....................  Probe nl duct w/balloon......             P3*
C9728....................  Place device/marker, non pro.             R2*
------------------------------------------------------------------------
* Denotes temporary office-based payment indicator.

c. Covered Surgical Procedures Designated as Device-Intensive
(1) Background
    As discussed in the August 2, 2007 final rule (72 FR 42503 through 
42508), we adopted a modified payment methodology for calculating the 
ASC payment rates for covered surgical procedures that are assigned to 
the subset of OPPS device-dependent APCs with a device offset 
percentage greater than 50 percent under the OPPS, in order to ensure 
that payment for the procedure is adequate to provide packaged payment 
for the high-cost implantable devices used in those procedures. We 
assigned payment indicators ``H8'' (Device-intensive procedure on ASC 
list in CY 2007; paid at adjusted rate) and ``J8'' (Device-intensive 
procedure added to ASC list in CY 2008 or later; paid at adjusted rate) 
to identify the procedures that were eligible for ASC payment 
calculated according to the modified methodology, depending on whether 
the procedure was included on the ASC list of covered surgical 
procedures prior to CY 2008 and therefore, subject to transitional 
payment as discussed in section XV.D.1.b. of this proposed rule. The 45 
``device-intensive'' procedures for which the modified rate calculation 
methodology applies in CY 2008 are displayed in Table 56 and in 
Addendum AA to the CY 2008 OPPS/ASC final rule with comment period (72 
FR 66843 and 66945 through 66993).

[[Page 41529]]

(2) Proposed Changes to List of Covered Surgical Procedures Designated 
as Device-Intensive for CY 2009
    We are proposing to update the ASC list of covered surgical 
procedures that are eligible for payment according to the modified 
methodology for CY 2009 consistent with the proposed update to the 
device-dependent APCs under the OPPS that reflects the proposed APC 
assignments of procedures, designation of APCs as device-dependent, and 
APC device offset percentages based on CY 2007 claims data. OPPS 
device-dependent APCs are discussed further in section II.A.2.d.(1) of 
this proposed rule. The ASC covered surgical procedures that we are 
proposing to designate as device-intensive and that would be subject to 
the device-intensive procedure payment methodology are listed in Table 
41 below. The HCPCS code, the HCPCS code short descriptor, the proposed 
payment indicator, the proposed CY 2009 OPPS APC assignment, and the 
proposed CY 2009 OPPS APC device offset percentage are also listed in 
Table 41. Each proposed device-intensive procedure is assigned payment 
indicator ``H8'' or ``J8,'' depending on whether it is subject to 
transitional payment, and all of these codes are included in Addendum 
AA to this proposed rule.

       Table 41.--ASC Covered Surgical Procedures Proposed for Designation as Device-Intensive for CY 2009
----------------------------------------------------------------------------------------------------------------
                                                                                                       Proposed
                                                       Proposed                                        CY 2009
                                                     CY 2009 ASC    Proposed                           device-
          HCPCS code             Short descriptor       payment     CY 2009       OPPS APC title      dependent
                                                      indicator    OPPS  APC                          APC offset
                                                                                                      percentage
----------------------------------------------------------------------------------------------------------------
27446........................  Revision of knee               J8         0681  Knee Arthroplasty...           74
                                joint.
33206........................  Insertion of heart             J8         0089  Insertion/                     72
                                pacemaker.                                      Replacement of
                                                                                Permanent Pacemaker
                                                                                and Electrodes.
33207........................  Insertion of heart             J8         0089  Insertion/                     72
                                pacemaker.                                      Replacement of
                                                                                Permanent Pacemaker
                                                                                and Electrodes.
33208........................  Insertion of heart             J8         0655  Insertion/                     75
                                pacemaker.                                      Replacement/
                                                                                Conversion of a
                                                                                permanent dual
                                                                                chamber pacemaker.
33212........................  Insertion of pulse             H8         0090  Insertion/                     73
                                generator.                                      Replacement of
                                                                                Pacemaker Pulse
                                                                                Generator.
33213........................  Insertion of pulse             H8         0654  Insertion/                     77
                                generator.                                      Replacement of a
                                                                                permanent dual
                                                                                chamber pacemaker.
33214........................  Upgrade of pacemaker           J8         0655  Insertion/                     75
                                system.                                         Replacement/
                                                                                Conversion of a
                                                                                permanent dual
                                                                                chamber pacemaker.
33224........................  Insert pacing lead &           J8         0418  Insertion of Left              70
                                connect.                                        Ventricular Pacing
                                                                                Elect..
33225........................  Lventric pacing lead           J8         0418  Insertion of Left              70
                                add-on.                                         Ventricular Pacing
                                                                                Elect..
33240........................  Insert pulse                   J8         0107  Insertion of                   89
                                generator.                                      Cardioverter-
                                                                                Defibrillator.
33249........................  Eltrd/insert pace-             J8         0108  Insertion/                     88
                                defib.                                          Replacement/Repair
                                                                                of Cardioverter-
                                                                                Defibrillator Leads.
33282........................  Implant pat-active             J8         0680  Insertion of Patient           71
                                ht record.                                      Activated Event
                                                                                Recorders.
53440........................  Male sling procedure           H8         0385  Level I Prosthetic             57
                                                                                Urological
                                                                                Procedures.
53444........................  Insert tandem cuff..           H8         0385  Level I Prosthetic             57
                                                                                Urological
                                                                                Procedures.
53445........................  Insert uro/ves nck             H8         0386  Level II Prosthetic            64
                                sphincter.                                      Urological
                                                                                Procedures.
53447........................  Remove/replace ur              H8         0386  Level II Prosthetic            64
                                sphincter.                                      Urological
                                                                                Procedures.
54400........................  Insert semi-rigid              H8         0385  Level I Prosthetic             57
                                prosthesis.                                     Urological
                                                                                Procedures.
54401........................  Insert self-contd              H8         0386  Level II Prosthetic            64
                                prosthesis.                                     Urological
                                                                                Procedures.
54405........................  Insert multi-comp              H8         0386  Level II Prosthetic            64
                                penis pros.                                     Urological
                                                                                Procedures.
54410........................  Remove/replace penis           H8         0386  Level II Prosthetic            64
                                prosth.                                         Urological
                                                                                Procedures.
54416........................  Remv/repl penis                H8         0386  Level II Prosthetic            64
                                contain pros.                                   Urological
                                                                                Procedures.
55873........................  Cryoablate prostate.           H8         0674  Prostate                       59
                                                                                Cryoablation.
61885........................  Insrt/redo neurostim           H8         0039  Level I Implantation           83
                                1 array.                                        of Neurostimulator.
61886........................  Implant neurostim              H8         0315  Level III                      88
                                arrays.                                         Implantation of
                                                                                Neurostimulator.
62361........................  Implant spine                  H8         0227  Implantation of Drug           81
                                infusion pump.                                  Infusion Device.
62362........................  Implant spine                  H8         0227  Implantation of Drug           81
                                infusion pump.                                  Infusion Device.
63650........................  Implant                        H8         0040  Percutaneous                   56
                                neuroelectrodes.                                Implantation of
                                                                                Neurostimulator
                                                                                Electrodes,
                                                                                Excluding Cranial
                                                                                Nerve.
63655........................  Implant                        J8         0061  Laminectomy,                   61
                                neuroelectrodes.                                Laparoscopy, or
                                                                                Incision for
                                                                                Implantation of
                                                                                Neurostimulator
                                                                                Electr.
63685........................  Insrt/redo spine n             H8         0222  Level II                       84
                                generator.                                      Implantation of
                                                                                Neurostimulator.
64553........................  Implant                        H8         0225  Implantation of                61
                                neuroelectrodes.                                Neurostimulator
                                                                                Electrodes, Cranial
                                                                                Nerve.
64555........................  Implant                        J8         0040  Percutaneous                   56
                                neuroelectrodes.                                Implantation of
                                                                                Neurostimulator
                                                                                Electrodes,
                                                                                Excluding Cranial
                                                                                Nerve.
64560........................  Implant                        J8         0040  Percutaneous                   56
                                neuroelectrodes.                                Implantation of
                                                                                Neurostimulator
                                                                                Electrodes,
                                                                                Excluding Cranial
                                                                                Nerve.
64561........................  Implant                        H8         0040  Percutaneous                   56
                                neuroelectrodes.                                Implantation of
                                                                                Neurostimulator
                                                                                Electrodes,
                                                                                Excluding Cranial
                                                                                Nerve.

[[Page 41530]]

 
64565........................  Implant                        J8         0040  Percutaneous                   56
                                neuroelectrodes.                                Implantation of
                                                                                Neurostimulator
                                                                                Electrodes,
                                                                                Excluding Cranial
                                                                                Nerve.
64573........................  Implant                        H8         0225  Implantation of                61
                                neuroelectrodes.                                Neurostimulator
                                                                                Electrodes, Cranial
                                                                                Nerve.
64575........................  Implant                        H8         0061  Laminectomy,                   61
                                neuroelectrodes.                                Laparoscopy, or
                                                                                Incision for
                                                                                Implantation of
                                                                                Neurostimulator
                                                                                Electr.
64577........................  Implant                        H8         0061  Laminectomy,                   61
                                neuroelectrodes.                                Laparoscopy, or
                                                                                Incision for
                                                                                Implantation of
                                                                                Neurostimulator
                                                                                Electr.
64580........................  Implant                        H8         0061  Laminectomy,                   61
                                neuroelectrodes.                                Laparoscopy, or
                                                                                Incision for
                                                                                Implantation of
                                                                                Neurostimulator
                                                                                Electr.
64581........................  Implant                        H8         0061  Laminectomy,                   61
                                neuroelectrodes.                                Laparoscopy, or
                                                                                Incision for
                                                                                Implantation of
                                                                                Neurostimulator
                                                                                Electr.
64590........................  Insrt/redo pn/gastr            H8         0039  Level I Implantation           83
                                stimul.                                         of Neurostimulator.
65770........................  Revise cornea with             H8         0293  Level V Anterior               68
                                implant.                                        Segment Eye
                                                                                Procedures.
69930........................  Implant cochlear               H8         0259  Level VII ENT                  83
                                device.                                         Procedures.
----------------------------------------------------------------------------------------------------------------

2. Covered Ancillary Services
    We are proposing to update the ASC list of covered ancillary 
services to reflect the services' proposed separate payment status 
under the CY 2009 OPPS. Maintaining consistency with the OPPS may 
result in proposed changes to ASC payment indicators because some 
covered ancillary services that are paid separately under the revised 
ASC payment system in CY 2008 are proposed for packaged status under 
the OPPS for CY 2009. Comment indicator ``CH,'' as discussed in section 
XV.F. of this proposed rule, is used in Addendum BB to this proposed 
rule to indicate covered ancillary services for which we are proposing 
a change in the ASC payment indicator that reflects, for example, our 
proposal to package payment for the service under the CY 2009 ASC 
payment system consistent with its proposed treatment under the CY 2009 
OPPS.
    Except for the Level II HCPCS code listed in Table 38 of this 
proposed rule, all covered ancillary services and their proposed 
payment indicators for CY 2009 are included in Addendum BB to this 
proposed rule.

D. Proposed ASC Payment for Covered Surgical Procedures and Covered 
Ancillary Services

1. Proposed Payment for Covered Surgical Procedures
a. Background
    Our final payment policy for covered surgical procedures under the 
revised ASC payment system is described in the CY 2008 OPPS/ASC final 
rule with comment period (72 FR 66828 through 66831). In that rule, we 
updated the CY 2008 rates for covered surgical procedures with payment 
indicators of ``A2,'' ``G2,'' ``H8,'' and ``J8'' using CY 2006 data, 
consistent with the CY 2008 OPPS update. We also updated the payment 
amounts for office-based procedures (payment indicators ``P2,'' ``P3,'' 
and ``R2'') using the most recent available MPFS and OPPS data. We 
compared the estimated CY 2008 rate for each of the office-based 
procedures calculated according to the standard methodology of the 
revised ASC payment system to the MPFS nonfacility PE RVU amount to 
determine which was the lower payment amount that, therefore, would be 
the rate for payment of the procedure according to the final policy of 
the revised ASC payment system. See Sec.  416.171(d).
    Subsequent to publication of that rule, the Congress enacted the 
Medicare, Medicaid, and SCHIP Extension Act of 2007, Pub. L. 110-173. 
That law required changes to the rates paid under the MPFS for the 
first 6 months of CY 2008, and therefore, the ASC rates for some 
office-based procedures were also affected. We revised the CY 2008 ASC 
payment rates and made them available by posting them to the CMS Web 
site at: http://www.cms.hhs.gov/ASCPayment/.
b. Proposed Update to ASC Covered Surgical Procedure Payment Rates for 
CY 2009
    We are proposing CY 2009 payment rates for procedures with payment 
indicator ``G2'' that are calculated according to the standard 
methodology of multiplying the proposed CY 2009 ASC relative payment 
weight for the procedure by the proposed CY 2009 ASC conversion factor 
(72 FR 42492 through 42493). Also, according to our established policy, 
we are proposing CY 2009 payments for procedures subject to the 
transitional payment methodology (payment indicators ``A2'' and ``H8'') 
using a blend of 50 percent of the proposed CY 2009 ASC rate calculated 
according to the standard or device-intensive methodology, 
respectively, and 50 percent of the CY 2007 ASC payment rate (72 FR 
42519).
    We are proposing payment rates for office-based procedures (payment 
indicators ``P2,'' ``P3,'' and ``R2'') and device-intensive procedures 
(payment indicators ``J8'' and ``H8'') calculated according to our 
established policies (72 FR 42504 and 42511). Thus, we are proposing to 
update the payment

[[Page 41531]]

amounts for device-intensive procedures based on the CY 2009 OPPS 
proposal that reflects updated OPPS claims data and to make payment for 
office-based procedures at the lesser of the proposed CY 2009 MPFS 
nonfacility PE RVU amount or the CY 2009 ASC payment amount calculated 
according to the standard methodology. Similarly, ASC payment rates for 
the device-intensive procedures would be based on the proposed updated 
CY 2009 OPPS device-offset amounts as displayed in Table 41 above.
c. Proposed Adjustment to ASC Payments for Partial or Full Device 
Credit
    Under Sec.  416.179, our ASC policies with regard to payment for 
costly devices implanted in ASCs at no cost or with full or partial 
credit are fully consistent with the OPPS policies. The proposed CY 
2009 OPPS APCs and devices subject to the adjustment policy are 
discussed in section IV.B.2. of this proposed rule. The ASC policies 
include adoption of the OPPS policy for reduced payment to providers 
when a device is furnished without cost or with full credit for the 
cost of the device for those ASC covered surgical procedures that are 
assigned to APCs under the OPPS to which this policy applies. According 
to that policy, payment to the ASC is reduced by the device offset 
amount that we estimate represents the cost of the device when the 
necessary device is furnished without cost to the ASC or with a full 
credit for the cost of the new device (72 FR 42504). We provide the 
same amount of payment reduction based on the device offset amount in 
ASCs that would apply under the OPPS under the same circumstances. 
Specifically, when a procedure that is listed in Table 42 of this 
proposed rule is performed in an ASC and the case involves implantation 
of a no cost or full credit device listed in Table 43, the ASC must 
report the HCPCS ``FB'' modifier on the line with the covered surgical 
procedure code to indicate that an implantable device in Table 43 was 
furnished without cost.
    When the ``FB'' modifier is reported with a procedure code that is 
listed in Table 42, the contractor reduces the ASC payment by the 
amount of payment that is attributed to the device when the ASC payment 
rate is calculated. The reduction of ASC payment in this circumstance 
is necessary to pay appropriately for the covered surgical procedure 
being furnished by the ASC.
    Consistent with the OPPS policy, we also adopted an ASC payment 
policy for certain procedures involving partial credit for a specified 
device. Specifically, we reduce the payment for implantation procedures 
listed in Table 42 by one-half of the device offset amount that would 
be applied if a device were provided at no cost or with full credit, if 
the credit to the ASC is 50 percent or more of the device cost (72 FR 
66846). ASCs must append the modifier ``FC'' to the code for the 
surgical procedure when the facility receives a partial credit of 50 
percent or more of the cost of a device listed in Table 43 when used in 
a surgical procedure listed in Table 42. In order to report that they 
received a partial credit of 50 percent or more of the cost of a 
device, ASCs have the option of either: (1) Submitting the claim for 
the device implantation procedure to their Medicare contractor after 
the procedure's performance but prior to manufacturer acknowledgment of 
credit for the device, and subsequently contacting the contractor 
regarding a claims adjustment once the credit determination is made; or 
(2) holding the claim for the device implantation procedure until a 
determination is made by the manufacturer on the partial credit and 
submitting the claim with the ``FC'' modifier appended to the 
implantation procedure HCPCS code if the partial credit is 50 percent 
or more of the cost of the device. Beneficiary coinsurance is based on 
the reduced payment amount.
    Consistent with the OPPS, we are proposing to update the list of 
device-intensive procedures that would be subject to the full and 
partial credit payment reduction policies for CY 2009. Table 42 
displays the ASC covered implantation procedures and their payment 
indicators that we are proposing would be subject to the full and 
partial device credit policies for CY 2009.
    Specifically, when a procedure that is listed in Table 42 below is 
performed in an ASC and the case involves implantation of a no cost or 
full credit device or a device for which the ASC received at least a 50 
percent partial credit that is listed in Table 43, the ASC must report 
the HCPCS ``FB'' or ``FC'' modifier, as appropriate, on the line with 
the covered surgical procedure code. The procedures listed in Table 42 
are those ASC covered device-intensive procedures assigned to APCs 
under the OPPS to which the policy applies. We are not proposing to 
apply this policy to the procedures and devices associated with APCs 
0425 (Level II Arthroplasty or Implantation with Prosthesis) and 0648 
(Level IV Breast Surgery), which are proposed for inclusion in the OPPS 
full and partial credit payment reduction policy for CY 2009, because 
ASC covered procedures assigned to these two APCs under the OPPS do not 
qualify for payment as ASC covered device-intensive surgical procedures 
(that is, their estimated device offset percentages are less than 50 
percent).

   Table 42.--Proposed CY 2009 Adjustments to Payments for ASC Covered Surgical Procedures in Cases of Devices
                               Reported at No Cost or With Full or Partial Credit
----------------------------------------------------------------------------------------------------------------
                                                                                        Proposed CY  Proposed CY
                                      Proposed CY  Proposed CY                           2009 OPPS    2009 OPPS
 HCPCS code      Short descriptor       2009 ASC    2009 OPPS       OPPS APC title          full       partial
                                        payment        APC                                 offset       offset
                                       indicator                                         percentage   percentage
----------------------------------------------------------------------------------------------------------------
27446......  Revision of knee joint.           J8         0681  Knee Arthroplasty.....           74           37
33206......  Insertion of heart                J8         0089  Insertion/Replacement            72           36
              pacemaker.                                         of Permanent
                                                                 Pacemaker and
                                                                 Electrodes.
33207......  Insertion of heart                J8         0089  Insertion/Replacement            72           36
              pacemaker.                                         of Permanent
                                                                 Pacemaker and
                                                                 Electrodes.
33208......  Insertion of heart                J8         0655  Insertion/Replacement/           75           37
              pacemaker.                                         Conversion of a
                                                                 permanent dual
                                                                 chamber pacemaker.
33212......  Insertion of pulse                H8         0090  Insertion/Replacement            73           36
              generator.                                         of Pacemaker Pulse
                                                                 Generator.
33213......  Insertion of pulse                H8         0654  Insertion/Replacement            77           38
              generator.                                         of a permanent dual
                                                                 chamber pacemaker.

[[Page 41532]]

 
33214......  Upgrade of pacemaker              J8         0655  Insertion/Replacement/           75           37
              system.                                            Conversion of a
                                                                 permanent dual
                                                                 chamber pacemaker.
33224......  Insert pacing lead &              J8         0418  Insertion of Left                70           35
              connect.                                           Ventricular Pacing
                                                                 Elect.
33225......  Lventric pacing lead              J8         0418  Insertion of Left                70           35
              add-on.                                            Ventricular Pacing
                                                                 Elect.
33240......  Insert pulse generator.           J8         0107  Insertion of                     89           44
                                                                 Cardioverter-
                                                                 Defibrillator.
33249......  Eltrd/insert pace-defib           J8         0108  Insertion/Replacement/           88           44
                                                                 Repair of
                                                                 Cardioverter-
                                                                 Defibrillator Leads.
33282......  Implant pat-active ht             J8         0680  Insertion of Patient             71           35
              record.                                            Activated Event
                                                                 Recorders.
53440......  Male sling procedure...           H8         0385  Level I Prosthetic               57           29
                                                                 Urological Procedures.
53444......  Insert tandem cuff.....           H8         0385  Level I Prosthetic               57           29
                                                                 Urological Procedures.
53445......  Insert uro/ves nck                H8         0386  Level II Prosthetic              64           32
              sphincter.                                         Urological Procedures.
53447......  Remove/replace ur                 H8         0386  Level II Prosthetic              64           32
              sphincter.                                         Urological Procedures.
54400......  Insert semi-rigid                 H8         0385  Level I Prosthetic               57           29
              prosthesis.                                        Urological Procedures.
54401......  Insert self-contd                 H8         0386  Level II Prosthetic              64           32
              prosthesis.                                        Urological Procedures.
54405......  Insert multi-comp penis           H8         0386  Level II Prosthetic              64           32
              pros.                                              Urological Procedures.
54410......  Remove/replace penis              H8         0386  Level II Prosthetic              64           32
              prosth.                                            Urological Procedures.
54416......  Remv/repl penis contain           H8         0386  Level II Prosthetic              64           32
              pros.                                              Urological Procedures.
61885......  Insrt/redo neurostim 1            H8         0039  Level I Implantation             83           42
              array.                                             of Neurostimulator.
61886......  Implant neurostim                 H8         0315  Level III Implantation           88           44
              arrays.                                            of Neurostimulator.
62361......  Implant spine infusion            H8         0227  Implantation of Drug             81           40
              pump.                                              Infusion Device.
62362......  Implant spine infusion            H8         0227  Implantation of Drug             81           40
              pump.                                              Infusion Device.
63650......  Implant neuroelectrodes           H8         0040  Percutaneous                     56           28
                                                                 Implantation of
                                                                 Neurostimulator
                                                                 Electrodes, Excluding
                                                                 Cranial Nerve.
63655......  Implant neuroelectrodes           J8         0061  Laminectomy,                     61           30
                                                                 Laparoscopy, or
                                                                 Incision for
                                                                 Implantation of
                                                                 Neurostimulator
                                                                 Electr.
63685......  Insrt/redo spine n                H8         0222  Level II Implantation            84           42
              generator.                                         of Neurostimulator.
64553......  Implant neuroelectrodes           H8         0225  Implantation of                  61           30
                                                                 Neurostimulator
                                                                 Electrodes, Cranial
                                                                 Nerve.
64555......  Implant neuroelectrodes           J8         0040  Percutaneous                     56           28
                                                                 Implantation of
                                                                 Neurostimulator
                                                                 Electrodes, Excluding
                                                                 Cranial Nerve.
64560......  Implant neuroelectrodes           J8         0040  Percutaneous                     56           28
                                                                 Implantation of
                                                                 Neurostimulator
                                                                 Electrodes, Excluding
                                                                 Cranial Nerve.
64561......  Implant neuroelectrodes           H8         0040  Percutaneous                     56           28
                                                                 Implantation of
                                                                 Neurostimulator
                                                                 Electrodes, Excluding
                                                                 Cranial Nerve.
64565......  Implant neuroelectrodes           J8         0040  Percutaneous                     56           28
                                                                 Implantation of
                                                                 Neurostimulator
                                                                 Electrodes, Excluding
                                                                 Cranial Nerve.
64573......  Implant neuroelectrodes           H8         0225  Implantation of                  61           30
                                                                 Neurostimulator
                                                                 Electrodes, Cranial
                                                                 Nerve.
64575......  Implant neuroelectrodes           H8         0061  Laminectomy,                     61           30
                                                                 Laparoscopy, or
                                                                 Incision for
                                                                 Implantation of
                                                                 Neurostimulator
                                                                 Electr.

[[Page 41533]]

 
64577......  Implant neuroelectrodes           H8         0061  Laminectomy,                     61           30
                                                                 Laparoscopy, or
                                                                 Incision for
                                                                 Implantation of
                                                                 Neurostimulator
                                                                 Electr.
64580......  Implant neuroelectrodes           H8         0061  Laminectomy,                     61           30
                                                                 Laparoscopy, or
                                                                 Incision for
                                                                 Implantation of
                                                                 Neurostimulator
                                                                 Electr.
64581......  Implant neuroelectrodes           H8         0061  Laminectomy,                     61           30
                                                                 Laparoscopy, or
                                                                 Incision for
                                                                 Implantation of
                                                                 Neurostimulator
                                                                 Electr.
64590......  Insrt/redo pn/gastr               H8         0039  Level I Implantation             83           42
              stimul.                                            of Neurostimulator.
69930......  Implant cochlear device           H8         0259  Level VII ENT                    83           42
                                                                 Procedures.
----------------------------------------------------------------------------------------------------------------


Table 43.--Proposed Devices for Which the ``FB'' or ``FC'' Modifier Must
  Be Reported With the Procedure Code When Furnished at No Cost or With
                         Full or Partial Credit
------------------------------------------------------------------------
       Device HCPCS code                    Short descriptor
------------------------------------------------------------------------
C1721.........................  AICD, dual chamber.
C1722.........................  AICD, single chamber.
C1764.........................  Event recorder, cardiac.
C1767.........................  Generator, neurostim, imp.
C1771.........................  Rep dev, urinary, w/sling.
C1772.........................  Infusion pump, programmable.
C1776.........................  Joint device (implantable).
C1778.........................  Lead, neurostimulator.
C1779.........................  Lead, pmkr, transvenous VDD.
C1785.........................  Pmkr, dual, rate-resp.
C1786.........................  Pmkr, single, rate-resp.
C1813.........................  Prosthesis, penile, inflatab.
C1815.........................  Pros, urinary sph, imp.
C1820.........................  Generator, neuro rechg bat sys.
C1881.........................  Dialysis access system.
C1882.........................  AICD, other than sing/dual.
C1891.........................  Infusion pump, non-prog, perm.
C1897.........................  Lead, neurostim, test kit.
C1898.........................  Lead, pmkr, other than trans.
C1900.........................  Lead coronary venous.
C2619.........................  Pmkr, dual, non rate-resp.
C2620.........................  Pmkr, single, non rate-resp.
C2621.........................  Pmkr, other than sing/dual.
C2622.........................  Prosthesis, penile, non-inf.
C2626.........................  Infusion pump, non-prog, temp.
C2631.........................  Rep dev, urinary, w/o sling.
L8614.........................  Cochlear device/system.
------------------------------------------------------------------------

2. Proposed Payment for Covered Ancillary Services
a. Background
    Our final CY 2008 payment policies under the revised ASC payment 
system for covered ancillary services vary according to the particular 
type of service and its payment policy under the OPPS. Our overall 
policy provides separate ASC payment for certain ancillary services 
integrally related to the provision of ASC covered surgical procedures 
that are paid separately under the OPPS and provides packaged ASC 
payment for other ancillary services that are packaged under the OPPS. 
Thus, we established a final policy to align ASC payment bundles with 
those under the OPPS (72 FR 42495).
    Our ASC payment policies provide separate payment for drugs and 
biologicals that are separately paid under the OPPS at the OPPS rates, 
while we pay for separately payable radiology services at the lower of 
the MPFS nonfacility PE RVU (or technical component) amount or the rate 
calculated according to the standard ASC payment methodology (72 FR 
42497). In all cases, these services must be provided integral to the 
performance of ASC covered surgical procedures for which the ASC bills 
Medicare. As noted in section XV.D.1.a. of this proposed rule, changes 
were made to the MPFS payment rates for the period of January 1, 2008 
through June 30, 2008 as a result of the enactment of the Medicare, 
Medicaid, and SCHIP Extension Act of 2007. In addition to changing the 
ASC payment rates for some office-based procedures, those changes also 
affected the ASC rates for some covered ancillary radiology services 
for the first 6 months of CY 2008.
    ASC payment policy for brachytherapy sources generally mirrors the 
payment policy under the OPPS. We finalized our policy to pay for 
brachytherapy sources applied in ASCs at the same prospective rates 
that were adopted under the OPPS or, if the OPPS rates were 
unavailable, at contractor-priced rates in the CY 2008 OPPS/ASC final 
rule with comment period (72 FR 66832). Subsequent to publication of 
that rule, section 106 of the Medicare, Medicaid, and SCHIP Extension 
Act of 2007 mandated that, for the period January 1, 2008 through June 
30, 2008, brachytherapy sources be paid under the OPPS at charges 
adjusted to cost. Therefore, because our final overall ASC payment 
policy requires payment for brachytherapy sources at contractor-priced 
rates if prospective OPPS rates are not available (72 FR 42499), we 
paid ASCs at contractor-priced rates for brachytherapy sources provided 
in ASCs for this period of time. Beginning July 1, 2008, brachytherapy 
sources applied in ASCs are paid at the same prospectively set rates 
that were finalized in the CY 2008 OPPS/ASC final rule with comment 
period, unless Congress specifies another payment methodology.
    Other separately paid covered ancillary services in ASCs, 
specifically corneal tissue acquisition and device categories with OPPS 
pass-through status, do not have prospectively established ASC payment 
rates according to the final policies of the revised ASC payment system 
(72 FR 42502 and 42509). Under the revised ASC payment system, corneal 
tissue acquisition is paid based on the invoiced costs for acquiring 
the corneal tissue for transplantation. As discussed in section IV.A.1. 
of this proposed rule, new pass-through device categories may be 
established on a quarterly basis, but currently there are no OPPS 
device pass-through categories that would continue for OPPS pass-
through payment (and, correspondingly, separate ASC payment) in CY 
2009.
b. Proposed Payment for Covered Ancillary Services for CY 2009
    For CY 2009, we are proposing to update the ASC payment rates and 
make

[[Page 41534]]

changes to payment indicators as necessary in order to maintain 
alignment between the OPPS and ASC payment systems regarding the 
packaged or separately payable status of services and the proposed CY 
2009 OPPS and ASC payment rates. The proposed CY 2009 OPPS payment 
methodologies for separately payable drugs and biologicals and 
brachytherapy sources are discussed in sections V. and VII. of this 
proposed rule, respectively, and the CY 2009 ASC payment rates for 
those services are proposed to equal the proposed CY 2009 OPPS rates. 
In Addendum BB, we indicate whether the proposed CY 2009 payment rate 
for radiology services is based on the MPFS PE RVU amount or the 
standard ASC payment calculation. Thus, the proposed CY 2009 payment 
indicator for a covered radiology service may differ from its CY 2008 
payment indicator based on packaging changes under the OPPS or the 
comparison of the CY 2009 proposed MPFS nonfacility PE RVU amount to 
the CY 2009 ASC payment rate calculated according to the standard 
methodology. Services that we are proposing to pay based on the 
standard ASC rate methodology are assigned payment indicator ``Z2'' 
(Radiology service paid separately when provided integral to a surgical 
procedure on ASC list; payment based on OPPS relative payment weight) 
and those for which payment is based on the MPFS PE RVU amount are 
assigned payment indicator ``Z3'' (Radiology service paid separately 
when provided integral to a surgical procedure on ASC list; payment 
based on MPFS nonfacility PE RVUs).
    Covered ancillary services and their proposed payment indicators 
are listed in Addendum BB to this proposed rule.

E. New Technology Intraocular Lenses

1. Background
    In the CY 2007 OPPS/ASC final rule with comment period, we 
finalized our proposal to update and streamline the process for 
reviewing applications to establish new active classes of new 
technology intraocular lenses (NTIOLs) and for recognizing new 
candidate intraocular lenses (IOLs) inserted during or subsequent to 
cataract extraction as belonging to a new technology intraocular lens 
(NTIOL) class that is qualified for a payment adjustment (71 FR 68176) 
Specifically, we established the following process:
     We will announce annually in the Federal Register document 
that proposes the update of ASC payment rates for the following 
calendar year, a list of all requests to establish new NTIOL classes 
accepted for review during the calendar year in which the proposal is 
published and the deadline for submission of public comments regarding 
those requests. The deadline for receipt of public comments will be 30 
days following publication of the list of requests.
     In the Federal Register document that finalizes the update 
of ASC payment rates for the following calendar year, we will--
    + Provide a list of determinations made as a result of our review 
of all new class requests and public comments; and
    + Publish the deadline for submitting requests for review of an 
application for a new NTIOL class in the following calendar year.
    In determining whether a lens belongs to a new class of NTIOLs and 
whether the ASC payment amount for insertion of that lens in 
conjunction with cataract surgery is appropriate, we expect that the 
insertion of the candidate IOL would result in significantly improved 
clinical outcomes compared to currently available IOLs. In addition, to 
establish a new NTIOL class, the candidate lens must be distinguishable 
from lenses already approved as members of active or expired classes of 
NTIOLs that share a predominant characteristic associated with improved 
clinical outcomes that was identified for each class. Furthermore, in 
the CY OPPS/ASC 2007 final rule with comment period, we finalized our 
proposal to base our determinations on consideration of the following 
factors (71 FR 68177):
     The IOL must have been approved by the FDA and claims of 
specific clinical benefits and/or lens characteristics with established 
clinical relevance in comparison with currently available IOLs must 
have been approved by the FDA for use in labeling and advertising.
     The IOL is not described by an active or expired NTIOL 
class; that is, it does not share the predominant, class-defining 
characteristic associated with improved clinical outcomes with 
designated members of an active or expired NTIOL class.
     Evidence demonstrates that use of the IOL results in 
measurable, clinically meaningful, improved outcomes in comparison with 
use of currently available IOLs. According to the statute, and 
consistent with previous examples provided by CMS, superior outcomes 
that would be considered include the following:
    + Reduced risk of intraoperative or postoperative complication or 
trauma;
    + Accelerated postoperative recovery;
    + Reduced induced astigmatism;
    + Improved postoperative visual acuity;
    + More stable postoperative vision;
    + Other comparable clinical advantages, such as--
    ++ Reduced dependence on other eyewear (for example, spectacles, 
contact lenses, and reading glasses);
    ++ Decreased rate of subsequent diagnostic or therapeutic 
interventions, such as the need for YAG laser treatment;
    ++ Decreased incidence of subsequent IOL exchange;
    ++ Decreased blurred vision, glare, other quantifiable symptom or 
vision deficiency.
    For a request to be considered complete, we require submission of 
the information that is found in the guidance document entitled 
``Application Process and Information Requirements for Requests for a 
New Class of New Technology Intraocular Lens (NTIOL)'' posted on the 
CMS Web site at: http://www.cms.hhs.gov/ASCPayment/05_NTIOLs.asp.
    As stated in the CY 2007 OPPS/ASC final rule with comment period 
(71 FR 68180), there are three possible outcomes from our review of a 
request for establishment of a new NTIOL class. As appropriate, for 
each completed request for consideration of a candidate IOL into a new 
class that is received by the established deadline, one of the 
following determinations would be announced annually in the final rule 
updating the ASC payment rates for the next calendar year:
     The request for a payment adjustment is approved for the 
candidate IOL for 5 full years as a member of a new NTIOL class 
described by a new HCPCS code.
     The request for a payment adjustment is approved for the 
candidate IOL for the balance of time remaining as a member of an 
active NTIOL class.
     The request for a payment adjustment is not approved.
    We also discussed our plan to summarize briefly in the final rule 
the evidence that was reviewed, the public comments, and the basis for 
our determinations in consideration of applications for establishment 
of a new NTIOL class. We established that when a new NTIOL class is 
created, we would identify the predominant characteristic of NTIOLs in 
that class that sets them apart from other IOLs (including those 
previously approved as members of other expired or active NTIOL 
classes) and that is associated with improved clinical outcomes. The 
date of implementation of a payment adjustment in the case of approval 
of an

[[Page 41535]]

IOL as a member of a new NTIOL class would be set prospectively as of 
30 days after publication of the ASC payment update final rule, 
consistent with the statutory requirement.
2. NTIOL Application Process for Payment Adjustment
    In CY 2007, we posted an updated guidance document to the CMS Web 
site to provide process and information requirements for applications 
requesting a review of the appropriateness of the payment amount for 
insertion of an IOL to ensure that the ASC payment for covered surgical 
procedures includes payment that is reasonable and related to the cost 
of acquiring a lens that is approved as belonging to a new class of 
NTIOLs. This guidance document can be accessed on the CMS Web site at: 
http://www.cms.hhs.gov/ASCPayment/downloads/NTIOLprocess.
    We note that we have also issued a guidance document entitled 
``Revised Process for Recognizing Intraocular Lenses Furnished by 
Ambulatory Surgery Centers (ASCs) as Belonging to an Active Subset of 
New Technology Intraocular Lenses (NTIOLs).'' This guidance document 
can be accessed on the CMS Web site at: http://www.cms.hhs.gov/ASCPayment/Downloads/Request_for_inclusion_in_current_NTIOL_subset.pdf.
    This second guidance document provides specific details regarding 
requests for recognition of IOLs as belonging to an existing, active 
NTIOL class, the review process, and information required for a request 
to review. Currently, there is one active NTIOL class whose defining 
characteristic is the reduction of spherical aberration. CMS accepts 
requests throughout the year to review the appropriateness of 
recognizing an IOL as a member of an active class of NTIOLs. That is, 
review of candidate lenses for membership in an existing, active NTIOL 
class is ongoing and not limited to the annual review process that 
applies to the establishment of new NTIOL classes. We ordinarily 
complete the review of such a request within 90 days of receipt, and 
upon completion of our review, we notify the requestor of our 
determination and post on the CMS Web site notification of a lens newly 
approved for a payment adjustment as an NTIOL belonging to an active 
NTIOL class when furnished in an ASC.
3. Classes of NTIOLs Approved and New Requests for Payment Adjustment
a. Background
    Since implementation of the process for adjustment of payment 
amounts for NTIOLs that was established in the June 16, 1999 Federal 
Register, we have approved three classes of NTIOLs, as shown in the 
following table, with the associated qualifying IOLs to date:

----------------------------------------------------------------------------------------------------------------
                                     $50 approved for
NTIOL class       HCPCS code        services furnished          NTIOL            IOLs eligible for adjustment
                                        on or after         characteristic
----------------------------------------------------------------------------------------------------------------
1..........  Q1001...............  May 18, 2000,         Multifocal.........  Allergan AMO Array Multifocal
                                    through May 18,                            lens, model SA40N.
                                    2005.
2..........  Q1002...............  May 18, 2000,         Reduction in         STAAR Surgical Elastic Ultraviolet-
                                    through May 18,       Preexisting          Absorbing Silicone Posterior
                                    2005.                 Astigmatism.         Chamber IOL with Toric Optic,
                                                                               models AA4203T, AA4203TF, and
                                                                               AA4203TL.
3..........  Q1003...............  February 27, 2006,    Reduced Spherical    Advanced Medical Optics (AMO)
                                    through February      Aberration.          Tecnis[supreg] IOL models Z9000,
                                    26, 2011.                                  Z9001, Z9002, ZA9003, AR40xEM and
                                                                               Tecnis[supreg] 1-Piece model
                                                                               ZCB00; Alcon Acrysof[supreg] IQ
                                                                               Model SN60WF and Acrysert
                                                                               Delivery System model SN60WS;
                                                                               Bausch & Lomb Sofport AO models
                                                                               LI61AOV, and LI61AOV; STAAR
                                                                               Affinity Collamer model CQ2015A.
----------------------------------------------------------------------------------------------------------------

b. Request To Establish New NTIOL Class for CY 2009 and Deadline for 
Public Comment
    As discussed below and explained in the guidance document on the 
CMS Web site, a request for review for a new class of NTIOLs for CY 
2009 must have been submitted to CMS by March 14, 2008, the due date 
published in the CY 2008 OPPS/ASC final rule with comment period (72 FR 
66855). We received one request for review of the appropriateness of 
the ASC payment amount for insertion of a candidate IOL as a member of 
a new class of NTIOLs for CY 2009 by the March 14, 2008 due date. A 
summary of this request follows.
    Requestor: Rayner Surgical, Inc.
    Manufacturer: Rayner Intraocular Lenses Limited.
    Lens Model Number: C-flex IOL, Model Number 570C.
    Summary of the Request: Rayner Surgical, Inc. (Rayner) submitted a 
request for CMS to determine that its C-flex Model 570C intraocular 
lens meets the criteria for recognition as an NTIOL and to concurrently 
establish a new class of NTIOLs, with this lens as a member. As part of 
its request, Rayner submitted descriptive information about the 
candidate IOL as outlined in the guidance document that we make 
available on the CMS Web site for the establishment of a new class of 
NTIOLs, as well as information regarding approval of the candidate IOL 
by the U.S. Food and Drug Administration (FDA). This information 
included the approved labeling for the candidate lens, a summary of the 
IOL's safety and effectiveness, a copy of the FDA's approval 
notification, and instructions for its use. In addition, Rayner also 
submitted several peer-reviewed articles in support of its claim that 
the design features and hydrophilic properties of the candidate lens 
would reduce silicone oil adhesion and silicone oil-induced 
opacification. We note that we have previously considered other 
candidate IOLs for which ASC payment review was requested on the basis 
of their hydrophilic characteristics or their associated reduction in 
cellular deposits. We discussed these lenses in the December 20, 1999 
and May 3, 2000 NTIOL proposed and final rules published in the Federal 
Register (FR 64 71148 through 71149 and 65 FR 25738 through 25740, 
respectively).
    In its CY 2009 request, Rayner asserts that the design features and 
hydrophilic properties of the candidate lens would reduce silicone oil 
adhesion and silicone oil-induced opacification problems associated 
with FDA-approved IOL materials currently marketed in the United 
States. Rayner states that silicone oil is widely used as a tamponade 
in vitreoretinal surgery, and that silicone oil-induced opacification 
of an IOL, through adherence of the oil to the IOL surface, is a well-
known surgical complication. Rayner also states that at present, there 
are no active or expired NTIOL classes that describe IOLs similar to 
its IOL.
    We established in the CY 2007 OPPS/ASC final rule with comment 
period that when reviewing a request for recognition of an IOL as an 
NTIOL and a concurrent request to establish a new class of NTIOLs, we 
would base our

[[Page 41536]]

determination on consideration of the three major criteria that are 
outlined in the discussion above. We have begun our review of Rayner's 
request to recognize its C-flex IOL as an NTIOL and concurrently 
establish a new class of NTIOLs. We are soliciting comments on this 
candidate IOL with respect to the established NTIOL criteria as 
discussed above.
    First, for an IOL to be recognized as an NTIOL we require that the 
IOL must have been approved by the FDA and claims of specific clinical 
benefits and/or lens characteristics with established clinical 
relevance in comparison with currently available IOLs must have been 
approved by the FDA for use in labeling and advertising. We note that 
FDA approval for the candidate lens was granted in May of 2007 and in 
its request, Rayner provided FDA approval documentation, including a 
copy of the FDA's approval notification, the FDA's summary of the IOL's 
safety and effectiveness, and the labeling approved by the FDA. The 
approved label for the Rayner C-flex states, ``The hydrophilic nature 
of the Rayacryl material and the design features of the Rayner C-Flex 
lens reduce the problems of silicone oil adhesion and silicone oil 
opacification.'' The FDA label does not otherwise reference specific 
clinical benefits or lens characteristics with established clinical 
relevance in comparison with currently available IOLs. Although the 
labeling reference to reduced ``problems'' could imply clinical 
relevance and clinical benefits of the lens, the label does not 
indicate the specific clinical benefits associated with the lens. We 
are interested in public comments on the specific clinical benefits 
and/or lens characteristics with established clinical relevance in 
comparison with currently available IOLs that may be associated with 
the silicone adherence and silicone oil-induced opacification reducing 
characteristics of this candidate lens.
    Second, we also require that the candidate IOL not be described by 
an active or expired NTIOL class, that is, it does not share the 
predominant, class-defining characteristic associated with improved 
clinical outcomes with designated members of an active or expired NTIOL 
class. As noted in the table above regarding active and expired NTIOL 
classes, since implementation of the NTIOL review process that was 
established in the June 16, 1999 Federal Register, we have approved 
three classes of NTIOLs: Multifocal and Reduction in Preexisting 
Astigmatism classes, both of which were created in 2000 and expired in 
2005, and the currently active Reduced Spherical Aberration class, 
which was created in 2006 and will expire in 2011. The class-defining 
characteristic specific to IOLs that are members of these classes is 
evident in the name assigned to the class. For example, IOLs recognized 
as members of the reduced spherical aberration class are characterized 
by their aspheric design that results in reduced spherical aberration. 
Please refer to the table above for information about the NTIOL classes 
that have been created since the implementation of the review process. 
Based on this information, the candidate lens may not be described by 
an active or expired NTIOL class. Its proposed class-defining 
characteristic and associated clinical benefits that were described in 
the submitted request, specifically the hydrophilic nature of the 
Rayacryl material and the design features of the C-flex lens to reduce 
problems with silicone oil adhesion and silicone oil-induced 
opacification, may not be similar to the class-defining characteristics 
and associated benefits of the two expired NTIOL classes, the 
Multifocal and Reduction in Preexisting Astigmatism classes, or to the 
class-defining characteristic and associated benefits of the currently 
active Reduced Spherical Aberration class. We welcome public comments 
that address whether the proposed class-defining characteristic and 
associated clinical benefits of the candidate Rayner IOL are described 
by the expired or currently active NTIOL classes.
    Third, our NTIOL evaluation criteria also require that an applicant 
submit evidence that demonstrates use of the IOL results in measurable, 
clinically meaningful, improved outcomes in comparison with use of 
currently available IOLs. We note that in the CY 2007 OPPS/ASC final 
rule with comment period, we sought comments as to what constitutes 
currently available IOLs for purposes of such comparisons, and we 
received several comments in response to our solicitation (71 FR 
68178). We agreed with commenters that we should remain flexible with 
respect to our view of ``currently available lenses'' for purposes of 
reviewing NTIOL requests, in order to allow for consideration of 
technological advances in lenses over time. For purposes of reviewing 
this request to establish a new NTIOL class for CY 2009, we believe 
that foldable, spherical, monofocal IOLs made of acrylic, silicone, or 
polymethylmethacrylate materials represent the currently available 
lenses against which the candidate NTIOL to establish a new class 
should be compared. The Rayner request asserts that the hydrophilic 
material of the candidate lens with respect to silicone oil adhesion 
makes the lens a novel IOL in the U.S. market. We are seeking public 
comment on our view of ``currently available lenses'' for the purposes 
of this CY 2009 review.
    We reviewed the four peer-reviewed articles submitted by Rayner 
with the request, specifically three bench studies of silicone oil 
coverage of various IOL materials and a single series of three clinical 
case histories where silicone oil adhesion was documented. The 
literature did not clearly provide information regarding the clinical 
benefit to patients who received the candidate lens in conjunction with 
cataract removal surgery compared to patients receiving currently 
available IOLs. As stated in the Rayner request, the potential benefits 
of the candidate lens would apply only to individuals undergoing 
vitreoretinal surgery, in which silicone oil was used as a tamponade at 
some time after insertion of the intraocular lens. The size and 
composition of this population that could potentially benefit is 
unclear, and it is also unclear how often and what other alternative 
tamponade materials may be employed in the U.S. relative to silicone 
oil. We welcome public comments and relevant data specifically 
addressing whether use of the Rayner C-flex IOL results in measurable, 
clinically meaningful, improved outcomes in comparison with use of 
currently available IOLs.
    In accordance with our established NTIOL review process, we are 
seeking public comments on all of the review criteria for establishing 
a new NTIOL class with the characteristic of reduced silicone oil-
induced opacification based on the request for the Rayner C-flex IOL 
Model 570C lens. All comments on this request must be received by 
August 18, 2008. The announcement of CMS' determination regarding this 
request will appear in the CY 2009 OPPS/ASC final rule with comment 
period. If a determination of membership of the candidate lens in a new 
or currently active NTIOL class is made, this determination will be 
effective 30 days following the date that the final rule is published 
in the Federal Register.
4. Proposed Payment Adjustment
    The current payment adjustment for a 5-year period from the 
implementation date of a new NTIOL class is $50. In the CY 2007 OPPS/
ASC final rule with comment period, we revised Sec.  416.200(a) through 
(c) to clarify how the IOL payment adjustment will be made and how an 
NTIOL will be paid

[[Page 41537]]

after expiration of the payment adjustment, as well as made minor 
editorial changes to Sec.  416.200(d). For CY 2008, we did not revise 
the current payment adjustment amount, and we are not proposing to 
revise the payment adjustment amount for CY 2009 in light of our very 
short experience with the revised ASC payment system, implemented 
initially on January 1, 2008.
5. Proposed ASC Payment for Insertion of IOLs
    In accordance with the final policies of the revised ASC payment 
system, for CY 2009 payment for IOL insertion procedures will be 
established according to the standard payment methodology of the 
revised payment system, which multiples the ASC conversion factor by 
the ASC payment weight for the surgical procedure to implant the IOL. 
CY 2009 ASC payment for the cost of a conventional lens will be 
packaged into the payment for the associated covered surgical 
procedures performed by the ASC. The proposed CY 2009 ASC payment rates 
for IOL insertion procedures are included in Table 44.

  Table 44.--Insertion of IOL Procedures and Their Proposed CY 2009 ASC
                              Payment Rates
------------------------------------------------------------------------
                                                             Proposed CY
  HCPCS code                  Long descriptor                  2009 ASC
                                                               payment
------------------------------------------------------------------------
66983........  Intracapsular cataract extraction with            $961.91
                insertion of intraocular lens prosthesis
                (one stage procedure).
66984........  Extracapsular cataract removal with                961.91
                insertion of intraocular lens prosthesis
                (one stage procedure), manual or mechanical
                technique (e.g., irrigation and aspiration
                or phacoemulsification).
66985........  Insertion of intraocular lens prosthesis           890.22
                (secondary implant), not associated with
                concurrent cataract removal.
66986........  Exchange of intraocular lens................       890.22
------------------------------------------------------------------------

F. Proposed ASC Payment and Comment Indicators

1. Background
    In addition to the payment indicators that we introduced in the 
August 2, 2007 final rule, we also created final comment indicators for 
the ASC payment system in the CY 2008 OPPS/ASC final rule with comment 
period (72 FR 66855). We created Addendum DD1 to define ASC payment 
indicators that we use in Addenda AA and BB to provide payment 
information regarding covered surgical procedures and covered ancillary 
services, respectively, under the revised ASC payment system. The ASC 
payment indicators in Addendum DD1 are intended to capture policy-
relevant characteristics of HCPCS codes that may receive packaged or 
separate payment in ASCs, including: Their ASC payment status prior to 
CY 2008; their designation as device-intensive or office-based and the 
corresponding ASC payment methodology; and their classification as 
separately payable radiology services, brachytherapy sources, OPPS 
pass-through devices, corneal tissue acquisition services, drugs or 
biologicals, or NTIOLs.
    We also created Addendum DD2 that lists the ASC comment indicators. 
The ASC comment indicators used in Addenda AA and BB to the final rule 
with comment period will serve to identify, for the revised ASC payment 
system, the status of a specific HCPCS code and its payment indicator 
with respect to the timeframe when comments will be accepted. The 
comment indicator ``NI'' will be used in the final rule to indicate new 
HCPCS codes for which the interim payment indicator assigned is subject 
to comment.
    The ``CH'' comment indicator is used in Addenda AA and BB to this 
CY 2009 proposed rule to indicate that: A new payment indicator (in 
comparison with the indicator for the CY 2008 ASC April quarterly 
update) is proposed for assignment to an active HCPCS code for the next 
calendar year; an active HCPCS code is proposed for addition to the 
list of procedures or services payable in ASCs; or an active HCPCS code 
is proposed for deletion at the end of the current calendar year. The 
``CH'' comment indicators that are published in the final rule with 
comment period are provided to alert readers that a change has been 
made from one calendar year to the next, but do not indicate that the 
change is subject to comment. The full definitions of the comment 
indicators are provided in Addendum DD2 to this proposed rule.
2. Proposed ASC Payment and Comment Indicators
    We are proposing to revise the definition of one ASC payment 
indicator for CY 2009. We are proposing that the definition of payment 
indicator ``F4'' would be changed from ``Corneal tissue acquisition; 
paid at reasonable cost'' to ``Corneal tissue acquisition, hepatitis B 
vaccine; paid at reasonable cost'' for CY 2009 as displayed in Addendum 
DD1 to this proposed rule. While we did not include hepatitis B vaccine 
HCPCS codes in Addendum BB to the CY 2008 OPPS/ASC final rule with 
comment period, we consider these vaccines to be separately payable 
drugs under the OPPS, and the revised ASC payment system policy 
provides the same payment for covered ancillary drugs and biologicals 
as would be made under the OPPS (72 FR 42501). Under the OPPS, these 
hepatitis B vaccines are proposed for CY 2009 payment at reasonable 
cost and, therefore, for the ASC payment system, we are proposing to 
include hepatitis B vaccines in the payment indicator definition of 
``F4'' for CY 2009.

G. Calculation of the ASC Conversion Factor and ASC Payment Rates

1. Background
    In the August 2, 2007 final rule, we made final our proposal to 
base ASC relative payment weights and payment rates under the revised 
ASC payment system on APC groups and relative payment weights (72 FR 
42493). Consistent with that policy and the requirement at section 
1833(i)(2)(D)(ii) of the Act that the revised payment system be 
implemented so that it would be budget neutral, the initial ASC 
conversion factor (CY 2008) was calculated so that estimated total 
Medicare payments under the revised ASC payment system in the first 
year would be budget neutral to estimated total Medicare payments under 
the existing (CY 2007) ASC payment system. That is, application of the 
ASC conversion factor was designed to result in aggregate expenditures 
under the revised ASC payment system in CY 2008 equal to aggregate 
expenditures that would have occurred in CY 2008 in the absence of the 
revised system, taking into consideration the cap on payments in CY 
2007 as required under section

[[Page 41538]]

1833(i)(2)(E) of the Act (72 FR 42521 through 42522).
    We note that we consider the term ``expenditures'' in the context 
of the budget neutrality requirement under section 1833(i)(2)(D)(ii) of 
the Act to mean expenditures from the Medicare Part B Trust Fund. We do 
not consider expenditures to include beneficiary coinsurance and 
copayments. This distinction was important for the CY 2008 ASC budget 
neutrality model that considered payments across hospital outpatient, 
ASC, and MPFS payment systems. However, because coinsurance is almost 
always 20 percent for ASC services, this interpretation of expenditures 
has minimal impact for subsequent budget neutrality adjustments 
calculated within the revised ASC payment system.
    In the CY 2008 OPPS/ASC final rule with comment period (72 FR 66857 
through 66858), we set out a step-by-step illustration of the final 
budget neutrality adjustment calculation based on the methodology 
finalized in the August 2, 2007 final rule (72 FR 42521 through 42531) 
and as applied to updated data available for the CY 2008 OPPS/ASC final 
rule with comment period. The application of that methodology to the 
data available for the CY 2008 OPPS/ASC final rule with comment period 
resulted in a budget neutrality adjustment of 0.65.
    For CY 2008, we adopted the OPPS relative payment weights for most 
services as the ASC relative payment weights and, consistent with the 
final policy, we calculated the CY 2008 ASC payment rates by 
multiplying the ASC relative payment weights by the CY 2008 ASC 
conversion factor of $41.401. For covered office-based surgical 
procedures and covered ancillary radiology services, the final policy 
is to set the relative payment weights so that the national unadjusted 
ASC payment rate does not exceed the MPFS unadjusted nonfacility PE RVU 
amount. Further, as discussed in section XV.F. of this proposed rule, 
in addition to the standard payment methodology, we also adopted 
several other alternative payment methods for specific types of 
services (for example, device-intensive procedures).
    Beginning in CY 2008, Medicare accounts for geographic wage 
variation in labor cost when calculating individual ASC payments by 
applying the pre-floor and pre-reclassified hospital wage index values 
that CMS calculates for payment and updated Core Based Statistical 
Areas (CBSAs) issued by the Office of Management and Budget in June 
2003. This is the same wage index that is used to adjust for geographic 
differences in labor costs in all Medicare payment systems except the 
IPPS and the OPPS. As discussed in the August 2, 2007 final rule (72 FR 
42518), the revised ASC payment system accounts for geographic wage 
variation when calculating individual ASC payments by applying the pre-
floor and pre-reclassified hospital wage index to the labor-related 
portion, which is 50 percent of the ASC payment amount.
    We note that as part of our review of the hospital wage index, in 
accordance with section 106(b)(1) of the MIEA-TRHCA, CMS has initiated 
a research contract that will evaluate the application of the hospital 
wage index in non-inpatient settings (73 FR 23618). For further 
information, see the discussion in the FY 2009 IPPS proposed rule.
2. Proposed Policy Regarding Calculation of the ASC Payment Rates
a. Updating the ASC Relative Payment Weights for CY 2009 and Future 
Years
    We update the ASC relative payment weights in the revised ASC 
payment system each year using the national OPPS relative payment 
weights (and MPFS nonfacility PE RVU amounts, as applicable) for that 
same calendar year and uniformly scale the ASC relative payment weights 
for each update year to make them budget neutral (72 FR 42531 through 
42532). Consistent with our established policy, we are proposing to 
scale the CY 2009 relative payment weights for ASCs according to the 
following method. Holding ASC utilization and the mix of services 
constant from CY 2007, for CY 2009, we would compare the total payment 
weight using the CY 2008 ASC relative payment weights under the 75/25 
blend (of the CY 2007 payment rate and the revised ASC payment rate) 
with the total payment weight using the CY 2009 ASC relative payment 
weights under the 50/50 blend (of the CY 2007 ASC payment rate and the 
revised ASC payment rate) to take into account the changes in the OPPS 
relative payment weights between CY 2008 and CY 2009. We would use the 
ratio of CY 2008 to CY 2009 total payment weight (the weight scaler) to 
scale the ASC relative payment weights for CY 2009. The proposed ASC 
scaler is 0.9753 and scaling of ASC relative payment weights would 
apply to covered surgical procedures and covered ancillary radiology 
services whose ASC payment rates are based on OPPS relative payment 
weights. Scaling would not apply in the case of ASC payment for 
separately payable covered ancillary services that have a predetermined 
national payment amount (that is, their national ASC payment amounts 
are not based on OPPS relative payment weights), such as drugs and 
biologicals or brachytherapy sources that are separately paid under the 
OPPS or services that are contractor-priced or paid at reasonable cost 
in ASCs. Any service with a predetermined national payment amount would 
be included in the ASC budget neutrality comparison, but scaling of the 
ASC relative payment weights would not apply to those services. The ASC 
payment weights for those services without predetermined national 
payment amounts (that is, those services with national payment amounts 
that would be based on OPPS relative payment weights if a payment 
limitation did not apply) would be scaled to eliminate any difference 
in the total payment weight between the current year and the update 
year.
    The proposed weight scaler used to model ASC fully implemented 
rates in order to reflect our estimate of rates if there was no 
transition for CY 2009 is equal to 0.9412. This scaler was applied to 
all payment weights subject to scaling, in order to estimate the fully 
implemented payment rates for CY 2009 without the transition, for 
purposes of the ASC impact analysis discussed in section XXI.D. of this 
proposed rule.
    For any given year's ratesetting, we typically use the most recent 
full calendar year of claims data to model budget neutrality 
adjustments. We currently have 95 percent of CY 2007 ASC claims data 
available for this proposed rule. These claims do not include new 
covered surgical procedures and covered ancillary services under the 
revised ASC payment system that were first payable in ASCs in CY 2008 
and only contain data for ASC services billed in CY 2007 that were 
eligible to receive payment under the previous ASC payment system. We 
do not have sufficiently robust CY 2008 ASC claims data upon which to 
base the CY 2009 ASC payment system update. Therefore, for CY 2009 
budget neutrality adjustments, we assume that there would be no 
significant change in the weight scaler or wage adjustment attributable 
to new covered surgical and covered ancillary services.
    To create an analytic file to support calculation of the weight 
scaler and budget neutrality adjustment for the wage index (discussed 
below), we summarized available CY 2007 ASC claims by provider and by 
HCPCS code. We defined a unique supplier identifier solely for the 
purpose of identifying unique providers within the CY 2007 claims data. 
We used the provider zip code reported on the claim to associate

[[Page 41539]]

state, county, and CBSA with each ASC. This file, available to the 
public as a supporting data file for this proposed rule, is posted on 
the CMS Web site at: http://www.cms.hhs.gov/ASCPayment/01_Overview.asp#TopOfPage.
b. Updating the ASC Conversion Factor
    Under the OPPS, we typically apply a budget neutrality adjustment 
for provider-level changes, most notably a change in the wage index for 
the upcoming year, to the conversion factor. For the CY 2009 ASC 
payment system, we are proposing to calculate and apply the pre-floor 
and pre-reclassified hospital wage index that is used for ASC payment 
adjustment to the ASC conversion factor, just as the OPPS wage index 
adjustment is calculated and applied to the OPPS conversion factor. For 
CY 2009, we calculated this proposed adjustment for the revised ASC 
payment system by using the most recent CY 2007 claims data available 
and estimating the difference in total payment that would be created by 
introducing the CY 2009 pre-floor and pre-reclassified hospital wage 
index. Specifically, holding CY 2007 ASC utilization and service-mix 
and CY 2009 national payment rates after application of the weight 
scaler constant, we calculated the total adjusted payment using the CY 
2008 pre-floor and pre-reclassified hospital wage index and a total 
adjusted payment using the proposed CY 2009 pre-floor and pre-
reclassified hospital wage index. We used the 50-percent labor that we 
finalized for the revised ASC payment system in CY 2008 for both total 
adjusted payment calculations. We then compared the total adjusted 
payment calculated with the CY 2008 pre-floor and pre-reclassified 
hospital wage index to the total adjusted payment calculated with the 
proposed CY 2009 pre-floor and pre-reclassified hospital wage index and 
applied the resulting ratio of 0.9996 (the ASC wage index budget 
neutrality adjustment) to the CY 2008 ASC conversion factor to 
calculate the CY 2009 ASC conversion factor.
    Section 1833(i)(2)(C) of the Act requires that, if the Secretary 
has not updated the ASC payment amounts in a calendar year after CY 
2009, the payment amounts shall be increased by the percentage increase 
in the Consumer Price Index for All Urban Consumer (CPI-U) as estimated 
by the Secretary for the 12-month period ending with the midpoint of 
the year involved. Therefore, as discussed in the August 2, 2007 final 
rule, we adopted a final policy to update the ASC conversion factor 
using the CPI-U in order to adjust ASC payment rates for inflation (72 
FR 42518 through 42519). We will implement the annual updates through 
an adjustment to the conversion factor under the revised ASC payment 
system beginning in CY 2010 when the statutory requirement for a zero 
update no longer applies. Therefore, for CY 2009, we are only proposing 
to update the ASC conversion factor with the budget neutrality 
adjustment due to the revised CY 2009 pre-floor and pre-reclassified 
hospital wage index, resulting in a proposed CY 2009 ASC conversion 
factor of $41.384, which is the product of $41.401 multiplied by 
0.9996.
3. Display of Proposed ASC Payment Rates
    Addenda AA and BB to this proposed rule display the proposed 
updated ASC payment rates for CY 2009 for covered surgical procedures 
and covered ancillary services, respectively. These addenda contain 
several types of information related to the proposed CY 2009 payment 
rates. Specifically, in Addendum AA, the column titled ``Subject to 
Multiple Procedure Discounting'' indicates whether a surgical procedure 
would be subject to the multiple procedure payment reduction policy. As 
discussed in the CY 2008 OPPS/ASC final rule with comment period (72 FR 
66829 through 66830), most covered surgical procedures are subject to a 
50-percent reduction in the ASC payment for the lower-paying procedure 
when more than one procedure is performed in a single operative 
session. Display of the comment indicator ``CH'' in the column titled 
``Comment Indicator'' indicates a proposed change in payment policy for 
the item or service, including identifying new or discontinued HCPCS 
codes, designating items or services newly proposed for payment under 
the ASC payment system, and identifying items or services with a 
proposed change in the ASC payment indicator for CY 2009. The column 
titled ``CY 2009 Second Year Transition Payment Weight'' is the 
relative transition payment weight for the service. CY 2009 is the 
second year of a 4-year transition to ASC payment rates calculated 
according to the standard methodology of the revised ASC payment 
system. As proposed, the CY 2009 ASC payment rates for the covered 
surgical procedures subject to transitional payment (payment indicators 
``A2'' and ``H8'' in Addendum AA) are based on a blend of 50 percent of 
the CY 2007 ASC payment weight for the procedure and 50 percent of the 
proposed CY 2009 fully implemented ASC weight before scaling for budget 
neutrality, calculated according to the standard methodology. The 
payment weights for all covered surgical procedures and covered 
ancillary radiology services whose ASC payment rates are based on OPPS 
relative payment weights are scaled for budget neutrality. Thus, 
scaling was not applied for the device portion of the device-intensive 
procedures, services that are paid at the MPFS nonfacility PE RVU 
amount, separately payable covered ancillary services that have a 
predetermined national payment amount, such as drugs, biologicals, and 
brachytherapy sources that are separately paid under the OPPS or 
services that are contractor-priced or paid at reasonable cost in ASCs.
    To derive the proposed CY 2009 payment rate displayed in the ``CY 
2009 Second Year Transition Payment'' column, each ASC payment weight 
in the ``CY 2009 Second Year Transition Payment Weight'' column is 
multiplied by the proposed CY 2009 ASC conversion factor of $41.384, 
that includes a budget neutrality adjustment for changes in the wage 
index. Items and services with a predetermined national payment amount, 
such as separately payable drugs and biologicals displayed in Addendum 
BB to this proposed rule, may not show a relative payment weight. The 
``CY 2009 Second Year Transition Payment'' column displays the proposed 
CY 2009 national unadjusted ASC payment rates for all items and 
services. The proposed CY 2009 ASC payment rates for separately payable 
drugs and biologicals are based on ASP data used for payment in 
physicians' offices in April 2008.

XVI. Reporting Quality Data for Annual Payment Rate Updates

A. Background

1. Reporting Hospital Outpatient Quality Data for Annual Payment Update
    Section 109(a) of the MIEA-TRHCA (Pub. L. 109-432) amended section 
1833(t) of the Act by adding a new subsection (17) that affects the 
payment rate update applicable to OPPS payments for services furnished 
by hospitals in outpatient settings on or after January 1, 2009. 
Section 1833(t)(17)(A) of the Act, which applies to hospitals as 
defined under section 1886(d)(1)(B) of the Act, requires that hospitals 
that fail to report data required for the quality measures selected by 
the Secretary in the form and manner required by the Secretary under 
section 1833(t)(17)(B) of the Act will incur a reduction in their 
annual payment update factor by 2.0 percentage points. Section 
1833(t)(17)(B) of the Act

[[Page 41540]]

requires that hospitals submit quality data in a form and manner, and 
at a time that the Secretary specifies. Sections 1833(t)(17)(C)(i) and 
(ii) of the Act require the Secretary to develop measures appropriate 
for the measurement of the quality of care (including medication 
errors) furnished by hospitals in outpatient settings and that these 
measures reflect consensus among affected parties and, to the extent 
feasible and practicable, include measures set forth by one or more 
national consensus building entities. The Secretary is not prevented 
from selecting measures that are the same as (or a subset of) the 
measures for which data are required to be submitted under section 
1886(b)(3)(B)(viii) of the Act for the IPPS Reporting Hospital Quality 
Data for Annual Payment Update (RHQDAPU) program. Section 
1833(t)(17)(D) of the Act gives the Secretary the authority to replace 
measures or indicators as appropriate, such as when all hospitals are 
effectively in compliance or when the measures or indicators have been 
subsequently shown not to represent the best clinical practice. Section 
1833(t)(17)(E) of the Act requires the Secretary to establish 
procedures for making data submitted available to the public. Such 
procedures must give hospitals the opportunity to review data before 
these data are released.
    In the CY 2007 OPPS/ASC final rule with comment period (71 FR 
68189), we indicated our intent to establish an OPPS payment program 
modeled after the current IPPS RHQDAPU program. We stated our belief 
that the quality of hospital outpatient services would be most 
appropriately and fairly rewarded through the reporting of quality 
measures developed specifically for application in the hospital 
outpatient setting. We agreed that assessment of hospital outpatient 
performance would ultimately be most appropriately based on reporting 
of hospital outpatient measures developed specifically for this 
purpose. We stated our intent to implement the full OPPS payment rate 
update beginning in CY 2009 based upon hospital reporting of quality 
data beginning in CY 2008, using effective measures of the quality of 
hospital outpatient care that have been carefully developed and 
evaluated, and endorsed as appropriate, with significant input from 
stakeholders.
    The amendments to the Act made by section 109(a) of the MIEA-TRHCA 
are consistent with our intent and direction outlined in the CY 2007 
OPPS/ASC final rule with comment period. Under these amendments, we 
were statutorily required to establish a program under which hospitals 
would report data on the quality of hospital outpatient care using 
standardized measures of care in order to receive the full annual 
update to the OPPS payment rate, effective for payments beginning in CY 
2009. We refer to the program established under these amendments as the 
Hospital Outpatient Quality Data Reporting Program (HOP QDRP).
    In reviewing the measures currently available for care in the 
hospital outpatient settings, we continue to believe that it would be 
most appropriate and desirable to use measures that specifically apply 
to the hospital outpatient setting. In other words, we do not believe 
that we should simply, without further analysis, adopt the IPPS RHQDAPU 
program measures as the measures for the HOP QDRP. Nonetheless, we note 
that section 1833(t)(17)(C)(ii) of the Act allows the Secretary to 
``[select] measures that are the same as (or a subset of) the measures 
for which data are required to be submitted'' under the IPPS RHQDAPU 
program. We invite comment on whether we should select for the HOP QDRP 
some or all measures from the current RHQDAPU program measure set that 
apply to the outpatient setting. In the CY 2008 OPPS/ASC final rule 
with comment period (72 FR 66860), we established a separate reporting 
program, and adopted quality measures that were deemed appropriate for 
measuring hospital outpatient quality of care that reflected consensus 
among affected parties, and were set forth by one or more national 
consensus building entities.
2. Reporting ASC Quality Data for Annual Payment Update
    Section 109(b) of the MIEA-TRHCA amended section 1833(i) of the Act 
by adding new sections 1833(i)(2)(D)(iv) and 1833(i)(7) to the Act. 
These amendments may affect ASC payments for services furnished in ASC 
settings on or after January 1, 2009. Section 1833(i)(2)(D)(iv) of the 
Act authorizes the Secretary to implement the revised payment system 
for services furnished in ASCs (established under section 1833(i)(2)(D) 
of the Act), ``so as to provide for a reduction in any annual payment 
increase for failure to report on quality measures * * *.''
    Section 1833(i)(7)(A) of the Act authorizes the Secretary to 
provide that any ASC that fails to report data required for the quality 
measures selected by the Secretary in the form and manner required by 
the Secretary under section 1833(i)(7) of the Act will incur a 
reduction in any annual payment update of 2.0 percentage points. 
Section 1833(i)(7)(A) of the Act also specifies that a reduction for 
one year cannot be taken into account in computing the ASC update for a 
subsequent calendar year.
    Section 1833(i)(7)(B) of the Act provides that, ``except as the 
Secretary may otherwise provide,'' the hospital outpatient quality data 
provisions of section 1833(t)(17)(B) through (E) of the Act, summarized 
above, shall apply to ASCs. We did not implement an ASC quality 
reporting program for CY 2008 (72 FR 66875).
    We refer readers to section XVI.H. of this proposed rule for a 
discussion of our proposal to implement ASC quality data reporting in a 
later rulemaking.

B. Hospital Outpatient Quality Measures for CY 2009

    For the CY 2009 annual payment update, we required HOP QDRP 
reporting using 7 quality measures--5 Emergency Department measures 
plus 2 Perioperative Care measures. These measures address care 
provided to a large number of adult patients in hospital outpatient 
settings, across a diverse set of conditions, and were selected for the 
initial set of HOP QDRP measures based on their relevance as a set to 
all hospital outpatient departments.
    The five Emergency Department measures capture the quality of 
outpatient care in hospital emergency departments (EDs), specifically 
for those adult patients with acute myocardial infarction (AMI) who are 
treated and then transferred to another facility for further care. 
These patients receive many of the same interventions as patients who 
are evaluated and admitted at the same facility. Three of these five 
measures are currently reported under the IPPS RHQDAPU program, and are 
published on the Hospital Compare Web site at: http://www.HospitalCompare.hhs.gov. Transferred AMI patients are currently not 
included in the calculation of the inpatient AMI measures because of 
differences in data collection and reporting for this patient group. 
The processes of care encompassed by these measures address care on 
arrival, the promptness of interventions, and discharge care for 
patients presenting to a hospital with an AMI.
    In addition to the five ED-AMI measures, we required reporting of 
two measures related to surgical care improvement. These two surgical 
care improvement measures derived from the Physician Quality Reporting 
Initiative (PQRI) are directly related to interventions provided in the 
outpatient setting.

[[Page 41541]]

    Specifically, in order for hospitals to receive the full OPPS 
payment update for services furnished in CY 2009, in the CY 2008 OPPS/
ASC final rule with comment period (72 FR 66860) we required that 
subsection (d) hospitals paid under the OPPS submit data on the 
following 7 measures as designated below, effective with hospital 
outpatient services furnished on or after April 1, 2008:

                             Quality Measure
------------------------------------------------------------------------
 
-------------------------------------------------------------------------
ED-AMI-1--Aspirin at Arrival.
ED-AMI-2--Median Time to Fibrinolysis.
ED-AMI-3--Fibrinolytic Therapy Received within 30 Minutes of Arrival.
ED-AMI-4--Median Time to Electrocardiogram (ECG).
ED-AMI-5: Median Time to Transfer for Primary PCI.
PQRI 20: Perioperative Care: Timing of Antibiotic Prophylaxis.
PQRI 21: Perioperative Care: Selection of Perioperative
 Antibiotic.
------------------------------------------------------------------------

C. Proposed Quality Measures for CY 2010 and Subsequent Calendar Years 
and Proposed Process to Update Measures

1. Proposed Quality Measures for CY 2010 Payment Determinations
    For CY 2010, we are proposing to require continued submission of 
data on the existing 7 measures discussed above and to adopt 4 imaging 
measures. We propose to designate the existing 7 measures as follows:

       CY 2009 Quality Measures With Proposed CY 2010 Designations
------------------------------------------------------------------------
       Current designation          Proposed quality measure designation
------------------------------------------------------------------------
ED-AMI-2.........................  OP-1: Median Time to Fibrinolysis.
ED-AMI-3.........................  OP-2: Fibrinolytic Therapy Received
                                    Within 30 Minutes.
ED-AMI-5.........................  OP-3: Median Time to Transfer to
                                    Another Facility for Acute Coronary
                                    Intervention.
ED-AMI-1.........................  OP-4: Aspirin at Arrival.
ED-AMI-4.........................  OP-5: Median Time to ECG.
PQRI 20.................  OP-6: Timing of Antibiotic
                                    Prophylaxis.
PQRI 21.................  OP-7: Prophylactic Antibiotic
                                    Selection for Surgical Patients.
------------------------------------------------------------------------

    The 4 imaging measures that we are proposing to adopt beginning 
with the CY 2010 payment determination are claims-based measures that 
CMS can calculate using Medicare Part B claims data without imposing on 
hospitals the burden of additional chart abstraction. For purposes of 
the CY 2010 payment determination, CMS will calculate these measures 
using CY 2008 Medicare administrative claims data.
    The proposed imaging measures are based on clinical evidence that, 
we believe, promote efficient and high quality patient care. MedPAC has 
expressed concern about potential overuse of imaging services based 
upon the rapid growth in the volume of usage over the last 5 years. 
Because of growing concerns regarding overuse of imaging services, CMS 
has developed and is now proposing 4 imaging measures which measure 
high quality, efficient use of services for the outpatient setting. 
Efficiency has been identified as an important area of development by 
the Institute of Medicine (IOM).

                                Proposed Additional Quality Measures for CY 2010
----------------------------------------------------------------------------------------------------------------
                        Topic                                                   Measure
----------------------------------------------------------------------------------------------------------------
Imaging Efficiency..................................  OP-8: MRI Lumbar Spine for Low Back Pain.
                                                      OP-9: Mammography Follow-up Rates.
                                                      OP-10: Abdomen CT--Use of Contrast Material:
                                                       OP-10: CT Abdomen--Use of Contrast Material.
                                                       OP-10a: CT Abdomen--Use of Contrast Material
                                                       excluding calculi of the kidneys, ureter, and/or urinary
                                                       tract.
                                                       OP-10b: CT Abdomen--Use of Contrast Material for
                                                       diagnosis of calculi in the kidneys, ureter, and/or
                                                       urinary tract.
                                                      OP-11: Thorax CT--Use of Contrast Material.
----------------------------------------------------------------------------------------------------------------

    We invite public comment on these 4 proposed imaging measures which 
have been submitted to the NQF for consideration. The NQF is one 
example of a voluntary consensus building entity, thus, meeting the 
requirement to include measures set forth by one or more such entities 
for use in HOP QDRP reporting as stipulated in section 
1833(t)(17)(C)(i) of the Act.
    While we are required under section 1833(t)(17)(C)(i) of the Act to 
develop measures appropriate for the measurement of the quality of care 
furnished by hospitals in hospital outpatient settings, it is also our 
intent to consider, when developing these measures, whether they can be 
``harmonized'' with measures that can be or are already adopted in the 
context of comparable inpatient and ambulatory care. In other words, it 
is CMS' intent to harmonize measures that assess the care that is given 
across settings and providers and to use the same measure 
specifications based on clinical evidence and guidelines for the care 
being assessed regardless of provider and setting. The goal of 
harmonization is to assure that comparable care in different settings 
can be evaluated in similar ways, which further assures that quality 
measurement can focus more on the needs of a patient with a particular 
condition than on the specific program or policy attributes of the 
setting in which the care is provided.
2. Proposed Process for Updating Measures
    Although we adopt measures through the rulemaking process, we are 
proposing to establish a sub-regulatory process that will allow us to 
update the technical specifications that we use to calculate those 
measures when we believe such updates are warranted based on scientific 
evidence and guidance from a consensus building entity such as the NQF. 
We believe that the establishment of such a sub-regulatory process is 
necessary so that the HOP QDRP measures are calculated based on the 
most up-to-date scientific and consensus standards. We also recognize 
that neither scientific advances nor updates to measure

[[Page 41542]]

specifications made by a consensus building entity are linked to the 
timing of regulatory actions. An example of changes that would prompt 
us to update a measure would be a change in antibiotic selection and/or 
timing (see measures with proposed designations of OP-6 and OP-7) based 
on updated clinical guidelines or best practices.
    Therefore, we are proposing that when a consensus building entity 
such as the NQF updates the measure specifications for a measure that 
we have adopted for the HOP QDRP program, we will update our measure 
specifications for that measure accordingly. We will provide 
notification of the measure specification updates on the QualityNet Web 
site, http://www.qualitynet.org, and in the CMS Hospital Outpatient 
Quality Measures Specifications Manual (Specifications Manual) no less 
than three months before any changes become effective for purposes of 
reporting under the HOP QDRP. We are inviting public comments on this 
proposal.
3. Possible New Quality Measures for CY 2011 and Subsequent Calendar 
Years
    We are seeking comment on possible new quality measures for CY 2011 
and subsequent calendar years. The following table contains a list of 
18 measures included within 9 measure sets from which additional 
quality measures could be selected for inclusion in the HOP QDRP. This 
table includes measures and measure sets that are part of clinical 
topics for which we currently do not require quality measure data 
reporting, such as cancer. We note that we sought comment on some of 
these measures in the CY 2008 OPPS/ASC proposed rule. We are seeking 
public comment on the measures and measure sets that are listed below 
as well as on any possible critical gaps or missing measures or measure 
sets. We specifically request input concerning the following:
     Which of the measures or measure sets should be included 
in the HOP QDRP for CY 2011 or subsequent calendar years?
     What challenges for data collection and reporting are 
posed by the identified measures and measure sets?
     What improvements could be made to data collection or 
reporting that might offset or otherwise address those challenges?
    We are soliciting public comment on the following measure sets and 
measures for consideration in CY 2011 and subsequent calendar years.

 Measures Under Consideration for CY 2011 and Subsequent Calendar Years
------------------------------------------------------------------------
            Topic                               Measure
------------------------------------------------------------------------
Cancer.......................  1. Radiation Therapy is Administered
                                within 1 Year of Diagnosis for Women
                                Under Age 70 Receiving Breast Conserving
                                Surgery for Breast Cancer.*
                               2. Adjuvant Chemotherapy is Considered or
                                Administered within 4 Months of Surgery
                                to Patients Under Age 80 with AJCC III
                                Colon Cancer.*
                               3. Adjuvant Hormonal Therapy for Patients
                                with Breast Cancer.*
                               4. Needle Biopsy to Establish Diagnosis
                                of Cancer Precedes Surgical Excision/
                                Resection.*
ED Throughput................  5. Median Time from ED Arrival to ED
                                Departure for Discharged ED Patients.
Diabetes.....................  6. Low Density Lipoprotein Control in
                                Type 1 or 2 Diabetes Mellitus.*
                               7. High Blood Pressure Control in Type 1
                                or 2 Diabetes Mellitus.*
Falls........................  8. Screening for Fall Risk.*
Depression...................  9. Antidepressant Medication During Acute
                                Phase for Patients with New Episode of
                                Major Depression.*
Stroke & Rehabilitation......  10. Computed Tomography (CT) or Magnetic
                                Resonance Imaging (MRI) Reports.*
                               11. Carotid Imaging Reports.*
Osteo........................  12. Communication with the Physician
                                Managing Ongoing Care Post Fracture.*
                               13. Screening or Therapy for Women Aged
                                65 Years and Older.*
                               14. Pharmacologic Therapy.*
                               15. Management Following a Fracture.*
Medication Reconciliation....  16. Medication Reconciliation.*
Respiratory..................  17. Asthma Pharmacological Therapy.*
                               18. Assessment of Mental Status for
                                Community Acquired Pneumonia.*
------------------------------------------------------------------------
* One of the 30 measures included as ``under consideration'' in the CY
  2008 OPPS/ASC proposed rule.

    We welcome suggestions regarding other additional measures and 
topics relevant to the hospital outpatient setting that we could use to 
further develop the measure set, and are particularly interested in 
receiving comments on potential HOP QDRP measures that could be used to 
measure the quality of care in other settings (such as hospital 
inpatient, physician office, and emergency care settings) and, thus, 
contribute to improved coordination and harmonization of high quality 
patient care.

D. Proposed Payment Reduction for Hospitals That Fail To Meet the HOP 
QDRP Requirements for the CY 2009 Payment Update

1. Background
    Section 1833(t)(17)(A) of the Act, which applies to hospitals as 
defined under section 1886(d)(1)(B) of the Act, requires that hospitals 
that fail to report data required for the quality measures selected by 
the Secretary, in the form and manner required by the Secretary under 
section 1833(t)(17)(B) of the Act, incur a 2.0 percentage point 
reduction to their OPD fee schedule increase factor, that is, the 
annual payment update factor. Section 1833(t)(17)(A)(ii) of the Act 
specifies that any reduction would apply only to the payment year 
involved and would not be taken into account in computing the 
applicable OPD fee schedule increase factor for a subsequent payment 
year.
    This section discusses how the proposed payment reduction for 
failure to meet the administrative, data collection and submission 
requirements of the HOP QDRP will affect the CY 2009 payment update 
applicable to OPPS payments for HOPD services furnished by the 
hospitals defined under section 1886(d)(1)(B) of the Act to which the 
program applies. The application of a reduced OPD fee schedule increase 
factor results in reduced national unadjusted payment rates that will 
apply to certain outpatient items and services provided

[[Page 41543]]

by hospitals that are required to report outpatient quality data and 
that fail to meet the HOP QDRP requirements. All other hospitals paid 
under the CY 2009 OPPS will receive the full OPPS payment update 
without the reduction.
2. Proposed Reduction of OPPS Payments for Hospitals That Fail To Meet 
the HOP QDRP CY 2009 Payment Update Requirements
a. Calculation of Reduced National Unadjusted Payment Rates
    The national unadjusted payment rates for many services paid under 
the OPPS equal the product of the OPPS conversion factor and the scaled 
relative weight for the APC to which the service is assigned. The OPPS 
conversion factor is updated annually by the OPD fee schedule increase 
factor. The conversion factor is used to calculate the OPPS payment 
rate for services with the following status indicators (listed in 
Addendum B to this proposed rule): ``P,'' ``Q1,'' ``Q2,'' ``Q3,'' 
``R,'' ``S,'' ``T,'' ``U,'' ``V,'' or ``X.'' We are proposing that 
payment for all services assigned the status indicators listed above 
would be subject to the reduction of the national unadjusted payment 
rates for applicable hospitals, with the exception of services assigned 
to New Technology APCs. While services assigned to New Technology APCs, 
specifically APCs 1491 (New Technology-Level IA ($0-$10)) through 1574 
(New Technology-Level XXXVII ($9,500-$10,000)), are assigned status 
indicator ``S'' or ``T,'' the payment rates for New Technology APCs are 
set at the mid-point of a cost band increment, rather than based on the 
product of the OPPS conversion factor and relative payment weight. 
Therefore, we are proposing to exclude services assigned to New 
Technology APCs from the list of services that are subject to the 
reduced national unadjusted payment rates because the OPD fee schedule 
increase factor is not used to update the payment rates for these APCs.
    The conversion factor is also not used to calculate the OPPS 
payment rates for separately payable services that are assigned status 
indicators other than status indicators ``P,'' ``Q1,'' ``Q2,'' ``Q3,'' 
``R,'' ``S,'' ``T,'' ``U,'' ``V,'' or ``X.'' These services include 
separately payable drugs and biologicals, separately payable 
therapeutic radiopharmaceuticals, pass-through drugs and devices that 
are paid at charges adjusted to cost, and a few other specific services 
that receive cost-based payment. As a result, we are also proposing 
that the OPPS payment rates for these services would not be reduced 
because the payment rates for these services are not calculated using 
the conversion factor and, therefore, the payment rates for these 
services are not updated by the OPD fee schedule increase factor.
    The OPD fee schedule increase factor, or market basket update, is 
an input into the OPPS conversion factor, which is used to calculate 
OPPS payment rates. To implement the requirement to reduce the market 
basket update for hospitals that fail to meet reporting requirements, 
we are proposing that, effective for services paid under the CY 2009 
OPPS, CMS would calculate two conversion factors: A full market basket 
conversion factor (that is, the full conversion factor) and a reduced 
market basket conversion factor (that is, the reduced conversion 
factor). It is necessary to calculate a reduced market basket 
conversion factor for hospitals that fail to meet reporting 
requirements as section 1833(t)(17)(A)(i) of the Act requires a 
reduction of 2.0 percentage points from the market basket update for 
those hospitals. (We implemented this statutory requirement in 
regulations at 42 CFR 419.43(h).) For a complete discussion of the 
calculation of the OPPS conversion factor, we refer readers to section 
II.B. of this proposed rule. Therefore, we are proposing to calculate a 
reduction ratio by dividing the reduced conversion factor by the full 
conversion factor. We refer to this reduction ratio as the ``reporting 
ratio'' to indicate that it applies to payment for hospitals that fail 
to meet their reporting requirements. Beginning January 1, 2009, the 
PRICER will calculate reduced national unadjusted payment rates that 
will be used as a basis for paying hospitals that fail to meet the 
requirements of the HOP QDRP by multiplying the national unadjusted 
payment rates by the reporting ratio. This will result in reduced 
national unadjusted payment rates that are mathematically equivalent to 
the reduced national unadjusted payment rates that would result if we 
multiplied the scaled OPPS relative weights by the reduced conversion 
factor. For CY 2009, we are proposing a reporting ratio of 0.981, 
calculated by dividing the reduced conversion factor of $64.409 by the 
full conversion factor of $65.684. As stated above, the use of the 
reporting ratio is mathematically equivalent to the creation and 
application of a reduced conversion factor to the OPPS payment weights.
    To determine the proposed reduced national unadjusted payment rates 
that would apply to hospitals that fail to meet their quality reporting 
requirements for the CY 2009 OPPS, we would multiply the proposed full 
national unadjusted payment rate in Addendum B to this proposed rule by 
the proposed reporting ratio of 0.981. For example, CPT code 11401 
(Excision, benign lesion including margins, except skin tag (unless 
listed elsewhere) trunk, arms or legs; excised diameter 0.6 to 1.0 cm), 
is assigned to APC 0019, with a proposed national unadjusted payment 
rate of $288.20. Where a hospital fails to meet the requirements of the 
HOP QDRP for the CY 2009 payment update, the reduced national 
unadjusted payment rate for that hospital would be $282.72 (the 
reporting ratio of 0.981 multiplied by the full national unadjusted 
payment rate for CPT code 11401).
b. Calculation of Reduced Minimum Unadjusted and National Unadjusted 
Beneficiary Copayments
    Under the OPPS, we have two levels of Medicare beneficiary 
copayment for many services: the minimum unadjusted copayment and the 
national unadjusted copayment. The minimum unadjusted copayment is 
always 20 percent of the national unadjusted payment rate for each 
separately payable service. The national unadjusted copayment is 
determined based on the historic coinsurance rate for the services 
assigned to the APC. Where the national unadjusted copayment is blank 
for an item or service listed in Addendum B to this proposed rule, the 
national unadjusted copayment is equal to the minimum unadjusted 
copayment. In general, under our longstanding copayment policy, the 
coinsurance percentage (the ratio of the copayment to the service 
payment) for a particular service may decline over time to a minimum of 
20 percent but will never increase. This is consistent with the 
statute's intent that eventually all services paid under the OPPS would 
be subject to a 20 percent coinsurance percentage. We refer readers to 
section 1833(t)(3)(B)(ii) of the Act for the specific statutory 
language. For additional background on the standard OPPS copayment 
calculation, we refer readers to the CY 2004 OPPS final rule with 
comment period (68 FR 63458 through 63459).
    For hospitals that receive the reduced OPPS payment for failure to 
meet the HOP QDRP requirements, we believe that it is both equitable 
and appropriate that a reduction in the payment for a service should 
result in proportionately reduced copayment liability for 
beneficiaries. Similarly, we believe that it would be inequitable to 
the beneficiary and in conflict with the intent of the law (section 
1833(t)(3)(B)(ii) of the Act) and our longstanding policy (68 FR 63458

[[Page 41544]]

through 63459) if the coinsurance percentage of the total payment for 
certain OPPS services to which reduced national unadjusted payment 
rates apply was to increase as a result of using the reduced conversion 
factor to calculate these reduced national unadjusted payment rates. 
Therefore, we are proposing that the Medicare beneficiary's minimum 
unadjusted copayment and national unadjusted copayment for a service to 
which a reduced national unadjusted payment rate applies would each 
equal the product of the reporting ratio and the national unadjusted 
copayment or the minimum unadjusted copayment, as applicable, for the 
service, under the authority of section 1833(t)(2)(E) of the Act, which 
authorizes the Secretary to ``establish, in a budget neutral manner, * 
* * adjustments as determined to be necessary to ensure equitable 
payments'' under the OPPS.
    We considered calculating the national unadjusted copayments and 
the minimum unadjusted copayments based on the reduced national 
unadjusted payment rates, using our standard copayment methodology. We 
found that in many cases the beneficiary's copayment amount would 
remain the same as calculated based on the full national unadjusted 
payment rate, although the total reduced national unadjusted payment 
rate would decline because of the reduction to the conversion factor. 
Therefore, in these cases, the ratio of the copayment to the total 
payment (the coinsurance percentage) would increase rather than 
decrease if we were to calculate copayments based on the reduced 
national unadjusted payment rates. For example, in the case of APC 0019 
(Level I Excision/Biopsy), the full national unadjusted payment rate 
for CY 2008 is $274.13 and the national unadjusted copayment is $71.87 
or 26 percent of the full national unadjusted payment rate for the APC. 
If the reduction were in effect for CY 2008, the reduced national 
unadjusted payment rate would be $268.65, but the national unadjusted 
copayment, if calculated under the standard rules, would continue to be 
$71.87, which represents 27 percent of the reduced national unadjusted 
payment rate. We believe that the increased coinsurance percentage that 
results from this methodology is contradictory to the intent of the 
statute that the coinsurance percentage would never increase and is 
also contradictory to our copayment rules that are intended to 
gradually reduce the percentage of the payment attributed to copayments 
until the national unadjusted copayment is equal to the minimum 
unadjusted copayment for all services.
    To avoid this inconsistent result, we are proposing to apply the 
reporting ratio to the national unadjusted copayment and the minimum 
unadjusted copayment to calculate the national unadjusted copayments 
that would apply to each APC for hospitals that receive the reduced CY 
2009 OPPS payment update. This application of the reporting ratio would 
be to the national unadjusted and minimum unadjusted copayments as 
calculated according to Sec.  419.41, prior to any adjustment for 
hospitals' failure to meet the quality reporting standards according to 
Sec.  419.43(h). Beneficiaries and secondary payers would thereby share 
in the reduction of payments to these hospitals. We believe that 
applying this copayment calculation methodology for those hospitals 
that fail to meet the HOP QDRP requirements allows us to appropriately 
set the national unadjusted copayments for the reduced OPPS national 
unadjusted payment rates and is most consistent with the eventual 
establishment of 20 percent of the payment rate as the uniform 
coinsurance percentage for all services under the OPPS. We are 
proposing to make changes to Sec. Sec.  419.41, 419.42, and 419.43 in 
this proposed rule to reflect this policy.
c. Treatment of Other Payment Adjustments
    We are proposing that all other applicable adjustments to the OPPS 
national unadjusted payment rates would apply in those cases when the 
OPD fee schedule increase factor is reduced for hospitals that fail to 
meet the requirements of the HOP QDRP. For example, the following 
standard adjustments would apply to the reduced national unadjusted 
payment rates: The wage index adjustment, the multiple procedure 
adjustment, the interrupted procedure adjustment, the rural sole 
community hospital adjustment, and the adjustment for devices furnished 
with full or partial credit or without cost. We believe that these 
adjustments continue to be equally applicable to payments for hospitals 
that do not meet the HOP QDRP requirements.
    Similarly, we are proposing that outlier payments would continue to 
be made when the criteria are met. For hospitals that fail to meet the 
quality data reporting requirements, we are proposing that the 
hospitals' costs would be compared to the reduced payments for purposes 
of outlier eligibility and payment calculation. We believe no changes 
in the regulation text would be necessary to implement this policy 
because using the reduced payment for these outlier eligibility and 
payment calculations is contemplated in the current regulations at 
Sec.  419.43(d). This proposal conforms to current practice under the 
IPPS in this regard. Specifically, under the IPPS, for purposes of 
determining the hospital's eligibility for outlier payments, the 
hospital's estimated operating costs for a discharge are compared to 
the outlier cost threshold based on the hospital's actual DRG payment 
for the case. For a complete discussion of the OPPS outlier calculation 
and eligibility criteria, we refer readers to section II.F. of this 
proposed rule.

E. Requirements for HOP Quality Data Reporting for CY 2010 and 
Subsequent Calendar Years

    In the CY 2008 OPPS/ASC final rule with comment period (72 FR 
66869), we stated that in order to participate in the HOP QDRP for CY 
2009 and subsequent calendar years, hospitals must meet administrative, 
data collection and submission, and data validation requirements. 
Hospitals that do not meet the requirements of the HOP QDRP, as well as 
hospitals not participating in the program and hospitals that withdraw 
from the program, will not receive the full OPPS payment rate update. 
Instead, in accordance with section 1833(t)(17)(A) of the Act, those 
hospitals would receive a reduction of 2.0 percentage points in their 
updates for the affected payment year.
    For payment determinations affecting the CY 2010 payment update, we 
are proposing to implement the requirements listed below. Most of these 
requirements are the same as the requirements we implemented for the CY 
2009 payment determination.
1. Administrative Requirements
    To participate in the HOP QDRP, several administrative steps must 
be completed. These steps require the hospital to:
     Identify a QualityNet administrator who follows the 
registration process and submits the information to the appropriate CMS 
designated contractor. All CMS designated contractors will be 
identified on the QualityNet Web site. The same person may be the 
QualityNet administrator for both the IPPS RHQDAPU program and the OPPS 
HOP QDRP. This designation must be kept current and must be done, 
regardless of whether the hospital submits data directly to the CMS 
designated contractor or uses a vendor for transmission of data.

[[Page 41545]]

     Register with QualityNet regardless of the method used for 
data submission.
     Complete the Notice of Participation form if one has not 
been completed or if a hospital has previously submitted a withdrawal 
form. We remind hospitals that they do not need to submit another 
Notice of Participation form if they have already done so and they have 
not withdrawn from participation. At this time, the participation form 
for the HOP QDRP is separate from the IPPS RHQDAPU program and 
completing a Notice of Participation form for each program is required. 
Agreeing to participate includes acknowledging that the data submitted 
to the CMS designated contractor will be submitted to CMS and may also 
be shared with a different CMS contractor or contractors supporting the 
implementation of the HOP QDRP program. For HOP QDRP decisions 
affecting CY 2010 payment determinations, hospitals that share the same 
Medicare Provider Number (MPN), now known as the CMS Certification 
Number (CCN) must complete a single Notice of Participation form.
    Hospitals with a newly acquired CCN and hospitals that are not 
participating in the CY 2009 HOP QDRP must send a completed paper copy 
of the Notice of Participation form to the appropriate CMS designated 
contractor in order to participate in the CY 2010 HOP QDRP. Hospitals 
with a newly acquired CCN must submit a Notice of Participation form no 
later than 30 days after receiving their new provider CCN. Hospitals 
that did not participate or withdrew from participation in the CY 2009 
HOP QDRP must submit a Notice of Participation form by January 31, 2009 
in order to participate in the CY 2010 HOP QDRP. We are proposing for 
CY 2011 to implement an on-line registration form and eliminate the 
paper form. We invite public comment on this proposed change.
    Hospitals with newly acquired CCNs, as well as hospitals that are 
not participating in the CY 2009 HOP QDRP, that do not properly submit 
a Notice of Participation form for CY 2010 as described above will be 
deemed as non-participatory, will not be able to submit data to the 
OPPS Clinical Warehouse, and will be deemed as not meeting reporting 
requirements under the HOP QDRP for CY 2010. Hospitals that have 
previously completed a Notice of Participation form and subsequently 
wish to terminate participation in the HOP QDRP must submit a 
withdrawal form.
2. Data Collection and Submission Requirements
    We are proposing that, to be eligible for the full OPPS payment 
update in CY 2010, hospitals must:
     Collect data required for the CY 2010 measure set that 
will be finalized in the CY 2009 OPPS/ASC final rule and that will be 
published and maintained in the Specifications Manual that can be found 
at: http://www.qualitynet.org. It will not be necessary to submit data 
for all eligible cases for some measures if sufficient eligible case 
thresholds are met. Instead, for those measures where a hospital has a 
sufficiently large number of cases, the hospital will be allowed to 
sample cases and submit data for these sampled cases rather than 
submitting data from all eligible cases. This sampling scheme will be 
set out in the Specifications Manual at least 4 months in advance of 
required data collection.
    In addition, in order to reduce the burden on hospitals that treat 
a low number of patients who meet the submission requirements for a 
particular quality measure, we are proposing that beginning with 
services furnished on or after January 1, 2009, hospitals that have 
five or fewer claims (both Medicare and non-Medicare) for any measure 
included in a measure topic in a quarter will not be required to submit 
patient level data for the entire measure topic for that quarter. 
However, the hospital would still be required to submit its aggregate 
measure population and sample size counts for the applicable measure 
topic as part of its quarterly data submission.
     Submit the data according to the data submission schedule 
that will be available on the QualityNet Web site. HOP QDRP data will 
continue to be submitted through the QualityNet secure Web site 
(https://www.qualitynet.org). This Web site meets or exceeds all 
current Health Insurance Portability and Accountability Act 
requirements. Submission deadlines will be four months after the last 
day of each calendar quarter for measures finalized in the CY 2009 
OPPS/ASC final rule. Thus, for example, the submission deadline for 
data for services occurring during the first calendar quarter of 2009 
(January-March 2009) will be August 1, 2009, and the submission 
deadline for the second calendar quarter of 2009 (April-June 2009) will 
be November 1, 2009.
     Submit data to the OPPS Clinical Warehouse using either 
the CMS Abstraction and Reporting Tool for Outpatient Department 
measures (CART-OPD) or the tool of a third-party vendor that meets the 
measure specification requirements for data transmission to QualityNet.
    Hospitals must submit quality data through the QualityNet Web site 
to the OPPS Clinical Warehouse; a CMS-designated contractor will submit 
OPPS Clinical Warehouse data to CMS. Under current implementation, OPPS 
Clinical Warehouse data are not considered QIO data. However, it is 
possible that the information in the OPPS Clinical Warehouse may at 
some point be considered QIO information. If this occurs, OPPS Clinical 
Warehouse data may become subject to the stringent QIO confidentiality 
regulations in 42 CFR part 480.
    Hospitals are to submit data under the HOP QDRP on outpatient 
episodes of care to which the required measures apply. For the purposes 
of the HOP QDRP, an outpatient episode of care is defined as care 
provided to a patient who has not been admitted as an inpatient but who 
is registered on the hospital's medical records as an outpatient and 
receives services (rather than supplies alone) directly from the 
hospital. Every effort will be made to assure that data elements common 
to both inpatient and outpatient settings are defined consistently 
(such as ``time of arrival'').
    To be accepted by the CMS designated contractor, submissions would, 
at a minimum, need to be timely, complete, and accurate. Data are 
considered to have been ``timely'' when data are submitted prior to the 
reporting deadline and have passed all CMS designated contractor edits. 
A ``complete'' submission is determined based on sampling criteria that 
will be published and maintained in the Specifications Manual to be 
found on the Web site at http://www.qualitynet.org, and must correspond 
to both the aggregate number of cases submitted by a hospital and the 
number of Medicare claims it submits for payment. To be considered 
``accurate,'' submissions must pass validation, if applicable.
     Submit the aggregate numbers of outpatient episodes of 
care which are eligible for submission under the HOP QDRP. These 
aggregated numbers of outpatient episodes would represent the number of 
outpatient episodes of care in the universe eligible for data reporting 
under the HOP QDRP. We plan to use the aggregate population and sample 
size data to assess data submission completeness and adherence to 
sampling requirements for Medicare and non-Medicare patients.

[[Page 41546]]

3. HOP QDRP Validation Requirements
a. Proposed Data Validation Requirements for CY 2010
    Validation, as discussed in the CY 2008 OPPS/ASC final rule with 
comment period (72 FR 66871), is intended to provide assurance of the 
accuracy of the hospital abstracted data. A data validation requirement 
was not implemented for purposes of the CY 2009 annual payment update. 
We are now proposing to implement validation requirements that will 
apply beginning with the CY 2010 payment determinations.
    Specifically, we propose to randomly select per year, 50 patient 
episodes of care that a hospital successfully submitted to the OPPS 
Clinical Warehouse for the relevant time period and validate those data 
by requesting that the hospital send the supporting medical record 
documentation that corresponds to each selected episode to a CMS 
contractor within 30 calendar days of the date of the request. The CMS 
contractor will then independently reabstract quality measure data 
elements from those records, compare the reabstracted data to the data 
originally submitted by the hospital, and provide feedback to each 
hospital on the results of the reabstraction.
    We propose to validate data reported beginning with January 2009 
episodes of care to be used toward CY 2010 payment determinations.
    Unlike the IPPS RHQDAPU program, where we validate data for each 
participating hospital each quarter (for a total of 20 cases per year), 
we are proposing not to validate data submitted by every hospital 
participating in the HOP QDRP every year. Instead, we are proposing to 
validate data from 800 randomly selected hospitals (approximately 20 
percent of all participating HOP QDRP hospitals) each year. In other 
words, only 800 participating HOP QDRP hospitals will have their data 
validated each year. However, we note that because the 800 hospitals 
will be selected randomly, every HOP QDRP participating hospital will 
be eligible each year for validation selection. We believe that the 
approach of validating a larger number of cases per hospital will 
produce a more reliable estimate of whether that hospital's data has 
been submitted accurately and will provide more reliable estimates of 
measure level data.
    For calculation of a hospital's validation score, we propose that 
percent agreement for each calculated clinical measure rather than for 
the individual data elements would be calculated. Due to the contingent 
nature of data elements comprising quality measures, a mismatch of a 
few data elements can result in the elimination of subsequent data 
elements from the data abstraction process. Thus, while the quality 
measure calculation can match, a low validation score based upon level 
of data element match can occur. Calculating match rates at the quality 
measure level obviates the issue of low validation scores at the data 
element level and also validates the data as they are publicly 
reported, that is, at the measure level.
    To receive the full OPPS payment rate update, the hospital must 
pass our validation requirement of a minimum of 80 percent reliability, 
based upon our validation process, for the designated time periods. In 
addition, an upper bound of 95 percent confidence interval to measure 
accuracy will be used.
    The methodology to be used for calculating the confidence intervals 
under the HOP QDRP will be the methodology currently utilized for the 
IPPS RHQDAPU program. We anticipate estimating the percent reliability 
based upon a review of submitted documentation and then calculating the 
upper 95 percent confidence limit for that estimate. If that upper 
limit is above the required 80 percent reliability threshold, we will 
consider the hospital's data ``validated'' for payment update purposes 
for CY 2010. We intend to use the design specific estimate of the 
variance for the confidence interval calculation, which, in this case, 
is a single stage cluster sample, with unequal cluster sizes. (For 
reference, see Cochran, William G. (1977) Sampling Techniques, John 
Wiley & Sons, New York, chapter 3, section 3.12.) Each sampled medical 
record is considered as a cluster for variance estimation purposes, as 
documentation and abstraction errors are believed to be clustered 
within specific medical records.
    We solicit comment on this validation methodology, and believe that 
this approach is a reliable process that is suitable for the HOP QDRP. 
We also note that we are considering whether to propose a similar 
approach for the RHQDAPU program in future years. CMS continues to 
study approaches to improve its quality data reporting program, and 
aligning the RHQDAPU program and HOP QDRP validation approaches in the 
future is one possible area of improvement.
b. Alternative Data Validation Approaches for CY 2011
    We are also soliciting comments on three alternative validation 
methodologies. We are considering whether we could apply one of these 
methodologies to validate data as part of our CY 2011 payment 
determination. The first alternative approach would be to validate data 
from all participating HOP QDRP hospitals, as is currently done under 
the RHQDAPU program. Under this approach, data validation would be done 
on a random sample of 5 records per quarter (20 records per year) per 
hospital.
    A second alternative approach would be to select targeted hospitals 
based on criteria designed to measure whether the data being reported 
by them raises a concern regarding their accuracy. We welcome 
suggestions for criteria to be used for targeting hospitals for 
validation. Either percent agreement at the clinical measure level or 
the data element level (currently used for the RHQDAPU program) could 
be calculated for the validation score. Because few data have been 
collected under the HOP QDRP at this point, we are considering this 
approach for possible use in future years.
    A third alternative approach would involve some combination of the 
two approaches discussed above.

F. Publication of HOP QDRP Data

    Section 1833(t)(17)(E) of the Act requires that the Secretary 
establish procedures to make data collected under this program 
available to the public and to report quality measures of process, 
structure, outcome, patients' perspectives of care, efficiency, and 
costs of care that relate to services furnished in outpatient settings 
in hospitals on the CMS Web site. We intend to make the information 
collected under the HOP QDRP public in CY 2010 by posting it on the CMS 
Web site. Participating hospitals will be granted the opportunity to 
review this information as we have recorded it before the information 
is published.
    CMS requires hospitals to sign and submit a Notice of Participation 
form in order to participate in the HOP QDRP. Hospitals signing this 
form agree that they will allow CMS to publicly report the quality 
measures as required by the HOP QDRP.
    All hospitals have a unique CCN, whereas a single hospital may have 
multiple National Provider Identifiers (NPI), another CMS identifier. 
We propose for CY 2010 that hospitals sharing the same CCN must combine 
data collection and submission across their multiple campuses for all 
clinical measures for public reporting purposes. We also propose to 
publish quality data by CCN under the HOP QDRP; however, we will note 
on our Web site where the publicly reported measures combine

[[Page 41547]]

results from two or more hospitals. This approach is consistent with 
the approach taken under the IPPS RHQDAPU program.

G. Proposed HOP QDRP Reconsideration and Appeals Procedures

    When the IPPS RHQDAPU program was initially implemented, it did not 
include a reconsideration submission process for hospitals. 
Subsequently, we received many requests for reconsideration of those 
payment decisions, and as a result established a process by which 
participating hospitals would submit requests for reconsideration. We 
anticipate similar concerns with the HOP QDRP and in the CY 2008 OPPS/
ASC final rule with comment period (72 FR 66875), we stated our intent 
to implement for the HOP QDRP a reconsideration process modeled after 
the reconsideration process we implemented for the IPPS RHQDAPU 
program. We are therefore proposing a mandatory reconsideration and 
appeals process that will apply to the CY 2010 payment decisions. In 
order to receive reconsideration of a CY 2010 payment decision, the 
hospitals must--
     Submit to CMS, via QualityNet, a Reconsideration Request 
form that will be made available on the QualityNet Web site. This form 
shall contain the following information:
    [cir] Hospital Medicare ID number known as the CCN.
    [cir] Hospital Name.
    [cir] CMS-identified reason for failure (as provided in any CMS 
notification of failure to the hospital).
    [cir] Hospital basis for requesting reconsideration. This must 
identify the hospital's specific reason(s) for believing it met the HOP 
QDRP program requirements and should receive a full annual payment 
update.
    [cir] CEO contact information, including name, e-mail address, 
telephone number, and mailing address (must include physical address, 
not just a post office box).
    [cir] A copy of all material that the hospital submitted to CMS in 
order to receive the full payment update for the year that is the 
subject of the reconsideration request. Such material would include, 
but not be limited to, the applicable Notice of Participation form, 
quality measure data that the hospital submitted, and data that the 
hospital submitted in response to a validation request.
    [cir] QualityNet System Administrator contact information, 
including name, e-mail address, telephone number, and mailing address 
(must include physical address, not just the post office box).
    [cir] The request must be signed by the hospital's CEO.
     Following receipt of a request for reconsideration, CMS 
will--
    [cir] Provide an e-mail acknowledgement, using the contact 
information provided in the reconsideration request, to the CEO and the 
QualityNet Administrator notifying them that the hospital's request has 
been received.
    [cir] Provide a formal response to the hospital CEO, using the 
contact information provided in the reconsideration request, notifying 
the hospital of the outcome of the reconsideration process.
    If a hospital is dissatisfied with the result of a HOP QDRP 
reconsideration decision, the hospital may file a claim under 42 CFR 
part 405, subpart R (PRRB) appeal.

H. Reporting of ASC Quality Data

    As discussed above, section 109(b) of the MIEA-TRHCA amended 
section 1833(i) of the Act by redesignating clause (iv) as clause (v), 
adding section 1833(i)(2)(D)(iv) to the Act, and adding section 
1833(i)(7) to the Act. These amendments authorize the Secretary to 
require ASCs to submit data on quality measures and to reduce the 
annual payment update in a year by 2.0 percentage points for ASCs that 
fail to do so. These provisions permit, but do not require, the 
Secretary to require ASCs to submit such data and to reduce any annual 
increase for non-compliant ASCs.
    In the CY 2008 OPPS/ASC final rule with comment period, we 
indicated that we intended to implement the provisions of section 
109(b) of the MIEA-TRHCA in a future rulemaking (72 FR 66875). While we 
believe that promoting high quality care in the ASC setting through 
quality reporting is highly desirable and fully in line with our 
efforts under other payment systems, we believed that the transition to 
the revised payment system in CY 2008 posed such a significant 
challenge to ASCs that it would be most appropriate to allow some 
experience with the revised payment system before introducing other new 
requirements. We believed that implementation of quality reporting in 
CY 2008 would require systems changes and other accommodations by ASCs, 
facilities which do not have prior experience with quality reporting as 
hospitals already have for inpatient quality measures, at a time when 
they are implementing a significantly revised payment system. We 
believed that our CY 2008 decision to implement quality reporting for 
HOPDs prior to establishing quality reporting for ASCs would allow time 
for ASCs to adjust to the changes in payment and case-mix that are 
anticipated under the revised payment system. We would also gain 
experience with quality measurement in the ambulatory setting in order 
to identify the most appropriate measures for quality reporting in ASCs 
prior to the introduction of the requirement in ASCs.
    We continue to believe that promoting high quality care in the ASC 
setting through quality reporting is highly desirable and fully in line 
with our efforts under other payment systems. However, we continue to 
have the concerns outlined above for CY 2009 and, therefore, we intend 
to implement the provisions of section 109(b) of the MIEA-TRHCA in a 
future rulemaking. We invite public comment on this deferral of quality 
data reporting for ASCs and invite suggestions for quality measures 
geared toward the services provided by ASCs. We also seek comment on 
potential reporting mechanisms for ASC quality data, including 
electronic submission of these data.

XVII. Healthcare-Associated Conditions

A. Background

    In its landmark 1999 report ``To Err is Human: Building a Safer 
Health System,'' the Institute of Medicine found that medical errors, 
particularly hospital-acquired conditions (referred to as HACs in the 
FY 2008 IPPS proposed and final rules and the FY 2009 IPPS proposed 
rule) caused by medical errors, are a leading cause of morbidity and 
mortality in the United States. The report noted that the number of 
Americans who die each year as a result of medical errors that occur in 
hospitals may be as high as 98,000. The cost burden of hospital-
acquired conditions is also high. Total national costs of these errors 
due to lost productivity, disability, and health care costs were 
estimated at $17 billion to $29 billion.\1\ In 2000, the CDC estimated 
that hospital-acquired infections added nearly $5 billion to U.S. 
health care costs every year.\2\ A 2007 study found that, in 2002, 1.7 
million hospital-acquired infections were associated

[[Page 41548]]

with 99,000 deaths.\3\ Research has also shown that hospitals are not 
following recommended guidelines to avoid preventable hospital-acquired 
infections. A 2007 Leapfrog Group survey of 1,256 hospitals found that 
87 percent of those hospitals do not follow recommendations to prevent 
many of the most common hospital-acquired infections.\4\
---------------------------------------------------------------------------

    \1\ Institute of Medicine: To Err Is Human: Building a Safer 
Health System, November 1999. Available at: http://www.iom.edu/Object.File/Master/4/117/ToErr-8pager.pdf.
    \2\ Centers for Disease Control and Prevention: Press Release, 
March 2000. Available at: http://www.cdc.gov/od/oc/media/pressrel/r2k0306b.htm.
    \3\ Klevens et al. Estimating Health Care-Associated Infections 
and Deaths in U.S. Hospitals, 2002. Public Health Reports. March-
April 2007. Volume 122.
    \4\ 2007 Leapfrog Group Hospital Survey. The Leapfrog Group 
2007. Available at: http://www.leapfroggroup.org/media/file/Leapfrog_hospital_acquired_infections_release.pdf.
---------------------------------------------------------------------------

    As one approach to combating hospital-acquired conditions in 2005 
Congress authorized CMS to adjust Medicare IPPS hospital payments to 
encourage the prevention of these conditions. Section 1886(d)(4)(D) of 
the Act (as added by section 5001(c) of the Deficit Reduction Act (DRA) 
of 2005, Pub. L. 109-171) required the Secretary to select by October 
1, 2007, at least two conditions that are: (1) High cost, high volume, 
or both; (2) assigned to a higher paying DRG when present as a 
secondary diagnosis; and (3) could reasonably have been prevented 
through the application of evidence-based guidelines. Beginning October 
1, 2008, Medicare cannot assign an inpatient discharge that includes 
the selected conditions to a higher-paying MS-DRG unless these 
conditions were present on admission. Beginning October 1, 2007, CMS 
required hospitals to begin submitting information on Medicare hospital 
claims specifying whether diagnoses were present on admission (POA). In 
the FY 2008 IPPS final rule with comment (72 FR 47202 through 47218), 
eight conditions were selected for the hospital-acquired conditions 
payment provision. In the FY 2009 IPPS proposed rule (73 FR 23547 
through 23562), 10 additional conditions are proposed for the hospital-
acquired conditions payment provision.
    The preventable hospital-acquired conditions payment provision at 
section 1886(d)(4)(D) of the Act is part of an array of Medicare value-
based purchasing (VBP) tools that CMS is using to promote increased 
quality and efficiency of care. Those tools include measuring 
performance, using payment incentives, publicly reporting performance 
results, applying national and local coverage policy decisions, 
enforcing conditions of participation, and providing direct support for 
providers through QIO activities. CMS' application of VBP tools through 
various initiatives is transforming Medicare from a passive payer to an 
active purchaser of higher-value health care services. CMS is applying 
these strategies across the continuum of care for Medicare 
beneficiaries.

B. Broadening the Concept of the IPPS Hospital-Acquired Conditions 
Payment Provision to the OPPS

    The principle of Medicare not paying more for the preventable 
hospital-acquired conditions during inpatient stays paid under the IPPS 
could be applied more broadly to other Medicare payment systems for 
conditions that occur or result from care in other settings. Other 
potential settings of care include HOPDs, ASCs, SNFs, home health care, 
end-stage renal disease (ESRD) facilities, and physicians' practices; 
therefore, we will refer to conditions that occur in settings other 
than the inpatient hospital setting as ``healthcare-associated 
conditions.'' The implementation would be different for each setting, 
as each Medicare payment system is different, and the reasonable 
preventability through the application of evidence-based guidelines 
would vary for candidate conditions across the various care settings. 
However, alignment of incentives across settings of care is an 
important goal for all of CMS' VBP initiatives, including the hospital-
acquired conditions payment provision.
    The risks of preventable medical errors leading to the occurrence 
of healthcare-associated conditions is likely high in the outpatient 
setting, given the substantially larger number of encounters and 
exposures that occur in those settings. For example, studies indicate 
that 400,000 preventable drug-related injuries occur each year in 
hospitals. Roughly 530,000 preventable drug-related injuries occur each 
year among Medicare beneficiaries in outpatient clinics.\5\ These 
statistics clearly point to the significant magnitude of the problem of 
healthcare-associated conditions in outpatient settings. Indeed, we 
would have no reason to believe that medical errors would be less 
common in the outpatient setting than the hospital inpatient setting 
and, as increasingly more health care services are delivered in 
outpatient settings, we would expect the occurrence of healthcare-
associated conditions stemming from outpatient care to grow directly as 
a result of this shift in sites of service.
---------------------------------------------------------------------------

    \5\ Asplen, P., Wolcott, J., Bootman, J.L., Cronenwett, L.R. 
(editors): Preventing Medication Errors: Quality Chasm Series, The 
National Academy Press, 2007. Available at: http://www.nap.edu/catalog.php?record_id=11623.
---------------------------------------------------------------------------

    The HOPD, where a broad array of services covered and paid under 
the OPPS are provided, could be another setting for Medicare to extend 
the concept of not paying more for preventable healthcare-associated 
conditions that occur as a result of care provided during an encounter. 
Hospitals provide a range of services under the OPPS that may overlap 
or precede the inpatient activities of the hospital, including many 
surgical procedures and diagnostic tests that are commonly performed on 
both hospital inpatients and outpatients. Similarly, individuals who 
are eventually admitted as hospital inpatients often initiate their 
hospital encounter in the HOPD, where they receive clinic or emergency 
department visits or observation care that precede their ultimate 
hospital admission. In addition, like the IPPS, under the authority of 
section 1833(t)(17) of the Act (as amended by section 109(a) of the 
MIEA-TRHCA), the OPPS is also subject to the ``pay-for-reporting'' 
provision that affects the hospital annual payment update. Under this 
authority, hospitals report quality data for specified performance 
measures related to hospital outpatient services under the HOP QDRP. 
Hospitals that fail to meet the reporting requirements established by 
CMS for the payment update year receive a reduced payment update that 
is applicable to OPPS payments for most services furnished by hospitals 
in outpatient settings in the succeeding year. The HOP QDRP is further 
discussed in section XVI. of this proposed rule.
    We note that we are not proposing new Medicare policy in this 
discussion of healthcare-associated conditions as they relate to the 
OPPS. Instead, we are seeking public comments on options and 
considerations, including statutory authority, related to extending the 
IPPS hospital-acquired conditions payment provision for hospitals to 
the OPPS. We understand that there would be challenges in expanding the 
IPPS provision to other settings paid under different Medicare payment 
systems, and we are seeking public comments that present ideas and 
models for extending the principle behind the IPPS provision to the 
OPPS. To stimulate reflection and creativity, we present discussion in 
the following areas:
     Criteria for possible candidate OPPS conditions
     Collaboration process
     Potential OPPS healthcare-associated conditions
     OPPS infrastructure and payment for encounters resulting 
in healthcare-associated conditions

[[Page 41549]]

1. Criteria for Possible Candidate OPPS Conditions
    We have applied the following statutory criteria to the analysis of 
candidate inpatient conditions for the IPPS hospital-acquired 
conditions payment provision:
     Cost or Volume--Medicare data must support that the 
selected inpatient conditions are high cost, high volume, or both.
     Complicating Conditions (CC) or Major Complication 
Conditions (MCC)--Selected inpatient conditions must be represented by 
ICD-9-CM diagnosis codes that clearly identify the condition, are 
designated as a CC or an MCC, and result in the assignment of the case 
to an MS-DRG that has a higher payment when the code is reported as a 
secondary diagnosis. That is, selected inpatient conditions must be a 
CC or an MCC that would, in the absence of this provision, result in 
assignment to a higher paying MS-DRG.
     Evidence-Based Guidelines--Selected inpatient conditions 
must be reasonably presentable through the application of evidence-
based guidelines. By reviewing guidelines developed by professional 
organizations, academic institutions, and other entities such as the 
Healthcare Infection Control Practices Advisory Committee (HICPAC), we 
evaluated whether guidelines are available that hospitals should follow 
to prevent the condition from occurring in the hospital.
     Reasonably Preventable--Selected inpatient conditions must 
be reasonably preventable through the application of evidence-based 
guidelines.
    We are seeking public comment on the applicability of these 
criteria to the selection of candidate healthcare-associated conditions 
for the OPPS. Specifically, we are interested in comments on the 
definition of reasonably preventable in the HOPD setting. Additionally, 
there are significant infrastructure differences between the IPPS and 
the OPPS (discussed further in section XVII.V.4. below). OPPS payment 
is determined by assignment of HCPCS codes for items and services to 
APCs that represent groups of services that share clinical and resource 
characteristics. APC assignments for related services are determined by 
the similarities between the clinical aspects of services and their 
hospital costs from claims data, rather than by patient-specific 
clinical parameters such as level of severity or comorbidities. In some 
cases, there are multiple related levels of APCs for specific types of 
services defined by distinct HCPCS codes (for examples, APCs 0203 
through 0207 for Levels I, II, III, and IV Nerve Injections) based on 
increasing hospital resource requirements, but, in other cases, there 
is only a single level APC to which all related HCPCS codes are 
assigned (for example, APC 0283 for Computed Tomography with Contrast). 
As explained below in more detail, under the OPPS--unlike the IPPS--
payment generally depends on the package of services provided rather 
than severity of illness. Thus, as higher severity of illness does not 
directly affect payment under the OPPS as it does under the IPPS, it is 
not as straightforward as not recognizing the healthcare-associated 
condition when determining how not to pay a hospital for its higher 
costs in the OPPS when a preventable adverse event occurs as a result 
of treatment. We are interested in public comments generally and 
specifically those that would help answer the following questions:
     Are there examples within the context of the reporting of 
ICD-9-CM codes for diagnoses and HCPCS codes for services on OPPS 
claims that could be used to identify where a higher payment for a 
hospital outpatient encounter would result from a medical error?
     Are there examples of evidence-based guidelines related to 
the prevention of high volume or high cost conditions, or both, that 
are sufficiently rigorous to permit selection of healthcare-associated 
conditions that could reasonably have been prevented in the HOPD 
setting?
     What other criteria should be considered in the selection 
of healthcare-associated conditions for the OPPS?
2. Collaboration Process
    CMS has worked with public health and infectious disease experts 
from the Centers for Disease Control and Prevention (CDC) to select 
hospital-acquired conditions, including infections, that meet the 
statutory criteria under section 1886(d)(4)(D) of the Act for 
application in the hospital inpatient setting. CMS and CDC have also 
collaborated to develop the process for submission of a present on 
admission (POA) indicator on the inpatient claim for each diagnosis. We 
would expect to continue our collaboration with CDC to examine the 
relevance and applicability of a POA indicator in the HOPD setting, and 
also to utilize their expertise in chronic diseases in the selection of 
candidate healthcare-associated conditions for the OPPS. In addition, 
we would expect to seek collaboration with the Agency for Healthcare 
Research and Quality (AHRQ) to utilize its expertise in patient safety. 
We would also expect to seek collaboration with other Federal agencies 
and with medical specialty societies. We are soliciting public comment 
regarding a collaborative process for the identification of candidate 
healthcare-associated conditions for hospital outpatient services and a 
mechanism for public input from stakeholders.
3. Potential OPPS Healthcare-Associated Conditions
    The FY 2008 IPPS final rule with comment period (72 FR 47202 
through 47218) provides a detailed analysis supporting the hospital-
acquired conditions selected for application under the IPPS for FY 
2008. We believe that only a small number of the hospital-acquired 
conditions adopted in the FY 2008 IPPS final rule with comment period 
could potentially be applicable to the OPPS. These include:
     Object left in during surgery;
     Air embolism;
     Blood incompatibility; and
     Falls and trauma fractures, dislocations, intracranial 
injuries, crushing injuries, and burns.
    The characteristics of these conditions are such that they would be 
relatively straightforward to incorporate in an OPPS healthcare-
associated conditions payment provision. For example, these events 
would likely occur and be coded in the timeframe of an OPPS encounter 
reported on a single claim and determination of the occurrence of these 
events would probably not require sequential evaluation of claims over 
time. We are seeking public comment on the potential for considering 
these conditions as healthcare-associated conditions for the HOPD. 
Also, we are soliciting public comment on which of the hospital-
acquired conditions proposed in the FY 2009 IPPS proposed rule (73 FR 
23554 through 23555) might be considered for the OPPS. For reasons 
cited above, we believe only a small number of the proposed conditions 
(for example, iatrogenic pneumothorax) might be considered for the 
OPPS.
    We understand that this short list of possible candidate conditions 
for the OPPS is weighted toward surgical procedures. However, surgical 
procedures account for a large proportion (about 33 percent) of total 
OPPS spending. Overall, surgical procedures, together with imaging, 
separately payable drugs, and clinic visits, account for approximately 
80 percent of OPPS spending.
    We acknowledge that reporting even this short list of healthcare-
associated

[[Page 41550]]

conditions as a secondary diagnosis on a claim in order to attribute 
their occurrence to the HOPD encounter might present problems for 
hospitals, particularly for the conditions resulting from trauma or 
falls. Consequently, we are also seeking comment on whether or not we 
could assume that these conditions reported as secondary diagnoses on 
OPPS claims would have developed during the encounter or whether the 
reporting of POA indicator information should be required under the 
OPPS (and perhaps under every Medicare payment system) because POA data 
increase the utility of claims for analyzing the characteristics of a 
clinical encounter. More generally, we recognize that patients may be 
cared for by different providers across settings and that the provider 
caring for certain types of complicating conditions may not have 
provided the health care services that led to the healthcare-associated 
condition. Therefore, we welcome broad public comment on the approaches 
and challenges related to the appropriate attribution of different 
types of healthcare-associated conditions encountered in the HOPD. 
Ultimately, payment policy for healthcare-associated conditions under 
the OPPS should fully address the broad range of clinical services in 
the HOPD where preventable healthcare-associated conditions may harm 
Medicare beneficiaries. Therefore, we are seeking public comment on 
additional candidate conditions that could have applicability to the 
OPPS, beyond those mentioned above that would be extensions from the 
IPPS final or proposed hospital-acquired conditions. We are 
particularly interested in recommendations of preventable healthcare-
associated conditions that are likely to occur with frequency in the 
HOPD (and other outpatient settings) and that may be associated with 
significant harm, such as adverse drug events related to medication 
errors or other complications of care for which we either currently 
have no diagnosis codes or where correct coding for such occurrences 
has not been clearly defined.
    The CDC has been interested in further developing and expanding 
strategies to improve the External Cause-of-Injury coding (E-codes). A 
recent CDC Workgroup report discussed the importance and value of using 
high-quality E-coding.\6\ Workgroup recommendations included enhancing 
the completeness and accuracy of E-coding and making E-coded data more 
useful for injury surveillance and prevention activities (including 
medical errors) at the local, State, and Federal levels. E-coding may 
represent a mechanism for coding clarity for preventable healthcare-
associated conditions such as adverse drug events related to medication 
errors. In addition, we are seeking public comment on how to account 
for patient-specific risk factors that increase the likelihood of the 
occurrence of healthcare-associated conditions.
---------------------------------------------------------------------------

    \6\ Centers for Disease Control and Prevention: Morbidity and 
Mortality Weekly Report, March 28, 2008, Vol. 57, No. RR-1. 
Available at: http://cdc.gov/mmwr/mmwr_rr.html.
---------------------------------------------------------------------------

4. OPPS Infrastructure and Payment for Encounters Resulting in 
Healthcare-Associated Conditions
    The OPPS infrastructure is a prospective payment system based on 
relative costs from hospital claims for services assigned to APC 
groups, where there is an individual payment rate that is specific to 
each APC. Each APC contains HCPCS codes for items or services that are 
clinically similar and that have comparable resource costs. In most 
cases, an APC payment is made for each unit of each separately payable 
HCPCS code through the code's assigned APC. For a single hospital 
outpatient clinical encounter in which a patient receives services 
described by several HCPCS codes with individual APC assignments (for 
example, emergency department visit, first hour of therapeutic 
intravenous infusion, chest x-ray, and electrocardiogram), the hospital 
would receive multiple APC payments for that encounter. This payment 
approach is altogether different from the MS-DRG-based IPPS, which 
groups the services provided to an inpatient into an assigned MS-DRG 
for which a single payment for the inpatient case is made. Under the 
MS-DRGs that took effect in FY 2008, there are currently 258 sets of 
MS-DRGs that are split into 2 or 3 subgroups based on the presence or 
absence of a CC or an MCC. (We refer readers to the FY 2008 IPPS final 
rule with comment period for a discussion of DRG reforms (72 FR 
47141).) Prior to the October 1, 2008, effective date of the IPPS 
hospital-acquired conditions payment provision, if a condition acquired 
during a hospital stay was one of the conditions on the CC or MCC list, 
the hospital received a higher payment under the MS-DRGs. Beginning 
October 1, 2008, Medicare can no longer assign an inpatient hospital 
discharge to a higher paying MS-DRG if a selected hospital-acquired 
condition was not present on admission and no other CC or MCC that is 
not on the list of hospital-acquired conditions is present. That is, 
the case will be paid as though the secondary diagnosis (selected 
hospital-acquired condition) was not present, unless a nonselected 
secondary diagnosis that is a CC or an MCC is also present. Medicare 
will continue to assign a discharge to a higher paying MS-DRG if the 
selected condition was present on admission.
    As discussed previously, the OPPS currently has neither the 
infrastructure to identify POA indicator data nor the ability to 
stratify by CC or MCC for differential payment under the present APC 
payment methodology. OPPS claims report an ``admitting diagnosis'' 
which identifies the reason for the encounter prior to the 
establishment of the principal diagnosis, but the admitting diagnosis 
cannot be presumed to be equivalent to a diagnosis that is present on 
admission as reported on an inpatient claim. As a consequence, initial 
application of a healthcare-associated conditions payment policy under 
the OPPS might be limited in its scope of conditions as discussed above 
and in its options for payment adjustment. We welcome public comment on 
how necessary a POA indicator would be for the candidate conditions we 
have identified for potential use in the OPPS setting, and on how the 
OPPS infrastructure could be modified to allow for the incorporation of 
any POA information.
    We also seek recommendations regarding how hospital payment for a 
clinical encounter (which could include multiple individual APC 
payments) could be adjusted to reflect a derivative payment reduction 
similar to the CC/MCC MS-DRG adjustment for hospital-acquired 
conditions under the IPPS. Without a POA and risk stratification 
infrastructure for the OPPS, one approach to limiting OPPS payment for 
healthcare-associated conditions in the short term could be to pay for 
all services provided in the encounter that led to the healthcare-
associated condition at the same reduced rate that would be paid to a 
hospital that failed to meet the quality reporting requirements. 
Currently, this would mean that the hospital payment for an encounter 
where a healthcare-associated condition resulted would be based on the 
OPPS conversion factor reduced by a 2 percentage point reduction to the 
market basket increase for the year. Alternatively, a flat case rate 
reduction percentage could be considered for all, or a subset, of 
services provided in the clinical encounter. This reduction could 
potentially be empirically derived from analyzing the costs of subsets 
of OPPS claims for Medicare beneficiaries with and without healthcare-
associated conditions, or could possibly be

[[Page 41551]]

developed through analysis of the IPPS payment relationship between MS-
DRGs with the presence or absence of a CC or an MCC. Any reduction in 
OPPS payment should also be applied to the 20-percent beneficiary 
copayment requirement for the OPPS so that the beneficiary's cost 
sharing (which is paid for each service furnished) would not rise as a 
proportion of the total Medicare payment when the payment would be 
reduced. In contrast to the payment limitation approach used for the 
IPPS, we recognize that neither of the possible payment limitation 
approaches discussed above would specifically target the separate OPPS 
payment for those additional hospital services provided as a result of 
the healthcare-associated condition (as opposed to the payment for the 
services that initially brought the beneficiary to the HOPD). We note 
that the current OPPS payment structure sets a single payment rate for 
a service based on the APC median cost from all claims for services 
assigned to the APC, including cases with healthcare-associated 
conditions as well as cases without healthcare-associated conditions. 
Therefore, we believe it could be appropriate to reduce the single OPPS 
payment through one of the general payment limitation approaches 
described above for the OPPS because any additional costs of encounters 
resulting in healthcare-associated conditions would already be included 
in the base OPPS payment rates for most OPPS services. We are seeking 
public comment on these possibilities or other ways to use or adapt the 
current OPPS infrastructure for purposes of implementing a healthcare-
associated conditions payment provision.
    A related application of the broad principle behind the IPPS 
hospital-acquired conditions payment provision could be accomplished 
through Medicare secondary payer policy by requiring the provider that 
failed to prevent the occurrence of a healthcare-associated condition 
in one setting to pay for all or part of the necessary followup care in 
a second setting. This would shield the Medicare program from paying 
for the downstream effects of a condition acquired in the first setting 
but treated in the second setting. This type of scenario would likely 
be common for certain healthcare-associated conditions related to HOPD 
care, given the relatively short lengths of stay for HOPD services. We 
are interested in public comments regarding this more general approach 
to extending beyond the inpatient setting the concept of not providing 
Medicare payment for healthcare-associated conditions, including the 
advantages and disadvantages of taking a payment system by payment 
system approach or of adopting the general principle of holding the 
provider that failed to prevent the occurrence of a condition in one 
setting responsible for payment of the followup care in any other 
setting.
    We emphasize that we are not proposing new Medicare policy in this 
discussion of extending the principle behind the IPPS hospital-acquired 
conditions payment provision to the OPPS. Rather, we are seeking public 
comment on this discussion of possible healthcare-associated conditions 
and the challenges associated with OPPS implementation of related 
payment policies. We look forward to continuing to work with 
stakeholders to improve the quality, safety, and value of health care. 
We view addressing the ongoing problem of preventable healthcare-
associated conditions in outpatient settings, including the HOPD, as a 
key VBP strategy to sharpen the focus on such improvements beyond 
hospital inpatient care to those settings where the majority of 
Medicare beneficiaries receive most of their health care services.

XVIII. Files Available to the Public Via the Internet

A. Information in Addenda Related to the Proposed CY 2009 Hospital OPPS

    Addenda A and B to this proposed rule provide various data 
pertaining to the proposed CY 2009 payment for items and services under 
the OPPS. Addendum A, which includes a list of all APCs proposed to be 
payable under the OPPS, and Addendum B, which includes a list of all 
active HCPCS codes and their proposed CY 2009 OPPS payment status, are 
available to the public by clicking ``Hospital Outpatient Regulations 
and Notices'' on the CMS Web site at: http://www.cms.hhs.gov/HospitalOutpatientPPS/.
    For the convenience of the public, we are also including on the CMS 
Web site a table that displays the HCPCS data in Addendum B sorted by 
proposed APC assignment, identified as Addendum C.
    Addendum D1 defines the proposed payment status indicators that are 
used in Addenda A and B. Addendum D2 defines the proposed comment 
indicators that are used in Addendum B. Addendum E lists the proposed 
HCPCS codes that would only be payable as inpatient procedures and 
would not be payable under the OPPS. Addendum L contains the proposed 
out-migration wage adjustment for CY 2009. Addendum M lists the 
proposed HCPCS codes that would be members of a composite APC and 
identifies the composite APC to which they would be assigned. This 
addendum also identifies the status indicator for the code and a 
comment indicator if there is a proposed change in the code's status 
with regard to its membership in the composite APC. Each of the 
proposed HCPCS codes included in Addendum M has a single procedure 
payment APC, listed in Addendum B, to which it would be assigned when 
the criteria for assignment to the composite APC are not met. When the 
criteria for payment of the code through the composite APC are met, one 
unit of the composite APC payment is paid, thereby providing packaged 
payment for all services that are assigned to the composite APC 
according to the specific I/OCE logic that applies to the APC. We refer 
readers to the discussion of composite APCs in section II.A.2.e. of 
this proposed rule for a complete description of the composite APCs.
    These addenda and other supporting OPPS data files are available on 
the CMS Web site at: http://www.cms.hhs.gov/HospitalOutpatientPPS/.

B. Information in Addenda Related to the Proposed CY 2009 ASC Payment 
System

    Addenda AA and BB to this proposed rule provide various data 
pertaining to the proposed CY 2009 payment for ASC covered surgical 
procedures and covered ancillary services for which ASCs may receive 
separate payment. Addendum AA lists the proposed ASC covered surgical 
procedures and the proposed CY 2009 ASC payment indicators and payment 
rates for each procedure. Addendum BB displays the proposed ASC covered 
ancillary services and their proposed CY 2009 payment indicators and 
payment rates. All proposed relative payment weights and payment rates 
for CY 2009 are a result of applying the revised ASC payment system 
methodology established in the final rule for the revised ASC payment 
system published in the Federal Register on August 2, 2007 (72 FR 42470 
through 42548) to the proposed CY 2009 OPPS and MPFS ratesetting 
information.
    Addendum DD1 defines the proposed payment indicators that are used 
in Addenda AA and BB. Addendum DD2 defines the proposed comment 
indicators that are used in Addenda AA and BB.
    Addendum EE (available only on the Internet) lists the surgical 
procedures that we are proposing to exclude from Medicare payment if 
furnished in ASCs. The excluded procedures listed in

[[Page 41552]]

Addendum EE are surgical procedures that would either be assigned to 
the OPPS inpatient list, would not be covered by Medicare, would be 
reported using a CPT unlisted code, or have been determined to pose a 
significant safety risk or are expected to require an overnight stay 
when performed in ASCs.
    These addenda and other supporting ASC data files are included on 
the CMS Web site at: http://www.cms.hhs.gov/ASCPayment/. The MPFS data 
files are located at: http://www.cms.hhs.gov/PhysicianFeeSched/.
    The links to all of the FY 2009 IPPS wage index related tables 
(that are proposed to be used for the CY 2009 OPPS) from the FY 2009 
IPPS proposed rule (73 FR 23723 through 23886) are accessible on the 
CMS Web site at: http://www.cms.hhs.gov/AcuteInpatientPPS/WIFN/list.asp#TopofPage.

XIX. Collection of Information Requirements

A. Legislative Requirement for Solicitation of Comments

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

B. Associated Information Collections Not Specified in Regulatory Text

    This proposed rule makes reference to one associated information 
collection, HOP QDRP, that is not presented in the regulatory text. The 
following is a discussion of this collection:
    Section 419.43(h) requires hospitals, in order to qualify for the 
full annual update, to submit quality data to CMS, as specified by CMS. 
In this proposed rule, we are proposing the specific requirements 
related to the data that must be submitted for the update for CY 2010. 
The burden associated with this section is the time and effort 
associated with collecting and submitting the data, completing 
participating forms and submitting charts for chart audit validation. 
We estimate that there will be approximately 3,500 respondents per 
year.
    For hospitals to collect and submit the information on the required 
measures, we estimate it will take 30 minutes per sampled case. 
Further, based on an estimated 10 percent sample size and estimated 
populations of 2.5 to 5 million outpatient visits per measure, we 
estimate a total of 1,800,000 cases per year. In addition, we estimate 
that completing participation forms will require approximately 4 hours 
per hospital per year. We expect the burden for all of these hospitals 
to total 914,000 hours per year.
    For CY 2010, our proposed validation process requires a random 
sample of 800 participating hospitals to submit 50 charts on an annual 
basis. The burden associated with this requirement is the time and 
effort associated with collecting, copying, and submitting these 
charts. It will take approximately 20 hours per hospital to submit the 
50 charts. There will be a total of approximately 40,000 charts (800 
hospitals x 50 charts per hospital) submitted by the hospitals to CMS 
for a total burden of 16,000 hours. Therefore, the total burden for all 
hospitals would be 930,000 hours per year.
    We have submitted a copy of this proposed rule to OMB for its 
review of the information collection requirements described above. 
These requirements are not effective until they have been approved by 
OMB.

C. Addresses for Submittal of Comments on ICRs

    If you comment on these information collection and recordkeeping 
requirements, please do either of the following:
    1. Submit your comments electronically as specified in the 
ADDRESSES section of this proposed rule; or
    2. Mail copies to the address specified in the ADDRESSES section of 
this proposed rule and to--Office of Information and Regulatory 
Affairs, Office of Management and Budget, Room 10235, New Executive 
Office Building, Washington, DC 20503, Attn: Carolyn L. Raffaelli, CMS 
Desk Officer, CMS-1390-P, e-mail: [email protected], 
Fax (202) 395-6974.

XX. Response to Comments

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

XXI. Regulatory Impact Analysis

A. Overall Impact

    We have examined the impacts of this proposed rule as required by 
Executive Order 12866 (September 1993, Regulatory Planning and Review), 
the Regulatory Flexibility Act (RFA) (September 19, 1980, Pub. L. 96-
354), section 1102(b) of the Social Security Act, the Unfunded Mandates 
Reform Act of 1995 (Pub. L. 104-4), Executive Order 13132 on 
Federalism, and the Congressional Review Act (5 U.S.C. 804(2)).
1. Executive Order 12866
    Executive Order 12866 (as amended by Executive Order 13258) directs 
agencies to assess all costs and benefits of available regulatory 
alternatives and, if regulation is necessary, to select regulatory 
approaches that maximize net benefits (including potential economic, 
environmental, public health and safety effects, distributive impacts, 
and equity). A regulatory impact analysis (RIA) must be prepared for 
major rules with economically significant effects ($100 million or more 
in any 1 year).
    We estimate that the effects of the OPPS provisions that would be 
implemented by this proposed rule would result in expenditures 
exceeding $100 million in any 1 year. We estimate the total increase 
(from proposed changes in this proposed rule as well as enrollment, 
utilization, and case-mix changes) in expenditures under the OPPS for 
CY 2009 compared to CY 2008 to be approximately $1.8 billion.
    We estimate that the proposed update to the ASC payment system for 
CY 2009 (such as adding nine procedures to the ASC list of covered 
surgical procedures and designating five additional procedures as 
office-based) would have no net effect on Medicare expenditures in CY 
2009 compared to the level of expenditures in CY 2008. A more detailed 
discussion of the effects of the proposed changes to the ASC payment 
system for CY 2009 is provided in section XXI.C. of this proposed rule.

[[Page 41553]]

    We estimate that this proposed rulemaking is ``economically 
significant'' as measured by the $100 million threshold, and hence also 
a major rule under the Congressional Review Act. Accordingly, we have 
prepared an initial Regulatory Impact Analysis that, to the best of our 
ability, presents the costs and benefits of the rulemaking.
2. Regulatory Flexibility Act (RFA)
    The RFA requires agencies to analyze options for regulatory relief 
of small businesses if a rule has a significant impact on a substantial 
number of small entities. For purposes of the RFA, small entities 
include small businesses, nonprofit organizations, and small 
governmental jurisdictions. Most hospitals, other providers, ASCs, and 
other suppliers are considered to be small entities, either by being 
nonprofit organizations or by meeting the Small Business Administration 
(SBA) definition of a small business (having revenues of $31.5 million 
or less in any 1 year). (For details on the latest standards for health 
care providers, we refer readers the SBA's Web site at: http://sba.gov/idc/groups/public/documents/sba_homepage/serv_sstd_tablepdf.pdf 
(refer to the 620000 series).
    For purposes of the RFA, we have determined that most hospitals and 
most ASCs would be considered small entities according to the SBA size 
standards. Individuals and States are not included in the definition of 
a small entity. Therefore, the Secretary has determined that this 
proposed rule would have a significant impact on a substantial number 
of small entities.
3. Small Rural Hospitals
    In addition, section 1102(b) of the Act requires us to prepare a 
regulatory impact analysis if a rule may have a significant impact on 
the operations of a substantial number of small rural hospitals. This 
analysis must conform to the provisions of section 603 of the RFA. With 
the exception of hospitals located in certain New England counties, for 
purposes of section 1102(b) of the Act, we now define a small rural 
hospital as a hospital that is located outside of an urban area and has 
fewer than 100 beds. Section 601(g) of the Social Security Amendments 
of 1983 (Pub. L. 98-21) designated hospitals in certain New England 
counties as belonging to the adjacent urban areas. Thus, for OPPS 
purposes of this proposed rule, we continue to classify these hospitals 
as urban hospitals. We believe that the proposed changes to the OPPS in 
this proposed rule would affect both a substantial number of rural 
hospitals as well as other classes of hospitals and that the effects on 
some may be significant. The proposed changes to the ASC payment system 
for CY 2009 would have no effect on small rural hospitals.
    Therefore, the Secretary has determined that this proposed rule 
would have a significant impact on the operations of a substantial 
number of small rural hospitals.
4. Unfunded Mandates
    Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) also 
requires that agencies assess anticipated costs and benefits before 
issuing any rule whose mandates require spending in any 1 year of $100 
million in 1995 dollars, updated annually for inflation. That threshold 
level is currently approximately $130 million. This proposed rule will 
not mandate any requirements for State, local, or tribal government, 
nor will it affect private sector costs.
5. Federalism
    Executive Order 13132 establishes certain requirements that an 
agency must meet when it promulgates a proposed rule (and subsequent 
final rule) that imposes substantial direct costs on State and local 
governments, preempts State law, or otherwise has Federalism 
implications.
    We have examined the OPPS and ASC proposed provisions included in 
this proposed rule in accordance with Executive Order 13132, 
Federalism, and have determined that they would not have a substantial 
direct effect on State, local or tribal governments, preempt State law, 
or otherwise have a Federalism implication. As reflected in Table 45 
below, we estimate that OPPS payments to governmental hospitals 
(including State and local governmental hospitals) would increase by 
3.9 percent under this proposed rule. The proposed provisions related 
to payments to ASCs in CY 2009 would not affect payments to 
governmental hospitals.

B. Effects of OPPS Changes in This Proposed Rule

    We are proposing to make several changes to the OPPS that are 
required by the statute. We are required under section 
1833(t)(3)(C)(ii) of the Act to update annually the conversion factor 
used to determine the APC payment rates. We are also required under 
section 1833(t)(9)(A) of the Act to revise, not less often than 
annually, the wage index and other adjustments. In addition, we must 
review the clinical integrity of payment groups and weights at least 
annually. Accordingly, in this proposed rule, we are proposing to 
update the conversion factor and the wage index adjustment for hospital 
outpatient services furnished beginning January 1, 2009, as we discuss 
in sections II.B. and II.C., respectively, of this proposed rule. We 
also are proposing to revise the relative APC payment weights using 
claims data from January 1, 2007 through December 31, 2007 and updated 
cost report information. We are proposing to continue the payment 
adjustment for rural SCHs, including EACHs. We are proposing to remove 
two device categories, HCPCS code C1821 (Interspinous process 
distraction device (implantable)) and HCPCS code L8690 (Auditory 
osseointegrated device, includes all internal and external components), 
from pass-through payment status in CY 2009. Finally, we list the 15 
drugs and biologicals in Table 20 of this proposed rule that we are 
proposing to remove from pass-through payment status for CY 2009.
    Under this proposed rule, the proposed update change to the 
conversion factor as provided by statute would increase total OPPS 
payments by 3.0 percent in CY 2009. The proposed changes to the APC 
weights, the proposed changes to the wage indices, and the proposed 
continuation of a payment adjustment for rural SCHs, including EACHs, 
would not increase OPPS payments because these proposed changes to the 
OPPS are budget neutral. However, these proposed updates do change the 
distribution of payments within the budget neutral system as shown in 
Table 45 below and described in more detail in this section.
1. Alternatives Considered
    Alternatives to the changes we are proposing to make and the 
reasons that we have chosen the options are discussed throughout this 
proposed rule. Some of the major issues discussed in this proposed rule 
and the options considered are discussed below.
a. Alternatives Considered for Payment of Multiple Imaging Procedures
    We are proposing to revise our payment methodology for multiple 
imaging procedures performed during a single session using the same 
imaging modality by applying a composite APC payment methodology in CY 
2009. We would provide one composite APC payment each time a hospital 
bills for second and subsequent procedures described by the HCPCS codes 
in one imaging family on a single date of service. As discussed in 
detail in section II.A.2.e.(5) of this proposed rule, we are

[[Page 41554]]

proposing to utilize three imaging families of HCPCS codes based on 
imaging modality for purposes of this methodology (that is, Ultrasound, 
CT and CTA, and MRI and MRA). The proposed composite APC methodology 
for multiple imaging services would result in the creation of the 
following five new APCs due to the statutory requirement that we 
differentiate payment for OPPS imaging services provided with and 
without contrast: APC 8004 (Ultrasound Composite); APC 8005 (CT and CTA 
without Contrast Composite); APC 8006 (CT and CTA with Contrast 
Composite); APC 8007 (MRI and MRA without Contrast Composite); and APC 
8008 (MRI and MRA with Contrast Composite).
    We considered three alternative CY 2009 payment options for imaging 
services under the OPPS. The first alternative we considered was to 
make no change to the current payment policy of providing hospitals a 
full APC payment for each imaging service on a claim, regardless of how 
many procedures are performed during a single session using the same 
imaging modality or whether the procedures are performed on contiguous 
body areas. We did not choose this alternative because we believe that 
continuing the current payment methodology would neither reflect nor 
promote the efficiencies hospitals can achieve when they perform 
multiple imaging procedures during a single session, as demonstrated in 
CY 2007 claims data and discussed in section II.A.2.e.(5) of this 
proposed rule.
    The second alternative we considered was to utilize the 11 families 
of imaging HCPCS codes applicable under the MPFS multiple imaging 
discount policy, distinct groups of codes which are based on imaging 
modality and contiguous body area, in the development of the multiple 
imaging composite APCs. We did not choose this alternative because, as 
we discuss in section II.A.2.e.(5) of this proposed rule, we believe 
that the large number of smaller MPFS families are neither appropriate 
nor necessary for the OPPS. These groups do not correspond to the 
larger APC groups of services paid under the OPPS in contrast to the 
service-specific payment under the MPFS, and would not reflect all 
efficiencies that may typically be gained in a single imaging session 
in the hospital outpatient setting of care.
    The third alternative we considered and are proposing for CY 2009 
is to develop the multiple imaging composite APCs by collapsing the 11 
MPFS imaging families into 3 imaging families based solely on imaging 
modality. We chose this alternative because we believe that the 
contiguous body area concept that is central to the MPFS imaging 
families is not necessary to capture potential efficiencies in a 
hospital outpatient imaging session. As discussed in section 
II.A.2.e.(5) of this proposed rule, we would not expect second and 
subsequent imaging services of the same modality involving 
noncontiguous body areas to require certain duplicate facility 
services. We believe that collapsing the 11 MPFS imaging families into 
3 groups for purposes of the OPPS multiple imaging composite payment 
methodology most accurately reflects how these services are provided in 
the hospital outpatient setting of care and would most effectively 
encourage hospital efficiencies that could be achieved when multiple 
imaging procedures are performed during a single session. We also 
believe that deriving the proposed multiple imaging composite APCs from 
3 collapsed imaging families, rather than the 11 MPFS imaging families, 
would enable us to maximize the use of multiple imaging claims for 
ratesetting.
b. Alternatives Considered for the Proposed HOP QDRP Requirements for 
the CY 2009 Payment Update
    As discussed in section XVI.D.2. of this proposed rule, we are 
proposing to implement the payment provisions of section 109 of the 
MIEA-TRHCA, which amended section 1833(t) of the Act by adding a new 
subsection (17). In summary, new section 1833(t)(17)(A) of the Act 
requires that certain hospitals that fail to meet the HOP QDRP 
reporting requirements incur a 2.0 percentage point reduction to their 
OPD fee schedule increase factor, that is, the market basket update. 
The application of a reduced OPD fee schedule increase factor results 
in reduced national unadjusted payment rates that will apply to certain 
outpatient items and services performed by hospitals that are required 
to report outpatient quality data and that fail to meet the HOP QDRP 
requirements.
    As described in detail in section XVI.D.2. of this proposed rule, 
we are proposing that, effective for services paid under the CY 2009 
OPPS, we would calculate two conversion factors: A full market basket 
conversion factor (that is, the full CF) and a reduced market basket 
conversion factor (that is, the reduced CF). Therefore, we are 
proposing to calculate a ``reporting ratio'' which would apply to 
payment for hospitals that fail to meet their reporting requirements, 
by dividing the reduced CF by the full CF.
    Under the OPPS, we have two levels of Medicare beneficiary 
copayment for many separately paid services: The minimum unadjusted 
copayment and the national unadjusted copayment. The minimum unadjusted 
copayment is always 20 percent of the unadjusted national payment rate 
for each separately payable service. The national unadjusted copayment 
is determined based on the historic coinsurance rate for the services 
assigned to the APC. We considered two alternative policy options for 
the copayment calculation methodology for those hospitals that fail to 
meet the HOP QDRP requirements.
    The first alternative we considered was to calculate the national 
unadjusted copayments and the minimum unadjusted copayments based on 
the reduced national unadjusted payment amounts, using our standard 
copayment methodology. We found that in many cases the beneficiary 
copayment amount would remain the same as calculated based on the full 
national unadjusted payment rates, although the total reduced national 
unadjusted payment rate would decline because of the reduction to the 
conversion factor. Therefore, in these cases, the ratio of the 
copayment to the total payment (the coinsurance percentage) would 
increase rather than decrease if we were to calculate copayments based 
on the reduced national unadjusted payment rates. We did not choose 
this option because we believe that the increased coinsurance 
percentage that results from this methodology is contradictory to the 
intent of the statute that the coinsurance percentage should never 
increase and is also contradictory to our copayment rules that are 
intended to gradually reduce the percentage of the payment attributed 
to copayments until the copayment is equal to the minimum unadjusted 
copayment for all services.
    The second alternative we considered and are proposing is to apply 
the reporting ratio noted above to both the national unadjusted 
copayment and the minimum unadjusted copayment that would apply to each 
APC for hospitals that receive the reduced CY 2009 OPPS payment update. 
Beneficiaries and secondary payers would thereby not pay a higher 
coinsurance rate and would share in the reduction of payments to these 
hospitals. We believe that this alternative would allow us to 
appropriately set the national unadjusted copayments for the reduced 
OPPS national unadjusted payment rates and is most consistent with the 
eventual establishment of 20 percent of the payment rate as the uniform 
coinsurance percentage for all services under the OPPS.

[[Page 41555]]

c. Alternatives Considered Regarding OPPS Cost Estimation for Relative 
Payment Weights
    Since the implementation of the OPPS, some commenters have raised 
concerns about potential bias in the OPPS cost-based weights due to 
``charge compression,'' which is the practice of applying a lower 
charge markup to higher-cost services and a higher charge markup to 
lower-cost services. To explore this issue, in August 2006 we awarded a 
contract to RTI to study the effects of charge compression in 
calculating the IPPS relative weights, particularly with regard to the 
impact on inpatient DRG payments, and to consider methods to reduce the 
variation in the CCRs used to calculate costs for the IPPS relative 
weights across services within cost centers. Of specific note was 
analysis of a regression-based methodology estimating an average 
adjustment for CCRs by type of revenue code from an observed 
relationship between provider cost center CCRs and proportional billing 
of high and low cost services in the cost center. In August 2007, we 
expanded the RTI contract to determine whether the findings of the 
report were also applicable to the payment weights established under 
the OPPS and to more systematically explore cost estimation issues 
specific to the OPPS, including the revenue code-to-cost center 
crosswalk. We refer readers to section II.A.1.c. of this proposed rule 
for discussion of the issues and http://www.rti.org for the RTI 
findings and recommendations. The final RTI report describing its 
research findings was made available at about the time of the release 
of this proposed rule in July 2008. In this report, RTI made a number 
of recommendations for achieving more accurate estimates of cost for 
services paid under both the IPPS and the OPPS. This report also 
distinguished between two types of research findings and 
recommendations, that is, those pertaining to the accounting or cost 
report data itself and those related to statistical regression 
analysis. RTI made 11 recommendations to improve IPPS and OPPS cost 
estimation, including both short- and long-term accounting changes, and 
short-term regression-based and other statistical adjustments. For a 
detailed discussion of the RTI recommendations from the July 2008 
report, we refer readers to section II.A.1.c. of this proposed rule.
    With respect to adopting the RTI recommendations, we considered 
three alternatives. The first alternative we considered was to propose 
no changes in response to the RTI findings and to accept none of the 
recommendations regarding cost estimation. We did not choose this 
alternative because we agree with RTI's findings that there are likely 
misassigned costs in the cost reports that could adversely affect the 
OPPS relative weights and that charge compression influences the OPPS 
payment weights.
    The second alternative we considered was to accept all of the RTI 
recommendations. We did not choose this alternative because of the 
magnitude and scope of impact on APC relative weights that would result 
from adopting all accounting and statistical changes in cost estimation 
that were recommended. Further, the numerous and substantial changes 
that RTI recommended have significantly complex interactions with one 
another and we believe that we should proceed cautiously in considering 
their adoption. In a budget neutral payment system, increases in 
payment for some services always result in reductions to payment for 
other services. We believe that any potential accounting and 
statistical changes in cost estimation are likely to result in 
significant shifts in payment within hospital departments and between 
hospitals and should be thoroughly assessed before we decide whether to 
propose changes beyond those we are proposing for CY 2009 as discussed 
below.
    The third alternative we considered and the one we are proposing in 
this OPPS rule is to break the single standard cost center 5600 into 
two proposed new standard cost centers: Drugs with High Overhead Cost 
Charged to Patients and Drugs with Low Overhead Cost Charged to 
Patients, to reduce the reallocation of pharmacy overhead cost from 
expensive to inexpensive drugs and biologicals when setting an 
equivalent average ASP-based payment amount in the future. This 
proposal is consistent with RTI's recommendation for creating a new 
cost center whose CCR would be used to adjust charges to costs for 
drugs requiring detail coding. We refer readers to section V.B.3. of 
this proposed rule for the discussion of the creation of the two 
proposed new cost centers and the potential approaches to 
distinguishing between the two groups of drugs and biologicals. We note 
that we made a similar proposal for the Medical Supplies Charged to 
Patients cost center in the FY 2009 IPPS proposed rule (73 FR 23546). 
We are proposing this alternative because we believe that it would lead 
to more accurate cost estimation for drugs and biologicals and their 
associated pharmacy overhead costs in a manner that is consistent with 
our current methodology for estimating costs under both the IPPS and 
the OPPS. The nature of cost report timing and changes in reporting 
charges would phase in the resulting changes to payment rates in such a 
way that the impact would be moderated compared to the effect of 
applying the regression adjustments to the current claims data. 
Therefore, this approach would ultimately provide more accurate payment 
for drugs and biologicals based on the costs of hospitals as reported 
to us and would also not introduce a high level of instability in the 
OPPS payment rates. Moreover, we would be able to complete a full 
assessment of the potential impact of all of the cost estimation 
changes recommended by RTI and to consider and analyze public comments 
on the numerous other recommendations before deciding whether or not to 
propose any of the other recommendations of the RTI study.
2. Limitations of Our Analysis
    The distributional impacts presented here are the projected effects 
of the proposed CY 2009 policy changes on various hospital groups. We 
post our hospital-specific estimated payments for CY 2009 with the 
other supporting documentation for this proposed rule. To view the 
hospital-specific estimates, we refer readers to the CMS Web site at: 
http://www.cms.hhs.gov/HospitalOutpatientPPS/. Select ``regulations and 
notices'' from the left side of the page and then select ``CMS-1404-P'' 
from the list of regulations and notices. The hospital-specific file 
layout and the hospital-specific file are listed with the other 
supporting documentation for this proposed rule. We show hospital-
specific data only for hospitals whose claims were used for modeling 
the impacts shown in Table 45 below. We do not show proposed hospital-
specific impacts for hospitals whose claims we were unable to use. We 
refer readers to section II.A.2. of this proposed rule for a discussion 
of the hospitals whose claims we do not use for ratesetting and impact 
purposes.
    We estimate the effects of the proposed individual policy changes 
by estimating payments per service, while holding all other payment 
policies constant. We use the best data available but do not attempt to 
predict behavioral responses to our proposed policy changes. In 
addition, we do not make adjustments for future changes in variables 
such as service volume, service-mix, or number of encounters. As we 
have done in previous rules, we are soliciting public comment and 
information about the anticipated effect

[[Page 41556]]

of the proposed changes on hospitals and our methodology for estimating 
them.
3. Estimated Effects of This Proposed Rule on Hospitals
    Table 45 below shows the estimated impact of this proposed rule on 
hospitals. Historically, the first line of the impact table, which 
estimates the proposed change in payments to all hospitals, has always 
included cancer and children's hospitals, which are held harmless to 
their pre-BBA payment to cost ratio. We are also including CMHCs in the 
first line that includes all providers because we included CMHCs in our 
weight scaler estimate. We typically do not report a separate impact 
for CMHCs because they are paid for only one service, PHP, under the 
OPPS, and each CMHC can typically easily estimate the impact of the 
proposed changes by referencing payment for PHP services in Addendum A. 
Because we are proposing a CY 2009 policy change to PHP payment that is 
more complicated than a simple change in the payment rate, this year we 
present separate impacts for CMHCs in Table 45 and discuss the impact 
on CMHCs in section XXI.B.4. below.
    The estimated increase in the total payments made under the OPPS is 
limited by the increase to the conversion factor set under the 
methodology in the statute. The distributional impacts presented do not 
include assumptions about changes in volume and service-mix. The 
enactment of Pub. L. 108-173 on December 8, 2003 provided for the 
additional payment outside of the budget neutrality requirement for 
wage indices for specific hospitals reclassified under section 508. The 
MMSEA extended section 508 reclassifications through September 30, 
2008. The amounts attributable to this reclassification are 
incorporated into the CY 2008 estimates but because section 508 expires 
in 2008, no additional payments under section 508 are considered for CY 
2009 in this impact analysis.
    Table 45 shows the estimated redistribution of hospital and CMHC 
payments among providers as a result of proposed APC reconfiguration 
and recalibration; wage indices; the combined impact of the APC 
recalibration, wage effects, and the market basket update to the 
conversion factor; and, finally, estimated redistribution considering 
all proposed payments for CY 2009 relative to all payments for CY 2008, 
including the impact of changes in the outlier threshold and changes to 
the pass-through estimate. We did not model a budget neutrality 
adjustment for the rural adjustment for SCHs, including EACHs, because 
we are not proposing any changes to the policy for CY 2009. Because 
updates to the conversion factor, including the update of the market 
basket and the addition of money not dedicated to pass-through payment 
for CY 2009, are applied uniformly across services, observed 
redistributions of payments in the impact table for hospitals largely 
depend on the mix of services furnished by a hospital (for example, how 
the APCs for the hospital's most frequently furnished services would 
change), and the impact of the wage index changes on the hospital. 
However, total payments made under this system and the extent to which 
this proposed rule would redistribute money during implementation also 
would depend on changes in volume, practice patterns, and the mix of 
services billed between CY 2008 and CY 2009, which CMS cannot forecast.
    Overall, the proposed OPPS rates for CY 2009 would have a positive 
effect for providers paid under the OPPS, resulting in a 3.2 percent 
increase in Medicare payments. Removing cancer and children's hospitals 
because their payments are held harmless to the pre-BBA ratio between 
payment and cost, and CMHCs, suggests that proposed changes would 
result in a 3.6 percent increase in Medicare payments to all other 
hospitals, exclusive of transitional pass-through payments.
    To illustrate the impact of the proposed CY 2009 changes, our 
analysis begins with a baseline simulation model that uses the final CY 
2008 weights, the FY 2008 final post-reclassification IPPS wage 
indices, and the final CY 2008 conversion factor. Column 2 in Table 45 
shows the independent effect of proposed changes resulting from the 
reclassification of services among APC groups and the proposed 
recalibration of APC weights, based on 12 months of CY 2007 hospital 
OPPS claims data and more recent cost report data. We modeled the 
effect of proposed APC recalibration changes for CY 2009 by varying 
only the weights (the final CY 2008 weights versus the estimated 
proposed CY 2009 weights) and calculating the percent difference in 
payments. Column 2 also reflects the effect of proposed changes 
resulting from the APC reclassification and recalibration changes and 
any changes in multiple procedure discount patterns that occur as a 
result of the changes in the relative magnitude of proposed payment 
weights.
    Column 3 reflects the independent effects of updated wage indices, 
including proposed application of budget neutrality for the rural floor 
policy on a statewide basis. While we have included changes to the 
rural adjustment in this column in the past, we did not model a budget 
neutrality adjustment for the rural adjustment for SCHs, including 
EACHs, because we are proposing no changes to the policy for CY 2009. 
We modeled the independent effect of updating the wage index and the 
rural adjustment by varying only the wage index, using the proposed CY 
2009 scaled weights and a CY 2008 conversion factor that included a 
budget neutrality adjustment for changes in wage effects and the rural 
adjustment between CY 2008 and CY 2009.
    Column 4 demonstrates the combined ``budget neutral'' impact of APC 
recalibration (that is, Column 2), the wage index update (that is, 
Column 3), as well as the impact of updating the conversion factor with 
the market basket update. We modeled the independent effect of the 
budget neutrality adjustments and the market basket update by using the 
weights and wage indices for each year, and using a CY 2008 conversion 
factor that included the market basket update and budget neutrality 
adjustments for differences in wages.
    Finally, Column 5 depicts the full impact of the CY 2009 proposed 
policies on each hospital group by including the effect of all the 
proposed changes for CY 2009 (including the APC reconfiguration and 
recalibration shown in Column 2) and comparing them to all estimated 
payments in CY 2008, including changes to the wage index under section 
508 of Pub. L. 108-173 as extended by the MMSEA. Column 5 shows the 
combined budget neutral effects of Columns 2 through 4, plus the impact 
of the proposed change to the fixed outlier threshold from $1,575 to 
$1,800; the impact of expiring section 508 reclassification wage index 
increases; and the impact of reducing the estimate of the percentage of 
total OPPS payments dedicated to transitional pass-through payments. We 
estimate that these proposed cumulative changes would increase payments 
to all providers by 3.2 percent for CY 2009. We modeled the independent 
effect of all proposed changes in Column 5 using the final weights for 
CY 2008 and the proposed weights for CY 2009. We used the final 
conversion factor for CY 2008 of $63.694 and the proposed CY 2009 
conversion factor of $65.684. Column 5 also contains simulated outlier 
payments for each year. We used the charge inflation factor used in the 
FY 2009 IPPS proposed rule of 5.84 percent (1.0585) to increase 
individual costs on

[[Page 41557]]

the CY 2007 claims to reflect CY 2008 dollars, and we used the most 
recent overall CCR in the April 2008 Outpatient Provider-Specific File. 
Using the CY 2007 claims and a 5.84 percent charge inflation factor, we 
currently estimate that outlier payments for CY 2008, using a multiple 
threshold of 1.75 and a fixed-dollar threshold of $1,575, would be 
approximately 0.76 percent of total payments. Outlier payments of 0.76 
percent appear in the CY 2008 comparison in Column 5. We used the same 
set of claims and a charge inflation factor of 12.04 percent (1.1204) 
and the CCRs in the April 2008 Outpatient Provider-Specific File, with 
an adjustment of 0.9920 to reflect relative changes in cost and charge 
inflation between CY 2007 and CY 2009, to model the proposed CY 2009 
outliers at 1.0 percent of total payments using a multiple threshold of 
1.75 and a fixed-dollar threshold of $1,800.

Column 1: Total Number of Hospitals

    The first line in Column 1 in Table 45 shows the total number of 
providers (4,181), including cancer and children's hospitals and CMHCs 
for which we were able to use CY 2007 hospital outpatient claims to 
model CY 2008 and CY 2009 payments by classes of hospitals. We excluded 
all hospitals for which we could not accurately estimate CY 2008 or CY 
2009 payment and entities that are not paid under the OPPS. The latter 
entities include CAHs, all-inclusive hospitals, and hospitals located 
in Guam, the U.S. Virgin Islands, Northern Mariana Islands, American 
Samoa, and the State of Maryland. This process is discussed in greater 
detail in section II.A. of this proposed rule. At this time, we are 
unable to calculate a disproportionate share (DSH) variable for 
hospitals not participating in the IPPS. Hospitals for which we do not 
have a DSH variable are grouped separately and generally include 
psychiatric hospitals, rehabilitation hospitals, and LTCHs. We show the 
total number (3,902) of OPPS hospitals, excluding the hold-harmless 
cancer and children's hospitals, and CMHCs, on the second line of the 
table. We excluded cancer and children's hospitals because section 
1833(t)(7)(D) of the Act permanently holds harmless cancer hospitals 
and children's hospitals to a proportion of their pre-BBA payment 
relative to their pre-BBA costs and, therefore, we removed them from 
our impact analyses. We show the isolated impact on 218 CMHCs in the 
last row of the impact table and discuss that impact separately below.

Column 2: APC Changes Due to Reassignment and Recalibration

    This column shows the combined effects of proposed reconfiguration, 
recalibration, and other policies (such as composite payment for 
multiple imaging procedures performed on the same day, payment for 
drugs at ASP+4 percent, and changes in payment for PHP services). In 
many cases, the redistribution created by the reduction in the PHP 
payment offsets other recalibration losses. Specifically, the reduction 
in PHP payment is redistributed to hospitals and reflected in the 0.4 
percent increase for the 3,902 hospitals that remain after excluding 
hospitals held harmless and CMHCs. Overall, these proposed changes 
would increase payments to urban hospitals by 0.4 percent. We estimate 
that large urban hospitals would see an increase of 0.4 percent and 
other urban hospitals would see a 0.5 percent increase in payments, all 
attributable to recalibration.
    Overall, rural hospitals would show a 0.5 percent increase as a 
result of proposed changes to the APC structure. With the money 
redistributed from PHP services, rural hospitals of all bed sizes would 
experience no change or would experience increases ranging from 0.4 to 
0.7 percent.
    Among teaching hospitals, the largest observed impacts resulting 
from APC recalibration include an increase of 0.6 percent for major 
teaching hospitals and an increase of 0.4 percent for minor teaching 
hospitals.
    Classifying hospitals by type of ownership suggests that 
proprietary hospitals would see an increase of 0.3 percent, 
governmental hospitals would see an increase of 0.4 percent, and 
voluntary hospitals would see an increase of 0.5 percent.
    We note also that both low volume urban and rural hospitals with 
less than 5,000 lines and hospitals for which DSH payments are not 
available would experience decreases of 0.2 to 6.2 percent as a result 
of the decline in payment for PHP services and the proposed change in 
payment policy for PHP services from one per diem rate in CY 2008 to 
two per diem rates in CY 2009.

Column 3: New Wage Indices and the Effect of the Rural Adjustment

    This column estimates the impact of applying the proposed FY 2009 
IPPS wage indices for the CY 2009 OPPS. Overall, these proposed changes 
would not change the payments to urban or rural hospitals.
    Among teaching hospitals, the largest observed impact resulting 
from proposed changes to the wage indices is a decrease of 0.1 percent 
for major teaching hospitals in contrast to no change for minor 
teaching hospitals. Classifying hospitals by type of ownership suggests 
that proprietary hospitals would gain 0.1 percent, governmental 
hospitals would see an increase of 0.2 percent, and voluntary hospitals 
would experience no change.
    We estimate that the combination of updated wage data from FY 2005 
cost reports and statewide application of rural floor budget neutrality 
redistributes payment among regions. Both rural and urban areas in New 
England and the Middle Atlantic states experience declines up to 2.0 
percent. The Central regions (excluding the East North Central regions) 
and the Pacific regions of the country experience increases up to 0.5 
percent. Change in Puerto Rico's wage data contributes to the decrease 
of 0.8 percent.

Column 4: All Proposed Budget Neutrality Changes and Market Basket 
Update

    With the exception of urban hospitals with the lowest volume of 
services and hospitals not paid under the IPPS, including psychiatric 
hospitals, rehabilitation hospitals, and long term care hospitals (DSH 
not available), the addition of the proposed market basket update of 
3.0 percent mitigates any negative impacts on proposed payments for CY 
2009 created by the budget neutrality adjustments made in Columns 2 and 
3. In general, all hospitals would see an increase of 3.4 percent, 
attributable to the proposed 3.0 percent market basket increase and the 
0.4 percent increase in payment weight created by the reduction in 
payment for PHP services that is then redistributed to other services.
    Overall, these proposed changes would increase payments to urban 
hospitals by 3.4 percent. We estimate that large urban hospitals would 
see an increase of 3.3 percent and other urban hospitals would see a 
3.6 percent increase. In contrast, small urban hospitals that bill 
fewer than 5,000 lines per year would experience a decrease in payment 
of 1.0 percent, largely as a result of the decrease in payment for PHP 
and mental health services appearing in Column 2.
    Overall, rural hospitals would show a 3.5 percent increase as a 
result of the proposed market basket update. Rural hospitals that bill 
less than 5,000 lines would see a 3.5 percent increase. Increases in 
payment due to the proposed wage index modestly offset the reduction in 
payment for PHP services in low volume rural hospitals.

[[Page 41558]]

Rural hospitals that bill more than 5,000 lines would experience 
increases of 2.7 to 3.6 percent.
    Among teaching hospitals, the observed impacts resulting from the 
proposed market basket update include an increase of 3.4 percent for 
both major and minor teaching hospitals.
    Classifying hospitals by type of ownership suggests that 
proprietary hospitals would increase 3.3 percent, governmental 
hospitals would increase 3.6 percent, and voluntary hospitals would 
experience an increase of 3.4 percent.

Column 5: All Proposed Changes for CY 2009

    Column 5 compares all proposed changes for CY 2009 to final payment 
for CY 2008 and includes the expiring section 508 reclassification wage 
indices, the change in the outlier threshold, and the difference in 
pass-through estimates which are not included in the combined 
percentages shown in Column 4. Overall, we estimate that providers 
would see an increase of 3.2 percent under this proposed rule in CY 
2009 relative to total spending in CY 2008. The projected 3.2 percent 
increase for all providers in Column 5 reflects the proposed 3.0 
percent market basket increase, plus 0.02 percent for the proposed 
change in the pass-through estimate between CY 2008 and CY 2009, plus 
0.24 percent for the difference in estimated outlier payments between 
CY 2008 (0.76 percent) and CY 2009 (1.0 percent), less 0.09 percent for 
the expired section 508 wage payments. When we exclude cancer and 
children's hospitals (which are held harmless to their pre-OPPS costs) 
and CMHCs, the gain would be 3.6 percent.
    The combined effect of all proposed changes for CY 2009 would 
increase payments to urban hospitals by 3.6 percent. We estimate that 
large urban hospitals would see a 3.5 percent increase, while ``other'' 
urban hospitals would experience an increase of 3.6 percent. Urban 
hospitals that bill less than 5,000 lines would experience a decrease 
of 1.0 percent.
    Overall, rural hospitals would show a 3.6 percent increase as a 
result of the combined effects of all proposed changes for CY 2009. 
Rural hospitals that bill less than 5,000 lines would experience an 
increase of 4.0 percent, which is greater than the 3.5 percent increase 
in Column 4. All rural hospitals that bill greater than 5,000 lines 
would experience increases ranging from 2.9 percent to 3.7 percent.
    Among teaching hospitals, the largest observed impacts resulting 
from the combined effects of all proposed changes include an increase 
of 3.9 percent for major teaching hospitals and an increase of 3.5 
percent for minor teaching hospitals.
    Classifying hospitals by type of ownership suggests that 
proprietary hospitals would gain 3.4 percent, governmental hospitals 
would experience an increase of 3.9 percent, and voluntary hospitals 
would experience an increase of 3.5 percent.
4. Estimated Effects of This Proposed Rule on CMHCs
    The last row of the impact analysis in Table 45 demonstrates the 
impact on CMHCs. We modeled this impact assuming that CMHCs would 
continue to provide the same number of days of PHP care, with each day 
having either three services or four or more services, as seen in the 
CY 2007 claims data. Using these assumptions, there would be a 33.2 
percent decrease in payments to CMHCs due to these proposed APC policy 
changes (shown in Column 2). Column 3 shows that the CY 2009 proposed 
wage index updates account for a small decrease in payments to CMHCs 
(0.2 percent). We note that all providers paid under the OPPS, 
including CMHCs, receive a 3.0 percent market basket increase (shown in 
Column 4). Combining this market basket increase, along with proposed 
changes in APC policy for CY 2009 and the CY 2009 wage index updates, 
the combined impact on CMHCs for CY 2009 is a 30.3 percent decrease.
    We anticipate that CMHCs would change their behavior in response to 
the CY 2009 proposed payment rates for PHP services, consistent with 
patient need. By providing one additional qualifying partial 
hospitalization service, CMHCs would qualify for payment of proposed 
APC 0173 (Level II Partial Hospitalization payment (4 or more 
services)), whose proposed payment rate is approximately $174, rather 
than proposed APC 0172 (Level I Partial Hospitalization payment rate (3 
services)), whose proposed payment rate is approximately $140. This 
change in behavior would lessen the impact on CMHCs in CY 2009.
    Using the CY 2007 CMHC claims data, there are a large number of 
days provided by CMHCs with only 3 services furnished in a given day 
(nearly 1 million days billed by CMHCs were for 3 units of service). If 
CMHCs were to provide 1 additional service on 50 percent of those 1 
million days with 3 services, we estimate that the impact on CY 2009 
payment to CMHCs would be a 26.8 percent decrease rather than a 33.2 
percent decrease (which is the decrease due to proposed APC changes, 
while keeping the number of days with 3 services the same as reflected 
in CY 2007 claims data). Continuing to use the assumption that 50 
percent of CMHC days would qualify for the Level II PHP payment rate, 
we estimate that the combined impact including all changes (market 
basket increase, proposed changes in APC policy for CY 2009, and CY 
2009 wage index updates), on CMHCs for CY 2009 would be approximately a 
24.7 percent decrease in payment.
    We believe that CMHCs may provide additional services on days in 
excess of the 50 percent of current 3 service days assumed in the 
scenario described above, behavior which would further mitigate the 
estimated decrease in payments to CMHCs. Furthermore, we note that 
there are approximately 40,000 days billed by CMHCs in CY 2007 with 
only 1 or 2 PHP services. The impact analysis shown in Table 45 is 
modeled assuming that those days would not receive any payment, in 
accordance with our proposed policy to deny payment for days with less 
than three services. However, we anticipate that CMHCs would also 
change their behavior in response to our proposed policy to deny 
payment for days with less than three services, to the extent providing 
additional services is consistent with the plan of care established by 
each patient's physician. This change in behavior would mitigate 
modeled payment reductions to CMHCs because additional days would 
qualify for proposed new APC 0172.
BILLING CODE 4120-01-P

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[GRAPHIC] [TIFF OMITTED] TP18JY08.668


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[GRAPHIC] [TIFF OMITTED] TP18JY08.669


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[GRAPHIC] [TIFF OMITTED] TP18JY08.670

BILLING CODE 4120-01-C
5. Estimated Effect of This Proposed Rule on Beneficiaries
    For services for which the beneficiary pays a copayment of 20 
percent of the payment rate, the beneficiary share of payment would 
increase for services for which the OPPS payments would rise and would 
decrease for services for which the OPPS payments would fall. For 
example, for a service assigned to Level IV Needle Biopsy/Aspiration 
Except Bone Marrow (APC 0037) in the CY 2008 OPPS, the national 
unadjusted copayment was $228.76, and the minimum unadjusted copayment 
was $172.95. For CY 2009, the proposed national unadjusted copayment 
for APC 0037 is $228.76, the same national unadjusted copayment in 
effect for CY 2008. The proposed minimum unadjusted copayment for APC 
0037 is $177.69, or 20 percent of the proposed national unadjusted 
payment rate for APC 0037 of $888.42 for CY 2009. The proposed minimum 
unadjusted copayment would rise because the proposed payment rate for 
APC 0037 would rise for CY 2009. In all cases, the statute limits 
beneficiary liability for copayment for a service to the inpatient 
hospital deductible for the applicable year. The CY 2009 inpatient 
deductible is not yet available.
    In order to better understand the impact of proposed changes in 
copayment on beneficiaries, we modeled the percent change in total 
copayment liability using CY 2007 claims. We estimate, using the claims 
of the 4,181 hospitals and CMHCs on which our modeling is based, that 
total beneficiary liability for copayments would decline as an overall 
percentage of total payments from 24.9 percent in CY 2008 to 23.1 
percent in CY 2009. This estimated decline in beneficiary liability is 
a consequence of the APC recalibration and reconfiguration we are 
proposing for CY 2009.
6. Conclusion
    The proposed changes in this proposed rule would affect all classes 
of hospitals. Some classes of hospitals would experience significant 
gains and others less significant gains, but almost all classes of 
hospitals would experience positive updates in OPPS payments in CY 
2009. Table 45 demonstrates the estimated distributional impact of the 
OPPS budget neutrality requirements that results in a 3.2 percent 
increase in payments for CY 2009, after considering all proposed 
changes to APC reconfiguration and recalibration, as well as the 
proposed market basket increase, wage index changes, estimated payment 
for outliers, and proposed changes to the pass-through payment 
estimate. The accompanying discussion, in combination with the rest of 
this proposed rule, constitutes a regulatory impact analysis.

[[Page 41562]]

7. Accounting Statement
    As required by OMB Circular A-4 (available at http://www.whitehouse.gov/omb/circulars/a004a-4.pdf), in Table 46, we have 
prepared an accounting statement showing the CY 2009 estimated hospital 
OPPS incurred benefit impact associated with the proposed CY 2009 
hospital outpatient market basket update shown in this proposed rule, 
based on the 2008 Trustees' Report baseline. All estimated impacts are 
classified as transfers.

    Table 46.--Accounting Statement: CY 2009 Estimated Hospital OPPS
  Incurred Benefit Impact Associated With the Proposed CY 2009 Hospital
                     Outpatient Market Basket Update
                              [In billions]
------------------------------------------------------------------------
                Category                            Transfers
------------------------------------------------------------------------
Annualized Monetized Transfers.........  $0.6.
From Whom to Whom......................  Federal Government to
                                          outpatient hospitals and other
                                          providers who received payment
                                          under the hospital OPPS.
                                        --------------------------------
    Total..............................  $0.6.
------------------------------------------------------------------------

C. Effects of Proposed ASC Payment System Changes in This Proposed Rule

    On August 2, 2007, we published in the Federal Register the final 
rule for the revised ASC payment system, effective January 1, 2008 (72 
FR 42470). In that final rule, we: Adopted the methodologies to set 
payment rates for covered ASC services to implement the revised payment 
system so that it would be designed to result in budget neutrality as 
required by section 626 of Public Law 108-173; established that the 
OPPS relative payment weights would be the basis for payment and that 
we would update the system annually as part of the OPPS rulemaking 
cycle; and provided that the revised ASC payment rates would be phased 
in over four years. During the 4-year transition to full implementation 
of the revised ASC rates, payments for surgical procedures paid in ASCs 
in CY 2007 will be made using a blend of the CY 2007 ASC payment rate 
and the revised ASC payment rate for that calendar year. In CY 2009, we 
are proposing to pay ASCs using a 50/50 blend, in which payment would 
be calculated by adding 50 percent of the CY 2007 ASC rate for a 
surgical procedure on the CY 2007 ASC list of covered surgical 
procedures and 50 percent of the CY 2009 revised ASC rate for the same 
procedure. For CY 2010, we would transition the blend to a 25/75 blend 
of the CY 2007 ASC rate and the revised ASC payment rate. Beginning in 
CY 2011, we would pay ASCs for all covered surgical procedures, 
including those on the CY 2007 ASC list, at the full revised ASC 
payment rates. Payment for procedures that were not included on the ASC 
list of covered surgical procedures in CY 2007 are not subject to the 
transitional payment methodology.
    ASC payment rates are calculated by multiplying the ASC conversion 
factor by the ASC relative payment weight. As discussed fully in 
section XV. of this proposed rule, we set the CY 2009 proposed ASC 
relative payment weights by scaling unadjusted CY 2009 ASC relative 
payment weights by the ASC scaler of 0.9753. These weights take into 
consideration the 50/50 blend for the second year of transitional 
payment for certain services. If there were no transition, the scaler 
for CY 2009 fully implemented payment rates would be 0.9412. The 
estimated effects on payment rates during this transitional period are 
varied and are reflected in the estimated payments displayed in Tables 
47 and 48 below.
    The proposed CY 2009 ASC conversion factor was calculated by 
adjusting the CY 2008 ASC conversion factor to account for changes in 
the pre-floor and pre-reclassified hospital wage indices between CY 
2008 and CY 2009. Under section 1833(i)(2)(C)(iv) of the Act, there is 
no inflation update to the ASC conversion factor for CY 2009. The 
proposed CY 2009 ASC conversion factor is $41.384.
1. Alternatives Considered
    Alternatives to the changes we are making and the reasons that we 
have chosen the options are discussed throughout this proposed rule.
a. Office-Based Procedures
    According to our final policy for the revised ASC payment system, 
we designate as office-based those procedures that are added to the ASC 
list of covered surgical procedures in CY 2008 or later years and that 
we determine are usually performed in physicians' offices based on 
consideration of the most recent available volume and utilization data 
for each individual procedure code and/or, if appropriate, the clinical 
characteristics, utilization, and volume of related codes. We establish 
payment for procedures designated as office-based at the lesser of the 
MPFS nonfacility PE RVU amount or the ASC rate developed according to 
the standard methodology of the revised ASC payment system.
    In developing this proposed rule, we reviewed the newly available 
CY 2007 utilization data for all surgical procedures added to the ASC 
list of covered surgical procedures in CY 2008 and for those procedures 
for which the office-based designation is temporary in the CY 2008 
OPPS/ASC final rule with comment period (72 FR 66840 through 66841). 
Based on that review, and as discussed in section XV.C.1.b. of this 
proposed rule, we are proposing to newly designate five surgical 
procedures as office-based, with four of those designations as 
permanent. We considered two alternatives in developing this policy.
    The first alternative we considered was to make no change to the 
procedure payment designations. This would mean that we would continue 
to pay for the five procedures we are proposing to designate as office-
based at an ASC payment rate developed according to the standard 
methodology of the revised ASC payment system. We did not select this 
alternative because our analysis of data for these services and related 
procedures indicated that the five procedures we are proposing to 
designate as office-based could be considered to be usually performed 
in physicians' offices. Consistent with our final policy adopted in the 
August 2, 2007 revised ASC payment system final rule (72 FR 42509), we 
were concerned that if these services were not designated as office-
based, their ASC payment could create financial incentives for the 
procedures to shift from physicians' offices to ASCs for reasons 
unrelated to clinical decisions regarding the most appropriate setting 
for surgical care.

[[Page 41563]]

    The second alternative we considered, and the alternative we 
selected, is to propose to designate five additional procedures added 
to the ASC list of covered surgical procedures in CY 2008 as office-
based for CY 2009. We selected this alternative because our claims data 
indicate that these procedures could be considered to be usually 
performed in physicians' offices. We believe that designating these 
procedures as office-based, which results in the ASC payment rate for 
these procedures potentially being capped at the physician's office 
rate (that is, the MPFS nonfacility PE RVU amount), if applicable, is 
an appropriate step to ensure that Medicare payment policy does not 
create financial incentives for such procedures to shift unnecessarily 
from physicians' offices to ASCs, consistent with our final policy 
adopted in the August 2, 2007 revised ASC payment system final rule.
b. Covered Surgical Procedures
    According to our final policy for the revised ASC payment system, 
we designate as covered surgical procedures all surgical procedures 
that we determine do not pose a significant risk to beneficiary safety 
or are not expected to require an overnight stay.
    In developing this proposed rule, we reviewed the clinical 
characteristics and newly available CY 2007 utilization data, if 
applicable, for all procedures reported by Category III CPT codes 
implemented July 1, 2008 and surgical procedures that were excluded 
from ASC payment for CY 2008. Based on that review, we identified nine 
surgical procedures that meet the criteria for inclusion on the ASC 
list of covered surgical procedures and we are proposing to add those 
procedures to the list for CY 2009 payment. We considered two 
alternatives in developing this policy.
    The first alternative we considered was to make no change to the 
ASC list of covered surgical procedures. We did not select this 
alternative because our analysis of data for these services and related 
procedures indicated that the nine procedures we are proposing to 
designate as covered surgical procedures for CY 2009 may be safely 
provided to beneficiaries in ASCs and are not expected to require an 
overnight stay. Consistent with our final policy, we were concerned 
that if these services were not designated as ASC covered surgical 
procedures, beneficiaries would lack access to these services in the 
most clinically appropriate setting.
    The second alternative we considered, and the alternative we 
selected, is to propose to designate nine additional procedures as ASC 
covered surgical procedures for CY 2009. We selected this alternative 
because our claims data indicate that these procedures do not pose a 
significant risk to beneficiary safety and are not expected to require 
an overnight stay, and thus they meet the criteria for inclusion on the 
list of ASC covered surgical procedures. We believe that adding these 
procedures to the list of covered surgical procedures is an appropriate 
step to ensure that beneficiary access to services is not limited 
unnecessarily.
2. Limitations of Our Analysis
    Presented here are the estimated effects of the proposed changes 
for CY 2009 on Medicare payment to ASCs. A key limitation of our 
analysis is our inability to predict changes in ASC service-mix between 
CY 2007 and CY 2009 with precision. The aggregate impacts displayed in 
Tables 47 and 48 below are based upon a methodology that assumes no 
changes in service-mix with respect to the CY 2007 ASC data used for 
this proposed rule. In addition, data on services that are newly 
payable under the revised ASC payment system are not yet reflected in 
the available claims data. We believe that the net effect on Medicare 
expenditures resulting from the CY 2009 changes will be negligible in 
the aggregate. However, such changes may have differential effects 
across surgical specialty groups as ASCs adjust to payment rates. We 
are unable to accurately project such changes at a disaggregated level. 
Clearly, individual ASCs will experience changes in payment that differ 
from the aggregated estimated impacts presented below.
3. Estimated Effects of This Proposed Rule on Payments to ASCs
    Some ASCs are multispecialty facilities that perform the gamut of 
surgical procedures, from excision of lesions to hernia repair to 
cataract extraction; others focus on a single specialty and perform 
only a limited range of surgical procedures, such as eye, digestive 
system, or orthopedic procedures. The combined effect on an individual 
ASC of the update to the CY 2009 payments will depend on a number of 
factors including, but not limited to, the mix of services the ASC 
provides, the volume of specific services provided by the ASC, the 
percentage of its patients who are Medicare beneficiaries, and the 
extent to which an ASC will choose to provide different services in the 
coming year. The following discussion presents tables that provide 
estimates of the impact of the proposed CY 2009 update to the revised 
ASC payment system on Medicare payments to ASCs, assuming the same mix 
of services as reflected in our CY 2007 claims data. Table 47 depicts 
the estimated aggregate percent change in payment by surgical specialty 
group and Table 48 shows a comparison of payment for procedures that we 
estimate would receive the most Medicare payment in CY 2008.
    Table 47 shows the expected effects on aggregate Medicare payments 
under the revised ASC payment system by surgical specialty group. We 
have aggregated the surgical HCPCS codes by specialty group and 
estimated the effect on aggregated payment for surgical specialty 
groups, considering separately the CY 2009 transitional rates and the 
fully implemented revised ASC payment rates that would apply in CY 2009 
if there were no transition. The groups are sorted for display in 
descending order by estimated Medicare program payment to ASCs for CY 
2008. The following is an explanation of the information presented in 
Table 47.
     Column 1--Surgical Specialty Group indicates the surgical 
specialties into which ASC procedures are grouped. We used the CPT code 
range definitions and Level II HCPCS codes and Category III CPT codes, 
as appropriate, to account for all surgical procedures to which the 
Medicare program payments are attributed.
     Column 2--Estimated CY 2008 ASC Payments were calculated 
using CY 2007 ASC utilization (the most recent full year of ASC 
utilization) and CY 2008 ASC payment rates. The surgical specialty 
groups are displayed in descending order based on estimated CY 2008 ASC 
payments.
     Column 3--Estimated CY 2009 Percent Change with Transition 
(50/50 Blend) is the aggregate percentage increase or decrease, 
compared to CY 2008, in Medicare program payment to ASCs for each 
surgical specialty group that is attributable to proposed updates to 
the ASC payment rates for CY 2009 under the scaled, 50/50 blend of the 
CY 2007 ASC payment rate and the proposed CY 2009 revised ASC payment 
rate.
     Column 4--Estimated CY 2009 Percent Change without 
Transition (Fully Implemented) is the aggregate percentage increase or 
decrease in Medicare program payment to ASCs for each surgical 
specialty group that is attributable to proposed updates to ASC payment 
rates for CY 2009 compared to CY 2008 if there were no transition 
period to the revised payment rates. We used a different relative 
payment weight scaler to model the estimated CY 2009 ASC payment 
effects as a result of ASC

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rates without the transition than we did for the proposed CY 2009 ASC 
payment rates with the transition. The percentages appearing in Column 
4 are presented only as comparisons to the percentage changes under the 
transition policy in column 3. We are not proposing to eliminate or 
modify the transition that was finalized in the August 2, 2007 revised 
ASC payment system final rule (72 FR 42519).
    As seen in Table 47, the proposed update to ASC rates for CY 2009 
is expected to result in small aggregate decreases in payment amounts 
for eye and ocular adnexa and nervous system procedures and somewhat 
greater decreases for digestive system procedures. As shown in column 4 
in the table, those payment decreases would be expected to be greater 
in CY 2009 if there were no transitional payment for all three of those 
surgical specialty groups.
    Generally, for the surgical specialty groups that account for less 
ASC utilization and spending, the expected payment effects of the CY 
2009 update are positive. ASC payments for procedures in those surgical 
specialties are expected to increase in CY 2009 with the 50/50 
transitional payment rates and, in the absence of the transition, would 
be expected to increase even more. For instance, in the aggregate, 
integumentary system procedures are expected to increase by 7 percent 
under the proposed CY 2009 rates and by 19 percent if there were no 
transition. Similar effects are observed for genitourinary, 
cardiovascular, musculoskeletal, respiratory, and auditory system 
procedures as well. An estimated increase in aggregate payment for the 
specialty group does not mean that all procedures in the group would 
experience increased payment rates. For example, the estimated 
increased payments at the surgical specialty group level may be due to 
decreased payments for some of the most frequently provided procedures 
in the group and the moderating effect of the sometimes substantial 
payment increases for the less frequently performed procedures within 
the surgical specialty group.

  Table 47.--Estimated CY 2009 Impact of the Revised ASC Payment System on Estimated Aggregate CY 2009 Medicare
     Program Payments Under the 50/50 Transition Blend and Without a Transition, by Surgical Specialty Group
----------------------------------------------------------------------------------------------------------------
                                                                                                   Estimated CY
                                                                 Estimated CY     Estimated CY     2009 percent
                                                                   2008 ASC       2009 percent    change without
                   Surgical specialty group                      payments (in     change with       transition
                                                                  millions)     transition  (50/      (fully
                                                                                   50 blend)       implemented)
(1)                                                                        (2)              (3)              (4)
----------------------------------------------------------------------------------------------------------------
Eye and ocular adnexa........................................           $1,373               -1               -2
Digestive system.............................................              742               -6              -16
Nervous system...............................................              321               -3               -8
Musculoskeletal system.......................................              217               19               54
Integumentary system.........................................               87                7               19
Genitourinary system.........................................               86               11               29
Respiratory system...........................................               22               13               38
Cardiovascular system........................................               14               16               45
Auditory system..............................................                5               18               46
----------------------------------------------------------------------------------------------------------------

    Table 48 below shows the estimated impact of the proposed updates 
to the revised ASC payment system on aggregate ASC payments for 
selected procedures during CY 2009 with and without the transitional 
blended rate. The table displays 30 of the procedures estimated to be 
responsible for the greatest estimated CY 2008 aggregate Medicare 
payments to ASCs. The HCPCS codes are sorted in descending order by 
estimated program payment.
     Column 1--HCPCS code.
     Column 2--Short Descriptor of the HCPCS code.
     Column 3--Estimated CY 2008 ASC Payments were calculated 
using CY 2007 ASC utilization (the most recent full year of ASC 
utilization) and the CY 2008 ASC payment rates. The estimated CY 2008 
payments are expressed in millions of dollars.
     Column 4--CY 2009 Percent Change with Transition (50/50 
Blend) reflects the percent differences between the estimated ASC 
payment for CY 2008 and the estimated payment for CY 2009 based on the 
proposed update, incorporating a 50/50 blend of the CY 2007 ASC payment 
rate and the proposed CY 2009 revised ASC payment rate.
     Column 5--CY 2009 Percent Change without Transition (Fully 
Implemented) reflects the percent differences between the estimated ASC 
payment for CY 2008 and the estimated payment for CY 2009 based on the 
proposed update if there were no transition period to the fully 
implemented revised payment rates. We used a different relative payment 
weight scaler to model the estimated CY 2009 ASC payment effects as a 
result of ASC rates without the transition than we did for the proposed 
CY 2009 ASC payment rates with the transition. The percentages 
appearing in Column 5 are presented as a comparison to the percentage 
changes under the transition policy in Column 4. We are not proposing 
to eliminate or modify the transition that was finalized in the August 
2, 2007 revised ASC payment system final rule (72 FR 42519).
    As displayed in Table 48, 23 of the 30 procedures with the greatest 
estimated aggregate CY 2008 Medicare payment are included in the three 
surgical specialty groups that are estimated to account for the most 
Medicare payment in CY 2008, specifically eye and ocular adnexa, 
digestive system, and nervous system groups. Consistent with the 
estimated payment effects on the surgical specialty groups displayed in 
Table 47, the estimated effects of the proposed CY 2009 update on ASC 
payment for individual procedures in year 2 of the transition are 
varied. Aggregate ASC payments for many of the most frequently 
furnished ASC procedures are expected to decrease as the transition 
causes individual procedure payments to reflect relative ASC payment 
weights that are more closely aligned with the relativity of payments 
under the OPPS.
    The procedure for which the most Medicare ASC payment is estimated 
to

[[Page 41565]]

be made in CY 2008 is the cataract removal procedure reported with CPT 
code 66984 (Extracapsular cataract removal with insertion of 
intraocular lens prosthesis (one stage procedure), manual or mechanical 
technique (e.g., irrigation and aspiration or phacoemulsification)). 
The proposed update to the ASC rates is expected to result in a 1 
percent payment decrease for that procedure in CY 2009. The estimated 
payment effects on the four other high volume eye and ocular adnexa 
procedures included in that table are slightly positive and negative, 
but for CPT code 66821 (Discission of secondary membranous cataract 
(opacified posterior lens capsule and/or anterior hyaloid); laser 
surgery (e.g., YAG laser) (one or more stages)), the expected CY 2009 
payment decrease is 10 percent, significantly greater than the 
decreases expected for any of the other eye and ocular adnexa 
procedures shown.
    The proposed transitional payment rates for 8 of the 9 digestive 
system procedures included in Table 48 are expected to decrease by 6 to 
9 percent in CY 2009. Those estimated decreases are consistent with the 
estimated 6 percent reduction shown in Table 47 for the digestive 
system surgical specialty group.
    The 10 nervous system procedures for which the most Medicare 
payment is estimated to be made to ASCs in CY 2008 are included in 
Table 48. The proposed CY 2009 update is expected to result in 4 
percent payment decreases for 5 of those procedures and result in even 
more substantial decreases, 19 percent and 22 percent respectively, for 
CPT code 64484 (Injection, anesthetic agent and /or steroid, 
transforaminal epidural; lumbar or sacral, each additional level) and 
CPT code 64476 (Injection, anesthetic agent and/or steroid, 
paravertebral facet joint or facet joint nerve; lumbar or sacral, each 
additional level). The other three nervous system procedures included 
in the table are expected to realize payment increases, especially CPT 
code 64721 (Neuroplasty and/or transposition; medial nerve at carpal 
tunnel) for which payment is estimated to increase by 13 percent in CY 
2009.
    The estimated payment effects for most of the remaining procedures 
listed in Table 48 are positive. For example, the CY 2009 proposed 
transitional payment rate for CPT code 29826 (Arthroscopy, shoulder, 
distal claviculectomy (Mumford Procedure); decompression of subacromial 
space with partial acromioplasty, with or without coracoacromial 
release) is estimated to increase 45 percent over the CY 2008 
transitional payment amount.
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    Over time, we believe that the ASC payment system has served as an 
incentive to ASCs to focus on providing procedures for which they 
determine Medicare payments will support ASCs' continued operation. We 
note that historically, the ASC payment rates for many of the most 
frequently performed procedures in ASCs were similar to the OPPS 
payment rates for the same procedures. Conversely, procedures with ASC 
payment rates that were substantially lower than the OPPS rates have 
been performed least often in ASCs. We believe the revised ASC payment 
system represents a major stride towards encouraging greater efficiency 
in ASCs and promoting a significant increase in the breadth of surgical 
procedures performed in ASCs because it distributes payments across the 
entire spectrum of covered surgical procedures based on a coherent 
system of relative payment weights that are related to the clinical and 
facility resource characteristics of those procedures.
4. Estimated Effects of This Proposed Rule on Beneficiaries
    We estimate that the proposed changes to the revised ASC payment 
system would be generally positive for beneficiaries with respect to 
the procedures newly proposed for addition to the ASC list of covered 
surgical procedures and for those proposed as office-based for CY 2009. 
First, except for screening colonoscopy and flexible sigmoidoscopy 
procedures, the ASC coinsurance rate for all procedures is 20 percent. 
This contrasts with procedures performed in HOPDs, where the 
beneficiary is responsible for copayments that range from 20 percent to 
40 percent of the procedure payment. Second, ASC payment rates under 
the revised payment system are lower than payment rates for the same 
procedures under the OPPS, so the beneficiary coinsurance amount under 
the ASC payment system almost always would be less than the OPPS 
copayment amount for the same services. (The only exceptions would be 
when the ASC coinsurance amount exceeds the inpatient deducible. The 
statute requires that copayment amounts under the OPPS not exceed the 
inpatient deductible.) For those procedures newly proposed for addition 
to the ASC list of covered surgical procedures in CY 2009

[[Page 41567]]

that would migrate from the HOPD to the ASC, the beneficiary 
coinsurance amount would be less than the OPPS copayment amount. 
Furthermore, these proposed additions to the list would provide 
beneficiaries access to more surgical procedures in ASCs. Beneficiary 
coinsurance for services migrating from physicians' offices to ASCs may 
decrease or increase under the revised ASC payment system, depending on 
the particular service and the relative payment amounts for that 
service in the physician's office compared to the ASC. However, for 
those procedures newly proposed for designation as office-based in CY 
2009, the beneficiary coinsurance amount would be no greater than the 
beneficiary coinsurance in the physician's office.
    In addition, as finalized in the August 2, 2007, revised ASC 
payment system final rule (72 FR 42520), in CY 2009, the second year of 
the 4 year transition to the ASC payment rates calculated according to 
the standard methodology of the revised ASC payment system, ASC payment 
rates for a number of commonly furnished ASC procedures would continue 
to be reduced, resulting in lower beneficiary coinsurance amounts for 
these ASC services in CY 2009. Continued migration of procedures 
currently on the list of ASC covered surgical procedures from the HOPD 
to the ASC would also reduce beneficiary liability for these services, 
for the two reasons described above with respect to the proposed new 
ASC covered services.
5. Conclusion
    The updates to the ASC payment system for CY 2009 will affect each 
of the approximately 5,300 ASCs currently approved for participation in 
the Medicare program. The effect on an individual ASC will depend on 
its mix of patients, the proportion of the ASC's patients that are 
Medicare beneficiaries, the degree to which the payments for the 
procedures offered by the ASC are changed under the revised payment 
system, and the degree to which the ASC chooses to provide a different 
set of procedures.
    Like the OPPS, the revised ASC payment system is designed to result 
in the same aggregate amount of Medicare expenditures in CY 2009 as was 
estimated to be made in CY 2008. We estimate that the update to the 
revised ASC payment system, including the addition of surgical 
procedures to the list of covered surgical procedures, that we are 
proposing for CY 2009 will have no net effect on Medicare expenditures 
compared to the estimated level of Medicare expenditures in CY 2008.
6. Accounting Statement
    As required by OMB Circular A-4 (available at http://www.whitehouse.gov/omb/circulars/a004/a-4.pdf), in Table 49 below, we 
have prepared an accounting statement showing the classification of the 
expenditures associated with the update to the CY 2009 revised ASC 
payment system, based on the provisions of this proposed rule. We 
estimate that Medicare payments to ASCs for CY 2009 will be about 
$3.884 billion. This table provides our best estimate of Medicare 
payments to providers and suppliers as a result of the proposed update 
to the CY 2009 revised ASC payment system, as presented in this 
proposed rule. All expenditures are classified as transfers.

      Table 49.--Accounting Statement: Classification of Estimated
 Expenditures From CY 2008 to CY 2009 as a Result of the CY 2009 Update
                    to the Revised ASC Payment System
------------------------------------------------------------------------
                Category                            Transfers
------------------------------------------------------------------------
Annualized Monetized Transfers.........  $0 Million.
From Whom to Whom......................  Federal Government to Medicare
                                          Providers and Suppliers.
Annualized Monetized Transfer..........  $0 Million.
From Whom to Whom......................  Premium Payments from
                                          Beneficiaries to Federal
                                          Government.
------------------------------------------------------------------------
    Total..............................  $0 Million
------------------------------------------------------------------------

D. Effects of Proposed Requirements for Hospital Reporting of Quality 
Data for Annual Hospital Payment Update

    In section XVII. of the CY 2008 OPPS/ASC final rule with comment 
period (72 FR 66871), we finalized our measures and requirements for 
reporting of quality data to CMS for services furnished in hospital 
outpatient settings under the CY 2009 HOP QDRP. The initial data 
submission for April to June 2008 services is due to the OPPS Clinical 
Warehouse by November 1, 2008 (72 FR 66871). CMS and its contractors 
will provide assistance to all affected hospitals that wish to submit 
data. In section XVI. of this proposed rule, we discuss our measures 
and requirements for reporting of quality data to CMS for services 
furnished in hospital outpatient settings under the CY 2010 HOP QDRP.
    We have no previous history under the HOP QDRP to indicate the 
percentage of hospitals that will submit quality data. However, for the 
initial data submission, in CY 2008, 98 percent of affected hospitals 
have pledged to participate. In addition, results from the RHQDAPU 
program indicate that over 98 percent of IPPS hospitals submitted 
quality data in the initial year of the program. We expect that 
affected hospitals will participate at approximately the same rate 
under the HOP QDRP. We have continued our efforts to ensure that our 
CMS contractors provide assistance to all affected hospitals that wish 
to submit data. Therefore, for purposes of this CY 2009 impact 
analysis, we have assumed that the 98 percent of affected hospitals 
that have pledged to participate will qualify for the full payment 
update factor for CY 2009.

E. Executive Order 12866

    In accordance with the provisions of Executive Order 12866, this 
proposed rule was reviewed by the OMB.

List of Subjects

42 CFR Part 410

    Health facilities, Health professions, Laboratories, Medicare, 
Rural areas, X-rays.

42 CFR Part 419

    Hospitals, Medicare, Reporting and recordkeeping requirements.

    For reasons stated in the preamble of this proposed rule, the 
Centers for Medicare & Medicaid Services is proposing to amend 42 CFR 
Chapter IV as set forth below:

PART 410--SUPPLEMENTARY MEDICAL INSURANCE (SMI) BENEFITS

    1. The authority citation for part 410 continues to read as 
follows:

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

    2. Section 410.43 is amended by--

[[Page 41568]]

    a. Removing the word ``and'' at the end of paragraph (a)(2).
    b. Redesignating paragraph (a)(3) as paragraph (a)(4).
    c. Adding a new paragraph (a)(3).
    c. Adding a new paragraph (c).
    The additions read as follows:


Sec.  410.43   Partial hospitalization services: Conditions and 
exclusions.

    (a) * * *
    (3) Are furnished in accordance with a physician certification and 
plan of care as specified under Sec.  424.24(e) of this chapter; and
* * * * *
    (c) Partial hospitalization programs are intended for patients 
who--
    (1) Require 20 hours per week of therapeutic services;
    (2) Are likely to benefit from a coordinated program of services 
and require more than isolated sessions of outpatient treatment.
    (3) Do not require 24-hour care;
    (4) Have an adequate support system while not actively engaged in 
the program;
    (5) Have a mental health diagnosis;
    (6) Are not judged to be dangerous to self or others; and
    (7) Have the cognitive and emotional ability to participate in the 
active treatment process and can tolerate the intensity of the partial 
hospitalization program.

PART 419--PROSPECTIVE PAYMENT SYSTEM FOR HOSPITAL OUTPATIENT 
DEPARTMENT SERVICES

    3. The authority citation for part 419 continues to read as 
follows:

    Authority: Secs. 1102, 1833(t), and 1871 of the Social Security 
Act (42 U.S.C. 1302, 1395l(t), and 1395hh).

    4. Section 419.41 is amended by revising paragraph (c)(4)(iv) to 
read as follows:


Sec.  419.41   Calculation of national beneficiary copayment amounts 
and national Medicare program payment amounts.

* * * * *
    (c) * * *
    (4) * * *
    (iv) The copayment amount is computed as if the adjustment under 
Sec. Sec.  419.43(d) and (e) (and any adjustments made under Sec.  
419.43(f) in relation to these adjustments) and Sec.  419.43(h) had not 
been paid.
* * * * *
    5. Section 419.42 is amended by revising paragraph (e) to read as 
follows:


Sec.  419.42   Hospital election to reduce insurance.

* * * * *
    (e) In electing reduced coinsurance, a hospital may elect a 
copayment amount that is less than that year's wage-adjusted copayment 
amount for the group but not less than 20 percent of the APC payment 
rate as determined under Sec.  419.32 or, in the case of payments 
calculated under Sec.  419.43(h), not less than 20 percent of the APC 
payment rate as determined under Sec.  419.43(h).
* * * * *
    6. Section 419.43 is amended by--
    a. Adding new paragraphs (d)(5) and (d)(6).
    b. Adding a new paragraph (h)(4).
    The additions read as follows:


Sec.  419.43   Adjustments to national program payment and beneficiary 
copayment amounts.

* * * * *
    (d) * * *
    (5) Reconciliation. For hospital outpatient services (or groups of 
services) as defined in paragraph (d)(1) of this section performed on 
or after January 1, 2009--
    (i) CMS may specify an alternative to the overall ancillary cost-
to-charge ratio otherwise applicable under paragraph (d)(5)(ii) of this 
section. A hospital may also request that its Medicare contractor use a 
different (higher or lower) cost-to-charge ratio based on substantial 
evidence presented by the hospital. Such a request must be approved by 
the CMS.
    (ii) The overall ancillary cost-to-charge ratio applied at the time 
a claim is processed is based on either the most recent settled cost 
report or the most recent tentative settled cost report, whichever is 
from the latest cost reporting period.
    (iii) The Medicare contractor may use a statewide average cost-to-
charge ratio if it is unable to determine an accurate overall ancillary 
cost-to-charge ratio for a hospital in one of the following 
circumstances:
    (A) A new hospital that has not yet submitted its first Medicare 
cost report. (For purposes of this paragraph, a new hospital is defined 
as an entity that has not accepted assignment of an existing hospital's 
provider agreement in accordance with Sec.  489.18 of this chapter.)
    (B) A hospital whose overall ancillary cost-to-charge ratio is in 
excess of 3 standard deviations above the corresponding national 
geometric mean. This mean is recalculated annually by CMS and published 
in the annual notice of prospective payment rates issued in accordance 
with Sec.  419.50(a).
    (C) Any other hospital for whom accurate data to calculate an 
overall ancillary cost-to-charge ratio are not available to the 
Medicare contractor.
    (iv) Any reconciliation of outlier payments will be based on an 
overall ancillary cost-to-charge ratio calculated based on a ratio of 
costs to charges computed from the relevant cost report and charge data 
determined at the time the cost report coinciding with the service is 
settled.
    (6) Time value of money. Effective for services performed on or 
after January 1, 2009, at the time of any reconciliation under 
paragraph (d)(5)(iv) of this section, outlier payments may be adjusted 
to account for the time value of any underpayments or overpayments. Any 
adjustment will be based on a widely available index to be established 
in advance by CMS, and will be applied from the midpoint of the cost 
reporting period to the date of reconciliation.
* * * * *
    (h) * * *
    (4) Beneficiary copayment. The beneficiary copayment for services 
to which the adjustment to the conversion factor specified under 
paragraph (h)(1) of this section applies is the product of the national 
beneficiary copayment amount calculated under Sec.  419.41 and the 
ratio of the adjusted conversion factor calculated under paragraph 
(h)(1) of this section divided by the conversion factor specified under 
Sec.  419.32(b)(1).

(Catalog of Federal Domestic Assistance Program No. 93.773, 
Medicare--Hospital Insurance; and Program No. 93.774, Medicare--
Supplementary Medical Insurance Program)

(Catalog of Federal Domestic Assistance Program No. 93.778, Medical 
Assistance Program)

    Dated: June 26, 2008.
 Kerry Weems,
Acting Administrator, Centers for Medicare & Medicaid Services.

    Dated: July 2, 2008.
Michael O. Leavitt,
Secretary.
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-----------------------------------------------------------------------

Part II--Continued

Book 2 of 2 Books

Pages 41743-42256





Department of Health and Human Services





-----------------------------------------------------------------------



Centers for Medicare & Medicaid Services



-----------------------------------------------------------------------



 42 CFR Parts 410 and 419



Medicare Program: Proposed Changes to the Hospital Outpatient 
Prospective Payment System and CY 2009 Payment Rates; Proposed Changes 
to the Ambulatory Surgical Center Payment System and CY 2009 Payment 
Rates; Proposed Rule

  Federal Register / Vol. 73, No. 139 / Friday, July 18, 2008 / 
Proposed Rules  

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[FR Doc. E8-15539 Filed 7-3-08; 12:00 pm]
BILLING CODE 4120-01-C